HomeMy WebLinkAbout00 098 Merger - Westario/Public
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THE CORPORATION OF THE MUNICIPALITY OF KINCARDINE
BY-LAW
NO. 2000 - 98
A BY-LAW TO AUTHORIZE THE SIGNING OF
A PARTICIPATION AGREEMENT FOR THE RESTRUCTURING OF THE
KINCARDINE HYDRO ELECTRIC COMMISSION WITH OTHER PUBLIC
UTILITIES AND THE CANADIAN NIAGARA POWER COMPANY
WHEREAS the Council for The Municipality of Kincardine deems it advisable to enter
into a Participation Agreement with The Corporation of the Town of Hanover, The
Corporation of the Township of Huron-Kinloss, The Corporation of the Municipality of
South Bruce, The Corporation of the Town of Saugeen Shores, The Corporation of the
Town of Wing ham, and Canadian Niagara Power Company;
AND WHEREAS this Participation Agreement provides for the incorporation,
amalgamation, operation and control of jointly owned corporations that will distribute
electricity and/or marketing and selling associated products and services;
NOW THEREFORE the Council for The Corporation of the Municipality of Kincardine
ENACTS as follows:
1. That The Corporation of the Municipality of Kincardine enter into an agreement with
The Corporation of the Town of Hanover, The Corporation of the Township of Huron-
Kinloss, The Corporation of the Municipality of South Bruce, The Corporation of the
Town of Saugeen Shores, The Corporation of the Town of Wingham, and Canadian
Niagara Power Company respecting the incorporation, amalgamation, operation and
control of jointly owned corporations that will distribute electricity and/or marketing
and selling associated products and services.
2. That the Mayor and Clerk be authorized to sign, on behalf of The Corporation of the
Municipality of Kincardine, the Participation Agreement with The Corporation of the
Town of Hanover, The Corporation of the Township of Huron-Kinloss, The
Corporation of the Municipality of South Bruce, The Corporation of the Town of
Saugeen Shores, The Corporation of the Town of Wingham, and Canadian Niagara
Power Company respecting the incorporation, amalgamation, operation and control
of jointly owned corporations that will distribute electricity and/or marketing and sell
associated products and services attached to this by-law and to affIX the corporate
seal as and when required.
3. This By-law shall come into full force and effect upon its final passage.
4. This By-law may be cited as the "Public Utilities "Westario Power" Merger
Agreement, By-law".
READ a FIRST and SECOND TIME on this 2nd day of August, 2000.
READ a THIRD TIME and DEEMED TO BE PASSED this 9th day of August, 2000.
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P ARTICIP ATION AGREEMENT
This Agreement dated this 1Qfu day of August, 2000.
WHEREAS:
1. The Corporation of the Town of Hanover, The Corporation of the Township of
Huron-Kinloss, The Corporation of the Municipality of Kincardine, The Corporation
of the Municipality of South Bruce, The Corporation of the Town ofSaugeen Shores
(collectively, the "Initial Municipalities"), and Canadian Niagara Power Company
Limited ("CNP") and certain other parties entered into a letter of intent dated April
21, 2000 (the "Letter of Intent") respecting the incorporation, amalgamation,
operation and control of jointly owned corporations that will carry on the business of,
among other things, distributing electricity and/or marketing and selling associated
products and services;
2. The Corporation of the Town of Wingham and the Initial Municipalities
(collectively, the "Municipalities"), and CNP entered into an agreement dated July
12,2000 pursuant to which Wingham agreed to be bound by the Letter of Intent;
3. An application dated July 14, 2000, for an advance tax ruling, as amended by a letter
dated July 19, 2000, each attached as Schedule "A", (the "Application") was
submitted to the Ministry of Finance of the Province of Ontario on behalfofCNP;
4. Whereas the Ontario Energy Board is conducting Generic Proceedings (the "OEB
Proceedings") with respect to the Minister's Directive of June 7, 2000 - RP-2000-
0069, the outcome of which may affect the decision of a Party to enter into the
Shareholders' Agreement (as defined below).
5. The Municipalities and CNP wish to bind themselves to enter into a Shareholders'
Agreement (as defined below) contingent only upon the Favourable Outcomes (as
defined below);
NOW THEREFORE in consideration of the premises and the mutual convenants and
agreements herein, the parties hereto hereby covenant and agree as follows:
1. Definitions
1.1.
In this Agreement, unless there is somethin¡¡; in the subj ect matter or context inconsistent
therewith,
(a) "Agreement" means this Participation Agreement together with the schedules
attached hereto;
(b) "Application" has the meaning set out in the recitals; .
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(c)
"Favourable Outcomes" means, in the reasonable opinion of counsel to the
Municipalities in the case of clause (A) and in the reasonable opinion of both
counsel to the Municipalities and counsel to CNP in the case of clause (B):
(A) one or more ru1ings, given in writing by the Ministry of Finance to CNP in
response to the Application, which establish(es) that, inter alia, no transfer
tax will be exigible from:
(i) any of the Municipalities;
(ii) any corporations incorporated by the Municipalities pursuant to
section 142 of the Electricity Act, 1998;
(iii) CNP;
(iv) any corporation incorporated by CNP as contemplated in the
Application;
(v) Holdco-Amalco; or
(vi) any corporation resulting from the amalgamation of any
corporations incorporated (x) by any Municipalities pursuant to
section 142 of the Electricity Act, 1998 or (y) by CNP;
Provided that, a ruling by the Ministry of Finance shall be a Favourable
Outcome for the purpose of this paragraph l.1(c)(A) even where such
ruling is qualified or made conditional, provided that such qualifications
or conditions are, m the reasonable opinion of counsel to the
Municipalities, contemplated in the Application or contained in
Corporations Tax Branch Information Bulletin Number 2-77R dated
September 14,1981, with necessary modifications; and
(B) the fina1 result of the OEB Proceedings permits the attainment of all
performance indicators as set out in Schedule "B" to this Agreement.
For greater certainty, both (A) and (B) above shall be required in order for
Favourable Outcomes to have been achieved.
G) "Holdco-Ama1co" has the meaning set out in the Application;
(k)
"Initial Municipalities" has the meaning set out in the recitals;
(I) "Municipalities" has the meaning set out in the recitals;
(m) "OEB Proceedings" has the meaning set out in the recitals;
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"Party" or "Parties" means a party to this Agreement or the parties to this
Agreement, respectively; and
"Shareholders' Agreement" means a shareholders' agreement substantially in the
form attached hereto as Schedule "C".
2. Representations and Warranties ofCNP
2.1. CNP represents and warrants to the Municipalities as follows and acknowledges that each
Municipality is relying on these representations and warranties in entering into this
Agreement and the transactions contemplated hereby:
(a) CNP has been duly incorporated and organized and is validly subsisting and in
good standing under the laws of the Province of Ontario.
(b) No bankruptcy, insolvency or receivership proceedings have been instituted or are
pending against CNP.
(c)
CNP has all necessary corporate power, authority and capacity to enter into this
Agreement and to perform its obligations hereunder; the execution and delivery of
this Agreement has been duly authorized by all necessary corporate action on the
partofCNP.
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(d) CNP is not a party to, bound or affected by or subject to any indenture, mortgage,
lease, agreement, instrument, statute, regulation, arbitration award, charter or
bylaw provision, order or judgment which would be violated, contravened,
breached by, or under which any default would occur as a result of the execution
and delivery of this Agreement or the consummation of any of the transactions
contemplated under this Agreement.
(e) This Agreement constitutes valid and binding obligations of CNP enforceable
against it in accordance with its terms, provided that enforcement may be limited
by bankruptcy, insolvency, liqnidation, reorganization, reconstruction and other
similar laws generally affecting enforceability of creditor's rights and that
eqnitable remedies such as specific performance and injunction are in the
discretion of the court from which they are sought.
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PROVIDED that CNP shall not be deemed to have breached this Agreement or to have
given an untrue or incorrect representation or warranty where such breach has resulted or
such representation or warranty is untrue by reason of a failure by the board of directors
ofCNP to approve the entering into of the Shareholders' Agreement by CNP.
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3.
Representations and Warranties of the Municipalities
3.1. Each Municipality represents and warrants to each other Municipality and to CNP as
follows and acknowledges that each such other Municipality and CNP is relying on these
representations and warranties in entering into this Agreement and the transactions
contemplated hereby:
(a) The Municipality is a municipal corporation validly subsisting and in good
standing under the laws of the Province of Ontario.
(b) No bankruptcy, insolvency, receivership or similar proceedings have been
instituted or are pending against the Municipality.
(c) The Municipality has all necessary corporate power, authority and capacity to
enter into this Agreement and to perform its obligations hereunder; the execution
and delivery of this Agreement has been duly authorized by all necessary
corporate action on the part of the Municipality.
(d)
The Municipality is not a party to, bound or affected by or subject to any
indenture, mortgage, lease, agreement, instrument, statute, regulation, arbitration
award, charter or bylaw provision, order or judgment which would be violated,
contravened, breached by, or under which any default would occur as a result of
the execution and delivery of this Agreement or the consummation of any of the
transactions contemplated under this Agreement.
(e) This Agreement constitutes valid and binding obligations of the Municipality
enforceable against it in accordance with its terms, provided that enforcement
may be limited by bankruptcy, insolvency, liquidation, reorganization,
reconstruction and other similar laws generally affecting enforceability of
creditor's rights and that eqnitable remedies such as specific performance and
injunction are in the discretion of the court from which they are sought.
PROVIDED that a Municipality shall not be deemed to have breached this Agreement or
to have given an untrue or incorrect representation or warranty where such breach has
resulted or such representation or warranty is untrue by reason of a failure by the council
of such Municipality to approve the entering into of the Shareholders' Agreement by
such Municipality.
4. Covenants
4.1. Each Party irrevocably agrees to execute and deliver and become bound by, as soon as
practicable and in any event not later than October 15, 2000, the Shareholders'
Agreement, conditional only upon Favourable Outcomes being achieved by October 1,
2000.
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4.2. CNP agrees to promptly notify each Municipality upon the receipt of any response(s) by
the Ministry of Finance to the Application, such notification to contain a true and
complete copy or copies of such response(s).
. 4.3. Each Municipality agrees to take all necessary municipal action to perform its obligations
hereunder.
4.4. Each Party agrees not to enter into any transaction that, if entered into before the
execution and delivery of the Shareholders' Agreement, would cause any representation
or warranty of such Party to be incorrect or constitute a breach of any covenant or
agreement of such Party contained herein.
4.5. No Party shall take any action that would result in any material adverse change with
respect to its power, authority, capacity to enter into and carry out its obligations under
the Shareholders' Agreement or with respect to its financial or business condition prior to
execution and delivery of the Shareholders' Agreement.
5.
5.1.
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6.1.
Letter of Intent and Costs
The Letter of Intent, including without limitation Article 6 thereof, remains in full force
and effect. The Parties agree that, inter alia, they shall pay fees and share costs in
accordance with Article 6.0 of the Letter of Intent.
Conflict
In the case of any conflict between any provision of this Agreement and any provision of
the Letter of Intent, as amended, the provisions of this Agreement shall prevail to the
extent of such conflict.
7. General Provisions
7.1. The Parties agree that the recitals in this Agreement are true and correct to the best of
their knowledge and belief.
7.2. This Agreement shall enure to the benefit of and be binding upon the Parties hereto and
their successors and permitted assigns.
7.3. This Agreement shall not be assigned by any Party in whole or in part to any other
person, except with the prior written consent of all other Parties to this Agreement.
7.4. This Agreement constitutes the entire agreement between the Parties with respect to the
subject matter of this Agreement. The Parties acknowledge that there is no
representation, warranty, agreement or understanding between them, whether express or
implied, oral or written, which has induced any of the Parties to enter into this Agreement
except as expressly stated herein.
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7.5.
No Party to this Agreement will be deemed to have waived the exercise of any right that
it holds under this Agreement unless such waiver is made in writing. No waiver made
with respect to any instance involving the exercise of any such right will be deemed to be
a waiver with respect to any other instance involving the exercise of the right or with
respect to any other such right.
7.6. Each Party sha1l at any time and from time-to-time, upon each request by any other Party,
execute and deliver such further documents and do such further acts and things as the
other Parties may. reasonably request to evidence, carry out and give full effect to the
terms, conditions, intent and meaning of this Agreement.
7.7. This Agreement shall be governed by and construed in accordance with the laws of the
Province of Ontario and the laws of Canada applicable therein. The Parties to this
Agreement hereby irrevocably and unconditiona1ly attorn to the exclusive jurisdiction of
the courts of the Province of Ontario and all courts competent to hear appeals thererrom.
7.8. Time shall be of the essence in all respects of this Agreement.
7.9.
This Agreement may be executed in any number of counterparts with the same effect as
if all parties hereto had all signed the same document. All counterparts shall be construed
together and shall constitute one and the same original agreement.
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7.10. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND CONFIRMS THAT IT
HAS BEEN ADVISED TO AND HAS HAD AN OPPORTUNITY TO RETAIN
COUNSEL AND RECEIVE INDEPENDENT LEGAL ADVICE WITH RESPECT TO
THIS AGREEMENT.
IN WITNESS WHEREOF this Agreement has been executed by the Parties hereto.
SIGNED, SEALED AND DELIVERED
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The Corporation of the TOWILofHanover
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The Corporation ofthe Township of
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The Corporation of the Municipality of
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The Corporation of the Municipality of
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The Corporation of the Town of Wing ham
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Canadian Niagara Power Company
Limited
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Schedule "A"
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DAVIES, WARD &BECK
~......,¡ 6:SOLlOTOJIS
Pi\TRICKII4ONAHAN
DirectLinc (416) 367-6976
pmonahan@dwb.=
File No, 34884
July 14, 2000
;ßY FAX AND COURIER.
PRIYATEAND CONFIDENTIAL
The Director
Tax Advisory Section
Corporations Tax Branch
MiIÙStxy of Finance
33 King St. West
Oshawa, ON LlH 8H5
Attn: Jim Kareclas
Senior Tax Advisory Specialist
Dear Mr. Kareclas:
Creation ala New Re¡ion..¡ Electricity Distrigution Uß1if:y
This is an appJication by Davies, Ward & Beck on behalf of Canadian NlagaraPower
Company Limited ("CNP") for an advance taxru1íng within the teIms set out in Inf=ation Bu1letin
2-77R h Advance Corporations Tax Rulings", dated September 14,1981, as amendedbyInformation
Bulletin 2741, "Ontario Budget 1988", datedJuly 1988,inrespect of the consequences under section
94(1) of the Electricity Act, 1998 (the "Act") of the proposed transactions hereinafter described.
In connection with Ibis roIing application, we enclose:
(a) a letter of authorization from CNP authorizing us to act on its behalf in applying for
this tuIing¡
(b) A fax authorization from CNP authorizing the Minisuy of Finance to éo]]ll11Ul1ÏCate
with us by fax; and '
(c) a resolution passed by the Hydro-E1cctric Amslgœation Steering Committee (a
commHtI'e composed of ~~~ves of the J'arti~ tþat would participate in the
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proposed transactions hereinafter dcscribed), consenting to the making of this ruling
request.
To the best of our knowledge and that of CNI', none of the issues involved in this
ruling request, as they apply specificaJly to CNI':
(i) is in an earlier retam;
(ü) is being considered by the Corporations Tax Branch in connection with a
previously filed tax retum;
(iií) is under objection;
(iv) is before the courts; or
(v) is the subject of a previously issued ruling,
We hereby undertake to pay such fees as may be payable under the provisions of the
Information Circular.
BackEl'ound
One of the primary purposes of the Act and the On/anI! Energy Board Act, 1998 is
to create acost-competitive distribution sec:torto support Ontario's industrial competitiveness.' Prior
to the enactment of these significant refonns. Ontario had more than 300 local distribution utilities.
The legislation was dcs.igned to facilitate the amalgamation of smaller utilities and the adoption of
"best practice methodsw. thereby achieving significant economies and ccintributing to keeping prices
low, securing investment andjobs, and avoiding risks for the taxpayers.'
In furtherance of these objectives, CNP has been involved in negotiations with a
numbet' of municipalities overthe past five months. with a view to creating a new regional electricity
distribution utility in certain municipalities in central Ontario. This new regional utility would
consolidare a. number of smaller municipal utilities that individually lack the scale or resources
needed to operate in a cost-effective manner in the new colIl1I1e1'Ci.al environment that is emerging
in the province's electricity incluslIy. A formal Letter of Intent has been signed by CNP and eight
municipalities, and the parties are now in the process of fjnaH'7.Ïng the forma11egal documentation
necessary'to create the new regional utility. A copy of the signedLetú:r of Intent is attached hereto.
See generaDy, HOIIOurahle Tun Wdson, Dlrectillnfor Change: Charting a Coanefor Comper/rive Eleclridry
andJob. InOnrario (Mìnimyo~, ScienCB and Technology, November 1997) (hereinafter ")997 White
Pap.r").
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1997 White Pap., aJ. 12.
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In these negotiations, the parties have proceeded on the basis that the new regional
utility would be a municipal e1cctric utility that is exempt from tax under section 149 of the Income
TaxAct(Canada). Therefore, it has been assumed that the regional utilitywouldmakc the payments
in lieu of federal cOIporate income tax and municipal and school taxes provided for undet sections
92 and 93 of the Ad. It has also been asS1JIDed that the transactions whereby the utility would be
constituted as an operating entity would not be subject to transfer tax under section 94(1) of the Act,
on the basis that any asset transfers would be exempt from such tax under section 94(7)(a) oftheAct.
The plIIpOse of this request is to obtain an advance tax ruling confirming these
interpretations of the relevant statlltory provisions so that the transaction may proceed.
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(n) Canadian Niagara Power Company Limited
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Founded iI11892 and headquartered in Fort Erie, Ontario, CNP is a cotporation incoIporated
and resident in Ontario that, through its wholly-owned subsidiary Canadian Niagara Power
Inc., currently distributes electricity to 14,000 customers in Fort Erie and operates
approximaíe.Iy 32 kilometres of transmission lines, six transformer stations and 900
kilometres of distribUlion lines. CNP has beën generating elèctricity in Ontario since 1905,
making it one of Ontario's oldest municipal utilities. CNP is one of the few electricity
companies in Ontario that is privatèJ.y owned and., through its energy marketing division, is
one of the few utilities engaged in wholesale energy transactions.
2. CNP is owned equally by Fortis Inc. (an Atlantic Canada-based diversified services company
whose principal assets consist of two electric utility subsidiaries Newfoundland Power Inc.
and Maritime Electric Company, Limited, the principal distributors of electricity in the
provinces. of Newfoundland and Prince Edward Island), and by Niagara Mohawk Power
COIporation (a New York utility). These two parent companies had combinc<i annual
revenues in 1999 of $6.2 billion (Cdn..), which provides CNP with ready access to financial
capital.
3.
CNP hall experience and expertise in marlœting energy, both within Ontario and to Uni~d
States utilities. CNP has also developed and impIerncnted the information technology
necessary to provide accurate and efficient infonnation management systems that will be
needeå to manage b1Ilrin".ss, customer and supplier relationships in a competitive enet!Y
marketplace. This technology results in lower costs, increased customc.r satisfaction and
improved profitability.
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4.
CNP's cw::œnt m~mT1g addIess and tax ic1entification number are as follows:
Canadian Niagara Power Company Limited
1130 Bertie Street
P.O. Box 1218
Port Erie, ON L2A SY2
Tax ID No.: 120234
5. In eadyFebtuary, 2000, CNP initiated discussions witb anumberofIIlUllicipalities in central
Ontario (collectively, the "Municipalities") with a view to merging their existing electricity
distribution utilities into a single new:regional distribution company. This new utility would
be a public-private partnership which would replace the existing smaIl and fragmented
distribution operations of the Municipalities with a competitive and leac1i:D.g-edge company
that will reduce costs, eliminate duplication and provide better service for consumers.
6.
CNP has acted as the catalyst in these discussions, bringing the Municipalities together in a
manner that would not have occu:rred but for CNP's involvement. The presence of a private-
sector partner with the experience, skills and resources of CNP and its cmporate parents has
also provided assurance to the municipal partners as to the feasibility and likely success of
the venture in the new, emerging :regulatory and business environment in the province's
electricity industry.
(b) The MunicipaItties
7. The Municipalities that have signed the Letter of Intent which contemplates the creation of
a new :regional e1ectricity utility in their area are: the Coxporation of the Town of Hanover
("Hanover"); the Coxporation of the Town&bip of Huron-Kinloss ("Huron-Kinloss"); the
Corporation of the Municipality of Kincardine ("KiDcardine")¡ the Cmporation of the
Municipality of South Broce ("South Bruce"); the Coxporation of the Town of Saugeen
Shores r'Saugeen Shores"): the Coxporation of the Village of Markdale r'Markda1e"): the
Corporation of the Town of Brockton r'Brockton"); and the Corporation of the Town of
Meaford ("Meaford''),'
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Note tba1 whDe Meaford sipd the Letter of InIeDt, it has &ubseqtll!lltly derJqeð not !O participate in the
transac::ticms deacn"bed below. Note al&o tþat.1herc are OJllOin& diacusllioDS wlih additioDa1l11UDidpalities in
the re¡ion, with a view !O ob1amin¡ their agreement In plttl!cipale in these tl'aDS..,¡;""'<,
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8.
The number of custome1'S currently served by the electricity distribution undertakings
operated by the Municipalities is as follows:
Hanover
Huron Kinloss
KJncardinc
South BIUCe
Saugeen Shores
Markdale
Broclaon
MeafOId
TOTAL
3,271
1,200
3,081
1,100
5,293
778
2,528
2,214
19,465
Certain of the Municipalities have transf=d assets, liabilities and employees used in
connection with the distribution of electricity to an Ontario Business Corporations Act
("OBCA") corporation by way of transfer bylaw, as contemplated by sections 142 and 145
of the Act, However, certain of the municipalities have not yet effcctlld such transfen;.
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ProDosed Tl'8n.actïoDS
10. The Municipalities will incmporate three corporations unde.rthe OBCA, pursuant to section
142 of the Act: (i) W=co, which will cmy on the business of the distribution of electricity¡
[n) Servco, which will cmy on the business ofmaiketing and selling associated products and
services; and (üi) Ho1dco, which will own all of the issued and outstanding shares ofWiresco
and Scrvco. The Municipalities intend that all undertakings, assets, property and employees
that are cummtlyuscd in thcirelectricity distribution businesses, or shares in any cOIporation
holding such assets (collectively "B]ectricity Assets") will be transfened to or be held by one
ofWu:csco, Scrvco orHoldco(collcctive1ythe ·Section 142 Corporations"), or by successors
thereto, in accordance with the transactions descn'bed below. All of the Electricity Assets to
be transfem:d are used to provide electricity-related services within the geographical
boundaries of the Municipalities.
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11. Upon incorporation, the authorized share capita! ofHo1dco, WJ.IeSCO and Servco will each
consist of an tmJiJTritednumbc:rof common shares. Each of the incOIporatingMunicipalities
will subsc:r:ibe for ODe COUDIlOD. share in each of Ho1dco, WII'CSCO and Servco for a
subscIiption price of $1.00 per share. . ,
12. The fair market value of the Electricity Assets of each Municipality which are to be
transfmed to me Section 142 Corpotations will be clctermined by an independent, arms-
length valuator on a consistent and få.ir basis. ': ,. . .'
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Each of the Municipalities wbich has not yet transfened Electricity Assets to an OBCA
corporation will transfer any such assets used in connection with the distribution of
e1ectricltyto W.1I'C5CO, pursuant to transf'erby-laws as contemplated by section 145 oftheAct.
The consideration for such transfers wlU be the issuance of shares in the capital of Wires co
håving an ascribed value equal to the fair ma.rlœt value of the transfen-ed. assets, as
detemùned by the valuation in paragraph 12 above.
Each of the MunicipalitieS which ~ already transferred Electricity Assets used in
connection with the distribution of electricity to an OBCA corporation as contemplated by
section 145 of the Act will transfer the shares of such corporation to Wuesco.~ 'The
consideration for such transfers will be the issuance of shares in the capital of Wiresco
having an a&crlbed value equal to ,the fair marlœt value of the transfetred shares, as
determined by the valuation in paragraph 12 above.
Wiresco will formally .mo1 vmote with any subsidiary acquired as a mJult of the transfer of
shares provided for under paragraph .14, and will be continued as Whesco.
16. Each Municipality will transfer all of their other Electricity Assets (i.e. those not already
transfCJ:Ied to Wiresco pursuant to paragraphs 13 and 14) to Servco, in consideratiolJ of the
issue to each such municipality of shares in Servco having an ascribed value equal to the fair
market value of the transferred Electricity Assets, as determined by the valuation in
paragraph 12 above.
17. Each Municipality will transfer all of its shares in the capital of both Wnesco and Servco to
Haldeo, in consideration of the issue to each such Municipality of shares in HaIdco with II
value equaJ to the aggregate fairmarlœt value of the Electricity Assets previously transfeued
to Wiresco and Servco, respectively.
18. CNP win incorporate II corpoI31ion ("CNPc.o") m1dcr the OBCA. CNP will subscribe for
shares in CNPco having a value equal to ten per cent of the combined value of the shares
held by the Municipalities in Holdco after the transfers contemplated by paragraphs 13-17
above. The consideration fur the purchase of these shares by CNP will be cash.
19. HaIdeo will amalp'tlAtp. with CNPco and be continucdas Holdeo-.A m..I~.o. The shareholders
of Haldeo and CNPco will receive shares in Haldeo-Ama1co equal to the value of their
fOIl:1JeI' holdings in HoIdco or CNPco, as applicable. It is intended that the xnunicipalities will
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Doc ff: 783673.6
Note that II i¡ possible dt.ú one or ØIQœ af die Municipalítiea. may ~ traDI!femd to' a single OBCA
COlpoJalion _ets used in electricity c!ls1nDulion aa well.u wets IISe!I fur other eIcclrlcity-ra1ated aeivices.
In such s. cue. it is com-pI. P.d that !be re1eVBDt DlUJ)iclpality would seg¡¡:prc !he ISsets into two different
OBCA coqx¡rations through a corporation reorgs.nizalion; W'= would then s.cquira the shares of !he
çarporation boIc!in&!be electrlcítycJiatributiøn assets, while Sem:o would scquira!be sbares o{!becoq¡ors.IÍOI1
balding the othee assets as descnõed iD ~1116, below.
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20.
hold not less than 90 per cent of the shates ofHoldco-Amalco and CNP will hold not more
than 10 per cent of the said shares.
The shareholders of Holdco-Amalco will enter into a. shareholders agreement which shall
provide each shareholder with representation on the Board of Directors of the company. The
shareholders agree~nt will provide thatnò single shareholder can exercise exclusive control
over the company.
21. Holdco-Amalcowill use the working capital acquiredthrougb the amalgamation withCNPco
(i.e. the cash providcå by CNP in connection with its share subscrlption descn"bed in
paragraph 18 above) to fund the one-time costs associated with the establishment of the
Section 142 Corpvdttions and Holdco-Amalco. including: costs associated with the
incOlporation and orgEnization of the Section 142 Corporations and Holdco-Amalco
(including the settling of all definitive documentation such as the shareholders' agreement,
the amalgamation agreement and all documentation required in connection with the transfer
of assets or shares to the Section 142 Corporations and Holdco-Amalco); the negotiation of
a long-teIm debt facility on behalf of the new merged utility; the development of a viable
business and integration plan; the identification of a suitable Chief :&ecutive Officer; and
obtaining all necessary regulatoty approvals. Any balance remaining afterpayment of these
expenses will be used for working capital puxposes.
22. The Municipalities' participation in the transactions described in paragraphs 10-21- above is
subject to obtaining aruIing thatthe transactions will notbe subject to taX pursuant 10 S<:Ction
94(1) of the Act.
PuruoS8 of the ProDosed Tt'RnUletions
23, As was noted. in the 1997 White Paper, in designing anew electricity system in Ontario, ODe
of the Government's goals was to create a cost-competitive distribution sector. Ontario
electricity consumers pay about $1.5 billion per yearfor local distribution service. The1997
White Paper concluded that significant econOIIÚes could be achieved through the
~m~lgø~"tìon of smaller utilities.
24. The 1997 Whire Paper also stated that it was important to encourage new partnerships
between the private sector and local distribution urilities. Such public-private partnmhips
were said to be important since they "bring new perspectives, new energy, new resources,
and discipline to help get costs down."s
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25.
The GoV""11"~t'8 expectation was that Ttlnn;cipal electric utilities would achieve significant
geograpbical consolidations overthc 1998 - 2003 period. The GoVP.mm.."t was ofthc view
that restruc:tw:îng should be controlled mainly by cumrmmities themselves, worldng closely
with local businesses.'
26. The puzposc of the tJ:anSactions described above is to achieve the very geographical
consolidation that was endorsed by the 1997 White Paper. Through a public-private
partnership, a number of small utilities with an average of approximately 2,500 customers
each will be combined into a new regional utility. This n~ regional utility will achieve
significant efficiency improvemenþ!. lower costs and provide better service for consumers.
.
27. As was foreseen by the 1997 White Paper, the involvement of a private sector partner such
as CNP is the key to the realization of these potential efficiency gains. CNP has developed
the concept and business plan for the merged U1ility, and will provide the knowledge,
expertise and aecess to capital necessary to ensure that the promised efficiency gains are
realized. The Municipalities acting alone, either individually or collectively. could not have
conceived of or executed the trmIsactions proposed herein.
R.1I1il1!!S Reauested
On behalf of CNP, we, request the following rulings:
28, For puxposes of sections 93 and 94 of the Act, the Section 142 Coxporations and HaIdee-
Amalco will each constitute a "municipal electric utility that is exempt UDder section 149(1)
of the Income Tax Act (Canada) from the payment of tax under that Act".
29. The Section 142 Corporations and Holdco-Amalco will be liable to ma1œ payments· to the
Fmancial CoIporation in lieu of federal corporate income tax in accordance with section 93
of the Act, and payments in lieu of additional municipal and school taxes in accordance with
section 92 of the Act, calculated, as applicable, on 100 per cent of their income or property.
.
30. No Municipality will be liab1etopaytransfertax under section 94(1) oftheActin connection
with any of the transactions descnõed in paragraphs 10-21 above, 'provided that the s!IÎd
transactions are completed prio¡ to the repeal of section 94(7Xa) of the Act.
Subml~sions
(a) Section 149(1) of the 1nc:oTM Tax Act (Canada)
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31. Section 149(1)(d.S) of the IncU/1/8 Tax Act (Canada) includes the following persons within
the category of persons exempt from tax under its provisions:
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. "subject to subsections (1.2.) and (1.3), 8.cotporation. conmùssionDr BSSOCiationnot
less than 90% of the capital of which was owned by DI1e Dr = I11UIIÌCip8litÌ in
('\11""", if the ÏDc""'" fartbe period ófthe corporation, CDIIIIIIission Dr associarlon
froma.ctivities carded on outside the geographical bmmdarie& of the municipa1ities
does not eJCCeed 10% of its ÎDCoIDe for tbe perlod;"
32. Section 149(1)(d.6) provides that a wholly-owned subsidiary of 8. coxporation to which
section 149(1)(d.S) applies is also exempt from tax under the lrwome Tax Acr (Canada).
33. At the time of the transfer of Electricity Assets to the Section 142 CorporatiCDB (namely, the
transfm to WiIesco and SerYco described in paragraphs 13, 14 and Hi, and the transfers to
Haldeo described in paragraph 11) each of the transferees will be coxporations that are
whcIly-owned by ~ MDnicipaliåes. (See paragraphs 10 and 11, above), Further, the
Municipalities are each "municipa.li~es in Canada" as that phrase is used in section
149(1)(d.5),
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34, All of the assets 1Iansf.erred to the Section 142 Corporations relate to businesses canied on
within the geographical boundaries of the Municipalities. Each of the Section 142
Coxporations will also comply with the conditions in subsections (1.2) and (1.3) of Section
149(1).'
35. Therefore the Section 142 Corporations are exempt from tax under section 149(1) of the
Income Tax Act (Canada).
36. Holdco·Amalco is at least 90 per cent owned by the Municipalities. (See paragraph 19,
above). On the same reasoning as outlined in paragraphs 33-34 above, Holdco-Amalco is
exempt from tax unåcrsection 149(1) of the Income Tax Act (Canada).
37. Each of the Section 142 Corporations is a "municipal e1ectdc utility" as that term is defmed
in section 88(d) of the Act, since each was established pursuant to section 142 of the Act.
Holdco·Amalco is a successor to Baldeo and, in accordance with section 179(b) of the
OBCA, possesscs all the "property, rights, privileges and franchises" ofHaldco. Therefore,
Holdco-Amalco is also a "municipal el~lric utility" forpUIposes ofthcAct, Altematlvely,
the Section 142 CotpOIations and Holdco-Amalco are bodies throu¡h which a mUIIkipal
coxporation ¡me:rateS, transmits, distdbutcs or retails electrlcity and are therefom municipal
. elec:tåc utilities by virtue of section 88(c) ofthcAct.
7
Subsection 1.2 provùles a rule for d~"'.....;..n,g the application of the income testreferred to in subsectiOll (d.5),
wlúleaubsection 1.3 Rq13it=s tfIat"""".-\paHlie.s must oWn sIwes duI140¡etbergiw tbem 90% or ¡pare of the
voleS that could be cast at all &DIUIa1 "!D""""g of shareboJdms of the COIporaIion.
Doc 41: 783G73.s
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38.
'Thetef0IC, each oftbe Section 142 Còtporaticns andBoldco-Amalco is a -municipal elec:trlc
utility that is excmptunder section 149(1) of the Income TaxAct (Canada)frOJn 1he payment
of ~ unde: that At;t" far purposes of sections 93 and 94 of the Act.
(b) paywzents in Lieu of Tax
39. In light of the conclusion expressed in paragraph 38, it follows that the Section 142
Cotpcrations andHaldco-Amalco are liable tomalœ the payments in lieu offederal corporate
income tax and I11unicipal and school taxes contemplated by sections 93 and 92 of the Act,
calculated, as applicable, on 100 per cent of their income or property.
(c) Transfer Tax,
40. Although section 94(1) or the Act provides for the paymßnt of tax upon the transfer of
Electricity Assets by a municipal! ry, section 94(7) provides an exemption from this tax for
tranSfem to the Generation Corporation, the Services Cotporatíon and to municipal electric
utilities that arc exempt from tax undersectíon 149(1) of the Income TaxAct (Canada). This
exemption is time limited and only applies to transfers made prior to the expùy of section
94(7).
41. It would appear that the pl1Ipose of the exemption in section 94(7) for transfers to municipal
. electric utilities is to provide an incentive for the consolidation in the distriblltion sector that
was endorsed by the 1997 White Paper. Absent such an incentive. the danger is that
municipalities would fail to proceed rapidly with a voluntaIy restructlJring of their
distribution operations. thereby postponing or missing entire1y the cost savings that .such
restructUring will produce.
42, In light of the conclusion expressed in paragraphs 38 and 39 above, the Section 142
Cexporazions and HaIdee-Amalea fail sqlÎarely within the plain meaning of the exemption
provided for under section 94(7). Each of them is a "municipal electric utility that is exempt
under section 149(1) of the Income Tax Act (Canada) from the payment of taX under that
Act". Further. since each of these entities will be making the payments in lieu of taxes
contemplated by sections 93 and 92 on 100 per cent of their income or property, and these
payments will be used to reduce the debt fot which the Financial CDIporation is Iesponsible,
it is consistent with the schœne of thc Act that they be exempt from the payment of transfer
taX und« section 94.
43. The Section 142 Corporations andHoldco-AmaIco also satisfy the puzposepftheexemptìon
in scotion 94(7), as set out in paragraph 41 above. These entities will bring tog¢1er a series
of small distribution uode:rtakings which lack the rcsourqes or expertise to achieve the cost .
savings promised by the'1997 White Paper into a new consolidated regional utility. The
public-private partnership model and the key role played by CNP, as envisaged by the White
Paper, will lead to the realization at economies and lower consumer costs.
J)oc #: 783673.6
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Tb.erefore, th~ ttanSfe¡:s to the Section 142 Corporations described in paragraphs 13,14, 16
and 17 are eJœffipt from tax under section 94(1) of the Act by virtue of section 94(7)(a)
45. With:respect to the amalgamations described in paragraphs 15 and 19 above, subsection 2(5)
of Regulation 124/99. as øm~'¡"-d by Regulation18100, makes specific provision for the
definition of It ''transfer'' for purposes' of section 94(1) of the kt in the context of an
amalgamation or merger. Subsection 2(5) provides as follows:
44.
If s. COIpomtion (the successor corporation") is fonœd as a result of the
.malpTn.tion or metgm' of two or znore catpOtILtions (the "p.redecesscr
corporal:ioøs"), an Interest in property desc:rlbed in subsection (1) that is
held by a precl8cesscr corporation ;Tnm..ñí.'''1ybefore the amalgamation or
merger shall be dce.med to have been transferred to the successor
corporation upon the an1algamation or xœrger. That transfer sbal1 be
deemed to consti~ s. transfer described in subsection (1).
46. Applying this provision to the amalgJ'TWltÎon(S) described in paragraph 15 above, Wiresco
will be a "successor corporation" for purposes of subsection 2(5). Therefore, the said
ama1gama.tion(s) will œsult in a transfer of the electricity assets of the predecessor
corporations to Wiresco. Howeve.r, since Wire:sco is "a municipal electric utility that is
exemptunde.rsection 149(1) oftbelncome TaxAct(Canada) from the payment of tax", this
transfer is exempt from tax under section 94(1) by virtue of section 94(7)(a),
47. The identical analysis applies to the amalgamation contemplated by paragraph 19 above.
Holdco·AmaJco will bea "successor corparation" forpwposes of subsection 2(5). Therefore,
the said amalgamation will result in a transfer of the electricity assets of the predecessor
corpÖrationa to Holdco-Ama1co. However. since Holdco-Amalco is "a municipal electric
utilitytbatis exempt under- section 149(1) of the Income TaxAct (Canada) from the payment
of tax", this transfer is eJfe1Tlpt from tax under section 94(1) by virtue of section 94(7)(a).
Given the timc-limited nature of the exemption in section 94(7){a), we are hoping to
=~ve a positive ruling as soon as reasonably possible. and in any event within 30 days. If this
timing can be accommodated, the parties will be able to finR1ire the doçnm"'\bl.tion necessaIj' in
. . order to complete the transactions as descn'bed in this letter in a timely tfI~nner.
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DAVIES, WARD &: BECK'
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. In order to expedite matters, we would appreciate an opportunity to discuss any
queati.onaorconcems thatyoumayhave, so that any dìfficulties can bcresolved as soouas possible.
In that regard, ei1herI or my colleague Arthur Sbiff «416)863-5513) will be in touch with you in the
near future with a view to arranging such a meeting.
Y OUIS vel:)' truly,
~,J~
Patrick Monahan
(416-367-6976)
PMlseh
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Doc t: 783673.6
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June 29, 2000
Davies, Ward & Beck
Barristers and Solicitors
Sutte 4400
1 First Canadian Place
Toronto, Ontario
MSX 181
Dear Sirs:
A.dvance Tax RulinQ Reauest
You are hereby authorized and instructed to apply on behalf of Canadian Niagara
Power Company Umited to the Ministry of Finance for an advance tax ruling in
accordance with Information Bulletin 2-77R "Advance Corporations Tax Rulings", dated
September 14,1981, as amended by Information Bulletin 2741, ·Ontario Budget 1988",
dated July 1988, In respect of the consequences under section 94(1) of the Electricity
Act, 1998 of the proposed transactions more fully described in the ruling application
letter accompanying this authorization. '.
Yours very truly,
CANADIAN NIAGARA POWER COMPANY LIMITED
1-d
Timothy B. Curtis
Vice President, FInance and Chief Financial Officer
TBC/mar
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P..'AXA'UT!JO~U~
Advanœ Income Ta:s: Ruling Request on BehaJf of
C..n..r'lJItp. NiaørB Power ComnlD.Y Lbuited by Davies. Ward & ~
Canadian Nia.gam Power Company Limited (nCNP'~ hereby autborizes the
Corporations Tax Branch. of the Mini.stry of Finance to fax aU com:spond= concerning the
advance income tax ruling request made on behalf of CNP by Davies, Ward & Beck. The
correspondence is to be transmitted to Davies, Ward & Beck at fax number (416) 863-0871.
CNP is aware thai the Múrlstry of Fi'M"""e does not provide assurance with
respect to the protection of fàcmmite tr-Ir>lOTn;Jlgons. CNP accepts the risks mh.crent in sending
information by fax, CNP agrees not to bold the Ministry of Finance or its employees liable for
any damage or loss, however caused, arising out of the facsimile transmissions of
correspondence related to the advance income tax ruling request
CANADIAN NIAGARA POWER COMPANY LIMITED
Date:
1",1'<- 2-% ~
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By:
Name: "{;""lc91L.¡ G, c;...r' t
Position: / ¡; ß "'(:t..1z.¿. ¿ G..P=7
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Hydro-EJ~ AMAlpmtoflnn SteerittV Committee
E:r¡þ'Pt'!!: :!tom Minutes of June 29. 2000 Meetin"
2.2 ACTION: Moved by Bob Jameson. Seconded by Eugene Fay:
THAT the Hydro--Elcctric .Axna1gamation Stcerløg CommHtee approved CNP's submission of a
request for a tax ruling:from the Mmister ofFinancereganfing CNP's 10% ownership of the new
company.
Cmicd
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LE'J.'TER. OF INI'ENT
P\1ISI.I.al1t to Scçtion 142(1) of the Elr:clI'idty Ad, 1998 (1.11e "Eløctricity Act"), Ollc or
mere a¡u.túcl:Pal ccrporatiotl$ miLÿ cause cœporati01lll to be incorpotated under ,'!he
Bsuines8 CorporatJ.ons Act (OnImio) (''OBCA'') ibr the purpose: of ienmltJI1g.
tnnsmitting,. åisttibttting ou..f....1;"', electricity.
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The fiillowing municipalities have 1wf. discussious le&,"-ding the p05si1rllity of
em.a1gmIat!ng their elaclñcit)o opetlUions:
.
· Town ofBsnover
· Towœhip oflIuron-KinloS&
· Municipality ofKincatùine
· M-nniclpality of Sooth Bnu:e
· Town of'Saugeen Shores
· Village of.Markða1e
· Town ofBroc1åon
· '!1)V/I1 ofMeaiWd
(lõUCh M~alilies and any o1bt:: lI'Junlc!pal1tìeJ¡ signing this Letter of Intent .!rom 1iroe
1:0 time being c:on~tlve!.y refmed tQ IIIi the "Mucicipal.iti.e&'').
Cemín gfthe Munic:ipa1ilieo: have øot yet transferred any of their assets or employcà'i (I)
8J:1 OgCA corporation by wlCf of trll1l5Íe:r by-law, 3B pmmitted 'IIPrl=r SectíDT1 145 ofthc
£lectrid.r:y.4ct. Other Municipalities ~ tnnsf==d their assets Imd cmplOYl)cs to
cowora.tlans incorporated 'I1I1Òm' th= OBCA, by them pum¡.ant to Section 142.(1) of the
E10Ciri:i1:y Act (8UCh coq¡orations being referred to ill this Letter of Intent as "Su.ooessor
Corp01.'l!!iousj.
For purposes of thls Letter of l'xttœr, the OBCA company which. would be Jointly
inco¡pota.ted by the MUllicipaIim.s witl be refem:d to as "Newco Powcz" and III1y
e.£fi.!iatœ of N_ PowlIr hIcorparared by the Municlpali'tilJlI ahsI1 be refèI:red to 11$ lhe
''NeM:O ,ATñI{.mo,", .
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'I'he Municip4lliies have also had discasdous with Canad:í1Ð:l Ni8B= POW8I' Company
Limited ("CNP"') regaIdiu¡ the POSSl1ñli1y of CNP pa:r:tÍ.ciparlng in Ncwc:o .Power and/or
the N'ew=o ~ t'!iJj·~"5 Basa4 011. I1æ discqesions between the Municips1i.ties a.!1d with
CNP, the panies bemo wish trI set out their mutual IJDde¡¡tandings and the Tn~"I1=r ~
w1rlcb. !hey wish to proeaod in order 10 Qet...."{.,,.. whether or not to participate in tru:
t'tmSaçtÎcm.1hat will result in the ama.1;gamadon of'1:heir utilities. '
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The M m;~ü~cs acþ¡Qw1edp that SOUle of the Mmzicipalities h&vc not yet
ta1œn my acti.cm with tspeot to tb.e incOlpOta.1ion. of an OBCÞ.. compmny PUISI.W11
to Section 142(1) of 'c11e Eler:tricily Acr.. The Municipalities IÚSO acknowledge
other Municipalities have traœi'1lmd assets and eroploye;a of thm elcotñd.ty
opcn.tì.ons to Successor CorpQre.tìons.. The Municipalitiu agree tbm: tMy will
wo:k tD~ tD stlUCrnrc the i:!uJs:fi:r of the electricity assetll and emp10yees of
all of'the MUIIic:ipaJities to Newco Power a:odIOT a Neweo }o. ffiHat11 eithet by w~
o£ transfer by-lø', træ:s&fef of the &hares of the Successat' Cotponticns, formal
amalgamation under the OBCA, or any COtIlbination of the foregoing.
BIWb. of the MIWicXpalliies takin¡ part In this tmlsactiou who has '!lOt mco¡pO!2lcd
P1 SUIIC=uor Corpœatian will tramfc:r the unciertakÍng, ptope¡ty and BõB6ts of its
electric: utili!.y 'buslacss (the "5lectrlc:íty Business") to N~ Power and/or
Newco Affiliates.
1.3 EacIì MllIliçfpaJity w!:Io has IWt Ì:acoIpomed a. Succcuor Cœpora1ion shall also
tran5fcr tD Newco PQwm- êllldlQr No:wt:o Af'IiliÐ1es such ettll'Joyees of its
cleclrl;ity buslncss u the Municipality d~ spproprim in the mam1er sel fo.rth
in patagn¡.p'h 2.4.
1.4 The tran&fcr of the Eled:d~ 'Business and employces ¡rom each Mur::ici,paüty
pursuant to ScctiotlB 1.2 aIICl 1.3 will be dcme pursumt to a TratISfer by.ræ.w
cotrtmnplated under S=ct!.on 145 of the Elecrridty Acz.
1.'2
1.5 Each Municipality who has InooIpCœted one o.r more S~esso: COIpOration shall
either transiEll' 1he sIæea of 1he S"':~sor CœpOrBtÏo.tI5 11) Nawco Fower mðlor a
Newco þ.. /'R11_ or fêIrma1ly ama1¡amat.e t1:æ Sl1t:œssar ColporatiOIl. with Neww
Power and/or a NCIWCO "fñHøt< d.ep~ on ~ course of action is most
favolttab1e atter a tIIYÍOW of their operations and my potential t:aJt ar ñnancial
aomoci'uen~es.
1.6 The oonsideration r=œived. 'by tbI: MmdcipaJitìc& f~ their Electricity BusineS!: or
S1lCCC&sor CoIpont.im:rs wilt be paid in 8. combination of cash. cIobt and sbares of
Nc:wco Power trMJor a New-ço .4. ¡:m.;"te, as applicable. 'The amcur:d: of casb, debt
mdlor shaNs 'œceMd by my MuDicipality will bç dctmniue4 by using !In
Ú!d¡;1euden1:va.1~Oll. com1uc:led by BDO Dunwoody (''BDO'').
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BDO w!1l ~..Jùe 1he wue of eacl1 Elec:t:dcity Business or SuctCSsor
Co:pomion 1br the purpose:s of transfming it to New1XI I'owo:r lICdIor Nswco
Affiliatæ em a consistent and. fídr basis. the va11.wIons .P"!Iared by BOO wID bll
BUbjec;¡ to rmc:w æ:ui apptoval by 8acb. Municipalliy md CNP.
The MUl'IicipalWes IIIlIicipara that 1he ÚliI:Íal debt instrument is.sued t:1ý ~ewco
PgWIIr OJ; a Newco A.ffiliate wiD. be issued. to Mutiicipallties =sf=rlng asaœ
nncI =nploY=8 by WflY of transfer by-1s.w. Tn ac1ðition, the Municipalities
antic!pm that my debt whil:h WB:I j¡¡~ by any S=5Ol Cozpon.tion to II.
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1ICMK'\IJSER\OROU~\GraY a 8nIœ\Da:::>ICdn ~ P_loIZr"'Io.I8nLO~.aOl:
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Muuicipllity will be RDigJ'M to Newço Power or II Newco Af!i1i;¡te and assumed
by sueh cot'l'tplll1Y. A debt instrument may be iilllue=d to t=p1a<:1! the d<:bt
insrrumam: which waa 80 assigned.
Tht Municipalities ø:ad CNP agree tbat a.ftot completion of an trilnsllt:lÌ=
contemplated by this Letter of I:nt=nt, It Is intended !bat each Mumcipeli.ty will
have received cash, debt IIIld shares ofNcwOQ Power eMlor a. NCWI:O Affiliate in
lltIlou.ats based OB the vaIualion of their Bleotrici1y Busmm or Successor
CotpOrations.
T:!I!1VI:O ,-
The businesa of Newco Power will 'b; the ¡mMsiOI1 Qf electrlcity dlstribution
IQt'VÎQes to its custoJ"eæ. '!be New-co Affiliates ma.y engage in suah businesses ;¡¡¡
the b/f,mi"ipal!!:i.es and CNP agree ~ one or the: Newco Afñliates may bl! a.
boIdí:og company ~ by tM ~i:ies and CNP.
2.2 NlIW\:o Power wiI1 be CQptm;tted to respect: !or people, O11StOtner sat:iafacrlon.
pmductiv.i1y, !;,""'cia! sua:ess comm11Ility involvement. and ~ unre1~
c:anmritment to sæety IUd the e:nvircmnœt.
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2.0
2.1
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2.3 The board of directcrrs ofNl!iW<:o Powà- and the Newao Affi.Iiates or a. ho1d1n,g
comp:¡ny wm be comprised of a repre&e:ntatíve of the pa:rticipatmg MlmicipaJ.ities.
CNP win bo cc.ti&d to &.'IIPOin1: one direåot'. The board win be C01n~ of
qll!ilified individuals,
2.4 AU IIItIployees of the Blectrícity B1Jsinesses and Successor CmporaQons wbiçb
a;¡¡y MUDÎçÍplÙÌty !misters wiU beçOlJ: þ employees of New co Powtt or & Newco
.A.t'5J.iate.. No cll.Utlrt QIIlPlnyec wm Jose bislber job as .. rcsclt of the
I1ma!gamation. 'Iha tlW:la.gem.œt oCN;wco Power Ø!IIi the New-co Af5.liates will
adðross long-term employment j¡¡ Nes in a. ~ cousisteat with the Ìl:l6truc!ion
it IeCe1vcs from 'ib.c bod of directœs, up¡:as1!l:l1i:a¡ the' interests of lb...
Muniaipa.lliies. It is anticipated that the D"....òer of 1IDp1oyees wiI1 clumge ~ a
resu!1 of earLy ~t and DOnna! Id:tritiou wbW!l will. aUOW' for the
development of eccmarnie& of ewe.
2.S Newco Power and. tho N_ j.fñ1i-"" WiJl operate ~ the :tIlI!I1d.ate of
maxlTIÛ7.lng their 1cng-œrm value one!. ~ & 5ta'h1e mmua! mcoltle s1mlQ:¡
fo:r the shaœboldm&.. .
2.6 Newc~ Power will ståve b:I ma¡..~n current e1ectdoìty distnÖUti.oJ1 rates 1mt11 the
!mplexaenlalb1 DE !he ope¡¡ ~t and 1II1bnndled TaleS. At tba.t timEr Newco
Powerwi11 apply to tho Oøts:rla BœtgyBoard for B:.JI.pt'Oval oerms !118I:pnerau: a.
:fiùr tI6tIIm for ÍbII shazeb.oI4eœ while also raflcotíug the efficiencies Wbich 1ho
amaJ~ is 1IItpeCte4 to ÞlCrBte. '
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G~.\Gray & -~\CdnNhl;ara _LstIera/'nIenI C_.dca
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s.Þ1II',~!u)ld"no' A,r..-n-"
A shart:botden agreement Wl.1l be entered into by the s!mreboldc:œ of Newco
Power and/or the Newco Affiliate!. which will !OVQCIl the relationship b~tween
the !lhstdloI~ and ptovido 1bt the o~ot!. snd managlll 1SQt of Neweo
1-ower MðJar !he Nowco AfE!l!atcs.
The shareholdm ~t vnn provide that decieions of the board or d~ts
wID g~ 1'"'1.";"" tbÞ support. of a. tna,jorlty of cllieatora. Some specW.
decilJous will nqldre I11e support of a11 directors.
'Ibe shateholdm agTtI'nlent win mtriçt the trmsfi:rr of sItaœs without the ptÌO!
cOl1l!mlt of an sbareht!lde:rs such COJJIIc:.nt not t\:) be u:¡¡m¡sO'J.ll1:¡ly w;t'b""1d. The
shar=holdm agreement win stipula1e the mr:¡¡¡¡ by wbiub. " s1:1a.rebolð.er may
se.!Il\nnsf'er its ~ and the obligations of aU shBreholdm with tespel:t to
I5:I1Oh tl'ansfers..
3.4 'I'hs shareholders agres:o.em will be st!:uc:tured in suen a. fåsbion thI.l 110 siD,gle
.. shatehol4er can. exæc:isc w.closive control over the company.
3.5 If CNP becomes a. shar=hol~ ofNewca POWer or at'1.Io/ Newco Affilii1.te, it shaU
enter into a sb.areho!ået's a.gteemeo.t with tb,¡:: M'DlIioÏpaJitícs containing the abøvc.
noted tmns.
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3.1
3.2.
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3.5 'l'hII shs:reb.o1deœ agraemem sh:all :also £tipula:!.ll that CNP uny UQt own toOre than
10% ot th= sharu of Neww POWΠDr my Newco Affiliate 0: my holdiaS
cottlpa¡¡y without 1be prior wrltren consent of the other shar=ho~, such Cot1Se:tI.t
not to be unteasoœbly Withheld (it b~! acknowledged. !:bat ne¡¢ive tax
trœtml.lllt would be a t=a.swaò1e noI.SOn fœ DOt pro'll:iÓÌIIg consont).
4.0 Qæ
4.1 The M""~clpalities a.gm¡ t!Jat.lUb.!ect to the terms of !h;s Lette: ofInten't and the
n=JQtisti.on and settlement of an r!..m,;!ive docuznemat¡on, CN.P ahaU be em!tI.ed
to participate ÙI die ~""ct.ìons contempWed hereby by þ\J 'f!'ha......g II.p to 10% of
tho equity ofNewco p~ lndIar 3. NCWCD . ffíllat(' Any pmiciplltion ¡:ball be
sl1bjwL 10 eo"fiw...,.¡ol1. 1ba1 the ownsr!hJp by CN:P will not tesu1t in the Newc:o
Power mdlor N~ ..m¡ot.... individually and in !he ~, being owned
lesa 1:hm 510% by the Munici:pD1itie:s.
4.2 GNP acknowledges that m CJder to obtlÙ1 ~ eIi~ìty interest !n Neweo Power
eM/or = .Neww Mtiliates it wiU have to =tcor faro a ~ agreement
with t1u: M1IIIic:ipa1itiQ com..m!I'Ig, amq oth=r things, !he corJditjCtlS JICt forIh In
Article 3.0 above. .
4.3 CNP cba1l pay to the MuuiciplIlitiea (10 be ~ted 11$ asreeä 'by thé
Mun:ici¡¡aliries), an IttlOU4t ¡:quat to 10% of tÃe aggr~ value of New co PaWl!!' .
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\\CMI(1~PIXI~GIray A~ ~P"-~aI'l"""'IOrllfttl4.tIoQ
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!IIId b NC'NCO Affi1il!.teI.. Suoh amount shall be pllid in cash unless othl::wise
asreed. by the 'Mmú¡¡ipe1itiœ.
QoJP's abiJity to par6CÏ :1atc 111 t1:Ie trs;nsac:!ÌODI contempWcd he:eby by pmcD"""1
equhy in accordante with Sectiœ¡, 4.1 is wbJect to suCh panic.ipation not violati¡¡,g
arr¡ a.pplilOablc law !!Or ø.tt:ractmg taxes payable pUISUmt to Section 94 of the
E./eæi.cÏt)l Act, 1998.
'The MuuicipaJities msy jOÚltly -retain CNP, or iucb. <:It:1=: parties as ma.y ptOOIlS!
the. relmmt skIDs, to proWl: certain sc::vices including without Um1ta1.ion, tb.e
íol1owing:
(a) ISöÍs\:ance with::
(i) ù:lcarporation and. orga¡ûza.tiou ofNewco Pawa;
(ù) the t:rea.tiou of tltll by-lr¡,ws requ:i¡ed to pemùt the pmies to comply
wit11tbcprovisioua of the Eleob'icityAct, 1998 (01l!ari0); and
(üi) d1e ¡æggtialiotl at\ð. s6ttling of all de1inltivc dQÇUIXI.I !1tðtÌlXl
int:luding '!be sha:reh.old8r$' agreemenf. the atna1¡atnarlon
agT8l:tncnt BDd all doc==ntatío.o t~quired in c:œmection with the
transfer of assets tD Newcò Power t:ff any Newco A.!I'"ùja:te;
i!.$a'Í""Ir'I'= ~ & long-term debt facüity on baba1f cfNewco POWIiIt'
to pto1l'Ïde the c:ash tonsíd=ntion tc be paid to the Municipalities in
woanecti011 with tb:: =1gama1ìon¡
4.5
(b)
dcvgIopme:c:t. with th", patt{clpatiug MunicipB1ìties, of II viable bU5Íne.~~
and integration p¡m lbr NI:WCO Power IIIId tile NII"'<\O AflUiates;
usista:ace In the identification and hirl:ng of a suitablfl Chief ~tM
0fI5.cer ibr Ncwco Power smAlor tbI: Newco Affi1!.."3 who mllY Dr may
not be cuxteotly employed in tlw Eectrlcity Busmess or a. SuçOe5SOt'
Cotpontion in the Bmce Gray County am; snd
ø.ssistance in o~a all n:quhed regulatory 8pptOva1:s in ootma:1Íol!.
with the transactlœœ desc.ñbed herein..
4.6 CNP or sucb olber party &hall be paid a fee to ~ agreCd upOll for the prcvisicn of
BIlY cftbe services .A...d 10 in SectiQp 4.5.
(c)
(d.)
(e)
5.0 Conñden1:i.'~
5. t Each ~""i"Ìpllli1y and CNP wm, and. "'IriU cause eac:h of i.Œ I:D3ployees, o!fioers,
agr:o.1$ and other rcprc&eI1tatives, to hold in the smctest oonñð.=ace. aud'D01: use in
~ "'''''''''1'" whatsoever, IItIY cnnfidmtìaJ. 'i'l:l:!b1::a:w:ion wbich it 1eams wilJi respect
to ~ ol:bc:r Mumcipa1ity, 1be Electrlçi1y Bu¡ines¡¡.Of any S~~essor COtpO:rùÌon$
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\\CMK~~&.II~1Cdn ~_L8br.t .....mOniii>l"l-.doc
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of ¡¡¡ ,Other Municipality 01' CNP. For PI.IIpOS8S of this I.ett=t of I.tm:ar.
c:on.fi\1.enliel1.nfb¡m,atiœ wU\ 'mean all information t1I1a:ti:¡¡g to a. M\1:EJJci.paJity, its
Electricity B1ISiœIs or my S~r Ca:pontio¡¡, and if &Pp1icablc: CNP,
incl~ without Ihnùation, 'twIFi""-u ~lans, DTHm1':Ía1. ~~nrt. P'Perty,
~ of doing bus!nesõ ~ business results or PfOSPects and. inç}adø ñ:Ji'n"",,,tinn
whi"h Ì¡ propdetsJ:y, ¡¡. trade ~t or ot:herwisa of a. ~Iial iaformarlon.
Confid.emia1 itWnma.tion win not mç1ud1= üûonnanon vJbich is genemUy availaò1e
w the publW. avail3bJe to on a ZIQtl..çQtI.Ûdemia1. ba.sit or becœnes avøiliWle en. II
UOt1-<:~d"'Otb<l basi..
5.2 The ~ I.g:ee that paragraph 5.1 t: '!;s;te& a legaImd \rlnding obJigation f'o'r
o:acb. oftl1em..
G.I! C&
6.1 FoDowiag the: execu1ien. of this Letru of !nœm. the Municipa1ì1ics and. if
a,¡¡p1icable, CNP, 'WÙl p¡:oceed to t1eg1:!tiate,. F=pBl'C and seu.ta ibn:na.1
ðoc.umenta.1ion. to :reßec¡. \:be texms and ço¡¡ditiO,ll$ set out herein.
6.2 The MmdI::!paIitiœ agree tbaJ: tŠ1ey man pay the legal !ees md disbU!Sl:IIIents of
Power Budd lS$ociated with negotiating, P1"Ç1I.ri:c¡ and ~ of this Letter of
Int=:ù aml my o\hel: døc:u.menwion required in oonnec1ion with the tra:l!$ac1:iotl$
contemplated hereby, on a per customer basis. The Muuicips1itìes wi1l share
other joint costs they ape to ~ in the wnc iilshian. CNP agteeS to pay .I.
percentage of aD such c;gsl:$ in an amoum to be based on it& ~onate
ow:a=nq.. Bach Mœic:ipality and, if sppJicable, CNP agœes th..l it shalt pay i'!!!
pOTtÌOI1 of BDY fi:=s. cOstS or 01:b.er amounts iDcumd in ço:aneclÍon with thi&
agreem8llt within 3D ðaya ofreœi.YÙlS an aCIJOunt.
6.3 The pries qree that paraaraph 6.2 c;reates aJ1 obli.o:ratiotl which is 1=gal i.Ud
bindta¡ on it.
'..0 Cð"ditinft.,;
7.l The c:1osi.n¡ of the: lxanallCti= eoou:mp1a1ad by this Lc:tter Df' !ntwt will be
toIX1íI:inlJ9ll on thll faDowing:
(.) Execution of utIafactory deßmüvc dc=:nentation;
(b) ¡æ~d:pt of a1l necessary IDve:nmu:at:lt1 and thÏ1'd party DO &cnts to the
~
(c) b:eipt of apptOYal of all 00=14 af'thc Munic:.ip1li1ies mcl the board of
CNP;
(d) Comp1øIicn of all Ðm=SSary bUSÙ19s, aççQwting. C'Dgineerl~> and 1egaI
ch¡e~and ' .
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\\CMK1\USEl\\eRCUP\IIJn<::arcfinelGr.P¡ I. fIrUI:a\DQGa\Cd "'- Po-r Led« r:I Inll=nl Dra_c
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(e)
in çtmnec:tion wiè1 any part¡c:ipatiou. by CNP. NIfflQO Þower bI:ving a
1J1initIltllIl afl0,OOO COJmeÇtions.
"""It/flft"'! MUttI"~1!tJQ~
"l'bb MUIili;ipaliiic:& and CNP ackuawledge tb!.t other mJmlœpalities IrJaY decide to
partiQipw: in tha traœac:lions oontem'Pts.~t:d hereby prior to 'the ex=ou:tion of the
shmehc~ ~ The 1I<fm¡IQÍflsJities and CNP agree that such
",·,."icipaJities 'tlWJ partioipate hi. !:b.I:; 1ø.nsactìons provided. tbat !hey execut.e tbJ!
Lottet or Intent. agrœ 'tII:I me tcnu and condiliona set om herein. ~ aJ]
d.:fmitiv~ ~oD,. e:c.d a¡ree to make a cOttlñbut!.on to the co¡;tS i:ncmed
in connection b.æcwiIt. in IIJl iIC1tIUt'It dctmnmed Dy me M'Q '\;r.ipll.titics.
T.b.is Lea=r of1nÙll1t ÛI i1Itet'ñed only 10 teCOJd the agre=ml:l2t m pri%II::ip~ reached by tbe
partiu mc1 is not inbmde4 to c:reatc bindùt¡ legal oò1iptians. Except II! speçifi...Uy
lndJcated, le¡al obligations between the p&rti.es wù1 bll c¡;eafed only V/ÙI::I1 ""'¡¡nitin
~tiQ!1 is t::Kecuted by all pllrtics md on1y 10 the I:XtI:nt set OU.! in such dllfinitivc
dooum=ta.tion.
8.0
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This Letter of intent a.o:culWe1y reflectS the parties' :mutual unðcrstanding 'Wit'h .respect to
. the ms.tters set 0111 above rmd the parties a¡:ree to. proceed Ü1 ¡ood fàith. to settle the
deñnidvc docun¡enta:tioD. tcflccting these poi:c.œ;
~ted a& of tbis _ äa.y of AprlI, 2ooD.
TOWN OF HANOVER
By:
T'ttle:
:ay:
Title: ~,A'~~
11m COBPOtu..TION OF T.BE TOWNSHIP OF mmON-IQNLOSS
:Sy: ~-Ú tI. Sl
T1tle: Lt...e~
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\1CMK'~\GIwy"~fl!aQaRpg.".,ruœrcrt1rnentC"'_.d""
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THE COR1'ORATIOfl8~';~Rß. OJ loffNCAm)INE-BRUCE.
'l'lVERTON
Jay: I~~ f!~
'!i~ J;
Br- -::~ ~J~ ~s;?.r'1!'LJ-
TIDe: C- p.... 0
'rRE COlU'ORATION or 'EEΠMUNICIPALITY OF SOtJTH BRUCE
By. t.~.I d.~,~~
TItle;; ,
~ ~~~~.~ 7(!.!;L.
Tltle:
~OFT"" TOW!< OFSAUGDNSROBES
:By: ,,~ . .
1.'\tIe: )1f/,Y(-'
By: ~.
'ritJe: <!... ¡rt/-ð
T1ΠCORPORATION OF THE VILI.AGE OFMARKDALE
By: ~~
Tille:.pi /"~
By:
Title:
nm COR.PORATION OF '1'BE TOWN 0-' BROCKTON
By:
'riï:le:
By:
1'itll:
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\\CMIt~rIIia~~& IltutltlDcx:ii\Cdn~ P_~oIlI1iIm:tnII:i'+.dOQ
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THE COJU'ORATION orTBE TOWN OJ!' MEAi'ORD
By:
We:
By:
'I1tle:
CANADIAN NtAGARAPOW~LIM1TED
B~~~
Title:
~"i~
:By; µ~--.
1'it1e: v.P. ~A Hè,,-t
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\\CMK'IIlJS&RIGAO!J\'IIIQnc:an IIIQ\GnIy I. BnIoe\DocoIQdI1I'11oi1g:or.o p_ '-"- or 1,,/I0I'l1 CI1IlIiI4.dgc
...
"
DA vms, WARD & BECK
~"1a.IarOIIS
i'ATBJCK I. MoNAHAN
Ditec:tLine (416) 367-6976
pmonahan@dwb.cotn
.
File No. 34884
B.YFAX
My 19, 2000
The Director
Tax Advisory Section
Corporations Tax Branch
Mh:ústry of Finance
33 King St. West
Oshawa, ON LlE 8H5
Attn.; Jun KarecIas
Senior Tax AdvisOIV Sne<:~¡;!It
.
Dear Mr, Kareclas:
Amendment to Tax Rutin, R!!auest
1 em wrlting to make an minor amendment to the tax ruling request dated July 14,
2000 submitted on behalf of ClmA';;"" Niagara Power Company Limited. We wish to amend the
proposal by deleting paragraph 30 on page,S and substitutingthe following therefor (with the revised
paragn.ph set out below marlœd to show additions from the original):
30. NeJther a Municipality, a Semon 142 Cornorstion. Holdeo-Amsleo. qsPor
CNJ>eo will be liable to pay transfcr tax under section 94(1) of the Act in """,,,"ction
with any of the trsmoa"Ûl'US described in paragraph 1 0-21 above, provided that the
said transactions II1'C completed JIrlor to the repeal of Section 94(7)( a) of the Act.
In our view, these changes donata1ta:thc substance of the request, whichis to obtain
a ruling to the effect tb.!rt the proposed transactions will not result in a liability to pay transfer tax by
the parties to the transactions.
.
Doc U: 796301.1
l',o.1\OX ø,SVIft 4400 1 PDIS1' CANADL\l'IPL.\(X, TORONl'O, ON1'ABlO. CAN.-\IIA.M5X IBI
TELE1'Ø.ONJ: (416) 163-0900 FAX (416) 8G0811
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. Please ensure that this 9menñm~ is brought to the attention of the individual who
will be responsible fot '",nrl1i"g ibis matter,
Yours very truly,
P~J~
Patrick J. Mona11m
. PJMi1dv
bee: Tim Curtis
Bill Daley
Ron Clark
Bernard Manis
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Do. #: 796301.1
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.' . . . " Schedl,lle,"B"
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Performance Indicators for Westario Power Holdings Inc., Westario Power
Services Inc. and Westario Power Inc.
,
. 2001 2002 2003· 2004 2005
Rate Increase Percentage 2% 2% 2% 2% 2%
Rate centslkwh 7.9794 8.1356 8.2924 8.4488 8.6053
Interest Payments $680,000 $680,000 $680,000 $680,000 $680,000
Return on Equity as -0.73% 2.26% 5.25% 8.24% 11.23%
Percentage
Net Cash Flow Available $11,467 $293,722 $575,978 $858,234 $1,140,489
for Dividend
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Schedule "c"
STRICTLY PRIVATE AND CONFIDENTIAL
DRAFT: August 8, 2000
SHAREHOLDERS' AGREEMENT
The Corporation of the Town of Hanover
and-
The Corporation of the Township of Huron-Kin loss
and-
The Corporation of the Municipality of Kincardine
and-
The Corporation of the Municipality of South Bruce
and-
The Corporation of the Town of Saugeen Shores
- and -
The Corporation of the Town of Wing ham
· and -
Canadian Niagara Power Company Limited
· and·
Westario Power Holdings Inc.
· and .
Westario Power Services Inc.
and-
Westario Power Inc.
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Schedule "C"
STRICTLY PRIVATE AND CONFIDENTIAL
DRAFT: August 8, 2000
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT made as of the ., 2000
BETWEEN:
The Corporation of the Township ofHuron-Kinloss
(hereinafter called "Huron-Kinloss")
-and-
The Corporation of the Municipality of Kincardine
(hereinafter called "Kincardine")
- and-
The Corporation of the Municipality of South Bruce
(hereinafter called "South Bruce")
-and-
The Corporation of the Town ofSaugeen Shores
(hereinafter called "Saugeen Shores")
-and-
The Corporation of the Town ofWingn~m
(hereinafter called "Wingham")
(Huron-Kinloss, Kincardine, South Bruce, Saugeen Shores,
Markdale and Wingham are hereinafter collectively referred to as the
"Specified Municipalities")
-and-
The Corporation of the Town of Hanover
(hereinafter called "Hanover")
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(The Specified Municipalities and Hanover are hereinafter
collectively referred to as the "Municipalities")
-and-
Canadian Niagara Power Company Limited
(hereinafter called "CNP")
(the Municipalities and CNP are hereinafter collectively referred to
as the "Initial Shareholders")
- and-
Westario Power Holdings Inc.
(hereinafter called the "Corporation ")
-and-
Westario Power Services Inc.
(hereinafter called "Servco ")
- and-
Westario Power Inc.
(hereinafter called "Wiresco")
WHEREAS:
1. It is intended that the authorized capital of the Corporation consist of an unlimited number
of Common Shares; and
2. The Initial Shareholders desire to enter into an agreement providing for certain
arrangements for the ongoing operation and control of the Corporation and the Subsidiaries
and providing for certain restrictions on, and arrangements respecting, dealings with shares
of the Corporation which are issued and outstanding from time to time;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the
mutual covenants herein contained, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS AND INTERPRETATION
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1.1 Definitions
In this Agreement, unless there is something in the subject matter or context inconsistent
therewith,
(a) "Act" means the Business Corporations Act (Ontario), and unless otherwise
indicated, means such Act as amended and re-enacted wm time to time;
(b) "Af1iliate" of a particular body corporate means another body corporate which is
affiliated with the particular body corporate and for such purposes one body shall be
deemed to be affiliated with another body corporate if, but only if, one of them is
the Subsidiary of the other or both of them are Subsidiaries of the same body
corporate or each of them is Controlled by the same person, and if two bodies
corporate are affiliated with the same body corporate at the same time, they are
deemed to be affiliated with each other at that time;
(c)
"Accession Agreement" means an agreement in the form of Schedule 1.1 (c) hereto
which has the effect of making a person (x) bound to each other person who is then
bound by this Agreement by all the obligations by which the Initial Shareholders
that are a Party are or would be bound and (y) subject to all the restrictions to which
the Initial Shareholders that are a Party are or would be bound;
(d) "Agreement" means this agreement including all schedules and exhibits to this
agreement and includes any and every agreement made at any time (whether past,
present or future) which amends or supplements or restates any agreement which is,
or is included in, this Agreement;
(e) "Articles of Incorporation" of, or in relation to, a corporation means at any time
such original or restated articles of incorporation, articles of amendment, articles of
amalgamation, articles of continuance, articles of reorganization, articles. of
arrangement, articles of dissolution, articles of revival, letters patent, supplementary
letters patent and any other instrument of a substantially similar nature to any of the
foregoing, as are in effect at the time for or in relation to the corporation;
(f)
(g)
"Auditor" means the auditor designated pursuant to section 4.2;
"Business Day" means any day, other than a day that is a Saturday, a Sunday, a
statutory holiday in Ontario or a day on which banks generally are not open to the
public for business in the city, town or township that is the principal place of
business of the Corporation;
(h) "Business Plan" means the annual business plan of the Corporation approved by
the Shareholders as provided herein;
-4-
.
(i) . "Businesses" has the meaning ascribed thereto in section 2.1;
(j)
(k)
(I)
. (m)
(n)
(n)
(0)
(P)
(q)
.
(r)
"Common Shares" means common shares in the capital of the Corporation;
"Control" in relation to a body corporate means control of the body corporate and
for purposes of this Agreement a person has, or two or more persons have, control
of a body corporate, and a body corporate is "Controlled" by a person or by two or
more persons, if
(i) securities of the body corporate to which are attached more than fifty per
cent (50%) of the votes that may be cast to elect directors of the body
corporate are held, other than by way of security only, by or for the benefit
of that person or by or for the benefit of those persons, and
(ü) the votes attached to those securities are sufficient, if exercised, to elect a
majority of the directors of the body corporate;
"Effective Date" means the last date on which assets and liabilities are transferred
to Holdco, Servco A and/or Wiresco A as provided in the Transfer By-laws;
"GAAP" means Canadian generally accepted accounting principles;
"Holdco" has the meaning set out in subsection 3.1(a);
"Income Tax Act" means the Income Tax Act of Canada as amended and re-
enacted ftom time to time;
"Insolvency Event" has the meaning ascribed thereto in section 6(a);
"Party" means a party to this Agreement including any person that becomes bound
by this Agreement as provided herein;
"person" means and includes any individual, corporation, body corporate,
partnership, firm, joint venture, syndicate, association, trust, trustee, government,
governmental agency or board or commission or authority or other form of entity or
organization;
"Prime Rate" means, for and in relation to any particular day in a calendar month,
the variable rate of interest, expressed as a rate per annum, equal to the rate of
interest determined by the principal bank of the Corporation (hereinafter in this
section referred to as the "Bank") as, or commonly known as, its prime rate of
interest effective for the first day in such calendar month for Canadian dollar loans
- 5-
made by the Bank in Canada from time to time, being a variable per annum
reference rate of interest adjusted antomatically upon change by the Bank;
.
(s)
"Promissory Note" means a demand promissory note bearing interest at a rate of
7.25 per cent, calculated and payable quarterly;
(u) "Related Sbarebolder" of a person means at any time a Shareholder that is an
Affiliate of such person;
(v) "Satisfactory Closing Location" means a location whose address shall be
specified in writing and which sha11 be the principal place of business of the
Corporation in ., Ontario or such other location as the parties hereto shall agree;
(w) "Servco A" has the meaning set out in subsection 3.l(b);
(x) "Sbare" means a share of any class in the capital of the Corporation;
(y)
"Sbareholder" means at any time a person that is a party to this Agreement that is
bound by this Agreement at the time and holds one or more Shares at the time or a
person that becomes bound by this Agreement at any time and is bound by this
Agreement at the time and holds one or more Shares at the time;
.
(z) "Sbareholder Special Approval" means, with respect to any matter, the approval
of such matter by Shareholders by
(i) a resolution passed at a duly constituted meeting of the Shareholders by the
favourable vote of at least fifty per cent (50%) of the Shareholders holding
in the aggregate more than fifty per cent (50%) of the total number of
Common Shares held by all Shareholders as at the beginning of such
meeting; or
(ii) one or more instruments in writing which sha11 have been signed by at least
fifty per cent (50"10) of the Shareholders holding in the aggregate more than
fifty per cent (50%) of the total number of Common Shares held by all
Shareholders as at such time,
.
and any Shareholder Special Approval given by resolution as aforesaid shall
become effective on the day on which such resolution is duly passed and any .
Shareholder Special Approval given by one or more instruments in writing as
aforesaid sha11 become effective on the Effective Date shown in such one or more
instruments;
-6-
(aa) "Share Proportion" of a Shareholder (determined in relation to one or more
particular Shareholders) as at any time means, with respect to a class of shares, the
number obtained when the number of shares of a given class held by the
Shareholder as at such time is divided by the total number of shares of each class
held by such one or more particular Shareholders as at such time;
.
(bb) "Subsidiary" of a particular corporation (including, without limitation, a city,
town, township or village) means a body corporate that is
(i) Controlled by
(i)
.
(A) the particular corporation,
(B) the particular corporation and one or more bodies corporate each of
which is Controlled by the particular corporation, or
(C) two or more bodies corporate each of which is Controlled by the
particular corporation, or
a Subsidiary of a body corporate that is a Subsidiary of the particular
corporation;
(cc) "Transfer By-laws" means the Transfer By-laws passed by each of the Specified
Municipalities in respect of the transfer to Holdco, Servco A and/or Wìresco A by
such Specified Municipality of employees, assets, liabilities, rights and obligations;
(dd) "Wiresco A" has the meaning set out in subsection 3.I(c).
1.2 Interpretation
In this Agreement, unless there is something in the subject matter or context inconsistènt
therewith,
(a) (i)
(ii)
. (ill)
words in the singular include the plural and such words shall be construed as
if the plural had been used,
words in the plural include the singular and such words shall be construed as
if the singular had been used,
words importing the masculine gender or the feminine gender include the
feminine gender, the masculine gender and the neuter and sha1l be construed
as if the corresponding word importing the feminine gender, the masculine
gender or the neuter had been used, and
.
(b)
(c)
(d)
(e)
(f)
. 1.3
-7-
where the context or a party hereto so requires, and the rest of the sentence shall be
construed as if the grammatical and terminological changes thereby rendered
necessary had been made;
"this Agreement", "hereto", "herein", "hereby", ''hereunder'', ''hereof' and similar
expressions refer to this Agreement and not to any particular Article, section,
paragraph, subparagraph, clause, subclause or other portion of this Agreement;
a reference to anyone or more parties to this Agreement shall be deemed to mclude
a reference to the respective heirs, executors, administrators, legal representatives,
successors and permitted assigns of each such party;
unless otherwise specifically provided, all references herein to dollar amounts are in
Canadian funds;
unless otherwise specifically provided, each reference herein, which is to a time or
contemplates a time refers to Ontario time; and
Unless otherwise provided, any term or expression defined in any Article of this
Agreement (other than this Article) shall have such meaning only in such Article.
Schedules
The following are the Schedules attached hereto and incorporated by reference and deemed
to be a part hereof:
Schedule 1.1 (c)
Schedule 3.1
Schedule 6.7(a)
Accession Agreement
Capitalization
Determination of Fair Marlœt Value
1.4 Unanimous Shareholder Agreement
Each of the parties hereby acknowledges and agrees that this Agreement is intended to
operate and be construed as a nnanimous shareholder agreement with respect to the Corporation
within the meaning of the Act.
. 2.1
ARTICLE 2
BUSINESS AND PURPOSE OF THE CORPORATION
Business of the Corporation
The parties acknowledge that the businesses (the "Businesses") which they intend that the
Corporation and/or its Subsidiaries carry on are the following, namely:
.
.
.
- 8-
ARTICLE 2
BUSINESS AND PURPOSE OF THE CORPORATION
2.1
Business of the Corporation
The parties acknowledge that the businesses (the "Businesses") which they intend that the
Corporation and/or its Subsidiaries carry on are the following, namely:
(a) the business of distributing electricity;
(b) the business of holding shares in corporations that distribute electricity and/or
market and sell associated products and services; and/or
(c) other than retailing electricity, such other businesses as are permitted under the
Energy Competition Act, 1998 and other applicable legislation.
2.2 Purpose of the Corporation, Servco and Wiresco
The parties acknowledge and agree that the Corporation, Servco and Wiresco shall be
operated with a view to profitability and maxinúzing shareholder value, including actively pursuing
appropriate growth and merger opportunities relating to the Businesses while maintaining a
commitment to respect for people, customer satisfaction, community involvement, and unrelenting
commitment to safety and the environment.
ARTICLE 3
CONTRIBUTIONS OF THE SHAREHOLDERS
3.1 Capitalization
The Corporation, Servco and Wiresco sha11 be capitalized in accordance with the provisions
of Schedule 3.1.
-9-
.
ARTICLE 4
OPERATION AND CONTROL OF THE CORPORATION AND SUBSIDIARIES
4.1
Operation and Control
The parties hereto sha11 cause such meetings of directors and shareholders of the
Corporation to be held, votes to be cast, resolutions to be passed, by-laws to be passed, documents
to be executed and all things and acts to be done to ensure the following continuing arrangements
with respect to the operation and control of the Corporation:
(1)
The initial directors of the Corporation shall be:
.
·
·
·
·
·
·
·
·
The board of directors of the Corporation shall be composed of a number of members equal
to the number of Shareholders holding Common Shares. Each Shareholder shall be entitled, from
time to time, by notice to the Corporation and the other Shareholders, to designate a nominee for
election or appointment to the board of directors of the Corporation. The Shareholders shall
endeavor to ensure that the composition of the board of directors reflects expertise in the areas of
the electricity industry, local business and industry, government, human resource management, the
environment, and/or finance. The Corporation and the Shareholders sha11 act diligently and
promptly to take such actions as are necessary in order that, at any time, the board of directors of
the Corporation includes the then latest nominee designated by one Shareholder in accordance with
this paragraph for election or appointment to the board of directors of the Corporation except for
any such nominee as is not ready, wì11ing or able to serve as a director of the Corporation. Each
Shareholder shall appoint its permanent nominee director by March 31, 2001.
(2) A quorum for a meeting of the directors of the Corporation shall be comprised of a
majority of the directors of the Corporation.
. (3) Except as otherwise provided herein, any resolution of the directors of the
Corporation shall only be validly passed and effective if at a duly constituted meeting of the
directors of the Corporation such resolution receives the affirmative vote of at least a majority of
the directors participating in the meeting.
- 10-
(4)' No person shall have a second or casting vote in any circumstances at any meeting
· of the directors of the Corporation or at any meeting of the Shareholders of the Corporation.
(5) All written contracts made, and all cheques and negotiable instruments made or
issued, by the Corporation sha11 be signed by such one or more directors or officers of the
Corporation as are fÌ'Om time to time designated or authorized to do so by the by-laws of the
Corporation or by a resolution duly passed by the directors of the Corporation
(6) Each of the following sha11 reqnire Shareholder Special Approval:
(a) any change in the number of directors of the Corporation;
(b) the Corporation entering into an undertaking inconsistent with the
operations of the Corporation contemplated in section 2,1 including, without
limitation, retailing electricity;
(c) any borrowing on the credit of the Corporation if the debt incurred would
exceed by more than twenty-five per cent (25%) the debt provided in the
Business Plan for the applicable fiscal year;
·
(d) the issuance, sale or pledge of any debt obligations of the Corporation if
such debt obligations would exceed by more than twenty-five per cent (25%)
the debt provided in the Business Plan for the applicable fiscal year;
(e) the charge, mortgage, hypothecation, pledge or encumbrance of any
currently owned or subsequently acqnired real or personal, movable or
immovable, property of the Corporation, including book debts, rights,
powers, franchises and undertaking, to secure any debt obligations or any
money borrowed, or other debt or liability of the Corporation if the debt
incurred would by more than twenty-five per cent (25%) the debt provided in
the Business Plan for the applicable fiscal year;
(t)
the sale, lease, exchange or other disposal of any property of the Corporation
in excess of one hundred thousand dollars ($100,000.00), other than in the
ordinary course of the business of the Corporation, as provided for in the
Business Plan for the applicable fiscal year, or where such disposal is in
respect of assets that are obsolete or otherwise not reqnired for operations of
the Corporation;
·
(g) any amendment of the Articles of Incorporation of the Corporation;
(h) any continuation of the Corporation under the laws of another jurisdiction;
.
.
.
-11-
(i)
the creation of any Subsidiaries by the Corporation or the acquisition by the
Corporation of any shares or securities of any other corporation, unless for
the purpose of short-term investments of surplus funds;
(j) the creation or issuance of any shares, or any rights to acqnire shares of the
Corporation;
(k) the taking of any proceedings with a view to the dissolution, winding-up, or
termination of the corporate existence of the Corporation;
(1) the establishment or change of any dividend policy or other policy with
respect to the distribution of surplus and the declaration or payment of any
dividend or other distribution on any class of shares;
(m) the making of agreements with any of the Shareholders not in the ordinary
course of business;
(n) the acquisition of all or substantially all of the assets of any other
corporation or business entity or the entering into of any amalgamation,
merger, partnership or joint venture, or other combination with any other
corporation or business entity by the Corporation not in the ordinary course
of business of the Corporation;
(0) any purchase of Shares by the Corporation except as may be provided for
herein and any redemption of Shares by the Corporation unless the same are
required to be redeemed in accordance with the Articles of Incorporation of
the Corporation and are being so redeemed;
(P) any change in the auditors of the Corporation;
(q) any commitment to make anyone or more capital expenditure(s) that would
cause total capital expenditures in a fiscal year to exceed by more than
twenty-five per cent (25%) the total capital expenditure amount provided for
in the Business Plan for the applicable fiscal year; and
(r) any advance or loan by the Corporation to any person who is an officer,
director or employee of the Corporation.
(7) December 31- in each calendar year sha11 be the end of a financial year of the
Corporation and sha11 also be the end of a taxation year for which an applicable return shall be filed
pursuant to the relevant taxation legislation.
- 12 -
·
(8) Each of the directors and officers of the Corporation shall be reimbursed by the
Corporation for reasonable out-of-pocket expenses incurred in connection with his or her
participation in any meetings of the directors of the Corporation or his or her serving as a director of
the Corporation. Remuneration in respect of the initial interim board of directors shall be
determined by the Shareholders.
(9) Meetings of the board of directors of the Corporation may be called by any director
of the Corporation and shall be held in a location determined by the directors from time to time, and
at least one meeting of the directors of the Corporation sha11 be held in 2000.
(10) !fall the directors of the Corporation present at or participating in the meeting of the
board of directors of the Corporation consent, a meeting of the board of directors of the Corporation
may be held by means of such telephone, electronic or other communication facilities as permit all
persons participating in the meeting to communicate with each other simultaneously and
instantaneously, and a director participating in such a meeting by such means is deemed for the
purposes of this Agreement and the Act to be present at that meeting.
(11) Meetings of the shareholders of the Corporation may be called by any director of the
Corporation and shall be held in ., Ontario or such other location determined by the Shareholders
from time to time.
·
(12) The holders of a majority of the Shares entitled to vote at a meeting of Shareholders,
whether present in person or represented by proxy, constitute a quorum.
4.2 Auditor
The auditor of the Corporation sha11 be ., unless and until otherwise agreed as provided
herein.
4.3 Books of Account
Proper books of account sha11 be kept by the Corporation and entries sha11 be made therein
of all such matters, terms, transactions and things as are usually written, recorded or entered in
books of account kept by corporations engaged in an enterprise of a similar nature. The books of
account for the Corporation sha11 be kept at the principal place of business of the Corporation.
Each Shareholder shall have free access at all times during normal business hours to inspect,
examine, copy and use the facilities of the Corporation to make copies of or take extracts from the
books of account for the Corporation.
· 4.4 Budgets and Business Plans
In the case of the initial budget and Business Plan and for each and every subsequent
financial year of the Corporation, the Corporation sha11 prepare a b~dget showing, among other
·
·
·
-13 -
things, in a reasonable degree of detail the anticipated revenues, expenditures and cash flow of the
Corporation for such financial year of the Corporation and a Business Plan. The budget and
Business pian for any particular financial year of the Corporation shall be prepared and delivered to
each Shareholder,
(a) in the case of the first budget and Business Plan, by November 1,2000, and
(b) in the case of any other financial year commencing with the financial year 2001-
2002, at least sixty (60) days prior to the beginning of such financial year in the case
of the budget and at least sixty (60) days prior to the beginning of such financial
year in the case of the Business Plan.
In the management and operation of the business, each Shareholder shall, and shall cause its
nominee director to endeavour to the extent it is reasonable to do so, adhere to the final budget for a
financial year and not exceed expenditures provided for therein.
4.5 Periodic Financial Statements
For each quarter that commences after the last day of October, 2000 the Corporation shall
prepare a financial statement which shall include statements of income, retained earnings and
changes in financial position for the quarter and a balance sheet as at the end of the quarter and such
statement shall be prepared in accordance with GAAP, but need not reflect accruals and
adjustments ordinarily made only as at the end of a financial year. The financial statement prepared
for such quarter shall be delivered to each Shareholder within forty-five (45) days following the end
of such quarter.
4.6 Application of Sections 4.1 to 4.5 to Subsidiaries
Unless the Shareholders otherwise agree in writing and except as provided herein, the
provisions of sections 4.1 to 4.5, inclusive, shall apply to each and every Subsidiary of the
Corporation; provided that in applying the provisions of such sections to any particular Subsidiary
all references to the Corporation in such sections shall be read as a reference to the particular
Subsidiary.
4.7 Restriction of Powers of Directors
Pursuant to subsection 108(2) of the Act, the discretion and powers of the directors of the
Corporation, Servco and Wiresco to manage and supervise the management of the business and
affairs of the Corporation, Servco and Wiresco, respectively, are hereby restricted to the extent of
the provisions of subsection 4.1(6).
4.8 Agreement Binds Corporation
.
.
.
- 14-
The Corporation, by its execution hereof, acknowledges that it has actual notice of the
terms of this Agreement, consents hereto and hereby covenants with each of the Shareholders
that it win at all times during the term hereof: (i) 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 hereof; (ü) 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 hereof; and (iii) take no action which would constitute a
contravention of any of the terms and provisions thereof.
ARTICLE 5
SERVCO AND WlRESCO
5.1 Subsidiaries
(a) On or before the Effective Date, the Specified Shareholders agree to incorporate and
organize Servco A and Wiresco A.
(b) Wiresco sha11 carry on the business of the distribution of electricity and Servco shall
carry on the business of marketing and selling associated products and services.
5.2
Directors
(a) The initial directors ofServco sha11 be:
·
·
·
(b) The initial directors ofWiresco shall be:
·
·
·
(c) the board of directors of each of Servco and Wiresco shall be composed of such
number of directors as the Shareholders shall determine from time to time.
5.3 Ownership of Shares
All of the issued and outstanding shares in the capital of Servco and Wiresco shall be
owned beneficially and held of record by the Corporation.
.
.
.
- 15 -
ARTICLE 6
TRANSFER AND DISPOSmON OF SHARES
6.1
Restriction on Transfer
No Shares of the Corporation or any interest therein shall be sold, exchanged, transferred,
disposed of, encumbered, pledged, mortgaged, hypothecated and/or given, directly or indirectly,
and no agreement or commitment shall be made to do any of the same except in each case with
Shareholder Special Approval or pursuant to the applicable provisions of this Agreement and any
attempt to do so without such consent or not pursuant to such provisions shall be void and,
because the parties hereto acknowledge the inadequacy of money damages in such
circumstances, shall be subject to specific performance and injunctive relief at the instance of the
other parties hereto.
6.2 Shareholder Consent
The Shareholders shall vote the Shares owned by them to approve as required by the
Articles of Incorporation any transfer of Shares permitted or required pursuant to this Agreement.
6.3
Transfers to Affiliates
Notwithstanding section 6.1 all or, with the consent of the board expressed by resolution,
part of the Shares of a Shareholder may be transferred to an Affiliate of such Shareholder and
Article 7 shall apply, mutatis mutandis, to such transfer.
6.4 Right of First Refusal
Subject to the provisions of sections 6.6, 6.7 and 6.8, if any Shareholder (hereinafter in
this section 6.4 called the "Offeror") desires to sell (other than pursuant to section 6.3) all but not
less than all of the Common Shares owned by it and any Affiliate, the Offeror shall give notice
(hereinafter in this section 6.4 called the "Selling Notice") to the other holders of Shares
(hereinafter in this section 6.4 called collectively the "Offerees" and individually an "Offeree") of
its intention to do so. Such Selling Notice shall set forth the number and class of the Shares
(hereinafter in this section 6.4 called the "Offered Shares") which the Offeror wishes to sell, the
price per share at which the Offeror is prepared to sell the Offered Shares and any other terms
and conditions, provided that such must not be contrary to the provisions of Article 7 of this
Agreement, and the proposed date of sale (hereafter called the "Sale Date"), which shall not be
less than thirty (30) days nor more than sixty (60) days after the date on which the Selling Notice
is given to the Offerees. In such event, unless all the Shareholders otherwise agree, the following
provisions of this section 6.4 shall govern such purchase and sale:
(a) the Selling Notice shall be deemed to be an offer, irrevocable within the time
.
.
(d)
(e)
.
- 16 -
hereinafter specified for acceptance, by the Offeror to sell the Offered Shares to
the Offerees;
(b)
within thirty (30) days after receipt of the Selling Notice, each Offeree may give
to the Offeror a notice of acceptance which shall set forth the number of Offered
Shares which such Offeree is willing to purchase from the Offeror;
(c) if the Offerees accepting the offer collectively are prepared to purchase all the
Offered Shares, then they shall be entitled to purchase the Offered Shares as
nearly as may be in proportion to the number of Common Shares of the
Corporation then held by them respectively, provided that, if any such Offeree
claims less than its respective proportion, the difference in unclaimed Offered
Shares shall be used to satisfy the claims of those who claim in excess of their
proportions and if the claims in excess are more than sufficient to exhaust such
unclaimed Offered Shares, the unclaimed Offered Shares shall be divided pro rata
among the Offerees desiring to purchase excess shares in proportion to their
holdings of Shares of the Corporation immediately prior to the delivery of the
Selling Notice, but no Offeree shall be bound to purchase any Offered Shares in
excess of the number which it agreed to purchase in its notice of acceptance;
if none of the Offerees accepts the offer or the Offerees accepting the offer
collectively are not prepared to purchase all of the Offered Shares, then the
Offeror may sell all of the Offered Shares to any other person within sixty (60)
days after the Sale Date at a price per security not less than and on terms and
conditions not more favourable to such person than the price per security and the
terms and conditions set forth in the Selling Notice. In the event that the Offeror
does not sell the Offered Shares to such person within such sixty (60) day period,
then the provisions of this Agreement shall once again apply and so on from time
to time;
if the Offeror has received a bona fide offer from a third party to purchase the
Offered Shares prior to the date of the Selling Notice which he wishes to accept,
then a copy of such offer sha11 be sent to each Offeree with the Selling Notice and
the terms and conditions of sale set forth in the Selling Notice shall be the same as
those set forth in such offer, and the Sale Date proposed shall not be less than thirty
(30) days nor more than sixty (60) days after the date on which the Selling Notice is
given to each Offeree. By delivering a Selling Notice, the Offeror represents and
warrants to each other Offeree that there is no direct or indirect supplementary
consideration (whether or not in the nature of tangible or intangible assets, money,
property, securities or other benefits) to be received by the third party or any other
person in connection with such offer and that such offer is not made as part of or in
connection with any other transaction;
.
.
.
- 17 -
(f)
if the Offered Shares shall not be capable, without division into fractions, of being
offered to or being divided among such Offerees in the proportions above
mentioned, the same sha11 be offered to or divided among such Offerees as nearly as
may be in the proportions hereinbefore mentioned and any balance sha11 be offered
to or divided among such Offerees or some of them in such manner as may be
determined by the board of directors of the Corporation;
6.5 Piggyback Rights
Where, after compliance with the provisions of section 6.4, any group of Shareholders
desires and is entitled to sell to a third party all but not less than all of the Common Shares held
by them and each of their Affiliates and such group holds in the aggregate more than fifty percent
(50%) of the Common Shares, then any such sale, notwithstanding the provisions of section 6.4,
shall be permitted only if such third party makes an offer in writing irrevocable for forty-five
(45) days to all other Shareholders holding Common Shares to purchase such Common Shares
held by such Shareholders or their Affiliates at the same price and upon the same terms and
conditions.
6.6 Draw Along
If, (i) an offer is made by a third party to purchase all outstanding Common Shares held
by Shareholders holding more than eighty percent (80%) of the outstanding Common Shares; or
(ii) an amalgamation, merger, plan of arrangement, or other reorganization of the Corporation,
for greater certainty, excluding a municipal amalgamation or other restructuring, is proposed by a
third party or an offer is made by a third party to purchase all or substantially all of the assets of
the Corporation (collectively a "Reorganization"), all Shareholders are required to sell their
Common Shares to the Offeror or approve such Reorganization, as the case may be, if such sale
or Reorganization is approved by the holders of more than eighty percent (80%) of the
outstanding Common Shares.
6.7 Insolvency of Shareholder
(a)
If any Shareholder makes an assignment for the benefit of creditors or a proposal
under the Bankruptcy and Insolvency Act (Canada) or a similar filing or proposal
under any other bankruptcy or insolvency legislation or is declared bankrupt or
becomes insolvent, or any trustee, receiver, receiver and manager, liquidator or
other officer with similar powers is appointed for such member or for all or any
material part of his property (such member being hereinafter referred to as the
"Insolvent Shareholder" and any such assignment, proposal, filing, declaration or
insolvency or the appointment of any trustee, receiver or receiver and manager,
liquidator or other officer with similar powers being hereinafter referred to as an
"Insolvency Event"), the other Shareholders (the "Solvent Shareholders") shall be
deemed to be entitled, effective immediately prior to the Insolvency Event, to
.
(b)
(c)
.
-18 -
purchase all. but not less than all of the Common Shares held by the Insolvent
Shareholder for a cash purchase price equal to the Fair Market Value of the
Common Shares as determined in accordance with Schedule 6.7(a). Solvent
Shareholders shall have ninety (90) days from the date of the fina1 determination of
Fair Market Value of the Common Shares pursuant to Schedule 6.7(a) to deliver to
the Insolvent Shareholder (with a copy to the Corporation) a notice in writing
setting out therein their respective intentions to purchase, effective immediately
prior to the Insolvency Event, all but not less than all of the Common Shares owned
by the Insolvent Shareholders pro rata, based on their respective holdings of
Common Shares.
If the said Common Shares shall not be capable, without division into fractions, of
being divided among such Solvent Shareholders in the proportions above
mentioned, the same sha11 be divided among such Solvent Shareholders as nearly as
may be in the proportions hereinbefore mentioned and any balance shall be divided
among such Solvent Shareholders or some of them in such manner as may be
determined by the board of directors of the Corporation.
Subject to the provisions of the Act, if within ninety (90) days of the final
determination of the Fair Market Value of the Common Shares pursuant to Schedule
6.7(a) a notice in writing shall not have been given to the Insolvent Shareholder
(with a copy to the Corporation) by all or any of the Solvent Shareholders setting
out therein the intention of such Solvent Shareholder or Shareholders to purchase,
effective immediately prior to the Insolvency Event, all of the Common Shares
owned by the Insolvent Shareholder, then the Corporation shall have the right to
redeem and repurchase such portion of the Common Shares as shall not be the
subject of a purchase and sale transaction with the Solvent Shareholder, effective
immediately prior to the Insolvency Event, for a cash price equal to the value of the
Common Shares as calculated by reference to the shareholders' equity of the
Corporation as shown on the Corporation's most recent financial statements prior to
the Insolvency Event prepared in accordance with this Agreement.
(d) Any transaction of purchase and sale pursuant to this section 6.7 sha11 be completed
in accordance with the provisions of Article 7 hereof but with effect and deemed
completion as of the time immediately prior to the occurrence of an Insolvency
Event.
.
. 7.1
.
.
- 19-
ARTICLE 7
GENERAL SALE PROVISIONS
Sale Provisions
Each Shareholder who hereafter sells any Shares pursuant to the provisions of this
Agreement (such Shareholder being herein sometimes in this Article 7 called the "Seller") shall
hereby be deemed to warrant to each other Shareholder or other person who purchases such Shares
(such Purchasing Shareholder or other person being herein sometimes called the "Buyer") that, at
the time of Closing of the transaction of purchase and sale in question, (a) the Seller shall have
good and marketable title to such Shares, and (b) the Buyer will acquire such Shares fi:ee of any
encumbrance of any kind, and in addition the Seller sha11 hereby be deemed to agree to indemnifY
and save the Buyer harmless against any loss suffered by the Buyer as a result of there being any
encumbrance upon or any defect in the title of the Seller to such Shares,
7.2 Closing
Each purchase and sale of Shares between Shareholders pursuant to this Agreement shall,
unless otherwise expressly provided herein, be closed at the offices of the solicitors of the
Corporation at 10:00 a.m. on the fifteenth (15~ day after the date of the last notice given (or
deemed to be given) by the Buyer or the Seller, as the case may be, pursuant to the applicable
sections of this Agreement or at such other time and/or on such other day as may be agreed upon by
the Seller and the Buyer.
7.3 Conditions and Closing
At the time of closing of any purchase of Shares of the Corporation as set forth in section
7.2, the Seller shall table:
(a) in the case of a sale of Shares by a person which is not a natural person, such
authorizing resolutions, orders and other instruments as the solicitors for the Buyer
and Seller shall reasonably consider necessary to effect and evidence a valid transfer
of such Shares; and
(b) evidence of the consent of the Shareholders to the purchase of Shares in question if
such consent is required by this Agreement,
and each Buyer shall pay for such Shares by bank draft or certified cheque. If the Seller fails to
comply with the requirements set out in this section, the Buyer shall, in addition to its other rights,
including its right to specific performance, be entitled to rescind and sha11 have an action for
damages.
7 A Indebtedness of Seller to Corporation
.
.
.
-20 -
If, on the date of closing of any sale and purchase of Shares of the Corporation, the Seller is
indebted to ihe Corporation in an amount recorded on the books of the Corporation and verified by
the auditor of the Corporation, then unless otherwise agreed in writing between the Corporation and
the Seller, each Buyer sha11 pay the purchase price payable therefor by him to the Corporation's
solicitors, in trust, by tabling and delivering to the Corporation's solicitors, in trust, at the time of
closing of such purchase and sale, the purchase price for such Shares. The Corporation's solicitor is
hereby authorized by the Seller to apply the total purchase price proceeds to repayment of the
indebtedness of the Seller to the Corporation. If such proceeds exceed such indebtedness, the
Corporation's solicitors are hereby authorized by the Buyer to pay the excess over to the Seller at
the time of closing of such purchase and sale. In the event that the Seller sells all of the Shares of
the Corporation owned by him and the indebtedness of the Seller to the Corporation exceeds the
proceeds of such sale, then the Seller sha11 at the time of closing of such purchase and sale pay the
ba1ance of such indebtedness to the Corporation to retire such indebtedness.
7.5 Indebtedness of Corporation to Seller
If, on the date of closing of any sale and purchase of Shares of the Corporation, the
Corporation is indebted to the Seller all of whose Shares are purchased by other Shareholders or
other persons pursuant to Article 6, or if such Seller is the guarantor of any indebtedness of the
Corporation, the Buyer or Buyers shall, at the time of closing, purchase such indebtedness at its
face value or assume such guarantee in either case pro rata in accordance with the number of
Shares purchased by it or them.
7.6 Agreement Binding on Transferees
No Shares of the Corporation shall be effectively issued, sold, assigned, transferred,
disposed of or conveyed, whether pursuant to any provision of Article 6 or otherwise, by the
Corporation or a Shareholder to any person other than a Shareholder, until the proposed transferee
or purchaser executes and delivers to the parties hereto an agreement to the same effect as this
Agreement and any further agreement with respect to the Corporation to which the Shareholders are
then, or are then required to be, a party, and unless the proposed transferee or purchaser, on
becoming a party to this Agreement, would be in compliance with the provisions of this
Agreement. Upon the proposed transferee or purchaser so doing, such agreements sha11 enure to
them as if all had executed and delivered the same agreements.
7.7 Continuing Obligations
Any Shareholder who sells to a person, other than an Affiliate of the Shareholder, all of the
Shares of the Corporation owned by it in accordance with the terms of this Agreement shall
thereafter be released and discharged from the further performance of all of its covenants and
obligations hereunder from and after the date of such sale and compliance by the transferee with
.
.
.
- 21 -
section 7.6 except for any obligations under this Article 7 and any other obligations under this
Agreementwhich expressly or impliedly are to survive any such sale.
7.8
Power of Attorney
Each Shareholder hereby irrevocably nominates, constitutes and appoints the Corporation
(the "Attorney''), its attorney and agent to act for, in the name of and on behalf of such Shareholder
to do all acts and things and sign all documents which are necessary or desirable to complete the
sale or pledge of any Shares by such Shareholder as provided herein or to perform, satisfy or
discharge any obligations in relation to the sale of or pledge of any Shares by such Shareholder, and
without limiting the foregoing, such Shareholder acknowledges and agrees that the Attorney is
hereby granted authority to receive and accept delivery of and keep possession of, and to execute
and deliver, in the name and on behalf of such Shareholder all such certificates, instruments and
documents as may be necessary or desirable, in the opinion of the Attorney, to complete any sale or
pledge of shares or to perform, satisfy or discharge any obligations in relation to a sale. Each
Shareholder hereby acknowledges and agrees that the appointment hereby made and the powers
hereby granted are coupled with an interest and are and sha11 be irrevocable and to the extent
permitted by applicable law shall survive the dissolution of, and the death or incapacity of, and the
insolvency or bankruptcy of, anyone or more Shareholders and may be exercised by the Attorney
in its own name or in the name of such Shareholder and sha11 survive any assignment or purported
assignment of Shares by anyone or more Shareholders and to the extent permitted by applicable
law sha11 be binding on the respective heirs, executors, administrators, personal representatives,
successors and permitted assigns of such Shareholder. Each Shareholder hereby ratifies and
confirms and agrees to ratify and confirm in writing all that the attorney may lawfully do or canse
to be done by virtue of the appointment made, and the power of attorney granted, by such
Shareholder in this section.
7.9 Change in Control
Any change in Control of a Shareholder or the holding body corporate (as defined in the
Act) of a Shareholder shall be deemed to be a transfer by the Shareholder of Shares held by such
Shareholder to the person acqniring such Control.
ARTICLE 8
PRE-EMPTIVE RIGHT
8.1 Pre-Emptive Right
Subject to subsection 4.1(6), if the Corporation wishes at any time hereafter to issue any
Shares, such issue shall be approved by Shareholder Special Approval and the Corporation shall
first offer them for purchase by the Shareholders by written notice given to each such Shareholder,
Such notice shall be given within ten (10) days following approval by the board of directors of a
proposal to issue Shares and sha11 set forth a description of the Shares to be offered, the proposed
.
.
.
- 22-
purchase price and the purchase date which sha11 be a date not earlier than thirty (30) days after the
date of such notice. Upon receipt of such notice, each such Shareholder shall have the right to
subscribe for and purchase at least a number of such Shares determined by multiplying the total
number of Common Shares offered by a ftaction the numerator of which shall be the number of
Common Shares owned by such Shareholder at the date of such notice and the denominator of
which sha11 be the total number of Common Shares outstanding as at the date of such notice. Such
right sha11 be exercised by the Shareholder by giving notice of acceptance to the Corporation within
ten (10) days after the receipt of the notice from the Corporation, which notice of acceptance sha11
set forth the number of Shares which such Shareholder is willing to purchase. In the event that the
Shareholder does exercise such right, it shall subscribe, purchase and pay for such Shares on the
purchase date set forth in the notice of the Corporation. If all the Shareholders do not subscribe for
their respective proportions, the unsubscribed Shares shall be used to satisfy the subscriptions of
Shareholders who subscribed for Shares in excess of their proportion and, if the subscriptions in
excess are more than sufficient to exhaust such unsubscribed Shares, the unsubscribed Shares shall
be divided pro rata among the Shareholders desiring Shares as nearly as may be in proportion to
the number of Shares held by them respectively at the date of such notice, but no Shareholder shall
be bound to take any such Shares in excess of the amount set out in its notice of acceptance.
ARTICLE 9
LEGEND ON SHARE CERTIFICATES
9.1 Legend
The certificates representing any Shares held by any Shareholder shall have typed or
otherwise written thereon the following legend:
"The shares represented by this certificate are subject to the provisions of an
agreement made as of the . day of ., 2000 between the shareholder(s) of the
Corporation as at that date and the Corporation and such other persons as have or
shall from time to time become bound by such agreement, as the same may be
amended, supplemented and restated from time to time and notice of the terms and
conditions of such agreement is hereby given. Such agreement includes restrictions
on the transfer of, and the right to transfer, shares in the capital of the Corporation
including the shares represented by this certificate. Such shares may not be sold,
assigned, transferred, donated, mortgaged, pledged, hypothecated, charged or
otherwise encumbered or dealt with except in accordance with such agreement.
A copy of such agreement, as amended, supplemented and restated from time to
time may be examined at the principal place of business of the Corporation".
9.2
Corporation to Keep a Copy of the Agreement
.
.
.
- 23-
The Corporation shall keep a true copy of this Agreement at its principal place of business
and on reasonable prior notice from any Party shall make the same available for examination by
such Party during the Corporation's regular hours of business at such office.
ARTICLE 10
INDEMNIFICATION
10.1 Indemnity
Each particular Shareholder hereby agrees to indemnify, hold harmless, reimburse and
defend each and every other Shareholder (hereinafter in this section referred to as an "Indenmified
Shareholder"), other than any Related Shareholder of the particular Shareholder, for, from and
against any and all liability, loss, damage or expense (including, without limitation, reasonable
legal fees and disbursements) and any claim thereof or therefor which
(a) is asserted against, imposed on, or incurred or sustained by, any Indenmified
Shareholder (regardless of the form or nature of such liability, damage, loss,
expense or claim), and
(b)
results from, arises out of or is connected with
(i) the nonfulfillment or breach by any person (a "Designated Person") that is
the particular Shareholder or any Related Shareholder of the particular
Shareholder, of any covenant in or obligation under this Agreement, or
(ii) the negligence or misconduct of (x) any Designated Person or (y) any
shareholder, director, officer, employee or agent of any Designated Person
or (z) any Affiliate (other than the Corporation or any Subsidiary of the
Corporation) of a Designated Person.
.
.
.
- 24-
ARTICLE 11
TERMINATION
11.1
Termination
If on any day
(a) any particular person (any such person being referred to as a "Terminated Party")
that was a Shareholder at any earlier time, does not hold any Shares; and
(b) there is no Shareholder that is a Related Shareholder of the particular person
then (unless and in any event until the particular person again becomes a Shareholder) after the
expiration of such day
(c) no further rights or obligations of the particular person shall arise or accrue under
this Agreement other than in relation to any rights or obligations respecting or
relating to the payinent of any amount by or to the particular person pursuant to this
Agreement; and
(d)
this Agreement may be amended, terminated, replaced or superseded at any time by
agreement of the parties hereto, each of whom is not a Terminated Party at that time,
it being understood that the same sha11 not affect the rights or obligations under this
Agreement of any person who is then a Terminated Party.
ARTICLE 12
CONFIDENTIALITY
12.1 Confidentiality
Each of the Shareholders and their respective Affiliates sha11 keep in the strictest confidence
and sha11 not disclose and not use, in any manner whatsoever in connection with or relating to,
directly or indirectly, any business engaged in or participating in the Businesses or the operation,
franchising, development or sale of products or services similar to those of the Corporation or its
Subsidiaries, all non-public information pertaining to or concerning the Corporation and its
Subsidiaries including, without limitation, budgets, forecasts, analyses, and financial results, costs,
margins, wages and salaries, bids and other business activities, all supplier and customer lists, all
non-public intellectual property including trade secrets, unfilled patents, trade-marks, technical
expertise and know-how, documentation including standard terms and agreements and all other
information not generally known outside the Corporation or its Subsidiaries except to persons
through business dealings with the Corporation or its Subsidiaries. However, no Shareholder or
.
.
.
- 25-
Affiliate thereof shall be obliged to keep in confidence or sha11 incur any liability for disclosure of
information which:
(a)
was already in the public domain or comes into the public domain without any
breach of this agreement;
(b) is required to be disclosed pursuant to applicable law or court order; or
(c) is made to the legal counsel, auditors and other professional advisors to such
disclosing party, in which event such disclosing party shall, so far as reasonably
possible, cause the recipient to comply with this section 12.1 as if it were a party
to this agreement.
ARTICLE 13
GENERAL PROVISIONS
13.1 Further Acts
The parties hereto agree to do and to cause to be done all acts and things as shareholders of
the Corporation to effect compliance with or waiver of the restrictions on the transfer of shares
contained in the Articles of Incorporation or by-laws of the Corporation to give effect to any
transfer or intended transfer of Shares reqnired or permitted to be made and recorded as a result of
the application of the provisions of this Agreement in order that, notwithstanding such restrictions,
the terms and conditions of this Agreement may be carried out.
13.2 Extended Application
The parties hereto agree that the provisions of this Agreement relating to Shares of a
particular class (and series, if applicable) sha11 apply mutatis mutandis
(a) to any shares or securities which result, either directly or indirectly, from the
conversion, changing, reclassification, redivision, redesignation, subdivision or
consolidation of Shares of such class (and series, if applicable);
(b) to any shares or securities in the capital of, or issued by, the Corporation which are
received by anyone or more parties hereto as a stock dividend or distribution on or
in respect of Shares of such class (and series, if applicable); and
(c)
to any shares or securities in the capital of; or issued by, the Corporation or any
successor or continuing body corporate to the Corporation which are received by
anyone or more parties hereto (x) on a reorganization, amalgamation, consolidation
- 26-
or merger, statutory or otherwise and (y) on or in respect of Shares of such class
(and series, if applicable).
· 13.3 Assignment
Subject to the restrictions to assignment contained herein, this Agreement shall enure to the
benefit of and be binding upon the parties hereto and their successors and permitted assigns.
Except as expressly permitted by this Agreement, the rights of any person under this Agreement
sha11 not be assignable.
Any person (the "Assignor"), other than the Corporation, having rights under this
Agreement shall be permitted to assign such rights to another person (the "Assignee") provided
(a)
(i)
the Assignor transfers all Shares owned by the Assignor to the Assignee and
such transfer is otherwise permitted by this Agreement, and
(ii) the Assignor assigns all rights of the Assignor under this Agreement to the
Assignee; and
(b) the Assignee is bound by this Agreement.
· 13.4 Notices
The provisions of this section apply to any notice, offer or other communication (any such
notice, offer or communication being referred to in this section as a "Notice") contemplated or
provided for in this Agreement:
(1) Manner of Givin¡ Notice. Any Notice required or permitted by this Agreement to
be given or sent or delivered to, or received by, a person
(a) shall be in writing;
(b) sha11 be addressed to such person at such person's Notice Address;
(c) sha11 be given to such person
(i) by delivery, including delivery by courier, to such person,
(ii)
by prepaid registered or certified mail, return receipt requested,
mailed in Ontario in an envelope addressed to such person's Notice
Address, or
·
- 27-
.
(iii). by transmission by telecopier to such person at such person's
Telecopier Number to the attention of such person's Telecopier
Addressee; and
(d) sha11, if being given to the Corporation, also be given to each Shareholder
other than the Shareholder giving such Notice or any Related Shareholder of
such Shareholder.
(2) Notices sha11 be given as follows:
If to Hanover:
341 1011> Street
Hanover, Ontario
N4N IP5
Attention:
The Clerk
Fax No.:
(519) 364-6456
If to Huron-Kinloss:
P.O. Box 130
21 Queen Street
Ripley, Ontario
NOG 2RO
.
Attention:
The Clerk
Fax No.:
(519) 395-4107
If to Kincardine:
707 Queen Street
Kincardine, Ontario
N2Z 1Z9
Attention:
The Clerk
Fax No.:
(519) 396-8288
.
-28 -
If to South Bruce: P.O. Box 540
· 21 Gordon Street East
Teeswater, Ontario
NOG 2S0
Attention: The Clerk
Fax No.: (519) 392-6266
If to Saugeen Shores: 515 Goderich Street
Maple Square Mall
Port Elgin, Ontario
NOH 2C4
Attention: The Clerk
Fax No.: (519) 832-2140
·
If to Wingham: ·
·
·
Attention: .
Fax No.: .
If to CNP:
1130 Bertie Street
P.O. Box 1218
Fort Erie, Ontario
L2A 5Y2
Attention:
Bill Daley, Vice President,
Corporate Development
·
Fax No.:
(905) 871-8676
·
·
·
- 29-
If to the Corporation,
Wiresco or Servco:
·
·
·
Attention: .
Fax No.: ·
(3) Deemed Delivery. Any Notice given to a person as aforesaid
(a) if given by delivery (other than by mail), shall be deemed to have been
given, sent and delivered to, and received by, such person on the day on
which it is so delivered;
(b) if given by mail, shall be deemed to have been given, sent and delivered to,
and received by, such person on the day on which it is delivered as
evidenced by a receipt, acknowledgement or other document issued by a
postal authority; and
(c)
if given by transmission by telecopier, sha11 be deemed to have been given,
sent and delivered to, and received by, such person on the first Business Day
after transmission.
13.5 Remedies Cumulative
The rights and remedies of the Parties under this Agreement are cumulative and in addition
to and not in substitution for any rights or remedies provided for in law.
13.6 Titles
The titles to the Articles and certain other provisions hereof have been inserted for ease of
reference only and shall not affect the construction or the interpretation of this Agreement.
13.7 Governing Law
This Agreement sha11 be deemed to have been made in, and shall be governed by, and be
construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable
in such Province.
.
.
.
- 30-
13.8 Counterparts
This Agreement may be executed in several counterparts, each of which so executed shall
be deemed to be an original, and such counterparts together sha11 constitute but one and the same
instrument
13.9 Entire Agreement
This Agreement constitutes the entire agreement between the parties hereto with respect to
the subject matter of this Agreement. The parties hereto acknowledge that there is no
representation, warranty, agreement or understanding between them which has induced any of the
parties hereto to enter into this Agreement except as expressly stated herein.
13.10 Waiver
Any Party which is entitled to any right or benefit under this Agreement may, and shall be
entitled and have the right to, waive any term or condition relating to the application of this
Agreement in relation to any matter or transaction provided that any such waiver shall only be
effective if it is in writing signed by such Party and delivered to a Party to whom such waiver is
directed. If a particular Party waives any term or condition relating to the application of this
Agreement in relation to any matter or transaction as aforesaid, then in relation to the specific
matter or transaction which is the subject matter of such waiver, each person that is then a Party or
that subsequently becomes a Party sha11 be entitled to rely upon such waiver in the same manner
and to the same extent as if such waiver had been directed and delivered to such person by the
particular Party.
No failure on the part of any Party to exercise, and no delay by any Party io exercising, any
right under this Agreement shall operate as a waiver of such right.
13.11 Time
Time sha11 be of the essence in this Agreement.
13.12 Inconsistency with By-Laws
In the event of any inconsistency between the provisions hereof and the by-laws of any of
the Corporation, Servco or Holdco, this Agreement sha11 prevail.
- 31 -
13.13 INDEPENDENT ADVICE.
. EACH OF THE PARTIES HERETO ACKNOWLEDGES AND CONFIRMS THAT IT
HAS BEEN ADVISED TO AND HAS HAD AN OPPORTUNITY TO RETAIN COUNSEL
AND RECEIVE INDEPENDENT LEGAL ADVICE WITH RESPECT TO THIS AGREEMENT.
IN WITNESS WHEREOF this Agreement has been executed by the parties hereto.
SIGNED, SEALED AND DELIVERED )
in the presence of ) The Corporation of the Town of Hanover
)
) By: cis
) Name:
) Title:
)
) By:
) Name:
) Title:
)
. ) The Corporation of the Township of
) Huron-Kinloss
)
) By: cIs
) Name:
) Title:
)
) By:
) Name:
) Title:
)
) The Corporation of the Municipality of
) Kincardine
)
) By: cis
) Name:
) Title:
)
. ) By:
) Name:
) Title:
)
- 32-
) The Corporation of the Municipality of
) South Bruce
. )
) By: cIs
) Name:
) Title:
)
) By:
) Name:
) Title:
)
) The Corporation of the Town of
) Saugeen Shores
)
) By: cis
) Name:
) Title:
)
) By:
) Name:
. ) Title:
)
)
)
) The Corporation of the Town of Wing ham
)
) By: cis
) Name:
) Title:
)
) By:
) Name:
) Title:
)
) Canadian Niagara Power Company
) Limited
)
. ) By: cis
) Name:
) Title:
)
) By:
- 33-
) Name:
) Title:
. )
) Westario Power Holdings Inc.
)
) By: cis
) Name:
) Title:
)
) By:
) Name:
) Title:
)
) Westario Power Services Inc.
)
) By: cis
) Name:
) Title:
)
) By:
. ) Name:
) Title:
)
) Westario Power Inc.
)
) By: cis
) Name:
) Title:
)
) By:
) Name:
) Title:
)
.
SCHEDULE I.I(e)
ACCESSION AGREEMENT
. THIS AGREEMENT made.
.
.
BY: .
(hereinafter referred to as the "Transferee")
TO AND IN THE FAVOUR OF AND FOR THE BENEFIT OF:
Each person that is now or hereafter becomes bound by the Shareholders Agreement (as
hereinafter defined)
WHEREAS. (the "Corporation") and certain shareholders of the Corporation are parties to
the Shareholders Agreement;
AND WHEREAS it is proposed that certain transfers of securities or other actions
affecting securities be made or taken and that following the completion thereof the Transferee will,
either directly or indirectly, have an interest in shares in the capital of the Corporation;
AND WHEREAS the Shareholders Agreement includes provisions which restrict the right
to transfer shares in the capital of the Corporation and provisions that may be applicable in relation
to certain transactions which involve an indirect transfer of an interest in shares in the capital of the
Corporation or a direct or indirect change in the ownership or control of securities issued by a
shareholder of the Corporation;
AND WHEREAS the Transferee desires to become a party to the Shareholders Agreement
and to become bound by the terms (including, without limitation, all applicable obligations and
restrictions) of the Shareholders Agreement to each party that is now or hereafter becomes bound
by the Shareholders Agreement;
AND WHEREAS in order for the Transferee to become bound by the Shareholders
Agreement as aforesaid, the Transferee has executed and delivered this agreement;
NOW THEREFORE for good and valuable consideration the receipt and sufficiency of
which is hereby acknowledged by the Transferee and in consideration of rights and benefits to
which the Transferee may become entitled under the Shareholders Agreement, the Transferee
hereby covenants and agrees as follows:
.
.
.
2
1. Definitions
In this agreement, unless there is something in the subject matter or context inconsistent
therewith, ,
(a)
"person" means and includes any individual, corporation, body corporate,
partnership, firm, joint venture, syndicate, association, trust, trustee, government,
governmental agency or board or commission or authority or other form of entity or
organization; and
(b) "Shareholders Agreement" means the agreement which
(i) is dated the . day of., 2000,
(ii) is binding on two or more shareholders of the Corporation and includes
provisions which restrict the rights of those shareholders to transfer shares in
the capital of the Corporation, and
(ill) shows at the beginning thereof that it is between persons that include the
following as the only parties that are specified by their name, namely,
[FIRST SHAREHOLDER CORPORATION], [SECOND
SHAREHOLDER CORPORATION] and [SUBJECT
CORPORATION],
and includes any and every agreement which shall have been made prior to the date hereof which
amends or supplements or restates any agreement which is, or is included in, the Shareholders
Agreement.
2. Covenant to be Bound by the Shareholder Agreement
The Transferee covenants and agrees to be bound by the tenns of the Shareholders
Agreement including, without limitation, all applicable obligations and restrictions, and
(a) to be so bound to each party that is now bound by the Shareholders Agreement, and
(b) effective at the time hereafter at which any other party becomes bound by the
Shareholders Agreement, to be so bound to such other party.
3. Notices
Subject to the rights provided for in the Shareholders Agreement to establish or change the
same, for purposes of the Shareholders Agreement, the Transferee hereby designates the following
as the Notice Address and Telecopier Number of the Transferee: .,
4. Receipt of Shareholders Agreement
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The Transferee acknowledges that the Transferee has received a copy of the Shareholders
Agreement and has had an opportunity to review the same and obtain such legal advice with respect
thereto as the Transferee col!8iders necessary or desirable.
5.
Govérning Law
This agreement shall be governed by and construed in accordance with the laws of the
Province of Ontario and the laws of Canada applicable therein.
IN WITNESS WHEREOF the Transferee has duly executed this agreement as of the date
first above written.
· [Name of Transferee]
· (seal)
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SCHEDULE 3.1
CAPITALIZATION
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[Mechanics 'of the Capitalization must result in amount eqnal to CNP contnöution being
distributed to Municipalities within one year of the date of execution of the Shareholders'
Agreement)
(a) On or before the Effective Date each Specified Municipality shall subscribe for and,
in consideration of certain of its electricity assets transferred to a corporation
incorporated pursuant to section 142(1) of the Electricity Act, 1998 ("Holdco"),
Holdco shall issue to each Specified Municipality common shares in the capital of
Holdco having an ascribed value equal to the net book value of the assets transferred
to Holdco by such Specified Municipality, as determined in the Transfer By-law of
such Specified Municipality.
(b)
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On or before the Effective Date each Specified Municipality shall subscribe for and,
in consideration of certain of its assets used in respect of the marketing and selling
of products and services associated with the distribution of electricity transferred to
a corporation incorporated pursuant to section 142(1) of the Electricity Act, 1998
("Servco A"), Servco A, shall issue to each Specified Municipality common shares
in the capital of Servco A having an ascribed value equal to the net book value of
the assets transferred to Servco A by such Specified Municipality, as determined in
the Transfer By-law of such Specified Municipality.
(c) On or before the Effective Date each Specified Municipality shall subscribe for and,
in consideration of certain of its assets used in respect of the distribution of
electricity transferred to a corporation incorporated pursuant to section 142(1) of the
Electricity Act, 1998 ("Wiresco A''), Wiresco A sha11 issue to each Specified
Municipality common shares in the capital of Wiresco A having an ascribed value
equal to the net book value of the assets transferred to Wiresco A by such Specified
Municipality, as determined in the Transfer By-law of such Specified Municipality.
(d)
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In consideration of certain of the assets transferred to Wiresco A, Servco A and
Holdco, respectively, on or before the Effective Date, Wiresco A sha11 deliver to
each Specified Municipality a Promissory Note having a principal amount equal to
55% of the net book value of the assets transferred to Wiresco A by such Specified
Municipality, Servco A sha11 deliver to each Specified Municipality a Promissory
Note having a principal amount equal to 50"10 of the net book value of the assets
transferred to Servco A by such Specified Municipality and Holdco sha11 deliver to
each Specified Municipality a Promissory Note having a principal amount equal to
50% of the net book value of the assets transferred to Holdco by such Specified
Municipality.
[Note to draft: 50/50 (as modified to accommodate the CNP amount) is necessary for
all three corporations. Otherwise certain shareholders will,have different debt/equity
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ratios because they will have had more or fewer assets transferred to given
corporation in corporate structure.]
(e)· Following the transactions contemplated in subsections 3.1(a) to (d) and on the
Effective Date, each Specified Municipality sha11 transfer all of its common shares
in the capital of Servco A and all of its common shares in the capital of Wiresco A
to Holdco in consideration of the issue to each such Specified Municipality of a
number of common shares in the capital ofHoldco equal to the product obtained by
multiplying the total number of common shares of Holdco to be issued and
outstanding following the issuances of common shares to all Specified
Municipalities by a fraction the numerator of which is equal to the net book value of
the assets transferred to Servco A and Wiresco A by such Specified Municipality
and the denominator of which is equal to the aggregate net book value of the assets
transferred to Servco A and Wiresco A by all of the Specified Municipalities, in
each case as determined in the Transfer By-laws.
(f) Following the transactions contemplated in subsections 3.1(a) to (e) and on the
Effective Date,
(i) Hanover Electric Services Inc. ("HWiresco") shall deliver to Hanover a
Promissory Note having a principal amount equal to 52.8% of the net book
value of its assets;
(ii) the corporation incorporated by Hanover pursuant to section 142(1) of the
Electricity Act, 1998, on. , to which assets related to the marketing and
selling of products and services associated with the distribution of electricity
were transferred ("HServco"), shall deliver to Hanover a Promissory Note
having a principal amount equal to 52.8% of the net book value of the
assets;
[Note to Draft: Confirm no debt issued by Hanover companies]
(ill) in consideration of the transfer by Hanover to Holdco of all of the remaining
issued and outstanding shares in the capital of HWiresco and HServco,
Holdco sha11 issue to Hanover a number of common shares in the capital of
Holdco equal to the product obtained by multiplying the total number of
common shares of Holdco to be issued and outstanding following the
issuances of common shares to all Municipalities by a fÌ"action the numerator
of which is equal to:
(A) 45% of the net book value of the HWiresco Assets; plus
(B) 50% of the net book value of the HServco Assets (as defined below);
and the denominator of which is equal to the aggregate net book value of the assets
transferred to Holdco, Servco A and Wiresco A by all of the Specified
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Municipalities, in each case as detennined in the Transfer By-laws together with the
Hanover Assets (as defined below).
"HWiresco Assets" sha11 mean the assets (the "Hanover Assets") transferred to
Hwiresco, less the assets (the ''HServco Assets") subsequently transferred to
HServco by Hanover.
(g)
Following the transactions contemplated in subsection 3.1(f) and on the Effective
Date,
(i) Wiresco A shall amalgamate with HWiresco and the amalgamated
corporation sha11 continue as Wiresco; and
(ii) Servco A sha11 amalgamate with HServco and the amalgamated corporation
sha11 continue as Servco.
The by-laws of the amalgamated corporations shall, in the case of the amalgamation
described in subsection 3. 1 (g)(i), be those ofWiresco A in effect immediately prior
to the amalgamation, and in the case of the amalgamation described in subsection
3.1 (g)(ii), be those of Servco A in effect immediately prior to the amalgamation.
(h)
Following the transactions contemplated in subsections 3.1(a) to (g) and on the
Effective Date, CNP sha11 incorporate a corporation ("CNPco") under the OBCA
and., in consideration of a cash amount (the "CNPco Value") equal to eleven and
one hundred and eleven thousandths percent (11.111%) of (the value (on a
discounted cash Bow basis) of the shares in the capital of Holdco then held by
the Municipalities], purchase:
(i) shares in CNPco having an ascribed value equal to 50% of the CNPco
Value; and
(ii) a Promissory Note (the "CNP Promissory Note") of CNPco in a principal
amount equal to 50% of the CNPco Value.
(i) Following the transaction contemplated in subsection 3.1 (h) and on the Effective
Date, CNPco sha11 amalgamate with Holdco, and the amalgamated corporation shall
continue as the Corporation. The by-laws of the Corporation sha11 be those of
Holdco in effect immediately prior to its amalgamation with CNPco. For each
common share in Holdco, each Municipality sha11 receive, and the Corporation shall
issue, one Common Share.
(j)
Following the transaction contemplated in subsection 3.1(i) and on the Effective
Date, CNP sha11 receive and the Corporation shall issue a number of Common
Shares such that following the issue thereof CNP shall hold Common Shares equal
to ten per cent (10%) of all of the issued and outstanding Common Shares.
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(k) Following the transaction contemplated in 3.1(j) and on the Effective Date, the
Corporation shall subscribe for and purchase, in consideration for the CNP
Promissory Note and a cash amount equal to 50% of the CNPco Value, shares in
Wiresco.
(1)
Following the transaction contemplated in 3.1(k) and no later than 12 months
following the date of execution of this Agreement, Wiresco shall, in consideration
for an amount equal to 10% of the principal amount of each such Promissory Note,
partially redeem the Promissory Notes issued by it to each Municipality such that
the upon such redemption the aggregate value of the unredeemed portion of such
Promissory Notes sha11 be equal to 50% of the net book value of the assets of
Wìresco.
(m) The Corporation, Servco, Wiresco, the directors of the Corporation and the
Shareholders shall, to the full extent of their respective power, authority and right to
do so, make all proposals, give all approvals, vote, pass all resolutions, give all
notices, effect all transfers and do all other things necessary or required to facilitate
and effect the transactions contemplated in this section 3.1.
3.3 Credit Facilities
Each Shareholder sha11 use reasonable efforts subject to applicable laws to facilitate the
establishment by the Corporation of such credit facilities with arm's length financial institutions as
the directors of the Corporation ftom time to time determine to be necessary or desirable for the
conduct of the business of the Corporation or any Subsidiary of the Corporation.
3.4 Ongoing Financing
Subject to any restrictions on Shareholders contained in applicable laws, if at any time the
directors of the Corporation determine that
(a) the Corporation requires an amount of money to enable the Corporation in the
following six (6) months
(i) to carry on its business as contemplated in the then current budget approved
by the board of directors of the Corporation, or
(ii) to pay its liabilities as they become due, and
(b) the amount required by the Corporation exceeds the funds and credit available to the
Corporation from its usual external sources of financing (the amount of the excess
being hereinafter referred to as the "Required Amount"), and
(c) the Shareholders be requested by the Corporation to provide the Required Amount
to the Corporation,
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and the Corporation gives to all Shareholders a written notice wherein each Shareholder is
requested to advance to the Corporation, by way of a loan with a term of one year bearing interest
at the Prime Rate plus one per cent (1%) both before and after default calculated monthly, an
amount equal to the amount obtained when the Required Amount is multiplied by the Share
Proportion of the Shareholder with respect to the Common Shares, then within thirty (30) days after
receiving such notice, each Shareholder sha11 advance to the Corporation, by way of an interest
bearing loan, the amount that it is requested to advance as determined in accordance with the
notice. All or any portion of an amount that is to be advanced by a Shareholder may be advanced
by a Related Shareholder of such Shareholder. If, within thirty (30) days after receiving such
notice, all or any portion of the amount to be advanced by a Shareholder (a "Defaulting
Shareholder") has not been advanced in accordance with this section, then, at any time before the
Defaulting Shareholder advances such amount, the amount which has not been advanced by or in
respect of the Defaulting Shareholder may be advanced by anyone or more other Shareholders (any
such Shareholder that advances an amount in respect of the Defaulting Shareholder being referred
to as a "Supporting Shareholder"). An amount advanced by a Supporting Shareholder in respect of
a Defaulting Shareholder shall be a loan of such amount from the Supporting Shareholder to the
Defaulting Shareholder which shall bear interest at the Prime Rate plus four per cent (4%) per
annum calculated and payable monthly and the principal amount advanced shall be payable on
demand. The Defaulting Shareholder sha11, at the time the Supporting Shareholder makes an
advance in respect of a Defaulting Shareholder, pledge in favour of the Supporting Shareholder the
number of its Shares whose book value is equal to the amounts advanced by the Supporting
Shareholder in respect of the Defaulting Shareholder. The Supporting Shareholder may, without
advance notice to the Defaulting Shareholder, enforce on such security if the Defaulting
Shareholder is in default of its obligation to the Supporting Shareholder. In the event the
Supporting Shareholder enforces on such security, the shares pledged shall be valued at book value.
Following a pledge of shares as contemplated herein, the Defaulting Shareholder shall retain the
right to vote, to receive dividends, and the right to receive distributions upon dissolution of the
Corporation and all other rights of a Shareholder as provided herein with respect to the pledged
Shares. Each Shareholder hereby agrees that if any amount becomes payable by the Corporation to
it at any time when it owes any amount in respect of one or more loans from Supporting
Shareholders made pursuant to this section, then to the extent of the amounts owing in respect of
such loans, the Corporation shall pay to such Supporting Shareholders the amount payable to the
Defaulting Shareholder and each Shareholder hereby irrevocably authorizes and directs the
Corporation to do so.
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(f) The costs and expenses of the Designated Valuators incurred in connection with the
appointment of the Valuator and/or the Valuator in connection with the preparation
of the Valuator's Report shall be paid by the Corporation.
(g)
Capitalized terms used in this schedule and not defined sha11 have the meanings
ascribed thereto in Article 6 of this Agreement.
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