Document:

exv10w32

 

Exhibit 10.32

EXECUTION VERSION

WASTE MANAGEMENT OF CANADA CORPORATION

as Borrower

- and -

WASTE MANAGEMENT, INC.

WASTE MANAGEMENT HOLDINGS, INC.

as Guarantors

- and -

BNP PARIBAS SECURITIES CORP.

SCOTIA CAPITAL

as Lead Arrangers and Book Runners

- and -

THE BANK OF NOVA SCOTIA

as Administrative Agent

- and -

THE LENDERS FROM TIME TO TIME

PARTY TO THIS AGREEMENT

 

CDN. $410,000,000 CREDIT FACILITY

CREDIT AGREEMENT

DATED AS OF 30 NOVEMBER 2005

 

BORDEN LADNER GERVAIS LLP

 

TABLE
OF CONTENTS

 

	 	 	 	 	 	 	 	 	 
	Section	 	 	Description	 	Page	 
	ARTICLE 1
	 	 	 	 
	DEFINED TERMS
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	1.1	 	 	Defined Terms
	 	 	1	 
	 	1.2	 	 	Construction
	 	 	13	 
	 	1.3	 	 	References to U.S. Credit Agreement
	 	 	13	 
	 	1.4	 	 	Certain Rules of Interpretation
	 	 	14	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 2
	 	 	 	 
	CREDIT
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	2.1	 	 	Amount and Availment Options
	 	 	15	 
	 	2.2	 	 	Non-Revolving Credit and Availability Period
	 	 	15	 
	 	2.3	 	 	Use of the Credit
	 	 	15	 
	 	2.4	 	 	Term and Repayment
	 	 	15	 
	 	2.5	 	 	Voluntary Prepayments
	 	 	15	 
	 	2.6	 	 	Interest Rates, Fees and Commissions
	 	 	15	 
	 	2.7	 	 	Standby Fee
	 	 	16	 
	 	2.8	 	 	Agency and Assignment Fees
	 	 	16	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 3
	 	 	 	 
	SECURITY
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	3.1	 	 	Security
	 	 	17	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 4
	 	 	 	 
	DISBURSEMENT CONDITIONS
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	4.1	 	 	Conditions Precedent to Initial Advance
	 	 	17	 
	 	 	 	 	(1) Other Debt and Encumbrances
	 	 	17	 
	 	 	 	 	(2) Documentation and Ancillary Information
	 	 	17	 
	 	 	 	 	(3) Opinions
	 	 	18	 
	 	 	 	 	(4) Other Matters
	 	 	18	 
	 	4.2	 	 	Conditions Precedent to all Advances
	 	 	18	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 5
	 	 	 	 
	ADVANCES
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	5.1	 	 	Evidence of Indebtedness
	 	 	19	 
	 	5.2	 	 	Conversions
	 	 	19	 
	 	5.3	 	 	Notice of Advances and Payments
	 	 	19	 
	 	5.4	 	 	Prepayments and Reductions
	 	 	20	 
	 	5.5	 	 	Prime Rate Advances
	 	 	20	 
	 	5.6	 	 	Co-ordination of Prime Rate Advances
	 	 	21	 
	 
	 	 	 	 	 
	 	 	(i)	 

 

 

	 	 	 	 	 	 	 	 	 
	Section	 	 	Description	 	Page	 
	 	5.7	 	 	Execution of Banker’s Acceptances
	 	 	21	 
	 	5.8	 	 	Sale of Banker’s Acceptances
	 	 	22	 
	 	5.9	 	 	Size and Maturity of Banker’s Acceptances and Rollovers
	 	 	22	 
	 	5.10	 	 	Co-ordination of BA Advances
	 	 	22	 
	 	5.11	 	 	Payment of Banker’s Acceptances
	 	 	24	 
	 	5.12	 	 	Deemed Advance — Banker’s Acceptances
	 	 	24	 
	 	5.13	 	 	Waiver
	 	 	24	 
	 	5.14	 	 	Degree of Care
	 	 	24	 
	 	5.15	 	 	Obligations Absolute
	 	 	25	 
	 	5.16	 	 	Shortfall on Drawdowns, Rollovers and Conversions
	 	 	25	 
	 	5.17	 	 	Payment by the Borrower
	 	 	25	 
	 	5.18	 	 	Prohibited Rates of Interest
	 	 	26	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 6
	 	 	 	 
	REPRESENTATIONS AND WARRANTIES
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	6.1	 	 	Representations and Warranties
	 	 	27	 
	 	 	 	 	(1) Corporate Authority
	 	 	27	 
	 	 	 	 	(2) Governmental and Other Approvals
	 	 	27	 
	 	 	 	 	(3) Title to Properties; Leases
	 	 	28	 
	 	 	 	 	(4) Financial Statements; Solvency
	 	 	28	 
	 	 	 	 	(5) No Material Changes, Etc.
	 	 	29	 
	 	 	 	 	(6) Franchises, Patents, Copyrights, Etc.
	 	 	29	 
	 	 	 	 	(7) Litigation
	 	 	29	 
	 	 	 	 	(8) No Materially Adverse Contracts, Etc.
	 	 	29	 
	 	 	 	 	(9) Compliance With Other Instruments, Laws, Etc.
	 	 	29	 
	 	 	 	 	(10) Tax Status
	 	 	29	 
	 	 	 	 	(11) No Event of Default
	 	 	30	 
	 	 	 	 	(12) Holding Company and Investment Company Acts
	 	 	30	 
	 	 	 	 	(13) Absence of Financing Statements, Etc.
	 	 	30	 
	 	 	 	 	(14) Environmental Matters
	 	 	30	 
	 	 	 	 	(15) Disclosure
	 	 	32	 
	 	 	 	 	(16) Permits and Governmental Authority
	 	 	32	 
	 	6.2	 	 	Survival of Representations and Warranties
	 	 	32	 
	 	 	 	 	 
	 	 	 	 
	ARTICLE 7
	 	 	 	 
	COVENANTS
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	7.1	 	 	Financial Covenants of Waste Management, Inc.
	 	 	32	 
	 	7.2	 	 	Positive Covenants
	 	 	33	 
	 	 	 	 	(1) Punctual Payment
	 	 	33	 
	 	 	 	 	(2) Chief Place of Business
	 	 	33	 
	 	 	 	 	(3) Records and Accounts
	 	 	33	 
	 	 	 	 	(4) Existence and Conduct of Business
	 	 	33	 
	 	 	 	 	(5) Maintenance of Properties
	 	 	34	 
	 	 	 	 	(6) Insurance
	 	 	34	 
	 	 	 	 	(7) Taxes
	 	 	34	 
	 
	 	 	 	 	 
	 	 	(ii)	 

 

 

	 	 	 	 	 	 	 	 	 
	Section	 	 	Description	 	Page	 
	 	 	 	 	(8) Inspection of Properties, Books and Contracts
	 	 	34	 
	 	 	 	 	(9) Compliance with Laws, Contracts, Licenses and Permits; Maintenance
of Material Licenses and
Permits
	 	 	35	 
	 	 	 	 	(10) Environmental Indemnification
	 	 	35	 
	 	 	 	 	(11) Further Assurances
	 	 	36	 
	 	 	 	 	(12) Notice of Potential Claims or Litigation
	 	 	36	 
	 	 	 	 	(13) Notice of Certain Events Concerning Environmental Claims
	 	 	36	 
	 	 	 	 	(14) Notice of Default
	 	 	37	 
	 	 	 	 	(15) Use of Proceeds
	 	 	37	 
	 	 	 	 	(16) Certain Transactions
	 	 	37	 
	 	7.3	 	 	Reporting Requirements
	 	 	37	 
	 	 	 	 	(1) Periodic Financial Reports
	 	 	37	 
	 	7.4	 	 	Negative Covenants
	 	 	38	 
	 	 	 	 	(1) Restrictions on Indebtedness
	 	 	38	 
	 	 	 	 	(2) Restrictions on Encumbrances
	 	 	38	 
	 	 	 	 	(3) Restrictions on Investments
	 	 	39	 
	 	 	 	 	(4) Mergers, Consolidations, Sales
	 	 	39	 
	 	 	 	 	(5) Restricted Distributions and Redemptions
	 	 	39	 
	 
	ARTICLE 8
	 	 	 	 
	DEFAULT
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	8.1	 	 	Events of Default
	 	 	40	 
	 	8.2	 	 	Acceleration and Termination of Rights, Pre-Acceleration Rights
	 	 	41	 
	 	8.3	 	 	Payment of Banker’s Acceptances
	 	 	42	 
	 	8.4	 	 	Remedies
	 	 	42	 
	 	8.5	 	 	Saving
	 	 	43	 
	 	8.6	 	 	Perform Obligations
	 	 	43	 
	 	8.7	 	 	Third Parties
	 	 	43	 
	 	8.8	 	 	Remedies Cumulative
	 	 	43	 
	 
	ARTICLE 9
	 	 	 	 
	THE AGENT AND THE LENDERS
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	9.1	 	 	Authorization of Agent
	 	 	44	 
	 	9.2	 	 	Disclaimer of Agent
	 	 	44	 
	 	9.3	 	 	Failure of Lender to Fund
	 	 	45	 
	 	9.4	 	 	Payments by the Borrower
	 	 	46	 
	 	9.5	 	 	Payments by Agent
	 	 	46	 
	 	9.6	 	 	Direct Payments
	 	 	47	 
	 	9.7	 	 	Administration of the Credit
	 	 	48	 
	 	9.8	 	 	Rights of Agent
	 	 	51	 
	 	9.9	 	 	Acknowledgements, Representations and Covenants of Lenders
	 	 	51	 
	 	9.10	 	 	Collective Action of the Lenders
	 	 	52	 
	 	9.11	 	 	Successor Agent
	 	 	53	 
	 	9.12	 	 	Provisions Operative Between Lenders and Agent Only
	 	 	53	 
	 
	 	 	 	 	 
	 	 	(iii)	 

 

 

	 	 	 	 	 	 	 	 	 
	Section	 	 	Description	 	Page	 
	ARTICLE 10
	 	 	 	 
	ADDITIONAL LENDERS, SUCCESSORS AND ASSIGNS
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	10.1	 	 	Successors and Assigns
	 	 	54	 
	 	10.2	 	 	Assignments
	 	 	55	 
	 	10.3	 	 	Participations
	 	 	56	 
	 
	ARTICLE 11
	 	 	 	 
	MISCELLANEOUS PROVISIONS
	 	 	 	 
	 	 	 	 	 
	 	 	 	 
	 	11.1	 	 	Defined Terms
	 	 	56	 
	 	11.2	 	 	Severability
	 	 	56	 
	 	11.3	 	 	Amendment, Supplement or Waiver
	 	 	57	 
	 	11.4	 	 	Governing Law
	 	 	57	 
	 	11.5	 	 	This Agreement to Govern
	 	 	57	 
	 	11.6	 	 	Currency
	 	 	57	 
	 	11.7	 	 	Liability of Lenders
	 	 	58	 
	 	11.8	 	 	Expenses and Indemnity
	 	 	58	 
	 	11.9	 	 	Manner of Payment and Taxes
	 	 	58	 
	 	11.10	 	 	Change in Law
	 	 	59	 
	 	11.11	 	 	Illegality
	 	 	61	 
	 	11.12	 	 	Interest on Miscellaneous Amounts
	 	 	61	 
	 	11.13	 	 	Address for Notice
	 	 	62	 
	 	11.14	 	 	Time of the Essence
	 	 	62	 
	 	11.15	 	 	Further Assurances
	 	 	62	 
	 	11.16	 	 	Term of Agreement
	 	 	62	 
	 	11.17	 	 	Payments on Business Day
	 	 	62	 
	 	11.18	 	 	Counterparts and Facsimile
	 	 	62	 
	 	11.19	 	 	Waiver of Jury Trial and Consequential Damages
	 	 	63	 
	 	11.20	 	 	Whole Agreement
	 	 	63	 
	 	11.21	 	 	English Language
	 	 	63	 
	 	11.22	 	 	Date of Agreement
	 	 	64	 

	 	 	 	 	 
	SCHEDULE A

	 	-
	 	FORM OF NOTICE OF ADVANCE OR PAYMENT
	 
	SCHEDULE B

	 	-
	 	FORM OF COMPLIANCE CERTIFICATE
	 
	SCHEDULE C

	 	-
	 	FORM OF ASSIGNMENT AGREEMENT
	 
	SCHEDULE D

	 	-
	 	FORM OF GUARANTEE
	 
	SCHEDULE E

	 	-
	 	APPLICABLE PERCENTAGES OF LENDERS

	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 
	 	 	(iv)	 

 

 

THIS CREDIT AGREEMENT is dated as of 30 November 2005

B E T W E E N:

WASTE MANAGEMENT OF CANADA CORPORATION

a Nova Scotia unlimited liability company

as Borrower

- and -

WASTE MANAGEMENT, INC.

WASTE MANAGEMENT HOLDINGS, INC.

as Guarantors

- and -

THE LENDERS LISTED ON SCHEDULE E

TO THIS AGREEMENT FROM TIME TO TIME

as Lenders

- and -

THE BANK OF NOVA SCOTIA,

in its capacity as Administrative Agent

RECITALS:

A. BNP Paribas Securities Corp., BNP Paribas (Canada), The Bank of Nova Scotia and the Borrower
have entered into a Commitment Letter and Term Sheet dated and accepted on 25 October 2005 under
which BNP Paribas Securities Corp. and Scotia Capital have agreed to arrange a credit facility in
favour of the Borrower, under which BNP Paribas (Canada) and The Bank of Nova Scotia have agreed to
be lenders.

B. The parties are entering into this Agreement to provide for the terms of such credit facility.

FOR VALUE RECEIVED, and intending to be legally bound by this Agreement, the parties agree as
follows:

ARTICLE 1

DEFINED TERMS

	1.1	 	Defined Terms

     In this Agreement, unless something in the subject matter or context is inconsistent
therewith:

	1.1.1	 	“Advance” means an availment of the Credit by the Borrower by way of a Prime Rate Advance,
BA Equivalent Loan or acceptance of a Banker’s Acceptance, including

 

- 2 -

deemed Advances and conversions, renewals and rollovers of existing Advances, and any
reference relating to the amount of Advances shall mean the sum of all outstanding Prime
Rate Advances plus the face amount of all outstanding Banker’s Acceptances and BA
Equivalent Loans.

	1.1.2	 	“Affiliate” means, with respect to a specified Person, another Person that directly, or
indirectly through one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.

	1.1.3	 	“Agency Fee Letter” means the letter agreement dated as of 30 November 2005 between the
Agent and the Borrower.

	1.1.4	 	“Agent” or “Administrative Agent” means Scotia Capital in its capacity as administrative
agent for the Lenders, and any successor administrative agent appointed in accordance with
this Agreement.

	1.1.5	 	“Agreement”, “hereof”, “herein”, “hereto”, “hereunder” or similar expressions mean this
Agreement, the Recitals hereto and any Schedules hereto, as amended, supplemented, restated
and replaced from time to time in accordance with the provisions hereof, and not any
particular Article, Section or other portion hereof.

	1.1.6	 	“Applicable Percentage” means with respect to any Lender, the percentage of the total
Commitments represented by such Lender’s Commitment. If the Commitments have terminated or
expired, the Applicable Percentages shall be the percentage of the total outstanding Advances
represented by such Lender’s outstanding Advances. The Applicable Percentage of each Lender
as of the date of this Agreement is the percentage calculated based on the amounts set out in
Schedule E to this Agreement, which shall be amended and distributed to all parties by the
Agent from time to time as Applicable Percentages change in accordance with this Agreement.

	1.1.7	 	“Arrangers” means each of BNP Paribas Securities Corp. and The Bank of Nova Scotia.

	1.1.8	 	“Article” means the designated article of this Agreement.

	1.1.9	 	“Assignment Agreement ” means an assignment agreement substantially in the form of Schedule
C or any other form approved by the Agent.

	1.1.10	 	“Availability Period” has the meaning defined in Section 2.2.

	1.1.11	 	“BA Discount Proceeds” means, in respect of any Banker’s Acceptance, an amount calculated on
the applicable Drawdown Date which is (rounded to the nearest full cent, with one-half of one
cent being rounded up) equal to the face amount of such Banker’s Acceptance multiplied by the
price, where the price is calculated by dividing one by the sum of one plus the product of (a)
the BA Discount Rate applicable thereto expressed as a decimal fraction multiplied by (b) a
fraction, the numerator of which is the term of such Banker’s Acceptance and the denominator
of which is 365, rounded to the nearest multiple of 0.001%.

 

- 3 -

	1.1.12	 	“BA Discount Rate” means, (a) with respect to any Banker’s Acceptance accepted by a Lender
named on Schedule I to the Bank Act (Canada), the rate determined by the Agent as being the
arithmetic average (rounded upward to the nearest multiple of 0.01%) of the discount rates,
calculated on the basis of a year of 365 days and determined in accordance with normal market
practice at or about 10:00 a.m. (Toronto time) on the applicable Drawdown Date, for banker’s
acceptances of the Schedule I Reference Lenders having a comparable face amount and identical
maturity date to the face amount and maturity date of such Banker’s Acceptance, and (b) with
respect to any Banker’s Acceptance accepted by any other Lender, the lesser of (i) the rate
determined in Section 1.1.12(a) above plus 0.07% per annum, and (ii) the discount rate,
calculated on the basis of a year of 365 days and determined in accordance with normal market
practice at or about 10:00 a.m. (Toronto time) on the applicable Drawdown Date, for banker’s
acceptances of such other lender having a comparable face amount and identical maturity date
to the face amount and maturity date of such Banker’s Acceptance.

	1.1.13	 	“BA Equivalent Loan” has the meaning defined in Section 5.10(5).

	1.1.14	 	“Balance Sheet Date” means 31 December 2004.

	1.1.15	 	“Banker’s Acceptance” means a depository bill as defined in the Depository Bills and Notes
Act (Canada) in Canadian Dollars that is in the form of an order signed by the Borrower and
accepted by a Lender pursuant to this Agreement or, for Lenders not participating in clearing
services contemplated in that Act, a draft or bill of exchange in Canadian Dollars that is
drawn by the Borrower and accepted by a Lender pursuant to this Agreement. Orders or drafts
that become depository bills, drafts and bills of exchange are sometimes collectively referred
to in this Agreement as “orders”.

	1.1.16	 	“Banker’s Acceptance Fee” means, with respect to any Banker’s Acceptance, the amount
calculated by multiplying the face amount of the Banker’s Acceptance by the applicable rate
for the Banker’s Acceptance Fee specified in Section 2.6, and then multiplying the result by a
fraction, the numerator of which is the duration of its term on the basis of the applicable
actual number of days to elapse from and including the date of acceptance of the Banker’s
Acceptance by the Lender up to but excluding the maturity date of the Banker’s Acceptance and
the denominator of which is the number of days in the calendar year in question.

	1.1.17	 	“Borrower” means Waste Management of Canada Corporation, a Nova Scotia unlimited liability
company, its successors and permitted assigns.

	1.1.18	 	“Branch of Account” means WBO–Loan Administration & Agency Operations of the Agent located
at 720 King Street West, 4th Floor, Wholesale Banking Operations, Toronto, Ontario, M5V 2T3,
or such other branch or branches as may be designated by the Agent from time to time.

	1.1.19	 	“Business Day” means a day of the year, other than Saturday or Sunday, on which the
Arrangers are open for normal banking business at, as applicable, their executive

 

- 4 -

offices in Toronto, Ontario and Montreal, Quebec and the Agent is open for normal banking
business at the Branch of Account.

	1.1.20	 	“Canadian Dollars”, “Cdn. Dollars”, “Cdn. $” and “$” mean the lawful money of Canada.

	1.1.21	 	“CDOR Rate” means, on any date, with respect to any Banker’s Acceptance, the simple average
of the rates shown on the display referred to as the “CDOR Page” (or any display substituted
therefor) on Reuters Domestic Money Service (or any successor source from time to time) with
respect to the banks and other financial institutions named in such display at or about 10:00
a.m. (Toronto time) on such date for banker’s acceptances having an identical maturity date to
the maturity date of such Banker’s Acceptance, as determined by the Agent, or if such day is
not a Business Day, then on the immediately preceding Business Day; provided, however, that if
such rates are not available, then the CDOR Rate for any day shall be calculated as the
average of the bid rates (rounded upwards to the nearest 1/16th of 1%) quoted by each of the
Schedule I Reference Lenders for its own banker’s acceptances for the applicable period as of
10:00 a.m. (Toronto time) on such day, as determined by the Agent, or if such day is not a
Business Day, then on the immediately preceding Business Day.

	1.1.22	 	“Change in Law” means the occurrence, after the date of this Agreement, of any of the
following: (a) the adoption or taking effect of any applicable law, (b) any change in any
Applicable Law or in the administration, interpretation or application thereof by any
Governmental Authority, or (c) the making or issuance of any Applicable Law by any
Governmental Authority.

	1.1.23	 	“Closing Date” means 30 November 2005 or such other day as may be agreed to by the parties
which is not later than 15 December 2005.

	1.1.24	 	“Collateral” means cash, a bank draft or a letter of credit issued by a Canadian chartered
bank, all in a form satisfactory to the Agent, acting reasonably.

	1.1.25	 	“Commitment” means in respect of each Lender from time to time, the covenant to make
Advances to the Borrower in the Lender’s Applicable Percentage of the maximum amount of the
Credit and, where the context requires, the maximum amount of Advances which the Lender has
covenanted to make.

	1.1.26	 	“Compliance Certificate” means a certificate in the form of Schedule B, signed by a senior
officer of each of the Borrower and Waste Management, Inc.

	1.1.27	 	“Consolidated Total Interest Expense” has the meaning defined in the U.S. Credit Agreement,
as such definition exists at the date of this Agreement.

	1.1.28	 	“Constating Documents” means, with respect to any Person, its articles or certificate of
incorporation, amendment, amalgamation, continuance or association, memorandum of association,
by-laws, declaration of trust, trust indenture, partnership agreement, limited liability
company agreement or other similar document, as

 

- 5 -

applicable, and all unanimous shareholder agreements, other shareholder agreements, voting trust
agreements and similar arrangements applicable to the Person’s capital stock, all as amended,
supplemented, restated or replaced from time to time.
1.1.29 “Contributing Lender” shall have the meaning defined in Section 9.3(2).

	1.1.30	 	“Control” means the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability to exercise
voting power, by contract or otherwise. “Controlling” and “Controlled” have corresponding
meanings.

	1.1.31	 	“Credit” means the credit facility of up to Cdn. $410,000,000 established by the Lenders in
favour of the Borrower pursuant to Article 2 of this Agreement.

	1.1.32	 	“Debt” means collectively, without duplication, whether classified as Debt, an Investment or
otherwise on the obligor’s balance sheet, (a) all indebtedness for borrowed money (including
the face amount of all bankers’ acceptances), (b) all obligations for the deferred purchase
price of property or services (other than trade payables incurred in the ordinary course of
business which either (i) are not overdue by more than 90 days, or (ii) are being disputed in
good faith and for which adequate reserves have been established in accordance with GAAP), (c)
all obligations evidenced by notes, bonds, debentures or other similar debt instruments, (d)
all obligations created or arising under any conditional sale or other title retention
agreement with respect to property acquired (even though the rights and remedies of the seller
or lender under such agreement in the event of default are limited to repossession or sale of
such property), (e) all obligations, liabilities and indebtedness under capital leases, (f)
all obligations, liabilities or indebtedness arising from the making of a drawing under
surety, performance bonds, or any other bonding arrangement, (g) Guarantees of any Debt others
referred to in clauses (a) through (f) above, and (h) all Debt of others referred to in
clauses (a) through (f) above secured or supported by (or for which the holder of such Debt
has an existing right, contingent or otherwise, to be secured or supported by) any Encumbrance
on the property of any Obligor, even though the owner of the property has not assumed or
become liable, contractually or otherwise, for the payment of such Debt; provided that if a
Permitted Receivables Transaction is outstanding and is accounted for as a sale of accounts
receivable under generally accepted accounting principles, Debt shall also include the
additional Debt, determined on a consolidated basis, which would have been outstanding had
such Permitted Receivables Transaction been accounted for as a borrowing.

	1.1.33	 	“Defaulting Lender” has the meaning defined in Section 9.3(2).

	1.1.34	 	“Designated Account” means, in respect of any Advance, the account or accounts maintained by
the Borrower at the Agent’s West Metro Commercial Banking Centre, 2 Robert Speck Parkway,
Mississauga, Ontario L4Z 1H8 that the Borrower designates in its notice requesting an
Advance.

 

- 6 -

	1.1.35	 	“Disclosure Documents” means the Borrower’s financial statements referred to in Section
6.1(4)(a), and filings made by any Obligor with the Securities and Exchange Commission that
were publicly available prior to the date of this Agreement.

	1.1.36	 	“Distribution” means the declaration or payment of any dividend or other return on equity on
or in respect of any shares of any class of capital stock, any partnership interests or any
membership interests of any Person (other than dividends or other such returns payable solely
in shares of capital stock, partnership interests or membership units of such Person, as the
case may be); the purchase, redemption, or other retirement of any shares of any class of
capital stock, partnership interests or membership units of such Person, directly or
indirectly through a Subsidiary or otherwise; the return of equity capital by any Person to
its shareholders, partners or members as such; or any other distribution on or in respect of
any shares of any class of capital stock, partnership interest or membership unit of such
Person.

	1.1.37	 	“Drawdown Date” means the date, which shall be a Business Day, of any Advance.

	1.1.38	 	“EBIT” has the meaning defined in the U.S. Credit Agreement, as such definition exists at
the date of this Agreement.

	1.1.39	 	“EBITDA” has the meaning defined in the U.S. Credit Agreement, as such definition exists at
the date of this Agreement.

	1.1.40	 	“Encumbrance” means, with respect to any asset, (a) any mortgage, deed of trust, lien
(statutory or otherwise), pledge, hypothecation, encumbrance, charge, security interest,
assignment, deposit arrangement or other restriction in, on or of such asset, (b) the interest
of a vendor or a lessor under any conditional sale agreement, capital lease or title retention
agreement (or any financing lease having substantially the same economic effect as any of the
foregoing) relating to such asset, and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.

	1.1.41	 	“Environmental Laws” has the meaning defined in Section 6.1(14)(a).

	1.1.42	 	“Event of Default” means any of the events or circumstances described in Section 8.1.

	1.1.43	 	“Exchange Rate” means on any day, for the purpose of calculations under this Agreement, the
amount of Canadian Dollars into which another currency may be converted, or vice versa, using
the Bank of Canada noon spot rate for converting the one currency into the other on that day
or if that day is not a Business Day, the preceding Business Day, or if such rate is not so
published by the Bank of Canada for any such day, then at the mid rate (i.e. the average of
the Agent’s spot buying and selling rates) quoted by the Agent at the Branch of Account at
approximately noon (Toronto time) on that day in accordance with its normal practice for the
applicable currency conversion in the wholesale market, or if that day is not a Business Day,
the preceding Business Day.

 

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	1.1.44	 	“Excluded Taxes” means any income or capital Tax now or hereafter imposed, levied,
collected, withheld or assessed on a Lender by any applicable Governmental Authority in Canada
or any other jurisdiction in which that Lender is subject to Tax as a result of the Lender:
(a) having a permanent establishment in such jurisdiction, (b) being organized under the laws
of such jurisdiction, (c) being resident or deemed to be resident in such jurisdiction, or (d)
not dealing at arm’s length with an Obligor or any other Lender; but does not include any
sales, goods or services Tax payable under the laws of any such jurisdiction with respect to
any goods or services made available by a Lender to the Borrower under this Agreement or any
withholding tax.

	1.1.45	 	“Fee Letter” means the confidential fee letter agreement dated 25 October 2005 from the
Arrangers to the Borrower and the Guarantors providing for the payment of certain fees in
relation to the Credit, accepted and agreed to by the Borrower and the Guarantors on 25
October 2005.

	1.1.46	 	“GAAP” means, when used in this Agreement, whether directly or indirectly through reference
to a capitalized term used therein, means (a) principles that are consistent with the
principles promulgated or adopted by the Financial Accounting Standards Board (U.S.) and its
predecessors, in effect for the fiscal year ended on the Balance Sheet Date, and (b) to the
extent consistent with such principles, the accounting practice of Waste Management, Inc.
reflected in its financial statements for the year ended on 31 December 2003; provided, that
in each of clause (a) and (b), such meaning shall include the application of Financial
Accounting Standards Board Interpretation No. 46, Consolidation of Variable Interest Entities
(revised December 2003) (“FIN 46-R”), provided, further, that in each case referred to in this
definition of “GAAP” a certified public accountant would, insofar as the use of such
accounting principles is pertinent, be in a position to deliver an unqualified opinion (other
than a qualification regarding changes in generally accepted accounting principles) as to
financial statements in which such principles have been properly applied.

	1.1.47	 	“Governmental Authority” means the government of Canada or any other nation, or of any
political subdivision thereof, whether provincial, state or local, and any agency, authority,
instrumentality, regulatory body, court, central bank or other entity exercising executive,
legislative, judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government, including any supra-national bodies.

	1.1.48	 	“Guarantee” means any obligation, contingent or otherwise, of a Person guaranteeing or
having the economic effect of guaranteeing any Debt or other obligation of any other Person
(the “primary obligor”) in any manner, whether directly or indirectly, and including any
obligation of the guarantor, direct or indirect, (a) to purchase or pay (or advance or supply
funds for the purchase or payment of) such Debt or other obligation or to purchase (or to
advance or supply funds for the purchase of) any security for the payment thereof, (b) to
purchase or lease property, securities or services for the purpose of assuring the owner of
such Debt or other obligation of the payment thereof, (c) to maintain working capital, equity
capital or any other financial statement condition or liquidity of the primary obligor so as
to enable the primary obligor to pay

 

- 8 -

such Debt or other obligation, or (d) as an account party in respect of any letter of
credit or letter of guarantee issued to support such Debt or obligation; provided that
the term Guarantee shall not include endorsements for collection or deposit in the
ordinary course of business.

	1.1.49	 	“Guarantors” means each of Waste Management, Inc., a Delaware corporation, and Waste
Management Holdings, Inc., a Delaware corporation, and each other Person which delivers a
guarantee hereunder, and becomes a party hereto, from time to time.

	1.1.50	 	“Hazardous Substances” has the meaning defined in Section 6.1(14)(b).

	1.1.51	 	“Interbank Reference Rate” means, in respect of any currency, the interest rate expressed as
a percentage per annum which is customarily used by the Agent when calculating interest due by
it or owing to it arising from correction of errors in transactions in that currency between
it and other chartered banks.

	1.1.52	 	“Interest Coverage Ratio” means, at any time, the ratio calculated by dividing (a) EBIT for
the four most recently completed fiscal quarters of Waste Management, Inc. by (b) Consolidated
Total Interest Expense for such period.

	1.1.53	 	“Interest Payment Date” means the 21st day of each calendar month.

	1.1.54	 	“Interim Balance Sheet Date” means 30 September 2005.

	1.1.55	 	“Investment” means all expenditures made by a Person and all liabilities incurred
(contingently or otherwise) by a Person for the acquisition of stock of (other than the stock
of Subsidiaries), or Debt of, or for loans, advances, capital contributions or transfers of
property to, or in respect of any Guarantees or other commitments as described under Debt, or
obligations of, any other Person, including without limitation, the funding of any captive
insurance company (other than loans, advances, capital contributions or transfers of property
to any Subsidiaries or variable interest entities consolidated in accordance with FIN 46-R, or
Guaranties with respect to Debt of any Subsidiary or variable interest entities consolidated
in accordance with FIN 46-R). In determining the aggregate amount of Investments outstanding
at any particular time: (a) the amount of any Investment represented by a Guarantee shall be
taken at not less than the principal amount of the obligations guaranteed and still
outstanding, (b) there shall be included as an Investment all interest accrued with respect to
Debt constituting an Investment unless and until such interest is paid, (c) there shall be
deducted in respect of each such Investment any amount received as a return of capital (but
only by partial or full repurchase, redemption, retirement, repayment, liquidating dividend or
liquidating distribution), (d) there shall not be deducted in respect of any Investment any
amounts received as earnings on such Investment, whether as dividends, interest or otherwise,
except that accrued interest included as provided in the foregoing clause (b) may be deducted
when paid; and (e) there shall not be deducted from the aggregate amount of Investments any
decrease in the value thereof.

 

- 9 -

	1.1.56	 	“Lenders” means each of the Persons listed on Schedule E and other lenders that agree from
time to time to become Lenders in accordance with the terms of this Agreement and “Lender”
means any one of the Lenders.

	1.1.57	 	“Loan Documents” means this Agreement, all Security, the Fee Letter, the Agency Fee Letter,
and all other documents from time to time relating to the Credit.

	1.1.58	 	“Material Adverse Effect” means any material adverse effect on (a) the business, assets,
operations or financial condition of the Obligors taken as a whole, (b) the ability of either
Guarantor to perform its obligations under any Loan Document to which it is a party, or (c)
the rights of, or remedies or benefits available to, the Agent or any of the Lenders under any
Loan Document.

	1.1.59	 	“Maturity Date” means 30 November 2008.
	 
	1.1.60	 	“Moody’s” means Moody’s Investor Services, Inc. and its successors.
	 
	1.1.61	 	“Non BA Lender” has the meaning defined in Section 5.10(5).

	1.1.62	 	“Obligations” means all obligations of the Borrower to the Agent and Lenders under or in
connection with this Agreement, including but not limited to all debts and liabilities,
present or future, direct or indirect, absolute or contingent, matured or not, at any time
owing by the Borrower to the Agent and Lenders in any currency or remaining unpaid by the
Borrower to the Agent and Lenders in any currency under or in connection with this Agreement,
whether arising from dealings between the Agent and Lenders and the Borrower or from any other
dealings or proceedings by which the Agent and Lenders may be or become in any manner whatever
creditors of the Borrower under or in connection with this Agreement, and wherever incurred,
and whether incurred by the Borrower alone or with another or others and whether as principal
or surety, and all interest, fees, legal and other costs, charges and expenses. In this
definition, “the Agent and Lenders” shall be interpreted as “the Agent and Lenders, or any of
them”.

	1.1.63	 	“Obligors” means the Borrower and each of the Guarantors, and “Obligor” means any of them.

	1.1.64	 	“Pending Event of Default” means an event which would constitute an Event of Default
hereunder, except for satisfaction of any requirement for giving of notice, lapse of time, or
both, or other condition subsequent.

	1.1.65	 	“Permitted Encumbrances” means, with respect to any Person, the following:

	 	(a)	 	liens for taxes, assessments or governmental charges or levies which are
not yet due, or for which instalments have been paid based on reasonable estimates
pending final assessments, or the validity of which is being contested in good faith
by appropriate proceedings and for which the Person has recorded the liability in
accordance with GAAP and which do not have, and will not reasonably be expected to
have, a Material Adverse Effect;

 

- 10 -

	 	(b)	 	inchoate or statutory liens of contractors, subcontractors, mechanics,
workers, suppliers, material men, carriers and others in respect of construction,
maintenance, repair or operation of assets of the Person, in respect of which
adequate holdbacks are being maintained as required by applicable laws and (i) which
have not at such time been filed or exercised and of which none of the Lenders have
been given notice, or (ii) which relate to obligations not due or payable or if due,
the validity of which is being contested in good faith by appropriate proceedings
and for which such Person has recorded the liability in accordance with GAAP and
which do not materially reduce the value of the affected asset or materially
interfere with the use of such asset in the operation of the business of the Person
and do not have, and will not reasonably be expected to have, a Material Adverse
Effect;
	 
	 	(c)	 	easements, rights-of-way, licences, servitudes, restrictions, restrictive
covenants, and similar rights in real property comprised in the assets of the Person
or interests therein (including in respect of sewers, drains, gas and water mains or
electric light and power or telephone and telegraph conduits, poles, wires and
cables) which do not materially reduce the value of the affected asset or materially
interfere with the use of such asset in the operation of the business of the Person
and do not have, and will not reasonably be expected to have, a Material Adverse
Effect;
	 
	 	(d)	 	title defects or irregularities which are of a minor nature and which do
not materially reduce the value of the affected asset or materially interfere with
the use of such asset in the operation of the business of the Person and do not
have, and will not reasonably be expected to have, a Material Adverse Effect;
	 
	 	(e)	 	the Encumbrance resulting from the deposit of cash or securities in
connection with contracts, tenders or expropriation proceedings, or to secure
workers’ compensation, employment insurance, surety or appeal bonds, costs of
litigation when required by applicable laws and other similar obligations, in each
case in the ordinary course of business;
	 
	 	(f)	 	the Encumbrance created by a judgment of a court of competent
jurisdiction; provided, however, that the Encumbrance is in existence for less than
20 days after its creation or the execution or other enforcement of the Encumbrance
is effectively stayed or the claims so secured are being actively contested in good
faith and by proper legal proceedings and do not result in the occurrence of an
Event of Default;
	 
	 	(g)	 	the reservations, limitations, provisos and conditions, if any, expressed
in any original grant from the Crown of any real property or any interest therein
which do not materially reduce the value of the affected asset or materially
interfere with the use of such asset in the operation of the business of the Person
and do not have, and will not reasonably be expected to have, a Material Adverse
Effect;

 

- 11 -

	 	(h)	 	Encumbrances given to a public utility or any municipality or
governmental or other public authority when required by such utility or other
authority in connection with the operation of the business or the ownership of the
assets of the Person which do not materially reduce the value of the affected asset
or materially interfere with the use of such asset in the operation of the business
of the Person and do not have, and will not reasonably be expected to have, a
Material Adverse Effect;
	 
	 	(i)	 	servicing agreements, development agreements, site plan agreements, and
other agreements with Governmental Authorities pertaining to the use or development
of any of the assets of the Person, provided same are complied with and do not
materially reduce the value of the affected asset or materially interfere with the
use of such asset in the operation of the business of the Person and do not have,
and will not reasonably be expected to have, a Material Adverse Effect;
	 
	 	(j)	 	the right reserved to or vested in any Governmental Authority by any
statutory provision or by the terms of any lease, licence, franchise, grant or
permit of the Person, to terminate any such lease, licence, franchise, grant or
permit, or to require annual or other payments as a condition to the continuance
thereof;
	 
	 	(k)	 	Encumbrances in favour of the Agent created by the Security, if any,
including Encumbrances over Collateral;
	 
	 	(l)	 	landlords’ rights of distraint and similar rights of a landlord
(including in Quebec a landlord’s hypothec) on tangible personal or moveable
property of the Person located solely on the premises leased by the landlord to the
Person and securing only the obligations of the Person under the applicable lease of
the premises, so long as the exercise of such rights do not result in the occurrence
of an Event of Default; and
	 
	 	(m)	 	Permitted Liens, as such term is defined in the U.S. Credit Agreement as
at the date of this Agreement.

	1.1.66	 	“Permitted Receivables Transaction” has the meaning defined in the U.S. Credit Agreement, as
such definition exists at the date of this Agreement.

	1.1.67	 	“Person” means any natural person, corporation, limited liability company, trust, joint
venture, association, company, partnership, Governmental Authority or other entity.

	1.1.68	 	“Prime Rate” means, on any day, the greater of:

	 	(a)	 	the average of the annual rates of interest expressed as a percentage per
annum on the basis of a 365 or 366 day year, as the case may be, announced by each
Schedule I Reference Lender on that day as its reference rate for commercial loans
made by it in Canada in Canadian Dollars; and

 

- 12 -

	 	(b)	 	the CDOR Rate for one month Canadian Dollar banker’s acceptances on that
day plus 0.50% per annum.

	1.1.69	 	“Prime Rate Advance” means an Advance in Canadian Dollars bearing interest based on the
Prime Rate and includes any deemed Prime Rate Advance provided for in this Agreement.

	1.1.70	 	“Real Property” has the meaning defined in the U.S. Credit Agreement, as such definition
exists at the date of this Agreement.

	1.1.71	 	“Register” has the meaning defined in Section 10.2(3).

	1.1.72	 	“Release” has the meaning defined in the U.S. Credit Agreement, as such definition exists at
the date of this Agreement.

	1.1.73	 	“Relevant Rating” means, as of any date of determination, the ratings as determined by S&P
and Moody’s of Waste Management, Inc.’s non-credit enhanced, senior unsecured long-term debt
and in circumstances when the ratings are not the same level (in the grid set forth in Section
2.6(1) ), then the higher of the two ratings shall apply, provided however that if
the higher rating is more than one level higher than the lower rating, the Relevant Rating
shall be set at one level below the higher rating.

	1.1.74	 	“Required Lenders” means a Lender or Lenders holding, in the aggregate, a minimum of 50.1%
of the amount of the Commitments (or the outstanding Advances if the Commitments have
terminated including after the occurrence of any Default), excluding in all cases Commitments
or Advances held by any Obligor or any Affiliate or Related Party of any Obligor.

	1.1.75	 	“S&P” means Standard & Poor’s Ratings Group, a division of McGraw-Hill, Inc., or any of its
successors.

	1.1.76	 	“Schedule” means the designated Schedule of this Agreement.

	1.1.77	 	“Schedule I Reference Lenders” means the Agent and such other institutions as may be agreed
upon by the Borrower and the Agent from time to time, and “Schedule I Reference Lender” means
any one of them.

	1.1.78	 	“Scotia Capital” means The Bank of Nova Scotia, a bank to which the Bank Act (Canada)
applies.

	1.1.79	 	“Section” means the designated section of this Agreement.

	1.1.80	 	“Security” means the guarantees held from time to time by or on behalf of the Agent and the
Lenders supporting or intended to support, inter alia, repayment of any of the Obligations,
including, without limitation, the guarantees described in Section 3.1 from time to time.

	1.1.81	 	“Standby Fee” has the meaning defined in Section 2.7.

 

- 13 -

	1.1.82	 	“Subsidiary” means any Person of which the designated parent shall at any time own directly
or indirectly through one or more subsidiaries at least a majority of the outstanding capital
stock or other interests entitled to vote generally and whose financial results are required
to be consolidated with the financial results of the designated parent in accordance with
GAAP.

	1.1.83	 	“Swap Contract” means all obligations in respect of interest rate, currency or commodity
exchange, forward, swap, or futures contracts or similar transactions or arrangements entered
into to protect or hedge any of the Obligors against interest rate, exchange rate or commodity
price risks or exposure, or to lower or diversify their funding costs.

	1.1.84	 	“Taxes” means all taxes, levies, imposts, stamp taxes, duties, deductions, withholdings and
similar governmental impositions payable, levied, collected, withheld or assessed as of the
date of this Agreement or at any time in the future and all interest, charges and penalties in
respect thereof, and “Tax” shall have a corresponding meaning.

	1.1.85	 	“Total Debt” has the meaning defined in the U.S. Credit Agreement, as such definition exists
at the date of this Agreement.

	1.1.86	 	“Total Leverage Ratio” means, at any time, the ratio calculated by dividing (a) Total Debt
at that time by (b) EBITDA for Waste Management, Inc.’s four most recently completed fiscal
quarters.

	1.1.87	 	“U.S. Credit Agreement” means the U.S. $2,400,000,000 revolving credit agreement dated as of
October 15, 2004 by and among Waste Management, Inc., as borrower, Waste Management Holdings,
Inc., as guarantor, various banks party thereto from time to time, as lenders, Citibank, N.A.,
as administrative agent and others, as amended by Amendment No. 1 dated October 15, 2004
between such parties.

	1.1.88	 	“U.S. Dollars” and “U.S. $” means lawful monies of the United States of America.

1.2 Construction

     This Agreement has been negotiated by each party with the benefit of legal representation and
any rule of construction to the effect that any ambiguities are to be resolved against the drafting
party shall not apply to the construction or interpretation of this Agreement.

1.3 References to U.S. Credit Agreement

     The provisions of the U.S. Credit Agreement that are incorporated by reference or referred to
in this Agreement shall continue to apply mutatis mutandis to the Credit notwithstanding the
termination of the U.S. Credit Agreement for any reason.

 

- 14 -

	1.4	 	Certain Rules of Interpretation

In this Agreement:

	 	(a)	 	the division into sections and other subdivisions thereof and the
insertion of headings are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement; and
	 
	 	(b)	 	unless specified otherwise or the context otherwise requires:

	 	(i)	 	references to any Section or Schedule are references to
the Section of, or Schedule to, this Agreement;
	 
	 	(ii)	 	“including” or “includes” means “including (or includes)
but not limited to” and shall not be construed to limit any general
statement preceding it to the specific or similar items or matters
immediately following it;
	 
	 	(iii)	 	references to contracts, agreements or instruments,
unless otherwise specified, are deemed to include all present and future
amendments, supplements, restatements or replacements to or of such
contracts, agreements or instruments, provided that such amendments,
supplements, restatements or replacements to or of such contracts,
agreements or instruments have been, if applicable, approved or consented to
and otherwise made in accordance with the provisions of this Agreement;
	 
	 	(iv)	 	references to any legislation, statutory instrument or
regulation or a section or other provision thereof, unless otherwise
specified, is a reference to the legislation, statutory instrument,
regulation, section or other provision as amended, restated or re-enacted
from time to time;
	 
	 	(v)	 	references to any thing includes the whole or any part of
that thing and a reference to a group of things or Persons includes each
thing or Person in that group;
	 
	 	(vi)	 	references to a Person includes that Person’s successors
and assigns;
	 
	 	(vii)	 	all references to specific times are references to
Toronto time; and
	 
	 	(viii)	 	words in the singular include the plural and vice-versa and words in one
gender include all genders.

 

- 15 -

ARTICLE 2

CREDIT

2.1 Amount and Availment Options

	(1)	 	Upon and subject to the terms and conditions of this Agreement, the Lenders severally agree
to provide to the Borrower a non-revolving term credit facility (the “Credit”) for the use of
the Borrower in the amount of up to Cdn. $410,000,000 (provided that each Lender’s obligation
hereunder shall be limited to its respective Applicable Percentage of the Credit).

	(2)	 	At the option of the Borrower, the Credit may be utilized by the Borrower by requesting that
Prime Rate Advances be made by the Lenders or by presenting orders to a Lender for acceptance
as Banker’s Acceptances.

2.2 Non-Revolving Credit and Availability Period

     The Credit is a non-revolving credit. The principal amount of any Advance under the Credit
which is repaid from time to time may not be reborrowed. The Credit shall be available in no more
than five Advances, in minimum amounts of Cdn. $25,000,000 during the period from the Closing Date
to and including 31 December 2005 (the “Availability Period”). Any unused portion of the Credit
after the Availability Period will be immediately cancelled.

2.3 Use of the Credit

     The Credit shall be used for general corporate purposes including to finance, in part, the
payment of a dividend to be paid, ultimately, to Waste Management, Inc. under the American Jobs
Creation Act.

2.4 Term and Repayment

     All Obligations under the Credit shall be repaid in full, and the Credit shall be cancelled,
on the Maturity Date.

2.5 Voluntary Prepayments

     The Borrower may prepay Prime Rate Advances under the Credit upon prior written notice given
in accordance with Section 5.3 without premium or penalty in minimum amounts of Cdn. $5,000,000 and
integral multiples of Cdn. $1,000,000 except that no Banker’s Acceptance or BA Equivalent Loan may
be paid prior to its maturity date. The Borrower may cash collateralize outstanding Banker’s
Acceptances and BA Equivalent Loans.

2.6 Interest Rates, Fees and Commissions

	(1)	 	Interest rates, Banker’s Acceptance Fees and Standby Fees will vary and be calculated based
on the Relevant Rating as follows:

 

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	 	 	Applicable Margin	 	 	 	 
	 	 	for Prime Rate	 	Banker’s Acceptance	 	 
	 	 	Advances	 	Fees	 	Standby Fee
	Relevant Rating	 	(% per annum)	 	(% per annum)	 	(% per annum)
	Greater than or equal to A-/A3
	 	 	0.0	%	 	 	0.275	%	 	 	0.085	%
	BBB+/Baa1
	 	 	0.0	%	 	 	0.425	%	 	 	0.100	%
	BBB/Baa2
	 	 	0.0	%	 	 	0.525	%	 	 	0.125	%
	BBB-/Baa3
	 	 	0.0	%	 	 	0.650	%	 	 	0.150	%
	Lower than or equal to BB+/Ba1
	 	 	0.0	%	 	 	0.850	%	 	 	0.200	%

	(2)	 	Any increase or decrease in interest rates, Banker’s Acceptance Fees and Standby Fees
resulting from a change in the Relevant Rating shall be effective on the day that the Relevant
Rating changes. Waste Management, Inc. shall immediately notify the Agent of any change in
the Relevant Rating, or in the rating of S&P or of Moody’s comprising the Relevant Rating.

	(3)	 	All interest rates, Banker’s Acceptance Fees and Standby Fees set forth in Section 2.6(1) are
rates per annum. Interest on Prime Rate Advances shall be the Prime Rate plus the relevant
rate shown in the column of the table in Section 2.6(1) headed “Applicable Margin for Prime
Rate Advances”. The rate for Banker’s Acceptance Fees shall be the relevant rate shown in the
column of the table in Section 2.6(1) headed “Banker’s Acceptance Fees”. Interest on Prime
Rate Advances, Banker’s Acceptances Fees and Standby Fees received by the Agent shall be
promptly distributed by the Agent to the Lenders in accordance with their respective
Applicable Percentages.

2.7 Standby Fee

     The Borrower shall pay a standby fee (“Standby Fee”) on the daily unadvanced portion of the
Credit at a rate per annum which shall vary and be calculated based on the Relevant Rating as set
out in the column of the table in Section 2.6(1) headed “Standby Fee” during the Availability
Period. The Standby Fee shall be calculated daily beginning on the Closing Date and shall be
payable in arrears on the third Business Day following the end of the Availability Period.

2.8 Agency and Assignment Fees

     The Borrower shall pay to the Agent, inter alia, the annual agency fee provided for in the
Agency Fee Letter.

 

- 17 -

ARTICLE 3

SECURITY

3.1 Security

     The security shall comprise the unlimited and unconditional guarantees by each of the
Guarantors in favour of the Agent and the Lenders of the Obligations, in the form annexed as
Schedule D.

ARTICLE 4

DISBURSEMENT CONDITIONS

	4.1	 	Conditions Precedent to Initial Advance

     The following conditions precedent must be satisfied at or before the time of the initial
Advance under this Agreement, unless waived by the Lenders. Where delivery of documents is referred
to, the documents shall be delivered to the Agent for and on behalf of the Lenders and shall be in
full force and effect and in form and substance satisfactory to the Lenders.

	(1)	 	Other Debt and Encumbrances – The Lenders shall have received:

	 	(a)	 	a true copy of the U.S. Credit Agreement together with all amendments
thereto up to the date of this Agreement;
	 
	 	(b)	 	the audited consolidated financial statements of Waste Management, Inc.
for the two most recent fiscal years ended prior to the Closing Date; and
	 
	 	(c)	 	the unaudited consolidated financial statements of Waste Management, Inc.
for each quarterly period ended subsequent to the date of the latest financial
statements delivered pursuant to Section 4.1(1)(b).

	(2)	 	Documentation and Ancillary Information – The Agent:

	 	(a)	 	shall have received duly executed copies of this Agreement, the Security
and the other Loan Documents, accompanied by all consents, acknowledgments and
ancillary agreements as may be reasonably required by the Agent, all in form and
substance satisfactory to the Agent and the Lenders; and
	 
	 	(b)	 	shall have received a certificate from each of the Obligors with copies
of its Constating Documents, a list of its officers, directors, trustees and/or
partners, as the case may be, who are executing Loan Documents on its behalf with
specimens of the signatures of those who are executing Loan Documents on its behalf,
and copies of the corporate proceedings taken to authorize it to execute, deliver
and perform its obligations under the Loan Documents.

 

- 18 -

	(3)	 	Opinions – The Agent shall have received the following favourable legal opinions, each in
form and substance satisfactory to it:

	 	(a)	 	the opinion of Borden Ladner Gervais LLP, counsel to the Lenders,
addressed to the Agent and the Lenders in relation to the Loan Documents which are
governed by Ontario law;
	 
	 	(b)	 	the opinion of Nova Scotia counsel to the Borrower, addressed to the
Agent, the Lenders and Borden Ladner Gervais LLP in relation to, among other things,
the existence of the Borrower, its corporate power and authority and the due
authorization, execution and delivery of the Loan Documents and such other matters
as the Agent may reasonably require; and
	 
	 	(c)	 	the opinion of in-house counsel to the Guarantors, addressed to the
Agent, the Lenders and Borden Ladner Gervais LLP in relation to, among other things,
the Guarantors and the enforceability of the Loan Documents governed by U.S. law and
such other matters as the Agent may reasonably require.

	(4)	 	Other Matters – The following conditions must also be satisfied:

	 	(a)	 	all fees and expenses payable under the Loan Documents, the Fee Letter
and the Agency Fee Letter (including upfront fees, agency fees, and reasonable legal
fees and expenses of the Lenders’ counsel invoiced prior to the Closing Date) shall
have been paid; and
	 
	 	(b)	 	the conditions precedent in this Section 4.1 shall be satisfied no later
than 15 December 2005.

	4.2	 	Conditions Precedent to all Advances

     The obligation of the Lenders to make any Advance (including the initial Advance) is subject
to the conditions precedent that:

	 	(a)	 	no Event of Default or Pending Event of Default has occurred and is
continuing on the Drawdown Date, or would result from making the Advance;
	 
	 	(b)	 	the Agent has received timely notice as required under Section 5.3;
	 
	 	(c)	 	the representations and warranties set out in Section 6.1 (other than the
representation and warranty in Section 6.1(5)), other than those expressly stated to
be made as of a specific date or otherwise expressly modified in accordance with
Section 6.2, are true and correct in all material respects on the date of the
Advance as if made on and as of the date of the Advance; and
	 
	 	(d)	 	all other terms and conditions of this Agreement upon which an Advance
may be obtained are fulfilled.

 

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ARTICLE 5

ADVANCES

	5.1	 	Evidence of Indebtedness

     The Agent will maintain records of the Obligations resulting from Prime Rate Advances made by
the Lenders and each Lender will maintain records concerning those Advances it has made. The Agent
shall also maintain records of the Obligations resulting from Advances by way of Banker’s
Acceptances and BA Equivalent Loans, and each Lender shall also maintain records relating to
Banker’s Acceptances that it has accepted and BA Equivalent Loans it has made. The records
maintained by the Agent shall constitute, in the absence of manifest error, prima facie evidence of
the Obligations and all details relating thereto. After a request by the Borrower, the Agent or
the Lender to whom the request is made will promptly advise the Borrower of the entries in such
records. The failure of the Agent or any Lender to correctly record any such amount or date shall
not, however, adversely affect the obligation of the Borrower to pay the Obligations in accordance
with this Agreement. The Agent shall, upon the reasonable request of a Lender or the Borrower,
provide any information contained in its records of Advances to such Lender or the Borrower and the
Agent, each Lender and the Borrower shall cooperate in providing all information reasonably
required to keep all accounts accurate and up-to-date.

	5.2	 	Conversions

     Subject to the other terms of this Agreement, the Borrower may from time to time convert all
or any part of the outstanding amount of any Advance into another form of Advance.

	5.3	 	Notice of Advances and Payments

	(1)	 	The Borrower shall give the Agent irrevocable written notice, in the form of Schedule A, of
any request for any Advance to it under the Credit. The Borrower shall also give the Agent
irrevocable written notice in the same form of any payment by it (whether resulting from a
repayment, prepayment, rollover or conversion of any Advance under the Credit) and each such
payment shall be for an amount no less than Cdn. $5,000,000 or the aggregate amount of the
Advances outstanding, whichever is less.
	 
	(2)	 	Notice in respect of a Prime Rate Advance or payment thereof shall be given on the Business
Day prior to any such Advance or payment. Notices in respect of Advances by way of Banker’s
Acceptance shall be given two Business Days prior to any such Advance. Any permanent
reduction of the Credit shall only be effective on three Business Days notice as required by
Section 5.4.

	(3)	 	Notices shall be given not later than 11:00 a.m. (Toronto time) on the date for notice.
Payments (other than those being made solely from the proceeds of rollovers and conversions)
must be made prior to 11:00 a.m. (Toronto time) on the date for payment. If a notice or
payment is not given or made by those times, it shall be deemed to have been given or made on
the next Business Day, unless all Lenders affected by the late

 

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notice or payment agree, in their sole discretion,
to accept a notice or payment at a later time as
being effective on the date it is given or made.

	5.4	 	Prepayments and Reductions

	(1)	 	Subject to giving notice required by Section 5.3, the Borrower may from time to time repay
Advances outstanding under the Credit without premium or penalty, except that Banker’s
Acceptances and BA Equivalent Loans may not be paid prior to their respective maturity dates.

	(2)	 	The Borrower may from time to time, by giving not less than three Business Days express
written notice to the Agent, irrevocably notify the Agent of the cancellation of the Credit or
of the permanent reduction of the committed amount of the Credit by an amount which shall be a
minimum of Cdn. $5,000,000 and a whole multiple of Cdn. $1,000,000. The Borrower shall have
no right to any increase in the committed amount of the Credit thereafter.

5.5 Prime Rate Advances

	(1)	 	Upon timely fulfilment of all applicable conditions as set forth in this Agreement, the
Agent, in accordance with the procedures set forth in Section 5.6, will make the requested
amount of a Prime Rate Advance available to the Borrower on the Drawdown Date requested by the
Borrower by crediting the Designated Account with such amount. Each Prime Rate Advance shall
be in an aggregate minimum amount of Cdn. $5,000,000 and in a whole multiple of Cdn.
$1,000,000. The Borrower shall pay interest to the Agent for the account of the Lenders at
the Branch of Account on any such Advances outstanding from time to time hereunder at the
applicable rate of interest specified in Section 2.6.

	(2)	 	Interest on Prime Rate Advances shall be calculated and payable monthly on each Interest
Payment Date. All interest shall accrue from day to day and shall be payable in arrears for
the actual number of days elapsed from and including the date of Advance or the previous date
on which interest was payable, as the case may be, to but excluding the date on which interest
is payable, both before and after maturity, default and judgment, with interest on overdue
interest at the same rate payable on demand.

	(3)	 	Interest calculated with reference to the Prime Rate shall be calculated on the basis of a
calendar year. Each rate of interest which is calculated with reference to a period (the
“deemed interest period”) that is less than the actual number of days in the calendar year of
calculation is, for the purposes of the Interest Act (Canada), equivalent to a rate based on a
calendar year calculated by multiplying such rate of interest by the actual number of days in
the calendar year of calculation and dividing by the number of days in the deemed interest
period. Interest shall be calculated using the nominal rate of calculation, and will not be
calculated using the effective rate method of calculation or any other basis that gives effect
to the principle of deemed reinvestment of interest.

 

- 21 -

	5.6	 	Co-ordination of Prime Rate Advances

Each Lender shall advance its Applicable Percentage of each Prime Rate Advance in accordance
with the following provisions:

	 	(a)	 	the Agent shall advise each Lender of its receipt of a notice from the
Borrower pursuant to Section 5.3 on the day such notice is received and shall, as
soon as possible, advise each Lender of such Lender’s Applicable Percentage of any
Advance requested by the notice;
	 
	 	(b)	 	each Lender shall deliver its Applicable Percentage of the Advance to the
Agent not later than 11:00 a.m. (Toronto time) on the Drawdown Date; and
	 
	 	(c)	 	unless a Lender notifies the Agent that a condition precedent to an
Advance specified in this Agreement has not been met, the Agent shall advance to the
Borrower the amount delivered by each Lender by crediting the Designated Account
prior to 2:00 p.m. (Toronto time) on the Drawdown Date, but if the conditions
precedent to the Advance are not met by 2:00 p.m. (Toronto time) on the Drawdown
Date, the Agent shall return the funds to the Lenders or invest them in an overnight
investment as orally instructed by each Lender until such time as the Advance is
made.

	5.7	 	Execution of Banker’s Acceptances

	(1)	 	To facilitate the acceptance of Banker’s Acceptances hereunder, the Borrower hereby appoints
each Lender as its attorney to sign and endorse on its behalf, as and when considered
necessary by the Lender, an appropriate number of orders in the form prescribed by that
Lender.

	(2)	 	Each Lender may, at its option, execute any order in handwriting or by the facsimile or
mechanical signature of any of its authorized officers, and the Lenders are hereby authorized
to accept or pay, as the case may be, any order of the Borrower which purports to bear such a
signature notwithstanding that any such individual has ceased to be an authorized officer of
the Lender. Any such order or Banker’s Acceptance shall be as valid as if he or she were an
authorized officer at the date of issue of the order or Banker’s Acceptance.

	(3)	 	Any order or Banker’s Acceptance signed by a Lender as attorney for the Borrower, whether
signed in handwriting or by the facsimile or mechanical signature of an authorized officer of
a Lender, may be dealt with by the Agent or any Lender to all intents and purposes and shall
bind the Borrower as if duly signed and issued by the Borrower.

	(4)	 	The receipt by the Agent of a request for an Advance by way of Banker’s Acceptances shall be
each Lender’s sufficient authority to execute, and each Lender shall, subject to the terms and
conditions of this Agreement, execute orders in accordance with such request and the advice of
the Agent given pursuant to Section 5.10, and the orders so executed shall thereupon be deemed
to have been presented for acceptance.

 

- 22 -

	5.8	 	Sale of Banker’s Acceptances

	(1)	 	It shall be the responsibility of each Lender to arrange, in accordance with normal market
practice, for the sale on each Drawdown Date of the Banker’s Acceptances to be accepted by
that Lender, failing which the Lender shall purchase its Banker’s Acceptances.

	(2)	 	In accordance with the procedures set forth in Section 5.10, the Agent will make the net
proceeds of the requested Advance by way of Banker’s Acceptances received by it from the
Lenders available to the Borrower on the Drawdown Date by crediting the Designated Account
with such amount.

	(3)	 	Notwithstanding the foregoing, if in the determination of the Required Lenders, acting
reasonably, a market for Banker’s Acceptances does not exist at any time, or the Lenders
cannot for other reasons, after reasonable efforts, readily sell Banker’s Acceptances or
perform their other obligations under this Agreement with respect to Banker’s Acceptances,
then upon at least one Business Day’s written notice by the Agent to the Borrower, the
Borrower’s right to request Advances by way of Banker’s Acceptances shall be and remain
suspended until the Agent notifies the Borrower that any condition causing such determination
no longer exists (and the Agent shall be obligated to so notify the Borrower promptly
following such occurrence).

	5.9	 	Size and Maturity of Banker’s Acceptances and Rollovers

     Each Advance of Banker’s Acceptances shall be in a minimum amount of Cdn. $5,000,000 and
integral multiples of Cdn. $1,000,000 and the maximum number of maturities of Banker’s Acceptances
outstanding at any time shall not exceed fifteen. Each Banker’s Acceptance shall have a term of 1,
2, 3, 6 or, if available, or 12 months or such other periods after the date of acceptance of the
order by a Lender, but no Banker’s Acceptance may mature on a date which is not a Business Day or
after the Maturity Date. Subject to the terms and conditions of this Agreement, the face amount at
maturity of a Banker’s Acceptance may be renewed as a Banker’s Acceptance (by repayment and
reissue) or converted (by repayment) into another form of Advance.

	5.10	 	Co-ordination of BA Advances

     Each Lender shall advance its Applicable Percentage of each Advance by way of Banker’s
Acceptances in accordance with the provisions set forth below.

	(1)	 	The Agent, promptly following receipt of a notice from the Borrower pursuant to Section 5.3
requesting an Advance by way of Banker’s Acceptances, shall advise each Lender of the
aggregate face amount and term(s) of the Banker’s Acceptances to be accepted by it, which
term(s) shall be identical for all Lenders. The aggregate face amount of Banker’s Acceptances
to be accepted by a Lender shall be determined by the Agent by reference to the respective
Commitments of the Lenders, except that, if the face amount of a Banker’s Acceptance would not
be Cdn. $1,000 or a whole multiple thereof, the face amount shall be increased or reduced by
the Agent in its sole discretion to the nearest whole multiple of Cdn. $1,000.

 

- 23 -

	(2)	 	Each Lender shall transfer to the Agent at the Branch of Account for value not later than
11:00 a.m. (Toronto time) on each Drawdown Date immediately available Cdn. Dollars in an
aggregate amount equal to the BA Discount Proceeds of all Banker’s Acceptances accepted and
sold or purchased by the Lender on such Drawdown Date net of the applicable Banker’s
Acceptance Fee and net of the amount required to pay any of its previously accepted Banker’s
Acceptances that are maturing on the Drawdown Date or any of its other Advances that are being
converted to Banker’s Acceptances on the Drawdown Date.

	(3)	 	Unless a Lender notifies the Agent that a condition precedent to an Advance specified in this
Agreement has not been met, the Agent shall advance to the Borrower the amount delivered by
each Lender by crediting the Designated Account prior to 2:00 p.m. (Toronto time) on the
Drawdown Date, but if the conditions precedent to the Advance are not met by 2:00 p.m.
(Toronto time) on the Drawdown Date, the Agent shall return the funds to the Lenders or invest
them in an overnight investment as orally instructed by each Lender until such time as the
Advance is made.

	(4)	 	Notwithstanding any other provision hereof, for the purpose of determining the amount to be
transferred by a Lender to the Agent for the account of the Borrower in respect of the sale of
any Banker’s Acceptance accepted by such Lender and sold or purchased by it, the proceeds of
sale thereof shall be deemed to be an amount equal to the BA Discount Proceeds calculated with
respect thereto. Accordingly, in respect of any particular Banker’s Acceptance accepted by
it, a Lender in addition to its entitlement to retain the applicable Banker’s Acceptance Fee
for its own account (a) shall be entitled to retain for its own account the amount, if any, by
which the actual proceeds of sale thereof exceed the BA Discount Proceeds calculated with
respect thereto, and (b) shall be required to pay out of its own funds the amount, if any, by
which the actual proceeds of sale thereof are less than the BA Discount Proceeds calculated
with respect thereto.

	(5)	 	Whenever the Borrower requests an Advance that includes Banker’s Acceptances, each Lender
that is not permitted by applicable law or by customary market practice to accept a Banker’s
Acceptance (a “Non BA Lender”) shall, in lieu of accepting its pro rata amount of such
Banker’s Acceptances, make available to the Borrower on the Drawdown Date a non-interest
bearing loan (a “BA Equivalent Loan”) in Canadian Dollars and in an amount equal to the BA
Discount Proceeds of its pro rata amount of the Banker’s Acceptances that the Non BA Lender
would have been required to accept on the Drawdown Date if it were able to accept Banker’s
Acceptances. The BA Discount Proceeds shall be calculated based on the BA Discount Rate.
Each Non BA Lender shall also be entitled to deduct from the BA Equivalent Loan an amount
equal to the Banker’s Acceptance Fee that would have been applicable had it been able to
accept Banker’s Acceptances. The BA Equivalent Loan shall have a term equal to the term of
the Banker’s Acceptances that the Non BA Lender would otherwise have accepted and the Borrower
shall, at the end of that term, be obligated to pay the Non BA Lender an amount equal to the
aggregate face amount of the Banker’s Acceptances that it would otherwise have accepted. All
provisions of this Agreement applicable to Banker’s Acceptances and Lenders that accept
Banker’s Acceptances shall apply

 

- 24 -

mutatis mutandis to BA Equivalent Loans and Non BA
Lenders and, without limiting the foregoing, Advances
shall include BA Equivalent Loans.

	5.11	 	Payment of Banker’s Acceptances

	(1)	 	The Borrower shall provide for the payment to the Agent at the Branch of Account for the
account of the applicable Lenders of the full face amount of each Banker’s Acceptance accepted
for its account on the earlier of (a) the date of maturity of a Banker’s Acceptance, and (b)
the date on which any Obligations become due and payable pursuant to Section 8.2. The Lenders
shall be entitled to recover interest from the Borrower at a rate of interest per annum equal
to the rate applicable to Prime Rate Advances under the Credit under which the Banker’s
Acceptance was issued, compounded monthly, upon any amount payment of which has not been
provided for by the Borrower in accordance with this Section. Interest shall be calculated
from and including the date of maturity of each such Banker’s Acceptance up to but excluding
the date such payment, and all interest thereon, is provided for by the Borrower, both before
and after demand, default and judgment.

	(2)	 	If the Borrower provides cash in response to any Obligations becoming due and payable under
Section 8.2, it shall be entitled to receive interest on the cash provided in accordance with
Section 11.12 as long as the cash is held as Collateral.

	5.12	 	Deemed Advance – Banker’s Acceptances

     Except for amounts which are paid from the proceeds of a rollover of a Banker’s Acceptance or
for which payment has otherwise been funded by the Borrower, any amount which a Lender pays to any
third party on or after the date of maturity of a Banker’s Acceptance in satisfaction thereof or
which is owing to the Lender in respect of such a Banker’s Acceptance on or after the date of
maturity of such a Banker’s Acceptance, shall be deemed to be a Prime Rate Advance to the Borrower
under this Agreement. Each Lender shall forthwith give notice of the making of such a Prime Rate
Advance to the Borrower and the Agent (which shall promptly give similar notice to the other
Lenders). Interest shall be payable on such Prime Rate Advances in accordance with the terms
applicable to Prime Rate Advances.

	5.13	 	Waiver

     The Borrower shall not claim from a Lender any days of grace for the payment at maturity of
any Banker’s Acceptances presented and accepted by the Lender pursuant to this Agreement. The
Borrower waives any defence to payment which might otherwise exist if for any reason a Banker’s
Acceptance shall be held by a Lender in its own right at the maturity thereof, and the doctrine of
merger shall not apply to any Banker’s Acceptance that is at any time held by a Lender in its own
right.

	5.14	 	Degree of Care

     Any executed orders to be used as Banker’s Acceptances shall be held in safekeeping with the
same degree of care as if they were the Lender’s own property, and shall be kept at the place at
which such orders are ordinarily held by such Lender.

 

- 25 -

	5.15	 	Obligations Absolute

     The obligations of the Borrower with respect to Banker’s Acceptances under this Agreement
shall be unconditional and irrevocable, and shall be paid strictly in accordance with the terms of
this Agreement under all circumstances, including the following circumstances:

	 	(a)	 	any lack of validity or enforceability of any order accepted by a Lender
as a Banker’s Acceptance; or
	 
	 	(b)	 	the existence of any claim, set-off, defence or other right which the
Borrower may have at any time against the holder of a Banker’s Acceptance, a Lender
or any other Person, whether in connection with this Agreement or otherwise.

	5.16	 	Shortfall on Drawdowns, Rollovers and Conversions

     The Borrower agrees that:

	 	(a)	 	the difference between the amount of an Advance requested by the Borrower
by way of Banker’s Acceptances and the actual proceeds of the Banker’s Acceptances;
	 
	 	(b)	 	the difference between the actual proceeds of a Banker’s Acceptance and
the amount required to pay a maturing Banker’s Acceptance, if a Banker’s Acceptance
is being rolled over; and
	 
	 	(c)	 	the difference between the actual proceeds of a Banker’s Acceptance and
the amount required to repay any Advance which is being converted to a Banker’s
Acceptance;

shall be funded and paid by the Borrower from its own resources, by 11:00 a.m. on the day of the
Advance or may be advanced as a Prime Rate Advance under the Credit if the Borrower is otherwise
entitled to an Advance under the Credit.

	5.17	 	Payment by the Borrower

	(1)	 	Except as otherwise provided herein, all payments made by or on behalf of the Borrower
pursuant to this Agreement shall be made to and received by the Agent and shall be distributed
by the Agent to the Lenders as soon as possible upon receipt by the Agent. Except as
otherwise provided in this Agreement (including Section 9.3(2), the Agent shall distribute:

	 	(a)	 	payments of interest in accordance with each Lender’s Applicable
Percentage of the Credit;
	 
	 	(b)	 	repayments of principal in accordance with each Lender’s Applicable
Percentage of the Credit; or

 

- 26 -

	 	(c)	 	all other payments received by the Agent including amounts received upon
the realization of Security, in accordance with each Lender’s Applicable Percentage
of the Credit provided, however, that with respect to proceeds of realization, no
Lender shall receive an amount in excess of the amounts owing to it in respect of
the Obligations.

	(2)	 	If the Agent does not distribute a Lender’s share of a payment made by the Borrower to that
Lender for value on the day that payment is made or deemed to have been made to the Agent, the
Agent shall pay to the Lender on demand an amount equal to the product of (a) the Interbank
Reference Rate per annum multiplied by (b) the Lender’s share of the amount received by the
Agent from the Borrower and not so distributed, multiplied by (c) a fraction, the numerator of
which is the number of days that have elapsed from and including the date of receipt of the
payment by the Agent to but excluding the date on which the payment is made by the Agent to
such Lender and the denominator of which is 365. The Agent shall be entitled to withhold any
Tax applicable to any such payment as required by applicable laws.

	5.18	 	Prohibited Rates of Interest

     It is the intention of the parties to comply with applicable usury laws now or hereafter
enacted. Accordingly, notwithstanding any other provisions of this Agreement or any other Loan
Document, in no event shall any Loan Document require the payment or permit the collection of
interest or other amounts in an amount or at a rate in excess of the amount or rate that is
permitted by law or in an amount or at a rate that would result in the receipt by the Lenders or
the Agent of interest at a criminal rate, as the terms “interest” and “criminal rate” are defined
under the Criminal Code (Canada). Where more than one such law is applicable to any Obligor, such
Obligor shall not be obliged to make payment in an amount or at a rate higher than the lowest
amount or rate permitted by such laws. If from any circumstances whatever, fulfilment of any
provision of any Loan Document shall involve transcending the limit of validity prescribed by any
applicable law for the collection or charging of interest, the obligation to be fulfilled shall be
reduced to the limit of such validity, and if from any such circumstances the Agent or the Lenders
shall ever receive anything of value as interest or deemed interest under any Loan Document in an
amount that would exceed the highest lawful rate of interest permitted by any applicable law, such
amount that would be excessive interest shall be applied to the reduction of the principal amount
of the Credit, and not to the payment of interest, or if such excessive interest exceeds the unpaid
principal balance of the Credit, the amount exceeding the unpaid balance shall be refunded to the
Borrower. In determining whether or not the interest paid or payable under any specified
contingency exceeds the highest lawful rate, the Obligors, the Agent and the Lenders shall, to the
maximum extent permitted by applicable laws (a) characterize any non-principal payment as an
expense, fee or premium rather than as interest, (b) exclude voluntary prepayments and the effects
thereof, (c) amortize, prorate, allocate and spread the total amount of interest throughout the
term of such indebtedness so that interest thereon does not exceed the maximum amount permitted by
applicable laws, or (d) allocate interest between portions of such indebtedness to the end that no
such portion shall bear interest at a rate greater than that permitted by applicable laws. For the
purposes of the application of the Criminal Code (Canada), the effective annual rate of interest
shall be determined in accordance with generally accepted actuarial practices and principles and in
the event of any dispute, a

 

- 27 -

certificate of a Fellow of the Canadian Institute of Actuaries appointed by the Agent shall be
conclusive for the purpose of such determination.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

	6.1	 	Representations and Warranties

     Each of the Obligors represents and warrants, with respect to itself and each other Obligor,
to the Lenders as follows:

	(1)	 	Corporate Authority

	 	(a)	 	Each of the Obligors (i) is duly organized, validly existing and in good
standing under the laws of its jurisdiction of formation, (ii) has all requisite
corporate power to own its property and conduct its business as now conducted and as
presently contemplated, and (iii) is in good standing and is duly authorized to do
business in each jurisdiction in which its property or business as presently
conducted or contemplated makes such qualification necessary, except where a failure
to be so qualified could not reasonably be expected to have a Material Adverse
Effect.
	 
	 	(b)	 	The execution, delivery and performance of its Loan Documents and the
transactions contemplated hereby and thereby (i) are within the corporate authority
of each of the Obligors, (ii) have been duly authorized by all necessary corporate
proceedings on the part of each of the Obligors, (iii) do not conflict with or
result in any breach or contravention of any provision of law, statute, rule or
regulation to which any of the Obligors is subject, (iv) do not contravene any
judgment, order, writ, injunction, license or permit applicable to any Obligor so as
to have a Material Adverse Effect, and (v) do not conflict with any provision of the
Constating Documents of any of the Obligors or any agreement or other instrument
binding upon any Obligor, except for those conflicts with any such agreement or
instrument which could not reasonably be expected to have a Material Adverse Effect.
	 
	 	(c)	 	The execution, delivery and performance of the Loan Documents by each of
the Obligors will result in valid and legally binding obligations of each of the
Obligors enforceable against each in accordance with the respective terms and
provisions hereof and thereof, except as enforceability is limited by bankruptcy,
insolvency, reorganization, moratorium or other laws relating to or affecting
generally the enforcement of creditors’ rights generally and general principles of
equity.

	(2)	 	Governmental and Other Approvals

The execution, delivery and performance of the Loan Documents by each of the Obligors and
the consummation by each of the Obligors of the transactions contemplated hereby and
thereby do not require any approval or consent of, or filing

 

- 28 -

with, any governmental
agency or authority or other third party other than those already obtained and those
required after the date hereof in connection with the Obligors’ performance of the
covenants contained in this Agreement.

	(3)	 	Title to Properties; Leases

Waste Management, Inc. and its Subsidiaries own all of the assets reflected in the
consolidated balance sheet as at the Interim Balance Sheet Date (other than those assets
not owned by Waste Management, Inc. or its Subsidiaries, but required to be consolidated
under GAAP) or acquired since that date (except property and assets operated under
capital leases or sold or otherwise disposed of in the ordinary course of business since
that date), subject to no Encumbrances except Permitted Encumbrances.

	(4)	 	Financial Statements; Solvency

	 	(a)	 	There have been furnished to the Lenders consolidated balance sheets of
Waste Management, Inc. dated the Balance Sheet Date and consolidated statements of
operations for the fiscal periods then ended, certified by the independent auditors
permitted under the U.S. Credit Agreement from time to time. In addition, there
have been furnished to the Lenders consolidated balance sheets of Waste Management,
Inc. and its Subsidiaries (including the Borrower) dated the Interim Balance Sheet
Date and the related consolidated statements of operations for the fiscal quarter
ending on the Interim Balance Sheet Date. All said balance sheets and statements of
operations have been prepared in accordance with GAAP (but, in the case of any of
such financial statements which are unaudited, only to the extent GAAP is applicable
to interim unaudited reports), and fairly present, in all material respects, the
financial condition of Waste Management, Inc. on a consolidated basis as at the
close of business on the dates thereof and the results of operations for the periods
then ended, subject, in the case of unaudited interim financial statements, to
changes resulting from audit and normal year-end adjustments and to the absence of
complete footnotes. There are no contingent liabilities of Waste Management, Inc.
and its Subsidiaries involving material amounts, known to the officers of any of the
Obligors, which have not been disclosed in said balance sheets and the related notes
thereto or otherwise in writing to the Lenders.
	 
	 	(b)	 	Each of the Obligors on a consolidated basis (both before and after
giving effect to the transactions contemplated by this Agreement) is solvent (i.e.,
it has assets having a fair value in excess of the amount required to pay its
probable liabilities on its existing debts as they become absolute and matured)
and has, and expects to have, the ability to pay its debts from time to time
incurred in connection therewith as such debts mature.

 

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	(5)	 	No Material Changes, Etc.

Since the Balance Sheet Date, there have been no material adverse changes in the
consolidated financial condition, business, assets or liabilities (contingent or
otherwise) of Waste Management, Inc. and its Subsidiaries, taken as a whole, other than
changes in the ordinary course of business which have not had a Material Adverse Effect.

	(6)	 	Franchises, Patents, Copyrights, Etc.

Each of the Obligors possess all franchises, patents, copyrights, trademarks, trade
names, licenses and permits, and rights in respect of the foregoing, adequate for the
conduct of their business substantially as now conducted (other than those the absence of
which would not have a Material Adverse Effect) without known conflict with any rights of
others other than a conflict which would not have a Material Adverse Effect.

	(7)	 	Litigation

Except as disclosed in Schedule 6.7 of the U.S. Credit Agreement, as such Schedule exists
at the date of this Agreement, or in the Disclosure Documents, there are no actions,
suits, proceedings or investigations of any kind pending or, to the knowledge of the
Obligors, threatened against the Obligors before any court, tribunal or administrative
agency or board which, either in any case or in the aggregate, could reasonably be
expected to have a Material Adverse Effect.

	(8)	 	No Materially Adverse Contracts, Etc.

None of the Obligors is subject to any restriction in its Constating Documents, corporate
or other legal restriction, or any judgment, decree, order, rule or regulation which in
the judgment of such Obligor’s officers has or could reasonably be expected in the future
to have a Material Adverse Effect. None of the Obligors is a party to any contract or
agreement which in the judgment of such Obligor’s officers has or could reasonably be
expected to have any Material Adverse Effect, except as otherwise reflected in adequate
reserves as required by GAAP.

	(9)	 	Compliance With Other Instruments, Laws, Etc.

None of the Obligor is (a) violating any provision of its Constating Documents, or (b)
violating any agreement or instrument to which any of them may be subject or by which any
of them or any of their properties may be bound or any decree, order,
judgment, or any statute, license, rule or regulation, in a manner which could (in the
case of such agreements or such instruments) reasonably be expected to result in a
Material Adverse Effect.

	(10)	 	Tax Status

Each of the Obligors have filed all federal, state, provincial and territorial income and
all other tax returns, reports and declarations (or obtained extensions with respect

 

- 30 -

thereto) required by applicable law to be filed by them (unless and only to the extent
that such Obligor has set aside on its books provisions reasonably adequate for the
payment of all unpaid and unreported taxes as required by GAAP); and have paid all taxes
and other governmental assessments and charges (other than taxes, assessments and other
governmental charges imposed by jurisdictions other than the United States, Canada or any
political subdivision thereof which in the aggregate are not material to the financial
condition, business or assets of any Obligor on an individual basis or of Waste
Management, Inc. on a consolidated basis) that are material in amount, shown or
determined to be due on such returns, reports and declarations, except those being
contested in good faith; and, as required by GAAP, have set aside on their books
provisions reasonably adequate for the payment of all taxes for periods subsequent to the
periods to which such returns, reports or declarations apply. Except to the extent
contested in the manner permitted in the preceding sentence, there are no unpaid taxes in
any material amount claimed by the taxing authority of any jurisdiction to be due and
owing by any Obligor, nor do the officers of any Obligor know of any basis for any such
claim.

	(11)	 	No Event of Default

No Pending Event of Default or Event of Default has occurred hereunder and is continuing.

	(12)	 	Holding Company and Investment Company Acts

None of the Obligors is a “holding company”, or a “subsidiary company” of a “holding
company”, or an “affiliate” of a “holding company”, as such terms are defined in the
Public Utility Holding Company Act of 1935; nor is any of them a “registered investment
company”, or an “affiliated company” or a “principal underwriter” of a “registered
investment company”, as such terms are defined in the Investment Company Act of 1940.

	(13)	 	Absence of Financing Statements, Etc.

Except as permitted by §8.1 of the U.S. Credit Agreement, as such provision exists at the
date of this Agreement, there is no Debt senior to the Obligations, and except for
Permitted Encumbrances, there are no Encumbrances, or any effective financing statement,
security agreement, chattel mortgage, real estate mortgage or other document filed,
registered or recorded with any filing records, registry, or other public
office, which purports to cover, affect or give notice of any present or possible future
Encumbrances on any assets or property of any Obligor or right thereunder.

	(14)	 	Environmental Matters

Each of the Obligors have taken all steps that they have deemed reasonably necessary to
investigate the past and present condition and usage of its Real Property and the
operations conducted by it and, based upon such diligent investigation, have determined
that, except as set forth in Schedule 6.15 to the U.S. Credit Agreement, as such Schedule
exists at the date of this Agreement, and in the Disclosure Documents:

 

- 31 -

	(a)	 	None of the Obligors, nor any operator of their properties, is in
violation, or alleged violation, of any judgment, decree, order, law, permit,
license, rule or regulation pertaining to environmental matters, including without
limitation, those arising under the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980 as
amended (“CERCLA”), the Superfund Amendments and Reauthorization Act of 1986, the
Federal Clean Water Act, the Federal Clean Air Act, the Toxic Substances Control
Act, or any applicable international, federal, state, provincial, territorial or
local statute, regulation, ordinance, order or decree relating to health, safety,
waste transportation or disposal, or the environment (the “Environmental Laws”),
which violation, individually or in the aggregate, could reasonably be expected to
have a Material Adverse Effect.

	(b)	 	Except with respect to any such matters that could not reasonably be
expected to have a Material Adverse Effect, none of the Obligors has received notice
from any third party including, without limitation: any federal, state, provincial,
territorial or local governmental authority, (i) that any one of them has been
identified by the United States Environmental Protection Agency (“EPA”) as a
potentially responsible party under CERCLA with respect to a site listed on the
National Priorities List, 40 C.F.R. Part 300 Appendix B, (ii) that any hazardous
waste, as defined by 42 U.S.C. §6903(5), any hazardous substances as defined by 42
U.S.C. §9601(14), any pollutant or contaminant as defined by 42 U.S.C. §9601(33) or
any toxic substance, oil or hazardous materials or other chemicals or substances
regulated by any Environmental Laws, excluding household hazardous waste (“Hazardous
Substances”), which any one of them has generated, transported or disposed of, has
been found at any site at which a federal, state, provincial, territorial or local
agency or other third party has conducted or has ordered that an Obligor conduct a
remedial investigation, removal or other response action pursuant to any
Environmental Law, or (iii) that it is or shall be a named party to any claim,
action, cause of action, complaint, legal or administrative proceeding arising out
of any third party’s incurrence of costs, expenses, losses or damages of any kind
whatsoever in connection with the Release of Hazardous Substances.

	(c)	 	Except for those occurrences or situations that could not reasonably be
expected to have a Material Adverse Effect (i) no portion of the Real Property
or other assets of the Obligors has been used for the handling, processing,
storage or disposal of Hazardous Substances except in accordance with applicable
Environmental Laws, (ii) in the course of any activities conducted by the
Obligors or their respective operators of the Real Property or other assets of
the Obligors, no Hazardous Substances have been generated or are being used on
such properties except in accordance with applicable Environmental Laws, (iii)
there have been no unpermitted Releases or threatened Releases of Hazardous
Substances on, upon, into or from the Real Property or other assets of the
Obligors, and (iv) any Hazardous Substances that have been generated on the Real
Property or other assets of the Obligors have been transported offsite only by
carriers having an identification number

 

- 32 -

issued by the EPA or other relevant
Governmental Authority, treated or disposed of only by treatment or disposal
facilities maintaining valid permits as required under applicable Environmental
Laws, which transporters and facilities have been and are, to the Obligors’
knowledge, operating in compliance with such permits and applicable Environmental
Laws.

	(15)	 	Disclosure

No representation or warranty made by any Obligor in this Agreement or in any agreement,
instrument, document, certificate, or financial statement furnished to the Lenders or the
Agent by or on behalf of or at the request of the Borrower and any other Obligor in
connection with any of the transactions contemplated by the Loan Documents contains any
untrue statement of a material fact or omits to state a material fact necessary in order
to make the statements contained therein, taken as a whole, not misleading in light of
the circumstances in which they are made.

	(16)	 	Permits and Governmental Authority

All permits (other than those the absence of which could not reasonably be expected to
have a Material Adverse Effect) required for the construction and operation of all
landfills currently owned or operated by Waste Management, Inc. or the other Obligors
have been obtained and remain in full force and effect and are not subject to any appeals
or further proceedings or to any unsatisfied conditions that may allow material
modification or revocation. None of the Obligors, to the knowledge of any such Obligor,
or the holder of such permits, is in violation of any such permits, except for any
violation which could not reasonably be expected to have a Material Adverse Effect.

	6.2	 	Survival of Representations and Warranties

         The representations and warranties made in this Agreement shall survive the execution of this
Agreement and all other Loan Documents until such time as all of the Obligations have been paid in
full, and unless expressly stated to be made as of a specific date, shall be deemed to be repeated
and made as of the date of each Advance (including any deemed Advance) and as of the date of
delivery of each Compliance Certificate with the same force and effect as if made on
and as of each such date, subject to modifications communicated by the Borrower to the Lenders
in writing and accepted by the Required Lenders. The Lenders shall be deemed to have relied upon
such representations and warranties at each such time as a condition of making an Advance hereunder
or continuing to extend the Credit hereunder.

ARTICLE 7

COVENANTS

7.1 Financial Covenants of Waste Management, Inc.

     Waste Management, Inc. shall at all times maintain:

	 	(a)	 	a Total Leverage Ratio of not greater than 3.50 to 1.00; and

 

- 33 -

	 	(b)	 	an Interest Coverage Ratio of not less than 2.75 to 1.00.

     The foregoing ratios shall be calculated on a rolling four quarter basis, based on the most
recently completed four fiscal quarters of Waste Management, Inc.

	7.2	 	Positive Covenants

     During the term of this Agreement, each Obligor, as applicable, shall perform the covenants
specified below:

	(1)	 	Punctual Payment

The Borrower shall duly and punctually pay and perform its indebtedness, liabilities and
obligations under this Agreement and under the other Loan Documents to which it is a
party and each Guarantor shall duly and punctually pay and perform its indebtedness,
liabilities and obligations under this Agreement and under the other Loan Documents to
which it is a party, in each case, at the times and places and in the manner required by
the terms hereof and thereof.

	(2)	 	Chief Place of Business

The Borrower’s place of business is located at 5045 South Service Road, Suite 300,
Burlington, Ontario L7L 5Y7. The Borrower will give 30 days’ prior written notice to
the Agent of any change in its place of business.

	(3)	 	Records and Accounts

Each of the Obligors will keep true and accurate records and books of account in which
full, true and correct entries will be made in accordance with GAAP and with the
requirements of all regulatory authorities and maintain adequate accounts and reserves
for all taxes (including income taxes), depreciation, depletion, obsolescence and
amortization of its properties, all other contingencies, and all other proper reserves.

	(4)	 	Existence and Conduct of Business

Each of the Obligors will do or cause to be done all things necessary to preserve and
keep in full force and effect its existence, rights and franchises; and effect and
maintain its foreign qualifications (except where the failure to do so could not
reasonably be expected to have a Material Adverse Effect), licensing, domestication or
authorization, except as any of the foregoing may be terminated by its board of directors
in the exercise of its reasonable judgment; provided that such termination could not
reasonably be expected to have a Material Adverse Effect. None of the Obligors will
become obligated under any contract or binding arrangement which, at the time it was
entered into, could reasonably be expected to have a Material Adverse Effect. Each of
the Obligors will continue to engage primarily in any of the businesses now conducted by
it and in related, complementary or supplemental

 

- 34 -

businesses, and any additional
businesses acquired pursuant to the terms of §8.4(a) of the U.S. Credit Agreement, as
such provision exists at the date of this Agreement.

	(5)	 	Maintenance of Properties

Each of the Obligors will cause all material properties used or useful in the conduct of
its businesses to be maintained and kept in good condition, repair and working order
(ordinary wear and tear excepted) and supplied with all necessary equipment and cause to
be made all necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in its judgment may be necessary so that the businesses carried on in
connection therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section 7.2(5) shall prevent any Obligor from discontinuing
the operation and maintenance of any of its properties if such discontinuance is, in its
judgment, desirable in the conduct of its business and could not reasonably be expected
to have a Material Adverse Effect.

	(6)	 	Insurance

Each Obligor shall maintain or cause to be maintained insurance on its property that
satisfies the covenants and conditions of the U.S. Credit Agreement concerning insurance
coverage from time to time. Whenever reasonably requested in writing by the Agent, it
shall cause certificates evidencing such policies of insurance to be made available to
the Agent to the same extent required to be delivered to the administrative agent under
the U.S. Credit Agreement.

	(7)	 	Taxes

Each Obligor will duly pay and discharge, or cause to be paid and discharged, before the
same shall become overdue, all taxes, assessments and other governmental charges imposed
upon it and its real properties, sales and activities, or any part thereof, or upon the
income or profits therefrom, as well as all claims for labour, materials, or supplies,
which if unpaid might by law become an Encumbrances upon any of its property; provided,
however, that any such tax, assessment, charge, levy or claim need
not be paid if the failure to do so (either individually, or in the aggregate for all
such failures) could not reasonably be expected to have a Material Adverse Effect and the
validity or amount thereof shall currently be contested in good faith by appropriate
proceedings and if such Obligor shall have set aside on its books adequate reserves with
respect thereto as required by GAAP; and provided, further, that each Obligor will pay
all such taxes, assessments, charges, levies or claims prior to the foreclosure on any
Encumbrance which may have attached as security therefor.

	(8)	 	Inspection of Properties, Books and Contracts

Each Obligor will permit the Agent or any Lender or any of their respective designated
representatives, upon reasonable notice, to visit and inspect any of its properties, to
examine its books of account or contracts (and to make copies thereof and extracts
therefrom), and to discuss its affairs, finances and accounts with, and to

 

- 35 -

	 	 	be advised as
to the same by, its officers, all at such times and intervals as may be reasonably
requested.
	 
	(9)	 	Compliance with Laws, Contracts, Licenses and Permits; Maintenance of Material Licenses and
Permits
	 
	 	 	Each Obligor will (a) comply with the provisions of its Constating Documents, (b) comply
with all agreements and instruments by which it or any of its properties may be bound
except where non-compliance could not reasonably be expected to have a Material Adverse
Effect, (c) comply with all applicable laws and regulations (including Environmental
Laws), decrees, orders, judgments, licenses and permits, including, without limitation,
all environmental permits (“Applicable Requirements”), except where non-compliance with
such Applicable Requirements could not reasonably be expected to have a Material Adverse
Effect, (d) maintain all operating permits for all landfills now owned or hereafter
acquired, except where the failure to do so could not reasonably be expected to have a
Material Adverse Effect, and (e) dispose of hazardous waste only at licensed disposal
facilities operating, to such Obligor’s knowledge, in compliance with Environmental Laws,
except where the failure to do so could not reasonably be expected to have a Material
Adverse Effect. If at any time any authorization, consent, approval, permit or license
from any officer, agency or instrumentality of any government shall become necessary or
required in order that any Obligor may fulfill any of its obligations hereunder or under
any other Loan Document, such Obligor will immediately take or cause to be taken all
reasonable steps within its power to obtain such authorization, consent, approval, permit
or license and furnish the Agent with evidence thereof.
	 
	(10)	 	Environmental Indemnification
	 
	 	 	Each of the Obligors covenants and agrees that it will indemnify and hold the Lenders and
the Agent and their respective affiliates, and each of the representatives, agents
and officers of each of the foregoing, harmless from and against any and all claims,
expense, damage, loss or liability incurred by the Lenders or the Agent (including all
reasonable costs of legal representation incurred by the Lenders or the Agent) relating
to (a) any Release or threatened Release of Hazardous Substances on any of its Real
Property, (b) any violation of any Environmental Laws or other Applicable Requirements
with respect to conditions of the Real Property or other assets of the Obligors, or the
operations conducted thereon, or (c) the investigation or remediation of offsite
locations at which any of the Obligors, or their predecessors, are alleged to have
directly or indirectly disposed of Hazardous Substances. It is expressly acknowledged by
the Obligors that this covenant of indemnification shall survive the payment of the
Obligations and termination of the Credit and shall inure to the benefit of the Lenders,
the Agent and their affiliates, successors and assigns.

 

- 36 -

	(11)	 	Further Assurances
	 
	 	 	Each of the Obligors will cooperate with the Agent and execute such further instruments
and documents as the Agent shall reasonably request to carry out to the Required Lenders’
satisfaction the transactions contemplated by this Agreement.
	 
	(12)	 	Notice of Potential Claims or Litigation
	 
	 	 	Waste Management, Inc. shall deliver to the Agent written notice of the initiation of any
action, claim, complaint, investigation or any other notice of dispute or litigation
against any Obligor that could reasonably be expected to have a Material Adverse Effect,
or which questions the validity or enforceability of any Loan Document, together with a
copy of each such complaint or other notice received by such Obligor if requested by the
Agent within 30 days of receipt thereof or of the determination that such action could
reasonably be expected to have a Material Adverse Effect, whichever occurs later (and
such Obligor will make such determination in each case as promptly as practicable).
	 
	(13)	 	Notice of Certain Events Concerning Environmental Claims
	 
	 	 	Waste Management, Inc. shall promptly, and in any event within ten Business Days of the
Obligor obtaining knowledge thereof, notify the Agent of any of the following events:

	 	(a)	 	any Obligor obtaining knowledge of any violation of any Environmental Law
regarding its Real Property or operations which violation could reasonably be
expected to have a Material Adverse Effect;
	 
	 	(b)	 	any Obligor obtaining knowledge of any potential or known Release, or
threat of Release, of any Hazardous Substance at, from, or into any Real Property
which could reasonably be expected to have a Material Adverse Effect;
	 
	 	(c)	 	any Obligor receiving any notice of any material violation of any
Environmental Law or of any Release or threatened Release of Hazardous Substance,
including a notice or claim of liability or potential responsibility from any third
party (including any Governmental Authority) and including notice of any formal
inquiry, proceeding, demand, investigation or other action with regard to (i) any
Obligor’s or other Person’s operation of the Real Property of such Obligor, (ii)
contamination on, from, or into the Real Property, or (iii) investigation or
remediation of offsite locations at which any Obligor, or its predecessors, are
alleged to have directly or indirectly disposed of Hazardous Substances, if any
thereof could reasonably be expected to have a Material Adverse Effect; or
	 
	 	(d)	 	any Obligor obtaining knowledge that any expense or loss has been
incurred by any Governmental Authority in connection with the assessment,
containment, removal or remediation of any Hazardous Substance with respect to which
any Obligor has been alleged to be liable by such Governmental

 

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	 	 	 	Authority or for
which an Encumbrance may be imposed on any Real Property by such Governmental
Authority, if any thereof could reasonably be expected to have a Material Adverse
Effect.

	(14)	 	Notice of Default
	 
	 	 	The Borrower will promptly notify the Agent in writing of the occurrence of any Pending
Event of Default or Event of Default. If any Person shall give any notice or take any
other action in respect of a claimed default (whether or not constituting an Event of
Default) under this Agreement or any other note, evidence of indebtedness, indenture or
other obligation evidencing indebtedness in excess of U.S. $25,000,000 as to which any
Obligor is a party or obligor, whether as principal or surety, such Obligor shall
promptly upon obtaining actual knowledge thereof give written notice thereof to the
Agent, describing the notice of action and the nature of the claimed default.
	 
	(15)	 	Use of Proceeds
	 
	 	 	The proceeds of the Advances shall be used as set forth in Section 2.3.
	 
	(16)	 	Certain Transactions
	 
	 	 	Except as disclosed in the Disclosure Documents, and except for arm’s length transactions
pursuant to which any Obligor makes payments in the ordinary course of business, none of
such Obligor’s officers, directors, or employees (or any affiliate of such officers,
directors or employees) are presently or shall be a party to any transaction with the
Borrower or any Guarantor (other than for services as employees, officers and directors),
including any contract, agreement or other arrangement providing for the furnishing of
services to or by, providing for rental of real or personal property to or from, or
otherwise requiring payments to or from any officer, director or such employee or, to the
knowledge of the Borrower or any Guarantor, any
corporation, partnership, trust or other entity in which any officer, director, or any
such employee has a substantial interest or is an officer, director, trustee or partner.
	 
	7.3	 	Reporting Requirements

     During the term of this Agreement, Waste Management, Inc. and the Borrower shall deliver or
cause the delivery of the periodic reports specified below and shall give notices in the
circumstances specified below, or cause notices to be given. All financial statements and other
reports shall be prepared in accordance with GAAP applied on a consistent basis.

	(1)	 	Periodic Financial Reports

	 	(a)	 	Waste Management, Inc. shall, as soon as practicable and in any event
within 60 days of the end of each of its fiscal quarters (excluding the fourth
fiscal quarter), cause to be prepared and delivered to the Agent, its interim
unaudited consolidated financial statements as at the end of such quarter.

 

- 38 -

	 	(b)	 	Waste Management, Inc. shall, as soon as practicable and in any event
within 100 days after the end of each of its fiscal years, prepare and deliver to
the Agent its consolidated annual financial statements, audited by Ernst & Young LLP
or other independent auditors reasonably acceptable to the Lenders.
	 
	 	(c)	 	Waste Management, Inc. shall, concurrently with the delivery of its
quarterly financial statements and annual financial statements, provide the Agent
with a Compliance Certificate.
	 
	 	(d)	 	Waste Management, Inc. shall provide to the Agent, promptly following the
filing or mailing thereof, copies of all material of a financial nature filed by
Waste Management, Inc. with the Securities and Exchange Commission or sent to the
Waste Management Inc.’s stockholders generally.
	 
	 	(e)	 	The Obligors shall promptly provide the Agent with all other information,
reports and certificates reasonably requested by the Lenders from time to time
concerning the business, financial condition and property of the Borrower and each
other Obligor.

	7.4	 	Negative Covenants

     During the term of this Agreement, none of the Obligors shall, or shall cause or permit any
other Obligor, to do any of the things specified in this Section 7.4.

	(1)	 	Restrictions on Indebtedness
	 
	 	 	None of the Obligors (other than Waste Management, Inc.) will create, incur, assume, or
be or remain liable, contingently or otherwise, with respect to any Debt, or become or be
responsible in any manner (whether by agreement to purchase any obligations, stock,
assets, goods or services, or to supply or advance any funds, assets, goods or services
or otherwise) with respect to any Debt of any other Person (other than Waste
Management, Inc. or any of its Subsidiaries), other than Debt which is permitted under
§8.1 of the U.S. Credit Agreement, as such provision (and all references therein) exists
at the date of this Agreement.
	 
	(2)	 	Restrictions on Encumbrances

	 	(a)	 	None of the Obligors will create or incur or suffer to be created or
incurred or to exist any Encumbrance of any kind upon any property or assets of any
character, whether now owned or hereafter acquired, or upon the income or profits
therefrom; or transfer any of such property or assets or the income or profits
therefrom for the purpose of subjecting the same to the payment of Debt or
performance of any other obligation in priority to payment of its general creditors;
or acquire, or agree or have an option to acquire, any property or assets upon
conditional sale or other title retention or purchase money security agreement,
device or arrangement; or suffer to exist for a period of more than 30 days after
the same shall have been incurred any Debt or claim or demand against it which if
unpaid might by law or upon bankruptcy or insolvency, or

 

- 39 -

	 	 	 	otherwise, be given any
priority whatsoever over its general creditors; or sell, assign, pledge or otherwise
transfer any accounts, contract rights, general intangibles or chattel paper, with
or without recourse, except for Permitted Encumbrances.
	 
	 	(b)	 	Each Obligor covenants and agrees that if any of them shall create or
incur any Encumbrance upon any of their respective property or assets, whether now
owned or hereafter acquired, other than Permitted Encumbrances (unless prior written
consent shall have been obtained from the Lenders), the Obligors will make or cause
to be made effective provision whereby the Obligations will be secured by such
Encumbrance equally and ratably with any and all other Debt thereby secured so long
as such other Debt shall be so secured; provided that the covenants of the Obligors
contained in this sentence shall only be in effect for so long as the Obligors shall
be similarly obligated under any other Debt; provided, further, that an Event of
Default shall occur for so long as such other Debt becomes secured notwithstanding
any actions taken by the Obligor to ratably secure the Obligations hereunder.

	(3)	 	Restrictions on Investments
	 
	 	 	None of the Obligors may make or permit to exist or to remain outstanding any Investment,
except to the extent that it may do so in compliance with §8.3 of the U.S. Credit
Agreement, as such provision exists at the date of this Agreement,
	 
	(4)	 	Mergers, Consolidations, Sales.

	 	(a)	 	No Obligor shall be a party to any amalgamation, merger, consolidation or
exchange of stock except to the extent that it may do so in compliance with
§8.4 of the U.S. Credit Agreement, as such provision exists at the date of this
Agreement.
	 
	 	(b)	 	None of the Obligors shall sell, transfer, convey or lease any assets or
group of assets, including the sale or transfer of any property owned by such
Obligor in order then or thereafter to lease such property or lease other property
which such Obligor intends to use for substantially the same purpose as the property
being sold or transferred, or sell or assign, with or without recourse, any
receivables, except to the extent that it may do so in compliance with §8.4(b) of
the U.S. Credit Agreement, as such provision exists at the date of this Agreement.

	(5)	 	Restricted Distributions and Redemptions
	 
	 	 	None of the Obligors will (a) declare or pay any Distributions, or (b) redeem, convert,
retire or otherwise acquire shares of any class of its capital stock unless such action
is permitted under §8.5 of the U.S. Credit Agreement, as such provision exists at the
date of this Agreement.

 

- 40 -

ARTICLE 8

DEFAULT

	8.1	 	Events of Default

     The occurrence of any one or more of the following events shall constitute an Event of Default
under this Agreement:

	 	(a)	 	the Borrower fails to pay, whether by acceleration or otherwise, any
amount of principal (including any amount relating to a Banker’s Acceptance) when
due; or
	 
	 	(b)	 	the Borrower fails to pay any amount of interest, fees, commissions or
other Obligations (other than amounts on account of principal) when due, and such
failure continues for five Business Days after the date of such default; or
	 
	 	(c)	 	there occurs a breach of any of the covenants in Section 7.1 or Section
7.4; or
	 
	 	(d)	 	any Obligor makes any representation or warranty in any Loan Document, or
in any written statement or certificate made or delivered pursuant to this Agreement
which shall prove to have been false in any material respect upon the date when made
or deemed to be made; or
	 
	 	(e)	 	there is a breach of any covenant, condition or other provision of any
Loan Document (other than a breach which is specifically dealt with elsewhere in
this Section 8.1), by any party thereto other than the Agent or the Lenders, and
such breach, if capable of being remedied, is not corrected or otherwise
remedied within 30 days after the Agent or any Lender gives written notice
thereof to the Borrower; or
	 
	 	(f)	 	any Obligor shall fail to pay when due, or within any applicable period
of grace, any Debt or obligations under Swap Contracts in an aggregate amount
greater than U.S. $50,000,000, or fail to observe or perform any material term,
covenant or agreement contained in any one or more agreements by which it is bound,
evidencing or securing any Debt or obligations under Swap Contracts in an aggregate
amount greater than U.S. $50,000,000 for such period of time as would permit, or
would have permitted (assuming the giving of appropriate notice if required) the
holder or holders thereof or of any obligations issued thereunder to accelerate the
maturity thereof or terminate its commitment with respect thereto; or
	 
	 	(g)	 	any Obligor makes an assignment for the benefit of creditors, or admits
in writing its inability to pay or generally fails to pay its debts as they mature
or become due, or petitions or applies for the appointment of a trustee or other
custodian, liquidator or receiver of any Obligor, or of any substantial part of the
assets of any Obligor or commences any case or other proceeding relating to any
Obligor under any bankruptcy, reorganization, arrangement, insolvency, readjustment
of debt, dissolution or liquidation or similar law of any

 

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	 	 	 	jurisdiction, now or
hereafter in effect, or takes any action to authorize or in furtherance of any of
the foregoing, or if any such petition or application is filed or any such case or
other proceeding is commenced against any Obligor or any Obligor indicates its
approval thereof, consent thereto or acquiescence therein; or
	 
	 	(h)	 	if a decree or order is entered appointing any such trustee, custodian,
liquidator or receiver or adjudicating any Obligor bankrupt or insolvent, or
approving a petition in any such case or other proceeding, or a decree or order for
relief is entered in respect of any Obligor in an involuntary case under the
bankruptcy laws of any jurisdiction as now or hereafter constituted; or
	 
	 	(i)	 	if there shall remain in force, undischarged, unsatisfied and unstayed,
for more than 30 days, whether or not consecutive, any final judgment against any
Obligor which, with other outstanding final judgments against any Obligor, exceeds
in the aggregate U.S. $25,000,000 after taking into account any undisputed insurance
coverage; or
	 
	 	(j)	 	if any of the Loan Documents shall be cancelled, terminated, revoked or
rescinded otherwise than in accordance with the terms thereof or with the express
prior written agreement, consent or approval of the Lenders, or any action at law,
suit or in equity or other legal proceeding to cancel, revoke or rescind any of the
Loan Documents shall be commenced by or on behalf of any Obligor, or any of their
respective stockholders, or any court or any other governmental or regulatory
authority or agency of competent jurisdiction shall make a determination that, or
issue a judgment, order, decree or ruling to the
effect that, any one or more of the Loan Documents is illegal, invalid or
unenforceable in accordance with the terms thereof; or
	 
	 	(k)	 	the Borrower ceases to be directly or indirectly wholly-owned by Waste
Management, Inc.; or
	 
	 	(l)	 	the occurrence of any Event of Default (as such term is defined in the
U.S. Credit Agreement as at the date of this Agreement) under the U.S. Credit
Agreement.

	8.2	 	Acceleration and Termination of Rights, Pre-Acceleration Rights
	 
	(1)	 	If any Event of Default occurs, no Lender shall be under any further obligation to make
Advances and the Required Lenders may instruct the Agent to give notice to the Borrower (a)
declaring the Lenders’ obligations to make Advances to be terminated, whereupon the same shall
forthwith terminate, (b) declaring the Obligations or any of them to be forthwith due and
payable, whereupon they shall become and be forthwith due and payable without presentment,
demand, protest or further notice of any kind, all of which are hereby expressly waived by the
Borrower, and/or (c) demanding that the Borrower deposit forthwith with the Agent for the
Lenders’ benefit Collateral equal

 

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	 	 	to the full face amount at maturity of all Banker’s
Acceptances then outstanding for its account.
	 
	(2)	 	Notwithstanding the preceding paragraph, if any Obligor becomes a bankrupt (voluntarily or
involuntarily), or institutes any proceeding seeking liquidation, dissolution, arrangement,
winding-up, relief of debtors or from creditors or the appointment of a receiver or trustee
over any material part of its property or analogous proceeding in any jurisdiction, then
without prejudice to the other rights of the Lenders as a result of any such event, without
any notice or action of any kind by the Agent or any Lender, and without presentment, demand
or protest, the Lenders’ obligation to make Advances shall immediately terminate, the
Obligations shall immediately become due and payable and the Borrower shall be obligated to
deposit forthwith with the Agent for the Lenders’ benefit Collateral equal to the full face
amount at maturity of all Banker’s Acceptances then outstanding for its account
	 
	8.3	 	Payment of Banker’s Acceptances
	 
	(1)	 	Immediately upon any Obligations becoming due and payable under Section 8.2, the Borrower
shall, without necessity of further act or evidence, be and become thereby unconditionally
obligated to deposit forthwith with the Agent for the benefit of the Lenders, Collateral equal
to the full face amount at maturity of Banker’s Acceptances then outstanding for its account
and the Borrower hereby unconditionally promises and agrees to deposit with the Agent
immediately upon such demand Collateral in the amount so demanded. The Borrower authorizes
the Lenders, or any of them, to debit its accounts with the amount required to pay such
Banker’s Acceptances, notwithstanding that such Banker’s Acceptances may be held by the
Lenders, or any of them, in their own right at maturity. Amounts paid to the Agent pursuant
to such a demand in respect of Banker’s Acceptances shall be applied against, and shall reduce, pro
rata among the Lenders, to the extent of the amounts paid to the Agent in respect of
Banker’s Acceptances, the obligations of the Borrower to pay amounts then or thereafter
payable under Banker’s Acceptances, at the times amounts become payable thereunder.
	 
	(2)	 	The Borrower shall be entitled to receive interest on cash held by the Agent as Collateral in
accordance with Section 11.12.
	 
	8.4	 	Remedies

     Upon the occurrence of any event by which any of the Obligations become due and payable under
Section 8.2, the Security shall become immediately enforceable and the Required Lenders may
instruct the Agent to take such action or proceedings on behalf of the Lenders and in compliance
with applicable laws as the Required Lenders in their sole discretion deem expedient to enforce the
same, all without any additional notice, presentment, demand, protest or other formality, all of
which are hereby expressly waived by the Obligors.

 

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	8.5	 	Saving

     Neither the Agent nor any Lender shall be under any obligation to any Obligor or any other
Person to realize any collateral or enforce the Security or any part thereof or to allow any of the
collateral to be sold, dealt with or otherwise disposed of. None of the Agent or any Lender shall
be responsible or liable to any Obligor or any other Person for any loss or damage upon the
realization or enforcement of, the failure to realize or enforce the collateral or any part thereof
or the failure to allow any of the collateral to be sold, dealt with or otherwise disposed of or
for any act or omission on their respective parts or on the part of any director, officer, agent,
servant or adviser in connection with any of the foregoing, except that the Agent and each Lender
may be responsible or liable for any loss or damage arising from its wilful misconduct or gross
negligence.

	8.6	 	Perform Obligations

     If an Event of Default has occurred and is continuing and any Obligor has failed to perform
any of its covenants or agreements in the Loan Documents, the Required Lenders, may, but shall be
under no obligation to, instruct the Agent on behalf of the Lenders to perform any such covenants
or agreements in any manner deemed fit by the Required Lenders without thereby waiving any rights
to enforce the Loan Documents. The reasonable expenses (including any legal costs) paid by the
Agent and/or the Lenders in respect of the foregoing shall be secured by the Security.

	8.7	 	Third Parties

     No Person dealing with the Lenders or any agent of the Lenders shall be concerned to inquire
whether the Security has become enforceable, or whether the powers which the Lenders are purporting
to exercise have become exercisable, or whether any Obligations remain outstanding upon the
security thereof, or as to the necessity or expediency of the stipulations and conditions subject
to which any sale shall be made, or otherwise as to the propriety or regularity
of any sale or other disposition or any other dealing with the collateral charged by such
Security or any part thereof.

	8.8	 	Remedies Cumulative

     The rights and remedies of the Lenders under the Loan Documents are cumulative and are in
addition to and not in substitution for any rights or remedies provided by applicable laws. Any
single or partial exercise by the Lenders of any right or remedy for a default or breach of any
term, covenant, condition or agreement herein contained shall not be deemed to be a waiver of or to
alter, affect, or prejudice any other right or remedy or other rights or remedies to which the
Lenders may be lawfully entitled for the same default or breach. Any waiver by the Lenders of the
strict observance, performance or compliance with any term, covenant, condition or agreement herein
contained, and any indulgence granted by the Lenders shall be deemed not to be a waiver of any
subsequent default.

 

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ARTICLE 9

THE AGENT AND THE LENDERS

	9.1	 	Authorization of Agent

     Each Lender irrevocably designates and appoints the Agent as its agent hereunder and under the
other Loan Documents for all purposes of the Credit, including for the purpose of holding and
enforcing the Security in accordance with and subject to the terms hereof and the terms of the
other Loan Documents, and authorizes it on behalf of such Lender to take such action and to
exercise such rights, powers and discretions as are expressly delegated to it under this Agreement
and the other Loan Documents and on the terms hereof or thereof together with such other rights,
powers and discretions as are reasonably incidental thereto. The Agent may perform any of its
duties hereunder or thereunder by or through its agents, officers or employees, its Affiliates or
its Affiliates’ agents, officers or employees. The Agent hereby accepts each such appointment.
Each such appointment may only be terminated as expressly provided in this Agreement. The Agent
shall have only those duties and responsibilities which are of a solely mechanical and
administrative nature and which are expressly specified in this Agreement, and it may perform such
duties by or through its agents or employees, but shall not by reason of this Agreement have a
fiduciary duty in respect of any Lender. As to any matters not expressly provided for by this
Agreement, the Agent is not required to exercise any discretion or to take any action, but is
required to act or to refrain from acting (and is fully protected in so acting or refraining from
acting) upon the instructions of the Lenders or the Required Lenders, as the case may be. Those
instructions shall be binding upon all Lenders, but the Agent is not required to take any action
which exposes the Agent to personal liability or which is contrary to this Agreement or applicable
law.

	9.2	 	Disclaimer of Agent

     The Agent makes no representation or warranty, and assumes no responsibility with respect to
the due execution, legality, validity, sufficiency, enforceability or collectability of this
Agreement or any other Loan Document; provided, however, that the foregoing shall not be
construed to relieve the Agent from the performance of its own duties and responsibilities as
set forth herein. The Agent assumes no responsibility for the financial condition of any Obligor,
or for the performance of the obligations of any Obligor under this Agreement or any other Loan
Document. The Agent assumes no responsibility with respect to the accuracy, authenticity,
legality, validity, sufficiency or enforceability of any documents, papers, materials or other
information furnished by or on behalf of any Obligor to the Agent on behalf of the Lenders. The
Agent shall not be required to ascertain or inquire as to the performance or observance of any of
the terms, conditions, provisions, covenants or agreements contained herein or as to the use of the
proceeds of the Credit or (unless the officers or employees of the Agent active in their capacity
as officers or employees on the Borrower’s accounts have actual knowledge thereof, or have been
notified thereof in writing by an Obligor) of the existence or possible existence of any Event of
Default or Pending Event of Default. Neither the Agent nor any of its directors, officers, agents
or employees shall be liable for any action taken or omitted to be taken by it or them as Agent
under or in connection with the Agreement except for its or their own gross negligence or wilful
misconduct. With respect to its Commitment, the Advances made by the Lender that is acting as
Agent, and all amounts payable with respect thereto, the Agent shall have

 

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the same rights and
powers hereunder as any other Lender, and may exercise the same as though it were not performing
the duties and functions delegated to it as Agent hereunder.

	9.3	 	Failure of Lender to Fund

	(1)	 	Unless the Agent has actual knowledge that a Lender has not made or will not make available
to the Agent for value on a Drawdown Date the applicable amount required from such Lender
pursuant to Sections 5.6 or 5.10, the Agent shall be entitled to assume that such amount has
been or will be received from such Lender when so due and the Agent may (but shall not be
obliged to), in reliance upon such assumption, make available to the Borrower a corresponding
amount. If such amount is not in fact received by the Agent from such Lender on such Drawdown
Date and the Agent has made available a corresponding amount to the Borrower on such Drawdown
Date as aforesaid, such Lender shall pay to the Agent on demand such amount together with an
amount equal to the product of (a) the Interbank Reference Rate per annum multiplied by (b)
the amount that should have been paid to the Agent by such Lender on such Drawdown Date and
was not, multiplied by (c) a fraction, the numerator of which is the number of days that have
elapsed from and including such Drawdown Date to but excluding the date on which the amount is
received by the Agent from such Lender and the denominator of which is the number of days in
the calendar year in which the same is to be ascertained. A certificate of the Agent
containing details of the amounts owing by a Lender under this Section shall be binding and
conclusive in the absence of manifest error. If any such principal amount is not in fact
received by the Agent from such Lender on such Drawdown Date, the Agent shall be entitled to
recover from the Borrower, on demand, the related amount made available by the Agent to the
Borrower as aforesaid together with interest thereon at the applicable rate per annum payable
by the Borrower hereunder.

	(2)	 	Notwithstanding the provisions of Section 9.3(1), if any Lender fails to make available to
the Agent its Applicable Percentage of any Advance (such Lender being herein called the
“Defaulting Lender”), the Agent shall forthwith give notice of such failure
by the Defaulting Lender to the Borrower and the
other Lenders. The Agent shall then forthwith
give notice to the other Lenders that any Lender
may make available to the Agent all or any
portion of the Defaulting Lender’s Applicable
Percentage of such Advance (but in no way shall
any other Lender or the Agent be obliged to do
so) in the place of the Defaulting Lender. If
more than one Lender gives notice that it is
prepared to make funds available in the place of
a Defaulting Lender in such circumstances and the
aggregate of the funds which such Lenders (herein
collectively called the “Contributing Lenders”
and individually called the “Contributing
Lender”) are prepared to make available exceeds
the amount of the Advance which the Defaulting
Lender failed to make, then each Contributing
Lender shall be deemed to have given notice that
it is prepared to make available its Applicable
Percentage of such Advance based on the
Contributing Lenders’ relative commitments to
advance in such circumstances. If any
Contributing Lender makes funds available in the
place of a Defaulting Lender in such
circumstances, then the Defaulting Lender shall
pay to each Contributing Lender making the funds
available in its place, forthwith on demand, each
amount advanced on its behalf together with
interest thereon at the rate

 

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	 	 	applicable to such
Advance from the date of advance to the date of
payment, against payment by the applicable
Contributing Lender making the funds available of
all interest received in respect of the Advance
from the Borrower. The failure of any Lender to
make available to the Agent its Applicable
Percentage of any Advance as required herein
shall not relieve any other Lender of its
obligations to make available to the Agent its
Applicable Percentage of any Advance as required
herein.
	 
	9.4	 	Payments by the Borrower
	 
	(1)	 	All payments made by or on behalf of the Borrower pursuant to this Agreement shall be made to
and received by the Agent and shall be distributed by the Agent to the Lenders as soon as
possible upon receipt by the Agent. The Agent shall distribute:

	 	(a)	 	payments of interest in accordance with each Lender’s Applicable
Percentage of the Credit;
	 
	 	(b)	 	repayments of principal in accordance with each Lender’s Applicable
Percentage of the Credit; and
	 
	 	(c)	 	all other payments received by the Agent including amounts received upon
the enforcement of the Security in accordance with each Lender’s Applicable
Percentage of the Credit provided, however, that with respect to proceeds of
realization, no Lender shall receive an amount in excess of the amounts owing to it
in respect of the Obligations.

	(2)	 	If the Agent does not distribute a Lender’s share of a payment made by the Borrower to that
Lender for value on the day that payment is made or deemed to have been made to the Agent, the
Agent shall pay to the Lender on demand an amount equal to the product of (a) the Interbank
Reference Rate per annum multiplied by (b) the Lender’s share of the amount received by the
Agent from the Borrower and not so distributed, multiplied by (c) a fraction, the numerator of
which is the number of days that have
elapsed from and including the date of
receipt of the payment by the Agent to but
excluding the date on which the payment is
made by the Agent to such Lender and the
denominator of which is the number of days
in the calendar year in which the same is
to be ascertained.
	 
	9.5	 	Payments by Agent
	 
	(1)	 	For greater certainty, the following provisions shall apply to any and all payments made by
the Agent to the Lenders hereunder:

	 	(a)	 	the Agent shall be under no obligation to make any payment (whether in
respect of principal, interest, fees or otherwise) to any Lender until an amount in
respect of such payment has been received by the Agent from the Borrower;
	 
	 	(b)	 	if the Agent receives less than the full amount of any payment of
principal, interest, fees or other amount owing by the Borrower under this
Agreement, the Agent shall have no obligation to remit to each Lender any amount other

 

- 47 -

	 	 	 	than such Lender’s Applicable Percentage of the amount actually received by
the Agent;
	 
	 	(c)	 	if any Lender advances more or less than its Applicable Percentage of a
Credit, such Lender’s entitlement to payment shall be increased or reduced, as the
case may be, in proportion to the amount actually advanced by such Lender;
	 
	 	(d)	 	if a Lender’s Applicable Percentage of an Advance has been advanced, or a
Lender’s Commitment has been outstanding, for less than the full period to which any
payment (other than a payment of principal) by the Borrower relates, such Lender’s
entitlement to such payment shall be reduced in proportion to the length of time
such Lender’s Applicable Percentage of the relevant Credit or such Lender’s
Commitment, as the case may be, has actually been outstanding;
	 
	 	(e)	 	the Agent acting reasonably and in good faith shall, after consultation
with the Lenders in the case of any dispute, determine in all cases the amount of
all payments to which each Lender is entitled and such determination shall, in the
absence of manifest error, be binding and conclusive; and
	 
	 	(f)	 	upon request, the Agent shall deliver a statement detailing any of the
payments to the Lenders referred to herein.

	(2)	 	Unless the Agent has actual knowledge that the Borrower has not made or will not make a
payment to the Agent for value on the date in respect of which the Borrower has notified the
Agent that the payment will be made, the Agent shall be entitled to assume that such payment
has been or will be received from the Borrower when due and the Agent may (but shall not be
obliged to), in reliance upon such assumption, pay the Lenders corresponding amounts. If the
payment by the Borrower is in fact not received by the Agent on the required date and the
Agent has made available corresponding amounts to the Lenders, the Borrower shall, without
limiting its other obligations under this Agreement,
indemnify the Agent against any and all
liabilities, obligations, losses,
damages, penalties, costs, expenses or
disbursements of any kind or nature
whatsoever that may be imposed on or
incurred by the Agent as a result,
except for those arising from the
Agent’s gross negligence or wilful
misconduct. A certificate of the Agent
with respect to any amount owing by the
Borrower under this Section shall be
prima facie evidence of the amount owing
in the absence of manifest error. If
the payment is not received by the Agent
from the Borrower within a reasonable
time following the disbursement to the
Lenders by the Agent, the Lenders shall
return the amounts received by them to
the Agent with interest at the Interbank
Reference Rate.
	 
	9.6	 	Direct Payments

     The Lenders agree among themselves that, except as otherwise provided for in this Agreement
(including but not limited to Sections 11.9 and 11.10), and except as necessary to adjust for
Advances that are not in each Lender’s Applicable Percentage under the Credit, all

 

- 48 -

sums received by
a Lender relating to this Agreement or by virtue of the Security, whether received by voluntary
payment, by the exercise of the right of set off or compensation or by counterclaim, cross action
or as proceeds of realization of any Security or otherwise, shall be shared by each Lender in its
Applicable Percentage under the Credit and each Lender undertakes to do all such things as may be
reasonably required to give full effect to this Section, including, all things as shall be
necessary to cause the Lender in receipt of such sum to share the excess amount rateably in its
Applicable Percentage under the Credit with the other Lenders. If any sum which is so shared is
later recovered from the Lenders who originally received it, the Lender shall restore its
Applicable Percentage under the Credit of such sum to such Lenders, without interest. If any Lender
shall obtain any payment of moneys due under this Agreement as referred to above, it shall
forthwith remit such payment to the Agent and, upon receipt, the Agent shall distribute such
payment in accordance with the provisions of Section 9.5.

	9.7	 	Administration of the Credit
	 
	(1)	 	Unless otherwise specified herein, the Agent shall perform the following duties under this
Agreement:

	 	(a)	 	take delivery of each Lender’s Applicable Percentage of an Advance and
make all Advances hereunder in accordance with the procedures set forth in Sections
5.6 and 5.10;
	 
	 	(b)	 	use reasonable efforts to collect promptly all sums due and payable by
the Borrower pursuant to this Agreement;
	 
	 	(c)	 	make all payments to the Lenders in accordance with the provisions
hereof;
	 
	 	(d)	 	hold the Security on behalf of the Lenders;
	 
	 	(e)	 	hold all legal documents relating to the Credit, maintain complete and
accurate records showing all Advances made by the Lenders, all remittances and
payments made by the Borrower to the Agent, all remittances and payments
made by the Agent to the Lenders and all fees or any other sums received by the
Agent and, except for accounts, records and documents relating to the fees
payable by the Borrower to the Agent in its capacity as Agent under the Agency
Fee Letter or the Arrangers under the Fee Letter, allow each Lender and their
respective advisors to examine such accounts, records and documents at their own
expense, and provide any Lender, upon reasonable notice, with such copies thereof
or information contained therein as such Lender may reasonably require from time
to time at the Lender’s expense;
	 
	 	(f)	 	except as otherwise specifically provided for in this Agreement, promptly
advise each Lender upon receipt of each notice and deliver to each Lender, promptly
upon receipt, all other written communications furnished by any Obligor to the Agent
on behalf of the Lenders pursuant to this Agreement, including copies of financial
reports and certificates which are to be furnished to the Agent; and

 

- 49 -

	 	(g)	 	upon learning of same, promptly advise each Lender in writing of the
occurrence of an Event of Default or Pending Event of Default or the occurrence of
any event, condition or circumstance which would or could reasonably be expected to
have a Material Adverse Effect or of any material adverse information coming to the
attention of the Agent (using reasonable efforts) relative to the Security or of the
occurrence of any material adverse change in the financial condition or property of
any Obligor, provided that, except as aforesaid, the Agent shall be under no duty or
obligation whatsoever to provide any notice to the Lenders and further provided that
each Lender hereby agrees to notify the Agent of any Event of Default or Pending
Event of Default of which it may become aware.

	(2)	 	The Agent may take the following actions only with the prior consent of the Required Lenders,
unless otherwise specified in this Agreement:

	 	(a)	 	subject to Section 9.7(3), exercise any and all rights of approval
conferred upon the Lenders by this Agreement;
	 
	 	(b)	 	give written notice to any Obligor in respect of any matter in respect of
which notice may be required, permitted, necessary or desirable in accordance with
or pursuant to this Agreement, promptly after receiving the consent of the Required
Lenders, except that the Agent shall, without direction from the Lenders,
immediately give the Borrower notice of any payment that is due or overdue under the
terms of this Agreement unless the Agent considers that it should request the
direction of the Required Lenders, in which case the Agent shall promptly request
that direction;
	 
	 	(c)	 	amend, modify or waive any of the terms of this Agreement, including
waiver of an Event of Default or Pending Event of Default, if such action is not
otherwise provided for in Section 9.7(3);
	 
	 	(d)	 	declare an Event of Default or take, or cause to be taken by the Agent,
action to enforce performance of the Obligations and to realize upon the Security,
including the appointment of a receiver, the exercise of powers of distress, lease
or sale given by the Security or by law and the taking of foreclosure proceedings
and/or the pursuit of any other legal remedy necessary;
	 
	 	(e)	 	decide to accelerate the amounts outstanding under the Credit; and
	 
	 	(f)	 	pay, or instruct the Agent to pay insurance premiums, Taxes and any other
sums as may be reasonably required to protect the interests of the Lenders.

	(3)	 	The Agent may take the following actions only if the prior unanimous consent of the Lenders
is obtained, unless otherwise specified herein:

	 	(a)	 	amend, modify, discharge, terminate or waive any of the terms of the
Security;

 

- 50 -

	 	(b)	 	amend, modify, discharge, terminate or waive any of the terms of this
Agreement or the Security if such amendment, modification, discharge, termination or
waiver would increase the amount of the Credit, amend the purpose of the Credit,
reduce the interest rates and similar charges applicable to the Credit, reduce the
fees payable with respect to the Credit, extend any date fixed for payment of
principal, interest or any other amount relating to the Credit or extend the term of
the Credit; and
	 
	 	(c)	 	amend the definition of “Required Lenders” or this Section 9.7(3).

	 	 	For greater certainty, no Lender’s Commitment or Applicable Percentage may be amended
without the consent of that Lender.
	 
	(4)	 	To the extent that any Obligor or any Affiliate of a Obligor becomes a Lender, such Lender
shall not be permitted to vote on or consent to any matter under this Agreement on or to which
a Lender may vote or consent and the Commitment of such Lender shall be deemed not to be
outstanding for the purposes of determining whether a specified majority has been achieved.
	 
	(5)	 	Notwithstanding Sections 9.7(2) and 9.7(3) the Agent may, without the consent of the Lenders
(but with the consent of the Borrower), make, or cause to be made, amendments to the Loan
Documents that are for the sole purpose of curing any immaterial or administrative ambiguity,
defect or inconsistency, but shall immediately notify the Lenders of any such action.
	 
	(6)	 	As between the Obligors, on the one hand, and the Agent and the Lenders, on the other hand:

	 	(a)	 	all statements, certificates, consents and other documents which the
Agent purports to deliver on behalf of the Lenders or the Required Lenders shall be
binding on each of the Lenders, and none of the Obligors shall be required to
ascertain or confirm the authority of the Agent in delivering such documents;
	 
	 	(b)	 	all certificates, statements, notices and other documents which are
delivered by any Obligor to the Agent in accordance with this Agreement shall be
deemed to have been duly delivered to each of the Lenders;
	 
	 	(c)	 	all payments which are delivered by the Borrower to the Agent in
accordance with this Agreement shall be deemed to have been duly delivered to each
of the Lenders; and
	 
	 	(d)	 	unless a Pending Event of Default or an Event of Default has occurred and
is continuing, the Borrower’s consent to the appointment of any Successor Agent must
be obtained, but the Borrower’s consent shall not be unreasonably withheld.

 

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	9.8	 	Rights of Agent
	 
	(1)	 	In administering the Credit, the Agent may retain, at the expense of the Lenders if such
expenses are not recovered from the Borrower, such solicitors, counsel, auditors and other
experts and agents as the Agent may select, in its sole discretion, acting reasonably and in
good faith after consultation with the Lenders.
	 
	(2)	 	The Agent shall be entitled to rely on any communication, instrument or document believed by
it to be genuine and correct and to have been signed by the proper individual or individuals,
and shall be entitled to rely and shall be protected in relying as to legal matters upon
opinions of independent legal advisors selected by it. The Agent may also assume that any
representation made by any Obligor is true and that no Event of Default or Pending Event of
Default has occurred unless the officers or employees of the Lender acting as Agent, active in
their capacity as officers or employees responsible for the Borrower’s and the Guarantors’
accounts, have actual knowledge to the contrary or have received notice to the contrary from
any other party to this Agreement.
	 
	(3)	 	The Agent may, without any liability to account, accept deposits from and lend money to and
generally engage in any kind of banking, or other business with any Obligor, as if it were not
the Agent.
	 
	(4)	 	Except in its own right as a Lender, the Agent shall not be required to advance its own funds
for any purpose, and in particular, shall not be required to pay with its own funds insurance
premiums, taxes or public utility charges or the cost of repairs or maintenance with respect
to the assets which are the subject matter of the Security, nor shall it be required to pay
with its own funds the fees of solicitors, counsel, auditors, experts or agents engaged by it
as permitted hereby.
	 
	(5)	 	The Agent shall be entitled to receive a fee for acting as Agent as agreed between the Agent
and the Borrower from time to time.
	 
	9.9	 	Acknowledgements, Representations and Covenants of Lenders
	 
	(1)	 	It is acknowledged and agreed by each Lender that it has itself been, and will continue to
be, solely responsible for making its own independent appraisal of and investigations into the
financial condition, creditworthiness, property, affairs, status and nature of the Obligors.
Accordingly, each Lender confirms to the Agent that it has not relied, and will not hereafter
rely, on the Agent (a) to check or inquire on its behalf into the adequacy or completeness of
any information provided by any Obligor under or in connection with this Agreement or the
transactions herein contemplated (whether or not such information has been or is hereafter
distributed to such Lender by the Agent), or (b) to assess or keep under review on its behalf
the financial condition, creditworthiness, property, affairs, status or nature of Obligors.
	 
	(2)	 	Each Lender represents and warrants that it has the legal capacity to enter into this
Agreement pursuant to its charter and any applicable legislation and has not violated its
charter, constating documents or any applicable legislation by so doing.

 

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	(3)	 	Each Lender agrees to indemnify the Agent (to the extent not reimbursed by the Borrower),
rateably according to its Applicable Percentage from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or
asserted against the Agent in any way relating to or arising out of the Loan Documents or the
transactions therein contemplated, provided that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent’s gross negligence or wilful misconduct.
Without limiting the generality of the foregoing, each Lender agrees to reimburse the Agent
for its Applicable Percentage of any out of pocket expenses (including counsel fees) incurred
by the Agent in connection with the preservation of any rights of the Agent or the Lenders
under, or the enforcement of, or legal advice in respect of rights or responsibilities under
this Agreement, to the extent that the Agent is not reimbursed for such expenses by the
Borrower. The obligation of the Lenders to indemnify the Agent shall survive the termination
of this Agreement and shall be performed by the Lenders promptly upon demand by the Agent.
	 
	(4)	 	Each of the Lenders acknowledges and confirms that in the event that the Agent does not
receive payment in accordance with this Agreement, it shall not be the obligation of the Agent
to maintain the Credit in good standing nor shall any Lender have recourse to the Agent in
respect of any amounts owing to such Lender under this Agreement.
	 
	(5)	 	Each Lender acknowledges and agrees that its obligation to advance its Applicable Percentage
of Advances in accordance with the terms of this Agreement is independent and in no way
related to the obligation of any other Lender hereunder.
	 
	(6)	 	Each Lender hereby acknowledges receipt of a copy of this Agreement and the Security (to the
extent that the Security has been delivered) and acknowledges that it is satisfied with the
form and content of such documents.
	 
	9.10	 	Collective Action of the Lenders

     Each of the Lenders hereby acknowledges that to the extent permitted by applicable law, the
Security and the remedies provided under the Loan Documents to the Lenders are for the benefit of
the Lenders collectively and acting together and not severally and further acknowledges that its
rights hereunder and under the Security are to be exercised not severally, but by the Agent upon
the decision of the Required Lenders or Lenders as required by this Agreement. Accordingly,
notwithstanding any of the provisions contained herein or in the Security each of the Lenders
hereby covenants and agrees that it shall not be entitled to take any action hereunder including
any declaration of default hereunder or thereunder but that any such action shall be taken only by
the Agent with the prior written agreement of the Required Lenders. Each of the Lenders hereby
further covenants and agrees that upon any such written agreement being given by the Required
Lenders, it shall co operate fully with the Agent to the extent requested by the Agent.
Notwithstanding the foregoing, in the absence of instructions from the Lenders and where in the
sole opinion of the Agent, acting reasonably and in good

 

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faith, the exigencies of the situation
warrant such action, the Agent may without notice to or consent of the Lenders take such action on
behalf of the Lenders as it deems appropriate or desirable in the interest of the Lenders.

	9.11	 	Successor Agent

     Subject to the appointment and acceptance of a Successor Agent as provided in this Section,
and subject to Section 9.7(6)(d), the Agent may resign at any time by giving 30 days written notice
thereof to the Lenders and the Borrower, and may be removed at any time by the Required Lenders
upon 30 days written notice. Upon receipt of notice by the Lenders of the resignation of the
Agent, or upon giving notice of termination to the Agent, the Required Lenders may, within 21 days,
appoint a successor from among the Lenders or, if no Lender is willing to accept such an
appointment, from among other banks or authorized foreign banks to which the Bank Act (Canada)
applies, which have combined capital and reserves in excess of $250,000,000, and which have offices
in Toronto (the “Successor Agent”). If no Successor Agent has been so appointed and has accepted
such appointment within 21 days after the retiring Agent’s giving of notice of resignation or
receiving of notice of termination, then the retiring Agent may, on behalf of the Lenders, appoint
a Successor Agent. Upon the acceptance of any appointment as Agent hereunder by a Successor Agent,
the retiring Agent shall pay the Successor Agent any unearned portion of any fee paid to the Agent
for acting as such, and the Successor Agent shall succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged
from its further duties and obligations as Agent under this Agreement and the other Loan Documents
(but for greater certainty, shall not be discharged from any existing liabilities resulting from
its own gross negligence or wilful misconduct). After any retiring Agent’s resignation hereunder
as Agent, the provisions of this Article shall continue to enure to its benefit and be binding upon
it as to any actions taken or omitted to be taken by it while it was Agent hereunder. Each Obligor
shall, at its expense, at the request of the Successor Agent, do all such further acts and execute
and deliver all such further documents, agreements, certificates and instruments as may, in the
reasonable opinion of the Successor Agent, be necessary or desirable in order to fully perform and
carry out the purpose and intent of this Section and to ensure that any Security granted in favour
of the Agent on behalf of the Lenders continues for the benefit of the Successor Agent on behalf of
the Lenders.

	9.12	 	Provisions Operative Between Lenders and Agent Only

     Except for the provisions of Sections 9.7(6), 9.9 and this Section 9.12, the provisions of
this Article 9 relating to the rights and obligations of the Lenders and the Agent inter se shall
be operative as between the Lenders and the Agent only, and no Obligor shall have any rights or
obligations under or be entitled to rely for any purpose upon such provisions.

 

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ARTICLE 10

ADDITIONAL LENDERS, SUCCESSORS AND ASSIGNS

	10.1	 	Successors and Assigns
	 
	(1)	 	The Loan Documents shall be binding upon and enure to the benefit of the Agent, each Lender,
each Obligor and their respective successors and permitted assigns, except that no Obligor
shall assign any rights or obligations with respect to this Agreement or any of the other Loan
Documents without the prior written consent of each Lender.
	 
	(2)	 	Any Lender shall be entitled to assign in whole or in part its individual rights and
obligations hereunder or to permit other financial institutions to participate in the Credit,
all in accordance with the provisions of Sections 10.2 and 10.3 and the other terms of this
Agreement. Each Obligor hereby consents to the disclosure of any information relating to it
to any Lender or participant or potential Lender or participant provided that the Lender or
participant or potential Lender or participant agrees in writing to keep all non-public
information confidential except as may otherwise be required by applicable law or Governmental
Authority.
	 
	(3)	 	Notwithstanding any other provision of this Agreement, each Lender agrees that it shall not
assign any portion of its rights and obligations under this Agreement, including any portion
of its Commitment, without the prior written consent of the Agent and the Borrower, which
consent of the Borrower shall not be unreasonably withheld, provided however that the consent
of the Borrower shall not be required if an Event of Default has occurred and is continuing or
in connection with an assignment to any existing Lender or to any of their respective
Affiliates. No consent of the Borrower is required if any Lender offers to sell or sells a
participation in any portion of its rights and obligations under this Agreement pursuant to
Section 10.3. If any such assignment or participation is made to a Person which is a non
resident of Canada within the meaning of the Income Tax Act (Canada) for the purposes of the
withholding tax provisions in Part XIII of the Income Tax Act (Canada), the Borrower
will not be required to make any payment to such Person pursuant to Section 11.9 which
would otherwise have been payable by virtue of the residency of such Person.
	 
	(4)	 	A participation by a Lender of its interest (or a part thereof) hereunder or a payment by a
participant to a Lender as a result of the participation will not constitute a payment
hereunder to the Lender or an Advance to the Borrower. A payment made by an assignee to an
assigning Lender in order for the assignee to assume its Applicable Percentage of Advances
made by the assigning Lender will reduce the Advances owing by the Borrower to the assigning
Lender and will be deemed to be Advances by the assignee to the Borrower as of the date that
the payment is made, excluding in each case the effect of any premium or discount.

 

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	10.2	 	Assignments
	 
	(1)	 	Subject to Section 10.1 and the other terms of this Agreement, each of the Lenders may assign
to one or more assignees all or a portion of their respective rights and obligations under
this Agreement (including all or a portion of their respective Commitments). No assignment by
a Lender of its Commitment hereunder shall be for an amount less than $5,000,000 unless the
Commitment of such Lender at the time of such assignment is less than that amount and the
entirety of its Commitment is disposed of. The parties to each such assignment shall execute
and deliver an Assignment Agreement to the Agent, for its consent and recording in the
Register and, except in the case of an assignment by a Lender to an Affiliate of that Lender,
shall pay a processing and recording fee of $2,500 to the Agent. After such execution,
delivery, consent and recording (a) the assignee thereunder shall be a party to this Agreement
and, to the extent that rights and obligations hereunder have been assigned to it, have the
rights and obligations of a Lender hereunder, and (b) the assigning Lender thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it pursuant to such
Assignment Agreement, relinquish its rights and be released from its obligations under this
Agreement, other than obligations in respect of which it is then in default and liabilities
arising from its actions prior to the assignment. In the case of an Assignment Agreement
covering all or the remaining portion of an assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto.
	 
	(2)	 	The agreements of an assignee contained in an Assignment Agreement shall benefit the
assigning Lender thereunder, the other Lenders, the Agent and the Borrower in accordance with
the terms of the Assignment Agreement.
	 
	(3)	 	The Agent shall maintain at its address referred to herein a copy of each Assignment
Agreement delivered to and acknowledged by it and a register for recording the names and
addresses of the Lenders and the Commitment under the Credit of each Lender from time to time
(the “Register”). The entries in the Register shall be conclusive and binding for all
purposes, absent manifest error. The Borrower, the Agent, each of the Lenders and each of the
Guarantors may treat each person whose name is recorded in the Register as a Lender hereunder
for all purposes of this Agreement, and need not recognize any person as a Lender unless it is
recorded in the Register as a Lender. The Register shall be available for inspection by the
Borrower or any Lender at any reasonable time and from time to time upon reasonable prior
notice.
	 
	(4)	 	Upon its receipt of an Assignment Agreement executed by an assigning Lender and an assignee
and approved by the Agent and the Borrower, if applicable, the Agent shall, if the Assignment
Agreement has been completed and is in the required form with such immaterial changes as are
acceptable to the Agent:

	 	(a)	 	record the information contained therein in the Register; and
	 
	 	(b)	 	give prompt notice thereof to the Borrower and the other Lenders, and
provide them with an updated version of Schedule E.

 

 

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	10.3	 	Participations
	 
	(1)	 	Each Lender may (subject to the provisions of Section 10.1) sell participations to one or
more financial institutions or other persons in or to all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment), but the
participant shall not become a Lender and:

	 	(a)	 	the Lender’s obligations under this Agreement (including its Commitment)
shall remain unchanged;
	 
	 	(b)	 	the Lender shall remain solely responsible to the other parties hereto
for the performance of such obligations;
	 
	 	(c)	 	the Borrower, the Agent and the other Lenders shall continue to deal
solely and directly with the Lender in connection with the Lender’s rights and
obligations under this Agreement; and
	 
	 	(d)	 	no participant shall have any right to approve any amendment or waiver of
any provision of this Agreement, or any consent to any departure by any Person
therefrom (provided however that, for greater certainty, the foregoing shall not
limit or restrict a Lender from agreeing with its participant that the Lender will
not, without the consent of its participant, consent to any amendment or waiver that
would increase the amount of any Credit, reduce the interest rates, fees or similar
charges applicable to any Credit, extend the date fixed for payment of any
principal, interest or other amount relating to any Credit, extend the term of any
Credit or, except as permitted in Section 9.7(5), discharge any Security).

	(2)	 	Each participant shall have the right to be provided by the Lender from whom it has obtained
its participation with all information relating to each Obligor which is provided to any
Lender and shall have the benefit of Sections 11.8, 11.10 and 11.11. No participant shall
have the benefit of Section 11.9 except to the extent that the Lender from whom it has
obtained its participation is itself entitled to compensation under that Section.

ARTICLE 11

MISCELLANEOUS PROVISIONS

	11.1	 	Defined Terms

          All terms used in any of the Loan Documents (other than this Agreement) which are defined in
this Agreement shall have the meanings defined herein unless otherwise defined in the other Loan
Document.

	11.2	 	Severability

          Any provision of this Agreement which is or becomes prohibited or unenforceable in any
relevant jurisdiction shall not invalidate or impair the remaining provisions hereof which shall be
deemed severable from such prohibited or unenforceable provision and any such

 

 

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prohibition or unenforceability in any such jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Should this Agreement fail to provide for
any relevant matter, the validity, legality or enforceability of this Agreement shall not thereby
be affected.

	11.3	 	Amendment, Supplement or Waiver

          No amendment, supplement or waiver of any provision of the Loan Documents, nor any consent to
any departure by an Obligor therefrom, shall in any event be effective unless it is in writing,
makes express reference to the provision affected thereby and is signed by the Agent for and on
behalf of the Lenders or the Required Lenders, as the case may be, and then such waiver or consent
shall be effective only in the specific instance and for the specific purpose for which given. In
addition, any amendment or supplement shall require the written consent of the other parties to the
Loan Document in question. No waiver or act or omission of the Agent, the Lenders, or any of them,
shall extend to or be taken in any manner whatsoever to affect any subsequent Event of Default or
breach by an Obligor of any provision of the Loan Documents or the rights resulting therefrom.

	11.4	 	Governing Law

          Each of the Loan Documents, except for those which expressly provide otherwise, shall be
conclusively deemed to be a contract made under, and shall for all purposes be governed by and
construed in accordance with, the laws of the Province of Ontario and the laws of Canada applicable
in Ontario. For the purposes of all legal proceedings this Agreement will be deemed to have been
performed in the Province of Ontario and the courts of the Province of Ontario will have
jurisdiction to entertain any action arising under this Agreement. Each party to this Agreement
hereby irrevocably and unconditionally attorns to the non exclusive jurisdiction of the courts of
the Province of Ontario and all courts competent to hear appeals therefrom.

	11.5	 	This Agreement to Govern

          In the event of any conflict or inconsistency between the terms of this Agreement and the
terms of any other Loan Document, the provisions of this Agreement shall govern to the extent
necessary to remove the conflict or inconsistency.

	11.6	 	Currency
	 
	(1)	 	All payments made hereunder shall be made in the currency in respect of which the obligation
requiring such payment arose. Unless the context otherwise requires, all amounts expressed in
this Agreement in terms of money shall refer to Canadian Dollars.
	 
	(2)	 	Except as otherwise expressly provided in this Agreement, wherever this Agreement
contemplates or requires the calculation of the equivalent in one currency of an amount
expressed in another currency, the calculation shall be made on the basis of the Exchange
Rate, at the effective date of the calculation.

 

 

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	11.7	 	Liability of Lenders

          The liability of the Lenders in respect of all matters relating to this Agreement and the
other Loan Documents is several and not joint or joint and several. Without limiting that
statement, the obligations of the Lenders to make Advances is limited to their respective
Applicable Percentages of any Advance that is requested, and, in the aggregate, to their respective
Applicable Percentages of the total amounts of the Credit.

	11.8	 	Expenses and Indemnity
	 
	(1)	 	All statements, reports, certificates, opinions, appraisals and other documents or
information required to be furnished to the Lenders, the Agent, or any of them, by any Obligor
under this Agreement shall be supplied without cost to the Lenders, the Agent, or any of them.
The Borrower shall pay on demand all reasonable third party costs and expenses (including the
reasonable fees and expenses of counsel) for the Agent, on its and the Lenders’ collective
behalf, but not separately for individual Lenders and the Agent, on a solicitor and own client
basis, incurred in connection with (a) the preparation, execution, delivery, and enforcement
of the Loan Documents and all amendments, waivers and consents with respect thereto and the
syndication of the Credit, (b) obtaining advice as to their rights and responsibilities in
connection with the Credit and the Loan Documents, (c) reviewing, inspecting and appraising
the collateral that is the subject of the Security at reasonable intervals (but, unless an
Event of Default has occurred and is continuing, no more frequently than once each calendar
year), and (d) all other matters relating to the Credit, excluding any assignment or
participation of an interest in the Credit following the initial Advance under this Agreement.
Such costs and expenses shall be payable whether or not an Advance is made under this
Agreement.
	 
	(2)	 	The Borrower shall indemnify each of the Agent, the Lenders and their respective agents,
receivers, successors, assigns, officers, directors and employees (collectively for the
purpose of this Section 11.8 the “Indemnitees”) (in respect of each of whom it is agreed that
the Agent and the Lenders are acting as agent for the purpose of agreeing to the availability
of such indemnity) from and against any claim, liability, obligation, loss, damage or expense
(including reasonable legal fees and expenses) which any of them may sustain or incur as a
consequence of the consummation of the transactions contemplated by this Agreement, except any
of the foregoing which resulted from the gross negligence or wilful misconduct of the
Indemnitee.
	 
	(3)	 	The agreements in this Section 11.8 shall survive the termination of this Agreement and
repayment of the Obligations.
	 
	11.9	 	Manner of Payment and Taxes
	 
	(1)	 	All payments to be made by or on behalf of each Obligor (or in the case of upfront fees and
indemnity fees, by the Agent or any Lender to another Lender or to an assignee of an interest
in the Credit) in connection with the Loan Documents are to be made without set off,
compensation or counterclaim, free and clear of and without

 

 

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deduction for or on account of any Tax (other than Excluded Taxes), except if such
deduction is required by applicable law or the administration thereof. If any Tax (other
than Excluded Taxes) is deducted or withheld from any payments under the Loan Documents
(including the remittance provided for in this Section), the Obligor making payment shall
promptly remit to the Agent for the Lenders’ benefit in the currency in which such
payment was made, the equivalent of the amount of Tax so deducted or withheld together
with the relevant receipt issued by the taxing or other receiving authority. Subject to
Section 5.18, if the Borrower is prevented by operation of law or otherwise from paying,
causing to be paid or remitting such Tax (other than Excluded Taxes), the interest or
other amount payable under the Loan Documents will be increased to such rates as are
necessary to yield and remit to the Lenders the principal sum advanced or made available
together with interest at the rates specified in the Loan Documents after provision for
payment of such Tax.

	(2)	 	If any Lender or the Agent becomes liable for any Tax (other than Excluded Taxes) in the
jurisdiction in which the person making a payment under the Loan Documents is located as a
result of a payment being made without the required Tax (other than Excluded Taxes) in that
jurisdiction having been deducted or withheld, the payer shall indemnify the Lender or the
Agent, as the case may be, for such Tax and any interest and penalties thereon, and the
indemnity payment shall be increased as necessary so that after the imposition of any such Tax
in that jurisdiction on the indemnity payment (including Tax in respect of any such increase
in the indemnity payment), the Lender or the Agent shall receive the full amount of such
Taxes, interest and penalties for which it is liable in that jurisdiction as a result of the
failure to deduct or withhold such Tax.
	 
	(3)	 	None of the Obligors shall be required to pay any additional amounts under Section 11.9 of
this Agreement (a) to any Lender that is an original party to this Agreement as at the Closing
Date and is a non resident of Canada within the meaning of the Income Tax Act (Canada) for the
purposes of the withholding tax provisions in Part XIII of the Income Tax Act (Canada), or (b)
to any Lender that was not a non resident of Canada within the meaning of the Income Tax Act
(Canada) for the purposes of the withholding tax provisions in Part XIII of the Income Tax Act
(Canada) as at the Closing Date who becomes such a non-resident of Canada subsequent to the
Closing Date.
	 
	11.10	 	Change in Law
	 
	(1)	 	If any change in any applicable law, rule, guideline, treaty or official directive (whether
or not having the force of law) or in the interpretation or application thereof by any court
or by any governmental agency, central bank or other authority or entity charged with the
administration thereof which now or hereafter:

	 	(a)	 	subjects any Lender to any Tax (except for Excluded Taxes) or changes the
basis of taxation, or increases any existing Tax (except for Excluded Taxes), on
payments of principal, interest, fees or other amounts payable by the Borrower to
the Lenders under this Agreement;

 

 

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	 	(b)	 	imposes, modifies or deems applicable any reserve, special deposit or
similar requirements against assets held by, or deposits in or for the account of or
loans by or any other acquisition of funds by, an office of any of the Lenders; or
	 
	 	(c)	 	imposes on any of the Lenders or expects there to be maintained by any of
the Lenders any capital adequacy or additional capital requirements in respect of
any Advance or the Credit hereunder or any other condition with respect to this
Agreement,

and the result of any of the foregoing will be to increase the cost to, or reduce the
amount of principal, interest or other amount received or receivable by any Lender
hereunder or its effective return hereunder in respect of making, maintaining or funding
such Advance, the affected Lender will determine that amount of money which will
compensate the affected Lender for such increase in cost or reduction in income (herein
referred to as “Additional Compensation”). Upon the affected Lender having determined
that it is entitled to Additional Compensation in accordance with the provisions of this
Section 11.10, the affected Lender will promptly so notify the Borrower and provide to
the Borrower a photocopy of the relevant law, rule, guideline, treaty or official
directive and a certificate of a duly authorized officer of the affected Lender setting
forth the Additional Compensation and the basis of calculation therefor, which will be
conclusive evidence of such Additional Compensation in the absence of manifest error.
The Borrower will pay to the affected Lender within 10 Business Days of the giving of
such notice the Additional Compensation calculated to the date of such notification. The
affected Lender will be entitled to be paid such Additional Compensation from time to
time to the extent that the provisions of this Section 11.10 are then applicable
notwithstanding that the affected Lender has previously been paid any Additional
Compensation. The affected Lender will endeavour to limit the incidence of any such
Additional Compensation, including seeking recovery for the account of the Borrower, by
appealing any assessment at the expense of the Borrower upon the Borrower’s request. If
the affected Lender subsequently recovers all or a part thereof, it will repay an equal
amount to the Borrower.

	(2)	 	If a Lender gives the notice provided for in Section 11.10(1) with respect to any Advance (an
“Affected Advance”), the Borrower may, upon 10 Business Days notice to that effect given to
such Lender (which notice shall be irrevocable), either prepay in full without penalty the
Affected Advance together with accrued and unpaid interest on the principal amount so prepaid
up to the date of such prepayment, such compensation as may be payable pursuant to Section
11.10(1) to the date of such prepayment and all costs, losses and expenses incurred by the
Lender by reason of the liquidation or re employment of deposits or other funds or for any
other reason whatsoever resulting from the repayment of such Affected Advance or any part
thereof on other than the last day of the applicable period, or may arrange for another bank
or financial institution to purchase all of the interest of such Lender in the Advance
represented by the Affected Advance (and, in such event, such Lender shall sell, assign and
transfer all of its interest in the Advance represented by the Affected

 

 

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Advance to such other bank or
financial institution upon payment
to such Lender by such other bank
or financial institution of the
same amount as would have been
payable by the Borrower if it had
prepaid the Affected Advance) and
upon either such payment being
made, that Lender’s obligation to
make such Affected Advance to the
Borrower under this Agreement shall
terminate. The other Lenders shall
be given the first opportunity to
make any such purchase pro rata in
accordance with their respective
Applicable Percentages or as they
may otherwise agree.

	11.11	 	Illegality

          If the adoption of any applicable law, treaty or official directive (whether or not having the
force of law) or any change therein or in the interpretation or application thereof by any court or
by any governmental or other authority or central bank or comparable agency or any other entity
charged with the interpretation or administration thereof or compliance by any Lender with any
request or direction (whether or not having the force of law) of any such authority, central bank
or comparable agency or entity, now or hereafter makes it unlawful or impossible for such Lender to
make, fund or maintain an Advance or to give effect to its obligations in respect of such an
Advance, such Lender may, by notice thereof to the Borrower, declare its obligations under this
Agreement to be terminated whereupon the same will forthwith terminate, and the Borrower will
prepay within the time required by such law (or at the end of such longer period as such Lender at
its discretion has agreed) the principal of such Advance together with accrued interest and such
Additional Compensation as may be applicable to the date of such payment. The Lender will also
provide to the Borrower a photocopy of the relevant law, treaty or directive. The Borrower will be
responsible for any costs, losses or expenses incurred by such Lender by reason of the liquidation
or re employment of deposits or other funds or for any other reason whatsoever resulting from the
repayment of such Advance or any part thereof on other than the last day of the applicable period
of such Advance. If any such change will only affect a portion of such Lender’s obligations under
this Agreement which is, in the opinion of such Lender, severable from the remainder of this
Agreement so that the remainder of this Agreement may be continued in full force and effect without
otherwise affecting any of the obligations of such Lender or the Borrower hereunder, such Lender
will only declare its obligations under that portion so terminated.

	11.12	 	Interest on Miscellaneous Amounts
	 
	(1)	 	If the Borrower fails to pay any amount payable hereunder on the due date (including
principal, interest thereon, interest upon interest or any other amount), the Borrower shall,
on demand, pay interest on such overdue amount to the Agent from and including such due date
up to but excluding the date of actual payment, both before and after demand, default or
judgment, at a rate of interest per annum equal to the sum of the Prime Rate plus 2.0% per
annum, compounded monthly.
	 
	(2)	 	If the Borrower deposits cash as Collateral pursuant to a requirement under this Agreement,
the Agent, Lender or Lenders, as applicable, holding the cash shall pay the Borrower interest
on the cash while it continues to be held as Collateral at the rate offered by the relevant
Lender or Agent from time to time for deposits in the relevant currency of comparable size and
term.

 

 

- 62 -

	11.13	 	Address for Notice

          Notice to be given under the Loan Documents shall, except as otherwise specifically provided,
be in writing addressed to the party for whom it is intended and, unless the law or a specific
provision in another Loan Document deems a particular notice to be received earlier, a notice shall
not be deemed received until actual receipt thereof by the other party. The addresses of the
parties hereto for the purposes hereof shall be the addresses specified beside their respective
signatures to this Agreement or on any Assignment Agreement, or such other mailing, internet
e-mail, secure internet website or telecopier addresses as each party from time to time may notify
the other as aforesaid.

	11.14	 	Time of the Essence

          Time shall be of the essence in this Agreement.

	11.15	 	Further Assurances

          Each Obligor shall, at its expense, at the request of the Agent acting on the instructions of
the Required Lenders, do all such further acts and execute and deliver all such further documents,
agreements, certificates and instruments as may, in the reasonable opinion of the Required Lenders,
be necessary or desirable in order to fully perform and carry out the purpose and intent of the
Loan Documents.

	11.16	 	Term of Agreement

          Except as otherwise provided herein, this Agreement shall remain in full force and effect
until the indefeasible payment and performance in full in cash of all of the Obligations and the
termination of the Commitments. The obligations of the Obligors in Sections 7.2(10), 11.8 and 11.9
and of the Lenders in Article 9 shall continue for the benefit of those to whom the obligations are
owed notwithstanding the termination of this Agreement or the termination of any particular
Person’s role as Obligor, Agent or Lender.

	11.17	 	Payments on Business Day

          Whenever any payment or performance under the Loan Documents would otherwise be due on a day
other than a Business Day, such payment shall be made on the following Business Day, unless the
following Business Day is in a different calendar month, in which case the payment shall be made on
the preceding Business Day.

	11.18	 	Counterparts and Facsimile

          This Agreement may be executed in any number of counterparts, each of which when executed and
delivered shall be deemed to be an original, and such counterparts together shall constitute one
and the same agreement. For the purposes of this Section, the delivery of a facsimile copy of an
executed counterpart of this Agreement shall be deemed to be valid execution and delivery of this
Agreement.

 

 

- 63 -

	11.19	 	Waiver of Jury Trial and Consequential Damages

	(1)	 	Each party hereto hereby waives, to the fullest extent permitted by applicable law, any right
it may have to a trial by jury in any legal proceeding directly or indirectly arising out of
or relating to this the Loan Documents, the transactions contemplated thereby or any course of
conduct, course of dealing, statements (whether oral or written) or actions of any party
(whether based on contract, tort or any other theory).
	 
	(2)	 	No party shall assert, and each party hereby waives, to the fullest extent permitted by
applicable law, any claim against any other party on any theory of liability, for special,
indirect, consequential or punitive damages (as opposed to direct or actual damages) arising
out of, in connection with, or as a result of, the Loan Documents, the transactions
contemplated thereby or any course of conduct, course of dealing, statements (whether oral or
written) or actions of any party (whether based on contract, tort or any other theory).
	 
	(3)	 	Each Obligor acknowledges and agrees that none of the Agent or the Lenders shall have any
liability to them in relation to any due diligence investigations conducted by any of them in
connection with the transactions contemplated hereby or be under any obligation whatsoever to
disclose to them any information received or facts disclosed by any such investigations. Each
Obligor further acknowledges and agrees that it is not relying, will not rely, and will not be
deemed, in any respect whatsoever, to have relied upon the facts received by and information
disclosed to any of the Agent or the Lenders under or in connection with such due diligence
investigations.
	 
	(4)	 	Each party 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 the foregoing provisions, and (b) acknowledges that it and the
other parties hereto have been induced to enter into this Agreement by, among other things,
the waivers, acknowledgments and certifications in this Section.

	11.20	 	Whole Agreement

          Except in relation to matters contemplated by the other Loan Documents, this Agreement
constitutes the whole and entire agreement between the parties hereto concerning the matters
addressed in this Agreement, and cancels and supersedes any prior agreements, undertakings,
declarations, commitments or representations, written or verbal, in respect thereof.

	11.21	 	English Language

          The Loan Documents have been negotiated in English and will be or have been executed in the
English language. Les soussigné ont expressément demandé que ce document soit rédigé en langue
anglaise. All paper writings given or delivered pursuant to this Agreement and the other Loan
Documents shall, if requested by the Agent, be in the English language or, if not, shall be
accompanied by a certified English translation thereof. The English language version of any
document shall, absent manifest error, control the meaning and interpretation of the matters set
forth therein.

 

 

- 64 -

	11.22	 	Date of Agreement

          This Agreement may be referred to as being dated 30 November 2005 or as of 30 November 2005,
notwithstanding the actual date of execution.

* * * *

[SIGNATURE PAGES FOLLOW]

 

 

- S1 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 	 	 
	Address For Notice	 	THE BANK OF NOVA SCOTIA, as Agent	 	 
	 
	 	 	 	 	 	 
	The Bank of Nova Scotia, as Agent
	 	 	 	 	 	 
	Scotia Capital

	 	By:
	 	/s/ I. D. McKay	 	 
	Corporate Banking – Loan Syndications

	 	 	 	 

I. D. McKay
	 	 
	62nd Floor

	 	 	 	Director	 	 
	Scotia Plaza
	 	 	 	 	 	 
	40 King Street West
	 	 	 	 	 	 
	Toronto, ON M5W 2X6

	 	By:
	 	/s/ J. Qi
 

J. Qi
	 	 
	Attention: Unit Head

	 	 	 	Associate	 	 
	 
	 	 	 	 	 	 
	Facsimile: (416) 866-3329
	 	 	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S2 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 	 	 
	Address For Notice	 	WASTE MANAGEMENT OF CANADA	 	 
	 	 	CORPORATION	 	 
	Waste Management of Canada Corporation
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	c/o Waste Management, Inc.

	 	By:
	 	/s/ Cherie C. Rice	 	 
	1001 Fannin Street, Suite 4000

	 	 	 	 

Name: Cherie C. Rice
	 	 
	Houston, Texas 77002

	 	 	 	Title: Vice President and Treasurer	 	 
	 
	 	 	 	 	 	 
	Attention: Treasurer
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Jay Clement
 

	 	 
	Facsimile: (713) 942-1580

	 	 	 	Name: Jay Clement	 	 
	 
	 	 	 	Title: Assistant Treasurer	 	 
	With copy to General

	 	 	 	 	 	 
	Counsel, facsimile number
	 	 	 	 	 	 
	(713) 209-9710
	 	 	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S3 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 	 	 
	Address For Notice	 	WASTE MANAGEMENT, INC.	 	 
	 
	 	 	 	 	 	 
	Waste Management, Inc.
	 	 	 	 	 	 
	1001 Fannin Street, Suite 4000

	 	By:
	 	/s/ Cherie C. Rice	 	 
	Houston, Texas 77002

	 	 	 	 

Name: Cherie C. Rice
	 	 
	 

	 	 	 	Title: Vice President and Treasurer	 	 
	Attention: Treasurer
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Facsimile: (713) 942-1580

	 	By:
	 	/s/ Jay Clement	 	 
	 

	 	 	 	 

Name: Jay Clement
	 	 
	With copy to General Counsel,

	 	 	 	Title: Assistant Treasurer	 	 
	facsimile number (713) 209-9710
	 	 	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S4 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 	 	 
	Address For Notice	 	WASTE MANAGEMENT HOLDINGS, INC.	 	 
	 
	 	 	 	 	 	 
	Waste Management Holdings, Inc.
	 	 	 	 	 	 
	1001 Fannin, Suite 4000

	 	By:
	 	/s/ Cherie C. Rice	 	 
	Houston, Texas 77002

	 	 	 	 

Name: Cherie C. Rice
	 	 
	 

	 	 	 	Title: Vice President and Treasurer	 	 
	Attention: Treasurer
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Jay Clement	 	 
	Facsimile: (713) 942-1580

	 	 	 	 

Name: Jay Clement
	 	 
	 

	 	 	 	Title: Assistant Treasurer	 	 
	With copy to General Counsel,
	 	 	 	 	 	 
	facsimile number (713) 209-9710
	 	 	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S5 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 	 	 
	Address For Notice	 	BNP PARIBAS (CANADA)	 	 
	 
	 	 	 	 	 	 
	BNP Paribas (Canada)
	 	 	 	 	 	 
	Royal Trust Tower

	 	By:
	 	/s/ Don Lee	 	 
	77 King Street West

	 	 	 	 

Don Lee
	 	 
	Suite 4100

	 	 	 	Managing Director	 	 
	P.O. Box 31
	 	 	 	 	 	 
	T-D Centre
	 	 	 	 	 	 
	Toronto, ON M5K 1N8

	 	By:
	 	/s/ Andrew Sclater	 	 
	 

	 	 	 	 

Andrew Sclater
	 	 
	Attention: Vice-President

	 	 	 	Vice President	 	 
	Facsimile: (416) 947-3538
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	With a copy to
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	BNP Paribas (Canada)
	 	 	 	 	 	 
	1981, McGill College Avenue
	 	 	 	 	 	 
	Montreal, QC H3A 2W8
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Attention: Paula Fortin/AnnaCiolfi
	 	 	 	 	 	 
	Facsimile: (514) 285-2944
	 	 	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S6 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 	 	 
	Address For Notice	 	THE BANK OF NOVA SCOTIA	 	 
	 
	 	 	 	 	 	 
	The Bank of Nova Scotia, as Lender
	 	 	 	 	 	 
	West Metro Commercial Banking Centre

	 	By:
	 	/s/ P. J. Armstrong	 	 
	2 Robert Speck Parkway

	 	 	 	 

P. J. Armstrong
	 	 
	Mississauga, ON L4Z 1H8

	 	 	 	Vice-President	 	 
	 
	 	 	 	 	 	 
	Attention: Unit Head
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ S. G. Zaki	 	 
	Facsimile: (905)276-4920

	 	 	 	 

S. G. Zaki
	 	 
	 

	 	 	 	Senior Relationship Manager	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S7 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 
	Address For Notice	 	BANK OF AMERICA, NATIONAL
	 	 	ASSOCIATION (CANADA BRANCH)
	Bank of America, National Association
	 	 	 	 
	(Canada Branch)
	 	 	 	 
	200 Front Street West
	 	 	 	 
	Suite 2700

	 	By:
	 	/s/ Medina Sales De Andrade
	 

	 	 	 	 
	Toronto, Ontario M5V 3L2

	 	 	 	Medina Sales De Andrade
	 	 	 	 	Assistant Vice President
	 
	 	 	 	 
	Attention: Medina Sales De Andrade
	 	 	 	 
	                    Assistant Vice President
	 	 	 	 
	 
	 	 	 	 
	Facsimile: (416) 349-4282/4283
	 	 	 	 
	 
	 	 	 	 
	With a copy to:
	 	 	 	 
	 
	 	 	 	 
	Bank of America, National Association
	 	 	 	 
	100 Federal Street
	 	 	 	 
	Boston, MA 02110
	 	 	 	 
	 
	 	 	 	 
	Attention: Maria F. Maia
	 	 	 	 
	                    Managing Director
	 	 	 	 
	 
	 	 	 	 
	Facsimile: (617) 434-2160
	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S8 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 	 	 
	Address For Notice	 	MIZUHO CORPORATE BANK (CANADA)	 	 
	 
	 	 	 	 	 	 
	Mizuho Corporate Bank (Canada)
	 	 	 	 	 	 
	100 Yonge Street, Suite 1102, Box 29

	 	By:
	 	/s/ Bill McFarland	 	 
	Toronto, ON M5C 2W1

	 	 	 	 

Bill McFarland
	 	 
	 

	 	 	 	Vice President	 	 
	Attention: Bill McFarland
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Facsimile: (416) 367-3452
	 	 	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S9 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 	 	 
	Address For Notice	 	ABN AMRO BANK N.V.	 	 
	 	 	(CANADA BRANCH)	 	 
	ABN AMRO Bank N.V., Canada Branch
	 	 	 	 	 	 
	79 Wellington Street West
	 	 	 	 	 	 
	Suite 1500

	 	By:
	 	 /s/ Lawrence J. Maloney	 	 
	Toronto-Dominion Centre

	 	 	 	 

Lawrence J. Maloney
	 	 
	Toronto, ON M5K 1G8

	 	 	 	Managing Director	 	 
	 
	 	 	 	 	 	 
	Attention: Vice President
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ H. Bayu Budiatimanto	 	 
	Facsimile: (416) 367-7937

	 	 	 	 

H. Bayu Budiatimanto
	 	 
	 

	 	 	 	Assistant Vice-President	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S10 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 	 	 
	Address For Notice	 	SUMITOMO MITSUI BANKING	 	 
	 	 	CORPORATION OF CANADA	 	 
	Sumitomo Mitsui Banking Corporation of
	 	 	 	 	 	 
	Canada
	 	 	 	 	 	 
	Ernst & Young Tower

	 	By:	 	 /s/ E. R. Langley	 	 
	Toronto-Dominion Centre

	 	 	 	 

E. R. Langley
	 	 
	Suite 1400, P.O. Box 172

	 	 	 	Vice President	 	 
	222 Bay Street
	 	 	 	 	 	 
	Toronto, ON M5K 1H6
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Attention: Mr. Elwood Langley
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Facsimile: (416) 367-3565
	 	 	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S11 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 
	Address For Notice	 	U.S. BANK NATIONAL ASSOCIATION,
	 	 	CANADA BRANCH
	U.S. Bank National Association,
	 	 	 	 
	Canada Branch
	 	 	 	 
	2300-120 Adelaide Street West

	 	By:
	 	/s/ Kevin Jephcott
	 

	 	 	 	 
	Toronto, ON M5H 1T1

	 	 	 	Kevin Jephcott
	 

	 	 	 	Principal Officer
	Attention: Kevin Jephcott
	 	 	 	 
	 
	 	 	 	 
	Facsimile: (416) 306-3565
	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S12 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 
	Address For Notice	 	JPMORGAN CHASE BANK, NATIONAL
	 	 	ASSOCIATION, TORONTO BRANCH
	JPMorgan Chase Bank, National
	 	 	 	 
	Association, Toronto Branch
	 	 	 	 
	200 Bay Street

	 	By:
	 	/s/ Christine Chan
	 

	 	 	 	 
	Royal Bank Plaza, South Tower

	 	 	 	Christine Chan
	Suite 1800

	 	 	 	Vice President
	Toronto, ON M5J 2J2
	 	 	 	 
	 
	 	 	 	 
	Attention: Ms. Christine Chan
	 	 	 	 
	 
	 	 	 	 
	Facsimile: (416) 981-9138
	 	 	 	 
	 
	 	 	 	 
	With a copy to:
	 	 	 	 
	 
	 	 	 	 
	JPMorgan Chase Bank, National
	 	 	 	 
	Association
	 	 	 	 
	270 Park Avenue
	 	 	 	 
	4th Floor
	 	 	 	 
	New York, NY      10017-2014
	 	 	 	 
	U.S.A.
	 	 	 	 
	Attention: Mr. Robert Sacks
	 	 	 	 
	                     Managing Director
	 	 	 	 
	 
	 	 	 	 
	Facsimile: (212) 270-6637
	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

- S13 -

     IN WITNESS WHEREOF, the parties have duly executed this Agreement.

	 	 	 	 	 	 	 
	Address For Notice	 	COMERICA BANK	 	 
	 
	 	 	 	 	 	 
	Comerica Bank
	 	 	 	 	 	 
	Suite 2210

	 	By:
	 	/s/ Robert Rosen	 	 
	South Tower, Royal Bank Plaza

	 	 	 	 

Robert Rosen
	 	 
	200 Bay Street

	 	 	 	Vice-President	 	 
	Toronto, ON M5J 2J2
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Attention: Mr. Robert Rosen
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Facsimile: (416) 367-2460
	 	 	 	 	 	 

[signature page for Credit Agreement relating to Waste Management of Canada Corporation et al.]

 

 

SCHEDULE A

FORM OF NOTICE OF ADVANCE OR PAYMENT

[see reference in Section 5.3]

	 	 	 	 	 	 	 	 	 	 	 
	TO:

	 	The Bank of Nova Scotia

Scotia Capital

WBO – Loan Administration & Agency Operations

720 King Street West 4th Floor

Wholesale Banking Operations

Toronto, ON M5V 2T3
	 	 	c.c.	The Bank of Nova Scotia

West Metro Commercial
Banking Centre
2 Robert Speck Parkway
Mississauga, ON L4Z
1H8
Attention:      Unit Head
Facsimile:      (905)276-4920
	 	 	c.c.	The Bank of Nova Scotia

Scotia Capital

Corporate Banking –
Loan Syndications

62nd Floor, Scotia Plaza

40 King Street West

Toronto, ON M5W 2X6

	 
	 

	 	Attention:      Managing Director	 	 	 	 	 	 	 	Attention:      Unit
	 

	 	Attention:      Managing Director	 	 	 	 	 	 	 	 Head Facsimile:      (416) 866-3329
	 

	 	Facsimile:      (416) 866-5991	 	 	 	 	 	 	 	 

     We refer to the credit agreement dated as of 30 November 2005 between Waste Management of
Canada Corporation, as Borrower, others, as Guarantors, The Bank of Nova Scotia, as Administrative
Agent and the Lenders named therein, as amended, supplemented, restated or replaced from time to
time (the “Credit Agreement”). All terms used in this certificate and that are defined in the
Credit Agreement will have the meanings defined in the Credit Agreement.

	1.	 	Request for Advance

     Notice is hereby given pursuant to Section 5.3 of the Credit Agreement that the undersigned
hereby irrevocably requests as follows:

	 	 	 	 	 	 	 
	 

	 	(a)
	 	that an Advance be made under the Credit;	 	 
	 
	 	 	 	 	 	 
	 

	 	(b)
	 	the requested Advance represents the following [check one or more]:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	initial Advance under the Credit
	 	( )
	 
	 	 	 	 	 	 
	 

	 	 	 	increase in an Advance under the Credit
	 	( )
	 
	 	 	 	 	 	 
	 

	 	 	 	rollover of an existing Advance under the Credit
	 	( )
	 
	 	 	 	 	 	 
	 

	 	 	 	conversion of an existing Advance to another type of Advance
	 	( )
	 
	 	 	 	 	 	 
	 

	 	(c)
	 	the Drawdown Date shall be
__________________;	 	 
	 
	 	 	 	 	 	 
	 

	 	(d)
	 	the Advance shall be in the form of [check one or more and complete details]:	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	           Prime Rate Advance
	 	( )
	 

	 	 	 	                Amount: $                                        	 	 

 

 

- A2 -

	 	 	 	 	 	 	 
	 

	 	Banker’s Acceptances
	 	 	 	( )
	 

	 	           Face Amount:
	 	$                                        	 	 
	 

	 	           Term:
	 	                                        	 	 

	 	(e)	 	the proceeds of the Advance shall be deposited in [specify Designated Account].

	2.	 	The undersigned hereby confirms as follows:

	 	(a)	 	the representations and warranties made in Section 6.1 of the Credit Agreement,
other than those expressly stated to be made as of a specific date or otherwise
expressly modified pursuant to the provisions of Section 6.2 of the Credit Agreement,
are true and correct on and as of the date hereof with the same force and effect as if
such representations and warranties had been made on and as of the date hereof, but
subject to the same qualifications as are contained in Section 6.2 of the Credit
Agreement;
	 
	 	(b)	 	no Event of Default or Pending Event of Default has occurred and is continuing
on the date hereof or will result from the Advance(s) requested herein;
	 
	 	(c)	 	after due inquiry, there is no reasonable expectation that the Borrower will
not be in compliance with all covenants contained in Section 7.1 of the Credit
Agreement at the end of its current fiscal quarter and was not in compliance with those
covenants at the end of its immediately preceding fiscal quarter if it has not yet
delivered its Compliance Certificate for that quarter;
	 
	 	(d)	 	the undersigned will immediately notify you if it becomes aware of the
occurrence of any event which would mean that the statements in the immediately
preceding paragraphs (a), (b) and (c) would not be true if made on the Drawdown Date;
and
	 
	 	(e)	 	all other conditions precedent set out in Section 4.2 [and Section 4.1 as
applicable] of the Credit Agreement have been fulfilled.

	3.	 	Notice of Payment

     Pursuant to Section 5.3 of the Credit Agreement, the undersigned hereby irrevocably notifies
you of the following:

	 	(a)	 	that a payment will be made under the Credit;
	 
	 	(b)	 	the payment represents the following [check one or more]:

	 	 	 	 	 
	 

	 	reduction in Advances under the Credit
	 	( )
	 
	 	 	 	 
	 

	 	payment of existing Advances which will be rolled over as
the same type of Advance under the Credit
	 	( )
	 
	 	 	 	 
	 

	 	payment of existing Advances which will be converted to
	 	( )

 

 

- A3 -

another type of Advance under the Credit

	(c)	 	the payment date shall be __________________

	(d)	 	the Advance to be paid shall be in the form of [check one or more and complete
details]:

	 	 	 	 	 	 	 
	 

	 	Prime Rate Advance
	 	 	 	( )
	 

	 	     Amount:
	 	$__________________	 	 
	 
	 

	 	Banker’s Acceptances
	 	 	 	( )
	 

	 	     Face Amount:
	 	$__________________	 	 
	 

	 	     Maturity Date:
	 	___________________	 	 

DATED ___________________________.

	 	 	 	 	 	 	 
	 	 	WASTE MANAGEMENT OF CANADA
 CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

 

 

SCHEDULE B

FORM OF COMPLIANCE CERTIFICATE

[see references in Sections 4.2 and 7.3(1)(c)]

TO:            THE LENDERS (as defined in the Credit Agreement referred to below)

AND TO:            THE BANK OF NOVA SCOTIA, as Agent

          We refer to Sections 4.2 and 7.3(1)(c) of the credit agreement dated as of 30 November 2005
between Waste Management of Canada Corporation, as Borrower, Waste Management, Inc. and others, as
Guarantors, The Bank of Nova Scotia, as Administrative Agent and the Lenders named therein, as
amended, supplemented, restated or replaced from time to time (the “Credit Agreement”). All terms
used in this certificate that are defined in the Credit Agreement will have the meanings defined in
the Credit Agreement.

The undersigned hereby certify that:

I, ___, [Chief Financial Officer] [Chief Accounting Officer] [Corporate Treasurer] of
WASTE MANAGEMENT, INC. certify that no Pending Event of Default or Event of Default exists and that
the Obligors are in compliance with Sections 7.1, 7.2 and 7.4 of the Credit Agreement, [as of the
end of the quarter ended ___]. Computations to evidence compliance with the financial
covenants are detailed below.

Interest Coverage Ratio

	 	 	 	 	 
	Consolidated Net Income (or Deficit)
Plus (without duplication):
	 	 	 	 
	interest expense
	 	$	                    	(i)
	equity in losses (earnings) of
	 	$                    (ii)
	unconsolidated entities
	 	$                    (iii)
	income tax expense
	 	$                    (iv)
	non-cash writedowns or writeoffs of assets
	 	$	                    	(v)
	Minus non-cash extraordinary gains on the sale of assets
	 	$                    (vi)
	 
	 	 	 	 
	EBIT (sum of (i) through (v))
	 	$	                    	(a)
	 
	 	 	 	 
	Consolidated Net Income of Acquired Businesses
Plus (without duplication):
	 	$	                    	(i)
	interest expense
	 	$                    (ii)
	equity in losses (earnings) of
	 	$                    (iii)
	unconsolidated entities
	 	$                    (iv)
	income tax expense
	 	$	                    	(v)
	non-cash writedowns or write-offs of assets
	 	$                    (vi)
	non-recurring extraordinary charges
	 	 	 	 

 

 

- B2 -

	 	 	 	 	 
	EBIT of Acquired Businesses (sum of (i) through (vi)
	 	$	                    	(b)
	 
	 	 	 	 
	Sum of (a) plus (b)
	 	$	                    	(c)
	 
	 	 	 	 
	Consolidated Total Interest Expense
	 	$	                    	(d)
	 
	 	 	 	 
	Ratio of (c) to (d)
	 	 	___:____	 
	 
	 	 	 	 
	Minimum ratio
	 	 	2.75:1	 
	 
	 	 	 	 
	§9.2 Total Debt to EBITDA
	 	 	 	 
	 
	 	 	 	 
	EBIT (from §9.1 item (c) above)
	 	$	                    	(i)
	 
	 	 	 	 
	Plus:
	 	 	 	 
	Depreciation expense
	 	$                    (ii)
	Amortization expense
	 	$                    (iii)
	 
	 	 	 	 
	EBITDA (sum of (i) through (iii))
	 	$                    (iv)
	 
	 	 	 	 
	The sum of the following (calculated on a consolidated basis
for Waste Management Inc. and its Subsidiaries):
	 	 	 	 
	Indebtedness for borrowed money
	 	$                    (v)
	Obligations for deferred purchase price of property
or services (other than trade payables)
	 	$                    (vi)
	Obligations evidenced by debt instruments
	 	$                    (vii)
	Obligations under conditional sales
	 	$                    (viii)
	Obligations, liabilities and indebtedness under
Capitalized Leases
	 	$                    (ix)
	Obligations, liabilities and indebtedness under
bonding arrangements
	 	$                    (x)
	(to the extent that a surety has been called upon
to make payment on a bond) Guaranties of the
Indebtedness of others
	 	$                    (xi)
	Indebtedness secured by liens or encumbrances on
property
	 	$                    (xii)
	Reimbursement obligations with respect to letters
of credit
	 	$                    (xiii)
	 
	 	 	 	 
	Total Debt (sum of v — xiv)
	 	$                    (xiv)
	 
	 	 	 	 
	Ratio of (xv) to (iv)
	 	 	___ : ___	 
	 
	 	 	 	 
	Maximum ratio:
	 	 	3.50:1.00	 

DATED ___________________________________________.

 

 

- B-3

	 	 	 	 	 	 	 
	 	 	WASTE MANAGEMENT, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	WASTE MANAGEMENT OF CANADA

CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	 	 	 

Name:
	 	 
	 

	 	 	 	Title:	 	 

 

 

SCHEDULE C

FORM OF ASSIGNMENT AGREEMENT

[see references in Sections 1.1.9 and 10.2]

     The undersigned refer to the credit agreement dated as of 30 November 2005 between Waste
Management of Canada Corporation, as Borrower, Waste Management, Inc. and Waste Management
Holdings, Inc., as Guarantors, The Bank of Nova Scotia, as Administrative Agent and the Lenders
named therein, as amended, supplemented, restated or replaced from time to time (the “Credit
Agreement”). All terms used in this Assignment Agreement that are defined in the Credit Agreement
will have the meanings defined in the Credit Agreement.

     For value received, the “Assignor” and the “Assignee” named below hereby agree as follows:

	1.	 	The Assignor hereby sells and assigns, without recourse, to the Assignee, and the Assignee
hereby purchases and assumes from the Assignor, the Proportionate Share specified on Appendix
1 in and to the Assignor’s rights and obligations under the Credit Agreement, the Security and
all other Credit Documents.

	2.	 	The Assignor (a) represents and warrants that it is the legal and beneficial owner of the
interest being assigned by it hereunder, that such interest is free and clear of any lien or
security interest and that it is entitled to enter into this Assignment Agreement, (b) makes
no representation or warranty, other than as provided in this Assignment Agreement and assumes
no responsibility with respect to any statements, warranties or representations made in or in
connection with the Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other Credit Document, and
(c) makes no representation or warranty and assumes no responsibility with respect to the
financial condition of any Obligor or the performance or observance by any Obligor of any of
the obligations under the Credit Agreement or any other Credit Document.

	3.	 	The Assignee, for the benefit of the Borrower, the Guarantors, the other Obligors, the Agent
and all Lenders from time to time, including the Assignor, (a) acknowledges receipt of any
upfront fee payable by the Assignor, (b) confirms that it has received a copy of the Credit
Agreement, together with such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Assignment Agreement, (c) agrees
that it will, independently and without reliance upon the Agent, the Assignor or any other
Lender and based on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under the Credit
Agreement, (d) appoints and authorizes the Agent to take such action on its behalf and to
exercise such powers and discretion under the Credit Agreement as are delegated to the Agent
by the terms thereof, together with such powers and discretion as are reasonably incidental
thereto, (e) ratifies and adopts the powers of attorney and related powers given to the Agent
and the Collateral Agent under the Credit Agreement, (f) agrees that it will perform in
accordance with their terms all of the obligations that by the terms of the Credit Agreement
are

 

 

- C2 -

required to be performed by it as a Lender, (g) agrees to be bound by the terms of all
Intercreditor Agreements, and (h) specifies as its address for notice and payments its
office at the address set forth on Appendix 1 hereto.

	4.	 	Following the execution of this Assignment Agreement, it shall immediately be delivered to
the Agent, together with the processing and recording fee specified in Section 10.2 of the
Credit Agreement if applicable, for approval and recording by the Agent, the Issuing Lender
and the Borrower, if applicable. The Assignee’s agreement to become a Lender, as constituted
by this Assignment Agreement, is irrevocable, unless the Assignee is not approved by the
Agent, the Issuing Lender or the Borrower, if applicable. The Assignee shall become a Lender,
and shall be bound by the obligations and entitled to the benefits in the Credit Agreement,
immediately upon this Assignment Agreement being approved and recorded by the Agent, the
Issuing Lender and the Borrower, if applicable (the “Effective Date”). On the Effective Date,
the Assignee (a) shall pay the Assignor an amount equal to the Assignee’s Proportionate Share
of Prime Rate Advances made by the Assignor as of the Effective Date, and (b) shall become
entitled to receive standby fees in accordance with the Credit Agreement in respect of its
Proportionate Share of the aggregate amount of the Credit that has not been advanced by the
Lenders.

	5.	 	If Advances made by the Assignee to the Borrower are for any reason less than the Assignee’s
Proportionate Share of the aggregate Advances made by all Lenders under the Credit Agreement,
the Assignee shall, on demand, indemnify the Assignor in respect of the principal amount of
the corresponding Advances made by the Assignor in excess of the Assignor’s Proportionate
Share. The Advances by the Assignor in respect of which the Assignee is bound to indemnify
the Assignor are set out on Appendix 2 to this Assignment Agreement. The Assignor shall pay
the Assignee indemnity fees during the period in which the Assignee is obliged to indemnify
the Assignor. The fee shall be in the amount specified on Appendix 2 and shall be payable on
the Effective Date in respect of Advances by way of Banker’s Acceptances.

	6.	 	This Assignment Agreement shall be governed by, and construed in accordance with the laws of
the Province of Ontario, Canada.

 

 

- C3 -

	7.	 	This Assignment Agreement may be executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when so executed shall be deemed to be
an original and all of which taken together shall constitute one and the same agreement.
Delivery of an executed counterpart of this Assignment Agreement by telecopier shall be
effective as delivery of a manually executed counterpart of this Assignment Agreement.

     IN WITNESS WHEREOF, the Assignor and the Assignee have caused this Assignment Agreement to be
executed by their duly authorized officers as of the dates specified below.

	 	 	 	 	 
	 

	 	Assignor:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Assignee:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Name:
	 

	 	 	 	Title:
	 
	 	 	 	 
	 

	 	Date:	 	 
	 

	 	 	 	 

	 	 	 	 	 	 	 
	Approved on

	 	 	 	[If applicable] Approved on	 	 
	 

	 	 
	 	 	 	 

	 	 	 	 	 	 	 
	THE BANK OF NOVA SCOTIA, as Agent	 	WASTE MANAGEMENT OF CANADA CORPORATION
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 

	 	Name:
	 	 	 	Name:
	 

	 	Title:
	 	 	 	Title:
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 

	 	Name:
	 	 	 	Name:
	 

	 	Title:
	 	 	 	Title:

 

 

- C4 -

	 	 	 	 	 	 	 
	Effective Date:

	 	 	 	Date:	 	 
	 

	 	 
	 	 	 	 

 

 

APPENDIX 1

TO

ASSIGNMENT AGREEMENT

	 	 	 
	Proportionate Share assigned by Assignor:
	 	 
	 

	 	 
	 
	 	 
	Proportionate Share retained by Assignor:
	 	 
	 

	 	 
	 
	 	 
	Payment Details, including address of Assignee for notices:

	 	 

 

 

APPENDIX 2

TO

ASSIGNMENT AGREEMENT

Advances in respect of which the Assignee is to indemnify the Assignor, as of the Effective Date:

	 	 	 	 	 
	Type
of Advance

	 	Maturity
Date of Advance

	 	Principal
Amount of Advance

	 
	 	 
	 	 

 

Indemnity fee:

 

 

SCHEDULE D

FORM OF GUARANTEE

 

 

SCHEDULE E

APPLICABLE PERCENTAGES OF LENDERS

[see references in Section 1.1]

	 	 	 	 	 	 	 
	Lender	 	Commitment	 	Applicable Percentage
	The Bank of Nova Scotia
	 	Cdn. $99,000,000	 	 	24.146	%
	 
	 	 	 	 	 	 
	BNP Paribas (Canada)
	 	Cdn. $75,000,000	 	 	18.293	%
	 
	 	 	 	 	 	 
	Mizuho Corporate Bank (Canada)
	 	Cdn. $50,000,000	 	 	12.195	%
	 
	 	 	 	 	 	 
	U.S. Bank National Association
	 	Cdn. $50,000,000	 	 	12.195	%
	 
	 	 	 	 	 	 
	Bank of America, National Association
	 	Cdn. $45,000,000	 	 	10.976	%
	 
	 	 	 	 	 	 
	ABN AMRO Bank N.V.
	 	Cdn. $35,000,000	 	 	8.537	%
	 
	 	 	 	 	 	 
	Sumitomo Mitsui Banking Corporation
of Canada
	 	Cdn. $25,000,000	 	 	6.098	%
	 
	 	 	 	 	 	 
	JPMorgan Chase Bank, National
Association
	 	Cdn. $20,000,000	 	 	4.878	%
	 
	 	 	 	 	 	 
	Comerica Bank
	 	Cdn. $11,000,000	 	 	2.683	%exv10w1

 

Exhibit 10.1

JEFFERIES GROUP, INC.

$125,000,000

3.25% Series A Cumulative Convertible Preferred Stock

 

PURCHASE AGREEMENT

 

Dated February 17, 2006

 

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page	 
	SECTION 1.	 	AUTHORIZATION OF CONVERTIBLE SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK	 	 	1	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 2.	 	SALE AND PURCHASE OF SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK	 	 	1	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 3.	 	CLOSING	 	 	1	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 4.	 	CONDITIONS TO CLOSING	 	 	2	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.1	 	 	 	Representations and Warranties
	 	 	2	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.2	 	 	 	Performance; No Default
	 	 	2	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.3	 	 	 	Compliance Certificates
	 	 	2	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.4	 	 	 	Opinion of Counsel
	 	 	2	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.5	 	 	 	Purchase Permitted By Applicable Law, Etc
	 	 	2	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.6	 	 	 	Changes in Corporate Structure
	 	 	3	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.7	 	 	 	Proceedings and Documents
	 	 	3	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.8	 	 	 	Listing
	 	 	3	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.9	 	 	 	Ratings
	 	 	3	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.10	 	 	 	Registration Rights Agreement
	 	 	3	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.11	 	 	 	Recording of Certificate of Designations
	 	 	3	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.12	 	 	 	Legality
	 	 	3	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.13	 	 	 	Private Placement Numbers
	 	 	3	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.14	 	 	 	Funding Instructions
	 	 	4	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 4.15	 	 	 	Fees and Expenses
	 	 	4	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 5.	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY	 	 	4	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.1	 	 	 	Organization; Power and Authority
	 	 	4	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.2	 	 	 	Authorization, Etc
	 	 	4	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.3	 	 	 	Disclosure
	 	 	4	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.4	 	 	 	Organization and Ownership of Shares of Subsidiaries; Affiliates
	 	 	5	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.5	 	 	 	Financial Statements; Material Liabilities
	 	 	5	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.6	 	 	 	Compliance with Laws, Other Instruments, Etc
	 	 	5	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.7	 	 	 	Governmental Authorizations, Etc
	 	 	6	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.8	 	 	 	Litigation; Observance of Agreements, Statutes and Orders
	 	 	6	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.9	 	 	 	Taxes
	 	 	6	 

 -i-

 

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page	 
	 	 	Section 5.10	 	 	 	Licenses, Permits, Etc
	 	 	6	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.11	 	 	 	Compliance with ERISA
	 	 	7	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.12	 	 	 	Private Offering by the Company
	 	 	7	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.13	 	 	 	Status under Certain Statutes
	 	 	7	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.14	 	 	 	Environmental Matters
	 	 	7	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.15	 	 	 	Use of Proceeds of Series A Cumulative Convertible Preferred Stock
	 	 	7	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 5.16	 	 	 	Capitalization
	 	 	8	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 6.	 	REPRESENTATIONS OF THE PURCHASERS	 	 	8	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 6.1	 	 	 	Purchase for Investment
	 	 	8	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 6.2	 	 	 	Source of Funds
	 	 	9	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 7.	 	REGISTRATION OF SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK; LEGENDS	 	 	10	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 7.1	 	 	 	Stock Register
	 	 	10	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 7.2	 	 	 	Legends
	 	 	10	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 8.	 	PAYMENTS OF DIVIDENDS AND OTHER AMOUNTS DUE	 	 	11	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 8.1	 	 	 	Place of Payment
	 	 	11	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 8.2	 	 	 	Home Office Payment
	 	 	11	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 9.	 	AMENDMENT AND WAIVER	 	 	11	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 9.1	 	 	 	Requirements
	 	 	11	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 9.2	 	 	 	Solicitation of Holders of Series A Cumulative Convertible Preferred
Stock
	 	 	11	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 9.3	 	 	 	Binding Effect, Etc
	 	 	11	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 10.	 	NOTICES	 	 	12	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 11.	 	REPRODUCTION OF DOCUMENTS	 	 	12	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 12.	 	CONFIDENTIAL INFORMATION	 	 	13	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 13.	 	SUBSTITUTION OF PURCHASER	 	 	13	 
	 	 	 	 	 	 	 
	 	 	 	 
	SECTION 14.	 	FEES AND EXPENSES	 	 	14	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 14.1	 	 	 	Transaction Expenses
	 	 	14	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 14.2	 	 	 	Survival
	 	 	14	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 14.3	 	 	 	Hart-Scott-Rodino Fees and Expenses
	 	 	14	 

 -ii-

 

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	Page	 
	SECTION 15.	 	MISCELLANEOUS	 	 	14	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 15.1	 	 	 	Successors and Assigns
	 	 	14	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 15.2	 	 	 	Accounting Terms
	 	 	15	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 15.3	 	 	 	Severability
	 	 	15	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 15.4	 	 	 	Construction, Etc
	 	 	15	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 15.5	 	 	 	Counterparts
	 	 	15	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 15.6	 	 	 	Governing Law
	 	 	15	 
	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Section 15.7	 	 	 	Jurisdiction and Process; Waiver of Jury Trial
	 	 	15	 

 -iii-

 

 

	 	 	 	 	 
	SCHEDULE A

	 	—
	 	INFORMATION RELATING TO PURCHASERS
	 
	 	 	 	 
	SCHEDULE B

	 	—
	 	DEFINED TERMS
	 
	 	 	 	 
	EXHIBIT 1

	 	—
	 	CERTIFICATE OF DESIGNATIONS FOR THE SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK
	 
	 	 	 	 
	EXHIBIT 4.4

	 	—
	 	OPINION OF COMPANY COUNSEL
	 
	 	 	 	 
	EXHIBIT 4.10

	 	—
	 	REGISTRATION RIGHTS AGREEMENT
	 
	 	 	 	 
	ANNEX 5.15

	 	—
	 	USE OF PROCEEDS
	 
	 	 	 	 
	ANNEX 5.16

	 	—
	 	CAPITALIZATION INFORMATION

 

 

JEFFERIES GROUP, INC.

520 MADISON AVENUE

12TH FLOOR

NEW YORK, NEW YORK 10022

3.25% Series A Cumulative Convertible Preferred Stock

February 17, 2006

TO EACH OF THE PURCHASERS LISTED IN

     SCHEDULE A HERETO:

Ladies and Gentlemen:

     Jefferies Group, Inc., a Delaware corporation (the “Company”), agrees with each of the
purchasers whose names appear at the end hereof (each, a “Purchaser” and, collectively, the
“Purchasers”) as follows:

			
	     SECTION 1.	 	AUTHORIZATION OF CONVERTIBLE SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK.

     The Company will authorize the issue and sale of 125,000 shares of its 3.25% Series A
Cumulative Convertible Preferred Stock (the “Series A Cumulative Convertible Preferred Stock”).
The powers, designations, preferences and relative, participating, optional or other rights, if
any, and the qualifications, limitations or restrictions of the Series A Cumulative Convertible
Preferred Stock are set out in the Certificate of Designations, the form of which is attached as
Exhibit 1 (the “Certificate of Designations”). Certain capitalized and other terms used in this
Agreement are defined in Schedule B; and references to a “Schedule” or an “Exhibit” are, unless
otherwise specified, to a Schedule or an Exhibit attached to this Agreement.

			
	     SECTION 2.	 	SALE AND PURCHASE OF SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK.

     Subject to the terms and conditions of this Agreement, the Company will issue and sell to each
Purchaser and each Purchaser will purchase from the Company, at the Closing provided for in Section
3, the number of shares of the Series A Cumulative Convertible Preferred Stock specified opposite
such Purchaser’s name in Schedule A at the purchase price of $1,000.00 per share.

			
	      SECTION 3.	 	CLOSING.

     The sale and purchase of the shares of the Series A Cumulative Convertible Preferred Stock to
be purchased by each Purchaser shall occur at the offices of Morgan, Lewis & Bockius LLP, 101 Park
Avenue, New York, New York 10178, beginning at 10:00 a.m., Eastern Standard time, at a closing (the
“Closing”) on February 17, 2006 or on such other Business Day thereafter as may be agreed upon by
the Company and the Purchasers. At the Closing, the Company will

1

 

deliver to each Purchaser the Series A Cumulative Convertible Preferred Stock to be purchased
by such Purchaser, dated the date of the Closing and registered in such Purchaser’s name (or in the
name of its nominee), against delivery by such Purchaser to the Company or its order of immediately
available funds in the amount of the purchase price therefor by wire transfer of immediately
available funds for the account of the Company to an account specified by the Company at least
three Business Days prior to the date of the Closing.

			
	     SECTION 4.	 	CONDITIONS TO CLOSING.

     Each Purchaser’s obligation to purchase and pay for the shares of the Series A Cumulative
Convertible Preferred Stock to be sold to them at the Closing are subject to the fulfillment, prior
to or at the Closing, of the following conditions:

     Section 4.1 Representations and Warranties. The representations and warranties of the Company
in this Agreement which are qualified by materiality shall be correct, and those representations
and warranties of the Company in this Agreement which are not qualified by materiality shall be
correct in all material respects, when made and at the time of the Closing.

     Section 4.2 Performance; No Default. The Company shall have performed and complied with, in
all material respects, all agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at the Closing and after giving effect to the issue
and sale of the Series A Cumulative Convertible Preferred Stock.

     Section 4.3 Compliance Certificates.

          (a) Officer’s Certificate. The Company shall have delivered to such Purchaser an Officer’s
Certificate, dated the date of the Closing, certifying that the conditions specified in Sections
4.1, 4.2, 4.6, 4.8 and 4.9 have been fulfilled.

          (b) Secretary’s Certificate. The Company shall have delivered to such Purchaser a certificate
of its Secretary or Assistant Secretary, dated the date of Closing, certifying as to the
resolutions attached thereto and other corporate proceedings relating to the authorization,
execution and delivery of the Series A Cumulative Convertible Preferred Stock and this Agreement.

     Section 4.4 Opinion of Counsel. Such Purchaser shall have received an opinion in form and
substance satisfactory to each Purchaser, dated the date of the Closing from Morgan, Lewis &
Bockius LLP, special counsel for the Company, covering the matters set forth in Exhibit 4.4 and
covering such other matters incident to the transactions contemplated hereby as such Purchaser or
its counsel may reasonably request (and the Company hereby instructs its counsel to deliver such
opinion to the Purchasers).

     Section 4.5 Purchase Permitted By Applicable Law, Etc. On the date of the Closing, the
Purchasers’ purchases of the Series A Cumulative Convertible Preferred Stock shall (a) be permitted
by the laws and regulations of each jurisdiction to which such Purchaser is subject, (b) not
violate any applicable law or regulation and (c) not subject such Purchaser to any tax, penalty or
liability under or pursuant to any applicable law or regulation, which law or regulation was not in
effect on the date hereof. If requested by such Purchaser, such Purchaser

2

 

shall have received an Officer’s Certificate certifying as to such matters of fact as such
Purchaser may reasonably specify to enable such Purchaser to determine whether such purchase is so
permitted.

     Section 4.6 Changes in Corporate Structure. The Company shall not have changed its
jurisdiction of incorporation or organization, as applicable, or been a party to any merger or
consolidation or succeeded to all or any substantial part of the liabilities of any other entity,
at any time following the date of the most recent financial statements contained in the Disclosure
Documents.

     Section 4.7 Proceedings and Documents. All corporate and other proceedings in connection with
the transactions contemplated by this Agreement and all documents and instruments incident to such
transactions shall be reasonably satisfactory to the Purchasers and their special counsel, and the
Purchasers and their special counsel shall have received all such counterpart originals or
certified or other copies of such documents as such Purchaser or such special counsel may
reasonably request.

     Section 4.8 Listing. The shares of Common Stock issuable upon conversion of the Series A
Cumulative Convertible Preferred Stock shall have been duly authorized for listing, subject to
official notice of issuance, on the New York Stock Exchange.

     Section 4.9 Ratings. The Series A Cumulative Convertible Preferred Stock shall have, as of
the date of Closing, received a rating of at least Baa3 from Moody’s Investors Service and a rating
of at least BBB- from Fitch Ratings.

     Section 4.10 Registration Rights Agreement. The Company shall have executed and delivered the
Registration Rights Agreement (as may be amended from time to time, the “Registration Rights
Agreement”) in the form attached hereto as Exhibit 4.10.

     Section 4.11 Recording of Certificate of Designations. The Certificate of Designations shall
have been filed with the Secretary of State of Delaware and such Purchaser shall have received a
(a) long form good standing certificate from the Secretary of State of Delaware setting forth all
charter documents of the Company recorded with it (including, without limitation, the Certificate
of Designations) and (b) copies of all such charter documents (including, without limitation, the
Certificate of Designations) certified as true and correct by the Secretary of the State of the
State of Delaware.

     Section 4.12 Legality. The Series A Cumulative Convertible Preferred Stock shall on the date
of Closing qualify as a legal investment for such Purchaser under applicable insurance law (without
regard to any “basket” or “leeway” provisions), and the acquisition thereof shall not subject such
Purchaser to any penalty or onerous condition pursuant to any such law or regulation, and such
Purchaser shall have received such evidence as they may reasonably request to establish compliance
with this condition.

     Section 4.13 Private Placement Numbers. The Company shall have obtained or caused to be
obtained private placement numbers for the Series A Cumulative Convertible Preferred Stock from the
CUSIP Service Bureau of Standard & Poor’s, a division of McGraw-Hill, Inc. and such Purchaser shall
have been informed of such private placement numbers.

3

 

     Section 4.14 Funding Instructions. At least two Business Days prior to the date of the
Closing, each Purchaser shall have received written instructions, signed by an officer on
letterhead of the Company confirming the information specified in Section 3 including (i) the name
and address of the transferee bank, (ii) such transferee bank’s ABA number, and (iii) the account
name and number into which the purchase price for the Series A Cumulative Convertible Preferred
Stock is to be deposited.

     Section 4.15 Fees and Expenses. All fees and disbursements required to be paid pursuant to
Section 14 shall have been paid in full.

			
	     SECTION 5.	 	REPRESENTATIONS AND WARRANTIES OF THE COMPANY.

     The Company represents and warrants to each Purchaser that:

     Section 5.1 Organization; Power and Authority. The Company is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of incorporation, and is
duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such
qualification is required by law, other than those jurisdictions as to which the failure to be so
qualified or in good standing could not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. The Company has the corporate power and authority to own or
hold under lease the properties it purports to own or hold under lease, to transact the business it
transacts and proposes to transact, to execute and deliver each of the Financing Documents, to
issue and sell the Series A Cumulative Convertible Preferred Stock and to perform the provisions
hereof to be performed by it.

     Section 5.2 Authorization, Etc. The Series A Cumulative Convertible Preferred Stock has been
duly authorized and, when issued, sold and delivered in accordance with the terms hereof, will be
duly and validly issued, fully paid and nonassessable and free of preemptive rights. The Common
Stock issuable upon conversion of the Series A Cumulative Convertible Preferred Stock has been duly
and validly authorized and reserved for issuance upon conversion of the Series A Cumulative
Convertible Preferred Stock, and when issued and delivered upon conversion of the Series A
Cumulative Convertible Preferred Stock, will be duly and validly issued, fully paid and
nonassessable and free of preemptive rights.

     Section 5.3 Disclosure. The Company has made available to the Purchasers its Annual Report on
Form 10-K for the year ended December 31, 2004, filed on March 31, 2005; its Quarterly Reports on
Form 10-Q for the quarter ended March 31, 2005, filed on April 27, 2005, for the quarter ended June
30, 2005, filed on August 8, 2005 and for the quarter ended September 30, 2005, filed on October
25, 2005; and its Current Reports on Form 8-K filed on January 24, 2005, May 19, 2005, July 21,
2005, August 16, 2005, October 6, 2005 and January 18, 2006 (collectively the “Disclosure
Documents”). The Disclosure Documents taken as a whole, did not, as of their respective filing
dates, contain any untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading in light of the circumstances under which they were
made. Since September 30, 2005, there has not been any change in the financial condition,
operations, business or properties of the Company or any Subsidiary except changes that
individually or in the aggregate could not reasonably be expected to have a Material Adverse
Effect.

4

 

     Section 5.4 Organization and Ownership of Shares of Subsidiaries; Affiliates. (a) Exhibit 21
to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, filed on March
31, 2005, contains a complete and correct list of the Subsidiaries of the Company and their
respective jurisdictions of incorporation.

          (b) All of the outstanding shares of capital stock or similar equity interests of each
Subsidiary have been duly and validly issued, are fully paid and nonassessable and are owned by the
Company or another Subsidiary of the Company free and clear of any Lien (except as otherwise
disclosed in the Disclosure Documents or in Schedule 5.4).

          (c) Each Subsidiary is a corporation or other legal entity duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation. Each such Subsidiary has
the corporate or other power and authority to own or hold under lease the properties it purports to
own or hold under lease and to transact the business it transacts and proposes to transact.

          (d) Jefferies & Company, Inc. is the only Material Subsidiary of the Company.

     Section 5.5 Financial Statements; Material Liabilities. The financial statements of the
Company and its consolidated Subsidiaries are included in the Disclosure Documents. All of said
financial statements (including in each case the related schedules and notes) fairly present in all
material respects the consolidated financial position of the Company and its consolidated
Subsidiaries as of the respective dates specified in such Disclosure Documents and the consolidated
results of their operations and cash flows for the respective periods so specified and have been
prepared in accordance with GAAP consistently applied throughout the periods involved except as set
forth in the notes thereto (subject, in the case of any interim financial statements, to normal
year-end adjustments). The Company and its Subsidiaries do not have any Material liabilities of a
kind required to be included in financial statements prepared in accordance with GAAP, that are not
disclosed on such financial statements or otherwise disclosed in the Disclosure Documents, other
than liabilities incurred in the ordinary course of their businesses since September 30, 2005.

     Section 5.6 Compliance with Laws, Other Instruments, Etc. The execution, delivery and
performance by the Company of each of the Financing Documents will not (i) contravene, result in
any breach of, or constitute a default under, or result in the creation of any Lien in respect of
any material property of the Company or any Subsidiary under, any material indenture, mortgage,
deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any
other material agreement or instrument to which the Company or any Subsidiary is a party or by
which the Company or any Subsidiary or any of their respective properties may be bound or affected,
(ii) conflict with or result in a material breach of any of the terms, conditions or provisions of
any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority
applicable to the Company or any Subsidiary, or (iii) violate in any material respect any statute
or other rule or regulation of any Governmental Authority applicable to the Company or any
Subsidiary.

5

 

     Section 5.7 Governmental Authorizations, Etc. No consent, approval or authorization of, or
registration, filing or declaration with, any Governmental Authority is required in connection with
the execution, delivery or performance by the Company of any of the Financing Documents, except for
the filing of a registration statement or of a supplement to an existing registration statement of
the Company with the SEC in order to register or designate the Common Stock issuable upon
conversion of the Series A Cumulative Convertible Preferred Stock for resale by the holders
thereof.

     Section 5.8 Litigation; Observance of Agreements, Statutes and Orders. (a) Except as set
forth in the Disclosure Documents, there are no actions, suits, investigations or proceedings
pending or, to the knowledge of the Company, threatened against or affecting the Company or any
Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator
of any kind or before or by any Governmental Authority that, individually or in the aggregate,
could reasonably be expected to have a Material Adverse Effect.

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

     Section 5.9 Taxes. The Company and its Subsidiaries have filed all tax returns that are
required to have been filed in any jurisdiction, and have paid all taxes shown to be due and
payable on such returns and all other taxes and assessments levied upon them or their properties,
assets, income or franchises, to the extent such taxes and assessments have become due and payable
and before they have become delinquent, except for any taxes and assessments (i) the amount of
which is not individually or in the aggregate Material or (ii) the amount, applicability or
validity of which is currently being contested in good faith by appropriate proceedings and with
respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves
in accordance with GAAP. The Company knows of no basis for any other tax or assessment that could
reasonably be expected to have a Material Adverse Effect. The charges, accruals and reserves on
the books of the Company and its Subsidiaries in respect of Federal, state or other taxes for all
fiscal periods are adequate.

     Section 5.10 Licenses, Permits, Etc. (a) The Company and its Subsidiaries own or possess all
licenses, permits, franchises, authorizations, patents, copyrights, proprietary software, service
marks, trademarks and trade names, or rights thereto, that individually or in the aggregate are
Material, without known conflict with the rights of others the absence of which would have a
Material Adverse Effect.

          (b) To the best knowledge of the Company, no product of the Company or any of its Subsidiaries
infringes in any material respect any license, permit, franchise, authorization, patent, copyright,
proprietary software, service mark, trademark, trade name or other right owned by any other Person
the consequences of which infringement would have a Material Adverse Effect.

6

 

          (c) To the best knowledge of the Company, there is no Material violation by any Person of any
right of the Company or any of its Subsidiaries with respect to any patent, copyright, proprietary
software, service mark, trademark, trade name or other right owned or used by the Company or any of
its Subsidiaries, the consequences of which violation would have a Material Adverse Effect.

     Section 5.11 Compliance with ERISA. The Company and each ERISA Affiliate have operated and
administered each Plan in compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be expected to result in a Material
Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to
Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee
benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the incurrence of any such
liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to
Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412
of the Code or section 4068 of ERISA, other than such liabilities or Liens as would not be
individually or in the aggregate Material.

     Section 5.12 Private Offering by the Company. Neither the Company nor anyone acting on its
behalf has offered the Series A Cumulative Convertible Preferred Stock or any similar securities
for sale to, or solicited any offer to buy any of the same from, or otherwise approached or
negotiated in respect thereof with, any person other than the Purchasers. Neither the Company nor
anyone acting on its behalf has taken, or will take, any action that would subject the issuance or
sale of the Series A Cumulative Convertible Preferred Stock to the registration requirements of
Section 5 of the Securities Act or to the registration requirements of any securities or blue sky
laws of any applicable jurisdiction.

     Section 5.13 Status under Certain Statutes. Neither the Company nor any Subsidiary is subject
to regulation under the Investment Company Act of 1940, as amended (except in its capacity as an
investment advisor to companies which are so regulated), the ICC Termination Act of 1995, as
amended, or the Federal Power Act, as amended.

     Section 5.14 Environmental Matters. Neither the Company nor any Subsidiary has knowledge of
any claim or has received any notice of any claim, and no proceeding has been instituted raising
any claim against the Company or any of its Subsidiaries or any of their respective real properties
now or formerly owned, leased or operated by any of them or other assets, alleging any damage to
the environment or violation of any Environmental Laws, except, in each case, such as could not
reasonably be expected to result in a Material Adverse Effect.

			
	     Section 5.15	 	Use of Proceeds of Series A Cumulative Convertible Preferred Stock.

          (a) Use of Proceeds. The Company shall apply the proceeds from the sale of the Series A
Cumulative Convertible Preferred Stock as specified in Annex 5.15.

          (b) Foreign Assets Control Regulations, Etc.

7

 

               (i) Neither the sale of the Series A Cumulative Convertible Preferred Stock by the Company
hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as
amended, or any of the foreign assets control regulations of the United States Treasury Department
(31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating
thereto.

               (ii) Neither the Company nor any Subsidiary (A) is a Person described or designated in the
Specially Designated Nationals and Blocked Persons List of the Office of Foreign Assets Control or
in section 1 of the Anti-Terrorism Order or (B) engages in any dealings or transactions with any
such Person. The Company and its Subsidiaries are in compliance, in all material respects, with
the USA Patriot Act.

               (iii) No part of the proceeds from the sale of the Series A Cumulative Convertible Preferred
Stock hereunder will be used, directly or indirectly, for any payments to any governmental official
or employee, political party, official of a political party, candidate for political office, or
anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain
any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as
amended, assuming in all cases that such Act applies to the Company.

     Section 5.16 Capitalization. Annex 5.16 correctly sets forth, after giving effect to the
issuance of the Series A Cumulative Convertible Preferred Stock hereby on the date two Business
Days before the Closing:

               (i) the authorized and outstanding shares of the Capital Stock and other securities of the
Company (specifying the type, class or series of all such Capital Stock and other securities and
whether such Capital Stock and other securities are voting or non-voting);

               (ii) all options, warrants and other rights to purchase Capital Stock of the Company, together
with general descriptions of the terms thereof; and

               (iii) each obligation (contingent or otherwise) of the Company or any Subsidiary to repurchase
or otherwise acquire or retire any shares of Capital Stock (or options to purchase the same) of the
Company for a consideration in excess of $50,000,000 or in an aggregate number of shares of any
class of such Capital Stock which exceeds 5.0% of the shares of such class;

All such outstanding shares of Capital Stock have been duly authorized and validly issued and are
fully paid, non-assessable and free and clear of any lien. There are no preemptive rights,
subscription rights or other contractual rights similar in nature to preemptive rights with respect
to any Capital Stock of the Company, other than, as set forth in the Charter and the Certificate of
Designations.

			
	     SECTION 6.	 	REPRESENTATIONS OF THE PURCHASERS.

     Section 6.1 Purchase for Investment. Each Purchaser severally represents that it is
purchasing the Series A Cumulative Convertible Preferred Stock for its own account or for one or
more separate accounts maintained by such Purchaser or for the account of one or more pension or
trust funds and not with a view to the distribution thereof, provided that the

8

 

disposition of such Purchaser’s or their property shall at all times be within such
Purchaser’s or their control. Each Purchaser understands that neither the Series A Cumulative
Convertible Preferred Stock nor the Common Stock issuable upon conversion thereof has been
registered under the Securities Act and may be resold only if registered pursuant to the provisions
of the Securities Act or if an exemption from registration is available, except under circumstances
where neither such registration nor such an exemption is required by law, and that the Company is
not required to register the Series A Cumulative Convertible Preferred Stock.

     Section 6.2 Source of Funds. Each Purchaser severally represents that at least one of the
following statements is an accurate representation as to each source of funds (a “Source”) to be
used by such Purchaser to pay the purchase price of the Series A Cumulative Convertible Preferred
Stock to be purchased by such Purchaser hereunder:

     (a) the Source is an “insurance company general account” (as the term is defined in the
United States Department of Labor’s Prohibited Transaction Exemption (“PTE”) 95-60)) in
respect of which the reserves and liabilities (as defined by the annual statement for life
insurance companies approved by the National Association of Insurance Commissioners (the
“NAIC Annual Statement”)) for the general account contract(s) held by or on behalf of any
employee benefit plan together with the amount of the reserves and liabilities for the
general account contract(s) held by or on behalf of any other employee benefit plans
maintained by the same employer (or affiliate thereof as defined in PTE 95-60) or by the
same employee organization in the general account do not exceed 10% of the total reserves
and liabilities of the general account (exclusive of separate account liabilities) plus
surplus as set forth in the NAIC Annual Statement filed with such Purchaser’s state of
domicile; or

     (b) the Source is a separate account that is maintained solely in connection with such
Purchaser’s fixed contractual obligations under which the amounts payable, or credited, to
any employee benefit plan (or its related trust) that has any interest in such separate
account (or to any participant or beneficiary of such plan (including any annuitant)) are
not affected in any manner by the investment performance of the separate account; or

     (c) the Source is either (i) an insurance company pooled separate account, within the
meaning of PTE 90-1 or (ii) a bank collective investment fund, within the meaning of the PTE
91-38 and, except as disclosed by such Purchaser to the Company in writing pursuant to this
clause (c), no employee benefit plan or group of plans maintained by the same employer or
employee organization beneficially owns more than 10% of all assets allocated to such pooled
separate account or collective investment fund; or

     (d) the Source constitutes assets of an “investment fund” (within the meaning of Part V
of PTE 84-14 (the “QPAM Exemption”)) managed by a “qualified professional asset manager” or
“QPAM” (within the meaning of Part V of the QPAM Exemption), no employee benefit plan’s
assets that are included in such investment fund, when combined with the assets of all other
employee benefit plans established or maintained by the same employer or by an affiliate
(within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the
same employee organization and managed by such QPAM, exceed 20% of the total client assets
managed

9

 

by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied,
neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition
of “control” in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the
Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans
whose assets are included in such investment fund have been disclosed to the Company in
writing pursuant to this clause (d); or

     (e) the Source constitutes assets of a “plan(s)” (within the meaning of Section IV of
PTE 96-23 (the “INHAM Exemption”)) managed by an “in-house asset manager” or “INHAM” (within
the meaning of Part IV of the INHAM exemption), the conditions of Part I(a), (g) and (h) of
the INHAM Exemption are satisfied, neither the INHAM nor a person controlling or controlled
by the INHAM (applying the definition of “control” in Section IV(d) of the INHAM Exemption)
owns a 5% or more interest in the Company and (i) the identity of such INHAM and (ii) the
name(s) of the employee benefit plan(s) whose assets constitute the Source have been
disclosed to the Company in writing pursuant to this clause (e); or

     (f) the Source is a governmental plan; or

     (g) the Source is one or more employee benefit plans, or a separate account or trust
fund comprised of one or more employee benefit plans, each of which has been identified to
the Company in writing pursuant to this clause (g); or

     (h) the Source does not include assets of any employee benefit plan, other than a plan
exempt from the coverage of ERISA.

As used in this Section 6.2, the terms “employee benefit plan,” “governmental plan,” and “separate
account” shall have the respective meanings assigned to such terms in section 3 of ERISA.

			
	     SECTION 7.	 	REGISTRATION OF SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK; LEGENDS.

     Section 7.1 Stock Register. The Company shall cause to be kept a register for the
registration and registration of transfers of shares of the Series A Cumulative Convertible
Preferred Stock in accordance with Section 15 of the Certificate of Designations. The name and
address of each holder of one or more shares of Series A Cumulative Convertible Preferred Stock,
each transfer thereof and the name and address of each transferee of one or more shares of Series A
Cumulative Convertible Preferred Stock shall be registered in such register. Prior to due
presentment for registration of transfer, the Person in whose name any Series A Cumulative
Convertible Preferred Stock shall be registered shall be deemed and treated as the owner and holder
thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge
to the contrary.

     Section 7.2 Legends. The certificates evidencing the Series A Cumulative Convertible
Preferred Stock shall contain appropriate legends restricting their transfer under the Securities
Act and the provisions of Section 15 of the Certificate of Designations.

10

 

			
	     SECTION 8.	 	PAYMENTS OF DIVIDENDS AND OTHER AMOUNTS DUE.

     Section 8.1 Place of Payment. Subject to Section 8.2, payments of dividends and amounts due
upon redemption of the Series A Cumulative Convertible Preferred Stock shall be made in New York,
New York at the principal office of the Company in such jurisdiction. The Company may at any time,
by notice to each holder of Series A Cumulative Convertible Preferred Stock, change the place of
payment of the Series A Cumulative Convertible Preferred Stock so long as such place of payment
shall be either the principal office of the Company in such jurisdiction or the principal office of
a bank or trust company in such jurisdiction.

     Section 8.2 Home Office Payment. So long as any Purchaser or its nominee shall be the holder
of any Series A Cumulative Convertible Preferred Stock, and notwithstanding anything contained in
Section 8.1 to the contrary, the Company will pay all dividends and amounts due upon redemption of
the Series A Cumulative Convertible Preferred Stock on such Series A Cumulative Convertible
Preferred Stock by the method and at the address specified for such purpose below such Purchaser’s
name in Schedule A, or by such other method or at such other address as such Purchaser shall have
from time to time specified to the Company in writing for such purpose. The Company will afford
the benefits of this Section 8.2 to any Qualified Institutional Buyer that is the direct or
indirect permitted transferee of any Series A Cumulative Convertible Preferred Stock purchased by a
Purchaser under this Agreement and that has made the same agreement relating to such Series A
Cumulative Convertible Preferred Stock as the Purchasers have made in this Section 8.2.

			
	     SECTION 9.	 	AMENDMENT AND WAIVER.

     Section 9.1 Requirements. This Agreement and the terms of the Series A Cumulative Convertible
Preferred Stock may be amended, and the observance of any term hereof or of the Series A Cumulative
Convertible Preferred Stock may be waived (either retroactively or prospectively), with (and only
with) the written consent of the Company and the Required Holders, except that (a) no amendment or
waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 13 hereof, or any defined term (as
it is used therein), will be effective as to any Purchaser unless consented to by such Purchaser in
writing, and (b) no such amendment or waiver may be effected, without the written consent of each
holder of Series A Cumulative Convertible Preferred Stock at the time outstanding affected thereby.

     Section 9.2 Solicitation of Holders of Series A Cumulative Convertible Preferred Stock. The
Company will provide each holder of Series A Cumulative Convertible Preferred Stock (irrespective
of the amount of Series A Cumulative Convertible Preferred Stock then owned by it) with sufficient
information, sufficiently far in advance of the date a decision is required, to enable such holder
to make an informed and considered decision with respect to any proposed amendment, waiver or
consent in respect of any of the provisions hereof or of the terms of the Series A Cumulative
Convertible Preferred Stock.

     Section 9.3 Binding Effect, Etc. Any amendment or waiver consented to as provided in this
Section 9 applies equally to all holders of Series A Cumulative Convertible Preferred Stock and is
binding upon them and upon each future holder of any Series A Cumulative Convertible Preferred
Stock and upon the Company without regard to whether such Series A

11

 

Cumulative Convertible Preferred Stock has been marked to indicate such amendment or waiver.
No such amendment or waiver will extend to or affect any obligation or agreement not expressly
amended or waived or impair any right consequent thereon. No course of dealing between the Company
and the holder of any Series A Cumulative Convertible Preferred Stock nor any delay in exercising
any rights hereunder or under any Series A Cumulative Convertible Preferred Stock shall operate as
a waiver of any rights of any holder of such Series A Cumulative Convertible Preferred Stock. As
used herein, the term “this Agreement” and references thereto shall mean this Agreement as it may
from time to time be amended or supplemented.

			
	     SECTION 10.	 	NOTICES.

     All notices and communications provided for hereunder shall be in writing and sent (a) by
telecopy if the sender on the same day sends a confirming copy of such notice by a recognized
overnight delivery service (charges prepaid), or (b) by registered or certified mail with return
receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with
charges prepaid). Any such notice must be sent:

     (i) if to any Purchaser or its nominee, to such Purchaser or nominee at the address
specified for such communications in Schedule A, or at such other address as such Purchaser
or nominee shall have specified to the Company in writing,

     (ii) if to any other holder of any shares of the Series A Cumulative Convertible
Preferred Stock, to such holder at such address as such other holder shall have specified to
the Company in writing, or

     (iii) if to the Company, to the Company at its address set forth on the first page
hereof to the attention of General Counsel, or at such other address as the Company shall
have specified to the holder of Series A Cumulative Convertible Preferred Stock in writing.

Notices under this Section 10 will be deemed given only when actually received.

			
	     SECTION 11.	 	REPRODUCTION OF DOCUMENTS.

     This Agreement and all documents relating thereto, including, without limitation, (a)
consents, waivers and modifications that may hereafter be executed, (b) documents received by any
Purchaser at the Closing (except the Series A Cumulative Convertible Preferred Stock itself), and
(c) financial statements, certificates and other information previously or hereafter furnished to
any Purchaser, may be reproduced by such Purchaser by any photographic, photostatic, electronic,
digital or other similar process and such Purchaser may destroy any original document so
reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any
such reproduction shall be admissible in evidence as the original itself in any judicial or
administrative proceeding (whether or not the original is in existence and whether or not such
reproduction was made by such Purchaser in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction shall likewise be admissible in evidence.
This Section 11 shall not prohibit the Company or any holder of Series A Cumulative Convertible
Preferred Stock from contesting any such reproduction to the same extent that it could contest the
original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction.

12

 

			
	     SECTION 12.	 	CONFIDENTIAL INFORMATION.

     For the purposes of this Section 12, “Confidential Information” means information delivered to
any Purchaser by or on behalf of the Company or any Subsidiary in connection with the transactions
contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was
clearly marked or labeled or otherwise adequately identified when received by such Purchaser as
being confidential information of the Company or such Subsidiary, provided that such term does not
include information that (a) was publicly known or otherwise known to such Purchaser prior to the
time of such disclosure, (b) subsequently becomes publicly known through no act or omission by such
Purchaser or any person acting on such Purchaser’s behalf or (c) otherwise becomes known to such
Purchaser other than through disclosure by the Company or any Subsidiary. Each Purchaser will
maintain the confidentiality of such Confidential Information in accordance with procedures adopted
by such Purchaser in good faith to protect confidential information of third parties delivered to
such Purchaser, provided that such Purchaser may deliver or disclose Confidential Information to
(i) its directors, officers, employees, agents, attorneys and affiliates (to the extent such
disclosure reasonably relates to the administration of the investment represented by its Series A
Cumulative Convertible Preferred Stock), (ii) its financial advisors and other professional
advisors who agree to hold confidential the Confidential Information substantially in accordance
with the terms of this Section 12, (iii) any other holder of any Series A Cumulative Convertible
Preferred Stock, (iv) any federal or state regulatory authority having jurisdiction over such
Purchaser, (v) the NAIC or the SVO or, in each case, any similar organization, or any nationally
recognized rating agency that requires access to information about such Purchaser’s investment
portfolio, or (vi) any other Person to which such delivery or disclosure may be necessary or
appropriate (x) to effect compliance with any law, rule, regulation or order applicable to such
Purchaser, (y) in response to any subpoena or other legal process or (z) in connection with any
litigation to which such Purchaser is a party. Each holder of Series A Cumulative Convertible
Preferred Stock, by its acceptance of Series A Cumulative Convertible Preferred Stock, will be
deemed to have agreed to be bound by and to be entitled to the benefits of this Section 12 as
though it were a party to this Agreement. On reasonable request by the Company in connection with
the delivery to any holder of Series A Cumulative Convertible Preferred Stock of information
required to be delivered to such holder under this Agreement or requested by such holder (other
than a holder that is a party to this Agreement or its nominee), such holder will enter into an
agreement with the Company embodying the provisions of this Section 12.

			
	     SECTION 13.	 	SUBSTITUTION OF PURCHASER.

     Each Purchaser shall have the right to substitute any one of its Affiliates as the purchaser
of the Series A Cumulative Convertible Preferred Stock that it has agreed to purchase hereunder, by
written notice to the Company, which notice shall be signed by both such Purchaser and such
Affiliate, shall contain such Affiliate’s agreement to be bound by this Agreement and shall contain
a confirmation by such Affiliate of the accuracy with respect to it of the representations set
forth in Section 6. Upon receipt of such notice, any reference to such Purchaser in this Agreement
(other than in this Section 13), shall be deemed to refer to such Affiliate in lieu of such
original Purchaser. In the event that such Affiliate is so substituted as a Purchaser hereunder
and such Affiliate thereafter transfers to such original Purchaser all of the Series A Cumulative
Convertible Preferred Stock then held by such Affiliate, upon receipt by the

13

 

Company of notice of such transfer, any reference to such Affiliate as a “Purchaser” in this
Agreement (other than in this Section 13), shall no longer be deemed to refer to such Affiliate,
but shall refer to such original Purchaser, and such original Purchaser shall again have all the
rights of an original holder of the Series A Cumulative Convertible Preferred Stock under this
Agreement.

			
	     SECTION 14.	 	FEES AND EXPENSES

     Section 14.1 Transaction Expenses. Whether or not the transactions contemplated hereby are
consummated, the Company will pay all costs and expenses (including reasonable attorneys’ fees of a
special counsel incurred by the Purchasers and each other holder of Series A Cumulative Convertible
Preferred Stock in connection with such transactions and in connection with any amendments, waivers
or consents under or in respect of any of the Financing Documents (whether or not such amendment,
waiver or consent becomes effective), including, without limitation: (a) the costs and expenses
incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights
under any of the Financing Documents or in responding to any subpoena or other legal process or
informal investigative demand issued in connection with any of the Financing Documents, or by
reason of being a holder of any Series A Cumulative Convertible Preferred Stock, (b) the costs and
expenses, including financial advisors’ fees, incurred in connection with the insolvency or
bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of
the transactions contemplated hereby and by the Series A Cumulative Convertible Preferred Stock and
(c) the costs and expenses incurred in connection with the initial filing of this Agreement and all
related documents and financial information with the SVO. The Company will pay, and will save each
Purchaser and each other holder of Series A Cumulative Convertible Preferred Stock harmless from,
all claims in respect of any fees, costs or expenses, if any, of brokers and finders (other than
those, if any, retained by a Purchaser or other holder in connection with its purchase of the
Series A Cumulative Convertible Preferred Stock).

     Section 14.2 Survival. The obligations of the Company under this Section 14 will survive the
payment or transfer of any Series A Cumulative Convertible Preferred Stock, the enforcement,
amendment or waiver of any provision of this Agreement or the Certificate of Designations, and the
termination of this Agreement.

     Section 14.3 Hart-Scott-Rodino Fees and Expenses. If following the announcement of a
transaction or event which would constitute a Voluntary Acquisition Transaction (as defined in the
Certificate of Designations), any of the holders of the Series A Cumulative Convertible Preferred
Stock elects to convert their Series A Cumulative Convertible Preferred Stock, the Company shall
pay all costs and expenses in connection with making an HSR Filing (as defined in the Certificate
of Designations) in connection therewith (including reasonable attorneys’ fees of one special
counsel for all such holders making such filings). Otherwise, such costs and expenses in
connection with such HSR Filings shall be for the account of the holder of the Series A Cumulative
Convertible Preferred Stock making such HSR Filing.

14

 

			
	     SECTION 15.	 	MISCELLANEOUS.

     Section 15.1 Successors and Assigns. All covenants and other agreements contained in this
Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their
respective successors and assigns (including, without limitation, any subsequent holder of Series A
Cumulative Convertible Preferred Stock) whether so expressed or not.

     Section 15.2 Accounting Terms. All accounting terms used herein which are not expressly
defined in this Agreement have the meanings respectively given to them in accordance with GAAP.
Except as otherwise specifically provided herein, (i) all computations made pursuant to this
Agreement shall be made in accordance with GAAP, and (ii) all financial statements shall be
prepared in accordance with GAAP.

     Section 15.3 Severability. Any provision of this Agreement that is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining provisions hereof, and any
such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by
law) not invalidate or render unenforceable such provision in any other jurisdiction.

     Section 15.4 Construction, Etc. Each covenant contained herein shall be construed (absent
express provision to the contrary) as being independent of each other covenant contained herein, so
that compliance with any one covenant shall not (absent such an express contrary provision) be
deemed to excuse compliance with any other covenant. Where any provision herein refers to action
to be taken by any Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person.

     For the avoidance of doubt, the Schedules and the Exhibit attached to this Agreement shall be
deemed to be a part hereof.

     Section 15.5 Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original but all of which together shall constitute one instrument. Each
counterpart may consist of a number of copies hereof, each signed by less than all, but together
signed by all, of the parties hereto. Delivery of an executed counterpart of a signature page to
this Agreement by facsimile or electronic transmission shall be effective as delivery of a manually
executed counterpart of this Agreement.

     Section 15.6 Governing Law. This Agreement shall be construed and enforced in accordance
with, and the rights of the parties shall be governed by, the law of the State of New York
excluding choice of law principles of the law of such State that would permit the application of
the laws of a jurisdiction other than such State.

     Section 15.7 Jurisdiction and Process; Waiver of Jury Trial. (a) The Company irrevocably
submits to the non-exclusive jurisdiction of any New York State or federal court sitting in the
Borough of Manhattan, The City of New York, over any suit, action or proceeding arising out of or
relating to this Agreement or the Series A Cumulative Convertible Preferred Stock. To the fullest
extent permitted by applicable law, the Company irrevocably waives and agrees not to assert, by way
of motion, as a defense or otherwise, any claim that it is not subject

15

 

to the jurisdiction of any such court, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding brought in any such court and any claim
that any such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.

          (b) The Company consents to process being served by or on behalf of any holder of Series A
Cumulative Convertible Preferred Stock in any suit, action or proceeding of the nature referred to
in Section 15.7(a) by mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, return receipt requested, to it at its address specified in
Section 10 or at such other address of which such holder shall then have been notified pursuant to
said Section. The Company agrees that such service upon receipt (i) shall be deemed in every
respect effective service of process upon it in any such suit, action or proceeding and (ii) shall,
to the fullest extent permitted by applicable law, be taken and held to be valid personal service
upon and personal delivery to it. Notices hereunder shall be conclusively presumed received as
evidenced by a delivery receipt furnished by the United States Postal Service or any reputable
commercial delivery service.

          (c) Nothing in this Section 15.7 shall affect the right of any holder of Series A Cumulative
Convertible Preferred Stock to serve process in any manner permitted by law, or limit any right
that the holders of any of the Series A Cumulative Convertible Preferred Stock may have to bring
proceedings against the Company in the courts of any appropriate jurisdiction or to enforce in any
lawful manner a judgment obtained in one jurisdiction in any other jurisdiction.

          (d) THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO
THIS AGREEMENT, THE SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK OR ANY OTHER DOCUMENT EXECUTED
IN CONNECTION HEREWITH OR THEREWITH.

* * * * *

16

 

If you are in agreement with the foregoing, please sign the form of agreement on a counterpart of
this Agreement and return it to the Company, whereupon this Agreement shall become a binding
agreement between you and the Company.

	 	 	 	 	 
	 	Very truly yours,

JEFFERIES GROUP, INC.

 	 
	 	By:  	/s/ Joseph A. Schenk
 	 
	 	Name:  Joseph A. Schenk	 
	 	Title:  Chief Financial Officer	 
	 

This Agreement is hereby accepted and agreed to as of the date hereof:

MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY

By: Babson Capital Management LLC, as Investment Adviser

	 	 	 	 	 
	By:

	 	/s/ Richard E. Spencer, II 

	 	 
	Name:
	 	Richard E. Spencer, II	 	 
	Title:
	 	Managing Director	 	 

C.M. LIFE INSURANCE COMPANY

By: Babson Capital Management LLC, as Investment Sub-Adviser

	 	 	 	 	 
	By:

	 	/s/ Richard E. Spencer, II 

	 	 
	Name:
	 	Richard E. Spencer, II	 	 
	Title:
	 	Managing Director	 	 

17

 

SCHEDULE A

INFORMATION RELATING TO PURCHASERS

	 	 	 	 	 	 	 	 
	Purchaser Name	 	 	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
	 	 	 	 
	Name in Which Share Certificate is Registered	 	 	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
	 	 	 	 
	Share Certificate Number; Number of Shares

	 	 	P 1; 91,000 	 	 	 
	 	 	 	 
	Purchase Price of Shares

	 	 	$ 91,000,000	 	 	 
	 	 	 	 
	Payment on Account of Shares	 	 	 
	 
	 	 	 
	               Method	 	 	Federal Funds Wire Transfer
	 	 	 	 
	               Account Information	 	 	Citibank, N.A.
	 	 	 	New York, NY
	 	 	 	ABA # 021-000-089
	 	 	 	For MassMutual Corporate Investment
	 	 	 	Account # 30510618
	 
	 	 	 	 	 	 	 
	 	 	 	Re:      See “Accompanying information” below
	 	 	 	 
	Accompanying Information	 	 	Name of Company: JEFFERIES GROUP, INC.
	 
	 	 	 	 	 	 	 
	 	 	 	Description of Security:	3.25% Series A Cumulative Convertible Preferred Stock
	 
	 	 	 	 	 	 	 
	 	 	 	PPN: 472319 2# 8
	 
	 	 	 	 	 	 	 
	 	 	 	Due Date and
Application (as among principal, make whole and interest) of the payment being made:
	 	 	 	 
	Address for Notices Related to Payments	 	 	Massachusetts
Mutual Life Insurance Company
c/o Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Securities Custody and Collection Department
	 
	 	 	 	 	 	 	 
	 	 	 	With telephone advice of payment to:
	 
	 	 	 	 	 	 	 
	 	 	 	Babson Capital Management LLC
	 	 	 	Securities Custody and Collection Department
	 
	 	 	 	 	 	 	 
	 	 	 	Phone: 413-226-1889 / 1819
	 	 	 	 
	Address for All Other Notices	 	 	Massachusetts Mutual Life Insurance Company
	 	 	 	c/o Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Securities Investment Division
	 	 	 	 
	Other Instructions	 	 	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
	 	 	 	By:      Babson Capital Management LLC, as Investment Adviser
	 
	 	 	 	 	 	 	 
	 	 	 	By                                                           
	 	 	 	Name:
	 	 	 	Title:
	 	 	 	 
	Instructions for Delivery of Notes	 	 	Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Linda Terry
	 	 	 	 
	Tax Identification Number	 	 	04-1590850

SCHEDULE A

(to Purchase Agreement)

 

 

	 	 	 	 	 	 	 	 
	Purchaser Name	 	 	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
	 	 	 	 
	Name in Which Share Certificate is Registered	 	 	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
	 	 	 	 
	Share Certificate Number; Number of Shares

	 	 	P2; 30,000	 	 	 	 
	 	 	 	 
	Purchase Price of Shares

	 	 	$30,000,000	 	 	 	 
	 	 	 	 
	Payment on Account of Shares	 	 	 
	 
	 	 	 
	               Method	 	 	Federal Funds Wire Transfer
	 	 	 	 
	               Account Information	 	 	Citibank, N.A.
	 	 	 	New York, NY
	 	 	 	ABA # 021-000-089
	 	 	 	For MassMutual Unified Traditional
	 	 	 	Account: MassMutual BA 0033 TRAD Private ELBX
	 	 	 	 	Account # 30566056
	 
	 	 	 	 	 	 	 
	 	 	 	Re:      See “Accompanying information” below
	 	 	 	 
	Accompanying Information	 	 	Name of Company:	JEFFERIES GROUP, INC.
	 
	 	 	 	 	 	 	 
	 	 	 	Description of Security: 	3.25% Series A Cumulative Convertible Preferred Stock
	 
	 	 	 	 	 	 	 
	 	 	 	PPN: 472319 2# 8
	 
	 	 	 	 	 	 	 
	 	 	 	Due Date and Application (as among principal, make whole and
	 	 	 	interest) of the payment being made:
	 	 	 	 
	Address for Notices Related to Payments	 	 	Massachusetts Mutual Life Insurance Company
	 	 	 	c/o Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Securities Custody and Collection Department
	 
	 	 	 	 	 	 	 
	 	 	 	With telephone advice of payment to:
	 
	 	 	 	 	 	 	 
	 	 	 	Babson Capital Management LLC
	 	 	 	Securities Custody and Collection Department
	 
	 	 	 	 	 	 	 
	 	 	 	Phone: 413-226-1889 / 1803
	 	 	 	 
	Address for All Other Notices	 	 	Massachusetts Mutual Life Insurance Company
	 	 	 	c/o Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Securities Investment Division
	 	 	 	 
	Other Instructions	 	 	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
	 	 	 	By:      Babson Capital Management LLC, as Investment Adviser
	 
	 	 	 	 	 	 	 
	 	 	 	By                                         
	 	 	 	Name:
	 	 	 	Title:
	 	 	 	 
	Instructions for Delivery of Notes	 	 	Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Linda Terry
	 	 	 	 
	Tax Identification Number	 	 	04-1590850

2

 

	 	 	 	 	 	 	 	 
	Purchaser Name	 	 	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
	 	 	 	 
	Name in Which Share Certificate is Registered	 	 	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
	 	 	 	 
	Share Certificate Number; Number of Shares

	 	 	P3; 2,000	 	 	 	 
	 	 	 	 
	Purchase Price of Shares

	 	 	$20,000,000	 	 	 
	 	 	 	 
	Payment on Account of Shares	 	 	 
	 
	 	 	 
	               Method	 	 	Federal Funds Wire Transfer
	 	 	 	 
	               Account Information	 	 	Citibank, N.A.
	 	 	 	New York, NY
	 	 	 	ABA # 021-000-089
	 	 	 	For MassMutual DI
	 	 	 	Account: MassMutual BA 0033 TRAD Private ELBX
	 	 	 	                  Account # 30566064
	 
	 	 	 	 	 	 	 
	 	 	 	Re:      See “Accompanying information” below
	 	 	 	 
	Accompanying Information	 	 	Name of Company:	JEFFERIES GROUP, INC.
	 
	 	 	 	 	 	 	 
	 	 	 	Description of Security:	 3.25% Series A Cumulative Convertible Preferred Stock
	 
	 	 	 	 	 	 	 
	 	 	 	PPN: 472319 2# 8
	 
	 	 	 	 	 	 	 
	 	 	 	Due Date and Application (as among principal, make whole and
	 	 	 	interest) of the payment being made:
	 	 	 	 
	Address for Notices Related to Payments	 	 	Massachusetts Mutual Life Insurance Company
	 	 	 	c/o Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Securities Custody and Collection Department
	 
	 	 	 	 	 	 	 
	 	 	 	With telephone advice of payment to:
	 
	 	 	 	 	 	 	 
	 	 	 	Babson Capital Management LLC
	 	 	 	Securities Custody and Collection Department
	 
	 	 	 	 	 	 	 
	 	 	 	Phone: 413-226-1889 / 1803
	 	 	 	 
	Address for All Other Notices	 	 	Massachusetts Mutual Life Insurance Company
	 	 	 	c/o Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Securities Investment Division
	 	 	 	 
	Other Instructions	 	 	MASSACHUSETTS MUTUAL LIFE INSURANCE COMPANY
	 	 	 	By:      Babson Capital Management LLC, as Investment Adviser
	 
	 	 	 	 	 	 	 
	 	 	 	By                                         
	 	 	 	Name:
	 	 	 	Title:
	 	 	 	 
	Instructions for Delivery of Notes	 	 	Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Linda Terry
	 	 	 	 
	Tax Identification Number	 	 	04-1590850

3

 

	 	 	 	 	 	 	 	 
	Purchaser Name	 	 	C.M. LIFE INSURANCE COMPANY
	 	 	 	 
	Name in Which Share Certificate is Registered	 	 	C.M. LIFE INSURANCE COMPANY
	 	 	 	 
	Share Certificate Number; Number of Shares

	 	 	P4; 2,000	 	 	 
	 	 	 	 
	Purchase Price of Shares

	 	 	$20,000,000	 	 	 
	 	 	 	 
	Payment on Account of Shares	 	 	 
	 
	 	 	 	 	 	 	 
	               Method	 	 	Federal Funds Wire Transfer
	 
	 	 	 	 	 	 	 
	               Account Information	 	 	Citibank, N.A.
	 	 	 	New York, NY
	 	 	 	ABA # 021-000-089
	 	 	 	For CM Life Segment 43 - Universal Life
	 	 	 	Account # 30510546
	 
	 	 	 	 	 	 	 
	 	 	 	Re:      (See “Accompanying information” below)
	 	 	 	 
	Accompanying Information	 	 	Name of Company:	JEFFERIES GROUP, INC.
	 
	 	 	 	 	 	 	 
	 	 	 	Description of Security:	3.25% Series A Cumulative Convertible Preferred Stock
	 
	 	 	 	 	 	 	 
	 	 	 	PPN:	472319 2# 8
	 
	 	 	 	 	 	 	 
	 	 	 	Due Date and Application (as among principal, make whole and
	 	 	 	interest) of the payment being made:
	 	 	 	 
	Address for Notices Related to Payments	 	 	C.M. LIFE INSURANCE COMPANY
	 	 	 	c/o Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Securities Custody and Collection Department
	 
	 	 	 	 	 	 	 
	 	 	 	With telephone advice of payment to:
	 
	 	 	 	 	 	 	 
	 	 	 	Babson Capital Management LLC
	 	 	 	Securities Custody and Collection Department
	 
	 	 	 	 	 	 	 
	 	 	 	Phone: 413-226-1819 / 1803
	 	 	 	 
	Address for All Other Notices	 	 	C.M. LIFE INSURANCE COMPANY
	 	 	 	c/o Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Securities Investment Division
	 	 	 	 
	Other Instructions	 	 	C.M. LIFE INSURANCE COMPANY
	 	 	 	By:      Babson Capital Management LLC, as Investment Adviser
	 
	 	 	 	 	 	 	 
	 	 	 	By                                         
	 	 	 	Name:
	 	 	 	Title:
	 	 	 	 
	Instructions for Delivery of Notes	 	 	Babson Capital Management LLC
	 	 	 	1500 Main Street
	 	 	 	Springfield, MA 01115
	 	 	 	Attn:      Linda Terry
	 	 	 	 
	Tax Identification Number	 	 	06-1041383

4

 

DEFINED TERMS

     As used herein, the following terms have the respective meanings set forth below or set forth
in the Section hereof following such term:

     “Affiliate” means, at any time, and with respect to any Person, any other Person that at such
time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is
under common Control with, such first Person, and, with respect to the Company, shall include any
Person beneficially owning or holding, directly or indirectly, 10% or more of any class of voting
or equity interests of the Company or any Subsidiary or any corporation of which the Company and
its Subsidiaries beneficially own or hold, in the aggregate, directly or indirectly, 10% or more of
any class of voting or equity interests. As used in this definition, “Control” means the
possession, directly or indirectly, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by contract or
otherwise. Unless the context otherwise clearly requires, any reference to an “Affiliate” is a
reference to an Affiliate of the Company.

     “Anti-Terrorism Order” means Executive Order No. 13,224 of September 24, 2001, Blocking
Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit or Support
Terrorism, 66 U.S. Fed. Reg. 49, 079 (2001), as amended.

     “Business Day” means any day other than a Saturday, a Sunday or a day on which commercial
banks in New York, New York are required or authorized to be closed.

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

     “Capital Stock” means any class of preferred, common or other capital stock, share capital or
similar equity interest of a Person.

     “Certificate of Designations” is defined in Section 1.

     “Charter” means the Certificate of Incorporation, as amended or restated, as filed with the
Secretary of State of the State of Delaware.

     “Closing” is defined in Section 3.

     “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the rules
and regulations promulgated thereunder from time to time.

     “Common Stock” means the common stock, par value $.0001, of Jefferies Group, Inc.

     “Company” means Jefferies Group, Inc., a Delaware corporation or any successor thereto.

     “Confidential Information” is defined in Section 12.

 

 

     “Disclosure Documents” is defined in Section 5.3.

     “Environmental Laws” means any and all federal, state, local, and foreign statutes, laws,
regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or governmental restrictions relating to pollution and the
protection of the environment or the release of any materials into the environment, including but
not limited to those related to Hazardous Materials.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to
time, and the rules and regulations promulgated thereunder from time to time in effect.

     “ERISA Affiliate” means any trade or business (whether or not incorporated) that is treated as
a single employer together with the Company under section 414 of the Code.

     “Financing Documents” means this Agreement, the Certificate of Designations and the
Registration Rights Agreement.

     “GAAP” means generally accepted accounting principles as in effect from time to time in the
United States of America.

“Governmental Authority” means

          (a) the government of

     (i) the United States of America or any State or other political subdivision
thereof, or

     (ii) any other jurisdiction in which the Company or any Subsidiary conducts all
or any part of its business, or which asserts jurisdiction over any properties of
the Company or any Subsidiary, or

          (b) any entity exercising executive, legislative, judicial, regulatory or
administrative functions of, or pertaining to, any such government.

     “Hazardous Material” means any and all pollutants, toxic or hazardous wastes or other
substances that might pose a hazard to health and safety, the removal of which may be required or
the generation, manufacture, refining, production, processing, treatment, storage, handling,
transportation, transfer, use, disposal, release, discharge, spillage, seepage or filtration of
which is or shall be restricted, prohibited or penalized by any applicable law including, but not
limited to, asbestos, urea formaldehyde foam insulation, polychlorinated biphenyls, petroleum,
petroleum products, lead based paint, radon gas or similar restricted, prohibited or penalized
substances.

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

2

 

     “Material” means material in relation to the business, operations, affairs, financial
condition, assets, properties, or prospects of the Company and its Subsidiaries taken as a whole.

     “Material Adverse Effect” means a material adverse effect on (a) the business, operations,
affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a
whole, or (b) the ability of the Company to perform its obligations under any of the Financing
Documents or (c) the validity or enforceability of any of the Financing Documents.

     “NAIC” means the National Association of Insurance Commissioners or any successor thereto.

     “Officer’s Certificate” means a certificate of a Senior Financial Officer or of any other
officer of the Company whose responsibilities extend to the subject matter of such certificate.

     “Person” means an individual, partnership, corporation, limited liability company,
association, trust, unincorporated organization, business entity or Governmental Authority.

     “Plan” means an “employee benefit plan” (as defined in section 3(3) of ERISA) subject to Title
I of ERISA that is or, within the preceding five years, has been established or maintained, or to
which contributions are or, within the preceding five years, have been made or required to be made,
by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate
may have any liability.

     “property” or “properties” means, unless otherwise specifically limited, real or personal
property of any kind, tangible or intangible, choate or inchoate.

     “PTE” means a Prohibited Transaction Exemption issued by the Department of Labor.

     “Purchaser” is defined in the first paragraph of this Agreement.

     “Qualified Institutional Buyer” means any Person who is a “qualified institutional buyer”
within the meaning of such term as set forth in Rule 144A(a)(1) under the Securities Act.

     “Registration Rights Agreement” is defined in Section 4.10.

     “Required Holders” means, at any time, the holders of at least a majority of the shares of the
Series A Cumulative Convertible Preferred Stock at the time outstanding (exclusive of Series A
Cumulative Convertible Preferred Stock then owned by the Company or any of its Affiliates).

     “SEC” shall mean the Securities and Exchange Commission of the United States, or any successor
thereto.

     “securities” or “security” shall have the meaning specified in Section 2(1) of the Securities
Act.

     “Securities Act” means the Securities Act of 1933, as amended from time to time, and the rules
and regulations promulgated thereunder from time to time in effect.

3

 

     “Senior Financial Officer” means the chief financial officer, principal accounting officer,
treasurer or comptroller of the Company.

     “Series A Cumulative Convertible Preferred Stock” is defined in Section 1.

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

     “SVO” means the Securities Valuation Office of the NAIC or any successor to such Office.

     “USA Patriot Act” means United States Public Law 107-56, Uniting and Strengthening America by
Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA PATRIOT ACT) Act of
2001, as amended from time to time, and the rules and regulations promulgated thereunder from time
to time in effect.

4

 

ANNEX 5.15

USE OF PROCEEDS

     The Company will use the net proceeds from the issuance and sale of the Series A Cumulative
Convertible Preferred Stock for general corporate purposes, including specifically, the further
development of its businesses.

 

 

ANNEX 5.16

CAPITALIZATION INFORMATION

     The following table sets forth Jefferies Group, Inc.’s share capitalization (in thousands).

	 	 	 	 	 
	 	 	Authorized	 	Outstanding
	Preferred Stock,

	 	10,000
	 	—
	par value $0.0001 per share
	 	 	 	 
	 
	 	 	 	 
	Common Stock,

	 	500,000
	 	71,809
	par value $0.0001 per share

	 	 	 	(as of February 13, 2006)
	 
	 	 	 	 
	Restricted Shares

	 	—
	 	3,679 restricted shares subject to vesting* (as of December 31, 2005)
	 
	 	 	 	 
	Restricted Stock Units

	 	—
	 	12,331 restricted stock units subject to vesting† (as of December 31, 2005)
	 
	 	 	 	 
	Deferred Shares

	 	—
	 	3,678‡ (as of December 31, 2005)
	 
	 	 	 	 
	Director Deferred Shares

	 	—
	 	42* (as of December 31, 2005)
	 
	 	 	 	 
	Contractual Shares

	 	—
	 	650§ (as of December 31, 2005)

 

			
	*	 	Shares of Common Stock issued or reserved for
issuance under Stock Incentive Plans.
	 
	†	 	Shares of Common Stock issued or reserved for
issuance under Stock Incentive Plans.
	 
	‡	 	Shares of Common Stock issued or reserved for
issuance under the Deferred Compensation Plan which permits executives and
other eligible employees to defer cash compensation for five years, with an
optional deferral of an additional five years. The deferred amounts, at the
employee’s option, are allocated to a cash subamount or a common stock
subamount. Common Stock is allocated to the latter account at a discount of up
to 15% from the volume weighted average market price of the common stock on the
last day of a calendar quarter. The discounted portion is forfeitable until
certain conditions are satisfied. The cash and shares are delivered to the
participating employees following the satisfaction of the conditions and the
expiration of the deferral period.
	 
	§	 	Pursuant to a Purchase Agreement with Brian P. Friedman
and James Luikart.

2

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