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Clerk's
Report
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Report To: Council
Date of Meeting: March 18, 2019
Report Number: CLD -010-19
File Number:
Resolution: #C-110-19
By-law Number:
Report Subject: Appointments of Independent Directors to EI Hxicon Holdco
bmmend ations:
1. That Report CLD -010-19 be received;
2. That the draft resolution, Attachment 2 to Report CLD -010-19, regarding the nomination
of Independent Directors and authorizing Clarington's representative to elect the
Directors of Merged Holdco be approved; and
3. That all interested parties listed in Report CLD -010-19 and any delegations be advised
of Council's decision.
Municipality of Clarington
Report CLD -010-19
Report Overview
Page 2
This report presents the independent directors as recommended by the Veridian
Nominating Committee to be appointed to the new merged EI Hxicon Holdco Bodras per
the Unanimous Shareholder Agreement (USA).
1. Background
1.1 At the June 11, 2018 Council meeting, Council considered Report CAO -005-18 and
passed the following resolution:
Resolution #C-199-18
Moved by Councillor Cooke, seconded by Councillor Woo
That Report CAO -005-18 be received; and
That Council pass the by-law attached to Report CAO -005-18 (Attachment
1) in order to approve the proposed amalgamations between (1) Veridian
Corporation and Whitby Hydro Energy Corporation, and (2) Veridian
Connections Inc. and Whitby Hydro Electric Corporation.
This Report set out the terms and details of the Merger Agreement. By-law 2018-055
was enacted by Council on June 11, 2019, approving the merger of Veridian and Whitby
Hydro.
1.2 On January 11, 2019, the Municipal Solicitor and the Municipal Clerk provided Members
of Council with a detailed timeline regarding nominations for appointment to Veridian
Board and Veridian Connections as well as the steps to be followed to appoint directors
to the newly merged companies.
2. Discussion
2.1 The recommendation for appointment of independent directors to the Merged Holdo
Board (Elexicon) is presented to Council for consideration as per the requirements of
the USA and as per correspondence dated March 1, 2019 from Veridian (Attachment 1).
2.2 The list of independent directors includes the names of at least one individual who
currently represents each of the municipal shareholders as follows:
Ron Chatterton
City of Pickering
Jim Macpherson
Town of Ajax
Brian Mountford
Municipality of Clarington
Doug Parker
City of Bellville
Municipality of Clarington Page 3
Report CLD -010-19
The recommended motion for Council's consideration (see Attachment 2), contemplates
that Council will nominate the Recommended "Clarington" Independent Director to the
Board of Directors of the Merged Holdco for a two year term, nominate the other
Independent Directors as chosen for nomination by the other municipal shareholders (ie.
Clarington Council will support the other municipalities' nomination for their respective
nominees), and will endorse the nominations identified by Whitby.
2.3 The Mayor has been nominated to serve as the Mayor (or mayor's designate) on the
Merged Holdco Board, in accordance with the USA. This is consistent with the other
municipal shareholders, where each Mayor has confirmed that he will stand as the
nominated Director for their respective municipality, instead of a Mayor's designate.
2.4 It has been proposed that each municipal shareholder will nominate and authorize its
CAO to take necessary actions in connection with the first shareholder meeting of
Merged Holdco. These actions may include the election of the directors of the
subsidiaries of Merged Holdco, setting the compensation of such directors and dealing
with matters to be decided by the shareholders of Merged Holdco as contemplated in the
MPA and the USA, and other actions necessary to effect the merger. Attachment 2
includes the proposed recommendation for Council's consideration to appoint Mr. Allison,
CAO as Clarington's Authorized Representative to elect the directors of Merged Holdco
and vote at a meeting of shareholders of Merged Holdco, to execute and deliver any
necessary agreements, instruments, and any other necessary actions contemplated in
the MPA or USA.
2.5 Veridian has indicated that they will be providing the Shareholders with an independent
report respecting recommended compensation for Elexicon Directors. Upon receipt of
the report from Veridian, the report will be provided to Members of Council under
separate cover.
2.6 Aird & Berlis LLP has been providing advice and guidance on the merger process to the
merger joint steering committee to ensure that each municipal shareholder correctly
follows the appropriate corporate and municipal rules to form the Merged Holdco and the
Merged LDC.
2.7 The target date for completion of the amalgamation is April 1, 2019.
Municipality of Clarington Page 4
Resort CLD -010-19
3. Concurrence
This report has been reviewed by the Municipal Solicitor who concurs with the
recommendations.
4. Conclusion
Based on the foregoing, and to fulfil Clarington's obligations set out in the MPA and USA,
it is respectfully recommended that Council pass the recommendations as recommended
by Veridian and included in this Report as Attachment 2.
5. Strategic Plan Application
Not applicable.
Submitted by:^� Reviewed by.
C. nne AGreentree, B.A., CMO, Andrew C. Allison, B. Comm, LL.B
Municipal Clerk CAO
Staff Contact: Anne Greentree, Municipal Clerk, 905-623-3379 ext. 2102 or
agreentree@clarington. net
Attachments:
Attachment 1: Correspondence from Veridian — March 1, 2019
Attachment 2: Draft resolution nomination of Independent Directors
Attachment 3: Independent Compensation Report from Veridian (to be distributed under
separate cover)
List of interested parties to be notified of Council's decision is on file in the Clerk's Department.
\\4f
VERIDIAN
C O R P O R A T I O N
55 Taunton Road East
Ajax, ON UT 3V3
Tel: 905-427-9870
Ext.: 2200
Fax: 905-619-0210
email: tlaschuk@veridian.on.ca
NOTICE OF RECOMMENDATION RE INDEPENDENT DIRECTORS
RESOLUTION 112019 -VCO2
March 1, 2019
BY ELECTRONIC DELIVERY
To: The Corporation of the Town ofAjax, The Corporation of the City of
Belleville, The Corporation of the Municipality of Clarington, and The
Corporation of the City of Pickering (together with The Corporation of the
Town ofWhitby, collectively known as the "Municipal Shareholders")
Re: Project Taunton: Recommendation of Appointment of Independent
Directors
Please be advised that the board of directors of Veridian Corporation pursuant to Section
3.2(c)(iii) of the form of Unanimous Shareholder Agreement attached to the Merger Participation
Agreement between the Municipal Shareholders, Veridian Corporation and Whitby Hydro
( EFU FMRISR 3fiZ❑EAW 3CorporationsEmDEG_FF-4M.❑[RA-USDLWW G3hG1LDCCu:i❑FmR❑❑❑❑KH-FE
recommends:
Names of Independent
Director Nominees
Director Term
Ron Chatterton
Three year term
Doug Parker
Three year term
Jim Macpherson
Two year term
Brian Mountford
Two year term
to be directors of the corporation to be formed by the amalgamation of the Corporations.
Yours truly,
Tanya Laschuk
on behalf of the Board of Veridian Corporation.
The power to make your community better.
Veridian Connections is a wholly owned subsidiary of Veridian Corporation
WHEREAS The Corporation of the Municipality of Clarington ("Clarington") is a party to a Merger
Participation Agreement dated July 10, 2018 (the "MPA') with respect to the amalgamation (the
"Amalgamation") of Whitby Hydro Energy Corporation and Veridian Corporation to form
Elexicon Corporation ("Merged Holdco"), to which is attached a form of Unanimous Shareholder
Agreement (the "USA") to be executed and come into force as at the date of the Amalgamation;
AND WHEREAS, under the USA, Clarington and the municipalities of Ajax, Belleville, and
Pickering may nominate certain Independent Directors (as defined below) of Merged Holdco
following receipt of a recommendation by the board of directors of Veridian Corporation;
AND WHEREAS, Clarington has received such a recommendation;
AND WHEREAS, under the USA, the municipality of Whitby may nominate certain Independent
Directors (as defined below) of Merged Holdco following receipt of a recommendation by the
board of directors of Whitby Hydro Energy Corporation;
AND WHEREAS the USA defines an Independent Director in relation to a municipality, as an
individual that, at the time of his or her appointment to a Board and throughout his or her term as
a member of such Board is not: the Mayor of such municipality; a member of the municipal council
of such municipality; a member of a "local board" (as defined in the Municipal Act, 2001) of such
municipality; or an employee of such municipality or such local board;
AND WHEREAS, under the USA, Clarington and the municipalities of Ajax, Belleville, Pickering,
and Whitby shall each nominate one (1) director of Merged Holdco who shall, in the sole
discretion of the Mayor of each municipality, be either the Mayor or the Mayor's Designate;
AND WHEREAS Clarington has nominated its Mayor as a director of Merged Holdco;
AND WHEREAS the above-mentioned nominees would, if elected, fulfill the requirements to be
a directors of the Merged Holdco;
BE IT RESOLVED THAT:
1. Clarington nominates Brian Mountford as an Independent Director to the Board of
Directors of the Merged Holdco for a two year term, effective as at the date of the
Amalgamation;
2. Clarington nominates as Independent Directors of Merged Holdco, the individuals chosen
for nomination by each of Ajax, Belleville, and Pickering;
3. Clarington endorses the nominations to the Merged Holdco as are identified by Whitby
pursuant to the USA;
4. the Chief Administrative Officer, or an individual designated by the Chief Administrative
Officer, of Clarington (the "Authorized Representative") is authorized and directed, for and
in the name of and on behalf of Clarington:
a. to provide notice to the other parties to the MPA of these resolutions and to
execute and deliver all such other agreements, amendments, instruments,
certificates, resolutions and other documents, and to do all such other acts and
things as the Authorized Representative may determine to be necessary or
advisable in connection with the nomination and election of directors set out in
paragraphs 1 2, and 3, the execution and delivery of any such agreement,
amendment, instrument, certificate, resolution or other document or the doing of
any such other act or thing by the Authorized Representative being conclusive
evidence of such determination; and
b. execute and deliver all such other agreements, amendments, instruments,
certificates, resolutions and other documents, and to do all such other acts and
things as the Authorized Representative may determine to be necessary or
advisable in connection with the first shareholder meeting of Merged Holdco,
including without limitation the election of the directors of the subsidiaries of
Merged Holdco, setting the compensation of such directors and dealing with
matters to be decided by the shareholders of Merged Holdco as contemplated in
the MPA or USA, the execution and delivery of any such agreement, amendment,
instrument, certificate, resolution or other document or the doing of any such
other act or thing by the Authorized Representative being conclusive evidence of
such determination.
ron
ClatVgtOR
Memo
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Co-ordinator at 905-623-3379 ext. 2131
To: Mayor Foster and Members of Council
From: Andy Allison, CAO
Date: March 15, 2019
Subject: Elexicon
Attached please find a copy of an undated letter that was sent to me this morning by the
Interim President & CEO of Veridian and the President & CEO of Whitby Hydro. The
letter provideds their recommendations respecting compensation for directors of
Elexicon Corp. Unless directed otherwise, my intention would be to support the
recommendations contained in this letter at the inaugural shareholders' meeting for
Elexicon on April 1, 2019 (as Clarington's authorized representative).
Andy
cc: Department Heads
The Corporation of the Municipality of Clarington
40 Temperance Street, Bowmanville ON 1-11C 3A6 1905-623-3379
$WWDFKPHQVWR5HSRUW&/'
0
elexicon s�
CORP VERIDIAN �s
C O R P O R A T 1 0 N
Chief Administrative Officer
Municipality of Clarington
Dear: Mr. Allison
Re: Elexicon Director Compensation
We are pleased to provide you with our director compensation recommendations for the
Elexicon group of companies. As you know, approval for these compensation arrangements
❑L®HIVRE] KV®ViWH®E] ❑.DW(NELFR®KDUlKR(GHU/® HH%O , which has been scheduled
for April 1St 2019.
Our recommendations were prepared with the assistance of Korn Ferry; a reputable
consulting firm with extensive experience in the field of compensation benchmarking. The
recommendations address director compensation for the boards of directors of the following
business units:
Elexicon Corp. ❑the holding company with a board of directors comprised of 5
elected officials and 6 other members ®I®KLFK®LMBRSIGR❑LEMm'I-ILEHER❑
subsidiary boards).
Elexicon Energy ❑the regulated subsidiary of Elexicon Corp. that will carry out the
business of electricity distribution and which will be governed by a board of directors
comprised of 7 members (2 non -elected members from Elexicon Corp. plus 5
others).
:1 Elexicon Group ❑the unregulated subsidiary of Elexicon Corp. that will pursue
competitive business opportunities and which will be governed by a board of
directors comprised of 5 members (2 non -elected members from Elexicon Corp. plus
3 others).
The following table summarizes our compensation recommendations for these businesses:
Fee Category
Amount
Chair retainer
$30,000
per year
Director retainer ❑sin le board
$16,500
per year
Director retainer ❑dual board
$20,000
per year
Supplemental retainer ❑committee chair
$3,500
per year
Meeting fees
$575
per meeting (i.e. all board
and board committee
meetin s
These recommendations were determined through an assessment of the director
compensation practices of seven municipally owned electricity distributors operating in the
province of Ontario. They are: Alectra Utilities, Hydro Ottawa, London Hydro Inc., Kitchener -
Wilmot Hydro Inc., Oakville Hydro, Waterloo North Hydro Inc. and ENWIN Utilities Ltd. The
recommended compensation levels are targeted between the 50th and 75th percentile of this
SHHIIDLREEIR DLNHV®KLFK=Ra4-V flEVUL\MEWHm-I®VILHME ERIT(6i❑IFRE=usiness
operations within the group.
The recommended compensation levels are not dissimilar to those currently in place for
Veridian and Whitby Hydro. These are as follow:
Legacy Organization
Board Position
Annual Retainer
Meeting Fees2
Veridian4
Board Chair
$31,827
$530
Board Member $13,261 / $16,4111
$530
Committee Chair none
$1,0613
Whitby Hydros
Board Chair
$33,400
none
Board Member $18,750
none
Committee Chair $21,750
none
1. Veridian Corporation and Veridian Connections dual board members receive additional compensation
2. Veridian pays the Chair/Director incumbents meeting fees for all meetings in excess of four per year
3. Committee chairs are paid an enhanced meeting fee for meetings that they chair
4. Veridian director compensation was set based on the advice of an independent third party
5. Whitby Hydro director compensation was established by by-law, based on the average of compensation
levels in place for Veridian and Oshawa PUC.
We hope this information is helpful as you prepare for our shareholGHLVIEP HHV1® =01M®
hesitate to contact us if you have any questions.
Regards,
Rob Scarffe
Interim President & CEO
Veridian Corporation
John Sanderson
President & CEO
Whitby Hydro Energy Corporation