Strategic Aerospace and Defence Initiative (SADI) Contribution Agreement Template

Schedule 3 - Repayments to the Minister (Conditional)

(If repayments are conditional)

1. Definitions

For the purposes of Schedule 3 of this Agreement, unless the context or the Agreement indicates otherwise:

"Adjustment Factor"
means the multiplier applied to the Repayment Rate for purposes of calculating the amount of each Annual Repayment Due, determined in accordance with the provisions of paragraph 2.1 of this Schedule.
"Annual Repayment Due"
means the annual repayment payable by the Recipient to the Minister as set out in section 2 of this Schedule.
"Benchmark Year GBR"
means the GBR for the Recipient Fiscal Year which immediately follows the Project Completion Date.
"Gross business revenues" or "GBR"
means revenue in the currency reported in the audited consolidated financial statements of the Recipient, as determined in accordance with generally accepted accounting principles applied on a consistent basis.
"Maximum Amount to be Repaid"
means [XX] time the actual amount paid by the Minister to the Recipient under this Agreement.
"Repayment Period"
means the period of time determined in accordance with paragraph 2.2 of this Schedule.
"Repayment Rate"
means that percentage rate calculated as follows, without conversion of the Recipient's revenues into Canadian dollars in the event that the Recipient's revenues are reported in a foreign currency:

ITO Contribution amount ( Benchmark Year GBR amount × Years to Repay )
"Years to Repay"
means [xxxx]([XX]) years.

2. Repayments

The Recipient shall pay the Annual Repayment Due during each year of the Repayment Period in accordance with the following:

2.1 Repayment Calculation

The Annual Repayment Due shall be calculated annually based on the Repayment Rate and year-over-year change in GBR by application of the Adjustment Factor as outlined below.

Repayment Calculation
Annual Growth in Royalty Base Adjustment
Factor
Repayments
less than 0% 0 No repayments due
0% to less than or equal to [X]% 1 Nominal repayment, no adjustment
greater than [X]% to less than
or equal to [Y]%
[a] Royalty increased by [AA]%
greater than [Y]% to less than
or equal to [Z]%
[b] Royalty increased by [BB]%
greater than [Z]% [c] Royalty increased by [CC]%

The Annual Repayment Due shall be payable in Canadian dollars (CAD).

In the event that the Recipient's revenues are reported in a currency other than Canadian dollars, the Annual Repayment Due shall be calculated as if the amount of the Recipient's reported revenues were a Canadian dollar amount, and there shall be no adjustment made on account of the relative value of the Canadian and non-Canadian currencies.

The Annual Repayment due shall be calculated as follows:

Recipient's Fiscal Year GBR × Repayment Rate × Adjustment Factor

Example:

ITO Contribution = 1.5 million CAD
Benchmark Year GBR = 10 million USD
Years to Repay = 15 years

Repayment Rate = ITO contribution (CAD) ( Benchmark Year GBR (USD) × Years to Repay ) = 1.5 million CAD ( 10 million USD × 15 ) = 1.0 %

Current Year Sales = 12 million USD
Prior Year Sales = 11 million USD

Annual year-over-year Sales Growth = ( Current Year Sales Prior Year Sales ) 1 = ( 12 million USD 11 million USD ) 1 = 9.1 %

Assume a 9.1% growth rate generates an adjustment factor of 1.5

Repayment Due (in CAD) = Current Year GBR × Adjustment Factor × Repayment Rate = 12 million USD × 1.5 × 1.0 % = 180,000 CAD

2.2 Repayment Period

The Repayment Period will begin one (1) year following the fiscal year end in which the Project is completed and will continue for the Years to Repay. The Recipient shall be entitled to prepay any Annual Repayment Due under this Agreement, or portion thereof, at any time.

2.3 Repayment Statements and Payments

Notwithstanding any other provisions contained in this Agreement or its Schedules, the Recipient shall provide the Minister with a statement of GBR audited by a third party for the purposes of establishing the Benchmark Year GBR, and thereafter shall provide audited statements of GBR annually within four (4) months following the end of each Recipient Fiscal Year. The annual statement of GBR shall include the Recipient's company name and SADI Agreement number.

The first Annual Repayment Due shall be payable within four (4) months following the end of the first Recipient Fiscal Year in which the Repayment Period starts. Subsequent Annual Repayment Due shall be paid within four (4) months following the end of the Recipient Fiscal Year in which the repayment accrues for the Years to Repay, or until such time as the Maximum Amount to be Repaid is reached, whichever occurs earlier.

The Annual Repayment Due shall be paid by cheque issued to the order of the Receiver General of Canada, and shall be sent to:

Innovation, Science and Economic Development Canada
2nd Floor
235 Queen Street
Ottawa, Ontario
K1A 0H5

Attn: Director, Repayments & Recoveries Directorate (RRD).

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2.4 Acquisitions and Divestitures

2.4.1 Acquisitions

  1. Benchmark Repayment Rate Adjustment: In the event that an acquisition occurs at any time during the Benchmark Year, the Repayment Rate shall be calculated as if the acquisition had taken place on the first day of the Benchmark Year notwithstanding the definition of Repayment Rate set out in Section 1:

    Formula:

    Repayment Rate = ITO contribution ( Benchmark Year GBR × Years to Repay ) .

    Where:

    Benchmark Year GBR = Recipient GBR during the benchmark year + Acquired Company GBR during the benchmark year (not otherwise reported in Recipient GBR) .

    Example:

    Recipient GBR in benchmark year = 1,000,000
    Acquired Company GBR in benchmark year = 500,000

    Benchmark Year GBR = 1,000,000 + 500,000 = 1,500,000

    ITO Contribution = 225,000
    Years to Repay = 15

    Repayment Rate = 225,000 ( 1,500,000 × 15 ) = 1.0 %

  2. Repayment Rate Adjustment Subsequent to the Benchmark Year:  In the event that an acquisition affects the GBR of the Recipient and occurs after the Benchmark Year, the Repayment Rate will be changed so that the impact of the event upon the Annual Repayment Due will be neutral. The changed Repayment Rate becomes the Repayment Rate for the year of the event and future periods, unless there is a subsequent acquisition or divestiture affecting the GBR of the Recipient.

    In simple terms, for example, if the company doubles in size as the result of the acquisition, the Repayment Rate is cut in half.

    Formula:

    Modified Repayment Rate = Repayment Rate × ( Prior Year GBR of Recipient ) ( Prior Year GBR of Recipient + Prior Year GBR of Acquired Company ) .

    Example:

    Repayment Rate = 1%
    Prior Year GBR of Recipient = 1,000,000
    Prior Year GBR of Acquired Company = 500,000

    Modified Repayment Rate = 1% × ( 1,000,000 ) ( 1,000,000 + 500,000 ) = 0.67%

  3. Annual Growth Rate Calculation for determination of Adjustment Factor: For the purpose of calculating annual growth rates in the Acquisition Year (year of acquisition) and Subsequent Year (year directly following year of acquisition), the Recipient's GBR in the Prior Year (year directly preceding year of acquisition) and Acquisition Year will be restated as if the acquisition was effective from the beginning of each year.

    Formula:

    Annual Growth Rate Acquisition Year = ( Acquisition Year GBR Prior Year GBR ) 1

    Annual Growth Rate Subsequent Year = ( Subsequent Year GBR Acquisition Year GBR ) 1

    Where:

    Prior Year GBR = Prior Year GBR of Recipient + Prior Year GBR of Acquired Company

    Acquisition Year GBR = Acquisition Year GBR of Recipient + Acquisition Year GBR of Acquired Company (not otherwise reported in Recipient GBR)

    Example:

    Modified Repayment Rate = 0.67%

    Prior Year GBR of Recipient = 1,000,000
    Prior Year GBR of Acquired Company = 500,000
    Prior Year GBR = 1,500,000

    Acquisition Year GBR of Recipient = 1,200,000
    Acquisition Year GBR of Acquired Company (not otherwise reported in Recipient GBR) = 600,000
    Acquisition Year GBR = 1,800,000

    Subsequent Year GBR = 1,900,000

    Annual Growth Rate Acquisition Year = ( 1,800,000 1,500,000 ) 1 = 20%

    Annual Growth Rate Subsequent Year = ( 1,900,000 1,800,000 ) 1 = 5.6%

2.4.2 Divestitures

  1. Benchmark Repayment Rate Adjustment: In the event that a divestiture occurs at any time during the Benchmark Year, the Repayment Rate shall be calculated as if the divestiture had taken place on the first day of the Benchmark Year notwithstanding the definition of Repayment Rate set out in Section 1:

    Formula:

    Repayment Rate = ITO contribution ( Benchmark Year GBR × Years to Repay ) .

    Where:

    Benchmark Year GBR = Recipient GBR during the benchmark year Divested GBR during the benchmark year .

    Example:

    Recipient GBR in Benchmark Year = 1,000,000
    Divested GBR in Benchmark Year = 500,000
    Benchmark Year GBR = 1,000,000 500,000 = 500,000

    ITO Contribution = 225,000
    Years to Repay = 15

    Repayment Rate = 225,000 ( 500,000 × 15 ) = 3.0 %

  2. Repayment Rate Adjustment Subsequent to the Benchmark Year: In the event that a divestiture affects the GBR of the Recipient and occurs after the Benchmark Year, the Repayment Rate will be changed so that the impact of the event upon the Annual Repayment Due will be neutral. The changed Repayment Rate becomes the Repayment Rate for the year of the event and future periods, unless there is a subsequent acquisition or divestiture affecting the GBR of the Recipient.

    In simple terms, for example, if the company becomes half its size as the result of the divestiture, the Repayment Rate is doubled.

    Formula:

    Modified Repayment Rate = Repayment Rate × ( Prior Year GBR of Recipient ) ( Prior Year GBR of Recipient Prior Year Divested GBR ) .

    Where:

    Prior Year Divested GBR = Revenues in the prior year from operations which have been discontinued as the result of the divestiture .

    Example:

    Repayment Rate = 1%
    Prior Year GBR of Recipient = 1,000,000
    Prior Year Divested GBR = 500,000

    Modified Repayment Rate = 1% × ( 1,000,000 ) ( 1,000,000 500,000 ) = 2%

  3. Annual Growth Rate Calculation for determination of Adjustment Factor:  For the purpose of calculating annual growth rates in the Divestiture Year (year of divestiture) and Subsequent Year (year directly following year of divestiture), the Recipient's GBR in the Prior Year (year directly preceding year of divestiture) and Divestiture Year will be restated as if the divestiture was effective from the beginning of each year.

    Formula:

    Annual Growth Rate Divestiture Year = ( Divestiture Year GBR Prior Year GBR ) 1

    Annual Growth Rate Subsequent Year = ( Subsequent Year GBR Prior Year GBR ) 1

    Where:

    Prior Year GBR = Prior Year GBR of Recipient Prior Year Divested GBR

    Divestiture Year GBR = Divestiture Year GBR of Recipient Divestiture Year Divested GBR

    Prior Year Divested GBR = Revenues in the Prior Year from operations which have been discontinued as the result of the divestiture .

    Divestiture Year Divested GBR = Revenues in the Divestiture Year from operations which have been discontinued as the result of the divestiture .

    Example:

    Modified Repayment Rate = 2%

    Prior Year GBR of Recipient = 1,000,000
    Prior Year Divested GBR = 500,000
    Prior Year GBR = 500,000

    Divestiture Year GBR of Recipient = 560,000
    Divestiture Year Divested GBR = 10,000
    Divestiture Year GBR = 550,000

    Subsequent Year GBR = 558,000

    Annual Growth Rate Divestiture Year = ( 550,000 500,000 ) 1 = 10%

    Annual Growth Rate Subsequent Year = ( 558,000 550,000 ) 1 = 1.5%

2.5 Late Payments

Interest shall be payable on any portion of the Annual Repayment Due remaining unpaid, calculated and payable at the Interest Rate, from the date upon which the Annual Repayment Due is due, until payment in full has been received by the Minister. Interest shall be payable in accordance with the foregoing notwithstanding any other remedies available to the Minister in the event of Default by the Recipient under this Agreement. Whenever any payment date under this section falls on a Saturday, Sunday or statutory holiday, payment will be due on the next day following which is not a Saturday, Sunday or statutory holiday.

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