(F-7)

KPMG LLP

(416) 228-7000

Yonge Corporate Centre

(416) 228-7123

www.kpmg.ca

North York, ON M2P 2H3

As filed with the Securities and Exchange Commission on March 24, 2015

Registration No. 333-

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM F-7

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

Constellation Software Inc.

(Exact name of Registrant as specified in its charter)

Ontario, Canada

7372

Not Applicable

(Province or other jurisdiction of

incorporation or organization)

(Primary Standard Industrial

Classification Code Number)

(I.R.S. Employer

Identification Number)

20 Adelaide Street East - #1200, Toronto, Ontario, Canada M5C 2T6

(416) 861-2279

(Address and telephone number of Registrant’s principal executive offices)

Trapeze Software Group, Inc.

5265 Rockwell Drive NE

Cedar Rapids, IA 52402

(319) 743-4522

(Name, address and telephone number of agent for service in the United States)

Copies to:

Wendi Locke

McCarthy Tétrault LLP

Suite 5300, TD Bank Tower

Box 48, 66 Wellington Street West

Toronto, Ontario

Canada M5K 1E6

Tel: (416) 362-1812

Christopher J. Cummings

Paul, Weiss, Rifkind,

Wharton & Garrison LLP

Suite 3100, 77 King Street West

Toronto, Ontario

Canada M5K 1J3

Tel: (416) 504-0520

Approximate date of commencement of proposed sale of the securities to the public:

As soon as practicable after the filing of the next amendment to this registration statement.

This registration statement and any amendment thereto shall become effective upon filing with the Commission in accordance with Rule 467(a).

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to the home jurisdiction’s shelf prospectus offering procedures, check the following box: ¨

CALCULATION OF REGISTRATION FEE(1)



Title of Each Class of Securities to be Registered	Amount to be Registered(2)	Proposed Maximum Offering Price per Unit	Proposed Maximum Aggregate Offering Price(2)	Amount of Registration Fee
Unsecured Subordinated Floating Rate Debentures	US$158,800,000	100%	US$158,800,000	US$18,452.56

(1)	Calculation of Registration Fee is in accordance with General Instruction II.F of Form F-7.

(2)	Based on the noon buying rate for Canadian dollars published by the Bank of Canada on March 20, 2015 of Cdn$1.00 = US$0.7940.

If, as a result of stock splits, stock dividends or similar transactions, the number of securities purported to be registered on this registration statement changes, the provisions of Rule 416 shall apply to this registration statement.

PART I

INFORMATION REQUIRED TO BE SENT TO SHAREHOLDERS

A copy of this preliminary short form prospectus has been filed with the securities regulatory authorities in each of the provinces and territories of Canada but has not yet become final for the purpose of the sale of securities. Information contained in this preliminary short form prospectus may not be complete and may have to be amended. The securities may not be sold until a receipt for the short form prospectus is obtained from the securities regulatory authorities.

This short form prospectus constitutes a public offering only in those jurisdictions where they may be lawfully offered for sale and therein only by persons permitted to sell such securities. No securities regulatory authority has expressed an opinion about these securities and it is an offence to claim otherwise. See “Plan of Distribution”.

Information has been incorporated by reference in this prospectus from documents filed with securities commissions or similar authorities in Canada. Copies of the documents incorporated herein by reference may be obtained on request without charge from the Secretary of Constellation Software Inc. at 20 Adelaide Street East, Suite 1200, Toronto, Ontario, M5C 2T6, telephone: (416)-861-1941, and are also available electronically at www.sedar.com.

Preliminary Short Form Prospectus


Rights Offering		March 20, 2015

LOGO

CONSTELLATION SOFTWARE INC.

C$—

Offering of Rights to Subscribe for

Unsecured Subordinated Floating Rate Debentures, Series 1

Due March 31, 2040

Price: C$— per Debenture

This short form prospectus covers the issuance (the “Offering”) by Constellation Software Inc. (the “Company” or “CSI”) to the holders of its outstanding common shares (the “Common Shares”) of record (the “Shareholders”) on —, 2015 (the “Record Date”) of one right (each, a “Right”) for each Common Share held. The Rights will be issued in satisfaction of the dividend (the “Rights Dividend”) declared by the Company on the Common Shares in the amount of one Right per Common Share. For every 10.596 Rights held, a holder of Rights is entitled to subscribe for C$100 principal amount of unsecured subordinated floating rate debentures, Series 1 of the Company (the “Debentures”) prior to 4:30 p.m. (Toronto time) (the “Expiry Time”) on September —, 2015 (the “Expiry Date”) at a price of C$— per C$100 principal amount of Debentures purchased. The Debentures will be issued as an additional tranche of, and will be treated as a single series with, the $68 million principal amount of Debentures issued on October 1, 2014 and the $28 million principal amount of Debentures issued on November 19, 2014. The closing price of the Debentures on the Toronto Stock Exchange (the “TSX”) on March 19, 2015 was C$123.50 per C$100.00 principal amount. From, and including, the initial

date of issue of September 30, 2015 to, but excluding, March 31, 2016, the Debentures will bear interest at a rate of 8.5% per annum. From, and including, March 31, 2016 to, but excluding, the Maturity Date (as defined below), the interest rate applicable to the Debentures will be reset on an annual basis on March 31 of each year, at a rate equal to the Cost of Living Adjustment (as defined below) (which amount may be positive or negative) plus 6.5%. The Rights are fully divisible and fully transferable into and within Canada, and will be represented by rights certificates (the “Rights Certificates”). Rights not exercised prior to the Expiry Time on the Expiry Date will be void and of no further value.


	Subscription Price		Net Proceeds to the Company⁽¹⁾
Per Debenture	C$	—	C$	—
Total Offering⁽²⁾	C$	—	C$	—

⁽¹⁾	Before deducting the expenses of the Offering, which are estimated to be approximately C$— and will be paid by the Company.

⁽²⁾	Assumes the maximum amount of Debentures issued.

Investing in the Debentures involves significant risks. Prospective investors should carefully review the risks outlined in this short form prospectus and in the documents incorporated by reference herein before purchasing the Debentures. See “Risk Factors”.

This prospectus qualifies for distribution under applicable Canadian securities laws the Rights and the Debentures issuable on the exercise of the Rights (collectively, the “Offered Securities”) in each of the provinces and territories of Canada and also covers the offer and sale of the Debentures issuable upon exercise of the Rights within the United States (together with each of the provinces and territories of Canada, the “Eligible Jurisdictions”) under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”). However, notwithstanding registration under the U.S. Securities Act, the securities or blue sky laws of certain states may not permit or may limit the Company’s ability to offer Rights and/or Debentures in such states, or to certain persons in those states. The Company will only offer Rights in states where, and to such persons to whom, it is legally permitted to do so.

None of the Offered Securities have been qualified under the securities laws of any jurisdiction outside the Eligible Jurisdictions (an “Ineligible Jurisdiction”) and, except under the circumstances described herein, the Rights may not be exercised by or on behalf of a holder of Rights resident in an Ineligible Jurisdiction (an “Ineligible Holder”). This prospectus is not, and under no circumstances is to be construed as, an offering of any of the Offered Securities for sale in any Ineligible Jurisdiction or a solicitation therein or thereto of an offer to buy any securities. Rights Certificates will not be sent to any Shareholder with an address of record in an Ineligible Jurisdiction. Instead, the Rights Certificates of such Ineligible Holders will be held by the Subscription Agent, who will hold such Rights as agent for the benefit of all such Ineligible Holders. See “Description of the Rights – Ineligible Holders”.

This offering is made by a Canadian issuer that is permitted, under a multijurisdictional disclosure system adopted by the United States and Canada, to prepare this prospectus in accordance with the disclosure requirements of Canada. Prospective purchasers of securities should be aware that such requirements are different from those of the United States. Financial statements included or incorporated herein have been prepared in accordance with International Financial Reporting Standards, and are subject to Canadian auditing and auditor independence standards, and thus may not be comparable to financial statements of United States companies.

Prospective investors should be aware that the acquisition or disposition of the securities described in this prospectus may have tax consequences in the United States, Canada and the investor’s jurisdiction of residence. Prospective investors should review the sections herein entitled “Certain Canadian Federal Income Tax Considerations” and “Certain United States Federal Income Tax Considerations”, and should consult their own tax advisors.

The enforcement by investors of civil liabilities under United States federal securities laws may be affected adversely by the fact that the Company is incorporated under the laws of Ontario, that some or all of its officers and directors may be residents of a country other than the United States, that some or all of the experts named in the registration statement may be residents of Canada, and that all or a substantial portion of the assets of the Company and said persons may be located outside the United States.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION (THE “SEC”) NOR HAS THE SEC PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENCE.

The Rights may be transferred only in transactions outside of the United States in accordance with Regulation S under the U.S. Securities Act (“Regulation S”).

There is currently no market through which the Rights may be sold. There can be no assurance that an active trading market will develop for the Rights or, if developed, that such a market will be sustained. To the extent that an active trading market for the Rights does not develop, the pricing of the Rights in the secondary market, the transparency and availability of trading prices and the liquidity of the Rights may be adversely affected. See “Risk Factors”.

The currently outstanding Common Shares are listed and posted for trading on the TSX under the symbol “CSU”. The currently outstanding Debentures are listed and posted for trading on the TSX under the symbol “CSU.DB”.

No underwriter has been involved in the preparation of this prospectus or performed any review of the contents of this prospectus.

Computershare Trust Company of Canada (the “Subscription Agent”), at its principal offices in the City of Toronto (the “Subscription Offices”), is the subscription agent for this Offering. See “Description of the Rights – Subscription Agent”.

For Common Shares held in registered form, the Company will mail or cause to be mailed to each Shareholder a Rights Certificate evidencing the number of Rights issued to the holder thereof, together with a copy of this prospectus. In order to exercise the Rights represented by the Rights Certificate, a holder of Rights must complete and deliver Form 1 of the Rights Certificate to the Subscription Agent in the manner and upon the terms set out in this prospectus. See “Description of the Rights of the Offering – Common Shares Held in Registered Form”.

For Common Shares held through a securities broker or dealer, bank or trust company or other participant (a “CDS Participant”) in the book-based system administered by CDS Clearing and Depository Services Inc. (“CDS”), a holder of Rights may exercise the Rights issued in respect of such Common Shares by (a) instructing the CDS Participant holding such Rights to exercise all or a specified number of such Rights and (b) forwarding to such CDS Participant the subscription price for each Debenture that such Shareholder wishes to subscribe for in accordance with the terms of this Offering. Subscriptions for Debentures made through a CDS Participant will be irrevocable and subscribers will be unable to withdraw their subscriptions for Debentures once submitted. See “Description of the Rights – Common Shares Held Through CDS”.

TABLE OF CONTENTS


GENERAL MATTERS			1
ELIGIBILITY FOR INVESTMENT			1
FORWARD-LOOKING STATEMENTS			1
EXCHANGE RATE INFORMATION			2
DOCUMENTS INCORPORATED BY REFERENCE			2
CONSTELLATION SOFTWARE INC.			3
DESCRIPTION OF THE RIGHTS			4
DESCRIPTION OF THE DEBENTURES			9
CONSOLIDATED CAPITALIZATION			15
USE OF PROCEEDS			15
PLAN OF DISTRIBUTION			15
PRIOR SALES			16
TRADING PRICE AND VOLUME OF DEBENTURES			16
CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS			16
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS			20
RISK FACTORS			28
EARNINGS COVERAGE RATIOS			31
LEGAL MATTERS			32
LEGAL PROCEEDINGS			32
AUDITORS, TRANSFER AGENT AND REGISTRAR			32
DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT			32
PURCHASERS’ STATUTORY RIGHTS			33
ADDITIONAL INFORMATION			33
CERTIFICATE OF THE COMPANY			C-1

GENERAL MATTERS

Unless otherwise noted or the context otherwise indicates, all references in this prospectus to “CSI”, the “Company”, “we”, “us”, “our” and “our company” refer to Constellation Software Inc. and its subsidiaries.

The Company prepares its consolidated financial statements in U.S. dollars and in conformity with International Financial Reporting Standards.

All references to US$ are to U.S. dollars and all references to C$ are to Canadian dollars.

ELIGIBILITY FOR INVESTMENT

In the opinion of McCarthy Tétrault LLP, Canadian counsel to the Company, based on the provisions of the Income Tax Act (Canada) (the “Tax Act”) at the date hereof and provided (I) the Rights are listed on a “designated stock exchange” within the meaning of the Tax Act (which currently includes the TSX) and (II) either the Company is a “public corporation” within the meaning of the Tax Act or the Debentures are listed on a “designated stock exchange”, the Rights and Debentures would, if issued on the date hereof, be qualified investments under the Tax Act for a trust governed by a registered retirement savings plan (“RRSP”), a registered retirement income fund (“RRIF”), a deferred profit sharing plan (except, in the case of Debentures, a deferred profit sharing plan to which the Company, or an employer that does not deal at arm’s length with the Company, has made a contribution), a tax free savings account (“TFSA”), a registered disability savings plan and a registered education savings plan, each as defined in the Tax Act.

Notwithstanding the foregoing, if the Rights or Debentures are “prohibited investments” for the purposes of an RRSP, RRIF or TFSA, the holder of the TFSA or the annuitant of the RRSP or RRIF, as the case may be, will be subject to a penalty tax as set out in the Tax Act. Neither the Rights nor the Debentures will be a “prohibited investment” provided the holder of the TFSA or the annuitant of the RRSP or RRIF, as the case may be, deals at arm’s length with the Company for purposes of the Tax Act and does not have a significant interest (within the meaning of the Tax Act) in the Company. Annuitants of an RRSP or RRIF and holders of a TFSA should consult their own tax advisors to ensure the Rights and Debentures will not be a prohibited investment in their particular circumstances.

FORWARD-LOOKING STATEMENTS

Certain statements in this prospectus may contain “forward-looking” statements which involve risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. When used in this prospectus, words such as “may”, “will”, “expect”, “believe”, “plan”, “intend”, “should”, “anticipate” and other similar terminology are intended to identify forward-looking statements. These statements reflect current assumptions and expectations regarding future events and operating performance and speak only as of the date of this prospectus. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under “Risk Factors”. Although the forward-looking statements contained in this prospectus are based upon what management of the Company believes are reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this prospectus, and the Company assumes no obligation to update or revise them to reflect new events or circumstances, except as required by applicable securities laws.

EXCHANGE RATE INFORMATION

The following table sets out (i) the rate of exchange for one U.S. dollar in Canadian dollars in effect at the end of the period indicated, (ii) the high and low rate of exchange during that period and (iii) the average rate of exchange for that period, each based on the noon buying rate of exchange published by the Bank of Canada.


	Year ended December 31
	2014		2013
High		1.1643		1.0697
Low		1.0614		0.9839
End of period		1.1601		1.0636
Average		1.1045		1.0299

On March 19, 2015 the noon buying rate for one U.S. dollar in Canadian dollars published by the Bank of Canada was US$1.00 = C$1.2744.

DOCUMENTS INCORPORATED BY REFERENCE

The following documents have been filed with the securities regulatory authorities in each of the provinces and territories of Canada and are specifically incorporated by reference into, and form an integral part of, this prospectus:

(a)	the Company’s Annual Information Form dated March 28, 2014 (the “AIF”);

(b)	the Company’s Management Information Circulars dated August 30, 2013 and March 27, 2014;

(c)	the Company’s consolidated financial statements for the years ended December 31, 2014 and December 31, 2013, together with the auditor’s report thereon; and

(d)	the Company’s management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2014.

Any documents of the type referred to in the preceding paragraph, or otherwise described in Section 11.1 of Form 44-101F1 – Short Form Prospectus Distributions (excluding confidential material change reports), filed by the Company with any securities regulatory authority in Canada after the date of this prospectus and prior to the completion or withdrawal of this Offering, are deemed to be incorporated by reference in this prospectus.

Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for the purposes of this prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any statement so modified or superseded shall not constitute a part of this prospectus, except as so modified or superseded. The modifying or superseding statement need not state that it has modified or superseded a prior statement or include any other information set forth in the document that it modifies or supersedes. The making of a modifying or superseding statement will not be deemed an admission for any purpose that the modified or superseded statement, when made, constituted a misrepresentation, an untrue statement of a material fact or an omission to state a material fact that is required to be stated or that is necessary to make a statement not misleading in light of the circumstances in which it was made. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.

CONSTELLATION SOFTWARE INC.

We acquire, manage and build vertical market software (“VMS”) businesses. Generally, these businesses provide mission critical software solutions that address the specific needs of our customers in particular vertical markets. Our focus on acquiring businesses with growth potential, managing them well and then building them has allowed us to generate significant cash flow and revenue growth. Using a combination of proprietary software and market expertise, we provide software solutions designed to meet certain mission critical requirements of our customers. We believe that our software solutions enable our customers to boost productivity, operate more cost effectively, increase sales and improve customer service and satisfaction. Our principal strategy is to acquire, manage and build VMS businesses. Most of the VMS businesses that we acquire have the potential to be leaders within their particular markets. We target the VMS sector because of the attractive economics that it provides and our belief that our management teams understand those economics better than many of our competitors.

We are a global provider of enterprise software solutions serving a variety of distinct vertical markets. The Company is organized around two reportable segments: (i) the public sector segment, which primarily includes businesses focused on government and government-related customers, and (ii) the private sector segment, which primarily includes businesses focused on commercial customers. The vertical markets in which we participate in each sector include:

Public Sector


• Public transit operators	• Asset management	• Municipal systems

• Para transit operators	• Fleet and facility management	• School administration

• School transportation	• District attorney	• Public safety

• Non-emergency medical	• Taxi dispatch	• Healthcare

• Ride share	• Benefits administration	• Rental

• Local government	• Insurance	• Electric utilities

• Agri-business	• Collections management	• Court

• Marine asset management	• Water utilities	• School and special library

• Communications	• Credit unions	• Drink distribution

• Higher education

Private Sector


• Private clubs & daily fee golf courses	• Lease management	• Window manufacturers

• Construction	• Winery management	• Cabinet manufacturers

• Food services	• Buy here pay here dealers	• Made-to-order manufacturers

• Health clubs	• RV and marine dealers	• Window and other dealers

• Moving and storage	• Pulp & paper manufacturers	• Multi-carrier shipping

• Metal service centers	• Real estate brokers and agents	• Supply chain optimization


• Attractions	• Outdoor equipment dealers	• Multi-channel distribution

• Leisure centers	• Pharmaceutical and biotech manufacturers	• Wholesale distribution

• Education	• Healthcare electronic medical records	• Third party logistics warehouse management systems

• Radiology & laboratory information systems	• Homebuilders	• Retail management and distribution

• Product licensing	• Event management	• Association management

• Tire distribution	• Salons and spas	• Public housing authorities

• Housing finance agencies	• Municipal treasury & debt systems	• Real estate brokers and agents

• Tour operators	• Auto clubs	• Home and community care

• Long-term care	• Textiles and apparel

Our head and registered office is located at 20 Adelaide Street East, Suite 1200, Toronto, Ontario, M5C 2T6. We have more than 200 other offices worldwide including in the United States, Denmark, Italy, Germany, Switzerland, the United Kingdom, the Netherlands and Romania.

DESCRIPTION OF THE RIGHTS

Rights and Rights Certificates

The Company is issuing to each Shareholder of record at the close of business (Toronto time) on the Record Date one Right for each Common Share held by such Shareholder. The Rights will be issued in satisfaction of the dividend (the “Rights Dividend”) declared by the Company on the Common Shares in the amount of one Right per Common Share. Every 10.596 Rights entitle the holder thereof to subscribe for C$100 principal amount of Debentures at a price of C$• per C$100 principal amount of Debentures purchased. The Rights are fully divisible and fully transferable into and within Canada by the holders thereof. The Rights may not be transferred to any person within the United States. Shareholders in the United States who receive Rights may resell them only outside the United States in accordance with Regulation S under the U.S. Securities Act. See “– Sale or Transfer of Rights”.

The Rights are evidenced by Rights Certificates registered in the name of the Shareholder entitled thereto. Each Shareholder, other than an Ineligible Holder, will receive a Rights Certificate evidencing the total number of Rights to which such Shareholder is entitled. Subject to certain exceptions, Rights Certificates may not be held directly by, and subscriptions for Debentures will not be accepted from, Ineligible Holders. See “– Ineligible Holders”.

Shareholders that hold their Common Shares through a CDS Participant will not receive physical certificates evidencing their ownership of Rights. On the Record Date, a global certificate representing Rights held through CDS Participants will be issued in registered form to, and in the name of, CDS or its nominee. See “– Common Shares Held Through CDS”.

Subscription Privilege

Every 10.596 Rights entitle the holder thereof to subscribe for C$100 principal amount of Debentures prior to the Expiry Time on the Expiry Date at a price of C$— per C$100 principal amount of Debentures purchased. The Debentures will be issued on or about September 30, 2015 (the “Issue Date”).

Rights not exercised by the Expiry Time on the Expiry Date will be void and of no further value. A holder of Rights that subscribes for some, but not all, of the Debentures which such holder is entitled to subscribe for will be deemed to have elected to waive the unexercised balance of such Rights. For information on how to exercise the Subscription Privilege, see “– Common Shares Held in Registered Form – How to Complete the Rights Certificate”.

Fractional Debentures will not be issued upon the exercise of Rights. Each holder of a Rights Certificate which evidences a number of Rights not evenly divisible by 10.596 will have the principal amount of Debentures it is entitled to subscribe for rounded down to the next nearest multiple of C$100.

Subscription Agent

Computershare Trust Company of Canada (the “Subscription Agent”) has been appointed the agent of the Company to receive subscriptions and payments from holders of Rights and to perform certain services relating to the exercise and transfer of Rights. Subscriptions and payments under the Offering should be sent to the Subscription Agent at:

Computershare Investor Services Inc.

PO Box 7021

31 Adelaide St E

Toronto ON M5C 3H2

Attn: Corporate Actions

The Subscription Agent can be reached by telephone at 1-800-564-6253 or 1-514-982-7555 or by e-mail at corporateactions@computershare.com.

Common Shares Held Through CDS

For Common Shares held through a CDS Participant in the book-based system administered by CDS, a global certificate representing the aggregate number of Rights held through CDS Participants will be issued in registered form to CDS and will be deposited with CDS. Each Shareholder who holds Common Shares through a CDS Participant (a “Beneficial Shareholder”) will receive a confirmation of the number of Rights issued to such holder from its CDS Participant in accordance with the practices and procedures of that CDS Participant. CDS will be responsible for establishing and maintaining book-entry accounts for CDS Participants holding Rights.

In order to exercise Rights held through a CDS Participant, a Beneficial Shareholder must (a) instruct the CDS Participant holding such Rights to exercise all or a specified number of such Rights and (b) forward to such CDS Participant the Subscription Price for each Debenture that such Beneficial Shareholder wishes to subscribe for. Subscriptions for Debentures made through a CDS Participant will be irrevocable and subscribers will be unable to withdraw their subscriptions for Debentures once submitted.

The Subscription Price for Rights held through a CDS Participant is payable in Canadian dollars by certified cheque, bank draft or money order payable to the CDS Participant by direct debit from the subscriber’s brokerage account or by electronic funds transfer or other similar payment mechanism. The entire Subscription Price for any Rights exercised must be paid at the time of subscription and must be received by the Subscription Agent at one of the Subscription Offices prior to 4:30 p.m. (Toronto time) on the Expiry Date. Accordingly, a holder of Rights held through a CDS Participant must deliver its payment and subscriptions sufficiently in advance of the Expiry Date to allow the CDS Participant through which such Rights are held to properly exercise such Rights.

Neither the Company nor the Subscription Agent will have any liability for: (a) the records maintained by CDS or CDS Participants relating to the Rights or the book-entry accounts maintained by them; (b) maintaining, supervising or reviewing any records relating to such Rights; or (c) any advice or representations made or given by CDS or CDS Participants with respect to the rules and regulations of CDS or any action to be taken by CDS or CDS Participants.

The ability of a person having an interest in Rights held through a CDS Participant to pledge such interest or otherwise take action with respect to such interest (other than through a CDS Participant) may be limited due to the lack of a physical certificate. Beneficial Shareholders must arrange purchases or transfers of Rights through their CDS Participant.

Common Shares Held in Registered Form

Shareholders who hold Common Shares in registered form (“Registered Shareholders”) will be mailed a copy of this prospectus and a Rights Certificate representing the total number of Rights to which each such Shareholder is entitled to receive. In order to exercise Rights represented by the Rights Certificate, Registered Shareholders must complete and deliver the Rights Certificate in accordance with the instructions set out under “– Common Shares Held in Registered Form – How to Complete the Rights Certificate”.

Rights not exercised by 4:30 p.m. (Toronto time) on the Expiry Date will be void and of no value. The Subscription Price for Rights exercised by Registered Shareholders is payable in Canadian dollars by certified cheque, bank draft or money order payable to the Subscription Agent or by electronic funds transfer or other similar payment mechanism acceptable to the Subscription Agent.

How to Complete the Rights Certificate

Form 1 – Subscription Privilege. Every 10.596 Rights entitle the holder thereof to subscribe for C$100 principal amount of Debentures at a price of C$— per C$100 principal amount of Debentures purchased. The maximum number of Rights that may be exercised pursuant to the Subscription Privilege is shown in the box on the upper right hand corner of the face of the Rights Certificate. If Form 1 on the Rights Certificate is completed so as to exercise some but not all of the Rights represented by a Rights Certificate, the holder of such Rights Certificate will be deemed to have waived the unexercised balance of such Rights, unless the Subscription Agent is otherwise specifically advised by such holder at the time the Rights Certificate is surrendered that the Rights are to be transferred to a third party or are to be retained by the holder.

Only subscriptions for whole Debentures will be accepted. Each holder of a Rights Certificate which evidences a number of Rights not evenly divisible by 10.596 will have the principal amount of Debentures it is entitled to subscribe for rounded down to the next nearest multiple of C$100.

Completion of Form 1 on the Rights Certificate constitutes a representation by the holder thereof that the holder is not a resident or national of an Ineligible Jurisdiction and is not an Ineligible Holder or an agent of a person who is a national or resident of an Ineligible Jurisdiction or an Ineligible Holder.

Form 2 – Transfer of Rights. Only a holder of Rights who wishes to transfer the Rights represented by a Rights Certificate should complete and sign Form 2 on the Rights Certificate. To complete a transfer, a holder of Rights must complete Form 2 on the Rights Certificate and have its signature guaranteed by a Schedule I bank, a major trust company in Canada, or a member of an acceptable Medallion Signature Guarantee Program (including STAMP, SEMP, and MSP). Members of STAMP are usually members of a recognized stock exchange in Canada or members of the Investment Industry Regulatory Organization of Canada. The guarantor must affix a stamp bearing the actual words “Signature Guaranteed”. It is not necessary for a transferee to obtain a new Rights Certificate to exercise the Rights, but the signature of the transferee on Form 1 must correspond in every particular with the name

of the transferee (or the bearer if no transferee is specified) as the absolute owner of the Rights Certificate for all purposes. If Form 2 is completed, the Company and the Subscription Agent will treat the transferee as the absolute owner of the Rights Certificate for all purposes and will not be affected by notice to the contrary.

The Rights may be transferred only in transactions outside of the United States in accordance with Regulation S under the U.S. Securities Act, which will permit the resale of the Rights to a person outside the United States where neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States, and no “directed selling efforts”, as that term is defined in Regulation S, are conducted in the United States in connection with the resale. Certain additional conditions are applicable to the Company’s “affiliates”, as that term is defined under the U.S. Securities Act.

Form 3 – Dividing or Combining. Only a holder of Rights who wishes to divide or combine the Rights represented by a Rights Certificate should complete and sign Form 3 on the Rights Certificate. Rights Certificates need not be endorsed if the new Rights Certificate(s) will be issued in the same name. The Subscription Agent will then issue a new Rights Certificate in such denominations (totalling the same number of Rights as represented by the Rights Certificate(s) being divided or combined) as are required by the Rights Certificate holder. Rights Certificates must be surrendered for division or combination in sufficient time prior to the Expiry Time to permit the new Rights Certificates to be issued to and used by the Rights Certificate holder.

Payment. The Subscription Price of C$— per Debenture, is payable in Canadian funds by certified cheque, bank draft or money order payable to the order of “Computershare Trust Company of Canada” or by electronic funds transfer or other similar payment mechanism acceptable to the Subscription Agent.

Delivery. Holders of Rights who exercise their right to subscribe for Debentures must complete and mail the enclosed Rights Certificate to the Subscription Agent, together with payment of the Subscription Price (plus any accrued interest on the Debentures), in the enclosed return envelope. The completed Rights Certificate and payment of the Subscription Price must be received by the Subscription Agent by no later than 4:30 p.m. (Toronto time) on the Expiry Date. If mailing, registered mail is recommended. Please allow sufficient time to avoid late delivery.

The signature of the holder of a Rights Certificate must correspond in every particular with the name that appears on the face of the Rights Certificate. Signatures by a trustee, executor, administrator, guardian, attorney, officer of a company or any person acting in a fiduciary or representative capacity should be accompanied by evidence of authority satisfactory to the Subscription Agent. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of any subscription will be determined by the Company in its sole discretion, and any determination by the Company will be final and binding on the Company and its securityholders. Upon delivery or mailing of the completed Rights Certificate to the Subscription Agent, the exercise of the Rights and the subscription for Debentures is irrevocable. The Company reserves the right to reject any subscription if it is not in proper form or if the acceptance thereof or the issuance of Debentures pursuant thereto could be unlawful. The Company also reserves the right to waive any defect in respect of any particular subscription. Neither the Company nor the Subscription Agent is under any duty to give any notice of any defect or irregularity in any subscription, nor will they be liable for the failure to give any such notice.

If a holder of a Right has any questions with respect to the proper exercise of Rights, such holder should contact the Subscription Agent at 1-800-564-6253 or 1-514-982-7555 or by e-mail at corporateactions@computershare.com.

Undeliverable Rights

Rights Certificates returned to the Subscription Agent as undeliverable will not be sold by the Subscription Agent and no proceeds of sale will be credited to such holders.

Sale or Transfer of Rights

A holder of Rights in registered form may sell or transfer some or all of such Rights to any person who is not an Ineligible Holder. A holder who wishes to transfer some or all of its Rights must complete Form 2 on the Rights Certificate and have its signature guaranteed by a Schedule I bank, a major trust company in Canada, or a member of an acceptable Medallion Signature Guarantee Program (including STAMP, SEMP, and MSP). See “– Common Shares Held in Registered Form – How to Complete the Rights Certificate”. Holders who hold their Rights through a CDS Participant must arrange purchases or transfers of Rights through their CDS Participant.

Dividing or Combining Rights Certificates

Rights Certificates may be divided or combined by completing Form 2 on the Rights Certificate and delivering the Rights Certificate to the Subscription Agent in sufficient time prior to the Expiry Time to permit the new Rights Certificates to be issued to and used by the Rights Certificate holder. See “– Common Shares Held in Registered Form – How to Complete the Rights Certificate”.

Ineligible Holders

This prospectus covers the distribution of the Offered Securities in the Eligible Jurisdictions only. However, notwithstanding registration under the U.S. Securities Act, the securities or blue sky laws of certain states may not permit or may limit the Company’s ability to offer Rights and/or Debentures in such states, or to certain persons in those states. The Company will only offer Rights in states where, and to such persons to whom, it is legally permitted to do so. Rights Certificates will not be sent to any Shareholders with addresses of record in an Ineligible Jurisdiction and, except as described herein, Rights may not be exercised by or on behalf of any Shareholders with addresses of record in an Ineligible Jurisdiction. Instead, Ineligible Holders will be sent a copy of this prospectus together with a letter advising them that their Rights Certificates will be held by the Subscription Agent as agent for the benefit of all such Ineligible Holders. The letter will also set out the conditions required to be met, and procedures that must be followed, in order for Ineligible Holders to participate in the Offering.

Notwithstanding any of the foregoing, the Company may accept subscriptions from Ineligible Holders if the Company determines that the offering to and subscription by such person is lawful and in compliance with all securities and other laws applicable in the Ineligible Jurisdiction where such person is resident (each an “Approved Eligible Holder”). Shareholders who have not received Rights Certificates but are resident in an Eligible Jurisdiction or wish to be recognized as Approved Eligible Holders should contact the Subscription Agent at the earliest possible time. Rights of Shareholders with addresses of record in an Ineligible Jurisdiction will be held by the Subscription Agent until 4:30 p.m. (Toronto time) on —, 2015 in order to provide such holders with the opportunity to satisfy the Company that (i) the holder is resident in an Eligible Jurisdiction or (ii) the exercise of their Rights will not be in violation of securities and other laws applicable in the Ineligible Jurisdiction where such person is resident. After such time, the Subscription Agent will attempt to sell the Rights of such registered Ineligible Holders on the open market on such date or dates and at such price or prices as the Subscription Agent will determine in its sole discretion.

No charge will be made for the sale of Rights on behalf of Ineligible Holders by the Subscription Agent except for a proportionate share of any brokerage commissions incurred by the Subscription Agent and the costs of or incurred by the Subscription Agent in connection with the sale of the Rights. The proceeds from the sale of Rights by the Subscription Agent (net of brokerage fees and selling expenses and, if applicable, costs incurred and Canadian withholding taxes) will be divided on a pro rata basis among registered Ineligible Holders and delivered to such Ineligible Holders as soon as reasonably practicable, provided that amounts of less than C$100 will not be remitted. The Subscription Agent will act in its capacity as agent of the registered Ineligible Holders on a best efforts basis only and the Company and the Subscription Agent do not accept responsibility for the price obtained on the sale of Rights or the inability of the Subscription Agent to sell the Rights. Neither the

Company nor the Subscription Agent will be subject to any liability for or in connection with the sale of, or failure to sell, any Rights on behalf of Ineligible Holders. There is a risk that the proceeds received from the sale of Rights issued in respect of Common Shares held by Ineligible Holders will not exceed the costs of or incurred by the Subscription Agent in connection with the sale of such Rights, in which case no proceeds will be remitted to Ineligible Holders.

Holders of Rights who are not resident in Canada should be aware that the acquisition and disposition of any of the Offered Securities may have tax consequences in Canada and in the jurisdiction in which they reside which are not described in this prospectus. U.S. Holders should refer to the section “Certain United States Federal Income Tax Considerations” and all such holders should consult their own tax advisors about the specific tax consequences of acquiring, holding and disposing of the Offered Securities.

Debenture Certificates

Debentures issued in connection with the Rights Offering will be registered in the name of the person to whom the Rights Certificate was issued or to whom the Rights have been properly and duly transferred. The certificates representing such Debentures will be delivered by mail to the address of the subscriber as it appears on the Rights Certificate, unless otherwise directed, or to the address of the transferee, if any, indicated on the appropriate form on the Rights Certificate as soon as practicable after the Expiry Date. Except as otherwise described under “– Ineligible Holders”, Debentures will not be issued to or on behalf of any holders of Rights with addresses of record in an Ineligible Jurisdiction.

Holders of Rights that hold their Rights through a CDS Participant will not receive physical certificates evidencing their ownership of Debentures issued upon the exercise of Rights. Upon the closing of the Offering, a global certificate representing such Debentures will be issued in registered form to, and in the name of, CDS or its nominee.

DESCRIPTION OF THE DEBENTURES

The following description of the Debentures is a brief summary of their material attributes and characteristics. The following summary uses words and terms which are defined in the trust indenture dated November 19, 2014 between the Company and Computershare Trust Company of Canada (the “Debenture Trustee”) in respect of the Debentures, as amended or supplemented from time to time (the “Indenture”). This summary does not purport to be complete and is subject to, and is qualified in its entirety by, reference to the terms of the Indenture.

The Debentures will be issued as an additional tranche of, and will be treated as a single series with, the $68 million principal amount of Debentures issued on October 1, 2014 and the $28 million principal amount of Debentures issued on November 19, 2014. The Debentures will be issued under and pursuant to the provisions of the Indenture and will have a maturity date of March 31, 2040 (the “Maturity Date”). The Company may, from time to time, without the consent of Debentureholders, issue additional Debentures or other debentures in addition to the Debentures offered hereby.

The Debentures will be issuable only in denominations of C$100 and integral multiples thereof.

The Debentures will be direct obligations of CSI and will not be secured by any mortgage, pledge, hypothec or other charge and will be subordinated to all Senior Indebtedness of the Company as described under “Description of the Debentures – Subordination”. The Indenture does not restrict CSI from incurring additional Senior Indebtedness at any time or from time to time or other indebtedness or otherwise mortgaging, pledging or charging its real or personal property or properties to secure any indebtedness or other financing. The Debentures will rank pari passu with every other series of debentures that have been issued, or may hereafter be issued, under the Indenture including the Debentures.

Interest Rate

From, and including, the Issue Date to, but excluding, March 31, 2016, the Debentures will bear interest at a rate of 8.5% per annum (the “Current Rate”). From, and including, March 31, 2016 to, but excluding, the Maturity Date, the interest rate applicable to the Debentures will be reset on an annual basis on March 31 of each year, at a rate equal to the Cost of Living Adjustment (as defined below) (which amount may be positive or negative) plus 6.5% (“Floating Interest”). Notwithstanding the foregoing, the interest rate applicable to the Debentures will at no time be less than 0%. Interest, if any, will be payable quarterly in arrears in equal instalments on March 31, June 30, September 30 and December 31 in each year, commencing on December 31, 2015. Holders of Debentures at the close of business on the business day prior to an interest payment date will be entitled to receive the interest payment in respect of such quarter. The Current Rate will only apply to the Debentures in respect of the first and second interest payments on December 31, 2015 and March 31, 2016, respectively. Effective March 31, 2016, the interest payable on the Debentures will be based on the applicable Floating Interest rate.

For the purposes hereof:

“Cost of Living Adjustment” means, in any given year, the annual average percentage change in the CPI Index during the 12 month period ending on December 31 in the prior year. For the 12 month period ending on December 31, 2014, the Cost of Living Adjustment was 2.0%.

“CPI Index” means the index called the “All-items Consumer Price Index” published by Statistics Canada in its monthly publication, adjusted for base year 2002 (2002=100) and rebased from time to time, provided that if the Government of Canada determines not to publish such index, then the term “CPI Index” means whatever substitute index is used to determine the Government of Canada’s obligations under its real return bonds if any Government of Canada real return bonds are then outstanding, or if there is no such index or compilation, the term “CPI Index” means a similar measure determined by the Company, acting reasonably.

The principal and interest on the Debentures will be payable in lawful money of Canada as specified in the Indenture.

About the CPI Index

The CPI Index is a measure of the average change in consumer prices over time for a fixed market basket of goods and services, including food, clothing and footwear, shelter, household operations, furnishings and equipment, recreation, education and reading, alcoholic beverages and tobacco products, fuels, transportation, health and personal care, and energy. In calculating the CPI Index, the prices of the various items included in the fixed market basket are averaged together with the weights that represent their importance in the spending of households in Canada. Statistics Canada periodically updates the contents of the market basket of goods and services and the weights assigned to the various items to take into account changes in the consumer expenditure patterns. Since the basket contains commodities of unchanging or equivalent quantity and quality, the index reflects only pure price movements. The CPI Index is expressed in relative terms in relation to a time base reference period for which the level was set to 100.0.

Historical Performance of the CPI Index

The following chart shows the annual percentage changes to the CPI Index over the last 25 years. Historical performance of the CPI Index is not an indication of future performance and the future performance of the CPI Index may differ significantly from historical performance, either positively or negatively.

LOGO

Redemption and Purchase at the Option of the Company

As described below, the Company will, on an annual basis, have a 15 day notice period within which to provide notice to holders of Debentures of its intention to redeem some or all of such Debentures on a date that is five years following the end of such notice period.

During the period beginning on March 16 and ending on March 31 of each year, the Company will have the right, at its option, to give notice to holders of Debentures of its intention to redeem the Debentures, in whole or in part, on March 31 in the year that is five years following the year in which notice is given, at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the date fixed for redemption. For example, if the Company chooses to exercise its right to redeem the Debentures in March 2016, the Company would be required to deliver notice of such redemption to holders of Debentures during the period beginning on March 16, 2016 and ending on March 31, 2016, and the effective date of redemption would be March 31, 2021. Given the foregoing, the first possible redemption date is March 31, 2021.

In the event the Company exercises its right to redeem some or all of the outstanding Debentures in a given year, the Company will send a reminder redemption notice to holders of Debentures not less than 30 nor more than 60 days prior to each applicable redemption date.

The Company’s ability to redeem the Debentures will be subject to compliance with the terms of the Senior Indebtedness at the time of redemption and may be restricted in certain circumstances. See “Description of the Debentures – Subordination” and “Risk Factors – Prior Ranking Indebtedness”.

CSI will have the right to purchase Debentures in the market, by tender or by private contract subject to regulatory requirements; provided, however, that if an Event of Default (as defined below) has occurred and is continuing, the Company will not have the right to purchase the Debentures by private contract.

In the case of redemption of less than all of the Debentures, the Debentures to be redeemed will be selected by the Debenture Trustee on a pro rata basis or in such other manner as the Debenture Trustee deems equitable, subject to the consent of the TSX.

Investor Put Rights

As described below, holders of Debentures will, on an annual basis, have a 15 day notice period within which to provide notice to the Company of their intention to require the Company to repurchase some or all of such Debentures on a date that is approximately five years following the end of such notice period.

During the period beginning on March 1 and ending on March 15 of each year, holders of Debentures will have the right, at their option, to give notice to the Company of their intention to require the Company to repurchase (or to “put”) the Debentures, in whole or in part, on March 31 in the year that is five years following the year in which notice is given, at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the date fixed for repurchase. For example, if a holder of Debentures chooses to exercise its right to have the Company repurchase such holder’s Debentures in March 2016, the holder would be required to deliver notice of such repurchase to the Company during the period beginning on March 1, 2016 and ending on March 15, 2016, and the effective date of repurchase would be March 31, 2021. Given the foregoing, the first

possible repurchase date is March 31, 2021.

The Company’s ability to repurchase the Debentures will be subject to compliance with the terms of the Senior Indebtedness at the time of repurchase and may be restricted in certain circumstances. See “Description of the Debentures – Subordination” and “Risk Factors – Prior Ranking Indebtedness”. In addition, once a holder of Debentures has exercised its put right in respect of some or all of the Debentures held by such holder (the “Puttable Debentures”), the Puttable Debentures will be held in escrow by the Debenture Trustee and will no longer be transferable over the facilities of the TSX or otherwise. See “Risk Factors – Exercise of Put Rights”.

Holders of Debentures who hold their Debentures through a CDS Participant will, prior to exercising their right to have the Company repurchase such holder’s Debentures, be required to withdraw their Debentures from CDS and obtain a certificate for such Debentures in registered form.

Failure to Pay Interest on an Interest Payment Date

Interest May Form Part of Principal Amount Outstanding. The Company may, subject to regulatory approval, applicable law and the terms of the Senior Indebtedness, elect (the “PIK Election”), in lieu of paying interest in cash, to satisfy all or any portion of its obligation to pay interest on the Debentures, as and when the same becomes due (the “Interest Obligation”) by issuing to Debentureholders such principal amount of Debentures (the “PIK Debentures”) equal to the amount of the Interest Obligation to be satisfied by the issuance of PIK Debentures (less any tax required by law to be deducted, if any), which amount will be rounded down to the nearest multiple of C$100. No fractional PIK Debentures shall be delivered to Debentureholders in satisfaction of the Interest Obligation; however holders will receive a cash payment in respect of any fractional interest in PIK Debentures. The Company will make a PIK Election by delivering written notice (the “PIK Election Notice”) to the Debenture Trustee and the TSX at least ten business days prior to the applicable interest payment date. The PIK Election Notice will include the principal amount of PIK Debentures to be issued and delivered to the Debentureholders.

Common Share Dividend and Buyback Stopper. If, on any interest payment date, the Company fails to pay the interest on the Debentures in full in cash, the Company will not (i) declare or pay dividends of any kind on the Common Shares, nor (ii) participate in any share buyback or redemption involving the Common Shares, until the Company first pays such interest (or the unpaid portion thereof) to holders of Debentures; provided however that if the Company has issued PIK Debentures in respect of all or a portion of the amount of interest owing on the Debentures on one or more interest payment dates, the Company may resume declaring and paying dividends of

any kind on the Common Shares and participating in share buybacks or redemptions involving the Common Shares beginning on the earlier of (i) the next interest payment date in respect of which the Company pays the amount of interest owing on the Debentures in full in cash, and (ii) the date on which the Company repays all amounts owing under such PIK Debentures.

Payment upon Redemption or Maturity

On redemption or at the Maturity Date, CSI will repay the indebtedness represented by the Debentures by paying to the Debenture Trustee in lawful money of Canada an amount equal to the principal amount of the outstanding Debentures, together with accrued and unpaid interest thereon.

Cancellation

All Debentures redeemed or purchased as described herein will be cancelled and may not be reissued or resold.

Subordination

The payment of the principal of, and interest on, the Debentures will be subordinated in right of payment, in the circumstances referred to below and also more particularly as set forth in the Indenture, to the prior payment in full of all Senior Indebtedness of the Company. “Senior Indebtedness” of the Company is defined in the Indenture as all indebtedness of the Company (whether outstanding as at the date of the Indenture or thereafter incurred) which, by the terms of the instrument creating or evidencing the indebtedness, is not expressed to be pari passu with, or subordinate in right of payment to, the Debentures, which includes the Company’s existing credit facility with a syndicate of Canadian chartered banks and U.S. banks in the amount of US$300 million (the “Credit Facility”). The Indenture does not limit the ability of the Company to incur additional indebtedness, including additional Senior Indebtedness at any time or from time to time or other indebtedness or otherwise mortgaging, pledging or charging its real or personal property or properties to secure any indebtedness or other financing.

The Indenture provides that in the event of any insolvency or bankruptcy proceedings, or any receivership, liquidation, reorganization or other similar proceedings relative to the Company, or to its property or assets, or in the event of any proceedings for voluntary liquidation, dissolution or other winding up of the Company, whether or not involving insolvency or bankruptcy, or any marshalling of the assets and liabilities of the Company, all creditors under any Senior Indebtedness will receive payment in full before the Debentureholders will be entitled to receive any payment or distribution of any kind or character, including, without limitation, in cash, property or securities, which may be payable or deliverable in any such event in respect of any of the Debentures or any unpaid interest accrued thereon.

The Indenture also provides that, subject to the requirements of the U.S. Trust Indenture Act of 1939, as amended, neither the Debenture Trustee nor the Debentureholders shall be entitled to demand or otherwise attempt to enforce in any manner, institute proceedings for the collection of, or institute any proceedings against the Company including, without limitation, by way of any bankruptcy, insolvency or similar proceedings or any proceeding for the appointment of a receiver, liquidator, trustee or other similar official (it being understood and agreed that the Debenture Trustee and/or the Debentureholders shall be permitted to take any steps necessary to preserve the claims of the Debentureholders in any such proceeding and any steps necessary to prevent the extinguishment or other termination of a claim or potential claim as a result of the expiry of a limitation period provided that any such steps do not interfere with the enforcement by any holder of any Senior Indebtedness of its rights and remedies), or receive any payment or benefit in any manner whatsoever on account of indebtedness represented by the Debentures (the “Senior Indebtedness Postponement Provisions”) without the prior written consent of the lenders under the Senior Indebtedness.

In addition to the foregoing, pursuant to the terms of the Credit Facility, the Company will not be permitted to make any payment of principal or interest in respect of the Debentures unless both before and immediately after each such payment no event of default (as defined under the Credit Facility) has occurred and is continuing, and provided further that the Company may only redeem or purchase Debentures for cancellation if, immediately after such redemption or purchase, the aggregate of the amount that the Company is entitled to borrow under the Credit Facility plus available cash is equal to or greater than US$25,000,000.

Put Right upon a Change of Control

Upon the occurrence of a change of control of the Company involving the acquisition of voting control or direction of more than 50% of the votes represented by the issued and outstanding Common Shares by any person or group of persons acting jointly or in concert (a “Change of Control”), each holder of Debentures may require the Company to purchase, on the date which is 30 days following the giving of notice of the Change of Control as set out below (the “Change of Control Put Date”), the whole or any part of such holder’s Debentures at a price equal to 100% of the principal amount thereof (the “Change of Control Put Price”) plus accrued and unpaid interest up to, but excluding, the Change of Control Put Date.

If 90% or more of the aggregate principal amount of the Debentures outstanding on the date of the giving of notice of the Change of Control have been tendered for purchase on the Change of Control Put Date, the Company will have the right to redeem all the remaining Debentures on such date at the Change of Control Put Price, together with accrued and unpaid interest to such date. Notice of such redemption must be given to the Debenture Trustee prior to the Change of Control Put Date and, as soon as possible thereafter, by the Debenture Trustee to the holders of the Debentures not tendered for purchase.

Reinvestment Plan

Subject to regulatory approval, the Company intends to adopt a reinvestment plan pursuant to which holders of Debentures will be entitled to elect to have interest payable on the Debentures reinvested in additional Debentures, which Debentures will either be issued from treasury or purchased on the open market. Notwithstanding the foregoing, the Company reserves the right to cancel any such plan at any time at its option.

Modification

The rights of the holders of the Debentures as well as any other series of debentures that may be issued under the Indenture may be modified in accordance with the terms of the Indenture. For that purpose, among others, the Indenture contains certain provisions which will make binding on all Debentureholders resolutions passed at meetings of the holders of the debentures issued under the Indenture by votes cast thereat by holders of not less than 66^2/3% of the principal amount of the then outstanding debentures present at the meeting or represented by proxy, or rendered by instruments in writing signed by the holders of not less than 66^2/3% of the principal amount of the then outstanding debentures. In certain cases, the modification will, instead of or in addition to the foregoing, require assent by the holders of the required percentage of debentures of each particularly affected series. Under the Indenture, the Debenture Trustee will have the right to make certain amendments to the Indenture in its discretion, without the consent of the holders of Debentures.

Events of Default

The Indenture provides that an event of default (“Event of Default”) in respect of the Debentures will occur if certain events described in the Indenture occur, including if any one or more of the following described events has occurred and is continuing with respect to the Debentures: (i) failure to pay principal or premium, if any, on the Debentures, whether at the Maturity Date, upon redemption, by acceleration or otherwise; or (ii) certain events of bankruptcy, insolvency or reorganization of the Company under bankruptcy or insolvency laws. Subject to the Senior Indebtedness Postponement Provisions, if an Event of Default has occurred and is

continuing, the Debenture Trustee may, in its discretion, and shall, upon the request of holders of not less than 25% in principal amount of the then outstanding Debentures, declare the principal of (and premium, if any) and accrued interest on all outstanding Debentures to be immediately due and payable.

Governing Law

Each of the Indenture and the Debentures are governed by, and construed in accordance with, the laws of the Province of Ontario applicable to contracts executed and to be performed entirely in such Province.

CONSOLIDATED CAPITALIZATION

There have been no material changes in the Company’s share or loan capital on a consolidated basis since December 31, 2014 to the date of this prospectus. After giving effect to the Offering, a maximum of C$— principal amount of the Debentures will be outstanding. The net proceeds from the Offering are expected to be used by the Company to pay down existing indebtedness under the Credit Facility and for future acquisitions. See “Use of Proceeds”.

USE OF PROCEEDS

The estimated net proceeds to the Company from the Offering, after deducting the expenses of the Offering estimated to be approximately C$—, will be approximately C$—, assuming the maximum amount of Debentures are issued. The net proceeds from the Offering are expected to be used by the Company to pay down existing indebtedness under the Credit Facility and for future acquisitions. The Credit Facility may be used by the Company for general corporate purposes, including acquisitions. For further information regarding the outstanding amounts owing under our Credit Facility, please refer to the management discussion and analysis for the year ended December 31, 2014, which is incorporated by reference in this prospectus.

The Company intends to spend the funds available to the Company as stated in this short form prospectus; however, there may be circumstances where, for sound business reasons, a reallocation of funds may be deemed prudent or necessary.

PLAN OF DISTRIBUTION

Each Shareholder of record on the Record Date will receive one Right for each Common Share held. This prospectus qualifies for distribution under applicable Canadian securities laws the Rights and the Debentures issuable on the exercise of the Rights in each of the provinces and territories of Canada, and also covers the offer and sale of the Debentures issuable upon exercise of the Rights within the United States under the U.S. Securities Act. However, notwithstanding registration under the U.S. Securities Act, the securities or blue sky laws of certain states may not permit or may limit the Company’s ability to offer Rights and/or Debentures in such states, or to certain persons in those states. The Company will only offer Rights in states where, and to such persons to whom, it is legally permitted to do so.

The Offered Securities have not been qualified under the securities laws of any jurisdiction other than the Eligible Jurisdictions. Except as described herein, Rights may not be exercised by or on behalf of an Ineligible Holder. This prospectus is not, and under no circumstances is to be construed as, an offering of any of the Offered Securities for sale in any Ineligible Jurisdiction or to Ineligible Holders or a solicitation therein or thereto of an offer to buy any securities. Rights Certificates will not be sent to any Shareholder with an address of record in an Ineligible Jurisdiction. Instead, such Ineligible Holders will be sent a letter advising them that their Rights Certificates will be held by the Subscription Agent, who will hold such Rights as agent for the benefit of all such Ineligible Holders. See “Details of the Offering – Ineligible Holders”.

PRIOR SALES

On October 1, 2014, CSI issued C$68 million aggregate principal amount of Debentures at a price of C$95 per C$100 principal amount of Debentures.

On November 19, 2014, CSI issued an additional C$28 million aggregate principal amount of Debentures at a price of C$95 per C$100 principal amount of Debentures.

TRADING PRICE AND VOLUME OF DEBENTURES

The outstanding Debentures are listed and posted for trading on the TSX under the trading symbol “CSU.DB”. The following table sets forth, for the period indicated, the monthly high and low trading prices and the trading volumes of the Debentures as reported by the TSX:


Period	High (C$)⁽¹⁾		Low (C$)⁽¹⁾		Volume
2015
March (1 to 19)		124.50		122.02		105,000
February		125.00		120.00		955,700
January		120.00		112.60		2,099,500

2014
December		118.50		113.01		1,490,200
November		119.50		112.00		1,090,000

(1)	Trading prices include accrued interest.

CERTAIN CANADIAN FEDERAL INCOME TAX CONSIDERATIONS

The following is a general summary, as of the date hereof, of the principal Canadian federal income tax considerations applicable to a holder in respect of the receipt, exercise and disposition of Rights under the Offering and of acquiring, holding and disposing of Debentures received upon the exercise of Rights. This summary is only applicable to a holder of Rights who acquires such rights under this Offering and a holder who acquires, as beneficial owner, Debentures pursuant to the exercise of Rights (a “Holder”) and who, for purposes of the Tax Act and at all relevant times, holds the Rights and Debentures as capital property. Generally, the Rights and Debentures will be considered to be capital property to a Holder provided the Holder does not hold the Debentures in the course of carrying on a business of trading or dealing in securities and has not acquired them in one or more transactions considered to be an adventure or concern in the nature of trade.

This summary is not applicable to a Holder: (i) that is a “financial institution”, as defined in the Tax Act for purposes of the mark to market rules; (ii) an interest in which would be a “tax shelter investment”; (iii) that is a “specified financial institution”; (iv) who makes or has made a “functional currency” reporting election; or (v) that enters into a “derivative forward agreement” with respect to the Debentures (each as defined in the Tax Act). Any such Holder should consult its own tax advisor with respect to the income tax consequences associated with Rights and Debentures.

This summary is based upon the provisions of the Tax Act and the regulations promulgated thereunder (the “Regulations”) in force as of the date hereof, all specific proposals to amend the Tax Act and the Regulations that have been publicly and officially announced by or on behalf of the Minister of Finance (Canada) prior to the date hereof (the “Tax Proposals”) and Counsel’s understanding of the current administrative policies and assessing practices of the Canada Revenue Agency (“CRA”) published in writing by it prior to the date hereof. This summary assumes the Tax Proposals will be enacted in the form proposed. However, no assurance can be given that the Tax Proposals will be enacted in their current form, or at all. This summary is not exhaustive of all possible Canadian federal income tax considerations and, except for the Tax Proposals, does not take into account or anticipate any changes in the law or any changes in the CRA’s administrative policies or assessing practices, whether by legislative, governmental or judicial action or decision, nor does it take into account or anticipate any other federal or any provincial, territorial or foreign tax considerations, which may differ significantly from those discussed herein.

This summary is of a general nature only and is not intended to be, nor should it be construed to be, legal or tax advice to any holder of Rights or any prospective purchaser or holder of Debentures, and no representations with respect to the income tax consequences to any prospective purchaser or holder are made. Consequently, prospective purchasers or holders of Rights and Debentures should consult their own tax advisors with respect to their particular circumstances.

Canadian Resident Holders

The following portion of the summary is applicable to a Holder of Rights and Debentures who, at all relevant times, is resident or deemed to be resident in Canada for purposes of the Tax Act and deals at arm’s length with, and is not affiliated with, the Company (a “Resident Holder”). Certain Resident Holders who might not otherwise be considered to hold their Debentures as capital property may, in certain circumstances, be entitled to have their Debentures and all other “Canadian securities” (as defined in the Tax Act) owned by such Resident Holder in the taxation year of the election and in all subsequent taxation years deemed to be capital property by making the irrevocable election permitted by subsection 39(4) of the Tax Act. Such Resident Holders should consult their own tax advisors regarding their particular circumstances.

Rights Dividend and the Receipt of Rights

A Resident Holder that receives the Rights Dividend declared by the Company on its Common Shares will be required to include the amount of the Rights Dividend in computing such Resident Holder’s income. The amount of the Rights Dividend will be equal to the fair market value, at the time of receipt, of the Rights received by the Holder on account of such dividend.

In the case of an individual (other than certain trusts), such Rights Dividend will be subject to the gross-up and dividend tax credit rules normally applicable in respect of “taxable dividends” received from “taxable Canadian corporations” (as defined in the Tax Act). An enhanced dividend tax credit will be available to individuals in respect of “eligible dividends” designated by the Company to the Resident Holder in accordance with the provisions of the Tax Act. The Company intends to designate the Rights Dividend as an “eligible dividend” in accordance with the Tax Act.

The Rights Dividend received by a corporation that is a Resident Holder of Common Shares must be included in computing its income but generally will be deductible in computing its taxable income. A Resident Holder that is a “private corporation” (as defined in the Tax Act) and certain other corporations controlled by or for the benefit of an individual (other than a trust) or related group of individuals (other than trusts) generally will be liable to pay a 33¹⁄₃% refundable tax under Part IV of the Tax Act on dividends received on the Common Shares to the extent such dividends are deductible in computing taxable income. This refundable tax generally will be refunded to a Resident Holder that is a corporation at the rate of $1.00 for each $3.00 of taxable dividends paid while it is a private corporation.

The cost of the Rights received for purposes of the Tax Act will equal the fair market value, at the time of receipt, of such Rights. In determining the adjusted cost base to the Resident Holder of a Right, the cost of each Right held by a Resident Holder will be averaged with the adjusted cost base of each other identical Right (determined in accordance with the Tax Act) held by the Resident Holder for the purposes of determining the adjusted cost base to that Resident Holder of each Right so held.

Exercise of Rights

The exercise of Rights will not constitute a disposition of property for purposes of the Tax Act and, consequently, no gain or loss will be realized by a Resident Holder upon the exercise of Rights. Debentures acquired by a Resident Holder upon the exercise of Rights will have a cost to the Resident Holder equal to the aggregate of the subscription price paid by a Resident Holder plus the adjusted cost base to the Resident Holder of the exercised Rights. In determining the adjusted cost base to the Resident Holder of a Debenture, the cost of each Debenture held by a Resident Holder will be averaged with the adjusted cost base of each other identical Debenture (determined in accordance with the Tax Act) held by the Resident Holder.

Disposition of Rights

A Resident Holder who disposes of or is deemed to dispose of a Right (otherwise than by exercise of the Right) will generally realize a capital gain (or a capital loss) equal to the amount by which the proceeds of disposition, net of any reasonable costs of disposition, exceed (or are less than) the adjusted cost base of the Right to the Resident Holder. Such capital gain (or capital loss) will be subject to the tax treatment described below under “Capital Gains and Capital Losses”.

Expiry of Rights

The expiry of an unexercised Right will result in a capital loss to a Resident Holder equal to the adjusted cost base, if any, of the Right immediately before its expiry. Any such capital loss will be subject to the tax treatment described below under “ Capital Gains and Capital Losses”.

Interest on Debentures

Debentures are indexed debt obligations for purposes of the Tax Act. Accordingly, the normal rules which require certain taxpayers to include interest in income on an accrual basis will not apply. Rather, a Resident Holder of Debentures will be required to include in its income for each taxation year in which the Resident Holder owned a Debenture any Current Rate interest and Floating Interest which has been received or become receivable by the Resident Holder in that taxation year, depending upon the method regularly followed by the Resident Holder in computing income, except to the extent that the Resident Holder included such amounts in income for a preceding year.

The particular rules in the Tax Act relating to indexed debt obligations are complex. Resident Holders are urged to consult their own tax advisors concerning the application of such rules.

Dispositions of Debentures

A disposition or deemed disposition of a Debenture by a Resident Holder, including redemption, or repayment on maturity should generally result in the Resident Holder realizing a capital gain (or capital loss) equal to the amount by which the proceeds of disposition are greater (or less) than the aggregate of the Resident Holder’s adjusted cost base thereof and any reasonable costs of disposition. For this purpose, proceeds of disposition generally will not include amounts required to be included in income as interest. Such capital gain (or capital loss) will be subject to the tax treatment described below under “Capital Gains and Capital Losses”.

Upon a disposition or deemed disposition of a Debenture, interest (including amounts deemed to be interest) accrued thereon to the date of disposition will be included in computing the income of the Resident Holder as described above under “Interest on Debentures”, and will be excluded in computing the Resident Holder’s proceeds of disposition of the Debenture.

A Resident Holder who has over-accrued interest income in respect of a Debenture generally will be entitled to a deduction in computing the Resident Holder’s income for the taxation year in which the Debenture is disposed of in an amount equal to such over accrued income.

Capital Gains and Capital Losses

One-half of any capital gain realized by a Resident Holder will be included in the Resident Holder’s income as a “taxable capital gain” and one-half of any capital loss (an “allowable capital loss”) realized by a Resident Holder may generally be deducted only from taxable capital gains in accordance with the provisions of the Tax Act. Allowable capital losses for a taxation year in excess of taxable capital gains for that year generally may be carried back and deducted in any of the three preceding taxation years or carried forward and deducted in any subsequent taxation year against net taxable capital gains realized in such years, to the extent and under the circumstances described in the Tax Act.

Alternative Minimum Tax

Capital gains realized by a Resident Holder that is an individual or a trust, other than certain specified trusts, may give rise to alternative minimum tax under the Tax Act.

Additional Refundable Tax

A Resident Holder that is throughout the relevant taxation year a “Canadian controlled private corporation” (as defined in the Tax Act) may be liable to pay a refundable tax of 6²⁄₃% on its “aggregate investment income”, which is defined in the Tax Act to include taxable capital gains and interest.

Holders Not Resident in Canada

The following portion of the summary is applicable to a Holder of Rights and Debentures who, at all relevant times: (i) is not and is not deemed to be, a resident of Canada for purposes of the Tax Act; (ii) deals at arm’s length with the Company for purposes of the Tax Act; (iii) does not use or hold and is not deemed to use or hold the Rights or Debentures in the course of carrying on business in Canada; (iv) is not an insurer for purposes of the Tax Act; (v) deals at arm’s length with any person resident (or deemed to be resident) in Canada to whom the Holder disposes of a Debenture; (vi) is entitled to receive all payments made on the Debentures; and (vii) is not a “specified shareholder” (as defined in subsection 18(5) of the Tax Act) of the Company or a person who does not deal at arm’s length with such a specified shareholder (a “Non-Resident Holder”).

Rights Dividend and the Receipt of Rights

A Non-Resident Holder who receives the Rights Dividend declared by the Company on its Common Shares will be subject to Canadian withholding tax on such dividend. The amount of the Rights Dividend will be equal to the fair market value, at the time of receipt, of the Rights received by the Holder on account of such dividend.

Canadian withholding tax at a rate of 25% (subject to reduction under the provisions of any applicable tax treaty or convention) will be payable on such a dividend The rate of withholding tax applicable to dividends paid (or deemed to be paid) on the Common Shares to a resident of the United States who beneficially holds Common Shares and who is entitled to all the benefits of the Canada-U.S. Income Tax Convention generally will be reduced to 15%.

A portion of the Rights otherwise to be delivered to a Non-Resident Holder may be sold by the Company in order to fund the applicable withholding taxes.

Exercise of Rights

The exercise of Rights will not constitute a disposition of property for purposes of the Tax Act and, consequently, no gain or loss will be realized by a Non-Resident Holder upon the exercise of Rights.

Disposition of Rights

A Non-Resident Holder who disposes of or is deemed to dispose of a Right (otherwise than by exercise of the Right) will not be subject to tax under the Tax Act in respect of any capital gain realized on such a disposition, unless the Right constitutes “taxable Canadian property” of the Non-Resident Holder and such holder is not entitled to relief under an applicable tax treaty or convention. The Company believes the Rights will not be “taxable Canadian property”.

Expiry of Rights

The expiry of an unexercised Right will not result in any Canadian federal income tax consequences to a Non-Resident Holder provided the Right does not constitute “taxable Canadian property”.

Interest on Debentures

Amounts paid or credited, or deemed to be paid or credited, as, on account or in lieu of payment of, or in satisfaction of the principal amount of the Debentures or interest on the Debentures by the Company to a Non-Resident Holder will be exempt from Canadian withholding tax.

Dispositions of Debentures

A Non-Resident Holder will not be subject to tax under the Tax Act in respect of any capital gain realized on a disposition of a Debenture provided the Debenture does not constitute “taxable Canadian property” of such holder. No other taxes on income will be payable under the Tax Act by a Non-Resident Holder in respect of the acquisition, ownership or disposition of the Debentures.

CERTAIN UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS

The following is a general summary of certain U.S. federal income tax consequences to U.S. Holders (as defined below) of Common Shares of (i) the receipt, ownership, exercise, expiration and disposition of the Rights issued pursuant to this Offering and (ii) the ownership and disposition of Debentures received upon exercise of such Rights. This discussion is based on existing provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), final and temporary Treasury Regulations promulgated thereunder, administrative pronouncements or practice, judicial decisions, and interpretations of the foregoing, all as of the date hereof. Future legislative, judicial or administrative modifications, revocations or interpretations, which may or may not be retroactive, may result in U.S. federal income tax consequences significantly different from those discussed herein. This discussion is not binding on the U.S. Internal Revenue Service (the “IRS”). No ruling has been or will be sought or obtained from the IRS with respect to any of the U.S. federal income tax consequences discussed herein. There can be no assurance that the IRS will not challenge any of the conclusions described herein or that a U.S. court will not sustain such challenge.

As used herein, a “U.S. Holder” is a beneficial owner of Common Shares, Rights or Debentures that is (i) a citizen or individual resident of the United States as determined for U.S. federal income tax purposes; (ii) a

corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or any of its political subdivisions; (iii) an estate the income of which is subject to U.S. federal income taxation regardless of its source; and (iv) a trust if (a) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (b) the trust has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person. If a pass-through entity, including a partnership or other entity taxable as a partnership for U.S. federal income tax purposes, holds Common Shares, Rights or Debentures, the U.S. federal income tax treatment of an owner or partner generally will depend upon the status of such owner or partner and upon the activities of the pass-through entity. A U.S. person that is an owner or partner of a pass-through entity holding Common Shares, Rights or Debentures is urged to consult its own tax advisor.

This discussion does not address any U.S. federal alternative minimum tax, U.S. federal estate, gift, or other non-income tax; or state, local or non-U.S. tax consequences. In addition, this discussion does not address the U.S. federal income tax consequences to certain categories of U.S. Holders subject to special rules, including, without limitation, U.S. Holders that are (i) banks, financial institutions or insurance companies; (ii) regulated investment companies or real estate investment trusts; (iii) brokers or dealers in securities or currencies or traders in securities that elect to use a mark-to-market method of accounting; (iv) tax-exempt organizations, qualified retirement plans, individual retirement accounts or other tax-deferred accounts; (v) holders that hold a Common Share, Right or Debenture as part of a hedge, straddle, conversion transaction or a synthetic security or other integrated transaction; (vi) holders that have a “functional currency” other than the U.S. dollar; (vii) holders that own directly, indirectly or constructively 10 percent or more of the voting power of the Company; and (viii) U.S. expatriates.

This discussion assumes that the Rights or Debentures are held as capital assets (generally, property held for investment), within the meaning of Section 1221 of the Code, in the hands of a U.S. Holder at all relevant times.

The treatment of the receipt, exercise, expiration and cancellation of the Rights for U.S. federal income tax purposes is not entirely clear. The uncertainty is attributable to a variety of factors, including the limited authorities that address such treatment and the ability of the Company to withdraw or cancel the rights offering if certain conditions are not met. The discussion below assumes that, for U.S. federal income tax purposes, the distribution of the Rights is treated as a distribution of Rights to acquire Debentures occurring on the distribution date and such Rights are property. The discussion below also assumes that the Rights will have a fair market value for U.S. federal income tax purposes on the date of distribution.

A U.S. HOLDER OF COMMON SHARES, RIGHTS OR DEBENTURES IS URGED TO CONSULT ITS OWN TAX ADVISOR REGARDING THE APPLICATION OF U.S. FEDERAL TAX LAWS TO ITS PARTICULAR SITUATION AND ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE, LOCAL, NON-U.S. OR OTHER TAXING JURISDICTION.

Taxation of Rights

Receipt of Rights

A U.S. Holder that receives a Right in respect of a Common Share should generally be treated as receiving a distribution equal to the fair market value of such Right on the date of its distribution from the Company. Such distribution will be treated as a dividend to the extent it is made from the Company’s current or accumulated earnings and profits (as determined under U.S. federal income tax principles). If such fair market value exceeds the Company’s current and accumulated earnings and profits, such excess generally should be treated first as a tax-free return of capital to the extent of the U.S. Holder’s tax basis in such Common Share, and then as capital gain. We anticipate that the Company’s current and accumulated earnings and profits will exceed the aggregate fair market value of the Rights on the date of their distribution.

Subject to applicable exceptions with respect to short-term and hedged positions, certain dividends received by a non-corporate U.S. Holder from a “qualified foreign corporation” may be eligible for reduced rates of taxation. A qualified corporation includes a foreign corporation that is eligible for the benefits of a comprehensive income tax treaty with the United States that the U.S. Treasury Department determines to be satisfactory for these purposes and that includes an exchange of information provision. The U.S. Treasury has determined that the Canada-U.S. Income Tax Convention (1980) meets these requirements, and we believe that the Company is eligible for the benefits of the Canada-U.S. Income Tax Convention. Dividends received by U.S. investors from a foreign corporation that was a passive foreign investment company (a “PFIC”) in either the taxable year of the distribution or the preceding taxable year will not constitute qualified dividends. We believe that the Company was not a PFIC in the preceding taxable year, and we do not expect the Company to become a PFIC in the current taxable year. However, the determination of PFIC status for any year is very fact specific, and there can be no assurance in this regard.

A U.S. Holder will be required to fund any tax required to be paid as a result of the distribution of a Right from other sources.

A U.S. Holder’s adjusted tax basis in a Right should generally equal its fair market value on the date of its distribution. A U.S. Holder’s holding period for a Right should begin on the day that such Right is received by such U.S. Holder.

Exercise of Rights

A U.S. Holder generally should not recognize any gain or loss upon the exercise of a Right and related receipt of Debentures. A U.S. Holder’s initial tax basis in a Debenture received upon the exercise of Rights should be equal to the sum of (a) such U.S. Holder’s adjusted tax basis in such Rights, plus (b) the Subscription Price paid by such U.S. Holder on the exercise of such Rights. A U.S. Holder’s holding period for a Debenture received on the exercise of Rights will begin with and include the day that such Rights are exercised by such U.S. Holder.

Disposition of Rights

A U.S. Holder will recognize gain or loss on the sale or other taxable disposition of a Right in an amount equal to the difference, if any, between (a) the amount of cash plus the fair market value of any property received and (b) such U.S. Holder’s adjusted tax basis in the Right sold or otherwise disposed of. Any such gain or loss generally will be short-term capital gain or loss. The deductibility of capital losses is subject to various limitations.

If the consideration received on the sale of a Right is not in U.S. dollars, the amount realized generally will be the U.S. dollar value of the payment received determined on (1) the date of receipt of payment in the case of a cash basis U.S. Holder and (2) the date of disposition in the case of an accrual basis U.S. Holder. If the Right sold or exchanged is treated as traded on an “established securities market,” a cash basis taxpayer, or, if it elects, an accrual basis taxpayer, will determine the U.S. dollar value of the amount realized by translating the amount received at the spot rate of exchange on the settlement date of the sale. Such an election by an accrual basis U.S. Holder must be applied consistently from year to year and cannot be revoked without the consent of the IRS. It is unclear if this exception will apply to any sale of the Rights, in part because it is uncertain whether an active trading market on an established securities market will develop for the Rights.

Additionally, if a U.S. Holder receives any foreign currency on the sale of a Right, such U.S. Holder may recognize ordinary income or loss as a result of currency fluctuations between the date of the sale of the Right and the date the sale proceeds are converted into U.S. dollars.

Expiration of Rights

If a Right expires without being exercised by a U.S. Holder, the U.S. Holder should generally recognize a short-term capital loss in an amount equal to such U.S. Holder’s adjusted tax basis in such right. Capital losses are generally available to offset only capital gain (except, to the extent of up to $3,000 of capital loss per year, in the case of a non-corporate U.S. Holder) and therefore generally cannot be used to offset any dividend income arising from the receipt of a Right or other income.

Cancellation of the Offering

There is no authority that specifically addresses the tax treatment of a U.S. Holder that receives, sells or exercises a Right if the Company subsequently cancels the Offering. Certain authorities suggest that a U.S. Holder that receives a Right and does not sell or otherwise dispose of such Right may not be taxed on the receipt or cancellation of such right if the receipt and cancellation occur in the same taxable year. However, the scope of those authorities is unclear and the Company and applicable withholding agents are likely to take the position, for information reporting and backup withholding purposes, that the treatment described above under “Receipt of Rights” and below under “Information Reporting and Backup Withholding” continue to apply to such a U.S. Holder.

If a U.S. Holder has dividend income upon the receipt of a Right, even though the Company subsequently cancels the Offering, the U.S. Holder should generally have a short-term capital loss upon the cancellation of the Right in an amount equal to such U.S. Holder’s adjusted tax basis in such Right.

Taxation of Debentures received upon Exercise of Rights

Qualified Reopening

The issuance of additional Debentures pursuant to the exercise of the Rights issued pursuant to this Offering (the “Additional Debentures”) is a reopening of the issuance of the $68 million principal amount of Debentures issued on October 1, 2014 and the $28 million principal amount of Debentures issued on November 19, 2014 (the “Existing Debentures”). Additional debt instruments issued in a “qualified reopening” are treated as part of the same issue as the original debt instruments for U.S. federal income tax purposes. A qualified reopening includes, among other things, a reopening in which the original debt instruments are publicly traded or the additional debt instruments are issued for cash to persons unrelated to the issuer (as determined under section 267(b) or 707(b) of the Code) for an arm’s length price and, on the date on which the price of the additional debt instruments is established, the yield of the original debt instruments is not more than 110% of the yield of the original debt instruments on their issue date. For purposes of the preceding sentence, the yield test will be satisfied if, on the date on which the price of the additional instruments is established, the yield of the additional debt instruments (based on their fair market value or cash purchase price, whichever is applicable) is not more than 100% of the yield of the original debt instruments on their issue date.

As discussed below, the yield of the Existing Debentures and the Additional Debentures is determined under complex rules, the application of which is not free from doubt. Further, there is no authority directly on point regarding the application of these rules to a reopening of a debt instrument that pays a variable interest rate. However, because the Existing Debentures are publicly traded, and because the Company expects the yield of the Existing Debentures or the Additional Debentures on the date on which the price of the Additional Debentures is established to satisfy the yield test described above, the Company intends to treat the issuance of the Additional Debentures as a qualified reopening of the issuance of the Existing Debentures. Accordingly, for U.S. federal income tax purposes, the Company currently intends to treat the Additional Debentures as issued with original issue discount (“OID”) and as having the same adjusted issue price as the Existing Debentures. If the issuance of the Additional Debentures is not treated as a qualified reopening, whether because of changes in the yield of the Debentures between the date of this prospectus and the date on which the price of the Additional Debentures is established, or because the IRS successfully challenges the treatment of the issuance as a qualified reopening, the

Additional Debentures would be treated as a separate issuance from the Existing Debentures. As a result, the Additional Debentures would have a different issue price and a different amount of OID from the Existing Debentures, and would not be fungible with the Existing Debentures. The remainder of this discussion assumes that the Additional Debentures will be issued in a qualified reopening.

Issue Price

As described above, the Company intends to treat the Additional Debentures as having the same adjusted issue price as the Existing Debentures. An Existing Debenture’s “issue price” generally is:

in the case of an Existing Debenture issued for money, the first price at which a substantial amount of Debentures included in the issue of which the Existing Debenture is a part was sold to persons other than bond houses, brokers, or similar persons or organizations acting in the capacity of underwriters, placement agents or wholesalers;

in the case of an Existing Debenture that was not described in (a) and was part of an issue that was traded on an established market, the fair market value of the Existing Debenture on the issue date;

in the case of an Existing Debenture that was not described in (a) or (b) and was issued for property that was traded on an established market, the fair market value of the property on the issue date;

in the case of an Existing Debenture that was not described in (a), (b) or (c), if section 1274 applied, the issue price determined under section 1274; and

in the case of an Existing Debenture that was not described in (a), (b), (c), or (d), the stated redemption price at maturity.

It is not clear whether the Existing Debentures were issued for money, in which case the first rule applied, or for a combination of money and property (that is, the surrender of the Rights), in which case various rules may have applied. Under any of the definitions described above, the Company believes that the issue price of an Existing Debenture equaled at least the original subscription price for an Existing Debenture (being C$95.00 per C$100 principal amount of Existing Debentures), because a U.S. Holder that acquired an Existing Debenture by the exercise of Rights paid the Subscription Price in cash, but no more than the total of the original subscription price for an Existing Debenture plus the fair market value of the Rights on the date of issue of the Existing Debentures.

Variable Rate Debt Instrument

Complex rules apply to debt instruments treated as “contingent payment debt instruments.” However, a debt instrument that is treated as a “variable rate debt instrument” (a “VRDI”) will not be characterized as a contingent payment debt instrument. The definition of a VRDI includes a debt instrument that, among other things, does not provide for any stated interest other than stated interest (compounded or paid at least annually) at a current value of a single objective rate. A current value is the value of the rate on any day that is no earlier than 3 months prior to the first day on which that value is in effect and no later than 1 year following that first day. An objective rate is in general a rate that is determined using a single fixed formula and that is based on objective financial or economic information. If interest on a debt instrument is stated at a fixed rate for an initial period of 1 year or less followed by a variable rate that is an objective rate for a subsequent period, and the value of the variable rate on the issue date is intended to approximate the fixed rate, the fixed rate and the variable rate together constitute a single objective rate. Although the conclusion is not free from doubt, the interest rate on a Debenture should be an objective rate and a Debenture should be treated as a VRDI under the rules described above. If the Debentures were characterized as contingent payment debt instruments, a U.S. Holder might, among other things, be required to accrue interest income at a higher rate than the stated interest rate on the Debentures and to treat any gain recognized on the sale or other disposition of a Debenture as ordinary income rather than as capital gain.

Original Issue Discount

A debenture with a term that exceeds one year will constitute a discount debenture issued with OID if the stated redemption price at maturity of the debenture exceeds its issue price by more than the de minimis amount of ¹⁄₄ of 1 percent of the “stated redemption price at maturity” multiplied by the number of complete years from the issue date of the note to its maturity. The “stated redemption price at maturity” of a Debenture is the total of all payments provided by the Debenture that are not payments of qualified stated interest. Generally, an interest payment on a note is “qualified stated interest” if it is one of a series of stated interest payments on a note that are unconditionally payable at least annually at a single fixed rate, one or more qualified floating rates, or a single objective rate, with certain exceptions for lower rates paid during some periods, applied to the outstanding principal amount of the note. Interest is considered unconditionally payable only if reasonable legal remedies exist to compel timely payment or the note otherwise provides terms and conditions that make the likelihood of late payment (other than a late payment within a reasonable grace period) or non-payment a remote contingency.

Because failure to pay interest is not an Event of Default and the Company may make the PIK Election, stated interest on the Debentures is not considered unconditionally payable for purposes of the definition of qualified stated interest. As a result, the Existing Debentures were issued with OID, and the Additional Debentures will be issued with OID. Because the Debentures have OID, a U.S. Holder will be required to include OID in gross income for U.S. federal income tax purposes as it accrues (regardless of such U.S. Holder’s method of accounting), which may be in advance of receipt of the cash attributable to that income. OID accrues under the constant-yield method, based on a compounded yield to maturity, as described below. The Company will provide certain information to the IRS and/or U.S. Holders that is relevant to determining the amount of OID in each accrual period.

The annual amounts of OID includible in income by a U.S. Holder will equal the sum of the “daily portions” of the OID with respect to a Debenture for each day on which such U.S. Holder owns the Debenture during the taxable year. Generally, a U.S. Holder determines the daily portions of OID by allocating to each day in an “accrual period” a pro rata portion of the OID that is allocable to that accrual period. The term “accrual period” means an interval of time with respect to which the accrual of OID is measured and which may vary in length over the term of a Debenture provided that each accrual period is no longer than one year and each scheduled payment of principal or interest occurs on either the first or last day of an accrual period.

The amount of OID allocable to an accrual period will be the excess of:

the product of the “adjusted issue price” of the Debenture at the beginning of the accrual period and its “yield to maturity” over

the aggregate amount of any qualified stated interest payments allocable to the accrual period.

The adjusted issue price of a Debenture at the beginning of the first accrual period is its issue price, and, on any day thereafter, it is the sum of the issue price and the amount of OID previously included in gross income, reduced by the amount of any payment (other than a payment of qualified stated interest) previously made on the Debenture. If all accrual periods are of equal length except for a shorter initial and/or final accrual period, a U.S. Holder may compute the amount of OID allocable to the initial period using any reasonable method; however, the OID allocable to the final accrual period will always be the difference between the amount payable at maturity (other than a payment of qualified stated interest) and the adjusted issue price at the beginning of the final accrual period.

OID accrued on a Debenture (and any amount withheld in respect of non-U.S. taxes) will be taxable to a U.S. Holder as foreign-source ordinary income.

Treatment of PIK Debentures

If PIK Debentures are issued to satisfy interest on the Debentures, a newly distributed PIK Debenture issued in respect of a Debenture will be aggregated with the Debenture and will be treated as part of the Debenture with respect to which it was issued. Thus, the initial issue price of a newly distributed PIK Debenture issued in respect of a Debenture likely will be determined by allocating the adjusted issue price, at the time of distribution, of the underlying Debenture between the newly distributed PIK Debenture and the underlying Debenture in proportion to their respective principal amounts. A portion of the basis of such Debenture will be allocated to such PIK Debenture and OID on such PIK Debenture will accrue in the same manner as described above in the case of such Debenture. A U.S. Holder’s holding period for any PIK Debenture with respect to an original Debenture will likely be identical to such U.S. Holder’s holding period for the original Debenture. The same rules would apply to a PIK Debenture received in lieu of cash interest on a PIK Debenture.

Foreign Currency

If a U.S. Holder receives foreign currency as payments on a Debenture, such U.S. Holder will accrue OID on the Debenture in the foreign currency and translate the amount accrued into U.S. dollars based on:

the average exchange rate in effect during the interest accrual period or, with respect to an accrual period that spans two taxable years, at the average rate for the partial period within the taxable year; or

at the U.S. Holder’s election, at the spot rate of exchange on (1) the last day of the accrual period (and in the case of a partial accrual period, the spot rate on the last day of the taxable year) or (2) the date of receipt, if such date is within five business days of the last day of the accrual period.

Such election must be applied consistently by a U.S. Holder to all debt instruments from year to year and can be changed only with the consent of the IRS. A U.S. Holder will recognize foreign currency gain or loss with respect to the OID income accrued on a Debenture on the date cash is received in respect of such income (including, on the sale or other disposition of a Debenture, the receipt of proceeds that include amounts attributable to OID previously included in income) if the spot rate of exchange on the date the cash is received differs from the rate applicable to a previous accrual of that income as determined above. For these purposes, all payments on a Debenture will be treated first, as payments of previously accrued OID (to the extent thereof), with payments considered made for the earliest accrual period in which the OID has accrued and to which prior receipts or payments have not been attributable, and second, as the payment of principal. Such foreign currency gain or loss generally will be treated as ordinary income or loss, but generally will not be treated as an adjustment to OID accrued on the Debentures. U.S. Holders should be aware that because cash payments in respect of accrued OID on a Debenture may not be made until maturity or other disposition of the Debenture, a greater possibility exists for the fluctuations in foreign currency exchange rates (and the required recognition of gain or loss) than is the case for foreign currency instruments issued without OID. U.S. Holders are urged to consult with their tax advisors regarding the interplay between the application of the OID and foreign currency exchange gain or loss rules.

Debentures Purchased at a Premium

If a U.S. Holder purchases a Debenture for an amount that is less than or equal to the sum of all amounts payable on the Debenture after the purchase date but is greater than the amount of the Debenture’s adjusted issue price, as determined above under “– Issue Price,” the excess will be acquisition premium. In this case, unless a U.S. Holder elects to compute OID accruals by treating the purchase as a purchase at original issuance and applying the mechanics of the constant-yield method, a U.S. Holder must reduce the daily portions of OID by a fraction equal to:

(a)

the excess of its adjusted basis in the Debenture immediately after the purchase (generally, the cost of the Debenture) over the adjusted issue price of the Debenture, divided by

(b)

the excess of the sum of all amounts payable on the Debenture after the purchase date over the Debenture’s adjusted issue price.

In the case of a debt instrument that is denominated in, or determined by reference to, a foreign currency, acquisition premium will be computed in units of foreign currency, and acquisition premium will reduce interest income in units of the foreign currency. At the time acquisition premium offsets interest income, exchange gain or loss (taxable as U.S. source ordinary income or loss) will be recognized as measured by the difference between exchange rates at that time and at the time of the acquisition of the Debentures.

Purchase, Sale and Retirement of Debentures

A U.S. Holder’s tax basis in a Debenture will generally be its U.S. dollar cost (as defined below), increased by the amount of any OID included in the U.S. Holder’s income with respect to the Debenture, and reduced by (i) the amount of any payments that are not qualified stated interest payments, and (ii) the amount of any amortizable bond premium applied to reduce interest on the Debenture. The U.S. dollar cost of a Debenture purchased with a foreign currency will generally be the U.S. dollar value of the purchase price on the date of purchase or, in the case of Debentures traded on an established securities market, as defined in the applicable U.S. Treasury Regulations, that are purchased by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects), on the settlement date for the purchase.

A U.S. Holder will generally recognize gain or loss on the sale or retirement of a Debenture equal to the difference between the amount realized on the sale or retirement and the holder’s tax basis of the Debenture. The amount realized on a sale or retirement for an amount in foreign currency will be the U.S. dollar value of this amount on the date of sale or retirement or, in the case of Debentures traded on an established securities market, as defined in the applicable Treasury Regulations, sold by a cash basis U.S. Holder (or an accrual basis U.S. Holder that so elects), on the settlement date for the sale. Such an election by an accrual basis U.S. Holder must be applied consistently from year to year and cannot be revoked without the consent of the IRS. Except to the extent attributable to accrued but unpaid interest or changes in exchange rates, gain or loss recognized on the sale or retirement of a Debenture will be capital gain or loss and will be long-term capital gain or loss if the U.S. Holder’s holding period in the Debentures exceeds one year. Long-term capital gains of an individual taxpayer generally are taxed at preferential rates. The deductibility of capital losses is subject to limitations.

Gain or loss recognized by a U.S. Holder on the sale or retirement of a Debenture that is attributable to changes in exchange rates will be treated as ordinary income or loss. However, exchange gain or loss is taken into account only to the extent of total gain or loss realized on the transaction. Gain or loss realized by a U.S. Holder on the sale or retirement of a Debenture generally will be U.S. source.

Additionally, if a U.S. Holder receives any foreign currency on the sale of a Debenture, such U.S. Holder may recognize ordinary income or loss as a result of currency fluctuations between the date of the sale of the Debenture and the date the sale proceeds are converted into U.S. dollars.

Foreign Tax Credit Considerations

For purposes of the U.S. foreign tax credit limitations, interest received by a U.S. Holder with respect to Debentures will be foreign source income and generally will be “passive category income” but could, in the case of certain U.S. Holders, constitute “general category income.” In general, gain or loss realized upon sale or exchange of the Rights or Debentures by a U.S. Holder will be U.S. source income or loss, as the case may be.

Subject to certain limitations, any Canadian tax withheld may be treated as foreign taxes eligible for credit against a U.S. Holder’s U.S. federal income tax liability. Alternatively, a U.S. Holder may, subject to applicable limitations, elect to deduct the otherwise creditable Canadian withholding taxes for U.S. federal income tax purposes. The rules governing the foreign tax credit are complex and their application depends on each taxpayer’s particular circumstances. Accordingly, U.S. Holders are urged to consult their own tax advisors regarding the availability of the foreign tax credit under their particular circumstances.

Additional Tax on Passive Income

U.S. Holders that are individuals, estates or trusts and whose income exceeds certain thresholds generally will be subject to a 3.8% additional tax on unearned income, including, among other things, interest on the Debentures, and capital gains from the sale or other taxable disposition of, the Rights or Debentures, subject to certain limitations and exceptions. U.S. Holders are urged to consult their own tax advisors regarding the possible implications of the additional tax on investment income described above.

Reportable Transactions

A U.S. taxpayer that participates in a “reportable transaction” will be required to disclose its participation to the IRS. The scope and application of these rules is not entirely clear. A U.S. Holder may be required to treat a foreign currency exchange loss from the Debentures as a reportable transaction if the loss exceeds US$50,000 in a single taxable year, if the U.S. Holder is an individual or trust, or higher amounts for non-individual U.S. Holders. In the event the acquisition, holding or disposition of Debentures constitutes participation in a “reportable transaction” for purposes of these rules, a U.S. Holder will be required to disclose its investment by filing Form 8886 with the IRS, and the Issuer and its advisers may also be required to disclose the transaction to the IRS. In addition, the Company and its advisers may be required to maintain a list of U.S. Holders, and to furnish this list and certain other information to the IRS upon written request. U.S. Holders are urged to consult their tax advisers regarding the application of these rules to the acquisition, holding or disposition of Debentures.

U.S. Information Reporting and Backup Withholding

Under U.S. federal income tax law and regulations, certain categories of U.S. Holders must file information returns with respect to their investment in, or involvement in, a foreign corporation. Penalties for failure to file certain of these information returns are substantial. U.S. return disclosure obligations (and related penalties for failure to disclose) have also been imposed on U.S. individuals that hold certain specified foreign financial assets in excess of US$50,000. The definition of specified foreign financial assets includes not only financial accounts maintained in foreign financial institutions, but also may include the Rights and Debentures. U.S. Holders of Rights or Debentures should consult with their own tax advisors regarding the application of the information reporting rules to the Debentures.

Interest on Debentures and proceeds from the sale or other disposition of Rights or Debentures that are paid in the United States or by a U.S.-related financial intermediary will be subject to U.S. information reporting rules, unless a U.S. Holder is a corporation or other exempt recipient. In addition, payments that are subject to information reporting may be subject to backup withholding if a U.S. Holder fails to provide its taxpayer identification number, fails to certify that such number is correct, fails to certify that such U.S. Holder is not subject to backup withholding, or otherwise fails to comply with the applicable requirements of the backup withholding rules.

Backup withholding is not an additional tax. Amounts withheld under the backup withholding rules are available to be credited against a U.S. Holder’s U.S. federal income tax liability and may be refunded to the extent they exceed such liability, provided the required information is provided to the IRS in a timely manner.

RISK FACTORS

Before purchasing the Debentures subscribers should carefully consider the following risk factors as well as those set out in the AIF incorporated by reference into this prospectus in addition to the other information contained in this prospectus and incorporated by reference in this prospectus. See “Documents Incorporated by Reference”. Additional risks and uncertainties not presently known or that the Company currently considers immaterial also may impair the Company’s business and operations and cause the price of the Debentures to

decline. If any of the events contemplated in the risk factors described below or in the documents incorporated by reference actually occur, the Company’s business may be harmed and the financial condition and results of operation may suffer significantly. In that event, the trading price of the Debentures could decline, and purchasers of the Debentures may lose all or part of their investment.

In addition to the other information set forth elsewhere in this prospectus and in the documents incorporated by reference, prospective investors should carefully review the following risk factors:

Market for Securities. There is currently no market through which the Rights may be sold and there is no guarantee that an active trading market will develop. Accordingly, purchasers may not be able to sell the Rights distributed under this prospectus. This may affect the pricing of the Rights in the secondary market, the transparency and the availability of trading prices and the liquidity of the Rights. Although the closing of the Offering will be conditional on the listing of the Rights and Debentures on the TSX, there can be no assurance that an active trading market will develop for the Rights after the Offering, or if developed, that such market will be sustained at or above the Offering Price.

Market Conditions. The market price of the Debentures will be based on a number of factors, including: (i) the prevailing interest rates being paid by companies similar to CSI, (ii) the overall condition of the financial and credit markets, (iii) interest rate volatility, (iv) fluctuations in the CPI Index, (v) the markets for similar securities, (vi) the financial condition, results of operation and prospects of CSI, (vii) changes in the industry in which CSI operates and competition affecting CSI, and (viii) general market and economic conditions. The price at which the Rights or Debentures will trade cannot be accurately predicted.

Additional Indebtedness. The Indenture does not limit the ability of the Company to incur additional debt or liabilities (including Senior Indebtedness). In order to finance acquisitions from time-to-time, the Company expects to draw down additional indebtedness under its Credit Facility. The additional indebtedness will increase the interest payable by the Company from time-to-time until such amounts are repaid, which will represent an increase in the Company’s cost and a potential reduction in the Company’s income. In addition, the Company may need to find additional sources of financing to repay this amount when it becomes due. There can be no guarantee that the Company will be able to obtain financing on terms acceptable to it or at all at such time.

Prior Ranking Indebtedness. The Debentures are unsecured and the payment of principal and interest thereon will be subordinate to all existing and future Senior Indebtedness of the Company. The Indenture does not limit the ability of the Company to incur additional debt or liabilities (including Senior Indebtedness). Principal and interest will be payable on the Debentures only if no event of default exists under the Senior Indebtedness immediately before or after such payment is due and any other terms of the Senior Indebtedness have been complied with. In addition, the Credit Facility currently prohibits the redemption or repurchase of the Debentures unless the aggregate of the amount that the Company is entitled to borrow under the Credit Facility plus available cash is equal to or greater than US$25,000,000. The Credit Facility expires on February 29, 2016, following which time the Company may enter into a new credit facility with one or more lenders. The terms of any new credit facility may contain additional restrictions on the Company’s ability to redeem or repurchase the Debentures, but the nature and extent of such restrictions is not currently known and cannot be predicted. Enforcement of the Debentures, including the issuance of a bankruptcy petition, will require the consent of the lenders under the Senior Indebtedness.

Interest Rate will be Reset. The interest rate in respect of the Debentures will reset on an annual basis beginning on March 31, 2016 and will be based on changes in the CPI Index over the prior calendar year. In each case, the new interest rate is unlikely to be the same as, and may be lower than, the interest rate for the applicable preceding period. As a result, the amount of interest payable on the Debentures may rise or fall from one year to the next and such variations may be material during periods of significant changes in the CPI Index. In circumstances where the change in the Cost of Living Adjustment is negative from one year to another, the interest rate applicable to the Debentures for the following period could be as low at 0%. The Current Rate will

only apply to the Debentures in respect of the first and second interest payments on December 31, 2015 and March 31, 2016, respectively. Effective March 31, 2016, the interest payable on the Debentures will be based on the applicable Floating Interest rate.

Consumer Prices May Change Unpredictably, Affecting the Level of the CPI Index and the Market Value of the Debentures . Market prices of the consumer items underlying the CPI Index may fluctuate based on numerous factors, including: changes in supply and demand relationships; weather; agriculture; trade; fiscal, monetary, and exchange control programs; domestic and foreign political and economic events and policies; disease; technological developments; and changes in interest rates. These factors may affect the level of the CPI Index and the market value of the Debentures in varying ways, and different factors may cause the level of the CPI Index to move in inconsistent directions at inconsistent rates.

Ability to Defer Interest Payments or Issue PIK Debentures. Any failure by the Company to pay the interest on the Debentures in full on any interest payment date will not constitute an event of default under the Trust Indenture and holders of Debentures will have no right to accelerate payment of the principal amount outstanding under such Debentures. In addition, the Company may elect to satisfy all or any portion of the Interest Obligation by issuing PIK Debentures. Although the Company will not be permitted to declare dividends of any kind on the Common Shares and will not be permitted to participate in any share buyback or redemption involving the Common Shares until the Company first pays any outstanding interest (or the unpaid portion thereof) to holders of Debentures or resumes making subsequent interest payments on the Debentures in full in cash, holders of Debentures will not have an immediate right to receive such outstanding interest in cash. Instead, any unpaid interest may form part of the principal amount of such Debentures and may only become due and payable on the occurrence of an event giving rise to the obligation of the Company to pay or cause the payment of the redemption price, as the case may be, as part of such price and not prior thereto. In addition, if the Company issues PIK Debentures in lieu of cash interest on an interest payment date, holders will be required to include in their income the principal amount of such PIK Debentures issued despite not having received any cash payment from the Company in satisfaction of the applicable Interest Obligation.

Redemption of Debentures. The Debentures are redeemable annually, upon no more than five years’ and 15 days’ and no less than five years’ notice, and upon a Change of Control. Redemption could occur when prevailing interest rates are lower than the rate born by the Debentures. If prevailing rates are lower at the time of redemption, a purchaser would not be able to reinvest the redemption proceeds in a comparable security at an effective interest rate as high as the interest rate on the Debentures being redeemed. The Company’s redemption right also may adversely impact a purchaser’s ability to sell Debentures as the optional redemption date or period approaches.

Exercise of Put Rights. A holder of Debentures will have the right to require the Company to repurchase some or all of its Debentures annually. However, in order to excise its put rights, a holder of Debentures must provide the Company with no more than five years’ and 30 days’ and no less than five years’ and 15 days’ notice and must deposit its Puttable Debentures with the Debenture Trustee during this 5 year period. During this time, the Puttable Debentures will no longer be transferable over the facilities of the TSX or otherwise. In addition, holders of Debentures who hold their Debentures through a CDS Participant will, prior to exercising their right to have the Company repurchase such holder’s Debentures, be required to withdraw their Debentures from CDS and obtain a certificate for such Debentures in registered form from the Subscription Agent.

Use of Proceeds of the Offering. As set out under “Use of Proceeds” in this prospectus, the Company intends to use the proceeds of the Offering to pay down existing indebtedness under the Credit Facility and for future acquisitions. There may be circumstances that are not known at this time where a reallocation of the net proceeds of the Offering may be advisable for business reasons that the board of directors and management believe are in the Company’s best interests.

Prevailing Yields on Similar Securities. Prevailing yields on similar securities will affect the market value of the Debentures. Assuming all other factors remain unchanged, the market value of the Debentures will decline as prevailing yields for similar securities rise, and will increase as prevailing yields for similar securities decline.

Debentures are Subject to the Credit Risk of the Company. The obligation to make payments under the Debentures is an obligation of the Company. The likelihood that holders of Debentures will receive payments owing to them under the Debentures will depend on the financial health and creditworthiness of the Company. The Debentures have not been assigned a credit rating.

Senior Indebtedness Refinancing Risk. The Company’s Credit Facility expires on February 29, 2016. Although the Company may enter into a new credit facility with one or more lenders on or prior to the expiry of the Credit Facility, the terms of such credit facility cannot be predicted and may contain terms or conditions that are more onerous or restrictive than the Credit Facility. The Company’s ability to replace the Credit Facility on favourable terms will be dependent on, among other factors, the operating performance of the Company, future debt market conditions, the level of future interest rate spreads, and prospective lenders’ assessment of the Company’s credit risk at such time. If the Company is unable to obtain a new credit facility on favourable terms, the Company’s ability to complete acquisitions may be negatively impacted, which may have an adverse effect on the Company’s financial performance.

There may be Changes in Legislation or Administrative Practices that adversely affect Holders of Debentures. There can be no assurance that income tax, securities and other laws or the administrative practices of any government agency will not be amended or changed in a manner which adversely affects Debentureholders.

Subscription Rights May Not be Revoked. Subject to the Company’s right to terminate the Offering at any time, upon delivery or mailing of the completed Rights Certificate to the Subscription Agent, the exercise of the Rights and the subscription for Debentures is irrevocable.

The Company May Terminate the Offering. The Company may, in its sole discretion, decide not to continue with the Offering or to terminate the Offering at any time. This decision could be based on many factors, including market conditions. The Company currently has no intention to terminate the Offering, but reserves the right to do so. If the Company elects to cancel or terminate the Offering, nether the Company nor the Subscription Agent will have any obligation with respect to the subscription rights except to return, without interest, any subscription payments the Subscription Agent received.

Inability of Company to Purchase Debentures. Upon the occurrence of a Change of Control of the Company, each Debentureholder may require the Company to purchase, on the date which is 30 days following the giving of notice of the Change of Control, the whole or any part of such holder’s Debentures at a price equal to 100% of the principal amount plus accrued and unpaid interest up to, but excluding, the Change of Control Put Date. In addition, the Company may be required to redeem and/or repurchase Debentures from Debentureholders on a date which is approximately five years after the Company has exercised its right to redeem Debentures and/or Debentureholders have exercised their put rights. It is possible that upon a Change of Control, or upon a redemption or repurchase by the Company of some or all of the Debentures, the Company will not have sufficient funds to make the required redemption or repurchase of Debentures or that restrictions contained in other indebtedness will restrict those purchases. See “Description of the Debentures – Put Right upon a Change of Control”.

EARNINGS COVERAGE RATIOS

The following earnings coverage ratios and pro forma earnings coverage ratios are calculated on a consolidated basis for the 12 month period ended December 31, 2014, and are derived from the audited consolidated financial statements of the Company as at and for the year ended December 31, 2014, after adjustment for new financial

liabilities. The pro forma earnings coverage ratios have been prepared to give effect to the issuance of the Debentures as if such issuance had occurred at the beginning of the pro forma calculation period but do not take into account the use of proceeds from such Debentures.

The borrowing costs of the Company, after adjustment for new financial liabilities, for the twelve month period ended December 31, 2014 were approximately US$18.3 million. The borrowing costs of the Company for the twelve month period ended December 31, 2014, after adjustment for new financial liabilities and after giving effect to the issuance of the Debentures, were approximately US$31.8 million. The profit attributable to owners of the Company before borrowing costs and taxes for the twelve month period ended December 31, 2014 was approximately US$166.8 million , after giving effect to the expenses of the Offering. This represents earnings coverage ratios of 9.1 for the twelve month period ended December 31, 2014, on a historical basis (after adjustment for new financial liabilities), and 5.3 for the twelve month period ended December 31, 2014, after giving effect to the issuance of the Debentures.

The earnings coverage ratios noted above include a deduction for amortization of approximately US$173.2 million in the 12 month period ended December 31, 2014. If the earnings coverage ratios were adjusted to add back this non-cash deduction, the historical earnings coverage ratio (after adjustment for new financial liabilities) would be 18.5 for the 12 month period ended December 31, 2014, and the earnings coverage ratio after giving effect to the issuance of the Debentures would be 10.7 for the 12- month period ended December 31, 2014.

LEGAL MATTERS

Certain legal matters relating to the issue and sale of Debentures offered hereby will be passed upon on behalf of the Company by McCarthy Tétrault LLP, as Canadian counsel to the Company, and Paul, Weiss, Rifkind, Wharton & Garrison LLP, as United States counsel to the Company. As of the date of this prospectus, the partners and associates of McCarthy Tétrault LLP collectively own less than one percent of the Company’s issued and outstanding common shares.

LEGAL PROCEEDINGS

We and our subsidiaries are engaged in legal actions from time to time, arising in the ordinary course of business. None of these actions, individually or in the aggregate, are expected to have a material adverse effect on our consolidated financial position or results of operations.

AUDITORS, TRANSFER AGENT AND REGISTRAR

The auditors of the Company are KPMG LLP, Chartered Accountants, 4100 Yonge Street, Suite 200, Yonge Corporate Centre, North York, Ontario M2P 2H3.

The transfer agent and registrar for the Common Shares is Computershare Trust Company of Canada at its principal transfer office in Toronto, Ontario.

DOCUMENTS FILED AS PART OF THE REGISTRATION STATEMENT

The following documents have been or will be filed with the SEC as part of the registration statement of which this prospectus forms a part: (i) the documents incorporated by reference herein; (ii) the consent of KPMG LLP; (iii) the consent of McCarthy Tétrault LLP; (iv) powers of attorney of our directors and officers; and (vi) the Indenture.

PURCHASERS’ STATUTORY RIGHTS

Securities legislation in certain of the provinces and territories of Canada provides purchasers with the right to withdraw from an agreement to purchase securities. This right may be exercised within two business days after receipt or deemed receipt of a prospectus and any amendment. In several of the provinces, the securities legislation further provides a purchaser with remedies for rescission or, in some jurisdictions, damages if the prospectus and any amendment contains a misrepresentation or is not delivered to the purchaser, provided that such remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for the particulars of these rights or consult with a legal advisor.

ADDITIONAL INFORMATION

Additional information relating to our Company may be found on the Internet at the SEDAR website (www.sedar.com).

CERTIFICATE OF THE COMPANY

Dated: March 20, 2015.

This short form prospectus, together with the documents incorporated herein by reference, constitutes full, true and plain disclosure of all material facts relating to the securities offered by this short form prospectus as required by the securities legislation of each of the provinces and territories of Canada.


By: (Signed) MARK LEONARD		By: (Signed) JAMAL BAKSH
President (as Chief Executive Officer)		Chief Financial Officer

On behalf of the Board of Directors


By: (Signed) MARK MILLER		By: (Signed) JEFF BENDER
Director		Director

C-1

PART II

INFORMATION NOT REQUIRED TO BE SENT TO SHAREHOLDERS

EXHIBITS


Exhibit Number		Description

2.1		The Registrant’s annual information form for the year ended December 31, 2013, dated March 28, 2014 (incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form F-7, File No. 333- 197568, filed with the SEC on July 23, 2014 (the “Form F-7 Registration Statement”)).

2.2		The Registrant’s consolidated financial statements for the years ended December 31, 2014 and December 31, 2013, together with the auditor’s report thereon.

2.3		The Registrant’s management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2014.

2.4		The Registrant’s management information circular dated August 30, 2013 (incorporated by reference to Exhibit 2.6 to the Form F-7 Registration Statement).

2.5		The Registrant’s management information circular dated March 27, 2014 (incorporated by reference to Exhibit 2.7 to the Form F-7 Registration Statement).

3.1		Consent of KPMG LLP.

3.2		Consent of McCarthy Tétrault LLP.

4.1		Powers of Attorney (included on the signature page of this Registration Statement).

5.1		Indenture between the Registrant and Computershare Trust Company of Canada, dated November 19, 2014.

II-1

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form F-7 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Toronto, Ontario, Canada on March 24, 2015.


CONSTELLATION SOFTWARE INC.

By:		/s/ Jamal Baksh
Name:		Jamal Baksh
Title:		Chief Financial Officer

II-2

POWERS OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Mark Leonard and Jamal Baksh, and each of them, either of whom may act without the joinder of the other, the true and lawful attorney-in-fact and agent of the undersigned, with full power of substitution and resubstitution, to execute in the name, place and stead of the undersigned, in any and all such capacities, any and all amendments (including post-effective amendments) to this Registration Statement , and all instruments necessary or in connection therewith, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the United States Securities and Exchange Commission, and hereby grants to each such attorney-in-fact and agent, each acting alone, full power and authority to do and perform in the name and on behalf of the undersigned each and every act and thing whatsoever necessary or advisable to be done, as fully and to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his substitute or substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by or on behalf of the following persons in the capacities indicated, on March 24, 2015.


Signature		Title

/s/ Mark Leonard Mark Leonard		President and Chairman of the Board (Principal Executive Officer)

/s/ Jamal Baksh Jamal Baksh		Chief Financial Officer (Principal Financial and Principal Accounting Officer)

/s/ Jeff Bender Jeff Bender		Director

/s/ Meredith (Sam) Hall Hayes Meredith (Sam) Hall Hayes		Director

/s/ Robert Kittel Robert Kittel		Director

/s/ Paul McFeeters Paul McFeeters		Director

/s/ Ian McKinnon Ian McKinnon		Director

/s/ Mark Miller Mark Miller		Director and Chief Operating Officer

/s/ Stephen Scotchmer Stephen Scotchmer		Director

II-3

AUTHORIZED REPRESENTATIVE

Pursuant to the requirements of Section 6(a) of the Securities Act of 1933, as amended, the undersigned certifies that it is the duly authorized United States representative of the Registrant and has duly signed this Registration Statement on March 24, 2015.


TRAPEZE SOFTWARE GROUP, INC.

By:		/s/ Jamal Baksh
Name:		Jamal Baksh
Title:		Vice President, Support

II-4

INDEX TO EXHIBITS


Exhibit Number		Description

2.1		The Registrant’s annual information form for the year ended December 31, 2013, dated March 28, 2014 (incorporated by reference to Exhibit 2.1 to the Registrant’s Registration Statement on Form F-7, File No. 333- 197568, filed with the SEC on July 23, 2014 (the “Form F-7 Registration Statement”)).

2.2		The Registrant’s consolidated financial statements for the years ended December 31, 2014 and December 31, 2013, together with the auditor’s report thereon.

2.3		The Registrant’s management’s discussion and analysis of financial condition and results of operations for the year ended December 31, 2014.

2.4		The Registrant’s management information circular dated August 30, 2013 (incorporated by reference to Exhibit 2.6 to the Form F-7 Registration Statement).

2.5		The Registrant’s management information circular dated March 27, 2014 (incorporated by reference to Exhibit 2.7 to the Form F-7 Registration Statement).

3.1		Consent of KPMG LLP.

3.2		Consent of McCarthy Tétrault LLP.

4.1		Powers of Attorney (included on the signature page of this Registration Statement).

5.1		Indenture between the Registrant and Computershare Trust Company of Canada, dated November 19, 2014.

Exhibit 2.2

Consolidated Financial Statements

(In U.S. dollars)

CONSTELLATION

SOFTWARE INC.

For the years ended December 31, 2014 and 2013

LOGO

MANAGEMENT’S RESPONSIBILITY FOR FINANCIAL REPORTING

December 31, 2014

The accompanying consolidated financial statements of Constellation Software Inc. (“Constellation”) and its subsidiaries and all the information in Management’s Discussion and Analysis are the responsibility of management and have been approved by the Board of Directors.

The consolidated financial statements have been prepared by management in accordance with International Financial Reporting Standards (“IFRS”). The consolidated financial statements include certain amounts that are based on the best estimates and judgements of management and in their opinion present fairly, in all material respects, Constellation’s financial position, results of operations and cash flows, in accordance with IFRS. Management has prepared the financial information presented elsewhere in the Management’s Discussion and Analysis and has ensured that it is consistent with the consolidated financial statements, or has provided reconciliations where inconsistencies exist.

Management of Constellation has developed and maintains a system of internal controls, which is supported by the internal audit function. Management believes the internal controls provide reasonable assurance that material transactions are properly authorized and recorded, financial records are reliable and form a basis for the preparation of consolidated financial statements and that Constellation’s material assets are properly accounted for and safeguarded.

The Board of Directors carries out its responsibility for the consolidated financial statements principally through its Audit Committee. This committee meets with management and the Company’s independent auditors to review the Company’s reported financial performance and to discuss audit, internal controls, accounting policies, and financial reporting matters. The consolidated financial statements were reviewed by the Audit Committee and approved by the Board of Directors.

The consolidated financial statements have been audited by KPMG LLP, the external auditors, in accordance with Canadian generally accepted auditing standards on behalf of the shareholders. KPMG LLP has full and free access to the Audit Committee.

February 25, 2015


“Mark Leonard”				“Jamal Baksh”
President				Chief Financial Officer

LOGO

INDEPENDENT AUDITORS’ REPORT

To the Shareholders of Constellation Software Inc.

We have audited the accompanying consolidated financial statements of Constellation Software Inc., which comprise the consolidated statements of financial position as at December 31, 2014 and December 31, 2013, the consolidated statements of income, comprehensive income, changes in equity and cash flows for the years then ended, and notes, comprising a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our audits is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of Constellation Software Inc. as at December 31, 2014 and December 31, 2013 and its consolidated financial performance and its consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards.

LOGO

Chartered Professional Accountants, Licensed Public Accountants

February 25, 2015

Toronto, Canada

KPMG LLP is a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.. KPMG Canada provides services to KPMG LLP.

KPMG Confidential

CONSTELLATION SOFTWARE INC.

Consolidated Statements of Financial Position

(In thousands of U.S. dollars)


	December 31,			December 31,
	2014			2013
Assets
Current assets:
Cash	$	70,679		$	77,967
Equity security available-for-sale (note 5)		—			780
Accounts receivable		200,056			191,446
Work in progress		51,483			55,728
Inventories (note 6)		25,246			21,145
Other assets (note 7)		63,294			65,115

		410,758			412,181
Non-current assets:
Property and equipment (note 8)		37,227			36,017
Deferred income taxes (note 15)		60,763			71,673
Other assets (note 7)		36,942			36,171
Intangible assets (note 9)		887,435			981,662

		1,022,367			1,125,523

Total assets	$	1,433,125		$	1,537,704

Liabilities and Shareholders’ Equity
Current liabilities:
Bank indebtedness (note 10)	$	66,326		$	477,170
TSS membership liability (note 12)		17,345			—
Accounts payable and accrued liabilities		244,996			260,585
Dividends payable (note 16)		21,192			21,031
Deferred revenue		347,336			306,213
Provisions (note 13)		13,399			11,887
Acquisition holdback payments		22,665			26,496
Income taxes payable		25,588			5,474

		758,847			1,108,856
Non-current liabilities:
Bank indebtedness (note 10)		149,654			—
TSS membership liability (note 12)		30,515			—
Debentures (note 11)		78,642			—
Deferred income taxes (note 15)		107,275			112,780
Acquisition holdback payments		3,603			4,203
Other liabilities (note 7)		44,758			45,866

		414,447			162,849

Total liabilities		1,173,294			1,271,705

Shareholders’ equity (note 16):
Capital stock		99,283			99,283
Accumulated other comprehensive income		(19,290	)		449
Retained earnings		179,838			166,267

		259,831			265,999
Subsequent events (notes 16 and 28)

Total liabilities and shareholders’ equity	$	1,433,125		$	1,537,704

See accompanying notes to the consolidated financial statements.

CONSTELLATION SOFTWARE INC.

Consolidated Statements of Income

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


	Years ended December 31,
	2014			2013
Revenue
License	$	118,868		$	101,666
Professional services		396,128			256,749
Hardware and other		139,340			127,886
Maintenance and other recurring		1,015,008			724,475

		1,669,344			1,210,776
Expenses
Staff		881,587			643,672
Hardware		79,532			73,475
Third party license, maintenance and professional services		152,191			102,377
Occupancy		41,043			29,309
Travel		50,144			44,724
Telecommunications		16,356			14,208
Supplies		36,827			22,023
Professional fees		22,844			17,633
Other, net		24,278			19,593
Depreciation		16,462			9,944
Amortization of intangible assets		173,186			119,144

		1,494,450			1,096,102
Foreign exchange loss (gain)		10,528			(768	)
Share in net (income) loss of equity investee (note 7)		(830	)		(780	)
Finance and other income (note 18)		(4,109	)		(1,041	)
Bargain purchase gain		(2,246	)		(8,111	)
Finance costs (note 18)		16,680			7,124

		20,023			(3,576	)
Income before income taxes		154,871			118,250
Current income tax expense (recovery)		51,542			22,528
Deferred income tax expense (recovery)		231			2,587

Income tax expense (recovery) (note 14)		51,773			25,115

Net income		103,098			93,135

Earnings per share
Basic and diluted (note 19)	$	4.87		$	4.39

See accompanying notes to the consolidated financial statements.

CONSTELLATION SOFTWARE INC.

Consolidated Statements of Comprehensive Income

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


	Years ended December 31,
	2014			2013
Net income	$	103,098		$	93,135
Items that are or may be reclassified subsequently to net income:
Net change in fair value of available-for-sale financial asset during the year		93			310
Net change in fair value of derivatives designated as hedges during the year		(546	)		—
Amounts reclassified to profit during the year related to realized gains on available-for-sale financial asset		(574	)		—
Foreign currency translation differences from foreign operations		(18,871	)		(1,535	)
Current income tax recovery (expense)		35			53
Deferred income tax recovery (expense)		124			—

Other comprehensive (loss) income for the year, net of income tax		(19,739	)		(1,172	)

Total comprehensive income for the year	$	83,359		$	91,963

See accompanying notes to the consolidated financial statements.

CONSTELLATION SOFTWARE INC.

Consolidated Statements of Changes in Equity

(In thousands of U.S. dollars)


Year ended December 31, 2014
	Capital		Accumulated other comprehensive									Total accumulated other			Retained			Total
	stock		income/(loss)									comprehensive			earnings
												income/(loss)
			Cumulative translation account			Amounts related to gains/losses on derivatives designed as hedges			Amounts related to gains/losses on available- for-sale financial assets
Balance at January 1, 2014	$	99,283	$	(32	)	$	—		$	481		$	449		$	166,267		$	265,999
Total comprehensive income for the year
Net income		—		—			—			—			—			103,098			103,098
Other comprehensive income (loss)
Net change in fair value of available-for-sale financial asset during the year		—		—			—			93			93			—			93
Net change in fair value of derivatives designated as hedges during the year		—		—			(546	)		—			(546	)		—			(546	)
Amounts reclassified to profit during the year related to realized gains on available-for-sale financial assets		—		—			—			(574	)		(574	)		—			(574	)
Foreign currency translation differences from foreign operations		—		(18,871	)		—			—			(18,871	)		—			(18,871	)
Current tax recovery (expense)		—		35			—			—			35			—			35
Deferred tax recovery (expense)		—		(12	)		136			—			124			—			124

Total other comprehensive income (loss) for the year		—		(18,848	)		(410	)		(481	)		(19,739	)		—			(19,739	)

Total comprehensive income (loss) for the year		—		(18,848	)		(410	)		(481	)		(19,739	)		103,098			83,359

Transactions with owners, recorded directly in equity
Dividends to shareholders of the Company (note 16)		—		—			—			—			—			(84,768	)		(84,768	)
Fair value of rights offered to shareholders of the Company (note 16)																(4,759	)		(4,759	)

Balance at December 31, 2014	$	99,283	$	(18,880	)	$	(410	)	$	—		$	(19,290	)	$	179,838		$	259,831

See accompanying notes to the consolidated financial statements.

CONSTELLATION SOFTWARE INC.

Consolidated Statements of Changes in Equity

(In thousands of U.S. dollars)


Year ended December 31, 2013
	Capital		Accumulated other comprehensive							Total accumulated other			Retained			Total
	stock		income/(loss)							comprehensive			earnings
										income/(loss)
			Cumulative translation account			Amounts related to gains/losses on derivatives designed as hedges		Amounts related to gains/losses on available- for-sale financial assets
Balance at January 1, 2013	$	99,283	$	1,450		$	—	$	171	$	1,621		$	157,900		$	258,804
Total comprehensive income for the year
Net income		—		—			—		—		—			93,135			93,135
Other comprehensive income (loss)
Net change in fair value of available-for-sale financial assets during the year		—		—			—		310		310			—			310
Amounts reclassified to profit during the year related to realized gains on available-for-sale financial assets		—		—			—		—		—			—			—
Foreign currency translation differences from foreign operations		—		(1,535	)		—		—		(1,535	)		—			(1,535	)
Current tax recovery (expense)		—		53			—		—		53			—			53
Deferred tax recovery (expense)		—		—			—				—			—			—

Total other comprehensive income for the year		—		(1,482	)		—		310		(1,172	)		—			(1,172	)

Total comprehensive income for the year		—		(1,482	)		—		310		(1,172	)		93,135			91,963

Transactions with owners, recorded directly in equity
Dividends to shareholders of the Company (note 16)		—		—			—		—		—			(84,768	)		(84,768	)

Balance at December 31, 2013	$	99,283	$	(32	)	$	—	$	481	$	449		$	166,267		$	265,999

See accompanying notes to the consolidated financial statements.

CONSTELLATION SOFTWARE INC.

Consolidated Statements of Cash Flows

(In thousands of U.S. dollars)


	Year ended December 31,
	2014			2013
Cash flows from operating activities:
Net income	$	103,098		$	93,135
Adjustments for:
Depreciation		16,462			9,944
Amortization of intangible assets		173,186			119,144
Share in net (income) loss of equity investee		(830	)		(780	)
Finance and other income		(4,109	)		(1,041	)
Finance costs		16,680			7,124
Bargain purchase gain		(2,246	)		(8,111	)
Income tax expense		51,773			25,115
Foreign exchange loss (gain)		10,528			(768	)
Change in non-cash operating working capital exclusive of effects of business combinations (note 26)		(1,713	)		519
Income taxes paid		(21,367	)		(23,988	)

Net cash flows from operating activities		341,462			220,293
Cash flows from (used in) financing activities:
Interest paid		(12,877	)		(3,428	)
Increase (decrease) in bank indebtedness, net		(233,513	)		432,645
Credit facility transaction costs		(7,166	)		(343	)
Proceeds from issuance of debentures (note 11)		81,233			—
Proceeds from issuance of TSS membership liability (note 12)		48,503			—
Dividends paid		(84,768	)		(84,768	)

Net cash flows from (used in) in financing activities		(208,588	)		344,106
Cash flows from (used in) investing activities:
Acquisition of businesses, net of cash acquired (note 4)		(98,688	)		(501,095	)
Post-acquisition settlement payments, net of receipts		(22,952	)		(21,771	)
Proceeds from sale of available-for-sale equity securities		873			—
Interest and dividends received		788			348
Proceeds from sale of assets		153			5,690
Property and equipment purchased		(13,868	)		(11,100	)

Net cash flows used in investing activities		(133,694	)		(527,928	)
Effect of foreign currency on cash and cash equivalents		(6,468	)		183

Increase (decrease) in cash and cash equivalents		(7,288	)		36,654
Cash, beginning of year		77,967			41,313

Cash, end of year	$	70,679		$	77,967

See accompanying notes to the consolidated financial statements.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

Notes to the consolidated financial statements


1.	Reporting entity	15.	Deferred tax assets and liabilities
2.	Basis of presentation	16.	Capital and other components of equity
3.	Significant accounting policies	17.	Revenue
4.	Business acquisitions	18.	Finance income and finance costs
5.	Equity security available-for-sale	19.	Earnings per share
6.	Inventories	20.	Capital risk management
7.	Other assets and liabilities	21.	Financial risk management and financial instruments
8.	Property and equipment	22.	Operating leases
9.	Intangible assets and goodwill	23.	Operating segments
10.	Bank indebtedness	24.	Contingencies
11.	Debentures	25.	Guarantees
12.	TSS membership liability	26.	Changes in non-cash operating working capital
13.	Provisions	27.	Related parties
14.	Income taxes	28.	Subsequent events

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

1. Reporting entity

Constellation Software Inc. (“Constellation”) is a company domiciled in Canada. The address of Constellation’s registered office is 20 Adelaide Street East, Suite 1200, Toronto, Ontario, Canada. The consolidated financial statements of Constellation as at and for the fiscal years ended December 31, 2014 and December 31, 2013 comprise Constellation and its subsidiaries (together referred to as the “Company”) and the Company’s interest in associates. The Company is engaged principally in the development, installation and customization of software relating to the markets listed below, and in the provision of related professional services and support.

Public Sector:


Public transit operators	Asset management	Municipal systems
Para transit operators	Fleet and facility management	School administration
School transportation	District attorney	Public safety
Non-emergency medical	Taxi dispatch	Healthcare
Ride share	Benefits administration	Rental
Local government	Insurance	Electric utilities
Agri-business	Collections management	Court
Marine asset management	Water utilities	School and special library
Communications Higher education	Credit unions	Drink distribution

Private Sector:

Private clubs & daily fee golf courses	Lease management	Window manufacturers
Construction	Winery management	Cabinet manufacturers
Food services	Buy here pay here dealers	Made-to-order manufacturers
Health clubs	RV and marine dealers	Window and other dealers
Moving and storage	Pulp & paper manufacturers	Multi-carrier shipping
Metal service centers	Real estate brokers and agents	Supply chain optimization
Attractions	Outdoor equipment dealers	Multi-channel distribution
Leisure centers	Pharmaceutical and biotech manufacturers	Wholesale distribution
Education	Healthcare electronic medical records	Third party logistics warehouse management systems
Radiology & laboratory information systems	Homebuilders	Retail management and distribution
Product licensing	Event management	Association management
Tire distribution	Salons and spas	Public housing authorities
Housing finance agencies	Municipal treasury & debt systems	Real estate brokers and agents
Tour operators	Auto clubs	Home and community care
Long-term care	Textiles and apparel

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

2. Basis of presentation

(a) Statement of compliance

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (IFRSs), issued and outstanding as of February 25, 2015, the date the Board of Directors approved such financial statements.

(b) Basis of measurement

The consolidated financial statements have been prepared on the historical cost basis except for certain assets and liabilities initially recognized in connection with business combinations, and derivative financial instruments, which are measured at fair value.

(c) Functional and presentation of currency

The consolidated financial statements are presented in U.S. dollars, which is Constellation’s functional currency.

(d) Use of estimates and judgements

The preparation of the consolidated financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Estimates are based on historical experience and other assumptions that are considered reasonable in the circumstances. The actual amount or values may vary in certain instances from the assumptions and estimates made. Changes will be recorded, with corresponding effect in profit or loss, when, and if, better information is obtained.

Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustment within the next financial year are included in the following notes:

Note 3(k) – Revenue recognition

Note 3(a)(i) - Business combinations

Note 3(m) - Income taxes

Note 3(i) - Impairment

Note 3(d) - Intangible assets

Note 24 – Contingencies

Critical judgements that management has made in the process of applying accounting policies disclosed herein and that have a significant effect on the amounts recognized in the consolidated financial statements relates to the (i) determination of functional currencies for Constellation’s subsidiaries and, most notably, in respect of businesses acquired during the period; (ii) assessment as to whether certain customer contract obligations and deliverables related to multiple-element arrangements have stand-alone value to the customer; (iii) recognition of deferred tax assets; and (iv) recognition of provisions.

•

Functional currency - management applies judgement in situations where primary and secondary indicators are mixed. Primary indicators such as the currency that mainly influence sales prices are given priority before considering secondary indicators.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

•

Revenue recognition and separation of customer contract obligations and deliverables – management applies judgement when assessing whether certain deliverables in a customer arrangement should be included or excluded from the unit of account to which contract accounting is applied. The judgement is typically related to the sale and inclusion of third party hardware and licenses in a customer arrangement and involves an assessment that principally addresses whether the deliverable has stand-alone value to the customer that is not dependent upon other components of the arrangement.

•

The presentation of revenue and related costs on a gross or net basis – management assess whether the Company is the primary obligor in the arrangement involving third party services, license and/or maintenance, which is generally consistent with the Company retaining fulfillment, inventory, and credit risks, among others.

•

Deferred tax assets - The recognition of deferred tax assets is based on forecasts of future taxable profit. The measurement of future taxable profit for the purposes of determining whether or not to recognize deferred tax assets depends on many factors, including the Company’s ability to generate such profits and the implementation of effective tax planning strategies. The occurrence or non-occurrence of such events in the future may lead to significant changes in the measurement of deferred tax assets.

•

Provisions - In recognizing provisions, the Company evaluates the extent to which it is probable that it has incurred a legal or constructive obligation in respect of past events and the probability that there will be an outflow of benefits as a result. The judgements used to recognize provisions are based on currently known factors which may vary over time, resulting in changes in the measurement of recorded amounts as compared to initial estimates.

3. Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements unless otherwise indicated.

The significant accounting policies have been applied consistently by the Company‘s subsidiaries.

(a) Basis of consolidation

(i) Business combinations

Acquisitions have been accounted for using the acquisition method required by IFRS 3. Goodwill arising on acquisition is measured as the fair value of the consideration transferred including the recognized amount of any non-controlling interest in the acquiree, if any, less the net recognized amount of the estimated fair value of identifiable assets acquired and liabilities assumed (subject to certain exemptions to fair value measurement principles such as deferred tax assets or liabilities), all measured as of the acquisition date. When the excess of the consideration transferred less the assets and liabilities acquired is negative, a bargain purchase gain is recognized immediately in profit or loss. Transaction costs that the Company incurs in connection with a business combination are expensed as incurred.

The Company uses its best estimates and assumptions to accurately value assets and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, and these estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with a corresponding offset to goodwill. Upon conclusion of the measurement period or final determination of the values

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to profit or loss. For a given acquisition, the Company may identify certain pre-acquisition contingencies as of the acquisition date and may extend its review and evaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess these contingencies as part of acquisition accounting, as applicable.

(ii) Consolidation methods

Entities over which the Company has control are fully consolidated from the date that control commences until the date that control ceases. Entities over which the Company has significant influence (investments in “associates”) are accounted for under the equity method. Significant influence is assumed when the Company’s interests are 20% or more, unless qualitative factors overcome this assumption.

Associates are those entities in which the Company has significant influence, but not control, over the financial and operating policies. Investments in associates are recognized initially at cost, inclusive of transaction costs. The Company’s investment includes goodwill identified on acquisition, net of any accumulated impairment losses. The consolidated financial statements include the Company’s share of the income and expenses and equity movement of equity accounted investees, from the date that significant influence commences until the date that significant influence ceases.

(iii) Transactions eliminated on consolidation

Intra-company balances and transactions, and any unrealized income and expenses arising from intra-company transactions, are eliminated in preparing the consolidated financial statements.

(b) Foreign currency translation

(i) Foreign currency transactions

Transactions in foreign currencies are translated to the respective functional currencies of subsidiaries of the Company at exchange rates at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are re-measured to the functional currency at the exchange rate at that date. Foreign currency differences arising on re-measurement are recognized through profit or loss, except for differences arising on the retranslation of available-for-sale equity instruments, which are recognized in other comprehensive income. Non-monetary items that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction. Foreign currency gains and losses are reported in profit and loss on a net basis. The effect of currency translation adjustments on cash and cash equivalents is presented separately in the statements of cash flows and separated from investing and financing activities when deemed significant.

(ii) Foreign operations

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated to U.S. dollars at exchange rates at the reporting date. The income and expenses of foreign operations are translated to U.S. dollars using average exchange rates for the month during which the transactions occurred. Foreign currency differences are recognized in other comprehensive income in the cumulative translation account.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

Foreign currency differences are recognized and presented in other comprehensive income and in the foreign currency translation adjustment in equity. However, if the operation is a non-wholly owned subsidiary, then the relevant proportionate share of the translation difference is allocated to the non-controlling interest when applicable.

Foreign exchange gains or losses arising from a monetary item receivable from or payable to a foreign operation, the settlement of which is neither planned nor likely to occur in the foreseeable future and which its substance is considered to form part of the net investment in the foreign operation, are recognized in other comprehensive income in the cumulative amount of foreign currency translation differences. If, and when, settlement plans change or deemed likely to occur, then the accounting process in (b)(i) above is applied. When a foreign operation payable or receivable classified as a net investment is partially or fully disposed, the proportionate share of the cumulative amount in the translation reserve related to that foreign operation is transferred to profit or loss as part of the profit or loss on disposal. The Company has elected not to treat repayments of monetary items receivable or payable to a foreign operation as a disposition.

(c) Financial Instruments

The Company’s financial instruments comprise cash, equity securities, accounts receivables, derivatives in the form of foreign exchange forward contracts and cash flow hedges, bank indebtedness, debentures, Total Specific Solutions B.V. (“TSS”) membership liability, accounts payable and accrued liabilities, dividends payable and holdback liabilities on acquisitions.

Financial assets are recognized in the consolidated statement of financial position if we have a contractual right to receive cash or other financial assets from another entity. Financial assets, including accounts receivable, are derecognized when the rights to receive cash flows from the investments have expired or were transferred to another party and the Company has transferred substantially all risks and rewards of ownership.

All financial liabilities are recognized initially on the date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Company has a legal right to offset the amounts and intends either to settle on a net basis or to realize the asset and settle the liability simultaneously.

(i) Non-derivative financial assets

Non-derivative financial assets are classified in the following categories at the time of initial recognition based on the purpose for which the financial assets were acquired:

Available-for-sale financial assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available-for-sale and that are not classified within loans and receivables or financial assets at fair value through profit or loss. The Company’s investments in equity securities are classified as available-for-sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses which are recognized in profit or loss, are recognized, net of income taxes, in other comprehensive income and presented within shareholders’ equity in the fair value reserve. When an investment is disposed of and derecognized, the cumulative gain or loss in other comprehensive income is transferred to profit or loss for the period.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

The fair value of the available-for-sale financial assets is determined by reference to their quoted closing bid price at the reporting date.

Loans and receivables

Loans and receivables, which comprise accounts receivables, are financial assets with fixed or determinable payments that are not quoted in an active market. Such assets are recognized initially at fair value inclusive of any directly attributable transaction costs and subsequently carried at amortized cost using the effective interest method, less any impairment losses. They are included in current assets, except for those with maturities greater than 12 months after the balance sheet date, which are classified as non-current assets.

(ii) Non-derivative financial liabilities

Financial liabilities include bank indebtedness, TSS membership liability, debentures, accounts payable and accrued liabilities, provisions, dividends payable, and holdbacks on acquisitions. Financial liabilities are generally recognized initially at fair value, typically being transaction price, plus any directly attributable transaction costs and subsequently measured at amortized cost using the effective interest method. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled, or expire.

(iii) Capital Stock

Common shares are classified as equity. Incremental costs directly attributable to the issue of common shares are recognized as a deduction from equity, net of tax.

(iv) Derivatives

The Company’s derivatives are carried at fair value and are reported as assets when they have a positive fair value and as liabilities when they have a negative fair value.

Changes in the fair values of derivative financial instruments are reported in the consolidated statements of income, except for cash flow hedges that meet the conditions for hedge accounting. The portion of the gain or loss on the hedging instruments that are determined to be an effective hedge are recognized directly in other comprehensive income, and the ineffective portion in the statements of income. The gains or losses deferred in other comprehensive income in this way are subsequently recognized in the statements of income in the same period in which the hedged underlying transaction or firm commitment is recognized in the statement of income. In order to qualify for hedge accounting, the Company is required to document in advance the relationship between the item being hedged and the hedging instrument. The Company is also required to document and demonstrate an assessment of the relationship between the hedged item and the hedging instrument, which shows that the hedge will be highly effective on an ongoing basis. This effectiveness testing is re-performed at the end of each reporting period to ensure that the hedge remains highly effective.

(d) Intangible assets

(i) Goodwill

Goodwill that arises upon the acquisition of subsidiaries is included in intangible assets. For measurement of goodwill at initial recognition, including the recognition of bargain purchase gains, refer to note 4. After initial recognition, goodwill is measured at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

carrying value may be impaired. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity accounted investee. No such losses have been recognized during the year.

The impairment test methodology is based on a comparison between the higher of fair value less costs to sell and value-in-use of each of the Company’s business units (considered as the grouping of cash generating units (“CGU”) at which level the impairment test is performed) and the net asset carrying values (including goodwill) of the Company’s business units. Within the Company’s reporting structure, business units generally reflect one level below the six operating segments (Volaris, Harris, Total Specific Solutions, Jonas, Perseus (previously known as Homebuilder), and Vela Operating Groups). In determining the recoverable amount, the Company applies an estimated market valuation multiple to the business unit’s most recent annual recurring revenues, which are derived from combined software/support contracts, transaction revenues, and hosted products. Valuation multiples applied by management for this purpose reflect current market conditions specific to the business unit and are assessed for reasonability by comparison to the Company’s current and past acquisition experience involving ranges of revenue-based multiples required to acquire representative software companies. In addition, in certain instances, the recoverable amount is determined using a value-in-use approach which follows the same valuation process that is undertaken for the Company’s business acquisitions. An impairment is recognized if the carrying amount of a CGU exceeds its estimated recoverable amount.

(ii) Acquired intangible assets

The Company uses the income approach to value acquired technology and customer relationship intangible assets. The income approach is a valuation technique that calculates the estimated fair value of an intangible asset based on the estimated future cash flows that the asset can be expected to generate over its remaining useful life.

The Company utilizes the discounted cash flow (“DCF”) methodology which is a form of the income approach that begins with a forecast of the annual cash flows that a market participant would expect the subject intangible asset to generate over a discrete projection period. The forecasted cash flows for each of the years in the discrete projection period are then converted to their present value equivalent using a rate of return appropriate for the risk of achieving the intangible assets’ projected cash flows, again, from a market participant perspective. The present value of the forecasted cash flows are then added to the present value of the residual value of the intangible asset (if any) at the end of the discrete projection period to arrive at a conclusion with respect to the estimated fair value of the subject intangible assets.

Specifically, the Company relies on the relief-from-royalty method to value the acquired technology and the multiple-period excess earnings (“MEEM”) method to value customer relationship assets.

The underlying premise of the relief-from-royalty method is that the fair value of the technology is equal to the costs savings (or the “royalty avoided”) resulting from the ownership of the asset by the avoidance of paying royalties to license the use of the technology from another owner. Accordingly the income forecast reflects an estimate of a fair royalty that a licensee would pay, on a percentage of revenue basis, to obtain a license to utilize the technology.

The MEEM method isolates the cash flows attributable to the subject asset by utilizing a forecast of expected cash flows less the returns attributable to other enabling assets, both tangible and intangible.

Other intangible assets that are acquired by the Company and have finite useful lives are measured at cost, being reflective of fair value, less accumulated amortization and impairment losses. Subsequent expenditures are capitalized only when it increases the future economic benefits that form part of the specific asset to which it relates and other criteria have been met. Otherwise all other expenditures are recognized in profit or loss as incurred.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

Amortization is recognized in profit or loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill, from the date that they are acquired and available for use, since this most closely reflects the expected usage and pattern of consumption of the future economic benefits embodied in the asset. To determine the useful life of the technology assets, the Company considers the length of time over which it expects to earn or recover the majority of the present value of the related intangible assets. The estimated useful lives for the current and comparative periods are as follows:


Technology assets		2 to 12 years
Customer assets		5 to 20 years
Trademarks		20 years
Backlog		Up to 1 year
Non-compete agreements		Life of agreement

Amortization methods, useful lives and the residual values are reviewed at least annually and are adjusted as appropriate.

(iii) Research and development

Expenditure on research activities, undertaken with the prospect of gaining new scientific or technical knowledge and understanding, is recognized in profit or loss as an expense as incurred.

Expenditure on development activities, whereby research findings are applied to a plan or design for the production of new or substantially improved products and processes, is capitalized only if the product or process is technically and commercially feasible, if development costs can be measured reliably, if future economic benefits are probable, if the Company intends to use or sell the asset and the Company intends and has sufficient resources to complete development. To date, no material development expenditures have been capitalized.

For the year ended December 31, 2014, $245,923 (2013 – $177,021) of research and development costs have been expensed in profit or loss. These costs are net of estimated investment tax credits, recognized as part of other, net expenses through profit or loss of $14,392 for the year ended December 31, 2014 (2013 – $7,998).

(e) Property and equipment

(i) Recognition and measurement

Items of property and equipment are measured at cost less accumulated depreciation and accumulated impairment losses. Cost includes initial and subsequent expenditures that are directly attributable to the acquisition of the related asset. When component parts of an item of property and equipment have different useful lives, they are accounted for as separate items (major components) of property and equipment, where applicable.

(ii) Depreciation

Depreciation is recognized in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property and equipment.

The estimated useful lives for the current and comparative periods are as follows:

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013


Asset		Rate
Computer hardware		3-5 years
Computer software		1 year
Furniture and equipment		5 years
Leasehold improvements		Shorter of the estimated useful life and the term of the lease
Building		50 years

Depreciation methods, useful lives and residual values are reviewed at each financial year end or more frequently as deemed relevant, and adjusted where appropriate.

(f) Inventories

Inventories are measured at the lower of cost and net realizable value. The cost of inventories is based on the first-in first-out principle, and includes expenditures incurred in acquiring the inventories, production and other costs incurred in bringing them to their existing location and condition. In the case of manufactured inventories and work in progress, cost includes an appropriate share of production overheads based on normal operating capacity. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses.

(g) Work in progress

Work in progress represents the gross unbilled amount expected to be collected from customers for contract work performed to date. It is measured at cost plus profit recognized to date less progress billings and recognized losses, if any.

Work in progress is presented in the statement of financial position for all contracts in which costs incurred plus recognized profits exceed progress billings. If progress billings exceed costs incurred plus recognized profits, then the excess is presented as deferred revenue in the statement of financial position.

(h) Other non-current liabilities

Other non-current liabilities consists principally of the non-current portion of lease incentives, non-compete obligations, certain acquired contract liabilities, deferred revenue, provisions and contingent consideration recognized in connection with business acquisitions to be settled in cash, which are discounted for measurement purposes.

(i) Impairment

(i) Financial assets (including receivables)

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably.

Objective evidence that financial assets are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Company on terms that the Company would not consider otherwise, or indications that a debtor or issuer will enter bankruptcy.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

The Company considers evidence of impairment for receivables at both a specific and collective level. All individually significant receivables are assessed for specific impairment. All individually significant receivables found not to be specifically impaired, together with receivables that are not individually significant are collectively assessed for impairment by grouping together receivables with similar risk characteristics.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account against receivables. When a subsequent event causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss.

Impairment losses on available-for-sale equity securities are recognized by transferring the cumulative loss that has been recognized in other comprehensive income, and presented in unrealized gains/losses on available-for-sale financial assets in equity, to profit or loss. The cumulative loss that is removed from other comprehensive income and recognized through profit or loss is the difference between the acquisition cost, and the current fair value, less any impairment loss previously recognized through profit or loss. Any subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in other comprehensive income. If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the increase can be related objectively to an event occurring after the impairment loss was recognized in profit or loss, then the impairment loss is reversed, with the amount of the reversal recognized in profit or loss.

(ii) Non-financial assets

The carrying amounts of the Company’s non-financial assets, other than inventories (which is addressed in note 3(f)) and deferred tax assets (which is addressed in note 3(m)), are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. For goodwill, the recoverable amount is estimated annually on December 31 of each fiscal year.

The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing the value in use, the Company uses discounted cash flows which are determined using a pre-tax discount rate specific to the asset or CGU. The discount rate used reflects current market conditions including risks specific to the assets. Significant estimates within the cash flows include recurring revenue growth rates and operating expenses. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets, which for the Company’s purposes is typically representative of the business unit level within the corporate and management structure. For the purposes of goodwill impairment testing, goodwill acquired in a business combination is allocated to the CGU, or the group of CGUs, that is expected to benefit from the synergies of the combination.

An impairment loss is recognized if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognized in profit or loss. Impairment losses recognized in respect of CGUs are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets (such as intangible assets and property and equipment) in the CGU (group of units) on a pro rata basis.

Goodwill that forms part of the carrying amount of an investment in an associate is not recognized separately and, therefore, is not tested for impairment separately. Instead, the entire amount of the investment in an associate is tested for impairment as a single asset when there is objective evidence that the investment in an associate may be impaired.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

An impairment loss in respect of goodwill is not reversed. In respect of other non-financial assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been previously recognized.

(j) Provisions

A provision is recognized if, as a result of a past event, the Company has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are measured at the estimated future cash flows required to settle the present obligation, based on the most reliable evidence available at the reporting date. The estimated cash flows are discounted at a pre-tax rate that reflects current market assessments of the time value of money and the risks specific to the liability. The amortization of the discount is recognized as part of finance costs.

(k) Revenue recognition

Revenue represents the fair value of consideration received or receivable from customers for goods and services provided by the Company, net of discounts and sales taxes. The Company reports revenue under four revenue categories being, License, Hardware and other, Professional Services, and Maintenance and other recurring revenue.

Typically, the Company’s software license agreements are multiple-element arrangements as they may also include maintenance, professional services, and hardware. Multiple-element arrangements are recognized as the revenue for each unit of accounting is earned based on the relative fair value of each unit of accounting as determined by an internal analysis of prices or by using the residual method. A delivered element is considered a separate unit of accounting if it has value to the customer on a standalone basis, and delivery or performance of the undelivered elements is considered probable and substantially under the Company’s control. If these criteria are not met, revenue for the arrangement as a whole is accounted for as a single unit of accounting. Where company-specific objective evidence of fair value cannot be determined for undelivered elements, the Company determines fair value of the respective element by estimating its stand-alone selling price, which is also applied for the presentation as part of the revenue categories noted above when certain of those elements are deemed to be a single unit of accounting.

The Company typically sells or licenses software on a perpetual basis, but also licenses software for a specified period. Revenue from short-term time-based licenses, which usually include support services during the license period, is recognized rateably over the license term. Revenue from multi-year time based licenses that include support services, whether separately priced or not, is recognized rateably over the license term unless a substantive support service renewal rate exists; if this is the case, the amount allocated to the delivered software is recognized as software revenue based on the residual approach once the revenue criteria have been met. In those instances where the customer is required to renew mandatory support and maintenance in order to maintain use of the licensed software over the license term, the Company recognizes the consideration attributable to the license and support for the initial term of the arrangement attributable to the license and support over the initial term and recognizes revenue for the support renewal fees in subsequent years over the respective renewal periods.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

profit or loss. In certain situations where the outcome of an arrangement cannot be estimated reliably, costs associated with the arrangement are recognized as incurred. In this situation, revenues are recognized only to the extent of the costs incurred that are probable of recovery.

A portion of the Company’s sales, categorized as hardware and other revenue, are accounted for as product revenue. Product revenue is recognized when the Company has an executed agreement, the product has been delivered and costs can be measured reliably, the amount of the fee to be paid by the customer is fixed and determinable, and the collection of the related receivable is deemed probable from the outset of the arrangement. If for any of the product or service offerings, the Company determines at the outset of an arrangement that the amount of revenue cannot be measured reliably, and the Company concludes that the inflow of economic benefits associated with the transaction is not probable, then the revenue is deferred until the arrangement fee becomes due and payable by the customer. If, at the outset of an arrangement, the Company determines that collectability is not probable, and the Company concludes that the inflow of economic benefits associated with the transaction is not probable, then revenue recognition is deferred until the earlier of when collectability becomes probable or payment is received. If collectability becomes unlikely before all revenue from an arrangement is recognized, the Company recognizes revenue only to the extent of the fees that are successfully collected unless collectability becomes reasonably assured again. If a customer is specifically identified as a collection risk, the Company does not recognize revenue except to the extent of the fees that have already been collected.

Revenue related to the customer reimbursement of travel related expenses incurred during a project implementation is included in the hardware and other revenue category. Revenue is recognized as costs are incurred which is consistent with the period in which the costs are invoiced. Reimbursable travel expenses incurred for which an invoice has not been issued, are recorded as part of work in progress on the statement of financial position.

Maintenance and other recurring revenue primarily consists of fees charged for customer support on software products post-delivery and also includes, to a lesser extent, recurring fees derived from combined software/support contracts, transaction revenues, managed services, and hosted products. The company-specific fair value of maintenance is typically derived from rates charged to renew these services after an initial period. Maintenance revenue remaining to be recognized in profit or loss is recognized as deferred revenue in the statements of financial position when amounts have been billed in advance and the term of the service period has commenced.

Professional Services revenue including implementation, training and customization of software is recognized by the stage of completion of the arrangement determined using the percentage of completion method noted above or as such services are performed as appropriate in the circumstances. The revenue and profit of fixed price contracts is recognized on a percentage of completion basis when the outcome of a contract can be estimated reliably. When the outcome of the contract cannot be estimated reliably, the amount of revenue recognized is limited to the cost incurred in the period. Losses on contracts are recognized as soon as a loss is foreseen by reference to the estimated costs of completion.

Management exercises judgement in determining whether a contract’s outcome can be estimated reliably. Management also applies estimates in the calculation of future contract costs and related profitability as it relates to labour hours and other considerations, which are used in determining the value of amounts recoverable on contracts and timing of revenue recognition. Estimates are continually and routinely revised based on changes in the facts relating to each contract. Judgement is also needed in assessing the ability to collect the corresponding receivables.

The timing of revenue recognition often differs from contract payment schedules, resulting in revenue that has been earned but not billed. These amounts are included in work in progress. Amounts billed in accordance with customer contracts, but not yet earned, are recorded and presented as part of deferred revenue.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

(l) Finance income and finance costs

Finance income comprises interest income, gains on the disposal of available-for-sale financial assets, dividend income, and changes in the fair value of financial assets at fair value through profit or loss. Interest income is recognized as it accrues through profit or loss, using the effective interest method.

Finance costs comprise interest expense on borrowings, increases in the value of the TSS membership liability, amortization of the discount on provisions, fair value losses on financial assets at fair value through profit or loss, and impairment losses recognized on financial assets other than trade receivables. Transaction costs attributable to the Company’s bank indebtedness are recognized in finance costs using the effective interest method.

(m) Income taxes

Income tax expense comprises current and deferred tax. Current tax and deferred tax are recognized in profit or loss except to the extent that it relates to a business combination, or items recognized directly in equity or in other comprehensive income.

Current tax is the expected taxes payable or receivable on the taxable income or loss for the period, using tax rates enacted or substantively enacted at the reporting date, and any adjustment to taxes payable in respect of previous years.

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognized for temporary differences relating to investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future. In addition, deferred tax is not recognized for taxable temporary differences arising on the initial recognition of goodwill.

Deferred tax is measured at tax rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been enacted or substantively enacted by the reporting date. Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits, difference in tax bases in the purchaser’s tax jurisdiction and its cost as reported in the consolidated financial statements as a result of an intra-group transfer of assets and deductible temporary differences, to the extent that it is probable that future taxable profits will be available against which they can be utilized. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(n) Investment tax credits

The Company is entitled to both non-refundable and refundable investment tax credits for qualifying research and development activities. Investment tax credits are accounted for as a reduction of the related expenditure for items of a period expense nature or as a reduction of property and equipment for items of a capital nature when the amount is reliably estimable and the Company has reasonable assurance regarding compliance with the relevant objective conditions and that the credit will be realized.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

(o) Segment reporting

An operating segment is a component of the Company that engages in business activities from which it may earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the Company’s other components. The operating results of all operating segments are reviewed regularly by the Company’s President and Chairman of the Board of Directors to make decisions about resources to be allocated to the segment and assessing their performance.

The Company has six operating segments, referred to as Operating Groups by the Company, being Volaris, Harris, Total Specific Solutions, Jonas, Perseus, and Vela. The operating segments are aggregated by applying the aggregation criteria in IFRS 8, Operating Segments, into two reportable segments Public (Volaris, Harris, TSS Operating Groups) and Private (Jonas, Perseus, Vela Operating Groups).

Segment operating results, assets and liabilities include items directly attributable to a segment as well as those that can be allocated on a reasonable basis. Unallocated items comprise mainly interest-bearing borrowings and related expenses, and corporate assets and expenses and are included as part of the other segment when reconciling to the Company’s consolidated totals.

Segment capital expenditures are the total cost incurred during the period to acquire segment assets, being property and equipment and intangibles that are expected to be used for more than one year.

Corporate head office operating expenses, which exclude the unallocated items noted above, are allocated on a consistent basis to the Company’s operating segments based on the operating segment’s percentage of total consolidated revenue for the allocation period.

(p) Earnings per share

The Company presents basic and diluted earnings per share data for its ordinary shares, being common shares. Basic earnings per share is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period, adjusted for treasury shares held. Diluted earnings per share is determined by adjusting the profit or loss attributable to shareholders of ordinary shares and the weighted average number of shares outstanding, adjusted for the effects of all dilutive potential ordinary shares.

(q) Short-term employee benefits

Short-term employee benefit obligations, including wages, benefits, incentive compensation, and compensated absences are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognized for the amount expected to be paid and settled under the Company’s employee incentive compensation plan if the Company has legal or constructive obligation to pay this amount at the time bonuses are paid as a result of past service provided by the employee, and the obligation can be estimated reliably.

(r) Lease payments

Payments made under operating leases are recognized in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognized as an integral part of the total lease expense over the term of the lease.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

(s) New standards and interpretations adopted

Amendments to IAS 32, Offsetting Financial Assets and Liabilities

IAS 32 has been amended to include additional presentation requirements for financial assets and liabilities that can be offset in the statement of financial position. The Company adopted the amendments to IAS 32 in its consolidated financial statements for the annual period beginning January 1, 2014. The adoption of the amendments did not have a material impact on the financial statements.

Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36)

In May 2013, the IASB issued Recoverable Amount Disclosures for Non-Financial Assets (Amendments to IAS 36). The amendments apply retrospectively for annual periods beginning on or after January 1, 2014. The IASB has issued amendments to reverse the unintended requirement in IFRS 13 Fair Value Measurement to disclose the recoverable amount of every cash-generating unit to which significant goodwill or indefinite-lived intangible assets have been allocated. Under the amendments, recoverable amount is required to be disclosed only when an impairment loss has been recognized or reversed. The Company adopted the amendments in its financial statements for the annual period beginning on January 1, 2014. As the amendments impact certain disclosure requirements only, the adoption of the amendments did not have a material impact on the financial statements.

(t) New standards and interpretations not yet adopted

IFRS 9 Financial Instruments

IFRS 9 replaces the guidance in IAS 39 Financial Instruments: Recognition and Measurement, on the classification and measurement of financial assets. The Standard eliminates the existing IAS 39 categories of held to maturity, available-for-sale and loans and receivable.

Financial assets will be classified into one of two categories on initial recognition:

•

financial assets measured at amortized cost; or

•

financial assets measured at fair value.

Gains and losses on remeasurement of financial assets measured at fair value will be recognized in profit or loss, except that for an investment in an equity instrument which is not held-for-trading, IFRS 9 provides, on initial recognition, an irrevocable election to present all fair value changes from the investment in other comprehensive income (OCI). The election is available on an individual share-by-share basis. Amounts presented in OCI will not be reclassified to profit or loss at a later date. IFRS 9 also includes a new general hedge accounting standard which will align hedge accounting more closely with risk management.

The standard has a mandatory effective date for annual periods beginning on or after January 1, 2018 with early adoption permitted. The extent of the impact of adoption of the amendments has not yet been determined.

Annual Improvements to IFRS

In December 2013, the IASB issued narrow-scope amendments to a total of nine standards. Most of the amendments will apply prospectively for annual periods beginning on or after July 1, 2014. The Company intends to apply these amendments in its financial statements for the annual periods beginning on January 1, 2015. The extent of the impact of adoption of the amendments has not yet been determined.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

IFRS 15 Revenue from Contracts with Customers

On May 28, 2014 the IASB issued IFRS 15 Revenue from Contracts with Customers. The new standard is effective for fiscal years beginning on or after January 1, 2017 and is available for early adoption. The standard contains a single model that applies to contracts with customers. The Company intends to adopt IFRS 15 in its financial statements for the annual period beginning on January 1, 2017. The extent of the impact of adoption of the standard has not yet been determined.

4. Business acquisitions

(a) During the year ended December 31, 2014, the Company completed twenty-three acquisitions for aggregate cash consideration of $115,270 plus cash holdbacks of $17,346 and contingent consideration with an estimated fair value of $7,988 resulting in total consideration of $140,604. The contingent consideration is payable on the achievement of certain financial targets in the post-acquisition period. The obligation for contingent consideration for acquisitions during the year ended December 31, 2014 has been recorded at its estimated fair value at the various acquisition dates. The estimated fair value of the applicable contingent consideration is calculated using the weighted probability of the expected contingent consideration to be paid and inclusion of a discount rate as appropriate. As part of these arrangements, which include both maximum, or capped, and unlimited contingent consideration amounts, the estimated increase to the initial consideration is not expected to exceed a maximum of $7,988. Aggregate contingent consideration of $23,534 (December 31, 2013 - $18,452) has been reported in the statement of financial position at its estimated fair value relating to applicable acquisitions completed in the current and prior periods. Changes made to the estimated fair value of contingent consideration are included in other expenses, net in the consolidated statements of income. A credit of $1,114 has been recorded for the year ended December 31, 2014, as a result of such changes (charge of $263 for the year ended December 31, 2013).

There were no acquisitions during the period that were deemed to be individually significant. Of the twenty-three acquisitions, the Company acquired 100% of the shares of sixteen businesses and acquired the net assets of the other seven businesses. The cash holdbacks are payable over a two year period and are adjusted, as necessary, for such items as working capital or net tangible asset assessments, as defined in the agreements, and claims under the respective representations and warranties of the purchase and sale agreements.

The acquisitions during the year include software companies catering to the following markets; fleet and facility management, local government, health clubs, asset management, para transit operators, metal service centres, tour operators, auto clubs, home and community care, long-term care, public transit operators, salons and spas, food services, textiles and apparel, credit unions, drink distribution, public safety, homebuilders, healthcare, higher education and communications all of which are software businesses similar to existing businesses operated by the Company. The acquisitions have been accounted for using the acquisition method with the results of operations included in these consolidated financial statements from the date of each acquisition. Twelve of the acquisitions have been included in the Public reportable segment and eleven have been included in the Private reportable segment.

The goodwill recognized in connection with these acquisitions is primarily attributable to the application of Constellation’s best practices to improve the operations of the companies acquired, synergies with existing businesses of Constellation, and other intangibles that do not qualify for separate recognition including assembled workforce. Goodwill in the amount of $492 is expected to be deductible for income tax purposes.

A bargain purchase gain totalling $2,246 arose on one of the acquisitions because the fair value of the separately identifiable assets and liabilities exceeded the total consideration paid, principally due to the acquisition of certain assets that will benefit the Company that had limited value to the seller. The bargain purchase gain has been recorded in profit or loss in the consolidated statement of income.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

The gross contractual amounts of acquired receivables was $27,858; however the Company has recorded an allowance of $1,087 as part of the acquisition accounting to reflect contractual cash flows that are not expected to be collected.

Due to the complexity and timing of certain acquisitions made, the Company is in the process of determining and finalizing the estimated fair value of the net assets acquired as part of the acquisitions closed during 2014. The amounts determined on a provisional basis generally relate to net asset assessments and measurement of the assumed liabilities, including acquired contract liabilities. The cash consideration associated with these provisional estimates totals $115,270.

The aggregate impact of acquisition accounting applied in connection with business acquisitions in the year ended December 31, 2014 is as follows:


	Public Sector			Private Sector		Consolidated
Assets acquired:
Cash	$	9,181		$	7,401	$	16,582
Accounts receivable		16,421			10,350		26,771
Other current assets		4,436			4,344		8,780
Property and equipment		2,062			3,160		5,222
Other non-current assets		17			189		206
Deferred income taxes		664			269		933
Technology assets		63,781			30,530		94,311
Customer assets		16,115			17,624		33,739

		112,677			73,867		186,544
Liabilities assumed:
Current liabilities		6,170			11,760		17,930
Deferred revenue		13,047			9,322		22,369
Deferred income taxes		5,116			6,079		11,195
Other non-current liabilities		164			211		375

		24,497			27,372		51,869
Goodwill		2,088			6,087		8,175
Excess of fair value of net assets acquired		(2,246	)		—		(2,246	)
over consideration paid

Total consideration	$	88,022		$	52,582	$	140,604

(b) The 2014 business acquisitions had no significant impact on revenues or net income for the year ended December 31, 2014. There was also no significant impact on the Company’s revenues or net income on a pro-forma basis for the year ended December 31, 2014.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

5. Equity security available-for-sale

At December 31, 2013, the Company held an investment in a public company listed in the U.S., which develops and sells software solutions. The investment had been designated as available-for-sale. The Company sold 100% of its investment during the year ended December 31, 2014 for cash consideration totalling $873 and an aggregate gain on sale of $574 was recognized in net income.


	December 31, 2014				December 31, 2013
	Cost		Fair Value		Cost		Fair Value
Common shares	$	—	$	—	$	300	$	780

6. Inventories


	December 31, 2014		December 31, 2013
Raw materials	$	12,969	$	4,877
Work in progress		1,625		912
Finished goods		10,652		15,356

Total	$	25,246	$	21,145

No inventories were carried at fair value less cost to sell, and the carrying amount of inventories subject to retention of title clauses was $nil as at December 31, 2014 and 2013.

Raw materials and changes in finished goods and work in progress recognized as hardware expenses in the statements of income amounted to $74,046 (2013: $68,383). The write-down of inventories to net realizable value amounted to $1,051 (2013: $1,150). The reversal of write-downs amounted to $136 (2013: $1,225). Write-downs and reversals of write-downs are based on the Company’s projected sales. The write-down and reversal are included in hardware expenses.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

7. Other assets and liabilities

(a) Other assets


	December 31, 2014		December 31, 2013
Prepaid and other current assets	$	41,228	$	40,814
Investment tax credits recoverable		13,810		11,178
Sales tax receivable		2,402		5,777
Other receivables		5,854		7,346

Total current assets	$	63,294	$	65,115

Investment tax credits recoverable	$	11,828	$	10,900
Non-current trade and other receivables		10,622		11,235
Equity accounted investees (i)		14,242		13,886
Work in progress		250		150

Total non-current assets	$	36,942	$	36,171

(i) Equity accounted investees

The Company’s share of net income in its investments currently being accounted for as equity investees was $830 (2013: $780). Dividends received for the year totalled $474 (2013: $348). The carrying value of the Company’s investment in the equity accounted investee as at December 31, 2014 was $14,242 (December 31, 2013 - $13,886).

(b) Other liabilities


	December 31, 2014		December 31, 2013
Contingent consideration	$	18,101	$	15,810
Acquired contract liabilities		8,213		8,934
Other non-current liabilities		18,444		21,122

Total non-current liabilities	$	44,758	$	45,866

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

8. Property and equipment


	Computer hardware			Computer software			Furniture and equipment			Leasehold improvements			Building			Total
Cost
Balance at January 1, 2013	$	29,775		$	15,275		$	14,290		$	6,677		$	4,998		$	71,015
Additions		4,326			1,592			2,985			2,197			—			11,100
Acquisitions through business combinations		7,224			2,674			3,447			2,604			—			15,948
Disposals / retirements		(3,671	)		(1,621	)		(792	)		(607	)		(1,439	)		(8,130	)
Effect of movements in foreign exchange		178			15			(17	)		(54	)		(42	)		80

Balance at December 31, 2013	$	37,832		$	17,935		$	19,913		$	10,817		$	3,517		$	90,013

Balance at January 1, 2014	$	37,832		$	17,935		$	19,913		$	10,817		$	3,517		$	90,013
Additions		9,112			1,963			2,033			731			29			13,868
Acquisitions through business combinations		1,403			1,707			2,635			461			93			6,299
Disposals / retirements		(434	)		(66	)		(619	)		(28	)		80			(1,067	)
Effect of movements in foreign exchange		(1,465	)		(705	)		(889	)		(648	)		(394	)		(4,101	)

Balance at December 31, 2014	$	46,448		$	20,834		$	23,073		$	11,333		$	3,325		$	105,012

Depreciation and impairment losses
Balance at January 1, 2013	$	22,495		$	13,597		$	9,572		$	3,921		$	130		$	49,715
Depreciation charge for the year		4,781			2,189			1,949			918			107			9,944
Disposals / retirements		(3,304	)		(1,137	)		(515	)		(482	)		(108	)		(5,547	)
Effect of movements in foreign exchange		(79	)		14			(20	)		(25	)		(6	)		(116	)

Balance at December 31, 2013	$	23,893		$	14,663		$	10,986		$	4,332		$	123		$	53,996

Balance at January 1, 2014	$	23,893		$	14,663		$	10,986		$	4,332		$	123		$	53,996
Depreciation charge for the year		8,590			3,049			3,001			1,715			107			16,462
Disposals / retirements		(393	)		(63	)		(460	)		(2	)		—			(918	)
Effect of movements in foreign exchange and other		(582	)		(484	)		(531	)		(121	)		(37	)		(1,755	)

Balance at December 31, 2014	$	31,508		$	17,165		$	12,996		$	5,924		$	193		$	67,785

Carrying amounts:
At January 1, 2013	$	7,280		$	1,678		$	4,718		$	2,756		$	4,868		$	21,300
At December 31, 2013	$	13,939		$	3,272		$	8,927		$	6,485		$	3,394		$	36,017
At January 1, 2014	$	13,939		$	3,272		$	8,927		$	6,485		$	3,394		$	36,017
At December 31, 2014	$	14,940		$	3,669		$	10,077		$	5,409		$	3,132		$	37,227

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

9. Intangible assets and goodwill


	Technology Assets			Customer Assets			Backlog			Non- compete agreements			Trademarks			Goodwill			Total
Cost
Balance at January 1, 2013	$	508,049		$	183,087		$	14,798		$	2,726		$	—		$	91,225		$	799,885
Acquisitions through business combinations		285,715			274,736			1,659			—			8,673			129,411			700,194
Effect of movements in foreign exchange		(1,940	)		(1,105	)		56			(42	)		—			333			(2,698	)

Balance at December 31, 2013	$	791,824		$	456,718		$	16,513		$	2,684		$	8,673		$	220,969		$	1,497,381

Balance at January 1, 2014	$	791,824		$	456,718		$	16,513		$	2,684		$	8,673		$	220,969		$	1,497,381
Acquisitions through business combinations		93,852			33,510			2			—			—			13,221			140,585
Effect of movements in foreign exchange		(29,207	)		(29,418	)		(167	)		(46	)		(1,013	)		(14,270	)		(74,121	)

Balance at December 31, 2014	$	856,469		$	460,810		$	16,348		$	2,638		$	7,660		$	219,920		$	1,563,845

Accumulated amortization and impairment losses
Balance at January 1, 2013	$	286,519		$	94,770		$	13,598		$	2,643		$	—		$	—		$	397,530
Amortization for the year		86,677			30,239			2,145			83			—			—			119,144
Impairment charge		—			—			—			—			—			—			—
Effect of movements in foreign exchange		(704	)		(264	)		55			(42	)		—			—			(955	)

Balance at December 31, 2013	$	372,492		$	124,745		$	15,798		$	2,684		$	—		$	—		$	515,719

Balance at January 1, 2014	$	372,492		$	124,745		$	15,798		$	2,684		$	—		$	—		$	515,719
Amortization for the year		129,001			43,050			716			—			419			—			173,186
Effect of movements in foreign exchange		(9,272	)		(3,011	)		(166	)		(46	)		—			—			(12,495	)

Balance at December 31, 2014	$	492,221		$	164,784		$	16,348		$	2,638		$	419		$	—		$	676,410

Carrying amounts
At January 1, 2013	$	221,530		$	88,317		$	1,200		$	83		$	—		$	91,225		$	402,355
At December 31, 2013	$	419,332		$	331,973		$	715		$	—		$	8,673		$	220,969		$	981,662
At January 1, 2014	$	419,332		$	331,973		$	715		$	—		$	8,673		$	220,969		$	981,662
At December 31, 2014	$	364,248		$	296,026		$	—		$	—		$	7,241		$	219,920		$	887,435

Impairment testing for cash-generating units containing goodwill

The annual impairment test of goodwill was performed as of December 31, 2014 and 2013 and did not result in any impairment loss. For the purpose of impairment testing, goodwill is allocated to the Company’s business units included in each operating segment, which represent the lowest level within the Company at which goodwill is monitored for internal management purposes, which is not higher than the Company’s operating segments. There was no goodwill reallocated to the Company’s business units that was deemed to be significant in comparison to the carrying amount of goodwill as at December 31, 2014.

The Company has three CGUs whereby the total goodwill allocated is significant in comparison to the Company’s total carrying amount of goodwill. The total goodwill allocated to each of these CGUs as at December 31, 2014 is $26,485, $27,312 and $27,277 (collectively arising from our acquisition of TSS). In determining the recoverable amount, the Company applied an estimated market valuation multiple to the business unit’s most recent annual recurring revenues, which are derived from combined software/support contracts, transaction revenues, and hosted

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

products. Valuation multiples, which are Level 3 inputs, applied by management for this purpose reflect current market conditions specific to the business unit and are assessed for reasonability by comparison to the Company’s current and past acquisition experience involving ranges of revenue-based multiples required to acquire representative software companies.

10. Bank indebtedness

On March 13, 2012, the Company entered into a revolving credit facility with a syndicate of Canadian chartered banks and U.S. banks in the amount of $300,000 (December 31, 2013- $300,000). The revolving credit facility bears a variable interest rate and is due in full on February 29, 2016 with no fixed repayments required over the term to maturity. Interest rates are calculated at prime or LIBOR plus interest rate spreads based on a leverage table that considers Constellation’s indebtedness at the time. The credit facility is collateralized by substantially all of the Company’s assets including the assets of the majority of the Company’s material subsidiaries. The credit facility contains standard events of default which if not remedied within a cure period would trigger the repayment of any outstanding balance. Certain other subsidiaries also guarantee this facility. The facility is available for acquisitions, working capital needs, and other general corporate purposes and for the needs of the Company’s subsidiaries until 2016. As at December 31, 2014, $64,500 (December 31, 2013 – $149,200) had been drawn from this credit facility, and letters of credit totaling $14,051 (December 31, 2013 - $5,000) were issued, which limits the borrowing capacity on a dollar-for-dollar basis. Transaction costs associated with the line-of-credit were included as part of the carrying amount of the liability and are being amortized through profit or loss using the effective interest rate method. Amortized costs recognized in the year ended December 31, 2014 relating to this line-of-credit amounted to $516 (December 31, 2013 - $516). As at December 31, 2014 the carrying amount of such costs totaling $609 (December 31, 2013 - $1,125) has been classified as part of bank indebtedness in the consolidated statement of financial position.

On December 6, 2013, the Company amended the credit facility to facilitate the acquisition of TSS. A new one year $350,000 term facility was added solely for the purposes of funding the TSS acquisition and related expenses (the “TSS Acquisition Facility”). The TSS Acquisition Facility was non-amortizing and had an interest rate calculated at US prime or LIBOR plus interest rate spreads based on a level table consistent with the spreads applicable to Constellation’s credit facility. On December 31, 2014, the TSS Acquisition Facility expired and the outstanding balance was repaid.

On June 24, 2014 Constellation Software Netherlands Holding Cooperatief U.A. (“CNH”), a subsidiary of Constellation and the indirect owner of 100% of TSS, entered into a €150,000 term and €10,000 multicurrency revolving credit facility (the “CNH Facility”) with a number of European and North American financial institutions. The CNH Facility bears interest at a rate calculated at EURIBOR plus interest rate spreads based on a leverage table. The CNH Facility is collateralized by substantially all of the assets owned by CNH and its subsidiaries which includes substantially all of the assets of TSS and its subsidiaries. The CNH Facility contains standard events of default which if not remedied within a cure period would trigger the repayment of any outstanding balance. On June 24, 2014, €130,000 was drawn on the term component of the CNH Facility and used to repay a portion of the TSS Acquisition Facility. The terms of the CNH Facility require that €30,000 must be repaid in instalments over the next six years, and €100,000 is non-amortizing and due in seven years. The remaining €20,000 term component of the CNH Facility is currently available and if drawn must be repaid in five equal instalments starting on June 24, 2018. As at December 31, 2014 no amounts had been drawn on the €10,000 multicurrency revolving component of the CNH Facility. The revolving component of the CNH Facility is available for acquisitions, working capital needs, and other general corporate purposes until June 24, 2020. Transaction costs associated with the CNH Facility have been included as part of the carrying amount of the liability and are being amortized through profit or loss using the effective interest rate method. Amortized costs recognized in the year ended December 31, 2014 relating to this facility amounted to $504. As at December 31, 2014, the carrying amount of such costs relating to this facility totalling approximately $5,930 (€4,879) has been classified as part of bank indebtedness in the consolidated statement of financial position.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

The CNH Facility and Constellation’s credit facilities are independent of each other. The CNH Facility is not guaranteed by Constellation or its subsidiaries nor is Constellation or its subsidiaries subject to the terms of the CNH Facility other than, in each case, CNH and its subsidiaries. Similarly, CNH and its subsidiaries did not guarantee Constellation’s other credit facilities and are not subject to the provisions thereof. Constellation’s credit facilities impose limitations on the aggregate amount of investment that Constellation may make in CNH and its subsidiaries and the financial results of CNH and its subsidiaries are not included for the purposes of determining compliance by Constellation with the financial covenants in Constellation’s other credit facilities. The CNH Facility imposes limitations on the amount of distributions that CNH and its subsidiaries may make to Constellation.

11. Debentures

On October 1, 2014 and November 19, 2014, the Company issued debentures (the “Debentures”) with a total principal value of C$96,038 for total proceeds of C$91,236. The proceeds were used by the Company to pay down $81,233 of the TSS Acquisition Facility. The Debentures have a maturity date of March 31, 2040 (the “Maturity Date”). From and including the date of issue to but excluding March 31, 2015, the Debentures will bear interest at a rate of 7.4% per annum, paid quarterly in arrears. The rate from March 31, 2015 to March 30, 2016 will be 8.5%. From and including March 31, 2016 to but excluding the Maturity Date, the interest rate applicable to the Debentures will be reset on an annual basis on March 31 of each year, at a rate equal to the annual average percentage change in the All-items Consumer Price Index during the 12 month period ending on December 31 in the prior year (which amount may be positive or negative) plus 6.5%. Notwithstanding the foregoing, the interest rate applicable to the debentures will not be less than 0%. The Company may, subject to certain approvals, elect the Payment in Kind election (“PIK Election”), in lieu of paying interest in cash, to satisfy all or any portion of its interest obligation payable on an interest payment date by issuing to each Debenture holder PIK Debentures equal to the amount of the interest obligation to be satisfied. The PIK Debentures will have the same terms and conditions as the Debentures and will form part of the principal amount of the Debentures. If, on any interest payment date, the Company fails to pay the amount of interest owing on the Debentures in full in cash, the Company will not (A) declare or pay dividends of any kind on the Common Shares, nor (B) participate in any share buyback or redemption involving the Common Shares, until the date on which the Company pays such interest (or the unpaid portion thereof) in cash to holders of the Debentures; however, where the Company has issued PIK Debentures in respect of all or a portion of the amount of interest owing on the Debentures on an interest payment date, the Company may resume declaring or paying dividends of any kind on the Common Shares and participating in any share buyback or redemption involving the Common Shares beginning on the next earlier of (i) the interest payment date of which the Company pays the amount of interest owing on the Debentures in full in cash and (ii) the date on which the Company repays all amounts owing under the PIK Debenture. All payments in respect of the Debentures will be subordinated in right of payment to the prior payment in full of all senior indebtedness of the Company.

The Debentures will be redeemable in certain circumstances at the option of the Company or the holder. During the period beginning on March 16 and ending on March 31 of each year, the Company will have the right, at its option, to give notice to holders of Debentures of its intention to redeem the Debentures, in whole or in part, on March 31 in the year that is five years following the year in which notice is given, at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the date fixed for redemption. During the period beginning on March 1 and ending on March 15 of each year, holders of Debentures will also have the right, at their option, to give notice to the Company of their intention to require the Company to repurchase (or to “put”) the Debentures, in whole or in part, on March 31 in the year that is five years following the year in which notice is given, at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the date fixed for repurchase.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

12. TSS Membership Liability

On December 23, 2014, in accordance with the terms of the purchase and sale agreement for the TSS acquisition, and on the basis of the term sheets attached thereto, Constellation and the sellers of TSS along with members of TSS’ executive management team (collectively, the “minority owners”) entered into a Members Agreement pursuant to which the minority owners acquired 33.29% of the voting interests in Constellation Software Netherlands Holdings Cooperatief (the “Coop”). Proceeds from this transaction in the amount of €39,375 (US$48,503) were utilized to repay, in part, the TSS Acquisition Facility.

Commencing any time after December 31, 2014, each of the minority owners may exercise a put option to sell all or a portion of their interests in the Coop back to Constellation for an amount calculated in accordance with a valuation methodology described within the Members Agreement. Accordingly, the Company classified the proceeds from the membership agreement as a liability. The main valuation driver in such calculation is the maintenance and other recurring revenue of the Coop. Upon the exercise of a put option, Constellation would be obligated to redeem up to 33.33% of the minority owners’ interests put, no later than 30 business days from the date notice is received, and up to 33.33% on each of the first and second anniversary of the date the first redemption payment is made. In determining the valuation of the liability at December 31, 2014 we assumed the minority owners exercised their put option on December 31, 2014, and redeemed 33.33% of their interests on exercise (which is classified as a current liability), and will redeem 33.33% on each of the first and second anniversary dates. Maintenance and recurring revenue of the Coop for the fiscal year ended December 31, 2014 was used as the basis for valuing the interests at each redemption date. A similar approach will be utilized to value any interests that have not been put or called at the end of each subsequent reporting period. However, the actual maintenance and recurring revenue of the Coop for the trailing twelve months from the date of the related reporting period end will be utilized in the calculation. Any increase or decrease in the value of the membership liability will be recorded as an expense or income respectively in the Consolidated Statements of Income for the period.

The seller of TSS also has an option available to it to sell approximately 68% of its interests in the Coop, for an amount calculated in accordance with a valuation methodology described within the Members Agreement, in the event that Robin Van Poelje, TSS’ CEO, is no longer employed by TSS. The approximately 32% remaining interest can be sold via the put option described above.

In the event of a change of control in Constellation, the minority owners would have the option to sell 100% of their interests in the Coop for an amount calculated in accordance with a valuation methodology described within the Members Agreement. Constellation would be obligated to remit payment in respect thereof no later than 30 business days from the date notice is given.

Commencing at any time after December 31, 2023, Constellation may exercise a call option to purchase all of the minority owners’ interests in the Coop, for an amount calculated in accordance with a valuation methodology described within the Members Agreement. Upon exercise of the call option, the full purchase price will be paid within 30 business days of the notice date, following which the minority owners’ membership in the Coop will be terminated.

If any of TSS’ executive management team that participate in the Members agreement are terminated for urgent cause as defined in Section 7:678 of the Dutch Civil Code, Constellation shall have the right to purchase all of the interests beneficially owned by the terminated executive for an amount calculated in accordance with the a valuation methodology described with the Members Agreement. The full purchase price will be paid within 30 business days from the date notice is given, following which the terminated executive’s membership in the Coop will be terminated. An option does exist for the terminated executive to elect to be paid in annual installments of 33.33% of his interests in the Coop over a 3 year period. The valuation of the interests being purchased will be calculated at each reporting period.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

13. Provisions


At January 1, 2014	$	11,959
Reversal		(1,466	)
Provisions recorded during the period		17,079
Provisions used during the period		(12,689	)
Effect of movements in foreign exchange and other		(1,484	)

At December 31, 2014	$	13,399

The provisions balance is comprised of various individual provisions for onerous contracts and other estimated liabilities of the Company of uncertain timing or amount.

14. Income taxes

(a) Tax recognized in profit or loss


	2014			2013
Tax recognized in profit or loss

Current tax expense (recovery)
Current year	$	46,025		$	22,065
Adjustment for prior years		5,517			463

		51,542			22,528

Deferred tax expense (recovery)

Origination and reversal of temporary differences		(2,959	)		1,656
Effect of change in future tax rates		495			(342	)
Change in recognized temporary differences and unrecognized tax losses		3,810			3,005
Recognition of previously unrecognized losses		(1,115	)		(1,732	)

		231			2,587

Total tax expense (recovery)		51,773			25,115

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

(b) Reconciliation of effective tax rate


	2014			2013
Net income for the year	$	103,098		$	93,135
Total tax expense		51,773			25,115

Net income before tax		154,871			118,250

Income tax expense using the Company’s statutory tax rate of 26.5% (2013 - 26.5%)		41,041			31,337
Impact on taxes from:
Foreign tax rate differential		(1,058	)		(5,297	)
Other, including non deductible expenses and non taxable income		3,083			(2,319	)
Change in recognized temporary differences and unrecognized tax losses		3,810			3,005
Effect of change in future tax rates		495			(342	)
Recognition of prior year tax losses		(1,115	)		(1,732	)
Under (over) provisions in prior years		5,517			463

		51,773			25,115

15. Deferred tax assets and liabilities

(a) Unrecognized deferred tax liabilities

The aggregate amount of temporary differences associated with investments in subsidiaries for which we have not recognized deferred tax liabilities is $496,684 (2013: $261,192) as the Company ultimately controls whether the liability will be incurred and it is satisfied that it will not be incurred in the foreseeable future. The temporary differences relate to undistributed earnings of that Company’s subsidiaries. Dividends declared would be subject to withholding tax in the range of 0-15% depending on the jurisdiction of the subsidiary.

(b) Unrecognized deferred tax assets


	2014		2013
Deductible temporary differences, including capital losses	$	31,590	$	22,517
Non capital tax losses	$	66,184	$	76,186

$47,890 of the non-capital tax losses expire between 2015 and 2034 and $18,294 can be carried forward indefinitely. Included in the non-capital tax losses expiring between 2015 and 2034 is $27,900 of losses that are not expected to be used to offset future taxable profit as a result of legislative restrictions in the jurisdiction where those losses exist. The deductible temporary differences and capital losses do not expire under current tax legislation. Deferred tax assets have not been recognized in respect of those items because it is not probable that future taxable profit will be available in those jurisdictions against which the Company can utilize these benefits.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013


	Assets						Liabilities						Net
	2014			2013			2014			2013			2014			2013
Property, plant and equipment		1,904			11,493			(1,006	)		(1,078	)		898			10,415
Intangible assets		114,050			55,142			(170,734	)		(136,383	)		(56,684	)		(81,241	)
Reserves		9,915			8,688			(130	)		—			9,785			8,688
Non capital loss carryforwards		6,298			17,284			—			—			6,298			17,284
SR&ED expenditure pool		1,044			6,766			—			—			1,044			6,766
Deferred revenue		4,561			1,350			(1,236	)		—			3,325			1,350
Foreign and other tax credits		150			655			(4,194	)		(5,382	)		(4,044	)		(4,727	)
Contract asset		—			912			—			—			—			912
Other, including capital losses, withholding tax and foreign exchange		2,237			1,905			(9,371	)		(2,459	)		(7,134	)		(554	)

Tax assets (liabilities)		140,159			104,195			(186,671	)		(145,302	)		(46,512	)		(41,107	)
Reclassification		(79,396	)		(32,522	)		79,396			32,522

Net tax assets (liabilities)		60,763			71,673			(107,275	)		(112,780	)		(46,512	)		(41,107	)

This reclassification relates to the offsetting of deferred tax assets and deferred tax liabilities to the extent that they relate to the same taxing authorities and there is a legally enforceable right to do so.

(d) Movement in deferred tax balances during the year


	Balance January 1, 2014			Recognized in profit or loss			Recognized in other comprehensive income		Acquired in business combinations			Other		Balance December 31, 2014
Property, plant and equipment		10,415			(9,475	)		—		(42	)		—		898
Intangible assets		(81,241	)		36,968			—		(12,411	)		—		(56,684	)
Reserves		8,688			465			—		632			—		9,785
Non-capital loss carryforwards		17,284			(11,360	)		—		374			—		6,298
SR&ED expenditure pool		6,766			(5,722	)		—		—			—		1,044
Deferred revenue		1,350			651			—		1,324			—		3,325
Tax credits		(4,727	)		567			—		116			—		(4,044	)
Contract asset		912			(912	)		—		—			—		0
Other, including capital losses, withholding tax and foreign exchange		(554	)		(11,413	)		—		(156	)		4,989		(7,134	)

		(41,107	)		(231	)		—		(10,163	)		4,989		(46,512	)


	Balance January 1, 2013			Recognized in profit or loss			Recognized in other comprehensive income		Acquired in business combinations			Other			Balance December 31, 2013
Property, plant and equipment		18,556			(8,142	)		—		—			1			10,415
Intangible assets		34,228			16,700			—		(132,169	)		—			(81,241	)
Reserves		4,191			(1,277	)		—		5,774			—			8,688
Non-capital loss carryforwards		13,991			(8,262	)		—		11,555			—			17,284
SR&ED expenditure pool		(1,062	)		3,699			—		4,129			—			6,766
Deferred revenue		2,327			(977	)		—		—			—			1,350
Tax credits		1,439			(5,085	)		—		(1,081	)		—			(4,727	)
Contract asset		2,856			(1,944	)		—		—			—			912
Other, including capital losses		(1,502	)		2,701			—		380			(2,133	)		(554	)

		75,024			(2,587	)		—		(111,412	)		(2,132	)		(41,107	)

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

16. Capital and other components of equity

Capital Stock

At December 31, 2014 and December 31, 2013, the authorized share capital of Constellation consisted of an unlimited number of voting common shares and a limited number of non-voting preferred shares.


	Common Shares
	Number		Amount
December 31, 2013		21,191,530	$	99,283
December 31, 2014		21,191,530	$	99,283

Accumulated other comprehensive income (loss)

Accumulated other comprehensive income (loss) is comprised of the following separate components of equity:

Cumulative translation account

The cumulative translation account comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, as well as foreign exchange gains and losses arising from monetary items that form part of the net investment in the foreign operation.

Amounts related to available-for-sale financial assets

Available-for-sale differences comprise the cumulative net change in the fair value of available-for-sale financial assets until the investments are sold/derecognized or impaired.

Amounts related to derivatives designated as hedges

The portion of the gain or loss on derivatives designated as hedges that are determined to be an effective hedge are recognized directly in other comprehensive income, and the ineffective portion in the income statement. The gains or losses deferred in other comprehensive income in this way are subsequently recognized in the statement of income in the same period in which the hedged underlying transaction or firm commitment is recognized in the statement of income.

Dividends

During the year ended December 31, 2014 the Board of Directors approved and the Company declared dividends of $4.00 per common share. The first dividend declared in the quarter ended March 31, 2014 representing $21,192 was paid and settled on April 4, 2014. The second dividend declared in the quarter ended June 30, 2014 representing $21,192 was paid and settled on July 3, 2014. The third declared in the quarter ended September 30, 2014 representing $21,192 was paid and settled on October 3, 2014. The fourth dividend declared in the quarter ended December 31, 2014 representing $21,192 was paid and settled on January 5, 2015.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

On August 8, 2014, the Company completed a rights offering pursuant to which existing holders of common shares of the Company were entitled to purchase up to C$100,000 aggregate principal amount of unsecured subordinated floating rate Debentures of the Company as of the close of business on August 21, 2014 (see note 11 for further details on the terms of the Debentures issued during the fourth quarter of 2014). The Company estimated the fair value of these rights to be $4,759 and recorded a distribution to shareholders for this amount.

17. Revenue

The Company sub-classifies revenue within the following components: license revenue, professional services revenue, hardware and other revenue, and maintenance and other recurring revenue. Software license revenue is comprised of license fees charged for the use of software products licensed under multiple-year or perpetual arrangements in which the fair value of maintenance and/or professional service fees are determinable. Professional service revenue consists of fees charged for implementation services, custom programming, product training and consulting. Hardware and other revenue includes the resale of third party hardware as part of customized solutions, as well as sales of hardware assembled internally and the reimbursement of travel costs. Maintenance and other recurring revenue primarily consists of fees charged for customer support on software products post-delivery and also includes recurring fees derived from combined software/support contracts, transaction revenues, managed services, and hosted products.

Revenues from the application of contract accounting are typically allocated to license revenue, professional service revenue and hardware and other revenue based on their relative fair values when the amount recognized in the period is determined using the percentage of completion method under contract accounting. During the year ended December 31, 2014 $298,885 (December 31, 2013 - $273,742) of contract revenue was recognized.

18. Finance income and finance costs


	Year ended December 31,
	2014			2013
Gain on sale of available-for-sale financial assets transferred from other comprehensive income	$	(574	)	$	—
Gain on sale of non-current assets		(230	)		(369	)
Other finance income		(3,305	)		(672	)

Finance income	$	(4,109	)	$	(1,041	)

Interest expense on bank indebtedness	$	12,434		$	3,385
Amortization of debt related transaction costs		1,337			516
Other finance costs		2,909			3,223

Finance costs	$	16,680		$	7,124

The Company enters into forward foreign exchange contracts from time to time with the objective of mitigating volatility in profit or loss in respect of financial liabilities. During the period, the Company did not purchase any additional forward foreign exchange contracts. The Company had one forward contract outstanding as at December 31, 2013 with a value of $19,343 and the contract was settled on January 2, 2014.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

During the period, the Company entered into a three year floating-to-fixed interest rate swap to manage its cash-flow interest rate risk associated with the CNH Facility. The Company applied hedge accounting and determined that this is an effective hedge. Payments under the interest rate swap are made quarterly. The notional principal amount of the outstanding floating to fixed interest rate swap contract at December 31, 2014 was €130,000. The fair value of the interest rate swap contract at December 31, 2014 was $546.

19. Earnings per share

Basic and diluted earnings per share


	Year ended December 31,
	2014		2013
Numerator:
Net income	$	103,098	$	93,135
Denominator:
Basic and diluted shares outstanding		21,192		21,192
Earnings per share
Basic and diluted	$	4.87	$	4.39

20. Capital risk management

The Company’s objectives in managing capital are to ensure sufficient liquidity to pursue its strategy of organic growth combined with strategic acquisitions and to provide returns to its shareholders. The Company manages its capital with the objective of ensuring that there are adequate capital resources while maximizing the return to shareholders through the optimization of the debt and equity balance. The capital structure of the Company consists of cash, revolving credit facility, CNH facility, Debentures, TSS membership liability and components of shareholders’ equity including retained earnings and capital stock.

The Company is subject to certain covenants on its revolving credit facility. The covenants include a leverage ratio and an interest coverage ratio, as well as a minimum level of earnings for entities over which the lenders have security. The CNH facility is also subject to certain covenants. The covenants include a leverage ratio, debt service coverage ratio and an interest coverage ratio. The Company monitors the ratios on a quarterly basis. As at December 31, 2014, the Company is in compliance with its debt covenants. Other than the covenants required for the revolving credit facility and the CNH facility, the Company is not subject to any externally imposed capital requirements.

The Board of Directors determine if and when dividends should be declared and paid based on all relevant circumstances, including the desirability of financing further growth of the Company and its financial position at the relevant time. The Board of Directors has adopted a policy to pay quarterly dividends, which commenced in 2012. Constellation intends to declare a regular quarterly dividend to allow shareholders to participate in its free cash flow, while retaining sufficient capital to invest in acquisitions and organic growth. There is no guarantee that dividends will continue to be declared and paid in the future.

The Company makes adjustments to its capital structure in light of general economic conditions, the risk characteristics of the underlying assets and the Company’s working capital requirements. In order to maintain or adjust its capital structure, the Company, upon approval from its Board of Directors, may increase or decrease

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

dividends, increase or decrease the line of credit or undertake other activities as deemed appropriate under the specific circumstances. The Board of Directors reviews and approves any material transactions not in the ordinary course of business, as well as significant acquisitions and other major investments above pre-determined quantitative thresholds.

21. Financial risk management and financial instruments

Overview

The Company is exposed to risks of varying degrees of significance which could affect its ability to achieve its strategic objectives for growth. The main objectives of the Company’s risk management process are to ensure that risks are properly identified and that the capital base is adequate in relation to those risks. The principal financial risks to which the Company is exposed are described below.

Market risk

Market risk is the risk that changes in market prices, such as fluctuations in the equity prices of the Company’s publicly traded investments, foreign exchange rates and interest rates, will affect the Company’s income or the value of its financial instruments.

The Company manages risk related to fluctuations in the market prices of its publicly traded investments by regularly conducting financial reviews of publicly available information to ensure that any risks are within established levels of risk tolerance. The Company does not routinely engage in risk management practices such as hedging, derivatives or short selling with respect to its publicly traded investments.

The Company is exposed to interest rate risk on the utilized portion of its revolving credit facility and its Debentures and does not currently hold any financial instruments that mitigate this risk. Management does not believe that the impact of interest rate and CPI fluctuations relative to the variable interest rate attached to the line-of-credit and its Debentures in consideration of the current and expected level of borrowings will be significant and, therefore, has not provided a sensitivity analysis of the impact of fluctuations on net and comprehensive income.

The Company is also exposed to interest rate risk on the utilized portion of its CNH Facility. As required by our lenders, the Company entered into a floating-to-fixed interest rate swap to manage its cash-flow interest rate risk associated with the CNH Facility. The notional principal amount of the outstanding floating to fixed interest rate swap contract at December 31, 2014 was €130,000.

The Company operates internationally, giving rise to exposure to market risks from changes in foreign exchange rates which impact sales and purchases that are denominated in a currency other than the respective functional currencies of certain of its subsidiaries. The Company currently does not typically use derivative instruments to hedge its exposure to those risks. Most of the Company’s businesses are organized geographically so that many of its expenses are incurred in the same currency as its revenues thus mitigating some of its exposure to currency fluctuations.

The Company enters into forward foreign exchange contracts from time to time with the objective of mitigating volatility in profit or loss in respect of Canadian dollar monetary liabilities associated with the dividend payment. During 2014, the Company did not purchase any additional forward foreign exchange contracts. The Company had one forward contract outstanding as at December 31, 2013 with a value of $19,343 and the contract was settled on January 2, 2014.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

Foreign currency sensitivity analysis:

Foreign currency risk arises on financial instruments that are denominated in a currency other than the functional currency in which they are measured. The Company’s primary exposure with respect to foreign currencies is through the Canadian dollar denominated Debentures (note 11). The carrying value of the Debentures at December 31, 2014 is $78,642 (C$91,554). If there was a 1% strengthening of the Canadian dollar against the U.S. dollar, there would be a corresponding decrease in net income before tax of $786. There would be an equal and opposite impact if there was a 1% weakening of the Canadian dollar against the U.S. dollar.

Liquidity risk

Liquidity risk is the risk that the Company is not able to meet its financial obligations as they fall due or can do so only at excessive cost. The Company manages liquidity risk through the management of its capital structure and financial leverage, as outlined in note 20 to the consolidated financial statements. The Company’s growth is financed through a combination of cash flows from operations and borrowing under the existing credit facilities, TSS Membership Liability and Debentures. One of management’s primary goals is to maintain an optimal level of liquidity through the active management of the assets and liabilities as well as the cash flows from operations. The details of the Company’s revolving credit facility, CNH facility, Debentures, and TSS membership liability are disclosed in note 10, note 11 and note 12 to the consolidated financial statements. As at December 31, 2014, available credit in respect of the Company’s revolving credit facility was $221,449.

The majority of the Company’s financial liabilities recorded in accounts payable and accrued liabilities are due within 60 days. The Company also has payment processing liabilities which are settled within a few days of year-end. Included in cash is an equivalent cash balance of $10,622 (December 31, 2013 - $11,155) that is held to settle these payment processing liabilities as they become due. Holdbacks payable related to business acquisitions are due within six months to two years.

Given the Company’s available liquid resources and credit capacity as compared to the timing of the payments of liabilities, management assesses the Company’s liquidity risk to be low.

Credit risk

Credit risk represents the financial loss that the Company would experience if a counterparty to a financial instrument, in which the Company has an amount owing from the counterparty failed to meet its obligations in accordance with the terms and conditions of its contracts with the Company. The carrying amount of the Company’s financial assets, including receivables from customers, represents the Company’s maximum credit exposure.

The majority of the accounts receivable balance relates to maintenance invoices to customers that have a history of payment. In addition, a large proportion of the Company’s accounts receivable is with public sector government agencies where the credit risk has historically been assessed to be low.

The maximum exposure to credit risk for accounts receivables at the reporting date by geographic region was:

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013


	December 31, 2014		December 31, 2013
United States	$	107,097	$	113,697
Canada		22,715		9,908
United Kingdom		19,310		14,139
Europe		40,562		47,857
Other		10,372		5,845

	$	200,056	$	191,446

The maximum exposure to credit risk for accounts receivable at the reporting date by reportable segment was:


	December 31, 2014		December 31, 2013
Public		138,485		142,991
Private		61,571		48,455

	$	200,056	$	191,446

The aging of accounts receivables at the reporting date was:

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013


	December 31, 2014			December 31, 2013
Current
Gross		161,088			146,463
Impairment		(483	)		(373	)

Net		160,605			146,090
90-180 days
Gross		30,747			30,129
Impairment		(1,062	)		(998	)

Net		29,685			29,131
More than 180 days
Gross		17,930			24,437
Impairment		(8,164	)		(8,212	)

Net		9,766			16,225
Total accounts receivable
Gross		209,765			201,029
Impairment		(9,709	)		(9,583	)

Net		200,056			191,446

An allowance account for accounts receivable is used to record impairment losses unless the Company is satisfied that no recovery of the amount owing is possible; at which point the amounts are considered to be uncollectible and are written off against the specific accounts receivable amount attributable to a customer. The number of days outstanding of an individual receivable balance is the key indicator for determining whether an account is at risk of being impaired.

The movement in the allowance for impairment in respect of accounts receivable during the year ended:


	2014			2013
Balance at January 1	$	9,583		$	8,569
Impairment loss recognized		3,522			7,976
Impairment loss reversed		(759	)		(4,007	)
Amounts written off		(2,206	)		(2,955	)
Other movements		(431	)		—

Balance at December 31	$	9,709		$	9,583

There is no concentration of credit risk because of the Company’s diverse and disparate number of customers with individual receivables that are not significant to the Company on a consolidated basis. In addition the Company typically requires up front deposits from customers to protect against credit risk.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

The Company manages credit risk related to cash by maintaining the majority of the Company’s bank accounts with Schedule 1 banks.

In the ordinary course of business the Company and its subsidiaries have provided performance bonds and other guarantees for the completion of certain customer contracts. The Company has not experienced a loss to date and future losses are not anticipated; therefore, no liability has been recorded in the consolidated statements of financial position related to these types of indemnifications or guarantees at December 31, 2014.

Fair values versus carrying amounts

The carrying values of cash, accounts receivable, accounts payable, accrued liabilities, the majority of acquisition holdbacks and revolving line of credit, approximate their fair values due to the short-term nature of these instruments. Bank debt is subject to market interest rates.

The Company has capitalized transaction costs associated with its current revolving credit facility and CNH Facility. As a result at December 31, 2014, the fair value of the line of credit is $64,500 and the carrying value $63,894. (December 31, 2013: fair value $149,200, carrying value $148,075). The fair value and carrying value of the TSS Acquisition Facility is $nil as at December 31, 2014 (December 31, 2013: fair value of $329,438, carrying value is $329,095). As at December 31, 2014, the fair value of the CNH Facility is $158,015 and the carrying value is $152,086. As at December 31, 2014, the fair value of the Debentures is $93,322 and the carrying value is $78,642.

The fair value of available-for-sale equity investment at the reporting date is determined by the quoted market value (note 5).

Fair value hierarchy

The table below analyzes financial instruments carried at fair value, by valuation method.

•

level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities;

•

level 2 inputs are inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly (i.e. prices) or indirectly (i.e. derived from prices); and

•

level 3 inputs are inputs for the asset or liability that are not based on observable market data (i.e. unobservable inputs).

In the table below, the Company has segregated all financial assets and liabilities that are measured at fair value into the most appropriate level within the fair value hierarchy based on the inputs used to determine the fair value at the measurement date.

Financial assets and financial liabilities measured at fair value as at December 31, 2014 and December 31, 2013 in the financial statements are summarized below. The Company has no additional financial liabilities measured at fair value initially other than those recognized in connection with business combinations.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013


	December 31, 2014								December 31, 2013
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Equity securities	$	—	$	—	$	—	$	—	$	780	$	—	$	—	$	780

		—		—		—		—		780		—		—		780

Liabilities
Contingent consideration	$	—	$	—	$	23,534	$	23,534	$	—	$	—	$	18,452	$	18,452
Interest rate swap contract		—		546		—		546		—		—		—		—
Foreign forward exchange contract		—		—		—		—		—		179		—		179

		—		546		23,534		24,080		—		179		18,452		18,631

There were no transfers of fair value measurements between level 1, 2 and level 3 of the fair value hierarchy in the years ended December 31, 2014 and 2013.

The following table shows a reconciliation from the beginning balances to the ending balances for fair value measurements in Level 3 of the fair value hierarchy.


Balance at January 1, 2014	18,452
Increase from business acquisitions	9,728
Cash payments	(3,784	)
Charges through profit or loss	(185	)
Foreign exchange	(677	)

Balance at December 31, 2014	23,534

Estimates of the fair value of contingent consideration is performed by the Company on a quarterly basis. Key unobservable inputs include revenue growth rates and the discount rates applied (8% to 11%). The estimated fair value increases as the annual growth rate increases and as the discount rate decreases and vice versa.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

22. Operating leases

The Company leases premises and certain equipment and automobiles under operating leases. The operating rental expense for the year ended December 31, 2014 was $32,941 (2013 - $23,151). The annual minimum lease commitments are as follows:


	December 31, 2014		December 31, 2013
Less than 1 year	$	39,776	$	38,306
Between 1 and 5 years		86,857		79,740
More than 5 years		23,758		21,905

Total	$	150,391	$	139,951

23. Operating segments

Segment information is presented in respect of the Company’s business and geographical segments. The accounting policies of the segments are the same as those described in the significant accounting policies section of these consolidated financial statements.

Reportable segments

The Company has six operating segments, referred to as Operating Groups by the Company, being Volaris, Harris, TSS, Jonas, Perseus, and Vela. The operating segments are aggregated into two reportable segments in accordance with IFRS 8 Operating Segments. The Company‘s Public Sector segment develops and distributes software solutions primarily to government and government-related customers. The Company‘s Private Sector segment develops and distributes software solutions primarily to commercial customers.

During fiscal 2013, the Company had seven operating segments. During 2014, two of the Company’s operating groups (Friedman and Emphasys) have been combined to form a new operating segment, Vela. During 2014, the operating results of Friedman and Emphasys are reviewed by the Company’s President and Chairman of the Board of Directors as a single operating group to make decisions about resources to be allocated to that operating group and assessing its performance. Vela has been included in the Private Sector. Comparatives have been restated to reflect this change.

The determination that the Company has two reportable segments is based primarily on the assessment that differences in economic cycles and procedures for securing contracts between our governmental clients and commercial, or private sector clients, are significant, thus warranting distinct segmented disclosures.

Corporate head office operating expenses are allocated to the Company’s segments based on the segment’s percentage of total consolidated revenue for the allocation period.

Intercompany expenses (income) represent Constellation head office management fees and intercompany interest charged on related borrowings to the reportable segments.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013


Year ended December 31, 2014	Public Sector			Private Sector			Other			Consolidated Total
Revenue	$	1,171,608		$	497,736		$	—		$	1,669,344
Expenses
Staff		626,090			255,497			—			881,587
Hardware		65,676			13,856			—			79,532
Third party licenses, maintenance and professional services		89,742			62,449			—			152,191
Occupancy		28,021			13,022			—			41,043
Travel		36,666			13,478			—			50,144
Telecommunications		10,014			6,342			—			16,356
Supplies		29,391			7,436			—			36,827
Professional fees		16,007			6,837			—			22,844
Other, net		16,639			7,639			—			24,278
Depreciation		12,828			3,619			15			16,462
Amortization of intangible assets		115,705			57,481			—			173,186

		1,046,779			447,656			15			1,494,450
Foreign exchange (gain) loss		3,753			(429	)		7,204			10,528
Equity in net (income) loss of equity investees		—			—			(830	)		(830	)
Finance income		(2,111	)		(1,430	)		(568	)		(4,109	)
Bargain purchase gain		(2,246	)		—			—			(2,246	)
Finance costs		5,708			1,863			9,109			16,680
Intercompany expenses (income)		29,651			15,543			(45,194	)		—

		34,755			15,547			(30,279	)		20,023
Profit before income tax		90,074			34,533			30,264			154,871
Current income tax expense (recovery)		40,567			16,377			(5,402	)		51,542
Deferred income tax expense (recovery)		(6,067	)		(826	)		7,124			231

Income tax expense (recovery)		34,500			15,551			1,722			51,773

Net income		55,574			18,982			28,542			103,098


December 31, 2014	Public Sector			Private Sector			Other			Consolidated Total
Current assets		290,783			100,554			19,421			410,758
Current liabilities		464,839			200,381			93,627			758,847

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013


Year ended December 31, 2013	Public Sector			Private Sector			Other			Consolidated Total
Revenue	$	809,780		$	400,996		$	—		$	1,210,776
Expenses
Staff		426,248			217,424			—			643,672
Hardware		64,027			9,448			—			73,475
Third party licenses, maintenance and professional services		54,378			47,999			—			102,377
Occupancy		19,777			9,532			—			29,309
Travel		34,453			10,271			—			44,724
Telecommunications		9,149			5,059			—			14,208
Supplies		16,952			5,071			—			22,023
Professional fees		11,826			5,807			—			17,633
Other, net		10,278			9,315			—			19,593
Depreciation		6,991			2,913			40			9,944
Amortization of intangible assets		74,189			44,955			—			119,144

		728,268			367,794			40			1,096,102
Foreign exchange (gain) loss		(1,222	)		166			288			(768	)
Equity in net (income) loss of equity investees		—			—			(780	)		(780	)
Finance income		(577	)		(418	)		(46	)		(1,041	)
Bargain purchase gain		(8,111	)		—			—			(8,111	)
Finance costs		1,111			1,238			4,775			7,124
Intercompany expenses (income)		18,924			14,192			(33,116	)		—

		10,125			15,178			(28,879	)		(3,576	)
Profit before income tax		71,387			18,024			28,839			118,250
Current income tax expense (recovery)		13,832			12,466			(3,770	)		22,528
Deferred income tax expense (recovery)		3,873			(2,211	)		925			2,587

Income tax expense (recovery)		17,705			10,255			(2,845	)		25,115

Net income		53,682			7,769			31,684			93,135


December 31, 2013	Public Sector			Private Sector			Other			Consolidated Total
Current assets		305,783			88,234			18,164			412,181
Current liabilities		431,702			172,026			505,128			1,108,856

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

Geographical segments

The public and private sector segments are managed on a worldwide basis, but operate in three principal geographical areas, Canada, USA, and UK/Europe.

In presenting information on the basis of geographical segments, segment revenue is based on the region in which the revenue is transacted and intellectual property is located. Segment assets are based on the geographic locations of the assets.


Year ended December 31, 2014	Canada		USA		UK/Europe		Other		Total
Revenue	$	199,770	$	872,439	$	524,103	$	73,032	$	1,669,344
Non-current assets		131,897		342,883		500,541		47,046		1,022,367

Year ended December 31, 2013	Canada		USA		UK/Europe		Other		Total
Revenue	$	183,105	$	740,199	$	246,807	$	40,665	$	1,210,776
Non-current assets		99,171		406,541		568,647		51,164		1,125,523

Major customers

No customer represents revenue in excess of 5% of total revenue in both years ended December 31, 2014 and 2013.

24. Contingencies

In the normal course of operations, the Company is subject to litigation and claims from time to time. The Company may also be subject to lawsuits, investigations and other claims, including environmental, labour, product, customer disputes and other matters. Management believes that adequate provisions have been recorded in the accounts where required. Although it is not always possible to estimate the extent of potential costs, if any, management believes that the ultimate resolution of such contingencies will not have a material adverse impact on the results of operations, financial position or liquidity of the Company.

On September 30, 2008, the Company acquired certain assets and liabilities of Maximus Inc.’s Asset, Justice, and Education Solutions businesses (“MAJES”) including certain long-term contracts that contained contingent liabilities that the Company believed were unlikely to exceed $16,000 in the aggregate. The contingent liabilities related to liquidated damages contractually available to customers for breaches of contracts by MAJES and for estimated damages available to customers for breaches of such contracts by MAJES where such contracts did not contain specified penalties. The contingent liabilities represented the difference between the maximum financial liabilities potentially due to customers less the amounts accrued in connection with the contracts assumed on acquisition. Beginning in February 2011, MAXIMUS Inc. (“Maximus”) and a subsidiary of the Company, as a result of receiving a letter from a customer, initiated the dispute resolution process under the customer’s contract. The customer alleged that the subsidiary of the Company and Maximus failed to provide the services and products required to be delivered under the contract. In December 2012, the subsidiary of the Company obtained a favorable arbitration ruling in the amount of $10,000 which was subsequently reduced in July 2013 to $6,000 by a court judgment. The July 2013 court ruling also resolved an additional claim filed by the customer alleging no contract existed between

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

the parties. In September 2013 the customer initiated the appeals process in relation to the July 2013 court ruling. In September 2014 the customer and the subsidiary of the Company reached a settlement resulting in the customer making a payment in the amount of $3,800 and issuing a full release from further litigation on the matter and the claim was terminated. The proceeds of $3,800 has been recorded as Professional services revenue in the consolidated statements of income. The remaining contingent liabilities related to the acquired MAJES contracts is $4,000.

In July 2012, a subsidiary of Constellation received a notice of reassessment for the 2004 taxation year from the Canadian tax authorities (“CRA”) which increased taxable income of the subsidiary by approximately $20,000 relating to a gain on the sale of property between entities under common control. As a result of the notice of reassessment, the CRA has determined that the subsidiary owes approximately $6,000 in federal tax and interest and approximately $5,000 in provincial tax and interest. In order to appeal the reassessment, the subsidiary paid $8,000 in September 2012 representing 50% of the amount owing from the federal reassessment and 100% of the amount owing from the provincial reassessment. At this stage, the Company believes the proposed reassessment is without merit and is challenging the reassessment. In February 2013 the Company filed an appeal with the Tax Court of Canada. The Company believes that it has adequately provided for the probable outcome in respect of this matter and as such no additional provision has been recorded in these financial statements during the period. There is no assurance, however, that the Company’s appeal will be successful and, if unsuccessful, the Company’s future financial results and tax expense could be adversely affected. The $8,000 payment made in September 2012 has been recorded in other non-current assets, representative of the deposit on account.

25. Guarantees

(a)

In the ordinary course of business the Company and its subsidiaries have provided performance bonds and other guarantees for the completion of certain customer contracts. The total obligations of the Company pursuant to such bonds and related contingencies total $52,144 (2013 - $49,219). No liability has been recorded in the consolidated financial statements.

(b)

As at December 31, 2014, in the normal course of business, the Company and its subsidiaries have outstanding letters of credit totalling $14,051 (2013 - $5,000).

(c)

In the normal course of business, some of the Company’s subsidiaries entered into lease agreements for facilities. As the joint lessees, the subsidiaries agree to indemnify the lessor for liabilities that may arise from the use of the leased facility. The maximum amount potentially payable under the foregoing indemnity cannot be reasonably estimated. The subsidiaries have liability insurance that relates to the indemnifications.

(d)

The Company and its subsidiaries have provided routine indemnifications to some of its customers against liability if the Company’s product infringes on a third party’s intellectual property rights. The maximum exposure from the indemnifications cannot be reasonably estimated.

CONSTELLATION SOFTWARE INC.

Notes to Consolidated Financial Statements

(In thousands of U.S. dollars, except per share amounts and as otherwise indicated)

Years ended December 31, 2014 and 2013

26. Changes in non-cash operating working capital


	Year ended
	December 31,
	2014			2013
Decrease (increase) in accounts receivable	$	5,749		$	(5,737	)
Decrease (increase) in work in progress		4,439			(4,703	)
Decrease (increase) in other current assets		(7,417	)		(15,619	)
Decrease (increase) in inventory		(3,871	)		(45	)
Decrease (increase) in non-current assets		(958	)		244
Increase (decrease) in other non-current liabilities		(2,726	)		708
Increase (decrease) increase in accounts payable and accrued liabilities, excluding holdbacks from acquisitions		(21,490	)		23,157
Increase (decrease) in deferred revenue		22,252			3,081
Increase (decrease) in provisions		2,309			(567	)

	$	(1,713	)	$	519

27. Related parties

Key management personnel compensation

The key management personnel of the Company, inclusive of the operating segments, are the members of the Company’s executive management team at the Company operating segments and head office and Board of Directors, and control approximately 11% of the outstanding shares of Constellation.


	Years ended December 31,
	2014		2013
Salaries, bonus and employee benefits	$	12,124	$	14,082

Total	$	12,124	$	14,082

If terminated for other than just cause, each executive officer, is entitled to either up to 12 months prior written notice or payment in an amount equal to up to 12 months salary (or in the case of the Chief Operating Officer, 12 months total compensation) at the rate in effect at the time of his or her termination. There were no post-employment benefits, other long-term benefits, or share-based payments attributed to the key management personnel in 2014 and 2013.

28. Subsequent events

On February 25, 2015 the Company declared a $1.00 per share dividend that is payable on April 3, 2015 to all common shareholders of record at close of business on March 18, 2015.

Exhibit 2.3

CONSTELLATION SOFTWARE INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS (“MD&A”)

The following discussion and analysis should be read in conjunction with the Annual Consolidated Financial Statements for the year ended December 31, 2014, which we prepared in accordance with International Financial Reporting Standards (“IFRS”). Certain information included herein is forward-looking and based upon assumptions and anticipated results that are subject to uncertainties. Should one or more of these uncertainties materialize or should the underlying assumptions prove incorrect, actual results may vary significantly from those expected. See “Forward-Looking Statements” and “Risks and Uncertainties”.

Unless otherwise indicated, all dollar amounts are expressed in U.S. dollars. All references to “$” are to U.S. dollars and all references to “C$” are to Canadian dollars. Certain totals, subtotals and percentages may not reconcile due to rounding.

Additional information about Constellation Software Inc. (the “Company” or “Constellation”), including our most recently filed Annual Information Form (“AIF”), is available on SEDAR at www.sedar.com.

Forward Looking Statements

Certain statements in this report may contain “forward looking” statements that involve risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company or industry to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Words such as “may”, “will”, “expect”, “believe”, “plan”, “intend”, “should”, “anticipate” and other similar terminology are intended to identify forward looking statements. These statements reflect current assumptions and expectations regarding future events and operating performance as of the date of this MD&A, February 25, 2015. Forward looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to vary significantly from the results discussed in the forward looking statements, including, but not limited to, the factors discussed under “Risks and Uncertainties”. Although the forward looking statements contained in this MD&A are based upon what management of the Company believes are reasonable assumptions, the Company cannot assure investors that actual results will be consistent with these forward looking statements. These forward looking statements are made as of the date of this MD&A and the Company assumes no obligation, except as required by law, to update any forward looking statements to reflect new events or circumstances. This report should be viewed in conjunction with the Company’s other publicly available filings, copies of which can be obtained electronically on SEDAR at www.sedar.com.

Non-IFRS Measures

This MD&A includes certain measures which have not been prepared in accordance with IFRS such as Adjusted EBITA, Adjusted EBITA margin, Adjusted net income, Adjusted net income margin, Average Invested Capital, ROIC and Net Revenue.

The term ‘‘Adjusted EBITA’’ refers to net income before adjusting for finance and other income, finance costs, income taxes, share in net income or loss of equity investees, impairment of non-financial assets, amortization, and foreign exchange gain or loss. The Company believes that Adjusted EBITA is useful supplemental information as it provides an indication of the results generated by the Company’s main business activities prior to taking into consideration how those activities are financed and taxed and also prior to taking into consideration intangible asset amortization and the other items listed above. ‘‘Adjusted EBITA margin’’ refers to the percentage that Adjusted EBITA for any period represents as a portion of total revenue for that period. Prior to December 2013, the Company had reported “Adjusted EBITDA” in its MD&A. Adjusted EBITDA refers to Adjusted EBITA as defined above then further excludes depreciation. The Company uses

depreciation as a proxy for the cash flows used to purchase property and equipment required to support the Company’s main business activities. As such, the Company believes Adjusted EBITA is a more useful measure then Adjusted EBITDA.

“Adjusted net income” means net income adjusted for non-cash expenses (income) such as amortization of intangible assets, deferred income taxes, and certain other expenses (income). The Company believes that Adjusted net income is useful supplemental information as it provides an indication of the results generated by the Company’s main business activities prior to taking into consideration amortization of intangible assets, deferred income taxes, and certain other non-cash expenses (income) incurred or recognized by the Company from time to time. “Adjusted net income margin” refers to the percentage that Adjusted net income for any period represents as a portion of total revenue for that period.

Adjusted EBITA and Adjusted net income are not recognized measures under IFRS and, accordingly, readers are cautioned that Adjusted EBITA and Adjusted net income should not be construed as alternatives to net income determined in accordance with IFRS. The Company’s method of calculating Adjusted EBITA and Adjusted net income may differ from other issuers and, accordingly, Adjusted EBITA and Adjusted net income may not be comparable to similar measures presented by other issuers. See “Results of Operations —Adjusted EBITA” and “— Adjusted net income’’ for a reconciliation of Adjusted EBITA and Adjusted net income to Net income.

“Average Invested Capital” represents the average equity capital of the Company, and is based on the Company’s estimate of the amount of money that its common shareholders had invested in CSI. Subsequent to that estimate, each period the Company has kept a running tally, adding Adjusted net income, subtracting any dividends, adding any amounts related to share issuances and making some minor adjustments, including adjustments relating to our use of certain incentive programs and the amortization of impaired intangibles. The Company believes that Average Invested Capital is a useful measure as it approximates the retained earnings of the Company’s prior to taking into consideration amortization of intangible assets, deferred income taxes, and certain other non-cash expenses (income) incurred or recognized by the Company from time to time.

“ROIC” means Return on Invested Capital and represents a ratio of Adjusted net income to Average Invested Capital. The Company believes this is a useful profitability measure as it excludes non-cash expenses (income) from both the numerator and denominator.

“Net Revenue”. Net Revenue is gross revenue for IFRS purposes less any third party and flow-through expenses. The Company believes Net Revenue is a useful measure since it captures 100% of the license, maintenance and services revenues associated with Constellation’s own products, and only the margin on the lower value-added revenues such as commodity hardware or third party software.

Overview

We acquire, manage and build vertical market software (“VMS”) businesses. Generally, these businesses provide mission critical software solutions that address the specific needs of our customers in particular markets. Our focus on acquiring businesses with growth potential, managing them well and then building them, has allowed us to generate significant cash flows and revenue growth during the past several years.

Our revenue consists primarily of software license fees, maintenance and other recurring fees, professional service fees and hardware sales. Software license revenue is comprised of license fees charged for the use of our software products generally licensed under multiple-year or perpetual arrangements in which the fair value of maintenance and/or professional service fees are determinable, where applicable. Maintenance and other recurring revenue primarily consists of fees charged for customer support on our software products post-delivery and also includes, to a lesser extent, recurring fees derived from software as a service, subscriptions, combined software/support contracts, transaction-related revenues, and hosted products. Maintenance and other

recurring fee arrangements generally include ongoing customer support and rights to certain product updates “when and if available” and products sold on a subscription basis. Professional service revenue consists of fees charged for implementation and integration services, customized programming, product training and consulting. Hardware sales include the resale of third party hardware that forms part of our customer solutions, as well as sales of customized hardware assembled internally. Our customers typically purchase a combination of software, maintenance, professional services and hardware, although the type, mix and quantity of each vary by customer and by product.

Expenses consist primarily of staff costs, the cost of hardware, third party licenses, maintenance and professional services to fulfill our customer arrangements, travel and occupancy costs and other general operating expenses.

Results of Operations

(In millions of dollars, except percentages and per share amounts)


	Three months ended December 31,						Period-Over- Period Change						Fiscal Year ended December 31,						Period-Over- Period Change						Year ended December 31,
	2014			2013			$			%			2014			2013			$			%			2012
	(Unaudited)
Revenue		439.8			340.3			99.5			29	%		1,669.3			1,210.8			458.6			38	%		891.2
Expenses		335.8			264.2			71.6			27	%		1,321.3			977.0			344.3			35	%		712.9
Adjusted EBITA		103.9			76.1			27.9			37	%		348.1			233.8			114.3			49	%		178.3
Adjusted EBITA margin		24	%		22	%								21	%		19	%
Amortization of intangible assets		43.2			29.1			14.1			48	%		173.2			119.1			54.0			45	%		85.1
Foreign exchange (gain) loss		1.8			(1.3	)		3.1			NM			10.5			(0.8	)		11.3			NM			0.8
Share in net (income) loss of equity investees		(0.1	)		(0.1	)		(0.0	)		18	%		(0.8	)		(0.8	)		(0.1	)		6	%		0.8
Finance and other income		(1.4	)		(0.2	)		(1.2	)		745	%		(4.1	)		(1.0	)		(3.1	)		295	%		(23.2	)
Bargain purchase gain		(2.2	)		(8.1	)		5.9			-72	%		(2.2	)		(8.1	)		5.9			-72	%		—
Finance costs		5.8			2.2			3.6			169	%		16.7			7.1			9.6			134	%		4.0

Income before income taxes		56.9			54.5			2.4			4	%		154.9			118.3			36.6			31	%		110.7
Income taxes expense (recovery)
Current income tax expense (recovery)		11.3			6.3			5.0			79	%		51.5			22.5			29.0			129	%		23.6
Deferred income tax expense (recovery)		6.3			5.7			0.6			10	%		0.2			2.6			(2.4	)		-91	%		(5.6	)

Income tax expense (recovery)		17.6			12.0			5.6			46	%		51.8			25.1			26.7			106	%		18.1
Net income		39.3			42.5			(3.1	)		-7	%		103.1			93.1			10.0			11	%		92.6
Adjusted net income		86.6			69.2			17.4			25	%		274.3			206.8			67.5			33	%		172.2
Adjusted net income margin		20	%		20	%								16	%		17	%
Weighted average number of shares outstanding (000’s)
Basic and diluted		21,192			21,192									21,192			21,192									21,192
Net income per share
Basic and diluted	$	1.86		$	2.00		$	(0.15	)		-7	%	$	4.87		$	4.39		$	0.47			11	%	$	4.37
Adjusted EBITA per share
Basic and diluted	$	4.90		$	3.59		$	1.31			37	%	$	16.43		$	11.03		$	5.39			49	%	$	8.41
Adjusted net income per share
Basic and diluted	$	4.09		$	3.26		$	0.82			25	%	$	12.94		$	9.76		$	3.19			33	%	$	8.13
Cash dividends declared per share
Basic and diluted	$	1.00		$	1.00		$	—			0	%	$	4.00		$	4.00		$	—			0	%	$	4.00
Total assets														1,433.1			1,537.7			(104.6	)		-7	%		812.7
Total long-term liabilities														414.4			162.8			251.6			154	%		81.3

NM - Not meaningful

Comparison of the three and twelve month periods ended December 31, 2014 and 2013

Revenue:

Total revenue for the quarter ended December 31, 2014 was $439.8 million, an increase of 29%, or $99.5 million, compared to $340.3 million for the comparable period in 2013. For the 2014 fiscal year total revenues were $1,669.3 million, an increase of 38%, or $458.6 million, compared to $1,210.8 million for the comparable period in 2013. The increase for both the three and twelve month periods compared to the same periods in the prior year is mainly attributable to growth from acquisitions, however, the Company did experience positive organic growth

of 0.5% and 4%, respectively. For acquired companies, organic growth is calculated as the difference between actual revenues achieved by each company in the financial period following acquisition compared to the revenues they achieved in the corresponding financial period preceding the date of acquisition by Constellation. For the quarter ended December 31, 2014 the appreciation of the US dollar against most major currencies in which the Company transacts business resulted in an approximate 3.6% reduction in the Company’s organic growth rate. The impact to the full year 2014 organic growth rate was immaterial.

The following table displays the breakdown of our revenue according to revenue type:


	Three months ended December 31,				Period-Over- Period Change						Fiscal Year ended December 31,				Period-Over- Period Change
	2014		2013		$			%			2014		2013		$		%
	($M, except percentages)										($M, except percentages)
Licenses		33.7		30.1		3.6			12	%		118.9		101.7		17.2		17	%
Professional services		105.4		71.9		33.5			47	%		396.1		256.7		139.4		54	%
Hardware and other		37.5		37.6		(0.1	)		0	%		139.3		127.9		11.5		9	%
Maintenance and other recurring		263.1		200.6		62.5			31	%		1,015.0		724.5		290.5		40	%

		439.8		340.3		99.5			29	%		1,669.3		1,210.8		458.6		38	%

$M - Millions of dollars

We aggregate our business into two distinct segments for financial reporting purposes: (i) the public sector reportable segment, which includes business units focused primarily on government and government-related customers, and (ii) the private sector reportable segment, which includes business units focused primarily on commercial customers.

The following table displays our revenue by reportable segment and the percentage change for the three and twelve months ended December 31, 2014 compared to the same periods in 2013:


	Three months ended December 31,				Period-Over- Period Change						Fiscal Year ended December 31,				Period-Over- Period Change
	2014		2013		$			%			2014		2013		$		%
	($M, except percentages)										($M, except percentages)
Public Sector
Licenses		22.1		20.7		1.5			7	%		77.5		65.6		11.9		18	%
Professional services		87.4		55.8		31.6			57	%		327.0		198.2		128.8		65	%
Hardware and other		30.5		33.0		(2.5	)		-8	%		116.3		111.1		5.2		5	%
Maintenance and other recurring		165.3		121.6		43.7			36	%		650.7		434.9		215.8		50	%

		305.3		231.0		74.3			32	%		1,171.6		809.8		361.8		45	%

Private Sector
Licenses		11.5		9.4		2.1			22	%		41.3		36.1		5.3		15	%
Professional services		18.0		16.1		1.9			12	%		69.1		58.6		10.5		18	%
Hardware and other		7.1		4.7		2.4			51	%		23.0		16.8		6.2		37	%
Maintenance and other recurring		97.8		79.0		18.8			24	%		364.3		289.6		74.7		26	%

		134.5		109.2		25.2			23	%		497.7		401.0		96.7		24	%

Comparative figures have been reclassified to conform to the current year’s presentation.

Public Sector

For the quarter ended December 31, 2014, total revenue in the public sector reportable segment increased 32%, or $74.3 million to $305.3 million, compared to $231.0 million for the quarter ended December 31, 2013. For the fiscal year ended December 31, 2014, total revenue increased by 45%, or $361.8 million to $1,171.6 million, compared to $809.8 million for the comparable period in 2013. Total revenue growth from acquired businesses contributed approximately $75 million to our Q4 2014 revenues and $334 million to our fiscal year ended December 31, 2014 revenues compared to the same periods in 2013, as we completed 30 acquisitions since the beginning of 2013. Organic revenue growth was -0.3% in Q4 2014 and 3% for the fiscal year ended December 31, 2014 compared to the same periods in 2013. For the quarter ended December 31, 2014 the appreciation of the US dollar against most major currencies in which the Company transacts business resulted in an approximate 4.1% reduction in the public sector revenue organic growth rate. The impact to the full year 2014 organic growth rate was immaterial.

Private Sector

For the quarter ended December 31, 2014, total revenue in the private sector reportable segment increased 23%, or $25.2 million to $134.5 million, compared to $109.2 million for the quarter ended December 31, 2013. For the fiscal year ended December 31, 2014, total revenue increased by 24%, or $96.7 million to $497.7 million, compared to $401.0 million for the comparable period in 2013. Total revenue growth from acquired businesses contributed approximately $23 million to our Q4 2014 revenues and $80 million to our fiscal year ended December 31, 2014 revenues compared to the same periods in 2013, as we completed 23 acquisitions since the beginning of 2013. Organic revenue growth was 2% in Q4 2014 and 4% for the fiscal year ended December 31, 2014 compared to the same periods in 2013. For the quarter ended December 31, 2014 the appreciation of the US dollar against most major currencies in which the Company transacts business resulted in an approximate 2.5% reduction in the private sector revenue organic growth rate. The impact to the full year 2014 organic growth rate was immaterial.

Expenses:

The following table displays the breakdown of our expenses:


	Three months ended December 31,				Period-Over- Period Change						Fiscal Year ended December 31,				Period-Over- Period Change
	2014		2013		$			%			2014		2013		$		%
	($M, except percentages)										($M, except percentages)
Expenses
Staff		218.3		169.8		48.5			29	%		881.6		643.7		237.9		37	%
Hardware		22.8		20.4		2.4			12	%		79.5		73.5		6.1		8	%
Third party license, maintenance and professional services		39.7		30.5		9.2			30	%		152.2		102.4		49.8		49	%
Occupancy		10.6		8.1		2.5			31	%		41.0		29.3		11.7		40	%
Travel		13.9		12.9		1.0			8	%		50.1		44.7		5.4		12	%
Telecommunications		4.2		4.0		0.3			7	%		16.4		14.2		2.1		15	%
Supplies		10.7		6.6		4.1			61	%		36.8		22.0		14.8		67	%
Professional fees		6.3		6.4		(0.1	)		-2	%		22.8		17.6		5.2		30	%
Other, net		5.0		2.7		2.3			87	%		24.3		19.6		4.7		24	%
Depreciation		4.2		2.7		1.5			57	%		16.5		9.9		6.5		66	%

		335.8		264.2		71.6			27	%		1,321.3		977.0		344.3		35	%

Overall expenses for the quarter ended December 31, 2014 increased 27%, or $71.6 million to $335.8 million, compared to $264.2 million during the same period in 2013. As a percentage of total revenue, expenses decreased to 76% for the quarter ended December 31, 2014 from 78% for the same period in 2013. During the fiscal year ended December 31, 2014, expenses increased 35%, or $344.3 million to $1,321.3 million, compared to $977.0 million during the same period in 2013. As a percentage of total revenue, expenses decreased to 79% for the fiscal year ended December 31, 2014 from 81% for the same period in 2013. Our average employee headcount grew 38% in 2014 from 6,721 for the quarter ended December 31, 2013 to 9,251 for the quarter ended December 31, 2014 primarily due to acquisitions.

Staff expense – Staff expenses increased 29% or $48.5 million for the quarter ended December 31, 2014 and 37% or $237.9 million for the fiscal year ended December 31, 2014 over the same periods in 2013. Staff expense can be broken down into five key operating departments: Professional Services, Maintenance, Research and Development, Sales and Marketing, and General and Administrative. Included within staff expenses for each of the above five departments are personnel and related costs associated with providing the necessary services. The table below compares the period over period variances.


	Three months ended December 31,				Period-Over- Period Change					Fiscal Year ended December 31,				Period-Over- Period Change
	2014		2013		$		%			2014		2013		$		%
	($M, except percentages)									($M, except percentages)
Professional services		54.2		39.6		14.5		37	%		221.9		148.4		73.5		50	%
Maintenance		39.6		31.7		8.0		25	%		157.2		121.4		35.8		29	%
Research and development		61.0		46.3		14.7		32	%		248.8		175.2		73.6		42	%
Sales and marketing		31.3		25.0		6.3		25	%		119.3		93.1		26.2		28	%
General and administration		32.2		27.2		4.9		18	%		134.4		105.6		28.8		27	%

		218.3		169.8		48.5		29	%		881.6		643.7		237.9		37	%

The increase in staff expenses across all of our operating departments was primarily due to the growth in the number of employees compared to the same periods in 2013 primarily due to acquisitions. In addition, severance of approximately $6.5 million and $13.1 million for the three and twelve months ended December 31, 2014 respectively, relating to a transformation program at Total Specific Solutions (TSS) B.V. (“TSS”) was also recorded. The majority of this program is now complete and the associated severance expense for 2015 is expected to be approximately $5 million. The TSS acquisition had a proportionately higher number of professional services headcount and related revenue than our typical VMS businesses, which is contributing to the disproportionate increase to the expense in that department. Also, TSS currently has a greater proportion of headcount dedicated to research and development than our other VMS businesses. The negative impact of severance expenses was partially offset by a $4.1 million adjustment made in Q4 2014 to an accrual for incurred but not received US benefits claims to reflect the improvement in the Company’s actual claims experience during 2014.

Hardware expenses – Hardware expenses increased 12% or $2.4 million for the quarter ended December 31, 2014 and 8% or $6.1 million for the fiscal year ended December 31, 2014 over the same periods in 2013. Hardware margins for the three and twelve months ended December 31, 2014 were 39% and 43% respectively as compared to 46% and 43% respectively, for the same periods in 2013.

Third party license, maintenance and professional services expenses – Third party license, maintenance and professional services expenses increased 30% or $9.2 million for the quarter ended December 31, 2014 and 49% or $49.8 million for the fiscal year ended December 31, 2014 over the same periods in 2013. The increase is primarily due to an increase in maintenance and other recurring revenue for the three and twelve months ended December 31, 2014 compared to the same period in 2013. Expenses for the fiscal year ended December 31, 2014 have increased at a rate in excess of the growth in revenue as a result of the payment

processing activities associated with the Club Solutions (private sector) acquisition which closed on March 14, 2013. This business is highly dependent on the provision of services by third party payment processors.

Occupancy expenses – Occupancy expenses increased 31% or $2.5 million for the quarter ended December 31, 2014 and 40% or $11.7 million for the fiscal year ended December 31, 2014 over the same periods in 2013. The increase in occupancy expenses for both periods is primarily due to the occupancy expenses of acquired businesses.

Travel, Telecommunications and Supplies expenses – Travel, Telecommunications and Supplies expenses increased 23% or $5.3 million for the quarter ended December 31, 2014 and 28% or $22.4 million for the fiscal year ended December 31, 2014 over the same periods in 2013. The increase in these expenses is primarily due to expenses incurred by acquired businesses.

Professional fees – Professional fees decreased 2% or $0.1 million for the quarter ended December 31, 2014 and increased 30% or $5.2 million for the fiscal year ended December 31, 2014 over the same periods in 2013. The increase in professional fees is primarily due to expenses incurred by acquired businesses, plus approximately $0.5 million relating to the Company’s debenture offering.

Other, net – Other expenses increased 87% or $2.3 million for the quarter ended December 31, 2014 and 24% or $4.7 million for the fiscal year ended December 31, 2014 over the same periods in 2013. The following table provides a further breakdown of expenses within this category.


	Three months ended December 31,						Period-Over-Period Change						Fiscal Year ended December 31,						Period-Over-Period Change
	2014			2013			$			%			2014			2013			$			%
	($M, except percentages)												($M, except percentages)
Advertising and promotion		5.4			3.8			1.6			41	%		20.2			13.2			7.0			53	%
Recruitment and training		3.2			1.5			1.7			119	%		9.9			5.1			4.8			94	%
Bad debt expense		(0.2	)		0.7			(0.9	)		NM			0.6			2.7			(2.1	)		-78	%
R&D tax credits		(3.6	)		(4.1	)		0.5			-12	%		(14.5	)		(8.0	)		(6.5	)		81	%
Contingent consideration		(1.8	)		0.3			(2.0	)		NM			(1.1	)		0.3			(1.4	)		NM
Other expense, net		1.9			0.5			1.4			298	%		9.1			6.3			2.9			46	%

		5.0			2.7			2.3			87	%		24.3			19.6			4.7			24	%

Advertising and promotion, and recruitment and training costs increased primarily due to expenses incurred by acquired businesses. The period over period percentage increases exceed the growth in revenue due to increased spending at TSS. The fluctuations in bad debt expense relate to the timing of adjustments made to provisions for uncollectable accounts receivable. The increase in R&D tax credits for the year ended December 31, 2014 was due to an increase in claims made in the US and Australia. Approximately $4.9 million of the total claim relates to filings for prior years. The movement in contingent consideration expenses relate to the adjustment to expected earnout payments associated with acquisitions. The expected earnout payments have decreased primarily as a result of a reduction to revenue forecasts for two acquisitions. During Q4 2013 the Company reversed an impairment expense recorded during Q3 2013 relating to a $2 million customer receivable as the Company was able to successfully recover the receivable during Q4 2013. The $2 million credit is included in the other expense amount for Q4 2013. A similar credit was not recorded in Q4 2014. The increase for the fiscal year ended December 31, 2014 is primarily due to expenses incurred by acquired businesses.

Depreciation – Depreciation of property and equipment increased 57% or $1.5 million for the quarter ended December 31, 2014 and 66% or $6.5 million for the fiscal year ended December 31, 2014 over the same periods in 2013. The increase in depreciation expense is primarily attributable to an increase in the carrying

amount of our property and equipment asset balance over the twelve month period ended December 31, 2014 as a result of acquisitions completed during this period.

Other Income and Expenses:

The following tables display the breakdown of our other income and expenses:


	Three months ended December 31,						Period-Over- Period Change						Fiscal Year ended December 31,						Period-Over- Period Change
	2014			2013			$			%			2014			2013			$			%
	($M, except percentages)												($M, except percentages)
Amortization of intangible assets		43.2			29.1			14.1			48	%		173.2			119.1			54.0			45	%
Foreign exchange (gain) loss		1.8			(1.3	)		3.1			NM			10.5			(0.8	)		11.3			NM
Share in net (income) loss of equity investees		(0.1	)		(0.1	)		(0.0	)		18	%		(0.8	)		(0.8	)		(0.1	)		6	%
Finance and other income		(1.4	)		(0.2	)		(1.2	)		745	%		(4.1	)		(1.0	)		(3.1	)		295	%
Bargain purchase gain		(2.2	)		(8.1	)		5.9			-72	%		(2.2	)		(8.1	)		5.9			-72	%
Finance costs		5.8			2.2			3.6			169	%		16.7			7.1			9.6			134	%
Income tax expense (recovery)		17.6			12.0			5.6			46	%		51.8			25.1			26.7			106	%

		64.6			33.6			31.0			92	%		245.0			140.7			104.3			74	%

NM - Not meaningful

Amortization of intangible assets – Amortization of intangible assets increased 48% or $14.1 million for the quarter ended December 31, 2014 and 45% or $54.0 million for the fiscal year ended December 31, 2014 over the same periods in 2013. The increase in amortization expense is attributable to an increase in the carrying amount of our intangible asset balance over the twelve month period ended December 31, 2014 as a result of acquisitions completed during this period.

Foreign exchange – Most of our businesses are organized geographically so many of our expenses are incurred in the same currency as our revenues, which mitigates some of our exposure to currency fluctuations. For the quarter ended December 31, 2014, we realized a foreign exchange loss of $1.8 million compared to a gain of $1.3 million for the quarter ended December 31, 2013. For the fiscal year ended December 31, 2014 the foreign exchange loss was $10.5 million compared to a foreign exchange gain of $0.8 million for the same period in 2013. During the three and twelve months ended December 31, 2014 a $2.0 million and $9.6 million expense respectively, was recorded relating to an intercompany loan with TSS denominated in Euros which did not exist in 2013. The remaining foreign exchange gains and losses are due to realized gains and losses on the settlement of certain non-US denominated liabilities and due to holding, or unrealized, losses on certain non-US denominated liabilities.

Share in net (income) loss of equity investees – Share in the net (income) loss of equity investees was income of $0.1 million and income of $0.8 million for the three and twelve months ended December 31, 2014 respectively, compared to income of $0.1 million and income of $0.8 million for the same periods in 2013.

Finance and other income – Finance and other income for the quarter ended December 31, 2014 was $1.4 million compared to $0.2 million for the quarter ended December 31, 2013. During the fiscal year ended December 31, 2014, finance and other income was $4.1 million compared to $1.0 million for the same period in 2013. The increase in finance and other income for Q4 2014 primarily relates to $0.8 million of adjustments relating to the acquired net tangible assets of an acquisition which closed in May 2013, and interest income earned on cash balances held at TSS ($0.3 million for the year). The increase for the fiscal year ended December 31, 2014 is primarily due to $1.8 million of adjustments relating to the acquired net tangible assets of two acquisitions which closed in January and May 2013 respectively. Similar adjustments were not made in the comparable

period in 2013. In addition a gain of $0.6 million relating to the sale of equity securities available-for-sale was recorded in the fiscal year ended December 31, 2014 and no similar gain was recorded in the fiscal year ended December 31, 2013.

Bargain purchase gain – Bargain purchase gains totalling $2.2 million in Q4 2014 and $8.1 million in Q4 2013 arose on one of the acquisitions made during each quarter because the fair value of the separately identifiable assets and liabilities exceeded the total consideration paid, principally due to the acquisition of certain assets that will benefit the Company that had limited value to the seller.

Finance costs – Finance costs for the quarter ended December 31, 2014 increased $3.6 million to $5.8 million, compared to $2.2 million for the quarter ended December 31, 2013. During the fiscal year ended December 31, 2014, finance costs increased $9.6 million to $16.7 million, from $7.1 million over the same period in 2013. The increase in finance costs primarily relates to increased interest expense on our credit facilities resulting from increased average borrowings in 2014 compared to 2013, and $1.5 million of interest paid on the Company’s debentures issued in Q4 2014.

Income taxes – We operate globally and we calculate our tax provision in each of the jurisdictions in which we conduct business. Our effective tax rate on a consolidated basis is, therefore, affected by the realization and anticipated relative profitability of our operations in those various jurisdictions, as well as different tax rates that apply and our ability to utilize tax losses and other credits. For the quarter ended December 31, 2014, income tax expense increased $5.6 million to $17.6 million compared to $12.0 million for the quarter ended December 31, 2013. During the fiscal year ended December 31, 2014, income tax expense increased $26.7 million to $51.8 million compared to $25.1 million for the same period in 2013. Current tax expense as a percentage of adjusted net income before tax was 12% and 16% for the three and twelve months ended December 31, 2014 respectively, versus 8% and 10% for the comparable periods in 2013. This rate, which has historically approximated our cash tax rate, has ranged between 10% and 12% annually from 2011 to 2013. The quarterly rate can sometimes fall outside of the annual range due to out of period adjustments. As a result of the depletion of tax credits available to certain Canadian entities and a proportionately higher level of profitability in the US, the rate has gradually increased in 2014. In Q4 2014, a current tax expense of $1.3 million was recorded that will not actually result in a cash outlay due to the utilization of R&D tax credits. R&D tax credits in the amounts of $6.3 million and $10.2 million will be utilized to offset taxes payable on taxable income for the 2013 and 2014 fiscal years respectively. Current tax expense however reflects gross taxes before the application of R&D tax credits. The deferred income tax expense increase of $0.6 million for the quarter ended December 31, 2014 and decrease of $2.4 million for the fiscal year ended December 31, 2014, relates to various items including changes in recognition of certain deferred income tax assets.

Net Income and Earnings per Share:

Net income for the quarter ended December 31, 2014 was $39.3 million compared to net income of $42.5 million for the same period in 2013. On a per share basis this translated into a net income per diluted share of $1.86 in the quarter ended December 31, 2014 compared to net income per diluted share of $2.00 in the quarter ended December 31, 2013. For the fiscal year ended December 31, 2014, net income was $103.1 million or $4.87 per diluted share compared to $93.1 million or $4.39 per diluted share for the same period in 2013. There were no changes in the number of shares outstanding.

Adjusted EBITA:

For the quarter ended December 31, 2014, Adjusted EBITA increased to $103.9 million compared to $76.1 million in the quarter ended December 31, 2013 representing an increase of 37%. Adjusted EBITA margin was 24% for the quarter ended December 31, 2014 and 22% for the same period in 2013. For the fiscal year ended December 31, 2014, Adjusted EBITA increased to $348.1 million compared to $233.8 million during the

same period in 2013, representing an increase of 49%. Adjusted EBITA margin was 21% in the fiscal year ended December 31, 2014 and 19% for the same period in 2013.

See “Non-IFRS Measures” for a description of Adjusted EBITA and Adjusted EBITA margin.

The following table reconciles Adjusted EBITA to net income:


	Three months ended December 31,						Fiscal Year ended December 31,
	2014			2013			2014			2013
	($M, except percentages)						($M, except percentages)
Total revenue		439.8			340.3			1,669.3			1,210.8

Net income		39.3			42.5			103.1			93.1
Adjusted for:
Income tax expense (recovery)		17.6			12.0			51.8			25.1
Foreign exchange (gain) loss		1.8			(1.3	)		10.5			(0.8	)
Share in net (income) loss of equity investees		(0.1	)		(0.1	)		(0.8	)		(0.8	)
Finance and other income		(1.4	)		(0.2	)		(4.1	)		(1.0	)
Bargain purchase gain		(2.2	)		(8.1	)		(2.2	)		(8.1	)
Finance costs		5.8			2.2			16.7			7.1
Amortization of intangible assets		43.2			29.1			173.2			119.1
Adjusted EBITA		103.9			76.1			348.1			233.8
Adjusted EBITA margin		24	%		22	%		21	%		19	%

Adjusted net income:

For the quarter ended December 31, 2014, Adjusted net income increased to $86.6 million from $69.2 million for the quarter ended December 31, 2013, representing an increase of 25%. Adjusted net income margin was 20% for both the quarters ended December 31, 2014 and December 31, 2013. For the fiscal year ended December 31, 2014, Adjusted net income increased to $274.3 million from $206.8 million during the same period in 2013, representing an increase of 33%. Adjusted net income margin was 16% in the fiscal year ended December 31, 2014 and 17% for the comparable period in 2013. See “Non-IFRS Measures” for a description of Adjusted net income and Adjusted net income margin.

The following table reconciles Adjusted net income to net income:


	Three months ended December 31,						Fiscal Year ended December 31,
	2014			2013			2014			2013
	($M, except percentages)						($M, except percentages)
Total revenue		439.8			340.3			1,669.3			1,210.8

Net income		39.3			42.5			103.1			93.1
Adjusted for:
Amortization of intangible assets		43.2			29.1			173.2			119.1
Bargain purchase gain		(2.2	)		(8.1	)		(2.2	)		(8.1	)
Deferred income tax expense (recovery)		6.3			5.7			0.2			2.6
Adjusted net income		86.6			69.2			274.3			206.8
Adjusted net income margin		20	%		20	%		16	%		17	%

Quarterly Results (unaudited)


	Quarter Ended
	Mar. 31 2013		Jun. 30 2013		Sep. 30 2013		Dec. 31 2013		Mar. 31 2014		Jun. 30 2014		Sep. 30 2014		Dec. 31 2014
					($M, except per share amounts)
Revenue		256.4		298.2		315.9		340.3		394.8		415.9		418.8		439.8
Net Income		9.2		19.2		22.2		42.5		8.9		23.0		31.9		39.3
Adjusted Net Income		33.3		50.1		54.1		69.2		53.3		65.0		69.3		86.6
Net Income per share
Basic & diluted		0.43		0.91		1.05		2.00		0.42		1.08		1.51		1.86
Adjusted Net Income per share
Basic & diluted		1.57		2.36		2.55		3.26		2.52		3.07		3.27		4.09

We experience seasonality in our operating results in that Adjusted Net Income margins in the first quarter of every year are typically lower than margins achieved in the second, third and fourth quarters. The key drivers for the lower margins are increased payroll tax costs associated with our annual bonus payments that are made in the month of March, and the fact that historically there has been a consistent focus at year end to complete sales implementation projects which generally translates into increased professional services revenue in the fourth quarter and decreased professional services revenue in the first quarter. Our quarterly results may also fluctuate as a result of the various acquisitions which may be completed by the Company in any given quarter. We may experience variations in our net income on a quarterly basis depending upon the timing of certain expenses or gains, which may include changes in provisions, acquired contract liabilities, bargain purchase gains and gains or losses on the sale of financial and other assets.

ROIC plus Organic Growth

We believe the metric of ROIC plus organic Net Revenue growth is a proxy for the annual increase in shareholders’ value. The table below summarizes this metric for 2013 and 2014. Further discussion on this metric is included in the Company’s annual letters to shareholders available on SEDAR at www.sedar.com. For

acquired companies, organic Net Revenue growth is calculated as the difference between actual Net Revenues achieved by each company in the financial period following acquisition compared to the Net Revenues they achieved in the corresponding financial period preceding the date of acquisition by Constellation.


	Fiscal Year ended December 31,
	2014			2013
	($M, except percentages)
Adjusted Net Income		274			207
Average Invested Capital		739			585
ROIC		37	%		35	%
Organic Net Revenue growth (YoY)		3	%		4	%
ROIC + organic Net Revenue growth		40	%		39	%

See “Non-IFRS Measures” for a description of Adjusted Net Income, Average Invested Capital, ROIC and Net Revenue.

Acquisition of Total Specific Solutions (TSS) B.V. (“TSS”)

On December 31, 2013, the Company acquired 100% of the shares of TSS for aggregate cash consideration of approximately $342 million (€248 million). The tables below provide certain supplemental income statement and cash flow information of TSS for the three and twelve months ended December 31, 2014. TSS is not considered a reportable operating segment of Constellation, however, management has chosen to provide certain supplemental financial information to provide greater clarity into the operating performance and cash flow from operations of TSS.


Supplemental financial information

($M, except percentages)
	Three months ended December 31, 2014									Fiscal Year ended December 31, 2014
(Unaudited)	Constellation Software Inc. (excluding TSS)			TSS			Consolidated			Constellation Software Inc. (excluding TSS)			TSS			Consolidated
Revenue
Licenses	$	30.5		$	3.2		$	33.7		$	110.0		$	8.9		$	118.9
Professional services		81.9			23.5			105.4			309.7			86.4			396.1
Hardware and other		37.3			0.3			37.5			138.3			1.0			139.3
Maintenance and other recurring		232.9			30.3			263.1			882.8			132.2			1,015.0

		382.6			57.2			439.8			1,440.8			228.5			1,669.3
Expenses		284.3			51.5			335.8			1,116.8			204.4			1,321.3
Adjusted EBITA		98.2			5.7			103.9			324.0			24.1			348.1
Adjusted EBITA margin		26	%		10	%		24	%		22	%		11	%		21	%

Net Income	$	43.9		$	(4.6	)	$	39.3		$	121.9		$	(18.8	)	$	103.1

Cash flows from operating activities:
Net income	$	43.9		$	(4.6	)	$	39.3		$	121.9		$	(18.8	)	$	103.1
Adjustments to reconcile net income to net cash flows from operations, including taxes paid:		55.7			11.5			67.1			194.8			45.3			240.1
Change in non-cash operating working capital		0.2			(9.7	)		(9.5	)		3.9			(5.6	)		(1.7	)

Cash flows from operating activities	$	99.8		$	(2.9	)	$	96.9		$	320.5		$	21.0		$	341.5


Adjusted EBITA to net income reconciliation

($M, except percentages)
	Three months ended December 31, 2014									Fiscal Year ended December 31, 2014
(Unaudited)	Constellation Software Inc. (excluding TSS)			TSS			Consolidated			Constellation Software Inc. (excluding TSS)			TSS			Consolidated
Total revenue	$	382.6		$	57.2		$	439.8		$	1,440.8		$	228.5		$	1,669.3

Net income		43.9			(4.6	)		39.3			121.9			(18.8	)		103.1
Adjusted for:
Income tax expense		20.0			(2.4	)		17.6			58.6			(6.8	)		51.8
Other expenses, net		0.2			3.6			3.8			9.3			10.7			20.0
Amortization of intangible assets		34.1			9.1			43.2			134.3			38.9			173.2
Adjusted EBITA		98.2			5.7			103.9			324.0			24.1			348.1
Adjusted EBITA margin		26	%		10	%		24	%		22	%		11	%		21	%


Adjusted Net Income to net income reconciliation

($M, except percentages)
	Three months ended December 31, 2014									Fiscal Year ended December 31, 2014
(Unaudited)	Constellation Software Inc. (excluding TSS)			TSS			Consolidated			Constellation Software Inc. (excluding TSS)			TSS			Consolidated
Total revenue	$	382.6		$	57.2		$	439.8		$	1,440.8		$	228.5		$	1,669.3

Net income		43.9			(4.6	)		39.3			121.9			(18.8	)		103.1
Adjusted for:
Amortization of intangible assets		34.1			9.1			43.2			134.3			38.9			173.2
Bargain purchase gain		(2.2	)		—			(2.2	)		(2.2	)		—			(2.2	)
Deferred income tax expense (recovery)		8.3			(2.0	)		6.3			7.8			(7.6	)		0.2
Adjusted net income		84.1			2.5			86.6			261.7			12.6			274.3
Adjusted net income margin		22	%		4	%		20	%		18	%		6	%		16	%

Acquisition of certain software assets and liabilities from MAXIMUS Inc.

On September 30, 2008, Constellation acquired certain assets and liabilities of Maximus Inc.’s Asset, Justice, and Education Solutions businesses (“MAJES”) including certain long-term contracts that contained contingent liabilities that the Company believed were unlikely to exceed $16 million in the aggregate. The contingent liabilities related to liquidated damages contractually available to customers for breaches of contracts by MAJES and for estimated damages available to customers for breaches of such contracts by MAJES where such contracts did not contain specified penalties. The contingent liabilities represented the difference between the maximum financial liabilities potentially due to customers less the amounts accrued in connection with the contracts assumed on acquisition. Beginning in February 2011, MAXIMUS Inc. (“Maximus”) and a subsidiary of Constellation, as a result of receiving a letter from a customer, initiated the dispute resolution process under the customer’s contract. The customer alleged that the subsidiary of Constellation and Maximus failed to provide the services and products required to be delivered under the contract. In December 2012, the subsidiary of Constellation obtained a favorable arbitration ruling in the amount of $10 million which was subsequently reduced in July 2013 to $6 million by a court judgment. The July 2013 court ruling also resolved an additional claim filed by the customer alleging no contract existed between the parties. In September 2013 the customer

initiated the appeals process in relation to the July 2013 court ruling. In September 2014 the customer and the subsidiary of Constellation reached a settlement resulting in the customer making a payment in the amount of $3.8 million and issuing a full release from further litigation on the matter. The proceeds of $3.8 million have been recorded as Professional services revenue in the 2014 consolidated statement of income. The remaining contingent liabilities on the acquired MAJES contracts total $4 million.

Liquidity

Our net borrowings (bank indebtedness excluding capitalized transaction costs less cash) decreased by $255.3 million to $145.3 million in the fiscal year ended December 31, 2014 resulting from cash flows from operations exceeding capital deployed on acquisitions, and the application of proceeds from the issuance of debentures of $81.2 million and the issuance of the TSS membership liability of $48.5 million. (See the “Capital Resources and Commitments” section below for a description of the debentures and TSS membership liability.) The amount drawn on our credit facilities decreased by $262.6 million to $216.0 million at December 31, 2014 from $478.6 million at the end of 2013, and cash decreased by $7.3 million to $70.7 million at December 31, 2014 compared to $78.0 million at December 31, 2013.

Total assets decreased $104.6 million, from $1,537.7 million at December 31, 2013 to $1,433.1 million at December 31, 2014. The decrease is primarily due to a decrease in intangible assets of $94.2 relating to the amortization of intangible assets for accounting purposes. At December 31, 2014 TSS held a cash balance of $27.3 million. As explained in the “Capital Resources and Commitments” section below, there are limitations on TSS’ ability to distribute funds to Constellation’s corporate head office.

Current liabilities decreased $350.0 million, from $1,108.9 million at December 31, 2013 to $758.9 million at December 31, 2014. The decrease is primarily due to a decrease in current bank indebtedness of $410.8 million primarily relating to repayments utilizing cash flows from operating activities of $103.8 million, repayments utilizing proceeds from the issuance of debentures of $81.2 million, repayments utilizing proceeds from the issuance of the TSS membership liability of $48.5 million, and the reclassification of bank indebtedness in the amount of $149.7 million to non-current liabilities as a result of the refinancing which is explained in the “Capital Resources and Commitments” section below. Offsetting the bank indebtedness decrease was an increase in deferred revenue of $41.1 million mainly due to acquisitions and the timing of maintenance and other billings versus performance and delivery under those customer arrangements, and an increase to income taxes payable of $20.1 million. The Company has elected to present the amounts drawn under its revolving facility of $64.5 million as a current liability notwithstanding that the amounts are not due to be repaid until February 2016 on the basis that it is expected to be repaid by the Company using cash flows from operations generated in the following year.

Net Changes in Cash Flows

(in $M’s)


	Year ended December 31, 2014			Year ended December 31, 2013
Net cash provided by operating activities		341.5			220.3
Net cash from (used in) financing activities		(208.6	)		344.1
Net cash from (used in) acquisition activities		(121.6	)		(522.9	)
Net cash from (used in) other investing activities		(12.1	)		(5.1	)

Net cash from (used in) investing activities		(133.7	)		(527.9	)
Effect of foreign currency		(6.5	)		0.2

Net increase (decrease) in cash and cash equivalents		(7.3	)		36.7

The net cash flows from operating activities were $341.5 million for the fiscal year ended December 31, 2014. The $341.5 million provided by operating activities resulted from $103.1 million in net income plus $261.4 million of non-cash adjustments to net income, offset by $1.7 million of cash utilized in our non-cash operating working capital and $21.4 million in taxes paid.

The net cash flows used in financing activities in the fiscal year ended December 31, 2014 was $208.6 million, which is mainly a result of dividends paid in the period of $84.8 million and a decrease in bank indebtedness of $233.5 million, offset by proceeds from the issuance of debentures and the TSS membership liability of $81.2 million and $48.5 million respectively.

The net cash flows used in investing activities in the fiscal year ended December 31, 2014 was $133.7 million. The cash used in investing activities was primarily due to acquisitions for an aggregate of $121.6 million (including payments for holdbacks relating to prior acquisitions).

We believe we have sufficient cash and available credit capacity to continue to operate for the foreseeable future. Generally our VMS businesses operate with negative working capital as a result of the collection of maintenance payments and other revenues in advance of the performance of the related services. As such, management anticipates that it can continue to grow the business organically without any additional funding. If we continue to acquire VMS businesses we may need additional external funding depending upon the size and timing of the potential acquisitions.

Capital Resources and Commitments

Bank Indebtedness

On March 13, 2012, we entered into a new revolving credit facility with a syndicate of Canadian chartered banks and U.S. banks in the amount of $300 million. The revolving credit facility bears a variable interest rate and is due in full on February 29, 2016 with no fixed repayments required over the term to maturity. Interest rates are calculated at prime or LIBOR plus interest rate spreads based on a leverage table. The credit facility is collateralized by substantially all of our assets including the assets of the majority of our material subsidiaries. The credit facility contains standard events of default which if not remedied within a cure period would trigger the repayment of any outstanding balance. Certain other subsidiaries also guarantee this facility. The facility is available for acquisitions, working capital needs, and other general corporate purposes and for the needs of our subsidiaries until 2016. As at December 31, 2014, we had drawn $64.5 million on this facility, and letters of credit totalling $14.0 million were issued, which limits the borrowing capacity on a dollar-for-dollar

basis. Transaction costs associated with this facility have been included as part of the carrying amount of the liability and are being amortized through profit or loss using the effective interest rate method. As at December 31, 2014, the carrying amount of such costs totalling $0.6 million has been classified as part of bank indebtedness in the statement of financial position.

On December 6, 2013, we amended our credit facility to facilitate the acquisition of TSS. A new one year $350 million term facility was added solely for the purposes of funding the TSS acquisition and related expenses (the “TSS Acquisition Facility”). The TSS Acquisition Facility was non-amortizing and had an interest rate calculated at US prime or LIBOR plus interest rate spreads based on a leverage table consistent with the spreads applicable to Constellation’s credit facility. On December 31, 2014, the TSS Acquisition Facility expired and the outstanding balance was repaid.

On June 24, 2014 Constellation Software Netherlands Holding Cooperatief U.A. (“CNH”), a subsidiary of Constellation and the indirect owner of 100% of TSS, entered into a €150 million (approximately $190 million) term and €10 million (approximately $13 million) multicurrency revolving credit facility (the “CNH Facility”) with a number of European and North American financial institutions. The CNH Facility bears interest at a rate calculated at EURIBOR plus interest rate spreads based on a leverage table. The CNH Facility is collateralized by substantially all of the assets owned by CNH and its subsidiaries which includes substantially all of the assets of TSS and its subsidiaries. The CNH Facility contains standard events of default which if not remedied within a cure period would trigger the repayment of any outstanding balance. On June 24, 2014, €130 million (approximately $165 million) was drawn on the term component of the CNH Facility and used to repay a portion of the TSS Acquisition Facility. €30 million must be repaid in instalments over the next six years, and €100 million is non-amortizing and due in seven years. The remaining €20 million term component of the CNH Facility remains undrawn. If drawn, principal must be repaid in five equal instalments starting on June 24, 2018. As at December 31, 2014 no amounts had been drawn on the €10 million multicurrency revolving component of the CNH Facility. The revolving component of the CNH Facility is available for acquisitions, working capital needs, and other general corporate purposes until June 24, 2020. Transaction costs associated with the CNH Facility have been included as part of the carrying amount of the liability and are being amortized through profit or loss using the effective interest rate method. As at December 31, 2014, the carrying amount of such costs relating to this facility totalling $6 million (€5 million) has been classified as part of non-current bank indebtedness in the statement of financial position.

The CNH Facility and Constellation’s other credit facilities are independent of each other. The CNH Facility is not guaranteed by Constellation or its subsidiaries nor is Constellation or any subsidiary subject to the terms of the CNH Facility other than, in each case, CNH and its subsidiaries. Similarly, CNH and its subsidiaries did not guarantee Constellation’s other credit facilities and are not subject to the provisions thereof. Constellation’s credit facilities impose limitations on the aggregate amount of investment that Constellation may make in CNH and its subsidiaries and the financial results of CNH and its subsidiaries are not included for the purposes of determining compliance by Constellation with the financial covenants in Constellation’s other credit facilities. The CNH Facility imposes limitations on the amount of distributions that CNH and its subsidiaries may make to Constellation.

Debentures

On October 1, 2014 and November 19, 2014, the Company issued unsecured subordinated debentures (the “Debentures”) with a total principal value of C$96.0 million for total proceeds of C$91.2 million. The proceeds were used by the Company to pay down $81.2 million of the TSS Acquisition Facility. The Debentures have a maturity date of March 31, 2040 (the “Maturity Date”). From and including the date of issue to but excluding March 31, 2015, the Debentures will bear interest at a rate of 7.4% per annum, paid quarterly in arrears. The rate from and including March 31, 2015 to and including March 30, 2016 will be 8.5%. From and including March 31, 2016 to but excluding the Maturity Date, the interest rate applicable to the Debentures will be reset on an annual basis on March 31 of each year, at a rate equal to the annual average percentage change in the All-items Consumer Price Index during the 12 month period ending on December 31 in the prior year (which amount may

be positive or negative) plus 6.5%. Notwithstanding the foregoing, the interest rate applicable to the debentures will not be less than 0%. The Company may, subject to certain approvals, elect to make payment in kind (a “PIK Election”), in lieu of paying interest in cash, to satisfy all or any portion of its interest obligation payable on an interest payment date by issuing to each Debenture holder Debentures equal to the amount of the interest obligation to be satisfied. (“PIK Debentures”). The PIK Debentures will have the same terms and conditions as the Debentures and will form part of the principal amount of the Debentures. If, on any interest payment date, the Company fails to pay the amount of interest owing on the Debentures in full in cash, the Company will not (A) declare or pay dividends of any kind on the Common Shares, nor (B) participate in any share buyback or redemption involving the Common Shares, until the date on which the Company pays such interest (or the unpaid portion thereof) in cash to holders of the Debentures; however, where the Company has issued PIK Debentures in respect of all or a portion of the amount of interest owing on the Debentures on an interest payment date, the Company may resume declaring or paying dividends of any kind on the Common Shares and participating in any share buyback or redemption involving the Common Shares beginning on the next earlier of (i) the interest payment date of which the Company pays the amount of interest owing on the Debentures in full in cash and (ii) the date on which the Company repays all amounts owing under the PIK Debenture. All payments in respect of the Debentures will be subordinated in right of payment to the prior payment in full of all senior indebtedness of the Company.

The Debentures will be redeemable in certain circumstances at the option of the Company or the holder. During the period beginning on March 16 and ending on March 31 of each year, the Company will have the right, at its option, to give notice to holders of Debentures of its intention to redeem the Debentures, in whole or in part, on March 31 in the year that is five years following the year in which notice is given, at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the date fixed for redemption. During the period beginning on March 1 and ending on March 15 of each year, holders of Debentures will have the right, at their option, to give notice to the Company of their intention to require the Company to repurchase (or to “put”) the Debentures, in whole or in part, on March 31 in the year that is five years following the year in which notice is given, at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the date fixed for repurchase.

A complete description of the terms of the Debentures can be found in the final short form prospectus of the Company dated August 7, 2014 which has been filed on SEDAR at www.sedar.com.

TSS Membership Liability

On December 23, 2014, in accordance with the terms of the purchase and sale agreement for the TSS acquisition, and on the basis of the term sheets attached thereto, Constellation and the sellers of TSS along with members of TSS’ executive management team (collectively, the “minority owners”) entered into a Members Agreement pursuant to which the minority owners acquired 33.29% of the voting interests in Constellation Software Netherlands Holdings Cooperatief (the “Coop”). Proceeds from this transaction in the amount of €39.4 million (US$48.5 million) were utilized to repay, in part, the TSS Acquisition Facility. In accordance with IFRS, 100% of the financial results for TSS are included in the consolidated financial results of the Company.

in the event that Robin Van Poelje, TSS’ CEO, is no longer employed by TSS. The approximately 32% remaining interest can be sold via the put option described above.

If any of TSS’ executive management team that participate in the Members Agreement are terminated for urgent cause as defined in Section 7:678 of the Dutch Civil Code, Constellation shall have the right to purchase all of the interests beneficially owned by the terminated executive for an amount calculated in accordance with the valuation methodology described within the Members Agreement. The full purchase price will be paid within 30 business days from the date notice is given, following which the terminated executive’s membership in the Coop will be terminated. An option does exist for the terminated executive to elect to be paid in annual installments of 33.33% of his interests in the Coop over a 3 year period. The valuation of the interests being purchased will be calculated at each annual payment date.

Other commitments

Commitments include operating leases for office equipment and facilities, letters of credit and performance bonds issued on our behalf by financial institutions in connection with facility leases and contracts with public sector customers. Also, occasionally we structure some of our acquisitions with contingent consideration, or earn out obligations, based on the future performance of the acquired business. Aside from the aforementioned, we do not have any other business arrangements, derivative financial instruments, or any equity interests in non-consolidated entities that would have a significant effect on our assets and liabilities as at December 31, 2014.

Commitments


(in millions of dollars)
	Total		< 1 yr		1-5 yrs		> 5 yrs
Operating and capital leases		150.4		39.8		86.9		23.8
Holdbacks		26.3		22.7		3.6		—
TSS membership liability		47.9		17.3		30.5		—
Debentures		78.6		—		—		78.6
Bank indebtedness		216.0		66.3		30.4		119.3

Total outstanding commitments		519.1		146.1		151.4		221.7

The TSS membership liability commitment assumes that the minority owners have exercised their put option to sell 100% of their interests back to Constellation. This option however has not been exercised as at February 25, 2014. See the “Critical Accounting Estimate” section below for a discussion on the valuation methodology utilized.

Foreign Currency Exposure

We operate internationally and have foreign currency risks related to our revenue, operating expenses, assets and liabilities denominated in currencies other than the U.S. dollar. Consequently, we believe movements in the foreign currencies in which we transact could significantly affect future net earnings. Our analysis related

to the change in average exchange rates from 2013 to 2014 suggests that the impact to EBITA for the three and twelve months ended December 31, 2014 had less than a 1% impact to EBITA margins. The impact to the organic revenue growth percentage for the three and twelve months ended December 31, 2014 was approximately -3.6% and -0.3% respectively. We cannot predict the effect of foreign exchange gains or losses in the future; however, if significant foreign exchange losses are experienced, they could have a material adverse effect on our business, results of operations, and financial condition. The Company enters into forward foreign exchange contracts from time to time with the objective of mitigating volatility in profit or loss in respect of financial liabilities. In entering into these forward exchange contracts, the Company is exposed to the credit risk of the counterparties to such contracts and the possibility that the counterparties will default on their payment obligations under these contracts. However, given that the counterparties are Schedule 1 banks or affiliates thereof, the Company believes these risks are not material. During the fiscal year ended December 31, 2014, the Company did not purchase any contracts of this nature.

The following table provides an approximate breakdown of our revenue and expenses by currency, expressed as a percentage of total revenue and expenses, as applicable, for the three and twelve month periods ended December 31, 2014:


	Three Months Ended December 31, 2014						Year Ended December 31, 2014
Currencies	% of Revenue			% of Expenses			% of Revenue			% of Expenses
USD		57	%		46	%		58	%		48	%
CAD		7	%		13	%		7	%		13	%
GBP		8	%		9	%		8	%		8	%
EURO		21	%		22	%		21	%		21	%
CHF		1	%		3	%		1	%		3	%
Others		6	%		7	%		5	%		7	%

Total		100	%		100	%		100	%		100	%

Off-Balance Sheet Arrangements

As a general practice, we have not entered into off-balance sheet financing arrangements. Except for operating leases and letters of credit, all of our liabilities and commitments are reflected as part of our statement of financial position.

Proposed Transactions

We seek potential acquisition targets on an ongoing basis and may complete several acquisitions in any given fiscal year.

Critical Accounting Estimates

General

The preparation of our consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. Our estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Our ongoing evaluation of these estimates forms the basis for making judgments about the carrying values of assets and liabilities and the reported amount of revenues and expenses, in cases where they are not readily ascertainable from other sources. Actual amounts may differ from these estimates under different assumptions or conditions.

Our significant accounting policies are fully described in Note 3 to our annual consolidated financial statements which are available on SEDAR (www.sedar.com). Certain accounting policies are particularly important to the reporting of our financial position and results of operations, and require the application of significant judgment by our management. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different, estimates that reasonably could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could have a material impact on the financial statements. Management believes the following critical accounting policies reflect the more significant estimates and assumptions used in the preparation of our consolidated financial statements. We believe that there have been no significant changes in our critical accounting estimates for the years presented in our consolidated financial statements.

Revenue Recognition

Revenue represents the fair value of consideration received or receivable from customers for goods and services provided by the Company, net of discounts and sales taxes. The Company reports revenue under four revenue categories being License, Hardware and Other, Professional Services, and Maintenance and other recurring revenue.

The Company typically sells or licenses software on a perpetual basis, but also licenses software for a specified period. Revenue from short-term time-based licenses, which usually include support services during the license period, is recognized rateably over the license term. Revenue from multi-year time based licenses that include support services, whether separately priced or not, is recognized rateably over the license term unless a substantive support service renewal rate exists; if this is the case, the amount allocated to the delivered software is recognized as software revenue based on the residual approach once the revenue criteria have been met. In those instances where the customer is required to renew mandatory support and maintenance in order to maintain use of the licensed software over the license term, the Company recognizes the consideration attributable to the license and support for the initial term of the arrangement attributable to the license and support over the initial one-year term and recognizes revenue for the support renewal fees in subsequent years over the respective renewal periods.

Revenue from the license of software involving significant implementation or customization essential to the functionality of the Company’s product, or from the sales of hardware where software is essential to its functionality, is recognized under the percentage-of-completion method of contract accounting based either on the achievement of contractually defined milestones or based on labour hours. Any probable losses are recognized immediately in profit or loss. In certain situations where the outcome of an arrangement cannot be estimated reliably, costs associated with the arrangement are recognized as incurred. In this situation, revenues are recognized only to the extent of the costs incurred that are probable of recovery.

A portion of the Company’s sales, categorized as hardware revenue, are accounted for as product revenue. Product revenue is recognized when the Company has an executed agreement, the product has been delivered and costs can be measured reliably, the amount of the fee to be paid by the customer is fixed and determinable, and the collection of the related receivable is deemed probable from the outset of the arrangement. If for any of the product or service offerings, the Company determines at the outset of an arrangement that the amount of revenue cannot be measured reliably, and the Company concludes that the inflow of economic benefits associated with the

transaction is not probable, then the revenue is deferred until the arrangement fee becomes due and payable by the customer. If, at the outset of an arrangement, the Company determines that collectability is not probable, and the Company concludes that the inflow of economic benefits associated with the transaction is not probable, then revenue recognition is deferred until the earlier of when collectability becomes probable or payment is received. If collectability becomes unlikely before all revenue from an arrangement is recognized, the Company recognizes revenue only to the extent of the fees that are successfully collected unless collectability becomes reasonably assured again. If a customer is specifically identified as a collection risk, the Company does not recognize revenue except to the extent of the fees that have already been collected.

Maintenance and other recurring revenue primarily consists of fees charged for customer support on software products post-delivery and also includes, to a lesser extent, recurring fees derived from combined software/support contracts, transaction revenues, managed services, and hosted products. Maintenance revenue remaining to be recognized in profit or loss is recognized as deferred revenue in the statement of financial position when amounts have been billed in advance.

Valuation of Identifiable Goodwill and Other Intangible Assets

We use the income approach to value acquired technology and customer related intangible assets, which are the two material intangible asset categories reported in our financial statements.

The income approach is a valuation technique that calculates the fair value of an intangible asset based on the cash flows that the asset can be expected to generate over its remaining useful life. We utilize the discounted cash flow (“DCF”) methodology which is a form of the income approach that begins with a forecast of the annual cash flows a market participant would expect the subject intangible asset to generate over a discrete projection period. The forecasted cash flows for each of the years in the discrete projection period are then converted to their present value equivalent using a rate of return appropriate for the risk of achieving the intangible assets’ projected cash flows, again, from a market participant perspective. The present value of the forecasted cash flows are then added to the present value of the residual value of the intangible asset (if any) at the end of the discrete projection period to arrive at a conclusion with respect to the estimated fair value of the subject intangible asset.

Specifically, we rely on the relief-from-royalty method to value the acquired technology and the multiple-period excess earnings method (“MEEM”) to value customer relationship assets.

Goodwill is initially recorded when the purchase price paid for an acquisition exceeds the fair value assigned to the net identifiable tangible and intangible assets acquired. Goodwill is not amortized but rather it is periodically assessed for impairment. We perform an annual review in the fourth quarter of each fiscal year, or more frequently if indicators of potential impairment exist, to determine if the recorded goodwill is impaired.

After initial recognition, goodwill is measured at cost less any accumulated impairment losses, with the carrying value being reviewed for impairment at least annually and whenever events or changes in circumstances indicate that the carrying value may be impaired. In respect of equity accounted investees, the carrying amount of goodwill is included in the carrying amount of the investment, and an impairment loss on such an investment is not allocated to any asset, including goodwill, that forms part of the carrying amount of the equity accounted investee. No such losses have been recognized during the year.

The impairment test methodology is based on a comparison between the higher of fair value less costs to sell and value-in-use of each of the Company’s business units (considered as the grouping of cash generating units (“CGU”) at which level the impairment test is performed) and the net asset carrying values (including goodwill) of the Company’s business units. Within the Company’s reporting structure, business units generally reflect one level below the six operating segments (Volaris, Harris, Total Specific Solutions, Jonas, Perseus (previously known as Homebuilder), and Vela Operating Groups). In determining the recoverable amount, the Company applies an estimated market valuation multiple to the business unit’s most recent annual recurring revenues, which are derived from combined software/support contracts, transaction revenues, and hosted products. Valuation multiples applied by management for this purpose reflect current conditions specific to the business unit and are assessed for reasonability by comparison to the Company’s current and past experience of ranges of multiples required to acquire representative software companies. In addition, in certain instances, the recoverable amount is determined using a value-in-use approach which follows the same valuation process that is undertaken for the Company’s business acquisitions. An impairment is recognized if the carrying amount of a CGU exceeds its estimated recoverable amount.

We also review the carrying value of amortizable intangible assets for impairment whenever events and circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. Any change in estimate which causes the

undiscounted expected future cash flows to be less than the carrying value, would result in an impairment loss being recognized equal to the amount by which the carrying value of the asset exceeds the fair value of the asset.

The critical accounting estimates described above affect both the public and private segments of the business. The approach taken by management in performing these estimates is not significantly different between segments.

TSS Membership Liability

In determining the valuation of the liability at December 31, 2014 we assumed the minority owners exercised their put option on December 31, 2014, and redeemed 33.33% of their interests on exercise, and will redeem 33.33% on each of the first and second anniversary dates. Maintenance and recurring revenue of the Coop for the fiscal year ended December 31, 2014 was used as the basis for valuing the interests at each redemption date. A similar approach will be utilized to value any interests that have not been put or called at the end of each subsequent reporting period. However, the actual maintenance and recurring revenue of the Coop for the trailing twelve months from the date of the related reporting period end will be utilized in the calculation. Any increase or decrease in the value of the membership liability will be recorded as an expense or income respectively in the Consolidated Statements of Income for the period.

Accounting for Income Taxes

Significant management judgment is required in determining our provision for income taxes, our income tax assets and liabilities, and any valuation allowance recorded against our net income tax assets. We operate in multiple geographic jurisdictions, and to the extent that we have profits in each jurisdiction, these profits are taxed pursuant to the tax laws of their jurisdiction. Our effective tax rate may be affected by changes in, or interpretations of, tax laws in any given jurisdiction, the level of profitability, utilization of net operating losses and tax credit carry forwards, changes in geographical mix of income and expense, and changes in management’s assessment of matters, such as the ability to realize future tax assets. As a result of these considerations, we must estimate our income taxes in each of the jurisdictions in which we operate on a quarterly basis. This process involves estimating our actual current tax exposures, together with assessing temporary differences resulting from differing treatment of items for tax and accounting purposes. These differences result in future tax assets and liabilities, which are included in our consolidated balance sheet.

We are subject to income tax audits by various authorities in respect of prior periods that could result in additional tax expense in future periods. While the outcome of current outstanding actions and claims remains uncertain, it is expected that they will be resolved without a material impact to our financial position. However, there can be no assurances as to the final resolution of these matters and, if the final outcome is adverse to us, the amounts we will be required to pay and the loss of certain future tax deductions could be material to our financial statements.

Accounts Receivable

We evaluate the collectability of our trade receivables based on a combination of factors. We regularly analyze our significant customer accounts and when we become aware of a specific customer’s inability to meet its financial obligations to us, such as in the case of bankruptcy filings or deterioration in the customer’s operating results or financial position, we record specific bad debt reserves to reduce the related receivable to the amount which we reasonably believe is collectible. We also record reserves for bad debts on a small portion of all other customer balances based on a variety of factors, including the length of time that the receivables are past due, the financial health of the customer, macroeconomic considerations and historical experience. If circumstances related to specific customers change, our estimates of the recoverability of receivables could be further adjusted.

Work In Progress

For revenue arrangements that are accounted for under the percentage of completion method as well as other arrangements and contracts which limit our ability to invoice at certain milestones that do not match the timing of the actual provision of the services, we record such revenue and the related unbilled receivable in work in process. Similar to accounts receivable, we constantly have to evaluate our ability to bill and subsequently collect any amounts contained in the work in progress accounts. We review these balances on a periodic basis to ensure customer balances are prudent based upon a variety of factors, such as the financial health of the customer, macroeconomic considerations and historical experience. If circumstances related to specific customers change, our estimates of the recoverability of work in progress may be further adjusted.

Provisions

We are currently involved in various claims and legal proceedings. Quarterly, we review the status of each significant matter and assess our potential financial exposure. Because of the uncertainties related to these

matters, provisions are based only on the best information available at the time. As additional information becomes available, we reassess the potential liability related to our pending claims and litigation and, if necessary, revise our provisions. Such revisions in the estimates of the potential liabilities could have a material impact on our results of operations and financial position.

Recent Accounting Pronouncements

A number of new standards, and amendments to standards and interpretations, are not yet effective for the year ended December 31, 2014, and have not been applied in preparing our consolidated financial statements. The relevant standards are listed below.

IFRS 9 Financial Instruments

Financial assets will be classified into one of two categories on initial recognition:

•

financial assets measured at amortized cost; or

•

financial assets measured at fair value.

Annual Improvements to IFRS

IFRS 15 Revenue from Contracts with Customers

Share Capital

As at February 25, 2015, there were 21,191,530 common shares outstanding.

Risks and Uncertainties

The Company’s business is subject to a number of risk factors, including those set forth below and also those included in our most recently filed AIF. Additional risks and uncertainties not presently known to us or that we currently consider immaterial also may impair our business and operations and cause the price of the common shares to decline. If any of the noted risks actually occur, our business may be harmed and the financial condition and results of operation may suffer significantly. In that event, the trading price of the common shares could decline, and shareholders may lose all or part of their investment.

Canada Revenue Agency Reassessment and Other Tax Uncertainties

In July 2012, a subsidiary of Constellation received a notice of reassessment for the 2004 taxation year from the Canadian tax authorities (“CRA”) which increased taxable income of the subsidiary by approximately $20 million relating to a gain on the sale of property between entities under common control. As a result of the notice of reassessment, the CRA has determined that the subsidiary owes approximately $6 million in federal tax and interest and approximately $5 million in provincial tax and interest. In order to appeal the reassessment, the subsidiary paid $8 million in September 2012 representing 50% of the amount owing from the federal reassessment and 100% of the amount owing from the provincial reassessment. At this stage, the Company believes the proposed reassessment is without merit and is challenging the reassessment. In February 2013 the Company filed an appeal with the Tax Court of Canada. The Company believes that it has adequately provided for the probable outcome in respect of this matter and as such no additional provision has been recorded in these financial statements during the period. There is no assurance, however, that the Company’s appeal will be successful and, if unsuccessful, the Company’s future financial results and tax expense could be adversely affected. The $8 million payment made in September 2012 has been recorded in other non-current assets, representative of the deposit on account.

The Company is subject to various other income tax audits by various authorities in respect of prior periods that could result in additional tax expense in future periods. While the outcome of such other outstanding audits and claims remains uncertain, it is expected that they will be resolved without a material impact to the Company’s financial position.

Controls and Procedures

Evaluation of disclosure controls and procedures:

Management is responsible for establishing and maintaining disclosure controls and procedures as defined under National Instrument 52-109. At December 31, 2014, the President and Chief Financial Officer concluded that the design and operation of these disclosure controls and procedures were effective and that material information relating to the Company, including its subsidiaries, was made known to them and was recorded, processed, summarized and reported within the time periods specified under applicable securities legislation.

Internal controls over financial reporting:

The President and Chief Financial Officer have designed or caused to be designed under their supervision, disclosure controls and procedures which provide reasonable assurance that material information regarding the Company is accumulated and communicated to the Company’s management, including its President and Chief Financial Officer in a timely manner.

In addition, the President and Chief Financial Officer have designed or caused it to be designed under their supervision internal controls over financial reporting (“ICFR”) to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements. The President and Chief Financial Officer have been advised that the control framework the President and the Chief Financial Officer used to design the Company’s ICFR is recognized by the Committee of Sponsoring Organizations of the Treadway Commission.

The President and the Chief Financial Officer have evaluated, or caused to be evaluated under their supervision, whether or not there were changes to its ICFR during the period ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect the Company’s ICFR. No such changes were identified through their evaluation.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that its objectives are met. Due to inherent limitations in all such systems, no evaluations of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls and procedures and our internal controls over financial reporting are effective in providing reasonable, not absolute, assurance that the objectives of our control systems have been met.

Exhibit 3.1

KPMG LLP

Yonge Corporate Centre

4100 Yonge St.

Suite 200

North York, ON M2P 2H3

Telephone (416) 228-7000

Fax (416) 228-7123

Internet www.kpmg.ca

AUDITORS’ CONSENT

The Board of Directors

Constellation Software Inc.

We consent to the use of our audit report, dated February 25, 2015, on the consolidated financial statements of Constellation Software Inc. (the “Entity”), which comprise the consolidated statements of financial position as at December 31, 2014 and December 31, 2013, the consolidated statements of income, comprehensive income, changes in equity and cash flows for each of the years in the two-year period ended December 31, 2014, and notes, comprising a summary of significant accounting policies and other explanatory information, which is included in the registration statement on Form F-7 of the Entity, dated the date hereof.

/s/ KPMG LLP

Chartered Professional Accountants, Licensed Public Accountants

March 24, 2015

Toronto, Canada

Exhibit 3.2

CONSENT OF MCCARTHY TÉTRAULT LLP

We have acted as Canadian counsel to Constellation Software Inc. (the “Registrant”) in connection with the registration statement on Form F-7 (the “Registration Statement”) being filed today by the Registrant with the Securities and Exchange Commission under the United States Securities Act of 1933, as amended. We hereby consent to the references to our name and the inclusion of our opinion contained in the Registration Statement.

/s/ McCarthy Tétrault

Toronto, Ontario, Canada

March 24, 2015

Exhibit 5.1

EXECUTION VERSION

CONSTELLATION SOFTWARE INC.

– and –

COMPUTERSHARE TRUST COMPANY OF CANADA

TRUST INDENTURE

October 1, 2014

TABLE OF CONTENTS


		Page

ARTICLE 1 INTERPRETATION			1

1.1	Definitions		1
1.2	Meaning of “Outstanding”		6
1.3	Interpretation		7
1.4	Headings, etc.		7
1.5	Day not a Business Day		7
1.6	Applicable Law		8
1.7	Monetary References		8
1.8	Invalidity, etc.		8
1.9	Language		8
1.10	Successors and Assigns		8
1.11	Benefits of Indenture		8
1.12	Waiver of Jury Trial		8

ARTICLE 2 THE DEBENTURES			9

2.1	Limit of Debentures		9
2.2	Terms of Debentures of any Series		9
2.3	Form of Debentures		10
2.4	Form and Terms of Initial Debentures		11
2.5	Certification and Delivery of Additional Debentures		17
2.6	Issue of Global Debentures		18
2.7	Execution of Debentures		19
2.8	Certification		20
2.9	Mutilation, Loss, Theft or Destruction		20
2.10	Concerning Interest		20
2.11	Debentures to Rank Pari Passu		21
2.12	Payments of Amounts Due on Maturity		21
2.13	Payment of Interest		22
2.14	Withholding Tax		24

ARTICLE 3 REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP			24

3.1	Registered Debentures		24
3.2	Global Debentures		25
3.3	Transferee Entitled to Registration		27
3.4	No Notice of Trusts		27
3.5	Registers Open for Inspection		27
3.6	Exchanges of Debentures		28
3.7	Closing of Registers		28
3.8	Charges for Registration, Transfer and Exchange		29
3.9	Ownership of Debentures		29
3.10	Non-Certificated Inventory System		30


ARTICLE 4 REDEMPTION AND PURCHASE OF DEBENTURES AT THE OPTION OF THE COMPANY		31

4.1	Applicability of Article	31
4.2	Partial Redemption	31
4.3	Notice of Redemption	31
4.4	Debentures Due on Redemption Call Dates	32
4.5	Deposit of Redemption Moneys	32
4.6	Failure to Surrender Debentures Called for Redemption	33
4.7	Cancellation of Debentures Redeemed	34
4.8	Purchase of Debentures by the Company	34

ARTICLE 5 INVESTOR PUT RIGHT		34

5.1	Applicability of Article	34
5.2	Partial Redemption	35
5.3	Notice of Redemption	35
5.4	Debentures Due on Redemption Put Dates	36
5.5	Deposit of Redemption Moneys	36
5.6	Failure to Surrender Debentures Called for Redemption	36
5.7	Cancellation of Debentures Redeemed	37

ARTICLE 6 SUBORDINATION OF DEBENTURES		37

6.1	Subordination and Postponement	37
6.2	Order of Payment	38
6.3	Restricted Remedies	38
6.4	Subrogation to Rights of Holders of Senior Indebtedness	39
6.5	Obligation to Pay Not Impaired	39
6.6	Payment on Debentures Permitted	40
6.7	Confirmation of Subordination	40
6.8	Knowledge of Debenture Trustee	40
6.9	Debenture Trustee May Hold Senior Indebtedness	41
6.10	Rights of Holders of Senior Indebtedness Not Impaired	41
6.11	Altering the Senior Indebtedness	41
6.12	Additional Indebtedness	41
6.13	Invalidated Payments	41
6.14	Obligations Created by Article 6	41
6.14	No Reliance by Third Parties	42
6.15	No Set-Off	42

ARTICLE 7 COVENANTS OF THE COMPANY		42

7.1	To Pay Principal and Interest	42
7.2	To Pay Debenture Trustee’s Remuneration	42
7.3	To Give Notice of Default	43
7.4	Preservation of Existence, etc.	43


7.5	Keeping of Books	43
7.6	No Distributions on Common Shares if Event of Default	43
7.7	Performance of Covenants by Debenture Trustee	43

ARTICLE 8 DEFAULT		44

8.1	Events of Default	44
8.2	Notice of Events of Default	45
8.3	Waiver of Default	45
8.4	Enforcement by the Debenture Trustee	46
8.5	No Suits by Debentureholders	47
8.6	Application of Moneys by Debenture Trustee	48
8.7	Notice of Payment by Debenture Trustee	49
8.8	Debenture Trustee May Demand Production of Debentures	49
8.9	Remedies Cumulative	49
8.10	Judgment Against the Company	49
8.11	Immunity of Debenture Trustee and Others	50

ARTICLE 9 SATISFACTION AND DISCHARGE		50

9.1	Cancellation and Destruction	50
9.2	Non-Presentation of Debentures	50
9.3	Discharge	50
9.4	Repayment of Unclaimed Monies	51
9.5	Satisfaction	51
9.6	Continuance of Rights, Duties and Obligations	53

ARTICLE 10 SUCCESSORS		54

10.1	Restrictions on Amalgamation, Merger and Sale of Certain Assets, etc.	54
10.2	Vesting of Powers in Successor	55

ARTICLE 11 MEETINGS OF DEBENTUREHOLDERS		55

11.1	Right to Convene Meeting	55
11.2	Notice of Meetings	55
11.3	Chairman	57
11.4	Quorum	57
11.5	Power to Adjourn	57
11.6	Show of Hands	58
11.7	Poll	58
11.8	Voting	58
11.9	Proxies	59
11.10	Persons Entitled to Attend Meetings	59
11.11	Powers Exercisable by Extraordinary Resolution	59
11.12	Meaning of “Extraordinary Resolution”	61
11.13	Powers Cumulative	62
11.14	Minutes	62


11.15	Instruments in Writing	63
11.16	Binding Effect of Resolutions	63
11.17	Evidence of Rights Of Debentureholders	63
11.18	Concerning Serial Meetings	63

ARTICLE 12 NOTICES		64

12.1	Notice to Company	64
12.2	Notice to Debentureholders	64
12.3	Notice to Debenture Trustee	64
12.4	Mail Service Interruption	65

ARTICLE 13 CONCERNING THE DEBENTURE TRUSTEE		65

13.1	No Conflict of Interest	65
13.2	Replacement of Debenture Trustee	65
13.3	Duties of Debenture Trustee	66
13.4	Reliance Upon Declarations, Opinions, etc.	66
13.5	Evidence and Authority to Debenture Trustee, Opinions, etc.	66
13.6	Debenture Trustee May Rely on Certificate of the Company	68
13.7	Experts, Advisers and Agents	68
13.8	Debenture Trustee May Deal in Debentures	68
13.9	Investment of Moneys Held by Debenture Trustee	68
13.10	Debenture Trustee will Disburse Only Monies Deposited	69
13.11	Third Party Interests	69
13.12	Debenture Trustee Not Ordinarily Bound	69
13.13	Debenture Trustee Not Required to Give Security	70
13.14	Debenture Trustee Not Bound to Act on Company’s Request	70
13.15	Debenture Trustee Not Bound to Act	70
13.16	Debenture Trustee Protected in Acting	70
13.17	Conditions Precedent to Debenture Trustee’s Obligations to Act Hereunder	71
13.18	Authority to Carry on Business	71
13.19	Compensation and Indemnity	71
13.20	Acceptance of Trust	72
13.21	U.S. Matters	72
13.22	Withholding Obligation	73
13.23	Compliance with Privacy Laws	73
13.24	Protection of the Debenture Trustee	74

ARTICLE 14 SUPPLEMENTAL INDENTURES		74

14.1	Supplemental Indentures	74

ARTICLE 15 EXECUTION AND FORMAL DATE		76

15.1	Execution	76
15.2	Formal Date	76

TRUST INDENTURE

THIS TRUST INDENTURE made as of the 1^st day of October, 2014.

BETWEEN:

CONSTELLATION SOFTWARE INC., a corporation amalgamated pursuant to the laws of Ontario

(hereinafter referred to as the “Company”)

- and -

COMPUTERSHARE TRUST COMPANY OF CANADA, a trust company existing under the laws of Canada

(hereinafter referred to as the “Debenture Trustee”)

WHEREAS the Company deems it necessary for its purposes to create and issue the Debentures to be created and issued in the manner as herein provided;

AND WHEREAS the Company, under the laws relating thereto, is duly authorized to create and issue the Debentures to be issued as herein provided;

AND WHEREAS, when certified by the Debenture Trustee and issued in accordance with this Indenture, provided all necessary steps in relation to the Company have been duly enacted, passed and/or confirmed and other proceedings taken and conditions complied with to make the creation and issue of the Debentures proposed to be issued hereunder legal, valid and binding on the Company in accordance with the laws relating to the Company;

AND WHEREAS the foregoing recitals are made as representations and statements of fact by the Company and not by the Debenture Trustee;

NOW THEREFORE it is hereby covenanted, agreed and declared as follows:

ARTICLE 1

INTERPRETATION

1.1

Definitions

In this Indenture and in the Debentures, unless there is something in the subject matter or context inconsistent therewith, the expressions following shall have the following meanings, namely:

(a)

“1934 Act” means the United States Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder;

(b)

“90% Redemption Right” has the meaning ascribed thereto in Section 2.4(g)(iv);

(c)

“this Indenture”, “this Trust Indenture”, “hereto”, “herein”, “hereby”, “hereunder”, “hereof” and similar expressions refer to this Indenture and not to any particular Article, Section, subsection, clause, subdivision or other portion hereof and include any and every instrument supplemental or ancillary hereto;

(d)

“Additional Debentures” means Debentures of any one or more series, other than the first series of Debentures, being the Initial Debentures, issued under this Indenture;

(e)

“Affiliate” has the meaning ascribed thereto in National Instrument 45-106 - Prospectus and Registration Exemptions;

(f)

“Applicable Securities Legislation” means applicable securities laws (including rules, regulations, policies and instruments) in each of the Provinces and Territories of Canada;

(g)

“Authorized Investments” has the meaning ascribed thereto in Section 13.9;

(h)

“Beneficial Holder” means any person who holds a beneficial interest in a Global Debenture as shown on the books of the Depository or a Depository Participant;

(i)

“Business Day” means any day other than a Saturday, Sunday or a statutory or banking holiday in the City of Toronto, Ontario;

(j)

“Call Notice” has the meaning attributed thereto in Section 4.3;

(k)

“CDS” means CDS Clearing and Depository Services Inc.;

(l)

“Certificate of the Company” means a written certificate signed by any director or officer of the Company;

(m)

“Change of Control” means the acquisition by any Person, or group of Persons acting jointly or in concert, of voting control or direction over an aggregate of more than 50% of the outstanding Common Shares; but a “Change of Control” shall not include a sale, merger, reorganization, arrangement, combination or other similar transaction if the Shareholders immediately prior to the completion of the transaction hold or have direction over at least 50% of the voting control or direction in such merged, reorganized, arranged, combined or other continuing entity immediately following the completion of such transaction;

(n)

“Common Shares” means common shares of the Company;

(o)

“Company” means Constellation Software Inc., a corporation amalgamated under the laws of the Province of Ontario and includes any successor to or of the Company which shall have complied with the provisions of Article 10;

(p)

“Company’s Auditors” or “Auditors of the Company” means an independent firm of chartered accountants duly appointed as auditors of the Company;

(q)

“Cost of Living Adjustment” means, in any given year, the annual average percentage change in the CPI Index during the 12 month period ending on December 31 in the prior year;

(r)

“Counsel” means a barrister or solicitor or firm of barristers or solicitors retained or employed by the Debenture Trustee or retained or employed by the Company and acceptable to the Debenture Trustee, acting reasonably;

(s)

(t)

“Debentureholders” or “holders” means the Persons for the time being entered in the register for Debentures as registered holders of Debentures payable to a named payee or any transferees of such persons by endorsement or delivery;

(u)

“Debenture Liabilities” has the meaning ascribed thereto in Section 6.1;

(v)

“Debentures” means the debentures, notes or other evidence of indebtedness of the Company issued and certified hereunder, or deemed to be issued and certified hereunder, including, without limitation, the Initial Debentures and any PIK Debentures, for the time being outstanding;

(w)

“Debenture Trustee” means Computershare Trust Company of Canada, a trust company authorized to carry on business in all of the Provinces and Territories of Canada and includes any successor to or of the Debenture Trustee which shall have complied with the provisions of Article 13;

(x)

“Defeased Debentures” has the meaning ascribed thereto in Section 9.6(a);

(y)

“Depository” means, with respect to the Debentures of any series issuable or issued in the form of one or more Global Debentures, the Person designated as depository by the Company pursuant to Section 2.6(a) until a successor depository shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Depository” shall mean each Person who is then a depository hereunder, and if at any time there is more than one such Person, “Depository” as used with respect to the Debentures of any series shall mean each depository with respect to the Global Debentures of such series;

(z)

“Depository Participant” means a broker, dealer, bank, other financial institution or other person for whom from time to time, a Depository effects book entries for a Global Debenture deposited with the Depository;

(aa)

“Directors” means the directors of the Company on the date hereof or such directors as may, from time to time, be appointed or elected directors of the Company and “Director” means anyone of them;

(bb)

“Electronic Methods” has the meaning ascribed thereto in Section 13.24;

(cc)

“Event of Default” has the meaning ascribed thereto in Section 8.1;

(dd)

“Extraordinary Resolution” has the meaning ascribed thereto in Section 11.12;

(ee)

“First Issue Date” means October 1, 2014 or such other date on which the first tranche of Initial Debentures are issued by the Company pursuant to this Indenture;

(ff)

“Global Debenture” means a Debenture that is issued to and registered in the name of the Depository, or its nominee, pursuant to Section 2.6 for purposes of being held by or on behalf of the Depository as custodian for participants in the Depository’s book-entry only registration system or NCI System;

(gg)

“IFRS” means International Financial Reporting Standards, as issued by the International Accounting Standards Board;

(hh)

“Initial Debentureholders” means the Persons for the time being entered into the register of Debentures as registered holders of the Initial Debentures;

(ii)

“Initial Debentures” means the Debentures designated as “Unsecured Subordinated Floating Rate Debentures, Series 1” and described in Section 2.4;

(jj)

“Initial Debenture Maturity Date” means March 31, 2040;

(kk)

“Interest Obligation” means the obligation of the Company to pay interest on the Debentures, as and when the same becomes due;

(ll)

“Interest Payment Date” means a date specified in a Debenture as the date on which an instalment of interest on such Debenture shall become due and payable, and with respect to the Initial Debentures, means March 31, June 30, September 30 and December 31 in each year, commencing on December 31, 2014;

(mm)

“NCI System” means a non-certificated inventory system for Debentures maintained by the Depository, as may be changed, supplemented, replaced or otherwise modified from time to time;

(nn)

“Payment in Full of the Senior Indebtedness” means the full and final payment in cash (or as otherwise agreed by the Senior Creditors in respect of the Senior Indebtedness) of the Senior Indebtedness and termination of all commitments by the Senior Creditors to extend Senior Indebtedness to the Company;

(oo)

“Periodic Offering” means an offering of Debentures of a series from time to time, the specific terms of which Debentures, including, without limitation, the rate or rates of interest, if any, thereon, the stated maturity or maturities thereof and the redemption provisions, if any, with respect thereto, are to be determined by the Company upon the issuance of such Debentures from time to time;

(pp)

“Person” includes an individual, body corporate, partnership, joint venture, association, trust, trustee, unincorporated organization or government or any agency or political subdivision thereof;

(qq)

“PIK Debentures” means, collectively, any Debentures from time to time issued upon a PIK Election of the Company as payment in satisfaction of an Interest Obligation in accordance with Section 2.13(c);

(rr)

“PIK Election” has the meaning ascribed thereto in Section 2.13(c);

(ss)

“PIK Election Notice” has the meaning ascribed thereto in Section 2.13(c);

(tt)

“Put Notice” has the meaning attributed thereto in Section 5.3;

(uu)

“Recognized Stock Exchange” means the TSX or any other stock exchange on which the Common Shares or Debentures are then listed and posted for trading;

(vv)

“Redemption Call Date” has the meaning attributed thereto in Section 4.3;

(ww)

“Redemption Price” means, in respect of a Debenture, the amount, excluding interest, payable on the Redemption Call Date or the Redemption Put Date, as applicable, fixed for such Debenture;

(xx)

“Redemption Put Date” has the meaning attributed thereto in Section 5.3;

(yy)

“Registered Debentures” means Debentures registered as to both principal and interest;

(zz)

“Second Issue Date” means November 19, 2014 or such other date on which the second tranche of Initial Debentures are issued by the Company pursuant to this Indenture;

(aaa)

“Senior Creditor” means a holder or holders of Senior Indebtedness and includes any representative or representatives or trustee or trustees of any such holder or holders;

(bbb)

“Senior Indebtedness” shall mean all indebtedness of the Company (other than Debentures) whether outstanding as of the date of this Indenture or thereafter created, incurred, assumed or guaranteed, which, by the terms of the instrument creating or evidencing the indebtedness, is expressed to rank senior to the Debentures, which for greater certainty, includes all of the Company’s present and future indebtedness, liabilities and obligations under the fifth amended and

restated credit agreement dated as of June 25, 2014, between the Company, as borrower, Bank of Montreal, as administrative agent, and the lenders from time to time party thereto, as amended, supplemented, restated or replaced from time to time;

(ccc)

“Senior Security” means all mortgages, liens, pledges, charges (whether fixed or floating), security interests or other encumbrances of any kind, contingent or absolute, held by or on behalf of any Senior Creditor and in any manner securing any Senior Indebtedness, including any of the foregoing encumbrances granted by any guarantor or surety of the Senior Indebtedness, together with any other credit support for the Senior Indebtedness;

(ddd)

“Shareholders” means the holders from time to time of the Common Shares;

(eee)

“Subsidiary” has the meaning ascribed thereto in National Instrument 45-106 – Prospectus and Registration Exemptions;

(fff)

“Tax Act” means the Income Tax Act (Canada) and the regulations thereunder, as amended from time to time;

(ggg)

“TSX” means the Toronto Stock Exchange; and

(hhh)

“Written Direction of the Company” means an instrument in writing signed by any one director or officer of the Company.

1.2

Meaning of “Outstanding”

Every Debenture certified and delivered by the Debenture Trustee hereunder shall be deemed to be outstanding until it is cancelled, converted or redeemed or delivered to the Debenture Trustee for cancellation or redemption or moneys, as the case may be, or the payment thereof shall have been set aside under Section 9.2, provided that:

(a)

Debentures which have been partially redeemed or purchased shall be deemed to be outstanding only to the extent of the unredeemed or unpurchased part of the principal amount thereof;

(b)

when a new Debenture has been issued in substitution for a Debenture which has been lost, stolen or destroyed, only one of such Debentures shall be counted for the purpose of determining the aggregate principal amount of Debentures outstanding; and

(c)

for the purposes of any provision of this Indenture entitling holders of outstanding Debentures to vote, sign consents, requisitions or other instrument or take any other action under this Indenture, or to constitute a quorum of any meeting of Debentureholders, Debentures owned directly or indirectly, legally or equitably, by the Company or a Subsidiary of the Company shall be disregarded except that:

(i)

for the purpose of determining whether the Debenture Trustee shall be protected in relying on any such vote, consent, requisition or other instrument or action, or on the holders of Debentures present or represented at any meeting of Debentureholders, only the Debentures which the Debenture Trustee knows are so owned shall be so disregarded;

(ii)

Debentures so owned which have been pledged in good faith other than to the Company or a Subsidiary of the Company shall not be so disregarded if the pledgee shall establish to the satisfaction of the Debenture Trustee the pledgee’s right to vote such Debentures, sign consents, requisitions or other instruments or take such other actions in his or her discretion free from the control of the Company or a Subsidiary of the Company; and

(iii)

Debentures so owned shall not be disregarded if they are the only Debentures outstanding.

1.3

Interpretation

In this Indenture:

(a)

words importing the singular number or masculine gender shall include the plural number or the feminine or neuter genders, and vice versa;

(b)

all references to Articles and Schedules refer, unless otherwise specified, to articles of and schedules to this Indenture;

(c)

all references to Sections refer, unless otherwise specified, to sections, subsections or clauses of this Indenture; and

(d)

words and terms denoting inclusiveness (such as “include” or “includes” or “including”), whether or not so stated, are not limited by and do not imply limitation of their context or the words or phrases which precede or succeed them.

1.4

Headings, etc.

The division of this Indenture into Articles and Sections, the provision of a Table of Contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Indenture or of the Debentures.

1.5

Day not a Business Day

In the event that any day on or before which any action required to be taken hereunder is not a Business Day, then such action shall be required to be taken on or before the requisite time on the next succeeding day that is a Business Day.

1.6

Applicable Law

This Indenture and the Debentures shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and shall be treated in all respects as Ontario contracts. The parties hereto hereby submit to the jurisdiction of the courts of the Province of Ontario.

1.7

Monetary References

Whenever any amounts of money are referred to herein, such amounts shall be deemed to be in lawful money of Canada unless otherwise expressed.

1.8

Invalidity, etc.

Any provision hereof which is prohibited or unenforceable shall be ineffective only to the extent of such prohibition or unenforceability, without invalidating the remaining provisions hereof.

1.9

Language

Each of the parties hereto hereby acknowledges that it has consented to and requested that this Indenture and all documents relating thereto, including, without limiting the generality of the foregoing, the form of Debenture attached hereto as Schedule A, be drawn up in the English language only.

Les parties aux présentes ont exigé que la présente convention ainsi que tous les documents et avis qui s’y rattachent et qui en découleront soient redigés en langue anglaise.

1.10

Successors and Assigns

All covenants and agreements in this Indenture by the Company shall bind its successors and assigns, whether expressed or not.

1.11

Benefits of Indenture

Nothing in this Indenture or in the Debentures, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, any paying agent, the holders of Debentures, the Debenture Trustee and (to the extent provided in Article 6) any Senior Creditor, any benefit or any legal or equitable right, remedy or claim under this Indenture.

1.12

Waiver of Jury Trial

The parties hereto waive any right they may have to require a trial by jury.

ARTICLE 2

THE DEBENTURES

2.1

Limit of Debentures

The aggregate principal amount of Debentures authorized to be issued under this Indenture is unlimited, but Debentures may be issued only upon and subject to the conditions and limitations herein set forth.

2.2

Terms of Debentures of any Series

The Debentures may be issued in one or more series. There shall be established herein or in or pursuant to one or more indentures supplemental hereto, prior to the initial issuance of Debentures of any particular series:

(a)

the designation of the Debentures of the series (which need not include the term “Debentures”), which shall distinguish the Debentures of the series from the Debentures of all other series;

(b)

any limit upon the aggregate principal amount of the Debentures of the series that may be certified and delivered under this Indenture (except for Debentures certified and delivered upon registration of, transfer of, amendment of, or in exchange for, or in lieu of, other Debentures of the series pursuant to Sections 2.9, 3.2, 3.3 and 3.6);

(c)

the date or dates on which the principal of the Debentures of the series is payable;

(d)

the rate or rates at which the Debentures of the series shall bear interest, if any, the date or dates from which such interest shall accrue, on which such interest shall be payable and on which a record, if any, shall be taken for the determination of holders to whom such interest shall be payable and/or the method or methods by which such rate or rates or date or dates shall be determined;

(e)

the place or places where the principal of and any interest on Debentures of the series shall be payable or where any Debentures of the series may be surrendered for registration of transfer or exchange;

(f)

the rights, if any, of the Company to redeem Debentures of the series, in whole or in part, at its option and the period or periods within which, the price or prices at which and any terms and conditions upon which, Debentures of the series may be so redeemed, pursuant to any sinking fund or otherwise;

(g)

the obligation, if any, of the Company to redeem, purchase or repay Debentures of the series pursuant to any mandatory redemption, sinking fund or analogous provisions or at the option of a holder thereof and the price or prices at which, the period or periods within which, the date or dates on which, and any terms and

conditions upon which, Debentures of the series shall be redeemed, purchased or repaid, in whole or in part, pursuant to such obligations;

(h)

if other than denominations of $100 and any integral multiple thereof, the denominations in which Debentures of the series shall be issuable;

(i)

subject to the provisions of this Indenture, any trustee, Depositories, authenticating or paying agents, transfer agents or registrars or any other agents with respect to the Debentures of the series;

(j)

any other events of default or covenants with respect to the Debentures of the series;

(k)

whether and under what circumstances the Debentures of the series will be convertible into or exchangeable for securities of any Person, including the Company;

(l)

the form and terms of the Debentures of the series;

(m)

if applicable, that the Debentures of the series shall be issuable in whole or in part as one or more Global Debentures and, in such case, the Depository or Depositories for such Global Debentures in whose name the Global Debentures will be registered, and any circumstances other than or in addition to those set forth in Section 3.2 or those applicable with respect to any specific series of Debentures, as the case may be, in which any such Global Debenture may be exchanged for Registered Debentures, or transferred to and registered in the name of a person other than the Depository for such Global Debentures or a nominee thereof;

(n)

if other than Canadian currency, the currency in which the Debentures of the series are issuable; and

(o)

any other terms of the Debentures of the series (which terms shall not be inconsistent with the provisions of this Indenture).

All Debentures of any one series shall be substantially identical, except as may otherwise be established herein or by or pursuant to a resolution of the Directors, Certificate of the Company or in an indenture supplemental hereto. All Debentures of any one series need not be issued at the same time and may be issued from time to time, including pursuant to a Periodic Offering, consistent with the terms of this Indenture, if so provided herein, by or pursuant to such resolution of the Directors, Certificate of the Company or in an indenture supplemental hereto.

2.3

Form of Debentures

Except in respect of the Initial Debentures, the form of which is provided for herein, the Debentures of each series shall be substantially in such form or forms (not inconsistent with this Indenture) as shall be established herein or by or pursuant to one or more resolutions of the Directors (as set forth in a resolution of the Directors or to the extent established pursuant to,

rather than set forth in, a resolution of the Directors, in a Certificate of the Company detailing such establishment) or in one or more indentures supplemental hereto, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture and may have imprinted or otherwise reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto or with any rules or regulations of any securities exchange or securities regulatory authority or to conform to general usage, all as may be determined by the Director or officer executing such Debentures, as conclusively evidenced by his or her execution of such Debentures.

2.4

Form and Terms of Initial Debentures

(a)

The first series of Debentures (the “Initial Debentures”) authorized for issue immediately is unlimited in aggregate principal amount and shall be designated as “Unsecured Subordinated Floating Rate Debentures, Series 1”.

(b)

The Initial Debentures shall be dated as of the First Issue Date, shall mature on the Initial Debenture Maturity Date and shall bear interest from, and including, the First Issue Date to, but excluding, March 31, 2015 at the rate of 7.4% per annum. From and including March 31, 2015 to but excluding the Initial Debenture Maturity Date, the interest rate applicable to the Debentures will be reset on an annual basis on March 31 of each year, at a rate equal to the Cost of Living Adjustment (which amount may be positive or negative) plus 6.5% (the “Initial Debenture Floating Interest Rate”). Notwithstanding the foregoing, the interest rate applicable to the Initial Debentures will at no time be less than 0%. Interest will be payable quarterly in arrears in equal instalments on March 31, June 30, September 30 and December 31 in each year, commencing on December 31, 2014 and the last such payment (representing interest payable from the last Interest Payment Date to, but excluding, the Initial Debenture Maturity Date or the earlier date of redemption of the Initial Debentures), subject as hereinafter provided, to fall due on the Initial Debenture Maturity Date or the earlier date of redemption, payable after as well as before maturity and after as well as before default, with interest on amounts in default at the same rate, compounded quarterly. For certainty, the first interest payment payable on the Initial Debentures (whether issued on the First Issue Date or the Second Issue Date) on December 31, 2014 will include interest accrued from and including the First Issue Date to, but excluding, December 31, 2014 in the amount of $1.8449 for each $100 principal amount of Initial Debentures outstanding. The Debenture Trustee shall be entitled to rely on the interest payment calculations of the Company for any interest period.

Interest is payable on each Interest Payment Date to holders of record at the close of business on the Business Day immediately preceding each Interest Payment Date. In the event that any Interest Payment Date is not a Business Day, then the Interest Payment Date will be the next succeeding day that is a Business Day.

The Company shall provide written notice of (i) the Initial Debenture Floating Interest Rate to the Debenture Trustee and the TSX no later than March 1 of each year and (ii) each Interest Payment Date and applicable record date to the TSX, using the prescribed form, at least seven Business Days prior to the applicable record date in respect of each Interest Payment Date.

(c)

The Initial Debentures will be redeemable at the option of the Company in accordance with the terms of Article 4, provided that the Initial Debentures will not be redeemable prior to March 31, 2020, except in the event of the satisfaction of certain conditions after a Change of Control has occurred as outlined herein.

During the period beginning on March 16 and ending on March 31 of each year, the first such period commencing on March 16, 2015, the Company will have the right, at its option, to give notice to holders of Initial Debentures of its intention to redeem the Initial Debentures, in whole or in part, on March 31 in the year that is five years following the year in which notice is given (which date will constitute a “Redemption Call Date” for purposes of the Initial Debentures), at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the Redemption Call Date.

In the event the Company exercises its right to redeem some or all of the outstanding Initial Debentures in a given year, the Company will send a reminder redemption notice to holders of Initial Debentures not less than 30 nor more than 60 days prior to each applicable Redemption Call Date. The Redemption Call Notice for the Initial Debentures will be substantially in the form of Schedule B.

(d)

The Initial Debentures will be redeemable at the option of each Debentureholder in accordance with the terms of Article 5, provided that the Initial Debentures will not be redeemable prior to March 31, 2020, except in the event of the satisfaction of certain conditions after a Change of Control has occurred as outlined herein.

During the period beginning on March 1 and ending on March 15 of each year, the first such period commencing on March 1, 2015, holders of Initial Debentures will have the right, at their option, to give notice to the Company of their intention to require the Company to repurchase (or to “put”) the Initial Debentures, in whole or in part, on March 31 in the year that is five years following the year in which notice is given (which date will constitute a “Redemption Put Date” for purposes of the Initial Debentures), at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the Redemption Put Date.

A holder of Debentures who has exercised its put right in respect of some or all of the Initial Debentures held by such holder will be required to withdraw from the Depository and become definitively certificated. The registered holder must then deposit such Initial Debentures with the Trustee to be held in escrow by the Trustee until the applicable Redemption Put Date and such Debentures will no longer be transferable over the facilities of the TSX or otherwise without the

consent of the Company. The Redemption Put Notice for the Initial Debentures will be substantially in the form of Schedule C.

(e)

The Initial Debentures, including the payment of the principal thereof and interest thereon, will be subordinated to the prior payment in full of all Senior Indebtedness in accordance with the provisions of Article 6.

(f)

The Initial Debentures (including any PIK Debentures issued in accordance with Section 2.13) will be issued in denominations of $100 and integral multiples of $100. Each Initial Debenture represented by a physical certificate shall be issued in substantially the form set out in Schedule A, with such insertions, omissions, substitutions or other variations as shall be required or permitted by this Indenture, and may have imprinted or otherwise reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Indenture, as may be required to comply with any law or with any rules or regulations pursuant thereto or with any rules or regulations of any securities exchange or securities regulatory authority or to conform with general usage, all as may be determined by the Director or officer executing such Initial Debenture in accordance with Section 2.7 hereof, as conclusively evidenced by their execution of an Initial Debenture. Each Initial Debenture shall additionally bear such distinguishing letters and numbers as the Debenture Trustee shall accept. Notwithstanding the foregoing, an Initial Debenture may be in such other form or forms as may, from time to time, be approved by a resolution of the Directors or as specified in a Certificate of the Company. The Initial Debentures may be engraved, lithographed, printed, mimeographed or typewritten or partly in one form and partly in another.

The Initial Debentures may be issued as Global Debentures registered in the name of the Depository (or any nominee of the Depository). A Global Debenture may be exchanged for Initial Debentures in registered form that are not Global Debentures, or transferred to and registered in the name of a Person other than the Depository for such Global Debentures or a nominee thereof as provided in Section 3.2.

(g)

Upon the occurrence of a Change of Control, subject to the Payment in Full of the Senior Indebtedness and subject to the provisions and conditions of this Section 2.4(g), holders of Initial Debentures have a right to require the Company to purchase their Initial Debentures. The terms and conditions of such right are set forth below:

(i)

Upon the occurrence of a Change of Control, each holder of Initial Debentures shall have the right (the “Change of Control Put Right”) to require the Company to purchase, on the date which is 30 days following the date upon which the Debenture Trustee delivers a Change of Control Notice (as defined below) to the holders of Initial Debentures (the “Change of Control Put Date”), all or any part of such holder’s Initial Debentures in accordance with the requirements of Applicable Securities

Legislation at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest (less any tax required by law to be deducted) on such Initial Debentures up to, but excluding, the Change of Control Put Date (collectively, the “Total Put Price”).

(ii)

The Company will, as soon as practicable, and in any event no later than two Business Days after the occurrence of a Change of Control, give written notice to the Debenture Trustee of the Change of Control. The Debenture Trustee will, as soon as practicable thereafter, and in any event no later than two Business Days after receiving notice from the Company of the Change of Control, provide written notice to the holders of Initial Debentures of the Change of Control (the “Change of Control Notice”). The Change of Control Notice shall be prepared by the Company and shall include a description of the Change of Control, details of the Debentureholders’ Change of Control Put Right under the terms hereof, a statement that each holder will be entitled to withdraw his election to require the Company to purchase if the Debenture Trustee receives, no later than the close of business on the third Business Day immediately preceding the Change of Control Put Date, a facsimile transmission or letter setting forth the name of such holder, the principal amount of the Initial Debentures tendered for purchase and a statement that such holder is withdrawing his election to have the Initial Debentures purchased, and a description of the rights of the Company to redeem untendered Initial Debentures in accordance with Subsection 2.4(g)(iv) hereof.

(iii)

To exercise the Change of Control Put Right, the Debentureholder must deliver to the Debenture Trustee, not less than five Business Days prior to the Change of Control Put Date, written notice of the holder’s exercise of such right in the form attached as Schedule D hereto together with (A) the Initial Debentures with respect to which the right is being exercised, duly endorsed for transfer, or (B) if the Initial Debentures have been issued as Global Debentures, a duly endorsed form of transfer.

(iv)

If 90% or more in aggregate principal amount of Initial Debentures outstanding on the date the Company provides notice of a Change of Control to the Debenture Trustee have been tendered for purchase pursuant to the Change of Control Put Right on the Change of Control Put Date, the Company has the right upon written notice provided to the Debenture Trustee prior to the Change of Control Put Date, to redeem all the remaining outstanding Initial Debentures on the Change of Control Put Date at the Total Put Price (the “90% Redemption Right”).

(v)

Upon receipt of written notice that the Company shall exercise the 90% Redemption Right and acquire the remaining Initial Debentures, the Debenture Trustee shall as soon as reasonably possible provide written notice to all Debentureholders that did not previously exercise the Change of Control Put Right that:

(A)

The Company has exercised the 90% Redemption Right and will purchase all outstanding Initial Debentures on the Change of Control Put Date at the Total Put Price, including a calculation of such holder’s Total Put Price;

(B)

They must transfer their Initial Debentures to the Debenture Trustee on the same terms as those holders that exercised the Change of Control Put Right and must send their respective Initial Debentures, duly endorsed for transfer, or their duly endorsed form of transfer, as applicable, to the Debenture Trustee within 10 days after sending of such notice; and

(C)

The rights of such holder under the terms of the Initial Debentures cease as of the Change of Control Put Date provided the Company has paid the Total Put Price to, or to the order of, the Debenture Trustee and thereafter the Initial Debentures shall not be considered to be outstanding and the holder shall not have any right except to receive the Total Put Price upon surrender and delivery of such holder’s Initial Debentures with a duly completed form of transfer, as applicable, in accordance with the Indenture.

(vi)

The Company shall, on or before 11:00 a.m., Toronto time on the Business Day immediately prior to the Change of Control Put Date, deposit with the Debenture Trustee or any paying agent to the order of the Debenture Trustee, such sums of money as are sufficient to pay the Total Put Price of the Initial Debentures to be purchased or redeemed by the Company on the Change of Control Put Date, provided the Company may elect to satisfy this requirement by providing the Debenture Trustee with a certified cheque for such amounts required under this Subsection 2.4(g)(vi) hereof post-dated to the Change of Control Put Date or the Company may satisfy this requirement by an electronic funds transfer of such sums of money on the Business Day prior to the Change of Control Put Date. To the extent requested by the Debenture Trustee, the Company shall also deposit with the Debenture Trustee a sum of money sufficient to pay any charges or expenses which may be incurred by the Debenture Trustee in connection with such purchase and/or redemption, as the case may be. Every such deposit shall be irrevocable. From the sums so deposited, the Debenture Trustee shall pay or cause to be paid to the holders of such Initial Debentures, the Total Put Price to which they are entitled on the Company’s purchase or redemption.

(vii)

If one or more of such Initial Debentures being purchased in accordance with this Section 2.4(g) hereof becomes subject to purchase in part only, upon surrender of such Initial Debentures for payment of the Total Put Price, the Company shall execute and the Debenture Trustee shall certify and deliver without charge to the holder thereof or upon the holder’s

order, one or more new Initial Debentures for the portion of the principal amount of the Initial Debentures not purchased.

(viii)

The Total Put Price for Initial Debentures for which holders have exercised the Change of Control Put Right and Initial Debentures which the Company has elected to redeem in accordance with this Section 2.4(g) hereof shall become due and payable on the Change of Control Put Date, in the same manner and with the same effect as if it were the Final Maturity Date, anything therein or herein to the contrary notwithstanding, and from and after such Change of Control Put Date, if the money necessary to purchase or redeem the Initial Debentures shall have been deposited as provided in this Section 2.4(g) hereof and affidavits or other proof satisfactory to the Debenture Trustee as to the publication and/or mailing of such notices shall have been lodged with it, interest on the Initial Debentures shall cease. If any question shall arise as to whether any notice has been given as above provided and such deposit made, such question shall be decided by the Debenture Trustee whose decision shall be final and binding upon all parties in interest.

(ix)

If the holder of any Initial Debenture to be purchased or redeemed in accordance with this Section 2.4(g) hereof shall fail on or before the Change of Control Put Date so to surrender such holder’s Initial Debenture or duly endorsed form of transfer or shall not within such time accept payment of the moneys payable, or give such receipt therefor, if any, as the Debenture Trustee may require, such moneys may be set aside in trust without interest, or such certificates may be held in trust, either in the deposit department of the Debenture Trustee or in a chartered bank, and such setting aside shall for all purposes be deemed a payment to the Debentureholder of the sum so set aside and, to that extent, the Initial Debenture shall thereafter not be considered as outstanding hereunder and the Debentureholder shall have no other right except to receive payment of the moneys so paid and deposited, or to take delivery of the certificates so deposited, upon surrender and delivery up of such holder’s Initial Debenture, of the Total Put Price. If any money, or certificates, required to be deposited hereunder with the Debenture Trustee or any depositary or paying agent on account of principal, premium, if any, or interest, if any, on Initial Debentures issued hereunder shall remain so deposited for a period of ten years from the Change of Control Put Date, then to the extent permitted by law, such moneys, or certificates, together with any accumulated interest thereon, shall at the end of such period be paid over or delivered over by the Debenture Trustee or such depositary or paying agent to the Company and the Debenture Trustee shall not be responsible to Debentureholders for any amounts owing to them.

(x)

Subject to the provisions above related to Initial Debentures purchased in part, all Initial Debentures purchased, redeemed and paid under Section

2.4(g) hereof shall forthwith be delivered to the Debenture Trustee and cancelled and no Initial Debentures shall be issued in substitution therefor.

(xi)

The Company will publicly announce the results of the purchases and redemptions made pursuant to Section 2.4(g) hereof as soon as practicable after the Change of Control Put Date.

(xii)

The Company will comply with all Applicable Securities Legislation if the Company is required to purchase Initial Debentures pursuant to Section 2.4(g) hereof.

(h)

Unless otherwise specified in an indenture supplemental hereto, any PIK Debentures issued to the holders of the Initial Debentures in accordance with Section 2.13 will have the same terms and conditions as the Initial Debentures and will form part of the principal amount of such Initial Debentures. If, on any Interest Payment Date, the Company fails to pay the amount of interest owing on the Initial Debentures in full in cash, the Company will not (A) declare or pay dividends of any kind on the Common Shares, nor (B) participate in any share buyback or redemption involving the Common Shares, until the date on which the Company pays such interest (or the unpaid portion thereof) in cash to holders of Initial Debentures; provided, however, that where the Company has issued PIK Debentures in respect of all or a portion of the amount of interest owing on the Initial Debentures on such Interest Payment Date, the Company may resume declaring or paying dividends of any kind on the Common Shares and participating in any share buyback or redemption involving the Common Shares beginning on the next earlier of (i) the Interest Payment Date in respect of which the Company pays the amount of interest owing on the Initial Debentures in full in cash and (ii) the date on which the Company repays all amounts owing under such PIK Debenture.

(i)

The Debenture Trustee shall be provided with the documents and instruments referred to in Sections 2.5(b), (c) and (d) with respect to the Initial Debentures prior to the issuance of the Initial Debentures.

(j)

A copy of all notices provided to Debentureholders pursuant to this Section 2.4 will concurrently be provided to the TSX.

2.5

Certification and Delivery of Additional Debentures

The Company may from time to time request the Debenture Trustee to certify and deliver Additional Debentures of any series by delivering to the Debenture Trustee the documents referred to below in this Section 2.5 whereupon the Debenture Trustee shall certify such Debentures and cause the same to be delivered in accordance with the Written Direction of the Company referred to below or pursuant to such procedures acceptable to the Debenture Trustee as may be specified from time to time by a Written Direction of the Company. The maturity date, issue date, interest rate (if any) and any other terms of the Additional Debentures of such series shall be set forth in or determined by or pursuant to such Written Direction of the Company and

any special procedures in accordance with such issue. In certifying such Additional Debentures, the Debenture Trustee shall be entitled to receive, in either original or PDF form with original to follow within two Business Days, and shall be fully protected in relying upon, unless and until such documents have been superseded or revoked:

(a)

a Certificate of the Company and/or executed supplemental indenture by or pursuant to which the form and terms of such Additional Debentures were established;

(b)

a Written Direction of the Company requesting certification and delivery of such Additional Debentures and setting forth delivery instructions, provided that, with respect to Debentures of a series subject to a Periodic Offering:

(i)

such Written Direction of the Company may be delivered by the Company to the Debenture Trustee prior to the delivery to the Debenture Trustee of such Additional Debentures of such series for certification and delivery;

(ii)

the Debenture Trustee shall certify and deliver Additional Debentures of such series for original issue from time to time, in an aggregate principal amount not exceeding the aggregate principal amount, if any, established for such series, pursuant to a Written Direction of the Company or pursuant to procedures acceptable to the Debenture Trustee as may be specified from time to time by a Written Direction of the Company; and

(iii)

the maturity date or dates, issue date or dates, interest rate or rates (if any) and any other terms of Additional Debentures of such series shall be determined by an executed supplemental indenture or by Written Direction of the Company or pursuant to such procedures;

(c)

an opinion of Counsel, in form and substance satisfactory to the Debenture Trustee, acting reasonably, to the effect that all requirements imposed by this Indenture or by law in connection with the proposed issue of Additional Debentures have been complied with, subject to the delivery of certain documents or instruments specified in such opinion; and

(d)

a Certificate of the Company certifying that the Company is not in default under this Indenture, that the terms and conditions for the certification and delivery of Additional Debentures (including those set forth in Section 13.5), have been complied with subject to the delivery of any documents or instruments specified in such Certificate of the Company and that no Event of Default exists or will exist upon such certification and delivery.

2.6

Issue of Global Debentures

(a)

The Company may specify that the Debentures of a series are to be issued in whole or in part as one or more Global Debentures registered in the name of a Depository, or its nominee, designated by the Company in the Written Direction of the Company delivered to the Debenture Trustee at the time of issue of such

Debentures, and in such event the Company shall execute and the Debenture Trustee shall certify and deliver one or more Global Debentures that shall:

(i)

represent an aggregate amount equal to the principal amount of the outstanding Debentures of such series to be represented by one or more Global Debentures;

(ii)

be delivered by the Debenture Trustee pursuant to the Company’s written instructions; and

(iii)

bear a legend substantially to the following effect if the Depository is CDS:

“UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF CDS CLEARING AND DEPOSITORY SERVICES INC. (“CDS”) TO CONSTELLATION SOFTWARE INC. (THE “ISSUER”) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN RESPECT THEREOF IS REGISTERED IN THE NAME OF CDS & CO., OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS (AND ANY PAYMENT IS MADE TO CDS & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED HOLDER HEREOF, CDS & CO., HAS A PROPERTY INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE HEREIN AND IT IS A VIOLATION OF ITS RIGHTS FOR ANOTHER PERSON TO HOLD, TRANSFER OR DEAL WITH THIS CERTIFICATE.”

(b)

Each Depository designated for a Global Debenture must, at the time of its designation and at all times while it serves as such Depository, be a clearing agency registered or designated under the securities legislation of the jurisdiction where the Depository has its principal offices.

2.7

Execution of Debentures

All Debentures shall be signed (either manually or other electronic signature howsoever delivered) by any one Director or officer of the Company. An electronic signature upon a Debenture shall for all purposes of this Indenture be deemed to be the signature of the person whose signature it purports to be. Notwithstanding that any person whose signature, either manual or by electronic mail, appears on a Debenture as Director or officer of the Company may no longer hold such office at the date of the Debenture or at the date of the certification and delivery thereof, such Debenture shall be valid and binding upon the Company and entitled to the benefits of this Indenture.

2.8

Certification

Except as otherwise provided herein, no Debenture shall be issued or, if issued, shall be obligatory or shall entitle the holder to the benefits of this Indenture, until it has been manually certified by or on behalf of the Debenture Trustee substantially in the form set out in this Indenture, in the relevant supplemental indenture, or in some other form approved by the Debenture Trustee. Such certification on any Debenture shall be conclusive evidence that such Debenture is duly issued, is a valid obligation of the Company and the holder is entitled to the benefits hereof.

The certificate of the Debenture Trustee signed on the Debentures shall not be construed as a representation or warranty by the Debenture Trustee as to the validity of this Indenture or of the Debentures or as to the issuance of the Debentures and the Debenture Trustee shall in no respect be liable or answerable for the use made of the Debentures or any of them or the proceeds thereof. The certificate of the Debenture Trustee signed on the Debentures shall, however, be a representation and warranty by the Debenture Trustee that the Debentures have been duly certified by or on behalf of the Debenture Trustee pursuant to the provisions of this Indenture.

2.9

Mutilation, Loss, Theft or Destruction

In case any of the Debentures issued hereunder shall become mutilated or be lost, stolen or destroyed and in the absence of notice that such Debenture has been acquired by a bona fide purchaser, the Company, in its discretion, may issue, and thereupon the Debenture Trustee shall certify and deliver, a new Debenture upon surrender and cancellation of the mutilated Debenture, or in the case of a lost, stolen or destroyed Debenture, in lieu of and in substitution for the same, and the substituted Debenture shall be in a form approved by the Debenture Trustee and shall be entitled to the benefits of this Indenture and rank equally in accordance with its terms with all other Debentures issued or to be issued hereunder. The new or substituted Debenture may have endorsed upon it the fact that it is in replacement of a previous Debenture. In case of loss, theft or destruction the applicant for a substituted Debenture shall furnish to the Company and to the Debenture Trustee such evidence of the loss, theft or destruction of the Debenture and such other documents as shall be satisfactory to them in their discretion and shall also furnish an indemnity and surety bond satisfactory to them in their discretion. The applicant shall pay all reasonable expenses incidental to the issuance of any substituted Debenture.

2.10

Concerning Interest

(a)

All Debentures issued hereunder, whether originally or upon exchange or in substitution for previously issued Debentures which are interest bearing, shall bear interest (i) from and including their issue date, or (ii) from and including the last Interest Payment Date to which interest shall have been paid or made available for payment on the outstanding Debentures of that series, whichever shall be the later, or, in respect of Debentures subject to a Periodic Offering, from and including their issue date or from and including the last Interest Payment Date to which interest shall have been paid or made available for payment on such Debentures, in all cases, to but excluding the next Interest Payment Date. All

interest shall accrue from day to day and shall be payable in arrears for the actual number of days elapsed in the relevant interest period.

(b)

Unless otherwise specifically provided in the terms of the Debentures of any series, interest for any period of less than three months shall be computed on the basis of a year of 365 days. Subject to Section 2.4(b) in respect of the method for calculating the amount of interest to be paid on the Initial Debentures on the first Interest Payment Date in respect thereof, with respect to any series of Debentures, whenever interest is computed on a basis of a year (the “deemed year”) which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate for purposes of the Interest Act (Canada) by multiplying such rate of interest by the actual number of days in the calendar year of calculation and dividing it by the number of days in the deemed year.

2.11

Debentures to Rank Pari Passu

The Debentures will be direct, subordinated unsecured obligations of the Company. Each Debenture will rank pari passu with each other Debenture (regardless of their actual date or terms of issue) and, subject to statutory preferred exceptions, with all other present and future subordinated and unsecured indebtedness of the Company (other than Senior Indebtedness) except for sinking fund provisions (if any) applicable to different series of Debentures or other similar types of obligations of the Company.

2.12

Payments of Amounts Due on Maturity

Except as may otherwise be provided in this Indenture and any supplemental indenture in respect of any series of Debentures, payments of amounts due upon maturity of the Debentures will be made in the following manner. On or before 11:00 a.m. (Toronto time) on the Business Day immediately prior to each maturity date for Debentures outstanding from time to time under this Indenture, the Company shall have wired funds to the Debenture Trustee by electronic transfer of funds (provided the Debenture Trustee must have received confirmation of receipt of such funds on or before such time) in an amount sufficient to pay the cash amount payable in respect of such Debentures (including the principal amount and premium (if any), together with any accrued and unpaid interest thereon less any tax required by law to be deducted), provided the Company may elect to satisfy this requirement by providing the Debenture Trustee with a certified cheque for such amounts required under this Section 2.12 post-dated to the applicable maturity date. The Debenture Trustee, on behalf of the Company, will pay to each holder entitled to receive payment the principal amount of and premium (if any) and accrued and unpaid interest on the Debenture (less applicable withholding taxes, if any), upon surrender of the Debenture at any branch of the Debenture Trustee designated for such purpose from time to time by the Company and the Debenture Trustee. The delivery of such funds to the Debenture Trustee will satisfy and discharge the liability of the Company for the Debentures to which the delivery of funds relates to the extent of the amount delivered (plus the amount of tax deducted of as aforesaid) and such Debentures will thereafter to that extent not be considered as outstanding under this Indenture and such holder will have no other right in regard thereto other than to receive out of the money

so delivered or made available the amount to which such holder is entitled. All payments to be made by the Debenture Trustee will be subject to Section 13.10 hereunder.

2.13

Payment of Interest

The following provisions shall apply to Debentures, except as otherwise provided in Section 2.4(b) or specified in a resolution of the Directors, a Certificate of the Company or a supplemental indenture relating to a particular series of Additional Debentures:

(a)

As interest becomes due on each Debenture (except on redemption, when interest may at the option of the Company be paid upon surrender of such Debenture) the Company, either directly or through the Debenture Trustee or any agent of the Debenture Trustee, shall send or forward by prepaid ordinary mail, electronic transfer of funds or such other means as may be agreed to by the Debenture Trustee, payment of such interest (less any tax required to be withheld therefrom) to the order of the registered holder of such Debenture appearing on the registers maintained by the Debenture Trustee at the close of business on the Business Day prior to the applicable Interest Payment Date and addressed to the holder at the holder’s last address appearing on the register, unless such holder otherwise directs. If payment is made by cheque or by other means such as electronic transfer of funds, provided the Debenture Trustee must receive confirmation of receipt of funds prior to being able to wire funds to holders, such payment shall be forwarded at least three Business Days prior to each date on which interest becomes due. The mailing of such cheque or the making of such payment by other means shall, to the extent of the sum represented thereby, plus the amount of any tax withheld as aforesaid, satisfy and discharge all liability for interest on such Debenture, unless in the case of payment by cheque, such cheque is not paid at par on presentation. In the event of non-receipt of any cheque for or other payment of interest by the person to whom it is so sent as aforesaid, the Company or the Debenture Trustee will issue to such person a replacement cheque or other payment for a like amount upon being furnished with such evidence of non-receipt as it shall reasonably require and upon being funded and indemnified to its satisfaction. Notwithstanding the foregoing, if the Company is prevented by circumstances beyond its control (including, without limitation, any interruption in mail service) from making payment of any interest due on each Debenture in the manner provided above, the Company may make payment of such interest or make such interest available for payment in any other manner acceptable to the Debenture Trustee with the same effect as though payment had been made in the manner provided above.

(b)

Notwithstanding Section 2.13(a), if a series of Debentures is represented by a Global Debenture, then all payments of interest on the Global Debenture shall be made by electronic funds transfer (wire) to the Debenture Trustee or any paying agent, or cheque made payable to the Depository or its nominee, for subsequent payment (less applicable withholding taxes, if any) to Beneficial Holders of interests in that Global Debenture prior to the day interest is payable, unless the Company and the Depository otherwise agree (upon prior written notice to the

Debenture Trustee and any such paying agent). If payment is made by the Company directly to the Depository, then the Company shall provide written confirmation of such payment to the Debenture Trustee immediately thereafter. None of the Company, the Debenture Trustee or any agent of the Debenture Trustee for any Debenture issued as a Global Debenture will be liable or responsible to any person for any aspect of the records related to or payments made on account of beneficial interests in any Global Debenture or for maintaining, reviewing, or supervising any records relating to such beneficial interests. All payments to be made by the Debenture Trustee are subject to Section 13.10 hereunder.

(c)

Notwithstanding Section 2.13(a), the Company may, subject to regulatory approval, applicable law (including Applicable Securities Laws) and the terms of the Senior Indebtedness, elect (the “PIK Election”), in lieu of paying interest in cash, to satisfy all or any portion of its Interest Obligation payable on an Interest Payment Date by issuing to each Debentureholder appearing on the registers maintained by the Debenture Trustee at the close of business on the last Business Day prior to the applicable Interest Payment Date such principal amount of PIK Debentures equal to the amount of the Interest Obligation to be satisfied by the issuance of PIK Debentures (less any tax required by law to be deducted, if any), which amount will be rounded down to the nearest multiple of $100, and delivering to each Debentureholder, in the same manner as contemplated in Section 2.13(a) or 2.13(b), as applicable, with respect to the payment of interest, the certificate representing such PIK Debentures. No fractional PIK Debentures shall be delivered to the registered holders hereof upon a PIK Election to issue and deliver PIK Debentures in satisfaction of the Interest Obligation, however holders will receive a cash payment in respect of any fractional interest in PIK Debentures. The Company will make a PIK Election by delivering written notice (the “PIK Election Notice”) to the Debenture Trustee and the TSX, at least ten Business Days prior to the Interest Payment Date. The PIK Election Notice will include a calculation of the amount of the Interest Obligation due upon the Interest Payment Date and the principal amount of PIK Debentures to be issued and delivered to the Debentureholders in accordance with this Section 2.13(c).

(d)

The PIK Debentures issued to the holders of the Debentures in accordance with Section 2.13(c) will be subject to the terms of the Indenture and unless otherwise specified in an indenture supplemental hereto, will have the same terms and conditions as the Debentures in respect of which the PIK Debentures are issued.

(e)

Each Debentureholder agrees to advance to the Company an amount equal to the Interest Obligation to be satisfied by the issuance of the PIK Debentures (the “Advance”) and each Debentureholder and the Company agree that the delivery of the PIK Debentures to the Debenture Trustee in accordance with this Section 2.13 will satisfy and discharge the liability of the Company for any Interest Obligation payable on the applicable Interest Payment Date that is related to the delivery of such PIK Debentures and will satisfy the liability of the Debentureholder to make the Advance.

2.14

Withholding Tax

The Company will be entitled to deduct and withhold any applicable taxes or similar charges (including interest, penalties or similar amounts in respect thereof) imposed or levied by or on behalf of the Canadian government or of any Province or Territory thereof or any authority or agency therein or thereof or by any state, local or foreign tax authority, or otherwise pursuant to applicable law, including pursuant to the Tax Act, from any payment to be made on or in connection with the Debentures (including in connection with a redemption, put or repayment of the Debentures) and, provided that the Company timely remits such withheld amount to such government, authority or agency and files all required forms in respect thereof and provides reasonable evidence of such remittance and filing to the Debenture Trustee and the relevant Debentureholder, the amount of any such deduction or withholding will be considered an amount paid in satisfaction of the Company’s obligations under the Debentures. There is no obligation on the Company to gross-up amounts paid to a holder in respect of such deductions or withholdings. All determinations regarding any such deduction or withholding shall be made by the Company, acting reasonably. The Company shall provide the Debenture Trustee and the relevant Debentureholder with reasonable evidence relating to the remittance of such withheld amount or the filing of such forms received.

Where an Interest Obligation on the Debentures is paid by the issuance of a PIK Debenture, any taxes to be satisfied pursuant to this Section may be satisfied by the delivery of cash or cash equivalents by the Company (and the principal amount of the relevant PIK Debenture will be reduced by a like amount) or by the sale of a portion of the PIK Debentures for cash or cash equivalent proceeds.

The Debenture Trustee shall have no obligation to verify any payments under the Tax Act or any provision of provincial, territorial, state, local or foreign tax law. The Debenture Trustee, its officers, agents and employees shall at all times be indemnified and held harmless by the Company from and against any personal liabilities of the Debenture Trustee incurred in connection with the failure of the Company or its agents, to report, remit or withhold taxes as required by the Tax Act or otherwise failing to comply with the Tax Act. This indemnification shall survive the resignation or removal of the Debenture Trustee and the termination of this Indenture solely to the extent that such liabilities have been incurred in connection with taxation years occurring during the term of this Indenture.

ARTICLE 3

REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP

3.1

Registered Debentures

(a)

With respect to each series of Debentures issuable as Registered Debentures, the Company shall cause to be kept by and at the principal offices of the Debenture Trustee in Toronto and by the Debenture Trustee or such other registrar as the Company, with the approval of the Debenture Trustee, may appoint at such other place or places, if any, as may be specified in the Debentures of such series or as the Company may designate with the approval of the Debenture Trustee, a register in which shall be entered the names and addresses of the holders of

Registered Debentures and particulars of the Debentures held by them respectively and of all transfers of Registered Debentures. Such registration shall be noted on the Debentures by the Debenture Trustee or other registrar unless a new Debenture shall be issued upon such transfer. Any changes to the register by any registrar who is not the Debenture Trustee must be provided in writing to the Debenture Trustee forthwith, but no later than one Business Day following such change.

(b)

No transfer of a Registered Debenture shall be valid unless made on such register referred to in Section 3.1(a) by the registered holder or such holder’s executors, administrators or other legal representatives or an attorney duly appointed by an instrument in writing in form and execution satisfactory to the Debenture Trustee or other registrar upon surrender of the Debentures together with a duly executed form of transfer acceptable to the Debenture Trustee and upon compliance with such other reasonable requirements as the Debenture Trustee or other registrar may prescribe, nor unless the name of the transferee shall have been noted on the Debenture by the Debenture Trustee or other registrar.

3.2

Global Debentures

(a)

With respect to each series of Debentures issuable in whole or in part as one or more Global Debentures, the Company shall cause to be kept by and at the principal offices of the Debenture Trustee in Toronto and by the Debenture Trustee or such other registrar as the Company, with the approval of the Debenture Trustee, may appoint at such other place or places, if any, as the Company may designate with the approval of the Debenture Trustee, a register in which shall be entered the name and address of the holder of each such Global Debenture (being the Depository, or its nominee, for such Global Debenture) as holder thereof and particulars of the Global Debenture held by it, and of all transfers thereof. If any Debentures of such series are at any time not Global Debentures, the provisions of Section 3.1 shall govern with respect to registrations and transfers of such Debentures.

(b)

Notwithstanding any other provision of this Indenture, a Global Debenture may not be transferred by the registered holder thereof except in the following circumstances or as otherwise specified in a resolution of the Directors, Certificate of the Company or supplemental indenture relating to a particular series of Debentures:

(i)

Global Debentures may be transferred by a Depository to a nominee of such Depository or by a nominee of a Depository to such Depository or to another nominee of such Depository or by a Depository or its nominee to a successor Depository or its nominee;

(ii)

Global Debentures may be transferred at any time after the Depository for such Global Debentures (i) has notified the Debenture Trustee, or the Company has notified the Debenture Trustee, that it is unwilling or unable

to continue as Depository for such Global Debentures, or (ii) ceases to be eligible to be a Depository under Section 2.6(b), provided that at the time of such transfer the Company has not appointed a successor Depository for such Global Debentures;

(iii)

Global Debentures may be transferred at any time after the Company has determined, in its sole discretion, to terminate the book-entry only registration system in respect of such Global Debentures and has communicated such determination to the Debenture Trustee in writing;

(iv)

Global Debentures may be transferred at any time after the Debenture Trustee has determined that an Event of Default has occurred and is continuing with respect to the Debentures of the series issued as a Global Debenture, provided that Beneficial Holders of the Debentures representing, in the aggregate, not less than 25% of the aggregate principal amount of the Debentures of such series advise the Depository in writing, through the Depository Participants, that the continuation of the book-entry only registration system for such series of Debentures is no longer in their best interest and also provided that at the time of such transfer the Debenture Trustee has not waived the Event of Default pursuant to Section 8.3;

(v)

Global Debentures may be transferred if required by applicable law; or

(vi)

Global Debentures may be transferred if the book-entry only registration system ceases to exist.

(c)

With respect to the Global Debentures, unless and until definitive certificates have been issued to Beneficial Holders:

(i)

the Company and the Debenture Trustee may deal with the Depository for all purposes (including paying interest on the Debentures) as the sole holder of such series of Debentures and the authorized representative of the Beneficial Holders;

(ii)

the rights of the Beneficial Holders shall be exercised only through the Depository and shall be limited to those established by law and agreements between such Beneficial Holders and the Depository or the Depository Participants;

(iii)

the Depository will make book-entry transfers among the Depository Participants; and

(iv)

whenever this Indenture requires or permits actions to be taken based upon instruction or directions of Debentureholders evidencing a specified percentage of the outstanding Debentures, the Depository shall be deemed to be counted in that percentage only to the extent that it has received

instructions to such effect from the Beneficial Holders or the Depository Participant, and has delivered such instructions to the Debenture Trustee.

(d)

Whenever a notice or other communication is required to be provided to Debentureholders, unless and until definitive certificate(s) have been issued to Beneficial Holders, the Debenture Trustee shall provide all such notices and communications to the Depository and the Depository shall deliver such notices and communications to such Beneficial Holders in accordance with Applicable Securities Legislation. Upon the termination of the book-entry only registration system on the occurrence of one of the conditions specified in Section 3.2(b) with respect to a series of Debentures issued hereunder, the Debenture Trustee shall notify all applicable Beneficial Holders, through the Depository, of the availability of definitive Debenture certificates. Upon surrender by the Depository of the certificate(s) representing the Global Debentures and receipt of new registration instructions from the Depository, the Debenture Trustee shall deliver the definitive Debenture certificates for such Debentures to the holders thereof in accordance with the new registration instructions and thereafter, the registration and transfer of such Debentures will be governed by Section 3.1 and the remaining Sections of this Article 3.

3.3

Transferee Entitled to Registration

The transferee of a Debenture shall be entitled, after the appropriate form of transfer is lodged with the Debenture Trustee or other registrar and upon compliance with all other conditions in that behalf required by this Indenture or by law, to be entered on the register as the owner of such Debenture free from all equities or rights of set-off or counterclaim between the Company and the transferor or any previous holder of such Debenture, save in respect of equities of which the Company is required to take notice by statute or by order of a court of competent jurisdiction.

3.4

No Notice of Trusts

Neither the Company, the Debenture Trustee nor any registrar shall be bound to take notice of or see to the execution of any trust (other than that created by this Indenture) whether express, implied or constructive, in respect of any Debenture, and may transfer the same on the direction of the person registered as the holder thereof, whether named as trustee or otherwise, as though that person were the beneficial owner thereof.

3.5

Registers Open for Inspection

The registers referred to in Sections 3.1 and 3.2 shall at all reasonable times during the regular business hours of the Debenture Trustee be open for inspection by the Company, the Debenture Trustee or any Debentureholder. Every registrar, including the Debenture Trustee, shall from time to time when requested so to do by the Company or by the Debenture Trustee, in writing, furnish the Company or the Debenture Trustee, as the case may be, with a list of names and addresses of holders of registered Debentures entered on the register kept by them and showing the principal amount and serial numbers of the Debentures held by each such holder, provided the Debenture Trustee shall be entitled to charge a reasonable fee to provide such a list.

3.6

Exchanges of Debentures

(a)

Subject to Section 3.7, Debentures in any authorized form or denomination, other than Global Debentures, may be exchanged for Debentures in any other authorized form or denomination, of the same series and date of maturity, bearing the same interest rate and of the same aggregate principal amount as the Debentures so exchanged.

(b)

In respect of exchanges of Debentures permitted by Section 3.6(a), Debentures of any series may be exchanged only at the principal offices of the Debenture Trustee in Toronto or at such other place or places, if any, as may be specified in the Debentures of such series and at such other place or places as may from time to time be designated by the Company with the approval of the Debenture Trustee. Any Debentures tendered for exchange shall be surrendered to the Debenture Trustee. The Company shall execute and the Debenture Trustee shall certify all Debentures necessary to carry out exchanges as aforesaid. All Debentures surrendered for exchange shall be cancelled.

(c)

Debentures issued in exchange for Debentures which at the time of such issue have been selected or called for redemption at a later date shall be deemed to have been selected or called for redemption in the same manner and shall have noted thereon a statement to that effect.

3.7

Closing of Registers

(a)

Neither the Company, the Debenture Trustee nor any registrar shall be required to:

(i)

make transfers or exchanges of Registered Debentures on any Interest Payment Date for such Debentures or during the five preceding Business Days;

(ii)

make transfers or exchanges of any Debentures on the day of any selection by the Debenture Trustee of Debentures to be redeemed or during the five preceding Business Days; or

(iii)

make transfers or exchanges of any Debentures which will have been selected or called for redemption unless upon due presentation thereof for redemption such Debentures shall not be redeemed.

(b)

Subject to any restriction herein provided, the Company with the approval of the Debenture Trustee may at any time close any register for any series of Debentures, other than those kept at the principal offices of the Debenture Trustee in Toronto, and transfer the registration of any Debentures registered thereon to another register (which may be an existing register) and thereafter such Debentures shall be deemed to be registered on such other register. Notice of such transfer shall be given to the holders of such Debentures.

3.8

Charges for Registration, Transfer and Exchange

For each Debenture exchanged, registered, transferred or discharged from registration, the Debenture Trustee or other registrar, except as otherwise herein provided, may make a reasonable charge for its services and in addition may charge a reasonable sum for each new Debenture issued (such amounts to be agreed upon by the Debenture Trustee and the Company from time to time), and payment of such charges and reimbursement of the Debenture Trustee or other registrar for any stamp taxes or governmental or other charges required to be paid shall be made by the party requesting such exchange, registration, transfer or discharge from registration as a condition precedent thereto. Notwithstanding the foregoing provisions, no charge shall be made to a Debentureholder hereunder:

(a)

for any exchange, registration, transfer or discharge from registration of any Debenture applied for within a period of two months from the date of the first delivery of Debentures of that series or, with respect to Debentures subject to a Periodic Offering, within a period of two months from the date of delivery of any such Debenture;

(b)

for any exchange of a Global Debenture as contemplated in Section 3.2; or

(c)

for any exchange of any Debenture resulting from a partial redemption under Section 4.2 or Section 5.2 or upon a Change of Control.

3.9

Ownership of Debentures

(a)

Unless otherwise required by law, the Person in whose name any registered Debenture is registered shall for all the purposes of this Indenture be and be deemed to be the owner thereof and payment of or on account of the principal of and premium, if any, on such Debenture and interest thereon shall be made to such registered holder.

(b)

Neither the Company nor the Debenture Trustee shall have any liability for:

(i)

any aspect of the records relating to the beneficial ownership of the Debentures held by a Depository or of the payments relating thereto;

(ii)

maintaining, supervising or reviewing any records relating to the Debentures held by a Depository;

(iii)

the electronic records maintained by the Depository relating to any ownership interests or any other interests in the Debentures or the depository system maintained by the Depository, or payments made on account of any ownership interest or any other interest of any person in any Debenture represented by an electronic position in the book entry registration system (other than the Depository or its nominee);

(iv)

maintaining, supervising or reviewing any records of the Depository relating to any such interest; or

(v)

any advice or representation made or given by the Depository or those contained herein that relate to the rules and regulations of the Depository or any action to be taken by the Depository.

The rules governing Depositories provide that they act as the agent and depository for Depository Participants. As a result, such Depository Participants must look solely to the Depository and Beneficial Holders of Debentures must look solely to the Depository Participants for the payment of principal and interest on the Debentures paid by or on behalf of the Company to the Depository.

(c)

The registered holder for the time being of any registered Debenture shall be entitled to the principal, premium, if any, and/or interest evidenced by such instruments, respectively, free from all equities or rights of set-off or counterclaim between the Company and the original or any intermediate holder thereof and an Persons may act accordingly and the receipt of any such registered holder for any such principal, premium or interest shall be a good discharge to the Company and/or the Debenture Trustee for the same and neither the Company nor the Debenture Trustee shall be bound to inquire into the title of any such registered holder.

(d)

Where Debentures are registered in more than one name, the principal, premium, if any, and interest from time to time payable in respect thereof may be paid to the order of all such holders, failing written instructions from them to the contrary, and the receipt of any one of such holders therefor shall be a valid discharge, to the Debenture Trustee, any registrar and to the Company.

(e)

In the case of the death of one or more joint holders of any Debenture the principal, premium, if any, and interest from time to time payable thereon may be paid to the order of the survivor or survivors of such registered holders and the receipt of any such survivor or survivors therefor shall be a valid discharge to the Debenture Trustee and any registrar and to the Company.

3.10

Non-Certificated Inventory System

Notwithstanding anything to the contrary set out herein, all physical Debenture certificates issued to the Depositary may be surrendered to the Debenture Trustee for an electronic position on the register of Debentureholders to be maintained by the Debenture Trustee in accordance with Section 3.1. In such case, the Debentures will be represented electronically through the NCI System. All Debentures maintained in such electronic position will be valid and binding obligations of the Company, entitling the registered holders thereof to the same benefits as those registered holders who hold Debentures in physical form. This Indenture and the provisions contained herein will apply, mutatis mutandis, to such Debentures held in such electronic position.

ARTICLE 4

REDEMPTION AND PURCHASE OF DEBENTURES AT THE OPTION OF THE COMPANY

4.1

Applicability of Article

The Company shall have the right, at its option, to redeem, either in whole or in part before maturity, any Debentures issued hereunder of any series which by their terms are made so redeemable (subject, however, to any applicable restriction on the redemption of Debentures of such series) at such rate or rates of premium, if any, and on such date or dates and in accordance with such other provisions as shall have been determined at the time of issue of such Debentures and as shall have been expressed in this Indenture, in the Debentures, in a Certificate of the Company, or in a supplemental indenture authorizing or providing for the issue thereof, or in the case of Additional Debentures issued pursuant to a Periodic Offering, in the Written Direction of the Company requesting the certification and delivery thereof.

4.2

Partial Redemption

If less than all the Debentures of any series for the time being outstanding are at any time to be redeemed, the Debentures to be so redeemed shall be selected by the Debenture Trustee on a pro rata basis to the nearest multiple of $100 in accordance with the principal amount of the Debentures registered in the name of each holder or in such other manner as the Debenture Trustee deems equitable, subject to the approval of the TSX. Unless otherwise specifically provided in the terms of any series of Debentures, no Debenture shall be redeemed in part unless the principal amount redeemed is $100 or a multiple thereof. For this purpose, the Debenture Trustee may make, and from time to time vary, regulations with respect to the manner in which such Debentures may be drawn for redemption in part or for redemption in cash and regulations so made shall be valid and binding upon all holders of such Debentures notwithstanding the fact that as a result thereof one or more of such Debentures may become subject to redemption in part only or for cash only. In the event that one or more of such Debentures becomes subject to redemption in part only, upon surrender of any such Debentures for payment of the Redemption Price, together with interest accrued to but excluding the Redemption Call Date, the Company shall execute and the Debenture Trustee shall certify and deliver without charge to the holder thereof or upon the holder’s order one or more new Debentures for the unredeemed part of the principal amount of the Debenture or Debentures so surrendered or, with respect to a Global Debenture, the Depository shall make notations on the Global Debenture of the principal amount thereof so redeemed. Unless the context otherwise requires, the terms “Debenture” or “Debentures” as used in this Article 4 shall be deemed to mean or include any part of the principal amount of any Debenture which in accordance with the foregoing provisions has become subject to redemption.

4.3

Notice of Redemption

Notice of redemption (the “Call Notice”) of any series of Debentures pursuant to this Article 4 shall be given to the holders of the Debentures so to be redeemed in the manner provided in the terms of such series of Debentures and the date fixed for redemption (the “Redemption Call Date”) will be set out in the applicable Call Notice. Every such notice shall specify the aggregate

principal amount of Debentures called for redemption, the Redemption Call Date, the Redemption Price and the places of payment and shall state that interest upon the principal amount of Debentures called for redemption shall cease to accrue and be payable from and after the Redemption Call Date. In addition, unless all the outstanding Debentures are to be redeemed, the Call Notice shall specify:

(a)

the distinguishing letters and numbers of the registered Debentures which are to be redeemed (or of such thereof as are registered in the name of such Debentureholder);

(b)

in the case of a published notice, the distinguishing letters and numbers of the Debentures which are to be redeemed or, if such Debentures are selected by terminal digit or other similar system, such particulars as may be sufficient to identify the Debentures so selected;

(c)

in the case of a Global Debenture, that the redemption will take place in such manner as may be agreed upon by the Depository, the Debenture Trustee and the Company; and

(d)

in all cases, the principal amounts of such Debentures or, if any such Debenture is to be redeemed in part only, the principal amount of such part.

In the event that all Debentures to be redeemed are registered Debentures, publication shall not be required.

4.4

Debentures Due on Redemption Call Dates

Notice having been given as aforesaid, all the Debentures so called for redemption shall thereupon be and become due and payable at the Redemption Price, together with accrued and unpaid interest to but excluding the Redemption Call Date (less any taxes required to be deducted or withheld), on the Redemption Call Date specified in such notice, in the same manner and with the same effect as if it were the date of maturity specified in such Debentures, anything therein or herein to the contrary notwithstanding, and from and after such Redemption Call Date, if the moneys necessary to redeem such Debentures shall have been deposited as provided in Section 4.5 and affidavits or other proof satisfactory to the Debenture Trustee as to the publication and/or mailing of such notices shall have been lodged with it, interest upon the Debentures shall cease. If any question shall arise as to whether any notice has been given as above provided and such deposit made, such question shall be decided by the Debenture Trustee, acting reasonably, whose decision shall be final and binding upon all parties in interest.

4.5

Deposit of Redemption Moneys

providing the Debenture Trustee with a certified cheque for such amounts required under this Section 4.5 or by providing the Debenture Trustee with such funds through electronic transfer of funds on the Business Day immediately prior to the Redemption Call Date. The Company shall also deposit with the Debenture Trustee a sum of money sufficient to pay any charges or expenses that may be incurred by the Debenture Trustee in connection with such redemption. Every such deposit shall be irrevocable. From the sums so deposited, the Debenture Trustee shall pay or cause to be paid, or issue or cause to be issued, to the holders of such Debentures so called for redemption, upon surrender of such Debentures, the principal, premium (if any) and interest (if any) to which they are respectively entitled on redemption, less applicable withholding taxes, if any. If the money so transferred is insufficient to satisfy the Company’s obligations to the redeeming holders, or the fees and expenses of the Debenture Trustee relating to the redemption, the Debenture Trustee or the paying agent for the redemption shall notify the Company, and the Company shall deposit additional sums of money with the Debenture Trustee or any paying agent to the order of the Debenture Trustee. Any costs or losses resulting from a delay resulting from insufficient funds shall be borne by the Company. All payments to be made by the Debenture Trustee are subject to Section 13.10 hereunder.

4.6

Failure to Surrender Debentures Called for Redemption

In case the holder of any Debenture so called for redemption shall fail on or before the Redemption Call Date to surrender such holder’s Debenture, or shall not within such time accept payment of the redemption moneys payable or give such receipt therefor, if any, as the Debenture Trustee may require, such redemption moneys may be set aside in trust without interest, either in the deposit department of the Debenture Trustee or in a Canadian chartered bank, and such setting aside shall for all purposes be deemed a payment to the Debentureholder of the sum so set aside and, to that extent, the Debenture shall thereafter not be considered as outstanding hereunder and the Debentureholder shall have no other right except to receive payment out of the moneys so paid and deposited upon surrender and delivery up of such holder’s Debenture of the Redemption Price, as the case may be, of such Debenture plus any accrued but unpaid interest thereon to but excluding the Redemption Call Date. In the event that any money required to be deposited hereunder with the Debenture Trustee or any depository or paying agent on account of Redemption Price, or interest, if any, on Debentures issued hereunder shall remain so deposited for a period of six years from the Redemption Call Date, then such monies, together with any accumulated interest thereon or any distribution paid thereon, shall at the end of such period be paid over or delivered over by the Debenture Trustee or such Depository or paying agent to the Company on its demand, and thereupon the Debenture Trustee shall not be responsible to Debentureholders for any amounts owing to them and subject to applicable law, thereafter the holder of a Debenture in respect of which such money was so repaid to the Company shall have no rights in respect thereof except to obtain payment of the money due from the Company, subject to any limitation period provided by the laws of Ontario. Notwithstanding the foregoing, the Debenture Trustee will pay any remaining funds prior to the expiry of six years after the Redemption Call Date to the Company upon receipt from the Company, of an unconditional letter of credit from a Canadian chartered bank in an amount equal to or in excess of the amount of the remaining funds. If the remaining funds are paid to the Company prior to the expiry of six years after the Redemption Call Date, and such funds or any portion thereof are claimed after the date of such payment of the remaining funds to the Company but prior to six years after the Redemption Call Date, then the Debenture Trustee shall

immediately provide to the Company written notice of such claim and the Company shall promptly deposit with the Debenture Trustee funds in the amount necessary to satisfy such claim.

4.7

Cancellation of Debentures Redeemed

Subject to the provisions of Sections 4.2 and 4.8 as to Debentures redeemed or purchased in part, all Debentures redeemed and paid under this Article 4 shall forthwith be delivered to the Debenture Trustee and cancelled and no Debentures shall be issued in substitution therefor.

4.8

Purchase of Debentures by the Company

Unless otherwise specifically provided with respect to a particular series of Debentures, the Company or any of its Affiliates may at any time and from time to time, purchase Debentures in the market (which shall include purchases from or through an investment dealer or a firm holding membership on a Recognized Stock Exchange) or by tender or by private contract, at any price; provided that if an Event of Default has occurred and is continuing, the Company will not have the right to purchase the Debentures by private contract. All Debentures so purchased may, at the option of the Company, be delivered to the Debenture Trustee and shall be cancelled and no Debentures shall be issued in substitution therefor.

If, upon an invitation for tenders, more Debentures than the Company is prepared to accept are tendered at the same lowest price, the Debentures to be purchased by the Company shall be selected by the Debenture Trustee on a pro rata basis or in such other manner consented to by the TSX which the Debenture Trustee considers appropriate, from the Debentures tendered by each tendering Debentureholder who tendered at such lowest price. For this purpose the Debenture Trustee may make, and from time to time amend, regulations with respect to the manner in which Debentures may be so selected, and regulations so made shall be valid and binding upon all Debentureholders, notwithstanding the fact that as a result thereof one or more of such Debentures become subject to purchase in part only. The holder of a Debenture of which a part only is purchased, upon surrender of such Debenture for payment, shall be entitled to receive, without expense to such holder, one or more new Debentures for the unpurchased part so surrendered, and the Debenture Trustee shall certify and deliver such new Debenture or Debentures upon receipt of the Debenture so surrendered or, with respect to a Global Debenture, the Debenture Trustee shall make notations on the Global Debenture of the principal amount thereof so purchased.

ARTICLE 5

INVESTOR PUT RIGHT

5.1

Applicability of Article

Each Debentureholder shall have the right, at its option, to require the Company to redeem, either in whole or in part before maturity, any Debentures issued hereunder of any series which by their terms are permitted to be redeemed (subject, however, to any applicable restriction on the redemption of Debentures of such series) at such rate or rates of premium, if any, and on such date or dates and in accordance with such other provisions as shall have been determined at the time of issue of such Debentures and as shall have been expressed in this Indenture, in the

Debentures, in a Certificate of the Company, or in a supplemental indenture authorizing or providing for the issue thereof, or in the case of Additional Debentures issued pursuant to a Periodic Offering, in the Written Direction of the Company requesting the certification and delivery thereof.

5.2

Partial Redemption

Unless otherwise specifically provided in the terms of any series of Debentures, no Debenture shall be redeemed in part unless the principal amount redeemed is $100 or a multiple thereof. For this purpose, the Debenture Trustee may make, and from time to time vary, regulations with respect to the manner in which such Debentures may be drawn for redemption in part or for redemption in cash and regulations so made shall be valid and binding upon all holders of such Debentures notwithstanding the fact that as a result thereof one or more of such Debentures may become subject to redemption in part only or for cash only. In the event that one or more of such Debentures becomes subject to redemption in part only, upon surrender of any such Debentures for payment of the Redemption Price, together with interest accrued to but excluding the Redemption Put Date, the Company shall execute and the Debenture Trustee shall certify and deliver without charge to the holder thereof or upon the holder’s order one or more new Debentures for the unredeemed part of the principal amount of the Debenture or Debentures so surrendered or, with respect to a Global Debenture, the Debenture Trustee shall make notations on the Global Debenture of the principal amount thereof so redeemed. Unless the context otherwise requires, the terms “Debenture” or “Debentures” as used in this Article 5 shall be deemed to mean or include any part of the principal amount of any Debenture which in accordance with the foregoing provisions has become subject to redemption.

5.3

Notice of Redemption

Notice of redemption (the “Put Notice”) of any series of Debentures pursuant to this Article 5 shall be given to the Company in the manner provided in the terms of such series of Debentures, and the date fixed for redemption (the “Redemption Put Date”) will be set out in the applicable Put Notice. Every such notice shall specify the aggregate principal amount of Debentures held by such holder of Debentures to be redeemed by the Company, the Redemption Put Date and the Redemption Price. In addition, the Put Notice shall specify:

(a)

the distinguishing letters and numbers of the registered Debentures which are to be redeemed (or of such thereof as are registered in the name of such Debentureholder);

(b)

in the case of a Global Debenture, that the redemption will take place in such manner as may be agreed upon by the Depository, the Debenture Trustee and the Company; and

(c)

in all cases, the principal amounts of such Debentures or, if any such Debenture is to be redeemed in part only, the principal amount of such part.

5.4

Debentures Due on Redemption Put Dates

Notice having been given as aforesaid, all the Debentures so called for redemption shall thereupon be and become due and payable at the Redemption Price, together with accrued and unpaid interest to but excluding the Redemption Put Date (less any taxes required to be deducted or withheld), on the Redemption Put Date specified in such notice, in the same manner and with the same effect as if it were the date of maturity specified in such Debentures, anything therein or herein to the contrary notwithstanding, and from and after such Redemption Put Date, if the moneys necessary to redeem such Debentures shall have been deposited as provided in Section 5.5 and affidavits or other proof satisfactory to the Debenture Trustee as to the publication and/or mailing of such notices shall have been lodged with it, interest upon the Debentures shall cease. If any question shall arise as to whether any notice has been given as above provided and such deposit made, such question shall be decided by the Debenture Trustee, acting reasonably, whose decision shall be final and binding upon all parties in interest.

5.5

Deposit of Redemption Moneys

Redemption of Debentures shall be provided for by the Company depositing with the Debenture Trustee or any paying agent to the order of the Debenture Trustee, on or before 11:00 a.m. (Toronto time) on the Business Day immediately prior to the Redemption Put Date specified in such notice, such sums of money as may be sufficient to pay the Redemption Price of the Debentures so called for redemption, plus accrued and unpaid interest thereon to but excluding the Redemption Put Date, provided the Company may elect to satisfy this requirement by providing the Debenture Trustee with a certified cheque for such amounts required under this Section 5.5 or by providing the Debenture Trustee with such funds through electronic transfer of funds (wire) on the Business Day immediately prior to the Redemption Put Date. The Company shall also deposit with the Debenture Trustee a sum of money sufficient to pay any charges or expenses that may be incurred by the Debenture Trustee in connection with such redemption. Every such deposit shall be irrevocable. From the sums so deposited, the Debenture Trustee shall pay or cause to be paid, or issue or cause to be issued, to the holders of such Debentures so called for redemption, upon surrender of such Debentures, the principal, premium (if any) and interest (if any) to which they are respectively entitled on redemption, less applicable withholding taxes, if any. If the money so transferred is insufficient to satisfy the Company’s obligations to the redeeming holders, or the fees and expenses of the Debenture Trustee relating to the redemption, the Debenture Trustee or the paying agent for the redemption shall notify the Company, and the Company shall deposit additional sums of money with the Debenture Trustee or any paying agent to the order of the Debenture Trustee. All payments to be made by the Debenture Trustee are subject to Section 13.10 hereunder. Any costs or losses resulting from a delay resulting from insufficient funds shall be borne by the Company.

5.6

Failure to Surrender Debentures Called for Redemption

In case the holder of any Debenture so called for redemption shall fail on or before the Redemption Put Date to surrender such holder’s Debenture, or shall not within such time accept payment of the redemption moneys payable or give such receipt therefor, if any, as the Debenture Trustee may require, such redemption moneys may be set aside in trust without interest, either in the deposit department of the Debenture Trustee or in a Canadian chartered

bank, and such setting aside shall for all purposes be deemed a payment to the Debentureholder of the sum so set aside and, to that extent, the Debenture shall thereafter not be considered as outstanding hereunder and the Debentureholder shall have no other right except to receive payment out of the moneys so paid and deposited upon surrender and delivery up of such holder’s Debenture of the Redemption Price, as the case may be, of such Debenture plus any accrued but unpaid interest thereon to but excluding the Redemption Put Date. In the event that any money required to be deposited hereunder with the Debenture Trustee or any depository or paying agent on account of Redemption Price, or interest, if any, on Debentures issued hereunder shall remain so deposited for a period of six years from the Redemption Put Date, then such monies, together with any accumulated interest thereon or any distribution paid thereon, shall at the end of such period be paid over or delivered over by the Debenture Trustee or such Depository or paying agent to the Company on its demand, and thereupon the Debenture Trustee shall not be responsible to Debentureholders for any amounts owing to them and subject to applicable law, thereafter the holder of a Debenture in respect of which such money was so repaid to the Company shall have no rights in respect thereof except to obtain payment of the money due from the Company, subject to any limitation period provided by the laws of Ontario. Notwithstanding the foregoing, the Debenture Trustee will pay any remaining funds prior to the expiry of six years after the Redemption Put Date to the Company upon receipt from the Company, of an unconditional letter of credit from a Canadian chartered bank in an amount equal to or in excess of the amount of the remaining funds. If the remaining funds are paid to the Company prior to the expiry of six years after the Redemption Put Date, and such funds or any portion thereof are claimed after the date of such payment of the remaining funds to the Company but prior to six years after the Redemption Put Date, then the Debenture Trustee shall immediately provide to the Company written notice of such claim and the Company shall promptly deposit with the Debenture Trustee funds in the amount necessary to satisfy such claim.

5.7

Cancellation of Debentures Redeemed

Subject to the provisions of Sections 5.2 as to Debentures redeemed or purchased in part, all Debentures redeemed and paid under this Article 5 shall forthwith be delivered to the Debenture Trustee and cancelled and no Debentures shall be issued in substitution therefor.

ARTICLE 6

SUBORDINATION OF DEBENTURES

6.1

Subordination and Postponement

The indebtedness evidenced by the Debentures issued hereunder, whether on account of principal, interest or otherwise (collectively the “Debenture Liabilities”), shall, notwithstanding any other provision herein or in the Debentures, be subordinated and postponed and subject in right of payment, to the Payment in Full of the Senior Indebtedness (or as otherwise agreed by the Senior Creditors in respect of the Senior Indebtedness) and each holder of any such Debenture by his acceptance thereof agrees to and shall be bound by the provisions of this Article 6, provided that the Company may continue to make payments on account of interest on the Debentures as they come due unless and until the Debenture Trustee has received notice in writing from a holder of Senior Indebtedness that an event of default (as defined in, or under, any

Senior Indebtedness or any instrument evidencing the same) has occurred under the terms of such Senior Indebtedness and such event of default has not been cured or waived or unless otherwise prohibited by the terms of the Senior Indebtedness (or any instrument evidencing the same).

6.2

Order of Payment

In the event of any dissolution, winding-up, liquidation, bankruptcy, insolvency, receivership, creditor enforcement, reorganization or realization or other similar proceedings relating to the Company or any of its property or assets or any other marshalling of the assets and liabilities of the Company:

(a)

all Senior Indebtedness shall first be paid in full in cash (or as otherwise agreed by the Senior Creditors in respect of the Senior Indebtedness) before any payment or distribution of any kind of character, whether in cash, property or securities, is made on account of Debenture Liabilities; and

(b)

any payment or distribution of assets of the Company, whether in cash, property or securities, to which the holders of the Debentures or the Debenture Trustee on behalf of such holders would be entitled except for the provisions of this Article 6, shall be paid or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of creditors, or other liquidating agent making such payment or distribution, directly to the holders of Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing any of such Senior Indebtedness may have been issued, to the extent necessary to pay all Senior Indebtedness in full in cash (or as otherwise agreed by the Senior Creditors in respect of the Senior Indebtedness) after giving effect to any concurrent payment or distribution, or provision therefor, to the holders of such Senior Indebtedness.

6.3

Restricted Remedies

(a)

Subject to paragraph (b), Neither the Debenture Trustee nor the Debentureholders shall be entitled to demand or otherwise attempt to enforce in any manner, institute proceedings for the collection of, or institute any proceedings against the Company including, without limitation, by way of any bankruptcy, insolvency or similar proceedings or any proceeding for the appointment of a receiver, liquidator, trustee or other similar official (it being understood and agreed that the Debenture Trustee and/or the Debentureholders shall be permitted to take any steps necessary to preserve the claims of the Debentureholders in any such proceeding and any steps necessary to prevent the extinguishment or other termination of a claim or potential claim as a result of the expiry of a limitation period).

(b)

Notwithstanding any other provision of this Indenture, the right of any holder to receive payment of the principal of and interest on the Debentures on or after their respective due dates or to institute suit for the enforcement of any such payment

shall not be impaired or affected without the consent of such holder, provided that such rights shall be subject to the subordination provisions of this Article 6, other than paragraph (a) of this Section 6.3.

(c)

The Debenture Trustee agrees that it will not take any steps or proceedings to challenge the validity or enforceability of any of the Senior Security, or any other steps or proceedings whatsoever whereby the Senior Security or the priority or rights of the Senior Creditors shall or might be defeated or impaired. The Debenture Trustee shall not assert any right or claim, whether in law or equity, which might impair the validity and effectiveness of the Senior Security or the priority of the Senior Security. If at any time a receiver is appointed in respect of all or any portion of the property, assets and undertaking of any corporation, partnership or other entity subject to the Senior Security, either by private appointment by the Senior Creditor or by a court upon application of the Senior Creditor, the Debenture Trustee acknowledges and agrees that such receiver shall be entitled to the management, control and possession of such property, assets and undertaking.

6.4

Subrogation to Rights of Holders of Senior Indebtedness

Subject to the Payment in Full of the Senior Indebtedness, the Company agrees that, until the principal and interest of the Debentures have been paid in full, the holders of the Debentures shall be subrogated to the rights of the holders of Senior Indebtedness to receive payments of cash or distributions of securities or assets of the Company to the extent of the application to the Senior Indebtedness of payments of cash or distributions of securities or assets which but for the provisions hereof would have been received by the holders of the Debentures and no such payments of cash or distributions to the holders of the Debentures of securities or assets which otherwise would be payable or distributable to the holders of the Senior Indebtedness, shall, as between the Company, its creditors (other than the holders of the Senior Indebtedness) and the holders of Debentures, be deemed to be a payment by the Company to the former holders of the Senior Indebtedness or on account of the repaid Senior Indebtedness.

The Debenture Trustee, for itself and on behalf of each of the Debentureholders, hereby waives any and all rights to require a Senior Creditor to pursue or exhaust any rights or remedies with respect to the Company, any guarantor or surety of the Senior Indebtedness, or any property and assets subject to the Senior Security or in any other manner to require the marshalling of property, assets or security in connection with the exercise by the Senior Creditors of any rights, remedies or recourses available to them.

6.5

Obligation to Pay Not Impaired

Nothing contained in this Article 6 or elsewhere in this Indenture or in the Debentures is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness, and the holders of the Debentures, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debentures the principal of and interest on the Debentures, as and when the same shall become due and payable in accordance with their terms, or affect the relative rights of the holders of the Debentures and creditors of the Company

other than the holders of the Senior Indebtedness, nor shall anything herein or therein prevent the Debenture Trustee or the holder of any Debenture from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights under this Article 6 of the holders of Senior Indebtedness.

6.6

Payment on Debentures Permitted

Nothing contained in this Article 6 or elsewhere in this Indenture, or in any of the Debentures, shall affect the obligation of the Company to make, or prevent the Company from making, at any time except as prohibited by Section 6.1 or 6.2, any payment of principal of or interest on the Debentures. The fact that any such payment is prohibited by Section 6.1 or 6.2 shall not prevent the failure to make such payment from being an Event of Default hereunder. Nothing contained in this Article 6 or elsewhere in this Indenture, or in any of the Debentures, shall prevent the application by the Debenture Trustee of any moneys deposited with the Debenture Trustee hereunder for the purpose, to the payment of or on account of the Debenture Liabilities.

6.7

Confirmation of Subordination

Each holder of Debentures by his acceptance thereof authorizes and directs the Debenture Trustee on his behalf to take such action as may be necessary or appropriate to effect the subordination and postponement as provided in this Article 6 and appoints the Debenture Trustee his attorney for any and all such purposes. This power of attorney, being coupled with an interest and rights, shall be irrevocable. Upon request of the Company or a Senior Creditor or any representative of the Senior Creditors, and upon being furnished a Certificate of the Company or a certificate of a Senior Creditor or a representative of a Senior Creditor stating that one or more named persons are Senior Creditors and specifying the amount and nature of the Senior Indebtedness of such Senior Creditor, the Debenture Trustee shall enter into a written agreement or agreements with such Person and the person or persons named therein providing that such person or persons are entitled to all the rights and benefits of this Article 6 as a Senior Creditor. Such agreement shall be conclusive evidence that the indebtedness specified therein is Senior Indebtedness. However, nothing herein shall impair the rights of any Senior Creditor who has not entered into such an agreement.

6.8

Knowledge of Debenture Trustee

Notwithstanding the provisions of this Article 6 or any provision in this Indenture or in the Debentures contained, the Debenture Trustee will not be charged with knowledge of any Senior Indebtedness or of any default in the payment thereof or any other default or event of default, or of the existence of any other fact that would prohibit the making of any payment of moneys to or by the Debenture Trustee, or the taking of any other action by the Debenture Trustee, unless and until the Debenture Trustee has received written notice thereof from the Company, any Debentureholder, any Senior Creditor or a representative or trustee on behalf of any one or more Senior Creditors, and such notice to the Debenture Trustee shall be deemed to be notice to holders of the Debentures.

6.9

Debenture Trustee May Hold Senior Indebtedness

The Debenture Trustee is entitled to all the rights set forth in this Article 6 with respect to any Senior Indebtedness at the time held by it, if any, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture deprives the Debenture Trustee of any of its rights as such holder.

6.10

Rights of Holders of Senior Indebtedness Not Impaired

No right of any present or future holder of any Senior Indebtedness to enforce the subordination and postponement herein will at any time or in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or any guarantor or surety of the Senior Indebtedness, or by any non-compliance by the Company, or any such guarantor or surety, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof which any such holder may have or be otherwise charged with.

6.11

Altering the Senior Indebtedness

The holders of the Senior Indebtedness have the right to increase, extend, renew, revise, restate, modify or amend the terms of the Senior Indebtedness or any security therefor and to release, sell or exchange such security and otherwise to deal freely with the Company, all without notice to or consent of the Debentureholders or the Debenture Trustee and without affecting the liabilities and obligations of the parties to this Indenture or the Debentureholders or the Debenture Trustee.

6.12

Additional Indebtedness

This Indenture does not restrict the Company from incurring additional indebtedness for borrowed money (including Senior Indebtedness) or otherwise or mortgaging, pledging or charging its properties to secure any indebtedness.

6.13

Invalidated Payments

In the event that any of the Senior Indebtedness shall be paid in full and subsequently, for whatever reason, such formerly paid or satisfied Senior Indebtedness becomes unpaid or unsatisfied, the terms and conditions of this Article 6 shall be reinstated and the provisions of this Article shall again be operative until all Senior Indebtedness is repaid in full, provided that such reinstatement shall not give the Senior Creditors any rights or recourses against the Debenture Trustee or the Debentureholders for amounts paid to the Debentureholders subsequent to such payment or satisfaction in full and prior to such reinstatement.

6.14

Obligations Created by Article 6

The Company and the Debenture Trustee, solely in its capacity as trustee hereunder and not in its personal capacity agree, and each holder by its acceptance of a Debenture likewise agrees, that:

(a)

the provisions of this Article 6 are an inducement and consideration to each holder of Senior Indebtedness to give or continue credit to the Company, its Subsidiaries or others or to acquire Senior Indebtedness;

(b)

each holder of Senior Indebtedness may accept the benefit of this Article 6 on the terms and conditions set forth in this Article 6 by giving or continuing credit to the Company, its Subsidiaries or others or by acquiring Senior Indebtedness, in each case without notice to the Debenture Trustee and without establishing actual reliance on this Article 6; and

(c)

each obligation created by this Article 6 is created for the benefit of the holders of Senior Indebtedness and is hereby declared to be created in trust for those holders by the Company, the Debenture Trustee and each holder of a Debenture and shall be binding on the Company, the Debenture Trustee and each holder of a Debenture whether or not the confirmation described in Section 6.7 is requested, executed or delivered.

6.14

No Reliance by Third Parties

The provisions of this Article 6 are intended solely for the purpose of defining the relative rights of the holders of the Debentures, on the one hand, and the holders of Senior Indebtedness, on the other hand, and shall not enure to the benefit of any other person.

6.15

No Set-Off

Each of the Company and the Debenture Trustee agrees, and each holder of a Debenture, by his acceptance thereof, likewise agrees, that it shall have no rights of set-off or counterclaim with respect to the principal of, premium, if any, and interest on the Debentures at any time when any payment of, or in respect of, such amounts to the Debenture Trustee or the holder of a Debenture is prohibited by this Article 6 or is otherwise required to be paid to the holders of Senior Indebtedness or their representative or to the trustee under any indenture under which any instruments evidencing any of such Senior Indebtedness may have been issued, as their respective interests may appear.

ARTICLE 7

COVENANTS OF THE COMPANY

The Company hereby covenants and agrees with the Debenture Trustee for the benefit of the Debenture Trustee and the Debentureholders, that so long as any Debentures remain outstanding:

7.1

To Pay Principal and Interest

The Company will duly and punctually pay or cause to be paid to every Debentureholder the principal of and interest accrued on the Debentures of which it is the holder on the dates, at the places and in the manner mentioned herein and in the Debentures, subject to the provisions hereof.

7.2

To Pay Debenture Trustee’s Remuneration

The Company will pay the Debenture Trustee reasonable remuneration for its services as Debenture Trustee hereunder and will repay to the Debenture Trustee on demand all moneys which shall have been paid by the Debenture Trustee in connection with the execution of the

trusts hereby created including the reasonable compensation for advisors not regularly in its employ, reasonable legal fees and expenses and all reasonable costs incurred by the Debenture Trustee in complying with any laws applicable to it as a result of its duties hereunder and until all duties of the Debenture Trustee hereunder have been fully and finally performed, with interest at a rate per annum equal to the then current rate of interest charged by the Debenture Trustee to its corporate customers from 30 days after the issuance of the invoice from the Debenture Trustee to the Company until repayment and such moneys including the Debenture Trustee’s remuneration, shall be payable out of any funds coming into the possession of the Debenture Trustee in priority to any of the Debentures or interest thereon. Such remuneration shall continue to be payable following termination of this Indenture, the resignation or removal of the Debenture Trustee or until the trusts hereof be finally wound up and whether or not the trusts of this Indenture shall be in the course of administration by or under the direction of a court of competent jurisdiction.

7.3

To Give Notice of Default

The Company shall notify the Debenture Trustee in writing immediately upon obtaining knowledge of any Event of Default hereunder.

7.4

Preservation of Existence, etc.

Subject to the express provisions hereof, the Company will carry on and conduct its activities, and cause its Subsidiaries to carry on and conduct their businesses, in a proper, efficient and business-like manner and in accordance with good business practices; and, subject to the express provisions hereof, it will do or cause to be done all things necessary to preserve and keep in full force and effect its and its Subsidiaries’ respective existences and rights, except that the Company may undertake internal reorganizations of it and/or its Subsidiaries from time to time.

7.5

Keeping of Books

The Company will keep or cause to be kept proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Company in accordance with IFRS.

7.6

No Distributions on Common Shares if Event of Default

The Company shall not declare or make any distribution to Shareholders after the occurrence of an Event of Default unless and until such default shall have been cured or waived or shall have ceased to exist. In addition, the Company shall not declare any distribution to Shareholders if at the time the Directors of the Company or a committee thereof resolves to make the said declaration, the Company has actual knowledge that the paying of said distribution on the applicable distribution payment date will result in an Event of Default.

7.7

Performance of Covenants by Debenture Trustee

If the Company shall fail to perform any of its covenants contained in this Indenture, the Debenture Trustee may notify the Debentureholders of such failure on the part of the Company or may itself perform any of the covenants capable of being performed by it, but (subject to Sections 8.2 and 13.3) shall be under no obligation to do so or to notify the Debentureholders.

All sums so expended or advanced by the Debenture Trustee shall be repayable as provided in Section 7.2. No such performance, expenditure or advance by the Debenture Trustee shall be deemed to relieve the Company of any default hereunder or from its continuing indebtedness.

ARTICLE 8

DEFAULT

8.1

Events of Default

Each of the following events constitutes, and is herein sometimes referred to as, an “Event of Default”:

(a)

failure to pay principal or premium, if any, on the Debentures when due whether at maturity, upon redemption, by declaration or otherwise and the continuance of such default for 30 days;

(b)

if a decree or order of a Court having jurisdiction is entered adjudging the Company a bankrupt or insolvent under the Bankruptcy and Insolvency Act (Canada) or any other bankruptcy, insolvency or analogous laws, or issuing sequestration or process of execution against, or against any substantial part of, the property of the Company, or appointing a receiver of, or of any substantial part of, the property of the Company or ordering the winding-up or liquidation of its affairs, and any such decree or order continues unstayed and in effect for a period of 60 days;

(c)

if the Company institutes proceedings to be adjudicated a bankrupt or insolvent, or consents to the institution of bankruptcy or insolvency proceedings against it under the Bankruptcy and Insolvency Act (Canada) or any other bankruptcy, insolvency or analogous laws, or consents to the filing of any such petition or to the appointment of a receiver of, or of any substantial part of, the property of the Company or makes a general assignment for the benefit of creditors, or admits in writing its inability to pay its debts generally as they become due;

(d)

if a resolution is passed for the winding-up or liquidation of the Company except in the course of carrying out or pursuant to a transaction in respect of which the conditions of Section 10.1 are duly observed and performed; or

(e)

if, after the date of this Indenture, any proceedings with respect to the Company are taken with respect to a compromise or arrangement, with respect to creditors of the Company generally, under the applicable legislation of any jurisdiction and such proceeding, if instituted against the Company is not contested diligently, in good faith and on a timely basis and vacated, dismissed, withdrawn or stayed within 60 days of its commencement or issuance;

in each and every such event the Debenture Trustee may, in its discretion, and shall, upon receipt of a request in writing signed by the holders of not less than 25% in principal amount of the Debentures then outstanding and upon being funded and indemnified to its reasonable satisfaction against all costs, expenses and liabilities to be incurred, subject to

the provisions of Section 8.3, by notice in writing to the Company declare the principal of, premium, if any, and interest on all Debentures then outstanding and all other moneys outstanding hereunder to be due and payable and the same shall forthwith become immediately due and payable to the Debenture Trustee, and the Company shall forthwith pay to the Debenture Trustee for the benefit of the Debentureholders such principal, accrued and unpaid interest and interest on amounts in default on such Debenture (and, where such a declaration is based upon a voluntary winding-up or liquidation of the Company, the premium, if any, on the Debentures then outstanding which would have been payable upon the redemption thereof by the Company on the date of such declaration) and all other moneys outstanding hereunder, together with subsequent interest at the rate borne by the Debentures on such principal, interest and such other moneys from the date of such declaration until payment is received by the Debenture Trustee, such subsequent interest to be payable at the times and places and in the moneys mentioned in and according to the tenor of the Debentures. Such payment when made shall be deemed to have been made in discharge of the Company’s obligations hereunder and any moneys so received by the Debenture Trustee shall be applied in the manner provided in Section 8.6. For greater certainty, for the purposes of this Section 8.1, a series of Debentures shall be in default in respect of an Event of Default if such Event of Default relates to a default in the payment of principal, premium, if any, or interest on the Debentures of such series in which case references to Debentures in this Section 8.1 refer to Debentures of that particular series. For purposes of this Article 8, where the Event of Default refers to an Event of Default with respect to a particular series of Debentures as described in this Section 8.1, then this Article 8 shall apply mutatis mutandis to the Debentures of such series and references in this Article 8 to the Debentures shall mean Debentures of the particular series and references to the Debentureholders shall refer to the Debentureholders of the particular series, as applicable.

8.2

Notice of Events of Default

If an Event of Default shall occur and be continuing the Debenture Trustee shall, within 30 days after it receives written notice of the occurrence of such Event of Default, give notice of such Event of Default to the Debentureholders in the manner provided in Section 12.1, provided that notwithstanding the foregoing, unless the Debenture Trustee shall have been requested to do so by the holders of at least 25% of the principal amount of the Debentures then outstanding, the Debenture Trustee shall not be required to give such notice if the Debenture Trustee in good faith shall have determined that the withholding of such notice is in the best interests of the Debentureholders and shall have so advised the Company in writing.

When notice of the occurrence of an Event of Default has been given and the Event of Default is thereafter cured, notice that the Event of Default is no longer continuing shall be given by the Debenture Trustee to the Debenture holders within 15 days after the Debenture Trustee becomes aware the Event of Default has been cured.

8.3

Waiver of Default

Upon the happening of any Event of Default hereunder:

(a)

the holders of the Debentures shall have the power (in addition to the powers exercisable by Extraordinary Resolution as hereinafter provided) by requisition in writing by the holders of a 66 2/3% of the principal amount of Debentures then outstanding or by Extraordinary Resolution of Debentureholders at a meeting held in accordance with Article 11 hereof, to instruct the Debenture Trustee to waive any Event of Default and to cancel any declaration made by the Debenture Trustee pursuant to Section 8.1 and the Debenture Trustee shall thereupon waive the Event of Default and cancel such declaration upon such terms and conditions as shall be prescribed in such requisition; provided that notwithstanding the foregoing if the Event of Default has occurred by reason of the non-observance or non-performance by the Company of any covenant applicable only to one or more series of Debentures, then the holders of at least 66 2/3 % of the principal amount of the outstanding Debentures of that series shall be entitled to exercise the foregoing power and the Debenture Trustee shall so act and it shall not be necessary to obtain a waiver from the holders of any other series of Debentures; and

(b)

the Debenture Trustee, so long as it has not become bound to declare the principal and interest on the Debentures then outstanding to be due and payable, or to obtain or enforce payment of the same, shall have power to waive any Event of Default if, in the Debenture Trustee’s opinion, based on the advice of counsel, the same shall have been cured or adequate satisfaction made therefor, and in such event to cancel any such declaration theretofore made by the Debenture Trustee in the exercise of its discretion, upon such terms and conditions as the Debenture Trustee may deem advisable.

No such act or omission either of the Debenture Trustee or of the Debentureholders shall extend to or be taken in any manner whatsoever to affect any subsequent Event of Default or the rights resulting therefrom.

8.4

Enforcement by the Debenture Trustee

Subject to the provisions of Section 8.3 and to the provisions of any Extraordinary Resolution that may be passed by the Debentureholders, if the Company shall fail to pay to the Debenture Trustee, forthwith after the same shall have been declared to be due and payable under Section 8.1, the principal of and premium on, if any, all Debentures then outstanding, together with any other amounts due hereunder, the Debenture Trustee may in its discretion and shall upon receipt of a request in writing signed by the holders of not less than 25% in principal amount of the Debentures then outstanding and upon being funded and indemnified to its reasonable satisfaction against all costs, expenses and liabilities to be incurred, proceed in its name as trustee hereunder to obtain or enforce payment of such principal of and premium (if any) on any the Debentures then outstanding together with any other amounts due hereunder by such proceedings authorized by this Indenture or by law or equity as the Debenture Trustee in such request shall have been directed to take, or if such request contains no such direction, or if the Debenture Trustee shall act without such request, then by such proceedings authorized by this Indenture or by suit at law or in equity as the Debenture Trustee shall deem expedient.

The Debenture Trustee shall be entitled and empowered, either in its own name or as Debenture Trustee of an express trust, or as attorney-in-fact for the holders of the Debentures, or in any one or more of such capacities, to file such proof of debt, amendment of proof of debt, claim, petition or other document as may be necessary or advisable in order to have the claims of the Debenture Trustee and of the holders of the Debentures allowed in any insolvency, bankruptcy, liquidation or other judicial proceedings relative to the Company or its creditors or relative to or affecting its property. The Debenture Trustee is hereby irrevocably appointed (and the successive respective holders of the Debentures by taking and holding the same shall be conclusively deemed to have so appointed the Debenture Trustee) the true and lawful attorney-in-fact of the respective holders of the Debentures with authority to make and file in the respective names of the holders of the Debentures or on behalf of the holders of the Debentures as a class, subject to deduction from any such claims of the amounts of any claims filed by any of the holders of the Debentures themselves, any proof of debt, amendment of proof of debt, claim, petition or other document in any such proceedings and to receive payment of any sums becoming distributable on account thereof, and to execute any such other papers and documents and to do and perform any and all such acts and things for and on behalf of such holders of the Debentures, as may be necessary or advisable in the opinion of the Debenture Trustee, in order to have the respective claims of the Debenture Trustee and of the holders of the Debentures against the Company or its property allowed in any such proceeding, and to receive payment of or on account of such claims; provided, however, that subject to Section 8.3, nothing contained in this Indenture shall be deemed to give to the Debenture Trustee, unless so authorized by Extraordinary Resolution, any right to accept or consent to any plan of reorganization or otherwise by action of any character in such proceeding to waive or change in any way any right of any Debentureholder.

The Debenture Trustee shall also have the power at any time and from time to time to institute and to maintain such suits and proceedings as it may be advised shall be necessary or advisable to preserve and protect its interests and the interests of the Debentureholders.

All rights of action hereunder may be enforced by the Debenture Trustee without the possession of any of the Debentures or the production thereof on the trial or other proceedings relating thereto. Any such suit or proceeding instituted by the Debenture Trustee shall be brought in the name of the Debenture Trustee as trustee of an express trust, and any recovery of judgment shall be for the rateable benefit of the holders of the Debentures subject to the provisions of this Indenture. In any proceeding brought by the Debenture Trustee (and also any proceeding in which a declaratory judgment of a court may be sought as to the interpretation or construction of any provision of this Indenture, to which the Debenture Trustee shall be a party) the Debenture Trustee shall be held to represent all the holders of the Debentures, and it shall not be necessary to make any holders of the Debentures parties to any such proceeding.

8.5

No Suits by Debentureholders

No holder of any Debenture shall have any right to institute any action, suit or proceeding at law or in equity for the purpose of enforcing payment of the principal of or interest on the Debentures or for the execution of any trust or power hereunder or for the appointment of a liquidator or receiver or for a receiving order under the Bankruptcy and Insolvency Act (Canada) or to have the Company wound up or to file or prove a claim in any liquidation or bankruptcy proceeding or for any other remedy hereunder, unless: (a) such holder shall previously have

given to the Debenture Trustee written notice of a continuing Event of Default hereunder; and (b) the Debentureholders by Extraordinary Resolution or by written instrument signed by the holders of at least 25% in principal amount of the Debentures then outstanding shall have made a request to the Debenture Trustee and the Debenture Trustee shall have been afforded reasonable opportunity either itself to proceed to exercise the powers hereinbefore granted or to institute an action, suit or proceeding in its name for such purpose; and (c) the Debentureholders or any of them shall have furnished to the Debenture Trustee, when so requested by the Debenture Trustee, sufficient funds and security and indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby; and (d) the Debenture Trustee shall have failed to act within 30 days after such notification, request and offer of indemnity and such notification, request and offer of indemnity are hereby declared in every such case, at the option of the Debenture Trustee, to be conditions precedent to any such proceeding or for any other remedy hereunder by or on behalf of the holder of any Debentures.

8.6

Application of Moneys by Debenture Trustee

(a)

Except as herein otherwise expressly provided, any moneys received by the Debenture Trustee from the Company pursuant to the foregoing provisions of this Article 8, or as a result of legal or other proceedings or from any trustee in bankruptcy or liquidator of the Company, shall be applied, together with any other moneys in the hands of the Debenture Trustee available for such purpose, as follows:

(i)

first, in payment or in reimbursement to the Debenture Trustee of its compensation, costs, charges, expenses, borrowing, advances or other moneys furnished or provided by or at the instance of the Debenture Trustee in or about the execution of its trusts under, or otherwise in relation to, this Indenture, with interest thereon as herein provided;

(ii)

second, but subject as hereinafter in this Section 8.6 provided, in payment, rateably and proportionately to (and in the case of applicable withholding taxes, if any, on behalf of) the holders of Debentures, of the principal of and premium (if any) and accrued and unpaid interest and interest on amounts in default on the Debentures which shall then be outstanding in the priority of principal first and then premium and then accrued and unpaid interest and interest on amounts in default unless otherwise directed by Extraordinary Resolution and in that case in such order or priority as between principal, premium (if any) and interest as may be directed by such resolution;

(iii)

third, in payment of the surplus, if any, of such moneys to the Company or its assigns; and

provided, however, that no payment shall be made pursuant to clause (ii) above in respect of the principal, premium or interest on any Debenture held, directly or indirectly, by or for the benefit of the Company or any Subsidiary (other than any Debenture pledged for value and in good faith to a person other than the Company

or any Subsidiary but only to the extent of such person’s interest therein) except subject to the prior payment in full of the principal, premium (if any) and interest (if any) on all Debentures which are not so held.

(b)

The Debenture Trustee shall not be bound to apply or make any partial or interim payment of any moneys coming into its hands if the amount so received by it, after reserving thereout such amount as the Debenture Trustee may think necessary to provide for the payments mentioned in Section 8.6(a), is insufficient to make a distribution of at least 2% of the aggregate principal amount of the outstanding Debentures, but it may retain the money so received by it and invest or deposit the same as provided in Section 13.9 until the money or the investments representing the same, with the income derived therefrom, together with any other moneys for the time being under its control shall be sufficient for the said purpose or until it shall consider it advisable to apply the same in the manner hereinbefore set forth. The foregoing shall, however, not apply to a final payment in distribution hereunder.

8.7

Notice of Payment by Debenture Trustee

Not less than 15 days’ notice shall be given in the manner provided in Section 12.2 by the Debenture Trustee to the Debentureholders of any payment to be made under this Article 8. Such notice shall state the time when and place where such payment is to be made and also the liability under this Indenture to which it is to be applied. After the day so fixed, unless payment shall have been duly demanded and have been refused, the Debentureholders will be entitled to interest only on the balance (if any) of the principal moneys, premium (if any) and interest due (if any) to them, respectively, on the Debentures, after deduction of the respective amounts payable in respect thereof on the day so fixed.

8.8

Debenture Trustee May Demand Production of Debentures

The Debenture Trustee shall have the right to demand production of the Debentures in respect of which any payment of principal, interest or premium required by this Article 8 is made and may cause to be endorsed on the same a memorandum of the amount so paid and the date of payment.

8.9

Remedies Cumulative

No remedy herein conferred upon or reserved to the Debenture Trustee, or upon or to the holders of Debentures is intended to be exclusive of any other remedy, but each and every such remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now existing or hereafter to exist by law or by statute.

8.10

Judgment Against the Company

The Company covenants and agrees with the Debenture Trustee that, in case of any judicial or other proceedings to enforce the rights of the Debentureholders, judgment may be rendered against it in favour of the Debentureholders or in favour of the Debenture Trustee, as trustee for the Debentureholders, for any amount which may remain due in respect of the Debentures and premium (if any) and the interest thereon and any other moneys owing hereunder.

8.11

Immunity of Debenture Trustee and Others

The Debentureholders and the Debenture Trustee hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any past, present or future Director or Shareholder of the Company or of any successor for the payment of the principal of or premium or interest on any of the Debentures or on any covenant, agreement, representation or warranty by the Company herein or in the Debentures contained.

ARTICLE 9

SATISFACTION AND DISCHARGE

9.1

Cancellation and Destruction

All Debentures shall forthwith after payment thereof be delivered to the Debenture Trustee and cancelled by it. All Debentures cancelled or required to be cancelled under this or any other provision of this Indenture shall be destroyed by the Debenture Trustee and, if required by the Company, the Debenture Trustee shall furnish to it a destruction certificate setting out the designating numbers of the Debentures so destroyed.

9.2

Non-Presentation of Debentures

In case the holder of any Debenture shall fail to present the same for payment on the date on which the principal, premium (if any) or the interest thereon or represented thereby becomes payable either at maturity or otherwise or shall not accept payment on account thereof and give such receipt therefor, if any, as the Debenture Trustee may require:

(a)

the Company shall be entitled to pay or deliver to the Debenture Trustee and direct it to set aside; or

(b)

in respect of moneys in the hands of the Debenture Trustee which may or should be applied to the payment of the Debentures, the Company shall be entitled to direct the Debenture Trustee to set aside;

the principal, premium (if any) or the interest, as the case may be, in trust to be paid to the holder of such Debenture upon due presentation or surrender thereof in accordance with the provisions of this Indenture; and thereupon the principal, premium (if any) or the interest payable on or represented by each Debenture in respect whereof such moneys have been set aside shall be deemed to have been paid and the holder thereof shall thereafter have no right in respect thereof except that of receiving delivery and payment of the moneys (less applicable withholding taxes, if any), so set aside by the Debenture Trustee upon due presentation and surrender thereof.

9.3

Discharge

The Debenture Trustee shall at the written request of the Company release and discharge this Indenture and execute and deliver such instruments as it shall be advised by Counsel are requisite for that purpose and to release the Company from its covenants herein contained (other than the provisions relating to the indemnification of the Debenture Trustee), upon proof being given to the reasonable satisfaction of the Debenture Trustee that the principal and premium (if

any) of and interest (including interest on amounts in default, if any), on all the Debentures and all other moneys payable hereunder have been paid or satisfied or that all the Debentures having matured or having been duly called for redemption, payment of the principal of and interest (including interest on amounts in default, if any) on such Debentures and of all other moneys payable hereunder has been duly and effectually provided for in accordance with the provisions hereof.

9.4

Repayment of Unclaimed Monies

Subject to applicable law, any monies set aside under Section 9.2 and not claimed by and paid to holders of Debentures as provided in Section 9.2 within six years after the date of such setting aside shall be repaid and delivered to the Company by the Debenture Trustee and thereupon the Debenture Trustee shall be released from all further liability with respect to such monies and thereafter the holders of the Debentures in respect of which such monies were so repaid to the Company shall have no rights in respect thereof except to obtain payment and delivery of the monies from the Company subject to any limitation provided by the laws of the Province of Ontario. Notwithstanding the foregoing, the Debenture Trustee will pay any remaining funds prior to the expiry of six years after the setting aside described in Section 9.2 to the Company upon receipt from the Company, or one of its Subsidiaries (on behalf of the Company), of an uncontested letter of credit from a Canadian chartered bank in an amount equal to or in excess of the amount of the remaining funds. If the remaining funds are paid to the Company prior to the expiry of six years after such setting aside, and such funds or any portion thereof are claimed after the date of such payment of the remaining funds to the Company but prior to six years after such setting aside, then the Debenture Trustee shall immediately provide to the Company written notice of such claim and the Company shall promptly deposit with the Debenture Trustee funds in the amount necessary to satisfy such claim.

9.5

Satisfaction

(a)

The Company shall be deemed to have fully paid, satisfied and discharged all of the outstanding Debentures of any series and the Debenture Trustee, at the expense of the Company, shall execute and deliver proper instruments acknowledging the full payment, satisfaction and discharge of such Debentures, when, with respect to all of the outstanding Debentures or of the outstanding Debentures of any series, as applicable, either:

(i)

the Company has deposited or caused to be deposited with the Debenture Trustee as trust funds or property in trust for the purpose of making payment on such Debentures, an amount in money sufficient to pay, satisfy and discharge the entire amount of principal, premium, if any, and interest, if any, to maturity or any repayment date, Redemption Call Dates or Redemption Put Dates, as the case may be, of such Debentures; or

(ii)

the Company has deposited or caused to be deposited with the Debenture Trustee as trust property in trust for the purpose of making payment on such Debentures:

(A)

if the Debentures are issued in Canadian dollars, such amount in Canadian dollars of direct obligations of, or obligations the principal and interest of which are guaranteed by, the Government of Canada; or

(B)

if the Debentures are issued in a currency or currency unit other than Canadian dollars, cash in the currency or currency unit in which the Debentures are payable and/or such amount in such currency or currency unit of direct obligations of, or obligations the principal and interest of which are guaranteed by, the Government of Canada or the government that issued the currency or currency unit in which the Debentures are payable;

as will, together with the income to accrue thereon and reinvestment thereof, be sufficient to pay and discharge the entire amount of principal and accrued and unpaid interest to maturity or any repayment date, as the case may be, of all such Debentures; or

(iii)

all Debentures authenticated and delivered (other than (A) Debentures which have been destroyed, lost or stolen and which have been replaced or paid as provided in Section 2.9, and (B) Debentures for whose payment has been deposited in trust and thereafter repaid to the Company as provided in Section 9.4) have been delivered to the Debenture Trustee for cancellation;

and in either event:

(iv)

the Company has paid, caused to be paid or made provisions to the satisfaction of the Debenture Trustee for the payment of all other sums payable with respect to all of such Debentures (together with all applicable expenses of the Debenture Trustee in connection with the payment of such Debentures);

(v)

in respect of (i) and (ii) above, the Company has delivered to the Debenture Trustee an opinion of Counsel reasonably acceptable to the Debenture Trustee and qualified to practice in Canada to the effect that holders of outstanding Debentures that are resident in Canada for purposes of the Tax Act will not recognize income, gain or loss for Canadian federal income tax purposes as a result of this Section 9.5(a)(v) and will only be subject to Canadian federal income taxes on the same amounts, in the same manner and at the same times as would have been the case if this Section 9.5(a)(v) had not applied; and

(vi)

the Company has delivered to the Debenture Trustee a Certificate of the Company stating that all conditions precedent herein provided relating to the payment, satisfaction and discharge of all such Debentures have been complied with.

Any deposits with the Debenture Trustee referred to in this Section 9.5 shall be irrevocable, subject to Section 9.6, and shall be made under the terms of an escrow and/or trust agreement in form and substance satisfactory to the Debenture Trustee and which provides for the due and punctual payment of the principal of, and interest and premium, if any, on the Debentures being satisfied.

(b)

Upon the satisfaction of the conditions set forth in this Section 9.5 with respect to all the outstanding Debentures, or all the outstanding Debentures of any series, as applicable, the terms and conditions of the Debentures, including the terms and conditions with respect thereto set forth in this Indenture (other than those contained in Article 2, Article 4, Article 5, Article 6, Section 8.4 and the provisions of Article 1 pertaining to the foregoing provisions) shall no longer be binding upon or applicable to the Company.

(c)

Any funds or obligations deposited with the Debenture Trustee pursuant to this Section 9.5 shall be denominated in the currency or denomination of the Debentures in respect of which such deposit is made.

(d)

If the Debenture Trustee is unable to apply any money or securities in accordance with this Section 9.5 by reason of any legal proceeding or any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the affected Debentures shall be revived and reinstated as though no money or securities had been deposited pursuant to this Section 9.5 until such time as the Debenture Trustee is permitted to apply all such money or securities in accordance with this Section 9.5, provided that if the Company has made any payment in respect of principal, premium or interest on Debentures or, as applicable, other amounts because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the holders of such Debentures to receive such payment from the money or securities held by the Debenture Trustee.

9.6

Continuance of Rights, Duties and Obligations

(a)

Where trust funds or trust property have been deposited pursuant to Section 9.5 (the “Defeased Debentures”), the holders of Debentures and the Company shall continue to have and be subject to their respective rights, duties and obligations under Article 2, Article 4, Article 5 and Article 6 and the provisions of Article 1 pertaining to the foregoing.

(b)

In the event that, after the deposit of trust funds or trust property pursuant to Section 9.5, the Company is required to redeem any outstanding Debentures, the Company shall be entitled to use any trust money or trust property deposited with the Debenture Trustee pursuant to Section 9.5 for the purpose of paying to any holders of Defeased Debentures who have tendered such Debentures for redemption the redemption price payable to such holders in respect of such redemption. Upon receipt of a Written Direction from the Company, the

Debenture Trustee shall be entitled to pay to such holder from such trust money or trust property deposited with the Debenture Trustee pursuant to Section 9.5 in respect of the Defeased Debentures the amount which is applicable to the Defeased Debentures held by such holders who have redeemed any such Debentures.

ARTICLE 10

SUCCESSORS

10.1

Restrictions on Amalgamation, Merger and Sale of Certain Assets, etc.

The Company shall not enter into any transaction or series of transactions whereby all or substantially all of its undertaking, property or assets would become the property of any other Person (herein called a “Successor”) whether by way of reorganization, consolidation, amalgamation, arrangement, merger, transfer, sale or otherwise, unless:

(a)

prior to or contemporaneously with the consummation of such transaction the Company and the Successor shall have executed such instruments and done such things as, in the opinion of Counsel, are necessary or advisable to establish that upon the consummation of such transaction:

(i)

the Successor will have assumed all the covenants and obligations of the Company under this Indenture in respect of the Debentures;

(ii)

the Debentures will be valid and binding obligations of the Successor entitling the holders thereof, as against the Successor, to all the rights of Debentureholders under this Indenture; and

(iii)

in the case of an entity organized otherwise than under the laws of the Province of Ontario, shall attorn to the jurisdiction of the courts of the Province of Ontario;

(b)

such transaction, in the opinion of Counsel, shall be on such terms as to substantially preserve and not impair any of the rights and powers of the Debenture Trustee or of the Debentureholders hereunder; and

(c)

no condition or event shall exist as to the Company (at the time of such transaction) or the Successor (immediately after such transaction) and after giving full effect thereto or immediately after the Successor shall become liable to pay the principal moneys, premium, if any, interest and other moneys due or which may become due hereunder, which constitutes or would constitute an Event of Default hereunder.

10.2

Vesting of Powers in Successor

Whenever the conditions of Section 10.1 shall have been duly observed and performed, any Successor formed by or resulting from such transaction shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Indenture with the same effect as though the Successor had been named as the Company herein and thereafter, except in the case of a lease or other similar disposition of property to the Successor, the Company shall be relieved of all obligations and covenants under this Indenture and the Debentures forthwith upon the Company delivering to the Debenture Trustee an opinion of Counsel to the effect that the transaction shall not result in any material adverse tax consequences to the Company or the Successor. The Debenture Trustee will, at the expense of the Successor, execute any documents which it may be advised by Counsel are necessary or advisable for effecting or evidencing such release and discharge.

ARTICLE 11

MEETINGS OF DEBENTUREHOLDERS

11.1

Right to Convene Meeting

The Debenture Trustee or the Company may at any time and from time to time, and the Debenture Trustee shall, on receipt of a written request of the Company or a written request signed by the holders of not less than 25% of the principal amount of the Debentures then outstanding and upon receiving funding and being indemnified to its reasonable satisfaction by the Company or by the Debentureholders signing such request against the costs which may be incurred in connection with the calling and holding of such meeting, convene a meeting of the Debentureholders. In the event of the Debenture Trustee failing, within 30 days after receipt of any such request and such funding of indemnity, to give notice convening a meeting, the Company or such Debentureholders, as the case may be, may convene such meeting. Every such meeting shall be held in the City of Toronto or at such other place as may be approved or determined by the Debenture Trustee.

11.2

Notice of Meetings

(a)

At least 21 days’ notice of any meeting shall be given to the Debentureholders in the manner provided in Section 12.2 and a copy of such notice shall be sent by post to the Debenture Trustee, unless the meeting has been called by it. Such notice shall state the time when and the place where the meeting is to be held and shall state briefly the general nature of the business to be transacted thereat and it shall not be necessary for any such notice to set out the terms of any resolution to be proposed or any of the provisions of this Article. The accidental omission to give notice of a meeting to any holder of Debentures shall not invalidate any resolution passed at any such meeting. A holder may waive notice of a meeting either before or after the meeting.

(b)

If the business to be transacted at any meeting by Extraordinary Resolution or otherwise, or any action to be taken or power exercised by instrument in writing under Section 11.5, especially affects the rights of holders of Debentures of one or

more series in a manner or to an extent differing in any material way from that in or to which the rights of holders of Debentures of any other series are affected (determined as provided in Sections 11.2(c) and (d)), then:

(i)

a reference to such fact, indicating each series of Debentures so especially affected (hereinafter referred to as the “especially affected series”) shall be made in the notice of such meeting, and in any such case the meeting shall be and be deemed to be and is herein referred to as a “Serial Meeting”; and

(ii)

the holders of Debentures of an especially affected series shall not be bound by any action taken at a Serial Meeting or by instrument in writing under Section 11.5 unless in addition to compliance with the other provisions of this Article 11:

(A)

at such Serial Meeting: (I) there are Debentureholders present in person or by proxy and representing at least 25% in principal amount of the Debentures then outstanding of such series, subject to the provisions of this Article 11 as to quorum at adjourned meetings; and (II) the resolution is passed by the affirmative vote of the holders of more than 50% (or in the case of an Extraordinary Resolution not less than 66²⁄₃%) of the principal amount of the Debentures of such series then outstanding voted on the resolution; or

(B)

in the case of action taken or power exercised by instrument in writing under Section 11.15, such instrument is signed in one or more counterparts by the holders of not less than 66²⁄₃% in principal amount of the Debentures of such series then outstanding.

(c)

Subject to Section 11.2(d), the determination as to whether any business to be transacted at a meeting of Debentureholders, or any action to be taken or power to be exercised by instrument in writing under Section 11.15, especially affects the rights of the Debentureholders of one or more series in a manner or to an extent differing in any material way from that in or to which it affects the rights of Debentureholders of any other series (and is therefore an especially affected series) shall be determined by an opinion of Counsel, which shall be binding on all Debentureholders, the Debenture Trustee and the Company for all purposes hereof.

(d)

A proposal:

(i)

to extend the maturity of Debentures of any particular series or to reduce the principal amount thereof, the rate of interest or redemption premium thereon;

(ii)

to modify or terminate any covenant or agreement which by its terms is effective only so long as Debentures of a particular series are outstanding; or

(iii)

to reduce with respect to Debentureholders of any particular series any percentage stated in this Section 11.2 or Sections 11.4, 11.12 and 11.15;

shall be deemed to especially affect the rights of the Debentureholders of such series in a manner differing in a material way from that in which it affects the rights of holders of Debentures of any other series, whether or not a similar extension, reduction, modification or termination is proposed with respect to Debentures of any or all other series.

11.3

Chairman

Some person, who need not be a Debentureholder, nominated in writing by the Debenture Trustee shall be chairman of the meeting and if no person is so nominated, or if the person so nominated is not present within 15 minutes from the time fixed for the holding of the meeting, a majority of the Debentureholders present in person or by proxy shall choose some person present to be chairman.

11.4

Quorum

Subject to the provisions of Section 11.12, at any meeting of the Debentureholders a quorum shall consist of Debentureholders present in person or by proxy and representing at least 25% in principal amount of the outstanding Debentures and, if the meeting is a Serial Meeting, at least 25% of the Debentures then outstanding of each especially affected series. If a quorum of the Debentureholders shall not be present within 30 minutes from the time fixed for holding any meeting, the meeting, if summoned by the Debentureholders or pursuant to a request of the Debentureholders, shall be dissolved, but in any other case the meeting shall be adjourned to the same day in the next week (unless such day is not a Business Day in which case it shall be adjourned to the next following Business Day thereafter) at the same time and place, to the extent possible, and no notice shall be required to be given in respect of such adjourned meeting. At the adjourned meeting, the Debentureholders present in person or by proxy shall, subject to the provisions of Section 11.12, constitute a quorum and may transact the business for which the meeting was originally convened notwithstanding that they may not represent 25% of the principal amount of the outstanding Debentures or of the Debentures then outstanding of each especially affected series. Any business may be brought before or dealt with at an adjourned meeting which might have been brought before or dealt with at the original meeting in accordance with the notice calling the same. No business shall be transacted at any meeting unless the required quorum be present at the commencement of business.

11.5

Power to Adjourn

The chairman of any meeting at which a quorum of the Debentureholders is present may, with the consent of the holders of a majority in principal amount of the Debentures represented thereat, adjourn any such meeting and no notice of such adjournment need be given except such notice, if any, as the meeting may prescribe.

11.6

Show of Hands

Every question submitted to a meeting shall, subject to Section 11.7, be decided in the first place by a majority of the votes given on a show of hands except that votes on Extraordinary Resolutions shall be given in the manner hereinafter provided. At any such meeting, unless a poll is duly demanded as herein provided, a declaration by the chairman that a resolution has been carried or carried unanimously or by a particular majority or lost or not carried by a particular majority shall be conclusive evidence of the fact. The chairman of any meeting shall be entitled, both on a show of hands and on a poll, to vote in respect of the Debentures, if any, held by him.

11.7

Poll

On every Extraordinary Resolution, and on any other question submitted to a meeting when demanded by the chairman or by one or more Debentureholders or proxies for Debentureholders, a poll shall be taken in such manner and either at once or after an adjournment as the chairman shall direct. Questions other than Extraordinary Resolutions shall, if a poll be taken, be decided by the votes of the holders of a majority in principal amount of the Debentures and of each especially affected series, if applicable, represented at the meeting and voted on the poll.

11.8

Voting

(a)

On a show of hands every person who is present and entitled to vote, whether as a Debentureholder or as proxy for one or more Debentureholders or both, shall have one vote. On a poll each Debentureholder present in person or represented by a proxy duly appointed by an instrument in writing shall be entitled to one vote in respect of each $100 principal amount of Debentures of which he shall then be the holder. In the case of any Debenture denominated in a currency or currency unit other than Canadian dollars, the principal amount thereof for these purposes shall be computed by the Company in Canadian dollars on the basis of the conversion of the principal amount thereof at the applicable spot buying rate of exchange for such other currency or currency unit as reported by the Bank of Canada at the close of business on the Business Day next preceding the meeting. Any fractional amounts resulting from such conversion shall be rounded to the nearest $100. A proxy need not be a Debentureholder. In the case of joint holders of a Debenture, any one of them present in person or by proxy at the meeting may vote in the absence of the other or others but in case more than one of them be present in person or by proxy, they shall vote together in respect of the Debentures of which they are joint holders.

(b)

In the case of a Global Debenture, the Depositary may appoint or cause to be appointed a Person or Persons as proxies and shall designate the number of votes entitled to each such Person, and each such Person shall be entitled to be present at any meeting of Debentureholders and shall be the Persons entitled to vote at such meeting in accordance with the number of votes set out in the Depositary’s designation.

11.9

Proxies

A Debentureholder may be present and vote at any meeting of Debentureholders by an authorized representative. The Company (in case it convenes the meeting) or the Debenture Trustee (in any other case) for the purpose of enabling the Debentureholders to be present and vote at any meeting without producing their Debentures, and of enabling them to be present and vote at any such meeting by proxy and of lodging instruments appointing such proxies at some place other than the place where the meeting is to be held, may from time to time make and vary such regulations as it shall think fit providing for and governing any or all of the following matters:

(a)

the form of the instrument appointing a proxy, which shall be in writing, and the manner in which the same shall be executed and the production of the authority of any person signing on behalf of a Debentureholder;

(b)

the deposit of instruments appointing proxies at such place as the Debenture Trustee, the Company or the Debentureholder convening the meeting, as the case may be, may, in the notice convening the meeting, direct and the time, if any, before the holding of the meeting or any adjournment thereof by which the same must be deposited; and

(c)

the deposit of instruments appointing proxies at some approved place or places other than the place at which the meeting is to be held and enabling particulars of such instruments appointing proxies to be mailed, faxed or sent by other electronic means before the meeting to the Company or to the Debenture Trustee at the place where the same is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting.

Any regulations so made shall be binding and effective and the votes given in accordance therewith shall be valid and shall be counted. Save as such regulations may provide, the only persons who shall be recognized at any meeting as the holders of any Debentures, or as entitled to vote or be present at the meeting in respect thereof, shall be Debentureholders and persons whom Debentureholders have by instrument in writing duly appointed as their proxies.

11.10

Persons Entitled to Attend Meetings

The Company and the Debenture Trustee, by their respective officers, directors and employees, the Auditors of the Company and the legal advisers of the Company, the Debenture Trustee or any Debentureholder may attend any meeting of the Debentureholders, but shall have no vote as such.

11.11

Powers Exercisable by Extraordinary Resolution

In addition to the powers conferred upon them by any other provisions of this Indenture or by law, a meeting of the Debentureholders shall have the following powers exercisable from time to time by Extraordinary Resolution:

(a)

power to authorize the Debenture Trustee to grant extensions of time for payment of any principal, premium or interest on the Debentures, whether or not the principal, premium, or interest, the payment of which is extended, is at the time due or overdue;

(b)

power to sanction any modification, abrogation, alteration, compromise or arrangement of the rights of the Debentureholders or the Debenture Trustee against the Company, or against its property, whether such rights arise under this Indenture or the Debentures or otherwise, subject to the written consent of the Debenture Trustee;

(c)

power to assent to any modification of or change in or addition to or omission from the provisions contained in this Indenture or any Debenture which shall be agreed to by the Company and to authorize the Debenture Trustee to concur in and execute any indenture supplemental hereto embodying any modification, change, addition or omission;

(d)

power to sanction any scheme for the reconstruction, reorganization or recapitalization of the Company or for the consolidation, amalgamation or merger of the Company with any other Person or for the sale, leasing, transfer or other disposition of all or substantially all of the undertaking, property and assets of the Company or any part thereof, provided that no such sanction shall be necessary in respect of any such transaction if the provisions of Section 10.1 shall have been complied with;

(e)

power to direct or authorize the Debenture Trustee to exercise any power, right, remedy or authority given to it by this Indenture in any manner specified in any such Extraordinary Resolution or to refrain from exercising any such power, right, remedy or authority;

(f)

power to waive, and direct the Debenture Trustee to waive, any default hereunder and/or cancel any declaration made by the Debenture Trustee pursuant to Section 8.1 either unconditionally or upon any condition specified in such Extraordinary Resolution;

(g)

power to restrain any Debentureholder from taking or instituting any suit, action or proceeding for the purpose of enforcing payment of the principal, premium or interest on the Debentures, or for the execution of any trust or power hereunder;

(h)

power to direct any Debentureholder who, as such, has brought any action, suit or proceeding to stay or discontinue or otherwise deal with the same upon payment, if the taking of such suit, action or proceeding shall have been permitted by Section 8.5, of the costs, charges and expenses reasonably and properly incurred by such Debentureholder in connection therewith;

(i)

power to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of any Common Shares or other securities of the Company;

(j)

power to appoint a committee with power and authority (subject to such limitations, if any, as may be prescribed in the resolution) to exercise, and to direct the Debenture Trustee to exercise, on behalf of the Debentureholders, such of the powers of the Debentureholders as are exercisable by Extraordinary Resolution or other resolution as shall be included in the resolution appointing the committee. The resolution making such appointment may provide for payment of the expenses and disbursements of and compensation to such committee. Such committee shall consist of such number of persons as shall be prescribed in the resolution appointing it and the members need not be themselves Debentureholders. Every such committee may elect its chairman and may make regulations respecting its quorum, the calling of its meetings, the filling of vacancies occurring in its number and its procedure generally. Such regulations may provide that the committee may act at a meeting at which a quorum is present or may act by minutes signed by the number of members thereof necessary to constitute a quorum. All acts of any such committee within the authority delegated to it shall be binding upon all Debentureholders. Neither the committee nor any member thereof shall be liable for any loss arising from or in connection with any action taken or omitted to be taken by them in good faith;

(k)

power to remove the Debenture Trustee from office and to appoint a new Debenture Trustee or Debenture Trustees provided that no such removal shall be effective unless and until a new Debenture Trustee or Debenture Trustees shall have become bound by this Indenture; and

(l)

power to amend, alter or repeal any Extraordinary Resolution previously passed or sanctioned by the Debentureholders or by any committee appointed pursuant to Section 11.11(j).

Notwithstanding the foregoing provisions of this Section 11.11, none of such provisions shall in any manner allow or permit any amendment, modification, abrogation or addition to the provisions of Article 6 which could reasonably be expected to detrimentally affect the rights, remedies or recourse of the priority of the Senior Creditors.

11.12

Meaning of “Extraordinary Resolution”

(a)

The expression “Extraordinary Resolution” when used in this Indenture means, subject as hereinafter in this Article provided, a resolution proposed to be passed as an Extraordinary Resolution at a meeting of Debentureholders (including an adjourned meeting) duly convened for the purpose and held in accordance with the provisions of this Article at which the holders of not less than 25% of the principal amount of the Debentures then outstanding, and if the meeting is a Serial Meeting, at which holders of not less than 25% of the principal amount of the Debentures then outstanding of each especially affected series, are present in person or by proxy and passed by the favourable votes of the holders of not less than 66²⁄₃% of the principal amount of the Debentures, and if the meeting is a Serial Meeting by the affirmative vote of the holders of not less than 66²⁄₃% of

each especially affected series, in each case present or represented by proxy at the meeting and voted upon on a poll on such resolution.

(b)

If, at any such meeting, the holders of not less than 25% of the principal amount of the Debentures then outstanding and, if the meeting is a Serial Meeting, 25% of the principal amount of the Debentures then outstanding of each especially affected series, in each case are not present in person or by proxy within 30 minutes after the time appointed for the meeting, then the meeting, if convened by or on the requisition of Debentureholders, shall be dissolved but in any other case it shall stand adjourned to such date, being not less than 14 nor more than 60 days later, and to such place and time as may be appointed by the chairman. Not less than 10 days’ notice shall be given of the time and place of such adjourned meeting in the manner provided in Section 12.2. Such notice shall state that at the adjourned meeting the Debentureholders present in person or by proxy shall form a quorum. At the adjourned meeting the Debentureholders present in person or by proxy shall form a quorum and may transact the business for which the meeting was originally convened and a resolution proposed at such adjourned meeting and passed thereat by the affirmative vote of holders of not less than 66²⁄₃% of the principal amount of the Debentures and, if the meeting is a Serial Meeting, by the affirmative vote of the holders of not less than 66²⁄₃% of the principal amount of the Debentures of each especially affected series, in each case present or represented by proxy at the meeting voted upon on a poll shall be an Extraordinary Resolution within the meaning of this Indenture, notwithstanding that the holders of not less than 25% in principal amount of the Debentures then outstanding, and if the meeting is a Serial Meeting, holders of not less than 25% of the principal amount of the Debentures then outstanding of each especially affected series, are not present in person or by proxy at such adjourned meeting.

(c)

Votes on an Extraordinary Resolution shall always be given on a poll and no demand for a poll on an Extraordinary Resolution shall be necessary.

11.13

Powers Cumulative

Any one or more of the powers in this Indenture stated to be exercisable by the Debentureholders by Extraordinary Resolution or otherwise may be exercised from time to time and the exercise of any one or more of such powers from time to time shall not be deemed to exhaust the rights of the Debentureholders to exercise the same or any other such power or powers thereafter from time to time.

11.14

Minutes

Minutes of all resolutions and proceedings at every meeting as aforesaid shall be made and duly entered in books to be from time to time provided for that purpose by the Debenture Trustee at the expense of the Company, and any such minutes as aforesaid, if signed by the chairman of the meeting at which such resolutions were passed or proceedings had, or by the chairman of the next succeeding meeting of the Debentureholders, shall be prima facie evidence of the matters therein stated and, until the contrary is proved, every such meeting, in respect of the proceedings

of which minutes shall have been made, shall be deemed to have been duly held and convened, and all resolutions passed thereat or proceedings taken thereat to have been duly passed and taken.

11.15

Instruments in Writing

All actions which may be taken and all powers that may be exercised by the Debentureholders at a meeting held as hereinbefore in this Article provided may also be taken and exercised by the holders of 66²⁄₃% of the principal amount of all the outstanding Debentures and, if the meeting at which such actions might be taken would be a Serial Meeting, by the holders of 66²⁄₃% of the principal amount of the Debentures then outstanding of each especially affected series, by an instrument in writing signed in one or more counterparts and the expression “Extraordinary Resolution” when used in this Indenture shall include an instrument so signed.

11.16

Binding Effect of Resolutions

Every resolution and every Extraordinary Resolution passed in accordance with the provisions of this Article at a meeting of Debentureholders shall be binding upon all the Debentureholders, whether present at or absent from such meeting, and every instrument in writing signed by Debentureholders in accordance with Section 11.15 shall be binding upon all the Debentureholders, whether signatories thereto or not, and each and every Debentureholder and the Debenture Trustee (subject to the provisions for its indemnity herein contained) shall be bound to give effect accordingly to every such resolution, Extraordinary Resolution and instrument in writing.

11.17

Evidence of Rights Of Debentureholders

(a)

Any request, direction, notice, consent or other instrument which this Indenture may require or permit to be signed or executed by the Debentureholders may be in any number of concurrent instruments of similar tenor signed or executed by such Debentureholders.

(b)

The Debenture Trustee may, in its discretion, require proof of execution in cases where it deems proof desirable and may accept such proof as it shall consider proper.

11.18

Concerning Serial Meetings

If in the opinion of Counsel any business to be transacted at any meeting, or any action to be taken or power to be exercised by instrument in writing under Section 11.15, does not adversely affect the rights of the holders of Debentures of one or more series, the provisions of this Article 11 shall apply as if the Debentures of such series were not outstanding and no notice of any such meeting need be given to the holders of Debentures of such series. Without limiting the generality of the foregoing, a proposal to modify or terminate any covenant or agreement which is effective only so long as Debentures of a particular series are outstanding shall be deemed not to adversely affect the rights of the holders of Debentures of any other series.

ARTICLE 12

NOTICES

12.1

Notice to Company

Any notice to the Company under the provisions of this Indenture shall be valid and effective if delivered to the Company at: Constellation Software Inc., 20 Adelaide Street East, Suite 1200, Toronto, Ontario, M5C 2T6, facsimile (416) 861-2279 and a copy delivered to McCarthy Tétrault LLP, Suite 5300, TD Bank Tower, Box 48, 66 Wellington Street West, Toronto ON M5K 1E6 Attention: Wendi Locke, facsimile (416)868-0673, or if given by registered letter, postage prepaid, to such offices and so addressed and if mailed, shall be deemed to have been effectively given three days following the delivery thereof. The Company may from time to time notify the Debenture Trustee in writing of a change of address which thereafter, until changed by like notice, shall be the address of the Company for the purposes of this Indenture.

12.2

Notice to Debentureholders

All notices to be given hereunder with respect to the Debentures shall be deemed to be validly given to the holders thereof if sent by first class mail, postage prepaid, by letter or circular addressed to such holders at their post office addresses appearing in any of the registers hereinbefore mentioned and shall be deemed to have been effectively given three days following the day of mailing. Accidental error or omission in giving notice or accidental failure to mail notice to any Debentureholder or the inability of the Company to give or mail any notice due to anything beyond the reasonable control of the Company shall not invalidate any action or proceeding founded thereon.

If any notice given in accordance with the foregoing paragraph would be unlikely to reach the Debentureholders to whom it is addressed in the ordinary course of post by reason of an interruption in mail service, whether at the place of dispatch or receipt or both, the Company shall give such notice by publication at least once in the City of Toronto, Ontario, such publication to be made in a daily newspaper of general circulation in the designated city.

Any notice given to Debentureholders by publication shall be deemed to have been given on the day on which publication shall have been effected at least once in each of the newspapers in which publication was required.

All notices with respect to any Debenture may be given to whichever one of the holders thereof (if more than one) is named first in the registers hereinbefore mentioned, and any notice so given shall be sufficient notice to all holders of any persons interested in such Debenture.

12.3

Notice to Debenture Trustee

Any notice to the Debenture Trustee under the provisions of this Indenture shall be valid and effective if delivered to the Debenture Trustee at its principal office in the City of Toronto, Computershare Trust Company of Canada, 100 University Avenue, 11th Floor, North Tower, Toronto, Ontario M5J 2Y1, Attention: General Manager, Corporate Trust or if given by registered letter, postage prepaid, to such office and so addressed and, if mailed, shall be deemed to have been effectively given three days following the mailing thereof. The Debenture Trustee

may from time to time notify the Company in writing of a change of address which thereafter, until by like notice shall be the address of the Debenture Trustee to receive notices from the Company.

12.4

Mail Service Interruption

If by reason of any interruption of mail service, actual or threatened, any notice to be given to the Debenture Trustee would reasonably be unlikely to reach its destination by the time notice by mail is deemed to have been given pursuant to Section 12.3, such notice shall be valid and effective only if delivered at the appropriate address in accordance with Section 12.3.

ARTICLE 13

CONCERNING THE DEBENTURE TRUSTEE

13.1

No Conflict of Interest

The Debenture Trustee represents to the Company that at the date of execution and delivery by it of this Indenture there exists no material conflict of interest in the role of the Debenture Trustee as a fiduciary hereunder but if, notwithstanding the provisions of this Section 13.1, such a material conflict of interest exists, or hereafter arises, the validity and enforceability of this Indenture, and the Debentures issued hereunder, shall not be affected in any manner whatsoever by reason only that such material conflict of interest exists or arises but the Debenture Trustee shall, within 90 days after ascertaining that it has a material conflict of interest, either eliminate such material conflict of interest or resign in the manner and with the effect specified in Section 13.2.

13.2

Replacement of Debenture Trustee

The Debenture Trustee may resign its trust and be discharged from all further duties and liabilities hereunder by giving to the Company 60 days’ notice in writing or such shorter notice as the Company may accept as sufficient. In the event of the Debenture Trustee resigning or being removed or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Company shall forthwith appoint a new Debenture Trustee unless a new Debenture Trustee has already been appointed by the Debentureholders. Failing such appointment by the Company, the retiring Debenture Trustee or any Debentureholder may apply to a Judge of the Ontario Superior Court of Justice in the judicial district of Toronto, at the Company’s expense, on such notice as such Judge may direct, for the appointment of a new Debenture Trustee but any new Debenture Trustee so appointed by the Company or by the Court shall be subject to removal as aforesaid by the Debentureholders and the appointment of such new Debenture Trustee shall be effective only upon such new Debenture Trustee becoming bound by this Indenture. Any new Debenture Trustee appointed under any provision of this Section 13.2 shall be a corporation authorized to carry on the business of a trust company in all of the Provinces and Territories of Canada. On any new appointment the new Debenture Trustee shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Debenture Trustee.

Any company into which the Debenture Trustee may be merged or, with or to which it may be consolidated, amalgamated or sold, or any company resulting from any merger, consolidation,

sale or amalgamation to which the Debenture Trustee shall be a party, or any company succeeding to the corporate trust business of the Debenture Trustee shall be the successor trustee under this Indenture without the execution of any instrument or any further act. Nevertheless, upon the written request of the successor Debenture Trustee or of the Company, the Debenture Trustee ceasing to act shall execute and deliver an instrument assigning and transferring to such successor Debenture Trustee, upon the trusts herein expressed, all the rights, powers and trusts of the Debenture Trustee so ceasing to act, and shall duly assign, transfer and deliver all property and money held by such Debenture Trustee to the successor Debenture Trustee so appointed in its place. Should any deed, conveyance or instrument in writing from the Company be required by any new Debenture Trustee for more fully and certainly vesting in and confirming to it such estates, properties, rights, powers and trusts, then any and all such deeds, conveyances and instruments in writing shall on request of said new Debenture Trustee, be made, executed, acknowledged and delivered by the Company.

13.3

Duties of Debenture Trustee

In the exercise of the rights, duties and obligations prescribed or conferred by the terms of this Indenture, the Debenture Trustee shall act honestly and in good faith and exercise that degree of care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances.

13.4

Reliance Upon Declarations, Opinions, etc.

In the exercise of its rights, duties and obligations hereunder the Debenture Trustee may, if acting in good faith, rely, as to the truth of the statements and accuracy of the opinions expressed therein, upon statutory declarations, opinions, reports or certificates furnished pursuant to any covenant, condition or requirement of this Indenture or required by the Debenture Trustee to be furnished to it in the exercise of its rights and duties hereunder, if the Debenture Trustee examines such statutory declarations, opinions, reports or certificates and determines that they comply with Section 13.5, if applicable, and with any other applicable requirements of this Indenture. The Debenture Trustee may nevertheless, in its discretion, require further proof in cases where it deems further proof desirable. Without restricting the foregoing, the Debenture Trustee may rely on an opinion of Counsel satisfactory to the Debenture Trustee notwithstanding that it is delivered by a solicitor or firm which acts as solicitors for the Company.

13.5

Evidence and Authority to Debenture Trustee, Opinions, etc.

The Company shall furnish to the Debenture Trustee evidence of compliance with the conditions precedent provided for in this Indenture relating to any action or step required or permitted to be taken by the Company or the Debenture Trustee under this Indenture or as a result of any obligation imposed under this Indenture, including without limitation, the certification and delivery of Debentures hereunder, the satisfaction and discharge of this Indenture and the taking of any other action to be taken by the Debenture Trustee at the request of or on the application of the Company, forthwith if and when (a) such evidence is required by any other Section of this Indenture to be furnished to the Debenture Trustee in accordance with the terms of this Section 13.5, or (b) the Debenture Trustee, in the exercise of its rights and duties under this Indenture,

gives the Company written notice requiring it to furnish such evidence in relation to any particular action or obligation specified in such notice.

Such evidence shall consist of:

(a)

a Certificate of the Company, stating that any such condition precedent has been complied with in accordance with the terms of this Indenture;

(b)

in the case of a condition precedent compliance with which is, by the terms of this Indenture, made subject to review or examination by a solicitor, an opinion of Counsel that such condition precedent has been complied with in accordance with the terms of this Indenture; and

(c)

in the case of any such condition precedent compliance with which is subject to review or examination by auditors or accountants, an opinion or report of the Auditors of the Company whom the Debenture Trustee for such purposes hereby approves, that such condition precedent has been complied with in accordance with the terms of this Indenture.

Whenever such evidence relates to a matter other than the certificates and delivery of Debentures and the satisfaction and discharge of this Indenture, and except as otherwise specifically provided herein, such evidence may consist of a report or opinion of any solicitor, auditor, accountant, engineer or appraiser or any other person whose qualifications give authority to a statement made by him, provided that if such report or opinion is furnished by a director, officer or employee of the Company it shall be in the form of a statutory declaration. Such evidence shall be, so far as appropriate, in accordance with the immediately preceding paragraph of this Section.

Each statutory declaration, certificate, opinion or report with respect to compliance with a condition precedent provided for in the Indenture shall include (a) a statement by the person giving the evidence that he has read and is familiar with those provisions of this Indenture relating to the condition precedent in question, (b) a brief statement of the nature and scope of the examination or investigation upon which the statements or opinions contained in such evidence are based, (c) a statement that, in the belief of the person giving such evidence, he has made such examination or investigation as is necessary to enable him to make the statements or give the opinions contained or expressed therein, and (d) a statement whether in the opinion of such person the conditions precedent in question have been complied with or satisfied.

The Company shall furnish to the Debenture Trustee annually and at any time if the Debenture Trustee reasonably so requires, a Certificate of the Company with all covenants, conditions or other requirements contained in this Indenture, the non-compliance with which would, with the giving of notice or the lapse of time, or both, or otherwise, constitute an Event of Default, or if such is not the case, specifying the covenant, condition or other requirement which has not been complied with and giving particulars of such non-compliance. The Company shall, whenever the Debenture Trustee so requires, furnish the Debenture Trustee with evidence by way of statutory declaration, opinion, report or certificate as specified by the Debenture Trustee as to any action

or step required or permitted to be taken by the Company or as a result of any obligation imposed by this Indenture.

13.6

Debenture Trustee May Rely on Certificate of the Company

Except as otherwise specifically provided or prescribed by this Indenture, whenever in the administration of the provisions of this Indenture the Debenture Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, the Debenture Trustee, if acting in good faith, may rely upon a Certificate of the Company.

13.7

Experts, Advisers and Agents

The Debenture Trustee may:

(a)

employ or retain and act and rely on the opinion or advice of or information obtained from any solicitor, auditor, valuer, engineer, surveyor, appraiser or other expert, whether obtained by the Debenture Trustee or by the Company, or otherwise, and shall not be liable for acting, or refusing to act, in good faith on any such opinion or advice and may pay proper and reasonable compensation for all such legal and other advice or assistance as aforesaid, payable by the Company in accordance with Section 13.19(a); and

(b)

employ such agents, experts and other assistants as it may reasonably require for the proper determination and discharge of its duties hereunder, and may pay reasonable remuneration for all services performed for it (and shall be entitled to receive reasonable remuneration for all services performed by it) in the discharge of the trusts hereof and compensation for all disbursements, costs and expenses made or incurred by it in the determination and discharge of its duties hereunder and in the management of the trusts hereof and any solicitors employed or consulted by the Debenture Trustee may, but need not be, solicitors for the Company. The Debenture Trustee shall not be liable for the acts of any such agent, expert or assistants provided that the Debenture Trustee has satisfied its standard of care in Section 13.3 hereof in selecting such agents, experts or assistants.

13.8

Debenture Trustee May Deal in Debentures

Subject to Sections 13.1 and 13.3, the Debenture Trustee may, in its personal or other capacity, buy, sell, lend upon and deal in the Debentures and generally contract and enter into financial transactions with the Company or otherwise, without being liable to account for any profits made thereby.

13.9

Investment of Moneys Held by Debenture Trustee

Upon receipt of a written direction from the Company, the Debenture Trustee shall invest the funds in its name in accordance with such direction. Any direction from the Company to the Debenture Trustee shall be in writing and shall be provided to the Debenture Trustee no later

than 9:00 a.m. (Toronto time) on the day on which the investment is to be made. Any such direction received by the Debenture Trustee after 9:00 a.m. (Toronto time) or received on a non-Business Day, shall be deemed to have been given prior to 9:00 a.m. (Toronto time) the next Business Day. For the purpose of this Section, “Business Day” shall not include any day on which banks are not open for business in Toronto, Ontario. For the purpose hereof, “Authorized Investments” means short term interest bearing or discount debt obligations issued or guaranteed by the Government of Canada or a Province of Canada or a Canadian chartered bank (which may include an Affiliate or related party of the Debenture Trustee) provided that such obligation is rated at least “R1 (middle)” by DBRS Limited or an equivalent rating by an equivalent rating service.

In the event that the Debenture Trustee does not receive a direction or only a partial direction, the Debenture Trustee may hold cash balances constituting part or all of the funds and may, but need not deposit such balances in an account at a Schedule I Canadian chartered bank or an Affiliate thereof. The Debenture Trustee shall not be liable to account for any profit to any parties to this Indenture or to any other person or entity.

The Debenture Trustee shall not be held liable for any losses incurred in the investment of any funds in Authorized Investments.

13.10

Debenture Trustee will Disburse Only Monies Deposited

The Debenture Trustee will disburse monies according to this Indenture only to the extent that monies have been deposited with it.

13.11

Third Party Interests

The Company hereby represents to the Debenture Trustee that any account to be opened by, or interest to be held by, the Debenture Trustee in connection with this Indenture, for or to the credit of the Company, either:

(a)

is not intended to be used by or on behalf of any third party; or

(b)

is intended to be used by or on behalf of a third party, in which case such third party hereto agrees to complete and execute forthwith a declaration in the Debenture Trustee’s prescribed form as to the particulars of such third party.

13.12

Debenture Trustee Not Ordinarily Bound

Except as provided in Section 8.2 and as otherwise specifically provided herein, the Debenture Trustee shall not, subject to Section 13.3, be bound to give notice to any person of the execution hereof, nor to do, observe or perform or see to the observance or performance by the Company of any of the obligations herein imposed upon the Company or of the covenants on the part of the Company herein contained, nor in any way to supervise or interfere with the conduct of the Company’s business, unless the Debenture Trustee shall have been required to do so in writing by the holders of not less than 25% of the aggregate principal amount of the Debentures then outstanding or by any Extraordinary Resolution of the Debentureholders passed in accordance with the provisions contained in Article 11, and then only after it shall have been funded and

indemnified to its satisfaction against all actions, proceedings, claims and demands to which it may render itself liable and all costs, charges, damages and expenses which it may incur by so doing.

13.13

Debenture Trustee Not Required to Give Security

The Debenture Trustee shall not be required to give any bond or security in respect of the execution of the trusts and powers of this Indenture or otherwise in respect of the premises.

13.14

Debenture Trustee Not Bound to Act on Company’s Request

Except as in this Indenture otherwise specifically provided, the Debenture Trustee shall not be bound to act in accordance with any direction or request of the Company or of the Directors until a duly authenticated copy of the instrument or resolution containing such direction or request shall have been delivered to the Debenture Trustee, and the Debenture Trustee shall be empowered to act upon any such copy purporting to be authenticated and believed by the Debenture Trustee to be genuine.

13.15

Debenture Trustee Not Bound to Act

The Debenture Trustee shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Debenture Trustee, in its sole judgment, determines that such act might cause it to be in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline. Further, should the Debenture Trustee, in its sole judgment, determine at any time that its acting under this Indenture has resulted in its being in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline, then it shall have the right to resign on 30 days’ written notice to the Company, notwithstanding the provisions of Section 13.2 of this Indenture, provided that:

(a)

the Debenture Trustee’s written notice shall describe the circumstances of such non-compliance; and

(b)

if such circumstances are rectified to the Debenture Trustee’s satisfaction within such 30 day period, then such resignation shall not be effective.

13.16

Debenture Trustee Protected in Acting

The Debenture Trustee may act and rely, and shall be protected in acting and relying absolutely, upon any resolution, Certificate of the Company, statement, instrument, opinion, report, notice, request, consent, order, letter, facsimile transmission or other paper document believed in good faith by it to be genuine and to have been signed, sent or presented by or on behalf of the proper party or parties. The Debenture Trustee shall be protected in acting and relying upon any written notice, request, waiver, consent, certificate, receipt, statutory declaration, affidavit or other paper or document furnished to it, not only as to its due execution and the validity and the effectiveness of its provisions but also as to the truth and acceptability of any information therein contained which it in good faith believes to be genuine and what it purports to be.

13.17

Conditions Precedent to Debenture Trustee’s Obligations to Act Hereunder

The obligation of the Debenture Trustee to commence or continue any act, action or proceeding for the purpose of enforcing the rights of the Debenture Trustee and of the Debentureholders hereunder shall be conditional upon the Debentureholders furnishing when required by notice in writing by the Debenture Trustee, sufficient funds to commence or continue such act, action or proceeding and indemnity reasonably satisfactory to the Debenture Trustee to protect and hold harmless the Debenture Trustee against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof. The Debenture Trustee shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless and until it shall have been required so to do under the terms hereof; nor shall the Debenture Trustee be required to take notice of any default hereunder, unless and until notified in writing of such default, which notice shall distinctly specify the default desired to be brought to the attention of the Debenture Trustee and in the absence of any such notice the Debenture Trustee may for all purposes of the Indenture conclusively assume that no default has been made in the observance or performance of any of the representation, warranties, covenants, agreements or conditions contained herein. Any such notice shall in no way limit any discretion herein given the Debenture Trustee to determine whether or not the Debenture Trustee shall take action with respect to any default.

None of the provisions contained in this Indenture shall require the Debenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified and funded as aforesaid.

The Debenture Trustee may, before commencing or at any time during the continuance of any such act, action or proceeding require the Debentureholders at whose instance it is acting to deposit with the Debenture Trustee the Debentures held by them for which Debentures the Debenture Trustee shall issue receipts.

13.18

Authority to Carry on Business

The Debenture Trustee represents to the Company that at the date of execution and delivery by it of this Indenture it is authorized to carry on the business of a trust company in each of the Provinces and Territories of Canada but if, notwithstanding the provisions of this Section 13.14, it ceases to be so authorized to carry on business, the validity and enforceability of this Indenture and the securities issued hereunder shall not be affected in any manner whatsoever by reason only of such event but the Debenture Trustee shall, within 90 days after ceasing to be authorized to carry on the business of trust company in each of the Provinces and Territories of Canada, either become so authorized or resign in the manner and with the effect specified in Section 13.2.

13.19

Compensation and Indemnity

(a)

The Company shall pay to the Debenture Trustee from time to time compensation for its services hereunder as agreed separately by the Company and the Debenture Trustee, and shall pay or reimburse the Debenture Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Debenture Trustee in the administration or execution of its duties under this

Indenture (including the reasonable and documented compensation and disbursements of its Counsel and all other advisers and assistants not regularly in its employ), both before any default hereunder and thereafter until all duties of the Debenture Trustee under this Indenture shall be finally and fully performed. The Debenture Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. Any amount due hereunder shall bear interest at a rate per annum equal to the current rate charged by the Debenture Trustee from time to time from 30 days following the Debenture Trustee making the request for payment. This section shall survive the termination of this Indenture or the resignation or removal of the Debenture Trustee or whether the winding up of the trusts of this Indenture shall be in the course of administration by or under the direction of a court of competent jurisdiction in accordance with Section 7.2 herein.

(b)

The Company hereby indemnifies and saves harmless the Debenture Trustee and its directors, officers, employees and agents (collectively, the “Indemnified Parties” and each an “Indemnified Party”) from and against any and all loss, damages, suits, penalties, charges, expenses, claims, demands, actions or liability on a solicitor and client basis whatsoever which may be brought against an Indemnified Party or which it may suffer or incur as a result of or arising out of the performance of its duties and obligations hereunder save only in the event of the negligent failure to act, or the wilful misconduct or bad faith of an Indemnified Party. An Indemnified Party shall notify the Company promptly of any claim for which it may seek indemnity. The Company shall defend the claim and the Indemnified Party shall co-operate in the defence. An Indemnified Party may have separate Counsel and the Company shall pay the reasonable fees and expenses of such Counsel. The Company need not pay for any settlement made without its consent, which consent must not be unreasonably withheld. This indemnity shall survive the resignation or removal of the Debenture Trustee and the termination or discharge of this Indenture.

13.20

Acceptance of Trust

The Debenture Trustee hereby accepts the trusts in this Indenture declared and provided for and agrees to perform the same upon the terms and conditions herein set forth and to hold all rights, privileges and benefits conferred hereby and by law in trust for the various persons who shall from time to time be Debentureholders, subject to all the terms and conditions herein set forth.

13.21

U.S. Matters

(a)

The Company confirms that as at the date of execution of this Indenture it does not have a class of securities registered pursuant to Section 12 of the US Securities Exchange Act or have a reporting obligation pursuant to Section 15(d) of the US Securities Exchange Act. The Company covenants that in the event that (i) any class of its securities shall become registered pursuant to Section 12 of the US Securities Exchange Act or the Company shall incur a reporting obligation pursuant to Section 15(d) of the US Securities Exchange Act, or (ii) any such

registration or reporting obligation shall be terminated by the Company in accordance with the US Securities Exchange Act, the Company shall promptly deliver to the Debenture Trustee an Officers’ Certificate (in a form provided by the Debenture Trustee) notifying the Debenture Trustee of such registration or termination and such other information as the Debenture Trustee may reasonably request at the time. The Company acknowledges that the Debenture Trustee is relying upon the foregoing representation and covenants in order to meet certain SEC obligations with respect to those clients who are filing with the SEC.

(b)

This Indenture is subject to the provisions of the Business Corporations Act (Ontario), as amended, and the regulations thereunder and of the Trust Indenture Act of 1939, as amended, but only to the extent applicable under Rule 4d-9 thereunder, that are required to be part of this Indenture and shall, to the extent applicable, be governed by such provisions.

13.22

Withholding Obligation

For greater certainty, the Debenture Trustee shall, as directed by the Company, withhold, from any payment made to a holder of a Debenture pursuant to the terms of this Indenture, the amount of any applicable withholding taxes (including any amount referred to in Section 2.14 hereof) required to be withheld in respect of such payment, and the Debenture Trustee shall remit such withheld amounts to the appropriate governmental authority, as and when required. For the purposes of determining the appropriate withholdings to be made from any payment to be made to a holder of a Debenture, the Company and the Debenture Trustee agree to co-operate and to provide each other with any relevant information they have with respect to the holders of the Debentures.

13.23

Compliance with Privacy Laws

The parties acknowledge that federal and/or provincial legislation that addresses the protection of individuals’ personal information (collectively, the “Privacy Laws”) applies to obligations and activities under this Indenture. Despite any other provision of this Indenture, neither the Company, nor the Debenture Trustee shall take or direct any action that would contravene, or cause the other to contravene, applicable Privacy Laws. The Company shall, prior to transferring or causing to be transferred personal information to the Debenture Trustee, obtain and retain required consents of the relevant individuals to the collection, use and disclosure of their personal information, or shall have determined that such consents either have previously been given upon which the parties can rely or are not required under the Privacy Laws. The Debenture Trustee shall use commercially reasonable efforts to ensure that its services hereunder comply with Privacy Laws. Specifically, the Debenture Trustee agrees: (a) to have a designated chief privacy officer; (b) to maintain policies and procedures to protect personal information and to receive and respond to any privacy complaint or inquiry; (c) to use personal information solely for the purposes of providing its services under or ancillary to this Indenture and not to use it for any other purpose except with the consent of or direction from the Company or the individual involved; (d) not to sell or otherwise improperly disclose personal information to any third party; and (e) to employ administrative, physical and technological safeguards to reasonably secure and protect personal information against loss, theft, or unauthorized access, use or modification.

13.24

Protection of the Debenture Trustee

The Debenture Trustee shall not be bound to give any notice or to do or take any act, action or proceeding in virtue of the powers conferred on it hereby unless and until it shall be required so to do under the terms hereof; nor, subject to any default or Event of Default which may be known by the Debenture Trustee, shall the Debenture Trustee be required to take notice of any default or Event of Default hereunder, unless and until notified in writing of such default or Event of Default, which notice shall distinctly specify the default or Event of Default desired to be brought to the attention of the Debenture Trustee, and in the absence of such notice, the Debenture Trustee may for all purposes of this Indenture conclusively assume that the Company is not in default hereunder and that no default has been made with respect to the payment of principal of, premium, if any, or interest on Debentures or in the observance or performance of any of the covenants, agreements or conditions contained herein. Any such notice shall in no way limit any discretion herein given to the Debenture Trustee to determine whether or not the Debenture Trustee shall take action with respect to any default or Event of Default.

The Company shall provide to the Debenture Trustee an incumbency certificate setting out the names and sample signatures of persons authorized to give instructions to the Debenture Trustee hereunder. The Debenture Trustee shall be entitled to rely on such certificate until a revised certificate is provided to it hereunder. The Debenture Trustee shall be entitled to refuse to act upon any instructions given by a party which are signed by any person other than a person described in the incumbency certificate provided to it pursuant to this Section 13.24.

The Debenture Trustee shall not be liable for any consequential, punitive or special damages.

Except for the payment obligations of the Company contained herein, neither party shall be liable to the other or held in breach of this Indenture, if prevented, hindered, or delayed in the performance or observance of any provision contained herein by reason of act of God, riots, terrorism, acts of war, epidemics, governmental action or judicial order, earthquakes, or any other similar causes (including but not limited to, mechanical, electronic or communication interruptions, disruptions or failures). Performance times under this Indenture shall be extended for a period of time equivalent to the time lost because of any delay that is excusable under this Section.

ARTICLE 14

SUPPLEMENTAL INDENTURES

14.1

Supplemental Indentures

From time to time the Debenture Trustee and, when authorized by a resolution of the Directors, the Company, may, and they shall when required by this Indenture, execute, acknowledge and deliver by their proper officers deeds or indentures supplemental hereto which thereafter shall form part hereof, for anyone or more of the following purposes:

(a)

providing for the issuance of Additional Debentures under this Indenture;

(b)

adding to the covenants of the Company herein contained for the protection of the Debentureholders, or of the Debentures of any series, or providing for events of default, in addition to those herein specified;

(c)

making such provisions as may be necessary or desirable with respect to matters or questions arising hereunder, including the making of any modifications in the form of the Debentures which do not affect the substance thereof and which, in the opinion of the Debenture Trustee (relying on an opinion of Counsel), in no way prejudice the rights of the Debentureholders;

(d)

evidencing the succession, or successive successions, of others to the Company and the covenants of and obligations assumed by any such successor in accordance with the provisions of this Indenture;

(e)

to provide for uncertificated Debentures in addition to or in place of certificated Debentures;

(f)

giving effect to any Extraordinary Resolution passed as provided in Article 11; and

(g)

for any other purpose not inconsistent with the terms of this Indenture, provided that, in the opinion of the Debenture Trustee (relying on an opinion of Counsel), the rights of the Debentureholders are in no way prejudiced thereby.

Unless the supplemental indenture requires the consent or concurrence of Debentureholders or the holders of a particular series of Debentures, as the case may be, by Extraordinary Resolution, the consent or concurrence of Debentureholders or the holders of a particular series of Debentures, as the case may be, shall not be required in connection with the execution, acknowledgement or delivery of a supplemental indenture. The Company and the Debenture Trustee may amend any of the provisions of this Indenture related to matters of United States law or the issuance of Debentures or other securities into the United States in order to ensure that such issuances can be properly completed in accordance with applicable law in the United States without the consent or approval of the Debentureholders. Further, the Company and the Debenture Trustee may without the consent or concurrence of the Debentureholders or the holders of a particular series of Debentures, as the case may be, by supplemental indenture or otherwise, make any changes or corrections in this Indenture which it shall have been advised by Counsel are required for the purpose of curing or correcting any ambiguity or defective or inconsistent provisions or clerical omissions or mistakes or manifest errors contained herein or in any indenture supplemental hereto or any Written Direction of the Company provided for the issue of Debentures, providing that in the opinion of the Debenture Trustee (relying upon an opinion of Counsel) the rights of the Debentureholders are in no way prejudiced thereby.

ARTICLE 15

EXECUTION AND FORMAL DATE

15.1

Execution

This Indenture may be simultaneously executed in several counterparts, each of which when so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument. Delivery of an executed counterpart of this Indenture by facsimile electronic transmission or by email transmission of a .pdf (or similar) format document shall be as effective as delivery of a manually executed counterpart of this Indenture.

15.2

Formal Date

For the purpose of convenience this Indenture may be referred to as bearing the formal date of October 1, 2014 irrespective of the actual date of execution hereof.

[Remainder of page intentionally left blank.]

IN WITNESS whereof the parties hereto have executed this Indenture by the hands of their proper officers.


CONSTELLATION SOFTWARE INC.

Per:		Jamal Baksh
Name:		Jamal Baksh
Title:		Chief Financial Officer

COMPUTERSHARE TRUST COMPANY OF CANADA

Per:		Lisa Kudo
Name:		Lisa Kudo
Title:		Corporate Trust Officer

Per:		Raji Sivalingam
Name:		Raji Sivalingam
Title:		Associate Trust Officer

CONSTELLATION SOFTWARE INC.

- and -

COMPUTERSHARE TRUST COMPANY OF CANADA

SCHEDULE A TO THE TRUST INDENTURE

Form of Initial Debenture

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SCHEDULE A

[UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF CDS CLEARING AND DEPOSITORY SERVICES INC. (“CDS”) TO CONSTELLATION SOFTWARE INC. (THE “ISSUER”) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN RESPECT THEREOF IS REGISTERED IN THE NAME OF CDS & CO., OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS (AND ANY PAYMENT IS MADE TO CDS & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED HOLDER HEREOF, CDS & CO., HAS A PROPERTY INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE HEREIN AND IT IS A VIOLATION OF ITS RIGHTS FOR ANOTHER PERSON TO HOLD, TRANSFER OR DEAL WITH THIS CERTIFICATE.]

CUSIP: 21037XAA8

ISIN: CA21037XAA87

No. —

$—

CONSTELLATION SOFTWARE INC.

(a corporation amalgamated pursuant to the laws of Ontario)

UNSECURED SUBORDINATED FLOATING RATE DEBENTURE, SERIES 1

Constellation Software Inc. (the “Company”) for value received hereby acknowledges itself indebted and, subject to the provisions of the trust indenture (the “Indenture”) dated as of October 1, 2014 between the Company and Computershare Trust Company of Canada (the “Debenture Trustee”), promises to pay to the registered holder hereof on the Initial Debenture Maturity Date or on such earlier date as the principal amount hereof may become due in accordance with the provisions of the Indenture the principal sum of — Dollars ($—) in lawful money of Canada on presentation and surrender of this Initial Debenture at the principal offices of the Debenture Trustee in Toronto in accordance with the terms of the Indenture and, subject as hereinafter provided, to pay interest on the principal amount hereof from the date hereof, or from the last Interest Payment Date to which interest shall have been paid or made available for payment hereon, whichever is later. From, and including, the First Issue Date to, but excluding, March 31, 2015, the Initial Debentures will bear interest at a rate of 7.4% per annum (the “Initial Rate”). From, and including, March 31, 2015 to, but excluding, the Initial Debenture Maturity Date, the interest rate applicable to the Debentures will be reset on an annual basis on March 31 of each year, at a rate equal to the Cost of Living Adjustment (which amount may be positive or negative) plus 6.5%. Notwithstanding the foregoing, the interest rate applicable to the Debentures will at no time be less than 0%. Interest, if any, will be payable quarterly in arrears in equal instalments on March 31, June 30, September 30 and December 31 in each year, commencing on December 31, 2014 and the last such payment (representing interest payable from the last Interest Payment Date to, but excluding, the Initial Debenture Maturity Date or the

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earlier date of redemption of the Initial Debentures), subject as hereinafter provided, to fall due on the Initial Debenture Maturity Date or the earlier date of redemption, payable after as well as before maturity and after as well as before default, with interest on amounts in default at the same rate, compounded quarterly. Holders of Debentures at the close of business on the Business Day prior to an interest payment date will be entitled to receive the interest payment in respect of such quarter. The first interest payment payable on December 31, 2014 will include interest accrued from and including the First Issue Date to, but excluding, December 31, 2014 and will be in the amount of $1.8449 for each $100 principal amount of Debentures.

Interest hereon shall be payable by cheque mailed by prepaid ordinary mail to the registered holder hereof or by electronic transfer of funds to the Debenture Trustee or any paying agent for subsequent payment to the registered holder hereof and, subject to the provisions of the Indenture, the mailing of such cheque or the sending of such electronic transfer of funds shall, to the extent of the sum represented thereby (plus the amount of any tax withheld), satisfy and discharge all liability for interest on this Initial Debenture. Notwithstanding the foregoing, the Company may, subject to regulatory approval and applicable law, elect (the “PIK Election”), in lieu of paying interest in cash, to satisfy the Interest Obligation payable on an Interest Payment Date by issuing, in accordance with Section 2.13 of the Indenture, to each Debentureholder appearing on the registers maintained by the Debenture Trustee at the close of business on the last Business Day prior to the applicable Interest Payment Date such principal amount of PIK Debentures equal to the amount of the Interest Obligation (less any tax required by law to be deducted, if any), which amount will be rounded down to the nearest multiple of $100, and delivering to each Debentureholder the certificate representing such PIK Debentures. No fractional PIK Debentures shall be delivered to the registered holders hereof upon a PIK Election to issue and deliver PIK Debentures in satisfaction of the Interest Obligation, however holders will receive a cash payment in respect of any fractional interest in PIK Debentures. The delivery of the PIK Debentures in accordance with the terms of the Indenture will satisfy and discharge the liability of the Company for any Interest Obligation payable on an Interest Payment Date that is related to the delivery of such PIK Debentures.

This Initial Debenture is one of the Debentures of the Company issued or issuable in one or more series under the provisions of the Indenture. Reference is hereby expressly made to the Indenture for a description of the terms and conditions upon which the Initial Debentures are or are to be issued and held and the rights and remedies of the holders of the Initial Debentures and of the Company and of the Debenture Trustee, all to the same effect as if the provisions of the Indenture were herein set forth to all of which provisions the holder of this Initial Debenture by acceptance hereof assents. The Initial Debentures are issuable only in denominations of $100 and integral multiples thereof. Upon compliance with the provisions of the Indenture, Initial Debentures of any denomination may be exchanged for an equal aggregate principal amount of Initial Debentures in any other authorized denomination or denominations.

The Initial Debentures will not be redeemable prior to March 31, 2020.

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at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the date fixed for redemption.

During the period beginning on March 1 and ending on March 15 of each year, the first such period commencing on March 1, 2015, holders of Initial Debentures will have the right, at their option, to give notice to the Company of their intention to require the Company to repurchase (or to “put”) the Initial Debentures, in whole or in part, on March 31 in the year that is five years following the year in which notice is given, at a price equal to the principal amount thereof plus accrued and unpaid interest up to but excluding the date fixed for repurchase.

A holder of Debentures who has exercised its put right in respect of some or all of the Initial Debentures held by such holder will be required to deposit such Initial Debentures with the Trustee, which Debentures will be held in escrow by the Trustee until the applicable Redemption Put Date and will no longer be transferable over the facilities of the TSX or otherwise.

Upon the occurrence of a Change of Control of the Company, subject to the Payment in Full of the Senior Indebtedness and subject to the provisions and conditions of the Indenture, each holder of Initial Debentures may require the Company to purchase on the date that is 30 days following the giving of notice of the Change of Control (the “Change of Control Put Date”) the whole or any part of such holder’s Initial Debentures at a price equal to 100% of the principal amount of such Initial Debentures plus accrued and unpaid interest (less any tax required by law to be deducted) up to, but excluding, the date the Initial Debentures are so repurchased. If 90% or more of the aggregate principal amount of all Initial Debentures outstanding on the date the Company provides notices of a Change of Control to the Debenture Trustee have been tendered for purchase on the Change of Control Put Date, the Company has the right to purchase all the remaining outstanding Initial Debentures on the same date and at the same price, together with accrued and unpaid interest (less any tax required by law to be deducted) to such date, and in the same form.

The indebtedness evidenced by this Initial Debenture, and by all other Initial Debentures now or hereafter certified and delivered under the Indenture, is a direct unsecured obligation of the Company, and is subordinated in right of payment, to the extent and in the manner provided in the Indenture, to the prior payment of all Senior Indebtedness, whether outstanding at the date of the Indenture or thereafter created, incurred, assumed or guaranteed.

The principal hereof may become or be declared due and payable before the stated maturity in the events, in the manner, with the effect and at the times provided in the Indenture.

Any payment of money to any holder of Debentures will be reduced by the amount of applicable withholding taxes, if any. The Indenture contains provisions making binding upon all holders of Debentures outstanding thereunder (or in certain circumstances specific series of Debentures) resolutions passed at meetings of such holders held in accordance with such provisions and

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instruments signed by the holders of a specified majority of Debentures outstanding (or specific series), which resolutions or instruments may have the effect of amending the terms of this Initial Debenture or the Indenture.

This Initial Debenture may only be transferred, upon compliance with the conditions prescribed in the Indenture, in the register to be kept at the principal offices of the Debenture Trustee in Toronto and in such other place or places and/or by such other registrars (if any) as the Company with the approval of the Debenture Trustee may designate. No transfer of this Initial Debenture shall be valid unless made on the register by the registered holder hereof or his executors or administrators or other legal representatives, or his or their attorney duly appointed by an instrument in form and substance satisfactory to the Debenture Trustee or other registrar, and upon compliance with such reasonable requirements as the Debenture Trustee and/or other registrar may prescribe and upon surrender of this Initial Debenture for cancellation. Thereupon a new Initial Debenture or Initial Debentures in the same aggregate principal amount shall be issued to the transferee in exchange hereof.

This Initial Debenture shall not become obligatory for any purpose until it shall have been certified by the Debenture Trustee under the Indenture. This Initial Debenture is governed by the Indenture. If any of the provisions of this Initial Debenture are inconsistent with the provisions of the Indenture, the provisions of the Indenture shall take precedence and shall govern.

Capitalized words or expressions used in this Initial Debenture shall, unless otherwise defined herein, have the meaning ascribed thereto in the Indenture.

IN WITNESS WHEREOF CONSTELLATION SOFTWARE INC. has caused this Initial Debenture to be signed by its authorized representative as of the — day of —.


CONSTELLATION SOFTWARE INC.

Per:
Name:
Title:

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(FORM OF DEBENTURE TRUSTEE’S CERTIFICATE)

This Initial Debenture is one of the Unsecured Subordinated Floating Rate Debentures, Series 1 referred to in the Indenture within mentioned.


COMPUTERSHARE TRUST COMPANY OF CANADA

Per:
Name:		—
Title:		(Authorized Officer)

(FORM OF REGISTRATION PANEL)

(No writing hereon except by Debenture Trustee or other registrar)

Signature of Debenture Trustee or Registrar


CDS & Co.
85 Richmond Street West
Toronto, ON M5H 2C9

Date of Registration:

In Whose Name Registered:		CDS & Co.

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FORM OF ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto —, whose address and social insurance number, if applicable, are set forth below, this Initial Debenture (or $— principal amount hereof*) of CONSTELLATION SOFTWARE INC. standing in the name(s) of the undersigned in the register maintained by the Company with respect to such Initial Debenture and does hereby irrevocably authorize and direct the Debenture Trustee to transfer such Initial Debenture in such register, with full power of substitution in the premises.


Dated:

Address of Transferee:
		(Street Address, City, Province and Postal Code):

Social Insurance Number of Transferee,

if applicable:

(*)

If less than the full principal amount of the within Initial Debenture is to be transferred, indicate in the space provided the principal amount (which must be $100 or an integral multiple thereof, unless you hold an Initial Debenture in a non-integral multiple of $100 by reason of your having exercised your right to exchange upon the making of an Offer, in which case such Initial Debenture is transferable only in its entirety) to be transferred,

1.	The signature(s) to this assignment must correspond with the name(s) as written upon the face of this Debenture in every particular without alteration or any change whatsoever. The signature(s) on this form must be guaranteed by one of the following methods:

Canada and the USA: A Medallion Signature Guarantee obtained from a member of an acceptable Medallion Signature Guarantee Program (STAMP, SEMP, MSP). Many commercial banks, savings banks, credit unions, and all broker dealers participate in a Medallion Signature Guarantee Program. The Guarantor must affix a stamp bearing the actual words “Medallion Guaranteed”.

Canada: A Signature Guarantee obtained from a major Canadian Schedule I chartered bank. The Guarantor must affix a stamp bearing the actual words “Signature Guaranteed”. Signature Guarantees are not accepted from Treasury Branches, Credit Unions or Caisses Populaires unless they are members of a Medallion Signature Guarantee Program.

Outside North America: For holders located outside North America, present the certificate(s) and/or document(s) that require a guarantee to a local financial institution that has a corresponding Canadian or American affiliate which is a member of an acceptable Medallion Signature Guarantee Program. The corresponding affiliate will arrange for the signature to be over-guaranteed.

Signature of Guarantor:

A-7


Authorized Officer
				Signature of transferring registered holder

				Name of Institution:

A-8

EXHIBIT “1” TO GLOBAL DEBENTURE

CONSTELLATION SOFTWARE INC.

UNSECURED SUBORDINATED FLOATING RATE DEBENTURES, SERIES 1


Initial Principal Amount: $¨		CUSIP: 21037XAA8

Authorization:		ISIN: CA21037XAA87

ADJUSTMENTS


Date	Amount of Increase	Amount of Decrease	New Outstanding Principal Amount	Authorization

A-9

CONSTELLATION SOFTWARE INC.

- and -

COMPUTERSHARE TRUST COMPANY OF CANADA

SCHEDULE B TO THE TRUST INDENTURE

Form of Call Notice

B-1

SCHEDULE B

FORM OF CALL NOTICE

CONSTELLATION SOFTWARE INC.

UNSECURED SUBORDINATED FLOATING RATE DEBENTURES, SERIES 1

CALL NOTICE


To:		Holders of Unsecured Subordinated Floating Rate Debentures (the “Debentures”) of Constellation Software Inc. (the “Company”)

Note:		All capitalized terms used herein have the meaning ascribed thereto in the Indenture mentioned below, unless otherwise indicated.

Notice is hereby given pursuant to Section 4.3 of the trust indenture (the “Indenture”) dated as of —, 2014 between the Company and Computershare Trust Company of Canada (the “Debenture Trustee”), that the aggregate principal amount of $— of the $— of Debentures outstanding will be redeemed as of March 31, 20— (the “Redemption Call Date”), upon payment of a redemption amount of $— for each $100 principal amount of Debentures, being equal to the aggregate of (i) $100 (the “Redemption Price”), and (ii) accrued and unpaid interest thereon to, but excluding, the Redemption Call Date (collectively, the “Total Redemption Price”).

The Total Redemption Price will be payable upon presentation and surrender of the Debentures called for redemption at the following corporate trust office:

COMPUTERSHARE TRUST COMPANY OF CANADA

100 University Avenue

8th Floor, North Tower

Toronto, Ontario M5J 2Y1

The interest upon the principal amount of Debentures called for redemption shall cease to be payable from and after the Redemption Call Date, unless payment of the Total Redemption Price shall not be made on presentation for surrender of such Debentures at the above-mentioned corporate trust office on or after the Redemption Call Date or prior to the setting aside of the Total Redemption Price pursuant to the Indenture.

DATED: —


CONSTELLATION SOFTWARE INC.

Per:
Name:
Title:		Authorized Signatory

B-2

CONSTELLATION SOFTWARE INC.

- and -

COMPUTERSHARE TRUST COMPANY OF CANADA

SCHEDULE C TO THE TRUST INDENTURE

Form of Put Notice

C-1

SCHEDULE C

FORM OF PUT NOTICE

CONSTELLATION SOFTWARE INC.

UNSECURED SUBORDINATED FLOATING RATE DEBENTURES, SERIES 1

PUT NOTICE


To:		Constellation Software Inc. (the “Company”)

Note:		All capitalized terms used herein have the meaning ascribed thereto in the Indenture mentioned below, unless otherwise indicated.

Notice is hereby given pursuant to Section 5.3 of the trust indenture (the “Indenture”) dated as of —, 2014 between the Company and Computershare Trust Company of Canada (the “Debenture Trustee”), that the undersigned registered holder of $— aggregate principal amount of Debentures bearing certificate No. — hereby elects to put $— principal amount of such holder’s Debentures to the Company to be purchased by the Company on [March 31, 20—] (the “Redemption Put Date”), upon payment of a redemption amount of $— for each $100 principal amount of Debentures, being equal to the aggregate of (i) $100, and (ii) accrued and unpaid interest thereon to, but excluding, the Redemption Put Date (collectively, the “Total Redemption Price”).

The Total Redemption Price will be payable upon presentation and surrender of the Debentures called for redemption at the following corporate trust office:

COMPUTERSHARE TRUST COMPANY OF CANADA

100 University Avenue

8th Floor, North Tower

Toronto, Ontario M5J 2Y1

The interest upon the principal amount of Debentures called for redemption shall cease to be payable from and after the Redemption Put Date, unless payment of the Total Redemption Price shall not be made on presentation for surrender of such Debentures at the above-mentioned corporate trust office on or after the Redemption Put Date or prior to the setting aside of the Total Redemption Price pursuant to the Indenture.

The undersigned hereby agrees to deposit the enclosed Debentures with the Trustee from the date hereof until the Redemption Put Date and acknowledges that such Debentures will not be transferable under any circumstance without the consent of the Company.

DATED: —

C-2

Signature of registered holder

Name of Institution:

C-3

SCHEDULE D

FORM OF CHANGE OF CONTROL PUT NOTICE

CONSTELLATION SOFTWARE INC.

UNSECURED SUBORDINATED FLOATING RATE DEBENTURES, SERIES 1

CHANGE OF CONTROL PUT NOTICE


To:		Constellation Software Inc. (the “Company”)

Note:		All capitalized terms used herein have the meaning ascribed thereto in the Indenture mentioned below, unless otherwise indicated.

Notice is hereby given pursuant to Section 2.4(g) of the trust indenture (the “Indenture”) dated as of —, 2014 between the Company and Computershare Trust Company of Canada (the “Debenture Trustee”), that the undersigned registered holder of $— aggregate principal amount of Debentures bearing certificate No. — hereby elects to put $— principal amount of such holder’s Debentures to the Company to be purchased by the Company on —, 20—— (the “Change of Control Put Date”), upon payment of a redemption amount of $— for each $100 principal amount of Debentures, being equal to the aggregate of (i) $100, and (ii) accrued and unpaid interest thereon to, but excluding, the Redemption Put Date (collectively, the “Total Put Price”).

The Total Put Price will be payable upon presentation and surrender of the Debentures called for redemption at the following corporate trust office:

COMPUTERSHARE TRUST COMPANY OF CANADA

100 University Avenue

8th Floor, North Tower

Toronto, Ontario M5J 2Y1

The interest upon the principal amount of Debentures called for redemption shall cease to be payable from and after the Change of Control Put Date, unless payment of the Total Put Price shall not be made on presentation for surrender of such Debentures at the above-mentioned corporate trust office on or after the Change of Control Put Date or prior to the setting aside of the Total Put Price pursuant to the Indenture.

DATED: —

Signature of registered holder

Name of Institution:

D-1

Constellation Software (PK) (USOTC:CNSWF)
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