offering statement
TRANSCRIPT
Financial Services Commission desCommission services financiersof Ontario de l’Ontario f
‘a,Ontario
Ontario Corporation number: 1851884
Co-operative Corporations Act, R.S.O. 1990, c. C.35
RECEIPT FOR AN OFFERING STATEMENT
COMMUNITY ENERGY DEVELOPMENT CO-OPERATIVE LTD.
Community Energy Development Co-operative Ltd. (the “Co-operative”), filed anOffering Statement dated November 27, 2014.
As a condition of the Superintendent of Financial Services issuing a Receipt underSubsection 36(1) of the Co-operative Corporations Act, the Co-operative hasundertaken in accordance with Section 17 of the Offering Statement that:
a) the Offering Statement dated November 27, 2014 will expire on November 27,2015 and after that date no further securities will be issued unless a newOffering Statement has been filed and receipted;
b) a copy of the Offering Statement will be given to each prospective investorbefore payment for securities is accepted by the Co-operative; and
c) none of the securities issued by the Co-operative pursuant to this OfferingStatement will be in bearer form.
A Receipt for the Offering Statement relating to securities to be issued by the Cooperative is hereby issued under Subsection 36(1) of the Co-operative CorporationsAct.
Dated at Toronto, this 2-€ day of March, 2015.
Anatol Monid /Executive Direct’orLicensing and Market Conduct DivisionBy Delegated Authority from theSuperintendent of Financial Services
OFFERING STATEMENT OF THE
COMMUNITY ENERGY DEVELOPMENT CO-OPERATIVE LTD. (“CED Co-op” or “the Co-operative”)
Dated: November 27, 2014
Ontario Corporation No. 1851884
This document contains important information about the securities offered for sale by CED Co-op. You should read the entire Offering Statement before deciding whether or not to buy these
securities. All prospective purchasers of these securities must receive this Offering Statement before completing their purchase.
CED Co-op is offering to sell MEMBERSHIP SHARES, UNSECURED
CONVERTIBLE DEBENTURES, CLASS A PREFERENCE SHARES, BONDS and
TERM LOANS:
Summary:
Membership Shares
Unsecured Convertible Debentures
Class A Preference
Shares
Bonds- Series L1-4
Bonds-Series M1-5
Term Loans Totals
Minimum Offering
None None $2,500,000 None $2,500,000
Maximum Offering
$200,000 $400,000* $6,000,000* $4,000,000 $2,000,000 $20,000,000 $32,200,000*
Minimum Individual Purchase
$10 $500 $500 $1,000 $1,000 None
Maximum Individual Purchase
$10 $1,000 None None None None
* The Unsecured Convertible Debenture will be converted into Class A Preference Shares. Only $6 million in Unsecured Convertible Debentures and Class A Preference Shares in the aggregate will be offered. Description:
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Membership Shares: Total Minimum Offering: None Total Maximum Offering: $200,000 Share Price: $10 Minimum Individual Purchase: 1 @ $10 Maximum Individual Purchase: 1 @ $10 ($10)
Unsecured Convertible Total Minimum Offering: None Debentures: Total Maximum Offering: $400,000
Minimum Individual Purchase: $500 Maximum Individual Purchase: $1,000
Class A Preference Shares: Total Minimum Offering: None Total Maximum Offering: $6,000,000* Share Price: $5 Minimum Individual Purchase: 100 @ $5 ($500) Maximum Individual Purchase: None * The Unsecured Convertible Debenture will be converted into Class A Preference Shares. Only $6 million in Unsecured Convertible Debentures and Class A Preference Shares in the aggregate will be offered.
Bonds – Series L1-4: Total Minimum Offering: None Total Maximum Offering: $4,000,000 Minimum Individual Purchase: $1,000 Maximum Individual Purchase: None
Bonds – Series M1-5: Total Minimum Offering: None Total Maximum Offering: $2,000,000 Minimum Individual Purchase: $1,000 Maximum Individual Purchase: None
Term Loans: Total Minimum Offering: None Total Maximum Offering: $20,000,000 Minimum Individual Purchase: None Maximum Individual Purchase: None
Total Combined Minimum Offering of
Class A Preference Shares, Bonds Series L1-4
and Bonds Series M1-5: $2,500,000
Amount to be Raised by this Offering Not to Exceed: $32,200,000
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Membership Shares, Unsecured Convertible Debentures, Class A Preference Shares,
Bonds Series L1-4, Bonds Series M1-5 and Term Loans are being offered (the “Offering”).
This Offering is limited in that in the event that subscriptions for Class A Preference
shares, Bonds Series L1-4 and Bonds Series M1-5 under the Offering Statement, in the
combined amount of $2,500,000 are not received, no Class A Preference Shares or Bonds
will be sold pursuant to this Offering Statement and any subscription funds which have
been received for these specific Securities under this Offering Statement will be returned.
For clarity, those funds received for Membership Shares and Unsecured Convertible
Debentures, both under this Offering Statement and under applicable Offering
Statement exemptions, totaling a maximum of $1,000 per Investor, will not be held by the
Escrow Agent, neither at the time of initial investment, nor at the time the Unsecured
Convertible Debentures may be converted to Class A Preference Shares, and are therefore
not guaranteed to be returned to the Investor. This Co-operative has never conducted operations and is in the development stage.
Purchase of Securities in such start-up ventures involves a high degree of risk, and
subscribers should view this subscription as speculative and not invest any funds in this
Offering unless they can afford to lose their entire investment. No official of the Government of the Province of Ontario has considered the merits of the
matters addressed in this Offering Statement. Neither the Ministry of Finance nor any
other ministry or agency of the Government of Ontario assumes any liability or obligation to
anyone who purchases the securities offered under this Offering Statement. There is no established public market through which these Securities may be sold. Due to
the characteristics of the securities offered by this Offering Statement, restrictions on their
transfer, and the fact that significant resale restrictions may apply, no such market is likely to
develop. The Directors of the Co-operative have determined the price of these Shares.
Membership Shares, Class A Preference Shares, Unsecured Convertible Debentures and
Bonds may only be redeemed with the consent of the Board of Directors of the Co-
operative in accordance with the subscription agreements. Investors should not rely on any information other than what is contained in this Offering
Statement. An investment in the Securities of the Co-operative involves certain risks.
Potential buyers should pay careful attention to all of the Risk Factors noted in the Offering
Statement. See Section 5: RISK FACTORS, below, for a description of these risks. The information in any projections or pro forma statements contained in this Offering Statement may vary materially from actual results. This Offering Statement expires on November 27, 2015. No further Securities may be issued
after this date unless a new Offering Statement is filed and receipted.
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TABLE OF CONTENTS
GLOSSARY OF TERMS .......................................................................................................................... 1
1. CORPORATE INFORMATION ................................................................................................. 10
2. DIRECTORS AND OFFICERS .................................................................................................... 10
3. DESCRIPTION OF THE BUSINESS OF CED CO-OP ............................................................ 11
3.1 OVERVIEW AND HISTORY ............................................................................................... 11
3.2 VISION, MISSION AND VALUES .................................................................................... 13
3.3 MEMBERSHIP REQUIREMENTS AND SURPLUS ....................................................... 14
3.3.1. Membership Requirements .......................................................................................... 14
3.3.2. Acceptance ........................................................................................................................ 16
3.3.3. Rights of Membership ................................................................................................... 16
3.3.4. Obligations of Membership .......................................................................................... 16
3.3.5. Rights of Non-Members ................................................................................................ 17
3.3.6. Transfer of Membership ................................................................................................ 17
3.3.7. Termination of Membership ........................................................................................ 17
3.4 SURPLUS AND DISTRIBUTION ....................................................................................... 18
3.4.1. Distribution ...................................................................................................................... 18
3.4.2. Surplus and Distributions ............................................................................................. 18
3.5 INDUSTRY, OPERATIONS AND BUSINESS MODELS .............................................. 19
3.5.1. Industry - Renewable Energy ....................................................................................... 19
3.5.2. Operations ........................................................................................................................ 19
3.5.3. Business Models - FIT Contracts .................................................................................. 20
3.6 INDUSTRY MEMBERSHIPS ............................................................................................... 22
3.7 INSURANCE ........................................................................................................................... 22
3.8 REAL ESTATE ......................................................................................................................... 23
3.9 MARKETING .......................................................................................................................... 25
3.10 CO-OPERATIVE MANAGEMENT .................................................................................... 25
3.11 ON DISSOLUTION OF THE CO-OPERATIVE ............................................................... 30
4. BUSINESS PLAN ............................................................................................................................ 31
4.1 MARKET PENETRATION – INTEGRATING RENEWABLES .................................... 31
4.2 BENEFITS OF RENEWABLES ............................................................................................. 32
4.2.1. Flexibility .......................................................................................................................... 32
4.2.2. Economics ......................................................................................................................... 32
4.2.3. Safety ................................................................................................................................. 34
4.2.4. Environmental (Humanity) ........................................................................................... 35
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4.3 NEED FOR ELECTRICITY .................................................................................................... 35
4.4 FIT PROGRAM ....................................................................................................................... 36
4.4.1. History of the FIT Program ........................................................................................... 36
4.4.2. Sustainability of FIT Rates ............................................................................................ 37
4.4.3. Electricity Rates - Market Clearing Price .................................................................... 38
4.5 FIT PROCESS AND EXPECTED DIRECTION ................................................................ 41
4.6 PROJECTS – CURRENT ........................................................................................................ 48
4.7 PROJECTS – FUTURE............................................................................................................ 53
4.8 TECHNOLOGY ....................................................................................................................... 55
4.9 KEY RELATIONSHIPS ......................................................................................................... 57
4.10 MANAGEMENT AND ADMINISTRATION .................................................................. 59
4.11 PROJECT PORTFOLIO REVENUES .................................................................................. 61
4.12 PORTFOLIO INVESTMENT AND FINANCE ................................................................. 63
4.13 RRSP, RRIF AND TFSA ELIGBILITY ................................................................................ 65
4.14 MARKETING PLAN .............................................................................................................. 68
4.15 TAXATION .............................................................................................................................. 69
4.16 FINANCIAL STATEMENTS ................................................................................................ 72
4.17 CAPITAL LOANS ................................................................................................................... 73
5. RISK FACTORS .............................................................................................................................. 74
6. USE OF PROCEEDS OF THE OFFERING ................................................................................. 86
6.1 USE OF FUNDS IF THE MAXIMUM AMOUNT IS RAISED ....................................... 86
6.2 USE OF FUNDS IF THE MINIMUM AMOUNT IS RAISED ........................................ 87
6.3 ESCROW AGREEMENT ....................................................................................................... 89
7. CAPITAL STRUCTURE ................................................................................................................ 91
7.1 AUTHORIZED CAPITAL ..................................................................................................... 91
7.2 MATERIAL ATTRIBUTES OF AUTHORIZED CAPITAL ............................................ 91
7.2.1. MEMBERSHIP SHARES ............................................................................................... 91
7.2.2. CLASS A PREFERENCE SHARES .............................................................................. 92
7.2.3. CLASS B PREFERENCE SHARES ............................................................................... 95
7.2.4. CLASS C PREFERENCE SHARES .............................................................................. 98
8. DESCRIPTION OF SECURITIES .............................................................................................. 101
8.1. MEMBERSHIP SHARES ..................................................................................................... 102
8.2. UNSECURED CONVERTIBLE DEBENTURES ............................................................. 103
8.3. CLASS A PREFERENCE SHARES .................................................................................... 106
8.4. BONDS SERIES L1-4............................................................................................................ 111
8.5. BONDS SERIES M1-5 .......................................................................................................... 118
8.6. TERM LOANS ....................................................................................................................... 124
8.7. REGISTERED PLANS ......................................................................................................... 125
9. METHOD OF SALE OF SECURITIES ...................................................................................... 126
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10. DESCRIPTION OF THE MARKET ON WHICH THE SHARES MAY BE SOLD....... 127
11. STATEMENT OF MINIMUM AND MAXIMUM AMOUNTS OF THE OFFERING AND INDIVIDUAL SUBSCRIPTIONS ........................................................................................... 128
12. SECURITIES AND OTHER DEBT OBLIGATIONS OF CED CO-OP ........................... 130
13. MATERIAL LEGAL PROCEEDINGS TO WHICH CED CO-OP IS A PARTY ............ 130
14. MATERIAL INTERESTS OF DIRECTORS, OFFICERS AND EMPLOYEES .............. 130
15. MATERIAL CONTRACTS ENTERED INTO IN THE TWO YEARS PRECEDING THIS OFFERING STATEMENT........................................................................................................ 133
16. DIVIDENDS OR OTHER DISTRIBUTIONS PAID, DECLARED OR ACCUMULATED BUT UNPAID ...................................................................................................... 135
17. DESCRIPTION OF ANY OTHER MATERIAL FACTS .................................................... 135
18. CERTIFICATE OF DISCLOSURE ......................................................................................... 136
19. APPENDICES ............................................................................................................................ 137
APPENDIX A: Pro Forma Financial Projections ......................................................................... 138
APPENDIX B: Audited Financial Statements and Auditors’ Consent ................................... 142
APPENDIX C: Interim Financials (Unaudited) ........................................................................... 159
APPENDIX D: Membership Application and Membership Share Subscription ................. 164
APPENDIX E: Escrow Agreement .................................................................................................. 170
APPENDIX F: Certificate of Incorporation .................................................................................. 188
APPENDIX G: CWCF Self-Directed RRSP Fee Schedule ......................................................... 189
APPENDIX H: Form of Joint Venture Agreement ...................................................................... 190
APPENDIX I: Notice of Meeting of Members and Special Resolutions ................................ 209
APPENDIX J: Form of Offering Statement Subscription Agreement..................................... 221
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GLOSSARY OF TERMS
The following terms and phrases used in this Offering Statement have the meanings set
out below:
“$“,“CAD” and “dollars” means the legal currency of Canada;
“AC” means alternating current electricity;
“AcSB” means Accounting Standards Board;
“AGMoM” means annual general meeting of members;
“Applicant” means a Person that has submitted an Application to the FIT Program
“Application” means an application submitted by CED Co-op or a Joint Venture under
the FIT Program and “Applications” means more than one of them;
“Articles” means collectively CED Co-op’s Articles of Incorporation, as amended by
any Articles of Amendment or other constating documents;
“Blakes” means Blake Cassels & Graydon LLP;
“Board” or “Board of Directors” means the Board of Directors of CED Co-op;
“Bondholder” means a Member or Non-Member who holds one or more Bonds of the
Co-operative, and “Bondholders” shall mean more than one of them;
“Bonds” means the Co-operative’s series L1-4 bonds and series M1-5 bonds;
“By‐Laws” means the by‐laws of CED Co-op in force from time to time;
“CCA” means Capital Cost Allowance;
“CCPC” means Canadian Controlled Private Corporation;
“CCSA” means Contract Capacity Set Aside;
“CED Co-op” means Community Energy Development Co-operative Ltd.;
“CGL” means commercial general liability;
“Class A Preference Shares” means the Class A Preference Shares of CED Co-op, and
“Class A Preference Share” shall mean any one of them;
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“Commercial Operation” means the date on which a Project is recognized by the OPA
to be complete and connected to the Grid, the point after which electricity produced by
the Facility is sold under the FIT Contract;
“Community CCSA” means the CCSA portion of the FIT Allocation that has been set
aside for Community Investment Members;
“Community Investment Member” has the meaning ascribed thereto in the FIT
Standard Definitions which, in the case of a Community Participation CCSA Project,
generally a co‐operative with at least Fifty (50) members that are Property Owners
within the municipality in which the Project is to be developed, and have continuously
been property owners in the municipality for the previous 2 years, and in the case of a
Community Participation Project, generally a co-operative with at least Thirty-Five (35)
members that are Property Owners within the municipality in which the project is to be
developed, and have continuously been property owners in the municipality for the
previous 2 years;
“Community Participation Level” has the meaning ascribed thereto in the FIT
Standard Definitions, generally the economic interest held by a Community Investment
Member;
“Community Participation Project” means a Project that has a Community Investment
Member with at least a 15% Economic Interest in the Project;
“Community Participation CCSA Project” means a Project that has a Community
Investment Member with greater than a 50% Economic Interest in the Project;
“Connection Impact Assessment” or “CIA” means an assessment conducted by a LDC
to determine the impact on the distribution system of connecting the Project or Facility
to its distribution systems;
“Contract Capacity” means the rated capacity (generally viewed to be the AC rating) in
kW of a Solar PV Facility as indicated on the FIT Contract for that Facility;
“Co‐operative“, “the Co-operative” means the Community Energy Development Co-
operative Ltd.;
“Co-op Act” means the Co‐operative Corporations Act (Ontario) R.S.O. 1990, c.C..35 as
amended and successor legislation thereto;
“Co-op Regulations” means the Co-operative Corporations Act (Ontario) R.R.O. 1990,
REGULATION 178 as amended and successor regulations thereto;
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“CWCF” means the Canadian Worker Co-op Federation;
“DAT” means distribution availability test;
“DC” means direct current electricity;
“Debt Obligation” means a bond, debenture, note or other similar obligation of the Co-
operative, whether secured or unsecured;
“Director” means a member of the Board of Directors of CED Co-op and “Directors”
shall mean more than one of them;
“D&O” means directors and officers;
“Economic Interest” means the proportion of a Project for which the Co‐operative is
responsible in terms of costs and liabilities, and the portion of revenues to which it is
entitled;
“EPR” means EPR Kielstra & Company, Chartered Accountants;
“Escrow Agent” means the financial institution chosen by the Co‐operative to hold
certain proceeds of this Offering pending the fulfillment of certain terms and conditions
contained in the Escrow Agreement;
“Escrow Agreement” means the escrow agreement between CED Co-op and Concentra
Trust referred to in Section 15 hereof;
“Facility” means a Solar PV or other Renewable Energy Project owned in whole or in
part by the Co‐operative and installed on a leased building or land, or on land owned
by the Co‐operative, and “Facilities” means more than one of them;
“FCPC” means Federation of Community Power Co-operatives;
“Financial Projections” means the Co‐operative’s financial projections set forth herein;
“Financial Statements” means the Co‐operative’s annual or interim financial
statements, copies of which are attached hereto as Appendix A;
“FIT” means Feed‐In Tariff, which is the name of the OPA’s program for the purchase
of power and connectivity to the Grid for Renewable Energy generators
“FIT Allocation” means the amount, in MW of contracts to be issued for applications
submitted in a specific FIT Application Window
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“FIT Application Window” means a specific period during which the OPA accepts
Applications;
“FIT Contract” means a contract executed with the OPA under the FIT Program, and
“FIT Contracts” means more than one of them;
“FIT Program” means the Renewable Energy FIT Program established by the OPA
pursuant to the FIT Rules and any prior or subsequent version of the FIT Rules;
“FIT Rules” means the rules and regulations published by the OPA which govern the
process that must be followed to apply for and receive a FIT Contract, and “FIT Rules
and Regulations” shall have the same meaning;
“FIT Standard Definitions” means the definitions used to apply and interpret the FIT
Rules and the FIT Contracts;
“FSCO” means the Financial Services Commission of Ontario;
“Future Project” means any Project that the Co‐operative may participate in at some
future date, but which is not currently within the Application process or under
development, and “Future Projects” means more than one of them;
“Grant Thornton” means Grant Thornton LLP, together with the Quebec firm
Raymond Chabot Grant Thornton LLP, which form the Canadian representation of
Grant Thornton International Ltd.;
“Gowlings” means Gowling Lafleur Henderson LLP;
“Government” means the Government of the Province of Ontario and includes its
regulatory agencies;
“Green Energy and Green Economy Act” means the Green Energy and Green Economy Act,
2009 (Ontario), S.O. 2009 C.12, as amended and successor legislation thereto;
“Grid” means the electricity transmission or distribution networks’ power lines,
controlled by Hydro One or another LDC;
“Hydro One” means Hydro One Networks Inc.;
“HST” means harmonized sales tax pursuant to the Excise Tax Act (Canada) RSC, 1985,
c.E‐15, as amended and successor legislation thereto;
“IESO” means Independent Electricity System Operator;
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“IFRS” means International Financial Reporting Standards and the application of those
standards as determined by the Canadian Accounting Standards Board;
“Investor” means a Member or Non-Member who holds one more Securities of the Co-
operative, and “Investors” shall mean more than one of them;
“Installed Capacity” means the rated output (generally viewed to be the DC rating) in
kW of the Solar Panels installed in a Solar PV Facility;
“Joint Venture” or “JV” means a joint venture formed by contract in which the Co‐
operative holds an Interest of between Fifteen percent (15%) and Fifty‐One percent
(51%), and which is formed by agreement between the Co‐operative and one or more
Joint Venture Partners and “Joint Ventures” shall mean more than one of them;
“Joint Venture Partner” means a party to a Joint Venture agreement to which the Co‐
operative is also a party, and “Joint Venture Partners” means more than one of them;
“kV” means voltage characteristics of power measured in kilovolts (thousands of volts);
“kW” means instantaneous power measured in kilowatts (thousands of watts);
“kWh” means kilowatt hours, the unit of electrical power measured over time, i.e.
electrical energy 1,000 watts of power sustained for 1 hour;
”LDC” means the Local Distribution Company, which, depending on the Project, will
be Kitchener‐Wilmot Hydro, Cambridge North Dumfries Hydro, Waterloo North
Hydro, Hydro One, or a similar entity that owns and operates its own electrical
distribution network, or an independent utility that owns and operates its own
electrical distribution network;
“Lease Agreement” means a binding agreement between the Co‐operative or a Joint
Venture and an owner of property where the Solar PV Facility or other Renewable
Energy Facility may be installed, as more particularly described in Section 4 herein, and
“Lease Agreements” shall mean more than one of them;
“Lerners” means Lerners LLP;
“Member” means a natural person who holds an issued and outstanding Membership
Share of the Co‐operative and “Members” shall mean more than one Member;
“Membership Shares” means the Membership Shares of the Co‐operative;
“Minister of Energy” means the minister of the Ontario Government charged with the
administrative responsibility for the Ontario Ministry of Energy;
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“Ministry of Energy” means the Ontario Ministry of Energy;
“MW” means instantaneous power measured in megawatts (millions of watts);
“MWh” means megawatt hours, the unit of electrical power measured over time, i.e.
electrical energy of 1,000,000 watts of power sustained for 1 hour;
“Non-Member” means a Person who holds Securities of the Co-operative other than a
Membership Share;
“Notice to Proceed”, “NTP” means a Notice to Proceed received from the OPA, upon
execution and delivery of which a FIT Contract can no longer be terminated by the OPA
for convenience;
“Offering” means the Membership Shares, Unsecured Convertible Debentures, Class A
Preference Shares, Bonds Series L1-4, Bonds Series M1-5 and Term Loans being offered
pursuant to this Offering Statement;
“Offering Statement” means this Offering Statement;
“ON Co-op” means the Ontario Co-operative Association;
“Ontario Domestic Content” means the proportion of the Solar PV and ancillary
equipment that is manufactured in Ontario or Ontario labour that is used, as defined in
the OPA’s FIT Rules and Regulations;
“OPA” means the “Ontario Power Authority”;
“OSEA” means the Ontario Sustainable Energy Association;
“PAEs” means publically accountable enterprises;
“Participant” means a Person holding an Economic Interest in a Project and who has
been identified as such in an Application to the FIT Program;
“Person” is to be broadly interpreted and includes, without limitation, an individual, a
couple, a partnership, a trust, a corporation, an unincorporated organization, a
Government of a country or political subdivision thereof, or any agency or department
of any such Government and the legal personal representative or representatives of an
individual;
“Portfolio” means all of the Co‐operative’s Renewable Energy Facilities;
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“Preference Shares” means the Co‐operative’s Class A Preference Shares, Class B
Preference Shares or Class C Preference Shares;
“Priority Points” mean points under the priority points system, as described in the FIT
Rules and Regulations;
“Project” means the activities and tasks comprising the development and/or
installation of a Facility at a particular location, and "Projects" means more than one of
them;
“Project Portfolio” means all of the Co-operative’s or Joint Venture’s Projects;
“Project Property” means a Property that is the subject of a Lease Agreement and on
which it is expected that a Facility will be installed, and “Project Properties” means
more than one of them;
“Property Owner” means the registered owner of the real property on which a Facility
is located;
“Public Corporation” has the meaning ascribed to that term in the Tax Act;
“PV” means photovoltaic, the photovoltaic effect is a process by which sunlight is
converted into electricity;
“QSBC” means Qualified Small Business Corporation;
“Qualifying Co‐operative” means a Co‐operative that qualifies for an Application to
receive Priority Points, or to be eligible to apply for the Community CCSA, under the
FIT Program, pursuant to the FIT Rules, and is also known as a “Community
Investment Member”, and “Qualifying Cooperatives” means more than one of them;
“Registered Plan” means an RRSP, RRIF or TFSA;
“Renewable Energy” means energy that comes from resources which are naturally
replenished on a human time scale such as sunlight, wind, rain, tides, waves, biomass,
biogas and geothermal heat;
“Renewable Energy Co‐operative” means a renewable energy co‐operative as
described in Section 3 hereof;
“RETScreen” means the software produced by Natural Resources Canada that is used
to model the climate characteristics of sites;
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“Risk Factor” means one of the circumstances or events identified as a risk factor in
Section 5 hereof and “Risk Factors” shall mean more than one of them;
“RRIF” means registered retirement income fund;
“RRSP” means registered retirement savings plan;
“Security” means a Share or Debt Obligation of the Co-operative, and “Securities” shall
mean more than one of them;
“Security Holder” means a Member or Non-Member who holds one or more Securities
of the Co-operative, and “Security Holders” shall mean more than one of them;
“Shares” means the Co‐operative’s Membership Shares and/or Preference Shares, and
“Share” shall mean one of them;
“Shareholder” means a Member or Non-Member who holds one or more Shares of the
Co-operative, and “Shareholders” shall mean more than one of them;
“Solar PV” means solar photovoltaic – see “PV”;
“Solar PV Facility” means all of the components and equipment needed to produce
electricity from Solar PV installed on an individual property covered under a Lease
Agreement, and “Solar PV Facilities” shall mean more than one of them;
“Supplier” means the Person identified as the Supplier on the FIT Contract;
“Surplus” means the surplus arising from the business of the Co‐operative, to be
distributed in accordance with the By‐Laws of the Co‐operative;
“TAT” means transmission availability test;
“Tax Act” means the Canada Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)) as amended
and successor legislation thereto;
“Tax Regulations” means the Canada Income Tax Regulations (C.R.C., c. 945) as amended
and successor regulations thereto;
“Term Loans” means those loans described in Section 8.6 hereof;
“TFSA” means tax free savings account;
“Time Stamp” means the date and time on which a FIT Application was electronically
submitted to the OPA, as described in the FIT Rules and Regulations, and “Time
Stamps” means more than one of them;
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“TREC” means Toronto Renewable Energy Co-operative Inc.
“Unsecured Convertible Debenture” means those unsecured convertible debentures
referred to in greater detail in Section 8.2 hereof; and
“VCT” means Vigor Clean Tech Inc.
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1. CORPORATE INFORMATION
Name of Co-operative: Community Energy Development Co-operative Ltd.
Date of Incorporation: October 31, 2012
Ontario Corporation #: 1851884
Head Office Address: 1633 Snyder’s Rd E, PO Box 67 Petersburg, ON N0B 2H0 Contact Particulars: Toll Free: 855-274-6890 Fax: 519-279-4631 Website: www.cedco-op.com Email: [email protected]
Banking: Mennonite Savings and Credit Union
Auditors: Grant Thornton 5026 King St
Beamsville, ON L0R 1B0 Phone: 905-563-4528
Escrow Agent: Concentra Trust
Fiscal Year End: December 31
Registrar/Transfer Agent: CED Co-op will act as its own registrar and transfer agent in respect of the Securities offered for sale.
2. DIRECTORS AND OFFICERS
The Articles provide that CED Co-op may have a Board of Directors consisting of a
minimum of three (3) Directors, and a maximum of eleven (11) Directors. There are
presently ten (10) Directors. The present Directors and officers of CED Co-op are as
follows:
Name Title Residence Address Occupation
Arthur Bast Director 2652 Eden Township Rd Sudbury, ON P3G 1M1
Business Owner
Brian Unrau President, Director 3442 Huron Rd New Hamburg, ON N3A 3C4
Accountant / Executive
Dale Brubacher-Cressman
Secretary/Treasurer, Director
58 Shephard Pl New Hamburg, ON N3A 2E4
Engineer / Executive
Daniel Ulrich Director 196 Lyndhurst Dr Kitchener, ON N2B 1C1
Retired / Technologist
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David Agocs Director 11 Elberberry Court Guelph, ON N1L 1K3
Accountant / Manager
James Huebner Director 3464 Lobsinger Line St Clements, ON N0B 2M0
Accountant / Executive
John “Jerry” Enns Director 38 Lyle Pl Kitchener, ON N2B 2J6
Sales / Executive
Kelley McAlpine Director 43 Kipling Ave Guelph, ON N1H 8B9
Civil Servant / Manager
Stephen J. Funk Director 216 Shade St New Hamburg, ON N3A 4J2
Lawyer
Terry Ballantyne Director 1056 Swan St Ayr, ON N0B 1E0
Business Owner
3. DESCRIPTION OF THE BUSINESS OF CED CO-OP
3.1 OVERVIEW AND HISTORY
CED Co-op was incorporated in the Province of Ontario under the Co-op Act on
October 31, 2012. CED Co-op was incorporated as a for-profit co-operative with
share capital.
CED Co-op was formed in response to a number of market factors:
The Ontario FIT Program
The OPA has developed the FIT Program for the Province of Ontario to
encourage and promote greater use of Renewable Energy sources including on-
shore wind, waterpower, renewable biomass, biogas, landfill gas and Solar PV
for electricity generating projects in Ontario. The fundamental objective of the
FIT Program, in conjunction with the Green Energy and Green Economy Act and
Ontario’s Long Term Energy Plan, is to facilitate the increased development of
renewable generating facilities of varying sizes, technologies and configurations
via a standardized, open and fair process.
The FIT Program is open to projects with a rated electricity generating capacity
greater than 10 kW and generally up to and including 500 kW. To participate in
the FIT Program, Applicants must be willing to make necessary investments in
their facilities, including the connection and metering costs, bear certain ongoing
costs and risks of operation and maintenance, and enter into a FIT Contract with
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the OPA pursuant to which the Supplier will be paid for electricity delivered
from its generating facility for a long-term payment period, in accordance with
the terms of the FIT Contract.
FIT Program Focus on Community Ownership
Since the launch of the FIT Program, there have been several sets of rule changes,
rate changes, and changes in the mechanisms and processes for the award of
contracts. Many of the changes in the rules and the contract process have
increased the likelihood of receiving contracts for those Applicants whose
projects have more broad based community ownership. The OPA encourages
aboriginal, community, municipal, school, hospital, university, public transit
services, and Metrolinx projects under the FIT Program. The FIT Rules provide
incentives for Projects involving such groups. These rules also provide
incentives for Applicants to engage local municipalities and Aboriginal
communities where Projects are proposed.
Challenging Economics for Small Projects
Along-side the larger FIT Program, the microFIT program exists for projects that
are 10 kW in size or smaller. While both areas of the program have seen
dramatic cuts in rates, the cost of installation has also come down significantly.
Because of the scale of a microFIT Project and the associated economics, there is
less and less room for unexpected installation or operating costs while still
maintaining positive returns, especially for ground mounted systems. The lower
rates also help to select the “better” rooftops for solar over those roofs that are
marginal for reasons of pitch, orientation, shading, or age of the roofing surface
(shingles). This means that not everyone’s rooftop is ideal for a solar installation.
Interest in Investment in Clean Energy
In addition to increasing economic challenges for microFIT installations,
residential Renewable Energy systems are relatively new in Ontario, and present
a challenge in trying to sell a house while recouping the significant investment in
the system. This is something that is starting to work its way into the market,
but the valuation methods and sales processes are not well established. Despite
these challenges, the Co-operative believes there is still strong interest in
supporting clean energy and investing in Renewable Energy projects for those
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that have not yet made the investment, and those that have already invested in a
system on their property are often looking for further investment opportunities.
Economic Development Model
With changing rates and rule sets, evolving technologies, and increasing pressure
on Project economics, it is difficult for an individual Project owner to fully inform
themselves of the rules and technology in order to design and construct an
optimized, contracted, Renewable Energy Facility. By creating a Renewable
Energy Co-operative, it is possible to pool the funds of those investors and bring
down Project development costs and risks through the development of a
portfolio of Projects. This further allows access to higher levels of development
expertise and support in ongoing monitoring and maintenance on a more cost
effective basis.
It was out of the combination of these factors and in response to the market
forces outlined above that CED Co-op was formed.
3.2 VISION, MISSION AND VALUES
Vision
To provide superior returns on investments in Renewable Energy Projects
through effective partnerships between community and industry.
Mission
To make a positive impact on the energy industry in Ontario, providing
stakeholder education, distributed generation and community participation.
Values
As a co-operative, CED Co-op is guided by the 7 Co-operative Principles.
o Voluntary and Open Membership
o Democratic Member Control
o Member Economic Participation
o Autonomy and Independence
o Education, Training, Information
o Co-operation Among Co-operatives
o Concern for Community
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As a developer of Renewable Energy Projects, CED Co-op is guided by the
principles of socially responsible investment.
o Community Investment
o Environmental Stewardship
o Social Justice
o Transparency in Corporate Governance
o Sustainable Business Planning
3.3 MEMBERSHIP REQUIREMENTS AND SURPLUS
CED Co-op intends to qualify as a Community Investment Member under the
rules of the FIT Program. Though the Co-op Act does allow individuals,
corporations, co-operatives and other entities to become members in a co-
operative, the FIT Rules require that Community Investment Member co-
operatives only allow members who are natural persons who ordinarily reside in
Ontario. As of September 30, 2014, CED Co-op has 323 Members, all of whom
meet these criteria.
3.3.1. Membership Requirements
In compliance with the FIT Rules, Membership Shares of CED Co-op can only be
purchased by natural persons over the age of 16. Any individuals who meet the
criteria outlined above and also support the values of CED Co-op are eligible to
apply for membership and purchase a single Membership Share at a par value of
$10. A member may purchase a maximum of one Membership Share. Because
this represents a purchase of a Security, CED Co-op will need to maintain
information about Members for tax and reporting purposes, including, but not
limited to Social Insurance Numbers.
In order to qualify as a Community Investment Member, CED Co-op needs to
maintain a minimum of 50 Members of the Co-operative who are landowners in
each region in which the Co-operative has Community Participation Projects or
Applications. These landowners must have continuously owned property for a
period of two years prior to the Application date or other qualifying date. An
individual who does not own property, or has not owned property for two years,
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can still become a Member of the Co-operative, but would not immediately count
towards maintaining Community Investment Member status. The Co-operative
will be gathering property ownership information from individuals as they
become Members of CED Co-op, and will need to maintain up to date Member
address records for this purpose.
For the purposes of maintaining 50 landowner Members within a region, the FIT
Rules allow for the area to be defined as the upper tier municipality if there are
two tiers, or the municipality itself if it is a single tier. For example, Projects that
are located in the City of Kitchener, the lower tier municipality, can draw on
landowners from all of the Regional Municipality of Waterloo, the upper tier
municipality, in order to reach 50 qualifying Members of the Co-operative. For
projects in Sudbury, there is only a single tier which is the Greater Sudbury Area,
and so CED Co-op will need to maintain 50 qualifying landowner Members from
this Municipality. The following are the regions in which CED Co-op currently
qualifies as a Community Investment Member and currently intends to continue
to qualify:
Upper or Single Tier Lower Tiers, if applicable Qualifying Landowner Members of CED Co-op as at September 30, 2014
City of Guelph n/a 61
Greater Sudbury Area n/a 56
Regional Municipality of Waterloo
City of Cambridge, City of Kitchener, City of Waterloo, Township of North Dumfries, Township of Wellesley, Township of Wilmot, Township of Woolwich
83
As mentioned previously, an individual does not need to be a qualifying
landowner in order to become a Member of the Co-operative, and CED Co-op
currently has a number of Members that are not qualifying landowners. CED
Co-op wishes to increase the number of qualifying landowners in each region to
a minimum of 70 in order to provide a safety margin over the 50 qualifying
landowner Members referred to above. CED Co-op may also expand the list of
regions in which it qualifies as a Community Investment Member, and the Co-
operative is able to receive Members from regions that are not included in the list
above.
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If CED Co-op loses its status as a Community Investment Member because the
qualifying number of Members drops below 50 for a region, the Co-operative is
given a 6 month cure period to bring qualifying membership levels back above
50 for the region or to sell the Co-operative’s interest in the Projects in that region
to another qualifying Community Investment Member. If the Co-operative is not
able to do so, then FIT Contracts and Applications that rely on Community
Investment Member status are at risk of cancellation. This is a Risk Factor
identified in Section 5: Risk Factors – Community Investment Members Status.
3.3.2. Acceptance
All memberships must be approved by the Board of CED Co-op. If the
membership application is not approved by the Board, any payment received
with the application will be returned or refunded, without interest, to the co-op
applicant.
3.3.3. Rights of Membership
All Members are entitled to participate in guiding the operations of CED Co-op
through attending and voting at meetings of Members. Each Member shall be
entitled to one vote, regardless of the quantity or amount of any other Securities
of CED Co-op held by the Member.
For decisions that relate to a specific Class of Shares, all holders of that Class of
Shares in attendance at the meeting, regardless of Membership status, are eligible
to vote and votes will be counted in proportion to the respective holdings of such
Class of Shares in attendance at the meeting.
A Member in good standing is also eligible to stand for any elected office in CED
Co-op. To remain in good standing, a Member must abide by the By-Laws of
CED Co-op and any other policies CED Co-op may establish from time to time
pursuant to By-Laws.
3.3.4. Obligations of Membership
A Member is not required to attend meetings, vote or make any further purchase
from or investments in CED Co-op. The Co-operative will need to maintain
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property ownership records for Members as it relates to maintaining Community
Investment Member status, CED Co-op will be encouraging Members to
promptly supply changes of address and changes in property ownership status.
3.3.5. Rights of Non-Members
Because of the restriction the FIT Rules place on membership, CED Co-op will
allow Non-Members to purchase Securities other than Membership Shares. Non-
Members must first receive approval from the Board before purchasing any
Securities. Non-Members are not eligible to vote on matters of CED Co-op at
meetings of Members, unless there are decisions being made that affect a Class of
Shares that are held by the Non-Member.
3.3.6. Transfer of Membership
Membership in CED Co-op shall not be transferable unless authorized by the
Board. This restriction on the liquidity of Membership Shares is identified as a
Risk Factor in Section 5: Risk Factors – Market for Securities.
3.3.7. Termination of Membership
Membership in CED Co-op shall terminate upon the withdrawal of the Member
from the Co-operative, on the expulsion of the Member from the Co-operative,
on the death of the Member, or by a resolution passed by the Board pursuant to
the procedures outlined in the Co-op Act or otherwise in accordance with the
Co-op Act, subject always to the requirements of the Co-op Act. However, the
Co-op Act prohibits the redemption of the Shares of the Co-operative if CED Co-
op is or would be, as a result of such redemption, insolvent or if such repurchase
would, in the opinion of the Board, be detrimental to the financial stability of
CED Co-op. If the withdrawal of a Membership puts at risk the qualification of
CED Co-op as a Community Investment Member, the Board may choose to not
redeem Membership Shares in certain circumstances of Membership withdrawal.
This restriction on the liquidity of Membership Shares is identified as a Risk
Factor in Section 5: Risk Factors – No Sinking Fund or Reserve.
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3.4 SURPLUS AND DISTRIBUTION
3.4.1. Distribution
As a Renewable Energy Co-operative, the Co-op Act stipulates that the amount
that is allocated, credited or paid in each fiscal year to Members or Non-
Members is not considered to be patronage. This is a result of the fact that, as a
producer of electricity that is fed and sold directly to the grid, there is no
mechanism to measure business with members upon which a patronage amount
could be derived. Rather, the Surplus arising from the business of a Renewable
Energy Co-operative in each fiscal year shall be allocated, credited or paid to the
Members or Non-Members in accordance with the Articles and By-laws of the
Co-operative. The distribution of Surplus by the Co-operative is outlined in
greater detail in Section 3.4.2 below.
3.4.2. Surplus and Distributions
The ability of CED Co-op to make distributions is dependent upon the surplus
earned from the operations after paying expenses including, but not limited to,
insurance, maintenance, lease payments, administration and debt financing. For
clarity, any interest or principal payments due to Bondholders in order to
redeem the Bonds of CED Co-op would be paid ahead of the calculation of any
Surplus.
The Board, after paying expenses and making proper allowance for depreciation,
shall apportion the Surplus arising from the yearly business of the Co-Operative
in any or all of the following ways:
(a) by setting aside reserves in such amounts as the Board deems
advisable for such purpose or purposes that are deemed to be
conducive to the interests of the Co-Operative or its Members, which
sum may be invested, dealt with and disposed of for the benefit of the
Co-Operative as the Board determines from time to time;
(b) before any distribution of the Surplus remaining after allocation to the
reserve fund outlined in paragraph (a) above, for the payment of
dividends on the Shares of the Co-Operative; and
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(c) subject to the Co-op Act and paragraphs (a) and (b) above, by paying
in cash to Members the balance of the Surplus or such portion thereof
as may be determined by the Board from time to time.
3.5 INDUSTRY, OPERATIONS AND BUSINESS MODELS
3.5.1. Industry - Renewable Energy
Renewable Energy is generally defined as energy that comes from resources
which are naturally replenished on a human timescale such as sunlight, wind,
rain, tides, waves, biomass, biogas and geothermal heat. Renewable Energy
replaces conventional fuels in three main areas: electricity generation, heat
generation (thermal) and combustible fuels.
3.5.2. Operations
In order to qualify as a Renewable Energy Co-operative under the Co-op Act, the
Articles of CED Co-op restrict its business to the area of electricity generation as
follows:
(a) Generating, within the meaning of the Electricity Act, 1998, electricity
produced from one or more sources that are renewable energy sources for
the purposes of that Act; and
(b) Selling, as a generator within the meaning of that Act, electricity it produces
from one or more renewable energy sources.
Notwithstanding the above restrictions, as part of its business of generating and
selling electricity produced from one or more renewable energy sources, the Co-
operative:
(i) may establish or develop one or more generation facilities, within
the meaning of the Electricity Act, 1998, to generate electricity
produced from one or more renewable energy sources; and
(ii) may promote the purchase by electricity users of electricity
produced from renewable energy sources.
Given the inclusion of the foregoing in its Articles, CED Co-op qualifies as a
“generator” within the meaning of the Ontario Electricity Act, 1998 and the
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activities of CED Co-op fall within the definition of a “renewable energy
cooperative” pursuant to the provisions of Subsection 2(1) of the Co-op Act.
CED Co-op operates on “co-operative basis” by:
(a) providing each Member with only one vote and not allowing
voting by proxy;
(b) selling Securities to Members (and upon receipt of the Offering
Statement, to Non-Members also) and investing the proceeds in a
portfolio of renewable energy electricity generating Projects; and
(c) distributing the Surplus arising from the business of CED Co-op in
accordance with the Articles and Bylaws of the Co-operative.
3.5.3. Business Models - FIT Contracts
At this time, CED Co-op is focused on developing Renewable Energy Projects
under the FIT Program and selling electricity to the Grid under 20 year contracts.
Should the FIT Program close to new Applications, at some point in the future,
the Co-operative may explore options to develop Renewable Energy Projects in
Ontario without reliance on the FIT Program or possibly review opportunities to
develop projects outside of Ontario. At this time, all funds sought and received
are to be used for investment in bringing FIT Projects to completion in Ontario.
CED Co-op is developing Projects under a sole ownership (100% ownership)
model as well as a Joint Venture development model. The Joint Ventures have
been set up with a potential range of economic participation by CED Co-op from
15% to 51% with the Joint Venture partners holding the balance of the Economic
Interest ranging from 49% to 85%. The Joint Ventures are managed by executive
committees. These committees are typically made up of two people from CED
Co-op and three people from the other party or parties in the Joint Venture.
CED Co-op intends to construct and own a Portfolio of Renewable Energy
Projects with the funds raised through the Offering Statement. The investments
received by CED Co-op through the sale of Unsecured Convertible Debentures
(Converted to Class A Preference Shares), Class A Preference Shares and Bonds
is anticipated to provide approximately 35% of the Project capital with
approximately 65% of the Project capital required coming from lenders through
Term Loans. This division of debt and equity is subject to change, owing to a
number of factors, some of which may be beyond the control and/or present
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knowledge of CED Co-op. This is a Risk Factor identified in Section 5: Risk
Factors – Availability of Debt Financing. The diagram below describes the
currently proposed structure of ownership and control of the various entities, the
path of investment funds and financial returns as well as the sale of the clean
electricity produced by the Projects. More detail about this is provided in Section
4: Business Plan.
CED Co-op intends to initiate Applications under the FIT Program in order to
receive FIT Contracts. In addition to this, CED Co-op will review opportunities
to acquire or invest in other FIT Contracts and Projects in compliance with the
FIT Rules of the FIT Program, and may purchase FIT Contracts or Projects, or
purchase a partial interest in FIT Contracts or Projects, that meet the engineering
standards and the investment criteria of the Co-operative as determined by the
Board in its discretion.
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3.6 INDUSTRY MEMBERSHIPS
CED Co-op is a member of the FCPC. The FCPC is a province-wide umbrella
organization for community power co-operatives in Ontario that are developing
Grid-tied Renewable Energy projects. The FCPC works to promote community
involvement and investment in green energy projects throughout Ontario via the
co-operative business model. The president of CED Co-op is currently a member
of the board of directors for the FCPC.
CED Co-op is a member of ON Co-op, whose mission is to lead, cultivate and
connect the credit union and co-operative sectors in Ontario. ON Co-op focuses
on three strategic pillars, Co-operative engagement, Education and development
and Advocacy and government relations.
CED Co-op is a member of OSEA which is Ontario’s lead advocate, facilitator
and catalyst for energy sector transformation and the transition to a more
sustainable energy economy that is developed through community participation.
OSEA champions policy and regulatory change for a more sustainable society;
powered, heated, cooled and transported by a portfolio of sustainable energy.
CED Co-op is also a member of the CWCF which is a national grassroots
membership organization of and for worker co-operatives, related types of co-
operatives (multi-stakeholder co-ops and worker-shareholder co-ops), and
organizations that support the growth and development of worker co-operatives.
CED Co-op is working with CWCF for the hosting of self-directed RRSPs.
3.7 INSURANCE
CED Co-op maintains CGL insurance and D&O insurance for its operations
through St Clair Insurance Brokers with the policies issued for CGL by Kent &
Essex Insurance and for D&O by RSA Insurance Group companies. Once a
Project commences Commercial Operation CED Co-op will maintain property,
general liability, and casualty insurance with reputable insurers who are
experienced with insuring commercial renewable power Projects in amounts
which are customary in the industry. It is expected that the constructors of the
Projects will maintain insurance for the Projects and properties during the
construction stage prior to reaching Commercial Operation.
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3.8 REAL ESTATE
CED Co-op does not currently own, nor does it intend to acquire any real estate
either directly or through any of its Joint Ventures. It has entered into leases for
the purpose of developing Projects. The operations of CED Co-op are currently
managed through the offices of VCT, and CED Co-op does not hold a separate
lease for office space at this time. CED Co-op may require office space at some
time in the future, or may be required to compensate VCT for the use of VCT
office space.
Leases for FIT Project Development
The following is a summary of the leases CED Co-op, or the Joint Ventures to
which CED Co-op is a party, has signed with owners of the properties where FIT
Projects will be installed. The purpose of each Lease Agreement is to permit
CED Co-op or the Joint Venture to install Solar PV Systems on the Property
Owners’ land or buildings. A separate Lease Agreement has been signed by
CED Co-op or the Joint Venture with the Property Owner for each Project or
property.
CED Co-op or the Joint Ventures have, at this time, entered into 29 Lease
Agreements representing 29 properties with 19 different Property Owners. In
many cases, the property owner is also the Joint Venture partner. A list of these
Lease Agreements is found in Section 15 of this Offering Statement.
All Lease Agreements contain terms providing that, if CED Co-op or the Joint
Venture does not wish to proceed with the Project or a FIT Contract could not be
obtained for the Project, CED Co-op or the Joint Venture could, at its option,
terminate the Lease Agreement without cost or liability.
The following is a summary of the material terms and conditions of the Lease
Agreements:
(a) The legal description of the property
(b) The term of the Lease Agreement. The Lease Agreement is for twenty years
for Solar PV energy Projects to coincide with the duration of the term of the
FIT Contract, plus an estimate of the time taken to apply for the FIT Contract
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and bring the Project to Commercial Operation. This additional time could be
up to 4 years.
(c) Access to the Property for the purposes of installation, maintenance, repair
and decommissioning of the Project.
(d) Confirmation of tenant’s (CED Co-op or Joint Venture’s) ability to use the
property for the purpose of PV installations.
(e) Renewal options for extending the lease beyond 20 years
(f) The base rent to be paid over the term and ancillary charges payable.
(g) Covenants of the tenant to install and operate the system in a prudent manner
(h) Covenants of the Property Owner including provisions that the Property
Owner will not do any act or thing that will result in any shading or
obstruction of the sun, thereby impairing the Renewable Energy equipment’s
ability to generate electricity.
(i) A covenant that the Property Owner will obtain a non-disturbance agreement
from any holder of a mortgage on the Property being leased.
(j) The Property Owner has the ability to terminate the Lease Agreement if the
tenant has defaulted in its obligations to the Property Owner in the Lease
Agreement.
(k) The insurance the parties are required to obtain for the Renewable Energy
equipment and the property on which the renewable power equipment is
situated.
(l) Terms and provisions regarding the transfer by a party of their interest in the
Lease Agreement.
(m) It is intended that the parties would initially proceed to non-binding
mediation followed by binding arbitration in the event the non-binding
mediation did not result in a resolution of the issue.
(n) For building rooftop leases, terms under which a system, once installed, may
be temporarily moved or relocated in order to facilitate any roof repairs
required for the building
(o) General indemnification provisions between tenant and Property Owner
whereby one party agrees to indemnify the other for damages suffered by the
other party as a result of the conduct of the one party.
(p) The location of the Renewable Energy equipment and ancillary equipment on
the Property Owner’s property.
(q) Options upon completion of lease term regarding removal of equipment or
transfer of ownership.
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Given site variations and the fact that Lease Agreements must be negotiated
separately with each and every Property Owner, some variations exist within the
current leases that have been executed and it is envisioned that not all future
Lease Agreements will be uniform. This variation of leases is identified as a Risk
Factor in Section 5: Risk Factors – Lease Agreement Risk.
3.9 MARKETING
CED Co-op has a marketing strategy to attract Members and investment from
both Members and Non-Members. More information on this plan is provided in
Section 4 (“Business Plan”) of this Offering Statement.
3.10 CO-OPERATIVE MANAGEMENT
CED Co-op is currently managed by its Board of Directors and does not have any
employees. The Directors are elected for a three year term, with the initial terms
of some Directors being shortened to one or two years in order to have the expiry
of terms staggered so that not all directors’ positions are vacated in a given year.
If the Director is being elected to replace a Director who, for whatever reason,
has failed to serve their entire term, the term of such replacement Director shall
be for the balance of such Director’s term. A Director may be re-elected to such
number of consecutive terms as the Co-op Act permits from time to time. The
election of Directors occurs by vote of the Members at the annual general
meetings of CED Co-op. All current Directors are eligible to stand for another
term.
The current members of the Board have a broad range of business experience in
start-ups, financial co-operatives, high-tech companies, construction, legal,
finance, operations, and managing businesses as well as a proven track record of
energy project development:
Arthur Bast - Director
In addition to being a director for CED Co-op, Art is a contractor in the Sudbury
area. He brings experience in various types of construction and working with
sub-trades as well as experience in building businesses, having operated both as
a sole business owner as well as a partner in a company. Art brings a northern
perspective in helping to plan the development and construction of projects in
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the Canadian shield as well as a strong interest in environmental issues. Art has
served in Board roles with other organizations including those working with
convicts, former convicts and their families.
Brian Unrau, BED, MBA, FCUIC, CPA, CMA – President and Director
In addition to being President of CED Co-op, Brian is also the Vice-President,
Finance of VCT. Brian previously studied energy efficient and environmental
technologies in the Faculty of Architecture at the University of Manitoba,
receiving his Bachelor of Environmental Design. Following this he pursued
further studies in computer science and began working for Convergys/AT&T.
From this, Brian became a partner in a computer consulting firm, starting up a
computer sales company alongside the consulting business, as well as teaching
high school computer science courses. Brian left those endeavours to join the
financial co-operative, Mennonite Savings and Credit Union, in 2002 where he
subsequently held several technical, lending and management roles and earned
the designation of Fellow of the Credit Union Institute of Canada. During this
time Brian also obtained his Masters of Business Administration from Wilfrid
Laurier University. Brian joined renewable energy developer, VCT, as a partner
in 2008 and continues to work there in the role of Vice President, Finance. He
completed the Certified Management Accountant program in 2011, receiving the
professional CMA designation, and through this he has subsequently received
the designation of Chartered Professional Accountant. Brian is one of the
founding members of the CED Co-op and has served as the President of the
organization since its incorporation in 2012. He is currently serving on the board
of directors of the FCPC, is a member of the council of Stirling Avenue
Mennonite Church, and is a member of Mennonite Economic Development
Associates.
Dale Brubacher-Cressman, BASC, P.ENG – Secretary/Treasurer and Director
In addition to being Secretary/Treasurer for CED Co-op, Dale is also the
President of VCT. Dale previously spent 17 years at BlackBerry (formerly
Research In Motion) helping build the company from start up to a globally
recognized corporation. His responsibilities there included Program Manager for
the BlackBerry 8700. As Program Manager and reporting directly to the Chief
Operating Officer, Dale oversaw all aspects of product development including
product and market definition, hardware and software development, quality
Page | 27
assurance, new product introduction and manufacturing. Dale also led the
development and commercialization of the DigiSync Film Barcode reader which
received technical awards from both the Academy of Television Arts and
Sciences (“Emmy Awards”) and the Academy of Motion Picture Arts and
Sciences (“Academy Awards”). In addition to his work in the solar industry,
Dale is on the board of directors of Lucid Energy Technologies, Aeryon Labs,
Chair of the Board of Mennonite Savings and Credit Union and is a former
member of the board of Sustainable Waterloo Region. He is an investor in Power
Take-Off – EnerGXpert and an active member and investor in Mennonite
Economic Development Associates' programs, most notably through MicroVest.
Dale is a member of the Professional Engineers of Ontario, the Institute of
Electrical and Electronics Engineers and Community Renewable Energy
Waterloo.
Dan Ulrich - Director
Dan is recently retired from a career as a mechanical engineering technologist.
Most recently, he spent 10 years working on energy generation and power plant
facility design at Babcock and Wilcox including both new construction and
retrofit design processes. During this time, Dan also gained contract negotiations
experience as the Vice Chair for the union and chairman and representative to
the local board of directors. Dan has also been a representative in a number of
safety associations and committees including the Industrial Accident Prevention
Association. Dan holds a certificate in Mechanical Engineering Technology from
Conestoga College. In addition to his work as a Director of CED Co-op, he is
also active in the facilities management for a local charity, working on
sustainability and energy efficiency retrofits.
David Agocs, CPA, CMA, B. Comm – Director
In addition to being a director for CED Co-op, David is the Manager Lead for
Business Performance and Analysis at Revera Inc. David’s responsibilities there
include forecasting, budgeting and multi-year planning, providing financial
expertise and decision support for the Long Term Care division, and creating
and presenting financial reporting packages and detailed variance reports for the
executive leadership team. Prior to this, David worked as a finance manager
with more than ten years progressive leadership within operations and support
roles in health care, consumer packaged goods and service industries. David
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holds a Bachelor of Commerce degree from the University of Guelph, is a
Certified Management Accountant, and through this he has subsequently
received the designation of Chartered Professional Accountant.
Jerry Enns, BA, AMCT - Director
In addition to being a director for CED Co-op, Jerry is also the Vice-President,
Business Development for VCT. Jerry is a 15-year veteran of senior management
in government. Most notably, he managed the Ontario Division of the Federal
Government’s Energy Mines and Resources R-2000 Energy Efficient Housing
Program. He studied Public Administration at the University of Western
Ontario and became a registered Municipal Clerk and Treasurer through course
work at St. Lawrence College. He is also a graduate of the University of Waterloo
Human Kinetics and Leisure Studies and holds a diploma in business from
Wilfrid Laurier University. Jerry has also conducted research into cognitive
neuroscience and runs a sales consulting and training business teaching these
techniques to sales forces across Canada and the United States.
Jim Huebner, BEd, CPA, CMA, MBA, AMCT - Director
In addition to being a director for CED Co-op, Jim is also the Vice-President of
Operations and Innovation for VCT. Jim has experience as a senior executive
and consultant focusing on operations, finance and IT, with specialties in
strategy and sales in public and private sectors. Jim has previous entrepreneurial
experience as well, holding positions including President, Controller and CFO
for several manufacturing companies. In those roles, he was responsible for all
aspects of internal accounting and financial management as well as design and
management of strategic IT projects. Jim has also worked as an educator in both
public school and university settings as well as held the role of Chief
Administrative Officer in a Municipality. Jim holds a Bachelor’s degree in
Education, a Master’s degree in Business Administration, is a Certified
Management Accountant and Chartered Professional Accountant, and is
currently completing a PHd in Planning at the University of Waterloo, focusing
on sustainability and strategic development.
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Kelley McAlpine - Director
In addition to being a director for CED Co-op, Kelley is the Supervisor of
Centralized Municipal Services for the City of Guelph. Her responsibilities there
include the development and implementation of new service delivery based on
business case development. In Kelley’s 16 years with the City, she has
developed extensive project development, business process review and
implementation experience. By extension her work has given her experience
with bylaws, legislation (municipal, provincial and federal), risk management,
marketing and event planning. Kelley is also an active volunteer with a number
of other community based organizations in the region.
Stephen J. Funk, BA, LLB - Director
In addition to being a director for CED Co-op, Steve is a lawyer with the firm
Giesbrecht, Griffen, Funk & Irvine LLP. Steve received his Bachelor of Arts in
Economics at the University of Western Ontario. Steve graduated from the
University of Western Ontario faculty of law in 1989 and was called to the bar in
March of 1991, at which time he joined the firm of Giesbrecht, Griffin, as it was
then known. Although Steve serves a wide variety of clients, his principal
practice areas are real estate, estates and estate planning, and corporate and
commercial law for a variety of businesses, including professionals. His
knowledge and expertise in these areas is supported by his significant experience
in the area of civil litigation. He has represented clients in the various levels of
Court in Ontario, including the Divisional Court and the Ontario Court of
Appeal. Steve has previously served as a director for the HopeSpring Cancer
Support Centre as well as the Wilmot Family Resource Centre and currently
serves on the Executive of the Wilmot Aquatic Aces.
Terry Ballantyne, BA - Director
In addition to being a director for CED Co-op, Terry is business owner and
educator with experience writing and delivering curriculum related to business
and adult workforce re-entry programs. Terry previously taught Business
Education for 16 years with the Waterloo Region District School Board and spent
8 years coordinating Adult Re-entry programs for Women for the Waterloo
Region Board of Education. Her responsibilities included curriculum
development and delivery, budgeting, funding proposals, recruitment, co-
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ordination between federal, provincial, and municipal governments and Galt
Collegiate and the Waterloo County Board. Terry holds a Bachelor of Applied
Arts and is active in a number of other community organizations supporting
community investment and affordable housing.
3.11 ON DISSOLUTION OF THE CO-OPERATIVE
Upon dissolution and after the payment of all debts and liabilities, including any
dividends declared and not paid, and the purchase for cancellation or
redemption of all outstanding Shares, CED Co-op’s remaining property shall be
distributed equally among its Members irrespective of the number of Shares or
amount of Bonds or loans, if any, held or made by a Member.
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4. BUSINESS PLAN
Ontario’s energy supply mix is largely from non-renewables. According to the
IESO, as outlined in the following graphic, approximately 24% of Ontario’s
generating capacity comes from water power and 7% comes from wind power. Not
shown in the mix is solar power and other renewables, most of which are not
managed by the IESO as they enter the electrical Grid at the distribution level rather
than at the transmission level. Overall, less than 1/3 of Ontario’s current energy
needs are met by renewables, CED Co-op believes this is a significant growth
opportunity for Ontario and the Co-operative in particular.
Installed Energy Capacity by Fuel Type (September 2014)
4.1 MARKET PENETRATION – INTEGRATING RENEWABLES
In the combined portfolio of Renewable Energy types, there are intermittent types,
as is the case with solar, wave and wind power, more consistent base-load types
such as tidal, biomass, geothermal and waterpower, and transportable energy such
as biogas and biofuels.
Achieving a proper match between these different types of supply and the variable
nature of demand can be difficult. By gathering many types of supply together, a
major portion of the energy needs of Ontario can be met from renewable sources.
CED Co-op believes that employing energy storage, improved forecasting
technologies, demand shifting and smart Grid technologies in connection with
renewables can enable as much as 100% renewable penetration.
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4.2 BENEFITS OF RENEWABLES
4.2.1. Flexibility
Renewables offer some of the most flexible types of energy generation. Within
minutes, a waterpower project can have its floodgates opened and be producing at
maximum power, and similarly reduced on the same time scale. Solar power
systems can be controlled remotely to be shut off instantaneously. Similarly, the
blades of a wind turbine can be feathered to shut off generation with no damage to
the systems. These energy sources can similarly be very quickly switched on to
produce power again. Coal, natural gas and nuclear generating facilities are not as
responsive and can neither be shut down nor restarted as quickly and as safely. The
IESO has noted the superior flexibility of renewables, stating in its 2103 annual
report, that with the implementation of the dispatch ability of wind power, it was
possible to reduce generation from wind power by 800MW within 15 minutes, and
subsequently return generation to previous levels within a similar time period. As
stated by the IESO, this is seven times faster than the natural gas facilities.
4.2.2. Economics
Another major difference between renewables and other types of energy is that as
the use of renewables increases, the costs to develop the systems and produce power
generally decreases. Because there are finite quantities of fossil fuels the laws of
supply and demand dictate that as their use increases, the more expensive the cost
of energy from fossil fuels becomes.
The following two charts outline the decreasing costs of Solar PV panels taken from
a Bloomberg report and the decreasing costs of wind power taken from a United
States Department of Energy report.
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In addition to these direct economic drivers, the Co-operative believes there are also
other significant indirect economic factors supporting renewables. In 2005, the
Ontario Medical Association estimated the cost of pollution to the Ontario economy
at $16 billion annually. Prior to shutting down coal fired electricity generation in
Ontario, in 2003 the province recorded 53 smog days. In 2013, there were just two
smog days. The costs of a destabilized climate system are also evidenced in the
flooding that was experienced in the Calgary area in the summer of 2013, killing six
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people, displacing 100,000 people through the region, causing an estimated $6
billion of property damage, and an unquantifiable disruption to the families,
businesses and economy of the region.
4.2.3. Safety
The disasters relating to energy from non-renewable sources have been frequent in
the last few years. To name a few:
The Deepwater Horizon oil spill leaking 750 million litres of oil into the Gulf
of Mexico, killing 11 people and injuring 17 others in the explosion, resulting
in a $40 billion clean-up that is still ongoing;
The Fukushima Daiichi nuclear meltdown which, 3 years later, still has 30,000
people displaced, is still leaking radioactive elements and has an estimated
clean-up bill of $500 billion with timelines that are expected to stretch into
decades.
The Lac-Mégantic derailment which resulted in an explosion that killed
nearly 50 people, a clean-up operation estimated to cost $200 million and a
community that is deeply impacted.
In 2007, well ahead of the Fukushima disaster, the French government conducted a
study to estimate the range of costs that might result if a nuclear incident were to
occur at one of their 58 nuclear cores. The study was not intended to be published,
the purpose was simply for internal risk management, and was therefore not
considered to be politicized or biased for or against nuclear technology. The study
selected the plant at Dampierre in the Department of Loiret in north-central France
and evaluated a range of disaster scenarios that might occur at the plant. In the best-
case scenario, costs came to €760 billion ($1.15 trillion $CDN)—more than a third of
France’s GDP. At the other end of the spectrum, costs were estimated at €5.8 trillion
($8.8 trillion $CDN) which is more than three times France’s GDP.
In 2011, following the Fukushima disaster, the German government commissioned a
study to calculate the risk-adjusted insurance premium that would be required to be
paid if nuclear based generators were to be able to insure their facilities to the levels
other generators are required to insure their facilities. The conclusions of the study
estimated damages varying from a minimum of €150 billion to a maximum of
around €6 trillion, recommending a risk pool be generated of €6.09 trillion. In
adding this premium to the price of the electricity, an estimated cost for just the
insurance on nuclear generated power ranged from €0.14 (21 $CDN)/kWh to
€0.673 ($1.02 $CDN)/kWh. As it stands, nuclear reactors are not able to get
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insurance against disasters such as this, so this risk, effectively a subsidy, is
absorbed by the relevant government and its citizens.
4.2.4. Environmental (Humanity)
Though the environmental benefits of increased use of renewables are said to be
“saving the planet”, it is really more about preservation of humanity. The
overwhelming evidence is that the human mobilization of carbon in the atmosphere
is currently causing major change and destabilization of climate patterns. This belief
is held by 97% of climate scientists. As was noted recently by astronaut Chris
Hadfield when viewing the earth from space, the thin layer of the Earth and the
atmosphere that consists of the conditions necessary for humans to flourish is very
small and vary narrow compared to the vastness and the extremes found outside of
this thin layer. As various places become less hospitable, this will lead to increased
conflict between nations vying for resources and food. The Earth has gone through
significant climate and environmental cycles over time, each time seeking to return
to equilibrium. The Earth is likely to be continuing to do so many millennia from
now. The shift to renewables is more about trying to envision a sustained and
comfortable human presence on Earth in that future rather than simply “saving the
planet”.
4.3 NEED FOR ELECTRICITY
While conservation is typically the best route to savings, conservation alone will not
be sufficient to offset the expected increase in energy needs. As such, there is an
opportunity for clean energy generation to accompany reductions in use. Many of
the forced savings in electricity have already occurred within Canada through the
elimination of non-energy-star appliances, the continual tightening of the energy
star standards, the elimination of incandescent bulbs, and the exclusive availability
of hot water saving faucets and shower heads. Ontario also experienced a reduction
in residential electricity usage in the 1990’s through substitution of fossil fuels
(primarily natural gas) for electricity in hot water, home heating, clothes drying and
kitchen stoves. Now, as a reduced dependence on fossil fuels becomes the focus,
electricity will be one of the primary forms of energy that will be used as a
substitute. As one example, plug-in hybrid electric vehicles and fully electric
vehicles are increasing in numbers, and there is likely to be a dramatic increase in
the amount of electricity consumed as these vehicles start to gain market share. In
looking at the energy consumed by driving passenger cars in Canada (ignoring
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commercial trucks, buses and other types of vehicles), to fully replace the energy
consumed through gasoline with electricity, based on an estimated 303.5 billion kms
travelled in Canada in 2009 at a rate of 0.2 kWh/km would require an additional
60,700,000 MWh of electricity to be produced annually. Based on km estimates for
the province of Ontario for 2009, Ontario would have to produce 38% of this, or
approximately 23,200,000 MWh of additional electricity which represents an
increase of 16% over 2013 total electricity consumption levels of 140,700,000 MWh
per year. To put these numbers in context, the projects that are currently under
contract for CED Co-op are expected to produce 3,300 MWh of electricity per year
which is enough to power approximately 345 households, or manage 0.014% of the
vehicle fleet conversion.
4.4 FIT PROGRAM
The Government of Ontario passed the Green Energy and Green Economy Act into
law on May 14, 2009. As noted by the Green Energy Act Alliance, the vision of the
act was to make Ontario a global leader in the development of Renewable Energy
technologies, clean distributed energy and conservation, creating jobs and providing
economic prosperity, energy security, and climate protection. According to the
Green Energy Act Alliance, the purpose of the act was to facilitate the development
of a sustainable energy economy that protects the environment while streamlining
the approvals process, mitigating climate change, engaging communities and
building a world-class green industrial sector.
The Green Energy and Green Economy Act was comprehensive as it amended more
than 15 existing statutes and laid the foundation for specific programs that were
implemented by regulations and directives issued by Minister of Energy.
Specifically, it called for the implementation of a FIT Program, the creation of
Renewable Energy Co-operatives as a type of co-operative, streamlined approvals,
the creation of a Renewable Energy facilitation office, mandatory connection to the
Grid by local distribution companies, conservation programs, the implementation of
a smart electrical Grid, Building Code amendments and energy efficiency
requirements.
4.4.1. History of the FIT Program
On October 1, 2009, in partnership with OPA, the provincial government launched
the FIT Program for projects that have a peak generating capacity over 10kW, and
the microFIT Program for projects that have a peak generating capacity of 10kW or
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less. They are called feed-in-tariff programs because a premium tariff is paid for
feeding Renewable Energy to the Grid. These programs replaced the previous
Renewable Energy Standard Offer Program, providing higher payment rates for
clean electricity, streamlined processes for approvals and connections, and Ontario
manufacturing content requirements. The structures of the FIT and microFIT
Programs have a number of common features with the German Erneuerbare
Energien Gesetz program, a program that has been running since 2001.
Through the FIT Program, power purchase contracts are offered that guarantee that
every kWh of Renewable Energy produced will be purchased, and will qualify for a
set payment rate that is outlined in the contract. Once a contract is initiated, this rate
is guaranteed to remain unchanged for the entire 20 years of the contract.
4.4.2. Sustainability of FIT Rates
The contract rates represent a premium over the wholesale electricity price, and this
has caused some to wonder whether the premium rates offered by the FIT Program
make sense from a ratepayer standpoint. The FIT Program, however, is about more
than just generating clean energy. The FIT Program was designed to be an
industrial strategy. The launch of the FIT Program followed the significant decline
in the Ontario auto manufacturing sector, and one element of the program was to
provide new manufacturing jobs to replace some of the jobs lost in the auto sector.
The German experience, 10 years into their program, was that 280,000 jobs had been
added to their economy relating to the renewables sector. Most recently, it has been
found that solar and wind energy has helped to lower the cost of electricity in
Germany since 2011.
At the end of 2013, Germany’s unemployment rate was the lowest it had been since
the reunification of East and West Germany in the early 1990’s. This is strong
support that higher energy costs do not drive jobs away from the economy since the
cost of energy is rising almost everywhere. In 2013, Germany recorded record tax
revenues indicating both that their industry is profitable, and that wages have not
suffered. Further to this, Germany set a world wide record with a net trade surplus
of approximately $200 billion for 2013, the most ever recorded, indicating that
German companies have not lost their competitiveness in the global economy,
despite heavy investment in renewables.
In bringing manufacturers of Renewable Energy technologies to Ontario, another
intended goal was developing partnerships between industry and research. The
solar panels used in commercial scale installations today are approximately 16-17%
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efficient in converting solar energy to electricity. This leaves significant room for
improvement. Research is being done at places in Ontario, such as the Perimeter
Institute, the University of Waterloo, the University of Toronto, and a number of
other universities to understand the photoelectric effect at the quantum level and
increase the efficiencies of Solar PV. By bringing more industry to the province,
there are more opportunities to support this research and commercialize
technological advances and create a feedback loop to support the further
development of technologies.
Given the important role that renewables will play in the global economy in the
future, developing intellectual property in Ontario that can be exported all over the
world could bring significant economic benefits to the Province.
4.4.3. Electricity Rates - Market Clearing Price
There is very little general understanding amongst ratepayers of how electricity
prices are set in Ontario. The wholesale electricity market is managed by the IESO.
The IESO forecasts demand and receives bids from generators in order to fill that
expected demand. The following graphic, taken from an IESO presentation, shows a
small scale example of four power generators bidding an amount of power and an
associated price for that power. From those bids, it creates a stack and overlays the
demand profile for the day’s usage as outlined in the second graphic.
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The price that is actually paid to electricity producers at any given time of
consumption, the market clearing price, is the band where the top of the electricity
consumption occurs. In the example above, at 13:30, Generator 4 is paid $15/MWh
for the power supplied, at 17:15, Generators 1-4 are all paid the market clearing price
of $38 /MWh for the power supplied, even though Generators 1, 2 and 4 all bid at
rates lower than $38 /MWh. Similarly, at 19:15, Generators 1, 2 and 4 are all paid
$25 /MWh for power supplied.
Solar PV systems that are constructed under the FIT Program do not participate in
the IESO bid process because they are connected to the Grid at the distribution level
rather than the transmission level. The Solar PV projects produce their power closer
to where electricity is consumed. As individual projects they are much too small to
be managed in the bidding process and the supply from a single project is almost
indiscernible in the demand at any given time. Together, however, the combined
effect of hundreds of distributed solar projects makes an impact. The result is that,
instead of adding another layer to the stack, the production of solar appears as a
reduction in demand, moving the demand curve lower on the stack. Solar PV still
makes up less than 2% of the power supply in Ontario, but because solar energy is
always producing during the times of high demand when the demand curve is
elevated in the stack, solar is able to potentially lower the market clearing price paid
on the other 98% of power being consumed. The FIT Rate currently available to a
new application for a commercial Solar PV rooftop installation is $0.316
(31.6)/kWh. In purchasing 2% of the needed power at this rate, solar would need
to reduce the stack price for the other 98% of power by only $0.0055 (0.55) /kWh in
order to reach a levelized price of $0.072 (7.2) / kWh, the current off peak price for
electricity in Ontario.
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Ontario Demand Premium
>24,000 MW 10.1 cents
22,000-24,000 MW 4.5 cents
20,000-22,000 MW 2.0 cents
<20,000 MW Base
Further study from the IESO revealed that in 2012, the price premium paid for
electricity at peak demand levels was as follows:
Overlaying the price premiums with the demand profiles shown in the following
graphic (also provided by the IESO) indicates there is real possibility for solar to
justify the premiums paid purely from a price standpoint, beyond the other benefits
of moving to renewables previously mentioned.
The FIT Contracts have the rates set for 20 years, so as energy costs from non-
renewables continue to increase, the ability for solar and other renewables to “pay
for themselves” purely from a rate standpoint will get easier and easier.
When combining the direct financial factors, indirect financial factors and reduced
risk factors of renewables, the Co-operative believes the FIT Program is sustainable.
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That being said, the Co-operative believes communications and consumer education
surrounding the program, however, has not been as effective as desirable, which
leaves the program vulnerable to political forces. Though each of the political
parties has a different approach for the contracting of energy generation from
renewables, the contracts, once issued are expected to be honoured, and all political
parties vying for leadership in Ontario have confirmed their intent to continue to
honour any contracts that are in force.
Outside of Ontario, the market for renewables is expected by the Co-operative to
remain viable, providing potential opportunities for future work if the FIT Program
in Ontario ends prematurely.
4.5 FIT PROCESS AND EXPECTED DIRECTION
FIT Program Status
On September 30th, 2014, the OPA posted a new set of rates that are expected to
apply to any FIT contracts that are awarded after that date through to January 1,
2016. There is currently an allocation of 100MW of contract capacity that is being
awarded under these new rates. The applications that are eligible to receive
contracts under these new rates are carried over from the FIT 3 application window
from 2013.
The FIT Program is currently closed to new applications. It is expected that a new
Application Window will be opened at some point in 2015 where a minimum of
200MW will be available to be awarded to successful applicants. It is anticipated
that this allocation will be awarded using the September 30th, 2014 rate schedule.
CED Co-op does not anticipate a great number of changes in the rules with the next
round of FIT applications, although this cannot be guaranteed by the Co-operative.
The rules that are currently in place for the FIT 3 projects in process were released
on October 9, 2013. Because the rules for a potential FIT 4 for 2015 have not yet been
released, the following is an overview of the changes that occurred from FIT 2 to FIT
3 in order to give a sense of the direction of the FIT Program.
Major Program Changes from FIT 2.0 to FIT 3.0:
The changes outlined here apply specifically to the FIT 3.0 Projects and are expected
to remain in place for future FIT Application Windows. The microFIT Program was
re-launched in September 2013, and is currently still active. The changes that have
been implemented within the microFIT Program have not been addressed as CED
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Co-op is focused on the FIT Program for applications in the range of 100kW to
500kW at this time.
i. Restriction of FIT Program to 500kW and smaller projects
The FIT Program has been revised and slimmed down from the previous divisions
of Small FIT and Large FIT, and the FIT Program will now only allow projects that
are 500kW and smaller which were previously known as Small FIT. Applications
that would have been classified as Large FIT projects will have to follow a new,
competitive bidding process that is scheduled to be unveiled later in 2014. CED Co-
op does not have any projects planned as of yet that would fall under this bidding
program.
Within the 500kW limitation for the FIT Program, there is a further limitation in that
projects that connect to power lines that operate at 15kV and lower are limited to
250kW in size. Street–side power lines are predominantly operated at lower than
15kV, so the bulk of applications will be for 250kW and less, however 500kW
projects are ideal and the most profitable.
ii. Priority Points and Contract Capacity Set Aside
The most significant change in the development of projects is the re-structuring of
Priority Points. Whereas under the first round of the FIT Program, the application
date was virtually the sole factor that determined the order of awarding contracts,
the primary determinant of contract award order is now the number of Priority
Points a project carries, then followed by the application timestamp.
There are two categories of points that an applicant can now accumulate for a
project as outlined in the following chart:
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An application can only receive points from one of the three types of points from the
project type points section. However, an application can accumulate points from
more than one source for the non-project type points. Date/time stamp of the
application now matters only when applications with the same number of points are
reviewed. Generally a solar project that is not located within Reserve lands is
eligible for up to 7 points; 3 Project Type points for shared ownership, 2 Points if we
are able to get the local municipality to support the project or the renewable energy
technology, and an additional 2 points if the land or building is owned or controlled
by a Public Sector entity such as schools, hospitals, long term care facilities,
municipal buildings, etc..
Further to this point structure, there is an ability to achieve an elevated priority
through the CCSA stream of the FIT Program which specifically mandates a
community, municipal or aboriginal participation level of greater than 50% of the
Economic Interest in the Project. CED Co-op presently intends to make its future
applications through the CCSA area of the FIT Program. Within the Community
Participation CCSA Project portion of the next FIT Application Window, once again,
Projects with more Priority Points will be reviewed first, looking at time/date stamp
of the application only amongst those applications with the same number of points.
Any CCSA applications that are not awarded contracts within the set-aside will flow
over to be eligible for the remaining allocation, and will be evaluated on a points-
first, dates-second, basis.
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In order to count as a Community Participation CCSA Project, the Community
Economic Interest of greater than 50% must be held by a co-operative incorporated
in Ontario, and the members of the co-operative must include a minimum of 50
members who are landowners (continuously for a period of two years or longer)
within the municipality in which the project is to be developed. This means that
CED Co-op will need to maintain 50 or more Members who are qualifying
landowners in each municipality in which a Project is to be developed at the time
the Application is submitted and for the duration of the FIT Contract. For clarity,
CED Co-op can develop Projects within multiple municipalities, based on the
current structuring of the FIT Rules, a new co-operative is not currently needed for
each municipality, and when Investors put their money into CED Co-op, they are
investing in the Project Portfolio which can include Projects from many
municipalities.
iii. Pricing
On September 30th, 2014 a new FIT/microFIT pricing schedule came into effect.
The following rates are expected to be in effect for the 2015 allocation. This brings
the prices for each of these types of projects to less than half of where they were at
the launch of the program in 2009.
Technology Size Jan. 1, 2014 Rate
(per kWH)
Sep. 30, 2014 Rate
( per kWH)
Rate Change
(per kWh)
Percent Change
Solar (PV) (Rooftop) <=10kW 39.6 38.4 -1.2 -3.0%
Solar (PV) (Rooftop) >10kW to <=100kW 34.5 34.3 -0.2 -0.6%
Solar (PV) (Rooftop) >100kW to <=500kW 32.9 31.6 -1.3 -4.0%
Solar (PV) (Non-Rooftop) <=10kW 29.1 28.9 -0.2 -0.7%
Solar (PV) (Non-Rooftop) >10kW to <=500kW 28.8 27.5 -1.3 -4.5%
On-Shore Wind <=500kW 11.5 12.8 1.3 11.3%
Waterpower <=500kW 14.8 24.6 9.8 66.2%
Renewable Biomass <=500kW 15.6 17.5 1.9 12.2%
On-Farm Biogas <=100kW 26.5 26.3 -0.2 -0.8%
On-Farm Biogas >100kW to <=250kW 21 20.4 -0.6 -2.9%
Biogas <=500kW 16.4 16.8 0.4 2.4%
Landfill Gas <=500kW 7.7 17.1 9.4 122.1%
There is the ability to receive a further bonus on some of the rates outlined above
through the various CCSAs. Specifically, for the Community based CCSA where
>50% Economic Interest is held by a Co-operative, ground mounted solar projects
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would receive an additional $0.01/kWh which is a 3.6% increase in the FIT Rate.
This adder is not available to rooftop solar Projects.
FIT Price Adders Community Participation Level
Participation Level (Equity)
>50% >=15%<=50%
Price Adder
(per kWh) 1.00 0.50
Notwithstanding these changes in the rates for future FIT Contracts, CED Co-op
anticipates being able to achieve profitable Projects under these new rates.
iv. Domestic Content
Ontario was not successful in defending the domestic content rules to the World
Trade Organization challenge that was launched in 2011, and the final ruling came
out in mid-2013 forcing the domestic content requirements to be eliminated. Those
Projects that CED Co-op is building under FIT 2 contracts contain domestic content
provisions, and this is noted as a Risk Factor in Section 5: Availability of Solar Panels
that meet Ontario content requirements. As per the OPA announcement of August
14th, 2014, there are no domestic content requirements for the FIT 3 contracts
currently under development and no further domestic content provisions are
anticipated for any future contracts.
v. Procurement Targets
The procurement targets which cap the total amount of contracted capacity that will
be granted in an application window are expected to continue as originally
announced with FIT 4.0. Based on the Ministerial Directive of August 29th, 2014, the
FIT Allocation allotted for the next FIT Application Window is anticipated to be a
minimum of 200 MW with the potential addition of up to 40MW of capacity that is
likely not to be awarded within the 2014 microFIT allocation. Based on previous
allocations and the Ministerial Directive dated June 12, 2013, it is anticipated that the
total allocation will be divided into CCSAs as per the following table, however this
is yet to be confirmed once the final allocation is known in 2015:
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FIT 4.0 (2015) MW Allocation Available
Sector Ratio Minimum Possible
Allocation Allocation
>50% MUSH* 1/3 66.667 80.0 (MWs)
>50% Co-op 1/6 33.333 40.0 (MWs)
>50% Aboriginal 1/6 33.333 40.0 (MWs)
Other 1/3 66.667 80.0 (MWs)
Total MW Available 200 240 (MWs)
*MUSH - Municipal, University, School, Hospital
If an Application is submitted for a particular CCSA category, but the allocation for
that CCSA has been fully contracted with higher point or earlier timestamp projects,
the Application will carry its points and timestamps into the “Other” category.
Once the total FIT Allocation has been reached, all other Applications that have been
submitted will be deleted and should they wish to continue, will have to resubmit a
new Application with the release of the next FIT Allocation. For the following FIT
Application windows, the Minister of Energy has directed that further annual
procurements of 150MW will be set for each of 2016 and 2017.
Process going forward:
To put the upcoming 200MW FIT Allocation into perspective, during the FIT 2.1
Application Window there were over 825 MW’s of Applications submitted for with
a FIT Allocation of 200MW, and for the FIT 3.0 application window there were
494MW’s of Applications for 139MW of contracts. In the final award of the FIT 3.0
contracts, of the Applications that did not get submitted for CCSA allocations, only
two contracts out of 182 contracts were issued to Applications with fewer than 7
points. For this upcoming FIT Application Window, there are likely to still be many
applicants that are anxiously awaiting the opportunity to re-submit new
Applications from this backlog and the FIT Program is likely to be substantially
over-subscribed again. CED Co-op believes that the minimum number of Priority
Points that will be needed in order to have a chance at a contract in further FIT
Allocations is 5 Priority Points, and the only feasible Applications made by CED Co-
op will be those that are made through the Community CCSA.
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The timeline for receiving a contract has been presented to be approximately 5
months from the opening of the FIT Application Window. The expected process, as
outlined by the OPA in the graphic below, is that the FIT Application Window will
be open for approximately 30 days after which another 60 days will be allowed to
review Applications for completeness and eligibility. Once that has been done,
another 60 days is allotted to complete the TAT and DAT analysis for Grid
connection capacity.
From the issuing of a FIT Contract, successful Applicants will have locked in their
rate, and can begin the necessary work to take the Project to the request for NTP
stage. The maximum amount of time allowed to take a Project to this stage is 15
months, however, it is recommended that this process be expedited. The reason is
that, until the NTP is received, the awarded contract can still be canceled by the
OPA with payment for expenses incurred up to a $250,000 limit. It is only once NTP
is received that the FIT Contract can no longer be terminated by the OPA for
convenience, and construction can begin. The total time allowed for the
development of a solar project from the date the FIT Contract is issued is 18 months
for rooftop Solar PV Facilities and 36 months for ground mounted Solar PV
Facilities.
Other benefits of Contract Capacity Set-Aside:
In classifying a project as CCSA, security deposits are also lower. The initial security
deposit drops from $50/kW to $5/kW and the NTP security deposit drops from
$25/kW to $5/kW. For a 250kW project, that means only $2,500 of security deposits
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are required rather than $18,750, freeing up $16,250 of capital in the Application
process.
4.6 PROJECTS – CURRENT
CED Co-op is currently in the process of developing four Projects that have received
FIT Contracts under version 2.1 of the FIT Rules. All of these have reached final
NTP status and construction has already begun on several of the projects. CIAs
have been successfully conducted for all of these Projects, and all of them have been
granted connection offers. Further to this, the connection capacity has been reserved
for these Projects so that no other grid changes can impact the connections of these
Projects. The list of Projects as well as their location and contract size are:
As noted above, the structure for Projects 1, 2 and 3 is open rather than CCSA which
means that CED Co-op does not have to maintain Community Investment Member
status in any region in order to be able to continue to own and hold these three
contracts. CED Co-op intends to hold up to 100% ownership in these three Projects.
They are located in Blind River, Ontario, which is located on the North shore of Lake
Huron, at approximately the mid-point between Sault Ste. Marie and Sudbury. The
land on which these Projects are being developed is owned by VCT and will be
leased from VCT by CED Co-op.
The fourth Project under contract is a Joint Venture between CED Co-op and VCT
and is located just west of Sudbury in Nairn Centre as shown on the map below.
Project Project Name Geographic Area Energy Type Ownership kW Estimated Cost Structure
1 Solvation-V Blind River Ground Mount Solar Up to 100% 500 $7,875,000 Open
2 Solvation-VF Blind River Ground Mount Solar Up to 100% 490 $6,450,000 Open
3 Solvation-F Blind River Ground Mount Solar Up to 100% 330 $4,975,000 Open
Subtotal 1320 $19,300,000
4 62 Janti Rd - Cyr Nairn Centre Ground Mount Solar 51% 250 $1,606,000 CCSA
Total Development and Acquisition Cost (Co-op Portion) 1448 $20,119,060
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The three Blind River projects have an expected combined acquisition cost of
approximately $19,300,000. The final purchase price has not yet been finalized and
may change depending on factors such as technology selection, warranty and
service arrangements as well as financing charges. This agreement of purchase and
sale is currently under development between VCT and CED Co-op. The fact that
this agreement is not yet finalized is a Risk Factor as identified in Section 5: Risk
Factors - Agreements Not Finalized.
Gross revenue from electricity sales from these three Projects is forecast to be $2.4
million in the first year. The acquisition of these Projects is expected to be based on
a present value calculation of expected cash flows after operations and maintenance
expenses, so though price may fluctuate, the expected returns on a percentage basis
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are anticipated to remain consistent and are therefore not expected to negatively
impact the forecasted returns.
Long term debt financing has been arranged for the three Blind River projects
supplying 65% of the Project costs leaving 35% plus additional reserves to be funded
by CED Co-op. If CED Co-op is not able to raise sufficient investment of
approximately $7.25 million in order to complete the acquisition of all three Projects
and maintain sufficient reserves, the option exists to purchase portions of one or
more of the projects without penalty.
Ongoing operations, management and maintenance of the Projects are expected to
be performed under contract by VCT. This contract will be finalized and entered
into closer to the time at which these Projects achieve Commercial Operation. For
more information about VCT and maintenance, see sections 4.9 and 4.8 respectively.
Construction of the Blind River Projects is expected to begin in the summer of 2014,
with the first of these Projects being connected to the Grid and producing power in
the spring of 2015. Completion of the third Project is expected in the summer of
2015. Construction of these projects is being managed by VCT.
The fourth Project, “62 Janti Rd – Cyr”, is being developed as a Joint Venture
between VCT and CED Co-op named CEDC VIGOR SUNSHARE JV. It is expected
that VCT will manage the design and construction of this Project, and will invoice
the JV for the construction of the Project on a “time and materials” basis. VCT will
charge the Joint Venture for the labour performed by VCT. Sub-contractors and
materials will be invoiced to the JV on a “cost plus” basis whereby a markup is
charged to the JV on the invoices received by sub-contractors and suppliers. The 62
Janti Rd – Cyr Project has an expected development cost of $1,606,000 +HST
(including an estimated mark-up), however this budgetary number is expected to
change once the development agreement is finalized and the final Project
specifications are known. The fact that this agreement is not yet finalized is a Risk
Factor as identified in Section 5: Risk Factors - Agreements Not Finalized. CED Co-
op will hold a 51% Economic Interest in the Project and be responsible for 51% of the
total expenses. Long term financing has not yet been arranged for this Project,
however CED Co-op will be working to find suitable financing for this Project. The
fact that suitable financing has not yet been arranged is a Risk Factor identified in
Section 5: Risk Factors – Availability of Debt Financing. Gross revenue from
electricity sales from this Project is forecast to be $240,000 in the first year, of which
51% is anticipated to be attributable to CED Co-op.
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The land on which this Project will be developed has been secured by a lease with
the Cyr’s, the owners of the property. The lease holder is the Joint Venture, CEDC
VIGOR SUNSHARE JV.
Timelines
A list of the key tasks and expected dates in the Project development timelines is
outlined in the following table, however these dates are subject to change.
Task Solvation F Solvation-V Solvation-VF 62 Janti Rd - Cyr
Application Submission Complete Complete Complete Complete
Completeness and Eligibility Review Complete Complete Complete Complete
Transmission testing (TAT/DAT) Complete Complete Complete Complete
Contract Offered and Accepted Complete Complete Complete Complete
Connection Impact Assessment Complete Complete Complete Complete
Environmental Review (EASR) Complete Complete Complete Complete
Domestic Content Plan Complete Complete Complete Complete
Financing Plan Complete Complete Complete Complete
Application for Notice to Proceed Complete Complete Complete Complete
Notice to Proceed Received Complete Complete Complete Complete
Ground Preparation - Site work begins Complete Complete 14-Nov 15-May
Tracker Bases and Masts Complete 14-Nov 14-Dec 14-Jun
Tracker Assembly and Panel Installation Complete 15-Jan 15-Feb 15-Jul
Inverter Installation and DC Wiring 14-Nov 15-Feb 15-Mar 15-Jul
Trenching, AC Wiring and Main Electrical 14-Nov 15-Apr 15-May 15-Aug
Metering Hardware and Grid Connection 15-Jan 15-Apr 15-May 15-Aug
Commercial Operation 15-Mar 15-May 15-Jul 15-Sep
Environmental Attributes
The clean energy produced by these four combined Projects is expected to reduce
carbon emissions in the province by 700 tonnes per year and provide enough
Renewable Electricity to power 345 households.
Further Projects in Development
In addition to the four FIT Contracts under version 2.1 of the FIT Rules, the Co-
operative has also received 10 subsequent FIT Contracts under version 3 of the FIT
Rules. These FIT Contracts are all being developed in Joint Venture structures
whereby CED Co-op will hold 51% Economic Interest with the other 49% being held
by various development partners. The FIT Contracts outlined in the table below
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were issued in late August and early September of 2014. The deadline for
completion for rooftop Solar PV Projects is 18 months from the issue of the FIT
Contract, and the deadline for completion of ground mounted Solar PV Projects is 36
months from the issue of the FIT Contract. It is anticipated that VCT will manage
the design and construction of these Projects, and will develop the Projects under a
similar agreement as the 62 Janti Rd – Cyr Project outlined above. The fact that this
agreement is not yet finalized is a Risk Factor as identified in Section 5: Risk Factors
- Agreements Not Finalized. All of these Projects were granted FIT Contracts under
the CCSA FIT Allocations, and these are therefore mandated to have a minimum of
51% of the Economic Interest held by a Community Investment Member for the full
20 year duration of the FIT Contract.
# Joint Venture Partnership Project Renewable Type kW Budget Owned FIT Rate
1 CEDC CRESTVIEW SUNSHARE JV Hallman Construction Solar PV Rooftop 100 $300,000 51% $ 0.345
2 CEDC MCCO SUNSHARE JV MCCO - 50 Kent Solar PV Rooftop 200 $675,000 51% $ 0.329
3 CEDC SALUS SUNSHARE JV Salus Marine Wear Solar PV Rooftop 160 $480,000 51% $ 0.329
4 CEDC TURKEY SUNSHARE JV Schiedel View Farms Solar PV Rooftop 250 $750,000 51% $ 0.329
5 CEDC VIGOR SUNSHARE JV Whyte's Aggregate Pit 2 Solar PV Ground 250 $874,500 51% $ 0.298
6 CEDC VIGOR SUNSHARE JV Whyte's Aggregate Pit 3 Solar PV Ground 250 $874,500 51% $ 0.298
7 CEDC WELLESLEY SUNSHARE JV Wellesley Arena Solar PV Rooftop 300 $845,000 51% $ 0.329
8 CEDC WELLESLEY SUNSHARE JV St Clements Arena Solar PV Rooftop 200 $600,000 51% $ 0.329
9 CEDC WELLESLEY SUNSHARE JV Wellesley Township Ofc Solar PV Rooftop 100 $335,000 51% $ 0.345
10 CEDC WELLESLEY SUNSHARE JV Linwood Community Ctr Solar PV Rooftop 100 $325,000 51% $ 0.345
Totals 1,910 $6,059,000
In order to construct these FIT Contracts, CED Co-op will need to provide funds of
up to $3.5 million including reserves. Long term financing has not yet been
arranged for these Projects, however CED Co-op will be working to find suitable
financing for them. The fact that suitable financing has not yet been arranged is a
Risk Factor identified in Section 5: Risk Factors – Availability of Debt Financing.
Gross revenue from electricity sales from these Projects is forecast to be $875,000 in
the first year, of which 51% is anticipated to be attributable to CED Co-op.
CED Co-op believes the 14 Projects outlined above represent a sufficient Project
Portfolio for the Co-operative such that the annual operations of CED Co-op and the
targeted returns are presently expected to be able to be maintained from the cash
flows of only these Projects. Though the Co-operative believes this to be the case,
this is identified as a Risk Factor in Section 5: Risk Factors – Projections and
Forward-Looking Information and Section 5: Risk Factors – Financial Projections
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4.7 PROJECTS – FUTURE
In addition to the Projects already under FIT Contracts, CED Co-op is actively
pursuing further Projects for development. The FIT Program is currently under an
extended procurement for FIT Contracts under version 3 of the FIT Rules. An
additional 100MW of capacity is being awarded to Applications that were submitted
in November and December of 2013, but did not already receive FIT Contracts. It is
estimated that there are still 220 MW worth of Applications that are eligible to
receive FIT Contracts under this 100 MW extended procurement, as such, not all
Applications in queue will receive contracts. As noted above, a new rate schedule is
in effect as of September 30, 2014, and any of the Applications listed below that
receive FIT Contracts under this extended procurement are anticipated to receive the
rates from the rate schedule listed above. A number of transmission and
distribution stations have seen changes in their capacity since the time of the
submission of these applications which further reduces the likelihood of the
Applications receiving FIT Contracts. The table below shows CED Co-op’s
outstanding applications along with an estimate of the likelihood of receiving a FIT
Contract based on the information available.
# Joint Venture Partnership Location Renewable Type kW Owned Structure Contract Likelihood
1 CEDC BTB SUNSHARE JV Ayr Solar PV Rooftop 100 51% Open Likely - Timestamp
2 CEDC GH SUNSHARE JV Cambridge Solar PV Rooftop 250 51% Open Likely - Timestamp
3 CEDC LEIS SUNSHARE JV Wellesley Solar PV Rooftop 250 51% Open Likely - Timestamp
4 CEDC BALNAR SUNSHARE JV Guelph Solar PV Rooftop 250 51% CCSA Possible - Grid filling
5 CEDC ROHNBRAD SUNSHARE JV Guelph Solar PV Rooftop 250 51% Open Possible - Grid filling
6 CEDC ROHNBRAD SUNSHARE JV Guelph Solar PV Rooftop 250 51% Open Possible - Grid filling
7 CEDC ROHNBRAD SUNSHARE JV Guelph Solar PV Rooftop 250 51% Open Possible - Grid filling
8 CEDC VIGOR SUNSHARE JV Sudbury Solar PV Rooftop 160 51% Open Possible - Timestamp
9 CEDC VIGOR SUNSHARE JV Sudbury Solar PV Rooftop 180 51% Open Possible - Timestamp
10 CEDC BALNAR SUNSHARE JV Guelph Solar PV Rooftop 80 51% CCSA Unlikely - Grid full
11 CEDC BALNAR SUNSHARE JV Guelph Solar PV Rooftop 240 51% CCSA Unlikely - Grid full
12 CEDC OSKAM SUNSHARE JV Guelph Solar PV Rooftop 100 51% Open Unlikely - Grid full
13 CEDC ROHNBRAD SUNSHARE JV Guelph Solar PV Rooftop 250 51% Open Unlikely - Grid full
14 CEDC ROHNBRAD SUNSHARE JV Guelph Solar PV Rooftop 250 51% Open Unlikely - Grid full
15 CEDC ROHNBRAD SUNSHARE JV Guelph Solar PV Rooftop 250 51% Open Unlikely - Grid full
Totals 3,110
All of the Applications noted above that receive FIT Contracts are expected to be
developed as Joint Ventures. It is anticipated that VCT will manage the design and
construction of these Projects, and will develop the Projects under a similar structure
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as the 62 Janti Rd – Cyr Project outlined in Section 4.6. The fact that these
agreements are not yet finalized is a Risk Factor as identified in Section 5: Risk
Factors - Agreements Not Finalized
As mentioned in Section 4.5: FIT Process and Expected Direction, the next FIT
Allocation is expected to be in the range of 200MW to 240MW and the FIT
Application Window for the submission of Applications for this procurement is
anticipated to be opened in the spring of 2015, though the timing has not yet been
announced by the OPA. CED Co-op is actively partnering with VCT as well as other
Solar PV Project developers to develop further Projects and anticipates submitting
more Applications in this next FIT Application Window. CED Co-op achieved a
100% success rate in having the Applications submitted under version 3 of the FIT
Rules meet the completeness and eligibility review by the OPA and proceed to
TAT/DAT testing for Grid connection capacity. It is anticipated that CED Co-op
will achieve similar success under future FIT Allocations, but this is cannot be
guaranteed. This is a Risk Factor that is identified in Section 5: Risk Factors – Feed-
In Tariff Program.
It is anticipated that future Applications made for FIT Contracts will similarly be
developed under a Joint Venture model and that CED Co-op will seek long term
project financing for these projects, but it cannot be guaranteed.
In addition to the Projects already in the Application stage, and those contemplated
for the next FIT Allocation, CED Co-op may pursue further applications in
subsequent application windows of the FIT Program, and may also consider the
acquisition of built or un-built Projects that may be offered for sale by other co-
operatives or other project developers and may include Projects based on renewable
sources other than Solar PV such as wind power, water power, bio-mass or bio-gas.
It is contemplated, but cannot be guaranteed that, the Board will review the merits
of each individual Project using the following criteria:
Return on investment – the Board will prepare, or cause to be prepared, financial
projections in respect of any potential Project and will assess the projected returns of
any potential Project to ensure that the returns to security holders are maintained at
satisfactory rates.
Engineering – if a Project has already been constructed, the Board will assess, or
cause to be assessed, the technical expertise exhibited in the design and construction
of the system to ensure consistent quality standards and to ensure that relevant
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operations and maintenance experience is either available within the Co-operative
or available to the Co-operative.
Risk – the Board will evaluate the risk profile of any future potential Project and
compare that to the risk profile of the Projects set out in this Offering Statement.
Both technical and financial risk will be investigated.
Bankability – the Board will consider whether financing will be available, and the
terms upon which financing will be available, to fund a portion of the Project in
order to help lever the returns available from the Project.
Suitability – the Board will determine and ensure that any Project is consistent with
the mandate, objectives and reputation of CED Co-op, and will not approve any
Project that the Board determines, in its discretion, is not acceptable to the Board.
The Board shall report to the Members from time to time, by newsletter, and at
Members’ meetings, on its Project development work and decisions.
4.8 TECHNOLOGY
A summary of the main elements that CED Co-op is presently contemplating using
in the four Projects under development is outlined below, however CED Co-op may
change any or all elements, in its discretion:
Mounting System
The PV systems under FIT Contracts version 2.1 are expected to be constructed
using ground mounted dual-axis tracker technology.
Some of the factors that influenced this design decision are as follows:
The ability to track the sun and optimally orient the panels to face the sun
increases output of the system by 40% to 45% over a fixed panel system.
The entire system is accessible for service and maintenance to be performed
on the unit, and the movement of the array helps clear the panels of snow in
the winter.
Installing the panels on the ground eliminates the costs and downtime
associated with removing and reinstalling panels should a roofing surface
need to be repaired or replaced.
Installing the system on the ground allows for optimal location of the solar
array to avoid shading from trees or building.
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Installation of the system can be completely standardized from one site to the
next allowing for faster installation and fewer custom engineering expenses.
Counter to intuition, heat reduces the efficiency of solar panels. By having
the panels mounted on an open frame that allows air flow from all sides
rather than against a roof top, the panels are kept cooler, increasing
production and extending the longevity of components.
Modules (Solar Panels)
Because there is limited space in which to install the trackers, as well as constraints
on how many panels can be mounted on each tracker, the highest efficiency panels
will be needed in order to maximize the performance of the Projects. The Projects
will therefore utilize mono-crystalline silicon cell based panels with efficiencies in
the 17% to 18% range.
Inverters
A combination of string inverters and DC optimizers will be used on the Projects.
Some of the factors that influenced this design decision are as follows:
Maximum power point tracking is done on a panel pair basis rather than at
the string level. Based on measured experience, this provides 4-5% additional
power output.
Shading of panels or the failure of a panel is localized to the panel rather than
impacting the performance of an entire string of panels.
The installation of power optimizers behind each panel increases the safety of
the system, cutting the power between the panels and inverters when the
Grid is down or when the AC is shut off. Typical string inverter systems
have full power coming all the way to the inverter, even when the inverter is
shut off or the Grid is down which represents a safety risk.
The information available through remote monitoring is provided on a panel
pair level, dramatically increasing the visibility into the system’s operation.
Monitoring
The system will employ internet based monitoring systems that provide near real-
time data and analysis anywhere in the world, automated email alerts, and remote
diagnostics.
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4.9 KEY RELATIONSHIPS
CED Co-op presently has relationships with the following:
Legal
CED Co-op has its primary legal relationship with Lerners. Lerners has been
operating for over 80 years and employs over 100 lawyers between its offices in
Toronto and London Ontario. Lerners has extensive experience in the unique legal
environment of Co-operatives, with lead counsel for the Co-operative, Ian Shewan,
chairing the Regulatory Affairs Committee for ON Co-op. The Regulatory Affairs
Committee meets quarterly with the FSCO to discuss regulatory and policy issues
affecting Ontario co-operatives.
Further legal consultation regarding securities and the Tax Act has been conducted
through Blakes. Blakes was founded in 1856 and operates through 5 Canadian
offices and 7 international offices. Key advisors to the Co-operative from Blakes
include Chris Hewat and Kathleen Penny.
Lease development work has been done through Gowlings. Gowlings is one of
Canada’s largest law firms with over 750 lawyers and 7 offices in Canada. Key
advisor to the Co-operative from Gowlings is Manuel Martens.
Accounting
CED Co-op has its accounting relationship with Grant Thornton. CED Co-op
formerly held its accounting relationship with EPR, the financial statements for 2013
were audited by EPR. EPR has recently been merged with Grant Thornton, and as
such, the engagement of EPR as the Auditor for 2014 has been taken over and will
now occur with Grant Thornton. Grant Thornton has 4,000 people employed in 135
offices across Canada. Grant Thornton is the external auditor for the Co-operative
and also provides guidance on income tax, HST and accounting policies. Key
advisors to the Co-operative from Grant Thornton include Ronald Kielstra, Kevin
Stienstra and Kyle Weatherbee.
Engineering and Design
CED Co-op utilizes the services of a number of engineering offices for various
aspects of the design and construction of the Projects. These include McNeil
Engineering and Construction Inc. for structural engineering analysis of roof
systems, Burnside Engineering for structural analysis of tracker bases, Runge &
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Associates Inc. for electrical engineering as well as Fortech Engineering Ltd. for
additional electrical engineering.
Insurance
CED Co-op maintains CGL insurance and D&O insurance for its operations through
St Clair Insurance Brokers Inc. with the policies issued for CGL by Kent & Essex
Mutual Insurance Company and for D&O by Royal & Sun Alliance Insurance
Company of Canada.
Application and Project Management
CED Co-op is presently working primarily with VCT for Application and Project
management. VCT has installed over 2,300 kW of solar panels throughout Ontario.
The majority of these installations have utilized ground mounted tracker
technologies, but VCT also has experience with ground mounted systems using
fixed and seasonally adjustable panel mounting systems. Of the installed portfolio,
approximately 800kW has been installed on rooftops. These completed rooftop
installations have been a mix of pitched and flat roofs on materials including asphalt
shingle, rubberized membranes, tar and gravel, corrugated metal and standing seam
metal. VCT has installed systems on both residential and commercial buildings.
Customers for completed projects include individuals, businesses, charities,
aboriginal groups and municipalities.
In addition to being developers, VCT also owns of over 200 kW of solar installations
with significantly more in the development phase. VCT continues to design every
installation to very high specifications making sure they are built with the mindset
of long term ownership.
Having started in the solar industry by building smaller systems and since then
having grown into managing, designing and constructing larger systems, VCT is an
ideal development partner for CED Co-op in developing profitable projects within
the FIT Program. The personnel of VCT have gained expertise through installing,
operating and monitoring systems based on micro-inverters, string inverters,
optimizing technologies and central inverters has given substantial insight into
designing systems with high performance and high reliability. Because of the
experience gained in developing small projects VCT is also able to reduce costs by
managing many of the finer details of engineering, procurement and construction
processes in house rather than having to subcontract all of these portions of the
project development process to other firms.
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Together with customers, VCT has generated well over 7.5 million kilowatt hours of
clean, green energy.
4.10 MANAGEMENT AND ADMINISTRATION
CED Co-op does not have any employees at this time. Management of the Co-
operative has been performed by VCT and the Board of Directors of the Co-
operative.
It is the intention of CED Co-op and VCT to enter into an agreement wherein VCT
will provide management services to CED Co-op. This agreement is currently under
development. The fact that this agreement is not yet finalized is a Risk Factor as
identified in Section 5: Risk Factors - Agreements Not Finalized. The following
material terms are expected to be contained in the agreement:
VCT will provide, or arrange for, all of the administrative and management
services necessary to operate and maintain the business of CED Co-op and its
Projects which will include, but will not be limited to:
o providing services relating to the formation of CED Co-op, as applicable;
o developing and implementing an initial business plan for the Projects;
o developing this Offering Statement and managing the receipting
processes, Escrow processes, and fundraising processes;
o providing advice and guidance in respect of the management, financing,
and operations of CED Co-op as applicable;
o making available to CED Co-op for the benefit of the Projects its
intellectual property assets relating to the Projects;
o ensuring compliance with all material regulations, statutes, ordinances
and reporting requirements in connection with the solar generating units
and the FIT Program;
o supervising the installation and operation of the solar generating units;
o assisting CED Co-op in developing, implementing and monitoring its
annual business plan and budget;
o overseeing the implementation of preventative maintenance programs;
o maintaining records of the installation and operation of all solar
generating units;
o preparing accounting and administrative records and reports;
o supporting compliance by CED Co-op of all regulatory requirements
under the Co-op Act;
o providing CED Co-op with member/investor relation services;
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o calculating and making recommendations to CED Co-op for the payment
of dividends or return of capital on its issued and outstanding Shares;
o arranging for the maintenance of a registry of the Security Holders and
record of all transfers or redemption of Securities in the capital of CED Co-
op; and
o providing office space, equipment, supplies, accounting, bookkeeping and
administrative services as required by CED Co-op.
As part of the administration of CED Co-op, it is the intention of CED Co-op to
engage TREC to provide some of the back office services relating to the management
of Membership and investment information through their Community Power
Investor Management database. This engagement agreement is currently under
development and has not been finalized at this time. The fact that this agreement is
not yet finalized is a Risk Factor as identified in Section 5: Risk Factors - Agreements
Not Finalized. The anticipated service costs of the agreement have been included in
the projected cash flows of the Co-operative.
VCT has paid the expenses incurred by CED Co-op on behalf of the Co-operative
and VCT therefore expects to receive reimbursement from CED Co-op for all
expenses incurred in relation to the establishment of and start-up of CED Co-op
which include but are not limited to:
o professional fees;
o legal expenses;
o consulting fees;
o project development expenses;
o joint venture development expenses;
o marketing and advertising expenses;
o office overhead expenses; and
o corporate finance advisory services.
The total of these expenses incurred to the September 30, 2014 is $292,747.62 net of
HST. The estimated further expenses that will be incurred to operate the Co-
operative, complete the Offering Statement, perform fundraising activities and
achieve completion of the four Projects outlined above are $75,000. A breakdown of
these expected expenses is included in Section 6: Use of Proceeds. This estimate
does not include the direct Project costs, nor does it include the costs of due
diligence and related expenses for the long term financing of the Projects. CED Co-
op cannot guarantee that these expenses will not increase.
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4.11 PROJECT PORTFOLIO REVENUES
Pro Forma Financial Projections have been prepared for the 20 years of the FIT
Contracts and these are included as Appendix A. These projections are a forecast
and cannot be guaranteed. This is a Risk Factor that is identified in Section 5: Risk
Factors – Projections and Forward-Looking Information and Section 5: Risk Factors –
Financial Projections.
The cash flow projections have been prepared assuming that all fourteen Projects
under contract outlined above will be constructed. This represents a sufficient
Project Portfolio for the Co-operative such that the annual operations of CED Co-op
and the targeted returns are expected to be able to be maintained from the cash
flows of only these Projects. If subsequent Projects receive contracts and are
constructed, it is expected that the projected cash surpluses will be higher while
maintaining consistent or higher returns.
Pro Forma financials have been prepared to show statements for accounting
purposes as well as a cash flow summary that is prepared from a tax perspective.
The primary difference is the treatment of depreciation and revaluation of assets for
accounting purposes versus CCA deductions for tax purposes.
The following are the steps that are employed in projecting Project revenues:
i. RETScreen software is used to model the climate characteristics of sites.
RETScreen is one of the standard programs that is used for modelling of energy
systems. It has been developed by Natural Resources Canada and is used
throughout the world. More information about RET Screen is available
through its website: http://www.retscreen.net/ang/home.php. RETScreen is
used by CED Co-op for its climate data because it has very detailed and
accurate weather information available for the purposes of calculating solar
production, based on data gathered from 80+ points across Ontario.
RETScreen also has the capability to calculate the irradiance (sunshine) that
will be received by a tracking plane on an hourly basis throughout the entire
year to come up with accurate monthly data for potential solar yield. Losses
that are calculated from the efficiency of electrical conversion of the various
components in the Solar PV system as well as the losses that will be incurred
through the voltage drop across cabling distances are also factored in at this
stage.
ii. Data from RETScreen is then exported in order to do further processing.
Experience in developing projects has indicated the value of increasing the
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installed DC capacity (amount of power able to be produced by the panels –
mostly done by simply increasing the number of panels used and using the
most efficient panels) to installed AC capacity (the amount of power the
inverter can convert and feed to the Grid) ratio in order to maximize the
potential output of a system over its lifespan. This ratio, however, cannot be
increased indefinitely because the inverters have a maximum output after
which surplus power is “clipped” and not able to be transmitted through to the
Grid. This practice is common in the solar industry and the systems are
designed to ensure that any clipping that occurs is within the operating bounds
of the components, and no damage is done. Based on the actual measured
performance of installed systems ranging from a 1:1 (100% DC to AC) ratio up
to a 1:1.7 (170% DC to AC) ratio, VCT has created equations that calculate the
clipping that will occur at various levels of DC overbuilding. In applying this
calculation, the amount of energy expected to be produced by the system is
reduced based on the DC to AC ratio that is installed.
iii. From this number, two further reductions on the power production
expectations occur. The first of these is a de-rating based on the climate which
is done to recognize that the solar panels do not clear from snow cover in the
winter as quickly as would be optimal, and sometimes ice remains on panels
for a few days after a snowfall which impairs performance. The trackers are
also set to go into a ‘table-top’ safe position when the winds exceed certain
thresholds, resulting in a further reduction in production during those periods.
The combination of these effects reduces expectations to about 75% of the
potential amount of energy production during the winter months. These
numbers have been set based on the experience gained by VCT in operating
Solar PV systems in all corners of Ontario through 4 winters.
iv. The final de-rating that occurs is specific to each site and recognizes that objects
(mostly trees along the horizon and other trackers) will cause some shading on
the panels, and this varies from month to month depending on where the sun
rises and sets. In Blind River, on the Summer Solstice, the sun will rise at about
60 degrees off of North and set at about 300 degrees, traveling a 240 degree
path and reaching an angle of elevation of about 68 degrees. On the Winter
Solstice, the sun will rise at about 120 degrees and set at 240 degrees, traveling
a 120 degree path and reaching an angle of elevation of only about 21 degrees.
This shading further reduces the solar energy potential of the site. Each tracker
on the site will experience slightly different shading characteristics, so an
aggregate average has been used for modelling. In addition to shading, there
will be some soiling of the panels through dust accumulation, wet leaves
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sticking to panels, bird droppings that may accumulate, and other factors.
These elements are factored into the shading de-rate for the site at this stage as
well.
v. The resulting amount of energy forecast to be produced is then multiplied by
the contracted FIT Rate to derive the expected gross revenue for the Project for
the first year of operations. The annual gross revenues for a Project are also
expected to decline over time. It is known that solar panels will degrade and
become less efficient over time due to loss of light transmission of the glass as it
gets pitted from blowing particles, discolouration of the bonding agents
between the cells and the glass, degradation of the soldered interconnects
between cells and other more technical factors. A number of studies of panels
that were produced in the 1980’s indicate that this degradation rate is about
0.4% per year. Manufacturers of modern panels believe that the technology
that is employed today is superior to the technology used in manufacturing
panels in the 1980s, and so the numbers for panels manufactured today should
be better. A degradation rate of 0.5% per year has been used in the financial
modeling. Manufacturer’s warranties typically guarantee a rate of degradation
to be no more than 0.7% per year. This derate of the DC production capability
of the panels is modeled through the AC:DC clipping ratios each year to derive
the expected output in a given year.
4.12 PORTFOLIO INVESTMENT AND FINANCE
The debt to equity ratio in providing the necessary capital for the acquisition of the
Projects under development is anticipated to be 65% debt, 35% equity. This level of
leverage is not guaranteed and is identified as a Risk Factor in Section 5: Risk Factors
– Availability of Debt Financing. Future applications may be leveraged more
heavily in order to increase returns on equity and near equity. This will be possible
because startup expenses, some of the reserves and operating expenses will able to
be funded from current Projects.
The full terms of the proposed long term debt financing arrangement are still in
discussion and have not yet been finalized. As such, the full terms of the agreement
have not been included in this Offering Statement. A summary of the anticipated
terms of the proposed financing arrangement are included here:
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Long Term Financing Terms – Used in Financial Modelling
Maximum Loan Amount $13.1 Million
Amortization of the Loan 15 years
Term of the Loan 15 years
Interest Rate The actual interest rate will be set on the date of advance of funds for each advance based on the corresponding Canada Bond yield plus a fixed margin. The rate as of October 15, 2014 would have been 6.18%. 6.5% is used in the modelling to allow for fluctuations in the bond markets prior to the advance of funds.
Debt to Equity 65% Debt / 35% Equity
Minimum Debt Service Coverage Ratio 1.45 (EBITDA / Annual loan payment)
Fees, Legal Expenses, Engineering Reviews and other Due Diligence and Closing Fees
Estimated to be $450,000
The financing commitment that has been received is for the financing of the three
larger Projects, Solvation-V, Solvation-VF and Solvation-F. These are the projects
that are “open” contracts in that they do not require a minimum economic interest to
be held by a qualifying Community Investment Member. The 62 Janti Rd-Cyr
project is a Community CCSA Project . This has created a problem for some lenders
because of a clause 17.3 (b) in the FIT Contract which provides as follows:
Where, in the case of a Contract Capacity Set-Aside Project, at any time during the
Term the Participation Level is equal to or below 50%, then, such failure to maintain
a Participation Level of greater than 50% shall constitute a Supplier Event of Default
if such failure is not remedied within six months after written notice of such failure
from the OPA, provided that where the Contract Capacity Set-Aside Project is a
Community Participation Project and such failure is due to the Community
Investment Member ceasing to qualify as such due to an insufficient number of Co-op
Members that are Property Owners, such cure period shall be available only where
such failure commenced less than 12 months prior to the date on which the OPA
received the corresponding Notice of Decrease.
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A number of the lenders with which CED Co-op has spoken are not willing to lend
to Projects that are subject to this clause at this time. CED Co-op is working with the
FCPC to lobby the Ministry of Finance and the OPA to find a way to give comfort to
all lenders regarding this clause, but a solution has not yet been presented. Should
this clause fail to be amended, or a workaround fail to be created CED Co-op may
have to establish a relationship with another institutional lender for the purposes of
leveraging the 62 Janti Rd-Cyr project as well as the Projects that have received FIT
Contracts under version 3 of the FIT Rules. This has been identified as a Risk Factor
in Section 5: Risk Factors – Availability of Debt Financing.
It is expected that the institutional lenders who are holders of the Term Loans will
be registering security against the Co-operative and the FIT Contracts. Secured
lenders that may provide Term Loans to the Co-operative, will rank in priority for
payments to the Bondholders of CED Co-op, who will be considered unsecured
creditors. CED Co-op Bondholders will, in turn, rank in priority for payment over
the Shareholders of CED Co-op, who are not considered creditors of the Co-
operative. Within the Shareholders, Class A Preference Shareholders will rank in
priority to Class B Preference Shareholders, who will, in turn, rank ahead of Class C
Preference Shareholders, who will rank ahead of Membership Shareholders.
Though the Bonds issued by the Co-operative are considered a debt instrument,
because the Bondholders and Shareholders of CED Co-op will be subordinate to the
lenders providing Term Loans, the capital provided from the sale of Bonds and
Shares is anticipated to be considered as equity by the providers of Term Loans
when calculating the Debt to Equity ratio for lending purposes.
4.13 RRSP, RRIF AND TFSA ELIGBILITY
In achieving investment targets for the Co-operative it will be useful to achieve
RRSP eligibility for CED Co-op’s investments in order to access the funds investors
may have already set aside in Registered Plans rather than seeking new investment
dollars. Having laid out a plan that has been verified through legal opinions, CED
Co-op is expecting to achieve RRSP, RRIF and TFSA eligibility for its Securities.
Background
Renewable Energy Co-operatives, as a type of co-operative, were created in Ontario
with the implementation of the Green Energy and Green Economy Act in 2009. A
special type of co-operative was needed since co-operatives in Ontario are normally
required to conduct 50% or more of its business with its members. Since all of the
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electricity produced by CED Co-op is sold onto the Grid under the FIT Program,
there is no opportunity to do business with members. Renewable Energy Co-
operatives were therefore exempted from this business with members requirement.
As a result, there is no mechanism to measure business with members to derive
patronage, and a Renewable Energy Co-operative is required to distribute its
surplus according to its Articles and By-laws rather than according to patronage.
Section 55 of the Co-op Act provides:
(3)“The amount that is allocated, credited or paid in each fiscal year to members or non-
members of a co-operative other than a renewable energy co-operative is known as the
patronage return.
(6)The surplus arising from the business of a renewable energy co-operative in each fiscal
year shall be allocated, credited or paid to the members in accordance with the by-laws of
the co-operative.”
When testing the definition of a co-operative in the Tax Act, there appears to be a
lack of alignment with the Co-op Act. One of the key measures of the definition of a
co-operative in the Tax Act is whether “the statute by or under which it was
incorporated, its charter, articles of association or by-laws or its contracts with its members
or its members and customers held out the prospect that payments would be made to them in
proportion to patronage”.
Given the foregoing provision in the Tax Act requiring patronage payment,
although CED Co-op is incorporated as a co-operative under the Co-op Act, when it
comes to meeting the Tax Act definition, CED Co-op does not qualify. This has
presented a challenge as the more simple qualifications for RRSP, RRIF and TFSA
eligibility of the shares and bonds of a co-operative that meets the definition under
the tax act cannot be used.
Qualification of Securities
CED Co-op has developed a plan for a method of qualifying its Shares and Bonds to
be held in Registered Plans, which is to make an election to become a Public
Corporation. An important note of distinction, CED Co-op is not seeking to be listed
on any public exchanges for the trading of securities. This is an election to be
considered a Public Corporation for Tax Act purposes. In order to make this
election, CED Co-op will need to achieve a minimum of 300 Shareholders, each of
whom hold a minimum of a block ($500) of Shares. Along with this CED Co-op will
need to have a receipted Offering Statement in place. Once the requirements are
met, CED Co-op will file the election to become a Public Corporation, following
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which all of the Securities of the Co-operative that are qualified to be issued under
this Offering Statement will be eligible to be held in Registered Plans.
It is for this reason that CED Co-op is beginning its fundraising through only the
sale of Unsecured Convertible Debentures. Any Shares or Bonds that could be sold
prior to the receipt of this Offering Statement would not be eligible to be held in
Registered Plans. Managing a potential mix of eligible and non-eligible Securities
would be an administrative burden to the Co-operative. By issuing Unsecured
Convertible Debentures that are converted to Class A Preference Shares after the
receipting by FSCO of this Offering Statement, and subsequently making the
election to be a Public Corporation, all of the outstanding Preference Shares then
issued will be eligible to be held in Registered Plans.
As noted in the Unsecured Convertible Debenture Subscription Agreement, the
Unsecured Convertible Debentures that are sold prior to the receipting of this
Offering Statement are scheduled to automatically convert to Class A Preference
Shares on April 30th, 2015. If the Co-operative has not met the minimum of 300
qualifying Shareholders through the conversion of the Unsecured Convertible
Debentures, and/or the Offering Statement has not yet been receipted by April 30th,
2015, CED Co-op would not be able to make the election to become a Public
Corporation, and an alternative plan would need to be developed to reach
Registered Plan eligibility.
Membership Shares that have been issued prior to the receipting of the Offering
Statement will not be eligible to be held in Registered Plans. Though Membership
Shares issued after the receipt of the Offering statement would technically be eligible
to be held in a Registered Plan, given the limited financial value of $10 for the
Membership Share, it is not expected that any Member would want to transfer a
Membership Share into a Registered Plan. CED Co-op will therefore not be tracking
the registered investment eligibility or non-eligibility of any Membership Shares,
and the Co-operative will also not be accepting any investment in Membership
Shares through Registered Plans.
A benefit of achieving RRSP eligibility through the election to be a Public
Corporation is that recent RRSP restrictions on private corporations and specified
small business corporations will not be applicable to CED Co-op, and the Co-
operative will therefore not need to limit the amount of Shares or Bonds that an
Investor, together with their related non-arms-length persons, may hold of any
particular class of Security or investment in the Co-operative in general.
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4.14 MARKETING PLAN
For CED Co-op to reach RRSP eligible status, it will, as noted, need to have a
minimum of 300 qualifying Shareholders. As of September 30, 2014, CED Co-op had
323 Members, and this Membership number is expected to grow. Many of these
Members will be able to make the required investment in the Co-operative in order
to qualify towards the 300 Shareholder threshold, however it is anticipated that CED
Co-op may have to reach a membership level of 400 Investors or more in order to
exceed the minimum 300 qualifying Shareholders.
In order to raise the $2.5 million minimum amount of funds from the sale of
Preference Shares and Bonds, an average investment amount of $6,250 per Investor
would be needed from 400 Investors. In order to raise the $12 million maximum
amount of funds available through the sale of Preference Shares and Bonds to 400
Investors, an average investment amount of $30,000 per Investor would be needed.
Based on the experience of the Directors in selling Renewable Energy systems for the
past 5 years, it is envisioned that the interest in investment by the majority of
Members and Non-Members will first and foremost be based on economic returns.
Assuming that the Investor’s threshold for return on investment is met, the indirect
benefits of local economic development, job creation, distributed energy generation,
reduction in carbon emissions and community ownership of energy assets do
provide a significant enhancement to the investment opportunity. Communications
with potential Members and Investors will need to therefore encompass all of the
benefits of investing in renewables.
In order to achieve the desired investment objectives, CED Co-op will be initiating
communications with Members through email and print communications as well as
holding information meetings where Members will be able to come to hear updates
on the status of Projects and fundraising of the Co-operative as well as review and
receive the Offering Statement.
In addition to the current Membership base of CED Co-op, VCT will also be
approaching its customers who are not already Members of the Co-operative. VCT
has approximately 50 customers who are individuals that are not yet Members of
the Co-operative who have already invested from $40,000 to $200,000 in Solar PV
systems, and it is expected that there will be strong interest in further investment in
Renewable Energy systems amongst this group.
VCT also has 10 organizations (mostly religious-based organizations) as customers
with whom it will be communicating who have already invested in Renewable
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Energy systems. These organizations have membership bases that each range from
50 to 300 individuals, and the investment in Renewable Energy has been
demonstrated to be something that meets the values and interests of their respective
membership bases.
In addition to these organizations, VCT has several corporate customers who have
invested from $1 million to over $5 million in renewable energy systems that may
also be interested in further investment.
It is believed that the maximum limit of funds could well be raised from the contacts
already known to CED Co-op and VCT.
4.15 TAXATION
As previously outlined, CED Co-op intends to file an election to become a Public
Corporation for Tax Act purposes. As a result, the dividends paid by CED Co-op to
its Shareholders on CED Co-op’s Class A Preference Shares will be considered
“eligible dividends” and qualify for a lower income tax rate than “non-eligible
dividends”.
As a Public Corporation, CED Co-op will not be able to claim the small business
deduction that can be claimed by CCPC’s which reduces the tax rate on the first
$500,000 of active business income to a rate which is currently 15.5% (combined
federal and provincial rates). In addition, by electing to be a Public Corporation,
CED Co-op and its shareholders will lose certain other benefits available only to
private corporations, including, but not limited to, the following:
Subject to certain restrictions, individuals in Canada are eligible to claim a lifetime
exemption of up to $800,000 on capital gains realized on the disposition of shares of
QSBC’s. One of the conditions that a corporation must meet in order to be a QSBC is
that it must be a CCPC. As a result, shareholders in the CED Co-op will not be
entitled to claim an exemption from taxation on capital gains realized on the sale of
shares of the CED Co-Op.
Certain tax-preferred items, such as one-half of capital gains realized by CCPC’s, as
well as life insurance proceeds received as a result of the death of the life insured,
are added to a CCPC’s capital dividend account. On filing appropriate tax elections,
CCPC’s may pay amounts added to their capital dividend accounts to their
shareholders free of personal income tax. CED Co-Op would not be entitled to pay
these tax-preferred items to its shareholders free of personal income tax.
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CCPC’s with less than $800,000 of taxable income are eligible for combined
refundable federal and provincial tax credits of up to 44.5% of qualified
expenditures on activities that qualify as “scientific research and experimental
development”, as that term is defined for income tax purpose. For public companies,
the corresponding rates, under announced amendments to the Income Tax Act
(Canada), and substantively enacted federal and provincial tax legislation, are
expected to be approximately18.8%.
Employees of CCPC’s are entitled to the benefit of certain favourable rules in respect
of the taxation of stock-based compensation to which employees of non-CCPC’s are
not.
CCPC’s may generally return paid up capital to their shareholders free of personal
income tax; return of paid up capital by a public corporation will generally be
considered to be a dividend.
However, as a public corporation, CED Co-op will not be subject to the additional
tax on certain forms of investment income to which CCPC’s are subject.
The income tax rate currently in effect that would be applicable to the income of
CED Co-op is 26.5% (combined federal and provincial rates). It is expected that
corporate income tax rates will continue to fluctuate, and this rate is unlikely to
remain the same for the 20 years that are projected in the Pro Forma Financial
Projections used in Appendix A.
In order to maximize tax efficiency, CED Co-op is offering both Bonds and Shares as
general investment types. The Bonds will be earning interest based returns for
Investors, and the interest expense paid by the Co-operative qualifies as a pre-tax
expense, which reduces the Co-operative’s amount of taxable income while
providing returns to Investors. The interest portion of the return to Bondholders is
expected to be taxable income to the Bondholder. The return of principal to
Bondholders is not considered to be taxable income to the Bondholder.
The Shares will earn dividend income which comes from the after-tax revenues for
the Co-operative. The dividends paid to Shareholders are expected to be taxable
income to the Shareholder. The Preference Shares will also be repurchased over the
course of the 20 year FIT Contracts. The return of capital in the form of Share
repurchases is not considered to be taxable income to the Shareholder.
THOUGH IT IS BELIEVED THAT THE INFORMATION PROVIDED HERE
WILL BE APPLICABLE TO THE SITUATIONS OF MOST INVESTORS, THIS
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INFORMATION IS NOT PROVIDED AS A FORMAL LEGAL OR
ACCOUNTING OPINION. IT IS RECOMMENDED THAT ALL POTENTIAL
SECURITYHOLDERS OF THE CO-OPERATIVE CONSULT WITH THEIR
LEGAL ADVISORS AND ACCOUNTANTS TO CONFIRM THE TAXATION
IMPLICATIONS OF THE INVESTMENT AND RETURNS FROM THESE
SECURITIES PRIOR TO MAKING AN INVESTMENT.
The Co-operative is an HST registrant, and as such will be collecting HST on the
electricity that is sold to the LDCs. As an HST registrant, the HST that is paid on
eligible expenses will be claimed as an input tax credit and netted off of the amount
of HST that is remitted to Canada Revenue Agency. At the time of the acquisition of
a Project, the ability to claim the HST paid on the purchase of the Project will result
in a significant credit for the Co-operative that is refundable. The values that have
been used for financial projections show Project costs net of the expected return of
HST. This is a cash flow issue that the Co-operative will have to manage. A
staggered acquisition of projects will help to mitigate the effects of this cash flow
issue.
The acquisition of Projects creates an asset for the Co-operative that is held in Class
43.2 of the Tax Regulations for the purposes of CCA depreciation for income tax
purposes under the tax act. Class 43.2 assets are allowed to be depreciated at a rate
of 50% per year on a declining balance with only half of the deduction allowed in
the year of acquisition. In addition to the rules for Class 43.2, the Projects will also
be subject to specified energy property rules. The specified energy property rules
require that each Project be maintained in a separate asset class within the 43.2 Class
and generally limit the amount of CCA deduction that can be claimed in a tax year
to the amount that would reduce taxable income from that Project to $0. Since the
principal business of CED Co-op is the sale of electricity, however, the Co-operative
would be allowed to take the full deduction to create a loss for tax purposes or to
use the CCA from one Project to shield the income from other revenue realized by
the Co-operative from other Projects or other sources. Should a loss for tax purposes
be created, this loss is not eligible to be flowed through to any of the Security
Holders of the Co-operative. For the purposes of the financial projections prepared
for tax purposes, the specified energy property rules have been followed in only
claiming the amount of CCA deduction required to bring the taxable income to $0 in
any given year where it is possible.
In general, the CCA deductions, combined with the other allowable expenses
(including interest on Bonds), are expected to eliminate the payment of income tax
for the first 15 years of operations of the Co-operative.
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4.16 FINANCIAL STATEMENTS
There is currently global convergence towards a single set of high quality
accounting standards for use throughout the world. Accordingly, the AcSB has
adopted the mandatory use of IFRS by all PAEs. IFRS replaces previous Canadian
generally accepted accounting principles as the acceptable set of accounting
standards for PAEs.
While the Canada Revenue Agency does not specify that financial statements must
be prepared following any particular type of accounting principles or standards, the
AcSB requires PAEs to use IFRS in the preparation of all interim and annual
financial statements for fiscal years beginning on or after January 1, 2011.
Optionally, all other enterprises can choose to prepare their financial statements
according to IFRS.
Generally speaking, a publicly accountable enterprise is an entity that:
1. has issued, or is in a process of issuing, debt or equity instruments that are, or
will be, outstanding and traded in a public market (including a domestic or foreign
stock exchange or an over-the-counter market, including local and regional
markets); or
2. holds assets in a fiduciary capacity for a broad group of outsiders as one of its
primary businesses.
Banks, credit unions, insurance companies, securities brokers/dealers, mutual funds
and investment banks typically meet the second of these criteria.
The Securities of CED Co-op will not be traded on a public market, exchange, nor on
an over–the-counter market. Therefore CED Co-op is not strictly required to
prepare statements according to IFRS. However, since the Co-operative is planning
to elect to be a Public Corporation, CED Co-op has elected to follow IFRS in the
preparation of financial statements.
The revenue recognition policies and expense recognition policies for accounting
purposes are outlined in the notes to the financial statements. Audited financial
statements are included along with unaudited interim financials as Appendix B.
The Project assets will be recognized at cost when they are acquired by CED Co-op.
After recognition as an asset, in accordance with IFRS rules, an item of property,
plant and equipment whose fair value can be measured reliably shall be carried at a
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revalued amount, being its fair value at the date of the revaluation less any
subsequent accumulated depreciation and subsequent accumulated impairment
losses. Revaluations shall be made with sufficient regularity to ensure that the
carrying amount does not differ materially from that which would be determined
using fair value at the end of the reporting period. As a result, the Project assets will
be revalued based on the present value of future expected revenue from the Project.
It is anticipated that the discount rate used for this valuation will be the rate of
return provided by the Project at the time of acquisition which is believed to be a
rate at which the assets could be re-sold in an open market.
The Co-op Act requires that all co-operatives that have more than 50 members and
that have issued securities (including Membership Shares) are required to have the
financial statements audited by an external auditor. As such, CED Co-op will be
providing audited financial statements to Members on an annual basis at least 10
days prior to the AGMoM. The audited financial statements will be presented at the
AGMoM for discussion and a vote will be held by the Members on the acceptance of
the auditor’s report. The Members will further have the right to appoint the auditor
for the following year’s financial statements by means of a vote at the AGMoM.
4.17 CAPITAL LOANS
There are no capital loans outstanding at this time. It is intended that CED Co-op
will receive long term financing from institutional lenders. These term loans are
being qualified under this Offering Statement and are described in Section 4.12:
Portfolio Investment and Finance as well as Section 8: Description of Securities.
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5. RISK FACTORS
The Cooperative and its Investors will be subject to a number of risks common to
startup ventures in general and will also be subject to risks involved in the development
and operation of Renewable Energy Projects under the FIT Program. The failure to
prevent or mitigate any of the following circumstances could jeopardize investors’
investments in the Co‐operative and could have a negative impact on the Co‐
operative’s financial returns and solvency.
Before investing, prospective purchasers should carefully consider, in light of their own
financial circumstances, the Risk Factors set forth below as well as the other information
contained in this Offering Statement.
Projections and Forward‐Looking Information: This Offering Statement and the
Business Plan contain forward‐looking statements and projections which involve
numerous assumptions, hypotheses, risks and uncertainties including, among others,
those set out herein as Risk Factors. These Risk Factors impact future events including
future operating results, prospects and future financial performance and condition,
results of operations, business strategy and financial needs. These statements can be
identified by terminology such as "may," "will," "expect," "anticipate," "future," "intend,"
"plan," "believe," "estimate," "is/are likely to" or similar expressions. Actual results of
operations will vary, perhaps materially and adversely, from the projections contained
in this Offering Statement. No representations or warranties are given that these
projections will actually be achieved. The assumptions and hypotheses upon which
these projections are based may change on account of circumstances beyond the control
of the Co‐operative.
Long Term Investment: Purchases of the Securities offered herein should be considered
long term investments which may not be suitable for investors who may need to sell
their Securities quickly in order to raise money. Members are not entitled to demand the
redemption of these Securities as explained in “Material Attributes of Authorized
Capital” at the end of Section 7, “Capital Structure”. Any redemption of these Securities
will occur at the sole discretion of the Board. It is recommended that investors who are
looking for short term returns from their investments not purchase the Securities
offered herein.
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Speculative Investment: The Securities being offered under this Offering Statement are
speculative and involve a high degree of risk. Investors may lose their investment.
Start‐up Venture: The Co‐operative is a start‐up venture. The Co‐operative currently
does not have any significant assets or other financial resources. The commencement of
construction of the Renewable Energy Facilities is dependent upon the Co‐operative
raising sufficient equity under this Offering Statement, obtaining Term Loans on
favourable terms and generating the revenues described in Section 4 under the heading
“Business Plan”.
Financial Projections: The Co‐operative has prepared income projections for the
Projects. These are attached as Appendix A hereto. These projections are based upon
assumptions and hypotheses which the Board of the Co‐operative believes to be
reasonable. There can be no assurance that these forecasts and projections will actually
be achieved. Actual results will vary, perhaps in a materially negative way, from these
forecasts and projections. The assumptions upon which these forecasts and projections
are based may change, whether due to circumstances beyond the control of the Co‐
operative or otherwise. The projections made should be viewed as estimates only.
Failure to Raise Sufficient Equity and Impact on Financing: Raising sufficient equity
from investors under this Offering Statement will be essential to providing prospective
lenders a minimum level of confidence required to provide financing to the Co‐
operative. In the event that the net proceeds received under this Offering Statement,
together with the other resources of the Co‐operative, are insufficient to meet the
expected equity requirements of the Project Portfolio, the cost of financing the Projects
may rise, or else the Co-operative may have to reduce the size of its Project Portfolio.
There can be no assurance given that raising even the maximum amount provided for
in this Offering Statement will give prospective lenders the confidence required to
provide financing to the Co-operative.
Cash Flow: The Co‐operative anticipates receiving positive cash flow over the life of the
Project Portfolio. However these projections are based on a number of assumptions, as
outlined in this Offering Statement. If any one or more of these assumptions are
incorrect, then the Co-operative may be unable to satisfy its cash flow requirements.
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This could jeopardize the solvency of the Co‐operative, or it could cause Projects to fail
in the Application process.
Availability of Debt Financing: No assurances can be given that any of the loan
facilities referred to under the headings “Business Plan: Project Costs and Financing”,
“Capital Expenses for Project Development” and “Capital Loans” will be advanced or
alternate financing obtained or, if capable of being obtained, will be obtained on
acceptable terms. If the loans or bridge financing are not obtained by the Co‐operative
on terms acceptable to the Co‐operative’s Board, Projects may not proceed. If the loans
are obtained but are subject to higher interest rates than those projected in Section 4
Business Plan and in Appendix A, then the revenues flowing to the Co‐operative from
the Projects will be reduced and the Co‐operative’s financial projections will not be
accurate.
Priority of Lenders: The net proceeds from the Securities offered herein will be utilized
to capitalize the Co‐operative, which will in turn use this capital for the development of
Renewable Energy Facilities to produce electricity and for other purposes described
herein. These proceeds will be subordinate to any funds received from secured term
and/or working capital lenders and all other secured creditors of the Co‐operative, who
will rank in priority to all Bondholders who will in turn rank in priority to all
Shareholders. Any such secured lenders and creditors will have priority with respect to
the payment of interest and principal and secured lenders and creditors will hold a
secured position over all of the assets of the Co‐operative in priority to its Bondholders
and Shareholders. It is anticipated these secured lenders will place certain conditions
and restrictions upon the Co‐operative’s ability to make distributions to, or redeem the
Securities of, its Bondholders and Shareholders. These conditions could require the Co‐
operative to allocate all or part of any excess cash flow generated by the Co‐operative’s
operations to the pre‐payment of its indebtedness, thereby eliminating or reducing the
amount of cash that could otherwise be available for payment to Bondholders or
distribution to Shareholders. The ability of the Co-operative to pay interest on or
redeem Bonds, or pay dividends on or redeem Shares, will depend both on the success
of the Co‐operative and its Projects and on the terms and conditions imposed by the Co‐
operative’s lenders.
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Lease Agreement Risk: The Co‐operative and the Joint Ventures in which the Co-
operative holds an interest are parties to a number of executed Lease Agreements. Lease
Agreements under most Joint Ventures in which the Co‐operative holds an Economic
Interest will be negotiated on a Property Owner by Property Owner basis and the final
form of Lease Agreement to be entered into with each Property Owner could vary,
perhaps materially, from one another, and from the summary of the terms of the Lease
Agreement as described in Section 3.8. It is also envisioned that many Property Owner’s
properties will be subject to a mortgage or mortgages. If a Property Owner’s property
were sold under power of sale or were foreclosed upon, then such proceedings may
terminate the Lease Agreement prematurely. The Co‐operative shall seek to ensure that
a non-disturbance clause is included in each Lease Agreement to ensure that any
mortgagee must permit the Co‐operative to remain in possession in the event that a
Property Owner’s property is sold under power of sale or foreclosed upon. However,
Property Owners and/or mortgagees may be unwilling to enter into such non‐
disturbance agreements. The Co-operative may nevertheless elect to proceed with
Projects under such a risk.
Insufficient Capital: While the Co‐operative presently believes that any amount over
and above the minimum Two Million Five Hundred Thousand dollars ($2,500,000) to be
raised by the Co-operative will be sufficient capital to proceed with one or more
Facilities, a combination of factors such as, for example, price increases for the purchase
of Renewable Energy equipment, inability to obtain this equipment when contemplated
due to short supply, inability to obtain financing, or the cost to comply with regulatory
requirements, could result in the minimum Two Million Five Hundred Thousand
dollars ($2,500,000) or even a greater amount being an insufficient amount of capital,
which could ultimately result in the number of Facilities being insufficient to maintain
positive cash flows for the Co‐operative to cover its operating costs.
Failure of Equipment: The Solar PV and other Renewable Energy equipment the
Cooperative intends to install is expected to be low maintenance and trouble free. Solar
panels are typically covered by warranty for Five (5) years against manufacturer’s
defect and Twenty (20) to Twenty-Five (25) years for the performance of the Solar Panel.
Inverters are expected to be covered by a minimum warranty for Seven (7) years with
DC optimizers warranted for Twenty (20) years. The dual-axis tracker systems
typically carry a Two (2) year warranty that is extendable. Should issues with the solar
panels, inverters and/or trackers develop, there could be a loss of energy production
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and associated revenues for the period of time that a failure occurs. This loss may not be
covered by warranty or insurance, which may lower the Co‐operative’s profitability.
The Co‐operative shall seek to remedy this through insurance, but such insurance may
not be available, may, in the Co-operative’s discretion, be cost-prohibitive to obtain or
may not provide coverage in all circumstances.
Availability of Solar Panels that meet Ontario content requirements: Because of the
limited number of manufacturers of solar panels in Ontario, there could be difficulties
in acquiring solar panels or other equipment that meet the so-called “Domestic
Content” requirements under the FIT Contract. As a result the Co-operative’s Projects
may be unable to have the panels of choice delivered for installation according to the
Project construction schedule. If the solar panel delivery time is delayed from the
schedule, the revenue stream to the Co-operative could be negatively impacted.
Non‐completion and contingent liabilities: Should the Co‐operative not be successful
in raising the required capital from the sale of Securities, the Co‐operative may be
unable to complete the Facilities as described in Section 4. In the process of developing
a Project the Co‐operative may accumulate liabilities for which it will be responsible
even if the Project does not reach Commercial Operation. These liabilities could include,
without limitation, debts owed to Joint Venture Partners under the Joint Venture
agreements, or monies owing to third parties for services rendered to the Joint
Ventures. Due to the time constraints of the FIT Program, it may be necessary for the
Co-operative to take actions or commit funds, or take on liabilities, under circumstances
in which full due diligence has not been conducted. There is a risk that one or more
Projects may be abandoned or may fail to reach Commercial Operation even after
considerable funds have been spent on that Project(s), and this could impact on the
profitability of the Co‐operative.
Structural Damage upon installation: It is the intention of the Co‐operative to ensure
that the Joint Ventures maintain insurance that would cover any damage caused during
the installation of Projects. Additionally, the Co‐operative intends that all contractors
hired to perform the installation work will be required to have appropriate insurance in
place. Nevertheless, the cost of the Facilities could increase if damage occurs during
installation where the cost to repair the damage is higher than the amount that will be
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covered by insurance. This would have a negative impact on the profitability of the Co‐
operative, as would any increase in insurance costs owing to insurance claims made.
Timing: The timeline for the development of the Portfolio is subject to the Co‐operative
being able to receive the FIT Contracts contemplated. There may be a negative impact
on the profitability of the Co‐operative if the FIT Contracts are not executed in the time
contemplated, or if the Co‐operative misses certain deadlines as set out in the FIT Rules
and the FIT Contract. While the Co‐operative intends to make every effort to meet the
timing requirements under the FIT Program, if deadlines are missed by the Co‐
operative or its Joint Venture Partners this may cause contracts to go into default and
thereby result in the forfeiture of security deposits. The development and contract
management of the Co‐operative’s Projects will be conducted by the Co‐operative in co‐
ordination with Joint Venture Partners. This is expected to mitigate the risk of missing
deadlines, but the Co‐operative cannot guarantee that deadlines will not be missed.
Political Risk: The viability of the Co‐operative’s current plans to generate Renewable
Energy depends, in large measure, upon the continuation of the FIT Program. Changes
to Government policies, legislation or regulation, including the cancellation or
modification of the FIT Program, whether resulting in changes owing to a change in the
persons or parties in positions of leadership or otherwise, could have a negative impact
on the Co‐operative’s operations.
Regulatory Approval and Permits: The Co‐operative has outlined its expectations
based on the existing rules and regulatory requirements of the existing FIT Program. If
the FIT Rules and Regulations change, this may impose additional costs to the Co‐
operative not contemplated in the Co-operative’s current Business Plan.
Feed‐In Tariff Program: The Government of Ontario can amend the FIT Program at any
time. There is no guarantee that amended terms of the FIT Program will be viewed by
the Co‐operative to be as favourable as the current terms of the FIT Program. The
Government of Ontario can also suspend the FIT Program at any time. It is presumed,
but cannot be guaranteed, that any contract for a Project under the FIT Program signed
prior to its suspension will be honoured and the Co‐operative will complete the
installation and connection under the terms of the FIT Program prior to such a
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suspension. The OPA is required under the Green Energy and Green Economy Act to
review and amend FIT Program rates periodically to reflect changes in Renewable
Energy equipment costs. The Co‐operative is making a number of assumptions on how
the Government of Ontario and OPA will proceed with the FIT Program, but rates and
contracts are ultimately beyond the control of the Co‐operative.
Contract Risk: The Co-operative has endeavoured to comply with the FIT Rules and
the FIT Contracts and continues to do so. Where CED Co-op finds the FIT Rules and
FIT Contracts appear to be unclear, the Co-operative has sought interpretation advice
from the OPA as well as legal advice to confirm interpretations of the FIT Rules and FIT
Contracts. The OPA is the primary authority on the interpretation and application of
the FIT Rules and deemed compliance with the FIT Contract, and it is possible that the
OPA may interpret and apply rules and contract clauses differently than the FIT Rules
and FIT Contracts were understood and executed upon by the Co-operative. Further,
the FIT Contract contains a number of clauses which generally favour the OPA over the
Supplier. The FIT Contract also specifies a large number of factors (in the FIT Contract
the “events of default”) that may be outside of the Co‐operative’s control such as a
reduction in the number of Members as it relates to Community Investment Members
status. This may result in delays in completing Projects, unexpected periods of lost
revenue while achieving compliance or unexpected legal expenses in asserting the Co-
operative’s interpretation of the FIT Rules and FIT Contracts. Any event of default that
could not be remedied according to the terms of the FIT Contract could result in the
early termination of the FIT Contract at the option of the OPA, which would have a
detrimental impact on the Co-operative’s financial position. The Co‐operative is aware
of the grounds for termination in the FIT Contract and intends to carefully monitor its
Membership numbers and other factors to ensure ongoing compliance with the FIT
Contract, but cannot guarantee Membership numbers.
Community Investment Member Status: Some of the Projects that the Co-operative
intends to develop require Community Investment Member status (as outlined in the
Glossary of Terms and Section 3.3.1 Membership Requirements) as it relates to a
particular Project. If the Co-operative loses its status as a Community Investment
Member, through reductions in qualifying Memberships, or through other events, as it
relates to a specific Project, and the Co-operative can not either sell the Project to a
qualifying Community Investment Member or regain Community Investment Member
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status within a 6 month time period, the FIT Contract for that particular Project will be
considered in default and the FIT Contract will be at risk of termination.
Environmental Conditions: The Co‐operative does not have active knowledge of any
environmental concerns that could deter proceeding with the installation of the Project
Portfolio at this time. Environmental activity and sector registry processes have been
completed for the four ground mounted Projects under contract, and the Co-operative
anticipates that all future Projects will continue to meet environmental compliance
requirements. The FIT Program requires no environmental assessment for rooftop Solar
PV Facilities. However, there can be no assurances given that the OPA or other
Government bodies will not review or change the environmental requirements of
Projects constructed under the FIT Program.
Market for Securities: There is presently no market for the Securities being offered nor
is a market expected to develop. Purchasers may not be able to resell Securities
purchased pursuant to this Offering Statement. Transfers of all Securities require a valid
Offering Statement to be in effect as well as Board approval. Management will use its
best efforts to match buyers and sellers, but no guarantee is offered that holders of the
Securities will be able to sell them.
Technology Risk: Renewable Energy technology is in its early stages in the Province of
Ontario. It is anticipated this technology will evolve and improve rapidly and that
future technology will become more efficient and more reliable. It is further anticipated
that the technology available at the time of this Offering Statement and used as the basis
of the Business Plan will be, when compared to new technology, less efficient and may,
during the Twenty (20) year term of the FIT Contracts, become obsolete. With the
development of new technology, the maintenance and availability of replacement parts
may become more expensive.
No Sinking Fund or Reserve: No sinking fund or reserve has been established to
redeem the Securities of the Co-operative. It is the present intention of the Co‐operative
to redeem the Preference Shares and Bonds on a respective schedule outlined in Section
8: Description of Securities. However, there can be no guarantee this will be possible
for the Co-operative, whether under the Co-op Act or otherwise. Members are not
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entitled to demand the redemption of the Securities of the Co-operative. Any
redemption of these Securities will occur at the sole discretion of the Board of the Co-
operative.
Taxation: Financial Projections assume that Renewable Energy generation assets
owned by the Co‐operative are eligible for accelerated capital cost allowance under
Class 43.2 of the Tax Regulations. Together with other deductible expenses, it is
anticipated these provisions would limit the tax paid by the Co‐operative for the first
fifteen (15) years of operation. The Co‐operative’s Financial Projections are also based
on the Co-operative’s intention to elect to become a Public Corporation at which point
the Co-operative would cease to be able to claim the small business deduction that
results in a lower tax rate on the first five hundred thousand dollars ($500,000) of
taxable income. The current tax rate in effect for the income of a Public Corporation is
26.5% which is the tax rate has been used in Financial Projections. Corporate tax rates
have changed significantly over time, and it is expected this tax rate will change in the
future. It is also possible other tax provisions may be changed in the future and could
result in higher taxation for the Co-operative, thereby affecting the profitability of the
Co-operative.
Change in Dividend Policy: The Board is responsible to manage the business and
affairs of the Co‐operative. As described in Section 3: Description of the Business of
CED Co-op, the Board may at some future date elect to alter the Co‐operative’s
dividend policy, which could result in a smaller proportion of the profits of the Co‐
operative being received by Shareholders.
Future Prospects: As noted in Section 3: Description of the Business of CED Co-op,
there can be no guarantee the Co‐operative will be able to successfully acquire Project
Facilities. As noted in Section 4: Business Plan, there can be no guarantee that the Co-
operative will be able to take advantage of opportunities to participate in the FIT
Program beyond the current Projects. Furthermore, there is no guarantee that all of the
Co-operative’s current Applications referred to in Section 4.7 will be awarded FIT
Contracts.
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Adequate Level of Ownership: Although the Co‐operative has a short‐term goal of
acquiring direct ownership in 14 Projects, there can be no guarantee this level of
ownership will be achieved, or that if achieved it will be sufficient to enable the Co-
operative to generate profits and to repay investments, pay interest or pay dividends.
Support of Joint Venture Partners: As noted in Section 4: Projects - Current, if less than
the maximum Offering set forth in the Offering Statement is raised, it is expected that
Joint Venture Partners will be asked to finance the Co‐operative’s portion of Projects
until such time as the Co‐operative has the funds available to meet its obligations.
However, if the Joint Venture Partners are unwilling to cover the costs, it is possible that
the associated Project would be abandoned. Even if Joint Venture Partners are willing
to provide financing, the terms may not be acceptable to the Co‐operative or will be at
higher interest rates than contemplated, thereby impacting upon the Co-operative’s
profitability.
Reduced Number of Projects: The number of Projects undertaken by the Co‐operative
will depend in large measure upon the amount of equity raised through this Offering
Statement and the amount of financing obtained. While the Co‐operative believes that
Projects could proceed with obtaining the minimum amount of two million five
hundred thousand dollars ($2,500,000) set forth in this Offering Statement, the Co‐
operative believes that the greater amount of money raised through this Offering
Statement and Term Loans, the greater number of Projects the Co‐operative will be able
to pursue and the greater ability the Co-operative will have to pay interest on or redeem
Bonds, or to pay dividends on or redeem Shares.
Ability to Pay Dividends and Surplus: There can be no assurances the Co‐operative
will be able to pay dividends or distributions of Surplus according to the Business Plan
and as set forth in this Offering Statement. The payment of dividends and distributions
of Surplus will be in the discretion of the Board, who will assess the Co-operative’s
ability to pay and the Co-operative’s financial position and needs at such time.
Performance of Third Parties: The Co‐operative’s financial performance is, to some
degree, dependent upon the performance of its Joint Venture Partners. It is possible that
the unprofitability and/or insolvency of Joint Venture Partners could negatively impact
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upon the Co‐operative and its financial results. It is also possible that Joint Venture
Partners may be unable to meet their financial obligations toward the Projects, which
could put the Projects at risk.
No Escrow Agreement. No Escrow Agreement as referred to in Section 6 hereof has
been entered into. There can be no guarantee the Escrow Agent will sign an Escrow
Agreement, nor can there be any guarantee the Escrow Agreement ultimately entered
into will contain the contemplated terms set forth in this Offering Statement. There may
be delays in choosing the Escrow Agent, which could impact the Co‐operative’s
profitability. An Escrow Agreement containing more onerous terms than those
presently contemplated could also impact upon the Co‐operative’s profitability.
Agreements Not Finalized. There are a number of agreements that CED Co-op will be
entering into through the course of business, including but not limited to agreements of
purchase and sale, project development agreements, management agreements, land and
building lease agreements, operations and maintenance agreements, warranty and
service agreements. Some assumptions regarding the terms and conditions that are
anticipated to be contained in these agreements have been included in this Offering
Statement. There can be no guarantee that these agreements will ultimately be entered
into, nor can there be any guarantee that the agreements will contain the contemplated
terms set forth in this Offering Statement. There may be delays in negotiating and
signing agreements, which could impact the Co‐operative’s profitability. Agreements
containing more onerous terms than those presently contemplated could also impact
upon the Co‐operative’s profitability.
Assumptions and the FIT Program: The fact that the Co‐operative is making a number
of assumptions on how the OPA will proceed in the future with the FIT Program is
ultimately beyond the control of the Co‐operative. Assumptions that ultimately prove
to be incorrect may have a negative impact on the Co‐operative’s profitability.
Profitability and Solvency: There is no certainty the Co‐operative will be profitable and
able to pay interest on or redeem Bonds, pay dividends on or redeem or repurchase
Shares of the Co‐operative, nor is there any certainty the Co-operative will be viable and
solvent. In addition, there can be no guarantee the Co-operative will be able to meet the
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solvency test mandated by the Co-op Act when a request is made by a Shareholder to
redeem their Shares or when Membership ceases.
Unknown Risk Factors: The Co‐operative may also be subject to Risk Factors that are
currently unknown, and which could potentially affect its profitability and solvency.
These Risk Factors could include, but not be limited to, failure to comply with
governing statutes, increased competition and other factors that limit the Co‐operative’s
future growth and investment prospects. While the Board does not view these Risk
Factors as of an immediate concern, potential adverse changes in these areas may limit
the Co‐operative's solvency and/or its ability to pay interest on or redeem Bonds, or
pay dividends on or redeem Shares.
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6. USE OF PROCEEDS OF THE OFFERING
The purpose of the Offering is to finance the development and acquisition of the Co‐
operative’s Renewable Energy Projects. Potential purchasers should carefully review
the net amount to be raised by this Offering and should consider whether this amount
is sufficient to meet the objectives of this Offering and the plans as expressed by the Co‐
operative.
6.1 USE OF FUNDS IF THE MAXIMUM AMOUNT IS RAISED
The Co‐operative plans to raise up to a maximum of $12 million through the sale of
Class A Preference Shares and Bonds to Members and Non-Members. The funds raised
through the Term Loans offered to institutional lenders are not included in this figure.
These funds are intended to enable the development of the fourteen Projects under
contract and to pursue opportunities to develop future Projects.
Of the $12 million, the amount of funds required to pay all expenses up to and
including the completion of financing, the acquisition or development of the Co-
operative’s share of the fourteen Projects under contract and the funding of the reserve
accounts is expected to be approximately $8.7 million. The Pro Forma Financial
Projections found in Appendix A have been based on raising this amount of investment.
The remaining $3.3 million that would be received by the Co-operative in raising the
maximum would be used for activities including:
Capital expenses for the construction of up to 15 Projects that are in the
Application phase of version 3.0 of the FIT Program as described in Section 4.7:
Projects-Future, the Co-operative’s portion of which are estimated to be $1.8
million. The progress of developing these future Projects will include:
o Submitting requisite security payments and deposits for future Projects to
the OPA;
o Paying fees related to the design and engineering of future Projects
o Paying fees and deposits for Connection Impact Assessments and
securing connection capacity on future Projects;
o Fees and expenses related to long‐term debt financing for future Projects;
o Progress payments for the construction of the future Projects
Providing for the potential acquisition of or investment in Project Facilities;
Providing for the investigation of additional future Project opportunities
including the costs associated with preparing and submitting further Application
submissions; and
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Other costs as determined by the Board of the Co‐operative as being requisite or
prudent with regard to enabling the timely development of the Projects or to
further the interests of the Co-operative.
It is expected that the proceeds of this Offering will be used to develop Projects in the
geographic regions of South‐Western Ontario, Greater Sudbury and the District of
Algoma. The fourteen current Projects are located in the District of Algoma, the
Municipality of Waterloo and Greater Sudbury. Remaining Applications are for
Projects located in the Regional Municipality of Waterloo, the City of Guelph and
Greater Sudbury. It is presently anticipated that future Projects will be located in these
areas and possibly elsewhere in Ontario.
6.2 USE OF FUNDS IF THE MINIMUM AMOUNT IS RAISED
The minimum amount of funds that are to be raised through the sale of Preference
Shares and Bonds in order to release funds from escrow is $2.5 million. This amount
does not include funds that are raised through the sale of Membership Shares, the sale
of Unsecured Convertible Debentures, the Class A Preference Shares as converted from
Unsecured Convertible Debentures, or Term Loans. Should CED Co-op only raise this
minimum amount, the funds would be used to complete the construction and
acquisition of the Solvation-F Project as follows:
Minimum Raise - Budget of Expenditures
$265,000 Financing and Due Diligence Expenses
$190,000 Funding of debt reserves and maintenance reserves
$1,741,250 35% Equity in $4,975,000 Acquisition of Solvation-F
$250,000 Funds for Other Project and Contract Development
$53,750 Working Capital for operating expenses
$2,500,000 Total
CED Co-op currently has accounts payable (net of HST refunds) of $292,748. Of this
amount, $97,694 relates to project development expenses for the 62 Janti Rd-Cyr project.
It is expected that this amount will be paid from the $250,000 portion allocated to
“Other Project and Contract Development” of the minimum raise budget outlined
above. It will be important to fund the minimum necessary expenses for any FIT
Contracts received so that, should CED Co-op be unable to raise the funds to construct
and own the Projects, the associated FIT Contracts could potentially be sold to alternate
co-operatives and some value could be realized from sale of those FIT Contracts.
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Additional operating expenses of approximately $75,000 are anticipated to be incurred
to operate the Co-operative, complete the Offering Statement and perform fundraising
activities prior to the completion of the first Project. The breakdown of the expected
remaining costs that total $75,000 (net of HST) is as follows:
CED Co-op Operating Expense to First Project Commercial Operation
$ 20,000 Legal and Escrow
$ 12,000 Accounting
$ 8,000 Back-Office services - TREC
$ 6,000 Insurance
$ 9,000 Marketing
$ 8,000 Travel and expenses - investor meetings
$ 12,000 Office and Admin
$ 75,000 Total
The remaining $195,054 of accounts payable excluding the 62 Janti Rd-Cyr Project,
along with the anticipated remaining expenses of $75,000, totaling approximately
$270,000, will be paid from the funds raised through the sale of Membership Shares and
Unsecured Convertible Debentures. A breakdown of the $305,268 of expenditures that
have occurred up to September 30, 2014 is included with the interim financials as
Appendix C.
The expenses outlined above include some expenses that would be considered deferred
expenses, and therefore not all of the expenses above are shown in the Pro Forma
Financial Projections attached as Appendix A. If sufficient funds to pay these expenses
are not raised through the sale of Membership Shares and Unsecured Convertible
Debentures, it is expected that the Co-operative will continue to carry accounts payable
until further funds can be raised through the continued sale of Securities under Offering
Statement exemptions, or from the revenues of the Projects. It is expected that the
payables owed to VCT would be paid as the lowest priority payable in this situation.
First year revenues of approximately $640,000 are expected from the Solvation-F Project.
This is expected to be a sufficient amount to properly operate and maintain the Project,
meet debt obligations, and provide the funds necessary to develop a subsequent
operating plan. The development of a new operating plan may involve selling the
Project in order to pay back investors, raising alternate financing for further Project
development or to reduce the average cost of capital for the Co-operative, developing a
new marketing plan and a new Offering Statement to pursue other Projects, merging
with another co-operative, or other strategic directions.
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Should CED Co-op only raise the $2.5 million minimum, it is expected that the
Shareholders of CED Co-op would not receive dividend payments nor would the
repurchase of Preference Shares occur until a new operating plan is developed and
achieved that allows for such payments.
If any amount between the $2.5 million minimum and the $8.7 million required to
complete the fourteen Projects under FIT Contracts is raised, CED Co-op will next
prioritize ownership in the Solvation-V Project followed by Solvation-VF, 62 Janti Rd-
Cyr, and then the 10 FIT Contracts received under version 3 of the FIT Rules. As
mentioned previously, the Solvation-V and Solvation-VF Projects are open for partial
ownership by CED Co-op.
6.3 ESCROW AGREEMENT
CED Co-op is intending to work with Concentra Trust as the Escrow Agent for the Co-
operative. The Escrow Agreement prescribes the terms and conditions whereby
proceeds from the subscriptions for Class A Preference Shares, Bond Series L1-4 and
Bond Series M1-5 will be held by the Escrow Agent, in trust, and ultimately released
from escrow upon release of certain conditions. It is anticipated that the Escrow
Agreement will be substantially in the form disclosed in Appendix E of this Offering
Statement.
The subscription proceeds for Class A Preference Shares will be deposited with the
Escrow Agent and held in trust subject to satisfaction of the Release Conditions set forth
below. If CED Co-op fails to secure committed subscriptions for a minimum of
$2,500,000 of Class A Preference Shares, Bond Series L1-4 and Bond Series M1-5, all
subscription proceeds deposited with the Escrow Agent will be returned to subscribers.
The Escrow Agent will prepare a register setting forth each respective subscriber’s
details and the amount of the subscription proceeds deposited with the Escrow Agent.
Release of Funds from Escrow – Conditions Precedent:
The subscription proceeds from subscriptions for Class A Preference Shares, Bond
Series L1-4 and Bond Series M1-5 shall be released from escrow upon satisfaction of all
of the following conditions precedent:
(a) Confirmation that the Co-operative has received and accepted Applications for
Class A Preference Shares, Bond Series L1-4 and Bond Series M1-5 from Members, and
that the funds for all such Applications have been received by the Co-operative;
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(b) The Co-operative having obtained at least one (1) FIT Contract from the Ontario
Power Authority; and
(c) The Co-operative having received Applications for Class A Preference Shares,
Bond Series L1-4 and Bond Series M1-5 in the minimum aggregate amount of
$2,500,000, and that the funds for all such Securities have been received by the Escrow
Agent.
CED Co-op shall have confirmed to the Escrow Agent in writing that it has satisfied
conditions (a), (b) and (c) above and provided the Escrow Agent with written direction
specifying the details for the delivery of subscription funds to CED Co-op. The
subscription proceeds will be used by CED Co-op for the purposes set out in this
Offering Statement.
It is anticipated the escrow account will be in use for up to six (6) months. However the
amount of money and the time the money will be in this escrow account will depend
upon the success of the marketing plan to encourage members to invest the minimum
of $2,500,000 of Class A Preference Shares, Bond Series L1-4 and Bond Series M1-5, and
the time taken to meet the conditions precedent.
The Escrow Agent shall not at any time deliver any subscription funds received by it to
the Co-operative until the above conditions precedent are met.
At this time, both Concentra Trust and the Board have approved the Escrow Agreement
in draft, it is anticipated that the Escrow Agreement will be signed in its current form
and Concentra Trust engaged as the Escrow Agent once this Offering Statement has
been receipted.
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7. CAPITAL STRUCTURE
7.1 AUTHORIZED CAPITAL
The total authorized capital of the Co-operative is limited to the sum of One Hundred
and Fifty-One Million Dollars ($151,000,000.00), divided into:
(i) One Hundred Thousand (100,000) Membership shares with a par value of Ten
Dollars ($10.00) each, for a total aggregate amount of One Million Dollars
($1,000,000.00);
(ii) Ten Million (10,000,000) Class A Preference shares with a par value of Five
Dollars ($5.00) each, for a total aggregate amount of Fifty Million Dollars
($50,000,000.00);
(iii) Ten Million (10,000,000) Class B Preference shares with a par value of Five
Dollars ($5.00) each, for a total aggregate amount of Fifty Million Dollars
($50,000,000.00); and
(iii) Ten Million (10,000,000) Class C Preference shares with a par value of Five
Dollars ($5.00) each, for a total aggregate amount of Fifty Million Dollars
($50,000,000.00).
CED Co-op’s capital structure as of September 30, 2014 is as follows:
Issued Shares
323 Membership Shares $3,230
Total Member’s Equity and Share Investment $3,230
7.2 MATERIAL ATTRIBUTES OF AUTHORIZED CAPITAL
7.2.1. MEMBERSHIP SHARES
Holders of Membership shares are entitled to attend and vote at all meetings of the Co-
operative and, subject always to the prior rights of the holders of Class A Preference
shares, Class B Preference shares and Class C Preference shares, to receive dividends on
Membership shares as may be declared from time to time at the sole discretion of the
Board of Directors of the Co-operative.
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7.2.2. CLASS A PREFERENCE SHARES
Dividends:
A holder of Class A Preference Shares shall be entitled to receive and the Co-operative
shall pay thereon, as and when declared by the Board of Directors of the Co-operative
out of the assets of the Co-operative properly applicable to the payment of dividends,
non-cumulative cash dividends at a rate fixed and determined by the Board of Directors
of the Co-operative. For greater certainty, dividends on the Class B Preference Shares
and Class C Preference Shares may, in the discretion of the Board of Directors of the Co-
operative, be paid independently of and in priority to the Class A Preference Shares of
the Co-operative or the Board of Directors of the Co-operative may resolve that holders
of the Class A Preference Shares shall receive dividends independently of and in
priority to the holders of one or more of the Class B Preference Shares and Class C
Preference Shares of the Co-operative, but always in priority to the Membership shares
of the Co-operative. Dividends on the Class A Preference Shares shall be calculated
annually and shall accrue from the date of issue of the said Shares. In the event that the
Board of Directors of the Co-operative should not declare a dividend on the Class A
Preference Shares within one hundred and eighty (180) days following the close of the
fiscal year of the Co-operative, the right of Class A Preference Shareholders to a
dividend for that fiscal year shall be forever extinguished.
Voting Rights:
The holders of Class A Preference Shares shall be entitled to receive notice of and attend
all meetings of members of the Co-operative, but shall not be entitled to vote thereat.
Subject to the Co-op Act, Class A Preference Shareholders shall be entitled to vote at all
meetings of Class A Preference Shareholders called for the purpose of amending any of
the preferences, rights, conditions, restrictions, limitations or prohibitions attaching to
the said class of Shares, and at such meetings each Shareholder shall be entitled to cast
one vote for each Class A Preference Share held.
Amendment of Share Provisions:
Any amendment to the Co-operative’s articles or to the provisions of the Class A
Preference shares, the effect of which is to delete or vary any preference, right,
condition, restriction, limitation or prohibition attaching to the Class A Preference
shares, or to create a class of Preference shares ranking in priority to or on a parity with
the Class A Preference shares, or to increase the number of Class A Preference shares
authorized to be issued, may be confirmed by at least two-thirds of the votes cast at a
meeting of the Class A Preference shareholders duly called for that purpose.
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Redemption:
The Co-operative may at any time, and from time to time, redeem, without the consent
of the Class A Preference shareholders, the whole or any part of the issued and
outstanding Class A Preference shares upon payment of the par value thereof, together
with any dividends declared but unpaid (in this section 7.2.2, the "Redemption Price").
Notice of Redemption:
Unless all the holders of the Class A Preference Shares to be redeemed shall have
waived notice of such redemption, the Co-operative shall give not less than thirty (30)
days' notice in writing of such redemption by mailing to each person, who at the date of
mailing is a registered holder of the Class A Preference Shares to be redeemed, a notice
in writing of the intention of the Co-operative to redeem such Class A Preference
Shares. Such notice shall be mailed in a prepaid envelope addressed to each
Shareholder at his or her address as it appears on the books of the Co-operative or, in
the event of the address of any such Shareholder not so appearing, then to the last
known address of such Shareholder, provided however, that accidental failure or
omission to give any such notice to one or more of such holders shall not affect the
validity of such redemption. Such notice shall set out the Redemption Price of the
Shares to be redeemed and the date on which redemption is to take place and, if part
only of the Class A Preference Shares held by the person to whom notice is given is to
be redeemed, the number of such Shares to be redeemed.
Redemption Procedure:
On or after the date so specified for redemption in such notice, the Co-operative shall
pay or cause to be paid to, or to the order of, the registered holders of the Class A
Preference Shares to be redeemed, the Redemption Price of such Shares on presentation
and surrender, at the registered office of the Co-operative or any other place designated
in such notice, of the certificates representing the Shares so called for redemption. Such
payment shall be made by cheque payable at any branch in Canada of one of the Co-
operative's bankers at that time.
Partial Redemption:
In case a part only of the Class A Preference Shares is at any time to be redeemed, the
Shares so to be redeemed shall be redeemed as nearly as may be in proportion to the
number of Class A Preference Shares that are registered in the name of each holder of
Class A Preference Shares or in such other manner as the Board of Directors shall
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determine with the consent of the holders of the Class A Preference Shares in
accordance with the Co-op Act.
Cessation of Rights:
From and after the date specified for redemption in any such notice, the Class A
Preference Shares called for redemption shall cease to be entitled to dividends, and the
holders thereof shall not be entitled to exercise any of the rights of Shareholders in
respect thereof, unless payment of the Redemption Price of the Class A Preference
Shares is not made upon presentation of the Share certificates in accordance with the
foregoing provisions, in which case the rights of the holders shall remain unaffected.
Deposit of Redemption Price:
The Co-operative shall have the right, at any time after the mailing of notice of its
intention to redeem any shares, to deposit the Redemption Price of the Class A
Preference Shares so called for redemption or of such of the said Shares represented by
certificates which have not at the date of such deposit been surrendered by the holders
thereof in connection with any such redemption, in a special account at any chartered
bank, trust company, credit union, or caisse populaire in Canada named in such notice,
to be paid without interest to or to the order of the respective holders of such Shares
called for redemption upon presentation and surrender to such bank, trust company,
credit union or caisse populaire of the certificates representing the said Shares and, on
such deposit being made or upon the date specified for redemption in such notice,
whichever is the later, the Class A Preference Shares in respect of which such deposit
shall have been made shall be redeemed and the holders thereof after such deposit or
such redemption date, as the case may be, shall be limited to receiving without interest
their proportionate part of the total Redemption Price of the Class A Preference Shares
so deposited, against presentation and surrender of the said certificates held by them
respectively, and interest allowed on any such deposit shall belong to the Co-operative.
No Redemption of Shares upon Withdrawal from Membership:
Class A Preference Shareholders are not entitled to demand the redemption of such
Shares upon their withdrawal from membership in the Co-operative, and the Co-
operative is not under any obligation to redeem such Shares upon a member's
withdrawal from membership.
Dissolution:
In the event of the liquidation, dissolution, or winding-up of the Co-operative, whether
voluntary or involuntary, the holders of Class A Preference Shares shall be entitled to
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receive, before any distribution of any part of the assets of the Co-operative among the
holders of Class B Preference Shares, Class C Preference shares and Membership shares,
their par value of Five Dollars ($5.00) for each Class A Preference Share, plus an amount
equal to any dividends declared but not paid. Upon payment of the above amount, the
holders of Class A Preference Shares shall not be entitled to any further share in the
distribution of the property or assets of the Co-operative.
7.2.3. CLASS B PREFERENCE SHARES
Dividends:
A holder of Class B Preference Shares shall be entitled to receive and the Co-operative
shall pay thereon, as and when declared by the Board of Directors of the Co-operative
out of the assets of the Co-operative properly applicable to the payment of dividends,
non-cumulative cash dividends at a rate fixed and determined by the Board of Directors
of the Co-operative. For greater certainty, dividends on the Class A Preference Shares
and Class C Preference Shares may, in the discretion of the Board of Directors of the Co-
operative, be paid independently of and in priority to the Class B Preference Shares of
the Co-operative or the Board of Directors of the Co-operative may resolve that holders
of the Class B Preference Shares shall receive dividends independently of and in
priority to the holders of one or more of the Class A Preference Shares and Class C
Preference Shares of the Co-operative, but always in priority to the Membership Shares
of the Co-operative. Dividends on the Class B Preference Shares shall be calculated
annually and shall accrue from the date of issue of the said Shares. In the event that the
Board of Directors of the Co-operative should not declare a dividend on the Class B
Preference Shares within one hundred and eighty (180) days following the close of the
fiscal year of the Co-operative, the right of Class B Preference Shareholders to a
dividend for that fiscal year shall be forever extinguished.
Voting Rights:
The holders of Class B Preference Shares shall be entitled to receive notice of and attend
all meetings of members of the Co-operative, but shall not be entitled to vote thereat.
Subject to the Co-op Act, Class B Preference Shareholders shall be entitled to vote at all
meetings of Class B Preference Shareholders called for the purpose of amending any of
the preferences, rights, conditions, restrictions, limitations or prohibitions attaching to
the said class of Shares, and at such meetings each Shareholder shall be entitled to cast
one vote for each Class B Preference Share held.
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Amendment of Share Provisions:
Any amendment to the Co-operative’s articles or to the provisions of the Class B
Preference Shares, the effect of which is to delete or vary any preference, right,
condition, restriction, limitation or prohibition attaching to the Class B Preference
Shares, or to create a class of Preference Shares ranking in priority to or on a parity with
the Class B Preference Shares, or to increase the number of Class B Preference Shares
authorized to be issued, may be confirmed by at least two-thirds of the votes cast at a
meeting of the Class B Preference Shareholders duly called for that purpose.
Redemption:
The Co-operative may at any time, and from time to time, redeem, without the consent
of the Class B Preference Shareholders, the whole or any part of the issued and
outstanding Class B Preference Shares upon payment of the par value thereof, together
with any dividends declared but unpaid (in this Section 7.2.3 the "Redemption Price").
Notice of Redemption:
Unless all the holders of the Class B Preference Shares to be redeemed shall have
waived notice of such redemption, the Co-operative shall give not less than thirty (30)
days' notice in writing of such redemption by mailing to each person, who at the date of
mailing is a registered holder of the Class B Preference Shares to be redeemed, a notice
in writing of the intention of the Co-operative to redeem such Class B Preference Shares.
Such notice shall be mailed in a prepaid envelope addressed to each Shareholder at his
or her address as it appears on the books of the Co-operative or, in the event of the
address of any such Shareholder not so appearing, then to the last known address of
such Shareholder, provided however, that accidental failure or omission to give any
such notice to one or more of such holders shall not affect the validity of such
redemption. Such notice shall set out the Redemption Price of the Shares to be
redeemed and the date on which redemption is to take place and, if part only of the
Class B Preference Shares held by the person to whom notice is given is to be redeemed,
the number of such Shares to be redeemed.
Redemption Procedure:
On or after the date so specified for redemption in such notice, the Co-operative shall
pay or cause to be paid to, or to the order of, the registered holders of the Class B
Preference Shares to be redeemed, the Redemption Price of such Shares on presentation
and surrender, at the registered office of the Co-operative or any other place designated
in such notice, of the certificates representing the Shares so called for redemption. Such
Page | 97
payment shall be made by cheque payable at any branch in Canada of one of the Co-
operative's bankers at that time.
Partial Redemption:
In case a part only of the Class B Preference Shares is at any time to be redeemed, the
Shares so to be redeemed shall be redeemed as nearly as may be in proportion to the
number of Class B Preference Shares that are registered in the name of each holder of
Class B Preference Shares or in such other manner as the Board of Directors shall
determine with the consent of the holders of the Class B Preference Shares in
accordance with the Co-op Act.
Cessation of Rights:
From and after the date specified for redemption in any such notice, the Class B
Preference Shares called for redemption shall cease to be entitled to dividends, and the
holders thereof shall not be entitled to exercise any of the rights of Shareholders in
respect thereof, unless payment of the Redemption Price of the Class B Preference
Shares is not made upon presentation of the Share certificates in accordance with the
foregoing provisions, in which case the rights of the holders shall remain unaffected.
Deposit of Redemption Price:
The Co-operative shall have the right, at any time after the mailing of notice of its
intention to redeem any Shares, to deposit the Redemption Price of the Class B
Preference Shares so called for redemption or of such of the said Shares represented by
certificates which have not at the date of such deposit been surrendered by the holders
thereof in connection with any such redemption, in a special account at any chartered
bank, trust company, credit union, or caisse populaire in Canada named in such notice,
to be paid without interest to or to the order of the respective holders of such Shares
called for redemption upon presentation and surrender to such bank, trust company,
credit union or caisse populaire of the certificates representing the said Shares and, on
such deposit being made or upon the date specified for redemption in such notice,
whichever is the later, the Class B Preference Shares in respect of which such deposit
shall have been made shall be redeemed and the holders thereof after such deposit or
such redemption date, as the case may be, shall be limited to receiving without interest
their proportionate part of the total Redemption Price of the Class B Preference Shares
so deposited, against presentation and surrender of the said certificates held by them
respectively, and interest allowed on any such deposit shall belong to the Co-operative.
No Redemption of Shares upon Withdrawal from Membership:
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Class B Preference Shareholders are not entitled to demand the redemption of such
Shares upon their withdrawal from membership in the Co-operative, and the Co-
operative is not under any obligation to redeem such Shares upon a member's
withdrawal from membership.
Dissolution:
In the event of the liquidation, dissolution, or winding-up of the Co-operative, whether
voluntary or involuntary, the holders of Class B Preference Shares shall be entitled to
receive, subject to the prior rights of the holders of the Class A Preference Shares, but
before any distribution of any part of the assets of the Co-operative among the holders
of Class C Preference Shares and Membership Shares, their par value of Five Dollars
($5.00) for each Class B Preference Share, plus an amount equal to any dividends
declared but not paid. Upon payment of the above amount, the holders of Class B
Preference Shares shall not be entitled to any further Share in the distribution of the
property or assets of the Co-operative.
7.2.4. CLASS C PREFERENCE SHARES
Dividends:
A holder of Class C Preference Shares shall be entitled to receive and the Co-operative
shall pay thereon, as and when declared by the Board of Directors of the Co-operative
out of the assets of the Co-operative properly applicable to the payment of dividends,
non-cumulative cash dividends at a rate fixed and determined by the Board of Directors
of the Co-operative. For greater certainty, dividends on the Class A Preference Shares
and Class B Preference Shares may, in the discretion of the Board of Directors of the Co-
operative, be paid independently of and in priority to the Class C Preference Shares of
the Co-operative or the Board of Directors of the Co-operative may resolve that holders
of the Class C Preference Shares shall receive dividends independently of and in
priority to the holders of one or more of the Class A Preference Shares and Class B
Preference Shares of the Co-operative, but always in priority to the Membership Shares
of the Co-operative. Dividends on the Class C Preference Shares shall be calculated
annually and shall accrue from the date of issue of the said Shares. In the event that the
Board of Directors of the Co-operative should not declare a dividend on the Class C
Preference Shares within one hundred and eighty (180) days following the close of the
fiscal year of the Co-operative, the right of Class C Preference Shareholders to a
dividend for that fiscal year shall be forever extinguished.
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Voting Rights:
The holders of Class C Preference Shares shall be entitled to receive notice of and attend
all meetings of members of the Co-operative, but shall not be entitled to vote thereat.
Subject to the Co-op Act, Class C Preference Shareholders shall be entitled to vote at all
meetings of Class C Preference Shareholders called for the purpose of amending any of
the preferences, rights, conditions, restrictions, limitations or prohibitions attaching to
the said class of Shares, and at such meetings each Shareholder shall be entitled to cast
one vote for each Class C Preference Share held.
Amendment of Share Provisions:
Any amendment to the Co-operative’s articles or to the provisions of the Class C
Preference Shares, the effect of which is to delete or vary any preference, right,
condition, restriction, limitation or prohibition attaching to the Class C Preference
Shares, or to create a class of Preference Shares ranking in priority to or on a parity with
the Class C Preference Shares, or to increase the number of Class C Preference Shares
authorized to be issued, may be confirmed by at least two-thirds of the votes cast at a
meeting of the Class C Preference Shareholders duly called for that purpose.
Redemption:
The Co-operative may at any time, and from time to time, redeem, without the consent
of the Class C Preference Shareholders, the whole or any part of the issued and
outstanding Class C Preference Shares upon payment of the par value thereof, together
with any dividends declared but unpaid (in this Section 7.2.4 the "Redemption Price").
Notice of Redemption:
Unless all the holders of the Class C Preference Shares to be redeemed shall have
waived notice of such redemption, the Co-operative shall give not less than thirty (30)
days' notice in writing of such redemption by mailing to each person, who at the date of
mailing is a registered holder of the Class C Preference Shares to be redeemed, a notice
in writing of the intention of the Co-operative to redeem such Class C Preference
Shares. Such notice shall be mailed in a prepaid envelope addressed to each
Shareholder at his or her address as it appears on the books of the Co-operative or, in
the event of the address of any such Shareholder not so appearing, then to the last
known address of such Shareholder, provided however, that accidental failure or
omission to give any such notice to one or more of such holders shall not affect the
validity of such redemption. Such notice shall set out the Redemption Price of the
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Shares to be redeemed and the date on which redemption is to take place and, if part
only of the Class C Preference Shares held by the person to whom notice is given is to
be redeemed, the number of such Shares to be redeemed.
Redemption Procedure:
On or after the date so specified for redemption in such notice, the Co-operative shall
pay or cause to be paid to, or to the order of, the registered holders of the Class C
Preference Shares to be redeemed, the Redemption Price of such Shares on presentation
and surrender, at the registered office of the Co-operative or any other place designated
in such notice, of the certificates representing the Shares so called for redemption. Such
payment shall be made by cheque payable at any branch in Canada of one of the Co-
operative's bankers at that time.
Partial Redemption:
In case a part only of the Class C Preference Shares is at any time to be redeemed, the
Shares so to be redeemed shall be redeemed as nearly as may be in proportion to the
number of Class C Preference Shares that are registered in the name of each holder of
Class C Preference Shares or in such other manner as the Board of Directors shall
determine with the consent of the holders of the Class C Preference Shares in
accordance with the Co-op Act.
Cessation of Rights:
From and after the date specified for redemption in any such notice, the Class C
Preference Shares called for redemption shall cease to be entitled to dividends, and the
holders thereof shall not be entitled to exercise any of the rights of Shareholders in
respect thereof, unless payment of the Redemption Price of the Class C Preference
Shares is not made upon presentation of the Share certificates in accordance with the
foregoing provisions, in which case the rights of the holders shall remain unaffected.
Deposit of Redemption Price:
The Co-operative shall have the right, at any time after the mailing of notice of its
intention to redeem any Shares, to deposit the Redemption Price of the Class C
Preference Shares so called for redemption or of such of the said Shares represented by
certificates which have not at the date of such deposit been surrendered by the holders
thereof in connection with any such redemption, in a special account at any chartered
bank, trust company, credit union, or caisse populaire in Canada named in such notice,
to be paid without interest to or to the order of the respective holders of such Shares
called for redemption upon presentation and surrender to such bank, trust company,
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credit union or caisse populaire of the certificates representing the said Shares and, on
such deposit being made or upon the date specified for redemption in such notice,
whichever is the later, the Class C Preference Shares in respect of which such deposit
shall have been made shall be redeemed and the holders thereof after such deposit or
such redemption date, as the case may be, shall be limited to receiving without interest
their proportionate part of the total Redemption Price of the Class C Preference Shares
so deposited, against presentation and surrender of the said certificates held by them
respectively, and interest allowed on any such deposit shall belong to the Co-operative.
No Redemption of Shares upon Withdrawal from Membership:
Class C Preference Shareholders are not entitled to demand the redemption of such
Shares upon their withdrawal from membership in the Co-operative, and the Co-
operative is not under any obligation to redeem such Shares upon a member's
withdrawal from membership.
Dissolution:
In the event of the liquidation, dissolution, or winding-up of the Co-operative, whether
voluntary or involuntary, the holders of Class C Preference Shares shall be entitled to
receive, subject to the prior rights of the holders of Class A Preference Shares and Class
B Preference Shares, but before any distribution of any part of the assets of the Co-
operative among the holders of Membership Shares, their par value of Five Dollars
($5.00) for each Class C Preference Share, plus an amount equal to any dividends
declared but not paid. Upon payment of the above amount, the holders of Class C
Preference Shares shall not be entitled to any further Share in the distribution of the
property or assets of the Co-operative.
8. DESCRIPTION OF SECURITIES
CED Co-op is offering to sell MEMBERSHIP SHARES, UNSECURED CONVERTIBLE
DEBENTURES, CLASS A PREFERENCE SHARES, BONDS and TERM LOANS. In
designing the Securities of CED Co-op, there have been four main priorities for CED
Co-op:
Enabling continuous valuation of Securities to facilitate transfers of Securities in
subsequent years;
Income tax and fee efficiency to maximize returns to Investors;
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Managing the timing of payments to Investors with an anticipated 15 year
amortization of the Term Loans and almost 50% of free cash flow coming in the
final 5 years of the FIT Contract; and
Eliminating the need to rely on subsequent issues of Securities in future years to
pay off redemptions of Securities sold through this Offering.
8.1. MEMBERSHIP SHARES
Purpose:
The Membership Shares are the mechanism through which voting and control of the
Co-operative are exercised.
Offering:
Total Minimum Offering: None
Total Maximum Offering: $200,000 Minimum Individual Purchase: 1 @ $10 Maximum Individual Purchase: 1 @ $10 ($10)
Share Price (Par Value): $10 Issue: Only natural persons ordinarily resident in Ontario aged 16 years of age
and older may purchase Membership Shares. Each Member may
purchase only one Membership Share, subject always to approval by the
Board of Directors.
Closing Date: The initial closing of the sale of the Membership Shares will occur
as soon as possible once all subscription documents and membership
application documents have been received and the membership
application has been approved by the Board.
Dividends: At the discretion of the Board, to the maximum amount permitted under
the Co-op Act. Regulations under the Co-op Act currently set the
maximum annual dividend at two per cent (2%) above the prime rate of a
bank, trust company, or credit union named in the By-laws. It is not
presently contemplated that CED Co-op will pay dividends to holders of
Membership Shares.
Voting: Members in attendance at meetings of Members may vote and that vote
will receive a weighting of one vote on any matters relating to the Co-
operative that are brought before the Membership. Quorum for a
meeting of Members is the lower of 5% of Members and 10 Members. In
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accordance with the Co-op Act, voting by proxy is not permitted.
Rank: Junior, with respect to the payment of interest and principal on Term
Loans. Junior, to the payment of interest and principal on Bonds and the
payment of principal on Unsecured Convertible Debentures. Junior, to
dividends to the Class A Preference Shares, Class B Preference Shares and
Class C Preference Shares. Junior, to the Class A Preference Shares, Class
B Preference Shares and Class C Preference Shares upon dissolution.
Transfer: Subject to the consent of the Board and to the provisions of the Co-op Act
regarding the transfer of Shares. Such approval shall not unreasonably
be withheld.
8.2. UNSECURED CONVERTIBLE DEBENTURES
Purpose:
The Unsecured Convertible Debentures provide a mechanism for CED Co-op to sell
Securities and raise funds for the Co-operative prior to the conversion to Preference
Shares as part of the election to become a Public Corporation. This further enables the
Co-operative to issue only RRSP eligible Preference Shares and Bonds which simplifies
administration for the Co-operative in the long term.
Offering:
Total Minimum Offering: None
Total Maximum Offering: $400,000 Minimum Individual Purchase: $500 Maximum Individual Purchase: $1,000 (Increments of $5)
Issue: Prior to the receipt of the Offering Statement, only Members will be
eligible to purchase the Unsecured Convertible Debenture. Following the
receipting of the Offering Statement, Members and Non-Members will be
eligible to purchase Unsecured Convertible Debentures. All purchases
are subject to approval by the Board of Directors.
Closing Date: The initial closing of the sale of the Unsecured Convertible
Debentures will occur as soon as possible once all subscription
documents have been received and approved by the Co-operative.
Conversion: The Convertible Debentures will automatically be converted into Class A
Preference Shares, for no additional consideration, at the rate of one Class
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A Preference Share for every $5.00 principal amount of Convertible
Debentures, on the earlier of (a) the conversion date provided for in the
Conversion Notice as issued by the Co-operative; and (b) April 30, 2015.
Interest: The Unsecured Convertible Debentures are considered by CED Co-op to
be a short term transitional Security and the Co-operative will not be
paying interest on the Unsecured Convertible Debentures.
Security: The Unsecured Convertible Debentures are unsecured and subordinated.
Amendment:The rights of the holders of the Unsecured Convertible Debentures may
be modified or waived in accordance with the terms of the Unecured
Convertible Debentures, which will make binding on all Unsecured
Convertible Debentureholders resolutions passed at meetings of the
holders of Unsecured Convertible Debentures (which may be called by
the Co-operative or an Unsecured Convertible Debentureholder upon
not less than 21 days’ notice) by votes cast thereat by holders of at least
two-thirds of the aggregate principal amount of the Unsecured
Convertible Debentures present at the meeting, provided that a quorum
for all meetings of holders of Unsecured Convertible Debentures (other
than meetings following an adjournment due to failure to achieve
quorum) will be at least 25% of the principal amount of outstanding
Unsecured Convertible Debentures represented in person, or rendered by
instruments in writing signed by the holders of at least two-thirds of the
aggregate principal amount of the Unsecured Convertible Debentures
then outstanding.
Redemption: The Convertible Debentures will not be redeemable by the Co-operative.
Events of Default: The occurrence of any of the following events shall constitute an
event of default
(a) If default occurs in the performance of any material covenant or
obligation of the Co-operative in favour of the Holder under the
Unsecured Convertible Debenture certificate and such default is not
waived in writing by the Holder, or by Holders holding, in the aggregate,
a majority of the aggregate principal amount outstanding of Convertible
Debentures or, to the extent such default may be remedied, such default
remains unremedied for a period of 30 consecutive days;
(b) If an event of default occurs in payment or performance of any
obligation in favour of any Person from whom the Co-operative has
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borrowed money in excess of $100,000, and such default is not waived in
writing or remains unremedied for a period of 30 consecutive days;
(c) The Co-operative (i) becomes insolvent or generally not able to pay
its debts as they become due, (ii) admits in writing its inability to pay its
debts generally or makes a general assignment for the benefit of creditors;
(iii) institutes or has instituted against it any proceeding seeking (x) to
adjudicate it a bankrupt or insolvent, (y) dissolution, liquidation,
winding-up, reorganization, arrangement, adjustment, protection, relief
or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors including any plan of
compromise or arrangement or other corporate proceeding involving or
affecting its creditors, or (z) the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it or for any
substantial part of its properties and assets, and in the case of any such
proceeding instituted against it (but not instituted by it), either the
proceeding remains undismissed or unstayed for a period of 30 days, or
any of the actions sought in such proceeding (including the entry of an
order for relief against it or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
properties and assets) occurs, or (iv) takes any corporate action to
authorize any of the above actions;
(d) If any judgment or order for the payment of money in excess of
$100,000 shall be rendered against the Co-operative and either (i)
enforcement proceedings shall have been commenced by any creditor
upon such judgment or order, or (ii) there shall be any period of 10
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or
(e) If any act, matter or thing is done, or any action or proceeding is
launched or taken, to terminate the corporate existence of the Co-
operative, whether by dissolution, winding-up, liquidation or otherwise.
Consequences of an Event of Default: Upon the occurrence of an Event of Default,
the Principal Amount shall become forthwith due and payable.
Voting: The Unsecured Convertible Debentures have no voting rights
Rank: Junior, with respect to the payment of interest and principal on Term
Loans. Pari Passu, to the payment of interest and principal on Bonds.
Page | 106
Senior, to dividends to the Class A Preference Shares, Class B Preference
Shares and Class C Preference Shares. Senior, to the Class A Preference
Shares, Class B Preference Shares, Class C Preference Shares and
Membership Shares upon dissolution.
Transfer: Subject to a $75 administration fee, the consent of the Board and to the
provisions of the Co-op Act regarding the transfer of Debt Obligations.
Such approval shall not unreasonably be withheld.
8.3. CLASS A PREFERENCE SHARES
Purpose:
CED Co-op believes the Class A Preference Shares provide an opportunity for CED Co-
op to distribute after tax earnings of the Co-operative to Shareholders as “eligible
dividends” to the Shareholder. Though the payment of dividends on the Preference
Shares is not guaranteed and is at the discretion of the Board of Directors, it is the
present intention of the Board of Directors to pay a consistent minimum dividend rate
throughout the 20 year term of the FIT Contracts. The projected return available to
Preference Shareholders is 9% per annum, with some cash flow surpluses remaining
which could further be distributed to Preference Shareholders as dividends, which
would increase the percentage return. The Co-operative believes this Security would be
best suited for the prospective Investor who is looking for annual cash flow from a long
term investment, is looking to make the investment outside of a Registered Plan in
order to take advantage of the favourable tax treatment presently afforded to dividend
income, and is willing to invest in a Security that does not have a fixed or minimum
return, but has the potential to earn a higher rate of return than other Securities offered
by the Co-operative.
During the 20 year term of the FIT Contracts, the Co-operative intends to repurchase
some of the outstanding Class A Preference Shares each year. By doing so, the Class A
Preference Shares will, in some ways, be treated similarly to an amortizing loan. The
Co-operative believes this enables a more consistent valuation and therefore an
opportunity for the transfer of the Class A Preference Shares prior to the end of the 20
year term. If this dividend and repurchase schedule is maintained, a Shareholder
would potentially be able to sell their Class A Preference Shares to an investor at the par
value of the Class A Preference Shares, with the returns realized by the seller to the
point of transfer achieving the targeted returns, and the new holder of the Class A
Preference Shares would be able to potentially earn a similar return for the remainder of
the 20 years of the FIT Contracts. Again, if the dividend and repurchase schedule is
Page | 107
maintained, the new Shareholder could potentially have the same opportunity to sell
the Class A Preference Shares to another Shareholder in subsequent years. It is
important to have the Class A Preference Shares repurchased over the time of the
contract to ensure there are not significant amounts of Class A Preference Shares
outstanding at the end of the 20 year FIT Contracts with no further anticipated cash
flow from the Projects. This return of capital through the repurchase of Class A
Preference Shares also allows a portion of the returns to investors to occur free from
income tax.
Offering:
Total Minimum Offering: No specific minimum – subject to a minimum
$2,500,000 in aggregate from the sale of these
Preference Shares, the sale of Bonds M1-5 and
the sale of Bonds L1-4
Total Maximum Offering: $6,000,000 Minimum Individual Purchase: 100 @ $5 ($500) Maximum Individual Purchase: None
Issue: The Co-operative does not presently intend to offer the Class A
Preference Shares for sale until this Offering Statement has been receipted
and the Co-operative has made the election to be a Public Corporation
and has achieved RRSP eligibility for its Securities. The conversion of all
outstanding Unsecured Convertible Debentures to Class A Preference
Shares will be part of this election process. The maximum offering of
$6,000,000 includes the amount ($400,000 maximum) for Class A
Preference Shares that will be issued during the conversion of the
Unsecured Convertible Debenture. Following the receipting of the
Offering Statement, Members and Non-Members will be eligible to
purchase Class A Preference Shares. All purchases are subject to
approval by the Board of Directors. Though the Class A Preference
Shares are more suitable for investment outside of a registered plan, it is
expected that the Class A Preference Shares will be eligible to be held in
Registered Plans and the Co-operative is expected to be able to accept
investment through Registered Plans.
Closing Date: The initial closing of the sale of the Class A Preference Shares will
occur as soon as possible once all subscription documents have been
received and approved by the Co-operative, subject to subscriptions in
aggregate from the sale of these Preference Shares, the sale of Bonds M1-5
and the sale of Bonds L1-4 totaling a minimum of $2,500,000.
Page | 108
Dividends: Holders of the Class A Preference Shares shall be entitled to receive and
the Co-operative shall pay thereon, as and when declared by the Board of
Directors of the Co-operative, non-cumulative cash dividends at a rate
fixed and determined by the Board of Directors of the Co-operative. At
the discretion of the Board of Directors of the Co-operative, dividends on
the Class A Preference Shares may be paid in priority or subject to
priority to dividends on the Class B Preference Shares or the Class C
Preference Shares of the Co-operative, but always in priority to the
Membership Shares of the Co-operative. Dividends on the Class A
Preference Shares shall be calculated annually, and shall accrue from the
date of the issue of such shares. In the event that the Board of Directors
of the Co-operative does not declare a dividend on the Class A Preference
Shares within one hundred and eighty days (180 days) following the
close of the fiscal year of the Co-operative, the right of the holders of the
Class A Preference Shares for that fiscal year shall be forever
extinguished.
The amount of cash flow available for dividends depends on a number of
factors including the proportion of Class A Preference Shares in relation
to the amount of funds raised through the sale of other Securities. The
Pro Forma Financial Projections attached as Appendix A have a targeted
dividend rate of 9%, however this is not a guaranteed return. Should the
Board of Directors feel that a 9% return on the Class A Preference Shares
is sustainable, the projected schedule of declared and paid dividend and
the repurchase of Shares outstanding is shown in the table below and is
based on a $10,000 purchase of 2,000 Class A Preference Shares.
It is presently believed that only the Dividend Payment outlined in the
second last column would be treated as taxable income to the
Shareholder. However, prospective Investors are cautioned to consult
with their tax advisors regarding the treatment of dividends on the Class
A Preference Shares.
Page | 109
Preference A Share Investment 10,000$
5.000$ Share Price
Year
Preference A
Shares Held
Total Value of
Shares Dividend Rate Share Repurchase %
Shares
Repurchased Shares Payment
Dividend
Payment Total Payment
0 (10,000)$
1 2,000 10,000$ 9.00% 1.95% 39 195$ 900$ 1,095$
2 1,961 9,805$ 9.00% 2.17% 43 215$ 882$ 1,097$
3 1,918 9,590$ 9.00% 2.42% 46 230$ 863$ 1,093$
4 1,872 9,360$ 9.00% 2.70% 51 255$ 842$ 1,097$
5 1,821 9,105$ 9.00% 3.03% 55 275$ 819$ 1,094$
6 1,766 8,830$ 9.00% 3.41% 60 300$ 795$ 1,095$
7 1,706 8,530$ 9.00% 3.84% 66 330$ 768$ 1,098$
8 1,640 8,200$ 9.00% 4.36% 71 355$ 738$ 1,093$
9 1,569 7,845$ 9.00% 4.97% 78 390$ 706$ 1,096$
10 1,491 7,455$ 9.00% 5.69% 85 425$ 671$ 1,096$
11 1,406 7,030$ 9.00% 6.58% 93 465$ 633$ 1,098$
12 1,314 6,570$ 9.00% 7.68% 101 505$ 591$ 1,096$
13 1,213 6,065$ 9.00% 9.07% 110 550$ 546$ 1,096$
14 1,103 5,515$ 9.00% 10.87% 120 600$ 496$ 1,096$
15 983 4,915$ 9.00% 13.29% 131 655$ 442$ 1,097$
16 852 4,260$ 9.00% 16.71% 142 710$ 383$ 1,093$
17 710 3,550$ 9.00% 21.87% 155 775$ 320$ 1,095$
18 555 2,775$ 9.00% 30.51% 169 845$ 250$ 1,095$
19 385 1,925$ 9.00% 47.85% 184 920$ 173$ 1,093$
20 201 1,005$ 9.00% 100.00% 201 1,005$ 90$ 1,095$
Totals - 9.00% 2,000 10,000$ 11,910$ 21,910$
As outlined above, maintaining this schedule would allow, as an
example, for a Shareholder who had initially invested $10,000 to sell the
balance of their Class A Preference Shares outstanding at the beginning of
year 7 (following the dividend declaration and payment and repurchase
of some Class A Preference Shares at the end of year 6). The Shareholder
would have realized a return on investment of 9%, and the buyer of the
1,706 Shares outstanding at $5 each for a total of $8,530 would then be
able to also realize a 9% return for the remainder of the term of the FIT
Contracts.
The Board of Directors is also able to declare a stock dividend on the
Class A Preference Shares. The Board of Directors may elect to declare a
stock dividend if the cash flows of the Co-operative do not support the
payment of a cash dividend. As an example of the impact of the
declaration of a stock dividend, the following table shows a 9% Stock
dividend being declared in year 12, whereby holders of Class A
Preference Shares would receive 9 additional Class A Preference Shares
for every 100 Class A Preference Shares outstanding. This is noted by an
increase in the Class A Preference Shares held from 1,314 in year 12 to
Page | 110
Preference A Share Investment 10,000$
5.000$ Share Price
Year
Preference A
Shares Held
Total Value of
Shares Dividend Rate Share Repurchase %
Shares
Repurchased Shares Payment
Dividend
Payment Total Payment
0 (10,000)$
1 2,000 10,000$ 9.00% 1.95% 39 195$ 900$ 1,095$
2 1,961 9,805$ 9.00% 2.17% 43 215$ 882$ 1,097$
3 1,918 9,590$ 9.00% 2.42% 46 230$ 863$ 1,093$
4 1,872 9,360$ 9.00% 2.70% 51 255$ 842$ 1,097$
5 1,821 9,105$ 9.00% 3.03% 55 275$ 819$ 1,094$
6 1,766 8,830$ 9.00% 3.41% 60 300$ 795$ 1,095$
7 1,706 8,530$ 9.00% 3.84% 66 330$ 768$ 1,098$
8 1,640 8,200$ 9.00% 4.36% 71 355$ 738$ 1,093$
9 1,569 7,845$ 9.00% 4.97% 78 390$ 706$ 1,096$
10 1,491 7,455$ 9.00% 5.69% 85 425$ 671$ 1,096$
11 1,406 7,030$ 9.00% 6.58% 93 465$ 633$ 1,098$
12 1,314 6,570$ 0.00% 7.68% - -$ -$ -$
13 1,432 7,160$ 9.00% 9.07% 130 650$ 644$ 1,294$
14 1,302 6,510$ 9.00% 10.87% 142 710$ 586$ 1,296$
15 1,160 5,800$ 9.00% 13.29% 154 770$ 522$ 1,292$
16 1,006 5,030$ 9.00% 16.71% 168 840$ 453$ 1,293$
17 838 4,190$ 9.00% 21.87% 183 915$ 377$ 1,292$
18 655 3,275$ 9.00% 30.51% 200 1,000$ 295$ 1,295$
19 455 2,275$ 9.00% 47.85% 218 1,090$ 205$ 1,295$
20 237 1,185$ 9.00% 100.00% 237 1,185$ 107$ 1,292$
Totals - 9.00% 2,119 10,595$ 11,806$ 22,401$
1,432 for year 13, an increase of 118 Class A Preference Shares which is a
9% increase (rounded to full Shares).
As noted, the total payment in the final column is increased in subsequent
years to make up for the year with no cash payment. This potentially
allows for the continued trading (subject to the restrictions on transfers of
Class A Preference Shares noted) of Securities at their par value while
maintaining consistent returns for both the seller and buyer of the Class
A Preference Shares.
Amendment:The rights of amendment of Class A Preference Shares are set out under
“Amendment – Class A Preference Shares” found in section 7.2.2 hereof.
Redemption by the Co-operative:
The rights of redemption of Class A Preference Shares are set out under
“Redemption – Class A Preference Shares” found in section 7.2.2 hereof.
Page | 111
Redemption by the Shareholder:
The Class A Preference Shares are not redeemable by the Shareholder on
demand. The Co-operative may, from time to time before maturity, and
upon written notice of request for early redemption by the Shareholder,
offer to repurchase the Class A Preference Shares at the par value of the
Shares. This is subject to approval by the Board and an early redemption
fee of $75. In the event that a written notice of request for early
redemption by the Shareholder is received by the Co-operative and the
Co-operative is unable or unwilling to comply with the request, the Co-
operative will endeavor to maintain a list of parties that are interested in
buying the Securities, and will work towards facilitating a transfer of the
Securities on a best efforts basis. There is no guarantee that a willing
buyer of the Class A Preference Shares will exist at the time the request is
made, or that a buyer will exist in the future.
Voting: The voting rights of the holders of Class A Preference Shares are set out
under “Voting Rights – Class A Preference Shares” found in section 7.2.2
hereof.
Rank: Junior, with respect to the payment of interest and principal on Term
Loans. Junior, to the payment of interest and principal on Bonds. Pari
Passu, to dividends paid on Class B Preference Shares and Class C
Preference Shares. Senior, to the Class B Preference Shares, Class C
Preference Shares and Membership Shares upon dissolution.
Transfer: Subject to a $75 administration fee, the consent of the Board and to the
provisions of the Co-op Act regarding the transfer of Preference Shares.
Such approval shall not unreasonably be withheld.
8.4. BONDS SERIES L1-4
Purpose:
The Bonds that make up the Series L1-4 are the long term Bonds (the L denotes long
term). The Co-operative believes these Bonds to be the primary mechanism through
which the Co-operative is able to manage the differing levels of cashflow available
during the 15 years of debt payments on the Term Loans, and the final 5 years of the FIT
Contracts where the free cash flows are currently expected to be higher. The Series L1-4
Bonds are effectively made up of a package of four Bonds, with an 8, 12, 16 and 20 year
maturity respectively. The Co-operative envisions this investment to be for the long
Page | 112
term Investor who is looking to make the investment through a Registered Plan. The
cash flows are intended to minimize the fees assessed and transactions required within
the Registered Plan. Due to the cash flows of this Security, this investment may not be
suitable for RRSP based investors over the age of 50 due to the requirements of the
conversion of RRSPs to RRIFs (currently mandated at the age of 71), and the rules
regarding mandatory withdrawals from RRIFs.
Offering:
Total Minimum Offering: No specific minimum – subject to a minimum
$2,500,000 in aggregate from the sale of Class A
Preference Shares, the sale of Bonds Series M1-
5 and the sale of these Bonds Series L1-4
Total Maximum Offering: $4,000,000
Minimum Individual Purchase: $1,000
Maximum Individual Purchase: None
Issue: The Co-operative does not presently intend to offer the Bonds L1-4 for
sale until this Offering Statement has been receipted and the Co-operative
has made the election to be a Public Corporation and has achieved RRSP
eligibility for its Securities. Following the receipting of the Offering
Statement, Members and Non-Members will be eligible to purchase
Bonds Series L1-4. All purchases are subject to approval by the Board of
Directors of the Co-operative. Though the Board of Directors believes
these Bonds are considered more suitable for investment through a
Registered Plan, the Co-operative is expected to be able to accept
investment in these Bonds outside of Registered Plans.
Closing Date: The initial closing of the sale of the Bonds Series L1-4 will occur as
soon as possible once all subscription documents have been received and
approved by the Co-operative, subject to subscriptions in aggregate from
the sale of Class A Preference Shares, the sale of Bonds Series M1-5 and
the sale of these Bonds Series L1-4 totaling a minimum of $2,500,000.
Interest and Maturity:
The investment into the Bonds L1-4 will be divided across four Bonds
that can be described as stripped Bonds or zero coupon bonds meaning
Page | 113
Bond L1-4 Investment 10,000$
Bond Allocation Yield Maturity Initial Price
Face Value
(Payout at
Maturity)
L1 16% 7.00% 8 years $1,600 $2,749
L2 16% 7.50% 12 years $1,600 $3,811
L3 32% 8.00% 16 years $3,200 $10,963
L4 36% 8.50% 20 years $3,600 $18,403
Totals 100% 8.10% $10,000 $35,926
that the interest is not paid out semi-annually or annually. The interest
rate is different for each Bond with the average interest across the Bonds
L1-4 being a rate of 8.10%. Interest will accrue annually on each of the
Bonds and will be compounded rather than paid out to the Bondholder.
For this reason, this Bond may not be suitable for an Investor that is
making the investment outside of a Registered Plan since interest income
would need to be recognized through the issue of a T5 slip to the Investor
from the Co-operative. This may cause the Bondholder to need to remit
income tax to Canada Revenue Agency without receiving funds from the
Co-operative to make the associated remittance. Payments will only occur
at the maturity of each Bond, in years 8, 12, 16 and 20 respectively, when
they are redeemed by the Co-operative. For this reason, this Security is
not recommended for an Investor that is looking for regular cash flow.
The division of a potential $10,000 investment into the four Bonds and the
associated cash flows is outlined in the table below.
As outlined in the table above, of a $10,000 investment into the L1-4
Bonds, 16%, or $1,600 would be put into the L1 Bond. The L1 Bond will
compound annually at a rate of 7.0%, with the payout at maturity at the
end of year 8 of $2,749. The L4 Bond portion of $3,600 would compound
annually at a rate of 8.5% with the payout at the end of year 20 of $18,403.
Security: The Bonds Series L1-4 are unsecured obligations.
Amendment of Bond Provisions:
The rights of the holders of the Bonds Series L1-4 may be modified or
waived in accordance with the terms of the Bonds Series L1-4, which will
Page | 114
make binding on all holders of Bonds Series L1-4 resolutions passed at
meetings of the holders of Bonds Series L1-4 (which may be called by the
Co-operative or a holder of Bonds Series L1-4 upon not less than 21 days’
notice) by votes cast thereat by holders of at least two-thirds of the
aggregate principal amount of the Bonds Series L1-4 present at the
meeting, provided that a quorum for all meetings of holders of Bonds
Series L1-4 (other than meetings following an adjournment due to failure
to achieve quorum) will be at least 25% of the principal amount of
outstanding Bonds Series L1-4 represented in person, or rendered by
instruments in writing signed by the holders of at least two-thirds of the
aggregate principal amount of the Bonds Series L1-4 then outstanding.
Redemption by the Co-operative:
The Co-operative may at any time, and from time to time, redeem,
without the consent of the Bondholders, the whole or any part of the
issued and outstanding Bonds Series L1-4 upon payment of the principal,
together with any accrued interest, in this section, the “Redemption
Price”.
Notice of Redemption:
Unless all the holders of the Bonds Series L1-4 to be redeemed shall have
waived notice of such redemption, the Co-operative shall give not less
than thirty (30) days' notice in writing of such redemption by mailing to
each person, who at the date of mailing is a registered holder of the Bonds
Series L1-4 to be redeemed, a notice in writing of the intention of the Co-
operative to redeem such Bonds Series L1-4. Such notice shall be mailed
in a prepaid envelope addressed to each Bondholder at his or her address
as it appears on the books of the Co-operative or, in the event of the
address of any such Bondholder not so appearing, then to the last known
address of such Bondholder, provided however, that accidental failure or
omission to give any such notice to one or more of such holders shall not
affect the validity of such redemption. Such notice shall set out the
Redemption Price of the Bonds to be redeemed and the date on which
redemption is to take place and, if part only of the Bonds Series L1-4 held
by the person to whom notice is given are to be redeemed, the amount of
the Bonds to be redeemed.
Page | 115
Redemption Procedure:
On or after the date so specified for redemption in such notice, the Co-
operative shall pay or cause to be paid to, or to the order of, the registered
holders of the Bond Series L1-4 to be redeemed, the Redemption Price of
such Bonds on presentation and surrender, at the registered office of the
Co-operative or any other place designated in such notice, of the
certificates representing the Bonds so called for redemption. Such
payment shall be made by cheque payable at any branch in Canada of one
of the Co-operative's bankers at that time.
Partial Redemption:
In case a part only of the Bond Series L1-4 are at any time to be redeemed,
the Bonds so to be redeemed shall be redeemed as nearly as may be in
proportion to the amount of Bond Series L1-4 that are registered in the
name of each holder of Bond Series L1-4 or in such other manner as the
Board of Directors shall determine with the consent of the holders of the
Bond Series L1-4 in accordance with the Co-op Act.
Deposit of Redemption Price:
The Co-operative shall have the right, at any time after the mailing of
notice of its intention to redeem any shares, to deposit the Redemption
Price of the Bond Series L1-4 so called for redemption or of such of the
said Bonds represented by certificates which have not at the date of such
deposit been surrendered by the holders thereof in connection with any
such redemption, in a special account at any chartered bank, trust
company, credit union, or caisse populaire in Canada named in such
notice, to be paid without interest to or to the order of the respective
holders of such Bonds called for redemption upon presentation and
surrender to such bank, trust company, credit union or caisse populaire of
the certificates representing the said Bonds and, on such deposit being
made or upon the date specified for redemption in such notice, whichever
is the later, the Bond Series L1-4 in respect of which such deposit shall
have been made shall be redeemed and the holders thereof after such
deposit or such redemption date, as the case may be, shall be limited to
receiving without interest their proportionate part of the total Redemption
Price of the Bonds Series L1-4 so deposited, against presentation and
surrender of the said certificates held by them respectively, and interest
allowed on any such deposit shall belong to the Co-operative.
Page | 116
Redemption by the Issuer:
The Bonds Series L1-4 are not redeemable by the issuer on demand. The
Co-operative may, from time to time before maturity, and upon written
notice of request for early redemption by the issuer, offer to repay all or a
portion of the principal outstanding. This is subject to approval by the
Board and an early redemption fee of $75. In the event that a written
notice of request for early redemption by the issuer is received by the Co-
operative and the Co-operative is unable or unwilling to comply with the
request, the Co-operative will endeavor to maintain a list of parties that
are interested in buying the Securities, and will work towards facilitating
a transfer of the Securities on a best efforts basis. There is no guarantee
that a willing buyer of the Bonds Series L1-4 will exist at the time the
request is made, or that a buyer will exist in the future.
Events of Default: The occurrence of any of the following events shall constitute an
event of default
(a) If default occurs in the performance of any material covenant or
obligation of the Co-operative in favour of the Holder under the
Unsecured Convertible Debenture certificate and such default is not
waived in writing by the Holder, or by Holders holding, in the aggregate,
a majority of the aggregate principal amount outstanding of Convertible
Debentures or, to the extent such default may be remedied, such default
remains unremedied for a period of 30 consecutive days;
(b) If an event of default occurs in payment or performance of any
obligation in favour of any Person from whom the Co-operative has
borrowed money in excess of $100,000, and such default is not waived in
writing or remains unremedied for a period of 30 consecutive days;
(c) The Co-operative (i) becomes insolvent or generally not able to pay
its debts as they become due, (ii) admits in writing its inability to pay its
debts generally or makes a general assignment for the benefit of creditors;
(iii) institutes or has instituted against it any proceeding seeking (x) to
adjudicate it a bankrupt or insolvent, (y) dissolution, liquidation,
winding-up, reorganization, arrangement, adjustment, protection, relief
or composition of it or its debts under any law relating to bankruptcy,
Page | 117
insolvency, reorganization or relief of debtors including any plan of
compromise or arrangement or other corporate proceeding involving or
affecting its creditors, or (z) the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it or for any
substantial part of its properties and assets, and in the case of any such
proceeding instituted against it (but not instituted by it), either the
proceeding remains undismissed or unstayed for a period of 30 days, or
any of the actions sought in such proceeding (including the entry of an
order for relief against it or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
properties and assets) occurs, or (iv) takes any corporate action to
authorize any of the above actions;
(d) If any judgment or order for the payment of money in excess of
$100,000 shall be rendered against the Co-operative and either (i)
enforcement proceedings shall have been commenced by any creditor
upon such judgment or order, or (ii) there shall be any period of 10
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or
(e) If any act, matter or thing is done, or any action or proceeding is
launched or taken, to terminate the corporate existence of the Co-
operative, whether by dissolution, winding-up, liquidation or otherwise.
No Redemption of Bonds upon Withdrawal from Membership: Holders of Bonds
Series L1-4 are not entitled to demand the redemption of such Bonds upon
their withdrawal from membership in the Co-operative, and the Co-
operative is not under any obligation to redeem such Bonds upon a
member's withdrawal from membership.
Voting: The Bonds have no voting rights.
Rank: Junior, with respect to the payment of interest and principal on Term
Loans. Pari Passu, to the payment of interest and principal on Bonds M1-
5. Pari Passu, to the payment of principal on Unsecured Convertible
Debentures. Senior, to the payment of dividends on the Class A
Preference Shares, Class B Preference Shares and Class C Preference
Page | 118
Shares. Senior, to the Class A Preference Shares, Class B Preference
Shares, Class C Preference Shares and Membership Shares upon
dissolution.
Transfer: Subject to a $75 administration fee, the consent of the Board and to the
provisions of the Co-op Act regarding the transfer of Debt Obligations.
Such approval shall not unreasonably be withheld.
Dissolution: In the event of the liquidation, dissolution, or winding-up of the Co-
operative, whether voluntary or involuntary, the holders of Bonds Series
L1-4 shall be entitled to receive, after the retirement of the Term Loans, the
amount of principal outstanding, plus any interest earned but unpaid.
Upon payment of such amount, the holders of Bonds Series L1-4 shall not
be entitled to any further share in the distribution of the property or assets
of the Co-operative.
8.5. BONDS SERIES M1-5
Purpose:
The Bonds that make up the Series M1-5 are medium term bonds (the M denotes
medium term). The Co-operative considers the purpose of this Bond Series is to help
shape the payments to Investors to mirror the early cash flows of the Co-operative. This
Series of Bonds is effectively made up of a package of five Bonds, with a 1, 2, 3, 4 and 5
year maturity respectively. This investment has been designed for the medium term
Investor who is looking to make the investment through a Registered Plan such as a
RRIF or RRSP, or an Investor that is not interested in long term investments.
Offering:
Total Minimum Offering: No specific minimum – subject to a minimum
$2,500,000 in aggregate from the sale of Class A
Preference Shares, the sale of these Bonds
Series M1-5 and the sale of Bonds Series L1-4
Total Maximum Offering: $2,000,000 Minimum Individual Purchase: $1,000 Maximum Individual Purchase: None
Issue: The Co-operative does not presently intend to offer the Bonds M1-5 for
sale until this Offering Statement has been receipted and the Co-operative
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Bond M1-5 Investment 10,000$
Bond Allocation Yield Maturity Initial Price
Face Value
(Payout at
Maturity)
M1 24% 5.50% 1 year $2,400 $2,532
M2 22% 5.75% 2 years $2,200 $2,460
M3 20% 6.00% 3 years $2,000 $2,382
M4 18% 6.25% 4 years $1,800 $2,294
M5 16% 6.50% 5 years $1,600 $2,192
Totals 100% 6.13% $10,000 $11,860
has made the election to be a Public Corporation and has achieved RRSP
eligibility for its Securities. Following the receipting of the Offering
Statement, Members and Non-Members will be eligible to purchase
Bonds M1-5. All purchases are subject to approval by the Board of
Directors. The Co-operative is expected to be able to accept investment in
these Bonds both through Registered Plans and outside of Registered
Plans.
Closing Date: The initial closing of the sale of the Bonds Series M1-5 will occur as
soon as possible once all subscription documents have been received and
approved by the Co-operative, subject to subscriptions in aggregate from
the sale of Class A Preference Shares, the sale of these Bonds Series M1-5
and the sale of Bonds Series L1-4 totaling a minimum of $2,500,000.
Interest and Maturity:
The investment into the Bonds M1-5 will be divided across five Bonds
that can be described as stripped Bonds or zero coupon Bonds. The
interest rate is different for each Bond with the average interest across the
Bonds M1-5 being a rate of 6.13%. Interest will accrue annually on each
of the Bonds and be compounded rather than paid out to the Holder.
Because there is a Bond set to mature each year from year 1 to year 5,
regular cash flows are anticipated for the Bondholder.
The division of a potential $10,000 investment into the five Bonds and the
associated cash flows is outlined in the table below.
As outlined in the table above, of a $10,000 investment into the M1-4
Bonds, 24%, or $2,400 would be put into the M1 Bond. The M1 Bond will
compound annually at a rate of 5.5%, with the payout at maturity at the
end of year 1 of $2,532. The M5 Bond portion of $1,600 would compound
annually at a rate of 6.5% with the payout at the end of year 5 of $2,192.
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Security: The Bonds Series M1-5 are unsecured obligations.
Amendment of Bond Provisions:
The rights of the holders of the Bonds Series M1-5 may be modified or
waived in accordance with the terms of the Bonds Series M1-5, which will
make binding on all holders of Bonds Series M1-5 resolutions passed at
meetings of the holders of Bonds Series M1-5 (which may be called by the
Co-operative or a holder of Bonds Series M1-5 upon not less than 21
days’ notice) by votes cast thereat by holders of at least two-thirds of the
aggregate principal amount of the Bonds Series M1-5 present at the
meeting, provided that a quorum for all meetings of holders of Bonds
Series M1-5 (other than meetings following an adjournment due to failure
to achieve quorum) will be at least 25% of the principal amount of
outstanding Bonds Series M1-5 represented in person, or rendered by
instruments in writing signed by the holders of at least two-thirds of the
aggregate principal amount of the Bonds Series M1-5 then outstanding.
Redemption by the Co-operative:
The Co-operative may at any time, and from time to time, redeem,
without the consent of the Bondholders, the whole or any part of the
issued and outstanding Bonds Series M1-5 upon payment of the principal,
together with any accrued interest, in this section, the “Redemption
Price”.
Notice of Redemption:
Unless all the holders of the Bonds Series M1-5 to be redeemed shall have
waived notice of such redemption, the Co-operative shall give not less
than thirty (30) days' notice in writing of such redemption by mailing to
each person, who at the date of mailing is a registered holder of the Bonds
Series M1-5 to be redeemed, a notice in writing of the intention of the Co-
operative to redeem such Bonds Series M1-5. Such notice shall be mailed
in a prepaid envelope addressed to each Bondholder at his or her address
as it appears on the books of the Co-operative or, in the event of the
address of any such Bondholder not so appearing, then to the last known
address of such Bondholder, provided however, that accidental failure or
omission to give any such notice to one or more of such holders shall not
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affect the validity of such redemption. Such notice shall set out the
Redemption Price of the Bonds to be redeemed and the date on which
redemption is to take place and, if part only of the Bonds Series M1-5 held
by the person to whom notice is given are to be redeemed, the amount of
the Bonds to be redeemed.
Redemption Procedure:
On or after the date so specified for redemption in such notice, the Co-
operative shall pay or cause to be paid to, or to the order of, the registered
holders of the Bond Series M1-5 to be redeemed, the Redemption Price of
such Bonds on presentation and surrender, at the registered office of the
Co-operative or any other place designated in such notice, of the
certificates representing the Bonds so called for redemption. Such
payment shall be made by cheque payable at any branch in Canada of one
of the Co-operative's bankers at that time.
Partial Redemption:
In case a part only of the Bond Series M1-5 are at any time to be redeemed,
the Bonds so to be redeemed shall be redeemed as nearly as may be in
proportion to the amount of Bond Series M1-5 that are registered in the
name of each holder of Bond Series M1-5 or in such other manner as the
Board of Directors shall determine with the consent of the holders of the
Bond Series M1-5 in accordance with the Co-op Act.
Deposit of Redemption Price:
The Co-operative shall have the right, at any time after the mailing of
notice of its intention to redeem any shares, to deposit the Redemption
Price of the Bond Series M1-5 so called for redemption or of such of the
said Bonds represented by certificates which have not at the date of such
deposit been surrendered by the holders thereof in connection with any
such redemption, in a special account at any chartered bank, trust
company, credit union, or caisse populaire in Canada named in such
notice, to be paid without interest to or to the order of the respective
holders of such Bonds called for redemption upon presentation and
surrender to such bank, trust company, credit union or caisse populaire of
the certificates representing the said Bonds and, on such deposit being
made or upon the date specified for redemption in such notice, whichever
is the later, the Bond Series M1-5 in respect of which such deposit shall
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have been made shall be redeemed and the holders thereof after such
deposit or such redemption date, as the case may be, shall be limited to
receiving without interest their proportionate part of the total Redemption
Price of the Bonds Series M1-5 so deposited, against presentation and
surrender of the said certificates held by them respectively, and interest
allowed on any such deposit shall belong to the Co-operative.
Redemption by the Issuer:
The Bonds Series M1-5 are not redeemable by the issuer on demand. The
Co-operative may, from time to time before maturity, and upon written
notice of request for early redemption by the issuer, offer to repay all or a
portion of the principal outstanding. This is subject to approval by the
Board and an early redemption fee of $75. In the event that a written
notice of request for early redemption by the issuer is received by the Co-
operative and the Co-operative is unable or unwilling to comply with the
request, the Co-operative will endeavor to maintain a list of parties that
are interested in buying the Securities, and will work towards facilitating
a transfer of the Securities on a best efforts basis. There is no guarantee
that a willing buyer of the Bonds Series M1-5 will exist at the time the
request is made, or that a buyer will exist in the future.
Events of Default: The occurrence of any of the following events shall constitute an
event of default
(a) If default occurs in the performance of any material covenant or
obligation of the Co-operative in favour of the Holder under the
Unsecured Convertible Debenture certificate and such default is not
waived in writing by the Holder, or by Holders holding, in the aggregate,
a majority of the aggregate principal amount outstanding of Convertible
Debentures or, to the extent such default may be remedied, such default
remains unremedied for a period of 30 consecutive days;
(b) If an event of default occurs in payment or performance of any
obligation in favour of any Person from whom the Co-operative has
borrowed money in excess of $100,000, and such default is not waived in
writing or remains unremedied for a period of 30 consecutive days;
(c) The Co-operative (i) becomes insolvent or generally not able to pay
Page | 123
its debts as they become due, (ii) admits in writing its inability to pay its
debts generally or makes a general assignment for the benefit of creditors;
(iii) institutes or has instituted against it any proceeding seeking (x) to
adjudicate it a bankrupt or insolvent, (y) dissolution, liquidation,
winding-up, reorganization, arrangement, adjustment, protection, relief
or composition of it or its debts under any law relating to bankruptcy,
insolvency, reorganization or relief of debtors including any plan of
compromise or arrangement or other corporate proceeding involving or
affecting its creditors, or (z) the entry of an order for relief or the
appointment of a receiver, trustee or other similar official for it or for any
substantial part of its properties and assets, and in the case of any such
proceeding instituted against it (but not instituted by it), either the
proceeding remains undismissed or unstayed for a period of 30 days, or
any of the actions sought in such proceeding (including the entry of an
order for relief against it or the appointment of a receiver, trustee,
custodian or other similar official for it or for any substantial part of its
properties and assets) occurs, or (iv) takes any corporate action to
authorize any of the above actions;
(d) If any judgment or order for the payment of money in excess of
$100,000 shall be rendered against the Co-operative and either (i)
enforcement proceedings shall have been commenced by any creditor
upon such judgment or order, or (ii) there shall be any period of 10
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or
(e) If any act, matter or thing is done, or any action or proceeding is
launched or taken, to terminate the corporate existence of the Co-
operative, whether by dissolution, winding-up, liquidation or otherwise.
No Redemption of Bonds upon Withdrawal from Membership: Holders of Bonds
Series L1-4 are not entitled to demand the redemption of such Bonds upon
their withdrawal from membership in the Co-operative, and the Co-
operative is not under any obligation to redeem such Bonds upon a
member's withdrawal from membership.
Voting: The Bonds have no voting rights.
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Rank: Junior, with respect to the payment of interest and principal on Term
Loans. Pari Passu, to the payment of interest and principal on Bonds L1-4.
Pari Passu, to the payment of principal on Unsecured Convertible
Debentures. Senior, to the payment of dividends on the Class A
Preference Shares, Class B Preference Shares and Class C Preference
Shares. Senior, to the Class A Preference Shares, Class B Preference
Shares, Class C Preference Shares and Membership Shares upon
dissolution.
Transfer: Subject to a $75 administration fee, the consent of the Board and to the
provisions of the Co-op Act regarding the transfer of Debt Obligations.
Such approval shall not unreasonably be withheld.
Dissolution: In the event of the liquidation, dissolution, or winding-up of the Co-
operative, whether voluntary or involuntary, the holders of Bonds Series
M1-5 shall be entitled to receive, after the retirement of the Term Loans,
the amount of principal outstanding, plus any interest earned but unpaid.
Upon payment of such amount, the holders of Bonds Series M1-5 shall not
be entitled to any further share in the distribution of the property or assets
of the Co-operative.
8.6. TERM LOANS
Purpose:
The Co-operative intends to arrange Term Loans to provide a significant portion of the
capital required to construct or acquire Projects. The Term Loans are being qualified
under this Offering Statement to allow for the Term Loans to be held by a lender that
may not meet one of the Offering Statement exemptions as outlined in the Co-op
Regulations.
Offering:
Total Minimum Offering: None
Total Maximum Offering: $20,000,000 Minimum Individual Purchase: None Maximum Individual Purchase: None
Issue: All agreements through which the Co-operative will enter into Term
Loan agreements are subject to approval by the Board of Directors of the
Co-operative.
Page | 125
Interest: No set interest rate at this time. The Board of Directors will endeavor to
reach the most favourable terms available to the Co-operative for the
issue of Term Loans. For an outline of the terms used in the financial
forecasts, see Section 4.12: Portfolio Investment and Finance.
Security: It is anticipated that the security provided to holders of Term Loans may
include, but is not limited to, the real property and assets of the Co-
operative, including land, equipment, inventory, receivables, collateral
accounts, leases, contracts and insurance policies.
Voting: The Term Loans have no voting rights.
Rank: As a secured lender, the holders of Term Loans would be; Senior, to the
payment of interest and principal on Bonds. Senior, to the payment of
principal on Unsecured Convertible Debentures. Senior, to the payment
of dividends on the Class A Preference Shares, Class B Preference Shares
and Class C Preference Shares. Senior, to the Class A Preference Shares,
Class B Preference Shares, Class C Preference Shares and Membership
Shares upon dissolution.
8.7. REGISTERED PLANS
Investors who intend to hold the Securities of CED Co-op within RRSPs, RRIFs or
TFSAs will need to hold the securities in a self-directed Registered Plan. If the investor
already has one in place, CED Co-op recommends they contact the host of their plans to
determine if they are able to make investments in CED Co-op through their current
plan. For those who do not already have a self-directed Registered Plan that can hold
the Securities of CED Co-op, the Co-operative is working with the CWCF to assist
Investors in setting up a self-directed Registered Plan. At this time, CWCF offers RRSP
based plans, but not RRIF, or TFSA based plans. The current fee schedule is attached as
Appendix G. The primary fees that are expected to be incurred by the investor are the
annual fee of $50, a fee of $50 per withdrawal from the plan, and $75 at the closing of
the plan, all of which are inclusive of HST. The actual fees payable may be different,
there may be other fees that are applicable, and these fees are subject to change. For this
reason, it is recommended that investments in CED Co-op through self-directed plans
not total less than $10,000. The comparative difference in overall returns for various
investment levels in the Bonds L1-4 are shown in the table below with the anticipated
fees included.
Page | 126
Bonds L1-4 - Investment level comparison, including fees
Account Trans. Total
Year Fees Fees Fees Return After Fees Return After Fees Return After Fees Return After Fees Return After Fees
1 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
2 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
3 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
4 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
5 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
6 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
7 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
8 50$ 50$ 100$ 1,375$ 1,275$ 2,749$ 2,649$ 6,873$ 6,773$ 13,745$ 13,645$ 27,491$ 27,391$
9 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
10 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
11 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
12 50$ 50$ 100$ 1,905$ 1,805$ 3,811$ 3,711$ 9,527$ 9,427$ 19,054$ 18,954$ 38,108$ 38,008$
13 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
14 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
15 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
16 50$ 50$ 100$ 5,482$ 5,382$ 10,963$ 10,863$ 27,408$ 27,308$ 54,815$ 54,715$ 109,630$ 109,530$
17 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
18 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
19 50$ 50$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$ -$ (50)$
20 50$ 125$ 175$ 9,202$ 9,027$ 18,403$ 18,228$ 46,008$ 45,833$ 92,017$ 91,842$ 184,034$ 183,859$
Totals 1,000$ 275$ 1,275$ 17,963$ 16,688$ 35,926$ 34,651$ 89,816$ 88,541$ 179,632$ 178,357$ 359,263$ 357,988$
Return 8.10% 7.31% 8.10% 7.71% 8.10% 7.94% 8.10% 8.02% 8.10% 8.06%
$5,000.00 $10,000.00 $25,000.00 $50,000.00 $100,000.00
Investment Investment Investment Investment Investment
The foregoing chart is intended to be for illustration purposes only and assumes that
the annual fees are paid by the Bondholder separately from the Bond payments, but
netted off of the total cash flow. The actual mechanism for making this payment may
differ.
9. METHOD OF SALE OF SECURITIES
All Securities sold pursuant to this Offering Statement will be sold exclusively by Board
members, officers, employees (if any) of CED Co-op, and designated Members of CED
Co-op. There are no commissions payable or discounts allowed. Securities may be
issued to Members of CED Co-op as well as to Non-Members. All prospective
purchasers of Securities sold pursuant to this Offering Statement will have received a
copy of this Offering Statement prior to subscribing for such Securities.
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10. DESCRIPTION OF THE MARKET ON WHICH THE SHARES MAY BE SOLD
There is no market through which the Securities of CED Co-op may be sold and none is
expected to develop. Management will use its best efforts to match interested buyers
and sellers but there can be no guarantee that Investors will be able to resell Securities
purchased. There can be no assurance that Investors interested in the purchase of
Securities will be available if and when an Investor wishes to transfer the Securities or
that the Board will approve the transfer. It is a requirement that CED Co-op have an
active receipted Offering Statement in place in order to facilitate a transfer of Securities.
No Securities of CED Co-op may be transferred without the express consent of the
Board. Security holders may request a transfer by writing to the Board of the Co‐
operative.
The Membership Shares, except where prohibited by law, including the provisions of
the Co-op Act, shall be repurchased upon the withdrawal, death or expulsion of a
Member or when a Member exercises the rights of a dissenting Member pursuant to the
Co-op Act. In addition to paying an annual dividend, it is the present intention of CED
Co-op to return the full capital value of an Investor’s Class A Preference Shares through
redemption over twenty (20) years as described in Section 8 (“Description of
Securities”). Shareholders may only redeem Preference Shares with the approval of the
Board. The Bonds of CED Co-op are scheduled to be redeemed at the maturity of their
respective terms. CED Co-op is under no obligation to redeem any of the Class A
Preference Shares or Bonds offered under this Offering Statement upon the withdrawal
of a Member. No reserve or sinking fund is being established for the redemption of the
Class A Preference Shares or Bonds being issued.
The Act prohibits the redemption of the Shares of the Co-operative if CED Co-op is or
would be, as a result of such redemption, insolvent or if such repurchase would, in the
opinion of the Board, be detrimental to the financial stability of CED Co-op. CED Co-op
anticipates commencing full operations upon raising the minimum capital required, but
there can be no assurance given as to when or whether CED Co-op may be profitable.
Page | 128
11. STATEMENT OF MINIMUM AND MAXIMUM AMOUNTS OF THE
OFFERING AND INDIVIDUAL SUBSCRIPTIONS
Summary:
Membership Shares
Unsecured Convertible Debentures
Class A Preference
Shares
Bonds- Series L1-4
Bonds-Series M1-5
Term Loans Totals
Minimum Offering
None None $2,500,000 None $2,500,000
Maximum Offering
$200,000 $400,000* $6,000,000* $4,000,000 $2,000,000 $20,000,000 $32,200,000*
Minimum Individual Purchase
$10 $500 $500 $1,000 $1,000 None
Maximum Individual Purchase
$10 $1,000 None None None None
* The Unsecured Convertible Debenture will be converted into Class A Preference Shares. Only $6 million in Unsecured Convertible Debentures and Class A Preference Shares in the aggregate will be offered. Description:
Membership Shares: Total Minimum Offering: None Total Maximum Offering: $200,000 Share Price: $10 Minimum Individual Purchase: 1 @ $10 Maximum Individual Purchase: 1 @ $10 ($10)
Unsecured Convertible Total Minimum Offering: None Debentures: Total Maximum Offering: $400,000
Minimum Individual Purchase: $500 Maximum Individual Purchase: $1,000
Class A Preference Shares: Total Minimum Offering: None Total Maximum Offering: $6,000,000* Share Price: $5 Minimum Individual Purchase: 100 @ $5 ($500) Maximum Individual Purchase: None * The Unsecured Convertible Debenture will be converted into Class A Preference Shares. Only $6 million in Unsecured Convertible Debentures and Class A Preference Shares in the aggregate will be offered.
Bonds – Series L1-4: Total Minimum Offering: None Total Maximum Offering: $4,000,000
Page | 129
Minimum Individual Purchase: $1,000 Maximum Individual Purchase: None
Bonds – Series M1-5: Total Minimum Offering: None Total Maximum Offering: $2,000,000 Minimum Individual Purchase: $1,000 Maximum Individual Purchase: None
Term Loans: Total Minimum Offering: None Total Maximum Offering: $20,000,000 Minimum Individual Purchase: None Maximum Individual Purchase: None
Total Combined Minimum Offering of
Class A Preference Shares, Bonds Series L1-4
and Bonds Series M1-5: $2,500,000
Amount to be Raised by this Offering Not to Exceed: $32,200,000
Membership Shares, Unsecured Convertible Debentures, Class A Preference Shares,
Bonds Series L1-4, Bonds Series M1-5 and Term Loans are being offered (the
“Offering”). This Offering is limited in that in the event that subscriptions for Class
A Preference shares, Bonds Series L1-4 and Bonds Series M1-5 under the Offering
Statement, in the combined amount of $2,500,000 are not received, no Class A
Preference Shares or Bonds will be sold pursuant to this Offering Statement and any
subscription funds which have been received for these specific Securities under this
Offering Statement will be returned. For clarity, those funds received for
Membership Shares and Unsecured Convertible Debentures, both under this
Offering Statement and under applicable Offering Statement exemptions, totaling a
maximum of $1,000 per Investor, will not be held by the Escrow Agent, neither at the
time of initial investment, nor at the time the Unsecured Convertible Debentures
may be converted to Class A Preference Shares, and are therefore not guaranteed to
be returned to the Investor.
Minimum Amount by an Individual Investor
If a prospective Investor wishes to become a Member, the prospective Investor must
purchase one $10 Membership Share. Only one Membership Share may be owned by
each Member. The purchase of Unsecured Convertible Debentures, Class A Preference
Shares, Bonds L1-4 and Bonds M1-5 is optional and is not a requirement of
Membership. However, if an Investor does purchase Securities other than Membership
Shares, the Investor must meet the minimum individual purchase for that particular
Page | 130
Security, if any, as outlined above. There is no tie between the Securities. Purchasing
one of the Securities of the Co-operative does not obligate the Investor to purchase other
Securities.
Maximum Amount by an Individual Investor
As noted, the Membership Shares have a maximum individual purchase of one
Membership Share for its par value of $10. Apart from this, the Unsecured Convertible
Debentures have a maximum individual purchase of $1,000. There is no maximum
individual purchase for the Class A Preference Shares, the Bonds L1-4, the Bonds M1-5,
or the Term Loans, save and except for the maximum limit of the Offering of each
respective Security. All purchases of Securities are subject to approval by the Board of
Directors and the Board reserves the right to limit any individual purchase of Securities.
12. SECURITIES AND OTHER DEBT OBLIGATIONS OF CED CO-OP
CED Co-op currently has accounts payable outstanding to VCT. This obligation is
outlined in the interim September 30, 2014 financial statements in Appendix C and is
attributable to the start-up costs of CED Co-op that have thus far been paid and/or
accrued by VCT as described in Section 4: Business Plan.
In addition to the accounts payable outstanding, CED Co-op has received total
Unsecured Convertible Debenture subscriptions of $91,940 as of September 30, 2014
which are shown on the interim statement of financial position included in Appendix C.
13. MATERIAL LEGAL PROCEEDINGS TO WHICH CED CO-OP IS A PARTY
Neither the Co-operative, nor any of the Joint Ventures to which the Co-operative is a
party, are involved in, or a party to, any material legal proceedings.
14. MATERIAL INTERESTS OF DIRECTORS, OFFICERS AND EMPLOYEES
Securities
Each of the Directors and officers of CED Co-op is a Member of CED Co-op and owns
one Membership Share. Some of the Directors have made further investments in the
Unsecured Convertible Debentures offered by CED Co-op. Holdings of the Directors
and officers are shown here. CED Co-op has no employees at this time.
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Name Position Membership Shares
Unsecured Convertible Debentures
Arthur Bast Director $10 $990
Brian Unrau Director, President $10 $1,000
Dale Brubacher-Cressman Director, Secretary/Treasurer $10 $1,000
Daniel Ulrich Director $10 $1,000
David Agocs Director $10
James Huebner Director $10
John “Jerry” Enns Director $10 $1,000
Kelley McAlpine Director $10 $1,000
Stephen J. Funk Director $10 $500
Terryl Ballantyne Director $10
The Board members, officers and any employees that CED Co-op has or may have will
be offered the Securities to be issued under this Offering Statement on the same terms
as are available to all other Persons.
Operations
Some of the Directors and officers of CED Co-op are also the directors, officers, and
employees of VCT. As outlined in the Business Plan, VCT has performed development
work on behalf of the Co-operative including, but not limited to, starting up the Co-
operative, seeking legal and accounting advice regarding the operations of the Co-
operative, soliciting individuals to join CED Co-op as Members, securing Joint Venture
agreements for the purpose of developing solar contracts, developing supporting
documentation and making applications to the OPA for FIT Contracts, securing
connections and performing CIAs for FIT Contracts, performing engineering analysis
and Project development, developing this Offering Statement, and managing the
operations of the Co-operative. At this time, VCT has invoiced a total of $292,747.62
(net of HST) for this work, which remains unpaid and outstanding at this time, and
expects to incur further costs in bringing the Projects under development to
Commercial Operation for which it will be compensated. A breakdown of these
expenses is included in Appendix C: Interim Financials
VCT (including those individuals who are Directors and officers of CED Co-op) has
entered into a series of Joint Venture agreements with CED Co-op whereby VCT holds a
49% Economic Interest and CED Co-op holds a 51% Economic Interest in the
development of FIT Contracts and Projects. There are currently 10 Projects under
Page | 132
development in this structure, 8 of which have received FIT Contracts, the other 2 of
which are still in the Application stage.
In performing the dual roles of managing CED Co-op as well as VCT, there have been
decisions that have been made by the Directors of CED Co-op where the potential exists
for a conflict of interest. These situations were noted in a communication that was sent
by mail to all Members along with notice of the February 26th, 2014 meeting of
Members, in compliance with the advance notice requirements as outlined in the Co-op
Act. Further, notice was provided in the mailing which indicated that the Board of
Directors was seeking approval from members of those actions that had been taken
where such potential for a conflict of interest existed. The text of the communications is
attached as Appendix I: Notice of Meeting of Members and Special Resolutions. The
resolution to approve the actions of the Directors was passed unanimously.
CED Co-op has expanded the size of the Board of Directors, of which currently 10 out of
the 11 positions are filled. The purpose of expanding the Board of Directors is to
provide additional management expertise, further strategic development, and increase
outside influence to limit events and decision making where the potential for a conflict
of interest exists.
VCT has advised that it wants to enter into a purchase and sale agreement with CED
Co-op for contracts that have been developed by VCT separately and distinctly from
CED Co-op. The purchase of these contracts would be accompanied by a related lease
agreement that would allow the Co-op to use the land in Blind River which is owned by
VCT. The terms of this agreement are yet to be determined, however it is anticipated
that these contracts would be purchased from VCT at a price which would provide
profits to VCT. The fact that this agreement is not yet finalized is a Risk Factor as
identified in Section 5: Risk Factors - Agreements Not Finalized.
It is also the intention of VCT to enter into an operations and maintenance agreement
with the expanded Board of Directors of CED Co-op for the long term management of
the Projects to ensure proper operation. The terms of this agreement are yet to be
determined, however it is anticipated that these contracts would be set with a
remuneration level which would provide profits to VCT. The fact that this agreement is
not yet finalized is a Risk Factor as identified in Section 5: Risk Factors - Agreements
Not Finalized.
No member of the Board, officer or employee of the Co-operative has a material interest
in the business or operations of the Co-operative other than those disclosed herein.
Page | 133
15. MATERIAL CONTRACTS ENTERED INTO IN THE TWO YEARS PRECEDING
THIS OFFERING STATEMENT
The following are a list of the active contracts that have been entered into directly by
CED Co-op or entered into by a Joint Venture to which CED Co-op is a party.
Joint Venture Agreements
A sample of the Joint Venture agreements is included as Appendix H: Form of Joint
Venture Agreement
1. CEDC LEIS SUNSHARE JV (2047722 Ontario Inc.)
2. CEDC ROHNBRAD SUNSHARE JV (ROHNBRAD INC.)
3. CEDC GH SUNSHARE JV (The Greenhorizons Group of Farms Ltd.)
4. CEDC OSKAM SUNSHARE JV (Oskam Welding & Machine Ltd.)
5. CEDC BTB SUNSHARE JV (1054455 ONTARIO LIMITED)
6. CEDC TURKEY SUNSHARE JV (Schiedel View Farms Inc.)
7. CEDC BALNAR SUNSHARE JV (Balnar Management Ltd.)
8. CEDC CRESTVIEW SUNSHARE JV (2141938 Ontario Inc.)
9. CEDC SALUS SUNSHARE JV (Wag-660 Holdings Inc. and 2321416 Ontario
Limited)
10. CEDC VIGOR SUNSHARE JV (Vigor Clean Tech Inc.)
11. CEDC MCCO SUNSHARE JV (Vigor Clean Tech Inc.)
12. CEDC WELLESLEY SUNSHARE JV (Vigor Clean Tech Inc.)
FIT Contracts Entered into between JVs and the OPA
1. CEDC CRESTVIEW SUNSHARE JV, 20 Crestview Pl (J Hallman)
2. CEDC MCCO SUNSHARE JV, 50 Kent Ave (MCCO)
3. CEDC SALUS SUNSHARE JV, 660 Superior Dr (Salus Marine Wear)
4. CEDC TURKEY SUNSHARE JV, 2316 Bridge St (Schiedel View Farms)
5. CEDC VIGOR SUNSHARE JV, 62 Janti Rd-Cyr (Vigor Clean Tech Inc.)
6. CEDC VIGOR SUNSHARE JV10 New Cobden Rd (J Mason-PIT 2)
7. CEDC VIGOR SUNSHARE JV10 New Cobden Rd (J Mason-PIT 3)
8. CEDC WELLESLEY SUNSHARE JV, 1 Green St (St Clements Arena)
9. CEDC WELLESLEY SUNSHARE JV, 1000 Maple Leaf St (Wellesley Arena)
10. CEDC WELLESLEY SUNSHARE JV, 4639 Lobsinger Line (Wellesley Township
Office)
11. CEDC WELLESLEY SUNSHARE JV, 5279 Ament Line (Linwood Community
Center)
Page | 134
FIT Applications
1. CEDC BALNAR SUNSHARE JV, 104 Dawson Rd (M Balnar)
2. CEDC BALNAR SUNSHARE JV, 367 Woodlawn Rd W (Woodlawn Investments)
3. CEDC BALNAR SUNSHARE JV, 79 Regal Rd (Regal Mall Corp.)
4. CEDC BTB SUNSHARE JV, 1379 Northumberland St (B Ballantyne)
5. CEDC GH SUNSHARE JV, 1625 Kossuth Rd (R Schiedel)
6. CEDC LEIS SUNSHARE JV, 1315 Hutchison Rd (Leis Pet)
7. CEDC OSKAM SUNSHARE JV, 40 Rutherford Crt (J Oskam)
8. CEDC ROHNBRAD SUNSHARE JV, 20 Massey Rd (RohnBrad)
9. CEDC ROHNBRAD SUNSHARE JV, 348 Woodlawn Rd (RohnBrad)
10. CEDC ROHNBRAD SUNSHARE JV, 350 Woodlawn Rd (RohnBrad)
11. CEDC ROHNBRAD SUNSHARE JV, 40 Lewis Rd (GTDL)
12. CEDC ROHNBRAD SUNSHARE JV, 400 Southgate Dr (RohnBrad)
13. CEDC ROHNBRAD SUNSHARE JV, 45 Massey Rd (RohnBrad)
14. CEDC VIGOR SUNSHARE JV, 30 Mumford Dr (Perfetto Manufacturing Ltd.)
15. CEDC VIGOR SUNSHARE JV, 40 Mumford Dr (SER Hydraulics LTD)
Lease Agreements
1. CEDC BALNAR SUNSHARE JV, 104 Dawson Rd (M Balnar)
2. CEDC BALNAR SUNSHARE JV, 367 Woodlawn Rd W (Woodlawn Investments)
3. CEDC BALNAR SUNSHARE JV, 79 Regal Rd (Regal Mall Corp.)
4. CEDC BTB SUNSHARE JV, 1379 Northumberland St (B Ballantyne)
5. CEDC CRESTVIEW SUNSHARE JV, 20 Crestview Pl (J Hallman)
6. CEDC GH SUNSHARE JV, 1625 Kossuth Rd (R Schiedel)
7. CEDC LEIS SUNSHARE JV, 1315 Hutchison Rd (Leis Pet)
8. CEDC MCCO SUNSHARE JV, 50 Kent Ave (MCCO)
9. CEDC OSKAM SUNSHARE JV, 40 Rutherford Crt (J Oskam)
10. CEDC ROHNBRAD SUNSHARE JV, 20 Massey Rd (RohnBrad)
11. CEDC ROHNBRAD SUNSHARE JV, 348 Woodlawn Rd (RohnBrad)
12. CEDC ROHNBRAD SUNSHARE JV, 350 Woodlawn Rd (RohnBrad)
13. CEDC ROHNBRAD SUNSHARE JV, 40 Lewis Rd (GTDL)
14. CEDC ROHNBRAD SUNSHARE JV, 400 Southgate Dr (RohnBrad)
15. CEDC ROHNBRAD SUNSHARE JV, 45 Massey Rd (RohnBrad)
16. CEDC SALUS SUNSHARE JV, 660 Superior Dr (Salus Marine Wear)
Page | 135
17. CEDC TURKEY SUNSHARE JV, 2316 Bridge St (Schiedel View Farms)
18. CEDC VIGOR SUNSHARE JV, 10 New Cobden Rd (J Mason-PIT 2)
19. CEDC VIGOR SUNSHARE JV, 10 New Cobden Rd (J Mason-PIT 3)
20. CEDC VIGOR SUNSHARE JV, 30 Mumford Dr (Perfetto Manufacturing Ltd.)
21. CEDC VIGOR SUNSHARE JV, 40 Mumford Dr (SER Hydraulics LTD)
22. CEDC VIGOR SUNSHARE JV, 62 Janti Rd-Cyr (Ronald and Judy Cyr)
23. CEDC WELLESLEY SUNSHARE JV, 1 Green St (St Clements Arena)
24. CEDC WELLESLEY SUNSHARE JV, 1000 Maple Leaf St (Wellesley Arena)
25. CEDC WELLESLEY SUNSHARE JV, 4639 Lobsinger Line (Wellesley Township
Office)
26. CEDC WELLESLEY SUNSHARE JV, 5279 Ament Line (Linwood Community
Center)
16. DIVIDENDS OR OTHER DISTRIBUTIONS PAID, DECLARED OR
ACCUMULATED BUT UNPAID
CED Co-op has neither paid nor declared any dividends on its Shares since its
incorporation.
17. DESCRIPTION OF ANY OTHER MATERIAL FACTS
A copy of this Offering Statement must be given to each investor before any payment
may legally be accepted by CED Co-op.
None of the Securities issued by CED Co-op pursuant to this Offering Statement will be
in bearer form.
This Offering Statement will expire on November 27, 2015, after which date no further
sale of Securities shall occur, unless a new Offering Statement has been filed and
receipted.
Page | 136
18. CERTIFICATE OF DISCLOSURE
THE FOREGOING CONSTITUTES FULL, TRUE, AND PLAIN DISCLOSURE OF ALL
MATERIAL FACTS RELATING TO THE SECURITIES OFFERED BY THIS OFFERING
STATEMENT AS REQUIRED BY SECTION 35 OF THE CO-OPERATIVE
CORPORATIONS ACT.
Dated at Petersburg, Ontario this 27th day of November, 2014.
__________________________________
President, Chair of the Board: Brian Unrau
__________________________________
Secretary/Treasurer, Director: Dale Brubacher-Cressman
Page | 137
19. APPENDICES
Appendix A: Pro Forma Financial Projections
Appendix B: Audited Financial Statements
Appendix C: Interim Financials, Notes
Appendix D: Membership Application and Membership Share Subscription
Appendix E: Escrow Agreement
Appendix F: Certificate of Incorporation
Appendix G: CWCF Self-Directed RRSP Fee Schedule
Appendix H: Form of Joint Venture Agreement
Appendix I: Notice of Meeting of Members and Special Resolutions
Appendix J: Form of Offering Statement Subscription Agreement
Page | 138
APPENDIX A: Pro Forma Financial Projections
Co
mm
un
ity
Ene
rgy
De
velo
pm
en
t C
o-o
pe
rati
ve L
tdP
ro F
orm
a St
ate
me
nt
of
Op
era
tio
ns
- $
's (
Un
aud
ite
d)
For
the
ye
ars
en
de
d D
ece
mb
er
31
Ye
ar20
1420
1520
1620
1720
1820
1920
2020
2120
2220
2320
2420
2520
2620
2720
2820
2920
3020
3120
3220
3320
34To
tals
Ye
ar o
f C
on
trac
t0
12
34
56
78
910
1112
1314
1516
1718
1920
kWh
of
Ele
ctri
city
Pro
du
ced
04,
469,
184
4,46
0,77
24,
452,
112
4,44
3,19
94,
420,
644
4,41
1,40
24,
401,
894
4,37
9,20
34,
369,
355
4,35
9,22
94,
336,
405
4,32
5,92
74,
315,
157
4,30
4,08
84,
281,
071
4,26
9,63
24,
257,
880
4,23
4,73
94,
222,
605
4,21
0,14
286
,924
,643
Co
-op
Po
rtio
n o
f El
ect
rici
ty R
eve
nu
e0
3,00
7,12
23,
001,
014
2,98
6,55
52,
980,
558
2,97
4,16
12,
967,
918
2,95
2,87
32,
946,
528
2,93
9,96
62,
933,
039
2,91
8,11
22,
911,
221
2,90
3,96
32,
896,
756
2,88
1,63
82,
874,
033
2,86
6,50
12,
858,
844
2,84
5,67
92,
835,
378
58,4
81,8
60
Inte
rest
Inco
me
012
,711
13,3
1113
,911
14,5
1115
,111
15,7
1116
,311
16,9
1117
,511
18,1
1118
,711
19,3
1119
,911
20,5
1121
,111
9,00
00
00
026
2,66
2
Inve
stm
en
t In
com
e0
01,
403
2,89
24,
189
5,65
77,
361
20,9
1834
,270
18,1
0930
,566
43,0
7355
,330
26,5
6137
,341
48,0
8683
,399
50,2
2610
6,02
416
1,73
521
7,99
695
5,13
6
Re
ven
ue
03,
019,
833
3,01
5,72
83,
003,
357
2,99
9,25
72,
994,
929
2,99
0,99
02,
990,
102
2,99
7,70
82,
975,
587
2,98
1,71
62,
979,
896
2,98
5,86
22,
950,
435
2,95
4,60
72,
950,
835
2,96
6,43
22,
916,
726
2,96
4,86
83,
007,
414
3,05
3,37
459
,699
,657 0
Leas
e0
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
108,
615
2,17
2,30
0
Uti
lity
& In
tern
et
08,
400
8,46
38,
527
8,59
28,
658
8,72
58,
792
8,86
18,
931
9,00
29,
074
9,14
79,
222
9,29
79,
373
9,45
19,
530
9,61
09,
691
9,77
318
1,11
9
Insu
ran
ce -
Pro
ject
s0
28,1
2928
,551
28,9
8029
,414
29,8
5630
,303
30,7
5831
,219
31,6
8832
,163
32,6
4533
,135
33,6
3234
,137
34,6
4935
,168
35,6
9636
,231
36,7
7537
,326
650,
455
War
ran
ty &
Se
rvic
e0
170,
750
173,
312
175,
911
178,
550
181,
228
183,
947
186,
706
189,
507
192,
349
195,
234
198,
163
201,
135
204,
152
207,
215
210,
323
213,
478
216,
680
219,
930
223,
229
226,
577
3,94
8,37
7
Tota
l O&
M0
315,
895
318,
941
322,
033
325,
171
328,
357
331,
590
334,
871
338,
202
341,
583
345,
014
348,
497
352,
033
355,
621
359,
263
362,
960
366,
712
370,
520
374,
386
378,
310
382,
292
6,95
2,25
1
Op
era
tin
g In
com
e0
2,70
3,93
82,
696,
787
2,68
1,32
42,
674,
086
2,66
6,57
22,
659,
400
2,65
5,23
12,
659,
506
2,63
4,00
42,
636,
701
2,63
1,39
82,
633,
829
2,59
4,81
42,
595,
344
2,58
7,87
52,
599,
720
2,54
6,20
62,
590,
482
2,62
9,10
42,
671,
082
52,7
47,4
06
Acc
ou
nti
ng
12,0
0018
,462
18,7
3819
,020
19,3
0519
,594
19,8
8820
,187
20,4
8920
,797
21,1
0921
,425
21,7
4722
,073
22,4
0422
,740
23,0
8123
,427
23,7
7924
,136
24,4
9843
8,89
8
Lega
l8,
000
12,3
0812
,492
12,6
8012
,870
13,0
6313
,259
13,4
5813
,660
13,8
6514
,072
14,2
8414
,498
14,7
1514
,936
15,1
6015
,387
15,6
1815
,853
16,0
9016
,332
292,
599
Insu
ran
ce -
Org
aniz
atio
n5,
000
7,69
27,
808
7,92
58,
044
8,16
48,
287
8,41
18,
537
8,66
58,
795
8,92
79,
061
9,19
79,
335
9,47
59,
617
9,76
19,
908
10,0
5610
,207
182,
874
Co
mm
un
icat
ion
s3,
000
4,61
54,
685
4,75
54,
826
4,89
94,
972
5,04
75,
122
5,19
95,
277
5,35
65,
437
5,51
85,
601
5,68
55,
770
5,85
75,
945
6,03
46,
124
109,
725
Off
ice
24,0
0036
,923
37,4
7738
,039
38,6
1039
,189
39,7
7740
,373
40,9
7941
,594
42,2
1742
,851
43,4
9344
,146
44,8
0845
,480
46,1
6246
,855
47,5
5848
,271
48,9
9587
7,79
7
Ad
min
istr
atio
n52
,000
80,0
0081
,200
82,4
1883
,654
84,9
0986
,183
87,4
7588
,788
90,1
1991
,471
92,8
4394
,236
95,6
4997
,084
98,5
4010
0,01
910
1,51
910
3,04
210
4,58
710
6,15
61,
901,
893
EBIT
DA
(52,
000)
2,62
3,93
82,
615,
587
2,59
8,90
62,
590,
432
2,58
1,66
32,
573,
218
2,56
7,75
52,
570,
719
2,54
3,88
42,
545,
230
2,53
8,55
52,
539,
593
2,49
9,16
52,
498,
260
2,48
9,33
52,
499,
701
2,44
4,68
72,
487,
441
2,52
4,51
72,
564,
926
50,8
45,5
13
Inte
rest
on
Te
rm L
oan
s0
1,03
4,61
199
0,64
394
3,74
789
3,72
884
0,37
778
3,47
372
2,77
965
8,04
358
8,99
651
5,34
943
6,79
835
3,01
526
3,65
216
8,33
766
,674
00
00
09,
260,
225
Inte
rest
on
Bo
nd
s M
1-5
088
,077
72,7
2156
,220
38,5
7119
,805
00
00
00
00
00
00
00
027
5,39
4
Inte
rest
on
Bo
nd
s L1
-40
228,
155
246,
353
266,
008
287,
239
310,
171
334,
942
361,
699
390,
603
366,
530
396,
390
428,
687
463,
620
419,
278
453,
991
491,
580
532,
283
324,
344
351,
914
381,
826
414,
281
7,44
9,89
3
Tota
l In
tere
st0
1,35
0,84
21,
309,
717
1,26
5,97
51,
219,
538
1,17
0,35
31,
118,
415
1,08
4,47
91,
048,
647
955,
526
911,
739
865,
485
816,
635
682,
930
622,
328
558,
254
532,
283
324,
344
351,
914
381,
826
414,
281
16,9
85,5
11
Inco
me
be
fore
De
pre
ciat
ion
(52,
000)
1,27
3,09
61,
305,
870
1,33
2,93
11,
370,
894
1,41
1,31
01,
454,
803
1,48
3,27
71,
522,
072
1,58
8,35
81,
633,
491
1,67
3,07
01,
722,
958
1,81
6,23
51,
875,
932
1,93
1,08
11,
967,
418
2,12
0,34
32,
135,
527
2,14
2,69
12,
150,
645
33,8
60,0
01
De
pre
ciat
ion
(N
ot
CC
A)
01,
197,
135
1,19
7,13
51,
197,
135
1,19
7,13
51,
197,
135
1,19
7,13
51,
197,
135
1,19
7,13
51,
197,
135
1,19
7,13
51,
197,
135
1,19
7,13
51,
197,
135
1,19
7,13
51,
197,
135
1,19
7,13
51,
197,
135
1,19
7,13
51,
197,
135
1,19
7,13
523
,942
,704
Taxa
ble
Inco
me
(52,
000)
75,9
6110
8,73
513
5,79
617
3,75
921
4,17
525
7,66
728
6,14
232
4,93
739
1,22
343
6,35
647
5,93
552
5,82
361
9,09
967
8,79
773
3,94
677
0,28
392
3,20
893
8,39
294
5,55
695
3,50
99,
917,
297
Tax
020
,130
28,8
1535
,986
46,0
4656
,756
68,2
8275
,828
86,1
0810
3,67
411
5,63
412
6,12
313
9,34
316
4,06
117
9,88
119
4,49
620
4,12
524
4,65
024
8,67
425
0,57
225
2,68
02,
628,
084
Ne
t In
com
e A
fte
r Ta
x(5
2,00
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718
694,
983
700,
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3
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pre
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e0
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902
647,
305
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397,
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588
264,
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323
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289,
213
AP
PEN
DIX
A: P
ro F
orm
a Fi
nan
cial
s
Page | 139
Co
mm
un
ity
Ene
rgy
De
velo
pm
en
t C
o-o
pe
rati
ve L
tdP
ro F
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a St
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of
Fin
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n -
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nau
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As
at D
ece
mb
er
31
Ye
ar20
1420
1520
1620
1720
1820
1920
2020
2120
2220
2320
2420
2520
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2720
2820
2920
3020
3120
3220
3320
34
Ye
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f C
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196,
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557,
811
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708,
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Ass
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847,
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21,
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1,64
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0,30
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2,39
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72,
762,
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2,03
5,68
52,
363,
140
2,68
9,69
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1,33
9,35
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Sola
r P
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ts23
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22,2
97,8
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20,9
85,4
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,248
,770
19,4
48,7
9418
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,247
17,6
38,7
9916
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,220
15,5
09,4
3514
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13,0
11,7
1611
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10,0
84,2
818,
408,
515
6,63
2,72
34,
649,
952
2,44
6,89
00
Tota
l Ass
ets
24,7
90,0
8924
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,277
23,8
87,1
3423
,376
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22,8
25,0
4422
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21,8
93,9
6621
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20,2
21,5
5019
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,276
19,0
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1718
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16,3
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1415
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14,2
98,2
3612
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9,74
7,86
69,
460,
029
8,96
2,89
28,
260,
119
2,05
3,37
5
Liab
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ies
Cu
rre
nt
Po
rtio
n L
on
g Te
rm D
eb
t66
0,15
970
4,12
775
1,02
380
1,04
285
4,39
391
1,29
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1,99
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727
1,10
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179,
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1,25
7,97
21,
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755
1,43
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60
00
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0
Cu
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nt
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355,
268
344,
387
332,
649
319,
598
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1,99
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774,
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22,
360,
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1,11
81,
526,
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1,62
8,09
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916,
858
00
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873,
899
0
Lon
g Te
rm D
eb
t15
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,166
14,7
97,0
3914
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13,2
44,9
7512
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11,4
79,2
8510
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9,47
0,56
88,
364,
794
7,18
5,37
35,
927,
401
4,58
5,64
63,
154,
528
1,62
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60
00
00
00
Lon
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rm B
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3,99
8,49
93,
950,
804
3,91
7,42
63,
900,
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1,23
94,
211,
410
4,54
6,35
24,
169,
780
4,50
8,70
54,
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5,27
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54,
681,
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8,89
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93,
516,
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3,81
5,81
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140,
159
4,49
2,07
30
0
Tota
l No
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t Li
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s19
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18,7
47,8
4317
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17,1
45,0
7216
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15,6
90,6
9515
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13,6
40,3
4812
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12,0
60,6
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9,26
7,31
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00
Tota
l Lia
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s20
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19,7
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5719
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18,2
65,7
1217
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16,6
01,9
9216
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15,4
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11,6
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139,
654,
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8,64
2,69
77,
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y24
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AP
PEN
DIX
A: P
ro F
orm
a Fi
nan
cial
s
Page | 140
Co
mm
un
ity
Ene
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De
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t C
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d In
tere
st -
Bo
nd
s M
1-5
068
,537
34,1
93(3
31)
(34,
551)
(67,
848)
00
00
00
00
00
00
00
0
Ch
ange
in B
on
ds
L1-4
2,87
3,48
50
00
00
00
(459
,758
)0
00
(459
,758
)0
00
(919
,515
)0
00
(1,0
34,4
55)
Ch
ange
s in
Acc
rue
d In
tere
st -
Bo
nd
s L1
-40
228,
155
246,
353
266,
008
287,
239
310,
171
334,
942
361,
699
60,4
1236
6,53
039
6,39
042
8,68
7(1
71,6
64)
419,
278
453,
991
491,
580
(1,6
98,4
08)
324,
344
351,
914
381,
826
(3,8
39,4
44)
Ch
ange
in P
refe
ren
ce A
Sh
are
s4,
353,
765
(85,
100)
(92,
760)
(101
,110
)(1
10,2
10)
(120
,125
)(1
30,9
40)
(142
,720
)(1
55,5
65)
(169
,570
)(1
84,8
30)
(201
,465
)(2
19,5
95)
(239
,360
)(2
60,9
00)
(284
,385
)(3
09,9
80)
(337
,875
)(3
68,2
85)
(401
,430
)(4
37,5
60)
24,8
68,8
57(8
03,8
35)
(842
,003
)(8
82,5
12)
(925
,015
)(9
69,0
40)
(707
,295
)(7
53,0
11)
(1,5
91,6
38)
(908
,814
)(9
67,8
61)
(1,0
30,7
50)
(2,1
92,7
71)
(1,2
51,2
00)
(1,3
33,3
42)
(1,4
20,9
01)
(2,9
27,9
03)
(13,
531)
(16,
371)
(19,
604)
(5,3
11,4
59)
Div
ide
nd
s P
aid
on
Pre
f A
Sh
are
s0
(391
,840
)(3
84,1
80)
(375
,830
)(3
66,7
29)
(356
,814
)(3
45,9
99)
(334
,219
)(3
21,3
74)
(307
,370
)(2
92,1
10)
(275
,475
)(2
57,3
44)
(237
,580
)(2
16,0
40)
(192
,555
)(1
66,9
60)
(139
,064
)(1
08,6
55)
(75,
510)
(39,
380)
Fre
e C
ash
at
Be
gin
nin
g o
f Ye
ar(2
6,76
8)0
37,4
2277
,109
111,
698
150,
847
196,
303
557,
811
913,
858
482,
917
815,
092
1,14
8,61
21,
475,
458
708,
300
995,
755
1,28
2,30
62,
223,
968
1,33
9,35
12,
827,
305
4,31
2,94
05,
813,
229
Ch
ange
in C
ash
26,7
6837
,422
39,6
8734
,589
39,1
5045
,456
361,
508
356,
046
(430
,940
)33
2,17
433
3,52
032
6,84
5(7
67,1
58)
287,
455
286,
551
941,
662
(884
,617
)1,
487,
954
1,48
5,63
51,
500,
289
(3,7
59,8
54)
Fre
e C
ash
at
End
of
Year
037
,422
77,1
0911
1,69
815
0,84
719
6,30
355
7,81
191
3,85
848
2,91
781
5,09
21,
148,
612
1,47
5,45
870
8,30
099
5,75
51,
282,
306
2,22
3,96
81,
339,
351
2,82
7,30
54,
312,
940
5,81
3,22
92,
053,
375
AP
PEN
DIX
A: P
ro F
orm
a Fi
nan
cial
s
Page | 141
Co
mm
un
ity
Ene
rgy
De
velo
pm
en
t C
o-o
pe
rati
ve L
tdSu
mm
ary
of
Cas
h F
low
s fr
om
a T
ax P
ers
pe
ctiv
e -
$'s
(U
nau
dit
ed
)
For
the
ye
ars
en
de
d D
ece
mb
er
31
Ye
ar20
1420
1520
1620
1720
1820
1920
2020
2120
2220
2320
2420
2520
2620
2720
2820
2920
3020
3120
3220
3320
34To
tals
Ye
ar if
Co
ntr
acts
01
23
45
67
89
1011
1213
1415
1617
1819
20
Co
-op
Po
rtio
n o
f El
ect
rici
ty R
eve
nu
e0
3,00
7,12
23,
001,
014
2,98
6,55
52,
980,
558
2,97
4,16
12,
967,
918
2,95
2,87
32,
946,
528
2,93
9,96
62,
933,
039
2,91
8,11
22,
911,
221
2,90
3,96
32,
896,
756
2,88
1,63
82,
874,
033
2,86
6,50
12,
858,
844
2,84
5,67
92,
835,
378
58,4
81,8
60
Inte
rest
Inco
me
- N
ote
10
12,7
1113
,311
13,9
1114
,511
15,1
1115
,711
16,3
1116
,911
17,5
1118
,111
18,7
1119
,311
19,9
1120
,511
21,1
119,
000
00
00
262,
662
Inve
stm
en
t In
com
e -
No
te 2
00
1,40
32,
892
4,18
95,
657
7,36
120
,918
34,2
7018
,109
30,5
6643
,073
55,3
3026
,561
37,3
4148
,086
83,3
9950
,226
106,
024
161,
735
217,
996
955,
136
Gro
ss R
eve
nu
e0
3,01
9,83
33,
015,
728
3,00
3,35
72,
999,
257
2,99
4,92
92,
990,
990
2,99
0,10
22,
997,
708
2,97
5,58
72,
981,
716
2,97
9,89
62,
985,
862
2,95
0,43
52,
954,
607
2,95
0,83
52,
966,
432
2,91
6,72
62,
964,
868
3,00
7,41
43,
053,
374
59,6
99,6
57
Leas
e0
(108
,615
)(1
08,6
15)
(108
,615
)(1
08,6
15)
(108
,615
)(1
08,6
15)
(108
,615
)(1
08,6
15)
(108
,615
)(1
08,6
15)
(108
,615
)(1
08,6
15)
(108
,615
)(1
08,6
15)
(108
,615
)(1
08,6
15)
(108
,615
)(1
08,6
15)
(108
,615
)(1
08,6
15)
(2,1
72,3
00)
Uti
lity
& In
tern
et
0(8
,400
)(8
,463
)(8
,527
)(8
,592
)(8
,658
)(8
,725
)(8
,792
)(8
,861
)(8
,931
)(9
,002
)(9
,074
)(9
,147
)(9
,222
)(9
,297
)(9
,373
)(9
,451
)(9
,530
)(9
,610
)(9
,691
)(9
,773
)(1
81,1
19)
Insu
ran
ce -
Pro
ject
s0
(28,
129)
(28,
551)
(28,
980)
(29,
414)
(29,
856)
(30,
303)
(30,
758)
(31,
219)
(31,
688)
(32,
163)
(32,
645)
(33,
135)
(33,
632)
(34,
137)
(34,
649)
(35,
168)
(35,
696)
(36,
231)
(36,
775)
(37,
326)
(650
,455
)
War
ran
ty &
Se
rvic
e0
(170
,750
)(1
73,3
12)
(175
,911
)(1
78,5
50)
(181
,228
)(1
83,9
47)
(186
,706
)(1
89,5
07)
(192
,349
)(1
95,2
34)
(198
,163
)(2
01,1
35)
(204
,152
)(2
07,2
15)
(210
,323
)(2
13,4
78)
(216
,680
)(2
19,9
30)
(223
,229
)(2
26,5
77)
(3,9
48,3
77)
Pro
ject
Op
era
tin
g Ex
pe
nse
0(3
15,8
95)
(318
,941
)(3
22,0
33)
(325
,171
)(3
28,3
57)
(331
,590
)(3
34,8
71)
(338
,202
)(3
41,5
83)
(345
,014
)(3
48,4
97)
(352
,033
)(3
55,6
21)
(359
,263
)(3
62,9
60)
(366
,712
)(3
70,5
20)
(374
,386
)(3
78,3
10)
(382
,292
)(6
,952
,251
)
Op
era
tin
g In
com
e0
2,70
3,93
82,
696,
787
2,68
1,32
42,
674,
086
2,66
6,57
22,
659,
400
2,65
5,23
12,
659,
506
2,63
4,00
42,
636,
701
2,63
1,39
82,
633,
829
2,59
4,81
42,
595,
344
2,58
7,87
52,
599,
720
2,54
6,20
62,
590,
482
2,62
9,10
42,
671,
082
52,7
47,4
06
Pay
me
nts
on
Te
rm L
oan
s16
,161
,325
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
(1,6
94,7
70)
00
00
0(9
,260
,225
)
Inte
rest
Po
rtio
n o
f P
aym
en
ts -
No
te 3
0(1
,034
,611
)(9
90,6
43)
(943
,747
)(8
93,7
28)
(840
,377
)(7
83,4
73)
(722
,779
)(6
58,0
43)
(588
,996
)(5
15,3
49)
(436
,798
)(3
53,0
15)
(263
,652
)(1
68,3
37)
(66,
674)
00
00
0(9
,260
,225
)
Surp
lus
Aft
er
Pay
me
nts
on
Te
rm L
oan
s0
1,00
9,16
81,
002,
017
986,
554
979,
316
971,
802
964,
630
960,
461
964,
736
939,
234
941,
931
936,
628
939,
059
900,
044
900,
574
893,
105
2,59
9,72
02,
546,
206
2,59
0,48
22,
629,
104
2,67
1,08
227
,325
,856
Acc
ou
nti
ng
(12,
000)
(18,
462)
(18,
738)
(19,
020)
(19,
305)
(19,
594)
(19,
888)
(20,
187)
(20,
489)
(20,
797)
(21,
109)
(21,
425)
(21,
747)
(22,
073)
(22,
404)
(22,
740)
(23,
081)
(23,
427)
(23,
779)
(24,
136)
(24,
498)
(438
,898
)
Lega
l(8
,000
)(1
2,30
8)(1
2,49
2)(1
2,68
0)(1
2,87
0)(1
3,06
3)(1
3,25
9)(1
3,45
8)(1
3,66
0)(1
3,86
5)(1
4,07
2)(1
4,28
4)(1
4,49
8)(1
4,71
5)(1
4,93
6)(1
5,16
0)(1
5,38
7)(1
5,61
8)(1
5,85
3)(1
6,09
0)(1
6,33
2)(2
92,5
99)
Insu
ran
ce -
Org
aniz
atio
n(5
,000
)(7
,692
)(7
,808
)(7
,925
)(8
,044
)(8
,164
)(8
,287
)(8
,411
)(8
,537
)(8
,665
)(8
,795
)(8
,927
)(9
,061
)(9
,197
)(9
,335
)(9
,475
)(9
,617
)(9
,761
)(9
,908
)(1
0,05
6)(1
0,20
7)(1
82,8
74)
Co
mm
un
icat
ion
s(3
,000
)(4
,615
)(4
,685
)(4
,755
)(4
,826
)(4
,899
)(4
,972
)(5
,047
)(5
,122
)(5
,199
)(5
,277
)(5
,356
)(5
,437
)(5
,518
)(5
,601
)(5
,685
)(5
,770
)(5
,857
)(5
,945
)(6
,034
)(6
,124
)(1
09,7
25)
Off
ice
(24,
000)
(36,
923)
(37,
477)
(38,
039)
(38,
610)
(39,
189)
(39,
777)
(40,
373)
(40,
979)
(41,
594)
(42,
217)
(42,
851)
(43,
493)
(44,
146)
(44,
808)
(45,
480)
(46,
162)
(46,
855)
(47,
558)
(48,
271)
(48,
995)
(877
,797
)
Ad
min
istr
atio
n E
xpe
nse
(52,
000)
(80,
000)
(81,
200)
(82,
418)
(83,
654)
(84,
909)
(86,
183)
(87,
475)
(88,
788)
(90,
119)
(91,
471)
(92,
843)
(94,
236)
(95,
649)
(97,
084)
(98,
540)
(100
,019
)(1
01,5
19)
(103
,042
)(1
04,5
87)
(106
,156
)(1
,901
,893
)
Re
serv
e A
dd
itio
ns
- N
ote
4(8
47,3
85)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
(40,
000)
807,
385
600,
000
00
00
(0)
Tota
l Re
serv
es
(847
,385
)(8
87,3
85)
(927
,385
)(9
67,3
85)
(1,0
07,3
85)
(1,0
47,3
85)
(1,0
87,3
85)
(1,1
27,3
85)
(1,1
67,3
85)
(1,2
07,3
85)
(1,2
47,3
85)
(1,2
87,3
85)
(1,3
27,3
85)
(1,3
67,3
85)
(1,4
07,3
85)
(600
,000
)0
00
00
0
Surp
lus
Aft
er
Ad
min
& R
ese
rve
s(8
99,3
85)
889,
168
880,
817
864,
136
855,
662
846,
893
838,
448
832,
985
835,
949
809,
114
810,
460
803,
785
804,
823
764,
395
763,
490
1,60
1,95
03,
099,
701
2,44
4,68
72,
487,
441
2,52
4,51
72,
564,
926
25,4
23,9
63
Bo
nd
Re
de
mp
tio
ns
M1-
5 -
No
te 5
1,48
0,28
1(3
74,8
07)
(364
,190
)(3
52,6
08)
(339
,573
)(3
24,4
98)
00
00
00
00
00
00
00
0(2
75,3
94)
Bo
nd
Re
de
mp
tio
ns
L1-4
- N
ote
62,
873,
485
00
00
00
0(7
89,9
49)
00
0(1
,095
,041
)0
00
(3,1
50,2
07)
00
0(5
,288
,181
)(7
,449
,893
)
Tota
l In
tere
st -
No
te 7
01,
350,
842
1,30
9,71
71,
265,
975
1,21
9,53
81,
170,
353
1,11
8,41
51,
084,
479
1,04
8,64
795
5,52
691
1,73
986
5,48
581
6,63
568
2,93
062
2,32
855
8,25
453
2,28
332
4,34
435
1,91
438
1,82
641
4,28
116
,985
,511
Ne
t C
ash
Flo
w a
fte
r B
on
d P
aym
en
ts0
514,
361
516,
627
511,
528
516,
089
522,
395
838,
448
832,
985
45,9
9980
9,11
481
0,46
080
3,78
5(2
90,2
18)
764,
395
763,
490
1,60
1,95
0(5
0,50
6)2,
444,
687
2,48
7,44
12,
524,
517
(2,7
23,2
54)
14,2
44,2
94
CC
A (
De
pre
ciat
ion
) -
No
te 8
01,
273,
096
1,30
5,87
01,
332,
931
1,37
0,89
41,
411,
310
1,45
4,80
31,
483,
277
1,52
2,07
21,
588,
358
1,63
3,49
11,
673,
070
1,72
2,95
81,
816,
235
1,87
5,93
21,
239,
204
619,
602
309,
801
154,
900
77,4
5038
,725
23,9
03,9
79
Taxa
ble
Inco
me
(52,
000)
00
00
00
00
00
00
00
691,
877
1,34
7,81
61,
810,
542
1,98
0,62
72,
065,
241
2,11
1,92
09,
956,
022
Inco
me
Tax
00
00
00
00
00
00
00
0(1
83,3
48)
(357
,171
)(4
79,7
94)
(524
,866
)(5
47,2
89)
(559
,659
)(2
,652
,126
)
Aft
er
Tax
Fre
e C
ash
Flo
w -
No
te 9
(52,
000)
514,
361
516,
627
511,
528
516,
089
522,
395
838,
448
832,
985
45,9
9980
9,11
481
0,46
080
3,78
5(2
90,2
18)
764,
395
763,
490
1,41
8,60
3(4
07,6
77)
1,96
4,89
41,
962,
575
1,97
7,22
8(3
,282
,913
)11
,540
,168
Pai
d o
n C
lass
A P
ref
Shar
es
- N
ote
10
4,35
3,76
5(4
76,9
40)
(476
,940
)(4
76,9
40)
(476
,939
)(4
76,9
39)
(476
,939
)(4
76,9
39)
(476
,939
)(4
76,9
40)
(476
,940
)(4
76,9
40)
(476
,939
)(4
76,9
40)
(476
,940
)(4
76,9
40)
(476
,940
)(4
76,9
39)
(476
,940
)(4
76,9
40)
(476
,940
)(5
,185
,028
)
Re
mai
nin
g C
ash
Flo
w0
37,4
2239
,687
34,5
8939
,150
45,4
5636
1,50
835
6,04
6(4
30,9
40)
332,
174
333,
520
326,
845
(767
,158
)28
7,45
528
6,55
194
1,66
2(8
84,6
17)
1,48
7,95
41,
485,
635
1,50
0,28
9(3
,759
,854
)2,
053,
375
Re
serv
es
847,
385
887,
385
927,
385
967,
385
1,00
7,38
51,
047,
385
1,08
7,38
51,
127,
385
1,16
7,38
51,
207,
385
1,24
7,38
51,
287,
385
1,32
7,38
51,
367,
385
1,40
7,38
560
0,00
00
00
00
0
Fre
e C
ash
on
Han
d -
No
te 1
10
37,4
2277
,109
111,
698
150,
847
196,
303
557,
811
913,
858
482,
917
815,
092
1,14
8,61
21,
475,
458
708,
300
995,
755
1,28
2,30
62,
223,
968
1,33
9,35
12,
827,
305
4,31
2,94
05,
813,
229
2,05
3,37
52,
053,
375
Cu
mu
lati
ve C
ash
Incl
ud
ing
Re
serv
es
847,
385
924,
807
1,00
4,49
41,
079,
083
1,15
8,23
21,
243,
688
1,64
5,19
62,
041,
243
1,65
0,30
22,
022,
477
2,39
5,99
72,
762,
843
2,03
5,68
52,
363,
140
2,68
9,69
12,
823,
968
1,33
9,35
12,
827,
305
4,31
2,94
05,
813,
229
2,05
3,37
5
No
tes:
1. In
tere
st In
com
eTh
is is
th
e a
mo
un
t o
f in
tere
st e
arn
ed
on
mo
ne
y h
eld
in r
ese
rve
s b
ase
d o
n a
re
turn
of
1.50
%
2. In
vest
me
nt
Inco
me
This
re
pre
sen
ts a
mix
ture
of
the
po
ten
tial
inte
rest
ear
ne
d o
n d
ep
osi
ts t
hat
are
no
t re
stri
cte
d a
s w
ell
as
the
op
po
rtu
nit
y to
use
a p
ort
ion
of
fre
e c
ash
flo
w t
o r
ep
urc
has
e t
he
se
curi
tie
s o
f in
vest
ors
wh
o m
ay w
ish
to
se
ll t
he
m p
rio
r to
th
e e
nd
of
the
te
rm o
r co
ntr
acts
.
A r
etu
rn o
f 3.
75%
is u
sed
, ho
we
ver
secu
riti
es
that
are
re
pu
rch
ase
d w
ou
ld r
eal
ize
a h
igh
er
ne
t b
en
efi
t th
rou
gh r
ed
uct
ion
in f
utu
re c
ost
s o
f b
etw
ee
n 6
% a
nd
9%
fo
r th
e C
o-o
pe
rati
ve
3. In
tere
st P
ort
ion
of
Pay
me
nts
This
inte
rest
am
ou
nt
is in
clu
de
d in
th
e t
ota
l pay
me
nts
no
ted
on
th
e p
revi
ou
s li
ne
, bu
t is
bro
ken
ou
t fo
r th
e p
urp
ose
of
calc
ula
tin
g in
com
e.
On
ly t
he
inte
rest
po
rtio
n o
f th
e p
aym
en
t is
a d
ed
uct
ible
exp
en
se.
4. R
ese
rve
Ad
dit
ion
sTh
ere
are
tw
o m
ain
re
serv
es,
th
e d
eb
t se
rvic
e r
ese
rve
of
6 m
on
ths
wo
rth
of
pay
me
nts
on
th
e lo
ng
term
loan
s an
d t
he
mai
nte
nan
ce r
ese
rve
wh
ich
wil
l be
de
term
ine
d in
co
nju
nct
ion
wit
h t
he
en
gin
ee
r re
pre
sen
tin
g th
e le
nd
er
at t
he
tim
e o
f d
ue
dil
ige
nce
.
Bo
th o
f th
ese
re
serv
es
are
em
pti
ed
bac
k in
to c
ash
flo
w, a
ssu
min
g th
ey
rem
ain
un
use
d, t
he
de
bt
rese
rve
in y
ear
15
and
th
e m
ain
ten
ance
re
serv
e in
ye
ar 1
6
5. B
on
d R
ed
em
pti
on
s M
1-5
The
sal
e o
f B
on
ds
M1-
5 is
sh
ow
n in
201
4-Ye
ar 0
, th
e s
ub
seq
ue
nt
year
s sh
ow
on
ly t
he
am
ou
nts
act
ual
ly p
aid
to
Bo
nd
ho
lde
rs o
f th
e M
1-5
seri
es.
Th
is p
aym
en
t is
fo
r th
e f
ull
Pri
nci
pal
an
d In
tere
st p
aym
en
t fo
r th
e B
on
ds
that
are
mat
uri
ng
and
do
es
no
t in
clu
de
inte
rest
acc
rue
d o
n t
he
re
mai
nin
g B
on
ds
ou
tsan
din
g. T
he
Pri
nci
pal
po
rtio
n o
f th
e p
aym
en
t to
Bo
nd
ho
lde
rs is
no
t a
de
du
ctib
le e
xpe
nse
.
6. B
on
d R
ed
em
pti
on
s L1
-4Th
e s
ale
of
Bo
nd
s L1
-4 is
sh
ow
n in
201
4-Ye
ar 0
, th
e s
ub
seq
ue
nt
year
s sh
ow
on
ly t
he
am
ou
nts
act
ual
ly p
aid
to
Bo
nd
ho
lde
rs o
f th
e L
1-4
seri
es.
Th
is p
aym
en
t is
fo
r th
e f
ull
Pri
nci
pal
an
d In
tere
st p
aym
en
t fo
r th
e B
on
ds
that
are
mat
uri
ng
and
do
es
no
t in
clu
de
inte
rest
acc
rue
d o
n t
he
re
mai
nin
g B
on
ds
ou
tsan
din
g. T
he
Pri
nci
pal
po
rtio
n o
f th
e p
aym
en
t to
Bo
nd
ho
lde
rs is
no
t a
de
du
ctib
le e
xpe
nse
.
7. T
ota
l In
tere
stTh
is in
clu
de
s th
e in
tere
st p
aid
on
lon
g te
rm lo
ans
as w
ell
as
the
inte
rest
th
at is
bo
th a
crru
ed
an
d p
aid
on
th
e B
on
ds
ou
tsta
nd
ing.
Th
is is
use
d t
o d
eri
ve t
axab
le in
com
e.
8. C
CA
(D
ep
reci
atio
n)
This
is t
he
am
ou
nt
of
CC
A t
hat
is c
laim
ed
fo
r ta
x p
urp
ose
s to
bri
ng
the
tax
able
inco
me
to
$0
wh
ere
po
ssib
le.
In y
ear
s w
he
re t
he
tax
able
inco
me
is b
rou
gh t
o $
0, t
he
CC
A o
ffse
ts t
he
am
ou
nt
left
ove
r fr
om
Gro
ss R
eve
nu
e le
ss P
roje
ct O
pe
rati
ng
Exp
en
ses,
Ad
min
istr
atio
n E
xpe
nse
s an
d In
tere
st E
xpe
nse
9. A
fte
r Ta
x C
ash
Flo
wTh
e a
fte
r ta
x fr
ee
cas
h f
low
is c
alcu
late
d b
y ta
kin
g th
e G
ross
Re
ven
ue
plu
s su
bst
ract
ion
s fr
om
Re
serv
es
less
th
e P
roje
ct O
pe
rati
ng
Exp
en
ses,
th
e T
ota
l De
bt
Pay
me
nt,
th
e A
dm
inis
trat
ive
Exp
en
ses,
th
e R
ese
rve
Ad
dit
ion
s, t
he
Bo
nd
Pay
me
nts
an
d In
com
e T
axe
s
10. P
aym
en
ts o
n C
lass
A P
ref
Shar
es
The
sal
e o
f P
refe
ren
ce A
Sh
are
s is
sh
ow
n in
201
4-Ye
ar 0
, th
e s
ub
seq
ue
nt
year
s sh
ow
th
e p
aym
en
ts t
o P
refe
ren
ce A
Sh
are
ho
lde
rs w
hic
h c
on
sist
of
a d
ivid
en
d p
aym
en
t an
d a
re
pu
rch
ase
of
a p
ort
ion
of
the
sh
are
s o
uts
tan
din
g in
eac
h y
ear
.
11. F
ree
Cas
h o
n H
and
The
Bo
ard
of
Dir
ect
ors
may
ele
ct t
o u
se a
po
rtio
n o
f th
e f
ree
cas
h o
n h
and
to
re
pu
rch
ase
Se
curi
tie
s fr
om
Se
curi
ty h
old
ers
ah
ead
of
the
sch
ed
ule
d r
ep
urc
has
e.
AP
PEN
DIX
A: P
ro F
orm
a Fi
nan
cial
s
Page | 142
APPENDIX B: Audited Financial Statements and Auditors’ Consent
Page | 143
Page | 144
Page | 145
Page | 146
Page | 147
Page | 148
Page | 149
Page | 150
Page | 151
Page | 152
Page | 153
Page | 154
Page | 155
Page | 156
Page | 157
Page | 158
Page | 159
APPENDIX C: Interim Financials (Unaudited)
Page | 160
Page | 161
Page | 162
The following is a summary of all expenses incurred by CED Co-op from inception
through to September 30th, 2014.
Page | 163
Incorporation and Setup
Legal - Incorporation and Setup $ 10,212.91 3.3%
Subtotal $ 10,212.91 3.3%
Operating Expenses
Office Admin - Outsourced $ 5,018.19 1.6%
Legal and Accounting $ 187.50 0.1%
Industry Memberships and Events $ 2,838.00 0.9%
Travel Expenses (Mileage) $ 1,243.06 0.4%
Office Supplies $ 730.93 0.2%
Marketing and Promotions $ 499.91 0.2%
Postage and Courier $ 377.96 0.1%
Website and Technology $ 940.73 0.3%
Insurance $ 810.00 0.3%
Meetings of Members $ 2,805.94 0.9%
Subtotal $ 15,452.22 5.1%
Annual Accounting
2012 Financials - Year End $ 510.03 0.2%
2013 Audit, Financials - Year End $ 4,350.00 1.4%
Subtotal $ 4,860.03 1.6%
Offering Statement Development
Legal $ 68,285.00 22.4%
Accounting $ 5,825.80 1.9%
Subtotal $ 74,110.80 24.3%
FIT 2 Applications and Contracts
Land Titles $ 328.95 0.1%
Lender Fees $ 32,500.00 10.6%
Engineering $ 3,432.30 1.1%
Application Fees $ 7,042.85 2.3%
Legal $ 6,120.72 2.0%
Subtotal $ 49,424.82 16.2%
FIT 3 Applications and Contracts
Land Titles $ 668.10 0.2%
Engineering $ 991.95 0.3%
Application Fees $ 10,941.92 3.6%
Legal $ 12,011.04 3.9%
Subtotal $ 24,613.02 8.1%
Project - CEDC Vigor - Cyr
Engineering & Design $ 5,353.06 1.8%
Connection Cost $ 91,577.64 30.0%
Legal and Contract Fees $ 763.73 0.3%
Subtotal $ 97,694.43 32.0%
VCT Contract Success Fees
Solvation Projects $ 26,400.00 8.6%
Co-op Portion CEDC-Vigor Cyr Project $ 2,500.00 0.8%
Subtotal $ 28,900.00 9.5%
Grand Total $ 305,268.22 100.0%
Page | 164
APPENDIX D: Membership Application and Membership Share Subscription
Page | 165
Page | 166
Page | 167
Page | 168
Page | 169
Page | 170
APPENDIX E: Escrow Agreement
ESCROW AGREEMENT
THIS ESCROW AGREEMENT (the “Agreement”) made effective this ____ day of ________,
2014.
BETWEEN:
CONCENTRA TRUST, a trust company incorporated under the laws of Canada, with
its head office in the City of Saskatoon, in the Province of Saskatchewan, Canada
(hereinafter referred to as the “Escrow Agent”)
AND:
Community Energy Development Co-operative Ltd., a Co-operative incorporated
under the laws of the Province of Ontario, with its registered office in the Town of
Petersburg, in the Province of Ontario, Canada
(hereinafter referred to as the “Co-operative”)
(Individually the “Party”; collectively the “Parties”)
WHEREAS the Co-operative has undertaken the establishment of several renewable energy
generating projects in conjunction with the FIT Program of the Ontario Power Authority, (the
“Project”);
AND WHEREAS in order to raise sufficient capital to finance the Project, the Co-operative
will be offering members (the “Members”) Membership Shares, Class A Preference Shares,
Bonds and Term Loans;
AND WHEREAS the Co-operative has requested that the Escrow Agent hold the proceeds
received by the Co-operative in connection with the sale to the members of Class A
Preference Shares, Bond Series L1-4 and Bond Series M1-5 (the “Securities”) in escrow until
the conditions herein have been satisfied, failing which the Escrowed Funds will be returned
to the Members in accordance with the terms of this Agreement;
AND WHEREAS the Escrow Agent has agreed to hold the Escrowed Funds upon the terms
and conditions contained in this Agreement;
NOW THEREFORE, in consideration of the premises and other good and valuable
consideration (the receipt and sufficiency of which is hereby acknowledged by the Parties), the
Parties agree as follows:
Page | 171
ARTICLE 1 - DEFINITIONS
1.1 In this Agreement, including the preamble and the schedules hereto, unless the
context otherwise requires:
a) “Agreement” means this Escrow Agreement;
b) “Application” means the Membership Application and Subscription Form in accordance
with the Offering Statement;
c) “Bonds” means Bonds as described in the Offering Statement and Solar Bonds which
may be included in future offerings.
d) “Conditional Offer” means an offer from the Ontario Power Authority to enter into a FIT
Contract;
e) "Escrowed Funds" means the funds received pursuant to the purchase of Class A
Preference Shares, Series L1-4 Bonds or Series M1-5 Bonds made by Members in
accordance with the terms of the Offering Statement;
f) “Electronic Communication” means any communication or Instruction by telephone,
wire or other method of telecommunication or electronic transmission, including a
facsimile or personal computer transmission;
g) “Instructions”, “Instruct”, and any variation thereof, means directions and instructions
in writing, with respect to the Escrowed Funds and duties under this Agreement, signed
by the Co-operative;
h) “Member” means any individual who has subscribed for shares in the capital of the Co-
operative and “Members” shall have a corresponding meaning;
i) “Membership Shares” means the Membership Shares in the capital of the Co-operative;
j) “FIT Contract” means a Feed-In Tariff Contract with the OPA under the FIT Program;
k) “FIT Program” means the Feed-In-Tariff Program established by the OPA for projects of
greater than 10 kW;
l) "Offering" means the offering for sale by the Co-operative to residents of the Province
of Ontario of the Preferred Shares and Bonds under the Offering Statement;
m) "Offering Statement" means an offering statement submitted to the Financial Services
Commission of Ontario by the Co-operative on the 15th day of May, 2014, a copy of
which is attached as Schedule “A” hereto;
n) “OPA” means The Ontario Power Authority;
o) “Party” means either the Escrow Agent or the Co-operative;
p) “Parties” means both the Escrow Agent and the Co-operative;
q) “Shares" means the Class A Preference Shares;
r) “Subscriber” means any individual who has subscribed for the Securities and
“Subscribers” shall have a corresponding meaning;
s) “Third Party” means any and all third parties to whom the Co-operative or the Escrow
Agent (aside from the Co-operative and the Escrow Agent) may delegate duties
under this Agreement, consult with about duties under this Agreement, or rely upon
for provision of information related to this Agreement, the Escrowed Funds, or a
Subscriber.
Page | 172
ARTICLE 2 - APPOINTMENT OF ESCROW AGENT
2.1 The Co-operative hereby appoints the Escrow Agent to perform the services specified
herein until such time as the conditions set out in Article 8 are met, or until the Escrow
Agent resigns or is removed as Escrow Agent pursuant to Article 11. The Escrow Agent
hereby accepts the said appointment and confirms that in performing the services specified
herein, it acts solely in its capacity as Escrow Agent hereunder and not in its personal
capacity.
ARTICLE 3 – ESCROW AGENT FEES
3.1 The Escrow Agent shall be entitled to receive a fee from the Co-operative for its
services hereunder in accordance with its current fee schedule affixed to this Agreement as
Schedule “B”. Schedule B is subject to amendment from time to time upon the Escrow
Agent giving thirty (30) days prior written notice to the Co-operative. Any such amendment
is effective without amending this Agreement.
3.2 The Escrow Agent shall also be reimbursed by the Co-operative for reasonable and
necessary expenditures, not included in Schedule B, but which are incurred in the
performance of its duties hereunder as may be agreed in writing between the Escrow Agent
and the Co-operative.
3.3 The Escrow Agent shall be exempt from the giving of any bond or security in
connection with this Agreement.
ARTICLE 4 – ESCROWED FUNDS
The Co-operative shall, upon receipt of any Escrowed Funds, deposit such Escrowed Funds,
together with a copy of each Application form setting out the names and addresses of such
Subscribers and the number and type of Securities purchased, with the Escrow Agent.
4.2 The Escrowed Funds shall be held by the Escrow Agent pursuant to and in
accordance with the provisions of this Agreement.
4.3 Escrowed Funds received by the Trustee shall be promptly deposited in a daily
interest-bearing savings account maintained by the Trustee.
ARTICLE 5 – ESCROW AGENT POWERS AND DUTIES
5.1 The duties and responsibilities of the Escrow Agent hereunder shall be entirely
administrative and not discretionary and shall be determined solely by the express
provisions of this Agreement and no duties shall be implied.
5.2 Notwithstanding anything to the contrary herein, the Escrow Agent shall be obligated
to act only in accordance with Instructions received by it as provided in this Agreement.
Page | 173
5.3 The duties and obligations of the Escrow Agent shall be determined by the provisions
hereof and by the provisions of applicable law and, accordingly, the Escrow Agent shall only
be responsible for the performance of such duties and obligations as it has undertaken
herein or as required by applicable law.
5.4 The Escrow Agent is authorized to comply with any orders or judgments of any court
with or without jurisdiction and shall not be liable as a result of its compliance with same.
5.5 The Escrow Agent will have no duty or responsibility arising under any agreement,
including any agreement referred to in this Agreement, to which it is not party.
5.6 In the administration of this Agreement, the Escrow Agent may execute its authority
and perform its duties hereunder directly or through Third Parties, and may consult with,
and rely and act upon, the advice of opinion of any Third Party so retained. The Escrow
Agent shall not be liable for anything done, suffered or omitted in good faith by it in
accordance with the advice or opinion of any such Third Party.
5.7 The Escrow Agent will have no responsibility for seeking, obtaining, compiling,
preparing or determining the accuracy of any information or document, including the
representative capacity in which a party purports to act, that the Escrow Agent receives as a
condition to a release under this Agreement.
5.8 The Escrow Agent shall retain the right not to act and shall not be held liable for
refusing to act unless it has received clear documentation, which complies with the terms of
this Agreement. Such documentation must not require the exercise of any discretion or
independent judgment. The Escrow Agent shall retain the right not to act and shall not be
liable for refusing to act if, due to a lack of information or for any other reason whatsoever,
the Escrow Agent, in its sole judgment, determines that such act might cause it to be in
non-compliance with any applicable anti-money laundering or anti-terrorist legislation,
regulation or guideline. Further, should the Escrow Agent, in its sole judgment, determine
at any time that its acting under this Agreement has resulted in it being non-compliant with
any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline,
then it shall have the right to resign in accordance with Article 10, provided (a) that the
Escrow Agent’s written notice shall describe the circumstances of such non-compliance; and
(b) that if such circumstances are rectified to the Escrow Agent’s satisfaction (as indicated
in writing by the Escrow Agent) within ten (10) days from the date of such notice, then such
resignation shall not be effective.
5.9 The Escrow Agent shall receive, tabulate, hold and account for all Escrowed Funds in
accordance with the terms of this Agreement.
5.10 The Escrow Agent shall keep appropriate books and records with respect to the
Subscribers, including, without limitation, with respect to each Subscriber: the name and
address of the Subscriber, the social insurance number of the Subscriber (if applicable), the
principal amount subscribed for and the amount of the Escrowed Funds received from the Co-
operative.
5.11 The Escrow Agent may, as a condition to the disbursement of monies or disposition
of securities as provided herein, require from the payee or recipient, a receipt thereof and,
upon final payment or disposition, a release of the Escrow Agent from any liability arising
out of its execution or performance of this Agreement, such release to be in a form
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reasonably satisfactory to the Escrow Agent. The Escrow Agent will have no responsibility
for the Escrowed Funds that it has released to the Co-operative or otherwise in accordance
with this Agreement.
5.12 The Escrow Agent will disburse moneys according to this Agreement only to the
extent such monies have been received by it. No provision of this Agreement shall require
the Escrow Agent to expend or risk its own funds or otherwise incur financial liability in the
performance of its duties or in the exercise of any of its rights or authority unless
indemnified. For greater certainty, the Escrow Agent shall not be bound to disburse any
amount after the Escrowed Funds, and all interest thereon, has been depleted.
5.13 The Escrow Agent shall, on a weekly basis, report to the Co-operative giving full
particulars of all Escrowed Funds delivered to it during the previous week.
5.14 Notwithstanding the foregoing, upon receipt of Escrowed Funds which, in the
aggregate, equal the minimum offering as described in the Offering Document, the Escrow
Agent shall immediately advise the Co-operative.
ARTICLE 6 - CO-OPERATIVE WARRANTIES AND REPRESENTATIONS
6.1 The Co-operative hereby represents and warrants to the Escrow Agent that any
account to be opened by, or interest to be held by the Escrow Agent in connection with this
Agreement for or to the credit of such party is not intended to be used by or on behalf of
any third party.
6.2 The Co-operative warrants that:
a) it does not have, nor does it anticipate having within the next 12 months, any
cash flow or liquidity problems;
b) it is not in default or in breach of any note, loan, lease or other indebtedness or
financing arrangement requiring the Co-operative to make payments;
c) it has no outstanding trade payables; and
d) it is not subject to any unsatisfied judgments, liens or settlement obligations.
6.3 The Co-operative also warrants that:
a) there will be no secondary market, or, the Co-operative will advise the Escrow
Agent immediately if there is going to be a secondary market, including the
details thereof. If the existence of a secondary market requires an amendment to
this Agreement for any reason, the Co-operative will negotiate with the Escrow
Agent reasonably and in good faith;
b) it is a corporation validly existing under the laws of Ontario and has full power
and authority to own its properties and conduct its business as currently owned or
conducted, and to execute and deliver this Agreement and any related documents
and to do all acts and things required or contemplated hereunder;
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c) it has taken all necessary action to authorize the execution and delivery by it of this
Agreement and any related documents to it and the performance of all obligations
hereunder;
d) this Agreement and any related documents to which the Co-operative is a party are
valid, legal and binding obligations of the Co-operative and are enforceable against
the Co-operative in accordance with their terms;
e) the execution and delivery by the Co-operative of this Agreement and the
performance by the Co-operative of this Agreement will not (i) conflict with or violate
the constating documents or by-laws of the Co-operative or any resolution of the
directors or shareholders of the Co-operative, or (ii) conflict with or result in any
breach of or a material default under, any indenture, contract, agreement or other
instrument to which the Co-operative is a party or by which its properties are bound;
and
f) all authorizations, consents, orders or approvals of or registrations or declarations
with any governmental authority required to be obtained, effected or given by the
Co-operative in connection with the execution and delivery by the Co-operative of
this Agreement and the performance of the transactions contemplated hereby have
been duly obtained, effected or given and are in full force and effect.
ARTICLE 7 - CO-OPERATIVE DUTIES
7.1 The Co-operative shall file with the Escrow Agent a certificate of incumbency,
substantially in the form set out in Schedule “C”, setting forth the names of those persons
who constitute the signing officers of the Co-operative (the “Authorized Officers”), together
with specimen signatures of such persons. The Escrow Agent shall be entitled to rely on the
latest certificate filed with it by the Co-operative or its Authorized Officers. The Escrow
Agent shall be fully protected when acting upon any instrument, certificate or paper
believed by it to be genuine and to be signed or presented by the proper person(s) on
behalf of the Co-operative and the Escrow Agent shall be under no duty to make any
investigation or inquiry as to any statement contained in any such writing, but may accept
the same as conclusive evidence of the truth and accuracy of the statement therein
contained. The Escrow Agent in acting upon the Instructions of the Co-operative may rely
on the direction of any one of the Authorized Officers set out in the most recent certificate
of incumbency.
7.2 Prior to the execution of this Agreement, the Co-operative shall provide the Escrow
Agent with the Initial Due Diligence Checklist in the form provided for in Schedule “D”
hereto.
7.3 The Co-operative shall maintain records of all personal or personally identifying
information required under any applicable laws with respect to each Subscriber, including
obtaining and recording satisfactory evidence of identification as required under the
Proceeds of Crime (Money Laundering) and Terrorist Financing Act(Canada) as may be
applicable, and shall obtain each Subscriber’s permission to share any such information with
the Escrow Agent to the extent necessary to enable the Escrow Agent to fulfill its duties and
obligations hereunder.
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7.4 The Co-operative shall provide information about each Subscriber to the Escrow Agent
in sufficient detail to enable the Escrow Agent to keep appropriate books and records with
respect to the Subscribers, including, without limitation, with respect to each Subscriber: a
copy of each Application, the name and address of the Subscriber, the social insurance number
of the Subscriber (if applicable), , the principal amount subscribed for and the amount of the
Escrowed Funds received.
7.5 The Co-operative shall, prior to the release of Escrowed Funds in accordance herewith,
by a certificate or certificates of any two Directors and/or Officers, as set out in Schedule C,
advise the Escrow Agent in writing which Escrowed Funds have been accepted and which
Escrowed Funds have been rejected, whether as to the whole or a part of such Escrowed
Funds.
7.6 On an annual basis, the Co-operative shall provide the Escrow Agent with:
a) proof that the Co-operative is validly incorporated pursuant to the laws of the
Province of Ontario;
b) an updated certificate of incumbency, in the form of Schedule C, setting out its
Authorized Officers;
c) written confirmation that there are no pending lawsuits against the Co-operative, or
if there are, written details about same;
d) written confirmation that there are no restrictions that have been placed upon the
Co-operative or its employees by any regulatory body, or if there are, written details
about same; and
e) a fully executed annual due diligence checklist with all required attachments, in the
form of Schedule “E” hereto.
7.7 The Co-operative shall ensure that all records and information, required to be kept by
the Co-operative under this Agreement, are maintained and located in Canada at all times.
ARTICLE 8 - CONDITIONS TO RELEASE OF ESCROWED FUNDS
8.1 The Escrow Agent shall not at any time deliver any Escrowed Funds received by it to
the Co-operative until it has received from the Co-operative written confirmation in the form of
a duly executed certificate by an authorized officer of the Co-operative pursuant to Article 7.1
(the “Officer’s Certificate”) certifying that the following conditions have been satisfied by the
Co-operative (collectively called the “Conditions Precedent”):
a) Confirmation that the Co-operative has received and accepted Applications for
Securities from Members, and that the funds for all such Applications have been
received by the Co-operative;
b) The Co-operative having obtained at least one (1) FIT Contract from the Ontario
Power Authority; and
c) The Co-operative having received Applications for Securities in the minimum
aggregate amount of $2,500,000, and that the funds for all such Securities have
been received by the Escrow Agent.
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8.2 Upon receiving the documentation and having satisfied itself as to the Conditions
Precedent referred to in this ARTICLE 8, the Escrow Agent shall forthwith deliver to the Co-
operative all Escrowed Funds received by it pursuant to this Agreement for the Members listed
in the Officer’s Certificate including, without limiting the generality of the foregoing, all funds
held in the daily interest-bearing savings account pursuant to ARTICLE 4 of this Agreement
(including all interest earned on such funds) together with a signed accounting of all such
Escrowed Funds and interest for the members listed in the Officer’s Certificate.
8.3 It is understood and agreed between the Parties that the offering contemplated under
the Offering Statement consists of a minimum and maximum amount, and there may be more
than one occasion upon which releases of Escrowed Funds, as hereinbefore described, may be
requested by the Co-operative.
8.4 In the event that the Escrow Agent shall be uncertain as to its duties or rights
hereunder or shall receive Instructions with respect to the Escrowed Funds which, in its sole
determination, are in conflict with any provision of this Agreement, it (a) shall be entitled to
hold the Escrowed Funds, or a portion thereof, pending the resolution of such uncertainty to
the Escrow Agent’s sole satisfaction, by final judgment of a court of competent jurisdiction,
or (b) at its sole option, may deposit the Escrowed Funds, or a portion thereof, together
with any interest earned thereon, with the clerk of a court of competent jurisdiction. Upon
deposit by the Escrow Agent of the Escrowed Funds, or such portion thereof, with the clerk
of any such court, the Escrow Agent shall be relieved of any further obligations hereunder,
and released from all liability arising after such deposit, with respect to such deposit.
8.5 Upon the final release of Escrowed Funds, as hereinbefore described, this Agreement,
with the exception of Article 14.12 shall terminate and be of no further force or effect.
ARTICLE 9 - RETURN OF ESCROWED FUNDS
9.1 If the Escrow Agent receives from the Co-operative written confirmation in the form of
a duly executed certificate by an authorized officer of the Co-operative pursuant to Article 7.1
(the “Early Return Officer’s Certificate”) certifying that the Conditions Precedent for the
release of funds from Escrow have not or will not be satisfied the Escrow Agent shall, within
thirty (30) days thereafter, remit to each Subscriber who paid Escrowed Funds to the Escrow
Agent through the Co-operative, his or her Escrowed Funds including, without limitation, all
funds held pursuant to Article 4 hereof (without interest) to the address specified in the
Application forms provided by the Co-operative, whereupon this Agreement, with the exception
of Article 14.12, shall terminate and be of no further force or effect. The Co-operative shall be
responsible for the preparation of the mailing labels, and shall forward these to the Escrow
Agent upon request.
9.2 If the Conditions Precedent set out in Article 8.1, are not satisfied by May 15, 2015,
and no Officer’s Certificate or Early Return Officer’s Certificate is received from the Co-
operative for such Subscriber, on or before May 15, 2015, then the Escrow Agent shall
return to each Subscriber within thirty (30) days of May 15, 2015, the Subscriber’s
Escrowed Funds including, without limitation, all funds held pursuant to Article 4 for such
Subscriber (without interest) to the address specified in the Application provided by the Co-
operative, whereupon this Agreement, with the exception of Article 14.12, in respect of such
Subscriber, shall terminate and be of no further force or effect. The Co-operative shall be
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responsible for the preparation of the mailing labels, and shall forward these to the Escrow
Agent upon request.
All interest which shall have accrued with respect to funds held pursuant to Article 4 hereof
shall be paid to the Co-operative.
ARTICLE 10 – CONFIDENTIALITY AND PRIVACY
10.1 The Parties agree to the following terms with respect to any Confidential Information
(as defined below) and that the obligations set forth in this Article shall survive the
termination of this Agreement:
For the purpose of this Article, Confidential Information shall include the following:
a) “contact information” which means information to enable an individual at a place of
business to be contacted and includes the name, position name or title, business
telephone number, business address, business e-mail or business fax number of the
individual; and
b) “personal information” which means recorded information about an identifiable
individual, other than contact information, collected or created by the Co-operative
as a result of this Agreement or any previous agreement between the Co-operative
and the Escrow Agent dealing with the same subject matter as this Agreement.
10.2 The Parties agree to use and to ensure that each of their respective representatives
uses the Confidential Information solely for the purpose of carrying out their respective
duties under this Agreement and the Parties agree to be fully liable for any breach of the
obligations contained herein as a result of any acts or omissions of their respective
representatives.
10.3 The Parties agree to maintain the Confidential Information in a secure facility, taking
commercially reasonable steps to protect the information from unauthorized use, access or
disclosure.
10.4 The Parties shall adhere to and comply with applicable federal and provincial laws
and regulations regarding privacy and protection of personal information (collectively
“Applicable Privacy Laws”). Without limiting their obligations under Applicable Privacy Laws,
each of the Parties hereto agrees:
a) to promptly notify one another of any accidental or unauthorized access, disclosure,
copying, use or modification of Confidential Information of third parties or any non-
compliance with, or breach of, the terms of this provision or obligations under
Applicable Privacy Laws, in which case(s) the Parties shall consult with one another
with respect to such matter and co-operate in implementing appropriate corrective
actions;
b) to promptly notify one another regarding anyone seeking access to, or with any
inquiries or complaints about, Confidential Information, and to co-operate with each
other in connection with any such access request, inquiry or complaint and any
response thereto; and
c) to retain Confidential Information only as long as necessary for fulfillment of the
approved purpose for which it was collected, and thereafter to destroy any record or
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document containing Confidential Information (taking appropriate care in the
destruction of the information to prevent unauthorized parties from gaining access to
it), or remove all Confidential Information from such documentation or other record
or document, except, in each case, to the extent that applicable law, regulation or
policy may require the Party to retain such records or documents; and, if so required
by applicable law, regulation or policy, not to use or disclose such Confidential
Information other than as permitted by an informed consent form or as prescribed
by law.
ARTICLE 11 – RESIGNATION AND TERMINATION
11.1 The Escrow Agent may resign upon giving at least ninety (90) days prior written
notice to the Co-operative, unless such notice shall be waived by the Co-operative. The Co-
operative may remove the Escrow Agent upon giving at least ninety (90) days prior written
notice to the Escrow Agent, unless such notice shall be waived by the Escrow Agent.
11.2 In the event of the resignation or removal of the Escrow Agent, the Co-operative
shall forthwith appoint a new Escrow Agent as Escrow Agent of the Escrowed Funds. Any
new Escrow Agent appointed shall be a corporation authorized to carry on the business of
an escrow agent in the Province of Ontario and, upon appointment, shall be vested with the
same powers, rights, duties and obligations as if it had been originally named herein as
Escrow Agent, without any further assurance, conveyance, act or deed.
11.3 If this Agreement is terminated, for any reason, the Escrow Agent shall deliver to the
Co-operative, or at the Co-operative’s direction to a successor Escrow Agent, all of the Co-
operative’s property in the Escrow Agent’s possession; provided that the Escrow Agent shall
not be required to make delivery until it has received full payment of all fees, costs and
expenses payable hereunder, including any costs or expenses that may arise out of such
termination and delivery.
11.4 Notwithstanding anything to the contrary in this Agreement, upon termination of this
Agreement the Co-operative shall execute a release of liability in a form acceptable to the
Escrow Agent.
ARTICLE 12 – LIMITATIONS OF LIABILITY, INDEMNIFICATION AND BREACHES
12.1 The Escrow Agent shall not incur liability, or be in any way responsible, for any
breach on the part of the Co-operative or its agents relating to the Co-operatives obligations
under this Agreement. The Escrow Agent shall conduct its obligations hereunder honestly,
in good faith and in the best interests of the Subscribers and, in connection therewith, shall
exercise the degree of care, diligence and skill that a reasonably prudent person would
exercise in the circumstances (the “Standard of Care”). The Escrow Agent shall not be
liable for any action taken or omitted by it, or any action suffered by it to be taken or
omitted excepting only its own failure to act in accordance with its Standard of Care. In no
event shall the Escrow Agent be liable for any consequential or punitive damages or for
consequential losses of any kind whatsoever.
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12.2 The Co-operative shall, to the extent permitted by law, indemnify and hold harmless
the Escrow Agent, its directors, officers, employees, related companies and agents, from
and against any and all losses, claims, damages, liabilities, penalties, actions, suits,
demands, levies, assessments, costs, expenses and disbursements, including any and all
legal fees and disbursements (the “Losses”) as invoiced to the Escrow Agent, of any kind or
nature whatsoever, which may at any time be suffered by, imposed on, incurred by or
asserted against the Escrow Agent, whether groundless or otherwise, howsoever arising
from, out of, in connection with, or as a result of:
a) any suit or claim brought or commenced against the Escrow Agent by any
Subscriber, prospective Subscriber, or any other person arising from the failure of
the Co-operative to observe, perform or keep the obligations required of the Co-
operative under this Agreement;
b) any act, omission or error of the Escrow Agent in connection with its acting as
Escrow Agent hereunder, including, in particular, but without limitation, in respect of
the responsibilities of the Co-operative hereunder; and
c) any other act or thing done or omitted to be done by, or any error by, the Co-
operative, or their respective directors, officers, employees, agents, delegates and
assigns, as the case may be,
except to the extent the Losses are a result of a breach of the Standard of Care by the
Escrow Agent.
12.3 The Co-operative acknowledges and agrees that monetary damages would not be a
sufficient remedy for a breach of any of the terms of this Agreement. In the event of a
breach by the Co-operative of any of the terms of this Agreement, including the bankruptcy
and insolvency of the Co-operative, the Escrow Agent shall, in addition to any and all
remedies available at law, be entitled to seek equitable relief, including injunction and
specific performance. The Co-operative also agrees to reimburse the Escrow Agent for all
legal fees, on a solicitor and own client basis, incurred by the Escrow Agent in successfully
enforcing the obligations of the Co-operative hereunder.
ARTICLE 13 - NOTICES
13.1 Any notice or direction required or permitted to be given under this Agreement shall
be in writing and may be given by delivering, sending by Electronic Communication capable
of producing a printed copy, or sending by prepaid registered mail posted in Canada, the
notice or direction to the following address or number.
13.2 If to the Escrow Agent, for directions and other administrative communications, to:
Concentra Trust
333 - 3rd Avenue North
Saskatoon, Saskatchewan S7K 2M2
Attention: Corporate Trust Department
Facsimile: (306) 956-3003
Email: [email protected]
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If to the Escrow Agent, for notices and other non-administrative communications, to:
Concentra Trust
333 - 3rd Avenue North
Saskatoon, Saskatchewan S7K 2M2
Attention: Corporate Secretary
Facsimile: (306) 652-7614
Email: [email protected]
If to the Co-operative, to:
Community Energy Development Co-operative Ltd.
1633 Snyder’s Rd. E., PO Box 67
Petersburg, Ontario, N0B 2H0
Attention: President
Facsimile: (519) 279-4630
Email: [email protected]
(or to such other address or number as any Party may specify by notice in writing to another
party). Any notice delivered or sent by electronic facsimile transmission or other means of
electronic communication capable of producing a printed copy on a business day shall be
deemed conclusively to have been effectively given on the day the notice was delivered, or the
transmission was sent successfully to the number set out above, as the case may be, and, if
not delivered on a business day, shall be deemed conclusively to have been effectively given
on the next following business day. Any notice sent by prepaid registered mail shall be deemed
conclusively to have been effectively given on the third business day after posting; but if at the
time of posting or between the time of posting and the third business day thereafter there is a
strike, lockout, or other labour disturbance affecting postal service, then the notice shall not be
effectively given until actually delivered.
13.3 Any Electronic Communication between the Co-operative and the Escrow Agent will
take place according to the following provisions:
a) The Escrow Agent will consider any Electronic Communication received from the Co-
operative or in the name of the Co-operative to have been authorized by the Co-
operative.
b) If the Electronic Communication is by facsimile, the Escrow Agent is entitled to act
upon any signature purporting to be the Co-operative’s signature. If the Escrow
Agent were to try to verify the signature on a facsimile transmission or the validity of
any Instruction provided by Electronic Communication (although the Escrow Agent is
not obligated to do so) and was unable to do so to its satisfaction, the Escrow Agent
may delay in acting or refuse to act on such Instructions.
c) The Co-operative agrees that the Escrow Agent’s records regarding any Electronic
Communication will be admissible in any legal, administrative or other proceedings
as if such records were original written documents. The Escrow Agent’s records will
be conclusive proof of the information contained in such Electronic Communication.
13.4 Any notice, direction, consent, Instruction, designation or other instrument to be
given by the Co-operative pursuant to this Agreement shall be sufficient if given by any of
its respective Authorized Officers. The Escrow Agent shall be protected in acting upon any
written notice, request, waiver, consent, certificate, receipt, statutory declaration or other
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paper or document furnished to it by any Authorized Officer, not only as to its due execution
and the validity and the effectiveness of its provisions, but also as to the truth and
acceptability of any information therein contained that it in good faith believes to be genuine
and what it purports to be. The Escrow Agent shall have no responsibility to inquire into the
genuineness or validity of any documents delivered to it and reasonably believed by it to
have been signed by the proper person or persons and shall be entitled to rely thereon.
ARTICLE 14 - MISCELLANEOUS
14.1 Amendment - Except as herein otherwise provided, no subsequent alteration,
amendment, change or addition to this Agreement shall be binding upon the Parties hereto
unless reduced to writing and signed by the Parties hereto.
14.2 Applicable Laws – This Agreement, in all events and for all purposes, will be governed
by, and construed in accordance with, the laws of the Province of Ontario and the federal laws
of Canada applicable therein.
14.3 Assignment - This Agreement shall not be assigned by either Party without the
prior written consent of the other. This Agreement shall enure to the benefit of and be
binding upon the Parties and their respective successors, heirs and permitted assigns. For
greater certainty, any body corporate into or with which the Escrow Agent may merge,
consolidate or amalgamate, or any body corporate succeeding to the trust business of the
Escrow Agent shall, upon notice thereof to the Co-operative, be deemed to be the successor
to the original Escrow Agent hereunder without any further act on the part of any of the
Parties hereto, provided that any such successor Escrow Agent is a trust company
incorporated under the laws of a Province of Canada or the laws of Canada.
14.4 Entire Agreement - The provisions herein contained constitute the entire
agreement between the Parties and supersede all previous communications,
representations, and agreements, whether oral or written, between the Parties with respect
to the subject matter hereof, there being no representations, warranties, terms, conditions,
undertakings, or collateral agreements (express or implied), between the Parties other than
as expressly set forth in this Agreement. In the event of a discrepancy between the terms
of this Agreement and the Offering Document, the terms of this Agreement take
precedence.
14.5 Execution - This Agreement may be executed in any number of counterparts. Each
executed counterpart shall be deemed to be an original; all executed counterparts taken
together shall constitute one agreement.
14.6 Further Assurances – Each of the Parties will promptly do, execute, deliver or
cause to be done, executed and delivered all further acts, documents and things in
connection with this Agreement that another party may reasonably require, for the purposes
of giving effect to this Agreement.
14.7 Independent Contractors – The Parties to this Agreement are independent
contractors. Neither Party is an agent, representative or partner of the other Party. Neither
Party shall have any right, power or authority to enter into any agreement for or on behalf
of, or incur any obligation or liability on behalf of, or to otherwise bind, the other Party.
This Agreement shall not be interpreted or construed to create a joint venture or
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partnership between the Parties or to impose any liability attributable to such a relationship
upon either Party.
14.8 Language – The Parties have expressly accepted that this Agreement and all
documents and notices relating hereto be drafted in English. Les parties aux présentes ont
accepté que la présente convention et tous les documents et avis qui y sont afférents soient
rédigés en anglais.
14.9 Miscellaneous – All references to Articles or Sections will be deemed to refer to the
Articles and Sections of this Agreement, and all titles to Articles or Sections are solely for
convenience and do not constitute a substantive part of this Agreement. All schedules
referenced herein and attached hereto are incorporated into this Agreement. Words
importing the singular include the plural and vice versa. Words importing one gender
include both genders, and references to persons include bodies corporate or non-corporate.
The term “including” will be deemed to mean “without limitation of any kind” whenever used
in this Agreement and schedules.
14.10 Settlement of Disputes – In the event of any disputes, controversies or claims
arising in connection with this Agreement or the breach thereof, the Parties shall try to
settle the problem amicably. Should the Parties so fail within sixty (60) days from the first
notice of such dispute, controversy or claim, same shall be settled by a competent court of
law.
14.11 Severability – If any covenant or other provision of this Agreement is invalid, illegal,
or incapable of being enforced by reason of any rule of law or public policy, then such covenant
or other provision shall be severed from and shall not affect any other covenant or other
provision of this Agreement, and this Agreement shall be construed as if such invalid, illegal, or
unenforceable covenant or provision had never been contained in this Agreement. All other
covenants and provisions of this Agreement shall, nevertheless, remain in full force and effect
and no covenant or provision shall be deemed dependent upon any other covenant or
provision unless so expressed herein.
14.12 Survive Termination - The following Articles will survive termination of this
Agreement for any reason: 3, 5.4, 5.7, 5.11, 5.12, 6, 10, 11.3, 11.4, 12, 14.6, 14.10,
14.11, 14.12 and 14.14.
14.13 Time of Essence – Time shall be of the essence in this Agreement.
14.14 Waiver - The failure of the Co-operative or the Escrow Agent to exercise any right,
power or option given to it hereunder or to insist upon the strict compliance with any of the
terms or conditions hereof shall not constitute a waiver of any provision of this Agreement
with respect to any other or subsequent breach thereof, nor a waiver by the Co-operative or
the Escrow Agent of strict compliance by the other with all of the other provisions hereof.
[Signatures to follow.]
Page | 184
IN WITNESS WHEREOF, the Parties hereto have executed this Agreement effective as of the
day and year first above written.
CONCENTRA TRUST
Per:
Authorized Signatory:
Per:
Authorized Signatory:
COMMUNITY ENERGY DEVELOPMENT CO-OPERATIVE LTD.
Per:
Authorized Signatory:
Per:
Authorized Signatory:
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Schedule A - OFFERING DOCUMENT
Schedule B - FEE SCHEDULE
Page | 186
Schedule C
AUTHORIZED SIGNING OFFICERS OF
COMMUNITY ENERGY DEVELOPMENT CO-OPERATIVE LTD.
I, _______________, Secretary of Community Energy Development Co-operative Ltd.. (the
“Co-operative”), do hereby certify that the following individuals are Authorized Officers of
the Co-operative within the meaning given to those terms in the Agreement dated the ____
of _______________, 20___, between the Co-operative and Concentra Trust, and each
such individual was duly appointed to the position as specified below, having all the
authority pertaining thereto as of the date hereof until such authority is revoked by the Co-
operative by notice delivered pursuant to Article 10 of the Agreement, and that a sample of
each Authorized Officer’s signature and the official electronic facsimile transmission number
and electronic mail address of each such Authorized Officer appears below:
________________________ Title: ____________________
Name
Facsimile No.: ____ _________________
_____________________________
Signature Email:
________________________ Title: ____________________
Name
Facsimile No.: ____ _________________
_____________________________
Signature Email:
________________________ Title: ____________________
Name
Facsimile No.: ____ _________________
_____________________________
Signature Email:
________________________ Title: ____________________
Name
Facsimile No.: ____ _________________
_____________________________
Signature Email:
WITNESS my hand and the seal of Community Energy Development Co-operative Ltd. this
_______ day of ______________, 20____.
(c/s)
____________________________,
Secretary
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Schedule D - INITIAL DUE DILIGENCE CHECKLIST
Schedule E - ANNUAL DUE DILIGENCE CHECKLIST
Page | 188
APPENDIX F: Certificate of Incorporation
Page | 189
APPENDIX G: CWCF Self-Directed RRSP Fee Schedule
Page | 190
APPENDIX H: Form of Joint Venture Agreement
JOINT VENTURE AGREEMENT
THIS JOINT VENTURE AGREEMENT is made as of the _____ day of _____________, 20___,
B E T W E E N:
____________________________________________________ (hereinafter referred to as “Proponent”)
- and -
Community Energy Development Co-operative Ltd. (hereinafter referred to as “CED Co-Op”).
BACKGROUND
Proponent and CED Co-Op wish to form a joint venture for the purpose, term and upon the terms and
conditions as set forth hereunder in this Agreement.
AGREEMENT
IN CONSIDERATION OF the mutual covenants contained below and other good and valuable
consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:
1. FORMATION, DEFINITIONS AND DURATION
1.1 Formation and Purpose - The parties have agreed to form a joint venture for the purpose of investing in the development of solar photovoltaic generating facilities (individually a “Facility” or collectively the “Facilities”), under feed-in-tariff contracts with the Ontario Power Authority (individually a “FIT Contract” or collectively the “FIT Contracts”), such Joint Venture to be on the terms and conditions herein contained. A description of the nature and location of the specific Facilities contemplated by this Agreement are listed here below:
Location
Roof or Ground
Project Size (kW)
The parties acknowledge and agree that subsequent to the date of this Agreement, the Joint Venture will be pursuing other Facilities which, if successful, will be added to
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Facilities governed by the terms and conditions of this Agreement, as evidenced by a written addendum between the Venturers.
1.2 Definitions - The following words and terms shall have the respective meanings set out below:
“Agreement” means this agreement, including its schedules, all as same may be amended from time to time.
“Charge” means assign, pledge, charge, mortgage, hypothecate, or otherwise encumber, as set out in paragraph 4.4.
“Chargee” means a Person to whom a Charge is granted.
“Contribution” or “Contributions” means any payment of monies required to be made under this Agreement, whether as additional capital for the construction or operation of a Facility or payment of any costs or expenses of the Joint Venture or relating to the construction or operation of a Facility, including any payment pursuant to paragraph 2.1 or pursuant to any indemnity contained herein or as a liability pursuant to paragraph 2.9.
“Default” has the meaning set out in paragraph 7.1.
“Executive Committee” has the meaning set out in paragraph 3.2.
“Expenses” means all expenses incurred by or on behalf of the Joint Venture which have been approved by the parties in accordance with this Agreement.
“Facility” or “Facilities” has the meaning set out in paragraph 1.1.
“FIT Contract” or “FIT Contracts” has the meaning set out in paragraph 1.1.
“FIT Rules” means the rules governing the Renewable Energy Feed-In Tariff Program established by the Ontario Power Authority as may be amended in accordance with its terms from time to time.
“Joint Venture” means the joint venture between Proponent and CED Co-Op that has been established pursuant to the terms and provisions of this Agreement.
“Joint Venture Interest” means all of the right, title and interest of a Venturer in the Joint Venture including its Proportionate Interest.
“Key Agreements” has the meaning set out in paragraph 3.4.
“Manager” has the meaning set out in paragraph 3.3(c).
“Person“ means anyone including any individual, sole proprietorship, partnership, firm, corporation, unincorporated association, unincorporated organization, trust, other body corporate, and a natural person in his or her capacity as a trustee, executor, administrator, or other legal representative or any other legal entity.
“Prime” means the rate per annum charged on loans by the Royal Bank of Canada with its principal office in Toronto, Ontario, for loans of Canadian dollars to its customers in Canada, and said to be its prime rate, as the same is adjusted from time to time.
“Project” means the development of a Facility under a FIT Contract as undertaken by the Venturers from time to time, and “Projects” being the plural thereof.
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“Property” has the meaning set out in paragraph 1.8.
“Proportionate Interest” means ______% for CED Co-op and _____% for Proponent.
“Records” have the meaning set out in subparagraph 8.1(a).
“Termination” shall mean termination of this Agreement for any reason whatsoever, including termination pursuant to paragraph 5.1.
“Transfer” means sale, exchange, lease, re-lease, transfer or abandonment or any other disposition of any interest or portion of any interest.
“Venturer” means one of Proponent or CED Co-Op, as the context may require, and “Venturers” means both Proponent and CED Co-Op collectively.
1.3 Schedule - The following schedules form part of the Agreement:
Schedule “A”- Capital Budget and Budget for the First Operating Year of the Joint Venture.
1.4 Name - The Joint Venture shall be known as the CEDC _____________ Sunshare JV.
1.5 Place of Business - The principal office and place of business of the Joint Venture shall be located at such place as the Executive Committee may, from time to time, designate.
1.6 Term - The Joint Venture shall commence as of the date set out above and shall continue in force until Termination in accordance with this Agreement.
1.7 Approvals and Consents - The Venturers will jointly identify all approvals required and cooperate with each other in obtaining such approvals. All approvals shall be sought on a timely basis, and with respect to regulatory approvals, on terms acceptable to both Venturers. The costs of such approvals shall be borne by the Venturers according to their Proportionate Interest.
1.8 Title to Property - All property subject to this Agreement, including the FIT Contract , and intangible rights such as an interest in required licences, contracts and agreements (the “Property”) shall be taken in the name of the Joint Venture, or failing this, in the names of Proponent and CED Co-Op as Joint Venturers according to their respective Proportionate Interest.
1.9 Representations and Warranties of the Venturers - Each Venturer represents and warrants to the other Venturer that it is duly incorporated, organized and validly existing under the laws of the Province of Ontario and has all necessary corporate power and, after the fulfillment of the condition precedent set forth in paragraph 1.7, will have all governmental approvals required to carry on the business of the Joint Venture, that the execution, delivery and performance by it of this Agreement is within the Venturer’s powers and has been duly authorized by all necessary action on its part, that this Agreement has been duly and validly executed by it and constitutes a legal and binding Agreement enforceable against it in accordance with its terms except as may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights and subject to general principles of equity, and does not contravene or conflict with any of its articles or by-laws or contravene or conflict with or constitute a material violation of any provision of any applicable law abiding upon or applicable to it.
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1.10 Other Agreements
(a) Proponent has entered into the following agreements (all of which are Key Agreements, as such term is defined in paragraph 3.4), which it holds as a bare trustee for Proponent and CED Co-Op according to their Proportionate Interest all as fully disclosed to the Venturers from time to time:
Description of Agreement Date of Agreement
Proponent is not in default under such agreements, nor is there any circumstance whereby Proponent could be in default, and Proponent has not carried on any other business or made any other financial commitments whatsoever affecting the interests of the Joint Venture or CED Co-Op; and.
(b) CED Co-Op has entered into the following agreements (all of which are Key Agreements, as such term is defined in paragraph 3.4), which it holds as a bare trustee for Proponent and CED Co-Op according to their Proportionate Interest all as fully disclosed to the Venturers from time to time:
Description of Agreement Date of Agreement
CED Co-Op is not in default under such agreements, nor is there any circumstance whereby CED Co-Op could be in default, and CED Co-Op has not carried on any other business or made any other financial commitments whatsoever affecting the interests of the Joint Venture or Proponent.
1.11 Covenant to Act - Each party shall do, observe and perform all things hereby contemplated by it to be done, observed and performed to give effect to the provisions of this Agreement.
2. CONTRIBUTIONS, DISTRIBUTIONS AND RESPONSIBILITIES
2.1 Contributions - The Joint Venture shall require Contributions from the Venturers from time to time as the need for additional capital is required by the Executive Committee. Each Venturer shall act in good faith and use its best efforts to contribute to the capital requirements of the Projects from time to time. It is the general goal of the Venturers that each shall contribute their Proportionate Interest of the Contribution required and shall co-operate with each other to work towards that goal. The Capital Budget and Budget for the First Operating Year of the Joint Venture are set forth in Schedule “A” attached.
2.2 Contribution-in-kind and Payment of Expenses Prior to Execution of Agreement - All in-kind contributions must be fully described, including a statement as to the dollar value of such in-kind contribution, for presentation for approval to the Executive Committee, which will determine the applicability and value of the in-kind contributions claimed by each party. All in-kind contributions shall be approved by the Executive
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Committee, prior to such contribution being made to the Joint Venture. A contribution-in-kind will only be accepted from a Venturer if such contribution is made at rates that are competitive with rates that are otherwise available from third party suppliers.
2.3 Failure to Make Required Contributions - If any Venturer fails or refuses to contribute its share of required funds when and as the funds are required as set forth in this Agreement (herein this paragraph 2.3 the “Non-paying Venturer”) then:
(a) subject to the FIT Rules and applicable law, the other Venturer shall have the right, at its sole option, to pay the required sum, and the Non-paying Venturer shall be liable to re-imburse the other Venturer for the amount paid together with interest on such sum from the date of payment to the date of reimbursement at a rate equal to Prime plus 2% per annum; or
(b) subject to the notice and cure period set forth in paragraphs 7.1(a) and 7.1(b), the Non-paying Venturer shall be deemed to be in Default, and the rights of the non-defaulting Venturer pursuant to paragraph 7.2 shall apply.
2.4 Distribution - Each Venturer shall own its Proportionate Interest of the funds generated by the Project and, subject always to the application of paragraph 2.3(a), shall have no obligation to account to the other for the sale, distribution or other disposal of its share of the revenues received from the power generated.
2.5 Time and Effort - Neither Venturer is expected to devote time and effort to operate the Joint Venture other than the time required to be represented on the Executive Committee at no charge. No compensation shall be paid to any Venturer for its time, nor shall a Venturer’s representative on the Executive Committee be paid compensation, whether for sitting on the Executive Committee or otherwise, unless otherwise agreed by both Venturers.
2.6 Other Business Interests of Joint Venturer - Each Venturer may have other business interests and may engage in any other business or trade whatsoever, on its own account, or in partnership with any other Person.
2.7 Allocation of Capital Cost Allowance - As owner of its part of the Property, each Venturer shall be entitled to capital cost allowance, depreciation, and other similar rights as any owner of similar property might claim, equal to its Proportionate Interest.
2.8 Full Disclosure - Any transactions between the Joint Venture and a Venturer shall be based on a full disclosure of all conditions, good faith and fair dealing.
2.9 Limited Recourse and Several Liability - Unless approved by the Venturers, every agreement or instrument entered into by the Venturers creating obligations of the Venturers to third parties and to each other in respect of the Joint Venture, other than any instrument entered into by a Venturer in its separate capacity as contemplated in this Agreement, shall contain provisions to the effect that:
(a) only each Venturer’s Proportionate Interest in the Joint Venture shall be bound and the obligations are not otherwise personally binding upon nor shall resort be had to any other property of any of the Venturers; and
(b) the rights and obligations of each Venturer shall be several, and not either joint or joint and several and shall be limited to the Venturer’s Proportionate Interest of the aggregate liability.
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Where such an Agreement or instrument is entered into, each Venturer shall indemnify the other Venturer so that neither is responsible for more than their Proportionate Interest of their obligations in such Agreement or instrument.
2.10 Liability to Third Parties Based on Unauthorized Acts - It is agreed that no Venturer shall act as the agent of the other Venturer without an express written authorization to act as an agent, and any act by a Venturer as an agent, without proper authorization, shall create a separate liability in the Venturer so acting to any and all third parties affected.Any contract entered into by a Venturer that is outside the scope of this Agreement will not be binding on the other Venturer, and only the Venturer entering into that contract shall be liable to third parties.
2.11 Actions of Venturers - In making any decisions with respect to the Joint Venture, each Venturer agrees to cause its representatives on the Executive Committee to act reasonably, promptly, honestly and in good faith and strictly upon the merits of the proposed decision and to exercise the degree of care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
2.12 Marketing Activities - Each Venturer shall, prior to making any communication to the public regarding the Joint Venture, use all reasonable efforts to inform the other Venturer of the communication and agree with the other Venturer on the content of such communication except that where a Venturer is making communications to the public regarding activities of such Venturer of which the Joint Venture is only a part it shall have no such obligation. Such activities that do not require a Venturer to inform shall include marketing activities of CED Co-op to sell shares to raise capital for the Projects pursuant to a receipted Offering Statement.
2.13 Emission Credits - The Venturers agree that the emission credits that the Joint Venture may be entitled to receive from time to time in respect of the electricity generated by the Projects shall be the property of the Venturers to deal with as each determines according to their Proportionate Interest and, subject to the foregoing, each Venturer is entitled Transfer its Proportionate Interest of the emission reduction credits.
3. MANAGEMENT AND OPERATION
3.1 Decisions/Approvals of the Venturers - Any decisions or approvals required to be made by the Venturers shall be made by the Executive Committee based on the direction of the Venturers.
3.2 Executive Committee - The business and affairs of the Joint Venture shall be managed by an executive committee (the “Executive Committee”) consisting of five (5) members, with Proponent being entitled to appoint three (3) members and CED Co-Op being entitled to appoint two (2) members. The following terms and provisions shall apply to meetings of the Executive Committee and decisions taken thereat:
(a) The Executive Committee shall meet not less than annually at such times and at such places as may be determined by the Executive Committee;
(b) Special meetings of the Executive Committee may be called by a member of the Executive Committee at any time with the support of at least one of the other Venturer’s Executive Committee members;
(c) Notice of all meetings of the Executive Committee shall be sent by mail, or be delivered personally, by telephone, by facsimile or by electronic mail, to each member not later than 5 days before the date on which the meeting is to be held, unless notice is waived by all members;
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(d) A meeting of the Executive Committee may be held by means of such telephone, electronic or other communication facilities as permit all persons participating in the meeting to communicate with each other simultaneously and instantaneously, and a member of the Executive Committee participating in such meeting by such means is deemed to be present at that meeting;
(e) Subject always to the provisions of paragraph 3.2(g), three (3) members of the Executive Committee shall constitute a quorum to transact business with at least one (1) member of each Venturer in attendance;
(f) All decisions of the Executive Committee must be made by simple majority by those present at the meeting; and
(g) If all of a Venturer’s representatives miss three (3) consecutive meetings, at the option of the other Venturer, then:
i. that Venturer shall be deemed to be in Default under this Agreement; or
ii. the other Venturer who is not in Default shall be entitled to deal with matters listed on the agenda for those three (3) meetings at a subsequent meeting, regardless of whether or not a representative of the Venturer in Default is present at the subsequent meeting, and the number of members of the Executive Committee of the Venturer who is not in Default shall be the quorum for the purposes of this paragraph 3.2(g).
Each Venturer shall ensure that its representatives on the Executive Committee act in accordance with the terms of this Agreement.
3.3 Executive Committee Responsibilities - The Executive Committee shall:
(a) Obtain insurance on such terms and in such amounts as the Executive Committee deems appropriate;
(b) Have the responsibility of managing and overseeing the Joint Venture including, without limitation, the following:
i. as and when applicable, selecting locations and negotiating land and/or rooftop leases, or other property access rights as necessary, for sites where the Projects will be located;
ii. preparing and approving a budget for the Joint Venture including an annual budget, the capital budget for years subsequent to the year covered by the capital budget contained in Schedule "A" to develop the Projects at the inception of the Joint Venture, and a 5 year budget for the first 5 years the Projects are in operation;
iii. preparing and approving the technical specifications for the Projects;
iv. selecting a supplier of the services and equipment necessary for developing the Projects in accordance with the approved technical specifications;
v. selecting a supplier to provide on-going monitoring, service, management, operation and maintenance of the Projects; and
vi. negotiate contracts with third parties including, without limitation, with consultants;
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(c) At its sole and absolute discretion, hire or appoint a manager (the “Manager”) to manage the daily operation of the Joint Venture and delegate such duties to such manager as it deems appropriate; and
(d) not be required to devote their full time and effort to the Joint Venture, but only such time as shall be reasonably necessary to perform their duties under this Agreement.
3.4 Key Agreements - The Executive Committee shall identify all key agreements required for the Joint Venture (the “Key Agreements”), and shall acquire, negotiate and settle such Key Agreements on behalf of the Joint Venture. The Key Agreements shall be governed by the laws of the Province of Ontario and the laws of Canada applicable in this Agreement with exclusive attornment to the courts of Ontario. The Key Agreements may include, without limitation, the following:
(a) Lease or other access rights agreements for land and/or rooftops on which the Projects shall be located;
(b) agreements to purchase the land or facility on which the Projects are located;
(c) management and maintenance agreements for the land or facility on which the Projects are located; and
(d) management agreement for the daily operation of the Joint Venture.
Each Key Agreement will be signed by both Venturers, who shall each be responsible under these Agreements for their Proportionate Interest of the liabilities contained in these Agreements.
3.5 Duties of Manager - If appointed, the Manager shall be responsible for the management and supervision of the day to day operation of the Projects, subject always to the specific instruction and direction of the Executive Committee.
3.6 Replacement of Manager - Either Venturer may at any time through its representatives on the Executive Committee, withdraw its support for any Manager and require the replacement of such Manager. In such event, a hiring process will be undertaken to identify a suitable candidate to replace the Manager.
3.7 Financial Year - The Joint Venture’s financial year shall run from January 1st to December 31st, inclusive.
3.8 Auditor - The Joint Venturer’s auditor shall be _______________________________
__________________________________________________________________.
3.9 Arbitration of Disputes - If, during the course of the Joint Venture, the Venturers are unable to agree on any matter with respect to which a decision must be made, or if, on termination, no satisfactory arrangement can be made for settlement of each Venturer’s interest in the Joint Venture, the dispute or disputes shall be subject to binding arbitration by a single arbitrator. The Parties shall each use all reasonable efforts to avoid arbitration, including referring the dispute to senior executives and/or the board of directors of each of the Venturers for resolution; provided always that before resort to arbitration shall be taken, the Venturers agree that any such dispute or disputes shall be submitted to non-binding mediation.
The Venturers agree that there shall be no appeal from the decision of the arbitrator.
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The Arbitration Act, 1991 (Ontario) as amended and successor legislation thereto shall apply to the arbitration.
3.10 Covenants of Proponent - The Proponent does hereby covenant and agree with CED Co-op that:
(a) the Proponent shall neither do nor omit to do any act or thing that would cause Proponent to be in breach of this Agreement; and
(b) the Proponent shall not do or omit to do any act or thing that shall cause the Joint Venture to be in breach of either the FIT Contracts or the FIT Rules.
3.11 Covenants of CED Co-op - CED Co-op does hereby covenant and agree with Proponent that:
(a) CED Co-op shall neither do nor omit to do any act or thing that would cause CED Co-op to be in breach of this Agreement; and
(b) CED Co-op shall not do or omit to do any act or thing that will cause the Joint Venture to be in breach of either the FIT Contracts or the FIT Rules.
4. FINANCIAL MATTERS
4.1 Spending - No costs or expenses respecting the Project will be paid except those that have been approved by the Executive Committee, or are within a budget approved by the Executive Committee.
4.2 Funds Required for the Joint Venture - Each Venturer shall be directly responsible for paying its Proportionate Interest of all costs and expenses attributable to the Joint Venture, it being agreed that no costs or expenses respecting the Joint Venture will be paid except those that have been approved by the Executive Committee, and those costs which have been determined by a court to be payable by the Venturers, provided that where a cost or expense was incurred by a Venturer without the prior approval of the Executive Committee, the other Venturer will have no responsiblity for payment of its share, and if the other Venturer is obliged by an order of a court to make a payment to a third party in respect of such cost or expense, it shall be indemnified for such cost or expense by a Venturer who had incurred the unauthorized cost or expense.
4.3 Indemnities - Each Venturer (in this paragraph 4.3 the “Indemnifying Venturer”) agrees with the other Venturer (in this paragraph 4.3 the “Indemnified Venturer”):
(a) to be responsible for the Indemnifying Venturer’s Proportionate Interest of the debts, liabilities, obligations, duties, agreements, costs and expenses (including reasonable legal fees on a substantial indemnity basis) (collectively in this paragraph 4.3 the “Liabilities”) arising from or incurred in connection with the Joint Venture whether present or future, provided that the Liabilities have been properly incurred by the Venturers pursuant to this Agreement;
(b) Each Indemnifying Venturer shall at all times indemnify and save harmless each Indemnified Venturer from any and all Liabilities to the extent of that portion of all Liabilities which the Indemnified Venturer has incurred and which is in excess of the Indemnified Venturer’s Proportionate Interest of the Liabilities and which has been paid or incurred by the Indemnified Venturer. Each Indemnifying Venturer shall pay, forthwith on demand, the Indemnified Venturer with respect to such amount;
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(c) Each Indemnifying Venturer shall at all times indemnify and save harmless each Indemnified Venturer from any and all actions, proceedings, causes, claims, demands, costs, liabilities, damages and expenses of every nature or kind whatsoever arising out of the Indemnifying Venturer’s separate debts, liabilities, obligations, duties, agreements, costs and expenses (inlcuding reasonable legal fees on a substantial indemnity basis), whether present or future;
(d) Notwithstanding the foregoing, each Indemnifying Venturer will indemnify, defend and hold harmless the Indemnified Venturer and its affiliates, and its and their directors, officers, employees, and agents from and against the full amount of (not limited to the Proportionate Interest) all claims, losses, damages, liabilities, obligations, costs and expenses (including reasonable legal fees and expenses on a substantial indemnity basis) suffered by the Indemnified Party caused by, or arising, directly or indirectly, from a claim by a third party relating to:
i. the business or activities of the Indemnifying Party in circumstances where the Indemnified Party is joined as a party solely because of the Indemnifying Party's conduct in the Joint Venture;
ii. the unauthorized acts of, or contracts outside the scope of this Agreement entered into by, the Indemnifying Party;
iii. the Indemnifying Party's intellectual property; or
iv. negligence or misconduct of the Indemnifying Party,
except to the extent that the claims, losses, damages, liabilities, obligations, costs or expenses are determined to have resulted, in whole or in part, from the negligence or intentional misconduct of the Indemnified Party, in which case the indemnity in this paragraph (d) shall not apply; and
(e) These indemnity provisions and all other indemnities contained in this Agreement shall survive Termination of this Agreement.
4.4 Charges
(a) No Venturer shall charge (a “Charge”) any of the assets of the Joint Venture except as specifically and mutually agreed by both Venturers in writing;
(b) No Venturer shall Charge (in this paragraph 4.4. (b) a “Chargor Venturer”) its Joint Venture Interest without:
i. first advising the other Venturer in writing of the amount of the debt giving rise to the Charge, and of the identity of the Chargee;
ii. obtaining the prior written consent of the other Venturer to such Charge, such consent not to be unreasonably withheld;
iii. providing in the agreement with such Chargee a right, to be exercised by the other Venturer at its sole option, to remedy a default of the Chargor Venturer, or assume the debt of the Chargor Venturer under the Charge; and
iv. the Chargee acknowledges to the Venturers in writing thatthe Charge of such Joint Venture Interest shall at all times be subject to all the terms and conditions of this Agreement, including the terms and provisions regarding charging such Joint Venture Interest; and
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(c) If any Venturer exercises its right in any charging agreement pursuant to paragraph 4.4(b)(iii), then, subject to applicable law, (1) the Chargor Venturer shall re-imburse the other Venturer for the amount paid together with interest on such sum from the date of payment to the date of reimbursement at a rate equal to Prime plus 2% per annum and (2) subject to the provisions of paragraph 7.1(g) the Chargor Venturer shall be in Default under this Agreement pursuant to paragraph 7.1(g), and the rights of the non-defaulting Venturer pursuant to paragraph 7.2 shall apply.
4.5 Insurance - In addition to the insurance to be obtained by the Executive Committee pursuant to paragraph 3.3(a), each Venturer shall effect and maintain such additional insurance as would be obtained by a prudent owner of a Project having the obligations, including the indemnities, set forth in this Agreement, and shall provide to the other Venturer, upon request, proof that such insurance is in force.
4.6 Taxes - Each Venturer shall be responsible for payment of its own taxes of whatsoever kind and its Proportionate Interest of such taxes assessed against the Joint Venture.
5. TERMINATION
5.1 Distribution of Assets on Termination - On the termination of this Joint Venture for any reason other than a purchase of a Venturer’s Joint Venture Interest by the other Venturer or as a result of the vendor Venturer being in Default (a “Termination”) , all assets shall be liquidated, and the proceeds realized from the liquidation shall be distributed according to the following order of priority:
(a) first, to payment of all Joint Venture expenses and liabilities in order of their priority in accordance with applicable law, including obligations, debts, salaries, and taxes, and expenses necessary to wind up the Joint Venture and the establishment of a reserve for any and all contingent liabilities;
(b) second, from monies otherwise payable to a Venturer, payment of all sums owing to the other Venturer under this Agreement;
(c) third, to repayment of all sums received as Contributions from the Venturers, and in the event of shortfall, the Venturers shall receive their Proportionate Interest of such monies; and
(d) fourth, the remaining property of the Joint Venture is to be divided between the Venturers in proportion to their Proportionate Interest at the time of Termination.
5.2 Audit on Termination - On Termination, if at such time the Venturers determine that such action shall be advisable and proper, the Venturers shall employ a firm of chartered accountants to make a complete and final audit of the books, Records, and accounts so kept by the Joint Venture as in this Agreement provided, and all final adjustments between the Venturers shall be made on the basis of such audit. Should the Venturers disagree about the choice of a chartered accountant, the audit shall be performed by the accountant for the Joint Venture, and accepted by the Venturers as final and binding upon them such that the audit and the decision(s) of the auditor shall not be subject to appeal, whether to a Court of competent jurisdiction or otherwise.
5.3 Liability for Claims Asserted After Termination - If, after Termination, any claim, liability, or expense shall be asserted against the Joint Venture which was not used in computing the profits and losses of the Joint Venture and which is a proper item of computation, the Venturers shall bear their Proportionate Interest of the amount of any such claim, liability, or expense. The Venturers shall cooperate and consult with one another in defending any such claim, liability or expense and in making any settlement or
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compromise and no such settlement or compromise shall be made unless both Venturers agree.
6. TRANSFER OF INTEREST/RIGHT OF FIRST OFFER
6.1 Validity of Transfer of Interest of Joint Venture
(a) A Venturer may Transfer their Joint Venture Interest to any Person provided:
i. such Transfer is in full compliance with the terms and provisions of the FIT Rules and applicable law which shall include, for greater certainty, the Joint Venture’s FIT Contracts not being terminated or modified (other than the names of the parties thereto) by any such Transfer; and
ii. such Transfer is in compliance with the terms and provisions of this Agreement including, without limitation, the provisions contained in this paragraph 6.1;
(b) Any such Transfer of a Joint Venture Interest shall include a Transfer of the Venturer's interest in all Property subject to this Agreement. No partial Transfer of a Joint Venture Interest is permitted;
(c) Each and every Transfer under this Agreement shall be subject to the terms and conditions of this Agreement and to any amendment of this Agreement, and assuming all liabilities incurred by the transferring Venturer to the effective date of Transfer unless otherwise agreed by the Venturers; and
(d) No Transfer or other disposition permitted under this Agreement shall be valid unless and until the Venturer making such Transfer shall have delivered to the other Venturer a copy of each and every instrument providing for such Transfer, together with the written agreement of the transferee or transferees to be bound by all of the terms and conditions of this Agreement, and any amendment of the Agreement, all to be in a form satisfactory to the other Venturer, acting reasonably, with the same force and effect as if such transferee or transferees had owned the Joint Venture Interest so acquired at the date of this Agreement and had in fact signed this Agreement as of that time.
6.2 Release of Guarantees - The purchaser of any Joint Venture Interest shall be required to use their best efforts to obtain a release of any guarantee, indemnity, bond and/or covenant given by a vendor of the Joint Venture Interest and, in the event that such release(s) is not forthcoming, then the purchaser must offer themselves as a replacement guarantor, indemnifier, surety and/or covenantor, as the case may be. In the event that the vendor’s guarantee, indemnity, bond and/or other covenant is limited to a specific monetary amount and the purchaser has already provided a guarantee to a specific monetary amount in favour of the same party, then such purchaser must offer a guarantee, indemnity, bond and/or covenant for an increased monetary amount equivalent to the specific monetary amount of the vendor’s guarantee. If, notwithstanding the foregoing, the aforesaid releases are still not forthcoming, then the purchaser shall be required to provide an indemnity in favour of the vendor of the Joint Venture Interest in respect of such unreleased guarantees, indemnities, bonds and/or covenants, the form of same to be satisfactory to the vendor receiving same, acting reasonably.
6.3 Closing Mechanics - The completion of a transaction pursuant to the provisions of this paragraph 6 (and pursuant to the provisions of subparagraph 7. 2(d)) shall take place at 11:00 a.m. local time at the offices of the lawyers of the vendor Venturer or at such other place or time as the parties may unanimously agree upon. The applicable purchaser
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shall pay the applicable vendor the applicable balance due on closing by a certified cheque, bank draft or other immediately available funds upon delivery of the requisite documentation to the applicable purchaser.
7. DEFAULTS AND REMEDIES FOR DEFAULT
7.1 Events of Default - The occurrence or happening of any one or more of the following events shall constitute an event of default on the part of a Venturer (a “Default”) if:
(a) a Venturer shall fail to pay any Contributions as required and the failure to make any such Contributions is not rectified within 30 days of receipt of notice of such failure from the other Venturer;
(b) a Venturer fails to perform or observe any other covenant, condition or agreement to be performed or observed by it under this Agreement (other than as set out in subparagraph (a) above) and such failure to perform or observe is not rectified within 60 days of notice of such failure from the other Venturer;
(c) a Venturer shall make an assignment for the general benefit of creditors or is adjudged insolvent or bankrupt within the meaning of the bankruptcy laws of Canada;
(d) a proposal is made or petition filed by a Venturer under any law having for its purpose the extension of time for payment, composition or compromise of the liabilities of the Venturer;
(e) any resolution is passed for or judgment or order given by any court of competent jurisdiction ordering the dissolution, winding-up or liquidation of the Venturer;
(f) a petition or other application is made for the winding-up of the Venturer, unless and for so long as the Venturer shall be contesting the petition or other application in good faith with all due diligence and by appropriate proceedings;
(g) the Venturer defaults on any agreement under which the Venturer’s Joint Venture Interest in the Joint Venture is Charged and such defaults are not cured within the time period permitted under such Agreement; or
(h) any material representation of a Venturer in this Agreement is found to be incorrect or untrue at the time it was made.
7.2 Rights Upon Default - In the event of Default, the non-defaulting Venturer (in this paragraph 7.2 the “non-defaulting Venturer”) shall have the right
a) subject to applicable law, to recover any amounts owing to it by taking it from the share of the Venturer in Default (in this paragraph 7.2 the “Defaulting Venturer”) of the proceeds from the Projects, with each Venturer who is a Venturer in Default irrevocably authorizing and directing that any amounts that would otherwise be payable to it from the Joint Venture to be paid to the non-defaulting Venturer to give effect to the terms and provisions of this paragraph 7.2(a);
(b) to bring any proceedings in the nature of specific performance, injunction or other equitable remedy, it being acknowledged by the Venturers that a Default in the observance of the terms of the Agreement shall have caused irreparable harm and that damages at law may be an inadequate remedy for a Default, breach or threatened breach of this Agreement;
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(c) to bring any action at law or in equity as may be permitted in order to recover damages or for such other remedy or remedies as may be available to it; and
(d) subject to compliance with the FIT Rules and applicable law, at its sole option, the non-defaulting Venturer shall have the option of purchasing the Joint Venture Interest owned by the Defaulting Venturer at fair market value, as determined by an independent business valuator being a member of the Canadian Association of Chartered Business Valuators or successor chosen by the non-defaulting Venturer. The Venturers agree they shall be bound by the choice of the independent business valuator in the manner aforesaid and the valuation of the independent business valuator shall be binding upon the Venturers and not subject to appeal, whether to a Court of competent jurisdiction or otherwise. Upon completing the valuation, the independent business valuator shall deliver a copy of the valuation to the Venturers, such valuation to be delivered in accordance with the notice provisions set forth in paragraph 9.3 herein. The valuator shall be entitled to free and unimpeded access to the books and Records of the Joint Venture and the valuation shall take into account and apply generally accepted accounting principles, it being understood and agreed that a minority discount is not to be applied. The non-defaulting Venturer shall have 28 days from receipt of the valuation to exercise the option to purchase by giving notice to that effect to the defaulting Venturer and the purchase of the defaulting Venturer’s Joint Venture Interest shall be closed 21 days after delivery by the non-defaulting Venturer of the notice of the exercise of such option.
The purchase price for the defaulting Venturer’s Joint Venture Interest shall be payable in five equal instalments, the first of which shall be payable at the time of closing of the transfer of such Joint Venture Interest and thereafter in four equal consecutive annual instalments payable on the anniversary of the closing of the purchase of the Joint Venture Interest. No interest shall be payable on the outstanding instalments. The Closing mechanics shall be as set forth in paragraph 6.3 herein. The balance of the purchase price shall be evidenced by a promissory note. No security shall be provided for the outstanding balance of the purchase price. If the non-defaulting Venturer chooses not to purchase the defaulting Venturer’s Joint Venture Interest within the 28 days referred to above, the non-Defaulting Venturer’s option to purchase shall expire and the non-Defaulting Venturer shall have the right to take such further and other proceedings pursuant to the provisions of this paragraph 7.2 as it deems appropriate in the circumstances.
Notwithstanding all of the foregoing, if at any time a defaulting Venturer is indebted to the non-defaulting Venturer, such defaulting Venturer hereby assigns and sets over to the non-defaulting Venturer the purchase price to the extent requried to discharge the defaulting Venturer’s indebtedness to the non-defaulting Venturer.
Where a Default has been rectified prior to a proceeding or action being commenced under paragraph (a), (b) or (c), or prior to the transfer of the Joint Venture Interest in paragraph (d), provided all of the non-defaulting Venturer's costs of pursuing its remedies, including legal fees and disbursements on a substantial indemnity basis, have been reimbursed by the defaulting Venturer, the right to pursue any remedy under this Agreement for such Default shall cease.
8. CONFIDENTIALITY AND INTELLECTUAL PROPERTY
8.1 Confidentiality
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(a) Each Venturer agrees that all Confidential Information, as defined below, shall be and remain the exclusive property of the Venturer disclosing such information (in this paragraph 8.1 the “Disclosing Party”), or, in respect of information that is developed in the course of the Joint Venture, such Confidential Information shall belong jointly and indivisibly to each of the Venturers. Any Venturer receiving Confidential Information (in this paragraph 8.1 the “Receiving Party”) shall not disclose, and shall ensure that its representatives shall not disclose, to any Person, any Confidential Information that it receives relating to the Joint Venture, except as expressly authorized and directed by the other Venturer in writing. Each Venturer agrees not to use any Confidential Information or make copies or notices of any documents, records or materials whether they be printed or in machine readable form, (the “Records”) containing or referring to Confidential Information, except as may be authorized in writing by the Disclosing Party. Any Venturer, upon ceasing to be a party to the Joint Venture, shall return all Records containing any Confidential Information to the Disclosing Party or, with respect to Confidential Information developed in the course of the Joint Venture, shall return such Records to a party to the Joint Venture, who shall accept such Records on behalf of the Joint Venture. This paragraph shall not prohibit either Venturer from using the Confidential Information without compensation to the other Venturer for the development of additional Projects on its own;
(b) Confidential Information means all information with respect to trade secrets, know-how and secret or confidential information relating to the Joint Venture, the business of the Joint Venture, customers, operations, financial condition and affairs of the Joint Venture, and similar information about the business and activities of each Venturer (which, notwithstanding the provisions of paragraph 8.1 (a), may not be used by the Receiving Party after Termination) not generally known outside the Joint Venture, including without limitation, financial and marketing information, customer lists and information concerning programs, systems, processes and techniques whether patented, patentable or unpatentable. Notwithstanding the foregoing, it is understood that the Venturers shall not have liability hereunder for disclosure or use of any Confidetial Information which:
i. is in or, through no fault of the Disclosing Party or its directors, officers, partners, employees, agents and representatives, comes into the public domain;
ii. was acquired by, or was already in the possession of, the Receiving Party from other sources, provided such sources are not, to the knowledge of the Receiving Party, prohibited from disclosing such information by legal, contractual or fiduciary obligation to the other party; and
iii. either Venturer is legally required to disclose, the Venturers acknowledging and agreeing that any information contained in any receipted Offering Statement filed by CED Co-op with the Financial Services Commission of Ontario shall be deemed to be information CED Co-op is legally required to disclose.
Furthermore, the Venturers acknowledge and agree the intellectual property referred to in paragraph 8.2 below is not Confidential Information; and
(c) Each Venturer acknowledges that its relationship with the Joint Venture is of a special, unique, unusual and extraordinary character, which gives it peculiar value, the loss of which cannot adequately be compensated in damages in an
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action at law and would cause irreparable harm. Each Venturer shall be entitled to all equitable and legal remedies, including interlocutory and permanent injunctive relief, relating to any violation or breach of the provisions of paragraph 8.1 of this Agreement by the other Venturer.
8.2 Intellectual Property - All property of the Joint Venture in copyright, patents, know-how, or other intellectual property, which are acquired or created during the term of this Agreement in relation to the Projects of the Joint Venture, shall belong to the Venturers jointly according to its respective Proportionate Interest, and each Venturer shall be entitled to use such property for its own purposes during and after Termination without payment to the other Venturer and each Venturer agrees to execute such further documentation as may be required to give effect to such rights.
9. MISCELLANEOUS
9.1 Negation of Partnership - Nothing contained in this Agreement, or otherwise, shall constitute the Venturers partners, or render them liable to contribute more than their ratable amounts as described above, or entitle them to any participation in the results or profits of the Joint Venture other than as specified in this Agreement. This Agreement is intended to create a Joint Venture, not a partnership.
9.2 Individual Activities of Venturer - Joint operations between the Venturers are limited to those operations specified in this Agreement. This Agreement has no relation to any operations conducted by either Venturer as an individual or jointly with others, provided that no Venturer shall participate in any activity, as an individual or jointly with others, where such participation would be contrary to the purposes or activities of the Joint Venture formed under this Agreement.
9.3 Notice - Any and all notices provided for in this Agreement shall be given in writing delivered by courier or transmitted by email or fax to the following:
if to Proponent at:
Address:
Attention:
Email:
Fax number:
- and -
if to CED Co-Op at:
Address: 1633 Snyder’s Rd E – PO Box 67
Petersburg ON N0B 2H0
Attention: President
Email: [email protected]
Fax number: 519-279-4631
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Notices are deemed to be received on the day of actual delivery in the case of delivery by courier, and on the date transmitted by facsimile if transmission is completed before 5:00 p.m., Toronto time, with a record of transmission showing same. Notices of changes of address and contact person shall be given in accordance with the foregoing.
9.4 Liability - The doing of any act or the failure to do any act by any Venturer (the effect of which may cause or result in loss or damage to the Joint Venture) if done or not done pursuant to opinion of legal counsel employed by the Executive Committee on behalf of the Venture, shall not subject such Venturer to any liability. Further, the members of the Executive Committee shall not be liable for any error in judgment or any mistake of law or fact or any act done in good faith in the exercise of powers and authority conferred upon them but shall be liable only for gross negligence or willful misconduct.
9.5 Agreement Binding and Further Assurances - This Agreement shall be binding upon the parties and upon their successors and permitted assigns, and the parties agree for themselves and their respective successors and permitted assigns to execute any and all instruments in writing which are or may become necessary or proper to carry out the purpose and intent of this Agreement.
9.6 Amendments - This Agreement may not be altered unless the Venturers mutually agree in writing.
9.7 Titles and Subtitles - Titles of the paragraphs and subparagraphs are placed in this Agreement for convenient reference only and shall not to any extent have the effect of modifying, amending or changing the express terms and provisions of this Agreement.
9.8 Words and Gender or Number - As used in this Agreement, unless the context clearly indicates the contrary, the singular number shall include the plural, the plural the singular, and the use of any gender shall be applicable to all genders.
9.9 Severability - In the event any parts of this Agreement are found to be invalid or unenforceable, the remaining provisions of this Agreement shall nevertheless be binding with the same effect as though the invalid or unenforceable parts were deleted.
9.10 Effective Date - This Agreement shall be effective as of the date first written above.
9.11 Waiver - No waiver of any provisions of this Agreement shall be valid unless in writing and signed by the person or party against whom charged.
9.12 Representation of Venturers - Each Venturer represents and warrants to the other Venturer that it is participating in the Joint Venture as principal.
9.13 Entire Agreement - This Agreement is the entire Agreement between the parties.
9.14 Force Majeure - If, because of a circumstance beyond the control of a Venturer, it is delayed in performing or observing a covenant, or in complying with a condition under the terms of this Agreement that it is required to do by a specified date or within a specified period of time, or with all due diligence, and if the circumstance is neither caused by the Default, act or omission of that Venturer, nor avoidable by the exercise of reasonable effort or foresight by that Venturer, the date or period of time by or within which it is to perform, observe or comply will be extended by a period of time equal to the duration of the delay.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.
PROPONENT
Per:
NAME:
TITLE:
Per:
NAME:
TITLE:
We have the authority to bind the Corporation.
COMMUNITY ENERGY DEVELOPMENT CO-OPERATIVE LTD.
Per:
NAME: BRIAN P UNRAU
TITLE: PRESIDENT
Per:
NAME:
TITLE:
We have the authority to bind the Co-operative.
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SCHEDULE “A”
Capital Budget and Budget for the First Operating Year of the Joint Venture
3717567.1
Page | 209
APPENDIX I: Notice of Meeting of Members and Special Resolutions
NOTICE OF MEETING OF THE MEMBERS
OF
COMMUNITY ENERGY DEVELOPMENT CO-OPERATIVE LTD. (the “Co-operative”)
Notice is hereby given that a meeting of the members of the Co-operative will be held at Breslau
Mennonite Church, 7 Menno Street, Woolwich, Ontario on the 26th day of February, 2014 at the hour of
7:00 p.m. for the following purposes:
To consider and, if thought fit, to pass a special resolution amending the Articles of the Co-operative.
The text of the special resolution amending the Articles of the Co-operative is attached hereto as
Schedule "A".
To consider, and if thought fit, to confirm, ratify and approve the entry by the Co-operative into the
contracts listed on Schedule “B” annexed hereto. The directors and officers of the Co-operative, Brian
Peter Unrau, John Jerrald Jacob Enns and Dale Keith Brubacher-Cressman are also directors, officers and
shareholders of Vigor Clean Tech Inc. (“Vigor”). Vigor and the Co-operative are parties to the
agreements referred to and summarized in Schedule "B" hereto. The text of the proposed resolution
confirming, ratifying and approving the entry by the Co-operative into the aforementioned contracts is
also attached as Schedule "B".
To consider, and if thought fit, to pass a resolution confirming, ratifying and approving all acts taken by
the Co-operative and its directors. The text of the proposed resolution is attached hereto as Schedule
"C".
DATED this ____ day of February, 2014.
Brian Peter Unrau
4424882.1
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SCHEDULE "A"
Text of Special Resolution Amending the Articles
"BE IT RESOLVED THAT the Articles of Incorporation of the Co-operative are amended as follows:
To delete Section 4, inserting in lieu thereof the following:
"A minimum of three (3) and a maximum of eleven (11) directors."
To delete Section 8, inserting in lieu thereof the following:
"The authorized capital of the Co-operative is limited to the sum of One Hundred and Fifty-One Million
Dollars ($151,000,000.00), divided into:
(a) One hundred thousand (100,000) Membership shares with a par value of Ten Dollars ($10.00)
each, for a total aggregate amount of One Million Dollars ($1,000,000.00);
(b) Ten Million (10,000,000) Class A Preference shares with a par value of Five Dollars ($5.00) each,
for a total aggregate amount of Fifty Million Dollars ($50,000,000.00);
(c) Ten Million (10,000,000) Class B Preference shares with a par value of Five Dollars ($5.00) each,
for a total aggregate amount of Fifty Million Dollars ($50,000,000.00); and
(d) Ten Million (10,000,000) Class C Preference shares with a par value of Five Dollars ($5.00) each,
for a total aggregate amount of Fifty Million Dollars ($50,000,000.00)."
To delete Section 9, inserting in lieu thereof the following:
"CLASS A PREFERENCE SHARES
Dividends:
A holder of Class A Preference shares shall be entitled to receive and the Co-operative shall pay thereon,
as and when declared by the Board of Directors of the Co-operative out of the assets of the Co-operative
properly applicable to the payment of dividends, non-cumulative cash dividends at a rate fixed and
determined by the Board of Directors of the Co-operative. For greater certainty, dividends on the Class
B Preference shares and Class C Preference shares may, in the discretion of the Board of Directors of the
Co-operative, be paid independently of and in priority to the Class A Preference shares of the Co-
operative or the Board of Directors of the Co-operative may resolve that holders of the Class A
Preference shares shall receive dividends independently of and in priority to the holders of one or more
of the Class B Preference shares and Class C Preference shares of the Co-operative, but always in priority
to the Membership shares of the Co-operative. Dividends on the Class A Preference shares shall be
calculated annually and shall accrue from the date of issue of the said shares. In the event that the
Board of Directors of the Co-operative should not declare a dividend on the Class A Preference shares
within one hundred and eighty (180) days following the close of the fiscal year of the Co-operative, the
right of Class A Preference shareholders to a dividend for that fiscal year shall be forever extinguished.
Voting Rights:
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The holders of Class A Preference shares shall be entitled to receive notice of and attend all meetings of
members of the Co-operative, but shall not be entitled to vote thereat. Subject to the Co-operative
Corporations Act, Class A Preference shareholders shall be entitled to vote at all meetings of Class A
Preference shareholders called for the purpose of amending any of the preferences, rights, conditions,
restrictions, limitations or prohibitions attaching to the said class of shares, and at such meetings each
shareholder shall be entitled to cast one vote for each Class A Preference share held.
Amendment of Share Provisions:
Any amendment of these articles or to the provisions of the Class A Preference shares, the effect of
which is to delete or vary any preference, right, condition, restriction, limitation or prohibition attaching
to the Class A Preference shares, or to create a class of Preference shares ranking in priority to or on a
parity with the Class A Preference shares, or to increase the number of Class A Preference shares
authorized to be issued, may be confirmed by at least two-thirds of the votes cast at a meeting of the
Class A Preference shareholders duly called for that purpose.
Redemption:
The Co-operative may at any time, and from time to time, redeem, without the consent of the Class A
Preference shareholders, the whole or any part of the issued and outstanding Class A Preference shares
upon payment of the par value thereof, together with any dividends declared but unpaid (the
"Redemption Price").
Notice of Redemption:
Unless all the holders of the Class A Preference shares to be redeemed shall have waived notice of such
redemption, the Co-operative shall give not less than thirty (30) days' notice in writing of such
redemption by mailing to each person, who at the date of mailing is a registered holder of the Class A
Preference shares to be redeemed, a notice in writing of the intention of the Co-operative to redeem
such Class A Preference shares. Such notice shall be mailed in a prepaid envelope addressed to each
shareholder at his or her address as it appears on the books of the Co-operative or, in the event of the
address of any such shareholder not so appearing, then to the last known address of such shareholder,
provided however, that accidental failure or omission to give any such notice to one or more of such
holders shall not affect the validity of such redemption. Such notice shall set out the Redemption Price
of the shares to be redeemed and the date on which redemption is to take place and, if part only of the
Class A Preference shares held by the person to whom notice is given is to be redeemed, the number of
such shares to be redeemed.
Redemption Procedure:
On or after the date so specified for redemption in such notice, the Co-operative shall pay or cause to be
paid to, or to the order of, the registered holders of the Class A Preference shares to be redeemed, the
Redemption Price of such shares on presentation and surrender, at the registered office of the Co-
operative or any other place designated in such notice, of the certificates representing the shares so
called for redemption. Such payment shall be made by cheque payable at any branch in Canada of one
of the Co-operative's bankers at that time.
Partial Redemption:
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In case a part only of the Class A Preference shares is at any time to be redeemed, the shares so to be
redeemed shall be redeemed as nearly as may be in proportion to the number of Class A Preference
shares that are registered in the name of each holder of Class A Preference shares or in such other
manner as the Board of Directors shall determine with the consent of the holders of the Class A
Preference shares in accordance with the Co-operative Corporations Act.
Cessation of Rights:
From and after the date specified for redemption in any such notice, the Class A Preference shares
called for redemption shall cease to be entitled to dividends, and the holders thereof shall not be
entitled to exercise any of the rights of shareholders in respect thereof, unless payment of the
Redemption Price of the Class A Preference shares is not made upon presentation of the share
certificates in accordance with the foregoing provisions, in which case the rights of the holders shall
remain unaffected.
Deposit of Redemption Price:
The Co-operative shall have the right, at any time after the mailing of notice of its intention to redeem
any shares, to deposit the Redemption Price of the Class A Preference shares so called for redemption or
of such of the said shares represented by certificates which have not at the date of such deposit been
surrendered by the holders thereof in connection with any such redemption, in a special account at any
chartered bank, trust company, credit union, or caisse populaire in Canada named in such notice, to be
paid without interest to or to the order of the respective holders of such shares called for redemption
upon presentation and surrender to such bank, trust company, credit union or caisse populaire of the
certificates representing the said shares and, on such deposit being made or upon the date specified for
redemption in such notice, whichever is the later, the Class A Preference shares in respect of which such
deposit shall have been made shall be redeemed and the holders thereof after such deposit or such
redemption date, as the case may be, shall be limited to receiving without interest their proportionate
part of the total Redemption Price of the Class A Preference shares so deposited, against presentation
and surrender of the said certificates held by them respectively, and interest allowed on any such
deposit shall belong to the Co-operative.
No Redemption of Shares upon Withdrawal from Membership:
Class A Preference shareholders are not entitled to demand the redemption of such shares upon their
withdrawal from membership in the Co-operative, and the Co-operative is not under any obligation to
redeem such shares upon a member's withdrawal from membership.
Dissolution:
In the event of the liquidation, dissolution, or winding-up of the Co-operative, whether voluntary or
involuntary, the holders of Class A Preference shares shall be entitled to receive, before any distribution
of any part of the assets of the Co-operative among the holders of Class B Preference shares, Class C
Preference shares and Membership shares, their par value of Five Dollars ($5.00) for each Class A
Preference share, plus an amount equal to any dividends declared but not paid. Upon payment of the
above amount, the holders of Class A Preference shares shall not be entitled to any further share in the
distribution of the property or assets of the Co-operative.
CLASS B PREFERENCE SHARES
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Dividends:
A holder of Class B Preference shares shall be entitled to receive and the Co-operative shall pay thereon,
as and when declared by the Board of Directors of the Co-operative out of the assets of the Co-operative
properly applicable to the payment of dividends, non-cumulative cash dividends at a rate fixed and
determined by the Board of Directors of the Co-operative. For greater certainty, dividends on the Class
A Preference shares and Class C Preference shares may, in the discretion of the Board of Directors of the
Co-operative, be paid independently of and in priority to the Class B Preference shares of the Co-
operative or the Board of Directors of the Co-operative may resolve that holders of the Class B
Preference shares shall receive dividends independently of and in priority to the holders of one or more
of the Class A Preference shares and Class C Preference shares of the Co-operative, but always in priority
to the Membership shares of the Co-operative. Dividends on the Class B Preference shares shall be
calculated annually and shall accrue from the date of issue of the said shares. In the event that the
Board of Directors of the Co-operative should not declare a dividend on the Class B Preference shares
within one hundred and eighty (180) days following the close of the fiscal year of the Co-operative, the
right of Class B Preference shareholders to a dividend for that fiscal year shall be forever extinguished.
Voting Rights:
The holders of Class B Preference shares shall be entitled to receive notice of and attend all meetings of
members of the Co-operative, but shall not be entitled to vote thereat. Subject to the Co-operative
Corporations Act, Class B Preference shareholders shall be entitled to vote at all meetings of Class B
Preference shareholders called for the purpose of amending any of the preferences, rights, conditions,
restrictions, limitations or prohibitions attaching to the said class of shares, and at such meetings each
shareholder shall be entitled to cast one vote for each Class B Preference share held.
Amendment of Share Provisions:
Any amendment of these articles or to the provisions of the Class B Preference shares, the effect of
which is to delete or vary any preference, right, condition, restriction, limitation or prohibition attaching
to the Class B Preference shares, or to create a class of Preference shares ranking in priority to or on a
parity with the Class B Preference shares, or to increase the number of Class B Preference shares
authorized to be issued, may be confirmed by at least two-thirds of the votes cast at a meeting of the
Class B Preference shareholders duly called for that purpose.
Redemption:
The Co-operative may at any time, and from time to time, redeem, without the consent of the Class B
Preference shareholders, the whole or any part of the issued and outstanding Class B Preference shares
upon payment of the par value thereof, together with any dividends declared but unpaid (the
"Redemption Price").
Notice of Redemption:
Unless all the holders of the Class B Preference shares to be redeemed shall have waived notice of such
redemption, the Co-operative shall give not less than thirty (30) days' notice in writing of such
redemption by mailing to each person, who at the date of mailing is a registered holder of the Class B
Preference shares to be redeemed, a notice in writing of the intention of the Co-operative to redeem
such Class B Preference shares. Such notice shall be mailed in a prepaid envelope addressed to each
Page | 214
shareholder at his or her address as it appears on the books of the Co-operative or, in the event of the
address of any such shareholder not so appearing, then to the last known address of such shareholder,
provided however, that accidental failure or omission to give any such notice to one or more of such
holders shall not affect the validity of such redemption. Such notice shall set out the Redemption Price
of the shares to be redeemed and the date on which redemption is to take place and, if part only of the
Class B Preference shares held by the person to whom notice is given is to be redeemed, the number of
such shares to be redeemed.
Redemption Procedure:
On or after the date so specified for redemption in such notice, the Co-operative shall pay or cause to be
paid to, or to the order of, the registered holders of the Class B Preference shares to be redeemed, the
Redemption Price of such shares on presentation and surrender, at the registered office of the Co-
operative or any other place designated in such notice, of the certificates representing the shares so
called for redemption. Such payment shall be made by cheque payable at any branch in Canada of one
of the Co-operative's bankers at that time.
Partial Redemption:
In case a part only of the Class B Preference shares is at any time to be redeemed, the shares so to be
redeemed shall be redeemed as nearly as may be in proportion to the number of Class B Preference
shares that are registered in the name of each holder of Class B Preference shares or in such other
manner as the Board of Directors shall determine with the consent of the holders of the Class B
Preference shares in accordance with the Co-operative Corporations Act.
Cessation of Rights:
From and after the date specified for redemption in any such notice, the Class B Preference shares
called for redemption shall cease to be entitled to dividends, and the holders thereof shall not be
entitled to exercise any of the rights of shareholders in respect thereof, unless payment of the
Redemption Price of the Class B Preference shares is not made upon presentation of the share
certificates in accordance with the foregoing provisions, in which case the rights of the holders shall
remain unaffected.
Deposit of Redemption Price:
The Co-operative shall have the right, at any time after the mailing of notice of its intention to redeem
any shares, to deposit the Redemption Price of the Class B Preference shares so called for redemption or
of such of the said shares represented by certificates which have not at the date of such deposit been
surrendered by the holders thereof in connection with any such redemption, in a special account at any
chartered bank, trust company, credit union, or caisse populaire in Canada named in such notice, to be
paid without interest to or to the order of the respective holders of such shares called for redemption
upon presentation and surrender to such bank, trust company, credit union or caisse populaire of the
certificates representing the said shares and, on such deposit being made or upon the date specified for
redemption in such notice, whichever is the later, the Class B Preference shares in respect of which such
deposit shall have been made shall be redeemed and the holders thereof after such deposit or such
redemption date, as the case may be, shall be limited to receiving without interest their proportionate
part of the total Redemption Price of the Class B Preference shares so deposited, against presentation
Page | 215
and surrender of the said certificates held by them respectively, and interest allowed on any such
deposit shall belong to the Co-operative.
No Redemption of Shares upon Withdrawal from Membership:
Class B Preference shareholders are not entitled to demand the redemption of such shares upon their
withdrawal from membership in the Co-operative, and the Co-operative is not under any obligation to
redeem such shares upon a member's withdrawal from membership.
Dissolution:
In the event of the liquidation, dissolution, or winding-up of the Co-operative, whether voluntary or
involuntary, the holders of Class B Preference shares shall be entitled to receive, subject to the prior
rights of the holders of the Class A Preference shares, but before any distribution of any part of the
assets of the Co-operative among the holders of Class C Preference shares and Membership shares,
their par value of Five Dollars ($5.00) for each Class B Preference share, plus an amount equal to any
dividends declared but not paid. Upon payment of the above amount, the holders of Class B Preference
shares shall not be entitled to any further share in the distribution of the property or assets of the Co-
operative.
CLASS C PREFERENCE SHARES
Dividends:
A holder of Class C Preference shares shall be entitled to receive and the Co-operative shall pay thereon,
as and when declared by the Board of Directors of the Co-operative out of the assets of the Co-operative
properly applicable to the payment of dividends, non-cumulative cash dividends at a rate fixed and
determined by the Board of Directors of the Co-operative. For greater certainty, dividends on the Class
A Preference shares and Class B Preference shares may, in the discretion of the Board of Directors of the
Co-operative, be paid independently of and in priority to the Class C Preference shares of the Co-
operative or the Board of Directors of the Co-operative may resolve that holders of the Class C
Preference shares shall receive dividends independently of and in priority to the holders of one or more
of the Class A Preference shares and Class B Preference shares of the Co-operative, but always in priority
to the Membership shares of the Co-operative. Dividends on the Class C Preference shares shall be
calculated annually and shall accrue from the date of issue of the said shares. In the event that the
Board of Directors of the Co-operative should not declare a dividend on the Class C Preference shares
within one hundred and eighty (180) days following the close of the fiscal year of the Co-operative, the
right of Class C Preference shareholders to a dividend for that fiscal year shall be forever extinguished.
Voting Rights:
The holders of Class C Preference shares shall be entitled to receive notice of and attend all meetings of
members of the Co-operative, but shall not be entitled to vote thereat. Subject to the Co-operative
Corporations Act, Class C Preference shareholders shall be entitled to vote at all meetings of Class C
Preference shareholders called for the purpose of amending any of the preferences, rights, conditions,
restrictions, limitations or prohibitions attaching to the said class of shares, and at such meetings each
shareholder shall be entitled to cast one vote for each Class C Preference share held.
Amendment of Share Provisions:
Page | 216
Any amendment of these articles or to the provisions of the Class C Preference shares, the effect of
which is to delete or vary any preference, right, condition, restriction, limitation or prohibition attaching
to the Class C Preference shares, or to create a class of Preference shares ranking in priority to or on a
parity with the Class C Preference shares, or to increase the number of Class C Preference shares
authorized to be issued, may be confirmed by at least two-thirds of the votes cast at a meeting of the
Class C Preference shareholders duly called for that purpose.
Redemption:
The Co-operative may at any time, and from time to time, redeem, without the consent of the Class C
Preference shareholders, the whole or any part of the issued and outstanding Class C Preference shares
upon payment of the par value thereof, together with any dividends declared but unpaid (the
"Redemption Price").
Notice of Redemption:
Unless all the holders of the Class C Preference shares to be redeemed shall have waived notice of such
redemption, the Co-operative shall give not less than thirty (30) days' notice in writing of such
redemption by mailing to each person, who at the date of mailing is a registered holder of the Class C
Preference shares to be redeemed, a notice in writing of the intention of the Co-operative to redeem
such Class C Preference shares. Such notice shall be mailed in a prepaid envelope addressed to each
shareholder at his or her address as it appears on the books of the Co-operative or, in the event of the
address of any such shareholder not so appearing, then to the last known address of such shareholder,
provided however, that accidental failure or omission to give any such notice to one or more of such
holders shall not affect the validity of such redemption. Such notice shall set out the Redemption Price
of the shares to be redeemed and the date on which redemption is to take place and, if part only of the
Class C Preference shares held by the person to whom notice is given is to be redeemed, the number of
such shares to be redeemed.
Redemption Procedure:
On or after the date so specified for redemption in such notice, the Co-operative shall pay or cause to be
paid to, or to the order of, the registered holders of the Class C Preference shares to be redeemed, the
Redemption Price of such shares on presentation and surrender, at the registered office of the Co-
operative or any other place designated in such notice, of the certificates representing the shares so
called for redemption. Such payment shall be made by cheque payable at any branch in Canada of one
of the Co-operative's bankers at that time.
Partial Redemption:
In case a part only of the Class C Preference shares is at any time to be redeemed, the shares so to be
redeemed shall be redeemed as nearly as may be in proportion to the number of Class C Preference
shares that are registered in the name of each holder of Class C Preference shares or in such other
manner as the Board of Directors shall determine with the consent of the holders of the Class C
Preference shares in accordance with the Co-operative Corporations Act.
Cessation of Rights:
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From and after the date specified for redemption in any such notice, the Class C Preference shares called
for redemption shall cease to be entitled to dividends, and the holders thereof shall not be entitled to
exercise any of the rights of shareholders in respect thereof, unless payment of the Redemption Price of
the Class C Preference shares is not made upon presentation of the share certificates in accordance with
the foregoing provisions, in which case the rights of the holders shall remain unaffected.
Deposit of Redemption Price:
The Co-operative shall have the right, at any time after the mailing of notice of its intention to redeem
any shares, to deposit the Redemption Price of the Class C Preference shares so called for redemption or
of such of the said shares represented by certificates which have not at the date of such deposit been
surrendered by the holders thereof in connection with any such redemption, in a special account at any
chartered bank, trust company, credit union, or caisse populaire in Canada named in such notice, to be
paid without interest to or to the order of the respective holders of such shares called for redemption
upon presentation and surrender to such bank, trust company, credit union or caisse populaire of the
certificates representing the said shares and, on such deposit being made or upon the date specified for
redemption in such notice, whichever is the later, the Class C Preference shares in respect of which such
deposit shall have been made shall be redeemed and the holders thereof after such deposit or such
redemption date, as the case may be, shall be limited to receiving without interest their proportionate
part of the total Redemption Price of the Class C Preference shares so deposited, against presentation
and surrender of the said certificates held by them respectively, and interest allowed on any such
deposit shall belong to the Co-operative.
No Redemption of Shares upon Withdrawal from Membership:
Class C Preference shareholders are not entitled to demand the redemption of such shares upon their
withdrawal from membership in the Co-operative, and the Co-operative is not under any obligation to
redeem such shares upon a member's withdrawal from membership.
Dissolution:
In the event of the liquidation, dissolution, or winding-up of the Co-operative, whether voluntary or
involuntary, the holders of Class C Preference shares shall be entitled to receive, subject to the prior
rights of the holders of Class A Preference shares and Class B Preference shares, but before any
distribution of any part of the assets of the Co-operative among the holders of Membership shares, their
par value of Five Dollars ($5.00) for each Class C Preference share, plus an amount equal to any
dividends declared but not paid. Upon payment of the above amount, the holders of Class C Preference
shares shall not be entitled to any further share in the distribution of the property or assets of the Co-
operative."
To delete Section 12, inserting in lieu thereof the following:
"Holders of Membership shares are entitled to attend and vote at all meetings of the Co-operative and,
subject always to the prior rights of the holders of Class A Preference shares, Class B Preference shares
and Class C Preference shares, to receive dividends on Membership shares as may be declared from
time to time at the sole discretion of the Board of Directors of the Co-operative."
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SCHEDULE “B”
Contracts and Other Legal Instruments to be
Confirmed, Ratified and Approved by the Membership
Contract /
Transaction
Description
1. Authorization to
Appoint
Representatives
Community Energy Development Co-operative Ltd. ("CED Co-op") authorizes Brian
Unrau, as President of CED Co-op, to appoint representatives to the Executive
Committee of the various Joint Ventures which CED co-op has or will become a party
to.
Declaration of Conflict of Interest:
In addition to being President of CED Co-op, Brian Unrau is an owner of Vigor Clean
Tech Inc. ("Vigor"). Vigor is a renewable energy developer that intends to sell
materials and services to the various Joint Ventures formed by CED Co-op, and is also
a joint venturer in some of the Joint Ventures.
2. Joint Venture
Agreement
CED Co-op has entered into the following joint venture agreements with Vigor for the
purpose of investing in the development of solar photovoltaic generating facilities
under feed-in-tariff contracts with the Ontario Power Authority:
CEDC VIGOR SUNSHARE JV
CEDC MCCO SUNSHARE JV
CEDC WELLESLEY SUNSHARE JV
Declaration of Conflict of Interest:
Brian Unrau signed the Joint Venture Agreements on behalf of CED Co-op and is an
owner of Vigor. The other two members of the Executive Committees of the Joint
Ventures, Dale Brubacher-Cressman and Jerry Enns, are also owners of Vigor.
3. Appointment of
the Executive
Committee of the
Joint Venture for
each Joint Venture
formed
CED Co-op appointing Brian Unrau, Dale Brubacher-Cressman and Jerry Enns to the
Executive Committee of the Joint Ventures referred to in No. 2. above, which Joint
Ventures are comprised of two representatives from CED Co-op and three
representatives from the other Venturer.
Declaration of Conflict of Interest:
Page | 219
Brian Unrau, Dale Brubacher-Cressman and Jerry Enns are also owners of Vigor.
4. Authorization to
make FIT
Applications on
behalf of the Joint
Venture
A resolution of the Executive Committee of the Joint Venture authorizing Brian
Unrau, President of CED Co-op, to make applications on behalf of the joint ventures
listed below:
CEDC MCCO SUNSHARE JV, 50 Kent Avenue (MCCO)
CEDC VIGOR SUNSHARE JV, 30 Mumford Drive
(Perfetto Manufacturing Ltd.)
CEDC VIGOR SUNSHARE JV, 40 Mumford Drive
(SER Hydraulics LTD)
CEDC WELLESLEY SUNSHARE JV, 1 Green Street
(St. Clements Arena)
CEDC WELLESLEY SUNSHARE JV, 1000 Maple Leaf Street
(Wellesley Arena)
CEDC WELLESLEY SUNSHARE JV, 4639 Lobsinger Line
(Wellesley Township Office)
CEDC WELLESLEY SUNSHARE JV, 5279 Ament Line
(Linwood Community Center)
CEDC VIGOR SUNSHARE JV10 New Cobden Road (J Mason-PIT 2)
CEDC VIGOR SUNSHARE JV10 New Cobden Road (J Mason-PIT 3)
Declaration of Conflict of Interest:
In addition to being President of CED Co-op, Brian Unrau is an owner of Vigor. Vigor
and CED Co-op are the joint venturers in the joint ventures listed above.
Text of Proposed Resolution
"WHEREAS the directors and officers of the Co-operative have disclosed the nature and extent of their
interest in the contracts and/or transactions listed on Schedule "B" set forth above in reasonable detail
in the notice of this meeting:
BE IT RESOLVED THAT the directors and officers of the Co-operative having acted honestly and in good
faith, the entry by the Co-operative into the contracts listed on Schedule "B" attached hereto be and is
hereby confirmed, ratified and approved."
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SCHEDULE "C"
Text of Proposed Resolution
"All by-laws, resolutions, contracts, acts and proceedings of the Board of Directors of the Co-operative
enacted, passed, made, done or taken since the incorporation of the Co-operative and the resolutions of the
Board of Directors of the Co-operative in the minutes and record book of the Co-operative are hereby
approved, ratified and confirmed.
Page | 221
APPENDIX J: Form of Offering Statement Subscription Agreement
SUBSCRIPTION AGREEMENT
(Individuals resident in the Province of Ontario)
A completed and originally executed copy of this Subscription Agreement, including all applicable schedules hereto, must be delivered in hard copy or
electronically to: Community Energy Development Co-operative Ltd., 1633 Snyder’s Road E, P. O. Box 67, Petersburg, Ontario N0B 2H0, Attention:
Brian Unrau or at [email protected].
TO: COMMUNITY ENERGY DEVELOPMENT CO-OPERATIVE LTD. (the “Co-operative”)
The undersigned, on its own behalf, and, if applicable, on behalf of those for whom the undersigned is contracting hereunder (the
“Purchaser”) hereby irrevocably subscribes for and agrees to purchase the number of Membership Shares, Unsecured Convertible
Debentures, Class A Preference Shares, Bonds-Series L1-4, Bonds-Series M1-5 and Term Loans, as the case may be, of the Co-operative
set out below having the terms and conditions set forth in the Offering Statement (as defined below), receipt of a copy of which is
acknowledged by the Purchaser (collectively, the “Securities”), for the aggregate subscription price set out below (the “Purchase
Price”), subject to the following terms and conditions. This subscription agreement is referred to herein as the “Subscription
Agreement”. The Purchaser agrees to be bound by the terms and conditions set forth in the attached “Terms and Conditions of
Subscription”. The Purchaser further acknowledges and agrees, without limitation, that the Co-operative and its counsel may rely on the
Purchaser’s representations, warranties and covenants contained this Subscription Agreement.
Issuer: Community Energy Development Co-Operative Ltd.
Subscription:
Membership
Shares
Unsecured
Convertible
Debentures
Class A
Preference
Shares
Bonds-Series
L1-4
Bonds-Series
M1-5 Term Loans
Price $10 $5 $5 ● ● ●
Minimum Subscription $10 $500 $500 $1,000 $1,000 None
Maximum Subscription $10 $1,000 None None None None
To be completed by
Purchaser:
Number of Securities
Subscribed For ___________ __________ ___________ ___________ ___________ __________
Total Subscription Price
$__________
$_________
$ ____________
$ ____________
$ ____________
$ __________
Aggregate Subscription Price: $ _________________
DATED this________ day of ____________________, 2014.
Name and Address of Purchaser
(Name of Purchaser - please print) Purchaser’s Address (if not a member)
(Authorized Signature of Purchaser) Social Insurance Number / Business Tax Number (if not a member)
Page | 222
ACCEPTANCE
The foregoing is acknowledged, accepted and agreed to this ______ day of ____________________, 2014.
COMMUNITY ENERGY DEVELOPMENT CO-OPERATIVE LTD.
Per: _____________________________________
Name:
Title:
Page | 223
TERMS AND CONDITIONS OF SUBSCRIPTION
1. Subscription. The Purchaser hereby tenders to the Co-operative this Subscription Agreement which, upon acceptance
by the Co-operative, will constitute an irrevocable agreement of the Purchaser to purchase from the Co-operative, and of the Co-
operative to sell to the Purchaser, the aggregate number and/or principal amount of the Securities set out on the face page hereof
(the “Purchaser’s Securities”) at the Purchase Price, all on the terms and subject to the conditions set out in this Subscription
Agreement.
2. Payment. The Purchaser shall deliver the aggregate amount payable in respect of the Purchaser’s Securities subscribed
for hereby to the Co-operative, by personal cheque or bank draft drawn on a Canadian chartered bank, credit union or trust
company in Canadian dollars and payable to “Community Energy Development Co-Operative Ltd.”.
3. Definitions. In this Subscription Agreement, unless the context otherwise requires:
“CCA” means Co-operative Corporations Act, R.S.O. 1990, c. C.35, and the regulations made thereunder;
“Closing” means the completion of the issue and sale by the Co-operative and the purchase by the Purchaser of the
Securities pursuant to the provisions of this Subscription Agreement;
“FSCO” means Financial Services Commission of Ontario;
“Offering Statement” means the offering statement of the Co-operative in respect of the Securities dated November
27, 2014;
“person” means an individual, firm, corporation, syndicate, partnership, trust, association, unincorporated organization,
joint venture, investment club, government or agency or political subdivision thereof and every other form of legal or
business entity of whatsoever nature or kind;
“Personal Information” means any information about a person (whether an individual or otherwise) required to be
disclosed to FSCO, whether pursuant to the CCA or a request made by the Superintendent, and includes information
contained in this Subscription Agreement;
“Superintendent” means Superintendent of Financial Services appointed under the Financial Services Commission of
Ontario Act, 1997;
“United States” means the United States of America, its territories and possessions, any State of the United States and
the District of Columbia;
“U.S. Person” means a U.S. person as defined in Rule 902(k) of Regulation S under the U.S. Securities Act; and
“U.S. Securities Act” means the United States Securities Act of 1933, as amended.
4. Delivery and Payment. The Purchaser agrees that the following shall be delivered to the Co-operative at the address
set out on the face page hereof, or such other place as the Co-operative may advise:
a) a completed and duly signed copy of this Subscription Agreement; and
b) a personal cheque or bank draft made payable to “Community Energy Development Co-Operative Ltd.” representing
the aggregate Purchase Price payable by the Purchaser for the Purchaser’s Securities, or such other method of payment
of the same amount as the Co-operative may accept.
The Purchaser consents to the filing of any documents as may be required to be filed with FSCO in connection with the
transactions contemplated hereby. The Purchaser acknowledges and agrees that this offer, the Purchase Price and any other
documents delivered in connection herewith will be held by the Co-operative until such time as the conditions set out in this
Subscription Agreement are satisfied by the Co-operative.
5. Closing. The transactions contemplated hereby will be completed at the offices of the Co-operative at 1633 Snyder’s
Rd. E., P.O. Box 67, Petersburg, Ontario N0B 2H0, at such date or time as the Co-operative may determine. Upon compliance
with the terms and conditions contained in this Subscription Agreement, the Co-operative shall deliver to each Purchaser (x) one
or more certificates evidencing the Securities (if applicable), and (y) such other documentation as may be required pursuant to
this Subscription Agreement, against the Purchaser’s delivery of (a) this Subscription Agreement completed and duly signed by
Page | 224
the Purchaser, (b) payment of the aggregate Purchase Price payable by the Purchaser for the Purchaser’s Securities and (c) a
receipt for the certificates (if any) evidencing the Securities signed by the Purchaser.
If, prior to the time of completion of the transactions contemplated hereby, the terms and conditions contained in this
Subscription Agreement (other than delivery by the Co-operative of certificates representing the Securities) have not been
complied with, the Co-operative and the Purchaser will have no further obligations under this Subscription Agreement
If the Closing does not occur, the Co-operative shall return this Subscription Agreement and any funds, personal
cheques and bank drafts delivered by the Purchaser to the Co-operative representing the aggregate Purchase Price for the
Purchaser’s Securities, without interest, to the Purchaser.
6. Representations and Warranties of the Co-operative. The Co-operative represents and warrants to the Purchaser as
follows and acknowledges that the Purchaser is relying on such representations and warranties in subscribing for the Securities
hereunder:
a) the Co-operative is incorporated and validly subsisting under the laws of the Ontario Co-operative Corporations Act;
b) if signed by the Co-operative, this Subscription Agreement will be duly authorized, executed and delivered by the Co-
operative and will constitute a legal, valid and binding obligation of the Co-operative; and
c) subject to the acceptance of this Subscription Agreement by the Co-operative, all necessary action will have been taken
by the Co-operative to issue the Securities to the Purchaser.
7. Conditions of Closing. The Purchaser acknowledges that the Co-operative’s obligation to sell the Purchaser’s
Securities to the Purchaser is subject to, among other things, the following conditions:
a) the Purchaser is a member of the Co-operative at Closing; and
b) the representations and warranties of the Purchaser set out herein being true and correct as at the time of Closing.
8. Acceptance or Rejection. The Co-operative will have the right, in its sole discretion, to accept or reject this
Subscription Agreement at any time at or prior to the Closing. The Purchaser acknowledges and agrees that the acceptance of this
offer will be conditional upon the issue and sale of the Purchaser’s Securities to the Purchaser being exempt from the requirement
to provide the Purchaser with an offering statement available to the Co-operative under the regulations to the CCA. The Co-
operative will be deemed to have accepted this Subscription Agreement upon the Co-operative’s execution of the acceptance at
page 2 of this Subscription Agreement and the delivery at the Closing of the Purchaser’s Securities in accordance with the
provisions hereof.
If this Subscription Agreement is rejected, the Purchaser understands that any funds, personal cheques and bank drafts
delivered by the Purchaser to the Co-operative representing the aggregate Purchase Price for the Purchaser’s Securities will be
returned promptly by the Co-operative to the Purchaser without interest or deduction.
9. Purchaser’s Representations and Warranties. The Purchaser represents and warrants to the Co-operative as follows
and acknowledges that the Co-operative is relying on such representations and warranties in connection with the transactions
contemplated in this Subscription Agreement which representations and warranties shall survive the Closing and,
notwithstanding such Closing or any investigation made by or on behalf of the Co-operative with respect thereto and
notwithstanding any subsequent disposition by the Purchaser of any of the Purchaser’s Securities shall continue in full force and
effect for the benefit of the Co-operative following the Closing:
a) Authorization and Effectiveness. The Purchaser is an individual of the full age of majority resident in the Province of
Ontario and has all requisite legal capacity and competence to execute and deliver this Subscription Agreement and to
observe and perform his or her covenants and obligations hereunder, or under any agreement to which the Purchaser is
a party or by which the Purchaser is bound or any law applicable to the Purchaser or any judgment, decree, order,
statute, rule or regulation applicable to the Purchaser;
b) Offering Statement. The decision of the Purchaser to tender this Subscription Agreement and acquire the Purchaser’s
Securities has not been made as a result of any oral or written representation as to fact or otherwise made by or on
behalf of the Co-operative or any other person other than as contained in the Offering Statement. The Purchaser is
solely responsible for its own due diligence investigation of the Co-operative, its business and the merits and risks of its
investment pursuant to this Subscription Agreement and the Offering Statement, and has relied only on the information
contained in the Offering Statement in making the decision to subscribe for the Purchaser’s Securities hereunder;
c) Broker. There is no person acting or purporting to act in connection with the transactions contemplated herein who is
entitled to any brokerage or finder’s fee and if any person establishes a claim that any fee or other compensation is
payable in connection with this subscription for the Purchaser’s Securities, the Purchaser covenants to fully indemnify
Page | 225
and hold harmless the Co-operative with respect thereto and with respect to all costs reasonably incurred in the defence
thereof;
d) Illegal Use of Funds. None of the funds being used to purchase the Purchaser’s Securities are to the Purchaser’s
knowledge proceeds obtained or derived directly or indirectly as a result of illegal activities. The funds being used to
purchase the Purchaser’s Securities which will be advanced by the Purchaser to the Co-operative hereunder will not
represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) Act (Canada) (the
“PCMLA”) and the Purchaser acknowledges that the Co-operative may in the future be required by law to disclose the
Purchaser’s name and other information relating to this Subscription Agreement and the Purchaser’s subscription
hereunder, on a confidential basis, pursuant to the PCMLA. To the best of its knowledge (i) none of the funds to be
provided by the Purchaser are being tendered on behalf of a person or entity who has not been identified to the
Purchaser, and (ii) it shall promptly notify the Co-operative if the Purchaser discovers that any of such representations
cease to be true, and to provide the Co-operative with appropriate information in connection therewith;
e) No Purchase or Offer in United States. The Purchaser is not a U.S. Person and was not offered the Purchaser’s
Securities in the United States, at the time the purchase order originated was outside the United States, did not execute
or deliver this Subscription Agreement or related documents in the United States, is not purchasing the Purchaser’s
Securities on behalf of or for the benefit of a person in the United States or a U.S. Person, and confirms that no act,
solicitation, conduct or negotiation directly or indirectly in furtherance of the purchase of the Purchaser’s Securities
hereunder has occurred in the United States, and acknowledges that the Securities have not been, nor will they be,
registered under the U.S. Securities Act or the securities laws of any state, and such securities may not be offered or
sold, directly or indirectly, in the United States except pursuant to registration or unless an exemption from the
registration requirements under the U.S. Securities Act and applicable state securities laws is available, and agrees not
to offer or sell the Securities in the United States unless registered under the U.S. Securities Act or pursuant to an
exemption from registration under the U.S. Securities Act and applicable state securities laws and the Purchaser
acknowledges and understands that the Co-operative has no present intention of filing a registration statement under the
U.S. Securities Act in respect of the Securities;
f) Investment Suitability. The Purchaser has such knowledge and experience in financial and business affairs as to be
capable of evaluating the merits and risks of the investment hereunder in the Purchaser’s Securities and is able to bear
the economic risk of total loss of such investment; and
g) Personal Information. The Purchaser acknowledges that this Subscription Agreement requires the Purchaser to
provide certain Personal Information to the Co-operative and its agents and advisers as reasonably necessary in
connection with the proposed Offering. Such information is being collected and will be used by the Co-operative for
the purposes of completing the proposed Offering. The Purchaser agrees that the Purchaser’s Personal Information may
be disclosed by the Co-operative to: (a) FSCO and other applicable regulatory authorities, (b) the Canada Revenue
Agency or other taxing authorities, (c) Ontario Power Authority, Ministry of Energy, local distribution companies or
other parties as required for the Co-operative’s operations and (d) any of the other parties involved in the proposed
Offering, including legal counsel, and may be included in record books in connection with the Offering. By executing
this Subscription Agreement, the Purchaser consents to the foregoing collection, use and disclosure of the Purchaser’s
Personal Information. The Purchaser also consents to the filing of copies or originals of any of the Purchaser’s
documents described herein as may be required to be filed with any regulatory authority in connection with the
transactions contemplated hereby.
The Purchaser acknowledges and agrees that the foregoing representations and warranties are made by it with the
intention that they may be relied upon by the Co-operative and its respective counsel in determining the Purchaser’s eligibility to
purchase the Purchaser’s Securities. The Purchaser further agrees that by accepting delivery of the Purchaser’s Securities on
Closing, it shall be representing and warranting that the foregoing representations and warranties are true and correct as at
Closing with the same force and effect as if they had been made by the Purchaser at Closing and that they shall survive the
purchase by the Purchaser of the Purchaser’s Securities and shall continue in full force and effect notwithstanding any subsequent
disposition by the Purchaser of the Purchaser’s Securities. The Purchaser undertakes to notify the Co-operative immediately of
any change in any representation, warranty or other information relating to the Purchaser set out in this Subscription Agreement
which takes place prior to Closing.
The Purchaser acknowledges and agrees that the Co-operative may establish and maintain a file of the Purchaser’s
Personal Information for the purposes set out above, which will be accessible at the Co-operative’s offices at
1633 Snyder’s Rd. E., P.O. Box 67, Petersburg, Ontario N0B 2H0. Authorized employees and agents of the Co-operative will
have access to the Purchaser’s Personal Information. The Purchaser may request access to or correction of his or her Personal
Information in the Issuer’s possession by writing to the foregoing address, to the attention of the President of the Co-operative or
Brian Unrau.
Page | 226
10. No Revocation. The Purchaser agrees that this Subscription Agreement is made for valuable consideration and may
not be withdrawn, cancelled, terminated or revoked by the Purchaser without the consent of the Co-operative.
11. Indemnity. The Purchaser agrees to fully indemnify and hold harmless the Co-operative and its directors, officers,
employees, agents, advisers, shareholders and partners from and against any and all loss, liability, claim, damage and expense
whatsoever (including, but not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating,
preparing or defending against any claim, lawsuit, administrative proceeding or investigation whether commenced or threatened)
arising out of or based upon any representation or warranty of the Purchaser contained herein or in any document furnished by
the Purchaser to the Co-operative in connection herewith being untrue in any material respect or any breach or failure by the
Purchaser to comply with any covenant or agreement made by the Purchaser herein or in any document furnished by the
Purchaser to the Co-operative in connection herewith.
12. Modification. Subject to the terms hereof, neither this Subscription Agreement nor any provision hereof shall be
modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom any waiver,
change, discharge or termination is sought.
13. Assignment. The terms and provisions of this Subscription Agreement shall be binding upon and enure to the benefit
of the Purchaser, the Co-operative and their respective successors and assigns; provided that this Subscription Agreement shall
not be assignable by any party without the prior written consent of the other parties. For greater certainty this Subscription
Agreement may only be transferred or assigned by the Purchaser subject to compliance with applicable laws (including, without
limitation, the CCA) and with the express written consent of the Co-operative, which is subject to approval by the Board of
Directors of the Co-operative and the requirement that the transferee or assignee be a resident of the Province of Ontario.
14. Miscellaneous. All representations, warranties, agreements and covenants (including those relating to indemnification)
made or deemed to be made by the Purchaser (and, if applicable, others for whom it is contracting hereunder) herein will survive
the execution and delivery, and acceptance, of this Subscription Agreement and the Closing.
15. Electronic Deliveries and Counterparts. The Co-operative shall be entitled to rely on delivery by facsimile machine
or other electronic means of an executed copy of this Subscription Agreement, and acceptance by the Co-operative of such
facsimile copy shall be legally effective to create a valid and binding agreement between the Purchaser and the Co-operative in
accordance with the terms hereof. This Subscription Agreement may be executed in any number of counterparts, each of which
when delivered, either in original or electronic form, shall be deemed to be an original and all of which together shall constitute
one and the same document.
16. Governing Law. This Subscription Agreement shall be governed by and construed in accordance with the laws of the
Province of Ontario and the federal laws of Canada applicable therein. The Purchaser hereby irrevocably attorns to the
jurisdiction of the courts of the Province of Ontario with respect to any matters arising out of this Subscription Agreement.
17. Entire Agreement. This Subscription Agreement (including the Schedules hereto) contains the entire agreement of the
parties hereto relating to the subject matter hereof and there are no representations, covenants or other agreements relating to the
subject matter hereof except as stated or referred to herein. This Subscription Agreement may be amended or modified only by
written instrument.
18. Time of Essence. Time shall be of the essence of this Subscription Agreement.
19. Currency. All dollar amounts referred to in this Subscription Agreement are in Canadian dollars.
20. Further Assurances. Each of the parties hereto shall do or cause to be done all such acts and things and shall execute
or cause to be executed all such documents, agreements and other instruments as may reasonably be necessary or desirable for
the purpose of carrying out the provisions and intent of this Subscription Agreement.
21. Singular and Plural, etc. Where the context so requires, words importing the singular number include the plural and
vice versa, and words importing gender shall include the masculine, feminine and neuter genders.
22. Headings. The headings contained herein are for convenience only and shall not affect the meaning or interpretation
hereof.