MASTER NOTE PURCHASE AGREEMENT
This Master Note Purchase Agreement (this "AGREEMENT") is made as of
this 3rd day of March, 2003 among Fairfax Financial (US) LLC, a Delaware limited
liability company (the "ISSUER"), NMS Services (Cayman) Inc., a company
organized under the laws of the Cayman Islands (the "PURCHASER"), Fairfax
Financial Holdings Limited, a corporation incorporated under the laws of Canada,
as guarantor (the "GUARANTOR"), and Banc of America Securities LLC, as agent
(the "AGENT").
W I T N E S S E T H
WHEREAS, the Issuer and the Purchaser wish to sell and purchase the
Issuer's promissory notes (each, a "NOTE") on the terms and conditions set forth
herein;
WHEREAS, the Issuer and the Guarantor intend that the transactions
contemplated hereby result in the Guarantor being able to treat members of the
consolidated group (within the meaning of U.S. Treasury Regulations section
1.1502-1(h)), of which Fairfax, Inc., a wholly-owned subsidiary of the
Guarantor, is the common parent, as owning at least 80 percent of the
outstanding Shares (as defined below) and therefore treat Odyssey (as defined
below) as a member of such group for U.S. federal income tax purposes;
WHEREAS, the Issuer has agreed, pursuant to a Pledge Agreement dated as
of the date hereof, as amended from time to time (the "PLEDGE AGREEMENT"), to
grant the Purchaser a security interest in the collateral described therein to
secure certain of the Issuer's obligations under this Agreement and the Notes;
NOW, THEREFORE, in consideration of their mutual covenants herein
contained, the parties hereto, intending to be legally bound, hereby mutually
covenant and agree as follows:
Section 1. Definitions. As used herein, the following terms have the
following meanings:
"ACTUAL HEDGE COST" means the cost to the Purchaser or its affiliates
of establishing, re-establishing or maintaining any transactions necessary or
advisable to hedge, directly or indirectly, the equity price risk of entering
into the transactions contemplated by this Agreement on terms deemed reasonable
by the Purchaser, including without limitation the cost of establishing,
re-establishing or maintaining a full hedge of its position in respect of any
Note or Exchange Shares through share borrowing arrangements on terms deemed
reasonable by the Purchaser.
"AGREEMENT" has the meaning specified in the preamble and includes each
Note Purchase Confirmation executed by the Issuer and the Purchaser pursuant
hereto.
"BUSINESS DAY" means any day on which commercial banks are open for
business in New York City and the NYSE is not closed.
"CALCULATION AGENT" means Banc of America Securities LLC.
"CLOSING PRICE" means, for any Note, the per Share closing price of the
Shares for the regular trading session on the NYSE on the Issue Date for such
Note (or, if such date is not a Business Day, the immediately preceding Business
Day).
"EQUITY DEFINITIONS" means the 1996 ISDA Equity Derivatives Definitions
published by ISDA.
"EVENT OF DEFAULT" has the meaning specified in Section 13.
"EXCHANGE DATE" means, for any Note, any date designated as such
pursuant to Section 7(a), Section 7(b) or Section 7(c).
"EXCHANGE PERIOD" means, for any Note, the period specified in the Note
Purchase Confirmation for such Note, which shall begin no earlier than the Issue
Date for such Note and end no later than 24 months after the Issue Date for such
Note..
"EXCHANGE PERIOD END DATE" means, for any Note, the last day in the
Exchange Period for such Note.
"EXCHANGE PRICE" means, for any Note, the price specified as such in
the Note Purchase Confirmation for such Note, which on the Issue Date may not be
less than the Closing Price, subject to adjustment pursuant to Section 7(g).
"EXCESS HEDGE COST" means, as of any date, the sum of the daily amounts
of the daily Actual Hedge Cost in respect of all outstanding Notes over the
Maximum Hedge Cost up to and including such date.
"EXCHANGE SHARES" means, for any Note or any portion of any Note, a
number of Shares equal to the quotient obtained by dividing the principal amount
of such Note or portion by the Exchange Price for such Note.
"EXTRAORDINARY DIVIDEND" has the meaning set forth in Section 7(b).
"FEE" means, for any Note, the amount of cash specified as such in the
Note Purchase Confirmation for such Note.
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"GUARANTOR" has the meaning specified in the preamble.
"GUARANTEED OBLIGATIONS" means (i) all principal of, premium and
interest on the Notes (including, without limitation, any interest
("POST-PETITION INTEREST") that accrues (or which would accrue but for such
case, proceeding or action) after the commencement of any case, proceeding or
other action relating to the bankruptcy, insolvency or reorganization of the
Issuer (whether or not such interest is allowed or allowable as a claim in any
such case, proceeding or other action) on the Notes), (ii) the delivery of
Exchange Shares by the Issuer when due pursuant to the terms of the Notes, (iii)
all other amounts payable by the Issuer from time to time under the Notes
(including any Post-Petition Interest with respect to such amounts) and (iv) any
renewals, refinancings or extensions of any of the foregoing (including
Post-Petition Interest).
"HEDGE COST REIMBURSEMENT AGREEMENT" means the Hedge Cost Reimbursement
Agreement dated as of the date hereof between the Purchaser and the Guarantor.
"HEDGE DISRUPTION EVENT" means, as determined by the Calculation Agent,
the inability or impracticality on any day, due to market illiquidity,
Illegality (as defined in the ISDA Master Agreement, but with respect to the
Purchaser's hedging activities relating to any Note), lack of hedging
transactions, lack of credit worthy market participants or otherwise, of the
Purchaser or an affiliate of the Purchaser to establish, re-establish or
maintain any transactions necessary or advisable to hedge, directly or
indirectly, the equity price risk of holding the Notes on terms deemed
reasonable by the Purchaser and at a daily Actual Hedge Cost that is equal to or
less than the Maximum Hedge Cost.
"INTEREST PAYMENT DATE" means, for any Note, each of the dates
specified as such in the Note Purchase Confirmation for such Note.
"INTEREST PERIOD" means, for any Note, each period from and including
one Interest Payment Date to but excluding the next following Interest Payment
Date, except that (a) the initial Interest Period for any Note will commence on
and include the Issue Date for such Note and (b) the final Interest Period for
any Note will end on but exclude the Maturity Date for such Note.
"INTEREST RATE" applicable to any Interest Period for any Note means
the rate specified as such in the Note Purchase Confirmation for such Note.
"ISDA" means the International Swaps and Derivatives Association, Inc.
"ISDA MASTER AGREEMENT" means the 1992 ISDA Master Agreement
(Multicurrency-Cross Border) published by ISDA.
"ISSUE DATE" means, for any Note, the date specified as such in the
Note Purchase Confirmation for such Note.
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"ISSUER" has the meaning specified in the preamble.
"LIQUIDATED AMOUNT" has the meaning specified in Section 7(j).
"MATURITY DATE" means, for any Note, the date specified as such in the
Note Purchase Confirmation for such Note.
"MAXIMUM HEDGE COST" means an amount, calculated by the Calculation
Agent, equal to the daily equivalent of 1.00% per annum of the principal amount
of all Notes outstanding.
"NASD" means the National Association of Securities Dealers, Inc.
"NOTE" has the meaning specified in the recitals.
"NOTE PURCHASE CONFIRMATION" has the meaning specified in Section 2.
"NYSE" means the New York Stock Exchange, Inc.
"ODYSSEY" means Odyssey Re Holdings Corp., a Delaware corporation.
"ORDINARY DIVIDEND AMOUNT" means USD0.03 per Share per calendar
quarter, subject to adjustment pursuant to Section 7(g).
"PLEDGE AGREEMENT" has the meaning specified in the recitals.
"PREPAID INTEREST AMOUNT" means, for any Note, the amount of cash
specified as such in the Note Purchase Confirmation for such Note.
"PURCHASE SHARES" means, for each Note, the number of Shares determined
by dividing (i) the principal amount of such Note by (ii) the Closing Price for
such Note, as specified in the Note Purchase Confirmation for such Note.
"PURCHASER" has the meaning specified in the preamble.
"REGISTRATION DEFAULT" has the meaning specified in Section 13(b).
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
dated as of the date hereof among Odyssey, the Purchaser, individually and as
representative of the Holders named therein, and Banc of America Securities LLC.
"SECURITIES ACT" means the Securities Act of 1933, as amended.
"SHARES" means shares of common stock, par value USD0.01, of Odyssey.
"TAXES" has the meaning specified in Section 6(b).
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"TRANSACTION DOCUMENTS" means (i) this Agreement, (ii) the Notes, (iii)
the Pledge Agreement, (iv) any Note Purchase Confirmation, (v) the Registration
Rights Agreement, (vi) the Hedge Cost Reimbursement Agreement and (vii) the
Limited Liability Company Agreement of the Issuer dated as of March 3, 2003.
Section 2. Note Purchase Confirmations. At any time and from time to
time, the Issuer and the Purchaser may execute a note purchase confirmation
substantially in the form of Exhibit A hereto (a "NOTE PURCHASE CONFIRMATION")
pursuant to which the Issuer shall issue and sell to the Purchaser, and the
Purchaser shall purchase from the Issuer, a Note on the terms and conditions set
forth herein and in such Note Purchase Confirmation.
Section 3. Sale and Purchase. (a) Upon the terms and subject to the
conditions set forth herein and in the Note Purchase Confirmation for any Note,
the Issuer agrees to issue and sell to the Purchaser, and the Purchaser agrees
to purchase from the Issuer, on the Issue Date set forth in such Note Purchase
Confirmation, a Note having the terms set forth herein, in such Note Purchase
Confirmation and in such Note.
(b) Upon the terms and subject to the conditions set forth herein and
in the Note Purchase Confirmation for such Note, on the Issue Date for such
Note, (i) the Purchaser will deliver the Purchase Shares for such Note to the
Issuer by book-entry transfer to an account designated by the Issuer and (ii)
the Issuer will (A) deliver such Note substantially in the form of Exhibit B
hereto, duly completed with the terms and conditions set forth in the Note
Purchase Confirmation for such Note, to the Purchaser (or an agent of Purchaser
specified by the Purchaser) and (B) pay the Fee and the Prepaid Interest Amount
for such Note to the Purchaser by wire transfer of immediately available funds
to an account designated by the Purchaser, in each case against such delivery of
the Purchase Shares.
Section 4. Principal. (a) The principal amount of each Note, together
with any accrued and unpaid interest thereon, will be payable on the Maturity
Date for such Note.
Section 5. Interest. (a) Each Note shall bear interest on the
outstanding principal amount thereof, for each day during each Interest Period
for such Note, at a rate per annum equal to the Interest Rate applicable to such
Interest Period, calculated on the basis of a year of 360 days and paid for the
actual number of days elapsed. Such interest shall be payable for each Interest
Period in arrears on each Interest Payment Date for such Note. Notwithstanding
the foregoing, the Issuer's payment of the Prepaid Interest Amount for any Note
on the Issue Date for such Note in accordance with Section 3(b) shall satisfy
the Issuer's obligation to pay interest in respect of such Note on each of the
Interest Payment Dates occurring prior to the Exchange Period End Date.
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(b) To the extent that the payment of such interest shall be legally
enforceable, (i) any overdue principal or interest on any Note shall bear
interest, payable on demand, for each day until paid at a rate per annum equal
to the prime rate as published in The Wall Street Journal, Eastern Edition
applicable to the Interest Period that includes such day (or the last Interest
Period for such Note, if such day falls on or after the Maturity Date for such
Note) plus 2%, and (ii) any such interest on any overdue principal that is not
so paid on demand shall bear interest, payable on demand, for each day until
paid at the same rate as the overdue interest.
Section 6. Payments. (a) All payments of, or in respect of, principal
and interest on the Notes shall be made in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts by wire transfer of immediately available funds to an
account designated by the Purchaser.
(b) All payments of, or in respect of, principal and interest on the
Notes made by the Issuer hereunder will be made without withholding or deduction
for, or on account of, any present or future taxes, duties, fines, penalties,
assessments or other governmental charges of whatsoever nature (or interest on
any taxes, duties, fines, penalties, assessments or other governmental charges
of whatsoever nature) imposed, levied, collected, withheld or assessed by,
within or on behalf of any jurisdiction in which the Issuer is organized, deemed
to reside or engaged in business for tax purposes, or any jurisdiction from or
through which any amount is paid by the Issuer or any political subdivision or
governmental authority thereof or therein having power to tax (collectively
"TAXES"), unless such withholding or deduction is required by law. If any such
Taxes shall at any time be required in respect of the payment of any amounts by
the Issuer under any Note, the Issuer will pay to the Purchaser such additional
amounts as may be necessary to ensure that the amounts received by the Purchaser
after such withholding or deduction shall equal the amounts of principal and
interest that would have been receivable in respect of such Note in the absence
of such withholding or deduction.
Section 7. Right to Exchange Notes.
(a) On any Business Day during the Exchange Period for any Note, by
notice to the Issuer not less than five Business Days prior to such Business Day
(the "EXCHANGE DATE"), the Purchaser shall have the right to exchange such Note
or any portion of such Note for the Exchange Shares for such Note or such
portion.
(b) If, at any time prior to the Exchange Period End Date for any Note,
Odyssey shall declare either a dividend on the Shares to be paid in property
other than cash or Shares or a cash dividend on the Shares that, together with
all other such dividends for any calendar quarter in which such dividend is
paid, exceeds the Ordinary Dividend Amount per Share (such dividend, an
"EXTRAORDINARY
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DIVIDEND"), the Purchaser shall have the right to designate any Business Day on
or prior to the Exchange Period End Date and prior to the record date of such
Extraordinary Dividend as the Exchange Date for such Note, in which event the
notice period required by Section 7(a) shall be the shorter of (x) three
Business Days and (y) the period from the Business Day immediately following the
date of public announcement of such declaration to the Business Day immediately
preceding such record date.
(c) If at any time prior to the Exchange Period End Date for any Note,
a Hedge Disruption Event shall have occurred, the Purchaser shall so inform the
Issuer promptly and shall have the right to designate any Business Day on or
prior to the Exchange Period End Date as the Exchange Date for such Note or any
portion of such Note; provided that the Purchaser shall not have the right to so
designate an Exchange Date pursuant to this Section 7(c) if (i) the Hedge
Disruption Event shall have occurred because any daily Actual Hedge Cost
exceeded the Maximum Hedge Cost, (ii) the Issuer shall have paid to the
Purchaser, on or prior to the third Business Day following the notice of such
Hedge Disruption Event, the Excess Hedge Cost as of the time the Purchaser gives
such notice by wire transfer in immediately available funds to an account
designated by the Purchaser and (iii) the Issuer shall have entered into an
agreement with the Purchaser, reasonably acceptable to the Purchaser, on or
prior to the third Business Day following such Notice, to compensate the
Purchaser at least as frequently as monthly for any future Excess Hedge Cost in
respect of such Note.
(d) Notwithstanding the foregoing, if the Purchaser elects to exercise
its right to exchange any Note or any portion of any Note and surrenders such
Note to the Issuer on or prior to the Exchange Date for such Note, the Issuer
shall deliver to the Purchaser on such Exchange Date the Exchange Shares for
such Note or such portion by book-entry transfer to an account designated by the
Purchaser. The Issuer represents and agrees that delivery of any Exchange Shares
will pass to the Purchaser title to such Exchange Shares free and clear of any
liens or encumbrances. If the Purchaser exercises such right with respect to a
portion but not all of any Note, the Issuer shall issue to the Purchaser a new
certificate representing the portion of such Note with respect to which the
Purchaser does not exercise such right, and Section 16(d) and Section 16(e)
shall apply to such issuance. The Issuer shall not be required to deliver any
fractional Exchange Shares, but may instead deliver cash in lieu thereof at the
closing price of the Shares on the NYSE on the immediately preceding Business
Day.
(e) [Reserved].
(f) The parties agree that the delivery of Exchange Shares (or cash in
lieu of fractional shares) upon exchange of any Note or portion thereof as set
forth in this Section 7 shall be considered a payment in full of the principal
of such Note or portion thereof exchanged for all purposes of this Agreement.
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(g) If a Potential Adjustment Event (as defined in the Equity
Definitions) occurs, the Exchange Price and the Ordinary Dividend Amount shall
be subject to adjustment by the Calculation Agent in a manner consistent,
mutatis mutandis, with "Calculation Agent Adjustment" as defined in Article 9 of
the Equity Definitions, as if the exchange right described in this Section were
set forth in a Confirmation (as defined in the ISDA Master Agreement) for a
Share Option Transaction (as defined in the Equity Definitions) and Odyssey were
the Issuer (as defined in the Equity Definitions), with the following
amendments:
(i) The first paragraph of Section 9.1(c) of the Equity
Definitions is hereby amended to read as follows: '(c) If "Calculation
Agent Adjustment" is specified as the method of adjustment in the
Confirmation of a Share Option Transaction, then following the
declaration by the Issuer of the terms of any Potential Adjustment
Event, the Calculation Agent will determine whether such Potential
Adjustment Event has a material effect on the theoretical value of the
relevant Shares or Options and, if so, may in its sole discretion make
appropriate adjustments to the Exchange Price, the Ordinary Dividend
Amount and any other variable relevant to the exercise, settlement or
payment terms of such Share Option Transaction", and the sentence
immediately preceding Section 9.1(c)(ii) is hereby amended by deleting
the words "diluting or concentrative".
(ii) Section 9.1(e) of the Equity Definitions shall be amended
to add the new following subsection (vii): "(vii) any tender offer with
respect to the Shares and is not a Merger Event as defined in Section
9.2 of the Equity Definitions and is deemed to be material in the
determination of the Calculation Agent".
(iii) Section 9.1(e)(vi) of the Equity Definitions is hereby
amended by deleting the words "other similar" between "any" and "event"
and replacing it with the word "corporate"; deleting the words
"diluting or concentrative" and replacing them with "material"; and
adding the following words at the end of the sentence "or Options".
(iv) Section 9.1(e) of the Equity Definitions shall be amended
by deleting subsection (iii) thereof.
(h) If a Merger Event (as defined in the Equity Definitions) occurs,
the provisions of Sections 9.2, 9.3, 9.4, 9.5 and 9.7 shall apply to the Notes,
mutatis mutandis, as if (i) each Note were a Share Option Transaction (as
defined in the Equity Definitions) with an Expiration Date (as defined in the
Equity Definitions) of the Exchange Date for such Note and Odyssey were the
Issuer (as defined in the Equity Definitions), (ii) the elections under
"Consequences of Merger Events" were (A) "Cancellation and Payment" for a
Share-for-Other Merger Event and a Share-for-Combined Merger Event and (B)
"Modified
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Alternative Obligation" for a Share-for-Share Merger Event, and (iii) the Equity
Definitions were amended as follows:
(i) Section 9.3(b) of the Equity Definitions shall be amended
to add the following subsection (iv): "(iv) "Modified Alternative
Obligation" means that the Calculation Agent will make the adjustments
set forth under Alternative Obligation; provided, however, the
Calculation Agent will determine if any such Merger Event affects the
theoretical value of the Share Option Transaction and, if so, may in
its sole discretion make an adjustment to the Exchange Price and any
other variable relevant to the exercise, settlement or payment terms of
the Share Option Transaction to reflect the characteristics (including,
without limitation, the volatility, dividend practice and policy and
liquidity) of the New Shares. Any such adjustment made will be
effective as of the date determined by the Calculation Agent.";
(ii) The first paragraph of Section 9.7(b) of the Equity
Definitions shall be amended by (1) deleting from the second sentence
thereof the words "after that date" between the words "that would have
been required" and "but for the occurrence of the Option Value Event"
and by (2) deleting the period at the end of subsection (iii) thereof
and inserting the following words therefor: "; and (iv) a term equal to
the number of days from the Announcement Date through and including the
Expiration Date".
(i) The adjustments described in paragraphs (g) and (h) above will be
made successively whenever any Potential Adjustment Event or Share-for-Share
Merger Event may occur. For greater certainty, the Calculation Agent shall not
make any adjustment to the principal amount of any Note or the Exchange Date or
Interest Rate for any Note.
(j) If the Purchaser elects to exercise such right to exchange any Note
or any portion of any Note as set forth in this Section 7 and the Issuer does
not deliver the Exchange Shares for such Note or such portion at the time and in
the manner required by this Agreement, the Purchaser shall be entitled to
liquidated damages (the "LIQUIDATED AMOUNT") equal to the Purchaser's cost of
purchasing in the open market a number of Shares equal to the number of Exchange
Shares to which the Purchaser is entitled pursuant to this Section 7. The
Purchaser shall be entitled to deliver to itself any Shares pledged pursuant to
the Pledge Agreement in full or partial, as the case may be, satisfaction of the
Issuer's obligation to pay the Liquidated Amount.
(k) The Issuer understands its reporting obligations under Sections 13
and 16 of the Securities Exchange Act of 1934, as amended, with respect to the
transactions contemplated hereby and shall comply with such obligations, and
shall provide the Purchaser with a copy of any report filed thereunder in
respect of such transactions.
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Section 8. Representations and Warranties of the Issuer and the
Guarantor. Each of the Issuer and the Guarantor represents and warrants to the
Purchaser and the Agent, as of the date hereof, as of the date of each Note
Purchase Confirmation and as of the Issue Date for each Note, that:
(a) it is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization or incorporation;
(b) it has the power to execute this Agreement, any Note and any other
Transaction Document or other documentation relating to this Agreement to which
it is a party, to deliver this Agreement, each Note and each other Transaction
Document and other documentation relating to this Agreement that it is required
by this Agreement to deliver and to perform its obligations under this Agreement
(including, without limitation, the issuance of the Notes) and any other
Transaction Agreement and has taken all necessary action to authorize such
execution, delivery and performance;
(c) such execution, delivery and performance do not violate or conflict
with any law applicable to it, any provision of its constitutional documents,
any order or judgment of any court or other agency of government applicable to
it or any of its assets or any contractual restriction binding on or affecting
it or any of its assets;
(d) all governmental and other consents that are required to have been
obtained by it with respect to this Agreement, any Note and any other
Transaction Document have been obtained and are in full force and effect and all
conditions of any such consents have been complied with;
(e) its obligations under this Agreement, each other Transaction
Document and, when issued and delivered pursuant to this Agreement and the Note
Purchase Confirmation for such Note, each Note constitute legal, valid and
binding obligations, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles;
(f) no Event of Default with respect to it has occurred and is
continuing and no such event or circumstance would occur as a result of its
entering into or performing its obligations under this Agreement, any Note or
any other Transaction Document;
(g) there is not pending or, to its knowledge, threatened against it or
any of its affiliates any action, suit or proceeding at law or in equity or
before any court, tribunal, governmental body, agency or official or any
arbitrator that is likely to affect the legality, validity or enforceability
against it of this Agreement, any Note or any other Transaction Document or its
ability to perform its obligations under this Agreement, any Note or any other
Transaction Document;
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(h) expect as previously disclosed to the Purchaser or its affiliates,
it has not, nor has anyone acting on its behalf (other than the Purchaser and
the Agent), offered or sold any Note to, or solicited offers to buy any Note
from, or otherwise approached or negotiated with respect thereto with, any
prospective purchaser (other than the Purchaser);
(i) assuming the accuracy of the representations and agreements of the
Purchaser in Section 9(f), Section 9(g) and Section 11 hereof, it is not
necessary in connection with the offer, sale and delivery of the Notes in the
manner contemplated by this Agreement to register the Notes under the Securities
Act;
(j) it is not and, after giving effect to the sale of the Notes and the
application of the proceeds thereof, will not be an "investment company" as such
term is defined in the Investment Company Act of 1940, as amended;
(k) it is acting for its own account, and has made its own independent
decision to enter into this Agreement and each other Transaction Document and as
to whether this Agreement and the other Transaction Documents are appropriate or
proper for it based upon its own judgment and upon advice of such advisors as it
deems necessary; each of the Issuer and the Guarantor acknowledges and agrees
that it is not relying, and has not relied, upon any communication (written or
oral) of the Purchaser or any affiliate of the Purchaser with respect to the
legal, accounting, tax or other implications of this Agreement or any other
Transaction Document and that it has conducted its own analyses of the legal,
accounting, tax and other implications hereof and thereof (it being understood
that information and explanations related to the terms and conditions of this
Agreement or any other Transaction Document shall not be considered investment
advice or a recommendation to enter into this Agreement or any such Transaction
Document); it further acknowledges and confirms that it has taken independent
tax advice with respect to this Agreement and each other Transaction Document;
(l) each of the Issuer and the Guarantor is entering into this
Agreement and the other Transaction Documents with a full understanding of all
of the terms and risks hereof and thereof (economic and otherwise) and is
capable of evaluating and understanding (on its own behalf or through
independent professional advice), and understands and accepts, the terms,
conditions and risks; each of the Issuer and the Guarantor is also capable of
assuming (financially and otherwise), and assumes, those risks;
(m) it acknowledges that neither the Purchaser nor any affiliate of the
Purchaser is acting as a fiduciary for or an advisor to the Issuer or the
Guarantor in respect of this Agreement or any other Transaction Document;
(n) the Issuer was organized on February 28, 2003 for the purpose of
participating in the transactions contemplated by this Agreement;
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(o) (i) the financial statements of the Guarantor, copies of which have
been delivered to each of the Purchaser and the Agent, fairly present, in
conformity with Canadian generally accepted accounting principles, the
consolidated financial position of the Guarantor and its subsidiaries (if any)
as of the respective dates of such financial statements and their consolidated
results of operations, changes in stockholders' equity and cash flows for such
period, and (ii) since December 31, 2002, there has been no material adverse
change in the business, operations, properties, prospects or condition
(financial or otherwise) of the Guarantor and its subsidiaries (if any), taken
as a whole;
(p) the Issuer is an "Accredited Investor" as such term is defined in
Rule 501(a)(3) of Regulation D under the Securities Act;
(q) the Issuer is acquiring the Purchase Shares for its own account and
not with a view to the distribution or resale of the Purchase Shares except
pursuant to a registration statement declared effective under, or an exemption
from the registration requirements of, the Securities Act;
(r) the Issuer understands and acknowledges that the Purchaser or an
affiliate thereof may possess material, non-public information concerning
Odyssey; neither the Purchaser nor any affiliate thereof has disclosed any such
information; and the Issuer has not requested the Purchaser or any affiliate of
the Purchaser to disclose any of such information to the Issuer;
(s) the Issuer has, independently, and without reliance upon the
Purchaser or any affiliate thereof and based on such information concerning
Odyssey that the Issuer has obtained from sources other than the Purchaser and
its affiliates, made its own investment analysis and decision to make the
purchase of the Purchase Shares;
(t) as of the date hereof or any Issue Date, it is not aware of any
material, non-public information concerning Odyssey; and
(u) each of the representations and warranties made in each other
Transaction Document by each of the Issuer and the Guarantor is true and correct
in all material respects, and such representations and warranties are hereby
incorporated herein by reference with the same effect as though set forth in
their entirety herein, as qualified therein, except to the extent that such
representation or warranty relates to a specific date, in which case such
representation and warranty shall be true as of such earlier date.
Section 9. Representations and Warranties of the Purchaser. The
Purchaser represents and warrants to each of the Issuer and the Guarantor, as of
the date hereof and as of the date of each Note Purchase Confirmation and as of
the Issue Date for each Note, that:
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(a) it is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization or incorporation;
(b) it has the power to execute this Agreement, any Transaction
Document or any other documentation relating this Agreement to which it is a
party, to deliver this Agreement, any Transaction Document and any other
documentation relating to this Agreement that it is required by this Agreement
to deliver and to perform its obligations under this Agreement (including,
without limitation, the purchase of the Notes) and any other Transaction
Document and has taken all necessary action to authorize such execution,
delivery and performance;
(c) such execution, delivery and performance do not violate or conflict
with any law applicable to it, any provision of its constitutional documents,
any order or judgment of any court or other agency of government applicable to
it or any of its assets or any contractual restriction binding on or affecting
it or any of its assets;
(d) all governmental and other consents that are required to have been
obtained by it with respect to this Agreement have been obtained and are in full
force and effect and all conditions of any such consents have been complied
with;
(e) its obligations under this Agreement constitute its legal, valid
and binding obligations, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency and similar laws affecting
creditors' rights generally and to general equitable principles;
(f) the Purchaser is an "Accredited Investor" as such term is defined
in Rule 501(a)(3) of Regulation D under the Securities Act;
(g) the Purchaser understands that the Notes will not be and have not
been registered under the Securities Act and the sale of the Notes is being made
to the Purchaser in reliance on a private placement exemption; the Purchaser is
acquiring the Notes for its own account and not with a view to the distribution
or resale of the Notes in violation of the Securities Act and the Purchaser is
entering into this Agreement on the basis of bilateral discussions with the
Issuer and not as the result of any general solicitation or general advertising;
and
(h) upon the crediting of the Purchase Shares for any Note to a
securities account of the Issuer and the issuance and delivery of such Note
against delivery thereof as provided herein, assuming that the Issuer has no
notice of any adverse claim thereto, the Issuer will have control of a security
entitlement in respect of such Purchase Shares and no action based on an adverse
claim to the Purchase Shares, whether framed in conversion, replevin,
constructive trust, equitable lien, or other theory, may be asserted against the
13
Issuer (terms used in this paragraph have the meanings as used in Section 8-502
of the Uniform Commercial Code as in effect in the State of New York).
Section 10. Covenants of the Issuer. Each of the Issuer and the
Guarantor hereby covenants and agrees with the Purchaser that from the date
hereof and for so long as any Note remains outstanding or any amount unpaid
under this Agreement or any Note:
(a) the Guarantor will deliver to the Purchaser, in form and detail
satisfactory to the Purchaser, (i) as soon as available, but in any event within
90 days after the end of each fiscal year of the Guarantor, a consolidated
balance sheet of the Guarantor and its subsidiaries (if any) as at the end of
such fiscal year, and the related consolidated statements of income or
operations, shareholders' equity and cash flows for such fiscal year, and (ii)
as soon as available, but in any event within 45 days after the end of each of
the first three fiscal quarters of each fiscal year of the Guarantor, a
consolidated balance sheet of the Guarantor and its subsidiaries (if any) as at
the end of such fiscal quarter, and the related consolidated statements of
income or operations, shareholders' equity and cash flows for such fiscal
quarter and for the portion of the Guarantor's fiscal year then ended setting
forth in each case in comparative form the figures for the previous fiscal year
or quarter and the corresponding portion of the previous fiscal year, all in
reasonable detail and certified by an independent certified public accountant
(in the case of clause (i)) or an authorized officer of the Guarantor (in the
case of clause (ii)) as fairly presenting the financial condition, results of
operations and cash flows of the Guarantor and its subsidiaries (if any) in
accordance with Canadian generally accepted accounting principles as in effect
from time to time;
(b) the Guarantor will deliver or cause to be delivered to the
Purchaser from time to time, upon written request by the Purchaser, such
information regarding the business affairs, property and condition, financial or
otherwise, of the Guarantor, in such detail as may reasonably be requested;
(c) it will cause to be delivered to the Purchaser immediately upon the
occurrence of any Event of Default hereunder or under the Pledge Agreement
notice of such occurrence;
(d) it will pay and discharge, and cause each of its subsidiaries (if
any) to pay and discharge, as the same shall become due and payable, all its
obligations and liabilities, including (i) all tax liabilities, assessments and
governmental charges or levies upon it or its properties or assets, unless the
same are being contested in good faith by appropriate proceedings and adequate
reserves in accordance with Canadian generally accepted accounting principles as
in effect from time to time are being maintained by it or such subsidiaries (if
any); (ii) all lawful claims that, if unpaid, would by law become a lien upon
its property; and (iii) all indebtedness, as and when due and payable, but
subject to
14
any subordination provisions contained in any instrument or agreement evidencing
such indebtedness;
(e) it will preserve, renew and maintain in full force and effect its
legal existence and good standing under the laws of the jurisdiction of its
organization; take all reasonable action to maintain all rights, privileges,
permits, licenses and franchises necessary or desirable in the normal conduct of
its business;
(f) it will comply, and cause each of its subsidiaries (if any) to
comply, in all material respects with the terms of all Transaction Documents and
with all applicable laws, ordinances, rules, regulations, and requirements of
governmental authorities (including environmental and labor laws, rules and
regulations), except, in the case of the Guarantor, where failure to so comply
with laws, ordinances, rules, regulations or requirements would not have a
material adverse effect on the business, operations, properties, prospects or
condition (financial or otherwise) of the Guarantor and its subsidiaries (if
any) taken as a whole;
(g) it will maintain proper books of record and account, in which full,
true and correct entries in conformity with generally accepted accounting
principals as in effect from time to time consistently applied shall be made of
all financial transactions and matters involving the assets and business of the
Issuer and its subsidiaries (if any), and permit representatives and independent
contractors of the Purchaser, at the expense of the Purchaser, to visit and
inspect any of its properties, to examine its corporate, financial and operating
records, and make copies thereof or abstracts therefrom, and to discuss its
affairs, finances and accounts with its directors, officers, and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably desired, upon reasonable advance notice to it;
provided, however, that when an Event of Default exists the Purchaser (or any of
its representatives or independent contractors) may do any of the foregoing at
the expense of the Issuer at any time during normal business hours and without
advance notice;
(h) none of it or any of its affiliates or any person acting on behalf
of it or any such affiliate will solicit any offer to buy or offer to sell the
Notes by means of any form of general solicitation or general advertising;
(i) the Issuer will pay all transfer, excise or similar taxes (not
including income or franchise taxes) in connection with the issuance, sale,
delivery or transfer by the Issuer to the Purchaser of any Note, and shall
indemnify and save the Purchaser harmless without limitation as to time against
any and all liabilities with respect to such taxes. The obligations of the
Issuer under this Section 10(i) shall survive the repayment of the Notes and the
termination of this Agreement; and
15
(j) it agrees that the Issuer shall treat the Purchase Shares as if
they were restricted securities (as defined under Rule 144 of the Securities
Act) and shall not offer, sell or otherwise transfer the Purchase Shares unless
and until the Purchase Shares are registered under the Securities Act or an
exemption from the registration requirements thereof is available.
Section 11. Covenants of the Purchaser. The Purchaser hereby covenants
and agrees that:
(a) it shall not sell or otherwise transfer any Note, except with the
consent of the Issuer, such consent not be unreasonably withheld, and pursuant
to a registration statement declared effective under, or an exemption from the
registration requirements of, the Securities Act; provided that such consent of
the Issuer shall not be required (i) for any sale or transfer of any Note on or
following the date one year from the Issue Date for such Note or (ii) at any
time to any affiliate of the Purchaser or Intrepid Master Funding Trust or any
similar entity sponsored or organized by, or on behalf of or for the benefit of,
the Purchaser or an affiliate of the Purchaser; provided further that the Issuer
shall have a right of first refusal with respect to any proposed sale or
transfer of any Note to either pay the proposed purchase price or designate an
alternate buyer reasonably acceptable to the Purchaser who is willing to pay the
proposed purchase price; provided further that if the Purchaser sells or
transfers any Notes to any person or company that would result in the Issuer
being required to make payments of additional amounts as provided in Section
6(b), the Issuer shall no longer be required to make any payments required under
Section 6(b) in respect of the Notes that have been sold or transferred;
(b) none of it, any of its affiliates or any person acting on behalf of
it or any such affiliate shall solicit any offer to buy or offer to sell any
Note by means of any form of general solicitation or general advertising; and
(c) it shall notify the Issuer promptly upon becoming aware of the
occurrence or existence of any Registration Default or any event or condition
that, with the giving of notice or the passage of time or both, would become a
Registration Default.
Section 12. Conditions. (a) Conditions to Effectiveness. The
effectiveness of this Agreement is subject to the satisfaction of each of the
following conditions:
(i) each of the Transaction Documents shall have been duly
executed and delivered by the parties thereto;
(ii) the Purchaser shall have received such opinions (in form
and substance satisfactory to the Purchaser and its counsel acting
reasonably), dated as of the date hereof, of Torys LLP, counsel for the
Issuer and the Guarantor, as the Purchaser may reasonably require;
16
(iii) the Purchaser shall have received such opinions (in form
and substance satisfactory to the Purchaser and its counsel acting
reasonably), dated the date hereof, of Shearman & Sterling, counsel to
Odyssey, as the Purchaser may reasonably require;
(iv) all documents and instruments required by law or
reasonably requested by the Purchaser to be filed, registered or
recorded to create the security interest intended to be created by the
Pledge Agreement and perfect or record such security interest to the
extent, and with the priority, required by the Pledge Agreement, shall
have been filed, registered or recorded; and
(v) the Issuer shall have furnished to the Purchaser such
further certificates and documents as the Purchaser shall reasonably
request.
(b) Conditions to Effectiveness of any Note Purchase Confirmation and
to the Purchaser's Obligations. The effectiveness of any Note Purchase
Confirmation for any Note and the obligation of the Purchaser to deliver the
Purchase Shares for such Note on the Issue Date for such Note is subject to the
satisfaction of each of the following additional conditions:
(i) the Purchaser shall have received (A) an executed copy of
the Note Purchase Confirmation for such Note and (B) such Note duly
executed and delivered by the Issuer and the Guarantor;
(ii) the Initial Pledged Items (as defined in the Pledge
Agreement) shall have been delivered to Secured Party (as defined in
the Pledge Agreement) pursuant to the Pledge Agreement;
(iii) the Purchaser shall have received such opinions (in form
and substance satisfactory to the Purchaser and its counsel acting
reasonably), dated as of the date of the Note Purchase Confirmation for
such Note, of Torys LLP, counsel for the Issuer and the Guarantor, as
the Purchaser may reasonably require;
(iv) each of the representations and warranties of the Issuer
and the Guarantor contained in this Agreement and each Transaction
Document to which it is a party shall be true and correct on and as of
the date of such Note Purchase Confirmation or the Issue Date, as
applicable, as if made on and as of such date;
(v) each of the representations and warranties of the
Purchaser contained in this Agreement and each Transaction Document to
which it is a party shall be true and correct on and as of the date of
such Note Purchase Confirmation or Issue Date, as applicable, as if
made on and as of such date;
17
(vi) the Issuer shall have complied with all agreements and
all conditions to be performed or satisfied by it under this Agreement
and each Transaction Document to which it is a party on or prior to the
date of such Note Purchase Confirmation or the Issue Date, as
applicable;
(vii) as of the date of such Note Purchase Confirmation or the
Issue Date, as applicable, no Event of Default under this Agreement
shall have occurred and be continuing; and
(viii) the Guarantor shall have executed the Hedge Cost
Reimbursement Agreement and paid the Prepayment Amount (as such term is
defined in the Hedge Cost Reimbursement Agreement) to the Purchaser by
wire transfer in immediately available funds to an account designated
by the Purchaser.
Section 13. Events of Default. The occurrence of any of the following
events shall constitute an event of default (an "EVENT OF DEFAULT") hereunder
and under each Note:
(a) failure by the Issuer or the Guarantor to make, when due, any
payment (including, without limitation, of principal or interest) or delivery
under this Agreement, any Note or any other Transaction Document;
(b) failure by Odyssey to comply with or perform any agreement or
obligation under the Registration Rights Agreement (a "REGISTRATION DEFAULT");
(c) failure by the Issuer to comply with or perform any agreement or
obligation (other than an obligation to make any payment or delivery referred to
in Section 13(a)) under this Agreement, any Note or any other Transaction
Document to be complied with or performed by it in accordance with this
Agreement, any Note or any other Transaction Document if such failure is not
remedied on or before the thirtieth day after notice of such failure is given to
the Issuer;
(d) this Agreement, any Note or any other Transaction Document ceases
to be in full force and effect, or is declared by a court of competent
jurisdiction to be null and void, invalid or unenforceable in any material
respect, or the Issuer, the Guarantor or Odyssey disaffirms, disclaims,
repudiates or rejects, in whole or in part, or challenges the validity of, this
Agreement, any Note or any other Transaction Document;
(e) a representation made or repeated or deemed to have been made or
repeated by the Issuer, the Guarantor or Odyssey in this Agreement or any other
Transaction Document proves to have been incorrect or misleading in any material
respect when made or repeated or deemed to have been made or repeated;
18
(f) the occurrence or existence of (i) a default, event of default,
termination event or other similar condition or event (however described) in
respect of the Issuer or the Guarantor under (A) any Transaction Document or (B)
one or more agreements or instruments relating to any indebtedness of the Issuer
(individually or collectively) in an aggregate amount of not less than
CDN$10,000,000 which has resulted in such indebtedness becoming, or becoming
capable at such time of being declared, due and payable under such agreements or
instruments before it would otherwise have been due and payable or (ii) a
default by the Issuer or the Guarantor (individually or collectively) in making
one or more payments on the due date thereof in an aggregate amount of not less
than CDN$10,000,000 under such agreements or instruments (after giving effect to
any applicable notice requirement or grace period);
(g) the Issuer or the Guarantor is (1) dissolved (other than pursuant
to a consolidation, amalgamation or merger); (2) becomes insolvent or is unable
to pay its debts or fails or admits in writing its inability generally to pay
its debts as they become due; (3) makes a general assignment, arrangement or
composition with or for the benefit of its creditors; (4) institutes or has
instituted against it a proceeding seeking a judgment of insolvency or
bankruptcy or any other relief under any bankruptcy or insolvency law or other
similar law affecting creditors' rights, or a petition is presented for its
winding-up or liquidation, and, in the case of any such proceeding or petition
instituted or presented against it, such proceeding or petition (A) results in a
judgment of insolvency or bankruptcy or the entry of an order for relief or the
making of an order for its winding-up or liquidation or (B) is not dismissed,
discharged, stayed or restrained in each case within 15 days of the institution
or presentation thereof; (5) has a resolution passed for its winding-up,
official management or liquidation (other than pursuant to a consolidation,
amalgamation or merger); (6) seeks or becomes subject to the appointment of an
administrator, provisional liquidator, conservator, receiver, trustee custodian
or other similar official for it or for all or substantially all its assets; (7)
has a secured party take possession of all or substantially all its assets or
has a distress, execution attachment, sequestration or other legal process
levied, enforced or sued on or against all or substantially all its assets and
such secured party maintains possession, or any such process is not dismissed,
discharged, stayed or restrained, in each case within 15 days thereafter; (8)
causes or is subject to any event with respect to it which, under the applicable
laws of any jurisdiction, has an analogous effect to any of the events specified
in clauses (1) to (7) (inclusive); or (9) takes any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the foregoing
acts;
(h) due to the adoption of, or any change in, any applicable law after
the date hereof, or due to the promulgation of, or any change in, the
interpretation by any court, tribunal or regulatory authority with competent
jurisdiction of any applicable law after such date, it becomes unlawful for the
Issuer, the Guarantor or Odyssey (i) to perform any absolute or contingent
19
obligation to make a payment or delivery, or to receive a payment or delivery in
respect of this Agreement or any other Transaction Document or to comply with
any other material provision of this Agreement or any other Transaction Document
or (2) to perform any contingent or other obligation which the Issuer, Guarantor
or Odyssey has under this Agreement or any other Transaction Document;
(i) any legal proceeding shall have been instituted or any other event
shall have occurred or condition shall exist that is reasonably likely to have a
material adverse effect on the ability of the Issuer, the Guarantor or Odyssey
to perform its obligations under this Agreement, any Note or any other
Transaction Document, or that calls into question the validity or binding effect
of any agreement of the Issuer, the Guarantor or Odyssey under this Agreement,
any Note or any other Transaction Document; or
(j) the occurrence or existence of a Collateral Event of Default (as
defined in the Pledge Agreement) under the Pledge Agreement.
Section 14. Remedies Upon Default. (a) Upon the occurrence, and during
the continuance of any Event of Default, the Purchaser may declare the
outstanding principal amount of all Notes issued hereunder (together with any
accrued and unpaid interest thereon) due and payable and exercise any and all
remedies available to it under this Agreement, the Notes and the Pledge
Agreement; provided that in the case of any of the events specified in Section
13(g), without any notice, the outstanding principal amount of all Notes issued
hereunder (together with any accrued and unpaid interest thereon) shall become
immediately due and payable without presentment, demand for payment, protest,
notice of nonpayment or other notice of any kind, all of which are hereby waived
by the Issuer. Notwithstanding the foregoing, if the outstanding principal
amount of any Note so becomes due and payable prior to the Exchange Date for
such Notes, then the Issuer shall satisfy its obligation to pay the principal
thereof by delivering the Exchange Shares for such Note (or cash in lieu of
fractional Shares) to the Purchaser as provided in Section 7 as if the date the
outstanding principal amount of the Note so becomes due and payable were the
Exchange Date and the Purchaser elected to exercise the exchange right described
in Section 7, and the provisions of Section 7 shall apply to such delivery and
any Shares so delivered shall be considered Exchange Shares for all purposes
under the Transaction Documents.
(b) Except as expressly set forth herein, upon payment of (i) the
outstanding principal amount (including, if applicable, by delivery of Exchange
Shares as provided in paragraph (a) above) and accrued and unpaid interest on
any Note so declared due and payable and (ii) any overdue interest thereon, all
of the Issuer's obligations in respect of the payment of the principal of and
interest on such Note shall terminate.
20
(c) Upon the occurrence and during the continuance of any Event of
Default, the Purchaser is hereby authorized at any time and from time to time,
to the fullest extent permitted by law, to, and the Issuer agrees that the
Purchaser shall have the right to, (i) set-off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by the Purchaser to or for the credit or
the account of the Issuer against any and all of the obligations of the Issuer
now or hereafter existing under this Agreement and the Notes held by the
Purchaser, and (ii) set-off any obligation that the Purchaser or any affiliate
of the Purchaser may have to the Issuer against any right the Purchaser or any
of its affiliates may have against the Issuer, in each case irrespective of
whether or not the Purchaser shall have made any demand under this Agreement or
the Notes or any such agreement and although such obligations may be unmatured.
In the case of a set-off of any obligation to release, deliver or pay assets
against any right to receive assets of the same type, such obligation and right
shall be set-off in kind. In the case of a set-off of any obligation to release,
deliver or pay assets against any right to receive assets of any other type, the
value of each of such obligation and such right shall be determined by the
Calculation Agent and the result of such set-off shall be that the net obligor
shall pay or deliver to the other party an amount of cash or assets, at the net
obligor's option, with a value (determined, in the case of a delivery of assets,
by the Calculation Agent) equal to that of the net obligation. In determining
the value of any obligation to release or deliver any securities or right to
receive any securities, the value at any time of such obligation or right shall
be determined by reference to the market value of such securities at such time.
If an obligation or right is unascertained at the time of any such set-off, the
Calculation Agent may in good faith estimate the amount or value of such
obligation or right, in which case set-off will be effected in respect of that
estimate, and the relevant party shall account to the other party at the time
such obligation or right is ascertained. The rights of the Purchaser under this
Section 14(c) are in addition to other rights and remedies (including, without
limitation, other rights of set-off) that the Purchaser may have as a matter of
law, pursuant to contract or otherwise.
Section 15. Indemnity. In the event that the Purchaser or any of its
affiliates becomes involved in any capacity in any action, proceeding or
investigation brought by or against any person in connection with any matter
referred to in this Agreement, the Notes, the Pledge Agreement or any other
Transaction Document, the Issuer shall reimburse the Purchaser or such affiliate
for its reasonable legal and other out-of-pocket expenses (including the cost of
any investigation and preparation) incurred in connection therewith within 30
days of receipt of notice of such expenses, and shall indemnify and hold the
Purchaser or such affiliate harmless against any losses, claims, damages or
liabilities to which the Purchaser or such affiliate may become subject in
connection with any such action, proceeding or investigation. Notwithstanding
the foregoing, such obligation to hold harmless shall not apply to any action,
proceeding, or investigation that is judicially determined as having resulted
from
21
the Purchaser's gross negligence, willful misconduct, or breach of this
Agreement or such other Transaction Document. The reimbursement and indemnity
obligations of the Issuer under this Section shall be in addition to any
liability that the Issuer may otherwise have, shall extend upon the same terms
and conditions to the partners, directors, officers, agents, employees and
controlling persons (if any), as the case may be, of the Purchaser and its
affiliates and shall be binding upon and inure to the benefit of any successors,
assigns, heirs and personal representatives of the Issuer, the Purchaser, any
such affiliate and any such person. The Issuer also agrees that neither the
Purchaser nor any of such affiliates, partners, directors, officers, agents,
employees or controlling persons shall have any liability to the Issuer for or
in connection with any matter referred to in this Agreement, the Notes, the
Pledge Agreement or any other Transaction Document except to the extent that any
losses, claims, damages, liabilities or expenses incurred by the Issuer result
from the gross negligence, willful misconduct or bad faith of the Purchaser or a
breach by the Purchaser of any of its covenants or obligations hereunder or
thereunder. The foregoing provisions shall survive any termination or completion
of this Agreement.
Section 16. Note Register. (a) The Issuer shall cause to be kept a note
register (the "NOTE REGISTER") for the Notes in which, subject to such
reasonable regulations as it may prescribe, the Issuer shall provide for the
registration of the Notes and the registration of transfers of the Notes. The
Issuer shall initially be the note registrar (in such capacity, the "NOTE
REGISTRAR") for the purpose of registering the Notes and transfers of Notes as
herein provided and may appoint a successor to itself, subject to the last
sentence of this Section 16(a). Upon any resignation of any Note Registrar, the
Issuer shall promptly appoint a successor or, if it elects not to make such an
appointment, assume the duties of the Note Registrar. If a person other than the
Issuer is appointed as Note Registrar, the Issuer will give the Purchaser prompt
written notice of the appointment of such Note Registrar and of the location,
and any change in the location of the Note Register.
(b) Upon surrender for registration of transfer of any certificate
representing any Note at an office or agency of the Issuer where the principal
of and interest on the Notes are payable, the Issuer shall execute, and the
Purchaser shall obtain from the Issuer, in the name of the designated transferee
or transferees, one or more new certificates of a like aggregate principal
amount.
(c) At the option of the Purchaser, certificates with respect to any
Notes may be exchanged for other certificates of a like aggregate principal
amount, upon surrender of the certificates to be exchanged at the office or
agency of the Issuer where the principal of and interest on the Notes are
payable.
(d) All Notes issued upon any registration of transfer or exchange of
Notes shall be the valid obligations of the Issuer, evidencing the same debt,
and entitled to the same benefits under this Agreement, as the Notes surrendered
upon such registration of transfer or exchange.
22
(e) No service charge shall be made by the Purchaser for any
registration of transfer or exchange of any Note, but the Issuer may require
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection with any registration of transfer or exchange of
Notes.
Section 17. Mutilated, Destroyed, Lost or Stolen Notes. (a) If (i) any
mutilated Note is surrendered to the Issuer, or the Issuer receives evidence to
its satisfaction of the destruction, loss or theft of any Note, and (ii) there
is delivered to the Issuer such security or indemnity as may be reasonably
required by it to hold the Issuer harmless, then, in the absence of notice to
the Issuer or the Note Registrar that such Note has been acquired by a bona fide
purchaser, the Issuer shall execute and deliver, in exchange for or in lieu of
any such mutilated, destroyed, lost or stolen Note, a replacement Note of a like
aggregate principal amount; provided, however, that if Notes represented by any
such destroyed, lost or stolen certificate, but not a mutilated certificate,
shall have become or within seven days shall be due and payable, instead of
issuing a replacement certificate, the Issuer may pay to the holder of such
destroyed, lost or stolen Note the amount due when so due or payable without
surrender thereof.
(b) Any duplicate Note issued pursuant to this Section 17 in
replacement for any mutilated, destroyed, lost or stolen Note shall constitute
an original additional contractual obligation of the Issuer, whether or not the
mutilated, destroyed, lost or stolen Note shall be found at any time or be
enforced by any person, and shall be entitled to all the benefits of this
Agreement equally and proportionately with any and all other Notes duly issued
hereunder.
Section 18. Successors and Assigns. This Agreement and any Note issued
hereunder shall inure to the benefit of, and be binding upon, the Issuer and the
Purchaser and their respective successors and assigns. Nothing expressed or
mentioned in this Agreement is intended or shall be construed to give any other
person, firm or corporation any legal or equitable right, remedy or claim under
or in respect of this Agreement or any provision herein contained.
Section 19. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the Purchaser
shall be given to it at 0 Xxxx 00xx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, XX 00000;
Telecopy No. 000-000-0000; Attention: Xxxxxxx Xxxxxxxxx. Notices to the Issuer
shall be given to it at 0000 Xxxxx X'Xxxxxx Xxxx., Xxxxxx, XX 00000; Telecopy
No. 000-000-0000; Attention: Xxxx Xxxxxx, President. Notices to the Guarantor
shall be given to it at 00 Xxxxxxxxxx Xxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx,
X0X 0X0; Telecopy No. 000-000-0000; Attention: Xxxxxxx X. Xxxxxx, Vice President
and Secretary.
23
Section 20. Counterparts. This Agreement may be signed in counterparts,
each of which shall be an original and all of which together shall constitute
one and the same instrument.
Section 21. Governing Law; Jurisdiction; Service Of Process. (a) THIS
AGREEMENT AND ANY OTHER TRANSACTION DOCUMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
THE CONFLICTS OF LAWS PROVISIONS THEREOF.
(b) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of the
Supreme Court of the State of New York sitting in New York County and of the
United States District Court for the Southern District of New York, and any
relevant appellate court, in any action or proceeding arising out of or relating
to any Transaction Document, or for recognition or enforcement of any judgment,
and each party hereto hereby irrevocably and unconditionally agrees that all
claims in respect of any such action or proceeding may be heard and determined
in New York State court or, to the extent permitted by law, in such Federal
court. Each party hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that the Purchaser may otherwise have to bring
any action or proceeding relating to any Transaction Document against the Issuer
or the Guarantor or its properties in the courts of any jurisdiction.
(c) Each party hereto irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to any Transaction Document in any court referred to
in subsection (b) of this Section. Each party hereto irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of any such suit, action or proceeding in any such court.
(d) Each party hereto irrevocably consents to service of process in the
manner provided in Section 19. Nothing in any Transaction Document will affect
the right of any party hereto to serve process in any other manner permitted by
law.
Section 22. Calculation Agent. All calculations and determinations
under any Transaction Document shall be made by the Calculation Agent in good
faith in a commercially reasonable manner.
Section 23. Integration; Amendments and Waivers. (a) Except as provided
herein, this Agreement and the Notes constitute the complete agreement between
the parties with respect to the subject matter hereof and thereof, supersede any
previous agreement or understanding between them
24
relating hereto or thereto and may not be modified, altered or amended except as
provided therein.
(b) No amendment or waiver of any provision of this Agreement or any
Note, nor consent to any departure by the Issuer therefrom, shall in any event
be effective unless the same shall be in writing and signed by the Issuer and
the Purchaser.
Section 24. No Waiver by the Purchaser. The Purchaser's failure, at any
time or times, to require strict performance by the Issuer of any provision of
this Agreement or any Note shall not waive, affect or diminish any right of the
Purchaser thereafter to demand strict compliance and performance herewith or
therewith. Any suspension or waiver by the Purchaser of an Event of Default
under this Agreement shall not suspend, waive or affect any other default or
event of default by the Issuer under this Agreement or any Note whether the same
is prior or subsequent thereto and whether of the same or of a different type.
None of the undertakings, agreements, warranties, covenants and representations
of the Issuer contained in this Agreement or any Note and no Event of Default
under this Agreement shall be deemed to have been suspended or waived by the
Purchaser unless such suspension or waiver is by an instrument in writing signed
by an officer of the Purchaser and directed to the Issuer specifying such
suspension or waiver.
Section 25. Waiver of Jury Trial. The parties hereto waive all right to
trial by jury in any action or proceeding to enforce or defend any rights under
this Agreement or the Notes.
Section 26. Severability. Wherever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
Section 27. Survival. The representations and warranties of the Issuer
and the Purchaser in this Agreement shall survive the execution, delivery and
acceptance hereof by the parties hereto and the closing of the transactions
described herein or related hereto.
Section 28. Matters Relating To The Agent. Each party agrees that the
Agent, in its capacity as such (as distinguished from Banc of America Securities
LLC, in its capacity as Calculation Agent) (i) acts as agent only, (ii) is not
acting as a principal with respect to any Transaction Document and (iii) shall
have no responsibility or liability (including without limitation, by way of
guarantee, endorsement or otherwise) to any party in respect of any Transaction
Document, including without limitation, in respect of the failure of a party to
pay or perform under any Transaction Document. The Issuer hereby agrees that it
will not
25
proceed against the Agent in respect of any obligation owed to it under any
Transaction Document.
Section 29. Judgment Currency. If, for the purpose of obtaining
judgment in any court, it is necessary to convert a sum due hereunder in U.S.
dollars into another currency, the parties hereto agree, to the fullest extent
that they may legally and effectively do so, that the rate of exchange used
shall be that at which in accordance with normal banking procedures the
Purchaser could purchase U.S. dollars with such other currency in New York, New
York, on the business day immediately preceding the day on which final judgment
is given. The obligation of the Guarantor in respect of any sum due to the
Purchaser hereunder in U.S. dollars shall, to the extent permitted by applicable
law, notwithstanding any judgment in a currency other than U.S. dollars, be
discharged only to the extent that on the Business Day following receipt of any
sum adjudged to be so due in the judgment currency the Purchaser may in
accordance with normal banking procedures purchase and transfer U.S. dollars in
the amount originally due to the Purchaser with the judgment currency. If the
amount of U.S. dollars so purchased is less than the sum originally due to the
Purchaser, the Guarantor agrees, as a separate obligation and notwithstanding
any such judgment, to indemnify the Purchaser against the resulting loss; and if
the amount of U.S. dollars so purchased is greater than the sum originally due
to the Purchaser, the Purchaser agrees to repay such excess.
Section 30. Guarantee.
(a) The Guarantor hereby unconditionally guarantees the full and
punctual payment or performance (whether at stated maturity, upon acceleration,
upon exchange or otherwise) of each Guaranteed Obligation. Upon failure by the
Issuer to pay or perform punctually any Guaranteed Obligation, the Guarantor
shall forthwith on demand pay the amount not so paid or make the performance not
so made at the place and in the manner specified in the instrument evidencing
such Guaranteed Obligation.
(b) The obligations of the Guarantor hereunder shall be unconditional
and absolute and, without limiting the generality of the foregoing, shall not be
released, discharged or otherwise affected by:
(i) any extension, renewal, settlement, compromise, waiver or
release in respect of any obligation of the Issuer under the Notes, by
operation of law or otherwise;
(ii) any modification or amendment of or supplement to the
Notes;
(iii) any release, impairment, non-perfection or invalidity of
any direct or indirect security for any obligation of the Issuer under
the Notes;
26
(iv) any change in the limited liability company existence,
structure or ownership of the Issuer, or any insolvency, bankruptcy,
reorganization or other similar proceeding affecting the Issuer or its
assets or any resulting release or discharge of any obligation of the
Issuer contained in the Notes;
(v) the existence of any claim, set-off or other rights which
the Guarantor may have at any time against the Issuer, the Purchaser or
any other entity, whether in connection herewith or with any unrelated
transactions, provided that nothing herein shall prevent the assertion
of any such claim by separate suit or compulsory counterclaim;
(vi) any invalidity or unenforceability relating to or against
the Issuer for any reason of the Notes or any provision of applicable
law or regulation purporting to prohibit the payment by the Issuer of
any amounts payable under the Notes; or
(vii) any other act or omission to act or delay of any kind by
the Issuer, the Purchaser or any other person or any other circumstance
whatsoever which might, but for the provisions of this paragraph,
constitute a legal or equitable discharge of or defense to the
Guarantor's obligations hereunder.
(c) The Guarantor shall be liable under this guarantee only for amounts
aggregating up to the largest amount that would not render its obligations
hereunder subject to avoidance under Section 548 of the United States Bankruptcy
Code or any comparable provision of any other applicable law.
(d) The Guarantor's obligations hereunder shall remain in full force
and effect until all Guaranteed Obligations shall have been paid or performed in
full. If at any time any payment of any Guaranteed Obligation is rescinded or
must be otherwise restored or returned upon the insolvency, bankruptcy or
reorganization of the Guarantor or otherwise, the Guarantor's obligations
hereunder with respect to such payment shall be reinstated as though such
payment had been due but not made at such time.
(e) The Guarantor irrevocably waives acceptance hereof, presentment,
demand, protest and any notice not provided for herein, as well as any
requirement that at any time any action be taken by any person or entity against
the Guarantor, the Issuer or any other person or entity.
(f) Upon making full payment or performance with respect to any
obligation of the Issuer hereunder, the Guarantor shall be subrogated to the
rights of the payee or recipient against the Issuer with respect to such
obligation; provided that the Guarantor shall not enforce any payment by way of
27
subrogation so long as any Guaranteed Obligation remains unpaid or unperformed.
(g) If acceleration of the time for payment or performance of any
Guaranteed Obligation is stayed upon the insolvency, bankruptcy or
reorganization of the Issuer, all such Guaranteed Obligations otherwise subject
to acceleration under the terms of the Notes shall nonetheless be payable or
performable by the Guarantor hereunder forthwith on demand by the Purchaser.
(h) No failure or delay by the Purchaser in exercising any right, power
or privilege under this Guarantee or the Notes shall operate as a waiver thereof
nor shall any single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or privilege.
(i) This Guarantee shall be binding upon the Guarantor and its
successors and assigns, for the benefit of the Purchaser and its successors and
assigns, except that the Guarantor may not transfer or assign any or all of its
rights or obligations hereunder without the prior written consent of the
Purchaser.
28
IN WITNESS WHEREOF, this Agreement has been executed as of the date
first written above.
ISSUER:
FAIRFAX FINANCIAL (US) LLC
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice President
GUARANTOR:
FAIRFAX FINANCIAL HOLDINGS LIMITED
By: /s/ Xxxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice President and
Secretary
PURCHASER:
NMS SERVICES (CAYMAN) INC.
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title:
AGENT:
BANC OF AMERICA SECURITIES LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
-------------------------------
Name: Xxxxxxx X. Xxxxxxxxx
Title:
29
EXHIBIT A
[FORM OF NOTE PURCHASE CONFIRMATION]
NOTE PURCHASE CONFIRMATION
No. __
The purpose of this letter (this "NOTE PURCHASE CONFIRMATION") is to
confirm the terms of the Note to be issued and sold by Fairfax Financial (US)
LLC, a Delaware limited liability company (the "ISSUER") to NMS Services
(Cayman) Inc. (the "PURCHASER") on the Issue Date specified below pursuant to
the Master Note Purchase Agreement (as amended, replaced, restated, extended,
supplemented or otherwise modified from time to time, the "MASTER NOTE PURCHASE
AGREEMENT") dated as of March 3, 2003 among the Issuer, the Purchaser, Fairfax
Financial Holdings Limited (the "GUARANTOR") and Banc of America Securities LLC
(the "AGENT"). Capitalized terms used and not otherwise defined herein shall
have the meanings ascribed to them in the Master Note Purchase Agreement.
This Note Purchase Confirmation constitutes a "Note Purchase
Confirmation" as referred to in the Master Note Purchase Agreement. This Note
Purchase Confirmation supplements, forms a part of, and is subject to, the
Master Note Purchase Agreement. All provisions contained in the Master Note
Purchase Agreement govern this Note Purchase Confirmation except as expressly
modified below.
The terms of the Note to which this Note Purchase Confirmation relates
are as follows:
Principal Amount: USD_____________
Purchase Shares: ______________
Fee: USD_____________
Issue Date: __________ __, 200_
Maturity Date: __________ __, 200_
Interest Rate: __%
Prepaid Interest Amount: USD_____________
Interest Payment Date: __________, __________, __________ and
__________ of each year, commencing with
__________, and ending on the Maturity
Date, or if any such day is not a Business
Day, the first following day that is a
Business Day unless that day falls in
another calendar month, in which case that
date will be the first preceding day that
is a Business Day
Exchange Period: [The period from and including ___________
__, 200_ through and including _________
__, 200_]
Exchange Price: USD__________________
A-2
IN WITNESS WHEREOF, the parties have signed this Confirmation as of
this ___ day of ________, 200_.
ISSUER:
FAIRFAX FINANCIAL (US) LLC
By:___________________________
Name:
Title:
GUARANTOR:
FAIRFAX FINANCIAL HOLDINGS LIMITED
By:___________________________
Name:
Title:
PURCHASER:
NMS SERVICES (CAYMAN) INC.
By:___________________________
Name:
Title:
AGENT:
BANC OF AMERICA SECURITIES LLC
By:___________________________
Name:
Title:
A-3
EXHIBIT B
[FORM OF NOTE]
USD ______ PROMISSORY NOTE
Note No. ____ Issue Date:________ __, 200_
FOR VALUE RECEIVED, Fairfax Financial (US) LLC, a Delaware limited
liability company (the "COMPANY"), hereby promises to pay to the order of NMS
Services (Cayman) Inc. or registered assigns (the "NOTEHOLDER"), on ________ __,
200_, or if any such day is not a Business Day (as defined in the Master Note
Purchase Agreement referred to below), the first following day that is a
Business Day unless that day falls in another calendar month, in which case that
date will be the first preceding day that is a Business Day (the "MATURITY
DATE"), the principal amount of USD (______________________________ U.S.
DOLLARS) under that certain Master Note Purchase Agreement dated as of March 3,
2003, among the Company, NMS Services (Cayman) Inc., Fairfax Financial Holdings
Limited, as Guarantor (the "GUARANTOR") and Banc of America Securities LLC, as
Agent (the "AGENT"), as amended, replaced, restated, extended, supplemented or
otherwise modified from time to time (the "MASTER NOTE PURCHASE AGREEMENT").
The Company promises to pay interest on the principal amount hereof
from the Issue Date stated above until such principal amount is paid in full, at
such interest rates, at such times and in such manner as are specified in the
Master Note Purchase Agreement and the Note Purchase Confirmation referred to
below. If any amount is not paid in full when due hereunder, such unpaid amount
shall bear interest, to be paid upon demand, from the due date thereof until the
date of actual payment (and before as well as after judgment) computed at the
rate set forth in the Master Note Purchase Agreement.
This Note is one of the Notes issued pursuant to a Note Purchase
Confirmation dated as of _______, __, 200_, as amended from time to time (the
"NOTE PURCHASE CONFIRMATION"), under the Master Note Purchase Agreement, and is
entitled to the benefits thereof. This Note is secured by collateral pursuant to
the Pledge Agreement dated as of March 3, 2003 among the Company, the Noteholder
and the Agent, as amended from time to time, until and including the Pledge
Termination Date as defined therein. Upon the occurrence of one or more of the
Events of Default specified in the Master Note Purchase Agreement, all amounts
then remaining unpaid on this Note shall become, or may be declared to be,
immediately due and payable all as provided in the Master Note Purchase
Agreement.
B-1
This Note is entitled to the benefits of the guarantee of the Guarantor
contained in the Master Note Purchase Agreement.
This Note is exchangeable into the shares of common stock of Odyssey Re
Holdings Corp. on the terms set forth in the Master Note Purchase Agreement.
The Company, for itself and its successors and assigns, hereby waives
diligence, presentment, protest and demand and notice of protest, demand,
dishonor and non-payment of this Note. This Note shall be governed by and
construed in accordance with the laws of the State of New York, without giving
effect to the conflict of laws provisions thereof.
COMPANY:
FAIRFAX FINANCIAL (US) LLC
By:___________________________
Name:
Title:
GUARANTOR:
FAIRFAX FINANCIAL HOLDINGS LIMITED
By:___________________________
Name:
Title:
B-2
