Document:

<PAGE>
                                                                               .
                                                                               .
                                                                               .

                                                                   EXHIBIT 10(i)

[EBS LOGO]     PROASSURANCE GROUP
           -   The Executive Nonqualified "Excess" Plan(SM)

<TABLE>
<CAPTION>
TABLE OF CONTENTS                                      TAB
-----------------                                      ---
<S>                                                    <C>
ENGAGEMENT AGREEMENT                                    1

SERVICE AGREEMENT                                       2

ADOPTION AGREEMENT                                      3

PLAN DOCUMENT                                           4

TRUST AGREEMENT & TRUST DOCUMENTS                       5

BOARD RESOLUTION                                        6

DEPARTMENT OF LABOR NOTIFICATION                        7

EXECUTIVE SUMMARY                                       8
</TABLE>

Executive Benefit Services, Inc. - 4140 ParkLake Avenue, Suite 500 -
800.999.4031 - FAX 919.719.2015 - WWW.EBSNQ.COM Copyright (C)2003 Executive
Benefit Services, Inc. All Rights Reserved Executive Benefit Services, Inc.
(EBS) is a member company of the Principal financial Group(R),Des Moines,
IA 50392

<PAGE>

[EBS LOGO]      THE EXECUTIVE NONQUALIFIED "EXCESS" PLAN(SM)  EXCESS PLAN
            -   Engagement Agreement

This agreement entered into this 9th day of November, 2004 between Executive
Benefit Services, Inc., hereafter called ("EBS"), a North Carolina corporation,
located at 4140 ParkLake Avenue, Suite 500, Raleigh, NC 27612 and Proassurance
Group, located at 100 Brookwood PLC., Birmingham, AL 35209, hereafter
called the ("COMPANY"). Whereas, the COMPANY wishes to use the administrative
services of EBS for The Executive Nonqualified "Excess " Plan(TM), hereafter
referred to as the "Plan".

      NOW, THEREFORE, in consideration of the terms and conditions contained
herein, the parties hereto agree as follows:

1.0   PLAN DESIGN SERVICES:

      EBS will provide the following services in coordination with the servicing
      representative(s) to assist the COMPANY in the design of the Plan:

      a)    Coordinate Implementation conference call with COMPANY
            representative(s), the EBS implementation team, servicing
            representative(s) and other parties as applicable.

      b)    Assist in preparation of prototype Plan documentation including
            (where applicable):

                  -     Service Agreement

                  -     Plan Document and Adoption Agreement

                  -     Board Resolution

                  -     Department of Labor Notification

                  -     Trust Agreement (if applicable)

      c)    Implement Plan financing method.

2.0   ACKNOWLEDGMENTS:

      a)    EBS does not provide legal, tax or accounting advice. EBS may
            provide general information regarding the operation of the Plan, but
            it is solely the responsibility of the COMPANY to determine actual
            legal and tax consequences associated with the Plan.

      b)    EBS may provide the COMPANY model documents but it is solely the
            responsibility of the COMPANY and the COMPANY'S legal counsel to
            determine whether documents are appropriate for the Plan.

      c)    Plan Administrative Service fees vary depending on the plan
            financing method(s) used. A Service Agreement will be drafted based
            on the COMPANY'S selection of a financing method. Any change in
            financing method will require execution of a new Service Agreement.
            Any difference in fees will be due / refunded upon execution of the
            new Service Agreement.

3.0   APPLICATION FEE:

A $500.00 non-refundable application fee is payable with this engagement letter.
This fee will be applied towards the Plan Set-up fee. Any additional amounts
owed for the Plan Set-up fee will be invoiced and due with the first quarter's
statement fees.

Victor T. Adamo, President                         /S/ Victor T. Adamo
-------------------------------------------        ----------------------------
Please print COMPANY OFFICER'S Name & Title         Signature of COMPANY OFFICER

<PAGE>

[SEAL]                                                                [EBS LOGO]

                                  THE EXECUTIVE
                          NONQUALIFIED "EXCESS" PLAN(SM)

        SERVICE AGREEMENT - ADVANTAGE NONQUALIFIED MUTUAL FUND FINANCING

This agreement is made this 1 day of December, 2004, between Executive Benefit
Services, Inc. ("EBS"), a North Carolina corporation, located at 4140 ParkLake
Avenue, Suite 500, Raleigh, NC 27612 and PROASSURANCE GROUP SERVICES
CORPORATION, located at 100 BROOKWOOD PLACE, SUITE 300, BIRMINGHAM, AL 35209
("COMPANY"). Whereas, the COMPANY wishes to use the administrative services of
EBS to provide plan level administration for The Executive Nonqualified "Excess"
Plan(SM), hereinafter referred to as the "Plan".

                                    RECITALS:

      Whereas, the COMPANY has established a Nonqualified Executive Benefit
Program and will use mutual funds as the financing method; and

      Whereas, EBS is in the business of providing administrative services to
companies offering Nonqualified Executive Benefit Programs to certain of their
eligible employees (the "EXECUTIVES"); and

      Whereas, the COMPANY wishes to use the administrative services of EBS to
service the Plan; and

      Whereas, EBS is willing to provide such services and undertake such
actions on the terms and conditions set forth in this Agreement,

                                    AGREEMENT

      NOW, THEREFORE, in consideration of the terms and conditions contained
herein, the undersigned parties agree as follows:

1.0   APPOINTMENT OF EBS:

      1.1   The COMPANY hereby appoints EBS as its administrative agent for the
            purposes set forth herein.

      1.2   EBS hereby accepts such appointment, upon the terms and conditions
            set forth herein.

2.0   THE PLAN:

      2.1   The COMPANY agrees to provide EBS a copy of all plan documents,
            forms and administrative procedures regarding the Plan, and such
            other information and documents needed by EBS to assist in
            administering the Plan.

      2.2   The COMPANY agrees to promptly provide EBS with all amendments or
            modifications to the Plan documents and all such other information
            as EBS may reasonably request to perform its duties.

      2.3   The COMPANY represents, acknowledges and agrees that EBS may rely on
            all documents and information provided to it by the COMPANY as being
            complete and accurate.

      2.4   The COMPANY shall appoint one or more employees to act as its
            representative ("COMPANY REPRESENTATIVE(s)") to coordinate
            administration of the Plan with EBS.

                                       1
<PAGE>

3.0   PLAN IMPLEMENTATION:

      3.1   EBS agrees to assist the COMPANY in implementing the Plan by
            providing the services described in Appendix A to this Agreement.

      3.2   In consideration for its services under this Agreement, the COMPANY
            shall pay or cause the Plan to pay EBS for services selected as set
            forth in Appendix B. "the Election of Services and Fees".

4.0   PURCHASE AND REDEMPTION OF MUTUAL FUND SHARES:

      4.1   The COMPANY has selected EBS to coordinate the Purchases and
            Redemptions of mutual funds shares.

      4.2   EBS has selected Princor Financial Services Corporation ("PRINCOR"),
            a licensed broker- dealer and member of the National Association of
            Securities Dealers ("NASD"), as its broker-dealer for executing
            purchases and redemptions of mutual fund shares.

      4.3   EBS will act as a liaison between the COMPANY and PRINCOR for mutual
            fund purchases and redemptions.

5.0   GENERAL PROVISIONS:

      5.1   Limitation of Administrative Duties.

                  5.1.1 The parties acknowledge and agree that EBS is not a
                        fiduciary, trustee or administrator of the Plan.

                  5.1.2 The parties acknowledge and agree that EBS does not
                        provide legal, accounting, tax or investment advisory
                        services.

                  5.1.3 The parties acknowledge and agree that EBS does not
                        guarantee the execution of orders to purchase or redeem
                        mutual fund shares and shall not be liable for
                        unexecuted or partially filled trades.

      5.2   Limitation of Liability. EBS shall not be responsible for any losses
            or damages to the Plan or the COMPANY other than those resulting
            directly from EBS' negligence or willful disregard of its duties
            under this Agreement; provided, however, that in no event shall EBS
            be liable for any error or inaccuracy in the transmission of
            information because of a breakdown or failure of transmission or
            communication facilities.

                  5.2.1 The EBS website is intended to provide summary
                        information only and does not supersede reports,
                        confirmations or other primary source documents.

      5.3   Term.

                  5.3.1 This Agreement shall commence as of the date of this
                        Agreement and continue until terminated by any party
                        upon ninety-days (90) prior written notice.

                  5.3.2 EBS reserves the right to terminate this agreement for
                        non-payment of any fees due by COMPANY to EBS. Fees are
                        due upon receipt and there is a ninety-day (90) grace
                        period.

                  5.3.3 In the event that any party to this Agreement files a
                        petition for bankruptcy, or loses any licenses required
                        in order to perform the services contained herein, this
                        Agreement shall be deemed to immediately terminate.

                                       2
<PAGE>

      5.4   Termination. Termination of this Agreement shall not affect any
            other agreements between or among the parties.

      5.5   EBS' Authority. The COMPANY hereby authorizes EBS to have access to
            all information contained in the Plan's custodial accounts so as to
            permit EBS to affect the administrative duties set forth in this
            Agreement.

      5.6   Construction of this Agreement.

            5.6.1 No provision of this Agreement shall be construed so as to
                  violate the Plan, or any law, rule, regulation or order of any
                  federal or state governmental or regulatory authority,
                  including, without limitation, the Internal Revenue Code,
                  ERISA, the Securities and Exchange Commission, NASD.

            5.6.2 The parties agree that this Agreement shall be construed as
                  though jointly drafted by the parties and according to the
                  fair intent of the language as a whole and not for or against
                  any party.

      5.7   Amendments or Modifications. This Agreement may be amended or
            modified only in writing signed by the parties.

      5.8   Authorization. Each of the parties represents that it has duly
            authorized the execution, delivery, and performance of this
            Agreement and that this Agreement is a valid and binding obligation.

      5.9   Entire Agreement. This Agreement sets forth the entire understanding
            of the parties with regard to the matters set out herein.

      5.10  Governing Law. This Agreement shall be governed by the laws of the
            State of North Carolina without regard to conflict of law
            principles.

      5.11  Assignment. This Agreement may not be assigned by any party without
            the written consent of the other party. Any attempted assignment
            without such consent shall be void and of no effect.

      5.12  Performance of Functions. EBS, to the extent it deems necessary or
            appropriate, may engage an affiliate or outside agent to perform any
            functions described in this Agreement as appropriate or required by
            law. Compensation to such affiliate or outside agent, if any, shall
            be paid by EBS and will not change the fee structure described in
            this Agreement.

      5.13  Confidentiality. The parties acknowledge that during the course of
            this Agreement they may receive or learn confidential, business,
            proprietary or other like information concerning each other (the
            "CONFIDENTIAL INFORMATION"). The parties agree to keep all
            Confidential Information strictly confidential and not to disclose
            to any third party any Confidential Information without the prior
            written consent of the other. Further, each party covenants and
            agrees that it will not appropriate any Confidential Information to
            its own use or to the use of any third party. The parties agree to
            take at least such precautions to protect the Confidential
            Information as it takes to protect its own confidential and
            proprietary information.

            5.13.1 Upon learning of any unauthorized disclosure or use of
                   Confidential Information, a party shall notify the other
                   party promptly and cooperate fully to protect such
                   Confidential Information.

            5.13.2 If a party believes it is required by law, subpoena or court
                   order to disclose any Confidential Information, then such
                   party shall promptly notify the other party and provide a
                   copy of the subpoena, court order or other demand and make

                                        3
<PAGE>

                  reasonable efforts to allow the other party an opportunity to
                  seek a protective order or other judicial relief.

      5.14 Notice. For purposes of this Agreement, Notice shall be considered to
           have been given if it is provided by one Party to the other by U.S.
           mail or nationally recognized overnight courier to the following
           mailing addresses:

           EBS
           4140 ParkLake Avenue
           Suite 500
           Raleigh, NC 27612

           THE COMPANY
           ProAssurance Group Services Corporation
           Attn: Clay Shaw
           100 Brookwood Place
           Suite 300
           Birmingham, AL 35209

      IN WITNESS WHEREOF, this Agreement is executed as of the date above
written.

PROASSURANCE GROUP SERVICES CORPORATION     EXECUTIVE BENEFIT SERVICES, INC.

By: /s/ Victor T. Adamo                     By: /s/ [ILLEGIBLE]
    -----------------------------               -------------------------------
Its: President                              Its: Assistant VP of Plan Management

                                       4
<PAGE>

                             EBS PLAN LEVEL SERVICES

                                   APPENDIX A

1.0   INITIAL PLAN REVIEW: EBS will review Plan documents to make sure they
      coordinate with EBS' administrative capabilities.

2.0   PLAN IMPLEMENTATION: EBS will provide the following services to assist the
      COMPANY in implementing and administering the Plan:

      1.1   Prepare prototype Plan documents for legal review.

      1.2   Prepare enrollment material, review Plan communications with
            eligible employees/Plan members ("EXECUTIVES"), and help organize
            enrollment meetings and presentations.

      1.3   Set up Plan liability administration system.

3.0   COORDINATE PLAN FINANCING:

      3.1   Based upon the mutual funds selected by the COMPANY (maximum of 40),
            EBS will coordinate with PRINCOR the transfer of necessary
            information so as PRINCOR can create the proper accounts with the
            fund families.

      3.2   Instruct COMPANY representatives on electronic wire transfer
            procedures generally.

4.0   PLAN ADMINISTRATIVE SERVICES:

      4.1   Plan-level administrative services:

            4.1.1 EBS shall provide internet access to COMPANY to view Plan
                  values and allocations for each participating executive.

            4.1.2 EBS shall provide a Plan liability report to COMPANY showing
                  accounting for Plan expenses.

            4.1.3 EBS shall provide a Plan asset report reflecting values of the
                  mutual fund accounts at a frequency as selected by COMPANY in
                  Appendix B.

            4.1.4 EBS shall provide such general payroll and accounting record
                  keeping assistance, as COMPANY shall request.

      4.2   Executive-Level Administrative Services:

            4.2.1 EBS shall provide internet access to each executive to view
                  his or her account values, asset allocations, detailed fond
                  information and performance history.

            4.2.2 EBS shall provide executive statements, as selected by COMPANY
                  in Appendix B, identifying each executive's account values,
                  asset allocation, share prices and supplemental supporting
                  information.

            4.2.3 EBS shall provide toll-free telephone numbers for executives
                  to make account inquiries during business hours. (U.S.
                  residents only)

                                        5
<PAGE>

5.0   ASSET ADMINISTRATION: The COMPANY will hold mutual funds in its name (or a
      Trust) with each fund company. The COMPANY will receive fund statements
      and related tax documents directly from the individual fund houses.

      5.1   The COMPANY will administer supporting assets. That is, the COMPANY
            will monitor the relationship between the Plan liability portfolio
            and the supporting asset portfolio. EBS will provide COMPANY with
            access to an allocation comparison report on the EBS website.
            COMPANY will contact EBS and direct fund transfers as it deems
            appropriate.

      5.2   The COMPANY may elect to deliver standing directions to EBS to
            monitor and communicate trade instructions in an attempt to maintain
            a balance designated by the COMPANY between the overall asset and
            liability portfolios of the Plan.

            5.2.1 The COMPANY acknowledges and agrees that an "attempt to
                  maintain a balance" does not mean that the asset portfolio
                  will exactly mirror the liability portfolio.

            5.2.2 EBS agrees to monitor the relationship between the asset and
                  liability portfolio on each day that the New York Stock
                  Exchange is open for business.

            5.2.3 On each such day that it monitors the portfolio, EBS will
                  adjust the assets as needed to maintain the balance designated
                  by the COMPANY; except, however, that no such action will be
                  taken unless a fund is off balance by more than a percentage
                  as selected by COMPANY in Appendix B.

            5.2.4 The COMPANY will receive confirmation statements from the
                  mutual fund companies on any day that mutual funds are traded
                  in the Plan account.

                                       6
<PAGE>

                  ELECTION OF ADMINISTRATIVE SERVICES AND FEES

                                   APPENDIX B

1.0   PLAN SET UP FEES; (PLAN SET UP FEES ARE NONREFUNDABLE.)

<TABLE>
<S>                                     <C>
ONE TIME PLAN SET UP FEE:               $  500.00
PER ENROLLMENT KIT FEE:                 $    5.00 (WAIVED IF ENROLLMENT KITS ARE EMAILED.)
</TABLE>

2.0   ANNUAL RECORD KEEPING FEES; (BILLED QUARTERLY)

<TABLE>
<S>                         <C>         <C>
PLAN FEE:                               $ 2,500.00

PARTICIPANT FEE: (per # of active participants)

                            1-25        $   150.00
                            26-100      $   125.00
                            100+        $   100.00
</TABLE>

      SERVICE FEE: (valued as an average daily balance of mutual funds)
                   Principal Investor and Russell Lifepoint Funds - no service
                   fee Access Funds - 0.20% of Access Mutual Fund assets

      CHECK HANDLING FEE: $20 per check submitted (COMPANY acknowledges that
      there is a significant time delay from the day a check is submitted to
      when it purchases mutual funds. ELECTRONIC FORMS ACCEPTED AT NO COST).

3.0   MISCELLANEOUS SERVICES FEES:

<TABLE>
<S>                                 <C>
Amendment of the executed
Adoption Agreement:                 $ 100.00/amendment

Custom requests:                    $ 150.00/hour
                                    $ 0.35/page mailed (No charge for entailed reports)
</TABLE>

4.0   OPTIONAL SERVICES: (CHECK DESIRED SERVICES)

[ ]   Statements mailed to residences @ $l/each statement mailed

[X]   Semi-Annual frequency for Executive Statements and Corporate Report (25%
      discount on Participant Fee)

[ ]   Annual frequency for Executive Statements and Corporate Report (50%
      discount on Participant Fee)

5.0   ASSET ADMINISTRATIVE SERVICES:(PLEASE CHECK ONE OPTION)

[ ]   COMPANY will administer supporting assets as described in section 5.1 of
      Appendix A.

[X]   COMPANY elects to deliver standing instructions to BBS for monitoring
      supporting assets as described in section 5.2 of Appendix A.

      -     If standing instructions to EBS is selected, please indicate maximum
            percentage tolerance per fund: 5%. (Minimum of 1%)

                                        7
<PAGE>

                   THE EXECUTIVE NONQUALIFIED EXCESS PLAN (SM)
                               ADOPTION AGREEMENT

                    FOR PLANS EFFECTIVE AFTER OCTOBER 3, 2004

      THIS AGREEMENT is made the 1 day of December, 2004, by PROASSURANCE GROUP
SERVICES CORPORATION (the "Employer"), having its principal office at 100
BROOKWOOD PLACE, SUITE 300, BIRMINGHAM, AL 35209 and EXECUTIVE BENEFIT SERVICES,
INC. (the "Provider"), having its principal office at 4140 ParkLake Avenue,
Suite 500, Raleigh, North Carolina 27612.

                                   WITNESSETH:

      WHEREAS, the Provider has established The Executive Nonqualified Excess
Plan(SM) (the "Plan"); and

      WHEREAS, the Employer desires to adopt the Plan as an unfunded,
nonqualified deferred compensation plan; and

      WHEREAS, the Employer has been advised by the Provider to obtain legal and
tax advice from its professional advisors before adopting the Plan, and that the
Provider disclaims all liability for the legal and tax consequences which result
from the elections made by the Employer in this Adoption Agreement;

      NOW, THEREFORE, the Employer hereby adopts the Plan in accordance with the
terms and conditions set forth in this Adoption Agreement:

                                    ARTICLE I

      Terms used in this Adoption Agreement shall have the same meaning as in
the Plan, unless some other meaning is expressly herein set forth. The Employer
hereby represents and warrants that the Plan has been adopted by the Employer
upon proper authorization and the Employer hereby elects to adopt the Plan for
the benefit of its Participants as referred to in the Plan. By the execution of
this Adoption Agreement, the Employer hereby agrees to be bound by the terms of
the Plan.

      This Adoption Agreement may only be used in connection with The Executive
Nonqualified Excess Plan(SM). The Provider will inform the Employer of any
amendments to the Plan or of the discontinuance or abandonment of the Plan. For
questions concerning the Plan, the Employer may call the Provider at (919)
833-1042.

                                    (C) 10/2004 EXECUTIVE BENEFIT SERVICES, INC.
<PAGE>

                                   ARTICLE II

The Employer hereby makes the following designations or elections for the
purpose of the Plan:

2.6   COMMITTEE: The duties of the Committee set forth in the Plan shall be
      satisfied by:

      XX    (a)  The administrative committee of at least three individuals
                 appointed by the Board to serve at the pleasure of the Board.

      __    (b)  Employer.

      __    (c)  Other (specify):___________________________________________.

2.7   COMPENSATION: The "Compensation" of a Participant shall mean all of a
      Participant's:

      XX    (a)  Base salary.

      __    (b)  Service Bonus.

      __    (c)  Performance-Based Compensation earned in a period of 12 months
                 or more.

      __    (d)  Commissions.

      XX    (e)  Compensation received as an Independent Contractor reportable
                 on Form 1099.

      __    (f)  Other:________________________________________________________.

2.8   CREDITING DATE: The Deferred Compensation Account of a Participant shall
      be credited with the amount of any Salary Deferral Credits to such account
      at the time designated below:

      __    (a)  The last business day of each Plan Year.

      __    (b)  The last business day of each calendar quarter during the Plan
                 Year.

      __    (c)  The last business day of each month during the Plan Year.

      __    (d)  The last business day of each payroll period during the Plan
                 Year.

      __    (e)  Each pay day as reported by the Employer.

      XX    (f)  Any business day on which Salary Deferral Credits are received
                 by the Provider.

      __    (g)  Other:_______________________________________________________.

                                       -2-
<PAGE>

2.12  EFFECTIVE DATE:

      XX    (a)  This is a newly-established Plan, and the Effective Date of the
                 Plan is JANUARY 1, 2005.

      __    (b)  This is an amendment and restatement of a plan named
                 __________________________________________________________with
                 an effective date of________________. The Effective Date of
                 this amended and restated Plan is__________________. This is
                 amendment number____________.

2.20  PARTICIPATING EMPLOYER(S): As of the Effective Date, the following
      Participating Employer(s) are parties to the Plan:

<TABLE>
<CAPTION>
     Name of Employer                  Address             Telephone No.       EIN
-----------------------------   --------------------      --------------    ----------
<S>                             <C>                       <C>               <C>
ProAssurance Group Services     100 Brookwood Place,
       Corporation                     Suite 300          (205) 877-4400    63-1285505
                                Birmingham, AL 35209

                                100 Brookwood Place,
ProAssurance Corporation               Suite 300          (205) 877-4400    63-1261433
                                Birmingham, AL 35209

The Medical Assurance           100 Brookwood Place,
      Company, Inc.                    Suite 300          (205) 877-400     63-0720042
                                Birmingham, AL 35209

Medical Assurance of West       100 Brookwood Place,
     Virginia, Inc.                    Suite 300          (205) 877-4400    55-066686
                                Birmingham, AL 35209

                                100 Brookwood Place,
Mutual Assurance Agency, Inc.          Suite 300          (205) 877-4400    63-0725911
                                Birmingham, AL 35209

                                100 Brookwood Place,
ProNational Insurance Company          Suite 300          (205) 877-4400    38-2317569
                                Birmingham, AL 35209

Red Mountain Casualty           100 Brookwood Place,
 Insurance Company, Inc.               Suite 300          (205) 877-4400    36-3990058
                                Birmingham, AL 35209

                                691 N. Squirrell Rd.
Meemic Insurance Company               Suite 100          (248)373-5700     38-1337336
                                Auburn Hills, MI 48326
</TABLE>

                                       -3-
<PAGE>

2.18  NORMAL RETIREMENT AGE: The Normal Retirement Age of a Participant shall
      be:

      __    (a)  Age______.

      __    (b)  The later of age ______ or the _________ anniversary of the
                 participation commencement date. The participation
                 commencement date is the first day of the first Plan Year in
                 which the Participant commenced participation in the Plan.

      XX    (c)  Other: AGE 55 AND 5 YEARS OF SERVICE.

2.22  Plan: The name of the Plan as applied to the Employer is
      THE EXECUTIVE NONQUALIFIED EXCESS PLAN OF PROASSURANCE GROUP

2.23  PLAN ADMINISTRATOR: The Plan Administrator shall be:

      __    (a)  Committee.

      XX    (b)  Employer.

      __    (c)  Other:___________________________________________________.

2.24  PLAN YEAR: The Plan Year shall end each year on the last day of the month
      of DECEMBER.

2.33  TRUST:

      XX    (a)  The Employer DOES DESIRE to establish a "rabbi" trust for the
                 purpose of setting aside assets of the Employer contributed
                 thereto for the payment of benefits under the Plan.

      __    (b)  The Employer DOES NOT DESIRE to establish a "rabbi" trust for
                 the purpose of setting aside assets of the Employer contributed
                 thereto for the payment of benefits under the Plan.

      __    (c)  The Employer desires to establish a 'rabbi" trust for the
                 purpose of setting aside assets of the Employer contributed
                 thereto for the payment of benefits under the Plan UPON THE
                 OCCURRENCE OF A CHANGE IN CONTROL.

                                      -4-
<PAGE>

4.1   SALARY DEFERRAL CREDITS: A Participant may elect to have his Compensation
      (as selected in Section 2.7 of this Adoption Agreement) deferred within
      the annual limits below by the following percentage or amount as
      designated in writing to the Committee:

      XX    (a)  Base salary:

                      minimum deferral: $_______________ or       1       %
                      maximum deferral: $_______________ or      75       %

      __    (b)  Service Bonus:

                      minimum deferral: $_______________ or _____________ %
                      maximum deferral: $_______________ or _____________ %

      __    (c)  Performance-Based Compensation:

                      minimum deferral: $_______________ or _____________ %
                      maximum deferral: $_______________ or _____________ %

      XX    (d)  Other: 1099 Income.

                      minimum deferral: $     1.000      or _____________ %
                      maximum deferral: $   100.000      or _____________ %

      __    (e)  Salary deferral credits not allowed.

4.2   EMPLOYER CREDITS: The Employer will make Employer Credits in the following
      manner:

      __    (a)  EMPLOYER MATCHING CREDITS: The Employer may make
                 matching credits to the Deferred Compensation Account of
                 each Participant in an amount determined as follows:

                 _  (i)  An amount determined each Plan Year by the
                         Employer.

                 _  (ii) Other: __________________________________________.

      __    (b)  EMPLOYER PROFIT SHARING CREDITS: The Employer may make
                 profit sharing credits to the Deferred Compensation
                 Account of each Active Participant in an amount determined
                 as follows:

                 _  (i)  An amount determined each Plan Year by the Employer.

                 _  (ii) Other: __________________________________________.

      __    (c)  OTHER:______________________________________

      XX    (d)  Employer Credits not allowed.

                                       -5-
<PAGE>

5.3   DEATH OF A PARTICIPANT: If the Participant dies while in Service, the
      Employer shall pay a benefit to the Beneficiary in an amount equal to the
      vested balance in the Deferred Compensation Account of the Participant
      determined as of the date payments to the Beneficiary commence, plus:

      __    (a)  An amount to be determined by the Committee.

      __    (b)  Other:______________________________________________________.

      XX    (c)  No additional benefits.

5.4   ID-SERVICE WITHDRAWALS: In-service withdrawals may be made from the Plan:

      __    (a)  Yes, with respect to:

                 __   Salary Deferral Credits only.

                 __   Vested Employer Credits only.

                 __   Salary Deferral and Vested Employer Credits.

                 In-service withdrawals may be made in the following manner:

                 __   Single lump sum payment.

                 __   Installment payments over no more than__________years.

      XX    (b)  No in-service withdrawals.

5.5     EDUCATION WITHDRAWALS: Education withdrawals may be made from the Plan:

      __    (a)  Yes, with respect to:

                 __   Salary Deferral Credits only.

                 __   Vested Employer Credits only.

                 __   Salary Deferral and Vested Employer Credits.

                 Education withdrawals may be made in the following manner:

                 __   Single lump sum payment.

                 __   Installment payments over no more than_________ years.

      XX    (b)  No education withdrawals.

5.6   CHANGE IN CONTROL: Distributions are permitted upon a Change in Control:

      XX    (a)  Yes.
      __    (b)  No.

                                      -6-
<PAGE>

6.1   PAYMENT OPTIONS: Any benefit payable under the Plan upon a Qualifying
      Distribution Event may be made to the Participant or his Beneficiary (as
      applicable) in any of the following payment forms, as selected by the
      Participant in the Salary Deferral Agreement:

      XX    (a)   A lump sum in cash as soon as practicable following the date
                  of the Qualifying Distribution Event.

      XX    (b)   Approximately equal annual installments over a term certain as
                  elected by the Participant upon his entry into the Plan not to
                  exceed 10 years.

      __    (c)   Other:______________________________________________________.

7.    VESTING: An Active Participant shall be fully vested in the Employer
      Credits made to the Deferred Compensation Account upon first to occur of
      the following events: N/A

      ____  (a) Normal Retirement Age

      ____  (b) Death

      ____  (c) Disability

      ____  (d) Change in Control

      ____  (e) Other:_________________________________________________.

      ____  (f) Satisfaction of the vesting requirement specified below:

                   __  EMPLOYER MATCHING CREDITS:

                       ____     (i)    Immediate 100% vesting.

                       ____     (ii)   100% vesting after______Years of Service.

                       ____     (iii)  100% vesting at age______.

                       ____     (iv)   Number of Years     Vested
                                         of Service      Percentage

                                  Less than 1              ______%
                                            1              ______%
                                            2              ______%
                                            3              ______%
                                            4              ______%
                                            5              ______%
                                            6              ______%
                                            7              ______%
                                            8              ______%
                                            9              ______%
                                            10 or more     ______%

                                       -7-

<PAGE>

              For this purpose, Years of Service of a Participant shall be
              calculated from the date designated below:

              ____  (1) First Day of Service.

              ____  (2) Effective Date of the Plan Participation.

              ____  (3) Each Crediting Date. Under this option (3), each
                        Employer Credit shall vest based on the Years of Service
                        of a Participant from the Crediting Date on which each
                        Employer Matching Credit is made to his or her Deferred
                        Compensation Account. Notwithstanding the vesting
                        schedule elected above, all Employer Matching Credits to
                        the Deferred Compensation Account shall be 100% vested
                        upon the following event(s): __________________________
                        _______________________________________________________.

_____  EMPLOYER PROFIT SHARING CREDITS:

       _______  (i)  Immediate 100% vesting.

       _______  (ii) 100% vesting after__Years of Service.

       _______  (iii)100% vesting at age____.

       _______  (iv) Number of Years          Vested
                        of Service          Percentage

       Less than         1                _______%
                         1                _______%
                         2                _______%
                         3                _______%
                         4                _______%
                         5                _______%
                         6                _______%
                         7                _______%
                         8                _______%
                         9                _______%
                         10 or more       _______%

       For this purpose, Years of Service of a Participant shall be calculated
       from the date designated below:

       _______  (1) First Day of Service.

       _______  (2) Effective Date of the Plan Participation.

       _______  (3) Each Crediting Date. Under this option (3), each Employer
                    Credit

                                       -8-

<PAGE>

                        shall vest based on the Years of Service of a
                        Participant from the Crediting Date on which each
                        Employer Profit Sharing Credit is made to his or her
                        Deferred Compensation Account.

                        Notwithstanding the vesting schedule elected above, all
                        Employer Profit Sharing Credits to the Deferred
                        Compensation Account shall be 100% vested upon the
                        following event(s):
                        _______________________________________________________
                        _______________________________________________________

_____  OTHER EMPLOYER CREDITS:

       _____  (i)   Immediate 100% vesting.

       _____  (ii)  100% vesting after__Years of Service.

       _____  (iii) 100% vesting at age______.

       _____  (iv)  Number of Years         Vested
                      of Service          Percentage

              Less than  1                 ______%
                         1                 ______%
                         2                 ______%
                         3                 ______%
                         4                 ______%
                         5                 ______%
                         6                 ______%
                         7                 ______%
                         8                 ______%
                         9                 ______%
                         10 or more        ______%

              For this purpose, Years of Service of a Participant
              shall be calculated from the date designated below:

              _______ (1) First Day of Service.

              _______ (2) Effective Date of the Plan Participation.

              _______ (3) Each Crediting Date. Under this option (3),
                                 each Employer Credit shall vest based on the
                                 Years of Service of a Participant from the
                                 Crediting Date on which each Employer Profit
                                 Sharing Credit is made to his or her Deferred
                                 Compensation Account. Notwithstanding the
                                 vesting schedule elected above, all Employer
                                 Profit Sharing Credits to the Deferred
                                 Compensation Account shall be 100% vested
                                 upon the following event(s): _______________

                                       -9-

<PAGE>

14.   AMENDMENT AND TERMINATION OF PLAN: Notwithstanding any provision in this
      Adoption Agreement or the Plan to the contrary, Section 17.8 of the Plan
      shall be amended to read as provided in attached Exhibit A.

17.9  CONSTRUCTION: The provisions of the Plan and Trust (if any) shall be
      construed and enforced according to the laws of the State of ALABAMA,
      except to the extent that such laws are superseded by ERISA.

            IN WITNESS WHEREOF, this Agreement has been executed as of the day
and year first above stated.

                                        PROASSURANCE GROUP SERVICES CORPORATION
                                        Name of Employer

                                        By:  /s/ Victor T. Adamo, PRESIDENT
                                             -----------------------------
                                                Authorized Person

NOTE: EXECUTION OF THIS ADOPTION AGREEMENT CREATES A LEGAL LIABILITY OF THE
EMPLOYER WITH SIGNIFICANT TAX CONSEQUENCES TO THE EMPLOYER AND PARTICIPANTS. THE
EMPLOYER SHOULD OBTAIN LEGAL AND TAX ADVICE FROM ITS PROFESSIONAL ADVISORS
BEFORE ADOPTING THE PLAN. THE PROVIDER DISCLAIMS ALL LIABILITY FOR THE LEGAL AND
TAX CONSEQUENCES WHICH RESULT FROM THE ELECTIONS MADE BY THE EMPLOYER IN THIS
ADOPTION AGREEMENT.

           The Plan is adopted by the following Participating Employers:

                                        PROASSURANCE CORPORATION
                                        Name of Employer

                                        By:  /s/ Victor T. Adamo, PRESIDENT
                                             ----------------------------------
                                                Authorized Person

                                        THE MEDICAL ASSURANCE COMPANY. INC.
                                        Name of Employer

                                        By:  Jeffrey P. Lisenby, VICE PRESIDENT
                                             -----------------------------------
                                                Authorized Person

                                      -10-

<PAGE>

      The Plan is adopted by the following Participating Employers (continued):

                        MEDICAL ASSURANCE OF WEST VIRGINIA, INC.
                        Name of Employer

                        By: /s/ [ILLEGIBLE]
                            ----------------------------------
                                Authorized Person

                        MUTUAL ASSURANCE AGENCY, INC.
                        Name of Employer

                        By: Jeffrey P. Lisenby, Vice President
                            ----------------------------------
                                Authorized Person

                        PRONATIONAL INSURANCE COMPANY
                        Name of Employer

                        By: /s/ Victor T. Adamo, President
                            ----------------------------------
                                Authorized Person

                        RED MOUNTAIN CASUALTY INSURANCE COMPANY, INC.
                        Name of Employer

                        By: /s/ Victor T. Adamo, President
                            ----------------------------------
                                Authorized Person

                        MEEMIC INSURANCE COMPANY
                        Name of Employer

                        By:-----------------------------------
                                Authorized Person

                                      -11-

<PAGE>

EXHIBIT A to the Executive Nonqualified Excess Plan Adoption Agreement
ProAssurance Group Services Corporation

Plan Section 17.8 shall be amended and superseded to read as follows:

17.8 MERGER OR CONSOLIDATION; ASSUMPTION OF PLAN. Subject to Section 5.6,
nothing herein shall prohibit the assumption of the obligations and liabilities
of the Employer under the Plan by any successor entity.

<PAGE>

                   THE EXECUTIVE NONQUALIFIED EXCESS PLAN(SM)
                                 PLAN DOCUMENT

                                    (C) 10/2004 EXECUTIVE BENEFIT SERVICES, INC.
                                     4140 PARKLAKE AVENUE, SUITE 500
                                     RALEIGH, NC 27612

<PAGE>

                               TABLE OF CONTENTS

                   THE EXECUTIVE NONQUALIFIED EXCESS PLAN(SM)

<TABLE>
<CAPTION>
                                                                        Page
                                                                        ----
<S>                                                                     <C>
Section 1.       Purpose..............................................    1

Section 2.       Definitions..........................................    1

     2.1         "Active Participant".................................    1
     2.2         "Adoption Agreement".................................    1
     2.3         "Beneficiary"........................................    2
     2.4         "Board"..............................................    2
     2.5         "Change in Control"..................................    2
     2.6         "Committee"..........................................    2
     2.7         "Compensation".......................................    2
     2.8         "Crediting Date".....................................    2
     2.9         "Deferred Compensation Account"......................    2
     2.10        "Disabled"...........................................    3
     2.11        "Education Account"..................................    3
     2.12        "Effective Date".....................................    3
     2.13        "Employee"...........................................    3
     2.14        "Employer"...........................................    4
     2.15        "Employer Credits"...................................    4
     2.16        "Independent Contractor".............................    4
     2.17        "In-Service Account".................................    4
     2.18        "Normal Retirement Age"..............................    4
     2.19        "Participant"........................................    4
     2.20        "Participating Employer".............................    5
     2.21        "Performance-Based Compensation".....................    5
     2.22        "Plan"...............................................    5
     2.23        "Plan Administrator".................................    5
     2.24        "Plan Year"..........................................    5
     2.25        "Provider"...........................................    5
     2.26        "Qualifying Distribution Event"......................    5
     2.27        "Salary Deferral Agreement"..........................    5
     2.28        "Salary Deferral Credits"............................    5
     2.29        "Service"............................................    6
     2.30        "Service Bonus"......................................    6
     2.31        "Spouse" or "Surviving Spouse".......................    6
     2.32        "Student"............................................    6
     2.33        "Trust"..............................................    6
     2.34        "Trustee"............................................    6
     2.35        "Unforeseeable Emergency"............................    6
     2.36        "Years of Service"...................................    7
</TABLE>

                                        i

<PAGE>

<TABLE>
<S>                                                                      <C>
Section 3.       Participation........................................    7

Section 4.       Credits to Deferred Compensation Account.............    7

     4.1         Salary Deferral Credits..............................    7
     4.2         Employer Credits.....................................    8
     4.3         Deferred Compensation Account........................    8

Section 5.       Qualifying Distribution Events.......................    9

     5.1         Separation from Service..............................    9
     5.2         Disability...........................................    9
     5.3         Death................................................    9
     5.4         In-Service Withdrawals...............................    9
     5.5         Education Withdrawals................................   10
     5.6         Change in Control....................................   11
     5.7         Unforeseeable Emergency..............................   11

Section 6.       Qualifying Distribution Events Payment Options.......   12

     6.1         Payment Options......................................   12
     6.2         Subsequent Elections.................................   13
     6.3         Acceleration Prohibited..............................   13

Section 7.       Vesting..............................................   13

Section 8.       Accounts; Deemed Investment; Adjustments to Account..   14

     8.1         Accounts.............................................   14
     8.2         Deemed Investments...................................   14
     8.3         Adjustments to Deferred Compensation Account.........   14

Section 9.       Administration by Committee..........................   15

     9.1         Membership of Committee..............................   15
     9.2         Committee Officers; Subcommittee.....................   15
     9.3         Committee Meetings...................................   15
     9.4         Transaction of Business..............................   15
     9.5         Committee Records....................................   16
     9.6         Establishment of Rules...............................   16
     9.7         Conflicts of Interest................................   16
     9.8         Correction of Errors.................................   16
     9.9         Authority to Interpret Plan..........................   16
     9.10        Third Party Advisors.................................   17
     9.11        Compensation of Members..............................   17
     9.12        Expense Reimbursement................................   17
     9.13        Indemnification......................................   17
</TABLE>

                                       ii

<PAGE>

<TABLE>
<S>                                                                                 <C>
Section 10.      Contractual Liability; Trust.............................          18

    10.1         Contractual Liability....................................          18
    10.2         Trust....................................................          18

Section 11.      Allocation of Responsibilities...........................          18

    11.1         Board ...................................................          19
    11.2         Committee................................................          19
    11.3         Plan Administrator.......................................          19

Section 12.      Benefits Not Assignable; Facility of Payments............          19

    12.1         Benefits not Assignable..................................          19
    12.2         Payments to Minors and Others............................          20

Section 13.      Beneficiary..............................................          20

Section 14.      Amendment and Termination of Plan........................          21

Section 15.      Communication to Participants............................          21

Section 16.      Claims Procedure.........................................          21

    16.1         Filing of a Claim for Benefits...........................          21
    16.2         Notification to Claimant of Decision.....................          22
    16.3         Procedure for Review.....................................          22
    16.4         Decision on Review.......................................          23
    16.5         Action by Authorized Representative of Claimant..........          23

Section 17.      Miscellaneous Provisions.................................          23

    17.1         Set off..................................................          23
    17.2         Notices................. ................................          24
    17.3         Lost Distributes.........................................          24
    17.4         Reliance on Data.........................................          24
    17.5         Receipt and Release for Payments.........................          25
    17.6         Headings ................................................          25
    17.7         Continuation of Employment...............................          25
    17.8         Merger or Consolidation; Assumption of Plan..............          25
    17.9         Construction.............................................          26
</TABLE>

                                      iii

<PAGE>

                    THE EXECUTIVE NONQUALIFIED EXCESS PLAN(SM)

            SECTION 1. PURPOSE:

            By execution of the Adoption Agreement, the Employer has adopted the
Plan set forth herein to provide a means by which certain management Employees
and Independent Contractors of the Employer may elect to defer receipt of
current Compensation from the Employer in order to provide retirement and other
benefits on behalf of such Employees and Independent Contractors of the
Employer, as selected in the Adoption Agreement. The Plan is intended to be a
nonqualified deferred compensation plan that complies with the provisions of
Section 409A of the Internal Revenue Code (the "Code"). The Plan is intended to
be an unfunded plan maintained primarily for the purpose of providing deferred
compensation benefits for a select group of management or highly compensated
employees under Sections 201(2), 301(a)(3) and 401(a)(l) of the Employee
Retirement Income Security Act of 1974 and independent contractors.

            SECTION 2. DEFINITIONS:

            As used in the Plan, including this Section 2, references to one
gender shall include the other and, unless otherwise indicated by the context:

            2.1 "ACTIVE PARTICIPANT" means, with respect to any day or date, a
Participant who is in Service on such day or date; provided, that a Participant
shall cease to be an Active Participant immediately upon a determination by the
Committee that the Participant has ceased to be an Employee or Independent
Contractor, or that the Participant no longer meets the eligibility requirements
of the Plan.

            2.2 "ADOPTION AGREEMENT" means the written agreement pursuant to
which the Employer adopts the Plan. The Adoption Agreement is a part of the Plan
as applied to the Employer.

<PAGE>

            2.3 "BENEFICIARY" means the person, persons, entity or entities
designated or determined pursuant to the provisions of Section 13 of the Plan.

            2.4 "BOARD" means the Board of Directors of the Employer, if the
Employer is a corporation. If the Employer is not a corporation, "Board" shall
mean the Employer.

            2.5 "CHANGE IN CONTROL" means a change in ownership or effective
control of the Employer, or in the ownership of a substantial portion of the
assets of the Employer, as provided in regulations promulgated under Section
409A of the Code.

            2.6 "COMMITTEE" means the person designated in the Adoption
Agreement. If the Committee designated in the Adoption Agreement is unable to
serve, the Employer shall satisfy the duties of the Committee provided for in
Section 9.

            2.7 "COMPENSATION" shall have the meaning designated in the Adoption
Agreement.

            2.8 "CREDITING DATE" means the date designated in the Adoption
Agreement for crediting the amount of any Salary Deferral Credits to the
Deferred Compensation Account of a Participant. Employer Credits may be credited
to the Deferred Compensation Account of a Participant on any day that securities
are traded on a national securities exchange.

            2.9 "DEFERRED COMPENSATION ACCOUNT" means the account maintained
with respect to each Participant under the Plan. The Deferred Compensation
Account shall be credited with Salary Deferral Credits and Employer Credits,
credited or debited for deemed investment gains or losses, and adjusted for
payments in accordance with the rules and elections in effect under Section 8.
The Deferred Compensation Account of a Participant shall include any In-Service
Account or Education Account of the Participant, if applicable.

                                       2

<PAGE>

            2.10 "DISABLED" means a Participant who is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to
last for a continuous period of not less than 12 months, or is, by reason of any
medically determinable physical or mental impairment which can be expected to
result in death or can be expected to last for a continuous period of not less
than 12 months, receiving income replacement benefits for a period of not less
than three months under an accident and health plan covering Employees of the
Employer.

            2.11 "EDUCATION ACCOUNT" means a separate account to be kept for
each Participant that has elected to make education withdrawals as described in
Section 5.5. The Education Account shall be adjusted in the same manner and at
the same time as the Deferred Compensation Account under Section 8 and in
accordance with the rules and elections in effect under Section 8.

            2.12 "EFFECTIVE DATE" shall be the date designated in the Adoption
Agreement as of which the Plan first becomes effective. Notwithstanding the
foregoing, any amounts credited to the account of a Participant pursuant to the
terms of a predecessor plan of the Employer which are not earned and vested
before January 1, 2005, shall be subject to the terms of this Plan.

            2.13 "EMPLOYEE" means an individual in the Service of the Employer
if the relationship between the individual and the Employer is the legal
relationship of employer and employee and if the individual is a highly
compensated or management employee of the Employer. An individual shall cease to
be an Employee upon the Employee's termination of Service.

                                       3

<PAGE>

            2.14 "EMPLOYER" means the Employer identified in the Adoption
Agreement, and any Participating Employer which adopts this Plan. The Employer
may be a corporation, a limited liability company, a partnership or sole
proprietorship. All references herein to the Employer shall be applied
separately to each such Employer as if the Plan were solely the Plan of that
Employer.

            2.15 "EMPLOYER CREDITS" means the amounts credited to the
Participant's Deferred Compensation Account by the Employer pursuant to the
provisions of Section 4.2.

            2.16 "INDEPENDENT CONTRACTOR" means an individual in the Service of
the Employer if the relationship between the individual and the Employer is not
the legal relationship of employer and employee. An individual shall cease to be
an Independent Contractor upon the termination of the Independent Contractor's
Service. An Independent Contractor shall include a director of the Employer who
is not an Employee.

            2.17 "IN-SERVICE ACCOUNT" means a separate account to be kept for
each Participant that has elected to make in-service withdrawals as described in
Section 5.4. The In-Service Account shall be adjusted in the same manner and at
the same time as the Deferred Compensation Account under Section 8 and in
accordance with the rules and elections in effect under Section 8.

            2.18 "NORMAL RETIREMENT AGE" of a Participant means the age
designated in the Adoption Agreement.

            2.19 "PARTICIPANT" means with respect to any Plan Year an Employee
or Independent Contractor who has been designated by the Committee as a
Participant and who has entered the Plan or who has a Deferred Compensation
Account under the Plan.

                                       4

<PAGE>

            2.20 "PARTICIPATING EMPLOYER" means any trade or business (whether
or not incorporated) which adopts this Plan with the consent of the Employer
identified in the Adoption Agreement.

            2.21 "PERFORMANCE-BASED COMPENSATION" means any compensation based
on services performed over a period of at least twelve months as provided in
regulations promulgated under Section 409A of the Code.

            2.22 "PLAN" means The Executive Nonqualified Excess Plan(SM), as
herein set out or as duly amended. The name of the Plan as applied to the
Employer shall be designated in the Adoption Agreement.

            2.23 "PLAN ADMINISTRATOR" means the person designated in the
Adoption Agreement. If the Plan Administrator designated in the Adoption
Agreement is unable to serve, the Employer shall be the Plan Administrator.

            2.24 "PLAN YEAR" means the twelve-month period ending on the last
day of the month designated in the Adoption Agreement; provided, that the
initial Plan Year may have fewer than twelve months.

            2.25 "PROVIDER" means Executive Benefit Services, Inc.

            2.26 "QUALIFYING DISTRIBUTION EVENT" means an event described in
Section 5.

            2.27 "SALARY DEFERRAL AGREEMENT" means a written agreement entered
into between a Participant and the Employer pursuant to the provisions of
Section 4.1

            2.28 "SALARY DEFERRAL CREDITS" means the amounts credited to the
Participant's Deferred Compensation Account by the Employer pursuant to the
provisions of Section 4.1.

                                       5

<PAGE>

            2.29 "SERVICE" means employment by the Employer as an Employee. If
the Participant is an Independent Contractor, "Service" shall mean the period
during which the contractual relationship exists between the Employer and the
Participant.

            2.30 "SERVICE BONUS" means any bonus paid to a Participant by the
Employer which is not Performance-Based Compensation.

            2.31 "SPOUSE" or "SURVIVING SPOUSE" means, except as otherwise
provided in the Plan, a person of the opposite sex who is the legally married
spouse or surviving spouse of a Participant.

            2.32 "STUDENT" means the individual designated by the Participant in
the Salary Deferral Agreement with respect to whom the Participant will create
an Education Account.

            2.33 "TRUST" means the trust fund established pursuant to Section
10.2, if designated by the Employer in the Adoption Agreement.

            2.34 "TRUSTEE" means the trustee, if any, named in the agreement
establishing the Trust and such successor or additional trustee as may be named
pursuant to the terms of the agreement establishing the Trust.

            2.35 "UNFORESEEABLE EMERGENCY" means a severe financial hardship to
the Participant resulting from a sudden or unexpected illness or accident of the
Participant, the Participant's Spouse or dependent (as defined in Section 152(a)
of the Code), loss of the Participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant.

                                       6

<PAGE>

            2.36 "YEARS OF SERVICE" means each Plan Year of Service completed by
the Participant. For vesting purposes, Years of Service shall be calculated from
the date designated in the Adoption Agreement.

            SECTION 3. PARTICIPATION:

            The Committee in its discretion shall designate each Employee or
Independent Contractor who is eligible to participate in the Plan. An Employee
or Independent Contractor designated by the Committee as a Participant who has
not otherwise entered the Plan shall enter the Plan and become a Participant as
of the date determined by the Committee. A Participant who separates from
Service with the Employer and who later returns to Service will not be an Active
Participant under the Plan except upon satisfaction of such terms and conditions
as the Committee shall establish upon the Participant's return to Service,
whether or not the Participant shall have a balance remaining in the Deferred
Compensation Account under the Plan on the date of the return to Service.

            SECTION 4. CREDITS TO DEFERRED COMPENSATION ACCOUNT:

            4.1 SALARY DEFERRAL CREDITS. To the extent provided in the Adoption
Agreement, each Active Participant may elect, by entering into a Salary Deferral
Agreement with the Employer, to defer the receipt of Compensation from the
Employer by a dollar amount or percentage specified in the Salary Deferral
Agreement. The amount of the Participant's Salary Deferral Credit shall be
credited by the Employer to the Deferred Compensation Account maintained for the
Participant pursuant to Section 8. The following special provisions shall apply
with respect to the Salary Deferral Credits of a Participant:

            4.1.1 The Employer shall credit to the Participant's Deferred
      Compensation Account on each Crediting Date an amount equal to the total
      Salary Deferral Credit for the period ending on such Crediting Date.

                                       7

<PAGE>

            4.1.2 An election pursuant to Section 4.1 shall be made by the
      Participant by executing and delivering a Salary Deferral Agreement to the
      Committee. The Salary Deferral Agreement shall become effective with
      respect to such Participant as of the first day of January following (the
      date such Salary Deferral Agreement is received by the Committee;
      provided, that in the case of the first year in which the Participant
      becomes eligible to participate in the Plan, the Participant may execute
      and deliver a Salary Deferral Agreement to the Committee within 30 days
      after the date the Participant enters the Plan to be effective as of the
      first payroll period next following the date the Salary Deferral Agreement
      is received by the Committee. A Participant's election shall continue in
      effect, unless earlier modified by the Participant, until the Participant
      separates from Service, or, if earlier, until the Participant ceases to be
      an Active Participant under the Plan.

            4.1.3 A Participant may unilaterally modify a Salary Deferral
      Agreement (either to terminate, increase or decrease the portion of his
      future Compensation which is subject to salary deferral within the
      percentage limits set forth in Section 4.1 of the Adoption Agreement) by
      providing a written modification of the Salary Deferral Agreement to the
      Employer. The modification shall become effective as of the first day of
      January following the date such written modification is received by the
      Committee.

            4.1.4 Notwithstanding Sections 4.1.2 and 4.1.3, a Salary Deferral
      Agreement relating to the deferral of Performance-Based Compensation must
      be executed and delivered to the Committee no later than the date which is
      6 months prior to the end of the performance period, and may not be
      modified after such date.

            4.1.5 The Committee may from time to time establish policies or
      rules governing the manner in which Salary Deferral Credits may be made.

            4.2 EMPLOYER CREDITS. If designated by the Employer in the Adoption
Agreement, the Employer shall cause the Committee to credit to the Deferred
Compensation Account of each Active Participant an Employer Credit as determined
in accordance with the Adoption Agreement.

            4.3 DEFERRED COMPENSATION ACCOUNT. All Salary Deferral Credits and
Employer Credits shall be credited to the Deferred Compensation Account of the
Participant.

                                       8

<PAGE>

            SECTION 5. QUALIFYING DISTRIBUTION EVENTS:

            5.1 SEPARATION FROM SERVICE. If the Participant separates from
Service with the Employer, the vested balance in the Deferred Compensation
Account shall be paid to the Participant by the Employer as provided in Section
6. Notwithstanding the foregoing, no distribution shall be made earlier than six
months after the date of separation from Service (or, if earlier, the date of
death) with respect to a Participant who is a key employee (as defined in
Section 416(i) of the Code without regard to paragraph (5) thereof) of a
corporation the stock in which is traded on an established securities market or
otherwise.

            5.2 DISABILITY. If the Participant becomes Disabled while in
Service, the vested balance in the Deferred Compensation Account shall be paid
to the Participant by the Employer as provided in Section 6.

            5.3 DEATH. If the Participant dies while in Service, the Employer
shall pay a benefit to the Participant's Beneficiary in the amount designated in
the Adoption Agreement. Payment of such benefit shall be made by the Employer as
provided in Section 6. If a Participant dies following his separation from
Service for any reason, and before all payments under the Plan have been made,
the vested balance in the Deferred Compensation Account shall be paid by the
Employer to the Participant's Beneficiary pursuant to Section 6.

            5.4 IN-SERVICE WITHDRAWALS. If the Employer designates in the
Adoption Agreement that in-service withdrawals are permitted under the Plan, a
Participant may elect in the Salary Deferral Agreement to withdraw a designated
amount from the Deferred Compensation Account at the specified time or times
designated by the Participant in the Salary Deferral Agreement, and the
Participant's In-Service Account shall be credited with the amount designated
for in-service withdrawals. In no event may an in-service withdrawal be made
prior to two years following the establishment of the In-Service Account of the
Participant.

                                       9

<PAGE>

Notwithstanding the foregoing, if a Participant incurs a Qualifying Distribution
Event prior to the date on which the entire balance in the In-Service Account
has been distributed, then the balance in the In-Service Account on the date of
the Qualifying Distribution Event shall be distributed to the Participant in the
same manner and at the same time as the balance in the Deferred Compensation
Account is distributed under Section 6 and in accordance with the rules and
elections in effect under Section 6.

            5.5 EDUCATION WITHDRAWALS. If the Employer designates in the
Adoption Agreement that education withdrawals are permitted under the Plan, a
Participant may elect in the Salary Deferral Agreement to withdraw a designated
amount from the Deferred Compensation Account at the specified time or times
designated by the Participant in the Salary Deferral Agreement, and the
Participant's Education Account shall be credited with the amount designated for
in-service withdrawals. If the Participant designates more than one Student, the
Education Account will be divided into a separate Education Account for each
Student, and the Participant may designate in the Salary Deferral Agreement the
percentage or dollar amount of the Deferred Compensation Account to be credited
to each Education Account. In the absence of a clear designation, all credits
made to the Education Account shall be equally allocated to each Education
Account. The Employer shall pay to the Participant the balance in the Education
Account with respect to the Student at the time and in the manner designated by
the Participant in the Salary Deferral Agreement. Notwithstanding the foregoing,
if the Participant incurs a Qualifying Distribution Event prior to the date on
which the entire balance of the Education Account has been distributed, then the
balance in the Education Account on the date of the Qualifying Distribution
Event shall be distributed to the Participant in the same manner and at

                                       10
<PAGE>

the same time as the Deferred Compensation Account is distributed under Section
6 and in accordance with the rules and elections in effect under Section 6.

            5.6 CHANGE IN CONTROL. If the Employer designates in the Adoption
Agreement that distributions are permitted under the Plan due to a Change in
Control, the vested balance in the Deferred Compensation Account shall be paid
to the Participant by the Employer as provided in Section 6 as soon as
practicable following a Change in Control regardless of whether the Participant
has separated from Service with the Employer.

            5.7 UNFORESEEABLE EMERGENCY. A distribution of the Deferred
Compensation Account may be made to a Participant in the event of an
Unforeseeable Emergency, subject to the following provisions:

            5.7.1 A Participant may, at any time prior to his separation from
      Service for any reason, make application to the Committee to receive a
      distribution in a lump sum of all or a portion of the vested balance in
      the Deferred Compensation Account (determined as of the date the
      distribution, if any, is made under this Section 5.7) because of an
      Unforeseeable Emergency. A distribution because of an Unforeseeable
      Emergency shall not exceed the amount required to satisfy the
      Unforeseeable Emergency plus amounts necessary to pay taxes reasonably
      anticipated as a result of such distribution, after taking into account
      the extent to which the Unforeseeable Emergency may be relieved through
      reimbursement or compensation by insurance or otherwise or by liquidation
      of the Participant's assets (to the extend the liquidation of such assets
      would not itself cause severe financial hardship).

            5.7.2 The Participant's request for a distribution on account of
      Unforeseeable Emergency must be made in writing to the Committee. The
      request must specify the nature of the financial hardship, the total
      amount requested to be distributed from the Deferred Compensation Account,
      and the total amount of the actual expense incurred or to be incurred on
      account of financial hardship.

            5.7.3 If a distribution under this Section 5.7 is approved by the
      Committee, such distribution will be made as soon as practicable following
      the date it is approved. The processing of the request shall be completed
      as soon as practicable from the date on which the Committee receives the
      properly completed written request for a distribution on account of an
      Unforeseeable Emergency. A distribution due to Unforeseeable Emergency
      shall not affect any deferral election previously made by the Participant.
      If a Participant's separation

                                       11
<PAGE>

      from Service occurs after a request is approved in accordance with this
      Section 5.7.3, but prior to distribution of the full amount approved, the
      approval of the request shall be automatically null and void and the
      benefits which the Participant is entitled to receive under the Plan shall
      be distributed in accordance with the applicable distribution provisions
      of the Plan.

            5.7.4 The Committee may from time to time adopt additional policies
      or rules governing the manner in which such distributions may be made so
      that the Plan may be conveniently administered.

            SECTION 6. QUALIFYING DISTRIBUTION EVENTS PAYMENT OPTIONS:

            6.1 PAYMENT OPTIONS. The Employer shall designate in the Adoption
Agreement the payment options available upon a Qualifying Distribution Event.
The Participant shall elect in the Salary Deferral Agreement the method under
which the vested balance in the Deferred Compensation Account shall be
distributed from among the designated payment options. Payment shall be made in
the manner elected by the Participant and shall commence as soon as practicable
following the Qualifying Distribution Event. If the Participant elects the
installment payment option, the payment of each annual installment shall be made
on the anniversary of the date of the first installment payment, and the amount
of the annual installment shall be adjusted on such anniversary for credits or
debits to the Participant's account pursuant to Section 8 of the Plan. Such
adjustment shall be made by dividing the balance in the Deferred Compensation
Account on such date by the number of annual installments remaining to be paid
hereunder; provided that the last annual installment due under the Plan shall be
the entire amount credited to the Participant's account on the date of payment.
In the event the Participant fails to make a valid election of the payment
method, the distribution will be made in a single lump sum payment upon the
Qualifying Distribution Event. Notwithstanding any election made by the
Participant, the vested balance in the Deferred Compensation Account of the
Participant will be distributed in a single lump sum payment if the amount of
such benefit on the date that payment

                                       12
<PAGE>

is to commence does not exceed the maximum amount permitted to be automatically
distributed under the regulations promulgated under Section 409A of the Code.

            6.2 SUBSEQUENT ELECTIONS. With the consent of the Committee, a
Participant may delay or change the method of payment of the Deferred
Compensation Account subject to the following requirements:

            6.2.1 The new election may not take effect until at least 12 months
      after the date on which the new election is made.

            6.2.2 If the new election relates to a payment for a Qualifying
      Distribution Event other than the death of the Participant, the
      Participant becoming Disabled, or an Unforeseeable Emergency, the new
      election must provide for the deferral of the first payment for a period
      of at least five years from the date such payment would otherwise have
      been made.

            6.2.3 If the new election relates to a payment from the In-Service
      Account or Education Account, the new election must be made at least 12
      months prior to the date of the first scheduled payment from such account.

            6.3 ACCELERATION PROHIBITED. The acceleration of the time or
schedule of any payment due under the Plan is prohibited except as provided in
regulations promulgated under Section 409A of the Code.

            SECTION 7. VESTING:

            A Participant shall be fully vested in the portion of his Deferred
Compensation Account attributable to Salary Deferral Credits, and all income,
gains and losses attributable thereto. A Participant shall become fully vested
in the portion of his Deferred Compensation Account attributable to Employer
Credits, and income, gains and losses attributable thereto, in accordance with
the vesting schedule and provisions designated by the Employer in the Adoption
Agreement. If a Participant's Deferred Compensation Account is not fully vested
upon separation from Service, the portion of the Deferred Compensation Account
that is not fully vested shall thereupon be forfeited.

                                       13
<PAGE>

            SECTION 8. ACCOUNTS; DEEMED INVESTMENT; ADJUSTMENTS TO ACCOUNT:

            8.1 ACCOUNTS. The Committee shall establish a book reserve account,
entitled the "Deferred Compensation Account," on behalf of each Participant. The
Committee shall also establish an In-Service Account and Education Account as a
part of the Deferred Compensation Account of each Participant, if applicable.
The amount credited to the Deferred Compensation Account shall be adjusted
pursuant to the provisions of Section 8.3.

            8.2 DEEMED INVESTMENTS. The Deferred Compensation Account of a
Participant shall be credited with an investment return determined as if the
account were invested in one or more investment funds made available by the
Committee. The Participant shall elect the investment funds in which his
Deferred Compensation Account shall be deemed to be invested. Such election
shall be made in the manner prescribed by the Committee and shall take effect
upon the entry of the Participant into the Plan. The investment election of the
Participant shall remain in effect until a new election is made by the
Participant. In the event the Participant fails for any reason to make an
effective election of the investment return to be credited to his account, the
investment return shall be determined by the Committee.

            8.3 ADJUSTMENTS TO DEFERRED COMPENSATION ACCOUNT. With respect to
each Participant who has a Deferred Compensation Account under the Plan, the
amount credited to such account shall be adjusted by the following debits and
credits, at the times and in the order stated:

            8.3.1 The Deferred Compensation Account shall be debited each
      business day with the total amount of any payments made from such account
      since the last preceding business day to him or for his benefit.

            8.3.2 The Deferred Compensation Account shall be credited on each
      Crediting Date with the total amount of any Salary Deferral Credits and
      Employer Credits to such account since the last preceding Crediting Date.

                                       14
<PAGE>

            8.3.3 The Deferred Compensation Account shall be credited or debited
      on each day securities are traded on a national stock exchange with the
      amount of deemed investment gain or loss resulting from the performance of
      the investment funds elected by the Participant in accordance with Section
      8.2. The amount of such deemed investment gain or loss shall be determined
      by the Committee and such determination shall be final and conclusive upon
      all concerned.

            SECTION 9. ADMINISTRATION BY COMMITTEE:

            9.1 MEMBERSHIP OF COMMITTEE. If elected in the Adoption Agreement,
the Committee shall consist of at least three individuals who shall be appointed
by the Board to serve at the pleasure of the Board. Any member of the Committee
may resign, and his successor, if any, shall be appointed by the Board. The
Committee shall be responsible for the general administration and interpretation
of the Plan and for carrying out its provisions, except to the extent all or any
of such obligations are specifically imposed on the Board.

            9.2 COMMITTEE OFFICERS; SUBCOMMITTEE. The members of the Committee
may elect Chairman and may elect an acting Chairman. They may also elect a
Secretary and may elect an acting Secretary, either of whom may be but need not
be a member of the Committee. The Committee may appoint from its membership such
subcommittees with such powers as the Committee shall determine, and may
authorize one or more of its members or any agent to execute or deliver any
instruments or to make any payment on behalf of the Committee.

            9.3 COMMITTEE MEETINGS. The Committee shall hold such meetings upon
such notice, at such places and at such intervals as it may from time to time
determine. Notice of meetings shall not be required if notice is waived in
writing by all the members of the Committee at the time in office, or if all
such members are present at the meeting.

            9.4 TRANSACTION OF BUSINESS. A majority of the members of the
Committee at the time in office shall constitute a quorum for the transaction of
business. All resolutions or other actions taken by the Committee at any meeting
shall be by vote of a majority of those

                                       15
<PAGE>

present at any such meeting and entitled to vote. Resolutions may be adopted or
other action taken without a meeting upon written consent thereto signed by all
of the members of the Committee.

            9.5 COMMITTEE RECORDS. The Committee shall maintain full and
complete records of its deliberations and decisions. The minutes of its
proceedings shall be conclusive proof of the facts of the operation of the Plan.

            9.6 ESTABLISHMENT OF RULES. Subject to the limitations of the Plan,
the Committee may from time to time establish rules or by-laws for the
administration of the Plan and the transaction of its business.

            9.7 CONFLICTS OF INTEREST. No individual member of the Committee
shall have any right to vote or decide upon any matter relating solely to
himself or to any of his rights or benefits under the Plan (except that such
member may sign unanimous written consent to resolutions adopted or other action
taken without a meeting), except relating to the terms of his Salary Deferral
Agreement.

            9.8 CORRECTION OF ERRORS. The Committee may correct errors and, so
far as practicable, may adjust any benefit or credit or payment accordingly. The
Committee may in its discretion waive any notice requirements in the Plan;
provided, that a waiver of notice in one or more cases shall not be deemed to
constitute a waiver of notice in any other case. With respect to any power or
authority which the Committee has discretion to exercise under the Plan, such
discretion shall be exercised in a nondiscriminatory manner.

            9.9 AUTHORITY TO INTERPRET PLAN. Subject to the claims procedure set
forth in Section 16 the Plan Administrator and the Committee shall have the duty
and discretionary authority to interpret and construe the provisions of the Plan
and to decide any dispute which

                                       16
<PAGE>

may arise regarding the rights of Participants hereunder, including the
discretionary authority to construe the Plan and to make determinations as to
eligibility and benefits under the Plan. Determinations by the Plan
Administrator and the Committee shall apply uniformly to all persons similarly
situated and shall be binding and conclusive upon all interested persons.

            9.10 THIRD PARTY ADVISORS. The Committee may engage an attorney,
accountant, actuary or any other technical advisor on matters regarding the
operation of the Plan and to perform such other duties as shall be required in
connection therewith, and may employ such clerical and related personnel as the
Committee shall deem requisite or desirable in carrying out the provisions of
the Plan. The Committee shall from time to time, but no less frequently than
annually, review the financial condition of the Plan and determine the financial
and liquidity needs of the Plan. The Committee shall communicate such needs to
the Employer so that its policies may be appropriately coordinated to meet such
needs.

            9.11 COMPENSATION OF MEMBERS. No fee or compensation shall be paid
to any member of the Committee for his Service as such.

            9.12 EXPENSE REIMBURSEMENT. The Committee shall be entitled to
reimbursement by the Employer for its reasonable expenses properly and actually
incurred in the performance of its duties in the administration of the Plan.

            9.13 INDEMNIFICATION. No member of the Committee shall be personally
liable by reason of any contract or other instrument executed by him or on his
behalf as a member of the Committee nor for any mistake of judgment made in good
faith, and the Employer shall indemnify and hold harmless, directly from its own
assets (including the proceeds of any insurance policy the premiums for which
are paid from the Employer's own assets), each member of the Committee and each
other officer, employee, or director of the Employer to

                                       17
<PAGE>

whom any duty or power relating to the administration or interpretation of the
Plan may be delegated or allocated, against any unreimbursed or uninsured cost
or expense (including any sum paid in settlement of a claim with the prior
written approval of the Board) arising out of any act or omission to act in
connection with the Plan unless arising out of such person's own fraud, bad
faith, willful misconduct or gross negligence.

            SECTION 10. CONTRACTUAL LIABILITY; TRUST:

            10.1 CONTRACTUAL LIABILITY. The obligation of the Employer to make
payments hereunder shall constitute a contractual liability of the Employer to
the Participant. Such payments shall be made from the general funds of the
Employer, and the Employer shall not be required to establish or maintain any
special or separate fund, or otherwise to segregate assets to assure that such
payments shall be made, and the Participant shall not have any interest in any
particular assets of the Employer by reason of its obligations hereunder. To the
extent that any person acquires a right to receive payment from the Employer,
such right shall be no greater than the right of an unsecured creditor of the
Employer.

            10.2 TRUST. If so designated in Section 2.33 of the Adoption
Agreement, the Employer may establish a Trust with the Trustee, pursuant to such
terms and conditions as are set forth in the Trust Agreement. The Trust, if and
when established, is intended to be treated as a grantor trust for purposes of
the Code and all assets of the Trust shall be held in the United States. The
establishment of the Trust is not intended to cause Participants to realize
current income on amounts contributed thereto, and the Trust shall be so
interpreted and administered.

            SECTION 11. ALLOCATION OF RESPONSIBILITIES:

            The persons responsible for the Plan and the duties and
responsibilities allocated to each are as follows:

                                       18
<PAGE>

            11.1 BOARD.

                  (i)   To amend the Plan;

                  (ii)  To appoint and remove members of the Committee; and

                  (iii) To terminate the Plan.

            11.2 COMMITTEE.

                  (i)   To designate Participants;

                  (ii)  To interpret the provisions of the Plan and to determine
            the rights of the Participants under the Plan, except to the extent
            otherwise provided in Section 16 relating to claims procedure;

                  (iii) To administer the Plan in accordance with its terms,
            except to the extent powers to administer the Plan are specifically
            delegated to another person or persons as provided in the Plan;

                  (iv)  To account for the amount credited to the Deferred
            Compensation Account of a Participant; and

                  (v)   To direct the Employer in the payment of benefits.

            11.3 PLAN ADMINISTRATOR.

                  (i)   To file such reports as may be required with the United
            States Department of Labor, the Internal Revenue Service and any
            other government agency to which reports may be required to be
            submitted from time to tune; and

                  (ii)  To administer the claims procedure to the extent
            provided in Section 16.

            SECTION 12. BENEFITS NOT ASSIGNABLE; FACILITY OF PAYMENTS;

            12.1 BENEFITS NOT ASSIGNABLE. No portion of any benefit credited or
paid under the Plan with respect to any Participant shall be subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt so to anticipate, alienate, sell,
transfer, assign, pledge, encumber or charge the same shall be void, nor shall
any portion of such benefit be in any manner payable to any assignee, receiver
or any one trustee, or be liable for his debts, contracts, liabilities,
engagements or torts. Notwithstanding the

                                       19
<PAGE>

foregoing, in the event that all or any portion of the benefit of a Participant
is transferred to the former spouse of the Participant incident to a divorce,
the Committee shall maintain such amount for the benefit of the former spouse
until distributed in the manner required by an order of any court having
jurisdiction over the divorce, and the former spouse shall be entitled to the
same rights as the Participant with respect to such benefit.

            12.2 PAYMENTS TO MINORS AND OTHERS. If any individual entitled to
receive a payment under the Plan shall be physically, mentally or legally
incapable of receiving or acknowledging receipt of such payment, the Committee,
upon the receipt of satisfactory evidence of his incapacity and satisfactory
evidence that another person or institution is maintaining him and that no
guardian or committee has been appointed for him, may cause any payment
otherwise payable to him to be made to such person or institution so maintaining
him. Payment to such person or institution shall be in full satisfaction of all
claims by or through the Participant to the extent of the amount thereof.

            SECTION 13. BENEFICIARY:

            The Participant's beneficiary shall be the person or persons
designated by the Participant on the beneficiary designation form provided by
and filed with the Committee or its designee. If the Participant does not
designate a beneficiary, the beneficiary shall be his Surviving Spouse. If the
Participant does not designate a beneficiary and has no Surviving Spouse, the
beneficiary shall be the Participant's estate. The designation of a beneficiary
may be changed or revoked only by filing a new beneficiary designation form with
the Committee or its designee. If a beneficiary (the "primary beneficiary") is
receiving or is entitled to receive payments under the Plan and dies before
receiving all of the payments due him, the balance to which he is entitled shall
be paid to the contingent beneficiary, if any, named in the Participant's
current beneficiary designation form. If there is no contingent beneficiary, the
balance shall be

                                       20
<PAGE>

paid to the estate of the primary beneficiary. Any beneficiary may disclaim all
or any part of any benefit to which such beneficiary shall be entitled hereunder
by filing a written disclaimer with the Committee before payment of such benefit
is to be made. Such a disclaimer shall be made in a form satisfactory to the
Committee and shall be irrevocable when filed. Any benefit disclaimed shall be
payable from the Plan in the same manner as if the beneficiary who filed the
disclaimer had died on the date of such filing.

            SECTION 14. AMENDMENT AND TERMINATION OF PLAN:

            The Board may amend any provision of the Plan or terminate the Plan
at any time; provided, that in no event shall such amendment or termination
reduce the balance in any Participant's Deferred Compensation Account as of the
date of such amendment or termination, nor shall any such amendment affect the
terms of the Plan relating to the payment of such Deferred Compensation Account.

            SECTION 15. COMMUNICATION TO PARTICIPANTS:

            The Employer shall make a copy of the Plan available for inspection
by Participants and their beneficiaries during reasonable hours at the principal
office of the Employer.

            SECTION 16. CLAIMS PROCEDURE;

            The following claims procedure shall apply with respect to the Plan:

            16.1 FILING OF A CLAIM FOR BENEFITS. If a Participant or beneficiary
(the "claimant") believes that he is entitled to benefits under the Plan which
are not being paid to him or which are not being accrued for his benefit, he
shall file a written claim therefor with the Plan Administrator. In the event
the Plan Administrator shall be the claimant, all actions which are required to
be taken by the Plan Administrator pursuant to this Section 16 shall be taken
instead by another member of the Committee designated by the Committee.

                                       21
<PAGE>

            16.2 NOTIFICATION TO CLAIMANT OF DECISION. Within 90 days after
receipt of a claim by the Plan Administrator (or within 180 days if special
circumstances require an extension of time), the Plan Administrator shall notify
the claimant of the decision with regard to the claim. In the event of such
special circumstances requiring an extension of time, there shall be furnished
to the claimant prior to expiration of the initial 90-day period written notice
of the extension, which notice shall set forth the special circumstances and the
date by which the decision shall be furnished. If such claim shall be wholly or
partially denied, notice thereof shall be in writing and worded in a manner
calculated to be understood by the claimant, and shall set forth: (i) the
specific reason or reasons for the denial; (ii) specific reference to pertinent
provisions of the Plan on which the denial is based; (iii) a description of any
additional material or information necessary for the claimant to perfect the
claim and an explanation of why such material or information is necessary; and
(iv) an explanation of the procedure for review of the denial and the time
limits applicable to such procedures, including a statement of the claimant's
right to bring a civil action under ERISA following an adverse benefit
determination on review. Notwithstanding the forgoing, if the claim relates to a
Participant who is Disabled, the Plan Administrator shall notify the claimant of
the decision within 45 days (which may be extended for an additional 30 days if
required by special circumstances).

            16.3 PROCEDURE FOR REVIEW. Within 60 days following receipt by the
claimant of notice denying his claim, in whole or in part, or, if such notice
shall not be given, within 60 days following the latest date on which such
notice could have been timely given, the claimant shall appeal denial of the
claim by filing a written application for review with the Committee. Following
such request for review, the Committee shall fully and fairly review the
decision

                                       22
<PAGE>

denying the claim. Prior to the decision of the Committee, the claimant shall be
given an opportunity to review pertinent documents and to submit issues and
comments in writing.

            16.4 DECISION ON REVIEW. The decision on review of a claim denied in
whole or in part by the Plan Administrator shall be made in the following
manner:

            16.4.1 Within 60 days following receipt by the Committee of the
      request for review (or within 120 days if special circumstances require an
      extension of time), the Committee shall notify the claimant in writing of
      its decision with regard to the claim. In the event of such special
      circumstances requiring an extension of time, written notice of the
      extension shall be furnished to the claimant prior to the commencement of
      the extension. If the decision on review is not furnished in a timely
      manner, the claim shall be deemed denied as of the close of the initial
      60-day period (or the close of the extension period, if applicable).
      Notwithstanding the forgoing, if the claim relates to a Participant who is
      Disabled, the Committee shall notify the claimant of the decision within
      45 days (which may be extended for an additional 45 days if required by
      special circumstances).

            16.4.2 With respect to a claim that is denied in whole or in part,
      the decision on review shall set forth specific reasons for the decision,
      shall be written in a manner calculated to be understood by the claimant,
      and shall cite specific references to the pertinent Plan provisions on
      which the decision is based.

            16.4.3 The decision of the Committee shall be final and conclusive.

            16.5 ACTION BY AUTHORIZED REPRESENTATIVE OF CLAIMANT. All actions
set forth in this Section 16 to be taken by the claimant may likewise be taken
by a representative of the claimant duly authorized by him to act in his behalf
on such matters. The Plan Administrator and the Committee may require such
evidence as either may reasonably deem necessary or advisable of the authority
to act of any such representative.

            SECTION 17. MISCELLANEOUS PROVISIONS:

            17.1 SET OFF. Notwithstanding any other provision of this Plan, the
Employer may reduce the amount of any payment otherwise payable to or on behalf
of a Participant hereunder by the amount of any loan, cash advance, extension of
credit or other obligation of the

                                       23
<PAGE>

Participant to the Employer that is then due and payable, and the Participant
shall be deemed to have consented to such reduction.

            17.2 NOTICES. Each Participant who is not in Service and each
Beneficiary shall be responsible for furnishing the Committee or its designee
with his current address for the mailing of notices and benefit payments. Any
notice required or permitted to be given to such Participant or Beneficiary
shall be deemed given if directed to such address and mailed by regular United
States mail, first class, postage prepaid. If any check mailed to such address
is returned as undeliverable to the addressee, mailing of checks will be
suspended until the Participant or beneficiary furnishes the proper address.
This provision shall not be construed as requiring the mailing of any notice or
notification otherwise permitted to be given by posting or by other publication.

            17.3 LOST DISTRIBUTEES. A benefit shall be deemed forfeited if the
Plan Administrator is unable to locate the Participant or Beneficiary to whom
payment is due on or before the fifth anniversary of the date payment is to be
made or commence; provided, that the deemed investment rate of return pursuant
to Section 8.2 shall cease to be applied to the Participant's account following
the first anniversary of such date; provided further, however, that such benefit
shall be reinstated if a valid claim is made by or on behalf of the Participant
or Beneficiary for all or part of the forfeited benefit.

            17.4 RELIANCE ON DATA. The Employer, the Committee and the Plan
Administrator shall have the right to rely on any data provided by the
Participant or by any Beneficiary. Representations of such data shall be binding
upon any party seeking to claim a benefit through a Participant, and the
Employer, the Committee and the Plan Administrator shall

                                       24
<PAGE>

have no obligation to inquire into the accuracy of any representation made at
any time by a Participant or beneficiary.

            17.5 RECEIPT AND RELEASE FOR PAYMENTS. Subject to the provisions of
Section 17.1, any payment made from the Plan to or with respect to any
Participant or Beneficiary, or pursuant to a disclaimer by a Beneficiary, shall,
to the extent thereof, be in full satisfaction of all claims hereunder against
the Plan and the Employer with respect to the Plan. The recipient of any payment
from the Plan may be required by the Committee, as a condition precedent to such
payment, to execute a receipt and release with respect thereto in such form as
shall be acceptable to the Committee.

            17.6 HEADINGS. The headings and subheadings of the Plan have been
inserted for convenience of reference and are to be ignored in any construction
of the provisions hereof.

            17.7 CONTINUATION OF EMPLOYMENT. The establishment of the Plan shall
not be construed as conferring any legal or other rights upon any Employee or
any persons for continuation of employment, nor shall it interfere with the
right of the Employer to discharge any Employee or to deal with him without
regard to the effect thereof under the Plan.

            17.8 MERGER OR CONSOLIDATION; ASSUMPTION OF PLAN. No employer-party
to the Plan shall consolidate or merge into or with another corporation or
entity, or transfer all or substantially all of its assets to another
corporation, partnership, trust or other entity (a "Successor Entity") unless
such Successor Entity shall assume the rights, obligations and liabilities of
the employer-party under the Plan and upon such assumption, the Successor Entity
shall become obligated to perform the terms and conditions of the Plan. Nothing
herein shall prohibit the assumption of the obligations and liabilities of the
Employer under the Plan by any Successor Entity.

                                       25
<PAGE>

            17.9 CONSTRUCTION. The Employer shall designate in the Adoption
Agreement the state according to whose laws the provisions of the Plan shall be
construed and enforced, except to the extent that such laws are superseded by
ERISA.

                                                                         12/1/04

                                       26
<PAGE>

                                  THE EXECUTIVE
                         NONQUALIFIED "EXCESS" PLAN(SM)

                     PROASSURANCE GROUP SERVICES CORPORATION
                                 TRUST AGREEMENT
<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                               Page
                                                                               ----
<S>                                                                            <C>
Section 1. Trust Fund.......................................................     2
 1.1  Definitions and Construction..........................................     2
 1.2  Trust Fund............................................................     2
 1.3  Non-diversion of Funds................................................     2

Section 2. Investment and Administration....................................     3
 2.1  Collection of Contributions...........................................     3
 2.2  General...............................................................     3
 2.3  Appointment of Investment Manager.....................................     3
 2.4  Investment Decisions..................................................     4
 2.5  Investment in Short-Term Obligation...................................     5
 2.6  Trustee's Administrative Authority....................................     5
 2.7  Substitution of Assets................................................     8

Section 3. Trustee and Committee............................................     8
 3.1  Committee.............................................................     8
 3.2  Trustee's Reliance....................................................     8
 3.3  Legal Counsel.........................................................     8
 3.4  Liability Under the Plan..............................................     9

Section 4. Distributions from the Trust Fund................................     9
 4.1  General...............................................................     9
 4.2  Direction by the Committee............................................     9
 4.3  Method of Payment.....................................................     9
 4.4  Special Distributions.................................................    10
 4.5  Payments to Employer..................................................    10

Section 5. Trustee's and Committee's Responsibilities.......................    10
 5.1  General Standard of Care..............................................    10
 5.2  No Liability for Acts of Others.......................................    11

Section 6. Trustee's Accounts...............................................    11
 6.1  Accounts..............................................................    11
 6.2  Valuation of Trust Fund...............................................    11
 6.3  Reports to the Committee..............................................    11
 6.4  Right of Judicial Settlement..........................................    12
 6.5  Enforcement of Agreement..............................................    12

Section 7. Taxes; Compensation of Trustee...................................    12
 7.1  Taxes.................................................................    12
 7.2  Compensation of Trustee; Expenses.....................................    12
</TABLE>

<PAGE>

<TABLE>
<S>                                                                             <C>
Section 8. Resignation and Removal of Trustee...............................    13
 8.1  Resignation or Removal of Trustee.....................................    13
 8.2  Appointment of Successor..............................................    13
 8.3  Succession............................................................    13
 8.4  Successor Bound by Agreement..........................................    14

Section 9. Trustee Responsibility Regarding Payments to Trust
           Beneficiaries When Employer Is Insolvent.........................    14
 9.1  Direction.............................................................    14
 9.2  Insolvency............................................................    14
 9.3  Resumption of Payments................................................    15

Section 10. Amendment and Irrevocability....................................    15

Section 11. Miscellaneous...................................................    15
 11.1 Binding Effect; Assignability.........................................    15
 11.2 Governing Law.........................................................    16
 11.3 Notices...............................................................    16
 11.4 Severability..........................................................    17
 11.5 Waiver................................................................    17
 11.6 Non-Alienation........................................................    17
 11.7 Headings..............................................................    17
 11.8 Construction of Language..............................................    17
 11.9 Counterparts..........................................................    17
</TABLE>

<PAGE>

                   THE EXECUTIVE NONQUALIFIED EXCESS PLAN(SM)
                                 TRUST AGREEMENT

            THIS TRUST AGREEMENT, made as of the 1 day of December, 2004 by and
between PROASSURANCE GROUP SERVICES CORPORATION ("Employer") and Delaware
Charter Guarantee & Trust Company, conducting business as Principal Trust
Company ('Trustee").

                                   WITNESSETH:

            WHEREAS, the Employer has adopted The Executive Nonqualified Excess
Plan(SM)(the "Plan") to provide benefits for certain participants of the
Employer and its designated affiliates; and

            WHEREAS, the Employer wishes to establish a Trust Fund (as
hereinafter defined) to aid it in accumulating the amounts necessary to satisfy
its contractual liability to pay benefits under the terms of the Plan; and

            WHEREAS, the Employer presently intends to make contributions to
this Trust Fund from time to time to be applied in payment of the Employer's
obligations under the Plan; and

            WHEREAS, the Employer is obligated to pay all benefits from its
general assets to the extent not paid by this Trust Fund, and the establishment
of this Trust Fund shall not reduce or otherwise affect the Employer's
continuing liability to pay benefits from such assets, except that the
Employer's liability shall be offset by actual benefit payments made from this
Trust Fund;

            WHEREAS, the trust established by this Agreement is intended to be a
"grantor trust" with the result that the corpus and income of the trust be
treated as assets and income of the Employer pursuant to Sections 671 through
679 of the Internal Revenue Code of 1986, as amended (the "Code"); and

<PAGE>

            WHEREAS, the Employer intends that the Trust Fund shall at all times
be subject to the claims of its creditors as herein provided and that the Plan
not be deemed funded within the meaning of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), solely by virtue of the existence of
this Trust;

            NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the Employer and the Trustee hereby agree as
follows:

            Section 1. Trust Fund:

            1.1 Definitions and Construction. Unless the context of this
Agreement clearly indicates otherwise, the terms defined in the Plan shall, when
used herein, have the same meaning as in the Plan. The headings in this
Agreement are used for the convenience of reference only and are to be ignored
in any constructions of the provisions hereof.

            1.2 Trust Fund. The Employer hereby establishes with the Trustee a
trust, pursuant to the Plan, in which may be deposited such sums of money as
shall from time to time be paid or delivered to or deposited with the Trustee by
or with the approval of the Employer in accordance with terms of the Plan.
Neither the Trustee nor any Plan participant or beneficiary shall have the right
to compel such deposits. All such deposits, all investments and reinvestments
thereof and all earnings, appreciation and additions allocable thereto, less
losses, depreciation and expenses allocable thereto and any payments made
therefrom as authorized under the Plan or this Agreement shall constitute the
"Trust Fund." The Trust Fund shall be held, managed and administered by the
Trustee, IN TRUST, and dealt with in accordance with the provisions of this
Agreement and in accordance with any funding policy or guidelines established
under the Plan that are communicated in writing to the Trustee.

            1.3 Non-diversion of Funds. Notwithstanding anything to the contrary
contained in this Agreement or any amendment thereto, no part of the Trust Fund
other than such expenses, fees, indemnities and taxes properly charged to the
Trust Fund under the Plan or this Agreement shall be used for or diverted to
purposes other than for the exclusive benefit of Plan participants and their
beneficiaries; provided, however, that the Trust Fund shall at all times be

                                       -2-
<PAGE>

subject to the claims of the general creditors of the Employer. Any rights
created under the Plan and this Agreement shall be mere unsecured contractual
rights of Plan participants and their beneficiaries against the Employer.

            Section 2. Investment and Administration:

            2.1 Collection of Contributions. The Trustee shall have no authority
over and shall have no responsibility for the administration of the Plan. The
Trustee shall be under no duty to enforce the payment of any contribution to the
Trust Fund and shall not be responsible for the adequacy of the Trust Fund to
satisfy any obligations for benefits expenses and liabilities under the Plan. In
addition to making contributions, the Employer, through the Committee, shall
furnish the Trustee with such information and data relative to the Plan as is
necessary for the proper administration of the Trust Fund.

            2.2 General. The Trust Fund shall be held by the Trustee and shall
be invested and reinvested as hereinafter provided in this Section 2, without
distinction between principal and income and without regard to the restrictions
of the laws of any jurisdiction relating to the investment of trust funds.

            2.3 Appointment of Investment Manager. (a) The Committee may, in its
      discretion, appoint an investment manager ("Investment Manager") to direct
      the investment and reinvestment of all or any portion of the Trust Fund.
      Any such Investment Manager shall either (i) be registered as an
      investment adviser under the Investment Advisers Act of 1940, as amended
      ("Investment Advisers Act"); (ii) be a bank, as defined in the Investment
      Advisers Act; or (iii) be an insurance company qualified to perform
      investment services under the laws of more than one state.

            (b) The Committee shall give written notice to the Trustee of the
      appointment of an Investment Manager pursuant to Section 2.3(a). Such
      notice shall include: (i) a specification of the portion of the Trust Fund
      to which the appointment applies; (ii) a certification by the Committee
      that the Investment Manager satisfies the requirements of Section
      2.3(a)(i), (ii) or (iii); (iii) a copy of the instruments appointing the
      Investment Manager and evidencing the Investment Manager's acceptance of
      the appointment; (iv) directions as to the manner in which the Investment
      Manager is authorized to give instructions to the Trustee, including the
      persons authorized to give instructions and the number of signatures
      required for any written instruction; (v) an acknowledgment by the
      Investment Manager that it is a fiduciary of the Plan; and (vi) if
      applicable, a

                                       -3-
<PAGE>

      certificate evidencing the Investment Manager's current registration under
      the Investment Advisers Act. For purposes of this Agreement, the
      appointment of an Investment Manager pursuant to this Section 2.3 shall
      become effective as of the effective date specified in such notice, or, if
      later, as of the date on which the Trustee receives proper notice of such
      appointment.

            (c) The Committee shall give written notice to the Trustee of the
      resignation or removal of an Investment Manager previously appointed
      pursuant to this Section 2.3. From and after the date on which the Trustee
      receives such notice, or, if later, the effective date of the resignation
      or removal specified in such notice, the Committee shall be responsible,
      in accordance with Section 2.4, for the investment and reinvestment of the
      portion of the Trust Fund theretofore managed by such Investment Manager,
      until such time as a successor Investment Manager has been duly appointed
      pursuant to this Section 2.3.

            2.4 Investment Decisions. (a) The Trustee shall invest and reinvest
      the Trust Fund in accordance with the directions of the Committee, or, to
      the extent provided in Section 2.3, in accordance with the directions of
      an Investment Manager. The Trustee shall be under no duty or obligation to
      review any investment to be acquired, held or disposed of pursuant to such
      directions nor to make any recommendation with respect to the disposition
      or continued retention of any such investment. The Trustee shall have no
      liability or responsibility for its action or inaction pursuant to the
      direction of, or its failure to act in the absence of directions from, the
      Committee or an Investment Manager, except to the extent provided in
      Section 5.2. The Employer hereby agrees to indemnify the Trustee and hold
      it harmless from and defend it against any claim or liability which may be
      asserted against the Trustee by reason of any action or inaction by it
      pursuant to a direction by the Committee or by an Investment Manager or
      failing to act in the absence of any such direction.

            (b) The Committee or an Investment Manager appointed pursuant to
      Section 2.3 may, at any time and from time to time, issue orders for the
      purchase or sale of securities directly to a broker; and in order to
      facilitate such transaction, the Trustee upon request shall execute and
      deliver appropriate trading authorizations. Written notification of the
      issuance of each such order shall be given promptly to the Trustee by the
      Committee or the Investment Manager, and the execution of each such order
      shall be confirmed by written advice to the Trustee by the broker. Such
      notification shall be authority for the Trustee to pay for securities
      purchased against receipt thereof and to deliver securities sold against
      payment therefore, as the case may be.

            (c) To the extent that neither the Committee nor an Investment
      Manager furnishes directions as to the investment of the Trust Fund, the
      Trustee shall invest and reinvest the Trust Fund in any savings account,
      time or other interest-bearing deposit in or other interest-bearing
      obligation of any one or more savings banks, savings and loan
      associations, banks or other financial institutions.

                                       -4-
<PAGE>

            2.5 Investment in Short-Term Obligation. Notwithstanding any
provisions of this Section 2 to the contrary, the Trustee in its sole discretion
or in consultation with the Committee, may retain uninvested cash or cash
balances, in whatever portion of the Trust Fund that it may deem advisable,
without being required to pay interest thereon. Pending investment, the Trustee,
in its sole discretion, may temporarily invest any funds held or received by it
for investment in an investment fund established to invest funds held thereunder
in commercial paper or in obligations of, or guaranteed by, the United States
government or any of its agencies.

            2.6 Trustee's Administrative Authority. (a) In addition to and not
      by way of limitation of any other powers conferred upon the Trustee by law
      or by other provisions of this Agreement, but subject to the provisions of
      Section 1.3 and this Section 2, the Trustee is authorized and empowered:

                  (i) to invest and reinvest part or all of the Trust Fund in
            accordance with funding policies which may be established by the
            Committee from time to time in such assets as the Trustee deems
            appropriate (including common and preferred stocks of the Employer),
            bonds, debentures, mutual fund shares, notes, commercial paper,
            treasury bills, options, partnership interests, venture capital
            investments, any common, commingled, collective trust funds or
            pooled investment funds (including such funds for which the Trustee
            serves as investment manager), contracts and policies issued by an
            insurance company, any interest bearing deposits held by any bank of
            similar financial institution, and any other real or personal
            property;

                  (ii) in accordance with directions from the Committee, to
            apply for, pay premiums on and maintain in force on the lives of
            Plan participants, individual ordinary or individual or group term
            or universal life insurance policies, variable universal life
            insurance policies, survivorship life insurance policies or annuity
            policies ("policies") and to have with respect to such policies all
            of the rights, powers, options, privileges and benefits usually
            comprised in the term "incidents of ownership" and normally vested
            in an owner of such policies;

                  (iii) to sell, exchange, convey, transfer or dispose of and
            also to grant options with respect to any property, whether real or
            personal, at any time held by it, and any sale may be made by
            private contract or by public auction, and for cash or upon credit,
            or partly for cash and partly upon credit, and no person dealing
            with the Trustee shall be bound to see the application of the

                                       -5-
<PAGE>

            purchase money or to inquire into the validity, expediency or
            propriety of any such sale or other disposition;

                  (iv) to retain, manage, operate, repair and rehabilitate and
            to mortgage or lease for any period any real estate held by it and,
            in its discretion, cause to be formed any corporation or trust to
            hold tile to any such real property;

                  (v) to vote in person or by proxy on any stocks, bonds, or
            other securities held by it, including any shares of mutual funds
            held by it, to exercise any options appurtenant to any stocks, bonds
            or other securities for the conversion thereof into other stocks,
            bonds or securities, or to exercise any rights to subscribe for
            additional stocks, bonds or other securities and to make any and all
            necessary payment therefor and to enter into any voting trust;

                  (vi) with respect to any investment, to join in, dissent from,
            or oppose any action or inaction of any corporation, or of the
            directors, officers or stockholders of any corporation, including,
            without limitation, any reorganization, recapitalization,
            consolidation, liquidation, sale or merger,

                  (vii) to settle, adjust, compromise, or submit to arbitration
            any claims, debts or damages due or owing to or from the Trust Fund;
            and

                  (viii) to deposit any property with any protective,
                         reorganization or similar committee, to delegate power
                         thereto and to pay and agree to pay part of its
                         expenses and compensation and any assessments levied
                         with respect to any property so deposited.

      In exercising such powers with respect to any portion of the Trust Fund
      that is invested pursuant to directions of the Committee or of an
      Investment Manager, the Trustee shall act in accordance with directions
      provided by the Committee or Investment Manager. The Trustee shall be
      under no duty or obligation to review any action to be taken, nor to
      recommend any action, pursuant to this Section 2.6(a) with respect to any
      portion of the Trust Fund that is under the direction of the Committee or
      an Investment Manager. The Trustee shall have no liability or
      responsibility for its action or inaction pursuant to the direction of, or
      its failure to act in the absence of directions from, the Committee or an
      Investment Manager, except to the extent provided in Section 5.2. The
      Employer hereby agrees to indemnify the Trustee and hold it harmless from
      and defend it against any claim or liability which may be asserted against
      the Trustee by reason of any action or inaction by it pursuant to a
      direction given by the Committee or by an Investment Manager or failing to
      act in the absence of any such direction.

                                       -6-
<PAGE>

            (b) In addition to and not by way of limitation of any other powers
      conferred upon the Trustee by law or other provisions of this Agreement,
      but subject to Section 1.3 and this Section 2, the Trustee is authorized
      and empowered, in its discretion:

                  (i) to commence or defend suits or legal proceedings, and to
            represent the Trust Fund in all suits or legal proceedings in any
            court or before any other body or tribunal;

                  (ii) to register securities in its name or in the name of any
            nominee or nominees with or without indication of the capacity in
            which the securities shall be held, or to hold securities in bearer
            form;

                  (iii) to borrow or raise monies for the purposes of the Trust
            from any lender, except the Trustee, in its individual capacity, and
            for any sum so borrowed to issue its promissory note as Trustee and
            to secure the repayment thereof by pledging all or any part of the
            Trust Fund, and no person lending money to the Trustee shall be
            bound to see the application of the money loaned or to inquire into
            the validity, expediency of propriety of any such borrowing;

                  (iv) to make distributions in cash upon the direction of the
            Committee;

                  (v) to withhold the appropriate amount of taxes from a
            participant's distribution as directed by the Committee;

                  (vi) to employ such agents, brokers, counsel and accountants
            as the Trustee shall deem advisable and to be reimbursed by the
            Employer for their reasonable expenses and compensation;

                  (vii) to make, execute, acknowledge, and deliver any and all
            deeds, leases, assignments and instruments; and

                  (viii) generally to do all acts which the Trustee may deem
            necessary or desirable for the administration and protection of the
            Trust Fund.

      Notwithstanding any powers granted to the Trustee pursuant to this
      Agreement or by applicable law, the Trustee shall not have any power that
      could give the Trust the objective of carrying on a business and dividing
      the gains therefrom, within the meaning of Section 301.7701-2 of the
      Treasury Regulations promulgated pursuant to the Code.

                                       -7-
<PAGE>

            2.7 Substitution of Assets. The Employer shall have the right at any
time, in its sole discretion, to substitute assets of equal fair market value
for any asset held by the Trust. This right is exercisable by the Employer in a
nonfiduciary capacity without the approval or consent of any person in a
fiduciary capacity.

            Section 3. Trustee and Committee:

            3.1 Committee. The Employer shall certify to the Trustee the names
and specimen signatures of the members of the Committee appointed by the
Employer to administer the Plan and give directions to the Trustee. Such
certification shall include directions as to the number of signatures required
for any communication or direction to the Trustee. The Employer shall promptly
give notice to the Trustee of changes in the membership of the Committee. The
Committee may also certify to the Trustee the name of any person, together with
a specimen signature of any such person who is not a member of the Committee,
authorized to act for the Committee in relation to the Trustee. The Committee
shall promptly give notice to the Trustee of any change in any person authorized
to act on behalf of the Committee. For all purposes under this Agreement, until
any such notice is received by the Trustee, the Trustee shall be fully protected
in assuming that the membership of the committee and the authority of any person
certified to act in its behalf remain unchanged.

            3.2 Trustee's Reliance. The Trustee may rely and act upon any
certificate, notice or direction of the Committee, or of a person authorized to
act on its behalf, or of the Employer or of an Investment Manager which the
Trustee believes to be genuine and to have been signed by the person or persons
duly authorized to sign such certificate, notice, or direction.

            3.3 Legal Counsel. The Trustee may consult with legal counsel (who
may be counsel to the Employer) and may charge the expense to the Employer
concerning any questions which may arise under this Agreement, and the opinions
of such counsel shall be full and complete protection with respect to any action
taken, or omitted, by the Trustee hereunder in good faith in accordance with the
opinion of such counsel.

                                      -8-
<PAGE>

            3.4 Liability Under the Plan. The duties and obligations of the
Trustee shall be limited to those expressly set forth in this Agreement,
notwithstanding any reference herein to the Plan. Notwithstanding any other
provision of this Trust Agreement, the Trustee and its officers, directors and
agents hereunder shall be indemnified and held harmless by the Employer and the
Fund to the fullest extent permitted by law against any and all costs, damages,
expenses and liabilities including, but not limited to, attorneys' fees and
disbursements reasonably incurred by or imposed upon it in connection with any
claim made against it or in which it may be involved by reason of it being, or
having been, a Trustee hereunder, to the extent such amounts are not satisfied
by fiduciary liability insurance that may or may not be maintained by the
Employer.

            Section 4. Distributions from the Trust Fund:

            4.1 General. The Trustee shall make payments from the Trust Fund in
such amounts, at such times, and to such persons as the Committee may, from time
to time, direct.

            4.2 Direction by the Committee. (a) A direction by the Committee to
make a distribution from the Trust Fund shall:

                  (i) be made in writing;

                  (ii) specify the amount of the payment to be distributed, the
            date such payment is to be made, the person to whom payment is to be
            made, and the address to which the payment is to be sent; and

                  (iii) be deemed to certify to the Trustee that such direction
            and any payment pursuant thereto are authorized under the terms of
            the Plan.

            (b) The Trustee shall be entitled to rely conclusively on the
      Committee's certification of its authority to direct a payment without
      independent investigation. The Trustee shall have no liability to any
      person with respect to payments made in accordance with the provisions of
      this Section 4.

            4.3 Method of Payment. Payments of money by the Trustee may be made
by its check payable to the order of the payee designated by the Committee and
mailed to the payee in care of the Employer. The Trustee shall provide for the
reporting and withholding of any

                                       -9-
<PAGE>

federal, state or local taxes that may be required to be withheld with respect
to the payment of benefits pursuant to the terms of the Plan and shall pay
amounts withheld to the appropriate taxing authorities or determine that such
amounts have been reported, withheld and paid by the Employer.

            4.4 Special Distributions. Notwithstanding any other provision of
this Trust Agreement to the contrary, if at any time (i) the Trust is finally
determined by the Internal Revenue Service (the "IRS") not to be a "grantor
trust," with the result that the income of the Trust Fund is not treated as
income of the Employer pursuant to Sections 671 through 679 of the Code, (ii) a
federal tax is finally determined by the IRS to be payable by the Trust
beneficiaries, or (iii) the Trustee receives an opinion of counsel satisfactory
to it to the effect that it is likely that the IRS will determine that a tax
will be payable by the Trust beneficiaries as described in (ii) and it is likely
that such determination will be upheld, then the Trust shall immediately
terminate and the assets paid as soon as practicable by the Trustee to the Trust
beneficiary as directed by the Committee.

            4.5 Payments to Employer. Except as expressly provided in the Plan,
the Employer shall have no right or power to direct the Trustee to return to the
Employer any of the Trust Fund before all payments of benefits have been made
pursuant to the Plan. However, upon written request from the Employer, if the
Trustee determines that the value of the assets of the Trust Fund are in excess
of 100% of the amount required to pay the benefits provided under the terms of
the Plan, then such excess assets, including both principal and income, shall be
returned to the Employer.

            Section 5. Trustee's and Committee's Responsibilities:

            5.1 General Standard of Care. The Trustee, the members of the
Committee and any Investment Manager shall at all times discharge their duties
with respect to the Trust Fund solely in the interest of the Plan participants
and their beneficiaries and with the care, skill, prudence, and diligence that,
under the circumstances prevailing, a prudent man acting in a like

                                      -10-
<PAGE>

capacity and familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims.

            5.2 No Liability for Acts of Others. No "fiduciary" (as such term is
defined in Section 3(21) of ERISA) under this Agreement shall be liable for an
act or omission of another person in carrying out any fiduciary responsibility
where such fiduciary responsibility is allocated to such other person by this
Agreement or pursuant to a procedure established in this Agreement.

            Section 6. Trustee's Accounts:

            6.1 Accounts. The Trustee shall keep accurate and detailed accounts
of all investments, reinvestments, receipts and disbursements, and other
transactions hereunder, and all such accounts and the books and records relating
thereto shall be open to inspection at all reasonable times by the Employer or
the Committee or persons designated by them.

            6.2 Valuation of Trust Fund. The Trustee shall value or cause to be
valued the Trust Fund as of the last business day of each calendar quarter
("Valuation Date"), and shall report to the Committee the value of the Trust
Fund as of such date, within a reasonable time after the first day of the month
next succeeding each Valuation Date.

            6.3 Reports to the Committee. (a) Within sixty (60) days following
      the last day of each fiscal year of the Trust, and within sixty (60) days
      following the effective date of the resignation or removal of the Trustee
      as provided in Section 8.1, the Trustee shall render to the Committee a
      written account setting forth all investments, receipts, disbursements and
      other transactions affecting the Trust Fund or any investment fund, which
      account shall be signed by the Trustee and mailed to the Committee.

            (b) The Committee shall notify the Trustee in writing of any
      objection or exception to an account so rendered not later than ninety
      (90) days following the date on which the Account was mailed to the
      Committee, whereupon the Committee and the Trustee shall cooperate in
      resolving such objection or exception.

            (c) If the Committee has not communicated in writing to the Trustee
      within ninety (90) days following the mailing of the account to the
      Committee any exception or objection to the account, the account shall
      become an account stated at the end of such ninety (90) day period. If the
      Committee does communicate such an exception or objection, as to which it
      later becomes

                                      -11-
<PAGE>

      satisfied, the Committee shall thereupon indicate in writing its approval
      of the account, or of the account as amended, and the account shall
      thereupon become an account stated.

            (d) Whenever an account shall have become an account stated as
      aforesaid, such account shall be deemed to be finally settled and shall be
      conclusive upon the Trustee, the Employer and all persons having or
      claiming to have any interest in the Trust Fund or under the Plan, and the
      Trustee shall be fully and completely discharged and released to the same
      extent as if the account had been settled and allowed by a judgment or
      decree of a court of competent jurisdiction in an action or proceeding in
      which the Trustee, the Employer, and all persons having or claiming to
      have any interest in the Trust Fund or under the Plan were parties.

            6.4 Right of Judicial Settlement. Notwithstanding the provisions of
Section 6.3, the Trustee, the Committee, and the Employer, or any of them, shall
have the right to apply at any time to a court of competent jurisdiction for the
judicial settlement of the Trustee's account. In any such case, it shall be
necessary to join as parties thereto only the Trustee, the Committee and the
Employer; and any judgment or decree which may be entered therein shall be
conclusive upon all persons having or claiming to have any interest in the Trust
Fund or under the Plan.

            6.5 Enforcement of Agreement. To protect the Trust Fund from
expenses which might otherwise be incurred, the Employer and the Committee shall
have authority, either jointly or severally, to enforce this Agreement on behalf
of all persons claiming any interest in the Trust Fund or under the Plan, and no
other person may institute or maintain any action or proceeding against the
Trustee or the Trust Fund in the absence of written authority from the Committee
or a judgment of a court of competent jurisdiction that in refusing authority
the Committee acted fraudulently or in bad faith.

            Section 7. Taxes; Compensation of Trustee:

            7.1 Taxes. Any taxes that may be imposed upon the Trust Fund or the
income therefrom shall be deducted from and charged against the Trust Fund.

            7.2 Compensation of Trustee; Expenses. The Trustee shall receive for
its services hereunder such compensation as may be agreed upon in writing from
time to time by the Employer and the Trustee and shall be reimbursed for its
reasonable expenses, including counsel

                                      -12-
<PAGE>

fees, incurred in the performance of its duties hereunder. The Trustee shall
deduct from and charge against the Trust Fund such compensation and all such
expenses unless previously paid by the Employer. EBS has entered into an
agreement with trustee to provide certain trust services on behalf of the
trustee. EBS will be compensated by the trustee from the fees paid to the
trustee for those services.

            Section 8. Resignation and Removal of Trustee:

            8.1 Resignation or Removal of Trustee. The Trustee may resign as
trustee hereunder at any time by giving sixty (60) days prior written notice to
the Employer. Notwithstanding the preceding, the Trustee may resign immediately
upon the occurrence of an unusual event which in the sole discretion of the
Trustee affects the viability of the Employer and in such event the Employer
shall promptly appoint a qualified successor trustee. The Employer may remove
the Trustee as trustee hereunder at any time by giving the Trustee prior written
notice of such removal, which shall include notice of the appointment of a
successor trustee. Such removal shall take effect not earlier than sixty (60)
days following receipt of such notice by the Trastee unless otherwise agreed
upon by the Trustee and the Employer.

            8.2 Appointment of Successor. In the event of the resignation or
removal of the Trustee, a successor trustee shall be appointed by the Employer.
Except as is otherwise provided in Section 8.1, such appointment shall take
effect upon delivery to the Trustee of an instrument so appointing the successor
and an instrument of acceptance executed by such successor, both of which
instruments shall be duly acknowledged before a notary public. If within sixty
(60) days after notice of resignation shall have been given by the Trustee a
successor shall not have been appointed as aforesaid, the Trustee may apply to
any court of competent jurisdiction for the appointment of such successor.

            8.3 Succession. (a) Upon the appointment of a successor hereunder,
      the Trustee shall transfer and deliver the Trust Fund to such successor;
      provided, however, that the Trustee may reserve such sum of money as it
      shall in its sole and absolute discretion deem advisable for payment of
      its fees and all expenses including counsel fees in connection with the
      settlement of its account, and any balance of such reserve remaining after
      the payment of such charges shall be paid over to the successor trustee.
      If such reserve shall be insufficient to pay such

                                      -13-
<PAGE>

      charges, the Trustee shall be entitled to recover the amount of any
      deficiency from the Employer, from the successor trustee, or from both.

            (b) Upon the completion of the succession and the rendering of its
      final accounts, the Trustee shall have no further responsibilities
      whatsoever under this Agreement.

            8.4 Successor Bound by Agreement. All the provisions of this
Agreement shall apply to any successor trustee with the same force and effect as
if such successor had been originally named herein as the trustee hereunder.

            Section 9. Trustee Responsibility Regarding Payments to Trust
                       Beneficiaries When Employer Is Insolvent:

            9.1 Direction. The Board of Directors and the chief executive
officer of the Employer shall have the duty to inform the Trustee in writing if
the Employer becomes Insolvent, as hereinafter defined. If the Trustee receives
any written certification signed under penalties of perjury by any person other
than the Board of Directors or the chief executive officer of the Employer that
the Employer has become Insolvent, the Employer shall be deemed to be Insolvent
for purposes of this Section 9. When the Trustee has been so informed by the
Board of Directors or the chief executive officer of the Employer, or has
received such certification from another person, the Trustee shall immediately
discontinue payments of benefits to Trust Beneficiaries and of net income to the
Employer, and shall hold the assets of the Trust for the benefit of the
Employer's general creditors. Nothing in this Agreement shall in any way
diminish any rights of Plan participants or their beneficiaries to pursue their
rights as general creditors of the Employer with respect to benefits due under
the Plan. During the continuance of the Trust, the fees and expenses of the
Trustee shall be paid from the Trust Fund if not paid by the Employer or any
successor trustee (including a regulatory agency).

            9.2 Insolvency. The Employer shall be considered Insolvent for
purposes of this Section 9 if: (i) the Employer is unable to pay its debts as
they become due; or (ii) the Employer is determined to be insolvent by any
agency having regulatory authority over the Employer.

                                      -14-
<PAGE>

            9.3 Resumption of Payments. The Trustee shall resume the payment of
benefits to Plan participants or their beneficiaries only after the Trustee has
determined that the Employer is not Insolvent (or is no longer Insolvent). If
the Trustee discontinues the payment of benefits from the Trust pursuant to
Section 9.1 hereof, and subsequently resumes such payments, the first payment
following such discontinuance shall include the aggregate amount of all payments
due to Plan participants or their beneficiaries under the terms of the Plan,
less the aggregate amount of any payments made to Plan participants or their
beneficiaries by the Employer in lieu of the payments provided for hereunder
during any such period of discontinuance.

            Section 10. Amendment and Irrevocability:

            10.1 The Employer may, at any time and from time to time, by
      instrument in writing executed pursuant to authorization of its Board of
      Directors, amend in whole or in part any or all of the provisions of this
      Agreement; provided, however, that: (i) no amendment which affects the
      rights, duties, fees or responsibilities of the Trustee may be made
      without the Trustee's consent; and (ii) no amendment shall conflict with
      the terms of the Plan or alter the fact that the Trust is irrevocable
      pursuant to Section 10.1 hereof.

            10.2 The Trust created hereunder is irrevocable and shall terminate
      only upon the complete distribution of the assets of the Trust to the
      participants or their beneficiaries. In the event that Trust assets remain
      after the payment of all benefits to the participants or their
      beneficiaries under the terms of the Plan, the Trust shall be terminated
      and any remaining assets shall be returned to the Employer.

            10.3 Any such amendment shall become effective upon receipt by the
      Trustee of the instrument of amendment and endorsement thereon by the
      Trustee of its consent thereto, if such consent is required; provided,
      however, no such amendment shall be permitted if, in the opinion of
      counsel to the Employer, any such amendment would cause the Trust to cease
      to constitute a grantor trust as described in Section 4.4 of this
      Agreement. Following any such termination as provided in Section 10.1, the
      powers of the Trustee hereunder shall continue as long as any of the Trust
      Fund remains in its hands.

            Section 11. Miscellaneous:

            11.1 Binding Effect; Assignability. This Agreement shall be binding
upon, and the powers granted to the Employer and the Trustee, respectively,
shall be exercisable by the

                                      -15-
<PAGE>

respective successors and assigns of the Employer and the Trustee. Any entity
which shall, by merger, consolidation, purchase, or otherwise, succeed to
substantially all the trust business of the Trustee shall, upon such succession
and without any appointment or other action by the Employer, be and become
successor trustee hereunder.

            11.2 Governing Law. This Agreement and the trust created and the
Trust Fund held hereunder shall be interpreted in accordance with the laws of
the state designated by the Employer in Section 17.9 of the Adoption Agreement,
except to the extent that such laws are preempted by the federal laws of the
United States of America. All contributions to the Trust Fund shall be deemed to
take place in the state designated by the Employer in Section 17.9 of the
Adoption Agreement.

            11.3 Notices. Any communication to the Trustee, including any
notice, direction, designation, certification, order, instruction, or objection
shall be in writing and signed by the person authorized under the Plan to give
the communication. The Trustee shall be fully protected in acting in accordance
with these written communications. Any notice required or permitted to be given
to a party hereunder shall be deemed given if in writing and hand delivered or
mailed, postage prepaid, certified mail, return receipt requested, to such party
at the following address or at such other address as such party may by notice
specify:

            If to the Employer:

                  PROASSURANCE GROUP SERVICES CORPORATION
                  100 BROOKWOOD PLACE, SUITE 300
                  BIRMINGHAM, AL 35209
                  ATTENTION: CLAY SHAW, VICE PRESIDENT OF HUMAN RESOURCES

            If to the Trustee:

                  Principal Trust Company
                  1013 Centre Road
                  Wilmington, DE 19805

                                      -16-
<PAGE>

            11.4 Severability. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity of enforceability of
the remaining provisions.

            11.5 Waiver. Failure of any party to insist at any time or times
upon strict compliance with any provision of this Agreement shall not be a
waiver of such provision at such time or any later time unless in a writing
designated as a waiver and signed by or on behalf of the party against whom
enforcement of the waiver is sought.

            11.6 Non-Alienation. No interest, right or claim in or to any part
of the Trust Fund or any payment therefrom shall be assignable, transferable or
subject to sale, mortgage, pledge, hypothecation, commutation, anticipation,
garnishment, attachment, execution, or levy of any kind, and the Trustee and the
Committee shall not recognize any attempt to assign, transfer, sell, mortgage,
pledge, hypothecate, commute, or anticipate the same, except to the extent
required by law.

            11.7 Headings. The headings of sections are included solely for
convenience of reference. If there is any conflict between such headings and the
text of the Agreement, the text shall control.

            11.8 Construction of Language. Whenever appropriate in this
Agreement, words used in the singular may be read in the plural; words used in
the plural may be read in the singular; and words importing the masculine gender
shall be deemed equally to refer to the female gender or the neuter. Any
reference to a section number shall refer to a section of this Agreement, unless
otherwise indicated.

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

                                      -17-
<PAGE>

      IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.

EMPLOYER: PROASSURANCE GROUP SERVICES CORPORATION

By: /s/ Victor T. Adamo, President
    ------------------------------
       Authorized Officer

Date: December 1, 2004

TRUSTEE: PRINCIPAL TRUST COMPANY

By: /s/   [ILLEGIBLE]
    --------------------------
       Authorized Officer

Date: 12/03/04

                                      -18-
<PAGE>

                              INVESTMENT AGREEMENT

WHEREAS, PROASSURANCE GROUP SERVICES CORPORATION (the Company) has retained
Principal Trust Company as Trustee of the Trust Fund (the Trust) established
with respect to certain plans established to provide deferred compensation, for
certain of its employees.

AND WHEREAS, that Trust is evidenced by certain Trust Agreement by virtue of
which Principal Trust Company has agreed to serve as Trustee.

AND WHEREAS, that section 2 of the Trust authorized Principal Trust Company to
act pursuant to investment guidelines agreed to in writing from time to time by
the Company and Principal Trust Company,

NOW, THEREFORE, In consideration of mutual promises and covenants contained
herein and the performance thereof, it is hereby agreed by and between these
Parties:

1.    All contributions to the aforementioned Plan and all assets of the Trust
      will be held In certain annuity contracts, mutual fund shares, or other
      instruments issued by Principal Life Insurance Company or other companies
      which are members of The Principal Financial Group, or in other
      instruments as instructed by the Company.

2.    Principal Trust Company will not be liable for the acts or omissions of
      Principal Life Insurance Company or other companies that are members of
      The Principal Financial Group or any other entity with regard to the
      investment of the contributions of the aforementioned plans and all assets
      of the Trust.

3.    That this agreement shall run for the full term of the Trust unless
      superseded by a subsequent written agreement between the Parties. This
      Agreement shall be terminated immediately and without notice if the Trust
      is terminated, or if Principal Trust Company resigns or is removed from
      its role as Trustee.

4.    That this agreement shall be construed, interpreted, and governed by the
      laws of the State of Alabama.

This Agreement shall be effective on this 1 day of December, 2004.

AGREED & ACCEPTED:

/s/ Victor T. Adamo                        /s/   [ILLEGIBLE]
---------------------------------------    -------------------------------------

ProAssurance Group Services Corporation    Principal Trust Company

Title President                            Trust Officer

Date December 1, 2004                      Date 12/3/04

<PAGE>

                             PRINCIPAL TRUST COMPANY
                      DIRECTED TRUST SERVICES FEE AGREEMENT
                     PROASSURANCE GROUP SERVICES CORPORATION

PROASSURANCE GROUP SERVICES CORPORATION
Set-up Fee: $250
Base Trustee Fee: $1250 annually

   -  Other Services: transactional fees and proxy services will be covered
      under an additional service agreement

   -  Extraordinary Services: the charge for out-of-pocket expenses will be at
      cost (Federal Express, Certified Postage, etc.)

   -  Changes in scope to duties of the trustee: a quoted fee based on facts and
      circumstances

   -  Outside money manager arrangement: $500 set-up fee, $1750 annual fee plus
      applicable custodial fees.

   -  Review of outside trust document: hourly rate will be applicable ($2500
      minimum)

                               AGREED AND ACCEPTED

PROASSURANCE GROUP SERVICES CORPORATION    PRINCIPAL TRUST COMPANY

/s/ Victor T. Adamo                        /s/  [ILLEGIBLE]
---------------------------------------    -------------------------------------
Signature                                  Signature

President                                  Director of Trust Services
Title                                      Title

Date: December 1, 2004                     Date: 12/3/2004

<PAGE>

                           RESOLUTION ADOPTED BY THE

                             BOARD OF DIRECTORS OF

                     PROASSURANCE GROUP SERVICES CORPORATION
                             AN ALABAMA CORPORATION

      The undersigned Secretary of PROASSURANCE GROUP SERVICES CORPORATION (the
"Corporation") hereby certifies that the following resolutions were duly adopted
by the Board of Directors of the Corporation and that such resolutions have not
been modified or rescinded as of the date hereof:

      WHEREAS, the Corporation, as an inducement and motivation to its key
managerial and highly compensated employees, desires to create a Nonqualified
Deferred Compensation plan (hereinafter sometimes referred to as "Plan");

      WHEREAS, the Corporation has been selected to serve as the lead company on
behalf of the direct and indirect subsidiaries of ProAssurance Corporation that
elect to participate in the Plan for the benefit of their designated employees.

      RESOLVED, that the form of Deferred Compensation Plan (the "Plan")
presented to this meeting is hereby approved and adopted and that the proper
officers of the Corporation are hereby authorized and directed to execute and
deliver to the Administrator of the Plan one or more counterparts of the Plan.

      RESOLVED, that the Administrator shall be instructed to take such actions
as are deemed necessary and proper in order to implement the Plan, and to set up
adequate accounting and administrative procedures to provide benefits under the
plan.

      RESOLVED, that the proper officers of the Corporation shall act as soon as
possible to notify the appropriate employees of the Corporation of the adoption
of the Plan by delivering to each said employee a copy of the Plan in the form
of the Plan presented to this meeting, which form is hereby approved.

      BE IT FURTHER RESOLVED, that the Corporation hereby establish such Plan
effective January 1, 2005 in accordance with the following:

      PURPOSE:

      The purpose of such Plan is to encourage selected key managerial employees
to maintain their employment with the Corporation by providing retirement
benefits for them, and pre-retirement death benefits for their survivors.

      ELIGIBILITY:

      The Plan shall be for the benefit of key managerial employees of this
Corporation, as determined in the sole discretion of its Board of Directors.

<PAGE>

      NOTIFICATION:

      The Corporation shall communicate the existence and terms of the Plan to
each eligible employee.

      AMENDMENT AND TERMINATION:

      The Plan shall be subject to amendment or termination at any time in the
sole discretion of the Board of Directors.

      IN WITNESS WHEREOF, the undersigned hereto sets his hand and seal of the
Corporation in Birmingham, Alabama on December 1, 2004.

                                       PROASSURANCE GROUP SERVICES CORPORATION
                                       AN ALABAMA CORPORATION

                                       By: /s/ Kathryn A. Neville
                                           -------------------------------------
                                           Its: Secretary

<PAGE>

                 ALTERNATIVE REPORTING AND DISCLOSURE STATEMENT

                 FOR NON-QUALIFIED DEFERRED COMPENSATION PLANS

To:   Top Hat Exemption
      Employee Benefits Security Administration
      Room N 1513
      U.S. Department of Labor
      200 Constitution Avenue N.W.
      Washington, D.C. 20210

In compliance with the requirements of the alternative method of reporting and
disclosure under Part I of Title I of the Employee Retirement Income Security
Act of 1974 for un-funded or insured pension plans for a select group of
management or highly compensated employees, specified in Department of Labor
Regulations, 29 CFR Sec. 2520.104-23, the following information is provided by
the undersigned administrator:

   1. The name of the Employer is: ProAssurance Group Services Corporation

   2. The mailing address of the Employer is: 100 Brookwood Place, Suite 300
                                              Birmingham, AL 35209

   3. The Employer Identification Number is: 63-1285505

   4. The above named Employer maintains a Plan (or Plans) primarily for the
      purpose of providing deferred compensation benefits for a select group of
      management or highly compensated employees.

   5. Number of Plans and Eligible Employees in each Plan:

      1 Plan(s) covering 50 Eligible Employees and 10 consultants (members
      of the Board of Directors) commencing on or after January 1, 2005.

   6. The Employer will provide a copy of the agreements to the office of
      Pension and Welfare Benefit Program upon request.

                                       ProAssurance Group Services Corporation
                                       An Alabama Corporation

                                       By: /s/ Victor T. Adamo
                                           -------------------------------------
                                           Victor T. Adamo, President

      Dated: December 3, 2004

VIA CERTIFIED MAIL, RETURN RECEIPT REQUESTED
<PAGE>

(EBS LOGO)    THE EXECUTIVE NON QUALIFIED "EXCESS" PLAN(TM)
            - ProAssurance Group Services Corporation

                                  PLAN SUMMARY

PURPOSE

To attract and retain key executives and to provide an opportunity to save on a
pre-tax basis and accumulate tax-deferred earnings to achieve your financial
goals. The IRS considers you highly compensated and limits your ability to
contribute to other company sponsored plans. The Nonqualified Deferred
Compensation Plan provides you the following benefits:

-  Defer income in excess of the 401 (k) limits on a pre-tax basis.

-  Earnings accumulate tax deferred

-  Systematic savings through payroll deduction

-  Self directed investment accounts

<TABLE>
<S>              <C>                           <C>
PLAN DESIGN      Eligibility:                  Determined by Company
                 Effective Date:               January 1, 2005
                 Compensation:                 Base Salary, 1099 Income
                 Employee Deferral:            1% to 75% of Base Salary, and $ 1,000 to $ 100,000 of 1099 Income
                 Distribution Payments:        Lump Sum or Annual Installments - no longer than 10 years

QUALIFYING       Death
DISTRIBUTION     Disability
  EVENTS         Termination of employment
                 Retirement
                 Change of Control

IN-SERVICES      Unforseeable                  An approved request for a stated amount of money withdrawn from the account to
DISTRIBUTION     Emergency                     cover an unforeseeable emergency.
  EVENT

REPORTS AND      Semi-annual statements of account values will be provided to the Participant.
INFORMATION      Information @ (800) 999-4031 for plan account balances, investment allocation
                 and performance.
                 Internet site: www.ebsnq.com
                 Plan administered by Employer.
</TABLE>

Executive Benefit Services - 4140 ParkLake Avenue, Suite 500 - 800.999.4031 -
FAX 919.719.2015 - WWW.EBSNQ.COM

<PAGE>

(EBS LOGO)   THE EXECUTIVE NONQUALIFIED "EXCESS" PLAN(TM)
           - ProAssurance Group Services Corporation

CONSIDERATIONS

Deferral into the Plan reduces compensation eligible for qualified retirement
plan contributions.
No loan provisions.
No rollover provision into an IRA or other qualified retirement plan.
Contractual promise to pay benefits.
Assets are owned by the company and are subject to claims of creditors.
Election to defer is irrevocable and can only be made once per year. However,
the Participant may suspend elections for the remainder of a Plan Year.

 DEEMED
INVESTMENT
 OPTIONS

Earnings and losses will be credited to the account(s) each business day that
securities are traded on the New York Stock Exchange.

The list of deemed investment options and corresponding information is available
on the website created specifically for Participants at:
www.ebsnq.com/proassurance

                      TWELVE (12) PRINCIPAL INVESTORS FUNDS

  Additional investment information is available at: www.ebsnq.com/proassurance

Executive Benefit Services - 4140 ParkLake Avenue, Suite 500 - 800.999.4031 -
FAX 919.719.2015 - WWW.EBSNQ.COMAGREEMENT & PLAN OF MERGER AND REORGANIZATION

 

Exhibit 10.1

 

 

AGREEMENT AND PLAN OF MERGER AND REORGANIZATION

among

HENRY BIRKS & SONS INC.,

BIRKS MERGER CORPORATION

and

MAYOR’S JEWELERS, INC.

Dated as of April 18, 2005

 

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE I
	 	 	 	 
	 
	 	 	 	 
	THE MERGER
	 	 	 	 
	 
	 	 	 	 
	SECTION 1.01 The Merger
	 	 	2	 
	SECTION 1.02 Effective Time; Closing
	 	 	2	 
	SECTION 1.03 Effect of the Merger
	 	 	2	 
	SECTION 1.04 Certificate of Incorporation; By-laws
	 	 	2	 
	SECTION 1.05 Directors and Officers
	 	 	3	 
	 
	 	 	 	 
	ARTICLE II
	 	 	 	 
	 
	 	 	 	 
	CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES
	 	 	 	 
	 
	 	 	 	 
	SECTION 2.01 Conversion of Securities
	 	 	3	 
	SECTION 2.02 Exchange of Certificates
	 	 	3	 
	SECTION 2.03 Stock Transfer Books
	 	 	6	 
	SECTION 2.04 Company Stock Options
	 	 	6	 
	SECTION 2.05 Restricted Stock
	 	 	8	 
	SECTION 2.06 Company Warrants
	 	 	8	 
	SECTION 2.07 No Appraisal Rights
	 	 	9	 
	SECTION 2.08 Affiliates
	 	 	9	 
	 
	 	 	 	 
	ARTICLE III
	 	 	 	 
	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	 	 	 	 
	 
	 	 	 	 
	SECTION 3.01 Authority Relative to this Agreement
	 	 	9	 
	SECTION 3.02 No Conflict; Required Filings and Consents
	 	 	9	 
	SECTION 3.03 Board Approval; Vote Required
	 	 	10	 
	SECTION 3.04 [Reserved]
	 	 	11	 
	SECTION 3.05 Opinion of Financial Advisor
	 	 	11	 
	SECTION 3.06 Brokers
	 	 	11	 
	 
	 	 	 	 
	ARTICLE IV
	 	 	 	 
	 
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
	 	 	 	 
	 
	 	 	 	 
	SECTION 4.01 Corporate Organization
	 	 	11	 
	SECTION 4.02 Certificate of Amalgamation and By-laws
	 	 	12	 
	SECTION 4.03 Capitalization
	 	 	12	 
	SECTION 4.04 Authority Relative to this Agreement
	 	 	13	 
	SECTION 4.05 No Conflict; Required Filings and Consents
	 	 	14	 
	SECTION 4.06 Permits; Compliance
	 	 	14	 
	SECTION 4.07 SEC Filings
	 	 	15	 
	SECTION 4.08 Financial Statement; Undisclosed Liabilities
	 	 	15	 

i

 

	 	 	 	 	 
	SECTION 4.09 Absence of Certain Changes or Events
	 	 	15	 
	SECTION 4.10 Internal Controls
	 	 	16	 
	SECTION 4.11 Absence of Litigation
	 	 	16	 
	SECTION 4.12 Employee Benefit Plans
	 	 	16	 
	SECTION 4.13 Labor and Employment Matters
	 	 	17	 
	SECTION 4.14 Real Property; Title to Assets
	 	 	18	 
	SECTION 4.15 Intellectual Property
	 	 	19	 
	SECTION 4.16 Taxes
	 	 	19	 
	SECTION 4.17 Environmental Matters
	 	 	20	 
	SECTION 4.18 Material Contracts
	 	 	20	 
	SECTION 4.19 Insurance
	 	 	21	 
	SECTION 4.20 Customers and Suppliers
	 	 	22	 
	SECTION 4.21 Certain Business Practices
	 	 	22	 
	SECTION 4.22 Interested Party Transactions
	 	 	22	 
	SECTION 4.23 No Vote Required
	 	 	22	 
	SECTION 4.24 Accounts Receivable
	 	 	22	 
	SECTION 4.25 Inventories
	 	 	22	 
	SECTION 4.26 Operations of Merger Sub
	 	 	23	 
	SECTION 4.27 Brokers
	 	 	23	 
	 
	 	 	 	 
	ARTICLE 
	 	 	 	 
	 
	 	 	 	 
	CONDUCT OF BUSINESS PENDING THE MERGER
	 	 	 	 
	 
	 	 	 	 
	SECTION 5.01 Conduct of Business by the Company Pending the Merger
	 	 	23	 
	SECTION 5.02 Conduct of Business by Parent Pending the Merger
	 	 	23	 
	 
	 	 	 	 
	ARTICLE VI
	 	 	 	 
	 
	 	 	 	 
	ADDITIONAL AGREEMENTS
	 	 	 	 
	 
	 	 	 	 
	SECTION 6.01 Registration Statement; Proxy Statement
	 	 	26	 
	SECTION 6.02 Company Stockholders’ Meeting
	 	 	27	 
	SECTION 6.03 Access to Information; Confidentiality
	 	 	28	 
	SECTION 6.04 Directors’ and Officers’ Indemnification and Insurance
	 	 	28	 
	SECTION 6.05 Notification of Certain Matters
	 	 	29	 
	SECTION 6.06 Company Affiliates
	 	 	29	 
	SECTION 6.07 Further Action; Reasonable Efforts
	 	 	29	 
	SECTION 6.08 Plan of Reorganization
	 	 	30	 
	SECTION 6.09 Obligations of Merger Sub
	 	 	30	 
	SECTION 6.10 Consents of Accountants
	 	 	30	 
	SECTION 6.11 AMEX Listing
	 	 	30	 
	SECTION 6.12 Public Announcements
	 	 	31	 
	SECTION 6.13 Board of Directors of Parent
	 	 	31	 
	SECTION 6.14 Company Stock Held by Parent
	 	 	31	 

ii

 

	 	 	 	 	 
	ARTICLE VII
	 	 	 	 
	 
	 	 	 	 
	CONDITIONS TO THE MERGER
	 	 	 	 
	SECTION 7.01 Conditions to the Obligations of Each Party
	 	 	31	 
	SECTION 7.02 Conditions to the Obligations of Parent and Merger Sub
	 	 	32	 
	SECTION 7.03 Conditions to the Obligations of the Company
	 	 	32	 
	 
	 	 	 	 
	ARTICLE VIII
	 	 	 	 
	 
	 	 	 	 
	TERMINATION, AMENDMENT AND WAIVER
	 	 	 	 
	 
	 	 	 	 
	SECTION 8.01 Termination
	 	 	34	 
	SECTION 8.02 Effect of Termination
	 	 	36	 
	SECTION 8.03 Fees and Expenses
	 	 	36	 
	SECTION 8.04 Amendment
	 	 	36	 
	SECTION 8.05 Waiver
	 	 	36	 
	 
	 	 	 	 
	ARTICLE IX
	 	 	 	 
	 
	 	 	 	 
	GENERAL PROVISIONS
	 	 	 	 
	 
	 	 	 	 
	SECTION 9.01 Non-Survival of Representations, Warranties and Agreements
	 	 	37	 
	SECTION 9.02 Notices
	 	 	37	 
	SECTION 9.03 Certain Definitions
	 	 	38	 
	SECTION 9.04 Severability
	 	 	42	 
	SECTION 9.05 Entire Agreement; Assignment
	 	 	43	 
	SECTION 9.06 Parties in Interest
	 	 	43	 
	SECTION 9.07 Specific Performance
	 	 	43	 
	SECTION 9.08 Governing Law
	 	 	43	 
	SECTION 9.09 Waiver of Jury Trial
	 	 	43	 
	SECTION 9.10 Headings
	 	 	43	 
	SECTION 9.11 Counterparts
	 	 	44	 
	SECTION 9.12 Special Committee
	 	 	44	 

iii

 

     AGREEMENT AND PLAN OF MERGER AND REORGANIZATION, dated as of April 18, 2005 (this
“Agreement”), among Henry Birks & Sons Inc., a Canadian corporation (“Parent”),
Birks Merger Corporation, a Delaware corporation and a wholly owned subsidiary of Parent
(“Merger Sub”), and Mayor’s Jewelers, Inc., a Delaware corporation (the “Company”).

     WHEREAS, upon the terms and subject to the conditions of this Agreement and in accordance with
the General Corporation Law of the State of Delaware (the “DGCL”), Parent and the Company
will enter into a business combination transaction pursuant to which Merger Sub will merge with and
into the Company (the “Merger”);

     WHEREAS, the Board of Directors of the Company (the “Company Board”) has established a
special committee composed of independent members of the Company Board (the “Special
Committee”) to review and evaluate the terms and conditions, and determine the advisability, of
a possible business combination with Parent;

     WHEREAS, the Special Committee has negotiated the terms and conditions of this Agreement on
behalf of the Company and has (i) determined that the Merger is consistent with and in furtherance
of the long-term business strategy of the Company and advisable, fair to, and in the best interests
of the stockholders of the Company (other than Parent and its affiliates and associates) and (ii)
recommended the approval and adoption of this Agreement by the Company Board;

     WHEREAS, the Company Board has, based upon the recommendation of the Special Committee, (i)
determined that the Merger is consistent with and in furtherance of the long-term business strategy
of the Company and advisable, fair to, and in the best interests of the stockholders of the Company
(other than Parent and its affiliates and associates), (ii) approved and adopted this Agreement and
declared its advisability and approved the Merger and the other transactions contemplated by this
Agreement and (iii) recommended the approval and adoption of this Agreement by the stockholders of
the Company;

     WHEREAS, the Board of Directors of Parent (the “Parent Board”) has determined that the
Merger is consistent with and in furtherance of the long-term business strategy of Parent and fair
to, and in the best interests of, Parent and its stockholders and has approved and adopted this
Agreement, the Merger and the other transactions contemplated by this Agreement; and

     WHEREAS, for federal income tax purposes, the Merger is intended to qualify as a
reorganization under the provisions of Section 368(a) of the United States Internal Revenue Code of
1986, as amended (the “Code”);

     NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements
herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company
hereby agree as follows:

 

 

ARTICLE I

THE MERGER

     SECTION 1.01 The Merger. Upon the terms of this Agreement and subject to the
conditions set forth in Article VII, and in accordance with the DGCL, at the Effective Time (as
defined in Section 1.02), Merger Sub shall be merged with and into the Company. As a result of the
Merger, the separate corporate existence of Merger Sub shall cease and the Company shall continue
as the surviving corporation of the Merger (the “Surviving Corporation”).

     SECTION 1.02 Effective Time; Closing. As promptly as practicable after the
satisfaction or, if permissible, waiver of the conditions set forth in Article VII (but in no event
earlier than August 21, 2005), the parties hereto shall cause the Merger to be consummated by
filing a certificate of merger (the “Certificate of Merger”) with the Secretary of State of
the State of Delaware, in such form as is required by, and executed in accordance with, the
relevant provisions of the DGCL (the date and time of such filing of the Certificate of Merger (or
such later time as may be agreed by each of the parties hereto and specified in the Certificate of
Merger) being the “Effective Time”). Immediately prior to such filing of the Certificate
of Merger, a closing (the “Closing”) shall be held at the offices of Shearman & Sterling
LLP, 599 Lexington Avenue, New York, New York 10022, or such other place as the parties shall
agree, for the purpose of confirming the satisfaction or waiver, as the case may be, of the
conditions set forth in Article VII.

     SECTION 1.03 Effect of the Merger. At the Effective Time, the effect of the Merger
shall be as provided in the applicable provisions of the DGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time, all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving Corporation, and
all debts, liabilities, obligations, restrictions, disabilities and duties of each of the Company
and Merger Sub shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Corporation.

     SECTION 1.04 Certificate of Incorporation; By-laws. (a) At the Effective Time the
Certificate of Incorporation of the Company shall be amended and restated to be the same as the
Certificate of Incorporation of Merger Sub, as in effect immediately prior to the Effective Time
until thereafter amended as provided by law and such Certificate of Incorporation;
provided, however, that, at the Effective Time, Article I of the Certificate of
Incorporation of the Surviving Corporation shall read as follows: “The name of the corporation is
Mayor’s Jewelers, Inc.”

     (b) Unless otherwise determined by Parent prior to the Effective Time, and subject to Section
6.04(a), at the Effective Time, the By-laws of the Company shall be amended and restated to be the
same as the By-laws of Merger Sub, as in effect immediately prior to the Effective Time until
thereafter amended as provided by law, the Certificate of Incorporation of the Surviving
Corporation and such By-laws.

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     SECTION 1.05 Directors and Officers. The directors of Merger Sub immediately prior to
the Effective Time shall be the initial directors of the Surviving Corporation, each to hold office
in accordance with the Certificate of Incorporation and By-laws of the Surviving Corporation, and
the officers of the Company immediately prior to the Effective Time shall be the initial officers
of the Surviving Corporation, in each case until their respective successors are duly elected or
appointed and qualified or until their earlier death, resignation or approval.

ARTICLE II

CONVERSION OF SECURITIES; EXCHANGE OF CERTIFICATES

     SECTION 2.01 Conversion of Securities. At the Effective Time, by virtue of the Merger
and without any action on the part of Merger Sub, the Company or the holders of any of the
following securities:

     (a) each share of common stock, par value $0.0001 per share (“Company Common
Stock”), of the Company issued and outstanding immediately prior to the Effective Time,
excluding any shares of Company Common Stock (i) held directly by Parent and (ii) to be
canceled pursuant to Section 2.01(b), being hereinafter collectively referred to as the
“Shares”, shall be canceled and shall be converted automatically, subject to Section
2.02, into the right to receive 0.08695 (the “Exchange Ratio”) Class A Voting Shares
(“Parent Common Stock”) of Parent (the “Merger Consideration”), payable upon
surrender, in the manner provided in Section 2.02, of the certificate that formerly
evidenced such Share;

     (b) each share of Company Common Stock held in the treasury of the Company and each
share of Company Common Stock held by any direct or indirect subsidiary of the Company
immediately prior to the Effective Time shall be canceled without any conversion thereof and
no payment or distribution shall be made with respect thereto; and

     (c) each share of common stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall be canceled and shall be converted
automatically into the right to receive one share of Company Common Stock, and no payment or
distribution shall be made with respect thereto.

     SECTION 2.02 Exchange of Certificates. (a) Exchange Agent. Parent shall
deposit, or shall cause to be deposited, with SunTrust Bank or such other bank or trust company
that may be designated by Parent and is reasonably satisfactory to the Company (the “Exchange
Agent”), for the benefit of the holders of Shares, for exchange in accordance with this Article
II through the Exchange Agent, certificates representing the shares of Parent Common Stock issuable
pursuant to Section 2.01 as of the Effective Time, and cash, from time to time as required to make
payments in lieu of any fractional shares pursuant to Section 2.02(e) (such cash and certificates
for shares of Parent Common Stock, together with any dividends or distributions with respect
thereto, being hereinafter referred to as the “Exchange Fund”). The Exchange Agent shall,
pursuant to irrevocable instructions, deliver the shares of Parent Common Stock

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contemplated to be issued pursuant to Section 2.01 out of the Exchange Fund. Except as
contemplated by Section 2.02(g) hereof, the Exchange Fund shall not be used for any other purpose.

     (b) Exchange Procedures. As promptly as practicable after the Effective Time, (but in
no event later than five (5) business days after the Effective Time), Parent shall cause the
Exchange Agent to mail to each person who was, at the Effective Time, a holder of record of Shares
entitled to receive the Merger Consideration pursuant to Section 2.01(a): (i) a letter of
transmittal (which shall be in customary form and shall specify that delivery shall be effected,
and risk of loss and title to the certificates evidencing such Shares (the “Certificates”)
shall pass, only upon proper delivery of the Certificates to the Exchange Agent) and (ii)
instructions for use in effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Exchange Agent of a Certificate for cancellation, together with
such letter of transmittal, duly completed and validly executed in accordance with the instructions
thereto, and such other documents as may be required pursuant to such instructions, the holder of
such Certificate shall be entitled to receive in exchange therefor a certificate representing that
number of whole shares of Parent Common Stock which such holder has the right to receive in respect
of the Shares formerly represented by such Certificate (after taking into account all Shares then
held by such holder), cash in lieu of any fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 2.02(e) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.02(c), and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Shares that is not registered
in the transfer records of the Company, a certificate representing the proper number of shares of
Parent Common Stock, cash in lieu of any fractional shares of Parent Common Stock to which such
holder is entitled pursuant to Section 2.02(e) and any dividends or other distributions to which
such holder is entitled pursuant to Section 2.02(c) may be issued to a transferee if the
Certificate representing such Shares is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and by evidence that any applicable stock
transfer taxes have been paid. Until surrendered as contemplated by this Section 2.02, each
Certificate shall be deemed at all times after the Effective Time to represent only the right to
receive upon such surrender the certificate representing shares of Parent Common Stock, cash in
lieu of any fractional shares of Parent Common Stock to which such holder is entitled pursuant to
Section 2.02(e) and any dividends or other distributions to which such holder is entitled pursuant
to Section 2.02(c).

     (c) Distributions with Respect to Unexchanged Shares of Parent Common Stock. No
dividends or other distributions declared or made after the Effective Time with respect to the
Parent Common Stock with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Parent Common Stock represented thereby,
and no cash payment in lieu of any fractional shares shall be paid to any such holder pursuant to
Section 2.02(e), until the holder of such Certificate shall surrender such Certificate. Subject to
the effect of escheat, tax or other applicable Laws, following surrender of any such Certificate,
there shall be paid to the holder of the certificates representing whole shares of Parent Common
Stock issued in exchange therefor, without interest, (i) promptly, the amount of any cash payable
with respect to a fractional share of Parent Common Stock to which such holder is entitled pursuant
to Section 2.02(e) and the amount of dividends or other distributions with a record date after the
Effective Time and theretofore paid with respect to such whole shares

4

 

of Parent Common Stock, and (ii) at the appropriate payment date, the amount of dividends or
other distributions, with a record date after the Effective Time but prior to surrender and a
payment date occurring after surrender, payable with respect to such whole shares of Parent Common
Stock.

     (d) No Further Rights in Shares. All shares of Parent Common Stock issued upon
conversion of the Shares in accordance with the terms hereof (including any cash paid pursuant to
Section 2.02(c) or (e)) shall be deemed to have been issued in full satisfaction of all rights
pertaining to such Shares.

     (e) No Fractional Shares. No certificates or scrip representing fractional shares ofParent Common Stock shall be issued upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner thereof to vote or to any other rights of a
shareholder of Parent. Each holder of a fractional share interest shall be paid an amount in cash
(without interest and subject to the amount of any withholding taxes as contemplated in Section
2.02(i)) equal to the product obtained by multiplying (i) such fractional share interest held,
directly or indirectly, by such holder (after taking into account all fractional share interests
then held, directly or indirectly, by such holder) by (ii) the average closing price of a share of
Parent Common Stock as reported by the American Stock Exchange (the “AMEX”) in the twenty
(20) consecutive trading days beginning on (and including) the trading day immediately following
the date of the Effective Time. As promptly as practicable after the determination of the amount
of cash, if any, to be paid to holders of fractional share interests, the Exchange Agent shall so
notify Parent, and Parent shall deposit such amount with the Exchange Agent and shall cause the
Exchange Agent to forward payments to such holders of fractional share interests subject to and in
accordance with the terms of Sections 2.02(b) and (c).

     (f) Adjustments to Exchange Ratio. The Exchange Ratio shall be adjusted to reflect
appropriately the effect of any stock split, reverse stock split, stock dividend (including any
dividend or distribution of securities convertible into Parent Common Stock or Company Common
Stock), extraordinary cash dividends, reorganization, recapitalization, reclassification,
combination, exchange of shares or other like change with respect to Parent Common Stock or Company
Common Stock occurring on or after the date hereof and prior to the Effective Time.

     (g) Termination of Exchange Fund. Any portion of the Exchange Fund that remains
undistributed to the holders of Shares for one year after the Effective Time shall be delivered to
Parent, upon demand, and any holders of Shares who have not theretofore complied with this Article
II shall thereafter look only to Parent for the shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which they are entitled pursuant to Section 2.02(e) and
any dividends or other distributions with respect to the Parent Common Stock to which they are
entitled pursuant to Section 2.02(c). Any portion of the Exchange Fund remaining unclaimed by
holders of Shares as of a date which is immediately prior to such time as such amounts would
otherwise escheat to or become property of any government entity shall, to the extent permitted by
applicable Law, become the property of Parent free and clear of any claims or interest of any
person previously entitled thereto.

     (h) No Liability. None of the Exchange Agent, Parent or the Surviving Corporation
shall be liable to any holder of Shares for any such Shares (or dividends or

5

 

distributions with respect thereto), or cash delivered to a public official pursuant to any
abandoned property, escheat or similar Law.

     (i) Withholding Rights. Each of the Exchange Agent, the Surviving Corporation and
Parent shall be entitled to deduct and withhold from the consideration otherwise payable pursuant
to this Agreement to any holder of Shares such amounts as it is required to deduct and withhold
with respect to the making of such payment under the Code, the Income Tax Act (Canada) (the
“ITA”), or any provision of state, provincial, local or other, United States or foreign,
tax Law. To the extent that amounts are so deducted or withheld by the Exchange Agent, the
Surviving Corporation or Parent, as the case may be, such deducted or withheld amounts shall be
treated for all purposes of this Agreement as having been paid to the holder of Shares in respect
of which such deduction and withholding was made by the Exchange Agent, the Surviving Corporation
or Parent, as the case may be.

     (j) Lost Certificates. If any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such Certificate to be lost,
stolen or destroyed and, if required by the Surviving Corporation, the posting by such person of a
bond, in such reasonable amount as the Surviving Corporation may direct, as indemnity against any
claim that may be made against it with respect to such Certificate, the Exchange Agent will issue
in exchange for such lost, stolen or destroyed Certificate the shares of Parent Common Stock, any
cash in lieu of fractional shares of Parent Common Stock to which the holders thereof are entitled
pursuant to Section 2.02(e) and any dividends or other distributions to which the holders thereof
are entitled pursuant to Section 2.02(c).

     SECTION 2.03 Stock Transfer Books. At the Effective Time, the stock transfer books of
the Company shall be closed and there shall be no further registration of transfers of Shares
thereafter on the records of the Company. From and after the Effective Time, the holders of
Certificates representing Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares, except as otherwise provided in this Agreement or by
Law. On or after the Effective Time, any Certificates presented to the Exchange Agent or Parent
for any reason shall be converted into shares of Parent Common Stock, any cash in lieu of
fractional shares of Parent Common Stock to which the holders thereof are entitled pursuant to
Section 2.02(e) and any dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.02(c).

     SECTION 2.04 Company Stock Options. (a) All options to purchase shares of Company
Common Stock (the “Company Stock Options”) outstanding, whether or not exercisable and
whether or not vested, at the Effective Time, issued under the Company’s 1991 Stock Option Plan,
the Company’s 2004 Long-Term Incentive Plan and any other plan or agreement pursuant to which
Company Stock Options have been issued, in each case as such may have been amended, supplemented or
modified (collectively, the “Company Stock Option Plans”), shall remain outstanding
following the Effective Time. At the Effective Time, the Company Stock Options shall, by virtue of
the Merger and without any further action on the part of the Company or the holder thereof, be
assumed by Parent in such manner that Parent (i) is a corporation “assuming a stock option in a
transaction to which Section 424(a) applies” within the meaning of Section 424 of the Code and the
regulations thereunder or (ii) to the extent that Section 424 of the Code does not apply to any
such Company Stock Options, would be such a

6

 

corporation were Section 424 of the Code applicable to such Company Stock Options. From and
after the Effective Time, all references to the Company in the Company Stock Option Plans and the
applicable stock option agreements issued thereunder shall be deemed to refer to Parent, which
shall have assumed the Company Stock Option Plans as of the Effective Time by virtue of this
Agreement and without any further action. Each Company Stock Option assumed by Parent (each, a
“Substitute Option”) shall be exercisable upon the same terms and conditions as under the
applicable Company Stock Option Plan and the applicable option agreement issued thereunder, except
that (A) each such Substitute Option shall be exercisable for, and represent the right to acquire,
that whole number of shares of Parent Common Stock (rounded downward to the nearest whole share)
equal to the number of shares of Company Common Stock subject to such Company Stock Option
multiplied by the Exchange Ratio; and (B) the option price per share of Parent Common Stock shall
be an amount equal to the option price per share of Company Common Stock subject to such Company
Stock Option in effect immediately prior to the Effective Time divided by the Exchange Ratio (the
option price per share, as so determined, being rounded upward to the nearest full cent). Such
Substitute Option shall otherwise be subject to the same terms and conditions as such Company Stock
Option. For illustrative purposes only, if, immediately prior to the Effective Time, a holder owns
100 Company Stock Options, each of which represents the right to acquire one (1) share of Company
Common Stock at an exercise price of $0.50 per share of Company Common Stock, at the Effective Time
such holder’s Company Stock Options shall be converted into eight (8) Substitute Options, each of
which will represent the right to acquire one (1) share of Parent Common Stock at an exercise price
of $5.75 per share of Parent Common Stock.

     (b) As soon as practicable after the Effective Time, Parent shall deliver, or cause to be
delivered, to each holder of a Substitute Option an appropriate notice setting forth such holder’s
rights pursuant thereto and such Substitute Option shall continue in effect on the same terms and
conditions (including any antidilution provisions, and subject to the adjustments required by this
Section 2.04 after giving effect to the Merger). Parent shall comply with the terms of all such
Substitute Options and ensure, to the extent required by, and subject to the provisions of, the
Company Stock Option Plans, that Substitute Options that qualified as incentive stock options under
Section 422 of the Code prior to the Effective Time continue to qualify as incentive stock options
after the Effective Time. Parent shall take all corporate action necessary to reserve for issuance
a sufficient number of shares of Parent Common Stock for delivery upon exercise of Substitute
Options pursuant to the terms set forth in this Section 2.04. As soon as practicable after the
Effective Time, the shares of Parent Common Stock subject to Substitute Options will be covered by
an effective registration statement on Form S-8 (or any successor form) or another appropriate
form, and Parent shall use its reasonable best efforts to maintain the effectiveness of such
registration statement or registration statements for so long as Substitute Options remain
outstanding. In addition, Parent shall use its reasonable best efforts to cause the shares of
Parent Common Stock subject to Substitute Options to be listed on the AMEX and such other exchanges
as Parent shall determine.

     (c) On or after the date of this Agreement and prior to the Effective Time, each of Parent and
the Company shall take all necessary action such that, with respect to each member of the Company
Board and each employee of the Company that is subject to Section 16 of the Exchange Act (as
defined in Section 3.02(b)) the acquisition by such person of Parent Common Stock or Substitute
Options in the Merger and the disposition by any such person of Company

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Common Stock or Company Stock Options pursuant to the transactions contemplated by this
Agreement shall be exempt from the short-swing profit liability rules of Section 16(b) of the
Exchange Act pursuant to Rule 16b-3 promulgated thereunder.

     SECTION 2.05 Restricted Stock. At the Effective Time, any shares of Company Common
Stock outstanding immediately prior to the Effective Time that are unvested or are subject to a
repurchase option, risk of forfeiture or other condition under the Company Stock Option Plans or
any applicable restricted stock purchase agreement or other agreement with the Company (a
“Company Restricted Stock Award”) shall be exchanged for shares of Parent Common Stock
pursuant to Section 2.01 that shall be unvested and subject to the same repurchase option, risk of
forfeiture or other condition to which the applicable Company Restricted Stock Award is subject,
and the certificates representing such shares of Parent Common Stock may accordingly be marked with
appropriate legends. The Company shall take all actions that may be necessary to ensure that, from
and after the Effective Time, Parent or the Surviving Corporation is entitled to exercise any such
repurchase options or other rights set forth in any such restricted stock purchase or other
agreement.

     SECTION 2.06 Company Warrants. (a) All warrants to purchase shares of Company Common
Stock, excluding any warrants to purchase shares of Company Common Stock held directly by Parent
(the “Company Warrants”) outstanding at the Effective Time shall remain outstanding
following the Effective Time. At the Effective Time, the Company Warrants shall, by virtue of the
Merger and without any further action on the part of the Company or the holder thereof, be assumed
by Parent. From and after the Effective Time, all references to the Company in the applicable
warrant agreements pursuant to which such Company Warrants were issued (the “Company Warrant
Agreements”) shall be deemed to refer to Parent, which shall have assumed the Company Warrants
and Company Warrant Agreements as of the Effective Time by virtue of this Agreement and without any
further action. Each Company Warrant assumed by Parent (each, a “Substitute Warrant”)
shall be exercisable upon the same terms and conditions as under the applicable Company Warrant
Agreements, except that (A) each such Substitute Warrant shall be exercisable for, and represent
the right to acquire, that whole number of shares of Parent Common Stock (rounded downward to the
nearest whole share) equal to the number of shares of Company Common Stock subject to such Company
Warrant multiplied by the Exchange Ratio; and (B) the exercise price per share of Parent Common
Stock shall be an amount equal to the exercise price per share of Company Common Stock subject to
such Company Warrant in effect immediately prior to the Effective Time divided by the Exchange
Ratio (the exercise price per share, as so determined, being rounded upward to the nearest full
cent). Such Substitute Warrants shall otherwise be subject to the same terms and conditions as
such Company Warrants. For illustrative purposes only, if, immediately prior to the Effective Time,
a holder owns 100 Company Warrants, each of which represents the right to acquire one (1) share of
Company Common Stock at an exercise price of $0.50 per share of Company Warrant, at the Effective
Time such holder’s Company Warrants shall be converted into eight (8) Substitute Warrants, each of
which will represent the right to acquire one (1) share of Parent Common Stock at an exercise price
of $5.75 per share of Parent Common Stock.

     (b) As soon as practicable after the Effective Time, Parent shall deliver, or cause to be
delivered, to each holder of a Substitute Warrant an appropriate notice setting forth such holder’s
rights pursuant thereto and such Substitute Warrant shall continue in effect on the same

8

 

terms and conditions (including any antidilution provisions, and subject to the adjustments
required by this Section 2.06 after giving effect to the Merger). Parent shall comply with the
terms of all such Substitute Warrants. Parent shall take all corporate action necessary to reserve
for issuance a sufficient number of shares of Parent Common Stock for delivery upon exercise of
Substitute Warrants pursuant to the terms set forth in this Section 2.06. Parent shall use its
reasonable best efforts to cause the shares of Parent Common Stock subject to Substitute Warrants
to be listed on the AMEX and such other exchanges as Parent shall determine.

     SECTION 2.07 No Appraisal Rights. In accordance with Section 262 of the DGCL, no
appraisal rights shall be available to holders of shares of Company Common Stock in connection with
the Merger.

     SECTION 2.08 Affiliates. Notwithstanding anything to the contrary herein, no Merger
Consideration shall be delivered to a Company Affiliate (as defined in Section 6.06) until such
person has executed and delivered to Parent an executed copy of the affiliate letter contemplated
in Section 6.06 hereof.

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

     As an inducement to Parent and Merger Sub to enter into this Agreement, the Company hereby
represents and warrants to Parent and Merger Sub that:

     SECTION 3.01 Authority Relative to this Agreement. The Company has all necessary
corporate power and authority to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated by this Agreement (collectively, the
“Transactions”). The execution and delivery of this Agreement by the Company and the
consummation by the Company of the Transactions have been duly and validly authorized by all
necessary corporate action, and no other corporate proceedings on the part of the Company are
necessary to authorize this Agreement or to consummate the Transactions (other than the Required
Company Vote and the Disinterested Stockholder Vote, each as defined herein, and the filing and
recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly
and validly executed and delivered by the Company and, assuming the due authorization, execution
and delivery by Parent and Merger Sub, constitutes a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency (including, without limitation, all Laws relating to fraudulent
transfers), reorganization, moratorium or similar Laws affecting creditors’ rights generally and
subject to the effect of general principles of equity (regardless of whether considered in a
proceeding at law or in equity). Pursuant to Section 203(b)(2) of the DGCL, in Article 7, Section
7 of the Company’s By-laws, the Company has validly elected not to be governed by Section 203 of
the DGCL. To the knowledge of the Company, no other state takeover statute is applicable to the
Merger or the other transactions contemplated by this Agreement.

     SECTION 3.02 No Conflict; Required Filings and Consents. (a) Except those set forth
in the Company Disclosure Schedule (the “Company Disclosure Schedule”),

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which has been prepared by the Company and delivered by the Company to Parent and Merger Sub
prior to the execution and delivery of this Agreement, the execution and delivery of this Agreement
by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws or any equivalent organizational
documents of the Company or any of its subsidiaries, (ii) assuming that all consents, approvals,
authorizations and other actions described in Section 3.02(b) have been obtained and all filings
and obligations described in Section 3.02(b) have been made, conflict with or violate any United
States, non-Canadian or non-United States or Canadian statute, law, ordinance, regulation, rule,
code, executive order, injunction, judgment, decree or other order (“Law”) applicable to
the Company or any of its subsidiaries or by which any property or asset of the Company or any of
its subsidiaries is bound or affected, or (iii) result in any breach of or constitute a default (or
an event which, with notice or lapse of time or both, would become a default) under, or give to
others any right of termination, amendment, acceleration or cancellation of, or result in the
creation of a lien or other encumbrance on any property or asset of the Company or any of its
subsidiaries pursuant to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or any property or asset of either of
them is bound or affected, except, with respect to clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would not, individually or in the
aggregate, prevent or materially delay consummation of any of the Transactions or otherwise prevent
or materially delay the Company from performing its obligations under this Agreement and would not,
individually or in the aggregate, have a Company Material Adverse Effect (as defined in Section
9.03(a)).

     (b) The execution and delivery of this Agreement by the Company do not, and the performance of
this Agreement by the Company will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any United States federal, state, county or local or non-United
States government, governmental, regulatory or administrative authority, agency, instrumentality or
commission or any court, tribunal, or judicial or arbitral body (a “Governmental
Authority”), except (i) for applicable requirements, if any, of the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder (the “Exchange
Act”), state and provincial securities or “blue sky” Laws (“Blue Sky Laws”) and, filing
and recordation of appropriate merger documents as required by the DGCL, and (ii) where the failure
to obtain such consents, approvals, authorizations or permits, or to make such filings or
notifications, would not, individually or in the aggregate, prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially delay the Company from
performing its obligations under this Agreement, and would not, individually or in the aggregate,
have a Company Material Adverse Effect.

     SECTION 3.03 Board Approval; Vote Required. (a) The Special Committee, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held and
not subsequently rescinded or modified in any way, has duly (i) determined that the Merger is
advisable, fair to, and in the best interests of the stockholders of the Company (other than
Parent and its affiliates and associates), and (ii) recommended the approval and adoption of this
Agreement by the Company Board.

10

 

     (b) The Company Board, by resolutions duly adopted by unanimous vote of those voting at a
meeting duly called and held and not subsequently rescinded or modified in any way, has duly (i)
determined that the Merger is advisable, fair to, and in the best interests of the stockholders of
the Company (other than Parent and its affiliates and associates), (ii) approved and adopted this
Agreement and declared its advisability and approved the Merger and the other transactions
contemplated by this Agreement, and (iii) recommended the approval and adoption of this Agreement
by the stockholders of the Company and directed that this Agreement be submitted for consideration
by the Company’s stockholders at the Company Stockholders’ Meeting (as defined in Section 6.01(a)).

     (c) Subject to Section 7.01(b), the only vote of the holders of any class or series of capital
stock of the Company necessary to approve this Agreement, the Merger and the other Transactions is
the Required Company Vote.

     SECTION 3.04 [Reserved]

     SECTION 3.05 Opinion of Financial Advisor. The Special Committee has received the
written opinion of Houlihan Lokey Howard & Zukin (the “HLHZ Fairness Opinion”), dated the
date of this Agreement, to the effect that, as of the date of this Agreement, the Exchange Ratio is
fair, from a financial point of view, to the Company’s stockholders (other than Parent and its
affiliates and associates), a copy of which opinion has heretofore been furnished to Parent prior
to the execution and delivery of this Agreement.

     SECTION 3.06 Brokers. No broker, finder or investment banker (other than Houlihan
Lokey Howard & Zukin) is entitled to any brokerage, finder’s or other fee or commission in
connection with the Transactions based upon arrangements made by or on behalf of the Company. The
Company has heretofore furnished to Parent a complete and correct copy of all agreements between
the Company and Houlihan Lokey Howard & Zukin pursuant to which such firm would be entitled to any
payment relating to the Transactions.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB

     As an inducement to the Company to enter into this Agreement, Parent and Merger Sub hereby,
jointly and severally, represent and warrant to the Company that:

     SECTION 4.01 Corporate Organization. (a) Each of Parent and each subsidiary of
Parent, excluding the Company and its subsidiaries (each a “Subsidiary” and collectively,
the “Subsidiaries”), is a corporation amalgamated or incorporated, as applicable, validly
existing and in good standing under the laws of the jurisdiction of its amalgamation or
incorporation, as applicable, and has the requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as it is now being conducted and is duly
qualified to do business in each jurisdiction where the character of its activities requires such
qualification, except where the failure to be so amalgamated or incorporated, as applicable,
existing or in good standing, to have such power and authority or to be so qualified would not,
individually or in the aggregate, prevent or materially delay consummation of any of the

11

 

Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing
their obligations under this Agreement and would not, individually or in the aggregate, have a
Parent Material Adverse Effect (as defined in Section 9.03(a)).

     (b) A true and complete list of all the Subsidiaries, together with the jurisdiction of
incorporation of each Subsidiary and the percentage of the outstanding capital stock of each
Subsidiary owned by Parent and each other Subsidiary, is set forth in Section 4.01(b) of the Parent
Disclosure Schedule (the “Parent Disclosure Schedule”), which has been prepared by Parent
and delivered by Parent to the Company prior to the execution and delivery of this Agreement.
Except as disclosed in Section 4.01(b) of the Parent Disclosure Schedule, Parent does not directly
or indirectly own any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for any equity or similar interest in, any corporation, partnership,
joint venture or other business association or entity.

     (c) Each Subsidiary that is material to the business, financial condition or results of
operations of Parent and the Subsidiaries taken as a whole is so identified in Section 4.01(c) of
the Parent Disclosure Schedule and is referred to herein as a “Material Subsidiary”.

     SECTION 4.02 Certificate of Amalgamation and By-laws. Parent has heretofore furnished
to the Company a complete and correct copy of the Articles of Amalgamation and the By-laws of
Parent and the Articles of Incorporation or Certificate of Amalgamation and By-laws of each
Material Subsidiary, each as amended to date. Such Articles of Amalgamation, Articles of
Incorporation or Certificate of Incorporation as applicable, and By-laws are in full force and
effect. Neither Parent nor any Material Subsidiary is in violation of any of the provisions of its
Articles of Amalgamation, Articles of Incorporation or Certificate of Incorporation as applicable,
or By-laws.

     SECTION 4.03 Capitalization. (a) The authorized capital stock of Parent consists of
(i) an unlimited number of shares of Parent Common Stock, (ii) an unlimited number of Class B
Multiple Voting Shares (“Parent Class B Shares”), (iii) 100,000 Class C Shares (“Parent
Class C Shares”), (iv) an unlimited number of non-voting common shares (“Parent Non-Voting
Shares”), and (v) 2,034,578 Series A preferred shares (“Parent Preferred Stock”). As
of the date of this Agreement, (i) 85,450 shares of Parent Common Stock are issued and outstanding,
all of which are validly issued, fully paid and non-assessable, (ii) nil shares of Parent Common
Stock are held in the treasury of Parent, (iii) nil shares of Parent Common Stock are held by
subsidiaries of Parent, (iv) 7,213,094 Parent Class B Shares are issued and outstanding, all of
which are validly issued, fully paid and non-assessable, (vi) nil Parent Class C Shares are issued
and outstanding, (vi) nil Parent Non-Voting Shares are issued and outstanding, and (vii) 1,022,350
shares of Parent Preferred Stock are issued and outstanding, all of which are validly issued, fully
paid and non-assessable. As of the date of this Agreement, no other shares of Parent Preferred
Stock are issued and outstanding. Except as set forth in this Section 4.03 and in Section 4.03(a)
of the Parent Disclosure Schedule and except for stock options granted pursuant to the stock option
plan of Parent (the “Parent Stock Option Plan”), there are no options, warrants or other
rights, agreements, arrangements or commitments of any character relating to the issued or unissued
capital stock of Parent or any Subsidiary or obligating Parent or any Subsidiary to issue or sell
any shares of capital stock of, or other equity interests in, Parent or any Subsidiary. Section
4.03(a) of the Parent Disclosure Schedule sets forth a correct and

12

 

complete list, as of the date hereof, of the holders of all stock options granted pursuant to
the Parent Stock Option Plan, the number of options held by each such holder and the exercise price
and the date of grant of each such option. All shares of Parent Common Stock subject to issuance
as aforesaid, upon issuance on the terms and conditions specified in the instruments pursuant to
which they are issuable, will be duly authorized, validly issued, fully paid and non-assessable.
Except as disclosed in Section 4.03(a) of the Parent Disclosure Schedule, there are no outstanding
contractual obligations of Parent or any Subsidiary to repurchase, redeem or otherwise acquire any
shares of Parent Common Stock or any capital stock of any Subsidiary. Except as disclosed in
Section 4.03(a) of the Parent Disclosure Schedule, there are no outstanding contractual obligations
of Parent to provide funds to, or make any investment (in the form of a loan, capital contribution
or otherwise) in, any Subsidiary or any other person.

     (b) Except as disclosed in Section 4.03(b) of the Parent Disclosure Schedule, as of the
Effective Time, (i) 1,623,644 shares of Parent Common Stock will be issued and outstanding, all of
which will be validly issued, fully paid and non-assessable, (ii) nil shares of Parent Common Stock
will be held in the treasury of Parent, (iii) nil shares of Parent Common Stock will be held by
subsidiaries of Parent, (iv) 7,717,970 Parent Class B Shares will be issued and outstanding, all of
which will be validly issued, fully paid and non-assessable, (v) nil Parent Class C Shares will be
issued and outstanding, (vi) nil Parent Non-Voting Shares will be issued and outstanding, and (vii)
nil shares of Parent Preferred Stock will be issued and outstanding.

     (c) The authorized capital stock of Merger Sub consists of 200 shares of common stock, par
value $0.01 per share, all of which are duly authorized, validly issued, fully paid and
non-assessable and free of any preemptive rights in respect thereof and all of which are owned by
Parent. Each outstanding share of capital stock of Merger Sub is duly authorized, validly issued,
fully paid and non-assessable and each such share is owned by Parent or Merger Sub free and clear
of all security interests, liens, claims, pledges, options, rights of first refusal, agreements,
limitations on Parent’s or Merger Sub’s voting rights, charges and other encumbrances of any nature
whatsoever.

     (d) The shares of Parent Common Stock to be issued pursuant to the Merger in accordance with
Section 2.01 (i) will be duly authorized, validly issued, fully paid and non-assessable and not
subject to preemptive rights created by statute, the Parent’s Articles of Amalgamation or By-laws
or any agreement to which the Parent is a party or is bound and (ii) will, when issued, be
registered under the Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the “Securities Act”) and the Exchange Act and registered or exempt from
registration under applicable Blue Sky Laws.

     SECTION 4.04 Authority Relative to this Agreement. Each of Parent and Merger Sub has
all necessary corporate power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the Transactions. The execution and delivery of this
Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the
Transactions have been duly and validly authorized by all necessary corporate action, and no other
corporate proceedings on the part of Parent or Merger Sub are necessary to authorize this Agreement
or to consummate the Transactions (other than, with respect to the Merger, the filing and
recordation of appropriate merger documents as required by the DGCL). This Agreement has been duly
and validly executed and delivered by

13

 

Parent and Merger Sub and, assuming due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each of Parent and Merger Sub, enforceable
against each of Parent and Merger Sub in accordance with its terms, subject to the effect of any
applicable bankruptcy, insolvency (including, without limitation, all Laws relating to fraudulent
transfers), reorganization, moratorium or similar Laws affecting creditors’ rights generally and
subject to the effect of general principles of equity (regardless of whether considered in a
proceeding at law or in equity).

     SECTION 4.05 No Conflict; Required Filings and Consents. (a) The execution and
delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement
by Parent and Merger Sub will not, (i) conflict with or violate the Articles of Amalgamation,
Articles of Incorporation or Certificate of Incorporation, as applicable, or By-laws of Parent or
any Subsidiary, (ii) assuming that all consents, approvals, authorizations and other actions
described in Section 4.05(b) have been obtained and all filings and obligations described in
Section 4.05(b) have been made, conflict with or violate any Law applicable to Parent or any
Subsidiary or by which any property or asset of either of them is bound or affected, or (iii)
result in any breach of, or constitute a default (or an event which, with notice or lapse of time
or both, would become a default) under, or give to others any rights of termination, amendment,
acceleration or cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent or any Subsidiary pursuant to, any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit, franchise or other instrument or obligation to which
Parent or any Subsidiary is a party or by which Parent or any Subsidiary or any property or asset
of either of them is bound or affected, except, with respect to clauses (ii) and (iii), for any
such conflicts, violations, breaches, defaults or other occurrences which would not, individually
or in the aggregate, prevent or materially delay consummation of any of the Transactions or
otherwise prevent or materially delay Parent and Merger Sub from performing their obligations under
this Agreement and would not, individually or in the aggregate, have a Parent Material Adverse
Effect.

     (b) The execution and delivery of this Agreement by Parent and Merger Sub do not, and the
performance of this Agreement by Parent and Merger Sub will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any Governmental Authority, except
(i) for applicable requirements of, or exemptions under, the Securities Act, Exchange Act, Blue Sky
Laws or Canadian securities laws and filing and recordation of appropriate merger documents as
required by the DGCL, and (ii) where the failure to obtain such consents, approvals, authorizations
or permits, or to make such filings or notifications, would not, individually or in the aggregate,
prevent or materially delay consummation of any of the Transactions or otherwise prevent Parent or
Merger Sub from performing, in all material respects, their obligations under this Agreement.

     SECTION 4.06 Permits; Compliance. Except as disclosed in Section 4.06 of the Parent
Disclosure Schedule, each of Parent and its Subsidiaries is in possession of all material
franchises, grants, authorizations, licenses, permits, easements, variances, exceptions, consents,
certificates, approvals and orders of any Governmental Authority necessary for Parent or any
Subsidiary to own, lease and operate its material properties or to carry on its business as it is
now being conducted (the “Parent Permits”). As of the date of this Agreement, no
suspension or cancellation of any of the Parent Permits is pending or, to the knowledge of Parent,

14

 

threatened. Neither Parent nor any Subsidiary is in conflict with, or in default, breach or
violation of, (a) any Law applicable to Parent or any Subsidiary or by which any material property
or asset of Parent or any Subsidiary is bound or affected, or (b) any material note, bond,
mortgage, indenture, contract, agreement, lease, license, franchise, Parent Permit or other
material instrument or obligation to which Parent or any Subsidiary is a party or by which Parent
or any Subsidiary or any property or asset of Parent or any Subsidiary is bound.

     SECTION 4.07 SEC Filings. Parent has filed all forms, schedules, reports and
documents required to be filed by it with the Securities and Exchange Commission (the
“SEC”) since July 31, 2002 (collectively, the “Parent SEC Reports”). The Parent
SEC Reports (i) were prepared in all material respects in accordance with either the requirements
of the Securities Act or the Exchange Act, as the case may be, and the rules and regulations
promulgated thereunder, and (ii) did not, at the time they were filed, or, if amended, as of the
date of such amendment, contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.

     SECTION 4.08 Financial Statement; Undisclosed Liabilities. (a) Schedule 4.08 of the
Parent Disclosure Schedule contains copies of (i) the consolidated audited balance sheets and
related consolidated audited annual statements of operations and deficit and cash flows of Parent
(as of and for the fiscal years ended March 29, 2003 and March 27, 2004) (the “Audited
Financial Statements”); and (ii) the consolidated unaudited balance sheet of Parent as of
December 25, 2004 and the related consolidated unaudited statements of operations and deficit and
cash flows for the 39-week period then ended (the “Unaudited Financial Statements”). The
Audited Financial Statements and the Unaudited Financial Statements are hereinafter referred to,
collectively, as the “Financial Statements.” Each of the balance sheets included in the
Financial Statements (including any related notes and schedules) fairly presents in all material
respects the consolidated financial position of Parent, as of the date thereof, and each of the
statements of operations and deficit and cash flows included in the Financial Statements (including
any related notes and schedules) fairly presents in all material respects the consolidated results
of operations and changes in cash flows, as the case may be, of Parent for the periods set forth
therein, in each case in accordance with GAAP (as defined in Section 4.10(a)), subject in the case
of the Unaudited Financial Statements, to normal recurring adjustments and the absence of
footnotes.

     (b) There are no liabilities or obligations of Parent or any Subsidiary of any kind
whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise, and there
is no existing condition, situation or set of circumstances which could reasonably be expected to
result in such a liability or obligation, other than: (i) liabilities fully reflected or provided
for in the most recent balance sheet included in the Financial Statements and (ii) liabilities or
obligations disclosed in the Parent Disclosure Schedule.

     SECTION 4.09 Absence of Certain Changes or Events. Since March 27, 2004, except as
set forth in Section 4.09 of the Parent Disclosure Schedule, or as expressly contemplated by this
Agreement, (a) Parent has conducted its business only in the ordinary course and in a manner
consistent with past practice, and (b) there has not been any Parent Material Adverse Effect and
(c) none of Parent or any Subsidiary has taken any action that, if

15

 

taken after the date of this Agreement, would constitute a breach of any of the covenants set
forth in Section 5.02.

     SECTION 4.10 Internal Controls. (a) Parent’s financial reporting is in accordance
with United States generally accepted accounting principles (“GAAP”). Parent and its
Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable
assurance that (i) transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of financial
statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is
permitted only in accordance with management’s general or specific authorization, and (iv) the
recorded accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences. Parent has made available to the
Company complete and correct copies of, all written descriptions of, and all policies, manuals and
other documents promulgating, such internal accounting controls.

     (b) Since March 27, 2004, neither Parent nor any Subsidiary nor, to Parent’s knowledge, any
director, officer, employee, auditor, accountant or representative of Parent or any Subsidiary, has
received or otherwise had or obtained knowledge of any complaint, allegation, assertion or claim,
whether written or oral, regarding the accounting or auditing practices, procedures, methodologies
or methods of Parent or any Subsidiary or their respective internal accounting controls, including
any complaint, allegation, assertion or claim that Parent or any Subsidiary has engaged in
questionable accounting or auditing practices.

     SECTION 4.11 Absence of Litigation. Except as set forth in Section 4.11 of the Parent
Disclosure Schedule, there is no litigation, suit, claim, action, proceeding or investigation (an
“Action”) pending or, to the knowledge of Parent, threatened against Parent or any
Subsidiary, or any property or asset of Parent or any Subsidiary, before any Governmental Authority
that (a) individually or in the aggregate, is reasonably likely to have a Parent Material Adverse
Effect or (b) seeks to materially delay or prevent the consummation of the Merger. Neither Parent
nor any Subsidiary nor any material property or asset of Parent or any Subsidiary is subject to any
continuing order of, consent decree, settlement agreement or other similar written agreement with,
or, to the knowledge of Parent, continuing investigation by, any Governmental Authority that would,
individually or in the aggregate, prevent or materially delay consummation of any of the
Transactions or otherwise prevent or materially delay Parent or Merger Sub from performing its
obligations under this Agreement or, individually or in the aggregate, is reasonably likely to have
a Parent Material Adverse Effect.

     SECTION 4.12 Employee Benefit Plans. (a) Section 4.12(a) of Parent Disclosure
Schedule lists all employee benefit plans and all bonus, stock option, stock purchase, restricted
stock, incentive, deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements, and all employment,
termination, severance or other contracts or agreements, whether legally enforceable or not, to
which Parent or any Subsidiary is a party, with respect to which Parent or any Subsidiary has any
obligation or which are maintained, contributed to or sponsored by Parent or any Subsidiary for the
benefit of any current or former employee, officer or director of Parent or any Subsidiary
(collectively, the “Plans”).

16

 

     (b) Each Plan is now and always has been operated in all material respects in accordance with
its terms and the requirements of all applicable Laws. Parent and the Subsidiaries have performed
all obligations required to be performed by them under, are not in any respect in default under or
in violation of, and have no knowledge of any default or violation by any party to, any Plan.
Except as otherwise described in the Parent Disclosure Schedule, no Action is pending or, to the
knowledge of Parent, threatened with respect to any Plan (other than claims for benefits in the
ordinary course).

     (c) All contributions, premiums or payments required to be made with respect to any Plan have
been made on or before their due dates. All such contributions have been fully deducted for income
tax purposes and no such deduction has been challenged or disallowed by any Governmental Authority.

     (d) Except as noted in Section 4.12(d) of the Parent Disclosure Schedule, neither the
execution and delivery of this Agreement nor the consummation of the Transactions will (either
alone or in conjunction with any other event, including termination of employment) result in, cause
the accelerated vesting or delivery of, or increase the amount or value of, any severance,
termination or other payment or benefit to any director, officer, employee or consultant of Parent
or any Subsidiary.

     SECTION 4.13 Labor and Employment Matters. (a) Except as set forth in Section
4.13(a) of Parent Disclosure Schedule, (i) there are no material controversies pending or, to the
knowledge of Parent, threatened between Parent or any Subsidiary and any of their respective
employees; (ii) neither Parent nor any Subsidiary is a party to any collective bargaining agreement
or other labor union contract applicable to persons employed by Parent or any Subsidiary, nor, to
the knowledge of Parent, are there any activities or proceedings of any labor union to organize any
such employees; and (iii) there are no unfair labor practice complaints pending against Parent or
any Subsidiary before any Governmental Authority.

     (b) Parent and the Subsidiaries are in material compliance with all applicable Laws relating
to the employment of labor, including those related to wages, hours, collective bargaining and the
payment and withholding of taxes and other sums as required by the appropriate Governmental
Authority and have withheld and paid to the appropriate Governmental Authority or are holding for
payment not yet due to such Governmental Authority all amounts required to be withheld from
employees of Parent or any Subsidiary and are not liable for any arrears of wages, taxes, penalties
or other sums for failure to comply with any of the foregoing. Parent and the Subsidiaries have
paid in full to all employees or adequately accrued for in accordance with GAAP consistently
applied all wages, salaries, commissions, bonuses, benefits and other compensation due to or on
behalf of such employees and, except as described in the Parent Disclosure Schedule, there is no
material claim or group of related claims with respect to payment of wages, salary or overtime pay
that has been asserted or is now pending or threatened before any Governmental Authority with
respect to any persons currently or formerly employed by Parent or any Subsidiary. Except as
described in Section 4.13(b) of the Parent Disclosure Schedule, neither Parent nor any Subsidiary
is a party to, or otherwise bound by, any consent decree with, or citation by, any Governmental
Authority relating to employees or employment practices. Except as described in Section 4.13(b) of
the Parent Disclosure Schedule, there is no charge or proceeding with respect to a violation of any
occupational safety or health

17

 

standards that has been asserted or is now pending or threatened with respect to Parent.
Except as described in Section 4.13(b) of the Parent Disclosure Schedule, there is no charge of
discrimination in employment or employment practices, for any reason, including, without
limitation, age, gender, race, religion or other legally protected category, which has been
asserted or is now pending or threatened before any Governmental Authority in any jurisdiction in
which Parent or any Subsidiary has employed or employ any person.

     SECTION 4.14 Real Property; Title to Assets. (a) Section 4.14(a) of the Parent
Disclosure Schedule lists each parcel of real property currently or formerly owned by Parent or any
Subsidiary. Except as disclosed in Section 4.14(a) of the Parent Disclosure Schedule, each parcel
of real property owned by Parent or any Subsidiary (i) is owned free and clear of all mortgages,
pledges, liens, security interests, conditional and installment sale agreements, encumbrances,
charges or other claims of third parties of any kind, including, without limitation, any easement,
right of way or other encumbrance to title, or any option, right of first refusal, or right of
first offer (collectively, “Liens”), other than (A) Liens for current taxes and assessments
not yet past due, (B) inchoate mechanics’ and materialmen’s Liens for construction in progress, (C)
supplier’s, workmen’s, repairmen’s, warehousemen’s and carriers’ Liens arising in the ordinary
course of business of Parent or such Subsidiary consistent with past practice, and (D) all matters
of record, Liens and other imperfections of title and encumbrances that would not, individually or
in the aggregate, have a Parent Material Adverse Effect (collectively, “Permitted Liens”),
and (ii) is neither subject to any governmental decree or order to be sold nor is being condemned,
expropriated or otherwise taken by any public authority with or without payment of compensation
therefor, nor, to the knowledge of Parent, has any such condemnation, expropriation or taking been
proposed.

     (b) Section 4.14(b) of the Parent Disclosure Schedule lists each parcel of real property
currently leased or subleased by Parent or any Subsidiary, pursuant to a lease agreement to which
Parent and the Subsidiaries are parties (collectively, the “Lease Documents”). True,
correct and complete copies of all Lease Documents have been delivered to the Company. All such
current leases and subleases are in full force and effect, are valid and effective in accordance
with their respective terms, and there is not, under any of such leases, any existing material
default or event of default (or event which, with notice or lapse of time, or both, would
constitute a default) by Parent or any Subsidiary.

     (c) There are no contractual or legal restrictions that preclude or restrict the ability to
use any real property owned or leased by Parent or any Subsidiary for the purposes for which it is
currently being used. There are no latent defects or adverse physical conditions affecting the
real property, and improvements thereon, owned or leased by Parent or any Subsidiary other than
those that would not, individually or in the aggregate, prevent or materially delay consummation of
any of the Transactions or otherwise prevent or materially delay Parent or Merger Sub from
performing its obligations under this Agreement and would not, individually or in the aggregate,
have a Parent Material Adverse Effect.

     (d) Each of Parent and the Subsidiaries has good and valid title to, or, in the case of leased
properties and assets, valid leasehold or subleasehold interests in, all of its properties and
assets, tangible and intangible, real, personal and mixed, used or held for use in its business,
free and clear of any Liens, except for such imperfections of title, if any, that do not materially

18

 

interfere with the present value of the subject property and that would not have a Parent
Material Adverse Effect.

     SECTION 4.15 Intellectual Property. (a) To the knowledge of Parent, the conduct of
the business of Parent and the Subsidiaries as currently conducted does not infringe upon or
misappropriate the Intellectual Property rights of any third party in any material respect, and no
claim has been asserted to Parent that the conduct of the business of Parent and the Subsidiaries
as currently conducted infringes upon or may infringe upon or misappropriates the Intellectual
Property Rights of any third party in any material respect; (b) Parent and the Subsidiaries own, or
have the right to use pursuant to licenses, sublicenses, agreements, or permissions, all
Intellectual Property material to the operation of the business of Parent and the Subsidiaries as
presently conducted; (c) with respect to each item of Intellectual Property owned by Parent or a
Subsidiary and material to the business, financial condition or results of operations of Parent and
the Subsidiaries taken as a whole (“Parent Owned Intellectual Property”), Parent or a
Subsidiary is the owner of the entire right, title and interest in and to such Parent Owned
Intellectual Property and is entitled to use such Parent Owned Intellectual Property in the
continued operation of its respective business; (d) with respect to each item of Intellectual
Property licensed to Parent or a Subsidiary that is material to the business of Parent and the
Subsidiaries as currently conducted (“Parent Licensed Intellectual Property”), Parent or a
Subsidiary has the right to use such Parent Licensed Intellectual Property in the continued
operation of its respective business in accordance with the terms of the license agreement
governing such Parent Licensed Intellectual Property; (e) Parent Owned Intellectual Property is
valid and enforceable, and has not been adjudged invalid or unenforceable in whole or in part; (f)
to the knowledge of Parent, no person is engaging in any activity that infringes upon Parent Owned
Intellectual Property in any material respect; (g) to the knowledge of Parent, each license of
Parent Licensed Intellectual Property is valid and enforceable, is binding on all parties to such
license, and is in full force and effect; (h) to the knowledge of Parent, no party to any license
of Parent Licensed Intellectual Property is in material breach thereof or default thereunder; and
(i) neither the execution of this Agreement nor the consummation of any Transaction shall adversely
affect any of Parent’s material rights with respect to Parent Owned Intellectual Property or Parent
Licensed Intellectual Property.

     SECTION 4.16 Taxes. Parent and the Subsidiaries have filed all material Tax returns
and reports required to be filed by them and have paid and discharged all material Taxes required
to be paid or discharged by them, other than such payments as are being contested in good faith by
appropriate proceedings. No taxing authority or agency is now asserting or, to the knowledge of
Parent, threatening to assert against Parent or any Subsidiary any deficiency or claim for any
Taxes or interest thereon or penalties in connection therewith. Section 4.16 of the Parent
Disclosure Schedule describes all Tax audits and investigations currently being conducted by any
Governmental Authority. The accruals and reserves for Taxes reflected in the March 27, 2004
balance sheet of Parent are adequate to cover all Taxes accruable through such date (including
interest and penalties, if any, thereon) in accordance with GAAP. There are no Tax liens upon any
property or assets of Parent or any of the Subsidiaries except liens for current Taxes not yet due.
To the knowledge of Parent, neither Parent nor any of its affiliates has taken or agreed to take
any action that would prevent the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code. Parent is not aware of any agreement, plan or other circumstance that
would (i) prevent the Merger from qualifying as a

19

 

reorganization within the meaning of Section 368(a) of the Code or (ii) cause Section
367(a)(1) of the Code to apply to any person other than a five-percent transferee shareholder.

     SECTION 4.17 Environmental Matters. Except as described in Section 4.17 of Parent
Disclosure Schedule (a) none of Parent nor any of the Subsidiaries has violated in any material
respect or is in material violation of any Environmental Law; (b) none of Parent nor any of the
Subsidiaries has received any written notice of actual or alleged material violations of any
Environmental Law; (c) none of the properties owned, leased or operated by Parent or any Subsidiary
(including, without limitation, soils and surface and ground waters) are materially contaminated
with any Hazardous Substance; (d) none of Parent or any of the Subsidiaries is actually or
allegedly liable in any material respect for any material contamination by Hazardous Substances;
(e) none of Parent or any of the Subsidiaries is actually or allegedly liable in any material
respect under any Environmental Law; (f) none of the real property owned, operated or leased by
Parent or any Subsidiary contains any asbestos in any form or polychlorinated biphenyls in any
form; (g) none of the real property owned, operated or leased by Parent or any Subsidiary has ever
or currently has any underground storage tanks used to hold Hazardous Substances; (h) each of
Parent and each Subsidiary has all material permits, licenses and other authorizations required
under any Environmental Law (“Environmental Permits”); and (i) none of Parent nor any of
the Subsidiaries has received any written notice from any Governmental Authority proposing to or
threatening to revoke, cancel, rescind, materially modify or refuse to renew any Environmental
Permit.

     SECTION 4.18 Material Contracts. (a) Subsections (i) through (viii) of Section
4.18(a) of Parent Disclosure Schedule lists the following types of contracts and agreements to
which Parent or any Subsidiary is a party (such contracts and agreements as are required to be set
forth in Section 4.18(a) of Parent Disclosure Schedule being the “Material Contracts”):

	 	(i)  	each “material contract” (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) with respect to Parent and its Subsidiaries;
	 
	 	(ii)  	each contract and agreement which is likely to involve consideration of more
than $2,500,000, in the aggregate, over the remaining term of such contract or
agreement;
	 
	 	(iii)  	all material broker, distributor, supply, dealer, manufacturer’s
representative, franchise, agency, sales promotion, market research, marketing
consulting and advertising contracts and agreements to which Parent or any Subsidiary
is a party;
	 
	 	(iv)  	all management contracts (excluding contracts for employment) and contracts
with other consultants, including any contracts involving the payment of royalties or
other amounts calculated based upon the revenues or income of Parent or any Subsidiary
or income or revenues related to any product of Parent or any Subsidiary to which
Parent or any Subsidiary is a party;

20

 

	 	(v)  	all material contracts and agreements under which it has created, incurred,
assumed, or guaranteed any material indebtedness or under which it has imposed a
material Lien on any of its assets, tangible or intangible;
	 
	 	(vi)  	all material contracts and agreements with any Governmental Authority to which
Parent or any Subsidiary is a party;
	 
	 	(vii)  	all contracts and agreements that materially limit, or purport to materially
limit, the ability of Parent or any Subsidiary to compete in any line of business or
with any person or entity or in any geographic area or during any period of time;
	 
	 	(viii)  	all other contracts and agreements, whether or not made in the ordinary course of
business, which are material to Parent or the conduct of its business, or the absence
of which would, individually or in the aggregate, prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially delay Parent
or Merger Sub from performing its obligations under this Agreement or would,
individually or in the aggregate, have a Parent Material Adverse Effect;
	 
	 	(ix)  	any material agreement concerning a partnership or joint venture; and
	 
	 	(x)  	any agreement under which it has advanced or loaned any amount to any of its
stockholders, affiliates, directors, officers, or employees other than in the ordinary
course of business.

     (b) Except as would not, individually or in the aggregate, prevent or materially delay
consummation of any of the Transactions or otherwise prevent or materially delay Parent or Merger
Sub from performing its obligations under this Agreement and would not, individually or in the
aggregate, have a Parent Material Adverse Effect, (i) each Material Contract is a legal, valid and
binding agreement, and none of the Material Contracts is in default by its terms or has been
canceled by the other party; (ii) to Parent’s knowledge, no other party is in breach or violation
of, or default under, any Material Contract; (iii) Parent and the Subsidiaries have not received
any claim of default under any such agreement; and (iv) neither the execution of this Agreement nor
the consummation of any Transaction shall constitute a default under, give rise to cancellation
rights under, or otherwise adversely affect any of the rights of Parent or any Subsidiary under any
Material Contract. Parent has furnished or made available to the Company true and complete copies
of all Material Contracts, including any amendments thereto.

     SECTION 4.19 Insurance. Parent and its Subsidiaries maintain insurance coverage with
reputable insurers in such amounts and covering such risks as are in accordance with normal
industry practice for companies engaged in businesses similar to that of Parent and its
Subsidiaries. There is no claim pending under any of such policies as to which coverage has been
denied or disputed by the underwriters of such policies. All premiums due and payable under all
such policies have been paid, and Parent and its Subsidiaries are otherwise in compliance in all
material respects with the terms of such policies. To the knowledge of Parent, there has been no
threatened termination of, or material premium increase with respect to, any of such policies.

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     SECTION 4.20 Customers and Suppliers. As of the date of this Agreement, none of the
Parent’s ten largest customers accounted for more than ten percent of Parent’s consolidated
revenues during the 12-month period ended as of December 25, 2004 and no material supplier of
Parent and its Subsidiaries, (i) has cancelled or otherwise terminated any Material Contract with
Parent or any Subsidiary prior to the expiration of its term, or (ii) to Parent’s knowledge, has
threatened, or indicated its intention, to cancel or otherwise terminate its relationship with
Parent or its Subsidiaries or to reduce substantially its purchase from or sale to Parent or any
Subsidiary of any products, equipment, goods or services.

     SECTION 4.21 Certain Business Practices. None of Parent, any Subsidiary or, in
connection with the operation of the business of Parent or any Subsidiary, any directors or
officers, agents or employees of Parent or any Subsidiary, has (i) directly or indirectly given or
agreed to give any funds for unlawful contributions, payments, gifts, entertainment or other
unlawful expenses related to political activity, (ii) made any unlawful payment to foreign or
domestic government officials or employees or to foreign or domestic political parties or campaigns
or violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (iii) made
any payment in the nature of criminal bribery.

     SECTION 4.22 Interested Party Transactions. Except as disclosed in Section 4.22 of
the Parent Disclosure Schedule, no director, officer or other affiliate of Parent or any Subsidiary
has or has had, directly or indirectly, (i) an economic interest in any person that has furnished
or sold, or furnishes or sells, services or products that Parent or any Subsidiary furnishes or
sells, or proposes to furnish or sell; (ii) an economic interest in any person that purchases from
or sells or furnishes to, Parent or any Subsidiary, any goods or services; (iii) a beneficial
interest in any contract or agreement disclosed in Section 4.18(a) of the Parent Disclosure
Schedule; or (iv) any contractual or other arrangement with Parent or any Subsidiary.

     SECTION 4.23 No Vote Required. No vote of the stockholders of Parent is required by
Law, Parent’s Articles of Amalgamation or By-laws or otherwise in order for Parent and Merger Sub
to consummate the Transactions.

     SECTION 4.24 Accounts Receivable. All accounts receivable of Parent and its
Subsidiaries reflected in the Financial Statements arose from, and such accounts receivable
existing as of the Effective Time will have arisen from, the sale of goods or services in the
ordinary course of business consistent with past practice and, to the knowledge of Parent,
constitute only valid and undisputed claims of Parent or a Subsidiary not subject to valid claims
of setoff or other defenses or counterclaims other than normal cash discounts accrued in the
ordinary course of business consistent with past practice. Such accounts receivable are
collectible in a manner consistent with Parent’s past practice.

     SECTION 4.25 Inventories. Subject to amounts reserved therefore on the Financial
Statements, the values at which all inventory, merchandise, finished goods, work in process and raw
materials of Parent and its Subsidiaries (“Inventories”) are carried on the Financial
Statements reflect the historical inventory valuation policy of Parent and the Subsidiaries of
stating such Inventories at the lower of cost (determined in a manner consistent with the valuation
of Inventories in the Financial Statements) or market value. Except as set forth in Section 4.25
of the Parent Disclosure Schedule:

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     (a) Parent or a Subsidiary, as the case may be, has good and marketable title to the
Inventories free and clear of all Liens other than Permitted Liens.

     (b) Parent has adequately provided for obsolescence and returns and the provision for
obsolescence and returns is accurately reflected, in all material respects, in the Financial
Statements.

     (c) Neither Parent nor any Subsidiary has acquired or committed to acquire or manufacture
Inventory for sale which is not of a quality and quantity usable in the ordinary course of business
within a reasonable period of time and consistent with past practice. The Inventories are in good
and merchantable condition in all material respects, are suitable and usable for the purposes for
which they are intended and are in a condition such that they can be sold in the ordinary course of
the business of Parent and its Subsidiaries consistent with past practice.

     SECTION 4.26 Operations of Merger Sub. Merger Sub is a direct, wholly owned
subsidiary of Parent, was formed solely for the purpose of engaging in the transactions
contemplated by this Agreement, has engaged in no other business activities and has conducted its
operations only as contemplated by this Agreement. Except for obligations and liabilities incurred
in connection with its organization and the transactions contemplated by this Agreement, Merger Sub
has no obligations or liabilities.

     SECTION 4.27 Brokers. No broker, finder or investment banker (other than Bear
Stearns) is entitled to any brokerage, finder’s or other fee or commission in connection with the
Transactions based upon arrangements made by or on behalf of Parent or Merger Sub. Parent has
heretofore furnished to the Company a complete and correct copy of all written agreements between
Parent and Bear Stearns pursuant to which such firm would be entitled to any payment relating to
the Transactions.

ARTICLE V

CONDUCT OF BUSINESS PENDING THE MERGER

     SECTION 5.01 Conduct of Business by the Company Pending the Merger. Except as
expressly contemplated by any other provision of this Agreement or at the direction of, or as
consented to by, Parent or its affiliates or associates, the Company agrees that, between the date
of this Agreement and the Effective Time, the businesses of the Company and its subsidiaries shall
be conducted, and the Company and its subsidiaries shall not take any action except, in all
material respects, in the ordinary course of business and in a manner consistent with past
practice.

     SECTION 5.02 Conduct of Business by Parent Pending the Merger. Except as expressly
contemplated by any other provision of this Agreement, Parent agrees that from the date of this
Agreement until the earlier of the termination of this Agreement and the Effective Time, Parent
shall not except as disclosed in Section 5.02 of the Parent Disclosure Schedule, directly or
indirectly, do, or propose to do, any of the following without the prior written consent of the
Company:

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     (a) conduct the businesses of Parent and the Subsidiaries in a manner, or take any
action with respect to the businesses of Parent and the Subsidiaries, that is not in the
ordinary course of business and consistent with past practice or that would cause Parent to
be in default of the Amended and Restated Accounts Receivable Management, Loan and Security
Agreement between GMAC Commercial Finance Corporation – Canada and Parent (as in effect on
the date hereof, irrespective of any subsequent waiver or amendment);

     (b) change nor amend the charter documents or By-laws of Parent;

     (c) issue, sell, or grant any shares of capital stock (except Parent Common Stock
issued upon exercise of options outstanding on the date of the Agreement), or any options,
warrants, or rights to purchase or subscribe to, or enter into any arrangement or contract
with respect to the issuance or sale of, any of the capital stock of Parent or any
Subsidiary or rights or obligations convertible into or exchangeable for any such shares of
capital stock;

     (d) split, combine or reclassify any of its capital stock or otherwise make any changes
in the capital structure of Parent;

     (e) declare, pay, or set aside for payment any dividend or other distribution in
respect of the capital stock or other equity securities of Parent or any Subsidiary or
redeem, purchase, or otherwise acquire any shares of the capital stock or other securities
of Parent or any Subsidiary or rights or obligations convertible into or exchangeable for
any shares of the capital stock or other securities of Parent or any Subsidiary or
obligations convertible into such, or any options, warrants, or other rights to purchase or
subscribe to any of the foregoing;

     (f) (i) except for normal increases made in the ordinary course of business consistent
with past practice, or as required by applicable Law or an agreement in existence as of the
date of this Agreement, increase the wages, salaries, compensation, pension, or other fringe
benefits or perquisites payable to any officer, employee, or director of Parent or any
Subsidiary or pay any benefit not contemplated by any Plan as in effect on the date hereof,
(ii) pay any pension or retirement allowance not required by any existing Plan or by
applicable Law, (iii) except for bonuses paid in the ordinary course of business consistent
with past practice, or as required by an agreement in existence as of the date of this
Agreement, pay any bonus, (iv) except for agreements entered or amended in the ordinary
course of business consistent with past practice, become a party to, amend or commit itself
to, any pension, retirement, profit-sharing or welfare benefit plan or agreement or
employment, consulting, indemnification, severance or termination agreement with or for the
benefit of any employee, other than as required by applicable law or an existing agreement
set forth in Section 4.12(a) of the Parent Disclosure Schedule, or (v) except as required
under any existing Plan, grant, or agreement, accelerate the vesting of, or the lapsing of
restrictions with respect to, any stock options granted pursuant to any Parent Stock Option
Plan or any other Parent stock-based awards;

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     (g) sell, license, lease, encumber, assign or otherwise dispose of, abandon or fail to
maintain any of its material assets, properties (including Intellectual Property) or other
rights or agreements other than in the ordinary course of business consistent with past
practice;

     (h) enter into any new line of business;

     (i) acquire or agree to acquire, by merging or consolidating with, or by purchasing a
substantial equity interest in or a substantial portion of the assets of, or by any other
manner, any business or any corporation, partnership, association or other business
organization or division thereof;

     (j) create, renew, amend or terminate, fail to perform any material obligations under,
waive or release any material rights under or give notice of a proposed renewal, amendment,
waiver, release or termination of, any material contract, agreement or lease for goods,
services or office space to which Parent or any of the Subsidiaries is a party or by which
Parent or any of the Subsidiaries or their respective properties is bound, other than any of
the foregoing arising in the ordinary course of business (and as to which Parent shall
provide prior notice thereof to the Company);

     (k) (i) cause any material insurance policy naming it as a beneficiary or a loss
payable payee to be canceled or terminated, or (ii) cause Parent’s directors and officers
liability insurance policy, and any excess liability policy related thereto, to be canceled,
terminated or otherwise not be renewed or replaced with at least an equivalent amount of
coverage and on other terms no less favorable to Parent and its officers and directors;

     (l) adopt a plan of complete or partial liquidation, dissolution, merger,
consolidation, restructuring, recapitalization or other reorganization of Parent or any of
its Subsidiaries;

     (m) make any material election relating to Taxes or change any Tax accounting method,
or settle any material liability relating to Taxes (other than in the ordinary course of
business);

     (n) engage in any action that could reasonably be expected to cause the Merger (i) to
fail to qualify as a “reorganization” under Section 368(a) of the Code or (ii) to result in
the application of Section 367(a)(1) of the Code to any person other than a five-percent
transferee shareholder;

     (o) take any action to cause Parent’s representations and warranties set forth in
Article IV to be untrue in any material respect;

     (p) take any action that would reasonably be likely to materially delay the Merger; or

     (q) agree to take, make any commitment to take, or adopt any resolutions of its board
of directors in support of, any of the foregoing actions.

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ARTICLE VI

ADDITIONAL AGREEMENTS

     SECTION 6.01 Registration Statement; Proxy Statement. (a) As promptly as practicable
after the execution of this Agreement, (i) Parent and the Company shall prepare and file with the
SEC the proxy statement to be sent to the stockholders of the Company relating to the meeting of
the Company’s stockholders (together with any adjournments or postponements thereof, the
“Company Stockholders’ Meeting”) to be held to consider approval and adoption of this
Agreement (such proxy statement, as amended or supplemented, being referred to herein as the
“Proxy Statement”) and (ii) Parent shall prepare and file with the SEC a registration
statement on Form F-4 (together with all amendments thereto, the “Registration Statement”)
in which the Proxy Statement shall be included as a prospectus, in connection with the registration
under the Securities Act of the shares of Parent Common Stock to be issued to holders of Shares
pursuant to the Merger. Parent and the Company each shall use their reasonable best efforts to
cause the Registration Statement to become effective as promptly as practicable, and, prior to the
effective date of the Registration Statement, Parent shall take all action required under any
applicable federal, state or Canadian securities Laws in connection with the issuance of shares of
Parent Common Stock pursuant to the Merger. The Company shall furnish all information concerning
the Company as Parent may reasonably request in connection with such actions and the preparation of
the Registration Statement and Proxy Statement. As promptly as practicable after the Registration
Statement shall have become effective, the Company shall mail the Proxy Statement to its
stockholders.

     (b) The Company covenants that neither the Company Board nor the Special Committee shall
withdraw or modify, or propose to withdraw or modify, in a manner adverse to Parent or Merger Sub,
the approval or recommendation by the Company Board and the Special Committee of this Agreement,
the Merger or the Transactions (the “Company Recommendation”), and the Proxy Statement
shall include the recommendation of the Special Committee to the Company Board and of the Company
Board to the stockholders of the Company in favor of approval and adoption of this Agreement.
Notwithstanding the foregoing, if the Company Board or the Special Committee determines, in its
good faith judgment prior to the Required Company Vote and the Disinterested Stockholder Vote and
after consultation with outside legal counsel (who may be the Company’s regularly engaged outside
legal counsel), that the failure to make a change in the Company Recommendation would be
inconsistent with its fiduciary obligations to the Company and its stockholders under applicable
Law, the Company Board or the Special Committee may withdraw or modify or propose to withdrawal or
modify the Company Recommendation. The Company shall have the right to notify the stockholders of
the Company of any such withdrawal or modification.

     (c) No amendment or supplement to the Proxy Statement or the Registration Statement will be
made by Parent or the Company without the approval of the other party (such approval not to be
unreasonably withheld or delayed). Parent and the Company each will advise the other, promptly
after they receive notice thereof, of the time when the Registration Statement has become effective
or any supplement or amendment has been filed, of the issuance of any stop order, of the suspension
of the qualification of the Parent Common Stock issuable in connection with the Merger for offering
or sale in any jurisdiction, or of any request by the SEC

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for amendment of the Proxy Statement or the Registration Statement or comments thereon and
responses thereto or requests by the SEC for additional information.

     (d) Parent represents that the information supplied by Parent for inclusion in the
Registration Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of the Company, (iii) the time of the
Company Stockholders’ Meeting and (iv) the Effective Time, contain any untrue statement of a
material fact or fail to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading. If, at any time prior to the Effective Time, any event or circumstance relating to
Parent or Merger Sub, or their respective officers or directors, should be discovered by Parent
which should be set forth in an amendment or a supplement to the Registration Statement or Proxy
Statement, Parent shall promptly inform the Company. All documents that Parent is responsible for
filing with the SEC in connection with the Merger or the other transactions contemplated by this
Agreement will comply as to form and substance in all material aspects with the applicable
requirements of the Securities Act and the Exchange Act.

     (e) The Company represents that the information supplied by the Company for inclusion in the
Registration Statement and the Proxy Statement shall not, at (i) the time the Registration
Statement is declared effective, (ii) the time the Proxy Statement (or any amendment thereof or
supplement thereto) is first mailed to the stockholders of the Company, (iii) the time of the
Company Stockholders’ Meeting and (iv) the Effective Time, contain any untrue statement of a
material fact or fail to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which they were made, not
misleading. Notwithstanding the foregoing, no representation is made by the Company with respect
to information included in the Registration Statement or Proxy Statement based on information
supplied by Parent or its affiliates or associates. If, at any time prior to the Effective Time,
any event or circumstance relating to the Company or any Company Subsidiary, or their respective
officers or directors, should be discovered by the Company which should be set forth in an
amendment or a supplement to the Registration Statement or Proxy Statement, the Company shall
promptly inform Parent. All documents that the Company is responsible for filing with the SEC in
connection with the Merger or the other transactions contemplated by this Agreement will comply as
to form and substance in all material respects with the applicable requirements of the Securities
Act and the Exchange Act.

     SECTION 6.02 Company Stockholders’ Meeting. The Company shall call and hold the
Company Stockholders’ Meeting as promptly as practicable for the purpose of voting upon the
approval and adoption of this Agreement and the Company shall use its reasonable efforts to hold
the Company Stockholders’ Meeting as soon as practicable after the date on which the Registration
Statement becomes effective. The Company shall use its reasonable efforts to solicit from its
stockholders proxies in favor of the approval and adoption of this Agreement, and shall take all
other action necessary or advisable to secure the required vote or consent of its stockholders,
except in the event and to the extent that the Company Board or the Special Committee, in
accordance with the last sentence of Section 6.01(b), withdraws or modifies the Company
Recommendation.

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     SECTION 6.03 Access to Information; Confidentiality. (a) Except as required pursuant
to any confidentiality agreement or similar agreement or arrangement to which the Company or Parent
or any of their respective subsidiaries is a party or pursuant to applicable Law, from the date of
this Agreement until the Effective Time, the Company and Parent shall (and shall cause their
respective subsidiaries to): (i) provide to the other party (and the other party’s officers,
directors, employees, accountants, consultants, financial advisors, legal counsel, agents and other
representatives, collectively, “Representatives”) access at reasonable times upon prior
notice to the officers, employees, agents, properties, offices and other facilities of such party
and its subsidiaries and to the books and records thereof; and (ii) furnish promptly to the other
party such information concerning the business, properties, contracts, assets, liabilities,
personnel and other aspects of such party and its subsidiaries as the other party or its
Representatives may reasonably request.

     (b) All information obtained by the parties pursuant to this Section 6.03 shall be kept
confidential in accordance with the confidentiality agreement, dated August 30, 2004 (the
“Confidentiality Agreement”), between Parent and the Company.

     (c) No investigation pursuant to this Section 6.03 shall affect any representation or warranty
in this Agreement of any party hereto or any condition to the obligations of the parties hereto.

     SECTION 6.04 Directors’ and Officers’ Indemnification and Insurance. (a) The By-laws
of the Surviving Corporation shall, and Parent shall cause such By-laws to contain provisions no
less favorable with respect to indemnification than are set forth in Article Five of the By-laws of
the Company, which provisions shall not be amended, repealed or otherwise modified after the
Effective Time in any manner that would affect adversely the rights thereunder of individuals who,
at or prior to the Effective Time, were directors, officers, employees, fiduciaries or agents of
the Company, unless such modification shall be required by Law.

     (b) The Surviving Corporation shall, and Parent shall cause the Surviving Corporation to,
maintain in effect for six years from the Effective Time the current directors’ and officers’
liability insurance policies maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies with an insurer of equal or greater claims paying ratings and of at
least the same coverage containing terms and conditions that are not materially less favorable)
with respect to matters occurring prior to the Effective Time; provided, however,
that in no event shall the Surviving Corporation or Parent be required to expend pursuant to this
Section 6.04(b) more than an amount per year equal to 200% of current annual premiums paid by the
Company for such insurance.

     (c) The provisions set forth in this Section 6.04 shall not be exclusive of any other rights
with respect to indemnification, insurance or expense advancement which any person may have or
hereafter acquire under any Law, agreement or otherwise. Following the Effective Time, the
Surviving Corporation shall, and Parent shall cause the Surviving Corporation to, assume, honor and
comply with all agreements and contracts between the Company and its directors, officers,
employees, fiduciaries or agents requiring the Company to provide indemnification, insurance or
expense advancement.

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     (d) In the event the Company or the Surviving Corporation or any of their respective
successors or assigns (i) consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or merger or (ii) transfers all
or substantially all of its properties and assets to any person, then, and in each such case,
proper provision shall be made so that the successors and assigns of the Company or the Surviving
Corporation, as the case may be, or at Parent’s option, Parent, shall assume the obligations set
forth in this Section 6.04.

     SECTION 6.05 Notification of Certain Matters. The Company shall give prompt notice to
Parent, and Parent shall give prompt notice to the Company, of (a) the occurrence, or
non-occurrence, of any event the occurrence, or non-occurrence, of which could reasonably be
expected to cause any representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect and (b) any failure of the Company, Parent or Merger Sub, as the
case may be, to comply with or satisfy in any material respect any covenant or agreement to be
complied with or satisfied by it hereunder; provided, however, that the Company’s
obligation pursuant to this Section 6.05 shall be limited to those matters as to which the Special
Committee has knowledge; and provided, further, that the delivery of any notice pursuant to this
Section 6.05 shall not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.

     SECTION 6.06 Company Affiliates. No later than 5 days after the date of this
Agreement, the Company shall deliver to Parent a list of names and addresses of those persons who
were, in the Company’s reasonable judgment, on such date, affiliates (within the meaning of Rule
145 of the rules and regulations promulgated under the Securities Act (each such person being a
“Company Affiliate”)) of the Company. The Company shall provide Parent with such
information and documents as Parent shall reasonably request for purposes of reviewing such list.
The Company shall use its reasonable efforts to deliver or cause to be delivered to Parent, prior
to the Effective time, an affiliate letter in the form attached hereto as Exhibit 6.06, executed by
each of the Company Affiliates identified in the foregoing list and any person who shall, to the
knowledge of the Company, have become a Company Affiliate subsequent to the delivery of such list.

     SECTION 6.07 Further Action; Reasonable Efforts. Upon the terms and subject to the
conditions of this Agreement, each of the parties hereto shall (i) make promptly its respective
filings, and thereafter make any other required submissions, under applicable Laws with respect to
the Transactions and (ii) use its reasonable efforts to take, or cause to be taken, all appropriate
action, and to do, or cause to be done, all things necessary, proper or advisable under applicable
Laws or otherwise to consummate and make effective the Transactions, including, without limitation,
using its reasonable efforts to obtain all Permits, consents, approvals, authorizations,
qualifications and orders of Governmental Authorities and parties to contracts with Parent, the
Subsidiaries, the Company and the Company’s subsidiaries as are necessary for the consummation of
the Transactions and to fulfill the conditions to the Merger; provided that neither Merger
Sub nor Parent will be required by this Section 6.07 to take any action, including entering into
any consent decree, hold separate orders or other arrangements, that (A) requires the divestiture
of any assets of any of Merger Sub, Parent, the Company or any of their respective subsidiaries or
(B) limits Parent’s freedom of action with respect to, or its ability to retain, the Company and
its subsidiaries or any portion thereof or any of Parent’s or its affiliates’

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other assets or businesses. In case, at any time after the Effective Time, any further action
is necessary or desirable to carry out the purposes of this Agreement, the proper officers and
directors of each party to this Agreement shall use their reasonable efforts to take all such
action.

     SECTION 6.08 Plan of Reorganization. (a) This Agreement is intended to constitute a
“plan of reorganization” within the meaning of section 1.368-2(g) of the income tax regulations
promulgated under the Code. From and after the date of this Agreement and until the Effective
Time, each party hereto shall use its reasonable efforts to cause the Merger to qualify, and will
not knowingly take any action, cause any action to be taken, fail to take any action or cause any
action to fail to be taken which action or failure to act could prevent the Merger from qualifying
as a “reorganization” within the meaning of Section 368(a) of the Code to which, in the case of any
person other than a five-percent transferee shareholder, Section 367(a)(1) of the Code does not
apply. Following the Effective Time, neither the Surviving Corporation, Parent nor any of their
affiliates shall knowingly take any action, cause any action to be taken, fail to take any action
or cause any action to fail to be taken, which action or failure to act could cause the Merger (i)
to fail to qualify as a “reorganization” within the meaning of Section 368(a) of the Code or (ii)
result in the application of Section 367(a)(1) of the Code to any person other than a five-percent
transferee shareholder.

     (b) As of the date hereof, Parent does not know of any reason (i) why it would not be able to
deliver to counsel to the Company, at the date of the legal opinion required by Section 7.03(d),
certificates substantially in compliance with Internal Revenue Service (“IRS”) published
advance ruling guidelines, with customary exceptions and modifications thereto, to enable such firm
to deliver such opinion, and Parent hereby agrees to deliver such certificates effective as of the
date of such opinion or (ii) why counsel to the Company would not be able to deliver the opinion
required by Section 7.03(d). Parent will deliver such certificates to counsel to the Company.

     (c) Following the Effective Time, Parent shall cause the Company to comply with the U.S. tax
reporting requirements described in Section 1.367(a)-3(c)(6) of the income tax regulations
promulgated under the Code.

     SECTION 6.09 Obligations of Merger Sub. Parent shall take all action necessary to
cause Merger Sub to perform its obligations under this Agreement and to consummate the Merger on
the terms and subject to the conditions set forth in this Agreement.

     SECTION 6.10 Consents of Accountants. Parent and the Company will each use all
reasonable efforts to cause to be delivered to each other consents from their respective
independent auditors, in form reasonably satisfactory to the recipient and customary in scope and
substance for consents delivered by independent public accountants in connection with registration
statements on Form F-4 under the Securities Act.

     SECTION 6.11 AMEX Listing. Parent shall promptly prepare and submit to the AMEX a
listing application covering the shares of Parent Common Stock outstanding and those to be issued
in the Merger and pursuant to Substitute Options, and shall use its reasonable efforts to obtain,
prior to the Effective Time, approval for the listing of such Parent Common

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Stock, subject to official notice of issuance to the AMEX, and the Company shall cooperate
with Parent with respect to such listing.

     SECTION 6.12 Public Announcements. The initial press release relating to this
Agreement shall be a joint press release the text of which has been agreed to by each of Parent and
the Company. Thereafter, unless otherwise required by applicable Law or the requirements of the
AMEX, each of Parent and the Company shall each use its reasonable efforts to consult with each
other before issuing any press release or otherwise making any public statements with respect to
this Agreement, the Merger or any of the other Transactions.

     SECTION 6.13 Board of Directors of Parent. Within one year following the Effective
Time, a majority of the members of the Parent Board shall be independent within the rules of AMEX.

     SECTION 6.14 Company Stock Held by Parent. From the date hereof until the Effective
Time, Parent shall not transfer, sell or otherwise dispose of any of the shares of Company Common
Stock, Company Preferred Stock or warrants to purchase Company Common Stock owned by Parent. At
the Company Stockholders’ Meeting, Parent shall vote all shares of Company Common Stock and Company
Preferred Stock owned by Parent in favor of the approval and adoption of this Agreement.

ARTICLE VII

CONDITIONS TO THE MERGER

     SECTION 7.01 Conditions to the Obligations of Each Party. The obligations of the
Company, Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver
(where permissible) of the following conditions:

     (a) Registration Statement. The Registration Statement shall have been
declared effective by the SEC under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued by the SEC and no
proceeding for that purpose shall have been initiated by the SEC.

     (b) Company Stockholder Approval. The Company shall have obtained the
Disinterested Stockholder Vote at the Company Stockholders’ Meeting.

     (c) No Order. No Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, judgment, decree, executive
order or award (an “Order”) which is then in effect and has the effect of making the
Merger illegal or otherwise prohibiting consummation of the Merger.

     (d) AMEX Listing. The shares of Parent Common Stock shall have been authorized
for listing on the AMEX, subject to official notice of issuance.

     (e) HLHZ Opinion. The HLHZ Fairness Opinion shall not have been withdrawn,
revoked, annulled or materially modified.

31

 

     SECTION 7.02 Conditions to the Obligations of Parent and Merger Sub. The obligations
of Parent and Merger Sub to consummate the Merger are subject to the satisfaction or waiver (where
permissible) of the following additional conditions:

     (a) Representations and Warranties. The representations and warranties of the
Company contained in this Agreement shall be true and correct in all material respects as of
the Effective Time, as though made on and as of the Effective Time, except to the extent
expressly made as of an earlier date, in which case as of such earlier date
(provided that any representation or warranty that is qualified by materiality or
Company Material Adverse Effect shall be true and correct in all respects as of the
Effective Time, or as of such particular earlier date, as the case may be);
provided, however, this condition shall not apply to any representation or
warranty of the Company that, to the knowledge of Parent, was not true and correct as of the
date hereof; and provided, further, this condition shall not apply to any
representation or warranty of the Company if the failure of such representation or warranty
to be so true and correct is attributable to any action or inaction on the part of Parent or
its affiliates or associates.

     (b) Agreements and Covenants. The Company shall have performed or complied in
all material respects with all agreements and covenants required by this Agreement to be
performed or complied with by it on or prior to the Effective Time; provided, however, this
condition shall not apply to any agreement or covenant of the Company if the failure by the
Company to so perform or comply is attributable to any action or inaction on the part of
Parent or its affiliates or associates.

     (c) Officer Certificate. The Company shall have delivered to Parent a
certificate, dated the date of the Closing, signed by the Chief Administrative Officer of
the Company, certifying as to the satisfaction of the conditions specified in Sections
7.02(a) and 7.02(b).

     (d) Consents. All consents, approvals and authorizations legally required to
be obtained to consummate the Merger shall have been obtained from and made with all
Governmental Authorities, and all consents from the third parties listed in Section 7.02(d)
of the Parent Disclosure Schedule shall have been obtained.

     (e) Material Adverse Effect. No Company Material Adverse Effect shall have
occurred since the date of this Agreement.

     SECTION 7.03 Conditions to the Obligations of the Company. The obligations of the
Company to consummate the Merger are subject to the satisfaction or waiver (where permissible) of
the following additional conditions:

     (a) Representations and Warranties. The representations and warranties of
Parent and Merger Sub contained in this Agreement shall be true and correct in all material
respects as of the Effective Time, as though made on and as of the Effective Time, except to
the extent expressly made as of an earlier date, in which case as of such earlier date
(provided that any representation or warranty that is qualified by materiality

32

 

or Parent Material Adverse Effect shall be true and correct in all respects as of the
Effective Time, or as of such particular earlier date, as the case may be).

     (b) Agreements and Covenants. Parent and Merger Sub shall have performed or
complied in all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by it on or prior to the Effective Time.

     (c) Officer Certificate. Parent shall have delivered to the Company a
certificate, dated the date of the Closing, signed by the President or any Vice President of
Parent, certifying as to the satisfaction of the conditions specified in Sections 7.03(a)
and 7.03(b).

     (d) Tax Opinion. The Company shall have received the opinion of Holland &
Knight LLP, counsel to the Company, based upon customary representations of Parent, Merger
Sub and the Company, and normal assumptions, to the effect that, for United States federal
income tax purposes, (i) the Merger will qualify as a “reorganization” within the meaning of
Section 368(a) of the Code and each of Parent and the Company will be a “party to the
reorganization” within the meaning of section 368(b) of the Code, and (ii) the conversion of
Company Common Shares into Parent Common Stock in the Merger will not result in the
recognition of gain under Section 367 of the Code to any person who is not a five percent
transferee shareholder, which opinion shall not have been withdrawn or modified in any
material respect; provided, however, that if such counsel is unable or
unwilling to deliver such opinion this condition shall be satisfied by delivery to the
Company of a similar opinion of King & Spalding LLP. The issuance of such opinion shall be
conditioned on receipt by Holland and Knight LLP or King & Spalding LLP, as the case may be,
of representation letters from each of Parent and Company as contemplated in Section 6.08 of
this Agreement. Each such representation letter shall be dated on or before the date of
such opinion and shall not have been withdrawn or modified in any material respect as of the
Effective Time.

     (e) Company Stockholder Approval. The Company shall have obtained the Required
Stockholder Vote at the Company Stockholders’ Meeting.

     (f) Articles of Amalgamation and By-laws. The Articles of Amalgamation and
By-laws of Parent in effect shall be in the form attached hereto as Exhibit 7.03(f)(i) and
Exhibit 7.03(f)(ii), respectively.

     (g) Material Adverse Effect. No Parent Material Adverse Effect shall have
occurred since the date of this Agreement.

     (h) Consents. All consents, approvals and authorizations legally required to
be obtained to consummate the Merger shall have been obtained from and made with all
Governmental Authorities, and all consents from the third parties listed in Section 7.02(d)
of the Parent Disclosure Schedule shall have been obtained.

     (i) Conversion of Parent Securities. All of the issued and outstanding Series
A Preferred Shares of Parent Preferred Stock and $5,000,000 aggregate principal amount of
Secured Convertible Notes of Parent (“Secured Convertible Notes”) shall have been

33

 

converted into 512,015 shares of Parent Common Stock and 504,876 Parent Class B Shares;
nil Series A Preferred Shares of Parent Preferred Stock and nil Secured Convertible Notes
shall be issued and outstanding.

     (j) Anti-Dilution Provisions.

     (i) Each Company Warrant shall have been amended, for no additional
consideration to the holder, to (A) provide that the definition of
“Additional Shares of Common Stock” shall specifically exclude any stock
options or other securities exercisable for, convertible into or
exchangeable into capital stock (or shares issued upon exercise, conversion
or exchange thereof), any restricted stock or any other equity granted or
issued for a compensatory purpose following the Effective Time to employees,
officers, directors or consultants, and (B) delete the last two sentences of
Section 1 thereof.

     (ii) The employment agreement dated October 24, 2001 between Parent and
Thomas A. Andruskevich (the “Andruskevich Employment Agreement”)
shall have been amended, in form reasonably satisfactory to the Company, for
no additional consideration to Mr. Andruskevich, to provide that any stock
options or other securities exercisable for, convertible into or
exchangeable into capital stock (or shares issued upon exercise, conversion
or exchange thereof), any restricted stock or any other equity granted or
issued for a compensatory purpose following the Effective Time to employees,
officers, directors or consultants shall be disregarded for purposes of
calculating two percent (2%) of the issued and outstanding shares in the
capital stock of Parent (on a fully diluted basis) pursuant to Section 5.1
of the Andruskevich Employment Agreement.

ARTICLE VIII

TERMINATION, AMENDMENT AND WAIVER

     SECTION 8.01 Termination. This Agreement may be terminated and the Merger and the
other Transactions may be abandoned at any time prior to the Effective Time, notwithstanding any
requisite approval and adoption of this Agreement and the Transactions by the stockholders of the
Company, as follows:

     (a) by mutual written consent of Parent and the Company duly authorized by the Board of
Directors of Parent and the Special Committee; or

     (b) by either Parent or the Company if the Effective Time shall not have occurred on or
before December 31, 2005; provided, however, that the right to terminate
this Agreement under this Section 8.01(b) shall not be available to any party whose material
breach of any representation, warranty, covenant or agreement under this

34

 

     Agreement has been the cause of, or resulted in, the failure of the Effective Time to
occur on or before such date; or

     (c) by either Parent or the Company if any Governmental Authority shall have enacted,
issued, promulgated, enforced or entered any injunction, order, decree or ruling (whether
temporary, preliminary or permanent) which is then in effect and has the effect of making
consummation of the Merger illegal or otherwise preventing or prohibiting consummation of
the Merger; or

     (d) by Parent or the Company if a Company Triggering Event (as defined below) shall
have occurred; or

     (e) by either Parent or the Company if this Agreement shall fail to receive the
requisite vote for approval at the Company Stockholders’ Meeting as set forth in Section
7.01(b) (other than by reason of a breach by Parent of Section 6.14 hereof); or

     (f) by Parent upon a breach of any representation, warranty, covenant or agreement on
the part of the Company set forth in this Agreement, or if any representation or warranty of
the Company shall have become untrue, in either case such that the conditions set forth in
Section 7.02(a) and Section 7.02(b) would not be satisfied (“Terminating Company
Breach”); provided, however, that, if such Terminating Company Breach is
curable by the Company, Parent may not terminate this Agreement under this Section 8.01(f)
for so long as the Company continues to exercise its best efforts to cure such breach,
unless such breach is not cured within 15 days after notice of such breach is provided by
Parent to the Company; provided, further, that Parent may not terminate this
Agreement under this Section 8.01(f) if such Terminating Company Breach is attributable to
action or inaction on the part of Parent or its affiliates or associates; or

     (g) by the Company upon a breach of any representation, warranty, covenant or agreement
on the part of Parent and Merger Sub set forth in this Agreement, or if any representation
or warranty of Parent and Merger Sub shall have become untrue, in either case such that the
conditions set forth in Section 7.03(a) and Section 7.03(b) would not be satisfied
(“Terminating Parent Breach”); provided, however, that, if such
Terminating Parent Breach is curable by Parent and Merger Sub, the Company may not terminate
this Agreement under this Section 8.01(g) for so long as Parent and Merger Sub continue to
exercise their best efforts to cure such breach, unless such breach is not cured within 15
days after notice of such breach is provided by the Company to Parent.

For purposes of this Agreement, a “Company Triggering Event” shall be deemed to have
occurred if: (i) the Company Board or the Special Committee withdraws, modifies or changes the
Company Recommendation in a manner adverse to Parent or shall have resolved to do so; (ii) the
Company shall have failed to include in the Proxy Statement the recommendation of the Company Board
or Special Committee in favor of the approval and adoption of this Agreement by the Company Board;
or (iii) the HLHZ Fairness Opinion shall have been withdrawn, revoked, annulled or materially
modified.

35

 

     SECTION 8.02 Effect of Termination. In the event of the termination of this Agreement
pursuant to Section 8.01, this Agreement shall forthwith become void, and there shall be no
liability under this Agreement on the part of any party hereto, except (a) as set forth in Section
8.03 and (b) nothing herein shall relieve any party from liability for any willful breach of any of
its representations, warranties, covenants or agreements set forth in this Agreement prior to such
termination; provided, however, that the Confidentiality Agreement shall survive
any termination of this Agreement.

     SECTION 8.03 Fees and Expenses. All Expenses (as defined below) incurred in
connection with this Agreement and the transactions contemplated by this Agreement shall be paid by
the party incurring such expenses, whether or not the Merger or any other transaction is
consummated, except that the Company and Parent shall each pay one-half of all Expenses relating to
printing, filing and mailing the Registration Statement and the Proxy Statement and all SEC and
other regulatory filing fees incurred in connection with the Registration Statement and the Proxy
Statement; provided, however, that in the event this Agreement is terminated by the
Company pursuant to Section 8.01(b) if (i) the Registration Statement has not been declared
effective by the SEC for reasons unrelated to the Company and its subsidiaries or (ii) the Parent
Common Stock has not been authorized for listing on the AMEX for reasons unrelated to the Company
and its subsidiaries, Parent shall reimburse the Company for all the Company’s Expenses.
“Expenses”, as used in this Agreement, shall include all reasonable out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its affiliates) incurred by a party (which in the
case of the Company shall be deemed to include the Special Committee) or on its behalf in
connection with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the preparation, printing, filing and mailing of the Registration
Statement and the Proxy Statement, the solicitation of stockholder approvals and all other matters
related to the closing of the Merger and the other Transactions.

     SECTION 8.04 Amendment. This Agreement may be amended by the parties hereto by action
taken by or on behalf of their respective Boards of Directors at any time prior to the Effective
Time; provided, however, that, after the approval and adoption of this Agreement
and the Transactions by the stockholders of the Company, no amendment may be made which by
applicable Law or in accordance with the rules of the AMEX requires further approval by such
stockholders without such further approval. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.

     SECTION 8.05 Waiver. At any time prior to the Effective Time, any party hereto may
(a) extend the time for the performance of any obligation or other act of any other party hereto,
(b) waive any inaccuracy in the representations and warranties of any other party contained herein
or in any document delivered pursuant hereto and (c) waive compliance with any agreement of any
other party or any condition to its own obligations contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or parties to be bound
thereby.

36

 

ARTICLE IX

GENERAL PROVISIONS

     SECTION 9.01 Non-Survival of Representations, Warranties and Agreements. The
representations, warranties and agreements in this Agreement and in any certificate delivered
pursuant hereto shall terminate at the Effective Time, except that the agreements set forth in
Articles I and II, Section 6.04 and Section 6.08 and this Article IX shall survive the Effective
Time.

     SECTION 9.02 Notices. All notices, requests, claims, demands and other communications
hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon
receipt) by delivery in person, by telecopy or email or by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance with this Section
9.02):

if to Parent or Merger Sub:

Henry Birks & Sons Inc.

1240 Square Phillips

Montreal, Quebec

H3B 3H4

Attention: Sabine Bruckert, Esq.

bruckerts@birks.com

with a copy to:

Shearman & Sterling LLP

199 Bay Street

Commerce Court West

Suite 4405, P.O. Box 247

Toronto, Ontario

M5L 1E8 CANADA

Attention: Brice T. Voran, Esq.

bvoran@shearman.com

and

Adam M. Givertz, Esq.

agivertz@shearman.com

if to the Company:

Mayor’s Jewelers, Inc.

14051 N.W. 14th Street

Sunrise, Florida 33323

Attention: Marc Weinstein

mweinstein@mayors.com

and

37

 

Ann Spector Lieff, Chairperson of the Special Committee

annlieff@aol.com

with a copy to:

Holland & Knight LLP

701 Brickell Avenue

Suite 3000

Miami, Florida 33131

Attention: Rodney H. Bell, Esq.

rodney.bell@hklaw.com

and

King & Spalding LLP

191 Peachtree Street

Atlanta, Georgia 30303

Attention: C. William Baxley, Esq.

bbaxley@kslaw.com

     SECTION 9.03 Certain Definitions. (a) For purposes of this Agreement:

     “affiliate” of a specified person means a person who, directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under common control
with, such specified person.

     “associate” of a specified person has the meaning ascribed to such term under
Rule 12b-2 of the Exchange Act.

     “business day” means any day on which the principal offices of the SEC in
Washington, D.C. are open to accept filings, or, in the case of determining a date when any
payment is due, any day on which banks are not required or authorized to close in The City
of New York and/or Montreal, Quebec.

     “Company Material Adverse Effect” means any event, circumstance, change or
effect that, individually or in the aggregate with all other events, circumstances, changes
and effects, is or is reasonably likely to be materially adverse to (i) the business,
condition (financial or otherwise), assets, liabilities or results of operations of the
Company and its subsidiaries taken as a whole or (ii) the ability of the Company to
consummate the transactions contemplated by this Agreement; provided,
however, that clause (i) shall not include any event, circumstance, change or effect
resulting from (x) changes in general economic conditions, changes in the stock price of the
Company, or changes in securities markets in general that do not have a materially
disproportionate effect (relative to other industry participants) on the Company or its
subsidiaries, (y) general changes in the industries in which the Company and its
subsidiaries operate, except those events, circumstances, changes or effects that adversely
affect the Company and its subsidiaries to a materially greater extent than they affect
other entities operating

38

 

in such industries or (z) the public announcement or pendency of the transactions
contemplated hereby.

     “Company Preferred Stock” means the shares of preferred stock, par value
$0.0001 per share, of the Company designated as “Series A-1 Convertible Preferred Stock.”

     “control” (including the terms “controlled by” and “under common
control with”) means the possession, directly or indirectly, or as trustee or executor,
of the power to direct or cause the direction of the management and policies of a person,
whether through the ownership of voting securities, as trustee or executor, by contract or
credit arrangement or otherwise.

     “Disinterested Stockholder Vote” means the affirmative vote in favor of the
approval and adoption of this Agreement by at least a majority of the outstanding shares of
Company Common Stock voted, in person or by proxy (but not including a vote that is not
counted as either affirmative or negative), at the Company Stockholder meeting by persons
other than Parent or any person that is an affiliate or associate of Parent.

     “Environmental Laws” means any United States federal, state or local or
Canadian federal, provincial or local or non-United States or Canadian Laws relating to (i)
releases or threatened releases of Hazardous Substances or materials containing Hazardous
Substances; (ii) the manufacture, handling, transport, use, treatment, storage or disposal
of Hazardous Substances or materials containing Hazardous Substances; or (iii) pollution or
protection of the environment, health, safety or natural resources.

     “five-percent transferee shareholder” means any person who owns at least five
percent of either the total voting power or total value of the stock of Parent immediately
after the Merger after applying the rules of Section 1.367(a)-3(c)(4) of the income tax
regulations promulgated under the Code.

     “Hazardous Substances” means (i) petroleum and petroleum products, including
crude oil and any fractions thereof; (ii) natural gas, synthetic gas, and any mixtures
thereof; (iii) polychlorinated biphenyls, asbestos and radon; (iv) any other contaminant;
and (v) any substance, material or waste regulated by any Governmental Authority pursuant to
any Environmental Law.

     “Intellectual Property” means (i) United States, Canadian and international
patents, patent applications and statutory invention registrations, (ii) trademarks, service
marks, trade dress, logos, trade names, corporate names and other source identifiers, and
registrations and applications for registration thereof, (iii) copyrightable works,
copyrights, and registrations and applications for registration thereof, and (iv)
confidential and proprietary information, including trade secrets and know-how.

     “knowledge” when used in reference to Parent, means actual knowledge of any
executive officer of Parent who is also an executive officer of the Company.

39

 

     “Parent Material Adverse Effect” means any event, circumstance, change or
effect that, individually or in the aggregate with all other events, circumstances, changes
and effects, is or is reasonably likely to be materially adverse to (i) the business,
condition (financial or otherwise), assets, liabilities or results of operations of Parent
and the Subsidiaries taken as a whole or (ii) the ability of Parent to consummate the
transactions contemplated by this Agreement; provided, however, that clause
(i) shall not include any event, circumstance, change or effect resulting from (x) changes
in general economic conditions or changes in securities markets in general that do not have
a materially disproportionate effect (relative to other industry participants) on Parent or
the Subsidiaries, (y) general changes in the industries in which Parent and the Subsidiaries
operate, except those events, circumstances, changes or effects that adversely affect Parent
and the Subsidiaries to a materially greater extent than they affect other entities
operating in such industries or (z) the public announcement or pendency of the Transactions.

     “person” means an individual, corporation, partnership, limited partnership,
limited liability company, syndicate, person (including, without limitation, a “person” as
defined in Section 13(d)(3) of the Exchange Act), trust, association or entity or
government, political subdivision, agency or instrumentality of a government.

     “Required Company Vote” means the affirmative vote in favor of the approval and
adoption of this Agreement by the holders of the Company Common Stock and the Company
Preferred Stock, voting as a single class, representing at least a majority of the sum of
(i) the outstanding shares of Company Common Stock and (ii) the shares of Company Common
Stock into which the outstanding shares of Company Preferred Stock are convertible.

     “subsidiary” or “subsidiaries” means, with respect to any person, any
corporation or other entity of which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or other persons performing
similar functions are directly or indirectly owned by such person.

     “Taxes” shall mean any and all taxes, fees, levies, duties, tariffs, imposts
and other charges of any kind (together with any and all interest, penalties, additions to
tax and additional amounts imposed with respect thereto) imposed by any Governmental
Authority or taxing authority, including, without limitation: taxes or other charges on or
with respect to income, franchise, windfall or other profits, gross receipts, property,
sales, use, capital stock, payroll, employment, social security, workers’ compensation,
unemployment compensation or net worth; taxes or other charges in the nature of excise,
withholding, ad valorem, stamp, transfer, value-added or gains taxes; license, registration
and documentation fees; and customers’ duties, tariffs and similar charges.

40

 

     (b) Unless otherwise noted, all references to “$” or “dollars” shall mean U.S. dollars.

     (c) The following terms have the meaning set forth in the Sections set forth below:

	 	 	 	 	 
	Defined Term	 	Location of Definition	 
	Action
	 	§ 4.11
	Agreement
	 	Preamble
	AMEX
	 	§ 2.02(e)
	Audited Financial Statements
	 	§ 4.08
	Blue Sky Laws
	 	§ 3.02(b)
	Certificate of Merger
	 	§ 1.02
	Certificates
	 	§ 2.02(b)
	Closing
	 	§ 1.02
	Code
	 	Recitals
	Company
	 	Preamble
	Company Board
	 	Recitals
	Company Common Stock
	 	§ 2.01(a)
	Company Disclosure Schedule
	 	§ 3.02	 
	Company Recommendation
	 	§ 6.01(b)
	Company Restricted Stock Award
	 	§ 2.05	 
	Company Stock Options
	 	§ 2.04(a)	
	Company Stock Option Plans
	 	§ 2.04(a)
	Company Stockholders’ Meeting
	 	§ 6.01(a)
	Company Triggering Event
	 	§ 8.01	 
	Company Warrants
	 	§ 2.06(a)
	Company Warrant Agreements
	 	§ 2.06(a)
	Confidentiality Agreement
	 	§ 6.03(b)
	DGCL
	 	Recitals
	Effective Time
	 	§ 1.02	 
	Environmental Permits
	 	§ 4.17	 
	Exchange Act
	 	§ 3.02(b)
	Exchange Agent
	 	§ 2.02(a)
	Exchange Fund
	 	§ 2.02(a)
	Exchange Ratio
	 	§ 2.01(a)
	Expenses
	 	§ 8.03	 
	Financial Statements
	 	§ 4.08	 
	GAAP
	 	§ 4.10(a)
	Governmental Authority
	 	§ 3.02(b)
	HLHZ Fairness Opinion
	 	§ 3.05	 
	Inventories
	 	§ 4.25	 
	IRS
	 	§ 6.08(b)
	ITA
	 	§ 2.02(i)
	Law
	 	§ 3.02(a)
	Lease Documents
	 	§ 4.14(b)

41

 

	 	 	 	 	 
	Liens
	 	§ 4.14(a)
	Material Contracts
	 	§ 4.18(a)
	Material Subsidiary
	 	§ 4.01(c)
	Merger
	 	Recitals
	Merger Consideration
	 	§ 2.01(a)
	Merger Sub
	 	Preamble
	Order
	 	§ 7.01(c)
	Parent
	 	Preamble
	Parent Board
	 	Recitals
	Parent Class B Shares
	 	§ 4.03(a)
	Parent Common Stock
	 	§ 2.01(a)
	Parent Disclosure Schedule
	 	§ 4.01(b)
	Parent Licensed Intellectual Property
	 	§ 4.15	 
	Parent Owned Intellectual Property
	 	§ 4.15	 
	Parent Permits
	 	§ 4.06	 
	Parent Preferred Stock
	 	§ 4.03(a)
	Parent SEC Reports
	 	§ 4.07	 
	Parent Stock Option Plan
	 	§ 4.03(a)
	Permitted Liens
	 	§ 4.14(a)
	Plans
	 	§ 4.12(a)
	Proxy Statement
	 	§ 6.01(a)
	Registration Statement
	 	§ 6.01(a)
	Representatives
	 	§ 6.03(a)
	SEC
	 	§ 4.07	 
	Secured Convertible Notes
	 	§ 7.03(i)
	Securities Act
	 	§ 4.03(d)
	Shares
	 	§ 2.01(a)
	Special Committee
	 	Recitals
	Subsidiary
	 	§ 4.01	 
	Subsidiaries
	 	§ 4.01	 
	Substitute Option
	 	§ 2.04(a)
	Substitute Warrant
	 	§ 2.06(a)
	Surviving Corporation
	 	§ 1.01	 
	Terminating Company Breach
	 	§ 8.01(f)
	Terminating Parent Breach
	 	§ 8.01(g)
	Transactions
	 	§ 3.01	 
	Unaudited Financial Statements
	 	§ 4.08	 

     SECTION 9.04 Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full force and effect so
long as the economic or legal substance of the Transactions is not affected in any manner
materially adverse to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith
to modify this Agreement so as to effect the original intent of the parties as closely as

42

 

possible in a mutually acceptable manner in order that the Transactions be consummated as
originally contemplated to the fullest extent possible.

     SECTION 9.05 Entire Agreement; Assignment. This Agreement constitutes the entire
agreement among the parties with respect to the subject matter hereof and supersedes, except as set
forth in Sections 6.03(b), all prior agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter hereof. This Agreement shall not be
assigned or delegated (whether pursuant to a merger, by operation of Law or otherwise).

     SECTION 9.06 Parties in Interest. This Agreement shall be binding upon and inure
solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement, other than Section 6.04 (which is intended to be
for the benefit of the persons covered thereby and may be enforced by such persons).

     SECTION 9.07 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event any provision of this Agreement were not performed in accordance with the
terms hereof and that the parties shall be entitled to specific performance of the terms hereof, in
addition to any other remedy at law or equity.

     SECTION 9.08 Governing Law. This Agreement shall be governed by, and construed in
accordance with, the Laws of the State of Delaware applicable to contracts executed in and to be
performed in that State. All actions and proceedings arising out of or relating to this Agreement
shall be heard and determined exclusively in any Delaware Chancery Court. The parties hereto
hereby (a) submit to the exclusive jurisdiction of the Delaware Chancery Court for the purpose of
any Action arising out of or relating to this Agreement brought by any party hereto, and (b)
irrevocably waive, and agree not to assert by way of motion, defense, or otherwise, in any such
Action, any claim that it is not subject personally to the jurisdiction of the Delaware Chancery
Court, that its property is exempt or immune from attachment or execution, that the Action is
brought in an inconvenient forum, that the venue of the Action is improper, or that this Agreement
or the Transactions may not be enforced in or by the Delaware Chancery Court.

     SECTION 9.09 Waiver of Jury Trial. Each of the parties hereto hereby waives to the
fullest extent permitted by applicable Law any right it may have to a trial by jury with respect to
any litigation directly or indirectly arising out of, under or in connection with this Agreement or
the Transactions. Each of the parties hereto (a) certifies that no representative, agent or
attorney of any other party has represented, expressly or otherwise, that such other party would
not, in the event of litigation, seek to enforce that foregoing waiver and (b) acknowledges that it
and the other hereto have been induced to enter into this Agreement and the Transactions, as
applicable, by, among other things, the mutual waivers and certifications in this Section 9.09.

     SECTION 9.10 Headings. The descriptive headings contained in this Agreement are
included for convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.

43

 

     SECTION 9.11 Counterparts. This Agreement may be executed and delivered (including by
facsimile transmission) in one or more counterparts, and by the different parties hereto in
separate counterparts, each of which when executed shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.

     SECTION 9.12 Special Committee. Prior to the Effective Time, any consent, waiver or
other determination to be made, or action to be taken, by the Company under this Agreement shall be
made or taken only upon the approval of the Special Committee, including, without limitation,
pursuant to or under Section 5.02, Section 7.03 or Article VIII.

44

 

     IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be
executed as of the date first written above by their respective officers thereunto duly authorized.

	 	 	 	 	 
	 	HENRY BIRKS & SONS INC.

 	 
	 	By:  	/s/
Thomas A. Andruskevich
 	 
	 	 	Name:  	Thomas A. Andruskevich 	 
	 	 	Title:  	President & Chief Executive Officer 	 
	 

	 	 	 	 	 
	 	BIRKS MERGER CORPORATION

 	 
	 	By:  	/s/ Thomas A. Andruskevich
 	 
	 	 	Name:  	Thomas A. Andruskevich 	 
	 	 	Title:  	President 	 
	 

	 	 	 	 	 
	 	MAYOR’S JEWELERS, INC.

 	 
	 	By:  	/s/ Marc Weinstein
 	 
	 	 	Name:  	Marc Weinstein 	 
	 	 	Title:  	Senior Vice President & Chief Administrative
Officer 	 

45

 

	 	 	 	 	 

EXHIBIT 6.06

FORM OF AFFILIATE LETTER FOR

AFFILIATES OF THE COMPANY

[___] [_], 2005

Henry Birks & Sons Inc.

1240 Phillips Square

Montreal, Quebec

H3B 3H4

Ladies and Gentlemen:

     I have been advised that as of the date of this letter I may be deemed to be an “affiliate” of
Mayor’s Jewelers, Inc., (the “Company”), as the term “affiliate” is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the “Rules and
Regulations”) of the Securities and Exchange Commission (the “Commission”) under the
Securities Act of 1933, as amended (the “Act”). Pursuant to the terms of the Agreement and
Plan of Merger and Reorganization, dated as of April 18, 2005 (the “Merger Agreement”),
among Henry Birks & Sons Inc., a Canadian corporation (“Parent”), Birks Merger Corporation,
a Delaware corporation (“Merger Sub”), and the Company, Merger Sub will be merged with and
into the Company (the “Merger”). Capitalized terms used in this letter agreement without
definition shall have the meanings assigned to them in the Merger Agreement.

     As a result of the Merger, I may receive shares of common stock, without par value, of Parent
(the “Parent Shares”). I would receive such Parent Shares in exchange for shares (or upon
exercise of options for shares) owned by me of common stock, par value $0.0001 per share, of the
Company (the “Company Shares”).

     1. I represent, warrant and covenant to Parent that in the event I receive any Parent Shares
as a result of the Merger:

     A. I shall not make any sale, transfer or other disposition of the Parent Shares in
violation of the Act or the Rules and Regulations.

     B. I have carefully read this letter and the Merger Agreement and discussed the
requirements of such documents and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of the Parent Shares, to the extent I felt necessary, with my
counsel or counsel for the Company.

     C. I have been advised that the issuance of the Parent Shares to me pursuant to the
Merger has been registered with the Commission under the Act on a Registration Statement on
Form F-4. However, I have also been advised that, because at the time the Merger is
submitted for a vote of the shareholders of the Company, (a) I may be deemed to be an
affiliate of the Company and (b) the distribution by me of the Parent Shares has not been
registered under the Act, I may not sell, transfer or otherwise dispose of the Parent Shares
issued to me in the Merger unless (i) such sale, transfer or other disposition

 

 

     is made in conformity with the volume and other limitations of Rule 145 promulgated by
the Commission under the Act, (ii) such sale, transfer or other disposition has been
registered under the Act or (iii) in the opinion of counsel reasonably acceptable to Parent,
such sale, transfer or other disposition is otherwise exempt from registration under the
Act.

     D. I understand that Parent is under no obligation to register the sale, transfer or
other disposition of the Parent Shares by me or on my behalf under the Act or, except as
provided in paragraph 2(A) below, to take any other action necessary in order to make
compliance with an exemption from such registration available.

     E. I understand that there will be placed on the certificates for the Parent Shares
issued to me, or any substitutions therefor, a legend stating in substance:

	 	   	“THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO WHICH
RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE WITH THE TERMS
OF AN AGREEMENT DATED [___], 2005 BETWEEN THE REGISTERED HOLDER HEREOF AND HENRY
BIRKS & SONS INC., A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL OFFICES OF
HENRY BIRKS & SONS INC.”

     F. I understand that unless a sale or transfer is made in conformity with the
provisions of Rule 145, or pursuant to a registration statement, Parent reserves the right
to put the following legend on the certificates issued to my transferee:

	 	   	“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH SHARES IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN
CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT
OF 1933 AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE
WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933.

     G. Execution of this letter should not be considered an admission on my part that I am
an “affiliate” of the Company as described in the first paragraph of this letter, nor as a
waiver of any rights I may have to object to any claim that I am such an affiliate on or
after the date of this letter.

     2. By Parent’s acceptance of this letter, Parent hereby agrees with me as follows:

     A. For so long as and to the extent necessary to permit me to sell the Parent Shares
pursuant to Rule 145 and, to the extent applicable, Rule 144 under the Act, Parent

2

 

shall (a) use its reasonable efforts to (i) file, on a timely basis, all reports and
data required to be filed with the Commission by it pursuant to Section 13 of the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), and (ii) furnish to me upon
request a written statement as to whether Parent has complied with such reporting
requirements during the 12 months preceding any proposed sale of the Parent Shares by me
under Rule 145, and (b) otherwise use its reasonable efforts to permit such sales pursuant
to Rule 145 and Rule 144. Parent hereby represents to me that it has filed all reports
required to be filed with the Commission under Section 13 of the Exchange Act during the
preceding 12 months.

     B. It is understood and agreed that certificates with the legends set forth in
paragraphs I(E) and l(F) above will be substituted by delivery of certificates without such
legends if (i) one year shall have elapsed from the date the undersigned acquired the Parent
Shares received in the Merger and the provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the undersigned acquired the
Parent Shares received in the Merger and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, or (iii) Parent has received either an opinion of counsel,
which opinion and counsel shall be reasonably satisfactory to Parent, or a “no action”
letter obtained by the undersigned from the staff of the Commission, to the effect that the
restrictions imposed by Rule 145 under the Act no longer apply to the undersigned.

	 	 	 	 	 
	 	Very truly yours,

_____________________________________

Name:

 	 
	 	
 	 
	 	 	 
	 	 	 
	 

Agreed and accepted this [___] day

of [___], 2005, by

	 	 	 	 	 
	 	HENRY BIRKS & SONS INC.

 	 
	 	By:  	/s/
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 

3

 

Exhibit 7.03(f)(i)

CANADA BUSINESS

CORPORATIONS ACT

ARTICLES

1. Name of the Corporation

     HENRY BIRKS & SONS INC.

2. The province or territory in Canada where the registered office is situated

     Province of Quebec

3. The classes and any maximum number of shares that the Corporation is authorized to issue

     The attached Schedule 1 is forming part hereof.

4. Restrictions, if any, on share transfers

None

5. Number (or minimum and maximum number) of directors

     A minimum of three (3) directors and a maximum of fifteen (15) directors.

6. Restrictions, if any, on the business the Corporation may carry on

     None.

7. Other provisions, if any

	 	(a)  	Meetings of shareholders of the Corporation may be held in the greater
metropolitan area of any city having a population of more than 80,000 inhabitants in
the United States, in any member-country of the European Union or in Asia.
	 
	 	(b)  	A director’s term of office shall be from the date of the meeting at which he
is elected or appointed until the first annual meeting next following his election or
nomination or, if an election of the board of directors is not held at such meeting or
if such meeting does not occur, at the date on which his successor is elected or
appointed, or earlier if he dies or resigns, is removed or disqualified, or if his term
of office ends for any other reason.
	 
	 	(c)  	The directors may appoint one or more directors, who shall hold office for a
term expiring no later than the close of the next annual meeting of shareholders, but
the total number of directors so appointed may not exceed one-third of the number of
directors elected at the previous annual meeting of shareholders.

 

 

Schedule 1

3. The classes and maximum number of shares that the Corporation is authorized to issue:

	 	   	Unlimited number of Class A Voting Shares without nominal or par value;
Unlimited number of Class B Multiple Voting Shares without nominal or par value; and
Unlimited number of Preferred Shares without nominal or par value, issuable in series.
	 
	 	   	The Class A Voting Shares and the Class B Multiple Voting Shares are sometimes referred to
herein collectively as the “Common Shares”. Any capitalized term shall have the meaning
assigned to such term in these Articles. Any reference herein to the Act is a reference to
the Canada Business Corporations Act as it now exists and as it may be amended from time to
time and any reference herein to a section of the Act is a reference to a section of the Act
as such section is presently numbered or as it may be renumbered from time to time.

	I.  	The Class A Voting Shares shall have attached thereto the following rights, privileges, restrictions and conditions:

	 	(b)  	Voting. Each Class A Voting Share shall entitle the holder thereof to
one (1) vote at all meetings of the shareholders of the Corporation (except meetings at
which only holders of another specified class of shares are entitled to vote pursuant
to the provisions hereof or pursuant to the provisions of the Act).
	 
	 	(c)  	Ranking on Liquidation. In the event of the liquidation, dissolution
or winding-up of the Corporation, whether voluntary or involuntary, or other
distribution of assets of the Corporation among shareholders for the purpose of
winding-up its affairs, subject to the rights, privileges, restrictions and conditions
attaching to any other class of shares ranking prior to the Class A Voting Shares or
the Class B Multiple Voting Shares, the holders of the Class A Voting Shares and the
holders of the Class B Multiple Voting Shares shall be entitled to receive the
remaining property of the Corporation. The holders of the Class A Voting Shares and
the holders of the Class B Multiple Voting Shares shall rank equally with respect to
the distribution of assets in the event of the liquidation, dissolution or winding-up
of the Corporation, whether voluntary or involuntary, or any other distribution of the
assets of the Corporation among shareholders for the purpose of winding-up its affairs.
	 
	 	(d)  	Dividends and Distributions. In addition to any dividend or
distribution declared by the directors of the Corporation in respect of Class A Voting
Shares, holders of Class A Voting Shares shall be entitled to receive a dividend or
distribution, whether cash, non-cash or some combination thereof, equal (on a per share
basis) to any dividend or distribution declared by the directors of the Corporation in
respect of the Class B Multiple Voting Shares. Dividends and distributions on Class A
Voting Shares shall be payable on the date fixed for payment of the dividend or
distribution in respect of Class A Voting Shares or, if

2

 

	 	   	applicable, on the date fixed for payment of any dividend or distribution in
respect of Class B Multiple Voting Shares.

	 	(e)  	Right of Participation in a Sale Transaction.

	 	(i)  	No holder of Class B Multiple Voting Shares (a “Selling
Holder”) shall sell, transfer or otherwise dispose of Class B Multiple Voting
Shares if, immediately following such sale, transfer or disposition of Class B
Multiple Voting Shares, such Selling Holder and its Affiliates shall control
less than a majority of the total voting rights attached to the Common Shares
issued and outstanding on the date of such sale, transfer or disposition (a
“Sale Transaction”), unless all other holders of Common Shares shall have the
right (A) to receive the same consideration (on a per share basis), whether
cash, non-cash or some combination thereof, as that to be received by the
Selling Holder pursuant to the Sale Transaction and (B) to participate in such
Sale Transaction on the same terms as the Selling Holder in all other material
respects, including in respect of the conditions to such Sale Transaction.
Written notice of any Sale Transaction, which notice shall specify the terms of
such Sale Transaction and the right of all holders of Common Shares to
participate in such Sale Transaction, shall be provided to the holders of
Common Shares by first class mail, at least twenty (20) business days prior to
the consummation of such Sale Transaction.
	 
	 	(ii)  	Any Sale Transaction not in compliance with subsection (e)(i)
above shall be null and void and shall not be registered in the books of the
Corporation.
	 
	 	(iii)  	Notwithstanding the foregoing, none of the following shall
constitute a Sale Transaction: (A) any pledge, mortgage, hypothecation, lien or
similar encumbrance, whether by possession or registration, of Class B Multiple
Voting Shares which creates a security interest in favor of another person or
entity, and (B) any sale, transfer or other disposition of Class B Multiple
Voting Shares to Affiliates, Associates or shareholders of the transferor of
such Class B Multiple Voting Shares. For purposes of these Articles, an
“Affiliate” means a person that directly or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such specified person. For purposes of these Articles, an “Associate”, when
used to indicate a relationship with any person, means (x) any trust or other
estate in which such person has a substantial beneficial interest or as to
which such person serves as trustee or in a similar fiduciary capacity and (y)
a spouse or child of such person.

	 	(f)  	Right of Participation in a Business Combination.

	 	(i)  	The Corporation shall not consummate a Business Combination
unless the holders of Class A Voting Shares shall have the right (A) to receive

3

 

	 	   	the same consideration (on a per share basis), whether cash, non-cash or
some combination thereof, as that to be received by the holders of Class B
Multiple Voting Shares in connection with such Business Combination and (B)
to participate in such Business Combination on the same terms as the holders
of Class B Multiple Voting Shares in all other material respects, including
in respect of the conditions to such Business Combination.

	 	(ii)  	“Business Combination” as used herein shall mean, whether in
one or a series of related transactions:

	 	(A)  	any merger, amalgamation, recapitalization or
consolidation involving the Corporation, other than a merger,
amalgamation, recapitalization, consolidation or similar transaction
with a wholly-owned subsidiary of the Corporation or which is solely
for the purpose of continuance of the Corporation as a corporation in
another jurisdiction;
	 
	 	(B)  	any sale, lease, exchange, transfer or other
disposition involving 50% or more of the assets of the Corporation and
its subsidiaries, on a consolidated basis; or
	 
	 	(C)  	any agreement, contract or other arrangement
having the same purpose or effect as the transactions described in (A)
and (B) above.

	 	(g)  	Transactions or Actions Requiring Special Approval.

	 	(i)  	In addition to any other approvals required under the Act,
prior to consummating a Related Party Transaction, the Corporation shall obtain
(A) the consent of the majority of a committee of independent directors of the
Corporation and (B) with respect to clauses (x) and (y) of the definition of
Related Party Transaction below, the affirmative vote in favor of the approval
of the Related Party Transaction by the majority of the holders of Class A
Voting Shares (exclusive of Class A Voting Shares held by the Related Person
(and its Affiliates and Associates) which is or would be a party to such
Related Party Transaction) that cast a vote, in person or by proxy (but not
including any vote that is not counted as either an affirmative or negative
vote), at the annual or special shareholders meeting at which such Related
Party Transaction is considered.
	 
	 	(ii)  	For purposes of these Articles, (A) “Related Party Transaction”
shall mean (x) consummation of a Business Combination with a Related Person;
(y) amending, repealing or altering in anyway any provision of these Articles
or the By-laws of the Corporation, except for matters not having an adverse
effect on the holders of Class A Voting Shares; or (z) the

4

 

	 	   	issuance, sale, exchange, transfer or other disposition (in one transaction
or a series of related transactions) by the Corporation or any wholly-owned
subsidiary of the Corporation of any securities of the Corporation or of
such subsidiary to a Related Person (other than pursuant to: an employee or
director stock incentive plan or other compensation arrangements approved by
the Compensation Committee of the Corporation; an offering made to all
holders of Class A Voting Shares; or a public offering); and (B) “Related
Person” shall mean any individual, corporation, partnership, group,
association or other person or entity that, together with its Affiliates and
Associates, beneficially owns Class A Voting Shares and/or Class B Multiple
Voting Shares which, in the aggregate, equal twenty percent (20%) or more of
the total voting rights attached to the Common Shares issued and outstanding
at the time the definitive agreement with respect to a Related Party
Transaction is executed.

	 	(h)  	Subdivision, Consolidation, Reclassification or other Change. No
subdivision, consolidation or reclassification of, or other change to, the Class A
Voting Shares shall be carried out, either directly or indirectly unless, at the same
time, the Class B Multiple Voting Shares are subdivided, consolidated, reclassified or
changed in the same manner and on the same basis.
	 
	 	(i)  	Equal Status. Except as otherwise expressly provided in these
Articles, Class A Voting Shares and Class B Multiple Voting Shares shall have the same
rights and privileges and shall rank equally, share ratably and be equal in all
respects as to all matters.

	II.  	The Class B Multiple Voting Shares shall have attached thereto the following rights, privileges, restrictions and conditions:

	 	(a)  	Voting. Each Class B multiple voting share shall entitle the holder
thereof to ten (10) votes at all meetings of the shareholders of the Corporation
(except meetings at which only holders of another specified class of shares are
entitled to vote pursuant to the provisions hereof or pursuant to the provisions of the
Act).
	 
	 	(b)  	Ranking on Liquidation. In the event of the liquidation, dissolution
or winding-up of the Corporation, whether voluntary or involuntary, or other
distribution of assets of the Corporation among shareholders for the purpose of
winding-up its affairs, subject to the rights, privileges, restrictions and conditions
attaching to any other class of shares ranking prior to the Class B Multiple Voting
Shares or the Class A Voting Shares, the holders of the Class B Multiple Voting Shares
and the holders of the Class A Voting Shares shall be entitled to receive the remaining
property of the Corporation. The holders of the Class B Multiple Voting Shares and the
holders of the Class A Voting Shares shall rank equally with respect to the
distribution of assets in the event of the liquidation, dissolution or winding-up of
the Corporation, whether voluntary or

5

 

	 	   	involuntary, or any other distribution of the assets of the Corporation among
shareholders for the purpose of winding-up its affairs.
	 
	 	(c)  	Dividends and Distributions. In addition to any dividend or
distribution declared by the directors in respect of Class B Multiple Voting Shares,
holders of Class B Multiple Voting Shares shall be entitled to receive a dividend or
distribution, whether cash, non-cash or some combination thereof, equal (on a per share
basis) to any dividend or distribution declared by the directors of the Corporation in
respect of Class A Voting Shares. Dividends and distributions on Class B Multiple
Voting Shares shall be payable on the dated fixed for payment of the dividend or
distribution in respect of Class B Multiple Voting Shares or, if applicable, on the
date fixed for payment of a dividend or distribution in respect of Class A Voting
Shares
	 
	 	(d)  	Conversion by Holder into Class A Voting Shares. Each Class B multiple
voting share may at any time and from time to time, at the option of the holder, be
converted into one (1) fully paid and non-assessable Class A voting share. Such
conversion right shall be exercised as follows:

	 	(i)  	the holder of Class B Multiple Voting Shares shall send to the
transfer agent of the Corporation a written notice, accompanied by a
certificate or certificates representing the Class B Multiple Voting Shares in
respect of which the holder desires to exercise such conversion right. Such
notice shall be signed by the holder of the Class B Multiple Voting Shares in
respect of which such right is being exercised, or by the duly authorized
representative thereof, and shall specify the number of Class B Multiple Voting
Shares which such holder desires to have converted. The holder shall also pay
any governmental or other tax, if any, imposed in respect of such conversion.
The conversion of the Class B Multiple Voting Shares into Class A Voting Shares
shall take effect upon receipt by the transfer agent of the Corporation of the
conversion notice accompanied by the certificate or certificates representing
the Class B Multiple Voting Shares in respect of which the holder desires to
exercise such conversion right.
	 
	 	(ii)  	upon receipt of such notice and certificate or certificates by
the transfer agent of the Corporation, the Corporation shall, effective as of
the date of such receipt, issue or cause to be issued a certificate or
certificates representing Class A Voting Shares into which Class B Multiple
Voting Shares are being converted. If less than all of the Class B Multiple
Voting Shares represented by any certificate are to be converted, the holder
shall be entitled to receive a new certificate representing the Class B
Multiple Voting Shares represented by the original certificate which are not to
be converted.

	 	(e)  	Subdivision, Consolidation, Reclassification or other Change. No
subdivision, consolidation or reclassification of, or other change to, the Class B
Multiple Voting Shares shall be carried out unless, at the same time, the Class A
Voting

6

 

	 	   	Shares are subdivided, consolidated, reclassified or changed in the same manner and
on the same basis.
	 
	 	(f)  	Equal Status. Except as otherwise expressly provided in these
Articles, Class B Multiple Voting Shares and Class A Voting Shares shall have the same
rights and privileges and shall rank equally, share ratably and be equal in all
respects as to all matters.

	III.  	The Preferred Shares shall have attached thereto, as a class, the following rights, privileges, restrictions and conditions:

	 	(a)  	Issuance of Preferred Shares, in Series. The directors of the
Corporation may, at any time and from time to time, issue Preferred Shares in one (1)
or more series, each series to consist of such number of Preferred Shares as may,
before issuance thereof, be determined by the directors.
	 
	 	(b)  	Determination of Rights, Privileges, Restrictions, Conditions and
Limitations attaching to Series of Preferred Shares. The directors of the
Corporation may, subject to the following, from time to time fix, before issuance, the
designation, rights, privileges, restrictions, conditions and limitations to attach to
the Preferred Shares of each series including, without limiting the generality of the
foregoing,

	 	(i)  	the rate, amount or method of calculation of preferential
dividends of the Preferred Shares of such series, if any, whether cumulative or
non-cumulative or partially cumulative, and whether such rate, amount or method
of calculation shall be subject to change or adjustment in the future, the
currency or currencies of payment, the date or dates and place or places of
payment thereof and the date or dates from which such preferential dividends
shall accrue; provided, that, the dividends payable with respect to any series
of Preferred Shares, whether cumulative or non-cumulative or partially
cumulative, shall not exceed five (5) percent of the liquidation preference of
such series of Preferred Shares;
	 
	 	(ii)  	the redemption price and terms and conditions of redemption, if
any, of the Preferred Shares of such series; provided, that, without the
approval by a majority of the votes cast at a meeting of shareholders of the
Company duly called, the redemption price shall not exceed the liquidation
preference of such shares;
	 
	 	(iii)  	the rights of retraction, if any, vested in the holders of
Preferred Shares of such series, and the prices and the other terms and
conditions of any rights of retraction, and whether any additional rights of
retraction may be vested in such holders in the future; provided, that, without
the approval by a majority of the votes cast at a meeting of shareholders of
the Company duly called, the retraction price shall not exceed the liquidation
preference of such shares;

7

 

	 	(iv)  	the voting rights, if any, of the Preferred Shares of such
series; provided, that, the approval by a majority of the votes cast at a
meeting of shareholders of the Corporation duly called shall be required for
the issuance of any series of Preferred Shares with voting rights;
	 
	 	(v)  	the conversion rights and terms and conditions of conversion,
if any, of the Preferred Shares of such series; provided, that, the approval by
a majority of the votes cast at a meeting of shareholders of the Company duly
called shall be required for the issuance of any series of Preferred Shares
which are convertible into securities with voting rights;
	 
	 	(vi)  	any sinking fund, purchase fund or other provisions attaching
to the Preferred Shares of such series; and
	 
	 	(vii)  	any other relative rights, preferences and limitations of the
Preferred Shares of such series,

	 	   	the whole subject to the issue of a certificate of amendment in respect of articles
of amendment in the prescribed form to designate a series of Preferred Shares.

	 	(c)  	Cumulative Dividends or Return of Capital not Paid in Full. Pursuant
to section 27(2) of the Act, when any cumulative dividends or amounts payable on a
return of capital in respect of a series of Preferred Shares are not paid in full, the
Preferred Shares of all series shall participate ratably in respect of such dividends
including accumulations, if any, in accordance with the sums which would be payable on
the Preferred Shares if all such dividends were declared and paid in full, and on any
return of capital in accordance with the sums which would be payable on such return of
capital if all sums so payable were paid in full.
	 
	 	(d)  	Payment of Dividends and Other Preferences. The Preferred Shares shall
be entitled to preference over the Class A Voting Shares, the Class B Multiple Voting
Shares and any other shares of the Corporation ranking junior to the Preferred Shares
with respect to the payment of dividends, and may also be given such other preferences
over the Class A Voting Shares, the Class B Multiple Voting Shares and any other shares
of the Corporation ranking junior to the Preferred Shares, as may be fixed by the
directors of the Corporation, as to the respective series authorized to be issued.
	 
	 	(e)  	Procedure for Payment of Dividends. No dividends shall at any time be
declared or paid or set apart for payment on any shares of the Corporation ranking
junior to the Preferred Shares, unless all dividends up to and including the dividends
payable for the last completed period for which such dividends shall be payable on each
series of Preferred Shares then issued and outstanding shall have been declared and
paid or set apart for payment at the date of such declaration or payment or setting
apart for payment on such shares of the Corporation ranking junior to the Preferred
Shares, nor shall the Corporation call

8

 

	 	   	for redemption or redeem or purchase for cancellation or reduce or otherwise pay off
any of the Preferred Shares (less than the total amount then outstanding) or any
            shares of the Corporation ranking junior to the Preferred Shares, unless all
dividends up to and including the dividend payable for the last completed period for
which such dividends shall be payable on each series of the Preferred Shares then
issued and outstanding shall have been declared and paid or set apart for payment at
the date of such call for redemption, purchase, reduction or other payment.

	 	(f)  	Ranking for Payment of Dividends and Liquidation, Dissolution or
Winding-up. The Preferred Shares of each series shall rank on a parity with the
Preferred Shares of every other series with respect to priority in payment of dividends
and in the distribution of assets in the event of liquidation, dissolution or
winding-up of the Corporation whether voluntary of involuntary.
	 
	 	(g)  	Liquidation, Dissolution or Winding-up. In the event of the
liquidation, dissolution or winding-up of the Corporation or other distribution of
assets of the Corporation among shareholders for the purpose of winding-up its affairs,
the holders of the Preferred Shares shall, before any amount shall be paid to or any
property or assets of the Corporation distributed among the holders of the Class A
Voting Shares, the Class B Multiple Voting Shares or any other shares of the
Corporation ranking junior to the Preferred Shares, be entitled to receive:

	 	(i)  	an amount equal to the consideration received by the
Corporation upon the issuance of such shares together with, in the case of
cumulative Preferred Shares, all unpaid cumulative dividends (which for such
purpose shall be calculated as if such cumulative dividends were accruing from
day to day for the period from the expiration of the last period for which
cumulative dividends have been paid-up to and including the date of
distribution) and, in the case of non-cumulative Preferred Shares, all declared
and unpaid non-cumulative dividends; and
	 
	 	(ii)  	if such liquidation, dissolution, winding-up or distribution
shall be voluntary, an additional amount equal to the premium, if any, which
would have been payable on the redemption of the said Preferred Shares
respectively if they had been called for redemption by the Corporation on the
date of distribution and, if said Preferred Shares could not be redeemed on
such date, then an additional amount equal to the greatest premium, if any,
which would have been payable on the redemption of said Preferred Shares
respectively.

	 	(h)  	Purchase by the Corporation. The Preferred Shares of any series may be
purchased for cancellation or made subject to redemption by the Corporation at such
times and at such prices and upon such other terms and conditions as may be specified
in the rights, privileges, restrictions and conditions attaching to the Preferred
Shares of such series as set forth in the articles of amendment relating to such
series.

9

 

	 	(i)  	Amendments. The provisions of this section III may be deleted or
varied in whole or in part by a certificate of amendment, but only with the prior
approval of the holders of the Preferred Shares, given as hereinafter specified, in
addition to any other approval required by the Act (or any other statutory provision of
the like or similar effect, from time to time in force). The approval of the holders
of the Preferred Shares with respect to any and all matters hereinbefore referred to,
may be given by at least two-thirds (2/3) of the votes cast at a meeting of the holders
of the Preferred Shares duly called for that purpose and held upon at least twenty-one
(21) days notice at which the holders of a majority of the outstanding Preferred Shares
are present or represented by proxy. If at any such meeting the holders of a majority
of the outstanding Preferred Shares are not present or represented by proxy within
thirty (30) minutes after the time appointed for such meeting, then the meeting shall
be adjourned to such date being not less than thirty (30) days later and to such time
and place as may be determined by the chairman of the meeting and not less than
twenty-one (21) days notice shall be given of such adjourned meeting but it shall not
be necessary in such notice to specify the purpose for which the meeting was originally
called. At such adjourned meeting the holders of Preferred Shares, present or
represented by proxy, may transact the business for which the meeting was originally
called and a resolution passed thereat by not less than two-thirds (2/3) of the votes
cast at such adjourned meeting, shall constitute the authorization of the holders of
the Preferred Shares referred to above. The formalities to be observed in respect of
the giving of notice of any such meeting or adjourned meeting and the conduct thereof
shall be those from time to time prescribed by the by-laws of the Corporation with
respect to meetings of shareholders. On every poll taken at every such meeting or
adjourned meeting, every holder of Preferred Shares shall be entitled to one (1) vote
in respect of each preferred share held.

10

 

Exhibit 7.03(f)(ii)

HENRY BIRKS & SONS INC. / HENRY BIRKS ET FILS INC.

BY-LAW NO. ONE

	 	 	 	 	 
	 	 	Page	 
	DEFINITIONS
	 	 	1	 
	Act
	 	 	1	 
	Articles
	 	 	1	 
	By-law
	 	 	1	 
	 
	 	 	 	 
	REGISTERED OFFICE
	 	 	1	 
	 
	 	 	 	 
	CORPORATE SEAL
	 	 	2	 
	 
	 	 	 	 
	DIRECTORS
	 	 	2	 
	Number
	 	 	2	 
	Vacancies
	 	 	2	 
	Vacation of Office
	 	 	2	 
	Election
	 	 	3	 
	Consent to be Elected or Appointed Director
	 	 	3	 
	 
	 	 	 	 
	MEETINGS OF DIRECTORS
	 	 	3	 
	Place and Calling of Meetings
	 	 	3	 
	Notice
	 	 	4	 
	Waiver of Notice
	 	 	4	 
	Participation by Communication Facilities
	 	 	4	 
	Adjournment
	 	 	4	 
	Quorum and Voting
	 	 	5	 
	Resolution in lieu of Meeting
	 	 	5	 
	 
	 	 	 	 
	REMUNERATION OF DIRECTORS
	 	 	5	 
	 
	 	 	 	 
	SUBMISSION OF CONTRACTS OR TRANSACTIONS TO SHAREHOLDERS
FOR APPROVAL
	 	 	6	 
	 
	 	 	 	 
	CHAIRMAN OF THE BOARD
	 	 	6	 
	 
	 	 	 	 
	OFFICERS
	 	 	6	 
	Appointment of Officers
	 	 	6	 
	Remuneration and Removal of Officers
	 	 	6	 
	Duties of Officers may be Delegated
	 	 	7	 
	President
	 	 	7	 
	Vice-President
	 	 	7	 
	Secretary
	 	 	7	 
	Treasurer
	 	 	8	 

 

 

- ii -

	 	 	 	 	 
	 	 	Page	 
	Assistant Secretary and Assistant Treasurer
	 	 	8	 
	 
	 	 	 	 
	COMMITTEES
	 	 	8	 
	Appointment of Committees
	 	 	8	 
	Audit Committee
	 	 	8	 
	Nominating Committee
	 	 	9	 
	Corporate Governance Committee
	 	 	9	 
	Executive Committee
	 	 	9	 
	Compensation Committee
	 	 	10	 
	 
	 	 	 	 
	DISCLOSURE OF INTEREST
	 	 	10	 
	 
	 	 	 	 
	INDEMNIFICATION AND PROTECTION OF DIRECTORS, OFFICERS AND
OTHERS
	 	 	11	 
	Liability
	 	 	11	 
	Indemnification
	 	 	12	 
	Insurance
	 	 	12	 
	 
	 	 	 	 
	MEETINGS OF SHAREHOLDERS
	 	 	12	 
	Annual Meeting
	 	 	12	 
	Special Meetings
	 	 	13	 
	Place of Meetings
	 	 	13	 
	Notice
	 	 	13	 
	Omission of Notice
	 	 	14	 
	Record Date
	 	 	14	 
	Participation by Communication Facilities
	 	 	14	 
	Votes
	 	 	15	 
	Proxies
	 	 	16	 
	Adjournment
	 	 	17	 
	Quorum
	 	 	17	 
	 
	 	 	 	 
	SECURITIES
	 	 	18	 
	Certificates
	 	 	18	 
	Registrar and Transfer Agent
	 	 	18	 
	Surrender of Share Certificates
	 	 	18	 
	Defaced, Destroyed, Stolen or Lost Certificates
	 	 	18	 
	 
	 	 	 	 
	DIVIDENDS
	 	 	19	 
	 
	 	 	 	 
	NOTICES
	 	 	19	 
	Method of Giving Notices
	 	 	19	 
	Shares registered in more than one (1) name
	 	 	19	 
	Persons becoming entitled by operation of law
	 	 	20	 
	Deceased Shareholder
	 	 	20	 
	Signatures to Notices
	 	 	20	 
	Computation of Time
	 	 	20	 
	Proof of Service
	 	 	20	 

 

 

- iii -

	 	 	 	 	 
	 	 	Page	 
	CHEQUES, DRAFTS, NOTES, ETC.
	 	 	21	 
	 	 	 	 	 
	CUSTODY OF SECURITIES
	 	 	21	 
	 	 	 	 	 
	EXECUTION OF CONTRACTS, ETC.
	 	 	21	 
	 	 	 	 	 
	DECLARATIONS
	 	 	22	 
	 	 	 	 	 
	FISCAL YEAR
	 	 	23	 

 

 

Exhibit 7.03(f)(ii)

BY-LAW NO. ONE

being a by-law relating generally to the transaction of the business and affairs
of Henry Birks & Sons Inc./Henry Birks et Fils Inc. (the “Corporation”).

DEFINITIONS

1. In this by-law and all other by-laws of the Corporation, unless the context otherwise
specifies or requires:

	 	(a)  	“Act” means the Canada Business Corporations Act, R.S.C., 1985, chapter C-44,
any statute that may be substituted therefore and any regulations thereunder, as from
time to time amended; and any reference to a section of the Act is a reference to a
section of the Act as such section is presently numbered or as it may be renumbered
from time to time;
	 
	 	(b)  	“articles” means the articles of the Corporation, as from time to time
amended or restated;
	 
	 	(c)  	“by-law” means this by-law and all other by-laws of the Corporation from time
to time in force and effect;
	 
	 	(d)  	words importing the singular number only shall include the plural and vice
versa; words importing the masculine gender shall include the feminine and neuter
genders and vice versa; words importing persons shall include bodies corporate,
corporations, companies, partnerships, syndicates, trusts and any number or aggregate
of individuals;
	 
	 	(e)  	the headings used in this by-law are inserted for reference purposes only and
are not to be considered or taken into account in construing the terms or provisions
thereof or to be deemed in any way to clarify, modify or explain the effect of any
such terms or provisions; and
	 
	 	(f)  	all terms contained in this by-law and which are defined in the Act shall
have the meanings given to such terms in the Act.

REGISTERED OFFICE

2. The Corporation may from time to time (i) by resolution of the board of directors, change
the place and/or address of the registered office of the Corporation within the province specified
in its articles and (ii) by articles of amendment, change the province in which its registered
office is situated to another province of Canada.

 

 

- 2 -

CORPORATE SEAL

3. The Corporation may have one or more corporate seals which shall be such as the board of
directors may by resolution from time to time adopt and change.

DIRECTORS

4. Number

     There shall be a board of directors consisting of such fixed number, or minimum and maximum
number of directors as may be set out in the articles. If any of the issued securities of the
Corporation are or were part of a distribution to the public, remain outstanding and are held by
more than one person, the Corporation shall not have fewer than three (3) directors, at least two
(2) of whom are not officers or employees of the Corporation or its affiliates.

5. Vacancies

     If a fixed number of directors is set out in the articles and if such fixed number is higher
than the number of directors in office at the time of the amendment to the articles, or if such
fixed number is thereafter increased, the resulting vacancies shall be filled at a meeting of
shareholders duly called for that purpose. Notwithstanding the provisions of this by-law and
subject to the provisions of the Act, if a vacancy should otherwise occur in the board, the
remaining directors, if constituting a quorum, may appoint a qualified person to fill the vacancy
for the remainder of the term, except a vacancy resulting from the fixing, in the articles, of a
number of directors that is higher than the number of directors in office at the time of the
amendment to the articles, from a subsequent increase of such fixed number or from a failure of the
shareholders to elect the number or minimum number of directors specified in the articles. In the
absence of a quorum or if the vacancy has arisen from a failure by the shareholders to elect the
number or minimum number of directors specified in the articles, the remaining directors shall
forthwith call a meeting of shareholders to fill the vacancy pursuant to subsection 111(2) of the
Act. If the directors fail to call such a meeting or if there are no directors then in office, any
shareholder may call the meeting. Where a vacancy or vacancies exist in the board, the remaining
directors may exercise all of the powers of the board so long as a quorum remains in office.

6. Vacation of Office

     The office of a director shall ipso facto be vacated if:

	 	(a)  	he dies;
	 
	 	(b)  	by notice in writing to the Corporation, he resigns his office and such
resignation, if not effective immediately, becomes effective in accordance with its
terms;

 

 

- 3 -

	 	(c)  	he is removed from office in accordance with section 109 of the Act; or
	 
	 	(d)  	he ceases to be qualified to be a director.

7. Election

     Directors shall be elected by the shareholders by ordinary resolution in a general meeting
unless the articles of the Corporation confer upon the directors the right to appoint additional
directors in which case, the dispositions of the Act apply. A vote by ballot shall not be necessary
for the election of the directors unless it is required by someone present and entitled to vote at
the meeting.

     A retiring director shall retain office until the adjournment or termination of the meeting at
which his successor is elected, unless such meeting was called for the purpose of removing him from
office as a director in which case the director so removed shall vacate office forthwith upon the
passing of the resolution for his removal.

8. Consent to be Elected or Appointed Director

     An individual who is elected or appointed to hold office as a director is not a director and
is deemed not to have been elected or appointed to hold office as a director unless:

	 	(a)  	the said individual was present at the meeting when the election or
appointment took place and he did not refuse to hold office as a director; or
	 
	 	(b)  	the said individual was not present at the meeting when the election or
appointment took place and the said individual consented to hold office as a director
in writing before the election or appointment or within ten (10) days after it, or the
said individual has acted as a director pursuant to the election or appointment.

MEETINGS OF DIRECTORS

9. Place and Calling of Meetings

     Subject to the articles, meetings of directors may be held at any place within or outside
Canada as the directors may from time to time determine or the person convening the meeting may
give notice. A meeting of the board of directors may be convened by the chairman of the board, if
any, the president, if any, or any director at any time. The secretary, if any, shall, upon
direction of any of the foregoing, convene a meeting of the board of directors.

 

 

- 4 -

10. Notice

     Notice of the time and place for the holding of any such meeting shall be delivered, mailed,
faxed or emailed to each director at his latest address as shown on the records of the Corporation
no less than two (2) days or twelve (12) days if mailed (exclusive of the day on which the notice
is sent, but inclusive of the day for which notice is given) before the date of the meeting;
provided that meetings of the board of directors may be held at any time without notice, if all the
directors have waived notice.

     For the first meeting of the board of directors, to be held immediately following the election
of directors at any annual or special meeting of the shareholders, no notice of such meeting need
be given to the newly elected or appointed director or directors in order for the meeting to be
duly constituted, provided a quorum of the directors is present.

     A notice of a meeting of directors shall specify any matter referred to in subsection 115(3)
of the Act that is to be dealt with at the meeting but otherwise need not specify the purpose of or
the business to be transacted at the meeting.

11. Waiver of Notice

     Notice of any meeting of the board of directors or any irregularity in any meeting or in the
notice thereof may be waived by any director, and such waiver may be validly given either before or
after the meeting to which such waiver relates. The attendance of a director at a meeting of
directors is a waiver of notice of the meeting, except where a director attends a meeting for the
express purpose of objecting to the transaction of any business on the grounds that the meeting is
not lawfully called.

12. Participation by Communication Facilities

     A director may, if all the directors of the Corporation consent thereto (either before, during
or after the meeting), participate in a meeting of the board of directors or of any committee
thereof, if any, by means of a telephonic, electronic or other communication facility that permits
all participants to communicate adequately with each other, and a director participating in such
manner is deemed to be present at that meeting. A consent may be given with respect to all meetings
of the board and/or of the committees of the board, if any.

13. Adjournment

     Any meeting of the board of directors may be adjourned from time to time by the chairman of
the meeting, with the consent of the meeting, to a fixed time and place and no notice of the time
and place for the continuance of the adjourned meeting need be given to any director in such a
case. Any adjourned meeting shall be duly constituted if held in accordance with the terms of the
adjournment and a quorum is present at the meeting. The directors who formed a quorum at the
original meeting are not required to
form the quorum at the adjourned meeting. If there is no quorum present at the

 

 

- 5 -

adjourned
meeting, the original meeting shall be deemed to have terminated forthwith after its adjournment.

14. Quorum and Voting

     Subject to the articles, a majority of the number of directors in office shall constitute a
quorum for the transaction of business. Subject to subsection 117(1) of the Act, no business shall
be transacted by the directors, except at a meeting of directors at which a quorum of the board is
present. The directors shall not transact business at a meeting unless the number of Canadian
directors required by the law are present, except where:

	 	(a)  	a resident Canadian director who is unable to be present approves in writing,
or by telephonic, electronic or other communication facility, the business transacted
at the meeting; and
	 
	 	(b)  	the required number of resident Canadian directors would have been present
had that director been present at the meeting.

     Questions arising at any meeting of the board of directors shall be decided by a majority of
votes cast. In case of an equality of votes, the chairman of the meeting, in addition to his
original vote, shall not have a second or casting vote.

15. Resolution in lieu of Meeting

     A resolution in writing, signed by all the directors entitled to vote on that resolution at a
meeting of directors or a committee of directors, if any, is as valid as if it had been passed at a
meeting of directors or committee of directors, if any.

     A copy of every such resolution shall be kept with the minutes of the proceedings of the
directors or committee of directors, if any.

REMUNERATION OF DIRECTORS

16. Subject to the articles, the remuneration to be paid to the directors shall be such as the
board of directors shall from time to time determine and such remuneration shall not be in addition
to the salary paid to any officer of the Corporation who is also a member of the board of
directors. The directors may also by resolution award special remuneration to any director
undertaking any special services on the Corporation’s behalf other than the routine work ordinarily
required of a director by the Corporation. The confirmation of any such resolution or resolutions
by the shareholders shall not be required. The directors concerned shall not vote on such
resolutions. The directors shall be entitled to be paid their traveling and other expenses properly
incurred by them in connection with the affairs of the Corporation.

 

 

- 6 -

SUBMISSION OF CONTRACTS OR TRANSACTIONS TO SHAREHOLDERS FOR APPROVAL

17. The board of directors, in its discretion, may submit any contract, act or transaction for
approval, ratification or confirmation at any annual meeting of the shareholders or at any special
meeting of the shareholders called for the purpose of considering the same and any contract, act or
transaction that shall be approved, ratified or confirmed by resolution passed by a majority of the
votes cast at any such meeting (unless any different or additional requirement is imposed by the
Act or by the Corporation’s articles or the by-law) shall be as valid and as binding upon the
Corporation and upon all the shareholders as though it had been approved, ratified or confirmed by
every shareholder of the Corporation.

CHAIRMAN OF THE BOARD

18. The chairman of the board, if any, shall, if present, preside at all meetings of the board
of directors and of shareholders. He shall sign such contracts, documents or instruments in writing
as require his signature and shall have such other powers and duties as may from time to time be
assigned to him by resolution of the board of directors.

OFFICERS

19. Appointment of Officers

     Subject to the articles, the board of directors, annually or as often as may be required, may
appoint among themselves a chairman of the board and may appoint a president and a secretary and,
if deemed advisable, may appoint a vice chairman, one (1) or more vice-presidents (to which title
may be added words indicating seniority or function), a treasurer and one (1) or more assistant
secretaries and/or one (1) or more assistant treasurers. None of such officers, except the chairman
of the board, need be a director of the Corporation. The board of directors may from time to time
designate such other offices and appoint such other officers, employees and agents as it shall deem
necessary, who shall have such authority and shall perform such functions and duties, as may from
time to time be prescribed by resolution of the board of directors. Any two (2) or more offices may
be held by the same person. In case and whenever the same person holds the offices of secretary and
treasurer he may, but need not, be known as the secretary-treasurer.

20. Remuneration and Removal of Officers

     Subject to the articles, the remuneration of all officers, employees and agents elected or
appointed by the board of directors may be determined from time to time by resolution of the board
of directors. The fact that any officer, employee or agent is a director or shareholder of the
Corporation shall not disqualify him from receiving such

 

 

- 7 -

remuneration as may be so determined. The
board of directors may, by resolution, remove any officer, employee or agent at any time, with or
without cause, subject to his rights under any employment contract in force between the Corporation
and such individual.

21. Duties of Officers may be Delegated

     In case of the absence or inability or refusal to act of any officer of the Corporation or for
any other reason that the board of directors or the President, as applicable, may deem sufficient,
the board of directors or the President, as applicable, may delegate all or any of the powers of
such officer to any other officer or to any director for the time being.

22. President

     The president, if any, shall be the chief executive officer of the Corporation and shall
exercise general supervision over the business and affairs of the Corporation. In the absence or
inability of the chairman of the board, if any, the president shall, when present, preside at all
meetings of the board of directors and shareholders; he shall sign such contracts, documents or
instruments in writing as require his signature and shall have such other powers and shall perform
such other duties as may from time to time be assigned to him by resolution of the board of
directors or as are incident to his office.

23. Vice-President

     The vice-president or, if more than one (1), the vice-presidents, in order of seniority, shall
be vested with all the powers and shall perform all the duties of the president in the absence or
inability or refusal to act of the president, provided, however, that a vice-president, who is not
a director, shall not preside as chairman at any meeting of shareholders. The vice-president or, if
more than one (1), the vice-presidents, in order of seniority, shall sign such contracts, documents
or instruments in writing as require his or their signatures and shall also have such other powers
and duties as may from time to time be assigned to him or them by resolution of the board of
directors or, to the extent permitted by the Act, by the president of the Corporation.

24. Secretary

     The secretary, if any, shall give or cause to be given notices for all meetings of the board
of directors, of committees thereof, if any, and of shareholders when directed to do so and shall
have charge, subject to the provisions of this by-law, of the records referred to in section 20 of
the Act (except the accounting records) and of the corporate seal or seals, if any, except when
some other officer or agent has been appointed for that purpose. He shall sign such contracts,
documents or instruments in writing as require his signature and shall have such other powers and
duties as may from time to time be assigned to him by resolution of the board of directors or as
are incident to his office.

 

 

- 8 -

25. Treasurer

     Subject to the provisions of any resolution of the board of directors, the treasurer, if any,
shall have the care and custody of all the funds and securities of the Corporation and shall
deposit the same in the name of the Corporation in such bank or banks or with such other depositary
or depositaries as the board of directors may, by resolution, direct. He shall prepare, maintain
and keep or cause to be kept adequate books of accounts and accounting records. He shall sign such
contracts, documents or instruments in writing as require his signature and shall have such other
powers and duties as may from time to time be assigned to him by resolution of the board of
directors or as are incident to his office. He may be required to give such bond for the faithful
performance of his duties as the board of directors, in their absolute discretion, may require, and
no director shall be liable for failure to require any such bond or for the insufficiency of any
such bond or for any loss by reason of the failure of the Corporation to receive any indemnity
thereby provided.

26. Assistant Secretary and Assistant Treasurer

     The assistant secretary or, if more than one (1), the assistant secretaries, in order of
seniority, and the assistant treasurer or, if more than one (1), the assistant treasurers, in order
of seniority, shall respectively perform all the duties of the secretary and treasurer,
respectively, in the absence or inability to act of the secretary or treasurer, as the case may be.
The assistant secretary or assistant secretaries, if more than one (1), and the assistant treasurer
or assistant treasurers, if more than one (1), shall sign such contracts, documents or instruments
in writing as require his or their signatures respectively and shall have such other powers and
duties as may from time to time be assigned to them by resolution of the board of directors.

COMMITTEES

27. Appointment of Committees

     The board of directors may from time to time appoint from their number one (1) or more
committees consisting of one (1) or more individuals and delegate to such
committee or committees any of the powers of the directors, except as provided in subsection
115(3) of the Act. Unless otherwise ordered by the board, a committee of directors shall have power
to fix its quorum and to regulate its proceedings. Meetings of any such committee may be held at
any place in or outside of Canada.

28. Audit Committee

     The Corporation shall have an Audit Committee composed of not fewer than three (3) directors.
If any of the issued securities of the Corporation are or were part of a distribution to the
public, remain outstanding and are held by more than one (1) person, each of the directors
composing the Audit Committee must be independent and none of them must be an employee of the
Corporation or any of its affiliates. The members of the

 

 

- 9 -

Audit Committee shall be appointed
annually by the board of directors from its number. The Audit Committee shall be responsible for
reviewing the scope and results of the annual audit of the Corporation’s consolidated financial
statements conducted by the Corporation’s independent auditors, the scope of other services
provided by the Corporation’s independent auditors, the proposed changes in the Corporation’s
policies and procedures with respect to its internal accounting, auditing, auditing and financial
controls and shall have such other powers and duties as may be provided in the Act or specified by
the board of directors.

29. Nominating Committee

     The board of directors may appoint a Nominating Committee composed of not fewer than three (3)
directors. If any of the issued securities of the Corporation are or were part of a distribution
to the public, remain outstanding and are held by more than one (1) person, each of the directors
composing the Nominating Committee must be independent and none of them must be an employee of the
Corporation or any of its affiliates. The Nominating Committee shall be responsible for nominating
potential nominees to the board of directors. The members of the Nominating Committee shall be
appointed annually by the board of directors from its number. The Nominating Committee shall have
the powers and duties as may be specified by the board of directors.

30. Corporate Governance Committee

     The board of directors shall have a Corporate Governance Committee composed of not fewer than
three (3) directors. If any of the issued securities of the Corporation are or were part of a
distribution to the public, remain outstanding and are held by more than one (1) person, each of
the directors composing the Corporate Governance Committee must be independent and none of them
must be an employee of the Corporation or any of its affiliates. The Corporate Governance
Committee shall be responsible for overseeing all aspects of the Corporation’s corporate governance
policies. The members of the Corporate Governance Committee shall be appointed annually by the
board of directors from its number. The Corporate Governance Committee shall have such other
powers and duties that may be specified by the board of directors. No
agreement or arrangement between the Corporation and any affiliate of the Corporation shall be
entered into by the Corporation without the approval of the Corporate Governance Committee;
provided, however, that the foregoing prohibition shall not apply to any agreement or arrangement
that does not exceed any applicable threshold which may be established by the Corporate Governance
Committee from time to time.

31. Executive Committee

     The board of directors may appoint an Executive Committee composed of at least three (3)
members of the board of directors and responsible for facilitating the efficient operation of the
Corporation. The members of the Executive Committee shall be appointed annually by the board of
directors from its number. The Executive Committee shall have the powers and duties as may be
specified by the board of directors.

 

 

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32. Compensation Committee

     The board of directors shall appoint a Compensation Committee composed of not fewer than
three (3) directors. If any of the issued securities of the Corporation are or were part of a
distribution to the public, remain outstanding and are held by more than one (1) person, each of
the directors composing the Compensation Committee must be independent and none of them must be an
employee of the Corporation or any of its affiliates. The Compensation Committee shall be
responsible for recommending to the board of directors executive compensation, including base
salaries, bonuses and long-term incentive awards for the executive officers of the Corporation. The
members of the Compensation Committee shall be appointed annually by the board of directors from
its number. The Compensation Committee shall have the powers and duties as may be specified by the
board of directors.

DISCLOSURE OF INTEREST

33. A director or officer of the Corporation shall disclose to the Corporation, in writing, or
by requesting to have it entered in the minutes of meetings of directors or of meetings of
committees of directors, if any, the nature and extent of any interest that he has in a material
contract or material transaction, whether made or proposed, with the Corporation: if the director
or officer is a party to the contract or the transaction; if he is a director or officer, or an
individual acting in a similar capacity of a party to the contract or transaction; or if he has a
material interest in a party to the contract or transaction.

     In the case of a contract or transaction or a proposed contract or transaction involving a
director, the disclosure shall be made at the meeting of directors at which the question of
entering into the contract or transaction is first considered. If the director was not at the time
of the meeting referred to previously interested in the proposed contract or transaction, the
disclosure shall be at the first meeting of the directors held after he becomes so interested. If
the director becomes interested in a contract or
transaction after it is made, the disclosure shall be made at the first meeting of directors
held after the director becomes so interested. If an individual who is interested in a contract or
transaction later becomes a director, the disclosure shall be made at the first meeting after he
becomes a director.

     If a material contract or material transaction, whether entered into or proposed, is one that,
in the ordinary course of the Corporation’s business, would not require approval by the directors
or shareholders, a director or officer shall disclose, in writing to the Corporation or
request to have it entered in the minutes of meetings of directors or of meetings of committees of
directors, if any, the nature and extent of his interest immediately after he becomes aware of the
contract or transaction.

     In the case of a contract or transaction or proposed contract or transaction involving an
officer who is not a director, the disclosure shall be made immediately after he becomes aware that
the contract, transaction or proposed contract or proposed

 

 

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transaction is to be considered or has
been considered at a meeting. If the officer becomes interested after a contract or transaction is
made, the disclosure shall be made immediately after he becomes so interested. If an individual who
is interested in a contract or transaction later becomes an officer, the disclosure shall be made
immediately after he becomes an officer.

     A general notice to the directors declaring that a director or an officer is to be regarded as
interested, for any of the following reasons, in a contract or transaction made with a party, is a
sufficient declaration of interest in relation to the contract or transaction:

	 	(a)  	the director or officer is a director or officer or acting in a similar
capacity, of a party to the contract or transaction, or of a party who has a material
interest in a party to the contract or transaction;
	 
	 	(b)  	the director or officer has a material interest in the party; or
	 
	 	(c)  	there has been a material change in the nature of the director’s or the
officer’s interest in the party.

     A director required to make a disclosure of interest shall not vote on any resolution to
approve the contract or transaction unless the contract or transaction:

	 	(a)  	relates primarily to his remuneration as a director, officer, employee or
agent of the Corporation or an affiliate; or
	 
	 	(b)  	is for indemnity or insurance under section 124 of the Act.

INDEMNIFICATION AND PROTECTION OF DIRECTORS, OFFICERS AND OTHERS

34. Liability

     No director or officer shall be liable for the acts, receipts, neglects or defaults of any
other director, officer or employee of the Corporation, or for joining any receipt or other act for
conformity, or for any loss, damage or expense happening to the Corporation through the
insufficiency or deficiency of title to any property acquired for or on behalf of the Corporation,
or for the insufficiency or deficiency of any security in or upon which any of the moneys of the
Corporation shall be invested, or for any loss or damage arising from the bankruptcy, insolvency or
tortuous acts of any person with whom any of the moneys, securities or effects of the Corporation
shall be deposited, or for any loss occasioned by any error of judgment or oversight on his part,
or for any other loss, damage or misfortune which shall happen in the execution of the duties of
his office or in relation thereto, provided that nothing herein shall relieve any director or
officer from the duty to act in accordance with the Act or from liability for any breach thereof.

 

 

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35. Indemnification

     Subject to the Act, the Corporation shall indemnify a director or officer of the Corporation,
a former director or officer of the Corporation, or another individual who acts or acted at the
Corporation’s request as a director or officer, or an individual acting in a similar capacity, of
another entity against all costs, charges and expenses, including an amount paid to settle an
action or satisfy a judgment, reasonably incurred by the individual in respect of any civil,
criminal, administrative, investigative or other proceeding in which the individual is involved
because of that association with the Corporation or other entity if:

	 	(a)  	he acted honestly and in good faith with a view to the best interests of the
Corporation, or, as the case may be, to the best interests of the other entity for
which the individual acted as a director of officer or in a similar capacity at the
Corporation’s request; and
	 
	 	(b)  	in the case of a criminal or administrative action or proceeding that is
enforced by a monetary penalty, the individual had reasonable grounds for believing
that the individual’s conduct was lawful.

     The Corporation shall advance the necessary moneys to a director, officer or other individual
for the costs, charges and expenses of a proceeding referred to previously. The individual shall
repay the moneys if the individual does not fulfill the previously named conditions.

     The Corporation shall also indemnify such person in such other circumstances as the Act
permits or requires. Nothing in this by-law shall limit the right of any person entitled to
indemnity to claim indemnity apart from the provisions of this by-law.

36. Insurance

     Subject to the Act, the Corporation may purchase and maintain insurance for the benefit of an
individual referred to in section 35 against any liability incurred by the individual in his
capacity as a director or officer of the Corporation or in the individual’s capacity as a director
or officer, or similar capacity, of another entity (as such term is defined in the Act), if the
individual acts or acted in that capacity at the Corporation’s request.

MEETINGS OF SHAREHOLDERS

37. Annual Meeting

     Subject to compliance with section 133 of the Act, the annual meeting of the shareholders
shall be convened on such day in each year and at such time as the board of directors may by
resolution determine. The directors of the Corporation shall call an annual meeting of shareholders
not later than fifteen (15) months after holding the last

 

 

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preceding annual meeting but no later
than six (6) months after the end of the Corporation’s preceding financial year.

38. Special Meetings

     Other meetings of the shareholders may be convened by order of the chairman of the board, the
president or a vice-president who is a director or by the board of directors, to be held at such
time and place as may be specified in such order.

     Special meetings of shareholders may also be called by written requisition to the board of
directors signed by shareholders holding between them not less than five percent (5%) of the
outstanding shares of the capital of the Corporation entitled to vote thereat. Such requisition
shall state the business to be transacted at the meeting and shall be sent to each director and to
the registered office of the Corporation.

     Except as otherwise provided in subsection 143(3) of the Act, it shall be the duty of the
board of directors, on receipt of such requisition, to cause the meeting to be called by the
secretary of the Corporation.

     If the board of directors does not, within twenty-one (21) days after receiving such
requisition call a meeting, any shareholder who signed the requisition may call the meeting.

39. Place of Meetings

     Meetings of shareholders of the Corporation shall be held at the registered office of the
Corporation or at such other place in Canada as may be specified in the notice convening such
meeting. Notwithstanding the foregoing, a meeting of shareholders may be held at a place outside
Canada if the place does not contravene the articles.

40. Notice

     A notice stating the day, hour and place of meeting and, subject to subsection 135(6) of the
Act, the general nature of the business to be transacted shall be served to each shareholder who is
entitled to vote at such meeting, each director of the Corporation and the auditor of the
Corporation no less than twenty-one (21) days or more than sixty (60) days before the meeting. If
such notice is served by mail, it shall be directed to the latest address, as shown in the records
of the Corporation, of the intended recipient. Notice of any meeting of shareholders or any
irregularity in any such meeting or in the notice thereof may be waived by any shareholder, the
duly appointed proxy of any shareholder, any director or the auditor of the Corporation in any
manner that a notice can be given to the Corporation or by any other manner, and any such waiver
may be validly given either before or after the meeting to which such waiver relates.

 

 

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41. Omission of Notice

     The accidental omission to give notice of any meeting to or the non-receipt of any notice by
any person shall not invalidate any resolution passed or any proceeding taken at any meeting of
shareholders.

42. Record Date

     The board of directors may, by resolution, fix in advance a date and time as the record date
for the determination of the shareholders entitled to receive notice of a meeting of the
shareholders and/or to vote at such meeting and/or to receive the financial statements of the
Corporation, but such record date shall not precede by more than sixty (60) days or by less than
twenty-one (21) days the date on which the meeting is to be held and notice of such record date
shall be given not less than seven (7) days before such record date in the manner prescribed in the
Act unless waiver in accordance with the Act is obtained.

     If the directors fail to fix in advance a date and time as the record date in respect of all
or any of the matters described above for any meeting of the shareholders of the Corporation, the
following provisions shall apply, as the case may be:

	 	(a)  	the record date for the determination of the shareholders entitled to receive
notice of a meeting of shareholders shall be at the close of business on the day
immediately preceding the day on which notice is given or sent or, if no notice is
given, the day on which the meeting is held;
	 
	 	(b)  	the record date for the determination of the shareholders entitled to vote at
a meeting of shareholders shall be the day on which the meeting is held or in
accordance with subsection 138(3) of the Act, if so determined by the directors; and
	 
	 	(c)  	the record date for the determination of the shareholders entitled to receive
the financial statements of the Corporation shall be the close of business on the day
on which the directors pass the resolution relating thereto.

43. Participation by communication facilities

     Any person entitled to attend a meeting of shareholders may participate in the meeting by
means of a telephonic, electronic or other communication facility that permits all participants to
communicate adequately with each other during the meeting if the Corporation makes available such a
communication facility. A person participating in a meeting by such means is deemed to be present
at that meeting. A meeting of shareholders may be held, in accordance with the Act, entirely by
telephonic, electronic or other communication facility if the requirements listed previously are
met.

 

 

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44. Votes

     Except in the case of a meeting held by telephonic, electronic or other communication means,
voting at a meeting of shareholders shall be by show of hands, except where a ballot is demanded by
a shareholder entitled to vote at the meeting. A shareholder may demand a ballot either before or
immediately after any vote by show of hands.

     Every question submitted to any meeting of shareholders shall be decided in the first
instance, unless a ballot is demanded, on a show of hands, and, in case of an equality of votes,
the chairman of the meeting shall not, both on a show of hands and on a ballot, have a second or
casting vote in addition to the vote or votes to which he may be entitled as a shareholder.

     At any meeting, unless a ballot is demanded, a declaration by the chairman of the meeting that
a resolution has been carried or carried unanimously or by a particular majority or lost or not
carried by a particular majority shall be conclusive evidence of the fact without proof of the
number or proportion of votes recorded in favour of or against the motion.

     In the absence of the chairman of the board, the president and every vice-president who is a
director, the shareholders present entitled to vote shall choose another director as chairman of
the meeting, and if no director is present or if all the directors present decline to take the
chair, then the shareholders present shall choose one of their number to be chairman of the
meeting.

     If at any meeting a ballot is demanded on the election of a chairman or on the question of
adjournment or termination, it shall be taken forthwith without adjournment. If a ballot is
demanded on any other question or as to the election of directors, it shall be taken in such manner
and either at once or later at the meeting or after adjournment as the chairman of the meeting
directs. The result of a ballot shall be deemed to be the resolution of the meeting at which the
ballot was demanded. A demand for a ballot may be withdrawn.

     Where a person holds shares as a personal representative, such person or his proxy is the
person entitled to vote at all meetings of shareholders in respect of the shares so held by him.

     Where a person mortgages or hypothecates his shares, such person or his proxy is the person
entitled to vote at all meetings of shareholders in respect of such shares unless, in the
instrument creating the mortgage or hypothec, he has expressly empowered the person holding the
mortgage or hypothec to vote in respect of such shares, in which case, subject to the articles,
such holder or his proxy is the person entitled to vote in respect of the shares.

     Where two (2) or more persons hold the same share or shares jointly, any one (1) of such
persons present at a meeting of shareholders has the right, in the absence of the

 

 

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other or others,
to vote in respect of such share or shares, but if more than one (1) of such persons are present or
represented by proxy and vote, they shall vote together as one (1) on the share or shares jointly
held by them.

     Any vote at a meeting held solely by telephonic, electronic or other communication facility,
may be exercised entirely by telephonic, electronic or other communication facility in accordance
with the Act.

45. Proxies

     A shareholder, including a shareholder that is a body corporate, entitled to vote at a meeting
of shareholders may, by means of a proxy, appoint a proxyholder or one (1) or more alternate
proxyholders, who are not required to be shareholders, to attend and act at the meeting in the
manner and to the extent authorized by the proxy and with the authority conferred by the proxy.

     An instrument appointing a proxyholder shall be in writing and shall be executed by the
shareholder or his attorney authorized in writing or, if the shareholder is a body corporate,
either under its seal or by an officer or attorney thereof, duly authorized. A proxy is valid only
at the meeting in respect of which it is given or any adjournment thereof.

     Unless the Act requires another form, an instrument appointing a proxyholder may be in the
following form:

     “The undersigned shareholder of                      hereby appoints                     of
                    or
failing him,                      of           , as the nominee
of the undersigned to attend and act for and on behalf of the undersigned at the meeting of the
shareholders of the said Corporation to be held on the            day of                     ,      
        , and at any adjournment thereof to the same extent and with the same power as if the
undersigned were personally present at the said meeting or such adjournment thereof.

     Dated this           day of           ,                      .

	 
	
 Signature
of Shareholder

NOTE:

     This form of proxy must be signed by a shareholder or his attorney authorized in writing or,
if the shareholder is a body corporate, either under its seal or by an officer or attorney thereof
duly authorized.”

     The directors may from time to time adopt procedures regarding the deposit of instruments
appointing a proxyholder at some place or places other than the place at which a meeting or
adjourned meeting of shareholders is to be held and for particulars

 

 

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of such instruments to be sent
before the meeting or adjourned meeting to the Corporation or any agent of the Corporation for the
purpose of receiving such particulars and providing that instruments appointing a proxyholder so
lodged may be voted upon as though the instruments themselves were produced at the meeting or
adjourned meeting and votes given in accordance with such regulations shall be valid and shall be
counted. The chairman of any meeting of shareholders may, subject to any procedure adopted as
aforesaid, in his discretion, accept such a communication as to the authority of anyone claiming to
vote on behalf of and to represent a shareholder, notwithstanding that no instrument of proxy
conferring such authority has been lodged with the Corporation, and any votes given in accordance
with such a communication accepted by the chairman of the meeting shall be valid and shall be
counted.

46. Adjournment

     The chairman of the meeting may, with the consent of the meeting, adjourn any meeting of
shareholders from time to time to a fixed time and place. If a meeting of shareholders is adjourned
less than thirty (30) days, it is not necessary to give notice of the adjourned meeting other than
by announcement at the earliest meeting that is adjourned. If a meeting of shareholders is
adjourned by one (1) or more adjournments for an aggregate of thirty (30) days or more, notice of
the adjournment meeting shall be given as for an original meeting but, unless the meeting is
adjourned by one (1) or more adjournments for an aggregate of more than ninety (90) days, the
requirements of subsection 149(1) of the Act relating to mandatory solicitation of proxies do not
apply.

     Any adjourned meeting shall be duly constituted if held in accordance with the terms of the
adjournment and a quorum is present thereat. The persons who formed a quorum at the original
meeting are not required to form a quorum at the adjourned meeting. If there is no quorum present
at the adjourned meeting, the original meeting shall be deemed to have terminated forthwith after
its adjournment. Any business may be brought before or dealt with at any adjourned meeting which
might have been brought before or dealt with at the original meeting in accordance with the notice
calling same.

47. Quorum

     One (1) person present and holding or representing by proxy at least one (1) issued voting
share of the Corporation shall be the required quorum for the choice of a chairman of the meeting
and for the adjournment of the meeting; for all other purposes, a quorum for any meeting (unless a
different number of shareholders and/or a different number of shares are required to be represented
by the Act or by the articles or by the by-law) shall be persons present being not less than two
(2) in number and holding or representing by proxy at least 50% of the shares entitled to vote at
such meeting. If a quorum is present at the opening of a meeting of the shareholders, the
shareholders present may proceed with the business of the meeting, notwithstanding that a quorum is
not present throughout the meeting. Where the Corporation has only one (1) shareholder or only one
(1) holder of any class or series of shares, the shareholder, present in person or by proxy,
constitutes a meeting.

 

 

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SECURITIES

48. Certificates

     Share certificates (and the form of stock transfer power on the reverse side thereof) shall
(subject to compliance with section 49 of the Act) be in such form and be signed by such
director(s) or officer(s) as the board of directors may from time to time, by resolution,
determine.

49. Registrar and Transfer Agent

     The board of directors may from time to time, by resolution, appoint or remove one (1) or more
registrars and/or branch registrars (which may, but need not be, the same person) to keep the
register of security holders and/or one (1) or more transfer agents and/or branch transfer agents
(which may, but need not be, the same person) to keep the register of transfer, and (subject to the
Act) may provide for the registration of issues and the registration of transfers of the securities
of the Corporation in one (1) or more places and such registrars and/or branch registrars and/or
transfer agents and/or branch transfer agents shall keep all necessary books and registers of the
Corporation for the registration of the issuance and the registration of transfers of the
securities of the Corporation for which they are so appointed. All certificates issued after any
such appointment representing securities issued by the Corporation shall be countersigned

by or on behalf of one of the said registrars and/or branch registrars and/or transfer agents
and/or branch transfer agents, as the case may be.

50. Surrender of Share Certificates

     No transfer of a share issued by the Corporation shall be recorded or registered unless or
until the certificate representing the share to be transferred has been surrendered and cancelled
or, if no certificate has been issued by the Corporation in respect of such share, unless or until
a duly executed share transfer power in respect thereof has been presented for registration.

51. Defaced, Destroyed, Stolen or Lost Certificates

     If the defacement, destruction or apparent destruction, theft, or other wrongful taking or
loss of a share certificate is reported by the owner to the Corporation or to a registrar, branch
registrar, transfer agent or branch transfer agent of the Corporation (hereinafter, in this
paragraph, called the “Corporation’s transfer agent”) and such owner gives to the Corporation or
the Corporation’s transfer agent a written statement verified by oath or statutory declaration as
to the defacement, destruction or apparent destruction, theft, or other wrongful taking or loss and
the circumstances concerning the same, a request for the issuance of a new certificate to replace
the one so defaced, destroyed, wrongfully taken or lost and a bond of a surety company (or other
security approved by the board of directors) in such form as is approved by the board of directors
or by the chairman of the board, the president, a vice-president, the secretary or the treasurer of
the Corporation, indemnifying the Corporation (and the

 

 

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Corporation’s transfer agent, if any),
against all loss, damage or expense, which the Corporation and/or the Corporation’s transfer agent
may suffer or be liable for by reason of the issuance of a new certificate to such shareholder, a
new certificate may be issued in replacement of the one defaced, destroyed or apparently destroyed,
stolen or otherwise wrongfully taken or lost, if such issuance is ordered and authorized by any one
(1) of the chairman of the board, the president, a vice-president, the secretary or the treasurer
of the Corporation or by resolution of the board of directors.

DIVIDENDS

52. Subject to the relevant provisions of the Act, the board of directors may from time to
time, by resolution, declare and the Corporation may pay dividends on its issued shares, subject to
the relevant provisions, if any, of the articles.

NOTICES

53. Method of Giving Notices

     Any notice or document to be given pursuant to the Act, the articles or the by-law to a
shareholder or director of the Corporation may be sent (a) by prepaid mail addressed to, or may be
delivered personally to, the shareholder at the shareholder’s latest address as shown in the
records of the Corporation or its transfer agent or branch transfer agent and the director at the
director’s latest address as shown on the records of the Corporation or in the last notice of
directors or notice of change of directors filed under the Act, and a notice or document sent in
accordance with the foregoing to a shareholder or director of the Corporation shall be deemed to be
received by them at the time it would be delivered in the ordinary course of mail unless there are
reasonable grounds for believing that the shareholder or director did not receive the notice or
document at the time or at all or (b) by electronic means as permitted by, and in accordance with,
the Act. The secretary may change or cause to be changed the recorded address of any shareholder,
director, officer, auditor or member of a committee of the board, if any, in accordance with any
information believed by the secretary to be reliable. The foregoing shall not be construed so as to
limit the manner or effect of giving notice by any other means of communication otherwise permitted
by law.

54. Shares registered in more than one (1) name

     All notices or other documents required to be sent to a shareholder by the Act, the articles
or the by-law of the Corporation shall, with respect to any shares in the capital of the
Corporation registered in more than one name, be given to whichever of such persons is named first
in the records of the Corporation or its transfer agent or branch transfer agent and any notice or
other document so given shall be sufficient notice of delivery of such documents to all the holders
of such shares.

 

 

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55. Persons becoming entitled by operation of law

     Every person, who by operation of law, transfer or by any other means whatsoever shall become
entitled to any shares in the capital of the Corporation, shall be bound by every notice or other
document in respect of such shares which prior to his name and address being entered in the records
of the Corporation or its transfer agent or branch transfer agent shall have been duly given to the
person or persons from whom he derives his title to such shares.

56. Deceased Shareholder

     Any notice or other document delivered or sent by post or left at the address of any
shareholder as the same appears in the records of the Corporation or its transfer agent or branch
transfer agent shall, notwithstanding that such shareholder be then deceased and whether or not the
Corporation has notice of his decease, be deemed to

have been duly served in respect of the shares held by such shareholder (whether held solely
or with other persons) until some other person be entered in his stead in the records of the
Corporation or its transfer agent or branch transfer agent as the holder or one of the holders
thereof and such service shall, for all purposes, be deemed a sufficient service of such notice or
other document on his heirs, executors or administrators and all persons, if any, interested with
him in such shares.

57. Signatures to Notices

     The signature of any director or officer of the Corporation to any notice may be written,
stamped, typewritten or printed or partly written, stamped, typewritten or printed or, for the
notice given by electronic means, in accordance with section 252.7 of the Act. The foregoing shall
not be construed so as to limit the manner or effect of affixing a signature by any other means
otherwise permitted by law.

58. Computation of Time

     Where a given number of days’ notice or notice extending over any period is required to be
given under any provisions of the articles or by-law of the Corporation, the day of service or
posting of the notice shall, unless it is otherwise provided, be counted in such number of days or
other period and such notice shall be deemed to have been given or sent on the day of service or
posting.

59. Proof of Service

     A certificate of any officer of the Corporation in office at the time of the making of the
certificate or of a transfer officer of any transfer agent or branch transfer agent of shares of
any class of the Corporation as to facts in relation to the mailing or delivery or service of any
notice or other documents to any shareholder, director, officer or auditor or publication of any
notice or other document, shall be conclusive evidence thereof and shall be binding on every
shareholder, director, officer or auditor of the Corporation, as the case may be.

 

 

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CHEQUES, DRAFTS, NOTES, ETC.

60. All cheques, drafts or orders for the payment of money and all notes, acceptances and
bills of exchange shall be signed by such officer or officers or other person or persons, whether
or not officers of the Corporation, and in such manner as the board of directors may from time to
time designate by resolution.

CUSTODY OF SECURITIES

61. All securities, including warrants, owned by the Corporation shall be lodged, in the name
of the Corporation, with a chartered bank or a trust company or in a safety
deposit box or, if so authorized by resolution of the board of directors, with such other
depositaries or in such other manner as may be determined from time to time by the board of
directors.

     All securities, including warrants, belonging to the Corporation may be issued and held in the
name of a nominee or nominees of the Corporation, and, if issued or held in the names of more than
one nominee, shall be held in the names of the nominees jointly with right of survivorship and
shall be endorsed in blank with endorsement guaranteed in order to enable transfer thereof to be
completed and registration thereof to be effected.

EXECUTION OF CONTRACTS, ETC.

62. Contracts, documents or instruments in writing requiring the signature of the Corporation
may be signed by any director or any officer of the Corporation, or by any person authorized by
resolution of the board of directors. All contracts, documents or instruments in writing so signed
shall be binding upon the Corporation without any further authorization or formality. The board of
directors is authorized from time to time, by resolution, to appoint any officer or officers or any
other person or persons on behalf of the Corporation, either to sign contracts, documents or
instruments in writing generally or to sign specific contracts, documents or instruments in
writing. Where the Corporation has only one (1) director and officer being the same person, that
person may sign all such contracts, documents or other written instruments.

     The corporate seal, if any, may, when required, be affixed to contracts, documents or
instruments in writing, signed as aforesaid, by an officer or officers, person or persons,
appointed as aforesaid by resolution of the board of directors.

     The term “contracts, documents or instruments in writing”, as used in this by-law, shall
include deeds, mortgages, hypothecs, charges, conveyances, transfers and assignments of property,
real or personal, immoveable or moveable, agreements, releases, receipts and discharges for the
payment of money or other obligations, conveyances, transfers and assignments of shares, warrants,
bonds, debentures or other securities and all paper writings or their equivalent on all electronic
form.

 

 

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     In particular, without limiting the generality of the foregoing, any director or any officer
of the Corporation, or any person authorized by resolution of the board of directors, is hereby
authorized to sell, assign, transfer, exchange, convert or convey all shares, bonds, debentures,
rights, warrants or other securities owned by or registered in the name of the Corporation and to
sign and execute, under the seal of the Corporation or otherwise, all assignments, transfers,
conveyances, powers of attorney and other instruments that may be necessary for the purpose of
selling, assigning, transferring, exchanging, converting or conveying or enforcing or exercising
any voting rights in respect of any such shares, bonds, debentures, rights, warrants or other
securities. Where the Corporation has only one (1) director and officer, being the same person, that
person may perform the functions and exercise the powers herein contemplated.

     The signature or signatures of any officer or director of the Corporation and/or of any person
or persons appointed as aforesaid by resolution of the board of directors may, if specifically
authorized by resolution of the directors, be printed, engraved, lithographed, otherwise
mechanically or electronically reproduced or given in any manner permitted by the law, on all
contracts, documents or instruments in writing or in an electronic form, or, subject to subsections
49(4) and 49(5) of the Act, on bonds, debentures or other securities of the Corporation executed or
issued by or on behalf of the Corporation. All such contracts, documents or instruments in writing
or in an electronic form, or bonds, debentures or other securities of the Corporation on which the
signatures of any of the foregoing officers, directors or persons shall be so reproduced, by
authorization by resolution of the board of directors shall, subject to subsections 49(4) and 49(5)
of the Act, be deemed to have been duly signed by such officers and shall be as valid to all
intents and purposes as if they had been signed manually and notwithstanding that the officers,
directors or persons whose signature or signatures is or are so reproduced may have ceased to hold
office at the date of the delivery or issue of such contracts, documents or instruments in writing
or in an electronic form or bonds, debentures or other securities of the Corporation.

DECLARATIONS

63. Any director or any officer of the Corporation, or any person authorized by resolution of
the board of directors or any employee authorized by any officer or director of the Corporation, is
authorized and empowered to appear and make answer for the Corporation to all writs, orders and
interrogatories upon articulated facts issued out of any court and to declare for and on behalf of
the Corporation any answer to writs of attachment by way of garnishment in which the Corporation is
garnishee, and to make all affidavits and sworn declarations in connection therewith or in
connection with any or all judicial proceedings to which the Corporation is a party and to make
demands of abandonment or petitions for winding up or bankruptcy orders upon any debtor of the
Corporation and to attend and vote at all meetings of creditors of any of the Corporation’s debtors
and grant proxies in connection therewith.

 

 

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FISCAL YEAR

64. The fiscal period of the Corporation shall terminate on such day in each year as the board
of directors may from time to time, by resolution, determine.

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