VALENER INC. NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS. to be held on March 23, and

Transcription

1 VALENER INC. NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS to be held on March 23, 2011 and MANAGEMENT PROXY CIRCULAR OF THE MANAGEMENT OF THE MANAGER February 11, 2011

2 VALENER INC. NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS to be held on March 23, 2011 NOTICE IS HEREBY GIVEN that the annual and special meeting (the Meeting ) of shareholders (the Shareholders ) of Valener Inc. ( Valener ) will be held at the Palais des congrès de Montréal, 159 Saint-Antoine Street West, Room 511A-E, Montréal, (Québec) on March 23, 2011 at 2:00 p.m. (Montréal time) for the following purposes: 1. to receive the audited financial statements of Valener for the 108-day period ended on September 30, 2010 and the related auditors report and the audited consolidated financial statements of Gaz Métro Limited Partnership ( Gaz Métro ) for the year ended on September 30, 2010 and the related auditors report; 2. to elect the directors of Valener; 3. to appoint the auditors of Valener and authorize the directors of Valener to determine their remuneration; 4. to review and, if deemed advisable, pass, with or without amendments, a special resolution, the full text of which appears in Appendix A of the attached management proxy circular of the Management of the Manager (as this expression is defined in the Circular) of Valener dated February 11, 2011 (the Circular ), for the purpose of approving the creation of a special class of preferred shares issuable in series, having the rights and restrictions described in Appendix B of the Circular, subject to a maximum of ten (10) million authorized preferred shares; and 5. to transact such other business as may properly come before the Meeting or any adjournment thereof. This Notice of Meeting is accompanied by the Circular and a Voting Form (as this expression is defined in the Circular) or form of proxy, as applicable. Details of the matters to be put before the Meeting are set forth in the Circular. The record date for determination of Shareholders entitled to receive notice of and to vote at the Meeting (the Record Date ) is January 31, Only persons registered as Shareholders on the books of Valener as of the close of business on the Record Date are entitled to receive notice of and to vote at the Meeting. Pursuant to the Canada Business Corporations Act, Valener is required to prepare, not later than ten (10) days after the Record Date, an alphabetical list of its Shareholders entitled to vote as of the Record Date that shows the number of Common Shares of Valener held by each Shareholder. A Shareholder whose name appears on the aforementioned list is entitled to vote the Common Shares of Valener shown opposite his or her name at the Meeting. The list of Shareholders may be examined at the head office of Valener during usual business hours and at the Meeting. Regardless of whether or not Shareholders are able to attend the Meeting or any adjournment of the Meeting in person: (i) (ii) Non-Registered Shareholders (as this expression is defined in the Circular) are requested to date, sign and return the Voting Form in accordance with the instructions provided by their broker or intermediary; and Registered Shareholders (as this expression is defined in the Circular) are requested to date, sign and return the accompanying form of proxy to the registrar and transfer agent for use at the Meeting or any adjournment of the Meeting. To be effective, proxies must be received by Valener s registrar and transfer agent, CIBC Mellon Trust Company, by facsimile at or or in

3 the pre-addressed envelope provided for that purpose, by no later than 5:00 p.m. (Montréal time) on March 21, 2011 or on the second to last Business Day preceding any adjournment of the Meeting. Shareholders are invited to attend the Meeting as there will be an opportunity to ask questions and meet with the directors of Valener and management of Gaz Métro inc., Gaz Métro s general partner, which is acting as Manager of Valener. For those Shareholders who cannot attend the Meeting in person, Valener has made arrangements to provide a live webcast of the Meeting. Details on how Shareholders may view the webcast will be found at and will also be provided in a media release prior to the Meeting. Nonetheless, Shareholders viewing the webcast will not be permitted to vote through the webcast facilities or participate in the Meeting. If you have any questions regarding the matters to be dealt with at the Meeting, the procedures for voting or completing the form of proxy or any information contained in the accompanying Circular, please contact Georgeson, Valener s proxy solicitation agent, toll free at DATED at Montréal, Québec, this 11 th day of February, By order of the Board of Directors of Valener Inc., Corporate Secretary of Gaz Métro inc., in its capacity as general partner of Gaz Métro Limited Partnership acting as Manager of Valener Inc. (signed) Lyne Burelle Lyne Burelle -2-

4 GLOSSARY OF TERMS The following is a glossary of certain terms used in this Circular, and such terms have the meanings set forth hereunder. Administration Agreement means the administration and management support agreement entered into between Valener and Gaz Métro on September 30, 2010, as more fully described under Management of Valener, and any other related additional service agreements entered into between Valener and Gaz Métro; Business Day means a day other than a Saturday, Sunday or statutory holiday, when banks are generally open for business in the City of Montréal, in the Province of Québec, for the transaction of banking business; CBCA means the Canada Business Corporations Act, R.S.C. 1985, c. C-44, as currently in force; CIBC Mellon means CIBC Mellon Trust Company acting as registrar and transfer agent with respect to the Common Shares; Circular means this management proxy circular of the Management of the Manager dated February 11, 2011, together with all appendices hereto, forwarded as part of the proxy solicitation materials to Shareholders in connection with the Meeting; Common Share means the common shares in the share capital of Valener; Corporation means Valener Inc.; Gaz Métro means Gaz Métro Limited Partnership; Gaz Métro Financial Statements means the audited consolidated financial statements of Gaz Métro for the fiscal years ended on September 30, 2010 and 2009, together with the notes thereto and the auditors report thereon; Georgeson means Georgeson Shareholder Communications Canada Inc., the proxy solicitation agent retained by Valener in connection with the Meeting; GMi means Gaz Métro inc.; GMI Annual Information Form means the Annual Information Form of GMi dated December 16, 2010 in respect of GMi s fiscal year ended on September 30, 2010; Management of the Manager means the management of GMi, in its capacity as general partner of the Manager; Manager means Gaz Métro, acting as manager of Valener under the Administration Agreement; Meeting means the annual and special meeting of Shareholders to be held on or around March 23, 2011 and any adjournment thereof; Non-Registered Shareholder has the meaning ascribed thereto under the heading General Proxy Matters Voting of Proxies for Non-Registered Shareholders; Notice of Meeting means the Notice of Annual and Special Meeting of Shareholders which accompanies this Circular; Record Date means the close of business on January 31, 2011; Registered Shareholder means a person registered as a Shareholder in the records of Valener immediately prior to the Record Date, in which case a share certificate will have been issued to the person showing his or her name and the number of shares he or she owns; -i-

5 Shareholder or Shareholders means shareholders of Valener; Special Resolution means the special resolution in respect of the creation of a class of preferred shares issuable in series, the main terms of which are set out in Appendix B to this Circular; Valener means Valener Inc.; Valener Annual Information Form means the Annual Information Form of Valener dated December 16, 2010 in respect of Valener s fiscal year ended on September 30, 2010; Valener Board means the Board of Directors of Valener; Valener Financial Statements means the audited financial statements of Valener for the 108-day period ended on September 30, 2010, together with the notes thereto and the auditors report thereon; and Voting Form has the meaning ascribed thereto under the heading General Proxy Matters Giving Voting Instructions. -ii-

6 QUESTIONS AND ANSWERS RELATING TO THE MEETING Capitalized terms not otherwise defined herein are defined in the Glossary of Terms. Why am I receiving this information? The Circular provides a detailed description of the business to be acted upon at the Meeting. Shareholders will be asked to vote on the matters described in the Circular. Please give this material your careful consideration. If you have any questions regarding the matters to be dealt with at the Meeting, the procedures for voting or completing the Voting Form or the form of proxy, as applicable, or any information contained in the accompanying Circular, please contact Georgeson, Valener s proxy solicitation agent, toll free at Who can vote? Persons registered as Shareholders on the records of Valener as of the close of business on January 31, 2011 are entitled to receive notice of and vote at the Meeting. Shareholders are entitled to one vote per Common Share on any matters that may come before the Meeting. As at January 31, 2011, there were 37,295,121 issued and outstanding Common Shares. How will my Proxy be voted? On the form of proxy, you can instruct your proxyholder on how to vote your Common Shares, or you can let your proxyholder decide for you. If you have specified on the form of proxy how you want your shares to be voted on a particular matter, then your proxyholder must vote your Common Shares accordingly. If you have not specified on the form of proxy how you want your shares to be voted on a particular matter, your proxyholder can then vote in accordance with his or her judgment. Unless contrary instructions are provided in writing, the Common Shares represented by proxies will be voted: (i) FOR the election as directors of each and all of the nominees listed under the heading Election of Directors of this Circular; (ii) FOR the appointment of Raymond Chabot Grant Thornton LLP as auditors of Valener and the determination of their remuneration by the Board of Directors; and (iii) FOR the special resolution in respect of the creation of a class of preferred shares issuable in series. How can I vote? Please ensure that you register your vote by following the instructions under the headings Appointment of Proxies by Registered Shareholders and Voting of Proxies for Non-Registered Shareholders on pages 6 and 7 of the accompanying Circular and on your Voting Form or form of proxy, as applicable. Voting is quick and easy and your vote is important. What if I sign the form of proxy enclosed with the Circular? Signing the enclosed form of proxy gives authority to Mr. Pierre Monahan or Mr. Réal Sureau, each of whom is a director of the Corporation, or to another person you have appointed, to exercise the voting rights attached to your Common Shares at the Meeting. How do I vote if I am a Registered Shareholder? You are a Registered Shareholder if your name appears on your certificate for Common Shares or if your name appears in the records of Valener on the Record Date. If you are not sure whether you are a Registered Shareholder, please contact CIBC Mellon at iii -

7 Voting by proxy Accompanying the Circular is a form of proxy for Registered Shareholders. Complete your form of proxy and return it in the envelope we have provided or by facsimile to or , for receipt by no later than 5:00 p.m. (Montréal time) on March 21, 2011 or prior to 5:00 p.m. (Montréal time) on the second to last Business Day preceding any adjournment or postponement of the Meeting. You can appoint a person other than the persons named in the form of proxy as your proxyholder. This person does not have to be a Shareholder. Fill in the name of the person you are appointing in the blank space provided on the form of proxy. Complete your voting instructions, date and sign the form of proxy, and return it to CIBC Mellon as indicated above. Make sure that the person you appoint is aware that he or she has been appointed and attends the Meeting. Voting in person at the Meeting You do not need to complete or return your form of proxy. To vote at the Meeting, you will register for voting at the Meeting at the CIBC Mellon registration desk prior to the commencement of the Meeting on the day thereof. How do I vote if I am a Non-Registered Shareholder? You are a Non-Registered Shareholder if your securities broker, bank, trust company, or other financial institution ( your intermediary ) holds your Common Shares for you. If you are not sure whether you are a Non-Registered Shareholder, please contact CIBC Mellon at Voting by proxy Your intermediary is required to ask for your voting instructions before the Meeting. Please contact your intermediary if you did not receive a request for voting instructions which should accompany this Circular. In most cases, Non-Registered Shareholders will receive a Voting Form which allows them to provide voting instructions by telephone, on the Internet or by mail. You will need your control number found on your Voting Form, if you choose to vote by telephone or on the Internet. Alternatively, Non-Registered Shareholders may complete the Voting Form and return it by mail within the time limit and in accordance with the instructions provided by your intermediary. Each intermediary has its own signature and return instructions, which you should follow carefully to ensure that your Common Shares are voted at the Meeting. If, after voting by mail, on the Internet or by facsimile, the Non-Registered Shareholder changes his or her mind and wishes to vote in person, he or she must contact his or her intermediary to make the necessary arrangements when possible. Voting in person at the Meeting You can vote your Common Shares in person at the Meeting only if you have instructed your intermediary to appoint you or another person as proxyholder. To do this, write your name or the name of your appointee, as applicable, in the space provided on the Voting Form and otherwise follow the instructions of your intermediary. -iv-

8 If I change my mind, how can I revoke my proxy? In addition to revocation in any other manner permitted by law, a Shareholder giving a proxy and submitting it by mail may revoke it by an instrument in writing executed by the Shareholder or the Shareholder s attorney authorized in writing and deposited either at the Montréal office of CIBC Mellon, 2001 University Street, Suite 1600, Montréal (Québec), H3A 2A6, or at the head office of Valener, 1717 du Havre Street, Montréal (Québec), H2K 2X3 (to the attention of the Corporate Secretary), at any time up to and including the last Business Day preceding the date of the Meeting, or any adjournment thereof, at which the proxy is to be used, or with the chair of the Meeting prior to the commencement of such Meeting on the day of such Meeting or any adjournment thereof. How can I obtain help to complete the Proxy or Voting forms, as applicable? If you need assistance completing your form of proxy or Voting Form, please contact Georgeson, Valener s proxy solicitation agent, toll free at Whom should I contact if I need additional information? Georgeson, the proxy solicitation agent, toll free at ; or CIBC Mellon, the transfer agent and registrar, at v-

9 MANAGEMENT PROXY CIRCULAR Introduction This Circular is provided in connection with the solicitation by the Management of the Manager of proxies for use at the Meeting, which will be held at the Palais des congrès de Montréal, 159 Saint-Antoine Street West, Room 511A-E, Montréal, (Québec) on March 23, 2011 at 2:00 p.m. (Montréal time) and at any adjournment thereof, for the purposes set forth in the accompanying Notice of Meeting and in this Circular. All capitalized terms used in this Circular but not otherwise defined herein have the meanings set forth under Glossary of Terms of this Circular or elsewhere in this Circular. Information contained in this Circular is given as of February 11, 2011 unless otherwise specifically stated. Solicitation of Proxies GENERAL PROXY MATTERS The solicitation of proxies for the Meeting will be made primarily by mail but proxies may also be solicited personally or by telephone on behalf of Valener. Valener will bear the total cost in respect of the solicitation of proxies for the Meeting, subject to the reimbursement of certain costs by Gaz Métro (see Management of Valener Reimbursement of Costs by Gaz Métro). Valener has retained Georgeson to act as proxy solicitation agent. In connection with these services, Georgeson will receive approximately $27,500 plus a fee per phone call for its assistance and will be reimbursed for its reasonable out-of-pocket expenses. Appointment of Proxies by Registered Shareholders Together with this Circular, Registered Shareholders have also been sent a form of proxy. The persons named in such form of proxy as persons to vote on behalf of Registered Shareholders are directors of Valener or members of the Management of the Manager. A Registered Shareholder who wishes to appoint some other person (who need not be a Shareholder) to represent him or her at the Meeting may do so by striking out the names set forth in the enclosed form of proxy and by inserting such person s name in the blank space provided therein or by completing another form of proxy. To be effective, proxies must be received by CIBC Mellon by facsimile at or or in the pre-addressed envelope provided for that purpose, by no later than 5:00 p.m. (Montréal time) on March 21, 2011 or in the case of an adjournment of the Meeting, by no later than 5:00 p.m. (Montréal time) on the second to last Business Day preceding any adjournment of the Meeting. The chair of the Meeting has the discretion to accept late proxies. The document appointing a proxy must be in writing and completed and signed by the Registered Shareholder or his or her attorney duly authorized in writing or, if the Registered Shareholder is a corporation, by its duly authorized officer or attorney. Persons signing as officers, attorneys, executors, administrators or trustees should so indicate and may be asked to provide satisfactory evidence of such authority. Revocation of Proxies by Registered Shareholders A Registered Shareholder who has given a proxy may revoke the proxy: (a) by completing and signing a form of proxy bearing a later date and depositing it as set forth above; (b) by depositing an instrument in writing executed by the Registered Shareholder or by his or her attorney duly authorized in writing: (i) either at the Montréal office of CIBC Mellon, 2001 University Street, Suite 1600, Montréal (Québec), H3A 2A6, or at the head office of Valener, 1717 du Havre Street, Montréal (Québec), H2K 2X3 (to the attention of the Corporate Secretary), at any time up to and including the last Business Day preceding the date of the Meeting, or any adjournment thereof, at which the proxy is to be used; or (ii) with the chair of the Meeting prior to the commencement of such Meeting on the day of such Meeting or any adjournment thereof; or (c) in any other manner permitted by law. -6-

10 Voting of Proxies for Registered Shareholders The persons named in the accompanying form of proxy will vote Common Shares in respect of which they are appointed on any poll that may be called for, in accordance with the instructions of the Registered Shareholder as indicated on the form of proxy. In the absence of instructions, such Common Shares will be voted FOR the approval of the resolution in the manner set forth in the relevant section of this Circular. The persons named in the accompanying form of proxy are conferred with discretionary authority with respect to amendments or variations of matters identified in the form of proxy and Notice of Meeting and with respect to other matters which may properly come before the Meeting or any adjournment thereof. In the event that amendments or variations to matters identified in the Notice of Meeting are properly brought before the Meeting, it is the intention of the persons named in the accompanying form of proxy to vote in accordance with their best judgment on such matter or business. As at the date of the Circular, the directors of Valener and members of the Management of the Manager know of no such amendments, variations or other matters to come before the Meeting. A Registered Shareholder which is a legal entity may appoint an officer, director or other authorized individual as its representative to attend, vote and act on its behalf at the Meeting and may by a like instrument revoke any such appointment, and for all purposes of the Meeting, other than the giving of notice, an individual so appointed shall be deemed to be the Shareholder of every Common Share held by the legal entity he or she represents. If two or more persons hold Common Shares jointly, a proxy given on their behalf must be executed by all of them and may only be revoked by all of them. If two or more of those joint Shareholders are present at the Meeting and they do not agree on which of them is to exercise any vote to which they are jointly entitled, they are deemed not to be present for the purposes of voting. Voting of Proxies for Non-Registered Shareholders Information set forth in this section is very important to persons who hold their Common Shares otherwise than in their own names. In many cases, Common Shares that are beneficially owned by a person who is a Non- Registered Shareholder are registered (i) in the name of an intermediary (an intermediary ) with whom the Non- Registered Shareholder deals in respect of the Common Shares of Valener, such as securities brokers, banks, trust companies or trustees or administrators of self-administered RRSPs, RRIFs, RESPs and similar plans, or (ii) in the name of a clearing agency in which the intermediary is a participant. Non-Registered Shareholders should note that only proxies deposited by Shareholders whose names appear on the records of Valener as the Registered Shareholders can be recognized and acted upon at the Meeting. Without specific instructions, intermediaries and their agents or nominees are prohibited from voting Common Shares for their clients. There are two ways, listed below, for Non-Registered Shareholders to vote their Common Shares. Giving Voting Instructions Applicable securities laws require Non-Registered Shareholders intermediaries to seek voting instructions from them in advance of the Meeting. Accordingly, Non-Registered Shareholders will receive or have already received from their intermediary a voting instruction form for the number of Common Shares they hold. Every intermediary has its own mailing procedures and provides its own signature and return instructions, which should be carefully followed by Non-Registered Shareholders to ensure that their Common Shares are voted at the Meeting. Most intermediaries now delegate responsibility for obtaining instructions from clients to Broadridge Communications Corporation ( Broadridge, formerly ADP Investor Communications Corporation). Broadridge typically prepares a voting instruction form (a Voting Form ) that it mails to the Non-Registered Shareholders and asks them to return the Voting Form directly to Broadridge. Broadridge then tabulates the results of all instructions received and provides appropriate instructions representing the voting of Common Shares represented at the Meeting. A Non- Registered Shareholder receiving a Voting Form cannot use that Voting Form to vote his or her shares directly at the Meeting. The Voting Form must be returned to Broadridge or the intermediary, if the latter has not delegated this responsibility to Broadridge, well in advance of the Meeting to have the Common Shares voted. Voting In Person However, if Non-Registered Shareholders wish to vote in person at the Meeting, they have to insert their own name in the space provided on the Voting Form provided by the intermediary to appoint themselves as proxyholder and -7-

11 follow the signature and return instructions of their intermediary. Non-Registered Shareholders who appoint themselves as proxyholders should present themselves to a representative of CIBC Mellon prior to the commencement of the Meeting on the day thereof. Those Non-Registered Shareholders do not otherwise have to complete the Voting Form sent to them as they will be voting at the Meeting. Record Date The Record Date for determining those Shareholders entitled to receive notice of and to vote at the Meeting is the close of business on January 31, Only persons registered as Shareholders on the books of Valener as of the close of business on the Record Date are entitled to receive notice of and to vote at the Meeting, and no Person becoming a Shareholder after the Record Date shall be entitled to receive notice of and to vote at the Meeting or any adjournment thereof. The list of Registered Shareholders so entitled will be available for inspection during normal business hours at the Montréal office of CIBC Mellon, located at 2001 University Street, Suite 1600, Montréal, Québec, Canada, H3A 2A6, and at the Meeting. Voting Shares and Principal Shareholders As of January 31, 2011, there were 37,295,121 issued and outstanding Common Shares, with each Common Share carrying one voting right. To the knowledge of the directors of Valener and members of the Management of the Manager, no Person beneficially owns, or exercises control or direction, directly or indirectly, over Common Shares carrying 10% or more of the voting rights attached to all issued and outstanding Common Shares. MANAGEMENT OF VALENER Valener has no officer or any person acting in a similar capacity. Strategic decisions concerning Valener s activities, business or current or potential investments must be approved by the Valener Board, while day-to-day management, including Valener s interest in Gaz Métro, is assumed by the Manager pursuant to the Administration Agreement, a copy of which is available on the SEDAR Website, under Valener s profile, at Valener holds a direct interest of approximately 29% in the activities of Gaz Métro. It also holds a 24.5% indirect interest in the Seigneurie de Beaupré wind power projects. In addition, as a result of its interest of approximately 29% in Gaz Métro, it benefits from Gaz Métro s 25.5% indirect interest in those same wind power projects. With more that 3.6 billion dollars in assets, Gaz Métro is Québec's leading natural gas distributor. Operating in this regulated industry for over 50 years, Gaz Métro has become the trusted energy provider to more than 180,000 customers in Québec and 135,000 customers in Vermont while developing the skills and expertise needed to diversify beyond natural gas. In line with its prudent growth strategy, Gaz Métro is active in the electricity distribution market in Vermont and in the development of wind power projects in Québec. Additional information on Gaz Métro s activities is available on the SEDAR Website, under Valener s profile, at or on the Gaz Métro Website at -8-

12 Structure of Gaz Métro The following diagram shows the structure of Gaz Métro: Noverco Inc. Public 100.0% 100.0% 100.0% GMi (General Partner) 70.99% Valener (Limited Partner) Gaz Métro Plus inc. Limited Partner 0.01% 29.0% Gaz Métro Administration Agreement Under the Administration Agreement, inter alia, (i) Gaz Métro, either directly or through GMi, its general partner, shall provide to Valener certain administration and management support services solely in respect of Valener s interest in Gaz Métro and related public company matters and, in certain circumstances, may provide certain additional services, and (ii) Gaz Métro shall reimburse Valener for certain expenses, subject to certain limitations. Services, Fees and Expenses As long as (i) Valener s activities consist solely of holding its interest in Gaz Métro and that Valener is not engaged, directly or indirectly, in any other business, operations or affairs, has no other assets, investments or projects and is not subject to any indebtedness; or (ii) all of the additional business, operations and affairs of Valener are subject to an agreement between Gaz Métro and Valener, the latter will not have its own management team and Gaz Métro will provide all services necessary for the management and general administration of the business, operations and affairs of Valener. These services include preparing continuous disclosure documents of Valener required under applicable securities legislation. Should the business of Valener no longer be fully managed by Gaz Métro as specifically provided under the Administration Agreement, Valener will appoint its own management team and Gaz Métro will only provide a limited number of services for the management and general administration of the business, operations and affairs of Valener which are solely related to Valener s interest in Gaz Métro and related public company matters. These services include providing to Valener information solely related to Valener s interest in Gaz Métro which is reasonably required for the preparation by Valener of Valener s continuous disclosure documents required under securities legislation. Valener will also have the right to have reasonable access to the senior management of GMi to assist with investor relations and financial reporting matters, at its cost and on a cost recovery basis, subject to certain exceptions. Gaz Métro, either directly or through GMi, its general partner, may provide to Valener additional services as may be reasonably requested by Valener from time to time, including with respect to the management of other operations, -9-

13 business and affairs, the whole upon terms mutually agreed in writing. Notwithstanding the foregoing, Gaz Métro will have no obligation to provide any services which are not solely related to Valener s interest in Gaz Métro (and related public company matters). It is intended that Valener will then have its own management team and employees and/or other consultants to support any development activities at its cost, unless otherwise agreed to between the parties. Pursuant to the Administration Agreement, Gaz Métro shall be reimbursed by Valener for all operating and other expenses incurred in providing the services under the Administration Agreement. Reimbursement of Costs by Gaz Métro Gaz Métro shall reimburse Valener for all general administrative expenses (including public company costs) it incurs starting from October 1, 2010, subject to a maximum aggregate amount of (i) $1.75 million annually for the first five (5) years, and (ii) $1 million annually for the subsequent ten (10) year period, until the termination of the Administration Agreement, benefiting from an annual indexation corresponding to the Consumer Price Index and any fee increases implemented by regulatory authorities or the Toronto Stock Exchange from time to time, which are out of Valener s control. Notwithstanding the foregoing, Gaz Métro will only reimburse attendance fees for Board and Committee meetings of Valener s directors (and no other directors retainer, compensation, fees and expenses) and the aggregate annual attendance fees comprised in public company costs to be reimbursed to Valener by Gaz Métro will not be greater than $200,000. Termination Either party may terminate the Administration Agreement by delivering a 60-day prior written notice in case of uncured breach of a material obligation by the other party or upon occurrence of an event of bankruptcy or insolvency. Gaz Métro may also terminate the Administration Agreement: (i) if Valener takes an action or becomes party to a transaction that, in the reasonable opinion of GMi, could cause Gaz Métro to become a SIFT partnership within the meaning of the Income Tax Act; and (ii) in case of a change of control of Valener. Valener may also terminate the Administration Agreement at any time by delivering a 180-day prior written notice to Gaz Métro. For more information concerning the Administration Agreement, see Additional Information Material Contracts Administration Agreement of the Valener Annual Information Form (available, in particular, on the SEDAR Website, under Valener s profile, at and on the Valener Website at A copy of the Administration Agreement is also available, in particular, on the SEDAR Website, under Valener s profile, at

14 BUSINESS OF THE MEETING The Meeting will be constituted as an annual and special meeting. As stated in the Notice of Meeting, the Shareholders will receive the Valener Financial Statements and the Gaz Métro Financial Statements and will be asked to act on the following other annual and special business: (i) the election of the directors of Valener; (ii) the appointment of Valener s auditors for the following fiscal year and authorization for the directors of Valener to determine their remuneration; (iii) adoption of the Special Resolution in respect of the creation of a class of preferred shares; and (iv) other matters which may properly come before the Meeting or any adjournment thereof. Presentation of the Financial Statements The Valener Financial Statements for the 108-day period ended on September 30, 2010 and the Gaz Métro Financial Statements for the year ended on September 30, 2010 will be brought before the Meeting; a vote is neither required nor planned in this respect. The Valener Financial Statements and the Gaz Métro Financial Statements are set out in the Valener 2010 Annual Report which was sent to Shareholders who requested it. The Valener Financial Statements and the Gaz Métro Financial Statements are also available on the SEDAR Website under Valener s profile at and on Valener s Website at Election of Directors The Valener Board has fixed at four (4) the number of directors to be elected. The term of office of each director will expire at the next Annual Meeting of Shareholders or upon the election of his or her successor, unless he or she shall resign his or her office or his or her position becomes vacant by death, removal or other cause. It is not contemplated that any nominees will be unable, or for any reason, will become unwilling to serve as director. Should this occur for any reason prior to the election, the persons named in the accompanying form of proxy reserve the right to vote for another nominee, at their discretion, unless the Shareholder has specified in the form of proxy his or her intention to withhold from voting in the election of the directors. The following are the names of the four (4) candidates presented as nominees for election as directors of Valener: - Nicolle Forget - François Gervais - Pierre Monahan - Réal Sureau The persons whose names are printed on the form of proxy intend to vote FOR the election of the nominees named above as directors of Valener unless specifically instructed otherwise on the form of proxy. -11-

15 The following table sets out certain information on the nominees. These four (4) nominees are currently directors of Valener. Nicolle Forget Québec, Canada Independent Director since June 15, 2010 Principal occupation Board/Committee Memberships A graduate of the Université du Québec à Montréal, the École des hautes études commerciales de Montréal and the Université de Montréal, Ms. Forget is a member of the Québec Bar. She was a member of a number of administrative tribunals and boards of directors, including the boards of Hydro-Québec and the Economic Council of Canada. She is a member of the boards of directors of The Jean Coutu Group (PJC) Inc., GMi and the Collège des administrateurs de sociétés. Corporate Director Attendance at meetings during fiscal year 2010 Number of Common Shares held or controlled as at February 11, 2011 Board of Directors 2/2 Number: 6,500 Audit Committee N/A (1) Other reporting issuer directorships held as at the date hereof The Jean Coutu Group (PJC) Inc. GMi Mr. Gervais is a corporate director and financial advisor. He was an investment banker at RBC Capital Markets from 2003 to 2008 and at CIBC World Markets from 1977 to During a career in corporate finance that has spanned more than 30 years, Mr. Gervais has been involved in numerous share and bond issues and merger and acquisition transactions for companies in a variety of industries. He holds a Bachelor of Business Administration from Université Laval and an MBA from the Harvard Business School. He also holds the CA and ICD.D. designations. He was also a director of Nurun Inc. from 2003 to Mr. Gervais is also a director of GMi. François Gervais Québec, Canada Independent Director since September 10, 2010 Principal occupation Board/Committee Memberships Corporate Director and Financial Advisor Attendance at meetings during fiscal year 2010 Number of Common Shares held or controlled as at February 11, 2011 Board of Directors 2/2 Number: 7,000 Audit Committee N/A (1) Other reporting issuer directorships held as at the date hereof GMi 1) The Audit Committee was formed on September 29, 2010 and held its first meeting on October 7, 2010, after the end of fiscal year

16 Pierre Monahan Québec, Canada Independent Director since June 15, 2010 Mr. Monahan has been a corporate director and business management consultant since January Previously, he was President of Bowater Canadian Forest Products Inc. and Executive Vice President, Building Products at Bowater Inc. until his departure in Mr. Monahan received his bachelor s degree in commerce from the École des hautes études commerciales de Montréal in Over the course of his career, he has held a number of management positions in the forestry industry. He has also occupied financial management positions in major corporations, including Vice President, Finance and Treasury, and Executive Vice President, Business Expansion, at Tembec Inc.; Vice President and CFO of Domtar Inc. and President and CEO of a spin-off company, Alliance Forest Products Inc. Mr. Monahan has sat on the boards of directors of the Forest Products Association of Canada, the Pulp and Paper Research Institute of Canada and/or Paprican, the Forintek Canada Wood Products Research Institute and the FERIC Forestry Research Institute, and has served as chairman of the board of each of these organizations. He is also a member of the board of directors of AXA Insurance (Canada) as well as chairman of its audit committee and a member of its investment committee. In 2004, Mr. Monahan was awarded an honorary doctorate in forestry science from Université Laval, Québec, and in 2006 he received the Pulp and Paper Excellence Award (PCPP) from the Québec Forest Industry Council. Mr. Monahan has been a director of Fortress Paper Ltd. since August 9, He is also a director of GMi. Principal occupation Board/Committee Memberships Corporate Director and Business Management Consultant Attendance at meetings during fiscal year 2010 Number of Common Shares held or controlled as at February 11, 2011 Board of Directors (Chairman) 2/2 Number: 800 Audit Committee N/A (1) Other reporting issuer directorships held as at the date hereof Fortress Paper Ltd. GMi Réal Sureau Québec, Canada Independent Director since June 15, 1010 Principal occupation Board/Committee Memberships Mr. Sureau is a chartered accountant. Over the course of his career, positions held by Mr. Sureau have included Vice President, Finance with Forex and the Canam Manac Group. He was also President of the Ordre des comptables agréés du Québec in and Vice President of the Patented Medicine Prices Review Board from 1995 to He is a director of Desjardins Financial Security Life Assurance Company and the Société de services financiers Fonds FMOQ inc. and its subsidiaries. Since November 2004, he has been a member of the Employment Insurance Board of Referees. He is also a member of the Disciplinary Council of the Ordre des comptables agréés du Québec. He is also a director of GMi. Corporate Director Attendance at meetings during fiscal year 2010 Number of Common Shares held or controlled as at February 11, 2011 Board of Directors 2/2 Number: 8,104 Audit Committee (Chairman) N/A (1) Other reporting issuer directorships held as at the date hereof GMi (1) The Audit Committee was formed on September 29, 2010 and held its first meeting on October 7, 2010, after the end of fiscal year

17 Over the past five (5) years, all of the aforementioned directors have had the principal occupation indicated opposite their names or have held various positions with the above-mentioned companies or their subsidiaries, predecessors or affiliated companies, with the exception of: François Gervais, who was managing director of RBC Capital Markets from 2003 to 2008; and Pierre Monahan, who was President of Bowater Forest Products Inc. and then Executive Vice President, Building Products at Bowater Inc. from 2001 to Corporate Cease Trade Orders or Bankruptcies To the knowledge of Valener and based on the information provided by the nominees for election as directors, none of the nominees (a) is, as at the date hereof, or was within ten (10) years before the date hereof, a director or a member of senior management of any company (including Valener) that meets one of the following conditions: (i) it was, while that person was acting in that capacity, subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than thirty (30) consecutive days; (ii) it was, after that person ceased to act in that capacity, subject to a cease trade order, an order similar to a cease trade order or an order that denied the relevant company access to any exemption under securities legislation that was in effect for a period of more than (30) consecutive days as a result of an event that occurred while that person was acting in that capacity; or (iii) while that person was acting in that capacity or within a year of that person ceasing to act in that capacity, it became bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency or was subject to or instituted any proceedings, arrangement or compromise with creditors or had a receiver, receiver manager or trustee appointed to hold its assets; or (b) has, nor has any personal holding company thereof, within ten (10) years before the date of this Circular, become bankrupt, made a proposal under any legislation relating to bankruptcy or insolvency, or become subject to or instituted any proceedings, arrangement or compromise with creditors, or had a receiver, receiver manager or trustee appointed to hold his or her assets or the assets of his or her holding company, as applicable. Penalties or Sanctions To the knowledge of Valener and based on the information provided by the nominees for election as directors, none of these nominees (a) has been subject to any penalties or sanctions imposed by a court relating to securities legislation or by a securities regulatory authority or has entered into an amicable agreement with a securities regulatory authority, or (b) has been subject to any other penalties or sanctions imposed by a court or regulatory body that would likely be considered important to a reasonable investor in deciding whether to vote for a proposed director. Appointment of the Auditors The auditors of Valener are Raymond Chabot Grant Thornton LLP, Chartered Accountants. The Valener Audit Committee recommended to the Valener Board that it renew the mandate of Raymond Chabot Grant Thornton LLP and the Valener Board approved its recommendation. Raymond Chabot Grant Thornton LLP was originally appointed auditors of Valener on June 15, An affirmative vote of a majority of votes cast at the Meeting is sufficient for the appointment of the auditors. The persons whose names are printed on the form of proxy intend to vote FOR the resolution appointing Raymond Chabot Grant Thornton LLP as auditors of Valener, which appointment shall remain in effect until the next Annual Meeting of Shareholders or until the appointment of their successor, and authorizing the directors to fix their remuneration, unless specifically instructed otherwise on the form of proxy. -14-

18 Auditors Fees The following table shows, by category, the fees invoiced by Raymond Chabot Grant Thornton LLP, Chartered Accountants, the auditors of Valener, for their services for the 108-day period ended on September 30, Fees (by category) 2010 (1) Audit $ Audit-related services - Tax-related services - Non-audit and Non-tax services - Total $ (1) The 108-day period ended on September 30, 2010 is Valener s first fiscal year given that Valener was incorporated on June 15, Audit fees include the total fees paid to Raymond Chabot Grant Thornton LLP for the audit of the annual financial statements and other documents to be filed with the Canadian Securities Administrators. Audit Committee For more information concerning the Valener Audit Committee, see Additional Information Valener s Audit Committee Information of the Valener Annual Information Form (available, in particular, on the SEDAR Website under Valener s profile, at and on the Valener Website at Creation of a Class of Preferred Shares At the Meeting, the Shareholders will be asked to consider and, if it is deemed advisable, pass the Special Resolution for the purpose of approving the creation of a class of preferred shares issuable in series, having the rights and restrictions described in Appendix B of this Circular, subject to a maximum of ten (10) million authorized preferred shares. For the Special Resolution to pass, it must be approved by at least 66 % of votes cast by all the Shareholders voting in person or represented by proxy at the Meeting. The full text of the Special Resolution appears in Appendix A of this Circular. It is proposed that a class of preferred shares be created to give Valener additional flexibility to facilitate its future financings in order to optimize its value. A maximum of ten (10) million preferred shares will be authorized for this class of preferred shares. Each series of preferred shares will consist of an authorized number of shares, which number shall not exceed the authorized number for this class of preferred shares taking into account all series created thereunder, and of such rights, privileges, restrictions and conditions as may be determined by the Valener Board prior to the issuance thereof. Except where provided for by law and in certain special circumstances as may be determined when a series of preferred shares is created, holders of preferred shares will not be entitled to vote at meetings of Shareholders. With respect to the payment of dividends and the distribution of assets in the event of the liquidation, dissolution or winding-up of Valener, whether voluntary or involuntary, the preferred shares shall rank prior to Common Shares and the other shares that are junior to them. They may also be given, in relation to the Common Shares and other shares junior to the preferred shares, any other privilege determined at the time they are created. The preferred shares are not being created as an anti-takeover measure. The rights and restrictions proposed for the preferred shares are described in more detail in Appendix B. The persons whose names are printed on the form of proxy intend to vote FOR the Special Resolution unless specifically instructed otherwise on the form of proxy. Holders of Common Shares have a right of dissent in respect of the Special Resolution proposed in Appendix A. Dissenting Shareholders are entitled to be paid the fair value of their Common Shares in accordance with section 190 of the Canada Business Corporations Act if they oppose the Special Resolution. The following text -15-

19 summarizes the course of action to be taken by dissenting Shareholders. Shareholders should review the provisions of section 190 of the Canada Business Corporations Act for more information. A Shareholder who wishes to dissent is required to send Valener, at or before the Meeting, a written objection to the Special Resolution to Valener s head office, 1717 du Havre Street, Montréal (Québec) H2K 2X3 (to the attention of the Corporate Secretary). Valener is required, within ten (10) days after the Shareholders adopt the Special Resolution proposed in Appendix A, to send each dissenting Shareholder a notice that the Special Resolution has been adopted, and the dissenting Shareholder is required, within twenty (20) days after receiving such notice from Valener, to send a written notice containing a demand for payment of the fair value of its Common Shares. The dissenting Shareholder is required, within thirty (30) days after sending such notice, to send the certificates representing the Common Shares in respect of which the Shareholder dissents to Valener or CIBC Mellon. The dissenting Shareholder is entitled to be paid the fair value of the Common Shares, determined as of the close of business on the day before the Special Resolution was adopted. Valener, not later than seven (7) days after (i) the day on which the action approved by the Special Resolution is effective or (ii) the day the notice containing the demand for payment was received, shall send the dissenting Shareholder a written offer to pay for the dissenting Shareholder s Common Shares. If the dissenting Shareholder fails to accept Valener s offer or if Valener fails to make an offer, Valener, or, failing which, the dissenting Shareholder may apply to the Superior Court of Québec (the Court ) to fix a fair value for the dissenting Shareholder s shares. The dissenting Shareholder shall be entitled to payment of the amount fixed by the Court. The Valener Board reserves the right, at its discretion, not to give effect to the Special Resolution described in Appendix A if too many holders of Common Shares exercise their rights of dissent. The Valener Board recommends that the Shareholders vote FOR of the proposed Special Resolution in Appendix A. Elements of Directors' Compensation Program DIRECTORS COMPENSATION Valener s four (4) independent directors also serve as Valener s representatives on the GMi Board of Directors, in accordance with the provisions of Gaz Métro s Limited Partnership Agreement as amended and restated on September 30, 2010 in the context of its corporate restructuring. As such, they receive the basic annual retainer payable to directors of GMi as members of the GMi Board of Directors and its various committees. Reference is made to Report on Executive Officer and Director Compensation Director Compensation Analysis in the GMi Annual Information Form (on the SEDAR website, under GMi s profile, at for information concerning the basic annual retainer payable by GMi to directors of GMi. During the fiscal year ended on September 30, 2010, Valener did not pay a basic annual retainer to its directors and the directors of Valener did not receive any basic annual retainer other than the basic annual retainer paid by GMi to its directors. During the fiscal year ended on September 30, 2010, the only compensation payable by Valener to its directors consisted of a $2,000 attendance fee per director, paid in cash, for each meeting of the Valener Board or its Audit Committee. The attendance fee was set by the Valener Board at exactly the same amount as the attendance fee payable by the GMi Board of Directors to its directors. Under the Administration Agreement, Gaz Métro has agreed to reimburse Valener for attendance fees paid by Valener to its directors for attendance at meetings of the Valener Board or its committees, subject to a maximum reimbursement of $200,000 in any given fiscal year, pursuant to Gaz Métro s undertaking to reimburse all Valener s general administrative expenses incurred since October 1, 2010, subject to certain restrictions (See Management of Valener Administration Agreement Reimbursement of Costs by Gaz Métro). The directors of Valener are also reimbursed for expenses they incur, including travelling expenses, to attend meetings of the Valener Board and its Audit Committee. -16-