-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RryCxVYijOo03aLVDO7bPudnvbod5ykS3P7q5Hwtcj1ba0tZx4gjIADUSuikkFtC VZnJUUaKMxaMiVrR2bRkUw== 0001047469-99-031459.txt : 19990813 0001047469-99-031459.hdr.sgml : 19990813 ACCESSION NUMBER: 0001047469-99-031459 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FIRSTSERVICE CORP CENTRAL INDEX KEY: 0000913353 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-DETECTIVE, GUARD & ARMORED CAR SERVICES [7381] IRS NUMBER: 000000000 FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24762 FILM NUMBER: 99686047 BUSINESS ADDRESS: STREET 1: 1140 BAY ST STREET 2: SUITE 4000 CITY: TORONTO ONTARIO CANA STATE: A6 MAIL ADDRESS: STREET 1: FIRSTSERVICE BUILDING 1140 BAY STREET STREET 2: SUITE 4000 CITY: TORONTO ONTARIO CANA STATE: A6 10-Q 1 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------- FORM 10-Q /X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 1999 or / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From __ to ____ -------------------- Commission File Number 0-24762 FIRSTSERVICE CORPORATION (Exact name of registrant as specified in its charter) ONTARIO, CANADA NOT APPLICABLE (Province or other (I.R.S. employer jurisdiction of incorporation identification number, if or organization) applicable) 1140 BAY STREET SUITE 4000 TORONTO, ONTARIO CANADA M5S 2B4 (416) 960-9500 (ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICE) FIRSTSERVICE CORPORATION 580 VILLAGE BLVD., SUITE 330 WEST PALM BEACH, FLORIDA 33409 U.S.A. (561) 697-9983 (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE IN THE UNITED STATES) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No/ / Indicate the number of shares outstanding of the registrant's common stock as of the latest practicable date: Subordinate Voting Shares 12,933,180 as of June 30, 1999. FIRSTSERVICE CORPORATION FORM 10-Q For the Quarter Ended June 30, 1999 INDEX PART 1. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements PAGE ---- a) Earnings Statements For the Three Months Ended June 30, 1999 and 1998............... 1 b) Balance Sheets As of June 30, 1999 and March 31, 1999........................... 2 c) Cash Flows Statements For the Three Months Ended June 30, 1999 and 1998................ 3 d) Notes to Financial Statements.................................... 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..................................... 6 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K........................................ 10 Signature................................................................................... 11 Exhibit Index............................................................................... 12
FIRSTSERVICE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (in thousands of U.S. dollars except per share data) (Unaudited)
For the three months ended June 30 1999 1998 - ------------------------------------------------------------------------------------------------ Revenues $84,907 $64,686 Cost of revenues 56,070 42,836 Selling, general and administrative expenses 17,593 12,736 Depreciation 1,470 1,192 Amortization 814 629 Interest 1,763 1,302 - ------------------------------------------------------------------------------------------------ Earnings before income taxes and minority interest 7,197 5,991 Income taxes 2,859 2,406 - ------------------------------------------------------------------------------------------------ Earnings before minority interest 4,338 3,585 Minority interest share of earnings 754 382 - ------------------------------------------------------------------------------------------------ Net earnings $3,584 $3,203 - ------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------ Earnings per share: Basic 0.28 0.26 Diluted 0.26 0.24 Weighted average shares outstanding: Basic 12,924 12,346 (000's) Diluted 13,788 13,263
1 FIRSTSERVICE CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars)
As at June 30 As at March 31 1999 1999 - ----------------------------------------------------------------------------------------------------------- (Unaudited) (Audited) ASSETS CURRENT ASSETS Cash $10,290 $4,627 Accounts receivable, net 54,321 41,360 Inventories 9,383 7,969 Prepaids and other assets 6,489 8,475 - ----------------------------------------------------------------------------------------------------------- 80,483 62,431 - ----------------------------------------------------------------------------------------------------------- Other receivables 4,391 3,425 Fixed assets 27,605 25,847 Other assets 4,339 3,429 Deferred income taxes 1,839 410 Goodwill 100,272 88,764 - ----------------------------------------------------------------------------------------------------------- 138,446 121,875 - ----------------------------------------------------------------------------------------------------------- $218,929 $184,306 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- LIABILITIES CURRENT LIABILITIES Accounts payable and other current liabilities $35,083 $27,737 Unearned revenue 13,287 6,099 Long-term debt - current 2,572 1,726 - ----------------------------------------------------------------------------------------------------------- 50,942 35,562 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- LONG-TERM LIABILITIES Long-term debt less current portion 100,079 84,516 Deferred income taxes 166 319 - ----------------------------------------------------------------------------------------------------------- 100,245 84,835 - ----------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------- Minority interest 5,525 4,889 Shareholders' equity Capital stock 53,704 53,654 Receivables pursuant to company's share purchase plan (3,294) (3,294) Retained earnings 9,751 6,168 Cumulative other comprehensive income 2,056 2,492 - ----------------------------------------------------------------------------------------------------------- 62,217 59,020 - ----------------------------------------------------------------------------------------------------------- $218,929 $184,306 - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
2 FIRSTSERVICE CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands of U.S. dollars) (Unaudited)
For the three months ended June 30 1999 1998 - ----------------------------------------------------------------------------------------------------------- CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Earnings for the period $3,584 $3,203 Items not affecting cash Depreciation and amortization 2,284 1,821 Deferred income taxes 544 (575) Minority interest share of earnings 754 382 Other 110 76 - ----------------------------------------------------------------------------------------------------------- 7,276 4,907 Changes in working capital, net of acquisitions Accounts receivable (5,885) (6,901) Inventories (1,413) 470 Prepaids and other 736 907 Accounts payable and current liabilities 1,384 (3,495) Unearned revenue 1,963 (1,093) - ----------------------------------------------------------------------------------------------------------- Net cash provided by (used in) operating activities 4,061 (5,205) - ----------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Acquisition of businesses (5,822) (25,435) Increase in fixed assets (2,245) (1,457) (Increase) decrease in other assets (160) 121 Increase in other receivables (967) (282) - ----------------------------------------------------------------------------------------------------------- Net cash used for investing (9,194) (27,053) - ----------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Net increase in long-term debt 11,833 25,571 Financing fees paid (531) (741) Issuance of subordinate voting shares 50 638 Dividends paid to minority shareholders of subsidiaries (83) (71) - ----------------------------------------------------------------------------------------------------------- Net cash provided from financing 11,269 25,397 - ----------------------------------------------------------------------------------------------------------- Effect of exchange rates on cash (473) 4,504 - ----------------------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents during the period 5,663 (2,357) Cash and cash equivalents, beginning of period 4,627 2,629 - --------------------------------------------------------------------- -- ------------- --- ---------------- Cash and cash equivalents, end of period $10,290 $272 - ----------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------
3 FIRSTSERVICE CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS June 30, 1999 (UNAUDITED) 1. DESCRIPTION OF THE BUSINESS - FirstService Corporation (the "Company") is a provider of property and business services to corporate, public sector and residential customers in the United States and Canada, principally in Ontario. The Company's operations are conducted through two principal operating divisions, Property Services and Business Services. The Property Services division includes community association management, security, franchising and lawncare and represented approximately 80% of the Company's revenues for the year ended March 31, 1999. The Business Services division provides outsourcing services such as transaction processing and literature fulfillment for corporations and government agencies. 2. SUMMARY OF PRESENTATION - The condensed consolidated financial statements included herein have been prepared by FirstService Corporation, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission for the presentation of interim financial information. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information not misleading. In the opinion of management, the condensed consolidated financial statements contain all adjustments necessary to present fairly the financial position of the Company as of June 30, 1999 and the results of its operations and its cash flows for the three months ended June 30, 1999 and 1998. All such adjustments are of a normal recurring nature. The results of operations for the three months ended June 30, 1999 are not necessarily indicative of the results to be expected for the year ended March 31, 2000. For further information, refer to the consolidated financial statements and footnotes thereto for the year ended March 31, 1999 contained in the Company's annual information form included as an Exhibit to its Form 6-K for the month of August, 1999. 3. ACQUISITION - Effective June 1, 1999 the Company acquired American Pool Enterprises Inc. ("APE") which is the largest commercial swimming pool and recreation facility management operation in the U.S. APE, headquartered in Beltsville, Maryland, provides management, repair, maintenance and renovation services to more than 1,100 apartment, condominium and community association swimming pool and recreation facilities, through 11 branches in 9 States. APE generated revenues of $20 million for the year ended December 31, 1998. 4 The results of operations of this acquisition have been included in the condensed consolidated financial statements included herein since the date of acquisition. This acquisition was accounted for using the purchase method of accounting. As a result, the purchase price has been allocated to the assets acquired, including intangibles, based on their respective fair values. The purchase price allocation is preliminary and subject to adjustment. 4. ANNOUNCED ACQUISITIONS SUBSEQUENT to June 30, 1999 - On July 1, 1999, the Company acquired DDS Southwest Distribution Services Limited ("Southwest") through it's 89% owned subsidiary, DDS Distribution Services Limited. Southwest provides order processing and fulfillment, kit preparation, invoicing and accounts receivable collection to customers in the educational publishing industry. The acquired company generated revenues of approximately $8 million for the year ended December 31, 1998. 5. LONG-TERM DEBT - On April 1, 1998, the Company amended and restated its lending agreement increasing credit availability by approximately U.S. $30.0 million and splitting the facilities into tranches of Cdn. $50.0 million and U.S. $130 million. The amended facilities which will be used for acquisitions, capital expenditures and working capital provide a more tax efficient structure and more effectively match long term U.S. dollar denominated assets with U.S. dollar denominated debt. The revolving facilities provide that the Company may borrow using Prime, LIBOR or Bankers Acceptances interest rate options that vary within a range depending on certain leverage ratios. Borrowings currently bear interest at the lenders cost of funds rate plus 1.25%. The Company has an interest rate swap contract to December 31, 2002 at a fixed rate of 5.3% in the amount of $20 million to hedge against interest rate exposure on a portion of its revolving facilities. As security for the revolving working capital and acquisition facilities, the Company has granted the lenders various security including the following: an interest in all of the assets of the Company including the Company's share of its subsidiaries, an assignment of material contracts and an assignment of the Company's "call rights" with respect to shares of the subsidiaries held by minority interest. The Company is also required to comply with certain operating and financial ratios. 6. COMPREHENSIVE INCOME - Total comprehensive income for the three months ended June 30, 1999 and 1998 was $3.15 million and $6.55 million, respectively, which included net income and foreign currency exchange adjustments. 5 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1999 AND 1998 Revenues increased $20.2 million, or 31%, to $84.9 million in the first quarter of fiscal 2000 from $64.7 million in the first quarter of fiscal 1999. Approximately $11.0 million of the increase was attributable to acquired companies owned less than one year including California Closets, American Pool Enterprises and several smaller companies. The balance of the increase resulted from internal growth. Earnings before interest, taxes, depreciation and amortization ("EBITDA") increased 23% to $11.2 million from $9.1 million in the prior year period. EBITDA margins for the three months ended June 30, 1999, were 13.2% compared to 14.1% in the first quarter of fiscal 1999. The margin decline primarily reflects a change in the seasonal mix of business impacted by strong growth in the non-seasonal operations which generate consistent EBITDA margins across four quarters relative to the seasonal businesses which generate very high margins in the June and September quarters and losses in the December and March quarters. Depreciation for the quarter ended June 30, 1999 was $1.5 million up 23% from the previous year quarter due largely to acquisitions. However, the increase also reflected a sharp step-up in capital investment in management information systems over the past year. Generally, these investments are depreciated over a short time frame relative to the Company's other pool of assets. Amortization was $0.8 million, up 29% due to the increase in goodwill that has resulted from acquisitions completed during the past year. Interest expense increased 35% over prior year levels to $1.8 million as a result of increased borrowings related to acquisitions. All acquisitions completed during the past year have been financed through the Company's credit facilities. The income tax provision for the first quarter was approximately 40.0% of earnings before taxes, consistent with the prior year. Minority interest expense increased 98% to $0.75 million or 17.4% of earnings before minority interest compared to $0.38 million or 10.7% in the prior year quarter. The minority interest in the current year more accurately reflects the average equity interest in the Company's subsidiaries held by management and more closely reflects the expected expense ratio in the future. The prior year consolidated minority interest expense was lower due to the deficit position of an 80% owned, profitable subsidiary of the Company which resulted in no minority interest expense being reflected for the subsidiary. The deficit position was eliminated during the second quarter of fiscal 1999. 6 Net income was $3.6 million, up 12% over the prior year, while diluted earnings per share increased 8% to $0.26. Diluted earnings per share reflect a 4% increase in the weighted average number of shares outstanding. Revenues for the Property Services division were $69.1 million, an increase of approximately $18.0 million or 35% over the prior year. Approximately $11.0 million of the revenue increase resulted from acquisitions including California Closets and American Pool Enterprises, which closed effective June 1, 1999. The balance of the increase resulted from internal growth. Property Services EBITDA margin grew 30% to $9.2 million or 13.3% of revenue compared to an EBITDA margin of 13.8% in the prior year. The margin decline reflects a change in the seasonal mix of business as discussed above. Revenues for the Business Services division grew internally by 16% for the first quarter to $15.8 million compared to $13.6 million in the prior year. Business Services EBITDA was $3.1 million or 19.6% of revenue, down slightly from 20.5% in the prior year impacted by higher expenditures at our fulfillment operation during the quarter to expand capacity. Corporate expenses increased to $1.1 million in the first quarter from $0.7 million as a result of higher salary costs and increased travel relative to the prior year. SEASONALITY AND QUARTERLY FLUCTUATIONS Certain segments of the Company's operations, which in the aggregate contribute approximately 15% of revenues, are subject to seasonal variations. Specifically, the demand for residential lawn care services, exterior painting services, and commercial pool maintenance in the northern United States and in Canada is highest during late spring, summer and early fall and very low during winter. As a result, these operations generate a large percentage of their annual revenues between April and September. The Company has historically generated lower profits or net losses during its third and fourth fiscal quarters, from October to March. The community association management, security, business services and many of the franchise systems generate revenues approximately evenly throughout the fiscal year. The seasonality of the lawn care, painting and pool maintenance operations results in variations in quarterly EBITDA margins. Variations in quarterly EBITDA margins can also be caused by acquisitions which alter the consolidated service mix. The Company's non-seasonal businesses typically generate a consistent EBITDA margin over all four quarters, while the Company's seasonal businesses experience high EBITDA margins in the first two quarters, offset by negative EBITDA in the last two quarters. As non-seasonal revenues increase as a percentage of total revenues, the Company's quarterly EBITDA margin fluctuations should be reduced. 7 LIQUIDITY AND CAPITAL RESOURCES Bank borrowings, proceeds from capital stock issues, and cashflow from operations have historically been the funding sources for working capital requirements, capital expenditures and acquisitions. Management believes that funds from these sources will remain available and are adequate to support ongoing operational requirements and near-team acquisition growth. In December 1996, FirstService entered into a lending agreement with a syndicate of chartered banks. The agreement - amended and restated in October 1997, again in June, 1998 and most recently on April 1, 1999, - currently provides six-year committed revolving credit facilities for acquisitions of Cdn $50 million and US $130 million. Outstanding indebtedness under the facilities bears interest at a rate based on competitive floating reference rates, as selected by the Company, such as LIBOR plus a margin of 1.00% to 1.50% per annum, depending on certain leverage ratios. The agreement requires the Company to meet specific financial ratios and places certain limitations on additional borrowing and the ability to pay dividends or sell assets. As of June 30, 1999, the Company had drawn Cdn $4.7 million and US $92.5 million. FirstService is exposed to foreign currency exchange risk through its U.S. operations. The Company's exposure to foreign exchange losses may be mitigated as the lending agreement provides that it may borrow in Canadian or U.S. funds. During the first quarter, capital expenditures were approximately $2.2 million split approximately equally between management information systems and vehicles and equipment. FirstService does not anticipate paying dividends on its outstanding shares in the foreseeable future. Management believes that it is in the best interest of shareholders to retain all available funds to invest in its businesses with the objective of building long-term shareholder value. YEAR 2000 The Company is currently in the process of addressing the Year 2000 issue, which is the result of computer programs being written using two digits rather than four to define the applicable year. As a result, computer applications and software may recognize an input of two zeros (00) as the year 1900. This incorrect date recognition could cause systems and software malfunctions that may have a material adverse effect on business operations. This potential problem could affect not only the Company's internal information systems and other infrastructure containing embedded technology, but also those of third parties, such as customers and suppliers using systems that may interact with or affect the Company's operations or, in the case of the Company's security operation, systems supplied by the Company. 8 COMPANY'S READINESS. Beginning in late fiscal 1997 the Company undertook a comprehensive review of its software applications and computer infrastructure and other infrastructure containing embedded technology that are likely to be affected by the Year 2000 issue. The review was completed in fiscal 1999 using the Company's employees and various computer consultants. As a result of this review, new systems or upgrades were implemented at several of the operations during fiscal 1998 and fiscal 1999 and several upgrades will be completed in the first half of fiscal 2000. The Company's objective is to complete all its Y2K readiness programs by the fall of calendar 1999. The Company presently believes that it is largely Y2K compliant and that the Year 2000 issue will not pose significant operational problems for its computer systems. The Company has identified its significant customers and suppliers that it believes, at this time, to be critical to its various operations. Steps are underway to ascertain their respective stages of readiness through the use of questionnaires, interviews, and other available means to determine the progress that those customers and suppliers are making in remediating their own Year 2000 issues. The Company is requiring that significant customers and suppliers certify those products and services to be Year 2000 compliant. However, there can be no assurance that the information systems provided by or utilized by other companies which affect the Company's operations will be timely revised in such a way as to allow them to continue normal business operations or furnish products, services or data to the Company without disruption. COST OF COMPLIANCE. Many of the systems upgrades which are dealing with Y2K issue would have occurred in the normal course of business. In other cases, the Company is accelerating normal course systems replacements or upgrades in view of the Y2K issue. The costs incurred to date to replace non-compliant systems that would not otherwise have been replaced are not material and the Company does not expect its future Year 2000 costs to be material. All Year 2000 costs have been funded with cash from operations. COMPANY RISK AND CONTINGENCY PLANS. The Company's systems identified as non-compliant or in need of replacement are being upgraded or replaced. The Company expects this remediation to be substantially completed by the fall of calendar 1999. If needed conversions to the Company's information systems are not made on a timely basis or the Company's significant customers or suppliers fail to make such remediations and conversions on a timely basis, it could have a material adverse effect on the Company's results of operation or financial condition. 9 PART II. OTHER INFORMATION Item 6. (a) Exhibits 3.1 Articles of Incorporation and Amendment 3.2 By-laws and Amendments 10.1 Credit Facility dated April 1, 1999 among the Company and a syndicate of bank lenders. (b) Reports on Form 8-K None 10 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DATE: AUGUST 13, 1999 FIRSTSERVICE CORPORATION By: /s/ D. Scott Patterson ---------------------- D. SCOTT PATTERSON SENIOR VICE PRESIDENT AND CHIEF FINANCIAL OFFICER 11 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION PAGE - --------------- ---------------------------------------------------------------------- ------------- 3.1 Articles of Incorporation and Articles of Amendment of - Registrant. 3.2 By-laws of Registrant and Amendments thereto. - 10.1 Credit Facility dated April 1, 1999 among the Company and a syndicate of bank lenders. -
12 EX-3.1 2 EX-3.1
[LOGO] Ministry of Ministere de ONTARIO CORPORATION NUMBER Consumer and la Consommation NUMERO DE LA SOCIETE EN ONTARIO Commercial et du Commerce 1348301 Relations CERTIFICATE CERTIFICAT This is to certify that these Ceci certifie que les presents articles are effective on statuts entrent en vigueur le APRIL 1 AVRIL, 1999 - ----------------------------------------------------------------------------------------------------------------------
[illegible] Director/Directeur Business Corporations Act / Loi sur les societes par actions ____________________________________________________________________ ARTICLES OF AMALGAMATION Form 4 STATUTS DE FUSION Business Corporations Act
1. The name of the amalgamated corporation is: DENOMINATION SOCIALE DE LA SOCIETE ISSUE DE LA FUSION: F I R S T S E R V I C E C O R P O R A T I O N - ----------------------------------------------------------------------------------------------------------------------
Formule 4 Loi sur les societes par actions
2. The address of the registered office is: ADRESSE DU SIEGE SOCIAL: 1140 Bay Street, Suite 4000, Toronto, Ontario, Canada ------------------------------------------------------------------------------------------------------- (Street & Number or R.R. Number & if Multi-Office Building give Room No.) (RUE ET NUMERO, OU NUMERO DE LA R.R. ET, S'IL S'AGIT D'UN EDIFICE A BUREAUX, NUMERO DU BUREAU) Municipality of Metropolitan Toronto, M 5 S 2 B 4 ------------------------------------------------------------------------------------------------------- (Name of Municipality or Post Office) (Postal Code) (NOM DE LA MUNICIPALITE OU DU BUREAU DE POSTE) (CODE POSTAL) 3. Number (or minimum and maximum number) of NOMBRE (OU NOMBRES MINIMAL ET MAXIMAL) directors is: D'ADMINISTRATEURS: Minimum: 3, Maximum: 20
4. The director(s) is/are: ADMINISTRATEUR(S): Resident Canadian State First name, initials and surname Resident address, giving Street & No. or R.R. No., Yes or No PRENOM, INITIALES ET NOM DE FAMILLE municipality and postal code. RESIDENT ADRESSE PERSONNELLE, Y COMPRIS LA RUE ET CANADIEN LE NUMERO DE LA R.R., LE NOM DE LA OUI/NON MUNICIPALITE ET LE CODE POSTAL - -------------------------------------------------------------------------------------------------------------------------------
PLEASE REFER TO ATTACHMENT 1 1(1) ATTACHMENT 1
4. The director(s) is are: ADMINISTRATEUR(S): Resident Canadian State First name, initials and surname Residence address, giving Street & No. or R.R. No., Yes or No PRENOM, INITIALES ET NOM DE municipality and postal code. RESIDENT FAMILLE ADRESSE PERSONNELLE, Y COMPRIS LA RUE CANADIEN ET LE NUMERO, LE NUMERO DE LA R.R., OUI/NON LE NOM DE LA MUNICIPALITE ET LE CODE POSTAL - ----------------------------------------------------------------------------------------------------------- Michael H. Appleton 1166 Bay Street, Apt. 705, Toronto, Yes Ontario, CANADA M5S 2X8 C. Robert Burgess 24 Brookshire, Thornhill, Ontario, Yes CANADA L3T 7A9 Brendan Calder 121 Walker Avenue, Toronto, Ontario, Yes CANADA M4V 1G5 Peter F. Cohen 32 Fifeshire Road, Willowdale, Ontario, Yes CANADA M2L 2X3 Jay S. Hennick 164 Warren Road, Toronto, Ontario, Yes CANADA M4V 2S5 Samuel Hennick 58 Chiswell Cres., North York, Ontario, Yes CANADA M2N 6E1 Steven S. Rogers 868 Melton Drive, Mississauga, Ontario, Yes CANADA L4Y 1K8 James R. Rollwagon 670 Brookside Lane, Mendota-Heights, No Minnesota, USA 55118
2. 5. A) The amalgamation agreement has been duly A) LES ACTIONNAIRES DE CHAQUE SOCIETE QUI FUSIONNE adopted by the shareholders of each of the ONT DUMENT ADOPTE LA CONVENTION DE FUSION amalgamating corporations as required by CONFORMEMENT AU PARAGRAPHE 176(4) DE LA LOI subsection 176(4) of the Business SUR LES SOCIETES PAR ACTIONS A LA DATE Corporations Act on the date set out below. / / MENTIONNEE CI-DESSOUS. -------------------- Check Cocher A or B A ou B -------------------- B) The amalgamation has been approved by the B) LES ADMINISTRATEURS DE CHAQUE SOCIETE QUI directors of each amalgamating corporation FUSIONNE ONT APPROUVE LA FUSION PAR VOIE DE by a resolution as required by section 177 RESOLUTION CONFORMEMENT A L'ARTICLE 177 DE LA of the Business Corporations Act on the LOI SUR LES SOCIETES PAR ACTIONS A LA DATE date set out below. /X/ MENTIONNEE CI-DESSOUS. The articles of amalgamation in substance LES STATUTS DE FUSION REPRENNENT ESSENTIELLEMENT contain the provisions of the articles of LES DISPOSITIONS DES STATUTS CONSTITUTIFS DE incorporation of FIRSTSERVICE CORPORATION - ------------------------------------------------------------------------------------------------------------------------ and are more particularly set out in these et sont enonces textuellement aux presents articles. statuts.
Names of amalgamating corporations Ontario Corporation Number Date of Adoption/Approval DENOMINATION SOCIALE DES NUMERO DE LA SOCIETE EN ONTARIO DATE D'ADOPTION OU D'APPROBATION SOCIETES QUI FUSIONNENT - ------------------------------------------------------------------------------------------------------------------------ 1140 BAY STREET LIMITED 1107607 March 30, 1999 FIRSTSERVICE CORPORATION 788412 March 30, 1999
3. 6. Restrictions, if any, on business the corporation may LIMITES, S'IL Y A LIEU, IMPOSEES AUX ACTIVITES carry on or on powers the corporation may exercise. COMMERCIALES OU AUX POUVOIRS DE LA SOCIETE. None 7. The classes and any maximum number of shares CATEGORIES ET NOMBRE MAXIMAL, S'IL Y A LIEU, that the corporation is authorized to issue: /D'ACTIONS QUE LA SOCIETE EST AUTORISEE A EMETTRE: Class of Shares Maximum Number --------------- -------------- Preference shares Unlimited Series 1 Preference Shares 2,500 Subordinate Voting Shares Unlimited Multiple Voting Shares Unlimited
4. 8. Rights, privileges, restrictions and conditions (if any) DROITS, PRIVILEGES, RESTRICTIONS ET CONDITIONS, S'IL Y A attaching to each class of shares and directors LIEU, RATTACHES A CHAQUE CATEGORIE D'ACTIONS ET authority with respect to any class of shares which is POUVOIRS DES ADMINISTRATEURS RELATIFS A CHAQUE to be issued in series: CATEGORIE D'ACTIONS QUI PEUT ETRE EMISE EN SERIE: See Pages 4(A) to 4(CC) attached.
4(A) Schedule "1" 1.00 THE PREFERENCE SHARES 1.01 The Preference Shares may at any time or from time to time be issued in one or more series, each series to consist of such number of shares as may, before the issue thereof, be determined by the board of directors of the Corporation. The directors shall by resolution fix, from time to time, before the issue of any series of Preference Shares, the designation, preferences, rights, restrictions, conditions, limitations, priorities as to payment of dividends and/or distribution on liquidation, dissolution or winding-up, or prohibitions attaching thereto including, without limiting the generality of the foregoing, the provision of a purchase fund, the right of the Corporation to purchase such shares for cancellation, the rate of preferential dividends, the dates of payment thereof, the date or dates from which any such preferential dividends shall accrue, redemption rights including purchase or redemption price, terms and conditions of redemption, conversion rights and any sinking fund or other provisions, and authorize the issuance thereof. 1.02 The directors before the issue of any Preference Shares of a series shall file with the Director appointed under the BUSINESS CORPORATIONS ACT, (Ontario) or any successor statute of the Province of Ontario which is from time to time in force (the "ACT"), Articles of Amendment designating such series and specifying the number, designation, preferences, rights, restrictions, conditions, limitations, priorities as to payment of dividends and/or distribution on liquidation, dissolution or winding-up, and prohibitions attached thereto, and shall obtain a certificate from the Director with respect thereto. 1.03 The Preference Shares of each series shall be entitled to preference over the Subordinate Voting Shares, the Multiple Voting Shares and any other shares ranking junior to the Preference Shares with respect to priority in payment of dividends and in the distribution of assets in the event of liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding-up its affairs, and may also be given such other preferences over the Subordinate Voting Shares, the Multiple Voting Shares and any other shares ranking junior to the Preference Shares as may be determined with respect to the respective series authorized to be issued. l.04 The holders of the Preference Shares shall not be entitled as such, except as required by law, to receive notice of or to attend any meeting of the shareholders of the Corporation or to vote at any such meeting, but shall be entitled to receive notice of meetings of shareholders of the Corporation called for the purpose of authorizing the dissolution of the Corporation or the sale of its undertaking or a substantial part thereof. 2.00 SUBORDINATE VOTING SHARES 2.01 The holders of the Subordinate Voting Shares shall be entitled to receive notice of, to attend and speak at and to vote at, any meeting of the shareholders of the Corporation, other than a meeting 4(B) of the holders of another class as such or the holders of a series of shares of another class as such, and at such meeting shall have one (l) vote for each Subordinate Voting Share held. 2.02 Subject to any provisions of the Act and to applicable securities laws and the by-law, regulations or policies of any stock exchange upon which the Subordinate Voting Shares may then be listed, all or any part of the Subordinate Voting Shares which are then outstanding shall be purchasable for cancellation by the Corporation at any time, in the open market, by private contract or otherwise, at the lowest price at which, in the opinion of the directors, such shares are obtainable. 2.03 The Subordinate Voting Shares shall not be redeemable by the Corporation. 2.04 If the Act would in effect require in the absence of this clause 2.04 that an amendment to the Articles of the Corporation to delete or vary any preference, right, condition, restriction, limitation or prohibition attaching to any of the Subordinate Voting Shares, or to create special shares ranking in priority to or on a parity with the Subordinate Voting Shares, be confirmed in writing by the holders of 100% or any lesser percentage of the then outstanding Subordinate Voting Shares, then in lieu of such confirmation in writing such confirmation, may be given by at least two-thirds of the votes cast at a meeting of the holders of the Subordinate Voting Shares duly called for that purpose, and at such meeting each holder of Subordinate Voting Shares shall be entitled to one vote for each Subordinate Voting Shares held. 2.05 The holders of the Subordinate Voting Shares shall not have any right to vote separately upon any proposal to amend the Articles of the Corporation to: (a) increase any maximum number of authorized shares of any class or series having rights or privileges equal or superior to the Subordinate Voting Shares; or (b) create a new class of shares equal or superior to the Subordinate Voting Shares. 2.06 (1) For the purposes of this clause 2.06: (a) "affiliate" has the meaning assigned by the SECURITIES ACT (Ontario) as amended from time to time; (b) "associate" has the meaning assigned by the SECURITIES ACT (Ontario) as amended from time to time; (c) "Conversion Period" means the period of time commencing on the eighth day after the Offer Date and terminating on the Expiry Date; 4(C) (d) "Converted Shares" means Multiple Voting Shares resulting from the conversion of Subordinate Voting Shares into Multiple Voting Shares pursuant to paragraph (2) of this clause 2.06; (e) "Exclusionary Offer" means an offer to purchase Multiple Voting Shares that: (i) must, by reason of applicable securities legislation or the requirements of a stock exchange on which the Multiple Voting Shares are listed, be made to all or substantially all holders of Multiple Voting Shares who are in a province of Canada to which the requirement applies; (ii) is not made concurrently with an offer to purchase Subordinate Voting Shares that is identical to the offer to purchase Multiple Voting Shares in terms of price per share and percentage of outstanding shares to be taken up exclusive of shares owned immediately prior to the offer by the Offeror, and in all other material respects, and that has no condition attached other than the right not to take up and pay for shares tendered if no shares are tendered pursuant to the offer for Multiple Voting Shares, and for the purposes of this definition, if an offer to purchase Multiple Voting Shares is not an Exclusionary Offer as defined above but would be an Exclusionary Offer if it were not for sub-clause (ii), the varying of any term of such offer shall be deemed to constitute the making of a new offer unless an identical variation concurrently is made to the corresponding offer to purchase Subordinate Voting Shares; (f) "Expiry Date" means the last date upon which holders of Multiple Voting Shares may accept an Exclusionary Offer; (g) "Offer Date" means the date on which an Exclusionary Offer is made; (h) "Offeror" means a person or company that makes an offer to purchase Multiple Voting Shares (the "BIDDER"), and includes any associate or affiliate or the bidder or any person or company that is disclosed in the offering document to be acting jointly or in concert with the bidder; and (i) "transfer agent" means the transfer agent for the time being of the Multiple Voting Shares. (2) Subject to subparagraph (5) of this clause 2.06, if an Exclusionary Offer is made, each outstanding Subordinate Voting Share shall be convertible into one Multiple Voting Share at the option of the holder during the Conversion Period. The conversion right may be exercised by notice in writing given to the transfer agent accompanied by the share certificate 4(D) or certificates representing the Subordinate Voting Shares which the holder desires to convert, and such notice shall be executed by such holder, or by his attorney duly authorized in writing, and shall specify the number of Subordinate Voting Shares which the holder desires to have converted. The holder shall pay any governmental or other tax imposed on or in respect of such conversion. Upon receipt by the transfer agent of such notice and share certificate or certificates, the Corporation shall issue a share certificate representing fully paid Multiple Voting Shares as above prescribed and in accordance with paragraph (4) of this clause 2.06. If less than all of the Subordinate Voting Shares represented by any share certificate are to be converted, the holder shall be entitled to receive a new share certificate representing in the aggregate the number of Subordinate Voting Shares represented by the original share certificate which are not to be converted. (3) An election by a holder of Subordinate Voting Shares to exercise the conversion right provided for in paragraph (2) of this clause 2.06 shall be deemed to also constitute an irrevocable election by such holder to deposit the Converted Shares pursuant to the Exclusionary Offer (subject to such holder's right to subsequently withdraw the shares from the offer) and to exercise the right to convert into Subordinate Voting Shares all Converted Shares in respect of which such holder exercises his right of withdrawal from the Exclusionary Offer or which are not otherwise ultimately taken up under the Exclusionary Offer. Any conversion into Subordinate Voting Shares, pursuant to such deemed election, of Converted Shares in respect of which the holder exercises his right of withdrawal from the Exclusionary Offer shall become effective at the time such right of withdrawal is exercised. If the right of withdrawal is not exercised, any conversion into Subordinate Voting Shares pursuant to such deemed election shall become effective. (a) in respect of an Exclusionary Offer which is completed, immediately following the time by which the Offeror is required by applicable securities legislation to take up and pay for all shares to be acquired by the Offeror under the Exclusionary Offer; and (b) in respect of an Exclusionary Offer which is abandoned or withdrawn, at the time at which the Exclusionary Offer is abandoned or withdrawn. (4) No share certificates representing Converted Shares shall be delivered to the holders of the shares before such shares are deposited pursuant to the Exclusionary Offer; the transfer agent, on behalf of the holders of the Converted Shares, shall deposit pursuant to the Exclusionary Offer a certificate or certificates representing the Converted Shares. Upon completion of the Offer, the transfer agent shall deliver to the holders entitled thereto all consideration paid by the Offeror pursuant to the offer. If Converted Shares are converted into Subordinate Voting Shares pursuant to paragraph (3) of this clause 2.06, the transfer agent shall deliver to the holders entitled thereto share certificates representing the Subordinate Voting Shares representing the Subordinate Voting Shares resulting from the conversion. The Corporation shall make all arrangements with the transfer agent necessary or desirable to give effect to this sub-paragraph. 4(E) (5) Subject to paragraph (6) of this clause 2.06, the conversion right provided for in subparagraph (2) of this clause 2.06 shall not come into effect if: (a) prior to the time at which the Exclusionary Offer is made there is delivered to the transfer agent and to the Secretary of the Corporation a certificate or certificates signed by or on behalf of one or more shareholders of the Corporation owning in the aggregate, as at the time the Exclusionary Offer is made, more than 50% of the then outstanding Multiple Voting Shares, exclusive of shares owned immediately prior to the Exclusionary Offer by the Offeror, which certificate or certificates shall confirm, in the case of each such shareholder, that such shareholder shall not: (i) accept any Exclusionary Offer without giving the transfer agent and the Secretary of the Corporation written notice of such acceptance or intended acceptance at least seven days prior to the Expiry Date; (ii) make any Exclusionary Offer; (iii) act jointly or in concert with any person or company that makes any Exclusionary Offer; or (iv) transfer any Multiple Voting Shares, directly or indirectly, during the time at which any Exclusionary Offer is outstanding without giving the transfer agent and the Secretary of the Corporation written notice of such transfer or intended transfer at least seven days prior to the Expiry Date, which notice shall state, if known to the transferor, the names of the transferees and the number of Multiple Voting Shares transferred or to be transferred to each transferee; or (b) within seven days after the Offer Date there is delivered to the transfer agent and to the Secretary of the Corporation a certificate or certificates signed by or on behalf of one or more shareholders of the Corporation owning in the aggregate more than 50% of the then outstanding Multiple Voting Shares, exclusive of shares owned immediately prior to the Exclusionary Offer by the Offeror, which certificate or certificates shall confirm, in the case of each such shareholder: (i) the number of Multiple Voting Shares owned by the shareholder; (ii) that such shareholder is not making the offer and is not an associate of affiliate of, or acting jointly or in concert with, the person or company making the offer; (iii) that such shareholder shall not accept the offer, including any varied form of the offer, without giving the transfer agent and the Secretary of the 4(F) Corporation written notice of such acceptance or intended acceptance at least seven days prior to the Expiry Date; and (iv) that such shareholder shall not transfer any Multiple Voting Shares, directly or indirectly, prior to the Expiry Date without giving the transfer agent and the Secretary of the Corporation written notice of such transfer or intended transfer at least seven days prior to the Expiry Date, which notice shall state, if known to the transferor, the names of the transferees and the number of Multiple Voting Shares transferred or to be transferred to each transferee if this information is known to the transferor. (6) If notice referred to in sub-clause 5(a)(i), 5(a)(iv), 5(b)(iii) or 5(b)(iv) of this Clause 2.06 is given and the conversion right provided for in paragraph (2) of this clause 2.06 has not come into effect, the transfer agent shall either forthwith upon receipt of the notice or forthwith after the seventh day following the Offer Date, whichever is later, make a determination as to whether there are subsisting certifications that comply with either sub-clause 5(a) or 5(b) of this clause 2.06 from shareholders of the Corporation who own in the aggregate more than 50% of the then outstanding Multiple Voting Shares, exclusive of shares owned immediately prior to the offer by the Offeror. For the subject of such notice shall be deemed to have taken place at the time of the determination, and the shares that are the subject of such notice shall be deemed to have been transferred to a person or company from whom the transfer agent has not received such a certification unless the transfer agent is otherwise advised either by such notice or by the transferee in writing. If the transfer agent determines that there are not such subsisting certifications, paragraph (5) of this clause 2.06 shall cease to apply and the conversion right provided for in paragraph (2) of this clause 2.06 shall be in effect for the remainder of the Conversion Period. (7) As soon as reasonably possible after the seventh day after the Offer Date, the Corporation shall send to each holder of Subordinate Voting Shares a notice advising the holders as to whether they are entitled to convert their Subordinate Voting Shares into Multiple Voting Shares and the reasons therefor. If such notice discloses that they are not so entitled but is subsequently determined that they are so entitled by virtue of paragraph (6) of this clause 2.06 or otherwise, the Corporation shall forthwith send another notice to them advising them of that fact and the reasons therefor. (8) If a notice referred to in paragraph (7) of this clause 2.06 discloses that the conversion right has come into effect, the notice shall: (a) include a description of the procedure to be followed to effect the conversion and to have the Converted Shares tendered under the offer; (b) include the information set out in paragraph (3) of this clause 2.06; and 4(G) (c) be accompanied by a copy of the offer and all other material sent to holders of Multiple Voting Shares in respect of the offer, and as soon as reasonably possible after any additional material, including a notice of variation, is sent to the holders of Multiple Voting Shares in respect of the offer, the Corporation shall send a copy of such additional material to each holder of Subordinate Voting Shares. (9) Prior to or forthwith after sending any notice referred to in paragraph (7) of this clause 2.06, the Corporation shall cause a press release to be issued to a Canadian national news ticker service, describing the contents of the notice. 3.00 MULTIPLE VOTING SHARES 3.01 The holders of the Multiple Voting Shares shall be entitled to receive notice of, and to attend and speak at and vote at, any meeting of the shareholders of the Corporation, other than a meeting of the holders of shares of another class as such or of the holders of a series of shares of another class as such, and at such meeting shall have twenty (20) votes for each Multiple Voting Share held. 3.02 Subject to any provisions of the Act and to applicable securities laws and the by-laws, regulations or policies of any stock exchange upon which the Multiple Voting Shares may then be listed, all or any part of the Multiple Voting Shares which are then outstanding shall be purchasable for cancellation by the Corporation at any time, in the open market, by private contract or otherwise, at the lowest price at which, in the opinion of the directors, such shares are obtainable. 3.03 The Multiple Voting Shares shall not be redeemable by the Corporation. 3.04 If the Act would in effect require in the absence of this clause 3.04 that an amendment to the Articles of the Corporation to delete or vary any preference, right, condition, restriction, limitation or prohibition attaching to any of the Multiple Voting Shares, or to create special shares ranking in priority to or on a parity with the Multiple Voting Shares, be confirmed in writing by the holders of 100% or any lesser percentage of the then outstanding Multiple Voting Shares, then in lieu of such confirmation in writing such confirmation may be given by at least two-thirds of the votes cast at a meeting of the holders of the Multiple Voting Shares duly called for that purpose, and at such meeting each holder of Multiple Voting Shares shall be entitled to one vote for each Multiple Voting Shares held. 3.05 The holders of the Multiple Voting Shares shall not have any right to vote separately upon any proposal to amend the Articles of the Corporation to: (a) increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the Multiple Voting Shares; or (b) create a new class of shares equal or superior to the Multiple Voting Shares. 4(H) 3.06 Each Multiple Voting Share shall be convertible at any time, at the option of the holder thereof, into a Subordinate Voting Share, on the basis of one Subordinate Voting Share for each Multiple Voting Share so converted. The holder of Multiple Voting Shares desiring to convert such Multiple Voting Shares into Subordinate Voting Shares on the basis aforesaid shall deliver to the transfer agent for the time being of the Subordinate Voting Shares the share certificate or share certificates representing the Multiple Voting Shares which the holder desires to so convert accompanied by a written notice duly executed by such holder or his attorney duly authorized in writing, which notice shall state that such holder elects to convert the Multiple Voting Shares represented by such share certificate or share certificates into Subordinate Voting Shares in accordance with the provisions hereof and which notice shall further state the name or names (with addresses) in which the share certificate or certificates for Subordinate Voting Shares issuable on such conversion shall be issued, and if any of the Subordinate Voting Shares into which such Multiple Voting Shares are to be converted are to be issued to a person or persons other than the holder of such Multiple Voting Shares, there shall be paid to such transfer agent, for the account of the Corporation, any transfer taxes which may properly be payable. If any such certificate or share certificates representing any of the Subordinate Voting Shares issuable on conversion are directed to be issued to any person other than the holder of such Multiple Voting Shares, the signature of such holder shall be guaranteed by a Canadian chartered bank or such other financial institution as such transfer agent may require. Such holder shall, in addition, comply with such other reasonable requirements as such transfer agent may prescribe. As promptly as practicable after the receipt of such notice of election to convert, the payment of such transfer tax (if any), the delivery of such share certificate or share certificates and compliance with all reasonable requirements of the transfer agent as aforesaid, the Corporation shall cause the transfer agent for the Subordinate Voting Shares to issue and deliver in accordance with such notice of election to convert a share certificate or share certificates representing the number of Subordinate Voting Shares into which such Multiple Voting Shares have been converted in accordance with the provisions of this clause 3.06. Such conversion shall be deemed to have been made immediately prior to the close of business on the date on which all conditions precedent to the conversion of such Multiple Voting Shares have been fulfilled and the person or persons in whose name or names any share certificate or share certificates for Subordinate Voting Shares shall be issuable shall be deemed to have become on the said date the holder or holders of record of the Subordinate Voting Shares represented thereby; provided, however, that if the transfer books of the Corporation for Subordinate Voting Shares shall be closed on the said date, the Corporation shall not be required to issue Subordinate Voting Shares upon such conversion until the date on which such transfer books shall be re-opened and such person or persons shall not be deemed to have become the holder or holders of record of such Subordinate Voting Shares until the said date on which such transfer books shall be reopened. There shall be no payment or adjustment on account of any unpaid dividends on the Multiple Voting Shares converted or on account of any dividends on the Subordinate Voting Shares resulting from such conversion. In the event that part only of the Multiple Voting Shares represented by any share certificate shall be converted, a share certificate for the remainder of the Multiple Voting Shares represented by the said share certificate shall be delivered to the holder converting without charge. 4(I) 4.00 DIVIDENDS AND DISTRIBUTION RIGHTS OF THE SUBORDINATE AND MULTIPLE VOTING SHARES 4.01 (a) All dividends which are declared in any year in the discretion of the directors on all of the Subordinate Voting Shares shall be declared and paid in an equal or, in the discretion of the directors, a greater amount per share than on all of the Multiple Voting Shares at the time outstanding. All dividends which are declared in any year, in the discretion of the directors, on all of the Multiple Voting Shares shall be declared and paid in an equal or, in the discretion of the directors, a lesser amount per share than on all of the Subordinate Voting Shares outstanding. If any stock dividend is declared on Subordinate Voting Shares, such dividend may be paid in Subordinate Voting Shares, such dividend may be paid in Subordinate Voting Shares or in Multiple Voting Shares, or partly in one class and partly in the other, if stock dividends in equal or, in the discretion of the directors, lesser amounts per share are declared at the same time on the Multiple Voting Shares and are payable in either Subordinate Voting Shares or in Multiple Voting Shares, or partly in one class and partly in the other, regardless of which class the stock dividend was paid on Subordinate Voting Shares. If any stock dividend is declared on Multiple Voting Shares, such dividend may be paid in Subordinate Voting Shares or in Multiple Voting Shares, or partly in one class and partly in the other, if stock dividends in equal or, in the discretion of the directors, greater amounts per share are paid at the same time on the Subordinate Voting Shares and are payable in either Subordinate Voting Shares or in Multiple Voting Shares, or partly in one class and partly in the other, regardless or which class the stock dividend was paid on Multiple Voting Shares. (b) All distributions other than dividends (including, but without limiting the generality of the foregoing, any distribution of rights, warrants or options to purchase securities of the Corporation), and all such distributions which may at any time or from time to time be authorized or made: (i) in respect of the Subordinate Voting Shares, shall be authorized and made in equal, or in the discretion of the directors, greater quantities or amounts per share than on all Multiple Voting Shares then outstanding without preference or distinction; and (ii) in respect of the Multiple Voting Shares, shall be authorized and made in equal, or, in the discretion of the directors, lesser quantities or amounts per share than on all Subordinate Voting Shares then outstanding without preference or distinction. 5.00 SUBDIVISIONS, CONSOLIDATIONS, RECLASSIFICATIONS, WINDING-UP AND LIQUIDATION, ETC. 5.01 No subdivision, consolidation, reclassification or other change of the Subordinate Voting Shares or the Multiple Voting Shares shall be made unless at the time an equivalent or comparable 4(J) subdivision, consolidation, reclassification or change is made with respect to all of the Multiple Voting Shares and Subordinate Voting Shares, respectively, which are then outstanding. 5.02 In any case where a fraction of a Subordinate Voting Shares or a Multiple Voting Shares would otherwise be issuable on a subdivision, consolidation, reclassification or change of one or more Subordinate Voting Shares or Multiple Voting-Shares, the Corporation shall in lieu thereof adjust such fractional interest by the payment by cheque (to the nearest cent) of an amount related or equivalent to the then current market value of such fractional interest computed on the basis of the last board lot sale price (or the last bid price, if there has been no board lot sale) for the Subordinate Voting Shares on The Toronto Stock Exchange, on such stock exchange in Canada on which the Subordinate Voting Shares are listed or traded as may be selected fur such purpose by the Directors of the Corporation) on the business day on which such stock exchange was open next preceding the date of such subdivision, consolidation, reclassification or change or if the Subordinate Voting Shares are not then listed on any stock exchange, then the current market price in any public market in which the Subordinate Voting Shares are traded and otherwise in the discretion of the board of directors. 5.03 In the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of the assets of the Corporation amongst its shareholders for the purposes of winding-up its affairs, all of the property and assets of the Corporation available for distribution to the shareholders of the Corporation shall, after providing for preferential payment of the amounts required to be paid under and in respect of any Preference Shares or series thereof ranking in priority, shall be paid or distributed in equal amounts per share on all Subordinate Voting Shares and Multiple Voting Shares at the time outstanding without preference or distinction and the holders thereof shall as such participate on a share-for-share basis equally therein. 6.00 PROVISIONS RELATING TO SUBORDINATE VOTING SHARES AND MULTIPLE VOTING SHARES 6.01 Notwithstanding any of the provisions of this Schedule, the Articles of the Corporation hereby provide that, for the purposes of the take-over bid and issuer bid provisions of the SECURITIES ACT (Ontario) and the regulations thereunder, both as amended from time to time, (a) the Subordinate Voting Shares and the Multiple Voting Shares shall be treated as, and are hereby deemed to constitute, one class of voting securities, and (b) the published market for such one class of voting securities shall be deemed to be the published market of the Subordinate Voting Shares. For greater certainty, the provisions of this Section 6.01 shall have no application in the event of a purchase of Multiple Voting Shares at a price per share not in excess of the aggregate of (i) the "market price" per share (at the time of such purchase) determined in accordance with the provisions of the SECURITIES ACT (Ontario) and the regulations thereunder, (both as amended or replaced from time to time) together with any permitted premium, plus (ii) reasonable brokerage fees or other commissions calculated on a per share basis. For greater certainty, "market price" as at the date of these articles is defined in Section 164 of the Regulation to the SECURITIES ACT (Ontario). 4(K) 7.00 SERIES 1 PREFERENCE SHARES The first series of the Preference Shares of the Corporation shall consist of an aggregate of 2500 shares, all designated as "Series 1 Preference Shares" (collectively, the "Series 1 Shares"), with each such share having a stated value of $1,000. In addition to the rights, conditions, restrictions and prohibitions attaching to the Preference Shares of the Corporation as a class, the Series 1 Shares shall have attached thereto the following rights, conditions, restrictions and prohibitions: 7.01 DEFINITIONS: As used herein, the following words and phrases shall have the following meanings, respectively: (a) "arm's length" has the meaning given thereto in the Income Tax Act (Canada), as amended from time to time; (b) "Board Lot" means a lot of not less than 100 Subordinate Voting Shares or a lot consisting of at least that number of securities convertible into or exchangeable for Subordinate Voting Shares which, if fully converted or exchanged, would result in the issuance of not less than 100 Subordinate Voting Shares; (c) "Business Day" means a day other than a Saturday, Sunday or any other day that is a statutory or civic holiday in the place where the Corporation's registered office is located and, if any day on which any dividend on the Series 1 Shares is payable or by which any other action is required or permitted to be taken pursuant to these provisions is not a Business Day, such dividend shall be payable or such other action shall be required or permitted to be taken on the next succeeding day that is a Business Day; (d) "Coit Termination Amount" means the amount which Cleanol Services Inc. (formerly 875551 Ontario Limited) would be required to pay to Coit Drapery Cleaners Inc. at the time in question if Cleanol Services Inc. then elected to exercise the option granted to it in Section 8.04 of a franchise agreement entered into effective as of the 1st day of March, 1990 (the "Coit Franchise Agreement") between Coit Drapery Cleaners Inc. and 875551 Ontario Limited; (e) "Conversion Notice" has the meaning given thereto in subsection 1.03(e) hereof; (f) "Conversion Price" means the applicable conversion price per Subordinate Voting Share for which Subordinate Voting Shares may be issued upon the 4(L) conversion of Series 1 Shares, such conversion price to be determined as follows: (i) if at the time in question the Corporation has gone public, an amount equal to the lesser of: (A) $8.50; and (B) the greater of: (1) 75% of the Public Offering Price; and (2) $5.50; and (ii) if the Corporation has not gone public prior to the Redemption Date, an amount equal to the greater of: (A) an amount equal to the quotient obtained when an amount equal to 800% of Normalized After Tax Earnings for the then most recently completed fiscal year of the Corporation (provided that if such fiscal year is less than 365 days in duration, the Normalized After Tax Earnings of the Corporation for the period of 365 days ending on the last day of such fiscal year shall be used) is decreased by an amount equal to: (1) the Coit Termination Amount if the Coit Franchise Agreement has not then been terminated; or (2) zero if the Coit Franchise Agreement has then been terminated and the remainder so obtained is divided by the aggregate number of Multiple Voting Shares and Subordinate Voting Shares outstanding on the day immediately prior to the Redemption Date calculated on a fully diluted basis in accordance with GAAP; and (B) $6.50 or such other dollar amount per Subordinate Voting Share for which Subordinate Voting Shares shall be issued upon the conversion of Series 1 Shares in accordance with Section 1.04 hereof; 4(M) (g) "Current Market Price" of the Subordinate Voting Shares as at any date (the "Reference Date") means: (i) if the Subordinate Voting Shares are then listed on one or more stock exchanges, the weighted average of the closing prices per share for bona fide arm's length Board Lot sales of Subordinate Voting Shares for the 20 trading days as on which such shares were traded immediately prior to the Reference Date on such stock exchange as on which the highest volume of Subordinate Voting Shares was traded during such 20 days; (ii) if the Subordinate Voting Shares are not then listed on any stock exchange but are traded on an over-the-counter market, the weighted average of the closing prices per share for bona fide arm's length Board Lot sales of Subordinate Voting Shares for the 20 trading days as on which such shares were traded immediately prior to the Reference Date on such over-the-counter market as on which the highest volume of Subordinate Voting Shares was traded during such 20 days; or (iii) if the Subordinate Voting Shares are not then listed on any stock exchange or traded on any over-the-counter market, the greater of the amounts referred to in paragraphs l.0l(f)(ii)(A) and 1.01(f)(ii)(B) subject to any adjustments which may be required to be made to such amounts pursuant to the applicable provisions hereof; (h) "Dividend Payment Date" means March 31, June 30, September 30 and December 31 in each calendar year; (i) "Dividend Payment Period" means the period of three consecutive months ending on a Dividend Payment Date; (j) "Fixed Amounts" means, collectively, the amounts specified in paragraphs l.0l(f)(i)(A), l.0l(f)(i)(B)(2) and l.0l(f)(ii)(B) and "Fixed Amount" means any one of such aforesaid amounts; (k) "going public" means, when used in relation to the Corporation, that the board of directors of the Corporation has authorized the Corporation to engage in a Public Offering; (l) "gone public" means, when used in relation to the Corporation, that the Corporation has fully completed a Public Offering in accordance with all applicable laws; 4(N) (m) "GAAP" means generally accepted accounting principles as promulgated or interpreted, as the case may be, from time to time by the Canadian Institute of Chartered Accountants or, if it should cease to exist, the entity which is the successor thereto; (n) "Normalized After Tax Earnings" means, for any fiscal year of the Corporation, the aggregate of the following: (i) the consolidated after tax earnings (before all extraordinary losses (as so designated by the Corporation's auditors) incurred by the Corporation and its subsidiaries in such fiscal year) and before minority interest in such earnings of the Corporation for such fiscal year; (ii) the after tax cost to Greenspace Services Ltd. of all amortization charges incurred in such fiscal year by the Corporation and its subsidiaries to the extent that such charges are referrable to the amount paid for those items referred to in subsections 2.01(1) and (m) of a certain asset purchase agreement made effective as of the 27th day of October, 1991 among Ecolab Ltd., Greenspace Services Ltd. and the Corporation; (iii) the after tax cost to Cleanol Services Inc. of all franchise fees and other like payments made to or accrued in favour of Coit Drapery Cleaners Inc. in such fiscal year pursuant to the Coit Franchise Agreement; (iv) the provision made in such fiscal year for income taxes payable by the Corporation and its subsidiaries which are categorized by the Corporation's auditors as "Income Taxes Payable - Other Deferred", being those taxes that will not be paid as a result of operating losses incurred subsequent to such fiscal year end by reason of the seasonal nature of the expenses giving rise to such operating losses; and (v) the after tax effect to the Corporation and its subsidiaries of all unusual and/or non-recurring gains and losses which are considered material to the financial position or results from operations in such fiscal year (i.e., asset dispositions); and all of the foregoing shall be determined on a consolidated basis in accordance with GAAP, consistently applied; 4(O) (o) "Public Offering" means an offering to the public at any time subsequent to the date of issuance of the Series 1 Shares involving the issuance by the Corporation of at least one Board Lot of its Subordinate Voting Shares (or securities exchangeable or convertible into its Subordinate Voting Shares) (which Subordinate Voting Shares or securities convertible or exchangeable into the Subordinate Voting Shares forming the subject matter of such offering, are listed at, prior or within 30 days following the date of the completion of such offering on any one or more of The Toronto Stock Exchange, the Montreal Exchange, the Vancouver Stock Exchange or a major U.S. stock exchange) to not less than 200 subscribers pursuant to a (final) prospectus (or other similar public offering document which, in the case of any such offering to be conducted in the United States of America, includes a registration statement filed with and accepted by the Securities and Exchange Commission) in respect of which a receipt or other like approval has been received from all securities regulatory authorities in Canada and/or the United States of America having jurisdiction with respect to such offering; (p) "Public Offering Price" means: (i) if the Corporation is offering Subordinate Voting Shares for sale pursuant to a Public Offering, an amount equal to the per share price at which such Subordinate Voting Shares are being offered; (ii) if the Corporation is offering securities convertible into or exchangeable for Subordinate Voting Shares for sale pursuant to a Public Offering, an amount equal to the per share conversion or exchange price of such securities; or (iii) if the Corporation is offering securities in units comprised in part of Subordinate Voting Shares for sale pursuant to a Public Offering an amount equal to the portion of the purchase price of such units which is allocable, on a per share basis, to the Subordinate Voting Shares forming a part thereof; (q) "Redemption Amount" means, with respect to any Series 1 Share, the amount specified in subsection 1.05(b); and (r) "Redemption Date" means the earlier of: (i) the first date following the date of issuance of the Series 1 Shares as on which the Corporation has gone public; and 4(P) (ii) December 31, 1994, provided that the Corporation may, without the necessity of obtaining the consent or approval of the holders of the Series 1 Shares thereto, extend such date to such later date (the "Extended Redemption Date") not later than December 31, 1995, as it may in its sole discretion determine in which event the Corporation shall pay on the Extended Redemption Date to each holder of Series 1 Shares in respect of each Series 1 Share then held by it an additional amount equal to the quotient obtained when the sum of $193,000 is divided by the aggregate number of Series 1 Shares then outstanding and the quotient so obtained is multiplied by a fraction, the numerator of which is the number of days during the period commencing January 1, 1995 and ending on the Extended Redemption Date and the denominator of which is 365. 7.02 DIVIDENDS. The holders of the Series 1 Shares shall be entitled to receive, out of any profits or surplus available for dividends, fixed, cumulative, preferential cash dividends at the rate of $50 per annum per Series 1 Share, such dividends to be paid in equal quarterly instalments on each Dividend Payment Date. Such dividends shall accrue on a daily basis from the respective dates of issue of the Series 1 Shares. If in any Dividend Payment Period the Corporation shall not have paid in full such quarterly dividend instalment for such Dividend Payment Period on all of the Series 1 Shares then outstanding, such quarterly dividend instalment, or the unpaid portion thereof; shall be paid in a subsequent Dividend Payment Period or Dividend Payment Periods in priority to dividends on any class of shares ranking junior to the Series 1 Shares. No dividend shall be declared, paid or set apart for payment on any class of shares ranking junior to the Series 1 Shares as regards the payment of dividends unless all accrued cumulative preferential cash dividends on the Series 1 Shares then outstanding shall have been paid in full or sufficient funds therefor set aside for payment at the time of such declaration, payment or setting apart. The holders of the Series 1 Shares shall not be entitled to any dividends other than or in excess of the cash dividends provided for in this Section 1.02. The amount of the accrued dividend on any Series 1 Share required to be paid in respect of any period which is less than a full Dividend Payment Period shall be an amount (rounded to the nearest cent) equal to the result obtained when $12.50 is multiplied by a fraction, the numerator of which is the number of days in such period that such Series 1 Share has been outstanding and the denominator of which is the total number of days in such Dividend Payment Period. Payment of such dividends to those persons entitled thereto shall be made by way of cheques of the Corporation drawn on a Canadian chartered bank and payable at par at any branch in Canada of such bank. The mailing of such cheques shall satisfy and discharge all liability of the Corporation for the payment of such dividends to the extent of the amount represented thereby plus any tax required to be withheld 4(Q) therefrom) unless such cheques are dishonoured on due presentation. Any monies to be paid in cash pursuant to this Section 1.02 represented by a cheque which has not been presented for payment within 6 years after it was issued or that otherwise remains unclaimed for a period of 6 years from the date on which it was declared to be payable and set apart for payment shall be forfeited to the Corporation. 7.03 CONVERSION AT THE OPTION OF THE HOLDER: (a) Each holder of Series 1 Shares may at any time from time to time on or prior to August 31, 1994 send to the Corporation a Conversion Notice in respect of all or any part of the Series 1 Shares then owned by it and in respect of which a Conversion Notice had not previously been sent and any Conversion Notice so sent shall be irrevocable from and after such time as it shall have been received by the Corporation. Notwithstanding the foregoing, if the Corporation elects to extend the Redemption Date as contemplated in subsection 1.01(q) hereof, the date of expiry of the conversion rights of the holders of the Series 1 Shares shall be extended to the Extended Redemption Date. The Corporation shall send a notice in writing to each of the holders of the Series 1 Shares not earlier than June 1, 1994 and not later than June 30, 1994 advising them of their conversion rights under this subsection 1.03(a). (b) If at any time and from time to time while any of the Series 1 Shares are outstanding the Corporation should decide that it wishes to engage in a Public Offering and such decision has been approved by a decision of the board of directors of the Corporation, the Corporation shall, within 21 days following the making of such decision by the Board of Directors of the Corporation, send to each registered holder of Series 1 Shares a notice in writing (the "Offering Notice") at the address of such holder maintained in the share registers of the Corporation advising that the Corporation proposes to engage in a Public Offering. Such Offering Notice shall, to the extent that the same has been determined, set out a summary of the material particulars of any such proposed Public Offering. Each holder of Series 1 Shares shall have a period of 60 days following its receipt of an Offering Notice in which to send to the Corporation a Conversion Notice in respect of all or any part of those Series 1 Shares then held by it in respect of which a Conversion Notice had not previously been sent and a holder who so sends a Conversion Notice shall not have any right to withdraw the same. If the Corporation has not gone public prior to the expiry of a period of 150 days following its sending of an Offering Notice, all Conversion Notices submitted to the Corporation in response to such Offering Notice shall be deemed to have been withdrawn and the Corporation shall forthwith return all share certificate(s) evidencing the Series 1 Shares deposited pursuant to all Conversion Notices so deemed to 4(R) have been withdrawn. Any holder of Series 1 Shares shall be provided with a copy of the preliminary prospectus, final prospectus or other similar disclosure document prepared in connection with any such proposed Public Offering. (c) The conversion rights attaching to the Series 1 Shares as provided for in this Section 1.03 shall forever cease and be null and void in respect of all those Series 1 Shares as in respect of which the Corporation shall not have received a valid Conversion Notice prior to the expiration of the time periods hereinbefore specified during which any such Conversion Notice in respect thereof may be given and all Series 1 Shares in respect of which a Conversion Notice has not been so received by the Corporation shall be redeemed on the Redemption Date in accordance with the provisions of Section 1.05 hereof. (d) Subject to the provisions contained in this Section 1.03, a holder of Series 1 Shares shall receive in respect of each Series 1 Share elected to be converted into Subordinate Voting Shares that number of fully paid and non-assessable Subordinate Voting shares as is equal to the result obtained when the sum of $1,000 is divided by the Conversion Price. (e) Any holder of Series 1 Shares electing to exercise the conversion right provided for in this Section 1.03 shall send a written notice (a "Conversion Notice") to the Corporation and such Conversion Notice shall be signed by such holder and shall specify (i) the number of Series 1 Shares which such holder desires to have converted, (ii) whether such notice is being furnished as a result of the Corporation having sent an Offering Notice to such holder and (iii) the name(s) in which the Subordinate Voting Shares resulting from such conversion are to be registered failing which such Subordinate Voting Shares shall be registered in the name of such holder. Such Conversion Notice shall be accompanied by share certificate(s) evidencing at least that number of Series 1 Shares as are elected to be converted as specified in such Conversion Notice. Any Conversion Notice not accompanied by the required share certificate(s) (or, alternatively, a declaration of loss and indemnity bond in form acceptable to the Corporation) or which does not contain all of the hereinbefore specified information which it is required to contain or which has not been signed as aforesaid shall be invalid and of no effect whatsoever. If less than all of the Series 1 Shares represented by the certificate(s) accompanying such Conversion Notice are to be converted, the person in whose name such certificate(s) are registered shall be entitled to receive, upon its request therefor, a new certificate without charge representing those Series 1 Shares comprised in the certificate(s) delivered as aforesaid which are not to be converted. 4(S) (f) Upon the conversion of any Series 1 Shares there shall be no payment or adjustment by the Corporation or by any holder of Series 1 Shares on account of any dividends either on the Series 1 Shares so converted or on the Subordinate Voting Shares into which the Series 1 Shares are converted other than as provided for in Section 1.02 hereof and any dividends accrued but unpaid on the Series 1 Shares being converted shall be paid by the Corporation in full at the time of conversion. Unless otherwise specified in the Conversion Notice, on any conversion of Series 1 Shares the share certificates representing the Subordinate Voting Shares resulting therefrom shall be issued in the name of the registered holder of the Series 1 Shares converted or, subject to payment by the registered holder of any stock transfer or other applicable taxes, in such name or names as such registered holder may direct in writing (either in the applicable Conversion Notice or otherwise). (g) The right of a registered holder of Series 1 Shares to convert into Subordinate Voting Shares those Series 1 Shares as in respect of which a Conversion Notice has been validly submitted shall be deemed to have been exercised, and the registered holder of the Series 1 Shares to be converted (or any person or persons in whose name or names such registered holder of Series 1 Shares shall have directed the shares to be issued) shall be deemed to have become a holder of record of the Subordinate Voting Shares to be issued upon such conversion for all purposes of the Redemption Date, notwithstanding any delay in the delivery of the certificates representing the Subordinate Voting Shares into which such Series 1 Shares have been converted. (h) Notwithstanding anything herein contained, the Corporation shall in no case be required to issue fractional Subordinate Voting Shares upon the conversion of any Series 1 Shares. If more than one Series 1 Share shall be surrendered for conversion at one time by the same holder, the number of Subordinate Voting Shares issuable upon the conversion thereof shall be computed on the basis of the aggregate stated value of all such Series 1 Shares so surrendered by such holder for conversion. If any fractional interest in a Subordinate Voting Share would, except for the provisions of this Section, be deliverable upon the conversion of any Series 1 Shares, the Corporation shall, in lieu of delivering a certificate for such fractional interest, satisfy such fractional interest by paying to the holder of such surrendered Series 1 Shares an amount in cash equal (to the nearest cent) to the result obtained when the Conversion Price is multiplied by the percentage that such fractional interest is of one whole Subordinate Voting Share. 4(T) (i) In the event that any conversion of the Series 1 Preference Shares is made pursuant to subsection 1.03(a) hereof and, in connection therewith, the Conversion Price was determined by reference to the unaudited consolidated financial statements of the Corporation and its subsidiaries (the Conversion Price so determined being called in this paragraph 1.03(i) the "Unaudited Conversion Price"), then if following the completion of the audit of such financial statements the Conversion Price determined by reference to such audited financial statements is determined to be an amount which is greater or less than the Unaudited Conversion Price (the Conversion Price so determined by reference to such audited financial statements being herein called in this paragraph 1.30(i) the "Audited Conversion Price"), the Corporation and the holders of the Series 1 Preference Shares involved in the aforesaid conversion shall, within 10 days following the finalization of such audited financial statements, determine the number of Subordinate Voting Shares which would have been issued to each such holder on the aforesaid conversion had the Audited Conversion Price been then used and immediately thereafter: (A) if the Audited Conversion Price is an amount which is less than the Unaudited Conversion Price, the Corporation shall issue to each of the holders of the Series 1 Preference Shares so converted that number of Subordinate Voting Shares as is equal to the difference between the number of Subordinate Voting Shares which it would have received had the Audited Conversion Price been used at the time of the aforesaid conversion and the number of Subordinate Voting Shares which it was previously issued upon the aforesaid conversion and, in addition, the Corporation shall pay to each such holder an amount equal to all dividends which it would have been entitled to receive in respect of such additional Subordinate Voting Shares so issued to it had it been the holder of such shares since the date of the aforesaid conversion; or (B) if the Audited Conversion Price is an amount which is greater than the Unaudited Conversion Price, each of the holders of the Series 1 Preference Shares so converted shall return to the Corporation that number of Subordinate Voting Shares as is equal to the difference between the number of Subordinate Voting Shares which it would have received had the Audited Conversion Price been used and the number of Subordinate Voting Shares which it was previously issued upon the aforesaid conversion and, in addition, each such holder shall pay to the Corporation an amount equal to the total amount of the dividends paid to it by the Corporation on the Subordinate Voting Shares so returned. 4(U) 7.04 ADJUSTMENT OF THE CONVERSION PRICE CALCULATION FORMULA IN CERTAIN EVENTS (a) If the Corporation shall: (i) subdivide or change its outstanding Subordinate Voting Shares into a greater number of Subordinate Voting Shares or Multiple Voting Shares, as the case may be; (ii) reduce, combine or consolidate its outstanding Subordinate Voting Shares or Multiple Voting Shares into a lesser number of Subordinate Voting Shares or Multiple Voting Shares, as the case may be; or (iii) declare a dividend or make any distribution to the holders of all or substantially all of the outstanding Subordinate Voting Shares or the Multiple Voting Shares payable in Subordinate Voting Shares or Multiple Voting Shares or securities convertible into Subordinate Voting Shares or Multiple Voting Shares (other than an issue of Subordinate Voting Shares or Multiple Voting Shares or securities convertible into Subordinate Voting Shares or Multiple Voting Shares by way of a stock dividend or dividend reinvestment plan to shareholders pursuant to their exercise of options to receive dividends in the form of shares in lieu of cash dividends declared payable on the Subordinate Voting Shares); (any of such events being hereinafter referred to as a "Share Reorganization"), each of the Fixed Amounts in effect on the record date for such Share Reorganization shall be adjusted effective immediately after such record date by multiplying such amount by a fraction, the numerator of which is the aggregate number of Subordinate Voting Shares and Multiple Voting Shares outstanding on such record date before giving effect to such Share Reorganization and the denominator of which is the aggregate number of Subordinate Voting Shares or Multiple Voting Shares outstanding immediately after such record date after giving effect to such Share Reorganization. (b) If the Corporation shall fix a record date for the issuance of options, rights, or warrants to any of the holders of its Subordinate Voting Shares or Multiple Voting Shares entitling them to subscribe for or purchase Subordinate Voting Shares or Multiple Voting Shares (or securities convertible into or exchangeable for Subordinate Voting Shares or Multiple Voting Shares) for a period of more than 45 days following such record date at a price per Subordinate Voting Share or Multiple Voting Share (or having a conversion or exchange price per Subordinate Voting Share or 4(V) Multiple Voting Share), as the case may be, of less than 95% of the Current Market Price of one Subordinate Voting Share or Multiple Voting Share, as the case may be, on such record date (any such event being herein referred to as a "Rights Offering"), each of the Fixed Amounts in effect on the record date for such Rights Offering shall be adjusted effective immediately after such record date by multiplying such amount by a fraction, the numerator of which is the total number of Subordinate Voting Shares or Multiple Voting Shares outstanding on such record date plus a number of Subordinate Voting Shares or Multiple Voting Shares, as the case may be, equal to the number determined by dividing the aggregate price of the total number of additional Subordinate Voting Shares or Multiple Voting Shares, as the case may be, offered for subscription or purchase under the Rights Offering (or the aggregate conversion price of the convertible or exchangeable securities so offered) by the Current Market Price of one Subordinate Voting Shares or Multiple Voting Share, as the case may be, on such record date and the denominator of which is the total number of Subordinate Voting Shares or Multiple Voting Shares outstanding on such record date plus the total number of additional Subordinate Voting Shares or Multiple Voting Shares, as the case may be, offered for subscription or purchase under the Rights Offering (or the total number of Subordinate Voting Shares or Multiple Voting Shares, as the case may be, into which the convertible or exchangeable securities so offered are convertible or exchangeable). Subordinate Voting Shares or Multiple Voting Shares beneficially owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed. If the rights, options or warrants subject to the Rights Offering are not so issued or if, at the date of expiry of the rights, options or warrants issued pursuant to such Rights Offering, less than all of the rights, options or warrants subject to such Rights Offering have been exercised, each of the Fixed Amounts shall be readjusted effectively immediately after the date of expiry to an amount equal to the amount which would have been in effect if such record date had not been fixed or to an amount which would then be in effect on such date of expiry of the Rights Offering if the only rights, options or warrants issued pursuant thereto have been those that were exercised, as the case may be. (c) If the Corporation shall fix a record date for the issue or the distribution to any of the holders of its Subordinate Voting Shares or Multiple Voting Shares of: (i) securities in the capital of the Corporation (including rights, warrants or options to purchase any securities in the capital of the Corporation); 4(W) (ii) evidences of the Corporation's indebtedness; or (iii) any property or other assets and, to the extent that such issuance or distribution does not constitute a distribution referred to in paragraph 1.04(a)(iii), a Share Reorganization or a Rights Offering (any of such non-excluded events being herein called a "Special Distribution"), each of the Fixed Amounts in effect on the record date for such Special Distribution shall be adjusted effective immediately after such record date by multiplying such amount by a fraction, the numerator of which is equal to the remainder obtained when: (iv) the product obtained by multiplying the aggregate number of Subordinate Voting Shares or Multiple Voting Shares outstanding on such record date is multiplied by the current Market Price of one Subordinate Voting Share on such record date is reduced by: (v) the fair market value, as determined by the auditors of the Corporation acting reasonably (whose determination shall be conclusive) of such securities, evidences of indebtedness or property or other assets, as the case may be, so issued or distributed in the Special Distribution and which shall be net of any consideration paid therefor by the holders of the Subordinate Voting Shares or Multiple Voting Shares, as the case may be, and the denominator of which is the total number of Subordinate Voting Shares or Multiple Voting Shares outstanding on such record date multiplied by such Current Market Price of a Subordinate Voting Share. Subordinate Voting Shares or Multiple Voting Shares beneficially owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that such Special Distribution is not so made or is altered, each of the Fixed Amounts shall be readjusted to the amount which would then be in effect based upon the said securities, evidences of indebtedness, property or assets, if any, actually distributed prior to the most recent record date. (d) (i) No adjustments to the Fixed Amounts shall be made pursuant to subsections 1.04(a) or (c) hereof if the holders of the Series 1 Shares are permitted to participate in such Share Reorganization or Special Distribution, as though and to the same effect as if they had 4(X) converted their Series 1 Shares into Subordinate Voting Shares immediately prior to the record date for such Share Reorganization or Special Distribution. (ii) No adjustments to the Fixed Amounts shall be made pursuant to subsection 1.04(b) if: (A) the Subordinate Voting Shares or Multiple Voting Shares (or securities convertible into or exchangeable for Subordinate Voting Shares or Multiple Voting Shares) forming the subject matter of the Rights Offering therein referred to are offered at a price equal to or greater than 65% of the greater of the amounts referred to in paragraphs 1.01(f)(ii)(A) and 1.01(f)(ii)(B) hereof; or (B) the holders of the Series 1 Shares are permitted to participate and do in fact participate in the Rights Offering therein referred to as if they had converted their Series 1 Shares into Subordinate Voting Shares immediately prior to the Record Date for such Rights Offering. (e) If and whenever at any time prior to the Redemption Date there shall be: (i) a reclassification of the Subordinate Voting Shares or Multiple Voting Shares outstanding at such time or a change of the Subordinate Voting Shares or Multiple Voting Shares into other shares or into other securities (other than pursuant to a Share Reorganization); or (ii) a consolidation, amalgamation, arrangement or merger of the Corporation with or into any other corporation or other entity (other than a consolidation, amalgamation, arrangement or merger which does not result in any reclassification of the outstanding Subordinate Voting Shares or Multiple Voting Shares or change of the Subordinate Voting Shares or Multiple Voting Shares into other shares); (any of such events enumerated in (i) and (ii) above) being herein called a "Capital Reorganization"), any holder of Series 1 Preference Shares who exercises his right to subscribe for and purchase Subordinate Voting Shares pursuant to the exercise of his Conversion Rights then held at any time after the effective date of such Capital Reorganization shall be entitled to receive, and shall accept for the same aggregate consideration in lieu of the number of Subordinate Voting Shares to which such holder was 4(Y) theretofore entitled upon such exercise, the aggregate number of shares, other securities or other property which such holder would have been entitled to receive as a result of such Capital Reorganization if, on the effective date thereof, the holder of the Series 1 Preference Shares had been the registered holder of the number of Subordinate Voting Shares to which such holder was theretofore entitled to subscribe for and purchase upon the conversion of the Series 1 Preference Shares; (f) In any case in which this Section 1.04 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may, until the occurrence of such event, defer issuing to the holder of any Series 1 Shares converted after such record date and before the occurrence of such event the additional Subordinate Voting Shares or Multiple Voting Shares, as the case may be, issuable upon such conversion by reason of the adjustment required by such event in addition to the Subordinate Voting Shares or Multiple Voting Shares, as the case may be, issuable upon such conversion before giving effect to such adjustment; provided, however, that the Corporation shall deliver to such holder an appropriate instrument evidencing such holder's rights to receive such additional Subordinate Voting Shares or Multiple Voting Shares, as the case may be, upon the occurrence of the event requiring such adjustment. (g) In the case of any reclassification of, or other change in, the outstanding Subordinate Voting Shares or Multiple Voting Shares not otherwise mentioned herein, each of the Fixed Amounts shall be adjusted in such manner as the auditors of the Corporation determines to be appropriate on a basis consistent with this Section 1.04. (h) If any question shall at any time arise with respect to adjustments to the Fixed Amounts or with respect to the amount of any cash payment made in lieu of issuing a fractional share, such question shall be determined by the auditors of the Corporation and thereupon shall become conclusive. (i) Forthwith after the occurrence of any adjustment in any of the Fixed Amounts pursuant to this Section 1.04, the Corporation shall forward to the holders of the Series 1 Shares a certificate certifying as to the amount of such adjustment and, in reasonable detail, the event requiring and the manner of computing such adjustment. (j) Notwithstanding any other provision contained herein, no adjustment to any of the Fixed Amounts shall be required in respect of the issue of Subordinate Voting Shares or securities convertible into Subordinate Voting Shares pursuant to any stock option, purchase plan or exchange right of, for 4(Z) or held by any directors, officers or employees of the Corporation or any of its subsidiaries, save and except that this subsection 1.01(j) shall have no application in the case of the issue to Jay S. Hennick of Subordinate Voting Shares or securities convertible into Subordinate Voting Shares pursuant to any such stock option, purchase plan or exchange right extended to directors, officers or employees of the Corporation or any of its subsidiaries. (k) Notwithstanding any other provision contained herein, no adjustment to any of the Fixed Amounts shall be required unless such adjustment would require an increase or decrease of at least 2% in such Fixed Amounts; provided, however, that any adjustments which by reason of this subsection 1.04(k) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. 7.05 REDEMPTION BY THE CORPORATION: (a) Subject to the provisions of applicable law, the Corporation shall redeem on the Redemption Date all Series 1 Shares then outstanding and in respect of which a Conversion Notice sent in accordance with the applicable provisions hereof has not been received. (b) The price at which each such Series 1 Share is to be redeemed shall be the aggregate of the following amounts: (i) the sum of $1,000; (ii) all dividends accrued (but unpaid) on such Series 1 Share up to the date fixed for redemption; and (iii) any amount payable by the Corporation in respect of such Series 1 Shares pursuant to paragraph 1.01(q)(ii) hereof. (c) (i) Notice of redemption of Series 1 Shares shall be given by the Corporation not less than 10 days prior to the Redemption Date to each then registered holder of Series 1 Shares. Accidental failure or omission to give such notice to one or more of such holders shall not affect the validity of such redemption. Such notice shall set out the Redemption Amount, the Redemption Date, the place or places of redemption and the number of Series 1 Shares to be redeemed. (ii) On the Redemption Date, the Corporation shall pay the Redemption Amount to the holder of the Series 1 Shares redeemed and, if the Corporation has not at such time already gone public, the Corporation shall, concurrently therewith, deliver an agreement (the 4(AA) "Participation Agreement") executed by it in favour of the holders of Series 1 Shares so redeemed to the effect that if the Corporation goes public within 6 months following the Redemption Date, a holder of Series 1 Shares which have been redeemed shall have the right, upon paying to the Corporation the Redemption Amount together with interest thereon at the rate of 10% per annum from and after the Redemption Date to the date of payment, to receive that number of Subordinate Voting Shares as such holder would have received had it converted its Series 1 Shares into Subordinate Voting Shares in accordance with Section 1.03 on the Redemption Date, on presentation and surrender at the place or one of the places of redemption of the respective certificates representing such shares, and the holders of the Series 1 Shares called for redemption shall cease to be entitled to dividends or to exercise any of the rights of holders in respect thereof unless payment of the Redemption Amount shall not be made in accordance with the foregoing provisions, in which case the rights of the holders shall remain unimpaired. (iii) The Corporation shall have the right at any time after giving notice of redemption to deposit the Redemption Amount of the Series 1 Shares thereby called for redemption, or such part thereof as at the time of deposit has not been claimed by the shareholders entitled thereto (together with executed copies of the Participation Agreement, if applicable) with any Canadian chartered bank or trust company in Canada specified in the notice of redemption or in a subsequent notice to the holders of the shares in respect of which the deposit is made, in a special account for the holders of such shares, and upon such deposit and delivery being made or upon the Redemption Date, whichever is the later, the Series 1 Shares in respect of which such deposit (together with delivery of an executed copy of the Participation Agreement, if applicable) shall have been made shall be deemed to be redeemed and the rights of each holder thereof shall be limited to receiving, without interest, his proportionate part of the Redemption Amount so deposited (and delivery of the Participation Agreement, if applicable) upon presentation and surrender of the certificates representing his shares so redeemed. 7.06 CANCELLATION OF SERIES 1 SHARES: Series 1 Shares purchased, redeemed or otherwise acquired by the Corporation shall be cancelled. 7.07 DISSOLUTION: On the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs, the holders of the Series 1 Shares shall be entitled to receive in lawful money of Canada an amount equal to the Redemption Amount per share. The Series 1 Preference Shares shall be entitled to preference over all other series of Preference Shares and all other classes of shares in the capital of the Corporation with respect to priority in payment of dividends and in the distribution of assets in the event of liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding-up its affairs. 7.08 NOTICES: All notices or other communications by the terms hereof required or permitted to be given by a holder of Series 1 Shares to the Corporation or by the Corporation to a holder of Series 1 Shares shall be given in writing by personal delivery (which personal delivery may be affected by depositing the notice or other communication in question with a responsible courier service for delivery (courier charges fully prepaid) to the addressee thereof) or by registered mail (postage fully prepaid) mailed from anywhere within Canada or the continental United States of America, addressed, in the case of the Corporation, to the President of the Corporation at the Corporation's registered office and, in the case of a holder of Series 1 Shares, to that holder at its most recent address appearing in the Corporation's share register. Any such notices or other communications shall be deemed to have been received, in the case of sending by personal delivery, upon delivery, or, in the case of sending by registered mail, 72 hours after 12:01 a.m. on the day following the day of the mailing thereof; provided that if any such notice, request, demand or other communication shall have been mailed and if regular mail service shall be interrupted by strikes or other irregularities, such notice, request, demand or other communication shall be deemed to have been received 72 hours after 12:01 a.m. on the day following the resumption of normal mail service. 7.09 CURRENCY: All dollar amounts expressed herein are expressed in Canadian dollars and all payments contemplated by the provisions hereof shall be made in Canadian funds. 7.10 MODIFICATION: In addition to any other approval or authorization required by applicable law the rights, conditions, restrictions and prohibitions attaching to the Series 1 Shares may not be deleted, varied, altered or amended without the prior approval of at least 66-2/3% of the votes cast at a meeting of the holders of the Series 1 Shares or by a resolution in writing by those persons holding not less than 66-2/3% of all of the Series 1 Shares then being outstanding. 7.11 APPROVAL BY HOLDERS OF SERIES 1 SHARES: The approval of the holders of the Series 1 Shares with respect to any and all matters referred to herein or any other matter requiring the consent of such holders may, subject to applicable law, be given in writing by the holders of 50% (or, if required by Section 1.10, 66-2/3%) of the Series 1 Shares for the time being outstanding or by resolution duly passed and carried by not less than 50% (or, if required by Section 1.10, 66-2/3%) of the votes cast on a ballot at a meeting of the holders of the Series 1 Shares duly called and held for the purpose of considering the subject matter of such resolution and at which meeting holders of not less than 10% of the Series 1 Shares then outstanding are present in person or represented by proxy; provided, however, that if at any such meeting, when originally held, the holders of at least 10% of the Series 1 Shares then outstanding are not present in person or represented by proxy within 30 minutes after the time fixed for the meeting, the meeting shall be adjourned to such date, being not less than 15 days later, and at such time and place as may be fixed by the Chairman of such meeting and at such adjourned meeting the holders of the Series 1 Shares present in person or represented by proxy, whether or not they hold 10% of the Series 1 Shares then outstanding, may transact the business for which the meeting was originally called, and the resolution duly passed and carried by not less than 50% (or, if required by Section 1.10, 66-2/3%) of the votes cast on a ballot at such adjourned meeting shall constitute the approval of the holders of the Series 1 Shares hereinbefore mentioned. Notice of any such original meeting of the holders of the Series 1 Shares shall be given not less than 10 days nor more than 50 days prior to the date fixed for such meeting and shall specify in general terms the purpose for which the meeting is called. No notice of any such adjourned meeting need be given unless such meeting is adjourned by one or more adjournments for an aggregate of 30 days or more from the date of such original meeting, in which later case notice of the adjourned meeting shall be given in the manner prescribed for the original meeting as aforesaid. The formalities to be observed with respect to the giving of notice of any such original or adjourned meeting and the conduct thereof shall be those from time to time prescribed in the constating documents of the Corporation with respect to meetings of shareholders. 7.12 VOTING RIGHTS: The holders of the Series 1 Shares shall not be entitled as such, except as required by law, to vote at any meeting of the shareholders of the Corporation but such holders shall be entitled to receive notice of and attend at all meetings of shareholders of the Corporation. 9. The issue, transfer or ownership of shares is/is not L'EMISSION, LE TRANSFERT OU LA PROPRIETE D'ACTIONS restricted and the restrictions (if any) are as follows: EST/N'EST PAS RESTREINT. LES RESTRICTIONS, S'IL Y A LIEU, SONT LES SUIVANTES: Not restricted 10. Other provisions, if any, are: AUTRES DISPOSITIONS, S'IL Y A LIEU :
Without in any way limiting the powers conferred upon the Corporation and its directors by the Act, or any successor statute, the board of directors may from time to time, in such amounts and on such terms as they deem expedient: (a) borrow money on the credit of the Corporation; (b) issue, sell or pledge debt obligations (including bonds, debentures, notes or other similar obligations, secured or unsecured) of the Corporation; (c) charge, mortgage, hypothecate or pledge all or any of the currently owned or subsequently acquired real or personal, movable or immovable, property of the Corporation, including book debts, rights, powers, franchises and undertaking, to secure any debt obligations or money borrowed, or other debt or liability of the Corporation. Subject to the Act, the board of directors may from time to time delegate to such one or more of the directors and officers of the Corporation as may be designated by the board all or any of the powers conferred on the board above to such extent and in such manner as the board shall determine with respect to each such delegation. 11. The statements required by subsection 178(2) of the LES DECLARATIONS EXIGEES AUX TERMES DU PARAGRAPHE Business Corporations Act are attached as Schedule 178(2) DE LA LOI SUR LES SOCIETES PAR ACTIONS "A". CONSTITUENT L'ANNEXE "A". 12. A copy of the amalgamation agreement or directors UNE COPIE DE LA CONVENTION DE FUSION OU LES resolutions (as the case may be) is/are attached as RESOLUTIONS DES ADMINISTRATEURS (SELON LE CAS) Schedule "B". CONSTITUTE(NT) L'ANNEXE "B".
These articles are signed in duplicate. LES PRESENTS STATUTS SONT SIGNES EN DOUBLE EXEMPLAIRE. _____________________________________________________________________________________________________________ Names of the amalgamating corporations and DENOMINATION SOCIALE DES SOCIETES QUI FUSIONNENT, signatures and descriptions of office of their SIGNATURE ET FONCTION DE LEURS DIRIGEANTS REGULIEREMENT proper officers. DESIGNES.
1140 BAY STREET LIMITED Per: _____________________________ JAY S. HENNICK Director & President FIRSTSERVICE CORPORATION Per: _____________________________ JAY S. HENNICK Director & President SCHEDULE "A" STATEMENT OF DIRECTOR OR OFFICER OF ----------------------------------- FIRSTSERVICE CORPORATION (THE "Corporation") PURSUANT TO SUBSECTION 178(2) OF THE BUSINESS CORPORATIONS ACT (ONTARIO) (THE "ACT") ----------------------------------- WHEREAS the Corporation and 1140 Bay Street Limited wish to amalgamate and continue as one corporation (the "Amalgamated Corporation") pursuant to Section 177(1) of the Act; AND WHEREAS the undersigned is required to make the following statements in connection with the said amalgamation: 1. The undersigned is President and a director of the Corporation. 2. There are reasonable grounds for believing that: (a) the Corporation is and the Amalgamated Corporation will be able to pay its liabilities as they become due; (b) the realizable value of the assets of the Amalgamated Corporation will not be less than the aggregate of its liabilities and stated capital of all classes; and (c) no creditor of the Corporation will be prejudiced by the amalgamation. DATED as of the March 30, 1999. /s/ Jay S. Hennick ------------------------------- Jay S. Hennick STATEMENT OF DIRECTOR OR OFFICER OF 1140 BAY STREET LIMITED (THE "Corporation") PURSUANT TO SUBSECTION 178(2) OF THE BUSINESS CORPORATIONS ACT (ONTARIO) (the "Act") ------------------------------------------ WHEREAS the Corporation and FirstService Corporation wish to amalgamate and continue as one corporation (the "Amalgamated Corporation") pursuant to Section 177(1) of the Act; AND WHEREAS the undersigned is required to make the following statements in connection with the said amalgamation: 1. The undersigned is President of the Corporation. 2. There are reasonable grounds for believing that: (a) the Corporation is and the Amalgamated Corporation will be able to pay its liabilities as they become due; (b) the realizable value of the assets of the Amalgamated Corporation will not be less than the aggregate of its liabilities and stated capital of all classes; and (c) no creditor of the Corporation will be prejudiced by the amalgamation. DATED as of the March 30, 1999. /s/ Jay S. Hennick --------------------------------- Jay S. Hennick SCHEDULE "B" RESOLUTION OF THE DIRECTORS OF FIRSTSERVICE CORPORATION (THE "CORPORATION") "WHEREAS the Corporation holds directly or indirectly all the issued and outstanding shares of 1140 Bay Street Limited and has agreed to amalgamate with 1140 Bay Street Limited pursuant to subsection (1) of section 177 of the BUSINESS CORPORATIONS ACT; RESOLVED that: 1. The amalgamation of the Corporation with 1140 Bay Street Limited under the BUSINESS CORPORATIONS ACT, pursuant to subsection (1) of section 177 thereof, be and the same is hereby authorized and approved; 2. The name of the amalgamated corporation shall be "FirstService Corporation"; 3. Effective upon issuance of a Certificate of Amalgamation pursuant to section 178 of the BUSINESS CORPORATIONS ACT, and without affecting the validity of the incorporation and existence of the Corporation under its articles of incorporation and of any act done thereunder, all shares of the authorized capital of 1140 Bay Street Limited including all such shares which have been issued and are outstanding at the date hereof, shall be cancelled without any repayment of capital in respect thereof; 4. Except as may be prescribed, the articles of amalgamation of the amalgamated corporation shall be the same as the articles of FirstService Corporation; 5. No securities shall be issued and no assets shall be distributed by the amalgamated corporation in connection with the amalgamation; 6. The by-laws of the amalgamated corporation shall be the same as the by-laws of the Corporation, the amalgamating holding corporation; and 7. The proper officers of the Corporation be and they are hereby authorized to do all things and execute all instruments and documents necessary or desirable to carry out and give effect to the foregoing. 8. This resolution may be executed (by original or facsimile signature) in several counterparts, each of which so executed shall be deemed to be an original and such counterparts together shall constitute one and the same resolution and notwithstanding their date of execution, shall be deemed to have been executed as of the date hereof." __________________________________________________________________________ Certified to be a true and correct copy of a resolution duly passed by the directors of FirstService Corporation as of the 30th day of March, 1999 and that the said resolution is now in full force and effect. DATED this 30th day of March, 1999. /s/ Jay S. Hennick --------------------------------- Jay S. Hennick, President RESOLUTION OF THE SOLE DIRECTOR OF 1140 BAY STREET LIMITED (THE "CORPORATION") "WHEREAS the Corporation is a wholly-owned subsidiary of FirstService Corporation and has agreed to amalgamate with FirstService Corporation pursuant to subsection (1) of section 177 of the BUSINESS CORPORATIONS ACT; RESOLVED that: 1. The amalgamation of the Corporation with FirstService Corporation under the BUSINESS CORPORATIONS ACT, pursuant to subsection (1) of section 177 thereof, be and the same is hereby authorized and approved; 2. The name of the amalgamated corporation shall be "FirstService Corporation"; 3. Effective upon issuance of a Certificate of Amalgamation pursuant to section 178 of the BUSINESS CORPORATIONS ACT, and without affecting the validity of the incorporation and existence of the Corporation under its articles of incorporation and of any act done thereunder, all shares of the authorized capital of the Corporation including all such shares which have been issued and are outstanding at the date hereof, shall be cancelled without any repayment of capital in respect thereof; 4. Except as may be prescribed, the articles of amalgamation of the amalgamated corporation shall be the same as the articles of FirstService Corporation; 5. No securities shall be issued and no assets shall be distributed by the amalgamated corporation in connection with the amalgamation; 6. The by-laws of the amalgamated corporation shall be the same as the by-laws of FirstService Corporation, amalgamating holding corporation; and 7. The proper officers of the Corporation be and they are hereby authorized to do all things and execute all instruments and documents necessary or desirable to carry out and give effect to the foregoing. 8. This resolution may be executed (by original or facsimile signature) in several counterparts, each of which so executed shall be deemed to be an original and such counterparts together shall constitute one and the same resolution and notwithstanding their date of execution, shall be deemed to have been executed as of the date hereof." __________________________________________________________________________ Certified to be a true and correct copy of a resolution duly passed by the directors of 1140 Bay Street Limited as of the 30th day of March, 1999 and that the said resolution is now in full force and effect. DATED this 30th day of March, 1999. /s/ Jay S. Hennick --------------------------------- Jay S. Hennick, President
[LOGO] Ministry of Ministere de ONTARIO CORPORATION NUMBER Consumer and la Consommation NUMERO DE LA COMPAGNIE EN ONTARIO Commercial et du Commerce 1 788412 1 Relations CERTIFICATE CERTIFICAT This is to certify that these Ceci certifie que les presents articles are effective on statuts entrent en vigueur le DECEMBER 17 DECEMBRE, 1991 - ---------------------------------------------------------------------------------------------------------------------- [illegible] Director/Directeur TRANS Business Corporations Act / Loi de sur les compagnies CODE | C | 18 - ----------------------------------------------------------------------------------------------------------------------
ARTICLES OF AMENDMENT Form 3 STATUTS DE MODIFICATION Business Corporations Act, 1982
1. The present name of the corporation is: DENOMINATION SOCIALE ACTUELLE DE LA COMPAGNIE: ------------------------------------------------------------------------------------------------------ F I R S T S E R V I C E C O R P O R A T I O N ------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------
FORMULE NUMERO 3 LOI DE 1982 SUR LES COMPAGNIES
2. The name of the corporation is changed to NOUVELLE DENOMINATION SOCIALE DE LA COMPAGNIE (if applicable): (S'IL Y A LIEU): ------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------- ------------------------------------------------------------------------------------------------------- 3. Date of incorporation/amalgamation: DATE DE LA CONSTITUTION OU DE LA FUSION: 31 JULY 1988 ------------------------------------------------------------------------------------------------------- (Day, Month, Year) (JOUR, MOIS, ANNEE) 4. The articles of the corporation are amended as LES STATUS DE LA COMPAGNIE SONT MODIFIES follows: DE LA FACON SUIVANTE: SEE SCHEDULE "A" ATTACHED HERETO.
5. The amendment has been duly authorized as LA MODIFICATION A ETE DUMENT AUTORISEE CONFORMEMENT required by Sections 167 and 169 (as applicable) of A L'ARTICLE 167 ET, S'IL Y A LIEU, A L'ARTICLE 169 DE LA the Business Corporations Act. LOI SUR LES COMPAGNIES. 6. The resolution authorizing the amendment was LES ACTIONNAIRES OU LES ADMINISTRATEURS (LE CAS ECHEANT) approved by the [illegible]/directors (as DE LA COMPANGIE ONT APPROUVE LA RESOLUTION AUTORISANT applicable) of the corporation on LA MODIFICATION 17 DECEMBER 1991 ---------------------------------------------------------------------------------------------------------------- (Day, Month, Year) (JOUR, MOIS, ANNEE) These articles are signed in duplicate. LES PRESENTS STATUTS SONT SIGNES EN DOUBLE EXEMPLAIRE.
FIRSTSERVICE CORPORATION -------------------------------------- (Name of Corporation) (DENOMINATION SOCIALE DE LA COMPAGNIE) [ILLEGIBLE] JAY S. HENNICK - President By/PAR: -------------------------------------- (Signature) (Description of Office) (SIGNATURE) (FONCTION) SCHEDULE "A" SERIES 1 PREFERENCE SHARES The first series of the Preference Shares of the Corporation shall consist of an aggregate of 2,500 shares, all designated as "Series 1 Preference Shares" (collectively, the "Series 1 Shares"), with each such share having a stated value of $1,000. In addition to the rights, conditions, restrictions and prohibitions attaching to the Preference Shares of the Corporation as a class, the Series 1 Shares shall have attached thereto the following rights, conditions, restrictions and prohibitions: 1.01 DEFINITIONS: As used herein, the following words and phrases shall have the following meanings, respectively: (a) "arm's length" has the meaning given thereto in the Income Tax Act (Canada), as amended from time to time; (b) "Board Lot" means a lot of not less than 100 Subordinate Voting Shares or a lot consisting of at least that number of securities convertible into or exchangeable for Subordinate Voting Shares which, if fully converted or exchanged, would result in the issuance of not less than 100 Subordinate Voting Shares; (c) "Business Day" means a day other than a Saturday, Sunday or any other day that is a statutory or civic holiday in the place where the Corporation's registered office is located and, if any day on which any dividend on the Series 1 Shares is payable or by which any other action is required or permitted to be taken pursuant to these provisions is not a Business Day, such dividend shall be payable or such other aciton shall be required or permitted to be taken on the next succeeding day that is a Business Day; (d) "Coit Termination Amount" means the amount which Cleanol Services Inc. (formerly 875551 Ontario Limited) would be required to pay to Coit Drapery Cleaners Inc. at the time in question if Cleanol Services Inc. then elected to exercise the option granted to it in Section 8.04 of a franchise agreement entered into effective as of the 1st day of March, 1990 (the "Coit Franchise Agreement") between Coit Drapery Cleaners Inc. and 875551 Ontario Limited; (e) "Conversion Notice" has the meaning given thereto in subsection 1.03(e) hereof; (f) "Conversion Price" means the applicable conversion price per Subordinate Voting Shares for which Subordinate Voting Shreas may be issued upon the - 2 - conversion of Series 1 Shares, such conversion price to be determined as follows: (i) if at the time in question the Corporation has gone public, an amount equal to the lesser of: (A) $8.50; and (B) the greater of: (1) 75% of the Public Offering Price; and (2) $5.50; and (ii) if the Corporation has not gone public prior to the Redemption Date, an amount equal to the greater of: (A) an amount equal to the quotient obtained when an amount equal to 800% of Normalized After Tax Earnings for the then most recently completed fiscal year of the Corporation (provided that if such fiscal year is less than 365 days in duration, the Normalized After Tax Earnings of the Corporation for the period of 365 days ending on the last day of such fiscal year shall be used) is decreased by an amount equal to: (1) the Coit Termination Amount if the Coit Franchise Agreement has not then been terminated; or (2) zero if the coit Franchise Agreement has then been terminated and the remainder so obtained is divided by the aggregate number of Multiple Voting Shares and Subordinate Voting Shares outstanding on the day immediately prior to the Redemption Date calculated on a fully diluted basis in accordance with GAAP; and (B) $6.50 or such other dollar amount per Subordinate Voting Share for which Subordinate Voting Shartes shall be issued upon the conversion of Series 1 Shares in accordance with Section 1.04 hereof; - 3 - (g) "Current Market Price" of the Subordinate Voting Shares as at any date (the "Reference Date") means: (i) if the Subordinate Voting Shares are then listed on one or more stock exchanges, the weighted average of the closing prices per share for bona fide arm's length Board Lot sales of Subordinate Voting Shares for the 20 trading days as on which such shares were traded immediately prior to the Reference Date on such stock exchange as on which the highest volume of Subordinate Voting Shares was traded during such 20 days; (ii) if the Subordinate Voting Shares are not then listed on any stock exchange but are traded on an over-the-counter market, the weighted average of the closing prices per share for bona fide arm's length Board Lot sales of Subordinate Voting Shares for the 20 trading days as on which such shares were traded immediately prior to the Reference Date on such over-the-counter market as on which the highest volume of Subordinate Voting Shares was traded during such 20 days; or (iii) if the Subordinate Voting Shares are not then listed on any stock exchange or traded on any over-the-counter market, the greater of the amounts refered to in paragraphs 1.01(f)(ii)(A) and 1.01(f)(ii)(B) subject to any adjustments which may be required to be made to such amounts pursuant to the applicable provisions hereof; (h) "Dividend Payment Date" means March 31, June 30, September 30 and December 31 in each calendar year; (i) "Dividend Payment Period" means the period of three consecutive months ending on a Dividend Payment Date; (j) "Fixed Amounts" means, collectively, the amounts specified in paragraphs 1.01(f)(i)(A), 1.01(f)(i)(B)(2) and 1.01(f)(ii)(B) and "Fixed Amount" means any one of such aforesaid amounts; (k) "going public" means when used in relation to the Corporation, that the board of directors of the Corporation has authorized the Corporation to engage in a Public Offering; (l) "gone public" means, when used in relation to the Corporation, that the Corporation has fully completed a Public Offering in accordance with all applicable laws; - 4 - (m) "GAAP" means generally accepted accounting principles as promulgated or interpreted, as the case may be, from time to time by the Canadian Institute of Chartered Accountants or, if it should cease to exist, the entity which is the successor thereto; (n) "Normalized After Tax Earnings" means, for any fiscal year of the Corporation, the aggregate of the following: (i) the consolidated after tax earnings (before all extraordinary losses (as so designated by the Corporation's auditors) incurred by the Corporation and its subsidiaries in such fiscal year) and before minority interest in such earnings of the Corporation for such fiscal year; (ii) the after tax cost to Greenspace Services Ltd. of all amortization charges incurred in such fiscal year by the Corporation and its subsidiaries to the extent that such charges are referrable to the amount paid for those items referred to in subsections 2.01(1) and (m) of a certain asset purchase agreement made effective as of the 27th day of October, 1991 among Ecolab Ltd., Greenspace Services Ltd. and the Corporation; (iii) the after tax cost to Cleanol Services Inc. of all franchise fees and other like payments made to or accrued in favour of Coit Drapery Cleaners Inc. in such fiscal year pursuant to the Coit Franchise Agreement; (iv) the provision made in such fiscal year for income taxes payable by the Corporation and its subsidiaries which are categorized by the Corporation's auditors as "Income Taxes Payable - Other Deferred", being those taxes that will not be paid as a result of operating losses incurred subsequent to such fiscal year end by reason of the seasonal nature of the expenses giving rise to such operating losses; and (v) the after tax effect to the Corporation and its subsidiaries of all unusual and/or non-recurring gains and losses which are considered material to the financial position or results from operations in such fiscal year (i.e., asset dispositions); and all of the foregoing shall be determined on a consolidated basis in accordance with GAAP, consistently applied; - 5 - (o) "Public Offering" means an offering to the public at any time subsequent to the date of issuance of the Series 1 Shares involving the issuance by the Corporation of at least one Board Lot of its Subordinate Voting Shares (or securities exchangeable or convertible into its Subordinate Voting Shares) (which Subordinate Voting Shares or securities convertible or exchangeable into the Subordinate Voting Shares forming the subject matter of such offering, are listed at, prior or within 30 days following the date of the completion of such offering on any one or more of The Toronto Stock Exchange, the Montreal Exchange, the Vancouver Stock Exchange or a major U.S. stock exchange) to not less than 200 subscribers pursuant to a (final) prospectus (or other similar public offering document which, in the case of any such offering to be conducted in the United States of America, includes a registration statement filed with and accepted by the Securities and Exchange Commission) in respect of which a receipt or other like approval has been received from all securities regulatory authorities in Canada and/or the United States of America having jurisdiction with respect to such offering; (p) "Public Offering Price" means: (i) if the Corporation is offering Subordinate Voting Shares for sale pursuant to a Public Offering, an amount equal to the per share price at which such Subordinate Voting Shares are being offered; (ii) if the Corporation is offering securities convertible into or exchangeable for Subordinate Voting Shares for sale pursuant to a Public Offering, an amount equal to the per share conversion or exchange price of such securities; or (iii) if the Corporation is offering securities in units comprised in part of Subordinate Voting Shares for sale pursuant to a Public Offering, an amount equal to the portion of the purchase price of such units which is allocable, on a per share basis, to the Subordinate Voting Shares forming a part thereof; (q) "Redemption Amount" means, with respect to any Series 1 Share, the amount specified in subsection 1.05(b); and (r) "Redemption Date" means the earlier of: (i) the first date following the date of issuance of the Series 1 Shares as on which the Corporation has gone public; and - 6 - (ii) December 31, 1994, provided that the Corporation may, without the necessity of obtaining the consent or approval of the holders of the Series 1 Shares thereto, extend such date to such later date (the "Extended Redemption Date") not later than December 31, 1995, as it may in its sole discretion determine in which event the Corporation shall pay on the Extended Redemption Date to each holder of Series 1 Shares in respect of each Series 1 Share then held by it an additional amount equal to the quotient obtained when the sum of $193,000 is divided by the aggregate number of Series 1 Shares then outstanding and the quotient so obtained is multiplied by a fraction, the numerator of which is the number of days during the period commencing January 1, 1995 and ending on the Extended Redemption Date and the denominator of which is 365. 1.02 DIVIDENDS. The holders of the Series 1 Shares shall be entitled to receive, out of any profits or surplus available for dividends, fixed, cumulative, preferential cash dividends at the rate of $50 per annum per Series 1 Share, such dividends to be paid in equal quarterly instalments on each Dividend Payment Date. Such dividends shall accrue on a daily basis from the respective dates of issue of the Series 1 Shares. If in any Dividend Payment Period the Corporation shall not have paid in full such quarterly dividend instalment for such Dividend Payment Period on all of the Series 1 Shares then outstanding, such quarterly dividend instalment, or the unpaid portion thereof, shall be paid in a subsequent Dividend Payment Period or Dividend Payment Periods in priority to dividends on any class of shares ranking junior to the Series 1 Shares. No dividend shall be declared, paid or set apart for payment on any class of shares ranking junior to the Series 1 Shares as regards the payment of dividends unless all accrued cumulative preferential cash dividends on the Series 1 Shares then outstanding shall have been paid in full or sufficient funds therefor set aside for payment at the time of such declaration, payment or setting apart. The holders of the Series 1 Shares shall not be entitled to any dividends other than or in excess of the cash dividends provided for in this Section 1.02. The amount of the accrued dividend on any Series 1 Share required to be paid in respect of any period which is less than a full Dividend Payment Period shall be an amount (rounded to the nearest cent) equal to the result obtained when $12.50 is multiplied by a fraction, the numerator of which is the number of days in such period that such Series 1 Share has been outstanding and the denominator of which is the total number of days in such Dividend Payment Period. Payment of such dividends to those persons entitled thereto shall be made by way of cheques of the Corporation drawn on a Canadian chartered bank and payable at par at any branch in Canada of such bank. The mailing of such cheques shall satisfy and discharge all liability of the Corporation for the payment of such dividends to the extent of the amount represented thereby (plus any tax required to be withheld - 7 - therefrom) unless such cheques are dishonoured on due presentation. Any monies to be paid in cash pursuant to this Section 1.02 represented by a cheque which has not been presented for payment within 6 years after it was issued or that otherwise remains unclaimed for a period of 6 years from the date on which it was declared to be payable and set apart for payment shall be forfeited to the Corporation. 1.03 CONVERSION AT THE OPTION OF THE HOLDER. (a) Each holder of Series 1 Shares may at any time and from time to time on or prior to August 31, 1994 send to the Corporation a Conversion Notice in respect of all or any part of the Series 1 Shares then owned by it and in respect of which a Conversion Notice had not previously been sent and any Conversion Notice so sent shall be irrevocable from and after such time as it shall have been received by the Corporation. Notwithstanding the foregoing, if the Corporation elects to extend the Redemption Date as contemplated in subsection 1.01(q) hereof, the date of expiry of the conversion rights of the holders of the Series 1 Shares shall be extended to the Extended Redemption Date. The Corporation shall send a notice in writing to each of the holders of the Series 1 Shares not earlier than June 1, 1994 and not later than June 30, 1994 advising them of their conversion rights under this subsection 1.03(a). (b) If at any time and from time to time while any of the Series 1 Shares are outstanding the Corporation should decide that it wishes to engage in a Public Offering and such decision has been approved by a decision of the board of directors of the Corporation, the Corporation shall, within 21 days following the making of such decision by the Board of Directors of the Corporation, send to each registered holder of Series 1 Shares a notice in writing (the "Offering Notice") at the address of such holder maintained in the share registers of the Corporation advising that the Corporation proposes to engage in a Public Offering. Such Offering Notice shall, to the extent that the same has been determined, set out a summary of the material particulars of any such proposed Public Offering. Each holder of Series 1 Shares shall have a period of 60 days following its receipt of an Offering Notice in which to send to the Corporation a Conversion Notice in respect of all or any part of those Series 1 Shares then held by it in respect of which a Conversion Notice had not previously been sent and a holder who so sends a Conversion Notice shall not have any right to withdraw the same. If the Corporation has not gone public prior to the expiry of a period of 150 days following its sending of an Offering Notice, all Conversion Notices submitted to the Corporation in response to such Offering Notice shall be deemed to have been withdrawn and the Corporation shall forthwith return all share certificate(s) evidencing the Series 1 Shares deposited pursuant to all Conversion Notices so deemed to - 8 - have been withdrawn. Any holder of Series 1 Shares shall be provided with a copy of the preliminary prospectus, final prospectus or other similar disclosure document prepared in connection with any such proposed Public Offering. (c) The conversion rights attaching to the Series 1 Shares as provided for in this Section 1.03 shall forever cease and be null and void in respect of all those Series 1 Shares as in respect of which the Corporation shall not have received a valid Conversion Notice prior to the expiration of the time periods hereinbefore specified during which any such Conversion Notice in respect thereof may be given and all Series 1 Shares in respect of which a Conversion Notice has not been so received by the Corporation shall be redeemed on the Redemption Date in accordance with the provisions of Section 1.05 hereof. (d) Subject to the provisions contained in this Section 1.03, a holder of Series 1 Shares shall receive in respect of each Series 1 Share elected to be converted into Subordinate Voting Shares that number of fully paid and non-assessable Subordinate Voting Shares as is equal to the result obtained when the sum of $1,000 is divided by the Conversion Price. (e) Any holder of Series 1 Shares electing to exercise the conversion right provided for in this Section 1.03 shall send a written notice (a "Conversion Notice") to the Corporation and such Conversion Notice shall be signed by such holder and shall specify (i) the number of Series 1 Shares which such holder desires to have converted, (ii) whether such notice is being furnished as a result of the Corporation having sent an Offering Notice to such holder and (iii) the name(s) in which the Subordinate Voting Shares resulting from such conversion are to be registered failing which such Subordinate Voting Shares shall be registered in the name of such holder. Such Conversion Notice shall be accompanied by share certificate(s) evidencing at least that number of Series 1 Shares as are elected to be converted as specified in such Conversion Notice. Any Conversion Notice not accompanied by the required share certificate(s) (or, alternatively, a declaration of loss and indemnity bond in form acceptable to the Corporation) or which does not contain all of the hereinbefore specified information which it is required to contain or which has not been signed as aforesaid shall be invalid and of no effect whatsoever. If less than all of the Series 1 Shares represented by the certificate(s) accompanying such Conversion Notice are to be converted, the person in whose name such certificate(s) are registered shall be entitled to receive, upon its request therefor, a new certificate without charge representing those Series 1 Shares comprised in the certificate(s) delivered as aforesaid which are not to be converted. - 9 - (f) Upon the conversion of any Series 1 Shares there shall be no payment or adjustment by the Corporation or by any holder of Series 1 Shares on account of any dividends either on the Series 1 Shares so converted or on the Subordinate Voting Shares into which the Series 1 Shares are converted other than as provided for in Section 1.02 hereof and any dividends accrued but unpaid on the Series 1 Shares being converted shall be paid by the Corporation in full at the time of conversion. Unless otherwise specified in the Conversion Notice, on any conversion of Series 1 Shares the share certificates representing the Subordinate Voting Shares resulting therefrom shall be issued in the name of the registered holder of the Series 1 Shares converted or, subject to payment by the registered holder of any stock transfer or other applicable taxes, in such name or names as such registered holder may direct in writing (either in the applicable Conversion Notice or otherwise). (g) The right of a registered holder of Series 1 Shares to convert into Subordinate Voting Shares those Series 1 Shares as in respect of which a Conversion Notice has been validly submitted shall be deemed to have been exercised, and the registered holder of the Series 1 Shares to be converted (or any person or persons in whose name or names such registered holder of Series 1 Shares shall have directed the shares to be issued) shall be deemed to have become a holder of record of the Subordinate Voting Shares to be issued upon such conversion for all purposes on the Redemption Date, notwithstanding any delay in the delivery of the certificates representing the Subordinate Voting Shares into which such Series 1 Shares have been converted. (h) Notwithstanding anything herein contained, the Corporation shall in no case be required to issue fractional Subordinate Voting Shares upon the conversion of any Series 1 Shares. If more than one Series 1 Share shall be surrendered for conversion at one time by the same holder, the number of Subordinate Voting Shares issuable upon the conversion thereof shall be computed on the basis of the aggregate stated value of all such Series 1 Shares so surrendered by such holder for conversion. If any fractional interest in a Subordinate Voting Share would, except for the provisions of this Section, be deliverable upon the conversion of any Series 1 Shares, the Corporation shall, in lieu of delivering a certificate for such fractional interest, satisfy such fractional interest by paying to the holder of such surrendered Series 1 Shares an amount in cash equal (to the nearest cent) to the result obtained when the Conversion Price is multiplied by the percentage that such fractional interest is of one whole Subordinate Voting Share. - 10 - (i) In the event that any conversion of the Series 1 Preference Shares is made pursuant to subsection 1.03(a) hereof and, in connection therewith, the Conversion Price was determined by reference to the unaudited consolidated financial statements of the Corporation and its subsidiaries (the Conversion Price so determined being called in this paragraph 1.03(i) the "Unaudited Conversion Price"), then if following the completion of the audit of such financial statements the Conversion Price determined by reference to such audited financial statements is determined to be an amount which is greater or less than the Unaudited Conversion Price (the Conversion Price so determined by reference to such audited financial statements being herein called in this paragraph 1.03(i) the "Audited Conversion Price"), the Corporation and the holders of the Series 1 Preferred Shares involved in the aforesaid conversion shall, within 10 days following the finalization of such audited financial statements, determine the number of Subordinate Voting Shares which would have been issued to each such holder on the aforesaid conversion had the Audited Conversion Price been then used and immediately thereafter: (A) if the Audited Conversion Price is an amount which is less than the Unaudited Conversion Price, the Corporation shall issue to each of the holders of the Series 1 Preference Shares so converted that number of Subordinate Voting Shares as is equal to the difference between the number of Subordinate Voting Shares which it would have received had the Audited Conversion Price been used at the time of the aforesaid conversion and the number of Subordinate Voting Shares which it was previously issued upon the aforesaid conversion and, in addition, the Corporation shall pay to each such holder an amount equal to all dividends which it would have been entitled to receive in respect of such additional Subordinate Voting Shares so issued to it had it been the holder of such shares since the date of the aforesaid conversion; or (B) if the Audited Conversion Price is an amount which is greater than the Unaudited Conversion Price, each of the holders of the Series 1 Preference Shares so converted shall return to the Corporation that number of Subordinate Voting Shares as is equal to the difference between the number of Subordinate Voting Shares which it would have received had the Audited Conversion Price been used and the number of Subordinate Voting Shares which it was previously issued upon the aforesaid conversion and, in addition, each such holder shall pay to the Corporation an amount equal to the total amount of the dividends paid to it by the Corporation on the Subordinate Voting Shares so returned. - 11 - 1.04 ADJUSTMENT OF THE CONVERSION PRICE CALCULATION FORMULA IN CERTAIN EVENTS (a) If the Corporation shall: (i) subdivide or change its outstanding Subordinate Voting Shares into a greater number of Subordinate Voting Shares or Multiple Voting Shares, as the case may be; (ii) reduce, combine or consolidate its outstanding Subordinate Voting Shares or Multiple Voting Shares into a lesser number of Subordinate Voting Shares or Multiple Voting Shares, as the case may be; or (iii) declare a dividend or make any distribution to the holders of all or substantially all of the outstanding Subordinate Voting Shares or the Multiple Voting Shares payable in Subordinate Voting Shares or Multiple Voting Shares or securities convertible into Subordinate Voting Shares or Multiple Voting Shares (other than an issue of Subordinate Voting Shares or Multiple Voting Shares or securities convertible into Subordinate Voting Shares or Multiple Voting Shares by way of a stock dividend or dividend reinvestment plan to shareholders pursuant to their exercise of options to receive dividends in the form of shares in lieu of cash dividends declared payable on the Subordinate Voting Shares); (any of such events being hereinafter referred to as a "Share Reorganization"), each of the Fixed Amounts in effect on the record date for such Share Reorganization shall be adjusted effective immediately after such record date by multiplying such amount by a fraction, the numerator of which is the aggregate number of Subordinate Voting Shares and Multiple Voting Shares outstanding on such record date before giving effect to such Share Reorganization and the denominator of which is the aggregate number of Subordinate Voting Shares or Multiple Voting Shares outstanding immediately after such record date after giving effect to such Share Reorganization. (b) If the Corporation shall fix a record date for the issuance of options, rights or warrants to any of the holders of its Subordinate Voting Shares or Multiple Voting Shares entitling them to subscribe for or purchase Subordinate Voting Shares or Multiple Voting Shares (or securities convertible into or exchangeable for Subordinate Voting Shares or Multiple Voting Shares) for a period of more than 45 days following such record date at a price per Subordinate Voting Share or Multiple Voting Share (or having a conversion or exchange price per Subordinate Voting Share or - 12 - Multiple Voting Share), as the case may be, of less than 95% of the Current Market Price of one Subordinate Voting Share or Multiple Voting Share, as the case may be, on such record date (any such event being herein referred to as a "Rights Offering"), each of the Fixed Amounts in effect on the record date for such Rights Offering shall be adjusted effective immediately after such record date by multiplying such amount by a fraction, the numerator of which is the total number of Subordinate Voting Shares and Multiple Voting Shares outstanding on such record date plus a number of Subordinate Voting Shares or Multiple Voting Shares, as the case may be, equal to the number determined by dividing the aggregate price of the total number of additional Subordinate Voting Shares or Multiple Voting Shares, as the case may be, offered for subscription or purchase under the Rights Offering (or the aggregate conversion price of the convertible or exchangeable securities so offered) by the Current Market Price of one Subordinate Voting Share or Multiple Voting Share, as the case may be, on such record date and the denominator of which is the total number of Subordinate Voting Shares and Multiple Voting Shares outstanding on such record date plus the total number of additional Subordinate Voting Shares or Multiple Voting Shares, as the case may be, offered for subscription or purchase under the Rights Offering (or the total number of Subordinate Voting Shares or Multiple Voting Shares, as the case may be, into which the convertible or exchangeable securities so offered are convertible or exchangeable). Subordinate Voting Shares or Multiple Voting Shares beneficially owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed. If the rights, options or warrants subject to the Rights Offering are not so issued or if, at the date of expiry of the rights, options or warrants issued pursuant to such Rights Offering, less than all of the rights, options or warrants subject to such Rights Offering have been exercised, each of the Fixed Amounts shall be readjusted effectively immediately after the date of expiry to an amount equal to the amount which would have been in effect if such record date had not been fixed or to an amount which would then be in effect on such date of expiry of the Rights Offering if the only rights, options or warrants issued pursuant thereto have been those that were exercised, as the case may be. (c) If the Corporation shall fix a record date for the issue or the distribution to any of the holders of its Subordinate Voting Shares or Multiple Voting Shares of: (i) securities in the capital of the Corporation (including rights, warrants or options to purchase any securities in the capital of the Corporation); - 13 - (ii) evidences of the Corporation's indebtedness; or (iii) any property or other assets and, to the extent that such issuance or distribution does not constitute a distribution referred to in paragraph 1.04(a)(iii), a Share Reorganization or a Rights Offering (any of such non-excluded events being herein called a "Special Distribution"), each of the Fixed Amounts in effect on the record date for such Special Distribution shall be adjusted effective immediately after such record date by multiplying such amount by a fraction, the numerator of which is equal to the remainder obtained when: (iv) the product obtained by multiplying the aggregate number of Subordinate Voting Shares and Multiple Voting Shares outstanding on such record date is multiplied by the Current Market Price of one Subordinate Voting Share on such record date is reduced by: (v) the fair market value, as determined by the auditors of the Corporation acting reasonably (whose determination shall be conclusive) of such securities, evidences of indebtedness or property or other assets, as the case may be, so issued or distributed in the Special Distribution and which shall be net of any consideration paid therefor by the holders of the Subordinate Voting Shares or the Multiple Voting Shares, as the case may be, and the denominator of which is the total number of Subordinate Voting Shares and Multiple Voting Shares outstanding on such record date multiplied by such Current Market Price of a Subordinate Voting Share. Subordinate Voting Shares and Multiple Voting Shares beneficially owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that such Special Distribution is not so made or is altered, each of the Fixed Amounts shall be readjusted to the amount which would then be in effect based upon the said securities, evidences of indebtedness, property or assets, if any, actually distributed prior to the most recent record date. (d) (i) No adjustments to the Fixed Amounts shall be made pursuant to subsections 1.04(a) or (c) hereof if the holders of the Series 1 Shares are permitted to participate in such Share Reorganization or Special Distribution, as though and to the same effect as if they had - 14 - converted their Series 1 Shares into Subordinate Voting Shares immediately prior to the record date for such Share Reorganization or Special Distribution (ii) No adjustments to the Fixed Amounts shall be made pursuant to subsection 1.04(b) if: (A) the Subordinate Voting Shares or Multiple Voting Shares (or securities convertible into or exchangeable for Subordinate Voting Shares or Multiple Voting Shares) forming the subject matter of the Rights Offering therein referred to are offered at a price equal to or greater than 65% of the greater of the amounts referred to in paragraphs 1.01(f)(ii)(A) and 1.01(f)(ii)(B) hereof; or (B) the holders of the Series 1 Shares are permitted to participate and do in fact participate in the Rights Offering therein referred to as if they had converted their Series 1 Shares into Subordinate Voting Shares immediately prior to the Record Date for such Rights Offering. (e) If and whenever at any time prior to the Redemption Date there shall be: (i) a reclassification of the Subordinate Voting Shares or Multiple Voting Shares outstanding at such time or a change of the Subordinate Voting Shares or Multiple Voting Shares into other shares or into other securities (other than pursuant to a Share Reorganization); or (ii) a consolidation, amalgamation, arrangement or merger of the Corporation with or into any other corporation or other entity (other than a consolidation, amalgamation, arrangement or merger which does not result in any reclassification of the outstanding Subordinate Voting Shares or Multiple Voting Shares or change of the Subordinate Voting Shares or Multiple Voting Shares into other shares); (any of such event enumerated in (i) and (ii), above) being herein called a "Capital Reorganization"), any holder of Series 1 Preference Shares who exercises his right to subscribe for and purchase Subordinate Voting Shares pursuant to the exercise of his Conversion Rights then held at any time after the effective date of such Capital Reorganization shall be entitled to receive, and shall accept for the same aggregate consideration in lieu of the number of Subordinate Voting Shares to which such holder was - 15 - theretofore entitled upon such exercise, the aggregate number of shares, other securities or other property which such holder would have been entitled to receive as a result of such Capital Reorganization if, on the effective date thereof, the holder of the Series 1 Preference Shares had been the registered holder of the number of Subordinate Voting Shares to which such holder was theretofore entitled to subscribe for and purchase upon the conversion of the Series 1 Preference Shares; (f) In any case in which this Section 1.04 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may, until the occurrence of such event, defer issuing to the holder of any Series 1 Shares converted after such record date and before the occurrence of such event the additional Subordinate Voting Shares or Multiple Voting Shares, as the case may be, issuable upon such conversion by reason of the adjustment required by such event in addition to the Subordinate Voting Shares or Multiple Voting Shares, as the case may be, issuable upon such conversion before giving effect to such adjustment; provided, however, that the Corporation shall deliver to such holder an appropriate instrument evidencing such holder's rights to receive such additional Subordinate Voting Shares or Multiple Voting Shares, as the case may be, upon the occurrence of the event requiring such adjustment. (g) In the case of any reclassification of, or other change in, the outstanding Subordinate Voting Shares or the Multiple Voting Shares not otherwise mentioned herein, each of the Fixed Amounts shall be adjusted in such manner as the auditors of the Corporation determines to be appropriate on a basis consistent with this Section 1.04. (h) If any question shall at any time arise with respect to adjustments to the Fixed Amounts or with respect to the amount of any cash payment made in lieu of issuing a fractional share, such question shall be determined by the auditors of the Corporation and thereupon shall become conclusive. (i) Forthwith after the occurrence of any adjustment in any of the Fixed Amounts pursuant to this Section 1.04, the Corporation shall forward to the holders of the Series 1 Shares a certificate certifying as to the amount of such adjustment and, in reasonable detail, the event requiring and the manner of computing such adjustment. (j) Notwithstanding any other provision contained herein, no adjustment to any of the Fixed Amounts shall be required in respect of the issue of Subordinate Voting Shares or securities convertible into Subordinate Voting Shares pursuant to any stock option, purchase plan or exchange right of, for - 16 - or held by any directors, officers or employees of the Corporation or any of its subsidiaries, save and except that this subsection 1.01(j) shall have no application in the case of the issue to Jay S. Hennick of Subordinate Voting Shares or securities convertible into Subordinate Voting Shares pursuant to any such stock option, purchase plan or exchange right extended to directors, officers or employees of the Corporation or any of its subsidiaries. (k) Notwithstanding any other provision contained herein, no adjustment to any of the Fixed Amounts shall be required unless such adjustment would require an increase or decrease of at least 2% in such Fixed Amounts; provided, however, that any adjustments which by reason of this subsection 1.04(k) are not required to be made shall be carried forward and taken into account in any subsequent adjustment. 1.05 REDEMPTION BY THE CORPORATION: (a) Subject to the provisions of applicable law, the Corporation shall redeem on the Redemption Date all Series 1 Shares then outstanding and in respect of which a Conversion Notice sent in accordance with the applicable provisions hereof has not been received. (b) The price at which each such Series 1 Share is to be redeemed shall be the aggregate of the following amounts: (i) the sum of $1,000; (ii) all dividends accrued (but unpaid) on such Series 1 Share up to the date fixed for redemption; and (iii) any amount payable by the Corporation in respect of such Series 1 Shares pursuant to paragraph 1.01(q)(ii) hereof. (c) (i) Notice of redemption of Series 1 Shares shall be given by the Corporation not less than 10 days prior to the Redemption Date to each then registered holder of Series 1 Shares. Accidental failure or omission to give such notice to one or nor of such holders shall not affect the validity of such redemption. Such notice shall set out the Redemption Amount, the Redemption Date, the place or places of redemption and the number of Series 1 Shares to be redeemed. (ii) On the Redemption Date, the Corporation shall pay the Redemption Amount to the holders of the Series 1 Shares redeemed and, if the Corporation has not at such time already gone public, the Corporation shall, concurrently therewith, deliver an agreement (the - 17 - "Participation Agreement") executed by it in favour of the holders of Series 1 Shares so redeemed to the effect that if the Corporation goes public within 6 months following the Redemption Date, a holder of Series 1 Shares which have been redeemed shall have the right, upon paying to the Corporation the Redemption Amount together with interest thereon at the rate of 10% per annum from and after the Redemption Date to the date of payment, to receive that number of Subordinate Voting Shares as such holder would have received had it converted its Series 1 Shares into Subordinate Voting Shares in accordance with Section 1.03 on the Redemption Date, on presentation and surrender at the place or one of the places of redemption of the respective certificates representing such shares, and the holders of the Series 1 Shares called for redemption shall cease to be entitled to dividends or to exercise any of the rights of holders in respect thereof unless payment of the Redemption Amount shall not be made in accordance with the foregoing provisions, in which case the rights of the holders shall remain unimpaired. (iii) The Corporation shall have the right at any time after giving notice of redemption to deposit the Redemption Amount of the Series 1 Shares thereby called for redemption, or such part thereof as at the time of deposit has not been claimed by the shareholders entitled thereto (together with executed copies of the Participation Agreement, if applicable) with any Canadian chartered bank or trust company in Canada specified in the notice of redemption or in a subsequent notice to the holders of the shares in respect of which the deposit is made, in a special account for the holders of such shares and upon such deposit and delivery being made or upon the Redemption Date, whichever is the later, the Series 1 Shares in respect of which such deposit (together with delivery of an executed copy of the Participation Agreement, if applicable) shall have been made shall be deemed to be redeemed and the rights of each holder thereof shall be limited to receiving, without interest, his proportionate part of the Redemption Amount so deposited (and delivery of the Participation Agreement, if applicable) upon presentation and surrender of the certificates representing his shares so redeemed. 1.06 CANCELLATION OF SERIES 1 SHARES: Series 1 Shares purchase4d, redeemed or otherwise acquired by the Corporation shall be cancelled. - 18 - 1.07 DISSOLUTION: On the liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, or other distribution of assets of the Corporation among its shareholders for the purpose of winding up its affairs, the holders of the Series 1 Shares shall be entitled to receive in lawful money of Canada an amount equal to the Redemption Amount per share. The Series 1 Preference Shares shall be entitled to preference over all other series of Preference Shares and all other classes of shares in the capital of the Corporation with respect to priority in payment of dividends and in the distribution of assets in the event of liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding-up its affairs. 1.08 NOTICES: All notices or other communications by the terms hereof required or permitted to be given by a holder of Series 1 Shares to the Corporation or by the Corporation to a holder of Series 1 Shares shall be given in writing by personal delivery (which personal delivery may be effected by depositing the notice or other communication in question with a responsible courier service for delivery (courier charges fully prepaid) to the addressee thereof) or by registered mail (postage fully prepaid) mailed from anywhere within Canada or the continental United States of America, addressed, in the case of the Corporation, to the President of the Corporation at the Corporation's registered office and, in the case of a holder of Series 1 Shares, to that holder at its most recent address appearing in the Corporation's share register. Any such notices or other communications shall be deemed to have been received, in the case of sending by personal delivery, upon delivery, or, in the case of sending by registered mail, 72 hours after 12:01 a.m. on the day following the day of the mailing thereof; provided that if any such notice, request, demand or other communication shall have been mailed and if regular mail service shall be interrupted by strikes or other irregularities, such notice, request, demand or other communication shall be deemed to have been received 72 hours after 12:01 a.m. on the day following the resumption of normal mail service. 1.09 CURRENCY All dollar amounts expressed herein are expressed in Canadian dollars and all payments contemplated by the provisions hereof shall be made in Canadian funds. 1.10 MODIFICATION: In addition to any other approval or authorization required by applicable law the rights, conditions, restrictions and prohibitions attaching to the Series 1 Shares may not be deleted, varied, altered or amended without the prior approval of at least 66-2/3% of the votes cast at a meeting of the holders of the Series 1 Shares or by a - 19 - resolution in writing by those persons holding not less than 66-2/3% of all the Series 1 Shares then being outstanding. 1.11 APPROVAL BY HOLDERS OF SERIES 1 SHARES: The approval of the holders of the Series 1 Shares with respect to any and all matters referred to herein or any other matter requiring the consent of such holders may, subject to applicable law, be given in writing by the holders of 50% (or, if required by Section 1.10, 66-2/3%) of the Series 1 Shares for the time being outstanding or by resolution duly passed and carried by not less than 50% (or, if required by Section 1.10, 66-2/3%) of the votes cast on a ballot at a meeting of the holders of the Series 1 Shares duly called and held for the purpose of considering the subject matter of such resolution and at which meeting holders of not less than 10% of the Series 1 Shares then outstanding are present in person or represented by proxy; provided, however, that if at any such meeting, when originally held, the holders of at least 10% of the Series 1 Shares then outstanding are not present in person or represented by proxy within 30 minutes after the time fixed for the meeting, the meeting shall be adjourned to such date, being not less than 15 days later, and at such time and place as may be fixed by the Chairman of such meeting and at such adjourned meeting the holders of the Series 1 Shares present in person or represented by proxy, whether or not they hold 10% of the Series 1 Shares then outstanding, may transact the business for which the meeting was originally called, and the resolution duly passed and carried by not less than 50% (or, if required by Section 1.10, 66-2/3%) of the votes cast on a ballot at such adjourned meeting shall constitute the approval of the holders of the Series 1 Shares hereinbefore mentioned. Notice of any such original meeting of the holders of the Series 1 Shares shall be given not less than 10 days nor more than 50 days prior to the date fixed for such meeting and shall specify in general terms the purpose for which the meeting is called. No notice of any such adjourned meeting need be given unless such meeting is adjourned by one or more adjournments for an aggregate of 30 days or more from the date of such original meeting, in which later case notice of the adjourned meeting shall be given in the manner prescribed fr the original meeting as aforesaid. The formalities to be observed with respect to the giving of notice of any such original or adjourned meeting and the conduct thereof shall be those from time to time prescribed in the constating documents of the Corporation with respect to meetings of shareholders. 1.12 VOTING RIGHTS: The holders of the Series 1 Shares shall not be entitled as such, except as required by law, to vote at any meeting of the shareholders of the Corporation but such holders shall be entitled to receive notice of and attend at all meetings of shareholders of the Corporation.
[LOGO] Ministry of Ministere de ONTARIO CORPORATION NUMBER Consumer and la Consommation NUMERO DE LA SOCIETE EN ONTARIO Commercial et du Commerce 788412 Relations CERTIFICATE CERTIFICAT This is to certify that these Ceci certifie que les presents articles are effective on statuts entrent en vigueur le APRIL 2 AVRIL, 1990 - --------------------------------------------------------------
[illegible] Director/Directeur TRANS Business Corporations Act / Loi sur les societes par actions CODE C - ------------------------------------------------------------------------------ 8
ARTICLES OF AMENDMENT Form 3 STATUTS DE MODIFICATION Business Corporations Act 1982
1. The present name of the corporation is: DENOMINATION SOCIALE DE LA SOCIETE ISSUE DE LA COMPAGNIE: -------------------------------------------------------------------------------------------------------- F I R S T S E R V I C E C O R P O R A T I O N -------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------
FORMULE NUMERO 3 LOI DE 1982 SUR LES COMPAGNIES
2. The name of the corporation is changed to NOUVELLE DENOMINATION SOCIALE DE LA COMPAGNIE (if applicable): (S'IL Y A LIEU): -------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- -------------------------------------------------------------------------------------------------------- --------------------------------------------------------------------------------------------------------
3. Date of incorporation/amalgamation: DATE DE LA CONSTITUTION OU DE LA FUSION: 31 JULY 1988 -------------------------------------------------------------------------------------------------------- (Day, Month, Year) (JOUR, MOIS, ANNEE)
4. The articles of the corporation are LES STATUTS DE LA COMPAGNIE SONT MODIFIES DE LA FACON amended as follows: SUIVANTE: See Schedule "A" attached hereto
SCHEDULE "A" 1. The articles (as defined in the Business Corporations Act, 1982 (Ontario) (the "OBCA")) of the Corporation be amended to: (a) consolidate each of the issued and unissued Class A subordinate voting shares (the "Class A Subordinate Voting Shares") of the Corporation, on the basis that each thirty (30) Class A Subordinate Voting Shares shall become one (1) new class A subordinate voting share (the "New Class A Subordinate Voting Shares"); provided, however, that any person who, on the date the articles of amendment referred to in paragraph 2 hereof become effective is the registered holder of a number of Class A Subordinate Voting Shares not evenly divisible by thirty (30), shall not be entitled to become a registered holder of a fraction of a New Class A Subordinate Voting Share or to receive a certificate therefor, but in lieu thereof any such person shall be entitled to receive in respect of the fraction of New Class A Subordinate Voting Shares to which such person is otherwise entitled on the surrender of a certificate or certificates representing issued and outstanding Class A Subordinate Voting Shares in the capital of the Corporation, an amount in cash (rounded to the nearest cent) equal to $1.50 multiplied by the fraction of New Class A Subordinate Voting Shares to which such person is otherwise entitled; (b) consolidate each of the issued and unissued Class B shares (the "Class B Shares") of the Corporation, on the basis that each thirty (30) Class B Shares shall become one (1) new class B share (the "New Class B Shares"); provided, however, that any person who, on the date the articles of amendment referred to in paragraph 2 hereof become effective is the registered holder of a number of Class B Shares not evenly divisible by thirty (30), shall not be entitled to become a registered holder of a fraction of a New Class B Share or to receive a certificate therefor, but in lieu thereof any such person shall be entitled to receive in respect of the fraction of New Class B Shares to which such person is otherwise entitled on the surrender of a certificate or certificates representing issued and outstanding Class B Shares in the capital of the Corporation, an amount in cash (rounded to the nearest cent) equal to $1.50 multiplied by the fraction of New Class B Shares to which such person is otherwise entitled; - 2 - (c) change the designation of the issued and unissued New Class A Subordinate Voting Shares, by redesignating such shares as subordinate voting shares (the "Subordinate Voting Shares") and, in connection therewith, by deleting the words "Class A Subordinate Voting Shares" wherever they appear in the articles of the Corporation and substituting therefor the words "Subordinate Voting Shares"; and (d) change the designation of each of the issued and unissued New Class B Shares, by redesignating such shares as multiple voting shares (the "Multiple Voting Shares") and, in connection therewith, by deleting the words "Class B Shares" wherever they appear in the articles of the Corporation and substituting therefor the words "Multiple Voting Shares". first-mi.rjs March 26, 1990 5. The amendment has been duly authorized as LA MODIFICATION A ETE DUMENT AUTORISEE required by Sections 167 and 169 (as CONFORMEMENT A L'ARTICLE 167 ET, S'IL Y A LIEU, applicable) of the Business Corporations Act A L'ARTICLE 169 DE LA LOI SUR LES COMPAGNIES 6. The resolution authorizing the amendment was LES ACTIONNAIRES OU LES ADMINISTRATEURS (LE CAS ECHEANT) approved by the shareholders/directors (as DE LA COMPAGNIE ONT APPROUVE LA RESOLUTION AUTORISANT applicable) of the corporation on LA MODIFICATION
30 MARCH 1990 --------------------------------------------------------- (Day Month Year) (JOUR MOIS ANNEE) These articles are signed in duplicate. LES PRESENTS STATUTS SONT SIGNES EN DOUBLE EXEMPLAIRE.
FIRSTSERVICE CORPORATION ------------------------------------------------- (Name of Corporation) (DENOMINATION SOCIALE DE LA COMPAGNIE) By/Par: /s/ Ken Pearce ------------------------------------------------- (Signature) Kenneth (Description of Office) (SIGNATURE) Pearce (FONCTION) Secretary
[LOGO] Ministry of Ministere de ONTARIO CORPORATION NUMBER Consumer and la Consommation NUMERO DE LA SOCIETE EN ONTARIO Commercial et du Commerce 788412 Relations CERTIFICATE CERTIFICAT This is to certify that these Ceci certifie que les presents articles are effective on statuts entrent en vigueur le JULY 31 JUILLET, 1988 - ----------------------------------------------------------------------------------------------------------------------
[illegible] Trans Line Comp Method Code No. Staf Type repro Share / A / / O / / O / / A / / 3 / / S / 18 20 28 29 30 31 Director Le Directeur Companies Branch Direction des Compagnies Notice Req'd urisdiction / N / / ONTARIO / / A / 32 37 47 57 _______________________________________________________________________________________________________
ARTICLES OF AMALGAMATION STATUTS DE FUSION Form 4 Business Corporations Act 1982
1. The name of the amalgamated corporation is: DENOMINATION SOCIALE DE LA COMPAGNIE ISSUE DE LA FUSION: F I R S T S E R V I C E C O R P O R A T I O N - ----------------------------------------------------------------------------------------------------------------------
FORMULE NUMERO 4 LOI DE 1982 SUR LES COMPAGNIES
2. The address of the registered office is: ADRESSE DU SIEGE SOCIAL: 150 York Street, Suite 1400, ------------------------------------------------------------------------------------------------------- (Street & Number or R.R. Number & if Multi-Office Building give Room No.) (RUE ET NUMERO, OU NUMERO DE LA R.R. ET, S'IL S'AGIT D'UN EDIFICE A BUREAUX, NUMERO DU BUREAU) Toronto, Ontario M 5 H 3 T 1 ------------------------------------------------------------------------------------------------------- (Name of Municipality or Post Office) (Postal Code) (NOM DE LA MUNICIPALITE OU DU BUREAU DE POSTE) (CODE POSTAL) City of Toronto Municipality of Metropolitan Toronto --------------------------------------------- in the -------------------------------------------- (Name of Municipality, DANS LE/LA (County, District, Regional Geographical Township) Municipality) (NOM DE LA MUNICIPALITE, (COMTE, DISTRICT, MUNICIPALITE DU CANTON) REGIONALE) 3. NUMBER (OR MINIMUM AND MAXIMUM NUMBER) OF NOMBRE (OU NOMBRES MINIMAL ET MAXIMAL) DIRECTORS IS: D'ADMINISTRATEURS: Minimum of Three (3) and a maximum of Twenty (20)
4. The director(s) is/are: ADMINISTRATEUR(S): First name, initials and surname Resident address, giving Street & No. or R.R. No., Resident PRENOM, INITIALES ET NOM DE FAMILLE Municipality and Postal Code. Canadian ADRESSE PERSONNELLE, Y COMPRIS LA RUE ET State LE NUMERO, LE NUMERO DE LA R.R., OU LE NOM DE LA Yes or No MUNICIPALITE ET LE CODE POSTAL RESIDENT CANADIEN OUI/NON - -------------------------------------------------------------------------------------------------------------------------------
See attached page 1A 1A
First name, initials Residence address Resident and surname Street No., Postal Code Canadian - -------------------- ----------------------- -------- Jay S. Hennick 74 Spring Gate Blvd. Yes Thornhill, Ontario L4J 3L7 Dr. Brian H. Price 250 Warren Road Yes Toronto, Ontario M4V 2S8 Miles Nadal The Lonsdale Yes 619 Avenue Road, #603 Toronto, Ontario M4V 2K6 Edward Sonshine 86 Forest Heights Blvd. Yes Willowdale, Ontario M2L 2K8 C. Robert Burgess 24 Brockshire Circle Yes Thornhill, Ontario L3T 7A9
8. Rights, privileges, restrictions and conditions (if DROITS, PRIVILEGES, RESTRICTIONS ET CONDITIONS (S'IL Y A any) attaching to each class of shares and LIEU) RATTACHES A CHAQUE CATEGORIE D'ACTIONS ET POUVOIRS directors authority with respect to any class of DES ADMINISTRATEURS RELATIFS A CHAQUE CATEGORIE D'ACTIONS shares which is to be issued in series. QUI PEUT ETRE EMISE EN SERIE. The Preference Shares, the Class A Shares and the Class B Shares of the Corporation shall have attached thereto the rights, privileges, restrictions and conditions set out in Schedule "1" to the Amalgamation Agreement annexed hereto.
9. The issue, transfer or ownership of shares is not L'EMISSION DE TRANSFERT OU LA PROPRIETE D'ACTIONS restricted and the restrictions (if any) are as EST/N'EST PAS RESTREINTE. LES RESTRICTIONS, S'IL follows: Y A LIEU, SONT LES SUIVANTES: No restrictions 10. Other provisions, (if any): AUTRES DISPOSITIONS, S'IL Y A LIEU. (a) Without in any way limiting the powers conferred upon the Corporation and its directors by the Act, or any successor statute, the board of directors may from time to time, in such amounts and on such terms as it deems expedient: (i) borrow money on the credit of the Corporation; (ii) issue, sell or pledge debt obligations (including bonds, debentures, notes or other similar obligations, secured or unsecured) of the Corporation; and (iii) charge, mortgage, hypothecate or pledge all or any of the currently owned or subsequently acquired real or personal, movable or immovable, property of the Corporation, including book debts, rights, powers, franchises and undertaking, to secure any debt obligations or any money borrowed, or other debt or liability of the Corporation. (b) Subject to the Act, the board of directors may from time to time delegate to such one or more of the directors and officers of the Corporation as may be designated by the board all or any of the powers conferred on the board above to such extent and in such manner as the board shall determine at the time of such delegation. 11. The statements required by subsection 177(2) of LES DECLARATIONS EXIGEES AUX TERMES DU PARAGRAPHE 177(2) the Business Corporations Act are attached as DE LA LOI SUR LES COMPAGNIES CONSTITUENT L'ANNEXE "A". Schedule "A". 12. A copy of the amalgamation agreement or directors UNE COPIE DE LA CONVENTION DE FUSION OU LES RESOLUTIONS resolutions (as the case may be) is/are DES ADMINISTRATEURS (SELON LE CAS) CONSTITUTE(NT) attached as Schedule "B". L'ANNEXE "B".
These articles are signed in duplicate. LES PRESENTS STATUTS SONT SIGNES EN DOUBLE EXEMPLAIRE -------------------------------------------------------------------------------------------------- Names of the amalgamating corporations and DENOMINATION SOCIALE DES COMPAGNIES QUI signatures and descriptions of office of FUSIONNENT, SIGNATURE ET FONCTION DE LEURS their proper officers. DIRIGEANTS REGULIEREMENT DESIGNES. -------------------------------------------------------------------------------------------------- COLOMA RESOURCES LIMITED FIRSTSERVICE CORPORATION Per: /s/ Jay S. Hennick Per: /s/ Jay S. Hennick -------------------------------------- --------------------------------------- President - Jay S. Hennick President - Jay S. Hennick Per: /s/ Ken Pearce Per: /s/ Ken Pearce -------------------------------------- --------------------------------------- Secretary - Ken Pearce Secretary - Ken Pearce
SCHEDULE A-1 The undersigned, Jay S Hennick, being the President of COLOMA RESOURCES LIMITED, hereby states that: 1. There are reasonable grounds for believing that: (a) each of COLOMA RESOURCES LIMITED and FIRSTSERVICE CORPORATION is and FIRSTSERVICE CORPORATION the corporation continuing from the amalgamation of COLOMA RESOURCES LIMITED and FIRSTSERVICE CORPORATION (the "Amalgamated Corporation") will be able to pay its liabilities as the become due; (b) the realizable value of the Amalgamated Corporation's assets will not be less than the aggregate of its liabilities and stated capital of all classes; (c) no creditor will be prejudiced by the amalgamation; and 2. No creditor has notified COLOMA RESOURCES LIMITED that such creditor objects to the amalgamation. DATED this 29th day of July, 1998. /s/ Jay S. Hennick ----------------------------------------- Jay S. Hennick - President SCHEDULE A-2 The undersigned, Jay S. Hennick, being the President of FIRSTSERVICE CORPORATION, hereby states that: 1. There are reasonable grounds for believing that: (a) each of FIRSTSERVICE CORPORATION and COLOMA RESOURCES LIMITED is and FIRSTSERVICE CORPORATION the corporation continuing from the amalgamation of COLOMA RESOURCES LIMITED and FIRSTSERVICE CORPORATION (the "Amalgamated Corporation") will be able to pay its liabilities as they become due; (b) the realizable value of the Amalgamated Corporation's assets will not be less than the aggregate of its liabilities and stated capital of all classes; (c) no creditor will be prejudiced by the amalgamation; and 2. No creditor has notified FIRSTSERVICE CORPORATION that such creditor objects to the amalgamation. DATED this 29th day of July, 1998. /s/ Jay S. Hennick ----------------------------------------- Jay S. Hennick - President SCHEDULE "B" THIS AMALGAMATION AGREEMENT made as of the 31st day of July, 1998. B E T W E E N: COLOMA RESOURCES LIMITED, a corporation incorporated under the laws of the Province of Ontario (hereinafter called "Coloma") OF THE FIRST PART; - and - FIRSTSERVICE CORPORATION, a corporation incorporated under the laws of the Province of Ontario (hereinafter called "FirstService") OF THE SECOND PART. WHEREAS each of Coloma and FirstService are corporations to which the Business Corporations Act, 1982 (Ontario) applies; AND WHEREAS Coloma is authorized to issue an unlimited common shares without par value and 2,000,000 special shares, of which 1,577,507 common shares are presently issued and outstanding; AND WHEREAS FirstService is authorized to issue an unlimited number of common shares of which 1,234,251 common shares are issued and outstanding; AND WHEREAS the parties hereto, acting under the authority contained in the Business Corporations Act, 1982 (ontario) have agreed to amalgamate upon the terms and conditions set out hereunder; AND WHEREAS Coloma has reserved up to a maximum of 10% of its outstanding common shares for issuance pursuant to its share option plan (the "Share Option Plan"); AND WHEREAS FirstService has outstanding an option permitting the optionee to purchase 60,000 common shares of FirstService at an exercise price of $1.00 per share expiring May 31, 1993 (the "Option"); - 2 - NOW THEREFORE THIS AGREEMENT WITNESSETH as follows: 1. DEFINITION In this agreement: (a) "Amalgamating Corporations" means Coloma and FirstService; (b) "Amalgamation Agreement" or "Agreement" means this amalgamation agreement; (c) "Act" means the Business Corporations Act, 1982 (Ontario); (d) "Corporation" means the corporation continuing from the amalgamation of the Amalgamating Corporations; and (e) "Effective Date" means the date set out on the certificate endorsed by the Director appointed under the Act on the Articles of Amalgamation giving effect to the amalgamation herein provided for. 2. AGREEMENT TO AMALGAMATE The Amalgamating Corporations hereby agree to amalgamate as of the Effective Date under the provisions of the Act and to continue as one corporation upon the terms and conditions herein set out. 3. NAME OF CORPORATION The name of the Corporation shall be FIRSTSERVICE CORPORATION. 4. REGISTERED OFFICE The registered office of the Corporation shall be in the City of Toronto, Municipality of Metropolitan Toronto, in the Province of Ontario. The address of the registered office of the Corporation shall be 150 York Street, Suite 1400, Toronto, Ontario M5H 3T1. 5. RESTRICTIONS There shall be no restrictions on the business that the Corporation may carry on or on the powers that the Corporation may exercise. 6. AUTHORIZED CAPITAL The classes and any maximum number of shares that the Corporation is authorized to issue are as follows: - 3 - (a) an unlimited number of preference shares issuable in series (the "Preference Shares"); (b) an unlimited number of Class A subordinate voting shares (the "Class A Shares"); and (c) an unlimited number of Class B shares (the "Class B Shares"). 7. RIGHTS ATTACHING TO SHARES The Preference Shares, the Class A Shares and the Class B Shares of the Corporation shall have attached thereto the rights, privileges, restrictions and conditions set out in Schedule "1" annexed hereto. 8. DIRECTORS The board of directors of the Corporation shall consist of a minimum of three (3) directors and a maximum of twenty (20) directors provided that the directors shall be entitled, subject to the provisions of the Act, to determine the number of directors of the Corporation and the number of directors to be elected at the annual meeting of the shareholders of the Corporation from time to time by resolution of the board provided that such number of directors is not greater than twenty (20) nor less than three (3) directors. Until changed by resolution of the directors, the board of directors of the Corporation shall be fixed at five (5) directors and the first directors of the Corporation are as follows;
Resident Name & Municipality of Residence Canadian - -------------------------------- -------- Dr. Brian H. Price Yes Toronto, Ontario Jay S. Hennick Yes Thornhill, Ontario Miles S. Nadal Yes Toronto, Ontario Edward Sonshine, Q.C. Yes North York, Ontario C. Robert Burgess Yes Thornhill, Ontario
- 4 - The said first directors shall hold office until the first annual meeting of the Corporation or until their successors are elected or appointed, subject to the Corporation's by-laws. 9. BY-LAWS The by-laws of the Corporation shall be the by-laws of FirstService. A copy of such by-laws may be examined at the offices of Fogler, Rubinoff, Suite 1400, 150 York Street, Toronto, Ontario, M5H 3T1 at any time during regular business hours. 10. CONVERSION OF SHARES The authorized but unissued shares and the issued shares in the capital of each of the Amalgamating Corporations shall be respectively cancelled and/or converted on the Effective Date into issued and outstanding Class A Shares and Class B Shares of the Corporation as follows: (a) the 1,577,507 issued and outstanding common shares of Coloma shall be converted into 1,577,507 Class A Shares of the Corporation on the basis of one common share of Coloma for each Class A Share of the Corporation; (b) the 1,234,251 issued and outstanding common shares of FirstService shall be converted into 15,428,137 Class B Shares of the Corporation on the basis of one common share of FirstService for each 12.5 Class B Shares of the Corporation; and (c) the authorized but unissued special shares of Coloma shall be cancelled. After filing Articles of Amalgamation in respect of this Agreement and the issue of a Certificate of Amalgamation in respect thereof, the shareholders of Coloma when requested by the Corporation shall surrender the certificates representing the shares held by them in Coloma and, subject to the provisions of the Act, in return shall be entitled to receive certificates for Class A Shares of the Corporation on the basis aforesaid. The common shares of Coloma reserved for issuance pursuant to the Share Option Plan approved by the directors and shareholders of Coloma shall be reserved for issuance pro rata and mutatis mutandis of the Class A Shares and the Class B Shares of the Corporation. The Option of FirstService for 60,000 common shares of FirstService with an exercise price of $1.00 per share expiring May 31, 1993 will be assumed by the Corporation on the basis of 12.5 Class A Shares of the Corporation for each common share of - 5 - FirstService to which such option applied, resulting in an option to purchase 750,000 Class A Shares of the Corporation with an exercise price of $0.08 per share expiring May 31, 1993. 11. STATED CAPITAL The stated capital of the shares of the Corporation issued on the conversion of the shares of the Corporation pursuant to paragraph 10 hereof as at May 31, 1988 shall be as follows:
Shares of the Corporation Stated Capital - ------------------------- -------------- 1,577,507 Class A Shares issued on conversion of 1,577,507 common shares of Coloma $ 148,984 1,428,137 Class B Shares issued on conversion of 1,234,251 common shares of FirstService 1,234,251 ---------- Total $1,383,235
12. TRANSFER OF SHARES There shall be no restrictions on the right to transfer shares of the Corporation. 13. SPECIAL PROVISIONS (a) Without in any way limiting the powers conferred upon the Corporation and its directors by the Act, or any successor statute, the board of directors may from time to time, in such amounts and on such terms as it deems expedient: (i) borrow money on the credit of the Corporation; (ii) issue, sell or pledge debt obligations (including bonds, debentures, notes or other similar obligations, secured or unsecured) of the Corporation; and (iii) charge, mortgage, hypothecate or pledge all or any of the currently owned or subsequently acquired real or personal, movable or immovable, property of the Corporation, including book debts, rights, powers, franchises and undertaking, to secure any debt obligations or any money borrowed, or other debt or liability of the Corporation. - 6 - (b) Subject to the Act, the board of directors may from time to time delegate to one or more of the directors and officers of the Corporation as may be designated by the board all or any of the powers conferred on the board above to such extent and in such manner as the board shall determine at the time of such delegation. 14. DELIVERY OF ARTICLES Upon the shareholders of the Amalgamating Corporations respectively adopting this Agreement in accordance with the requirements of the Act and subject to paragraph 16 hereof, Articles of Amalgamation in the prescribed form shall be filed with the Director appointed under the Act. 15. AMALGAMATION Upon the Effective Date: (a) the Amalgamating Corporations are amalgamated and continued as one corporation under the terms and conditions prescribed in the Amalgamation Agreement; (b) the property of each of the Amalgamating Corporations continues to be the property of the Corporation; (c) the Corporation continues to be liable for the obligations of each of the Amalgamating Corporations; (d) any existing cause of action, claim or liability to prosecution is unaffected; (e) a civil, criminal or administrative action or proceeding pending by or against any of the Amalgamating Corporations may be continued to be prosecuted by or against the Corporation; (f) a conviction against, or ruling, order or judgment in favour of or against, any of the Amalgamating Corporations may be enforced by or against the Corporation; and (g) the Articles of Amalgamation are deemed to be the Articles of Incorporation of the Corporation and the Certificate of Amalgamation is deemed to be the Certificate of Incorporation of the Corporation. - 7 - 16. TERMINATION At any time before the Effective Date, this Amalgamation Agreement may be terminated by the directors of any of the Amalgamating Corporations, notwithstanding the approval of this Amalgamation Agreement by the shareholders of any of the Amalgamating Corporations. IN WITNESS WHEREOF this Agreement has been executed by the parties hereto as of the date and year first above written. COLOMA RESOURCES LIMITED FIRSTSERVICE CORPORATION Per: /s/ Jay S. Hennick Per: /s/ Jay S. Hennick ---------------------------- ---------------------------- President - Jay S. Hennick President - Jay S. Hennick c/s c/s Per: /s/ Ken Pearce Per: /s/ Ken Pearce ---------------------------- ---------------------------- Secretary - Ken Pearce Secretary - Ken Pearce Schedule "1" 1.00 THE PREFERENCE SHARES 1.01 The Preference Shares may at any time or from time to time be issued in one or more series, each series to consist of such number of shares as may, before the issue thereof, be determined by the board of directors of the Corporation. The directors shall by resolution fix, from time to time, before the issue of any series of Preference Shares, the designation, preferences, rights, restrictions, conditions, limitations, priorities as to payment of dividends and/or distribution on liquidation, dissolution or winding-up, or prohibitions attaching thereto including, without limiting the generality of the foregoing, the provision of a purchase fund, the right of the Corporation to purchase such shares for cancellation, the rate of preferential dividends, the dates of payment thereof, the date or dates from which any such preferential dividends shall accrue, redemption rights including purchase or redemption price, terms and conditions of redemption, conversion rights and any sinking fund or other provisions, and authorize the issuance thereof. 1.02 The directors before the issue of any Preference Shares of a series shall file with the Director appointed under the Business Corporations Act, 1982 (Ontario) or any successor statute of the Province of Ontario which is from time to time in force (the "Act"), Articles of Amendment designating such series and specifying the number, designation, preferences, rights, restrictions, conditions, limitations, priorities as to payment of dividends and/or distribution on liquidation, dissolution or winding-up, and prohibitions attached thereto, and shall obtain a certificate from the Director with respect thereto. 1.03 The Preference Shares of each series shall be entitled to preference over the Class A Shares, the Class B Shares and any other shares ranking junior to the Preference Shares with respect to priority in payment of dividends and in the distribution of assets in the event of liquidation, dissolution or winding-up of the Corporation, whether voluntary or involuntary, or any other distribution of the assets of the Corporation among its shareholders for the purpose of winding-up its affairs, and may also be given such other preferences over the Class A Shares, the Class B Shares and any other shares ranking junior to the Preference Shares as may be determined with respect to the respective series authorized to be issued. 1.04 The holders of the Preference Shares shall not be entitled as such, except as required by law, to receive notice of or to attend any meeting of the shareholders of the Corporation or to vote at any such meeting, but shall be entitled to receive notice of meetings of shareholders of the Corporation called for the purpose of authorizing the dissolution of the Corporation or the sale of its undertaking or a substantial part thereof. - 2 - 2.00 CLASS A SHARES 2.01 The holders of the Class A Shares shall be entitled to receive notice of, to attend and speak at and to vote at, any meeting of the shareholders of the Corporation, other than a meeting of the holders of another class as such or the holders of a series of shares of another class as such, and at such meeting shall have one (1) vote for each Class A Share held. 2.02 Subject to any provisions of the Act and to applicable securities laws and the by-laws, regulations or policies of any stock exchange upon which the Class A Shares may then be listed, all or any part of the Class A Shares which are then outstanding shall be purchasable for cancellation by the Corporation at any time, in the open market, by private contract or otherwise, at the lowest price at which, in the opinion of the directors, such shares are obtainable. 2.03 The Class A Shares shall not be redeemable by the Corporation. 2.04 If the Act would in effect require in the absence of this clause 2.04 that an amendment to the Articles of the Corporation to delete or vary any preference, right, condition, restriction, limitation or prohibition attaching to any of the Class A Shares, or to create special shares ranking in priority to or on a parity with the Class A Shares, be confirmed in writing by the holders of 100% or any lesser percentage of the then outstanding Class A Shares, then in lieu of such confirmation in writing such confirmation may be given by at least two-thirds of the votes cast at a meeting of the holders of the Class A Shares duly called for that purpose, and at such meeting each holder of Class A Shares shall be entitled to one vote for each Class A Share held. 2.05 The holders of the Class A Shares shall not have any right to vote separately upon any proposal to amend the Articles of the Corporation to: (a) increase any maximum number of authorized shares of any class or series having rights or privileges equal or superior to the Class A Shares; or (b) create a new class of shares equal or superior to the Class A Shares. - 3 - 2.06 (1) For the purposes of this clause 2.06: (a) "affiliate" has the meaning assigned by the Securities Act (Ontario) as amended from time to time; (b) "associate" has the meaning assigned by the Securities Act (Ontario) as amended from time to time; (c) "Conversion Period" means the period of time commencing on the eighth day after the Offer Date and terminating on the Expiry Date; (d) "Converted Shares" means Class B Shares resulting from the conversion of Class A Subordinate Voting Shares into Class B Shares pursuant to paragraph (2) of this clause 2.06; (e) "Exclusionary Offer" means an offer to purchase Class B Shares that: (i) must, by reason of applicable securities legislation or the requirements of a stock exchange on which the Class B Shares are listed, be made to all or substantially all holders of Class B Shares who are in a province of Canada to which the requirement applies; and (ii) is not made concurrently with an offer to purchase Class A Subordinate Voting Shares that is identical to the offer to purchase Class B Shares in terms of price per share and percentage of outstanding shares to be taken up exclusive of shares owned immediately prior to the offer by the Offeror, and in all other material respects, and that has no condition attached other than the right not to take up and pay for shares tendered if no shares are tendered pursuant to the offer for Class B Shares, and for the purposes of this definition, if an offer to purchase Class B Shares is not an Exclusionary Offer as defined above but would be an Exclusionary Offer if it were not for sub-clause (ii), the varying of any term of such offer shall be deemed to constitute the making of a new offer unless an identical variation concurrently is made to the corresponding offer to purchase Class A Subordinate Voting Shares; (f) "Expiry Date" means the last date upon which holders of Class B Shares may accept an Exclusionary Offer; - 4 - (g) "Offer Date" means the date on which an Exclusionary Offer is made; (h) "Offeror" means a person or company that makes an offer to purchase Class B Shares (the "bidder"), and includes any associate or affiliate of the bidder or any person or company that is disclosed in the offering document to be acting jointly or in concert with the bidder; and (i) "transfer agent" means the transfer agent for the time being of the Class B Shares. (2) Subject to subparagraph (5) of this clause 2.06, if an Exclusionary Offer is made, each outstanding Class A Share shall be convertible into one Class B Share at the option of the holder during the Conversion Period. The conversion right may be exercised by notice in writing given to the transfer agent accompanied by the share certificate or certificates representing the Class A Subordinate Voting Shares which the holder desires to convert, and such notice shall be executed by such holder, or by his attorney duly authorized in writing, and shall specify the number of Class A Subordinate Voting Shares which the holder desires to have converted. The holder shall pay any governmental or other tax imposed on or in respect of such conversion. Upon receipt by the transfer agent of such notice and share certificate or certificates, the Corporation shall issue a share certificate representing fully-paid Class B Shares as above prescribed and in accordance with paragraph (4) of this clause 2.06. If less than all of the Class A Subordinate Voting Shares represented by any share certificate are to be converted, the holder shall be entitled to receive a new share certificate representing in the aggregate the number of Class A Subordinate Voting Shares represented by the original share certificate which are not to be converted. (3) An election by a holder of Class A Subordinate Voting Shares to exercise the conversion right provided for in paragraph (2) of this clause 2.06 shall be deemed to also constitute an irrevocable election by such holder to deposit the Converted Shares pursuant to the Exclusionary Offer (subject to such holder's right to subsequently withdraw the shares from the offer) and to exercise the right to convert into Class A Subordinate Voting Shares all Converted Shares in respect of which such holder exercises his right of withdrawal from the Exclusionary Offer or which are not otherwise ultimately taken up under the Exclusionary Offer. Any conversion into Class A Subordinate Voting Shares, pursuant to such deemed election, of Converted Shares in respect of which the holder exercises his right of withdrawal from the Exclusionary Offer - 5 - shall become effect at the time such right of withdrawal is exercised. If the right of withdrawal is not exercised, any conversion into Class A Subordinate Voting Shares pursuant to such deemed election shall become effective, (a) in respect of an Exclusionary Offer which is completed, immediately following the time by which the Offeror is required by applicable securities legislation to take up and pay for all shares to be acquired by the Offeror under the Exclusionary Offer; and (b) in respect of an Exclusionary Offer which is abandoned or withdrawn, at the time at which the Exclusionary Offer is abandoned or withdrawn. (4) No share certificates representing Converted Shares shall be delivered to the holders of the shares before such shares are deposited pursuant to the Exclusionary Offer; the transfer agent, on behalf of the holders of the Converted Shares, shall deposit pursuant to the Exclusionary Offer a certificate or certificates representing the Converted Shares. Upon completion of the offer, the transfer agent shall deliver to the holders entitled thereto all consideration paid by the offeror pursuant to the offer. If Converted Shares are converted into Class A Subordinate Voting Shares pursuant to paragraph (3) of this clause 2.06, the transfer agent shall deliver to the holders entitled thereto share certificates representing the Class A Subordinate Voting Shares resulting from the conversion. The Corporation shall make all arrangements with the transfer agent necessary or desirable to give effect to this sub-paragraph. (5) Subject to paragraph (6) of this clause 2.06, the conversion right provided for sub-paragraph (2) of this clause 2.06 shall not come into effect if: (a) prior to the time at which the Exclusionary Offer is made there is delivered to the transfer agent and to the Secretary of the Corporation a certificate or certificates signed by or on behalf of one or more shareholders of the Corporation owning in the aggregate, as at the time the Exclusionary Offer is made, more than 50% of the then outstanding Class B Shares, exclusive of shares owned immediately prior to the Exclusionary Offer by the Offeror, which certificate or certificates shall confirm, in the case of each such shareholder, that such shareholder shall not: (i) accept any Exclusionary Offer without giving the transfer agent and the Secretary of the Corporation - 6 - written notice of such acceptance or intended acceptance at least seven days prior to the Expiry Date; (ii) make any Exclusionary Offer; (iii) act jointly or in concert with any person or company that makes any Exclusionary Offer; or (iv) transfer any Class B Shares, directly or indirectly, during the time at which any Exclusionary Offer is outstanding without giving the transfer agent and the Secretary of the Corporation written notice of such transfer or intended transfer at least seven days prior to the Expiry Date, which notice shall state, if known to the transferor, the names of the transferees and the number of Class B Shares transferred or to be transferred to each transferee; or (b) within seven days after the Offer Date there is delivered to the transfer agent and to the Secretary of the Corporation a certificate or certificates signed by or on behalf of one or more shareholders of the Corporation owning in the aggregate more than 50% of the then outstanding Class B Shares, exclusive of shares owned immediately prior to the Exclusionary Offer by the Offeror, which certificate or certificates shall confirm, in the case of each such shareholder: (i) the number of Class B Shares owned by the shareholder; (ii) that such shareholder is not making the offer and is not an associate or affiliate of, or acting jointly or in concert with, the person or company making the offer; (iii) that such shareholder shall not accept the offer, including any varied form of the offer, without giving the transfer agent and the Secretary of the Corporation written notice of such acceptance or intended acceptance at least seven days prior to the Expiry Date; and (iv) that such shareholder shall not transfer any Class B Shares, directly or indirectly, prior to the Expiry Date without giving the transfer agent and the Secretary of the Corporation written notice of such transfer or intended transfer at least seven days prior to the Expiry Date, which notice shall - 7 - state, if known to the transferor, the names of the transferees and the number of Class B Shares transferred or to be transferred to each transferee if this information is known to the transferor. (6) If a notice referred to in sub-clause 5(a)(i), 5(a)(iv), 5(b)(iii) or 5(b)(iv) of this clause 2.06 is given and the conversion right provided for in paragraph (2) of this clause 2.06 has not come into effect, the transfer agent shall either forthwith upon receipt of the notice or forthwith after the seventh day following the Offer Date, whichever is later, make a determination as to whether there are subsisting certifications that comply with either sub-clause 5(a) or 5(b) of this clause 2.06 from shareholders of the Corporation who own in the aggregate more than 50% of the then outstanding Class B Shares, exclusive of shares owned immediately prior to the offer by the Offeror. For the purposes of this determination the transaction that is the subject of such notice shall be deemed to have taken place at the time of the determination, and the shares that are the subject of such notice shall be deemed to have been transferred to a person or company from whom the transfer agent has not received such a certification unless the transfer agent is otherwise advised either by such notice or by the transferee in writing. If the transfer agent determines that there are not such subsisting certifications, paragraph (5) of this clause 2.06 shall cease to apply and the conversion right provided for in paragraph (2) of this clause 2.06 shall be in effect for the remainder of the Conversion Period. (7) As soon as reasonably possible after the seventh day after the Offer Date, the Corporation shall send to each holder of Class A Subordinate Voting Shares a notice advising the holders as to whether they are entitled to convert their Class A Subordinate Voting Shares into Class B Shares and the reasons therefor. If such notice discloses that they are not so entitled but is subsequently determined that they are so entitled by virtue of paragraph (6) of this clause 2.06 or otherwise, the Corporation shall forthwith send another notice to them advising them of that fact and the reasons therefor. (8) If a notice referred to in paragraph (7) of this clause 2.06 discloses that the conversion right has come into effect, the notice shall: (a) include a description of the procedure to be followed to effect the conversion and to have the Converted Shares tendered under the offer; - 8 - (b) include the information set out in paragraph (3) of this clause 2.06; and (c) be accompanied by a copy of the offer and all other material sent to holders of Class B Shares in respect of the offer, and as soon as reasonably possible after any additional material, including a notice of variation, is sent to the holders of Class B Shares in respect of the offer, the Corporation shall send a copy of such additional material to each holder of Class A Subordinate Voting Shares. (9) Prior to or forthwith after sending any notice referred to in paragraph (7) of this clause 2.06, the Corporation shall cause a press release to be issued to a Canadian national news ticker service, describing the contents of the notice. 3.00 CLASS B SHARES 3.01 The holders of the Class B Shares shall be entitled to receive notice of, and to attend and speak at and vote at, any meeting of the shareholders of the Corporation, other than a meeting of the holders of shares of another class as such or of the holders of a series of shares of another class as such, and at such meeting shall have twenty (20) votes for each Class B Share held. 3.02 Subject to any provisions of the Act and to applicable securities laws and the by-laws, regulations or policies of any stock exchange upon which the Class B Shares may then be listed, all or any part of the Class B Shares which are then outstanding shall be purchasable for cancellation by the Corporation at any time, in the open market, by private contract or otherwise, at the lowest price at which, in the opinion of the directors, such shares are obtainable. 3.03 The Class B Shares shall not be redeemable by the Corporation. 3.04 If the Act would in effect require in the absence of this clause 3.04 that an amendment to the Articles of the Corporation to delete or vary any preference, right, condition, restriction, limitation or prohibition attaching to any of the Class B Shares, or to create special shares ranking in priority to or on a parity with the Class B Shares, be confirmed in writing by the holders of 100% or any lesser percentage of the then outstanding Class B Shares, then in lieu of such confirmation in writing such confirmation may be given by at least two-thirds of the votes cast at a meeting of the holders of the Class B Shares - 9 - duly called for that purpose, and at such meeting each holder of Class B Shares shall be entitled to one vote for each Class B Share held. 3.05 The holders of the Class B Shares shall not have any right to vote separately upon any proposal to amend the Articles of the Corporation to: (a) increase any maximum number of authorized shares of a class or series having rights or privileges equal or superior to the Class B Shares; or (b) create a new class of shares equal or superior to the Class B Shares. 3.06 Each Class B Share shall be convertible at any time, at the option of the holder thereof, into a Class A Share, on the basis of one Class A Share for each Class B Share so converted. The holder of Class B Shares desiring to convert such Class B Shares into Class A Shares on the basis aforesaid shall deliver to the transfer agent for the time being of the Class A Shares the share certificate or share certificates representing the Class B Shares which the holder desires to so convert accompanied by a written notice duly executed by such holder or his attorney duly authorized in writing, which notice shall state that such holder elects to convert the Class B Shares represented by such share certificate or shares certificates into Class A Shares in accordance with the provisions hereof and which notice shall further state the name or names (with addresses) in which the share certificate or certificates for Class A Shares issuable on such conversion shall be issued, and if any of the Class A Shares into which such Class B Shares are to be converted are to be issued to a person or persons other than the holder of such Class B Shares, there shall be paid to such transfer agent, for the account of the Corporation, any transfer taxes which may properly be payable. If any share certificate or share certificates representing any of the Class A Shares issuable on conversion are directed to be issued to any person other than the holder of such Class B Shares, the signature of such holder shall be guaranteed by a Canadian chartered bank or such other financial institution as such transfer agent may require. Such holder shall, in addition, comply with such other reasonable requirements as such transfer agent may prescribe. As promptly as practicable after the receipt of such notice of election to convert, the payment of such transfer tax (if any), the delivery of such share certificate or share certificates and compliance with all reasonable requirements of the transfer agent as aforesaid, the Corporation shall cause the transfer agent for the Class A Shares to issue and deliver in accordance with such notice of election to convert a share certificate or share certificates representing the number of Class A Shares into which such Class B Shares have been converted - 10 - in accordance with the provisions of this clause 3.06. Such conversion shall be deemed to have been made immediately prior to the close of business on the date on which all conditions precedent to the conversion of such Class B Shares have been fulfilled and the person or persons in whose name or names any share certificate or share certificates for Class A Shares shall be issuable shall be deemed to have become on the said date the holder or holders of record of the Class A Shares represented thereby; provided, however, that if the transfer books of the Corporation for Class A Shares shall be closed on the said date, the Corporation shall not be required to issue Class A Shares upon such conversion until the date on which such transfer books shall be re-opened and such person or persons shall not be deemed to have become the holder or holders of record of such Class A Shares until the said date on which such transfer books shall be re-opened. There shall be no payment or adjustment on account of any unpaid dividends on the Class B Shares converted or on account of any dividends on the Class A Shares resulting from such conversion. In the event that part only of the Class B Shares represented by any share certificate shall be converted, a share certificate for the remainder of the Class B Shares represented by the said share certificate shall be delivered to the holder converting without charge. 4.00 DIVIDENDS AND DISTRIBUTION RIGHTS OF THE CLASS A AND CLASS B SHARES 4.01 (a) All dividends which are declared in any year in the discretion of the directors on all of the Class A Shares shall be declared and paid in an equal or, in the discretion of the directors, a greater amount per share than on all of the Class B Shares at the time outstanding. All dividends which are declared in any year, in the discretion of the directors, on all of the Class B Shares shall be declared and paid in an equal or, in the discretion of the directors, a lesser amount per share than on all of the Class A Shares outstanding. If any stock dividend is declared on Class A Shares, such dividend may be paid in Class A Shares or in Class B Shares, or partly in one class and partly in the other, if stock dividends in equal or, in the discretion of the directors, lesser amounts per share are declared at the same time on the Class B Shares and are payable in either Class A Shares or in Class B Shares, or partly in one class and partly in the other, regardless of which class the stock dividend was paid on Class A Shares. If any stock dividend is declared on Class B Shares, such dividend may be paid in Class A Shares or in Class B Shares, or partly in one class and partly in the other, if stock dividends in equal or, in the discretion of the directors, greater amounts per share are paid at the same time on the Class A Shares and are payable in either Class A Shares or in Class B Shares, or - 11 - partly in one class and partly in the other, regardless of which class the stock dividend was paid on Class B Shares. (b) All distributions other than dividends (including, but without limiting the generality of the foregoing, any distribution of rights, warrants or options to purchase securities of the Corporation), and all such distributions which may at the time or from time to time be authorized or made: (i) in respect of the Class A Shares, shall be authorized and made in equal, or in the discretion of the directors, greater quantities or amounts per share than on all Class B Shares then outstanding without preference or distinction; and (ii) in respect of the Class B Shares, shall be authorized and made in equal, or in the discretion of the directors, greater quantities or amounts per share than on all Class A Shares then outstanding without preference or distinction. 5.00 SUBDIVISIONS, CONSOLIDATIONS, RECLASSIFICATIONS, WINDING-UP AND LIQUIDATION, ETC. 5.01 No subdivision, consolidation, reclassification or other change of the Class A Shares or the Class B Shares shall be made unless at the time an equivalent or comparable subdivision, consolidation, reclassification or change is made with respect to all of the Class B Shares and Class A Shares, respectively, which are then outstanding. 5.02 In any case where a fraction of a Class A Share or a Class B Share would otherwise be issuable on a subdivision, consolidation, reclassification or change of one or more Class A Shares or Class B Shares, the Corporation shall in lieu thereof adjust such fractional interest by the payment by cheque (to the nearest cent) of an amount related or equivalent to the then current market value of such fractional interest computed on the basis of the last board lot sale price (or the last bid price, if there has been no board lot sale) for the Class A Shares on The Toronto Stock Exchange (or if the Class A Shares are not listed on The Toronto Stock Exchange, on such stock exchange in Canada on which the Class A Shares are listed or traded as may be selected for such purpose by the Directors of Corporation) on the business day on which such stock exchange was open next preceding the date of such subdivision, consolidation, reclassification or change or if the Class A Shares are not then listed on any stock exchange, then the current market price in any public market in which the Class A Shares are traded and otherwise in the discretion of the board of directors. - 12 - 5.03 In the event of the liquidation, dissolution or winding-up of the Corporation or other distribution of the assets of the Corporation amongst its shareholders for the purposes of winding-up its affairs, all of the property and assets of the Corporation available for distribution to the shareholders of the Corporation shall, after providing for preferential payment of the amounts required to be paid under and in respect of any Preference Shares or series thereof ranking in priority, shall be paid or distributed in equal amounts per share on all Class A Shares and Class B Shares at the time outstanding without preference or distinction and the holders thereof shall as such participate in a share-for-share basis equally therein. 6.00 PROVISIONS RELATING TO CLASS A SHARES AND CLASS B SHARES 6.01 Notwithstanding any of the provisions of this Schedule, the Articles of the Corporation hereby provide that, for the purposes of the take-over bid and issuer bid provisions of the Securities Act (Ontario) and the regulations thereunder, both as amended from time to time, (a) the Class A Shares and the Class B Shares shall be treated as, and are hereby deemed to constitute, one class of voting securities, and (b) the published market for such one class of voting securities shall be deemed to be the published market of the Class A Shares. For greater certainty, the provisions of this Section 6.01 shall have no application in the event of a purchase of Class B Shares at a price per share not in excess of the aggregate of (i) the "market price" per share (at the time of such purchase) determined in accordance with the provisions of the Securities Act (Ontario) and the regulations thereunder, (both as amended or replaced from time to time) together with any permitted premium, plus (ii) reasonable brokerage fees or other commissions calculated on a per share basis. For greater certainty, "market price" as at the date of these articles is defined in Section 164 of the Regulation to the Securities Act (Ontario). ----- 5. A) The amalgamation agreement X A) LES ACTIONNAIRES DE CHAQUE has been duly adopted by ----- COMPAGNIE QUI FUSIONNE ONT DUMENT the shareholders of each of ADOPTE LA CONVENTION DE FUSION the amalgamating corporations CONFORMEMENT AU PARAGRAPHE 175(4) as required by subsection DE LA LOI SUR LES COMPAGNIES A LA 175(4) of the Business DATE MENTIONNEE CI-DESSOUS. Corporations Act on the date set out below. -------------------------- Check COCHER A or B A OU B -------------------------- ----- B) The amalgamation has been B) LES ADMINISTRATEURS DE CHAQUE approved by the directors ----- COMPAGNIE QUI FUSIONNE ONT of each amalgamating APPROUVE LA FUSION PAR VOIE DE corporation by a resolution RESOLUTION CONFORMEMENT A as required by section 176 L'ARTICLE 176 DE LA LOI SUR LES of the Business Corporations COMPAGNIES A LA DATE MENTIONNEE Act on the date set out CI-DESSOUS. LES STATUTS DE below. FUSION REPRENNENT ESSENTIELLEMENT The articles of amalgamation LES DISPOSITIONS DES STATUTS in substance contain the CONSTITUTIFS DE provisions of the articles of incorporation of - ---------------------------------------------------------------------------- and are more particularly set ET SONT ENONCES TEXTUELLEMENT out in these articles. AUX PRESENTS STATUTS.
Names of amalgamating Ontario Corporation Number Date of Adoption/ corporations NUMERO DE LA COMPAGNIE EN Approval DENOMINATION SOCIALE ONTARIO DATE D'ADOPTION OU DES COMPAGNIES QUI D'APPROBATION FUSIONNENT - ---------------------------------------------------------------------------- COLOMA RESOURCES 47215 July 29, 1988 LIMITED FIRSTSERVICE 761840 July 1, 1988 CORPORATION
EX-3.2 3 EX-3.2 BY-LAW NUMBER 1 A by-law relating generally to the transaction of the business and affairs of FIRSTSERVICE CORPORATION
Section Contents - ------- -------- One Interpretation Two Execution of Documents Three Directors Four Committees Five Officers Six Protection of Directors, Officers and Others Seven Shares Eight Dividends Nine Meetings of Shareholders Ten Notices Eleven Officers of Divisions Twelve Corporate Seal
BE IT ENACTED as a by-law of the Corporation as follows: SECTION ONE Interpretation 1.01 DEFINITIONS in this by-law, unless the context otherwise requires: "Act" means the Business Corporations Act, 1982 and the regulations thereto, as amended from time to time, or any successor Act or regulations thereto, as the case may be; "articles" means the articles (as that term is defined in the Act) of the Corporation as from time to time amended or restated; "board" means the board of directors of the Corporation; "Corporation" means FirstService Corporation; and "special meeting of shareholders" includes a meeting of any class of shareholders. Save as aforesaid, words and expressions defined in the Act have the same meanings when used herein; and words importing the singular number include the plural and vice versa; words importing gender include the masculine, feminine and neuter genders; and words importing persons include individuals, corporations, partnerships, trusts and unincorporated organizations. - 2 - SECTION TWO Execution of Documents 2.01 EXECUTION OF INSTRUMENTS Deeds, transfers, assignments, contracts, obligations, certificates and other instruments may be signed on behalf of the Corporation by any one director or officer of the Corporation. Notwithstanding any provision to the contrary contained in the by-laws of the Corporation, the board may at any time or times direct the manner in which and the person or persons by whom any particular instrument or class of instruments may or shall be signed. Any signing officer may affix the corporate seal to any instrument requiring the same. 2.02 BANKING ARRANGEMENTS All funds of the Corporation shall be deposited in its name in such account or accounts as are designated by the board. Withdrawals from such account or accounts or the making, signing, drawing, accepting, endorsing, negotiating, lodging, depositing or transferring of any cheques, promissory notes, drafts, acceptances, bills of exchange and orders for the payment of money with the institution maintaining such account or accounts shall be made by such person or persons as the board may from time to time determine. 2.03 VOTING RIGHTS IN OTHER BODIES CORPORATE Any two of the directors or officers of the Corporation, as well as any person so empowered by the board, may execute and deliver instruments of proxy appointing such persons as respectively are named therein the proxy of the Corporation to exercise the voting rights attaching to any securities held by the Corporation. SECTION THREE Directors 3.01 QUORUM Subject to the Articles and Section 3.03, a quorum for the transaction of business at any meeting of the board shall be two-fifths of the number of directors then holding office. 3.02 CALLING OF MEETINGS (a) The board, a quorum of the directors, the chairman of the board, any vice-president, the chief operating officer or the secretary may at any time call a meeting of the board to be held at the time and place determined by the board or by the person calling the meeting. Meetings of the board may be held in any place within or outside Canada. In any financial year, a - 3 - majority of the meetings of the board need not be held within Canada. (b) If a quorum of directors is present, each newly elected board may, without notice, hold its first meeting for the purpose of its organization and the election or appointment of officers, immediately following the meeting of shareholders at which such board was elected. 3.03 NOTICE OF MEETING Notice of the time and place of each meeting of the board shall be given in the manner provided in Section 10.01 to each director not less that 48 hours before the time when the meeting is to be held. A notice of a meeting of directors need not specify the purpose of or the business to be transacted at the meeting except where the Act requires such purpose or business to be specified. A director may in any manner and at any time waive notice of a meeting of directors and attendance of a director at a meeting of directors is a waiver of notice of the meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting was not lawfully called. 3.04 REGULAR MEETINGS The board may appoint a day or days in any month or months for regular meetings of the board at a place and hour to be named. A copy of any resolution of the board fixing the place and time of such regular meetings shall be sent to each director forthwith after being passed, but no other notice shall be required for any such regular meeting except where the Act requires the purpose thereof or the business to be transacted thereat to be specified. 3.05 CHAIRMAN The chairman of any meeting of the board shall be the first mentioned of such of the following officers as have been appointed and who is a director and is present at the meeting: chairman of the board, vice-chairman of the board, chief executive officer, president, chief operating officer or a vice-president. If no such officer is present, the directors present shall choose one of their number to be chairman. 3.06 VOTES TO GOVERN At all meetings of the board every question shall be decided by a majority of the votes cast on the question. In case of any equality of votes the chairman of the meeting shall not be entitled to a second or casting vote. 3.07 REMUNERATION AND EXPENSES The directors shall be paid such remuneration for their services as the board may from time to time determine. The directors shall also be entitled to be reimbursed for travelling and other expenses properly incurred - 4 - by them in attending meetings of the board or any committee thereof. Nothing herein contained shall preclude any director from serving the Corporation in any other capacity and receiving remuneration therefor. SECTION FOUR Committees 4.01 COMMITTEE OF DIRECTORS The Board may appoint committees of directors and delegate to any such committee any of the powers of the board except those which, under the Act, cannot be so delegated. 4.02 TRANSACTION OF BUSINESS The powers of a committee of directors may be exercised by a meeting at which a quorum is present or by resolution in writing signed by all the members of such committee who would have been entitled to vote on that resolution at a meeting of the committee. Meetings of such committee may be held at any place in or outside Canada. 4.03 PROCEDURE Unless otherwise determined by the board, each committee shall have the power to fix its quorum at not less than a majority of its members, to elect its chairman and to regulate its procedure. SECTION FIVE Officers 5.01 APPOINTMENT The board may from time to time designate the offices of the Corporation, including but without limitation chairman of the board, vice-chairman of the board, chief executive officer, chief financial officer, president, one or more vice-presidents (to which title may be added words indicating seniority or function), chief operating officer and secretary, and may specify the duties attaching to such officers, appoint officers, and subject to the provisions of the Act, delegate to such officers powers to manage the business and affairs of the Corporation in any particular. 5.02 TERMS OF EMPLOYMENT AND REMUNERATION The terms of employment of the officers shall be settled by the board. In the absence of written agreement to the contrary, each officer holds office until he resigns, his successor is appointed or he is removed by the board at its pleasure. - 5 - 5.03 AGENTS AND ATTORNEYS The board shall have power from time to time to appoint agents or attorneys of the Corporation in or outside Canada with such powers of management or otherwise (including the power to sub-delegate) as may be thought fit. 5.04 FIDELITY BONDS The board may at any time require any officer, employee or agent of the Corporation as the board deems advisable to furnish a bond for the faithful discharge of his powers and duties in such form and with such surety as the board may from time to time determine. SECTION SIX Protection of Directors, Officers and Others 6.01 LIMITATION OF LIABILITY No director or officer shall be liable for the acts, receipts, neglects or defaults of any other director or officer or employee or for joining in any receipt or other act for conformity, or for any loss, damage or expense happening to the Corporation through the insufficiency or deficiency of any security in or upon which any of the monies of the Corporation shall be invested, or for any loss or damage arising from the bankruptcy, insolvency or tortious acts of any person with whom any of the monies, securities or effects of the Corporation shall be deposited, or for any loss occasioned by any error of judgment or oversight on his part, or for any other loss, damage or misfortune whatever which shall happen in the execution of the duties of his office or in relation thereto; provided that nothing herein shall relieve any director or officer from the duty to act in accordance with the Act and the regulations thereunder or from liability for any breach thereof. 6.02 INDEMNITY Subject to the Act, the Corporation shall indemnify a director or officer, a former director or officer, or a person who acts or acted at the Corporation's request as a director or officer of a body corporate of which the Corporation is or was a shareholder or creditor (or a person who undertakes or has undertaken any liability on behalf of the Corporation or any such body corporate), and his heirs and legal representatives, against all costs, charges and expenses, including an amount paid to settle an action or satisfy a judgment, reasonably incurred by him in respect of any civil, criminal or administrative action or proceeding to which he is made a party by reason of being or having been a director or officer of the Corporation or such body corporate, if (a) he acted honestly and in good faith with a view to the best interests of the Corporation; and - 6 - (b) in the case of a criminal or administrative action or proceeding that is enforced by a monetary penalty, he had reasonable grounds for believing that his conduct was lawful. SECTION SEVEN Shares 7.01 ALLOTMENT The board may from time to time allot, or grant options to purchase, any of the authorized and unissued shares of the Corporation at such time and to such persons and for such consideration as the board shall determine, provided that no share shall be issued until it is fully paid as provided by the Act. 7.02 COMMISSIONS The board may from time to time authorize the Corporation to pay a commission to any person in consideration of his purchasing or agreeing to purchase shares of the Corporation, whether from the Corporation or from any other person, or procuring or agreeing to procure purchasers for any such shares. 7.03 REGISTRATION OF TRANSFER Subject to the provisions of the Act, no transfer of shares shall be registered in a securities register except upon presentation of the certificate representing such shares with a transfer endorsed thereon or delivered therewith duly executed by the registered holder or by his attorney or successor duly appointed, together with such reasonable assurance or evidence of signature, identification and authority to transfer as the board may from time to time prescribe, upon payment of all applicable taxes and any fees prescribed by the board. 7.04 TRANSFER AGENTS AND REGISTRARS The board may from time to time appoint a registrar to maintain the securities register and a transfer agent to maintain the register of transfers and may also appoint one or more branch registrars to maintain branch securities registers and one or more branch transfer agents to maintain branch registers of transfers, but one person may be appointed both registrar and transfer agent. The board may at any time terminate any such appointment. 7.05 NON-RECOGNITION OF TRUSTS Subject to the provisions of the Act, the Corporation shall treat as absolute owner of any share the person in whose name the share is registered in the securities register as if that person had full legal capacity and authority to exercise all rights of ownership, - 7 - irrespective of any indication to the contrary through knowledge or notice of description in the Corporation's records or on the share certificate. 7.06 SHARE CERTIFICATES Every holder of one or more shares of the Corporation shall be entitled, at his option, to a share certificate, or to a non-transferable written acknowledgement of his right to obtain a share certificate, stating the number and class or series of shares held by him as shown on the register thereof. Subject to the Act, share certificates and acknowledgements of a shareholder's right to obtain a share certificate shall be in such respective forms as the board shall from time to time approve. Any share certificate shall be signed in accordance with Section 2.01 and need not be under the corporate seal; provided that, unless the board otherwise determines, certificates representing shares in respect of which a transfer agent and/or registrar has been appointed shall not be valid unless countersigned by or on behalf of such transfer agent and/or registrar. A share certificate shall be manually signed by at least one director or officer of the Corporation or by or on behalf of a registrar, transfer agent, branch transfer agent or other authenticating agent of the Corporation. Notwithstanding the foregoing a share certificate may be executed and delivered by the Corporation if the signatures therein are printed, engraved, lithographed or otherwise are mechanically reproduced in facsimile. A share certificate executed as aforesaid shall be valid notwithstanding that one or both of the officers whose facsimile signature appears thereon no longer holds office at the date of issue of the certificate. 7.07 REPLACEMENT OF SHARE CERTIFICATES Where the registered holder of a share certificate claims that the share certificate has been lost, apparently destroyed or wrongfully taken, the Corporation shall issue a new share certificate in place of the original share certificate if the owner: (a) so requests before the Corporation has notice that the share certificate has been acquired by a bona fide purchaser; (b) files with the Corporation an indemnity bond sufficient in the Corporation's opinion to protect the Corporation and any transfer agent, registrar or other agent of the Corporation from any loss that any of them may suffer by complying with the request to issue a new share certificate; and (c) satisfies any other reasonable requirements imposed by the Corporation. - 8 - 7.08 JOINT SHAREHOLDERS If two or more persons are registered as joint holders of any share, the Corporation shall not be bound to issue more than one certificate in respect thereof, and delivery of such certificate to one of such persons shall be sufficient delivery to all of them. Any one of such persons may give effectual receipts for the certificate issued in respect thereof or for any dividend, bonus, return of capital or other money payable or warrant issuable in respect of such share. 7.09 DECEASED SHAREHOLDERS In the event of the death of a holder, or of one of the joint holders, of any share, the Corporation shall not be required to make any entry in the securities register in respect thereof or to make payment of any dividends thereon except upon production of all such documents as may be required by law and upon compliance with the reasonable requirements of the Corporation and its transfer agents. SECTION EIGHT Dividends 8.01 DIVIDEND CHEQUES A dividend payable in cash shall be paid by cheque to the order of each registered holder of shares of the class or series in respect of which it has been declared and mailed by prepaid ordinary mail to such registered holder at his recorded address, unless such holder otherwise directs. In the case of joint holders, the cheque shall, unless such joint holders otherwise direct, be made payable to the order of all of such joint holders and mailed to them at their recorded address and if more than one address appears on the register, at the first such recorded address. The mailing of such cheque as aforesaid, unless the same is not paid on due presentation, shall satisfy and discharge the liability for the dividend to the extent of the sum represented thereby plus the amount of any tax which the Corporation is required to and does withhold. 8.02 NON-RECEIPT OF CHEQUES In the event of non-receipt of any dividend cheque by the person to whom it is sent as aforesaid, the Corporation shall issue to such person a replacement cheque for a like amount on such terms as to indemnity, reimbursement of expenses and evidence of non-receipt and to title as the board may from time to time prescribe, whether generally or in any particular case. 8.03 UNCLAIMED DIVIDENDS Any dividend unclaimed after a period of six years from the date on which the same has been declared to be payable shall be forfeited and shall revert to the Corporation. - 9 - SECTION NINE Meeting of Shareholders 9.01 ANNUAL MEETINGS The annual meeting of shareholders shall be held at such time in each year and, subject to Section 9.03, at such place as the board may from time to time determine, for the purpose of there being placed before the meeting the financial statements and reports required by the Act to be placed before the annual meeting, electing directors, appointing auditors and for the transaction of such other business as may properly be brought before the meeting. 9.02 SPECIAL MEETINGS Subject to the Act, the board shall have power to call a special meeting of shareholders at any time. 9.03 PLACE OF MEETINGS Subject to the articles, a meeting of shareholders of the Corporation shall be held at such place in or outside Ontario as the board may determine or, in the absence of such determination, at the place where the registered office of the Corporation is located. 9.04 NOTICE OF MEETINGS Notice of the time and place of each meeting of shareholders shall be given in the manner provided in Section 10.01 not less than 21 days nor more than 50 days before the date of the meeting to each director, to the auditor and to each shareholder who at the close of business on the record date for notice, if any, is entered in the securities register as the holder of one or more shares carrying the right to vote at or entitled to notice of the meeting. Notice of a meeting of shareholders called for any purpose other than consideration of the financial statements and auditor's report, election of directors and reappointment of the incumbent auditor shall state the nature of such business in sufficient detail to permit the shareholder to form a reasoned judgment thereon and shall state the text of any special resolution to be submitted to the meeting. A shareholder may in any manner waive notice of or otherwise consent to a meeting of shareholders. 9.05 LIST OF SHAREHOLDERS ENTITLED TO NOTICE For every meeting of shareholders, the Corporation shall prepare a list of shareholders entitled to receive notice of the meeting, arranged in alphabetical order and showing the number of share entitled to vote at the meeting held by each shareholder. If a record date for the meeting is fixed pursuant to Section 9.06, the shareholders listed shall be those registered at the close of business on such record date. If no record date is fixed, the shareholders listed shall be those registered at the close of - 10 - business on the day immediately preceding the day on which notice of the meeting is given, or where no such notice is given, the day on which the meeting is held. The list shall be available for examination by any shareholder during usual business hours at the registered office or the Corporation or at the place where the securities register is kept and at the place where the meeting is held. 9.06 RECORD DATE FOR NOTICE The board may fix in advance a date preceding the date of any meeting of shareholders by not more than 50 days and not less than 21 days, as a record date for the determination of the shareholders entitled to notice of the meeting and notice of any such record date shall be given not less than 14 days before such record date by newspaper advertisement in the manner provided in the Act. If no record date is so fixed, the record date for the determination of the shareholders entitled to notice of the meeting shall be the close of business on the day immediately preceding the day on which the notice is given. 9.07 CHAIRMAN, SECRETARY AND SCRUTINEERS The chairman of any meeting of shareholders shall be the first mentioned of such of the following officers as have been appointed and who is present at the meeting: chairman of the board, vice-chairman of the board, chief executive officer, chief operating officer, president or a vice-president who is a shareholder. If no such officer is present within 15 minutes from the time fixed for the holding of the meeting, the persons present and entitled to vote shall choose one of their number to be chairman. If the secretary of the Corporation is absent, the chairman shall appoint some person, who need not be a shareholder, to act as secretary of the meeting. If desired, one or more scrutineers, who need not be shareholders, may be appointed by a resolution or by the chairman with the consent of the meeting. 9.08 PERSONS ENTITLED TO BE PRESENT The only persons entitled to be present at a meeting of shareholders shall be those entitled to vote thereat, the directors and auditors of the Corporation and others who, although not entitled to vote, are entitled or required under any provision of the Act or the articles or by-laws to be present at the meeting. Any other person may be admitted only on the invitation of the chairman of the meeting or with the consent of the meeting. 9.09 QUORUM Any two shareholders entitled to vote at a meeting of shareholders, whether present in person or represented by proxy, constitute a quorum. If a quorum is present at the opening of a meeting of shareholders, the shareholders present may proceed with the business of the meeting notwithstanding that a quorum is not present throughout the meeting. - 11 - 9.10 PROXIES Every shareholder entitled to vote at a meeting of shareholders may appoint a proxyholder, or one or more alternate proxyholders, who need not be shareholders, to attend and act at the meeting in the manner and to the extent authorized and with the authority conferred by the proxy. A proxy shall be in writing executed by the shareholder or his attorney authorized in writing and shall conform with the requirements of the Act. 9.11 REPRESENTATIVE If a body corporate or association is a shareholder of the Corporation, the Corporation shall recognize any individual authorized by a resolution of the board of directors or governing body of the body corporate or association to represent it at meetings of shareholders of the Corporation. An individual so authorized may exercise on behalf of the body corporate or association he represents all the powers it could exercise if it were an individual shareholder. 9.12 JOINT SHAREHOLDERS If two or more persons hold shares jointly, any one of them present in person or represented by proxy at a meeting of shareholders may, in the absence of the other or others, vote the shares; but if two or more of those persons are present in person or represented by proxy and vote, they shall vote as one on the share jointly held by them. 9.13 VOTES TO GOVERN At any meeting of shareholders every question shall, unless otherwise required by the articles or by-laws or by law, be determined by the majority of the votes cast on the question. In case of an equality of votes either upon a show of hands or upon a poll, the chairman of the meeting shall not be entitled to a second or casting vote. 9.14 VOTING (a) Voting at a meeting of shareholders shall be by show of hands except where a ballot is demanded by a shareholder or proxyholder entitled to vote at the meeting. A shareholder or proxyholder may demand a ballot either before or after any vote by show of hands. Upon a show of hands every person present and entitled to vote has one vote. Whenever a vote by show of hands has been taken upon a motion, unless a ballot thereon is demanded, a declaration by the chairman of the meeting that the vote upon the motion has been carried or carried by a particular majority or not carried and an entry to that effect in the minutes of the meeting is prima facie evidence of the fact without proof of the number or proportion of the votes recorded in favour of or against the motion, and the result of the votes so taken is a decision of the shareholders of the Corporation upon the motion. A demand for a ballot may be withdrawn at any time prior to the taking of the ballot. - 12 - (b) Upon a ballot each shareholder who is present or represented by proxy is entitled, in respect of the shares which he is entitled to vote at the meeting upon the motion, to that number of shares provided by the Act or the articles in respect of those shares and the result of the ballot is the decision of the shareholders of the Corporation upon the motion. 9.15 ADJOURNMENT If a meeting of shareholders is adjourned for less than 30 days, it shall not be necessary to give notice of the adjourned meeting, other than by announcement of the adjournment at the meeting which has been adjourned. If a meeting of shareholders is adjourned by one or more adjournments for an aggregate of 30 days or more, notice of the adjourned meeting shall be given as for an original meeting. SECTION TEN Notices 10.01 METHOD OF GIVING NOTICES Any notice (which term includes any communication or document) to be given (which term includes sent, delivered or served) pursuant to the Act, the articles, the by-laws or otherwise to a shareholder, director, officer, auditor or member of a committee of the board shall be sufficiently given if delivered personally to the person to whom it is to be given or if delivered to his recorded address or if mailed to him at his recorded address by prepaid ordinary or air mail or if sent to him at his recorded address by means of prepaid transmitted or recorded communication. A notice so delivered shall be deemed to have been given when delivered or when deposited in a post office or public letter box; and a notice so sent by any means of transmitted or recorded communication shall be deemed to have been given when dispatched or delivered to the appropriate communications company or agency or its representative for dispatch. The secretary may change or cause to be changed the recorded address of any shareholder, director, officer, auditor or member of a committee of the board in accordance with any information believed to him to be reliable. 10.02 NOTICE TO JOINT SHAREHOLDERS If two or more persons are registered as joint holders of any share, any notice shall be addressed to all of such joint holders but notice to one of such persons shall be sufficient notice to all of them. 10.03 COMPUTATION OF TIME Unless otherwise provided for in the Act, in computing the date when notice must be given under any provision requiring a specified number of days' notice of any meeting or other event, the date of giving the notice shall be - 13 - excluded and the date of the meeting or other event shall be included. 10.04 UNDELIVERED NOTICES If any notice given to a shareholder pursuant to Section 10.01 is returned on three consecutive occasions because he cannot be found, the Corporation shall not be required to give any further notices to such shareholder until he informs the Corporation in writing of his new address. 10.05 OMISSIONS AND ERRORS The accidental omission to give any notice to any shareholder, director, officer, auditor or member of a committee of the board or the non-receipt of any notice by any such person or any error in any notice not affecting the substance thereof shall not invalidate any action taken at any meeting held pursuant to such notice or otherwise founded thereon. 10.06 PERSONS ENTITLED BY DEATH OR OPERATION OF LAW Every person who, by operation of law, transfer, death of a shareholder or any other means whatsoever, shall become entitled to any share, shall be bound by every notice in respect of any share which shall have been duly given to the shareholder from whom he derives his title to such share prior to his name and address being entered on the securities register (whether such notice was given before or after the happening of the event upon which he became so entitled) and prior to his furnishing to the Corporation the proof of authority or evidence of his entitlement prescribed by the Act. 10.07 WAIVER OF NOTICE Any shareholder (or his duly appointed proxyholder), director, officer, auditor or member of a committee of the board may at any time waive notice, or waive or abridge the time for any notice, required to be given to him under any provision of the Act, the articles, the by-laws or otherwise and such waiver or abridgement shall cure any default in the giving or in the time of such notice, as the case may be. Any such waiver or abridgement shall be in writing except a waiver of notice of a meeting of shareholders or of the board or of a committee of the board, which may be given in any manner. 10.08 SIGNATURE OF NOTICE The signature of any notice to be given by the Corporation may be written or printed or partly written and partly printed. - 14 - SECTION ELEVEN Officers of Divisions 11.01 OFFICERS OF DIVISIONS From time to time the board or any officer of the Corporation duly authorized may appoint one or more officers for any division of the business or of any branch office of the Corporation, prescribe their powers and duties and settle their terms of employment and remuneration. The board or any such officer may remove at its or his pleasure any officer so appointed, without prejudice to such officer's rights under any employment contract. Officers of such divisions or branch offices shall not, as such, be officers of the Corporation. SECTION TWELVE Corporate Seal 12.01 CORPORATE SEAL Any person authorized to sign any document may affix the corporate seal of the Corporation thereto, if the Corporation has a corporate seal. ENACTED by the board of directors as of the 25th day of February, 1988. WITNESS the corporate seal of the Corporation. /s/ [ILLEGIBLE] ----------------------- President /s/ [ILLEGIBLE] ----------------------- Secretary by-law.lh (wordpro, sgordon) June 20, 1988 - 15 - BY-LAW NO. 2 A by-law relating to the borrowing of money and the issuing of securities by FIRSTSERVICE CORPORATION (the "Corporation"). BE IT ENACTED as a by-law of the Corporation as follows: 1. Without limiting the borrowing powers of the Corporation as set forth in the Business Corporations Act, 1982 (the "Act") the directors of the Corporation may, from time to time without authorization of the shareholders: (a) borrow money upon the credit of the Corporation; (b) issue, re-issue, sell or pledge debt obligations of the Corporation; (c) subject to section 20 of the Act, give a guarantee on behalf of the Corporation to secure performance of any obligation of any person; and (d) mortgage, hypothecate, pledge or otherwise create a security interest in all or any property of the Corporation, owned or subsequently acquired, to secure any obligation of the Corporation. 2. The Directors may, from time to time, by resolution delegate any or all of the powers referred to in paragraph 1 of this by-law to a director, a committee of directors or one or more officers of the Corporation. MADE as of the 25th day of February, 1988. /s/ Jay S. Hennick /s/ Jay S. Hennick - -------------------------- -------------------------- President - Jay S. Hennick Secretary - Jay S. Hennick COL-BYL2.KSP [LOGO] BORROWING BY-LAW FIRSTSERVICE CORPORATION --------------------------------------------------- Name of Corporation BY-LAW NO. 3 x ----- RESPECTING THE BORROWING OF MONEY BY THE CORPORATION RESOLVED: WHEREAS it is necessary for the purposes of the Corporation to borrow money or obtain other financial assistance on the credit of the Corporation from time to time from one of the chartered banks of Canada: THEREFORE BE IT ENACTED by the Directors of FirstService Corporation, as a By-law thereof: 1. That the Directors of the Corporation be and they are hereby authorized to borrow moneys or obtain other financial assistance from time to time from the Bank of Montreal (the "Bank") (including without limitation through the issuance of bills of exchange drawn by the Corporation and accepted by the Bank) upon the credit of the Corporation in such amounts as they deem proper and by way of overdraft or otherwise. 2. That any promissory notes, bills of exchange or other negotiable paper (including renewals thereof in whole or in part) signed on behalf of the Corporation by the officer or officers of the Corporation authorized from time to time to sign negotiable instruments on its behalf and granted to or accepted by the Bank for moneys borrowed and interest thereon as may be agreed upon or other financial assistance obtained from the Bank shall be binding upon the Corporation. 3. That the Directors may from time to time, if they see fit to do so, grant securities by way of mortgage, hypothecation, pledge or otherwise covering all or any of the property and assets of the Corporation present and future as security for all or any moneys borrowed by the Corporation from the Bank or any other liability of the Corporation to the Bank, and any such mortgage, hypothecation, pledge or other security shall be valid and binding upon the Corporation if signed by any of the officers authorized to sign negotiable instruments on the Corporation's behalf. 4. All contracts, deeds, grants, assurances and documents reasonably required by the Bank or its Counsel for all or any of the purposes aforesaid shall be executed and carried into effect by the proper officers of the Corporation* (and when necessary the seal of the Corporation shall be affixed thereto). *Delete the bracketed words if not appropriate 5. This By-law when sanctioned by the Shareholders shall be irrevocable until a by-law repealing this By-law shall have been confirmed or sanctioned by the Shareholders and a copy thereof duly certified* (under the seal of the Corporation) delivered to the Bank, and meanwhile all the powers and authorities hereby conferred shall continue in force. I CERTIFY that the foregoing is true copy of By-Law No. 3 of** FirstService Corporation duly enacted by the Directors of the said Corporation and duly confirmed or sanctioned by the Shareholders thereof as required by law. **Insert Corporation Name AS WITNESS* (the corporate seal of the Corporation) this 7th day of June, 1988. /s/ [ILLEGIBLE] --------------- Secretary X MEMO AFFIX SEAL EX-10.1 4 EX-10.1 SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF APRIL 1, 1999 FIRSTSERVICE CORPORATION AS CANADIAN BORROWER AND FIRSTSERVICE (USA), INC. AND FIRSTSERVICE DELAWARE, LP AS U.S. BORROWERS AND THE WHOLLY-OWNED SUBSIDIARIES NAMED ON THE EXECUTION PAGES HEREOF AS UNLIMITED GUARANTORS AND DRESDNER BANK CANADA AS LEAD ARRANGER AND FIRST CHICAGO NBD BANK, CANADA, SOCIETE GENERALE (CANADA) AND THE TORONTO-DOMINION BANK AS CO-ARRANGERS AND ROYAL BANK OF CANADA, CANADIAN IMPERIAL BANK OF COMMERCE AND THE BANK OF NOVA SCOTIA AS MANAGERS AND THE BANKS NAMED ON THE EXECUTION PAGES HEREOF AS LENDERS AND DRESDNER BANK CANADA AS COLLATERAL AGENT AND DRESDNER BANK CANADA AS CANADIAN ADMINISTRATIVE AGENT AND DRESDNER BANK CANADA AS U.S. ADMINISTRATIVE AGENT MEIGHEN DEMERS FOGLER RUBINOFF LENDERS' COUNSEL BORROWERS' CANADIAN COUNSEL TABLE OF CONTENTS
ARTICLE I DEFINITIONS..............................................................................4 1.1 DEFINITIONS.....................................................................4 1.2 REFERENCES.....................................................................25 1.3 INTERPRETATION.................................................................25 1.4 HEADINGS AND TABLE OF CONTENTS.................................................26 1.5 ACCOUNTING TERMS...............................................................26 1.6 RECITALS.......................................................................26 1.7 PRECEDENCE.....................................................................26 ARTICLE II FACILITIES..............................................................................27 2.1 FACILITIES.....................................................................27 2.2 NOTICE AND REVOLVING NATURE OF CERTAIN BORROWINGS..............................27 2.3 CONVERSION.....................................................................28 2.4 MAKING BORROWINGS..............................................................29 2.5 PARTICIPATION OF EACH LENDER...................................................30 2.6 BANKERS' ACCEPTANCES...........................................................30 2.7 ACCEPTANCE DATE PROCEDURE......................................................31 2.8 PURCHASE OF BANKERS' ACCEPTANCES...............................................32 2.9 PAYMENT OF BANKERS' ACCEPTANCES................................................33 2.10 SET-OFF AND NETTING............................................................33 2.11 LETTERS OF CREDIT..............................................................34 ARTICLE III REPAYMENT AND ACCOUNTS..................................................................38 3.1 REPAYMENT......................................................................38 3.2 ACCOUNTS KEPT BY THE CANADIAN ADMINISTRATIVE AGENT.............................38 3.3 ACCOUNTS KEPT BY THE U.S. ADMINISTRATIVE AGENT.................................38 3.4 ACCOUNTS KEPT BY EACH CANADIAN LENDER..........................................39 3.5 ACCOUNTS KEPT BY U.S. LENDERS..................................................39 3.5A PROMISSORY NOTES...............................................................39 3.6 EXCESS RESULTING FROM EXCHANGE RATE CHANGE.....................................40 3.7 CURRENCY.......................................................................40 3.8 EXTENSION OF FINAL MATURITY DATE...............................................40 ARTICLE IV INTEREST AND ACCEPTANCE FEE.............................................................43 4.1 INTEREST ON LIBOR LOANS........................................................43
4.2 INTEREST ON COF LOANS..........................................................44 4.3 INTEREST ON PRIME LOANS........................................................44 4.4 INTEREST ON ALTERNATE BASE RATE LOANS..........................................45 4.5 LIBOR INTEREST PERIODS OR COF INTEREST PERIODS.................................46 4.6 INTEREST ON OVERDUE AMOUNTS....................................................46 4.7 ACCEPTANCE FEE.................................................................47 4.8 PRICING PERIODS................................................................47 ARTICLE V CONDITIONS PRECEDENT....................................................................47 5.1 CONDITIONS PRECEDENT...........................................................47 5.2 CONDITIONS PRECEDENT TO BORROWINGS UNDER THE ACQUISITION FACILITIES............50 5.3 WAIVER.........................................................................52 5.4 HOSTILE TAKEOVER...............................................................52 ARTICLE VI PREPAYMENT, CANCELLATION, MANDATORY APPLICATION OF CASH PROCEEDS............................................................52 6.1 PREPAYMENT AND CANCELLATION....................................................52 6.2 NOTICE.........................................................................53 6.3 STATUS OF LENDER...............................................................53 6.4 FEES...........................................................................54 6.5 MANDATORY APPLICATION OF CASH PROCEEDS.........................................54 ARTICLE VII SPECIAL LIBOR, COF AND INCREASED COST PROVISIONS........................................54 7.1 SUBSTITUTE RATE OF BORROWING...................................................54 7.2 INCREASED COST.................................................................55 7.3 ILLEGALITY.....................................................................56 7.4 INDEMNITY......................................................................57 7.5 OTHER INCREASED COSTS OR REDUCTIONS IN RETURN..................................57 7.6 ADDITIONAL COST IN RESPECT OF TAX..............................................59 7.7 CLAIMS UNDER SECTION 7.6.......................................................60 7.8 TAX RECEIPTS...................................................................60 7.9 INTERNAL REVENUE SERVICE FORMS.................................................61 ARTICLE VIII REPRESENTATIONS, WARRANTIES & COVENANTS.................................................62 8.1 REPRESENTATIONS AND WARRANTIES.................................................62 8.2 COVENANTS......................................................................66
ARTICLE IX EVENTS OF DEFAULT.......................................................................76 9.1 EVENTS OF DEFAULT..............................................................76 9.2 SECURITY.......................................................................80 9.3 REMEDIES NOT EXCLUSIVE.........................................................80 9.4 SET-OFF........................................................................80 ARTICLE X PAYMENTS................................................................................81 10.1 PAYMENTS TO AGENTS.............................................................81 10.2 PAYMENTS BY LENDERS TO AGENTS..................................................81 10.3 PAYMENTS BY AGENTS TO BORROWERS................................................82 10.4 DISTRIBUTION TO LENDERS AND APPLICATION OF PAYMENTS............................82 10.5 NO SET-OFF OR COUNTERCLAIM.....................................................82 10.6 NON-RECEIPT BY AGENTS..........................................................82 10.7 WHEN DUE DATE NOT SPECIFIED....................................................83 10.8 AGENTS' AUTHORITY TO DEBIT.....................................................83 ARTICLE XI EXPENSES................................................................................83 11.1 PAYMENT OF EXPENSES............................................................83 11.2 SURVIVAL.......................................................................84 11.3 ENVIRONMENTAL INDEMNITY........................................................84 ARTICLE XII FEES....................................................................................86 12.1 COMMITMENT FEES................................................................86 ARTICLE XIII THE AGENTS AND THE LEAD ARRANGER........................................................87 13.1 AGENTS.........................................................................87 13.2 AGENTS' RESPONSIBILITY.........................................................88 13.3 AGENTS' DUTIES.................................................................89 13.4 PROTECTION OF AGENTS, LEAD ARRANGER, CO-ARRANGERS AND MANAGERS.................90 13.5 INDEMNIFICATION OF AGENTS......................................................91 13.6 TERMINATION OR RESIGNATION OF AGENT............................................91 13.7 RIGHTS OF AN AGENT AS LENDER...................................................92 13.8 AUTHORIZED WAIVERS, VARIATIONS AND OMISSIONS...................................92 13.9 FINANCIAL INFORMATION CONCERNING THE BORROWERS OR GUARANTORS...................93 13.10 KNOWLEDGE OF FINANCIAL SITUATION OF BORROWERS..................................93
13.11 LEGAL PROCEEDINGS..............................................................93 13.12 CAPACITY AS AGENT..............................................................93 13.13 CAPACITY AS ARRANGERS..........................................................94 13.14 DEPOSITS OR LOANS RESPECTING THE BORROWERS.....................................94 ARTICLE XIV ASSIGNMENTS AND TRANSFERS...............................................................94 14.1 BENEFIT OF AGREEMENT...........................................................94 14.2 ASSIGNMENTS AND TRANSFERS BY A BORROWER OR AN UNLIMITED GUARANTOR..............94 14.3 ASSIGNMENTS AND TRANSFERS BY A LENDER..........................................94 14.4 TRANSFER CERTIFICATE...........................................................95 14.5 NOTICE.........................................................................96 14.6 SUB-PARTICIPATIONS.............................................................96 14.7 DISCLOSURE.....................................................................97 14.8 ASSIGNMENT TO FEDERAL RESERVE BANK.............................................97 ARTICLE XV GOVERNING LAW, COURTS AND JUDGMENT CURRENCY.............................................97 15.1 GOVERNING LAW..................................................................97 15.2 COURTS.........................................................................97 15.3 JUDGMENT CURRENCY..............................................................98 ARTICLE XVI GUARANTORS' OBLIGATIONS.................................................................99 16.1 GUARANTEE......................................................................99 ARTICLE XVII MISCELLANEOUS..........................................................................101 17.1 EQUAL RANKING OF LENDERS......................................................101 17.2 SHARING OF INFORMATION........................................................101 17.3 SEVERABILITY..................................................................101 17.4 REMEDIES AND WAIVERS..........................................................102 17.5 DIRECT OBLIGATION.............................................................102 17.6 NOTICES.......................................................................102 17.7 COUNTERPARTS..................................................................103 17.8 LIMIT ON RATE OF INTEREST.....................................................103
SCHEDULES "A" Call Price Formulae "B" Net Proceeds of Bankers' Acceptances "C" Security "D" Shareholders' Agreements "E" Transfer Certificate "F" Form of Undertaking "G" Form of Conversion Notice "H" Form of Bankers' Acceptance "I" Details of Issue "J" Form of Officer's Certificate "K" Intentionally Deleted "L" Intentionally Deleted "M" Intentionally Deleted "N" Form of Officer's Certificate Re: Acquisition Facility "O" Calculations - Available Acquisition Amount "P" Permitted Encumbrances Re: Real Property "Q" Form of Promissory Note SECOND AMENDED AND RESTATED CREDIT AGREEMENT DATED AS OF APRIL 1, 1999 AMONG: FIRSTSERVICE CORPORATION, a corporation duly organized and existing under the laws of Ontario, AND: FIRSTSERVICE (USA), INC., a corporation duly organized and existing under the laws of the State of Delaware and FIRSTSERVICE DELAWARE, LP, a limited partnership duly organized and existing under the laws of the State of Delaware, AND: THE WHOLLY-OWNED SUBSIDIARIES NAMED ON THE EXECUTION PAGES HEREOF AND: DRESDNER BANK CANADA, as the lead arranger, AND: FIRST CHICAGO NBD BANK, CANADA, SOCIETE GENERALE (CANADA) AND THE TORONTO-DOMINION BANK, as co-arrangers AND: ROYAL BANK OF CANADA, CANADIAN IMPERIAL BANK OF COMMERCE AND THE BANK OF NOVA SCOTIA, as managers AND: THE BANKS NAMED ON THE EXECUTION PAGES HEREOF, as lenders - 2 - AND: DRESDNER BANK CANADA, as collateral agent, AND: DRESDNER BANK CANADA, as Canadian administrative agent AND: DRESDNER BANK CANADA, as U.S. administrative agent WHEREAS, the Canadian Borrower, the Unlimited Guarantors, Dresdner Bank Canada, The Toronto-Dominion Bank, First Chicago NBD Bank Canada, the Lead Arranger and Dresdner Bank Canada as Agent entered into a Credit Agreement dated as of December 16, 1996 (the "Original Credit Agreement"); AND WHEREAS, the Original Credit Agreement was amended as of August 7, 1997, September 30, 1997, January 8, 1998, January 12, 1998 and May 13, 1998; AND WHEREAS the Original Credit Agreement so amended was amended and restated by way of an amended and restated credit agreement dated as of June 1, 1998 (the "First Amended and Restated Credit Agreement"); AND WHEREAS, the parties hereto desire to amend and restate the terms of the First Amended and Restated Credit Agreement; WHEREAS the Borrowers have requested that the Lead Arranger, the Co- Arrangers and the Managers arrange for the Lenders to grant: (a) a revolving senior secured credit facility (including the Cdn. Overdraft Facility as hereinafter defined) in an aggregate amount not exceeding Cdn. $7,000,000 or the Equivalent Amount thereof in U.S. Dollars to be made available to the Canadian Borrower by the Canadian Lenders (the "Canadian Revolving Facility") to finance working capital needs and capital expenditures of the Canadian Borrower and its Subsidiaries; - 3 - (b) a revolving senior secured credit facility (including the U.S. Overdraft Facility as hereinafter defined) in an aggregate amount not exceeding U.S. $19,000,000 to be made available to the U.S. Borrowers by the U.S. Lenders (the "U.S. Revolving Facility") to finance working capital needs and capital expenditures of Subsidiaries of the Canadian Borrower located in the United States. (c) a revolving senior secured acquisition credit facility in an aggregate amount not exceeding Cdn. $50,000,000 less amounts outstanding under the Canadian Revolving Facility or the Equivalent Amount thereof in U.S. Dollars to be made available to the Canadian Borrower by the Canadian Lenders (the "Canadian Acquisition Facility") to refinance existing debt under the Acquisition Facility (as defined in the First Amended and Restated Credit Agreement) and finance future acquisitions by the Canadian Borrower and its Subsidiaries; and (d) a revolving senior secured acquisition credit facility in an aggregate amount not exceeding U.S. $130,000,000 less amounts outstanding under the U.S. Revolving Facility to be made available to the U.S. Borrowers by the U.S. Lenders to finance the purchase by the U.S. Borrowers of certain loans made by the Canadian Borrower to its Subsidiaries and to finance loans to be made by the U.S. Borrowers to Subsidiaries of the Canadian Borrower to finance acquisitions by such Subsidiaries (the "U.S. Acquisition Facility"); (the Canadian Revolving Facility and the U.S. Revolving Facility, referred to herein collectively as the Revolving Facilities, the Canadian Acquisition Facility and the U.S. Acquisition Facility referred to herein collectively as the "Acquisition Facilities", the Cdn. Overdraft Facility and the U.S. Overdraft Facility referred to herein collectively as the "Overdraft Facilities" and the Revolving Facilities, Overdraft Facilities and the Acquisition Facilities referred to herein collectively as the "Facilities"); AND WHEREAS the Lead Arranger, the Co-Arrangers and the Managers have made such arrangements and the Lenders are willing to grant such Facilities upon and subject to the following terms and conditions; NOW THEREFORE in consideration of the respective covenants of the parties contained herein and other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged) the parties amend and restate with effect as and from the Effective Date the terms of the First Amended and Restated Credit Agreement and the parties agree as follows: - 4 - ARTICLE I DEFINITIONS 1.1 DEFINITIONS In this Agreement, unless the context otherwise requires, the terms defined in the introduction of the parties and the recitals shall have, as herein used, the same meanings and: "30 DAY BA REFERENCE RATE" means, in respect of a Prime Loan, the rate calculated from time to time by the Canadian Administrative Agent as the Reference Bankers' Acceptance Discount Rate applicable for bankers' acceptances having 30 day terms and a face value equal to or in excess of Cdn. $300,000 during the Quarter preceding an Interest Date. "ACCEPTANCE DATE" means any Business Day on which a Bankers' Acceptance is or is requested to be issued hereunder. "ACCEPTANCE FEE" means in respect of any Bankers' Acceptance outstanding at any time: (a) prior to June 1, 2000, at any time during: (i) a Low Pricing Period or a Mid Pricing Period: 1.25% per annum; and (ii) a Higher Pricing Period: 1.50% per annum; and (b) on or after June 1, 2000, at any time during: (i) a Low Pricing Period: 1.00% per annum; (ii) a Mid-Pricing Period: 1.25% per annum; and (iii) a Higher Pricing Period: 1.50% per annum. "ACCOMMODATION" has the meaning attributed thereto in Section 7.5 (a). "ACCOUNT BANK" means (a) in respect of the Canadian Borrower and its Subsidiaries which carry on business in Canada, a Schedule I Canadian chartered bank acceptable to the Lenders, and (b) in respect of each of the U.S. Borrowers and any Subsidiaries of the Canadian Borrower which carry on business in the United States of America, a United States financial institution acceptable to the Lenders, and (c) any other bank or other financial institution appointed in replacement thereof under Section 13.3 (c), in any case, - 5 - at which a Borrower has established one or more accounts which shall be debited by the Agents in accordance with Section 10.8. "ACCOUNTS" means the accounts kept by the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, pursuant to Section 3.2 and 3.3 to record the Borrowers' liabilities to the Agents and each Lender under this Agreement. "ACQUISITION ENTITY" means an Eligible Business acquired by the Canadian Borrower or a Subsidiary thereof as permitted under this Agreement. "ACQUISITION FACILITIES" has the meaning attributed thereto in the recitals. "ADDITIONAL COMPENSATION" has the meaning attributed thereto in Section 7.2. "ADDITIONAL OTHER COMPENSATION" has the meaning attributed thereto in Section 7.5. "ADJUSTED EBITDA" means, in respect of any 12 month period, EBITDA of the Canadian Borrower on a consolidated basis for such period adjusted to include the EBITDA of all applicable Acquisition Entities for such period as demonstrated by the Canadian Borrower to the satisfaction of the Majority Lenders, including pro forma trailing EBITDA for a period of 12 consecutive calendar months for each such Acquisition Entity and a full year impact of the cost savings readily identifiable and which can be immediately implemented such as elimination of salaries for redundant employees and elimination of various administrative functions which will, in the reasonable opinion of the Canadian Borrower, satisfactory to the Majority Lenders, become unnecessary or otherwise more cost effectively performed. "ADVANCE" means an advance of money under the Facilities. "AFFECTED SUBSIDIARY" means any Subsidiary other than the Wholly-Owned Subsidiaries, Nutrilawn International Inc., F.C.L.S. Inc. or Sidea Corporation (unless the Majority Lenders shall at any time advise the Borrowers in writing that F.C.L.S. Inc. or Sidea Corporation is not to be excluded). "AFFILIATE" means, in respect of any Person (the "first Person"), any Person which, directly or indirectly, controls or is controlled by or is under common control with the first Person; and for the purpose of this definition, "control" (including, with correlative meanings, the terms "controlled by" and "under common control with") means the power to direct, or cause to be directed, the management and policies of a Person whether through the ownership of voting shares or by contract or otherwise. - 6 - "AGENTS" means collectively the Canadian Administrative Agent, the Collateral Agent and the U.S. Administrative Agent and "Agent" means any one of the Canadian Administrative Agent, the Collateral Agent or the U.S. Administrative Agent. "AGREEMENT" means this Second Amended and Restated Credit Agreement dated as of April 1, 1999 and any future amendments or supplements to it. "ALTERNATE BASE RATE" means for any day and with respect to all Alternate Base Rate Loans, a fluctuating interest rate per annum equal to the greater of the base rate most recently announced by the Alternate Base Rate Reference Bank as its reference rate or the Federal Funds Rate plus 1/2% per annum. The Alternate Base Rate is not necessarily the lowest rate of interest offered by the Alternate Base Rate Reference Bank for extensions of credit. "ALTERNATE BASE RATE LOANS" mean Loans, or any portion thereof, made available by the Canadian Lenders to the Canadian Borrower or by the U.S. Lenders to the U.S. Borrowers outstanding from time to time which are drawndown in U.S. Dollars and in respect of which interest is payable in accordance with Section 4.4. "ALTERNATE BASE RATE MARGIN" means, in respect of an Alternate Base Rate Loan, or portion thereof outstanding: (a) prior to June 1, 2000, at any time during: (i) a Low Pricing Period or a Mid-Pricing Period: 1.25% per annum, and (ii) a Higher Pricing Period: 1.50% per annum; and (b) on or after June 1, 2000, at any time during: (i) a Low Pricing Period: 1.00% per annum, (ii) a Mid-Pricing Period: 1.25% per annum, and (iii) a Higher Pricing Period: 1.50% per annum. "ALTERNATE BASE RATE REFERENCE BANK" means the U.S. Administrative Agent with respect to determination of the Alternate Base Rate under U.S. Facilities other than the U.S. Overdraft Facility, the Canadian Administrative Agent with respect to the determination of the Alternate Base Rate under the Canadian Facilities other than the Canadian Overdraft Facility, FNBC with respect to the determination of the Alternate Base Rate under the U.S. Overdraft Facility and TD with respect to the determination of the Alternate Base Rate for the Cdn. Overdraft Facility or such other Canadian Lender - 7 - or U.S. Lender, as the case may be, appointed in replacement thereof under Section 13.3(c). "AMOUNT" has the meaning attributed thereto in Section 9.1. "AUTHORIZED SIGNATORY" in relation to a Borrower and any communication to be made or document to be executed or certified by it, means at any time a Person who is at such time duly appointed as such by such Borrower in a manner acceptable to the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, acting reasonably. "AVAILABLE PROCEEDS" has the meaning ascribed to it in Section 2.7(b)(iv). "B/A MATURITY DATE", in respect of a Bankers' Acceptance, means the date on which such Bankers' Acceptance matures. "BANKERS' ACCEPTANCE" means a bill of exchange or a depository note, duly completed and accepted by a Canadian Lender under either the Canadian Revolving Facility or the Canadian Acquisition Facility pursuant to this Agreement. "BORROWERS" means the Canadian Borrower and the U.S. Borrowers and "Borrower" means either the Canadian Borrower or either of the U.S. Borrowers. "BORROWERS' CANADIAN COUNSEL" means Fogler, Rubinoff or any other firm of solicitors selected by the Borrowers and acceptable to the Canadian Administrative Agent, acting reasonably. "BORROWERS' U.S. COUNSEL" means Ferrante & Associates or any other firm of attorneys selected by the Borrowers and acceptable to the U.S. Administrative Agent, acting reasonably. "BORROWING" means a utilization of a Facility by way of Loans, by the issue of Bankers' Acceptances or by the issue of Letters of Credit. "BUSINESS DAY" means (a) in respect of Borrowings available to a Borrower by way of Libor Loans and payments in connection therewith, a day (other than Saturday or Sunday) which is a day for trading by and between banks in U.S. Dollar deposits in the London interbank market which is also a day on which banks are generally open for business in New York City and Toronto; - 8 - (b) in respect of Borrowings available to a Borrower by way of Alternate Base Rate Loans or Letters of Credit denominated in U.S.$, a day (other than Saturday or Sunday) on which banks are generally open for business in New York City and Toronto; and (c) for all other purposes of this Agreement, a day (other than Saturday or Sunday) on which banks are generally open for business in Toronto. "BUSINESS VALUE" means, in respect of any period, (i) the product obtained by multiplying (a) Adjusted EBITDA for such period by (b) 4.5 less (ii) the Cash Amount. "BUSINESS VALUE/TOTAL DEBT RATIO" means, in respect of any period, the quotient obtained by dividing (a) Business Value for such period (as numerator) by (b) Total Debt for such period (as denominator). "CALL OPTION TRIGGERING EVENT" means, in respect of any Affected Subsidiary: (a) the 61st day following the commencement of any actions or proceedings against such Subsidiary or against any of the property thereof before any court, governmental agency or arbitrator which, if determined adversely, may have a material adverse effect on the financial condition or operations of such Subsidiary unless the Canadian Borrower shall have satisfied the Majority Lenders that such Subsidiary shall not be materially and adversely affected by such action or proceeding or the consequences arising therefrom; or (b) the 31st day following the receipt by such Subsidiary of any Violation Notice which, if same were enforced, may have a material adverse effect on the financial condition or operations of such Subsidiary, unless the Canadian Borrower shall have satisfied the Majority Lenders that such Subsidiary shall not be materially and adversely affected by such Violation Notice or the consequences arising therefrom; or (c) the EBITDA of such Subsidiary for any period of 4 consecutive Quarters ended (the "Relevant 4 Quarter Period") is at least 50% less than such Subsidiary's EBITDA for the period of 4 consecutive Quarters ending immediately prior to the commencement of the Relevant 4 Quarter Period. "CALL OPTION TRIGGERING EVENT NOTICE" means a written notice from the Collateral Agent to the Canadian Borrower requiring the Canadian Borrower to cause an Affected Subsidiary in respect of which a Call Option Triggering Event shall have occurred to become a Direct Guarantor. "CALL PRICE FORMULAE" means the call price formulae described on Schedule "A". - 9 - "CANADIAN ACQUISITION FACILITY" has the meaning ascribed thereto in the recitals. "CANADIAN ADMINISTRATIVE AGENT" means Dresdner Bank Canada and its successors and assigns duly appointed in accordance with Section 13.6. "CANADIAN ASSIGNEE" has the meaning ascribed to it in Section 14.3(a). "CANADIAN BORROWER" means FirstService Corporation. "CANADIAN DOLLARS" means the lawful money of Canada and "CDN $" has a corresponding meaning. "CANADIAN FACILITIES" means, collectively, the Canadian Revolving Facility and the Canadian Acquisition Facility. "CANADIAN LENDERS" means the Lenders identified as Canadian Lenders on the execution pages hereof having a Commitment to lend or when such Commitment shall have terminated, having Borrowings outstanding to the Canadian Borrower under the Canadian Facilities. "CANADIAN REVOLVING FACILITY" has the meaning ascribed thereto in the recitals. "CAPITALIZATION" means, at any time, the sum of (a) Total Debt and (b) Total Shareholders' Equity at such time. "CASH AMOUNT" means, for the purposes of Schedule "O" referred to in Subsection 5.2(i)(D) hereof, that portion of the consideration payable in cash in respect of any purchase of shares by the Canadian Borrower in the capital stock of any Subsidiary pursuant to the exercise of any call option right in favour of such Borrower under the terms of any Shareholders Agreement in respect of such Subsidiary. "COF INTEREST PERIOD" means, with respect to each COF Loan, the period selected by the Canadian Borrower hereunder and being 30, 60, 90 or 180 days (as selected by the Canadian Borrower and notified to the Canadian Administrative Agent pursuant to Section 4.5 and subject to availability) commencing on the applicable Drawdown Date. "COF LOAN" means a Loan denominated in Cdn.$ made by the Canadian Lenders to the Canadian Borrower outstanding from time to time and on which interest is to be paid in accordance with Section 4.1(b). "COF MARGIN" means in respect of a COF Loan or portion thereof outstanding: (a) prior to June 1, 2000, at any time during: - 10 - (i) a Low Pricing Period or a Mid Pricing Period: 1.25% per annum, and (ii) a Higher Pricing Period: 1.50% per annum; and (b) on or after June 1, 2000, at any time during: (i) a Low Pricing Period: 1.00% per annum, (ii) a Mid-Pricing Period: 1.25% per annum, and (iii) a Higher Pricing Period: 1.50% per annum. "COF RATE" means, for the COF Interest Period of each COF Loan, the rate of interest per annum equal to the annual rate of interest quoted on the Business Day prior to the first day of such Interest Period in the case of COF Loans in Cdn $, by the Canadian Administrative Agent as being its rate of interest for cost of funds loans in Cdn.$ for a face amount similar to the amount of the applicable COF Loan and for a term equivalent to the applicable COF Interest Period. "COF RATE DETERMINATION DATE" means any date when the Canadian Administrative Agent determines the COF Rate for a COF Interest Period. "CDN. GAAP" means generally accepted accounting principles applied in Canada. "CDN. OVERDRAFT FACILITY" means that portion of the Canadian Revolving Facility in an aggregate amount not to exceed the lesser of the unused amount of the Canadian Revolving Facility and Cdn.$4,000,000 or the Equivalent Amount in U.S. Dollars made available to the Canadian Borrower in accordance with Section 2.12. "CO-ARRANGERS" means First Chicago NBD Bank, Canada, Societe Generale (Canada) and The Toronto-Dominion Bank and their successors and assigns. "CODE" means the Internal Revenue Code (U.S.) of 1986, as amended or any successor statute. "COLLATERAL AGENT" means Dresdner Bank Canada and its successors and assigns acting in the capacity of Collateral Agent with respect to the Security. "COMMITMENT" (a) in relation to a Canadian Lender means, except as otherwise provided herein, the amount set opposite its name on the execution pages hereof as its Commitment to the Canadian Facilities, and (b) in relation to a U.S. Lender, except as otherwise provided herein, the amount set opposite its name on the execution pages hereof as its Commitment to the U.S. Facilities. - 11 - "CONVERSION" means the conversion of a Borrowing or any portion thereof in accordance with Section 2.3. "CONVERSION DATE" means the date a Borrower has notified the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, to be the date on which it has elected to convert a Borrowing or a portion thereof pursuant to Section 2.3. "CURRENT ASSETS" has the meaning attributed thereto under Cdn. GAAP. "CURRENT LIABILITIES" has the meaning attributed thereto under Cdn. GAAP. "DIRECT GUARANTOR" means (a) the Unlimited Guarantor, Prime Management Group Inc., Prime Management Inc., Prime Pest Control Inc., Prime Realty Associates Inc. and Prime Services Inc.; and (b) each other Subsidiary of the Canadian Borrower, of which the Canadian Borrower shall at any time directly or indirectly own and control 100% of the issued and outstanding shares, equity or other ownership interests which shall have executed and delivered to the Collateral Agent the Direct Security. "DIRECT SECURITY" means the Security designated as Direct Security in Schedule "C". "DRAWDOWN" means a drawdown of a Borrowing by a Borrower. "DRAWDOWN DATE" means any Business Day when a Borrower makes a Drawdown or a Conversion Date with respect to any Borrowing or portion thereof. "EBITDA" means, in respect of any period, earnings before interest, taxes, depreciation and amortization. "EFFECTIVE DATE" means April 15, 1999. "ELIGIBLE BUSINESS" means, in respect of any business to be acquired by the Canadian Borrower or its Subsidiaries, a business which: (a) is substantially similar to the "core" businesses currently conducted by the Canadian Borrower and its Subsidiaries, taken as a whole, in the reasonable opinion of the Canadian Borrower; which "core" businesses of the Canadian Borrower and its Subsidiaries are as follows: (i) the security business, (ii) the property management business, (iii) the property maintenance business, - 12 - (iv) the service franchise business, (v) landscape, lawn-care and lawn maintenance business, (vi) the interior or exterior pest control businesses, (vii) business out-sourcing, and (viii) residential and commercial cleaning and/or maintenance business; (b) does not include (i) manufacturing, fabrication or similar processes or (ii) retail business; (c) does not include any business that carries on a material part of its business outside of Canada or the United States of America; (d) if such business is out-sourcing, then it shall have easily recognizable features or characteristics which complement or otherwise add value to the businesses of such nature currently conducted by the Canadian Borrower and its Subsidiaries, taken as a whole, in the reasonable opinion of the Canadian Borrower, satisfactory to the Majority Lenders; (e) if such business is a security services business, then at all times after completion of such acquisition, the proportion of sales and consolidated EBITDA derived from all the security businesses of the Canadian Borrower and its Subsidiaries, taken as a whole, of the total sales and consolidated EBITDA of the Canadian Borrower and its Subsidiaries taken as a whole, shall not exceed either (i) 40% of the total sales or (ii) 33% of consolidated EBITDA of the Canadian Borrower and its Subsidiaries, taken as whole. "ENVIRONMENTAL LAWS" means all laws, statutes, codes, ordinances, orders, decrees, rules, regulations, guidelines, standards, judgements, or instruments, in each case having the force of law, of any authority having jurisdiction relating in whole or in part to the environment or its protection. "EQUIVALENT AMOUNT" means on any date, as the case may be, the amount of Cdn. Dollars into which an amount of U.S. Dollars may be converted or the amount of U.S. Dollars into which an amount of Cdn. Dollars may be converted at the Canadian Administrative Agent's spot buying rate in Toronto as at approximately 12:00 noon, on such date. "ERISA" has the meaning ascribed to it in Section 8.1(n). - 13 - "EVENT" has the meaning attributed thereto in Section 7.5(b). "EVENT OF DEFAULT" has the meaning ascribed to it in Section 9.1. "EXTENSION DATE" has the meaning ascribed to it in Section 3.8(a). "EXTENSION REQUEST" has the meaning ascribed to it in Section 3.8(a). "FACILITIES" has the meaning ascribed to such term in the recitals and "FACILITY" means any one of the Facilities. "FEDERAL FUNDS RATE" means, for any period, a fluctuating interest rate per annum equal for each day during such period to (a) the weighted average of the rates on overnight federal funds transactions with members of the Federal Reserve System arranged by federal funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or (b) if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by the applicable Alternate Base Rate Reference Bank from three federal funds brokers of recognized standing selected by it. "FINAL MATURITY DATE" means June 1, 2004 unless extended in accordance with the terms hereof. "FINANCIAL CONTRACT OBLIGATIONS" means all obligations, present and future, direct or indirect, contingent or absolute, of a Borrower and/or its Subsidiaries in respect of: (a) a currency or interest rate swap agreement; (b) a swap, future, forward or other foreign exchange agreement; (c) a forward rate agreement; (d) any derivative, combination or option in respect of, or agreement similar to, an agreement or contract referred to in paragraphs (a) to (c); (e) any master agreement in respect of any agreement or contract referred to in paragraphs (a) to (c); or (f) a guarantee of the liabilities under an agreement or contract referred to in paragraphs (a) to (c). - 14 - "FIRST AMENDED AND RESTATED CREDIT AGREEMENT" has the meaning attributed thereto in the recitals. "FISCAL YEAR" means a fiscal year of the Canadian Borrower; currently the Fiscal Year ends on March 31. "FIXED CHARGE COVERAGE RATIO" means, in respect of any period, the quotient obtained by dividing (a) the amount (as numerator) obtained by subtracting (i) capital expenditures (other than acquisition expenditures) for such period from (ii) Adjusted EBITDA for such period, by (b) the sum (as denominator) of (i) interest expense on Total Debt for such period, (ii) scheduled principal repayments and capital lease payments for such period, (iii) scheduled payments required to be made as of the date of this Agreement with respect to any purchase price balance or the refinancing of any purchase price balances of any assets, and (iv) payments required to be made with respect to any purchase price balance or the refinancing of any purchase price balances of any assets in connection with acquisitions made after the date hereof which exceed availability under the Acquisition Facilities. In calculating such interest expense, there shall be included a 12 month interest burden, so as to reflect the incremental debt drawn down to effect a Permitted Acquisition, calculated at the average rate of interest incurred by the Canadian Borrower on its Total Debt during such period. "FNBC" means The First National Bank of Chicago. "FS (USA)" means FirstService (USA), Inc. "FSLLC" means FirstService Delaware, LLC. "FSLP" means FirstService Delaware, LP. "GAAP" means Cdn. GAAP until such time as the Canadian Borrower notifies the Canadian Administrative Agent in writing that it has converted to U.S. GAAP and thereafter all references to GAAP shall mean U.S. GAAP. "GUARANTOR" means any Person, including an Unlimited Guarantor and a Direct Guarantor, which shall have provided a guarantee of a Borrower's obligations hereunder in favour of the Collateral Agent and/or the Lenders. "GUARANTEED OBLIGATIONS" means the Canadian Borrower's Guaranteed Obligations, (as such term is defined in Section 16.1(a)) and/or the Unlimited Guarantor's Guaranteed Obligations (as such term is defined in Section 16.1(b)). "HAZARDOUS MATERIAL" means any substance, waste, solid, liquid, or gaseous matter, petroleum or petroleum derived substance, micro-organism, sound, vibration, ray, heat, - 15 - odour, radiation, energy vector, plasma, organic or inorganic matter, whether animate or inanimate, transient reaction intermediate or any combination of the foregoing deemed hazardous, hazardous waste, solid waste, or pollutant, a deleterious substance, or a contaminant under any Environmental Law. "HEDGING AGREEMENTS" means one or more interest rate and/or currency hedge agreements entered into between the Canadian Borrower and a Canadian Lender from time to time to a maximum aggregate notional amount of Cdn. $50,000,000 for all Canadian Lenders and between a U.S. Borrower and a U.S. Lender from time to time to a maximum aggregate notional amount of U.S. $130,000,000 for all U.S. Lenders. "HIGHER PRICING PERIOD" means a Quarter next following a Quarter when the Canadian Borrower is maintaining: (a) a Total Debt/Adjusted EBITDA Ratio equal to or greater than 3 to 1; or (b) an Interest Coverage Ratio of less than 3.5 to 1. "INITIAL ADVANCE" means, in respect of a Facility, the Borrowing, or where more than one Borrowing may be made thereunder, the first Borrowing, contemplated to be made thereunder pursuant to this Agreement. "INTEREST COVERAGE RATIO" means, in respect of any period, the quotient obtained by dividing (a) the amount (as numerator) obtained by subtracting (i) capital expenditures (other than acquisition expenditures) for such period from (ii) Adjusted EBITDA for such period by (b) the sum of interest expense on Total Debt for such period. In calculating such interest expense, there shall be included a 12 month interest burden, so as to reflect the incremental debt drawn down to effect a Permitted Acquisition, calculated at the current rate of interest incurred by the Canadian Borrower on its Total Debt for such period. "INTEREST DATE" means (a) in respect of a Prime Loan or an Alternate Base Rate Loan and Article XII, the 1st Business Day of each Quarter and (b) in respect of a COF Loan or a Libor Loan, the last day of the applicable Interest Period and, where any Interest Period is longer than 90 days or 3 months, as the case may be, the 90th day or, as the case may be, the last Business Day of such Interest Period. "INTEREST PERIOD" means a COF Interest Period or a Libor Interest Period, as applicable. "ISSUING BANK" means, in the case of Letters of Credit issued under the Canadian Facilities, a Canadian Lender which is a designated Schedule I Canadian chartered bank as may be agreed to by the Canadian Lenders and, in the case of Letters of Credit issued under the U.S. Facilities, a U.S. Lender so designated by the U.S. Lenders, in any case, - 16 - which issues Letters of Credit hereunder. As of the Effective Date the Issuing Bank for Letters of Credit issued under the Canadian Revolving Facility is TD and the Issuing Bank for Letters of Credit issued under the U.S. Revolving Facility is FNBC. "LEAD ARRANGER" means Dresdner Bank Canada and its successors and assigns. "LENDERS" means the Canadian Lenders and the U.S. Lenders and their respective successors and assigns. "Lender" means any Canadian Lender or U.S. Lender, as the case may be. "LENDERS' COUNSEL" means Meighen Demers or any other firm of solicitors selected by the Majority Lenders. "LETTER OF CREDIT" means a Standby Letter of Credit or a Trade Letter of Credit issued by an Issuing Bank at the request of a Borrower in an amount not to exceed the unused portion of the applicable Revolving Facility. "LETTER OF CREDIT FEE" means a monthly fee equivalent to the following annual returns on each Lender's Participation in the average daily balance of the face amount of Letters of Credit outstanding: (a) prior to June 1, 2000, at any time during: (i) a Low Pricing Period or a Mid-Pricing Period, 1.25% per annum, and (ii) a Higher Pricing Period, 1.50% per annum; (b) on or after June 1, 2000, at any time, during: (i) a Low Pricing Period: 1.00% per annum, (ii) a Mid-Pricing Period: 1.25% per annum; and (iii) a Higher Pricing Period: 1.50% per annum. "LIBOR" means, with respect to any Libor Interest Period, the rate of interest per annum, rounded upwards, if necessary, to the nearest whole multiple of 1/16%, established by the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, to be the average of the rates at which the Libor Reference Bank, in accordance with their normal practice, would be prepared to offer deposits in U.S. Dollars to leading banks in the London Interbank Market, for delivery on the first day of the relevant Libor Interest Period, as determined at or about 11:00 a.m. (London time) 2 Business Days before the first day of such Libor Interest Period for a period equal to - 17 - such Libor Interest Period in an amount substantially equal to the amount of such Libor Loan. "LIBOR DETERMINATION DATE" means any date on which the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, determines LIBOR for a Libor Interest Period. "LIBOR INTEREST PERIOD" means with respect to any Borrowing by way of a Libor Loan, the period of 1, 2, 3 or 6 months (as selected by the Canadian Borrower and notified to the Canadian Administrative Agent or selected by a U.S. Borrower and notified to the U.S. Administrative Agent, as the case may be, pursuant to Section 4.5 and subject to availability) commencing with the applicable Drawdown Date. "LIBOR LOAN" means a Loan made available by the U.S. Lenders to a U.S. Borrower or by the Canadian Lenders to the Canadian Borrower, as the case may be, outstanding from time to time and denominated in U.S. Dollars and on which interest is to be paid in accordance with Section 4.1. "LIBOR MARGIN" means in respect of a Libor Loan or portion thereof outstanding: (a) prior to June 1, 2000, at any time during: (i) a Low Pricing Period or a Mid-Pricing Period: 1.25% per annum, and (ii) a Higher Pricing Period: 1.50% per annum; and (b) on or after June 1, 2000, at any time during: (i) a Low Pricing Period: 1.00% per annum, (ii) a Mid-Pricing Period: 1.25% per annum, and (iii) a Higher Pricing Period: 1.50% per annum. "LIBOR REFERENCE BANK" means the Canadian Administrative Agent with respect to Libor Loans made to the Canadian Borrower and the U.S. Administrative Agent with respect to Libor Loans made to a U.S. Borrower and or any other Lender or Affiliate thereof appointed as such in replacement thereof under Section 13.3 (c). "LIEN" means with respect to the property or assets of any Person, a mortgage, pledge, hypothecation, encumbrance, lien (statutory or other), charge or other security interest of any kind in or with respect to such property or assets (including, without limitation, any conditional sale or other title retention agreement, and any financing lease under - 18 - which such Person is lessee having substantially the same economic effect as any of the foregoing). "LOANS" means collectively, that portion of any Borrowing outstanding from time to time by way of Libor Loans, COF Loans, Prime Loans, Alternate Base Rate Loans or, as the context may require, all Loans outstanding at any time. "Loan" means, at any time, any Libor Loan, COF Loan, Prime Loan, or Alternate Base Rate Loan, as the case may be. "LOW PRICING PERIOD" means a Quarter next following a Quarter when the Canadian Borrower is maintaining: (a) a Total Debt/Adjusted EBITDA Ratio of less than 2.5 to 1; and (b) an Interest Coverage Ratio of equal to or greater than 4 to 1. "MAJORITY LENDERS" means 2 or more Lenders having at least 66-2/3% of the Total Commitments or, if the Commitments have terminated, of total Borrowings outstanding at such time. For purposes of this definition each U.S. Lender and its related Canadian Lender (which may be the same institution in certain cases) shall be considered one Lender and the Commitments (or Borrowings) of each such related U.S. and Canadian Lender shall be aggregated for purposes of determining the requisite percentage. "MANAGERS" means Royal Bank of Canada, Canadian Imperial Bank of Commerce and The Bank of Nova Scotia and their successors and assigns. "MATERIAL CONTINGENT OBLIGATION" means, in respect of the Canadian Borrower or its Subsidiaries, a contingent obligation or liability of Cdn.$1,000,000 (or the Equivalent Amount thereof in U.S.$) or more or which is otherwise required to be disclosed to securities regulators or exchanges or the public. "MAXIMUM ACQUISITION TOTAL DEBT/ADJUSTED EBITDA RATIO" means, in respect of any proposed acquisition of a Target Acquisition Entity, the Total Debt/Adjusted EBITDA Ratio calculated as at the time of completion of such acquisition, on the basis that Adjusted EBITDA shall be adjusted to include pro forma trailing EBITDA for a period of 12 consecutive calendar months for the Target Acquisition Entity including a full year impact of the cost savings readily identifiable and which can be immediately implemented such as elimination of salaries for redundant employees and elimination of various administrative functions which will, in the reasonable opinion of the Canadian Borrower, satisfactory to the Majority Lenders, become unnecessary or otherwise more cost effectively performed. - 19 - "MAXIMUM TOTAL DEBT/ADJUSTED EBITDA RATIO" means for each period of 4 consecutive Quarters or 12 consecutive calendar months, a Total Debt/Adjusted EBITDA Ratio of: (a) not more than: 3.5 to 1; or (b) if the Interest Coverage Ratio is less than 3.0 to 1 after April 1, 2000, not more than: 3.25 to 1; or (c) if the Interest Coverage Ratio is less than 3.0 to 1 after April 1, 2001, not more than: 3.0 to 1; for the purposes of calculating a Total Debt/Adjusted EBITDA Ratio, Total Debt is measured as at the date of calculation. "MAXIMUM TOTAL DEBT/CAPITALIZATION RATIO" means, at any time, a Total Debt/Capitalization Ratio of not more than .75 to 1. "MID-PRICING PERIOD" means a Quarter next following a Quarter when the Canadian Borrower is maintaining: (a) a Total Debt/Adjusted EBITDA Ratio of less than 3 to 1 and greater than or equal to 2.5 to 1; and (b) an Interest Coverage Ratio equal to or greater than 3.5 to 1 and less than 4 to 1. "MINIMUM BUSINESS VALUE/TOTAL DEBT RATIO" means a Business Value/Total Debt Ratio of at least 1.25 to 1. "MINIMUM FIXED CHARGE COVERAGE RATIO" means a Fixed Charge Coverage Ratio of at least 1.5 to 1. "MINIMUM INTEREST COVERAGE RATIO" means an Interest Coverage Ratio of at least 2.5:1. "MINIMUM WORKING CAPITAL RATIO" means a Working Capital Ratio of at least 1.1 to 1. "NET PROCEEDS", in respect of any Bankers' Acceptance, means the amount obtained by applying the Reference Bankers' Acceptance Discount Rate to the Principal Amount of such Bankers' Acceptance in accordance with the formula set out in Schedule "B". "NON-CONSENTING LENDER" has the meaning ascribed to it in Section 3.8(e). - 20 - "NON-EXTENDING LENDERS CONVERSION DATE" has the meaning ascribed to it in Section 3.8(e). "NON-EXTENSION CONVERSION DATE" has the meaning ascribed to it in Section 3.8(d). "NSULC" means FirstService Nova Scotia Corp. "ORIGINAL CREDIT AGREEMENT" has the meaning attributed thereto in the recitals. "OWNERSHIP AND CONTROL" has the meaning attributed thereto in Section 8.1(k). "PARTICIPATION" of a Lender means the percentage of the Commitment indicated opposite its name on the execution pages hereof in relation to, in the case of a U.S. Lender, the Total U.S. Commitments and in the case of a Canadian Lender, the Total Cdn. Commitments or, at such time as the Commitments have terminated, the percentage of Advances made by such U.S. Lender or Canadian Lender of all Advances then outstanding under the U.S. Facilities or the Canadian Facilities, respectively. "PERMITTED ENCUMBRANCES" has the meaning ascribed to it in Section 8.2(n). "PERMITTED LOANS" has the meaning ascribed to it in Section 8.2(k)(ii). "PERMITTED VTBS" has the meaning ascribed to it in Section 8.2(n). "PERSON" means any individual, firm, company, corporation, entity, joint venture, joint-stock company, trust, unincorporated organization, government or state entity or any association or a partnership (whether or not having separate legal personality) of two or more of the foregoing. "PREPAID BANKERS' ACCEPTANCES" has the meaning attributed thereto in Section 7.5 (c). "PRICING PERIOD" means a Low Pricing Period, a Mid-Pricing Period or a Higher Pricing Period. "PRIME LOANS" means the Loans, or portion of them, made available by the Canadian Lenders to the Canadian Borrower outstanding from time to time which are drawn down in Canadian Dollars and in respect of which interest is payable in accordance with Section 4.3. - 21 - "PRIME MARGIN" means in respect of a Prime Loan or portion thereof outstanding: (a) prior to June 1, 2000 at any time during: (i) a Low Pricing Period or a Mid-Pricing Period, .50% per annum; and (ii) a Higher Pricing Period, .75% per annum; and (b) on or after June 1, 2000, at any time during: (i) a Low Pricing Period, .25% per annum; (ii) a Mid-Pricing Period, .50%; and (iii) a Higher Pricing Period, .75% per annum. "PRIME RATE" means, at any time, the greater of (a) the floating annual rate of interest calculated from time to time by the Canadian Administrative Agent as the base rate, calculated on the basis of a year of 365 or 366 days, as the case may be, which the Prime Reference Bank uses to determine rates of interest on Canadian Dollar loans to customers in Canada and designates as its prime rate and (b) the rate expressed as an annual percentage equal to the sum of (x) .75% per annum and (y) the 30 Day BA Reference Rate. "PRIME REFERENCE BANK" means the Canadian Administrative Agent or any other Canadian Lender appointed as such in replacement thereof in accordance with the provisions of Section 13.3(c). "PRINCIPAL AMOUNT" means (a) for a Bankers' Acceptance or a Letter of Credit, the face amount thereof and (b) for a Loan, the principal amount thereof. "QUARTER" means a fiscal quarter of any Fiscal Year. "REFERENCE BANK" means the Libor Reference Bank, the Prime Reference Bank, the Alternate Base Rate Reference Bank or the Reference Bank for Bankers' Acceptances, as the context requires. "REFERENCE BANKERS' ACCEPTANCE DISCOUNT RATE" means the rate, calculated on the basis of a year of 365 days, determined from time to time by the Canadian Administrative Agent as the discount rate for Bankers' Acceptances, based on the discount rate reported to the Canadian Administrative Agent by the Reference Bank for Bankers' Acceptances, established in accordance with its normal practices at or about 9:30 a.m. on the Acceptance Date, for bankers' acceptances accepted by such Reference Bank having a - 22 - face value equal to or in excess of Cdn. $300,000 and an identical term to that of the proposed Bankers' Acceptances to be purchased on such day. "REFERENCE BANK FOR BANKERS' ACCEPTANCES" means the Canadian Administrative Agent or any other Canadian Lender appointed as such in replacement thereof under Section 13.3 (c). "REPAYMENT DATE" means a day, other than the Final Maturity Date, on which a Borrower repays all or part of a Loan pursuant to Section 2.2. "REVOLVING FACILITIES" has the meaning attributed thereto in the recitals. "SECURITY" means the security described in Schedule "C". "SHAREHOLDERS' AGREEMENTS" means the shareholders' agreements described in Schedule "D". "STANDBY LETTER OF CREDIT" means a standby letter of credit issued by any Issuing Bank pursuant to Section 2.11 or a letter of guarantee issued by an Issuing Bank which is a Canadian Lender. "SUBSIDIARY" of any Person means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or of others performing similar functions are directly or indirectly owned or controlled by such Person. "TD" means The Toronto-Dominion Bank. "TARGET ACQUISITION ENTITY" means an Eligible Business to be acquired by the Canadian Borrower or a Subsidiary thereof as permitted under this Agreement. "TAX" includes all present and future taxes, levies, imposts, stamp taxes, duties, withholdings and all penalty, interest and other payments on or in respect thereof. "TOTAL CDN. COMMITMENTS" means the aggregate of the Canadian Lenders' Commitments for the Canadian Facilities from time to time. "TOTAL COMMITMENTS" means the aggregate for all Facilities from time to time of the Lenders' Commitments from time to time. "TOTAL U.S. COMMITMENTS" means the aggregate of the U.S. Lenders' Commitments for the U.S. Facilities from time to time. - 23 - "TOTAL DEBT" shall include the obligations under this Agreement, Financial Contract Obligations, guaranteed obligations, capital leases, vendor-take-back financing and subordinated debt of the Canadian Borrower on a consolidated basis and shall be determined in accordance with Cdn. GAAP after deduction of cash-on-hand. "TOTAL DEBT/ADJUSTED EBITDA RATIO" means, at any time, the quotient obtained by dividing (a) Total Debt at such time (as numerator) by (b) Adjusted EBITDA for the period of the 4 consecutive Quarters or, in the case of the calculation of the Maximum Acquisition Total Debt/Adjusted EBITDA Ratio, 12 consecutive calendar months, most recently ended (as denominator). "TOTAL DEBT/CAPITALIZATION RATIO" means, at any time, the quotient obtained by dividing (a) Total Debt (as numerator) by (b) Capitalization (as denominator). "TOTAL SHAREHOLDERS' EQUITY" has the meaning attributed thereto under Cdn. GAAP. "TRADE LETTER OF CREDIT" means a trade letter of credit or letter of guarantee acceptable to the Majority Lenders, acting reasonably, issued by an Issuing Bank pursuant to Section 2.11. "TRANSFER CERTIFICATE" means a certificate substantially in the form set out in Schedule "E" signed by a Lender and a Transferee. "TRANSFEREE" means a bank or other financial institution to which a Lender seeks to assign or transfer all or part of such Lender's rights and obligations hereunder in accordance with Article XIV. "TYPE" means, with respect to any Loan, a Prime Loan, a COF Loan, an Alternate Base Rate Loan or a LIBOR Loan and otherwise , with respect to any Borrowing or portion thereof, Bankers' Acceptances or Letters of Credit. "U.S. ACQUISITION FACILITY" has the meaning ascribed thereto in the recitals. "U.S. ADMINISTRATIVE AGENT" means Dresdner Bank Canada and its successors and assigns duly appointed in accordance with Section 13.6. "U.S. ASSIGNEE" has the meaning ascribed to it in Section 14.3(a). "U.S. BORROWERS" means, collectively, FS (USA) and FSLP and each of such U.S. Borrowers being a "U.S. Borrower". "U.S. DOLLARS" means the lawful money of the United States of America and "U.S. $" has a corresponding meaning. - 24 - "U.S. FACILITIES" means, collectively, the U.S. Revolving Facility (including the U.S. Overdraft Facility) and the U.S. Acquisition Facility. "U.S. GAAP" means generally accepted accounting principles applied in the United States. "U.S. LENDERS" means the Lenders identified as U.S. Lenders on the execution pages hereof having a Commitment to lend or when such Commitment shall have terminated, having Borrowings outstanding to the U.S. Borrower under the U.S. Facilities. "U.S. OVERDRAFT FACILITY" means that portion of the U.S. Revolving Facility in an aggregate amount not to exceed the lesser of the unused amount of the U.S. Revolving Facility and U.S. $4,000,000 made available to the U.S. Borrowers in accordance with Section 2.13. "U.S. REVOLVING FACILITY" has the meaning ascribed thereto in the recitals. "UNDERTAKING TO SECURE" means the Undertaking to be provided by Subsidiaries of the Canadian Borrower, other than Subsidiaries that are Wholly-Owned Subsidiaries as of the date of this Agreement, substantially in the form set out in Schedule "F". "UNLIMITED GUARANTOR" means FirstService GP Inc. "VIOLATION NOTICE" means any notice received by a Borrower or any of its Subsidiaries from any governmental or regulatory body or agency under any Environmental Law that such Borrower or any of its Subsidiaries is in non-compliance with the requirements of any Environmental Law. "WHOLLY-OWNED SUBSIDIARY" means any corporation or other entity of which 100% of the securities or other ownership interests are owned directly or indirectly by a Borrower. "WORKING CAPITAL RATIO" means at any time the quotient obtained by dividing (a) Current Assets of the Canadian Borrower at such time (as numerator) by (b) Current Liabilities of the Canadian Borrower at such time (as denominator). "YEAR 2000 PROBLEM" means the risk that principal computer applications used in connection with a Borrower's business or the business of any Subsidiary of a Borrower may be unable to recognize and perform properly date sensitive functions involving certain dates prior to or any date after December 31, 1999. - 25 - 1.2 REFERENCES Any reference made in this Agreement to: (a) Any of the "Canadian Administrative Agent", the "U.S. Administrative Agent", the "Collateral Agent", the "Lenders" or a "Lender" shall so be construed as to include its or their respective successors and permitted assigns. (b) A time of day is, unless otherwise stated, a reference to Toronto time. (c) Sections, Articles or Schedules is, unless otherwise indicated, to Sections and Articles of this Agreement and to Schedules to this Agreement, as the case may be. The provisions of each Schedule shall constitute provisions of this Agreement as though repeated at length herein. (d) A "month" is a reference to a period starting on one day in a calendar month to but excluding the numerically corresponding day in the next calendar month except that, where any such period would otherwise end on a day other than a Business Day, it shall end on the next Business Day, unless that day falls in the calendar month succeeding that in which it would otherwise have ended, in which case it shall end on the next preceding Business Day in a calendar month or if there is no numerically corresponding day in the month in which that period ends, that period shall end on the last Business Day in that later month (and references to "months" (other than "calendar months") shall be construed accordingly). 1.3 INTERPRETATION In this Agreement: (a) the singular includes the plural and vice-versa; (b) "in writing" or "written" includes printing, typewriting, or any electronic means of communication capable of being visibly reproduced at the point of reception, including telex, telecopy and telegraph and, as between an Agent and the Lenders (but only when so directed by an Agent), Reuters screen or equivalent means of communication; (c) a document, notice, note, bill of exchange or other instrument shall be considered to have been validly signed or executed, if it has been signed by either an original signature or a facsimile signature or stamp affixed by an Authorized Signatory, provided that this Agreement, all collateral documents contemplated hereby, any promissory notes required by a Lender and the bills of exchange or depository notes to be deposited pursuant to Section 2.6 shall be considered to be validly - 26 - signed or executed only if signed by an original signature of an Authorized Signatory; and (d) all calculations of interest under this Agreement are to be made on the basis of the stated rates set out herein and not on the basis of the effective yearly rates determined on any basis which gives effect to the principle of deemed reinvestment. 1.4 HEADINGS AND TABLE OF CONTENTS The headings, the table of contents, the Articles and the Sections are inserted for convenience only and are to be ignored in construing this Agreement. 1.5 ACCOUNTING TERMS All accounting terms not defined in this Agreement shall be interpreted in accordance with GAAP unless otherwise expressly indicated. Unless otherwise indicated, references to accounting terms, ratios or financial tests applicable to the Canadian Borrower hereunder shall be references to such terms, ratios or tests, calculated and determined on a consolidated basis. 1.6 RECITALS The recitals to this Agreement form part hereof. 1.7 PRECEDENCE In the event that any provisions of the Security contradict or are otherwise incapable of being construed in conjunction with the provisions of this Agreement, the provisions of this Agreement shall take precedence over those contained in the Security and, in particular, if any act of a Borrower or a Guarantor is expressly permitted under this Agreement but is prohibited under the Security, any such act shall be permitted under this Agreement and shall be deemed to be permitted under the Security. - 27 - ARTICLE II FACILITIES 2.1 FACILITIES (a) Subject to the terms of this Agreement, (i) the Canadian Lenders shall extend credit to the Canadian Borrower by way of (A) the Canadian Revolving Facility and (B) the Canadian Acquisition Facility; and (ii) the U.S. Lenders shall extend credit to the U.S. Borrowers by way of the (A) the U.S. Revolving Facility and (B) the U.S. Acquisition Facility. (b) The proceeds of Borrowings shall be used by the Borrowers, subject to the terms and conditions of this Agreement, for the purposes set out in the recitals. 2.2 NOTICE AND REVOLVING NATURE OF CERTAIN BORROWINGS (a) The Canadian Borrower may, subject to the terms of this Agreement, upon giving the Canadian Administrative Agent prior written notice: (i) by not later than 10:00 a.m. on the 3rd Business Day prior to the Drawdown Date for each Advance which is a Libor Loan; (ii) by not later than 10:00 a.m. on the 2nd Business Day prior to the Drawdown Date or Repayment Date or Acceptance Date, as the case may be, for any Borrowing or Conversion under the Canadian Revolving Facility or the Canadian Acquisition Facility (other than a Libor Loan); borrow, repay and/or reborrow or convert in accordance with Section 2.3 under the Canadian Revolving Facility or the Canadian Acquisition Facility, (A) in respect of Prime Loans, COF Loans denominated in Cdn.$ or Bankers' Acceptances issued by it, in initial minimum tranches of Cdn. $300,000 and thereafter in multiples of Cdn. $100,000 and (B) in respect of Alternate Base Rate Loans or Libor Loans in initial minimum tranches of U.S.$300,000 and thereafter in multiples of U.S. $100,000, provided further, however, that repayment of COF Loans and Libor Loans shall be made on the last day of the applicable Interest Period. (b) Notwithstanding the provisions of Section 2.2(a), the Canadian Administrative Agent shall use its best efforts to make Advances by way of Prime Loans under the Canadian Revolving Facility available to the Canadian Borrower on the Business Day following the receipt by the Canadian Administrative Agent of a Drawdown Notice for a Prime Loan. - 28 - (c) The U.S. Borrowers may, subject to the terms of this Agreement, upon giving the U.S. Administrative Agent prior written notice: (i) by not later than 10:00 a.m. on the 3rd Business Day prior to the Drawdown Date for each Advance which is a Libor Loan; (ii) by not later than 10:00 a.m. on the 2nd Business Day prior to the Drawdown Date or Repayment Date, as the case may be, for any Borrowing or Conversion under the U.S. Revolving Facility or the U.S. Acquisition Facility (other than a Libor Loan); borrow, repay and/or reborrow or convert in accordance with Section 2.3, under the U.S. Revolving Facility or the U.S. Acquisition Facility, (A) in respect of Alternate Base Rate Loans in initial minimum tranches of U.S. $300,000 and thereafter in multiples of U.S. $100,000 and (B) in respect of Libor Loans in initial minimum tranches of U.S. $1,000,000 and thereafter in multiples of U.S. $100,000, provided further, however, that repayment of Libor Loans shall be made on the last day of the applicable Interest Period. 2.3 CONVERSION A Borrower may, upon giving prior written notice to the Canadian Administrative Agent and/or the U.S. Administrative Agent, as the case may be, in accordance with Section 2.2 containing the information set out in Schedule "G" effective on any Business Day during the term of this Agreement (a "Conversion"), convert on the Conversion Date Advances outstanding from one Type to another Type to the extent such Type is available hereunder, provided that: (a) a Libor Loan or a COF Loan may be converted to another Type only on the last day of the Interest Period applicable to that Libor Loan or COF Loan, as the case may be; (b) Borrowings or any portion thereof comprising Bankers' Acceptances may be converted to another Type only on the applicable B/A Maturity Date; and (c) the conditions precedent set out in Section 5.1 have been fulfilled. The Conversion of any Advances shall not reduce any amount available under the Total Commitments. - 29 - 2.4 MAKING BORROWINGS (a) If the Canadian Borrower gives prior written notice to the Canadian Administrative Agent of its intention to draw down a Borrowing, including Bankers' Acceptances, a COF Loan, a Prime Loan, an Alternate Base Rate Loan or Libor Loan or a Conversion in accordance with Section 2.2 or 2.3, the Canadian Administrative Agent shall on the same day it receives the notice notify each Canadian Lender by telephone or in writing of the amount of the COF Loan, Prime Loan, Alternate Base Rate Loan, Libor Loan or Bankers' Acceptance and such Canadian Lender's portion thereof, and (i) each Canadian Lender shall, not later than 12:00 noon. on the Drawdown Date, make, or procure to be made, its Participation in such Bankers' Acceptances, COF Loan, Prime Loan, Libor Loan or Alternate Base Rate Loan, as the case may be, available to the Canadian Administrative Agent in accordance with Article X; and (ii) the Canadian Administrative Agent shall, not later than 4:00 p.m. on the Drawdown Date, make such Bankers' Acceptances, COF Loan, Prime Loan, Libor Loan or Alternate Base Rate Loan, as the case may be, available to the Canadian Borrower, in accordance with Article X. (b) If a U.S. Borrower gives prior written notice to the U.S. Administrative Agent of its intention to draw down a Borrowing, including an Alternate Base Rate Loan or a Libor Loan, or a Conversion of an Alternate Base Rate Loan or a Libor Loan in accordance with Section 2.2 or 2.3, the U.S. Administrative Agent shall on the same day it receives the notice notify each U.S. Lender by telephone or in writing of the amount of the COF Loan or Libor Loan and such U.S. Lender's portion thereof, and (i) each U.S. Lender shall, not later than 12:00 noon. on the Drawdown Date, make, or procure to be made, its Participation in the Alternate Base Rate Loan or Libor Loan, as the case may be, available to the U.S. Administrative Agent in accordance with Article X; and (ii) the U.S. Administrative Agent shall, not later than 4:00 p.m. on the Drawdown Date, make such Alternate Base Rate Loan or Libor Loan, as the case may be, available to the U.S. Borrower, in accordance with Article X. - 30 - 2.5 PARTICIPATION OF EACH LENDER (a) The amount of the Participation of each Lender in any COF Loan, Libor Loan, Prime Loan, or Alternate Base Rate Loan or issue of Bankers' Acceptances shall be determined by the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, by reference, subject to the Canadian Administrative Agent's authority pursuant to paragraph (b) of this Section 2.5, to each such Lender's Participation. (b) The Canadian Administrative Agent is authorized by the Canadian Borrower and each Canadian Lender to allocate amongst the Canadian Lenders the Bankers' Acceptances to be issued and purchased in such manner and amounts as the Canadian Administrative Agent may, in its sole and unfettered discretion consider necessary and equitable, rounding up or down, so as to ensure that no Canadian Lender is required to accept and purchase a Bankers' Acceptance for a fraction of Cdn. $100,000; provided however the Canadian Administrative Agent shall seek to allocate such Bankers' Acceptances in such amounts and for such terms, over time, as to maintain the Participations of all such Canadian Lenders in substantially the relative amounts and percentages set out on the execution pages for such Lenders. To the extent, if any, necessary to maintain each such Participation as the result of the foregoing, the Canadian Administrative Agent shall allocate a lesser or greater amount of other Advances to each Canadian Lender. (c) At the time of making any Loan, the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, shall, if appropriate, re-allocate amounts made available to the Borrowers under any of the Loans to give effect to the Participation of each Lender, determined immediately prior to the making of a Loan. 2.6 BANKERS' ACCEPTANCES (a) Upon execution of this Agreement, the Canadian Borrower shall deliver to the Canadian Lenders depository notes and/or bills of exchange, in the form for Bankers' Acceptances of each Canadian Lender, executed in blank by its Authorized Signatories in sufficient quantity and thereafter shall, from time to time upon request from the Canadian Administrative Agent, deliver to such Canadian Lenders further quantities of such bills of exchange and/or depository notes (on such Canadian Lender's forms) so executed, and the Canadian Lenders shall hold such bills of exchange and/or depository notes in safekeeping. The form of Bankers' Acceptances shall be as set out in Schedule "H". - 31 - (b) The Canadian Borrower hereby agrees to indemnify each such Canadian Lender against any cost, expense (including reasonable counsel fees and disbursements) claim, demand, action, loss or liability (except to the extent resulting from the gross negligence or wilful misconduct of such Canadian Lender) that such Lender may suffer or incur in connection with the deposit, safekeeping or completion in accordance with Section 2.8 of such bills of exchange and/or depository notes. Each Canadian Lender is hereby appointed attorney-in-fact for such completion and to execute any endorsement necessary in connection with the transactions contemplated by this Agreement with respect to Bankers' Acceptances. These agreements shall survive the termination of this Agreement and shall remain in full force and effect after termination of this Agreement. (c) With respect to any such bills of exchange and/or depository notes deposited in accordance with this Section 2.6, the Canadian Borrower shall furnish to each Canadian Lender accepting such drafts, in form and substance satisfactory to such Lender, (i) evidence of the authority of any officers or other representatives authorized to sign and to act with respect to such drafts, (ii) if such Lender shall so request, a formal power of attorney authorizing it to take all actions contemplated hereby with respect to Bankers' Acceptances as provided herein, and (iii) such other documents as such Canadian Lender or its counsel may reasonably request. (d) When the Canadian Borrower wishes to make a Borrowing by way of Bankers' Acceptances it shall give the Canadian Administrative Agent the notice required pursuant to Section 2.2. Bankers' Acceptances shall have terms of at least 30 days and not more than 180 days excluding days of grace (and which shall, in no event, end on a date after the Final Maturity Date). (e) On the same day it receives such notice, the Canadian Administrative Agent shall notify by telephone or in writing all the Canadian Lenders of the details of the proposed issue, specifying, for each Canadian Lender: (i) the Principal Amount of the Bankers' Acceptances to be accepted and purchased by such Canadian Lender; and (ii) the term of such Bankers' Acceptances. 2.7 ACCEPTANCE DATE PROCEDURE On the Acceptance Date, the following provisions shall apply: - 32 - (a) At or about 9:30 a.m. on the Acceptance Date, the Canadian Administrative Agent shall promptly determine the Reference Bankers' Acceptance Discount Rate. (b) Forthwith, and in any event not later than 10:30 a.m. that same day, the Canadian Administrative Agent shall indicate to each Canadian Lender: (i) the Reference Bankers' Acceptance Discount Rate; (ii) the amount of the Acceptance Fee applicable to those Bankers' Acceptances to be accepted by such Canadian Lender on such Acceptance Date, such Canadian Lender being authorized by the Canadian Borrower to collect such Acceptance Fee out of the Net Proceeds of those Bankers' Acceptances mentioned in subsection (iii); (iii) the Net Proceeds of those Bankers' Acceptances to be accepted and purchased by such Canadian Lender on such Acceptance Date; and (iv) the amount obtained (the "Available Proceeds") by subtracting the Acceptance Fee mentioned in subsection (ii) from the Net Proceeds mentioned in subsection (iii). (c) Not later than 12:00 noon that same day, each Canadian Lender shall make available to the Canadian Administrative Agent its Available Proceeds. (d) Not later than 4:00 p.m. that same day, the Canadian Administrative Agent shall transfer all such Available Proceeds so made available to it to the Canadian Borrower in accordance with Section 10.3 and shall notify the Canadian Borrower on such day either by telex or telephone (to be confirmed subsequently by letter) of the details of the issue, substantially in the form set out in Schedule "I". 2.8 PURCHASE OF BANKERS' ACCEPTANCES Before giving value to the Canadian Borrower, the Canadian Lenders shall, on the Acceptance Date, accept the Bankers' Acceptances, by inserting the appropriate Principal Amount, Acceptance Date and maturity date thereof in accordance with the Canadian Borrower's notice relating thereto and affixing their acceptance stamps thereto, and shall purchase same. The Principal Amount so accepted and purchased by any such Canadian Lender shall not exceed such Canadian Lender's unutilized Commitment. - 33 - 2.9 PAYMENT OF BANKERS' ACCEPTANCES The Bankers' Acceptances shall be payable in accordance with the following provisions: (a) The Canadian Borrower shall pay to the Canadian Administrative Agent for the account of the Canadian Lenders an amount equal to the Principal Amount of the Bankers' Acceptances on their respective B/A Maturity Dates. (b) In the event the Canadian Borrower fails to notify the Canadian Administrative Agent verbally (or at the discretion of the Canadian Borrower, in writing), not later than 10:00 a.m. (such notice, if verbal, to be confirmed to the Canadian Administrative Agent in writing later the same day, but not necessarily by 10:00 a.m.), 2 Business Days prior to any B/A Maturity Dates of a Bankers' Acceptance, that the Canadian Borrower intends to pay with its own funds the Principal Amount of the Bankers' Acceptances due on such B/A Maturity Dates, the Canadian Borrower shall be deemed, for all purposes, to have given the Canadian Administrative Agent notice to convert the Principal Amount of such Bankers' Acceptances into a COF Loan denominated in Cdn.$ having a COF Interest Period of 30 days and the provisions of Section 2.3 shall apply mutatis mutandis save that: (i) such B/A Maturity Date shall be considered to be the Drawdown Date of such COF Loan; (ii) the proceeds of such COF Loan shall be used to pay the Principal Amount of the Bankers' Acceptances due on such B/A Maturity Date; and (iii) on such B/A Maturity Date, each Canadian Lender, instead of making its Participation in such COF Loan available to the Canadian Administrative Agent, shall first directly apply its Participation in such COF Loan in payment of its Participation in the Principal Amount of the Bankers' Acceptances accepted, purchased and issued by such Canadian Lender and due on such B/A Maturity Date. 2.10 SET-OFF AND NETTING On any Acceptance Date, Drawdown Date or Repayment Date, the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, shall be entitled to set-off and net amounts payable on such date by the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, to a Lender for the account of any Borrower against amounts payable on such date by such Lender to the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, in connection with transactions conducted in the same basis of borrowing, for the account of such Borrower. Similarly, on any Acceptance Date, - 34 - Drawdown Date or Repayment Date, each Lender shall be entitled to set-off and to net amounts payable on such date by such Lender to a Borrower (by payment to the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be), against amounts payable on such date by such Borrower to such Lender, in accordance with the Canadian Administrative Agent's or the U.S. Administrative Agent's, as the case may be, calculations. 2.11 LETTERS OF CREDIT (a) Subject to the notice provisions of Sections 2.2 and 2.3 and upon the terms and subject to the conditions hereof the applicable Issuing Bank shall, at the request of a Borrower, issue under the applicable Revolving Facility one or more irrevocable Letters of Credit in such Issuing Bank's usual form (or such other form as may be required by such Borrower and is acceptable to the Issuing Bank acting reasonably), expiring no later than, in the case of Standby Letters of Credit, 365 days from the date of issuance and, in the case of Trade Letters of Credit, 270 days from the date of issuance and in no case later than 3 Business Days before the Final Maturity Date, provided that the maximum amount payable under all Letters of Credit shall not, at the time of issue of each Letter of Credit, exceed Cdn.$5,000,000 or the Equivalent Amount thereof in U.S. Dollars. (b) In the event that an Issuing Bank is called upon by a beneficiary to honour a Letter of Credit, such Issuing Bank shall forthwith give notice thereof to the applicable Borrower. Unless such Borrower has made other arrangements with the Issuing Bank with respect to payment to the Issuing Bank of an amount sufficient to permit the Issuing Bank to discharge its obligations under the Letter of Credit plus that amount equal to any and all charges and expenses which the Issuing Bank may pay or incur relative to such Letter of Credit, any such payment so payable in Canadian Dollars with respect to the Canadian Revolving Facility shall be deemed to be a Drawdown of a Prime Loan under the Canadian Revolving Facility and any amount so payable in U.S. Dollars with respect to a Letter of Credit issued on behalf of the Canadian Borrower shall be deemed to be a Drawdown by way of an Alternate Base Rate Loan under the Canadian Revolving Facility, and any such amount so payable with respect to a Letter of Credit issued on behalf of a U.S. Borrower shall be deemed to be a Drawdown by way of an Alternate Base Rate Loan under the U.S. Revolving Facility provided that the provisions of Section 2.2 regarding notices shall not apply to such Loans. (c) Any Issuing Bank shall notify the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, of each issuance or amendment of any Letter of Credit on the day upon which such issuance or amendment occurs and the Issuing Bank shall provide the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, with monthly reports setting out the face amount of Letters of Credit outstanding on each day of the preceding month. - 35 - Each of the Lenders, other than an Issuing Bank, shall be deemed to have purchased from such Issuing Bank its Participation of the face amount of each Letter of Credit issued by such Issuing Bank. Each of the Canadian Lenders agrees to indemnify the Issuing Bank issuing Letters of Credit under the Canadian Facilities and each of the U.S. Lenders agrees to indemnify the Issuing Bank issuing Letters of Credit under the U.S. Facilities, in each case as to such Lender's Participation of any amount paid by the Issuing Bank under any Letter of Credit plus that amount equal to any and all payments, losses, costs, charges and expenses which such Issuing Bank may pay or incur relative to such Letter of Credit. (d) The Borrowers shall indemnify the Issuing Banks against any and all actions, proceedings, costs, damages, expenses, taxes (other than taxes on overall net income, assets or capital), claims and demands which the Issuing Banks may incur or sustain by reason of or arising in any way whatsoever in connection with the opening, establishing or paying of the amounts payable under Letters of Credit issued at the request of a Borrower or arising in connection with any amounts payable by any Issuing Bank thereunder. (e) Each Borrower for which a Letter of Credit has been issued on its behalf shall pay to the Canadian Administrative Agent or U.S. Administrative Agent, as the case may be, for the account of the Canadian Lenders or the U.S. Lenders, as the case may be, each month that Letters of Credit issued on behalf of such Borrower are outstanding, the applicable Letter of Credit Fee. (f) Each Borrower for which a Letter of Credit has been issued on its behalf shall pay to the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, for the account of the applicable Issuing Bank, sundry charges and out-of-pocket expenses payable in respect of Letters of Credit which the Issuing Bank issues pursuant to a request of such Borrower. 2.12 CDN. OVERDRAFT FACILITY (a) In order to facilitate the Canadian Borrower's cash management requirements, TD in its capacity as a Lender agrees to make available to the Canadian Borrower the Cdn. Overdraft Facility as part of its Participation under the Canadian Revolving Facility in accordance with Section 2.1. The Cdn. Overdraft Facility shall form part of the Canadian Revolving Facility and shall be used by the Canadian Borrower to fund amounts which would otherwise be drawn down by the Canadian Borrower by way of Prime Loans or Alternate Base Rate Loans under the Canadian Revolving Facility pursuant to Section 2.2 but for such amounts not being, in the case of Prime Loans, in a minimum principal amount of Cdn.$300,000 and multiples of Cdn.$100,000 thereafter and in the case of - 36 - Alternate Base Rate Loans in a minimum principal amount of U.S.$300,000 and multiples of U.S.$100,000 thereafter. Notwithstanding any other provision hereof, drawdowns under the Cdn. Overdraft Facility are not subject to any minimum amount. Any Borrowings under the Cdn. Overdraft Facility may be drawn down by the Canadian Borrower without notice to TD by way of presentment to TD of cheques and other bills of exchange issued by the Canadian Borrower. (b) TD shall provide the Canadian Administrative Agent with monthly reports setting out the outstanding balance of the Cdn. Overdraft Facility on each day of the preceding month. (c) At any time and from time to time in its discretion, TD may notify the Canadian Administrative Agent that TD wishes each of the Canadian Lenders to provide its Participation in Advances made under the Cdn. Overdraft Facility, in which case the Canadian Administrative Agent shall forthwith notify each of the Canadian Lenders of such Participation and each Canadian Lender shall thereupon provide to the Canadian Administrative Agent, for the account of TD, such Canadian Lender's Participation under the Cdn. Overdraft Facility; PROVIDED HOWEVER no such Participation shall cause any such Canadian Lender to exceed its Commitment for the Canadian Revolving Facility. The amounts so provided by the Canadian Lenders in respect of the Cdn. Overdraft Facility shall be deemed to be Prime Loans or Alternate Base Rate Loans denominated in Cdn$ or U.S.$, as the case may be, under the Canadian Revolving Facility in accordance with the provisions of this Agreement (and for such purposes any notice provisions or minimum amounts of such Loans otherwise required under this Agreement shall be disregarded except for the proviso of this Section 2.12(c)). The aggregate of the amounts paid by the Canadian Lenders to the Canadian Administrative Agent in respect of the Cdn. Overdraft Facility shall be paid by the Canadian Administrative Agent to TD and applied by TD to reduce the then outstanding Loans under the Cdn. Overdraft Facility. (d) (i) The Canadian Borrower shall pay interest payable on Advances made under the Cdn. Overdraft Facility directly to TD unless TD otherwise directs the Canadian Borrower to make such payments to the Canadian Administrative Agent; and (ii) For purposes of determining the Prime Rate or the Alternate Base Rate, as the case may be, for Advances made under the Cdn. Overdraft Facility, TD shall be the Alternate Base Rate Reference Bank or the Prime Reference Bank, as the case may be. - 37 - 2.13 U.S. OVERDRAFT FACILITY (a) In order to facilitate each U.S. Borrower's cash management requirements, FNBC in its capacity as a U.S. Lender agrees to make available to the U.S. Borrowers the U.S. Overdraft Facility as part of its Participation under the U.S. Revolving Facility in accordance with Section 2.1. The U.S. Overdraft Facility shall form part of the U.S. Revolving Facility and shall be used by the U.S. Borrowers to fund amounts which would otherwise be drawn down by the U.S. Borrowers under the U.S. Revolving Facility pursuant to Section 2.2 but for such amounts not being, in a minimum principal amount of U.S.$300,000 and multiples of U.S. $100,000 thereafter. Notwithstanding any other provision hereof, Drawdowns under the U.S. Overdraft Facility are not subject to any minimum amount. Any Borrowings under the U.S. Overdraft Facility may be drawn down by way of Alternate Base Rate Loans by the U.S. Borrowers by providing notice to FNBC before 3:00 p.m. on the date of the request for drawdown. (b) FNBC shall provide the U.S. Administrative Agent with monthly reports setting out the outstanding balance of the U.S. Overdraft Facility on each day of the preceding month. (c) At any time and from time to time in its discretion, FNBC may notify the U.S. Administrative Agent that FNBC wishes each of the U.S. Lenders to provide its Participation in Advances made under the U.S. Overdraft Facility, in which case the U.S. Administrative Agent shall forthwith notify each of the U.S. Lenders of such Participation and each U.S. Lender shall thereupon provide to the U.S. Administrative Agent, for the account of FNBC, such U.S. Lender's Participation under the U.S. Overdraft Facility; PROVIDED HOWEVER, no such Participation shall cause any such U.S. Lender to exceed its Commitment. The amounts so provided by the U.S. Lenders in respect of the U.S. Overdraft Facility shall be deemed to be Alternate Base Rate Loans denominated in U.S.$ under the U.S. Revolving Facility in accordance with the provisions of this Agreement (and for such purposes any notice provisions or minimum amounts of such Loans otherwise required under this Agreement shall be disregarded except for the proviso to this Section 2.13(c)). The aggregate of the amounts paid by the U.S. Lenders to the U.S. Administrative Agent in respect of the U.S. Overdraft Facility shall be paid by the U.S. Administrative Agent to FNBC and applied by FNBC to reduce the then outstanding Loans under the U.S. Overdraft Facility. (d) (i) The U.S. Borrowers shall pay interest on Advances made under the U.S. Overdraft Facility directly to FNBC unless FNBC otherwise directs the U.S. Borrowers to make such payments to the U.S. Administrative Agent; and - 38 - (ii) For purposes of determining the Alternate Base Rate for Advances made under the U.S. Overdraft Facility, FNBC shall be the Alternate Base Rate Reference Bank. ARTICLE III REPAYMENT AND ACCOUNTS 3.1 REPAYMENT The Principal Amount of all Borrowings outstanding under all of the Facilities shall be repaid in full by the Borrowers on the Final Maturity Date and the Commitments in respect of such Facilities shall terminate on such date. 3.2 ACCOUNTS KEPT BY THE CANADIAN ADMINISTRATIVE AGENT The Canadian Administrative Agent shall keep in its books Accounts for the Letters of Credit, the Prime Loans, Alternate Base Rate Loans, Libor Loans, COF Loans, Bankers' Acceptances and other amounts payable by the Canadian Borrower under this Agreement. The Canadian Administrative Agent shall make appropriate entries showing, as debits, the amount of the indebtedness of the Canadian Borrower in respect of the Letters of Credit, the Prime Loans, Alternate Base Rate Loans, Libor Loans, COF Loans, and Bankers' Acceptances, as the case may be, the amount of all accrued interest, and any other amount due to the Canadian Lenders or the Agents pursuant hereto, according to the respective Participation of each Lender, and showing, as credits, each payment or repayment of principal and interest made in respect of such indebtedness, as well as any other amount paid to the Canadian Lenders or the Agents pursuant hereto, according to the respective Participation of each. Such Accounts shall constitute (in the absence of manifest error) prima facie evidence of their content against the Canadian Borrower and the Canadian Lenders. The Canadian Administrative Agent shall supply any Canadian Lender and the Canadian Borrower, upon request, with statements of such Accounts. 3.3 ACCOUNTS KEPT BY THE U.S. ADMINISTRATIVE AGENT The U.S. Administrative Agent shall keep in its books Accounts for the Letters of Credit, the Alternate Base Rate Loans and Libor Loans and other amounts payable by the U.S. Borrowers under this Agreement. The U.S. Administrative Agent shall make appropriate entries showing, as debits, the amount of the indebtedness of the U.S. Borrowers in respect of the Alternate Base Rate Loans and Libor Loans, as the case may be, the amount of all accrued interest, and any other amount due to the U.S. Lenders or the Agents pursuant hereto, according to the respective Participation of each Lender, and showing, as credits, each payment or repayment of principal and interest made in respect of such indebtedness, as well as any other - 39 - amount paid to the U.S. Lenders or the Agents pursuant hereto, according to the respective Participation of each. Such Accounts shall constitute (in the absence of manifest error) prima facie evidence of their content against the U.S. Borrowers and the U.S. Lenders. The U.S. Administrative Agent shall supply any U.S. Lender and either U.S. Borrower, upon request, with statements of such Accounts. 3.4 ACCOUNTS KEPT BY EACH CANADIAN LENDER Each Canadian Lender shall keep in its books, in respect of its Participation, accounts for the Letters of Credit, the Prime Loans, Alternate Base Rate Loans, the COF Loans, Libor Loans, Bankers' Acceptances and other amounts payable by the Canadian Borrower under this Agreement. Each Canadian Lender shall make appropriate entries showing, as debits, the amount of the indebtedness of the Canadian Borrower towards it in respect of the Letters of Credit, the Prime Loans, Alternate Base Rate Loans, COF Loans, Libor Loans, and Bankers' Acceptances, as the case may be, the amount of all accrued interest and any other amount due to such Lender pursuant hereto and, as credits, each payment or repayment of principal and interest made in respect of such indebtedness as well as any other amount paid to such Lender pursuant hereto. These accounts shall constitute (in the absence of manifest error or of contradictory entries in the Accounts), prima facie evidence of their content against the Canadian Borrower. 3.5 ACCOUNTS KEPT BY U.S. LENDERS Each U.S. Lender shall keep in its books, in respect of its Participation, accounts for the Letters of Credit, Alternate Base Rate Loans, Libor Loans, and other amounts payable by the U.S. Borrowers under this Agreement. Each U.S. Lender shall make appropriate entries showing, as debits, the amount of the indebtedness of the U.S. Borrower towards it in respect of the Letters of Credit, Alternate Base Rate Loans, Libor Loans, as the case may be, the amount of all accrued interest and any other amount due to such Lender pursuant hereto and, as credits, each payment or repayment of principal and interest made in respect of such indebtedness as well as any other amount paid to such Lender pursuant hereto. These accounts shall constitute (in the absence of manifest error or of contradictory entries in the Accounts), prima facie evidence of their content against the U.S. Borrowers. 3.5A PROMISSORY NOTES At the request of any Lender, each Borrower under the Facilities applicable to such Lender shall execute and deliver to such Lender a promissory note substantially in the form attached hereto as Schedule "Q". - 40 - 3.6 EXCESS RESULTING FROM EXCHANGE RATE CHANGE Any time that, following one or more fluctuations in the exchange rate of the Cdn. Dollar against the U.S. Dollar, the sum of: (a) the Borrowings in Cdn. Dollars under the Canadian Facilities; and (b) the Equivalent Amount in Canadian Dollars of the Borrowings in U.S. Dollars under the Canadian Facilities; exceeds the Total Commitments under the Canadian Facilities then in effect, the Canadian Borrower shall, within 10 days thereafter, either: (c) make the necessary payments or repayments to the Canadian Administrative Agent to reduce such sum to an amount equal to or less than the Total Commitments under the Canadian Facilities then in effect; or (d) maintain or cause to be maintained with the Canadian Administrative Agent deposits of U.S. Dollars in an amount equal to or greater than the amount by which such sum exceeds the Total Commitments under the Canadian Facilities then in effect, such deposits to be maintained in such form and upon such terms as are acceptable to the Canadian Administrative Agent. Until such time as such sum shall no longer exceed the Total Commitments under the Canadian Facilities, the Canadian Administrative Agent shall invest the deposits, in such manner and form of investment as shall be mutually acceptable to the Canadian Borrower and the Canadian Administrative Agent, and income earned thereon shall be received by the Canadian Administrative Agent for the Canadian Borrower's account and paid to the Canadian Borrower. Without in any way limiting the foregoing provisions, the Canadian Administrative Agent shall, on each Acceptance Date, Drawdown Date, Interest Date and B/A Maturity Date make the necessary exchange rate calculations to determine whether any such excess exists on such date and, if there is an excess, it shall so notify the Canadian Borrower. 3.7 CURRENCY Borrowings and payments in respect thereof are payable in the currency in which they are denominated. 3.8 EXTENSION OF FINAL MATURITY DATE (a) June 1, 2000 or, if such date shall be extended as provided herein, any subsequent June 1 following any extension provided herein, shall be an "Extension Date". Subject to the terms of this Agreement, not earlier than 90 days but not later than - 41 - 60 days prior to the next pending Extension Date, the Borrowers collectively may request, in writing to the Canadian Administrative Agent and the U.S. Administrative Agent, an extension of the Final Maturity Date for all but not less than all Facilities to a date which is one year after the Final Maturity Date then in effect (an "Extension Request"). (b) Upon receipt of an Extension Request, the Canadian Administrative Agent shall advise the Canadian Lenders and the U.S. Administrative Agent shall advise the U.S. Lenders of such Extension Request and each Lender shall advise their respective Agent within 30 days of receipt thereof whether such Lender consents to the Extension Request. (c) Unless the Majority Lenders agree to any Extension Request the Final Maturity Date shall not be extended by any Lender. (d) In the event that either the Majority Lenders have not agreed to an Extension Request or the Borrowers do not provide the Canadian Administrative Agent and the U.S. Administrative Agent with an Extension Request as provided in Section 3.8(a), the next pending Extension Date shall become a "Non-Extension Conversion Date" and the Lenders' Commitments under the Acquisition Facilities will convert to four-year reducing revolving facilities and the Acquisition Facilities and Revolving Facilities shall be reduced and/or repaid, as follows: (i) on or before the first anniversary of the Non-Extension Conversion Date, the amount necessary to reduce (A) the Canadian Lenders' Commitments with respect to the Canadian Acquisition Facility by Cdn $5,000,000 and the Commitments of the Canadian Lenders with respect to the Canadian Acquisition Facility shall be reduced by Cdn $5,000,000; and (B) the amount necessary to reduce the U.S. Lenders Commitments with respect to the U.S. Acquisition Facility by U.S. $13,000,000; and the Commitments of the U.S. Lenders with respect to the U.S. Acquisition Facility shall be reduced by U.S. $13,000,000. (ii) on or before the second anniversary of the Non-Extension Conversion Date, the amount necessary to reduce (A) the Canadian Lenders' Commitments with respect to the Canadian Acquisition Facility by Cdn $12,500,000; and the Commitments of the Canadian Lenders with respect to the Canadian Acquisition Facility shall be reduced by Cdn $12,500,000; and (B) the amount necessary to reduce the U.S. Lenders Commitments with respect to the U.S. Acquisition Facility by U.S. $32,500,000; and the Commitments of the U.S. Lenders with respect to the U.S. Acquisition Facility shall be reduced by U.S. $32,500,000. - 42 - (iii) on or before the third anniversary of the Non-Extension Conversion Date, the amount necessary to reduce (A) the Canadian Lenders' Commitments with respect to the Canadian Acquisition Facility by Cdn $12,500,000; and the Commitments of the Canadian Lenders with respect to the Canadian Acquisition Facility shall be reduced by Cdn $12,500,000; and (B) the amount necessary to reduce the U.S. Lenders Commitments with respect to the U.S. Acquisition Facility by U.S. $32,500,000; and the Commitments of the U.S. Lenders with respect to the U.S. Acquisition Facility shall be reduced by U.S. $32,500,000.; (iv) on or before the fourth anniversary of the Non-Extension Conversion Date, the amount necessary to reduce the Lenders' Commitments under the Acquisition Facilities and the Revolving Facilities to zero; and the Commitments of the Lenders with respect to the Acquisition Facilities and the Revolving Facilities shall be cancelled. (e) If the Majority Lenders have consented to an Extension Request but one or more Lenders (each a "Non-Consenting Lender") do not consent to the Extension Request, the Canadian Administrative Agent shall so advise the Canadian Borrower and the U.S. Administrative Agent shall so advise the U.S. Borrowers and the Canadian Borrower, with respect to a Non-Consenting Lender which is a Canadian Lender, or the U.S. Borrowers with respect to a Non-Consenting Lender which is a U.S. Lender, as the case may be, may (i) elect to have one or more Lenders assume all or a ratable portion of the Commitments of such Non-Consenting Lender, or (ii) prepay the portion of Facilities outstanding to Non-Consenting Lenders and accordingly the Commitments of such Non-Consenting Lenders shall be cancelled or (iii) the Extension Date shall become a "Non-Extending Lenders Conversion Date", and the Non-Extending Lenders' Commitments under the Acquisition Facilities shall convert to four-year reducing revolving facilities and the Non-Extending Lenders' Commitments shall be reduced and/or repaid as follows: (A) on or before the first anniversary of the Non-Extending Lenders Conversion Date, the amount necessary to reduce the Non-Consenting Lenders' Commitments to the extent of such Non-Consenting Lenders' Participations in Cdn $5,000,000 in the case of the Canadian Lenders and U.S. $13,000,000 in the case of the U.S. Lenders of the Acquisition Facilities (the "Year 1 Repayment"); and the Commitments of such Non-Consenting Lenders with respect to the Acquisition Facilities shall be reduced by the Year 1 Repayment; (B) on or before the second anniversary of the Non-Extending Lenders Conversion Date, the amount necessary to reduce the Non-Consenting - 43 - Lenders' Commitments to the extent of such Non-Consenting Lenders' Participations in Cdn $12,500,000 in the case of the Canadian Lenders and U.S. $32,500,000 in the case of the U.S. Lenders of the Acquisition Facilities (the "Year 2 Repayment"); and the Commitments of such Non-Consenting Lenders with respect to the Acquisition Facilities shall be reduced by the Year 2 Repayment; (C) on or before the third anniversary of the Non-Extending Lenders Conversion Date, the amount necessary to reduce the Non-Consenting Lenders' Commitments with respect to such Non-Consenting Lenders' Participations in Cdn $12,500,000 in the case of the Canadian Lenders and U.S. $32,500,000 in the case of the U.S. Lenders of the Acquisition Facilities (the "Year 3 Repayment") and the Commitments of such Non-Consenting Lenders with respect to the Acquisition Facilities shall be reduced by the Year 3 Repayment; and (D) on or before the fourth anniversary of the Non-Extending Lenders Conversion Date, the amount necessary to reduce the Non-Consenting Lenders' Commitments to zero and the Commitments of such Non-Consenting Lenders with respect to the Acquisition Facilities and the Revolving Facilities shall be cancelled. ARTICLE IV INTEREST AND ACCEPTANCE FEE 4.1 INTEREST ON LIBOR LOANS (a) The U.S. Borrowers shall pay, on each applicable Interest Date, to the U.S. Administrative Agent for the account of the U.S. Lenders interest on each Libor Loan in U.S. Dollars drawn down by the U.S. Borrowers for each Libor Interest Period at that rate per annum determined by the U.S. Administrative Agent to be equal to the sum of the applicable Libor Margin plus LIBOR. Each determination by the U.S. Administrative Agent of the rate of interest applicable to a Libor Interest Period shall, in the absence of manifest error, be final, conclusive and binding upon the U.S. Borrowers and the U.S. Lenders. Upon determination of the rate of interest applicable on the Libor Determination Date, the U.S. Administrative Agent shall notify the U.S. Borrowers and the U.S. Lenders of such rate. Such interest shall be calculated daily on the basis of the actual number of days elapsed divided by 360. - 44 - (b) The Canadian Borrowers shall pay, on each applicable Interest Date, to the Canadian Administrative Agent for the account of the Canadian Lenders interest on each Libor Loan in U.S. Dollars drawn down by the Canadian Borrowers for each Libor Interest Period at that rate per annum determined by the Canadian Administrative Agent to be equal to the sum of the applicable Libor Margin plus LIBOR. Each determination by the Canadian Administrative Agent of the rate of interest applicable to a Libor Interest Period shall, in the absence of manifest error, be final, conclusive and binding upon the Canadian Borrowers and the Canadian Lenders. Upon determination of the rate of interest applicable on the Libor Determination Date, the Canadian Administrative Agent shall notify the Canadian Borrowers and the Canadian Lenders of such rate. Such interest shall be calculated daily on the basis of the actual number of days elapsed divided by 360. (c) The yearly rate of interest to which the rate determined in accordance with the foregoing provisions of this Section 4.1 is equivalent, is the rate so determined multiplied by the actual number of days in that year and divided by 360. 4.2 INTEREST ON COF LOANS The Canadian Borrower shall pay, on each applicable Interest Date, to the Canadian Administrative Agent for each COF Interest Period at that rate per annum determined by Canadian Administrative Agent to be equal to the sum of the COF Margin plus the COF Rate. Each determination by the Canadian Administrative Agent of the rate of interest applicable to a COF Interest Period shall, in the absence of manifest error, be final, conclusive and binding upon the Canadian Borrower and the Canadian Lenders. Upon determination of the rate of interest applicable on the applicable COF Rate Determination Date, the Canadian Administrative Agent shall notify the Canadian Borrower and the Canadian Lenders of such rate. Such interest shall be calculated daily on the basis of the actual days elapsed divided by 365 or 366, as the case may be. The yearly rate of interest to which the rate determined in accordance with the foregoing provisions of this Section 4.2 applicable to COF Loans is the rate so determined multiplied by the actual number of days in that year and divided by 365 or 366, as the case may be. 4.3 INTEREST ON PRIME LOANS (a) The Canadian Borrower shall pay the Canadian Administrative Agent for the account of the Canadian Lenders in Canadian Dollars interest on each Prime Loan as evidenced by the Accounts at a rate per annum equal to the sum of (i) the Prime Margin and (ii) the Prime Rate. Each change in the fluctuating interest rate - 45 - for a Prime Loan will take place simultaneously with the corresponding change in the Prime Rate. (b) This interest is payable quarterly in arrears on each Interest Date for the period up to and including the last day of the previous Quarter and shall be calculated daily on the basis of the actual number of days elapsed in a year of 365 or 366 days, as the case may be. 4.4 INTEREST ON ALTERNATE BASE RATE LOANS (a) The U.S. Borrowers shall pay to the U.S. Administrative Agent for the account of the U.S. Lenders in U.S. Dollars, interest on each Alternate Base Rate Loan as evidenced by the Accounts at a rate per annum equal to the sum of: (i) the Alternate Base Rate Margin; and (ii) the Alternate Base Rate. Each change in the fluctuating rate for an Alternate Base Rate Loan will take place simultaneously with a corresponding change in the Alternate Base Rate. (b) The Canadian Borrower shall pay to the Canadian Administrative Agent for the account of the Canadian Lenders in U.S. Dollars, interest on each Alternate Base Rate Loan as evidenced by the Accounts at a rate per annum equal to the sum of: (i) the Alternate Base Rate Margin; and (ii) the Alternate Base Rate. Each change in the fluctuating rate for an Alternate Base Rate Loan will take place simultaneously with a corresponding change in the Alternate Base Rate. (c) The yearly rate of interest to which the rate determined in accordance with the foregoing provisions of this Section 4.4 is equivalent, is the rate so determined multiplied by the actual number of days in that year and divided by 360. (d) This interest is payable quarterly in arrears on each Interest Date for the period up to and including the last day of the previous Quarter and shall be calculated daily on the basis of the number of days elapsed divided by 360. - 46 - 4.5 LIBOR INTEREST PERIODS OR COF INTEREST PERIODS If a U.S. Borrower or the Canadian Borrower is borrowing by way of a Libor Loan or the Canadian Borrower is borrowing by way of a COF Loan or if a U.S. Borrower elects to convert into a Libor Loan pursuant to Section 2.3, the applicable Borrower shall, prior to the expiration or beginning of each Libor Interest Period or COF Interest Period, as applicable, select and notify the Canadian Administrative Agent and/or the U.S. Administrative Agent, as the case may be, at least 3 Business Days prior to: (a) the last day of the current Libor Interest Period for such Libor Loan; (b) the last date of the current COF Interest Period for such COF Loan; or (c) the Conversion Date, as the case may be, of the next or new, as the case may be, Libor Interest Period applicable to such Libor Loan, or COF Interest Period applicable to such COF Loan, which new Libor Interest Period or COF Interest Period, as applicable, shall commence on and include the day following the expiration of the prior Libor Interest Period or COF Interest Period, as applicable. If a Borrower fails to select and to notify the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, of the Libor Interest Period applicable to a Libor Loan or COF Interest Period applicable to such COF Loan, such Borrower shall be deemed to have selected a Libor Interest Period, or a COF Interest Period, of one month or 30 days, as the case may be. In any event, no Libor Interest Period or COF Interest Period shall end on a date falling after the Final Maturity Date. The Borrowers shall ensure, when selecting an Interest Period, that no Libor Loan or COF Loan shall be required to be prepaid in order for the Borrowers to perform their obligations under Section 3.1. 4.6 INTEREST ON OVERDUE AMOUNTS The Canadian Borrower shall pay to the Canadian Administrative Agent for the account of the Canadian Lenders and the U.S. Borrowers shall pay to the U.S. Administrative Agent for the account of the U.S. Lenders, on demand, interest on all overdue payments in connection with this Agreement, at a rate per annum which is equal to 2% per annum in excess of (a) the applicable rates of interest (inclusive of Libor Margin or COF Margin) payable under Section 4.1 in the case of payments of principal or interest on Libor Loans or Section 4.2 in the case of payments of principal and interest on COF Loans or (b) the applicable rates of interest (inclusive of Prime Margin or Alternate Base Rate Margin) payable under Sections 4.3 or 4.4 in the case of any other payments in Cdn.$ or U.S.$, as applicable. - 47 - 4.7 ACCEPTANCE FEE An Acceptance Fee shall be: (a) payable by the Canadian Borrower to the Canadian Administrative Agent for distribution to the Canadian Lenders on the Acceptance Date for each Bankers' Acceptance issued; and (b) calculated on the Principal Amount of each Bankers' Acceptance for the number of days in the term of such Bankers' Acceptance and based on a year of 365 days. 4.8 PRICING PERIODS Notwithstanding any other provision of this Agreement, in the event that a Pricing Period comes into effect which would require a downward adjustment to the rates applicable to any Borrowings outstanding by way of Bankers' Acceptances, Letters of Credit, COF Loans and/or LIBOR Loans such rates shall not be adjusted downward prior to: (a) in the case of Bankers' Acceptances, the applicable B/A Maturity Date; (b) in the case of Letters of Credit, the applicable expiry date; (c) in the case of Libor Loans, the end of the applicable Libor Interest Period; and (d) in the case of COF Loans, the end of the applicable COF Interest Period. and in any event no rates shall be adjusted downward until such time as the Canadian Borrower notifies the Canadian Administrative Agent and a U.S. Borrower notifies the U.S. Administrative Agent in writing that a Pricing Period which would require a downward adjustment to the applicable rates has come into effect. ARTICLE V CONDITIONS PRECEDENT 5.1 CONDITIONS PRECEDENT The Lenders' and Issuing Banks' obligations to make available any Borrowings under the Facilities on any Drawdown Date or Acceptance Date (other than in respect of a Conversion pursuant to Section 2.3) or date of issuance of a Letter of Credit is subject to and conditional upon the satisfaction of each of the following conditions: - 48 - (a) The Canadian Administrative Agent and the U.S. Administrative Agent, as the case may be, shall have received a notice of the requested Borrowing or Conversion in accordance with Section 2.2 or 2.3, as applicable, and with respect to Letters of Credit, the Issuing Bank shall have received an application therefor and any other documents it may require, all in form and substance satisfactory to such Issuing Bank. (b) on each Drawdown Date or Acceptance Date or date of issuance of a Letter of Credit: (i) there shall exist no Event of Default and no condition, event or act which, with the giving of notice or lapse of time, or both, would constitute an Event of Default and the Collateral Agent shall have received a certificate (without personal liability) from the applicable Borrower's president, chief financial officer or treasurer to such effect, substantially as in Schedule "J"; and (ii) the representations and warranties set out in Section 8.1 would, if made on such date, be true and accurate in all material respects on each such Drawdown Date or Acceptance Date or date of issuance of a Letter of Credit; (c) the Collateral Agent has received, in sufficient quantities to provide 1 copy to each Lender, on or prior to the first Drawdown Date or Acceptance Date or date of issuance of a Letter of Credit and in form and substance satisfactory to the Collateral Agent and Lenders' Counsel and in the case of clause (iv) of this paragraph (c), in form and substance satisfactory to the U.S. Lender referred to therein: (i) this Agreement duly executed by the Borrowers, the Unlimited Guarantors, the Lead Arranger, the Co-Arrangers, the Managers, the Lenders, the Canadian Administrative Agent, the U.S. Administrative Agent and the Collateral Agent; (ii) certified copies of the articles and certificate of incorporation of each of the Borrowers and the Unlimited Guarantors, their respective borrowing by-laws, if any, and resolutions of their respective boards of directors authorizing the execution, delivery and performance of this Agreement and the Security by them respectively; (iii) the certificate (without personal liability) of the president, the chief financial officer or treasurer of each of the Borrowers and the Unlimited Guarantor confirming, in all material respects, the veracity of the - 49 - representations and warranties set out in Section 8.1, substantially as set out in Schedule "J" supplemented by all such certificates as Lenders' Counsel may require; (iv) promissory note(s) requested by a U.S. Lender; and (v) incumbency certificates setting forth the signatures and titles of Authorized Signatories for each Borrower, certifying their authority to sign this Agreement and any documents contemplated hereby or provided in connection herewith. (d) the Collateral Agent shall have received, on or prior to the first Drawdown Date or Acceptance Date or date of issuance of a Letter of Credit, in form and substance acceptable to the Collateral Agent and Lenders' Counsel, as security for repayment of all Borrowings, payment of all interest and other amounts due hereunder and the performance of all other obligations of the Borrowers under this Agreement, all Security required to be delivered as of the Effective Date; (e) on or prior to the initial Drawdown Date or Acceptance Date or date of issuance of a Letter of Credit: (i) the Collateral Agent shall have received the opinions in form and substance satisfactory to the Collateral Agent, the Lenders and the Lenders' Counsel of each of Borrowers' Canadian Counsel, Borrowers' U.S. Counsel, and counsel to the Borrowers or its or their applicable Subsidiaries in British Columbia, Alberta, New York, Florida, Massachusetts, Illinois and Pennsylvania, each addressed to the Canadian Administrative Agent, the U.S. Administrative Agent, the Collateral Agent, the Lenders and Lenders' Counsel; (ii) the Collateral Agent shall have received opinions of Lenders' Counsel addressed to the Canadian Administrative Agent, the U.S. Administrative Agent, the Collateral Agent and Lenders in form and substance satisfactory to the Collateral Agent, the Lenders and Lenders' Counsel; (iii) all registrations and filings in respect of the Security shall have been made to the satisfaction of Lenders' Counsel in such jurisdictions as Lenders' Counsel shall determine to be necessary or appropriate; - 50 - (iv) there shall not have occurred any event, act or thing which would have a material adverse effect on the business, operations or properties of the Borrowers or any Guarantor or the rights and Security of the Lenders or on the ability of any Borrower or any Guarantor to perform all its obligations under this Agreement or any Security; (v) the Collateral Agent shall have received and be satisfied with the insurance policies of the Borrowers and the Guarantors and the terms and extent of coverage thereunder (such policies to include, without limitation, the standard mortgagee clause); (vi) the Lenders shall have received and be satisfied with a list disclosing all of the Borrowers' Subsidiaries in existence on the initial Acceptance Date or Drawdown Date or date of issuance of a Letter of Credit, and shall have completed and be satisfied with the results of their due diligence review of the Borrowers and the Guarantors including review of audited and unaudited intercompany debt arrangements, the Shareholders' Agreements, call options, non-competition agreements with key management personnel, compliance with environmental regulations, leases and outstanding material litigation; (vii) the Collateral Agent, the Canadian Administrative Agent, the U.S. Administrative Agent, the Lead Arranger, the Co-Arrangers, the Managers and Lenders' Counsel shall have received payment of all fees or other amounts then due and payable to them in connection with this Agreement; and (viii) the Collateral Agent shall have received a list disclosing, in sufficient detail, all Material Contingent Obligations of the Borrowers and any of their Subsidiaries. 5.2 CONDITIONS PRECEDENT TO BORROWINGS UNDER THE ACQUISITION FACILITIES The Lenders' obligations to make available any Borrowings under the Acquisition Facilities on any Drawdown Date or Acceptance Date (other than in respect of a Conversion pursuant to Section 2.3) are subject to and conditional upon the satisfaction of each of the following conditions (in addition to the conditions set out in Section 5.1): (a) at least 10 Business Days' prior to such Drawdown Date or Acceptance Date the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, shall have received: - 51 - (i) a certificate from the Canadian Borrower's president, chief financial officer or treasurer, substantially as in Schedule "N", to the following effect: (A) the proposed Borrowing shall be used to assist a Borrower in financing the acquisition of an Eligible Business; (B) in the opinion of the Canadian Borrower or, where the Canadian Borrower has identified the existence of potentially Hazardous Materials, a third party environmental consultant engaged by the Canadian Borrower of experience and reputation reasonably satisfactory to such Agent certifying that such Eligible Business has been and can continue to be conducted in compliance with any applicable Environmental Laws and that no material adverse change in the earnings of the applicable Acquisition Entity or the Canadian Borrower shall result therefrom; (C) that following completion of such acquisition the Maximum Acquisition Total Debt/Adjusted EBITDA Ratio of the Canadian Borrower shall not exceed the Maximum Total Debt/Adjusted EBITDA Ratio; and (D) the proposed Borrowing is within the amount available to be drawn down under the Commitments in relation to the applicable Acquisition Facility (the "Available Acquisition Amount"), such Available Acquisition Amount to be calculated in accordance with Schedule "O"; and (ii) (A) in the case where the Canadian Borrower has engaged a third party environmental consultant, a copy of such third party consultant's environmental report and opinion; and (B) pro forma financial projections supporting the statement in (i) (C) above; and (C) a copy of Schedule "O" setting out the calculation of the Available Acquisition Amount; and (b) in the case where the Maximum Acquisition Total Debt/Adjusted EBITDA Ratio is equal to or greater than 3.25 to 1, the Canadian Borrower and the Majority Lenders, acting reasonably, shall be satisfied that there shall not then exist and shall not occur, following completion of the acquisition, a material adverse - 52 - change in the financial condition of the Canadian Borrower and its Subsidiaries, taken as a whole. 5.3 WAIVER The terms and conditions of Sections 5.1 and 5.2 are inserted for the sole benefit of the Lenders. The Lenders may, in writing only, waive the terms and conditions of Section 5.1 and the Majority Lenders may, in writing only, waive the terms and conditions of Section 5.2 (other than Section 5.2 (a)(i)(D) which shall only be waived with the consent of all Lenders in writing) in each case in whole or in part and with or without terms or conditions in respect of any Borrowing, without prejudicing the Lenders' rights to assert them in whole or in part in respect of any other Borrowing. 5.4 HOSTILE TAKEOVER Notwithstanding any other provision of this Agreement, if any portion of the Facilities are to be used to fund a hostile takeover, any Lender may refuse to fund its Participation with respect to such hostile takeover if the Lender reasonably determines, by providing such funding, that it may be placed in a conflict of interest. ARTICLE VI PREPAYMENT, CANCELLATION, MANDATORY APPLICATION OF CASH PROCEEDS 6.1 PREPAYMENT AND CANCELLATION (a) The Borrowers may at any time prepay, in whole or in part, Borrowings outstanding under the Facilities and thereby reduce or cancel, as the case may be, corresponding Commitments by the amount of such prepayment upon giving the Canadian Administrative Agent and/or the U.S. Administrative Agent, as the case may be, at least 3 Business Days' prior written notice, in the case of the Canadian Facilities, in minimum amounts of Cdn.$10,000,000 and multiples of Cdn. $1,000,000 thereafter (or the Equivalent Amount thereof in U.S.$) and in the case of the U.S. Facilities, in minimum amounts of U.S. $10,000,000 and multiples of U.S. $1,000,000 thereafter. Any such prepayment of Borrowings outstanding under the Facilities shall be applied against reductions of Commitments and related repayment instalments required to be made under Section 3.8, as applicable, in inverse order of maturity. - 53 - For greater certainty repayments made under a Revolving Facility or an Acquisition Facility pursuant to Section 2.2 and repayments made under an Acquisition Facility under Section 6.5 do not constitute prepayments under this Section 6.1. (b) The Borrowers may, at any time, reduce or cancel any unused portion of the Commitments, provided that to the extent any such reduction shall cause any Borrowings outstanding to exceed the Commitments so reduced or cancelled such Borrowers shall prepay any such excess in accordance with paragraph (a) above. (c) Any prepayment and reduction or cancellation relating to Bankers' Acceptances, COF Loans or Libor Loans shall be made subject to the Borrowers' obligations under Section 7.4. (d) Any such prepayment and reduction shall reduce the Commitments of the Lenders pro rata according to their respective Participations. 6.2 NOTICE Each notice of prepayment and reduction or cancellation given pursuant to this Article shall be irrevocable, and shall specify the date upon which such prepayment and reduction or cancellation is to be made. A Borrower may not thereafter give a notice of prepayment and reduction or cancellation of such part of the Facilities for a date other than the date so specified in any previous such notice. 6.3 STATUS OF LENDER If, at any time: (a) the Commitment of any Lender is, in accordance with the terms of this Agreement, permanently reduced to zero; (b) all indebtedness owed to such Lender by the Borrowers hereunder or in connection herewith or under any Hedging Agreements has been finally and indefeasibly satisfied in full; and (c) such Lender is under no further actual or contingent obligation hereunder; then such Lender shall cease to be a party hereto and a Lender for the purposes hereof; provided however that all indemnities and provisions of this Agreement for the benefit of such Lender shall survive termination for the benefit of such Lender. - 54 - 6.4 FEES Upon cancellation of the Facilities in accordance with this Article VI, all accrued and unpaid fees for the Facilities as provided in Section 12.1 hereof shall be paid in full on and to such cancellation date. 6.5 MANDATORY APPLICATION OF CASH PROCEEDS Each Borrower shall apply, in permanent reduction of availability under the applicable Acquisition Facility, 100% of the net cash proceeds which are derived from the sale or disposition of assets by it or any of its Subsidiaries, other than in the ordinary course of business, towards repayment of the Principal Amount of Borrowings outstanding from time to time under the Acquisition Facilities, except to the extent that such net proceeds are reinvested, within 12 months of receipt thereof, in the businesses of the Borrowers and their Subsidiaries and except to the extent that such net proceeds are less than Cdn.$5,000,000 in the aggregate. ARTICLE VII SPECIAL LIBOR, COF AND INCREASED COST PROVISIONS 7.1 SUBSTITUTE RATE OF BORROWING If, on any Libor Determination Date or COF Rate Determination Date during the term of this Agreement, any Reference Bank, reasonably determines (which determination is final, conclusive and binding upon the Borrowers and the Lenders) and advises the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, that: (a) adequate and fair means do not exist for ascertaining the rate of interest on a Libor Loan or a COF Loan, (b) the making or the continuing of a loan bearing interest substantially similar to a Libor Loan or a COF Loan by such Reference Bank has become impracticable by reason of circumstances which materially and adversely affect, in the case of a Libor Loan, the London interbank market or, in the case of a COF Loan, the Canadian or United States, as the case may be, financial market, or (c) deposits in U.S. Dollars are not available to such Reference Bank, in the case of a Libor Loan, in the London interbank market or, in the case of a COF Loan, the Canadian or United States, as the case may be, financial market, in sufficient amounts in the ordinary course of business for the applicable Interest Period to make, fund or maintain a loan bearing interest substantially similar to a Libor Loan or a COF Loan during such Interest Period, - 55 - then, the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, shall promptly notify the applicable Borrower in writing and such Borrower shall (if so notified), promptly and, in any event, no later than by close of business on the day it receives such notification, advise such Agent of the Type into which the Borrower wishes to convert such Libor Loan or COF Loan, as applicable. Should a Borrower fail to advise such Agent, the Borrower shall be deemed to have given such Agent notice to convert (a) any such Libor Loan or COF Loan to the Canadian Borrower denominated in U.S.$, into an Alternate Base Rate Loan, and any such Libor Loan or COF Loan, as applicable, will be deemed to be an Alternate Base Rate Loan for all purposes under this Agreement, (b) any such Libor Loan to a U.S. Borrower, into an Alternate Base Rate Loan, and any such Libor Loan will be deemed to be an Alternate Base Rate Loan for all purposes under this Agreement and (c) any such COF Loan to the Canadian Borrower denominated in Cdn.$, into a Prime Loan, and any such COF Loan will be deemed to be a Prime Loan for all purposes under this Agreement. With a view to returning to the normal operation of the Facilities, the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, shall, after having consulted with the applicable Borrowers, the Lenders and the Reference Banks, examine the situation at least weekly to determine if the circumstances described in Section 7.1 (a), (b) or (c) still prevail. 7.2 INCREASED COST If the introduction of, or any change in, applicable law, regulation, treaty or official directive or regulatory requirement now or hereafter in effect (whether or not having the force of law) or in the interpretation or application thereof by any court or by any judicial or governmental authority charged with the interpretation or administration thereof, or if compliance by a Lender with any request from any central bank or other fiscal, monetary or other regulatory authority (other than a change in the relative credit rating or borrowing ability of a Lender) (whether or not having the force of law): (a) subjects any Lender to any Tax, or changes the basis of taxation of payments due to such Lender or increases any existing Tax, on payments of principal, interest or other amounts payable by a Borrower to such Lender under this Agreement (in each case, except for Taxes on the net income or capital of such Lender), (b) imposes, modifies or deems applicable any reserve, special deposit, regulatory, capital or similar requirement against assets held by or deposits in or for the account of, or loans bearing interest at a rate fixed on the basis of the London interbank market rates by, or any other acquisition of funds for loans bearing interest at a rate fixed on the basis of the London interbank market rates or any commitments or authorizations in respect thereof by any Lender or an office of any Lender, or - 56 - (c) imposes on any Lender any other condition with respect to this Agreement (except for Taxes on the net income or capital of such Lender), and the result of Sections 7.2 (a), (b) or (c) is to increase the cost to any Lender or to reduce the income receivable by such Lender in respect of a Libor Loan or COF Loan by any amount, the applicable Borrower shall pay to the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, for the account of any such Lender, that amount which compensates such Lender for such additional cost or reduction in income ("Additional Compensation") arising and calculated as and from a date which shall not be earlier than the 30th day preceding the date the applicable Borrower receives the notice referred to in the following sentence. Upon any Lender having determined that it is entitled to Additional Compensation, it shall promptly notify the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, and such Agent shall promptly notify the applicable Borrower. A certificate by any manager of such Lender setting forth the amount of the Additional Compensation and the basis for it shall be submitted by such Lender to such Agent and forwarded by such Agent, to the applicable Borrower and, absent manifest error, shall be prima facie evidence of the amount of the Additional Compensation and the applicable Agent shall debit, from the applicable Borrower's accounts, the amount stipulated as Additional Compensation in such certificate in accordance with Section 10.8. If an Agent notifies a Borrower pursuant to this Section 7.2, such Borrower shall have the right, upon written irrevocable notice to that effect delivered to such Agent at least 10 Business Days prior to the end of such Interest Period, to repay or convert such Lender's Participation in any such Libor Loan or COF Loan in full, together with payment of accrued interest and the Additional Compensation to the date of payment, to COF Loans which do not suffer the same defect or Alternate Base Rate Loans, as the case may be, denominated in U.S.$. 7.3 ILLEGALITY If the introduction of, or any change in, applicable law, regulation, treaty or official directive, or regulatory requirement (whether or not having the force of law) or in the interpretation or application thereof by any court or by any governmental authority charged with the administration thereof, makes it unlawful, or prohibited for any Lender to make, to fund or to maintain Libor Loans, such Lender may, by written notice to the Canadian Administrative Agent or the U.S. Administrative Agent, which notice shall be promptly communicated by such Agent to the applicable Borrower terminate its obligations to make, to fund or to maintain Libor Loans and the applicable Borrower shall prepay or convert such Lender's Participation in the Libor Loans forthwith (or at the end of any applicable Interest Period as such Lender in its discretion agrees) together with payment of all additional amounts as may be applicable to the date of payment, to COF Loans which do not suffer the same defect or Alternate Base Rate Loans, as the case may be, denominated in U.S.$. - 57 - 7.4 INDEMNITY If a Borrower prepays or converts, whether pursuant to Section 6.1, 7.2, 7.3 or 7.5 or otherwise repays pursuant to Section 6.5, a Libor Loan or a COF Loan on a day other than the last day of an Interest Period, such Borrower shall indemnify the Lenders for any loss, cost or expense (except that in the case of prepayment or conversion pursuant to Section 7.3, such loss, cost or expense shall be restricted to actual costs incurred by the Lenders) incurred in maintaining or redeploying deposits obtained by the Lenders to fund such Libor Loan or COF Loan, as applicable. The provisions of Section 11.1(d) shall apply to such indemnification mutatis mutandis. 7.5 OTHER INCREASED COSTS OR REDUCTIONS IN RETURN (a) If, with respect to any accommodation of any kind or nature provided by the Lenders under this Agreement, whether by way of Bankers' Acceptances or otherwise (each accommodation being in this Section 7.5 referred to as an "Accommodation") and as a result of the introduction of or any change in any law, regulation, rule or order or in its interpretation or administration or by reason of any compliance with any guideline, request or requirement from any fiscal, monetary or other authority (other than a change in the relative credit rating or borrowing ability of a Lender with respect to such Accommodation) (whether or not having the force of law) which it is customary for a bank or other lending institutions to comply with in respect of all its loans or facilities of similar type in Canada or the U.S. as the case may be, in relation to Facilities made available to the Borrowers: (i) any Lender incurs a cost (which it would not otherwise have incurred) or becomes liable to make a payment (calculated with reference to the Borrowings outstanding under an Accommodation) with respect to continuing to provide or maintain an Accommodation (other than Taxes imposed on the net income or capital of such Lender); (ii) any reserve, special deposit or similar requirement is imposed or increased with respect to an Accommodation increasing the cost thereof to any Lender; or (iii) any Lender suffers a reduction in its effective return on the date hereof, on the transactions contemplated under this Agreement (as determined by such Lender after taking into account any reduction in the rate of return (before Tax) on its overall capital arising as a consequence of compliance with any such guideline, request or requirement as aforesaid); - 58 - then the Borrowers shall, subject to the terms and conditions hereof, pay to such Lender such amount (the "Additional Other Compensation") as will compensate the Lender for and will indemnify the Lender against such increase in costs or reduction of rate of return with respect to the Facilities (arising and calculated as and from a date which shall not be earlier than the 30th day preceding the date a Borrower receives notice from the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, pursuant to Section 7.5 (b) below). (b) The Lender shall, forthwith, after incurring a cost as set out in Section 7.5 (a)(i), suffering an increase in cost as set out in Section 7.5 (a) (ii) or suffering a reduction in its effective return as set out in Section 7.5 (a) (iii) (each being in this Section referred to as an "Event") entitling the Lender to the payment of Additional Other Compensation and the Lender determining to claim such Additional Other Compensation, shall give notice to the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, of the Additional Other Compensation claimed with details of the Event giving rise thereto and the Agent shall promptly provide a copy of such notice to the applicable Borrower. Such Lender shall at that time or within 20 days thereafter provide to such Agent a certificate setting out in reasonable detail a compilation of the Additional Other Compensation claimed (and where appropriate the Lender's reasonable allocation to a Facility of Additional Other Compensation with respect to the aggregate of such similar facilities granted by the Lender affected by such Event) or, if the Lender is then unable to determine the Additional Other Compensation or the method of compilation thereof, an estimate of such Additional Other Compensation and/or the method or the basis on which the Lender estimates the calculation will be made which estimate will be confirmed or adjusted by the aforesaid certificate. The Agent shall promptly provide a copy of such certificate to the applicable Borrower. The certificate of the Lender with respect to the Additional Other Compensation shall , absent manifest error, constitute prima facie evidence of the amount payable. The Borrower shall, within 60 days of receipt of such notice from the Lender, pay to such Agent, for the account of the Lender, the Additional Other Compensation (or the estimated Additional Other Compensation) claimed but if the Additional Other Compensation claimed and paid is greater or lesser than the Additional Other Compensation as finally determined, the Lender or the Borrower, as the case may be, shall pay to the other the amount required to adjust the payment to the Additional Other Compensation required to be paid. The obligation to pay such Additional Other Compensation for subsequent periods will continue, subject as herein provided, until the earlier of the termination of the Accommodation affected by the Event referred to in the notice given by the Lender to the Agent or the lapse or cessation of the Event giving rise to the Additional Other Compensation. - 59 - (c) Within 120 days of receipt of the above-mentioned notice from the Agent, the Borrower may notify such Agent that it elects to repay or cancel, as the case may be, an Accommodation with respect to which Additional Other Compensation is claimed, or such Lender's Participation therein, and, if such election to repay or cancel is made, the Borrower shall 45 days after the giving of the notice of election to repay or cancel to such Agent (for distribution to the Lenders or to such Lender, as the case may be) such Accommodation or Participation, as the case may be, pay or cancel the same, together with payment of accrued interest, if any, and the Additional Other Compensation (or the estimated Additional Other Compensation) applicable thereto calculated to the date of such repayment or cancellation. If any such repayment constitutes a prepayment of Bankers' Acceptances, the Canadian Borrower shall deposit with the Canadian Administrative Agent (for the benefit of the Canadian Lenders involved) an amount equal to the face amount of all Bankers' Acceptances then outstanding which are to be prepaid (the "Prepaid Bankers' Acceptances"). The Canadian Administrative Agent shall, upon maturity of the Prepaid Bankers' Acceptances, apply the sum so deposited against payment of the Prepaid Bankers' Acceptances and remit to the Canadian Borrower the interest earned on the sum deposited. (d) For greater certainty, the costs referred to in Section 7.5(a) which may be included in Additional Other Compensation shall not include costs (i) which have already been factored into the Prime Rate or the Alternate Base Rate, as the case may be or (ii) which are attributable to staff time and related administrative costs incurred in the preparation and submission of compliance reports. 7.6 ADDITIONAL COST IN RESPECT OF TAX (a) Each payment to be made by a Borrower or an Unlimited Guarantor hereunder or in connection herewith to any other party hereto shall be made free and clear of and without deduction for or on account of Tax (except for Taxes on the net income or capital of a Lender or Taxes resulting from such Lender changing its residency for tax purposes) unless a Borrower or such Unlimited Guarantor is required to make such a payment subject to the deduction or withholding of Tax, in which case the sum payable by such Borrower or such Unlimited Guarantor in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that, after the making of such deduction or withholding, such other party hereto receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding been made or required to be made. (b) If any Lender or any Agent, on behalf of such Lender or on its own behalf, is required by law to make any payment on account of Tax (except for Taxes on the - 60 - overall net income or capital of such Lender or Agent or Taxes resulting from such Lender or Agent changing its residency for tax purposes) on or in relation to any sum received or receivable hereunder by such Lender or such Agent, or any liability in respect of any such payment is asserted, imposed, levied or assessed against such Lender or such Agent, the applicable Borrower and the Unlimited Guarantors, as applicable will, upon demand of such Lender or Agent, promptly indemnify such Lender or Agent (as the case may be) against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith. If a Lender or Agent has paid over on account of Tax (other than Taxes excepted above) an amount paid to such Lender or Agent by a Borrower or an Unlimited Guarantor pursuant to the foregoing indemnification and the amount so paid over is subsequently refunded to such Lender or Agent, in whole or in part, such Lender shall promptly remit such amount refunded to such Borrower or Unlimited Guarantor, as the case may be. 7.7 CLAIMS UNDER SECTION 7.6 A Lender or Agent intending to make a claim pursuant to Section 7.6 shall deliver to the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, reasonably promptly after becoming aware of the circumstances giving rise to the claim, a certificate to that effect specifying the event by reason of which it is entitled to make such claim and setting out in reasonable detail the basis and computation of such claim. Such Agent shall promptly deliver to the applicable Borrower a copy of such certificate. 7.8 TAX RECEIPTS If at any time a Borrower is required by law to make any deduction or withholding from any sum payable by it hereunder or in connection herewith (or if thereafter there is any change in the rates at which or the manner in which such deductions or withholdings are calculated) such Borrower shall promptly notify the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, thereof. If a Borrower makes any payment hereunder or in connection herewith in respect of which it is required by law to make any deduction or withholding it shall pay the full amount to be deducted or withheld to the relevant taxation or other authority within the time allowed for such payment under applicable law and shall deliver to such Agent within 30 days after it has made such payment to the applicable authority: (a) a receipt issued by such authority; or (b) other evidence reasonably satisfactory to such Agent evidencing the payment to such authority of all amounts so required to be deducted or withheld from such payment. - 61 - 7.9 INTERNAL REVENUE SERVICE FORMS (a) Each U.S. Lender and each of their respective successors and assigns, shall provide each of the U.S. Borrowers (with copies to the U.S. Administrative Agent), with (x) Internal Revenue Service Form 1001, Form 4224 or Form W-9, as appropriate, or any successor Forms prescribed by the Internal Revenue Service, certifying that such Lender is entitled to benefits under an income tax treaty to which the United States is a party which exempts such Lender from United States withholding tax or certifying that the income receivable by it pursuant to this Agreement is effectively connected with the conduct of a trade or business in the United States or certifying that such Lender is a U.S. Person as defined by Section 7701(a)(30) of the Code or (y) solely if such Lender is claiming exemption from United States withholding tax under Section 871(h) or 881(c) of the Code with respect to payments of "portfolio interest", a Form W-8, or any successor form prescribed by the Internal Revenue Service, and a certificate representing that such Lender is not a bank for purposes of Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning of Section 871(h)(3)(B) of the Code) of the U.S. Borrower and is not a controlled foreign corporation related to a U.S. Borrower (within the meaning of Section 864(d)(4) of the Code). (b) For any period with respect to which a U.S. Lender has failed to provide the U.S. Borrower or the U.S. Administrative Agent with the appropriate form referred to in Section 7.9(a) (unless such failure is due to a change in treaty, law or regulation occurring after the date on which such form originally was required to be provided), such Lender shall not be entitled to indemnification under Section 7.6 with respect to Taxes imposed by the United States; provided that if a Lender, that is otherwise exempt from or subject to a reduced rate of withholding tax, becomes subject to Taxes because of its failure to deliver a form required hereunder, the applicable Borrower shall take such steps as such Lender shall reasonably request to assist such Lender to recover such Taxes. (c) If a Borrower is required to pay additional amounts to or for the account of any Lender pursuant to this Section as a result of a change in law or treaty occurring after such Lender first became a party to this Agreement, then such Lender will, at the Borrower's request, change the jurisdiction of its applicable lending office if, in the judgment of such Lender, such change (i) will eliminate or reduce any such additional payment which may thereafter accrue and (ii) is not otherwise disadvantageous to such Lender. - 62 - ARTICLE VIII REPRESENTATIONS, WARRANTIES & COVENANTS 8.1 REPRESENTATIONS AND WARRANTIES Each Borrower and each Unlimited Guarantor represents and warrants to each of the Agents and each of the Lenders as of the date of this Agreement, all of which representations and warranties shall survive the execution and delivery of this Agreement, that: (a) each of the Borrowers and the Guarantors which is a corporation is duly incorporated, validly existing and in good standing in all material respects as a corporation under the laws of its jurisdiction of incorporation and has full corporate power, authority and capacity to own its properties and conduct its business and each of the Borrowers and the Guarantors which are corporations has the full corporate power, authority and capacity to execute, deliver and perform its obligations to be performed under, in the case of each Borrower and each Unlimited Guarantor which are corporations, this Agreement and under the Security provided or to be provided by it, and, in the case of each of the other Guarantors, its guarantee and the Security to be provided by it; (b) FSLP is a limited partnership, duly organized and existing under the laws of the State of Delaware and has full power, authority and capacity to execute, deliver and perform its obligations to be performed under this Agreement and under the Security provided or to be provided by it; (c) all acts, conditions and things required to be done and performed by each Borrower, or to have occurred prior to the execution, delivery and performance, in the case of each Borrower and each Unlimited Guarantor of this Agreement and the Security provided or to be provided by it and, in the case of each of the other Guarantors, its guarantee and the Security provided or to be provided by it to constitute it a binding obligation of such party enforceable against it in accordance with its terms, have been done and performed, and have occurred in due compliance with all applicable laws; (d) the execution, delivery and performance, in the case of each of the Borrowers and each Unlimited Guarantor of this Agreement and the Security provided or to be provided by it and, in the case of each of the other Guarantors, its guarantee and the Security provided or to be provided by it has been duly authorized by all necessary corporate and other action and does not: (i) violate any provision of law or any provision of the articles of incorporation or other instrument of formation of such party, or - 63 - (ii) result in a breach of, a default under, or the creation of any Lien (other than those in favour of the Agents and the Lenders) on the properties and assets of any Borrower or Guarantor, as the case may be, under any material agreement or instrument to which it is a party or by which its properties and assets may be bound or affected; (e) this Agreement in the case of the Borrowers and each Unlimited Guarantor and the Security provided or to be provided by it and, in the case of each of the other Guarantors, its guarantee and the Security provided or to be provided by it constitutes, when executed and delivered, binding, direct obligations of such party, enforceable in accordance with its terms, subject to: (i) applicable bankruptcy, insolvency, moratorium, reorganization and other similar laws affecting creditors' rights generally and statutes limiting creditors' rights, including the Personal Property Security Act (Ontario); (ii) the equitable and statutory powers of the courts of appropriate jurisdiction to stay proceedings before them, to stay the execution of judgments and to award costs; (iii) the discretion of such courts as to the granting of the remedies of specific performance and injunction; and (iv) the restriction that Canadian courts can only render judgments in Canadian currency; (f) other than as disclosed to the Agents and the Lenders in writing prior to the date hereof there is no litigation and there are no legal proceedings pending, or to the best of its knowledge, threatened against any of the Borrowers or any Guarantor or any Affiliate of a Borrower or any Guarantor before any court or administrative agency of any jurisdiction which is likely to affect materially and adversely the financial condition, assets or operations of a Borrower or any Guarantor; (g) no event has occurred which constitutes or which, with the giving of notice, the lapse of time or both, would constitute a default under or in respect of any material agreement, undertaking or instrument to which any of the Borrowers or any Guarantor is a party or to which any of their respective properties or assets may be subject which is likely to affect materially and adversely, the financial conditions, assets or operations of a Borrower or any Guarantor; (h) other than as disclosed to the Agents and the Lenders in writing prior to the date hereof each of the Borrowers and the Guarantors is not in violation in any - 64 - material respect of any term of their respective incorporating instruments or by-laws, and, to the best of each Borrower's and each Unlimited Guarantor's knowledge, none of the Borrowers and the Guarantors is in violation of any material mortgage, franchise, license, judgment, decree, order, statute, rule or regulation which is likely to affect materially and adversely the financial condition, assets or operations of a Borrower or any Guarantor; (i) each Borrower and each Guarantor has filed all tax returns which were required to be filed, paid all Taxes (including interest and penalties) which are due and payable by such Borrower or such Guarantor and provided adequate reserves for payment of any Tax the payment of which is being contested; (j) each of the Direct Guarantors is a Wholly-Owned Subsidiary of the Canadian Borrower, FS (USA) is a Wholly-Owned Subsidiary of the Canadian Borrower and each of the other Guarantors is a Subsidiary of the Canadian Borrower or a shareholder of a Subsidiary thereof; (k) the Canadian Borrower's shares are owned and controlled as follows:
- ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- PRINCIPAL SHAREHOLDERS SHARES OF SHARES OF TOTAL SHARES VESTED PERCENT MULTIPLE SUBORDINATED OPTIONS TO VOTING VOTING JANUARY 31, CAPITAL CAPITAL STOCK 1999 STOCK (1) - ---------------------------------------------------------------------------------------------- MANAGEMENT/DIRECTOR % SHAREHOLDERS - ---------------------------------------------------------------------------------------------- Jay S. Hennick 662,847 885,081 1,547,928 411,805 10.70 - ---------------------------------------------------------------------------------------------- D. Scott Patterson 0 203,600 203,600 178,500 1.41 - ---------------------------------------------------------------------------------------------- Douglas Cooke 0 22,500 22,500 23,500 0.15 - ---------------------------------------------------------------------------------------------- John Friedrichsen 0 30,000 30,000 9,000 0.21 - ---------------------------------------------------------------------------------------------- Timothy Greener 0 227,035 227,035 34,000 1.57 - ---------------------------------------------------------------------------------------------- Management Options 0 1,637,437 1,637,437 11.32 (55 persons, including officers named above) - ---------------------------------------------------------------------------------------------- Other 10,795,692 10,795,692 74.64 - ---------------------------------------------------------------------------------------------- TOTAL 662,847 13,801,345 14,464,192 100 ---------- ---------- ---------- ----- ---------- ---------- ---------- ----- - ---------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------
(1) Multiple Voting Capital Stock has 20 votes per share ("Ownership and Control"); - 65 - (l) there exists no Event of Default and no condition, event or act which, with the giving of notice, lapse of time, or both, would constitute an Event of Default; (m) other than as provided under the applicable incorporating or formation statute of any Borrower or any Guarantor, none of the Borrowers nor any Guarantor is subject to regulation under the Public Utility Holding Company Act of 1935, the Federal Power Act, the Interstate Commerce Act or the Investment Company Act of 1940 or to any U.S. or Canadian federal, state or provincial statute or regulation limiting its ability to incur indebtedness for money borrowed; (n) none of the Borrowers nor any Guarantor is by itself, nor is it by virtue of its being under "common control" with any other Person within the meaning of Section 414 (b) or (c) of the Internal Revenue Code of 1986 (the "Code"), an "employer" within the meaning of Section 3 (5) of the Employee Retirement Income Security Act of 1974 of the United States of America, as amended from time to time ("ERISA"), in respect of any employee pension benefit plan covered by Title IV of ERISA or subject to the minimum funding standards under the Code; (o) no part of the proceeds of the Borrowings will be used for any purpose that violates the provisions of any of Regulation T, U or X of the Board of Governors of the Federal Reserve System or any other regulation of such Board of Governors; none of the Borrowers nor any Guarantor is engaged in the business of extending credit for the purpose of purchasing or carrying margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System; none of the Borrowers nor any Guarantor owns any such "margin stock"; (p) since September 30, 1998 to the best of its knowledge, there has been no material adverse change in the business, operations, properties, prospects or condition (financial or otherwise) of the Canadian Borrower or its Subsidiaries; (q) on the basis of a review and assessment undertaken by the Borrowers of their computer applications, the Borrowers reasonably believe that the Year 2000 Problem will not result in a material adverse effect on the business, operations or properties of the Canadian Borrower or its Subsidiaries. (r) none of the Borrowers nor any Guarantor has received any notice, or has any knowledge, that the operations of a Borrower or any Guarantor are not in compliance in all material respects with all applicable Environmental Laws; and (s) each Borrower and all its Subsidiaries have valid title to their respective assets and, without limitation, own or possess or are licensed or otherwise have the right to use all material licenses, permits and other governmental approvals and - 66 - authorizations, patents, trademarks, service marks, trade names, copyrights, franchises, authorizations and other rights that are reasonably necessary for the operations of their respective businesses, without, to the best of the knowledge of the Borrowers and the Unlimited Guarantors, conflict with the rights of any other Person with respect thereto. 8.2 COVENANTS Each Borrower covenants with each of the Agents and with each of the Lenders that so long as there shall remain any Borrowings or any other obligations of or affecting any party to this Agreement: (a) it will pay duly and punctually all sums of money due by it under this Agreement at the times and places and in the manner provided for herein and will cause each Guarantor to do likewise under its Guarantee; (b) it will maintain, and cause each Guarantor to maintain, its existence, corporate and otherwise, in good standing; (c) it will, on a timely basis: (i) take all necessary and appropriate steps to address the Year 2000 Problem such that there does not occur any material adverse effect on the business, operations or properties of the Borrowers or their Subsidiaries as a consequence thereof; and (ii) provide the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, with disclosure of its measures to deal with the Year 2000 Problem as well as any updates of such measures, (d) it will not, without the Majority Lenders' prior written consent (which consent shall not be unreasonably withheld), sell, transfer or otherwise dispose of its control, direct or indirect, of any of its Subsidiaries and it will not, nor will it permit any of its Subsidiaries to, without the Majority Lenders' prior written consent, sell, lease, assign, transfer, convey or otherwise dispose of any of its properties or assets whether now owned or hereafter acquired (including, without limitation, receivables and leasehold interests, patents and intellectual property rights) BUT EXCLUDING: (i) inventory disposed of in the ordinary course of business; (ii) property no longer used or useful in its business provided that the net book value of such property sold, leased, assigned, transferred, conveyed or - 67 - otherwise disposed of shall not exceed Cdn $100,000 per transaction and Cdn. $500,000 in the aggregate in any Fiscal Year of the Canadian Borrower; (iii) property which is, substantially contemporaneously with the disposition thereof, replaced by property (of substantially the same kind or nature) of at least equivalent value; and (iv) entering into sale/leaseback transactions with respect to property having a net book value of not more than Cdn. $100,000 per transaction and Cdn. $500,000 in the aggregate in any Fiscal Year of the Canadian Borrower; provided, however, that it or any one or more of its Subsidiaries may, without such consent, sell, lease, assign, transfer, convey or otherwise dispose of such control, properties or assets, so long as: (A) the aggregate book value of the Subsidiaries, assets and properties subject to all such sales, leases, assignments, transfers, conveyances or other dispositions by the Borrowers and/or their Subsidiaries made in any Fiscal Year (or at any time during such Fiscal Year) without such consent (other than as permitted under (i), (ii) or (iii) above) do not exceed Cdn.$5,000,000 or the Equivalent Amount thereof in U.S.$ in any Fiscal Year of the Canadian Borrower; (B) it gives the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, prior written notice of each sale, lease, assignment, transfer, conveyance or other disposition involving one or more properties or assets having either a realization value or a book value of Cdn.$500,000 or the Equivalent Amount thereof in U.S.$ or more, and (C) no Event of Default or any event which, with notice and/or lapse of time, or both, would become an Event of Default shall exist after giving effect to any such sale, lease, assignment, transfer, conveyance or other disposition and the application of the proceeds thereof; (e) it will carry on diligently and conduct its business in a proper and efficient manner so as to preserve and protect its properties, assets and income in a prudent manner consistent with usual industry practice and the preservation of its business and assets, and it will cause its Subsidiaries to do the same in respect of their respective businesses and assets and, in particular, without limiting the foregoing, it will not alter its business plan so as to change materially the nature - 68 - or scope of business, operations or activities currently carried on by it or its Subsidiaries or to shift or transfer same from a Borrower or any such Subsidiaries to other of its Subsidiaries, without obtaining the prior written consent of the Majority Lenders (which consent shall not be unreasonably withheld); (f) it will maintain or cause to be maintained, with responsible and reputable insurers, insurance with respect to its properties, assets and business and the respective properties, assets and businesses of its Subsidiaries against such casualties and contingencies (including public liability) and in such types and in such amounts and with such deductibles and other provisions as are customarily maintained or caused to be maintained by persons engaged in the same or similar businesses in the same territories under similar conditions; it will ensure that the Collateral Agent is an additional named loss payee under all policies of insurance, as its interest may appear, and that such policies are not cancellable without at least 30 days' prior written notice being given by the insurers to the Collateral Agent; (g) it will do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered all such other acts, agreements, instruments and assurances in law as the Collateral Agent or Lenders' Counsel shall reasonably require for the better accomplishing and effectuating of the intentions and provisions of this Agreement and the Security; (h) it will do, observe and perform all material matters and things necessary or expedient to be done, observed or performed under any law of Canada, the United States of America, any province or state or municipality thereof or of any other jurisdiction for the purpose of carrying on and conducting its business and owning and possessing its properties and assets and, without limitation, it will maintain at all times in full force and effect all material certificates, permits, licenses and other approvals required to operate its business and it will cause its Subsidiaries to do the same in respect of their respective businesses, properties and assets; for greater certainty and without in any way limiting the generality of the foregoing: (i) each Borrower and each Guarantor shall be at all times in compliance in all material respects with all applicable Environmental Laws; and (ii) each Borrower shall ensure that each of the real properties or premises owned, leased or occupied by it or any of its Subsidiaries is free from contamination by a release, discharge or emission of any Hazardous Material; (i) it will promptly pay or cause to be paid all Taxes levied, assessed or imposed upon it and/or its Subsidiaries, and/or its properties and assets or those of its - 69 - Subsidiaries or any part thereof and/or upon its income and profits or that of its Subsidiaries, as and when the same shall become due and payable save when and so long as any such Taxes are in good faith contested by it or those of its Subsidiaries as may be affected thereby; (j) it will furnish to the Canadian Administrative Agent and the U.S. Administrative Agent, in sufficient quantities to provide 1 copy to each Lender and such Agent: (i) as soon as available and in any event within 45 days (or 60 days in the case of the last Quarter in each Fiscal Year) after the end of each Quarter of each Fiscal Year of the Canadian Borrower and each Subsidiary (A) the unaudited consolidated (and unconsolidated) financial statements of the Canadian Borrower or Subsidiary, as the case may be, prepared in substantially the same manner and containing substantially comparable information to the financial statements which were delivered to the Canadian Administrative Agent prior to the date of this Agreement, as of the end of such Quarter to be prepared in accordance with GAAP, accompanied by a confirmation (without personal liability) from the president, the chief financial officer or treasurer of the Canadian Borrower confirming that such financial statements have not been prepared in a manner, and do not contain any statement, which is inconsistent with GAAP, certified (without personal liability), subject to audit and year-end adjustment, by the president, chief financial officer or treasurer of the Canadian Borrower and containing sufficient information to permit each Lender to determine whether the financial covenants contained in Section 8.2(p) are being maintained and, (B) such officer's certificate to the effect that, as of the last day of such Quarter, and, to the best knowledge of such officer, as of the date of such certificate, no event has occurred and is continuing which constitutes an Event of Default or which would constitute an Event of Default with the giving of notice and/or the lapse of time or both; (ii) as soon as practicable and in any event within 90 days after the end of each Fiscal Year of the Canadian Borrower, (A) a copy of the consolidated (and unconsolidated) financial statements of the Canadian Borrower as of the end of such Fiscal Year, such financial statements of the Canadian Borrower and its Subsidiaries to be prepared in accordance with GAAP, (a) the consolidated financial statements of the Canadian Borrower to be accompanied by a report thereon by independent auditors of recognized standing confirming, without qualification, that such financial statements of the Canadian Borrower have been prepared in accordance with GAAP and (b) copies of such auditors' recommendations, if any, (following completion of their audit to be provided) together with (B) a certificate - 70 - (without personal liability) of the president, chief financial officer or treasurer of the Canadian Borrower containing sufficient information to permit each Lender to determine whether the financial covenants contained in Section 8.2(p) are being maintained and the information required to determine amounts to be paid under Section 6.5 and to the effect that, as of the last day of such Fiscal Year, and to the best of the knowledge of such officer, as of the date of such certificate, no event has occurred and is continuing which constitutes an Event of Default or which would constitute an Event of Default with the giving of notice and/or the lapse of time or both; (iii) as soon as possible and in any event within 10 Business Days after any Borrower or any of its Subsidiaries receives (A) notice of the commencement thereof, notice of any actions or proceedings against it or any of its Affiliates or against any of the property of a Borrower or any of its Subsidiaries before any court, governmental agency or arbitrator, which, if determined adversely, would have a material adverse effect on the financial condition or operations of any Borrower or its Subsidiaries, taken as a whole and (B) a copy of any Violation Notice received by a Borrower or any of its Subsidiaries; (iv) within 30 days of the beginning of each Fiscal Year of the Canadian Borrower, the Canadian Borrower's annual business plan and financial projections, including projected capital expenditures for the Fiscal Year then begun; (v) promptly upon request, such other information concerning the financial affairs or operations of any Borrower or any of its Subsidiaries as the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, may reasonably request from time to time including for greater certainty financial statements of the U.S. Borrowers, NSULC, FSLLC and FSLP; (k) it will not, nor will it permit any Subsidiary to, without the Majority Lenders' prior written consent, make any advances to or for the benefit of, or guarantee (other than under Permitted VTBS) the indebtedness or liabilities of, or otherwise become liable for, any Person or any business or project of any Person save and except: (i) the endorsement of cheques and other negotiable instruments for deposit in the ordinary course of business; - 71 - (ii) advances and accounts between one or more of a Borrower and any of its Subsidiaries which shall be on commercially reasonable terms; provided that such advances and accounts are secured by means of security agreements in form and substance satisfactory to the Collateral Agent, are assigned to the Collateral Agent and form part of the Security (hereinafter referred to as "Permitted Loans"); and (iii) liabilities, indebtedness and obligations which would otherwise constitute Permitted Encumbrances hereunder but for the lack of a lien to secure such liabilities, indebtedness and obligations. (l) it will permit from time to time to the Canadian Administrative Agent and the U.S. Administrative Agent or their representatives or advisers access to its premises, assets, records and meetings of directors and/or of shareholders upon reasonable (both as to timing and advance notice) request of such Agent; (m) it will give to the Canadian Administrative Agent or the U.S. Administrative Agent prompt notice of any Event of Default or any event, of which it is aware, which, with the giving of notice and/or the lapse of time or both, would constitute an Event of Default; (n) it will not, and it will not permit any of its Subsidiaries to, without the Majority Lenders' prior written consent, incur, create, assume or permit to exist any Lien on any of its or any of its Subsidiaries' property or assets, whether owned at the date hereof or hereafter acquired, except that the following shall be permitted (the "Permitted Encumbrances"): (i) Liens incurred and pledges and deposits made in connection with workers' compensation, unemployment insurance, old-age pensions and similar legislation (other than ERISA); (ii) Liens securing the performance of bids, tenders, leases, contracts (other than for the repayment of borrowed money), and statutory obligations of like nature, incurred as an incident to and in the ordinary course of business; (iii) statutory Liens of landlords, undetermined or inchoate Liens and other Liens imposed by law, such as carriers', warehousemens', mechanics', construction and materialmen's Liens, incurred in good faith in the ordinary course of business provided that the aggregate amount of any carriers', warehousemens', mechanics', construction or materialmens' Liens shall at no time exceed an aggregate amount of Cdn. $500,000 or - 72 - the Equivalent Amount thereof in U.S.$ and the amount thereof shall be paid when same shall become due; (iv) Liens securing the payment of Taxes, assessments and governmental charges or levies, either (i) not delinquent or (ii) being contested in good faith by appropriate proceedings; (v) permits, right-of-way, zoning restrictions, easements, licenses, reservations, restrictions on the use of real property or minor irregularities or minor title defects incidental thereto which do not in the aggregate materially detract from the value of the property or assets of a Borrower or any of its Subsidiaries or materially impair the operation of the business of a Borrower or any of its Subsidiaries; (vi) Liens arising out of the leasing of personal property by it or any of its Subsidiaries in the ordinary course of business up to an amount not exceeding in the aggregate Cdn.$9,000,000 for all Borrowers and their Subsidiaries or the Equivalent Amount thereof in U.S. $; (vii) Liens, subordinate in priority to the Liens created under the Security, incurred in the ordinary course of business for the purposes of securing the payment of any purchase price balance or the refinancing of any purchase price balances not greater than in the aggregate Cdn.$15,000,000 or the Equivalent Amount in U.S. $ of any assets (other than current assets) acquired by a Borrower or any of its Subsidiaries provided that any such Liens are restricted to the assets so acquired ("Permitted VTBS"); (viii) reservations, conditions, limitations and exceptions contained in or implied by statute in the original disposition from the Crown and grants made by the Crown of interests so reserved or accepted; (ix) security given in the ordinary course of business by a Borrower, or any of its Subsidiaries to a public utility or any municipality or governmental or public authority in connection with operations of a Borrower, or any of its Subsidiaries, (other than in connection with borrowed money) securing not more than an aggregate amount equal to Cdn. $500,000 for all Borrowers and their Subsidiaries or the Equivalent Amount thereof in U.S. $; (x) liens in respect of Permitted Loans; - 73 - (xi) the Security and any additional or further security granted to the Collateral Agent and/or the Lenders by a Borrower, a Guarantor or any future Subsidiary of a Borrower; and (xii) the encumbrances described on Schedule "P" with respect to real property owned by Prime Management Group Inc. and the Canadian Borrower. (o) it will not, without the prior written consent of the Majority Lenders: (i) declare dividends, whether in cash or in specie, or make payments thereof; (ii) make or permit any distributions or returns of capital (whether by retirement, redemption, repurchase, cancellation or otherwise); or (iii) make or permit any withdrawals or any other payments of money or equivalents thereof whatsoever (including, without limitation, royalties, management fees, etc.) (which are not otherwise expressly permitted by the terms of this Agreement) by or to the shareholders of the Canadian Borrower, its Affiliates or any creditors ranking junior to the Lenders and it will cause its Subsidiaries to do likewise save and except for: (A) interest dividend payments, distributions and/or returns of capital made, directly or indirectly to any Borrower; (B) normal course distributions to other shareholders of such Subsidiaries as contemplated in the Canadian Borrower's annual business plan and within limits approved by the Majority Lenders annually; (C) normal course issuer bids of the Canadian Borrower up to an aggregate amount not exceeding Cdn. $2,000,000; (D) payments upon exercise of the put options under the Shareholders' Agreements; (E) payments upon exercise of the call options under the Shareholders' Agreements; (F) payments on account of retirement, termination, death or disability, redemptions; and (G) payments on account of Permitted VTBS; - 74 - (p) the Canadian Borrower will, at all times, maintain on a consolidated and rolling 4 Quarters basis: (i) the Maximum Total Debt/Adjusted EBITDA Ratio; (ii) the Maximum Total Debt/Capitalization Ratio; (iii) the Minimum Fixed Charge Coverage Ratio; (iv) the Minimum Working Capital Ratio; (v) the Minimum Business Value/Total Debt Ratio; and (vi) the Minimum Interest Coverage Ratio; (q) it will not, nor will it permit any of its Subsidiaries to, without the Majority Lenders' prior written consent (which shall not be unreasonably withheld), enter into a merger or consolidation or amalgamation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or, except as permitted under Section 8.2(d), convey, sell, lease, transfer or otherwise dispose of, in one transaction or a series of transactions, all or a substantial part of its or such Subsidiary's business, properties or assets; (r) it will not, nor will it permit any of its Subsidiaries to, incur any other indebtedness (including senior and subordinated debt), loans or financing of any kind or nature whatsoever (whether in the form of capital leases or sale-leaseback transactions or otherwise) or incur any contingent obligations or liabilities (including guarantees) other than trade payables incurred in the ordinary course of business and indebtedness or contingent obligations or liabilities secured by Permitted Encumbrances and Permitted Liens, without obtaining the prior written consent of the Majority Lenders; (s) it will not, nor will it permit any of its Subsidiaries to: (i) other than: (A) in the ordinary course of business; or (B) in connection with the acquisition of an Eligible Business which satisfies the conditions of Section 5.2 (whether or not Borrowings are being requested under an Acquisition Facility), - 75 - make any acquisition of, or investment in, properties, assets, businesses, shares, Persons or effectively related series of such acquisitions or investments; or (ii) establish, incorporate otherwise form, charter or create any new Subsidiary other than in connection with the acquisition of an Eligible Business which satisfies the conditions of Section 5.2 (whether or not Borrowings are being requested under an Acquisition Facility), without obtaining the prior written consent of the Majority Lenders; (t) it will ensure that all Security granted to the Collateral Agent, and/or the Lenders continues to be perfected and preserve the first priority thereof; (u) it will not make, or permit the making of, any change or modification to the Shareholders' Agreements, without the prior written consent of the Majority Lenders; (v) it will cause any entity which after the date hereof shall become a Subsidiary of a Borrower (such entity, a "New Subsidiary") to execute and deliver in favour of the Collateral Agent and the Lenders either (i) the Direct Security or (ii) an Undertaking to Secure, together with favourable supporting legal opinions, in either case, as soon as reasonably practicable after becoming a Subsidiary and no later than (A) in the case of an Acquisition Entity where the acquisition has been financed, wholly or partially, by way of Borrowings under an Acquisition Facility, on the date of completion of the acquisition, or (B) in any other case within 10 Business Days following the date of completion of the acquisition or creation of the New Subsidiary, as the case may be; and (w) it will not, without the prior written consent of the Majority Lenders, terminate or replace Jay Hennick as Chairman and Chief Executive Officer of the Canadian Borrower, and, in the event that due to any other reason, Jay Hennick ceases to be Chairman and Chief Executive Officer or to perform his duties as such, it will not appoint a successor or new Chairman and/or Chief Executive Officer unless such Person shall be reasonably acceptable to the Majority Lenders. For greater certainty, with respect to the covenants contained in this Section 8.2, the ordinary courses of business of: (a) FSLP is limited to holding the shares of NSULC; (b) NSULC is limited to holding the units of FSLLC; (c) FSLLC is limited to making loans to Subsidiaries of the Canadian Borrower and taking security for such loans; and - 76 - (d) FS USA is limited to making loans to Subsidiaries of the Canadian Borrower and taking security for such loans. ARTICLE IX EVENTS OF DEFAULT 9.1 EVENTS OF DEFAULT Upon the occurrence of any one or more of the following events (an "Event of Default"): (a) the non-payment by a Borrower when due, whether by acceleration or otherwise, of any payment of principal due under the Facilities, or otherwise hereunder; (b) the non-payment by a Borrower when due (or within 3 Business Days thereafter) whether by acceleration or otherwise, of any payment (other than a payment of principal) due under the Facilities or otherwise hereunder; (c) the commencement of proceedings by or against a Borrower, any Guarantor or any of their Subsidiaries for the dissolution, merger, amalgamation, liquidation or winding-up of any of a Borrower or any Guarantor or any of their Subsidiaries or for the suspension of the operations of any of a Borrower or any Guarantor or any of their Subsidiaries, unless, in the case of proceedings against a Borrower, any Guarantor or any of their Subsidiaries, such proceedings are being actively and diligently contested by the Borrower, or Guarantor or such Subsidiary, as the case may be, in good faith to the satisfaction of the Majority Lenders; (d) a Borrower or any Guarantor or any of their Subsidiaries is adjudged or declared bankrupt or insolvent or makes an assignment for the benefit of creditors, or petitions or applies to any tribunal for the appointment of a receiver, custodian or trustee for a Borrower, any Guarantor or any such Subsidiary or for any substantial part of its property, or commences any proceedings relating to it under any reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction whether now or hereafter in effect relating to or governing debtors or such proceedings are commenced against it (unless, in the case of proceedings commenced against it, such proceedings are being actively and diligently contested by such Borrower, such Guarantor or such Subsidiary in good faith to the satisfaction of the Majority Lenders), or by any act indicates its consent to, approval of, or acquiescence in, any such proceeding for a Borrower, any Guarantor or any such Subsidiary or for any substantial part of its property, or suffers the appointment of any receiver, custodian or trustee and any such appointment continues undischarged and in effect for a period of 30 days; - 77 - provided that during such 30 day period such appointment is being actively and diligently contested by such Borrower or Guarantor or Subsidiary in good faith to the satisfaction of the Majority Lenders and in the case of a Borrower such receiver, custodian or trustee shall not have taken possession of or otherwise enforced its rights over the property in respect of which it has been appointed; (e) any material representation or warranty made in this Agreement or any Security by a Borrower, the Unlimited Guarantor, or any of their Subsidiaries or any information furnished in writing to an Agent or Lender by a Borrower, any Guarantor or any such Subsidiary proves to have been incorrect in any material respect when made or furnished save that if any such materially incorrect representation or warranty is capable of being corrected and none of the Agents and the Lenders has been prejudiced by such materially incorrect representation or warranty, then the Borrowers shall have 30 days after written notice to do so by the Collateral Agent to take such action to make the representation or warranty true and correct at such time, in which case such representation or warranty shall be deemed to have been true and correct when originally made or furnished; (f) a writ, execution or attachment or similar process is issued or levied against all or a substantial portion of the property of a Borrower, any Guarantor or any of their Subsidiaries in connection with any judgment against a Borrower, any Guarantor or any of their Subsidiaries in any amount which materially affects the assets of a Borrower, any Guarantor or its Subsidiaries, and such writ, execution, attachment or similar process is not released, bonded, satisfied, discharged, vacated or stayed within 30 days after its entry, commencement or levy; provided that during such 30 day period such process if being actively and diligently contested by such Borrower or Guarantor or Subsidiary in good faith to the satisfaction of the Majority Lenders; (g) the breach or failure of due performance by a Borrower or any Guarantor of any covenant or provision of this Agreement, other than those heretofore dealt with in this Section 9.1, which is not remedied by such Borrower, or Guarantor within 30 days, after written notice to do so by the Collateral Agent or any Lender; provided that such breach or failure is capable of being remedied and during such 30 day period the Borrower or Guarantor is proceeding actively and diligently in good faith to remedy such breach or failure to the satisfaction of the Majority Lenders; (h) demand by any Person (including, without limitation, any Lender) is made on a Borrower, any Guarantor or any of their Subsidiaries in respect of indebtedness, in an aggregate amount of: - 78 - (i) Cdn. $3,000,000 (or the Equivalent Amount thereof in U.S.$) but less than Cdn. $5,000,000 (or the Equivalent Amount thereof in U.S. $) and such demand is not withdrawn within 30 days; or (ii) Cdn. $5,000,000 (or the Equivalent Amount thereof in U.S.$) or more, payable on demand by such Borrower, such Guarantor or such Subsidiary and such Borrower, such Guarantor or such Subsidiary has not, when due and payable, made payment of the amount so demanded or contested the validity of such demand in good faith or a Borrower, any Guarantor or any of their Subsidiaries is in default under any term or provision of any agreement, deed, indenture or instrument (other than this Agreement) between such Borrower, such Guarantor or such Subsidiary as the case may be, and any Person (including, without limitation, any Lender) shall have accelerated or shall have the right to accelerate any indebtedness (including Financial Contract Obligations) in an aggregate amount of: (iii) Cdn. $3,000,000 (or the Equivalent Amount thereof in US$) but less than Cdn. $5,000,000 (or the Equivalent Amount thereof in U.S.$) and such acceleration or right to accelerate is not withdrawn within 30 days; or (iv) Cdn. $5,000,000 (or the Equivalent Amount thereof in U.S.$) or more, of a Borrower, such Guarantor or such Subsidiary, as the case may be; (i) a writ, execution or attachment or similar process is issued or levied against all or a substantial portion of the property of a Borrower, any Guarantor or any of their Subsidiaries in connection with any judgment against a Borrower, any Guarantor or any of their Subsidiaries in any amount which materially affects the assets of a Borrower, any Guarantor or its Subsidiaries, and such writ, execution, attachment or similar process is not released, bonded, satisfied, discharged, vacated or stayed within 30 days after its entry, commencement or levy provided during such 30 day period such process if being actively and diligently contested by such Borrower or Guarantor or Subsidiary in good faith to the satisfaction of the Majority Lenders; (j) a Borrower, any Guarantor or any of their Subsidiaries ceases or threatens to cease to carry on all or a substantial part of the business currently carried on by such Borrower, such Guarantor or such Subsidiary; (k) there is any change in Ownership and Control which results in Jay Hennick, his spouse, descendants and ascendants and any entities controlled by any of them or trusts established by, or for the benefit of, any of them, ceasing to own, directly or indirectly, more voting shares of the Canadian Borrower than any other - 79 - shareholder or group of related or affiliated shareholders without the prior written consent of the Majority Lenders; or (l) a Borrower shall have failed within 30 days of the giving of a Call Option Triggering Event Notice to have caused an Affected Subsidiary to become a Direct Guarantor; the Collateral Agent shall, if so instructed by the Majority Lenders, by written notice to the Borrowers declare the Borrowings, including accrued interest thereon, and all other indebtedness of the Borrowers to any of the Lenders and/or the Agents in connection with this Agreement to be due and payable, whereupon: (i) any right of the Borrowers to any further utilization of the Facilities terminates; and (ii) all Borrowings and other indebtedness of the Borrowers to any of the Lenders and/or to the Agents in connection with this Agreement are, notwithstanding anything in this Agreement to the contrary, immediately due and payable without further demand or other notice of any kind, all of which are expressly waived by the Borrowers and Guarantors, and the Borrowers shall immediately: (A) pay to the Canadian Administrative Agent and/or the U.S. Administrative Agent, as the case may be, the amount so declared to be due and payable (except for the Principal Amount of the Bankers' Acceptances then issued and outstanding); (B) pay to the Canadian Administrative Agent, a sum of money in Cdn. $ equal to such amount which the Canadian Administrative Agent shall establish as being the amount which if invested in certificates of deposit or similar money market instruments issued by the Canadian Administrative Agent will, together with the yield derived from such investments (the sum of such amount and such yield the "Amount"), equal the Principal Amount of all Bankers' Acceptances then issued and outstanding. The Canadian Administrative Agent shall, promptly upon receipt of the Amount distribute among the Lenders the Amount or the applicable portion thereof for such Bankers' Acceptances; and (C) if so requested by the Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, pay to such Agent an amount in immediately available funds (which funds shall be held as collateral pursuant to arrangements satisfactory to such Agent) - 80 - equal to the aggregate amount available for drawing under all Letters of Credit then outstanding. 9.2 SECURITY (a) Upon the occurrence of an Event of Default, the Security held by the Collateral Agent and/or any Lender shall become immediately enforceable and the Majority Lenders may, in their absolute discretion, instruct the Collateral Agent or, in respect of any Security held by any Lender directly, such Lender, to take any and all steps in order to enforce and realize upon the Security, in whole or in part. (b) The Borrowers' obligations and liabilities under this Agreement are in no way affected or diminished in the event of any such enforcement of or realization upon any Security by the Collateral Agent or any such Lender. 9.3 REMEDIES NOT EXCLUSIVE The Borrowers and the Guarantors expressly agree that the rights and remedies of the Agents and the Lenders under this Agreement and the Security are cumulative and in addition to, and not in substitution for, any rights or remedies provided by law; any single or partial exercise by an Agent or any Lender of any right or remedy for a default or breach of any term, covenant, condition or agreement in this Agreement does not affect its or their rights and does not waive, alter, affect, or prejudice any other right or remedy to which an Agent or the Lenders may be lawfully entitled for the same default or breach. Any waiver by an Agent or any of the Lenders of the strict observance of, performance of or compliance with any term, covenant, condition or agreement of this Agreement, and any indulgence by any Agent or any of the Lenders is not a waiver of that or any subsequent default. 9.4 SET-OFF In addition to any rights now or hereafter granted under applicable law and not by way of limitation of any such rights, each of the Lenders is authorized during an Event of Default which is continuing, without notice to the Borrowers, any Guarantor or to any other Person, any such notice being expressly waived by the Borrowers and each Guarantor, to set-off and to appropriate and to apply any and all deposits, matured or unmatured, general or special and any other indebtedness at any time held by or owing by each of the Lenders to or for the credit of or the account of any of the Borrowers or any Guarantor against and on account of the obligations and liabilities of the Borrowers and the Guarantors due and payable to each of the Lenders under this Agreement, including without limitation, all claims of any nature or description arising out of or connected with this Agreement. - 81 - ARTICLE X PAYMENTS 10.1 PAYMENTS TO AGENTS (a) All payments to be made by the Canadian Borrower in connection with this Agreement shall be made in funds having same day value to the Canadian Administrative Agent, for its own account or for the account of the Canadian Lenders, at Canadian Imperial Bank of Commerce, International, Toronto, in favour of Dresdner Bank Canada, Toronto, Account No. 650-0811 for CDN$, at Dresdner Bank AG, New York, U1D 143039, in favour of Dresdner Bank Canada for US$, or at any other office or account designated by the Canadian Administrative Agent. Any such payment shall be made on the date upon which such payment is due, in accordance with the terms hereof, no later than 10:00 a.m. Any such payment shall be a good discharge to the Canadian Borrower for such payment and, if any such payment is for the account of the Lenders, the Canadian Administrative Agent shall hold the amount so paid "in trust" for the Lenders until distributed to them in accordance with this Agreement. (b) All payments to be made by the U.S. Borrowers in connection with this Agreement shall be made in funds having same day value to the U.S. Administrative Agent, for the account of the U.S. Lenders, at Dresdner Bank AG, New York, U1D 143039, or at any other office or account designated by the U.S. Administrative Agent. Any such payment shall be made on the date upon which such payment is due, in accordance with the terms hereof, no later than 10:00 a.m. Any such payment shall be a good discharge to the U.S. Borrowers for such payment and, if any such payment is for the account of the U.S. Lenders, the U.S. Administrative Agent shall hold the amount so paid "in trust" for the U.S. Lenders until distributed to them in accordance with this Agreement. (c) Whenever a payment is due on a day which is not a Business Day, the day for payment is the following Business Day. 10.2 PAYMENTS BY LENDERS TO AGENTS All payments to be made by any Lender to an Agent in connection with Borrowings shall be made in funds having same day value to such Agent, for the applicable Borrower's applicable Cdn. $ or U.S. $ account (unless otherwise specified), at the branch, office or account mentioned in or designated under Section 10.1 (a) or (b) and by the time designated therein. - 82 - 10.3 PAYMENTS BY AGENTS TO BORROWERS Any payment received by an Agent for the account of a Borrower shall be paid in funds having same day value to such Borrower by such Agent on the date of receipt or, if such date is not a Business Day, on the next Business Day, to the Canadian Borrower's Operating Accounts or each U.S. Borrower's Operating Account, as the case may be, at the same branch, or to such other accounts as a Borrower may designate. 10.4 DISTRIBUTION TO LENDERS AND APPLICATION OF PAYMENTS (a) Except as otherwise indicated herein, all payments made to an Agent by a Borrower for the account of the Lenders in connection herewith shall be distributed the same day by such Agent in funds having same day value among the Lenders to the accounts last designated in writing by such Lenders respectively to such Agent pro rata, in accordance with their respective Participations with respect to the Loans, Bankers' Acceptances or Letters of Credit in respect of which any such payment is made. (b) Any amounts so distributed shall be applied by the Lenders as follows: (i) to amounts due pursuant to Articles VII or XI; (ii) to amounts due pursuant to Articles XII; (iii) to amounts due pursuant to Article IV; and (iv) to any other amounts due pursuant to this Agreement. 10.5 NO SET-OFF OR COUNTERCLAIM All payments by a Borrower or any Guarantor shall be made free and clear of and without any deduction for or on account of any set-off or counterclaim. 10.6 NON-RECEIPT BY AGENTS Where a sum is to be paid hereunder to an Agent for the account of another party hereto, such Agent shall not be obliged to make the same available to that other party hereto until it has been able to establish that it has actually received such sum, but if it does pay out a sum and it proves to be the case that it had not actually received the sum it paid out, then the party hereto to whom such sum was so made available shall on request ensure that the amount so made available is refunded to such Agent and shall on demand indemnify such Agent against any cost or loss it may have suffered or incurred by reason of its having paid out such sum prior to its having received such sum. - 83 - 10.7 WHEN DUE DATE NOT SPECIFIED Whenever this Agreement does not provide a date when any amount payable hereunder shall be due and payable such amount shall be due and payable on the 5th Business Day following written notice or demand for payment thereof by an Agent or any Lender save that nothing hereinbefore provided shall in any way affect or alter the rights and remedies available to the Agents and any Lender under Article IX. 10.8 AGENTS' AUTHORITY TO DEBIT In respect of all amounts payable by a Borrower under this Agreement, the Borrowers and each Unlimited Guarantor hereby authorize and instruct the Agents, as applicable, to debit, from time to time when such amounts are due and payable, the account or accounts designated pursuant to Section 10.3 and all other accounts of the applicable Borrower or Unlimited Guarantor, whether such accounts are maintained with an Agent, an Account Bank or otherwise, for the purpose of satisfying payment thereof. ARTICLE XI EXPENSES 11.1 PAYMENT OF EXPENSES Whether or not an Event of Default exists, the Borrowers shall, jointly and severally: (a) pay (i) all reasonable out-of-pocket expenses of the Agents and the Lead Arranger incurred in the preparation, negotiation, execution and delivery of this Agreement, the Security and all other documents relating hereto including, without limitation, legal fees and out-of-pocket expenses of Lenders' Counsel and their agents and (ii) all other reasonable out-of- pocket expenses of the Agents, the Lead Arranger, the Co-Arrangers and the Managers incurred in connection with the establishment and maintenance of the Facilities including, without limitation, environmental and other consultants' fees and expenses; (b) pay all reasonable out-of-pocket expenses of the Agents incurred in the amendment or modification of this Agreement or documents (including waivers or consents) relating thereto at a Borrower's request (whether or not any such amendment or modification is actually consummated) including without limitation, legal fees and out-of-pocket expenses of Lenders' Counsel and their agents; - 84 - (c) pay all reasonable out-of-pocket expenses of the Agents and the Lenders incurred in the enforcement and preservation of any of their rights under this Agreement or any Security, including, without limitation, legal fees and out-of-pocket expenses of Lenders' Counsel or other counsel and their agents; and (d) indemnify the Agents and the Lenders from all losses, costs, damages, out-of-pocket expenses and liabilities which any Agent or any Lender sustains or incurs (including, without limitation, any loss of profit or expenses any Lender incurs by reason of the liquidation or redeployment of deposits or other funds acquired by such Lender to maintain Borrowings or any interest or other charges payable by such Lender to other lenders of funds borrowed in order to make, to fund or to maintain the Loans or to maintain any amount in default) as a consequence of (I) any prepayment (it being understood that the mandatory repayments to be made pursuant to Section 3.1 do not constitute prepayments), (II) any acceleration of the payment of Borrowings pursuant to Section 9.1 or 17.8 or (III) any default by a Borrower under any of the provisions of this Agreement including, without limitation, a failure to borrow on a Drawdown Date or to issue Bankers' Acceptances on an Acceptance Date, a failure to pay interest on, or principal amounts of, the Loans on the dates due, the failure to make a payment on the specified date or the failure to make a payment in accordance with this Agreement or any misrepresentation by a Borrower contained in or delivered in writing in connection with this Agreement. The certificate of an officer or manager of any Agent or any such Lender setting forth the amount of any such losses, damages, expenses and liabilities shall constitute, absent manifest error, prima facie evidence of any such amount and any Agent shall debit, from any Borrower's accounts, the amount stipulated in the certificate in accordance with Section 10.8. The affected Agent or Lender shall also provide to the affected Borrower a statement setting out the basis for the calculation of such amount. 11.2 SURVIVAL Without prejudice to the survival or termination of any other agreement of the Borrowers under this Agreement, the obligations of the Borrowers under Section 11.1 survive the repayment of all the Borrowings and the termination of the Commitments. 11.3 ENVIRONMENTAL INDEMNITY (a) Subject to the limitations in this Section 11.3, the Borrowers agree to and do hereby, jointly and severally, indemnify and save harmless the Agents - 85 - and the Lenders and their officers, directors, employees, agents and shareholders in such capacities (the "Indemnified Parties") from and against any and all losses, damages, costs and expenses of any and every nature and kind whatsoever which at any time or from time to time may be paid by or incurred by them (without duplication and net of Tax Recoveries by any of the Indemnified Parties) for, with respect to, or as a direct or indirect result of the disposal, refining, generation, manufacture, production, storage, handling, presence, treatment, transfer, release, processing or transportation of any Hazardous Material in, on or under any property of whatsoever nature or kind of a Borrower, or any Subsidiary thereof, or the discharge, emission, spill or disposal from such property into or upon any land, the atmosphere or any watercourse, body of water or wetland of any Hazardous Material where it has been proven that the source of the Hazardous Material is the said property to the extent that such losses, damages, costs and expenses arise out of the relationship between the Indemnified Parties and a Borrower reflected herein including,without limitation: (i) the cost of defending and/or counterclaiming or claiming over against third parties in respect of any action or matter referred to above; (ii) any cost, liability or damage arising out of any settlement of any action referred to above to which any Indemnified Party is a party; and (iii) costs of any cleanup in connection with any matter referred to above. (b) In the event that any claim, action, order, suit or proceeding, including, without limiting the generality of the foregoing, any inquiry or investigation (whether formal or informal) is brought or instituted against any Indemnified Party, the Indemnified Party shall promptly notify the Borrowers and the Borrowers shall promptly retain counsel who shall be reasonably satisfactory to the Indemnified Parties to represent the Indemnified Parties in such claim, action, order, suit or proceeding and the Borrowers shall pay all of the reasonable fees and disbursements of such counsel relating to such claim, action, order, suit or proceeding. (c) In any such claim, action, order, suit or proceeding, the Indemnified Parties shall have the rights to retain other counsel to act on their behalf, provided that the fees and disbursements of such other counsel shall be paid by the Indemnified Parties unless: (i) the Borrowers and the - 86 - Indemnified Parties shall have mutually agreed to the retention of such other counsel; or (ii) the named parties to any such claim, action, order, suit or proceeding (including any added, third or impleaded parties) include the Borrowers and the Indemnified Parties and representation of all such parties by the same counsel would be inappropriate due to actual or potential differing interests between them (such as the availability of different defences). (d) Notwithstanding anything contained in this Section 11.3, none of the Indemnified Parties shall agree to any settlement of any such claim, action, order, suit or proceeding unless the Borrowers shall have consented in writing thereto, and the Borrowers shall not be liable for any settlement of any such claim, action, order, suit or proceeding unless they have consented in writing thereto. The Borrowers shall be entitled to settle any such claim, action, order, suit or proceeding on any terms it deems appropriate. (e) The provisions of this Section 11.3 shall survive the Final Maturity Date and the repayment of all Borrowings hereunder and the satisfaction by the Borrowers of all other obligations hereunder. (f) For the purposes of this Section 11.3, "Tax Recoveries" of any Person in respect of a payment or outlay made or incurred by such Person means the Taxes that would be saved or recovered by such Person and the creation or increase of a loss or credit for Tax purposes which may be used to reduce Taxes payable by such Person. ARTICLE XII FEES 12.1 COMMITMENT FEES (a) From and including the date hereof to and including the Final Maturity Date, the Canadian Borrower shall pay to the Canadian Administrative Agent, for the account of the Canadian Lenders to be allocated among and paid to such Lenders pro rata in accordance with such Lenders' respective Commitments, a commitment fee equal to .375% per annum on the daily average unutilized portion of the Commitments in respect of the Canadian Acquisition Facility for each Quarter. - 87 - (b) From and including the date hereof to and including the Final Maturity Date, the U.S. Borrowers shall pay to the U.S. Administrative Agent, for the account of the U.S. Lenders to be allocated among and paid to such Lenders pro rata in accordance with such Lenders' respective Commitments, a commitment fee equal to .375% per annum on the daily average unutilized portion of the Commitments in respect of the U.S. Acquisition Facility for each Quarter. (c) Such fees referred to in Section 12.1(a) and (b) shall be debited, in the case of the Canadian Borrower by the Canadian Administrative Agent from the Canadian Borrower's Cdn. $ account designated under Section 10.3 on the first Business Day of each Fiscal Quarter and in the case of the U.S. Borrowers by the U.S. Administrative Agent from each such U.S. Borrower's Operating Account designated under Section 10.3 on the first Business Day of each Fiscal Quarter. The Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, shall furnish to the respective Borrowers written notice thereof setting out the details of such calculation on or before the 10th Business Day following the end of each Quarter. ARTICLE XIII THE AGENTS AND THE LEAD ARRANGER 13.1 AGENTS Each Lender hereby appoints each Agent to act as its agent, as specified hereunder, in connection with this Agreement and any matter contemplated hereunder and authorizes irrevocably each Agent for the duration of such appointment to exercise such rights, powers and discretions as are delegated to such Agent pursuant to this Agreement and the Security together with all such rights, powers and discretions as are incidental hereto or thereto. Each Agent shall have only those duties and responsibilities which are expressly specified in this Agreement and the Security, and it may perform such duties by or through its agents or employees. This Agreement and the Security shall not place any Agent under any fiduciary duties in respect of any Lender. Each Agent and any other Person to whom an Agent may delegate duties or responsibilities as permitted under Section 13.2 (h) shall enjoy the same benefits, rights and protections as those provided to the Agents under this Article "mutatis mutandis". - 88 - 13.2 AGENTS' RESPONSIBILITY Each Agent may: (a) assume, until it is notified in writing or has actual notice or actual knowledge to the contrary, that: (i) any representation made by a Borrower or any of its Subsidiaries in or in connection with any of this Agreement, any notice or other document, instrument or certificate is true; (ii) no Event of Default has occurred; and (iii) each Borrower or a Subsidiary of a Borrower is not in breach of or in default under, its obligations under any of this Agreement or the Security; and each Agent may also: (b) unless such Agent has actual knowledge or actual notice to the contrary, assume that each Lender's address is that identified with its signature below until it has received from such Lender a notice designating some other office of such Lender as its address and act upon any such notice until the same is superseded by a further such notice; (c) engage and pay for the advice or services of any lawyers, accountants or other experts whose advice or services may to it seem necessary, expedient or desirable and rely upon any advice so obtained; (d) unless such Agent has actual knowledge or actual notice to the contrary, rely as to matters of fact which might reasonably be expected to be within the knowledge of a Borrower or any Subsidiary of a Borrower upon a statement signed by or on behalf of a Borrower or any Subsidiary of a Borrower; (e) unless such Agent has actual knowledge or actual notice to the contrary, rely upon any communication or document believed by it to be genuine; (f) refrain from exercising any right, power or discretion vested in it under this Agreement or any Security unless and until instructed by the Majority Lenders as to whether or not such right, power or discretion is to be exercised and, if it is to be exercised, as to the manner in which it should be exercised; (g) refrain from exercising any right, power or discretion vested in it which would or might in its opinion be contrary to any law of any jurisdiction or any directive or - 89 - otherwise render it liable to any Person, and may do anything which is in its opinion necessary to comply with any such law or directive; (h) retain for its own benefit, and without liability to account for, any fee or other sum receivable by it for its own account; (i) accept deposits from, lend money to, provide any advisory or other services to or engage in any kind of banking or other business with any party (including any Affiliate thereof) to this Agreement; and (j) refrain from acting in accordance with any instructions of the Majority Lenders to begin any legal action or proceeding arising out of or in connection with any of this Agreement or any Bankers' Acceptance, or take any steps to enforce or realize upon any Security, until it shall have received such security as it may require (whether by way of payment in advance or otherwise) against all costs, claims, expenses (including legal fees) and liabilities which it will or may expend or incur in complying with such instruction. 13.3 AGENTS' DUTIES Each Agent shall: (a) promptly upon receipt thereof, inform each Lender of the contents of any notice, document, request or other information received by it in its capacity as an Agent hereunder from a Borrower or any Subsidiary of a Borrower; (b) promptly notify each Lender of the occurrence of any Event of Default or any default (of which a Borrower is aware which, with the giving of notice or passage of time or both, would constitute an Event of Default) by a Borrower or a Guarantor in the due performance of its obligations under this Agreement, any Security or any document incidental thereto to which it is expressed to be a party and of which the Agent has actual knowledge or actual notice; (c) with the prior consent of the Borrowers (such consent not to be unreasonably withheld or delayed) and the Majority Lenders, (i) appoint a Lender or Affiliate of a Lender as a Reference Bank in replacement of any Reference Bank which ceases to be a Lender or an Affiliate of a Lender and (ii) with the prior consent of the Borrowers (such consent not to be unreasonably withheld or delayed) appoint a bank or financial institution as an Account Bank in replacement of an existing Account Bank; (d) each time the Borrowers request the prior written consent of the Majority Lenders, use its best efforts to obtain and communicate to the Borrowers the - 90 - response of the Majority Lenders in a reasonable and timely manner having due regard to the nature and circumstances of the request; (e) subject to the foregoing provisions of this Section 13.3, act in accordance with any instructions given to it by the Majority Lenders and, in particular, only take steps to enforce or realize upon Security in accordance with the instructions or delegated authority of the Majority Lenders; and (f) if so instructed by the Majority Lenders, refrain from exercising any right, power or discretion vested in it under this Agreement, the Security or any document incidental thereto. 13.4 PROTECTION OF AGENTS, LEAD ARRANGER, CO-ARRANGERS AND MANAGERS Notwithstanding anything to the contrary expressed or implied herein, each of the Agents, the Lead Arranger, the Co-Arrangers and the Managers shall not: (a) be bound to enquire as to: (i) whether any representation made by a Borrower, a Guarantor or any of their Subsidiaries in or in connection with this Agreement, the Security or any document incidental thereto is true; (ii) the occurrence or otherwise of any Event of Default; (iii) the performance by a Borrower, a Guarantor or any of their Subsidiaries of its obligations under any of this Agreement, the Security or any document incidental thereto; (iv) any breach of or default by a Borrower, a Guarantor or any of their Subsidiaries of or under its obligations under this Agreement, the Security or any document incidental thereto; or (v) the use or application by a Borrower of any of the proceeds of the Facilities; (b) be bound to account to any Lender for any sum or the profit element of any sum received by it for its own account; (c) be bound to disclose to any Person any information relating to a Borrower or a Guarantor if such disclosure would or might in its opinion constitute a breach of any law or regulation or be otherwise actionable at the suit of any Person; or - 91 - (d) accept any responsibility for the accuracy and/or completeness of any information supplied in connection herewith or for the legality, validity, effectiveness, adequacy or enforceability of this Agreement, any Bankers' Acceptance or any document incidental hereto or thereto and no Agent shall be under any liability to any Lender as a result of taking or omitting to take any action in relation to this Agreement, any Bankers' Acceptance, the Security or any document incidental hereto or thereto save in the case of gross negligence or wilful misconduct, and each of the Lenders agrees that it will not assert or seek to assert against any director, officer, employee or agent of any Agent or the Lead Arranger, any Co- Arranger or any Manager any claim it might have against any of them in respect of the matters referred to in this Section 13.4. 13.5 INDEMNIFICATION OF AGENTS Each Lender shall, on demand by an Agent, indemnify such Agent pro rata in accordance with such Lender's Participation at the time of such demand against any and all costs, claims, reasonable expenses (including legal fees) and liabilities which such Agent may incur (and which have not been reimbursed by a Borrower), otherwise than by reason of its own gross negligence or wilful misconduct, in acting in its capacity as an Agent under this Agreement, any Bankers' Acceptance, the Security or any document incidental hereto or thereto. 13.6 TERMINATION OR RESIGNATION OF AGENT (a) Notwithstanding the appointment of an Agent, the Majority Lenders may (with the consent of the Canadian Borrower prior to an Event of Default and without requiring such consent after the occurrence of an Event of Default which is continuing; such consent not to be unreasonably withheld or delayed), upon giving an Agent 90 days prior written notice to such effect, terminate an Agent's appointment hereunder. (b) An Agent may resign its appointment hereunder at any time without assigning any reason therefor by giving written notice to such effect to each of the other parties hereto. (c) In the event of any such termination or resignation, the Majority Lenders shall appoint a successor Agent (with the consent of the Canadian Borrower prior to an Event of Default and without requiring such consent after the occurrence of an Event of Default which is continuing, such consent not to be unreasonably withheld or delayed). The Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, (if it is the Agent being replaced) shall deliver copies of the Accounts to such successor and the retiring Agent shall be discharged from any further obligation hereunder but shall remain entitled to the benefit of the provisions of this Article XIII and the Agent's successor and each - 92 - of the other parties hereto shall have the same rights and obligations among themselves as they would have had if such successor originally had been a party hereto as an Agent. 13.7 RIGHTS OF AN AGENT AS LENDER With respect to its Commitment and its Participation, and to Bankers' Acceptances and Letters of Credit, an Agent shall have the same rights and powers under this Agreement and any Bankers' Acceptances as any other Lender, and it may exercise such rights and powers as though it were not performing the duties and functions delegated to it as an Agent hereunder, and the term "Lender" or any other similar term shall, unless the context otherwise requires, include any Agent in its capacity as a Lender. 13.8 AUTHORIZED WAIVERS, VARIATIONS AND OMISSIONS If so authorized in writing by the Majority Lenders, the Collateral Agent may grant waivers, consents, vary the terms of this Agreement and do or omit to do all acts and things in connection herewith or therewith. Except with the prior written agreement of all the Lenders, nothing in this Section 13.8 shall authorize: (a) any decrease in the Acceptance Fee, the COF Margin, the Libor Margin, the Letter of Credit Fee, the Prime Margin, the Alternate Base Rate Margin or the Commitment Fees; (b) any extension of the date for, or alteration in the amount, currency or mode of calculation or computation of any payment of principal or interest or other amount; (c) any increase in the Commitment of a Lender or subject any Lender to any additional obligations hereunder; (d) any amendments to Section 3.8; (e) any change in the terms of Article IX; (f) any change in the definition of Majority Lenders; (g) the release or discharge of a Borrower or a Guarantor; provided however and notwithstanding the foregoing, the Collateral Agent may, without the consent of the Lenders, grant partial releases and discharges of the Security in connection with any sale, lease, transfer, assignment, disposition or conveyance by the Canadian Borrower and/or any of its Subsidiaries of properties or assets permitted under Section 8.2(d) hereof; or - 93 - (h) any amendments to this Section 13.8. 13.9 FINANCIAL INFORMATION CONCERNING THE BORROWERS OR GUARANTORS Subject to Section 13.3 (a), no Agent nor the Lead Arranger shall have any duty or responsibility either initially or on a continuing basis to provide any Lender with any credit or other information with respect to the financial condition and affairs of the Borrowers or Guarantors. 13.10 KNOWLEDGE OF FINANCIAL SITUATION OF BORROWERS Each of the Lenders represents and warrants to the Agents, the Lead Arranger, the Co- Arrangers and the Managers that it has made its own independent investigation of the financial condition and affairs of the Borrowers and each Guarantor in connection with the making and continuation of its Participation in this Agreement and that it has not relied on any information provided to it by any Agent, the Lead Arranger, any Co-Arranger or any Manager in connection herewith or therewith, and each represents and warrants to the Agents and the Lead Arranger, the Co-Arrangers and the Managers that it shall continue to make its own appraisal of the creditworthiness of the Borrowers and the Guarantors from time to time. 13.11 LEGAL PROCEEDINGS No Agent shall be obligated to take any legal proceedings against a Borrower or any other Person for the recovery of any amount due under this Agreement or under any Bankers' Acceptances. No Lender shall bring legal proceedings against a Borrower, any Guarantor or Subsidiary hereunder or in connection herewith, or exercise any right arising hereunder or in connection herewith over the property and assets of a Borrower, any Guarantor or any Subsidiary, without the prior written consent of the Majority Lenders. 13.12 CAPACITY AS AGENT In performing its functions and duties under this Agreement, each Agent shall act solely as the agent of the Lenders and shall not assume, and shall not be deemed to have assumed, any obligation as agent or trustee for a Borrower or any other Person. No Agent shall be under any liability or responsibility of any kind to the Borrowers, the Lenders or to any other Person arising out of or in relation to any failure or delay in performance or breach by any Lender or Lenders or, as the case may be, by the Borrowers, any Guarantor or any other Person (other than such Agent in respect of its own gross negligence or wilful misconduct) pursuant to or in any way in connection with this Agreement. - 94 - 13.13 CAPACITY AS ARRANGERS The Borrowers, each Lender and each Agent hereby agree and confirm that the Lead Arranger, the Co-Arrangers and the Managers have performed their functions and duties in connection with the arrangement of the Facilities and shall not be under any liability or responsibility of any kind from and after the date hereof to the Borrowers, the Guarantors, the Lenders, the Agents or any of them arising out of or in relation to the arrangement of the Facilities or this Agreement. 13.14 DEPOSITS OR LOANS RESPECTING THE BORROWERS Each Agent and each of the Lenders may accept deposits from, lend money to and generally engage in any kind of banking or other business with the Borrowers or the Guarantors without liability to account to any Agent or any Lender. ARTICLE XIV ASSIGNMENTS AND TRANSFERS 14.1 BENEFIT OF AGREEMENT This Agreement shall be binding upon and enure to the benefit of each party hereto and its successors and permitted assigns. 14.2 ASSIGNMENTS AND TRANSFERS BY A BORROWER OR AN UNLIMITED GUARANTOR No Borrower nor the Unlimited Guarantor shall be entitled to assign or transfer all or any of its rights, benefits and obligations hereunder. 14.3 ASSIGNMENTS AND TRANSFERS BY A LENDER (a) Subject to Section 14.4, any Lender may, at its cost, assign or transfer, with: (i) the consent of the Canadian Administrative Agent with respect to a Canadian Lender and the U.S. Administrative Agent with respect to a U.S. Lender (which consents shall not be unreasonably withheld or delayed); and (ii) (unless there exists an Event of Default) the consent of the Canadian Borrower (which shall not be unreasonably withheld or delayed) - 95 - and upon such terms and conditions as such Lender shall determine, all or any portion of its rights, benefits and/or obligations hereunder in relation to a portion of such Lender's Commitment of not less than, with respect to the Canadian Facilities, Cdn.$1,000,000 and with respect to the U.S. Facilities, U.S. $10,000,000, to an assignee or a transferee which in the case of assignments by a Canadian Lender is a recognized financial institution resident in Canada (a "Canadian Assignee") and in the case of assignments by a U.S. Lender, is a Person which can comply with the provisions of Section 7.9(a) of this Agreement and provides evidence thereof satisfactory to the U.S. Borrowers acting reasonably and is in the business of making loans (a "U.S. Assignee"); provided that in the case of an assignment or transfer by a Canadian Lender there is a corresponding assignment or transfer by the related U.S. Lender (which may, in certain circumstances be the same institution) to a U.S. Assignee related to the Canadian Assignee (which may in certain circumstances be the same institution) of an amount which bears the same proportion to the related U.S. Lender's Commitment as the amount assigned or transferred by the Canadian Lender bears to the Canadian Lender's Commitment, and vice versa in the case of an assignment or transfer by a U.S. Lender. (b) Where obligations of any Lender are so assigned or transferred, the assignee or transferee shall confirm in writing to the Borrowers and the Canadian Administrative Agent and the U.S. Administrative Agent, as the case may be, prior to such assignment or transfer taking effect, that it shall be bound towards the Borrowers and the Agents by the terms hereof relating to such obligations. On the assignment and transfer being made and such written confirmation, as aforesaid, being delivered to the Borrowers and such Agent, such Lender shall be relieved of its obligations to the extent of such assignment or transfer thereof and such assignee or transferee shall become a Lender for all purposes of this Agreement and the related documents and transactions provided herein or contemplated thereby to the extent of such assigned or transferred interest. 14.4 TRANSFER CERTIFICATE If any Lender wishes to assign or transfer all or any of its rights, benefits and obligations hereunder in accordance with Section 14.3, then such assignment or transfer shall be effected by the delivery by such Lender to the Canadian Administrative Agent and the U.S. Administrative Agent and the Borrowers of a duly completed and executed Transfer Certificate whereupon, to the extent that in such Transfer Certificate the Lenders party thereto seeks to assign or transfer its rights and obligations hereunder: (a) the applicable Borrower(s) and such Lender shall each be released from further obligations to the other hereunder, and their respective rights against each other shall be cancelled (such rights and obligations being referred to in this Section 14.4 as "discharged rights and obligations"); - 96 - (b) the applicable Borrower(s) and the Transferee party thereto shall each assume obligations towards and acquire rights in respect of each other which differ from the discharged rights and obligations only insofar as the obligations so assumed and the rights so acquired by the Borrowers are owed to and constituted by claims against such Transferee and not such Lender, so that the Borrowers and the Transferee shall have the same rights and obligations towards each other which they would have acquired had the Transferee been an original party hereto; (c) the Agents, the Transferee and the other Lenders shall acquire the same rights and assume the same obligations between themselves as they would have acquired and assumed had the Transferee been an original party hereto with the obligations assumed and the rights acquired by it as a result of such assignment or transfer. (d) the amounts payable by any Borrower under this Agreement shall not increase, whether in respect of withholding on account of taxes or otherwise, as a result of any such assignment or transfer to a Lender which is, or is deemed to be (i) in the case of the Canadian Facilities, not resident in Canada for the purposes of the Income Tax Act (Canada) with respect to any such Transferee becoming a Canadian Lender or (ii) in the case of the U.S. Facilities, is not a resident of the U.S. for the purpose of the Code with respect to any such Transferee becoming a U.S. Lender. 14.5 NOTICE The Canadian Administrative Agent or the U.S. Administrative Agent, as the case may be, shall notify promptly the appropriate parties hereto of the receipt by it of any Transfer Certificate, and shall promptly deliver a copy of such Transfer Certificate to the Borrowers. 14.6 SUB-PARTICIPATIONS Any Lender may, at its own cost, grant one or more sub-participations in all or any portion of its rights, benefits and/or obligations hereunder to third parties, without the consent of the Borrowers, and upon such terms and conditions as such Lender shall determine, provided that, notwithstanding any such sub-participation, such Lender shall remain, in so far as the other parties hereto are concerned, entitled to its rights and benefits hereunder and bound by its obligations hereunder and the Borrowers, the other Lenders and the Agents shall not be obliged to recognize any such third party as having the rights against any of them which it would have if it had been a party hereto, and provided further that in the case of any sub-participation by a Canadian Lender to a Canadian participant (a "Canadian Participant"), there shall be a corresponding sub-participation by the related U.S. Lender (which may in certain circumstances be the same institution) to a U.S. participant (a "U.S. Participant") related to the Canadian Participant of an amount which has the same proportion to the related U.S. Lender's Commitment as the amount sub-participated by the Canadian Lender has to the Canadian - 97 - Lender's Commitment, and vice versa in the case of sub-participation by a U.S. Lender. For greater certainty, the Borrowers shall not be obligated to pay, in respect of any rights, benefits and/or obligations in which a Lender has granted one or more such sub-participations, to such Lender or to any sub-participant thereof any amount(s) pursuant to Article VII of this Agreement which is (are) greater than the amount(s), if any, which the Borrowers would otherwise have been obligated to pay in respect of such rights, benefits and/or obligations to such Lender, had such sub-participation(s) not been granted. 14.7 DISCLOSURE Each Lender is hereby authorized by the Borrowers and each Unlimited Guarantor to disclose to any proposed assignee, Transferee or sub-participant information in such Lender's possession relating to the Borrowers and each Unlimited Guarantor provided that such proposed assignee, transferee or sub-participant shall have executed and delivered to such Lender a written undertaking to keep confidential any such information which is not publicly available. 14.8 ASSIGNMENT TO FEDERAL RESERVE BANK Notwithstanding anything to the contrary provided herein, without seeking or obtaining the consent of any party, any U.S. Lender may at any time assign and transfer all or any portion of its rights under this Agreement and any promissory notes issued to such U.S. Lender hereunder to a Federal Reserve Bank in the United States. No such assignment shall release such Lender from its obligations hereunder. ARTICLE XV GOVERNING LAW, COURTS AND JUDGMENT CURRENCY 15.1 GOVERNING LAW This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein. 15.2 COURTS Any legal action or proceeding with respect to this Agreement or any Security against a Borrower or the Unlimited Guarantor may be brought in the courts of the Province of Ontario, which courts the parties hereto acknowledge irrevocably to be a convenient forum for the resolution of any such legal action or proceeding. Each Borrower and each Unlimited Guarantor hereby accepts, for itself and in respect of its assets and revenues, generally and unconditionally the non-exclusive jurisdiction of the aforesaid courts. - 98 - Each Unlimited Guarantor and each of the U.S. Borrowers hereby irrevocably designates and appoints the Canadian Borrower (the "Process Agent") at its registered office from time to time and of which the Canadian Administrative Agent shall have been notified, which office is currently located at 1140 Bay Street, Suite 4000, Toronto, Ontario, M5S 2B4, as the authorized agent of each of the U.S. Borrowers and each Unlimited Guarantor upon which process may be served in any suit or proceeding arising out of or in connection with this Agreement or any Security or other documents relating hereto or thereto which may be instituted in the Province of Ontario and agrees that service of process on the Process Agent together with written notice of such service to such U.S. Borrower or such Unlimited Guarantor by the Person serving the same shall, to the extent permitted by law, be deemed in every respect to be effective service of process on such U.S. Borrower or such Unlimited Guarantor, as the case may be. Notwithstanding the address noted on the execution pages hereof, process may be served on a Borrower at its registered office. However, nothing in this Section 15.2 shall affect the right of any Agent or Lender to serve legal process in any other manner permitted by law or affect the right of any Agent or Lender to bring any action or proceeding against a Borrower or the Unlimited Guarantor or their properties in the courts of any other jurisdiction including, without limitation the State of New York. 15.3 JUDGMENT CURRENCY (a) If for the purpose of obtaining judgment in any court it is necessary to convert an amount due hereunder in the currency in which it is due (the "Original Currency") into another currency (the "Second Currency"), the rate of exchange applied shall be that at which, in accordance with normal banking procedures, a Lender could purchase, in the Toronto foreign exchange market, the Original Currency with the Second Currency on the date 2 Business Days preceding that on which judgment is given. Each Borrower and each Unlimited Guarantor agrees that its obligation in respect of any Original Currency due from it to any Lender hereunder shall, notwithstanding any judgment or payment in such other currency, be discharged only to the extent that, on the Business Day following the date such Lender receives payment of any sum so adjudged to be due hereunder in the Second Currency such Lender may, in accordance with normal banking procedures, purchase, in the Toronto foreign exchange market the Original Currency with the amount of the Second Currency so paid; and if the amount of the Original Currency so purchased or could have been so purchased is less than the amount originally due in the Original Currency, each Borrower and each Unlimited Guarantor agrees as a separate obligation and notwithstanding any such payment or judgment to indemnify such Lender against such loss. (b) The term "rate of exchange" in this Section 15.3 means the spot rate at which the Lender in accordance with normal practices is able on the relevant date to purchase the Original Currency with the Second Currency and includes any premium and costs of exchange payable in connection with such purchase. - 99 - ARTICLE XVI GUARANTORS' OBLIGATIONS 16.1 GUARANTEE (a) The Canadian Borrower, as primary obligor and not as a surety merely, hereby unconditionally and irrevocably guarantees to each of the Agents and each of the Lenders the punctual payment when due in accordance with the terms hereof of all obligations, of whatever kind and description, of the U.S. Borrowers and each of them to the Agents and each of the Lenders now or hereafter existing, whether direct or indirect, absolute or contingent, matured or unmatured, secured or unsecured joint, several or independent pursuant to or arising out of or under this Agreement and the Security (all such obligations so guaranteed are referred to herein as the "Canadian Borrower's Guaranteed Obligations"). (b) The Unlimited Guarantor hereby: (i) unconditionally and irrevocably guarantees; and (ii) is jointly and severally liable and obligated with the Canadian Borrower to each of the Agents and the Lenders for; (A) the due and punctual payment of amounts of principal, interest or fees in respect of all Borrowings and all other amounts payable to the Agents or the Lenders by the Canadian Borrower under this Agreement, or any portion thereof; and (B) all other obligations of the Canadian Borrower to the Agents or the Lenders under this Agreement (collectively the "Unlimited Guarantor's Guaranteed Obligations"). (c) Without in any way limiting the foregoing, each of the Canadian Borrower and the Unlimited Guarantor hereby unconditionally and irrevocably agrees and covenants with the Agents and the Lenders that: (i) the Guaranteed Obligations shall be a guarantee of payment and not merely of collection and shall be a primary obligation of each of the Canadian Borrower and the Unlimited Guarantor. - 100 - (ii) it will pay duly and punctually all its Guaranteed Obligations under the terms of this Agreement; (iii) its Guaranteed Obligations shall not be affected by any act, omission or circumstances which but for this provision might operate to release or otherwise exonerate it from such Guaranteed Obligations or limit or reduce or otherwise affect such Guaranteed Obligations including without limitation and whether or not known to it or the Lenders, or an Agent or the Lead Arranger: (A) any time or indulgence granted to or composition with any Borrower or any other Person; (B) the variation, extension, compromise, renewal or release of, or refusal or neglect to perfect or enforce, any terms of this Agreement, the Borrowings, the Security or any rights or remedies against, or security granted by, any Borrower or any other Person; or (C) any irregularity or unenforceability of any obligations of any Borrower or any other Person under this Agreement, the Borrowings, any Guaranteed Obligations or any present or future law or order of any government or authority (whether of right or in fact) purporting to reduce or otherwise affect any of such obligations, it being the intent that its Guaranteed Obligations under this Agreement shall remain in full force and this Agreement shall be construed accordingly as if there were no such irregularity, unenforceability, law or order; (iv) it waives any right it may have of first requiring any Agent or any Lender, before enforcing its rights against it, to proceed against or claim payment from a Borrower or any other Person or enforce any Security; and (v) if any claim is made by an Agent or any Lender against it under this Agreement and is not entirely and irrevocably paid and discharged, it shall not have the right to rank as a creditor in competition with any Agent or any Lender in the bankruptcy, liquidation or dissolution of a Borrower and shall not attempt to do so until payment in full of all indebtedness and liabilities which may be owing by such Borrower to any Agent or Lender under this Agreement and all Borrowings. (vi) The Guaranteed Obligations shall survive the repayment thereof and shall be reinstated as to any Guaranteed Obligations incurred prior to the - 101 - termination hereof if any payment of any Guaranteed Obligation is at any time rescinded or must otherwise be returned as a result of the bankruptcy, insolvency or reorganization of any of the U.S. Borrowers, Canadian Borrower and/or the Unlimited Guarantor, all as though such payment had not been made. ARTICLE XVII MISCELLANEOUS 17.1 EQUAL RANKING OF LENDERS The Lenders, and to the extent necessary the Borrowers, agree that any indebtedness of a Borrower towards any of the Agents and any of the Lenders: (a) hereunder; and (b) under Hedging Agreements, shall be secured by the Security and shall be recoverable by the Agents in accordance with the terms of this Agreement and the Security and all such obligations shall rank equally without preference or distinction with the indebtedness of a Borrower towards any Lender hereunder or under any Hedging Agreements. 17.2 SHARING OF INFORMATION Each Borrower and the Unlimited Guarantor agree that the Agents and the Lenders may share amongst themselves any information which any of them may possess concerning any Borrower or the Unlimited Guarantor, as the case may be, in respect of a Borrower's or the Unlimited Guarantor's undertakings, obligations or indebtedness towards any Lender pursuant to this Agreement as well as any payment received from a Borrower or the Unlimited Guarantor by any Lender pursuant to this Agreement. 17.3 SEVERABILITY If any of the provisions of this Agreement, any Article, any Section or any Bankers' Acceptance shall be unenforceable or invalid in any jurisdiction, the validity and enforceability of such provisions in any other jurisdiction shall not be impaired thereby nor shall the enforceability and validity of any other provisions of this Agreement, any Article, any Section or any Bankers' Acceptance be impaired thereby. - 102 - 17.4 REMEDIES AND WAIVERS No failure to exercise, and no delay in exercising, on the part of the Agents or the Lenders or any of them, any right or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies herein provided are cumulative and not exclusive of any rights or remedies provided by law. 17.5 DIRECT OBLIGATION Notwithstanding any other provision hereof, the Borrowers shall be obligated directly towards the Agents and each of the Lenders in respect of the Participation of each of the Lenders which are made available to such Borrower as well as any other amounts which may be payable by the Borrowers pursuant to or in connection with this Agreement or any Borrowings. The obligations of each of the Lenders are independent from one another, are not joint and several, and may not be increased, reduced, extinguished or otherwise affected due to the default of another Lender pursuant hereto. Any default of any party hereto in the performance of its obligations shall not release any of the other parties hereto from the performance of any of its respective obligations. 17.6 NOTICES The following provisions shall govern in respect of notices or communications contemplated hereunder: (a) unless otherwise stated, each communication to be made hereunder shall be made in writing; (b) all communications or notices to be made to: (i) any Borrower, shall be made to the Canadian Borrower, as provided in Section 17.6 (c); and (ii) an Unlimited Guarantor, shall be made to such Unlimited Guarantor with a copy to the Canadian Borrower, as provided in Section 17.6 (c); (c) subject to Section 17.6 (b) and to an Agent's irrevocable right to deliver communications or notices to the Canadian Borrower's address specified in Section 15.2, any written communication or document to be made or delivered by one party to another pursuant to this Agreement shall (unless otherwise specified herein or that other party has by notice to the Agent specified another address or facsimile number) be made or delivered to that other Person at the address or facsimile number identified with its signature below and shall in any event be - 103 - deemed to have been made or delivered or (in the case of any other form of written communication) when left at that address or otherwise received or, as the case may be, 10 days after being deposited in the post first class postage prepaid in an envelope addressed to it at that address, provided that any communication or document to be made or delivered to any Agent shall be effective only when received by such Agent; it is agreed that parties shall not send communications by mail or postal service when there is an actual or likely pending strike or similar disruption of mail or postal services; (d) subject to Section 17.6 (b), where any provision of this Agreement specifically contemplates telephone communication, such communication shall (unless otherwise specified herein or that other party has by written notice to the Agents specified another telephone number) be made to that other party at the telephone number identified with its signature below; each such telephone communication shall be expressed to be for the attention of the officer whose name has been identified with its signature below; and (e) each party hereto shall confirm promptly by writing any telephone communication made by it to another party pursuant to this Agreement, however the absence of such confirmation shall not affect the validity of such communication. 17.7 COUNTERPARTS This Agreement may be executed in any number of counterparts and all of such counterparts taken together shall be deemed to constitute one and the same instrument. 17.8 LIMIT ON RATE OF INTEREST (a) Notwithstanding any provision contained in this Agreement, the Borrowers shall not be obliged to make any payments of interest or other amounts payable to a Lender hereunder in excess of the amount or rate which would be prohibited by applicable law or would result in the receipt by a Lender of interest at a criminal rate (as such terms are construed under the Criminal Code (Canada) or other applicable law). (b) In the event that any such payments are limited or prohibited as provided in Section 17.8 (a), the Lenders shall have no further obligation to make any Borrowings available hereunder and the entire amount of Borrowings then outstanding shall become immediately due and payable. - 104 - 17.9 NO MERGER OR NOVATION All guarantees and Security provided to an Agent and/or the Lenders prior to the date hereof in connection with the Original Credit Agreement, the First Amended and Restated Credit Agreement or the indebtedness of the Canadian Borrower thereunder remain in full force and effect, there being no novation or merger of the Original Credit Agreement, the First Amended and Restated Credit Agreement, such guarantees or the Security. AS WITNESS the hands of the duly authorized representatives of the parties hereto on the execution pages hereof as of the day and year first before written. -----END PRIVACY-ENHANCED MESSAGE-----