Special Shareholder Meeting AGENDA City of Guelph Council Chambers August 13, :00 p.m. to 8:00 p.m.

Transcription

1 Special Shareholder Meeting AGENDA City of Guelph Council Chambers August 13, :00 p.m. to 8:00 p.m. # ITEM TIME ACTION LEAD Attmt(s) 1. Agenda Approval 6:00 Standing Chair A. 2. Declaration of Pecuniary Interest or Conflict of Interest 3. GMHI Shareholder Meeting Minutes June 16, 2014 Standing Chair 6:05 Approve Chair B. 4. Introduction of GMHI CEO 6:10 Chair/CEO 5. GMHI Restructuring Report from CEO Business Case Study (Schedule A) Shareholder Declaration (Schedule C) Organizational By-law (Schedule E) 6:15 Receive Approve Approve Approve CEO C. Recess to Closed Session 7:30 Municipal Act, 2001, S. 239 (2)(b) personal matters about an identifiable individual, including municipal or local board employees Resume Open Session 7:45 6. Appointment of Directors 7:45 7. Adjourn 8:00 Attachments: A. Resolutions B. June 16, 2014 Shareholder Meeting Minutes C. Report from CEO (with Schedules A F)

2 Attachment A Report to Shareholder (Open) Date of Meeting: August 13, 2014 RE: Resolutions GMHI Shareholder Minutes RESOLVED that: The Minutes of the GMHI Annual General Meeting (open and closed session) of the Shareholder held June 16, 2014 be approved. BUSINESS CASE STUDY RESOLVED that: The Business Case Study dated July 22, 2014 is approved and adopted by the City as required pursuant to subsection 6(d) of O.Reg.599/06 under the Municipal Act, AMALGAMATION WHEREAS: Guelph Hydro Inc. (the "Subsidiary") is a wholly-owned subsidiary of Guelph Municipal Holdings Inc (the Corporation ). AND WHEREAS: The Corporation has agreed to amalgamate with its Subsidiary pursuant to subsection 177(1) of the Business Corporations Act (Ontario) (the "Act"). THEREFORE, it is resolved that: 1

3 Attachment A 1. The amalgamation of the Corporation with its Subsidiary pursuant to subsection 177(1) of the Act is approved; 2. Any officer or director of the Corporation is authorized and directed to sign the Articles of Amalgamation for and on behalf of the Corporation and to file them with the Director appointed under the Business Corporations Act (Ontario); 3. The Board of Directors of the Corporation is hereby authorized to revoke this special resolution without further approval of the sole shareholder of the Corporation at any time prior to the endorsement by the Director under the Business Corporations Act (Ontario), of a certificate of amalgamation of articles in respect of the amalgamation referred to above. SHAREHOLDER DECLARATION RESOLVED that: The Shareholder Declaration dated August 13, 2014 between the City and the amalgamated corporation is approved and shall be effective on the date the Articles of Amalgamation are filed with the Director appointed under the Business Corporations Act (Ontario). AND that: The CAO of the City, as the Shareholder s Representative, is directed to execute and deliver the Shareholder Declaration to the amalgamated corporation upon the filing of the Articles of Amalgamation with the Director appointed under the Business Corporations Act (Ontario). ORGANIZATIONAL BY-LAW RESOLVED that: The Organizational By-law (By-law # 1) approved by resolution of the Board of Directors of GMHI on July 29, 2014 is approved. 2

4 Attachment B 2013 Annual General Meeting of the Shareholder Minutes of Meeting Monday, June 16, 2014 at 6:00 P.M. Guelph City Hall, Council Chambers PRESENT SHAREHOLDERS K. Farbridge (Chair) B. Bell C. Guthrie J. Furfaro G. Kovach I. Findlay L. Piper K. Wettstein (Director) M. Laidlaw J. Hofland (Director) T. Dennis (Director) A. Van Hellemond BOARD T. Sehl STAFF A. Pappert D. Jaques A. Horsman J. Surgeoner R. Kerr GUESTS ABSENT B. Cowan (Vice-Chair, Guelph Holdings Inc.) L. Burcher (Director) ITEM COMMENTS RESPONSIBILITY & FOLLOW-UP Motion to approve the agenda. 1. Welcome and Agenda Approval The GMHI Annual General Meeting of the Shareholder agenda is approved. Moved, Seconded and Carried. 2. Declaration of Pecuniary Interest or Conflict of Interest 3. GMHI Shareholder Meeting Minutes None declared. Motion to approve. The Minutes of the GMHI Annual General Meeting (Open Session) of the Shareholder held July 10, 2013, as amended, are approved. Annual General Meeting of the Shareholder June 16, 2014 Page 1 of 5

5 Attachment B Moved, Seconded and Carried. 4. GMHI Annual Report to the City The Chair advised that the 2013 GMHI Annual Report would be available to the public on June 17, The Chair reviewed the history of GMHI and the Business Activities of GMHI in 2013, including the ongoing development of energy assets, creation of a development company, the development of an independent management team and the monitoring of mergers and acquisitions in the LDC industry. The Chair congratulated GHI for its excellent 2013 Sustainability Report, which is available publically, and introduced Brian Cowan, the Vice-Chair of the Guelph Hydro Inc. Board. The Chair introduced Ted Sehl, the existing community member of the GMHI Board. On behalf of the GMHI Board, Officers and Staff, the Chair thanked the Shareholder for its continued support. Councillor Piper requested information from GHI regarding GHESI s standing of fourth out of 76 utilities in energy conservation, in particular, Brian Cowan agreed to provide this information. Councillor Hofland received information from Brian Cowan regarding any trends in conservation that are being observed as a result of the smart meter installation. ACTION: Brian Cowan to provide information about the energy conservation rankings, specifically, what is the difference in the amount of energy conservation savings between Guelph and the first ranked city and what would it take for Guelph to be ranked first. Annual General Meeting of the Shareholder June 16, 2014 Page 2 of 5

6 Attachment B Motion The Compensation Report from the Board of Directors of GMHI regarding the activities of GMHI in 2013 be received. Moved, seconded and carried Motion The Compliance Report from the Board of Directors of GMHI dated May 29, 2014 regarding the activities of GMHI in 2013 be received. Moved, seconded and carried. 5. Audited 2013 Financial Statements The CFO provided an explanation of his report regarding the inability to produce an audit of the consolidated GMHI financial statements. There was a discussion regarding the implications of receiving unconsolidated statements. The CFO advised that this issue would be explored further with the auditors. The CFO confirmed that the auditors for both the City and GHI were selected through an RFP process. Motion: In lieu of an audit of the consolidated 2013 financial statements of GMHI as required by IFRS 10, the 2013 unconsolidated audited financial statements shall be presented to the Shareholder with an Annual General Meeting of the Shareholder June 16, 2014 Page 3 of 5

7 Attachment B accompanying special report on the audit of the GMHI financial statements by Deloitte. Moved, seconded and carried. The CFO introduced the financial statements. Councillor Bell questioned the deficit showing on the income statements and how this was being funded. Jade Surgeoner advised that on a cash flow basis, this deficit was being funded from the money GMHI received in 2013 from the sale of 777 shares of GMHI to the City and confirmed this constituted a dilution of share value. Motion The 2013 audited, unconsolidated GMHI Financial Statements and auditor s report are received. Moved, seconded and carried. 6. Recess into Closed Session Resumption of Open Session Report from Closed Session Motion to move into closed session. Moved, Seconded and Carried. The meeting resumed at 7:00 p.m. Motion That Council rise and report back in open session on the approval of the following items: Confirmation of the closed minutes held on July 10, 2013 and April 28, 2014 The appointment of auditors; and Annual General Meeting of the Shareholder June 16, 2014 Page 4 of 5

8 Attachment B The amalgamation of GHI and GMHI and communications for that purpose Moved, seconded and carried. Closing Remarks The Chair thanked GMHI staff and officers for their hard work on the AGM. The Chair made closing remarks. Adjourn Motion to Adjourn. That the 2013 GMHI Annual General Meeting of the Shareholder be adjourned. Moved, Seconded and Carried. Annual General Meeting adjourned at 7:05 p.m. Annual General Meeting of the Shareholder June 16, 2014 Page 5 of 5

9 Minutes of Guelph City Council as Shareholders of Guelph Municipal Holdings Inc. Held in the Council Chambers, Guelph City Hall on Monday, June 16, 2014 at 6:00 p.m. Attendance DRAFT MINUTES SUBJECT TO CONFIRMATION Council: Mayor Farbridge Councillor J. Hofland Councillor B. Bell Councillor M. Laidlaw (arrived at 6:02 p.m.) Councillor T. Dennis Councillor G. Kovach (arrived at 6:07 p.m.) Councillor L. Piper Councillor I. Findlay Councillor A. Van Hellemond Councillor J. Furfaro Councillor K. Wettstein Councillor C. Guthrie Regrets: Staff: Others Present: Councillor L. Burcher Ms. A. Pappert, Chief Administrative Officer Mr. A. Horsman, Executive Director, Finance & Enterprise Ms. D. Jaques, General Manager of Legal & Realty Services/City Solicitor Mr. R. Kerr, Corporate Manager, Community Energy Ms. J. Surgeoner, Acting Manager Financial Reporting & Accounting/Senior Financial Analyst, Financial Reporting Mr. S. O Brien, City Clerk Ms. G. van den Burg, Council Committee Coordinator Mr. T. Sehl, Director of GMHI Mr. B. Cowan, Vice Chair of the Board of GHI Call to Order (6:00 p.m.) Mayor Farbridge called the meeting to order. Disclosure of Pecuniary Interest and General Nature Thereof There were no disclosures. Approval of Agenda 1. Moved by Councillor Bell Seconded by Councillor Hofland That the open meeting agenda for the Special Council Meeting held on June 16, 2014 be approved. VOTING IN FAVOUR: Mayor Farbridge, Councillors Bell, Dennis, Findlay, Furfaro, Guthrie, Hofland, Piper, Van Hellemond and Wettstein (10) Page 1

10 June 16, 2014 Guelph City Council Meeting VOTING AGAINST: (0) CARRIED Confirmation of Minutes 2. Moved by Councillor Dennis Seconded by Councillor Van Hellemond That the open minutes of the Special Council Meeting held on July 10, 2013 be confirmed, as amended. VOTING IN FAVOUR: Mayor Farbridge, Councillors Bell, Dennis, Findlay, Furfaro, Guthrie, Hofland, Piper, Van Hellemond and Wettstein (10) VOTING AGAINST: (0) CARRIED Councillor Laidlaw arrived at 6:02 p.m. Councillor Kovach arrived at 6:07 p.m. Consent Reports The following matters were considered: GMHI Report on Compensation for Directors for Moved by Councillor Furfaro Seconded by Councillor Hofland That the Compensation Report from the Board of Directors of GMHI regarding the activities of GMHI in 2013, be received. VOTING IN FAVOUR: Mayor Farbridge, Councillors Bell, Dennis, Findlay, Furfaro, Guthrie, Hofland, Kovach, Laidlaw, Piper, Van Hellemond and Wettstein (12) VOTING AGAINST: (0) CARRIED GMHI Compliance Report 4. Moved by Councillor Kovach Seconded by Councillor Laidlaw That the Compliance Report from the Board of Directors of GMHI dated May 29, 2014 regarding the activities of GMHI in 2013, be received. VOTING IN FAVOUR: Mayor Farbridge, Councillors Bell, Dennis, Findlay, Furfaro, Guthrie, Hofland, Kovach, Laidlaw, Piper, Van Hellemond and Wettstein (12) VOTING AGAINST: (0) CARRIED Page 2

11 June 16, 2014 Guelph City Council Meeting GMHI Report from the Chief Financial Officer 5. Moved by Councillor Hofland Seconded by Councillor Dennis That in lieu of an audit of the consolidated 2013 financial statements of GMHI as required by IFRS 10, the 2013 unconsolidated audited financial statements shall be presented to the Shareholder with an accompanying special report on the audit of the GMHI financial statements by Deloitte. VOTING IN FAVOUR: Mayor Farbridge, Councillors Bell, Dennis, Findlay, Furfaro, Guthrie, Hofland, Kovach, Laidlaw, Piper, Van Hellemond and Wettstein (12) VOTING AGAINST: (0) CARRIED GMHI Receipt of GMHI Financial Statements 6. Moved by Councillor Bell Seconded by Councillor Hofland That the 2013 audited, unconsolidated GMHI Financial Statements and auditor s report, be received. VOTING IN FAVOUR: Mayor Farbridge, Councillors Bell, Dennis, Findlay, Furfaro, Guthrie, Hofland, Kovach, Laidlaw, Piper, Van Hellemond and Wettstein (12) VOTING AGAINST: (0) CARRIED Authority to Resolve into a Closed Meeting of Council 7. Moved by Councillor Piper Seconded by Councillor Findlay That the Council of the City of Guelph now hold a meeting that is closed to the public, pursuant to Section 239 (2) (b) and (a) of the Municipal Act, with respect to: b) personal matters about an identifiable individual, including a matter in respect of which a Council, Board, Committee or other body may hold a closed meeting under another Act. a) security of the property of the municipality or local board in regards to the governance of Guelph Municipal Holdings Inc. CARRIED Page 3

12 June 16, 2014 Guelph City Council Meeting Closed Meeting (6:24 p.m.) The following confidential matters were considered: Confirmation of Closed Meeting Minutes held July 10, 2013 & April 28, 2014 C.GMHI Appointment of Auditors C.GMHI Amalgamation of GHI and GMHI and Communications for that Purpose Rise and Report from Closed Meeting (6:59 p.m.) Open Meeting Council reported back from its closed meeting as follows: Confirmation of Closed Meeting Minutes 8. Moved by Councillor Dennis Seconded by Councillor Hofland That the closed minutes of the Special Council Meeting held on July 10, 2013 and April 28 th, 2014 be confirmed as amended. VOTING IN FAVOUR: Mayor Farbridge, Councillors Bell, Dennis, Findlay, Furfaro, Guthrie, Hofland, Kovach, Laidlaw, Piper, Van Hellemond and Wettstein (12) VOTING AGAINST: (0) CARRIED C.GMHI Appointment of Auditors 9. Moved by Councillor Dennis Seconded by Councillor Kovach 1. That the recommendation of the GMHI Board of Directors regarding the appointment of auditors for GHI and its Subsidiaries and GMHI be received; and 2. That KPMG LLP be appointed as auditors for Guelph Hydro Inc. and its Subsidiaries for its 2014 fiscal year; and 3. That KPMG LLP be appointed as auditors for Guelph Municipal Holdings Inc. for its 2014 fiscal year. Page 4

13 June 16, 2014 Guelph City Council Meeting VOTING IN FAVOUR: Mayor Farbridge, Councillors Bell, Dennis, Findlay, Furfaro, Guthrie, Hofland, Kovach, Laidlaw, Piper, Van Hellemond and Wettstein (12) VOTING AGAINST: (0) CARRIED C.GMHI Amalgamation of GHI and GMHI and Communications for that Purpose 10. Moved by Councillor Guthrie Seconded by Councillor Laidlaw That the recommendations related to the amalgamation of GHI and GMHI, in principle, be approved. VOTING IN FAVOUR: Mayor Farbridge, Councillors, Dennis, Findlay, Furfaro, Guthrie, Hofland, Kovach, Laidlaw, Piper, Van Hellemond and Wettstein (11) VOTING AGAINST: Councillor Bell (1) CARRIED Adjournment (7:01 p.m.) 11. Moved by Councillor Hofland Seconded by Councillor Furfaro That the meeting be adjourned. CARRIED Mayor Farbridge Stephen O Brien - City Clerk Page 5

14 Attachment C TO SERVICE AREA City Council As Shareholder of GMHI Guelph Municipal Holdings Inc. DATE August 13, 2014 SUBJECT Restructuring of GMHI REPORT NUMBER GMHI PURPOSE OF REPORT EXECUTIVE SUMMARY This report contains the documents required to support the corporate and governance restructuring of GMHI and Guelph Hydro Inc. (GHI). In particular, the report: 1. Presents the Business Case Study supporting the request by the GMHI Board for approval by the City of the amalgamation of GMHI and GHI; 2. Provides details of a new Shareholder Declaration between the City and the amalgamated corporation; and, 3. Requests approval by the Shareholder of a new Organizational By-law passed by the GMHI Board. KEY FINDINGS The Business Case Study supports the amalgamation of GMHI and GHI, based on a review of the tax, legal and financial implications and a qualitative and quantitative analysis of the status quo and amalgamation options. The City is required by O.Reg. 599/06 under the Municipal Act, 2001, to adopt the Business Case Study prior to proceeding with the amalgamation. The directors for the amalgamated corporation will be appointed in the Articles of Amalgamation. The proposed recommendation is for appointment of the existing GMHI Board members, less the Chair of GHI, and the appointment of a current member of the GHI Board. The amalgamation will require a new Shareholder Declaration to be made between the City and the amalgamated corporation. There are a number of changes from the existing declaration being proposed in the new 1

15 Attachment C declaration reflecting the maturity of GMHI and creation of the amalgamated corporation. The Business Corporations Act (Ontario) requires that the amalgamated corporation have the By-laws of GMHI as its By-laws. A new Organizational By-law (By-Law No. 1) for GMHI was approved by the GMHI Board on July 29, The Shareholder is required to approve the By-law. There are no substantive changes to the By-law other than those required to reflect the proposed amalgamation. FINANCIAL IMPLICATIONS The financial implications are set out in the Business Case Study and predict a savings of $379,100 annually if the amalgamation proceeds. ACTION REQUIRED The City is being requested to adopt the Business Case Study, approve the amalgamation, the new Shareholder Declaration and a new By-law No. 1 and approve the appointment of the directors of Amalco. RESOLUTIONS: BUSINESS CASE STUDY 1. The Business Case Study dated July 22, 2014 is approved and adopted by the City as required pursuant to subsection 6(d) of O.Reg.599/06 under the Municipal Act, AMALGAMATION WHEREAS: Guelph Hydro Inc. (the "Subsidiary") is a wholly-owned subsidiary of Guelph Municipal Holdings Inc (the Corporation ). AND WHEREAS: The Corporation has agreed to amalgamate with its Subsidiary pursuant to subsection 177(1) of the Business Corporations Act (Ontario) (the "Act"). 2

16 Attachment C THEREFORE, it is resolved that: 2. The amalgamation of the Corporation with its Subsidiary pursuant to subsection 177(1) of the Act is approved; 3. Any officer or director of the Corporation is authorized and directed to sign the Articles of Amalgamation for and on behalf of the Corporation and to file them with the Director appointed under the Business Corporations Act (Ontario); 4. The Board of Directors of the Corporation is hereby authorized to revoke this special resolution without further approval of the sole shareholder of the Corporation at any time prior to the endorsement by the Director under the Business Corporations Act (Ontario), of a certificate of amalgamation of articles in respect of the amalgamation referred to above. SHAREHOLDER DECLARATION 5. The Shareholder Declaration dated August 13, 2014 between the City and the amalgamated corporation is approved and shall be effective on the date the Articles of Amalgamation are filed with the Director appointed under the Business Corporations Act (Ontario). 6. The CAO of the City, as the Shareholder s Representative, is directed to execute and deliver the Shareholder Declaration to the amalgamated corporation upon the filing of the Articles of Amalgamation with the Director appointed under the Business Corporations Act (Ontario). ORGANIZATIONAL BY-LAW 7. The Organizational By-law (By-law # 1) approved by resolution of the Board of Directors of GMHI on July 29, 2014 is approved. BACKGROUND On May 8, 2014, the GMHI Board passed the following resolutions: GMHI Restructuring Initial Amalgamation Resolution 3

17 Attachment C WHEREAS Guelph Municipal Holdings Inc. (the Corporation ) is the sole shareholder of Guelph Hydro Inc. (the Subsidiary ); AND WHEREAS under section 177 of the Business Corporations Act (Ontario), a holding corporation may amalgamate with any one or more of its subsidiary corporations, and continue as one corporation in the manner provided in that section without complying with sections 175 and 176 of the Act; AND WHEREAS the Board has determined the current corporate structure is not serving the business and there is a desire to flatten the structure; THEREFORE, it is resolved that: 1. The Corporation approves, in principle, the amalgamation of the Corporation and Subsidiary in accordance with section 177 of the Act, subject to the following: (a) (b) The appropriate due diligence as set out in the Business Case Study is completed and the results are satisfactory to the Board; and, The Shareholder, the Corporation of the City of Guelph, approves the amalgamation. RESOLVED that: The previous resolution be shared with the Subsidiary and Shareholder and that the Subsidiary and Shareholder be asked to support, in principle, the amalgamation of GMHI and GHI subject to due diligence. On June 13, 2014, the GHI Board passed the following resolution: BE IT RESOLVED THAT the Board of Directors of GHI approve the preparation of a business case and the conducting of due diligence in consideration of the Shareholder s proposal to amalgamate the Corporation with GMHI; AND BE IT RESOLVED THAT upon completion of the business case and due diligence that the proposed amalgamation be brought back to the Board for consideration; AND BE IT RESOLVED THAT management be and is hereby authorized to conduct such due diligence and otain such information from the Shareholder as may be reasonably required to establish such business case and further that management be authorized to collaborate with Shareholder staff in the conduct of its due diligence and to provide such information and documentation as may be required by the Shareholder to complete its due diligence for the purpose of its analysis of the amalgamation proposal. On June 6, 2014, the Shareholder passed the following resolution: Initial Amalgamation Resolution 4

18 Attachment C WHEREAS The Corporation of the City of Guelph (the City ) is the sole shareholder of Guelph Municipal Holdings Inc. ( GMHI ), which is the sole shareholder of Guelph Hydro Inc. ( GHI ); AND WHEREAS under section 177 of the Business Corporations Act (Ontario), a holding corporation may amalgamate with any one or more of its subsidiary corporations, and continue as one corporation in the manner provided in that section without complying with sections 175 and 176 of the Act; AND WHEREAS the GMHI Board has determined the current corporate structure is not serving the business and there is a desire to flatten the structure; THEREFORE, it is resolved that: 1. The City approves, in principle, the amalgamation of GMHI and GHI in accordance with section 177 of the Act, subject to the following: (a) The appropriate due diligence as set out in the Case for Restructuring is completed and the results are satisfactory to the City. 2. The City approves GMHI making public its intent to amalgamate GMHI and GHI. REPORT Business Case Study and Due Diligence GMHI Staff in collaboration with GHI Staff and external legal and tax advice, have completed the due diligence related to the amalgamation. A summary of the due diligence is attached to the Business Case Study. There were no concerns raised with the tax, legal and financial aspects of the amalgamation itself, although a number of implementation concerns were raised. The issues will be resolved through the next two months. A Business Case Study (BCS) is required by the Municipal Act and regulations thereto as a condition of the City approving the amalgamation. The BCS was prepared by GMHI with input from GHI. The content of the BCS was informed by the City s template for a Business Case, which was designed to support capital project approvals and thus had to be modified for the purpose of the BCS. The BCS sets out the rationale for the amalgamation, the gap analysis, the quantitative and qualitative analysis and finally makes conclusions and recommendations. The Business Case Study is attached as Schedule A. 5

19 Attachment C On July 29, 2014, the GMHI Board reviewed the Business Case Study. Following this review, the Board passed a resolution approving the amalgamation and made a recommendation to the Shareholder that the amalgamation be approved. The full text of the GMHI Board resolution is attached as Schedule B. Both the GMHI and GHI Boards must approve the amalgamation. It is understood that GHI will be considering their approval at the GHI Board meeting to be held August 11, Assuming all the approvals are obtained, the intention is to have the amalgamation effective on September 8, Shareholder Declaration In consequence of the amalgamation, a new Shareholder Declaration from the City to GMHI has been prepared in consultation with the City and GMHI Staff. The new declaration reflects the changes that have occurred over the last three years in the existing declaration and the maturity of GMHI. The new Shareholder Declaration is attached as Schedule C. The new Shareholder Declaration has been drafted to be easier to understand and to provide clarity of the intent and purpose of GMHI. While there are a number of changes to the declaration, the reservation of decision making power to Council for fundamental changes and material issues in relation to GMHI has not changed. The following are the most significant changes in the declaration and an explanation for the changes. Section 4.04 Composition of the GMHI Board Previous Version: The Board was composed of four Councillors, the Mayor, the Chair of each GMHI Subsidiary and two Independent Directors. Proposed Change: The GMHI Board shall consist of: i. the Mayor of the City of Guelph or a Councillor designated by the Mayor to be appointed as a director for a specific term; ii. one City Councillor; and, 6

20 Attachment C iii. the balance of the members of the Board shall be Independent Directors, except that a member of a GMHI Subsidiary Board may be appointed as a member of the GMHI Board. Explanation: GMHI s current and anticipated growth requires its board to be skills based. The issues of continuity and succession management are also factors dictating less reliance on Councillors to fill positions on the Board. There is a growing trend in the LDC industry to move away from shareholder dominated Boards which is in accordance with best practices for the governance of corporations. The proposed composition of the Board is in alignment with Council representation on other City Boards, such as the Elliott and GJR. The automatic appointment of the Chairs of Subsidiary Boards to the Board of GMHI has been eliminated. After a review of best practices, it was determined that the more appropriate model is to have a GMHI Board member or a member of GMHI senior management appointed to the Subsidiary Board. This will allow communication between the Subsidiary Board and parent Board and assist with the alignment of strategic objectives between the corporations. To allow for flexibility in the future, members of GMHI Subsidiary Boards are not prohibited from being appointed to the Board. Section GMHI Subsidiary Boards Previous Version: The existing Shareholder declaration reserved to the City the right to appoint the directors of GMHI Subsidiaries and also reserved decisions regard those Subsidiaries to the City. Proposed Change: The GMHI Board shall appoint the members of GMHI Subsidiary Boards in accordance with the terms of the Shareholder Declarations between GMHI and its Subsidiaries. Explanation: GMHI has matured in the three years since its incorporation and has the ability to provide oversight to the corporations it owns. Each of the corporations which GMHI owns or plans to own are different and require different governance structures. For example, both GHESI and GJR are mature companies with existing businesses, 7

21 Attachment C Envida is a start-up company and DevCo does not yet have any assets. GMHI needs the flexibility to address changes in the corporations over time and is in the best position to determine the composition of the Subsidiary Boards and what level of decision making it will, as owner, reserve to itself. Section Dividends Previous Version: The existing Shareholder Declaration included a dividend policy for both GHI and GMHI, which essentially tried to guarantee the City would receive $1.5M in dividend payments each year. Proposed Change: The GMHI Board shall establish policies regarding the payment of dividends to the City, from time to time, which policy shall be approved by the City. Explanation: GMHI now has a better understanding of the current and future pressures on the GHESI and Envida businesses which may impact the amount of the dividend able to be paid to the City. Over the course of the next few months, GMHI will develop a new policy for the payment of dividends to the City and bring it for approval by Council in early Subject to any material changes in its business, it is the intention of GMHI to continue to pay the dividend of $1.5M per year until a new dividend policy is approved by the Board and the City. The intention is that this Shareholder Declaration will be effective on the date of amalgamation of GMHI and GHI and the existing Shareholder Declaration will be repealed as of that date. On July 29, 2014, the GMHI Board reviewed the new Shareholder Declaration and passed a resolution recommending the City approve the new declaration effective upon the amalgamation being completed. The GMHI Board resolution is attached as Schedule D. Organizational By-law The OBCA states that upon amalgamation, the articles and by-laws of the parent corporation (GMHI) will be the articles and by-laws of the amalgamated corporation. The articles of GMHI have been reviewed and there are no changes to be made. 8

22 Attachment C The original organizational by-law for GMHI was approved by the Board on December 11, In discussions with the GHI corporate secretary, it was decided that a new by-law would be drafted that was easier to understand. No substantive changes to the by-law have been made except for the addition of electronic voting. The new organizational by-law is attached as Schedule E. At its July 29, 2014 Board meeting, the GMHI Board approved the new organizational by-law. The GMHI Board resolution is attached as Schedule F. In accordance with the OBCA, the by-law must also be approved by the shareholder. Next Steps Following the approval of GHI and the City for the amalgamation, GHI and GMHI staff will proceed with implementation. The implementation plan is included in the Business Case Study GMHI STRATEGIC PLAN READINESS: GMHI will build its resources and skill sets to be in a position of readiness to deliver on initiatives. CAPABILITY: GMHI will put into place a collaborative structure that will take ideas and process them into outcomes. IDENTITY: GMHI will differentiate itself from the City and its purpose will be clearly understood by all stakeholders and the community. CORPORATE STRATEGIC PLAN 2.1 Build an adaptive environment, for government innovation to ensure fiscal and service sustainability 9

23 Attachment C ATTACHMENTS Schedule A Business Case Study Schedule B GMHI Resolution re Amalgamation Schedule C Shareholder Declaration Schedule D GMHI Resolution re Shareholder Declaration Schedule E Organizational By-law Schedule F GMHI Resolution re Organizational By-law. Barry Chuddy CEO, Guelph Municipal Holdings Inc. 10

24 Schedule A A Business Case Study To Support the Amalgamation of GMHI and GHI Prepared by: GMHI Date: July 22,

25 GMHI/GHI Amalgamation Business Case Study i TABLE OF CONTENTS Table of Contents... i Section 1: Executive Summary... 1 Section 2: Background (Gap Analysis)... 3 Section 3: Objectives / Desired Outcomes... 6 Section 4: Environmental Analysis... 9 Section 5: Option Identification Section 6: Qualitative & Quantitative Analysis.14 Section 7: Due Diligence Review and Ancillary Work..30 Section 8: Alignment to Strategic Plans.32 Section 9: Conclusions & Recommendations Section 10: Implementation Strategy Section 11: Approval Signatures Schedule 1: Due Diligence Results.37 i

26 GMHI GHI Business Case Study 1 SECTION 1: EXECUTIVE SUMMARY Introduction In 2011, the City of Guelph established a municipal holding company, Guelph Municipal Holdings Inc. (GMHI), to manage City-owned assets more strategically, to maximize the value of those assets, and to achieve greater alignment with the City's priorities and approach to accountability and transparency. GMHI is one example of how Guelph is doing business differently by taking an enterprising approach to city building and delivering value to the community. Since its establishment, GMHI has provided oversight for Guelph Hydro Inc. (GHI), a holding company, and its subsidiaries, the regulated utility Guelph Hydro Electric Systems Inc. (GHESI) and the unregulated company Envida Community Energy Inc. (Envida). The City of Guelph is GMHI's sole shareholder. GMHI has the capacity to bring other City assets under its umbrella to maximize their value and alignment, and it is actively exploring new partnership opportunities. However, under its current governance structure, GMHI is hampered from fully achieving what it was established to do. A change in governance structure would improve GMHI's agility and responsiveness, strategically align the family of companies, and increase the value of assets. Growth & Emerging Businesses GMHI is looking forward to actively growing new businesses and exploring a series of emerging opportunities. In , GMHI will acquire two businesses - a new real estate based development corporation (i.e. DevCo) to manage select City assets and operations such as downtown land parcels and parking and Guelph Junction Railway (GJR), an established railway with emerging potential. The City, GMHI and GHI/Envida are also incubating a Guelph Thermal Utility based on the District Energy Strategic Plan. Pursuant to a Memorandum of Understanding with the City of Guelph, GHI/Envida has developed several projects that implement Guelph's Community Energy initiative. As a result, Envida is positioned to operate like a start-up company to lead and gain implementation partners for the Thermal Utility. Under the current corporate and governance structure, the business is unable to make the transition from a tactical developer of projects to playing a strategic start up role in the establishment of a Thermal Utility. Changing Business Needs GMHI is at an exciting point in its development. Over the next two years, GMHI will oversee up to three new companies (GJR, DevCo and a Thermal Utility) in addition to the current three companies (GHI, GHESI and Envida). 1

27 2 To meet the opportunities ahead, GMHI must ensure it has the correct balance of organizational agility, skills and resources. It must be able to advise, inform, and make recommendations to the City, as Shareholder, about the opportunities, challenges, and operations of the companies that report to it. In reviewing its current situation, GMHI has identified that its family of companies is not optimally or strategically aligned. Its governance structure is cumbersome, with multiple holding companies and subsidiary boards with different communication protocols, systems, and approaches to risk management. This complicates business deliberations, information sharing, and the pursuit of shared strategic directions. In keeping with best practices in corporate governance, the structure should be more streamlined and flatter to enable greater alignment, better use of resources and talent, and the ability to capitalize on business opportunities and increase value. Timely Response It is important to pursue this work now because: 1. In 2015, GHESI will be required to file a Cost of Service (COS) rates application with the Ontario Energy Board, and which application will result in new distribution rates for 2016 that will underpin distribution rates for the subsequent four years. The COS is required to include information about structural or organizational changes. The preparation of this application is proceeding. 2. Two Task Forces, comprised of GMHI and GHI Directors, will provide advice to GMHI in the summer of 2014 regarding the best model for a Thermal Utility and its impact on Envida, and the criteria for evaluating future merger and/or acquisition opportunities for GHESI. 3. GMHI has hired a CEO of GMHI. The amalgamation will create an opportunity to assess all internal resources available to GMHI to support business growth and emerging opportunities. 4. A new structure will enable the Board and CEO to leverage current resources to grow the businesses and secure the conditions for success which enable the pooling of resources - capital assets, skilled Board members and staff and streamlined systems. Conclusion The City of Guelph established GMHI so that it could manage City-owned assets more strategically, maximize value, and leverage assets to support broader City priorities including economic development, job creation, and better services. GMHI is at an exciting point in meeting its mission. A more streamlined governance structure will provide the organizational agility, skills, and resources needed for GMHI to meet the business opportunities ahead and achieve what it was established to do. 2

28 3 SECTION 2: BACKGROUND (GAP ANALYSIS) GMHI was officially incorporated in Its governance structure was established through a Shareholder Declaration with the City, Guelph Hydro Inc., and subsidiaries. Creation of the holding company was made possible through new Municipal Act provisions. At that time, incorporation opened a new window for exploration into strengthened asset management approaches. GMHI continues to be of interest to other provincial municipalities as a leading practice and new tool to support fiscal sustainability and improved customer service. In 2012 and 2013, GMHI continued to serve as an innovative municipal asset management model. It pursued preliminary directions, educated itself to the complex operating environment, and began to further position itself for success as outlined in its strategic and business plans. Presently, emerging factors and trends agreed upon by the GMHI board members present the necessary opportunity to rethink the existing governance structures and further evolve the role of GMHI for greater value and community benefit including: a) Community Energy Initiative (CEI): Without a shared focus and strategy to support the community endorsed goals and objectives of the Community Energy Initiative, specifically the Thermal Utility proposal, Guelph will miss a significant opportunity for growth, development, fiscal and environmental sustainability. b) Provincial Announcements: A recent Provincial Blue Ribbon Panel strongly intimated the immediate need for municipalities to begin exploring merger and acquisition opportunities of their LDCs. This action requires full collaboration, understanding, well aligned business goals and transparency to ensure the greatest returns and community benefit. c) Maturity: As GMHI grows and develops further, significant opportunities continue to arise for capital pooling, resource sharing and diversification. As complexity increases, so too must board strength to match future requirements. Expertise in business strategy, performance management, execution, investments, mergers and acquisitions, organizational health and talent management, business risk management, core governance and compliance will be imperative for both the board and GMHI staff. 3

29 4 To that end, a plan is proposed to restructure the GMHI group of companies through a flattening of the corporate structure and a rejuvenated governance structure which will allow clearer alignment of the City s strategic direction and goals with the business and strategic plans of the GMHI group of companies. The following is an outline of the plan: 1. Flattening of the corporate structure by amalgamating the two holding companies, GHI and GMHI, into a new corporation which will continue as GMHI. This will result in the following outcomes: Remove redundancy in having two holding companies Create greater oversight by GMHI of the revenue producing asset (GHESI) Allow more efficient use of existing resources by providing opportunities for shared services/resources across the GMHI group of companies. Cost savings are anticipated in the areas of Board support, senior management compensation, and other areas where resources in GMHI and GHI are duplicated. Create synergies in the GMHI group of companies to better leverage existing assets in order to develop new assets. It is anticipated that making available existing GHI resources to GMHI, DevCo, GJR, Envida and GHESI will allow these companies to work collaboratively within the limited resources available to create value in the all the subsidiary corporations. 2. Creation of a new governance structure and accountabilities between the City and the GMHI group of companies, through a new Shareholder Declaration between the City and GMHI and GMHI and its Subsidiary corporations. This will result in the following: Create agility in decision making by GMHI and its subsidiaries A governance structure better able to align the strategic directions and goals of GMHI and its Subsidiaries with the strategic plan and operational goals of the City 3. Development of more appropriate board structures for GMHI, GHESI and Envida to achieve the strategic goals of the City by: Changing the composition of the GMHI Board to a more skills based Board while retaining City representation on the Board Changing the composition of the GHESI Board to include GMHI representation on the Board and continuing to focus on skills-based and strategic thinking Board members 4

30 5 Changing the composition of the Envida board to a Board consisting of management, a GMHI Board representative and two independent skills-based members. Creating a committee structure for the GMHI group of corporations that will include Finance & Audit, Human Resources and Governance, all at the GMHI level with GMHI Subsidiary representatives, along with a Nominating Committee as required and ad hoc task-based committees as deemed necessary. Together these three changes will set the framework for greater accountability by the GMHI Subsidiary companies to GMHI and ultimately to the City. This business case study has been developed to provide information for the City to determine if it wants to proceed with the amalgamation of GMHI and GHI. 5

31 6 SECTION 3: OBJECTIVES / DESIRED OUTCOMES The business case study will explore the rationale for restructuring of GMHI and GHI in order to achieve the City s objectives in creating GMHI to achieve excellence in asset management practices. The objectives of the City for the establishment of GMHI were: 1. GMHI, reporting through the City, will work to build value for the community through excellence in asset management that strengthens the individual and collective position of City-owned assets and investments. 2. Operating in a business environment, GMHI will play an integral role in achieving enhanced operational excellence through a continual dialogue between the operating companies and the Shareholder. 3. GMHI, through its management and oversight role of a number of businesses and assets, will ensure the continued generation of reliable returns and benefits from its assets by capitalizing on opportunities created by pooling of the resources of the GMHI group of corporations. The amalgamation of GMHI and GHI is an important step in assisting the City to meet its objectives for GMHI through the continued growth of its governance model. GMHI s objectives for the restructuring plan are to create a corporate and board structure that supports: 1. Agility in decision making. 2. Accountability to the shareholder and the public,. 3. Efficient use of limited resources to create increased value of managed assets. 4. Alignment of the GMHI group of companies with the City s strategic plans and goals. Figure # 1 sets out the proposed new organizational structure. Figure # 2 sets out the identified stakeholders in the amalgamation and a high level assessment of their interests and requirements. 6

32 7 Figure 1 7

33 8 Figure 2 Stakeholder Interest or Requirement Assessment City of Guelph GMHI Board GHI and GHI Subsidiaries Boards Residents Investors Excellence in asset management through effective governance, strategic and operational management; alignment and achievement of strategic goals and objectives. Duty of care to GMHI and the Shareholder Duty of care to the GHI group of corporations and the Shareholder Prudent use of City resources; achieve reliable returns and benefits from City assets Investment opportunities to generate adequate ROIs The restructuring will allow the City to achieve its objectives for GMHI. The impacts of the restructuring on GMHI has been investigated and determined to have overall positive implications for GMHI. The impacts of the restructuring on the GHI group of corporations has been investigated and determined to have no negative impacts that would prevent the GHI Board from consenting to the amalgamation. The restructuring will allow the City to achieve its objectives for GMHI and increase its ability to manage City assets. The streamlined governance and management structure of GMHI and its companies will result in increased agility of decision making in accordance with City objectives making its corporations more attractive investments. While increased closeness to a political body may be deemed a higher risk for investors, this will be mitigated by a commitment to accountability over control and skills-based boards. 8

34 9 SECTION 4: ENVIRONMENTAL ANALYSIS Holding Corporations The City of Guelph is unique in positioning GMHI as a vehicle for holding a number of unrelated corporations and providing oversight on behalf of the City as Shareholder. A number of cities across Canada have established development corporations which generally report directly to the city/shareholder. As well, most Ontario municipalities not serviced by Hydro One have an ownership interest in the local distribution company. There are a number of examples of holding corporations similar to GHI, which hold both the regulated utility and an alternative energy related utility. We have been unable to identify any other municipal corporations which have been set up with a holding company owning a holding company. Local Distribution Industry The current environment in the local distribution industry is in a state of uncertainty due to the Blue Ribbon Panel recommendations regarding consolidation. While these recommendations, made in 2012, created some activity immediately after their release, that activity has decreased due to a failure by the province to provide any guidance regarding acceptance of the recommendation as well as acquisitions by Hydro One which have affected the ability of LDCs to make acquisitions of their own. Despite this decrease in activity, there is value in ensuring the governance and corporate structure of GHESI is attractive to potential purchasers or partners. In addition, there is an expectation that the new provincial government will make consolidation mandatory and could impose limits on the ability of municipalities to negotiate the acquisition value, therefore making time of the essence for GMHI to position itself for a merger or acquisition or divestiture. Investment Community A corporation that is well managed by a Board responsive to its shareholder and that operates efficiently producing a desirable return on investment is crucial to obtain the best deal in a merger or acquisition transaction and to attract investors in specific projects or businesses. By restructuring the corporation, a governance structure that can be responsive to business challenges and to shareholder directives will be created. In addition, investors will be attracted to a skills-based board and a lack of political interference in the operations and governance of the businesses and/or the risk of political interference mitigated by a framework which emphasizes accountability over control. Thermal Utility The Thermal Utility Task Force, composed of members of each of GHI and GMHI Boards, has been tasked with developing a model for the development of a thermal utility. While final recommendations have not been received at this time, one of the options being considered is using Envida as the entity to develop the thermal utility directly under the oversight of GMHI. This restructuring plan formalizes that direction. 9

35 10 Governance Best Practices The restructuring plan creates a corporate and board structure which is more appropriate for the management of the existing and future assets of GMHI. The restructuring will ensure the adherence of best practices in corporate governance of private, closely held corporations. In particular the following best practices are being achieved: Management boards for small, developing subsidiaries supported by skills-based Committees for financial oversight Parent representation on subsidiary boards Skills-based board membership Clear distinction between the role of the board and senior management, including no management/officer representation on the GMHI Board Clear delineation of decision making authority between board and shareholder in shareholder declarations between each parent and subsidiary. Responsibility of members of board of public sector corporations includes alignment with the goals and strategic objectives of the public sector parent in the context of accountability rather than control. Size and cost of boards is appropriate to the capitalization of the corporation and the complexity of its business Ability of shareholder to control the appointment and removal of directors to ensure that a skills-based board endures. 10

36 11 SECTION 5: OPTION IDENTIFICATION In order to better assess the potential benefits and risks associated with the amalgamation of GMHI and GHI, this document will compare other potential options. In summary the options that will be assessed are: 1. Status-Quo The current corporate and governance structure remains in place. 2. Amalgamation GMHI and GHI are amalgamated. 5.1 Option Identification Option Description Of Scope Probability of Achieving Stated Objectives SWOT Analysis List all options Explain key features and how the option will address the problem or opportunity. Indicate if option is considered viable (YES/NO) Provide a rationale for why the option is viable or not. Reference strengths, weaknesses, opportunities and threats. Option 1: Status Quo In this option, there is no change in the existing corporate and governance structure. The growth of the GMHI group of companies will continue to be hampered through lack of resources and inadequate decision making opportunities. Poor Strengths The current structure was considered a workable solution when GMHI was incorporated in GMHI can continue to operate without the amalgamation. Weaknesses The risk factors identified in the status quo option are set out in detail in Section 6.1. Opportunities There are limitations on the opportunities GMHI can exploit within the current structure. Threats GMHI will not perform as expected and result in a loss of public confidence in the City. 11

37 12 Option 2: Amalgamation In this option, GMHI and GHI would be amalgamated into one corporation which would continue under the GMHI name. The existing resources of GHI would be assumed by the new corporation, allowing the City through GMHI to have advantage of an extremely skilled group of professionals. High Strengths Integrated approach to asset management. Innovative ways of doing business that bring more benefits to our community. Increased agility in decision making with new board structure. Weaknesses The risk factors identified in the amalgamation option are set out in detail in Section 6.1. The amalgamated corporation would continue to report to Council as Shareholder regarding GMHI s activities. Opportunities Media exposure through coverage of the announcement. Communicate key benefits of the amalgamation. Opportunity to engage board members, key staff and influential audiences to gain their support and understanding of the amalgamation Streamlined efforts and increased efficiency. Realization of the goals and objectives of the Community Energy Initiative with increased control over ENVIDA operation. Opportunity to gain support for GHMI from GHI/GHESI staff if handled correctly this can be shown to be good for shareholders, rate payers and employees. Threats Negative publicity. Lack of support for the amalgamation by Guelph residents Loss of key talented board members and staff. 12

38 13 Potential for staff to worry that the amalgamation may go beyond the board level. Potential that GHESI employees will have the perception that GMHI s agenda is really to pave the way for a sale or merger of the regulated utility. 13

39 14 SECTION 6: QUALITATIVE & QUANTITATIVE ANALYSIS SECTION 6.1 RISK ANALYSIS OF OPTIONS The current City of Guelph Risk Matrix below assigns colours to the resulting score based on the City s risk tolerance as set out below. Impact Scale 4 Catastrophic Major Moderate Minor Likelihood Scale Rare Unlikely Somewhat Likely Likely Almost Certain 14

40 15 Option 1 Status Quo Description No change is made to the corporate or governance structure of GMHI and its Subsidiaries Risk Categories Category Definition Risk ID# Description Impact Likelihood TOTAL Service Delivery Risk of not meeting customer expectations 1 Risk that the performance of GMHI does not meet shareholder expectations, due to a lack of agility in decision making, lack of alignment of the strategic directions and goals of the City with those of GMHI and the City and non-optimal level and mix of skill sets at the board levels Risk that the Community Energy Initiative implementation goals and timelines are not met due to a lack of resources and lack of alignment of strategic objectives. Mitigation: The existing structure does not allow the City, as shareholder, to provide direction to GMHI regarding its strategic objectives and GMHI to cascade those objectives to its Subsidiaries. There is no accountability of the GMHI Subsidiaries for the achievement of the City s strategic objectives. An overly cumbersome decision making protocol which relies on control by the Shareholder and control by GMHI, rather than accountability, does not allow for quick decision making. Within the current corporate and governance structure there is minimal opportunity to address these issues. 15

41 16 Employees Risk that employees, contractors or other people at the City will be negatively impacted by a policy, program, process or project including physical harm. 2 Risk that employees, contractors or other people at the City will be negatively impacted by the current structure of GMHI and GHI Boards, due to duplication of efforts and decreased morale and productivity as a result of workload and capacity. Risk of losing senior level employees of GHI if the status quo remains is somewhat higher due to the negative impact of the current corporate and governance structure Mitigation: City staff, senior management, members of Council and the Mayor are required to support GMHI in addition to their normal responsibilities, resulting in an increased workload and lack of capacity to generate results. There is no sharing of resources between GMHI and its Subsidiaries, leaving GMHI under resourced and duplication of work by City Staff and GMHI Subsidiary Staff. To allow GMHI to fulfill its role and grow under the existing structure would require additional taxpayer based funding which would impact other City services. GHI senior staff have difficulty in effectively working with GMHI and City staff and accomplishing objectives, thus making retention of such staff a continuing concern. 16

42 17 Public Risk that the policy, program or action will have a negative impact on the citizens of Guelph 3 Risk that the current GMHI performance/ structure has a negative impact on Guelph ratepayers and taxpayers due to unnecessary duplicated board and service costs and lack of resources. Mitigation: GMHI is currently supported by tax based funding of City staff and services. The GHI group of companies is supported, by ratepayers. Duplication of board and staff and service resources between GMHI and its Subsidiaries creates an unnecessary use of taxpayer and ratepayer funds and leaves GMHI without the necessary resources to fulfill its objectives. Continuation of the status quo will have a negative impact on Guelph ratepayers and taxpayers. Physical Environment Risk that natural capital will be damaged 4 Risk that the current GMHI performance/ structure will cause negative environmental impact because the goals and objectives of the Community Energy Initiative are not realized due to limited control over Envida projects, thus Guelph s goal to create a healthy, reliable and sustainable energy future will not be met Mitigation: Reputation Risk associated with anything that can damage the reputation of The current structure does not allow GMHI to have control over projects initiated by the GHI group of companies in support of the CEI. The GHI Boards are not accountable for the achievement of the strategic objectives of the City as stated in the CEI and decisions made by the Boards in relation to the projects are based on GHI objectives, which may not include making implementation of the CEI a priority above others. Continuation of the status quo may result in the environmental benefits of the CEI not being realized. 5 Risk that the current GMHI performance and structure will damage the reputation of the City s reputation and undermine public

43 18 the City or undermine confidence in the City of Guelph confidence in it because of the ineffectiveness of the City in not achieving the original intent of GMHI, the potential for conflicts of interest for City staff and senior management and, and the commitment to the CEI may be seen as diminished. Mitigation: The current structure has, for the reasons set out above, hampered GMHI in achieving the City s objectives in establishing GMHI. The use of City staff, senior management and councillors to support GMHI may result in actual or perceived conflicts of interest between their duty to the City and their duty to GMHI. Due to the failure of GMHI to fulfill its objectives, the City s commitment to the CEI may be perceived as reduced, resulting in a diminished reputation of the City as a leader in the field. The conflicts can only be resolved by GMHI having dedicated staff and Board members. The achievement of the objectives of the City and the CEI will continued to be hampered without access to adequate resources. Financial Risk related to decisions about assets, liabilities, income and expenses including asset management, capital and operational funding, economic development, theft or fraud 6 Risk that the current GMHI performance and structure will negatively impact assets, liabilities, funds, economic development, and taxes due to inefficient use of existing resources and potential synergies (duplication in the areas of board support, senior management and compensation), and potential failure to obtain the right deal in merger or acquisition transactions due to the lack of an effective and efficient governance structure. Mitigation: As set out above, the financial impact of the current structure is unable to be mitigated without restructuring the allocation of resources among the companies. The current governance 18

44 19 structure emphasises control over accountability and allows for significant political interference in the GMHI decision making process. This structure would not be attractive to potential investors. This risk cannot be mitigated in the existing governance structure. Regulatory Risk related to the consequences of non-compliance with laws, regulations, policies or other rules 7 Risk that the current GMHI performance and structure may have negative consequences of non-compliance with laws, regulations, policies or other rules, due to sub-optimal oversight by GMHI of the revenue producing GHESI and Envida, sub-optimal framework for decision making and accountabilities in the GMHI group of companies and reduced level and mix of skill sets being brought into the GMHI corporation for optimal operational and strategic oversight Mitigation: GMHI currently is removed from direct oversight of the regulated utility which currently provides 98% of GMHI s revenue. The current framework does not provide sufficient accountability of GMHI Subsidiaries to GMHI nor does it allow the GMHI Board to develop the ability to provide effective oversight due to an inability to establish a skills-based Board and senior management. This risk cannot be mitigated in the current structure. OVERALL 80 19

45 20 Option 2 Amalgamation Description GMHI and GHI would be amalgamated into one corporation which would continue under the GMHI name. The existing resources of GHI would be assumed by the new corporation, allowing the City through GMHI to have advantage of an extremely skilled group of professionals. The amalgamated corporation would continue to report to Council as Shareholder regarding GMHI s activities. Risk Categories Category Definition Risk ID# Description Impact Likelihood TOTAL Service Delivery Risk of not meeting customer expectations 1 Risk that the GMHI x GHI amalgamation does not meet customer expectations, due to a gap in service delivery (service level or service disruptions) during the transition due to lost or decreased productivity caused by changes and decreased morale among GHESI and ENVIDA staff Mitigation: The amalgamation has been communicated to all GHI (and GHESI) staff and there are no indications of morale issues. Executives at GHI are committed to delivering the CEI. Employees Risk that employees, contractors or other people at the City will be negatively impacted by a policy, program or project including physical harm. 2 Risk that employees, contractors or other people at the City will be negatively impacted by the GMHI/GHI amalgamation, including: Negative impact to some of the GHI board members - i.e. lost income Confusion and insecurity during the transition, negatively impacting work environment for GHESI and ENVIDA (decreased productivity, decreased morale, etc.) Potential union strikes 20

46 21 2 potential grievances and complaints potential lost employment (staff reduction) Mitigation: There may be a reduction in income of some GHI board members, however the amounts involved are relatively minor. All GHI members will continue or offered to be members of the GHESI or GMHI Board. The transition to the new structure will be eased by the new CEO of GMHI being seconded into the position prior to the official amalgamation. This will permit the CEO to address and deal with transition issues. The new CEO of GMHI is intimately familiar with the regulatory environment in Ontario, and this will bode well for the amalgamation. All employees of GHI are expected to receive offers from GMHI and this should minimize any adverse impacts. The GHI communications plan to GHESI employees went well. There have been no concerns expressed from unionized or non-unionized employees of GHESI. 21

47 22 Public Risk that the policy, program or action will have a negative impact on the citizens of Guelph 3 Risk that the GMHI / GHI amalgamation will not be supported by certain individuals and stakeholders in Guelph. Mitigation: A communication plan has been developed and partially implemented to enhance public understanding of the amalgamation. With proper execution, the amalgamation will result in cost savings that will benefit the citizens of Guelph. The amalgamation should have no negative impact on electricity rates for Guelph ratepayers. The amalgamation is being carried out to improve communication between the City of Guelph and its subsidiary companies and ultimately to improve transparency and accountability of GMHI to Guelph residents Physical Environment Risk that natural capital will be damaged 4 Risk that the GMHI x GHI amalgamation will cause negative impact to environment if the achievement of the goals and objectives of the Community Energy Initiatives are not improved by the amalgamation Mitigation: The amalgamation is being undertaken partially to ensure the City s strategic priorities, including the CEI, are reflected in the GMHI group of companies strategic directions and operations. No impact is expected on the physical environment. Reputation Risk associated with anything that can damage the reputation of the City or undermine confidence in the City of 5 Risk that the GMHI/GHI amalgamation will damage the reputation of the City, GMHI and GMHI Subsidiaries or undermine public confidence in it due to opposition to the amalgamation, perception of failure of the GMHI model or difficulties with the amalgamation itself. Risk that the directors and employees of

48 23 Guelph GMHI and its Subsidiaries will have negative impacts on their personal reputations if the amalgamation does not occur smoothly or there is a perception that the amalgamation was necessary due to performance issues with identified people. Mitigation: The new GMHI Board will be a skills-based board so that the values of all of the City of Guelph's assets can be maximized. This, coupled with effective communication of the amalgamation, should minimize any adverse impact on the City's reputation. The rationale for the amalgamation, as set out in the Business Case Study, does not identify performance issues by Boards or employees as a reason for the amalgamation. The amalgamation implementation plan does not contemplate dismissal of any employees. GHI Board members as a whole will be affected by the amalgamation, however this is due to the collapsing of GHI. The communication plan for the amalgamation will be clear in identifying the reasons for the amalgamation are the result of the existing corporate and governance structure and not caused by any performance issues of Boards or employees. Financial Risk related to decisions about assets, liabilities, income and expenses including asset management, capital and operational funding, economic development, 6 Risk that the GMHI x GHI amalgamation will negatively impact assets, liabilities, funds, economic development, etc. Risk that the GMHI Board will not have the skills to provide effective oversight of the amalgamated corporation. Mitigation: The risk of negative impact on assets, etc will be minimized through substantial due

49 24 theft or fraud diligence and risk mitigation measures being conducted by the City and GHI. The City CFO and GHI's CFO are working cooperatively on finding financial solutions that will ensure the delivery of the CEI. The restructuring plan includes a movement from a Council based Board for GMHI to a skills based Board, which will enhance GMHI s ability to provide effective oversight. Regulatory Risk related to the consequences of noncompliance with laws, regulations, policies or other rules 7 Risk that the GMHI/GHI amalgamation will have negative consequences of noncompliance with laws, regulations, policies or other rules. GHESI may be at heightened risk of not being able to file its 2016 cost of service distribution rates application on time given all the proposed changes to the Corporate structure. A late filing could result in the hearing being delayed and the possibility of receiving a late decision from the OEB. This could result in foregone revenue and reputational damage Mitigation: Non-compliance has been carefully considered during the due diligence period. GMHI is satisfied that based on input from legal, tax, regulatory and financial experts, this risk has been mitigated. GHESI and GMHI staff are committed to ensuring the 2016 COS application is filed on time. The impact of the amalgamation has been considered in the work done to date on the COS application. GHESI and GMHI will ensure the necessary resources and expertise are available to complete the 2016 COS application on time. 24

50 25 OVERALL Qualitative Analysis Summary RISKS Risk Categories Viable Options Service Delivery Employees Public Physical Environment Reputation Financial Regulatory TOTAL Option 1: Status Quo Option 2: Amalgamation

51 26 SECTION 6.2 BENEFIT ANALYSIS OF OPTIONS The current City of Guelph Benefit Matrix below assigns colours to the resulting score based on the City s benefit significance as set out below. Impact Scale 3 Significant Moderate Minor Likelihood Scale Rare Unlikely Somewhat Likely Likely Almost Certain Option Description Status Quo No change to the existing corporate and governance structure. Benefit Categories Stakeholders (Specific Groups) Description Impact Likelihood TOTAL Organizational Culture Organizational Performance Organizational Sustainability GMHI Board and Staff GHI Board and Staff City Council and City Staff City Council GMHI Board GMHI Board and Staff The existing culture of the organization will remain the same, with little to no disruption to staff. The performance of GMHI and its subsidiaries will be unable to be enhanced and GMHI will continue to have low impact on GHI performance The ability of GMHI to generate revenues to support continued growth will be constrained Organizational Accountability 30 GMHI Board GHI Board City Council The accountability of GMHI and GHI to Council will remain high

52 27 Viable Option Amalgamation Description GMHI and GHI amalgamate into a new company called GMHI Benefit Categories Stakeholders (Specific Groups) Description Impact Likelihood TOTAL Organizational Culture Organizational Performance Organizational Sustainability GMHI Board and Staff GHI Board and Staff City Council and City Staff City Council GMHI Board GMHI Board and Staff The culture following amalgamation will be more aligned with the City s mission and values. GMHI will be able to influence the culture of GHESI and Envida. The performance of GMHI and its Subsidiaries will be enhanced through shared resources and more effective governance. GMHI s ability to influence the performance of GHESI will increase. GMHI will have adequate resources to sustain and grow the corporation Organizational Accountability GMHI Board GHI Board City Council The accountability of GMHI to the City will remain high. The new governance structure will increase the accountability of GHESI and Envida to GMHI and ultimately the City Qualitative Analysis Summary Benefits Viable Options Option 1: Status Quo Option 2: Amalgamation Org Culture Org Performance Org Sustainability Org Accountability TOTAL

53 QUANTITATIVE ANALYSIS FINANCIAL The following charts show the areas in which it is anticipated the amalgamation would have an effect. Option Status Quo No change to the existing corporate and governance structure. Expense Explanation Annual Cost Savings City Staff CEO Board Budget and Staff 1 GMHI Office Space GMHI will continue to pay the City for City Staff s work on GMHI GMHI will pay for a CEO as budgeted for in the 2014 GMHI budget. Existing resources to support GHI Board GMHI will be require to find office space $250,000 + lost capacity of City staff $250,000 /year $427,500 $50,000 Total Costs $977,500 $ Staff costs related to Board support carried out of staff, including reports, minutes and board preparation Option Amalgamation GMHI and GHI amalgamate into a new company called GMHI Expense Explanation Annual Cost Savings City Staff GMHI will not continue to pay the City for City Staff s work on GMHI CEO CEO expense already part of GHI Budget General Manager Current secondment will become a permanent position with GMHI Administrative Support New support person to assist GM and Corporate Secretary $100,000 $250,000 $250,000 28

54 29 Board Budget and Staff 1 GMHI Office Space New GMHI Board and staff costs GMHI will use GHI office space $249,200 $178,300 $50,000 Total Costs $349,200 $728,300 Note: There may be a requirement for additional resources for the transfer of Dev Co and GJR to GMHI. 6.3 Quantitative Analysis Summary Total Additional Costs Total Savings (incl. Cost of Net Savings or Additional Costs Viable Options avoidance) (Costs) Option 1: Status Quo $50,000 ($50,000) Option 2: Amalgamation $349,200 $728,300 $379, Overall Viable Option Ranking *Overall Ranking of viable options with 1 being the best. Viable Options Qualitative Quantitative *Overall Viable Option Ranking Risks Benefits Financial Option 1: Status Quo $50,000 Annual Expense 2 Option 2: Amalgamation ($379,000) Annual Savings 1 29

55 30 SECTION 7: DUE DILIGENCE REVIEW AND ANCILIARY WORK Due Diligence Review GMHI and GHI undertook an extensive review of 6 categories to determine if the amalgamation would pose any risk to either organization and, from the point of view of GMHI, to understand what risks GMHI would be assuming as a result of the amalgamation. The six categories reviewed were Tax, Financial, Property, Legal, Employment Regulatory and Miscellaneous. Details of the review are attached as Appendix C. The overall opinion of GMHI is that GHI and its group of companies is well run and there are no areas of serious concern. Most issues that were apparent dealt with implementation of the actual blending of the two corporations, such as human resource issues. Governance Structure To ensure the restructuring accomplishes its objectives, the governance documents of the corporations were reviewed and new board structures were developed to be implemented upon amalgamation. This work was done collaboratively among GMHI and GHI staff and the City. Highlights of the changes are as follows: Organizational By-law. The organizational by-laws of GMHI and GHI were reviewed and revised to create an organizational by-law for the new corporation. This by-law will need to be approved by the GMHI and the City prior to amalgamation. Shareholder Declarations. New shareholder declarations were developed to establish the relationships and accountabilities between the City and GMHI and between GMHI and its Subsidiary Corporations. The new declarations are clear and concise and ensure that the responsibilities of the corporations to the City as the ultimate Shareholder are codified. While keeping the implementation of the Community Energy Initiative as a key objective for GMHI, other objectives relating to the development of new opportunities are also incorporated in the documents. The City, as Shareholder, will be required to approve the new Shareholder Declaration between it and GMHI prior to amalgamation and the new corporation will approve the Shareholder Declarations between it and GHESI and Envida following amalgamation. Governance Structures. GMHI developed a governance structure for GMHI and its Subsidiaries which include skills-based boards and balanced committees and, in the case of Envida, a smaller more focused 30

56 31 board to begin the development of the thermal utility. The major change that impacts the City is the implementation of a structure for the GMHI Board which includes a smaller number of Councillors and more skills-based community representatives. This is necessary to allow GMHI to assume a more knowledgeable oversight of GHESI and Envida and provide the skills necessary to develop new corporations and assume additional City assets. The boards of the subsidiary companies also need to be reviewed as the make-up of the Boards needs to be a mix of key senior management personnel and independent directors. The new governance structures are set out in the Shareholder Declarations. 31

57 32 SECTION 8: ALIGNMENT TO STRATEGIC PLANS City Strategic Plan The restructuring plan aligns to the Corporate Strategic Plan as follows: Organizational Excellence 1.3 Building robust systems, structures and frameworks aligned to strategy. The restructuring plan is creating a new framework for decision making and accountabilities in the GMHI group of companies. Innovation in Local Government 2.1 Build an adaptive environment for government innovation to ensure fiscal and service sustainability. The restructuring plan will ensure greater oversight by GMHI of the revenue producing assets and developing assets. In addition, it provides for an innovative solution to managing resources by leveraging them across multiple entities. 2.2 Ensure accountability, transparency and engagement. Greater accountability to the shareholder is built into the restructuring plan, which will lead to more transparency with the public. City Building 3.2 Be economically viable, resilient, diverse and attractive for business. The restructuring plan creates a more attractive model for investors seeking corporations which are concerned with governance while maintaining adequate controls by the shareholder to address risk. GMHI Strategic Directions The restructuring aligns with the GMHI Strategic Directions Readiness GMHI will build its resources and skill sets to be in a strong position of readiness to deliver on initiatives. The restructuring plan provides for an allocation of existing GHI resources to GMHI and its subsidiaries. The plan will result in additional skill sets being brought into the GMHI Corporation as well as more appropriate uses of existing staff, management and board skill sets. 32

58 33 Skills-based boards, especially where the skills link strongly to emerging challenges, translate into high functioning boards that can deliver well on expected results. Strategy, performance management, execution, investments, M&A, organizational health and talent management, business risk management, core governance and compliance. Capability GMHI will put into place a collaborative structure that will take ideas and process them into outcomes. The new corporate structure will foster increased collaboration amongst GMHI Subsidiaries and with the City. The new shareholder declaration will allow more agility in decision making and clarity of roles between the shareholder and its corporations. Identity GMHI will differentiate itself from the City and its purpose will be clearly understood by all stakeholders and the community. The result of the restructuring will be a corporation that has a physical presence external to City Hall and has its own human resources. A communication plan regarding the restructuring will be undertaken directed at the business community and City residents. 33

59 34 SECTION 9: CONCLUSIONS & RECOMMENDATIONS GMHI, in collaboration with GHI, has conducted extensive due diligence and analysis regarding the potential amalgamation of GMHI with GHI. The results of this work as set out in this Business Case Study have shown that the amalgamation of GMHI and GHI, as compared to the status quo, will: Meet the objectives of the City in establishing GMHI Produce a more effective governance structure for the GMHI group of companies Align with the strategic objectives of the City and GMHI Allow for adequate resourcing of GMHI Enhance the ability of GMHI to implement the CEI Reduce risks Increase benefits Reduce costs It is therefore recommended that the Business Case Study be approved by the City and direction given to GMHI to proceed with the amalgamation. 34

60 35 SECTION 10: IMPLEMENTATION STRATEGY It is anticipated that following Council approval of the business case study, the amalgamation will occur in September, In order to complete the amalgamation, the resources of GHI will need to be assumed by the new corporation. Major areas of work as follows: Human Resources: The new corporation will need to assume GHI s obligations as employer for 8 employees, including establishing itself as an OMERS corporation, arranging for a benefit plan and setting up government remittance accounts. Finance & Tax: Tax returns for GMHI and GHI will need to be completed as of the date of amalgamation. GMHI will require an HST number. Banking arrangements for GMHI may need to be changed to align with the existing GHI arrangements. Change of Name: All GHI agreements will need to be assumed by the new corporation and notice provided to the other parties. The website will need to be redesigned to remove references to GHI and replace them with GMHI. It is anticipated that reallocation of resources will occur over a period of time following amalgamation to ensure stability and continuity. In addition, the new governance structures will be implemented in two stages to allow adequate time for the recruitment of new directors for GMHI, GHESI and Envida while ensuring proper oversight continues. 35

61 36 SECTION 11: APPROVAL SIGNATURES Approved by GMHI Board: Approved By City Council: 36

62 37 SCHEDULE 1 DUE DILIGENCE RESULTS Area Items Status Supporting Documents/Comments Tax Payments in Lieu of Taxes Complete Amalco will pay PILs. Subs, except GHESI, will not be subject to PILs. GMHI should have paid PILs since incorporation. The necessary filings to correct this will be completed before amalgamation Deemed disposition of assets Complete Obtained legal opinion and accounting opinion that s.87 of the ITA can be used to avoid deemed disposition on amalgamation HST, Health Tax, LTT Complete Confirmed Amalco will have an HST # Will obtain compliance confirmation upon amalgamation Prior losses Complete Confirmed with KPMG there will be no impact on prior losses Schedule II filings Complete Documents received confirming compliance Annual Return 2013 Complete No concerns Financial Employee Remittances Complete Will obtain compliance confirmation upon amalgamation Allocations Complete GHI cost sharing/allocation agreement with GHESI received and reviewed. No concerns. Creditors Complete GHESI debenture agreements received. No concerns Will obtain compliance confirmation upon amalgamation Property Title Complete GHI owns no real property. Leases space from GHESI. Liens Complete Execution search to be completed prior to closing. Will obtain confirmation that no liens, etc upon amalgamation 37

63 38 Legal Actions for and against the companies Complete Details of claims (2) received. No concerns Will obtain confirmation that no other claims upon amalgamation Contracts Complete No material contracts at GHI level. Material contracts of Envida reviewed. No concerns Employment Collective Agreements Complete CBA received no impact on Amalco. All GHI employees are non-union. Benefit plans Complete Details of benefits contracts received. GHI/GHESI benefits differ from City benefits, particularly in the area of short term disability. This may impact the ability of GMHI to transition current City employees into GMHI employees. OMERS Complete OMERS has confirmed that Amalco will be an OMERS employer and GHI employees can be transferred. Employment contracts Complete Employment contracts received and reviewed. No concerns. Will need assignment of contracts to Amalco. EI, WSIB, OHSA Complete No loss time work injuries in Will obtain compliance confirmation upon amalgamation and confirmation that no work injuries in Employees Complete Received list of employees and titles. Regulatory Electricity Act & ARC Complete Amalco will be an affiliate company of GHESI and thus subject to PILs regime and certain other restrictions. Will obtain compliance confirmation upon amalgamation Ontario Energy Board Act Ontario Business Corporations Act Complete Complete Legal opinion received that no OEB approval is required for amalgamation. All requirements under OBCA for amalgamation will be complied with upon amalgamation. 38

64 39 Environmental Protection Act & Regs Agreements Notice or consents required Complete Complete Will obtain compliance confirmation upon amalgamation No consents required. Misc Business Continuity Plan Complete Received Business Continuity Plan and appears to be sufficient. Board Expenses Complete Details of Board expenses for all three Boards and all committees for 2013 and to date in 2014 reviewed. Concerns have been noted that will be addressed during the transition period. External Legal Complete Details of external legal costs for each corporation and list of service providers and area of law reviewed. Concerns have been noted, particularly relating to the efficiency of using in house counsel for contract review and governance advice rather than external counsel. This will be addressed in the implementation/transition plan. 39

65 Schedule B Report to the Shareholder (Open) Date of Meeting: August 13, 2014 Business Case Study RESOLVED that: 1. The Business Case Study, as amended, dated July 22, 2014 is approved; and 2. The Board recommends that the City of Guelph approve the Business Case Study. Amalgamation WHEREAS: Guelph Hydro Inc. (the "Subsidiary") is a wholly-owned subsidiary of the Corporation. AND WHEREAS: The Corporation has agreed to amalgamate with its Subsidiary pursuant to subsection 177(1) of the Business Corporations Act (Ontario) (the "Act"). THEREFORE, it is resolved that: 1. the amalgamation of the Corporation with its Subsidiary pursuant to subsection 177(1) of the Act is approved; 2. subject to the issuance of a Certificate of Amalgamation pursuant to section 178 of the Act, all the issued and outstanding shares in the capital of the Subsidiary immediately prior to the amalgamation shall 1

66 be cancelled on the amalgamation without any repayment of capital in respect thereof; 3. the by-laws of the amalgamated corporation shall be the same as the by-laws of the Corporation; 4. except as may be prescribed, the articles of amalgamation of the amalgamated corporation shall be the same as the articles of amalgamation of the Corporation, as amended; 5. the name of the amalgamated corporation shall be GUELPH MUNICIPAL HOLDINGS INC.; 6. no securities shall be issued and no assets shall be distributed by the amalgamated corporation in connection with the amalgamation; and 7. any officer or director of the Corporation is authorized and directed to sign the Articles of Amalgamation for and on behalf of the Corporation and to file them with the Director appointed under the Business Corporations Act (Ontario). Passed by the GMHI Board of Directors July 29, 2014 Donna Jaques Corporate Secretary 2

67 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C SHAREHOLDER DECLARATION OF THE CORPORATION OF THE CITY OF GUELPH REGARDING GUELPH MUNICIPAL HOLDINGS INC. WHEREAS: 1. Guelph Municipal Holdings Inc. was incorporated on August 13, 2011 under the Business Corporations Act (Ontario) under s. 203 of the Municipal Act and related regulations; 2. The original Guelph Municipal Holdings Inc. amalgamated with its Subsidiary, Guelph Hydro Inc., on September 8, 2014 to create the existing Guelph Municipal Holdings Inc. (GMHI); 3. The City of Guelph is the sole shareholder of all the issued shares of GMHI; 4. GMHI is the sole shareholder of Guelph Hydro Electric Systems Inc. (GHESI) and Envida Community Energy Inc. (Envida) and intends to acquire additional Subsidiary corporations in the future; 5. The City of Guelph wishes to set out its expectations, establish certain operating principles, set out requirements to be met by GMHI and inform the residents of Guelph of the City s fundamental principles and accountability mechanisms regarding GMHI. NOW THEREFORE THIS DIRECTION WITNESSES: Article 1 Interpretation 1.01 Definitions In this Shareholder Declaration, (a) Annual Budget means a quantitative expression of an operating and capital plan for a fiscal year including projected revenues based on anticipated sales volumes and projected operating and capital expenditures, resource quantities, assets, liabilities and cash flows and intended as a tool to control resources and ensure management accountability. Page 1 of 13

68 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C (b) Applicable Law means any statute, regulation, code, regulatory policy or order of any Governmental Authority, including all applicable by-laws, and relevant common law. (c) Business Plan means a high level quantitative expression of projected revenues and operating and capital expenditures expected to be earned or incurred over a number of future accounting periods estimated on a reasonable efforts basis and intended only as an approximate guide to future financial profitability. (d) Community Energy Initiative means the City s Community Energy Plan (now called Initiative) dated April 3, 2007 which outlines the City s strategies and vision with respect to energy conservation, consumption, generation and efficiency and environmental sustainability as may be modified by Council from time to time; (e) Energy Legislation means legislation enacted from time to time by the Province of Ontario regulating the energy sector and including without limitation the Electricity Act, 1998, the Ontario Energy Board Act, 1998, the Green Energy and Green Economy Act, 2009 and all regulations thereunder, and all amendments, reenactments and replacements to such legislation and all other statutes, decisions, orders and policies of the Province of Ontario with respect to the energy sector which may be enacted from time to time; (f) GMHI Subsidiary means any subsidiary corporation of GMHI, a majority of whose shares are directly owned by GMHI; (g) Governmental Authority means a federal, provincial or municipal government, or any entity, person, court or other body or organization exercising one or more executive, legislative, judicial or regulatory functions; (h) Independent Director means an individual who is not a Municipal Member or an employee of, or consultant to, the City or any agency, board or commission of, or corporation established by, the City; (i) MFIPPA means the Municipal Freedom of Information and Protection of Privacy Act (Ontario); (j) Municipal Act means the Municipal Act 2001 (Ontario); (k) Municipal Member means a sitting member of Council; (l) OBCA means the Business Corporations Act (Ontario); Page 2 of 13

69 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C (m) Strategic Plan means a plan setting forth for a number of future periods an organization s vision, mission, values and strategy of resource utilization to successfully execute and achieve its vision; and, (n) Subsidiary means a corporation, a majority of whose shares are owned directly by another corporation Authority of Applicable Law In the event of any conflict between any approval, direction or requirement of GMHI under this Shareholder Declaration and any Applicable Law, the Applicable Law shall govern. Article 2 OBJECTIVES AND PRINCIPLES 2.01 Purpose of this Shareholder Declaration This Shareholder Declaration: (a) establishes a framework of corporate governance for GMHI, including the City s expectations of and objectives for GMHI; (b) establishes GMHI s mandate, scope of responsibility and reporting requirements; (c) sets out the relationship between GMHI and the City; and, (d) constitutes, where applicable, a declaration by the City pursuant to s.108(3) of the OBCA City Objectives The City established GMHI to meet the following objectives: (a) GMHI, reporting through the City, would work to build value for the community through synergistic collaboration that strengthens the individual and collective position of Cityowned assets and investments. (b) Operating in a business environment, GMHI will play an integral role in achieving enhanced operational excellence through a continuum of improved communications between the operating companies and the Shareholder. (c) By capitalizing on synergies and unlocking greater potential, GMHI, through its management and oversight role, will help to ensure the continued generation of reliable returns and benefits from its assets. Page 3 of 13

70 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C 2.03 Overarching Principles The following principles shall apply to the relationship between the City and GMHI: (a) A Shareholder Declaration for municipal entities should foster and reinforce a collaborative relationship and shared values among all parties and recognize that the interface between the worlds governed by the Municipal Act (public sector) and the OBCA (private sector) requires mutual respect, understanding and flexibility and regular communication between GMHI and the City regarding the activities of GMHI and its Subsidiaries. Such communication should take place whether or not such activities would require the approval of the City. (b) The activities of the City and GMHI which may be applicable to the Community Energy Initiative shall be a fundamental aspect of the relationship between GMHI and Envida. (c) Decision making authority shall be clearly assigned to the City and GMHI, recognizing that the GMHI Board is the primary decision-making body of the corporation. (d) The authority of the GMHI Board will be accompanied by clearly articulated reporting to ensure transparency, accountability and recognition of its status as a public sector entity and of the role of the City as the ultimate authority over GMHI, subject to the fiduciary responsibilities of directors of the GMHI Board. (e) The provisions of this Shareholder Declaration should be interpreted so as to maximize transparency and facilitate communication between the City and GMHI. Employees and management of GMHI and the City are expected to communicate seamlessly and transparently with each other on a regular basis without the need for GMHI Board approval. (f) The principles of director independence and skills based boards will be paramount in the interpretation of this Shareholder Declaration. (g) The unique overlapping community interests and professional capabilities of the group of companies including the City are important components of an integrated and coordinated approach to excellence in asset management. (h) Shareholder return and benefits will be measured by several metrics, including but not limited to, dividends. In general, a long term, strategic view will be applied to the measure of shareholder return. Page 4 of 13

71 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C (i) It is recognized that GMHI and its Subsidiaries are operated on a for profit basis, may operate in a competitive environment, and are subject to the obligation to make payments in lieu of taxes under Energy Legislation. (j) The opportunity for community assets to contribute to the building of community capacity, community pride and overall community well-being should be key drivers to the decision making of the GMHI Board and the City in relation to GMHI. (k) In making decisions concerning GMHI Subsidiaries, the GMHI Board and management of GMHI shall act in a commercially reasonable manner consistent with the City s requirements from time to time and having regard to the City s Strategic Plan. Article 3 CORPORATE GOVERNANCE 3.01 GMHI Director s Duties The GMHI Board shall supervise the management of the business and affairs of GMHI. The directors and officers of GMHI have a duty to act honestly, in good faith and in the best interests of the corporation and shall exercise the same degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances Standards of Governance In conducting its oversight of the Corporation, the Board may consult the standards for corporate governance established by the Canadian Securities Administrators for publically traded corporations, modified as appropriate, for non-issuing private corporations. Article 4 BOARD OF DIRECTORS AND OFFICERS OF GMHI 4.01 Qualifications In addition to the requirements established under the OBCA, it is the intention of the City that the GMHI Board will be a skills based board with the collective ability to discharge their duty of care to GMHI and the City Residency Preference may be given to qualified candidates for the GMHI Board who are residents of the City, however non-residents shall not be excluded from serving as Board members. Page 5 of 13

72 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C 4.03 Number of Directors The GMHI Board shall consist of a minimum of 7 directors Composition of the GMHI Board (a) The GMHI Board shall consist of: i. the Mayor of the City of Guelph or a Councillor designated by the Mayor to be appointed as a director for a specific term; ii. one City Councillor; and, iii. the balance of the members of the Board shall be Independent Directors, except that a member of a GMHI Subsidiary Board may be appointed as a member of the GMHI Board. (b) The GMHI Board shall establish a Nominating Committee, as required, which shall develop a process to identify and evaluate potential GMHI Board candidates. The GMHI Board shall recommend qualified candidates to the City for appointment to the GMHI Board Chair of GMHI Board The Chair of the GMHI Board shall be selected by the Board and appointed for a term determined by the GMHI Board Officers of GMHI The GMHI Board shall appoint officers of the corporation, which shall include a Chief Executive Officer, a Chief Financial Officer and a General Counsel and Corporate Secretary and such other officers as the Board determines appropriate Term of Directors (a) The term for Municipal Members shall be concurrent with the municipal term of each Council, provided that following the expiry of the term of council, the Municipal Member shall continue to serve until reappointed or replaced by the City. (b) The term for Independent Members shall be between one and three years unless otherwise determined by the City. The GMHI Board will establish a policy for term limits of directors which is informed by best practices in continuity and succession management for Boards. Page 6 of 13

73 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C (c) The City may at its discretion terminate the appointment of a GMHI Board member prior to the end of the member s term and appoint a replacement member. (d) Any member of the GMHI Board may serve for successive terms as determined by the City, having regard to any GMHI Board policy as set out in (b) Board Committees The GMHI Board may establish committees of the Board in the GMHI Board s discretion Director Compensation (a) Municipal Members shall not receive an renumeration or other compensation of any kind, other than as expressly approved by the City, for serving as a member on the GMHI Board or any committee of the Board or carrying out any activities in relation to the Board or committee. (b) Despite 4.09(a), Municipal Members shall be entitled to compensation for reasonable expenses related to the director s role on the GMHI Board in accordance with the policy established under section 4.09(c). (c) The GMHI Board shall establish a policy for Independent Director compensation, which shall include compensation for reasonable expenses related to the director s role on the GMHI Board. The policy shall be provided to the City at the time the report on directors compensation is submitted to the City in accordance with section 8.01(d) GMHI Subsidiary Boards The GMHI Board shall appoint the members of GMHI Subsidiary Boards in accordance with the terms of the Shareholder Declarations between GMHI and its Subsidiaries. Article 5 DIVIDEND POLICIES, RISK MANAGEMENT AND STRATEGIC OBJECTIVES FOR GMHI 5.01 Dividends The GMHI Board shall establish policies regarding the payment of dividends to the City, from time to time, which policy shall be approved by the City Risk Management Page 7 of 13

74 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C The GMHI Board shall establish risk management strategies and internal controls to manage all risk related to the businesses conducted by GMHI and its Subsidiaries Strategic Objectives The GMHI Board shall establish strategic objectives for GMHI and its Subsidiaries that incorporate the City s long and short term strategic objectives for GMHI and its Subsidiaries and which are consistent with the maintenance of viable, competitive businesses and preservation of the value of the businesses of GMHI and its Subsidiaries. Article 6 DECISIONS OF THE CITY 6.01 Shareholder Representative The City designates the Chief Administrative Officer of the City or their designate as its legal representative (the Shareholder Representative ) for purposes of communicating to the GMHI Board any consent or approval required by the Shareholder Declaration or by the OBCA City Approval Approvals or decisions of the City required pursuant to this Shareholder Declaration or the OBCA shall require a resolution of Council and shall be communicated in writing to the GMHI Board by the Shareholder Representative. Article 7 SHAREHOLDER MEETINGS 7.01 Protocol GMHI shall establish a protocol with the City Clerk, from time to time, for the calling and holding of shareholder meetings Closed Meetings Shareholder meetings, in whole or in part, may only be conducted as a closed meeting of Council in compliance with the provisions of the Municipal Act. All directors of GMHI shall be entitled to have notice of open and closed shareholder meetings Annual General Meeting GMHI shall hold an annual shareholder meeting prior to June 30 of each year. At the annual meeting, GMHI shall place before Council, the following: Page 8 of 13

75 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C (a) Audited financial statements and notes thereto with the auditor s report for GMHI and the consolidated statements, notes and auditor s reports of GMHI Subsidiaries for the previous fiscal year; (b) Recommendations for any required appointment of members to the GMHI Board; (c) Recommendations for the appointment of auditors for GMHI; and, (d) Any other information the GMHI Board determines should be presented. Article 8 GMHI REPORTS TO THE CITY 8.01 Annual Report Within six months after the end of each financial year, GMHI shall present its annual report to City Council. This report shall include the following: (a) An update on the Strategic Plans and strategic objectives of GMHI and its Subsidiaries and how the plan and the objectives align with the City s strategic objectives; (b) A report on any material deviations from the GMHI Business Plan in the previous year; (c) A report on major business developments or significant results; (d) A report on compensation disclosure and analysis for officers and directors of GMHI for the previous year; (e) A report on risk management strategies; (f) Confirmation from the GMHI Board that as of the end of the previous financial year, GMHI has complied with the requirements of this Shareholder Declaration and is in compliance with applicable Laws and that it has received a similar confirmation of compliance from the Boards of GMHI Subsidiaries; (g) Any other information the GMHI Board wants to present or the City requests. Some or all of the contents of this report may be confidential and may be presented in a closed session meeting Regular Reporting GMHI shall maintain a dialogue with the City based on a mutual understanding of strategic objectives to ensure that the activities of GMHI remain fully aligned with the interests of the City. This dialogue may include correspondence and meetings between the Chair of the Page 9 of 13

76 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C GMHI Board and the Shareholder Representative, information reports from GMHI to Council and meetings between City and GMHI officers and staff. Article 9 BUDGET 9.01 Budget Forecast On or before September 15 of each year, GMHI shall provide the City Treasurer with a report regarding any major budget impacts to the City anticipated in the next financial year Budget On or before April 30 of each year, the GMHI Board shall provide the City with its Annual Budget, which shall include the following: (a) an operating budget for GMHI for the financial year; (b) the projected operating and capital expenditure budget on a consolidated basis for GMHI Subsidiaries financial year and an operating and capital expenditure projection on a consolidated basis for GMHI Subsidiaries for each of the two subsequent financial years, including the resources necessary to implement the GMHI Business Plan; and, (c) the projected annual revenues and Net Income for GMHI and GMHI Subsidiaries, on a consolidated basis, for the following two financial years. Article 10 CONFIDENTIALITY 10.1 Confidentiality of GMHI Information Except as required by applicable law or any Governmental Authority and except for portions of the annual report to Council pursuant to Section 8.01, the City shall treat as confidential each GMHI Business Plan and all other information provided to it in confidence pursuant to this Article 10, subject to the Municipal Act and Applicable Laws. The parties acknowledge that information that is in the custody or under the control of the City or GMHI is subject to the access provisions of MFIPPA Disclosure of Confidential Information The City acknowledges that GMHI and GMHI Subsidiaries may, from time to time, supply it in confidence with confidential information, the disclosure of which could reasonably be expected to significantly prejudice the competitive position of or interfere with contractual or other negotiations of GMHI or the relevant Subsidiary or result in undue loss to GMHI or Page 10 of 13

77 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C the relevant Subsidiary, and the City shall protect such information in accordance with the exemption for third party information in Section 10 of MFIPPA Request for Information The City shall inform GMHI or the relevant GMHI Subsidiary of any request made for access to information supplied to the City by GMHI or the relevant Subsidiary, permit GMHI or the relevant Subsidiary an opportunity to make representations on the disclosure of such information, and consider any such representations prior to disclosing or permitting access to the information and shall provide GMHI or the relevant Subsidiary with notice of its decision concerning any such request for access to information. Article 11 DECISIONS RESERVED TO THE SHAREHOLDER Matters Requiring Shareholder Approval under the OBCA GMHI shall not take any of the following actions without the approval of the City: (a) Amend or repeal its articles of incorporation; (b) Amalgamate with another corporation, apply to continue as a body corporate under the laws of another jurisdictions, merge, consolidate or reorganize or approve or effect any plan of arrangement, in each case whether statutory or otherwise; (c) Take or institute proceedings for any winding up, arrangement, reorganization or dissolution; (d) Create new classes of shares or reorganize, consolidate, subdivide or otherwise change its outstanding securities; (e) Sell or otherwise dispose of, by conveyance, transfer, lease, sale and leaseback, or other transaction, all or substantially all of its assets or undertaking; (f) Change the auditor; (g) Make any changes to the number of directors comprising the Board; or, (h) Enter into any other transaction or take any other action that requires shareholder approval pursuant to the OBCA Other Matters Requiring City Approval Without the prior written approval of the City, GMHI shall not: (a) Make representations or promises of any financial incentives or similar inducements that are binding on the City; Page 11 of 13

78 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C (b) Issue publicly traded debt, or any debt instruments with real or implied recourse to, or guarantees from, the City or any borrowing that, in the opinion of the City CFO, will have a negative impact on the City s credit rating; (c) Sell any shares of a GMHI Subsidiary; (d) Amend the dividend policy approved by the City in accordance with Article 5 or, (e) Approve an agreement for a transaction for the disposition or acquisition, whether by purchase, merger/amalgamation or otherwise, where the transaction involves GHESI or where the transaction has a value greater than 25% of the book value of GMHI on a consolidated basis GMHI By-laws The GMHI Board may make, amend or repeal any of its by-laws and the changes take effect at such time as the Board approves. By-laws and changes to by-laws shall be submitted to the City, as shareholder, immediately upon approval by the Board for approval. If the City makes any amendments, the amendments take effect when approved by the City and are not retroactive. Article 12 REVISIONS TO THE SHAREHOLDER DECLARATION The City, in its sole discretion, may revise this Shareholder Declaration from time to time and may consult with GMHI regarding proposed revisions as appropriate in the circumstances. The City will provide a written amendment or the amended Shareholder Declaration, as the case may be, to the GMHI Board. The amendment will come into effect on a date specified by the City. Article 13 TRANSITION PROVISIONS Effective Date This Shareholder Declaration shall come into effect on the date the amalgamation of GMHI and GHI is effective and the shareholder declaration made August 16, 2011, as amended, shall be terminated as of that date Transition Despite the provisions of Section 13.01, Article 4 of this Shareholder Declaration shall only come into effect and replace the provisions in the August 16, 2011 shareholder declaration Page 12 of 13

79 August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION Schedule C at the time the City appoints a new Board of Directors in December 2014 or such other date as the City determines. Approved by the City of Guelph, the 13th day of August, THE CORPORATION OF THE CITY OF GUELPH By: Page 13 of 13

80 Schedule D Report to the Shareholder (Open) Date of Meeting: August 13, 2014 Shareholder Declaration RESOLVED that: 1. The City-GMHI Shareholder Declaration, as amended, dated August 13, 2014 is approved; and 2. The Board recommends that the City of Guelph approve the City-GMHI Shareholder Declaration dated August 13, Passed by the GMHI Board of Directors on July 29, Donna Jaques Corporate Secretary 1

81 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT By-law Number 1 (General By-law) A by-law relating generally to the transaction of the business and affairs of Guelph Municipal Holdings Inc. BE IT ENACTED as a by-law of Guelph Municipal Holdings Inc. (hereinafter referred to as the Corporation ) as follows: 1. Interpretation 1.01 Definitions. In this by-law and all other by-laws and resolutions of the Corporation, unless there is something in the subject-matter or context inconsistent therewith, (a) Act means the Business Corporations Act (Ontario), including the regulations made pursuant thereto and any statute or regulation that may be substituted therefor, as amended from time to time; (b) affiliate means an affiliated body corporate, and one body corporate shall be deemed to be affiliated with another body corporate if one of them is the subsidiary of the other or both are subsidiaries of the same body corporate or each of them is controlled by the same person; (c) appoint includes elect and vice versa; (d) Articles means the original or restated articles of incorporation, articles of amendment, articles of amalgamation, articles of reorganization, letters patent, or any other instrument of incorporation of the Corporation, as amended from time to time; (e) auditor means the auditor of the Corporation; (f) board means the board of directors of the Corporation; (g) by-law means this by-law and all other by-laws of the Corporation, in force from time to time; (h) Chair of the Board, Chief Executive Officer, General Counsel, Secretary, Treasurer or any other officer means such officer of the Corporation; (i) committee means a committee appointed pursuant to section 4.01 of this by-law; 1

82 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT (j) director means a director of the Corporation; (k) instrument in writing includes deeds, contracts, mortgages, hypothecs, charges, conveyances, transfers and assignments of property, real or personal, immovable or movable, agreements, releases, receipts and discharges for the payment of money or other obligations, cheques, promissory notes, drafts, acceptances, bills of exchange and orders for the payment of money, conveyances, transfers and assignments of shares, instruments of proxy, powers of attorney, stocks, bonds, debentures or other securities or any paper writings; (l) meeting of the shareholder includes an annual meeting of the shareholder and a special meeting of the shareholder; (m) number of directors means the number of directors as determined from time to time by special resolution or, if a special resolution empowers the directors to determine the number, by resolution of the directors; (n) officer means an officer of the Corporation; (o) person includes an individual, sole proprietorship, partnership, unincorporated association, unincorporated syndicate, unincorporated organization, trust, body corporate, and a natural person in his capacity as trustee, executor, administrator or other legal representative; (p) recorded address means an address as recorded in the securities register or records of the Corporation; (q) resident Canadian means an individual who is, (i) a Canadian citizen ordinarily resident in Canada, (ii) a Canadian citizen not ordinarily resident in Canada who is a member of a class of persons prescribed by the Act for the purposes of the definition of resident Canadian, or (iii) a permanent resident within the meaning of the Immigration Act, R.S.C. 1985, c. I-2, and ordinarily resident in Canada; (r) shareholder means the Corporation of the City of Guelph; (s) Shareholder Declaration means the document entitled City of Guelph Shareholder Declaration dated August 13, 2014, as from time to time amended; 2

83 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT (t) signing officer means, in relation to any instrument in writing, any person authorized to sign the same on behalf of the Corporation by section 2.04 of this by-law or by a resolution passed pursuant thereto; (u) special resolution means a resolution that is (i) submitted to a special meeting of the shareholder of the Corporation duly called for the purpose of considering the resolution and passed, with or without amendment, at such meeting, or (ii) consented to in writing by the shareholder of the Corporation or its attorney authorized in writing; (v) subsidiary means in relation to another body corporate, a body corporate which (i) is controlled by (A) that other, (B) that other and one or more bodies corporate each of which is controlled by that other, or (C) two or more bodies corporate each of which is controlled by that other, or (ii) is a subsidiary of a body corporate that is that other s subsidiary. (2) Subject to the foregoing, the words and expressions herein contained shall have the same meaning as corresponding words and expressions in the Act Number, gender and statutes. In any by-law, resolution of the shareholder of the Corporation, resolution of the board or any committee thereof, unless there is something in the subject-matter or context inconsistent therewith, the singular shall include the plural and the plural shall include the singular and words importing gender shall include the masculine and feminine genders. Wherever reference is made in any other by-law or in any special resolution of the shareholder, resolution of the board or any committee thereof to any statute or section thereof, such reference shall be deemed to extend and refer to any amendment to or re-enactment of such statute or section, as the case may be. 3

84 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT 1.03 Headings and table of contents. The headings and table of contents in this by-law are inserted for convenience of reference only and shall not affect the construction or interpretation of the provisions of this by-law Shareholder Declaration. If any conflict shall appear between a by-law of the Corporation and the provisions of the Shareholder Declaration, the provisions of the Shareholder Declaration shall govern. 2. General 2.01 Registered office. The Corporation may by resolution of the directors change the location of its registered office within the municipality specified in the Articles Corporate Seal. The Corporation may have a corporate seal which shall be adopted and may be changed by resolution of the directors Financial Year. The financial year end of the Corporation shall be December Execution of Documents. Instruments in writing requiring execution by the Corporation may be signed on behalf of the Corporation by any two of the directors or officers, and all instruments in writing so signed shall be binding upon the Corporation without any further authorization or formality. The board may from time to time by resolution appoint any officer or officers or any other person or persons on behalf of the Corporation either to sign instruments in writing generally or to sign specific, or specific classes of, instruments in writing. Any signing officer may affix the corporate seal to any instrument requiring the same. Any signing officer may certify a copy of any instrument, resolution, by-law or other document of the Corporation to be a true copy thereof Execution in Counterpart. Any Articles, notice, resolution, requisition, statement or other document required or permitted to be executed by more than one person may be executed in several documents of like form each of which is executed by one or more of such persons, and such documents, when duly executed by all persons required or permitted, as the case may be, to do so, shall be deemed to constitute one document and to bear date as of the date of execution thereof by the last such person Banking Business. The banking business of the Corporation including, without limitation, the borrowing of money and the giving of security therefor, shall be transacted with such banks, trust companies or other bodies corporate or organizations as may from time to time be designated by or under the authority of 4

85 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT the board. Such banking business or any part thereof shall be transacted under such agreements, instructions and delegations of powers as the board may from time to time prescribe or authorize Voting Rights in Other Bodies Corporate. The officers of the Corporation may execute and deliver proxies to a person to exercise the voting rights attaching to any securities held by the Corporation. The board may direct the manner in which and the person or person by whom the voting rights may be exercised. 3. Borrowing 3.01 Power to borrow. Subject to the Articles, the by-laws, the Shareholder Declaration and the Municipal Act, 2001, S.O. 2001, c.25, the Board may without authorization of the shareholder from time to time (a) borrow money upon the credit of the Corporation; (b) issue, reissue, sell or pledge debt obligations of the Corporation; (c) subject to the Act, give a guarantee on behalf of the Corporation to secure performance of an obligation of any person; and (d) mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation owned or subsequently acquired, to secure any obligation of the Corporation Delegation of power to borrow. Unless the the Articles, the by-laws, the Shareholder Declaration and the Municipal Act, 2001, S.O. 2001, c.25 otherwise provide, the directors may by resolution delegate any or all of the powers referred to in section 3.01 of this by-law to a director, a committee or an officer. 4. Directors 4.01 Number of Directors and Quorum. The Board shall consist of the number of directors determined from time to time by a resolution of the Shareholder within the minimum and maximum numbers set out in the articles. A majority of the number of directors so determined shall constitute a quorum for the transaction of business at any meeting of the board Qualification. (1) The following persons are disqualified from being a director: (a) a person who is less than eighteen years of age, 5

86 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT (b) (c) (d) a person who is of unsound mind and has been so found by a court in Canada or elsewhere, a person who is not an individual, and a person who has the status of bankrupt. (2) A director is not required to hold shares issued by the Corporation. (3) All of the directors shall be resident Canadians Appointment and Term. Directors shall be elected by a resolution of the Shareholder at a shareholder meeting for one year terms or such other terms of office determined by the Shareholder. If an election of directors is not held at the proper time, the directors shall continue in office until their successors are appointed. The board of the Corporation may make recommendations to the Shareholder for the election of directors and the term of their appointment, however the Shareholder is not bound by the recommendation Ceasing to Hold Office. A director ceases to hold office when (a) the director dies or, subject to section 4.05 of this by-law, the director resigns; (b) the director is removed from office in accordance with the provisions of the Act, the Shareholder Declaration or the by-laws; or (c) the director becomes disqualified from being a director under the Act, the Shareholder Declaration or the by-laws Resignation of a Director. A director may resign their office as a director by giving to the Corporation a written resignation, which resignation shall become effective at the later of (a) the time at which such resignation is received by the Corporation, or (b) the time specified in the resignation Removal., The shareholder may remove any director from the board prior to the end of the director s term and appoint a replacement director. The Board may recommend to the Shareholder the removal of a director for failing to faithfully discharge a director s required responsibilities at the discretion of the shareholder Term of replacement director. A director appointed to fill a vacancy holds office for the unexpired term of his predecessor Directors Expenses. The directors shall receive renumeration or other compensation for serving as a director on the board or any committee, in 6

87 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT accordance with the board compensation policy established by the board and approved by the Shareholder. The directors shall be entitled to be reimbursed for reasonable expenses incurred by them for travel and/or training in attending to the business of the board or any committee. 5. Director Meetings 5.01 First Meeting of New Board. Each newly elected board of directors may without notice hold its first meeting immediately following the meeting of the Shareholder at which such board was elected if a quorum of directors is present Place of Meeting. Meetings of the directors may be held at any place within or outside of Ontario and in any financial year a majority of the meetings of the directors need not be held at a place within Canada Calling of Meetings. Meetings of the directors shall be held at such time and place as the board, the Chair, or a quorum of directors may determine Notice of Meeting. Notice of the time and place of each meeting of the directors shall be given to each director not less than 48 hours before the time of the meeting. A notice of a meeting of directors need not specify the purpose of or the business to be transacted at the meeting except where the Act requires such purpose or business to be specified Regular meetings. The board may by resolution fix a day or days in any month or months for the holding of regular meetings at a time and place specified in such resolution Meetings Without Notice. Meetings of the board may be held at any time or place permitted by the Act, the Articles or the by-laws without notice or on shorter notice than that provided for in 5.04, and proceedings at the meeting shall not be invalidated if all the directors are present in person (other than expressly to object that the meeting is not lawfully called) or if all the directors who are not present, in writing, waive notice of or accept short notice of such meeting. Notice of any meeting or any irregularity in any meeting or in the notice thereof may be waived by any director either before or after such meeting. Attendance of a director at a meeting of the board is a waiver of notice of the meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called Participation in Meeting by Telephone or Other Electronic Means. If all the directors of the Corporation present at or participating in the meeting consent, a meeting of directors or of a committee of directors may be held by 7

88 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT means of such telephone, electronic or other communication facilities as permits all persons participating in the meeting to communicate with each other simultaneously and instantaneously. A director participating in a meeting by such means is deemed for the purposes of the Act to be present at that meeting. Any such consent shall be effective whether given before or after the meeting to which it relates and may be given with respect to all meetings of the board and of committees of the board. If a majority of the directors participating in a meeting held under this section are then in Canada, the meeting shall be deemed to have been held in Canada for the purposes of section Chair. The chair of any meeting of the directors shall be the Chair of the board. If the Chair of the board is not present, the directors present shall choose one of their number to be chair Votes to Govern. Each question at a meeting of the directors shall be decided by a majority vote and, upon an equality of votes, the chair shall not have a second or casting vote Action by the Board. Subject to section 4.10, the powers of the board may be exercised, (a) by a meeting at which the quorum is present; (b) by a resolution consented to by an electronic vote by all the directors entitled to vote on that resolution at a meeting of the board; or, (c) by resolution in writing signed by all the directors entitled to vote on that resolution at a meeting of the board. Subject to the Shareholder Declaration, where there is a vacancy or vacancies on the board, the remaining directors may exercise all the powers of the board Canadian majority. Unless otherwise provided by the Act, the board shall not transact business at a meeting unless a majority of the directors present are resident Canadians, except where: (a) (b) a resident Canadian director who is unable to be present approves in writing or by telephone or other communication facility the business transacted at the meeting; and a majority of resident Canadians would have been present had that director been present at the meeting Disclosure of interest. A director or officer who is a party to, or is a director or an officer of, or has a material interest in, any person who is a party to a material contract or transaction or proposed material contract or transaction with the Corporation shall disclose the nature and extent of his interest at the time and in the manner provided by the Act. 8

89 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT 5.13 Municipal Conflict of Interest Act. The directors of the Corporation are deemed to be members for the purposes of the Municipal Conflict of Interest Act and shall declare any pecuniary interest in a matter before the board at the time and in the manner provided by that Act. 6. Committees 6.01 Appointment. The board may appoint one or more committees of the board, however designated, and delegate to any such committee any of the powers of the board except those which, under the Act, a committee of directors has no authority to exercise Canadian membership. Except as allowed by the Act, a majority of the members of any committee appointed by the directors shall be resident Canadians Transaction of Business. Subject to 5.11, the powers of a committee of the board may be exercised: (a) (b) (c) by a meeting at which a quorum is present; by a resolution consented to by an electronic vote by all the directors entitled to vote on that resolution at a meeting of the board; or, by resolution in writing signed by all members of such committee who would have been entitled to vote on that resolution at a meeting of the committee Procedure. Unless otherwise determined by the board, each committee shall have power to fix its quorum at not less than a majority of its members, to elect its chair and to regulate its procedure. 7. Officers 7.01 Appointment. In accordance with the Shareholder Declaration, the board shall appoint a Chair of the Board, a Chief Executive Officer, a Chief Financial Officer, a Secretary and a General Counsel as officers of the Corporation. None of the officers, other than the Chair of the Board, shall be a member of the board. Any two or more offices of the Corporation may be held by the same person. The board may specify the duties of and, in accordance with this by-law and subject to the provisions of the Act and the Shareholder Declaration, delegate to such officers powers to manage the business and affairs of the Corporation. In the absence of specific delegation the officers of the Corporation shall have the responsibility to manage the day to day operations of the Corporation consistent with the strategic plans, business plans and budget approved by the board. 9

90 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT 7.02 Chair of the Board. The Chair of the Board shall, if present, preside at all meetings of directors and shareholders. The Chair shall sign all instruments which require the Chair s signature and shall perform all duties incident to the office, and shall have such other powers and perform such other duties as may from time to time be prescribed by resolution of the board Chief Executive Officer. The Chief Executive Officer (CEO) shall exercise general supervision over the affairs of the Corporation. The CEO shall sign all instruments which require the CEO s signature and shall perform all duties incident to the office, and shall have such other powers and perform such other duties as may from time to time be prescribed by resolution of the board Secretary. The Secretary shall give, or cause to be given, all notices required to be given to shareholders, directors, auditors and members of any committee. The Secretary, as and when requested to do so, shall attend and be the secretary of all meetings of the board, shareholders and committees of the board. The Secretary shall enter or cause to be entered in the books kept for that purpose minutes of all proceedings at meetings of directors and of the shareholder. The Secretary shall be the custodian of the seal (if any) of the Corporation and of all books, papers, records, documents and other instruments belonging to the Corporation. The Secretary shall have such other authority and perform such other duties as the board or the CEOmay specify Chief Financial Officer. The Chief Financial Officer (CFO) shall keep or cause to be kept proper accounting records in compliance with the Act and shall be responsible for the deposit of money, the safekeeping of securities and the disbursement of the funds of the Corporation. The CFO shall render to the board whenever required an account of all the transactions as CFO and of the financial position of the Corporation. The CFO shall have such other powers and duties as the board or the chief executive officer may specify General Counsel. The General Counsel shall provide legal advice and services to the Corporation. The General Counsel shall have such other powers and duties as the board or the CEO may specify Delegation of board powers. In accordance with the by-laws and subject to the provisions of the Act and the Shareholder Declaration, the board may from time to time by resolution delegate to any officer or officers the power to manage the business and affairs of the Corporation Vacancies. If any office of the Corporation shall for any reason be or become vacant, the board may appoint a person to fill such vacancy. 10

91 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT 7.09 Variation of powers and duties. Notwithstanding the foregoing, the board may from time to time and subject to the provisions of the Act and Shareholder Declaration, add to or limit the powers and duties of an office or of an officer occupying any office Term of Office. The board, in its discretion but subject to the terms of the Shareholder Declaration, may remove any officer of the Corporation, without prejudice to such officer s rights under any employment contract. Otherwise, each officer shall hold office until his successor is appointed, or until his earlier resignation Terms of Employment and Remuneration. The terms of employment and the remuneration of an officer appointed by the board shall be settled by it from time to time. 8. Protection of Directors, Officer and Others 8.01 Limitation of Liability. Every director and officer of the Corporation in exercising their powers and discharging their duties shall act honestly and in good faith with a view to the best interests of the Corporation and exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances. Subject to the foregoing, no director or officer shall be liable for: (a) (b) (c) (d) (e) (f) (g) the acts, receipts, neglects or defaults of any other director, officer or employee; or joining in any receipt or other act for conformity; or any loss, damage or expense suffered or incurred by the Corporation through the insufficiency or deficiency of title to any property acquired by the Corporation or for or on behalf of the Corporation; or the insufficiency or deficiency of any security in or upon which any of the moneys of the Corporation shall be invested; or any loss or damage arising from the bankruptcy, insolvency or tortious acts of any person with whom any of the moneys, securities or effects of the Corporation shall be deposited; or any loss occasioned by any error of judgment or oversight on the part of the director or officer, as the case may be; or any other loss, damage or misfortune which shall happen in the execution of the duties of the officer or director, as the case may be, or in relation thereto; 11

92 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT PROVIDED that nothing herein shall relieve any director or officer from the duty to act in accordance with the Act and the regulations thereunder or from liability for any breach thereof Indemnification by Corporation. Subject to the limitations contained in the Act, the Corporation shall indemnify a director or officer, a former director or officer or a person who acts or acted at the Corporation s request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor, and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by the person in respect of any civil, criminal or administrative action or proceeding to which the person is made a party by reason of being or having been a director or officer of the Corporation or such body corporate, if (a) the person acted honestly and in good faith with a view to the best interests of the Corporation; and (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, the person had reasonable grounds for believing that the relevant conduct was lawful. The Corporation shall also indemnify that person in such other circumstances as the Act or law permits or requires. Nothing in this by-law shall limit the right of any person entitled to indemnity apart from the provisions of this by-law Insurance. The Corporation may purchase and maintain insurance for the benefit of any person referred to in section 8.02 of this by-law against any such liabilities and in such amounts as the board may from time to time determine and are permitted by the Act. 11. Shares 9.01 Issue of Shares. Shares of the Corporation may only be issued in accordance with the Shareholder Declaration, the Articles and the Municipal Act and associated regulations Share certificates. Share certificates shall be in such form as the directors may approve Lien on Shares. The Corporation shall be entitled to a lien on a share registered in the name of a shareholder or such shareholder s legal representative for a debt of that shareholder to the Corporation. 12

93 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT 9.04 Surrender of Certificates. No transfer shall be registered unless or until the certificate representing the shares to be transferred has been surrendered and cancelled. 10. Meetings of the Shareholder Calling of meetings. A meeting of the shareholder may be called at any time by resolution of the board or by the Chair of the Board, and the Secretary shall cause notice of a meeting of the shareholder to be given to the Clerk of the City of Guelph and the CAO of the City of Guelph, each director and the auditor when a meeting is called Waiver of notice. The shareholder and any other person entitled to attend a meeting of the shareholder may in any manner and at any time waive notice of a meeting of the shareholder, and attendance of any such person at a meeting of the shareholder is a waiver of notice of the meeting Annual meeting. The Corporation shall hold an annual meeting of the shareholder in accordance with the Act and the Shareholder Declaration Special meeting. Subject to the Act and the Shareholder Declaration, a special meeting of the shareholder may be called at any time and may be held in conjunction with an annual meeting of the shareholder Place of meetings. A meeting of the shareholder shall be held at the place where the registered office of the Corporation is located or such other place as requested by the shareholder Vote to govern. At all meetings of the shareholder, every question shall, unless otherwise required by law, the Articles, the by-laws, or the Shareholder Declaration, be determined by a resolution of the Council of the City of Guelph. 12. Dividends Declaration of dividends. Subject to the provisions of the Act, the Articles and the Shareholder Declaration, the Board may from time to time declare and the Corporation may pay dividends to the shareholder according to its rights and interests in the Corporation. 13. Notices Method of giving. Any notice, communication or other document to be sent or given by the Corporation to the shareholder, a director, officer or auditor of the 13

94 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT Corporation under any provision of the Act, the Articles or by-laws shall be sufficiently sent and given if delivered by , fax, courier, mail or personally to the person to whom it is to be given. A notice, communication or document so delivered shall be deemed to have been sent and given when it is delivered personally, when the or fax is sent, the day after it is sent by courier and five days after it is sent by mail Computation of time. Where a given number of days notice or notice extending over any period is required to be given, the date of giving the notice and the date of the meeting or other event shall both be excluded Waiver of notice. The shareholder (or its duly appointed proxyholder), any director, officer, auditor or member of a committee may at any time waive any notice, or waive or abridge the time for any notice, required to be given to him under any provisions of the Act, the Articles, the by-laws or otherwise and such waiver or abridgement shall cure any default in the giving or in the time of such notice, as the case may be. Any such waiver or abridgement shall be in writing except a waiver of notice of a meeting of the shareholder or of the board which may be given in any manner. 14. Effective Date Effective Date: This by-law shall come into force when made by the board of directors in accordance with the Act. MADE by the board: 29 July 2014 Karen Farbridge, Chair of the Board Donna Jaques Secretary THE FOREGOING BY-LAW is hereby confirmed by the sole shareholder of the Corporation pursuant to the Act, as evidenced by its signature hereto. DATED the 13 th day of August, 2014 THE CORPORATION OF THE CITY OF GUELPH 14

95 Schedule E July 22, 2014 GMHI By-Law No. 1 DRAFT By: Ann Pappert, Chief Administrative Officer 15

96 Schedule F Report to the Shareholder (Open) Date of Meeting: August 13, 2014 Organizational By-law RESOLVED that: 1. The Organizational By-law for GMHI is approved and the Organizational By-law passed by the Board on December 11, 2011 is repealed; and, 2. The Organizational By-law for GMHI shall be presented to the City, as Shareholder, for approval at the August 13, 2014 shareholder meeting. Passed by the GMHI Board of Directors July 29, 2014 Donna Jaques Corporate Secretary 1