Document:

Shareholder Rights Plan Dated April 5, 2005

 

EXHIBIT 4.13

SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT

WESTERN WIND ENERGY CORP.

(the “Company”)

AND

PACIFIC CORPORATE TRUST COMPANY

(the “Rights Agent”)

April 5, 2005

 

 

TABLE OF CONTENTS

	 	 	 
	 	 	Page
	ARTICLE 1 INTERPRETATION 
	 	2
	 
	 	 
	1.1 Definitions: 
	 	2
	1.2 Currency: 
	 	15
	1.3 Headings and References: 
	 	15
	1.4 Calculation of Number and Percentage of Beneficial Ownership of
Outstanding Voting Shares:
	 	16
	1.5 Acting Jointly or in Concert: 
	 	16
	1.6 Generally Accepted Accounting Principles: 
	 	16
	 
	 	 
	ARTICLE 2 THE RIGHTS 
	 	17
	 
	 	 
	2.1 Legend on Common Share Certificates: 
	 	17
	2.2 Initial Exercise Price; Exercise of Rights; Detachment of Rights: 
	 	17
	2.3 Adjustments to Exercise Price; Number of Rights: 
	 	20
	2.4 Date on Which Exercise is Effective: 
	 	25
	2.5 Execution, Authentication, Delivery and Dating of Rights Certificates: 
	 	25
	2.6 Registration, Transfer and Exchange: 
	 	25
	2.7 Mutilated, Destroyed, Lost and Stolen Rights Certificates: 
	 	26
	2.8 Persons Deemed Owners: 
	 	27
	2.9 Delivery and Cancellation of Certificates: 
	 	27
	2.10 Agreement of Rights Holders: 
	 	27
	2.11 Rights Certificate Holder Not Deemed a Shareholder: 
	 	28
	 
	 	 
	ARTICLE 3 ADJUSTMENTS TO THE RIGHTS 
	 	29
	 
	 	 
	3.1 Flip-in Event: 
	 	29
	3.2 Exchange Option: 
	 	30
	3.3 Fiduciary Duties of the Board of Directors: 
	 	31
	 
	 	 
	ARTICLE 4 THE RIGHTS AGENT 
	 	31
	 
	 	 
	4.1 General: 
	 	31
	4.2 Merger or Amalgamation or Change of Name of Rights Agent: 
	 	32
	4.3 Duties of Rights Agent: 
	 	33
	4.4 Change of Rights Agent: 
	 	34

 

 

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	 	 	Page
	ARTICLE 5 MISCELLANEOUS 
	 	35
	 
	 	 
	5.1 Redemption and Waiver: 
	 	35
	5.2 Expiration: 
	 	36
	5.3 Issue of New Rights Certificates: 
	 	37
	5.4 Supplements and Amendments: 
	 	37
	5.5 Fractional Rights and Fractional Common Shares: 
	 	38
	5.6 Rights of Action: 
	 	38
	5.7 Regulatory Approvals: 
	 	39
	5.8 Declaration as to Non-Canadian holders: 
	 	39
	5.9 Notices: 
	 	39
	5. 10 Costs of Enforcement: 
	 	40
	5.11 Successors: 
	 	41
	5.12 Benefits of this Agreement: 
	 	41
	5.13 Governing Law: 
	 	41
	5.14 Severability: 
	 	41
	5.15 Effective Date: 
	 	41
	5.16 Confirmation: 
	 	41
	5.17 Determinations and Actions by the Board of Directors: 
	 	42
	5.18 Counterparts: 
	 	42

SCHEDULE A — FORM OF RIGHTS CERTIFICATE

 

 

SHAREHOLDER PROTECTION RIGHTS PLAN AGREEMENT

THIS SHAREHOLDER PROTECTION RIGHTS AGREEMENT DATED FOR REFERENCE APRIL 5, 2005.

BETWEEN:

WESTERN WIND ENERGY CORP., a company incorporated pursuant
to the laws of British Columbia and having its registered office at
Suite 1925 – 700 West Georgia Street, Vancouver, British Columbia
V7Y 1A1

(the “ Company”)

AND:

PACIFIC CORPORATE TRUST COMPANY, a trust company
incorporated under the laws of British Columbia and having an office
at 10th Floor, 625 Howe Street, Vancouver, BC V6C 3B8

(the “Rights Agent”)

WHEREAS:

A. The Board of Directors of the Company have determined that it is in the best interests of the
Company to adopt a shareholder protection rights plan to ensure, to the extent possible, that all
shareholders of the Company are treated fairly in connection with any take-over bid for the
Company.

B. In order to implement the adoption of a shareholder protection rights plan as established by
this Agreement the Board of Directors of the Company has:

	 	(1)	 	authorized the issuance, effective at 12:01 a.m. (Vancouver time) on the
Effective Date, of one Right in respect of each Common Share outstanding as of 12:01
a.m. (Vancouver time) on the Effective Date (the “Record Time”); and
	 
	 	(2)	 	authorized the issue of one Right in respect of each Common Share issued after
the Record Time and prior to the earlier of the Separation Time and the Expiration
Time.

C. Each Right entitles the holder thereof, after the Separation Time, to purchase securities of the
Company pursuant to the terms and subject to the conditions set forth in this Agreement.

D. The Company wishes to appoint the Rights Agent to act on behalf of the Company and the holders
of Rights, and the Rights Agent is willing to so act, in connection with the issuance, transfer,
exchange and replacement of Rights Certificates, the exercise of Rights and other matters referred
to in this Agreement.

E. The Board of Directors of the Company proposes that this Agreement be in place for a period of
ten years.

 

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NOW THEREFORE, in consideration of the premises and respective agreements set forth herein, the
parties hereto agree as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions:

In this Agreement, the following words and terms will, unless the context otherwise requires, have
the following meanings:

	 	(a)	 	“Acquiring Person” means any Person who is or becomes the Beneficial Owner of
20% or more of the outstanding Voting Shares, provided that the term “Acquiring Person”
will not include:

	 	(i)	 	the Company or any Subsidiary of the Company;
	 
	 	(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)	 	a Pro Rata Acquisition,

	 	 	 	provided 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 a Voting
Share Reduction, Permitted Bid Acquisitions, an Exempt Acquisition or a Pro
Rata Acquisition and thereafter such Person becomes the Beneficial Owner of
any additional Voting Shares (other than pursuant to a Voting Share
Reduction, Permitted Bid Acquisitions, an Exempt Acquisition or a Pro Rata
Acquisition), then as of the date that such Person becomes the Beneficial
Owner of such additional Voting Shares, such Person will 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 Subsection 1.1(f)(viii) solely because such Person or the
Beneficial Owner of such Voting Shares has participated in, proposes or intends
to make or is participating in a Take-Over Bid or any plan or proposal relating
thereto or resulting therefrom, 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 of facts indicating that any
Person has participated in, has made, proposes or intends to make or is
participating in a Take-Over Bid or any plans or proposals relating thereto or
resulting therefrom, including, without limitation, a report filed pursuant to
Section 111 of the Securities Act (British Columbia);

 

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	 	(iv)	 	an underwriter or member of a banking or selling group that
becomes the Beneficial Owner of 20% or more of the outstanding Voting Shares in
connection with a bona fide distribution to the public of securities by way of
a prospectus or private placement; or
	 
	 	(v)	 	a Grandfathered Person, provided that this exception will not
be, and will cease to be, applicable to a Grandfathered Person if such
Grandfathered Person, after the Record Time:

	 	(A)	 	ceases to have Beneficial Ownership of more
than 20% of the Voting Shares; or
	 
	 	(B)	 	becomes the Beneficial Owner of any additional
Voting Shares that increases its Beneficial Ownership of Voting Shares
by more than 2% of the number of Voting Shares outstanding from time to
time, other than through a Voting Share Reduction, a Permitted Bid
Acquisition, an Exempt Acquisition, a Pro Rata Acquisition or through
the exercise of existing rights to acquire additional Voting Shares
from the Company where such rights were owned by the Grandfathered
Person at the Record Time.

	 	(b)	 	“Affiliate” means, when used to indicate a relationship with a specified
Person, a Person that, directly, or indirectly through one or more intermediaries or
otherwise, controls, or is controlled by, or is under common control with, such
specified Person.
	 
	 	(c)	 	“Agreement” means this shareholder protection rights plan agreement dated for
reference April 5, 2005 between the Company and the Rights Agent, as amended, modified
or supplemented from time to time.
	 
	 	(d)	 	“annual cash dividend” means cash dividends paid at regular intervals in any
financial year of the Company to the extent that such cash dividends do not exceed, in
the aggregate, the greatest of:

	 	(i)	 	200% of the aggregate amount of cash dividends declared payable
by the Company on its Common Shares in its immediately preceding financial
year;
	 
	 	(ii)	 	300% of the arithmetic average of the aggregate amount of cash
dividends declared payable by the Company on its Common Shares in its three
immediately preceding financial years; and
	 
	 	(iii)	 	100% of the aggregate consolidated net income of the Company,
before extraordinary items, for its immediately preceding financial year.

	 	(e)	 	“Associate” means, when used to indicate a relationship with a specified
Person:

	 	(i)	 	a corporation of which that Person owns, at law or in equity,
            shares or securities currently convertible into shares carrying more than 10%
of the Voting Rights exercisable with respect to the election of directors
under all circumstances or by reason of the occurrence of an event that has
occurred and is continuing, or a

 

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	 	 	 	currently exercisable option or right to purchase such shares or such
convertible securities and with whom that Person is acting jointly or in
concert;
	 
	 	(ii)	 	a partner of that Person acting on behalf of the partnership of
which they are partners;
	 
	 	(iii)	 	a trust or estate in which that Person has a beneficial
interest and with whom that Person is acting jointly or in concert or in which
that Person has a beneficial interest of 50% or more or in respect of which
that Person serves as a trustee or in a similar capacity provided, however,
that a Person shall not be an associate of a trust by reason only of the fact
that such Person serves as a trustee or any similar capacity in relation to
such trust if such Person is duly licensed to carry on the business of a trust
company under the laws of Canada or any province thereof or if the ordinary
business of such Person includes the management of investment funds for
unaffiliated investors and such Person acts as trustee or in a similar capacity
in relation to such trust in the ordinary course of such business; and
	 
	 	(iv)	 	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.

	 	(f)	 	“Beneficial Owner”: a Person shall be deemed the “Beneficial Owner”, 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 is the direct or indirect owner at law or in equity and for the
purposes of this Subsection 1.1(f)(i), but without limiting the generality of
the foregoing, a Person shall be deemed to be an owner at law or in equity of
all securities:

	 	(A)	 	owned by a partnership of which the Person is a
partner;
	 
	 	(B)	 	owned by a trust in which the Person has a
beneficial interest and which is acting jointly or in concert with that
Person or in which the Person has a beneficial interest of 50% or more;
	 
	 	(C)	 	owned by 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 residing in the same residence;
	 
	 	(D)	 	owned jointly or in common with others; and
	 
	 	(E)	 	of which the Person may be deemed to be the
beneficial owner (whether or not of record) pursuant to the provisions
of the Business Corporations Act, or the Securities Act (British
Columbia) or pursuant to Rule 13d-3 or 13d-5 under the Exchange Act of
1934 (or pursuant to any comparable or successor laws, regulations or
rules enacted in relation to the provisions of the Business
Corporations Act or the Securities Act (British Columbia) or pursuant
to Rule 13d-3 or 13d-5 as in effect on the date of this Agreement);

 

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	 	(ii)	 	any securities as to which such Person or any of such Person’s
Affiliates or Associates has, directly or indirectly:

	 	(A)	 	the right to acquire (whether such right is
exercisable immediately or after the lapse or passage of time and
whether or not on condition or the happening of any contingency or
otherwise) pursuant to any agreement, arrangement, pledge or
understanding, whether or not in writing (other than (1) customary
agreements with and between underwriters and/or banking group members
and/or selling group members with respect to a bona fide distribution
to the public or private placement of securities; (2) pledges of
securities in the ordinary course of business that meet all the
conditions specified in Rule 13d-3(d)(3) under the Exchange Act of 1934
(except for the condition in Rule 13d-3(d)(3)(ii)); and (3) pledge
agreements with a registered securities dealer relating to the
extension of credit for purchases of securities on margin in the
ordinary course of the dealer’s business), or upon the exercise of any
conversion right, exchange right, share purchase right (other than the
Rights), warrant or option, or otherwise; or
	 
	 	(B)	 	the right to vote such securities (whether such
right is exercisable immediately or after the lapse or passage of time
and whether or not on condition or the happening of any contingency or
otherwise) pursuant to any agreement, arrangement, pledge (other than
(1) pledges of securities in the ordinary course of business that meet
all the conditions specified in Rule 13d-3(d)(3) under the Exchange Act
of 1934 (except for the condition in Rule 13d-3(d)(3)(ii)); and (2)
pledge agreements with a registered securities dealer relating to the
extension of credit for purchases of securities on margin in the
ordinary course of the dealer’s business) or understanding (whether or
not in writing) or otherwise;

	 	(iii)	 	any securities which are Beneficially Owned within the meaning
of Subsections 1.1(f)(i) or (ii) by any other Person with which such Person or
any of such Person’s Affiliates or Associates has any agreement, arrangement or
understanding, whether or not in writing (other than (1) customary agreements
with and between underwriters and/or banking group members and/or selling group
members with respect to a bona fide distribution to the public or private
placement of securities, (2) pledges of securities in the ordinary course of
business that meet all the conditions specified in Rule 13d-3(d)(3) under the
Exchange Act of 1934 (except for the condition in Rule 1 3d-3(d)(3)(ii)) and
(3) pledge agreements with a registered securities dealer relating to the
extension of credit for purchases of securities on margin in the ordinary
course of the dealer’s business) with respect to or for the purpose of acting
jointly or in concert in acquiring, holding, voting or disposing of any Voting
Shares of any class; and
	 
	 	(iv)	 	any securities which are directly or indirectly owned at law or
in equity by an Associate of such Person;

 

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	 	 	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:

	 	(v)	 	where such security has been deposited or tendered pursuant 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 referred to in Subsection
1.1(f)(iii), until such deposited or tendered security has been taken up or
paid for, whichever shall first occur;
	 
	 	(vi)	 	where such Person, any of such Person’s Affiliates or
Associates or any other Person referred to in Subsection 1.1(f)(iii), has or
shares the power to vote or direct the voting of such security in connection
with or in order to participate in a public proxy solicitation or pursuant to a
revocable proxy given in response to a public proxy solicitation or where such
Person has an agreement, arrangement or understanding with respect to a
shareholder proposal or proposals or a matter or matters to come before a
meeting of shareholders, including the election of directors;
	 
	 	(vii)	 	where such Person, any of such Person’s Affiliates or
Associates or any other Person referred to in Subsection 1.1(f)(iii), holds or
exercises voting or dispositive power over such security provided that:

	 	(A)	 	the ordinary business of any such Person (the
“Investment Manager”) includes the management of investment 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 voting
or dispositive power over 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 another Person
including non-discretionary accounts held on behalf of a client by a
broker or dealer registered under applicable laws (a “Client”);
	 
	 	(B)	 	such Person (the “Trust Company”) is licensed
to carry on the business of a trust company under the laws of Canada or
any province thereof 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 voting or dispositive
power over such security in the ordinary course of such duties for the
estate of any such deceased or incompetent Person or for such other
accounts;
	 
	 	(C)	 	such Person is established by statute for
purposes that include, and a substantial portion of the ordinary
business or activity of such Person (the “Statutory Body”) is, the
management of investment funds for employee benefit plans, pension
plans, insurance plans (other than plans administered by insurance
companies) or various public bodies;
	 
	 	(D)	 	such Person (the “Administrator”) is the
administrator or trustee of one or more pension funds or plans (a
“Plan”) registered under the laws of Canada or any Province thereof or
the laws of the United States of America or any State thereof; or

 

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	 	(E)	 	such Person 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 or the Crown Agent, as the
case may be, is not then making or proposing to make a Take-Over Bid, other
than an Offer to Acquire Voting Shares or other securities by means of a
distribution by the Company or by means of ordinary market transactions
(including prearranged trades) executed through the facilities of a stock
exchange or organized over-the-counter market, alone or by acting jointly or
in concert with any other Person; or

	 	(viii)	 	where such Person is a Client of the same Investment Manager as another
Person on whose account the Investment Manager holds or exercises voting or
dispositive power over such security, or by reason of such Person being an
Estate Account or an Other Account of the same Trust Company as another Person
on whose account the Trust Company holds or exercises voting or dispositive
power over such security or where such Person is a Plan and has an
Administrator who is also Administrator for another Plan on whose account the
Administrator holds or exercises voting or dispositive power over such
security; or
	 
	 	(ix)	 	where such Person is (A) a client of an Investment Manager and
such security is owned by law or in equity by the Investment Manager or (B) an
account of a Trust Company 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;
or
	 
	 	(x)	 	where such Person is the registered holder of securities as a
result of carrying on business of or acting as a nominee of a securities
depositary.

	 	(g)	 	“Board of Directors” means the board of directors from time to time of the
Company or any duly constituted and empowered committee thereof.
	 
	 	(h)	 	“Business Corporations Act” means the Business Corporations Act (British
Columbia) and the regulations thereunder, as now in effect or as the same may from time
to time be amended, re-enacted or replaced.
	 
	 	(i)	 	“Business Day” means any day other than a Saturday, Sunday or a day on which
banking institutions in Vancouver, British Columbia, are authorized or obligated by law
to close.
	 
	 	(j)	 	“Canadian Dollar Equivalent” means, for any amount which is expressed in United
States dollars on any date, the Canadian dollar equivalent of such amount determined by
reference to the U.S.-Canadian Exchange Rate on such date.
	 
	 	(k)	 	“Canadian-U.S. Exchange Rate” means, on any date, the inverse of the
U.S.-Canadian Exchange Rate.
	 
	 	(l)	 	“close of business” means, on any given date, 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 Vancouver, British Columbia, of the transfer agent for
the Common Shares of the Company (or, after the Separation Time, the office in
Vancouver, British Columbia, of the Rights Agent) closes to the public.

 

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	 	(m)	 	“Common Shares” means the common shares without par value in the capital of the
Company as presently constituted, as such shares may be subdivided, consolidated,
reclassified or otherwise changed from time to time.
	 
	 	(n)	 	“Competing Permitted Bid” means a Take-Over Bid made while a Permitted Bid is
in existence and that satisfies all of the provisions of a Permitted Bid except that
the condition set forth in Subsection 1.1(ak)(ii) may provide that the Voting Shares
that are the subject of the Take-Over Bid may be taken up or paid for on a date which
is not earlier than the later of 21 days (or such other minimum period of days as may
be prescribed by applicable law in British Columbia) after the date of the Take-Over
Bid or the earliest date on which Voting Shares may be taken up or paid for under any
other Permitted Bid that is in existence for the Voting Shares.
	 
	 	(o)	 	“controlled”: a corporation shall be deemed to be “controlled” by another
Person or two or more Persons if:

	 	(i)	 	securities entitled to vote in the election of directors
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
	 
	 	(ii)	 	the votes carried by such securities are entitled, if
exercised, to elect a majority of the Board of Directors of such corporation.

	 	(p)	 	“Co-Rights Agents” means a Co-Rights Agent, if any, appointed pursuant to
Subsection 4.1(a).
	 
	 	(q)	 	“Company” means Western Wind Energy Corp.
	 
	 	(r)	 	“Disposition Date” has the meaning ascribed thereto in Subsection 5.1(i).
	 
	 	(s)	 	“Dividend Reinvestment Acquisition” shall mean an acquisition of Voting Shares
pursuant to a Dividend Reinvestment Plan.
	 
	 	(t)	 	“Dividend Reinvestment Plan” means a regular dividend reinvestment or other
plan of the Company made available by the Company to holders of its securities 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
Company;
	 
	 	(ii)	 	proceeds of redemption of shares of the Company;
	 
	 	(iii)	 	interest paid on evidence of indebtedness of the Company; or
	 
	 	(iv)	 	optional cash payments;

	 	 	 	be applied to the purchase from the Company of Common Shares.

	 	(u)	 	“Effective Date” means April 5, 2005.
	 
	 	(v)	 	“Election to Exercise” means an election to exercise Rights substantially in
the form attached to the Rights Certificate.

 

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	 	(w)	 	“Exchange Act of 1934” means the Securities Exchange Act of 1934 (United States
of America), 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 repealed.
	 
	 	(x)	 	“Exempt Acquisition” means a share acquisition:

	 	(i)	 	in respect of which the Board of Directors has waived the
application of Section 3.1 pursuant to the provisions of Subsections 5.1(a) or
(i);
	 
	 	(ii)	 	which was made on or prior to the date of this Agreement; or
	 
	 	(iii)	 	which was made pursuant to a distribution by the Company of
Voting Shares by way of private placement by the Company or upon the exercise
by an individual employee of stock options granted under a stock option plan of
the Company or rights to purchase securities granted under a share purchase
plan of the Company provided that:

	 	(A)	 	all necessary stock exchange approvals for such
private placement, stock option plan or share purchase plan have been
obtained and such private placement, stock option plan or share
purchase plan complies with the terms and conditions of such approvals;
and
	 
	 	(B)	 	such Person does not become the Beneficial
Owner of more than 25% of the Voting Shares outstanding immediately
prior to the distribution, and in making this determination the Voting
Shares to be issued to such Person in the distribution shall be deemed
to be held by such Person but shall not be included in the aggregate
number of outstanding Voting Shares immediately prior to the
distribution.

	 	(y)	 	“Exercise Price” means, as of any date, the price at which a holder of a Right
may purchase the securities issuable upon exercise of one whole Right which, until
adjusted in accordance with the terms hereof, will be $50.
	 
	 	(z)	 	“Expansion Factor” shall have the meaning ascribed thereto in Subsection
2.3(a).
	 
	 	(aa)	 	“Expiration Time” means the earlier of:

	 	(i)	 	the time at which this Agreement or the right to exercise
Rights shall terminate (the “Termination Time”); and
	 
	 	(ii)	 	the termination of the annual meeting of the shareholders of
the Company in the year 2005

	 	 	 	provided, however, that if the resolutions, respectively, referred to in Section
5.16 are approved by Independent Shareholders in accordance with Section 5.16 at or
prior to such annual meeting, “Expiration Time” means the earlier of the Termination
Time and (ii) if this Agreement is not reconfirmed pursuant to Section 5.16, the
termination of the annual meeting of the shareholders of the Company in the year
2010 or 2013, as the case may be.

 

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	 	(ab)	 	“Flip-in Event” means a transaction or event in or pursuant to which a Person
becomes an Acquiring Person.
	 
	 	(ac)	 	“Grandfathered Person” means a Person who is the Beneficial Owner of 20% or
more of the outstanding Voting Shares of the Company determined as at the Record Time.
	 
	 	(ad)	 	“Holder” shall have the meaning ascribed thereto in Section 2.8.
	 
	 	(ae)	 	“Independent Shareholders” means holders of outstanding Voting Shares, other
than:

	 	(i)	 	any Acquiring Person;
	 
	 	(ii)	 	any Offeror;
	 
	 	(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, or with any Affiliate or Associate of 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 Company unless the beneficiaries of the plan or trust direct
the manner in which the Voting Shares are to be voted or direct whether the
Voting Shares are to be tendered to a Take-Over Bid.

	 	(af)	 	“Market Price” per share of any securities on any date means the average daily
Closing Price per Share of such securities 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 Day not to be fully comparable with the closing price on such date (or, if
such date is not a Trading Day, on the immediately preceding Trading Day), each such
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 such date or, if such date is not a Trading Day,
on the immediately preceding Trading Day. The closing price per share (“Closing Price
per Share”) of any securities on any date shall be:

	 	(i)	 	the closing board lot sale price or, in case no sale takes
place on such date, the average of the closing bid and ask prices per security,
as reported by the principal Canadian stock exchange (as determined by the
Board of Directors) on which such securities are listed and posted for trading;
	 
	 	(ii)	 	if for any reason none of such prices is available on such day
or the securities are not listed or posted for trading on a Canadian stock
exchange, the last sale price or, in case no such sale takes place on such
date, the average of the closing bid and ask prices for each of such securities
as reported by the principal United States securities exchange (as determined
by the Board of Directors) on which such securities are listed or remitted to
trading;

 

- 11 -

	 	(iii)	 	if for any reason none of such prices is available on such
date or the securities are not listed or remitted to trading on a Canadian
stock exchange or a 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
ask prices for each of such securities in the over the counter market, as
quoted by any reporting system then in use (as determined by the Board of
Directors); or
	 
	 	(iv)	 	if for any reason none of such prices is available on such date
or the securities are not listed or remitted to trading on a Canadian stock
exchange or a United States securities exchange or quoted by any such reporting
system, the average of the closing bid and ask prices as furnished by a
professional market maker making a market in the securities selected by the
Board of Directors;

	 	 	 	provided, however, that if for any reason none of such prices is available on such
day, the Closing Price per Share of such securities on such a date means the fair
value per share of such securities on such date as determined by the Board of
Directors, after consultation with a nationally recognized investment dealer or
investment banker with respect to the fair value per share of such securities. The
market price shall be expressed in Canadian dollars and, if initially determined in
respect of any date following part of the 20 consecutive trading day period in
question in United States dollars, such amount shall be translated into Canadian
dollars at such date at the Canadian dollar equivalent thereof.
	 
	 	 	 	Notwithstanding the foregoing, where the Board of Directors is satisfied that the
Market Price of securities as determined herein was affected by an anticipated or
actual Take-Over Bid or by improper manipulation, the Board of Directors may, acting
in good faith, determine the Market Price of securities, such determination to be
based on a finding as to the price at which a holder of securities of that class
could reasonably have expected to dispose of his securities immediately prior to the
relevant date excluding any change in price reasonably attributable to the
anticipated or actual Take-Over Bid or to the improper manipulation.

	 	(ag)	 	“Nominee” has the meaning ascribed thereto in Subsection 2.2(c).
	 
	 	(ah)	 	“Offer to Acquire” includes:

	 	(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.

	 	(ai)	 	“Offeror” means a Person who has announced an intention to make, or who has
made, a Take-Over Bid but excluding any such Person if the Take-Over Bid so announced
by or made by such Person has been withdrawn, terminated or expired.
	 
	 	(aj)	 	“Offeror’s Securities” means the aggregate of all Voting Shares Beneficially
Owned by the Offeror on the date of an Offer to Acquire.

 

- 12 -

	 	(ak)	 	“Permitted Bid” means a Take-Over Bid made by an Offeror by way of a takeover
bid circular which also complies with the following additional provisions:

	 	(i)	 	the Take-Over Bid is made for all outstanding Voting Shares and
to all holders of Voting Shares as registered on the books of the Company,
other than the Offeror. For greater certainty and without limiting the
generality of the foregoing, a Take-Over Bid, which excludes a holder of Shares
resident in a specific jurisdiction, does not meet the requirements of this
Subsection 1.1(ak)(i). The Take-Over Bid shall expressly state that Common
Shares issued on the exercise of share purchase warrants, options and other
securities convertible into Common Shares shall, subject to compliance with the
procedures applicable generally to the tendering of Voting Shares of the
Take-Over Bid, be eligible to be tendered under the Take-Over Bid;
	 
	 	(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 prior to the close of business on a date which is not less than
60 days following the date of the Take-Over Bid and 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)	 	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 Subsection 1.1(ak)(ii) unless
the Take-Over Bid is withdrawn and that any Voting Shares deposited pursuant to
the Take-Over Bid may be withdrawn until taken up and paid for; and
	 
	 	(iv)	 	the Take-Over Bid contains an irrevocable and unqualified
provision that if the deposit condition set forth in Subsection 1.1(ak)(ii) 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 (10) Business Days from the date of such public announcement;

	 	 	 	provided that if a Take-Over Bid constitutes a Competing Permitted Bid the term
“Permitted Bid” shall also mean the Competing Permitted Bid.

	 	(al)	 	“Permitted Bid Acquisition” means an acquisition of Voting Shares made pursuant
to a Permitted Bid or a Competing Permitted Bid.
	 
	 	(am)	 	“Person” includes an individual, body corporate, partnership, syndicate or
other form of unincorporated association, a government and its agencies or
instrumentalities, any entity or group (as such term is used in Rule 13d-5 under the
Exchange Act of 1934 as in effect on the date hereof) whether or not having legal
personality and any of the foregoing acting in any derivative, representative or
fiduciary capacity.
	 
	 	(an)	 	“Pro-Rata Acquisition” means an acquisition by a Person of Voting Shares
pursuant to:

	 	(i)	 	a Dividend Reinvestment Acquisition;

 

- 13 -

	 	(ii)	 	a stock dividend, stock split or other event in respect of
securities of the Company pursuant to which such Person becomes a beneficial
owner of Voting Shares on the same pro-rata basis as all other holders of
securities;
	 
	 	(iii)	 	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 Company pursuant to a bona fide rights offering or
pursuant to a prospectus provided the Person does not acquire a greater
percentage of Voting Shares so offered than the Person’s percentage of voting
shares Beneficially Owned immediately prior to such acquisition; or
	 
	 	(iv)	 	a distribution to the public 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.

	 	(ao)	 	“Record Time” means 12:01 a.m. (Vancouver time) on the Effective Date.
	 
	 	(ap)	 	“Redemption Price” has the meaning ascribed thereto in Subsection 5.1(c).
	 
	 	(aq)	 	“Right” means a right to purchase Common Shares on and subject to the terms and
conditions of this Agreement.
	 
	 	(ar)	 	“Rights Agent” means Pacific Corporate Trust Company and any successor rights
agent hereunder.
	 
	 	(as)	 	“Rights Certificate” means a certificate representing Rights in substantially
the form of Schedule A attached hereto.
	 
	 	(at)	 	“Rights Register” shall have the meaning ascribed thereto in Subsection 2.6(a).
	 
	 	(au)	 	“Securities Act (British Columbia)” means the Securities Act, R.S.B.C. 1996,
c.418, 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.
	 
	 	(av)	 	“Securities Act of 1933” means the Securities Act of 1933 (United States of
America), 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.
	 
	 	(aw)	 	“Separation Time” means 4:00 p.m. on the 10th Business Day after the earlier
of:

	 	(i)	 	the Share Acquisition Date; and
	 
	 	(ii)	 	the date of the commencement of or first public announcement of
the intent of any Person (other than the Company or any Subsidiary of the
Company) to commence a Take-Over Bid (other than a Permitted Bid or a Competing
Permitted Bid so long as such Take-Over Bid continues to satisfy the
requirements of a Permitted Bid) as

 

- 14 -

	 	 	 	the case may be; provided that, if any such Take-Over Bid expires, is
canceled, 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 upon which a Permitted Bid ceases to be a Permitted Bid

	 	 	 	or such earlier or later time as may be determined by the Board of Directors
provided that if the foregoing results in the Separation Time being prior to the
Record Time, the Separation Time shall be the Record Time and if the Board of
Directors determined pursuant to Section 5.1 to waive the application of Section 3.1
to a Flip-in Event the Separation Time in respect of such Flip-in Event shall be
deemed never to have occurred.
	 
	 	(ax)	 	“Share Acquisition Date” means the first date of a public announcement or
disclosure (which, for purposes of this definition, shall include, without limitation,
a report filed pursuant to Section 111 of the Securities Act (British Columbia)) by the
Company or an Acquiring Person that a Person has become an Acquiring Person.
	 
	 	(ay)	 	“Special Meeting” means a Special Meeting of the holders of Voting Shares,
called by the Board of Directors for the purpose of approving a supplement, amendment
or variation of this Agreement and the Rights pursuant to Subsection 5.4(b) or
Subsection 5.4(c).
	 
	 	(az)	 	“Subsidiary” a corporation shall be deemed to be 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; or
	 
	 	(iii)	 	the date upon which a Permitted Bid or Competing Permitted Bid
ceases to be such.

	 	(ba)	 	“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, but excluding any Offer to Acquire Voting Shares made after the
Record Time by a Grandfathered Person, provided, assuming the successful completion of
such Offer to Acquire, the Grandfathered Person would not become the Beneficial Owner
of Voting Shares in excess of the percentage set out in Subsection 1.1(a)(v)(B).

 

 - 15 -

	 	(bb)	 	“Trading Day” means, when used with respect to any securities, a day on which
the principal Canadian stock exchange on which such securities are listed or posted for
trading is open for the transaction of business or, if the securities are not listed or
posted for trading on any Canadian stock exchange, a Business Day.
	 
	 	(bc)	 	“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 the manner
determined by the Board of Directors from time to time.

	 	(bd)	 	“U.S. Dollar Equivalent” means, for any amount which is expressed in Canadian
dollars on any date, the United States dollar equivalent of such amount determined by
reference to the Canadian-U.S. Exchange Rate on such date.
	 
	 	(be)	 	“Voting Shares” means the Common Shares and any other shares of the Company
entitled to vote generally and at all times for the election of directors of the
Company.
	 
	 	(bf)	 	“Voting Share Reduction” means an acquisition or redemption by the Company of
outstanding Voting Shares which, by reducing the number of Voting Shares outstanding,
increases the percentage of Voting Shares Beneficially Owned by a Person to 20% or more
of the Voting Shares then outstanding.

	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 and References:

The headings of the articles, sections and subsections of this Agreement and the table of contents
are inserted for convenience of reference only and shall not affect the construction or
interpretation of this Agreement. All references to articles, sections, subsections and paragraphs
are to articles, sections, subsections and paragraphs of this Agreement. The words “hereto”,
“herein”, “hereof’, “hereunder”, “this Agreement”, “the Rights Agreement” and similar expressions
refer to this Agreement including the schedule attached hereto as a whole, as the same may be
amended, modified or supplemented at any time or from time to time.

 

 - 16 -

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

For purposes of this Agreement, the percentage of Voting Shares of any class Beneficially Owned by
any Person, will 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 of the particular class Beneficially
Owned by such Person; and
	 
	 	 	 	 	 	 
	 

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

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

	1.5	 	Acting Jointly or in Concert:

For purposes of this Agreement, whether Persons are acting jointly or in concert is a question of
fact in each circumstance, however, a Person shall be deemed to be acting jointly or in concert
with another Person if such Person would be deemed to be acting jointly or in concert with such
other Person for purposes of Subsection 96(1) of the Securities Act (British Columbia) (other than
by virtue of the inclusion of the word “associate” in Subsection 96(1) of the Securities Act
(British Columbia) as it exists on the date hereof). Notwithstanding the foregoing and for greater
certainty, the phrase “acting jointly or in concert”, wherever used in this Agreement, shall not
include conduct:

	 	(a)	 	unrelated to the Company; or
	 
	 	(b)	 	pertaining to:

	 	(i)	 	voting or directing the vote of securities of the Company
pursuant to a revocable proxy given in response to a public proxy solicitation;
	 
	 	(ii)	 	voting or directing the vote of securities of the Company in
connection with or in order to participate in a public proxy solicitation made
or to be made;
	 
	 	(iii)	 	having an agreement, arrangement or understanding with respect
to a particular shareholder proposal or a particular matter to come before a
meeting of shareholders, including the election of directors.

	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 of the date
on which a calculation is made or required to be made in accordance with generally accepted
accounting principles. Where the character or

 

 - 17 -

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	 	Legend on Common Share Certificates:

Certificates representing Common Shares which are issued after the Record Time but prior to the
earlier of the Separation Time and the Expiration Time, will evidence one Right for each Common
Share represented thereby and shall have impressed, printed or written thereon or otherwise affixed
thereto the following legend:

“Until the Separation Time (as such term is defined in the Shareholder Protection
Rights Plan Agreement referred to below), this certificate also evidences and
entitles the holder hereof to certain rights as set forth in the shareholder
protection rights plan agreement (the “Shareholder Protection Rights Plan
Agreement”) dated for reference April 5, 2005 between the Company and Pacific
Corporate Trust Company, as Rights Agent, the terms of which are hereby incorporated
herein by reference and a copy of which is on file and may be inspected during
normal business hours at the principal executive office of the Company. Under
certain circumstances as set forth in the Shareholder Protection Rights Plan
Agreement, such Rights may be amended, redeemed or exchanged, may expire, may lapse,
may become void (if, in certain circumstances, they are “Beneficially Owned” by a
person who is or becomes an “Acquiring Person”, as such terms are defined in the
Shareholder Protection Rights Plan Agreement, or a transferee thereof) or may be
evidenced by separate certificates and may no longer be evidenced by this
certificate. The Company will mail or arrange for the mailing of a copy of the
Shareholder Protection Rights Plan Agreement to the holder of this certificate
without charge as soon as practicable after the receipt of a written request
therefor.”

Certificates representing Common Shares that are issued and outstanding at the Record Time will
also evidence one Right for each one Common Share evidenced thereby, notwithstanding the absence of
the foregoing legend, until the close of business on the earlier of the Separation Time and the
Expiration Time.

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

	 	(a)	 	Exercise Terms: 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. Notwithstanding
any other provision of this Agreement, any Rights held by the Company or any of its
Subsidiaries will be void.

 

 - 18 -

	(b)	 	No Exercise Prior to Separation Time: Until the Separation Time:

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

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

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

Promptly following the Separation Time, the Company 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 such Rights (a “Nominee”)), at such holder’s address as shown by the
records of the Company (the Company hereby agreeing to furnish copies of such
records to the Rights Agent for this purpose):

	 	(iii)	 	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 Company 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 “system” on which the Rights
may from time to time be listed or traded, or to conform to usage; and
	 
	 	(iv)	 	a disclosure statement describing the Rights;

provided that a Nominee shall be sent the materials provided for in (iii) and (iv)
in respect of all Common Shares of the Company held of record by it which are not
Beneficially Owned by an Acquiring Person. In order for the Company to determine
whether any Person is holding Common Shares which are Beneficially Owned by another
Person, the Company may require such first mentioned Person to furnish such
information and documentation as the Company deems necessary or appropriate in order
to make such determination.

	(d)	 	Manner of Exercise: 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 Right;

 

 - 19 -

	 	(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 their executors or administrators or
other personal representatives or their legal attorney duly appointed by
instrument in writing in form and executed in a manner satisfactory to the
Rights Agent; and
	 
	 	(iii)	 	payment by certified cheque, banker’s draft or money order
payable to the order of the Company, in 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 charge which may be payable in respect of any
transfer involved and the transfer or delivery of Rights Certificates or the
issuance or delivery of certificates of Common Shares in a name other than that
of the holder of the Rights being exercised.

	 	(e)	 	Issue of Common Shares: Upon receipt of a Rights Certificate, together
with a completed Election to Exercise executed in accordance with Subsection 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 Subsection 2.2(d)(iii), the Rights Agent (unless
otherwise instructed by the Company if the Company 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 Common Shares to be purchased (the Company hereby irrevocably
authorizing its transfer agent to comply with all such requisitions);
	 
	 	(ii)	 	when appropriate, requisition from the Company the amount of
cash to be paid in lieu of issuing fractional Common Shares;
	 
	 	(iii)	 	after receipt of the certificates referred to in Subsection
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 Subsection 2.2(e)(ii) to or to the order of the registered holder of such
Rights Certificate; and
	 
	 	(v)	 	tender to the Company all payments received on exercise of the
Rights.

	 	(f)	 	Partial Exercise: If the holder of any Rights shall exercise less than
all of the Rights evidenced by the Rights Certificate of such holder, 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 authorized assigns.
	 
	 	(g)	 	Covenants: The Company covenants and agrees to:

	 	(i)	 	take all such action as may be necessary on its part and within
its powers to ensure that all Common Shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates evidencing such Common
Shares (subject to payment of the Exercise Price), be validly authorized,
executed, issued and delivered and be fully paid and non-assessable;

 

 - 20 -

	 	(ii)	 	take all such action as may be necessary and within its power
to comply with any applicable requirements of the Business Corporations Act,
the Securities Act (British Columbia), and the securities laws or comparable
legislation of each of the other provinces and territories of Canada, and any
other applicable law, rule or regulation thereof, in connection with the issue
and delivery of the Rights Certificates and the issuance of the Common Shares
upon exercise of Rights;
	 
	 	(iii)	 	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;
	 
	 	(iv)	 	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
Company to withhold tax) which may be payable in respect of the original
issuance or delivery of the Rights Certificates, or certificates for the Common
Shares to be issued upon exercise of any Rights, provided that the Company
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
	 
	 	(v)	 	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)	 	Share Reorganization: If the Company 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 Company) other than
pursuant to any optional stock dividend program, dividend reinvestment plan or
dividend payable in Common Shares in lieu of a regular periodic cash dividend;
	 
	 	(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 Company) in

 

 - 21 -

	 	 	 	respect of, in lieu of or in exchange for existing Common Shares, except as
otherwise provided in this Section 2.3,

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 an event occurs which would require an
adjustment under both this Section 2.3 and Subsection 3.1(a), the adjustment
provided for in this Section 2.3 shall be in addition to, and shall be made prior
to, any adjustment required under Subsection 3.1(a).

If the Exercise Price and number of Rights outstanding are to be adjusted:

	 	(1)	 	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
	 
	 	(2)	 	each Right held prior to such adjustment will become that
number of Rights as results from the application of 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 in effect following the payment or
effective date of the event referred to in Subsection 2.3(a)(i), (ii), (iii) or
(iv), as the case may be.

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 Company shall issue
any shares of capital stock other than Common Shares in a transaction of a type
described in Subsection 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 Company and the Rights Agent agree to
amend this Agreement in order to effect such treatment.

If the Company 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)	 	Rights Offering: If the Company 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 21 calendar days

 

 - 22 -

	 	 	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 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 if 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 the 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 Company; provided, however, that, in
all such cases, the right to purchase Common Shares is at a price per share of not
less than 80% of the current market price per share (determined as provided in such
plans) of the Common Shares.

	(c)	 	Special Distribution: If the Company 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 paid in Common Shares, but including any
dividend payable in securities 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

 

 - 23 -

	 	 	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 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 if 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)	 	Minimum Adjustments: 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)	 	Discretionary Adjustment: If the Company 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 Subsection 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), such adjustments, rather than the
adjustments contemplated by Subsections 2.3(a), (b) and (c), shall be made. The
Company and the Rights Agent shall have authority without the approval of the holders
of the Common Shares or the holders of Rights to amend this Agreement as appropriate to
provide for such adjustments.
	 
	(f)	 	Benefit of Adjustments: Each Right originally issued by the Company
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.

  

 

- 24 -

	 	(g)	 	No Change of Certificates: 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 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)	 	Timing of Issuance: 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 Company 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 Company, if any, issuable upon such
exercise over and above the number of Common Shares and other securities of the
Company, if any, issuable upon such exercise on the basis of the Exercise Price in
effect prior to such adjustment;
	 
	 	(i)	 	Adjustments Regarding Tax: Notwithstanding anything contained in this
Section 2.3 to the contrary, the Company 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
shall determine 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 Company to holders of its Common Shares, shall not be taxable
to such shareholders.
	 
	 	(j)	 	Adjustments to Other Securities: If, as a result of an adjustment made
pursuant to Section 3.2, the holder of any Right thereafter exercised shall become
entitled to receive any securities other than Common Shares, thereafter the number of
such other securities so receivable upon exercise of any Right and applicable Exercise
Price thereof shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as may be practicable to the provisions with respect to the Common
Shares contained in the foregoing subsections in this Section 2.3 and the provisions of
this Agreement with respect to the Common Shares shall apply on like terms to any such
other securities.
	 
	 	(k)	 	Adjustment Certificate: Whenever an adjustment to the Exercise Price
or a change in the securities purchasable upon the exercise of Rights is made pursuant
to this Section 2.3, the Company shall promptly:

	 	(i)	 	prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment;
	 
	 	(ii)	 	file with the Rights Agent and with each transfer agent for the
Common Shares, a copy of such certificate; and

 

- 25 -

	 	(iii)	 	cause notice of the particulars of such adjustment or change
to be given to the holders of the Rights.

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 transfer books of the
Common Shares of the Company are closed, such Person shall be deemed to have become the holder of
record of such Common Shares on, and such certificate shall be dated, the next succeeding Business
Day on which the transfer books of the Common Shares are open.

2.5 Execution, Authentication, Delivery and Dating of Rights Certificates:

	 	(a)	 	Execution: The Rights Certificates shall be executed on behalf of the Company,
under its corporate seal reproduced thereon, by any one of its Chairman, President,
Chief Executive Officer or a Vice-President or Secretary. The signature of any of
these officers on the Rights Certificates may be manual or facsimile.
	 
	 	(b)	 	Valid Signatures: Rights Certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the countersignature and delivery of such Rights
Certificates.
	 
	 	(c)	 	Delivery: Promptly after the Company learns of the Separation Time, the
Company shall notify the Rights Agent of such Separation Time and shall deliver Rights
Certificates executed by the Company to the Rights Agent for countersignature, and the
Rights Agent shall countersign (manually or by facsimile signature in a manner
satisfactory to the Company) and send such Rights Certificates and a disclosure
statement describing the Rights 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 in the manner described above.
	 
	 	(d)	 	Date: Each Rights Certificate shall be dated the date of
countersignature thereof.

2.6 Registration, Transfer and Exchange:

	 	(a)	 	Maintaining of Register: The Company shall cause to be kept a register
(the “Rights Register”) in which, subject to such reasonable regulations as it may
prescribe, the Company shall provide for the registration and transfer of Rights. The
Rights Agent is hereby appointed registrar for the Rights (“Rights Registrar”) for the
purpose of maintaining the Rights Register for the Company and registering Rights and
transfers of Rights as herein provided and the Rights Agent hereby accepts such
appointment. If the Rights Agent shall cease to be the Rights Registrar, the Rights
Agent shall have the right to examine such register at all reasonable times.

 

- 26 -

	 	(b)	 	Transfer or Exchange of Rights Certificate: 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 Subsections 2.6(c)
and 3.1(b) below, the Company shall execute, and the Rights Agent shall 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 Certificate so
surrendered.
	 
	 	(c)	 	Effect of Transfer or Exchange: All Rights issued upon any
registration of a transfer or exchange of Rights Certificates shall be valid
obligations of the Company, and such Rights shall be entitled to the same benefits
under this Agreement as the Rights surrendered upon such registration of transfer or
exchange.
	 
	 	(d)	 	Transfer or Exchange of Rights: Every Rights Certificate surrendered
for registration of transfer or exchange shall have the form of assignment thereon
completed and executed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company or the Rights Agent, as the case may be, executed by the
holder thereof or the attorney of such holder duly authorized in writing. As a
condition to the issue of any new Rights Certificate under this Section 2.6, the
Company may require the payment of an amount sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and other expenses,
including the reasonable fees and expenses of its Rights Agent, connected therewith.
	 
	 	(e)	 	No Transfer or Exchange After Termination: The Company shall not be
required to register the transfer or exchange of any Rights after the Rights have been
terminated pursuant to the provisions of this Agreement.

2.7 Mutilated, Destroyed, Lost and Stolen Rights Certificates:

	 	(a)	 	Mutilation: If there shall be delivered to the Company and the Rights Agent
prior to the Expiration Time, evidence to their satisfaction of the mutilation or
defacing of any Rights Certificate, the Company shall execute and the Rights Agent
shall countersign and deliver a new Rights Certificate upon surrender and cancellation
of the mutilated or defaced Rights Certificate.
	 
	 	(b)	 	Destruction, Loss: If there shall be delivered to the Company and the
Rights Agent prior to the Expiration Time:

	 	(i)	 	evidence to their satisfaction of the destruction, loss or
theft of any Rights Certificate; and
	 
	 	(ii)	 	such security or indemnity as may be required by them to save
each of them and their respective agents harmless, then, in the absence of
notice to the Company or the Rights Agent that such Rights Certificate has been
acquired by a bona fide purchaser, the Company shall execute and 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 Rights Certificate so destroyed, lost or stolen.

 

- 27 -

	 	(c)	 	Taxes: As a condition to the issue of any new Rights Certificate under
this Section 2.7, the Company or the Rights Agent may require the payment of an amount
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)	 	Original Obligation: Every new Rights Certificate issued pursuant to
this Section 2.7 in lieu of any mutilated, destroyed, lost or stolen Rights Certificate
shall evidence an additional original contractual obligation of the Company, whether or
not the mutilated, 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 issued hereunder.

2.8 Persons Deemed Owners:

The Company, the Rights Agent and any agent of the Company or the Rights Agent may deem and treat
the person in whose name such 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 Right shall mean the registered holder of such Right (or, prior
to the Separation Time of the associated Common Share).

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 canceled by the Rights Agent. The Company may at
any time deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Company may have acquired in any manner whatsoever,
and all Rights Certificates so delivered shall be promptly canceled by the Rights Agent. No Rights
Certificates shall be countersigned in lieu of or in exchange for any Rights Certificates canceled
as provided in this Section 2.9, except as expressly permitted by this Agreement. The Rights Agent
shall destroy all canceled Rights Certificates and deliver a certificate of destruction to the
Company.

2.10 Agreement of Rights Holders:

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

	 	(a)	 	such holder is 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)	 	prior to the Separation Time, each Right shall be transferable only together
with, and shall be transferred by a transfer of, the associated Common Share
certificate representing such Right;
	 
	 	(c)	 	after the Separation Time, the Rights Certificates shall be transferable only
on the Rights Register as provided herein;

 

- 28 -

	 	(d)	 	prior to due presentment of a Rights Certificate (or, to the Separation Time,
the certificate evidencing the associated Common Shares certificate) for registration
of transfer, the Company, the Rights Agent and any agent of the Company or the Rights
Agent may deem and treat the Person in whose name the Rights Certificate (or, prior to
the Separation Time, the certificate evidencing the associated Common Shares
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 certificate evidencing the associated Common Shares made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and neither
the Company nor the Rights Agent shall be affected by any notice to the contrary;
	 
	 	(e)	 	such holder has waived all rights to receive any fractional Right or any
fractional Common Share or other securities upon exercise of a Right (except as
provided herein);
	 
	 	(f)	 	without the approval of any holder of Rights or Voting Shares and upon the sole
authority of the Board of Directors, this Agreement may be supplemented or amended from
time to time pursuant to Subsection 5.4(a) and the last sentence of the penultimate
paragraph of Subsection 2.3(a) and 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.
	 
	 	(g)	 	that notwithstanding anything in this Agreement to the contrary, neither the
Company nor the Board of Directors nor the Rights Agent shall have any liability to any
holder of a Right or to any other Person as a result of the inability of the Company,
the Board of Directors or the Rights Agent to perform any of its obligations under this
Agreement by reason of any preliminary or permanent jurisdiction or other order, decree
or ruling issued by a court of competent jurisdiction or by a government, 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.

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 Company 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 to 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 Company
or any right to vote at any meeting of shareholders of the Company whether for the election of
directors or otherwise or upon any matter submitted to the holders of Common Shares or any other
shares of the Company at any meeting thereof, or to give or withhold consent to any action of the
Company, or to receive notice of any meeting or other action affecting any holder of Common Shares
or any other shares of the Company except as expressly provided herein, or to receive dividends,
distributions or subscription rights, or otherwise, until the Rights or Rights evidenced by the
Rights Certificates shall have been duly exercised in accordance with the terms and the provisions
hereof.

 

- 29 -

ARTICLE 3

ADJUSTMENTS TO THE RIGHTS

3.1 Flip-in Event:

	 	(a)	 	Flip-In: Subject to the provisions of Subsection 3.1(b), Section 3.2
and Section 5.1, if prior to the Expiration Time a Flip-in Event shall occur, each
Right shall constitute, effective at the close of business on the tenth Trading Day
after the Share Acquisition Date, the right to purchase from the Company, upon exercise
thereof in accordance with the terms hereof, that number of Common Shares as have 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 hereof if, after such date of consummation or
occurrence, an event of a type analogous to any of the events described in Section 2.3
hereof shall have occurred).
	 
	 	(b)	 	Certain Rights Void: 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 and the Share
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, 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 an 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 Subsection 3.1(b)(i),

	 	 	 	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)	 	Compliance with Laws: From and after the Separation Time, the Company
shall do all 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 that may be required to satisfy the requirements of the Securities
Act (British Columbia) and the securities laws or comparable legislation of each of the
Provinces of Canada in respect of the issue of Common Shares on the exercise of Rights
in accordance with this Agreement.
	 
	 	(d)	 	Legend: Any Rights Certificate that represents Rights Beneficially
Owned by a Person described in either Subsection 3.1(b)(i) or (ii) or transferred to
any Nominee of any such Person, and any Rights Certificate issued upon the transfer,
exchange or replacement of any

 

- 30 -

	 	 	 	other Rights Certificate referred to in this sentence shall contain and be deemed to
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 Protection 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 shall become void in
the circumstances specified in Subsection 3.1(b) of the Shareholder
Protection 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 be required to impose such legend only if instructed to do so by the
Company 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.

3.2 Exchange Option:

	 	(a)	 	Optional Exchange: If the Board of Directors shall determine that
conditions exist which would eliminate or otherwise materially diminish in any respect
the benefits intended to be afforded to the holders of Rights pursuant to this
Agreement, the Board of Directors may at its option and without seeking the approval of
holders of Common Shares or Rights at any time after a Flip-in Event has occurred,
authorize the Company to issue and deliver in respect of each Right which is not void
pursuant to Subsection 3.1(b) either:

	 	(i)	 	in return for the Exercise Price and Right, cash, debt, equity
or other securities or other property or assets (or a combination thereof)
having a value equal to twice the Exercise Price; or
	 
	 	(ii)	 	in return for the Right and without further charge, subject to
any amounts that may be required to be paid under applicable law, cash, debt,
equity or other securities or other property or assets (or a combination
thereof), having a value equal to the Exercise Price;

	 	 	 	in full and final settlement of all rights attaching to the Rights; provided that
the value of any such debt, equity or other securities or other property or assets
shall be determined by the Board of Directors who may rely for that purpose on the
advice of a nationally recognized Canadian firm of investment dealers or investment
bankers selected by the Board of Directors. To the extent that the Board of
Directors determines in good faith that any action need be taken pursuant to this
Section 3.2, the Board of Directors may suspend the exercisability of the Rights for
a period up to 60 days following the date of the occurrence of the relevant Flip-in
Event in order to determine the appropriate form and value of cash, debt, equity or
other securities or other property or assets (or a combination thereof) to be issued
or delivered on such exchange for Rights. In the event of any such suspension, the
Company shall notify the Rights Agent and issue as promptly as practicable a public
announcement stating that the exercisability of the Rights has been temporarily
suspended.

 

- 31 -

	 	(b)	 	Termination of Right to Exercise: If the Board of Directors authorizes
and directs the exchange of cash, debt, equity or other securities or other property or
assets (or a combination thereof) for Rights pursuant to Subsection 3.2(a) hereof, then
without any further action or notice the right to exercise the Rights will terminate
and the only right thereafter of a holder of Rights shall be to receive such cash,
debt, equity or other securities or other property or assets (or a combination thereof)
in accordance with the determination of the Board of Directors made pursuant to
Subsection 3.2(a). Within 10 Business Days of the Board of Directors authorizing and
directing any such exchange, the Company shall give notice of such exchange to the
holders of such Rights in accordance with Section 5.9. Each such notice of exchange
shall state the method by which the exchange of cash, debt, equity or other securities
or other property or assets (or a combination thereof) for Rights will be effected.
	 
	 	(c)	 	Additional Securities: If there shall not be sufficient securities
authorized but unissued to permit the exchange in full of Rights pursuant to this
Section 3.2, the Company will take all such action as may be necessary to authorize
additional securities for issuance upon the exchange of Rights provided however, that
the Company shall not be required to issue fractions of securities or to distribute
certificates evidencing fractional securities. In lieu of issuing such fractional
securities, subject to Subsection 5.5(b), there shall be paid to the registered holders
of Rights to whom such fractional securities would otherwise be issuable, an amount in
cash equal to the same fraction of the market price of a whole such security.

3.3 Fiduciary Duties of the Board of Directors:

For clarification it is understood that nothing contained in this Article 3 shall be considered to
affect the obligations of the Board of Directors to exercise its fiduciary duties. Without
limiting the generality of the foregoing, nothing contained herein shall be construed to suggest or
imply that the Board of Directors shall not be entitled to recommend that holders of the Voting
Shares reject or accept any Take-Over Bid or take any other action including, without limitation,
the commencement, prosecution, defence or settlement of any litigation and the submission of
additional or alternative Take-Over Bids or other proposals to the shareholders of the Company with
respect to any Take-Over Bid or otherwise that the Board of Directors believes is necessary or
appropriate in the exercise of its fiduciary duties.

ARTICLE 4

THE RIGHTS AGENT

4.1 General:

	 	(a)	 	Appointment of Rights Agent: The Company hereby appoints the Rights
Agent to act as agent for the Company and the holders of Rights in accordance with the
terms and conditions hereof and the Rights Agent hereby accepts such appointment. The
Company may from time to time appoint one or more Co-Rights Agents as it may deem
necessary or desirable subject to the prior approval of the Rights Agent. In such
event, the respective duties of the Rights Agent and any Co-Rights Agent shall be as
the Company may determine with the approval of the Rights Agent and the Co–Rights
Agent. The Company agrees to pay to the Rights Agent reasonable compensation for all
services rendered by it hereunder and, from time to time on demand of the Rights Agent,
its reasonable expenses and counsel fees and other disbursements incurred in the
administration and execution of

 

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	 	 	 	this Agreement and the exercise and performance of its duties hereunder. The
Company 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
willful misconduct on the part of the Rights Agent, for anything done or omitted by
the Rights Agent in connection with the acceptance and performance of this
Agreement, including the costs and expenses of defending against any claim of
liability, which right to indemnification shall survive the termination of this
Agreement or the resignation or removal of the Rights Agent.
	 
	 	(b)	 	Protection of Rights Agent: The Rights Agent shall be protected from,
and shall incur no liability for or in respect of, any action taken, suffered or
omitted by it in connection with its performance of this Agreement in reliance upon any
certificate for Common Shares, or any Rights Certificate, certificate for other
securities of the Company, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate, 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.
	 
	 	(c)	 	Notification of Events: The Company will inform the Rights Agent in a
reasonably timely manner of events which may materially affect the administration of
this Agreement by the Rights Agent and, at any time upon written request, will provide
to the Rights Agent an incumbency certificate certifying the then current officers of
the Company.

4.2 Merger or Amalgamation or Change of Name of Rights Agent:

	 	(a)	 	Merger: Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or amalgamated with or into, or any corporation succeeding
to the shareholder services business of the Rights Agent or any successor Rights Agent,
shall 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. In case 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, any such successor Rights Agent
may adopt the countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned, and in case at that time any of the Rights Certificates
have not been countersigned, any successor Rights Agent may countersign such Rights
Certificates either 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 shall have the
full force and effect provided in the Rights Certificates and in this Agreement.
	 
	 	(b)	 	Change of Name: In case at any time the name of the Rights Agent is
changed and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned, and in case at that time any of the
Rights Certificates shall not have 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.

 

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4.3 Duties of Rights Agent:

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

	 	(a)	 	Legal Counsel: The Rights Agent may consult with legal counsel (who
may be legal counsel for the Company), and the opinion of such counsel shall be full
and complete authorization and protection to the Rights Agent as to any action taken or
omitted to be taken by it in good faith and in accordance with such opinion.
	 
	 	(b)	 	Satisfactory Proof: 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 Company prior to taking or suffering any action or
omitting to take any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be conclusively
proved and established by a certificate signed by a person believed by the Rights Agent
to be the Chairman, the President, the Chief Executive Officer or any Vice-President
and by the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Secretary, any Assistant Secretary, or by any two directors of the Company and
delivered to the Rights Agent and such certificate shall be full authorization to the
Rights Agent for any action taken, omitted or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.
	 
	 	(c)	 	Bad Faith: The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
	 
	 	(d)	 	Recitals: The Rights Agent shall not be liable for or by reason of any
of the statements of fact or recitals contained in this Agreement or in the
certificates representing Common 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 only by the Company.
	 
	 	(e)	 	No Responsibility: The Rights Agent shall not be under any
responsibility in respect of the validity of this Agreement or the execution and
delivery hereof (except the authorization, execution and delivery hereof by the Rights
Agent) or in respect of the validity or execution of any certificate representing
Common Shares or Rights Certificate (except its countersignature thereof), nor will it
be responsible for any breach by the Company of any covenant or condition contained in
this Agreement or in any Rights Certificate, any change in the exercisability of the
Rights (including the Rights becoming void pursuant to Section 2.11 or Subsection
3.2(b) hereof) or any adjustment required under the provisions of Section 2.3 hereof or
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 hereof
describing any such adjustment) nor will it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any Common Shares
to be issued pursuant to this Agreement or any Rights or as to whether any Common
Shares shall, when issued, be duly and validly authorized, executed, issued and
delivered and be fully paid and non-assessable.

 

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	 	(f)	 	Performance By Company: The Company 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)	 	Persons To Give Instructions: The Rights Agent is hereby authorized to
rely upon and directed to accept instructions in writing with respect to the
performance of its duties hereunder from any person believed by the Rights Agent to be
the Chairman, the President, the Chief Executive Officer, any Vice-President, the
Secretary, any Assistant Secretary, the Chief Financial Officer, the Treasurer, any
Assistant Treasurer, or any two directors of the Company and to apply to such persons
for advice or instructions in connection with its duties, and it shall not be liable
for any action taken, omitted or suffered by it in good faith in accordance with the
instructions of any such person.
	 
	 	(h)	 	Ability To Deal: The Rights Agent and any shareholder, director,
officer or employee of the Rights Agent may buy, sell or deal in Common Shares, Rights
or other securities of the Company or become financially interested in any transaction
in which the Company may be interested, or contract with or lend money to the Company
or otherwise act as fully and freely as though it were not Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other legal entity.
	 
	 	(i)	 	No Liability: 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 shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or agents
or for any loss to the Company resulting from any such act, omission, 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 Company) in writing delivered or mailed to
the Company and to each transfer agent of Common Shares by first class or registered mail. The
Company may remove the Rights Agent upon 60 days’ notice in writing, mailed or delivered to the
Rights Agent and to each transfer agent of Common Shares by first class or registered mail. If the
Rights Agent should resign or be removed or otherwise become incapable of acting, the Company shall
appoint a successor to the Rights Agent. If the Company fails to make such appointment within a
period of 60 days after such removal or after it has been notified in writing of such resignation
or incapacity by the resigning or incapacitated Rights Agent or by the holder of any Rights (which
holder shall, with such notice, submit the Rights Certificate of such holder for inspection by the
Company), then the holder of any Rights may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or
by such a court, shall be a trust company incorporated under the laws of Canada or a province
thereof authorized to carry on the business of a trust company in the Province of British Columbia.
After appointment, the successor Rights Agent shall 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; provided that the predecessor Rights Agent 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 Company shall file notice

 

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thereof in writing with the predecessor Rights Agent and the transfer agent of the Common Shares,
and mail a notice thereof in writing to the holders of the Rights. 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 the successor
Rights Agent, as the case may be.

ARTICLE 5

MISCELLANEOUS

5.1 Redemption and Waiver:

	 	(a)	 	The Board of Directors may, until the occurrence of a Flip-in Event, upon prior
written notice delivered to the Rights Agent, determine to waive the application of
Section 3.1 to such particular Flip-in Event (which for greater certainty shall not
include the circumstances described in Subsection 5.1(b)); 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 which may arise in
respect of any Take-Over Bid then in effect or made prior to the public announcement of
the completion or termination of the transaction in respect of which the Board of
Directors waived the application of Section 3.1.
	 
	 	(b)	 	the Board of Directors may, prior to a Flip-in Event having occurred, upon
prior written notice delivered to the Rights Agent, determine to waive the application
of Section 3.1 to a Flip-in Event that may occur by reason of a Take-over Bid made by
means 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(a)),
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(b), 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(b).
	 
	 	(c)	 	If prior to the occurrence of a Flip-in Event a Person acquires, pursuant to a
Permitted Bid, a Competing Permitted Bid or an Exempt Acquisition under Subsection
5.1(b), outstanding Voting Shares, then the Board of Directors shall, immediately upon
the consummation of such acquisition, without further formality, be deemed to have
elected to redeem all but not less than all of the outstanding Rights at a redemption
price of $0.0001 per 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”). The redemption of the Rights by
the Board of Directors may be made effective at such time, on such basis and with such
conditions as the Board of Directors in its sole discretion may establish.
	 
	 	(d)	 	If, prior to the occurrence of a Flip-in Event, a Person acquires pursuant to a
Permitted Bid or a Competing Permitted Bid not less than 90% of the outstanding Voting
Shares other than Voting Shares Beneficially Owned at the date of the Permitted Bid or
the Competing Permitted Bid by such Person, then the Board of Directors of the Company
shall

 

- 36 -

	 	 	 	immediately upon the consummation of such acquisition without further formality be
deemed to have elected to redeem the Rights at the Redemption Price.
	 
	 	(e)	 	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 at the Redemption Price.
	 
	 	(f)	 	If the Board of Directors is deemed under Subsections 5.1(c) or (d) to have
elected, or elects under either of Subsection 5.1(e), to redeem the Rights, the right
to exercise the Rights will thereupon, without further action and without notice,
terminate and the only right thereafter of the holders of Rights shall be to receive
the Redemption Price.
	 
	 	(g)	 	Within 10 days after the Board of Directors is deemed under Subsections 5.1(c)
or (d) to have elected, or elects under Subsection 5.1(e), to redeem the Rights, the
Company shall give notice of redemption to the holders of the then outstanding Rights
by mailing such notice to each such holder at 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 Common Shares. Any notice that is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the payment of
the Redemption Price will be made.
	 
	 	(h)	 	Upon the Rights being redeemed pursuant to Subsection 5.1(e), 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 held by each holder
of record of Common 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.
	 
	 	(i)	 	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 Share 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, if such a waiver is granted by
the Board of Directors, such Share Acquisition Date shall be deemed not to have
occurred. Any such waiver pursuant to this Subsection 5.1(i) 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 such 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 Share Acquisition Date and Section 3.1 shall
apply thereto.

5.2 Expiration:

	No Person shall have any rights pursuant to this Agreement or any Right after the Expiration Time,
except the Rights Agent as provided in Section 4.1 hereof.

 

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5.3 Issue of New Rights Certificates:

Notwithstanding any of the provisions of this Agreement or of the Rights to the contrary, the
Company 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 of
securities purchasable upon exercise of Rights made in accordance with the provisions of this
Agreement.

5.4 Supplements and Amendments:

	 	(a)	 	The Company may make amendments to this Agreement to correct any clerical or
typographical error or which are required to maintain the validity of this Agreement as
a result of any change in any applicable legislation or regulations thereunder. The
Company may, prior to the date of the shareholders’ meeting referred to in Section
5.16, supplement, amend, vary or rescind this Agreement without the approval of any
holders of Rights or Voting Shares (whether or not such action would materially
adversely affect the interests of the holders of Rights generally) 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 Subsection 5.4(a), the Company may, with the prior consent of the
holders of Voting Shares obtained as set forth below, at any time prior to the
Separation Time, supplement, amend, vary, delete 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 of the
Company.
	 
	 	(c)	 	The Company may, with the prior consent of the holders of Rights, at any time
after the Separation Time and before the Expiration Time, supplement, amend, vary,
delete 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), 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 Company’s articles

 

- 38 -

	 	 	 	and the Business Corporations Act with respect to meetings of shareholders of
corporations.
	 
	 	(e)	 	Any amendments made by the Company 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 or regulation thereunder shall:

	 	(i)	 	if made before the Separation Time, be submitted to the
shareholders of the Company 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;
	 
	 	(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 Company and the holders of
Rights may, by resolution passed by the majority referred to in Subsection
5.4(c), 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 Common Shares:

	 	(a)	 	No Fractional Rights: The Company shall not be required to issue
fractions of Rights or to distribute Right Certificates which evidence fractional
Rights. After the Separation Time, in lieu of issuing fractional Rights the Company
shall pay to the holders of record of the Right Certificates, at the time such
fractional Rights would otherwise be issuable, an amount in cash equal to the same
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)	 	No Fractional Common Shares:  The Company shall not be required to
issue fractions of Common Shares upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares. In lieu of issuing fractional
Common Shares, the Company shall pay to the holders of record of Right Certificates at
the time such Rights are exercised as herein provided, an amount in cash equal to the
same 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 a whole
Common Share.

5.6 Rights of Action:

Subject to the terms of this Agreement, 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 any holder of

 

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any Rights, without the consent of the Rights Agent or of the holder of any other Rights may, on
such holder’s own behalf and for such holder’s own benefit and the benefit of other holders of
Rights, enforce, and may institute and maintain any suit, action or proceeding against the Company
to enforce, or otherwise act in respect of, such holder’s right to exercise the Rights of such
holder in the manner provided in the Rights Certificate of such holder and in this Agreement.
Without limiting the foregoing or any remedies available to the holders of Rights, it is
specifically acknowledged that the holders of Rights would not have an adequate remedy at law for
any breach of this Agreement and shall be entitled to 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 Company or action or event contemplated by this Agreement shall be subject to
the receipt of any requisite approval or consent from any governmental or regulatory authority, and
without limiting the generality of the foregoing, necessary approvals of the TSX Venture Exchange
and other exchanges will be obtained, such as to the issuance of Common Shares upon the exercise of
Rights under Subsection 2.2(d) and the issuance of convertible debt, equity or other securities or
other property or assets under Section 3.2. Notwithstanding anything to the contrary in this
Agreement, no supplement or amendment to this Agreement or to the terms of the Rights may be made
without the prior consent of the TSX Venture Exchange.

5.8 Declaration as to Non-Canadian 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 Company 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 Company 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, 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 to or on the Company 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:

Western Wind Energy Corp.

632 Foster Avenue

Coquitlam, BC V3J 2L7

Attention: Jeffrey J. Ciachurski

Telephone: (604) 781-4192

Facsimile: (604) 939-1292

 

- 40 -

With a copy to:

Thomas, Rondeau, Business Lawyers

Suite 1925 – 700 West Georgia Street

Vancouver, BC V7Y 1A1

Attention: Dale A. Rondeau

Telephone: (604) 688-6775

Facsimile: (604) 688-6995

	 	(b)	 	Notices or demands authorized or required by this Agreement to be given or made
by the Company or by the holder of any 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 Company), or sent by
facsimile or other form of recorded electronic communication, charges prepaid and
confirmed in writing, as follows:

Pacific Corporate Trust Company

10th Floor, 625 Howe Street

Vancouver, BC V6C 3B8

Attention: Manager, Client Services

Telephone: (604) 689-9853

Facsimile: (604) 689-8144

	 	(c)	 	Notices or demands authorized or required by this Agreement to be given or made
by the Company or the Rights Agent to or on the holder of any Rights shall be
sufficiently given or made if delivered or sent by first class mail, postage prepaid,
addressed to such holder as it appears upon the register of the Rights Agent or, prior
to the Separation Time, on the register of the Company for its Common 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 faxing 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 Company and the Rights Agent may from time to time change its
address for notice to the other given in the manner aforesaid.

5. 10 Costs of Enforcement:

The Company agrees that if the Company or any other Person the securities of which are purchasable
upon exercise of Rights, fails to fulfill any of its obligations pursuant to this Agreement, then
the Company or such Person shall reimburse the holder of any Rights for the costs and expenses
(including legal fees) incurred by such holder in actions to enforce his rights pursuant to any
Rights or this Agreement.

 

- 41 -

5.11 Successors:

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

5.12 Benefits of this Agreement:

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

5.13 Governing Law:

This Agreement and each Right issued hereunder shall be deemed to be a contract made under the laws
of British Columbia and for all purposes shall be governed by and construed in accordance with such
laws.

5.14 Severability:

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

5.15 Effective Date:

This Agreement is effective and in full force and effect in accordance with its terms from and
after the Effective Date, subject to confirmation pursuant to Section 5.16.

5.16 Confirmation:

The Company shall request the confirmation of this Agreement at a general meeting of holders of
Voting Shares to be held no later than six months from the date of this Agreement. If the
Agreement is not confirmed at such meeting by a majority of the votes cast by Independent Holders
of Voting Shares who vote in respect of the confirmation of this Agreement, this Agreement and all
outstanding Rights shall terminate and be void and of no further force and effect on and from the
close of business on the date of termination of such 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
Subsections 5.1(a), (b) or (i) hereof) prior to the date upon which this Agreement would otherwise
terminate pursuant to this Section 5.16. This Agreement must be re-confirmed by a resolution
passed by a majority of the votes cast by all Independent Holders of Voting Shares who vote in
respect of such reconfirmation (other than any holder who does not qualify as an Independent
Shareholder, with respect to all Voting Shares Beneficially Owned by such Person) at the fifth and
eighth annual meeting following the Company’s annual or special meeting of shareholders in 2005, as
the case may be. If this Agreement is not so recognized or is not presented for re-confirmation at
such annual meeting, this Agreement and all outstanding Rights shall terminate and be void and of
no further force and effect at 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

 

- 42 -

Subsections 5.1(a), (b) or (i) 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:

The Board of Directors shall have the exclusive power and authority to administer and amend this
Agreement and to exercise all rights and powers specifically granted to the Board of Directors or
the Company, or as may be necessary or advisable in the administration of this Agreement,
including, without limitation, the right and power to (a) interpret the provisions of this
Agreement and (b) make all determinations deemed necessary or advisable for the administration of
this Agreement (including a determination to terminate or redeem or not to terminate or redeem the
Rights or to amend the Agreement). All such actions, calculations, interpretations and
determinations (including, for purposes of the balance of this sentence, all omissions with respect
to the foregoing) which are done or made by the Board of Directors shall be final, conclusive and
binding on the Company, the Rights Agent, the holders of Rights and all other parties and shall not
subject the Board of Directors to any liability to the holders of Rights.

5.18 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.

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be duly executed.

	 	 	 	 	 	 	 
	 	 	WESTERN WIND ENERGY CORP.
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Jeffrey J. Ciachurski
	 	 	 	 	 
	 	 	 	 	Jeffrey J. Ciachurski
	 
	 	 	 	 	 	 
	 	 	PACIFIC CORPORATE TRUST COMPANY
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ MARC CASTONGUAY
	 	 	 	 	 
	 	 	 	 	Authorized Signatory
	 
	 	 	 	 	 	 
	 

	 	 	 	Name:	 	MARC CASTONGUAY
	 

	 	 	 	 	 	 
	 	 	 	 	(Please Print)
	 
	 
	 	 	 	/s/ DIANNA REIMER
	 	 	 	 	 
	 	 	 	 	Authorized Signatory
	 
	 	 	 	 	 	 
	 

	 	 	 	Name:	 	DIANNA REIMER
	 

	 	 	 	 	 	 
	 	 	 	 	(Please Print)

 

 

SCHEDULE A TO THE SHAREHOLDER RIGHTS AGREEMENT

DATED FOR REFERENCE APRIL 5, 2005 BETWEEN

WESTERN WIND ENERGY CORP. AND

PACIFIC CORPORATE TRUST COMPANY

[Form of Rights Certificate]

			
	Certificate No.                     
	 	                     Rights

THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE OPTION OF WESTERN
WIND ENERGY CORP., ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. RIGHTS
BENEFICIALLY OWNED BY ACQUIRING PERSONS (AS SUCH TERMS ARE DEFINED IN THE
SHAREHOLDER RIGHTS AGREEMENT) OR CERTAIN TRANSFEREES THEREOF OF ASSOCIATES OR
AFFILIATES OF EITHER OF THE FOREGOING OR ANY PERSON ACTING JOINTLY OR IN CONCERT
WITH ANY OF THEM) ARE VOID.

Rights Certificate

This certifies that ___, or registered assigns, is the holder of record of
the number of Rights set forth above, each one of which entitles the holder of record thereof,
subject to the terms, provisions and conditions of the Shareholder Protection Rights Plan Agreement
(the “Shareholder Protection Rights Plan Agreement”), dated for reference April 5, 2005 between
Western Wind Energy Corp. (the “Company”), a corporation incorporated under the laws of British
Columbia, and Pacific Corporate Trust Company, a trust company incorporated under the laws of
British Columbia, as Rights Agent under the Shareholder Protection Rights Plan Agreement, to
purchase from the Company at any time after the Separation Time and prior to the Expiration Time
(as such terms are defined in the Shareholder Protection Rights Plan Agreement), one common share
of the Company (a “Common Share”) (subject to adjustment as provided in the Shareholder Protection
Rights Plan Agreement) at the Exercise Price referred to below, upon presentation and surrender of
this Rights Certificate with a completed and executed Form of Election to Exercise at the principal
office of the Rights Agent in Vancouver, Canada. The Exercise Price shall initially be Cdn.$50.00
per Common Share and shall be subject to adjustment in certain events as provided in the
Shareholder Protection Rights Plan Agreement.

In certain circumstances described in the Shareholder Protection Rights Plan Agreement, the Rights
evidenced hereby may entitle the holder of record thereof to purchase shares of an entity other
than the Company or to purchase or receive in exchange for such Rights assets, securities or shares
of the Company other than Common Shares or more or less than one Common Share, or some combination
of the foregoing, all as provided in the Shareholder Protection Rights Plan Agreement.

This Rights Certificate is subject to all of the terms, provisions and conditions of the
Shareholder Protection Rights Plan Agreement which terms, provisions and conditions are hereby
incorporated herein by reference and made a part hereof and to which reference is hereby made for a
full description of the rights, limitations of rights, obligations, duties and immunities
thereunder of the Rights Agent, the Company and the holders of the Rights Certificates. A copy of
the Shareholder Protection Rights Plan Agreement is on file at the principal executive office of
the Company and is available upon written request.

 

- 2 -

This Rights Certificate, with or without other Rights Certificates, upon surrender at 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 the aggregate number of Rights equal to the
aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates so
surrendered. If this Rights Certificate shall be exercised in part, the holder of record 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 provision of the Shareholder Protection Rights Plan Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company at a redemption price of $0.0001 per Right,
subject to adjustment in certain events, under certain circumstances at the option of the Company.

Subject to the provisions of the Shareholder Protection Rights Plan Agreement, the Rights evidenced
by this Certificate may be terminated or amended by the Company at its option without the consent
of holders of Rights.

No fractional Common Shares will be issued upon the exercise of any Right or Rights evidenced
hereby nor will Rights Certificates be issued for less than one whole Right. After the Separation
Time, in lieu of issuing fractional Rights, a cash payment will be made as provided in the
Shareholder Protection Rights Plan 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 on the exercise hereof, nor shall anything contained in the Shareholder Protection
Rights Plan Agreement or herein be construed to confer upon the holder hereof, as such, any of the
rights of a shareholder of the Company or any right to vote for the election of directors or upon
any matter submitted to shareholders of the Company at any meeting, to give or withhold consent to
any corporate action, to receive notice of meetings or other actions affecting shareholders of the
Company (except as provided in the Shareholder Protection Rights Plan Agreement), 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 Protection Rights Plan
Agreement.

 

- 3 -

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 COMPANY.

	 	 	 	 	 
	 	 	WESTERN WIND ENERGY CORP.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	 	 	Jeffrey J. Ciachurski

Countersigned:

	 	 	 	 	 
	PACIFIC CORPORATE TRUST COMPANY	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 	 	 	 	 
	 

	 	Authorized Signatory	 	 
	 
	 	 	 	 
	 	 	 	 	 
	 

	 	[Name — please print]	 	 
	 
	 	 	 	 
	 	 	 	 	 
	 

	 	Authorized Signatory	 	 
	 
	 	 	 	 
	 	 	 	 	 
	 

	 	[Name — please print]	 	 

 

 

[Form of Reverse Side of Rights Certificate]

WESTERN WIND ENERGY CORP. — FORM OF ASSIGNMENT

(To be executed by the holder of record if such

holder desires to transfer the Rights.)

	 	 	 
	FOR VALUE RECEIVED
	 	 
	 

	 	 

	 	 	 
	hereby sells, assigns and transfers unto
	 	 
	 

	 	 

 

(Please print name and address of transferee)

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 Certificate on the
books of the Company with full power of substitution.

Dated:
                                         [month, day, year]

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.)

The signature of the person executing this form must be guaranteed by a Canadian chartered bank or
eligible guarantor institution with membership in an approved signature guarantee medallion
program.

CERTIFICATION

(To be completed if true)

The undersigned hereby represents, warrants and certifies, 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 of an Acquiring Person or any Person acting jointly or in concert with an
Acquiring Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in
the Shareholder Protection Rights Plan Agreement).

	 	 	 
	 

	 	 
	 

	 	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.)

 

- 2 -

NOTICE

If the certification set forth above is not completed in connection with a purported assignment,
the Company will deem the Beneficial Owner of the Rights evidenced by this Rights Certificate to be
an Acquiring Person or an Affiliate or Associate of an Acquiring Person or any Person acting
jointly or in concert with an Acquiring Person or an Affiliate or Associate of an Acquiring Person
(as defined in the Shareholder Protection Rights Plan Agreement) and accordingly will deem the
Rights evidenced by this Rights Certificate to be void and not transferable or exercisable.

 

 

WESTERN WIND ENERGY CORP.

FORM OF ELECTION TO EXERCISE

(To be executed if the holder desires to exercise the Rights Certificate)

	 	 	 
	TO:

	 	Pacific Corporate Trust Company
	 

	 	10th Floor, 625 Howe Street
	 

	 	Vancouver, BC V6C 3B8

The undersigned hereby irrevocably elects to exercise ___whole Rights
represented by the attached Rights Certificate to purchase the Common Shares issuable upon the
exercise of such Rights and requests that certificates for such Common Shares be issued in the name
of:

Address:

 

 

Social Insurance or Other Taxpayer Identification Number:

 

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

Full Address, including postal code:

 

Social Insurance or Other Taxpayer Identification Number:

 

Dated:
                                         [month, day, year]

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.)

The signature of the person executing this form must be guaranteed by a Canadian chartered bank or
eligible guarantor institution with membership in an approved signature guarantee medallion
program.

CERTIFICATION

(To be completed if true)

The undersigned hereby represents, warrants and certifies for the benefit of all holders of Rights
and Common Shares, that the Rights evidenced by this Right Certificate are not, and, to the
knowledge of the

 

- 2 -

undersigned, have never been, Beneficially Owned by an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or any Person acting jointly or in concert with an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the
Shareholder Protection Rights Plan Agreement).

	 	 	 
	 

	 	 
	 

	 	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.)

NOTICE

If the certification set forth above is not completed in connection with a purported assignment,
the Company will deem the Beneficial Owner of the Rights evidenced by this Rights Certificate to be
an Acquiring Person or an Affiliate or Associate of an Acquiring Person or any Person acting
jointly or in concert with an Acquiring Person or an Affiliate or Associate of an Acquiring Person
(as defined in the Shareholder Protection Rights Plan Agreement) and accordingly will deem the
Rights evidenced by this Rights Certificate to be void and not transferable or exercisable.FORM OF FLOATING RATE SENIOR NOTE

REGISTERED                                               REGISTERED
No. FLR-1                                                U.S.$
                                                         CUSIP:

      Unless this certificate is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York, New York) to the issuer
or its agent for registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.

                                       1

<PAGE>

                                 MORGAN STANLEY
                    SENIOR GLOBAL MEDIUM-TERM NOTES, SERIES F
                                 (Floating Rate)

                   CAPITAL PROTECTED NOTE DUE AUGUST 30, 2010
              BASED ON THE DECLINE IN THE VALUE OF THE PHILADELPHIA
                      STOCK EXCHANGE HOUSING SECTOR INDEX(SM)

--------------------------------------------------------------------------------
BASE RATE: None           ORIGINAL ISSUE DATE:         MATURITY DATE:
                                                        See "Maturity Date"
                                                        below.
--------------------------------------------------------------------------------
INDEX MATURITY: N/A       INTEREST ACCRUAL DATE: N/A   INTEREST PAYMENT DATE(S):
                                                        N/A
--------------------------------------------------------------------------------
SPREAD (PLUS OR MINUS):   INITIAL INTEREST RATE: N/A   INTEREST PAYMENT PERIOD:
  N/A                                                   N/A
--------------------------------------------------------------------------------
REPORTING SERVICE: N/A    MAXIMUM INTEREST RATE: N/A   INTEREST RESET DATE(S):
                                                        N/A
--------------------------------------------------------------------------------
INDEX CURRENCY: N/A       MINIMUM INTEREST RATE: N/A   CALCULATION AGENT: See
                                                        "Calculation Agent"
                                                        below.
--------------------------------------------------------------------------------
EXCHANGE RATE AGENT: N/A  INITIAL REDEMPTION DATE:     SPECIFIED CURRENCY:
                            N/A                         U.S. dollars
--------------------------------------------------------------------------------
APPLICABILITY OF          INITIAL REDEMPTION           IF SPECIFIED CURRENCY
  MODIFIED PAYMENT UPON     PERCENTAGE: N/A               OTHER THAN U.S.
  ACCELERATION: See                                       DOLLARS, OPTION TO
  "Alternate Exchange                                     ELECT PAYMENT IN U.S.
  Calculation in Case of                                  DOLLARS: N/A
  an Event of Default"
  below.
--------------------------------------------------------------------------------
                          ANNUAL REDEMPTION            DESIGNATED CMT TELERATE
                         PERCENTAGE REDUCTION:          PAGE: N/A
                            N/A
--------------------------------------------------------------------------------
                          OPTIONAL REPAYMENT           DESIGNATED CMT MATURITY
                            DATE(S): N/A                INDEX: N/A
--------------------------------------------------------------------------------
                          REDEMPTION NOTICE PERIOD:
                            N/A
--------------------------------------------------------------------------------
                          TAX REDEMPTION AND
                            PAYMENT OF ADDITIONAL
                            AMOUNTS: N/A
--------------------------------------------------------------------------------
                          IF YES, STATE INITIAL      OTHER PROVISIONS: See
                            OFFERING DATE: N/A         below.

Maturity Date.............    August 30, 2010, subject to extension in
                              accordance with the following paragraph in the
                              event of a Market Disruption Event on the final
                              Determination Date for calculating the Final
                              Average Index Value.

                              If, due to a Market Disruption Event or otherwise,
                              the final Determination Date is postponed so that
                              it falls

                                       2

<PAGE>

                              less than two scheduled Trading Days prior to the
                              scheduled Maturity Date, the Maturity Date shall
                              be the second scheduled Trading Day following the
                              final Determination Date as postponed. See
                              "Determination Dates" below.

                              In the event that the final Determination Date is
                              postponed due to a Market Disruption Event or
                              otherwise, the Issuer shall give notice of such
                              postponement as promptly as possible, and in no
                              case later than one Business Day following the
                              scheduled final Determination Date, (i) to the
                              holder of this Note by mailing notice of such
                              postponement by first class mail, postage prepaid,
                              to the holder's last address as it shall appear
                              upon the registry books, (ii) to the Trustee by
                              telephone or facsimile confirmed by mailing such
                              notice to the Trustee by first class mail, postage
                              prepaid, at its New York office and (iii) to The
                              Depository Trust Company (the "Depositary") by
                              telephone or facsimile confirmed by mailing such
                              notice to the Depositary by first class mail,
                              postage prepaid. Any notice that is mailed in the
                              manner herein provided shall be conclusively
                              presumed to have been duly given, whether or not
                              the holder of this Note receives the notice.

Minimum Denominations....    $10

Issue Price..............    $10

Maturity Redemption
Amount...................     At maturity, upon delivery of this Note to the
                              Trustee, the Issuer shall pay with respect to each
                              $10 principal amount of this Note an amount in
                              cash equal to the $10 principal amount of this
                              Note plus the Supplemental Redemption Amount, if
                              any.

                              The Issuer shall, or shall cause the Calculation
                              Agent to, (i) provide written notice to the
                              Trustee at its New York office, on which notice
                              the Trustee may conclusively rely, and to the
                              Depositary of the Maturity Redemption Amount, on
                              or prior to 10:30 a.m. on the Trading Day
                              preceding the Maturity Date (but if such Trading
                              Day is not a Business Day, prior to the close of
                              business on the Business Day preceding the
                              Maturity Date) and (ii) deliver the aggregate cash
                              amount due with respect to this Note to

                                       3

<PAGE>

                              the Trustee for delivery to the holder of this
                              Note on the Maturity Date.

Supplemental Redemption
 Amount..................     The Supplemental Redemption Amount shall be equal
                              to $10 times the Index Percent Change; provided
                              that the Supplemental Redemption Amount shall not
                              be less than zero. The Calculation Agent shall
                              calculate the Supplemental Redemption Amount on
                              the final Determination Date.

Index Percent Change......    The Index Percent Change is a fraction, the
                              numerator of which shall be the Initial Index
                              Value minus the Final Average Index Value and the
                              denominator of which shall be the Initial Index
                              Value. The Index Percent Change is described by
                              the following formula:

                                Final Average Index Value - Initial Index Value
                              -----------------------------------------------
                                            Initial Index Value

Initial Index Value......

Final Average Index Value.    The arithmetic average of the Index Closing Values
                              on the three Determination Dates, as calculated by
                              the Calculation Agent on the final Determination
                              Date.

Index Closing Value.......    The Index Closing Value on any Trading Day shall
                              equal the closing value of the PHLX Housing Sector
                              Index or any Successor Index (as defined under
                              "Discontinuance of the PHLX Housing Sector Index;
                              Alteration of Method of Calculation" below)
                              published at the regular weekday close of trading
                              on that Trading Day. In certain circumstances, the
                              Index Closing Value shall be based on the
                              alternate calculation of the PHLX Housing Sector
                              Index described under "Discontinuance of the PHLX
                              Housing Sector Index; Alteration of Method of
                              Calculation" below.

                              In this Note, references to the PHLX Housing
                              Sector Index shall include any Successor Index,
                              unless the context requires otherwise.

Determination Dates......     The Determination Dates shall be August 30, 2008,
                              August 30, 2009 and August 26, 2010, in each case
                              subject to adjustment for non-Trading Days or
                              Market

                                       4

<PAGE>

                              Disruption Events as described in the two
                              following paragraphs in this section.

                              If either of the first two scheduled Determination
                              Dates is not a Trading Day or if a Market
                              Disruption Event occurs on any such date, such
                              Determination Date shall be the immediately
                              succeeding Trading Day during which no Market
                              Disruption Event shall have occurred; provided
                              that if a Market Disruption Event has occurred on
                              each of the five Trading Days immediately
                              succeeding any of the first two scheduled
                              Determination Dates, the Calculation Agent shall
                              determine the applicable Index Closing Value on
                              such fifth succeeding Trading Day in accordance
                              with the formula for calculating the value of the
                              PHLX Housing Sector Index last in effect prior to
                              the commencement of the Market Disruption Event,
                              without rebalancing or substitution, using the
                              closing price (or, if trading in the relevant
                              securities has been materially suspended or
                              materially limited, its good faith estimate of the
                              closing price that would have prevailed but for
                              such suspension or limitation) on such fifth
                              succeeding Trading Day of each security most
                              recently constituting the PHLX Housing Sector
                              Index.

                              If August 26, 2010 (the final scheduled
                              Determination Date) is not a Trading Day or if a
                              Market Disruption Event occurs on such day, the
                              final Determination Date shall be the immediately
                              succeeding Trading Day during which no Market
                              Disruption Event shall have occurred.

The PHLX Housing Sector
Index.....................    The PHLX Housing Sector Index published by the
                              Philadelphia Stock Exchange, Inc. ("PHLX").

Trading Day..............     A day, as determined by the Calculation Agent, on
                              which trading is generally conducted on the New
                              York Stock Exchange, Inc. ("NYSE"), the American
                              Stock Exchange LLC ("AMEX"), the Nasdaq National
                              Market, the Chicago Mercantile Exchange, the
                              Philadelphia Stock Exchange and the Chicago Board
                              of Options Exchange and in the over-the-counter
                              market for equity securities in the United States.

Market Disruption Event...    Market Disruption Event means, with respect to the
                              PHLX Housing Sector Index, the occurrence or

                                       5

<PAGE>

                              existence of a suspension, absence or material
                              limitation of trading of stocks then constituting
                              20 percent or more of the level of the PHLX
                              Housing Sector Index (or the Successor Index) on
                              the Relevant Exchanges for such securities for
                              more than two hours of trading or during the
                              one-half hour period preceding the close of the
                              principal trading session on such Relevant
                              Exchange; or a breakdown or failure in the price
                              and trade reporting systems of any Relevant
                              Exchange as a result of which the reported trading
                              prices for stocks then constituting 20 percent or
                              more of the level of the PHLX Housing Sector Index
                              (or the Successor Index) during the last one-half
                              hour preceding the close of the principal trading
                              session on such Relevant Exchange are materially
                              inaccurate; or the suspension, material limitation
                              or absence of trading on any major U.S. securities
                              market for trading in futures or options contracts
                              or exchange traded funds related to the PHLX
                              Housing Sector Index (or the Successor Index) for
                              more than two hours of trading or during the
                              one-half hour period preceding the close of the
                              principal trading session on such market, in each
                              case as determined by the Calculation Agent in its
                              sole discretion.

                              For the purpose of determining whether a Market
                              Disruption Event exists at any time, if trading in
                              a security included in the PHLX Housing Sector
                              Index is materially suspended or materially
                              limited at that time, then the relevant percentage
                              contribution of that security to the value of the
                              PHLX Housing Sector Index shall be based on a
                              comparison of (x) the portion of the value of the
                              PHLX Housing Sector Index attributable to that
                              security relative to (y) the overall value of the
                              PHLX Housing Sector Index, in each case
                              immediately before that suspension or limitation.

                              For purposes of determining whether a Market
                              Disruption Event has occurred: (1) a limitation on
                              the hours or number of days of trading shall not
                              constitute a Market Disruption Event if it results
                              from an announced change in the regular business
                              hours of the relevant exchange or market, (2) a
                              decision to permanently discontinue trading in the
                              relevant futures or options contract or exchange
                              traded fund shall not

                                       6

<PAGE>

                              constitute a Market Disruption Event, (3)
                              limitations pursuant to the rules of any Relevant
                              Exchange similar to NYSE Rule 80A (or any
                              applicable rule or regulation enacted or
                              promulgated by any other self-regulatory
                              organization or any government agency of scope
                              similar to NYSE Rule 80A as determined by the
                              Calculation Agent) on trading during significant
                              market fluctuations shall constitute a suspension,
                              absence or material limitation of trading, (4) a
                              suspension of trading in futures or options
                              contracts on the PHLX Housing Sector Index by the
                              primary securities market trading in such
                              contracts by reason of (a) a price change
                              exceeding limits set by such exchange or market,
                              (b) an imbalance of orders relating to such
                              contracts or (c) a disparity in bid and ask quotes
                              relating to such contracts shall constitute a
                              suspension, absence or material limitation of
                              trading in futures or options contracts related to
                              the PHLX Housing Sector Index and (5) a
                              "suspension, absence or material limitation of
                              trading" on any Relevant Exchange or on the
                              primary market on which futures or options
                              contracts related to the PHLX Housing Sector Index
                              are traded shall not include any time when such
                              market is itself closed for trading under ordinary
                              circumstances.

Relevant Exchange........     Relevant Exchange means the primary exchange or
                              market of trading for any security then included
                              in the PHLX Housing Sector Index or any Successor
                              Index.

Alternate Exchange
Calculation in Case
of an Event of Default ...    In case an event of default with respect to this
                              Note shall have occurred and be continuing, the
                              amount declared due and payable for each $10
                              principal amount of this Note upon any
                              acceleration of this Note (the "Acceleration
                              Amount") shall be equal to such $10 principal
                              amount plus the Supplemental Redemption Amount, if
                              any, determined as though the Index Closing Value
                              for any Determination Date scheduled to occur on
                              or after such date of acceleration were the Index
                              Closing Value on the date of acceleration.

                              If the maturity of this Note is accelerated
                              because of an event of default as described above,
                              the Issuer shall, or shall cause the Calculation
                              Agent to, provide written notice to the Trustee at
                              its New York office, on

                                       7

<PAGE>

                              which notice the Trustee may conclusively rely,
                              and to the Depositary of the Acceleration Amount
                              and the aggregate cash amount due with respect to
                              this Note as promptly as possible and in no event
                              later than two Business Days after the date of
                              such acceleration.

Calculation Agent.........    Morgan Stanley & Co. Incorporated and its
                              successors ("MS & Co.")

                              All determinations made by the Calculation Agent
                              shall be at the sole discretion of the Calculation
                              Agent and shall, in the absence of manifest error,
                              be conclusive for all purposes and binding on the
                              holder of this Note, the Trustee and the Issuer.

                              All calculations with respect to the Final Average
                              Index Value and the Supplemental Redemption
                              Amount, if any, shall be made by the Calculation
                              Agent and shall be rounded to the nearest one
                              hundred-thousandth, with five one-millionths
                              rounded upward (e.g., .876545 would be rounded to
                              .87655); all dollar amounts related to
                              determination of the amount of cash payable per
                              Note shall be rounded to the nearest
                              ten-thousandth, with five one hundred-thousandths
                              rounded upward (e.g., .76545 would be rounded up
                              to .7655); and all dollar amounts paid on the
                              aggregate principal amount of this Note shall be
                              rounded to the nearest cent, with one-half cent
                              rounded upward.

Discontinuance of the
 PHLX Housing Sector
 Index; Alteration of
 Method of Calculation....    If PHLX discontinues publication of the PHLX
                              Housing Sector Index and any entity (including MS
                              & Co.) publishes a successor or substitute index
                              that the Calculation Agent determines, in its sole
                              discretion, to be comparable to the discontinued
                              PHLX Housing Sector Index (such index being
                              referred to herein as a "Successor Index"), then
                              any subsequent Index Closing Value shall be
                              determined by reference to the value of such
                              Successor Index at the regular weekday close of
                              trading on the Trading Day that any Index Closing
                              Value is to be determined, as determined by the
                              Calculation Agent.

                                       8

<PAGE>

                              Upon any selection by the Calculation Agent of a
                              Successor Index, the Calculation Agent shall cause
                              written notice thereof to be furnished to the
                              Trustee, to the Issuer and to the Depositary, as
                              holder of this Note, within three business days of
                              such selection.

                              If PHLX discontinues publication of the PHLX
                              Housing Sector Index prior to, and such
                              discontinuance is continuing on, the date that any
                              Index Closing Value is to be determined and MS &
                              Co., as the Calculation Agent, determines, in its
                              sole discretion, that no Successor Index is
                              available at such time, then the Calculation Agent
                              shall determine the Index Closing Value for such
                              date. The Index Closing Value shall be computed by
                              the Calculation Agent in accordance with the
                              formula for calculating the PHLX Housing Sector
                              Index last in effect prior to such discontinuance,
                              using the closing price (or, if trading in the
                              relevant securities has been materially suspended
                              or materially limited, its good faith estimate of
                              the closing price that would have prevailed but
                              for such suspension or limitation) at the close of
                              the principal trading session of the Relevant
                              Exchange on such date of each security most
                              recently constituting the PHLX Housing Sector
                              Index without any rebalancing or substitution of
                              such securities following such discontinuance.

                              If at any time the method of calculating the PHLX
                              Housing Sector Index or a Successor Index, or the
                              value thereof, is changed in a material respect,
                              or if the PHLX Housing Sector Index or a Successor
                              Index is in any other way modified so that such
                              index does not, in the opinion of the Calculation
                              Agent, fairly represent the value of the PHLX
                              Housing Sector Index or such Successor Index had
                              such changes or modifications not been made, then,
                              from and after such time, the Calculation Agent
                              shall, at the close of business in New York City
                              on each date on which the Index Closing Value is
                              to be determined, make such calculations and
                              adjustments as, in the good faith judgment of the
                              Calculation Agent, may be necessary in order to
                              arrive at a value of a stock index comparable to
                              the PHLX Housing Sector Index or such Successor
                              Index, as the case may be, as if such changes or
                              modifications had not been made, and the
                              Calculation Agent shall calculate the Final
                              Average

                                       9

<PAGE>

                              Index Value with reference to the PHLX Housing
                              Sector Index or such Successor Index, as adjusted.
                              Accordingly, if the method of calculating the PHLX
                              Housing Sector Index or a Successor Index is
                              modified so that the value of such index is a
                              fraction of what it would have been if it had not
                              been modified (e.g., due to a split in the PHLX
                              Housing Sector Index), then the Calculation Agent
                              shall adjust such index in order to arrive at a
                              value of the PHLX Housing Sector Index or such
                              Successor Index as if it had not been modified
                              (e.g., as if such split had not occurred).

                                       10

<PAGE>

      Morgan Stanley, a Delaware corporation (together with its successors and
assigns, the "Issuer"), for value received, hereby promises to pay to CEDE &
CO., or registered assignees, the amount of cash, as determined in accordance
with the provisions set forth under "Maturity Redemption Amount" above, due with
respect to the principal sum of U.S.$        (UNITED STATES DOLLARS       ) on
the Maturity Date specified above (except to the extent redeemed or repaid prior
to the maturity) and to pay interest thereon from and including the Interest
Accrual Date specified above at a rate per annum equal to the Initial Interest
Rate specified above until the Initial Interest Reset Date specified above, and
thereafter at a rate per annum determined in accordance with the provisions
specified on the reverse hereof until the principal hereof is paid or duly made
available for payment. The Issuer will pay interest in arrears weekly, monthly,
quarterly, semiannually or annually as specified above as the Interest Payment
Period on each Interest Payment Date (as specified above), commencing with the
first Interest Payment Date next succeeding the Interest Accrual Date specified
above, and on the Maturity Date (or any redemption or repayment date); provided,
however, that if the Interest Accrual Date occurs between a Record Date, as
defined below, and the next succeeding Interest Payment Date, interest payments
will commence on the second Interest Payment Date succeeding the Interest
Accrual Date to the registered holder of this Note on the Record Date with
respect to such second Interest Payment Date; and provided, further, that if an
Interest Payment Date (other than the Maturity Date or redemption or repayment
date) would fall on a day that is not a Business Day, as defined on the reverse
hereof, such Interest Payment Date shall be the following day that is a Business
Day, except that if the Base Rate specified above is LIBOR or EURIBOR and such
next Business Day falls in the next calendar month, such Interest Payment Date
shall be the immediately preceding day that is a Business Day; and provided,
further, that if the Maturity Date or redemption or repayment date would fall on
a day that is not a Business Day, such payment shall be made on the following
day that is a Business Day and no interest shall accrue for the period from and
after such Maturity Date or redemption or repayment date.

      Interest on this Note will accrue from and including the most recent date
to which interest has been paid or duly provided for, or, if no interest has
been paid or duly provided for, from and including the Interest Accrual Date,
until but excluding the date the principal hereof has been paid or duly made
available for payment. The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, subject to certain exceptions
described herein, be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on the date 15
calendar days prior to such Interest Payment Date (whether or not a Business
Day) (each such date, a "Record Date"); provided, however, that interest payable
at maturity (or any redemption or repayment date) will be payable to the person
to whom the principal hereof shall be payable.

      Payment of the principal of and premium, if any, and interest on this Note
due at maturity (or any redemption or repayment date), unless this Note is
denominated in a Specified Currency other than U.S. dollars and is to be paid in
whole or in part in such Specified Currency, will be made in immediately
available funds upon surrender of this Note at the office or agency of the
Paying Agent, as defined on the reverse hereof, maintained for that purpose in
the Borough of Manhattan, The City of New York, or at such other paying agency
as the Issuer may determine, in U.S. dollars. U.S. dollar payments of interest,
other than interest due at maturity or any date

                                       11

<PAGE>

of redemption or repayment, will be made by U.S. dollar check mailed to the
address of the person entitled thereto as such address shall appear in the Note
register. A holder of U.S. $10,000,000 (or the equivalent in a Specified
Currency) or more in aggregate principal amount of Notes having the same
Interest Payment Date, the interest on which is payable in U.S. dollars, shall
be entitled to receive payments of interest, other than interest due at maturity
or on any date of redemption or repayment, by wire transfer of immediately
available funds if appropriate wire transfer instructions have been received by
the Paying Agent in writing not less than 15 calendar days prior to the
applicable Interest Payment Date.

      If this Note is denominated in a Specified Currency other than U.S.
dollars, and the holder does not elect (in whole or in part) to receive payment
in U.S. dollars pursuant to the next succeeding paragraph, payments of
principal, premium, if any, and interest with regard to this Note will be made
by wire transfer of immediately available funds to an account maintained by the
holder hereof with a bank located outside the United States if appropriate wire
transfer instructions have been received by the Paying Agent in writing, with
respect to payments of interest, on or prior to the fifth Business Day after the
applicable Record Date and, with respect to payments of principal or any
premium, at least ten Business Days prior to the Maturity Date or any redemption
or repayment date, as the case may be; provided that, if payment of interest,
principal or any premium with regard to this Note is payable in euro, the
account must be a euro account in a country for which the euro is the lawful
currency, provided, further, that if such wire transfer instructions are not
received, such payments will be made by check payable in such Specified Currency
mailed to the address of the person entitled thereto as such address shall
appear in the Note register; and provided, further, that payment of the
principal of this Note, any premium and the interest due at maturity (or on any
redemption or repayment date) will be made upon surrender of this Note at the
office or agency referred to in the preceding paragraph.

      If so indicated on the face hereof, the holder of this Note, if
denominated in a Specified Currency other than U.S. dollars, may elect to
receive all or a portion of payments on this Note in U.S. dollars by
transmitting a written request to the Paying Agent, on or prior to the fifth
Business Day after such Record Date or at least ten Business Days prior to the
Maturity Date or any redemption or repayment date, as the case may be. Such
election shall remain in effect unless such request is revoked by written notice
to the Paying Agent as to all or a portion of payments on this Note at least
five Business Days prior to such Record Date, for payments of interest, or at
least ten calendar days prior to the Maturity Date or any redemption or
repayment date, for payments of principal, as the case may be.

      If the holder elects to receive all or a portion of payments of principal
of, premium, if any, and interest on this Note, if denominated in a Specified
Currency other than U.S. dollars, in U.S. dollars, the Exchange Rate Agent (as
defined on the reverse hereof) will convert such payments into U.S. dollars. In
the event of such an election, payment in respect of this Note will be based
upon the exchange rate as determined by the Exchange Rate Agent based on the
highest bid quotation in The City of New York received by such Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the applicable payment date from three recognized foreign exchange
dealers (one of which may be the Exchange Rate Agent unless such Exchange Rate
Agent is an affiliate of the Issuer) for the purchase by the quoting dealer of
the Specified Currency for U.S. dollars for settlement on such payment date in

                                       12

<PAGE>

the amount of the Specified Currency payable in the absence of such an election
to such holder and at which the applicable dealer commits to execute a contract.
If such bid quotations are not available, such payment will be made in the
Specified Currency. All currency exchange costs will be borne by the holder of
this Note by deductions from such payments.

      Reference is hereby made to the further provisions of this Note set forth
on the reverse hereof, which further provisions shall for all purposes have the
same effect as if set forth at this place.

      Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof by manual signature, this Note shall
not be entitled to any benefit under the Senior Indenture, as defined on the
reverse hereof, or be valid or obligatory for any purpose.

                                       13

<PAGE>

      IN WITNESS WHEREOF, the Issuer has caused this Note to be duly executed.

DATED:                               MORGAN STANLEY

                                     By:
                                           -------------------------------------
                                     Name:
                                     Title:

TRUSTEE'S CERTIFICATE OF
   AUTHENTICATION

This is one of the Notes
   referred to in the
   within-mentioned Senior
   Indenture.

JPMORGAN CHASE BANK, N.A., as
   Trustee

By:
    ------------------------------
     Authorized Officer

                                       14

<PAGE>

                               REVERSE OF SECURITY

      This Note is one of a duly authorized issue of Senior Global Medium-Term
Notes, Series F, having maturities more than nine months from the date of issue
(the "Notes") of the Issuer. The Notes are issuable under a Senior Indenture,
dated as of November 1, 2004, between the Issuer and JPMorgan Chase Bank, N.A.
(formerly known as JPMorgan Chase Bank), as Trustee (the "Trustee," which term
includes any successor trustee under the Senior Indenture) (as may be amended or
supplemented from time to time, the "Senior Indenture"), to which Senior
Indenture and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and immunities
of the Issuer, the Trustee and holders of the Notes and the terms upon which the
Notes are, and are to be, authenticated and delivered. The Issuer has appointed
JPMorgan Chase Bank, N.A. at its corporate trust office in The City of New York
as the paying agent (the "Paying Agent," which term includes any additional or
successor Paying Agent appointed by the Issuer) with respect to the Notes. The
terms of individual Notes may vary with respect to interest rates, interest rate
formulas, issue dates, maturity dates, or otherwise, all as provided in the
Senior Indenture. To the extent not inconsistent herewith, the terms of the
Senior Indenture are hereby incorporated by reference herein.

      Unless otherwise indicated on the face hereof, this Note will not be
subject to any sinking fund and, unless otherwise provided on the face hereof in
accordance with the provisions of the following two paragraphs, will not be
redeemable or subject to repayment at the option of the holder prior to
maturity.

      If so indicated on the face hereof, this Note may be redeemed in whole or
in part at the option of the Issuer on or after the Initial Redemption Date
specified on the face hereof on the terms set forth on the face hereof, together
with interest accrued and unpaid hereon to the date of redemption. If this Note
is subject to "Annual Redemption Percentage Reduction," the Initial Redemption
Percentage indicated on the face hereof will be reduced on each anniversary of
the Initial Redemption Date by the Annual Redemption Percentage Reduction
specified on the face hereof until the redemption price of this Note is 100% of
the principal amount hereof, together with interest accrued and unpaid hereon to
the date of redemption. Notice of redemption shall be mailed to the registered
holders of the Notes designated for redemption at their addresses as the same
shall appear on the Note register not less than 30 nor more than 60 calendar
days prior to the date fixed for redemption or within the Redemption Notice
Period specified on the face hereof, subject to all the conditions and
provisions of the Senior Indenture. In the event of redemption of this Note in
part only, a new Note or Notes for the amount of the unredeemed portion hereof
shall be issued in the name of the holder hereof upon the cancellation hereof.

      If so indicated on the face of this Note, this Note will be subject to
repayment at the option of the holder on the Optional Repayment Date or Dates
specified on the face hereof on the terms set forth herein. On any Optional
Repayment Date, this Note will be repayable in whole or in part in increments of
$1,000 or, if this Note is denominated in a Specified Currency other than U.S.
dollars, in increments of 1,000 units of such Specified Currency (provided that
any remaining principal amount hereof shall not be less than the minimum
authorized denomination hereof) at the option of the holder hereof at a price
equal to 100% of the principal amount to be repaid, together with interest
accrued and unpaid hereon to the date of repayment. For this Note

                                       15

<PAGE>

to be repaid at the option of the holder hereof, the Paying Agent must receive
at its corporate trust office in the Borough of Manhattan, The City of New York,
at least 15 but not more than 30 calendar days prior to the date of repayment,
(i) this Note with the form entitled "Option to Elect Repayment" below duly
completed or (ii) a telegram, telex, facsimile transmission or a letter from a
member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or a trust company in the United
States setting forth the name of the holder of this Note, the principal amount
hereof, the certificate number of this Note or a description of this Note's
tenor and terms, the principal amount hereof to be repaid, a statement that the
option to elect repayment is being exercised thereby and a guarantee that this
Note, together with the form entitled "Option to Elect Repayment" duly
completed, will be received by the Paying Agent not later than the fifth
Business Day after the date of such telegram, telex, facsimile transmission or
letter; provided, that such telegram, telex, facsimile transmission or letter
shall only be effective if this Note and form duly completed are received by the
Paying Agent by such fifth Business Day. Exercise of such repayment option by
the holder hereof shall be irrevocable. In the event of repayment of this Note
in part only, a new Note or Notes for the amount of the unpaid portion hereof
shall be issued in the name of the holder hereof upon the cancellation hereof.

      If the face hereof indicates that this Note is subject to "Tax Redemption
and Payment of Additional Amounts," this Note may be redeemed, as a whole, at
the option of the Issuer at any time prior to maturity, upon the giving of a
notice of redemption as described below, at a redemption price equal to 100% of
the principal amount hereof, together with accrued interest to the date fixed
for redemption, if the Issuer determines that, as a result of any change in or
amendment to the laws, or any regulations or rulings promulgated thereunder, of
the United States or of any political subdivision or taxing authority thereof or
therein affecting taxation, or any change in official position regarding the
application or interpretation of such laws, regulations or rulings, which change
or amendment becomes effective on or after the Initial Offering Date hereof, the
Issuer has or will become obligated to pay Additional Amounts, as defined below,
with respect to this Note as described below. Prior to the giving of any notice
of redemption pursuant to this paragraph, the Issuer shall deliver to the
Trustee (i) a certificate stating that the Issuer is entitled to effect such
redemption and setting forth a statement of facts showing that the conditions
precedent to the right of the Issuer to so redeem have occurred, and (ii) an
opinion of independent legal counsel satisfactory to the Trustee to such effect
based on such statement of facts; provided that no such notice of redemption
shall be given earlier than 60 calendar days prior to the earliest date on which
the Issuer would be obligated to pay such Additional Amounts if a payment in
respect of this Note were then due.

      Notice of redemption will be given not less than 30 nor more than 60
calendar days prior to the date fixed for redemption or within the Redemption
Notice Period specified on the face hereof, which date and the applicable
redemption price will be specified in the notice.

      If the face hereof indicates that this Note is subject to "Tax Redemption
and Payment of Additional Amounts," the Issuer will, subject to certain
exceptions and limitations set forth below, pay such additional amounts (the
"Additional Amounts") to the holder of this Note who is a United States Alien as
may be necessary in order that every net payment of the principal of and
interest on this Note and any other amounts payable on this Note, after
withholding or

                                       16

<PAGE>

deduction for or on account of any present or future tax,
assessment or governmental charge imposed upon or as a result of such payment by
the United States, or any political subdivision or taxing authority thereof or
therein, will not be less than the amount provided for in this Note to be then
due and payable. The Issuer will not, however, make any payment of Additional
Amounts to any such holder who is a United States Alien for or on account of:

            (a) any present or future tax, assessment or other governmental
      charge that would not have been so imposed but for (i) the existence of
      any present or former connection between such holder, or between a
      fiduciary, settlor, beneficiary, member or shareholder of such holder, if
      such holder is an estate, a trust, a partnership or a corporation for
      United States federal income tax purposes, and the United States,
      including, without limitation, such holder (or such fiduciary, settlor,
      beneficiary, member or shareholder) being or having been a citizen or
      resident thereof or being or having been engaged in a trade or business or
      present therein or having, or having had, a permanent establishment
      therein or (ii) the presentation by or on behalf of the holder of this
      Note for payment on a date more than 15 calendar days after the date on
      which such payment became due and payable or the date on which payment
      thereof is duly provided for, whichever occurs later;

            (b) any estate, inheritance, gift, sales, transfer, excise or
      personal property tax or any similar tax, assessment or governmental
      charge;

            (c) any tax, assessment or other governmental charge imposed by
      reason of such holder's past or present status as a personal holding
      company or foreign personal holding company or controlled foreign
      corporation or passive foreign investment company with respect to the
      United States or as a corporation which accumulates earnings to avoid
      United States federal income tax or as a private foundation or other
      tax-exempt organization or a bank receiving interest under Section
      881(c)(3)(A) of the Internal Revenue Code of 1986, as amended;

            (d) any tax, assessment or other governmental charge that is payable
      otherwise than by withholding or deduction from payments on or in respect
      of this Note;

            (e) any tax, assessment or other governmental charge required to be
      withheld by any Paying Agent from any payment of principal of, or interest
      on, this Note, if such payment can be made without such withholding by any
      other Paying Agent in a city in Western Europe;

            (f) any tax, assessment or other governmental charge that would not
      have been imposed but for the failure to comply with certification,
      information or other reporting requirements concerning the nationality,
      residence or identity of the holder or beneficial owner of this Note, if
      such compliance is required by statute or by regulation of the United
      States or of any political subdivision or taxing authority thereof or
      therein as a precondition to relief or exemption from such tax, assessment
      or other governmental charge;

                                       17

<PAGE>

            (g) any tax, assessment or other governmental charge imposed by
      reason of such holder's past or present status as the actual or
      constructive owner of 10% or more of the total combined voting power of
      all classes of stock entitled to vote of the Issuer or as a direct or
      indirect subsidiary of the Issuer; or

            (h) any combination of items (a), (b), (c), (d), (e), (f) or (g).

In addition, the Issuer shall not be required to make any payment of Additional
Amounts (i) to any such holder where such withholding or deduction is imposed on
a payment to an individual and is required to be made pursuant to any law
implementing or complying with, or introduced in order to conform to, any
European Union Directive on the taxation of savings; or (ii) by or on behalf of
a holder who would have been able to avoid such withholding or deduction by
presenting this Note or the relevant coupon to another Paying Agent in a member
state of the European Union. Nor shall the Issuer pay Additional Amounts with
respect to any payment on this Note to a United States Alien who is a fiduciary
or partnership or other than the sole beneficial owner of such payment to the
extent such payment would be required by the laws of the United States (or any
political subdivision thereof) to be included in the income, for tax purposes,
of a beneficiary or settlor with respect to such fiduciary or a member of such
partnership or a beneficial owner who would not have been entitled to the
Additional Amounts had such beneficiary, settlor, member or beneficial owner
been the holder of this Note.

      This Note will bear interest at the rate determined in accordance with the
applicable provisions below by reference to the Base Rate shown on the face
hereof based on the Index Maturity, if any, shown on the face hereof (i) plus or
minus the Spread, if any, and/or (ii) multiplied by the Spread Multiplier, if
any, specified on the face hereof. Commencing with the Initial Interest Reset
Date specified on the face hereof, the rate at which interest on this Note is
payable shall be reset as of each Interest Reset Date specified on the face
hereof (as used herein, the term "Interest Reset Date" shall include the Initial
Interest Reset Date). The determination of the rate of interest at which this
Note will be reset on any Interest Reset Date shall be made on the Interest
Determination Date (as defined below) pertaining to such Interest Reset Dates.
The Interest Reset Dates will be the Interest Reset Dates specified on the face
hereof; provided, however, that (a) the interest rate in effect for the period
from the Interest Accrual Date to the Initial Interest Reset Date will be the
Initial Interest Rate and (b) unless otherwise specified on the face hereof, the
interest rate in effect for the ten calendar days immediately prior to maturity,
redemption or repayment will be that in effect on the tenth calendar day
preceding such maturity, redemption or repayment date. If any Interest Reset
Date would otherwise be a day that is not a Business Day, such Interest Reset
Date shall be postponed to the next succeeding day that is a Business Day,
except that if the Base Rate specified on the face hereof is LIBOR or EURIBOR
and such Business Day is in the next succeeding calendar month, such Interest
Reset Date shall be the immediately preceding Business Day. As used herein,
"Business Day" means any day, other than a Saturday or Sunday, (a) that is
neither a legal holiday nor a day on which banking institutions are authorized
or required by law or regulation to close (x) in The City of New York or (y) if
this Note is denominated in a Specified Currency other than U.S. dollars, euro
or Australian dollars, in the principal financial center of the country of the
Specified Currency, or (z) if this Note is denominated in Australian dollars, in
Sydney and (b) if this Note is denominated in euro, that is also a day on which
the Trans-European Automated Real-time Gross

                                       18

<PAGE>

Settlement Express Transfer System ("TARGET") is operating (a "TARGET Settlement
Day").

      The Interest Determination Date pertaining to an Interest Reset Date for
Notes bearing interest calculated by reference to the Federal Funds Rate and
Prime Rate shall be on the Business Day prior to the Interest Reset Date. The
Interest Determination Date pertaining to an Interest Reset Date for Notes
bearing interest calculated by reference to the CD Rate, Commercial Paper Rate
and CMT Rate will be the second Business Day prior to such Interest Reset Date.
The Interest Determination Date pertaining to an Interest Reset Date for Notes
bearing interest calculated by reference to EURIBOR (or to LIBOR when the Index
Currency is euros) shall be the second TARGET Settlement Day prior such Interest
Reset Date. The Interest Determination Date pertaining to an Interest Reset Date
for Notes bearing interest calculated by reference to LIBOR (other than for
LIBOR Notes for which the Index Currency is euros) shall be the second London
Banking Day prior such Interest Reset Date, except that the Interest
Determination Date pertaining to an Interest Reset Date for a LIBOR Note for
which the Index Currency is pounds sterling will be such Interest Reset Date. As
used herein, "London Banking Day" means any day on which dealings in deposits in
the Index Currency (as defined herein) are transacted in the London interbank
market. The Interest Determination Date pertaining to an Interest Reset Date for
Notes bearing interest calculated by reference to the Treasury Rate shall be the
day of the week in which such Interest Reset Date falls on which Treasury bills
normally would be auctioned. Treasury Bills are normally sold at auction on
Monday of each week, unless that day is a legal holiday, in which case the
auction is normally held on the following Tuesday, except that the auction may
be held on the preceding Friday; provided, however, that if an auction is held
on the Friday of the week preceding such Interest Reset Date, the Interest
Determination Date shall be such preceding Friday; and provided, further, that
if an auction shall fall on any Interest Reset Date, then the Interest Reset
Date shall instead be the first Business Day following the date of such auction.
The Interest Determination Date pertaining to an Interest Reset Date for Notes
bearing interest calculated by reference to two or more base rates will be the
latest Business Day that is at least two Business Days before the Interest Reset
Date for the applicable Note on which each base rate is determinable.

      Unless otherwise specified on the face hereof, the "Calculation Date"
pertaining to an Interest Determination Date will be the earlier of (i) the
tenth calendar day after such Interest Determination Date or, if such day is not
a Business Day, the next succeeding Business Day, or (ii) the Business Day
immediately preceding the applicable Interest Payment Date or Maturity Date (or,
with respect to any principal amount to be redeemed or repaid, any redemption or
repayment date), as the case may be.

      Determination of CD Rate. If the Base Rate specified on the face hereof is
the "CD Rate," for any Interest Determination Date, the CD Rate with respect to
this Note shall be the rate on that date for negotiable U.S. dollar certificates
of deposit having the Index Maturity specified on the face hereof as published
by the Board of Governors of the Federal Reserve System in "Statistical Release
H.15(519), Selected Interest Rates," or any successor publication of the Board
of Governors of the Federal Reserve System ("H.15(519)") under the heading "CDs
(Secondary Market)."

                                       19

<PAGE>

      The following procedures shall be followed if the CD Rate cannot be
determined as described above:

      (i) If the above rate is not published in H.15(519) by 3:00 p.m., New York
City time, on the Calculation Date, the CD Rate shall be the rate on that
Interest Determination Date set forth in the daily update of H.15(519),
available through the world wide website of the Board of Governors of the
Federal Reserve System at http://www.federalreserve.gov/releases/h15/update, or
any successor site or publication ("H.15 Daily Update") for the Interest
Determination Date for certificates of deposit having the Index Maturity
specified on the face hereof, under the caption "CDs (Secondary Market)."

      (ii) If the above rate is not yet published in either H.15(519) or the
H.15 Daily Update by 3:00 p.m., New York City time, on the Calculation Date, the
Calculation Agent shall determine the CD Rate to be the arithmetic mean of the
secondary market offered rates as of 10:00 a.m., New York City time, on that
Interest Determination Date of three leading nonbank dealers in negotiable U.S.
dollar certificates of deposit in The City of New York, which may include the
initial dealer and its affiliates, selected by the Calculation Agent (after
consultation with the Issuer), for negotiable U.S. dollar certificates of
deposit of major U.S. money center banks of the highest credit standing in the
market for negotiable certificates of deposit with a remaining maturity closest
to the Index Maturity specified on the face hereof in an amount that is
representative for a single transaction in that market at that time.

      "Initial dealer" with respect to this Note means either Morgan Stanley &
Co. Incorporated or Morgan Stanley DW Inc., as applicable.

      (iii) If the dealers selected by the Calculation Agent are not quoting as
set forth above, the CD Rate for that Interest Determination Date shall remain
the CD Rate for the immediately preceding Interest Reset Period, or, if there
was no Interest Reset Period, the rate of interest payable shall be the Initial
Interest Rate.

      Determination of Commercial Paper Rate. If the Base Rate specified on the
face hereof is the "Commercial Paper Rate," for any Interest Determination Date,
the Commercial Paper Rate with respect to this Note shall be the Money Market
Yield (as defined herein), calculated as described below, of the rate on that
date for U.S. dollar commercial paper having the Index Maturity specified on the
face hereof, as that rate is published in H.15(519), under the heading
"Commercial Paper--Nonfinancial."

      The following procedures shall be followed if the Commercial Paper Rate
cannot be determined as described above:

      (i) If the above rate is not published by 3:00 p.m., New York City time,
on the Calculation Date, then the Commercial Paper Rate shall be the Money
Market Yield of the rate on that Interest Determination Date for commercial
paper of the Index Maturity specified on the face hereof as published in the
H.15 Daily Update, or other recognized electronic source used for the purpose of
displaying the applicable rate, under the heading "Commercial
Paper--Nonfinancial."

                                       20

<PAGE>

      (ii) If by 3:00 p.m., New York City time, on that Calculation Date the
rate is not yet published in either H.15(519) or the H.15 Daily Update, or other
recognized electronic source used for the purpose of displaying the applicable
rate, then the Calculation Agent shall determine the Commercial Paper Rate to be
the Money Market Yield of the arithmetic mean of the offered rates as of 11:00
a.m., New York City time, on that Interest Determination Date of three leading
dealers of U.S. dollar commercial paper in The City of New York, which may
include the initial dealer and its affiliates, selected by the Calculation Agent
(after consultation with the Issuer), for commercial paper of the Index Maturity
specified on the face hereof, placed for an industrial issuer whose bond rating
is "Aa," or the equivalent, from a nationally recognized statistical rating
agency.

      (iii) If the dealers selected by the Calculation Agent are not quoting as
set forth in (ii) above, the Commercial Paper Rate for that Interest
Determination Date shall remain the Commercial Paper Rate for the immediately
preceding Interest Reset Period, or, if there was no Interest Reset Period, the
rate of interest payable shall be the Initial Interest Rate.

      The "Money Market Yield" shall be a yield calculated in accordance with
the following formula:

                                       D x 360
           Money Market Yield   =   -------------  x   100
                                    360 - (D x M)

where "D" refers to the applicable per year rate for commercial paper quoted on
a bank discount basis and expressed as a decimal and "M" refers to the actual
number of days in the interest period for which interest is being calculated.

      Determination of EURIBOR Notes. If the Base Rate specified on the face
hereof is "EURIBOR," for any Interest Determination Date, EURIBOR with respect
to this Note shall be the rate for deposits in euros as sponsored, calculated
and published jointly by the European Banking Federation and ACI - The Financial
Market Association, or any company established by the joint sponsors for
purposes of compiling and publishing those rates, for the Index Maturity
specified on the face hereof as that rate appears on the display on Moneyline
Telerate, or any successor service, on page 248 or any other page as may replace
page 248 on that service ("Telerate Page 248") as of 11:00 a.m., Brussels time.

      The following procedures shall be followed if the rate cannot be
determined as described above:

      (i) If the above rate does not appear, the Calculation Agent shall request
the principal Euro-zone office of each of four major banks in the Euro-zone
interbank market, as selected by the Calculation Agent (after consultation with
the Issuer), to provide the Calculation Agent with its offered rate for deposits
in euros, at approximately 11:00 a.m., Brussels time, on the Interest
Determination Date, to prime banks in the Euro-zone interbank market for the
Index Maturity specified on the face hereof commencing on the applicable
Interest Reset Date, and in a principal amount not less than the equivalent of
U.S.$1 million in euro that is representative of a single transaction in euro,
in that market at that time. If at least two quotations are provided, EURIBOR
shall be the arithmetic mean of those quotations.

                                       21

<PAGE>

      (ii) If fewer than two quotations are provided, EURIBOR shall be the
arithmetic mean of the rates quoted by four major banks in the Euro-zone
interbank market, as selected by the Calculation Agent (after consultation with
the Issuer), at approximately 11:00 a.m., Brussels time, on the applicable
Interest Reset Date for loans in euro to leading European banks for a period of
time equivalent to the Index Maturity specified on the face hereof commencing on
that Interest Reset Date in a principal amount not less than the equivalent of
U.S.$1 million in euro.

      (iii) If the banks so selected by the Calculation Agent are not quoting as
set forth above, the EURIBOR rate for that Interest Determination Date shall
remain the EURIBOR for the immediately preceding Interest Reset Period, or, if
there was no Interest Reset Period, the rate of interest payable shall be the
Initial Interest Rate.

      "Euro-zone" means the region comprised of member states of the European
Union that adopt the single currency in accordance with the relevant treaty of
the European Union, as amended.

      Determination of the Federal Funds Rates. If the Base Rate specified on
the face hereof is the "Federal Funds Rate," for any Interest Determination
Date, the Federal Funds Rate with respect to this Note shall be the rate on that
date for U.S. dollar federal funds as published in H.15(519) under the heading
"Federal Funds (Effective)" as displayed on Moneyline Telerate, or any successor
service, on page 120 or any other page as may replace page 120 on that service
("Telerate Page 120").

      The following procedures shall be followed if the Federal Funds Rate
cannot be determined as described above:

      (i) If the above rate is not published by 3:00 p.m., New York City time,
on the Calculation Date, the Federal Funds Rate shall be the rate on that
Interest Determination Date as published in the H.15 Daily Update, or other
recognized electronic source used for the purpose of displaying the applicable
rate, under the heading "Federal Funds (Effective)."

      (ii) If the above rate is not yet published in either H.15(519) or the
H.15 Daily Update, or other recognized electronic source used for the purpose of
displaying the applicable rate, by 3:00 p.m., New York City time, on the
Calculation Date, the Calculation Agent shall determine the Federal Funds Rate
to be the arithmetic mean of the rates for the last transaction in overnight
U.S. dollar federal funds prior to 9:00 a.m., New York City time, on that
Interest Determination Date, by each of three leading brokers of U.S. dollar
federal funds transactions in The City of New York, which may include the
initial dealer and its affiliates, selected by the Calculation Agent (after
consultation with the Issuer).

      (iii) If the brokers selected by the Calculation Agent are not quoting as
set forth in (ii) above, the Federal Funds Rate for that Interest Determination
Date shall remain the Federal Funds Rate for the immediately preceding Interest
Reset Period, or, if there was no Interest Reset Period, the rate of interest
payable shall be the Initial Interest Rate.

                                       22

<PAGE>

      Determination of LIBOR. If the Base Rate specified on the face hereof is
"LIBOR," LIBOR with respect to this Note shall be based on London Interbank
Offered Rate. The Calculation Agent shall determine LIBOR for each Interest
Determination Date as follows:

      (i) As of the Interest Determination Date, LIBOR shall be either (a) if
"LIBOR Reuters" is specified as the Reporting Service on the face hereof, the
arithmetic mean of the offered rates for deposits in the Index Currency having
the Index Maturity designated on the face hereof, commencing on the second
London Banking Day immediately following that Interest Determination Date, that
appear on the Designated LIBOR Page, as defined below, as of 11:00 a.m., London
time, on that Interest Determination Date, if at least two offered rates appear
on the Designated LIBOR Page; except that if the specified Designated LIBOR
Page, by its terms provides only for a single rate, that single rate shall be
used; or (b) if "LIBOR Telerate" is specified as the Reporting Service on the
face hereof, the rate for deposits in the Index Currency having the Index
Maturity designated on the face hereof, commencing on the second London Banking
Day immediately following that Interest Determination Date or, if pounds
sterling is the Index Currency, commencing on that Interest Determination Date,
that appears on the Designated LIBOR Page at approximately 11:00 a.m., London
time, on that Interest Determination Date.

      (ii) If (a) fewer than two offered rates appear and LIBOR Reuters is
specified on the face hereof, or (b) no rate appears and the face hereof
specifies either (x) LIBOR Telerate or (y) LIBOR Reuters and the Designated
LIBOR Page by its terms provides only for a single rate, then the Calculation
Agent shall request the principal London offices of each of four major reference
banks in the London interbank market, as selected by the Calculation Agent
(after consultation with the Issuer), to provide the Calculation Agent with its
offered quotation for deposits in the Index Currency for the period of the Index
Maturity specified on the face hereof commencing on the second London Banking
Day immediately following the Interest Determination Date or, if pounds sterling
is the Index Currency, commencing on that Interest Determination Date, to prime
banks in the London interbank market at approximately 11:00 a.m., London time,
on that Interest Determination Date and in a principal amount that is
representative of a single transaction in that Index Currency in that market at
that time.

      (iii) If at least two quotations are provided, LIBOR determined on that
Interest Determination Date shall be the arithmetic mean of those quotations. If
fewer than two quotations are provided, LIBOR shall be determined for the
applicable Interest Reset Date as the arithmetic mean of the rates quoted at
approximately 11:00 a.m., London time, or some other time specified on the face
hereof, in the applicable principal financial center for the country of the
Index Currency on that Interest Reset Date, by three major banks in that
principal financial center selected by the Calculation Agent (after consultation
with the Issuer) for loans in the Index Currency to leading European banks,
having the Index Maturity specified on the face hereof and in a principal amount
that is representative of a single transaction in that Index Currency in that
market at that time.

      (iv) If the banks so selected by the Calculation Agent are not quoting as
set forth above, the LIBOR rate for that Interest Determination Date shall
remain the LIBOR for the immediately preceding Interest Reset Period, or, if
there was no Interest Reset Period, the rate of interest payable shall be the
Initial Interest Rate.

                                       23

<PAGE>

      The "Index Currency" means the currency specified on the face hereof as
the currency for which LIBOR shall be calculated, or, if the euro is substituted
for that currency, the Index Currency shall be the euro. If that currency is not
specified on the face hereof, the Index Currency shall be U.S. dollars.

      "Designated LIBOR Page" means either: (a) if LIBOR Reuters is designated
as the Reporting Service on the face hereof, the display on the Reuters Money
3000 Service for the purpose of displaying the London interbank rates of major
banks for the applicable Index Currency or its designated successor, or (b) if
LIBOR Telerate is designated as the Reporting Service on the face hereof, the
display on Moneyline Telerate, or any successor service, on the page specified
on the face hereof, or any other page as may replace that page on that service,
for the purpose of displaying the London interbank rates of major banks for the
applicable Index Currency.

      If neither LIBOR Reuters nor LIBOR Telerate is specified on the face
hereof, LIBOR for the applicable Index Currency shall be determined as if LIBOR
Telerate were specified, and, if the U.S. dollar is the Index Currency, as if
Page 3750 had been specified.

      Determination of Prime Rate. If the Base Rate specified on the face hereof
is "Prime Rate," for any Interest Determination Date, the Prime Rate with
respect to this Note shall be the rate on that date as published in H.15(519)
under the heading "Bank Prime Loan."

      The following procedures shall be followed if the Prime Rate cannot be
determined as described above:

      (i) If the above rate is not published prior to 3:00 p.m., New York City
time, on the Calculation Date, then the Prime Rate shall be the rate on that
Interest Determination Date as published in the H.15 Daily Update under the
heading "Bank Prime Loan."

      (ii) If the above rate is not published in either H.15(519) or the H.15
Daily Update by 3:00 p.m., New York City time, on the Calculation Date, then the
Calculation Agent shall determine the Prime Rate to be the arithmetic mean of
the rates of interest publicly announced by each bank that appears on the
Reuters Screen USPRIME 1 Page, as defined below, as that bank's Prime Rate or
base lending rate as in effect for that Interest Determination Date.

      (iii) If fewer than four rates for that Interest Determination Date appear
on the Reuters Screen USPRIME 1 Page by 3:00 p.m., New York City time, on the
Calculation Date, the Calculation Agent shall determine the Prime Rate to be the
arithmetic mean of the Prime Rates quoted on the basis of the actual number of
days in the year divided by 360 as of the close of business on that Interest
Determination Date by at least three major banks in The City of New York, which
may include affiliates of the initial dealer, selected by the Calculation Agent
(after consultation with the Issuer).

      (iv) If the banks selected by the Calculation Agent are not quoting as set
forth above, the Prime Rate for that Interest Determination Date shall remain
the Prime Rate for the immediately preceding Interest Reset Period, or, if there
was no Interest Reset Period, the rate of interest payable shall be the Initial
Interest Rate.

                                       24

<PAGE>

      "Reuters Screen USPRIME 1 Page" means the display designated as page
"USPRIME 1" on the Reuters Money 3000 Service, or any successor service, or any
other page as may replace the USPRIME 1 Page on that service for the purpose of
displaying prime rates or base lending rates of major U.S. banks.

      Determination of Treasury Rate. If the Base Rate specified on the face
hereof is "Treasury Rate," the Treasury Rate with respect to this Note shall be

      (i) the rate from the Auction held on the applicable Interest
Determination Date (the "Auction") of direct obligations of the United States
("Treasury Bills") having the Index Maturity specified on the face hereof as
that rate appears under the caption "INVESTMENT RATE" on the display on
Moneyline Telerate, or any successor service, on page 56 or any other page as
may replace page 56 on that service ("Telerate Page 56") or page 57 or any other
page as may replace page 57 on that service ("Telerate Page 57"); or

      (ii) if the rate described in (i) above is not published by 3:00 p.m., New
York City time, on the Calculation Date, the Bond Equivalent Yield of the rate
for the applicable Treasury Bills as published in the H.15 Daily Update, or
other recognized electronic source used for the purpose of displaying the
applicable rate, under the caption "U.S. Government Securities/Treasury
Bills/Auction High"; or

      (iii) if the rate described in (ii) above is not published by 3:00 p.m.,
New York City time, on the related Calculation Date, the Bond Equivalent Yield
of the Auction rate of the applicable Treasury Bills, announced by the United
States Department of the Treasury; or

      (iv) if the rate described in (iii) above is not announced by the United
States Department of the Treasury, or if the Auction is not held, the Bond
Equivalent Yield of the rate on the applicable Interest Determination Date of
Treasury Bills having the Index Maturity specified on the face hereof published
in H.15(519) under the caption "U.S. Government Securities/Treasury
Bills/Secondary Market"; or

      (v) if the rate described in (iv) above is not so published by 3:00 p.m.,
New York City time, on the related Calculation Date, the rate on the applicable
Interest Determination Date of the applicable Treasury Bills as published in the
H.15 Daily Update, or other recognized electronic source used for the purpose of
displaying the applicable rate, under the caption "U.S. Government
Securities/Treasury Bills/Secondary Market"; or

      (vi) if the rate described in (v) above is not so published by 3:00 p.m.,
New York City time, on the related Calculation Date, the rate on the applicable
Interest Determination Date calculated by the Calculation Agent as the Bond
Equivalent Yield of the arithmetic mean of the secondary market bid rates, as of
approximately 3:30 p.m., New York City time, on the applicable Interest
Determination Date, of three primary U.S. government securities dealers, which
may include the initial dealer and its affiliates, selected by the Calculation
Agent, for the issue of Treasury Bills with a remaining maturity closest to the
Index Maturity specified on the face hereof; or

                                       25

<PAGE>

      (vii) if the dealers selected by the Calculation Agent are not quoting as
described in (vi), the Treasury Rate for the immediately preceding Interest
Reset Period, or, if there was no Interest Reset Period, the rate of interest
payable shall be the Initial Interest Rate.

      The "Bond Equivalent Yield" means a yield calculated in accordance with
the following formula and expressed as a percentage:

                                              D x N
            Bond Equivalent Yield   =    --------------  x   100
                                          360 - (D x M)

where "D" refers to the applicable per annum rate for Treasury Bills quoted on a
bank discount basis, "N" refers to 365 or 366, as the case may be, and "M"
refers to the actual number of days in the interest period for which interest is
being calculated.

      Determination of CMT Rate. If the Base Rate specified on the face hereof
is the "CMT Rate," for any Interest Determination Date, the CMT Rate with
respect to this Note shall be the rate displayed on the Designated CMT Telerate
Page (as defined below) under the caption "... Treasury Constant Maturities ...
Federal Reserve Board Release H.15... Mondays Approximately 3:45 p.m.," under
the column for the Designated CMT Maturity Index, as defined below, for:

      (1) the rate on that Interest Determination Date, if the Designated CMT
Telerate Page is 7051; and

      (2) the week or the month, as applicable, ended immediately preceding the
week in which the related Interest Determination Date occurs, if the Designated
CMT Telerate Page is 7052.

      The following procedures shall be followed if the CMT Rate cannot be
determined as described above:

      (i) If the above rate is no longer displayed on the relevant page, or if
not displayed by 3:00 p.m., New York City time, on the related Calculation Date,
then the CMT Rate shall be the Treasury Constant Maturity rate for the
Designated CMT Maturity Index as published in the relevant H.15(519).

      (ii) If the above rate is no longer published, or if not published by 3:00
p.m., New York City time, on the related Calculation Date, then the CMT Rate
shall be the Treasury Constant Maturity Rate for the Designated CMT Maturity
Index or other U.S. Treasury rate for the Designated CMT Maturity Index on the
Interest Determination Date as may then be published by either the Board of
Governors of the Federal Reserve System or the United States Department of the
Treasury that the Calculation Agent determines to be comparable to the rate
formerly displayed on the Designated CMT Telerate Page and published in the
relevant H.15(519).

      (iii) If the information set forth above is not provided by 3:00 p.m., New
York City time, on the related Calculation Date, then the Calculation Agent
shall determine the CMT Rate to be a yield to maturity, based on the arithmetic
mean of the secondary market closing offer side

                                       26

<PAGE>

prices as of approximately 3:30 p.m., New York City time, on the Interest
Determination Date, reported, according to their written records, by three
leading primary U.S. government securities dealers ("Reference Dealers") in The
City of New York, which may include the initial dealer or its affiliates,
selected by the Calculation Agent as described in the following sentence. The
Calculation Agent shall select five reference dealers (after consultation with
the Issuer) and shall eliminate the highest quotation or, in the event of
equality, one of the highest, and the lowest quotation or, in the event of
equality, one of the lowest, for the most recently issued direct noncallable
fixed rate obligations of the United States ("Treasury Notes") with an original
maturity of approximately the Designated CMT Maturity Index, a remaining term to
maturity of no more than 1 year shorter than that Designated CMT Maturity Index
and in a principal amount that is representative for a single transaction in the
securities in that market at that time. If two Treasury Notes with an original
maturity as described above have remaining terms to maturity equally close to
the Designated CMT Maturity Index, the quotes for the Treasury Note with the
shorter remaining term to maturity shall be used.

      (iv) If the Calculation Agent cannot obtain three Treasury Notes
quotations as described in (iii) above, the Calculation Agent shall determine
the CMT Rate to be a yield to maturity based on the arithmetic mean of the
secondary market offer side prices as of approximately 3:30 p.m., New York City
time, on the Interest Determination Date of three reference dealers in The City
of New York, selected using the same method described in (iii) above, for
Treasury Notes with an original maturity equal to the number of years closest to
but not less than the Designated CMT Maturity Index and a remaining term to
maturity closest to the Designated CMT Maturity Index and in a principal amount
that is representative for a single transaction in the securities in that market
at that time.

      (v) If three or four, and not five, of the reference dealers are quoting
as described in (iv) above, then the CMT Rate for that Interest Determination
Date shall be based on the arithmetic mean of the offer prices obtained and
neither the highest nor the lowest of those quotes shall be eliminated.

      (vi) If fewer than three reference dealers selected by the Calculation
Agent are quoting as described in (iv) above, the CMT Rate for that Interest
Determination Date shall remain the CMT Rate for the immediately preceding
Interest Reset Period, or, if there was no Interest Reset Period, the rate of
interest payable shall be the Initial Interest Rate.

      "Designated CMT Telerate Page" means the display on Moneyline Telerate, or
any successor service, on the page designated on the face hereof or any other
page as may replace that page on that service for the purpose of displaying
Treasury Constant Maturities as reported in H.15(519). If no page is specified
on the face hereof, the Designated CMT Telerate Page shall be 7052, for the most
recent week.

      "Designated CMT Maturity Index" means the original period to maturity of
the U.S. Treasury securities, which is either 1, 2, 3, 5, 7, 10, 20 or 30 years,
as specified in the applicable pricing supplement for which the CMT Rate shall
be calculated. If no maturity is specified on the face hereof, the Designated
CMT Maturity Index shall be two years.

                                       27

<PAGE>

      Notwithstanding the foregoing, the interest rate hereon shall not be
greater than the Maximum Interest Rate, if any, or less than the Minimum
Interest Rate, if any, specified on the face hereof. The Calculation Agent shall
calculate the interest rate hereon in accordance with the foregoing on or before
each Calculation Date. The interest rate on this Note will in no event be higher
than the maximum rate permitted by New York law, as the same may be modified by
United States Federal law of general application.

      At the request of the holder hereof, the Calculation Agent will provide to
the holder hereof the interest rate hereon then in effect and, if determined,
the interest rate that will become effective as of the next Interest Reset Date.

      Unless otherwise indicated on the face hereof, interest payments on this
Note shall be the amount of interest accrued from and including the Interest
Accrual Date or from and including the last date to which interest has been paid
or duly provided for to but excluding the Interest Payment Dates or the Maturity
Date (or any earlier redemption or repayment date), as the case may be. Accrued
interest hereon shall be an amount calculated by multiplying the face amount
hereof by an accrued interest factor. Such accrued interest factor shall be
computed by adding the interest factor calculated for each day in the period for
which interest is being paid. The interest factor for each such date shall be
computed by dividing the interest rate applicable to such day (i) by 360 if the
Base Rate is CD Rate, Commercial Paper Rate, EURIBOR, Federal Funds Rate, Prime
Rate or LIBOR (except if the Index Currency is pounds sterling); (ii) by 365 if
the Base Rate is LIBOR and the Index Currency is pounds sterling; or (iii) by
the actual number of days in the year if the Base Rate is the Treasury Rate or
the CMT Rate. All percentages resulting from any calculation of the rate of
interest on this Note will be rounded, if necessary, to the nearest one hundred
thousandth of a percentage point with (.000005% being rounded up to .00001%) and
all U.S. dollar amounts used in or resulting from such calculation on this Note
will be rounded to the nearest cent, with one half cent rounded upward. All
Japanese Yen amounts used in or resulting from such calculations will be rounded
downwards to the next lower whole Japanese Yen amount. All amounts denominated
in any other currency used in or resulting from such calculations will be
rounded to the nearest two decimal places in such currency, with .005 being
rounded up to .01. The interest rate in effect on any Interest Reset Date will
be the applicable rate as reset on such date. The interest rate applicable to
any other day is the interest rate from the immediately preceding Interest Reset
Date (or, if none, the Initial Interest Rate).

      This Note and all the obligations of the Issuer hereunder are direct,
unsecured obligations of the Issuer and rank without preference or priority
among themselves and pari passu with all other existing and future unsecured and
unsubordinated indebtedness of the Issuer, subject to certain statutory
exceptions in the event of liquidation upon insolvency.

      This Note, and any Note or Notes issued upon transfer or exchange hereof,
is issuable only in fully registered form, without coupons, and, if denominated
in U.S. dollars, unless otherwise stated above, is issuable only in
denominations of U.S. $1,000 and any integral multiple of U.S. $1,000 in excess
thereof. If this Note is denominated in a Specified Currency other than U.S.
dollars, then, unless a higher minimum denomination is required by applicable
law, it is issuable only in denominations of the equivalent of U.S. $1,000
(rounded to an integral multiple of 1,000 units of such Specified Currency), or
any amount in excess thereof which is an

                                       28

<PAGE>

integral multiple of 1,000 units of such Specified Currency, as determined by
reference to the noon dollar buying rate in The City of New York for cable
transfers of such Specified Currency published by the Federal Reserve Bank of
New York (the "Market Exchange Rate") on the Business Day immediately preceding
the date of issuance.

      The Trustee has been appointed registrar for the Notes, and the Trustee
will maintain at its office in The City of New York a register for the
registration and transfer of Notes. This Note may be transferred at the
aforesaid office of the Trustee by surrendering this Note for cancellation,
accompanied by a written instrument of transfer in form satisfactory to the
Issuer and the Trustee and duly executed by the registered holder hereof in
person or by the holder's attorney duly authorized in writing, and thereupon the
Trustee shall issue in the name of the transferee or transferees, in exchange
herefor, a new Note or Notes having identical terms and provisions and having a
like aggregate principal amount in authorized denominations, subject to the
terms and conditions set forth herein; provided, however, that the Trustee will
not be required (i) to register the transfer of or exchange any Note that has
been called for redemption in whole or in part, except the unredeemed portion of
Notes being redeemed in part, (ii) to register the transfer of or exchange any
Note if the holder thereof has exercised his right, if any, to require the
Issuer to repurchase such Note in whole or in part, except the portion of such
Note not required to be repurchased, or (iii) to register the transfer of or
exchange Notes to the extent and during the period so provided in the Senior
Indenture with respect to the redemption of Notes. Notes are exchangeable at
said office for other Notes of other authorized denominations of equal aggregate
principal amount having identical terms and provisions. All such exchanges and
transfers of Notes will be free of charge, but the Issuer may require payment of
a sum sufficient to cover any tax or other governmental charge in connection
therewith. All Notes surrendered for exchange shall be accompanied by a written
instrument of transfer in form satisfactory to the Issuer and the Trustee and
executed by the registered holder in person or by the holder's attorney duly
authorized in writing. The date of registration of any Note delivered upon any
exchange or transfer of Notes shall be such that no gain or loss of interest
results from such exchange or transfer.

      In case this Note shall at any time become mutilated, defaced or be
destroyed, lost or stolen and this Note or evidence of the loss, theft or
destruction thereof (together with the indemnity hereinafter referred to and
such other documents or proof as may be required in the premises) shall be
delivered to the Trustee, the Issuer in its discretion may execute a new Note of
like tenor in exchange for this Note, but, if this Note is destroyed, lost or
stolen, only upon receipt of evidence satisfactory to the Trustee and the Issuer
that this Note was destroyed or lost or stolen and, if required, upon receipt
also of indemnity satisfactory to each of them. All expenses and reasonable
charges associated with procuring such indemnity and with the preparation,
authentication and delivery of a new Note shall be borne by the owner of the
Note mutilated, defaced, destroyed, lost or stolen.

      The Senior Indenture provides that (a) if an Event of Default (as defined
in the Senior Indenture) due to the default in payment of principal of or
premium, if any, or interest on, any series of debt securities issued under the
Senior Indenture, including the series of Notes of which this Note forms a part,
or due to the default in the performance or breach of any other covenant or
warranty of the Issuer applicable to the debt securities of such series but not
applicable to all

                                       29

<PAGE>

outstanding debt securities issued under the Senior Indenture, shall have
occurred and be continuing, either the Trustee or the holders of not less than
25% in aggregate principal amount of the outstanding debt securities of each
affected series, voting as one class, by notice in writing to the Issuer and to
the Trustee, if given by the securityholders, may then declare the principal of
all debt securities of all such series and interest accrued thereon to be due
and payable immediately and (b) if an Event of Default due to a default in the
performance of any other of the covenants or agreements in the Senior Indenture
applicable to all outstanding debt securities issued thereunder, including this
Note, or due to certain events of bankruptcy, insolvency or reorganization of
the Issuer, shall have occurred and be continuing, either the Trustee or the
holders of not less than 25% in aggregate principal amount of all outstanding
debt securities issued under the Senior Indenture, voting as one class, by
notice in writing to the Issuer and to the Trustee, if given by the
securityholders, may declare the principal of all such debt securities and
interest accrued thereon to be due and payable immediately, but upon certain
conditions such declarations may be annulled and past defaults may be waived
(except a continuing default in payment of principal or premium, if any, or
interest on such debt securities) by the holders of a majority in aggregate
principal amount of the debt securities of all affected series then outstanding.

      The Senior Indenture permits the Issuer and the Trustee, with the consent
of the holders of not less than a majority in aggregate principal amount of the
debt securities of all series issued under the Senior Indenture then outstanding
and affected (voting as one class), to execute supplemental indentures adding
any provisions to or changing in any manner the rights of the holders of each
series so affected; provided that the Issuer and the Trustee may not, without
the consent of the holder of each outstanding debt security affected thereby,
(i) extend the final maturity of any such debt security, or reduce the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, or reduce any amount payable on redemption thereof, or change the
currency of payment thereof, or modify or amend the provisions for conversion of
any currency into any other currency, or modify or amend the provisions for
conversion or exchange of the debt security for securities of the Issuer or
other entities or for other property or the cash value of the property (other
than as provided in the antidilution provisions or other similar adjustment
provisions of the debt securities or otherwise in accordance with the terms
thereof), or impair or affect the rights of any holder to institute suit for the
payment thereof or (ii) reduce the aforesaid percentage in principal amount of
debt securities the consent of the holders of which is required for any such
supplemental indenture.

      Except as set forth below, if the principal of, premium, if any, or
interest on, this Note is payable in a Specified Currency other than U.S.
dollars and such Specified Currency is not available to the Issuer for making
payments hereon due to the imposition of exchange controls or other
circumstances beyond the control of the Issuer or is no longer used by the
government of the country issuing such currency or for the settlement of
transactions by public institutions within the international banking community,
then the Issuer will be entitled to satisfy its obligations to the holder of
this Note by making such payments in U.S. dollars on the basis of the Market
Exchange Rate on the date of such payment or, if the Market Exchange Rate is not
available on such date, as of the most recent practicable date; provided,
however, that if the euro has been substituted for such Specified Currency, the
Issuer may at its option (or shall, if so required by applicable law) without
the consent of the holder of this Note effect the payment of

                                       30

<PAGE>

principal of or premium, if any, or interest on any Note denominated in such
Specified Currency in euro in lieu of such Specified Currency in conformity with
legally applicable measures taken pursuant to, or by virtue of, the Treaty
establishing the European Community, as amended. Any payment made under such
circumstances in U.S. dollars or euro where the required payment is in an
unavailable Specified Currency will not constitute an Event of Default. If such
Market Exchange Rate is not then available to the Issuer or is not published for
a particular Specified Currency, the Market Exchange Rate will be based on the
highest bid quotation in The City of New York received by the Exchange Rate
Agent at approximately 11:00 a.m., New York City time, on the second Business
Day preceding the date of such payment from three recognized foreign exchange
dealers (the "Exchange Dealers") for the purchase by the quoting Exchange Dealer
of the Specified Currency for U.S. dollars for settlement on the payment date,
in the aggregate amount of the Specified Currency payable to those holders or
beneficial owners of Notes and at which the applicable Exchange Dealer commits
to execute a contract. One of the Exchange Dealers providing quotations may be
the Exchange Rate Agent unless the Exchange Rate Agent is an affiliate of the
Issuer. If those bid quotations are not available, the Exchange Rate Agent shall
determine the market exchange rate at its sole discretion.

      The "Exchange Rate Agent" shall be Morgan Stanley & Co. Incorporated,
unless otherwise indicated on the face hereof.

      All determinations referred to above made by, or on behalf of, the Issuer
or by, or on behalf of, the Exchange Rate Agent shall be at such entity's sole
discretion and shall, in the absence of manifest error, be conclusive for all
purposes and binding on holders of Notes.

      So long as this Note shall be outstanding, the Issuer will cause to be
maintained an office or agency for the payment of the principal of and premium,
if any, and interest on this Note as herein provided in the Borough of
Manhattan, The City of New York, and an office or agency in said Borough of
Manhattan for the registration, transfer and exchange as aforesaid of the Notes.
The Issuer may designate other agencies for the payment of said principal,
premium and interest at such place or places (subject to applicable laws and
regulations) as the Issuer may decide. So long as there shall be such an agency,
the Issuer shall keep the Trustee advised of the names and locations of such
agencies, if any are so designated. If any European Union Directive on the
taxation of savings comes into force, the Issuer will, to the extent possible as
a matter of law, maintain a Paying Agent in a member state of the European Union
that will not be obligated to withhold or deduct tax pursuant to any such
Directive or any law implementing or complying with, or introduced in order to
conform to, such Directive.

      With respect to moneys paid by the Issuer and held by the Trustee or any
Paying Agent for payment of the principal of or interest or premium, if any, on
any Notes that remain unclaimed at the end of two years after such principal,
interest or premium shall have become due and payable (whether at maturity or
upon call for redemption or otherwise), (i) the Trustee or such Paying Agent
shall notify the holders of such Notes that such moneys shall be repaid to the
Issuer and any person claiming such moneys shall thereafter look only to the
Issuer for payment thereof and (ii) such moneys shall be so repaid to the
Issuer. Upon such repayment all liability of the Trustee or such Paying Agent
with respect to such moneys shall thereupon cease, without, however, limiting in
any way any obligation that the Issuer may have to pay the principal of or
interest or premium, if any, on this Note as the same shall become due.

                                       31

<PAGE>

      No provision of this Note or of the Senior Indenture shall alter or impair
the obligation of the Issuer, which is absolute and unconditional, to pay the
principal of and premium, if any, and interest on this Note at the time, place,
and rate, and in the coin or currency, herein prescribed unless otherwise agreed
between the Issuer and the registered holder of this Note.

      Prior to due presentment of this Note for registration of transfer, the
Issuer, the Trustee and any agent of the Issuer or the Trustee may treat the
holder in whose name this Note is registered as the owner hereof for all
purposes, whether or not this Note be overdue, and none of the Issuer, the
Trustee or any such agent shall be affected by notice to the contrary.

      No recourse shall be had for the payment of the principal of or premium,
if any, or the interest on this Note, for any claim based hereon, or otherwise
in respect hereof, or based on or in respect of the Senior Indenture or any
indenture supplemental thereto, against any incorporator, shareholder, officer
or director, as such, past, present or future, of the Issuer or of any successor
corporation, either directly or through the Issuer or any successor corporation,
whether by virtue of any constitution, statute or rule of law or by the
enforcement of any assessment or penalty or otherwise, all such liability being,
by the acceptance hereof and as part of the consideration for the issue hereof,
expressly waived and released.

      This Note shall for all purposes be governed by, and construed in
accordance with, the laws of the State of New York.

      As used herein, the term "United States Alien" means any person who is,
for United States federal income tax purposes, (i) a nonresident alien
individual, (ii) a foreign corporation, (iii) a nonresident alien fiduciary of a
foreign estate or trust or (iv) a foreign partnership one or more of the members
of which is, for United States federal income tax purposes, a nonresident alien
individual, a foreign corporation or a nonresident alien fiduciary of a foreign
estate or trust.

      All terms used in this Note which are defined in the Senior Indenture and
not otherwise defined herein shall have the meanings assigned to them in the
Senior Indenture.

                                       32

<PAGE>

                                  ABBREVIATIONS

      The following abbreviations, when used in the inscription on the face of
this instrument, shall be construed as though they were written out in full
according to applicable laws or regulations:

            TEN COM   -  as tenants in common
            TEN ENT   -  as tenants by the entireties
            JT TEN    -  as joint  tenants with right of  survivorship  and
                           not as tenants in common

      UNIF GIFT MIN ACT - ____________________ Custodian ______________________
                                    (Minor)                       (Cust)

      Under Uniform Gifts to Minors Act ___________________________
                                                (State)

      Additional abbreviations may also be used though not in the above list.

                           __________________________

                                       33

<PAGE>

      FOR VALUE RECEIVED, the undersigned hereby sell(s), assign(s) and
transfer(s) unto

_______________________________________
[PLEASE INSERT SOCIAL SECURITY OR OTHER
   IDENTIFYING NUMBER OF ASSIGNEE]

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
    [PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE]

the within Note and all rights thereunder, hereby irrevocably constituting and
appointing such person attorney to transfer such note on the books of the
Issuer, with full power of substitution in the premises.

Dated: ______________

NOTICE:  The signature to this assignment must correspond with the name as
         written upon the face of the within Note in every particular without
         alteration or enlargement or any change whatsoever.

                                       34

<PAGE>

                            OPTION TO ELECT REPAYMENT

      The undersigned hereby irrevocably requests and instructs the Issuer to
repay the within Note (or portion thereof specified below) pursuant to its terms
at a price equal to the principal amount thereof, together with interest to the
Optional Repayment Date, to the undersigned at

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
        (Please print or typewrite name and address of the undersigned)

     If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof which the holder elects to have repaid:
_____________; and specify the denomination or denominations (which shall not
be less than the minimum authorized denomination) of the Notes to be issued to
the holder for the portion of the within Note not being repaid (in the absence
of any such specification, one such Note will be issued for the portion not
being repaid):_________________ .

Dated:_________________________________      ___________________________________
                                             NOTICE: The signature on this
                                             Option to Elect Repayment must
                                             correspond with the name as written
                                             upon the face of the within
                                             instrument in every particular
                                             without alteration or enlargement.

                                       35

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