HomeMy WebLinkAbout99-86 THE CORPORATION OF THE MUNICIPALITY OF CLARINGTON
BY-LAW No. 99-86
Being a by-law to approve the merger of three Hydro-Electric
Commissions, the incorporation of a corporation and
Subsidiaries under the Business Corporations Act (Ontario)
pursuant to section 142 of the Electricity Act, 1998 and an
agreement of the shareholders of the foregoing parent corporation.
WHEREAS pursuant to section 142(1) of the Electricity Act, 1998 the Council of
the Corporation of the Municipality of Clarington (the "Municipality") may
cause a corporation to be incorporated under the Business Corporations Act
("OBCA") for the purpose of generating, transmitting, distributing or retailing
electricity;
AND WHEREAS the Municipality transmits, distributes and retails electricity
through the Clarington Hydro Electric Commission (the "Commission");
AND WHEREAS pursuant to subsection 142(3) of the Electricity Act, 1998 two
or more municipal corporations may incorporate a single corporation for the
purpose of carrying on the business of generating, transmitting, distributing or
retailing electricity;
AND WHEREAS the Municipality together with the Councils of the Corporation
of the Town of Ajax and the Corporation of the Town of Pickering (collectively
the "Other Municipalities") have agreed to enter into a merger agreement (the
"Merger Agreement") to establish the terms and conditions upon which the
Municipality and the Other Municipalities will merge the businesses of the Ajax
Hydro-Electric Commission, Clarington Hydro-Electric Commission and
Pickering Hydro-Electric Commission (collectively the "Predecessor Utilities");
AND WHEREAS the Municipality together with the Other Municipalities have
authorized the incorporation of a corporation (the "Corporation") and certain
subsidiaries (the "Subsidiaries") (collectively the "Corporation and its
Subsidiaries") to be incorporated under the OBCA pursuant to section 142(1)
of the Electricity Act, 1998 for the purpose of generating, transmitting,
distributing or retailing electricity;
AND WHEREAS the Municipality and the Other Municipalities have agreed to
enter into a shareholders' agreement (the "Shareholders' Agreement") to
provide for the conduct of certain affairs of the Corporation and its
Subsidiaries, to provide for certain restrictions on the transfer and ownership
of shares in the capital of the Corporation and to govern the mutual rights and
obligations of the Municipality and the Other Municipalities with respect to the
Corporation and its Subsidiaries and each other;
The Council of the Corporation of the Municipality of Clarington enacts
as follows:
1. The Merger Agreement among the Municipality and the Other
Municipalities, in substantially the form attached hereto as Schedule "A",
forming part of this by-law is hereby authorized and approved.
• By-law 99-86 Page 2
2. The incorporation, pursuant to section 142 of the Electricity Act, 1998 of
the Corporation under the OBCA on July 1, 1999 or such other date to
be determined by the Mayor and the Mayors of the Other Municipalities
is hereby authorized and approved, and Linda L. Bertoldi of the law firm
of Borden &, Elliot is hereby authorized to act as the incorporator of the
Corporation and its Subsidiaries and to file articles of incorporation for
the Corporation on such date in the form annexed hereto as Schedule
"B". The incorporation of Subsidiaries is also hereby authorized and
approved. The registered office of the Corporation and its Subsidiaries
shall be the head office of the Pickering Hydro-Electric Commission until
otherwise determined by the Town and the Other Municipalities
pursuant to the OBCA and Shareholders' Agreement.
3. The Shareholders' Agreement among the Municipality, the Other
Municipalities, the Corporation, in substantially the form attached hereto
as Schedule "C", forming part of this by-law is hereby authorized and
approved.
4. The transfer of the assets, liabilities and employees of the Commission to
the Corporation and as appropriate, to one or more Subsidiaries shall be
authorized by Council pursuant to a transfer by-law in accordance with
the Electricity Act, 1998 to be submitted to Council for its consideration
and enacted prior to November 1, 1999 or such other date to be
determined by the Mayor and the Mayors of the Other Municipalities.
5. Any two of the Mayor, the Chief Administrative Officer, and the Clerk are
hereby authorized and directed, for and on behalf of the Municipality to
execute and deliver the Merger Agreement and Shareholders' Agreement
(the "Main Documents") with such alterations, additions and
amendments thereto as they may approve, the execution of the Main
Documents by such individuals being conclusive evidence of such
approval and to do all such acts and things and to execute and deliver all
such other documents, instruments and writings as may be necessary or
desirable to give effect to the provisions of this by-law and the Main
Documents.
Read a First and Second Time this 28th day of June, 1999
Read a Third Time and Finally Passed this 28th day of June, 1999
Mavor
g.
Municipal Clerk
R a COUNCIL INFORMATION I-29
1362708 August 41999 AU6 2 17
Ontario Inc. Patti L. Barrie,
Municipal Clerk
St Municipality of Clarington
Pick ckerringing,, 40 Temperance St.
Ontario
L1W 3R6 Bowmanville,ON L1C 3A6
Dear Ms.Barrie:
905-427-0791
Re: Share Subscriptions in 1362708 Ontario Inc.and Shareholder Agreement
Please be advised that the new utility formed by the municipalities of Ajax, Clarington
and Pickering has been registered as #1362708 Ontario Inc. A new name for the
corporation is expected to be announced shortly.
The assets, liabilities and employees will be transferred by the municipalities to the
new corporation by means of a Transfer By-law on November 1, 1999. We will be
communicating further with you in the near future regarding the particulars of this by-
law.
To establish the shareholder's rights in this corporation the Board of Directors
authorized the issuance of 1000 common shares,at a value of$1.00 per share for a total
investment of $1000. The shares were issued in proportion to the estimated equity
contribution of each of the Hydro-Electric Commissions and the nominal subscription
- - --- fees for this issue were paid by the commissions. The proportional shareholder equity
will be adjusted on October 31, 1999 based on the assets and liabilities transferred to
the corporation at that time and the share issues will be adjusted accordingly.
Enclosed is a copy of the Common Share Certificate for your municipality. The
originals are held in safekeeping by our Solicitors,Borden&Elliot.
Board of Directors I have also enclosed an original executed copy of the Merger and Shareholder
Agreement.
J.I.Mason,Chair
W.Arthurs Finally please note that the following officers were appointed: J. Mason, Chair, G. Van
J.Atkinson Dyk,Vice Chair,J.Wiersma,President&CEO,A. P. Starck,Executive Vice President
B.Boyle Distribution and D.Clark,Vice President Corporate Support& Secretary Treasurer.
S.Elston
D.Hamre Yours very truly,
L.Hodgins
D.Jewell
R.Johnson LGK�j
N.Maxwell
S.Parish John Wiersma,P.Eng.
P.Reesor President&CEO
P.Storks
R. Sutton a D.Clark
G.Van Dyk
Encl(2) NOTE: Document available in the Cler 's Department.
J.Wiersma,
President ent&CEO
e,,
Certificate No. C-2 From whom transferred
COMMON For 158 Shares Treasur-3, Received Certificate No.
SHARE Issued to Dated 19_ for Shares
CERTIFICATE The Corporation of the Municipality No.Original No.Original No.of Shares this day of 19
of Clarington Certificate Shares Transferred
Dated July 27, 19—29,
(See reverse side for notice of share transfer restrictions. )
1111ilill IRONER
No. =C-2= INCORPORATED UNDER THE LAW OF THE PROVINCE OF ONTARIO 158=Sh
-- - - - - - - - - - - - - - - -
IMs Is to Certify that .............The.Corporation.of.the.Municipality.of.Clarington.................................
is the registered holder of ...........010. 1undr..ed.an..d.Fifty-Eight.058)..............................................
...........
fully paid and non-assessable Common shares of 1362708 ONTARIO INC.
The class or series of shares represented by this Certificate has rights,privileges,restrictions or conditions attached thereto and the Corporation will furnish
to the holder,on demand and without charge,a full copy of the text of,
(i) the rights,privileges,restrictions and conditions attached to the said shares and to each class authorized to be issued and to each series insofaras the
same have been fixed by the directors,and
(ri) the authority of the directors to fix the rights,privileges,restrictions and conditions of subsequent series,if applicable.
LIEN ON SHARES.The corporation has a lien on the shams represented by this Certificate for any debt of the shareholder to
the Corporation.
RESTRICTIONS ON TRANSFER.There are restrictions on the right to transfer the shares represented by this Certificate.
IN WITNESS WHEREOF the Corporation has caused this Certificate to be signed by its duty authorized officers and to be seated
the seal of the Corporation this . .......... .27t.h.- .. . ... .... day of .....July. ....... ......... . ........
James Mason Chair John Wiersma President and CEO
sli
r
� v, �—�✓- �. W. � ��W. \vim
O �y
►.ri � y
n
tp� JO o
The shares represented by this
certificate are subject to the
3 O provisions of the Shareholers'
(D Agreement made as of July 1, 1999
(!) among all of the shareholders of
p1 CERTIFICATE the Corporation as at that date,
a r which agreement contains restrictions
., for on the right to sell, transfer ,
.D pledge, mortgage, assign, vote or
c 158 otherwise deal with or encumber
�
(D Shares such shares . Notice of such
O
restrictions and the other provisions
a _______ - of such agreement is hereby given.
o. of the A copy of such agreement is available
Common Shares for inspection from the Secretary of
t the Corporation on request.
rn a—
(D
c� (D
O
a
cl) Issued to
=r cn The Corporation of the
1 gton
IT
(P °- Dated
3N103JA ONV 3NnN30 SI1N3W3S80ON3 3H11VH130NV T\lIV 27- 1999
-unsSV 318VNOSV38 38ino38 Ol 1H01H 3H1 S3A83S38 NOI1V8
-Od800 3H1 ONV'83A31VHM 39NVHO ANV d0'1N3VG08V1N3 --
FiO IJOI1V8311V inOH11M'8vino118Vd AU3A3 NI'31VOIjI1H30
3H1:i0 30V3 3H1 NOdn N31118M SV 3WVN 3H1 H11M ONOdS318
-k100 ism 1N3W3SHOON3 SIH1 30 3H(11VNOIS 3H1 3000N ,n J
t
' TOWN OF AJAX
' MUNICIPALITY OF CLARINGTON
' TOWN OF PICKERING
1
MERGER AGREEMENT
' SHAREHOLDERS' AGREEMENT
1
1
INDEX
' 1. Merger Agreement among the Town of Ajax,Municipality of Clarington, and Town
of Pickering dated June 29, 1999.
2. S h are h olders Agree men ta mo n g
the Town ofAJax,Municipality of Clanngton,Town
' of Pickering, and HoldCo dated July 1, 1999.
' G.\RJM\PICKER N\DOCLJMENTIBINDER5.WPD
r
r
HOLDCO
SHAREHOLDERS' AGREEMENT
1
' BORDEN & ELLIOT
1
1
' TABLE OF CONTENTS
' Page No.
ARTICLE I
' INTERPRETATION
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
' 1.2 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.3 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
' 1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.6 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.7 Calculation of Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
' 1.8 Statutory References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.9 Reclassification of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.10 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
' 1.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.12 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
' ARTICLE II
BUSINESS OF THE CORPORATIONS
' 2.1 Business of the Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Corporations' Standard of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III
CORPORATE AFFAIRS OF HOLDCO
3.1 Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 The Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
. (a) Shareholder Action. : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 15
(b) Initial Board 16
(c) The Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
' (d) Qualifications of Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
(e) Nominees of Transferee Shareholders 18
(f) Term of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
' (g) Vacancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Quorum . . . . . . . . . . . . . . 19
(i) Meetings of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
' 0) Decisions of the Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(k) Board Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(1) Indemnification and Insurance for Directors and Officers . . . . . . . . . . . 20
' 3.3 Board Committees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1 (i)
1
r
' Page No.
(a) Executive Committee . . . . . . . . . . . . . . . : : : : : : : : : : : : : : : : : : : : : 21
(b) Finance and Human Resources Committee 22
(c) Nominating Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
' (d) General Provisions Relating to Board Committees . . . . . . . . . . . . . . . . 23
3.4 Shareholders'Meetings 24
3.5 Regular Shareholders Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
' 3.6 Decisions of the Shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.7 Shareholder Representative 25
3.8 Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.9 Matters Requiring Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.10 Unanimous Shareholder Agreement . . . 27
3.11 Agreement Binds HoldCo and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
' 3.12 Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.13 Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.14 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
' 4.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
ARTICLE V
' TRANSFER OF SHARES
5.1 General Restriction on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.2 Legend on Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.3 Rights of First Refusal 31
(a) Notice of Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Offer Open During Notice Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
' (c) Acceptance of Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(d) Excess Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
r (� No Fractions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Sale 33
W Deemed Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(h) Prospective Purchaser Bound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
(i) HoldCo as Purchaser 34
5.4 Piggyback Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.5 Amalgamated Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
' (ii)
' Page No.
ARTICLE VI
CLOSING OF PURCHASE TRANSACTION
6.1 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2 Documents to be delivered by the Vendor . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
6.3 Documents to be delivered by the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.4 Failure to Complete Sale 37
' ARTICLE VII
NON-COMPETITION AND CONFIDENTIALITY
' 7.1 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
' 7.4 Accounting for Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.5 Reasonableness of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
' ARTICLE VIII
SALE OF SURPLUS ASSETS
8.1 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
' ARTICLE IX
BOOKS, RECORDS AND RIGHT TO INFORMATION
' 9.1 Books and Records . . • . . • . • • • • . . . . . . . . . • . . • . . . . . . . . . . . . . . . •. . . 42
9.2 Right to Information 42
' ARTICLE X
TERM
' 10.1 Term and Automatic Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XI
GENERAL
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Assignment and Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
11.3 Amalgamation of Municipal Shareholders 45
11.4 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
' (a) Selection of Single Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Page No.
(b) Referring Dispute. . . . . . . . . . . . • • . . • . . . . . • . . • • • • . . . . . • . . . 45
(c) Attempted Settlement. 46
(d) Decision Final and Binding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(e) Place of Arbitration. . . . . 46
' (f) Powers of Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
WCosts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(h) Written Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5 Further Assurances 47
11.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.7 Amendment, Modification and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.8 Time of Essence . . . . . . . . . . . . 48
11.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
' 11.10 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.11 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
' SCHEDULE "A"
DIRECTOR'S INDEMNITY
G:\RJM\PICKERIN\DOCUMENT\SHARHFIN.AGR
' (1V)
' THIS AGREEMENT made as of the 1st day of July, 1999.
BETWEEN:
The Corporation of the Town of Ajax, a municipal corporation
existing under the laws of Ontario
("Ajax")
- and -
The Corporation of the Municipality of Clarington, a
Imunicipal corporation existing under the laws of Ontario
("Clarington")
- and -
The Corporation of the Town of Pickering, a municipal
corporation existing under the laws of Ontario
' ("Pickering")
and -
[Number] Ontario Inc., a corporation existing under the laws of
Ontario
("HoldCo")
'
Recitals:
. H 1dC is a corporation existing under the laws of Ontario;
1 0 o p g o,
2. The authorized capital of HoldCo consists of an unlimited number of Shares of which
1,000 are issued and outstanding as fully paid and non-assessable;
- 2 -
3. Ajax, Clarington and Pickering are the sole registered and beneficial shareholders of
HoldCo holding the following numbers of Shares, respectively:
NAME OF NUMBER PERCENTAGE
SHAREHOLDER OF SHARES TOTAL
Ajax 368 36.8%
Clarington 158 15.8%
' Pickering 474 47.4%
4. Pursuant to the Electricity Act, each of the Shareholders shall transfer to the
Corporations, by applicable transfer by-laws, assets, liabilities and employees of the
' Predecessor Utilities; and
' 5. The parties wish to enter into this Agreement to provide for the conduct of certain
affairs of HoldCo, to provide for certain restrictions on the transfer and ownership of
Shares and to govern the mutual rights and obligations of the Shareholders with respect
to HoldCo and each other Shareholder;
NOW THEREFORE in consideration of the premises, the mutual promises herein
' contained and other good and valuable consideration (the receipt and sufficiency of which are
hereby acknowledged) each of the parties agrees with each other party as follows:
- 3 -
ARTICLE I
INTERPRETATION
' 1.1 Definitions
f
' In this Agreement the following terms shall have the following meanings unless the
subject matter or context otherwise requires:
"Act" means the Business Corporations Act (Ontario);
"Agreement" means this Agreement, all schedules attached hereto and any agreement or
schedule supplementing or amending this Agreement. All uses of the words "hereto",
"herein", "hereof", "hereby" and "hereunder" and similar expressions refer to this Agreement
and not to any particular section or portion of it. References to an Article, Section,
Subsection or Schedule refer to the applicable article, section, subsection or schedule of this
Agreement;
"Amalgamated Shareholder" has the meaning set out in Section 11.3;
"Arbitration Act" means the Arbitration Act, S.O., 1991;
"Arbitrator" has the meaning set out in Subsection 11.4(a);
"Arm's Length" has the meaning attributed thereto in the Income Tax Act (Canada) provided
that, for the purposes of Section 5.3, each Shareholder shall be deemed to be acting at Arm's
Length with each other Shareholder and HoldCo;
1
' - 4 -
' "Auditors" means the firm of chartered accountants appointed as auditor of the Corporations
from time to time;
' "Board" means the Board of Directors of HoldCo;
"Board Committees" means committees created by the Board from time to time for the
' purpose of overseeing specific tasks and reporting to the Board and includes the committees
referred to in Section 3.3;
Business means the business of the Corporations as described in Section 2.1 or as may
' otherwise be conducted by the Corporations from time to time;
"Business Day" means any day other than a Saturday, Sunday, or statutory holiday in
Ontario;
"Chair" means the director elected by the Board to serve as its chairperson from time to time;
"Closing Date" means the date on which the purchase and sale of Shares is to be completed;
"Confidential Information" means any and all information and data relating in any manner
' to the Business and any activities, plans, ideas, products, services, policies or intentions
(including without limitation, information of an operational, business, marketing, financial or
economic nature), whether or not proprietary in nature, that is of value to the Corporations
and is held by the Corporations as a trade secret and is not generally known to competitors
of the Corporations or to the public;
' "Corporations" means collectively HoldCo and any Subsidiary;
r - 5 -
r "Council Appointees" has the meaning set out in Subsection 3.2(d);
r "Debt" means, with respect to HoldCo and the Subsidiaries, without regard to any
uncapitalized interest component thereof (whether actual or imputed) that is not due and
rpayable, the aggregate of the following amounts, each calculated in accordance with generally
accepted accounting principles, unless the context otherwise requires:
r
(a) indebtedness for money borrowed (including, without limitation, by way of
roverdraft) or indebtedness represented by notes payable and drafts accepted
representing extensions of credit;
r
(b) the face amount of all bankers' acceptances and other similar instruments;
r
(c) all obligations (whether or not with respect to the borrowing of money) that
rare evidenced by bonds, debentures, notes or other similar instruments;
r (d) all liabilities upon which interest charges are customarily paid;
r (e) any capital stock of HoldCo (or of any subsidiary of HoldCo that is not held
by HoldCo or by a subsidiary of HoldCo that is wholly owned, directly or
rindirectly), which capital stock, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable at the option of the
rholder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
rat the option of the holder thereof, in whole or in part, on or prior to the
maturity date for cash or securities constituting debt;
r
' - 6 -
' (f) all capital lease obligations, synthetic lease obligations, obligations under sale
and leaseback transactions and purchase money obligations;
(g) the full amount of any contingent liability under any guarantee (other than by
endorsement of negotiable instruments for collection or deposit in the ordinary
course of business) in any manner of any part or all of an obligation of another
person of the type included in items (a) through (f) above, including contingent
liabilities in respect of letters of credit, letters of guarantee and similar
' instruments; and
' (h) contingent liabilities in respect of performance bonds and surety bonds, and any
other guarantee or other contingent liability of any part or all of an obligation
' of a person, in each case only to the extent that the guarantee or other
contingent liability is required by generally accepted accounting principles to be
' treated as a liability on a balance sheet of the guarantor or person contingently
liable,
provided that trade payables, operating leases and accrued liabilities that are current liabilities
incurred and deposits received in the ordinary course of business do not constitute Debt.
' "Debt/Equity Ratio" means a ratio of Debt to Equity on a consolidated basis for HoldCo and
all Subsidiaries;
"Disputing Shareholder" has the meaning set out in Subsection 11.4(c);
"Electricity Act" means the Electricity Act, 1998 (Ontario);
' - 7 -
"Encumbrance" means a mortgage, charge, pledge, hypothecation, lien (statutory or
otherwise), security interest, adverse claim, assignment as security or reservation of title of any
' kind;
"Equity" means the aggregate of the equity, capital stock and surplus as such amounts appear
on a consolidated balance sheet of HoldCo prepared in accordance with generally accepted
accounting principles and as determined by the Ontario Energy Board. In the event there is
a conflict between generally accepted accounting principles and the determination of the
Ontario Energy Board, the determination of the Ontario Energy Board with respect to the
conflict shall prevail;
"Fair Market Value" means the appraised value as determined by a registered appraiser
' selected and paid for by HoldCo;
' "Fiscal Year" means a 12-month period ending on December 31 in each year;
' "Governmental Authority" means any government or political subdivision (including without
limitation, any municipality or federal or provincial ministry) or agency, authority,
commission, department or instrumentality of any government or political subdivision, or any
court or tribunal, and specifically includes the Ontario Energy Board and the IMO;
"Hold Period" has the meaning set out in Section 5.1;
"IMO" means the Independent Electricity Market Operator established pursuant to the
Electricity Act;
"Initial Board" means the initial Board which holds office for the Initial Term;
' - 8 -
"Initial Shareholder" means, at the date of this Agreement, each of Ajax, Clarington and
' Pickering;
' "Initial Term" means the period from the date of this Agreement until December 31 2000•
P g >
' "Laws" means any law, including common law, equitable principle, statute ordinance,
' regulation, rule, order, permit, decision, declaration, notice, demand, injunction, writ, policy,
decree or award of any Governmental Authority;
"Majority Rule" has the meaning set out in Subsection 3.2(d);
"Merger Agreement" means the merger agreement dated June 29, 1999 among the Initial
' Shareholders;
"Notice Period" has the meaning set out in Subsection 5.3(b);
' "Offer" has the meaning set out in Subsection 5.3(a);
"Offered Shares" has the meaning set out in Subsection 5.3(a);
' "Other Holders" has the meaning set out in Section 5.3;
"Person" means an individual, firm, partnership, unincorporated association, corporation,
bank, trust or other legal entity of any kind whatsoever;
"Predecessor Utility" means each of Ajax Hydro-Electric Commission, Clarington
' Hydro-Electric Commission and Pickering Hydro-Electric Commission;
t - 9 -
' "Prospective Purchaser" has the meaning set out in Subsection 5.3(a);
' "Purchase Notice" has the meaning set out in Subsection 5.3(c);
' "Retiring Director" has the meaning set out in Subsection 3.2(g);
' "Selling Notice" has the meaning set out in Subsection 5.3(a);
"Selling Shareholder" has the meaning set out in Section 5.3;
"Shareholder" means any Person which is a registered holder of Shares;
"Shareholder Representative" has the meaning set out in Section 3.7;
"Shares" means common shares without par value in the capital of HoldCo;
' "Subsidiary" means any subsidiary (as this term is defined in the Act) of HoldCo;
"Surplus Assets" means any land or buildings owned by HoldCo or any Subsidiary that
HoldCo or any Subsidiary respectively has determined to offer for sale;
1
"Third Party" means any Person with whom a Shareholder deals at Arm's Length;
"Transferee Shareholder" means any Person which acquires Shares from a Shareholder in
accordance with the provisions of this Agreement; and
' "Vice-Chair" means the director elected by the Board to serve as its vice-chairperson from
time to time.
1
' - 10 -
1.2 Control
For the purposes of this Agreement, a body corporate shall be deemed to be
"controlled" by another Person or by two or more Persons if such Person or Persons (either
' individually or collectively and whether or not they act together jointly or in concert) directly
or indirectly own, legally and beneficially, and exercise the full voting rights over, shares of
such body corporate which:
(a) have attached to them voting rights, exercisable in all circumstances, which
represent more than 50% of the votes attaching to all outstanding securities of
' such body corporate;
(b) have sufficient votes to elect a majority of the board of directors of such body
corporate; and
(c) carry a right to receive, on a winding up or dissolution, more than 50% of the
' remaining property of such body corporate after payment of all debts and
liabilities of the body corporate.
1.3 Headings
The division of this Agreement into Articles, Sections and Subsections and the
insertion of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. The Article and Section headings in this
' Agreement are not intended to be full or precise descriptions of the text to which they refer
and shall not be considered part of this Agreement.
r1.4 Entire Agreement
rThe execution of this Agreement has not been induced by, nor do any of the parties
rely upon or regard as material, any representations, warranties, conditions, other agreements
ror acknowledgements not expressly made in this Agreement, in the agreements and other
documents to be delivered pursuant hereto or in the Merger Agreement.
r
1.5 Number and Gender
1
In this Agreement, words in the singular include the plural and vice-versa and words
rin one gender include all genders.
r1.6 Accounting Principles
rWhere the Canadian Institute of Chartered Accountants includes a recommendation
in its Handbook concerning the treatment of any accounting matter, such recommendation
rshall be regarded as the only generally accepted accounting principle applicable to the
circumstances that it covers and references herein to "generally accepted accounting principles"
rshall be interpreted accordingly.
rAll accounting and financial terms used herein, unless specifically provided to the
contrary, shall be interpreted and applied in accordance with generally accepted accounting
rprinciples in Canada.
r1.7 Calculation of Time
rIn this Agreement, a period of days shall be deemed to begin on the first day after
rthe event which began the period and to end at 5:00 p.m. (Eastern Standard time) on the last
1
1
r - 12 -
r day of the period. If, however, the last day of the period does not fall on a Business Day, the
period shall terminate at 5:00 p.m. (Eastern Standard time) on the next Business Day.
1.8 Statutory References
A reference in this Agreement to a statute refers to that statute and an regulations
g � Y �
ror rules issued thereunder, as amended, supplemented or replaced from time to time.
r1.9 Reclassification of Shares
rThe provisions of this Agreement shall apply, with any necessary changes to (a) any
shares or securities of any nature into which the Shares or any of them may be converted,
' exchanged, reclassified, redivided, redesignated, subdivided or consolidated; (b) any shares or
securities of any nature that are received by a Shareholder as a stock dividend or distribution
ipayable in shares, securities, warrants, rights or options of any nature of HoldCo; (c) any
shares, securities, warrants, rights or options of any nature of HoldCo or any successor,
rcontinuing company or corporation of HoldCo that may be received by a Shareholder on a
reorganization, amalgamation, arrangement, consolidation or merger, statutory or otherwise;
rand (d) any shares, securities, warrants, rights or options hereafter issued or allotted by
HoldCo to a Shareholder, all of which shares, securities, warrants, rights or options shall be
rdeemed to be Shares for all purposes of this Agreement.
r1.10 Interpretation
rIf any conflict shall appear between the by-laws and the articles of HoldCo and the
provisions of this Agreement, the provisions of this Agreement shall govern.
' - 13 -
' 1.11 Governing Law
' This Agreement shall be governed by and construed, interpreted and performed in
accordance with the laws of Ontario and the laws of Canada applicable therein and shall be
' treated in all respects as an Ontario contract.
' 1.12 Currency
' All dollar amounts referred to in this Agreement and all payments to be made
hereunder are in Canadian funds.
ARTICLE II
' BUSINESS OF THE CORPORATIONS
2.1 Business of the Corporations
The Corporations may engage in the following business activities and such other
business activities as may be permitted by Law and authorized by the Board from time to
' time:
' (a) transmitting or distributing electricity;
(b) owning and/or operating an electricity generation facility;
' (C) retailing electricity;
1 (d) distributing or retailing gas or any other energy product which is carried
through pipes or wires to the user;
' - 14 -
(e) business activities that enhance or develop the ability of any of the
' Corporations to carry on any of the activities described in paragraphs (a), (b),
(C), or (d) above;
' business activities the principal purpose of which is to use more effective) the
(� P P P rP Y
' assets of any of the Corporations including providing meter installation and
reading services, providing billing services and business activities in the
telecommunications area;
(g) renting, selling or maintaining equipment and appliances, including without
limitation, hot water heaters; and
(h) providing services related to improving energy efficiency.
2.2 Corporations' Standard of Service
It is the intention of the Initial Shareholders that: (a) the Corporations shall provide
' service levels at least equivalent to the existing levels in the service areas of each of the
Predecessor Utilities immediately prior to the transfer of their assets to the Corporations; (b)
new standards of service are established by the Board after the date of this Agreement so that
each service area will enjoy common standards and derive equal benefits, including but not
' limited to, the following matters:
(a) distribution, energy services and tariffs;
(b) maintenance standards and schedules;
r
- 15 -
(5) emergency response capabilities;
1
(d) distribution system capacity;
(e) customer convenience and accessibility;
' (f) power reliability and quality; and
' (g) marketing programmes and services.
ARTICLE III
CORPORATE AFFAIRS OF HOLDCO
1
3.1 Assurances
1
The Shareholders shall cause such meetings of Shareholders to be held, votes to be
' cast, resolutions to be passed, by-laws to be made, confirmed and/or repealed, agreements and
other documents and instruments to be executed and all other acts and things to be done, to
' ensure that at all times the provisions of this Article III are in effect, complied with or
implemented.
r .
3.2 The Board
r
(a) Shareholder Action. Each of the Shareholders agrees to elect as members of
the Board the nominees put forward by each other Shareholder from time to
time in accordance with the provisions of this Agreement.
1
1
i
1
' - 16 -
' (b) Initial Board. Subject to the provisions of this Agreement, the business and
affairs of HoldCo shall be managed or supervised for the Initial Term by the
Initial Board which shall Consist of 15 directors. Each Initial Shareholder shall
nominate five members of the Initial Board. Each Initial Shareholder's five
' nominees shall consist of the five commissioners of the applicable Predecessor
Utility. The following individuals, each being the nominee of the Initial
' Shareholder listed opposite his name, shall comprise the Initial Board:
' Director Nominee of
Joe Atkinson Ajax
' Bruce Boyle Ajax
Duncan Jewell Ajax
Nancy Maxwell Ajax
Steve Parish Ajax
Suzanne Elston Clarington
Diane Hamre Clarington
Paul Reesor Clarington
Pauline Storks Clarington
George Van Dyk Clarington
Wayne Arthurs Pickering
' Linda A. Hodgins Pickering
Rick Johnson Pickering
' James I. Mason Pickering
Ralph Sutton Pickering
Any Initial Shareholder may replace any director nominated by it at any time
during the Initial Term and shall nominate a new member to the Board as
appropriate to replace the removed member.
' - 17 -
' (c) The Board. Following the Initial Term, the business and affairs of HoldCo
shall be managed or supervised by the Board which shall consist of 12 directors
or such other number of directors as the Shareholders may determine from
time to time by special resolution in accordance with the Act. Each of the
Initial Shareholders shall nominate the number of members to the Board listed
opposite that Initial Shareholder's name below:
Number of Directors Nominee of
4 Ajax
3 Clarington
5 Pickering
The Board shall annually elect from its members a Chair and Vice-Chair.
(d) Qualifications of Board. Each Initial Shareholder shall nominate the Mayor
' of the Initial Shareholder or the Mayor's designate as one of the Initial
Shareholder's nominees to the Board provided that if the Mayor ceases to hold
the office of Mayor, the appointing Initial Shareholder shall forthwith replace
such nominee. Each Initial Shareholder may nominate to the Board members
' of its council ("Council Appointees") so long as the Council Appointees
(including the Mayor or the Mayor's designate) do not comprise a majority of
' that Initial Shareholder's nominees to the Board (the "Majority Rule"). In
addition to the requirements of the Act, the qualifications of candidates for the
Board shall, where possible, include the following:
(i) business experience;
' - 18 -
(ii) time availability;
' (iii) financial skills;
I (iv) marketing skills;
' (v) industry knowledge;
(vi) independence of judgment;
(vii) integrity;
(viii) knowledge of public policy issues relating to the Corporations; and
' (ix) knowledge and experience concerning environmental matters, labour
relations and occupational health and safety issues.
(e) Nominees of Transferee Shareholders. Following the transfer of Shares to
a Transferee Shareholder, that Transferee Shareholder shall be entitled to
nominate one member of the Board for each whole block of Shares owned by
' the Transferee Shareholder representing 9% of the total issued and outstanding
Shares. A Transferee Shareholder owning less than 9% of the total issued and
' outstanding Shares shall not be entitled to nominate any member of the Board
and a Transferee Shareholder owning less than 18% of the total issued and
' outstanding Shares shall only be entitled to nominate one member of the
Board. An Amalgamated Shareholder shall not be considered a Transferee
Shareholder for the purpose of this Section 3.2(e) and shall retain its rights to
' - 19 -
nominate members to the Board in the same manner as if it had not
amalgamated.
(f) Term of Directors. Followin g the Initial Term, the Board shall serve for a
term of three years. Members of the Board may serve successive terms on the
Board.
(g) Vacancy. If a director ceases to be a director for any reason (a Retiring
Director"), the Shareholders shall fill the vacancy thereby created as soon as
reasonably possible, provided that such vacancy shall be filled by an individual
' nominated by the Shareholder who had nominated the Retiring Director.
(h) Quorum. A quorum for a meeting of the Board shall be a majority of the
members of the Board. A meeting shall be adjourned for lack of a quorum and
ra notice of the adjourned meeting shall be sent to all directors rescheduling the
meeting to a date at least 15 days following the, adjourned meeting.
(i) Meetings of the Board. Meetings of the Board shall be held at least once in
every calendar quarter or at the request of the Chair or of a majority of the
members of the Board. All meetings of the Board shall be held in Ontario, or
' by such telephone or electronic communication devices as permit all persons
participating in the meeting to communicate with each other simultaneously
' and instantaneously. At least 5 days' written notice of the time and place of
the meeting and of the business to be transacted at the meeting in sufficient
rdetail to enable each director to assess reasonably the importance of such
business to the affairs of HoldCo shall be given to each director.
' - 20 -
(j) Decisions of the Directors. Decisions or resolutions of the Board shall
require the approval of the majority of the directors present at each meeting
thereof. The Chair shall not have a second or casting vote. A resolution in
writing signed by all of the directors entitled to vote on that resolution at a
meeting of the Board is as valid as if it had been passed at a meeting of the
Board.
(k) Board Duties. Subject to those matters requiring Shareholder approval as set
' out in Section 3.9 hereof, the Board shall supervise the management of the
business and affairs of HoldCo and, without limiting the generality of the
' foregoing, the Board shall be responsible for, but not limited to, overseeing the
following specific matters:
(i) the establishment of appropriate reserves and a dividend policy
consistent with sound financial principles, all with the intention of
providing the Shareholders with a reasonable rate of return on their
investment while maintaining reasonable rates for customers; and
(ii) declaration of any dividend or distribution of capital in respect of the
Shares.
r
(1) Indemnification and Insurance for Directors and Officers. Each of the
' Corporations shall indemnify and save its directors and officers harmless from
and against any and all liability, damages, costs (including any income tax
rpayable as a result of receiving such indemnity, reasonable counsel fees and
disbursements), charges and expenses arising out of or related to any act or
omission done or permitted by them to be done in connection with the
execution of the duties of their office as directors or officers of any one or
r
- 21 -
more of the Corporations or by reason of their being or having been directors
of any one or more of the Corporations, substantially in the form of the
indemnification agreement annexed hereto as Schedule "A" and shall provide
liability insurance for directors and officers in such amounts as the Board may
determine from time to time.
' 3.3 Board Committees
The Board may establish Board Committees from time to time and delegate certain
duties to them as follows:
(a) Executive Committee.
(i) The Executive Committee shall be appointed by the Board from time to
' time and shall be responsible for supervising the management of the day
to day operations of the Corporations;
(ii) For the Initial Term, the Executive Committee shall be comprised of
' 12 directors on the following basis:
' Number of Members Nominee(s) of
4 Ajax
3 Clarington
5 Pickering
(iii) Following the Initial Term, the Executive Committee shall be
' reconstituted by the Board and shall be comprised of 6 directors on the
' following basis:
r
- 22 -
Number of Members Nominee(s)of
2 Ajax
1 Clarington
3 Pickering
(iv) The Chair and the Vice-Chair shall be a member of the Executive
Committee.
(v) The members of the Executive Committee shall meet at least once a
month or as otherwise determined by the Executive Committee.
Members of the Executive Committee may serve for a term not to
exceed 3 years and shall be replaced by nominees of the Initial
Shareholders on the same basis as they were elected. Members of the
' Executive Committee may serve successive terms on the Executive
Committee.
(b) Finance and Human Resources Committee. The Board shall appoint
members to the Finance and Human Resources Committee. During the Initial
Term, the Finance and Human Resources Committee shall be comprised of 6
' directors and following the Initial Term shall be comprised of 3 directors. The
duties of the Finance and Human Resources Committee will be to oversee the
work of the Auditors, the preparation of HoldCo budgets (which shall include
details of all management salaries and bonuses, together with such other
' information as may reasonably be requested by any director of HoldCo), the
establishment and enforcement of guidelines for employee relations, the
establishment and alteration of any salary, bonus or other compensation paid
or payable to employees, the establishment of guidelines for the approval of
r
t - 23 -
any collective agreement and to report and make recommendations to the
Board.
c Nominating Committee. The Board shall appoint members to the
( ) g PP
Nominating Committee. During the Initial Term and for any period
thereafter in which the Initial Shareholders remain the Shareholders, the
Nominating Committee shall be comprised of 3 directors and each of the
3 directors shall be a nominee to the Board of each Initial Shareholder. In the
event that one or more Initial Shareholders amalgamate but the Shareholders
are still the Initial Shareholders only but in their amalgamated form, the
Nominating Committee shall remain comprised of 3 directors and the directors
shall be nominees of each Shareholder in the same manner as if there was no
amalgamation. For greater certainty, if Pickering and Ajax amalgamated, the
new entity would be entitled to have two Board nominees appointed to the
Nominating Committee. The purpose of the Nominating Committee shall be
to make recommendations to the Shareholders concerning candidates for the
' Board and the compensation for members of the Board, the Chair, Vice-Chair
and Board Committee members, and chairpersons.
(d) General Provisions Relating to Board Committees. The quorum for
' meetings of Board Committees shall be a majority of the members from time
to time of each Board Committee. Decisions of all Board Committees shall be
made by a majority of the members of the respective Board Committee.
Except as otherwise provided in this Section 3.3 and subject to the supervision
' of the Board, each Board Committee shall establish its own rules of procedure
for operating in an efficient and expeditious manner. A Transferee Shareholder
shall not acquire the rights of any Initial Shareholder to designate nominees to
any Board Committee except with the agreement of all of the other
- 24 -
Shareholders. An Amalgamated Shareholder shall retain its rights to designate
nominees to the Board Committees, as applicable in the same manner as if it
had not amalgamated.
' 3.4 Shareholders'Meetings
A quorum for a meeting of Shareholders shall be at least two individuals representing,
by proxy or as otherwise permitted by the Act, both (i) a majority in number of the
Shareholders; and (ii) not less than 51% of the Shares then issued and outstanding.
' In the event that the Initial Shareholders amalgamate such that only two Shareholders
in number remain, the quorum for a meeting of shareholders shall be all the Shareholders
represented by proxy or as otherwise permitted by the Act.
rThe chair of any meeting of the Shareholders of HoldCo shall be the Chair or, in the
absence of the Chair, the Vice-Chair, or in the absence of the Vice-Chair, the President of
' HoldCo or, in the absence of the President, such individual as the Shareholders represented
at such meeting shall determine.
3.5 Regular Shareholders Meetings
Unless the Shareholders otherwise determine, the Shareholders shall meet at least
annually at the registered office of HoldCo or at such other times or places as the Shareholders
may determine.
- 25 -
3.6 Decisions of the Shareholders
All decisions or resolutions of the Shareholders shall require, and shall be deemed to
be effective upon, the approval of at least two thirds of the votes cast at a meeting of
Shareholders. A Shareholders' resolution in writing signed by all of the Shareholders entitled
to vote on that resolution at a meeting of the Shareholders is as valid as if it had been passed
1 at a meeting of the Shareholders.
' 3.7 Shareholder Representative
Each Initial Shareholder shall designate the Mayor as the legal representative of that
Initial Shareholder (the "Shareholder Representative") for purposes of providing any consent
or approval required by this Agreement or by the Act. In the event that the Mayor is unable
or unwilling to act as the Shareholder Representative, the Chief Administrative Officer (or the
individual who performs the equivalent duties) shall be the Shareholder Representative for
purposes of this Agreement and of the Act unless the Initial Shareholder determines otherwise.
An Initial Shareholder shall designate its Shareholder Representative (by proxy duly completed
in accordance with the Act) as its representative to attend and vote at any meeting of
Shareholders.
' 3.8 Officers
(a) The officers of HoldCo shall include a President and such other officers as the
Board may determine from time to time. The Board shall appoint the officers
of HoldCo from time to time.
(b) For greater certainty the parties recognize that in carrying on the ordinary
course of Business, it is not practicable for the Board to be involved in the day
' - 26 -
' to day affairs of HoldCo. The Board will delegate responsibilities to the
officers, who will report to the Board and the Board Committees from time
to time as required.
3.9 Matters Requiring Shareholder Approval
The Shareholders agree that, without Shareholder approval given in accordance with
Section 3.6, HoldCo shall not:
(a) amend its articles (within the meaning of the Act) or enact, revoke, or amend
' any by-law of HoldCo;
(b) issue, or enter into any agreement to issue, any shares of HoldCo of any class,
or any securities convertible into any shares of any class, or grant any option
or other right to purchase any such shares or securities convertible into such
shares;
(c) redeem, purchase for cancellation or otherwise retire any of its outstanding
Shares;
(d) sell or otherwise dispose of, by conveyance, transfer, lease, sale and leaseback,
merger or other reorganization or transaction, mortgage, pledge, charge or
otherwise grant a security interest in, all or substantially all of the assets or
undertaking of HoldCo;
(e) enter into any contracts, commitments or transactions that would increase the
Debt/Equity Ratio to greater than 60% Debt;
- 27 -
(f) grant security for or guarantee, or otherwise become liable for any debt,
liability or obligation of any Person other than a Subsidiary;
( take or institute the proceedings for an winding u , reorganization or
� g Y g P g
dissolution;
(h) enter into any amalgamation, arrangement or consolidation; and
(i) apply to continue as a corporation under the laws of another jurisdiction.
3.10 Unanimous Shareholder Agreement
Each of the Shareholders acknowledges that this Agreement is intended to operate
as a unanimous shareholder agreement with respect to HoldCo within the meaning of the Act.
' Pursuant to Section 108(2) of the Act, the discretion and powers of the Board to manage or
supervise the management of the business and affairs of HoldCo are hereby restricted to the
textent of the provisions of Section 3.9 of this Agreement.
3.11 Agreement Binds Ho1dCo and Subsidiaries
iHoldCo and the Subsidiaries, by their execution of or acknowledgement to be bound
by this Agreement, acknowledges that they have actual notice of the terms of this Agreement,
consent to this Agreement and by this Agreement covenant with each of the Shareholders that
they will at all times during the term of this Agreement:
(a) give or cause to be given such notices, execute or cause to be executed such
deeds, transfers and documents as may from time to time be necessary or
conducive to the carrying out of the terms and intent of this Agreement;
r
- 28 -
(b) do or cause to be done all such acts, matters and things as may from time to
time be necessary or conducive to the carrying out of the terms and intent of
this Agreement; and
(c) take no action that would constitute a contravention of any of the terms and
provisions of this Agreement.
r
3.12 Auditors
1
The Auditors shall be appointed by the Shareholders from time to time.
1
3.13 Banking
HoldCo's bankers shall be such financial institution as the Board shall from time to
' time determine. All resolutions respecting banking authority, the opening of bank accounts
and the drawing on such accounts shall require the consent of the Board before becoming
effective.
3.14 Financial Statements
' (a) HoldCo shall cause to be prepared and delivered as soon as reasonably
practicable and in no event later than 120 days after the end of each fiscal year
of HoldCo annual audited financial statements for such fiscal year prepared in
accordance with generally accepted accounting principles and accompanied by
a report of the Auditors.
r (b) HoldCo shall cause to be prepared and delivered as soon as reasonably
' practicable and in no event later than 45 days after the end of the sixth month
1
r
- 29 -
of HoldCo's fiscal year an unaudited balance sheet and a statement of profit
and loss for such preceding six months prepared in accordance with generally
accepted accounting principles without adjusting entries or review by
accountants and signed by an authorized officer of HoldCo, and such other
information as may be reasonably requested by the Shareholders.
1 ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Representations and Warranties
Each of the Shareholders represents and warrants as follows and acknowledges that
each of the other parties hereto are relying on such representations and warranties in
connection with the entering into of this Agreement:
(a) it is the registered and beneficial owner of the Shares stated to be owned by
such Shareholder in the recitals hereto, free and clear of all Encumbrances and
there are no outstanding agreements, options, warrants or other rights capable
of becoming an agreement, option or warrant to purchase such Shares;
(b) it has the power and capacity to own its assets and to enter into and perform
its obligations hereunder and has taken all necessary action to authorize the
execution and delivery of this Agreement;
(c) this Agreement and the transactions contemplated herein have been duly
authorized by it and constitutes a valid and binding obligation of it enforceable
against it in accordance with its terms subject to the laws of bankruptcy and
the availability of equitable remedies; and
- 30 -
(d) the execution, delivery and performance of this Agreement does not and will
not contravene the provisions of its articles, by-laws, constating documents or
the provisions of any agreement or other instrument to which it is a party or
may be bound.
4.2 Covenants
Each of the Shareholders covenants and agrees with each other party hereto that all
of the foregoing representations and warranties pertaining to it set forth in Article 4.1 will
continue to be true and correct during the continuance of this Agreement.
ARTICLE V
' TRANSFER OF SHARES
r5.1 General Restriction on Transfer
No right, title, benefit or interest in any Shares may be sold, transferred, assigned,
made subject to any Encumbrance or otherwise disposed of by any Shareholder for the two
(2) year period from the date of this Agreement ending on the second anniversary of the
incorporation of HoldCo (the "Hold Period") except with the prior written approval of a
majority of the Shareholders in number holding not less than 662/x% of the Shares or in the
event that the Initial Shareholders amalgamate such that only two Shareholders in number
remain, with the prior written consent of all Shareholders.
Following the Hold Period, save and except for transfers made pursuant to and in
accordance with Sections 5.3 and 5.4 of this Agreement, no Shares, nor the whole or any item
or part of any right, title, benefit or interest therein or thereto, may be sold, transferred,
- 31 -
assigned, made subject to any Encumbrance or otherwise disposed. No Shareholder shall be
entitled to create or grant an Encumbrance on its Shares.
5.2 Legend on Shares
All share certificates g
re P resentin Shares of HoldCo shall bear on their face the
following notation:
"The shares represented by this certificate are subject to the
provisions of the Shareholders' Agreement made as of July 1,
1999 among all of the shareholders of the Corporation as at
that date, which agreement contains restrictions on the right to
sell, transfer, pledge, mortgage, assign, vote or otherwise deal
with or encumber such shares. Notice of such restrictions and
the other provisions of such agreement is hereby given. A
copy of such agreement is available for inspection from the
Secretary of the Corporation on request."
5.3 Rights of First Refusal
If any Shareholder (in this Article V called the "Selling Shareholder"), after the Hold
Period, wishes to sell all, but not less than all, of its Shares (subject to Section 5.5) to a Person
with whom it deals at Arm's Length, the other Shareholders and HoldCo (in this Article V
called the Other Holders ) shall have the prior right to purchase such Shares in accordance
with the following provisions:
(a) Notice of Offer. A Selling Shareholder shall give to the Secretary of HoldCo
and to each Other Holder notice in writing of its desired intention to sell all,
but not less than all, of its Shares (in this Article V called the "Offered
Shares"). The notice (in this Article called the Selling Notice ) shall have
annexed thereto a true copy of the offer, agreement or similar document (the
- 32 -
"Offer") containing the terms and conditions pursuant to which the Selling
Shareholder wishes to sell the Offered Shares to the prospective purchaser (in
this Article V called the "Prospective Purchaser"), who shall be identified, and
the price and terms of payment which the Selling Shareholder is willing to
accept for the Offered Shares which shall be the same as set forth in the Offer;
' (b) Offer Open During_ Notice Period. The Secretary of HoldCo shall
thereupon be deemed to be the agent of the Selling Shareholder for the
i purposes of offering the Offered Shares to the Other Holders on the terms of
■ payment and for the price contained in the Selling Notice and the offer by the
Secretary shall be irrevocable and remain open for acceptance, as hereinafter
provided, for a period of 60 days (in this Article V called the "Notice Period")
after receipt of the Selling Notice by the Secretary;
(c) Acceptance of Offer. Within 15 Business Days after receipt of the Selling
Notice by the Secretary, the Secretary shall offer the Offered Shares for sale
to the Other Holders as nearly may be in proportion to the number of Shares
held by each such Other Holder respectively as at the date of such offer. The
toffer by the Secretary shall state that any Other Holder desiring to purchase
a number of Offered Shares less than or in excess of its proportion shall
indicate in its notice to the Secretary (in this Article V called the "Purchase
Notice") stating the number of Offered Shares it desires to purchase. If, within
jthe Notice Period, a Purchase Notice has not been received by the Secretary
of HoldCo from an Other Holder, such Other Holder shall be deemed to have
' declined to purchase the Offered Shares being offered;
(d) Excess Shares. If the Other Holders do not claim their respective proportions,
any unclaimed Offered Shares shall be used to satisfy the claims of such Other
- 33 -
Holders for Offered Shares in excess of their proportions. If the claims in
excess are more than sufficient to exhaust such unclaimed Offered Shares, the
unclaimed Offered Shares shall be divided pro rata among such Other Holders
desiring Offered Shares in excess of their proportion, in proportion to the
number of Shares held by them respectively as at the date of such offer,
provided that any unclaimed Offered Shares after such pro rata division shall
be divided pro rata among Other Holders in proportion to their claims in
excess of their respective proportions determined as aforesaid. Notwithstanding
anything to the contrary, no Other Holder shall be bound to purchase any
Offered Shares in excess of the amount indicated in its Purchase Notice;
(e) No Fractions. If the Offered Shares are not capable, without division into
fractions of Shares, of being offered to or being divided among the Other
Holders in the proportions above mentioned, the same shall be offered to or
divided among the Other Holders as nearly as may be in the proportions
hereinbefore mentioned and any balance shall be offered to or divided among
the Other Holders or some of them in such equitable manner as may be
determined by the Board;
i
(f) Sale. If all, but not less than all, of the Offered Shares are accepted by the
' Other Holders pursuant to the provisions of this Section 5.3, the Offered
Shares shall be sold to the Other Holders for the price and for the terms
contained in the Selling Notice;
' (g) Deemed Refusal. If Purchase Notices have not been received by the Secretary
in respect of all of the Offered Shares within the Notice Period, the Other
Holders, and each of them, shall be deemed to have declined to purchase the
Offered Shares and, subject to the provisions of paragraph (h), the Selling
' - 34 -
Shareholder may within 60 days after the expiration of the Notice Period sell
all, but not less than all, of the Offered Shares to the Prospective Purchaser at
the price and upon terms of payment which are not more favourable than
those specified in the Selling Notice; and
h Prospective Purchaser Bound. The Selling Shareholder shall sell
( ) p g the Offered
Shares to a Person who is not a party hereto only if such other Person
simultaneously with any such sale executes and delivers to each of the other
parties hereto a counterpart of this Agreement in which case such Person shall
have the rights of a Transferee Shareholder and shall be subject to the same
obligations as a party to this Agreement as if it were an original signatory in
place of the Selling Shareholder or its predecessor in title originally party to
this Agreement, as applicable. Without limiting the generality of the
foregoing, a Transferee Shareholder shall agree to be bound by the provisions
of Section 7.1.
(i) Ho1dCo as Purchaser. The Other Holders, except HoldCo, may cause
HoldCo to act as an Other Holder.
5.4 Piggyback Right
In the event one or more Selling Shareholders receives an Offer and, in accordance
with the procedures set forth in Section 5.3, the Other Holders decline to purchase the
Offered Shares from the Selling Shareholder(s), and the Shares which the Selling Shareholder(s)
wish to sell under the Offer(s) would result in a Person owning more than 49% of all of the
issued and outstanding Shares, then each Other Holder except HoldCo shall have the right to
require that all, but not less than all, of its Shares be sold to the Prospective Purchaser, on the
same terms and conditions as those set out in the Offer; provided that, if the Prospective
- 35 -
Purchaser will not purchase the aggregate amount of Shares which the Selling Shareholder(s)
and the Other Holders except HoldCo requested to be sold pursuant to the immediately
' preceding sentence, the number of Shares which the Selling Shareholder(s) and the Other
Holders except HoldCo shall be permitted to sell to the Prospective Purchaser shall be
proportionately reduced so that each may sell the same percentage of its Shares. The Other
Holders except HoldCo may only exercise their right under this Section 5.4 by written notice
given to the Secretary of HoldCo within the Notice Period.
5.5 Amalgamated Shareholder
An Amalgamated Shareholder is entitled to sell its Shares in accordance with this
Agreement in the same manner as if the Amalgamated Shareholder had not been amalgamated
and, may for the purposes of Section 5.3 offer to sell less than all of its Shares (only if such
Amalgamated Shareholder sells its Shares in the original blocks held by it prior to
amalgamation) provided that each offer is otherwise made in compliance with Section 5.3.
ARTICLE VI
CLOSING OF PURCHASE TRANSACTION
6.1 Time and Place of Closing
The closing of any purchase and sale of Shares contemplated by Sections 5.3 or 5.4
tof this Agreement shall unless otherwise agreed upon by the parties to such transaction, take
place at the registered office of HoldCo on the date specified in the Selling Notice.
r
' - 36 -
6.2 Documents to be delivered by the Vendor
r
On or before the closing of a purchase and sale of Shares contemplated hereunder,
the vendor shall deliver to the purchaser the following (each in form and substance satisfactory
' to the purchaser):
(a) a share certificate or certificates representing the Shares being sold, duly
endorsed in blank for transfer or newly issued in the name of the purchaser;
(b) a certificate of a senior officer certifying that any representations and
' warranties made by such vendor in this Agreement are true and correct as of
the Closing Date;
(c) the written resignation of such vendor's nominee(s) to the Board and a release
by such nominee(s) of all claims against HoldCo with respect to any matter or
thing arising as a result of being a director;
(d) the written release of the vendor of all claims against HoldCo and the
' Subsidiaries, any of the other Shareholders with respect to any matter or thing
arising up to and including the Closing Date as a result of being a Shareholder;
and
' (e) such other documents as may be reasonably required by any party to such
purchase and sale to properly complete the purchase and sale of the Shares.
1
r
1
' - 37 -
' 6.3 Documents to be delivered by the Purchaser
On or before the closing of a purchase and sale of Shares contemplated hereunder,
the purchaser shall deliver to the vendor the following:
a a certified cheque or bank draft in an amount equal to the purchase rice for
( ) q q P P
' the Shares being purchased;
' (b) in the event Shares are sold to a Person who is not a Shareholder pursuant to
Sections 5.3 or 5.4 hereof, a duly executed counterpart of this Agreement or
other agreement pursuant to which such Person agrees to be bound by the
provisions hereof; and
(c) such other documents as may be reasonably required by any party to such
' purchase and sale to properly complete the purchase and sale of the Shares.
' 6.4 Failure to Complete Sale
' In the event the vendor fails to complete the subject purchase and sale transaction,
the purchaser shall have the right to deposit the purchase price for the subject Shares for the
' account of the vendor in an interest-bearing account at a branch of HoldCo's bankers.
Thereafter, notwithstanding that the documents required pursuant to Section 6.2 have not been
delivered by the vendor, the purchase and sale of the subject Shares shall be deemed to be fully
completed and all right, title, benefit and interest, both at law and in equity, in and to the
subject Shares shall be deemed to have been transferred and assigned to and become vested in
the purchaser and all right, title, benefit and interest, both at law and in equity, of the vendor
or any other Person having an interest in and to the subject Shares shall cease and the records
of HoldCo shall be amended accordingly.
' - 38 -
' ARTICLE VII
NON-COMPETITION AND CONFIDENTIALITY
' 7.1 Non-Competition
' (a) Each Shareholder covenants and agrees that it shall not, except through
HoldCo or otherwise with the consent of all Shareholders, or as provided in
Section 7.1(b), directly or indirectly, from the date hereof until 2 years after
' the party ceases to be a Shareholder, compete within (a) Ontario; (b) South
Central Ontario; or (c) Durham Region with the Business, whether by
carrying on or engaging in or being concerned with or interested in or
advising, lending money to, guaranteeing the debts or obligations of or
permitting the party's name or any part thereof to be used or employed by
any Person engaged in or concerned with or interested in any business within
' (d) Ontario; (e) South Central Ontario; or (f) Durham Region that is
competitive with the Business, or otherwise.
(b) The parties acknowledge that (i) a municipality other than the Shareholder
' which is a shareholder of one or more corporations incorporated under the
Act for the purposes of generating, transmitting, distributing or retailing
' electricity, and (ii) a person which holds a portfolio investment of less than 5%
of the shares of a corporation whose shares are publicly traded which competes
with the Business is permitted to become a Shareholder in accordance with the
provisions of this Agreement.
' - 39 -
7.2 Confidentiality
Each Shareholder shall not use or disclose to any Person other than in the ordinary
course of the Business of the Corporations, directly or indirectly, any Confidential
Information at any time other than to employees, officers or directors of such Shareholder
provided that all such Persons shall treat such information as confidential and not disclose
same to any Third Party nor use the same for any purpose other than for the purposes of the
Corporations or in respect of a Shareholder's investment in the Corporations, provided,
' however, that nothing in this Article VII shall preclude a Shareholder from disclosing or using
Confidential Information if:
(a) the Confidential Information is available to the public or in the public domain
at the time of such disclosure or use, without breach of this Agreement;
1 (b) disclosure of Confidential Information is required to be made by any law,
regulation, governmental body or authority or by court order;
(c) disclosure of Confidential Information is made in connection with any
' arbitration pursuant to Section 11.4;
' (d) disclosure of Confidential Information is made to a court which is determining
the rights of the parties under this Agreement;
(e) the Confidential Information is properly within the legitimate possession of a
Shareholder prior to its disclosure hereunder and without any obligation of
confidentiality;
' - 40 -
' (f) after disclosure, the Confidential Information is lawfully received by a
Shareholder from another Person who is lawfully in possession of such
' information and such other Person is not restricted from disclosing the
information to the Shareholder;
' the disclosure of Confidential Information is necessary ecessary to complete a transfer
' of Shares in accordance with this Agreement;
' (h) the Confidential Information is independently developed by a Shareholder
through Persons who have not had access to, or knowledge of, the
Confidential Information, other than as permitted in (a) through (g) above or
(i) below; or
(i) the Confidential Information is approved by the Corporations for disclosure
prior to its actual disclosure.
' Each Shareholder acknowledges and agrees that the obligations under this Section 7.2 shall
remain in effect for the period of two (2) years after it ceases to be a Shareholder.
' Notwithstanding the foregoing restrictions, the nominees of the Shareholders on the Board
shall be entitled to discuss the affairs of the Corporations with the officers, directors,
remployees and representatives of such Shareholder.
7.3 Injunctive Relief
' Each Shareholder understands and agrees that HoldCo, and consequently the other
parties, will suffer irreparable harm in the event that the Shareholder breaches any of the
' obligations set out in this Article VII and that monetary damages shall be inadequate to
' compensate for the breach. Accordingly, each Shareholder agrees that, in the event of a breach
' - 41 -
' or threatened breach by it of any of the provisions of this Article VII, HoldCo and the other
parties hereto, in addition to and not in limitation of any other rights, remedies or damages
available to them at law or in equity, shall be entitled to an interim injunction, interlocutory
injunction and permanent injunction in order to prevent or to restrain any such breach by the
Shareholder.
' 7.4 Accounting for Profits
' Each Shareholder agrees that in the event of a violation of any of its covenants or
agreements under this Article VII, HoldCo shall be entitled to an accounting and repayment
of all profits, compensation, royalties, commissions, remunerations or benefits which the
Shareholder directly or indirectly shall have realized or may realize relating to, growing out
of, or in connection with any such violation(s); this remedy shall be in addition to and not
in limitation of any injunctive relief or other rights or remedies to which HoldCo and the
other parties are or may be entitled at law or in equity or otherwise under this Article VII.
' 7.5 Reasonableness of Restrictions
' Each Shareholder acknowledges that it has given careful consideration to the
provisions of Sections 7.1 to 7.4 above and, having done so, agrees that the restrictions set
' forth in those sections are fair and reasonable and are reasonably required for the protection
of the other Shareholders' investments in HoldCo and for the protection of the interests of
HoldCo and its Business, and that it is being reasonably compensated for the imposition of
such restrictions.
r _ 42 _
r ARTICLE VIII
SALE OF SURPLUS ASSETS
' 8.1 f First Refusal
Right o
g f
' In the event that HoldCo or any Subsidia ry intends to sell any Surplus Assets, the
rmunicipal Shareholder in whose legal boundaries the Surplus Assets are located shall have a
first right of refusal to purchase the Surplus Assets at their Fair Market Value. Such municipal
rShareholder shall be entitled to receive written notice of any proposed disposition 90 days
from the date of such notice to exercise its right to purchase, failing which the Surplus Assets
rmay be sold by HoldCo or any Subsidiary as the case may be.
rARTICLE IX
BOOKS, RECORDS AND RIGHT TO INFORMATION
9.1 Books and Records
HoldCo shall at all times maintain at its registered office proper books of account,
rwhich shall contain accurate and complete records of all transactions, receipts, expenses, assets
and liabilities of HoldCo.
r
9.2 Right to Information
The parties covenant and agree that each Shareholder of HoldCo shall have rights of
' inspection as set out in Sections 140, 141, 144 and 145 of the Act.
r
' - 43 -
ARTICLE X
TERM
10.1 Term and Automatic Renewal
This Agreement shall come into force and effect as at and from the date ate of this
' Agreement and shall continue in force for five (5) years at which time this Agreement shall
be automatically renewed for further successive terms of five (5) years each.
ARTICLE XI
GENERAL
' 11.1 Notices
All notices, requests, demands, consents or other communications required to be
given or made or provided for in this Agreement shall be in writing and shall be deemed to
' have been given if delivered, if sent by registered mail or if sent by telecopier or other means
of electronic transmission to:
r
Ajax at:
' Corporation of the Town of Ajax
65 Harwood Avenue South
' Ajax, ON L1S 2H9
Fax Number: 905-683-1061
' Attention: Mayor
- 44 -
Clarington to:
Corporation of the Municipality of Clarington
40 Temperance Street
Bowmanville, ON L1C 3A6
Fax Number: 905-623-5717
' Attention: Mayor
Pickering to:
Corporation of the Town of Pickering
1 The Esplanade
Pickering, ON L1V 3P4
' Fax Number: 905-420-9695
Attention: Mayor
HoldCo to:
r1920 Bayly Street
Pickering, ON L1W 3R6
' Fax Number: 905-427-6827
Attention: President
or at such other addresses as the party to whom such notice is to be given may have
' designated by notice so given to the other parties. Any notice so mailed shall be deemed to
have been given on the fifth Business Day following the date of the mailing of the same or if
' delivered, on the date of delivery and any notice given by telecopier or other means of
electronic communication shall be deemed to have been received on the Business Day
rfollowing the date on which such transmission is completed and the appropriate confirmation
received.
' - 45 -
11.2 Assignment and Binding Effect
This Agreement is not assignable by any parry except insofar as its benefit and burden
pass with the Shares transferred in accordance with its provisions. This Agreement shall be
binding on and enure to the benefit of the parties hereto and their respective successors and
permitted assigns. Reference in this Agreement to any party shall be deemed to include
reference to such party and its respective successors and assigns as permitted hereunder.
11.3 Amalgamation of Municipal Shareholders
' Two or more Initial Shareholders that amalgamate ("Amalgamated Shareholder") shall
retain the same rights granted under this Agreement as if the respective Initial Shareholders
' had not amalgamated except as otherwise provided herein.
r11.4 Arbitration
' (a) Selection of Single Arbitrator. The Shareholders agree that any controversy,
dispute or claim between them or any of them arising out of or relating to this
' Agreement or the performance, enforcement, breach, termination or validity
of it, including the determination of the scope of the Agreement to arbitrate,
' shall be determined by arbitration before a single arbitrator (the "Arbitrator")
agreed to by all of the Shareholders. If the Shareholders are unable to agree
ton the Arbitrator, then, an application may be made under the Arbitration Act
to a judge for the appointment.
(b) Referring Dispute. Any Shareholder may refer a dispute to the Arbitrator by
providing notice in writing to the Arbitrator and to all of the shareholders
r
- 46 -
hereto expressing its intention to refer the dispute to arbitration and briefly
describing the nature of the dispute.
(c) Attempted Settlement. Upon service of the notice referred to above, the
Shareholders who are parry to the dispute (the "Disputing Shareholders") will
attempt to negotiate a settlement of the dispute amongst themselves. In the
' event that the parties are unable to reach settlement by themselves within 10
days of the service of the notice referred to above, the Shareholders will
proceed with the arbitration and any Disputing Shareholders shall be free to
apply to the Arbitrator for directions as to the scheduling of the arbitration
' itself and the pre-hearing procedures.
(d) Decision Final and Binding. The Shareholders agree that the award of the
Arbitrator shall be final and binding without any right of appeal and shall be
the sole and exclusive remedy between them regarding any claims,
counterclaims, issues or disputes referred to the Arbitrator.
(e) Place of Arbitration. The arbitration shall take place in Toronto, and shall
be governed by the laws of the Province of Ontario.
(f) Powers of Arbitrator. The Shareholders agree that the Arbitrator shall have
the powers and jurisdiction of an arbitrator pursuant to the Arbitration Act
and such power shall include the power to award interim and interlocutory
injunctions and other equitable relief.
(g) Costs. The Arbitrator shall have the power to award the costs of the
Arbitrator's services and related costs against either party, however, each party
' will bear the costs of their own counsel and witness fees.
- 47 -
(h) Written Notices. All notices by one Shareholder to the other in connection
with the arbitration shall be in writing and shall be deemed to have been duly
given or made if delivered or sent by facsimile transmission to the addresses
provided in this Agreement.
a11.5 Further Assurances
Each party hereto shall do such acts and shall execute such further documents,
conveyances, deeds, assignments, transfers and the like, and will cause the doing of such acts
and will cause the execution of such further documents as are within its power as any other
' party may in writing at any time and from time to time reasonably request be done and or
executed, in order to give full effect to the provisions of this Agreement.
11.6 Severability
If any provision of this Agreement is determined to be invalid or unenforceable by
a court of competent jurisdiction from which no further appeal lies or is taken, that provision
shall be deemed to be severed herefrom, and the remaining provisions of this Agreement shall
anot be affected thereby and shall remain valid and enforceable.
11.7 Amendment, Modification and Waiver
This Agreement may not be modified, amended, terminated or supplemented except
as agreed, in writing, by Shareholders both comprising a majority in number of the
Shareholders and holding not less than 51% of the Shares then issued and outstanding. In the
event that the Initial Shareholders amalgamate such that only two Shareholders remain, this
Agreement may not be modified, amended, terminated or supplemented except as agreed, in
writing, by all the Shareholders. Any waiver of, or consent to depart from, the requirements
- 48 -
of any provision of this Agreement shall be effective only if it is in writing and signed by the
party giving it, and only in the specific instance and for the specific purpose for which it has
Ibeen given. No failure on the part of any party to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver of such right. No single or partial
Iexercise of any such right shall preclude any other or further exercise of such right or the
exercise of any other right.
I
11.8 Time of Essence
I
Time is of the essence of this Agreement.
11.9 Counterparts
This Agreement may be executed in any number of counterparts, each of which shall
Ibe deemed to be an original and all of which taken together shall constitute one agreement.
I11.10 No Partnership
INothing in this Agreement shall be deemed in any way or for any purpose to
constitute any party a partner of or a joint venture with any other party.
11.11 Proceedings
The covenants, agreements and obligations herein expressed to be observed and
iperformed by the parties hereto may be enforced by any of the parties hereto pursuant to
ISection 11.4 without joining the remaining parties as parties in any proceedings.
I
I
' - 49 -
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as
of the date first above written.
THE CORPORATION OF THE TOWN OF
AJAX
By: c/s
Steve Parish, Mayor
By: c/s
Marty deRond, Clerk
THE MUNICIPALITY OF CLARINGTON
By: c/s
Diane Hamre, Mayor
' By: c/s
Frank Wu, Chief Administrative Officer
THE CORPORATION OF THE TOWN OF
PICKERING
By: c/s
Wayne Arthurs, Mayor
By: c/s
Bruce Taylor, Clerk
' ONTARIO INC.
By: CA
Name:
Authorized Signing Officer
SCHEDULE "A"
DIRECTOR'S INDEMNITY
THIS AGREEMENT made as of the
BETWEEN:
' (hereinafter called the "Director"),
OF THE FIRST PART,
- and-
'
(hereinafter called the "Corporation"),
OF THE SECOND PART.
' Recitals
WHEREAS pursuant to By-law No. 1 of the Corporation, the Corporation is
required to indemnify a director or officer, a former director or officer, or a person who acts
or acted at the request of the Corporation as a director or officer of a body corporate of which
the Corporation is or was a shareholder or creditor, and his heirs and legal representatives,
against all costs, charges and expenses, including an amount paid to settle an action or satisfy
a judgment, reasonably incurred by him in respect of any civil, criminal or administrative
action or proceeding to which he is made a party by reason of having been a director or
officer of the Corporation or such body corporate, if (a) he acted honestly and in good faith
with a view to the best interests of the Corporation, and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, he had reasonable
grounds for believing that his conduct was lawful;
AND WHEREAS pursuant to By-Law No. 1 of the Corporation, the
Corporation is authorized to execute an agreement evidencing its indemnity of the Director
to the full extent permitted by law;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in
consideration of the sum of $1.00 paid by the Director to the Corporation (the receipt and
' - 2 -
adequacy of which is hereby acknowledged) and for other good and valuable consideration,
it is agreed between the parties hereto as follows:
Agreement to Indemnify
1. Except in respect of an action by or on behalf of the Corporation to procure
a judgment in its favour, the Corporation shall indemnify and save harmless the Director, her
heirs and legal representatives, against all costs, charges and expenses, including an amount paid
to settle an action or to satisfy a judgment reasonably incurred by her in respect of any civil,
' criminal or administrative action or proceeding to which she is made a party by reason of
being or having been a director of the Corporation or a director of a body corporate of which
the Corporation is a shareholder or creditor, provided she is or was so acting as a director of
' such body corporate at the request of the Corporation, if (a) the Director acted honestly and
in good faith with a view to the best interests of the Corporation, and (b) in the case of a
criminal or administrative action or proceeding that is enforced by a monetary penalty, the
Director had reasonable grounds for believing that her conduct was lawful.
No Presumption
2. For the ur oses of section 1, the termination of an civil, criminal or
P P Y
administrative action or proceeding by judgment, order, settlement, conviction or similar or
' other result shall not, of itself, create a presumption either that the Director did not act
honestly and in good faith with a view to the best interests of the Corporation or that, in the
case of a criminal or administrative action or proceeding that is enforced by a monetary
penalty, the Director did not have reasonable grounds for believing that her conduct was
lawful.
' Application for Court Approval of Indemnity
3. In respect of an action by or on behalf of the Corporation or a body corporate
of which the Corporation is or was a shareholder or creditor to procure judgment in its favour
to which the Director is made a party by reason of being or having been a director of the
Corporation or a director of the body corporate at the Corporation's request, the Corporation
shall make application for approval of the Ontario Court of Justice to indemnify the Director,
her heirs and legal representatives, against all costs, charges and expenses reasonably incurred
1 by her in connection with such action if (a) the Director acted honestly and in good faith with
a view to the best interests of the Corporation, and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, the Director had
reasonable grounds for believing that her conduct was lawful.
' - 3 -
Indemnity for Costs, Charges and Expenses
4. Notwithstanding anything in this agreement the Corporation shall indemnify
the Director in respect of all costs, charges and expenses reasonably incurred by her in
connection with the defence of any civil, criminal or administrative action or proceeding to
which she is made a party by reason of being or having been a director of the Corporation
or a director of a body corporate of which the Corporation is or was a shareholder or
creditor, provided she is or was so acting as a director of such body corporate at the request
of the Corporation, if (a) the Director was substantially successful on the merits in her defence
1 of the action or proceeding, (b) the Director acted honestly and in good faith with a view to
the best interests of the Corporation, and (c) in the case of a criminal or administrative action
or proceeding that is enforced by a monetary penalty, the Director had reasonable grounds
for believing that her conduct was lawful.
Expenses for Defence of Legal Action
5. Subject as hereinafter provided, the Corporation will pay all expenses covered
by this indemnity agreement and incurred by the Director, her heirs and legal representatives,
in defending any civil, criminal or administrative action or proceeding to which the Director
or her heirs and legal representatives are made a party by reason of the Director being or
having been a director of the Corporation or a director of a body corporate of which the
Corporation is a shareholder or creditor, if she is or was so acting as a director of such body
corporate at the request of the Corporation, in advance of the final disposition of such action
' or proceeding. In respect of an action by or on behalf of the Corporation to procure
judgment in its favour and in respect of which the Corporation is obligated by section 3
hereof to make application for approval of the Ontario Court of Justice to indemnify the
' Director, or her heirs and legal representatives, the Corporation shall pay all such expenses in
advance upon the final disposition of such action or proceeding only upon receipt of an
undertaking satisfactory to the Corporation by or on behalf of the Director, or her heirs and
legal representatives, to repay such amount if the Court determines that the Director, or her
' heirs and legal representatives, is not entitled to be indemnified.
Director's Liability Insurance
b. The Corporation represents and warrants to the Director that the Corporation
has purchased liability insurance for the directors of the Corporation, with the aggregate
insurance coverage under the policy of at least $5,000,000 per policy year and no deductible
payable by any director making a claim under the policy. The Corporation agrees to use its
' best efforts to maintain appropriate liability insurance for the directors in an amount at least
as favourable to the directors as the existing policy and further agrees to advise each director
in advance if the Corporation knows that any liability policy is being terminated or if a
liability policy is expiring without an equivalent policy replacing it.
r
r - 4 -
Non-Exclusion of Other Rights
7. This agreement shall not operate to abridge or exclude any other rights, in law
' or in equity, to which the Director may be entitled by operation of law or under any statute,
by-law of the Corporation, agreement, vote of shareholders of the Corporation, vote of
disinterested directors of the Corporation or otherwise.
1 Governing Law and Attornment
' 8. This agreement shall be deemed to have been made in and shall be construed
in accordance with the laws of the Province of Ontario and the federal laws of Canada
applicable therein and the parties hereby agree that any claims, disputes or questions arising
' out of or in relation to this agreement may be submitted to the jurisdiction of the courts of
the Province of Ontario. Each of the parties hereto irrevocably attorns to the jurisdiction of
the courts of the Province of Ontario in respect of the interpretation and enforcement of this
' agreement.
' Enurement
9. This agreement and the benefit and obligation of all covenants herein contained
shall enure to the benefit of and be binding upon the heirs, executors, administrators, legal
personal representatives and successors and assigns of each of the parties hereto.
' IN WITNESS WHEREOF this agreement has been executed by the parties
hereto.
' SIGNED, SEALED & DELIVERED )
in the presence of )
>f
' G:\RJM\PICKERIN\DOCUMENT\SHARHFIN.AGR
SCHEDULE "C"
' SPECIAL PAYMENTS
' Party First Payment Second Payment Total
Pickering $2,844,000 ' $2,844,000 ' $5,688,000 '
' Ajax $2,208,000 ' $2,208,000* $4,416,000 '
Clarington $948,000 ' $948,000 ' $1,896,000 '
Total $6,000,000 $6,000,000 $12,000,000**
' This is an estimated amount only.
Y
The$12 million total shall not change.
G:\LLB\PICKHYDR\DCCLJMENT\MIERGFIN.WPD
' MERGER AGREEMENT
' THIS AGREEMENT made as of the 29`h day of June, 1999.
BETWEEN:
' The Corporation of the Town of Ajax, a municipal corporation
existing under the laws of Ontario,
' ("Ajax") OF THE FIRST PART
- and-
' The Corporation of the Municipality of Clarington,a municipal
corporation existing under the laws of Ontario,
' ("Clarington") OF THE SECOND PART
- and-
' The Corporation of the Town of Pickering, a municipal
corporation existing under the laws of Ontario,
' ("Pickering") OF THE THIRD PART
' (Ajax, Clarington and Pickering are sometimes referred to
collectively as the "Municipalities" and individually as a
"Municipality")
RECITALS:
(a) the Municipalities, acting under the authority contained in the Electricity Act, 1998(the
' "Act"), have agreed to authorize the incorporation of a corporation ("HoldCo") under
' the Business Corporations Act(Ontario)to be wholly-owned by the Municipalities and as
appropriate, certain subsidiaries of HoldCo ("the Subsidiaries ) for the purpose of
' carrying on the business of each of Ajax Hydro-Electric Commission, Clarington
' 2
' Hydro-Electric Commission and Pickering Hydro-Electric Commission(collectively the
"Predecessor Utilities" and individually a "Predecessor Utility");
(b) the Municipalities, pursuant to the Act, have agreed to transfer, by applicable transfer
' by-laws, assets, liabilities and employees of the Predecessor Utilities to HoldCo and as
appropriate, certain of the Subsidiaries in exchange for shares in the capital of HoldCo
' and/or the Subsidiaries, the assumption of all liabilities of each of the Predecessor
Utilities by HoldCo and/or the Subsidiaries and the issue of promissory notes or other
' evidence of indebtedness of HoldCo and/or the Subsidiaries to each of the Municipalities;
' and
' (c) the Municipalities, acting under the authority of the Act, have agreed to effect such
transfers to HoldCo and as appropriate, certain Subsidiaries upon the terms and
conditions hereinafter set out.
' NOW THEREFORE THIS AGREEMENT WITNESSES as follows:
' 1. Incorporation of HoldCo.Each of the Municipalities agrees to incorporate HoldCo on
the Incorporation Date pursuant to articles of incorporation substantially in the form
' attached hereto as Schedule "A". Each of the Municipalities further authorizes the
' incorporation, after the Incorporation Date, of one or more subsidiaries of HoldCo to
carry on businesses permitted by the Ontario Energy Board Act, 1998 (the "OEB Act")
' (collectively referred to hereinafter as the "HoldCo Subs").
' 2. Incorporation Date. For the purpose of this Agreement, the Incorporation Date shall
be Thursday, July 1, 1999 or such other date as the Municipalities may unanimously
agree.
3
3. Establishment of Board of Directors. Each of the Municipalities agrees to designate the
members of the commission of each Predecessor Utility as the Board of Directors of
' HoldCo on the Incorporation Date. The Board of Directors of HoldCo may thereafter
establish the Board of Directors of each HoldCo Sub.
4. Shareholders Agreement. Each of the Municipalities agrees that,as of the Incorporation
Date, it shall enter into a shareholders' agreement with each of the other parties hereto
substantially in the form attached hereto as Schedule "B" (the "Shareholders
Agreement")to provide for the conduct of certain affairs of HoldCo,and as appropriate,
' the HoldCo Subs, to provide for restrictions on the transfer and ownership of shares in
the capital of HoldCo and to govern the mutual rights and obligations of the shareholders
' of HoldCo with respect to HoldCo and to each other shareholder.
5. Effective Date. For the purpose of this Agreement, the Effective Date shall be
Wednesday, November 1, 1999 or such date or dates as the Municipalities may
' unanimously agree.
' 6. Transfer By-laws. Each of the Municipalities agrees that it shall cause a transfer by-law
pursuant to the Act (a "Transfer By-law") to be passed prior to the Effective Date
authorizing the transfer as of the Effective Date to HoldCo and as appropriate, to the
' HoldCo Subs of the assets (not including Surplus Land)("the Transferred Assets"),
liabilities and employees of that Municipality's respective Predecessor Utility and setting
' out the terms and conditions upon which such transfer is to take place, including the
consideration to be paid by HoldCo and as appropriate, the HoldCo Subs.
7. Transfer Agreement. Each of the Municipalities agrees that prior to the Effective Date
' it shall, pursuant to the Transfer By-law enter into, and shall cause its respective
Predecessor Utility to enter into, a transfer agreement and such other documents (the
-4 -
' "Transfer Agreement")with respect to the Transferred Assets,liabilities and employees
of the Predecessor Utility to be transferred to HoldCo and as appropriate, the HoldCo
Subs as may be necessary to effect the transfers contemplated by the Transfer By-law.
8. Lands Retained by Municipality. Each of the Municipalities agrees that it and each
other Municipality shall have the right and option to retain certain parcels of land of the
respective Municipality which parcels of land are vacant and not used in the operations
of the respective Predecessor Utility("Surplus Land"). Each Municipality shall designate
the Surplus Land which it wishes to retain and notify in writing each of the other
' Municipalities thereof priorto the enactment of that Municipality's Transfer By-law. For
the purposes of Section 10, any Surplus Land retained by a Municipality shall be valued
' at its book value as recorded on the books of the Predecessor Utility as at the Effective
Date.
9. Assumption of Obligations and Liabilities. Pursuant to the Transfer By-laws and the
Transfer Agreements, HoldCo and the HoldCo Subs, as applicable, shall assume and
discharge all obligations and liabilities of all of the Predecessor Utilities, including,
without limitation, all obligations and liabilities under environmental laws with respect
to the Transferred Assets or otherwise.
' 10. Valuation of Assets. Each of the Municipalities agrees that the Transferred Assets and
liabilities of each Predecessor Utility shall be transferred to HoldCo,or as applicable,the
' HoldCo Subs, at their fair market value as at the Effective Date. The book value of each
Predecessor Utility shall be deemed to be its fair market value and shall be based on the
audited financial statements of each Predecessor Utility as at the Effective Date. Each
Municipality agrees to cause an audit of its Predecessor Utility to be conducted as at the
' Effective Date. The audit shall be conducted in accordance with generally accepted
Canadian accounting principles on a basis consistent with prior periods,with such audit
1 - 5 -
to be completed and the audit report delivered by each Municipality to HoldCo's
auditors within 90 days after the Effective Date.
11. Principles of Equity Determination. Each of the Municipalities agrees that it shall
' receive fully-paid and non-assessable common shares ("Common Shares") in the capital
of HoldCo and, as may be applicable, evidence of indebtedness of HoldCo on a pro rata
basis in exchange for the transfer pursuant to the Transfer Bylaw and the Transfer
Agreement, of the Transferred Assets, liabilities and employees of its respective
Predecessor Utility(the "Equity"). The Equity of each Municipality shall be determined
as of the Effective Date on a pro rata basis by HoldCo's auditors based upon the values
for the Transferred Assets and liabilities reported on such Predecessor Utility's audited
' financial statements as at the Effective Date. HoldCo's auditors shall review and confirm
the Equity calculation which determination shall be final and binding for all of the
Municipalities for all purposes of this Agreement and the Shareholders' Agreement.
' 12. Initial Share Issuance. Each of the Municipalities agrees that it will not be possible to
determine the Equity of each Municipality as of the Effective Date for each Predecessor
' Utility until the completion of an audit of each Predecessor Utility after the Effective
Date as contemplated in Section 10 above. As a result, each Predecessor Utility shall
' subscribe for Common Shares and HoldCo shall issue the following number of Common
Shares to the respective Municipality on the Incorporation Date:
I (a) Ajax Hydro-Electric Commission shall pay$368 to HoldCo and Ajax shall receive
368 Common Shares;
i
(b) Clarington Hydro-Electric Commission shall pay$158 to HoldCo and Clarington
' shall receive 158 Common Shares; and
1
-6
' (c) Pickering Hydro-Electric Commission shall pay $474 to HoldCo and Pickering
shall receive 474 Common Shares,
with the effect that on the Incorporation. Date the issued and outstanding capital of
' HoldCo shall be 1,000 Common Shares,and the Common Shares shall be held as follows
and the initial Equity of each Municipality shall be as follows:
Number of Initial Equity of
Shareholder Common Shares each Municipality
Ajax 368 36.8%
' Clarington 158 15.8%
Pickering 474 47.4%
1,000 100%
13. Equity Adjustment. Each of the Municipalities agrees that once the Equity for each
' Municipality has been determined, and reviewed and confirmed by HoldCo's auditors
pursuant to Section 11 that all adjustments which may be necessary to reflect the Equity
' of each Municipality as so determined shall be made, including without limitation, the
' issuance of additional Common Shares of HoldCo, the issuance or reallocation of
indebtedness of HoldCo and any applicable HoldCo Subs and any amendments to the
' Shareholders' Agreement which may be required as a result of such determination of
HoldCo's auditors.
14. HoldCo and HoldCo Subs Expenses. Each of the Municipalities agrees to cause its
respective Predecessor Utility to pay its pro rata share of the expenses of HoldCo and the
HoldCo Subs prior to the Effective Date based upon the Equity of each Municipality.
1 7-
' Each of the Municipalities further agrees to cause its respective Predecessor Utility to
contribute the amount set out below on or before the Incorporation Date in respect of
' the initial start up expenses of HoldCo and the HoldCo Subs:
Predecessor Initial Start Up
Utili1Y Payment
' Ajax $36,800
Clarington $15,800
Pickering $47,400
$100,000
15. Special Payment. Each of the Municipalities agrees that it shall cause HoldCo and/or
' the HoldCo Subs to make two special payments totalling$12 million(individually called
a "Special Payment" and collectively called the "Special Payments") to each
Municipality. Each Special Payment shall be in an amount calculated by multiplying
' $60,000 times the percentage Equity of each Municipality. The first Special Payment shall
be made on the Effective Date and the second Special Payment shall be made on
September 1, 2000. The Special Payments shall be made in a tax efficient manner taking
' into account the ca p ital structure and financin g p lans of HoldCo and the HoldCo Subs.
' Schedule "C" hereto sets out an estimate of the Special Payments. As of the Effective
Date, the Equity of each Municipality shall be as specified in Section 12.
On the Effective Date,HoldCo shall pay to each Municipality the first Special Payment
' set out on Schedule "C" hereto. Following the determination by HoldCo's auditors of
the Equity of each Municipality pursuant to Section 13 after the Effective Date, the
second Special Payment set out in Schedule "C" shall be adjusted to reflect the final
Equity determination. The adjusted second Special Payment shall be paid on September
1 8
' 1,2000. Any adjustment to reflect an overpayment or underpayment to a Municipality
on the first Special Payment shall be made without any provision for interest as a result
' of any overpayment or underpayment to any Municipality on the first Special Payment
date.If any overpayment on the first Special Payment cannot be recovered by adjustment
' of the second Special Payment, the Municipality or Municipalities receiving the
overpayment shall repay the amount of the overpayment to HoldCo on the second
' Special Payment date.
16. Representations and Warranties of each Municipality. Each of the Municipalities
hereby represents and warrants with respect to itself and its Predecessor Utility to each
of the other parties hereto that as at the date hereof and as of the Effective Date:
(a) the Municipality has the power to enter into this Agreement and to perform its
' obligations under this Agreement and all documents and agreements contemplated
by this Agreement;
(b) this Agreement has been duly authorized, executed and delivered by the
' Municipality and is a legal, valid and binding obligation of the Municipality,
enforceable against the Municipality in accordance with its terms;
(C) each of the Transfer By-law, Transfer Agreement and Shareholders' Agreement
will be a legal, valid and binding obligation of the Municipality, enforceable
' against the Municipality in accordance with its terms;
' (d) the Municipality and/or its Predecessor Utility is the legal and beneficial owner
of all of the assets of the Predecessor Utility to be transferred pursuant to the
' Transfer By-law and Transfer Agreement, with a good and marketable title
thereto,subject to the Encumbrances and except for the Encumbrances,there are
- 9 -
' no outstanding agreements, options or other rights capable of becoming an
agreement or option to purchase such assets. For the purpose of this Agreement,
"Encumbrance"means a mortgage,charge,pledge,hypothecation,lien(statutory
or otherwise), security interest, adverse claim, assignment as security or
' reservation of title of any kind which may affect the Transferred Assets
immediately prior to the Effective Date and shall be disclosed in writing by each
' Municipality prior thereto;
(e) except as disclosed in writing by each Municipality prior to the Effective Date,
there are no actions, suits or proceedings pending or, to the best of the
Municipality's knowledge, after due enquiry, threatened against or affecting the
' assets of the Predecessor Utility to be transferred to HoldCo by the Transfer
By-law and Transfer Agreement at law or in equity or before or by any federal,
' provincial, municipal or other governmental department, court, commission,
board,bureau,agency or instrumentality,domestic or foreign,or before or by an
' arbitrator or arbitration board. Except as disclosed in writing by each
Municipality prior to the Effective Date, the Municipality is not aware of any
tground on which any such action, suit or proceeding might be commenced with
any reasonable likelihood of success;
(f) neither this Agreement nor any document to be delivered by the Municipality nor
' any certificate, report, statement or other document furnished by the
' Municipality in connection with the negotiation of this Agreement contains or
will contain any untrue statement of a material fact or omits or will omit to state
a material fact necessary to make the statements contained herein or therein not
misleading; and
- 10-
(g,) there has been no event,transaction or information that has come to the attention
of the Municipality that has not been disclosed to the other Municipalities in
writing that could reasonably be expected to have a material adverse effect on the
assets of the Predecessor Utility to be transferred to HoldCo pursuant to the
' Transfer By-law and Transfer Agreement.
' 17. Further Assurances. Each of the Municipalities shall, at its expense,promptly and duly
execute and deliver such further documents and promptly take such further action not
inconsistent with the terms hereof as may from time to time be reasonably required in
' order to more effectively carry out the intent and purpose of this Agreement.
18. Costs. All costs and expenses incurred or to be incurred by each Municipality and all
taxes incurred or payable in connection with the transfer of the Transferred Assets shall
' be paid by that Municipality.
' 19. Governing Law. This Agreement shall be governed by and construed in accordance with
the laws of the Province of Ontario and the federal laws of Canada applicable therein.
20. Entire Agreement. This Agreement, the Shareholders Agreement, the Transfer
' Agreement and the Schedules attached hereto constitute the entire agreement among the
parties relating to the subject matter hereof and supersede all prior agreements and
' understandings, oral or written, between the parties hereto with respect to the subject
' matter hereof.
21. Survival. All warranties, representations, covenants,provisions and terms contained in
this Agreement by the parties shall not merge but shall survive the completion of the
' actions contemplated herein.
- 11 -
22. Regulatory Approval. Completion of the transactions contemplated by this agreement
shall be conditional upon obtaining all necessary regulatory approvals under the OEB Act
and other applicable laws on terms and conditions satisfactory to the Municipalities.
IN WITNESS WHEREOF this Agreement has been duly executed by the parties under
their respective corporate seals as witnessed by the signatures of their proper officers in that
' behalf.
THE CORPORA rteveParish k THE
' TOWN OF(AJAX
1 By.
ame: M-
ayor
c/s.. 'Ad,!enz' By;
Name: Marty deRond, Clerk
THE CORPORATION OF THE
MUNICIPALITY OF CLARINGTON
By:
Name: Mayor Diane Hamre
c/s
By
' ie,"Clerk
1
1
- 12 -
THE CORPORATION OF THE
TOWN OF PICKERING
B
Y'
Name: yor Wayne urs
' c/s
By.
Name: Bruce Taylor, Clerk
r
rSCHEDULE "A"
ARTICLES OF INCORPORATION
ATTACHED.
i
r
1
i
1
i
1
1
i
r
1
1
1
1
For Ministry Use Only Ontario Corporation Number
A rusage exclusif du miMStbrs Num6ro de is soci6t6 en Ontario
Tram Une
Code No stet Type Incorp
F
to 20 26 29 30
Notkv
shen R"ap'd JuAWkilon
ONTARIO
31 32 33 47
' ARTICLES OF INCORPORATION
STATUTS CONSTITUTIFS
' Form 1 1. The name of the corporation is: Unomination sociale de la soci6t6:
Business O N T A R I O I N C
Corporations
Act
' Forrnule 1
Lot surles
soci6t6s par
actions
' 2. The address of the registered office is: Adresse du si6ge social:
1920 Bayly Street
(Street and No.or R.R.No.and.If multl-of oo building.give Room No.)
(Rue et num6ro ou num6ro de Is R.R.et s'd s'agit d'un Edifice A bureaux,num6ro du bureau)
Pickering L i W 3 R 6
' (Name of MunblpaUtty or Poet office) (Postal Code)
(Nom de is municipam ou du bureau de poste) (Code postal)
3. Number(or minimum and maximum number)of Nombre(ou nombres minimal et maximal)
directors is: d'administrateurs:
A minimum of 1 and a maximum of 30.
' 4. The first director(s)is/are: Premier(s)administrateur(s)
Resident
Address for Servics,giving Street and No.(or R.R.No.), Canadian
First name,initials and surname Municipality and Postal Code State
Pr6nom,initiales st nom de familis Domicile 61u,y compris Is rue et Is num6ro(ou Is num6ro de Is Yes or No
R.R.),Is nom de Is municipality at le code postal 86sident
canadisn
Oui/Non
See pages 1A and 1B.
Dw-new pnspw by
' Bov g ERW
arri.esn a safwator.
Toro9tq Canals
Sofd)ows 311
Mwdywoawor aerewa
9or10aaa Y a mghn d dada
nwk of WO-Us Con wwdM
Tawe4 crrda
' oacw Fwm1 111900
First Name, 1A
Initials and Surname Address for Service Resident Canadian
Wayne Arthurs 775 Aspen Road Yes
Pickering, Ontario
L1Y 1A2
Joe Atkinson 107 Bolland Crescent Yes
Ajax, Ontario
LIS 3H1
1 Bruce Boyle 148 Lake Driveway West Yes
Ajax, Ontario
LIS 4V7
Suzanne Elston 1604 Bloor Street Yes
Courtice, Ontario
LIB 2S3
Diane Hamre 401 Concession Road 8 Yes
P.O. Box 361
Orono, Ontario
LOB 1 MO
' Linda A. Hodgins 1597 Geta Circle Yes
Pickering, Ontario
L1V 3B5
' Duncan Jewell 57 Flowers Crescent Yes
Ajax, Ontario
tLIS 4B9
Rick Johnson R.R. #5 Yes
Claremont, Ontario
L1W 1L9
James I. Mason 1734 Finch Avenue Yes
' Pickering, Ontario
L1V 1K4
' Nancy Maxwell 76 Harland Crescent Yes
Ajax, Ontario
LIS 1J9
1B
First Name,
Initials and Surname Address for Service Resident Canadian
Steve Parish 67 Woodhouse Crescent Yes
Ajax, Ontario
LIS 2N5
Paul Reesor 26 McCrimmon Crescent Yes
Bowmanville, Ontario
' L1C 4N2
Pauline Storks 11 King Street East Yes
Newcastle, Ontario
LIB 1113
Ralph Sutton 1104 Timber Court Yes
1 Pickering, Ontario
L1X 1T4
George Van Dyk 7 Maryleah Court Yes
Bowmanville, Ontario
L1C 4115
2
5. Restrictions,if any,on business the corporation may Limites,s'il y a lieu,imposeses aux activit6s commerciales
carry on or on powers the corporation may exercise: ou aux pouvoirs de la societ8:
Form 1
Business
Corporations None.
Act
Formule 1
Loi sur lea
socl6t6s par
actions
s, The classes and any maximum number of shares Catigories at nombre maximal,s'il y a lieu,d'actions que
that the corporation is authorized to issue: la soci&6 est autoris6e it 6mettre:
' The corporation is authorized to issue an unlimited number of common shares.
glee a LOW
Benin+8 soicam
Tb offra Cola"
' s4011DO O a n
we,ey,on.�o.rrr«
sofmoo.Y e asb
nwk of etrf.tf.C
Taaee.C
oeCA cw F em1 1/19N
7 Rights,privileges,restrictions and conditions(if any) Droits,privileges,restrictions et conditions,s'il y a lieu, 3
attaching to each class of shares and directors rattach6s A chaque cat6gorie d'actions et pouvoirs des
Form 1 authority with respect to any class of shares which administrateurs relatifs A chaque cat6gorie d'actions qui
t eisi"es may be issued in series: peut fte bmise en s6rie:
Corpom lom
,act
Formule 1
La sur)as A. Voting Rights
sal6168 Par
salons
The holders of the common shares shall be entitled to receive notice of and to
attend and vote at all meetings of the shareholders of the corporation, and each
such share shall confer the right to one vote in person or by proxy at all
meetings of shareholders of the corporation.
B. Dividends
The holders of the common shares shall be entitled to receive dividends as and
' when declared by the directors from time to time out of moneys of the
corporation properly applicable to the payment of dividends, and the amount per
share of each such dividend shall be determined by the directors of the
corporation at the time of declaration.
C. Return of Capital
In the event of the liquidation, dissolution or winding up of the corporation or
other distribution of its assets among the shareholders by way of repayment
capital, whether voluntary or involuntary, the holders of the common shares
shall be entitled to receive the remaining property of the corporation.
awwnaK ro vPa r h
Bor"8 Ewae
Ban+sen 8 So&cd ra
Torowq Can&&
SaftDO080 311
w«aaae.-er�s�o.
nwk d eryNUW CoraOM"S.
Taa,q SCA F
oCw Form 1 1/lYW
a
8. The issue,transfer or ownership of shares is/is not L'6mission,le transfert ou la propri6t6 d'actions est/n'est pas
restricted and the restrictions(if any)are as follows: restreint.Les restrictions,s'il y a lieu,sont les suivantes:
Forth 1
,"no" No share or shares of the corporation shall at any time be transferred to any person
' C°"10M without either (a) the consent of the directors to be signified by a resolution passed by
ACt the board or by an instrument or instruments in writing signed by a majority of the
L°""""1
Ld our lea directors, or (b) the consent of the shareholders of the corporation to be signified by a
' SOCIMAa per resolution passed by the shareholders or by an instrument or instruments in writing
actlona signed by the holders of the shares of the corporation representing a majority of the
votes attributable to all of the issued and outstanding shares of the corporation.
1
1
1 �ll"bew +by
B"40 a Z"a
B.r"awn a Sear 9
Toronk Q""
So/1Dewd 3 tt
waapoOOrer Yiowlw
SOftoO in■,.yrsw ey.
"Wk d StOOW COrP W*dM
Twa Cr
' OOCA FOrre1 1/1900
S
9. Other provisions, if any, are: Autres dispositions,s'il y a lieu
Forth 1
Business A. The number of shareholders of the corporation, exclusive of persons who are in
' cOf'AC;i°"' its employment and exclusive of persons who, having been formerly in the
FortnWe I employment of the corporation, were, while in that employment, and have
W sur In continued after the termination of that employment to be, shareholders of the
' sw6t6s PW corporation, is limited to not more than fifty, two or more persons who are the
WIons joint registered owners of one or more shares being counted as one shareholder.
B. Any invitation to the public to subscribe for securities of the corporation is
prohibited.
C. Subject to the provisions of the Business Corporations Act, the corporation shall
' have alien on the shares registered in the name of a shareholder or such
shareholder's legal representative for a debt of that shareholder to the
corporation.
rD. The board of directors may from time to time on behalf of the corporation,
without authorization of the shareholders:
' (a) borrow money on the credit of the corporation;
(b) issue, reissue, sell or pledge bonds, debentures, notes or other evidences
of indebtedness or guarantee of the corporation, whether secured or
unsecured;
(c) to the extent permitted by the Business Corporations Act, give a
guarantee on behalf of the corporation to secure performance of any
present or future indebtedness, liability or obligation of any person; and
' (d) mortgage, hypothecate, pledge or otherwise create a security interest in
all or any currently owned or subsequently acquired real or personal,
movable or immovable, property of the corporation including book
' debts, rights, powers, franchises and undertakings, to secure any such
bonds, debentures, notes or other evidences of indebtedness or guarantee
or any other present or future indebtedness, liability or obligation of the
corporation.
' The board of directors may from time to time delegate to such one or more of
the directors and officers of the corporation as may be designated by the board
all or any of the powers conferred on the board above to such extent and in
such manner as the board shall determine at the time of such delegation.
' E. This Corporation is incorporated pursuant to section 142(1) of the Electricity
Act, 1998 (Ontario).
D--wW prepared by
Bordew 8 Mid
Banisters 8 solicitor.
Torowtg Canada
SaRDxaO 3.11
wIXdpraC.YOr kaaAau
SOtd)o=is a registered trade
nWk of StykAft Corporation,
To".0%Canada.
' OBCA Form 1 1/1999
n
to. The names and addresses of the incorporators are: Nom st adresse des fondateurs
Form 1 Full address for service,or address of registered office or
Business of principal place of business,giving Street&Na or
' Corporations First name,initials and surname or corporate name R.R.No,Municipality and Postal Code
Act Pr6nom,initiales at nom de famille ou d6nomination socials Domicile 61u,adresse du si6ge social ou adresse de
Fonnute 1 16tablissement principal,y oompris Is rue at Is num6ro ou
Lot sur tes Is num6ro de la R.R.,Is nom de Is municipalit6 at Is code
soct6t6s par postal
actions
Linda L. Bertoldi 41 Lascelles Blvd.
Toronto, Ontario
' M5P 2C9
These articles are signed in duplicate. Les pr6sents statuts sont sign6s en double exemplaire.
' SiprW"M of WWWporafore
swwkx a dee forKow"
Linda L. Bertoldi
Dwwnext pociaw by
aolifteE111W
en;.len a sohcUor.
Tbroota Cam"
' SolrDearO 3.11
waapeOror kOrbq
sw�oeo.t.�np.aw a.0
.wk of etV§"CeryarNu%
iolollq Car&►
OoCA Form 1 1/19W
' SCHEDULE "B"
' SHAREHOLDERS' AGREEMENT
ATTACHED.
1
' HOLDCO
SHAREHOLDERS' AGREEMENT
' BORDEN & ELLIOT
TABLE OF CONTENTS
Page No.
ARTICLE I
INTERPRETATION
1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.2 Control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.3 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.4 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
' 1.5 Number and Gender . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.6 Accounting Principles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.7 Calculation of Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
' 1.8 Statutory References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.9 Reclassification of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
1.10 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
' 1.11 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.12 Currency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1 ARTICLE II
BUSINESS OF THE CORPORATIONS
' 2.1 Business of the Corporations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Corporations'Standard of Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE III
CORPORATE AFFAIRS OF HOLDCO
' 3.1 Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.2 The Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
(a) Shareholder Action. : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : : 15
(b) Initial Board 16
(c) The Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
' (d) Qualifications of Board . . . . . . . . . . 17
. . . . . . . . . . . . . . . . . . . . . . . . .
(e) Nominees of Transferee Shareholders 18
(f) Term of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(g) Vacancy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(h) Quorum . . . . . . . . . . . . . 19
(i) Meetings of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
' 0) Decisions of the Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(k) Board Duties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
0) Indemnification and Insurance for Directors and Officers . . . . . . . . . . . 20
' 3.3 Board Committees . . : . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
1 (1)
1
Page No.
(a) Executive Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
' (b) Finance and Human Resources Committee . . . . . . . . . . . . . . . . . . . . . 22
(c) Nominating Committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
' (d) General Provisions Relating to Board Committees . . . . . . . . . . . . . . . . 23
3.4 Shareholders'Meetings 24
3.5 Regular Shareholders Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
3.6 Decisions of the Shareholders : : : : : : : . . . . . . . . . . . . . . . . . . . . . . . . . : . . . 25
3.7 Shareholder Representative 25
3.8 Oificers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
3.9 Matters Requiring Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
3.10 Unanimous Shareholder Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
3.11 Agreement Binds HoldCo and Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
' 3.12 Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.13 Banking . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
3.14 Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 R ep . . . . . . . . . . . . . . . . . . . . . . . . . . .
Representations and Warranties . . . . . . . 29
4.2 Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
' ARTICLE V
TRANSFER OF SHARES
5.1 General Restriction on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
'
5.2 Legend on Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.3 Rights of First Refusal 31
(a) Notice of Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
(b) Offer Open During Notice Period . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
' (c) Acceptance of Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(d) Excess Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
(e) No Fractions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
(f) Sale 33
(l) Deemed Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
' (h) Prospective Purchaser Bound . . . . . . . : . . . . . . . . . . . . . . . . . . . . . . . 34
(i) HoldCo as Purchaser 34
5.4 Piggyback Right . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
5.5 Amalgamated Shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
' (ii)
Page No.
ARTICLE VI
CLOSING OF PURCHASE TRANSACTION
' 6.1 Time and Place of Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
6.2 Documents to be delivered by the Vendor . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
' 6.3 Documents to be delivered by the Purchaser . . . . . . . . . . . . . . . . . . . . . . . . . . 37
6.4 Failure to Complete Sale 37
' ARTICLE VII
NON-COMPETITION AND CONFIDENTIALITY
7.1 Non-Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.2 Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
7.3 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
7.4 Accounting for Profits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
7.5 Reasonableness of Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
' ARTICLE VIII
SALE OF SURPLUS ASSETS
' 8.1 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
ARTICLE IX
BOOKS, RECORDS AND RIGHT TO INFORMATION
' 9.1 Books and Records . . • . • . . . • . . . . . . . . • • • • . . • . . . . . . . . . . . . . . • . • • . 42
9.2 Right to Information 42
ARTICLE X
' TERM
10.1 Term and Automatic Renewal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
ARTICLE XI
GENERAL
11.1 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
11.2 Assignment and Binding Effect . . . . . . . . . . . . . . . . . . 45
. . . . . . . . . . . . . . . .
11.3 Amalgamation of Municipal Shareholders . . . . . . . . . . . . 45
11.4 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
' (a) Selection of Single Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
(iii)
' Page No.
(b) Referring Dispute. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . . . . . . . . . . 45
. . . . . . . . . . . . . . . .
(c) Attempted Settlement. 46
(d) Decision Final and Binding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(e) Place of Arbitration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
r (f) Powers of Arbitrator. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(9) Costs. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
(h) Written Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.5 Further Assurances 47
11.6 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.7 Amendment, Modification and Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
11.8 Time of Essence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.10 No Partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
11.11 Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
SCHEDULE "A"
DIRECTOR'S INDEMNITY
G:\RJM\PICKERIN\DOCUMENT\SHARHFIN.AGR
' (1V)
r
r
' THIS AGREEMENT made as of the 1st day of July, 1999.
BETWEEN:
rThe Corporation of the Town of Ajax, a municipal corporation
existing under the laws of Ontario
r ("Ajax")
- and -
The Corporation of the Municipality of Clarington, a
municipal corporation existing under the laws of Ontario
("Clarington")
1
- and -
The Corporation of the Town of Pickering, a municipal
corporation existing under the laws of Ontario
("Pickering")
' - and -
1362708 Ontario Inc., a corporation existing under the laws of
rOntario
("HoldCo")
Recitals:
1. HoldCo is a corporation existing under the laws of Ontario;
1
2. The authorized capital of HoldCo consists of an unlimited number of Shares of which
1,000 are issued and outstanding as fully paid and non-assessable;
1
1
1
- 2 -
' 3. Ajax, Clarington and Pickering are the sole registered and beneficial shareholders of
HoldCo holding the following numbers of Shares, respectively:
NAME OF NUMBER PERCENTAGE
SHAREHOLDER OF SHARES TOTAL
Ajax 368 36.8%
Clarington 158 15.8%
Pickering 474 47.4%
4. Pursuant to the Electricity Act, each of the Shareholders shall transfer to the
Corporations, by applicable transfer by-laws, assets, liabilities and employees of the
' Predecessor Utilities; and
1 5. The parties wish to enter into this Agreement to provide for the conduct of certain
affairs of HoldCo, to provide for certain restrictions on the transfer and ownership of
Shares and to govern the mutual rights and obligations of the Shareholders with respect
to HoldCo and each other Shareholder;
NOW THEREFORE in consideration of the premises, the mutual promises herein
' contained and other good and valuable consideration (the receipt and sufficiency of which are
hereby acknowledged) each of the parties agrees with each other party as follows:
r
- 3 -
ARTICLE I
INTERPRETATION
' 1.1 Definitions
r
In this Agreement the following terms shall have the following meanings unless the
' subject matter or context otherwise requires:
"Act" means the Business Corporations Act (Ontario);
"Agreement" means this Agreement, all schedules attached hereto and any agreement or
schedule supplementing or amending this Agreement. All uses of the words "hereto",
"herein", "hereof", "hereby" and "hereunder" and similar expressions refer to this Agreement
and not to any particular section or portion of it. References to an Article, Section,
Subsection or Schedule refer to the applicable article, section, subsection or schedule of this
Agreement;
1
"Amalgamated Shareholder" has the meaning set out in Section 11.3;
r
"Arbitration Act" means the Arbitration Act, S.O., 1991;
1
"Arbitrator" has the meaning set out in Subsection 11.4(a);
1
"Arm's Length" has the meaning attributed thereto in the Income Tax Act (Canada) provided
rthat, for the purposes of Section 5.3, each Shareholder shall be deemed to be acting at Arm's
Length with each other Shareholder and HoldCo;
r .
r
r
1
- 4 -
"Auditors" means the firm of chartered accountants appointed as auditor of the Corporations
from time to time;
"Board" means the Board of Directors of HoldCo;
Board Committees„ means committees created by the Board from time to time for the
purpose of overseeing specific tasks and reporting to the Board and includes the committees
referred to in Section 3.3;
r
"Business” means the business of the Corporations as described in Section 2.1 or as may
' otherwise be conducted by the Corporations from time to time;
"Business Day" means any day other than a Saturday, Sunday, or statutory holiday in
Ontario;
r
"Chair" means the director elected by the Board to serve as its chairperson from time to time;
r
"Closing Date" means the date on which the purchase and sale of Shares is to be completed;
1
"Confidential Information" means any and all information and data relating in any manner
' to the*Business and any activities, plans, ideas, products, services, policies or intentions
(including without limitation, information of an operational, business, marketing, financial or
' economic nature), whether or not proprietary in nature, that is of value to the Corporations
and is held by the Corporations as a trade secret and is not generally known to competitors
rof the Corporations or to the public;
r "Corporations" means collectively HoldCo and any Subsidiary;
1
r
r
i
- 5 -
"Council Appointees" has the meaning set out in Subsection 3.2(d);
1 "Debt" means, with respect to HoldCo and the Subsidiaries, without regard to any
uncapitalized interest component thereof (whether actual or imputed) that is not due and
payable, the aggregate of the following amounts, each calculated in accordance with generally
accepted accounting principles, unless the context otherwise requires:
indebtedness(a) ess form money borrowed o ed (including, without limitation, by way of
overdraft) or indebtedness represented by notes payable and drafts accepted
representing extensions of credit;
(b) the face amount of all bankers' acceptances and other similar instruments;
(c) all obligations (whether or not with respect to the borrowing of money) that
are evidenced by bonds, debentures, notes or other similar instruments;
(d) all liabilities upon which interest charges are customarily paid;
(e) any capital stock of HoldCo (or of any subsidiary of HoldCo that is not held
by HoldCo or by a subsidiary of HoldCo that is wholly owned, directly or
indirectly), which capital stock, by its terms (or by the terms of any security
into which it is convertible or for which it is exchangeable at the option of the
holder), or upon the happening of any event, matures or is mandatorily
redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable
' at the option of the holder thereof, in whole or in part, on or prior to the
maturity date for cash or securities constituting debt;
' - 6 -
(f) all capital lease obligations, synthetic lease obligations, obligations under sale
and leaseback transactions and purchase money obligations;
the full amount of an contingent liability under an guarantee other than b
(� Y g Y Y � ( Y
endorsement of negotiable instruments for collection or deposit in the ordinary
course of business) in any manner of any part or all of an obligation of another
person of the type included in items (a) through (f) above, including contingent
liabilities in respect of letters of credit, letters of guarantee and similar
' instruments; and
(h) contingent liabilities in respect of performance bonds and surety bonds, and any
other guarantee or other contingent liability of any part or all of an obligation
' of a person, in each case only to the extent that the guarantee or other
contingent liability is required by generally accepted accounting principles to be
' treated as a liability on a balance sheet of the guarantor or person contingently
liable,
provided that trade payables, operating leases and accrued liabilities that are current liabilities
incurred and deposits received in the ordinary course of business do not constitute Debt.
' "Debt/Equity Ratio" means a ratio of Debt to Equity on a consolidated basis for HoldCo and
all Subsidiaries;
"Disputing Shareholder" has the meaning set out in Subsection 11.4(c);
"Electricity Act" means the Electricity Act, 1998 (Ontario);
- 7 -
"Encumbrance" means a mortgage, charge, pledge, hypothecation, lien (statutory or
otherwise), security interest, adverse claim, assignment as security or reservation of title of any
kind;
' "Equity" means the aggregate of the equity, capital stock and surplus as such amounts appear
on a consolidated balance sheet of HoldCo prepared in accordance with generally accepted
accounting principles and as determined by the Ontario Energy Board. In the event there is
a conflict between generally accepted accounting principles and the determination of the
' Ontario Energy Board, the determination of the Ontario Energy Board with respect to the
conflict shall prevail;
"Fair Market Value" means the appraised value as determined by a registered appraiser
' selected and paid for by HoldCo;
1 "Fiscal Year" means a 12-month period ending on December 31 in each year;
"Governmental Authority" means any government or political subdivision (including without
limitation, any municipality or federal or provincial ministry) or agency, authority,
' commission, department or instrumentality of any government or political subdivision, or any
court or tribunal, and specifically includes the Ontario Energy Board and the IMO;
"Hold Period" has the meaning set out in Section 5.1;
"IMO" means the Independent Electricity Market Operator established pursuant to the
Electricity Act;
"Initial Board" means the initial Board which holds office for the Initial Term;
' - 8 -
"Initial Shareholder" means, at the date of this Agreement, each of Ajax, Clarington and
Pickering;
' "Initial Term" means the � ,eriod from the date of this Agreement until December 31 2000•
P g
' "Laws" means any law, including common law, equitable principle, statute, ordinance,
' regulation, rule, order, permit, decision, declaration, notice, demand, injunction, writ, policy,
decree or award of any Governmental Authority;
"Majority Rule" has the meaning set out in Subsection 3.2(d);
"Merger Agreement" means the merger agreement dated June 29, 1999 among the Initial
' Shareholders;
' "Notice Period" has the meaning set out in Subsection 5.3(b);
' "Offer" has the meaning set out in Subsection 5.3(a);
' "Offered Shares" has the meaning set out in Subsection 5.3(a);
' "Other Holders" has the meaning set out in Section 5.3;
' "Person" means an individual, firm, partnership, unincorporated association, corporation,
bank, trust or other legal entity of any kind whatsoever;
' "Predecessor Utility" means each of Ajax Hydro-Electric Commission, Clarington
Hydro-Electric Commission and Pickering Hydro-Electric Commission;
- 9 -
' "Prospective Purchaser" has the meaning set out in Subsection 5.3(a);
"Purchase Notice" has the meaning set out in Subsection 5.3(c);
"Retiring Director" has the meaning set out in Subsection 3.2(g);
"Selling Notice" has the meaning set out in Subsection 5.3(a);
"Selling Shareholder" has the meaning set out in Section 5.3;
' "Shareholder" means any Person which is a registered holder of Shares;
"Shareholder Representative" has the meaning set out in Section 3.7;
"Shares" means common shares without par value in the capital of HoldCo;
"Subsidiary" means any subsidiary (as this term is defined in the Act) of HoldCo;
"Surplus Assets" means any land or buildings owned by HoldCo or any Subsidiary that
HoldCo or any Subsidiary respectively has determined to offer for sale;
i
"Third Party" means any Person with whom a Shareholder deals at Arm's Length;
1
"Transferee Shareholder" means any Person which acquires Shares from a Shareholder in
accordance with the provisions of this Agreement; and
I "Vice-Chair" means the director elected by the Board to serve as its vice-chairperson from
time to time.
1
- 10 -
1.2 Control
" For the purposes of this Agreement, a body corporate shall be deemed to be
controlled" by another Person or by two or more Persons if such Person or Persons (either
individually or collectively and whether or not they act together jointly or in concert) directly
or indirectly own, legally and beneficially, and exercise the full voting rights over, shares of
' such body corporate which:
' (a) have attached to them voting rights, exercisable in all circumstances, which
represent more than 50% of the votes attaching to all outstanding securities of
' such body corporate;
' (b) have sufficient votes to elect a majority of the board of directors of such body
corporate; and
(c) carry a right to receive, on a winding up or dissolution, more than 50% of the
' remaining property of such body corporate after payment of all debts and
liabilities of the body corporate.
1.3 Headings
The division of this Agreement into Articles, Sections and Subsections and the
insertion of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement. The Article and Section headings in this
Agreement are not intended to be full or precise descriptions of the text to which they refer
and shall not be considered part of this Agreement.
r
1.4 Entire Agreement
' The execution of this Agreement has not been induced by, nor do any of the parties
rely upon or regard as material, any representations, warranties, conditions, other agreements
' or acknowledgements not expressly made in this Agreement, in the agreements and other
documents to be delivered pursuant hereto or in the Merger Agreement.
1.5 Number and Gender
1
In this Agreement, words in the singular include the plural and vice-versa and words
' in one gender include all genders.
1.6 Accounting Principles
' Where the Canadian Institute of Chartered Accountants includes a recommendation
in its Handbook concerning the treatment of any accounting matter, such recommendation
' shall be regarded as the only generally accepted accounting principle applicable to the
circumstances that it covers and references herein to "generally accepted accounting principles"
shall be interpreted accordingly.
' All accounting and financial terms used herein, unless specifically provided to the
contrary, shall be interpreted and applied in accordance with generally accepted accounting
principles in Canada.
r1.7 Calculation of Time
' In this Agreement, a period of days shall be deemed to begin on the first day after
' the event which began the period and to end at 5:00 p.m. (Eastern Standard time) on the last
r
' _ 12 -
' day of the period. If, however, the last day of the period does not fall on a Business Day, the
period shall terminate at 5:00 p.m. (Eastern Standard time) on the next Business Day.
1.8 Statutory References
e
1
A reference in this Agreement to a statute refers to that statute, and any regulations
or rules issued thereunder, as amended, supplemented or replaced from time to time.
' 1.9 Reclassification of Shares
' The provisions of this Agreement shall apply, with any necessary changes to (a) any
shares or securities of any nature into which the Shares or any of them may be converted,
' exchanged, reclassified, redivided, redesignated, subdivided or consolidated; (b) any shares or
securities of any nature that are received by a Shareholder as a stock dividend or distribution
payable in shares, securities, warrants, rights or options of any nature of HoldCo; (c) any
shares, securities, warrants, rights or options of any nature of HoldCo or any successor,
' continuing company or corporation of HoldCo that may be received by a Shareholder on a
reorganization, amalgamation, arrangement, consolidation or merger, statutory or otherwise;
' and (d) any shares, securities, warrants, rights or options hereafter issued or allotted by
HoldCo to a Shareholder, all of which shares, securities, warrants, rights or options shall be
' deemed to be Shares for all purposes of this Agreement.
' 1.10 Interpretation
rIf any conflict shall appear between the by-laws and the articles of HoldCo and the
' provisions of this Agreement, the provisions of this Agreement shall govern.
1
' - 13 -
' 1.11 Governing Law
' This Agreement shall be governed by and construed, interpreted and performed in
accordance with the laws of Ontario and the laws of Canada applicable therein and shall be
treated in all respects as an Ontario contract.
' 1.12 Currency
All dollar amounts referred to in this Agreement and all payments to be made
hereunder are in Canadian funds.
ARTICLE II
BUSINESS OF THE CORPORATIONS
' 2.1 Business of the Corporations
' The Corporations may engage in the following business activities and such other
business activities as may be permitted by Law and authorized by the Board from time to
time:
' (a) transmitting or distributing electricity;
(b) owning and/or operating an electricity generation facility;
(c) retailing electricity;
(d) distributing or retailing gas or any other energy product which is carried
' through pipes or wires to the user;
' - 14 -
e business activities that enhance or develop the ability of an of the
( ) P Y Y
' Corporations to carry on any of the activities described in paragraphs (a), (b),
(c), or (d) above;
(f) business activities the principal purpose of which is to use more effectively the
assets of any of the Corporations including providing meter installation and
reading services, providing billing services and business activities in the
' telecommunications area;
(g) renting, selling or maintaining equipment and appliances, including without
limitation, hot water heaters; and
(h) providing services related to improving energy efficiency.
2.2 Corporations'Standard of Service
It is the intention of the Initial Shareholders that: (a) the Corporations shall provide
service levels at least equivalent to the existing levels in the service areas of each of the
Predecessor Utilities immediately prior to the transfer of their assets to the Corporations; (b)
new standards of service are established by the Board after the date of this Agreement so that
each service area will enjoy common standards and derive equal benefits, including but not
' limited to, the following matters:
' (a) distribution, energy services and tariffs;
(b) maintenance standards and schedules;
- 15 -
(c) emergency response capabilities;
(d) distribution system capacity;
(e) customer convenience and accessibility;
(f) power reliability and quality; and
' (g) marketing programmes and services.
' ARTICLE III
CORPORATE AFFAIRS OF HOLDCO
3.1 Assurances
The Shareholders shall cause such meetings of Shareholders to be held, votes to be
' cast, resolutions to be passed, by-laws to be made, confirmed and/or repealed, agreements and
other documents and instruments to be executed and all other acts and things to be done, to
ensure that at all times the provisions of this Article III are in effect, complied with or
implemented.
3.2 The Board
(a) Shareholder Action. Each of the Shareholders agrees to elect as members of
' the Board the nominees put forward by each other Shareholder from time to
time in accordance with the provisions of this Agreement.
w
' - 16 -
(b) Initial Board. Subject to the provisions of this Agreement, the business and
affairs of HoldCo shall be managed or supervised for the Initial Term by the
Initial Board which shall consist of 15 directors. Each Initial Shareholder shall
nominate five members of the Initial Board. Each Initial Shareholder's five
nominees shall consist of the five commissioners of the applicable Predecessor
Utility. The following individuals, each being the nominee of the Initial
Shareholder listed opposite his name, shall comprise the Initial Board:
Director Nominee of
Joe Atkinson Ajax
rBruce Boyle Ajax
Duncan Jewell Ajax
Nancy Maxwell Ajax
Steve Parish Ajax
rSuzanne Elston Clarington
Diane Hamre Clarington
rPaul Reesor Clarington
Pauline Storks Clarington
' George Van Dyk Clarington
Wayne Arthurs Pickering
Linda A. Hodgins Pickering
Rick Johnson Pickering
' James I. Mason Pickering
Ralph Sutton Pickering
r
Any Initial Shareholder may replace any director nominated by it at any time
rduring the Initial Term and shall nominate a new member to the Board as
rappropriate to replace the removed member.
r
1
w
- 17 -
(c) The Board. Following the Initial Term, the business and affairs of HoldCo
shall be managed or supervised by the Board which shall consist of 12 directors
or such other number of directors as the Shareholders may determine from
time to time by special resolution in accordance with the Act. Each of the
Initial Shareholders shall nominate the number of members to the Board listed
opposite that Initial Shareholder's name below:
Number of Directors Nominee of
4 Ajax
' 3 Clarington
5 Pickering
The Board shall annually elect from its members a Chair and Vice-Chair.
(d) Qualifications of Board. Each Initial Shareholder shall nominate the Mayor
of the Initial Shareholder or the Mayor's designate as one of the Initial
Shareholder's nominees to the Board provided that if the Mayor ceases to hold
tthe office of Mayor, the appointing Initial Shareholder shall forthwith replace
such nominee. Each Initial Shareholder may nominate to the Board members
of its council ("Council Appointees") so long as the Council Appointees
(including the Mayor or the Mayor's designate) do not comprise a majority of
' that Initial Shareholder's nominees to the Board (the "Majority Rule"). In
addition to the requirements of the Act, the qualifications of candidates for the
' Board shall, where possible, include the following:
(i) business experience;
- 18 -
(ii) time availability;
(iii) financial skills;
' (iv) marketing skills;
' (v) industry knowledge;
(vi) independence of judgment;
(vii) integrity;
(viii) knowledge of public policy issues relating to the Corporations; and
(ix) knowledge and experience concerning environmental matters, labour
relations and occupational health and safety issues.
I
(e) Nominees of Transferee Shareholders. Following the transfer of Shares to
Ia Transferee Shareholder, that Transferee Shareholder shall be entitled to
nominate one member of the Board for each whole block of Shares owned by
the Transferee Shareholder representing 9% of the total issued and outstanding
Shares. A Transferee Shareholder owning less than 9% of the total issued and
Ioutstanding Shares shall not be entitled to nominate any member of the Board
and a Transferee Shareholder owning less than 18% of the total issued and
outstanding Shares shall only be entitled to nominate one member of the
Board. An Amalgamated Shareholder shall not be considered a Transferee
iShareholder for the purpose of this Section 3.2(e) and shall retain its rights to
- 19 -
nominate members to the Board in the same manner as if it had not
amalgamated.
(f) Term of Directors. Following the Initial Term, the Board shall serve for a
term of three years. Members of the Board may serve successive terms on the
Board.
(g) Vacancy. If a director ceases to be a director for any reason (a Retiring
' Director"), the Shareholders shall fill the vacancy thereby created as soon as
reasonably possible, provided that such vacancy shall be filled by an individual
' nominated by the Shareholder who had nominated the Retiring Director.
(h) Quorum. A quorum for a meeting of the Board shall be a majority of the
members of the Board. A meeting shall be adjourned for lack of a quorum and
' a notice of the adjourned meeting shall be sent to all directors rescheduling the
meeting to a date at least 15 days following the adjourned meeting.
1
(i) Meetings of the Board. Meetings of the Board shall be held at least once in
' every calendar quarter or at the request of the Chair or of a majority of the
members of the Board. All meetings of the Board shall be held in Ontario, or
' by such telephone or electronic communication devices as permit all persons
participating in the meeting to communicate with each other simultaneously
iand instantaneously. At least 5 days' written notice of the time and place of
the meeting and of the business to be transacted at the meeting in sufficient
' detail to enable each director to assess reasonably the importance of such
business to the affairs of HoldCo shall be given to each director.
' - 20 -
(j) Decisions of the Directors. Decisions or resolutions of the Board shall
require the approval of the majority of the directors present at each meeting
thereof. The Chair shall not have a second or casting vote. A resolution in
writing signed by all of the directors entitled to vote on that resolution at a
meeting of the Board is as valid as if it had been passed at a meeting of the
Board.
' (k) Board Duties. Subject t o those matters requiring Shareholder approval as set
out in Section 3.9 hereof, the Board shall supervise the management of the
business and affairs of HoldCo and, without limiting the generality of the
foregoing, the Board shall be responsible for, but not limited to, overseeing the
following specific matters:
(i) the establishment of appropriate reserves and a dividend policy
' consistent with sound financial principles, all with the intention of
providing the Shareholders with a reasonable rate of return on their
investment while maintaining reasonable rates for customers; and
(ii) declaration of any dividend or distribution of capital in respect of the
Shares.
(1) Indemnification and Insurance for Directors and Officers. Each of the
Corporations shall indemnify and save its directors and officers harmless from
and against any and all liability, damages, costs (including any income tax
payable as a result of receiving such indemnity, reasonable counsel fees and
disbursements), charges and expenses arising out of or related to any act or
omission done or permitted by them to be done in connection with the
' execution of the duties of their office as directors or officers of any one or
' - 21 -
' more of the Corporations or by reason of their being or having been directors
of any one or more of the Corporations, substantially in the form of the
indemnification agreement annexed hereto as Schedule "A" and shall provide
liability insurance for directors and officers in such amounts as the Board may
determine from time to time.
' 3.3 Board Committees
The Board may establish Board Committees from time to time and delegate certain
duties to them as follows:
(a) Executive Committee.
(i) The Executive Committee shall be appointed by the Board from time to
' time and shall be responsible for supervising the management of the day
to day operations of the Corporations;
(ii) For the Initial Term, the Executive Committee shall be comprised of
' 12 directors on the following basis:
' Number of Members Nominee(s) of
4 Ajax
3 Clarington
5 Pickering
(iii) Following the Initial Term, the Executive Committee shall be
reconstituted by the Board and shall be comprised of 6 directors on the
' following basis:
- 22 -
Number of Members Nominee(s) of
' 2 Ajax
1 Clarington
' 3 Pickering
' (iv) The Chair and the Vice-Chair shall be a member of the Executive
Committee.
(v) The members of the Executive Committee shall meet at least once a
' month or as otherwise determined by the Executive Committee.
Members of the Executive Committee may serve for a term not to
' exceed 3 years and shall be replaced by nominees of the Initial
Shareholders on the same basis as they were elected. Members of the
' Executive Committee may serve successive terms on the Executive
Committee.
(b) Finance and Human Resources Committee. The Board shall appoint
members to the Finance and Human Resources Committee. During the Initial
Term, the Finance and Human Resources Committee shall be comprised of 6
' directors and following the Initial Term shall be comprised of 3 directors. The
duties of the Finance and Human Resources Committee will be to oversee the
' work of the Auditors, the preparation of HoldCo budgets (which shall include
details of all management salaries and bonuses, together with such other
information as may reasonably be requested by any director of HoldCo), the
establishment and enforcement of guidelines for employee relations, the
establishment and alteration of any salary, bonus or other compensation paid
or payable to employees, the establishment of guidelines for the approval of
' - 23 -
any collective agreement and to report and make recommendations to the
Board.
' i
(c) Nominating Committee The Board shall appoint members to the
Nominating Committee. During the Initial Term and for any period
thereafter in which the Initial Shareholders remain the Shareholders, the
' Nominating Committee shall be comprised of 3 directors and each of the
3 directors shall be a nominee to the Board of each Initial Shareholder. In the
event that one or more Initial Shareholders amalgamate but the Shareholders
are still the Initial Shareholders only but in their amalgamated form, the
' Nominating Committee shall remain comprised of 3 directors and the directors
shall be nominees of each Shareholder in the same manner as if there was no
' amalgamation. For greater certainty, if Pickering and Ajax amalgamated, the
new entity would be entitled to have two Board nominees appointed to the
' Nominating Committee. The purpose of the Nominating Committee shall be
to make recommendations to the Shareholders concerning candidates for the
' Board and the compensation for members of the Board, the Chair, Vice-Chair
and Board Committee members, and chairpersons.
(d) General Provisions Relating to Board Committees. The quorum for
' meetings of Board Committees shall be a majority of the members from time
to time of each Board Committee. Decisions of all Board Committees shall be
' made by a majority of the members of the respective Board Committee.
Except as otherwise provided in this Section 3.3 and subject to the supervision
of the Board, each Board Committee shall establish its own rules of procedure
for operating in an efficient and expeditious manner. A Transferee Shareholder
shall not acquire the rights of any Initial Shareholder to designate nominees to
any Board Committee except with the agreement of all of the other
- 24 -
' Shareholders. An Amalgamated Shareholder shall retain its rights to designate
nominees to the Board Committees, as applicable in the same manner as if it
had not amalgamated.
3.4 Shareholders'Meetings
A quorum for a meeting of Shareholders shall be at least two individuals representing,
by proxy or as otherwise permitted by the Act, both (i) a majority in number of the
Shareholders; and (ii) not less than 51% of the Shares then issued and outstanding.
In the event that the Initial Shareholders amalgamate such that only two Shareholders
in number remain, the quorum for a meeting of shareholders shall be all the Shareholders
' represented by proxy or as otherwise permitted by the Act.
' The chair of any meeting of the Shareholders of HoldCo shall be the Chair or, in the
absence of the Chair, the Vice-Chair, or in the absence of the Vice-Chair, the President of
HoldCo or, in the absence of the President, such individual as the Shareholders represented
at such meeting shall determine.
3.5 Regular Shareholders Meetings
Unless the Shareholders otherwise determine, the Shareholders shall meet at least
annually at the registered office of HoldCo or at such other times or places as the Shareholders
may determine.
' - 25 -
3.6 Decisions of the Shareholders
' All decisions or resolutions of the Shareholders shall require, and shall be deemed to
be effective upon, the approval of at least two thirds of the votes cast at a meeting of
' Shareholders. A Shareholders' resolution in writing signed by all of the Shareholders entitled
to vote on that resolution at a meeting of the Shareholders is as valid as if it had been passed
' at a meeting of the Shareholders.
3.7 Shareholder Representative
' Each Initial Shareholder shall designate the Mayor as the legal representative of that
Initial Shareholder (the "Shareholder Representative") for purposes of providing any consent
' or approval required by this Agreement or by the Act. In the event that the Mayor is unable
or unwilling to act as the Shareholder Representative, the Chief Administrative Officer (or the
' individual who performs the equivalent duties) shall be the Shareholder Representative for
purposes of this Agreement and of the Act unless the Initial Shareholder determines otherwise.
' An Initial Shareholder shall designate its Shareholder Representative (by proxy duly completed
in accordance with the Act) as its representative to attend and vote at any meeting of
Shareholders.
' 3.8 Officers
' (a) The officers of HoldCo shall include a President and such other officers as the
Board may determine from time to time. The Board shall appoint the officers
of HoldCo from time to time.
1 (b) For greater certainty the parties recognize that in carrying on the ordinary
' course of Business, it is not practicable for the Board to be involved in the day
- 26 -
' to day affairs of HoldCo. The Board will delegate responsibilities to the
officers, who will report to the Board and the Board Committees from time
' to time as required.
' 3.9 Matters Requiring Shareholder Approval
' The Shareholders agree that, without Shareholder approval given in accordance with
Section 3.6, HoldCo shall not:
(a) amend its articles (within the meaning of the Act) or enact, revoke, or amend
any by-law of HoldCo;
(b) issue, or enter into any agreement to issue, any shares of HoldCo of any class,
or any securities convertible into any shares of any class, or grant any option
' or other right to purchase any such shares or securities convertible into such
shares;
(C) redeem, purchase for cancellation or otherwise retire any of its outstanding
Shares;
' (d) sell or otherwise dispose of, by conveyance, transfer, lease, sale and leaseback,
merger or other reorganization or transaction, mortgage, pledge, charge or
' otherwise grant a security interest in, all or substantially all of the assets or
undertaking of HoldCo;
(e) enter into any contracts, commitments or transactions that would increase the
Debt/Equity Ratio to greater than 60% Debt;
- 27 -
' (f) grant security for or guarantee, or otherwise become liable for any debt,
liability or obligation of any Person other than a Subsidiary;
' take or institute the proceedings for an winding u reorganization or
(g) P g Y g P� g
dissolution;
' (h) enter into any amalgamation, arrangement or consolidation; and
(i) apply to continue as a corporation under the laws of another jurisdiction.
3.10 Unanimous Shareholder Agreement
' Each of the Shareholders acknowledges that this Agreement is intended to operate
as a unanimous shareholder agreement with respect to HoldCo within the meaning of the Act.
' Pursuant to Section 108(2) of the Act, the discretion and powers of the Board to manage or
supervise the management of the business and affairs of HoldCo are hereby restricted to the
' extent of the provisions of Section 3.9 of this Agreement.
3.11 Agreement Binds HoldCo and Subsidiaries
' HoldCo and the Subsidiaries, by their execution of or acknowledgement to be bound
by this Agreement, acknowledges that they have actual notice of the terms of this Agreement,
consent to this Agreement and by this Agreement covenant with each of the Shareholders that
they will at all times during the term of this Agreement:
(a) give or cause to be given such notices, execute or cause to be executed such
deeds, transfers and documents as may from time to time be necessary or
' conducive to the carrying out of the terms and intent of this Agreement;
' - 28 -
' (b) do or cause to be done all such acts, matters and things as may from time to
time be necessary or conducive to the carrying out of the terms and intent of
' this Agreement; and
' (c) take no action that would constitute a contravention of any of the terms and
provisions of this Agreement.
3.12 Auditors
The Auditors shall be appointed by the Shareholders from time to time.
3.13 Banking
HoldCo's bankers shall be such financial institution as the Board shall from time to
' time determine. All resolutions respecting banking authority, the opening of bank accounts
and the drawing on such accounts shall require the consent of the Board before becoming
' effective.
' 3.14 Financial Statements
' (a) HoldCo shall cause to be prepared and delivered as soon as reasonably
practicable and in no event later than 120 days after the end of each fiscal year
' of HoldCo annual audited financial statements for such fiscal year prepared in
accordance with generally accepted accounting principles and accompanied by
a report of the Auditors.
(b) HoldCo shall cause to be prepared and delivered as soon as reasonably
' practicable and in no event later than 45 days after the end of the sixth month
' - 29 -
of HoldCo's fiscal year an unaudited balance sheet and a statement of profit
and loss for such preceding six months prepared in accordance with generally
accepted accounting principles without adjusting entries or review by
accountants and signed by an authorized officer of HoldCo, and such other
information as may be reasonably requested by the Shareholders.
' ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS
4.1 Representations and Warranties
Each of the Shareholders represents and warrants as follows and acknowledges that
' each of the other parties hereto are relying on such representations and warranties in
connection with the entering into of this Agreement:
(a) it is the registered and beneficial owner of the Shares stated to be owned by
' such Shareholder in the recitals hereto, free and clear of all Encumbrances and
there are no outstanding agreements, options, warrants or other rights capable
' of becoming an agreement, option or warrant to purchase such Shares;
' (b) it has the power and capacity to own its assets and to enter into and perform
its obligations hereunder and has taken all necessary action to authorize the
execution and delivery of this Agreement;
' (c) this Agreement and the transactions contemplated herein have been duly
authorized by it and constitutes a valid and binding obligation of it enforceable
against it in accordance with its terms subject to the laws of bankruptcy and
' the availability of equitable remedies; and
- 30 -
' (d) the execution, delivery and performance of this Agreement does not and will
not contravene the provisions of its articles, by-laws, constating documents or
' the provisions of any agreement or other instrument to which it is a party or
may be bound.
4.2 Covenants
Each of the Shareholders covenants and agrees with each other party hereto that all
of the foregoing representations and warranties pertaining to it set forth in Article 4.1 will
continue to be true and correct during the continuance of this Agreement.
ARTICLE V
' TRANSFER OF SHARES
' 5.1 General Restriction on Transfer
No right, title, benefit or interest in any Shares may be sold, transferred, assigned,
made subject to any Encumbrance or otherwise disposed of by any Shareholder for the two
(2) year period from the date of this Agreement ending on the second anniversary of the
incorporation of HoldCo (the "Hold Period") except with the prior written approval of a
majority of the Shareholders in number holding not less than 662/x% of the Shares or in the
event that the Initial Shareholders amalgamate such that only two Shareholders in number
remain, with the prior written consent of all Shareholders.
Following the Hold Period, save and except for transfers made pursuant to and in
accordance with Sections 5.3 and 5.4 of this Agreement, no Shares, nor the whole or any item
or part of any right, title, benefit or interest therein or thereto, may be sold, transferred,
- 31 -
' assigned, made subject to any Encumbrance or otherwise disposed. No Shareholder shall be
entitled to create or grant an Encumbrance on its Shares.
5.2 Legend on Shares
All share certificates representing Shares of HoldCo shall bear on their face the
following notation:
"The shares represented by this certificate are subject to the
provisions of the Shareholders' Agreement made as of July 1,
1999 among all of the shareholders of the Corporation as at
that date, which agreement contains restrictions on the right to
sell, transfer, pledge, mortgage, assign, vote or otherwise deal
with or encumber such shares. Notice of such restrictions and
rthe other provisions of such agreement is hereby given. A
copy of such agreement is available for inspection from the
Secretary of the Corporation on request."
5.3 Rights of First Refusal
If any Shareholder (in this Article V called the "Selling Shareholder"), after the Hold
Period, wishes to sell all, but not less than all, of its Shares (subject to Section 5.5) to a Person
i with whom it deals at Arm's Length, the other Shareholders and HoldCo (in this Article V
called the Other Holders ) shall have the prior right to purchase such Shares in accordance
with the following provisions:
(a) Notice of Offer. A Selling Shareholder shall give to the Secretary of HoldCo
and to each Other Holder notice in writing of its desired intention to sell all,
but not less than all, of its Shares (in this Article V called the "Offered
Shares"). The notice (in this Article called the Selling Notice ) shall have
annexed thereto a true copy of the offer, agreement or similar document (the
- 32 -
"Offer") containing the terms and conditions pursuant to which the Selling
Shareholder wishes to sell the Offered Shares to the prospective purchaser (in
this Article V called the "Prospective Purchaser"), who shall be identified, and
the price and terms of payment which the Selling Shareholder is willing to
accept for the Offered Shares which shall be the same as set forth in the Offer;
' (b) Offer Open During Notice Period. The Secretary of HoldCo shall
thereupon be deemed to be the agent of the Selling Shareholder for the
purposes of offering the Offered Shares to the Other Holders on the terms of
payment and for the price contained in the Selling Notice and the offer by the
Secretary shall be irrevocable and remain open for acceptance, as hereinafter
provided, for a period of 60 days (in this Article V called the "Notice Period")
after receipt of the Selling Notice by the Secretary;
(c) Acceptance of Offer. Within 15 Business Days after receipt of the Selling
Notice by the Secretary, the Secretary shall offer the Offered Shares for sale
' to the Other Holders as nearly may be in proportion to the number of Shares
held by each such Other Holder respectively as at the date of such offer. The
' offer by the Secretary shall state that any Other Holder desiring to purchase
a number of Offered Shares less than or in excess of its proportion shall
rindicate in its notice to the Secretary (in this Article V called the "Purchase
Notice") stating the number of Offered Shares it desires to purchase. If, within
the Notice Period, a Purchase Notice has not been received by the Secretary
of HoldCo from an Other Holder, such Other Holder shall be deemed to have
declined to purchase the Offered Shares being offered;
(d) Excess Shares. If the Other Holders do not claim their respective proportions,
any unclaimed Offered Shares shall be used to satisfy the claims of such Other
- 33 -
Holders for Offered Shares in excess of their proportions. If the claims in
excess are more than sufficient to exhaust such unclaimed Offered Shares, the
unclaimed Offered Shares shall be divided pro rata among such Other Holders
desiring Offered Shares in excess of their proportion, in proportion to the
number of Shares held by them respectively as at the date of such offer,
provided that an unclaimed Offered Shares after such pro rata division shall
P Y P
' be divided pro rata among Other Holders in proportion to their claims in
excess of their respective proportions determined as aforesaid. Notwithstanding
anything to the contrary, no Other Holder shall be bound to purchase any
Offered Shares in excess of the amount indicated in its Purchase Notice;
(e) No Fractions. If the Offered Shares are not capable, without division into
Ifractions of Shares, of being offered to or being divided among the Other
Holders in the proportions above mentioned, the same shall be offered to or
divided among the Other Holders as nearly as may be in the proportions
hereinbefore mentioned and any balance shall be offered to or divided among
' the Other Holders or some of them in such equitable manner as may be
determined by the Board;
(f) Sale. If all, but not less than all, of the Offered Shares are accepted by the
Other Holders pursuant to the provisions of this Section 5.3, the Offered
Shares shall be sold to the Other Holders for the price and for the terms
contained in the Selling Notice;
i (g) Deemed Refusal. If Purchase Notices have not been received by the Secretary
in respect of all of the Offered Shares within the Notice Period, the Other
Holders, and each of them, shall be deemed to have declined to purchase the
1 Offered Shares and, subject to the provisions of paragraph (h), the Selling
- 34 -
Shareholder may within 60 days after the expiration of the Notice Period sell
all, but not less than all, of the Offered Shares to the Prospective Purchaser at
the price and upon terms of payment which are not more favourable than
those specified in the Selling Notice; and
Prospective Purchaser Bound. The Selling(h) Pros p g Sh areholder shall sell the Offered
' Shares to a Person who is not a party hereto only if such other Person
simultaneously with any such sale executes and delivers to each of the other
parties hereto a counterpart of this Agreement in which case such Person shall
have the rights of a Transferee Shareholder and shall be subject to the same
obligations as a party to this Agreement as if it were an original signatory in
place of the Selling Shareholder or its predecessor in title originally party to
this Agreement, as applicable. Without limiting the generality of the
foregoing, a Transferee Shareholder shall agree to be bound by the provisions
of Section 7.1.
(i) HoldCo as Purchaser. The Other Holders, except HoldCo, may cause
HoldCo to act as an Other Holder.
5.4 Piggyback Right
In the event one or more Selling Shareholders receives an Offer and, in accordance
twith the procedures set forth in Section 5.3, the Other Holders decline to purchase the
Offered Shares from the Selling Shareholder(s), and the Shares which the Selling Shareholder(s)
wish to sell under the Offer(s) would result in a Person owning more than 49% of all of the
issued and outstanding Shares, then each Other Holder except HoldCo shall have the right to
require that all, but not less than all, of its Shares be sold to the Prospective Purchaser, on the
' same terms and conditions as those set out in the Offer; provided that, if the Prospective
w
- 35 -
Purchaser will not purchase the aggregate amount of Shares which the Selling Shareholder(s)
and the Other Holders except HoldCo requested to be sold pursuant to the immediately
preceding sentence, the number of Shares which the Selling Shareholder(s) and the Other
Holders except HoldCo shall be permitted to sell to the Prospective Purchaser shall be
proportionately reduced so that each may sell the same percentage of its Shares. The Other
Holders except HoldCo may only exercise their right under this Section 5.4 by written notice
' given to the Secretary of HoldCo within the Notice Period.
1 5.5 Amalgamated Shareholder
1 An Amalgamated Shareholder is entitled to sell its Shares in accordance with this
Agreement in the same manner as if the Amalgamated Shareholder had not been amalgamated
and, may for the purposes of Section 5.3 offer to sell less than all of its Shares (only if such
Amalgamated Shareholder sells its Shares in the original blocks held by it prior to
amalgamation) provided that each offer is otherwise made in compliance with Section 5.3.
ARTICLE VI
CLOSING OF PURCHASE TRANSACTION
6.1 Time and Place of Closing
The closing of any purchase and sale of Shares contemplated by Sections 5.3 or 5.4
of this Agreement shall unless otherwise agreed upon by the parties to such transaction, take
place at the registered office of HoldCo on the date specified in the Selling Notice.
1
1
1
r
- 36 -
6.2 Documents to be delivered by the Vendor
On or before the closing of a purchase and sale of Shares contemplated hereunder,
the vendor shall deliver to the purchaser the following (each in form and substance satisfactory
to the purchaser):
(a) a share certificate or certificates representing the Shares being sold, duly
endorsed in blank for transfer or newly issued in the name of the purchaser;
(b) a certificate of a senior officer certifying that any representations and
warranties made by such vendor in this Agreement are true and correct as of
the Closing Date;
(c) the written resignation of such vendor's nominee(s) to the Board and a release
by such nominee(s) of all claims against HoldCo with respect to any matter or
thing arising as a result of being a director;
(d) the written release of the vendor of all claims against HoldCo and the
' Subsidiaries, any of the other Shareholders with respect to any matter or thing
arising up to and including the Closing Date as a result of being a Shareholder;
and
' (e) such other documents as may be reasonably required by any party to such
purchase and sale to properly complete the purchase and sale of the Shares.
- 37 -
6.3 Documents to be delivered by the Purchaser
On or before the closing of a purchase and sale of Shares contemplated hereunder,
the purchaser shall deliver to the vendor the following:
a a certified cheque or bank draft in an amount equal to the purchase rice for
( ) q q P P
' the Shares being purchased;
(b) in the event Shares are sold to a Person who is not a Shareholder pursuant to
Sections 5.3 or 5.4 hereof, a duly executed counterpart of this Agreement or
other agreement pursuant to which such Person agrees to be bound by the
provisions hereof; and
(c) such other documents as may be reasonably required by any party to such
purchase and sale to properly complete the purchase and sale of the Shares.
6.4 Failure to Complete Sale
rIn the event the vendor fails to complete the subject purchase and sale transaction,
the purchaser shall have the right to deposit the purchase price for the subject Shares for the
account of the vendor in an interest-bearing account at a branch of HoldCo's bankers.
Thereafter, notwithstanding that the documents required pursuant to Section 6.2 have not been
delivered by the vendor, the purchase and sale of the subject Shares shall be deemed to be fully
completed and all right, title, benefit and interest, both at law and in equity, in and to the
subject Shares shall be deemed to have been transferred and assigned to and become vested in
the purchaser and all right, title, benefit and interest, both at law and in equity, of the vendor
or any other Person having an interest in and to the subject Shares shall cease and the records
of HoldCo shall be amended accordingly.
1
- 38 -
ARTICLE VII
NON-COMPETITION AND CONFIDENTIALITY
7.1 Non-Competition
(a) Each Shareholder covenants and agrees that it shall not, except through
HoldCo or otherwise with the consent of all Shareholders, or as provided in
Section 7.1(b), directly or indirectly, from the date hereof until 2 years after
the party ceases to be a Shareholder, compete within (a) Ontario; (b) South
Central Ontario; or (c) Durham Region with the Business, whether by
1 carrying on or engaging in or being concerned with or interested in or
advising, lending money to, guaranteeing the debts or obligations of or
' permitting the party's name or any part thereof to be used or employed by
any Person engaged in or concerned with or interested in any business within
1 (d) Ontario; (e) South Central Ontario; or (f) Durham Region that is
competitive with the Business, or otherwise.
(b) The parties acknowledge that (i) a municipality other than the Shareholder
which is a shareholder of one or more corporations incorporated under the
Act for the purposes of generating, transmitting, distributing or retailing
electricity, and (ii) a person which holds a portfolio investment of less than 5%
of the shares of a corporation whose shares are publicly traded which competes
iwith the Business is permitted to become a Shareholder in accordance with the
provisions of this Agreement.
i
1
- 39 -
' 7.2 Confidentiality
' Each Shareholder shall not use or disclose to any Person other than in the ordinary
course of the Business of the Corporations, directly or indirectly, any Confidential
' Information at any time other than to employees, officers or directors of such Shareholder
provided that all such Persons shall treat such information as confidential and not disclose
same to any Third Party nor use the same for any purpose other than for the purposes of the
Corporations or in respect of a Shareholder's investment in the Corporations, provided,
however, that nothing in this Article VII shall preclude a Shareholder from disclosing or using
Confidential Information if:
(a) the Confidential Information is available to the public or in the public domain
at the time of such disclosure or use, without breach of this Agreement;
' (b) disclosure of Confidential Information is required to be made by any law,
regulation, governmental body or authority or by court order;
(c) disclosure of Confidential Information is made in connection with any
' arbitration pursuant to Section 11.4;
' (d) disclosure of Confidential Information is made to a court which is determining
the rights of the parties under this Agreement;
(e) the Confidential Information is properly within the legitimate possession of a
Shareholder prior to its disclosure hereunder and without any obligation of
confidentiality;
' - 40 -
' (f) after disclosure, the Confidential Information is lawfully received by a
Shareholder from another Person who is lawfully in possession of such
' information and such other Person is not restricted from disclosing the
information to the Shareholder;
(g) the disclosure of Confidential Information is necessary to complete a transfer
' of Shares in accordance with this Agreement;
(h) the Confidential Information is independently developed by a Shareholder
through Persons who have not had access to, or knowledge of, the
Confidential Information, other than as permitted in (a) through (g) above or
(i) below; or
(i) the Confidential Information is approved by the Corporations for disclosure
' prior to its actual disclosure.
' Each Shareholder acknowledges and agrees that the obligations under this Section 7.2 shall
remain in effect for the period of two (2) years after it ceases to be a Shareholder.
' Notwithstanding the foregoing restrictions, the nominees of the Shareholders on the Board
shall be entitled to discuss the affairs of the Corporations with the officers, directors,
' employees and representatives of such Shareholder.
' 7.3 Injunctive Relief
Each Shareholder understands and agrees that HoldCo, and consequently the other
parties, will suffer irreparable harm in the event that the Shareholder breaches any of the
obligations set out in this Article VII and that monetary damages shall be inadequate to
compensate for the breach. Accordingly, each Shareholder agrees that, in the event of a breach
' - 41 -
' or threatened breach by it of any of the provisions of this Article VII, HoldCo and the other
parties hereto, in addition to and not in limitation of any other rights, remedies or damages
' available to them at law or in equity, shall be entitled to an interim injunction, interlocutory
injunction and permanent injunction in order to prevent or to restrain any such breach by the
' Shareholder.
' 7.4 Accounting for Profits
' Each Shareholder agrees that in the event of a violation of any of its covenants or
agreements under this Article VII, HoldCo shall be entitled to an accounting and repayment
of all profits, compensation, royalties, commissions, remunerations or benefits which the
Shareholder directly or indirectly shall have realized or may realize relating to, growing out
' of, or in connection with any such violation(s); this remedy shall be in addition to and not
in limitation of any injunctive relief or other rights or remedies to which HoldCo and the
other parties are or may be entitled at law or in equity or otherwise under this Article VII.
' 7.5 Reasonableness of Restrictions
Each Shareholder acknowledges that it has given careful consideration to the
provisions of Sections 7.1 to 7.4 above and, having done so, agrees that the restrictions set
' forth in those sections are fair and reasonable and are reasonably required for the protection
of the other Shareholders' investments in HoldCo and for the protection of the interests of
HoldCo and its Business, and that it is being reasonably compensated for the imposition of
such restrictions.
r _ 42 _
' ARTICLE VIII
SALE OF SURPLUS ASSETS
8.1 f First Refusal
Right o
g f
In the event that HoldCo or any Subsidia ry intends to sell any Surplus Assets,ets, the
' municipal Shareholder in whose legal boundaries the Surplus Assets are located shall have a
first right of refusal to purchase the Surplus Assets at their Fair Market Value. Such municipal
Shareholder shall be entitled to receive written notice of any proposed disposition 90 days
from the date of such notice to exercise its right to purchase, failing which the Surplus Assets
may be sold by HoldCo or any Subsidiary as the case may be.
ARTICLE IX
BOOKS, RECORDS AND RIGHT TO INFORMATION
9.1 Books and Records
HoldCo shall at all times maintain at its registered office proper books of account,
' which shall contain accurate and complete records of all transactions, receipts, expenses, assets
and liabilities of HoldCo.
9.2 Right to Information
The parties covenant and agree that each Shareholder of HoldCo shall have rights of
' inspection as set out in Sections 140, 141, 144 and 145 of the Act.
- 43 -
ARTICLE X
TERM
' 10.1 Term and Automatic Renewal
This Agreement shall come into force and effect as at and from the date of this
' Agreement and shall continue in force for five (5) years at which time this Agreement shall
be automatically renewed for further successive terms of five (5) years each.
ARTICLE XI
GENERAL
11.1 Notices
All notices, requests, demands, consents or other communications required to be
given or made or provided for in this Agreement shall be in writing and shall be deemed to
' have been given if delivered, if sent by registered mail or if sent by telecopier or other means
of electronic transmission to:
Ajax at:
' Corporation of the Town of Ajax
65 Harwood Avenue South
Ajax, ON L1S 2H9
Fax Number: 905-683-1061
' Attention: Mayor
- 44 -
Clarington to:
Corporation of the Municipality of Clarington
40 Temperance Street
Bowmanville, ON L1C 3A6
Fax Number: 905-623-5717
Attention: Mayor
' Pickering to:
Corporation of the Town of Pickering
1 The Esplanade
Pickering, ON L 1 V 3P4
Fax Number: 905-420-9695
Attention: Mayor
HoldCo to:
1920 Bayly Street
Pickering, ON L1W 3R6
' Fax Number: 905-427-6827
Attention: President
or at such other addresses as the party to whom such notice is to be given may have
' designated by notice so given to the other parties. Any notice so mailed shall be deemed to
have been given on the fifth Business Day following the date of the mailing of the same or if
delivered, on the date of delivery and any notice given by telecopier or other means of
electronic communication shall be deemed to have been received on the Business Day
' following the date on which such transmission is completed and the appropriate confirmation
received.
- 45 -
11.2 Assignment and Binding Effect
This Agreement is not assignable by any party except insofar as its benefit and burden
pass with the Shares transferred in accordance with its provisions. This Agreement shall be
binding on and enure to the benefit of the parties hereto and their respective successors and
permitted assigns. Reference in this Agreement to any party shall be deemed to include
reference to such party and its respective successors and assigns as permitted hereunder.
11.3 Amalgamation of Municipal Shareholders
Two or more Initial Shareholders that amalgamate ("Amalgamated Shareholder") shall
retain the same rights granted under this Agreement as if the respective Initial Shareholders
had not amalgamated except as otherwise provided herein.
11.4 Arbitration
(a) Selection of Single Arbitrator. The Shareholders agree that any controversy,
dispute or claim between them or any of them arising out of or relating to this
Agreement or the performance, enforcement, breach, termination or validity
of it, including the determination of the scope of the Agreement to arbitrate,
' shall be determined by arbitration before a single arbitrator (the "Arbitrator")
agreed to by all of the Shareholders. If the Shareholders are unable to agree
' on the Arbitrator, then, an application may be made under the Arbitration Act
to a judge for the appointment.
(b) Referring Dispute. Any Shareholder may refer a dispute to the Arbitrator by
providing notice in writing to the Arbitrator and to all of the shareholders
' - 46 -
hereto expressing its intention to refer the dispute to arbitration and briefly
describing the nature of the dispute.
c Attempted Settlement. Upon service of the notice referred to above the "
( ) p P
Shareholders who are party to the dispute (the "Disputing Shareholders") will
attempt to negotiate a settlement of the dispute amongst themselves. In the
event that the parties are unable to reach settlement by themselves within 10
days of the service of the notice referred to above, the Shareholders will
1 proceed with the arbitration and any Disputing Shareholders shall be free to
apply to the Arbitrator for directions as to the scheduling of the arbitration
itself and the pre-hearing procedures.
(d) Decision Final and Binding. The Shareholders agree that the award of the
Arbitrator shall be final and binding without any right of appeal and shall be
' the sole and exclusive remedy between them regarding any claims,
counterclaims, issues or disputes referred to the Arbitrator.
(e) Place of Arbitration. The arbitration shall take place in Toronto, and shall
be governed by the laws of the Province of Ontario.
(f) Powers of Arbitrator. The Shareholders agree that the Arbitrator shall have
the powers and jurisdiction of an arbitrator pursuant to the Arbitration Act
and such power shall include the power to award interim and interlocutory
injunctions and other equitable relief.
r
(g) Costs. The Arbitrator shall have the power to award the costs of the
' Arbitrator's services and related costs against either party, however, each party
will bear the costs of their own counsel and witness fees.
- 47 -
(h) Written Notices. All notices by one Shareholder to the other in connection
with the arbitration shall be in writing and shall be deemed to have been duly
given or made if delivered or sent by facsimile transmission to the addresses
provided in this Agreement.
11.5 Further Assurances
r
Each party hereto shall do such acts and shall execute such further documents,
conveyances, deeds, assignments, transfers and the like, and will cause the doing of such acts
and will cause the execution of such further documents as are within its power as any other
party may in writing at any time and from time to time reasonably request be done and or
executed, in order to give full effect to the provisions of this Agreement.
11.6 Severability
If any provision of this Agreement is determined to be invalid or unenforceable by
' a court of competent jurisdiction from which no further appeal lies or is taken, that provision
shall be deemed to be severed herefrom, and the remaining provisions of this Agreement shall
not be affected thereby and shall remain valid and enforceable.
11.7 Amendment, Modification and Waiver
This Agreement may not be modified, amended, terminated or supplemented except
as agreed, in writing, by Shareholders both comprising a majority in number of the
Shareholders and holding not less than 51% of the Shares then issued and outstanding. In the
event that the Initial Shareholders amalgamate such that only two Shareholders remain, this
' Agreement may not be modified, amended, terminated or supplemented except as agreed, in
writing, by all the Shareholders. Any waiver of, or consent to depart from, the requirements
- 48 -
of any provision of this Agreement shall be effective only if it is in writing and signed by the
parry giving it, and only in the specific instance and for the specific purpose for which it has
been given. No failure on the part of any party to exercise, and no delay in exercising, any
right under this Agreement shall operate as a waiver of such right. No single or partial
exercise of any such right shall preclude any other or further exercise of such right or the
exercise of any other right.
11.8 Time of Essence
Time is of the essence of this Agreement.
11.9 Counterparts
This Agreement may be executed in any number of counterparts, each of which shall
be deemed to be an original and all of which taken together shall constitute one agreement.
' i 1.to No Partnership
Nothing in this Agreement shall be deemed in any way or for any purpose to
constitute any party a partner of or a joint venture with any other party.
11.11 Proceedings
The covenants, agreements and obligations herein expressed to be observed and
performed by the parties hereto may be enforced by any of the parties hereto pursuant to
Section 11.4 without joining the remaining parties as parties in any proceedings.
' - 49 -
IN WITNESS WHEREOF the parties hereto have duly executed this Agreement as
of the date first above written.
THE CO RA IO OF THE TOWN OF
AJAX
By: c/s
' Steve Paris , Mayor
By: c/s
Marty de ond, C erk
THE MUNICIPALITY OF CLARINGTON
i
i By:��� c/s
Diane Ha Mavor
i arrie, Clerk
THE CORPORATION OF THE TOWN OF
PICKERING
By: c/s
Wayne A rs, Mayor
' By: ! c/s
Bruce Taylor, Clerk
1362708 ONTARIO INC.
By: 2^ c/s
Name: J . w k eR S M A
Authorized Ognin Officer
SCHEDULE "A"
DIRECTOR'S INDEMNITY
THIS AGREEMENT made as of the .
BETWEEN:
1 .(hereinafter called the "Director"),
OF THE FIRST PART,
-
and-
(hereinafter called the "Corporation"),
OF THE SECOND PART.
Recitals
' WHEREAS pursuant to By-law No. 1 of the Corporation, the Corporation is
required to indemnify a director or officer, a former director or officer, or a person who acts
or acted at the request of the Corporation as a director or officer of a body corporate of which
the Corporation is or was a shareholder or creditor, and his heirs and legal representatives,
against all costs, charges and expenses, including an amount paid to settle an action or satisfy
a judgment, reasonably incurred by him in respect of any civil, criminal or administrative
action or proceeding to which he is made a party by reason of having been a director or
' officer of the Corporation or such body corporate, if (a) he acted honestly and in good faith
with a view to the best interests of the Corporation, and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, he had reasonable
grounds for believing that his conduct was lawful;
AND WHEREAS pursuant to By-Law No. 1 of the Corporation, the
Corporation is authorized to execute an agreement evidencing its indemnity of the Director
to the full extent permitted by law;
NOW THEREFORE THIS AGREEMENT WITNESSETH that in
consideration of the sum of $1.00 paid by the Director to the Corporation (the receipt and
- 2 -
adequacy of which is hereby acknowledged) and for other good and valuable consideration,
it is agreed between the parties hereto as follows:
Agreement to Indemnify
1. Except in respect of an action by or on behalf of the Corporation to procure
a judgment in its favour, the Corporation shall indemnify and save harmless the Director, her
heirs and legal representatives, against all costs, charges and expenses, including an amount paid
to settle an action or to satisfy a judgment reasonably incurred by her in respect of any civil,
criminal or administrative action or proceeding to which she is made a party by reason of
being or having been a director of the Corporation or a director of a body corporate of which
the Corporation is a shareholder or creditor, provided she is or was so acting as a director of
such body corporate at the request of the Corporation, if (a) the Director acted honestly and
in good faith with a view to the best interests of the Corporation, and (b) in the case of a
criminal or administrative action or proceeding that is enforced by a monetary penalty, the
Director had reasonable grounds for believing that her conduct was lawful.
No Presumption
2. For the ur oses of section 1, the termination of an civil criminal or
P P Y
administrative action or proceeding by judgment, order, settlement, conviction or similar or
other result shall not, of itself, create a presumption either that the Director did not act
honestly and in good faith with a view to the best interests of the Corporation or that, in the
' case of a criminal or administrative action or proceeding that is enforced by a monetary
penalty, the Director did not have reasonable grounds for believing that her conduct was
lawful.
Application for Court Approval of Indemnity
' 3. In respect of an action by or on behalf of the Corporation or a body corporate
of which the Corporation is or was a shareholder or creditor to procure judgment in its favour
to which the Director is made a party by reason of being or having been a director of the
' Corporation or a director of the body corporate at the Corporation's request, the Corporation
shall make application for approval of the Ontario Court of Justice to indemnify the Director,
her heirs and legal representatives, against all costs, charges and expenses reasonably incurred
' by her in connection with such action if (a) the Director acted honestly and in good faith with
a view to the best interests of the Corporation, and (b) in the case of a criminal or
administrative action or proceeding that is enforced by a monetary penalty, the Director had
reasonable grounds for believing that her conduct was lawful.
- 3 -
Indemnity for Costs, Charges and Expenses
4. Notwithstanding anything in this agreement the Corporation shall indemnify
the Director in respect of all costs, charges and expenses reasonably incurred by her in
connection with the defence of any civil, criminal or administrative action or proceeding to
which she is made a party by reason of being or having been a director of the Corporation
or a director of a body corporate of which the Corporation is or was a shareholder or
creditor, provided she is or was so acting as a director of such body corporate at the request
of the Corporation, if (a) the Director was substantially successful on the merits in her defence
' of the action or proceeding, (b) the Director acted honestly and in good faith with a view to
the best interests of the Corporation, and (c) in the case of a criminal or administrative action
or proceeding that is enforced by a monetary penalty, the Director had reasonable grounds
for believing that her conduct was lawful.
Expenses for Defence of Legal Action
' 5. Subject as hereinafter provided, the Corporation will a all expenses covered
J P P PY P
by this indemnity agreement and incurred by the Director, her heirs and legal representatives,
in defending any civil, criminal or administrative action or proceeding to which the Director
or her heirs and legal representatives are made a party by reason of the Director being or
having been a director of the Corporation or a director of a body corporate of which the
Corporation is a shareholder or creditor, if she is or was so acting as a director of such body
corporate at the request of the Corporation, in advance of the final disposition of such action
or proceeding. In respect of an action by or on behalf of the Corporation to procure
judgment in its favour and in respect of which the Corporation is obligated by section 3
hereof to make application for approval of the Ontario Court of Justice to indemnify the
Director, or her heirs and legal representatives, the Corporation shall pay all such expenses in
advance upon the final disposition of such action or proceeding only upon receipt of an
undertaking satisfactory to the Corporation by or on behalf of the Director, or her heirs and
' legal representatives, to repay such amount if the Court determines that the Director, or her
heirs and legal representatives, is not entitled to be indemnified.
' Director's Liability Insurance
6. The Corporation represents and warrants to the Director that the Corporation
' has purchased liability insurance for the directors of the Corporation, with the aggregate
insurance coverage under the policy of at least $5,000,000 per policy year and no deductible
payable by any director making a claim under the policy. The Corporation agrees to use its
best efforts to maintain appropriate liability insurance for the directors in an amount at least
as favourable to the directors as the existing policy and further agrees to advise each director
in advance if the Corporation knows that any liability policy is being terminated or if a
' liability policy is expiring without an equivalent policy replacing it.
- 4 -
Non-Exclusion of Other Rights
7. This agreement shall not operate to abridge or exclude any other rights, in law
' or in equity, to which the Director may be entitled by operation of law or under any statute,
by-law of the Corporation, agreement, vote of shareholders of the Corporation, vote of
disinterested directors of the Corporation or otherwise.
Governing Law and Attornment
8. This agreement shall be deemed to have been made in and shall be construed
in accordance with the laws of the Province of Ontario and the federal laws of Canada
applicable therein and the parties hereby agree that any claims, disputes or questions arising
out of or in relation to this agreement may be submitted to the jurisdiction of the courts of
the Province of Ontario. Each of the parties hereto irrevocably attorns to the jurisdiction of
the courts of the Province of Ontario in respect of the interpretation and enforcement of this
agreement.
Enurement
' 9. This agreement and the benefit and obligation of all covenants herein contained
g g
shall enure to the benefit of and be binding upon the heirs, executors, administrators, legal
personal representatives and successors and assigns of each of the parties hereto.
IN WITNESS WHEREOF this agreement has been executed by the parties
1 hereto.
' SIGNED, SEALED & DELIVERED )
in the presence of )
)
G:\RJM\PICKERIN\DOCUMENT\SHARHFIN.AGR