Terms and Conditions. Fairfax Financial Holdings Limited ( Fairfax Financial or the Company ). $200,000,000 (8,000,000 Series M Preferred Shares)

Transcription

1 Fairfax Financial Holdings Limited Cumulative 5-Year Rate Reset Preferred Shares, Series M February 20, 2015 The Preferred Shares will be offered by way of a prospectus supplement in all of the provinces and territories of Canada. A prospectus supplement containing important information relating to the Preferred Shares has not yet been filed with the applicable Canadian securities regulatory authorities. A final base shelf prospectus containing important information relating to the securities described in this document has been filed with the securities regulatory authorities in each of the provinces and territories of Canada. A copy of the final base shelf prospectus, any amendment to the final base shelf prospectus and any applicable shelf prospectus supplement that has been filed is required to be delivered with this document. This document does not provide full disclosure of all material facts relating to the Preferred Shares. Investors should read the final base shelf prospectus, any amendment and any applicable prospectus supplement, for disclosure of those facts, especially risk factors relating to the Preferred Shares, before making an investment decision. Terms and Conditions Issuer: Issue: Issue Size: Underwriters Option: Issue Price: Initial Dividend Rate: Dividends: Conversion: Fairfax Financial Holdings Limited ( Fairfax Financial or the Company ). Treasury offering of Cumulative 5-Year Rate Reset Preferred Shares, Series M (the Series M Preferred Shares ). $200,000,000 (8,000,000 Series M Preferred Shares) The Company has granted an option, exercisable by the underwriters at any time up to 9:00 a.m. on the date that is two business days prior to closing of the offering, to purchase up to an additional 2,000,000 Series M Preferred Shares (representing $50,000,000 at the Issue Price). $25.00 per Series M Preferred Share 4.75% per annum, payable quarterly for the Initial Fixed Rate Period (as defined below). Initial Fixed Rate Period: Fixed, cumulative, preferential cash dividends payable quarterly on the last business day of March, June, September and December at an annual rate of $ per Series M Preferred Share, for the initial period ending on March 31, 2020 (the Initial Fixed Rate Period ). The first of such dividends, if declared, shall be payable on June 30, 2015 and shall be $ per Series M Preferred Share, for the period from the anticipated closing of the treasury offering of the Series M Preferred Shares on March 3, 2015 to June 30, Subsequent Fixed Rate Periods: For every five-year period after the Initial Fixed Rate Period (a Subsequent Fixed Rate Period ), Fairfax Financial will determine on the 30th day prior to the first day of a Subsequent Fixed Rate Period, the annual cumulative fixed dividend rate applicable to that Subsequent Fixed Rate Period (the Annual Fixed Dividend Rate ). The Annual Fixed Dividend Rate will be equal to the 5-Year Government of Canada Bond Yield ( GCAN5YR ) plus 3.98% as quoted on Bloomberg (see quote or GCAN5YR <INDEX> ) or comparable sources at 10:00 a.m. (Toronto time) on the 30th day prior to the first day of a Subsequent Fixed Rate Period. Fixed, Cumulative, preferential cash dividends payable quarterly on the last business day of March, June, September and December, based on the Annual Fixed Dividend Rate. Election to Convert:

2 On March 31, 2020 and on March 31 every five years thereafter (each a Series M Conversion Date ), the holders of Series M Preferred Shares will have the right to elect to convert (subject to the Automatic Conversion provision described below) any or all of their Series M Preferred Shares into an equal number of Cumulative Floating Rate Preferred Shares, Series N (the Series N Preferred Shares ). Should any such March 31 not be a business day, the Series M Conversion Date will be the next succeeding business day. Election Notice: Holders of Series M Preferred Shares who elect to convert their Series M Preferred Shares into Series N Preferred Shares on the Series M Conversion Date are required to provide Fairfax Financial with written notice (an Election Notice ) on a date not earlier than the 30th day and not later than 5:00 p.m. (Toronto time) on the 15th day preceding the applicable Series M Conversion Date. Once received by Fairfax Financial, an Election Notice is irrevocable. Automatic Conversion: If Fairfax Financial determines that after giving effect to any Election Notices received by Fairfax Financial during the time fixed therefor there would be less than 1,000,000 Series M Preferred Shares issued and outstanding on the applicable Series M Conversion Date, then all of the issued and outstanding Series M Preferred Shares will automatically be converted on such Series M Conversion Date into an equal number of Series N Preferred Shares ( Automatic Conversion ). Notice of Series M Conversion Date, next Annual Fixed Dividend Rate and Floating Quarterly Dividend Rate: Notice of a Series M Conversion Date and a form of Election Notice will be given by Fairfax Financial at least 30 days and not more than 60 days prior to the Series M Conversion Date. Notice of the Annual Fixed Dividend Rate for the upcoming Subsequent Fixed Rate Period and the Floating Quarterly Dividend Rate will be provided by Fairfax Financial on the 29th day prior to each Series M Conversion Date. Not electing to convert and continuing to hold Series M Preferred Shares: If Fairfax Financial does not receive an Election Notice from a holder of Series M Preferred Shares during the time fixed therefor, then the Series M Preferred Shares shall be deemed not to have been converted (except in the case of an Automatic Conversion). Redemption for Cash: Purchase for Cancellation: Rights on Liquidation: The Series M Preferred Shares will not be redeemable prior to March 31, Subject to the provisions in the Prospectus and Supplement, on March 31, 2020 and on March 31 every five years thereafter, on not more than 60 nor less than 30 days notice, Fairfax Financial may, at its option, redeem all or any number of the then outstanding Series M Preferred Shares upon payment in cash for each Series M Preferred Share so redeemed of an amount equal to $25.00 per Series M Preferred Share together with all accrued and unpaid dividends (whether or not declared) to the date fixed for redemption. Should any such March 31 not be a business day, the redemption date in that year will be the next succeeding business day. Subject to the provisions in the Prospectus and Supplement, Fairfax Financial may at any time purchase for cancellation any Series M Preferred Shares at the lowest price or prices at which, in the opinion of the Board of Directors of Fairfax Financial, such shares are obtainable. In the event of the liquidation, dissolution or winding-up of Fairfax Financial, the holders of the Series M Preferred Shares shall be entitled to receive $25.00 per Series M Preferred Share together with all dividends accrued and unpaid (whether or not declared) to the date of payment before any amount shall be paid or any assets

3 of Fairfax Financial distributed to the holders of the Company s Multiple Voting Shares, Subordinate Voting Shares, or any other shares ranking junior to the Series M Preferred Shares. The holders of the Series M Preferred Shares shall not be entitled to share in any further distribution of the assets of Fairfax Financial. Ratings: Priority: Use of Proceeds: Voting Rights: S&P: P-3 with a negative outlook DBRS: Pfd-3 The Series M Preferred Shares will rank on parity with the Preferred Shares of every other series and will rank in priority to the Subordinate Voting Shares and Multiple Voting Shares and over any other shares ranking junior to the Series M Preferred Shares with respect to dividends and return of capital in the event of liquidation, dissolution or winding-up of Fairfax Financial. Fairfax Financial intends to use the net proceeds of the offering to partially fund the previously announced proposed acquisition of all of the outstanding shares of Brit PLC. If the acquisition is not successfully completed, Fairfax Financial intends to use the net proceeds to augment its cash position, to increase short-term investments and marketable securities held at the holding company level, to refinance or retire outstanding debt and other corporate obligations of Fairfax Financial and its subsidiaries from time to time, and for general corporate purposes. Subject to applicable law, the holders of the Series M Preferred Shares will not be entitled to receive notice of or to attend or to vote at any meeting of the shareholders of the Company unless the Company has not paid the dividends accrued and payable for any eight quarters, whether or not consecutive and whether or not such dividends shall have been declared by the Board of Directors of the Company, on the Series M Preferred Shares at the applicable dividend rate for such shares. In such case, the holders of the Series M Preferred Shares will be entitled to receive notice of and to attend all meetings of shareholders, other than meetings at which only holders of another specified class or series are entitled to vote, and to vote together with all other shareholders of the Company entitled to vote at such meetings on the basis of one vote for each Series M Preferred Share held. Such voting rights of the holders of the Series M Preferred Shares shall forthwith cease upon payment by the Company of all accrued but unpaid dividends on Series M Preferred Shares until such time as the Company may again fail to pay the applicable dividend for any eight quarters, in which event such voting rights will become effective again and so on from time to time. Eligibility: Listing: Form of Offering: Tax on Series M Preferred Shares: Representation and Agreement by Purchasers: Eligible for RRSPs, RESPs, RRIFs, TFSAs, RDSPs and DPSPs. An application will be made to list the Series M Preferred Shares on the Toronto Stock Exchange. Bought deal by way of prospectus supplement to a short form base shelf prospectus dated December 19, 2014, to be filed in all provinces and territories of Canada. Fairfax Financial will elect to pay tax under Part VI.1 of the Income Tax Act (Canada) at such a rate that no tax under Part IV.1 of such Act will be payable by holders of the Series M Preferred Shares. To comply with the provisions of the UK Takeover Code in connection with Fairfax Financial s offer for the issued and to be issued shares of Brit PLC, purchasers of Series M Preferred Shares pursuant to the Supplement will be deemed to have represented and agreed that they and their affiliates do not own any shares of Brit PLC and will not acquire any shares of Brit PLC prior to the completion of Fairfax Financial s offer.

4 Bookrunners: Commission: Currency: BMO Capital Markets, RBC Capital Markets, and Scotiabank 1.0% on Series M Preferred Shares sold to institutions 3.0% on all other Series M Preferred Shares sold All references to $ and dollars are to Canadian dollars. Closing: On or about March 3, 2015

5 Fairfax Financial Holdings Limited Cumulative Floating Rate Preferred Shares, Series N February 20, 2015 The Preferred Shares will be offered by way of a prospectus supplement in all of the provinces and territories of Canada. A prospectus supplement containing important information relating to the Preferred Shares has not yet been filed with the applicable Canadian securities regulatory authorities. A final base shelf prospectus containing important information relating to the securities described in this document has been filed with the securities regulatory authorities in each of the provinces and territories of Canada. A copy of the final base shelf prospectus, any amendment to the final base shelf prospectus and any applicable shelf prospectus supplement that has been filed is required to be delivered with this document. This document does not provide full disclosure of all material facts relating to the Preferred Shares. Investors should read the final base shelf prospectus, any amendment and any applicable prospectus supplement, for disclosure of those facts, especially risk factors relating to the Preferred Shares, before making an investment decision. Terms and Conditions Issuer: Issue: Dividends: Conversion: Fairfax Financial Holdings Limited ( Fairfax Financial or the Company ) Cumulative Floating Rate Preferred Shares, Series N (the Series N Preferred Shares ). Quarterly Dividend Payments: Cumulative, preferential cash dividends payable quarterly on the last business day of March, June, September and December (the Quarterly Dividend Payment Date ) at the Floating Quarterly Dividend Rate (as defined below). Floating Quarterly Dividend Rate: The Floating Quarterly Dividend Rate for a quarter will be equal to the 90- day Canadian Treasury Bill Rate ( T-Bill Rate ) plus 3.98%, on an actual/365 day count basis. The T-Bill Rate will be calculated using the 3- month average results, as reported by the Bank of Canada, for the most recent auction preceding the date on which the Floating Quarterly Dividend Rate for such quarter is determined. Auction results are posted on Reuters page BOCBILL. The Floating Quarterly Dividend Rate for such quarter will be determined 30 days prior to the first day of the quarter by Fairfax Financial. Election to Convert: On March 31, 2025 and on March 31 every five years thereafter (each a Series N Conversion Date ), the holders of Series N Preferred Shares have the right to elect to convert (subject to the Automatic Conversion provision described below) any or all of their Series N Preferred Shares into an equal number of Cumulative 5-Year Rate Reset Preferred Shares, Series M (the Series M Preferred Shares ). Should any such March 31 not be a business day, the Series N Conversion Date in that year will be the next succeeding business day. Election Notice: Holders of Series N Preferred Shares who elect to convert their Series N Preferred Shares into Series M Preferred Shares on the Series N Conversion Date are required to provide Fairfax Financial with written notice (an Election Notice ) on a date not earlier than the 30th day and not later than 5:00 p.m. (Toronto time) on the 15th day preceding the applicable Series N Conversion Date. Once received by Fairfax Financial, an Election Notice is irrevocable. Automatic Conversion: If Fairfax Financial determines that after giving effect to any Election Notices received by Fairfax Financial during the time fixed therefor there would be less than 1,000,000 Series N Preferred Shares issued and outstanding on the applicable Series N Conversion Date, then all of the issued and outstanding Series N Preferred Shares will automatically be

6 converted on such Series N Conversion Date into an equal number of Series M Preferred Shares ( Automatic Conversion ). Notice of Series N Conversion Date, Floating Quarterly Dividend Rate and next Annual Fixed Dividend Rate: Notice of a Series N Conversion Date and a form of Election Notice will be given by Fairfax Financial at least 30 days and not more than 60 days prior to the Series N Conversion Date. Notice of the Floating Quarterly Dividend Rate and the annual fixed dividend rate on the Series M Preferred Shares (the Annual Fixed Dividend Rate ) for the upcoming five-year period, after the initial period ending on March 31, 2020, (a Subsequent Fixed Rate Period ) will be provided by Fairfax Financial on the 29th day prior to each Series N Conversion Date. Not electing to convert and continuing to hold Series N Preferred Shares: If Fairfax Financial does not receive an Election Notice from a holder of Series N Preferred Shares during the time fixed therefor, then the Series N Preferred Shares shall be deemed not to have been converted (except in the case of an Automatic Conversion). Redemption for Cash: Purchase for Cancellation: Rights on Liquidation: Priority: Voting Rights: Subject to the provisions in the Prospectus and Supplement, on March 31, 2025 and on March 31 every five years thereafter, on not more than 60 nor less than 30 days notice, Fairfax Financial may, at its option, redeem all or any number of the then outstanding Series N Preferred Shares upon payment in cash for each Series N Preferred Share so redeemed of an amount equal to $25.00 per Series N Preferred Share together with all accrued and unpaid dividends (whether or not declared) to the date fixed for redemption. Subject to the provisions in the Prospectus and Supplement, on any other date after March 31, 2020 that is not a Series N Conversion Date, on not more than 60 nor less than 30 days notice, Fairfax Financial may, at its option, redeem all or any part of the then outstanding Series N Preferred Shares upon payment in cash for each Series N Preferred Share so redeemed of an amount equal to $25.50 per Series N Preferred Share together with all accrued and unpaid dividends (whether or not declared) to the date fixed for redemption. Should any such March 31 not be a business day, the redemption date in that year will be the next succeeding business day. Subject to the provisions in the Prospectus and Supplement, Fairfax Financial may at any time purchase for cancellation any Series N Preferred Shares at the lowest price or prices at which in the opinion of the Board of Directors of Fairfax Financial such shares are obtainable. In the event of the liquidation, dissolution or winding-up of Fairfax Financial, the holders of the Series N Preferred Shares shall be entitled to receive $25.00 per Series N Preferred Share together with all dividends accrued and unpaid (whether or not declared) to the date of payment before any amount shall be paid or any assets of Fairfax Financial distributed to the holders of the Company s Multiple Voting Shares, Subordinate Voting Shares, or any other shares ranking junior to the Series N Preferred Shares. The holders of the Series N Preferred Shares shall not be entitled to share in any further distribution of the assets of Fairfax Financial. The Series N Preferred Shares will rank on parity with the Preferred Shares of every other series and will rank in priority to the Subordinate Voting Shares and Multiple Voting Shares and over any other shares ranking junior to the Series N Preferred Shares with respect to dividends and return of capital in the event of liquidation, dissolution or winding-up of Fairfax Financial. Subject to applicable law, the holders of the Series N Preferred Shares will not be entitled to receive notice of or to attend or to vote at any meeting of the shareholders of the Company unless the Company has not paid the dividends accrued and payable for any eight quarters, whether or not consecutive and whether or not such dividends shall have been declared by the Board of Directors of the Company, on

7 the Series N Preferred Shares at the applicable dividend rate for such shares. In such case, the holders of the Series N Preferred Shares will be entitled to receive notice of and to attend all meetings of shareholders, other than meetings at which only holders of another specified class or series are entitled to vote, and to vote together with all other shareholders of the Company entitled to vote at such meetings on the basis of one vote for each Series N Preferred Share held. Such voting rights of the holders of the Series N Preferred Shares shall forthwith cease upon payment by the Company of all accrued but unpaid dividends on Series N Preferred Shares until such time as the Company may again fail to pay the applicable dividend for any eight quarters, in which event such voting rights will become effective again and so on from time to time. Listing: Eligibility: Tax on Series N Preferred Shares: An application will be made to list the Series N Preferred Shares on the Toronto Stock Exchange. Eligible for RRSPs, RESPs, RRIFs, TFSAs, RDSPs and DPSPs. Fairfax Financial will elect to pay tax under Part VI.1 of the Income Tax Act (Canada) at such a rate that no tax under Part IV.1 of such Act will be payable by holders of the Series N Preferred Shares.