shareholder declaration - city of guelph · shareholder agenda is approved. moved, seconded and...

Special Shareholder Meeting – AGENDA

City of Guelph – Council Chambers

August 13, 2014 - 6:00 p.m. to 8:00 p.m.

Attachments:

A. Resolutions

B. June 16, 2014 Shareholder Meeting Minutes

C. Report from CEO (with Schedules A – F)

# ITEM TIME ACTION LEAD Attmt(s)

1. Agenda Approval 6:00 Standing Chair A.

2. Declaration of Pecuniary Interest or

Conflict of Interest

Standing Chair

3. GMHI Shareholder Meeting Minutes • June 16, 2014

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

• Municipal Act, 2001, S. 239 (2) (b) personal

matters about an identifiable individual,

including municipal or local board

employees

7:30

Resume Open Session 7:45

6. Appointment of Directors 7:45

7. Adjourn 8:00

Attachment A

1

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, 2001.

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:

Attachment A

2

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.

Attachment B

Annual General Meeting of the Shareholder June 16, 2014 Page 1 of 5

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 B. Cowan (Vice-Chair, Guelph Holdings Inc.)

ABSENT L. Burcher (Director)

ITEM COMMENTS RESPONSIBILITY & FOLLOW-UP

1. Welcome and Agenda Approval

Motion to approve the agenda. The GMHI Annual General Meeting of the Shareholder agenda is approved. Moved, Seconded and Carried.

2. Declaration of Pecuniary Interest or Conflict of Interest

None declared.

3. GMHI Shareholder Meeting Minutes

Motion to approve. The Minutes of the GMHI Annual General Meeting (Open Session) of the Shareholder held July 10, 2013, as amended, are approved.

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, 2014. 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.

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

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

Motion to move into closed session. Moved, Seconded and Carried.

Resumption of Open Session

The meeting resumed at 7:00 p.m.

Report from Closed Session

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

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.

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.

DRAFT MINUTES – SUBJECT TO CONFIRMATION

Attendance 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: Councillor L. Burcher

Staff: 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

Others Mr. T. Sehl, Director of GMHI Present: 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)

June 16, 2014 Guelph City Council Meeting

Page 2

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-2014.1 Report on Compensation for Directors for 2013

3. 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.


Hofland, Kovach, Laidlaw, Piper, Van Hellemond and Wettstein (12) VOTING AGAINST: (0)

CARRIED

GMHI-2014.2 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,


CARRIED


Page 3

GMHI-2014.3 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)


GMHI-2014.4 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)


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 4

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-2014. 3 Appointment of Auditors C.GMHI-2014.4 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


Seconded by Councillor Hofland

That the closed minutes of the Special Council Meeting held on July 10, 2013 and April

28th, 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-2014. 3 Appointment of Auditors


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 5



CARRIED

C.GMHI-2014.4 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

1

Attachment C

TO City Council – As Shareholder of GMHI SERVICE AREA Guelph Municipal Holdings Inc. DATE August 13, 2014 SUBJECT Restructuring of GMHI

REPORT NUMBER GMHI-03-2014

EXECUTIVE SUMMARY

PURPOSE OF REPORT 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

2

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, 2014. 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, 2001.

AMALGAMATION

WHEREAS: Guelph Hydro Inc. (the "Subsidiary") is a wholly-owned subsidiary of Guelph Municipal Holdings Inc (the “Corporation “).

AND WHEREAS:


3

Attachment C


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

4

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) The appropriate due diligence as set out in the Business Case Study

is completed and the results are satisfactory to the Board; and,

(b) 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

5

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;


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.

6

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, 2014.

Assuming all the approvals are obtained, the intention is to have the amalgamation

effective on September 8, 2014.

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,

7

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 4.10 - 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,

8

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 5.01- 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 2015. 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.

9

Attachment C

The original organizational by-law for GMHI was approved by the Board on

December 11, 2011. 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

10

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.

Schedule A

1

Prepared by: GMHI

Date: July 22, 2014

A Business Case Study

To Support the Amalgamation of GMHI and GHI

i

i GMHI/GHI Amalgamation Business Case Study

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 ....................................................................... 11

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 .................................................... 34

Section 10: Implementation Strategy ............................................................... 35

Section 11: Approval Signatures ....................................................................... 36

Schedule 1: Due Diligence Results………………………………………………………………….37

1

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 2014-2015, 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).

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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.

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SECTION 2: BACKGROUND (GAP ANALYSIS)

GMHI was officially incorporated in 2011. 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.

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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

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• 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.

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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.

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Figure 1

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Figure 2

Stakeholder Interest or Requirement Assessment

City of Guelph Excellence in asset management

through effective governance,

strategic and operational

management; alignment and

achievement of strategic goals

and objectives.

The restructuring will allow the

City to achieve its objectives for

GMHI.

GMHI Board Duty of care to GMHI and the

Shareholder

The impacts of the restructuring

on GMHI has been investigated

and determined to have overall

positive implications for GMHI.

GHI and GHI Subsidiaries

Boards

Duty of care to the GHI group of

corporations and the

Shareholder

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.

Residents Prudent use of City resources;

achieve reliable returns and

benefits from City assets

The restructuring will allow the

City to achieve its objectives for

GMHI and increase its ability to

manage City assets.

Investors Investment opportunities to

generate adequate ROIs

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.

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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.

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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.

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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 2011. 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.

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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.

The amalgamated

corporation would

continue to report to

Council as Shareholder

regarding GMHI’s

activities.

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.

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.

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• 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.

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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 4 8 12 16 20

3 Major 3 6 9 12 15

2 Moderate 2 4 6 8 10

1 Minor 1 2 3 4 5

Likelihood Scale

1

Rare

2

Unlikely

3

Somewhat Likely

4

Likely

5

Almost Certain

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Option 1 Description

Status Quo 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.

3 4 12

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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.

3 4 12

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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.

3 4 12

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:

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.

2 4 8

Reputation Risk associated

with anything

that can damage

the reputation of

5 Risk that the current GMHI performance and

structure will damage the reputation of the

City’s reputation and undermine public

3 4 12

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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


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

3 4 12

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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


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.

3 4 12

OVERALL 80

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Option 2 Description

Amalgamation

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#


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.

2 2 4

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

2 2 4

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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.

2 2 4

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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.

2 2 4

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.

1 3 3

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

2 2 4

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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

2 3 6

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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 non-

compliance

with laws,

regulations,

policies or

other rules

7 Risk that the GMHI/GHI amalgamation will

have negative consequences of non-

compliance 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.

3 2 6

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25

OVERALL 31

6.1 Qualitative Analysis Summary – RISKS

Viable Options

Risk Categories

Service

Delivery Employees Public Physical

Environment Reputation Financial Regulatory TOTAL

Option 1:

‘Status Quo’

12 4 8 8 12 12 12 68

Option 2:

Amalgamation

4 4 4 3 4 6 6 31

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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.

Option Description

Status Quo No change to the existing corporate and governance structure.

Benefit

Categories

Stakeholders

(Specific

Groups)


Organizational

Culture

GMHI Board

and Staff

GHI Board

and Staff

City Council

and City Staff

The existing culture of the organization will

remain the same, with little to no disruption to

staff.

1 5 5

Organizational

Performance

City Council

GMHI Board

The performance of GMHI and its subsidiaries

will be unable to be enhanced and GMHI will

continue to have low impact on GHI

performance

1 5 5

Organizational

Sustainability

GMHI Board

and Staff

The ability of GMHI to generate revenues to

support continued growth will be constrained.

1 5 5

Organizational

Accountability

GMHI Board

GHI Board

City Council

The accountability of GMHI and GHI to Council

will remain high.

3 5 15

30

Impact Scale

3 Significant 3 6 9 12 15

2 Moderate 2 4 6 8 10

1 Minor 1 2 3 4 5

Likelihood Scale

1

Rare

2

Unlikely

3

Somewhat

Likely

4

Likely

5

Almost

Certain

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27

Viable Option Description

Amalgamation GMHI and GHI amalgamate into a new company called GMHI

Benefit

Categories

Stakeholders

(Specific

Groups)


Organizational

Culture

GMHI Board

and Staff

GHI Board

and Staff

City Council

and City 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.

3 4 12

Organizational

Performance

City Council

GMHI Board

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.

3 4 12

Organizational

Sustainability

GMHI Board

and Staff

GMHI will have adequate resources to sustain

and grow the corporation.

3 4 12

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.

3 5 15

54

6.2 Qualitative Analysis Summary – Benefits

Viable Options Org

Culture

Org

Performance

Org

Sustainability

Org

Accountability

TOTAL

Option 1:

Status Quo 5 5 5 15 30

Option 2:

Amalgamation 12 12 12 15 54

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6.3 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 GMHI will continue to pay

the City for City Staff’s work

on GMHI

$250,000 + lost

capacity of City staff

CEO GMHI will pay for a CEO as

budgeted for in the 2014

GMHI budget.

$250,000 /year

Board Budget and

Staff 1

Existing resources to support

GHI Board

$427,500

GMHI Office

Space

GMHI will be require to find

office space

$50,000

Total Costs $977,500 $0.00

1 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

$250,000

CEO CEO expense already part of

GHI Budget

$250,000

General Manager Current secondment will

become a permanent

position with GMHI

Administrative

Support

New support person to assist

GM and Corporate Secretary

$100,000

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29

Board Budget and

Staff 1

New GMHI Board and staff

costs

$249,200 $178,300

GMHI Office

Space

GMHI will use GHI office

space

$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

Viable Options Total Additional Costs Total Savings (incl. Cost of

avoidance)

Net Savings or Additional Costs

(Costs)

Option 1: Status Quo $50,000 ($50,000)

Option 2:

Amalgamation $349,200 $728,300 $379,100

6.4 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 68 30 $50,000 Annual Expense 2

Option 2:

Amalgamation

31 77 ($379,000) Annual

Savings 1

30

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

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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.

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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.

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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.

34

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.

35

35

SECTION 10: IMPLEMENTATION STRATEGY

It is anticipated that following Council approval of the business case study, the amalgamation will occur

in September, 2014.

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.

36

36

SECTION 11: APPROVAL SIGNATURES

Approved by GMHI Board:

Approved By City Council:

37

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


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

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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 2013.


amalgamation and confirmation that no work injuries in

2014.

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.


amalgamation

Ontario Energy Board

Act

Complete Legal opinion received that no OEB approval is required

for amalgamation.

Ontario Business

Corporations Act

Complete All requirements under OBCA for amalgamation will be

complied with upon amalgamation.

39

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Environmental

Protection Act & Regs

Complete Will obtain compliance confirmation upon

amalgamation

Agreements Notice or consents

required

Complete 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.

1

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:



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

Schedule B

2

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

August 13, 2014 CITY-GMHI SHAREHOLDER DECLARATION

Page 1 of 13

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 2 of 13

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 3 of 13

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.

1.02 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.

2.02 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 City-

owned 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 4 of 13

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 5 of 13

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.

3.02 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.

4.02 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 6 of 13

Schedule C

4.03 Number of Directors

The GMHI Board shall consist of a minimum of 7 directors.

4.04 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.

4.05 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.

4.06 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.

4.07 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.


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(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).

4.08 Board Committees

The GMHI Board may establish committees of the Board in the GMHI Board’s discretion.

4.09 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).

4.10 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.

5.02 Risk Management


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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.

5.03 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.

6.02 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.

7.02 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.

7.02 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:


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(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.

8.02 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


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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.

9.02 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.

10.2 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


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the relevant Subsidiary, and the City shall protect such information in accordance with the

exemption for third party information in Section 10 of MFIPPA.

10.3 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

11.01 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.

11.02 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;


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(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.

11.03 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

13.01 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.

13.02 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


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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, 2014.


By:

1


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, 2014.

Passed by the GMHI Board of Directors on July 29, 2014.

Donna Jaques

Corporate Secretary

Schedule D

July 22, 2014 GMHI By-Law No. 1 DRAFT

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Schedule E

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;


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Schedule E

(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;


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Schedule E

(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.

1.02 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.


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Schedule E

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.

1.04 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.

2.02 Corporate Seal. The Corporation may have a corporate seal which shall be

adopted and may be changed by resolution of the directors.

2.03 Financial Year. The financial year end of the Corporation shall be December

31.

2.04 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.

2.05 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.

2.06 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


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Schedule E

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.

2.07 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.

3.02 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.

4.02 Qualification.

(1) The following persons are disqualified from being a director:

(a) a person who is less than eighteen years of age,


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Schedule E

(b) a person who is of unsound mind and has been so found by a

court in Canada or elsewhere,

(c) a person who is not an individual, and

(d) 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.

4.03 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.

4.04 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.

4.05 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.

4.06 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.

4.07 Term of replacement director. A director appointed to fill a vacancy

holds office for the unexpired term of his predecessor.

4.08 Directors’ Expenses. The directors shall receive renumeration or other

compensation for serving as a director on the board or any committee, in


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Schedule E

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.

5.02 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.

5.03 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.

5.04 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. 5.05 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.

5.06 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.

5.07 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


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Schedule E

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 5.02.

5.08 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.

5.09 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.

5.10 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.

5.11 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) 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

(b) a majority of resident Canadians would have been present had that

director been present at the meeting.

5.12 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.


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Schedule E

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.

6.02 Canadian membership. Except as allowed by the Act, a majority of the

members of any committee appointed by the directors shall be resident Canadians.

6.03 Transaction of Business. Subject to 5.11, the powers of a committee of

the board may be exercised:

(a) by a meeting at which a 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 members of such committee who

would have been entitled to vote on that resolution at a meeting of the

committee.

6.04 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.


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Schedule E

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.

7.03 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.

7.04 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.

7.05 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.

7.06 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.

7.07 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.

7.08 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.


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Schedule E

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.

7.10 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.

7.11 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) the acts, receipts, neglects or defaults of any other director, officer

or employee; or (b) joining in any receipt or other act for conformity; or

(c) 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

(d) the insufficiency or deficiency of any security in or upon which any

of the moneys of the Corporation shall be invested; or (e) 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

(f) any loss occasioned by any error of judgment or oversight on the part of the director or officer, as the case may be; or

(g) 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;


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Schedule E

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.

8.02 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.

8.03 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.

9.02 Share certificates. Share certificates shall be in such form as the directors

may approve.

9.03 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.


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Schedule E

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

10.01 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.

10.02 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.

10.03 Annual meeting. The Corporation shall hold an annual meeting of the

shareholder in accordance with the Act and the Shareholder Declaration.

10.04 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.

10.05 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.

10.06 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

12.01 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

13.01 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


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Schedule E

Corporation under any provision of the Act, the Articles or by-laws shall be

sufficiently sent and given if delivered by email, 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 email or fax is sent, the day after it is sent by courier and five

days after it is sent by mail.

13.02 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.

13.03 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

14.01 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, Donna Jaques

Chair of the Board 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 13th day of August, 2014



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Schedule E

By: ______________________________

Ann Pappert, Chief Administrative Officer

1


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

Schedule F