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HomeMy WebLinkAboutCLD-030-14 Clafingt011 Jerk's Report If this information is required in an alternate accessible format, please contact the Municipal Clerk at 905-623-3379 ext. 2102. Report To: General Purpose and Administration Committee Date of Meeting: December 8, 2014 Report Number: CLD-030-14 Resolution Number: Fa File Number: By-law Number: Report Subject: Veridian Appointments Recommendations: 1. That Report CLD-030-14 be received; 2. That be nominated as Clarington's non-elected member of the Veridian Corporation Board of Directors for a term beginning January 1, 2015 and ending 3. That be recommended to Veridian Corporation as Clarington's non-elected member of the Veridian Connections Inc. Board of Directors for a term beginning January 1, 2015 and ending ; OPTION A: 4. That Staff be directed to advise Veridian Corporation that the Municipality of Clarington does not approve the proposed composition change and will not be signing the consent and waiver agreement to implement the "additional non- elected director proposal" in the event that Clarington's non-elected director is selected as Chair or Vice-Chair; 5. That be recommended as Clarington's alternate elected appointee to the Veridian Connection Inc. Board of Directors in the event that a Clarington non-elected Director is selected as either the Chair or Vice-Chair; and OPTION B: 4. That the Mayor and Clerk, be authorized to execute the consent and waiver agreement for this one term to implement the "additional non-elected director proposal" in the event that Clarington's non-elected director is selected as Chair or Vice-Chair; 5. That be recommended as Clarington's alternate non-elected individual to the Veridian Connections Inc. Board of Directors in the event that a Clarington non-elected Director is selected as either the Chair or Vice-Chair; and 6. That all interested parties listed in Report CLD-030-14 be advised of Council's decision. Municipality of Clarington Report CLD-030-14 Page 2 (Report Overview This report is intended to provide background, regarding the Veridian appointments, to assist in appointing members to the Veridian Corporation and Veridian Connections Inc. Boards of Directors. 1 . Background 1.1. General As a shareholder of Veridian, the Municipality of Clarington must abide by the Amended and Restated Shareholder's Agreement, as follows: • the Mayor (or the Mayor's Designate) is automatically a member of the Veridian Corporation Board and the Veridian Connections Inc. Board, and • Clarington also nominates one non-elected representative to the Veridian Corporation Board. Under the Shareholder's Agreement, the Veridian Corporation Board appoints directors to Veridian Connections Inc. Board. Clarington Council recommends the non-elected individual to be appointed to this Board as Clarington's representative. NOTE: An alternate director will also be required in the event that a non-elected Director is selected as Chair or Vice-Chair. On November 4, 2013, Council approved the "Council Nominations to Veridian Corporation and Veridian Connections Inc. Boards" policy (contained within the Addendum to Report CLD-027-13). As a result of changes to the Amended and Restated Shareholder's Agreement in May, 2014, Council directed staff to make all necessary changes to the policy in order to be consistent with the agreement at the June 2, 2014 Council meeting (Attachment 1). Municipality of Clarington Report CLD-030-14 Page 3 2. Policy 2.1. Clarington Policy The following is an excerpt from the "Council nominations to Veridian Corporation and Veridian Connections Inc. Boards" policy, pertaining to the appointment of the new board, following an election: "In the fall of the last year of the term of Council, Veridian will advertise in the local newspapers and on the Shareholders' website seeking candidates to serve on the Board of Directors for Veridian Corporation and Veridian Connections Inc. for a four-year term, as determined by the Shareholders. All applications will be submitted directly to Veridian Corporation." 2.2. Term Regarding the term for the Board of Directors, the Amended and Restated Shareholders' Agreement states that "each shareholder shall determine the term for each elected member and each non-elected Member nominated by it, provided that such term shall not exceed the greater of four (4) years or as may be permitted by the Act." 3. Process 3.1. OPTION A = Process According to the Amended and Restated Shareholders' Agreement For further clarification of the Veridian appointment process, including the new changes to the board composition, please find attached a letter, dated November 12, 2014, from Michael Angemeer, Chief Administrative Officer, Veridian Corporation, addressed to the Clerks (Attachment 2). NOTE: This letter indicates that Veridian is looking for names of the nominees on or before December 17, 2014. In summary, the changes include: • Elected Directors will sit on both the Veridian Corporation Board and the Veridian Connections Inc. Board. • In order to meet the Ontario Energy Board and Veridian Shareholder Agreement requirement for one-third independence, the non-elected Directors on the Veridian Corporation Board will be different than those on the Veridian Connections Inc. Board. Municipality of Clarington Report CLD-030-14 Page 4 • Should Clarington's non-elected Director be selected as the Chair or Vice- Chair, they would in accordance with the Shareholders' Agreement therefore be the Chair or Vice Chair of both Boards. • In order to maintain one-third independence, the Mayor or Mayor's Designate would be prohibited from sitting on Veridian Connections Inc. and therefore an alternate elected member would be required. The Chair and Vice Chair will be selected at the first Veridian Corporation Board meeting in early 2015. The waiver is limited to this instance and does not apply to subsequent appointments. 3.2. OPTION B = New Process Proposed —Additional Non-Elected Director Following distribution of Mr. Angemeer's correspondence to the Clerks, Mr. Angemeer forwarded the attached correspondence, dated November 12, 2014, to the Mayors (Attachment 3). In this correspondence, Mr. Angemeer outlined a proposal that would require agreement, by all Shareholders, to change the Shareholders' Agreement for this instance, with regard to the composition of the Boards, in the event of the selection of a non-elected Director as Chair or Vice- Chair. This proposal would be as follows: • Rather than the affected municipality appointing an alternate elected director, an additional non-elected director would be appointed to achieve one-third independence. Mr. Angemeer's letter indicated that he was looking for consensus prior to November 28, 2014. He has been informed that Clarington's response would not be received until after December 15, 2014. 3.3. Advertising & Nominating Committee In the fall of 2014, Veridian placed an advertisement for the non-elected representative and received 12 applications for Clarington. The applications have been circulated under separate cover (Confidential Attachment 4) as they contain personal information about the individuals. Once the applications were received and reviewed by Veridian's consultant, Veridian's Nominating Committee made a recommendation report to each of the shareholder municipalities to make their nominations. (See Confidential Attachment 5, a report from Peter Spratt, Vice President of Collins Barrow, dated October 31, 2014.) Municipality of Clarington Report CLD-030-14 Page 5 3.4. Selection of Non-Elected Representatives The "Council Nominations to Veridian Corporation and Veridian Connections Inc. Boards" policy states that the non-elected representative to the Veridian Corporation Board of Directors may be chosen from the submitted candidates list for the Corporation Board position, or a member of the public who has submitted their name to the Municipality for consideration on' or before the publication of the Agenda for the first General Purpose and Administration Committee meeting. The policy further states that the Municipality of Clarington recommends to Veridian Corporation, one non-elected representative to the Veridian Connections Inc. Board, who shall not be Clarington's non-elected nomination to the Veridian Corporation Board of Directors. The name of the representative may be chosen from the submitted candidates list for the Corporation Board position, or a member of the public who has not submitted their name for consideration. At the time of writing this report, no additional applications have been received by the Clerk's Department. 4. Concurrence This report has been reviewed by Andrew Allison, Municipal Solicitor, and Marie Marano, Director of Corporate Services, who concur with the recommendations. 5. Conclusion In order to fulfil the requirements of the Veridian Shareholder's Agreement, it is recommended that the following appointment be made, for a term determined by Council: • One non-elected nominee to the Veridian Corporation Board of Directors, and that the following recommendation be made, for appointment be made, for a term determined by Council ® One non-elected appointment by Veridian Corporation Inc. to the Veridian Connections Inc. Board of Directors, If Council chooses to not change the Shareholder Agreement (OPTION A), it is recommended that the following actions be taken: ® Staff be directed to advise Veridian Corporation that the Municipality of Clarington does not approve the proposed composition change and will not be signing the consent and waiver agreement to implement the "additional non-elected director proposal" in the event that Clarington's non-elected director is selected as Chair or Vice-Chair. Municipality of Clarington Report CLD-030-14 Page 6 ® One Member of Council (as an alternate).be recommended for the Veridian Connections Inc. Board of Directors. If Council agrees with the "Additional Non-Elected Director Proposal" (OPTION B), it is recommended that the following actions be taken: • The Mayor and Clerk be authorized to execute the consent and waiver agreement to implement the "additional non-elected director proposal" in the event that Clarington's non-elected director is selected as Chair or Vice-Chair. • One non-elected individual be recommended for the Veridian Connections Inc. Board of Directors (as an alternate). 6. Strategic Plan Application Not applicable. Submitted by: � Reviewed by: C, C. Anne Greentree Franklin Wu, Municipal Clerk Chief Administrative Officer Staff Contact: June Gallagher, Deputy Clerk, 905-623-3379 ext. 2103 or jgallagher@clarington.net Attachments: Attachment 1 — "Council Nominations to Veridian Corporation and Veridian Connections Inc. Boards" Policy Attachment 2 — Correspondence from Michael Angemeer, President & CEO, Veridian Corporation, dated November 12, 2014, regarding Appointment of Elected and Non-elected Directors, addressed to the Clerks Attachment 3 — Correspondence from Michael Angemeer, President & CEO, Veridian Corporation, dated November 12, 2014, regarding Appointment of Elected and Non-elected Directors, addressed to the Mayors Attachment 4 — Confidential Resumes from Applicants for Non-elected representatives (Distributed Separately) Attachment 5 — Report from Peter Spratt, Vice President of Collins Barrow, dated October 31, 2014 (Distributed Separately) Municipality of Clarington Report CLD-030-14 Page 7 The following is a list of the interested parties to be notified of Council's decision: All applicants Laurie McLorg, Chief Financial Officer, Veridian Connections Michael Angemeer, President & CEO, Veridian Corporation M. deRond, Town of Ajax D. Shields, City of Pickering M. MacDonald, City of Bellville CAG/jeg ATTACHMENT#�a43 'To REPORT # L Council Nominations. to Veridian corporation and Veridian connections Inc. Boards PURPOSE: To establish an open and transparent process for the nomination by Council of members to the Veridian Corporation Board and the Veridian Connections Inc. Board and any request by Council for the removal of a member from the Veridian Corporation Board and the Veridian Connections Inc. Board, PROCEDURES: 1. New Term of Council 1.1. Advertising In the fall of the last year of the term of council, Veridian will advertise in the local newspapers and on the Shareholders' websites seeking candidates to serve on the Board of Directors for Veridian Corporation and Veridian Connections Inc. for a four- year term, as determined by the Shareholders. All applications will be submitted directly to Veridian Corporation. 1.2. Applications Once the applications have been received and reviewed by Veridian's consultant who has been contracted to receive and review applications for nominations, Veridian's Nominating Committee shall make recommendations to each of their Shareholders for the councils to make their nominations to the Board of Directors for Veridian Corporation. 1.3. Mayor / Mayor's Designate In Accordance with the Amended and Restated Shareholders' Agreement, the Mayor/Mayor's Designate are automatically elected members to the Veridian Corporation Board and the Veridian Connections Inc. Board. s 1.4. Council Appointments — New Term,of Council 1.4.1. Upon receipt of the report of Veridian's Nominating Committee, the Municipal Clerk's Department will reproduce the report for distribution, confidentially, to the Members of Council together with the agenda for the first General Purpose and Administration Committee Meeting. The agenda is published in accordance with the Municipality's Procedural By-law. -6-Sep-14 Page 1 of 4 1.4.2.The matter will be considered by Council during the first General Purpose and Administration Committee Meeting. Should members of Council wish to discuss specific qualifications about an identifiable individual, the meeting will be "closed" in accordance with the Municipal Act. Once Council is back in "open",session, a motion will come forward*to: 1.4.3. Veridian Corporation Board Nominate one (1) non-elected representative to the Veridian'Corporation Board of Directors. The name of the representative may be chosen from the submitted candidates list for the Corporation Board position, or a member of the public who has submitted their name to the Municipality for consideration on or before the publication of the Agenda for the first General Purpose and Administration Committee. 1.4.4. Veridian Connections Inc. Request that the Veridian Corporation Board nominate and elect to the Veridian Connections Inc. Board of Directors, one (1) non-elected representative to the Veridian Connections Inc. Board, who shall not be Clarington's non-elected nomination to the Veridian Corporation Board of Directors. The name of the representative may be chosen from the submitted candidates list for the Corporation Board position, or a member of the public who has not submitted their name for consideration. Refer to the Amended and Restated Shareholders' Agreement should Clarington's non-elected director be elected Chair or Vice-Chair. (In making the recommendations for nominations to the Veridian Connections Board of Directors, Council is aware that the Veridian Corporation Board is not obliged to appoint the non-elected nominees put forward by the Municipality.) 1.4.5. The Municipal Clerk will advise Veridian Corporation of Council's decision. 6-Sep-14 Page 2 of 4 2. Replacement or Resignation of Directors 2.1. Veridian Corporation Board 1 2A.1. Vacancy Occurs i a) Council Chooses to Replace In accordance with Section 3.2 (i) of the Amended and Restaffed Shareholders'.Agreement, the Municipality of Clarington may replace any non-elected director nominated by it to the Board of Directors of Veridian Corporation at any time. Should.this be necessary, a resolution of Council shall be passed removing the Director, in accordance with the Municipality's Procedural By-law. b) Council Appointed Non-elected Director Resigns In the event of a replacement or if a non-elected director resigns, the Municipal Clerk shall request Veridian to undertake their process as outlined in subsection 1.1 to seek applications to fill the vacancy and make recommendations to Council for Clarington's nominee to the Veridian Corporation Board of Directors, and it shall be advertised on the Municipality's website. 2.1.2. Upon receipt of the report of Veridian's Nominating Committee containing the list of all applicants and the Nominating Committee's recommended Director, the Municipal Clerk's Department will include it on the next regularly scheduled General Purpose and Administration Committee meeting agenda, reproducing the report for distribution, confidentially, to the Members of Council together with the agenda. The agenda will be published in accordance with the Municipality's Procedural By-law. 2.1.3. In consideration of the report from Veridian's Nominating Committee, should it be desirable to discuss specific qualifications about identifiable individuals, the meeting will be "closed" in accordance with the Municipal Act. Once the j meeting is "open", a motion to nominate the non-elected representative will come forward. The name of the representative may be chosen from the submitted candidates list for the Corporation Board position, or a member of the public who has not submitted their name for consideration. 2.1.4.The Municipal Clerk will advise Veridian Corporation and the individual nominated of Council's decision. 6-Sep-14 Page 3 of 4. i 2.2. Veridian Connections Inc. Board 2.2.1.Should it be Council's desire to replace a non-elected member of the Board of Directors of Veridian Connections Inc., a resolution of Council shall be passed, . in accordance with the Municipality's Procedural By-law, requesting that the Veridian Corporation Board of Directors remove the director. .2.2.2.The Municipal Clerk will advise Veridian Corporation of Council's decision and request Veridian to commence their process as outlined in subsection 1.1, and it shall be advertised on the Municipality's website to seek applications to fill the vacancy and allow Clarington Council the opportunity to nominate the candidate for the director position. 2.2.3. Upon notification that the director has been removed or resigned, and receipt of the report from the Veridian Nominating Committee containing the list of all applicants and the Nominating Committee's recommended Director, as well as any applicants who have submitted their applications directly to the Municipality on or before the publication of the General Purpose and Administration Committee meeting Agenda during which,the nominations will be made, the Municipal Clerk's Department will include it on the next regularly scheduled General Purpose and Administration Committee meeting agenda, reproducing the report for distribution, confidentially, to the Members of Council together with the agenda. The agenda will be published in accordance with the Municipality's Procedural By-law. 2.2.4. In consideration of the report, should it be desirable to discuss specific qualifications about identifiable individuals, the meeting will be "closed" in accordance with the Municipal Act. Once the meeting is "open", a motion to nominate the non-elected representative will come forward. 2.2.5,The Municipal Clerk will advise Veridian Corporation and the individual nominated of Council's decision and request that the Corporation Board make the appointment to the Veridian Connections Inc. Board. i I 6-Sep-14 Page 4 of 4 t ATTACHMENT# REPORT # November 12, 2014 Via E-mail Delivery to: Mr.Martin DeRond-Director of Legislative and Information Services,Town of Ajax- - martin.derond@townofa'ax.com Ms.Debbie Shields-City Clerk,City of Pickering - dshields@ ickering.ca Ms.Anne Greentree-Municipal Clerk,Municipality of Clarington-agreentreeC@clarington.net Mr.Matt MacDonald-Acting Director of Corporate Services/City Clerk,City of Belleville- - mmacdonald@city.belleville on ca Re: Appointment of Elected and Nonelected Directors-Veridian Board On August 12, 2014 I wrote to you explaining the process that would be followed in appointing Veridian's new slate of elected and nonelected directors for the term commencing January 2015. To date advertisements have been placed for candidates,interviews have taken place and the consultant's report has been provided to the nominating committee.The nominating committee has also met,with the consultant,to review the nonelected candidates that were interviewed. Steps 10- 15 as outlined in my August 12 letter are left to be completed. See Appendix 1 attached. The purpose of this letter is to explain the requirements for Step 10. Step Action Timing Responsibility Comments Letter sent to municipal At this point in time clerks outlining process Veridian Energy Inc.is a /requirements and November shell company whose 10 requesting selections for 14 Veridian responsibilities have been Veridian Corporation and rolled up under Veridian recommendations for Corporation.No Veridian Connections Inc. nominees required. Each municipality will be required to develop a slate of directors for both Veridian Corporation and Veridian Connections Inc. An alternate elected director will also be required. I will attempt to explain the reason for this but it is based on the OEB's and Veridian's requirement for independence on the Veridian Connections Board and whether or not an elected or nonelected is selected as Chair of the Board. Background On September 16, 2014 the shareholders met and Resolution 2014-SO4 was passed changing the number of directors of Veridian Corporation to 11,effective January 1,2015. The composition of the new Boards will be as follows: Date: November 14, 2014 Page 2 Addressee: Shareholder Clerks Re: Appointment of Elected and Nonelected Directors-Veridian Board Entity Elected Directors Nonelected Directors Total Veridian Corporation • Pickering 3 1 4 • Ajax 2 1 3 • Clarin ton 1 1 r X 2 • Belleville 1 1 J 2 Total 7 4 11 Veridian Connections Of Inc • Pickering 3 4 • Ajax 2 3 • Clarin on 1 2 • Belleville 1 Total 7 04 FSame Individuals Different Individuals The elected members which are colour coded in yellow sit on both the Veridian Corporation and the Veridian Connections Board. The 4 nonelected Board members on the Veridian Corporation Board must be different individuals than the 4 nonelected on the Veridian Connections Board. This is shown on the above chart by having different colour codes (green&blue) for Veridian Corporation and Veridian Connections. The reason for this is to meet the Ontario Energy's Board and Veridian's Shareholder Agreement requirement for one-third independence. Section 2.13 of the Ontario Energy Board's Affiliate Relationship Coded states: 2.1.3 A utility shall ensure that at least one-third of its Board of Directors is independent from any affiliate. Independence Independence requires that at least one-third of the directors on the Veridian Connections Board be different members than those sitting on the Veridian Corporation Board. This is accomplished,in the new structure,by having the 4 nonelected members being represented by different individuals on the Veridian Corporation Board versus the Veridian Connections Board. The Veridian Board structure is as follows: • 11 directors for both Veridian Corporation and Veridian Connections, 7 elected and 4 nonelected; • same 7 elected directors sit on both the Veridian Corporation and Veridian Connections Boards; • according to the OEB rules and Veridian Shareholder Agreement Veridian Connections must have at least one-third of its directors independent from Veridian Corporation; Date: November 14, 2014 Page 3 Addressee: Shareholder Clerks Re: Appointment of Elected and Nonelected Directors-Veridian Board • 4 different nonelected directors sitting on the Veridian Connections Board meets this requirement; • one-third independence is achieved (4/11=36%). The requirement for the Board structure to reflect independence,as defined by the CEB,for Veridian Connections has been adopted and written into Veridian's Shareholder Agreement. Issue The Shareholder's Agreement states that the Chair and Vice Chair of Veridian Corporation hold the same positions on Veridian Connections. The one-third independence rule is achieved as long elected members are selected as the Chair and Vice Chair of Veridian Corporation. An issue arises should a nonelected member be elected as Chair or Vice Chair of Veridian Corporation. As previously mentioned the 4 nonelected members on the Veridian Connections Board are mutually exclusive form the Veridian Connections Board. However if a nonelected member is elected as Chair they would then sit on both the Veridian Corporation and the Veridian Connections Board and the one- third independence on the Veridian Connections Board would no longer exist. The Veridian Connections Board would be made up of 11 members but only three would be independent from Veridian Corporation (3/11=27%). The following example illustrates the issue. Different Individuals Entity Elected Directors Nonelected Directors 106tal Veridian Corporation • Pickering 3 1 Ae 4 • Ajax 2 1 3 • Clarin ton 1 1 2 • Belleville 1 1 2 Total 7 4 11 Veridian Connections ' Inc • Pickering 4 • Ajax 2 3 • Clarin ton 1 2 • Belleville 1 1 2 Total 4 11 Nonelected Becomes Chair or Vice Chair Same individual sits on both Veridian Corporation and Veridian Connections Board 1/3 independence not achieved as same person sits on both Boards Second nonelected director not required Date: November 14, 2014 Page 4 Addressee: Shareholder Clerks Re: Appointment of Elected and Nonelected Directors-Veridian Board In this example if the Belleville nonelected was chosen as Chair that person would sit on both the Veridian Corporation and the Veridian Connections Board and the one-third independence for Veridian Connections would not be achieved. (3/11=27%) It should also be noted that if a nonelected is selected as Chair or Vice Chair it would result in the second nonelected candidate from that municipality no longer being required. Nonelected Selected as Chair-Remedy If a nonelected is chosen as Chair or Vice Chair than one elected member cannot sit on both the Veridian Corporation and Veridian Connections Board as the one-third independence requirement for Veridian Connections would not be achieved. In the event this should happen it would be necessary,for the municipality from which the nonelected came,to change one of their elected directors from one dual board member to two single board members. One elected position would sit solely on the Veridian Connections Board.The other would sit solely on the Veridian Corporation Board. This requirement is prescribed in the shareholder's agreement. The following chart depicts the requirement. Changed from one dual Board member to two single Board members Entity ' Elected Directors Nonelected Directors Total Veridian Corporation • Pickering 3 1 4 • Ajax 2 1 3 • Clarin ton 1 1 2 • Belleville 1 1 2 Total 7 4 11 Veridian Connections Inc • Pickering 3 4 • Ajax 3 • Clarin ton 'Jeri 2 • Belleville 1 1 2 Total 7 4 11 Nonelected Becomes Chair or Vice Chair Same individual sits on both Veridian Corporation and Veridian Connections Board 1/3 independence not achieved as same person sits on both Boards Second nonelected director not required REMEDY One elected position changed from one dual Board director to two single Board directors One-third independence on Veridian Connections Board achieved Date: November 14, 2014 Page 5 Addressee: Shareholder Clerks Re: Appointment of Elected and Nonelected Directors-Veridian Board In the preceding example independence is achieved for the Veridian Connections Board. • nonelected Chair sits on both Veridian Corporation and Veridian Connections Boards. • 3 of the nonelected members on Veridian Connections are different than those sitting on the Veridian Corporation Board. • 6 of the 7 elected members sit on both the Veridian Corporation and the Veridian Connections Boards. • 1 elected position,from the municipality in which the nonelected chair comes from,has been changed from one dual Board member to two single Board members. • additional elected member is added that sits solely on the Veridian Connections Board. The other member sits solely on the Veridian Corporation Board. Under this scenario the Veridian Connections Board comprises 6 elected members that sit on both Veridian Corporation and Veridian Connections Boards, 1 elected director that only sits on the Veridian Connections Board,one nonelected Chair who sits on both Boards and 3 nonelected members who sit on the Veridian Connections Board only. Independence is achieved. • (6 elected dual board members+ 1 nonelected chair sitting on both boards) =7 dual board members • (1 elected single board member+ 3 nonelected single board members) =4 single board members • 4 single board members/11 members in total= 36%and one-third independence is achieved It should be noted that the same remedy is required if a nonelected is chosen as Vice Chair. Next Steps Step 11 stated that the consultant report and the resumes for nonelected candidates would be forwarded to the respective clerks as November 14,2014. For each municipality there are three attachments. The first contains the report of Peter Spratt which provides an evaluation of the nonelected applicants that were interviewed. The second contains the resumes of those nonelected candidates that were interviewed. The third contains the resumes of the nonelected applicants that were not interviewed. This information is provided to help in the decision making process and is for you to distribute to members of council as you see fit. All the information described above was previously provided to nominating committee of the Board which consists of the shareholder mayors or their designates Step 13 of my August 12,2014 states that prior to December 17,2014 each municipality will provide Veridian a list of its nominations for the Veridian Corporation Board and its recommendations for the Veridian Connections Board. At the first Veridian Corporation Board meeting in early 2015 a Chair and Vice Chair will be selected. As I have described the number of elected and nonelected directors required will depend on whether or not a nonelected is selected as Chair or Vice Chair. Date: November 14, 2014 Page 6 Addressee: Shareholder Clerks Re: Appointment of Elected and Nonelected Directors-Veridian Board I would ask that each municipality fill out the attached sheet providing the names of their appointments for Veridian Corporation,the names of their recommendations for Veridian Connections and an additional elected member for the Veridian Connections Board should the situation arise where a nonelected member is selected as Chair or Vice Chair. Your response on or before December 17,2014 would be appreciated. Hopefully what has been laid out here is clear. Should you have any questions please do not hesitate to call me directly. I would also be available to convene a meeting should it be felt that this is easier to explain in person. Yours truly, Michael Angemeer,P.Eng. President and CEO Copy: Adrienne Windsor Tanya Laschuk Rob Scarffe Heather Boissoin Date: November 14, 2014 Page 7 Addressee: Shareholder Clerks Re: Appointment of Elected and Nonelected Directors-Veridian Board SLATE OF DIRECTORS-2015 Veridian Corporation&Veridian Connections Inc. Municipality Elected Length of Nonelected Name Length of Name Term Term Veridian Cor oration Pickering Nomination 1 Nomination 2 N/A N/A Nomination 3 N/A N/A Ajax Nomination 1 Nomination 2 N/A N/A Clarington Nomination 1 Belleville Nomination 1 Veridian Connections Pickering Recommendation 1 Same as Above Recommendation 2 Same as Above N/A N/A Recommendation 3 Same as Above N/A N/A Alternate* Ajax Recommendation 1 Same as Above Recommendation 2 Same as Above N/A N/A Alternate* N/A N/A Clarington Recommendation 1 Same as Above Alternate* N/A N/A Belleville Recommendation 1 Same as Above Alternate* N A N/A *Required should a nonelected director be selected as Chair or Vice Chair of Veridian Corporation Date: November 14, 2014 Page 8 Addressee: Shareholder Clerks Re: Appointment of Elected and Nonelected Directors-Veridian Board APPENDIX 1 Veridian Corporation Director Nomination Process Step Action Timing Responsibility Comments Completed Initial meeting of Participants Nomination Mayor Ryan-Pickering 1 Committee to review J ul , Nominating (Chair) process and establish y 8 2014 Committee Councillor Dies-Ajax direction for Mayor Ellis-Bellville management Mayor Foster- Clarin ton Hire Consultant to 2 complete the July 2014 Veridian Completed nonelected selection rocess Send letter to 3 municipal clerks August 15 Veridian Completed explaining nomination process Completed Governance Committee Review Director to provide 4 Profile,Skills Matrix September 2 Governance recommended changes and recruitment tment Committee to Nominating advertisement Committee and Veridian Corporation Board for approval Completed Recruitment Ads Two insertions: 5 placed in local September 8 Veridian Ajax/Pickering News Advertiser newspapers Clarington This Week Belleville Intelli encer Recruitment Completed advertisement placed List of community 6 on Veridian, September 8 Veridian/Shareholders websites to be provided municipal and other by each shareholder community websites Interviews of To be 7 nonelected candidates completed Consultant&M. Completed conducted by by October Angemeer consultant&M. 15 Angemeer i Date: November 14, 2014 Page 9 � Addressee: Shareholder Clerks Re: Appointment of Elected and Nonelected Directors-Veridian Board Step Action Timing Responsibility Comments Consultant report to 8 be provided to October 31 Veridian Completed Nominating Committee&Veridian Completed Participants Nominating No later Mayor Ryan-Pickering 9 Committee to meet than Veridian to coordinate . (Chair) and review November meeting Councillor Dies-Ajax nonelected candidates 14 Mayor Ellis-Bellville Mayor Foster- Clarin ton Letter sent to municipal clerks Completed outlining At this point in time process/requirements Veridian Energy Inc.is a and requesting November shell company whose 10 selections for Veridian 14 Veridian responsibilities have Corporation and been rolled up under recommendations for Veridian Corporation.No Veridian Connections nominees required. Inc. Consultant report for nonelected candidates November 11 and resumes sent to 14 Veridian Completed municipal clerk with letter in ste 10 above Shareholder councils approve slate of candidates for N later t 12 Veridian Corporation than Shareholder councils and recommendations December for Veridian 15 Connections Inc. Shareholder selection for elected and nonelected directors No Later 13 for Veridian than Town/City Clerks Corporation and December recommendations for 17 Veridian Connections Inc sent to Veridian Inaugural Veridian Corporation Board January 14 meeting to select 2015 Elected Chair of Chair,Vice Chair,VCI Exact date Veridian Corporation Board,VEI Board TBD 15 Letters sent to all Week Veridian Date: November 14, 2014 Page 10 Addressee: Shareholder Clerks Re: Appointment of Elected and Nonelected Directors-Veridian Board Step Action Timing Responsibility Comments unsuccessful following candidates that were inaugural interviewed Board meeting I I i i I `ATTACN EPIT# ©3 REPORT # I November 12, 2014 Via E-mail Delivery to: Mayor Dave Ryan-City of Pickering-mayor(@pickering.ca Mayor Steve Parish -Town of Ajax- steve.parish(&ajax.ca Mayor Adrian Foster-Municipality of Clarington-mayor@clarington.net Mayor Neil R.Ellis - City of Belleville-mavor.ellisPcity.belleville.on.ca Re: Consent and Waiver Agreement-Nonelected Directors On November 12,2014,I wrote to the Clerks explaining the requirements for putting forth the 2015 slate of directors for each municipality(copy attached). In that letter it was explained,in some detail,the requirements of the OEB and Veridian's shareholder agreement for one third independence on the Veridian Connections Board. In your capacity as the Shareholder Representative I am bringing forward,for your consideration, an option with respect to elected and nonelected representation should a nonelected director be selected as Chair or Vice Chair. 2015 Board Composition Beginning in January 2015 the Veridian Corporation Board will be comprised of 7 elected and 4 nonelected directors. The Veridian Connections Board will consist of the same 7 elected directors as on the Veridian Corporation board and 4 different nonelected directors,thereby achieving one-third independence. Without going into specifics,Veridian's current Shareholder Agreement would require the following if a nonelected director was selected as Chair or Vice Chair of Veridian Corporation,as one-third independence on the Veridian Connections Board would no longer be achieved: • Nonelected Chair or Vice Chair would sit on both Veridian Corporation Board, and Veridian Connections Board as per the shareholders agreement; • The second nonelected position would be redundant; • Due to above scenario,one third independence would not be achieved on the Veridian Connections Board as per OEB requirements and Veridian's shareholder agreement; i I I f Date: November 12, 2014 Page 2 Addressee: The Mayors Re: Consent and Waiver Agreement-Nonelected Directors v In order to achieve one third impendence Veridian's shareholder agreement stipulates the municipality from which the nonelected Chair or Vice Chair came from would have to convert one elected dual Board director position to two single Board positions. An additional elected director would be required. One sitting solely on Veridian Corporation Board and the other sitting solely on the Veridian Connections Board; 6 Switching the elected director position from one dual Board member to two single Board members would ensure one-third independence is achieved on the Veridian Connections Board. Request The shareholder agreement is very specific in how independence would be achieved,through the conversion of one elected dual board director into two single board elected directors,should a nonelected be chosen as Chair or Vice Chair. Shareholder representatives have brought forward a request that the above be altered. Specifically, should a nonelected Chair or Vice Chair be selected from their municipality,that instead of converting one elected dual board member into two elected single board members,they be allowed to add an additional nonelected director. This would also result in one-third independence being achieved on the Veridian Connections Board. Legal counsel has reviewed the request and has informed us this would be a viable option under the following conditions: 1. A consent and waiver agreement to be signed by each of the shareholders of Veridian Corporation; 2. A consent and waiver agreement to be signed by Veridian Corporation in its capacity as shareholder of Veridian Connections Inc.; and 3. A resolution of the Board of Directors of Veridian Corporation authorizing Veridian Corporation to execute the waiver by Veridian Corporation regarding Veridian Connections Inc. The waiver would be limited as follows;. 1. that notwithstanding the waiver,the Chair of Veridian Corporation is still going to be the same person as the Chair of Veridian Connections Inc.; 2. that the substituted director otherwise complies with the requirements for directors; 3. that the waiver is limited to this one instance and does not apply to subsequent - --appointments; and - - --- - -- - - 4.--that the waiver is limited to the-extent that Veridian Connections will not be off-side the Affiliate Relationship Code. Legal counsel also indicated that the shareholder representatives of Veridian Corporation will need to consider for themselves,if they require council resolutions to permit them to sign the waiver as shareholder of Veridian Corporation. i Date: November 12,2014 Page 3 Addressee: The Mayors Re: Consent and Waiver Agreement-Nonelected Directors Attached is the Consent and Waiver Agreement. I would request that you demonstrate your intention by either signing this waiver and returning it to me, or letting me know directly that you will not support the request. I would appreciate your response by no later than November 30, 2014. A response prior to November 28, 2014 will provide the shareholder council with clarity in which way they should proceed in the selection of their slate of directors,at the inaugural meeting of their new council. Section 12.7 of the Shareholders Agreement requires all four shareholders to sign the waiver for it to be accepted. If approved,the requirement to convert an elected dual board position into two elected single board positions and fill it with an additional elected official would no longer be required. Instead, the municipality from which a nonelected was chosen as Chair or Vice Chair could instead opt to fill that split position with a non-elected candidate. The Veridian Corporation waiver and the resolution described above will be presented at the December 2014 Board meeting. If you would like to discuss or require further clarity please contact me directly. Yours truly, 7" Michael Angemeer President and CEO Attachments: Appointment of Elected and Nonelected Directors-Veridian Board Consent and Waiver Agreement Copy: Adrienne Windsor Tanya Laschuk Rob Scarffe Heather Boissoin II CONSENT AND WAIVER AGREEMENT TO: Each of the Undersigned Hereto RE: Veridian Connections Inc. ("VCI') DATE: November [o], 2014 1. Reference is made to the 2014 Amended and Restated Shareholders' Agreement among each of the undersigned in respect of Veridian Corporation (the "Shareholders' Agreement"). Each of the undersigned, for good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged) for and on behalf of itself hereby confirms and acknowledges that: (a) Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Shareholders' Agreement; (b) If a Non-Elected Member is elected as Chair or Vice Chair of the Board, section 3.2(f) of the Shareholders' Agreement requires that the Shareholder who nominated that director must nominate, and the Board must appoint to the board of directors of VCI, an Elected Member that is not already an Elected Member of the Board (the "Substitute Member") in place of an Elected Member that was appointed to the Board; (c) Notwithstanding section 3.2(f) of the Shareholders' Agreement, if a Non-Elected Member is elected as Chair or Vice Chair of the Board at the first election in respect of such offices subsequent to the date of this Consent and Waiver Agreement, the Shareholder who nominated that director may nominate, and the Board must appoint to the board of directors of VCI, a Non-Elected Member that is not already an Non-Elected Member of the Board to,be the Substitute Member; and (d) Other than being a Non-Elected Member, the Substitute Member complies with all of requirements for directors of VCI under the Shareholders' Agreement. 2. The waiver of, and consent to depart from, the requirements of section 3.2(f) of the Shareholders' Agreement set out herein is effective only in the specific instance and for the specific purpose for which it has been given. It does not preclude any of the undersigned from requiring strict compliance with the terms of section 3.2(f) of the Shareholders' Agreement other than this specific instance. 3. This Consent and Waiver 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 Consent and Waiver Agreement. An executed copy of this Consent and Waiver may be delivered by facsimile transmission .or such other means of electronic transmission and it shall not be necessary to confirm execution by delivery of the originally executed documents. 4. This Consent and Waiver Agreement shall enure to the benefit of and be binding upon each of the parties hereto and their respective successors and permitted assigns. 5. This Consent and Waiver Agreement shall be governed by and construed and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein). [Signature Page to Immediately Follow] 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 By: c/s THE CORPORATION OF THE CITY OF BELLEVILLE By: c/s By: c/s THE MUNICIPALITY OF CLARINGTON By: c/s By: c/s THE CORPORATION OF THE CITY OF PICKERING By: c/s By: c/s I i f i i MERIDIAN CORPORATION By: c/s By: Us VERIDIAN CONNECTIONS INC. By: c/s By: Us VERIDIAN ENERGY INC. By: Us By: c/s i CONFIDENTIAL REPORTS ✓ G P A REPORT NO. CLD-030-14 (Attachment 4 Only) Resolution#: By-law#: DATE OF REPORT: December 8, 2014 Veridian Appointments (Confidential Attachment 4) CONFIDENTIAL REPORTS ✓ G PA REPORT NO. CLD-030-14 (Attachment 5 Only) Resolution#: By-law#: DATE OF REPORT: December 8, 2014 Veridian Appointments (Confidential Attachment 5)