EXHIBIT 10.18
HUB INTERNATIONAL LIMITED,
as Issuer
and
United States Fire Insurance Company,
as Holder
-------------------------
DEBENTURE
Dated as of June 28, 2001
-------------------------
US$17,500,000
8.5% Convertible Subordinated Debenture
due June 28, 2007
DEBENTURE
DEBENTURE dated as of June 28, 2001 between Hub International Limited, a
corporation duly organized and existing under the laws of the Province of
Ontario (herein called the "Company"), having its registered office at 214 King
Street West, Suite 314, Toronto, Ontario, and United States Fire Insurance
Company, a company duly organized and existing under the laws of New York
(herein called the "Holder").
FOR GOOD AND VALUABLE CONSIDERATION the parties agree as follows:
ARTICLE ONE
DEFINITIONS AND OTHER PROVISIONS OF OTHER APPLICATION
SECTION 101. Definitions.
For all purposes of this Debenture, except as otherwise expressly provided
or unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to them in
this Article, and include the plural as well as the singular;
(b) all accounting terms not otherwise defined herein have the meanings
assigned to them in accordance with Generally Accepted Accounting Principles,
and, except as otherwise herein expressly provided, the term "Generally Accepted
Accounting Principles" with respect to any computation required or permitted
hereunder shall mean such accounting principles as are generally accepted at the
date of such computation; and
(c) the words "herein", "hereof" and "hereunder" and other
words of similar import refer to this Debenture as a whole and not to any
particular Article, Section or other subdivision.
"Additional Amounts" has the meaning specified in Section 1007.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Base Currency" has the meaning specified in Section 114.
"Board of Directors" or "Board" means the board of directors of the
Company.
"Board Resolution" means a copy of a resolution certified by the Secretary
of the Company to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of Toronto, Ontario
are obligated by law to close.
"Canadian Taxes" means any past, present or future tax, duty, levy, impost,
deduction, charge, withholding, assessment, tariff or other government charge
(including penalties, interest and other liabilities related thereto) imposed or
levied by or on behalf of any Tax Authority in Canada.
"Cash Equivalents" means:
(a) marketable securities issued or directly, fully and
unconditionally guaranteed or insured by Canada or any Province thereof or
by the United States of America or any State thereof or the District of
Columbia therein, or issued by any agency or instrumentality of any of
them, and in any case backed by the full faith and credit thereof, in each
case having a maturity date of not more than one year from the date of
acquisition;
(b) time deposits and certificates of deposit having a maturity date
of not more than one year from the date of acquisition issued by any
Canadian chartered bank, trust company or a bank which is organized under
the laws of the United States of America, any State thereof or the District
of Columbia therein and which has (or which is a subsidiary of a bank
holding company which has) issued capital and earned and contributed
surplus in excess of Cdn$500,000,000 or US$500,000,000, as the case may be;
(c) commercial paper maturing within one year after the date of
acquisition thereof issued by an issuer organized under the laws of Canada
or any Province thereof or the United States of America, any State thereof
or the District of Columbia which is rated at least A-1 or the equivalent
thereof by Standard and Poor's Corporation, P-1 or the equivalent thereof
by Moody's Investors Service, Inc. or R-1 low by Dominion Bond Rating
Service; and
(d) any other investment which the lender of the Company's Senior
Indebtedness shall expressly consent in writing to accept as a Cash
Equivalent.
"Closing Sale Price" means on any day the reported last sale price, regular
way, on such day or, in case no sale takes place on such day, the average of the
reported closing bid and asked prices, regular way, in each case on The Toronto
Stock Exchange (or such successor exchange), or, if not listed or admitted to
trading or quoted on The Toronto Stock Exchange (or such successor exchange), on
the principal securities exchange or quotation system in Canada on which such
security is quoted or listed or admitted to trading, or, determined in good
faith by the Board of Directors.
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"Commission" means the Ontario Securities Commission, as from time to time
constituted, created under the Securities Act (Ontario), or, if at any time
after the execution of this Debenture such Commission is not existing and
performing the duties now assigned to it then the body performing such duties at
such time.
"Common Shares" means the common shares, with no par value, of the Company
authorized at the date of this instrument as originally executed. Subject to the
provisions of Section 1218, shares issuable upon conversion of the Debenture
shall include only Common Shares or shares of any class or classes of Common
Stock resulting from any reclassification thereof; provided, however, that if at
any time as a result of such reclassification there shall be more than one such
resulting class, the shares so issuable upon conversion of the Debenture shall
include shares of all such classes, and the number of shares of each such class
then so issuable shall be in the same proportion which the total number of
shares of such class resulting from such reclassification bears to the total
number of shares of such classes resulting from such reclassification; and
provided further, however, that such shares issuable upon conversion of the
Debenture shall be "prescribed securities" as defined in Regulation 6208 to the
Tax Act, or such other shares as may, at the date of their issuance, be issued
without subjecting the Debenture to Canadian Taxes or US Taxes.
"Common Stock" means the Common Shares, together with any other class of
capital stock of the Company which has no preference in respect of dividends or
of amounts payable in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Company and which is not subject to redemption
by the Company.
"Company" means Hub International Limited, until a successor Person shall
have become such pursuant to the applicable provisions of this Debenture, and
thereafter "Company" shall mean such successor Person.
"Company Conversion Option" has the meaning specified in Section 1203.
"Company Conversion Threshold" has the meaning specified in Section 1203.
"Company Request" or "Company Order" means a written request or order
signed in the name of the Company by its Chairman, its President, its Chief
Financial Officer or Secretary.
"Consolidated EBITDA" for any period means Earnings of the Company and its
Subsidiaries for such period, before Consolidated Interest Expense, income
taxes, capital tax and large corporation tax, depreciation and amortization of
the Company and its Subsidiaries, all determined on an accrual basis and on a
consolidated basis for such period, all in accordance with Generally Accepted
Accounting Principles, but excluding, for greater certainty, (a) any gain or
loss arising from the disposition or write-up or write-down of any fixed assets,
(b) any other items not involving the outlay or receipt of cash in the current
or any future period, or (c) any other extraordinary items.
"Consolidated Indebtedness" means, as of the date of determination (a) the
aggregate outstanding principal amount of all Indebtedness of the Company and
its Subsidiaries determined (without duplication) in accordance with Generally
Accepted Accounting Principles
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on a consolidated basis, less (b) the excess of (i) then current market value of
cash and Cash Equivalents beneficially owned, and held directly, by the Company
at such time, over (ii) the reserves and capital required by applicable
insurance law to fund reasonably anticipated claims.
"Consolidated Interest Expense" of the Company and its Subsidiaries for any
period means the aggregate amount (without duplication) of all interest, fees
(other than professional fees), standby fees, acceptance fees, commissions,
costs and other charges paid in cash or accrued as a liability by the Company
and its Subsidiaries during such period on or in respect of or in connection
with any Indebtedness, including, without limitation, all interest expenses
(whether capitalized or not) on short and long term obligations for borrowed
money, fees and other charges payable in respect of financial guarantees,
letters of credit or letters of guarantee or obligations to financial
institutions who issued such letters of credit or letters of guarantee,
discounts in respect of the proceeds of bankers' acceptances, asset
monetizations and securitizations, any capitalized interest and the interest
portion of payments under Capital Leases, and interest on subordinated
Indebtedness, determined on a consolidated basis in accordance with Generally
Accepted Accounting Principles;
"Constituent Person" has the meaning specified in Section 1218.
"Conversion Agent" means any Person authorized by the Company to convert
Debentures in accordance with Article 12. The Company has initially appointed
the Secretary of the Company as its Conversion Agent.
"Conversion Date" of a Debenture means the day such Debenture is
surrendered for conversion in accordance with Section 1202 or Section 1204, if
such day is not a Business Day, then the next succeeding Business Day.
"Conversion Amount" has the meaning specified in Section 1210.
"Conversion Price" has the meaning specified in Section 1201.
"corporation" includes corporations, partnerships, associations, companies,
joint ventures and business trusts.
"current market price" has the meaning specified in Section 1210(h).
"Debenture", "Debentures", "this Debenture", "the Debenture" and "the
Debentures" means this instrument as originally executed and as it may from time
to time be supplemented, apportioned (in integral multiples of denominations of
US$1,000) or amended by one or more instruments supplemental hereto entered into
pursuant to the applicable provisions hereof, as applicable.
"Debenture Register" and "Debenture Registrar" have the respective meanings
specified in Section 305.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
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"Defaulted Interest" has the meaning specified in Section 307.
"Dollar", "Cdn$" or "Canadian dollar" means a dollar or other equivalent
unit in such coin or currency of Canada as at the time shall be legal tender for
the payment of public and private debts.
"Earnings" for any period means earnings of the Company and its
Subsidiaries for such period determined on a consolidated basis in accordance
with Generally Accepted Accounting Principles and the accounting practices
permitted under Generally Accepted Accounting Principles applied by the Company.
"EBITDA Ratio" means the ratio of the Company's Consolidated Indebtedness
to its Consolidated EBITDA for the period indicated.
"Encumbrance" means any mortgage, charge, hypothec, legal hypothec, pledge,
security interest, lien or deposit arrangement or any other encumbrance, whether
fixed or floating, that in substance secures the payment of any indebtedness or
liability or the observance or performance of any obligation, regardless of form
and whether consensual or arising by law, statutory or otherwise, on or in, any
asset or property, whether immovable or real, movable or personal, or mixed,
tangible or intangible, or any pledge or hypothecation thereof or any
conditional sale agreement or other title retention agreement or equipment trust
relating thereto or any lease relating to property which would be required to be
accounted for as a capital lease on such Person's balance sheet.
"Event of Default" has the meaning specified in Section 501.
"Exchange Rate" means the average for the 20 Business Days immediately
prior the Conversion Date of the noon buying rate in New York City for cable
transfers of Canadian dollars as certified for customs purposes (or, if not so
certified, as otherwise determined) by the Federal Reserve Bank of New York.
"Excluded Holder" has the meaning specified in Section 1007.
"Expiration Time" has the meaning specified in Section 1210(f).
"Financial Institution" means any bank, or other institutional lender or
commercial lender or any strategic lender.
"Generally Accepted Accounting Principles" means, at any time, accounting
principles generally accepted in Canada as recommended in the Handbook of the
Canadian Institute of Chartered Accountants applied on a basis consistent with
prior years.
"guarantee" means any guarantee or other credit support for all or any part
of any Indebtedness or other obligation of any other person, direct or indirect,
in any manner including, without limitation, by way of a pledge of assets or
through letters of credit or reimbursement agreements in respect thereof,
excluding, however, any endorsement of negotiable instruments for collection in
the ordinary course of business.
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"Hedging Obligations" means, with respect to any Person, the obligations of
such Person under: (1) interest rate swap agreements and interest rate cap
agreements; and (2) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates.
"Holder" means the "Holder" identified in the first paragraph of this
Debenture and any permitted assignee or successor Person in whose name a
Debenture is registered in the Debenture Register.
"Holder Conversion Option" has the meaning specified in Section 1201.
"Incur" means, with respect to any Indebtedness, to incur, create, issue,
assume, or otherwise become liable for or with respect to, or become responsible
for, the payment of, contingently or otherwise, such Indebtedness; provided that
the accrual of interest shall be considered an Incurrence of Indebtedness.
"Indebtedness" means (a) any liability of any Person (1) for borrowed
money, or under any reimbursement obligation relating to a letter of credit,
banker's acceptance, surety or other bond or instrument (2) evidenced by a bond,
note, debenture or similar instrument (including a purchase money obligation
given in connection with the acquisition of any businesses, properties or assets
of any kind other than a trade payable or a current liability arising in the
ordinary course of business), or (3) under any loan agreement, letter of credit
application, acceptance agreement, factoring agreement, Debenture, capital
lease, mortgage or similar agreement or document; (b) any liability of others
described in the preceding clause (a) that such Person has guaranteed or that is
otherwise its legal liability; and (c) any amendment, supplement, modification,
deferral, renewal, extension or refunding of any liability of the types referred
to in clauses (a) and (b) above.
"Interest Payment Date" has the meaning specified in Section 301.
"Judgment Currency" has the meaning specified in Section 114.
"junior securities" has the meaning specified in Section 1312.
"Maturity", when used with respect to the Debenture, means the date on
which the principal of the Debenture or an installment of principal becomes due
and payable as herein provided, whether at the Stated Maturity or by declaration
of acceleration, notice of redemption or otherwise.
"Non-electing Share" has the meaning specified in Section 1218.
"Non-payment Event of Default" means any event (other than a Payment Event
of Default) the occurrence of which entitles one or more Persons to accelerate
the maturity of any Indebtedness.
"Notice of Conversion" means the notice given by the Holder to the
Conversion Agent directing the Conversion Agent to convert such Debentures into
Common Shares on behalf of such Holder, the form of which is set out in Section
1202.
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"Notice of Default" has the meaning specified in Section 501.
"Officers' Certificate" means a certificate signed by the Chairman, the
President, the Chief Financial Officer or Secretary of the Company and delivered
to the Holder.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company, including an employee of the Company, and who shall be
acceptable to the Holder.
"Outstanding", when used with respect to the Debenture, means, as of the
date of determination, all Debentures theretofore authenticated and delivered to
the Holder, except:
(i) Debentures theretofore cancelled or delivered to the Company for
cancellation;
(ii) Debentures, or portions thereof, for whose payment or redemption
money in the necessary amount has been paid to the Holder;
(iii) Debentures which have been paid pursuant to Section 306 or in
exchange for or in lieu of which other Debentures have been delivered
pursuant to this Debenture, other than any such Debentures in respect of
which there shall have been presented to the Company proof satisfactory to
it that such Debentures are held by a bona fide purchaser in whose hands
the Debentures are valid obligations of the Company; and
(iv) the principal portion of Debentures converted into Common Shares
pursuant to Article 12.
"Paying Agent" means any Person (including the Company acting as Paying
Agent) authorized by the Company to pay the principal of (and premium, if any)
or interest on any Debentures on behalf of the Company.
"Payment Blockage Period" has the meaning specified in Section 1302(b).
"Payment Event of Default" means any default in the payment of principal of
(or premium, if any) or interest on any Senior Indebtedness beyond any
applicable grace period with respect thereto.
"Permitted Senior Indebtedness" means indebtedness that is permitted in
accordance with Section 1008.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Debenture" of any particular Debenture means every previous
Debenture evidencing all or a portion of the same debt as that evidenced by such
particular Debenture; and, for the purposes of this definition, any Debenture
authenticated and delivered under Section 306 in exchange for a mutilated
Debenture or in lieu of a lost, destroyed or stolen
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Debenture shall be deemed to evidence the same debt as the mutilated, lost,
destroyed or stolen Debenture.
"prescribed securities" has the meaning specified in Section 1218.
"Principal Lender" means Zurich Insurance Company.
"Purchased Shares" has the meaning specified in Section 1210(f).
"rate(s) of exchange" has the meaning specified in Section 114(d).
"Redemption Date" means the date fixed for redemption by or pursuant to
this Debenture.
"Redemption Price" has the meaning specified in Section 1101.
"Redemption Tax Event" means that the Company shall have received an
Opinion of Counsel to the effect that, as a result of (a) any amendment to or
change (including any announced prospective change) in the laws (or any
regulations thereunder) of any Tax Authority, (b) any amendment to or change in
an interpretation or application of such laws or regulations by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination), in either case, which amendment or change is enacted,
promulgated, issued or announced, or which interpretation is issued or
announced, or which action is taken, on or after the date hereof, or (c) any
change in the domicile or residence of the Company or the Holder thereby
subjecting the parties to the tax laws of another jurisdiction, there is more
than an insubstantial risk that the Company has or would become obligated to pay
Additional Amounts to the Holder, and the Board concludes that (i) the
Additional Amounts are or would be more than a de minimis amount and (ii) such
obligation cannot be avoided by the Company taking reasonable measures available
to it.
"Reference Date" has the meaning specified in Section 1210(d).
"Reference Period" has the meaning specified in Section 1203.
"Registered Office" means the registered office of the Company, currently
located at Suite 314, 214 King Street West, Toronto, Ontario.
"Regular Record Date" for the interest payable on any Interest Payment Date
means the date (whether or not a Business Day) next preceding such Interest
Payment Date.
"Responsible Officer", when used with respect to the Company, means the
Chairman, the President, the Chief Financial Officer or the Secretary.
"Securities Act" means the Securities Act, (Ontario), as amended from time
to time.
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"Senior Indebtedness" means: (a) the principal of (and premium, if any, on)
and interest on (including interest accruing after the filing of a petition
initiating any proceeding pursuant to any bankruptcy law) and other amounts due
on or in connection with any Indebtedness of the Company owed to any Financial
Institution pursuant to a negotiated agreement between the Company and such
Financial Institution, whether outstanding on the date of this Debenture or
hereafter created, incurred or assumed, and all Hedging Obligations with respect
thereto; (b) any other Indebtedness unless the instrument under which such
Indebtedness is incurred expressly provides that such Indebtedness shall not be
senior in right of payment to any other Indebtedness of the Company; and (c) all
obligations with respect to items listed in the preceding clauses (a) and (b).
Notwithstanding anything to the contrary in the preceding, Senior Indebtedness
will not include: (d) any liability for federal, state, local or other taxes
owed or owing by the Company; (e) Indebtedness of the Company that is expressly
subordinated in right of payment or pari passu to the Debentures; (f)
Indebtedness of the Company that is expressly subordinated in right of payment
to any Senior Indebtedness; (g) Indebtedness of the Company that by operation of
law is subordinate to any general unsecured obligations of the Company; (h) any
Indebtedness of the Company to any of its Subsidiaries; (i) any trade payables;
or (j) any Indebtedness incurred in violation of this Debenture.
"Stated Maturity" means, in the case of principal on the Debenture, June
28, 2007, and, in the case of interest thereon, the fixed date on which any
installment of interest is due and payable.
"Subsidiary" means any corporation of which at the time of determination
the Company, directly and/or indirectly through one or more Subsidiaries, owns
more than 50% of the Voting Stock.
"Tax Act" means the Income Tax Act (Canada) or a Canadian provincial or
territorial income tax statute.
"Tax Authority" means the Dominion of Canada, any province, territory or
other political subdivision thereof or the United States or any state or other
political subdivision thereof, as applicable, or any other authority, agency or
other person having the power to tax.
"Trading Day" means a Monday, Tuesday, Wednesday, Thursday and Friday,
other than any day on which securities are not traded on the applicable
securities exchange in the applicable securities market.
"Trading Volume" means the total number of shares of Common Stock traded on
a particular Trading Day.
"US$" or "United States" dollar means a dollar or other equivalent unit in
currency of the United States of America as at the time shall be legal tender
for payment of public and private debts.
"US Taxes" means any past, present or future tax, duty, levy, impost,
deductions, charges, withholdings, assessment, tariff or other government charge
(including penalties, interest and other liabilities related thereto) imposed or
levied by or on behalf of any Tax Authority in the United States of America.
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"Voting Stock" means stock of the class or classes having general voting
power under ordinary circumstances to elect at least a majority of the board of
directors, managers or trustees of a corporation (irrespective of whether or not
at the time stock of any other class or classes shall have or might have voting
power by reason of the happening of any contingency).
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Holder to take any
action under any provision of this Debenture, the Company shall furnish to the
Holder an Officers' Certificate stating that all conditions precedent, if any,
provided for in this Debenture (including any covenant compliance with which
constitutes a condition precedent) relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such
counsel all such conditions precedent, if any, have been complied with, except
that in the case of any such application or request as to which the furnishing
of such documents is specifically required by any provision of this Debenture
relating to such particular application or request, no additional certificate or
opinion need be furnished.
Every certificate or opinion with respect to compliance with a condition or
covenant provided for in this Debenture (other than pursuant to Section 1005)
shall include:
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been complied with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Holder.
In any case where several matters are required to be certified by, or
covered by an opinion of, any specified Person, it is not necessary that all
such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or
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officers of the Company as to such factual matters, unless such counsel knows,
or in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Debenture, they may, but need not, be consolidated and
form one instrument.
SECTION 104. Acts of Holder.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or other action provided by this Debenture to be given or taken by the Holder
may be embodied in and evidenced by one or more instruments of substantially
similar tenor signed by the Holder in person or by an agent duly appointed in
writing; and, except as herein otherwise expressly provided, such action shall
become effective when such instrument or instruments are delivered to the
Company and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holder. Proof of
execution of any such instrument or of writing appointing any such agent shall
be sufficient for any purpose of this Debenture and conclusive in favor of the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such instrument
or writing may be proved by the affidavit of a witness of such execution or by a
certificate of a notary public or other officer authorized by law to take
acknowledgments of deeds, certifying that the individual signing such instrument
or writing acknowledged to him the execution thereof. Where such execution is by
a signer acting in a capacity other than his individual capacity, such
certificate or affidavit shall also constitute sufficient proof of authority.
(c) The principal amount and serial numbers of Debentures held by any
Person, and the date of holding the same, shall be proved by the Debenture
Register.
(d) If the Company shall solicit from the Holder any request, demand,
authorization, direction, notice, consent, waiver or other Act, the Company may,
at its option, by or pursuant to a Board Resolution, fix in advance a record
date for the determination of the Holder entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other Act, but the Company
shall have no obligation to do so. Such record date shall be the record date
specified in or pursuant to such Board Resolution, which shall be a date not
earlier than the date 30 days prior to the first solicitation of the Holder
generally in connection therewith and not later than the date such solicitation
is completed. If such a record date is fixed, such request, demand,
authorization, direction, notice, consent, waiver or other Act may be given
before or after such record date, but only the Holder of record at the close of
business on such record date shall be deemed to be the Holder; provided that no
such authorization, agreement or consent by the Holder on such record date shall
be deemed effective unless it shall become effective pursuant to the provisions
of such request, demand, authorization, direction, notice, consent, waiver or
other Act.
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(e) Any request, demand, authorization, direction, notice, consent, waiver
or other Act of the Holder shall bind every future Holder of the same Debenture
and the Holder of every Debenture issued upon the registration of transfer
thereof or in exchange therefor or in lieu thereof in respect of anything done,
omitted or suffered to be done by the Company in reliance thereon, whether or
not notation of such action is made upon such Debenture.
SECTION 105. Notices, etc., to the Holder, Company.
(a) Any request, demand, authorization, direction, notice, consent, waiver
or act of the Company or other documents provided or permitted by this Debenture
to be made upon, given or furnished to, or filed with, the Holder by the Company
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
the Holder addressed to it as follows:
Fairfax Financial Holdings Limited, 95 Wellington Street West, Suite 800,
Toronto, Ontario M5J 2N7, Attention: Bradley Martin
or to such other address in Canada or the United States as the Holder may, upon
advance written notice, give to the Company.
(b) Any request, demand, authorization, direction, notice, consent, waiver
or Act of the Holder or other documents provided or permitted by this Debenture
to be made upon, given or furnished to, or filed with, the Company by the Holder
shall be sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
the Company addressed to it at the address of its Registered Office.
SECTION 106. Deemed Receipt and Waiver.
Any notice mailed to the Holder in the manner prescribed in Section 105
shall be conclusively deemed to have been received by the Holder or the Company,
as the case may be, five (5) Business Days after such mailing, whether or not
the intended recipient actually receives such notice. Where this Debenture
provides for notice in any manner, such notice may be waived in writing by the
Person entitled to receive such notice, either before or after the event, and
such waiver shall be the equivalent of such notice.
SECTION 107. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of Contents are for
convenience only and shall not affect the construction hereof.
SECTION 108. Successors and Assigns.
All covenants and agreements in this Debenture by the Company shall bind
its successors and assigns, whether so expressed or not. Notwithstanding
anything else herein contained, the Holder may not assign or transfer this
Debenture or any of its rights hereunder other than to an Affiliate or
Affiliates of the Holder (in such proportions of principal as the Holder may see
fit).
12
SECTION 109. Severability Clause.
In case any provision in this Debenture shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 110. Benefits of Debenture.
Nothing in this Debenture, express or implied, shall give to any Person,
other than the parties hereto, any Paying Agent, any Conversion Agent, any
Securities Registrar and their successors hereunder, the Holder and, with
respect to any provisions hereof relating to the subordination of the Debentures
or the rights of holders of Senior Indebtedness, the holders of Senior
Indebtedness, any benefit or any legal or equitable right, remedy or claim under
this Debenture.
SECTION 111. Governing Law.
This Debenture shall be governed by and construed in accordance with the
law of the Province of Ontario, and the laws of Canada applicable therein,
without regard to the principles of conflict of laws that would defer to the
substantive laws of any other jurisdiction.
SECTION 112. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date, Conversion
Date, Stated Maturity or Maturity of any Debenture shall not be a Business Day,
then (notwithstanding any other provision of this Debenture) payment of
principal (or premium, if any) or interest need not be made on such date, but
may be made on the next succeeding Business Day with the same force and effect
as if made on the Interest Payment Date, Redemption Date, Conversion Date or at
the Stated Maturity or Maturity; provided that, subject to section 3.01, no
interest shall accrue for the period from and after such Interest Payment Date,
Redemption Date, Conversion Date, Stated Maturity or Maturity, as the case may
be.
SECTION 113. Intentionally Deleted
SECTION 114. Conversion of Currency.
(a) The Company covenants and agrees that the following provisions shall
apply to conversion of currency in the case of this Debenture:
(i) If for the purpose of obtaining judgment in, or enforcing the
judgment of, any court in any country, it becomes necessary to convert into
a currency (the "Judgment Currency") an amount due in any other currency
(the "Base Currency"), then the conversion shall be made at the rate of
exchange prevailing on the Business Day before the day on which the
judgment is given or the order of enforcement is made, as the case may be
(unless a court shall otherwise determine).
(ii) If there is a change in the rate of exchange prevailing between
the Business Day before the day on which the judgment is given or an order
of enforcement
13
is made, as the case may be (or such other date as a court shall
determine), and the date of receipt of the amount due, the Company will pay
such additional (or, as the case may be, such lesser) amount, if any, as
may be necessary so that the amount paid in the Judgment Currency when
converted at the rate of exchange prevailing on the date of receipt will
produce the amount in Base Currency originally due.
(b) In the event of the winding-up of the Company at any time while any
amount or damages owing under this Debenture, or any judgment or order rendered
in respect thereof, shall remain outstanding, the Company shall indemnify and
hold the Holders harmless against any deficiency arising or resulting from any
variation in rates of exchange between (i) the date as of which the equivalent
of the amount in Base Currency due or contingently due under this Debenture
(other than under this Subsection (b)) is calculated for the purposes of such
winding-up and (ii) the final date for the filing of proofs of claim in such
winding-up. For the purpose of this Subsection (b) the final date for the filing
of proofs of claim in the winding-up of the Company shall be the date fixed by
the liquidator or otherwise in accordance with the relevant provisions of
applicable law as being the latest practicable date as at which liabilities of
the Company may be ascertained for such winding-up prior to payment by the
liquidator or otherwise in respect thereto.
(c) The obligations contained in Subsections (a)(ii) and (b) of this
Section 114 shall constitute separate and independent obligations of the Company
from its other obligations under this Debenture, shall give rise to separate and
independent causes of action against the Company, shall apply irrespective of
any waiver or extension granted by the Holder from time to time and shall
continue in full force and effect notwithstanding any judgment or order or the
filing of any proof of claim in the winding-up of the Company for a liquidated
sum in respect of amounts due hereunder (other than under Subsection (b) above)
or under any such judgment or order. Any such deficiency as aforesaid shall be
deemed to constitute a loss suffered by the Holders and no proof or evidence of
any actual loss shall be required by the Company or its liquidator. In the case
of Subsection (b) above, the amount of such deficiency shall not be deemed to be
increased or reduced by any variation in rates of exchange occurring between the
said final date and the date of any liquidating distribution.
(d) The term "rate(s) of exchange" shall mean the rate of exchange quoted
by the Bank of Montreal, or such other Canadian chartered bank as may be
designated in writing by the Company from time to time, at its central foreign
exchange desk in its main office in Toronto at 12:00 noon (Toronto time) on the
relevant date for purchases of the Base Currency with the Judgment Currency and
includes any premiums and costs of exchange payable.
SECTION 115. Submission to Jurisdiction; Waiver of Immunities.
The Company agrees that any legal suit, action or proceeding brought by any
party to enforce any rights under or with respect to this Debenture may be
instituted in any court in The City of Toronto, in the Province of Ontario, and
waives to the fullest extent permitted by law any objection which it may now or
hereafter have to the laying of venue of any such suit, action or proceeding,
including (without limitation) any objection or defense to any such jurisdiction
as an inconvenient forum and irrevocably submits itself to the non-exclusive
jurisdiction of any such court in any such suit, action or proceeding.
14
To the extent the Company has or hereafter may acquire any immunity from
jurisdiction of any court or from any legal process (whether through service of
notice, attachment prior to judgment, attachment in aid of execution, execution
or otherwise) with respect to itself or its property, the Company hereby
irrevocably waives such immunity in respect of its obligations under this
Debenture, to the extent permitted by law.
SECTION 116. Intentionally Deleted.
ARTICLE TWO
INTENTIONALLY DELETED
ARTICLE THREE
THE DEBENTURE
SECTION 301. Terms.
FOR VALUE RECEIVED, the Company hereby acknowledges itself indebted and
promises to pay to the Holder, or its registered assigns, the principal sum of
Seventeen Million Five Hundred Thousand United States Dollars (US$17,500,000.00)
on June 28, 2007, and to pay interest on the said principal sum from time to
time outstanding from the date that the subscription for the Debenture was
funded by the Holder, namely June 21, 2001, or from the most recent interest
payment date (each such date, an "Interest Payment Date") to which interest has
been paid, semi-annually on June 28 and December 28 of each year, commencing
December 28, 2001, at the rate of 8.5% per annum until the said principal amount
has been paid in full and, to the extent lawful, to pay on demand interest on
any overdue interest or principal payment at the rate borne by this Debenture
plus 3% per annum. Interest at the applicable rates set out above shall be
payable both before and after maturity and before and after judgment.
The principal of and the interest on this Debenture shall be payable at the
Registered Office or agency of the Company in The City of Toronto in such coin
or currency of The United States of America at the time and payment is the legal
tender for payment of public and private debts in United States Dollars;
provided, however, that payment of principal and interest may be made at the
option of the Company by mailing a cheque payable to the Holder at such address
as appears on the Debenture Register; provided, further, that in the case of
payments of principal the Debenture is first surrendered to the Paying Agent.
Notwithstanding the foregoing, the Holder will be entitled to receive interest
payments, if any, on any Interest Payment Date and principal on Maturity by wire
transfer of immediately available funds to an account maintained by the payee
located in The United States of America if appropriate wire transfer
instructions have been received in writing by the Company not less than 15 days
prior to such Interest Payment Date or Maturity, provided that in the case of
payments of principal the related Debenture is first surrendered to the Paying
Agent. Any such wire transfer instructions received by the Company shall remain
in effect until revoked by the Holder.
The Debenture shall be redeemable as provided in Article Eleven. In the
event of a partial redemption, the parties may, upon mutual agreement, indicate
on an addendum attached
15
to this Debenture and signed by the parties the amount of principal redeemed,
the actual date of redemption and the principal amount remaining on this
Debenture after such redemption, as contemplated in Section 1105(d).
The Debenture shall be convertible as provided in Article Twelve.
The Debenture shall be subordinated in right of payment to Senior
Indebtedness as provided in Article Thirteen.
There shall be no sinking fund for the retirement of the Debenture.
The Company will pay Additional Amounts with respect to the Debenture under
certain circumstances as provided in Section 1007.
SECTION 302. Denominations.
The Debenture shall be issuable without coupons and only in denominations
of US$1,000 and any integral multiple thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Debenture shall be executed on behalf of the Company by its Chairman,
its President, its Chief Financial Officer or Secretary under its corporate seal
reproduced thereon and attested by its Secretary or an Assistant Secretary. The
signature of any of these officers on the Debenture must be manual.
In case the Company, pursuant to Article Eight, shall be consolidated or
merged with or into any other Person or shall convey, transfer, lease or
otherwise dispose of its properties and assets substantially as an entirety to
any Person, and the successor Person resulting from such consolidation, or
surviving such merger, or into which the Company shall have been merged, or the
Person which shall have received a conveyance, transfer, lease or other
disposition as aforesaid (either, a "Successor"), shall have executed a
Debenture supplemental hereto with the Holder pursuant to Article Nine, the
Debenture delivered prior to such consolidation, merger, conveyance, transfer,
lease or other disposition may, from time to time, at the request of the
Successor, be exchanged for another Debenture executed in the name of the
Successor with such changes in phraseology and form as may be appropriate, but
otherwise in substance of like tenor as the Debenture surrendered for such
exchange and of like principal amount; however, such exchanged Debenture shall
conform to any requirements necessary to ensure that such Debenture will be and
will remain exempt from Canadian Taxes and US Taxes including, without
limitation, in respect of Canadian Taxes, the requirement in effect on the date
of the Debenture that the Holder shall not be entitled to receive shares, other
securities or property, other than shares that are "prescribed securities" as
defined in Regulation 6208 of the Tax Act; and the Company shall deliver a
Debenture as specified in such request for the purpose of such exchange. In the
event of a partial redemption, the parties may, upon mutual agreement, indicate
on an addendum attached to this Debenture and signed by the parties the amount
of principal redeemed, the actual date of redemption and the principal amount
remaining on this Debenture after such redemption, as contemplated in Section
1105(d). If any Debenture shall at any time be delivered in any new name of a
successor Person pursuant to this Section in
16
exchange or substitution for or upon registration of transfer of the Debenture,
such successor Person, at the option of the Holder but without expense to the
Holder, shall provide for the exchange of all Debentures at the time Outstanding
for a Debenture delivered in such new name.
SECTION 304. Intentionally Deleted.
SECTION 305. Registration, Registration of Transfer and Exchange.
(a) The Company shall cause to be kept at the Registered Office a register
(the register maintained in such office and in any other office or agency
designated pursuant to Section 1002 being herein sometimes referred to as the
"Debenture Register") in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration of the Debenture(s)
and of transfers of the Debenture(s). The Debenture Register shall be in written
form or any other form capable of being converted into written form within a
reasonable time. At all reasonable times, the Debenture Register shall be open
to inspection by the Holder. The Secretary of the Company is hereby initially
appointed as security registrar (the "Debenture Registrar") for the purpose of
registering Debentures and transfers of Debentures as herein provided.
Upon surrender for registration of transfer of the Debenture, the Company
shall execute, authenticate and deliver, in the name of the designated
transferee or transferees, one or more new Debentures of any authorized
denomination or denominations of a like aggregate principal amount.
At the option of the Holder, the Debenture may be exchanged for other
Debentures of any authorized denomination and of a like aggregate principal
amount, upon surrender of the Debentures to be exchanged at such office or
agency. Whenever the Debentures are so surrendered for exchange, the Company
shall execute and deliver the Debenture which the Holder making the exchange is
entitled to receive.
All Debentures issued upon any registration of transfer or exchange of the
Debenture shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits as this Debenture.
Every Debenture presented or surrendered for registration of transfer or
for exchange shall (if so required by the Company or the Debenture Registrar) be
duly endorsed, or be accompanied by a written instrument of transfer, in form
satisfactory to the Company and the Debenture Registrar, duly executed by the
Holder or the Holder's attorney duly authorized in writing.
No service charge shall be made for any registration of transfer or
exchange or redemption of Debentures, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer or exchange of Debentures, other
than exchanges pursuant to Section 304, 306, 906, 1104, 1202 or 1204 not
involving any transfer.
The Company shall not be required (i) to issue, register the transfer of or
exchange any Debenture during a period beginning at the opening of business 15
days before the
17
redemption of the Debenture under Section 1104 and ending at the close of
business on the day of such mailing of the relevant notice of redemption, or
(ii) to register the transfer of or exchange that portion of the Debenture so
selected for redemption.
SECTION 306. Mutilated, Destroyed, Lost and Stolen Debenture Certificate.
If (i) any mutilated Debenture is surrendered to the Company, or (ii) the
Company receives evidence to its satisfaction of the destruction, loss or theft
of the Debenture, and there is delivered to the Company such security or
indemnity as may be required by them to save each of them harmless, then, in the
absence of notice to the Company that the Debenture has been acquired by a bona
fide purchaser, the Company shall execute, authenticate and deliver, in exchange
for any such mutilated Debenture or in lieu of any such destroyed, lost or
stolen Debenture, a new Debenture of like tenor and principal amount, bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Debenture has become
or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Debenture, pay such Debenture.
Upon the issuance of any new Debenture under this Section, the Company may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses (including
the fees and expenses of a trustee, any Authenticating Agent and the Debenture
Registrar) connected therewith.
Every new Debenture issued pursuant to this Section in lieu of any
mutilated, destroyed, lost or stolen Debenture shall constitute an original
additional contractual obligation of the Company, whether or not the mutilated,
destroyed, lost or stolen Debenture shall be at any time enforceable by anyone,
and shall be entitled to all benefits of this Debenture equally and
proportionately with any and all other Debentures duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to the
extent lawful) all other rights and remedies with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Debentures.
SECTION 307. Payment of Interest; Interest Rights Preserved.
Interest on the Debenture which is payable, and is punctually paid, on any
Interest Payment Date shall be paid to the Person in whose name such Debenture
(or one or more Predecessor Debentures) is registered at the close of business
on the Regular Record Date for such interest at the office or agency of the
Company maintained for such purpose pursuant to Section 1002.
Subject to the foregoing provisions of this Section and Section 305, upon
registration of transfer of or in exchange for or in lieu of the Debenture, any
other Debenture shall carry the rights to interest accrued and unpaid, and to
accrue, which were carried by the Debenture.
SECTION 308. Persons Deemed Owners.
18
Prior to the due presentment of the Debenture for registration of transfer,
the Company, and any agent of the Company, may treat the Person in whose name
the Debenture is registered as the owner of the Debenture for the purpose of
receiving payment of principal of and (subject to Sections 305 and 307) interest
on the Debenture and for all other purposes whatsoever, whether or not the
Debenture is overdue, and none of the Company, or any agent of the Company,
shall be affected by notice to the contrary.
SECTION 309. Cancellation.
The Debenture, if surrendered for payment, redemption, registration of
transfer or exchange shall be cancelled promptly by the Company. The Company may
at any time cancel any Debentures previously authenticated and delivered
hereunder which the Company may have acquired in any manner whatsoever, and may
cancel any Debentures previously authenticated hereunder which the Company has
not issued and sold. No Debentures shall be authenticated in lieu of or in
exchange for any Debentures cancelled as provided in this Section, except as
expressly permitted by this Debenture.
SECTION 310. Computation of Interest.
Interest on the Debenture shall be computed on the basis of a 360-day year
of twelve 30-day months. For purposes of the Interest Act (Canada), where, in
this Debenture, a rate of interest is to be calculated on the basis of a year of
360 days, the yearly rate of interest to which the 360 day rate is equivalent is
such rate multiplied by the actual number of days in the year for which such
calculation is made and divided by 360.
SECTION 311. Company to Determine Certain Matters.
In accordance with the provisions of this Debenture, the Company shall
determine solely certain matters relating to the administration of the
Debenture, including but not limited to Sections 305, 306, 308 and 1002. It
shall be at the Company's sole option to exercise the redemption provisions set
forth in Article 11. In addition, it shall be the sole obligation of the Company
to satisfy the provisions of Article 12.
ARTICLE FOUR
SATISFACTION AND DISCHARGE
SECTION 401. Satisfaction and Discharge of Debenture.
This Debenture shall cease to be of further effect (except as to surviving
rights of registration of transfer or exchange of the Debenture expressly
provided for herein or pursuant hereto) and the Holder, shall execute proper
instruments acknowledging satisfaction and discharge of this Debenture when the
Company has paid or caused to be paid all other sums payable hereunder by the
Company; and the Company has delivered to the Holders an Officers' Certificate
stating that all conditions precedent herein provided for relating to the
satisfaction and discharge of this Debenture have been complied with.
19
ARTICLE FIVE
REMEDIES
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body):
(a) default in the payment of any interest on any Debenture when it
becomes due and payable, and continuance of such default for a period of
five (5) Business Days; or
(b) default in the payment of the principal of the Debenture at its
Maturity or a Redemption Date; or
(c) default in the performance, or breach, of any covenant or
agreement of the Company in this Debenture (other than a default in the
performance, or breach, of a covenant or agreement which is specifically
dealt with elsewhere in this Section), and continuance of such default or
breach for a period of 30 days after there has been given, by registered or
certified mail, to the Company by the Holder a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(d) Indebtedness of the Company shall have been accelerated or
otherwise declared or become due and payable or required to be prepaid or
repurchased (in each case other than by regularly scheduled required
installment), prior to the stated maturity thereof; or
(e) failure by the Company to pay a final judgment or final judgments
or a final order or final orders entered by a court or courts of competent
jurisdiction, which judgments or orders in the aggregate exceed US$5
million, and (i) the commencement by any creditor of any enforcement
proceeding upon any such judgment or order or (ii) such order remaining
unstayed for 45 days; or
(f) the entry of a decree or order by a court having jurisdiction in
the premises adjudging the Company a bankrupt or insolvent, or approving as
properly filed a petition seeking reorganization, arrangement, adjustment
or composition of or in respect of the Company under the Bankruptcy and
Insolvency Act (Canada), the Companies Creditors Arrangement Act (Canada)
or any other applicable federal or provincial insolvency law, or appointing
a receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of the Company or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order unstayed and in effect for a period of 30
consecutive days; or
(g) the institution by the Company of proceedings to be adjudicated a
bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it, or the filing by it of a
petition or answer or consent seeking reorganization or
20
relief under the Bankruptcy and Insolvency Act (Canada), the Companies
Creditors Arrangement Act (Canada) or any other applicable federal or
provincial insolvency law, or the consent by it to the filing of any such
petition or to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Company or of any
substantial part of its property, or the making by it of an assignment for
the benefit of creditors, or the admission by it in writing of its
inability to pay its debts generally as they become due.
SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default specified in Section
501(f) or 501(g)) occurs and is continuing, then and in every such case the
Holder may declare the principal amount of all the Debenture to be due and
payable immediately, by a notice in writing to the Company and upon any such
declaration such principal amount shall become due and payable. If an Event of
Default specified in Section 501(f) or 501(g) occurs and is continuing, then the
principal amount of the Debenture shall ipso facto become and be immediately due
and payable without any declaration or other act on the part of the Holder.
At any time after a declaration of acceleration has been made and before a
judgment or decree for payment of the money due has been obtained by the Holder
as hereinafter provided in this Article, the Holder by written notice to the
Company may rescind and annul such declaration and its consequences if:
(a) the Company has paid a sum sufficient to pay in [ Canadian/US ]
Dollars:
(i) all overdue interest on all Outstanding Debentures at the rate set
out in Section 301,
(ii) all unpaid principal of (and premium, if any, on) any Outstanding
Debenture which has become due otherwise than by such declaration of
acceleration, and interest on such unpaid principal at the rate set out in
Section 301,
(iii) to the extent that payment of such interest is lawful, interest
on overdue interest at the rate set out in Section 301, and
(b) all Events of Default, other than the non-payment of amounts of
principal of (or premium, if any, on) or interest on the Debenture which have
become due solely by such declaration of acceleration, have been cured or waived
as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by
Holder.
The Company covenants that if:
21
(a) default is made in the payment of any installment of interest on
any Debenture when such interest becomes due and payable and such default
continues for a period of five (5) Business Days: or
(b) default is made in the payment of the principal of (or premium, if
any, on) the Debenture at the Maturity thereof,
the Company will, upon demand of the Holder pay to the Holder the whole amount
then due and payable on such Debenture for principal (and premium, if any) and
interest, and interest on any overdue principal (and premium, if any) and, to
the extent that payment of such interest shall be legally enforceable, upon any
overdue installment of interest, at the rate set out in Section 301, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection.
If the Company fails to pay such amounts forthwith upon such demand, the
Holder may institute a judicial proceeding for the collection of the sums so due
and unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Debenture and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Debenture,
wherever situated.
If an Event of Default occurs and is continuing, the Holder may in its
discretion proceed to protect and enforce its rights by such appropriate
judicial proceedings as the Holder shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Debenture or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 504. Holder May File Proofs of Claim.
In case of the pendency of any receivership, insolvency, liquidation,
bankruptcy, reorganization, arrangement, adjustment, composition or other
judicial proceeding relative to the Company or any other obligor upon the
Debenture or the property of the Company or of such other obligor or their
creditors, the Holder (irrespective of whether the principal of the Debenture
shall then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Holder shall have made any demand on
the Company for the payment of overdue principal, premium, if any, or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(a) to file and prove a claim for the whole amount of principal (and
premium, if any) and interest owing and unpaid in respect of the Debenture
and to file such other papers or documents as may be necessary or advisable
in order to have the claims of the Holder allowed in such judicial
proceeding, and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
22
and any custodian, receiver, assignee, trustee, liquidator, sequestrator or
similar official in any such judicial proceeding is hereby authorized by the
Holder to make such payments to the Holder.
SECTION 505. Intentionally Deleted.
SECTION 506. Application of Money Collected.
Any money collected by the Holder pursuant to this Article shall be applied
forthwith in the following order and, in case of the distribution of such money
on account of principal (or premium, if any) or interest, upon presentation of
the Debenture and the notation thereon of the payment if only partially paid and
upon surrender thereof if fully paid:
FIRST: Subject to Article Thirteen, to the payment of the amounts then
due and unpaid for principal of (and premium, if any) and interest on the
Debenture; and
SECOND: The balance, if any, to the Person or Persons entitled
thereto.
SECTION 507. Limitation on Suits.
The Holder shall not have any right to institute any proceeding, judicial
or otherwise, with respect to this Debenture, or for the appointment of a
receiver or trustee, or for any other remedy hereunder, unless such Holder has
previously given written notice to the Company of a continuing Event of Default
or has made a demand under Section 503 or 504.
SECTION 508. Unconditional Right of Holder to Receive Principal, Premium
and Interest.
Notwithstanding any other provision in this Debenture, the Holder shall
have the right, which is absolute and unconditional, to receive payment, as
provided herein (including, if applicable, Article Thirteen) and the Debenture
of the principal of (and premium, if any) and (subject to Section 301) interest
on the Debenture on the Maturity expressed in such Debenture (or, in the case of
redemption, on the Redemption Date) and to institute suit for the enforcement of
any such payment, and such rights shall not be impaired without the consent of
such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Holder has instituted any proceeding to enforce any right or remedy
under this Debenture and such proceeding has been discontinued or abandoned for
any reason, or has been determined adversely to the Holder, then and in every
such case, subject to any determination in such proceeding, the Company and the
Holder shall be restored severally and respectively to their former positions
hereunder and thereafter all rights and remedies of the Holder shall continue as
though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement or payment of
mutilated, destroyed, lost or stolen Debenture Certificates in the last
paragraph of Section 306,
23
no right or remedy herein conferred upon or reserved to the Holder is intended
to be exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every other
right and remedy given hereunder or now or hereafter existing at law or in
equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Holder to exercise any right or remedy accruing
upon any Event of Default shall impair any such right or remedy or constitute a
waiver of any such Event of Default or an acquiescence therein. Every right and
remedy given by this Article or by law to the Holder may be exercised from time
to time, and as often as may be deemed expedient, by the Holder, as the case may
be. The acceptance of payments under this Debenture by the Holder during an
Event of Default will not be considered a waiver of such Event of Default.
SECTION 512. Intentionally Deleted.
SECTION 513. Waiver of Past Defaults.
The Holder may waive any past default hereunder and its consequences.
Upon any such waiver, such default shall cease to exist, and any Event of
Default arising there from shall be deemed to have been cured, for every purpose
of this Debenture; but no such waiver shall extend to any subsequent or other
default or Event of Default or impair any right consequent thereon.
SECTION 514. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law wherever enacted,
now or at any time hereafter in force, which may affect the covenants or the
performance of this Debenture; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such law
and covenants that it will not hinder, delay or impede the execution of any
power herein granted to the Holder, but will suffer and permit the execution of
every such power as though no such law had been enacted.
SECTION 515. Undertaking for Costs.
In any suit for the enforcement of any rights or remedy under this
Debenture a court may require any party litigant in such suit to file an
undertaking to pay the costs of such suit, and may assess costs against any such
party litigant.
ARTICLE SIX
INTENTIONALLY DELETED
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ARTICLE SEVEN
REPORTS BY COMPANY
SECTION 701. Reports by Company.
The Company shall:
(a) transmit to the Holder, within 15 days after it files its annual and
quarterly reports, information, documents and other reports with the Commission,
copies of its annual report and of the information, documents and other reports
(or copies of such portions of any of the foregoing as the Commission may by
rules and regulations prescribe) which the Company is required to file with the
Commission,
(b) transmit to the Holder in the manner provided in Section 106 all
information that is provided to the holders of Common Stock within 10 days after
such information is provided to such holders of Common Stock,
(c) provide to the Holder such information about the operations and
financial condition of the Company as the Holder may from time to time
reasonably request and allow the Holder, on reasonable advance notice from the
Holder to the Company, to examine the books of account and records of the
Company and discuss the affairs, finances and accounts of the Company with, and
to be advised as to the same by, the Company's Chief Executive Officer, Chief
Operating Officer, Chief Financial Officer and/or General Counsel (or as they
may otherwise delegate).
ARTICLE EIGHT
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 801. Company May Consolidate, etc., Only on Certain Terms.
The Company shall not, and shall not cause, suffer or permit any of its
Subsidiaries to, consolidate or amalgamate with or merge with or into any other
Person or sell, convey, transfer or lease or otherwise dispose of all or
substantially all of its assets to any Person, unless:
(a) the entity formed shall be a corporation, partnership or trust
organized under the laws of Canada or any province or territory thereof or
the United States, any state thereof or the District of Columbia (other
than Old Lyme Insurance Co. Ltd., a company domiciled in Bermuda that is a
Subsidiary of Kaye Group Inc., a company that the Company has agreed to
acquire), and, unless the Company is the continuing corporation, shall
expressly assume the Company's obligation to pay principal and interest on
the Debenture and to observe the covenants of the Debenture;
(b) immediately after giving effect to such transaction, (i) on a pro
forma basis the Company or such continuing corporation which becomes the
successor obligor of the Debentures could incur at least Cdn$1.00 of
additional Indebtedness under the first paragraph of Section 1008 (without
reliance on paragraph (b) thereof); and (ii) no Default or Event of Default
shall have occurred and be continuing;
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(c) the Corporation shall have delivered to the Holder an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, amalgamation, merger, conveyance, transfer or lease and the
supplemental Debenture comply with this Debenture.
The requirements of paragraph (b) of this Section 801 shall not apply to
any sale, conveyance, transfer, lease or other disposition of the Company's
assets to a direct or indirect Subsidiary of the Company.
SECTION 802. No Consent or Approval Required.
To the greatest extent permitted by law, no approval or consent of the
Holder is required in connection with any consolidation, amalgamation or merger
involving the Company, or any sale or conveyance to another Person of all or
substantially all the assets of the Company, whether as a result of any of the
events referred to in Section 801 or otherwise under the terms of this
Debenture.
SECTION 803. Successor Substituted.
Upon any consolidation or amalgamation of the Company with or merger of the
Company with or into any other corporation or any conveyance, transfer or lease
of the properties and assets of the Company substantially as an entirety to any
Person in accordance with Section 801, the successor Person formed by such
consolidation or amalgamation into which the Company is merged or to which such
conveyance, transfer or lease is made shall succeed to, and be substituted for,
and may exercise every right and power of, the Company under this Debenture with
the same effect as if such successor Person had been named as the Company
herein.
SECTION 804. Assignment of Rights.
The Company will have the right at all times to assign any of its
respective rights or obligations under this Debenture to a direct or indirect
Subsidiary of the Company; provided, however, that in the event of any such
assignment, the Company will remain liable for all of its respective
obligations. Subject to the foregoing, this Debenture will be binding upon and
inure to the benefit of the parties hereto, the Holder and its respective
successors and assigns. This Debenture may not otherwise be assigned by the
Company.
ARTICLE NINE
SUPPLEMENTAL DEBENTURE
SECTION 901. Intentionally Deleted.
SECTION 902. Supplemental Debentures.
The Company when authorized by a Board Resolution and with the prior
consent of The Toronto Stock Exchange, and the Holder may enter into a Debenture
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Debenture or any
supplemental Debenture.
26
SECTION 903. Intentionally Deleted.
SECTION 904. Effect of Supplemental Debenture.
Upon the execution of any supplemental Debenture by the Company and the
Holder under this Article, this Debenture shall be modified in accordance
therewith, and such supplemental Debenture shall form a part of this Debenture
for all purposes; and the Company and the Holder shall be bound thereby.
SECTION 905. Intentionally Deleted.
SECTION 906. Reference in Debenture to Supplemental Debentures.
Any Debenture delivered after the execution of any supplemental Debenture
pursuant to this Article may, bear a notation in form approved by the parties as
to any matter provided for in such supplemental Debenture. If the Company shall
so determine, a new Debenture so modified as to conform, in the opinion of the
Company, to any such supplemental Debenture may be prepared and executed by the
Company and delivered by the Company in exchange for the Debenture.
SECTION 907. Intentionally Deleted.
SECTION 908. Effect on Senior Indebtedness.
No supplemental Debenture shall adversely affect the rights of the holders of
Senior Indebtedness under Article Thirteen without the consent of the Holder.
ARTICLE TEN
COVENANTS
SECTION 1001. Payment of Principal, Premium, if any, and Interest.
The Company covenants and agrees for the benefit of the Holder that it will
duly and punctually pay the principal of (and premium, if any) and interest on
the Debenture in accordance with the terms of this Debenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain its Registered Office, where the Debenture may be
presented or surrendered for payment, where the Debenture may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of this Debenture may be served. The Company will give
prompt written notice to the Holder of any change in the location of the
Registered Office.
The Company may also from time to time designate one or more other offices
or agencies (in or outside of The City of Toronto) where the Debenture may be
presented or surrendered for any or all such purposes and may from time to time
rescind any such designation; provided, however, that no such designation or
rescission shall in any manner
27
relieve the Company of its obligation to maintain an office or agency in The
City of Toronto for such purposes. The Company will give prompt written notice
to the Holder of any such designation or rescission and any change in the
location of any such other office or agency.
SECTION 1003. Money for Debenture Payments to Be Held in Trust.
The Company, on or before each due date of the principal of (or premium, if
any) or interest on the Debenture, shall segregate and hold in trust for the
benefit of the Holder a sum sufficient to pay the principal of (or premium, if
any) or interest so becoming due until such sums shall be paid to the Holder or
otherwise disposed of as herein provided and will promptly notify the Holder of
its action or failure so to act.
Any money then held by the Company, in trust for the payment of the
principal of (or premium, if any) or interest on the Debenture and remaining
unclaimed for two years after such principal, premium or interest has become due
and payable shall be discharged from such trust; and the Holder may thereafter,
only as an unsecured general creditor, look only to the Company for payment
thereof, and all liability of the Company, as trustee thereof, shall thereupon
cease.
SECTION 1004. Corporate Existence.
Subject to Article Eight, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect the corporate
existence, rights (charter and statutory) and franchises of the Company and each
Subsidiary; provided, however, that the Company shall not be required to
preserve any such right or franchise if the Board of Directors shall determine
that the preservation thereof is no longer desirable in the conduct of the
business of the Company and that the loss thereof is not disadvantageous in any
material respect to the Holder.
SECTION 1005. Statement by Officers As to Default.
The Company will deliver to the Holder, within 120 days after the end of
each fiscal year, a brief certificate from the principal executive officer,
principal financial officer or principal accounting officer, as to his or her
knowledge, after reviewing the Debenture, of the Company's compliance with all
conditions and covenants under this Debenture. In addition, the Company shall
notify the Holder in the case of any Event of Default as soon as is reasonably
practicable after knowledge of such Event of Default comes to the attention of
any of any Responsible Officer. For purposes of this Section 1005, such
compliance shall be determined without regard to any period of grace or
requirement of notice under this Debenture.
SECTION 1006. Intentionally Deleted.
SECTION 1007. Payment of Additional Amounts.
All adjustments, payments or transfers made by the Company under or with
respect to the Debenture (including, but not limited to, the redemption or
conversion thereof or as a result of any adjustment to the Conversion Price), or
delivery of Common Shares (including cash in lieu of fractional shares) made by
or on behalf of the Company will be made free and
28
clear of and without withholding or deduction for or on account of Canadian
Taxes and US Taxes, unless the Company is required to withhold or deduct
Canadian Taxes or US Taxes by law or by the interpretation or administration
thereof by the relevant government authority or agency. If the Company is so
required to withhold or deduct any amount for or on account of Canadian Taxes or
US Taxes from any payment or transfer made under or with respect to the
Debentures (including, but not limited to, the redemption or conversion thereof
or as a result of any adjustment to the Conversion Price), the Company will pay
as additional interest such additional amounts ("Additional Amounts") as may be
necessary so that the net amount received by the Holder after such withholding
or deduction (including with respect to Additional Amounts) will not be less
than the amount the Holder would have received if such Canadian Taxes or US
Taxes, as the case may be, had not been withheld or deducted (a similar payment
will also be made to the Holder if the Holder is exempt from withholding but is
required to pay tax directly on amounts otherwise subject to withholding);
provided, however, that no Additional Amounts related to Canadian Taxes will be
payable with respect to a payment made to the Holder (an "Excluded Holder") in
respect of the beneficial owner thereof (i) if the Company does not deal at
arm's length (for purposes of the Tax Act) with the Holder at the time of the
making of such payment, (ii) if the Holder is subject to such Canadian Taxes by
reason of its failure to comply with any certification, identification,
information, documentation or other reporting requirement if compliance is
required by law, regulation, administrative practice or an applicable treaty as
a precondition to exemption from, or a reduction in the rate of deduction or
withholding of, such Canadian Taxes or (iii) which payment is subject to such
Canadian Taxes by reason of the Holder carrying on business in or being
connected with Canada or any province or territory thereof otherwise than by the
mere holding of Debentures or the receipt of payment thereunder. The Company
will make such withholding or deduction and remit the full amount deducted or
withheld to the relevant authority as and when required in accordance with
applicable law. The Company will pay all taxes, interest penalties, liabilities
or other amounts due of the Company or the Holder which arise by virtue of any
failure of the Company to withhold, deduct and remit to the relevant authority
on a timely basis the full amounts required in accordance with applicable law.
The Company will furnish to the Holder, within 30 days after the date the
payment of any Canadian Taxes or US Taxes is due pursuant to applicable law,
certified copies of tax receipts evidencing such payment by the Company.
SECTION 1008. Limitation on Additional Indebtedness.
(a) The Company shall not, directly or indirectly, Incur any Senior
Indebtedness, provided, however, that the Company may incur Senior Indebtedness
(i) if the date of such Incurrence shall be on or prior to the last day of the
fourth full fiscal quarter following the date of this Debenture, in an amount
not to exceed, together with all other Incurrences under this Section and all
other outstanding Senior Indebtedness, U.S.$148 million, or (ii) if the date of
such Incurrence is after the last day of the fourth full fiscal quarter
following the date of this Debenture then, the Company's EBITDA Ratio for the
most recently ended four full fiscal quarters immediately preceding the date on
which such additional Indebtedness is Incurred (taken as one accounting period)
would not have been greater than 4:1, determined on a pro forma basis (including
a pro forma application of the net proceeds therefrom) as if the additional
Indebtedness had been Incurred at the beginning of such four-quarter period.
(b) The foregoing provisions will not apply to:
29
(i) Indebtedness outstanding on the date of this Debenture;
(ii) the Incurrence of any Indebtedness in exchange for, or the
proceeds of which are used to refund, refinance or replace Indebtedness
that was outstanding on the date of this Debenture or otherwise permitted
by the terms of this Debenture to be then outstanding;
(iii) the Incurrence of Hedging Obligations that are incurred for the
purpose of fixing or hedging interest rate risk with respect to any
floating rate Indebtedness that is permitted by the terms of this Debenture
to be outstanding;
(iv) the Incurrence of intercompany Indebtedness between the Company
and its Subsidiaries; and
(v) the Incurrence of Indebtedness represented by capital lease
obligations, mortgage financings or purchase money obligations, in each
case, incurred for the purpose of financing all or any part of the purchase
price or cost of construction or improvement of property, plant or
equipment used in the business of the Company and its Subsidiaries,
including any Encumbrances on (and limited to) such assets to secure such
Indebtedness.
SECTION 1009. Limitations on Issuances of Guarantees of Senior
Indebtedness.
The Company will not permit any of its Subsidiaries, directly or
indirectly, to guarantee or pledge or grant any Encumbrance upon any assets to
secure the payment of any Senior Indebtedness of the Company, unless such
Subsidiary simultaneously executes and delivers a supplemental Debenture
providing for the guarantee of, or pledge of assets to secure, the payment of
the Debenture by such Subsidiary, which guarantee or pledge shall be on terms
substantially similar to the guarantee of or pledge of assets regarding such
Senior Indebtedness and shall be subordinated to such guarantee or pledge of
assets of such Senior Indebtedness to the same extent as the Debenture is
subordinated to such Senior Indebtedness. It is the intention of all such
parties hereto that any guarantee of the Debentures by any Subsidiary of the
Company shall not constitute a fraudulent transfer or conveyance for purposes of
Canadian federal or provincial law relating to fraudulent transfer or
conveyance. To effectuate the foregoing intention, the Holder hereby irrevocably
agrees that the obligations of such Subsidiary under any guaranty of the
Debenture shall be limited to the maximum amount that will not result in the
obligations of the Subsidiary constituting such fraudulent transfer or
conveyance (taking into account the subrogation and contribution rights such
Subsidiary may have against the borrower or any other guarantor or person).
Notwithstanding the preceding paragraph, any guarantee of, or pledge of
assets with respect to the Debenture by a Subsidiary of the Company will provide
by its terms that it will be automatically and unconditionally released and
discharged in connection with any permitted sale or disposition of all or
substantially all of the assets of such Subsidiary (including by way of
permitted merger or consolidation), or in connection with any permitted sale of
all the capital stock of such Subsidiary.
SECTION 1010. Limitation on Senior Subordinated Indebtedness.
30
The Company will not Incur, create, issue, assume, guarantee or otherwise
become liable for any Indebtedness that is pari passu in right of payment to
this Debenture, other than 8.5% convertible subordinated debentures due 2006
(subject to a call to redeem after three years) to be issued by the Company and
sold to the Principal Lender, in aggregate principal amount not to exceed
Cdn$42.5 million.
SECTION 1011. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with any term,
provision or condition set forth in Section 1007 through 1009, if before or
after the time for such compliance, the Holder waives such compliance (with or
without conditions) in such instance with such term, provision or condition, but
no such waiver shall extend to or affect such term, provision or condition
except to the extent so expressly waived, and, until such waiver shall become
effective, the obligations of the Company in respect of any such term, provision
or condition shall remain in full force and effect.
ARTICLE ELEVEN
REDEMPTION OF DEBENTURES
SECTION 1101. Right of Redemption.
Other than as hereinafter set out, the Debentures may not be redeemed at
the election of the Company.
Upon the occurrence of a Redemption Tax Event, the Company may, at its
option, redeem all of the Debentures upon notice as set forth in Section 1105,
at 100% of the principal amount (the "Redemption Price") plus any accrued and
unpaid interest to the Redemption Date and any Additional Amounts owed on such
interest; provided that (i) no such notice of redemption may be given earlier
than 60 Business Days prior to the earliest date on which the Company would be
obligated to pay any such Additional Amounts were a payment in respect of the
Debentures then due, and (ii) at the time such notice is given, the
circumstances creating the obligation to pay such Additional Amounts remain in
effect.
Prior to the giving of any such notice of redemption, the Company must
deliver to the Holder (i) an Officers' Certificate stating that the Company is
entitled to effect such redemption and setting forth a statement of facts
showing that the conditions precedent to the right to the Company so to redeem
have occurred, (ii) a Board Resolution to the effect that the Board has
concluded that the Additional Amounts are or would be more than a de minimis
amount and such obligations cannot be avoided by the Company taking reasonable
measures available to it, and (iii) an Opinion of Counsel acceptable to the
Holder, acting reasonably, to the effect that the Company has or would become
obligated to pay any Additional Amounts as a result of the Redemption Tax Event.
The Company's right to redeem the Debentures shall continue as long as the
Company is obligated to pay such Additional Amounts, notwithstanding that the
Company shall have made payments of Additional Amounts.
SECTION 1102. Applicability of Article.
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Redemption of the Debenture at the election of the Company, as permitted or
required by any provision of this Debenture, shall be made in accordance with
such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Holder.
The election of the Company to redeem the Debenture pursuant to Section
1101 shall be evidenced by a Board Resolution. The Company shall, at least 60
days prior to the Redemption Date fixed by the Company (unless a shorter notice
shall be satisfactory to the Holder), notify the Holder of such Redemption Date
and of the principal amount of the Debenture to be redeemed.
SECTION 1104. Debentures to be Redeemed.
No partial redemption of the Debenture shall reduce the portion of the
principal amount of the Debenture not redeemed to less than US$1,000.
Upon any redemption of any portion of the Debenture the Company and the
Holder shall treat as Outstanding any portion of the Debenture not thereafter
surrendered for conversion in accordance with Article 12 and any portion of the
Debenture thereafter delivered to the Holder in exchange for the unconverted
portion of the Debenture converted in part.
For all purposes of this Debenture, unless the context otherwise requires,
all provisions relating to redemption of the Debenture shall relate to the
portion of the principal amount of the Debenture which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by the Company to the Holder in the
manner provided for in Section 105 not less than 30 nor more than 60 days prior
to the Redemption Date.
All notices of redemption shall state:
(a) the Redemption Date,
(b) the Redemption Price and the amount of accrued and unpaid
interest, if any, to the Redemption Date payable as provided in Section
1107,
(c) in the case of a partial redemption, the principal amount of the
Debenture to be redeemed,
(d) in the case of a partial redemption, the notice shall state that
on and after the Redemption Date, upon surrender of the Debenture, the
Holder will receive, without charge, a new Debenture or Debentures of
authorized denominations for the principal amount thereof remaining
unredeemed or, in the alternative, the parties may, upon mutual agreement,
indicate on an addendum attached to this Debenture and signed by the
parties the amount of principal redeemed, the actual date of redemption and
the principal amount remaining on this Debenture after such redemption,
32
(e) (i) the Conversion Price then in effect, and (ii) the places where
the Debenture may be surrendered for conversion,
(f) that on the Redemption Date, the Redemption Price (and accrued
interest and unpaid interest, if any, to the Redemption Date payable as
provided in Section 1107) will become due and payable upon the applicable
portion of the Debenture, and that interest thereon will cease to accrue on
and after said date, and
(g) the place or places where the Debenture is to be surrendered for
payment of the Redemption Price and accrued interest, if any.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit, segregate and hold
in trust as provided in Section 1003 an amount of money sufficient to pay the
Redemption Price of, and accrued interest on, that the portion of the Debenture
which is to be redeemed on that date.
SECTION 1107. Debentures Payable on Redemption Date.
Notice of redemption having been given as aforesaid, and unless the Holder
shall have exercised a conversion right under Article Twelve, the portion of the
Outstanding Debenture to be so redeemed shall, on the Redemption Date, become
due and payable at the Redemption Price therein specified (together with accrued
interest, if any, to the Redemption Date), and from and after such date (unless
the Company shall default in the payment of the Redemption Price and accrued
interest, if any) such portion of the Debenture shall cease to be Outstanding
and to bear interest. Upon surrender of the Debenture for redemption in
accordance with said notice, such Debenture shall be paid by the Company at the
Redemption Price, together with accrued interest, if any, to the Redemption
Date; provided, however, that installments of interest whose Stated Maturity is
on or prior to the Redemption Date shall be payable to the Holder, or one or
more Predecessor Debentures, registered as such at the close of business on the
relevant Regular Record Dates according to their terms and the provisions of
Section 301.
ARTICLE TWELVE
CONVERSION OF DEBENTURES
SECTION 1201. Holder Conversion Option.
Subject to and upon compliance with the provisions of this Article, the
Holder at its option, at any time prior to 5:00 p.m. (Toronto time) on the
Business Day immediately preceding the Maturity, or, in the case of a
redemption, any time prior to 5:00 p.m. ((Toronto time) on the Business Day
immediately preceding the Redemption Date, may convert the Debenture (or any
portion of the principal amount thereof that is an integral multiple of
US$1,000), into that number of fully paid and nonassessable Common Shares as
calculated by such quotient where the numerator is the principal amount of the
Debenture to be converted and the denominator is the Conversion Price, as
defined below (the "Holder Conversion Option").
33
The price at which Common Shares shall be delivered upon a conversion by a
Holder (herein called the "Conversion Price") shall be Seventeen Canadian
Dollars (Cdn $17) per Common Share, as adjusted in certain instances as provided
in this Article Twelve.
SECTION 1202. Exercise of Holder Conversion Option.
In order to exercise the Holder Conversion Option, the Holder shall (A)
surrender the Debenture, duly endorsed or assigned to the Company or in blank at
any office or agency of the Company maintained for that purpose pursuant to
Section 1002, and (B) deliver to such office or agency a duly signed and
irrevocable completed Notice of Conversion (a "Notice of Conversion") in the
form set out below stating that the Holder elects to convert such Debenture or,
if less than the entire principal amount thereof is to be converted, the portion
thereof to be converted.
CONVERSION NOTICE
The undersigned holder of this Debenture hereby irrevocably converts the
Debenture, or any portion of the principal amount at Maturity hereof (which is
an integral multiple of US $1,000) below designated, into Common Shares of the
Company in accordance with the terms of this Debenture, and directs that such
shares, together with a Cheque in payment for any fractional shares and any
Debentures representing any unconverted principal amount hereof, be delivered to
and be registered in the name of the undersigned unless a different name has
been indicated below. If Common Shares or Debentures are to be registered in the
name of a Person other than the undersigned (which other Person the undersigned
acknowledges may only be an affiliate of the undersigned), the undersigned will
pay all transfer taxes, if any, payable with respect thereto.
Dated:
----------------------
-----------------------------------------
-----------------------------------------
Signature(s)
If Common Shares or Debentures are to be registered in If only a portion of the
Debenture is to be converted, the name of a Person other than the Holder, please
indicate: print such Person's name and address:
- ------------------------------------- Principal amount to be converted:
Name US$
--------------------------------
(US$1,000 denomination or
- ------------------------------------- integral multiple thereof)
Address
34
- -------------------------------------
Taxpayer
Identification Number, if any
The Debenture, if surrendered for conversion (in whole or in part) other
than on an Interest Payment Date, shall be entitled to, and the Company shall
make, a payment of interest, calculated in the normal course, on the outstanding
principal for that portion of the period during which such principal was not
converted on the next succeeding Interest Payment Date. For greater certainty,
the principal amount of the Debenture that is converted shall be entitled to
interest up to the Conversion Date, such interest to be paid on the next
succeeding Interest Payment Date, together with interest on that portion of the
principal that was not converted. The Company's delivery to the Holder of the
number of Common Shares (and cash in lieu of fractions thereof) into which the
Debenture is convertible will be deemed to satisfy the Company's obligation to
pay the principal amount of the Debenture.
The Holder shall promptly deliver to the Company and the Company, in turn,
to the transfer agent of the Common Shares, notification of such Notice of
Conversion at the address described in Section 105
The Debenture shall be deemed to have been converted immediately prior to
the close of business on the Business Day of surrender of the Debenture for
conversion (the "Conversion Date") in accordance with the foregoing provisions,
and at such time the rights of the Holder, as holder of the principal amount of
the Debenture so converted, shall cease, and the Person or Persons entitled to
receive the Common Shares issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Common Shares at such time. As
promptly as practicable on or after the Conversion Date, the Company shall issue
and deliver to the Holder, a certificate or certificates for the number of full
shares of Common Shares issuable upon conversion, together with payment in lieu
of any fraction of a share, as provided in Section 1208.
If the Debenture is converted in part only, upon such conversion the
Company shall execute and deliver to the Holder, at the expense of the Company,
a new Debenture or Debentures of authorized denominations in an aggregate
principal amount equal to the unconverted portion of the principal amount of
such Debenture. The Debenture may be converted in part, but only if the
principal amount to be converted is any integral multiple of US$1,000.
SECTION 1203. Company Conversion Option.
Subject to and upon the compliance with the provisions of this Article, the
Company is entitled, at any time after the fifth (5th) anniversary of the date
of this Debenture that the weighted average Closing Sale Price of the Common
Shares for 20 consecutive Trading Days (the "Reference Period") ending on the
Trading Day immediately prior to the day which the Company sends out a notice of
conversion pursuant to Section 1206, exceeds NINETEEN Canadian Dollars (Cdn$19)
per Common Share, as adjusted in certain instances as provided in this Article
Twelve (the "Company Conversion Threshold"), at its option (the "Company
35
Conversion Option"), in whole or in part, to require the Holder to convert the
Debentures held by such Holder into that number of fully paid and non-assessable
Common Shares as calculated by such quotient where the numerator is the
principal amount of the Debenture to be converted and the denominator is the
Conversion Price multiplied by the Exchange Rate.
As used in this Debenture, "weighted average" of the Closing Sale Price of
the Common Shares shall be calculated as the sum of the product of the Closing
Sale Price multiplied by the Trading Volume of the Common Shares on The Toronto
Stock Exchange (or such successor exchange) of each Trading Day within the
Reference Period divided by the total Trading Volume of the Common Shares on The
Toronto Stock Exchange (or such successor exchange) during the Reference Period.
SECTION 1204. Exercise of Company Conversion Option.
In order to exercise the Company Conversion Option, the Company shall
provide a conversion notice pursuant to Section 1206. On the Conversion Date
specified by the Company in such notice, the Holder must (a) surrender the
Debentures subject to the Company Conversion Option, (b) furnish appropriate
endorsements or transfer documents if required by the Conversion Agent, (c) pay
any transfer or similar tax, if required, and (d) pay any interest payments as
described in the next succeeding sentence. In case the Conversion Date specified
by the Company in a notice pursuant to a Company Conversion Option shall be made
subsequent to an Interest Payment Date but prior to the next Interest payment
Date (except Debentures called for redemption on a Redemption Date during such
period), the Holder will be entitled to an amount equal to the ratable interest
payable from such prior Interest Payment Date to the Conversion Date on the
principal amount of the Debenture then being converted by the Company. The
Company's delivery to the Holder of the number of Common Shares (and cash in
lieu of fractions thereof, as provided in the Debenture) into which the
Debenture is convertible will be deemed to satisfy the Company's obligation to
pay the principal amount of the Debenture.
Debentures shall be deemed to have been converted immediately prior to the
close of business on the Conversion Date in accordance with the foregoing
provisions, however, in no event shall the Conversion Date upon a Company
Conversion Option be later than 30 days from the date the Company provides a
conversion notice to the Holder, and at such time the rights of the Holder of
the Debenture, as holder, shall cease, and the Person or Persons entitled to
receive the Common Shares issuable upon conversion shall be treated for all
purposes as the record holder or holders of such Common Shares at such time. As
promptly as practicable on or after the Conversion Date, the Company shall issue
and deliver to the Conversion Agent, for delivery to the Holder, a certificate
or certificates for the number of full shares of Common Shares issuable upon
conversion, together with payment in lieu of any fraction of a share, as
provided in Section 1208.
In the case of any Debenture which is converted at the option of the
Company in part only, upon such conversion the Company shall execute and deliver
to the Holder, at the expense of the Company, a new Debenture or Debentures of
authorized denominations in an aggregate principal amount equal to the
unconverted portion of the principal amount of such
36
Debenture. A Debenture may be converted in part, but only if the principal
amount of such Debenture to be converted is any integral multiple of US$1,000.
SECTION 1205. Election to Convert; Notice to Holder.
The election of the Company to convert the Debenture pursuant to Section
1203 shall be evidenced by Board Resolution. In case of any Company Conversion
Option, the Company shall at least 30 days prior to the Conversion Date fixed by
the Company (unless a shorter notice shall be satisfactory to the Holder),
notify the Holder of such Conversion Date.
SECTION 1206. Notice of Company Conversion.
The conversion notice given by the Company to the Holder shall be given in
the manner provided for in Sections 105 and 106 and pursuant to Section 1203.
A conversion notice issued by the Company pursuant to a Company Conversion
Option shall state:
(a) the Conversion Date,
(b) the Conversion Price, and the amount of accrued and unpaid interest, if
any, on the Debentures to be converted from the Conversion Date to the next
subsequent Interest Payment Date payable as provided in Section 1203, and
(c) the place or places where the Debenture is to be surrendered for
conversion.
A conversion notice shall be given by the Company at the expense of the
Company.
SECTION 1207. Debenture to be Converted Upon a Company Conversion Notice.
A conversion notices having been given as aforesaid, that principal portion
of the Debenture to be so converted shall, on the Conversion Date, be converted
into that number of fully paid and nonassessable Common Shares (calculated as to
each conversion to the nearest 1/100th of a share) as calculated by such
quotient where the numerator is the principal amount of the Debenture to be
converted and the denominator is the Conversion Price multiplied by the Exchange
Rate (together with accrued and unpaid interest, if any, to the Conversion
Date), and from and after such date (unless the Company shall default in
providing Holders with such Common Shares), the converted portion of the
principal of the Debenture shall cease to bear interest.
SECTION 1208. Fractions of Shares.
No fractional Common Shares shall be issued upon conversion of any
Debentures. If more than one Debenture shall be surrendered for conversion at
one time by the same Holder, the number of full shares which shall be issuable
upon conversion thereof shall be completed on the basis of the aggregate
principal amount of the Debenture (or specified portions thereof) so
37
surrendered. Instead of any fractional share of Common Shares which would
otherwise be issuable upon conversion of the Debenture (or specified portions
thereof), the Company shall calculate and pay a cash adjustment in respect of
such fraction (calculated to the nearest 1/100th of a share) in an amount equal
to the same fraction of the Conversion Price per Common Share (calculated in
accordance with Section 1210(h) below) at the close of business on the
Conversion Date.
In effecting the conversion transactions described in this Section, the
Conversion Agent is acting as agent of the Holder. The Conversion Agent is
hereby authorized to convert all or a portion of the Debentures into Common
Shares and thereupon to deliver such Common Shares in accordance with the
provisions of this Article and to deliver to the Holder a new Debenture or
Debentures for any resulting unconverted principal amount.
SECTION 1209. Expiration of the Holder Conversion Option.
The conversion rights of the Holder shall expire (a) at 5:00 p.m. Toronto,
Ontario time on the Business Day prior to the Maturity Date of the Debentures,
or (b) if the Debenture is called for redemption, at 5:00 p.m. Toronto, Ontario
time on the Business Day prior to the Redemption Date, unless in either case the
Company defaults in making the payment due upon redemption or such Maturity Date
(both referred to as the "Conversion Expiration Date"), in which event
conversion rights shall continue until payment is made.
SECTION 1210. Adjustment of Conversion Price.
No adjustment will be made to the Conversion Price or the Company
Conversion Threshhold (each, a "Conversion Amount") other than as described in
this Article. The Conversion Amount shall be subject to adjustments from time to
time as follows:
(a) In case the Company shall pay or make a dividend or other distribution
on any of its Common Shares payable in Common Stock to all holders of its Common
Stock, the Conversion Amount in effect at the opening of business on the
Business Day following the date fixed for the determination of shareholders
entitled to receive such dividend or other distribution shall be reduced by
multiplying such Conversion Amount by a fraction of which the numerator shall be
the number of Common Shares outstanding at the close of business on the date
fixed for such determination and the denominator shall be the sum of such number
of shares and the total number of shares constituting such dividend or other
distribution, such reduction to become effective immediately after the opening
of business on the Business Day following the date fixed for such determination.
For purposes of this paragraph (a), the number of Common Shares at any time
outstanding shall not include shares held in the treasury of the Company but
shall include shares issuable in respect of scrip certificates issued in lieu of
fractions of Common Shares. The Company will not pay any dividend or make any
distribution on Common Shares that have not been issued.
(b) In case the Company shall issue rights, options or warrants to all
holders of Common Shares entitling them to subscribe for or purchase shares of
any class of Common Stock at a price per share less than the current market
price per share (determined as provided in paragraph (h) of this Section) of
such class of Common Stock on the date fixed for the
38
determination of shareholders entitled to receive such rights, options or
warrants, the Conversion Amount in effect at the opening of business on the
Business Day following the date fixed for such determination shall be reduced by
multiplying such Conversion Amount by a fraction of which the numerator shall be
the number of Common Shares outstanding at the close of business on the date
fixed for such determination plus the number of shares of Common Stock which the
aggregate of the offering price of the total number of shares of Common Stock so
offered for subscription or purchase would purchase at such current market price
and the denominator shall be the number of Common Shares outstanding at the
close of business on the date fixed for such determination plus the number of
shares of Common Stock so offered for subscription or purchase, such reduction
to become effective immediately after the opening of business on the day
following the date fixed for such determination. For the purposes of this
paragraph (b), the number of Common Shares at any time outstanding shall not
include shares held in the treasury of the Company but shall include shares
issuable in respect of scrip certificates issued in lieu of fractions of Common
Shares. The Company will not issue any rights, options or warrants in respect of
Common Shares held in the treasury of the Company. In the event that such
rights, warrants or options are not so issued, the Conversion Amount shall again
be adjusted to be the Conversion Amount which would then be in effect if such
date fixed for the determination of shareholders entitled to receive such
rights, warrants or options had not been fixed. In determining whether any
rights, warrants or options entitle the holders to subscribe for or purchase
Common Shares at less than such current market price, and in determining the
aggregate offering price of such Common Shares, there shall be taken into
account any consideration received by the Company for such rights, warrants or
options, the value of such consideration, if other than cash, to be determined
by the Board of Directors whose determination shall be conclusive and binding.
(c) In case outstanding shares of Common Shares shall be subdivided into a
greater number of Common Shares, and, conversely, in case outstanding shares of
Common Shares shall each be combined into a smaller number of Common Shares, the
Conversion Amount in effect at the opening of business on the Business Day
following the day upon which such subdivision or combination becomes effective
shall be adjusted by the Company so that the same shall equal the price
determined by multiplying the Conversion Price in effect immediately prior to
the effectiveness of the Conversion Amount adjustment contemplated by this
paragraph (c) by a fraction of which the numerator shall be the number of Common
Shares outstanding immediately prior to such subdivision or combination and the
denominator shall be the number of Common Shares outstanding immediately after
giving effect to such subdivision or combination, such adjustment to become
effective immediately after the opening of business on the Business Day
following the day upon which such subdivision or combination becomes effective.
(d) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Shares or shares of any class of its capital stock, or
other property (including securities, but excluding (i) any rights, options or
warrants referred to in paragraph (b) of this Section, (ii) any dividend or
distribution paid exclusively in cash, (iii) any dividend or distribution
referred to in paragraph (a) of this Section, and (iv) any merger, consolidation
or other transaction to which Section 1218 applies), the Conversion Amount shall
be reduced so that the same shall equal the price determined by multiplying the
Conversion Amount in effect immediately prior to the close of business on the
date fixed for the determination of shareholders
39
entitled to receive such distribution by a fraction of which (i) the numerator
shall be the current market price per share (determined as provided in paragraph
(h) of this Section) of the Common Shares on the third Trading Day prior to the
date fixed for such determination (such third Trading Day being the "Reference
Date") less the then fair market value (as determined by the Board of Directors,
whose determination shall be conclusive and described in a Board Resolution) on
the Reference Date of the portion of the assets, shares or evidences of
indebtedness so distributed applicable to one Common Share and the denominator
shall be the current market price per Common Share on the Reference Date, such
adjustment to become effective immediately prior to the opening of business on
the day following the Reference Date.
(e) In case the Company shall, by dividend or otherwise, distribute to all
holders of Common Shares cash (excluding any cash that is distributed upon a
merger or consolidation to which Section 1218 applies or as part of a
distribution referred to in paragraph (d) of this Section) in an aggregate
amount that, combined together with (i) the aggregate amount of any other cash
distributions to all holders of Common Shares made exclusively in cash within
the 12 months preceding the date of payment of such distribution and in respect
of which no adjustment pursuant to this paragraph (e) has been made and (ii) the
aggregate of any cash plus the fair market value (as determined by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution) of consideration payable in respect of any tender offer by the
Company or any of its Subsidiaries for all or any portion of Common Shares
concluded within the 12 months preceding the date of payment of such
distribution and in respect of which no adjustment pursuant to paragraph (f) of
this Section has been made, exceeds 12.5% of the product of the current market
price per Common Share on the date for the determination of holders of Common
Shares entitled to receive such distribution times the number of Common Shares
outstanding on such date, then, and in each such case, immediately after the
close of business on such date for determination, the Conversion Amount in
effect immediately prior to the close of business on the date fixed for
determination of the shareholders entitled to receive such distribution shall be
reduced by a fraction (1) the numerator of which shall be equal to the current
market price per share (determined as provided in paragraph (h) of this Section)
of the Common Shares on the date fixed for such determination less an amount
equal to the quotient of (x) the excess of such combined amount in (i) and (ii)
above over such 12.5% and (y) the number of Common Shares outstanding on such
date for determination and (2) the denominator of which shall be equal to the
current market price per share (determined as provided in paragraph (h) of this
Section) of the Common Shares on such date of determination.
(f) In case a tender or exchange offer (other than an odd-lot offer) made
by the Company or any Subsidiary for all or any portion of the Common Shares
shall expire and such tender or exchange offer shall involve the payment by the
Company or such Subsidiary of consideration per Common Share having a fair
market value (as determined by the Board of Directors, whose determination shall
be conclusive and described in a Board Resolution) at the last time (the
"Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it shall have been amended) that exceeds 110% of the current
market price per Common Share (determined as provided in paragraph (h) of this
Section) as of the Trading Day next succeeding the Expiration Time, the
Conversion Amount shall be reduced so that the same shall equal the price
determined by multiplying the Conversion Amount in effect immediately prior to
the effectiveness of the Conversion Amount reduction contemplated by this
paragraph (f) by a fraction of which the numerator shall be the product of the
number of Common Shares
40
outstanding (including any tendered or exchanged shares) at the Expiration Time
multiplied by the respective current market price per Common Share (determined
as provided in paragraph (h) of this Section) on the Trading Day next succeeding
the Expiration Time and the denominator shall be the sum of (i) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
stockholders based on the acceptance (up to any maximum specified in the terms
of the tender or exchange offer) of all shares validly tendered or exchanged and
not withdrawn as of the Expiration Time (the shares deemed so accepted, up to
any such maximum, being referred to as the "Purchased Shares") and (ii) the
product of the number of shares of each class of Common Stock outstanding (less
any Purchased Shares) at the Expiration Time and the respective current market
price per share (determined as provided in paragraph (h) of this Section) of
each such Common Shares on the Trading Day next succeeding the Expiration Time,
such reduction to become effective immediately prior to the opening of business
on the Trading day following the Expiration Time.
(g) The reclassification of any Common Shares into securities (other than
any reclassification upon a consolidation or merger to which Section 1218
applies) shall be deemed to involve (i) a distribution of such securities to all
holders of Common Shares (and the effective date of such reclassification shall
be deemed to be "the date fixed for the determination of shareholders entitled
to receive such distribution" and "the date fixed for such determination" within
the meaning of paragraph (d) of this Section), and (ii) a subdivision or
combination, as the case may be, of the number of Common Shares outstanding
immediately prior to such reclassification into the number of Common Shares
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such subdivision
becomes effective" or "the day upon which such combination becomes effective",
as the case may be, and "the day upon which such subdivision or combination
becomes effective" within the meaning of paragraph (c) of this Section).
(h) For the purpose of any computation under paragraphs (b), (d), (e) or
(f) of this Section 1210, the current market price per share of a class of
Common Stock on any date shall be calculated by the Company and be deemed to be
the average of the daily Closing Sale Prices per share of such class for the
five consecutive Trading Days selected by the Company commencing not more than
10 Trading Days before, and ending not later than, the earlier of the day in
question and the day before the "ex" date with respect to the issuance or
distribution requiring such computation. For purposes of this paragraph, the
term "`ex' date", when used with respect to any issuance or distribution, means
the first date on which such class of Common Stock trades in the applicable
securities market or on the applicable securities exchange without the right to
receive such issuance or distribution.
(i) No adjustment in the Conversion Amount shall be required unless such
adjustment (plus any adjustments not previously made by reason of this paragraph
(i)) would require an increase or decrease of at least one percent in such
price; provided, however, that any adjustments which by reason of this paragraph
(i) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Article shall be made
to the nearest cent or to the nearest one-hundredth of a share, as the case may
be.
(j) With the prior consent of The Toronto Stock Exchange, the Company at
its option may make such reductions in the Conversion Amount, for the remaining
term of the
41
Debentures or any shorter term, in addition to those required by paragraphs (a)
through (f) of this Section 1210, as it considers to be advisable in order to
avoid or diminish any income tax to any holders of Common Shares resulting from
any dividend or distribution of stock or issuance of rights or warrants to
purchase or subscribe for stock or from any event treated as such for income tax
purposes.
(k) No adjustment to the Conversion Amount shall be made for any event
referred to in paragraphs (a) through (f) of Section 1210, if the Board of
Directors, acting reasonably and in good faith, determines that the Holder will
participate in the event on a basis that is fair and appropriate in light of the
basis on which holders of Common Shares participate in the event;, such
participation subject to the prior consent of The Toronto Stock Exchange.
SECTION 1211. Notice of Adjustments of Conversion Amount.
Whenever the Conversion Amount is adjusted as herein provided:
(a) the Company shall compute the adjusted Conversion Amount in accordance
with Section 1210 and shall prepare a certificate signed by the Chief Financial
Officer of the Company setting forth the adjusted Conversion Amount and showing
in reasonable detail the facts upon which such adjustment is based, and such
certificate shall promptly be filed with the Conversion Agent; and
(b) a notice stating that the Conversion Amount has been adjusted and
setting forth the adjusted Conversion Amount shall forthwith be required, and as
soon as practicable after it is required, such notice, together with the
Certificate referred to in Section 1211(a), shall be provided by the Company to
the Holder in accordance with Section 106.
SECTION 1212. Notice of Certain Corporate Action.
In case:
(a) the Company shall declare a dividend (or any other distribution) on its
Common Shares payable (i) otherwise than exclusively in cash or (ii) exclusively
in cash in an amount that would require any adjustment pursuant to Section 1210;
or
(b) the Company shall authorize the granting to all holders of Common
Shares of rights, options or warrants to subscribe for or purchase any shares of
capital stock of any class or of any other rights; or
(c) of any reclassification of Common Shares (other than a subdivision or
combination of its outstanding shares of Common Shares), or of any consolidation
or merger to which the Company is a party and for which approval of any
shareholders of the Company is required, or of the sale or transfer of all or
substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
42
(e) the Company or any Subsidiary shall commence a tender offer for all or
a portion of any class of the Company's outstanding shares of Common Shares that
would require an adjustment of the Conversion Amount pursuant to paragraph (f)
of Section 1210 (or shall amend any such tender offer);
then the Company shall cause to be filed at the Registered Office, and
shall cause to be provided to the Holder in accordance with Section 106, on or
before the date that is the earlier of (i) 20 days (or 10 days in any case
specified in clause (a) or (b) above) prior to the applicable record, expiration
or effective date hereinafter specified, and (ii) five (5) Business Days after
the date upon which the Board of Directors determines to take the relevant
action or send to the shareholders the applicable notice, a notice stating (iii)
the date on which a record is to be taken for the purpose of such dividend,
distribution, rights, options or warrants are to be determined, (iv) the date on
which the right to make tenders under such tender offer expires or (iv) the date
on which such reclassification, consolidation, merger, share exchange,
conveyance, transfer, sale, lease, dissolution, liquidation or winding up is
expected to become effective, and the date as to which it is expected that
holders of Common Stock of record shall be entitled to exchange their Common
Shares for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, share exchange, conveyance, transfer,
sale, lease, dissolution, liquidation or winding up.
SECTION 1213. Dividend Reinvestment and Other Plans.
Notwithstanding anything to the contrary in this Article, no adjustment of
the Conversion Amount will be made upon the issuance of any Common Shares of the
Company pursuant to any present or future plan providing for the reinvestment of
dividends or interest payable on securities of the Company and the investment of
additional optional amount in Common Shares of the Company under any such plan,
or the issuance of any Common Shares or options or rights to purchase such
shares pursuant to any present or future employee benefit plan or program of the
Company or pursuant to any option, warrant, right, or exercisable, exchangeable
or convertible security which does not constitute an issuance to all holders of
Common Shares or a class thereof, of rights or warrants entitling holders of
such rights or warrants to subscribe for or purchase Common Shares at less than
the current market price (as determined in paragraph (h) of Section 1210)
SECTION 1214. Company to Maintain Authorized Capital.
The Company shall at all times have authorized capital that includes an
unlimited number of Common Shares.
SECTION 1215. Taxes on Conversions.
The Company will pay any and all taxes and duties that may be payable in
respect of the issue or delivery of shares of Common Shares on conversion of the
Debenture pursuant hereto. The Company shall not, however, be required to pay
any tax or duty which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Shares in a name other than that of the
Holder, and no such issue or delivery shall be made unless and
43
until the Person requesting such issue has paid to the Company the amount of any
such tax or duty, or has established to the satisfaction of the Company that
such tax or duty has been paid.
SECTION 1216. Covenant as to Common Shares.
The Company agrees that all Common Shares which may be delivered upon
conversion of the Debenture, upon such delivery, will have been duly authorized
and validly issued and will be fully paid and nonassessable and free of any
items, charges or adverse claims.
SECTION 1217. Cancellation of Converted Debenture.
The Debenture, if delivered for conversion, shall be cancelled by the
Company.
SECTION 1218. Provision in Case of Amalgamation, Consolidation, Merger or
Sale of Assets.
(a) In case of any amalgamation or consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another Person into
the Company (other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding Common Shares of the
Company) or any sale or transfer of all or substantially all of the assets of
the Company, the Person formed by such consolidation or resulting from such
merger or which acquires such assets, as the case may be (a "Successor"), shall
execute and deliver to the Holder a supplemental Debenture providing that the
Holder shall have the right thereafter, during the period the Debenture shall be
convertible as specified in Section 1201, to convert the Debenture only into the
kind and amount of securities, cash and other property receivable upon such
amalgamation, consolidation, merger, sale or transfer by a holder of the number
of Common Shares of the Company into which the Debenture might have been
converted immediately prior to such amalgamation, consolidation, merger, sale or
transfer, subject to any requirements necessary to ensure that the Debenture
will not be subject to Canadian or United States withholding tax as a result of
such event, and assuming such holder of Common Shares of the Company (i) is not
a Person with which the Company consolidated or into which the Company merged or
which merged into the Company or to which such sale or transfer was made, as the
case may be ("Constituent Person"), or an Affiliate of a Constituent Person and
(ii) failed to exercise his rights of election, if any, as to the kind or amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer (provided that if the kind or amount of securities,
cash and other property receivable upon such consolidation, merger, sale or
transfer is not the same for each Common Share of the Company held immediately
prior to such consolidation, merger, sale or transfer by other than a
Constituent Person or an Affiliate thereof and in respect of which such rights
of election shall not have been exercised ("Non-electing Share"), then for the
purpose of this Section 1218 the kind and amount of securities, cash and other
property receivable upon such amalgamation, consolidation, merger, sale or
transfer by the holders of each Non-electing Shares shall be deemed to be the
kind and amount so receivable per share by a plurality of the Non-electing
Shares), subject, however, to any requirements necessary to ensure that the
Debenture will be and will remain exempt from Canadian Taxes and US Taxes,
including, without limitation, the requirement in respect of Canadian Taxes in
effect on the date hereof that the Holder shall not be entitled to receive
shares, other securities or property, other than shares that are "prescribed
securities" as defined in
44
Regulation 6208 to the Tax Act. Notwithstanding the foregoing, if such
Successor, due to its continuation or domicile in another jurisdiction, is
unable to issue such supplemental Debenture in conformity to any requirements
necessary to ensure that such Debenture will be and will remain exempt from
Canadian Taxes and US Taxes, such inability will not constitute an Event of
Default or any other breach of the terms of this Debenture, provided that the
Company otherwise complies with Section 1007. Such supplemental Debenture shall
provide for adjustments which, for events subsequent to the effective date of
such supplemental Debenture, shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Article. The above provisions of this
Section 1218 shall similarly apply to successive consolidations, mergers, sales
or transfers. Notice of execution of such a supplemental Debenture shall be
given by the Company to the Holder as provided in Section 106 promptly upon such
execution.
(b) In case of any distribution of assets or properties of the Company or
any of its Subsidiaries to all holders of the Common Shares of the Company
(including securities, but excluding (i) any rights, options or warrants
referred to in Section 1210(b), (ii) any dividend or distribution paid
exclusively in cash or shares of Indebtedness or capital stock issued by the
Company, (iii) any dividend or distribution referred to in Section 1210(a), and
(iv) any merger, consolidation or other transaction to which Section 1218(a)
applies), the Company shall provide the Holder with notice of such distribution
at least 30 days prior to the Regular Record Date pertaining to the distribution
(it being the intent that the Holder be given the opportunity to convert the
Debenture to Common Shares of the Company during such period).
SECTION 1219. Intentionally Deleted.
ARTICLE THIRTEEN
SUBORDINATION OF DEBENTURES
SECTION 1301. Debentures Subordinate to Permitted Senior Indebtedness.
The Company covenants and agrees, and the Holder, by its acceptance
thereof, likewise covenants and agrees, for the benefit of the holders, from
time to time, of Permitted Senior Indebtedness that, to the extent and in the
manner hereinafter set forth in this Article and in Section 1008, the
indebtedness represented by the Debenture and the payment of the principal of
and interest on the Debenture are hereby expressly made subordinate and subject
in right of payment as provided in this Article to the prior payment in full of
all Permitted Senior Indebtedness.
SECTION 1302. Suspension of Payment When Permitted Senior Indebtedness in
Default.
(a) Unless Section 1303 shall be applicable, upon (1) the occurrence of a
Payment Event of Default and (2) receipt by the Holder of written notice of such
occurrence, then no payment or distribution of any assets of the Company of any
kind or character shall be made by the Company on account of principal of (or
premium, if any) or interest on the Debenture or on account of the purchase or
redemption or other acquisition of the Debenture unless and until such Payment
Event of Default shall have been cured or waived in writing or shall have ceased
to exist or such Permitted Senior Indebtedness shall have been discharged, after
which the
45
Company shall resume making any and all required payments in respect of the
Debenture, including any missed payments, together with interest on all missed
payments.
(b) Unless Section 1303 shall be applicable, upon (1) the occurrence of a
Non-payment Event of Default and (2) receipt by the Holder from the
representative of holders of Permitted Senior Indebtedness of written notice of
such occurrence, then no payment or distribution of any assets of the Company of
any kind or character shall be made by the Company on account of any principal
of (or premium, if any) or interest on the Debenture or on account of the
purchase or redemption or other acquisition of the Debenture for a period
("Payment Blockage Period") commencing on the earlier of the date of receipt by
the Company or the date of receipt by the Holder of such notice from the Agent
or such other representative unless and until (subject to any blockage of
payments that may then be in effect under paragraph (a) of this Section) (x)
more than 180 days shall have elapsed since receipt of such written notice by
the Company or the Holder, whichever was earlier, (y) such Non-payment Event of
Default shall have been cured or waived in writing or shall have ceased to exist
or such Permitted Senior Indebtedness shall have been discharged or (z) such
Payment Blockage Period shall have been terminated by written notice to the
Company or the Holder from the Agent or such other representative initiating
such Payment Blockage Period, after which, in the case of clause (x), (y) or
(z), the Company shall resume making any and all required payments in respect of
the Debenture, including any missed payments, together with interest on all
missed payments. Notwithstanding any other provision of this Agreement, only one
Payment Blockage Period may be commenced within any consecutive 365-day period,
and no event of default with respect to Permitted Senior Indebtedness which
existed or was continuing on the date of the commencement of any Payment
Blockage Period initiated by or behalf of such Permitted Senior Indebtedness
shall be, or be made, the basis for the commencement of a second Payment
Blockage Period whether or not within a period of 365 consecutive days unless
such event of default shall have been cured or waived for a period of not less
than 90 consecutive days subsequent to the commencement of such initial Payment
Blockage Period. In no event will a Payment Blockage Period extend beyond 180
days.
(c) In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Holder of the Debenture prohibited by the foregoing
provisions of this Section, then and in such event such payment shall be paid
over and delivered forthwith to the Company.
SECTION 1303. Liquidation; Dissolution; Bankruptcy.
(a) Upon any distribution of assets of the Company of any kind or
character, whether in cash, property or securities, to creditors upon any
dissolution, winding-up, liquidation or reorganization of the Company, whether
voluntary or involuntary, or in bankruptcy, insolvency, receivership or other
proceedings, all principal, premium, if any and interest due on all Permitted
Senior Indebtedness of the Company permitted by Section 1008 shall first be paid
in full before the Holder is entitled to receive or retain any payment
(excluding any class of shares of Common Stock); and upon any such dissolution
or winding-up or liquidation or reorganization, any payment by the Company, or
distribution of assets of the Company of any kind or character whether in cash,
property or securities (excluding any class of shares of Common Stock), which
the Holder would be entitled to receive from the Company, except for the
provisions of this Article Thirteen, shall be paid by the Company or by any
receiver, trustee
46
in bankruptcy, liquidation trustee, agent or other Person making such payment or
distribution, or by the Holder under this Debenture if received by them or it,
directly to the holders of Permitted Senior Indebtedness of the Company or their
respective representatives, or to the trustee or trustees under any indenture
pursuant to which any instruments evidencing such Permitted Senior Indebtedness
may have been issued, as their respective interests may appear, as calculated by
the Company, to the extent necessary to pay such Permitted Senior Indebtedness
in full, in cash, after giving effect to any concurrent payment or distribution
to or for the benefit of the holders of such Permitted Senior Indebtedness,
before any payment or distribution is made to the Holder.
(b) In the event that, notwithstanding the foregoing, any payment or
distribution of assets of the Company of any kind or character, whether in cash,
property or securities (excluding any class of shares of Common Stock),
prohibited by the foregoing, shall be received by the Holder before all
Permitted Senior Indebtedness of the Company permitted by Section 1008 is paid
in full, or provision is made for such payment in money in accordance with its
terms, such payment or distribution shall be held in trust for the benefit of
and shall be paid over or delivered to the holders of such Permitted Senior
Indebtedness or their respective representatives, or to the trustee or trustees
under any indenture pursuant to which any instruments evidencing such Permitted
Senior Indebtedness may have been issued, as their respective interests may
appear, as calculated by the Company, to the extent necessary to pay such
Permitted Senior Indebtedness in full in cash, after giving effect to any
concurrent payment or distribution to or for the benefit of the holders of such
Permitted Senior Indebtedness, before any payment or distribution is made to the
Holders.
(c) For purposes of this Article Thirteen, the words "cash, property or
securities" shall not be deemed to include shares of stock of the Company as
reorganized or readjusted, or securities of the Company or any other corporation
provided for by a plan of reorganization or readjustment, the payment of which
is subordinated at least to the extent provided in this Article Thirteen with
respect to the Debentures to the payment of all Permitted Senior Indebtedness of
the Company, as the case may be, that may at the time be outstanding; provided,
however, that (i) such Permitted Senior Indebtedness is assumed by the new
corporation, if any, resulting from any such reorganization or readjustment, and
(ii) the rights of the holders of such Permitted Senior Indebtedness are not,
without the consent of such holders, altered by such reorganization or
readjustment. The amalgamation or consolidation of the Company with, or the
merger of the Company into, another corporation or the liquidation or
dissolution of the Company following the conveyance or transfer its properties
or assets substantially as an entirety, to another corporation upon the terms
and conditions provided for in Article Eight of this Debenture shall not be
deemed a dissolution, winding-up, liquidation or reorganization for the purposes
of this Section 1303 if such other corporation shall, as a part of such
amalgamation, consolidation, merger, conveyance or transfer, comply with the
conditions stated in Article Eight of this Debenture.
SECTION 1304. Subrogation.
(a) Subject to the payment in full of all Permitted Senior Indebtedness of
the Company permitted by Section 1008 then outstanding, the rights of the Holder
shall be subrogated to the rights of the holders of such Permitted Senior
Indebtedness to receive
47
payments or distributions of such cash, property or securities of the Company,
as the case may be, applicable to such Permitted Senior Indebtedness until the
principal of and interest on the Debenture shall be paid in full; and, for the
purposes of such subrogation, no payments or distributions to the holders of
such Permitted Senior Indebtedness of any cash, property or securities to which
the Holder would be entitled except for the provisions of this Article Thirteen,
and no payment over pursuant to the provisions of this Article Thirteen to or
for the benefit of the holders of such Permitted Senior Indebtedness by the
Holder, shall, as between the Company, its creditors other than holders of
Permitted Senior Indebtedness of the Company, and the Holder, be deemed to be a
payment by the Company to or on account of such Permitted Senior Indebtedness.
It is understood that the provisions of this Article Thirteen are and are
intended solely for the purposes of defining the relative rights of the Holder,
on the one hand, and the holders of such Permitted Senior Indebtedness on the
other hand.
(b) Nothing contained in this Article Thirteen or elsewhere in this
Debenture or in the Debentures is intended to or shall impair, as between the
Company, its creditors other than the holders of Permitted Senior Indebtedness
of the Company, and the Holder, the obligation of the Company, which is absolute
and unconditional, to pay to the Holder the principal of and interest on the
Debenture as and when the same shall become due and payable in accordance with
its terms, or is intended to or shall affect the relative rights of the Holder
and creditors of the Company, as the case may be, other than the holders of
Permitted Senior Indebtedness of the Company, as the case may be, nor shall
anything herein or therein prevent the Holder from exercising all remedies
otherwise permitted by applicable law upon default under this Debenture, subject
to the rights, if any, under this Article Thirteen of the holders of such
Permitted Senior Indebtedness in respect of cash, property or securities of the
Company, as the case may be, received upon the exercise of any such remedy.
(c) Upon any payment or distribution of assets of the Company referred to
in this Article Thirteen, the Holder shall be entitled to conclusively rely upon
any order or decree made by any court of competent jurisdiction in which such
dissolution, winding-up, liquidation or reorganization proceedings are pending,
or a certificate of the receiver, trustee in bankruptcy, liquidation trustee,
agent or other Person making such payment or distribution, delivered to the
Holder, for the purposes of ascertaining the Persons entitled to participate in
such distribution, the holders of Permitted Senior Indebtedness and other
indebtedness of the Company, as the case may be, the amount thereof or payable
thereon, the amount or amounts paid or distributed thereon and all other facts
pertinent thereto or to this Article Thirteen.
SECTION 1305. Holder to Effectuate Subordination.
The Holder shall take such action as may be necessary or appropriate to
effectuate the subordination provided in this Article.
SECTION 1306. No Waiver of Subordination Provisions.
(a) No right of any present or future holder of any Permitted Senior
Indebtedness to enforce subordination as herein provided shall at any time in
any way be prejudiced or impaired by any act or failure to act on the part of
the Company or by any act or failure to act, in good faith, by any such holder,
or by any non-compliance by the Company with the terms,
48
provisions and covenants of this Debenture, regardless of any knowledge thereof
any such holder may have or be otherwise charged with.
(b) Without in any way limiting the generality of paragraph (a) of this
Section, the holders of Permitted Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Holder, without incurring
responsibility to the Holder and without impairing or releasing the
subordination provided in this Article or the obligations hereunder of the
Holder to the holders of Permitted Senior Indebtedness, do any one or more of
the following: (i) change the manner, place or terms of payment or extend the
time of payment of, or renew or, subject to Section 1008, alter, Permitted
Senior Indebtedness or any instrument evidencing the same or any agreement under
which Permitted Senior Indebtedness is outstanding; (ii) sell, exchange, release
or otherwise deal with any property pledged, mortgaged or otherwise securing
Permitted Senior Indebtedness; (iii) release any Person liable in any manner for
the collection of Permitted Senior Indebtedness; and (iv) exercise or refrain
from exercising any rights against the Company and any other Person.
SECTION 1307. Notice to Holder.
(a) The Company shall give prompt written notice in the form of an
Officers' Certificate to the Holder of any fact known to the Company which would
prohibit the making of any payment to or by the Holder in respect of the
Debenture. Notwithstanding the provisions of this Article or any other provision
of this Debenture, the Holder shall not be charged with knowledge of the
existence of any facts which would prohibit the making of any payment to or by
the Holder in respect of the Debentures, unless and until the Holder shall have
received written notice thereof from the Company or a holder of Permitted Senior
Indebtedness or from any trustee, fiduciary or agent therefor; and, prior to the
receipt of any such written notice, the Holder shall be entitled in all respects
to assume that no such facts exist; provided, however, that, if the Holder shall
not have received the notice provided for in this Section at least three (3)
Business Days prior to the date upon which by the terms hereof any money may
become payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest on any Debenture), then,
anything herein contained to the contrary notwithstanding, the Holder shall have
full power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by any
notice to the contrary which may be received by it within three Business Days
prior to such date.
(b) The Holder shall be entitled to rely on the delivery to it of a written
notice by a Person representing himself to be a holder of Permitted Senior
Indebtedness (or a trustee, fiduciary or agent therefor) to establish that such
notice has been given by a holder of Permitted Senior Indebtedness (or a
trustee, fiduciary or agent therefor). In the event that the Holder determines
in good faith that further evidence is required with respect to the right of any
Person as a holder of Permitted Senior Indebtedness to participate in any
payment or distribution pursuant to this Article, the Holder may request such
Person to furnish evidence to the reasonable satisfaction of the Holder as to
the amount of Permitted Senior Indebtedness held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such Person under this Article and,
if
49
such evidence is not furnished, the Holder may defer any payment to such Person
pending judicial determination as to the right of such Person to receive such
payment.
SECTION 1308. Intentionally Deleted.
SECTION 1309. Intentionally Deleted.
SECTION 1310. No Suspension of Remedies.
Nothing contained in this Article shall limit the right of the Holder to
take any action to accelerate the maturity of the Debentures pursuant to Article
Five or to pursue any rights or remedies hereunder or under applicable law,
except as provided in Article Five.
SECTION 1311. Permitted Senior Indebtedness Entitled to Rely.
The holders of Permitted Senior Indebtedness shall have the right to rely
upon this Article 13, and no amendment or modification of the provisions
contained herein shall diminish the rights of such holders unless such holders
shall have agreed in writing thereto.
SECTION 1312. Certain Conversions Deemed Payment.
For the purposes of this Article 13 only, (1) the issuance and delivery of
junior securities upon conversion of the Debenture in accordance with Article 12
or on account of the redemption or other acquisition of the Debenture shall not
be deemed to constitute a payment or distribution in respect of the Debenture,
and (2) the payment, issuance or delivery of cash (except in satisfaction of
fractional shares pursuant to Section 1208), property or securities (other than
junior securities) upon conversion of the Debenture shall be deemed to
constitute payment on account of the principal of such Debenture. For the
purposes of this Section 1312, the term "junior securities" means any shares of
any class of Common Stock of the Company (including, without limitation, the
Common Shares). Nothing contained in this Article 13 or elsewhere in this
Debenture is intended to or shall impair, as among the Company, its creditors
other than holders of Permitted Senior Indebtedness and the Holders, the right,
which is absolute and unconditional, of the Holder to convert the Debenture in
accordance with Article 12.
This Debenture may be signed in any number of counterparts each of which so
executed shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same Debenture.
ARTICLE FOURTEEN
FURTHER DISTRIBUTION
(a) This Debenture (for the purpose of this Article Fourteen, "these
securities") has not been registered under the United States Securities Act of
1933, as amended, or qualified for distribution to the public in Canada or
qualified under state securities laws and may not be sold, pledged, or otherwise
transferred unless (i) covered by an effective registration statement under the
United States Securities Act of 1933, as amended (the "Securities Act"), and
qualified under applicable state securities laws; (ii) sold outside the United
States in accordance with Rule 904 of Regulation S under the Securities Act;
(iii) sold inside the United States pursuant to an
50
exemption from registration under the Securities Act provided by Rule 144
thereunder, if available; or (iv) transferred in compliance with certain other
procedures satisfactory to the Company upon the furnishing to the Company of an
opinion from counsel in form and substance reasonably satisfactory to the
Company to the effect that no registration or qualification is legally required
for such transfer; and
(b) The Holder, by acquiring these securities, agrees for the benefit of
the Company that for a period (the "Minimum Holding Period") ending 120 days
after the date of the issuance of these securities by the Company (but in any
event the Minimum Holding Period shall end not later than December 31, 2001),
the Holder will not resell these securities to any Canadian resident or in
Canada.
These securities are not listed on any stock exchange and are not freely
transferable.
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IN WITNESS WHEREOF, the parties hereto have caused this Debenture to be
duly executed, and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
HUB INTERNATIONAL LIMITED
[SEAL] By: /s/ W. KIRK JAMES
------------------------------------
Name: W. Kirk James
Title: V.P. & GENERAL COUNSEL
United States Fire Insurance Company
[SEAL] By: /s/ Mary Jane Robertson
------------------------------------
Name: Mary Jane Robertson
Title: Vice President
52