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:
$\frac{\mathrm{ITO\; Contribution\; amount}}{(\mathrm{Benchmark\; Year\; GBR\; amount}\times \mathrm{Years\; to\; Repay})}$  "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 yearoveryear change in GBR by application of the Adjustment Factor as outlined below.
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 nonCanadian currencies.
The Annual Repayment due shall be calculated as follows:
$\mathrm{Recipient\text{'}s\; Fiscal\; Year\; GBR}\times \mathrm{Repayment\; Rate}\times \mathrm{Adjustment\; Factor}$
Example:
ITO Contribution = 1.5 million CAD
Benchmark Year GBR = 10 million USD
Years to Repay = 15 years
Current Year Sales = 12 million USD
Prior Year Sales = 11 million USD
Assume a 9.1% growth rate generates an adjustment factor of 1.5
$\mathrm{Repayment\; Due\; (in\; CAD)}=\mathrm{Current\; Year\; GBR}\times \mathrm{Adjustment\; Factor}\times \mathrm{Repayment\; Rate}=\mathrm{12\; million\; USD}\times 1.5\times \mathrm{1.0}\%=\mathrm{180,000}CAD$
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).
2.4 Acquisitions and Divestitures
2.4.1 Acquisitions
 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:
$\mathrm{Repayment\; Rate}=\frac{\mathrm{ITO\; contribution}}{(\mathrm{Benchmark\; Year\; GBR}\times \mathrm{Years\; to\; Repay})}$ .
Where:
$\mathrm{Benchmark\; Year\; GBR}=\mathrm{Recipient\; GBR\; during\; the\; benchmark\; year}+\mathrm{Acquired\; Company\; GBR\; during\; the\; benchmark\; year\; (not\; otherwise\; reported\; in\; Recipient\; GBR)}$ .
Example:
Recipient GBR in benchmark year = 1,000,000
Acquired Company GBR in benchmark year = 500,000$\mathrm{Benchmark\; Year\; GBR}=\mathrm{1,000,000}+\mathrm{500,000}=\mathrm{1,500,000}$
ITO Contribution = 225,000
Years to Repay = 15$\mathrm{Repayment\; Rate}=\frac{\mathrm{225,000}}{(\mathrm{1,500,000}\times \mathrm{15})}=1.0\%$

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:
$\mathrm{Modified\; Repayment\; Rate}=\frac{\mathrm{Repayment\; Rate}\times \left(\mathrm{Prior\; Year\; GBR\; of\; Recipient}\right)}{(\mathrm{Prior\; Year\; GBR\; of\; Recipient}+\mathrm{Prior\; Year\; GBR\; of\; Acquired\; Company})}$ .
Example:
Repayment Rate = 1%
Prior Year GBR of Recipient = 1,000,000
Prior Year GBR of Acquired Company = 500,000$\mathrm{Modified\; Repayment\; Rate}=\frac{\mathrm{1\%}\times \left(\mathrm{1,000,000}\right)}{(\mathrm{1,000,000}+\mathrm{500,000})}=\mathrm{0.67\%}$
 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:
${\mathrm{Annual\; Growth\; Rate}}_{\mathrm{Acquisition\; Year}}=\left(\frac{\mathrm{Acquisition\; Year\; GBR}}{\mathrm{Prior\; Year\; GBR}}\right)1$
${\mathrm{Annual\; Growth\; Rate}}_{\mathrm{Subsequent\; Year}}=\left(\frac{\mathrm{Subsequent\; Year\; GBR}}{\mathrm{Acquisition\; Year\; GBR}}\right)1$
Where:
$\mathrm{Prior\; Year\; GBR}=\mathrm{Prior\; Year\; GBR\; of\; Recipient}+\mathrm{Prior\; Year\; GBR\; of\; Acquired\; Company}$
$\mathrm{Acquisition\; Year\; GBR}=\mathrm{Acquisition\; Year\; GBR\; of\; Recipient}+\mathrm{Acquisition\; Year\; GBR\; of\; Acquired\; Company\; (not\; otherwise\; reported\; in\; Recipient\; GBR)}$
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 = 1,500,000Acquisition Year GBR of Recipient = 1,200,000
Acquisition Year GBR of Acquired Company (not otherwise reported in Recipient GBR) = 600,000
Acquisition Year GBR = 1,800,000Subsequent Year GBR = 1,900,000
${\mathrm{Annual\; Growth\; Rate}}_{\mathrm{Acquisition\; Year}}=\left(\frac{\mathrm{1,800,000}}{\mathrm{1,500,000}}\right)1=\mathrm{20\%}$
${\mathrm{Annual\; Growth\; Rate}}_{\mathrm{Subsequent\; Year}}=\left(\frac{\mathrm{1,900,000}}{\mathrm{1,800,000}}\right)1=\mathrm{5.6\%}$
2.4.2 Divestitures
 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:
$\mathrm{Repayment\; Rate}=\frac{\mathrm{ITO\; contribution}}{(\mathrm{Benchmark\; Year\; GBR}\times \mathrm{Years\; to\; Repay})}.$
Where:
$\mathrm{Benchmark\; Year\; GBR}=\mathrm{Recipient\; GBR\; during\; the\; benchmark\; year}\mathrm{Divested\; GBR\; during\; the\; benchmark\; year}$ .
Example:
Recipient GBR in Benchmark Year = 1,000,000
Divested GBR in Benchmark Year = 500,000
$\mathrm{Benchmark\; Year\; GBR}=\mathrm{1,000,000}\mathrm{500,000}=\mathrm{500,000}$ITO Contribution = 225,000
Years to Repay = 15$\mathrm{Repayment\; Rate}=\frac{\mathrm{225,000}}{(\mathrm{500,000}\times \mathrm{15})}=3.0\%$

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:
$\mathrm{Modified\; Repayment\; Rate}=\frac{\mathrm{Repayment\; Rate}\times \left(\mathrm{Prior\; Year\; GBR\; of\; Recipient}\right)}{(\mathrm{Prior\; Year\; GBR\; of\; Recipient}\mathrm{Prior\; Year\; Divested\; GBR})}$ .
Where:
$\mathrm{Prior\; Year\; Divested\; GBR}=\mathrm{Revenues\; in\; the\; prior\; year\; from\; operations\; which\; have\; been\; discontinued\; as\; the\; result\; of\; the\; divestiture}$ .
Example:
Repayment Rate = 1%
Prior Year GBR of Recipient = 1,000,000
Prior Year Divested GBR = 500,000$\mathrm{Modified\; Repayment\; Rate}=\frac{\mathrm{1\%}\times \left(\mathrm{1,000,000}\right)}{(\mathrm{1,000,000}\mathrm{500,000})}=\mathrm{2\%}$

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:
${\mathrm{Annual\; Growth\; Rate}}_{\mathrm{Divestiture\; Year}}=\left(\frac{\mathrm{Divestiture\; Year\; GBR}}{\mathrm{Prior\; Year\; GBR}}\right)1$
${\mathrm{Annual\; Growth\; Rate}}_{\mathrm{Subsequent\; Year}}=\left(\frac{\mathrm{Subsequent\; Year\; GBR}}{\mathrm{Prior\; Year\; GBR}}\right)1$
Where:
$\mathrm{Prior\; Year\; GBR}=\mathrm{Prior\; Year\; GBR\; of\; Recipient}\mathrm{Prior\; Year\; Divested\; GBR}$
$\mathrm{Divestiture\; Year\; GBR}=\mathrm{Divestiture\; Year\; GBR\; of\; Recipient}\mathrm{Divestiture\; Year\; Divested\; GBR}$
$\mathrm{Prior\; Year\; Divested\; GBR}=\mathrm{Revenues\; in\; the\; Prior\; Year\; from\; operations\; which\; have\; been\; discontinued\; as\; the\; result\; of\; the\; divestiture}$ .
$\mathrm{Divestiture\; Year\; Divested\; GBR}=\mathrm{Revenues\; in\; the\; Divestiture\; Year\; from\; operations\; which\; have\; been\; discontinued\; as\; the\; result\; of\; the\; divestiture}$ .
Example:
Modified Repayment Rate = 2%
Prior Year GBR of Recipient = 1,000,000
Prior Year Divested GBR = 500,000
Prior Year GBR = 500,000Divestiture Year GBR of Recipient = 560,000
Divestiture Year Divested GBR = 10,000
Divestiture Year GBR = 550,000Subsequent Year GBR = 558,000
${\mathrm{Annual\; Growth\; Rate}}_{\mathrm{Divestiture\; Year}}=\left(\frac{\mathrm{550,000}}{\mathrm{500,000}}\right)1=\mathrm{10\%}$
${\mathrm{Annual\; Growth\; Rate}}_{\mathrm{Subsequent\; Year}}=\left(\frac{\mathrm{558,000}}{\mathrm{550,000}}\right)1=\mathrm{1.5\%}$
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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