exv4w2



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Exhibit 4.2



 




 




 




 




 




 




SHAREHOLDER RIGHTS PLAN AGREEMENT




DATED AS OF JULY 30, 2001




AND AMENDED AND RESTATED AS OF




FEBRUARY 19, 2002 AND MAY 5, 2005




BETWEEN




CANADIAN PACIFIC RAILWAY LIMITED




AND




COMPUTERSHARE TRUST COMPANY OF CANADA




AS RIGHTS AGENT





 









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SHAREHOLDER RIGHTS PLAN AGREEMENT




TABLE OF CONTENTS




	 	 	 	 	 	 	 
	ARTICLE 1 - INTERPRETATION	 	 	1	 
	 
	 	 	 	 	 	 
	1.1
	 	Certain Definitions	 	 	1	 
	1.2
	 	Currency	 	 	13	 
	1.3
	 	Headings	 	 	13	 
	1.4
	 	Calculation of Number and Percentage of Beneficial Ownership of Outstanding Voting Shares	 	 	13	 
	1.5
	 	Acting Jointly or in Concert	 	 	13	 
	1.6
	 	Generally Accepted Accounting Principles	 	 	14	 
	 
	 	 	 	 	 	 
	ARTICLE 2 - THE RIGHTS	 	 	14	 
	 
	 	 	 	 	 	 
	2.1
	 	Issue of Rights and Convertible Rights:  Legend on Common Share Certificates	 	 	14	 
	2.2
	 	Initial Exercise Price; Exercise of Rights; Detachment of Rights	 	 	14	 
	2.3
	 	Adjustments to Exercise Price; Number of Rights	 	 	17	 
	2.4
	 	Date on Which Exercise Is Effective	 	 	21	 
	2.5
	 	Execution, Authentication, Delivery and Dating of Rights Certificates	 	 	21	 
	2.6
	 	Registration, Transfer and Exchange	 	 	22	 
	2.7
	 	Mutilated, Destroyed, Lost and Stolen Rights Certificates	 	 	23	 
	2.8
	 	Persons Deemed Owners of Rights	 	 	23	 
	2.9
	 	Delivery and Cancellation of Certificates	 	 	23	 
	2.10
	 	Agreement of Rights Holders	 	 	24	 
	2.11
	 	Rights Certificate Holder Not Deemed a Shareholder	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE 3 - ADJUSTMENTS TO THE RIGHTS	 	 	25	 
	 
	 	 	 	 	 	 
	3.1
	 	Flip-in Event	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE 4 - THE RIGHTS AGENT	 	 	26	 
	 
	 	 	 	 	 	 
	4.1
	 	General	 	 	26	 
	4.2
	 	Merger, Amalgamation or Consolidation or Change of Name of Rights Agent	 	 	27	 
	4.3
	 	Duties of Rights Agent	 	 	27	 
	4.4
	 	Change of Rights Agent	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE 5 - MISCELLANEOUS	 	 	30	 
	 
	 	 	 	 	 	 
	5.1
	 	Redemption and Waiver	 	 	30	 
	5.2
	 	Expiration	 	 	31	 
	5.3
	 	Issuance of New Rights Certificates	 	 	31	 
	5.4
	 	Supplements and Amendments	 	 	32	 
	5.5
	 	Fractional Rights and Fractional Shares	 	 	33	 
	5.6
	 	Rights of Action	 	 	33	 
	5.7
	 	Regulatory Approvals	 	 	34	 
	5.8
	 	Declaration as to Non-Canadian or Non-U.S. Holders	 	 	34	 
	5.9
	 	Notices	 	 	34	 
	5.10
	 	Costs of Enforcement	 	 	35	 
	5.11
	 	Successors	 	 	35	 
	5.12
	 	Benefits of this Agreement	 	 	35	 
	5.13
	 	Governing Law	 	 	35	 
	5.14
	 	Severability	 	 	36	 
	5.15
	 	Coming Into Effect	 	 	36	 
	5.16
	 	Reconfirmation	 	 	36	 
	5.17
	 	Determinations and Actions by the Board of Directors	 	 	36	 
	5.18
	 	Time of the Essence	 	 	36	 






 









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	ii
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	5.19
	 	Execution in Counterparts	 	 	37	 
	 
	 	 	 	 	 	 
	
ARTICLE 6 - CONVERTIBLE RIGHTS	 	 	37	 
	 
	 	 	 	 	 	 
	6.1
	 	Convertible Share Certificates	 	 	37	 
	6.2
	 	Conversion of Convertible Rights	 	 	37	 
	6.3
	 	Persons Deemed Owners	 	 	37	 
	6.4
	 	Agreement of Convertible Rights Holders	 	 	37	 
	 
	 	ATTACHMENT 1	 	 	39	 
	 
	 	FORM OF ASSIGNMENT	 	 	41	 
	 
	 	FORM OF ELECTION TO EXERCISE	 	 	42	 
	 
	 	CERTIFICATE	 	 	43	 
	 
	 	NOTICE	 	 	43	 






 













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SHAREHOLDER RIGHTS PLAN AGREEMENT




          MEMORANDUM OF AGREEMENT dated as of July 30, 2001 and amended and restated as of February 19,
2002 and May 5, 2005 between Canadian Pacific Railway Limited (the ‘Corporation’), a corporation
incorporated under the Canada Business Corporations Act and Computershare Trust Company of Canada,
a trust company incorporated under the laws of Canada (the ‘Rights Agent’);




          WHEREAS in connection with the completion of the Plan of Arrangement pursuant to the
Arrangement Agreement, the Board of Directors of the Corporation has determined that it is in the
best interests of the Corporation to adopt, with effect on the Effective Date (as defined below), a
shareholder rights plan to ensure, to the extent possible, that all shareholders of the Corporation
are treated fairly in connection with any take-over bid for the Corporation;




          AND WHEREAS each Right entitles the holder thereof, after the Separation Time, to purchase
securities of the Corporation pursuant to the terms and subject to the conditions set forth herein;




          AND WHEREAS the Corporation desires to appoint the Rights Agent to act on behalf of the
Corporation and the holders of Rights and Convertible Rights, and the Rights Agent is willing to so
act, in connection with the issuance, transfer, exchange and replacement of Rights Certificates (as
hereinafter defined), the exercise of Rights and Convertible Rights and other matters referred to
herein;




          AND WHEREAS the Board of Directors proposes that this Agreement be in place for a period of
ten years, subject to the Agreement being reconfirmed by shareholders of the Corporation every
three years;




          AND WHEREAS pursuant to Section 5.4(a) of this Agreement the Board of Directors acting in good
faith by resolution on February 19, 2002 made certain amendments to this Agreement and directed
that this restatement of the agreement as so amended be executed and delivered for and on behalf of
the Corporation;




          AND WHEREAS the Board of Directors of the Corporation has determined it advisable to amend
this Agreement and to restate it as so amended on the terms set forth herein, and such amendment
and restatement has been approved by the shareholders of the Corporation in accordance with this
Agreement.




          NOW THEREFORE, in consideration of the premises and the respective covenants and agreements
set forth herein, and subject to such covenants and agreements, the parties hereby agree as
follows:








ARTICLE 1 - INTERPRETATION









	1.1  	Certain Definitions





          For purposes of this Agreement, the following terms have the meanings indicated:





	 	(a)  	‘Acquiring Person’ means any Person who is the Beneficial Owner of 20% or more
of the outstanding Voting Shares provided, however, that the term ‘Acquiring Person’
shall not include:






	 	(i)  	the Corporation or any Subsidiary of the Corporation;












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	 	(ii)  	any Person who becomes the Beneficial Owner of 20% or more of
the outstanding Voting Shares as a result of one or any combination of (A) a
Voting Share Reduction, (B) Permitted Bid Acquisitions, (C) an Exempt
Acquisition or (D) Pro Rata Acquisitions; provided, however, that if a Person
becomes the Beneficial Owner of 20% or more of the outstanding Voting Shares by
reason of one or any combination of the operation of Paragraphs (A), (B), (C)
or (D) above and such Person’s Beneficial Ownership of Voting Shares thereafter
increases by more than 1.0% of the number of Voting Shares outstanding (other
than pursuant to one or any combination of a Voting Share Reduction, a
Permitted Bid Acquisition, an Exempt Acquisition or a Pro Rata Acquisition),
then as of the date such Person becomes the Beneficial Owner of such additional
Voting Shares, such Person shall become an ‘Acquiring Person’;
	 
	 	(iii)  	for a period of ten days after the Disqualification Date (as
defined below), any Person who becomes the Beneficial Owner of 20% or more of
the outstanding Voting Shares as a result of such Person becoming disqualified
from relying on Clause 1.1(g)(v) solely because such Person or the Beneficial
Owner of such Voting Shares is making or has announced an intention to make a
Take-over Bid, either alone or by acting jointly or in concert with any other
Person. For the purposes of this definition, ‘Disqualification Date’ means the
first date of public announcement that any Person is making or has announced an
intention to make a Take-over Bid;
	 
	 	(iv)  	an underwriter or member of a banking or selling group that
becomes the Beneficial Owner of 20% or more of the Voting Shares in connection
with a distribution of securities of the Corporation; or
	 
	 	(v)  	a Person (a “Grandfathered Person”) who is the Beneficial Owner
of 20% or more of the outstanding Voting Shares of the Corporation determined
as at the Record Time, provided, however, that this exception shall not be, and
shall cease to be, applicable to a Grandfathered Person in the event that such
Grandfathered Person shall, after the Record Time, become the Beneficial Owner
of additional Voting Shares of the Corporation that increases its Beneficial
Ownership of Voting Shares by more than 1% of the number of Voting Shares
outstanding as at the Record Time (other than pursuant to one or any
combination of a Voting Share Reduction, a Permitted Bid Acquisition, an Exempt
Acquisition or a Pro Rata Acquisition);






	 	(b)  	‘Affiliate’: when used to indicate a relationship with a specified corporation
means a Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
corporation;
	 
	 	(c)  	‘Agreement’ means this shareholder rights plan agreement dated as of July 30,
2001 between the Corporation and the Rights Agent, as the same may be further amended
or supplemented from time to time; ‘hereof’, ‘herein’, ‘hereto’ and similar expressions
mean and refer to this Agreement as a whole and not to any particular part of this
Agreement;
	 
	 	(d)  	‘annual cash dividend’ means cash dividends paid in any fiscal year of the
Corporation to the extent that such cash dividends do not exceed, in the aggregate, the
greatest of:






	 	(i)  	200 per cent of the aggregate amount of cash dividends declared
payable by the Corporation (including any predecessor thereto) on its Common
Shares in its immediately preceding fiscal year;
	 
	 	(ii)  	300 per cent of the arithmetic mean of the aggregate amounts of
the annual cash dividends declared payable by the Corporation (including any
predecessor












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	 	 	thereto) on its Common Shares in its three immediately preceding fiscal
years; and
	 
	 	(iii)  	100 per cent of the aggregate consolidated net income of the
Corporation (including any predecessor thereto), before extraordinary items,
for its immediately preceding fiscal year;






	 	(e)  	‘Arrangement Agreement’ means the Arrangement Agreement dated as of July 30,
2001 between Canadian Pacific Limited, Canadian Pacific Hotels & Resorts Inc., Canadian
Pacific Railway Company, Canadian Pacific Railway Limited, CP Ships Holdings Inc., CP
Ships Limited, FHR Investments Inc., Fording Inc., Fording Arrangement Inc.,
PanCanadian Petroleum Limited and PanCanadian Energy Corporation providing for the
implementation of the Plan of Arrangement;
	 
	 	(f)  	‘Associate’ means, when used to indicate a relationship with a specified
Person, a spouse of that Person, any Person of the same or opposite sex with whom that
Person is living in a conjugal relationship outside marriage, a child of that Person or
a relative of that Person if that relative has the same residence as that Person;
	 
	 	(g)  	A Person shall be deemed the ‘Beneficial Owner’ of, and to have ‘Beneficial
Ownership’ of, and to ‘Beneficially Own’,






	 	(i)  	any securities as to which such Person or any of such Person’s
Affiliates or Associates is the owner at law or in equity;
	 
	 	(ii)  	any securities as to which such Person or any of such Person’s
Affiliates or Associates has the right to become the owner at law or in equity
(where such right is exercisable immediately or within a period of 60 days, and
whether or not on condition or the happening of any contingency or the making
of any payment) pursuant to any agreement, arrangement, pledge or
understanding, whether or not in writing (other than (x) customary agreements
with and between underwriters and/or banking group members and/or selling group
members with respect to a public offering or private placement of securities
and (y) pledges of securities in the ordinary course of business), or upon the
exercise of any conversion right, exchange right, share purchase right (other
than the Rights), warrant or option; or
	 
	 	(iii)  	any securities which are Beneficially Owned within the meaning
of Clauses 1.1(g)(i) and (ii) by any other Person with whom such Person is
acting jointly or in concert;






	 	   	provided, however, that a Person shall not be deemed the ‘Beneficial Owner’ of, or
to have ‘Beneficial Ownership’ of, or to ‘Beneficially Own’, any security:






	 	(iv)  	where such security has been agreed to be deposited or tendered
pursuant to a Lock-up Agreement or is otherwise deposited to any Take-over Bid
made by such Person, made by any of such Person’s Affiliates or Associates or
made by any other Person acting jointly or in concert with such Person until
such deposited or tendered security has been taken up or paid for, whichever
shall first occur;












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	 	(v)  	where such Person, any of such Person’s Affiliates or
Associates or any other Person acting jointly or in concert with such Person
holds such security provided that:






	 	(A)  	the ordinary business of any such Person (the
‘Investment Manager’) includes the management of investment funds or
mutual funds for others (which others, for greater certainty, may
include or be limited to one or more employee benefit plans or pension
plans) and such security is held by the Investment Manager in the
ordinary course of such business in the performance of such Investment
Manager’s duties for the account of any other Person (a ‘Client’)
including a non-discretionary account held on behalf of a Client by a
broker or dealer registered under applicable law;
	 
	 	(B)  	such Person (the ‘Trust Company’) is licensed
to carry on the business of a trust company under applicable laws and,
as such, acts as trustee or administrator or in a similar capacity in
relation to the estates of deceased or incompetent Persons (each an
‘Estate Account’) or in relation to other accounts (each an ‘Other
Account’) and holds such security in the ordinary course of such duties
for such Estate Account or for such Other Accounts;
	 
	 	(C)  	such Person is established by statute for
purposes that include, and the ordinary business or activity of such
Person (the ‘Statutory Body’) includes, the management of investment
funds for employee benefit plans, pension plans, insurance plans or
various public bodies;
	 
	 	(D)  	such Person (the ‘Administrator’) is the
administrator or trustee of one or more pension funds or plans (a
‘Plan’), or is a Plan, registered or qualified under the laws of Canada
or any Province thereof or the laws of the United States of America or
any State thereof; or
	 
	 	(E)  	such Person (the ‘Crown Agent’) is a Crown
agent or agency;






	 	   	provided, in any of the above cases, that the Investment Manager, the Trust
Company, the Statutory Body, the Administrator, the Plan or the Crown Agent,
as the case may be, is not then making a Take-over Bid or has not then
announced an intention to make a Take-over Bid alone or acting jointly or in
concert with any other Person, other than an Offer to Acquire Voting Shares
or other securities (x) pursuant to a distribution by the Corporation, (y)
by means of a Permitted Bid or (z) by means of ordinary market transactions
(including prearranged trades entered into in the ordinary course of
business of such Person) executed through the facilities of a stock exchange
or organized over-the-counter market;
	 
	 	(vi)  	where such Person is (A) a Client of the same Investment
Manager as another Person on whose account the Investment Manager holds such
security, (B) an Estate Account or an Other Account of the same Trust Company
as another Person on whose account the Trust Company holds such security or (C)
a Plan with the same Administrator as another Plan on whose account the
Administrator holds such security;












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	 	(vii)  	where such Person is (A) a Client of an Investment Manager and
such security is owned at law or in equity by the Investment Manager, (B) an
Estate Account or an Other Account of a Trust Company and such security is
owned at law or in equity by the Trust Company or (C) a Plan and such security
is owned at law or in equity by the Administrator of the Plan; or
	 
	 	(viii)  	where such Person is a registered holder of such security as a result of
carrying on the business of, or acting as a nominee of, a securities
depositary;






	 	(h)  	‘Board of Directors’ means the board of directors of the Corporation or any
duly constituted and empowered committee thereof;
	 
	 	(i)  	‘Business Day’ means any day other than a Saturday, Sunday or a day on which
banking institutions in Calgary are authorized or obligated by law to close;
	 
	 	(j)  	‘Canada Business Corporations Act’ means the Canada Business Corporations Act,
R.S.C. 1985, C. 44, as amended, and the regulations made thereunder, and any comparable
or successor laws or regulations thereto;
	 
	 	(k)  	‘Canadian Dollar Equivalent’ of any amount which is expressed in United States
Dollars means, on any date, the Canadian dollar equivalent of such amount determined by
multiplying such amount by the U.S. - Canadian Exchange Rate in effect on such date;
	 
	 	(l)  	‘Canadian - U.S. Exchange Rate’ means, on any date, the inverse of the U.S. -
Canadian Exchange Rate in effect on such date;
	 
	 	(m)  	‘close of business’ on any given date means the time on such date (or, if such
date is not a Business Day, the time on the next succeeding Business Day) at which the
principal transfer office in Calgary of the transfer agent for the Common Shares of the
Corporation (or, after the Separation Time, the principal transfer office in Calgary of
the Rights Agent) is closed to the public;
	 
	 	(n)  	‘Common Shares’ means the common shares in the capital of the Corporation;
	 
	 	(o)  	‘Competing Permitted Bid’ means a Take-over Bid that:






	 	(i)  	is made after a Permitted Bid has been made and prior to the
expiry of the Permitted Bid;
	 
	 	(ii)  	satisfies all components of the definition of a Permitted Bid
other than the requirements set out in Clause 1.1(nn)(ii)(A) of the definition
of a Permitted Bid; and
	 
	 	(iii)  	contains, and the take-up and payment for securities tendered
or deposited is subject to, an irrevocable and unqualified condition that no
Voting Shares will be taken up or paid for pursuant to the Take-over Bid prior
to the close of business on a date that is no earlier than the later of: (A)
the 60th day after the date on which the earliest Permitted Bid which preceded
the Competing Permitted Bid was made; and (B) 35 days after the date of the
Take-over Bid constituting the Competing Permitted Bid;












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	 	(p)  	‘controlled’: a Person is ‘controlled’ by another Person or two or more other
Persons acting jointly or in concert if:






	 	(i)  	in the case of a body corporate, securities entitled to vote in
the election of directors of such body corporate carrying more than 50% of the
votes for the election of directors are held, directly or indirectly, by or for
the benefit of the other Person or Persons and the votes carried by such
securities are entitled, if exercised, to elect a majority of the board of
directors of such body corporate; or
	 
	 	(ii)  	in the case of a Person which is not a body corporate, more
than 50% of the voting or equity interests of such entity are held, directly or
indirectly, by or for the benefit of the other Person or Persons;






	 	   	and ‘controls’, ‘controlling’ and ‘under common control with’ shall be interpreted
accordingly;
	 
	 	(q)  	‘Convertible Right’ means a right to receive a Right upon the terms and subject
to the conditions set forth in this Agreement;
	 
	 	(r)  	‘Convertible Shares’ means the voting convertible shares in the capital of the
Corporation, each of which is convertible into one Common Share of the Corporation,
referred to in the Plan of Arrangement;
	 
	 	(s)  	‘Co-Rights Agents’ has the meaning ascribed thereto in Subsection 4.1(a);
	 
	 	(t)  	‘Disposition Date’ has the meaning ascribed thereto in Subsection 5.1(h);
	 
	 	(u)  	‘Dividend Reinvestment Acquisition’ means an acquisition of Voting Shares
pursuant to a Dividend Reinvestment Plan;
	 
	 	(v)  	‘Dividend Reinvestment Plan’ means a regular dividend reinvestment or other
plan of the Corporation made available by the Corporation to holders of its securities
or holders of securities of a Subsidiary where such plan permits the holder to direct
that some or all of:






	 	(i)  	dividends paid in respect of shares of any class of the
Corporation or a Subsidiary;
	 
	 	(ii)  	proceeds of redemption of shares of the Corporation or a
Subsidiary;
	 
	 	(iii)  	interest paid on evidences of indebtedness of the Corporation
or a Subsidiary; or
	 
	 	(iv)  	optional cash payments;






	 	   	be applied to the purchase from the Corporation of Voting Shares;
	 
	 	(w)  	‘Election to Exercise’ has the meaning ascribed thereto in Clause 2.2(d)(ii);
	 
	 	(x)  	‘Effective Date’ means October 1, 2001, being the effective date of the Plan of
Arrangement;












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	 	(y)  	‘Exempt Acquisition’ means a share acquisition in respect of which the Board of
Directors has waived the application of Section 3.1 pursuant to the provisions of
Subsection 5.1(a) or (h);
	 
	 	(z)  	‘Exercise Price’ means, as of any date, the price at which a holder may
purchase the securities issuable upon exercise of one whole Right which, until
adjustment thereof in accordance with the terms hereof, shall be 5 times the weighted
average trading price of the Common Shares on The Toronto Stock Exchange on the
Effective Date and the immediately following four consecutive trading days on The
Toronto Stock Exchange;
	 
	 	(aa)  	‘Expansion Factor’ has the meaning ascribed thereto in Clause 2.3(a)(x);
	 
	 	(bb)  	‘Expiration Time’ means the close of business on that date which is the earlier
of the date of termination of this Agreement pursuant to Section 5.15 or, if this
Agreement is confirmed pursuant to Section 5.15, the date of termination of this
Agreement pursuant to Section 5.16 or, if this Agreement is reconfirmed pursuant to
Section 5.16, the close of business on the tenth anniversary following the Effective
Date;
	 
	 	(cc)  	‘Flip-in Event’ means a transaction or other event, including the occurrence of
the Effective Date, in or pursuant to which any Person becomes an Acquiring Person;
	 
	 	(dd)  	‘holder’ has the meaning ascribed thereto in Section 2.8;
	 
	 	(ee)  	‘Independent Shareholders’ means holders of Voting Shares, other than:






	 	(i)  	any Acquiring Person;
	 
	 	(ii)  	any Offeror (other than any Person who, by virtue of Clause
1.1(g)(v), is not deemed to Beneficially Own the Voting Shares held by such
Person);
	 
	 	(iii)  	any Affiliate or Associate of any Acquiring Person or Offeror;
	 
	 	(iv)  	any Person acting jointly or in concert with any Acquiring
Person or Offeror; and
	 
	 	(v)  	any employee benefit plan, deferred profit sharing plan, stock
participation plan and any other similar plan or trust for the benefit of
employees of the Corporation or a Subsidiary unless the beneficiaries of the
plan or trust direct the manner in which the Voting Shares are to be voted or
withheld from voting or direct whether the Voting Shares are to be tendered to
a Take-over Bid;






	 	(ff)  	‘Lock-up Agreement’ means an agreement between an Offeror, any of its
Affiliates or Associates or any other Person acting jointly or in concert with the
Offeror and a Person (the ‘Locked-up Person’) who is not an Affiliate or Associate of
the Offeror or a Person acting jointly or in concert with the Offeror whereby the
Locked-up Person agrees to deposit or tender the Voting Shares held by the Locked-up
Person to the Offeror’s Take-over Bid or to any Take-over Bid made by any of the
Offeror’s Affiliates or Associates or made by any other Person acting jointly or in
concert with the Offeror (the ‘Subject Bid’), provided that:






	 	(i)  	the agreement:












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	 	(A)  	permits the Locked-up Person to withdraw the
Voting Shares from the agreement in order to tender or deposit the
Voting Shares to another Take-over Bid or to support another
transaction that in either case will provide greater value to the
Locked-up Person than the Subject Bid; or
	 
	 	(B)  	(1) permits the Locked-up Person to withdraw
the Voting Shares from the agreement in order to tender or deposit the
Voting Shares to another Take-over Bid or to support another
transaction that contains an offering price for each Voting Share that
exceeds by as much as or more than a specified amount (the ‘Specified
Amount’) the offering price for each Voting Share contained in or
proposed to be contained in the Subject Bid; and (2) does not by its
terms provide for a Specified Amount that is greater than 7% of the
offering price contained in or proposed to be contained in the Subject
Bid;






	 	   	and, for greater clarity, an agreement may contain a right of first refusal
or require a period of delay to give an offeror an opportunity to match a
higher price in another Take-over Bid or other similar limitation on a
Locked-up Person as long as the Locked-up Person can accept another bid or
tender to another transaction; and
	 
	 	(ii)  	no ‘break-up’ fees, ‘top-up’ fees, penalties, expenses or other
amounts that exceed in the aggregate the greater of:






	 	(A)  	the cash equivalent of 2.5% of the offering
price payable under the Subject Bid to the Locked-up Person; and
	 
	 	(B)  	50% of the amount by which the offering price
payable under another take-over bid or other transaction to the
Locked-up Person exceeds the offering price that such Locked-up Person
would have received under the Subject Bid;






	 	   	shall be payable by the Locked-up Person pursuant to the agreement in the
event the Locked-up Person fails to deposit or tender Voting Shares to the
Subject Bid, or withdraws Voting Shares previously tendered thereto in order
to tender to another take-over bid or support another transaction.






	 	(gg)  	‘Market Price’ per share of any securities on any date of determination means
the average of the daily closing prices per share of the securities (determined as
described below) on each of the 20 consecutive Trading Days through and including the
Trading Day immediately preceding such date; provided, however, that if an event of a
type analogous to any of the events described in Section 2.3 hereof shall have caused
the closing prices used to determine the Market Price on any Trading Days not to be
fully comparable with the closing price on the date of determination or, if the date of
determination is not a Trading Day, on the immediately preceding Trading Day, each
closing price so used shall be appropriately adjusted in a manner analogous to the
applicable adjustment provided for in Section 2.3 hereof in order to make it fully
comparable with the closing price on the date of determination or, if the date of
determination is not a Trading Day, on the immediately preceding Trading Day. The
closing price per share of any securities on any date shall be:












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	 	(i)  	the closing board lot sale price or, in case no such sale takes
place on such date, the average of the closing bid and asked prices for each of
the securities as reported by the principal Canadian stock exchange (as
determined by volume of trading) on which the securities are listed or admitted
to trading;
	 
	 	(ii)  	if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on a Canadian stock
exchange, the last sale price or, in case no such sale takes place on the date,
the average of the closing bid and asked prices for each of the securities as
reported by the principal national United States securities exchange (as
determined by volume of trading) on which the securities are listed or admitted
to trading;
	 
	 	(iii)  	if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on a Canadian stock
exchange or a national United States securities exchange, the last sale price
or, in case no sale takes place on such date, the average of the high bid and
low asked prices for each of the securities in the over-the-counter market, as
quoted by any recognized reporting system then in use; or
	 
	 	(iv)  	if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on a Canadian stock
exchange or a national United States securities exchange or quoted by any
reporting system, the average of the closing bid and asked prices as furnished
by a recognized professional market maker making a market in the securities;






	 	   	provided, however, that if for any reason none of such prices is available on such
day, the closing price per share of the securities on such date means the fair value
per share of the securities on such date as determined by an internationally
recognized investment dealer or investment banker; provided further that if an event
of a type analogous to any of the events described in Section 2.3 hereof has caused
any price used to determine the Market Price on any Trading Day not to be fully
comparable with the price as so determined on the Trading Day immediately preceding
such date of determination, each price so used shall be appropriately adjusted in a
manner analogous to the applicable adjustment provided for in Section 2.3 hereof in
order to make it fully comparable with the price on the Trading Day immediately
preceding such date of determination. The Market Price shall be expressed in
Canadian dollars and, if initially determined in respect of any day forming part of
the 20 consecutive Trading Day period in question in United States dollars, such
amount shall be translated into Canadian dollars on that date at the Canadian Dollar
Equivalent thereof;
	 
	 	(hh)  	‘1933 Securities Act’ means the Securities Act of 1933 of the United States, as
amended, and the rules and regulations thereunder, as now in effect or as the same may
from time to time be amended, re-enacted or replaced;
	 
	 	(ii)  	‘1934 Exchange Act’ means the Securities Exchange Act of 1934 of the United
States, as amended, and the rules and regulations thereunder as now in effect or as the
same may from time to time be amended, re-enacted or replaced;
	 
	 	(jj)  	‘Nominee’ has the meaning ascribed thereto in Subsection 2.2(c);
	 
	 	(kk)  	‘Offer to Acquire’ includes:












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10





	 	(i)  	an offer to purchase or a solicitation of an offer to sell
Voting Shares; and
	 
	 	(ii)  	an acceptance of an offer to sell Voting Shares, whether or not
such offer to sell has been solicited;








	 	 	or any combination thereof, and the Person accepting an offer to sell shall be
deemed to be making an Offer to Acquire to the Person that made the offer to sell;
	 
	 	(ll)  	‘Offeror’ means a Person who has announced, and has not withdrawn, an intention
to make or who has made, and has not withdrawn, a Take-over Bid, other than a Person
who has completed a Permitted Bid, a Competing Permitted Bid or an Exempt Acquisition;
	 
	 	(mm)  	‘Offeror’s Securities’ means Voting Shares Beneficially Owned by an Offeror on
the date of the Offer to Acquire;
	 
	 	(nn)  	‘Permitted Bid’ means a Take-over Bid made by an Offeror by way of take-over
bid circular which also complies with the following additional provisions:






	 	(i)  	the Take-over Bid is made to all holders of Voting Shares as
registered on the books of the Corporation, other than the Offeror;
	 
	 	(ii)  	the Take-over Bid contains, and the take-up and payment for
securities tendered or deposited is subject to, an irrevocable and unqualified
provision that no Voting Shares will be taken up or paid for pursuant to the
Take-over Bid:






	 	(A)  	prior to the close of business on the date
which is not less than 60 days following the date of the Take-over Bid;
and
	 
	 	(B)  	only if at such date more than 50% of the
Voting Shares held by Independent Shareholders shall have been
deposited or tendered pursuant to the Take-over Bid and not withdrawn;






	 	(iii)  	unless the Take-over Bid is withdrawn, the Take-over Bid
contains an irrevocable and unqualified provision that Voting Shares may be
deposited pursuant to such Take-over Bid at any time during the period of time
described in Clause 1.1(nn)(ii)(A) and that any Voting Shares deposited
pursuant to the Take-over Bid may be withdrawn until taken up and paid for; and
	 
	 	(iv)  	unless the Take-over Bid is withdrawn, the Take-over Bid
contains an irrevocable and unqualified provision that in the event that the
deposit condition set forth in Clause 1.1(nn)(ii)(B) is satisfied the Offeror
will make a public announcement of that fact and the Take-over Bid will remain
open for deposits and tenders of Voting Shares for not less than ten Business
Days from the date of such public announcement;






	 	(oo)  	‘Permitted Bid Acquisition’ means an acquisition of Voting Shares made pursuant
to a Permitted Bid or a Competing Permitted Bid;
	 
	 	(pp)  	‘Person’ includes any individual, firm, partnership, association, trust,
trustee, executor, administrator, legal personal representative, body corporate,
corporation, unincorporated organization, syndicate, governmental entity or other
entity;












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11




	 	(qq)  	‘Plan of Arrangement’ means the Plan of Arrangement set forth as Appendix A to
the Arrangement Agreement;
	 
	 	(rr)  	‘Pro Rata Acquisition’ means an acquisition by a Person of Voting Shares
pursuant to:






	 	(i)  	a Dividend Reinvestment Acquisition;
	 
	 	(ii)  	a stock dividend, stock split or other event in respect of
securities of the Corporation of one or more particular classes or series
pursuant to which such Person becomes the Beneficial Owner of Voting Shares on
the same pro rata basis as all other holders of securities of the particular
class, classes or series;
	 
	 	(iii)  	the acquisition or the exercise by the Person of only those
rights to purchase Voting Shares distributed to that Person in the course of a
distribution to all holders of securities of the Corporation of one or more
particular classes or series pursuant to a rights offering or pursuant to a
prospectus, provided that the Person does not thereby acquire a greater
percentage of such Voting Shares, or securities convertible into or
exchangeable for Voting Shares, so offered than the Person’s percentage of
Voting Shares Beneficially Owned immediately prior to such acquisition; or
	 
	 	(iv)  	a distribution of Voting Shares, or securities convertible into
or exchangeable for Voting Shares (and the conversion or exchange of such
convertible or exchangeable securities), made pursuant to a prospectus or by
way of a private placement, provided that the Person does not thereby acquire a
greater percentage of such Voting Shares, or securities convertible into or
exchangeable for Voting Shares, so offered than the Person’s percentage of
Voting Shares Beneficially Owned immediately prior to such acquisition;






	 	(ss)  	‘Record Time’ means the time at which Common Shares are first issued under the
Plan of Arrangement;
	 
	 	(tt)  	‘Right’ means a right to purchase a Common Share of the Corporation upon the
terms and subject to the conditions set forth in this Agreement;
	 
	 	(uu)  	‘Rights Certificate’ means the certificates representing the Rights after the
Separation Time, which shall be substantially in the form attached hereto as Attachment
1;
	 
	 	(vv)  	‘Rights Register’ has the meaning ascribed thereto in Subsection 2.6(a);
	 
	 	(ww)  	‘Securities Act (Alberta)’ means the Securities Act, S.A. 1991, c.S-6.1, as
amended, and the regulations thereunder, and any comparable or successor laws or
regulations thereto;
	 
	 	(xx)  	‘Separation Time’ means the close of business on the tenth Trading Day after
the earlier of:






	 	(i)  	the Stock Acquisition Date;
	 
	 	(ii)  	the date of the commencement of or first public announcement of
the intent of any Person (other than the Corporation or any Subsidiary of the
Corporation) to commence a Take-over Bid (other than a Permitted Bid or a
Competing












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12





	 	   	Permitted Bid), or such later time as may be determined by the Board of
Directors, provided that, if any Take-over Bid referred to in this Clause
(ii) expires, is cancelled, terminated or otherwise withdrawn prior to the
Separation Time, such Take-over Bid shall be deemed, for the purposes of
this definition, never to have been made; and
	 
	 	(iii)  	the date on which a Permitted Bid or Competing Permitted Bid
ceases to be such;






	 	(yy)  	‘Stock Acquisition Date’ means the first date of public announcement (which,
for purposes of this definition, shall include, without limitation, a report filed
pursuant to section 141 of the Securities Act (Alberta) or Section 13(d) of the 1934
Exchange Act by the Corporation or an Acquiring Person that an Acquiring Person has
become such;
	 
	 	(zz)  	‘Subsidiary’: a corporation is a Subsidiary of another corporation if:






	 	(i)  	it is controlled by:






	 	(A)  	that other; or
	 
	 	(B)  	that other and one or more corporations, each
of which is controlled by that other; or
	 
	 	(C)  	two or more corporations, each of which is
controlled by that other; or






	 	(ii)  	it is a Subsidiary of a corporation that is that other’s
Subsidiary;






	 	(aaa)  	‘Take-over Bid’ means an Offer to Acquire Voting Shares, or securities
convertible into Voting Shares if, assuming that the Voting Shares or convertible
securities subject to the Offer to Acquire are acquired and are Beneficially Owned at
the date of such Offer to Acquire by the Person making such Offer to Acquire, such
Voting Shares (including Voting Shares that may be acquired upon conversion of
securities convertible into Voting Shares) together with the Offeror’s Securities,
constitute in the aggregate 20% or more of the outstanding Voting Shares at the date of
the Offer to Acquire;
	 
	 	(bbb)  	‘Trading Day’, when used with respect to any securities, means a day on which
the principal Canadian stock exchange on which such securities are listed or admitted
to trading is open for the transaction of business or, if the securities are not listed
or admitted to trading on any Canadian stock exchange, a Business Day;
	 
	 	(ccc)  	‘U.S.-Canadian Exchange Rate’ means, on any date:






	 	(i)  	if on such date the Bank of Canada sets an average noon spot
rate of exchange for the conversion of one United States dollar into Canadian
dollars, such rate; and
	 
	 	(ii)  	in any other case, the rate for such date for the conversion of
one United States dollar into Canadian dollars calculated in such manner as may
be determined by the Board of Directors from time to time acting in good faith;












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13




	 	(ddd)  	‘U.S. Dollar Equivalent’ of any amount which is expressed in Canadian dollars
means, on any date, the United States dollar equivalent of the amount determined by
multiplying the amount by the Canadian-U.S. Exchange Rate in effect on such date;
	 
	 	(eee)  	‘Voting Share Reduction’ means an acquisition or redemption by the Corporation
of Voting Shares which, by reducing the number of Voting Shares outstanding, increases
the proportionate number of Voting Shares Beneficially Owned by any Person to 20% or
more of the Voting Shares then outstanding; and
	 
	 	(fff)  	‘Voting Shares’ means the Common Shares of the Corporation and any other
shares in the capital of the Corporation entitled to vote generally in the election of
all directors.










	1.2  	Currency





          All sums of money which are referred to in this Agreement are expressed in lawful money of
Canada, unless otherwise specified.









	1.3  	Headings





          The division of this Agreement into Articles, Sections, Subsections, Clauses, Paragraphs,
Subparagraphs or other portions hereof and the insertion of headings, subheadings and a table of
contents are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement.









	1.4  	Calculation of Number and Percentage of Beneficial Ownership of Outstanding Voting
Shares





          For purposes of this Agreement, the percentage of Voting Shares Beneficially Owned by any
Person, shall be and be deemed to be the product (expressed as a percentage) determined by the
formula:




	 	 	 	 	 	 	 
	 	 	100 x A/B
	 
	 	 	 	 	 	 
	where:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	

	 	A
	 	=
	 	the number of votes for the election of all directors
generally attaching to the Voting Shares Beneficially Owned by such Person; and
	 
	 	 	 	 	 	 
	

	 	B
	 	=
	 	the number of votes for the election of all directors
generally attaching to all outstanding Voting Shares.





Where any Person is deemed to Beneficially Own unissued Voting Shares, such Voting Shares shall be
deemed to be outstanding for the purpose of calculating the percentage of Voting Shares
Beneficially Owned by such Person.









	1.5  	Acting Jointly or in Concert





          For the purposes hereof, a Person is acting jointly or in concert with every Person who, as a
result of any agreement, commitment or understanding, whether formal or informal, with the first
Person or any Affiliate thereof, acquires or offers to acquire Voting Shares (other than customary
agreements with and between underwriters and/or banking group members and/or selling group members













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14



with respect to a public offering or private placement of securities or pledges of securities
in the ordinary course of business).









	1.6  	Generally Accepted Accounting Principles





          Wherever in this Agreement reference is made to generally accepted accounting principles, such
reference shall be deemed to be the recommendations at the relevant time of the Canadian Institute
of Chartered Accountants, or any successor institute, applicable on a consolidated basis (unless
otherwise specifically provided herein to be applicable on an unconsolidated basis) as at the date
on which a calculation is made or required to be made in accordance with generally accepted
accounting principles. Where the character or amount of any asset or liability or item of revenue
or expense is required to be determined, or any consolidation or other accounting computation is
required to be made for the purpose of this Agreement or any document, such determination or
calculation shall, to the extent applicable and except as otherwise specified herein or as
otherwise agreed in writing by the parties, be made in accordance with generally accepted
accounting principles applied on a consistent basis.








ARTICLE 2 - THE RIGHTS









	2.1  	Issue of Rights and Convertible Rights: Legend on Common Share Certificates






	 	(a)  	One Right shall be issued on the Effective Date in respect of each Common Share
of the Corporation issued under the Plan of Arrangement (the time of issue of such
Rights being herein called the “Record Time”) and one Right shall be issued in respect
of each Common Share of the Corporation issued after the Record Time and prior to the
earlier of the Separation Time and the Expiration Time.
	 
	 	(b)  	One Convertible Right shall be issued on the Effective Date in respect of each
Convertible Share issued under the Plan of Arrangement.
	 
	 	(c)  	Certificates representing Common Shares which are issued at and after the
Record Time but prior to the earlier of the Separation Time and the Expiration Time,
shall also evidence one Right for each Common Share represented thereby and shall have
impressed on, printed on, written on or otherwise affixed to them the following legend:






	 	   	Until the Separation Time (defined in the Agreement below), this certificate
also evidences the holder’s rights described in a Shareholder Rights Plan
Agreement dated as of July 30, 2001 (the ‘Agreement’) between Canadian
Pacific Railway Limited and Computershare Trust Company of Canada, as
amended, the terms of which are incorporated herein and a copy of which is
available on demand without charge. Under certain circumstances set out in
the Agreement, the rights may expire, may become null and void or may be
evidenced by separate certificates and no longer evidenced by this
certificate.










	2.2  	Initial Exercise Price; Exercise of Rights; Detachment of Rights






	 	(a)  	Subject to adjustment as herein set forth, each Right will entitle the holder
thereof, from and after the Separation Time and prior to the Expiration Time, to
purchase one Common Share for the Exercise Price (and the Exercise Price and number of
Common Shares are subject to adjustment as set forth below). Notwithstanding any other
provision of this Agreement, any Rights held by the Corporation or any of its
Subsidiaries shall be void.












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15





	 	(b)  	Until the Separation Time:






	 	(i)  	the Rights shall not be exercisable and no Right may be
exercised; and
	 
	 	(ii)  	each Right will be evidenced by the certificate for the
associated Common Share of the Corporation registered in the name of the holder
thereof (which certificate shall also be deemed to represent a Rights
Certificate) and will be transferable only together with, and will be
transferred by a transfer of, such associated Common Share of the Corporation.






	 	(c)  	From and after the Separation Time and prior to the Expiration Time:






	 	(i)  	the Rights shall be exercisable; and
	 
	 	(ii)  	the registration and transfer of Rights shall be separate from
and independent of Common Shares of the Corporation.






	 	   	Promptly following the Separation Time, the Corporation will prepare and the Rights
Agent will mail to each holder of record of Common Shares as of the Separation Time
(other than an Acquiring Person and, in respect of any Rights Beneficially Owned by
such Acquiring Person which are not held of record by such Acquiring Person, the
holder of record of such Rights (a ‘Nominee’)), and to each holder of Convertible
Shares (other than an Acquiring Person or the Nominee of an Acquiring Person) at
such holder’s address as shown by the records of the Corporation (the Corporation
hereby agreeing to furnish copies of such records to the Rights Agent for this
purpose):






	 	(x)  	a Rights Certificate appropriately completed, representing the
number of Rights held by such holder at the Separation Time and having such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Corporation may deem appropriate and as are
not inconsistent with the provisions of this Agreement, or as may be required
to comply with any law, rule or regulation or with any rule or regulation of
any self-regulatory organization, stock exchange or quotation system on which
the Rights may from time to time be listed or traded, or to conform to usage;
and
	 
	 	(y)  	a disclosure statement prepared by the Corporation describing
the Rights,






	 	   	provided that a Nominee shall be sent the materials provided for in (x) and (y) in
respect of all Common Shares or Convertible Shares of the Corporation held of record
by it which are not Beneficially Owned by an Acquiring Person.
	 
	 	(d)  	Rights may be exercised, in whole or in part, on any Business Day after the
Separation Time and prior to the Expiration Time by submitting to the Rights Agent:






	 	(i)  	the Rights Certificate evidencing such Rights;
	 
	 	(ii)  	an election to exercise such Rights (an ‘Election to Exercise’)
substantially in the form attached to the Rights Certificate appropriately
completed and executed by the holder or his executors or administrators or
other personal representatives or his or their legal attorney duly appointed by
an instrument in writing in form and executed in a manner satisfactory to the
Rights Agent; and












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16


	 	(iii)  	payment by certified cheque, banker’s draft or money order
payable to the order of the Corporation, of a sum equal to the Exercise Price
multiplied by the number of Rights being exercised and a sum sufficient to
cover any transfer tax or governmental charge which may be payable in respect
of any transfer involved in the transfer or delivery of Rights Certificates or
the issuance or delivery of certificates for Common Shares in a name other than
that of the holder of the Rights being exercised.






	 	(e)  	Upon receipt of a Rights Certificate, together with a completed Election to
Exercise executed in accordance with Clause 2.2(d)(ii), which does not indicate that
such Right is null and void as provided by Subsection 3.1(b), and payment as set forth
in Clause 2.2(d)(iii), the Rights Agent (unless otherwise instructed by the Corporation
in the event that the Corporation is of the opinion that the Rights cannot be exercised
in accordance with this Agreement) will thereupon promptly:






	 	(i)  	requisition from the transfer agent certificates representing
the number of such Common Shares to be purchased (the Corporation hereby
irrevocably authorizing its transfer agent to comply with all such
requisitions);
	 
	 	(ii)  	when appropriate, requisition from the Corporation the amount
of cash to be paid in lieu of issuing fractional Common Shares in accordance
with Subsection 5.5(b);
	 
	 	(iii)  	after receipt of the certificates referred to in Clause
2.2(e)(i), deliver the same to or upon the order of the registered holder of
such Rights Certificates, registered in such name or names as may be designated
by such holder;
	 
	 	(iv)  	when appropriate, after receipt, deliver the cash referred to
in Clause 2.2(e)(ii) to or to the order of the registered holder of such Rights
Certificate; and
	 
	 	(v)  	tender to the Corporation all payments received on exercise of
Rights.






	 	(f)  	In case the holder of any Rights shall exercise less than all the Rights
evidenced by such holder’s Rights Certificate, a new Rights Certificate evidencing the
Rights remaining unexercised (subject to the provisions of Subsection 5.5(a)) will be
issued by the Rights Agent to such holder or to such holder’s duly authorized assigns.
	 
	 	(g)  	The Corporation covenants and agrees that it will:






	 	(i)  	take all such action as may be necessary and within its power
to ensure that all Common Shares delivered upon exercise of Rights shall, at
the time of delivery of the certificates for such Common Shares (subject to
payment of the Exercise Price), be duly and validly authorized, executed,
issued and delivered as fully paid and non-assessable;
	 
	 	(ii)  	take all such action as may be necessary and within its power
to comply with the requirements of the Canada Business Corporations Act, the
Securities Act (Alberta), the securities laws or comparable legislation of each
of the provinces of Canada, the 1933 Securities Act and the 1934 Exchange Act
and the rules and regulations thereunder and any other applicable law, rule or
regulation, in












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17


	 	   	connection with the issuance and delivery of the Rights Certificates and the
issuance of any Common Shares upon exercise of Rights;
	 
	 	(iii)  	use reasonable efforts to cause all Common Shares issued upon
exercise of Rights to be listed on the principal stock exchanges on which such
Common Shares were traded immediately prior to the Stock Acquisition Date;
	 
	 	(iv)  	cause to be reserved and kept available out of the authorized
and unissued Common Shares, the number of Common Shares that, as provided in
this Agreement, will from time to time be sufficient to permit the exercise in
full of all outstanding Rights;
	 
	 	(v)  	pay when due and payable, if applicable, any and all federal,
provincial and municipal transfer taxes and charges (not including any income
or capital taxes of the holder or exercising holder or any liability of the
Corporation to withhold tax) which may be payable in respect of the original
issuance or delivery of the Rights Certificates, or certificates for Common
Shares to be issued upon exercise of any Rights, provided that the Corporation
shall not be required to pay any transfer tax or charge which may be payable in
respect of any transfer involved in the transfer or delivery of Rights
Certificates or the issuance or delivery of certificates for Common Shares in a
name other than that of the holder of the Rights being transferred or
exercised; and
	 
	 	(vi)  	after the Separation Time, except as permitted by Section 5.1,
not take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will diminish
substantially or otherwise eliminate the benefits intended to be afforded by
the Rights.










	2.3  	Adjustments to Exercise Price; Number of Rights





          The Exercise Price, the number and kind of securities subject to purchase upon exercise of
each Right and the number of Rights outstanding are subject to adjustment from time to time as
provided in this Section 2.3.





	 	(a)  	In the event the Corporation shall at any time after the date of this
Agreement:






	 	(i)  	declare or pay a dividend on Common Shares payable in Common
Shares (or other securities exchangeable for or convertible into or giving a
right to acquire Common Shares or other securities of the Corporation) other
than pursuant to any optional stock dividend program;
	 
	 	(ii)  	subdivide or change the then outstanding Common Shares into a
greater number of Common Shares;
	 
	 	(iii)  	consolidate or change the then outstanding Common Shares into
a smaller number of Common Shares; or
	 
	 	(iv)  	issue any Common Shares (or other securities exchangeable for
or convertible into or giving a right to acquire Common Shares or other
securities of the Corporation) in respect of, in lieu of or in exchange for
existing Common Shares except as otherwise provided in this Section 2.3,












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18





	 	   	the Exercise Price and the number of Rights outstanding, or, if the payment or
effective date therefor shall occur after the Separation Time, the securities
purchasable upon exercise of Rights shall be adjusted as of the payment or effective
date in the manner set forth below.
	 
	 	   	If the Exercise Price and number of Rights outstanding are to be adjusted:






	 	(x)  	the Exercise Price in effect after such adjustment will be
equal to the Exercise Price in effect immediately prior to such adjustment
divided by the number of Common Shares (or other capital stock) (the ‘Expansion
Factor’) that a holder of one Common Share immediately prior to such dividend,
subdivision, change, consolidation or issuance would hold thereafter as a
result thereof; and
	 
	 	(y)  	each Right held prior to such adjustment will become that
number of Rights equal to the Expansion Factor,






	 	   	and the adjusted number of Rights will be deemed to be distributed among the Common
Shares with respect to which the original Rights were associated (if they remain
outstanding) and the shares issued in respect of such dividend, subdivision, change,
consolidation or issuance, so that each such Common Share (or other capital stock)
will have exactly one Right associated with it.
	 
	 	   	For greater certainty, if the securities purchasable upon exercise of Rights are to
be adjusted, the securities purchasable upon exercise of each Right after such
adjustment will be the securities that a holder of the securities purchasable upon
exercise of one Right immediately prior to such dividend, subdivision, change,
consolidation or issuance would hold thereafter as a result of such dividend,
subdivision, change, consolidation or issuance.
	 
	 	   	If, after the Record Time and prior to the Expiration Time, the Corporation shall
issue any shares of capital stock other than Common Shares in a transaction of a
type described in Clause 2.3(a)(i) or (iv), shares of such capital stock shall be
treated herein as nearly equivalent to Common Shares as may be practicable and
appropriate under the circumstances and the Corporation and the Rights Agent agree
to amend this Agreement in order to effect such treatment. If an event occurs which
would require an adjustment under both this Section 2.3 and Section 3.1(a) hereof,
the adjustment provided for in this Section 2.3 shall be in addition to and shall be
made prior to any adjustment required pursuant to Section 3.1(a) hereof.
Adjustments pursuant to subsection 2.3(a) shall be made successively, whenever an
event referred to in Section 2.3(a) occurs.
	 
	 	   	In the event the Corporation shall at any time after the Record Time and prior to
the Separation Time issue any Common Shares otherwise than in a transaction referred
to in this Subsection 2.3(a), each such Common Share so issued shall automatically
have one new Right associated with it, which Right shall be evidenced by the
certificate representing such associated Common Share.
	 
	 	(b)  	In the event the Corporation shall at any time after the Record Time and prior
to the Separation Time fix a record date for the issuance of rights, options or
warrants to all holders of Common Shares entitling them (for a period expiring within
45 calendar days after such record date) to subscribe for or purchase Common Shares (or
securities convertible into or exchangeable for or carrying a right to purchase Common
Shares) at a












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19


	 	   	price per Common Share (or, if a security convertible into or exchangeable for or
carrying a right to purchase or subscribe for Common Shares, having a conversion,
exchange or exercise price, including the price required to be paid to purchase such
convertible or exchangeable security or right per share) less than the Market Price
per Common Share on such record date, the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction:






	 	(i)  	the numerator of which shall be the number of Common Shares
outstanding on such record date, plus the number of Common Shares that the
aggregate offering price of the total number of Common Shares so to be offered
(and/or the aggregate initial conversion, exchange or exercise price of the
convertible or exchangeable securities or rights so to be offered, including
the price required to be paid to purchase such convertible or exchangeable
securities or rights) would purchase at such Market Price per Common Share; and
	 
	 	(ii)  	the denominator of which shall be the number of Common Shares
outstanding on such record date, plus the number of additional Common Shares to
be offered for subscription or purchase (or into which the convertible or
exchangeable securities or rights so to be offered are initially convertible,
exchangeable or exercisable).






	 	   	In case such subscription price may be paid by delivery of consideration, part or
all of which may be in a form other than cash, the value of such consideration shall
be as determined in good faith by the Board of Directors, whose determination shall
be described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of Rights. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights, options or
warrants are not so issued, or if issued, are not exercised prior to the expiration
thereof, the Exercise Price shall be readjusted to the Exercise Price which would
then be in effect if such record date had not been fixed, or to the Exercise Price
which would be in effect based upon the number of Common Shares (or securities
convertible into, or exchangeable or exercisable for Common Shares) actually issued
upon the exercise of such rights, options or warrants, as the case may be.
	 
	 	   	For purposes of this Agreement, the granting of the right to purchase Common Shares
(whether from treasury or otherwise) pursuant to any Dividend Reinvestment Plan or
any employee benefit, stock option or similar plans shall be deemed not to
constitute an issue of rights, options or warrants by the Corporation; provided,
however, that, in all such cases, the right to purchase Common Shares is at a price
per share of not less than 95 per cent of the current market price per share
(determined as provided in such plans) of the Common Shares.
	 
	 	(c)  	In the event the Corporation shall at any time after the Record Time and prior
to the Separation Time fix a record date for the making of a distribution to all
holders of Common Shares (including any such distribution made in connection with a
merger or amalgamation) of evidences of indebtedness, cash (other than an annual cash
dividend or a dividend referred to in Section 2.3(a)(i), but including any dividend
payable in other securities of the Corporation other than Common Shares), assets or
rights, options or warrants (excluding those referred to in Subsection 2.3(b)), the
Exercise Price to be in effect after such record date shall be determined by
multiplying the Exercise Price in effect immediately prior to such record date by a
fraction:












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	 	(i)  	the numerator of which shall be the Market Price per Common
Share on such record date, less the fair market value (as determined in good
faith by the Board of Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent
and the holders of Rights), on a per share basis, of the portion of the cash,
assets, evidences of indebtedness, rights, options or warrants so to be
distributed; and
	 
	 	(ii)  	the denominator of which shall be such Market Price per Common
Share.






	 	   	Such adjustments shall be made successively whenever such a record date is fixed,
and in the event that such a distribution is not so made, the Exercise Price shall
be adjusted to be the Exercise Price which would have been in effect if such record
date had not been fixed.
	 
	 	(d)  	Notwithstanding anything herein to the contrary, no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or decrease of
at least one per cent in the Exercise Price; provided, however, that any adjustments
which by reason of this Subsection 2.3(d) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. All calculations under
Section 2.3 shall be made to the nearest cent or to the nearest ten-thousandth of a
share. Notwithstanding the first sentence of this Subsection 2.3(d), any adjustment
required by Section 2.3 shall be made no later than the earlier of:






	 	(i)  	three years from the date of the transaction which gives rise
to such adjustment; or
	 
	 	(ii)  	the Expiration Date.






	 	(e)  	In the event the Corporation shall at any time after the Record Time and prior
to the Separation Time issue any shares of capital stock (other than Common Shares), or
rights, options or warrants to subscribe for or purchase any such capital stock, or
securities convertible into or exchangeable for any such capital stock, in a
transaction referred to in Clause 2.3(a)(i) or (iv), if the Board of Directors acting
in good faith determines that the adjustments contemplated by Subsections 2.3(a), (b)
and (c) in connection with such transaction will not appropriately protect the
interests of the holders of Rights, the Board of Directors may determine what other
adjustments to the Exercise Price, number of Rights and/or securities purchasable upon
exercise of Rights would be appropriate and, notwithstanding Subsections 2.3(a), (b)
and (c), and subject to prior approval of the holders of Voting Shares or of Rights, as
the case may be, as provided in section 5.4, such adjustments, rather than the
adjustments contemplated by Subsections 2.3(a), (b) and (c), shall be made. The
Corporation and the Rights Agent shall have authority to amend this Agreement as
appropriate to provide for such adjustments.
	 
	 	(f)  	Each Right originally issued by the Corporation subsequent to any adjustment
made to the Exercise Price hereunder shall evidence the right to purchase, at the
adjusted Exercise Price, the number of Common Shares purchasable from time to time
hereunder upon exercise of a Right immediately prior to such issue, all subject to
further adjustment as provided herein.
	 
	 	(g)  	Irrespective of any adjustment or change in the Exercise Price or the number of
Common Shares issuable upon the exercise of the Rights, the Rights Certificates
theretofore and












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21


	 	   	thereafter issued may continue to express the Exercise Price per Common Share and
the number of Common Shares which were expressed in the initial Rights Certificates
issued hereunder.
	 
	 	(h)  	In any case in which this Section 2.3 shall require that an adjustment in the
Exercise Price be made effective as of a record date for a specified event, the
Corporation may elect to defer until the occurrence of such event the issuance to the
holder of any Right exercised after such record date the number of Common Shares and
other securities of the Corporation, if any, issuable upon such exercise over and above
the number of Common Shares and other securities of the Corporation, if any, issuable
upon such exercise on the basis of the Exercise Price in effect prior to such
adjustment; provided, however, that the Corporation shall deliver to such holder an
appropriate instrument evidencing such holder’s right to receive such additional shares
(fractional or otherwise) or other securities upon the occurrence of the event
requiring such adjustment.
	 
	 	(i)  	Notwithstanding anything contained in this Section 2.3 to the contrary, the
Corporation shall be entitled to make such reductions in the Exercise Price, in
addition to those adjustments expressly required by this Section 2.3, as and to the
extent that in their good faith judgment the Board of Directors determines to be
advisable, in order that any:






	 	(i)  	consolidation or subdivision of Common Shares;
	 
	 	(ii)  	issuance (wholly or in part for cash) of Common Shares or
securities that by their terms are convertible into or exchangeable for Common
Shares;
	 
	 	(iii)  	stock dividends; or
	 
	 	(iv)  	issuance of rights, options or warrants referred to in this
Section 2.3,






	 	   	hereafter made by the Corporation to holders of its Common Shares, shall not be
taxable to such shareholders.










	2.4  	Date on Which Exercise Is Effective





          Each Person in whose name any certificate for Common Shares or other securities, if
applicable, is issued upon the exercise of Rights shall for all purposes be deemed to have become
the holder of record of the Common Shares or other securities, if applicable, represented thereon,
and such certificate shall be dated the date upon which the Rights Certificate evidencing such
Rights was duly surrendered in accordance with Subsection 2.2(d) (together with a duly completed
Election to Exercise) and payment of the Exercise Price for such Rights (and any applicable
transfer taxes and other governmental charges payable by the exercising holder hereunder) was made;
provided, however, that if the date of such surrender and payment is a date upon which the Common
Share transfer books of the Corporation are closed, such Person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the next succeeding Business
Day on which the Common Share transfer books of the Corporation are open.









	2.5  	Execution, Authentication, Delivery and Dating of Rights Certificates






	 	(a)  	The Rights Certificates shall be executed on behalf of the Corporation by its
Chairman of the Board, President or any Vice-President and by its Corporate Secretary
or any Assistant Secretary under the corporate seal of the Corporation reproduced
thereon. The












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	 	   	signature of any of these officers on the Rights Certificates may be manual or
facsimile. Rights Certificates bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Corporation shall bind
the Corporation, notwithstanding that such individuals or any of them have ceased to
hold such offices either before or after the countersignature and delivery of such
Rights Certificates.
	 
	 	(b)  	Promptly after the Corporation learns of the Separation Time, the Corporation
will notify the Rights Agent of such Separation Time and will deliver Rights
Certificates executed by the Corporation to the Rights Agent for countersignature, and
the Rights Agent shall manually countersign (in a manner satisfactory to the
Corporation) and send such Rights Certificates to the holders of the Rights pursuant to
Subsection 2.2(c) hereof. No Rights Certificate shall be valid for any purpose until
countersigned by the Rights Agent as aforesaid.
	 
	 	(c)  	Each Rights Certificate shall be dated the date of countersignature thereof.










	2.6  	Registration, Transfer and Exchange






	 	(a)  	The Corporation will cause to be kept a register (the ‘Rights Register’) in
which, subject to such reasonable regulations as it may prescribe, the Corporation will
provide for the registration and transfer of Rights. The Rights Agent is hereby
appointed registrar for the Rights (the ‘Rights Registrar’) for the purpose of
maintaining the Rights Register for the Corporation and registering Rights and
transfers of Rights as herein provided and the Rights Agent hereby accepts such
appointment. In the event that the Rights Agent shall cease to be the Rights
Registrar, the Rights Agent will have the right to examine the Rights Register at all
reasonable times.
	 
	 	   	After the Separation Time and prior to the Expiration Time, upon surrender for
registration of transfer or exchange of any Rights Certificate, and subject to the
provisions of Subsection 2.6(c), the Corporation will execute, and the Rights Agent
will manually countersign and deliver, in the name of the holder or the designated
transferee or transferees, as required pursuant to the holder’s instructions, one or
more new Rights Certificates evidencing the same aggregate number of Rights as did
the Rights Certificates so surrendered.
	 
	 	(b)  	All Rights issued upon any registration of transfer or exchange of Rights
Certificates shall be the valid obligations of the Corporation, and such Rights shall
be entitled to the same benefits under this Agreement as the Rights surrendered upon
such registration of transfer or exchange.
	 
	 	(c)  	Every Rights Certificate surrendered for registration of transfer or exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer
satisfactory in form to the Corporation or the Rights Agent, as the case may be, duly
executed by the holder thereof or such holder’s attorney duly authorized in writing.
As a condition to the issuance of any new Rights Certificate under this Section 2.6,
the Corporation may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other expenses
(including the reasonable fees and expenses of the Rights Agent) connected therewith.












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	2.7  	Mutilated, Destroyed, Lost and Stolen Rights Certificates






	 	(a)  	If any mutilated Rights Certificate is surrendered to the Rights Agent prior to
the Expiration Time, the Corporation shall execute and the Rights Agent shall
countersign and deliver in exchange therefor a new Rights Certificate evidencing the
same number of Rights as did the Rights Certificate so surrendered.
	 
	 	(b)  	If there shall be delivered to the Corporation and the Rights Agent prior to
the Expiration Time:






	 	(i)  	evidence to their reasonable satisfaction of the destruction,
loss or theft of any Rights Certificate; and
	 
	 	(ii)  	such security or indemnity as may be reasonably required by
them to save each of them and any of their agents harmless;






	 	   	then, in the absence of notice to the Corporation or the Rights Agent that such
Rights Certificate has been acquired by a bona fide purchaser, the Corporation shall
execute and upon the Corporation’s request the Rights Agent shall countersign and
deliver, in lieu of any such destroyed, lost or stolen Rights Certificate, a new
Rights Certificate evidencing the same number of Rights as did the destroyed, lost
or stolen Rights Certificate.
	 
	 	(c)  	As a condition to the issuance of any new Rights Certificate under this Section
2.7, the Corporation may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the reasonable fees and expenses of the Rights Agent) connected
therewith.
	 
	 	(d)  	Every new Rights Certificate issued pursuant to this Section 2.7 in lieu of any
destroyed, lost or stolen Rights Certificate shall evidence the contractual obligation
of the Corporation, whether or not the destroyed, lost or stolen Rights Certificate
shall be at any time enforceable by anyone, and shall be entitled to all the benefits
of this Agreement equally and proportionately with any and all other Rights duly issued
hereunder.










	2.8  	Persons Deemed Owners of Rights





          The Corporation, the Rights Agent and any agent of the Corporation or the Rights Agent may
deem and treat the Person in whose name a Rights Certificate (or, prior to the Separation Time, the
associated Common Share certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever. As used in this Agreement, unless the context
otherwise requires, the term ‘holder’ of any Rights shall mean the registered holder of such Rights
(or, prior to the Separation Time, of the associated Common Shares).









	2.9  	Delivery and Cancellation of Certificates





          All Rights Certificates surrendered upon exercise or for redemption, registration of transfer
or exchange shall, if surrendered to any Person other than the Rights Agent, be delivered to the
Rights Agent and, in any case, shall be promptly cancelled by the Rights Agent. The Corporation
may at any time deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Corporation may have acquired in any manner
whatsoever, and all Rights Certificates so delivered shall be promptly cancelled by the Rights
Agent. No Rights Certificate shall be countersigned in lieu of or in exchange for any Rights
Certificates cancelled as provided in this Section












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2.9, except as expressly permitted by this Agreement. The Rights Agent shall, subject to
applicable laws, and its ordinary business practices, destroy all cancelled Rights Certificates and
deliver a certificate of destruction to the Corporation.









	2.10  	Agreement of Rights Holders





          Every holder of Rights, by accepting the same, consents and agrees with the Corporation and
the Rights Agent and with every other holder of Rights:





	 	(a)  	to be bound by and subject to the provisions of this Agreement, as amended from
time to time in accordance with the terms hereof, in respect of all Rights held;
	 
	 	(b)  	that prior to the Separation Time, each Right will be transferable only
together with, and will be transferred by a transfer of, the associated Common Share
certificate representing such Right;
	 
	 	(c)  	that after the Separation Time, the Rights Certificates will be transferable
only on the Rights Register as provided herein;
	 
	 	(d)  	that prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) for registration of transfer,
the Corporation, the Rights Agent and any agent of the Corporation or the Rights Agent
may deem and treat the Person in whose name the Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) is registered as the absolute
owner thereof and of the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on such Rights Certificate or the associated Common Share
certificate made by anyone other than the Corporation or the Rights Agent) for all
purposes whatsoever, and neither the Corporation nor the Rights Agent shall be affected
by any notice to the contrary;
	 
	 	(e)  	that such holder of Rights has waived his right to receive any fractional
Rights or any fractional shares or other securities upon exercise of a Right (except as
provided herein);
	 
	 	(f)  	that, subject to the provisions of Section 5.4, without the approval of any
holder of Rights or Voting Shares and upon the sole authority of the Board of
Directors, acting in good faith, this Agreement may be supplemented or amended from
time to time to cure any ambiguity or to correct or supplement any provision contained
herein which may be inconsistent with the intent of this Agreement or is otherwise
defective, as provided herein; and
	 
	 	(g)  	notwithstanding anything in this Agreement to the contrary, neither the
Corporation nor the Rights Agent shall have any liability to any holder of a Right or
any other Person as a result of its inability to perform any of its obligations under
this Agreement by reason of any preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority, prohibiting or
otherwise restraining performance of such obligation.












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	2.11  	Rights Certificate Holder Not Deemed a Shareholder





          No holder, as such, of any Rights or Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose whatsoever the holder of any Common Share or any other share
or security of the Corporation which may at any time be issuable on the exercise of the Rights
represented thereby, nor shall anything contained herein or in any Rights Certificate be construed
or deemed or confer upon the holder of any Right or Rights Certificate, as such, any right, title,
benefit or privilege of a holder of Common Shares or any other shares or securities of the
Corporation or any right to vote at any meeting of shareholders of the Corporation whether for the
election of directors or otherwise or upon any matter submitted to holders of Common Shares or any
other shares of the Corporation at any meeting thereof, or to give or withhold consent to any
action of the Corporation, or to receive notice of any meeting or other action affecting any holder
of Common Shares or any other shares of the Corporation except as expressly provided herein, or to
receive dividends, distributions or subscription rights, or otherwise, until the Right or Rights
evidenced by Rights Certificates shall have been duly exercised in accordance with the terms and
provisions hereof.








ARTICLE 3 - ADJUSTMENTS TO THE RIGHTS









	3.1  	Flip-in Event






	 	(a)  	Subject to Subsection 3.1(b) and Section 5.1, if prior to the Expiration Time a
Flip-in Event occurs, each Right shall constitute, effective at the close of business
on the tenth Trading Day after the Stock Acquisition Date, the right to purchase from
the Corporation, upon exercise thereof in accordance with the terms hereof, that number
of Common Shares having an aggregate Market Price on the date of consummation or
occurrence of such Flip-in Event equal to twice the Exercise Price for an amount in
cash equal to the Exercise Price (such right to be appropriately adjusted in a manner
analogous to the applicable adjustment provided for in Section 2.3 in the event that
after such consummation or occurrence, an event of a type analogous to any of the
events described in Section 2.3 shall have occurred).
	 
	 	(b)  	Notwithstanding anything in this Agreement to the contrary, upon the occurrence
of any Flip-in Event, any Rights that are or were Beneficially Owned on or after the
earlier of the Separation Time or the Stock Acquisition Date by:






	 	(i)  	an Acquiring Person (or any Affiliate or Associate of an
Acquiring Person or any Person acting jointly or in concert with an Acquiring
Person or any Affiliate or Associate of an Acquiring Person); or
	 
	 	(ii)  	a transferee of Rights, directly or indirectly, from an
Acquiring Person (or any Affiliate or Associate of an Acquiring Person or any
Person acting jointly or in concert with an Acquiring Person or any Affiliate
or Associate of an Acquiring Person), where such transferee becomes a
transferee concurrently with or subsequent to the Acquiring Person becoming
such in a transfer that the Board of Directors has determined is part of a
plan, arrangement or scheme of an Acquiring Person (or any Affiliate or
Associate of an Acquiring Person or any Person acting jointly or in concert
with an Acquiring Person or any Affiliate or Associate of an Acquiring Person),
that has the purpose or effect of avoiding Clause 3.1(b)(i),












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26




	 	   	shall become null and void without any further action, and any holder of such Rights
(including transferees) shall thereafter have no right to exercise such Rights under
any provision of this Agreement and further shall thereafter not have any other
rights whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise.
	 
	 	(c)  	From and after the Separation Time, the Corporation shall do all such acts and
things as shall be necessary and within its power to ensure compliance with the
provisions of this Section 3.1, including without limitation, all such acts and things
as may be required to satisfy the requirements of the Canada Business Corporations Act,
the Securities Act (Alberta) and the securities laws or comparable legislation of each
of the provinces of Canada and of the United States and each of the states thereof in
respect of the issue of Common Shares upon the exercise of Rights in accordance with
this Agreement.
	 
	 	(d)  	Any Rights Certificate that represents Rights Beneficially Owned by a Person
described in either Clause 3.1(b)(i) or (ii) or transferred to any nominee of any such
Person, and any Rights Certificate issued upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall contain
the following legend:






	 	   	The Rights represented by this Rights Certificate were issued to a Person
who was an Acquiring Person or an Affiliate or an Associate of an Acquiring
Person (as such terms are defined in the Shareholder Rights Plan Agreement)
or a Person who was acting jointly or in concert with an Acquiring Person or
an Affiliate or Associate of an Acquiring Person. This Rights Certificate
and the Rights represented hereby are void or shall become void in the
circumstances specified in Subsection 3.1(b) of the Shareholder Rights Plan
Agreement.






	 	   	provided, however, that the Rights Agent shall not be under any responsibility to
ascertain the existence of facts that would require the imposition of such legend
but shall impose such legend only if instructed to do so by the Corporation in
writing or if a holder fails to certify upon transfer or exchange in the space
provided on the Rights Certificate that such holder is not a Person described in
such legend.









ARTICLE 4 - THE RIGHTS AGENT









	4.1  	General






	 	(a)  	The Corporation hereby appoints the Rights Agent to act as agent for the
Corporation and the holders of the Rights and the Convertible Rights in accordance with
the terms and conditions hereof, and the Rights Agent hereby accepts such appointment.
The Corporation may from time to time appoint such co-Rights Agents (‘Co-Rights
Agents’) as it may deem necessary or desirable, subject to the approval of the Rights
Agent. In the event the Corporation appoints one or more Co-Rights Agents, the
respective duties of the Rights Agent and Co-Rights Agents shall be as the Corporation
may determine, with the approval of the Rights Agent and the Co-Rights Agent. The
Corporation agrees to pay all reasonable fees and expenses of the Rights Agent in
respect of the performance of its duties under this Agreement. The Corporation also
agrees to indemnify the Rights Agent for, and to hold it harmless against, any loss,
liability, or expense, incurred without negligence, bad faith or wilful misconduct on
the part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including the
costs and expenses of defending against












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27





	 	   	any claim of liability, which right to indemnification will survive the termination
of this Agreement or the resignation or removal of the Rights Agent.
	 
	 	(b)  	The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any certificate for Common Shares or
Convertible Shares, Rights Certificate, certificate for other securities of the
Corporation, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, opinion, statement, or
other paper or document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or Persons.










	4.2  	Merger, Amalgamation or Consolidation or Change of Name of Rights Agent






	 	(a)  	Any corporation into which the Rights Agent may be merged or amalgamated or
with which it may be consolidated, or any corporation resulting from any merger,
amalgamation, statutory arrangement or consolidation to which the Rights Agent is a
party, or any corporation succeeding to the shareholder or stockholder services
business of the Rights Agent, will be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the part
of any of the parties hereto, provided that such corporation would be eligible for
appointment as a successor Rights Agent under the provisions of Section 4.4 hereof.
If, at the time such successor Rights Agent succeeds to the agency created by this
Agreement, any of the Rights Certificates have been countersigned but not delivered,
the successor Rights Agent may adopt the countersignature of the predecessor Rights
Agent and deliver such Rights Certificates so countersigned; and if, at that time, any
of the Rights have not been countersigned, any successor Rights Agent may countersign
such Rights Certificates in the name of the predecessor Rights Agent or in the name of
the successor Rights Agent; and in all such cases such Rights Certificates will have
the full force provided in the Rights Certificates and in this Agreement.
	 
	 	(b)  	If, at any time, the name of the Rights Agent is changed and at such time any
of the Rights Certificates have been countersigned but not delivered, the Rights Agent
may adopt the countersignature under its prior name and deliver Rights Certificates so
countersigned; and if, at that time, any of the Rights Certificates have not been
countersigned, the Rights Agent may countersign such Rights Certificates either in its
prior name or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.










	4.3  	Duties of Rights Agent





          The Rights Agent undertakes the duties and obligations imposed by this Agreement upon the
following terms and conditions, all of which the Corporation and the holders of certificates for
Common Shares and Convertible Shares and the holders of Rights Certificates, by their acceptance
thereof, shall be bound:





	 	(a)  	the Rights Agent, at the expense of the Corporation, may consult with and
retain legal counsel (who may be legal counsel for the Corporation) and such other
experts as it reasonably considers necessary to perform its duties hereunder, and the
opinion of such counsel or other expert will be full and complete authorization and
protection to the












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28


	 	   	Rights Agent as to any action taken or omitted by it in good faith and in accordance
with such opinion;
	 
	 	(b)  	whenever in the performance of its duties under this Agreement, the Rights
Agent deems it necessary or desirable that any fact or matter be proved or established
by the Corporation prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof is specifically prescribed herein) is
deemed to be conclusively proved and established by a certificate signed by a Person
believed by the Rights Agent to be the Chairman of the Board, President, Chief
Executive Officer, Chief Financial Officer, any Vice-President, Treasurer, Corporate
Secretary, or any Assistant Secretary of the Corporation and delivered to the Rights
Agent; and such certificate will be full authorization to the Rights Agent for any
action taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate;
	 
	 	(c)  	the Rights Agent will be liable hereunder for its own negligence, bad faith or
wilful misconduct;
	 
	 	(d)  	the Rights Agent will not be liable for or by reason of any of the statements
of fact or recitals contained in this Agreement or in the certificates for Common
Shares or Convertible Shares or the Rights Certificates (except its countersignature
thereof) or be required to verify the same, but all such statements and recitals are
and will be deemed to have been made by the Corporation only;
	 
	 	(e)  	the Rights Agent will not have any responsibility in respect of the validity of
this Agreement or the execution and delivery hereof (except the due authorization,
execution and delivery hereof by the Rights Agent) or in respect of the validity or
execution of any certificate for a Common Share or a Convertible Share or Rights
Certificate (except its countersignature thereof); nor will it be responsible for any
breach by the Corporation of any covenant or condition contained in this Agreement or
in any Rights Certificate; nor will it be responsible for any change in the
exerciseability of the Rights (including the Rights becoming void pursuant to
Subsection 3.1(b) hereof) or any adjustment required under the provisions of Section
2.3 hereof or responsible for the manner, method or amount of any such adjustment or
the ascertaining of the existence of facts that would require any such adjustment
(except with respect to the exercise of Rights after receipt of the certificate
contemplated by Section 2.3 describing any such adjustment); nor is it deemed by any
act hereunder to make any representation or warranty as to the authorization of any
Common Shares or Convertible Shares to be issued pursuant to this Agreement or any
Rights or Convertible Rights or as to whether any Common Shares or Convertible Shares
will, when issued, be duly and validly authorized, executed, issued and delivered and
fully paid and non-assessable;
	 
	 	(f)  	the Corporation agrees that it will perform, execute, acknowledge and deliver
or cause to be performed, executed, acknowledged and delivered all such further and
other acts, instruments and assurances as may reasonably be required by the Rights
Agent for the carrying out or performing by the Rights Agent of the provisions of this
Agreement;
	 
	 	(g)  	the Rights Agent is hereby authorized and directed to accept instructions in
writing with respect to the performance of its duties hereunder from any individual
believed by the Rights Agent to be the Chairman of the Board, President, Chief
Executive Officer, Chief Financial Officer, any Vice-President, Treasurer, Corporate
Secretary or any Assistant Secretary of the Corporation, and to apply to such
individuals for advice or instructions in












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	 	   	connection with its duties, and it shall not be liable for any action taken or
suffered by it in good faith in accordance with instructions of any such individual;
	 
	 	(h)  	the Rights Agent and any shareholder or stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in Common Shares, Convertible
Shares, Rights, Convertible Rights or other securities of the Corporation or become
pecuniarily interested in any transaction in which the Corporation may be interested,
or contract with or lend money to the Corporation or otherwise act as fully and freely
as though it were not Rights Agent under this Agreement and nothing herein shall
preclude the Rights Agent from acting in any other capacity for the Corporation or for
any other legal entity; and
	 
	 	(i)  	the Rights Agent may execute and exercise any of the rights or powers hereby
vested in it or perform any duty hereunder either itself or by or through its attorneys
or agents, and the Rights Agent will not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or agents or for any loss to the
Corporation resulting from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued employment thereof.










	4.4  	Change of Rights Agent





          The Rights Agent may resign and be discharged from its duties under this Agreement upon 60
days’ notice (or such lesser notice as is acceptable to the Corporation) in writing mailed to the
Corporation and to each transfer agent of Common Shares and Convertible Shares by registered or
certified mail. The Corporation may remove the Rights Agent upon 60 days’ notice in writing,
mailed to the Rights Agent and to each transfer agent of the Common Shares and Convertible Shares
by registered or certified mail. If the Rights Agent should resign or be removed or otherwise
become incapable of acting, the Corporation will appoint a successor to the Rights Agent. If the
Corporation fails to make such appointment within a period of 60 days after removal or after it has
been notified in writing of the resignation or incapacity by the resigning or incapacitated Rights
Agent, then by prior written notice to the Corporation the resigning Rights Agent or the holder of
any Rights or Convertible Rights (which holder shall, with such notice, submit such holder’s Rights
Certificate, if any, for inspection by the Corporation), may apply to a court of competent
jurisdiction for the appointment of a new Rights Agent, at the Corporation’s expense. Any
successor Rights Agent, whether appointed by the Corporation or by such a court, shall be a
corporation incorporated under the laws of Canada or a province thereof authorized to carry on the
business of a trust company in the Province of Alberta. After appointment, the successor Rights
Agent will be vested with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the predecessor Rights Agent,
upon receipt of all outstanding fees and expenses owing to it, shall deliver and transfer to the
successor Rights Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Corporation will file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Shares and Convertible Shares and
mail a notice thereof in writing to the holders of the Rights and Convertible Shares in accordance
with Section 5.9. Failure to give any notice provided for in this Section 4.4, however, or any
defect therein, shall not affect the legality or validity of the resignation or removal of the
Rights Agent or the appointment of any successor Rights Agent, as the case may be.












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ARTICLE 5 - MISCELLANEOUS









	5.1  	Redemption and Waiver






	 	(a)  	The Board of Directors acting in good faith may, until the occurrence of a
Flip-in Event, upon prior written notice delivered to the Rights Agent, waive the
application of Section 3.1 to a particular Flip-in Event that would result from a
Take-over Bid made by way of take-over bid circular to all holders of record of Voting
Shares (which for greater certainty shall not include the circumstances described in
Subsection 5.1(h)); provided that if the Board of Directors waives the application of
Section 3.1 to a particular Flip-in Event pursuant to this Subsection 5.1(a), the Board
of Directors shall be deemed to have waived the application of Section 3.1 to any other
Flip-in Event occurring by reason of any Take-over Bid which is made by means of a
take-over bid circular to all holders of Voting Shares prior to the expiry of any
Take-over Bid (as the same may be extended from time to time) in respect of which a
waiver is, or is deemed to have been, granted under this Subsection 5.1(a).
	 
	 	(b)  	Subject to the prior consent of the holders of the Voting Shares or the Rights
as set forth in Subsection 5.4(b) or (c) the Board of Directors of the Corporation
acting in good faith may, at its option, at any time prior to the provisions of Section
3.1 becoming applicable as a result of the occurrence of a Flip-in Event, elect to
redeem all but not less than all of the outstanding Rights and Convertible Rights at a
redemption price of $0.000001 per Right or Convertible Right appropriately adjusted in
a manner analogous to the applicable adjustment provided for in Section 2.3 if an event
of the type analogous to any of the events described in Section 2.3 shall have occurred
(such redemption price being herein referred to as the ‘Redemption Price’).
	 
	 	(c)  	Where, pursuant to a Permitted Bid, a Competing Permitted Bid or an Exempt
Acquisition under Subsection 5.1(a), a Person acquires outstanding Voting Shares, other
than Voting Shares Beneficially Owned by such Person at the date of the Permitted Bid,
the Competing Permitted Bid or the Exempt Acquisition under Subsection 5.1(a), then the
Board of Directors of the Corporation shall immediately upon the consummation of such
acquisition without further formality and without any approval under Subsection 5.4(b)
or (c) be deemed to have elected to redeem the Rights and Convertible Rights at the
Redemption Price.
	 
	 	(d)  	Where a Take-over Bid that is not a Permitted Bid Acquisition is withdrawn or
otherwise terminated after the Separation Time has occurred and prior to the occurrence
of a Flip-in Event, the Board of Directors may elect to redeem all the outstanding
Rights and Convertible Rights at the Redemption Price.
	 
	 	(e)  	If the Board of Directors is deemed under Subsection 5.1(c) to have elected, or
elects under either of Subsection 5.1(b) or (d), to redeem the Rights and Convertible
Rights, the right to exercise the Rights and Convertible Rights will thereupon, without
further action and without notice, terminate and the only right thereafter of the
holders of Rights and Convertible Rights shall be to receive the Redemption Price.
	 
	 	(f)  	Within 10 days after the Board of Directors is deemed under Subsection 5.1(c)
to have elected, or elects under Subsection 5.1(b) or (d), to redeem the Rights and
Convertible Rights, the Corporation shall give notice of redemption to the holders of
the then outstanding Rights and Convertible Rights by mailing such notice to each such
holder at












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	 	   	his last address as it appears upon the registry books of the Rights Agent or, prior
to the Separation Time, on the registry books of the transfer agent for the Voting
Shares or Convertible Shares. Any notice which is mailed in the manner provided
herein shall be deemed given, whether or not the holder receives the notice. Each
notice of redemption will state the method by which the payment of the Redemption
Price will be made.
	 
	 	(g)  	Upon the Rights and Convertible Rights being redeemed pursuant to Subsection
5.1(d), all the provisions of this Agreement shall continue to apply as if the
Separation Time had not occurred and Rights Certificates representing the number of
Rights and Convertible Rights held by each holder of record of Common Shares and
Convertible Shares as of the Separation Time had not been mailed to each such holder
and for all purposes of this Agreement the Separation Time shall be deemed not to have
occurred and the Rights shall remain attached to the outstanding Common Shares and the
Convertible Rights shall remain attached to the Convertible Shares, subject to and in
accordance with the provisions of this Agreement.
	 
	 	(h)  	The Board of Directors may waive the application of Section 3.1 in respect of
the occurrence of any Flip-in Event if the Board of Directors has determined within ten
Trading Days following a Stock Acquisition Date that a Person became an Acquiring
Person by inadvertence and without any intention to become, or knowledge that it would
become, an Acquiring Person under this Agreement and, in the event that such a waiver
is granted by the Board of Directors, such Stock Acquisition Date shall be deemed not
to have occurred. Any such waiver pursuant to this Subsection 5.1(h) must be on the
condition that such Person, within 14 days after the foregoing determination by the
Board of Directors or such earlier or later date as the Board of Directors may
determine (the ‘Disposition Date’), has reduced its Beneficial Ownership of Voting
Shares so that the Person is no longer an Acquiring Person. If the Person remains an
Acquiring Person at the close of business on the Disposition Date, the Disposition Date
shall be deemed to be the date of occurrence of a further Stock Acquisition Date and
Section 3.1 shall apply thereto.
	 
	 	(i)  	The Corporation shall give prompt written notice to the Rights Agent of any
waiver of the application of Section 3.1 made by the Board of Directors under this
Section 5.1.










	5.2  	Expiration





          No Person shall have any rights whatsoever pursuant to this Agreement or in respect of any
Right or Convertible Right after the Expiration Time, except the Rights Agent as specified in
Subsection 4.1(a) of this Agreement.









	5.3  	Issuance of New Rights Certificates





          Notwithstanding any of the provisions of this Agreement, the Rights or the Convertible Rights
to the contrary, the Corporation may, at its option, issue new Rights Certificates evidencing
Rights in such form as may be approved by the Board of Directors to reflect any adjustment or
change in the number or kind or class of securities purchasable upon exercise of Rights made in
accordance with the provisions of this Agreement.












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	5.4  	Supplements and Amendments






	 	(a)  	The Corporation may make amendments to this Agreement to correct any clerical
or typographical error or, subject to Subsection 5.4(e), which are required to maintain
the validity of this Agreement as a result of any change in any applicable legislation,
rules or regulations thereunder. The Corporation may, prior to the date of its
shareholders’ meeting referred to in Section 5.15, supplement or amend this Agreement
without the approval of any holders of Rights, Convertible Rights or Voting Shares in
order to make any changes which the Board of Directors acting in good faith may deem
necessary or desirable. Notwithstanding anything in this Section 5.4 to the contrary,
no such supplement or amendment shall be made to the provisions of Article 4 except
with the written concurrence of the Rights Agent to such supplement or amendment.
	 
	 	(b)  	Subject to Section 5.4(a), the Corporation may, with the prior consent of the
holders of Voting Shares obtained as set forth below, at any time prior to the
Separation Time, amend, vary or rescind any of the provisions of this Agreement and the
Rights (whether or not such action would materially adversely affect the interests of
the holders of Rights generally). Such consent shall be deemed to have been given if
the action requiring such approval is authorized by the affirmative vote of a majority
of the votes cast by Independent Shareholders present or represented at and entitled to
be voted at a meeting of the holders of Voting Shares duly called and held in
compliance with applicable laws and the articles and by-laws of the Corporation.
	 
	 	(c)  	The Corporation may, with the prior consent of the holders of Rights, at any
time on or after the Separation Time, amend, vary or delete any of the provisions of
this Agreement and the Rights (whether or not such action would materially adversely
affect the interests of the holders of Rights generally), provided that no such
amendment, variation or deletion shall be made to the provisions of Article 4 except
with the written concurrence of the Rights Agent thereto. Such consent shall be deemed
to have been given if such amendment, variation or deletion is authorized by the
affirmative votes of the holders of Rights present or represented at and entitled to be
voted at a meeting of the holders and representing 50% plus one of the votes cast in
respect thereof.
	 
	 	(d)  	Any approval of the holders of Rights shall be deemed to have been given if the
action requiring such approval is authorized by the affirmative votes of the holders of
Rights present or represented at and entitled to be voted at a meeting of the holders
of Rights and representing a majority of the votes cast in respect thereof. For the
purposes hereof, each outstanding Right (other than Rights which are void pursuant to
the provisions hereof) shall be entitled to one vote, and the procedures for the
calling, holding and conduct of the meeting shall be those, as nearly as may be, which
are provided in the Corporation’s by-laws and the Canada Business Corporations Act with
respect to meetings of shareholders of the Corporation.
	 
	 	(e)  	Any amendments made by the Corporation to this Agreement pursuant to Subsection
5.4(a) which are required to maintain the validity of this Agreement as a result of any
change in any applicable legislation, rule or regulation thereunder shall:






	 	(i)  	if made before the Separation Time, be submitted to the
shareholders of the Corporation at the next meeting of shareholders and the
shareholders may, by the majority referred to in Subsection 5.4(b), confirm or
reject such amendment;












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	 	(ii)  	if made after the Separation Time, be submitted to the holders
of Rights at a meeting to be called for on a date not later than immediately
following the next meeting of shareholders of the Corporation and the holders
of Rights may, by resolution passed by the majority referred to in Subsection
5.4(d), confirm or reject such amendment.






	 	   	Any such amendment shall be effective from the date of the resolution of the Board
of Directors adopting such amendment, until it is confirmed or rejected or until it
ceases to be effective (as described in the next sentence) and, where such amendment
is confirmed, it continues in effect in the form so confirmed. If such amendment is
rejected by the shareholders or the holders of Rights or is not submitted to the
shareholders or holders of Rights as required, then such amendment shall cease to be
effective from and after the termination of the meeting at which it was rejected or
to which it should have been but was not submitted or from and after the date of the
meeting of holders of Rights that should have been but was not held, and no
subsequent resolution of the Board of Directors to amend this Agreement to
substantially the same effect shall be effective until confirmed by the shareholders
or holders of Rights as the case may be.










	5.5  	Fractional Rights and Fractional Shares






	 	(a)  	The Corporation shall not be required to issue fractions of Rights or to
distribute Rights Certificates which evidence fractional Rights. After the Separation
Time, in lieu of issuing fractional Rights, the Corporation shall pay to the holders of
record of the Rights Certificates (provided the Rights represented by such Rights
Certificates are not void pursuant to the provisions of Subsection 3.1(b), at the time
such fractional Rights would otherwise be issuable), an amount in cash equal to the
fraction of the Market Price of one whole Right that the fraction of a Right that would
otherwise be issuable is of one whole Right.
	 
	 	(b)  	The Corporation shall not be required to issue fractions of Common Shares upon
exercise of Rights or to distribute certificates which evidence fractional Common
Shares. In lieu of issuing fractional Common Shares, the Corporation shall pay to the
registered holders of Rights Certificates, at the time such Rights are exercised as
herein provided, an amount in cash equal to the fraction of the Market Price of one
Common Share that the fraction of a Common Share that would otherwise be issuable upon
the exercise of such Right is of one whole Common Share at the date of such exercise.










	5.6  	Rights of Action





          Subject to the terms of this Agreement, all rights of action in respect of this Agreement,
other than rights of action vested solely in the Rights Agent, are vested in the respective holders
of the Rights and Convertible Rights. Any holder of Rights or Convertible Rights, without the
consent of the Rights Agent or of the holder of any other Rights or Convertible Rights, may, on
such holder’s own behalf and for such holder’s own benefit and the benefit of other holders of
Rights or Convertible Rights, enforce, and may institute and maintain any suit, action or
proceeding against the Corporation to enforce such holder’s right to exercise such holder’s Rights
or Convertible Rights, or Rights or Convertible Rights to which such holder is entitled, in the
manner provided in such holder’s Rights or Convertible Rights and in this Agreement. Without
limiting the foregoing or any remedies available to the holders of Rights or Convertible Rights, it
is specifically acknowledged that the holders of Rights and Convertible Rights would not have an
adequate remedy at law for any breach of this Agreement and will be entitled to












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specific performance of the obligations under, and injunctive relief against actual or
threatened violations of the obligations of any Person subject to, this Agreement.









	5.7  	Regulatory Approvals





          Any obligation of the Corporation or action or event contemplated by this Agreement shall be
subject to the receipt of requisite approval or consent from any governmental or regulatory
authority, and without limiting the generality of the foregoing, necessary approvals of The Toronto
Stock Exchange and other exchanges shall be obtained, in relation to the issuance of Common Shares
upon the exercise of Rights under Subsection 2.2(d).









	5.8  	Declaration as to Non-Canadian or Non-U.S. Holders





          If in the opinion of the Board of Directors (who may rely upon the advice of counsel) any
action or event contemplated by this Agreement would require compliance by the Corporation with the
securities laws or comparable legislation of a jurisdiction outside Canada, the Board of Directors
acting in good faith shall take such actions as it may deem appropriate to ensure such compliance.
In no event shall the Corporation or the Rights Agent be required to issue or deliver Rights or
securities issuable on exercise of Rights to persons who are citizens, residents or nationals of
any jurisdiction other than Canada or the United States, in which such issue or delivery would be
unlawful without registration of the relevant Persons or securities for such purposes.









	5.9  	Notices






	 	(a)  	Notices or demands authorized or required by this Agreement to be given or made
by the Rights Agent or by the holder of any Rights or Convertible Rights to or on the
Corporation shall be sufficiently given or made if delivered, sent by registered or
certified mail, postage prepaid (until another address is filed in writing with the
Rights Agent), or sent by facsimile or other form of recorded electronic communication,
charges prepaid and confirmed in writing, as follows:




Canadian Pacific Railway Limited

Suite 500, Gulf Canada Square

401 – 9th Ave. S.W.

Calgary, AB T2P 4Z2


Attention:   Corporate Secretary

Fax No.:      (403) 319-6770




	 	(b)  	Notices or demands authorized or required by this Agreement to be given or made
by the Corporation or by the holder of any Rights or Convertible Rights to or on the
Rights Agent shall be sufficiently given or made if delivered, sent by registered or
certified mail, postage prepaid (until another address is filed in writing with the
Corporation), or sent by facsimile or other form of recorded electronic communication,
charges prepaid and confirmed in writing, as follows:












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Computershare Trust Company of Canada

530 – 8th Ave. S.W.

Calgary, AB T2P 3S8


Attention:   Stock Transfer Services

Fax No.:      (403) 260-6442




	 	(c)  	Notices or demands authorized or required by this Agreement to be given or made
by the Corporation or the Rights Agent to or on the holder of any Rights or Convertible
Rights shall be sufficiently given or made if delivered or sent by first class mail,
postage prepaid, addressed to such holder at the address of such holder as it appears
upon the register of the Rights Agent or, prior to the Separation Time, on the register
of the Corporation for its Common Shares or Convertible Shares. Any notice which is
mailed or sent in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.
	 
	 	(d)  	Any notice given or made in accordance with this Section 5.9 shall be deemed to
have been given and to have been received on the day of delivery, if so delivered, on
the third Business Day (excluding each day during which there exists any general
interruption of postal service due to strike, lockout or other cause) following the
mailing thereof, if so mailed, and on the day of telegraphing, telecopying or sending
of the same by other means of recorded electronic communication (provided such sending
is during the normal business hours of the addressee on a Business Day and if not, on
the first Business Day thereafter). Each of the Corporation and the Rights Agent may
from time to time change its address for notice by notice to the other given in the
manner aforesaid.










	5.10  	Costs of Enforcement





          The Corporation agrees that if the Corporation fails to fulfil any of its obligations pursuant
to this Agreement, then the Corporation will reimburse the holder of any Rights or Convertible
Rights for the costs and expenses (including legal fees) incurred by such holder to enforce his
rights pursuant to any Rights, Convertible Rights or this Agreement.









	5.11  	Successors





          All the covenants and provisions of this Agreement by or for the benefit of the Corporation or
the Rights Agent shall bind and enure to the benefit of their respective successors and assigns
hereunder.









	5.12  	Benefits of this Agreement





          Nothing in this Agreement shall be construed to give to any Person other than the Corporation,
the Rights Agent and the holders of the Rights and Convertible Rights any legal or equitable right,
remedy or claim under this Agreement; further, this Agreement shall be for the sole and exclusive
benefit of the Corporation, the Rights Agent and the holders of the Rights and the Convertible
Rights.









	5.13  	Governing Law





          This Agreement and each Right and Convertible Right issued hereunder shall be deemed to be a
contract made under the laws of the Province of Alberta and for all purposes shall be governed by












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and construed in accordance with the laws of such Province applicable to contracts to be made
and performed entirely within such Province.









	5.14  	Severability





          If any term or provision hereof or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or provision shall be
ineffective only as to such jurisdiction and to the extent of such invalidity or unenforceability
in such jurisdiction without invalidating or rendering unenforceable or ineffective the remaining
terms and provisions hereof in such jurisdiction or the application of such term or provision in
any other jurisdiction or to circumstances other than those as to which it is specifically held
invalid or unenforceable.









	5.15  	Coming Into Effect





          This Agreement is effective and in full force and effect in accordance with its terms from and
after the date hereof, provided that the shareholder rights plan contemplated hereby shall be
adopted with effect on the Effective Date. If this Agreement is not confirmed by resolution passed
by a majority of the votes cast by holders of Voting Shares of the Corporation who vote in respect
of confirmation of this Agreement at a meeting of the Corporation’s shareholders to be held on or
prior to April 15, 2002, then this Agreement and all outstanding Rights and Convertible Rights
shall terminate and be void and of no further force and effect on and from that date which is the
earlier of (a) the date of termination of the meeting called to consider the confirmation of this
Agreement under this Section 5.15 and (b) April 15, 2002.









	5.16  	Reconfirmation





          This Agreement must be reconfirmed by a resolution passed by a majority of greater than 50
percent of the votes cast by all holders of Voting Shares who vote in respect of such
reconfirmation at the annual meeting of the Corporation to be held in 2008 and at every third
annual meeting of the Corporation thereafter. If the Agreement is not so reconfirmed or is not
presented for reconfirmation at such annual meeting, the Agreement and all outstanding Rights and
Convertible Rights shall terminate and be void and of no further force and effect on and from the
date of termination of the annual meeting; provided that termination shall not occur if a Flip-in
Event has occurred (other than a Flip-in Event which has been waived pursuant to Subsection 5.1(a)
or (h) hereof), prior to the date upon which this Agreement would otherwise terminate pursuant to
this Section 5.16.









	5.17  	Determinations and Actions by the Board of Directors





          All actions, calculations and determinations (including all omissions with respect to the
foregoing) which are done or made by the Board of Directors, in good faith, for the purposes hereof
shall not subject the Board of Directors or any director of the Corporation to any liability to the
holders of the Rights or the Convertible Rights.









	5.18  	Time of the Essence





          Time shall be of the essence in this Agreement.













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	5.19  	Execution in Counterparts





          This Agreement may be executed in any number of counterparts and each of such counterparts
shall for all purposes be deemed to be an original, and all such counterparts shall together
constitute one and the same instrument.








ARTICLE 6 - CONVERTIBLE RIGHTS









	6.1  	Convertible Share Certificates





          Certificates for the Convertible Shares shall evidence one Convertible Right for each
Convertible Share represented thereby and each Convertible Right will be transferable only together
with, and will be transferred by a transfer of, such Convertible Share. Notwithstanding any other
provision of this Agreement, any Convertible Rights held by the Corporation or any of its
Subsidiaries shall be void.









	6.2  	Conversion of Convertible Rights






	 	(a)  	Each Convertible Right will entitle the holder thereof, prior to the earlier of
the Separation Time and the Expiration Time, to one Right for each whole Common Share
issued to the holder upon due exercise of the conversion privilege attached to the
Convertible Share associated with such Convertible Right without any further payment
therefor, and upon such issuance of a Common Share, the Convertible Right shall be
deemed to have been automatically converted into one Right for each Common Share so
issued. The holder of a Convertible Right shall not be entitled to, and the
Corporation shall not be required to issue, any fraction of a Right or any payment in
lieu thereof on exercise of such conversion privilege.
	 
	 	(b)  	In the event the Separation Time has occurred, each Convertible Right will
entitle the holder thereof to one Right for each whole Common Share into which his
Convertible Shares are then convertible at the then applicable conversion price and, as
of the Separation Time, such holder’s Convertible Rights shall be deemed to have
automatically become one Right for each such whole Common Share.










	6.3  	Persons Deemed Owners





          The Rights Agent and any agent of the Corporation or the Rights Agent may deem and treat the
Person in whose name a share certificate for a Convertible Share is registered as the absolute
owner thereof and of the Convertible Rights evidenced thereby for all purposes whatsoever. As used
in this Agreement, unless the context otherwise requires, the term “holder” of any Convertible
Rights shall mean the registered holder of the associated Convertible Share.









	6.4  	Agreement of Convertible Rights Holders





          Every holder of Convertible Rights by accepting the same consents and agrees with the
Corporation and the Rights Agent and with every other holder of Convertible Rights that:





	 	(a)  	he will be bound by and subject to the provisions of this Agreement, as amended
from time to time in accordance with the terms hereof, in respect of all Convertible
Rights held;












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	 	(b)  	each Convertible Right will be transferable only together with, and will be
transferred by a transfer of, the associated Convertible Share; and
	 
	 	(c)  	the Corporation, the Rights Agent and any agent of the Corporation or the
Rights Agent may deem and treat the person in whose name the associated Convertible
Share certificate is registered as the absolute owner thereof and of the Convertible
Rights evidenced thereby (notwithstanding any notations of ownership or writing on such
associated Convertible Share certificate made by anyone other than the Corporation or
the Rights Agent) for all purposes whatsoever, and neither the Corporation nor the
Rights Agent shall be affected by any notice to the contrary.





          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of
the date first above written.



	 	 	 	 	 
	 	CANADIAN PACIFIC RAILWAY LIMITED


 	 
	 	By:  	Signed
“Robert J. Ritchie”
 	 
	 
	 	 	 
	 	By:  	Signed
“G. A. Feigel”
 	 
	 	 	c/s	 
	 	 	 	 
	 



	 	 	 	 	 
	 	COMPUTERSHARE TRUST COMPANY OF CANADA


 	 
	 	By:  	Signed
“Lori Scigliano”
 	 
	 
	 	 	 
	 	By:  	Signed
“Carol Kinmond”
 	 
	 	 	c/s	 
	 	 	 	 












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ATTACHMENT 1




CANADIAN PACIFIC RAILWAY LIMITED




SHAREHOLDER RIGHTS PLAN AGREEMENT




[Form of Rights Certificate]




 




			
	Certificate No.                               
	 	Rights                               





THE RIGHTS ARE SUBJECT TO TERMINATION ON THE TERMS SET FORTH IN THE SHAREHOLDER RIGHTS PLAN
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SUBSECTION 3.1(b) OF THE SHAREHOLDER
RIGHTS PLAN AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR CERTAIN
RELATED PARTIES, OR TRANSFEREES OF AN ACQUIRING PERSON OR CERTAIN RELATED PARTIES, MAY
BECOME VOID.




Rights Certificate




          This certifies that                                                               
                     , or
registered assigns, is the registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and conditions of the
Shareholder Rights Plan Agreement, dated as of July 30, 2001, as the same may be amended or
supplemented from time to time (the ‘Shareholder Rights Agreement’), between Canadian Pacific
Railway Limited, a corporation duly incorporated under the Canada Business Corporations Act (the
‘Corporation’) and Computershare Trust Company of Canada, a trust company incorporated under the
laws of Canada (the ‘Rights Agent’) (which term shall include any successor Rights Agent under the
Shareholder Rights Agreement), to purchase from the Corporation at any time after the Separation
Time (as such term is defined in the Shareholder Rights Agreement) and prior to the Expiration Time
(as such term is defined in the Shareholder Rights Agreement), one fully paid common share of the
Corporation (a ‘Common Share’) at the Exercise Price referred to below, upon presentation and
surrender of this Rights Certificate with the Form of Election to Exercise (in the form provided
hereinafter) duly executed and submitted to the Rights Agent at its principal office in any of the
cities of Toronto, Montreal, Calgary and Vancouver or to the principal office of Computershare
Trust Company of New York in New York City, New York. The Exercise Price shall initially be
$   ·   (Cdn.) per Right and shall be subject to adjustment in certain events as provided in the
Shareholder Rights Agreement.




          In certain circumstances described in the Rights Agreement, the number of Common Shares which
each Right entitles the registered holder thereof to purchase shall be adjusted as provided in the
Rights Agreement.




          This Rights Certificate is subject to all of the terms and provisions of the Shareholder
Rights Agreement, which terms and provisions are incorporated herein by reference and made a part
hereof and to which Shareholder Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities thereunder of the Rights
Agent, the Corporation and the holders of the Rights Certificates. Copies of the Shareholder
Rights Agreement are on file at the registered office of the Corporation.




          This Rights Certificate, with or without other Rights Certificates, upon surrender at any of
the offices of the Rights Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing an aggregate number of Rights
equal to












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the aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be
entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for
the number of whole Rights not exercised.




          Subject to the provisions of the Rights Agreement, the Rights evidenced by this Certificate
may be redeemed by the Corporation at a redemption price of $0.000001 per Right, subject to
adjustment in certain events, under certain circumstances at its option.




          No fractional Common Shares will be issued upon the exercise of any Rights evidenced hereby,
but in lieu thereof a cash payment will be made, as provided in the Rights Agreement.




          No holder of this Rights Certificate, as such, shall be entitled to vote or receive dividends
or be deemed for any purpose the holder of Common Shares or of any other securities which may at
any time be issuable upon the exercise hereof, nor shall anything contained in the Shareholder
Rights Agreement or herein be construed to confer upon the holder hereof, as such, any of the
Rights of a shareholder of the Corporation or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or withhold consent to
any corporate action, or to receive notice of meetings or other actions affecting shareholders
(except as provided in the Shareholder Rights Agreement), or to receive dividends or subscription
rights, or otherwise, until the Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Shareholder Rights Agreement.




          This Rights Certificate shall not be valid or obligatory for any purpose until it shall have
been countersigned by the Rights Agent.




          WITNESS the facsimile signature of the proper officers of the Corporation and its corporate
seal.



Date:                                         




	 	 	 	 	 	 	 
	CANADIAN PACIFIC RAILWAY LIMITED	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	                                                                                	 	By:	 	                                                                                
	

	 	President
	 	 	 	Corporate Secretary
	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Countersigned:
 	 	 	 	 
	COMPUTERSHARE TRUST
COMPANY OF
CANADA	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	                                                                                	 	 	 	 
	

	 	Authorized Signature	 	 	 	 














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41






FORM OF ASSIGNMENT



(To be executed by the registered holder if such holder desires to transfer the Rights
Certificate.)
 
FOR VALUE
RECEIVED                                                                               hereby sells, assigns and

 


transfers unto                                                                                                                                                              

 


                                                                                                                                                             



(Please print name and address of transferee.)



the Rights represented by this Rights Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and

 


appoint                                                                              
, as attorney, to transfer the within Rights on the books of the Corporation,
with full

 

power
of substitution.



Dated:                                         






	 	 	 
	Signature Guaranteed:
 
	 	Signature
 
	
	 	(Signature must correspond to name
as written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.)






          Signature must be guaranteed by a Canadian chartered bank, a Canadian trust company, a member
of a recognized stock exchange or a member of the Securities Transfer Association Medallion (STAMP)
Program.






	 	 	 
	 







CERTIFICATE




(To be completed if true.)




          The undersigned party transferring Rights hereunder, hereby represents, for the benefit of all
holders of Rights and Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring
Person or an Affiliate or Associate thereof or a Person acting jointly or in concert with an
Acquiring Person or an Affiliate or Associate thereof. Capitalized terms shall have the meaning
ascribed thereto in the Shareholder Rights Agreement.


 


	 	 	 
	 
	 	Signature








	 	 	 
	 









(To be attached to each Rights Certificate)













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42








FORM OF ELECTION TO EXERCISE



(To be exercised by the registered holder if such holder desires to exercise the Rights Certificate.)



TO:                                                                                  




          The undersigned hereby irrevocably elects to exercise                               
whole Rights represented by the attached Rights Certificate to purchase the Common Shares or other
securities, if applicable, issuable upon the exercise of such Rights and requests that certificates
for such securities be issued in the name of:




                                                                                                                                                                                                                  



(Name)




                                                                                                                                                                                                                  





(Address)




                                                                                                                                                                                                                  





(City and Province)




                                                                                                                                                                                                                  




Social Insurance Number or other taxpayer identification number.




          If such number of Rights shall not be all the Rights evidenced by this Rights Certificate, a new
Rights Certificate for the balance of such Rights shall be registered in the name of and delivered
to:



                                                                                                                                                                                                                  





(Name)



                                                                                                                                                                                                                  





(Address)



                                                                                                                                                                                                                  





(City and Province)



                                                                                                                                                                                                                  





Social Insurance Number or other taxpayer identification number.




Dated:                                         



	 	 	 
	Signature Guaranteed:
	 	Signature
	 	 	 
	
	 	(Signature must correspond to name
as written upon the face of this Rights Certificate in every particular,
without alteration or enlargement or any change whatsoever.)






          Signature must be guaranteed by a Canadian chartered bank, a Canadian trust company, a member
of a recognized stock exchange or a member of the Securities Transfer Association Medallion (STAMP)
Program.






	 	 	 
	 















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43








CERTIFICATE




(To be completed if true.)




          The undersigned party exercising Rights hereunder, hereby represents, for the benefit of all
holders of Rights and Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the knowledge of the undersigned, have never been, Beneficially Owned by an Acquiring
Person or an Affiliate or Associate thereof or a Person acting jointly or in concert with an
Acquiring Person or an Affiliate or Associate thereof. Capitalized terms shall have the meaning
ascribed thereto in the Shareholder Rights Agreement.




 


	 	 	 
	 
	 	Signature








	 	 	 
	 









(To be attached to each Rights Certificate)










NOTICE




          In the event the certification set forth above in the Forms of Assignment and Election is not
completed, the Corporation will deem the Beneficial Owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof. No Rights Certificates
shall be issued in exchange for a Rights Certificate owned or deemed to have been owned by an
Acquiring Person or an Affiliate or Associate thereof, or by a Person acting jointly or in concert
with an Acquiring Person or an Affiliate or Associate thereof.