10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For Quarter Ended: June 30, 2004

Commission file number: 1-31310

HUB INTERNATIONAL LIMITED

(Exact name of registrant as specified in its Charter)

Ontario, Canada (State or other jurisdiction of incorporation or organization)	36-4412416 (I.R.S. Employer Identification No.)
55 East Jackson Boulevard, Chicago, Illinois (Address of principal executive offices)	60604 (Zip Code)

(877) 402-6601

Registrant’s telephone number, including area code

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 þ          No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)

Yes þ          No o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class

Common Shares Outstanding at August 2, 2004

30,527,779

HUB INTERNATIONAL LIMITED

INDEX

	Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)		3
Consolidated Balance Sheets as of June 30, 2004 and December 31, 2003		3
Consolidated Statements of Earnings for the three months and six months ended June 30, 2004 and 2003		4
Consolidated Statements of Retained Earnings for the six months ended June 30, 2004 and 2003		5
Consolidated Statements of Cash Flows for the three months and six months ended June 30, 2004 and 2003		6
Notes to Interim Consolidated Financial Statements		7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		22
Item 3. Quantitative and Qualitative Disclosures about Market Risk		37
Item 4. Controls and Procedures		37
PART II. OTHER INFORMATION
Item 1. Legal Proceedings		38
Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities		38
Item 4. Submission of Matters to a Vote of Security Holders		38
Item 5. Other Information		40
Item 6. Exhibits and Reports on Form 8-K		41
SIGNATURE		42
EX-10.1
EX-10.2
EX-31.1
EX-31.2
EX-32.1
EX-32.2

  2   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Hub International Limited

Consolidated Balance Sheets

As of June 30, 2004 and December 31, 2003

(in thousands of U.S. dollars)

	2004		2003
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	144,527	$	82,052
Trust cash		57,207		54,534
Accounts and other receivables		174,119		163,728
Income taxes receivable		5,634		6,768
Future income taxes		3,452		2,865
Prepaid expenses		7,911		4,449
Total current assets		392,850		314,396
Goodwill		311,935		305,862
Other intangible assets		46,538		42,903
Property and equipment		23,354		24,181
Future income taxes		6,997		6,458
Other assets		6,784		6,803
Total assets	$	788,458	$	700,603
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	226,556	$	226,168
Income taxes payable		2,520		3,804
Future income taxes		490		114
Current portion long-term debt and capital leases		2,428		3,362
Total current liabilities		231,994		233,448
Long-term debt and capital leases		140,467		75,437
Subordinated convertible debentures		35,000		35,000
Future income taxes		14,883		13,928
Total liabilities		422,344		357,813
Commitments and Contingencies
Shareholders’ equity
Share capital		258,638		254,845
Issuable shares		940		721
Contributed surplus		9,589		4,806
Cumulative translation account		16,420		20,062
Retained earnings		80,527		62,356
Total shareholders’ equity		366,114		342,790
Total liabilities and shareholders’ equity	$	788,458	$	700,603

(the accompanying notes form an integral part of the interim financial statements)

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    3 

Hub International Limited

Consolidated Statements of Earnings

For the three months and six months ended June 30, 2004 and 2003

(in thousands of U.S. dollars, except per share amounts)

(Unaudited)

		Second quarter						First six months
		2004			2003			2004			2003
Revenue
	Commission income	$	76,960		$	69,442		$	138,589		$	123,983
	Contingent commissions and volume overrides		3,038			2,889			18,075			15,266
	Other		2,233			1,824			4,916			3,783
			82,231			74,155			161,580			143,032
Expenses
	Compensation		42,114			39,877			82,751			76,889
	Selling, occupancy and administration		16,086			13,808			31,639			26,914
	Depreciation		1,730			1,517			3,317			2,911
	Interest expense		1,702			1,516			3,362			2,883
	Intangible asset amortization		936			756			1,717			1,557
	(Gain)/loss on disposal of subsidiaries, property, equipment and other assets		(597	)		65			(559	)		9
	Loss on write-off of trademarks		—			—			2,587			—
	(Gain) on put option liability		—			(267	)		—			(240	)
	Non-cash stock based compensation		1,701			1,258			3,315			2,220
			63,672			58,530			128,129			113,143
Net earnings before income taxes			18,559			15,625			33,451			29,889
Provision for income tax expense
	Current		4,992			3,604			11,730			9,265
	Future		1,976			1,912			507			1,611
			6,968			5,516			12,237			10,876
Net earnings		$	11,591		$	10,109		$	21,214		$	19,013
Earnings per share
	Basic	$	0.38		$	0.34		$	0.70		$	0.65
	Diluted	$	0.35		$	0.31		$	0.64		$	0.59
Weighted average shares outstanding — Basic (000’s)			30,189			29,326			30,102			29,326
Weighted average shares outstanding — Diluted (000’s)			34,905			33,930			34,711			33,632

(the accompanying notes form an integral part of the interim financial statements)

  4   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

Hub International Limited

Consolidated Statements of Retained Earnings

For the six months ended June 30, 2004 and 2003

(in thousands of U.S. dollars)

(Unaudited)

	2004			2003
Retained earnings — Beginning of period	$	62,356		$	31,915
Net earnings		21,214			19,013
Dividends		(3,043	)		(3,038	)
Retained earnings — End of period	$	80,527		$	47,890

(the accompanying notes form an integral part of the interim financial statements)

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    5 

Hub International Limited

Consolidated Statements of Cash Flows

For the three months and six months ended June 30, 2004 and 2003

(in thousands of U.S. dollars)

(Unaudited)

		Second quarter						First six months
		2004			2003			2004			2003
OPERATING ACTIVITIES
Net earnings		$	11,591		$	10,109		$	21,214		$	19,013
Items not affecting working capital
	Amortization and depreciation		2,666			2,273			5,034			4,468
	(Gain)/loss on disposal of subsidiaries, property, equipment and other assets		(597	)		65			(559	)		9
	Loss on write-off of trademarks		—			—			2,587			—
	(Gain) on put option liability		—			(267	)		—			(240	)
	Non-cash stock based compensation		1,701			1,258			3,315			2,220
	Future income taxes		1,976			1,912			507			1,611
Non-cash working capital items
	Trust cash		(10,373	)		(6,154	)		30			9,567
	Accounts and other receivables		(60,051	)		(44,801	)		(8,773	)		(6,834	)
	Prepaid expenses		(3,520	)		(2,435	)		(3,366	)		(3,724	)
	Accounts payable and accrued liabilities		67,209			55,105			(2,925	)		4,277
	Other assets		128			(2,420	)		256			(2,320	)
	Income taxes		(1,566	)		(4,662	)		(176	)		(2,844	)
Net cash flows from operating activities			9,164			9,983			17,144			25,203
INVESTING ACTIVITIES
Property and equipment — purchases			(1,465	)		(1,458	)		(2,850	)		(3,036	)
Property and equipment — proceeds on sale			14			20			81			27
Purchase of subsidiaries, net of cash received			(11,621	)		(1,161	)		(11,878	)		(12,385	)
Sale of subsidiaries			3,929			160			3,929			451
Other assets			(302	)		(705	)		255			(721	)
Net cash flows used for investing activities			(9,445	)		(3,144	)		(10,463	)		(15,664	)
FINANCING ACTIVITIES
Long-term debt — advances			65,000			65,000			65,000			65,000
Long-term debt and capital leases  — repayments			(3,680	)		(50,597	)		(4,690	)		(51,313	)
Share capital — issued for cash, net of issue costs			412			—			480			(32	)
Dividends paid			(3,043	)		(3,038	)		(3,043	)		(3,038	)
Net cash flows from financing activities			58,689			11,365			57,747			10,617
Effect of exchange rate changes on cash and cash equivalents			(1,185	)		1,651			(1,953	)		2,280
Change in cash and cash equivalents			57,223			19,855			62,475			22,436
Cash and cash equivalents — Beginning of period			87,304			43,223			82,052			40,642
Cash and cash equivalents — End of period		$	144,527		$	63,078		$	144,527		$	63,078

(the accompanying notes form an integral part of the interim financial statements)

  6   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

Hub International Limited

Notes to Interim Consolidated Financial Statements

For the three months and six months ended June 30, 2004 and 2003 (unaudited) (in thousands of U.S. dollars, except per share amounts or as otherwise indicated)

1.  Nature of Operations

Hub International Limited (the “Company”) is an international insurance brokerage that provides a variety of property and casualty, life and health, employee benefits, investment and risk management products and services. The Company’s shares are listed on both the New York Stock Exchange (NYSE: HBG) and the Toronto Stock Exchange (TSX: HBG).

2.  Summary of Significant Accounting Policies

The interim consolidated financial statements do not include all disclosures required by Canadian generally accepted accounting principles (Canadian GAAP) for annual financial statements and accordingly, should be read in conjunction with the Company’s consolidated financial statements for the year ended December 31, 2003 as set out on pages 39 to 68 of the Company’s 2003 Annual Report on Form 10-K. In the opinion of management, all adjustments (consisting of items of a normal recurring nature) considered necessary for a fair presentation of the accompanying financial statements have been reflected therein. These interim consolidated financial statements of the Company are expressed in United States (U.S.) dollars and have been prepared in accordance with Canadian GAAP using the same accounting principles as were used for the Company’s consolidated financial statements for the year ended December 31, 2003. These principles differ in certain respects from United States generally accepted accounting principles (U.S. GAAP) and, to the extent that they affect the Company, the differences are described in note 13 “Reconciliation to U.S. GAAP.” Certain reclassifications have been made to prior years’ financial statements to conform to the current year presentation. The results of operations are not necessarily indicative of the operating results for the fiscal year or any future period.

3.  Recent Acquisitions

During the second quarter 2004, the Company purchased all of the issued and outstanding membership interests of Bush, Cotton and Scott, LLC, as well as the assets of one other insurance brokerage, both of which were accounted for using the purchase method of accounting. Accordingly, the results of operations and cash flows of the acquired companies have been included in the Company’s consolidated results from their respective acquisition dates.

	Acquisition Date
	April 1, 2004			May 1, 2004
	Bush,
	Cotton & Scott			Other		Total
Current assets	$	4,702		$	—	$	4,702
Current liabilities		(4,803	)		—		(4,803	)
Property, equipment and other assets		96			8		104
Long-term debt and capital leases		(2,826	)		—		(2,826	)
Net assets (liabilities) at fair value	$	(2,831	)	$	8	$	(2,823	)
Consideration
Cash	$	10,368		$	1,177	$	11,545
Payable		1,016			544		1,560
Shares (at market value)		3,463			—		3,463
	$	14,847		$	1,721	$	16,568
Goodwill	$	10,013		$	1,466	$	11,479
Customer relationships		6,891			247		7,138
Non-competition covenants		774			—		774
	$	17,678		$	1,713	$	19,391
Number of shares issued as consideration (000’s)		187			3		190

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    7 

Of the goodwill acquired $11,092 is deductible for tax purposes including $187 associated with contingent consideration relating to prior period acquisitions.

Dispositions

During the second quarter of 2004, the Company sold assets and shares of certain insurance brokerages for approximately $4,699 resulting in a gain of approximately $632.

4.  Intangible Assets

As of June 30, 2004 and December 31, 2003 the gross carrying amount and accumulated amortization of intangible assets other than goodwill were as follows:

		As of June 30, 2004						As of December 31, 2003
		Gross						Gross
		carrying		Accumulated				carrying		Accumulated
		amount		amortization		Total		amount		amortization		Total
Definite life intangible assets:
	Customer relationships		$50,580		$7,130		$43,450		$43,422	$	5,480		$37,942
	Non-competition covenants		759		328		431		476		269		207
	Trademarks		—		—		—		2,587		—		2,587
			51,339		7,458		43,881		46,485		5,749		40,736
Indefinite life intangible assets:
	Non-competition covenants		2,657		—		2,657		2,167		—		2,167
Total			$53,996		$7,458		$46,538		$48,652	$	5,749		$42,903

During the first quarter 2004 the Company adopted a strategic plan to make use of the “Hub” brand throughout the Company. Certain of the Company’s subsidiaries have decided to change their names and as a result the Company recognized a non-cash loss on the write-off of trademarks of $2,587, before income taxes.

Additions to intangible assets during the six months ended June 30, 2004 and 2003 were as follows:

		2004		2003
Definite life intangible assets:
	Customer relationships	$	7,204	$	582
Indefinite life intangible assets:
	Non-competition covenants		781		67
Total		$	7,985	$	649

The Company is unable to estimate the useful life of certain non-competition covenants. These indefinite life intangible assets are reviewed annually for impairment. Once a non-competition covenant is triggered, following the departure of an employee from the Company, the Company’s policy is to amortize the related intangible asset over the period of the contractual obligation.

  8   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

The changes in the carrying amount of goodwill for the six months ended June 30, 2004 and the year ended December 31, 2003, are as follows:

	Operations			Operations
	in Canada			in U.S.			Total
Balance as of December 31, 2002	$	75,386		$	206,326		$	281,712
Goodwill acquired during 2003		535			7,654			8,189
Goodwill disposed during 2003		(478	)		(197	)		(675	)
Cumulative translation adjustment		16,636			—			16,636
Balance as of December 31, 2003		92,079			213,783			305,862
Goodwill acquired during 2004		344			12,115			12,459
Goodwill disposed during 2004		(3,089	)		—			(3,089	)
Cumulative translation adjustment		(3,297	)		—			(3,297	)
Balance as of June 30, 2004	$	86,037		$	225,898		$	311,935

For the three months and six months ended June 30, 2004, and 2003, amortization has been comprised of the following:

	For the three				For the six
	months ended				months ended
	June 30,				June 30,
	2004		2003		2004		2003
Customer relationships	$	893	$	721	$	1,657	$	1,502
Non-competition covenants		43		35		60		55
Total	$	936	$	756	$	1,717	$	1,557

The Company estimates the amortization charges for 2004 through 2008 for all acquisitions consummated to date will be:

	2004		2005		2006		2007		2008
Year ended December 31,
Customer relationships	$	3,438	$	3,553	$	3,553	$	3,553	$	3,553
Non-competition covenants		206		164		80		79		3
Total	$	3,644	$	3,717	$	3,633	$	3,632	$	3,556

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    9 

5.  Debt

Long-term debt and capital leases

	June 30,			December 31,
	2004			2003
Series A Senior Notes, with interest at 5.71% (1)	$	10,000		$	10,000
Series B Senior Notes, with interest at 6.16% (1)		55,000			55,000
Revolving U.S. Dollar LIBOR loan (2)		65,000			—
Term loan, interest only at 10%, due February 2007 (3)		7,500			7,500
Various other notes payable and debt (4)		4,863			5,649
Capital leases (4)		532			650
Long-term debt and capital leases		142,895			78,799
Less current portion		(2,428	)		(3,362	)
	$	140,467		$	75,437

Future repayments of long-term debt and capital leases are as follows:

For the twelve months ended June 30,
2005	$	2,428
2006		1,699
2007		8,183
2008		68,557
2009		14,695
2010 and thereafter		47,333
	$	142,895

(1) Senior Notes — As of June 30, 2004 the Company has $65 million aggregate principal amount of unsecured senior notes outstanding. The senior notes were issued in two series: Series A represents $10 million aggregate principal amount of 5.71% senior notes with interest due semi-annually, and principal of $3,333 due annually, June 15, 2008 through June 15, 2010 and Series B represents $55 million aggregate principal amount of 6.16% senior notes with interest due semi-annually, and principal due of $11,000 due annually June 15, 2009 through June 15, 2013. The senior notes were sold on a private basis in the United States to institutional accredited investors. Net proceeds of the sale of the senior notes were used to pay down $50 million of the Company’s revolving U.S. dollar LIBOR Loan with the balance for general corporate purposes, which may include future acquisitions. The Company incurred approximately $0.7 million in fees and expenses related to the offering of these notes, which were capitalized and are being amortized to expense over the term of the notes. At June 30, 2004, $65 million was outstanding under these senior notes. The Company is in compliance with all financial covenants governing these notes.

On July 15, 2003, the Company entered into an interest rate swap agreement. The effect of the swap is to convert the fixed rate interest payments on the 5.71% senior notes and 6.16% senior notes in amounts of $10 million and $55 million, respectively, in order to ensure that the Company pays a current market interest rate on that portion of its borrowings. The Company accounts for the swap transaction using the synthetic instruments method under which the net interest expense on the swap and associated debt is reported in earnings as if it were a single, synthetic, financial instrument. As of June 30, 2004, the Company estimated the fair value of the swap was $5.5 million, which is not recognized in these financial statements. Accordingly, $5.5 million is the estimated amount that the Company would need to pay to terminate the swap as of June 30, 2004.

(2) Revolving U.S. dollar LIBOR loan — This facility was renegotiated in April 2004. Under the new terms, the unsecured facility totals $75 million, bears interest at a floating rate of prime plus 1% or 112.5 basis points above LIBOR, which was 1.37% and 1.12% at June 30, 2004 and December 31, 2003, respectively. The facility is

  10   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

	available on a revolving basis for one year and expires on April 22, 2005 however if the revolving period is not extended, the Company may convert the outstanding balance under the facility to a three year non- revolving term loan repayable at the end of three years with an interest rate of 137.5 basis points above the Canadian dollar interest swap rate. An annual commitment fee of 20 basis points is assessed on the unused balance. Borrowings under this facility totaled $65 million and $NIL at June 30, 2004 and December 31, 2003, respectively. The Company is in compliance with all financial covenants governing this facility.
(3)	This term loan is from an insurance carrier. The terms of the loan provide for an incentive arrangement whereby a credit can be earned that will reduce annual interest payments under the loan (based on target premiums placed with the carrier) and reduce the principal repayment due in February 2007 (based on both target premiums placed with the carrier as well as the loss ratio on premiums placed with the carrier). Under this incentive arrangement both the annual interest payments as well as the principal payment can be reduced to zero. Credits earned for the year ended December 31, 2003 reduced interest payments to zero from $750. It is not yet determinable if a credit has been earned for 2004. Interest on this loan totaled $188 and $375 for the three months and six months ended June 30, 2004 and 2003, respectively.
(4)	Certain property and equipment have been pledged as collateral in amounts not less than the outstanding balance of the loan at June 30, 2004 and December 31, 2003, respectively.

Demand U.S. dollar base rate loan

The Company has an undrawn $9 million facility which bears interest at the bank’s U.S. rate plus 50 basis points. Borrowings on the facility are repayable on demand.

Subordinated convertible debentures

In connection with the acquisition of Kaye Group Inc. (Kaye) on June 28, 2001, the Company issued $35 million aggregate principal amount, 8.5% convertible subordinated debentures (the Fairfax notes) due June 28, 2007 to certain subsidiaries of Fairfax Financial Holdings Limited (Fairfax). The Fairfax notes are convertible by the holders at any time into the Company’s common shares at C$17.00 per share. Beginning June 28, 2006, the Company may require conversion of the Fairfax notes into common shares at C$17.00 per share if, at any time, the weighted average closing price of the Company’s common shares on the TSX for twenty consecutive trading days equals or exceeds C$19.00 per share. Fairfax owns approximately 26% of the Company’s outstanding common shares as of June 30, 2004. If converted, Fairfax would have owned approximately 33% of the Company’s outstanding common shares as of June 30, 2004.

6.  Commitments and Contingencies

(a)

In connection with the Company’s executive share purchase plan, under certain circumstances the Company may be obligated to purchase loans for officers and employees from a Canadian chartered bank totaling $4,103 and $4,513 as of June 30, 2004 and December 31, 2003, respectively, to assist in purchasing common shares of the Company. As collateral, the employees have pledged 456,000 and 478,000 common shares as of June 30, 2004 and December 31, 2003, respectively, which have a market value of $8,688 and $8,105 as of June 30, 2004 and December 31, 2003, respectively. Interest on the loans in the amount of $45 and $80 for the three months ended June 30, 2004 and 2003, respectively, and $96 and $148 for the six months ended June 30, 2004 and 2003, respectively, was paid by the Company and is included in compensation expense.

(b)

In connection with the acquisition of Hooper Hayes and Associates, Inc., in 2002 the Company issued 196,000 shares (the “Retractable Shares”) that are being held in escrow subject to release over a period of three years upon the satisfaction of certain performance targets. As of June 30, 2004, 63,000 shares have been released from escrow.

In connection with various other acquisitions completed through June 30, 2004, the Company may be obligated to pay contingent consideration of approximately $8.8 million cash and $3.1 million in common shares based upon management’s best estimate of acquired brokerages achieving certain targets. The contingent payments

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    11 

are payable on various dates through April 2009 according to the terms and conditions of each purchase agreement. Any additional consideration will be recorded as an adjustment to goodwill once the contingency is resolved. In connection with contingent consideration earned as at June 30, 2004, the financial statements reflect a liability to pay cash of $1.0 million and to issue common shares valued at approximately $0.9 million as of June 30, 2004.

(c)

In April 2004, Kaye Insurance Associates, Inc. (“Kaye Insurance”), a subsidiary of the Company, received a subpoena from the Office of the Attorney General of the State of New York seeking information regarding certain compensation agreements between insurance brokers and insurance companies. The New York Attorney General subpoenaed information on such compensation agreements from several other major insurance brokers as well. Such compensation agreements, also known as contingent agreements, between insurance companies and brokers are a long-standing and common practice within the insurance industry. Kaye Insurance has a practice of disclosing such agreements to its clients, including on its invoices to clients and on its web site. In addition, the Company discloses the arrangements in its public filings. The Company is fully cooperating with this inquiry. While it is not possible to predict the outcome of this investigation, if such compensation agreements were to be restricted or no longer permitted, the Company’s revenue and profitability may be materially adversely affected.

(d)

In the ordinary course of business, the Company and its subsidiaries are subject to various claims and lawsuits consisting primarily of alleged errors and omissions in connection with the placement of insurance. In the opinion of management, the ultimate resolution of all asserted and potential claims and lawsuits will not have a material adverse effect on the consolidated financial position or results of operations of the Company.

7.  Shareholders’ Equity

Share capital

At June 30, 2004 and December 31, 2003, there were an unlimited number of non-voting, preferred shares authorized, issuable in series on such terms and conditions as set by the Board of Directors, of which no shares were issued. At June 30, 2004 and December 31, 2003, there were an unlimited number of common shares authorized, of which 30,358 and 30,143 were issued and outstanding as at June 30, 2004 and December 31, 2003, respectively.

	Common Shares
	Outstanding
	(000’s)			Amount
Balance, December 31, 2003		30,143		$	254,845
Shares issued		137			2,524
Repurchases of executive share purchase plan shares, net of loan cancellations		1			21
Shares issued for contingent consideration		45			765
Cancellation of shares		(2	)		(26	)
Stock options exercised		32			482
Restricted share units exercised		2			27
Balance, June 30, 2004		30,358		$	258,638

  12   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

Issuable shares

	Common Shares
	(000’s)			Amount
Balance, December 31, 2003		43		$	721
Issued		(45	)		(765	)
Issuable for contingent consideration		53			984
Balance, June 30, 2004		51		$	940

Contributed surplus

	Amount
Balance, December 31, 2003	$	4,806
Non-cash stock based compensation		4,693
Other		90
Balance, June 30, 2004	$	9,589

Cumulative translation account

	Amount
Balance December 31, 2003	$	20,062
Translation of self-sustaining foreign operations		(3,671	)
Translation of debt financing of self-sustaining foreign operations		29
Balance, June 30, 2004	$	16,420

8.  Equity Incentive Plan

A summary of the stock option activity and related information for the six months ended June 30, 2004 consists of the following:

	Number			Weighted-Average
	(000’s)			Exercise Price
Balance, December 31, 2003		1,498		$	15.64
Granted		—		$	—
Exercised		(32	)	$	15.02
Forfeited		(3	)	$	15.67
Balance, June 30, 2004		1,463		$	15.49

The following table summarizes information about the stock options outstanding at:

June 30, 2004

December 31, 2003

Number

Weighted-average

Number

Number

Weighted-average

Number

outstanding

remaining

exercisable

outstanding

remaining

exercisable

(000’s)

contractual life

(000’s)

(000’s)

contractual life

(000’s)

Exercise price

$15.67

1,207

4.96 years

814

1,230

5.43 years

417

$13.79

256

5.67 years

85

268

6.08 years

6

1,463

5.05 years

899

1,498

5.55 years

423

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    13 

Non-cash stock based compensation related to stock options of $1,701 and $1,258 for the three months ended June 30, 2004 and 2003, respectively, and $3,315 and $2,220 for the six months ended June 30, 2004 and 2003, respectively, was expensed with offsetting credits to contributed surplus. The Company recognizes the fair value of non-cash stock based compensation as an expense over the period in which entitlement to the compensation vests.

Non-cash stock based compensation for the three months and six months ended June 30, 2004 and 2003 is comprised of the following:

		For the three				For the six
		months ended				months ended
		June 30,				June 30,
		2004		2003		2004		2003
Non-cash stock based compensation:
	Stock options granted June 2002	$	510	$	555	$	1,001	$	1,064
	Stock options granted February 2003		128		110		230		214
	Stock based compensation granted for 2003 bonuses		634		381		1,267		730
	Restricted share units		429		212		817		212
		$	1,701	$	1,258	$	3,315	$	2,220

  14   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

9.  Earnings Per Share

Basic earnings per share, excluding the dilutive effect of common share equivalents, is calculated by dividing net earnings by the weighted average number of common shares outstanding for the period. Diluted earnings per share is calculated using the treasury stock method and includes the effects of all potentially dilutive securities. Certain stock options under the equity incentive plan in which the average market price exceeds the exercise price of the Company’s common shares for the period that the options were outstanding were dilutive for the six months ended June 30, 2004 and were included in the calculation of diluted earnings per share. Earnings per common share have been calculated as follows:

		For the three				For the six
		months ended				months ended
		June 30,				June 30,
		2004		2003		2004		2003
Net earnings (numerator)		$	11,591	$	10,109	$	21,214	$	19,013
Effect of dilutive securities:
	Interest on 8.5% subordinated convertible debentures (net of income tax)		475		472		950		943
	Dividends in lieu of restricted share units		65		40		65		40
Net earnings plus assumed conversions (numerator)		$	12,131	$	10,621	$	22,229	$	19,996
Weighted average shares outstanding — Basic (denominator)			30,189		29,326		30,102		29,326
Effect of dilutive securities:
	8.5% subordinated convertible debentures		2,731		3,040		2,705		3,210
	Stock options		1,153		28		1,142		18
	Put options		—		730		—		730
	Restricted share units		649		610		615		152
	Retractable shares		133		196		133		196
	Issuable shares		50		—		14		—
Weighted average shares outstanding — Diluted (denominator)			34,905		33,930		34,711		33,632
Earnings per common share:
	Basic	$	0.38	$	0.34	$	0.70	$	0.65
	Diluted	$	0.35	$	0.31	$	0.64	$	0.59

10. Interest and Income Taxes Paid

Interest and income taxes paid for the three months and six months ended June 30, 2004 and 2003 were:

	For the three				For the six
	months ended				months ended
	June 30,				June 30,
	2004		2003		2004		2003
Interest paid	$	2,844	$	523	$	3,005	$	1,055
Income taxes paid	$	6,464	$	7,328	$	11,845	$	11,772

11. Segmented Information

The Company is an international insurance brokerage, which provides a variety of property, casualty, life and health, employee benefits, investment and risk management products and services. In addition to its Corporate Operations, the Company has identified two operating segments within its insurance brokerage business: Canadian Operations and U.S. Operations. Corporate Operations consist primarily of investment income, unallocated administrative costs, interest expense and the income tax expense or benefit which is not allocated to the Company’s operating

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    15 

segments. The elimination of intra-segment revenue relates to intra-company interest charges, management fees and dividends.

Geographic revenue is determined based upon the functional currency of the various subsidiaries. Financial information by operating and geographic segment is as follows:

	For the three months ended June 30,
	2004									2003
	Canada			U.S.			Consolidated			Canada			U.S.			Consolidated
Revenue
Brokerage	$	31,455		$	50,734		$	82,189		$	29,541		$	44,728		$	74,269
Corporate		5,152			475			5,627			4,891			477			5,368
Elimination of intra-segment revenue		(5,078	)		(507	)		(5,585	)		(4,949	)		(533	)		(5,482	)
	$	31,529		$	50,702		$	82,231		$	29,483		$	44,672		$	74,155
Net earnings (loss) before income taxes
Brokerage	$	8,003		$	12,536		$	20,539		$	5,656		$	11,200		$	16,856
Corporate		492			(2,472	)		(1,980	)		1,812			(3,043	)		(1,231	)
	$	8,495		$	10,064		$	18,559		$	7,468		$	8,157		$	15,625
Income tax expense (benefit) — current
Brokerage	$	2,848		$	3,298		$	6,146		$	2,384		$	2,347		$	4,731
Corporate		(180	)		(974	)		(1,154	)		(82	)		(1,045	)		(1,127	)
	$	2,668		$	2,324		$	4,992		$	2,302		$	1,302		$	3,604
Income tax expense (benefit) — future
Brokerage	$	(357	)	$	2,173		$	1,816		$	(356	)	$	2,036		$	1,680
Corporate		150			10			160			230			2			232
	$	(207	)	$	2,183		$	1,976		$	(126	)	$	2,038		$	1,912
Net earnings (loss)
Brokerage	$	5,512		$	7,065		$	12,577		$	3,628		$	6,817		$	10,445
Corporate		522			(1,508	)		(986	)		1,664			(2,000	)		(336	)
	$	6,034		$	5,557		$	11,591		$	5,292		$	4,817		$	10,109
Amortization of intangible assets	$	28		$	908		$	936		$	17		$	739		$	756
Additions to property and equipment	$	434		$	1,123		$	1,557		$	610		$	932		$	1,542
Depreciation	$	628		$	1,102		$	1,730		$	547		$	970		$	1,517
Interest income	$	204		$	192		$	396		$	178		$	173		$	351
Interest expense	$	1,441		$	261		$	1,702		$	1,215		$	301		$	1,516

  16   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

	For the six months ended June 30,
	2004									2003
	Canada			U.S.			Consolidated			Canada			U.S.			Consolidated
Revenue
Brokerage	$	61,924		$	99,510		$	161,434		$	53,105		$	90,020		$	143,125
Corporate		10,636			1,028			11,664			10,541			1,012			11,553
Elimination of intra-segment revenue		(10,466	)		(1,052	)		(11,518	)		(10,565	)		(1,081	)		(11,646	)
	$	62,094		$	99,486		$	161,580		$	53,081		$	89,951		$	143,032
Net earnings (loss) before income taxes
Brokerage	$	14,380		$	23,529		$	37,909		$	7,605		$	24,195		$	31,800
Corporate		1,706			(6,164	)		(4,458	)		4,324			(6,235	)		(1,911	)
	$	16,086		$	17,365		$	33,451		$	11,929		$	17,960		$	29,889
Income tax expense (benefit) — current
Brokerage	$	5,125		$	9,123		$	14,248		$	3,052		$	8,118		$	11,170
Corporate		(113	)		(2,405	)		(2,518	)		382			(2,287	)		(1,905	)
	$	5,012		$	6,718		$	11,730		$	3,434		$	5,831		$	9,265
Income tax expense (benefit) — future
Brokerage	$	(404	)	$	811		$	407		$	(203	)	$	1,476		$	1,273
Corporate		89			11			100			211			127			338
	$	(315	)	$	822		$	507		$	8		$	1,603		$	1,611
Net earnings (loss)
Brokerage	$	9,659		$	13,595		$	23,254		$	4,756		$	14,601		$	19,357
Corporate		1,730			(3,770	)		(2,040	)		3,731			(4,075	)		(344	)
	$	11,389		$	9,825		$	21,214		$	8,487		$	10,526		$	19,013
Amortization of intangible assets	$	55		$	1,662		$	1,717		$	28		$	1,529		$	1,557
Additions to property and equipment	$	947		$	2,006		$	2,953		$	1,610		$	1,206		$	2,816
Depreciation	$	1,270		$	2,047		$	3,317		$	1,029		$	1,882		$	2,911
Interest income	$	501		$	357		$	858		$	364		$	415		$	779
Interest expense	$	2,834		$	528		$	3,362		$	2,274		$	609		$	2,883

	As of June 30, 2004 and December 31, 2003
	2004						2003
	Canada		U.S.		Consolidated		Canada		U.S.		Consolidated
Identifiable assets
Brokerage	$	171,058	$	477,244	$	648,302	$	176,653	$	442,517	$	619,170
Corporate		39,387		100,769		140,156		65,316		16,117		81,433
	$	210,445	$	578,013	$	788,458	$	241,969	$	458,634	$	700,603

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    17 

12. Related Party Transactions

In the three months and six months ended June 30, 2004 and 2003, respectively, the Company had transactions with and recorded revenue from the following related parties:

	For the three				For the six
	months ended				months ended
	June 30,				June 30,
	2004		2003		2004		2003
Northbridge Financial Corporation	$	6,493	$	3,203	$	10,951	$	6,622
Crum & Forster Holdings, Inc.		176		614		359		831
Fairfax Inc.		1,158		2,169		2,590		4,263
		7,827		5,986		13,900		11,716
Old Lyme Insurance Company, Ltd (“OLIC”)		231		—		231		—
	$	8,058	$	5,986	$	14,131	$	11,716

The Company had accounts receivable and accounts payable balances with the above related parties in the amounts of $3,579 and $16,420 respectively, at June 30, 2004 and $3,185 and $17,999 respectively, at December 31, 2003. All revenue and related accounts receivable and accounts payable are the result of transactions in the normal course of business. The companies listed above, except for OLIC, are related through common ownership by Fairfax, which owns approximately 26% of the Company’s common shares as of June 30, 2004. Old Lyme Insurance Group, Ltd, a company owned primarily by a group of Hub employees, purchased OLIC from Fairfax during the second quarter 2004.

As of June 30, 2004 and December 31, 2003 subordinated convertible debentures of $35,000 were held by certain subsidiaries of Fairfax.

During the three months and six months ended June 30, 2004 and 2003, the Company incurred expenses related to rental of premises from related parties in the amount of $446 and $876 for 2004 and $510 and $996 for the respective periods in 2003. At June 30, 2004 and December 31, 2003 the Company also had receivables due from related parties in the amount of $2,777 and $3,530, respectively, of which the majority were loans to employees to enable them to purchase the Company’s common shares. Of these accounts receivable, as of June 30, 2004 and December 31, 2003, $1,834 and $1,918, respectively, were related to Company loans to employees to purchase shares under the executive share purchase plan. As collateral, the employees have pledged 146,000 and 153,000 common shares as of June 30, 2004 and December 31, 2003, respectively, which have a market value of $2,785 and $2,590 as of June 30, 2004 and December 31, 2003, respectively.

13. Reconciliation to U.S. GAAP

The consolidated financial statements have been prepared in accordance with Canadian GAAP, which differs in certain respects from U.S. GAAP.

  18   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

Net earnings and comprehensive income

The table below presents the differences between Canadian and U.S. GAAP affecting net earnings and comprehensive income for the three months and six months ended June 30, 2004 and 2003:

		For the three						For the six
		months ended						months ended
		June 30,						June 30,
		2004			2003			2004			2003
Net earnings for the period based on Canadian GAAP		$	11,591		$	10,109		$	21,214		$	19,013
Adjustment to put option liability (2)			—			(234	)		—			(275	)
Net earnings for the period based on U.S. GAAP (3)		$	11,591		$	9,875		$	21,214		$	18,738
Other comprehensive income: (4)
	Unrealized gain (loss), net of tax of $(17) — Q2/04, $(32) — Q2/03, $(40) — Q2/04 YTD, $22 — Q2/03 YTD		27			50			62			(35	)
	Reclassification adjustment, net of tax of $NIL — Q2/04, $49 — Q2/03, $NIL — Q2/04 YTD, $49 — Q2/03 YTD		—			(78	)		—			(78	)
	Foreign currency translation adjustment		(2,350	)		9,135			(3,642	)		16,533
Comprehensive income based on U.S. GAAP (4)		$	9,268		$	18,982		$	17,634		$	35,158
Basic earnings per share based on U.S. GAAP		$	0.38		$	0.34		$	0.70		$	0.64
Diluted earnings per share based on U.S. GAAP		$	0.35		$	0.30		$	0.64		$	0.59

Shareholders’ equity

The table below sets out the differences between Canadian GAAP and U.S. GAAP that affect shareholders’ equity at June 30, 2004 and December 31, 2003:

		June 30,			December 31,
		2004			2003
Shareholders’ equity based on Canadian GAAP		$	366,114		$	342,790
Adjustment to investment held for sale (1)			(1,716	)		(1,716	)
Accumulated other comprehensive income:
	Unrealized gain net of tax of $(101) — 2004, $(56) — 2003		159			90
Shareholders’ equity based on U.S. GAAP (3)		$	364,557		$	341,164

(1) Under Canadian GAAP, an investment held for sale is recorded at its cost. No further adjustments are made to the carrying value of the investment until it is sold at which time a gain or loss is recorded equal to the difference between the sale proceeds and its carrying value. Interest on debt financing the purchase of an investment is charged to income as accrued.

Under U.S. GAAP, an investment held for sale is recorded at its fair market value. The carrying value of the investment is adjusted for increases in fair value due to changes in its U.S. GAAP net asset value and interest accretion. Interest on debt financing the purchase of an investment is debited to its carrying value and does not impact earnings. The difference between the carrying value of the investment and the sale proceeds is reflected as an adjustment to goodwill with no gain or loss recorded in income.

The adjustment to shareholders’ equity of $1,716 above reflects the differences described above related to the Company’s investment and subsequent sale of certain insurance companies acquired as part of the 2001 acquisition of Kaye Group Inc.

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    19 

(2) Under Canadian GAAP, the fair value of the put options (determined using the Black-Scholes model) issued in connection with the Flanagan acquisition on May 31, 2001 was allocated to equity instruments on the balance sheet. The balance of the purchase price was allocated to debt. Changes in the value of the put options in periods subsequent to the acquisition date are included in earnings. Under U.S. GAAP prior to July 1, 2003, the fair value of the share consideration and the attached put options was initially recorded in equity and the redemption value of the shares to which the put options are attached was reclassified as mezzanine equity outside of shareholders’ equity as a result of the put options granted on those shares to certain of the selling shareholders. Only July 1, 2003, we adopted Statement of Financial Accounting Standards (SFAS) No. 150, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity. This Statement requires that an issuer classify financial instruments meeting certain criteria as liabilities (or assets in some circumstances) rather than equity. As a result of the adoption of this new standard the Company changed its accounting policy with respect to the financial instruments issued in connection with the Flanagan acquisition. Effective July 1, 2003, the Company remeasured the fair value of the put options (using the Black-Scholes model) and classified this amount as liability. Amounts previously classified as mezzanine equity were reclassified as shareholders’ equity. The difference between the estimated fair value of the put options as at July 1, 2003 and May 31, 2001 was reported as a cumulative adjustment to net earnings under U.S. GAAP. Comparative financial statements were not restated. Under U.S. GAAP, changes in the estimated fair value of the put options are included in earnings.

Also under U.S. GAAP, the fair value of the put options at the date of issuance was also recorded as a debit and credit to shareholders’ equity, representing an unearned compensation expense, as the put options require the selling shareholders to remain employed by the Company in order to be able to exercise the put options. Compensation expense was recognized using the straight-line method over the period from the issue date to the exercise date.

As part of the negotiations of contingent consideration the former owners of certain 2001 acquisitions agreed to relinquish their rights to put options on 730,000 common shares at December 31, 2003 and on 1,423,000 common shares at December 31, 2002. Accordingly at June 30, 2004 no put options were outstanding on our common shares.

(3) The condensed consolidated statements of earnings and cash flows for the three months and six months ended June 30, 2004 and 2003 and the condensed consolidated balance sheets as at June 30, 2004 and December 31, 2003 under U.S. GAAP are as follows:

	For the three						For the six
	months ended						months ended
	June 30,						June 30,
	2004			2003			2004			2003
Condensed consolidated statements of earnings:
Revenue	$	82,231		$	74,155		$	161,580		$	143,032
Net earnings before income taxes	$	18,558		$	15,293		$	33,450		$	29,525
Net earnings	$	11,591		$	9,875		$	21,214		$	18,738
Condensed consolidated statements of cash flows:
Cash provided by operating activities	$	9,164		$	9,988		$	17,144		$	25,203
Cash used in investing activities	$	(9,445	)	$	(3,144	)	$	(10,463	)	$	(15,664	)
Cash provided by financing activities	$	58,689		$	11,360		$	57,747		$	10,617
Effect of exchange rate changes on cash and cash equivalents	$	(1,185	)	$	1,651		$	(1,953	)	$	2,280

  20   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

	June 30,		December 31,
	2004		2003
Condensed consolidated balance sheets:
Total current assets	$	392,850	$	314,396
Total assets (5)	$	781,487	$	696,440
Total current liabilities	$	231,994	$	233,448
Total liabilities (5)	$	416,930	$	355,276
Total shareholders’ equity	$	364,557	$	341,164

(4)

Under U.S. GAAP, comprehensive income is measured in accordance with SFAS No. 130, Reporting Comprehensive Income. This standard defines comprehensive income as all changes in equity other than those resulting from investments by owners and distributions to owners and includes the change in unrealized gains (losses) on debt and equity securities and foreign currency translation adjustments. Under Canadian GAAP unrealized gains and losses (arising from a temporary decline in value) on equity securities are not recorded and foreign currency translation adjustments are presented as movements in the cumulative translation account. Certain disclosures required by SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, have not been included as such disclosures related to the Company’s investments in debt and equity securities are immaterial to the overall financial statement presentation.

(5)

Under Canadian GAAP, the Company accounts for the interest rate swap transaction which converted fixed rate interest payments of 5.71% and 6.16% on the Senior Notes of $10 million and $55 million, respectively, using the synthetic instruments method. Under this method, the Company reports in earnings the net interest expense on the swap and associated debt as if it were a single, synthetic, financial instrument. The fair value of the swap, estimated at $5.5 million, is not recognized in the Company’s Canadian GAAP financial statements. Under US GAAP, the Company has designated the swap transaction as a hedge of changes in the fair value of its fixed rate debt caused by changes in interest rates. Under SFAS 133, Accounting for Derivative Instruments and Hedging Activities, the Company records the swap at its fair value. Changes in fair value of the swap are reported in earnings. Changes in the fair value of the debt being hedged which are attributable to changes in interest rates are recognized in earnings by adjustment of the carrying amount of the debt.

14. Subsequent Event

On July 1, 2004 the Company purchased Talbot Financial Corporation, (“Talbot”) based in New Mexico at a cost of $90 million in cash. The Company purchased all of the common shares of Satellite Acquisition Corporation, (“Satellite”) a corporation formed by senior management at Talbot. In turn, Satellite purchased 100% of Talbot from Safeco Corporation for $90 million in cash. The Company will purchase Talbot management’s special shares of Satellite over the next three years, using a combination of both restricted and unrestricted common shares of the Company. Payments will be made on September 30, 2005, March 31, 2006 and March 31, 2007 based upon Talbot’s earnings for the 12 month periods ending December 31, 2004, 2005 and 2006, respectively. The contingent payments to management will be recorded by the Company as a charge to earnings in the form of non-cash stock based compensation expense over the period in which the payments are earned. Based on Talbot’s pro forma financial performance through the first half of 2004 and further improvements anticipated through 2006, the Company anticipates earnout payments in the $45-$50 million range.

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    21 

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with our unaudited consolidated financial statements and accompanying notes included elsewhere in this report. Certain information contained in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from the results discussed in the forward-looking statements because of various factors, including those discussed below and elsewhere in this Form 10-Q. Reference to “Hub”, “we”, “us”, “our” and the “registrant” refer to Hub International Limited and its subsidiaries, unless otherwise expressly stated. Unless otherwise indicated, all dollar amounts are expressed in, and the term “dollars” and the symbol “$” refer to, U.S. dollars. The term “Canadian dollars” and the symbol “C$” refer to Canadian dollars. Our financial statements are prepared in accordance with Canadian generally accepted accounting principles (Canadian GAAP). These principles differ in certain respects from United States generally accepted accounting principles (U.S. GAAP) and to the extent that they affect us are described in Note 13 to our unaudited consolidated financial statements.

Overview

Hub is a leading North American insurance brokerage that has grown rapidly since its formation in 1998 through mergers, acquisitions and organic growth. We provide a broad array of property and casualty, life and health, employee benefits, investment and risk management products and services through offices located in the United States and Canada. We are pursuing a growth strategy that includes expansion of our geographic footprint across the United States and deeper penetration of the insurance brokerage market in both the United States and Canada. Both acquisitions and internal growth are core components of our strategic plan for revenue expansion.

We anticipate that increases in revenue, higher revenue per employee, expense control and more advantageous commission arrangements with insurance companies will be instrumental in our margin expansion efforts.

As of June 30, 2004, our operations included 11 regional “hub” brokerages — six in the United States (including Bush, Cotton & Scott, LLC, based in Washington, acquired in April 2004) and five in Canada — and more than 150 offices staffed by approximately 2,500 people. Our strategic plan calls for the addition of approximately nine additional U.S. hubs to extend our geographic footprint. Brokerages large enough to be considered hubs will generally have annual revenue in excess of $10 million. In addition to larger, “hub” acquisitions by the parent corporation, each regional hub is tasked with pursuing smaller, fold-in acquisitions that either expand its geographic penetration or add new specialization or expertise to the regional operation.

In accordance with our strategic plan, on July 1, 2004 we purchased Talbot Financial Corporation, (“Talbot”) based in New Mexico at cost of $90 million in cash. We purchased all of the common shares of Satellite Acquisition Corporation, (“Satellite”) a corporation formed by senior management at Talbot. In turn, Satellite purchased 100% of Talbot from Safeco Corporation for $90 million in cash. We will purchase Talbot management’s special shares of Satellite over the next three years, using a combination of both our restricted and unrestricted common shares. Payments will be made on September 30, 2005, March 31, 2006 and March 31, 2007 based upon Talbot’s earnings for the 12 month period ending December 31, 2004, 2005 and 2006, respectively. The contingent payments to management will be recorded by us as a charge to earnings in the form of non-cash stock based compensation expense over the period in which the payments are earned. Based on Talbot’s pro forma financial performance through the first half of 2004 and further improvements anticipated through 2006, we anticipate earnout payments in the $45-$50 million range.

We generally acquire larger “hub” brokerages for a combination of cash and shares. Although there are variations in the purchase terms for each hub, our goal is to pay 30% - 70% of the “hub” purchase price in our common shares, while setting escrow periods of up to 10 years for the sellers to hold these shares. We believe the use of escrowed stock in major acquisitions creates increased alignment of interests between senior managers and the public shareholders of the corporation. We have paid all cash for the acquisition of certain brokerages, and may pay an all cash purchase price for brokerages in the future. As of June 30, 2004, senior managers of the company and its hubs owned approximately 2,195,911 shares, or 6.6%, of shares outstanding, while all employees as a group held approximately 8,260,931 shares, or 24.8%, of total shares outstanding.

  22   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

We have acquired 97 brokerages in Canada and the United States, with substantially all of our large acquisitions focused in the United States over the past four years. Accordingly, our revenue base has shifted increasingly to the United States. United States revenue has grown to 62% of our total in the second quarter 2004 from 13% in the second quarter 2000, reflecting primarily acquisition growth but also organic growth. Organic growth is similar to the same-store-sales calculation used by retailers. It includes revenue growth from operations included in our financial statements for at least 12 months. Because we apply the purchase method of accounting for acquisitions, acquired brokerages’ financial results are included only from the date of acquisition.

We have a diverse mix of products, services, insurer relationships and distribution channels, and as a result, our revenue and profitability levels are not usually highly susceptible to major changes related to a single product or service. However, general economic trends may influence both overall insurance rates, commissions and availability or costs of individual types of coverage, which in turn may affect our revenue and profitability levels.

During the 1990s, for example, insurance rates were generally considered low, or “soft,” as insurance companies sought to maximize the flow of premium dollars that they could invest profitably in a rising stock market and in other investments. Beginning in 2000, as return on investment began to shrink, insurance rates began to rise, or “harden,” at a pace that accelerated rapidly after the terrorist attacks of September 11, 2001. During the two years after September 11, 2001, premium rates remained firm for most types of coverage, rising 10% to 15% per year in many cases. During the latter part of 2003, the Canadian market remained firm, but the U.S. market experienced some softening of premium rates for property and casualty coverage. During the first six months of 2004 Canadian and U.S. markets both softened. However, rates for certain types of coverage continued to experience increases. Looking toward the remainder of 2004, we anticipate some continued softening in the U.S. and Canadian markets as the year progresses.

For us, as for other brokers, rising rates can present both positive and negative effects. Rising premiums usually yield stronger commission levels, if the insurance buyer maintains its coverage levels. However, many insurance buyers will respond to rising rates by reducing total coverage, often by raising deductibles, reducing limits of coverage, or by leaving some risks uninsured. Conversely, softening premium rates typically yield lower commissions, that may, however, be offset if the insurance buyer increases coverage levels. In addition, a weak economic environment often leads to lower sales and employee headcounts at client companies, leading in turn to reduced demand for employee benefits, liability and other types of coverage tied to business activity levels. Our ability to achieve organic revenue growth is not solely dependent on rising or declining rates, but results from a more complex mixture of general economic growth, access to coverage from insurers and marketing/ sales expertise.

Our total revenue increased $8.1 million, or 11%, to $82.2 million for the quarter. Of this increase, $3.8 million was attributable to acquisitions and $4.3 million was attributable to organic growth. Of our total organic growth of 6%, one percentage point resulted from the strengthening of the Canadian dollar in the second quarter 2004. During the second quarter of 2004, we acquired two insurance brokerages, including Bush, Cotton & Scott, LLC. Total annual revenue of these brokerages for 2003 was $9.7 million.

Results of Operations

Three months ended June 30, 2004 compared with three months ended June 30, 2003

Revenue

We achieved growth in revenue and profitability in the second quarter 2004. We benefited from strong organic growth rates at most hubs and contributions from brokerages acquired in 2003. As a result of these and other factors, we reported an 11% revenue increase to $82.2 million in the second quarter 2004, while net earnings increased 15% to $11.6 million from $10.1 million. Diluted earnings per share increased 13% to $0.35 from $0.31.

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    23 

The table below shows a breakdown of our revenue by segment and type for the three months ended June 30, 2004 including organic growth:

	Revenue
	Second
	Quarter									Adjustment
										for
(in thousands of U.S. dollars,					Total Net			Total Net		(Acquisitions)			Organic			Organic
except percentages)	2004		2003		Change($)			Growth(%)		and Disposals			Growth($)			Growth(%)
Total
Commission Income	$	76,960	$	69,442	$	7,518			11%	$	(3,418	)	$	4,100			6%
Contingent Commissions and Volume Overrides		3,038		2,889		149			5%		(64	)		85			3%
Other Income		2,233		1,824		409			22%		(299	)		110			6%
Total	$	82,231	$	74,155	$	8,076			11%	$	(3,781	)	$	4,295			6%
U.S.
Commission Income	$	46,843	$	41,307	$	5,536			13%	$	(3,892	)	$	1,644			4%
Contingent Commissions and Volume Overrides		2,189		2,195		(6	)		—%		(64	)		(70	)		(3)%
Other Income		1,670		1,170		500			43%		(318	)		182			16%
Total	$	50,702	$	44,672	$	6,030			14%	$	(4,274	)	$	1,756			4%
Canada
Commission Income	$	30,117	$	28,135	$	1,982			7%	$	474		$	2,456			9%
Contingent Commissions and Volume Overrides		849		694		155			22%		—			155			22%
Other Income		563		654		(91	)		(14)%		19			(72	)		(11)%
Total	$	31,529	$	29,483	$	2,046			7%	$	493		$	2,539			9%

Of the $8.1 million in new revenue we reported, $3.8 million, or 47%, reflected growth through acquisition, while $4.3 million, or 53%, resulted from organic growth. By comparison, acquired brokerages added $9.3 million, or 55%, of second quarter 2003 sales growth, while organic growth contributed $7.5 million, or 45%, of our revenue increases. We expect future growth to shift increasingly to acquisition growth as we complete acquisitions in 2004. Organic growth figures for both revenue and earnings include the impact of foreign exchange rate changes between the U.S. and Canadian dollars. In the second quarter 2004, the rise of the Canadian dollar versus the U.S. dollar contributed one percentage point of our 6% organic growth rate in revenue.

Commission income, which usually ranges from 5% to 20% of the premium charged by insurers, provided approximately 94% of our revenue base in the second quarter 2004. In addition to these “core” commissions, the company derives revenue from:

• Volume overrides — additional compensation paid by insurance companies to brokerages on the basis of the overall volume of business a brokerage places with the insurance company.

• Contingent commissions — additional compensation based on the profit an insurance company makes on the book of business a brokerage places with the insurance company.

• Other income — comprised of fees and interest income, including income earned while we hold client premiums on behalf of insurance companies.

In addition to the variations that can result from changes in organic growth rates, acquisitions and other variables related to operations, the second quarter 2004 and 2003 results included a number of factors that complicate direct

  24   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

comparisons. The following chart shows the net earnings and diluted earnings per share impact that currency exchange rates had during second quarter in 2004 and 2003 to increase investor understanding.

(in thousands of U.S. dollars, except per share amounts)		Net Earnings			Diluted EPS
June 30, 2004 reported net earnings (Canadian GAAP)		$	11,591		$	0.35
	Impact of foreign exchange		(172	)		—
	Adjusted June 30, 2004 results	$	11,419		$	0.35
June 30, 2003 reported net earnings (Canadian GAAP)		$	10,109		$	0.31
	Impact of foreign exchange		(578	)		(0.02	)
	Adjusted June 30, 2003 results	$	9,531		$	0.29

As shown above, we benefited less from a stronger Canadian dollar in the second quarter 2004 as compared to 2003. The impact of foreign exchange on second quarter 2004 earnings generated an increase of $0.2 million as compared to an increase of $0.6 million in the second quarter 2003. Excluding the effects of changes in currency exchange rates, adjusted net earnings would have increased 20% in second quarter 2004, versus a 15% increase in reported net earnings, and adjusted diluted earnings per share would have increased 21% in second quarter 2004, versus a 13% increase in reported diluted earnings per share.

Changes in currency exchange rates are not an unusual item. Because we derive our revenue from both the United States and Canada and do not use derivatives to manage our Canadian pre-tax income, foreign exchange fluctuations will continue to impact our results. We have highlighted the impact of these changes because currency translation effects can lead to reported results that are less meaningful than local-currency results as an indicator of underlying operations. In the second quarter 2004, the strength of the Canadian dollar versus the U.S. dollar had a less positive impact on our results than in the second quarter 2003. Any decline in the Canadian dollar relative to the U.S. dollar would have a negative effect on our results. See “Market Risk”.

           U.S. Results

U.S. revenue grew 14% to $50.7 million, or 62% of consolidated revenue, in the second quarter 2004 as compared to 2003, due to both acquisitions and organic growth. Acquisitions added $4.3 million to revenue – 71% of the increase while organic growth provided $1.8 million, or 29% of revenue growth. Our U.S. operations posted an organic growth rate of 4% in the second quarter 2004, a 33% decrease from 6% in the second quarter 2003, reflecting some softening of premium rates for property and casualty coverage. Core commission income increased 13%, while contingent commissions remained constant.

           Canadian Results

Canadian revenue grew 7% to $31.5 million, or 38% of consolidated revenue, in the second quarter 2004 as compared to 2003, primarily as a result of strong organic growth as well as a strengthening of the Canadian dollar against the U.S. dollar. Canadian brokerages posted organic growth of 9%, of which three percentage points reflected a stronger Canadian dollar. Net dispositions lowered revenue by $0.5 million reflecting the sale of certain fold-ins acquired in prior years. Canadian premium rates have started to soften and we expect them to continue softening for the remainder of 2004. Because Canadian revenue includes a lower percentage of commercial business and more personal lines, any acceleration in economic growth that adds to employee payrolls is not expected to have as strong a benefit in Canada as in the United States. Our strong relationships with and access to insurers in Canada continued to prove to be an important competitive advantage in the second quarter of 2004, leading to increased sales to clients who were unable to obtain coverage from other sources. Canadian operations also benefited from an increase in contingent commissions and volume overrides, which grew 22% in the second quarter 2004, versus a decrease of 26% in the second quarter 2003.

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    25 

Compensation Expense

Cash compensation in the second quarter 2004 increased 6% to $42.1 million from $39.9 million, while non-cash stock based compensation grew 35% to $1.7 million from $1.3 million in the second quarter 2003. As a percentage of revenue, cash compensation expense decreased to 51% from 54% a year earlier, benefiting from both expense control and previously reported changes in Hub’s management bonus plan. The increase in non-cash stock based compensation expense reflected the amortization of restricted share units granted in the first quarter 2004 as part of the change in the Company’s management bonus plan.

Compensation Comparison

For the three months ended June 30,

($ in thousands)

							% of
							Revenue
	2004		2003		% Change		2004		2003
Compensation (cash)	$	42,114	$	39,877		6%		51%		54%
Non-cash stock based compensation		1,701		1,258		35%		2%		2%
Total	$	43,815	$	41,135		7%		53%		56%

Our non-cash stock based compensation includes stock options and restricted share units for senior employees. In response to investor interest in the true impact of these costs, we began recognizing the expense of non-cash stock based compensation during 2003. Options vest evenly over three years and expire seven years from issuance. Shares derived from the options are held in escrow for a period of five years from the date the options are granted, subject to early release in certain circumstances. Restricted share units vest over periods ranging from 48 months to 95 months. Our policy is to expense the fair value of non-cash stock based compensation to employees over the period in which entitlement to the compensation vests. The amount of expense recognized in each quarter related to stock options will vary with respect to exercise and forfeiture of options.

In total, as of June 30, 2004, we had issued and outstanding approximately 1.5 million stock options at a weighted average exercise price of $15.49. Our closing share price on the New York Stock Exchange was $19.09 on June 30, 2004.

Selling, Occupancy and Administration Expense

Selling, occupancy and administration expense increased 17% to $16.1 million in the second quarter 2004 as compared to 2003. As a percentage of revenue, selling, occupancy and administration expense increased slightly to 20%, versus 19% in the second quarter 2003.

Depreciation

Depreciation remained consistent at 2% of revenue in the second quarter 2004 and 2003.

Interest Expense

Interest expense increased 12% to $1.7 million from $1.5 million in the second quarter 2004 as compared to 2003, primarily as a result of higher debt levels, partially offset by the benefits of an interest rate swap that was entered into during the third quarter of 2003. The interest rate swap effectively converted $65 million of fixed interest rate senior notes into floating rate instruments, reducing interest expense on the senior notes by $0.3 million in the second quarter 2004.

  26   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

Intangible Asset Amortization

Intangible asset amortization increased 23% to $0.9 million in the second quarter 2004. As a percentage of revenue this expense remained unchanged at 1%.

Gain/loss on Disposal of Subsidiaries, Property, Equipment and Other Assets

The second quarter of 2004 included gains of $0.6 million on the sale of the assets and shares of certain brokerages compared with a loss of $0.1 million on the sale of investments and assets of certain brokerages for the same prior year period.

Provision for Income Tax Expense

Our effective tax rate increased in the second quarter 2004 to 37.5% from 35.3%. The prior year tax rate was lower for the quarter as a result of adjustments made in the second quarter 2003 to reflect actual taxes paid versus amounts previously accrued. The tax rate of 37.5% for the second quarter 2004 is in line with the company’s previous guidance of 36% to 39%.

Net Earnings and Earnings Per Share

Our net earnings increased 15% to $11.6 million in the second quarter 2004, primarily as a result of growth in revenue. As a percentage of revenue, net earnings remained constant at 14%. Diluted earnings per share increased 13% to $0.35.

As shown in the table on page 25, net earnings increased $0.2 million as a result of the Canadian dollar strengthening versus the U.S. dollar in the second quarter 2004. In the second quarter 2003, net earnings increased $0.6 million or $0.02 per diluted share due to foreign exchange rates. Excluding this effect, our diluted earnings per share would have increased $0.06 to $0.35 in the second quarter of 2004 from $0.29 in the second quarter of 2003 on a comparable basis.

Results of Operations

Six months ended June 30, 2004 compared with six months ended June 30, 2003

Revenue

We achieved growth in revenue and profitability in the first six months of 2004. We benefited from strong organic growth rates at most hubs, contributions from brokerages acquired in the last 12 months and a strengthening Canadian dollar compared to the U.S. dollar.

As a result of these and other factors, we reported a 13% revenue increase to $161.6 million in the first six months of 2004, while net earnings increased 12% to $21.2 million. Diluted earnings per share increased 8% to $0.64 from $0.59.

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    27 

The table below shows a breakdown of our revenue by segment and type for the six months ended June 30, 2004 including organic growth:

		Revenue
										Adjustment
										for
(in thousands of U.S. dollars, except per share		First Six Months				Total Net		Total Net		(Acquisitions)			Organic		Organic
amounts)		2004		2003		Changes($)		Growth(%)		and Disposals			Growth($)		Growth(%)
Total
Commission Income		$	138,589	$	123,983	$	14,606		12%	$	(4,704	)	$	9,902		8%
Contingent
	Commissions and Volume Overrides		18,075		15,266		2,809		18%		(65	)		2,744		18%
Other Income			4,916		3,783		1,133		30%		(681	)		452		12%
Total		$	161,580	$	143,032	$	18,548		13%	$	(5,450	)	$	13,098		9%
U.S.
Commission Income		$	83,935	$	76,293	$	7,642		10%	$	(5,091	)	$	2,551		3%
Contingent
	Commissions and Volume Overrides		11,832		10,995		837		8%		(65	)		772		7%
Other Income			3,719		2,663		1,056		40%		(695	)		361		14%
Total		$	99,486	$	89,951	$	9,535		11%	$	(5,851	)	$	3,684		4%
Canada
Commission Income		$	54,654	$	47,690	$	6,964		15%	$	387		$	7,351		15%
Contingent
	Commissions and Volume Overrides		6,243		4,271		1,972		46%		—			1,972		46%
Other Income			1,197		1,120		77		7%		14			91		8%
Total		$	62,094	$	53,081	$	9,013		17%	$	401		$	9,414		18%

Of the $18.5 million in new revenue we reported, $5.4 million, or 29%, reflected growth through acquisition, while $13.1 million, or 71%, resulted from organic growth. By comparison, acquired brokerages added $21.4 million, or 59%, of the first six months 2003 sales growth, while organic growth contributed $14.9 million, or 41%, of our revenue increases. We expect future growth to shift increasingly to acquisition growth as we complete acquisitions in 2004. Organic growth figures for both revenue and earnings include the impact of foreign exchange rate changes between the U.S. and Canadian dollars. In the first six months the rise of the Canadian dollar versus the U.S. dollar contributed three percentage points of our 9% organic growth rate in revenue.

Commission income, which usually ranges from 5% to 20% of the premium charged by insurers, provided approximately 86% of our revenue base in the first six months 2004. Core commissions expressed as a percentage of revenue are anticipated to be lower in the first six months of 2004 because typically we earn the majority of our contingent commissions and volume overrides early in the year as they are based on prior year performance. For the year ended December 31, 2003, commission income provided approximately 91% of our revenue base.

In addition to the variations that can result from changes in organic growth rates, acquisitions and other variables related to operations, the first six months 2004 and 2003 results included a number of factors that complicate direct

  28   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

comparisons. The following chart shows the net earnings and diluted earnings per share impact that several of these factors had during first six months in 2004 and 2003 to increase investor understanding.

(in thousands of U.S. dollars, except per share amounts)		Net Earnings			Diluted EPS
June 30, 2004 reported net earnings (Canadian GAAP)		$	21,214		$	0.64
	Impact of foreign exchange		(831	)		(0.03	)
	Impact of write-off of trademarks		1,656			0.05
	Impact of non-cash stock based compensation		2,440			0.07
	Adjusted June 30, 2004 results	$	24,479		$	0.73
June 30, 2003 reported net earnings (Canadian GAAP)		$	19,013		$	0.59
	Impact of foreign exchange		(712	)		(0.02	)
	Impact of non-cash stock based compensation		1,755			0.05
	Adjusted June 30, 2003 results	$	20,056		$	0.62

As shown above, we benefited slightly more from a stronger Canadian dollar in the first six months 2004 as compared to 2003. The impact of foreign exchange on the first six months 2004 earnings generated an increase of $0.8 million as compared to an increase of $0.7 million in 2003. Also, 2004 included the write-off of trademarks of $1.7 million, after tax. This non-cash expense was incurred as a result of certain of our subsidiaries having decided to change their names. In addition, non-cash stock based compensation after tax increased 39% to $2.4 million for the first six months of 2004 as compared to $1.8 million in 2003, as a result of additional grants of stock based compensation in 2004 and 2003. Excluding the effects of these items, adjusted net earnings would have increased 22% in the first six months of 2004, versus a 12% increase in reported net earnings, and adjusted diluted earnings per share would have increased 18% in the first six months of 2004, versus an 8% increase in reported diluted earnings per share.

Changes in currency exchange rates are not an unusual item. Because we derive our revenue from both the United States and Canada and do not use derivatives to manage our Canadian pre-tax income, foreign exchange fluctuations will continue to impact our results. We have highlighted the impact of these changes because currency translation effects can lead to reported results that are less meaningful than local-currency results as an indicator of underlying operations. In the first six months 2004, the strength of the Canadian dollar versus the U.S. dollar had a more positive impact on our results than in the first six months 2003. Any decline in the Canadian dollar relative to the US dollar would have a negative effect on our results. See “Market Risk”.

           U.S. Results

U.S. revenue grew 11% to $99.5 million, or 62% of consolidated revenue, in the first six months 2004 as compared to 2003, due to both the contributions of operations acquired in the prior 12 months and organic growth. Acquisitions added $5.8 million to revenue – 61% of the increase while organic growth provided $3.7 million, or 39% of revenue growth. Our U.S. operations posted an organic growth rate of 4% in the first six months 2004, a 56% decrease from 9% in the first six months 2003. Core commission income increased 10%, while contingent commissions and volume overrides grew 8%.

During the first six months 2004, the U.S. market experienced some softening of premium rates for property and casualty coverage. However, rates for liability, health and other types of coverage continue to experience increases. Hard insurance pricing in 2003 contributed strongly to a significant increase in contingent profitability income received from insurers in 2004, based on 2003 results.

           Canadian Results

Canadian revenue grew 17% to $62.1 million, or 38% of consolidated revenue, in the first six months 2004 as compared to 2003, primarily as a result of a strengthening of the Canadian dollar against the U.S. dollar as well as strong organic growth. Canadian brokerages posted organic growth of 18%, of which nine percentage points

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    29 

reflected a stronger Canadian dollar. Net dispositions lowered revenue by $0.4 million reflecting the sale of certain fold-ins acquired in prior years. Canadian premium rates have started to soften and we expect them to continue softening for the remainder of 2004. Because Canadian revenue includes a lower percentage of commercial business and more personal lines, any acceleration in economic growth that adds to employee payrolls is not expected to have as strong a benefit in Canada as in the United States. Our strong relationships with and access to insurers in Canada proved to be an important competitive advantage in the first six months of 2004, leading to increased sales to clients who were unable to obtain coverage from other sources. In addition, Canadian operations benefited strongly from an increase in contingent commissions and volume overrides, which grew 46% in the first six months 2004, versus a 21% growth rate in first six months 2003.

Compensation Expense

Cash compensation expense for the six months 2004 increased 8% to $82.8 million from $76.9 million, while non-cash stock based compensation grew 49% to $3.3 million from $2.2 million in the first six months 2003. As a percentage of revenue, cash compensation expense decreased to 51% from 54% a year earlier, reflecting the benefits of higher contingent payments, which do not have payroll cost associated with them, and changes to the Company’s management bonus plan.

Compensation Comparison

For the six months ended June 30,

($ in thousands)

							% of Revenue
	2004		2003		% Change		2004		2003
Compensation (cash)	$	82,751	$	76,889		8%		51%		54%
Non-cash stock based compensation		3,315		2,220		49%		2%		1%
Total	$	86,066	$	79,109		9%		53%		55%

Our non-cash compensation includes stock options and restricted share units for senior employees. In response to investor interest in the true impact of these costs, we began recognizing the expense of non-cash stock based compensation during 2003. Options vest evenly over three years and expire in seven years from issuance. Shares derived from the options are held in escrow for a period of five years from the date the options are granted, subject to early release in certain circumstances. Restricted share units vest over periods ranging from 48 months to 95 months. Our policy is to expense the fair value of non-cash stock based compensation to employees over the period in which entitlement to the compensation vests. The amount of expense recognized in each quarter related to stock options will vary with respect to exercise and forfeiture of options.

Selling, Occupancy and Administration Expense

Selling, occupancy and administration expense increased 18% to $31.6 million in the first six months 2004 as compared to 2003. As a percentage of revenue, selling, occupancy and administration expense increased slightly to 20%, versus 19% in the first six months 2003.

Depreciation

Depreciation remained consistent at 2% of revenue in the first six months 2004 and 2003.

Interest Expense

Interest expense increased 17% to $3.4 million from $2.9 million in the first six months 2004, primarily as a result of higher debt levels, partially offset by the benefits of an interest rate swap that was entered into during the third quarter of 2003. The interest rate swap effectively converted $65 million of fixed interest rate senior notes into floating rate instruments, reducing interest expense on the senior notes by $0.7 million in the first six months 2004.

  30   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

Intangible Asset Amortization

Intangible asset amortization increased 10% to $1.7 million in the first six months 2004. As a percentage of revenue this expense remained unchanged at 1%.

Gain/loss on Disposal of Subsidiaries, Property, Equipment and Other Assets

The six months ended June 30, 2004 included gains on the sale of the assets and shares of certain brokerages.

Loss on Write-Off of Trademarks

In January 2004, we adopted a corporate marketing and positioning strategy to build awareness of the Hub brand across all of our markets and to encourage greater coordination and collegial identity among our employees. As part of this corporate consolidation and identity development program, we have reassigned a number of key executives to new or expanded areas of responsibility and determined that future marketing and communications will be conducted under the Hub International name, rather than the traditional corporate names of acquired brokerages. As a result, certain of our subsidiaries have decided to change their names and we recognized a non-cash expense of approximately $2.6 million before tax related to the write-off of trademarks.

Provision for Income Tax Expense

Our effective tax rate remained relatively unchanged in the first six months 2004 at 36.6% compared to 36.4% for the same prior year period.

Net Earnings and Earnings Per Share

Our net earnings increased 12% to $21.2 million in the first six months 2004, primarily as a result of growth in revenue. As a percentage of revenue, net earnings remained constant at 13% in the first six months 2004 and 2003. Diluted earnings per share increased at a somewhat slower rate than net earnings — 8% to $0.64 — due to the write-off of trademarks.

As shown in the table on page 29, net earnings increased $0.8 million or $0.03 per diluted share, related to the strengthening Canadian dollar versus the U.S. dollar and decreased $2.4 million or $0.07 per diluted share related to the impact of non-cash stock based compensation, in the first six months 2004. Also in 2004, diluted earnings per share decreased $0.05 per diluted share from the write-off of trademarks. In the first six months 2003, net earnings increased $0.7 million from foreign exchange rates and net earnings decreased $1.8 million or $0.05 per diluted share due to non-cash stock based compensation. Excluding these effects, our diluted earnings per share would have increased to $0.73 in the first six months of 2004 from $0.62 in the first six months of 2003 on a comparable basis.

Cash Flow, Liquidity and Capital Resources

As of June 30, 2004, we had cash and cash equivalents of $144.5 million, an increase of 76%, from $82.1 million as of December 31, 2003. Operating activities generated $17.1 million of cash in six months ended June 30, 2004 compared to $25.2 million in 2003. The amount of cash provided by operating activities is affected by net earnings for the period, non-cash income and expenses, the change in trust cash, the collection of accounts and other receivables and the payment of accounts payable and accrued liabilities. In 2004, $10.4 million of cash was used in investing activities, primarily for the purchase of subsidiaries and acquisitions of property and equipment compared to $15.7 million in 2003. Also in 2004, $57.7 million of cash was generated by financing activities, primarily resulting from long-term debt compared to $10.6 million generated in the first six months 2003. In 2004, the effect of exchange rate changes on cash and cash equivalents was a decrease of $2.0 million compared to an increase of $2.3 million in 2003. Net debt, defined as long-term debt ($142.9 million) and subordinated convertible debentures ($35.0 million) less non-trust cash (cash and cash equivalents of $144.5 million) as of June 30, 2004, was $33.4 million compared with $31.7 million as of December 31, 2003.

As a broker, we collect and hold premiums paid by clients, deduct commissions and other expenses from these payments, and hold the remainder in trust, which we remit to the insurers who provide coverage to clients. We earn

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    31 

interest on these funds during the time between receipt of the cash and the time the cash is paid to insurers. The cash held in trust is shown separately on our balance sheet. On the statement of cash flows, changes in trust cash are included as part of the change in non-cash working capital and the determination of cash provided from operating activities.

In addition to internally generated cash, we maintain two separate credit facilities:

(1)

Revolving U.S. dollar LIBOR loan — This facility was renegotiated in April 2004. Under the new terms, the unsecured facility totals $75 million and bears interest at a floating rate of prime plus 1% or 112.5 basis points above LIBOR, which were 1.37% and 1.12% at June 30, 2004 and December 31, 2003 respectively. The facility is available on a revolving basis for one year and expires on April 22, 2005; however if the revolving period is not extended, we may convert the outstanding balance under the facility to a three year non-revolving term loan repayable at the end of three years with an interest rate of 137.5 basis points above the Canadian dollar interest swap rate. An annual commitment fee of 20 basis points is assessed on the unused balance. Borrowings under this facility totaled $65 million and $NIL at June 30, 2004 and December 31, 2003, respectively. We are in compliance with all financial covenants governing this facility as of June 30, 2004 and December 31, 2003.

(2)

Demand U.S. dollar base rate loan — We have an undrawn $9 million facility which bears interest at the bank’s U.S. base rate plus 50 bonus points. Borrowings under this facility are repayable on demand.

As of June 30, 2004 we had $65 million aggregate principal amount of unsecured senior notes outstanding. The senior notes were issued in two series: Series A represents $10 million aggregate principal amount of 5.71% senior notes with interest due semi-annually, and principal of $3,333 due annually, June 15, 2008 through June 15, 2010 and Series B represents $55 million aggregate principal amount of 6.16% senior notes with interest due semi-annually, and principal of $11,000 due annually June 15, 2009 through June 15, 2013. The senior notes were sold on a private basis in the United States to institutional accredited investors. Net proceeds of the sale of the senior notes were used to pay down $50 million of our revolving U.S. dollar LIBOR Loan with the balance for general corporate purposes, which may include future acquisitions. We incurred approximately $0.7 million in fees and expenses related to the offering of these notes, which were capitalized and are being amortized to expense over the term of the notes.

On July 15, 2003, we entered into an interest rate swap agreement. The effect of the swap is to convert the fixed rate interest payments on the 5.71% senior notes and 6.16% senior notes in amounts of $10 million and $55 million, respectively, in order to ensure that we pay a current market interest rate on that portion of its borrowings. We account for the swap transaction using the synthetic instruments method under which the net interest expense on the swap and associated debt is reported in earnings as if it were a single, synthetic, financial instrument. As of June 30, 2004, we estimated the fair value of the swap was $5.5 million, which is not recognized in our financial statements. Accordingly, $5.5 million is the estimated amount that we would need to pay to terminate the swap as of June 30, 2004.

Also at June 30, 2004 we had outstanding a $7.5 million term loan from an insurance carrier. The terms of the loan provide for an incentive arrangement whereby a credit can be earned that will reduce annual interest payments under the loan (based on target premiums placed with the carrier) and reduces the principal repayment due in February 2007 (based on both target premiums placed with the carrier as well as the loss ratio on premiums placed with the carrier). Credits earned for the year ended December 31, 2003 reduced interest payments to zero from $0.8 million. It is not yet determinable if a credit has been earned for 2004.

In addition to these primary credit sources, we ended June 30, 2004 with $5.2 million of subsidiary debt comprised of various notes payable, term loans and capital leases. We intend to repay these liabilities from internally generated cash flow, existing cash balances and/or borrowings under our credit facilities as the subsidiary debt becomes due during 2004 through 2010. Of the outstanding subsidiary debt, $1.0 million is secured by liens on certain assets of our subsidiaries.

Also at June 30, 2004, we had outstanding $35 million aggregate principal amount of 8.5% convertible subordinated notes due June 28, 2007 held by certain subsidiaries of Fairfax (the Fairfax notes). The Fairfax notes are convertible by the holders at any time into our common shares at C$17.00 per share. If Fairfax converted all of the Fairfax notes,

  32   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

Fairfax would own approximately 33% of our total outstanding common shares as of June 30, 2004, versus the 26% of outstanding shares which it held on that date.

At June 30, 2004, our cash position included approximately $41.6 million deployed as working capital at the brokerage level and approximately $102.9 million available for acquisitions. Included in the cash available for acquisitions is $90 million paid on July 1, 2004 to acquire Talbot leaving $12.9 million available for acquisitions. It is impossible to define exactly how many acquisitions or how much new revenue could be acquired through the use of this cash, additional cash flow from operations and application of credit facilities, as acquisition pricing and other factors vary during the course of the year. However, we intend to use common shares as compensation for approximately 30-70% of the value of a hub acquisition, and generally have paid a multiple of 5-8 times earnings before interest, taxes, depreciation and amortization (frequently referred to as EBITDA, a non-GAAP measure) for acquired brokerages.

We believe that our capital resources, including existing cash, funds generated from operations and borrowings available under credit facilities, will be sufficient to satisfy the company’s financial requirements, including some strategic acquisitions, during the next twelve months. We may finance acquisitions with available cash or an existing credit facility, but may, depending on the number and size of future acquisitions, need to supplement our finance requirements with the proceeds from debt financing, the issuance of additional equity securities, or a combination of both.

Our debt to capitalization ratio (defined as debt expressed as a percentage of debt and shareholders’ equity) increased to 33% at June 30, 2004, compared with 25% at December 31, 2003. If all lines of credit and other loan facilities were fully utilized by the company at June 30, 2004 our ratio of debt to capitalization would have been 35%, which is within the range of 35% to 38% that our management believes is suitably conservative for our business model. Under our loan covenants, our debt to capitalization ratio must be less than 45%. As of June 30, 2004, we were in compliance with the financial covenants under all of our debt instruments.

Contingent obligations

The table below summarizes our contractual obligations and commercial commitments as of June 30, 2004:

Payments due by period			On		Less than		1-3		4-5		After
(in thousands)	Total		Demand		1 Year		Years		Years		5 Years
Contractual obligations
Long-term debt	$	142,363	$	—	$	2,200	$	9,578	$	83,252	$	47,333
Capital lease obligations		532		—		228		304		—		—
Operating lease obligations		61,480		—		11,073		19,995		15,398		15,014
Executive share purchase plan loans		472		—		—		—		472		—
Total	$	204,847	$	—	$	13,501	$	29,877	$	99,122	$	62,347

Acquisitions

In connection with the acquisition of Hooper Hayes and Associates, Inc., in 2003 we issued 196,000 shares (the “Retractable Shares”) that are being held in escrow subject to release over a period of three years upon the satisfaction of certain performance targets. As of June 30, 2004, 63,000 shares have been released from escrow.

In connection with various other acquisitions completed through June 30, 2004, we may be obligated to pay contingent consideration of approximately $8.8 million cash and $3.1 million in common shares based upon management’s best estimate of the acquired brokerages achieving certain targets. The contingent payments are payable on various dates through April 2009 according to the terms and conditions of each purchase agreement. Any additional consideration will be recorded as an adjustment to goodwill once the contingency is resolved. In connection with contingent consideration earned as at June 30, 2004, the financial statements reflect a liability to pay cash of $1.0 million and an obligation to issue common shares valued at approximately $0.9 million as of June 30, 2004.

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    33 

Other

In connection with our executive share purchase plan, under certain circumstances, we may be obligated to purchase loans for officers, directors and employees from a Canadian chartered bank totaling $4.1 million and $4.5 million as of June 30, 2004 and December 31, 2003, respectively, to assist in purchasing our common shares. As collateral, the employees have pledged 456,000 and 478,000 common shares as of June 30, 2004 and December 31, 2003, respectively, which have a market value of $8.7 million and $8.1 million as of June 30, 2004 and December 31, 2003, respectively. Interest on the loans in the amount of $96,000 and $148,000 for the six months ended June 30, 2004, and 2003, respectively, was paid by us and is included in compensation expense. We no longer make loans to our executive officers and directors.

In April 2004, Kaye Insurance Associates, Inc. (“Kaye Insurance”), a subsidiary of Hub, received a subpoena from the Office of the Attorney General of the State of New York seeking information regarding certain compensation agreements between insurance brokers and insurance companies. The New York Attorney General subpoenaed information on such compensation agreements from several other major insurance brokers as well. Such compensation agreements, also known as contingent agreements, between insurance companies and brokers are a long-standing and common practice within the insurance industry. Kaye Insurance has a practice of disclosing such agreements to its clients, including on its invoices to clients and on its web site. In addition, we disclose the arrangements in our public filings. We are fully cooperating with this inquiry. While it is not possible to predict the outcome of this investigation, if such compensation agreements were to be restricted or no longer permitted, our results of operations may be materially adversely affected.

In the ordinary course of business, we are subject to various claims and lawsuits consisting primarily of alleged errors and omissions in connection with the placement of insurance. In the opinion of our management, the ultimate resolution of all asserted and potential claims and lawsuits will not have a material adverse effect on our consolidated financial position or results of operations.

Shareholders’ Equity

Restricted share units. For the six months ended June 30, 2004, restricted share units totaling 983,000 were issued in connection with the restructuring of our management bonus agreement and 84,000 restricted share units were issued in connection with the renegotiation of contingent consideration for Flanagan.

Share repurchases. For the six months ended June 30, 2004, no common shares were repurchased by us, other than shares equal in value to $60,000 under the executive purchase plan.

Shares reserved for issuance. As of June 30, 2004, 3.6 million common shares were reserved for issuance under our equity incentive plan, of which approximately 3.2 million stock options and restricted share units were outstanding.

Shareholders’ equity increased by $23.3 million, or 7%, to $366.1 million as of June 30, 2004 from $342.8 million as of December 31, 2003. This increase resulted from net earnings of $21.2 million, an increase in contributed surplus of $4.8 million related primarily to non-cash stock based compensation expense, shares issued to Bush, Cotton, & Scott for $3.4 million and exercise of stock options for $0.5 million. The increase in shareholders’ equity was offset by the declaration of dividends of $3.0 million in 2004, and a decrease in the cumulative translation account of $3.6 million, due mainly to the weakening of the Canadian dollar compared to the U.S. dollar in 2004.

Market Risk

Interest rate risk

We are exposed to interest rate risk in connection with our senior notes due to the interest rate swap entered into in July 2003, which converted the fixed rate interest payments on the $65 million aggregate principal amount of senior notes into floating rate payments and our Revolving U.S. dollar LIBOR loan. As a result each 100 basis point increase in interest rates charged on the balance of our outstanding floating rate debt as of June 30, 2004 will result in approximately $0.8 million decrease in our earnings.

  34   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

Exchange rate sensitivity

We report our revenue in U.S. dollars. Our Canadian operations earn revenue and incur expenses in Canadian dollars. Given our significant Canadian dollar revenue, we are sensitive to the fluctuations in the value of the Canadian dollar and are therefore exposed to foreign currency exchange risk. Foreign currency exchange risk is the potential for loss in revenue and net income as a result of a decline in the U.S. dollar value of Canadian dollar revenue due to a decline in the value of the Canadian dollar compared to the U.S. dollar.

The Canadian dollar is subject to volatility. It experienced a significant decline in its value compared to the U.S. dollar in 2001, increased significantly in value throughout 2003 and declined in value the first six months 2004. At June 30, 2004 and 2003 one U.S. dollar equaled $1.3404 and $1.3553 Canadian dollars, respectively. The table below summarizes the effect that a $0.01 decline or increase in the value of the Canadian dollar would have had on our revenue, net earnings and cumulative translation account for the three months ended June 30, 2004, and 2003.

(in thousands of U.S. dollars)	2004		2003
Revenue	+/-$	401	+/-$	412
Net earnings	+/-$	69	+/-$	74
Cumulative translation account	+/-$	5	+/-$	108

The increasing proportion of our revenue derived from our U.S. operations and earned in U.S. dollars has, in part, offset the potential risk of a decline in the Canadian dollar. We expect that the proportion of revenue earned in U.S. dollars will continue to increase, further mitigating our foreign currency exchange sensitivity. We have not entered into, and do not intend to enter into, foreign currency forward exchange agreements.

Goodwill and Other Intangible Assets

Intangible assets arising from acquisitions consist of the following:

	June 30,			December 31,
(in thousands of U.S. dollars)	2004			2003
Customer relationships	$	50,580		$	43,422
Non-competition covenants		3,416			2,643
Trademarks		—			2,587
Goodwill		327,869			323,185
Accumulated amortization		(23,392	)		(23,072	)
Total	$	358,473		$	348,765

We completed our impairment testing on the balance of goodwill and intangible assets as of January 1, 2004 and 2003. Based on the testing performed, no impairment losses were incurred.

The amounts allocated to customer relationships were determined by discounting the expected future net cash flows from commissions with consideration given to remaining economic lives, renewals, and associated expenses. The amounts allocated to non-competition covenants were determined using an income approach with consideration given to economic benefits associated with having the covenants in place versus damages that would ensue absent the agreements; in the case of trademarks, a cash flow royalty savings approach addressing the economic benefits of the trademarks was used. The balance of the purchase price is allocated to goodwill.

Customer relationships are amortized on a straight-line basis over their periods of duration, normally fifteen years. Many factors outside our control determine the persistency of our customer relationships and we cannot be sure that the value we have allocated will ultimately be realized. Non-competition covenants are intangible assets that have an indefinite life and accordingly, are not amortized but are evaluated for impairment. When an employee leaves Hub, the non-competition covenant becomes effective and the value assigned is then amortized over the life of covenant. During the first quarter of 2004 certain of our subsidiaries changed their names and as a result we recognized a non-cash loss on the write-off of trademarks of $2.6 million before tax. Prior to 2003 we amortized

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    35 

goodwill primarily over a period of forty years. Under the new accounting standards adopted in 2003, goodwill is not amortized and is evaluated annually for impairment. For the three months and six months ended June 30, 2004 and 2003, our amortization has been comprised of the following:

	For the three				For the six
	months ended				months ended
	June 30,				June 30,
(in thousands of U.S. dollars)	2004		2003		2004		2003
Customer relationships	$	893	$	721	$	1,657	$	1,502
Non-competition covenants		43		35		60		55
Total	$	936	$	756	$	1,717	$	1,557

We estimate that our amortization charges for intangible assets for 2004 through 2008 for all acquisitions consummated to date will be:

Year ended December 31,
(in thousands of U.S. dollars)	2004		2005		2006		2007		2008
Customer relationships	$	3,438	$	3,553	$	3,553	$	3,553	$	3,553
Non-competition covenants		206		164		80		79		3
Total	$	3,644	$	3,717		3,633	$	3,632	$	3,556

Related Party Transactions

We had transactions with, and recorded revenue from, the following related parties:

	For the three				For the six
	months ended				months ended
	June 30,				June 30,
	2004		2003		2004		2003
Northbridge Financial Corporation	$	6,493	$	3,203	$	10,951	$	6,622
Crum & Forster Holdings, Inc.		176		614		359		831
Fairfax Inc.		1,158		2,169		2,590		4,263
		7,827		5,986		13,900		11,716
Old Lyme Insurance Company, Ltd (“OLIC”)		231		—		231		—
	$	8,058	$	5,986	$	14,131	$	11,716

As of June 30, 2004 and December 31, 2003, we had accounts receivable and accounts payable balances with the above related parties in the amounts of $3.6 million and $16.4 million, for June 30, 2004, respectively, and $3.2 million and $18.0 million for December 31, 2003, respectively. All revenue and related accounts receivable and accounts payable are the result of transactions in the normal course of business. The companies listed above except for OLIC, are related through common ownership by Fairfax Financial Holdings Limited (Fairfax), which owns approximately 26% of our common shares as of June 30, 2004. During the second quarter of 2004, Fairfax sold OLIC to Old Lyme Insurance Group, Ltd, a company owned primarily by a group of Hub employees, including Bruce Guthart, our Chief Operating Officer and a director of Hub, and Michael Sabanos, our Director, Mergers & Acquisitions. We continue to place insurance with OLIC. The compensation that Hub earns from the business placed with OLIC and the fees it earns from managing OLIC are substantially the same as if Fairfax continued to own the company.

As of June 30, 2004 and December 31, 2003 subordinated convertible debentures of $35.0 million were held by certain subsidiaries of Fairfax.

  36   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

During the first six months of 2004 and 2003, we incurred expenses related to rental of premises from related parties in the amount of $0.9 million and $1.0 million respectively. At June 30, 2004 and December 31, 2003, we also had accounts receivable due from related parties in the amount of $2.8 million and $3.5 million respectively, of which the majority were loans to employees to enable them to purchase our common shares. Of the accounts receivable, as of June 30, 2004 and December 31, 2003, $1.8 million and $1.9 was related to company loans to employees to purchase shares under our executive share purchase plan. As collateral, the employees have pledged 146,000 and 153,000 common shares as of June 30, 2004 and December 31, 2003, respectively, which have a market value of $2.8 million and $2.6 million as of June 30, 2004 and December 31, 2003, respectively.

Off-Balance Sheet Transactions

Under Canadian GAAP, we account for the interest rate swap transaction which converted fixed rate interest payments of 5.71% and 6.16% on the senior notes of $10 million and $55 million, respectively, using the synthetic instruments method. Under this method, we report in earnings the net interest expense on the swap and associated debt as if it were a single, synthetic, financial instrument. The fair value of the swap, estimated at $5.5 million is not recognized in our Canadian GAAP financial statements. Under U.S. GAAP, we have designated the swap transaction as a hedge of changes in the fair value of our fixed rate debt caused by changes in interest rates and record the swap on our U.S. GAAP balance sheet at is fair value. Changes in fair value of the swap are reported in earnings. Changes in the fair value of the debt being hedged which are attributable to changes in interest rates are recognized in earnings by adjustment of the carrying amount of the debt. We have no other material off-balance sheet arrangements.

Effects of Recent Accounting Pronouncements

We are not aware of any new accounting pronouncements which will impact on our financial reporting.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Market Risk”.

Item 4. Controls and Procedures

Under SEC rules, we are required to maintain disclosure controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Our chief executive officer and chief financial officer conducted an evaluation of our disclosure controls and procedures, as such term is defined under Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the Exchange Act) as of June 30, 2004 (the Evaluation Date). Based on that evaluation, our chief executive officer and chief financial officer concluded that as of the Evaluation Date, our disclosure controls and procedures were effective in timely alerting them to material information relating to us required to be disclosed in our reports filed or submitted under the Exchange Act. In addition, there have been no significant changes (including corrective actions with regard to significant deficiencies or material weaknesses) in the design or operation of our internal control over financial reporting or in other factors that could significantly affect our internal control over financial reporting during the second quarter of 2004. Notwithstanding the foregoing, there can be no assurance that our disclosure controls and procedures will detect or uncover all failures within our company to disclose all material information otherwise required to be set forth in our periodic reports.

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    37 

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

In the second quarter of 2004, Kaye Insurance, a subsidiary of Hub, received a subpoena from the Office of the Attorney General of the State of New York seeking information regarding certain compensation agreements between insurance brokers and insurance companies. The New York Attorney General subpoenaed information on such compensation agreements from several other major insurance brokers as well. Such compensation agreements, also known as contingent agreements, between insurance companies and brokers are a long-standing and common practice within the insurance industry. Kaye Insurance has a practice of disclosing such agreements to its clients, including on its invoices to clients and on its web site. In addition, we disclose the arrangements in our public filings. We are fully cooperating with this inquiry. While it is not possible to predict the outcome of this investigation, if such compensation agreements were to be restricted or no longer permitted, our results of operations may be materially adversely affected.

In the normal course of business, we are involved in various claims and legal proceedings relating to insurance placed by us and other contractual matters. Our management does not believe that any such pending or threatened proceedings will have a material adverse effect on our consolidated financial position or future results of operations.

Item 2. Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities

On April 15, 2004, we issued 2,607 common shares to former shareholders of C.S. Nenner, Inc. as contingent consideration for contingent obligations payable in connection with the acquisition of that brokerage. On April 21, 2004, we issued 136,619 common shares to former shareholders of Bush, Cotton & Scott, LLC. in connection with our acquisition of the shares of that brokerage.

All of the shares issued in transactions described above were issued in transactions exempt from registration pursuant to section 4(2) of the Securities Act of 1933.

Item 4. Submission of Matters to a Vote of Security Holders

The Annual and Special Meeting of Shareholders of Hub International Limited (the “Meeting”) was held on May 11, 2004. At the Meeting, 19,655,004 shares of Hub’s common shares, or 64.8% of the total common shares outstanding on the record date of the Meeting, were represented.

Continuance of the Corporation Under the Canada Business Corporations Act. Shareholders were asked to consider, and if deemed appropriate, pass a special resolution authorizing the continuance of Hub from the Business Corporations Act (Ontario) to the Canada Business Corporations Act (“CBCA”). To become effective, the approval of at least 2/3 of the votes cast by shareholders represented in person or by proxy at the Meeting was required. The continuance was passed with 99.9% of the votes cast, or 18,296,180 shares in favor of the resolution and 0.06%, or 10,476 votes cast against the resolution.

Adoption of New By-laws. The adoption of new by-laws of the corporation effective upon the continuance was approved by a majority of the votes cast on a vote by ballot. The results of the ballot were 13,458,026 shares in favor and 4,982,568 votes against the proposal.

Election of Directors Upon the Continuance Becoming Effective. The following nine nominees were elected as directors of Hub for terms of one year expiring on the date of Hub’s Annual Meeting of Shareholders to be held in 2005 effective upon the articles of continuance being filed under the CBCA, by a resolution passed by a majority of the votes cast in person or by proxy at the Meeting. Since the continuance became effective the slate of directors listed below did become our elected board members.

  38   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

The results were as follows:

			Votes
Name	Votes For		Withheld
Martin P. Hughes		19,467,596		44,570
Richard A. Gulliver		19,467,596		44,570
Bruce D. Guthart		19,467,596		44,570
Anthony F. Griffiths		19,467,596		44,570
Edward W. Lyman Jr.		19,467,596		44,570
Paul Murray		19,467,596		44,570
Bradley P. Martin		19,467,596		44,570
Stuart Ross		19,467,596		44,570
Frank S. Wilkinson		19,467,596		44,570

Election of Directors if the Continuance Did Not Become Effective. The following nine nominees were elected as directors of Hub for terms of one year expiring on the date of Hub’s Annual Meeting of Shareholders to be held in 2005 should the board of directors of Hub have decided not to proceed with the continuance, by a resolution passed by a majority of the votes cast in person or by proxy at the Meeting. Since the continuance became effective, the slate of directors listed below did not become our elected board members.

The results were as follows:

			Votes
Name	Votes For		Withheld
Martin P. Hughes		19,467,596		44,570
Richard A. Gulliver		19,467,596		44,570
Bruce D. Guthart		19,467,596		44,570
Scott Broome		19,467,596		44,570
Anthony F. Griffiths		19,467,596		44,570
Paul Murray		19,467,596		44,570
Bradley P. Martin		19,467,596		44,570
Gil Ross		19,467,596		44,570
Frank S. Wilkinson		19,467,596		44,570

Appointment of Auditors. PricewaterhouseCoopers LLP was appointed as Hub’s Auditors to serve until Hub’s Annual Meeting of Shareholders to be held in 2005, at a remuneration to be fixed by our Board of Directors, with a favorable vote of 19,467,172 of the common shares represented at the Meeting and 45,269 common shares withholding their votes on the appointment.

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    39 

Item 5. Other Information

Information Concerning Forward-Looking Statements

This Form 10-Q includes, and from time to time management may make, forward-looking statements which reflect our current views with respect to future events and financial performance. These forward-looking statements relate, among other things, to our plans and objectives for future operations. These forward-looking statements are subject to uncertainties and other factors that could cause actual results to differ materially from such statements. These uncertainties and other factors include, but are not limited to, risks associated with:

• implementing our business strategies;

• identifying and consummating acquisitions;

• successfully integrating acquired businesses;

• attaining greater market share;

• developing and implementing effective information technology systems;

• recruiting and retaining qualified employees;

• fluctuations in the demand for insurance products;

• fluctuations in the premiums charged by insurance companies (with corresponding fluctuations in our premium-based revenue);

• fluctuations in foreign currency exchange rates;

• any loss of services of key executive officers;

• industry consolidation;

• increased competition in the industry; and

• the passage of new federal, state or provincial legislation subjecting our business to increased regulation in the jurisdictions in which we operate.

The words “believe,” “anticipate,” “project,” “expect,” “intend,” “will likely result” or “will continue” and similar expressions identify forward-looking statements. We caution readers not to place undue reliance on these forward-looking statements, which speak only as of their dates. Except as otherwise required by federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Dividends

On February 19, 2004 the Board of Directors declared a dividend of $0.05 on our common shares, payable April 30, 2004 for the quarter ended March 31, 2004 to shareholders of record on April 15, 2004.

  40   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

Item 6. Exhibits and Reports on Form 8-K

(a)  Exhibits

10.1	Amended and Restated Credit Agreement dated as of April 23, 2004 by and between Hub International Limited and Bank of Montreal.
10.2	ISDA Master Agreement and Schedule to the Master Agreement dated as of July 15, 2003 by and between Hub International Limited and Bank of Montreal.
31.1	Certification of the Chief Executive Officer, Martin P. Hughes, pursuant to Rule 13a-14(a) or 15d-14(a), as enacted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of the Chief Financial Officer, Dennis J. Pauls, pursuant to Rule 13a-14(a) or 15d-14(a), as enacted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of the Chief Executive Officer, Martin P. Hughes, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of the Chief Financial Officer, Dennis J. Pauls, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Information under the caption “Risks related to our business” and “Risks related to our common shares” is incorporated by reference from the registrant’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 15, 2004.

(b)  Current Reports on Form 8-K

We filed a Current Report on Form 8-K on April 28, 2004 furnishing a press release which provided the registrant’s earnings for the quarter ended March 31, 2004.

We filed a Current Report on Form 8-K on April 23, 2004 furnishing a press release regarding the receipt of a subpoena by one of Hub’s subsidiaries from the attorney general of the State of New York.

INTERIM REPORT JUNE 30, 2004 HUB INTERNATIONAL LIMITED    41 

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HUB INTERNATIONAL LIMITED

By:  /s/ DENNIS J. PAULS

Dennis J. Pauls

Vice President and Chief Financial Officer

(duly authorized officer and Principal Financial Officer)

DATE: August 5, 2004

  42   HUB INTERNATIONAL LIMITED INTERIM REPORT JUNE 30, 2004

EX-10.1

HUB INTERNATIONAL LIMITED

As Borrower

-and -

BANK OF MONTREAL

As Lender

AMENDED AND RESTATED

CREDIT AGREEMENT

Dated as of April 23, 2004

Fraser Milner Casgrain LLP

42nd Floor

1 First Canadian Place

Toronto, Ontario

M5X 1B2

TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS AND ACCOUNTING TERMS
Section 1.1	Defined Terms	5
Section 1.2	Computation of Time Periods	16
Section 1.3	Accounting Terms	17
Section 1.4	Extended Meanings	17
Section 1.5	Incorporation of Schedules	17
Section 1.6	Headings and Table of Contents	17
Section 1.7	Singular, Plural, Gender	17
Section 1.8	Conflict	17
Section 1.9	Currency	17
Section 1.10	Time	17
Section 1.11	Control	18
Section 1.12	Wholly Owned Subsidiary	18
Section 1.13	References to Conversion of Advances	18
ARTICLE 2 THE CREDIT FACILITIES
Section 2.1	Credit Facility	18
Section 2.2	Drawdown Availability	18
Section 2.3	Renewal of Drawdown Period	19
Section 2.4	Term Obligations	19
Section 2.5	Advance Requests	19
Section 2.6	Advances under the Credit Facility	20
Section 2.7	Currency	20
Section 2.8	Conversion of Advance	20
Section 2.9	LIBOR Maturity	21
Section 2.10	Certain Provisions Relating to Bankers’ Acceptances	21
Section 2.11	Reduction or Termination of Commitment	23
Section 2.12	Use of Proceeds	23
ARTICLE 3 INTEREST AND FEES
Section 3.1	Interest on Prime Rate Loans	23
Section 3.2	Interest on U.S. Base Rate Loans	23
Section 3.3	Interest on LIBOR Loans	24
Section 3.4	Acceptance Fee	24
Section 3.5	Standby Fee	24
Section 3.6	Reimbursement Obligations	24

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Section 3.7	Fixed Rate Option	24
Section 3.8	Yearly Rate Statements	25
ARTICLE 4 REPAYMENT OF OBLIGATIONS
Section 4.1	Repayment on Maturity	25
Section 4.2	Voluntary Repayment	25
Section 4.3	Mandatory Repayment of Credit Facility	25
Section 4.4	Scheduled Repayment of Obligations	26
ARTICLE 5 PAYMENTS AND ACCOUNTS
Section 5.1	Maintenance of Accounts	26
Section 5.2	Payments by Borrower	26
Section 5.3	Due Date of Payments	26
Section 5.4	Time of Payments	27
Section 5.5	Form and Amount of Payments	27
Section 5.6	Charging Borrower’s Accounts	27
ARTICLE 6 CURRENCY AND COSTS
Section 6.1	Market Disruption and Illegality	27
Section 6.2	Additional Payments	28
Section 6.3	Prepayment and Conversion	29
Section 6.4	Mitigation	29
Section 6.5	Mandatory Prepayment	29
ARTICLE 7 CONDITIONS PRECEDENT TO LENDING
Section 7.1	Conditions Precedent to Initial Advance	30
Section 7.2	Conditions Precedent to Each Advance	30
ARTICLE 8 REPRESENTATIONS AND WARRANTIES
Section 8.1	Representations and Warranties by the Borrower	31
Section 8.2	Survival of Representations and Warranties	36
ARTICLE 9 COVENANTS OF THE BORROWER
Section 9.1	Affirmative Covenants	36
Section 9.2	Negative Covenants	36

3

ARTICLE 10 ACCELERATION
Section 10.1	Events of Default	43
Section 10.2	Remedies Upon Default	45
Section 10.3	Right of Set-Off	46
Section 10.4	Currency Conversion After Maturity	46
Section 10.5	Judgment Currency	46
ARTICLE 11 GENERAL
Section 11.1	Evidence of Debt	46
Section 11.2	Additional Expenses	46
Section 11.3	Invalidity of any Provisions	47
Section 11.4	Amendments, Waivers, etc.	47
Section 11.5	Notices, etc.	47
Section 11.6	Costs and Expenses	48
Section 11.7	Indemnification	48
Section 11.8	Taxes	48
Section 11.9	Calculations	49
Section 11.10	Assignments and Participations	49
Section 11.11	Governing Law	50
Section 11.12	Consent to Jurisdiction	50
Section 11.13	Binding Effect	50
Section 11.14	Interest Savings Clause	50
Section 11.15	Entire Agreement	51
Section 11.16	Counterparts	51
Schedule 1	Form of Advance Request
Schedule 2	Form of Compliance Certificate
Schedule 8.1(g)	Ownership of Property
Schedule 8.1(h)	Subsidiaries
Schedule 8.1(i)	Outstanding Debt
Schedule 8.1(k)	Litigation
Schedule 8.1(l)	Financial Statements

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THIS AMENDED AND RESTATED CREDIT AGREEMENT is made as of the 23rd day of April, 2004,

BETWEEN:

      HUB INTERNATIONAL LIMITED,

a corporation incorporated under

the laws of Ontario,

as the Borrower hereunder,

     - and -

     BANK OF MONTREAL,

     as the Lender hereunder

WHEREAS Bank of Montreal agreed, on and subject to the terms and conditions of a credit agreement dated April 26, 2000 (the “Original Credit Agreement”), as amended and restated as of June 21, 2001 and as further amended as of August 22, 2002 (the “Amended Credit Agreement”) between Bank of Montreal and Hub International Limited (formerly named “The Hub Group Limited”), to make available the credit facilities in favour of Hub International Limited provided for in the Amended Credit Agreement;

AND WHEREAS Bank of Montreal and Hub International Limited have agreed, on and subject to the terms and conditions of this amended and restated credit agreement, to amend and restate the Amended Credit Agreement effective as of the date of this amended and restated credit agreement;

NOW THEREFORE in consideration of these premises and the agreements hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE 1

DEFINITIONS AND ACCOUNTING TERMS

Section 1.1    Defined Terms.

Unless the context otherwise requires, the following capitalized terms shall have the following respective meanings in this Agreement and in each of the other Loan Documents:

“Acceptance Fee” means the fee payable in Canadian dollars to the Lender in respect of the Drafts accepted or purchased by the Lender prior to and as a condition of such acceptance or purchase, computed in accordance with Section 3.4;

“Advance” means any extension of credit by the Lender hereunder in the form of a Prime Rate Loan, a U.S. Base Rate Loan, a LIBOR Loan or a BA Advance (each of which is referred to herein as a “Type of Advance”), including the conversion of an Advance into another Advance;

“Advance Request” means a request for an Advance or conversion of an Advance to another Advance duly completed and executed on behalf of the Borrower, substantially in the form of Schedule 1 hereto, or a notice of a request for an Advance or conversion of an Advance to another Advance delivered pursuant to Section 2.5(c);

“Affiliate” shall mean, at any time, and with respect to any Person, (a) any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person, and (b) in the case of the Borrower or any Subsidiary, any Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting or equity interests of the Borrower or any Subsidiary or any corporation of which the Borrower and its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of any class of voting or equity interests; provided that “Affiliate,” in relation to the Borrower, shall not include any Subsidiary. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a reference to an Affiliate of the Borrower;

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“Agreement” means this credit agreement as supplemented, amended, modified or restated from time to time, and the expressions “Article”, “Section” and “Schedule” followed by a number mean and refer to the specified Article, Section or Schedule of this Agreement, respectively;

“Asset Disposition” shall mean any Transfer except:

(a)  any

(i)  Transfer from a Subsidiary to the Borrower or a Wholly-Owned Subsidiary; and

(ii)  Transfer from the Borrower to a Wholly-Owned Subsidiary;

so long as immediately before and immediately after the consummation of any such Transfer and after giving effect thereto, no Default or Event of Default shall exist; and

(b) any Transfer made in the ordinary course of business and involving only property that is either (i) inventory held for sale or (ii) equipment, fixtures, supplies or materials no longer required in the operation of the business of the Borrower or any of its Subsidiaries or that is obsolete;

“Amortization Date” means the first date, if any, on which the ratio of (a) Consolidated Debt (after excluding therefrom the subordinate debentures of the Borrower in the maximum aggregate principal amount of U.S. $35,000,000 that are subject to mandatory conversion into common shares of the Borrower) on such date, to (b) the product of (i) 4, multiplied by (ii) the EBITDA for the last completed fiscal quarter of the Borrower, exceeds 4:1;

“Applicable Margin” means:

(a)	in respect of any Prime Rate Loan, at any time prior to the Term Date, the rate of 1.0% per annum, and at any time on or after the Term Date, the rate of 1.25% per annum;
(b)	in respect of any U.S. Base Rate Loan, at any time prior to the Term Date, the rate of 1.0% per annum, and at any time on or after the Term Date, the rate of 1.25% per annum;
(c)	in respect of any LIBOR Loan, at any time prior to the Term Date, the rate of 1.125% per annum, and at any time on or after the Term Date, the rate of 1.375% per annum; and
(d)	in respect of any BA Advance, at any time prior to the Term Date, 1.125%, and at any time on or after the Term Date, 1.375%;

“Arm’s-Length” means arm’s-length within the meaning of such term under the Income Tax Act (Canada), as amended from time to time;

“Assignee Lender” has the meaning set out in Section 11.10;

“Assignee Lender’s Commitment” has the meaning set out in Section 11.10;

“Assignee Lender’s Commitment Percentage” has the meaning set out in Section 11.10;

“Attributable Debt” shall mean, as to any particular lease relating to a Sale-and-Leaseback Transaction not permitted under clause (i), (ii) or (iii) of Section 9.2(i), the present value of all Lease Rentals required to be paid by the Borrower or any Subsidiary under such lease during the remaining term thereof (determined in accordance with generally accepted financial practice using a discount factor equal to the interest rate implicit in such lease if known or, if not known, of 10% per annum);

“Available Commitment” means at any time the amount at such time of the Commitment less the amount of the Outstanding Principal Obligations, all expressed in Canadian Dollars, with any amount thereof denominated in another currency to be expressed in Canadian Dollars at the Canadian Dollar Equivalent at such time of such amount;

“BA Advance” means any Advance by way of the acceptance of any Draft drawn by the Borrower on, and the purchase of the resulting Bankers’ Acceptance by, the Lender;

6

“BA Discount Proceeds” means in respect of any Bankers’ Acceptance being purchased by the Lender on any day an amount (rounded to the nearest whole Canadian cent, and with one-half of one Canadian cent being rounded up) calculated on such day by multiplying

(a)	Face Amount of such Bankers’ Acceptance, by
(b)	the quotient equal to one divided by the sum of one plus the product of:

(i)  the BA Reference Rate (expressed as a decimal) applicable to such Bankers’ Acceptance; and

(ii)  a fraction, the numerator of which is the number of days remaining in the term of such Bankers’ Acceptance and the denominator of which is 365,

with such quotient being rounded up or down to the nearest fifth decimal place and 0.000005 being rounded up,

less the amount of the Acceptance Fee payable to the Lender in respect of, and as a condition precedent to the acceptance or purchase by the Lender of, such Bankers’ Acceptance;

“BA Liabilities” means, at any time and in respect of any Bankers’ Acceptance, the Face Amount thereof if still outstanding and unpaid, whether or not payment thereof is due or, following the maturity thereof, the aggregate unpaid amount of all Reimbursement Obligations at that time due and payable in respect of such Bankers’ Acceptance;

“BA Reference Rate” means, as applicable to any Bankers’ Acceptance being purchased by the Lender on any day, the per annum percentage discount rate (expressed to two decimal places and rounded upward, if necessary, to the nearest 1/100th of 1%), quoted by the Lender as that at which the Lender would, in accordance with its normal practice, on such day be prepared to purchase its own bankers’ acceptances in an amount and having a maturity date comparable to the amount and maturity date of such Bankers’ Acceptance;

“Bankers’ Acceptance” means a Draft of the Borrower denominated in Canadian Dollars which has been accepted and purchased by the Lender pursuant to Article 2;

“Borrower” means Hub International Limited (formerly named “The Hub Group Limited”), a corporation incorporated under the laws of Ontario, and any successor(s) and permitted assign(s) thereof;

“Borrower’s Accounts” means the Canadian Dollar account and U.S. Dollar account to be maintained by the Borrower with the Lender at the Lender’s Branch in accordance with Article 5;

“Business Day” means (i) any day of the year, other than Saturday or Sunday or any other day on which banks are closed for normal business in Toronto, Ontario, (ii) when used in connection with U.S. Base Rate Loans, any day of the year, other than Saturday or Sunday or any other day on which banks are closed for normal business in either Toronto, Ontario or New York, New York, and (iii) when used in connection with LIBOR Loans, any day of the year, other than Saturday or Sunday or any other day on which banks are closed for normal business in any of Toronto, Ontario, New York, New York and London, England, and which is also a day on which dealings in U.S. Dollars may be carried on by and between banks in the London interbank market;

“Canada Treasury Bill Rate” means on any day and for any discount calculation period the rate for Government of Canada Treasury bills for a period approximately equal to such discount calculation period appearing on the “Reuters Screen ISDD Page” (as defined in the International Swaps and Derivatives Association, Inc. definitions, as modified and amended from time to time) at approximately 10:00 a.m. (Toronto, Ontario time) on such day, or if such day is not a Business Day then on the immediately preceding Business Day;

“Canadian Dollars” and the symbols “Can. $” and “Cdn. $” mean lawful money of Canada;

“Canadian Dollar Equivalent” means, at any time, the amount of Canadian Dollars which could be purchased from the Lender by the payment of a specified amount of another currency using the Lender’s relevant spot rate for the sale of Canadian Dollars quoted by the Lender’s treasury department at such time;

7

“Capital Adequacy Guideline” means the capital adequacy requirements from time to time specified by OSFI or any other applicable Governmental Authority and published by it as one or more guidelines for chartered banks in Canada;

“Capital Lease” shall mean, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP;

“Capital Lease Obligation” shall mean, with respect to any Person and a Capital Lease, the amount of the obligation of such Person as the lessee under such Capital Lease which would, in accordance with GAAP, appear as a liability on a balance sheet of such Person;

“CDOR Rate” means, on any day, the annual rate which is the rate determined by the Lender as being the arithmetic average (rounded up or down, if necessary, to the nearest 0.01% and 0.005% being rounded up) of the discount rates applicable to Canadian Dollar bankers’ acceptances for a period of one month appearing on the “Reuters Screen CDOR Page” (as defined in the International Swaps and Derivatives Association, Inc. definitions, as modified and amended from time to time) at approximately 10:00 a.m. on such day, or if such day is not a Business Day then on the immediately preceding Business Day; provided, however, if such rates do not appear on the Reuters Screen CDOR Page for such one month period as contemplated, then the CDOR Rate on any day shall be calculated as the rate as determined by the Lender equal to the BA Reference Rate that would be applicable to any Drafts required to be purchased by the Lender on such day and having a term to maturity of 30 days;

“Claim” means any claim of any nature whatsoever including, without limitation, any demand, liability, obligation, cause of action, suit, proceeding, judgment, award, assessment and reassessment, whether present or future;

“Closing” means the execution and delivery of the Original Credit Agreement and the other Loan Documents by the respective parties thereto;

“Closing Date” means the date on which the Closing occurred;

“Code” shall mean the Internal Revenue Code of 1986 of the United States of America, as amended from time to time, and the rules and regulations promulgated thereunder from time to time;

“Commitment” means the amount of U.S. $75,000,000 or the Canadian Dollar Equivalent thereof, as such amount may be reduced or cancelled from time to time in accordance with the provisions of this Agreement;

“Compensating Amount” has the meaning set out in Section 6.2;

“Compliance Certificate” means, the certificate of the Borrower substantially in the form set out in Schedule 2 delivered pursuant to Section 9.1 and signed on its behalf by its chief financial officer, or any other Senior Officer acceptable to the Lender;

“Consolidated Debt” shall mean, as of any date of determination, the total of all Debt of the Borrower and its Subsidiaries outstanding on such date, after eliminating all offsetting debits and credits between the Borrower and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Borrower and its Subsidiaries in accordance with GAAP;

“Consolidated Net Income” shall mean, with reference to any period, the net income (or loss) of the Borrower and its Subsidiaries for such period (taken as a cumulative whole), as determined in accordance with GAAP, after eliminating all offsetting debits and credits between the Borrower and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Borrower and its Subsidiaries in accordance with GAAP, but excluding, in any event, any extraordinary gains or losses determined in accordance with GAAP;

“Consolidated Net Worth” shall mean, as of any date of determination thereof,

(a) the sum of (i) the par value (or value stated on the books of the corporation) of the share capital (but excluding treasury shares and share capital subscribed and unissued) of the Borrower and its Subsidiaries plus (ii) the amount of the paid-in capital and retained earnings of the Borrower and its Subsidiaries, in

8

	each case as such amounts would be shown on a consolidated balance sheet of the Borrower and its Subsidiaries as of such time prepared in accordance with GAAP, minus
(b)	to the extent included in clause (a) above, all amounts properly attributable to minority interests, if any, in the shares and surplus of Subsidiaries;

“Consolidated Total Assets” shall mean, as of any date of determination, the total assets of the Borrower and its Subsidiaries that would be shown as assets on a consolidated balance sheet of the Borrower and its Subsidiaries as of such time prepared in accordance with GAAP, after eliminating all amounts properly attributable to minority interests, if any, in the shares and surplus of Subsidiaries;

“Consolidated Total Capitalization” shall mean, as of any date of determination, the sum of Consolidated Debt and Consolidated Net Worth;

“Corporate Distribution” means, in respect of any Person:

(a)	any payment, dividend or other distribution on or in respect of securities (whether in the form of debt or equity) issued by such Person;
(b)	any purchase, redemption, retraction or other acquisition by such Person of any of its issued securities (whether in the form of debt or equity), or any purchase by such Person from any of its Affiliates or Subsidiaries or any other Person not dealing at Arm’s-Length with such Person of any securities (whether in the form of debt or equity) issued by such Affiliate or Subsidiary or other Person;
(c)	any consulting, management, administration, service or license fee, royalty or charge or any similar fee or charge paid or payable by such Person to any of its Affiliates or Subsidiaries or any other Person not dealing at Arm’s-Length with such Person;
(d)	any payment by such Person or any of its Subsidiaries on account of any loan or advance owed by such Person to any of its Affiliates or Subsidiaries or any other Person not dealing at Arm’s-Length with such Person; or
(e)	any loan to, or guarantee of the indebtedness of, or other financial assistance provided to, any Person not dealing at Arm’s-Length with such Person;

“Cover” for any BA Liabilities shall be effected by paying to the Lender immediately available and freely transferable funds in Canadian Dollars, in the full amount of such BA Liabilities, which funds shall be held by the Lender in a collateral account maintained by the Lender at the Lender’s Branch to provide for the payment of such BA Liabilities. Such funds shall be retained by the Lender in such collateral account until such time as the applicable Bankers’ Acceptances shall have matured and the related BA Liabilities shall have been fully satisfied; provided, however, that at such time if a Default or an Event of Default has occurred and is continuing, the Lender shall not be required to release any of the said funds in such collateral account until such Default or Event of Default shall have been cured or waived;

“Credit Facility” means the revolving credit facility to be made available to the Borrower hereunder during the Drawdown Period by way of Advances pursuant to Section 2.1 and the Term Obligations resulting from the conversion of Outstanding Principal Obligations to non-revolving term Debt pursuant to Section 2.2;

“Crown” shall mean the Crown in Right of Canada or of any Province or Territory thereof;

“Debt” shall mean, with respect to any Person, without duplication,

(a)	its liabilities for borrowed money;
(b)	its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including, without limitation, all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property);
(c)	its Capital Lease Obligations;

9

(d)	all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities);
(e)	the principal or lease balance outstanding under Synthetic Leases;

(f)    its income-put option liabilities; and

(g) any Guarantee of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof; provided, that Debt shall not include Guaranties of bank loans to officers of the Borrower the proceeds of which are used to purchase shares of the Borrower, in an aggregate principal amount not to exceed U.S. $12,000,000 at any one time outstanding;

Debt of any Person shall include all obligations of such Person of the character described in clauses (a) through (g) to the extent such Person remains legally liable in respect thereof notwithstanding that any such obligation is deemed to be extinguished under GAAP;

“Debt Prepayment Application” shall mean, with respect to any Transfer of property, the application by the Borrower or its Subsidiaries of cash in an amount equal to the Net Proceeds Amount with respect to such Transfer to pay Senior Funded Debt of the Borrower or any Subsidiary (other than Senior Funded Debt owing to the Borrower, any of its Subsidiaries or any Affiliates and Senior Funded Debt in respect of any revolving credit or similar facility providing the Borrower or any of its Subsidiaries with the right to obtain loans or other extensions of credit from time to time, except to the extent that in connection with such payment of Senior Funded Debt the availability under such revolving credit or similar facility is permanently reduced by an amount not less than the amount of such proceeds applied to the payment of such Senior Funded Debt);

“Default” means any event which with the giving of notice, the passage of time, or both, would constitute an Event of Default;

“Disposition Value” shall mean with respect to any property:

(a)

in the case of property that does not constitute Subsidiary Shares, the book value thereof, valued at the time of such disposition in good faith by the Borrower, and

(b)

in the case of property that constitutes Subsidiary Shares, an amount equal to that percentage of book value of the assets of the Subsidiary that issued such shares as is equal to the percentage that the book value of such Subsidiary Shares represents of the book value of all of the outstanding share capital of such Subsidiary (assuming, in making such calculations, that all securities convertible into such share capital are so converted and giving full effect to all transactions that would occur or be required in connection with such conversion) determined at the time of the disposition thereof, in good faith by the Borrower;

“Draft” means at any time a bill of exchange, within the meaning of the Bills of Exchange Act (Canada), drawn by the Borrower on the Lender and bearing such distinguishing letters and numbers as the Lender may determine, but which at such time has not been completed or accepted by the Lender;

“Drawdown Date” means a day which the Borrower has notified the Lender in an Advance Request as the date on which the Borrower requests an Advance in accordance with Article 2;

“Drawdown Period” the period from the Closing Date to 11:00 a.m. (Toronto, Ontario time) on the Term Date;

“EBITDA” shall mean, with respect to any period, the sum of (a) Consolidated Net Income for such period, plus (b) to the extent deducted in the determination of Consolidated Net Income for such period, (i) all Interest Charges during such period, (ii) all depreciation and amortization expenses during such period, (iii) all federal, state and provincial income taxes during such period and (iv) other non-cash expenses during such period, minus (c) to the extent included in the determination of Consolidated Net Income for such period, gains from the sale of capital assets and investments and other income-put option liabilities, all as determined in accordance with GAAP consistently applied;

“Environmental Laws” shall mean any and all federal, state, provincial, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses,

10

agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems;

“ERISA” shall mean the Employee Retirement Income Security Act of 1974 of the United States of America, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect;

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that is treated as a single employer together with the Borrower under Section 414 of the Code;

“Event of Default” means any of the events specified in Section 10.1;

“Face Amount” means in respect of a Bankers’ Acceptance, the amount stated therein to be payable to the holder thereof on its maturity;

“Fair Market Value” shall mean, as of any date of determination thereof and with respect to any property, the sale value of such property that would be realized in an arm’s-length sale at such time between an informed and willing buyer and an informed and willing seller (neither being under a compulsion to buy or sell);

“Fed Funds Rate” means, on any day, the rate equal to the USD-Federal Funds-H.15 rate (as defined in the International Swaps and Derivatives Association, Inc. definitions, as modified and amended from time to time) as of such day, or if such day is not a Business Day then on the immediately preceding Business Day;

“Funded Debt” means, with respect to any Person, all Debt of such Person which by its terms or by the terms of any instrument or agreement relating thereto matures, or which is otherwise payable or unpaid, one year or more from, or is directly or indirectly renewable or extendible at the option of the obligor in respect thereof to a date one year or more (including, without limitation, an option of such obligor under a revolving credit or similar agreement obligating the lender or lenders to extend credit over a period of one year or more) from, the date of any determination thereof;

“GAAP” means generally accepted accounting principles as in effect from time to time as now or hereafter established by the Canadian Institute of Chartered Accountants or any successor thereto;

“Governmental Authority” means any nation or government, and any political subdivision thereof, and any central bank, agency, department, commission, board, bureau, court, tribunal or other entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government;

“Guarantee” shall mean, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Debt, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including, without limitation, obligations incurred through an agreement, contingent or otherwise, by such Person:

(a)	to purchase such Debt or obligation or any property constituting security therefor;
(b)	to advance or supply funds (i) for the purchase or payment of such Debt or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Debt or obligation;
(c)	to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Debt or obligation of the ability of any other Person to make payment of the Debt or obligation; or
(d)	otherwise to assure the owner of such Debt or obligation against loss in respect thereof.
	In any computation of the Debt or other liabilities of the obligor under any Guarantee, the Debt or other obligations that are the subject of such Guarantee shall be assumed to be direct obligations of such obligor.

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“Hazardous Material” shall mean any and all pollutants, toxic or hazardous wastes or any other substances that might pose a hazard to health or safety, the removal of which may be required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is or shall be restricted, prohibited or penalized by any applicable law (including, without limitation, asbestos, urea formaldehyde foam insulation and polychlorinated biphenyls);

“Hostile Acquisition” means an offer to acquire, directly or indirectly and whether by purchase, amalgamation, merger or otherwise, properties, whether held directly or indirectly, or securities of any Person (the “Target”) where (i) in the case of such offer to acquire securities of the Target, the securities subject to such offer and the securities of the Target beneficially owned, directly or indirectly, by the offeror or Affiliates of the offeror or Persons acting in concert with the offeror and its Affiliates, exceed 10% of the then outstanding securities of any class of securities of the Target, (ii) the board of directors or other governing body of the Target has not recommended (at or prior to the time that such offer is made to the holders of the securities subject to such offer or is submitted for consideration by the holders of securities of the Target) acceptance or approval of such offer by such holders, and (iii) the properties or securities that are the subject of such offer to acquire would upon completion of such acquisition constitute a property or group of properties the loss of which would have a Material Adverse Effect;

“Interest Charges” shall mean, with respect to any period, the sum (without duplication) of the following (in each case, eliminating all offsetting debits and credits between the Borrower and its Subsidiaries and all other items required to be eliminated in the course of the preparation of consolidated financial statements of the Borrower and its Subsidiaries in accordance with GAAP): (a) all interest in respect of Debt of the Borrower and its Subsidiaries (including imputed interest on Capital Lease Obligations) deducted in determining Consolidated Net Income for such period, and (b) all debt discount and expense amortized or required to be amortized in the determination of Consolidated Net Income for such period;

“Lease Rentals” shall mean, with respect to any period, the sum of all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Borrower or a Subsidiary, as lessee or sublessee under a lease of property, but shall be exclusive of any amounts required to be paid by the Borrower or a Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under any so-called “percentage leases” shall be computed solely on the basis of the minimum rents, if any, required to be paid by the lessee regardless of sales volume or gross revenues;

“Legal Requirement” means any law, statute, ordinance, decree, requirement, order, judgment, treaty, rule, guideline, bulletin, license, permit or regulation, and any applicable determination, interpretation, ruling, order or decree, of any Governmental Authority or arbitrator, which is binding upon or applicable to the Lender, the Borrower or a Subsidiary of the Borrower, whether presently existing or arising in the future, including without limitation all Guidelines and Bulletins issued by OSFI;

“Lender” means Bank of Montreal and any other bank or financial institution to which a Commitment in the Credit Facility is assigned by the Lender or a further permitted assignee thereof in accordance with Section 11.10, and their respective successors and permitted assigns;

“Lender’s Branch” means the Lender’s main Toronto, Ontario branch, or such other branch of the Lender in Canada as the Lender may from time to time specify to the Borrower;

“LIBO Rate” means, for any LIBOR Period for each LIBOR Loan, the annual rate of interest determined by the Lender as being the rate at which deposits in U.S. Dollars are offered by the Lender in the London interbank market to leading international banks for an amount similar to the principal amount of such LIBOR Loan and having a term similar to such LIBOR Period, such rate to be determined as of 11:00 a.m. London time on the date two Business Days prior to the first day of the LIBOR Period for such LIBOR Loan;

“LIBOR Loan” means any Advance made by the Lender to the Borrower in, or converted into U.S. Dollars, bearing interest by reference to a LIBO Rate;

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“LIBOR Period” means, for each LIBOR Loan, a period (subject to Section 6.1) of one (1), two (2), three (3), six (6), nine (9) or twelve (12) months selected by the Borrower and advised to the Lender by written notice given in accordance with the provisions hereof, commencing with the date on which such LIBOR Loan is made and ending on the last day of such selected period and thereafter each successive period of one (1), two (2), three (3), six (6), nine (9) or twelve (12) months (again subject to Section 6.1) selected by the Borrower and advised to the Lender by written notice given in respect of the continuation of such LIBOR Loan in accordance with the provisions hereof, commencing on the last day of the immediately preceding LIBOR Period in respect of such LIBOR Loan, provided that the last day of a LIBOR Period shall occur on or before the Maturity Date and whenever the last day of a LIBOR Period would otherwise occur on a day other than a Business Day, the last day of such LIBOR Period shall be extended to the next succeeding Business Day unless such extension would cause the last day of such LIBOR Period to occur in the next following calendar month, in which case the last day of such LIBOR Period shall occur on the last preceding Business Day;

“Lien” shall mean, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of shares, shareholder agreements, voting trust agreements and all similar arrangements);

“Loan” means a direct advance of monies hereunder, by way of a Prime Rate Loan, a U.S. Base Rate Loan or a LIBOR Loan;

“Loan Documents” means this Agreement and all other documents, certificates, instruments and agreements to be executed and delivered to the Lender by the Borrower or by any other Person as contemplated hereunder and thereunder;

“Loss” means any loss, cost or expense whatsoever, whether present or future, direct or indirect, including, without limitation, any damages, judgments, penalties, fines, fees, charges, claims, demands, liabilities and any and all legal and other professional fees and disbursements, and, with respect to any Advance by the Lender, any loss, cost or expense incurred by reason of the liquidation or re-employment of deposits or other funds acquired by the Lender to fund or maintain such Advance, except any such loss representing loss of profit;

“Material” shall mean material in relation to the business, operations, affairs, financial condition, assets, properties or prospects of the Borrower and its Subsidiaries, taken as a whole;

“Material Adverse Effect” shall mean a material adverse effect on (a) the business, operations, affairs, financial condition, assets or properties of the Borrower and its Subsidiaries taken as a whole, or (b) the ability of the Borrower to perform its obligations under this Agreement, or (c) the validity or enforceability of this Agreement;

“Material Subsidiary” shall mean, at any time, any Subsidiary that accounts for more than (a) 5% of Consolidated Total Assets determined as of the immediately preceding fiscal quarter or (b) 5% of consolidated revenue of the Borrower and its Subsidiaries determined as of the immediately preceding fiscal year;

“Maturity Date” means at any time the third anniversary of the Term Date;

“Minimum Interest Coverage Ratio” shall mean, as of the date of any determination thereof, the ratio of (a) EBITDA for the period consisting of the immediately preceding four consecutive fiscal quarters of the Borrower ending on, or most recently ended prior to, such date to (b) Interest Charges for such period;

“Multiemployer Plan” shall mean any Plan that is a “multiemployer plan” (as such term is defined in Section 4001(a)(3) of ERISA);

“Net Proceeds Amount” shall mean, with respect to any Transfer of any Property by any Person, an amount equal to the difference of

(a) the aggregate amount of the consideration (valued at the Fair Market Value of such consideration at the time of the consummation of such Transfer) received by such Person in respect of such Transfer, minus

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(b) all ordinary and reasonable out-of-pocket costs and expenses actually incurred by such Person in connection with such Transfer;

“Obligations” means, at any time, the sum of (a) the aggregate principal amount of all Loans advanced to the Borrower and all accrued and unpaid interest thereon outstanding and unpaid at such time, (b) the aggregate BA Liabilities of the Borrower at such time in respect of all Bankers’ Acceptances accepted or purchased by the Lender at or prior to such time, including all accrued and unpaid interest on any then outstanding Reimbursement Obligations in respect of any such Bankers’ Acceptances, and (c) all other then outstanding liabilities, obligations and indebtedness of the Borrower to the Lender under this Agreement or any of the other Loan Documents;

“OSFI” means the Office of the Superintendent of Financial Institutions (Canada);

“Outstanding Principal Obligations” means, at any time, the sum of the aggregate principal amount of all Loans advanced to the Borrower outstanding and unpaid at such time and the aggregate BA Liabilities outstanding and unpaid at such time in respect of Bankers’ Acceptances accepted or purchased by the Lender, all expressed in Canadian Dollars (or the U.S. Dollar Equivalent thereof), with any amount thereof denominated in another currency to be expressed in Canadian Dollars at the Canadian Dollar Equivalent or the U.S. Dollar Equivalent at such time of such amount;

“Past Due Rate” means, on any day, a rate per annum equal to the Prime Rate, in the case of Obligations denominated in Canadian Dollars, and U.S. Base Rate, in the case of Obligations denominated in U.S. Dollars, plus two percent;

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto;

“Permitted Purpose” means the use by the Borrower of the proceeds of any Advance hereunder for general corporate purposes, including property acquisitions (other than Hostile Acquisitions or the payment of any costs, expenses or liabilities arising out of or relating to any Hostile Acquisition) pending receipt by the Borrower of permanent financing for such property acquisitions from capital markets, and for the conversion of Advances to other Advances hereunder;

“Person” includes an individual, partnership, whether general, limited or undeclared, corporation, limited liability corporation, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature;

“Plan” shall mean an “employee benefit plan” subject to Title IV of ERISA or Section 412 of the Code that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Borrower or any ERISA Affiliate or with respect to which the Borrower or any ERISA Affiliate could reasonably be expected to have any liability;

“Prime Rate” means, on any day, the greater of (a) the floating rate of interest per annum announced from time to time by the Lender, and in effect on such day, as the reference rate of interest the Lender will use to determine rates of interest for Canadian Dollar commercial loans made by the Lender to borrowers in Canada, and (b) the rate as determined by the Lender equal to (i) the CDOR Rate, plus (ii) 1.0% per annum;

“Prime Rate Loan” means any Advance made by the Lender to the Borrower in Canadian Dollars bearing interest by reference to the Prime Rate;

“Priority Debt” shall mean, without duplication, the sum of (a) Debt of the Borrower and its Subsidiaries secured by Liens other than Liens permitted by paragraphs (i) through (xi), inclusive, of Section 9.2(f), (b) Debt of Subsidiaries other than Debt permitted by paragraphs (i) through (iii), inclusive, of Section 9.2(c), and (c) Attributable Debt of the Borrower and its Subsidiaries relating to Sale-and-Leaseback Transactions other than Sale-and-Leaseback Transactions permitted by paragraphs (i) through (iii), inclusive, of Section 9.2(i);

“property” or “properties” shall mean, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate;

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“Property Reinvestment Application” shall mean, with respect to any Transfer of property, the application of an amount equal to the Net Proceeds Amount with respect to such Transfer to the acquisition by the Borrower or any Subsidiary of operating assets of the Borrower or any Subsidiary to be used in the principal business of such Person;

“Refunding Bankers’ Acceptance” has the meaning set out in Section 2.10(g);

“Reimbursement Obligations” means, at any time, the obligations of the Borrower to reimburse the Lender in respect of any Bankers’ Acceptance drawn by the Borrower upon the Lender and paid by the Lender on maturity thereof, which remain outstanding and unpaid at such time;

“Renewal Acceptance” has the meaning specified in Section 2.3;

“Renewal Request” has the meaning specified in Section 2.3;

“Restatement Date” means the date as of which the restatement and amendment of the Amended Credit Agreement pursuant to this Agreement occurs;

“Sale-and-Leaseback Transaction” means a transaction or series of transactions pursuant to which the Borrower or any Subsidiary shall sell or transfer to any Person (other than the Borrower or a Wholly-Owned Subsidiary) any property, whether now owned or hereafter acquired, and, as part of the same transaction or series of transactions, the Borrower or any Subsidiary shall rent or lease as lessee (other than pursuant to a Capital Lease), or similarly acquire the right to possession or use of, such property or one or more properties which it intends to use for the same purpose or purposes as such property;

“Senior Debt” in respect of any Person, shall mean, as of the date of any determination thereof, all Debt of such Person other than Subordinated Debt;

“Senior Funded Debt” in respect of any Person, shall mean, as of the date of any determination thereof, all Funded Debt of such Person other than Subordinated Funded Debt;

“Senior Officer” means the president, any executive vice-president, the chief financial officer, principal accounting officer, treasurer, comptroller or the secretary of the Borrower and any other Person designated from time to time as a Senior Officer by the president of the Borrower in writing;

“Standby Fee” has the meaning specified in Section 3.5;

“Subordinated Debt” in respect of any Person, shall mean, as of the date of any determination thereof, all unsecured Debt of such Person which shall contain or have applicable thereto subordination provisions providing for the subordination thereof to other Debt of such Person;

“Subordinated Funded Debt” in respect of any Person, shall mean, as of the date of any determination thereof, all unsecured Funded Debt of such Person which shall contain or have applicable thereto subordination provisions providing for the subordination thereof to other Funded Debt of such Person;

“Subsidiary” shall mean, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Borrower;

“Subsidiary Shares” shall mean, with respect to any Person, the shares (or any options or warrants to purchase shares or other securities exchangeable for or convertible into shares) of any Subsidiary of such Person;

“Successor Corporation” is defined in Section 9.2(g);

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“Synthetic Lease” shall mean any synthetic lease, tax retention operating lease, off-balance sheet loan or similar off-balance sheet financing product, where such transaction is considered debt for borrowed money for tax purposes but is classified as an operating lease in accordance with GAAP;

“Tax” or “Taxes” means all taxes, assessments, levies, imposts, stamp taxes, duties, charges to tax, fees, deductions, withholdings and any restrictions or conditions resulting in a charge imposed, levied, collected, withheld or assessed as of the date of this Agreement or at any time in the future, and all penalty, interest and other payments on or in respect thereof but does not include any tax on the overall income or capital of the Lender;

“Term Credit Period” means the period of time commencing on the Term Date and ending at 11:00 a.m. (Toronto, Ontario time) on the Termination Date;

“Term Date” means the earlier of (a) the date that occurs 364 days after the date of this Agreement or, if such date is extended pursuant to Section 2.3(c), the date to which it has been extended, and (b) the Amortization Date;

“Term Obligations” means the Outstanding Principal Obligations converted to non-revolving term Debt hereunder pursuant to Section 2.2;

“Termination Date” means the earlier of (a) the Maturity Date, and (b) the date on which the Obligations shall automatically, or by virtue of a declaration by the Lender made in accordance with this Agreement, become due and payable;

“Transfer” shall mean, with respect to any Person, any transaction in which such Person sells, conveys, transfers or leases (as lessor) any of its property, including, without limitation, Subsidiary Shares. For purposes of determining the application of the Net Proceeds Amount in respect of any Transfer, the Borrower may designate any Transfer as one or more separate Transfers each yielding a separate Net Proceeds Amount. In any such case, (a) the Disposition Value of any property subject to each such separate Transfer and (b) the amount of Consolidated Total Assets attributable to any property subject to each such separate Transfer shall be determined by ratably allocating the aggregate Disposition Value of, and the aggregate Consolidated Total Assets attributable to, all property subject to all such separate Transfers to each such separate Transfer on a proportionate basis;

“U.S. Base Rate” means, on any day, the greater of (i) the floating rate of interest per annum established or announced from time to time by the Lender, and in effect on such day, as its reference rate for determining rates of interest for U.S. Dollar commercial loans made by the Lender to borrowers in Canada, and (ii) the rate as determined by the Lender equal to (A) the Fed Funds Rate, plus (B) 0.50% per annum;

“U.S. Base Rate Loan” means any Advance made by the Lender to the Borrower in U.S. Dollars bearing interest by reference to the U.S. Base Rate;

“U.S. Dollar Equivalent” means, at any time, the amount of U.S. Dollars which could be purchased from the Lender by the payment of a specified amount of another currency using the Lender’s relevant spot rate for the sale of U.S. Dollars quoted by the Lender’s treasury department at such time;

“U.S. Dollars” and the symbol “U.S. $” mean lawful money of the United States of America in same day immediately available funds or, if such funds are not available, the form of money of the United States of America which is customarily used in the settlement of international banking transactions on that day;

“Wholly-Owned Subsidiary” shall mean any Subsidiary 100% of all of the equity interests (except directors’ qualifying shares) and voting interests of which are owned by any one or more of the Borrower and the Borrower’s other Wholly-Owned Subsidiaries;

“Written” or “in writing” shall include printing, typewriting, or any electronic means of communication capable of being visibly reproduced at the point of reception including telegraph and telecopier.

Section 1.2    Computation of Time Periods.

In this Agreement, in the computation of periods of time from a specified date to a later specified date, unless otherwise expressly stated the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”.

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Section 1.3    Accounting Terms.

Each accounting term, including all defined terms, used in this Agreement shall be construed in accordance with GAAP and in accordance with the auditing and accounting recommendations and guidelines issued from time to time by the Canadian Institute of Chartered Accountants, as amended from time to time, unless something in the subject matter or the context otherwise is inconsistent therewith.

Section 1.4    Extended Meanings.

Unless otherwise specified, any reference in this Agreement to any statute will include all regulations made thereunder or in connection therewith from time to time, and will include such statute as the same may be amended, supplemented or replaced from time to time. Every use of the word “including” herein shall be construed as meaning “including, without limitation”.

Section 1.5    Incorporation of Schedules.

The following Schedules annexed hereto shall, for all purposes hereof, form an integral part of this Agreement:

Schedule 1    Form of Advance Request

Schedule 2    Form of Compliance Certificate

Schedule 8.1(g)  Ownership of Property

Schedule 8.1(h)  Subsidiaries

Schedule 8.1(i)  Outstanding Debt

Schedule 8.1(k)  Litigation

Schedule 8.1(l)  Financial Statements

Section 1.6    Headings and Table of Contents.

The inclusion of headings and a table of contents in this Agreement is intended for convenience of reference only and shall not affect in any way the construction or interpretation hereof.

Section 1.7    Singular, Plural, Gender

As used herein, gender is used as a reference term only and applies with the same effect whether the parties are masculine, feminine, corporate or other form, and the singular shall include the plural and the plural the singular, as the context shall require.

Section 1.8    Conflict.

In the event of a conflict between the provisions of this Agreement and the provisions of any of the other Loan Documents, the provisions of this Agreement shall prevail.

Section 1.9    Currency.

Unless otherwise expressly stated, any reference herein to any sum of money herein shall be construed as a reference to Canadian Dollars. Whenever any limitation herein is expressed in U.S. Dollars the limitation shall apply and include the Canadian Dollar Equivalent thereof and the equivalent thereof in all other currencies. Whenever any limitation herein is expressed in Canadian Dollars the limitation shall apply and include the U.S. Dollar Equivalent thereof and the equivalent thereof in all other currencies. Any amount denominated in another currency required herein to be expressed at any time in Canadian Dollars or U.S. Dollars shall be so expressed as the Canadian Dollar Equivalent or the U.S. Dollar Equivalent, as the case may be, at such time of such amount.

Section 1.10    Time.

Unless otherwise expressly stated, any reference herein to time shall be construed as a reference to local time in Toronto, Ontario, Canada, and time is and shall be construed to be of the essence.

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Section 1.11    Control.

Unless otherwise expressly stated, any reference herein to “control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise and the expressions “controlled by” and “under common control” shall have correlative meanings.

Section 1.12    Wholly Owned Subsidiary.

Unless otherwise expressly stated, any reference herein to a wholly owned Subsidiary of a Person shall mean a Subsidiary of such Person where such Person is the beneficial owner, directly or indirectly, of all of the issued and outstanding shares in the capital of such Subsidiary, other than qualifying shares of such Subsidiary required by any applicable Legal Requirement to be held by any directors or nominee directors, and any reference herein to the ownership of all of the issued and outstanding shares in the capital of a Person shall exclude qualifying shares of such Person required by any applicable Legal Requirement to be held by any directors or nominee directors.

Section 1.13    References to Conversion of Advances.

References to “convert” and “conversion”, and other similar terms, in the context of Advances or Types of Advances, shall, unless the context otherwise requires, mean and refer to an election to have the Outstanding Principal Obligations of the referenced Advance or Type of Advance bear interest or fees on a different basis or fixed rate henceforth and so on from time to time, and any reference to the conversion of an Advance or Type of Advance to another Advance or Type of Advance includes, without limitation, issue of Refunding Bankers’ Acceptances to provide for the payment of maturing Bankers’ Acceptances and the continuation of a LIBOR Loan upon the expiry of the then current LIBOR Period for a successive LIBOR Period.

ARTICLE 2

THE CREDIT FACILITIES

Section 2.1    Credit Facility.

Upon and subject to the terms and conditions of this Agreement, the Lender agrees to extend to the Borrower a revolving credit facility available from time to time during the Drawdown Period by way of Advances in an aggregate principal amount such that the maximum aggregate amount of Outstanding Principal Obligations for all Advances made by the Lender under the Credit Facility (after giving effect to the making of any such Advances, all repayments of Outstanding Principal Obligations made concurrently with making any such Advances and any conversion of outstanding Advances from one Advance to another in accordance with Section 2.8) shall not exceed at any time an amount equal at such time to the Commitment, provided that the aggregate principal amount of all Advances by way of overdrafts shall not exceed at any time the maximum aggregate amount of Cdn. $10,000,000. The Borrower may borrow, prepay in whole or in part and reborrow Advances during the Drawdown Period, all in accordance with the terms and conditions hereof.

Section 2.2    Drawdown Availability.

Subject to the terms and conditions of this Agreement:

(a)	the Drawdown Period shall terminate at 11:00 a.m. (Toronto, Ontario time) on the Term Date;
(b)	from and after such time on the Term Date, the Borrower shall cease to be entitled to obtain any further Advance under the Credit Facility, subject to conversion of any Term Obligations outstanding by way of Advances under the Credit Facility from one Advance to another in accordance with Section 2.4;
(c)	provided that no Event of Default has occurred and is continuing, the Outstanding Principal Obligations outstanding as of the Term Date shall be automatically converted as of such time on such Term Date into Term Obligations under the Credit Facility;

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(d)	the Outstanding Principal Obligations so converted shall be subject to the terms and conditions applicable to Term Obligations under the Credit Facility pursuant to this Agreement; and
(e)	on such Term Date the Commitment in excess of the Outstanding Principal Obligations so converted to Term Obligations under the Credit Facility shall automatically be cancelled on a permanent basis.

Section 2.3    Renewal of Drawdown Period.

(a)	The Borrower may request prior to the occurrence of the Amortization Date that the Lender agree to a renewal of the Drawdown Period for an additional period of 364 days upon the terms and conditions of this Section 2.3 by notice in writing (a “Renewal Request”) to the Lender given not less than 60 days nor more than 75 days prior to the then current Term Date.
(b)	Upon receipt of any Renewal Request from the Borrower, the Lender shall undertake a credit assessment of the Borrower consistent with the Lender’s then current credit standards and practices and when the Lender decides, in its sole and total discretion, to renew or not to renew the Drawdown Period for an additional 364 day period, the Lender shall give the Borrower notice in writing of its decision not less than 30 days prior to the then current Term Date.
(c)	If the Lender gives the Borrower a notice in writing (a “Renewal Acceptance”) as provided above that the Lender has agreed in its sole and total discretion to renew the Drawdown Period for an additional 364 day period, then on and as of the date such Renewal Acceptance is given to the Borrower, the Term Date will automatically be extended to the date that occurs 364 days after the date such Renewal Acceptance is given to and deemed to have been received by the Borrower pursuant to the terms of this Agreement.
(d)	If (i) the Lender fails to advise the Borrower of its decision as provided above, or (ii) the Lender shall give the Borrower notice in writing of its decision not to renew the Drawdown Period pursuant to such Renewal Request, the provisions of Section 2.2 shall continue to apply to the Credit Facility up until the then current Term Date and the Borrower may continue to obtain further Advances during the Drawdown Period ending on the then current Term Date upon and subject to the terms and conditions of this Agreement.
(e)	The Borrower acknowledges that (i) the Lender has not made any representations to the Borrower regarding its intention to renew the Drawdown Period as set forth in this Section 2.3 and that the Lender shall not have any obligation to renew the Drawdown Period, and (ii) no extension of the Term Date or renewal of the Drawdown Period pursuant to this Section 2.3 shall extend the Term Date or renew the Drawdown Period beyond the Amortization Date.

Section 2.4    Term Obligations.

During the Term Credit Period, and subject to the terms and conditions hereof, including without limitation the provisions of Section 2.8, Section 3.7 and Article 7, the Borrower shall be entitled to convert, in whole or in part, any Term Obligation outstanding by way of an Advance under the Credit Facility to any other Advance under the Credit Facility, provided that, in the case of a LIBOR Loan, the last day of the applicable LIBOR Period shall not occur, and, in the case of a BA Advance, the Bankers’ Acceptances comprising such BA Advance shall not mature, beyond any date on which a scheduled repayment of Outstanding Principal Obligations in respect of the Credit Facility is required to be made pursuant to Article 4 if after giving effect to such Advance the Outstanding Principal Obligations in respect of LIBOR Loans and BA Advances which would mature after such date and all other Outstanding Principal Obligations under the Credit Facility would exceed the Commitment, after giving effect to such repayment. Subject to any such conversion, any payment made on account of Term Obligations shall constitute a permanent reduction in the Commitment and may not be reborrowed by the Borrower hereunder.

Section 2.5    Advance Requests.

The Borrower if it wishes to obtain an Advance under the Credit Facility, or to convert an existing Advance under the Credit Facility to another Advance under the Credit Facility, shall deliver to the Lender an Advance Request in

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writing, substantially in the form of Schedule 1 hereto, in respect of such Advance not later than 11:00 a.m. (Toronto, Ontario time):

(a)	in the case of any Advance by way of LIBOR Loan, three Business Days prior to the proposed date of such Advance;
(b)	in the case of any aggregate Advance by way of Prime Rate Loan, U.S. Base Rate Loan or BA Advance of Cdn. $10,000,000 or more, three Business Days prior to the proposed date of such Advance; and
(c)	in the case of any other Advance, one Business Day prior to the proposed date of such Advance, except that in the case of any Prime Rate Loan or U.S. Base Rate Loan of $10,000,000 or less requested by a Borrower by way of overdraft in any of its accounts with the Lender, the Borrower shall use its best efforts to deliver to the Lender in a reasonably timely manner (which may be on the proposed date of such Advance) an Advance Request by telephone or telecopy notice (or such other method of notification as may be agreed upon between the Lender and the Borrower), provided that the Lender shall have no obligation to advance such Advance unless the Lender has received at least one hour prior to the time of the advance of such Advance an Advance Request in writing, substantially in the form of Schedule 1 hereto, in respect of such Advance,

specifying the date of the Advance, which date shall be a Business Day in respect of such Advance, the Type of Advance, the aggregate amount thereof and (in the case of a BA Advance) the term or terms to maturity of the requested Bankers’ Acceptances or (in the case of a LIBOR Loan) the requested LIBOR Period.

Any such Advance Request, once delivered by the Borrower to the Lender, shall be binding, and (subject to the conditions precedent provided for herein conditioning the Borrower’s right to obtain the requested, or any, Advance), the Borrower shall be obligated to take the requested Advance on the date specified in such Advance Request. The Lender may rely and act upon, and shall incur no liability under or in respect of this Agreement by in good faith relying or acting upon, any Advance Request under this Section 2.5 given by telephone or telecopier (or other method of notification as may be agreed upon between the Lender and the Borrower) believed by the Lender to be genuine (without any verification inquiries) and to be signed or sent or given on behalf of the Borrower or by acting upon any representation or warranty of the Borrower made or deemed to be made hereunder by reason of or as a result of such Advance Request.

Section 2.6    Advances under the Credit Facility.

The aggregate of all Loans to be made by the Lender in connection with any particular Advance under the Credit Facility, shall not be less than the lesser of (i) the aggregate amount of the Commitment in respect of the Credit Facility not utilized by way of outstanding Advances, and (ii) an integral multiple of Cdn. $1,000,000, in the case of a Prime Rate Loan, or an integral multiple of U.S. $1,000,000, in the case of a U.S. Base Rate Loan or a LIBOR Loan.

Section 2.7    Currency.

Subject to Sections 6.1, 10.4 and 10.5, Advances under the Credit Facility shall only be denominated, at the option of the Borrower, in Canadian Dollars or U.S. Dollars, and any Advance denominated in either such currency shall be repayable, and all interest and fees in respect thereof or in connection therewith shall accrue and be payable, by the Borrower in like currency.

Section 2.8    Conversion of Advance.

Subject to the terms and conditions hereof, the Borrower shall be entitled from time to time to convert any outstanding Advance to any other Advance or Type of Advance under the Credit Facility by giving notice thereof to the Lender in accordance with Section 2.5, provided that:

(a)	such conversion does not result in the Outstanding Principal Obligations exceeding the then current Commitment of the Lender;
(b)	no such conversion of a BA Advance shall be made or purported to be made prior to the maturity date of any Bankers’ Acceptance purchased or issued hereunder in respect of such BA Advance; and

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(c) no such conversion of a LIBOR Loan shall be made or purported to be made prior to the last day of the LIBOR Period applicable to such LIBOR Loan.

Any Advance so converted shall cease to bear interest and fees as the former Advance, and shall begin to bear interest and fees as the new Advance, on and as of the date of such conversion. If the Borrower gives notice to the Lender that all or any portion of the principal amount of, or the BA Discount Proceeds in respect of, any new Advance to be advanced by the Lender to the Borrower is to be applied to repay Outstanding Principal Obligations in respect of any outstanding Advance, the Lender shall directly apply such amount to repay such Outstanding Principal Obligations owing to the Lender in satisfaction and discharge of the Lender’s obligations hereunder to deposit such amount into the Borrower’s Account.

Section 2.9    LIBOR Maturity.

Any LIBOR Loan in respect of which the Borrower shall not have given notice of the conversion of such outstanding LIBOR Loan to another Advance in accordance with Section 2.5 shall automatically be converted to a U.S. Base Rate Loan upon the expiry of the then current LIBOR Period. Should the Borrower not be entitled to a U.S. Base Rate Loan at all or in an amount sufficient to fully repay the principal of, and accrued and unpaid interest on, such outstanding LIBOR Loan, such principal and interest shall be due and payable on the expiry of the then current LIBOR Period and shall bear interest in accordance with Section 3.2.

Section 2.10    Certain Provisions Relating to Bankers’ Acceptances.

(a)	Bankers’ Acceptances shall be issued and shall mature on a Business Day. Each Bankers’ Acceptance shall have a term of at least 30 days and not more than 364 days excluding days of grace, shall mature on or before the Maturity Date and shall be in form and substance satisfactory to the Lender. No Bankers’ Acceptance may be made or accepted on or after the Termination Date, nor may any Bankers’ Acceptance be prepaid, whether pursuant to Section 4.2 or otherwise, or converted to another Type of Advance, prior to the maturity date of such Bankers’ Acceptance.
(b)	To facilitate the acceptance of Bankers’ Acceptances under this Agreement, the Borrower shall, upon execution of this Agreement and from time to time as required, provide to the Lender Drafts, in form satisfactory to the Lender, duly executed and endorsed in blank by the Borrower in quantities sufficient for the Lender to fulfill its obligations hereunder. In addition, the Borrower hereby appoints the Lender as its attorney to sign and endorse on its behalf, in handwriting or by facsimile or mechanical signature as and when deemed necessary by the Lender, blank forms of Bankers’ Acceptances and the Borrower shall deliver to the Lender powers of attorney, in form satisfactory to the Lender, whereby the Borrower appoints the Lender as its attorney to sign and endorse on its behalf, in handwriting or by facsimile or mechanical signature blank forms of Bankers’ Acceptances in accordance with the terms of such powers of attorney. The Borrower recognizes and agrees that all Bankers’ Acceptances signed and/or endorsed on its behalf by the Lender shall bind the Borrower as fully and effectually as if signed in the handwriting of and duly issued by the proper signing officer of the Borrower. The Lender is hereby authorized to issue such Bankers’ Acceptances endorsed in blank in such Face Amounts as may be determined by the Lender provided that the aggregate amount thereof is equal to the aggregate Face Amount of Bankers’ Acceptances required to be accepted by the Lender. The Lender shall not be responsible or liable for its failure to accept a Bankers’ Acceptance if the cause of such failure is, in whole or in part, due to the failure of the Borrower to provide duly executed and endorsed Drafts to the Lender on a timely basis nor shall the Lender be liable for any damage, loss or other claim arising by reason of any loss or improper use of any such instrument except loss or improper use arising by reason of the gross negligence or willful misconduct of the Lender, its officers, employees, agents or representatives. The Lender shall maintain a record with respect to Bankers’ Acceptances (i) received by it from the Borrower in blank hereunder, (ii) voided by it for any reason, (iii) accepted by it hereunder, (iv) purchased by it hereunder, and (v) cancelled at their respective maturities.
(c)	Drafts of the Borrower to be accepted as Bankers’ Acceptances hereunder shall be duly executed by a duly authorized officer of the Borrower. Notwithstanding that any person whose signature appears on any Bankers’ Acceptance as a signatory for the Borrower may no longer be an authorized signatory for the Borrower at the

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	date of issuance of a Bankers’ Acceptance, such signature shall nevertheless be valid and sufficient for all purposes as if such authority had remained in force at the time of such issuance and any such Bankers’ Acceptance so signed shall be binding on the Borrower.
(d)	On the requested date of Advance, the Lender agrees to purchase from the Borrower, at the face amount thereof discounted by the BA Reference Rate, any Bankers’ Acceptance accepted by it and provide to the Borrower, the amount of the BA Discount Proceeds in respect thereof, which amount (for greater certainty) shall be net of the amount of the Acceptance Fee payable by the Borrower to the Lender under Section 3.4 in respect of such Bankers’ Acceptance.
(e)	The Lender may at any time and from time to time hold, sell, rediscount or otherwise dispose of any or all Bankers’ Acceptances accepted and purchased by it.
(f)	The Borrower waives presentment for payment and any other defense to payment of any amounts due to the Lender in respect of a Bankers’ Acceptance accepted by it pursuant to this Agreement which might exist solely by reason of such Bankers’ Acceptance being held, at the maturity thereof, by the Lender in its own right and the Borrower agrees not to claim any days of grace if the Lender as holder sues the Borrower on any such Bankers’ Acceptance for payment of the amount payable by the Borrower thereunder.
(g)	With respect to each Bankers’ Acceptance, the Borrower, prior to the occurrence and continuation of a Default or an Event of Default, may give irrevocable written notice by means of an Advance Request (or such other method of notification as may be agreed upon between the Lender and the Borrower) to the Lender at or before 11:00 a.m. (Toronto, Ontario time) not less than two Business Days prior to the maturity date of such Bankers’ Acceptance of the Borrower’s intention to issue one or more Bankers’ Acceptances on such maturity date (each a “Refunding Bankers’ Acceptance”) to provide for the payment of such maturing Bankers’ Acceptance (it being understood that payments by the Borrower and fundings by the Lender in respect of each maturing Bankers’ Acceptance and each related Refunding Bankers’ Acceptance shall be made on a net basis reflecting the difference between the Face Amount of such maturing Bankers’ Acceptance and the BA Discount Proceeds (net of the applicable Acceptance Fee) of such Refunding Bankers’ Acceptance). Any funding on account of any maturing Bankers’ Acceptance must be made at or before 11:00 a.m. (Toronto, Ontario time) on the maturity date of such Bankers Acceptance. If the Borrower fails to give such notice, then subject to satisfaction of the conditions in Section VII hereof, the Borrower shall be irrevocably deemed to have requested and to have been advanced a Prime Rate Loan in the Face Amount of such maturing Bankers’ Acceptance on the maturity date of such Bankers’ Acceptance from the Lender, which Prime Rate Loan shall thereafter bear interest as such in accordance with the provisions hereof until paid in full. Should the Borrower not be entitled to a Prime Rate Loan at all or in an amount sufficient to fully reimburse the Lender for the Face Amount of a matured Bankers’ Acceptance, the Face Amount of such Bankers’ Acceptance shall constitute Reimbursement Obligations of the Borrower to the Lender and shall bear interest in accordance with Section 3.6.
(h)	If the Lender determines in good faith, which determination shall be final, conclusive and binding upon the Borrower, and notifies the Borrower that, by reason of circumstances affecting the money market, there is no competitive market for Bankers’ Acceptances, then,

(i)	the right of the Borrower to request an Advance by way of Bankers’ Acceptances shall be suspended until the Lender determines that the circumstances causing such suspension no longer exist and the Lender so notifies the Borrower; and
(ii)	any Advance Request which is outstanding shall be deemed to constitute a request for an Advance by way of a Prime Rate Loan.

(i)	The Lender shall promptly notify the Borrower of the suspension of the Borrower’s right to request an Advance by way of Bankers’ Acceptances and of the termination of any such suspension.
(j)	If an Event of Default shall have occurred and then be continuing (whether or not any declaration pursuant to Article 10 is made), the Borrower shall forthwith provide Cover to, and thereafter shall maintain Cover with, the Lender in respect of all outstanding Bankers’ Acceptances.

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(k) Bankers’ Acceptances accepted or purchased by the Lender under this Agreement may, at the option of the Lender, be issued in the form of a “depository bill” and deposited with a “clearing house”, as each such term is defined in the Depository Bills and Notes Act (Canada).

Section 2.11    Reduction or Termination of Commitment.

(a)

The Borrower shall have the right, exercisable by it at any time and from time to time upon not less than three Business Days prior written notice to the Lender and without penalty, but subject to the terms of this Section 2.11, to terminate any portion of the Commitment in respect of the Credit Facility not being used by the Borrower, provided that any such partial termination shall be in an amount not less than the lesser of (i) Cdn. $1,000,000 and integral multiples thereof, and (ii) the entire amount of the unused Commitment. Notwithstanding the foregoing, the Borrower shall not be entitled to thereby (i) reduce the Commitment of the Lender below the then Outstanding Principal Obligations under the Credit Facility, or (ii) to prepay any outstanding BA Advance or LIBOR Loan, unless the Borrower shall pay to the Lender all interest accrued to the date of such prepayment on the Advances so prepaid, provide Cover to and thereafter maintain Cover with, the Lender in respect of all outstanding Bankers’ Acceptances related to such BA Advances and on demand pay to the Lender any additional amounts payable pursuant to Section 11.7. No such reduction or termination of the Commitment in respect of the Credit Facility pursuant to this Section may be reinstated without the prior written approval of the Lender. Concurrently with the giving of any such notice, the Borrower shall prepay the Standby Fee that will have accrued due on the amount of the terminated portion of the Commitment to the effective date of such termination.

(b)

On the Termination Date in respect of the Credit Facility, all Commitments in respect of the Credit Facility shall be terminated in their entirety.

Section 2.12    Use of Proceeds.

The proceeds of the Advances shall be used by the Borrower only for Permitted Purposes, provided that as against the Borrower and any other Person, the Lender shall not have any responsibility as to the use of any such proceeds.

ARTICLE 3

INTEREST AND FEES

Section 3.1    Interest on Prime Rate Loans.

The Borrower shall pay interest on the outstanding principal amount of each Prime Rate Loan outstanding under the Credit Facility from the date on which such Prime Rate Loan was made until such outstanding principal amount shall have been repaid in full, and both before and after maturity, default and judgment, at a floating rate per annum equal to the Prime Rate in effect from time to time plus the Applicable Margin in respect of Prime Rate Loans in effect from time to time, calculated daily and compounded and payable (a) monthly in arrears on the last Business Day of each month of each year, and (b) on the date on which such Prime Rate Loan becomes due and payable or is converted to another Type of Advance as contemplated by Article 2, in each case based on the actual number of days elapsed and a year of 365 or 366 days, as the case may be.

Section 3.2    Interest on U.S. Base Rate Loans.

The Borrower shall pay interest on the outstanding principal amount of each U.S. Base Rate Loan outstanding under the Credit Facility from the date on which such U.S. Base Rate Loan was made until such outstanding principal amount shall have been repaid in full, and both before and after maturity, default and judgment, at a floating rate per annum equal to the sum of the U.S. Base Rate in effect from time to time plus the Applicable Margin in respect of U.S. Base Rate Loans in effect from time to time, calculated daily and compounded and payable (a) monthly in arrears on the last Business Day of each month of each year, and (b) on the date on which such U.S. Base Rate Loan becomes due and payable or is converted to another Type of Advance as contemplated by Article 2, in each case based on the actual number of days elapsed and a year of 365 or 366 days, as the case may be.

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Section 3.3    Interest on LIBOR Loans.

The Borrower shall pay interest on the outstanding principal amount of each LIBOR Loan outstanding under the Credit Facility from the date on which such LIBOR Loan was made until such outstanding principal amount shall have been repaid in full, and both before and after maturity, default and judgement, at a rate per annum equal at all times during each LIBOR Period for such LIBOR Loan to the sum of the LIBO Rate for such LIBOR Period plus the Applicable Margin in respect of LIBOR Loans in effect from time to time, in each case calculated daily and compounded and payable (a) in arrears on the last day of such LIBOR Period unless such LIBOR Period is greater than 90 days, in which case such interest shall be calculated daily and compounded and payable quarterly in arrears as well as on the last day of such LIBOR Period, and (b) on the date on which such LIBOR Loan otherwise becomes due and payable or is converted to another Type of Advance as contemplated by Article 2, in each case based on the actual number of days elapsed and a year of 360 days.

Section 3.4    Acceptance Fee.

The Borrower shall pay the Lender a fee equal to the Applicable Margin in respect of BA Advances in effect from time to time of the Face Amount of each Bankers’ Acceptance accepted or purchased by the Lender multiplied by a fraction the numerator of which is the term to maturity of such Bankers’ Acceptance, expressed in days, and the denominator of which is 365 (or 366 during a year of 366 days), which fee shall be paid as a condition precedent to any obligation on the part of the Lender to accept or purchase such Bankers’ Acceptance. If at the time of an increase in the Applicable Margin in respect of BA Advances there exists any outstanding BA Advance, then the Borrower shall pay to the Lenders an amount in respect of such BA Advance equal to the product obtained by multiplying (i) the product of (A) the difference between the Applicable Margin in respect of BA Advances in effect prior to such change in the Applicable Margin in respect of BA Advances and the Applicable Margin in respect of BA Advances in effect immediately after such change, and (B) the aggregate Face Amount of the Bankers’ Acceptances in respect of such BA Advance, by (ii) the quotient obtained by dividing (A) the number of days to maturity remaining in respect of such BA Advance at such time, by (B) 365 days. Any payment in respect of an outstanding BA Advance as a result of a change in the Applicable Margin in respect of BA Advances shall be paid on the maturity date of the Bankers’ Acceptances in respect of such BA Advance.

Section 3.5    Standby Fee.

The Borrower shall pay the Lender a standby fee in respect of the Credit Facility at the rate of 0.2% per annum (based on a year of 365 or 366 days, as the case may be) on the Available Commitment, expressed in Canadian Dollars and calculated on a daily basis and compounded and payable quarterly in arrears on the last Business Day of January, April, July and October in each year and on the Termination Date.

Section 3.6    Reimbursement Obligations.

The amount of any Reimbursement Obligation may, if the applicable conditions precedent specified in Article 7 hereof have been satisfied, be paid with the proceeds of Prime Rate Loans or, as provided in Section 2.10(g), by the purchase of Refunding Bankers’ Acceptances. Pending any such repayment in full, the Borrower shall pay to the Lender interest on any Reimbursement Obligation at the Past Due Rate, from and including the date on which such Reimbursement Obligations arose to the date of payment in full, calculated daily and compounded monthly in arrears based on the number of days elapsed and a year of 365 or 366 days, as the case may be, and payable on demand, both before and after judgement in respect thereof.

Section 3.7    Fixed Rate Option

Subject to the availability of fixed rate funds, the Borrower may, at its option, provided that such option may be exercised only once by notice in writing to the Lender given not more than 30 days prior to the Term Date or during the Term Credit Period, request the Lender to fix the rate at which all, but not less than all, of the Term Obligations shall bear interest during the then remaining Term Credit Period, which fixed rate shall be equal to (i) the annual rate of interest equal to the Canadian Dollar interest swap rate quoted by the Lender for the then remaining Term Credit Period as of the later of (A) the Term Date, and (B) any date within 30 days after the date such notice is given to the Lender specified by the Borrower in such notice, plus (ii) 1.375% per annum. Interest

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payable at such fixed rate shall be compounded and payable (a) monthly in arrears on the last Business Day of each month of each year, and (b) on the date on which such Term Obligations become due and payable, in each case based on the actual number of days elapsed and a year of 365 or 366 days, as the case may be. Any interest payable at such fixed rate not paid on the date it is due and payable pursuant to this Section 3.7 shall bear interest from such date at the Past Due Rate. Upon the exercise by the Borrower of its option pursuant to this Section 3.7 all rights or entitlements of the Borrower to convert, in whole or in part, any Term Obligation to any other Advance or Type of Advance under the Credit Facility shall be permanently terminated.

Section 3.8    Yearly Rate Statements.

For the purpose of complying with the Interest Act (Canada), it is expressly stated that:

(a)	where interest is calculated pursuant hereto at a rate based on a 365 day period, the yearly rate or percentage of interest to which such rate is equivalent is such rate multiplied by the actual number of days in the year (365 or 366, as the case may be) divided by 365;
(b)	where interest is calculated pursuant hereto at a rate based on a 360 day period, the yearly rate or percentage of interest to which such rate is equivalent is such rate multiplied by the actual number of days in the year (365 or 366, as the case may be) divided by 360; and
(c)	the rates of interest specified in this Agreement are nominal rates and not effective rates or yields and the parties hereto acknowledge that there is a material distinction between the nominal and effective rates of interest, that they are capable of making the calculations necessary to compare such rates and that the principle of deemed reinvestment of interest shall not apply to any calculations of interest hereunder.

ARTICLE 4

REPAYMENT OF OBLIGATIONS

Section 4.1    Repayment on Maturity.

The Obligations shall become due and payable, and shall be paid in full, on the Termination Date.

Section 4.2    Voluntary Repayment

Subject to the terms and conditions hereof, the Borrower may, without bonus or penalty, upon prior written notice to the Lender specifying the proposed date and aggregate principal amount of the prepayment and the Advance or Advances on account of which such prepayment is to be applied, prepay the specified principal amount on account of the then Outstanding Principal Obligations under the Credit Facility, together with all accrued interest to the date of such prepayment on the specified principal amount so prepaid and any other amounts payable to the Lender by the Borrower hereunder in respect thereof including, without limitation, pursuant to Section 11.7. Such notice shall be given at or before 11:00 a.m. (Toronto, Ontario time) not less than three Business Days, in the case of a prepayment of Cdn. $10,000,000 or more, and in any other case, not less than one Business Day, prior to the proposed date of prepayment and, once given, any such notice shall be irrevocable and binding upon the Borrower. Notwithstanding the foregoing, the Borrower shall not be entitled to prepay any outstanding BA Advance or LIBOR Loan, unless the Borrower shall pay to the Lender all interest accrued to the date of such prepayment on the Advances so prepaid, provide Cover to and thereafter maintain Cover with, the Lender in respect of all outstanding Bankers’ Acceptances related to such BA Advances and on demand pay to the Lender any additional amounts payable pursuant to Section 11.7, nor shall the Borrower be entitled to give any such notice or to make any such prepayment unless each partial prepayment is in an aggregate principal amount of not less than Cdn. $1,000,000.

Section 4.3    Mandatory Repayment of Credit Facility.

Subject to the terms and conditions hereof, the Outstanding Principal Obligations under the Credit Facility shall be repaid forthwith, upon demand by or on behalf of the Lender, to the extent that the Outstanding Principal Obligations under the Credit Facility exceed the then current Commitment in respect of the Credit Facility, whether as a result of oversight or otherwise, together with all accrued interest to the date of such repayment on the

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principal amount so repaid and any other amounts payable to the Lender by the Borrower hereunder in respect thereof including, without limitation, pursuant to Section 11.7, provided that any such repayment of the Outstanding Principal Obligations in respect of any BA Advance shall be discounted for the period to the maturity of the Bankers’ Acceptances outstanding in respect of such BA Advance at the Canada Treasury Bill Rate for such discount calculation period in effect on the date of such repayment.

Section 4.4    Scheduled Repayment of Obligations.

Subject to the Lender’s rights of acceleration pursuant to Article 10 and without limiting Section 4.1:

(a)  if the Amortization Date does not occur, the Outstanding Principal Obligations shall be repaid by the Borrower in full on the Maturity Date; or

(b) if the Amortization Date occurs, the Borrower shall repay Outstanding Principal Obligations in:

(i)	two equal semi-annual payments on the first and second semi-annual anniversaries of the Amortization Date, in an aggregate amount equal to 15% of the aggregate Outstanding Principal Obligations as of the Amortization Date; plus
(ii)	two equal semi-annual payments on the third and fourth semi-annual anniversaries of the Amortization Date, in an aggregate amount equal to an additional 25% of the aggregate Outstanding Principal Obligations as of the Amortization Date, plus
(iii)	in two equal semi-annual payments on the fifth and sixth semi-annual anniversaries of the Amortization Date, in an aggregate amount equal to the aggregate Outstanding Principal Obligations remaining unpaid immediately prior to such fifth semi-annual anniversary,

provided that, notwithstanding the foregoing, if the Amortization Date occurs after the Term Date and the Maturity Date therefore occurs prior to one or more of the semi-annual payment dates referred to above, the Outstanding Principal Obligations remaining unpaid on the Maturity Date shall be due and payable, and shall be repaid by the Borrower, in full on the Maturity Date.

ARTICLE 5

PAYMENTS AND ACCOUNTS

Section 5.1    Maintenance of Accounts.

The Borrower shall open in its name and maintain the Borrower’s Accounts with the Lender at the Lender’s Branch.

Section 5.2    Payments by Borrower.

Any payment by the Borrower on account of any amount due and payable by it hereunder, whether on account of principal, interest, fees, costs and expenses or otherwise, shall be made by the Borrower in the currency in which such payment is due in immediately available funds to the Lender at the Lender’s Branch. No payment by the Borrower shall be effective until such time as it is so paid to the Lender at the Lender’s Branch. The Borrower shall make all payments hereunder regardless of any counterclaim, compensation or set-off rights of the Borrower.

Section 5.3    Due Date of Payments.

Whenever any payment hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day, and such extension of time shall in such case be included in the computation of interest or fees, as the case may be, payable on such date, provided that if any such extension would cause repayment of the principal of or interest on a LIBOR Loan to be made in the next following calendar month, such payment shall be made on the last preceding Business Day with interest payments adjusted accordingly.

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Section 5.4    Time of Payments.

All payments to be made by the Borrower to the Lender shall be paid in immediately available funds no later than 11:00 a.m. (Toronto, Ontario time) on the date of payment in order to obtain same day credit. Any such payment so paid after such time on such date shall be deemed to have been paid on the next following Business Day.

Section 5.5    Form and Amount of Payments.

All amounts due hereunder, whether for principal, interest, or otherwise, in respect of any Advance denominated in Canadian Dollars shall be paid in full by the Borrower in Canadian Dollars, and all amounts due hereunder, whether for principal, interest fees or otherwise, in respect of any Advance denominated in U.S. Dollars shall be paid in full in U.S. Dollars, and all amounts due hereunder in respect of costs and expenses shall be paid in full by the Borrower in the currency in which such costs or expenses were originally incurred, in any case without set-off, withholding or deduction of any kind or nature whatsoever unless required by law, and then subject to Section 11.8.

Section 5.6    Charging Borrower’s Accounts.

In respect of all Obligations the Borrower hereby irrevocably authorizes and instructs the Lender to withdraw from or debit, from time to time when such Obligations are due and payable, any account of the Borrower with the Lender for the purpose of satisfying payment thereof. Without limiting the generality of the foregoing, the Borrower hereby authorizes the Lender, if and to the extent that any payment owed to the Lender by the Borrower in respect of such Obligations is not made when due hereunder, to charge from time to time against any or all of the Borrower’s accounts with the Lender, including without limitation the Borrower’s Accounts, the full amount of the payment so due.

ARTICLE 6

CURRENCY AND COSTS

Section 6.1    Market Disruption and Illegality.

If the Lender determines in good faith and acting reasonably, which determination shall be final, conclusive and binding upon the Borrower, and notifies the Borrower that (a) by reason of circumstances affecting financial markets inside or outside Canada or the United States, as the case may be, deposits of U.S. Dollars are unavailable to Canadian banks generally; (b) adequate and fair means do not exist for ascertaining the applicable interest rate on the basis provided in the definition of LIBO Rate or U.S. Base Rate, as the case may be; (c) the making or continuation of any U.S. Base Rate Loans or LIBOR Loans, as the case may be, has been made impracticable by the occurrence of an event (other than a mere increase in rates payable by the Lender to fund the Loans) which materially and adversely affects the funding of the Credit Facility at any interest rate computed on the basis of the LIBO Rate or the U.S. Base Rate, as the case may be; or (d) any change to the present, or the introduction of any future, Legal Requirement or any guideline, directive, policy, request or requirement with which it is customary for the Lender to comply (whether or not having the force of law) of any Governmental Authority, or in the interpretation or application thereof by any Governmental Authority, has made it unlawful for the Lender to make, fund, or maintain or to give effect to its obligations in respect of any Type of Advance as contemplated hereby, then the Lender shall notify the Borrower in writing thereof and:

(a)	the right of the Borrower to select any affected Type of Advance shall be suspended until the Lender determines in good faith that the circumstances causing such suspension no longer exist and the Lender so notifies the Borrower;
(b)	if any affected Type of Advance is not yet outstanding, any outstanding request for such Type of Advance shall be cancelled and the Type of Advance requested therein shall not be made; and
(c)	if any Advance is already outstanding at any time when the right of the Borrower to select that Type of Advance is suspended, in addition to its rights under Section 4.2, the Borrower shall, by written notice to the Lender given within three Business Days of the date of the notification, elect to (i) prepay within (A) seven Business Days of the date of such written notice to the Lender such Advance (in the case of

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Outstanding Principal Obligations in respect of any BA Advance, discounted for the period to the maturity of the Bankers’ Acceptances outstanding in respect of such BA Advance at the Canada Treasury Bill Rate for such discount calculation period in effect on the date of such prepayment), but should it do so the Borrower shall pay to the Lender all interest accrued to the date of such prepayment on the Advances so prepaid and on demand all such amounts as are required to compensate the Lender for (A) any Compensating Amount payable pursuant to Section 6.2, and (B) any additional amounts payable pursuant to Section 11.7, or (ii) convert, immediately, or in the case of a LIBOR Loan, effective the last day of the then current LIBOR Period applicable thereto (or on such earlier date as may be required to comply with any applicable Legal Requirement), or in the case of a BA Advance, on the maturity date of the outstanding Bankers’ Acceptances in respect of such BA Advance (or on such earlier date as may be required to comply with any applicable Legal Requirement), such outstanding Advance to another Type of Advance which the Borrower is then entitled to select, failing which such outstanding Advance shall be converted, at the sole discretion of the Lender, to another Type of Advance which the Borrower is then entitled to select as of the date specified above for conversion of such outstanding Advance by the Borrower or, if the Borrower is not then entitled to select any other Type of Advance, the Borrower shall immediately prepay such Advance as above provided.

If the provisions of this Section 6.1 apply or prepayment is made of any Advance, the Lender and the Borrower shall negotiate in good faith with a view to providing alternative funding arrangements for the Borrower in a similar amount (or the equivalent thereof in another currency) and on similar terms to the amount affected or prepaid to the extent reasonably practicable, provided that such alternative funding arrangements shall not be, in the reasonable judgment of the Lender, materially disadvantageous to the Lender.

Section 6.2    Additional Payments.

If subsequent to the date hereof (a) any change in applicable Legal Requirements or any change in the interpretation or application thereof by any Governmental Authority; or (b) compliance by the Lender with any guideline, direction, request or requirement with which it is customary for the Lender to comply (whether or not having the force of law) of any Governmental Authority shall have the effect of:

(a)	increasing the cost to the Lender (which it would not otherwise have incurred) of continuing to provide or maintain the Credit Facility (including, without limitation, the costs of maintaining any reserve or special deposit or similar requirements with respect to this Agreement, or with respect to its obligations hereunder or thereunder), other than an increased cost resulting from a generally applicable higher rate of tax imposed on the overall net income or capital of the Lender;
(b)	imposing on the Lender or expecting there to be maintained by the Lender any additional reserve, special deposit or similar requirement or any additional capital adequacy or additional capital requirement (including, without limiting the generality of the foregoing, under any Capital Adequacy Guideline or any other requirement which affects the Lender’s allocation of capital resources to its obligations) in respect of the Lender’s obligations hereunder;
(c)	reducing any amount paid or payable to the Lender under this Agreement in any amount which is material;
(d)	causing the Lender to make any payment or to forego any return, on a basis calculated by reference to any amount received or receivable by the Lender under this Agreement; or
(e)	directly or indirectly reducing the effective return to the Lender under this Agreement or on the Lender’s overall capital as a result of entering into this Agreement or as a result of any of the transactions or obligations contemplated by this Agreement (other than a reduction resulting from a generally applicable higher rate of tax imposed on the net income or capital of the Lender) received or receivable by the Lender under this Agreement;

the Borrower shall, subject to the terms and conditions hereof, pay such amount (the “Compensating Amount”) as may be necessary to compensate the Lender for and will indemnify the Lender against any such additional cost,

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reduction, payment or foregone return. The payment by the Borrower of such Compensating Amount is not, and shall not be deemed to be or construed as, a repayment on account of any Outstanding Principal Obligations.

The Lender shall, forthwith after the Lender becoming aware of the occurrence of an event entitling the Lender to the payment of a Compensating Amount and the Lender determining to claim such Compensating Amount (which determination the Lender shall make without undue delay), give notice to the Borrower of the Compensating Amount claimed with details of the events giving rise thereto and shall at that time or within twenty (20) days thereafter provide to the Borrower a certificate setting out in reasonable detail a compilation of the Compensating Amount claimed (and where appropriate the Lender’s reasonable allocation to its Advances hereunder of Compensating Amounts with respect to the aggregate of such similar credits granted by the Lender affected by such event) or, if the Lender is then unable to determine the Compensating Amount or the method of compilation thereof an estimate of such Compensating Amount 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 certificate of the Lender with respect to the Compensating Amount shall be conclusive evidence of the amount thereof, absent manifest error.

The Borrower shall within thirty (30) days of receipt of such notice from the Lender pay to the Lender the Compensating Amount (or the estimated Compensating Amount) claimed but, if the Compensating Amount claimed and paid is greater or lesser than the Compensating Amount 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 Compensating Amount required to be paid. The obligation to pay such a Compensating Amount for subsequent periods will continue, subject as herein provided, until the earlier of the payment in full of the Obligations owed to the Lender and the lapse or cessation of the event giving rise to the Compensating Amount.

Section 6.3    Prepayment and Conversion.

In addition to the Borrower’s rights under Section 4.2, if any notification of a Compensating Amount is given under Section 6.2 in respect of any Advance, then the Borrower may, by written notice to the Lender given within thirty Business Days next following the date of the notification, elect to prepay such Advances (in the case of Outstanding Principal Obligations in respect of any BA Advance, discounted for the period to the maturity of the Bankers’ Acceptances outstanding in respect of such BA Advance at the Canada Treasury Bill Rate for such discount calculation period in effect on the date of such prepayment) or to convert all such Advances to any other Type of Advance, but should it do so the Borrower shall pay to the Lender all interest accrued to the date of such prepayment on the Advances so prepaid and on demand all such amounts as are required to compensate the Lender for (a) any Compensating Amount payable pursuant to Section 6.2, and (b) any additional amounts payable pursuant to Section 11.7.

Section 6.4 Mitigation.

If the provisions of Section 6.1 become applicable or any Compensating Amount becomes payable pursuant to Section 6.2, the Lender shall use its reasonable efforts (subject to any legal and regulatory restrictions) to avoid the necessity of invoking the provisions of Section 6.1 or to avoid the need for paying, or to reduce, such additional Compensating Amount, including changing the jurisdiction of its applicable lending office; provided that the taking of any such action would not, in the reasonable judgment of the Lender, be materially disadvantageous to the Lender.

Section 6.5 Mandatory Prepayment.

In the event that the provisions of Section 6.1 become applicable or any Compensating Amount becomes payable to the Lender pursuant to Section 6.2, the Borrower may, at its own expense and in its sole discretion terminate the Commitment of the Lender and prepay all Outstanding Principal Obligations to the Lender (in the case of Outstanding Principal Obligations in respect of any BA Advance, discounted for the period to the maturity of the Bankers’ Acceptances outstanding in respect of such BA Advance at the Canada Treasury Bill Rate for such discount calculation period in effect on the date of such prepayment); provided that (a) the Borrower shall have paid to the Lender (i) the Outstanding Principal Obligations in respect of (in the case of Outstanding Principal Obligations in respect of any BA Advance, discounted as above provided) and interest accrued to the date of such payment on the Advances made by the Lender hereunder, (ii) any Compensating Amount payable pursuant to Section 6.2, (iii) any

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additional amounts payable pursuant to Section 11.7, (iv) Standby Fees accrued to the date of suspension of all Types of Advances pursuant to Section 6.1 or the date of such payment, whichever is earlier, and (v) all other amounts (excluding Standby Fees) owed to the Lender hereunder, and (b) such termination of the Commitment of the Lender and prepayment of Advances is not prohibited by any Legal Requirement.

ARTICLE 7

CONDITIONS PRECEDENT TO LENDING

Section 7.1 Conditions Precedent to Initial Advance.

The obligation of the Lender to make its initial Advance under the Credit Facility is subject to the Lender having received the following, each dated as of a date satisfactory to the Lender and in form and substance reasonably satisfactory to the Lender, provided that such condition precedent, being for the sole benefit of the Lender, may be unilaterally waived by it in whole or in part at any time on or before the date of the initial Advance:

(a)	certified copies of the articles and borrowing by-laws of the Borrower, together with a related certificate of non-restriction;
(b)	certified copies of the resolutions of the board of directors of the Borrower approving and authorizing the execution, delivery and performance of this Agreement;
(c)	a certificate of status or like certificate with respect to the Borrower issued by the appropriate Governmental Authority of the jurisdiction of its incorporation;
(d)	a certificate of the Secretary or an Assistant Secretary of the Borrower, certifying as to the names and true signatures of its officers authorized to sign this Agreement and the other Loan Documents;
(e)	a certificate of a Senior Officer of the Borrower to the effect that all representations and warranties of the Borrower set forth in Article 8 are true in all material respects as of the initial Drawdown Date;
(f)	such other certificates and documentation relating to the Borrower or this Agreement as separately agreed to by the Borrower and the Lender;
(g)	a certificate of a Senior Officer of the Borrower that there has been no material adverse change in the financial condition or results of operations of the Borrower and its Subsidiaries, taken as a whole, from the financial condition and results of operations of the Borrower and its Subsidiaries presented in the financial statements listed in Schedule 8.1(l); and
(h)	favourable opinion of counsel for the Borrower to and in favour of the Lender in form and substance reasonably satisfactory to the Lender and its counsel.

Section 7.2    Conditions Precedent to Each Advance.

The obligation of the Lender to make any Advance (including the initial Advance) under the Credit Facility is subject to the fulfilment of each of the following conditions precedent to the reasonable satisfaction of the Lender (provided that each such condition precedent, being for the sole benefit of the Lender, may be unilaterally waived by it in whole or in part at any time either generally or with respect to any particular Advance):

(a)	the Lender shall have received from the Borrower a duly completed Advance Request in accordance with the provisions of this Agreement in that regard;
(b)	the representations and warranties set forth herein and in any other Loan Document shall be true and correct in all material respects, both on the date of such Advance Request and on the requested date of Advance;
(c)	the Borrower shall have observed and performed in all material respects all covenants set forth herein and in any other Loan Document;

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(d)	no Default or Event of Default shall have occurred and be continuing or will result from giving effect to such Advance Request;
(e)	the making of the requested Advance shall not be prohibited by any Legal Requirement.

The submission by the Borrower of an Advance Request shall be deemed to constitute a representation and warranty by the Borrower that the conditions precedent to the making of the Advance requested thereby set forth in this Article 7 have been satisfied in full.

ARTICLE 8

REPRESENTATIONS AND WARRANTIES

Section 8.1    Representations and Warranties by the Borrower.

The Borrower represents and warrants to the Lender, acknowledging that the Lender is relying thereon without independent inquiry in entering into this Agreement and making Advances from time to time hereunder, that:

(a)	Organization and Qualification. The Borrower is a corporation duly incorporated and organized and validly existing and in good standing and up-to-date in the filing of all corporate, financial and other returns under the laws of Ontario, the jurisdiction of its incorporation, except where the failure to file any such corporate, financial or other return does not affect the Borrower’s good standing and would not otherwise have a Material Adverse Effect; it is duly authorized to do business wherever the nature of its material properties or activities requires authorization, except to the extent that a failure to be so duly authorized would not have a Material Adverse Effect, and it has the corporate right, power and authority and all material governmental licences, authorizations, consents, registrations and approvals required to own and lease its material properties and assets and to conduct the business in which it is presently engaged, except to the extent that the lack thereof would not have a Material Adverse Effect. The Borrower has delivered to the Lender a complete and correct copy of the charter documents and borrowing by-laws of the Borrower, in each case as amended to the date of such delivery, and there have been no amendments to any such charter documents or by-laws other than as have been disclosed to the Lender;
(b)	Corporate Power. The Borrower has full corporate right, power and authority to enter into and perform its obligations under each of the Loan Documents and the Borrower and each Material Subsidiary has full corporate power and authority to own and operate its properties and to carry on its business as now conducted and as presently proposed to be conducted;
(c)	Conflict with Other Instruments. The execution and delivery by the Borrower of the Loan Documents, the performance by the Borrower of its obligations thereunder and hereunder (as the case may be) and compliance with the terms, conditions and provisions thereof and hereof will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Borrower or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other Material agreement or instrument to which the Borrower or any Subsidiary is bound or by which the Borrower or any Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority applicable to the Borrower or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Borrower or any Subsidiary;
(d)	Authorization, Governmental Approvals, etc. The execution and delivery of each of the Loan Documents by the Borrower and the performance by the Borrower of its obligations hereunder and thereunder (as the case may be) have been duly authorized by all necessary corporate action; no consent, approval, order, authorization, licence, exemption or designation of or by any Governmental Authority or other Person is required in connection with the execution, delivery and performance by the Borrower of

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	this Agreement or any of the other Loan Documents except such as have been obtained and true copies of which have been delivered to the Lender on or prior to the Restatement Date; and no registration, qualification, designation, declaration or filing with any Governmental Authority is or was necessary to enable or empower the Borrower to enter into and to perform its obligations under the Loan Documents except such as have been made or obtained and are in full force and effect, unamended;
(e)	Due Execution. The Loan Documents have each been duly executed and delivered by the Borrower and each constitutes a legal, valid and binding obligation of the Borrower enforceable in accordance with its terms, subject to bankruptcy, insolvency, arrangement and other laws affecting the enforcement of creditors’ rights generally (other than those pertaining to settlements, fraudulent conveyances, assignments and preferences) and the availability, in the discretion of a court of competent jurisdiction, of equitable remedies;
(f)	Ranking. The Obligations rank at least pari passu in right of payment with all other Senior Debt (actual or contingent) of the Borrower including, without limitation, all Senior Debt of the Borrower described in Schedule 8.1(i);

     (g)  Ownership of Property.

(i)

The Borrower and its Subsidiaries have good and sufficient title to their respective properties that, individually or in the aggregate, are Material, including all such properties reflected in the most recent audited balance sheet referred to in Section 8.1(n) or purported to have been acquired by the Borrower or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement. All leases that, individually or in the aggregate, are Material are valid and subsisting and are in full force and effect in all material respects;

(ii)

Except as disclosed in Schedule 8.1(g),

(A)	the Borrower and its Subsidiaries own, possess or are licensed to use all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks, trade names and domain names, or rights thereto, that, individually or in the aggregate, are Material, without known conflict with the rights of others;
(B)	to the best knowledge of the Borrower, no product of the Borrower infringes in any material respect any license, permit, franchise, authorization, patent, copyright, service mark, trademark, trade name, domain name or other right owned by any other Person; and
(C)	to the best knowledge of the Borrower, there is no Material violation by any Person of any right of the Borrower or any of its Subsidiaries with respect to any patent, copyright, service mark, trademark, trade name, domain name or other right owned or used by the Borrower or any of its Subsidiaries;

     (h)  Subsidiaries.

(i)

Schedule 8.1(h) contains (except as noted therein) complete and correct lists (A) of the Borrower’s Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, the percentage of shares of each class of its share capital or similar equity interests outstanding owned by the Borrower and each other Subsidiary and, as of the Restatement Date, whether such Subsidiary is a Material Subsidiary, (B) of the Borrower’s Affiliates, other than Subsidiaries, and (C) of the Borrower’s directors and Senior Officers;

(ii)

All of the outstanding share capital or similar equity interests of each Subsidiary shown in Schedule 8.1(h) as being owned by the Borrower and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Borrower or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 8.1(h));

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(iii)

Each Subsidiary identified in Schedule 8.1(h) is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact;

(iv)

No Subsidiary is a party to, or otherwise subject to any legal restriction or any agreement (other than this Agreement, the agreements listed on Schedule 8.1(h) and customary limitations imposed by corporate law and insurance regulatory statutes or other statutes governing the organization of legal entities) restricting the ability of such Subsidiary to pay dividends out of profits or make any other similar distributions of profits to the Borrower or any of its Subsidiaries that owns any outstanding share capital or similar equity interests of such Subsidiary;

     (i)  Debt.

(i)

Except as described therein, Schedule 8.1(i) sets forth a complete and correct list of all outstanding Debt of the Borrower and its Subsidiaries as of December 31, 2003 since which date there has been no Material change in the amounts, interest rates, sinking funds, instalment payments or maturities of the Debt of the Borrower or its Subsidiaries. Neither the Borrower nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Debt of the Borrower or such Subsidiary and no event or condition exists with respect to any Debt of the Borrower or any Subsidiary that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Debt to become due and payable before its stated maturity or before its regularly scheduled dates of payment.

(ii)

Except as disclosed in Schedule 8.1(i), neither the Borrower nor any Subsidiary has agreed or consented to cause or permit in the future (upon the happening of a contingency or otherwise) any of its property, whether now owned or hereafter acquired, to be subject to a Lien not permitted by Section 9.2(f).

(j) Tax Matters. The Borrower and its Subsidiaries have filed all income tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments levied upon them or their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not, individually or in the aggregate, Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Borrower or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Borrower knows of no basis for any other tax or assessment that could reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of United States and Canadian federal, state, provincial or other taxes for all fiscal periods are adequate. The Canadian federal and provincial income tax liabilities of the Borrower and its Subsidiaries have been determined by the Canadian Customs and Revenue Agency and corresponding provincial taxing authorities by the issuance of notices of assessment for all fiscal years up to and including the fiscal year ended December 31, 2001, and the Borrower and its Subsidiaries have paid any taxes indicated to be owing on such notices of assessment. The United States federal income tax liabilities of the Borrower and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended 2001.

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     (k)  Litigation and Other Proceedings.

(i)

Except as disclosed in Schedule 8.1(k), there are no actions, suits or proceedings pending or, to the knowledge of the Borrower, threatened against or affecting the Borrower or any Subsidiary or any property of the Borrower or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect;

(ii)

Neither the Borrower nor any Subsidiary is in default under any term of any agreement or instrument to which it is a party or by which it is bound, or any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including, without limitation, Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect;

(l)

Financial Statements. The Borrower has delivered to the Lender copies of the financial statements of the Borrower and its Subsidiaries listed on Schedule 8.1(l). All of said financial statements (including in each case the related schedules and notes) fairly present, in all material respects, the consolidated financial position of the Borrower and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments);

(m)

Disclosure. To the best of the knowledge of the Borrower, all information supplied to the Lender by the Borrower, and its Affiliates, shareholders or Subsidiaries (i) with respect to any and all factual matters, is true and correct in all material respects (except as otherwise disclosed to the Lender in writing on or before the Restatement Date), (ii) with respect to any projections or forecasts therein and the assumptions on the basis of which such information was prepared, is believed to be reasonable in the circumstances (except as otherwise disclosed to the Lender in writing on or before the Restatement Date), and (iii) with respect to any other matters being the subject of opinion, is believed on reasonable grounds to be true and correct in all material respects (except as otherwise disclosed to the Lender in writing on or before the Restatement Date). There is no fact known to the Borrower as of the Restatement Date which could reasonably be expected to have after the Restatement Date a Material Adverse Effect which has not been fully and adequately disclosed to the Lender prior to the Restatement Date;

     (n)  Pension Plans, Compliance with ERISA.

(i)

All Canadian pension plans of the Borrower and its Subsidiaries have been established, operated, administered and maintained in compliance with all applicable laws, regulations and orders applicable thereto except where the failure to comply could not reasonably be expected to have a Material Adverse Effect. All premiums, contributions and any other amounts required by applicable Canadian pension plan documents or applicable laws have been paid or accrued as required, except where the failure to pay such premiums, contributions and amounts could not reasonably be expected to have a Material Adverse Effect;

(ii)

The Borrower and each ERISA Affiliate have operated and administered each employee benefit plan (as defined in Section 3(3) of ERISA) in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Borrower nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans (as defined in Section 3 of ERISA), and no event, transaction or condition has occurred or exists that could reasonably be expected to result in the incurrence of any such liability by the Borrower or any ERISA Affiliate, or in the imposition of any Lien on any of the rights,

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	properties or assets of the Borrower or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to Section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as could not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect;
(iii)	The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan’s most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan’s most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by more than $1,000,000 in the aggregate for all Plans. The term “benefit liabilities” has the meaning specified in Section 4001 of ERISA and the terms “current value” and “present value” have the meanings specified in Section 3 of ERISA;
(iv)	The Borrower and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under Section 4201 or 4204 of ERISA in respect of Multiemployer Plans that could, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect;
(v)	The expected post-retirement benefit obligation (determined as of the last day of the Borrower’s most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by Section 4980B of the Code) of the Borrower and its Subsidiaries is not Material;
(vi)	The execution and delivery of this Agreement will not involve any transaction that is subject to the prohibitions of Section 406(a) of ERISA or in connection with which a tax could be imposed pursuant to Section 4975(c)(1)(A)-(D) of the Code for which an exemption is not available;

(o)	Insurance. The Borrower and each of its Material Subsidiaries has in place all insurance policies required in accordance with the provisions of this Agreement and all policy premiums owing or payable in respect thereof have been paid to date;
(p)	Compliance with Laws. The Borrower and each of its Subsidiaries has complied and is complying in all material respects with all Legal Requirements applicable to its business, properties and operations in each jurisdiction in which such corporations own any Material properties or carry on any material portion of their respective businesses where the failure to do so could reasonably be expected to have a Material Adverse Effect; and
(q)	Environmental Matters. Neither the Borrower nor any Subsidiary has knowledge of any claim or has received any notice of any claim, and no proceeding has been instituted raising any claim against the Borrower or any of its Subsidiaries or any of their respective real properties now or formerly owned, leased or operated by any of them or other assets, alleging any damage to the environment or violation of any Environmental Laws, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect. Except as otherwise disclosed to each Purchaser in writing:

(i)

neither the Borrower nor any Subsidiary has knowledge of any facts which would give rise to any claim, public or private, of violation of Environmental Laws or damage to the environment emanating from, occurring on or in any way related to real properties now or formerly owned, leased or operated by any of them or to other assets or their use, except, in each case, such as could not reasonably be expected to result in a Material Adverse Effect;

(ii)

neither the Borrower nor any of its Subsidiaries has stored any Hazardous Materials on real properties now or formerly owned, leased or operated by any of them or has disposed of any Hazardous Materials in a manner contrary to any Environmental Laws in each case in any manner that could reasonably be expected to result in a Material Adverse Effect; and

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(iii) all buildings on all real properties now owned, leased or operated by the Borrower or any of its Subsidiaries are in compliance with applicable Environmental Laws, except where failure to comply could not reasonably be expected to result in a Material Adverse Effect.

Section 8.2    Survival of Representations and Warranties.

The representations and warranties herein set forth or contained in any certificates or documents delivered to the Lender pursuant hereto shall survive the execution and delivery hereof and any Advance hereunder and any investigation at any time made by or on behalf of the Lender. The representations and warranties shall be deemed to be continuing and repeated by the Borrower upon each Drawdown Date, and all references to the Restatement Date contained in such representations and warranties shall be deemed to refer to such Drawdown Date.

ARTICLE 9

COVENANTS OF THE BORROWER

Section 9.1    Affirmative Covenants.

From and after the Closing Date and so long as any Obligations remain outstanding and unpaid or any Commitment of the Lender shall continue to exist, the Borrower shall:

(a)	Payment of Obligations to Lender. Duly and punctually pay to the Lender all amounts payable by the Borrower hereunder as and when the same become due;
(b)	Payment of Taxes, etc. The Borrower will, and will cause each of its Subsidiaries to, file all tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies imposed on them or any of their properties, assets, income or franchises, to the extent such taxes and assessments have become due and payable and before they have become delinquent and all claims for which sums have become due and payable that have or might become a Lien on properties or assets of the Borrower or any Subsidiary, provided that neither the Borrower nor any Subsidiary need pay any such tax or assessment or claims if (i) the amount, applicability or validity thereof is contested by the Borrower or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Borrower or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Borrower or such Subsidiary or (ii) the nonpayment of all such taxes and assessments in the aggregate could not reasonably be expected to have a Material Adverse Effect;
(c)	Maintenance of Insurance. The Borrower will, and will cause each of its Subsidiaries to, maintain, with insurers reasonably determined by the Borrower in good faith to be financially sound and reputable, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated;
(d)	Preservation of Corporate Existence, etc. The Borrower will at all times preserve and keep in full force and effect its corporate existence. Subject to Sections 9.2(g), 9.2(h) and 9.2(j), the Borrower will at all times preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged, consolidated or amalgamated into or with the Borrower or another Subsidiary) and all rights and franchises of the Borrower and its Subsidiaries unless, in the good faith judgment of the Borrower, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise could not, individually or in the aggregate, have a Material Adverse Effect;
(e)	Conflict with Other Instruments. Ensure that at all times and from time to time the execution and delivery by it of each of the Loan Documents to which it is a party, the performance by it of its obligations thereunder and the compliance by it with the terms, conditions and provisions thereof will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in

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	respect of any property of the Borrower or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other Material agreement or instrument to which the Borrower or any Subsidiary is bound or by which the Borrower or any Subsidiary or any of their respective properties may be bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority applicable to the Borrower or any Subsidiary or (iii) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Borrower or any Subsidiary;
(f)	Enforceability. Ensure that at all times and from time to time the execution and delivery of each of the Loan Documents by it and the performance by it of its obligations thereunder will be, upon the execution and delivery thereof, duly authorized by all necessary corporate action; that all consents, approvals, orders, authorizations, licenses, exemptions or designations of or by any Governmental Authority or other Person required in connection with the execution, delivery and performance by it of any such documents have been obtained; and that all registrations, qualifications, designations, declarations or filings with any Governmental Authority necessary to enable or empower it to enter into and to perform its obligations under any such documents have been obtained and continue in full force and effect as required for such purpose; and that any and all Loan Documents to which it is a party have been duly executed and delivered by it and that each will constitute its legal, valid and binding obligation enforceable in accordance with its terms, subject only to bankruptcy, insolvency, arrangement and other laws affecting the enforcement of creditors’ rights generally (other than those pertaining to settlements, fraudulent conveyances, assignments and preferences) and the availability, in the discretion of a court of competent jurisdiction, of equitable remedies;
(g)	Compliance with Laws, etc. The Borrower will, and will cause each of its Subsidiaries to, comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;
(h)	Keeping of Books. Keep, and cause each of its Material Subsidiaries to keep, financial books and records systems in accordance with GAAP and all applicable Legal Requirements, and in such books and records make full and correct entries of all financial transactions, properties, liabilities, shareholders equity, participation accounts and business of the Borrower and each of its Material Subsidiaries in accordance with GAAP;
(i)	Maintenance of Properties, etc. The Borrower will, and will cause each of its Subsidiaries to, maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Borrower or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Borrower has concluded that such discontinuance could not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect;
(j)	Reporting Requirements. Furnish to the Lender:

(i) annually, as soon as available and in any event within 120 days after the end of each financial year:

(A) Audited Financial Statements. The audited annual consolidated financial statements of the Borrower and the Material Subsidiaries for such financial year; and

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(B) Compliance Certificate. A Compliance Certificate dated the date of delivery thereof, with work sheets attached thereto setting forth in reasonable detail the computations necessary to determine whether the covenants of the Borrower pursuant to Section 9.2 shall have been complied with and whether the Amortization Date shall have occurred;

(ii) quarterly, as soon as available and in any event within 60 days after the end of each financial quarter of each financial year:

(A)	Quarterly Financial Statements. The quarterly consolidated financial statements of the Borrower and the Material Subsidiaries for such financial quarter of each financial year; and
(B)	Compliance Certificate. A Compliance Certificate dated the date of delivery thereof, with work sheets attached thereto setting forth in reasonable detail the computations necessary to determine whether the covenants of the Borrower pursuant to Section 9.2 shall have been complied with and whether the Amortization Date shall have occurred;

(iii)	promptly on reasonable demand, a Compliance Certificate dated the date of delivery thereof, with work sheets attached thereto setting forth in reasonable detail the computations necessary to determine whether the covenants of the Borrower pursuant to Section 9.2 shall have been complied with and whether the Amortization Date shall have occurred;
(iv)	promptly upon becoming aware thereof, notice of any fact or change which has had, is having or is expected to have a Material Adverse Effect;
(v)	notice of any Subsidiary of the Borrower becoming a Material Subsidiary thereof, forthwith after becoming aware thereof; and
(vi)	such other information respecting the business and affairs, financial or otherwise, of the Borrower or any of its Subsidiaries or Affiliates, as the Lender may from time to time reasonably request;

(k)	Cure Defects. Promptly cure or cause to be cured, or cause its Subsidiaries to cure or cause to be cured, any defects in the execution, delivery, validity or enforceability of any of the Loan Documents or any of the other agreements, instruments or documents contemplated thereby or executed pursuant hereto or thereto and at its expense, execute and deliver or cause to be executed and delivered all such agreements, instruments and other documents and make all necessary filings and recordings as the Lender may consider reasonably necessary or desirable for the foregoing purposes;
(l)	Notice of Default, etc. Notify the Lender forthwith in writing of the occurrence of a Default, an Event of Default, and in such notice and in further notices delivered from time to time thereafter to (and in any event forthwith in response to any request for such a notice by) the Lender, provide the Lender with the particulars of the steps being taken to remedy any such Default, Event of Default;
(m)	Corporate Distributions.    Subject to compliance with applicable Legal Requirements, cause such of its Subsidiaries to declare and pay to the Borrower or to such Subsidiary’s holding body corporate such dividends and other Corporate Distributions as may be required to provide sufficient funds to the Borrower to duly and punctually pay to the Lender all amounts payable by the Borrower hereunder as and when the same become due; and
(n)	Further Assurances.    At its cost and expense, upon request of the Lender, duly execute and deliver, or cause to be duly executed and delivered, to the Lender all such further agreements, instruments, documents and other assurances and do and cause to be done all such further acts and things as may be necessary or desirable in the reasonable opinion of the Lender to carry out more effectually the provisions and purposes of this Agreement or any of the other Loan Documents.

Section 9.2    Negative Covenants.

From and after the Closing Date and so long as any Obligations remain outstanding and unpaid or any Commitment of the Lender shall continue to exist, the Borrower shall not, unless required pursuant to a Legal Requirement, or, if

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not required pursuant to a Legal Requirement then without the prior written consent of the Lender, which consent shall not be unreasonably withheld:

(a)	Consolidated Net Worth.    The Borrower will not, at any time, permit Consolidated Net Worth to be less than the sum of (a) U.S.$200,000,000, plus (b) an aggregate amount equal to 25% of its Consolidated Net Income (but, in each case, only if a positive number) for each completed fiscal quarter beginning with the fiscal quarter ended March 31, 2003.
(b)	Limitation on Consolidated Debt.    The Borrower will not, at any time, permit the Consolidated Debt to exceed 45% of Consolidated Total Capitalization.
(c)	Limitation on Subsidiary Debt.    The Borrower will not, at any time, permit any Subsidiary to, directly or indirectly, create, incur, assume, guarantee, have outstanding, or otherwise become or remain directly or indirectly liable with respect to any Debt other than:

(i)	Debt of a Subsidiary outstanding on December 31, 2003 described on Schedule 8.1(i) and any extension, renewal or refunding thereof, provided that (A) the principal amount thereof is not increased in connection with such extension, renewal or refunding and (B) no Default or Event of Default shall exist at the time of such extension, renewal or refunding;
(ii)	Debt of a Subsidiary owed to the Borrower or a Wholly-Owned Subsidiary;
(iii)	Debt of a Subsidiary outstanding at the time such Subsidiary becomes a Subsidiary, provided that (A) such Debt shall not have been incurred in contemplation of such Subsidiary becoming a Subsidiary and (B) immediately after such Subsidiary becomes a Subsidiary no Default or Event of Default shall exist, and any extension, renewal or refunding of such Debt, provided, that (x) the principal amount thereof is not increased in connection with such extension, renewal or refunding and (y) no Default or Event of Default shall exist at the time of such extension, renewal or refunding; and
(iv)	Debt of a Subsidiary in addition to that otherwise permitted by the provisions of this Section 9.2(c); provided that on the date such Subsidiary incurs or otherwise becomes liable with respect to any such additional Debt and immediately after giving effect thereto and to the concurrent retirement of any other Debt (A) no Default or Event of Default shall exist, and (B) such Debt can be incurred within the applicable limitations provided in Sections 9.2(b) and 9.2(d).

(d)	Limitation on Priority Debt.    The Borrower will not, at any time, permit Priority Debt to exceed 10% of Consolidated Total Capitalization.
(e)	Minimum Interest Coverage Ratio.    The Borrower will not, at any time, permit the Minimum Interest Coverage Ratio to be less than 3.0 to 1.0.
(f)	Limitation on Liens. The Borrower will not, and will not permit any of its Subsidiaries to, directly or indirectly create, incur, assume or permit to exist (upon the happening of a contingency or otherwise) any Lien on or with respect to any property or asset (including, without limitation, any document or instrument in respect of goods or accounts receivable) of the Borrower or any such Subsidiary, whether now owned or held or hereafter acquired, or any income or profits therefrom or assign or otherwise convey any right to receive income or profits, except:

(i)	Liens for taxes, assessments or other governmental charges or levies which are not yet due and payable or the payment of which is not at the time required by Section 9.1(b);
(ii)	statutory Liens of landlords, undetermined or inchoate Liens and other Liens imposed by law such as Liens of carriers, warehousemen, mechanics, materialmen and other similar Liens, in each case, incurred in the ordinary course of business for sums not yet due and payable or the payment of which is not at the time required by Section 9.1(b);

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(iii)	Liens (other than any Lien imposed by ERISA, the Income Tax Act (Canada), the Pension Benefits Standards Act, 1985 (Canada) and all other applicable Canadian Federal and provincial statutes or regulations governing pension plans) incurred or deposits made in the ordinary course of business (A) in connection with workers’ compensation, unemployment insurance, other types of social security or retirement benefits or insurance regulatory requirements or (B) to secure (or to obtain letters of credit that secure) the performance of tenders, statutory obligations, surety bonds, appeal bonds, bids, leases (other than Capital Leases), performance bonds, purchase, construction or sales contracts and other similar obligations, in each case not incurred or made in connection with the borrowing of money, the obtaining of advances or credit or the payment of the deferred purchase price of property;
(iv)	any attachment or judgment Lien, unless the judgment it secures shall not, within 60 days after the entry thereof, have been discharged or execution thereof stayed pending appeal, or shall not have been discharged within 60 days after the expiration of any such stay;
(v)	Liens on property or assets of a Subsidiary securing Debt owing to the Borrower or to a Wholly-Owned Subsidiary;
(vi)	Liens existing on December 31, 2003 and described on Schedule 8.1(i);
(vii)	leases or subleases granted to others, easements, rights-of-way, restrictions and other similar charges or encumbrances or minor survey exceptions, in each case incidental to, and not interfering with, the ordinary conduct of the business of the Borrower or any of its Subsidiaries, provided that such Liens do not, in the aggregate, materially detract from the value of such property;
(viii)	any Lien created to secure all or any part of the purchase price, or to secure Debt incurred or assumed to pay all or any part of the purchase price or cost of construction, of property (or any improvement thereon) acquired or constructed by the Borrower or a Subsidiary after the date of the Closing, provided that

(A)

any such Lien shall extend solely to the item or items of such property (or improvement thereon) so acquired or constructed and, if required by the terms of the instrument originally creating such Lien, other property (or improvement thereon) which is an improvement to or is acquired for specific use in connection with such acquired or constructed property (or improvement thereon) or which is real property being improved by such acquired or constructed property (or improvement thereon),

(B)

the principal amount of the Debt secured by any such Lien shall at no time exceed an amount equal to the lesser of (i) the cost to the Borrower or such Subsidiary of the property (or improvement thereon) so acquired or constructed and (ii) the Fair Market Value (as determined in good faith by one or more officers of the Borrower to whom authority to enter into the subject transaction has been delegated by the board of directors of the Borrower) of such property (or improvement thereon) at the time of such acquisition or construction,

(C) any such Lien shall be created contemporaneously with, or within 12 months after, the acquisition or construction of such property,

(D)	the aggregate principal amount of all Debt secured by such Liens shall be permitted by the limitation set forth in Section 9.2(b), and
(E)	at the time of the incurrence of the Debt secured by such Liens, no Default or Event of Default shall exist;

(ix) any Lien existing on property of a Person immediately prior to its being consolidated with or merged into the Borrower or a Subsidiary or its becoming a Subsidiary, or any Lien existing on any property acquired by the Borrower or any Subsidiary at the time such property is so acquired (whether or not the Debt secured thereby shall have been assumed), provided that (A) no such Lien shall have been

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	created or assumed in contemplation of such consolidation or merger or such Person’s becoming a Subsidiary or such acquisition of property, (B) each such Lien shall extend solely to the item or items of property so acquired and, if required by the terms of the instrument originally creating such Lien, other property which is an improvement to or is acquired for specific use in connection with such acquired property and (C) the aggregate amount of all Debt secured by such Liens shall be permitted by the limitation set forth in Section 9.2(b);
(x)	any Lien renewing, extending or refunding any Lien permitted by paragraphs (vi), (viii) or (ix) of this Section 9.2(f), provided that (A) the principal amount of Debt secured by such Lien immediately prior to such extension, renewal or refunding is not increased or the maturity thereof reduced, (B) such Lien is not extended to any other property and (C) immediately after such extension, renewal or refunding no Default or Event of Default would exist;
(xi)	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 excepted; and
(xii)	other Liens not otherwise permitted by paragraphs (i) through (xi), inclusive, of this Section 9.2(f), provided that the Debt secured by such Liens shall be permitted by the limitation set forth in Sections 9.2(b) and 9.2(d) at the time that the Lien securing such Debt is created.

Any Person that becomes a Subsidiary after the date of the Closing shall, for all purposes of this Section 9.2(f), be deemed to have created or incurred, at the time it becomes a Subsidiary, all outstanding Liens of such Person immediately after it becomes a Subsidiary, and any Person extending, renewing or refunding any Debt secured by any Lien shall be deemed to have incurred such Lien at the time of such extension, renewal or refunding.

(g) Merger, Consolidation, Etc. The Borrower will not, and will not permit any of its Subsidiaries to, consolidate with or merge with any other corporation or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any Person (except that a Subsidiary of the Borrower may (x) consolidate, merge or amalgamate with, or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to, the Borrower or a Wholly-Owned Subsidiary of the Borrower, as applicable, and (y) convey, transfer or lease all of its assets in compliance with the provisions of Section 9.2(h) or 9.2(j)), provided that the foregoing restriction does not apply to the consolidation or merger of the Borrower with, or the conveyance, transfer or lease of substantially all of the assets of the Borrower in a single transaction or series of transactions to, any Person so long as:

(i)	the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Borrower as an entirety, as the case may be (the “Successor Corporation”), shall be a solvent corporation organized and existing under the laws of the United States or any State thereof (including the District of Columbia) or Canada or any Province thereof;
(ii)	if the Borrower is not the Successor Corporation, (A) the Successor Corporation shall have executed and delivered to the Lender its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement (pursuant to such agreements and instruments as shall be reasonably satisfactory to the Lender) and (B) the Successor Corporation shall have caused to be delivered to the Lender an opinion of counsel of United States or Canadian national standing (and not an employee of the Borrower) or other counsel reasonably satisfactory to the Lender, to the effect that all agreements or instruments effecting such assumption are enforceable in accordance with their terms and comply with the terms hereof; and
(iii)	immediately after giving effect to such transaction, no Default or Event of Default would exist.

No such conveyance, transfer or lease of substantially all of the assets of the Borrower shall have the effect of releasing the Borrower or any Successor Corporation from its liability under this Agreement.

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(h) Sale of Assets, Etc. Except as permitted under Section 9.2(g), Section 9.2(i) and Section 9.2(j), the Borrower will not, and will not permit any of its Subsidiaries to, make any Asset Disposition unless:

(i)	in the good faith opinion of the Borrower, the Asset Disposition is in exchange for consideration having a Fair Market Value at least equal to that of the property exchanged and is in the best interest of the Borrower or such Subsidiary;
(ii)	immediately after giving effect to the Asset Disposition, no Default or Event of Default would exist; and
(iii)	subject to the following paragraph, immediately after giving effect to the Asset Disposition the Disposition Value of all property that was the subject of any Asset Disposition occurring in the immediately preceding period of 12 consecutive months would not exceed 15% of Consolidated Total Assets as of the end of the then most recently ended fiscal quarter of the Borrower.

If the Net Proceeds Amount for any Transfer is applied to a Debt Prepayment Application or a Property Reinvestment Application, in either case, within 12 months after such Transfer, then such Transfer, only for the purpose of determining compliance with subsection (iii) of this Section 9.2(h) as of a date on or after the Net Proceeds Amount is so applied, shall be deemed not to be an Asset Disposition.

(i)   Sale-and-Leasebacks. The Borrower will not, and will not permit any Subsidiary to, enter into any Sale-and-Leaseback Transaction with respect to any property more than 180 days following the acquisition or occupancy of such property by the Borrower or such Subsidiary, whichever is later, unless:

(i)	the term of the lease in respect of such Sale-and-Leaseback Transaction, including all renewal terms, shall not exceed three years;
(ii)	such Sale-and-Leaseback Transaction constitutes a sale by a Subsidiary to the Borrower or by the Borrower to a Wholly-Owned Subsidiary;
(iii)	the Net Proceeds Amount received by the Borrower or such Subsidiary in respect of such Sale-and-Leaseback Transaction is applied within 12 months of the consummation thereof to a Debt Prepayment Application or a Property Reinvestment Application; or
(iv)	immediately after giving effect thereto, the aggregate amount of Priority Debt does not exceed 10% of Consolidated Total Capitalization determined at such time and no Default or Event of Default would exist.

(j)   Disposal of Ownership of a Subsidiary. The Borrower will not, and will not permit any of its Subsidiaries to, sell or otherwise dispose of any Subsidiary Shares, nor will the Borrower permit any such Subsidiary to issue, sell or otherwise dispose of any shares of its own share capital, provided that the foregoing restrictions do not apply to:

(i)	the issue of directors’ qualifying shares by any such Subsidiary;
(ii)	any such Transfer of Subsidiary Shares constituting a Transfer described in clause (a) of the definition of “Asset Disposition”; and
(iii)	the Transfer of the Subsidiary Shares of a Subsidiary of the Borrower owned by the Borrower and its other Subsidiaries; provided that such Transfer satisfies the requirements of Section 9.2(h).

(k)   Nature of Business. The Borrower will not, and will not permit any of its Subsidiaries to, engage in any business if, as a result, the general nature of the business in which the Borrower and its Subsidiaries, taken as a whole, would then be engaged would be substantially changed from the general nature of the business in which the Borrower and its Subsidiaries, taken as a whole, are engaged on the date of the Restatement Date as described in the information supplied to the Lender and referred to in Section 8.1(m).

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(l)	Transactions with Affiliates. The Borrower will not, and will not permit any Subsidiary to, enter into directly or indirectly any Material transaction or Material group of related transactions (including, without limitation, the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Borrower or another Subsidiary), except in the ordinary course and pursuant to the reasonable requirements of the Borrower’s or such Subsidiary’s business and upon fair and reasonable terms no less favourable to the Borrower or such Subsidiary than would be obtainable in a comparable arm’s-length transaction with a Person not an Affiliate.
(m)	Hostile Aquisition. Engage in, or permit any of its Subsidiaries to engage in, any Hostile Acquisition, whether alone or in concert with any other Person or Persons;
(n)	Prohibition on Restrictions. Create or permit any of its Material Subsidiaries to, create or otherwise cause or suffer to exist any Encumbrance or restriction which prohibits or otherwise restricts in any material respect:

(i)	the ability of any such Subsidiary to (A) pay dividends or make other distributions or pay any Debt owed to the Borrower or any such Subsidiary, (B) make any other Corporate Distribution to the Borrower or any such Subsidiary or (C) transfer any of its properties or assets to the Borrower or any such Subsidiary; or
(ii)	the ability of the Borrower or any such Subsidiary to create, incur, assume or suffer to exist any Encumbrance upon its property or assets to secure the Obligations,

other than prohibitions or restrictions existing under or by reason of (A) this Agreement and the Loan Documents, (B) Legal Requirements, (C) customary non-assignment provisions entered into in the ordinary course of business and consistent with past practices, and (D) Liens permitted pursuant to Section 9.2(f) and any documents or instruments governing the terms of any Debt secured by any such Liens permitted pursuant to Section 9.2(f), provided that such prohibitions or restrictions apply only to the assets subject to such Liens permitted pursuant to Section 9.2(f); or

(o)  Financial Year. Change its fiscal year, or permit any of its Material Subsidiaries to change their respective fiscal years to other than December 31 or to have a fiscal year that does not end on December 31 of each calendar year.

ARTICLE 10

ACCELERATION

Section 10.1    Events of Default.

If any one or more of the following events (each an “Event of Default”) shall occur and be continuing then the Lender may, (i) terminate the Lender’s obligations to make any further Advance under the Credit Facility, and (ii) (at the same time or at any time after such termination) declare the Obligations to be immediately due and payable, provided that should any Event of Default specified in Sections 10.1(e), 10.1(f), 10.1(g) or 10.1(h) occur then the Obligations shall, to the extent permitted by applicable law, be and become immediately due and payable without any declaration or other act on the part of the Lender:

(a)	the Borrower makes default in the payment on the due date thereof of any amount payable by it hereunder on account of the Outstanding Principal Obligations under the Credit Facility;
(b)	the Borrower makes default in the payment when due of any amount payable by it hereunder on account of interest, fees, costs, expenses or other amounts payable by it hereunder, and such default shall continue for three Business Days after notice of such default being given to the Borrower by the Lender;
(c)	the Borrower fails to perform any covenant, agreement or undertaking under this Agreement other than those referred to in paragraphs (a) and (b) of this Section 10.1 or in any other Loan Document, provided that if such failure is capable of being remedied or cured within a ten day period, the Borrower, subject to

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	the other provisions of this Section 10.1, shall have a period of ten Business Days after the earlier of the Borrower becoming aware of such default and notice of such default being given to the Borrower by the Lender within which to remedy or cure such failure;
(d)	any representation or warranty made by the Borrower in this Agreement or in any other Loan Document is incorrect in any material respect when made (or when deemed to be made hereunder or thereunder), provided that, notwithstanding any lack of correctness of any such representation or warranty as so stated as at such time, if the subject matter of such representation and warranty is capable of being remedied or cured within a period of ten Business Days such that it would be true if so stated at such later time, the Borrower, subject to the other provisions of this Section 10.1, shall have a period of ten Business Days after the earlier of receipt of written notice from the Lender specifying the representation or warranty concerned and the Borrower otherwise becoming aware that such representation or warranty is incorrect in any material respect, within which to remedy or cure such lack of correctness;
(e)	the Borrower or any of its Material Subsidiaries ceases or threatens to cease to carry on business or becomes insolvent or bankrupt or ceases paying its debts generally as they fall due, other than any such debts which are contested in good faith and by appropriate proceedings and for which adequate provision has been made to the Lender’ sole satisfaction, or the Borrower or any of its Material Subsidiaries commits any act of bankruptcy or makes an assignment for the benefit of creditors or otherwise acknowledges its insolvency, or a trustee, receiver, receiver and manager, liquidator, agent or similar official is appointed for the Borrower or any of its Material Subsidiaries or for any material part of its properties with the consent of or without contest by the Borrower or such Material Subsidiaries upon receipt of notice of such appointment or action or proceeding to effect such appointment;
(f)	without limiting the generality of paragraph (e) of this Section 10.1, any Governmental Authority shall take control of the Borrower or any of its Material Subsidiaries, or shall take control of the properties of any such Person or any Material properties;
(g)	any proceeding is instituted by the Borrower or any of its Material Subsidiaries, any order is made or any resolution is passed for the winding-up of the Borrower or any of its Material Subsidiaries;
(h)	any petition shall be filed or other action or proceeding shall be commenced, whether judicial, quasi-judicial or administrative in nature or by or in respect of the Borrower or any of its Material Subsidiaries, to adjudge the Borrower or any of its Material Subsidiaries insolvent or a bankrupt, or to give notice of, consider or approve any proposal, reorganization, compromise, moratorium or arrangement with all or any of the creditors of the Borrower or any of its Material Subsidiaries, or to appoint a trustee, receiver, receiver and manager, liquidator, agent or similar official of the Borrower or any of its Material Subsidiaries or any of its properties or any Material properties, or to wind-up, dissolve or otherwise liquidate the Borrower or any of its Material Subsidiaries, provided that, if the Borrower or any of its Material Subsidiaries shall be contesting such petition, action or proceeding in good faith and by appropriate proceedings based, in the Lender’s sole opinion, on reasonable and substantial grounds, the Borrower and each of its Material Subsidiaries, subject to the other provisions of this Section 10.1, shall have a period of forty-five days after the date of the filing or commencement of such petition, action or proceeding within which to obtain or procure an abandonment, dismissal, withdrawal, quashing or permanent stay of such petition, action or proceeding;
(i)	a final judgment or judgments or any execution, sequestration or any other process of any court, any work order or any distress or analogous process for the payment of money resulting in liability (exclusive of amounts fully covered by valid and collectible insurance in respect thereof), aggregating in excess of U.S. $5,000,000 are rendered or become enforceable against one or more of the Borrower and its Subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay;
(j)	(i) the Borrower or any Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Debt that is

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	outstanding in an aggregate principal amount of at least U.S. $5,000,000 beyond any period of grace provided with respect thereto, or (ii) the Borrower or any Subsidiary is in default in the performance of or compliance with any term of any evidence of any Debt in an aggregate outstanding principal amount of at least U.S. $5,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Debt has become, or has been declared, due and payable before its stated maturity or before its regularly scheduled dates of payment and such declaration has not been annulled or rescinded, or (iii) as a consequence of the occurrence or continuation of any event or condition (other than the passage of time or the right of the holder of Debt to convert such Debt into equity interests), the Borrower or any Subsidiary has become obligated to purchase or repay Debt before its regular maturity or before its regularly scheduled dates of payment in an aggregate outstanding principal amount of at least U.S. $5,000,000;
(k)	if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under Section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA Section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Borrower or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate “amount of unfunded benefit liabilities” (within the meaning of Section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed U.S. $5,000,000, (iv) the Borrower or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Borrower or any ERISA Affiliate withdraws from any Multiemployer Plan or (vi) the Borrower or any ERISA Affiliate establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Borrower or any ERISA Affiliate thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, could reasonably be expected to have a Material Adverse Effect;
(l)	the Lender’s rights and entitlement to be paid the Obligations hereunder shall cease to rank at least pari passu in right of payment with all other Senior Debt (actual or contingent) of the Borrower including, without limitation, all Senior Debt of the Borrower described in Schedule 8.1(i);
(m)	a Material Adverse Effect shall occur;
(n)	there is any adverse qualification to any of the financial statements of the Borrower or any of its Material Subsidiaries by their respective auditors; or
(o)	this Agreement shall cease to be in full force and effect and to constitute a legal, valid and binding obligation of any of the parties signatory thereto enforceable against such parties in accordance with its terms, subject to bankruptcy, insolvency, arrangement and other laws affecting the enforcement of creditors’ rights generally (other than those pertaining to settlements, fraudulent conveyances, assignments and preferences) and the availability, in the discretion of a court of competent jurisdiction, of equitable remedies.

Section 10.2    Remedies Upon Default.

Upon the occurrence of an Event of Default and acceleration of the maturity of the Obligations owed to the Lender hereunder, the Lender may commence such litigation or proceedings as it may deem expedient, all without any additional notice, presentation, demand, protest, notice of dishonour, including entering into of possession of any of the property or assets of the Borrower, or any other action, notice of all of which the Borrower hereby expressly waives. For greater certainty, and subject to any curative provisions specified herein, the Borrower will be considered to be in default of its obligations hereunder by the mere lapse of time provided herein for performing such obligations, without any requirement of further notice or other act of the Lender unless a notice is specifically required under this Agreement. The rights and remedies of the Lender hereunder are cumulative and are in addition

45

to and not in substitution for any other rights or remedies provided by law. Nothing contained herein or in any Loan Documents now or hereafter held by the Lender with respect to the Obligations of the Borrower to the Lender, or any part thereof, nor any act or omission of the Lender with respect to such Loan Documents, shall in any way prejudice or affect the rights, remedies and powers of the Lender with respect to any other such Loan Documents.

Section 10.3    Right of Set-Off.

Upon the occurrence of an Event of Default and the acceleration of the maturity of the Obligations owed to the Lender hereunder, the Lender is hereby authorized by the Borrower at any time and from time to time and shall to the fullest extent permitted by law, set off, appropriate and apply any and all deposits (general or special, time or demand, matured or unmatured, provisional or final) at any time held and other Debt at any time owing to or for the credit or the account of the Borrower against any and all of the Obligations of the Borrower now or hereafter existing hereunder. The Lender shall promptly notify the Borrower in advance of any such set-off and application made by the Lender, provided that the failure to give such notice shall not affect the validity of such set-off and application. The rights of the Lender under this Section 10.3 are in addition to all other rights and remedies (including, without limitation, other rights of set-off) which the Lender may have.

Section 10.4    Currency Conversion After Maturity.

At any time following the occurrence of an Event of Default and the acceleration of the maturity of the Obligations owed to the Lender hereunder, the Lender shall be entitled to convert, with two (2) Business Days’ prior notice to the Borrower, any and all then unpaid and outstanding LIBOR Loans or U.S. Base Rate Loans or any of them to Prime Rate Loans. Any such conversion shall be calculated so that the resulting Prime Rate Loans shall be the Canadian Dollar Equivalent on the date of conversion of the amount of United States Dollars so converted. Any accrued and unpaid interest denominated in United States Dollars at the time of any such conversion shall be similarly converted to Canadian Dollars, and such Prime Rate Loans and accrued and unpaid interest thereon shall thereafter bear interest in accordance with Section 3.1.

Section 10.5 Judgment Currency.

The obligation of the Borrower to make payments on any Obligations to the Lender hereunder in any currency (the “first currency”) shall not be discharged or satisfied by any tender or recovery pursuant to any judgment expressed in or converted into any other currency (the “second currency”) except to the extent to which such tender or recovery shall result in the effective receipt by the Lender of the full amount of the first currency payable, and accordingly the primary obligation of the Borrower shall be enforceable as an alternative or additional cause of action for the purpose of recovery in the second currency of the amount (if any) by which such effective receipt shall fall short of the full amount of the first currency payable and shall not be affected by a judgment being obtained for any other sum due hereunder.

ARTICLE 11

GENERAL

Section 11.1     Evidence of Debt.

The Obligations of the Borrower hereunder, in respect of or in connection with the Advances under the Credit Facility made from time to time by the Lender or otherwise, shall, absent manifest error, be conclusively evidenced by the records of the Lender.

Section 11.2    Additional Expenses.

If during the continuation of an Event of Default the Borrower should fail to observe or perform any covenant or agreement to be observed or performed by the Borrower hereunder the Lender may but shall not be obliged to perform or cause to be performed the same for which purpose the Borrower hereby appoints the Lender to be the lawful attorney of the Borrower, and all reasonable expenses incurred or payments made by the Lender in so doing shall be paid by the Borrower to the Lender forthwith upon demand and any such unpaid amount shall bear interest, both before and after judgment, at the Past Due Rate, calculated daily and compounded monthly in arrears and

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payable on demand, and the Borrower hereby indemnifies the Lender against any loss incurred by the Lender in that regard.

Section 11.3    Invalidity of any Provisions.

Any provision of this Agreement or any of the other Loan Documents which is prohibited by the laws of any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition without invalidating the remaining terms and provisions hereof or thereof and no such invalidity shall affect the obligation of the Borrower to pay the Obligations in full. The rate of interest chargeable or collectable on overdue instalments of interest shall not exceed the maximum rate permitted by applicable law.

Section 11.4    Amendments, Waivers, etc.

No amendment, modification or waiver of any provision of, and no waiver of the strict observance, performance or compliance by the Borrower with any term, covenant, condition or agreement contained in this Agreement and no indulgence granted by the Lender or consent to any departure by the Borrower therefrom, shall in any event be effective unless it shall be in writing and signed by the Lender (and the Borrower in the case of amendments or modifications or waivers by the Borrower), and then such amendment, modification, waiver or consent shall be effective only in the specific instance and for the specific purpose for which it is given. Notwithstanding the foregoing, no failure to exercise and no delay in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The remedies herein provided are cumulative and not exclusive of any other rights or remedies available at or provided by law.

Section 11.5    Notices, etc.

All notices and other communications provided for hereunder shall, except as otherwise permitted hereunder, be in writing personally delivered by messenger or courier or facsimile or telecopy transmission, if

(a) to the Borrower, to it at:

Hub International Limited

214 King Street West

Suite 314

Toronto, Ontario

M5H 3S6

Telecopy:                        (416) 593-8717

for the attention of:  W. Kirk James

Vice President and General Counsel

(b)    to the Lender, to it at:

Bank of Montreal

4th Floor

1 First Canadian Place

Toronto, Ontario

M5X 1A1

Telecopy:                        (416)-359-7966

for the attention of:  Vice President,

Loan Products Group

or to such other address or facsimile or telecopy number as any party hereto may from time to time designate to the other parties hereto in such manner. All such notices and communications shall be effective, and deemed to be received by the intended recipient, on the date delivered or transmitted, if delivered or transmitted before 3:00 p.m. (Toronto, Ontario time) on a Business Day, or, in any other case, on the first Business Day following the date delivered or transmitted.

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Section 11.6    Costs and Expenses.

The Borrower shall pay to the Lender, on demand all reasonable out of pocket costs and expenses (including, without limitation, all reasonable legal fees and disbursements) incurred by the Lender in connection with this Agreement, the other Loan Documents and the Credit Facility including, without limitation, (a) the negotiation, preparation, execution, delivery and interpretation, both prior and subsequent to the Closing Date, of this Agreement and the other Loan Documents or any agreement or instrument contemplated hereby or thereby; (b) the performance by the Lender of its obligations and duties under this Agreement and the other Loan Documents; (c) advice of counsel with respect to the interpretation of the Credit Facility, the Loan Documents or any transaction contemplated thereunder; (d) the enforcement of any of the Loan Documents or the enforcement or preservation of rights under and the refinancing, renegotiation or restructuring of the Credit Facility under this Agreement or the other Loan Documents or the bringing of any action, suit or proceeding with respect to the enforcement of any of the Loan Documents or any such right or seeking any remedy which may be available to the Lender at law or in equity; and (e) any amendments, waivers or consents requested by the Borrower pursuant to the provisions hereof or any other Loan Document. The Borrower shall supply all statements, reports, certificates, opinions, appraisals and other documents or information required to be furnished to the Lender pursuant to this Agreement without cost to the Lender.

Section 11.7    Indemnification.

(a)	The Borrower agrees to indemnify the Lender and its directors, officers and employees from and against any and all Claims and Losses of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Lender or the directors, officers or employees of the Lender, arising by reason of any action (including any action referred to herein) or inaction or omission to do any act legally required of the Borrower pursuant to the Loan Documents.
(b)	The Borrower shall pay to the Lender on demand any amounts required to compensate the Lender for any Loss suffered or incurred by the Lender as a result of (i) any payment being made (due to acceleration of the maturity of any Advance pursuant to Article 10, a mandatory or optional prepayment of principal or otherwise) in respect of any Bankers’ Acceptance other than on the maturity date of such Bankers’ Acceptance or in respect of a LIBOR Loan other than on the last day of the related LIBOR Period; (ii) the failure of the Borrower to give any notice in the manner and at the times required by this Agreement; (iii) the failure of the Borrower to effect an Advance in the manner and at the time specified in any Advance Request; or (iv) the failure of the Borrower to make a payment or a mandatory repayment in the manner at the time specified in this Agreement or any notice given by the Borrower to the Lender in accordance with this Agreement. A certificate as to the amount of any such Loss, providing reasonable detail of the calculation of such Loss and submitted in good faith by the Lender to the Borrower shall be conclusive and binding for all purposes, absent manifest error.
(c)	The provisions of this Section 11.7 shall survive the termination of this Agreement and the repayment of all Obligations. The Borrower acknowledges that neither its obligation to indemnify, nor any actual indemnification by it, of the Lender or any other indemnified party hereunder in respect of such Person’s Losses for the legal fees and expenses of such Person’s counsel shall in any way affect the confidentiality or privilege relating to any information communicated by such Person to its counsel.

Section 11.8    Taxes.

(a) Any and all payments to the Lender by the Borrower hereunder (or under any of the other Loan Documents) shall be made free and clear of and without deduction or withholding for any and all present and future Taxes, imposed by any Governmental Authority including, without limitation, any Taxes which arise from the execution, delivery or registration of, or otherwise with respect to, this Agreement or any of the other Loan Documents, unless such Taxes are required by law or the administration thereof to be deducted or withheld. If the Borrower shall be required by law or the administration thereof to deduct or withhold any such Taxes from or in respect of any amount payable hereunder, (i) the amount payable shall be increased as may be necessary so that after making all required deductions or withholdings (including deductions or withholdings applicable to

48

	additional amounts paid under this paragraph), the Lender receives an amount equal to the amount it would have received if no such deduction or withholding had been made; (ii) the Borrower shall make such deductions or withholdings; and (iii) the Borrower shall pay forthwith the full amount deducted or withheld to the relevant taxation or other authority in accordance with applicable law.
(b)	The Borrower agrees to indemnify the Lender for the full amount of Taxes not deducted or withheld and paid by the Borrower in accordance with Section 11.8 (a) to the relevant taxation or other authority and any Taxes imposed by any jurisdiction on amounts payable by the Borrower under this Section 11.8, paid by the Lender and any liability (including penalties, interest and expenses) arising therefrom or with respect thereto, whether or not any such Taxes were correctly or legally asserted. Payment under this indemnification shall be made within fifteen days from the date the Lender makes written demand therefor. A certificate as to the amount of such Taxes, providing reasonable details of the calculation thereof, and evidence of payment thereof submitted to the Borrower by the Lender shall be conclusive evidence of the amount due from the Borrower to the Lender absent manifest error.
(c)	The Borrower shall furnish to the Lender the original or a certified copy of a receipt evidencing any payment of Taxes made by the Borrower, as soon as such receipt becomes available.
(d)	If the provisions of Section 11.8(a) or 11.8(b) require the Borrower to deduct or withhold and pay Taxes to any relevant taxation or other authority or to pay any additional amounts thereunder, the Lender shall use its reasonable efforts (consistent with its internal policy and legal and regulatory restrictions) to avoid the necessity of invoking such provisions of this Section 11.8, or to reduce the amounts payable thereunder, including changing the jurisdiction of its applicable lending office; provided that the taking of any such action would not, in the reasonable judgment of the Lender, be disadvantageous to the Lender.
(e)	The provisions of this Section 11.8 shall survive the termination of this Agreement and the repayment of all Obligations.

Section 11.9    Calculations.

Except as otherwise provided herein, the financial statements and returns to be furnished to the Lender pursuant to this Agreement shall be made and prepared in accordance with GAAP consistently applied throughout the periods involved (except as set forth in the notes thereto or as otherwise disclosed in writing by the Borrower to the Lender).

Section 11.10    Assignments and Participations.

(a) The Borrower shall not be entitled to assign its rights and obligations hereunder or any interest herein without the prior consent of the Lender.

(b)

Subject to the provisions of this Agreement, the Lender may grant participations to one or more Persons in or respect of all or any part of the Lender’s Commitment and the Obligations owed to the Lender, but in any such event the participant shall not have any rights under this Agreement or the other Loan Documents in respect of its participation and shall only have, as against the Lender, those rights and remedies in respect of such participation as are set forth in the agreement or agreements made between the Lender and such participant relating thereto.

(c)

The Lender may at any time, subject, prior to the occurrence of an Event of Default and other than in respect to an assignment by a Lender to one of its Affiliates, to the consent of the Borrower (such consent not to be unreasonably withheld or delayed), assign all or part of the Lender’s Commitment and the Obligations then owed to the Lender to one or more Persons (each of which is hereinafter in this Section called the “Assignee Lender”) in consideration of the agreement of each such Assignee Lender to advance or hold that percentage of the Lender’s Commitment or Obligations owed to the Lender as corresponds with the percentage thereof so assigned to such Assignee (hereinafter called the “Assignee Lender’s Commitment” and the “Assignee Lender’s Commitment Percentage”, respectively).

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(d)	If the Lender proposes to make any such assignment to a potential Assignee Lender, the Lender shall provide to the Borrower or procure the provision to the Borrower of any material information about such potential Assignee Lender which is generally available in order to assist the Borrower in complying with any applicable laws, treaties and regulations relating to the lending by such potential Assignee Lender and to determine whether to give any required consent by the Borrower under clause (c) above.
(e)	If the Lender assigns all or any part of its Commitment hereunder to an Assignee Lender as provided above, all references in this Agreement to the Lender shall thereafter be construed as references to the Lender and such Assignee Lender to the extent of their respective Commitments and, if such Assignee Lender is not an Affiliate of the Lender the Borrower shall thereafter look only to such Assignee Lender (and not to the Lender) in respect of that proportion of such Lender’s Commitment as corresponds to such Assignee Lenders’ Commitment therein and accordingly the Lender’s obligation to provide Advances in accordance with its Commitment hereunder shall be reduced correspondingly and such Assignee Lender shall assume a Commitment equivalent to such reduction in the Lender’s Commitment.
(f)	The Lender may disclose to a potential participant or potential Assignee Lender (provided that such potential participant or Assignee Lender has been approved by the Borrower, such approval not to be unreasonably withheld) such information concerning or pertaining to the Obligations of the Borrower and its Subsidiaries as is known to the Lender, and may in addition express to any such Person any opinion it may have with respect to any matter, provided such potential participant or potential Assignee Lender covenants in favour of the Borrower and the Lender to only use such information in connection with its evaluation as to whether to take any such participation or assignment and, should it do so, in connection therewith, and to maintain the confidential nature of all such information.

Section 11.11    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.

Section 11.12    Consent to Jurisdiction.

The Borrower hereby irrevocably submits to the non-exclusive jurisdiction of the Courts of the Province of Ontario in respect of any action, suit or proceeding arising out of or relating to this Agreement and the other Loan Documents and the Credit Facility hereby extended and hereby irrevocably agrees that all Claims in respect of any such action, suit or proceeding may be heard and determined in any such Ontario Court. The Borrower hereby irrevocably waives, to the fullest extent it and they may effectively do so, the defense of an inconvenient forum to the maintenance of such action or proceeding. The Borrower agrees that a final judgment in any such suit, action or proceeding shall be conclusive and may be enforced in another jurisdiction by suit on the judgment or in any other manner provided by law. Nothing in this Section 11.12 shall affect the right of the Lender to bring any suit, action or proceeding against the Borrower or its assets in the courts of any other jurisdiction.

Section 11.13    Binding Effect.

This Agreement shall be binding upon and enure to the benefit of the parties hereto and their respective successors and permitted assigns.

Section 11.14    Interest Savings Clause.

Nothing contained in this Agreement or in any promissory notes made by the Borrower to the Lender or in any of the other Loan Documents shall be construed to permit the Lender to receive at any time interest, fees or other charges in excess of the amounts which the Lender is legally entitled to charge and receive under any law to which such interest, fees or charges are subject. In no contingency or event whatsoever shall the compensation payable to the Lender by the Borrower, howsoever characterized or computed, hereunder or under any other agreement or instrument evidencing or relating to the Obligations of the Borrower to the Lender hereunder, exceed the highest rate permissible under any law to which such compensation is subject. There is no intention that the Lender shall contract for, charge or receive compensation in excess of the highest lawful rate, and, in the event it should be determined that any excess has been charged or received, then, ipso facto, such rate shall be reduced to the highest

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lawful rate so that no amounts shall be charged which are in excess thereof; and the Lender shall apply such excess against the Obligations of the Borrower to the Lender then outstanding and, to the extent of any amounts remaining thereafter, refund such excess to the Borrower.

Section 11.15    Entire Agreement.

This Agreement, including the Schedules hereto, constitutes the entire agreement between the Borrower and the Lender and supersedes all prior agreements, whether oral or written, between the Borrower and the Lender in respect of the Credit Facility extended hereby.

Section 11.16    Counterparts.

This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which, taken together, shall constitute one and the same instrument.

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed by their respective officers thereunto duly authorized, as of the date first above written.

 

HUB INTERNATIONAL LIMITED

   Per:  /s/   DENNIS J. PAULS

Dennis J. Pauls

Authorized Signing Officer

   Per:  /s/   W. KIRK JAMES

W. Kirk James

Authorized Signing Officer

BANK OF MONTREAL

   Per:  /s/   AUTHORIZED SIGNING OFFICER

Authorized Signing Officer

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EX-10.2

(Multicurrency — Cross Border)

MASTER AGREEMENT

dated as of July 15, 2003

Hub International Limited and Bank of Montreal

have entered and/or anticipate entering into one or more transactions (each a “Transaction”) that are or will be governed by this Master Agreement, which includes the schedule (the “Schedule”), and the documents and other confirming evidence (each a “Confirmation”) exchanged between the parties confirming those Transactions.

Accordingly, the parties agree as follows: —

1. Interpretation

(a)	Definitions. The terms defined in Section 14 and in the Schedule will have the meanings therein specified for the purpose of this Master Agreement.
(b)	Inconsistency. In the event of any inconsistency between the provisions of the Schedule and the other provisions of this Master Agreement, the Schedule will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Master Agreement (including the Schedule), such Confirmation will prevail for the purpose of the relevant Transaction.
(c)	Single Agreement. All Transactions are entered into in reliance on the fact that this Master Agreement and all Confirmations form a single agreement between the parties (collectively referred to as this “Agreement”), and the parties would not otherwise enter into any Transactions.

2. Obligations

(a)  General Conditions.

(i)	Each party will make each payment or delivery specified in each Confirmation to be made by it, subject to the other provisions of this Agreement.
(ii)	Payments under this Agreement will be made on the due date for value on that date in the place of the account specified in the relevant Confirmation or otherwise pursuant to this Agreement, in freely transferable funds and in the manner customary for payments in the required currency. Where settlement is by delivery (that is, other than by payment), such delivery will be made for receipt on the due date in the manner customary for the relevant obligation unless otherwise specified in the relevant Confirmation or elsewhere in this Agreement.
(iii)	Each obligation of each party under Section 2(a)(i) is subject to (1) the condition precedent that no Event of Default or Potential Event of Default with respect to the other party has occurred and is continuing, (2) the condition precedent that no Early Termination Date in respect of the relevant Transaction has occurred or been effectively designated and (3) each other applicable condition precedent specified in this Agreement.

(b)	Change of Account. Either party may change its account for receiving a payment or delivery by giving notice to the other party at least five Local Business Days prior to the scheduled date for the payment or delivery to which such change applies unless such other party gives timely notice of a reasonable objection to such change.
(c)	Netting. If on any date amounts would otherwise be payable: —

(i)	in the same currency; and
(ii)	in respect of the same Transaction,

by each party to the other, then, on such date, each party’s obligation to make payment of any such amount will be automatically satisfied and discharged and, if the aggregate amount that would otherwise have been payable by one party exceeds the aggregate amount that would otherwise have been payable by the other party, replaced by an obligation upon the party by whom the larger aggregate amount would have been payable to pay to the other party the excess of the larger aggregate amount over the smaller aggregate amount.

The parties may elect in respect of two or more Transactions that a net amount will be determined in respect of all amounts payable on the same date in the same currency in respect of such Transactions, regardless of whether such amounts are payable in respect of the same Transaction. The election may be made in the Schedule or a Confirmation by specifying that subparagraph (ii) above will not apply to the Transactions identified as being subject to the election, together with the starting date (in which case subparagraph (ii) above will not, or will cease to, apply to such Transactions from such date). This election may be made separately for different groups of Transactions and will apply separately to each pairing of Offices through which the parties make and receive payments or deliveries.

(d)  Deduction or Withholding for Tax.

(i)   Gross-Up. All payments under this Agreement will be made without any deduction or withholding for or on account of any Tax unless such deduction or withholding is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, then in effect. If a party is so required to deduct or withhold, then that party (“X”) will: —

(1)	promptly notify the other party (“Y”) of such requirement;
(2)	pay to the relevant authorities the full amount required to be deducted or withheld (including the full amount required to be deducted or withheld from any additional amount paid by X to Y under this Section 2(d)) promptly upon the earlier of determining that such deduction or withholding is required or receiving notice that such amount has been assessed against Y;
(3)	promptly forward to Y an official receipt (or a certified copy), or other documentation reasonably acceptable to Y, evidencing such payment to such authorities; and
(4)	if such Tax is an Indemnifiable Tax, pay to Y, in addition to the payment to which Y is otherwise entitled under this Agreement, such additional amount as is necessary to ensure that the net amount actually received by Y (free and clear of Indemnifiable Taxes, whether assessed against X or Y) will equal the full amount Y would have received had no such deduction or withholding been required. However, X will not be required to pay any additional amount to Y to the extent that it would not be required to be paid but for: —

(A)

the failure by Y to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d); or

(B)

the failure of a representation made by Y pursuant to Section 3(f) to be accurate and true unless such failure would not have occurred but for (I) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (II) a Change in Tax Law.

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     (ii)  Liability. If: —

(1)	X is required by any applicable law, as modified by the practice of any relevant governmental revenue authority, to make any deduction or withholding in respect of which X would not be required to pay an additional amount to Y under Section 2(d)(i)(4);
(2)	X does not so deduct or withhold; and
(3)	a liability resulting from such Tax is assessed directly against X,

then, except to the extent Y has satisfied or then satisfies the liability resulting from such Tax, Y will promptly pay to X the amount of such liability (including any related liability for interest, but including any related liability for penalties only if Y has failed to comply with or perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).

(e) Default Interest; Other Amounts. Prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party that defaults in the performance of any payment obligation will, to the extent permitted by law and subject to Section 6(c), be required to pay interest (before as well as after judgment) on the overdue amount to the other party on demand in the same currency as such overdue amount, for the period from (and including) the original due date for payment to (but excluding) the date of actual payment, at the Default Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed. If, prior to the occurrence or effective designation of an Early Termination Date in respect of the relevant Transaction, a party defaults in the performance of any obligation required to be settled by delivery, it will compensate the other party on demand if and to the extent provided for in the relevant Confirmation or elsewhere in this Agreement.

3. Representations

Each party represents to the other party (which representations will be deemed to be repeated by each party on each date on which a Transaction is entered into and, in the case of the representations in Section 3(f), at all times until the termination of this Agreement) that: —

(a)  Basic Representations.

(i)	Status. It is duly organised and validly existing under the laws of the jurisdiction of its organisation or incorporation and, if relevant under such laws, in good standing;
(ii)	Powers. It has the power to execute this Agreement and any other documentation relating to this Agreement to which it is a party, to deliver this Agreement 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 and any obligations it has under any Credit Support Document to which it is a party and has taken all necessary action to authorise such execution, delivery and performance;
(iii)	No Violation or Conflict. 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;
(iv)	Consents. All governmental and other consents that are required to have been obtained by it with respect to this Agreement or any Credit Support Document to which it is a party have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and
(v)	Obligations Binding. Its obligations under this Agreement and any Credit Support Document to which it is a party constitute its legal, valid and binding obligations, enforceable in accordance with their respective terms (subject to applicable bankruptcy, reorganisation, insolvency, moratorium or similar laws affecting creditors’ rights generally and subject, as to enforceability, to equitable principles of general application (regardless of whether enforcement is sought in a proceeding in equity or at law)).

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(b)	Absence of Certain Events. No Event of Default or Potential Event of Default or, to its knowledge, Termination Event 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 or any Credit Support Document to which it is a party.
(c)	Absence of Litigation. 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 or any Credit Support Document to which it is a party or its ability to perform its obligations under this Agreement or such Credit Support Document.
(d)	Accuracy of Specified Information. All applicable information that is furnished in writing by or on behalf of it to the other party and is identified for the purpose of this Section 3(d) in the Schedule is, as of the date of the information, true, accurate and complete in every material respect.
(e)	Payer Tax Representation. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(e) is accurate and true.
(f)	Payee Tax Representations. Each representation specified in the Schedule as being made by it for the purpose of this Section 3(f) is accurate and true.

4.  Agreements

Each party agrees with the other that, so long as either party has or may have any obligation under this Agreement or under any Credit Support Document to which it is a party: —

(a) Furnish Specified Information. It will deliver to the other party or, in certain cases under subparagraph (iii) below, to such government or taxing authority as the other party reasonably directs: —

(i)	any forms, documents or certificates relating to taxation specified in the Schedule or any Confirmation;
(ii)	any other documents specified in the Schedule or any Confirmation; and
(iii)	upon reasonable demand by such other party, any form or document that may be required or reasonably requested in writing in order to allow such other party or its Credit Support Provider to make a payment under this Agreement or any applicable Credit Support Document without any deduction or withholding for or on account of any Tax or with such deduction or withholding at a reduced rate (so long as the completion, execution or submission of such form or document would not materially prejudice the legal or commercial position of the party in receipt of such demand), with any such form or document to be accurate and completed in a manner reasonably satisfactory to such other party and to be executed and to be delivered with any reasonably required certification,

in each case by the date specified in the Schedule or such Confirmation or, if none is specified, as soon as reasonably practicable.

(b)	Maintain Authorisations. It will use all reasonable efforts to maintain in full force and effect all consents of any governmental or other authority that are required to be obtained by it with respect to this Agreement or any Credit Support Document to which it is a party and will use all reasonable efforts to obtain any that may become necessary in the future.
(c)	Comply with Laws. It will comply in all material respects with all applicable laws and orders to which it may be subject if failure so to comply would materially impair its ability to perform its obligations under this Agreement or any Credit Support Document to which it is a party.
(d)	Tax Agreement. It will give notice of any failure of a representation made by it under Section 3(f) to be accurate and true promptly upon learning of such failure.

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(e) Payment of Stamp Tax. Subject to Section 11, it will pay any Stamp Tax levied or imposed upon it or in respect of its execution or performance of this Agreement by a jurisdiction in which it is incorporated, organised, managed and controlled, or considered to have its seat, or in which a branch or office through which it is acting for the purpose of this Agreement is located (“Stamp Tax Jurisdiction”) and will indemnify the other party against any Stamp Tax levied or imposed upon the other party or in respect of the other party’s execution or performance of this Agreement by any such Stamp Tax Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the other party.

5. Events of Default and Termination Events

(a) Events of Default. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any of the following events constitutes an event of default (an “Event of Default”) with respect to such party: —

(i)	Failure to Pay or Deliver. Failure by the party to make, when due, any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) required to be made by it if such failure is not remedied on or before the third Local Business Day after notice of such failure is given to the party;
(ii)	Breach of Agreement. Failure by the party to comply with or perform any agreement or obligation (other than an obligation to make any payment under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give notice of a Termination Event or any agreement or obligation under Section 4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party in accordance with this Agreement if such failure is not remedied on or before the thirtieth day after notice of such failure is given to the party;
(iii)	Credit Support Default.

(1)	Failure by the party or any Credit Support Provider of such party to comply with or perform any agreement or obligation to be complied with or performed by it in accordance with any Credit Support Document if such failure is continuing after any applicable grace period has elapsed;
(2)	the expiration or termination of such Credit Support Document or the failing or ceasing of such Credit Support Document to be in full force and effect for the purpose of this Agreement (in either case other than in accordance with its terms) prior to the satisfaction of all obligations of such party under each Transaction to which such Credit Support Document relates without the written consent of the other party; or
(3)	the party or such Credit Support Provider disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, such Credit Support Document;

(iv)	Misrepresentation. A representation (other than a representation under Section 3(e) or (f)) made or repeated or deemed to have been made or repeated by the party or any Credit Support Provider of such party in this Agreement or any Credit Support Document proves to have been incorrect or misleading in any material respect when made or repeated or deemed to have been made or repeated;
(v)	Default under Specified Transaction. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party (1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination of, that Specified Transaction, (2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment or delivery due on the last payment, delivery or exchange date of, or any payment on early termination of, a Specified Transaction (or such default continues for at least three Local Business Days if there is no applicable notice requirement or grace period) or (3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such action is taken by any person or entity appointed or empowered to operate it or act on its behalf);
(vi)	Cross Default. If “Cross Default” is specified in the Schedule as applying to the party, the occurrence or existence of (1) a default, event of default or other similar condition or event (however described) in

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respect of such party, any Credit Support Provider of such party or any applicable Specified Entity of such party under one or more agreements or instruments relating to Specified Indebtedness of any of them (individually or collectively) in an aggregate amount of not less than the applicable Threshold Amount (as specified in the Schedule) which has resulted in such Specified 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 (2) a default by such party, such Credit Support Provider or such Specified Entity (individually or collectively) in making one or more payments on the due date thereof in an aggregate amount of not less than the applicable Threshold Amount under such agreements or instruments (after giving effect to any applicable notice requirement or grace period);

(vii)

Bankruptcy. The party, any Credit Support Provider of such party or any applicable Specified Entity of such party: —

(1) is 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 30 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 30 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; or

(viii)  Merger Without Assumption. The party or any Credit Support Provider of such party consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and, at the time of such consolidation, amalgamation, merger or transfer: —

(1)	the resulting, surviving or transferee entity fails to assume all the obligations of such party or such Credit Support Provider under this Agreement or any Credit Support Document to which it or its predecessor was a party by operation of law or pursuant to an agreement reasonably satisfactory to the other party to this Agreement; or
(2)	the benefits of any Credit Support Document fail to extend (without the consent of the other party) to the performance by such resulting, surviving or transferee entity of its obligations under this Agreement.

(b) Termination Events. The occurrence at any time with respect to a party or, if applicable, any Credit Support Provider of such party or any Specified Entity of such party of any event specified below constitutes an Illegality if the event is specified in (i) below, a Tax Event if the event is specified in (ii) below or a Tax Event Upon Merger if the event is specified in (iii) below, and, if specified to be applicable, a Credit Event Upon Merger if the event is specified pursuant to (iv) below or an Additional Termination Event if the event is specified pursuant to (v) below: —

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(i) Illegality. Due to the adoption of, or any change in, any applicable law after the date on which a Transaction is entered into, 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 (other than as a result of a breach by the party of Section 4(b)) for such party (which will be the Affected Party): —

(1)	to perform any absolute or contingent obligation to make a payment or delivery or to receive a payment or delivery in respect of such Transaction or to comply with any other material provision of this Agreement relating to such Transaction; or
(2)	to perform, or for any Credit Support Provider of such party to perform, any contingent or other obligation which the party (or such Credit Support Provider) has under any Credit Support Document relating to such Transaction;

(ii)	Tax Event. Due to (x) any action taken by a taxing authority, or brought in a court of competent jurisdiction, on or after the date on which a Transaction is entered into (regardless of whether such action is taken or brought with respect to a party to this Agreement) or (y) a Change in Tax Law, the party (which will be the Affected Party) will, or there is a substantial likelihood that it will, on the next succeeding Scheduled Payment Date (1) be required to pay to the other party an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount is required to be deducted or withheld for or on account of a Tax (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) and no additional amount is required to be paid in respect of such Tax under Section 2(d)(i)(4) (other than by reason of Section 2(d)(i)(4)(A) or (B));
(iii)	Tax Event Upon Merger. The party (the “Burdened Party”) on the next succeeding Scheduled Payment Date will either (1) be required to pay an additional amount in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a payment from which an amount has been deducted or withheld for or on account of any Indemnifiable Tax in respect of which the other party is not required to pay an additional amount (other than by reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a party consolidating or amalgamating with, or merging with or into, or transferring all or substantially all its assets to, another entity (which will be the Affected Party) where such action does not constitute an event described in Section 5(a)(viii);
(iv)	Credit Event Upon Merger. If “Credit Event Upon Merger” is specified in the Schedule as applying to the party, such party (“X”), any Credit Support Provider of X or any applicable Specified Entity of X consolidates or amalgamates with, or merges with or into, or transfers all or substantially all its assets to, another entity and such action does not constitute an event described in Section 5(a)(viii) but the creditworthiness of the resulting, surviving or transferee entity is materially weaker than that of X, such Credit Support Provider or such Specified Entity, as the case may be, immediately prior to such action (and, in such event, X or its successor or transferee, as appropriate, will be the Affected Party); or
(v)	Additional Termination Event. If any “Additional Termination Event” is specified in the Schedule or any Confirmation as applying, the occurrence of such event (and, in such event, the Affected Party or Affected Parties shall be as specified for such Additional Termination Event in the Schedule or such Confirmation).

(c) Event of Default and Illegality. If an event or circumstance which would otherwise constitute or give rise to an Event of Default also constitutes an Illegality, it will be treated as an Illegality and will not constitute an Event of Default.

6. Early Termination

(a) Right to Terminate Following Event of Default. If at any time an Event of Default with respect to a party (the “Defaulting Party”) has occurred and is then continuing, the other party (the “Non-defaulting Party”) may, by not more than 20 days notice to the Defaulting Party specifying the relevant Event of Default, designate a

7

day not earlier than the day such notice is effective as an Early Termination Date in respect of all outstanding Transactions. If, however, “Automatic Early Termination” is specified in the Schedule as applying to a party, then an Early Termination Date in respect of all outstanding Transactions will occur immediately upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the extent analogous thereto, (8), and as of the time immediately preceding the institution of the relevant proceeding or the presentation of the relevant petition upon the occurrence with respect to such party of an Event of Default specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).

(b)

Right to Terminate Following Termination Event.

(i)

Notice. If a Termination Event occurs, an Affected Party will, promptly upon becoming aware of it, notify the other party, specifying the nature of that Termination Event and each Affected Transaction and will also give such other information about that Termination Event as the other party may reasonably require.

(ii)

Transfer to Avoid Termination Event. If either an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the Affected Party, the Affected Party will, as a condition to its right to designate an Early Termination Date under Section 6(b)(iv), use all reasonable efforts (which will not require such party to incur a loss, excluding immaterial, incidental expenses) to transfer within 20 days after it gives notice under Section 6(b)(i) all its rights and obligations under this Agreement in respect of the Affected Transactions to another of its Offices or Affiliates so that such Termination Event ceases to exist.

If the Affected Party is not able to make such a transfer it will give notice to the other party to that effect within such 20 day period, whereupon the other party may effect such a transfer within 30 days after the notice is given under Section 6(b)(i).

Any such transfer by a party under this Section 6(b)(ii) will be subject to and conditional upon the prior written consent of the other party, which consent will not be withheld if such other party’s policies in effect at such time would permit it to enter into transactions with the transferee on the terms proposed.

(iii)	Two Affected Parties. If an Illegality under Section 5(b)(i)(1) or a Tax Event occurs and there are two Affected Parties, each party will use all reasonable efforts to reach agreement within 30 days after notice thereof is given under Section 6(b)(i) on action to avoid that Termination Event.
(iv)	Right to Terminate. If: —

(1)	a transfer under Section 6(b)(ii) or an agreement under Section 6(b)(iii), as the case may be, has not been effected with respect to all Affected Transactions within 30 days after an Affected Party gives notice under Section 6(b)(i); or
(2)	an Illegality under Section 5(b)(i)(2), a Credit Event Upon Merger or an Additional Termination Event occurs, or a Tax Event Upon Merger occurs and the Burdened Party is not the Affected Party,

either party in the case of an Illegality, the Burdened Party in the case of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event or an Additional Termination Event if there is more than one Affected Party, or the party which is not the Affected Party in the case of a Credit Event Upon Merger or an Additional Termination Event if there is only one Affected Party may, by not more than 20 days notice to the other party and provided that the relevant Termination Event is then continuing, designate a day not earlier than the day such notice is effective as an Early Termination Date in respect of all Affected Transactions.

(c) Effect of Designation.

(i) If notice designating an Early Termination Date is given under Section 6(a) or (b), the Early Termination Date will occur on the date so designated, whether or not the relevant Event of Default or Termination Event is then continuing.

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(ii) Upon the occurrence or effective designation of an Early Termination Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of the Terminated Transactions will be required to be made, but without prejudice to the other provisions of this Agreement. The amount, if any, payable in respect of an Early Termination Date shall be determined pursuant to Section 6(e).

(d) Calculations.

(i)

Statement. On or as soon as reasonably practicable following the occurrence of an Early Termination Date, each party will make the calculations on its part, if any, contemplated by Section 6(e) and will provide to the other party a statement (1) showing, in reasonable detail, such calculations (including all relevant quotations and specifying any amount payable under Section 6(e)) and (2) giving details of the relevant account to which any amount payable to it is to be paid. In the absence of written confirmation from the source of a quotation obtained in determining a Market Quotation, the records of the party obtaining such quotation will be conclusive evidence of the existence and accuracy of such quotation.

(ii)

Payment Date. An amount calculated as being due in respect of any Early Termination Date under Section 6(e) will be payable on the day that notice of the amount payable is effective (in the case of an Early Termination Date which is designated or occurs as a result of an Event of Default) and on the day which is two Local Business Days after the day on which notice of the amount payable is effective (in the case of an Early Termination Date which is designated as a result of a Termination Event). Such amount will be paid together with (to the extent permitted under applicable law) interest thereon (before as well as after judgment) in the Termination Currency, from (and including) the relevant Early Termination Date to (but excluding) the date such amount is paid, at the Applicable Rate. Such interest will be calculated on the basis of daily compounding and the actual number of days elapsed.

(e) Payments on Early Termination. If an Early Termination Date occurs, the following provisions shall apply based on the parties’ election in the Schedule of a payment measure, either “Market Quotation” or “Loss”, and a payment method, either the “First Method” or the “Second Method”. If the parties fail to designate a payment measure or payment method in the Schedule, it will be deemed that “Market Quotation” or the “Second Method”, as the case may be, shall apply. The amount, if any, payable in respect of an Early Termination Date and determined pursuant to this Section will be subject to any Set-off.

(i) Events of Default. If the Early Termination Date results from an Event of Default: —

(1)	First Method and Market Quotation. If the First Method and Market Quotation apply, the Defaulting Party will pay to the Non-defaulting Party the excess, if a positive number, of (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party over (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party.
(2)	First Method and Loss. If the First Method and Loss apply, the Defaulting Party will pay to the Non-defaulting Party, if a positive number, the Non-defaulting Party’s Loss in respect of this Agreement.
(3)	Second Method and Market Quotation. If the Second Method and Market Quotation apply, an amount will be payable equal to (A) the sum of the Settlement Amount (determined by the Non-defaulting Party) in respect of the Terminated Transactions and the Termination Currency Equivalent of the Unpaid Amounts owing to the Non-defaulting Party less (B) the Termination Currency Equivalent of the Unpaid Amounts owing to the Defaulting Party. If that amount is a positive number, the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.
(4)	Second Method and Loss. If the Second Method and Loss apply, an amount will be payable equal to the Non-defaulting Party’s Loss in respect of this Agreement. If that amount is a positive number,

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the Defaulting Party will pay it to the Non-defaulting Party; if it is a negative number, the Non-defaulting Party will pay the absolute value of that amount to the Defaulting Party.

(ii) Termination Events. If the Early Termination Date results from a Termination Event: —

(1)

One Affected Party. If there is one Affected Party, the amount payable will be determined in accordance with Section 6(e)(i)(3), if Market Quotation applies, or Section 6(e)(i)(4), if Loss applies, except that, in either case, references to the Defaulting Party and to the Non-defaulting Party will be deemed to be references to the Affected Party and the party which is not the Affected Party, respectively, and, if Loss applies and fewer than all the Transactions are being terminated, Loss shall be calculated in respect of all Terminated Transactions.

(2)

Two Affected Parties. If there are two Affected Parties: —

(A)

if Market Quotation applies, each party will determine a Settlement Amount in respect of the Terminated Transactions, and an amount will be payable equal to (I) the sum of (a) one-half of the difference between the Settlement Amount of the party with the higher Settlement Amount (“X”) and the Settlement Amount of the party with the lower Settlement Amount (“Y”) and (b) the Termination Currency Equivalent of the Unpaid Amounts owing to X less (II) the Termination Currency Equivalent of the Unpaid Amounts owing to Y; and

(B)

if Loss applies, each party will determine its Loss in respect of this Agreement (or, if fewer than all the Transactions are being terminated, in respect of all Terminated Transactions) and an amount will be payable equal to one-half of the difference between the Loss of the party with the higher Loss (“X”) and the Loss of the party with the lower Loss (“Y”).

If the amount payable is a positive number, Y will pay it to X; if it is a negative number, X will pay the absolute value of that amount to Y.

(iii)

Adjustment for Bankruptcy. In circumstances where an Early Termination Date occurs because “Automatic Early Termination” applies in respect of a party, the amount determined under this Section 6(e) will be subject to such adjustments as are appropriate and permitted by law to reflect any payments or deliveries made by one party to the other under this Agreement (and retained by such other party) during the period from the relevant Early Termination Date to the date for payment determined under Section 6(d)(ii).

(iv)

Pre-Estimate. The parties agree that if Market Quotation applies an amount recoverable under this Section 6(e) is a reasonable pre-estimate of loss and not a penalty. Such amount is payable for the loss of bargain and the loss of protection against future risks and except as otherwise provided in this Agreement neither party will be entitled to recover any additional damages as a consequence of such losses.

7. Transfer

Subject to Section 6(b)(ii), neither this Agreement nor any interest or obligation in or under this Agreement may be transferred (whether by way of security or otherwise) by either party without the prior written consent of the other party, except that: —

(a)	a party may make such a transfer of this Agreement pursuant to a consolidation or amalgamation with, or merger with or into, or transfer of all or substantially all its assets to, another entity (but without prejudice to any other right or remedy under this Agreement); and
(b)	a party may make such a transfer of all or any part of its interest in any amount payable to it from a Defaulting Party under Section 6(e).

Any purported transfer that is not in compliance with this Section will be void.

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8.  Contractual Currency

(a)	Payment in the Contractual Currency. Each payment under this Agreement will be made in the relevant currency specified in this Agreement for that payment (the “Contractual Currency”). To the extent permitted by applicable law, any obligation to make payments under this Agreement in the Contractual Currency will not be discharged or satisfied by any tender in any currency other than the Contractual Currency, except to the extent such tender results in the actual receipt by the party to which payment is owed, acting in a reasonable manner and in good faith in converting the currency so tendered into the Contractual Currency, of the full amount in the Contractual Currency of all amounts payable in respect of this Agreement. If for any reason the amount in the Contractual Currency so received falls short of the amount in the Contractual Currency payable in respect of this Agreement, the party required to make the payment will, to the extent permitted by applicable law, immediately pay such additional amount in the Contractual Currency as may be necessary to compensate for the shortfall. If for any reason the amount in the Contractual Currency so received exceeds the amount in the Contractual Currency payable in respect of this Agreement, the party receiving the payment will refund promptly the amount of such excess.
(b)	Judgments. To the extent permitted by applicable law, if any judgment or order expressed in a currency other than the Contractual Currency is rendered (i) for the payment of any amount owing in respect of this Agreement, (ii) for the payment of any amount relating to any early termination in respect of this Agreement or (iii) in respect of a judgment or order of another court for the payment of any amount described in (i) or (ii) above, the party seeking recovery, after recovery in full of the aggregate amount to which such party is entitled pursuant to the judgment or order, will be entitled to receive immediately from the other party the amount of any shortfall of the Contractual Currency received by such party as a consequence of sums paid in such other currency and will refund promptly to the other party any excess of the Contractual Currency received by such party as a consequence of sums paid in such other currency if such shortfall or such excess arises or results from any variation between the rate of exchange at which the Contractual Currency is converted into the currency of the judgment or order for the purposes of such judgment or order and the rate of exchange at which such party is able, acting in a reasonable manner and in good faith in converting the currency received into the Contractual Currency, to purchase the Contractual Currency with the amount of the currency of the judgment or order actually received by such party. The term “rate of exchange” includes, without limitation, any premiums and costs of exchange payable in connection with the purchase of or conversion into the Contractual Currency.
(c)	Separate Indemnities. To the extent permitted by applicable law, these indemnities constitute separate and independent obligations from the other obligations in this Agreement, will be enforceable as separate and independent causes of action, will apply notwithstanding any indulgence granted by the party to which any payment is owed and will not be affected by judgment being obtained or claim or proof being made for any other sums payable in respect of this Agreement.
(d)	Evidence of Loss. For the purpose of this Section 8, it will be sufficient for a party to demonstrate that it would have suffered a loss had an actual exchange or purchase been made.

9. Miscellaneous

(a)	Entire Agreement. This Agreement constitutes the entire agreement and understanding of the parties with respect to its subject matter and supersedes all oral communication and prior writings with respect thereto.
(b)	Amendments. No amendment, modification or waiver in respect of this Agreement will be effective unless in writing (including a writing evidenced by a facsimile transmission) and executed by each of the parties or confirmed by an exchange of telexes or electronic messages on an electronic messaging system.
(c)	Survival of Obligations. Without prejudice to Sections 2(a)(iii) and 6(c)(ii), the obligations of the parties under this Agreement will survive the termination of any Transaction.

11

(d)	Remedies Cumulative. Except as provided in this Agreement, the rights, powers, remedies and privileges provided in this Agreement are cumulative and not exclusive of any rights, powers, remedies and privileges provided by law.
(e)	Counterparts and Confirmations.

(i)

This Agreement (and each amendment, modification and waiver in respect of it) may be executed and delivered in counterparts (including by facsimile transmission), each of which will be deemed an original.

(ii)

The parties intend that they are legally bound by the terms of each Transaction from the moment they agree to those terms (whether orally or otherwise). A Confirmation shall he entered into as soon as practicable and may he executed and delivered in counterparts (including by facsimile transmission) or be created by an exchange of telexes or by an exchange of electronic messages on an electronic messaging system, which in each case will be sufficient for all purposes to evidence a binding supplement to this Agreement. The parties will specify therein or through another effective means that any such counterpart, telex or electronic message constitutes a Confirmation.

(f)	No Waiver of Rights. A failure or delay in exercising any right, power or privilege in respect of this Agreement will not be presumed to operate as a waiver, and a single or partial exercise of any right, power or privilege will not be presumed to preclude any subsequent or further exercise, of that right, power or privilege or the exercise of any other right, power or privilege.
(g)	Headings. The headings used in this Agreement are for convenience of reference only and are not to affect the construction of or to be taken into consideration in interpreting this Agreement.

10. Offices; Multibranch Parties

(a)	If Section 10(a) is specified in the Schedule as applying, each party that enters into a Transaction through an Office other than its head or home office represents to the other party that, notwithstanding the place of booking office or jurisdiction of incorporation or organisation of such party, the obligations of such party are the same as if it had entered into the Transaction through its head or home office. This representation will be deemed to be repeated by such party on each date on which a Transaction is entered into.
(b)	Neither party may change the Office through which it makes and receives payments or deliveries for the purpose of a Transaction without the prior written consent of the other party.
(c)	If a party is specified as a Multibranch Party in the Schedule, such Multibranch Party may make and receive payments or deliveries under any Transaction through any Office listed in the Schedule, and the Office through which it makes and receives payments or deliveries with respect to a Transaction will be specified in the relevant Confirmation.

11. Expenses

A Defaulting Party will, on demand, indemnify and hold harmless the other party for and against all reasonable out-of-pocket expenses, including legal fees and Stamp Tax, incurred by such other party by reason of the enforcement and protection of its rights under this Agreement or any Credit Support Document to which the Defaulting Party is a party or by reason of the early termination of any Transaction, including, but not limited to, costs of collection.

12. Notices

(a)   Effectiveness. Any notice or other communication in respect of this Agreement may be given in any manner set forth below (except that a notice or other communication under Section 5 or 6 may not be given by

12

facsimile transmission or electronic messaging system) to the address or number or in accordance with the electronic messaging system details provided (see the Schedule) and will be deemed effective as indicated: —

(i)	if in writing and delivered in person or by courier, on the date it is delivered;
(ii)	if sent by telex, on the date the recipient’s answerback is received;
(iii)	if sent by facsimile transmission, on the date that transmission is received by a responsible employee of the recipient in legible form (it being agreed that the burden of proving receipt will be on the sender and will not be met by a transmission report generated by the sender’s facsimile machine);
(iv)	if sent by certified or registered mail (airmail, if overseas) or the equivalent (return receipt requested), on the date that mail is delivered or its delivery is attempted; or
(v)	if sent by electronic messaging system, on the date that electronic message is received,

unless the date of that delivery (or attempted delivery) or that receipt, as applicable, is not a Local Business Day or that communication is delivered (or attempted) or received, as applicable, after the close of business on a Local Business Day, in which case that communication shall be deemed given and effective on the first following day that is a Local Business Day.

(b) Change of Addresses. Either party may by notice to the other change the address, telex or facsimile number or electronic messaging system details at which notices or other communications are to be given to it.

13. Governing Law and Jurisdiction

(a)	Governing Law. This Agreement will be governed by and construed in accordance with the law specified in the Schedule.
(b)	Jurisdiction. With respect to any suit, action or proceedings relating to this Agreement (“Proceedings”), each party irrevocably: —

(i)	submits to the jurisdiction of the English courts, if this Agreement is expressed to be governed by English law, or to the non- exclusive jurisdiction of the courts of the State of New York and the United States District Court located in the Borough of Manhattan in New York City, if this Agreement is expressed to be governed by the laws of the State of New York; and
(ii)	waives any objection which it may have at any time to the laying of venue of any Proceedings brought in any such court, waives any claim that such Proceedings have been brought in an inconvenient forum and further waives the right to object, with respect to such Proceedings, that such court does not have any jurisdiction over such party.

Nothing in this Agreement precludes either party from bringing Proceedings in any other jurisdiction (outside, if this Agreement is expressed to be governed by English law, the Contracting States, as defined in Section 1(3) of the Civil Jurisdiction and Judgments Act 1982 or any modification, extension or re-enactment thereof for the time being in force) nor will the bringing of Proceedings in any one or more jurisdictions preclude the bringing of Proceedings in any other jurisdiction.

(c)

Service of Process. Each party irrevocably appoints the Process Agent (if any) specified opposite its name in the Schedule to receive, for it and on its behalf, service of process in any Proceedings. If for any reason any party’s Process Agent is unable to act as such, such party will promptly notify the other party and within 30 days appoint a substitute process agent acceptable to the other party. The parties irrevocably consent to service of process given in the manner provided for notices in Section 12. Nothing in this Agreement will affect the right of either party to serve process in any other manner permitted by law.

(d)

Waiver of Immunities. Each party irrevocably waives, to the fullest extent permitted by applicable law, with respect to itself and its revenues and assets (irrespective of their use or intended use), all immunity on the grounds of sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any court, (iii) relief by way of injunction, order for specific performance or for recovery of property, (iv) attachment of its assets (whether

13

before or after judgment) and (v) execution or enforcement of any judgment to which it or its revenues or assets might otherwise be entitled in any Proceedings in the courts of any jurisdiction and irrevocably agrees, to the extent permitted by applicable law, that it will not claim any such immunity in any Proceedings.

14. Definitions

As used in this Agreement: —

“Additional Termination Event” has the meaning specified in Section 5(b).

“Affected Party” has the meaning specified in Section 5(b).

“Affected Transactions” means (a) with respect to any Termination Event consisting of an Illegality, Tax Event or Tax Event Upon Merger, all Transactions affected by the occurrence of such Termination Event and (b) with respect to any other Termination Event, all Transactions.

“Affiliate” means, subject to the Schedule, in relation to any person, any entity controlled, directly or indirectly, by the person, any entity that controls, directly or indirectly, the person or any entity directly or indirectly under common control with the person. For this purpose, “control” of any entity or person means ownership of a majority of the voting power of the entity or person.

“Applicable Rate” means: —

(a)	in respect of obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;
(b)	in respect of an obligation to pay an amount under Section 6(e) of either party from and after the date (determined in accordance with Section 6(d)(ii)) on which that amount is payable, the Default Rate;
(c)	in respect of all other obligations payable or deliverable (or which would have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default Rate; and
(d)	in all other cases, the Termination Rate.

“Burdened Party” has the meaning specified in Section 5(b).

“Change in Tax Law” means the enactment, promulgation, execution or ratification of, or any change in or amendment to, any law (or in the application or official interpretation of any law) that occurs on or after the date on which the relevant Transaction is entered into.

“consent” includes a consent, approval, action, authorisation, exemption, notice, filing, registration or exchange control consent.

“Credit Event Upon Merger” has the meaning specified in Section 5(b).

“Credit Support Document” means any agreement or instrument that is specified as such in this Agreement.

“Credit Support Provider” has the meaning specified in the Schedule.

“Default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the relevant payee (as certified by it) if it were to fund or of funding the relevant amount plus 1% per annum.

“Defaulting Party” has the meaning specified in Section 6(a).

“Early Termination Date” means the date determined in accordance with Section 6(a) or 6(b)(iv).

“Event of Default” has the meaning specified in Section 5(a) and, if applicable, in the Schedule.

“Illegality” has the meaning specified in Section 5(b).

“Indemnifiable Tax” means any Tax other than a Tax that would not be imposed in respect of a payment under this Agreement but for a present or former connection between the jurisdiction of the government or

14

taxation authority imposing such Tax and the recipient of such payment or a person related to such recipient (including, without limitation, a connection arising from such recipient or related person being or having been a citizen or resident of such jurisdiction, or being or having been organised, present or engaged in a trade or business in such jurisdiction, or having or having had a permanent establishment or fixed place of business in such jurisdiction, but excluding a connection arising solely from such recipient or related person having executed, delivered, performed its obligations or received a payment under, or enforced, this Agreement or a Credit Support Document).

“law” includes any treaty, law, rule or regulation (as modified, in the case of tax matters, by the practice of any relevant governmental revenue authority) and “lawful” and “unlawful” will be construed accordingly.

“Local Business Day” means, subject to the Schedule, a day on which commercial banks are open for business (including dealings in foreign exchange and foreign currency deposits) (a) in relation to any obligation under Section 2(a)(i), in the place(s) specified in the relevant Confirmation or, if not so specified, as otherwise agreed by the parties in writing or determined pursuant to provisions contained, or incorporated by reference, in this Agreement, (b) in relation to any other payment, in the place where the relevant account is located and, if different, in the principal financial centre, if any, of the currency of such payment, (c) in relation to any notice or other communication, including notice contemplated under Section 5(a)(i), in the city specified in the address for notice provided by the recipient and, in the case of a notice contemplated by Section 2(b), in the place where the relevant new account is to be located and (d) in relation to Section 5(a)(v)(2), in the relevant locations for performance with respect to such Specified Transaction.

“Loss” means, with respect to this Agreement or one or more Terminated Transactions, as the case may be, and a party, the Termination Currency Equivalent of an amount that party reasonably determines in good faith to be its total losses and costs (or gain, in which case expressed as a negative number) in connection with this Agreement or that Terminated Transaction or group of Terminated Transactions, as the case may be, including any loss of bargain, cost of funding or, at the election of such party but without duplication, loss or cost incurred as a result of its terminating, liquidating, obtaining or reestablishing any hedge or related trading position (or any gain resulting from any of them). Loss includes losses and costs (or gains) in respect of any payment or delivery required to have been made (assuming satisfaction of each applicable condition precedent) on or before the relevant Early Termination Date and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3) or 6(e)(ii)(2)(A) applies. Loss does not include a party’s legal fees and out-of-pocket expenses referred to under Section 11. A party will determine its Loss as of the relevant Early Termination Date, or, if that is not reasonably practicable, as of the earliest date thereafter as is reasonably practicable. A party may (but need not) determine its Loss by reference to quotations of relevant rates or prices from one or more leading dealers in the relevant markets.

“Market Quotation” means, with respect to one or more Terminated Transactions and a party making the determination, an amount determined on the basis of quotations from Reference Market-makers. Each quotation will be for an amount, if any, that would be paid to such party (expressed as a negative number) or by such party (expressed as a positive number) in consideration of an agreement between such party (taking into account any existing Credit Support Document with respect to the obligations of such party) and the quoting Reference Market-maker to enter into a transaction (the “Replacement Transaction”) that would have the effect of preserving for such party the economic equivalent of any payment or delivery (whether the underlying obligation was absolute or contingent and assuming the satisfaction of each applicable condition precedent) by the parties under Section 2(a)(i) in respect of such Terminated Transaction or group of Terminated Transactions that would, but for the occurrence of the relevant Early Termination Date, have been required after that date. For this purpose, Unpaid Amounts in respect of the Terminated Transaction or group of Terminated Transactions are to be excluded but, without limitation, any payment or delivery that would, but for the relevant Early Termination Date, have been required (assuming satisfaction of each applicable condition precedent) after that Early Termination Date is to be included. The Replacement Transaction would be subject to such documentation as such party and the Reference Market-maker may, in good faith, agree. The party making the determination (or its agent) will request each Reference Market-maker to provide its quotation to the extent reasonably practicable as of the same day and time (without regard to different time zones) on or as

15

soon as reasonably practicable after the relevant Early Termination Date. The day and time as of which those quotations are to be obtained will be selected in good faith by the party obliged to make a determination under Section 6(e), and, if each party is so obliged, after consultation with the other. If more than three quotations are provided, the Market Quotation will be the arithmetic mean of the quotations, without regard to the quotations having the highest and lowest values. If exactly three such quotations are provided, the Market Quotation will be the quotation remaining after disregarding the highest and lowest quotations. For this purpose, if more than one quotation has the same highest value or lowest value, then one of such quotations shall be disregarded. If fewer than three quotations are provided, it will be deemed that the Market Quotation in respect of such Terminated Transaction or group of Terminated Transactions cannot be determined.

“Non-default Rate” means a rate per annum equal to the cost (without proof or evidence of any actual cost) to the Non-defaulting Party (as certified by it) if it were to fund the relevant amount.

“Non-defaulting Party” has the meaning specified in Section 6(a).

“Office” means a branch or office of a party, which may be such party’s head or home office.

“Potential Event of Default” means any event which, with the giving of notice or the lapse of time or both, would constitute an Event of Default.

“Reference Market-makers” means four leading dealers in the relevant market selected by the party determining a Market Quotation in good faith (a) from among dealers of the highest credit standing which satisfy all the criteria that such party applies generally at the time in deciding whether to offer or to make an extension of credit and (b) to the extent practicable, from among such dealers having an office in the same city.

“Relevant Jurisdiction” means, with respect to a party, the jurisdictions (a) in which the party is incorporated, organised, managed and controlled or considered to have its seat, (b) where an Office through which the party is acting for purposes of this Agreement is located, (c) in which the party executes this Agreement and (d) in relation to any payment, from or through which such payment is made.

“Scheduled Payment Date” means a date on which a payment or delivery is to be made under Section 2(a)(i) with respect to a Transaction.

“Set-off” means set-off, offset, combination of accounts, right of retention or withholding or similar right or requirement to which the payer of an amount under Section 6 is entitled or subject (whether arising under this Agreement, another contract, applicable law or otherwise) that is exercised by, or imposed on, such payer.

“Settlement Amount” means, with respect to a party and any Early Termination Date, the sum of: —

(a)	the Termination Currency Equivalent of the Market Quotations (whether positive or negative) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation is determined; and
(b)	such party’s Loss (whether positive or negative and without reference to any Unpaid Amounts) for each Terminated Transaction or group of Terminated Transactions for which a Market Quotation cannot be determined or would not (in the reasonable belief of the party making the determination) produce a commercially reasonable result.

“Specified Entity” has the meanings specified in the Schedule.

“Specified Indebtedness” means, subject to the Schedule, any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of borrowed money.

“Specified Transaction” means, subject to the Schedule, (a) any transaction (including an agreement with respect thereto) now existing or hereafter entered into between one party to this Agreement (or any Credit Support Provider of such party or any applicable Specified Entity of such party) and the other party to this Agreement (or any Credit Support Provider of such other party or any applicable Specified Entity of such other party) which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign

16

exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions), (b) any combination of these transactions and (c) any other transaction identified as a Specified Transaction in this Agreement or the relevant confirmation.

“Stamp Tax” means any stamp, registration, documentation or similar tax.

“Tax” means any present or future tax, levy, impost, duty, charge, assessment or fee of any nature (including interest, penalties and additions thereto) that is imposed by any government or other taxing authority in respect of any payment under this Agreement other than a stamp, registration, documentation or similar tax.

“Tax Event” has the meaning specified in Section 5(b).

“Tax Event Upon Merger” has the meaning specified in Section 5(b).

“Terminated Transactions” means with respect to any Early Termination Date (a) if resulting from a Termination Event, all Affected Transactions and (b) if resulting from an Event of Default, all Transactions (in either case) in effect immediately before the effectiveness of the notice designating that Early Termination Date (or, if “Automatic Early Termination” applies, immediately before that Early Termination Date).

“Termination Currency” has the meaning specified in the Schedule.

“Termination Currency Equivalent” means, in respect of any amount denominated in the Termination Currency, such Termination Currency amount and, in respect of any amount denominated in a currency other than the Termination Currency (the “Other Currency”), the amount in the Termination Currency determined by the party making the relevant determination as being required to purchase such amount of such Other Currency as at the relevant Early Termination Date, or, if the relevant Market Quotation or Loss (as the case may be), is determined as of a later date, that later date, with the Termination Currency at the rate equal to the spot exchange rate of the foreign exchange agent (selected as provided below) for the purchase of such Other Currency with the Termination Currency at or about 11:00 a.m. (in the city in which such foreign exchange agent is located) on such date as would be customary for the determination of such a rate for the purchase of such Other Currency for value on the relevant Early Termination Date or that later date. The foreign exchange agent will, if only one party is obliged to make a determination under Section 6(e), be selected in good faith by that party and otherwise will be agreed by the parties.

“Termination Event” means an Illegality, a Tax Event or a Tax Event Upon Merger or, if specified to be applicable, a Credit Event Upon Merger or an Additional Termination Event.

“Termination Rate” means a rate per annum equal to the arithmetic mean of the cost (without proof or evidence of any actual cost) to each party (as certified by such party) if it were to fund or of funding such amounts.

“Unpaid Amounts” owing to any party means, with respect to an Early Termination Date, the aggregate of (a) in respect of all Terminated Transactions, the amounts that became payable (or that would have become payable but for Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early Termination Date and which remain unpaid as at such Early Termination Date and (b) in respect of each Terminated Transaction, for each obligation under Section 2(a)(i) which was (or would have been but for Section 2(a)(iii)) required to be settled by delivery to such party on or prior to such Early Termination Date and which has not been so settled as at such Early Termination Date, an amount equal to the fair market value of that which was (or would have been) required to be delivered as of the originally scheduled date for delivery, in each case together with (to the extent permitted under applicable law) interest, in the currency of such amounts, from (and including) the date such amounts or obligations were or would have been required to have been paid or performed to (but excluding) such Early Termination Date, at the Applicable Rate. Such amounts of interest will be calculated on the basis of daily compounding and the actual number of days elapsed. The fair market value of any obligation referred to in clause (b) above shall be reasonably determined by the party obliged to make the determination under Section 6(e) or, if each party is so obliged, it shall be the average of the Termination Currency Equivalents of the fair market values reasonably determined by both parties.

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IN WITNESS WHEREOF the parties have executed this document on the respective dates specified below with effect from the date specified on the first page of this document.

HUB INTERNATIONAL LIMITED	BANK OF MONTREAL
(Name of Party)	(Name of Party)
By:  Dennis J. Pauls	By:  R.J. Mailloux
Name: Dennis J. Pauls	Name: R.J. Mailloux
Title:   Vice President and Chief Financial Officer	Title:   Senior Manager Documentation
Date:   April 28, 2004	Date:   April 19, 2004

18

(Multicurrency — Cross Border)

ISDA

SCHEDULE

to the

MASTER AGREEMENT

dated as of July 15, 2003

between

HUB INTERNATIONAL LIMITED (“Party A”)

and

BANK OF MONTREAL (“Party B”)

PART 1

TERMINATION PROVISIONS

(a)   “Specified Entity” means in relation to Party A for the purpose of:–

     Section 5(a)(v), Section 5(a)(vi), Section 5(a)(vii), and Section 5(b)(iv), each Material Subsidiary (as such term is defined in the Private Placement Memorandum dated June 10, 2003)

     and in relation to Party B for the purpose of:-

Section 5(a)(v), Not Applicable

Section 5(a)(vi), Not Applicable

Section 5(a)(vii), Not Applicable

Section 5(b)(iv), Not Applicable

(b)  “Specified Transaction” will have the meaning specified in Section 14 of this Agreement.

(c) The “Cross Default” provisions of Section 5(a)(vi) will apply to Party A and Party B.

“Specified Indebtedness” will have the meaning specified in Section 14, provided that it will also include any obligation (whether present or future, contingent or otherwise, as principal or surety or otherwise) in respect of any Derivative Transaction and will not include (i) indebtedness in respect of deposits received or (ii) any payment not made because of an intervening change in law making such payment illegal, Force Majeure or act of state, provided that the party had available sufficient funds to make such payment at the time of non-payment.

“Threshold Amount” shall have the meaning set forth below; for purposes of “Threshold Amount”, “Equity” means the stockholders’ equity including retained earnings, total partnership capital, net assets, or total capital and reserves, as the case may be, of the Party or its Credit Support Provider.

“Threshold Amount” means in relation to Party A or any Credit Support Provider of Party A, (i) zero with respect to Specified Indebtedness to Party B or any Affiliate of Party B and (ii) CAD 100,000 with respect to other Specified Indebtedness.

“Threshold Amount” means, with respect to Party B, 2% of the Equity of Party B.

(d)	The “Credit Event Upon Merger” provisions of Section 5(b)(iv) will apply to Party A and Party B.
(e)	The “Automatic Early Termination” provisions of Section 6(a) will not apply to Party A and will not apply to Party B.
(f)	Payments on Early Termination. For the purpose of Section 6(e) of this Agreement:–

(i) Market Quotation will apply.

     (ii)  The Second Method will apply.

(g)  “Termination Currency” means Canadian Dollars.

(h) Additional Termination Event will apply. The following shall constitute an Additional Termination Event as to which Party A shall be the Affected Party:

(i) if the Notes (as defined in the Private Placement Memorandum) issued under the Private Placement Memorandum dated June 10, 2003 are cancelled or prepaid on the part of Party A.

PART 2

TAX REPRESENTATIONS

(a)   Payer Representation. For the purpose of Section 3(e) of this Agreement, Party A and Party B will each make the following representation:-

It is not required by any applicable law, as modified by the practice of any relevant governmental revenue authority, of any Relevant Jurisdiction to make any deduction or withholding for or on account of any Tax from any payment (other than interest under Section 2(e), 6(d)(ii) or 6(e) of this Agreement) to be made by it to the other party under this Agreement. In making this representation, it may rely on:-

(i)	the accuracy of any representations made by the other party pursuant to Section 3(f) of this Agreement;
(ii)	the satisfaction of the agreement contained in Section 4(a)(i) or 4(a)(iii) of this Agreement and the accuracy and effectiveness of any document provided by the other party pursuant to Section 4(a)(i) or 4(a)(iii) of this Agreement; and
(iii)	the satisfaction of the agreement of the other party contained in Section 4(d) of this Agreement;

provided that it shall not be a breach of this representation where reliance is placed on clause (ii) and the other party does not deliver a form or document under Section 4(a)(iii) by reason of material prejudice to its legal or commercial position.

(b)  Payee Representations. For the purpose of Section 3(f) of this Agreement, Party A and Party B make the representations specified below, if any:-

(i) The following representation will apply to Party A and will apply to Party B when Party B is acting through its Toronto office:-

It is fully eligible for the benefits of the “Business Profits” or “Industrial and Commercial Profits” provision, as the case may be, the “Interest” provision or the “Other Income” provision (if any) of the Specified Treaty with respect to any payment described in such provisions and received or to be received by it in connection with this Agreement and no such payment is attributable to a trade or business carried on by it through a permanent establishment in the Specified Jurisdiction.

“Specified Treaty” means with respect to Party B or Party A as Payee, the income tax convention between Canada and the United States of America.

“Specified Jurisdiction” means the United States of America.

(ii) The following representation will not apply to Party A and will apply to Party B when Party B is acting through its Chicago office:-

Each payment received or to be received by it in connection with this Agreement will be effectively connected with its conduct of a trade or business in the United States of America.

(iii) The following representation will not apply to Party A and will apply to Party B when Party B is acting through its London office:-

It is a party to the Transaction other than as agent or nominee for another person and will be taxed in the United Kingdom on profits earned in the United Kingdom.

PART 3

AGREEMENT TO DELIVER DOCUMENTS

For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party agrees to deliver the following documents, as applicable:

(a) Each party shall, as soon as practicable after demand, deliver to the other Party any form or document reasonably requested by the other party, including without limitation, any form or document required to enable such other party to make payments hereunder without withholding for or on account of Taxes or with such withholding at a reduced rate. Without limiting the generality of the foregoing:

				Covered by
Party required to			Date by which	Section 3(d)
deliver document		Form/Document/Certificate	to be delivered	Representation
	Party A	Form W-8-ECI with respect to Transactions entered into by Party A’s U.S. Office.	Upon execution of this Agreement		Yes
	Party A	Form W-8-BEN with respect to Transactions entered into by Party A’s non-U.S. Offices	Upon execution of this Agreement		Yes
	Party B	Form W-8-ECI, with respect to Transactions entered into by Party B’s Chicago Office	Upon execution of this Agreement		Yes
	Party B	Form W-8-BEN with respect to Transactions entered into by Party B’s London and Toronto Offices	Upon execution of this Agreement		Yes

Other documents to be delivered by each party concurrently with the execution and delivery of this Agreement are:

				Covered by
Party Required to			Date by which	Section 3(d)
deliver document		Form/Document/Certificate	to be Delivered	Representation
	Party A & B	Incumbency Certificate	Execution and delivery of Agreement		Yes
	Party A and Party B	Resolution or other documents evidencing the authority of the party entering into this Agreement and the persons acting on behalf of such party.	Upon execution of this Agreement, and if requested, each Confirmation		Yes
	Party A	Each Credit Support Document of such party listed in Part 4(f) of this Schedule	Upon execution of this Agreement		Yes
	Party A	Legal Opinion in Substantially the form appended as Exhibit I	Execution and delivery of Agreement		No
	Party A	Legal Opinions concerning Party A’s Credit Support Providers, substantially in the form of Exhibit II	Upon execution of this Agreement		No

PART 4

MISCELLANEOUS

(a)  Addresses for Notices. For the purpose of Section 12(a) of this Agreement:-

     Address(es) for notices or communications to Party A:-

Address:  Hub International Limited

55 East Jackson Blvd.

Chicago, Illinois 60604

Attention:  Kirk James

Facsimile:  312-279-4981

Telephone: 312-279-4881

     Address(es) for notices or communications to Party B:–

     With respect to Transactions:

Address:  Bank of Montreal

130 Adelaide Street West, Suite 500

Toronto, Ontario M5H 4E1

Canada

Attention:  Manager, Confirmations

Facsimile:  (416) 867-4778/6827

Telephone: (416) 867-7173

Any other notice sent to Party B (including without limitation, any notice in connection with Section 5, 6 or 9(b)) shall be copied to the following address:

Address:  Bank of Montreal

Treasury Credit, 24th Floor

First Canadian Place

Toronto, Ontario M5X 1A1

Canada

Attention:  Senior Manager, Documentation

Telephone: (416) 867-4178

(b) Process Agent. For purposes of Section 13(c) of this Agreement:-

Party A appoints as its Process Agent: Not Applicable.

Party B appoints as its Process Agent: Not Applicable.

(c)  Offices. The provisions of Section 10(a) will apply to this Agreement.

(d) Multibranch Party. For the purpose of Section 10(c) of this Agreement:-

Party A is not a Multibranch Party.

Party B is a Multibranch Party and, for purposes of this Agreement and each Transaction entered into pursuant hereto, may act through its Toronto, Chicago or London Offices.

(e)	Calculation Agent. The Calculation Agent is Party B, unless otherwise specified in a Confirmation in relation to the relevant Transaction.
(f)	Credit Support Document(s). With respect to Party A, means the Guarantees from each Material Subsidiary of Party A for the obligations of Party A under this Agreement.
(g)	Credit Support Provider. With respect to Party A, means each Material Subsidiary of Party A.

(h)	Governing Law. This Agreement will be governed by and construed in accordance with the laws of the Province of Ontario and the laws of Canada applicable therein.
(i)	Netting of Payments. Subparagraph (ii) of Section 2(c) shall apply to all Transactions.
(j)	“Affiliate” will have the meaning specified in Section 14 of this Agreement.

PART 5

OTHER PROVISIONS

(a)	2000 ISDA Definitions. The provisions of the 2000 ISDA Definitions (the “Definitions”), published by the International Swaps and Derivatives Association, Inc., are incorporated by reference in, and will be deemed to be part of, this Agreement and each Confirmation as if set forth in full in this Agreement or in such Confirmation, without regard to any revision or subsequent edition thereof. In the event of any inconsistency between the provisions of this Agreement and the Definitions, this Agreement will prevail. In the event of any inconsistency between the provisions of any Confirmation and this Agreement or the Definitions, such Confirmation will prevail for the purpose of the relevant transaction.
(b)	Illegality or Force Majeure. As contemplated by Section 6 of this Agreement, while neither party shall be obligated to violate any applicable law by reason of Section 6 or this Part 5(b), each party shall retain its right to payment pursuant to Section 6(e) if the other party does not perform because of Illegality or Force Majeure.
(c)	Set-off. Any amount (the “Early Termination Amount”) payable to one party (the “Payee”) by the other party (the “Payer”) under Section 6(e), in circumstances where there is a Defaulting Party or one Affected Party in the case where a Termination Event under Section 5(b)(iv) or 5(b)(v) has occurred, will, at the option of the party (“X”) other than the Defaulting Party or the Affected Party (and without prior notice to the Defaulting Party or the Affected Party), be reduced by its set-off against any amount(s) (the “Other Agreement Amount”) payable (whether at such time or in the future or upon the occurrence of a contingency) by the Payee to the Payer (irrespective of the currency, place of payment or booking office of the obligation) under any other agreement(s) between the Payee and the Payer or instrument(s) or undertaking(s) issued or executed by one party to, or in favour of, the other party (and the Other Agreement Amount will be discharged promptly and in all respects to the extent it is so set-off). X will give notice to the other party of any set-off effected under this Section.

For this purpose, either the Early Termination Amount or the Other Agreement Amount (or the relevant portion of such amounts) may be converted by X into the currency in which the other is denominated at the rate of exchange at which such party would be able, acting in a reasonable manner and in good faith, to purchase the relevant amount of such currency.

If an obligation is unascertained, X may in good faith estimate that obligation and set-off in respect of the estimate, subject to the relevant party accounting to the other when the obligation is ascertained.

Nothing in this Section shall be effective to create a charge or other security interest. This Section shall be without prejudice and in addition to any right of set-off, combination of accounts, lien or other right to which any party is at any time otherwise entitled (whether by operation of law, contract or otherwise).

(d) Conditions to Certain Payments. Notwithstanding the provision of Section 6(e)(i)(3) and (4), as applicable, if the amount referred to therein is a positive number, the Defaulting Party will pay such amount to the Non-defaulting Party, and if the amount referred to therein is a negative number, except to the extent set out below, the Non-defaulting Party shall have no obligation to pay any amount thereunder to the Defaulting Party unless and until the conditions set forth in (i) and (ii) below have been satisfied, at which time there shall arise an obligation of the Non-defaulting Party to pay to the Defaulting Party an amount equal to the absolute value of such negative number less any and all amounts which the Defaulting Party may be obligated to pay under Section 11 (the “Conditional Payment Amount”):

(i) the Non-defaulting Party shall have received confirmation satisfactory to it in its sole discretion (which may include an unqualified opinion of its counsel) that (x) no further payments or deliveries under Section 2(a)(i) or 2(e) in respect of Terminated Transactions will be required to be made in accordance with Section 6(c)(ii) and (y) each Specified Transaction shall have terminated pursuant to its specified

	termination date or through the exercise by a party of a right to terminate and all obligations owing under each such Specified Transaction shall have been fully and finally performed;
(ii)	all obligations (contingent or absolute, matured or unmatured) of the Defaulting Party and any Affiliate of the Defaulting Party to make any payment or delivery to the Non-defaulting Party or any Affiliate of the Non-defaulting Party shall have been fully and finally performed;

provided that if the Conditional Payment Amount exceeds the aggregate amount of the obligations owing to the Non-defaulting Party and Affiliates of the Non-defaulting Party by the Defaulting Party and Affiliates of the Defaulting Party (including without limitation all obligations owing under each Specified Transaction), the Non-defaulting Party shall pay the amount of the excess to the Defaulting Party.

(e) Relationship between the Parties. Each party will be deemed to represent to the other party on the date on which it enters into a Transaction that (absent a written agreement between the parties that expressly imposes affirmative obligations to the contrary for that Transaction):

(i)	Non-Reliance. It is acting for its own account, and it has made its own independent decision to enter into that Transaction and as to whether that Transaction is appropriate or proper for it based upon its own judgment and upon advice from such advisors as it has deemed necessary. It is not relying on any communication (written or oral) of the other Party as investment advice or as a recommendation to enter into that Transaction; it being understood that information and explanations related to the terms and conditions of a Transaction shall not be considered investment advice or a recommendation to enter into that Transaction. No communication (written or oral) received from the other party shall be deemed to be an assurance or guarantee as to the expected results of that Transaction.
(ii)	Assessment and Understanding. It is capable of assessing the merits of and understanding (on its own behalf or through independent professional advice), and understands and accepts the terms, conditions and risks of that Transaction. It is also capable of assuming, and assumes, the risks of that Transaction.
(iii)	Status of Parties. The other party is not acting as a fiduciary for or an advisor to it in respect of that Transaction.

(f)

Telephone Recording. Each party (i) consents to the recording of telephone conversations of trading and marketing personnel of the parties in connection with this Agreement or any potential or actual Transaction hereunder; (ii) agrees to obtain any necessary consent of and give notice of such recording to its trading and marketing personnel; and (iii) agrees that such recordings may be submitted in evidence in any proceeding relating to this Agreement, subject to applicable rules of discovery and evidence.

(g)

Additional Definitions. The following definition shall be added to Section 14 in its appropriate alphabetical place:

“Derivative Transaction” means (a) any transaction which is a rate swap transaction, basis swap, forward rate transaction, commodity swap, commodity option, equity or equity index swap, equity or equity index option, bond option, interest rate option, foreign exchange transaction, cap transaction, floor transaction, collar transaction, currency swap transaction, cross-currency rate swap transaction, currency option or any other similar transaction (including any option with respect to any of these transactions) and (b) any combination of these transactions.

“Force Majeure” is a natural or man-made disaster, armed conflict, riot, civil disturbance, or similar event that materially disrupts transportation or communication facilities in the relevant city where the party is to make payment, or otherwise prevents the personnel of the party from performing their duties in connection with such payment, and is beyond the control of the party.

(h) Equivalency Clause. For the purpose of disclosure pursuant to the Interest Act (Canada), the yearly rate of interest to which any rate of interest payable under this Agreement, which is to be calculated on any basis other than a full calendar year, is equivalent, may be determined by multiplying such rate by a fraction, the numerator

	of which is the actual number of days in the calendar year in which the period for which interest at such rate is payable ends and the denominator of which is the number of days of such other basis.
(i)	Submission to Jurisdiction. In substitution for the provisions of Section 13(b)(i) of this Agreement, each party irrevocably submits to the non-exclusive jurisdiction of the court of competent jurisdiction of the Province of Ontario, without reference to the choice of law doctrine.
(j)	WAIVER OF JURY TRIAL: EACH PARTY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY CREDIT SUPPORT DOCUMENT OR ANY TRANSACTION. EACH PARTY ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE ENTERED INTO THIS AGREEMENT AND ANY CREDIT SUPPORT DOCUMENT, AS APPLICABLE, IN RELIANCE ON, AMONG OTHER THINGS, THE MUTUAL WAIVERS IN THIS SECTION.
(k)	Right to Terminate. Either party (the “Terminating Party”) may, provided that no Event of Default or Potential Event of Default exists with respect to that party , elect to terminate any Transaction under this Agreement on the fourth (4th) anniversary of the Effective Date of such Transaction or every four (4) years thereafter, (the “Optional Termination Date”), by providing at least thirty (30) days prior notice to the other party (the “Other Party”). Notice may be provided by telephone but is to be followed up with a written notice to be received by the Other Party prior to the Optional Termination Date. In the event the Terminating Party elects to terminate a Transaction pursuant to the foregoing, the Terminating Party shall at or prior to 2:00 p.m. Toronto time on the Optional Termination Date, determine the amount payable in respect of the terminated Transaction (the “Market Value”) by making the calculations required by Section 6(e)(i) of the Agreement as if the Optional Termination Date were an Early Termination Date designated as a result of the occurrence of an Event of Default with respect to the Terminating Party and the parties had specified Loss and the Second Method for that purpose. The Market Value will be paid by the relevant party on the second Business Day following the Optional Termination Date.

If there is a dispute between the parties as to the calculation of the Market Value,

(a)

the parties will consult with each other in an attempt to resolve the dispute; and

(b)

if the parties fail to resolve the dispute prior to 3:00 p.m. Toronto time on the Optional Termination Date, then Bank of Montreal shall recalculate the Market Value by making calculations required by Section 6(e)(i) of the Agreement as if the Optional Termination Date were an Early Termination Date designated as a result of the occurrence of an Event of Default with respect to the Terminating Party and the parties had specified Market Quotation and the Second Method for that purpose.

Promptly following a resolution pursuant to this paragraph, the Market Value will be paid by the relevant party on the second Business Day following the Optional Termination Date.

Upon payment of such sum as provided herein, the obligations of both parties with respect to this Transaction shall be discharged in full.

(l) Commodity Exchange Act. Each party represents to the other party on and as of the date hereof and on each date on which a Transaction is entered into among them that:

(i) such party is an “eligible contract participant” as defined in the U.S. Commodity Exchange Act, as amended (the “CEA”).

HUB INTERNATIONAL LIMITED		BANK OF MONTREAL
By:	/s/  Dennis J. Pauls	By:	/s/  R. J. Mailloux
Name:	Dennis J. Pauls	Name:	R. J. Mailloux
Title:	VP and Chief Financial Officer	Title:	Senior Manager Documentation
Date:	April 28, 2004	Date:	April 19, 2004

EXHIBIT I

LETTERHEAD OF COUNTERPARTY’S COUNSEL

Date

Bank of Montreal

First Canadian Place

Toronto, Ontario

M5X 1A1

Dear Sirs:

     This opinion is furnished to you in connection with the ISDA Master Agreement dated as of July 15, 2003 (the “Agreement”) and the Confirmation dated July 15, 2003 between Hub International Limited (the “Counterparty”) and Bank of Montreal (the “Bank”). Terms defined in the Agreement and used but not defined herein have the meanings given to them in the Agreement.

     We have acted as counsel to the Counterparty in connection with the execution and delivery of the Agreement. We have examined the Agreement, the Counterparty’s constating documents and such other documents as we have deemed necessary or appropriate for purposes of the opinions expressed herein. We have also made such investigations and considered such questions of law as we have considered necessary for the purpose of rendering this opinion. In such examination we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies, certified or otherwise.

     We express no opinion with respect to the laws of any jurisdiction other than the laws of Ontario and the laws of Canada applicable therein.

     Based on the foregoing we are of the opinion that:

1.	The Counterparty has been duly incorporated and is validly existing and in good standing under the laws of Ontario.
2.	The execution and delivery of the Agreement and each Confirmation entered into by the parties on or prior to the date hereof and the performance by the Counterparty of its obligations thereunder have been duly authorized by the Counterparty, are within the corporate power of the Counterparty and do not conflict with, or result in a breach of, (i) the constating documents of the Counterparty, (ii) any law or regulation, or (iii) any agreement, decree, order, judgment, injunction or other instrument binding on or affecting the Counterparty.
3.	The Agreement and each Confirmation entered into by the parties on or prior to the date hereof have been duly authorized, executed and delivered by the Counterparty to the Bank.
4.	No action by, notice to or filing with, or consent, authorization or approval of, any governmental authority or regulatory body is required in connection with the Counterparty’s execution, delivery and performance of the Agreement or any Confirmation entered into by the parties on or prior to the date hereof.
5.	The Agreement and each Transaction evidenced by a Confirmation outstanding as of the date of execution of the Master Agreement constitutes a legal, valid and binding obligation of the Counterparty enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws and equitable principles of general application affecting the rights of creditors or limiting the availability of specific performance, injunctive relief or any other equitable remedy.

This opinion is provided solely for your benefit and is not to be relied upon for any purpose other than in respect of the Agreement or by any other person.

Yours very truly,

W. Kirk James

Executive Vice President,

Secretary and General Counsel

Hub International Limited

EXHIBIT II

Date

Bank of Montreal

First Canadian Place

Toronto, Ontario

M5X 1A1

Dear Sirs:

This opinion is furnished to you in connection with the ISDA Master Agreement dated as of July 15, 2003 (the “Agreement”) between Hub International Limited (“Counterparty”) and Bank of Montreal (the “Bank”), in respect of which each Material Subsidiary (the “Credit Support Provider”) has provided credit support in the form of a Guarantee dated July 15, 2003 (the “Credit Support Documents”) covering the obligations of the Counterparty. Terms defined in the Agreement and used but not defined herein have the meanings given to them in the Agreement.

We have acted as counsel to each Credit Support Provider in connection with the execution and delivery of the Credit Support Documents. We have examined the Agreement, the Credit Support Documents, the Credit Support Provider’s constating documents and such other documents as we have deemed necessary or appropriate for purposes of the opinions expressed herein. We have also made such investigations and considered such questions of law as we have considered necessary for the purpose of rendering this opinion. In such examination we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies, certified or otherwise.

We express no opinion with respect to the laws of any jurisdiction other than the laws of the respective jurisdiction of organization of each Credit Support Provider as listed on Exhibit A attached hereto and the laws of federal jurisdiction applicable therein.

Based on the foregoing we are of the opinion that:

1.	Each Credit Support Provider has been duly incorporated and is validly existing and in good standing under the laws of its respective jurisdiction of organization.
2.	The execution and delivery of each Credit Support Document and the performance by the respective Credit Support Provider of its obligations thereunder have been duly authorized by the Credit Support Provider, are within the corporate power of the Credit Support Provider and do not conflict with, or result in a breach of, (i) the constating documents of the Credit Support Provider, (ii) any law or regulation, or (iii) any agreement, decree, order, judgment, injunction or other instrument binding on or affecting the Credit Support Provider.
3.	The Credit Support Documents have been duly authorized, executed and delivered by each Credit Support Provider to the Bank.
4.	No action by, notice to or filing with, or consent, authorization or approval of, any governmental authority or regulatory body is required in connection with any Credit Support Provider’s execution, delivery and performance of the Credit Support Documents.
5.	The governing law clause, subjecting the Credit Support Document to the laws of the Province of Ontario is valid under the laws of the respective jurisdiction of organization of each Credit Support Provider. Under the laws of the respective jurisdiction of organization of each Credit Support Provider, the laws of the Province of Ontario will be applied to the Credit Support Document, provided that such choice of law is bona fide and provided that such choice of law is not contrary to public policy, as that term is understood under the laws of the respective jurisdiction of organization of each Credit Support Provider. To the best of our knowledge, having made due inquiry, the public policy of the respective jurisdiction of organization of each Credit Support Provider would not be breached by application of the chosen law.
6.	A final and conclusive judgment for sum certain in personam and rendered by a court of competent jurisdiction in the Province of Ontario with respect to the obligations of each Credit Support Provider under

the respective Credit Support Document would be recognized and enforceable by a court in the respective jurisdiction of organization of each Credit Support Provider.

7.

Each Credit Support Document constitutes a legal, valid and binding obligation of each Credit Support Provider enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws and equitable principles of general application affecting the rights of creditors, or limiting the availability of specific performance, injunctive relief or any other equitable remedy.

This opinion is provided solely for your benefit and is not to be relied upon for any purpose other than in respect of the Agreement or by any other person.

Yours very truly,

W. Kirk James

Executive Vice President,

Secretary and General Counsel

Hub International Limited

EXHIBIT A

Credit Support Provider	Jurisdiction of Organization
Barton Insurance Brokers Ltd.	British Columbia, Canada
Martin Assurance & Gestion de Risques Inc.	Quebec, Canada
TOS Insurance Services Ltd.	British Columbia, Canada

EXHIBIT II

LETTERHEAD OF CREDIT SUPPORT PROVIDER’S COUNSEL

Date

Bank of Montreal

First Canadian Place

Toronto, Ontario

M5X 1A1

Dear Sirs:

This opinion is furnished to you in connection with the ISDA Master Agreement dated as of July 15, 2003 (the “Agreement”) between Hub International Limited (“Counterparty”) and Bank of Montreal (the “Bank”), in respect of which each Material Subsidiary (the “Credit Support Provider”) has provided credit support in the form of a Guarantee dated July 15, 2003 (the “Credit Support Documents”) covering the obligations of the Counterparty. Terms defined in the Agreement and used but not defined herein have the meanings given to them in the Agreement.

We have acted as counsel to each Credit Support Provider in connection with the execution and delivery of the Credit Support Documents. We have examined the Agreement, the Credit Support Documents, the Credit Support Provider’s constating documents and such other documents as we have deemed necessary or appropriate for purposes of the opinions expressed herein. We have also made such investigations and considered such questions of law as we have considered necessary for the purpose of rendering this opinion. In such examination we have assumed the genuineness of all signatures, the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies, certified or otherwise.

We express no opinion with respect to the laws of any jurisdiction other than the laws of the respective jurisdiction of organization of each Credit Support Provider as listed on Exhibit A attached hereto and the laws of federal jurisdiction applicable therein.

Based on the foregoing we are of the opinion that:

1.	Each Credit Support Provider has been duly incorporated and is validly existing and in good standing under the laws of its respective jurisdiction of organization.
2.	The execution and delivery of each Credit Support Document and the performance by the respective Credit Support Provider of its obligations thereunder have been duly authorized by the Credit Support Provider, are within the corporate power of the Credit Support Provider and do not conflict with, or result in a breach of, (i) the constating documents of the Credit Support Provider, (ii) any law or regulation, or (iii) any agreement, decree, order, judgment, injunction or other instrument binding on or affecting the Credit Support Provider.
3.	The Credit Support Documents have been duly authorized, executed and delivered by each Credit Support Provider to the Bank.
4.	No action by, notice to or filing with, or consent, authorization or approval of, any governmental authority or regulatory body is required in connection with any Credit Support Provider’s execution, delivery and performance of the Credit Support Documents.
5.	The governing law clause, subjecting the Credit Support Document to the laws of the Province of Ontario is valid under the laws of the respective jurisdiction of organization of each Credit Support Provider. Under the laws of the respective jurisdiction of organization of each Credit Support Provider, the laws of the Province of Ontario will be applied to the Credit Support Document, provided that such choice of law is bona fide and provided that such choice of law is not contrary to public policy, as that term is understood under the laws of the respective jurisdiction of organization of each Credit Support Provider. To the best of our knowledge, having made due inquiry, the public policy of the respective jurisdiction of organization of each Credit Support Provider would not be breached by application of the chosen law.

6.

A final and conclusive judgment for sum certain in personam and rendered by a court of competent jurisdiction in the Province of Ontario with respect to the obligations of each Credit Support Provider under the respective Credit Support Document would be recognized and enforceable by a court in the respective jurisdiction of organization of each Credit Support Provider.

7.

Each Credit Support Document constitutes a legal, valid and binding obligation of each Credit Support Provider enforceable in accordance with its terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, and other similar laws and equitable principles of general application affecting the rights of creditors, or limiting the availability of specific performance, injunctive relief or any other equitable remedy.

This opinion is provided solely for your benefit and is not to be relied upon for any purpose other than in respect of the Agreement or by any other person.

YOURS VERY TRULY,

ANGELA M. YAZVAC

ASSISTANT GENERAL COUNSEL

HUB INTERNATIONAL LIMITED

Exhibit A

Credit Support Provider	Jurisdiction of Incorporation
Hub International of Indiana Limited	Indiana
C.J. McCarthy Insurance Agency	Massachusetts
Mack and Parker Inc.	Illinois
Kaye Group Inc.	New York

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a)

AS ENACTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Martin P. Hughes, Chairman of the Board and Chief Executive Officer, of Hub International Limited, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Hub International Limited;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:  /s/   Martin P. Hughes

Martin P. Hughes

Chief Executive Officer

DATE:   August 5, 2004

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO RULE 13a-14(a) OR 15d-14(a)

AS ENACTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Dennis J. Pauls, Vice President and Chief Financial Officer, of Hub International Limited, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Hub International Limited;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a.	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b.	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
c.	Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s fourth fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a.	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b.	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

By:  /s/   Dennis J. Pauls

Dennis J. Pauls

Vice President and Chief Financial Officer

DATE:   August 5, 2004

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Hub International Limited (the “Company”) dated August 5, 2004 containing the financial statements of the Company for the fiscal quarter ended June 30, 2004 (the “Report”) filed with the Securities and Exchange Commission on the date hereof, I, Martin P. Hughes, Chief Executive Officer of the Company, pursuant to 18 U.S.C. Section 1350, as enacted, certify pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

By:  /s/   MARTIN P. HUGHES

Martin P. Hughes

Chief Executive Officer

August 5, 2004

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,

AS ENACTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Hub International Limited (the “Company”) dated August 5, 2004 containing the financial statements of the Company for the fiscal quarter ended June 30, 2004 (the “Report”) filed with the Securities and Exchange Commission on the date hereof, I, Dennis J. Pauls, Chief Financial Officer of the Company, pursuant to 18 U.S.C. Section 1350, as enacted, certify, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1.	the Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and
2.	the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

By:  /s/   DENNIS J. PAULS

Dennis J. Pauls

Chief Financial Officer

August 5, 2004