SUPPLEMENTAL TRUST INDENTURE BETWEEN KILLAM PROPERTIES INC. AND COMPUTERSHARE TRUST COMPANY OF CANADA PROVIDING FOR THE ISSUE OF DEBENTURES

Transcription

1 SUPPLEMENTAL TRUST INDENTURE DATED AS OF THE 2 ND DAY OF JUNE, 2011 BETWEEN KILLAM PROPERTIES INC. AND COMPUTERSHARE TRUST COMPANY OF CANADA PROVIDING FOR THE ISSUE OF DEBENTURES

2 TABLE OF CONTENTS Page ARTICLE 1 INTERPRETATION Supplemental Indenture Definitions References to Sections, Articles and Schedules... 2 ARTICLE 2 THE SERIES DEBENTURES Creation and Designation Terms of Series Debentures Issue of Global Debentures Additional Amounts Trustee, etc ARTICLE 3 MISCELLANEOUS Trustee Accepts Trusts Trustee Not Bound to Act Right of Rescission Counterparts Language SCHEDULES: SCHEDULE "A" FORM OF DEBENTURE SCHEDULE "B" FORM OF REDEMPTION NOTICE SCHEDULE "C" FORM OF MATURITY NOTICE SCHEDULE "D" FORM OF NOTICE OF CONVERSION SCHEDULE "E" FORM OF DECLARATION FOR REMOVAL OF LEGEND

3 THIS SUPPLEMENTAL TRUST INDENTURE made as of the 2 nd day of June, BETWEEN: KILLAM PROPERTIES INC., a corporation incorporated under the laws of Canada (hereinafter called the "Corporation") AND WITNESSETH THAT: COMPUTERSHARE TRUST COMPANY OF CANADA, a trust company existing under the laws of Canada (hereinafter called the "Trustee") WHEREAS the Corporation has entered into a trust indenture (as amended, supplemented or restated from time to time), dated as of November 30, 2010 between the Corporation and the Trustee (the "Trust Indenture"), which provides for the issuance of one or more series of unsecured debt securities of the Corporation by way of supplemental indentures; AND WHEREAS this supplemental trust indenture (the "Supplemental Indenture") is entered into for the purpose of providing for the issue of $46,000,000 aggregate principal amount of Debentures designated as "5.45% Convertible Unsecured Subordinated Debentures" under the Trust Indenture and establishing the terms, provisions and conditions of such Debentures (the "Series Debentures"); NOW THEREFORE it is hereby covenanted, agreed and declared as follows: 1.1 Supplemental Indenture ARTICLE 1 INTERPRETATION This Supplemental Indenture is a "supplemental indenture" within the meaning of the Trust Indenture. The Trust Indenture and this Supplemental Indenture will be read together and have effect so far as practicable as though all of the provisions of both indentures were contained in one instrument. If any provisions of the Trust Indenture are inconsistent with the express provisions hereof, the provisions of the Trust Indenture will be, solely in respect of the Series Debentures, amended, varied, supplemented, modified, restated or replaced so as to be consistent with this Supplemental Indenture. The provisions of this Supplemental Indenture are applicable only in respect of the Series Debentures and not the Debentures of any other series. 1.2 Definitions All terms used but not defined in this Supplemental Indenture have the meanings ascribed to them in the Trust Indenture, as such meanings may be amended by this Supplemental Indenture. In the

4 -2- event of any inconsistency between the terms in the Trust Indenture and this Supplemental Indenture, the terms in this Supplemental Indenture prevail. Subject to the foregoing, in this Supplemental Indenture and in the Series Debentures, the following terms have the following meanings: "90% Redemption Right" has the meaning ascribed thereto in Subsection 2.2(i)(ii); "CDS" means CDS Clearing and Depository Services Inc., and its successors and assigns; "Change of Control Notice" has the meaning ascribed thereto in Subsection 2.2(i); "Change of Control Redemption" has the meaning ascribed thereto in Subsection 2.2(i); "Corporation" means Killam Properties Inc. and includes any successor to or of the Corporation which shall have complied with the provisions of Article 11 of the Trust Indenture. "Debentureholder" means a holder of Series Debentures; "Maturity Notice" has the meaning ascribed thereto in Subsection 2.2(f); "Offer" has the meaning ascribed thereto in Subsection 2.2(i); "Offer Price" has the meaning ascribed thereto in Subsection 2.2(i); "Series Debentures" has the meaning ascribed thereto in the recitals and as described in Section 2.2; and "Time of Expiry" has the meaning ascribed thereto in Subsection 2.2(e); 1.3 References to Sections, Articles and Schedules Unless otherwise provided, all references herein to Sections, Articles or Schedules are references to Sections, Articles and Schedules of or to this Supplemental Indenture. 2.1 Creation and Designation ARTICLE 2 THE SERIES DEBENTURES The Corporation is authorized to issue under this Supplemental Indenture a series of Debentures designated "5.45% Convertible Unsecured Subordinated Debentures due June 30, 2018", which will have the terms set out herein and in accordance with the Trust Indenture. 2.2 Terms of Series Debentures (a) The Series Debentures authorized for issue immediately are limited to an aggregate principal amount of $46,000,000.

5 -3- (b) The Series Debentures shall be dated as of June 2, 2011, shall mature on June 30, 2018 and shall bear interest from the date of issue at the rate of 5.45% per annum, payable in equal semi-annual payments on June 30 and December 31 in each year, except the first payment will include accrued and unpaid interest for the period from the date of this Supplemental Indenture to, but excluding, December 31, 2011 and the last such payment to fall due on June 30, 2018, 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 semi-annually. (c) (d) (e) The Series Debentures will be redeemable by the Corporation in accordance with the terms of Article 4 of the Trust Indenture, provided that the Series Debentures will not be redeemable on or before June 30, 2014, except in the event of the satisfaction of certain conditions after a Change of Control has occurred as outlined in Subsection 2.2(i). After June 30, 2014 and on or prior to June 30, 2016, the Series Debentures may be redeemed in whole at any time or in part from time to time at the option of the Corporation on not more than 60 days' and not less than 30 days' prior written notice as provided for in section 4.3 of the Trust Indenture at a price equal to their principal amount including accrued and unpaid interest provided that the Current Market Price preceding the date upon which the notice for redemption is given is not less than 125% of the Conversion Price and the Corporation shall have provided to the Trustee an Officer's Certificate confirming such Current Market Price. Subsequent to June 30, 2016 and prior to June 30, 2018, the Series Debentures may be redeemed by the Corporation in whole at any time or in part from time to time at the option of the Corporation on not more than 60 days' and not less than 30 days' prior written notice as provided for in section 4.3 of the Trust Indenture and, in such case, the Redemption Price for the Series Debentures will be a price equal to their principal amount including accrued and unpaid interest. The Redemption Notice for the Series Debentures shall be in the form of Schedule "B". The Series Debentures will be subordinated to the Senior Indebtedness of the Corporation in accordance with the provisions of Article 5 of the Trust Indenture; provided, however, that nothing contained in this Supplemental Indenture shall in any way or manner restrict the Corporation from incurring, directly or indirectly, any additional indebtedness. Upon and subject to the provisions and conditions of Article 6 of the Trust Indenture, the holder of each Series Debenture shall have the right, at such holder's option, at any time prior to 5:00 p.m. (Halifax time) on the earlier of June 30, 2018 and the Business Day immediately preceding the date specified by the Corporation for redemption of the Series Debentures by notice to the holders of Series Debentures in accordance with Subsection 2.2(c) above and section 4.3 of the Trust Indenture (the earlier of which will be the "Time of Expiry" for the purposes of Article 6 of the Trust Indenture in respect of the Series Debentures), to convert the whole or, in the case of a Series Debenture of a denomination in excess of $1,000, any part which is $1,000 or an integral multiple thereof, of the principal amount of such Series Debenture into Common Shares at the Conversion Price in effect on the Date of Conversion (as defined in subsection 6.3(b) of the Trust Indenture). Notwithstanding the foregoing, no Series Debenture may be converted during the five business days preceding June 30 and December 31 in each year, as the registers of the Trustee will be closed during such periods.

6 -4- The Conversion Price in effect on the date hereof for each Common Share to be issued upon the conversion of Series Debentures shall be equal to $14.60 such that approximately Common Shares shall be issued for each $1,000 principal amount of Series Debentures so converted. Holders converting their Series Debentures shall be entitled to receive in cash, in addition to the applicable number of Common Shares, accrued and unpaid interest in respect thereof for the period from the last Interest Payment Date to and including the last record date set by the Corporation occurring prior to the date of conversion for determining the holders of Common Shares entitled to receive dividends on the Common Shares. In the event the Corporation has suspended regular dividends, then a Debentureholder, in addition to the number of Common Shares to be received on conversion of the Series Debentures, will be entitled to receive accrued and unpaid interest for the period from the last Interest Payment Date prior to the date of conversion to the date of conversion. The Conversion Price applicable to and the Common Shares, securities or other property receivable on the conversion of the Series Debentures is subject to adjustment pursuant to the provisions of section 6.4 of the Trust Indenture. Notwithstanding the foregoing, if holders of Series Debentures would otherwise be entitled to receive, upon conversion of the Series Debentures, any property (including cash) or securities that would not constitute "prescribed securities" for the purposes of clause 212(1)(b)(vii)(E) of the Tax Act as it applied on December 31, 2007 ("ineligible consideration"), such holders shall not be entitled to receive such ineligible consideration but the Corporation or the successor or acquirer, as the case may be, shall have the right (at the sole option of the Corporation or the successor or acquirer, as the case may be) to deliver either such ineligible consideration or "prescribed securities" for the purposes of clause 212(1)(b)(vii)(E) of the Tax Act as it applied on December 31, 2007 with a market value (as conclusively determined by the directors of the Corporation) equal to the market value of such ineligible consideration. (f) (g) On redemption or on maturity of the Series Debentures, the Corporation may, at its option and subject to the provisions of section 4.6 and section 4.10 of the Trust Indenture as applicable, and subject to regulatory approval, if required, elect to satisfy its obligation to pay the principal amount of the Series Debentures, in whole or in part, by issuing and delivering to the holders of Series Debentures Freely Tradeable Common Shares. If the Corporation elects to exercise such option, it shall deliver a Redemption Notice or a maturity notice (the "Maturity Notice"), as the case may be, to the holders of the Series Debentures in the form of Schedule B or Schedule C, as applicable. The Series Debentures shall be issued as one or more Global Debentures in denominations of $1,000 and integral multiples of $1,000 and the Trustee is hereby appointed as registrar and transfer agent for the Series Debentures. Each Series Debenture and the certificate of the Trustee endorsed thereon 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 Supplemental Indenture and may have imprinted or otherwise reproduced thereon such legend or legends or endorsements, not inconsistent with the provisions of this Supplemental 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

7 -5- directors or officers of the Corporation executing such Series Debentures in accordance with section 2.7 of the Trust Indenture, as conclusively evidenced by their execution of a Series Debenture. Each Series Debenture shall additionally bear such distinguishing letters and numbers as the Trustee shall approve. Notwithstanding the foregoing, a Series 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 an Officer's Certificate. The Series Debentures may be engraved, lithographed, printed, mimeographed or typewritten or partly in one form and partly in another. The Series Debentures shall be issued as Global Debentures and the Depositary or Depositaries for such Global Debentures in whose name the Global Debentures will be registered (and the Global Debentures may be registered in the name of a nominee of the Depositary), and any circumstances other than or in addition to those set forth in section 3.2 of the Trust Indenture in which any such Global Debenture may be exchanged for Series Debentures in registered form that are not Global Debentures, or transferred-to and registered in the name of a person other than the Depositary for such Global Debentures or a nominee thereof, shall be determined by the Corporation at the time of issue. (h) (i) Upon and subject to the provisions and conditions of Article 10 of the Trust Indenture, the Corporation may elect, from time to time, to satisfy its Interest Obligation, in whole or in part, on the Series Debentures on any Interest Payment Date by delivering Common Shares to the Trustee. Within 30 days following the occurrence of a Change of Control, and subject to the provisions and conditions of this Subsection 2.2(i), the Corporation shall be obligated to offer to purchase the then outstanding Series Debentures ("Change of Control Redemption"). The terms and conditions of such obligation are set forth below: (i) Within 30 days following the occurrence of a Change of Control, the Corporation shall deliver to the Trustee, and the Trustee shall promptly deliver to the holders of the Series Debentures a notice stating that there has been a Change of Control and specifying the circumstances surrounding such event (a "Change of Control Notice") together with an offer in writing (the "Offer") to purchase all then outstanding Series Debentures made in accordance with the requirements of Applicable Securities Legislation at a price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, on such Series Debentures up to, but excluding, the date of acquisition of the Debentures by the Corporation or a related party of such Debentures (the "Offer Price") which Offer shall, unless otherwise provided under Applicable Securities Legislation, be open for acceptance thereof for a period of not less than 35 days and not more than 60 days and shall provide for payment to all Debentureholders who accept the Offer not later than the 60th day after the making of the Offer. The Change of Control Notice shall specify (i) the provision of the Trust Indenture pursuant to which the Offer is being made and that all Series Debentures validly tendered will be accepted for payment; (ii) the Offer Price and date of acquisition by the Corporation; (iii) that any Series Debenture not tendered will continue to accrue interest in accordance with its terms; (iv) that any Series Debenture accepted for payment pursuant to the Offer shall cease to accrue interest from and after the date of acquisition by the

8 -6- Corporation unless the Corporation defaults in the payment of the Offer Price; (v) that any Debentureholder electing to have a Series Debenture purchased pursuant to the Offer will be required to surrender the Series Debenture to the Trustee at the address specified in the Change of Control Notice prior to the close of business on the Business Day immediately preceding the date of acquisition by the Corporation or, in the case of the Global Debenture, that the purchase will take place in such manner as may be agreed upon by the Depository, the Trustee and the Corporation and specified in the Offer; and (vi) that a Debentureholder will be entitled to withdraw his election if the Trustee receives, not later than the close of business on the third Business Day immediately preceding the date of acquisition by the Corporation, a facsimile transmission or letter setting forth the name of such Debentureholder, the principal amount of Debentures delivered for purchase and a statement that such Debentureholder is withdrawing his election to have such Series Debentures purchased. (ii) (iii) If 90% or more in aggregate principal amount of Series Debentures outstanding on the date the Corporation provides the Change of Control Notice and the Offer to holders of the Series Debentures have been tendered for purchase pursuant to the Offer on the expiration thereof, the Corporation has the right and obligation upon written notice provided to the Trustee within 10 days following the expiration of the Offer, to redeem and shall redeem all the Series Debentures remaining outstanding on the expiration of the Offer at the Offer Price (the "90% Redemption Right"). Upon receipt of notice that the Corporation has exercised or is exercising the 90% Redemption Right and is acquiring the remaining Series Debentures, the Trustee shall promptly provide written notice to each Debentureholder that did not previously accept the Offer that: (A) (B) (C) the Corporation has exercised the 90% Redemption Right and is purchasing all outstanding Series Debentures effective on the expiry of the Offer at the Offer Price, and shall include a calculation of the amount payable to such holder as payment of the Offer Price; each such holder must transfer his Series Debentures to the Trustee on the same terms as those holders that accepted the Offer and must send its Series Debentures, duly endorsed for transfer, to the Trustee within 10 days after the sending of such notice; and the rights of such holder under the terms of the Series Debentures and this Supplemental Indenture cease to be effective as of the date of expiry of the Offer provided the Corporation has, on or before the time of notifying the Trustee of the exercise of the 90% Redemption Right, paid the aggregate Offer Price to, or to the order of, the Trustee and thereafter the Series Debentures shall not be considered to be outstanding and each holder thereof shall not have any right except to receive such holder's Offer Price upon surrender and delivery of such holder's Series Debentures in accordance with the Trust Indenture.

9 -7- The form of notice to be provided to each Debentureholder that did not previously accept the Offer shall be prepared by the Corporation or counsel to the Corporation, and the Trustee shall not be responsible for calculating any amount payable to such holders. (iv) (v) (vi) (vii) The Corporation shall, on or before 11:00 a.m. (Halifax time) on the date of the expiry of the Offer, deposit with the Trustee or any paying agent to the order of the Trustee by electronic transfer or certified cheque, such sums of money as may be sufficient to pay the aggregate Offer Price of the Series Debentures to be purchased or redeemed by the Corporation on the expiry of the Offer. The Corporation shall also deposit with the Trustee a sum of money sufficient to pay any charges or expenses which may be incurred by the 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 Trustee shall pay or cause to be paid to the holders of such Series Debentures, the Offer Price and accrued and unpaid interest, if any, to which they are entitled on the Corporation's purchase or redemption. For greater certainty, the Corporation shall not be permitted to satisfy the Offer Price or accrued and unpaid interest, if any, payable pursuant to an Offer or the exercise of the 90% Redemption Right through the issuance of Common Shares. In the event that one or more of such Series Debentures being purchased in accordance with this Section 2.2(i) becomes subject to purchase in part only, upon surrender of such Series Debentures for payment of the Offer Price, the Corporation shall execute and the Trustee shall certify and deliver without charge to the holder thereof or upon the holder's order, one or more new Series Debentures for the portion of the principal amount of the Series Debentures not purchased. Series Debentures for which holders have accepted the Offer and Series Debentures which the Corporation has elected to redeem in accordance with the Change of Control Redemption under this Section 2.2(i) shall become due and payable at the Offer Price on the date of expiry of the Offer or, where has Corporation has elected to redeem in accordance with the 90% Redemption Right under this Section 2.2(i), on the date prescribed in the notice provided pursuant to subsection 2.2(i)(iii), in the same manner and with the same effect as if it were the date of maturity specified in such Series Debentures, anything therein or herein to the contrary notwithstanding, and from and after such date of expiry of the Offer, if the money necessary to purchase or redeem the Series Debentures shall have been deposited as provided in this Section 2.2(i) and affidavits or other proofs satisfactory to the Trustee as to the publication and/or mailing of such notices shall have been lodged with it, interest on the Series 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 Trustee whose decision shall be final and binding upon all parties in interest. In case the holder of any Series Debenture to be purchased or redeemed in accordance with this Section 2.2(i) shall fail on or before the date specified in Section 2.2(i)(i) or Section 2.2(i)(vi), as applicable, so to surrender such holder's Series Debenture or shall not within such time accept payment of the

10 -8- monies payable, or give such receipt therefor, if any, as the Trustee may require, such monies may be set aside in trust, either in the deposit department of the 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 the Debentureholder shall have no other right except to receive payment of the monies so paid and deposited, upon surrender and delivery up of such holder's Series Debenture. In the event that any money required to be deposited hereunder with the Trustee or any depository or paying agent on account of principal, premium, if any, or interest, if any, on Series Debentures issued hereunder shall remain so deposited for a period of five years less one day from the date of expiry of the Offer, then such monies, together with any accumulated interest thereon, shall at the end of such period be paid over or delivered over by the Trustee or such depository or paying agent to the Corporation and the Trustee shall not be responsible to Debentureholders for any amounts owing to them. Notwithstanding the foregoing, the Trustee will pay any remaining funds deposited hereunder prior to the expiry of five years less one day after the date of expiry of the Offer to the Corporation upon receipt from the Corporation, or one of its Subsidiaries on behalf of the Corporation, 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 Corporation prior to the expiry of five years less one day after the date of expiry of the Offer, the Corporation shall reimburse the Trustee for any amounts required to be paid by the Trustee to a holder of a Debenture pursuant to the Offer after the date of such payment of the remaining funds to the Corporation but prior to five years less one day after the date of expiry of the Offer. (viii) (ix) (x) Subject to the provisions above related to Series Debentures purchased in part, all Series Debentures redeemed and paid under this Section 2.2(i) shall forthwith be delivered to the Trustee and cancelled and no Series Debentures shall be issued in substitution therefor. The Corporation will publicly announce the results of the purchases made pursuant to Section 2.2(i) as soon as practicable after the expiry of the Offer. The Corporation will comply with all Applicable Securities Legislation in the event that the Corporation is required to offer to purchase Series Debentures pursuant to Section 2.2(i). (j) The Trustee shall be provided with the documents and instruments referred to in subsections 2.5(b), (c) and (d) of the Trust Indenture with respect to the Series Debentures prior to the issuance of the Series Debentures. 2.3 Issue of Global Debentures The Series Debentures shall be issued in whole as one or more Global Debentures registered in the name of CDS & Co., or in the name of such other entity as is requested by CDS, as Depository, or in such other name as may be designated by the Corporation in the Written Direction of the Corporation delivered to the Trustee at the time of issue of the Series Debentures, and in such event the Corporation shall execute and the Trustee shall certify and deliver the Global Debentures that shall:

11 -9- (a) (b) (c) represent an aggregate amount equal to the principal amount of the outstanding Series Debentures represented by the Global Debentures; be delivered by the Trustee to such Depositary or pursuant to such Depositary's instructions; and bear a legend substantially to the following effect: 2.4 Additional Amounts "This Debenture is a Global Debenture within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee thereof. This Debenture may not be transferred to or exchanged for Debentures registered in the name of any person other than the Depositary or a nominee thereof and no such transfer may be registered except in the limited circumstances described in the Indenture. Every Debenture authenticated and delivered upon registration or transfer of, or in exchange for, or in lieu of, this Debenture shall be a Global Debenture subject to the foregoing, except in such limited circumstances described in the Indenture." The Corporation hereby covenants and agrees that any and all amounts paid or credited or deemed to have been paid or credited by the Corporation as, on account or in lieu of payment of, or in satisfaction of, interest on the Series Debentures will not be in respect of a debt or other obligation to pay an amount to a person with whom the Corporation is not dealing at arm's length (within the meaning of the Tax Act) for the purposes of proposed clause 212(1)(b)(i)(B) of the Tax Act. Notwithstanding the foregoing, where required by law, the Corporation will be entitled to withhold, deduct and remit from any payment to a holder of the Series Debentures any amount relating to the Series Debentures. 2.5 Trustee, etc. The Trustee will be the trustee, authenticating agent, transfer agent and registrar for the Series Debentures. 3.1 Trustee Accepts Trusts ARTICLE 3 MISCELLANEOUS The Trustee accepts the trusts declared in this Supplemental Indenture and agrees to perform the same upon the terms and conditions set out in this Supplemental Indenture and in accordance with the Trust Indenture. 3.2 Trustee Not Bound to Act The 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 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 Trustee, in its sole judgement, determine at any time that its acting under this Indenture has resulted in its being

12 -10- 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 10 days written notice to the Corporation, provided (i) that the Trustee's written notice shall describe the circumstances of such non- compliance to the extent that the Trustee is permitted by law to make such disclosure; and (ii) that if such circumstances are rectified to the Trustee's satisfaction within such 10 day period, then such resignation shall not be effective. 3.3 Right of Rescission (a) (b) If the final prospectus of the Corporation dated May 26, 2011 (the "Prospectus") contains a misrepresentation (as such term is defined in the Securities Act (Ontario)) a purchaser of Series Debentures to whom the Prospectus was sent or delivered and who was the original purchaser of the Series Debentures (collectively, the "Original Purchasers") shall have a right of action against the Corporation for rescission to receive the subscription price for each Series Debenture for which such purchaser subscribed, exercisable on notice given to the Corporation not more than 180 days subsequent to the date hereof the "Rescission Period"). The right of action for rescission is only available to an Original Purchaser either while he or she is a holder of Common Shares issued upon conversion of such Series Debentures during the Rescission Period. In no event shall the Corporation be liable under this section 3.3 if the Original Purchaser purchased the Series Debentures with knowledge of the misrepresentation. 3.4 Counterparts This Supplemental 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. 3.5 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. Chacune des parties aux présentes reconnaît par les présentes qu'elle a demandé et consent que le présent acte de fiducie et tous les documents s'y rattachant, notamment la formule de débenture jointe aux présentes en tant qu'annexe A, ne soient rédigés qu'en anglais.

13 IN WITNESS whereof the parties hereto have executed these presents under their respective corporate seals and the hands of their proper officers in that behalf. KILLAM PROPERTIES INC. Per: Per: Name: Philip D. Fraser Title: President and Chief Executive Officer Name: Robert G. Richardson Title: Executive Vice President and Chief Financial Officer I/We have authority to bind the Corporation.

14 COMPUTERSHARE TRUST COMPANY OF CANADA Per: Per: Name: Title: Name: Title: I/We have authority to bind the Corporation.

15 SCHEDULE "A" TO THE SUPPLEMENTAL TRUST INDENTURE BETWEEN KILLAM PROPERTIES INC. AND COMPUTERSHARE TRUST COMPANY OF CANADA FORM OF DEBENTURE

16 SCHEDULE "A" FORM OF SERIES DEBENTURE UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF CDS CLEARING AND DEPOSITORY SERVICES INC. ("CDS") TO KILLAM PROPERTIES INC. 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. [THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF KILLAM PROPERTIES INC. (THE "CORPORATION") THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, (C) IN COMPLIANCE WITH THE EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES OR "BLUE SKY" LAWS, (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, OR (E) IN ACCORDANCE WITH RULE 144A UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, AND, IN THE CASE OF SUBPARAGRAPH (C) OR (D), THE SELLER FURNISHES TO THE CORPORATION AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION TO SUCH EFFECT. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.] KILLAM PROPERTIES INC. (A corporation governed by the laws of Canada) 5.45% CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES DUE JUNE 30, 2018 No. 1 CUSIP: AD4 ISIN: CA494104AD49 KILLAM PROPERTIES INC. (the "Corporation") for value received hereby acknowledges itself indebted and, subject to the provisions of the Trust Indenture dated as of November 30, 2010 between the Corporation and Computershare Trust Company of Canada (the "Trustee") and the supplemental indenture dated as of June 2, 2011 between the Corporation and the Trustee (collectively, the "Indenture"), promises to pay to the registered holder hereof on June 30, 2018 (the "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 FORTY SIX MILLION DOLLARS ($46,000,000) in lawful money of Canada on presentation and surrender of this Series Debenture at the main branch of the

17 -2- Trustee in Halifax Nova Scotia, 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, at the rate of 5.45% per annum, in like money in arrears in equal semi-annual instalments (less any tax required by law to be deducted) on June 30 and December 31 in each year, except the first payment will include accrued and unpaid interest for the period from the date of issue hereof to, but excluding, December 31, 2011 and, should the Corporation at any time make default in the payment of any principal or Interest, to pay interest on the amount in default at the same rate, in like money and on the same dates. Interest hereon shall be payable by cheque to the registered holder hereof and, subject to the provisions of the Indenture, the mailing of such cheque 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 Series Debenture. This Series Debenture is one of the Debentures of the Corporation issued or issuable in one or more series under the provisions of the Indenture. The Series Debentures are limited to an aggregate principal amount of up to $46,000,000 in lawful money of Canada. Reference is hereby expressly made to the Indenture of a description of the terms and conditions upon which the Series Debentures are or are to be issued and held and the rights and remedies of the holders of the Series Debentures and of the Corporation and of the 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 Series Debenture by acceptance hereof assents. The Series Debentures are issuable only in denominations of $1,000 and integral multiples thereof. Upon compliance with the provisions of the Indenture, Series Debentures of any denomination may be exchanged for an equal aggregate principal amount of Series Debentures in any other authorized denomination or denominations. The whole, or if this Series Debenture is in a denomination in excess of $1,000 any part of which is $1,000 or an integral multiple thereof, of the principal of this Series Debenture is convertible, at the option of the holder hereof, upon surrender of this Series Debenture at the principal office of the Trustee in the City of Halifax, at any time prior to 5:00 p.m. (Halifax time) on the earlier of June 30, 2018 and the last Business Day immediately preceding the date specified by the Corporation for redemption of this Series Debenture in accordance with the Indenture (without adjustment for dividends on Common Shares issuable upon conversion) at a conversion price equal to $14.60 such that approximately Common Shares shall be issued for each $1,000 principal amount of Series Debentures so converted, all subject to the terms and conditions and in the manner set forth in the Indenture. The Indenture makes provision for the adjustment of the Conversion Price in the events therein specified. No fractional Common Shares will be issued on any conversion but in lieu thereof, the Corporation will satisfy such fractional interest by a cash payment equal to the market price of such fractional interest or determined in accordance with the Indenture. Notwithstanding the foregoing, no Debentures may be converted during the five Business Days preceding June 30 and December 31 in each year, commencing December 31, 2011, as the registers of the Trustee will be closed during such periods. The Series Debentures may be redeemed at the option of the Corporation on the terms and conditions set out in the Indenture at the redemption price therein set out. This Series Debenture is not redeemable on or before June 30, 2014, except in the event of the satisfaction of certain conditions after a Change of Control has occurred. After June 30, 2014 and on or prior to June 30, 2016 this Series Debenture is redeemable at the option of the Corporation provided that the Corporation files with the Trustee on the day that notice of redemption of this Series Debenture is first given an Officer's

18 -3- Certificate of the Corporation certifying that the weighted average price of the Common Shares on the Toronto Stock Exchange (or elsewhere in accordance with the Indenture) for 20 consecutive trading days, ending on the fifth trading day preceding the date on which such notice is given, is at least 125% of the Conversion Price then in effect. On or after June 30, 2016, this Series Debenture may be redeemed at the option of the Corporation. Upon the occurrence of a Change of Control of the Corporation, the Corporation is required to make an offer to purchase all of the Series Debentures at a price equal to 101% of the principal amount of such Series Debentures plus accrued and unpaid interest, if any, up to, but excluding, the date the Series Debentures are so repurchased (the "Offer"). If 90% or more of the principal amount of all Debentures outstanding on the date the Corporation provides notice of a Change of Control to the Trustee have been tendered pursuant to the Offer, the Corporation has the right to redeem and shall redeem all the remaining outstanding Series Debentures effective as of the same date and at the same price. If a takeover bid for Series Debentures, within the meaning of the Securities Act (Ontario) is made and 90% of the principal amount of all the Series Debentures (other than Series Debentures held at the date of the takeover bid by or on behalf of the Offeror, Associates or Affiliates of the Offeror or anyone acting jointly or in concert with the Offeror) are taken up and paid for by the Offeror, the Offeror will be entitled to acquire the Series Debentures of those holders who did not accept the offer on the same terms as the Offeror acquired the first 90% of the principal amount of the Series Debentures. The Corporation may, on notice as provided in the Indenture, at its option and (subject to any applicable regulatory approval), elect to satisfy the obligation to repay the principal amount of this Series Debenture on the Maturity Date or on redemption by the issue of that number of Freely Tradeable Common Shares obtained by dividing the principal amount of this Series Debenture by 95% of the Current Market Price on the Maturity Date or the date fixed for redemption, as the case may be. The indebtedness evidenced by this Series Debenture, and by all other Series Debentures now or hereafter certified and delivered under the Indenture, is a direct unsecured obligation of the Corporation, 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 and indebtedness to trade creditors, whether outstanding at the date of the Indenture of 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. The Indenture contains provisions making binding upon all holders of Debentures outstanding hereunder (or in certain circumstances, specific series of Debentures) resolutions passed at meetings of such holders held in accordance with such provisions and 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 Series Debenture or the Indenture. This Debenture is a Global Debenture within the meaning of the Indenture hereinafter referred to and is registered in the name of a Depositary or a nominee thereof. This Debenture may not be transferred to or exchanged for Debentures registered in the name of any person other than the Depositary or a nominee thereof and no such transfer may be registered except in the limited circumstances described in the Indenture. Every Debenture authenticated and delivered upon registration of transfer of, or in exchange for, or in lieu of, this Debenture shall be a Global Debenture subject to the foregoing, except in such limited circumstances described in the Indenture.

19 -4- This Series Debenture may only be transferred, upon compliance with the conditions prescribed in the Indenture, in one of the registers to be kept at the principal office of the Trustee in Halifax, Nova Scotia and in such other place or places and/or by such other registrars (if any) as the Corporation with the approval of the Trustee may designate. No transfer of this Series 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 Trustee or other registrar, and upon compliance with such reasonable requirements as the Trustee and/or other registrar may prescribe and upon surrender of this Series Debenture for cancellation. Thereupon a new Series Debenture or Series Debentures in the same aggregate principal amount shall be issued to the transferee in exchange hereof. No transfer of a Debenture will be registered during the period beginning 15 days before the day of the mailing of a notice of redemption of the Debentures and ending at the close of business on the day of such mailing or during the periods commencing on any interest payment record date and ending on the next following Interest Payment Date. This Series Debenture shall not become obligatory for any purpose until it shall have been certified by the Trustee under the Indenture. Capitalized words or expressions used in this Series Debenture shall, unless otherwise defined herein, have the meaning ascribed thereto in the Indenture. In the event that the terms and conditions stated in this Series Debenture conflict, or are inconsistent with, the terms and conditions of the Indenture, the Indenture shall prevail and take priority. IN WITNESS WHEREOF KILLAM PROPERTIES INC. has caused this Series Debenture to be signed by its authorized signatories as of the 2 nd day of June, KILLAM PROPERTIES INC. Per: Name Title

20 TRUSTEE'S CERTIFICATE This Series Debenture is one of the 5.45% Convertible Unsecured Debentures due June 30, 2018 referred to in the Indenture within mentioned. Computershare Trust Company of Canada By: (Authorized Officer) REGISTRATION PANEL (No writing hereon except by Trustee or other registrar) Date of Registration In Whose Name Registered Signature of Trustee or Registrar 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 Series Debenture (or $ principal amount hereof) of KILLAM PROPERTIES INC. standing in the name(s) of the undersigned in the register maintained by the Corporation with respect to such Series Debenture and does hereby irrevocably authorize and direct the Trustee to transfer such Series Debenture in such register, with full power of substitution in the premises. Date: Address Transferee: of CONVERSION NOTICE TO: KILLAM PROPERTIES INC. Note: All capitalized terms used herein have the meaning ascribed thereto in the Indenture, unless otherwise indicated. The undersigned registered holder of 5.45% Convertible Unsecured Subordinated Debentures bearing Certificate No. irrevocably elects to convert such Debentures (or principal $ amount thereof) in accordance with the terms of the Indenture and tenders herewith the Debentures, and, if applicable, directs that the Common Shares of Killam Properties Inc. issuable upon a conversion be issued and delivered to the person indicated below. (Street Address, City, Province and Postal Code) Dated: (Signature of Registered Holder) Social Insurance Number of Transferee, if applicable: If less than the full principal amount of the within Series Debenture is to be transferred, indicate in the space provided the principal amount which must be $1,000 or an integral multiple thereof, unless you hold a If less than the full principal amount of this Debenture, indicate in the space provided the principal amount (which must be $1,000 or integral multiples thereof). NOTE: If Common Shares are to be issued in the name of a person other than the holder, (A) the signature must be guaranteed by a chartered bank, a trust company or a

21 -2- Series Debenture in a non-integral multiple of $1,000, in which case such Series 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 Series Debenture in every particular without alteration or any change whatsoever. The signature must be guaranteed by an authorized officer of a Schedule 1 Canadian chartered bank or of a major Canadian trust company, or by a medallion signature guarantee from a member of a recognized Medallion Signature Guarantee Program. 2. The registered holder of this Series Debenture is responsible for the payment of any documentary, stamp or other transfer taxes that may be payable in respect of the transfer of this Series Debenture. member firm of a recognized stock exchange in Canada and (B) all requisite transfer taxes must be tendered by the undersigned. (Print name in which Common Shares are to be issued, delivered and registered) Name: (Address) Name of guarantor: Authorized signature: (City, Province and Postal Code) Signature of Guarantor Authorized Officer Signature of transferring registered holder Name of Institution

22 SCHEDULE "B" TO THE SUPPLEMENTAL TRUST INDENTURE BETWEEN KILLAM PROPERTIES INC. AND COMPUTERSHARE TRUST COMPANY OF CANADA FORM OF REDEMPTION NOTICE

23 SCHEDULE "B" FORM OF REDEMPTION NOTICE KILLAM PROPERTIES INC. 5.45% CONVERTIBLE UNSECURED SUBORDINATED DEBENTURES REDEMPTION NOTICE To: Note: Holders of 5.45% Convertible Unsecured Subordinated Debentures (the "Debentures") of Killam Properties Inc. (the "Corporation") 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 November 30, 2010 between the Corporation and Computershare Trust Company of Canada (the "Trustee"), as supplemented by the supplemental indenture dated June 2, 2011 between the Corporation and the Trustee, as may be further amended from time to time, that [the aggregate principal amount of all Debentures outstanding/$ aggregate principal amount of Debentures outstanding] will be redeemed as of (the "Redemption Date"), upon payment of a redemption amount of $ for each $1,000 principal amount of Debentures, being equal to the aggregate of (i) $1,000, and (ii) all accrued and unpaid interest hereon to but excluding the Redemption Date (collectively, the "Redemption Price"). The 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 1969 Upper Water Street Suite 2008, Purdy's Wharf Tower II Halifax, Nova Scotia, B3J 3R7 The interest upon the principal amount of Debentures called for redemption shall cease to be payable from and after the Redemption Date, unless payment of the 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 Date or prior to the setting aside of the Redemption Price pursuant to the Indenture. [Pursuant to Section 4.6 of the Indenture, the Corporation hereby irrevocably elects to satisfy its obligation to pay to holders of Debentures the Redemption Price by issuing and delivering to the holders that number of Freely Tradeable Common Shares obtained by dividing the aggregate principal amount of Debentures by 95% of the Current Market Price of the Common Shares on the Redemption Date. No fractional Common Shares shall be delivered upon the exercise by the Corporation of the Common Share Redemption Right but, in lieu thereof, the Corporation shall pay the cash equivalent thereof determined on the basis of the Current Market Price of Common Shares on the Redemption Date (less any tax required to be deducted, if any).] In this connection, upon presentation and surrender of the Debentures for payment on the Redemption Date, the Corporation shall, on the Redemption Date, make delivery to the Trustee, at the abovementioned corporate trust office, for delivery to and on account of the holders, the number of Freely Tradeable Common Shares (in book-based or certificated form) to which holders are entitled and cash equal to all accrued and unpaid interest to the Redemption Date together with the cash equivalent in lieu of all fractional Common Shares.