Document:

Shareholder Rights Plan Agreement

 

EXHIBIT 4.1

SHAREHOLDER RIGHTS PLAN AGREEMENT

DATED AS OF February 22, 2007

BETWEEN

RITCHIE BROS. AUCTIONEERS INCORPORATED

AND

COMPUTERSHARE INVESTOR SERVICES INC.

AS RIGHTS AGENT

 

 

McCarthy Tétrault LLP

Suite 1300, 777 Dunsmuir Street

Vancouver, British Columbia

Canada V7Y 1K2

 

 

SHAREHOLDER RIGHTS PLAN AGREEMENT

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	ARTICLE 1 — INTERPRETATION	 	 	1	 
	 
	 	 	 	 	 	 
	1.1
	 	Certain Definitions	 	 	1	 
	1.2
	 	Currency	 	 	13	 
	1.3
	 	Headings and Interpretation	 	 	13	 
	1.4
	 	Calculation of Number and Percentage of Beneficial Ownership of Outstanding Voting Shares	 	 	13	 
	1.5
	 	Acting Jointly or in Concert	 	 	14	 
	1.6
	 	Generally Accepted Accounting Principles	 	 	14	 
	 
	 	 	 	 	 	 
	ARTICLE 2 — THE RIGHTS	 	 	14	 
	 
	 	 	 	 	 	 
	2.1
	 	Issue of Rights:  Legend on Common Share Certificates	 	 	14	 
	2.2
	 	Initial Exercise Price; Exercise of Rights; Detachment of Rights	 	 	15	 
	2.3
	 	Adjustments to Exercise Price; Number of Rights	 	 	18	 
	2.4
	 	Date on Which Exercise Is Effective	 	 	21	 
	2.5
	 	Execution, Authentication, Delivery and Dating of Rights Certificates	 	 	21	 
	2.6
	 	Registration, Transfer and Exchange	 	 	22	 
	2.7
	 	Mutilated, Destroyed, Lost and Stolen Rights Certificates	 	 	22	 
	2.8
	 	Persons Deemed Owners of Rights	 	 	23	 
	2.9
	 	Delivery and Cancellation of Certificates	 	 	23	 
	2.10
	 	Agreement of Rights Holders	 	 	23	 
	2.11
	 	Holder of Rights Not Deemed a Shareholder	 	 	24	 
	 
	 	 	 	 	 	 
	ARTICLE 3 — ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF A FLIP-IN EVENT	 	 	25	 
	 
	 	 	 	 	 	 
	3.1
	 	Flip-in Event	 	 	25	 
	 
	 	 	 	 	 	 
	ARTICLE 4 — THE RIGHTS AGENT	 	 	26	 
	 
	 	 	 	 	 	 
	4.1
	 	General	 	 	26	 
	4.2
	 	Merger, Amalgamation or Consolidation or Change of Name of Rights Agent	 	 	27	 
	4.3
	 	Duties of Rights Agent	 	 	27	 
	4.4
	 	Change of Rights Agent	 	 	29	 
	 
	 	 	 	 	 	 
	ARTICLE 5 — MISCELLANEOUS	 	 	29	 
	 
	 	 	 	 	 	 
	5.1
	 	Redemption and Waiver	 	 	29	 
	5.2
	 	Expiration	 	 	31	 
	5.3
	 	Issuance of New Rights Certificates	 	 	31	 
	5.4
	 	Supplements and Amendments	 	 	31	 
	5.5
	 	Fractional Rights and Fractional Shares	 	 	32	 
	5.6
	 	Rights of Action	 	 	33	 
	5.7
	 	Regulatory Approvals	 	 	33	 
	5.8
	 	Non-Canadian Holders	 	 	33	 
	5.9
	 	Notices	 	 	34	 
	5.10
	 	Costs of Enforcement	 	 	34	 
	5.11
	 	Successors	 	 	35	 
	5.12
	 	Benefits of this Agreement	 	 	35	 
	5.13
	 	Governing Law	 	 	35	 
	5.14
	 	Severability	 	 	35	 
	5.15
	 	Effective Date and Confirmation	 	 	35	 
	5.16
	 	Reconfirmation	 	 	35	 
	5.17
	 	Determinations and Actions by the Board of Directors	 	 	36	 
	5.18
	 	Time of the Essence	 	 	36	 
	5.19
	 	Execution in Counterparts	 	 	36	 
	 
	 	ATTACHMENT 1	 	 	37	 
	 
	 	FORM OF ASSIGNMENT	 	 	40	 
	 
	 	FORM OF ELECTION TO EXERCISE	 	 	41	 
	 
	 	CERTIFICATE	 	 	42	 
	 
	 	NOTICE	 	 	42	 

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SHAREHOLDER RIGHTS PLAN AGREEMENT

     SHAREHOLDER RIGHTS PLAN AGREEMENT dated as of February 22, 2007 between Ritchie Bros.
Auctioneers Incorporated, a corporation incorporated under the Canada Business Corporations Act
(the ‘Company’) and Computershare Investor Services Inc., a trust company existing under the laws
of Canada (the ‘Rights Agent’).

WHEREAS:

	A.	 	The Board of Directors of the Company has determined that it is in the best interests of the
Company to adopt a shareholder 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 shareholder rights plan, the Board of Directors has authorized and
declared a distribution of one Right effective the close of business on February 22, 2007 in
respect of each Common Share outstanding at the Record Time and has further authorized the
issuance 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 herein;
	 
	D.	 	The Company desires 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 (as hereinafter defined), the
exercise of Rights and other matters referred to herein;

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

ARTICLE 1 — INTERPRETATION

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

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

	 	(i)	 	the 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)	 	a Permitted Bid Acquisition;
	 
	 	(C)	 	an Exempt Acquisition;
	 
	 	(D)	 	a Pro Rata Acquisition; or

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	 	(E)	 	a Convertible Security Acquisition;

	 	 	 	provided, however, that if a Person becomes the Beneficial Owner of 20% or more of
the outstanding Voting Shares by reason of one or any combination of a Voting Share
Reduction, a Permitted Bid Acquisition, an Exempt Acquisition, a Pro Rata
Acquisition or a Convertible Security Acquisition and such Person’s Beneficial
Ownership of Voting Shares thereafter increases by more than 1% of the number of
Voting Shares outstanding (other than pursuant to one or any combination of a Voting
Share Reduction, a Permitted Bid Acquisition, an Exempt Acquisition, a Pro Rata
Acquisition or a Convertible Security Acquisition), then as of the date of such
increase, such Person shall become an ‘Acquiring Person’;

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

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

	 	(i)	 	200 per cent of the aggregate amount of cash dividends declared
payable by the Company on its Common Shares in its immediately preceding fiscal
year;

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	 	(ii)	 	300 per cent of the arithmetic mean of the aggregate amounts of
the annual cash dividends declared payable by the Company on its Common Shares
in its three immediately preceding fiscal years; and
	 
	 	(iii)	 	100 per cent of the aggregate consolidated net income of the
Company, before extraordinary items, for its immediately preceding fiscal year;

	 	(e)	 	‘Associate’, when used to indicate a relationship with a specified Person,
means (i) a spouse of such specified Person, (ii) any Person of either sex with whom
such specified Person is living in a conjugal relationship outside marriage or (iii)
any relative of such specified Person or of a Person mentioned in clauses (i) or (ii)
or this definition if that relative has the same residence as the specified Person;
	 
	 	(f)	 	A Person shall be deemed the ‘Beneficial Owner’ of, and to have ‘Beneficial
Ownership’ of, and to ‘Beneficially Own’,

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

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

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

	 	(A)	 	the ordinary business of any such Person (the
‘Investment Manager’) includes the management of investment funds for
others (which others, for greater certainty, may include or be limited
to one or more employee benefit plans or pension plans) and such
security is held by the

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

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

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	 	(g)	 	‘Board of Directors’ means the board of directors of the Company or any duly
constituted and empowered committee thereof;
	 
	 	(h)	 	‘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;
	 
	 	(i)	 	‘Canada Business Corporations Act’ means the Canada Business Corporations Act,
R.S.C. 1985, c. C-44, as amended, and the regulations thereunder, unless otherwise
specified, as the same exist on the date hereof;
	 
	 	(j)	 	‘Canadian – U.S. Exchange Rate’ means, on any date, the inverse of the U.S. –
Canadian Exchange Rate in effect on such date;
	 
	 	(k)	 	‘close of business’ on any given date means the time on such date (or, if such
date is not a Business Day, the time on the next succeeding Business Day) at which the
principal transfer office in Vancouver, British Columbia of the transfer agent for the
Common Shares (or, after the Separation Time, the principal transfer office in
Vancouver, British Columbia of the Rights Agent) is closed to the public;
	 
	 	(l)	 	‘Common Shares’ means the common shares in the capital of the Company;
	 
	 	(m)	 	‘Competing Permitted Bid’ means a Take-over Bid that:

	 	(i)	 	is made after a Permitted Bid or another Competing Permitted
Bid has been made and prior to the expiry of such Permitted Bid or Competing
Permitted Bid;
	 
	 	(ii)	 	satisfies all components of the definition of a Permitted Bid
other than the requirements set out in Subsection (ii)(A) of the definition of
Permitted Bid; and
	 
	 	(iii)	 	contains, and the take-up and payment for securities tendered
or deposited are subject to, irrevocable and unqualified conditions that no
Voting Shares will be taken up or paid for pursuant to the Competing Take-over
Bid prior to the close of business on a date that is no earlier than the later
of: (A) the earliest date on which Voting Shares may be taken up and paid for
under any Permitted Bid or other Competing Permitted Bid outstanding on the
date of commencement of such Competing Permitted Bid; and (B) 35 days after the
date of the Take-over Bid constituting such Competing Permitted Bid;

	 	 	 	provided always, for greater certainty, that a Competing Permitted Bid will cease to
be a Competing Permitted Bid at any time when such bid ceases to meet any of the
provisions of this definition and provided that, at such time, any acquisition of
Voting Shares made pursuant to such Competing Permitted Bid, including any
acquisitions of Voting Shares theretofore made, will cease to be a Permitted Bid
Acquisition;
	 
	 	(n)	 	‘controlled’: a Person is ‘controlled’ by another Person or two or more other
Persons acting jointly or in concert if:

	 	(i)	 	in the case of a body corporate, securities entitled to vote in
the election of directors of such body corporate carrying more than 50% of the
votes for the election of directors are held, directly or indirectly, by or for
the benefit of the other Person or Persons and the votes carried by such
securities are entitled, if exercised, to elect a majority of the board of
directors of such body corporate; or

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	 	(ii)	 	in the case of a Person which is not a body corporate, more
than 50% of the voting or equity interests of such entity are held, directly or
indirectly, by or for the benefit of the other Person or Persons;

	 	 	 	and ‘controls’, ‘controlling’ and ‘under common control with’ shall be interpreted
accordingly;
	 
	 	(o)	 	‘Convertible Securities’ shall mean, at any time:

	 	(i)	 	any right (contractual or otherwise, regardless of whether it
would be considered a security); or
	 
	 	(ii)	 	any securities issued by the Company (including rights,
warrants and options but not including the Rights) carrying any purchase,
exercise, conversion or exchange right,

	 	 	 	pursuant to which the holder thereof may acquire Voting Shares or other securities
convertible into or exercisable or exchangeable for Voting Shares (in each case,
whether such right is exercisable immediately or after a specified period and
whether or not on condition or the happening of any contingency);
	 
	 	(p)	 	‘Convertible Security Acquisition’ means the acquisition of Voting Shares from
the Company upon the exercise or pursuant to the terms and conditions of any
Convertible Securities acquired by a Person pursuant to a Permitted Bid Acquisition, an
Exempt Acquisition or a Pro Rata Acquisition;
	 
	 	(q)	 	‘Co-Rights Agents’ has the meaning ascribed thereto in Subsection 4.1(a);
	 
	 	(r)	 	‘Disposition Date’ has the meaning ascribed thereto in Subsection 5.1(h);
	 
	 	(s)	 	‘Dividend Reinvestment Acquisition’ means 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 or
holders of securities of a Subsidiary where such plan permits the holder to direct that
some or all of:

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

	 	 	 	be applied to the purchase from the Company of Voting Shares;
	 
	 	(u)	 	‘Effective Date’ means the date of this Agreement;
	 
	 	(v)	 	‘Election to Exercise’ has the meaning ascribed thereto in Subsection
2.2(d)(ii);
	 
	 	(w)	 	‘Exempt Acquisition’ means an acquisition of Voting Shares or Convertible
Securities (i) in respect of which the Board of Directors has waived the application of
Section 3.1

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	 	 	 	pursuant to the provisions of Subsection 5.1(a) or (h); or (ii) pursuant to an
amalgamation, merger or other statutory procedure, or private placement or other
issuance of Voting Shares or Convertible Securities requiring approval of the
shareholders of the Company;
	 
	 	(x)	 	‘Exercise Price’ means, as of any date, the price at which a holder may
purchase the securities issuable upon exercise of one whole Right which, until
adjustment thereof in accordance with the terms hereof, shall be an amount equal to
three times the Market Price per Common Share determined as at the Separation Time;
	 
	 	(y)	 	‘Expansion Factor’ has the meaning ascribed thereto in Subsection 2.3(a)(x);
	 
	 	(z)	 	‘Expiration Time’ means (i) the earlier of the Termination Time, and (ii) the
termination of any meeting of holders of Voting Shares at which this Agreement was not
confirmed or reconfirmed as provided for in Sections 5.15 and 5.16;
	 
	 	(aa)	 	‘Flip-in Event’ means a transaction or other event in or pursuant to which any
Person becomes an Acquiring Person;
	 
	 	(bb)	 	‘holder’ has the meaning ascribed thereto in Section 2.8;
	 
	 	(cc)	 	‘Independent Shareholders’ means holders of Voting Shares, other than:

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

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

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	 	(i)	 	the last sale price, regular way, or, in case no such sale
takes place on such date, the average of the closing bid and asked prices,
regular way, for each of the securities as reported in the principal
consolidated transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange;
	 
	 	(ii)	 	if for any reason none of such prices is available on such day
or the securities are not listed or admitted for trading on the exchange
referred to in (i), the closing board lot sale price or, in case no such sale
takes place on such date, the average of the closing bid and asked prices for
each of the securities as reported by the principal stock exchange in the
United States of America (as determined by volume of trading) on which such
securities are listed or admitted to trading or, if for any reason none of such
prices is available on such day or the securities are not listed or admitted
for trading on any United States stock exchange, on such other Canadian stock
exchange, or if the securities are not listed or admitted for trading on any
Canadian stock exchange, such other stock exchange on which the securities are
listed or admitted for trading;
	 
	 	(iii)	 	if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on a national United
States stock exchange, a Canadian stock exchange or any other stock exchange,
the last sale price or, in case no sale takes place on such date, the average
of the high bid and low asked prices for each of the securities in the
over-the-counter market, as quoted by any recognized reporting system then in
use (as determined by the Board of Directors); or
	 
	 	(iv)	 	if for any reason none of such prices is available on such day
or the securities are not listed or admitted to trading on a Canadian stock
exchange, a national United States stock exchange or any other stock exchange
or quoted by any reporting system, the average of the closing bid and asked
prices as furnished by a recognized professional market maker making a market
in the securities selected in good faith 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 security of the securities on such date means the fair
value per share of the securities on such date as determined by an internationally
recognized investment dealer or investment banker selected by the Board of
Directors. The Market Price shall be expressed in U.S. dollars. If any relevant
amount used in calculating the Market Price happens to be in Canadian dollars, such
amount shall be translated into United States dollars on that date at the U.S.
Dollar Equivalent thereof;
	 
	 	(ee)	 	‘1933 Securities Act’ means the Securities Act of 1933 of the United States, as
amended, and the rules and regulations thereunder, as now in effect or as the same may
from time to time be amended, re-enacted or replaced;
	 
	 	(ff)	 	‘1934 Exchange Act’ means the Securities Exchange Act of 1934 of the United
States, as amended, and the rules and regulations thereunder as now in effect or as the
same may from time to time be amended, re-enacted or replaced;
	 
	 	(gg)	 	‘Nominee’ has the meaning ascribed thereto in Subsection 2.2(c);

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	 	(hh)	 	‘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;
	 
	 	(ii)	 	‘Offeror’ means a Person who has announced, and has not withdrawn, an intention
to make or who has made, and has not withdrawn, a Take-over Bid, other than a Person
who has completed a Permitted Bid, a Competing Permitted Bid or an Exempt Acquisition;
	 
	 	(jj)	 	‘Offeror’s Securities’ means Voting Shares Beneficially Owned by an Offeror on
the date of the Offer to Acquire;
	 
	 	(kk)	 	‘Permitted Bid’ means a Take-over Bid made by a Person by way of take-over bid
circular which also complies with the following additional provisions:

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

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

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

9

 

	 	 	 	provided always that a Permitted Bid will cease to be a Permitted Bid at any time
when such bid ceases to meet any of the provisions of this definition and provided
that, at such time, any acquisition of Voting Shares made pursuant to such Permitted
bid, including any acquisitions of Voting Shares theretofore made, will cease to be
a Permitted Bid Acquisition;
	 
	 	(ll)	 	‘Permitted Bid Acquisition’ means an acquisition of Voting Shares made pursuant
to a Permitted Bid or a Competing Permitted Bid;
	 
	 	(mm)	 	‘Permitted Lock-up Agreement’ means an agreement between an Offeror, any of its
Affiliates or Associates or any other Person acting jointly or in concert with the
Offeror and a Person (the ‘Locked-up Person’) who is not an Affiliate or Associate of
the Offeror or a Person acting jointly or in concert with the Offeror (the terms of
which agreement are publicly disclosed and a copy of which is made available to the
public (including the Company) not later than the date the Lock-up Bid (as defined
below) is publicly announced or if the Lock-up Bid has been made prior to the date on
which such agreement is entered into, forthwith, and in any event not later than the
date following the date of such agreement) whereby the Locked-up Person agrees to
deposit or tender the Voting Shares held by the Locked-up Person to the Offeror’s
Take-over Bid or to any Take-over Bid made by any of the Offeror’s Affiliates or
Associates or made by any other Person acting jointly or in concert with the Offeror
(the ‘Lock-up Bid’) provided such agreement:

	 	(i)	 	permits the Locked-up Person to withdraw the Voting Shares from
the agreement in order to tender or deposit the Voting Shares to another
Take-over Bid or to support another transaction (whether by way of merger,
amalgamation, arrangement, reorganization or other transaction) (the ‘Superior
Offer Consideration’) that in either case will provide a greater cash
equivalent value per Voting Share to the holders of Voting Shares than the
Locked-up Person otherwise would have received to pay under the Lock-up Bid
(the ‘Lock-up Bid Consideration’). Notwithstanding the above, the Lock-Up
Agreement may require that the Superior Offer Consideration must exceed the
Lock-up Bid Consideration by a specified percentage before such withdrawal
right takes effect, provided such specified percentage is not greater than 7%;

	 	 	 	(and, for greater clarity, such agreement may contain a right of first refusal or
require a period of delay to give an Offeror an opportunity to match a higher price
in another Take-over Bid or transaction and may provide for any other similar
limitation on a Locked-up Person’s right to withdraw Voting Shares from the
agreement, as long as the limitation does not preclude the exercise by the Locked-up
Person of the right to withdraw Voting Shares during the period of the other
Take-over Bid or other transaction); and

	 	(ii)	 	does not provide for any “break-up” fees, “top-up” fees,
penalties, expenses or other amounts that exceed in the aggregate the greater
of:

	 	(A)	 	the cash equivalent of 3.5% of the price or
value payable under the Lock-up Bid to a Locked-Up Person; and
	 
	 	(B)	 	50% of the amount by which the price or value
payable under another Take-over Bid or transaction exceeds the price or
value of the consideration that such Locked-up Person would have
received under the Lock-up Bid;

10

 

	 	 	 	being payable or forfeited by a Locked-up Person pursuant to the agreement in the
event a Locked-up Person fails to deposit or tender Voting Shares to the Lock-up
Bid, withdraws Voting Shares previously tendered thereto to another Take-over Bid or
supports another transaction;
	 
	 	(nn)	 	‘Person’ includes any individual, firm, partnership, association, trust,
trustee, executor, administrator, legal personal representative, body corporate, joint
venture, corporation, unincorporated organization, syndicate, governmental entity or
other entity;
	 
	 	(oo)	 	‘Pro Rata Acquisition’ means an acquisition by a Person of Voting Shares or
Convertible Securities pursuant to:

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

	 	(pp)	 	‘Record Time’ means the close of business on the date of this Agreement;
	 
	 	(qq)	 	‘Redemption Price’ has the meaning ascribed thereto under Subsection 5.1(b) of
this Agreement;
	 
	 	(rr)	 	‘Right’ means a right to purchase a Common Share upon the terms and subject to
the conditions set forth in this Agreement;
	 
	 	(ss)	 	‘Rights Certificate’ means the certificates representing the Rights after the
Separation Time, which shall be substantially in the form attached hereto as Attachment
1 or such other form as the Company and the Rights Agent may agree;
	 
	 	(tt)	 	‘Rights Register’ has the meaning ascribed thereto in Subsection 2.6(a);
	 
	 	(uu)	 	‘Rights Registrar’ has the meaning ascribed thereto in Subsection 2.6(a);

11

 

	 	(vv)	 	‘Securities Act (British Columbia)’ means the Securities Act, R.S.B.C. 1996
Chapter 418, as amended, and the regulations and rules thereunder, and any comparable
or successor laws or regulations and rules thereto;
	 
	 	(ww)	 	‘Separation Time’ means the close of business on the tenth Trading Day after
the earlier of:

	 	(i)	 	the Stock Acquisition Date;
	 
	 	(ii)	 	the date of the commencement of or first public announcement of
the intent of any Person (other than the Company or any Subsidiary of the
Company) to commence a Take-over Bid (other than a Permitted Bid or a Competing
Permitted Bid); and
	 
	 	(iii)	 	the date on which a Permitted Bid or Competing Permitted Bid
ceases to be such;

	 	 	 	or such later time as may be determined by the Board of Directors acting in good
faith, and provided that, if any Take-over Bid referred to in Subsection (ii) or
Permitted Bid or Competing Permitted Bid referred to in Subsection (iii) is not
made, expires, is cancelled, terminated or otherwise withdrawn prior to the
Separation Time, such Take-over Bid, Permitted Bid or Competing Permitted Bid, as
applicable, shall be deemed, for the purposes of this definition, never to have been
made;
	 
	 	(xx)	 	‘Stock Acquisition Date’ means the first date of public announcement (which,
for purposes of this definition, shall include, without limitation, a report filed
pursuant to section 111 of the Securities Act (British Columbia) or Section 13(d) of
the 1934 Exchange Act) by the Company or an Acquiring Person indicating that an
Acquiring Person has become such;
	 
	 	(yy)	 	‘Subsidiary’: a corporation is a Subsidiary of another corporation if:

	 	(i)	 	it is controlled by:

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

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

	 	(zz)	 	‘Take-over Bid’ means an Offer to Acquire Voting Shares, or Convertible
Securities 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 the conversion, exchange or exercise of the
rights under such Convertible Securities 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;
	 
	 	(aaa)	 	‘Termination Time’ means the time at which the right to exercise Rights shall
terminate pursuant to Subsection 5.1(e);

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	 	(bbb)	 	‘Trading Day’, when used with respect to any securities, means a day on which
the principal stock exchange in the United States of America on which such securities
are listed or admitted to trading is open for the transaction of business or, if the
securities are not listed or admitted to trading on any stock exchange in the United
States of America, a Business Day;

	 	(ccc)	 	‘U.S.-Canadian Exchange Rate’ means, on any date:

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

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

1.2               Currency

                    All sums of money which are referred to in this Agreement are expressed in lawful money of the
United States of America, unless otherwise specified.

1.3               Headings and Interpretation

                    The division of this Agreement into Articles, Sections, Subsections, Clauses, Paragraphs,
Subparagraphs or other portions hereof and the insertion of headings, subheadings and a table of
contents are for convenience of reference only and shall not affect the construction or
interpretation of this Agreement. In this Agreement, where the context so admits, words importing
the singular include the plural and vice versa and words importing gender includes the masculine,
feminine and neuter genders.

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

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

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	 	100 x A/B	 	 

where:

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

Where any Person is deemed to Beneficially Own unissued Voting Shares, such Voting Shares shall be
deemed to be outstanding for the purpose of calculating the percentage of Voting Shares
Beneficially Owned by such Person, but no other unissued Voting Shares shall, for the purposes of
such calculation, be deemed to be outstanding.

1.5               Acting Jointly or in Concert

                    For the purposes of this Agreement, a Person is acting jointly or in concert with every Person
who is a party to any agreement, commitment or understanding (whether formal or informal and
whether or not in writing) with the first Person (the ‘First Person’) or any Associate or Affiliate
thereof or any other Person acting jointly or in concert with the First Person, to acquire or offer
to acquire Voting Shares (other than customary agreements (i) with and between underwriters or
banking group members or selling group members with respect to a public offering or private
placement of securities or pledges of securities in the ordinary course of business, and (ii) among
shareholders of the Company for legitimate corporate governance activities).

1.6               Generally Accepted Accounting Principles

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

ARTICLE 2 — THE RIGHTS

2.1              Issue of Rights: Legend on Common Share Certificates

	 	(a)    	  	One Right shall be issued on the Effective Date in respect of each Common Share
outstanding at the Record Time and one Right shall be issued in respect of each Common
Share issued after the Record Time and prior to the earlier of the Separation Time and
the Expiration Time.
	 
	 	(b)    	  	Certificates representing Common Shares which are issued prior to the earlier
of the Separation Time and the Expiration Time shall evidence one Right for each Common
Share represented thereby. Certificates representing Common Shares that are issued
after the Record Time but prior to the earlier of the Separation Time and the
Expiration Time

14

 

	 	 	 	shall have impressed on, printed on, written on or otherwise affixed to them a
legend substantially in the following form:

	 	 	 	“Until the Separation Time (defined in the Agreement below), this
certificate also evidences the holder’s rights described in a
Shareholder Rights Plan Agreement dated as of February 22, 2007 (the
‘Agreement’) between Ritchie Bros. Auctioneers Incorporated and
Computershare Investor Services Inc., as the same may from time to
time be amended, the terms of which are incorporated herein and a
copy of which is available upon request without charge. Under
certain circumstances set out in the Agreement, the Rights may be
amended or redeemed, may expire, may become void (if, in certain
circumstances, they are ‘Beneficially Owned’ by an ‘Acquiring
Person’, as such terms are defined in the Agreement, or a transferee
thereof) or may be evidenced by separate certificates and no longer
evidenced by this certificate.”

	 	 	 	Certificates representing Common Shares that are issued and outstanding at the
Record Time shall evidence one Right for each Common Share evidenced thereby,
notwithstanding the absence of a legend in accordance with this Subsection 2.1(b),
until the earlier of the Separation Time and the Expiration Time.
	 
	 	 	 	Registered holders of Common Shares who have not received a share certificate and
are entitled to do so on the earlier of the Separation Time and Expiration Time
shall be entitled to Rights as if such certificates had been issued and such Rights
shall for all purposes hereof be evidenced by the corresponding entries on the
Company’s securities register for Common Shares.

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

	 	(a)	 	Subject to Subsection 3.1(a) and adjustment as herein set forth, each Right
will entitle the holder thereof, from and after the Separation Time and prior to the
Expiration Time, to purchase one Common Share for the Exercise Price (and the Exercise
Price and number of Common Shares are subject to adjustment as set forth below).
Notwithstanding any other provision of this Agreement, any Rights held by the Company
or any of its Subsidiaries shall be void.
	 
	 	(b)	 	Until the Separation Time:

	 	(i)	 	the Rights shall not be exercisable and no Right may be
exercised; and
	 
	 	(ii)	 	for administration purposes, each Right will 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 will be transferable only together with, and will be
transferred by a transfer of, such associated Common Share.

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

	 	(i)	 	the Rights shall be exercisable; and

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

15

 

	 	 	 	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 record 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): (x) a Rights Certificate
appropriately completed, representing the number of Rights held by such holder at
the Separation Time and having such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the 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 quotation system
on which the Rights may from time to time be listed or traded, or to conform to
standard usage; and (y) a disclosure statement prepared by the Company describing
the Rights, provided that a Nominee shall be sent the materials provided for in
clauses (x) and (y) in respect of all Common Shares held of record by it which are
not Beneficially Owned by an Acquiring Person.
	 
	 	(d)	 	Rights may be exercised, in whole or in part, on any Business Day after the
Separation Time and prior to the Expiration Time by submitting to the Rights Agent:

	 	(i)	 	the Rights Certificate evidencing such Rights;
	 
	 	(ii)	 	an election to exercise such Rights (an ‘Election to Exercise’)
substantially in the form attached to the Rights Certificate appropriately
completed and duly executed by the holder or his executors or administrators or
other personal representatives or his or their legal attorney duly appointed by
an instrument in writing in form and executed in a manner satisfactory to the
Rights Agent; and
	 
	 	(iii)	 	payment by certified cheque, banker’s draft or money order
payable to the order of the Company, of a sum equal to the Exercise Price
multiplied by the number of Rights being exercised and a sum sufficient to
cover any transfer tax or governmental charge which may be payable in respect
of any transfer involved in the transfer or delivery of Rights Certificates or
the issuance or delivery of certificates for Common Shares in a name other than
that of the holder of the Rights being exercised.

	 	(e)	 	Upon receipt of a Rights Certificate, together with a completed Election to
Exercise executed in accordance with 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 in the event that the Company is of the opinion that the Rights cannot be
exercised in accordance with this Agreement) will thereupon promptly:

	 	(i)	 	requisition from the Company’s transfer agent certificates
representing the number of such 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 in accordance with
Subsection 5.5(b);

16

 

	 	(iii)	 	after receipt of the certificates referred to in Clause
2.2(e)(i), deliver the same to or upon the order of the registered holder of
such Rights Certificates, registered in such name or names as may be designated
by such holder;
	 
	 	(iv)	 	when appropriate, after receipt, deliver the cash referred to
in 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
Rights.

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

	 	(i)	 	take all such action as may be necessary and within its power
to ensure that all Common Shares delivered upon exercise of Rights shall, at
the time of delivery of the certificates for such Common Shares (subject to
payment of the Exercise Price), be duly and validly authorized, executed,
issued and delivered as fully paid and non-assessable;
	 
	 	(ii)	 	take all such action as may be necessary and within its power
to comply with the requirements of the Canada Business Corporations Act, the
Securities Act (British Columbia), the securities laws or comparable
legislation of each of the provinces of Canada, the 1933 Securities Act and the
1934 Exchange Act and the rules and regulations thereunder and any other
applicable law, rule or regulation, in connection with the issuance and
delivery of the Rights Certificates and the issuance of any Common Shares upon
exercise of Rights;
	 
	 	(iii)	 	use reasonable efforts to cause all Common Shares issued upon
exercise of Rights to be listed on the principal stock exchanges on which such
Common Shares were traded immediately prior to the Stock Acquisition Date;
	 
	 	(iv)	 	cause to be reserved and kept available out of the authorized
and unissued Common Shares, the number of Common Shares that, as provided in
this Agreement, will from time to time be sufficient to permit the exercise in
full of all outstanding Rights;
	 
	 	(v)	 	pay when due and payable, if applicable, any and all Canadian
and foreign federal, provincial, state and other 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 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
	 
	 	(vi)	 	after the Separation Time, except as permitted by Section 5.1,
not take (or permit any Subsidiary to take) any action if at the time such
action is taken it is

17

 

	 	 	 	reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.

2.3               Adjustments to Exercise Price; Number of Rights

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

	 	(a)	 	In the event the 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;
	 
	 	(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 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 the Exercise Price and number of Rights outstanding are to be adjusted:

	 	(x)	 	the Exercise Price in effect after such adjustment will be
equal to the Exercise Price in effect immediately prior to such adjustment
divided by the number of Common Shares (or other capital stock) that a holder
of one Common Share immediately prior to such dividend, subdivision, change,
consolidation or issuance would hold immediately thereafter as a result thereof
(for the purpose of this Agreement, ‘Expansion Factor’ shall mean the number of
Common Shares (or other capital stock) that a holder of one Common Share
immediately prior to such dividend, subdivision, change, consolidation or
issuance would hold immediately thereafter as a result thereof divided by 1
Common Share); and
	 
	 	(y)	 	each Right held prior to such adjustment will become that
number of Rights equal to the Expansion Factor,

	 	 	 	and the adjusted number of Rights will be deemed to be distributed among the Common
Shares with respect to which the original Rights were associated (if they remain
outstanding) and the shares issued in respect of such dividend, subdivision, change,
consolidation or issuance, so that each such Common Share (or other capital stock)
will have exactly one Right associated with it.

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	 	 	 	For greater certainty, if the securities purchasable upon exercise of Rights are to
be adjusted, the securities purchasable upon exercise of each Right immediately
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 immediately thereafter,
including 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 an event occurs which
would require an adjustment under both this Section 2.3 and Subsection 3.1(a)
hereof, the adjustment provided for in this Section 2.3 shall be in addition to and
shall be made prior to any adjustment required pursuant to Subsection 3.1(a) hereof.
Adjustments pursuant to this Subsection 2.3(a) shall be made successively, whenever
an event referred to in this Subsection 2.3(a) occurs.
	 
	 	 	 	In the event 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)	 	In the event 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 45
calendar days after such record date) to subscribe for or purchase Common Shares (or
securities convertible into or exchangeable for or carrying a right to purchase Common
Shares) at a 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 90% of
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

19

 

	 	 	 	determined in good faith by the Board of Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding on the
Rights Agent and the holders of Rights. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such rights, options or
warrants are not so issued, or if issued, are not exercised prior to the expiration
thereof, the Exercise Price shall be readjusted to the Exercise Price which would
then be in effect if such record date had not been fixed, or to the Exercise Price
which would be in effect based upon the number of Common Shares (or securities
convertible into, or exchangeable or exercisable for Common Shares) actually issued
upon the exercise of such rights, options or warrants, as the case may be.
	 
	 	 	 	For purposes of this Agreement, the granting of the right to purchase Common Shares
(whether from unissued shares or otherwise) pursuant to any Dividend Reinvestment
Plan or any employee benefit, stock option or similar plans shall be deemed not to
constitute an issue of rights, options or warrants by the Company; provided,
however, that, in all such cases, the right to purchase Common Shares is at a price
per share of not less than 90% of the current Market Price per share (determined as
provided in such plans) of the Common Shares.
	 
	 	(c)	 	In the event 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 or statutory arrangement) of evidences of indebtedness, cash (other than
an annual, quarterly monthly or routine cash dividend or a dividend referred to in
Subsection 2.3(a)(i), but including any dividend payable in other securities of the
Company other than Common Shares), assets or rights, options or warrants (excluding
those referred to in Subsection 2.3(b)), the Exercise Price to be in effect after such
record date shall be determined by multiplying the Exercise Price in effect immediately
prior to such record date by a fraction:

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

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

20

 

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

	 	(e)	 	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.
	 
	 	(f)	 	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.
	 
	 	 	 	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; provided, however, that the Company shall deliver to such holder an
appropriate instrument evidencing such holder’s right to receive such additional
shares (fractional or otherwise) or other securities upon the occurrence of the
event requiring such adjustment.
	 
	 	(g)	 	Notwithstanding the foregoing, any adjustment to the Exercise Price made
pursuant to this Section 2.3 shall not be made if such adjustment occurs before the
Separation Time.

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

2.5              Execution, Authentication, Delivery and Dating of Rights Certificates

	 	(a)	 	The Rights Certificates shall be executed on behalf of the Company by its
Chairman of the Board, Chief Executive Officer, President, Chief Financial Officer or
any Vice-President and by its Corporate Secretary or any Assistant Secretary under the
corporate seal of the Company reproduced thereon. The signature of any of these
officers on the Rights Certificates may be manual or facsimile. Rights Certificates
bearing the manual or facsimile signatures of individuals who were at any time the
proper officers of the

21

 

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

2.6              Registration, Transfer and Exchange

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

2.7              Mutilated, Destroyed, Lost and Stolen Rights Certificates

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

22

 

	 	(b)	 	If there shall be delivered to the Company and the Rights Agent prior to the
Expiration Time:

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

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

2.8             Persons Deemed Owners of Rights

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

2.9             Delivery and Cancellation of Certificates

                  All Rights Certificates surrendered upon exercise or for redemption, registration of transfer
or exchange shall, if surrendered to any Person other than the Rights Agent, be delivered to the
Rights Agent and, in any case, shall be promptly cancelled by the Rights Agent. The 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 cancelled by the Rights Agent. No
Rights Certificate shall be countersigned in lieu of or in exchange for any Rights Certificates
cancelled as provided in this Section 2.9, except as expressly permitted by this Agreement. The
Rights Agent shall, subject to applicable laws, and its ordinary business practices, destroy all
cancelled Rights Certificates and deliver a certificate of destruction to the 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:

23

 

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

2.11           Holder of Rights 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 such Rights, nor
shall anything contained herein or in any Rights Certificate be construed or deemed or confer upon
the holder of any Right or Rights Certificate, as such, any right, title, benefit or privilege of a
holder of Common Shares or any other shares or securities of the 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 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 Right or Rights

24

 

evidenced by Rights Certificates shall have been duly exercised in accordance with the terms
and provisions hereof.

ARTICLE 3 — ADJUSTMENTS TO THE RIGHTS

IN THE EVENT OF A FLIP-IN EVENT

3.1             Flip-in Event

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

	 	(i)	 	an Acquiring Person (or any Affiliate or Associate of an
Acquiring Person or any Person acting jointly or in concert with an Acquiring
Person or any Affiliate or Associate of an Acquiring Person); or
	 
	 	(ii)	 	a transferee of or other successor in title or ownership to
Rights (a ‘transferee’), directly or indirectly, from an Acquiring Person (or
any Affiliate or Associate of an Acquiring Person or any Person acting jointly
or in concert with an Acquiring Person or any Affiliate or Associate of an
Acquiring Person), where such transferee becomes a transferee concurrently with
or subsequent to the Acquiring Person becoming an Acquiring Person 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 or transfer 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. The holder of any Rights represented by a Rights
Certificate which is submitted to the Rights Agent upon exercise or for registration
of transfer or exchange on which the holder fails to certify upon the transfer or
exchange in the place set forth in the Rights Certificate establishing that such
holder is not a Person described in either Subsection 3.1(b)(i) or (ii) above shall
be deemed to be Beneficially Owned by an Acquiring Person for the purposes of this
Subsection 3.1(b) and such rights shall be null and void.
	 
	 	(c)	 	From and after the Separation Time, the Company shall do all such acts and
things as shall be necessary and within its power to ensure compliance with the
provisions of this

25

 

	 	 	 	Section 3.1, including without limitation, all such acts and things as may be
required to satisfy the requirements of the Canada Business Corporations Act, the
Securities Act (British Columbia) and the securities laws or comparable legislation
of each of the provinces of Canada, the 1933 Securities Act and the 1934 Exchange
Act and the rules and regulations thereunder and any other applicable law, rule or
regulation in respect of the issue of Common Shares upon the exercise of Rights in
accordance with this Agreement.
	 
	 	(d)	 	Any Rights Certificate that represents Rights Beneficially Owned by a Person
described in either Subsection 3.1(b)(i) or (ii) or transferred to any nominee of any
such Person, and any Rights Certificate issued upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall contain
the following legend:

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

	 	 	 	provided, however, that the Rights Agent shall not be under any responsibility to
ascertain the existence of facts that would require the imposition of such legend
but shall impose such legend only if instructed to do so by the Company in writing
or if a holder fails to certify upon transfer or exchange in the space provided on
the Rights Certificate that such holder is not a Person described in such legend.
Notwithstanding the foregoing, the issuance of a Rights Certificate which does not
bear the legend referred to in this Subsection 3.1(d) shall not invalidate or have
any effect on the provisions of Subsection 3.1(b).

ARTICLE 4 — THE RIGHTS AGENT

4.1              General

	 	(a)	 	The Company hereby appoints the Rights Agent to act as agent for the Company
and the holders of the 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 such co-Rights Agents (‘Co-Rights Agents’) as it may deem necessary or
desirable, subject to the approval of the Rights Agent. In the event the Company
appoints one or more Co-Rights Agents, the respective duties of the Rights Agent and
Co-Rights Agents shall be as the Company may determine, with the approval of the Rights
Agent and the Co-Rights Agent. The Company agrees to pay all reasonable fees and
expenses of the Rights Agent in respect of the performance of its duties under this
Agreement. The Company also agrees to indemnify the Rights Agent, its officers,
directors, and employees for, and to hold them harmless against, any loss, liability,
or expense, incurred without negligence, bad faith or wilful misconduct on the part of
the Rights Agent, for anything done or omitted by the Rights Agent in connection with
the acceptance and administration of this Agreement, including the costs and expenses
of defending against any claim of liability, which right to indemnification will
survive the termination of this Agreement or the resignation or removal of the Rights
Agent.

26

 

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

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

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

4.3              Duties of Rights Agent

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

	 	(a)	 	the Rights Agent, at the expense of the Company, may consult with and retain
legal counsel (who may be legal counsel for the Company) and such other experts as it
reasonably considers necessary to perform its duties hereunder, and the opinion of such
counsel or other expert will be full and complete authorization and protection to the
Rights Agent as to any action taken or omitted by it in good faith and in accordance
with such opinion;
	 
	 	(b)	 	whenever in the performance of its duties under this Agreement, the Rights
Agent deems it necessary or desirable that any fact or matter be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof is specifically prescribed herein) is deemed
to be conclusively

27

 

	 	 	 	proved and established by a certificate signed by a Person believed by the Rights
Agent to be the Chairman of the Board, President, Chief Executive Officer, Chief
Financial Officer, any Vice-President, Treasurer, Corporate Secretary, or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate will be full authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this Agreement in reliance upon
such certificate;
	 
	 	(c)	 	notwithstanding anything to the contrary, the Rights Agent will be liable
hereunder for its own negligence, bad faith or wilful misconduct;
	 
	 	(d)	 	the Rights Agent will not be liable for or by reason of any of the statements
of fact or recitals contained in this Agreement or in the certificates for Common
Shares or the Rights Certificates (except its countersignature thereof) or be required
to verify the same, but all such statements and recitals are and will be deemed to have
been made by the Company only;
	 
	 	(e)	 	the Rights Agent will not have any responsibility in respect of the validity of
this Agreement or the execution and delivery hereof (except the due authorization,
execution and delivery hereof by the Rights Agent) or in respect of the validity or
execution of any certificate for a Common Share or 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; nor
will it be responsible for any change in the exerciseability of the Rights (including
the Rights becoming void pursuant to Subsection 3.1(b) hereof) or any adjustment
required under the provisions of Section 2.3 hereof or responsible for the manner,
method or amount of any such adjustment or the ascertaining of the existence of facts
that would require any such adjustment (except with respect to the exercise of Rights
after receipt of the certificate contemplated by Section 2.3 describing any such
adjustment); nor is it deemed by any act hereunder to make any representation or
warranty as to the authorization of any Common Shares to be issued pursuant to this
Agreement or any Rights or as to whether any Common Shares will, when issued, be duly
and validly authorized, executed, issued and delivered and fully paid and
non-assessable;
	 
	 	(f)	 	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)	 	the Rights Agent is hereby authorized and directed to accept instructions in
writing with respect to the performance of its duties hereunder from any individual
believed by the Rights Agent to be the Chairman of the Board, President, Chief
Executive Officer, Chief Financial Officer, any Vice-President, Corporate Secretary or
any Assistant Secretary of the Company, and to apply to such individuals for advice or
instructions in connection with its duties, and it shall not be liable for any action
taken or suffered by it in good faith in accordance with instructions of any such
individual;
	 
	 	(h)	 	the Rights Agent and any shareholder or stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in Common Shares, Rights or other
securities of the Company or become pecuniarily 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 and nothing herein shall preclude the Rights Agent from acting in any other
capacity for the Company or for any other legal entity; and

28

 

	 	(i)	 	the Rights Agent may execute and exercise any of the rights or powers hereby
vested in it or perform any duty hereunder either itself or by or through its attorneys
or agents, and the Rights Agent will not be answerable or accountable for any act,
default, neglect or misconduct of any such attorneys or agents or for any loss to the
Company resulting from any such act, default, neglect or misconduct, provided
reasonable care was exercised in the selection and continued employment thereof.

4.4              Change of Rights Agent

                   The Rights Agent may resign and be discharged from its duties under this Agreement upon 60
days’ notice (or such lesser notice as is acceptable to the Company) in writing mailed to the
Company and to each transfer agent of Common Shares by registered or certified mail. The Company
may remove the Rights Agent upon 30 days’ notice in writing, mailed to the Rights Agent and to each
transfer agent of the Common Shares by registered or certified mail. If the Rights Agent should
resign or be removed or otherwise become incapable of acting, the Company will appoint a successor
to the Rights Agent. If the Company fails to make such appointment within a period of 30 days
after removal or 60 days after it has been notified in writing of the resignation or incapacity by
the resigning or incapacitated Rights Agent, then by prior written notice to the Company the
resigning Rights Agent or the holder of any Rights (which holder shall, with such notice, submit
such holder’s Rights Certificate, if any, for inspection by the Company), may apply to a court of
competent jurisdiction for the appointment of a new Rights Agent, at the Company’s expense. Any
successor Rights Agent, whether appointed by the Company or by such a court, shall be a corporation
incorporated under the laws of Canada or a province thereof authorized to carry on the business of
a trust company in the Province of British Columbia. After appointment, the successor Rights Agent
will be vested with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the predecessor Rights Agent,
upon receipt of all outstanding fees and expenses owing to it, shall deliver and transfer to the
successor Rights Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company will file notice thereof in writing with the predecessor
Rights Agent and each transfer agent of the Common Shares and mail a notice thereof in writing to
the holders of the Rights in accordance with Section 5.9. Failure to give any notice provided for
in this Section 4.4, however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of any successor Rights Agent, as
the case may be.

ARTICLE 5 — MISCELLANEOUS

5.1             Redemption and Waiver

	 	(a)	 	The Board of Directors acting in good faith may, until the occurrence of a
Flip-in Event, upon prior written notice delivered to the Rights Agent, waive the
application of Section 3.1 to that particular Flip-in Event provided that the
particular Flip-in Event would result from a Take-over Bid made by way of take-over bid
circular sent to all holders of record of Voting Shares (which for greater certainty
shall not include the circumstances described in Subsection 5.1(h)); provided that if
the Board of Directors waives the application of Section 3.1 to a particular Flip-in
Event pursuant to this Subsection 5.1(a), the Board of Directors shall be deemed to
have waived the application of Section 3.1 to any other Flip-in Event occurring by
reason of any Take-over Bid which is made by means of a take-over bid circular to all
holders of record of Voting Shares prior to the expiry of any Take-over Bid (as the
same may be extended from time to time) in respect of which a waiver is, or is deemed
to have been, granted under this Subsection 5.1(a).

29

 

	 	(b)	 	Subject to the prior consent of the holders of the Voting Shares or the Rights
as set forth in Subsection 5.4(b) or (c), as the case may be, the Board of Directors of
the Company acting in good faith may, at its option, at any time prior to the
provisions of Section 3.1 becoming applicable as a result of the occurrence of a
Flip-in Event, elect to redeem all but not less than all of the outstanding Rights at a
redemption price of $0.000001 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’).
	 
	 	(c)	 	Where, pursuant to a Permitted Bid, a Competing Permitted Bid, an Exempt
Acquisition or an acquisition for which a waiver has been granted under Subsection
5.1(a), a Person acquires outstanding Voting Shares, other than Voting Shares
Beneficially Owned by such Person at the date of the Permitted Bid, the Competing
Permitted Bid, the Exempt Acquisition or an acquisition for which a waiver has been
granted under Subsection 5.1(a), then the Board of Directors of the Company shall
immediately upon the consummation of such acquisition without further formality and
without any approval under Subsection 5.4(b) or (c) be deemed to have elected to redeem
the Rights at the Redemption Price.
	 
	 	(d)	 	Where a Take-over Bid that is not a Permitted Bid or a Competing Permitted Bid
expires, is withdrawn or otherwise terminates 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.
	 
	 	(e)	 	If the Board of Directors is deemed under Subsection 5.1(c) to have elected, or
elects under either of Subsection 5.1(b) or (d), to redeem the Rights, 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 so redeemed shall be
to receive the Redemption Price.
	 
	 	(f)	 	Within 10 days after the Board of Directors is deemed under Subsection 5.1(c)
to have elected, or elects under Subsection 5.1(b) or (d), to redeem the Rights, the
Company shall give notice of redemption to the holders of the then outstanding Rights
by publication of a notice in any newspaper distributed nationally in Canada and in the
United States or 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 Voting Shares. Any notice which is
mailed in the manner provided herein shall be deemed given, whether or not the holder
receives the notice. Each notice of redemption will state the method by which the
payment of the Redemption Price will be made.
	 
	 	(g)	 	Upon the Rights being redeemed pursuant to Subsection 5.1(d), the directors
shall be deemed to have distributed new Rights to the holders of Voting Shares as of
such date and in respect of each additional Voting Share issued thereafter, on the same
basis as Rights were first distributed hereunder and thereafter all the provisions of
this Agreement shall continue to apply to such redistributed Rights as if the
Separation Time referred to in Section 5.1(d) had not occurred and which for all
purposes of this Agreement shall be deemed not to have occurred and the new Rights
shall be outstanding and attached to the outstanding Common Shares as of and after such
date, subject to and in accordance with the provisions of this Agreement.

30

 

	 	(h)	 	The Board of Directors may waive the application of Section 3.1 in respect of
the occurrence of any Flip-in Event if the Board of Directors has determined within ten
Trading Days following a Stock Acquisition Date that a Person became an Acquiring
Person by inadvertence and without any intention to become, or knowledge that it would
become, an Acquiring Person under this Agreement and, in the event that such a waiver
is granted by the Board of Directors, such Stock Acquisition Date shall be deemed not
to have occurred. Any such waiver pursuant to this Subsection 5.1(h) must be on the
condition that such Person, within 14 days after the foregoing determination by the
Board of Directors or such earlier or later date as the Board of Directors may
determine (the ‘Disposition Date’), has reduced its Beneficial Ownership of Voting
Shares so that the Person is no longer an Acquiring Person. If the Person remains an
Acquiring Person at the close of business on the Disposition Date, the Disposition Date
shall be deemed to be the date of occurrence of a further Stock Acquisition Date and
Section 3.1 shall apply thereto.
	 
	 	(i)	 	The Company shall give prompt written notice to the Rights Agent of any waiver
of the application of Section 3.1 made by the Board of Directors under this Section
5.1.

5.2              Expiration

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

5.3              Issuance of New Rights Certificates

                   Notwithstanding any of the provisions of this Agreement or 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 or
class 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 at any time, by resolution of the Board of Directors,
supplement or make amendments to this Agreement to correct any clerical or
typographical error or, subject to Subsection 5.4(e), which supplements or amendments
are required to maintain the validity of this Agreement as a result of any change in
any applicable legislation, rules or regulations thereunder or policies of securities
regulatory authorities or stock exchanges. The Company may, by resolution of the Board
of Directors, prior to the date of its shareholders’ meeting referred to in Section
5.15, supplement or amend this Agreement without the approval of any holders of Rights
or Voting Shares (whether or not such action would adversely affect the interest of the
holders of Rights or Voting Shares 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, amend, vary or rescind any of the provisions of this Agreement and the
Rights (whether or not such action would adversely affect the interests of the holders
of Rights or Voting Shares generally). Such consent shall be deemed to have been given
if the action

31

 

	 	 	 	requiring such approval is authorized by the affirmative vote of a majority of the
votes cast by Independent Shareholders present or represented at and entitled to be
voted at a meeting of the holders of Voting Shares duly called and held in
compliance with applicable laws and the Articles and By-laws of the Company.
	 
	 	(c)	 	The Company may, with the prior consent of the holders of Rights, at any time
on or after the Separation Time, amend, vary or delete any of the provisions of this
Agreement and the Rights (whether or not such action would materially adversely affect
the interests of the holders of Rights generally), provided that no such amendment,
variation or deletion shall be made to the provisions of Article 4 except with the
written concurrence of the Rights Agent thereto. Such consent shall be deemed to have
been given if such amendment, variation or deletion is authorized by the affirmative
votes of a simple majority of the votes cast by the holders of Rights present or
represented at and entitled to be voted at a meeting of the holders of Rights.
	 
	 	(d)	 	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 or By-laws and the
Canada Business Corporations Act with respect to meetings of shareholders of the
Company.
	 
	 	(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, rule or regulation thereunder or policies of
securities regulatory authorities or stock exchanges 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 called after the
Separation Time and the holders of Rights may, by resolution passed by the
majority referred to in Subsection 5.4(d), confirm or reject such amendment.

	 	 	 	Any such amendment shall be effective from the date of the resolution of the Board
of Directors adopting such amendment, until it is confirmed or rejected or until it
ceases to be effective (as described in the next sentence) and, where such amendment
is confirmed, it continues in effect in the form so confirmed. If such amendment is
rejected by the shareholders or the holders of Rights or is not submitted to the
shareholders or holders of Rights as required, then such amendment shall cease to be
effective from and after the termination of the meeting at which it was rejected or
to which it should have been but was not submitted or from and after the date of the
meeting of holders of Rights that should have been but was not held, and no
subsequent resolution of the Board of Directors to amend this Agreement to
substantially the same effect shall be effective until confirmed by the shareholders
or holders of Rights referred to Subsection 5.4(b) or 5.4(c) as the case may be.

5.5              Fractional Rights and Fractional Shares

	 	(a)	 	The Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates which evidence fractional Rights. After the Separation Time, in
lieu of

32

 

	 	 	 	issuing fractional Rights, the Company shall pay to the holders of record of the
Rights Certificates (provided the Rights represented by such Rights Certificates are
not void pursuant to the provisions of Subsection 3.1(b), at the time such
fractional Rights would otherwise be issuable), an amount in cash equal to the
fraction of the Market Price of one whole Right that the fraction of a Right that
would otherwise be issuable is of one whole Right, provided that the Company shall
not be required or obligated to make any payment provided for above unless the
amount payable by the Company to a certain holder exceeds $10.
	 
	 	(b)	 	The Company shall not be required to issue fractions of Common Shares upon
exercise of Rights or to distribute certificates which evidence fractional Common
Shares. In lieu of issuing fractional Common Shares, the Company shall pay to the
registered holders of Rights Certificates, at the time such Rights are exercised as
herein provided, an amount in cash equal to the fraction of the Market Price of one
Common Share that the fraction of a Common Share that would otherwise be issuable upon
the exercise of such Right is of one whole Common Share at the date of such exercise.

5.6              Rights of Action

                   Subject to the terms of this Agreement, all rights of action in respect of this Agreement,
other than rights of action vested solely in the Rights Agent, are vested in the respective holders
of the Rights. Any holder of 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 such holder’s right to exercise such holder’s Rights, or
Rights to which such holder is entitled, in the manner provided in such holder’s Rights Certificate
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 will 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 requisite approval or consent from any governmental or regulatory
authority having jurisdiction, and without limiting the generality of the foregoing, while any
securities of the Company are listed and admitted to trading thereon, necessary approvals of the
Toronto Stock Exchange, the New York Stock Exchange and other exchanges shall be obtained, in
relation to the issuance of the Rights and the Common Shares upon the exercise of Rights under
Subsection 2.2(d).

5.8              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 or the United States,
the Board of Directors acting in good faith shall take such actions as it may consider appropriate
to ensure such compliance or avoid the application thereof. 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 or the
United States of America, in which such issue or delivery would be unlawful without registration of
the relevant Persons or securities for such purposes.

33

 

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:

	 	 	 	     Ritchie Bros. Auctioneers Incorporated

     6500 River Road

     Richmond, BC V6X 4G5
	 
	 	 	 	     Attention:  Corporate Secretary

     Fax No.     (604) 273-2405

	 	(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:

	 	 	 	     Computershare Investor Services Inc.

     3rd Floor – 510 Burrard Street

     Vancouver, British Columbia V6C 3B9
	 
	 	 	 	     Attention:  General Manager, Client Services

     Fax No.:    (604) 661-9401

	 	(c)	 	Except as otherwise provided hereunder, 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 at the address of such
holder as it appears upon the register of the Rights Agent or, prior to the Separation
Time, on the register of the 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 telecopying or sending of the same by
other means of recorded electronic communication (provided such sending is during the
normal business hours of the addressee on a Business Day and if not, on the first
Business Day thereafter). Each of the Company and the Rights Agent may from time to
time change its address for notice by notice to the other given in the manner
aforesaid.

5.10           Costs of Enforcement

                  The Company agrees that if the Company fails to fulfil any of its obligations pursuant to this
Agreement, then the Company will reimburse the holder of any Rights for the costs and expenses

34

 

(including legal fees) reasonably incurred by such holder to enforce his rights pursuant to
any Rights or this Agreement.

5.11              Successors

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

5.12              Benefits of this Agreement

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

5.13              Governing Law

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

5.14              Severability

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

5.15              Effective Date and Confirmation

                     This Agreement is effective and in full force and effect in accordance with its terms from and
after the date hereof. At the first annual or special meeting of holders of Voting Shares
following the date hereof, the Company shall request confirmation of this Agreement by the holders
of its Voting Shares. If this Agreement is not confirmed by resolution passed by a majority of the
votes cast by holders of Voting Shares of the Company who vote in respect of confirmation of this
Agreement at a meeting of the Company’s shareholders to be held on or prior to June 30, 2007, then
this Agreement and all outstanding Rights shall terminate and be void and of no further force and
effect on and from that date which is the earlier of (a) the date of termination of the meeting
called to consider the confirmation of this Agreement under this Section 5.15 and (b) June 30,
2007.

5.16              Reconfirmation

                     This Agreement must be reconfirmed by a resolution passed by a majority of the votes cast by
all holders of Voting Shares who vote in respect of such reconfirmation at the annual meeting of
the Company held in 2010 and at every third annual meeting of the Company thereafter at which this
Agreement has been reconfirmed pursuant to this Section 5.16. If the Agreement is not so
reconfirmed or is not presented for reconfirmation at any such annual meeting, the Agreement and
all outstanding Rights shall terminate and be void and of no further force and effect on and from
the date of termination of any such annual meeting; provided, however, that termination shall not
occur if a Flip-in Event has occurred

35

 

(other than a Flip-in Event which has been waived pursuant to Subsection 5.1(a) or (h)
hereof), prior to the date upon which this Agreement would otherwise terminate pursuant to this
Section 5.16.

5.17              Determinations and Actions by the Board of Directors

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

5.18              Time of the Essence

                     Time shall be of the essence in this Agreement.

5.19              Execution in Counterparts

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

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

	 	 	 	 	 
	 	 
 
RITCHIE BROS. AUCTIONEERS INCORPORATED

 

 	 
	 	By:  	/s/ Robert S. Armstrong 	 
	 	 	
 	 
	 	 	 	 
	 
	 	 	 
	 	By:  	/s/ Randall J. Wall 	 
	 	 	
 	 
	 	 	c/s 	 
	 	 	 	 
	 	 	 	 
	 	COMPUTERSHARE INVESTOR SERVICES INC.

 

 	 
	 	By:  	/s/ Jenny Karim 	 
	 	 	
 	 
	 	 	 	 
	 
	 	By:  	/s/ Chad Emnace 	 
	 	 	
 	 
	 	 	c/s 	 

36

 

	 	 	 	 	 

ATTACHMENT 1

RITCHIE BROS. AUCTIONEERS INCORPORATED

SHAREHOLDER RIGHTS PLAN AGREEMENT

[Form of Rights Certificate]

 

			
	Certificate No. ____________
	 	____________ Rights

THE RIGHTS ARE SUBJECT TO TERMINATION ON THE TERMS SET FORTH IN THE SHAREHOLDER RIGHTS PLAN
AGREEMENT. UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN SUBSECTION 3.1(b) OF THE SHAREHOLDER
RIGHTS PLAN AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR CERTAIN
RELATED PARTIES, OR TRANSFEREES OF AN ACQUIRING PERSON OR CERTAIN RELATED PARTIES AND
THEIR TRANSFEREES, MAY BECOME VOID WITHOUT FURTHER ACTION.

Rights Certificate

     This certifies that                                , or
registered assigns, is the registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and conditions of the
Shareholder Rights Plan Agreement, dated as of February 22, 2007 (the ‘Shareholder Rights
Agreement’), between Ritchie Bros. Auctioneers Incorporated, a corporation duly incorporated under
the Canada Columbia Business Corporations Act (the ‘Company’) and Computershare Investor Services
Inc., a trust company incorporated under the laws of Canada (the ‘Rights Agent’) (which term shall
include any successor Rights Agent under the Shareholder Rights Agreement), to purchase from the
Company at any time after the Separation Time (as such term is defined in the Shareholder Rights
Agreement) and prior to the Expiration Time (as such term is defined in the Shareholder Rights
Agreement), one fully paid common share of the Company (a ‘Common Share’) at the Exercise Price
referred to below, upon presentation and surrender of this Rights Certificate with the Form of
Election to Exercise (in the form provided hereinafter) duly executed and submitted to the Rights
Agent at its principal office in any of the cities of Toronto, Montreal, Calgary and Vancouver,
Canada. Until adjustment thereof in certain events as provided in the Shareholder Rights
Agreement, the Exercise Price shall be an amount equal to three times the Market Price (as such
term is defined in the Rights Plan Agreement) per Common Share determined as at the Separation Time
and shall be subject to adjustment in certain events as provided in the Shareholder Rights
Agreement.

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

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

37

 

     This Rights Certificate, with or without other Rights Certificates, upon surrender at any of
the offices of the Rights Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing an aggregate number of Rights
equal to the aggregate number of Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the registered holder shall be
entitled to receive, upon surrender hereof, another Rights Certificate or Rights Certificates for
the number of whole Rights not exercised.

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

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

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

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

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

	 	 	 	 
	 
Date:	 
	 	 	 	 
	 
 
RITCHIE BROS.
AUCTIONEERS INCORPORATED

 

	 
	 	 	 	 
	By:  	 	 
	 	 	 	 
	 	 	 	 
	By:  	 	 
	 	 	 	 

38

 

Countersigned:

COMPUTERSHARE
INVESTOR SERVICES INC.

	 	 	 	 
	 	 	 	 
	By:  	 	 
	  	Authorized Signature 	 
	 	 	 	 

39

 

FORM OF ASSIGNMENT

(To be executed by the registered holder if such holder desires to transfer the Rights evidenced by
this Rights Certificate.)

FOR VALUE RECEIVED                                  
                                          hereby sells, assigns and

transfers unto 
                           
                           
                           
                                                    

 

 

(Please print name and address of transferee.)

the Rights represented by this Rights Certificate, together with all right, title and interest
therein, and does hereby irrevocably constitute and appoint               
       
       
                        , as attorney, to transfer the within Rights on the books of the Company, with
full power of substitution.

Dated: 
                           
                                                    

Signature Guaranteed:

	 	 	 	 	 
	 	                           
                           
                           
      

               
              
       Signature

(Signature must correspond to name as written upon

the face of this Rights Certificate in every

particular, without alteration or enlargement or any

change whatsoever.)

 	 
	 	 	 
	 	 	 
	 	 	 
	 

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

 

 

CERTIFICATE

(To be completed if true.)

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

	 	 	 	 	 
	 	                           
                           
                           

                               Signature

 	 
	 	 	 
	 	 	 

 

(To be attached to each Rights Certificate)

40

 

FORM OF ELECTION TO EXERCISE

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

	TO: 	 	RITCHIE BROS. AUCTIONEERS INCORPORATED
	 
	AND TO: 	 	COMPUTERSHARE INVESTOR SERVICES INC.

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

 

 
(Name)

 

 
(Address)

 

 
(City, Province and Postal Code)

 

 
(Social Insurance Number or other taxpayer identification number)

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

 

 
(Name)

 

 
(Address)

 

 
(City, Province and Postal Code)

 

 
(Social Insurance Number or other taxpayer identification number)

 

Dated:      
               
               
                                    

Signature Guaranteed:

	 	 	 	 	 
	 	                           
                           
                           

                            Signature

(Signature must correspond to name as written upon

the face of this Rights Certificate in every

particular, without alteration or enlargement or any

change whatsoever.)

 	 
	 	 	 

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

 

 

41

 

CERTIFICATE

(To be completed if true.)

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

	 	 	 	 	 
	 	                           
                           
                           

                            
      Signature

 	 
	 	 	 

 

 

(To be attached to each Rights Certificate)

NOTICE

In the event the certification set forth above in the Form of Assignment and Form of Election to
Exercise, as applicable, is not completed, 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
thereof. No Rights Certificates shall be issued in exchange for a Rights Certificate owned or
deemed to have been owned by an Acquiring Person or an Affiliate or Associate thereof, or by a
Person acting jointly or in concert with an Acquiring Person or an Affiliate or Associate thereof.

42Exhibit 4.1

FORM OF FIXED RATE SENIOR NOTE

	REGISTERED 	REGISTERED 
	No. FXR-1 	U.S. $ 
	 	CUSIP: 61750V667

     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.

  MORGAN STANLEY

  SENIOR GLOBAL MEDIUM-TERM NOTE, SERIES F

(Fixed Rate)

       STOCK PARTICIPATION ACCRETING

REDEMPTION
QUARTERLY-PAY SECURITIESSM (“SPARQS”)

  % SPARQS® DUE
MARCH 20, 2008

MANDATORILY EXCHANGEABLE

FOR SHARES OF COMMON STOCK OF

EBAY INC.

	
      ORIGINAL ISSUE DATE: 	
      INITIAL REDEMPTION

   DATE:
See “Morgan

   Stanley Call Right”

   below. 	
      INTEREST RATE: % per

   annum 	
      MATURITY DATE: See

   “Maturity
Date” below. 
	
      INTEREST ACCRUAL

   DATE:	
      INITIAL REDEMPTION

   PERCENTAGE:
See

   “Morgan Stanley Call

   Right” and “Call
Price”

   below.	
      INTEREST PAYMENT

   DATE(S):
See “Interest

   Payment Dates” below.	
      OPTIONAL REPAYMENT

   DATE(S):
N/A 
	
      SPECIFIED CURRENCY:

   U.S.
dollars	
      ANNUAL REDEMPTION

   PERCENTAGE

   REDUCTION:
N/A	
      INTEREST PAYMENT

   PERIOD:
Quarterly 	
      APPLICABILITY OF

   MODIFIED

   PAYMENT
UPON

   ACCELERATION OR

   REDEMPTION: See

   “Alternate Exchange

   Calculation in Case of an

   Event of Default” below. 
	
      IF SPECIFIED

   CURRENCY
OTHER

   THAN U.S. DOLLARS,

   OPTION TO ELECT

   PAYMENT IN U.S.

   DOLLARS: N/A 	
      REDEMPTION NOTICE

   PERIOD:
At least 10

   days but no more than 30

   days. See “Morgan

   Stanley Call Right” and

   “Morgan Stanley Notice

   Date” below. 	
      APPLICABILITY OF

   ANNUAL
INTEREST

   PAYMENTS: N/A 	
      If yes, state Issue Price: N/A 
	
      EXCHANGE RATE

   AGENT:
N/A	
      TAX REDEMPTION AND

   PAYMENT
OF

   ADDITIONAL

   AMOUNTS: NO 	
      PRICE APPLICABLE

   UPON
OPTIONAL

   REPAYMENT: N/A 	
      ORIGINAL YIELD TO

   MATURITY:
N/A 
	
      OTHER PROVISIONS: See

   below. 	
      IF YES, STATE INITIAL

   OFFERING
DATE: N/A 	 		 	

	
      Stated Principal Amount 	 		
      $      
           per SPARQS 
	 	 	 
	Underlying Company 
		 		eBay Inc. (“eBay”) 
	
	 	 	 
	Underlying Stock	 	The common stock of eBay

  2

	
      Pricing Date 	 		 		
	 	 	 
	
      Issue Price	 		
      $        
      per SPARQS 
	 	 	 
	
      Denominations	 		
      $          and
      integral multiples thereof 
	 	 	 
	Acceleration Trigger Price
		 		The product of $2.00 and the
    Exchange Ratio as of the Original Issue Date.
	
	 	 	 
	Exchange Ratio
		 		, subject to adjustment for corporate
    events relating to the Underlying Stock described under “Antidilution Adjustments” below.
	
	 	 	 
	Yield to Call

First Call Date

Maturity Date
		 		          % per annum

September 20, 2007

March 20, 2008, subject to acceleration as described
    below in “Price Event Acceleration” and “Alternate Exchange Calculation in Case of an Event of Default” and subject to extension if the Final Call Notice
Date is postponed in accordance with the definition thereof. If the Final Call Notice Date is postponed because it is not a Trading Day or due to a Market Disruption Event and the Issuer exercises the Morgan Stanley Call Right, the scheduled
Maturity Date shall be postponed so that the Maturity Date is the tenth calendar day following the Final Call Notice Date. See “Final Call Notice Date” below.

In the event that the Final Call Notice Date is
    postponed because it is not a Trading Day or 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 two Business Days following the scheduled
    Final Call Notice Date, (i) to the holder of this SPARQS 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
	

  3

	 		 		presumed to have been
	      duly given, whether or not the holder of this SPARQS receives the notice.
	      Notice of the date to which the Maturity Date has been rescheduled as
	      a result of postponement of the Final Call Notice Date, if applicable,
	      shall be included in the Issuer’s notice of exercise of the Morgan
    Stanley Call Right.
	
	 	 	 
	Interest Payment Dates
		 		June 20, 2007, September 20, 2007, December 20, 2007 and the Maturity Date.

If the scheduled Maturity Date is postponed, the Issuer shall pay interest on the Maturity Date as postponed rather than on the scheduled Maturity Date, but no interest shall accrue on this SPARQS or on such payment during the
period from or after the scheduled Maturity Date.
	
	 	 	 
	Record Date
		 		Notwithstanding the definition
	      of “Record Date” on page 23 hereof, the Record Date for each
	      Interest Payment Date, including the Interest Payment Date scheduled to
	      occur on the Maturity Date, shall be the date 5 calendar days prior to
	      such scheduled Interest Payment Date, whether or not that date is a Business
	      Day; provided, however,
	      that in the event that the Issuer exercises the Morgan Stanley Call Right,
	      no Interest Payment Date shall occur after the Morgan Stanley Notice Date,
	      except for any Interest Payment Date for which the Morgan Stanley Notice
	      Date falls on or after the “ex-interest” date for the
related interest payment, in which case the related interest payment shall be
	      made on such Interest Payment Date; and provided, further, that
	      accrued but unpaid interest payable on the Call Date, if any, shall be
	      payable to the person to whom the Call Price is payable. The “ex- interest” date
	      for any interest payment is the date on which purchase transactions in
	      the SPARQS no longer carry the right to receive such interest payment.

In the event that the Issuer exercises the Morgan
    Stanley Call Right and the Morgan Stanley Notice Date falls before the “ex-interest” date
    for an interest payment, so that as a result a scheduled Interest Payment
    Date does not occur, the Issuer shall cause the Calculation Agent to give
    notice to the Trustee and to the Depositary, in each case in the manner and
    at the time described in the second and third paragraphs
	

  4

	 		 		under “Morgan Stanley Call Right” below,
	      that no Interest Payment Date shall occur after such Morgan Stanley Notice
    Date.
	
	 	 	 
	Morgan Stanley Call Right
		 		On any scheduled Trading Day on or after the First Call Date or on the Maturity Date (including the Maturity Date as it may be extended and regardless of whether the Maturity Date is a Trading Day), the
Issuer may call the SPARQS, in whole but not in part, for mandatory exchange for the Call Price paid in cash (together with accrued but unpaid interest) on the Call Date.

On the Morgan Stanley Notice Date, the Issuer
    shall give notice of the Issuer’s exercise of the Morgan Stanley Call Right (i) to the holder of this SPARQS by mailing notice of such exercise, specifying the Call Date on
which the Issuer shall effect such exchange, 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 Depositary
in accordance with the applicable procedures set forth in the Blanket Letter
of Representations prepared by the Issuer. Any notice which is mailed in the
manner herein provided shall be conclusively presumed to have been duly given,
whether or not the holder of this SPARQS receives the notice. Failure to give
notice by mail or any defect in the notice to the holder of any SPARQS shall
not affect the validity of the proceedings for the exercise of the Morgan Stanley
Call Right with respect to any other SPARQS.

The notice of the Issuer’s exercise of the
    Morgan Stanley Call Right shall specify (i) the Call Date, (ii) the Call
    Price payable per SPARQS, (iii) the amount of accrued but unpaid interest
    payable per SPARQS on the Call Date, (iv) whether any subsequently scheduled
    Interest Payment Date shall no longer be an Interest Payment Date as a result
    of the exercise of the Morgan Stanley Call Right, (v) the place or places
    of payment of such Call Price, (vi) that such delivery shall be made upon
    presentation and surrender of this SPARQS, (vii) that such exchange is pursuant
    to the Morgan Stanley
	

  5

			 		Call Right and (viii)
	      if applicable, the date to which the Maturity Date has been extended due
	      to a Market Disruption Event as described under “Maturity Date” above.

The notice of the Issuer’s exercise of the Morgan Stanley Call Right shall be given by the Issuer or, at the Issuer’s
    request, by the Trustee in the name and at the expense of the Issuer.

If this SPARQS is so called for mandatory exchange by the Issuer, then the cash Call Price and any accrued but unpaid interest on this SPARQS to be delivered to the holder of this SPARQS shall be delivered on the Call Date
fixed by the Issuer and set forth in its notice of its exercise of the Morgan Stanley Call Right, upon delivery of this SPARQS to the Trustee. The Issuer shall, or shall cause the Calculation Agent to, deliver such cash to the Trustee for delivery
to the holder of this SPARQS.

If this SPARQS is not surrendered for exchange
    on the Call Date, it shall be deemed to be no longer Outstanding under, and
    as defined in, the Senior Indenture after the Call Date, except with respect
    to the holder’s right
to receive cash due in connection with the Morgan Stanley Call Right.
	
	 	 	 
	Morgan Stanley Notice Date
		 		The scheduled Trading Day on which the Issuer issues its notice of mandatory exchange, which must be at least 10 but not more than 30 calendar days prior to the Call Date.
	
	 	 	 
	Final Call Notice Date
		 		March 10, 2008; provided that if such date is not a Trading Day or if a Market Disruption Event occurs on such day, the Final Call Notice Date
shall be the immediately succeeding Trading Day on which no Market Disruption Event occurs.
	
	 	 	 
	Call Date
		 		The day specified in
	      the Issuer’s notice of mandatory exchange, on which the Issuer shall deliver cash to the holder of this SPARQS, for mandatory exchange, which day may be any scheduled Trading
Day on or after the First Call Date or the Maturity Date (including the Maturity Date as it may be extended and regardless of whether the Maturity Date is a scheduled Trading Day). See “Maturity Date” above.
	

  6

	Call Price
		 		The Call Price with respect to any Call Date is an amount of cash per each Stated Principal Amount of this SPARQS, as calculated by the Calculation Agent, such that the sum of the present values of all
cash flows on each Stated Principal Amount of this SPARQS to and including the Call Date (i.e., the Call Price and all of the interest payments, including accrued and unpaid interest payable
on the Call Date), discounted to the Original Issue Date from the applicable payment date at the Yield to Call rate computed on the basis of a 360-day year of twelve 30- day months, equals the Stated Principal Amount, as determined by the
Calculation Agent.
	
	 	 	 
	Exchange at Maturity
		 		At maturity, subject
	      to a prior call of this SPARQS for cash in an amount equal to the Call
	      Price by the Issuer as described under “Morgan Stanley Call Right” above
	      or any acceleration of the SPARQS, upon delivery of this SPARQS to the
	      Trustee, each Stated Principal Amount of this SPARQS shall be applied
	      by the Issuer as payment for a number of shares of the Underlying Stock
	      at the Exchange Ratio, and the Issuer shall deliver with respect to each
	      Stated Principal Amount of this SPARQS an amount of the Underlying Stock
	      equal to the Exchange Ratio.

The amount of Underlying Stock to be delivered
    at maturity shall be subject to any applicable adjustments (i) to the Exchange
    Ratio (including, as applicable, any New Stock Exchange Ratio or any Basket
    Stock Exchange Ratio, each as defined in paragraph 5 under “Antidilution Adjustments” below) and (ii) in the Exchange Property, as defined in paragraph 5 under “Antidilution Adjustments” below, to be delivered instead of, or in addition to, such
Underlying Stock as a result of any corporate event described under “Antidilution Adjustments” below,
in each case, required to be made through the close of business on the third
Trading Day prior to the scheduled Maturity Date.

The Issuer shall, or shall cause the Calculation Agent to, provide written notice to the Trustee at its New York Office and to the Depositary, on which notice the Trustee and Depositary may conclusively rely, on or prior to
10:30 a.m. on the Trading Day immediately
	

  7

			 		prior to maturity of this SPARQS (but if such Trading Day is not a Business Day, prior to the close of business on the Business Day preceding the maturity of this SPARQS), of the amount of Underlying
Stock (or the amount of Exchange Property) or cash to be delivered with respect to each Stated Principal Amount of this SPARQS and of the amount of any cash to be paid in lieu of any fractional share of the Underlying Stock (or of any other
securities included in Exchange Property, if applicable); provided that
if the maturity date of this SPARQS is accelerated (x) because of a Price Event
Acceleration (as described under
“Price Event Acceleration” below) or (y) because of an Event of Default Acceleration (as defined under “Alternate Exchange Calculation in Case of an Event of Default” below), the Issuer shall give notice of such acceleration as
promptly as possible, and in no case later than (A) in the case of an Event of Default Acceleration, two Trading Days following such deemed maturity date or (B) in the case of a Price Event Acceleration, 10:30 a.m. on the Trading Day immediately
prior to the date of acceleration (as defined under “Price Event Acceleration” below), (i) to the holder of this SPARQS by mailing notice of such acceleration 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 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 SPARQS receives the notice. If the maturity of this
SPARQS is accelerated, no interest on the amounts payable with respect to this
SPARQS shall accrue for the period from and after such accelerated maturity date; provided
that the Issuer has deposited with the Trustee the Underlying Stock, the Exchange Property or any cash due with respect to such acceleration by such accelerated maturity date.

The Issuer shall, or shall cause the Calculation Agent to, deliver any such shares of the Underlying Stock (or any Exchange Property) and cash in respect of interest
	

  8

			 		and any fractional share
	      of the Underlying Stock (or any Exchange Property) and cash otherwise
	      due upon any acceleration described above to the Trustee for delivery
	      to the holder of this Note. References to payment “per SPARQS” refer
	      to each Stated Principal Amount of this SPARQS.

If this SPARQS is not surrendered for exchange
    at maturity, it shall be deemed to be no longer Outstanding under, and as
    defined in, the Senior Indenture, except with respect to the holder’s
    right to receive Underlying Stock (and, if applicable, any Exchange Property)
    and any cash in respect of interest and any fractional share of the Underlying
    Stock (or any Exchange Property) and any other cash due at maturity as described
    in the preceding paragraph under this heading.
	
	 	 	 
	Price Event Acceleration
		 		If on any two consecutive
	      Trading Days during the period prior to and ending on the third Business
	      Day immediately preceding the Maturity Date, the product of the Closing
	      Price of the Underlying Stock and the Exchange Ratio is less than the
	      Acceleration Trigger Price, the Maturity Date of this SPARQS shall be
	      deemed to be accelerated to the third Business Day immediately following
	      such second Trading Day (the “date of acceleration”).
Upon such acceleration, the holder of each Stated Principal Amount of this SPARQS
	      shall receive per SPARQS on the date of acceleration:

      
        (i) a number of shares of the Underlying Stock at the then current Exchange Ratio;

        (ii) accrued but unpaid interest on each Stated Principal Amount of this SPARQS to but excluding the date of acceleration; and

        (iii) an amount of cash as determined by the Calculation Agent equal to the sum of the present values of the remaining scheduled payments of interest on each Stated Principal Amount of this SPARQS (excluding the amounts
          included in clause (ii) above) discounted to the date of acceleration. The present value of each remaining scheduled payment shall be based on the comparable yield that the Issuer would pay on a

    

  9

	 	 	
     non-interest bearing, senior
      unsecured debt obligation of the Issuer having a maturity equal to the
      term of each such remaining scheduled payment, as determined by the Calculation
      Agent.

  

	 	 	 
	 		 		The holder of this SPARQS shall not be entitled to receive the return of each Stated Principal Amount of this SPARQS upon a Price Event Acceleration.
	
	 	 	 
	No Fractional Shares
		 		Upon delivery of this SPARQS to the Trustee at maturity, the Issuer shall deliver the aggregate number of shares of the Underlying Stock due with respect to this SPARQS, as described above, but the
Issuer shall pay cash in lieu of delivering any fractional share of the Underlying Stock in an amount equal to the corresponding fractional Closing Price of such fraction of a share of the Underlying Stock as determined by the Calculation Agent as
of the second scheduled Trading Day prior to maturity of this SPARQS.
	
	 	 	 
	Closing Price
		 		The Closing Price for one share of the Underlying Stock (or one unit of any other security for which a Closing Price must be determined) on any Trading Day means:
	

	 	 	•	if the Underlying Stock
          (or any such other security) is listed or admitted to trading on a
          national securities exchange (other than The NASDAQ Stock
          Market LLC (the “NASDAQ”)), the last reported sale price,
          regular way, of the principal trading session on such day on the principal
          national securities exchange registered under the Securities Exchange
          Act of 1934, as amended (the “Exchange Act”), on which the
          Underlying Stock (or any such other security) is listed or admitted
    to trading,

	 	 	 	 
	 	 	•	if the Underlying Stock
          (or any such other security) is a security of the NASDAQ, the official
    closing price published by the NASDAQ on such day, or 

	 	 	 	 
	 	 	•	if the Underlying Stock
          (or any such other security) is not listed or admitted to trading on
          any national securities exchange but is included in the OTC Bulletin
          Board Service (the “OTC Bulletin Board”) operated by the
          National Association of Securities Dealers, Inc., the last reported
    sale price of the

  10

	 	 	 	 principal
    trading session on the OTC Bulletin Board on such day.

	 		 		If the Underlying Stock
	      (or any such other security) is listed or admitted to trading on any national
	      securities exchange but the last reported sale price or the official closing
	      price published by NASDAQ, as applicable, is not available pursuant to
	      the preceding sentence, then the Closing Price for one share of the Underlying
	      Stock (or one unit of any such other security) on any Trading Day shall
	      mean the last reported sale price of the principal trading session on
	      the over-the-counter market as reported on the NASDAQ or the OTC Bulletin
	      Board on such day. If a Market Disruption Event occurs with respect to
	      the Underlying Stock (or any such other security) or the last reported
	      sale price or the official closing price published by NASDAQ, as applicable,
	      for the Underlying Stock (or any such other security) is not available
	      pursuant to either of the two preceding sentences, then the Closing Price
	      for any Trading Day shall be the mean, as determined by the Calculation
	      Agent, of the bid prices for the Underlying Stock (or any such other security)
	      for such Trading Day obtained from as many recognized dealers in such
	      security, but not exceeding three, as shall make such bid prices available
	      to the Calculation Agent. Bids of MS & Co. or any of its affiliates may be included in the calculation of such mean, but only to the extent that any such bid is the highest of the bids obtained. The term “OTC Bulletin Board
Service” shall include any successor service thereto.
	
	 	 	 
	Trading Day
		 		A day, as determined
	      by the Calculation Agent, on which trading is generally conducted on the
	      New York Stock Exchange LLC (“NYSE”), the American Stock Exchange
	      LLC, the NASDAQ, the Chicago Mercantile Exchange, the Chicago Board of
	      Options Exchange and in the over-the-counter market for equity securities
	      in the United States and, if the principal trading market of the Underlying
    Stock is outside the United States, in such principal trading market.
	
	 	 	 
	Calculation Agent
		 		Morgan Stanley & Co. Incorporated (“MS & Co.”)
	      and its successors.

All calculations with respect to the Exchange Ratio and Call Price for the SPARQS shall be made by the
	

  11

			 		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 the Call Price resulting from such calculations shall be rounded to the nearest ten-thousandth, with five one hundred- thousandths rounded upward (e.g., .76545 would be rounded to .7655); and all dollar amounts paid with respect to the Call Price on the aggregate number of SPARQS shall be rounded to the nearest cent, with one-half cent rounded upward.

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 SPARQS, the
Trustee and the Issuer.
	
	 	 	 
	Antidilution Adjustments
		 		The Exchange Ratio shall be adjusted as follows:

1. If the Underlying Stock is subject to a stock split or reverse stock split, then once such split has become effective, the Exchange Ratio shall be adjusted to equal the product of the prior Exchange Ratio and the number of
shares issued in such stock split or reverse stock split with respect to one share of the Underlying Stock.

2. If the Underlying Stock is subject (i) to a
    stock dividend (issuance of additional shares of the Underlying Stock) that
    is given ratably to all holders of shares of the Underlying Stock or (ii)
    to a distribution of the Underlying Stock as a result of the triggering of
    any provision of the corporate charter of the Underlying Company, then once
    the dividend has become effective and the Underlying Stock is trading ex-dividend,
    the Exchange Ratio shall be adjusted so that the new Exchange Ratio shall
    equal the prior Exchange Ratio plus the product of (i) the number of shares
issued with respect to one share of the Underlying
Stock and (ii) the prior Exchange Ratio. 
	
	 		 		 
	 		 		3. If the Underlying Company issues rights or warrants to all holders of the Underlying Stock to subscribe for or purchase Underlying Stock at an exercise price per share less than the Closing Price of
the Underlying Stock on both (i) the date the exercise
	

  12

			 		price of such rights or warrants is determined and (ii) the expiration date of such rights or warrants, and if the expiration date of such rights or warrants precedes the maturity of this SPARQS, then
the Exchange Ratio shall be adjusted to equal the product of the prior Exchange Ratio and a fraction, the numerator of which shall be the number of shares of the Underlying Stock outstanding immediately prior to the issuance of such rights or
warrants plus the number of additional shares of Underlying Stock offered for subscription or purchase pursuant to such rights or warrants and the denominator of which shall be the number of shares of Underlying Stock outstanding immediately prior
to the issuance of such rights or warrants plus the number of additional shares of Underlying Stock which the aggregate offering price of the total number of shares of Underlying Stock so offered for subscription or purchase pursuant to such rights
or warrants would purchase at the Closing Price on the expiration date of such rights or warrants, which shall be determined by multiplying such total number of shares offered by the exercise price of such rights or warrants and dividing the product
so obtained by such Closing Price.

4. There shall be no adjustments to the Exchange
    Ratio to reflect cash dividends or other distributions paid with respect
    to the Underlying Stock other than distributions described in paragraph 2,
    paragraph 3 and clauses (i), (iv) and (v) of the first sentence of paragraph
    5 and Extraordinary Dividends as described below. A cash dividend or other
    distribution with respect to the Underlying Stock shall be deemed to be an “Extraordinary Dividend” if
    such cash dividend or distribution exceeds the immediately preceding non-
    Extraordinary Dividend for the Underlying Stock by an amount equal to at
    least 10% of the Closing Price of the Underlying Stock (as adjusted for any
    subsequent corporate event requiring an adjustment hereunder, such as a stock
    split or reverse stock split) on the Trading Day preceding the ex-dividend
    date (that is, the day on and after which transactions in the Underlying
    Stock on the primary U.S. organized securities exchange or trading system
    on which the Underlying Stock is traded or trading system no longer carry
    the right to receive that cash dividend or that cash distribution) for the
    payment of such
	

  13

			 		Extraordinary Dividend
	      (such closing price, the “Base Closing Price”). Subject to the following sentence, if an Extraordinary Dividend occurs with respect to the Underlying Stock, the Exchange
Ratio with respect to the Underlying Stock shall be adjusted on the ex- dividend date with respect to such Extraordinary Dividend so that the new Exchange Ratio shall equal the product of (i) the then current Exchange Ratio and (ii) a fraction, the
numerator of which is the Base Closing Price, and the denominator of which is the amount by which the Base Closing Price exceeds the Extraordinary Dividend Amount. If any Extraordinary Dividend Amount is at least 35% of the Base Closing Price, then,
instead of adjusting the Exchange Ratio, the amount payable upon exchange at maturity shall be determined as described in paragraph 5 below, and the Extraordinary Dividend shall be allocated to Reference Basket Stocks in accordance with the
procedures for a Reference Basket Event as described in clause (c)(ii) of paragraph 5 below. The “Extraordinary Dividend Amount” with
respect to an Extraordinary Dividend for the Underlying Stock shall equal (i)
in the case of cash dividends or other distributions that constitute regular
dividends, the amount per share of such Extraordinary Dividend minus the amount
per share of the immediately preceding non-Extraordinary Dividend for the Underlying
Stock or (ii) in the case of cash dividends or other distributions that do not
constitute regular dividends, the amount per share of such Extraordinary Dividend.
The value of the non- cash component of an Extraordinary Dividend shall be determined
on the ex-dividend date for such distribution by the Calculation Agent, whose
determination shall be conclusive in the absence of manifest error. A distribution
on the Underlying Stock described in clause (i), (iv) or (v) of the first sentence
of paragraph 5 below shall cause an adjustment to the Exchange Ratio pursuant
only to clause (i), (iv) or (v) of the first sentence of paragraph 5, as applicable.

5. Any of the following shall constitute a Reorganization Event: (i) the Underlying Stock is reclassified or changed, including, without limitation, as a result of the issuance of any tracking stock by the Underlying Company,
(ii) the Underlying Company has been subject to any merger, combination or
	

  14

	 	 	consolidation
          and is not the surviving entity, (iii) the Underlying Company completes
          a statutory exchange of securities with another corporation (other
          than pursuant to clause (ii) above), (iv) the Underlying Company is
          liquidated, (v) the Underlying Company issues to all of its shareholders
          equity securities of an issuer other than the Underlying Company (other
          than in a transaction described in clause (ii), (iii) or (iv) above)
          (a “spinoff stock”)
          or (vi) the Underlying Stock is the subject of a tender or exchange
          offer or going private transaction on all of the outstanding shares.
          If any Reorganization Event occurs, in each case as a result of which
          the holders of the Underlying Stock receive any equity security listed
          on a national securities exchange or traded on NASDAQ (a “Marketable
          Security”), other securities or other property, assets or cash
          (collectively “Exchange Property”), the amount payable upon
          exchange at maturity with respect to each Stated Principal Amount of
          this SPARQS following the effective date for such Reorganization Event
          (or, if applicable, in the case of spinoff stock, the ex-dividend date
          for the distribution of such spinoff stock) and any required adjustment
    to the Exchange Ratio shall be determined in accordance with the following:

	 	 	 
	 	 	
       (a) if the Underlying
        Stock continues to be outstanding, the Underlying Stock (if applicable,
        as reclassified upon the issuance of any tracking stock) at the Exchange
        Ratio in effect on the third Trading Day prior to the scheduled Maturity
        Date (taking into account any adjustments for any distributions described
        under clause (c)(i) below); and 

       (b) for each Marketable Security
          received in such Reorganization Event (each a “New Stock”), including
        the issuance of any tracking stock or spinoff stock or the receipt of
        any stock received in exchange for the Underlying Stock, the number of
        shares of the New Stock received with respect to one share of Underlying
        Stock multiplied by the Exchange Ratio for Underlying Stock on the Trading
        Day immediately prior to the effective date of the Reorganization Event
        (the “New Stock Exchange Ratio”), as adjusted to the third
        Trading 

    

  15

			 		Day prior to the scheduled Maturity Date (taking into account any adjustments for distributions described under clause (c)(i) below); and

(c) for any cash and any other property or securities
    other than Marketable Securities received in such Reorganization Event (the “Non-Stock Exchange Property”),
	
		 	 
		 	
     (i) if the combined value
      of the amount of Non-Stock Exchange Property received per share of Underlying
      Stock, as determined by the Calculation Agent in its sole discretion
      on the effective date of such Reorganization Event (the
      “Non-Stock Exchange Property Value”), by holders of the Underlying
      Stock is less than 25% of the Closing Price of the Underlying Stock on
      the Trading Day immediately prior to the effective date of such Reorganization
      Event, a number of shares of the Underlying Stock, if applicable, and of
      any New Stock received in connection with such Reorganization Event, if
      applicable, in proportion to the relative Closing Prices of the Underlying
      Stock and any such New Stock, and with an aggregate value equal to the
      Non-Stock Exchange Property Value multiplied by the Exchange Ratio in effect
      for the Underlying Stock on the Trading Day immediately prior to the effective
      date of such Reorganization Event, based on such Closing Prices, in each
      case as determined by the Calculation Agent in its sole discretion on the
      effective date of such Reorganization Event; and the number of such shares
      of Underlying Stock or any New Stock determined in accordance with this
      clause (c)(i) shall be added at the time of such adjustment to the Exchange
      Ratio in subparagraph (a) above and/or the New Stock Exchange Ratio in
      subparagraph (b) above, as applicable, or

     (ii) if the Non-Stock Exchange Property
      Value is equal to or exceeds 25% of the Closing Price of Underlying Stock
      on the Trading Day immediately prior to the effective date relating to
      such Reorganization Event or, if the 

  
    

  16

	 		 		
	  Underlying Stock is surrendered exclusively
	      for Non-Stock Exchange Property (in each case, a “Reference Basket Event”), an initially equal- dollar weighted basket of three Reference Basket
	    Stocks (as defined below) with an aggregate value on the effective date of such Reorganization Event equal to the Non-Stock Exchange Property Value multiplied by the Exchange Ratio in effect for the Underlying Stock on the Trading Day immediately
	    prior to the effective date of such Reorganization Event. The “Reference Basket Stocks” shall be the three stocks with the largest market capitalization among the stocks that then constitute the S&P 500 Index (or, if publication of
	    such index is discontinued, any successor or substitute index selected by the Calculation Agent in its sole discretion) with the same primary Standard Industrial Classification Code (“SIC Code”)
	    as the Underlying Company; provided, however, that a Reference
	    Basket Stock shall not include any stock that is subject to a trading restriction
	    under the trading restriction policies of Morgan Stanley or any of its affiliates
	    that would materially limit the ability of Morgan Stanley or any of its
	    affiliates to hedge the SPARQS with respect to such stock (a “Hedging Restriction”); provided further that
	    if three Reference Basket Stocks cannot be identified from the S&P 500
	    Index by primary SIC Code for which a Hedging Restriction does not exist,
	    the remaining Reference Basket Stock(s) shall be selected by the Calculation
	    Agent from the largest market capitalization stock(s) within the same Division
	    and Major Group classification (as defined by the Office of Management and
	    Budget) as the primary SIC Code for the Underlying Company. Each Reference
	    Basket Stock shall be assigned a Basket Stock Exchange Ratio equal to the
	    number of shares of such Reference Basket Stock with a Closing Price on
	    the effective date of such Reorganization Event equal to the product of
	    (a) the Non-Stock Exchange Property Value, (b) the Exchange Ratio in effect
	    for the Underlying Stock on the

    

  17

	 	 	
     Trading Day immediately prior
      to the effective date of such Reorganization Event and (c) 0.3333333.

  

	 	 	 
	 		 		Following the allocation of any Extraordinary Dividend to Reference Basket Stocks pursuant to paragraph 4 above or any Reorganization Event described in this paragraph 5, the amount payable upon
exchange at maturity with respect to each Stated Principal Amount of this SPARQS shall be the sum of:
	

	 	 	(x)	 if applicable, the Underlying
    Stock at the Exchange Ratio then in effect; and

	 	 	 	 
	 	 	(y)	  if applicable, for each
          New Stock, such New Stock at the New Stock Exchange Ratio then in effect
    for such New Stock; and

	 	 	 	 
	 	 	(z)	  if applicable, for each
          Reference Basket Stock, such Reference Basket Stock at the Basket Stock
    Exchange Ratio then in effect for such Reference Basket Stock.

		 	 
			 		In each case, the applicable Exchange Ratio (including for this purpose, any New Stock Exchange Ratio or Basket Stock Exchange Ratio) shall be determined by the Calculation Agent on the third Trading
Day prior to the scheduled Maturity Date.

For purposes of paragraph 5 above, in the case of a consummated tender or exchange offer or going- private transaction involving consideration of particular types, Exchange Property shall be deemed to include the amount of cash
or other property delivered by the offeror in the tender or exchange offer (in an amount determined on the basis of the rate of exchange in such tender or exchange offer or going-private transaction). In the event of a tender or exchange offer or a
going-private transaction with respect to Exchange Property in which an offeree may elect to receive cash or other property, Exchange Property shall be deemed to include the kind and amount of cash and other property received by offerees who elect
to receive cash.

Following the occurrence of any Reorganization Event referred to in paragraphs 4 or 5 above, (i) references to
	

  18

			 		“Underlying Stock” under “No Fractional Shares,” “Closing Price” and “Market Disruption Event” shall be deemed to also refer to any New Stock or Reference Basket
Stock, and (ii) all other references in this SPARQS to “Underlying Stock” shall be deemed to refer to the Exchange Property into which this SPARQS is thereafter exchangeable and references to a “share” or “shares” of
Underlying Stock shall be deemed to refer to the applicable unit or units of
such Exchange Property, including any New Stock or Reference Basket Stock, unless
the context otherwise requires. The New Stock Exchange Ratio(s) or Basket Stock
Exchange Ratios resulting from any Reorganization Event described in paragraph
5 above or similar adjustment under paragraph 4 above shall be subject to the
adjustments set forth in paragraphs 1 through 5 hereof.

If a Reference Basket Event occurs, the Issuer shall, or shall cause the Calculation Agent to, provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, and to DTC of the
occurrence of such Reference Basket Event and of the three Reference Basket Stocks selected as promptly as possible and in no event later than five Business Days after the date of the Reference Basket Event.

No adjustment to any Exchange Ratio (including for this purpose, any New Stock Exchange Ratio or Basket Stock Exchange Ratio) shall be required unless such adjustment would require a change of at least 0.1% in the Exchange
Ratio then in effect. The Exchange Ratio resulting from any of the adjustments specified above shall be rounded to the nearest one hundred- thousandth, with five one-millionths rounded upward. Adjustments to the Exchange Ratios shall be made up to
the close of business on the third Trading Day prior to the scheduled Maturity Date.

No adjustments to the Exchange Ratio or method of calculating the Exchange Ratio shall be made other than those specified above.

The Calculation Agent shall be solely responsible for the determination and calculation of any adjustments to the Exchange Ratio, any New Stock Exchange Ratio or
	

  19

			 		Basket Stock Exchange Ratio or method of calculating the Exchange Property Value and of any related determinations and calculations with respect to any distributions of stock, other securities or other
property or assets (including cash) in connection with any corporate event described in paragraphs 1 through 5 above, and its determinations and calculations with respect thereto shall be conclusive in the absence of manifest error.

The Calculation Agent shall provide information as to any adjustments to the Exchange Ratio, or to the method of calculating the amount payable upon exchange at maturity of the SPARQS made pursuant to paragraph 5 above, upon
written request by the holder of this SPARQS.
	
	 	 	 
	Market Disruption Event
		 		Market Disruption Event means, with respect to the Underlying Stock:
	
	 	 	 
	 	 	
     (i) a suspension, absence
      or material limitation of trading of the Underlying Stock on the primary
      market for the Underlying Stock for more than two hours of trading or
      during the one-half hour period preceding the close of the principal
      trading session in such market; or a breakdown or failure in the price
      and trade reporting systems of the primary market for the Underlying
      Stock as a result of which the reported trading prices for the Underlying
      Stock during the last one-half hour preceding the close of the principal
      trading session in such market are materially inaccurate; or the suspension,
      absence or material limitation of trading on the primary market for trading
      in options contracts related to the Underlying Stock, if available, during
      the one-half hour period preceding the close of the principal trading
      session in the applicable market, in each case as determined by the Calculation
      Agent in its sole discretion; and

     (ii) a determination by the Calculation
      Agent in its sole discretion that any event described in clause (i) above
      materially interfered with the ability of the Issuer or any of its affiliates
      to unwind or adjust all or a material portion of the hedge with respect
      to this issuance of SPARQS.

  
    

  20

	 		 		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 primary market, (2) a decision to permanently discontinue trading in the relevant options contract shall not constitute a Market Disruption Event, (3) limitations pursuant to NYSE Rule 80A (or
any applicable rule or regulation enacted or promulgated by the NYSE, any other self-regulatory organization or the Securities and Exchange Commission 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 options contracts on the Underlying Stock by the primary securities market trading in such options, if
available, by reason of (x) a price change exceeding limits set by such securities exchange or market, (y) an imbalance of orders relating to such contracts or (z) a disparity in bid and ask quotes relating to such contracts shall constitute a
suspension, absence or material limitation of trading in options contracts related to the Underlying Stock and (5) a suspension, absence or material limitation of trading on the primary securities market on which options contracts related to the
Underlying Stock are traded shall not include any time when such securities market is itself closed for trading under ordinary circumstances.
	
	 	 	 
	Alternate Exchange Calculation	 	 
	  in Case of an Event of Default
	 		In case an event of default
	      with respect to the SPARQS shall have occurred and be continuing, the
	      amount declared due and payable per each Stated Principal Amount of this
	      SPARQS upon any acceleration of this SPARQS (an “Event of Default Acceleration”)
	      shall be determined by the Calculation Agent and shall be an amount in
	      cash equal to the lesser of (i) the product of (x) the Closing Price of
	      the Underlying Stock (and/or the value of any Exchange Property) as of
	      the date of such acceleration and (y) the then current Exchange Ratio
	      and (ii) the Call Price calculated as though the date of acceleration
	      were the Call Date (but in no event less than the Call Price for the first
    Call Date), in each
	

  21

	 		 		case plus accrued but unpaid interest to but excluding the date of acceleration; provided that
	        if the Issuer has called the SPARQS in accordance with the Morgan Stanley
	        Call Right, the amount declared due and payable upon any such acceleration
	        shall be an amount in cash for each Stated Principal Amount of this
	        SPARQS equal to the Call Price for the Call Date specified in the Issuer’s
	        notice of mandatory exchange, plus accrued but unpaid interest to but
	        excluding the date of acceleration.
	

  22

       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 Underlying Stock (or other Exchange Property), as determined in accordance with the provisions set forth under “Exchange at Maturity” 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 maturity) and to pay
interest thereon at the Interest Rate per annum specified above, from and including
the Interest Accrual Date specified above until the principal hereof is paid
or duly made available for payment weekly, monthly, quarterly, semiannually or
annually in arrears as specified above as the Interest Payment Period on each
Interest Payment Date (as specified above), commencing on the Interest Payment
Date next succeeding the Interest Accrual Date specified above, and at maturity
(or on 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 this Note is subject to “Annual Interest
Payments,” interest payments shall be made annually in arrears and
the term “Interest Payment Date” shall be deemed
to mean the first day of March in each year.

       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 (as defined below)) (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. 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 Settlement
  Express Transfer System (“TARGET”) is operating (a “TARGET Settlement
Day”).

       Payment of the principal of this Note, any premium and the interest 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 on any date of redemption or repayment,
will be made by U.S. dollar check mailed to the address of the

  23

  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 interest, principal or any premium 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 the amount of the Specified Currency payable in the absence of such an election to such holder

  24

  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.

  25

       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.

THE BANK OF NEW YORK, as

  Trustee

	
      By: 	 		 	
					

	
	 		 		
      Authorized Signatory 

  26

  FORM OF REVERSE OF SECURITY

       This Note is
  one of a duly authorized issue of Senior Global Medium-Term Notes, Series F
  (the “Notes”) of the Issuer.  The Notes
are issuable under a Senior Indenture, dated as of November 1, 2004, between
  the Issuer and The Bank of New York, a New York banking corporation (as successor
  Trustee to 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 The
  Bank of New York (as successor to 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. If the face hereof indicates that this Note is subject to “Modified Payment upon Acceleration or Redemption”,
the amount of principal payable upon redemption will be limited to the aggregate
principal amount hereof multiplied by the sum of the Issue Price specified on
the face hereof (expressed as a percentage of the aggregate principal amount)
plus the original issue discount accrued from the Interest Accrual Date to the
date of redemption (expressed as a percentage of the aggregate principal amount),
with the amount of original issue discount accrued being calculated using a constant
yield method (as described below). 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.

  27

       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, provided that if the face hereof
  indicates that this Note is subject to “Modified Payment upon Acceleration or Redemption”, the
amount of principal payable upon repayment will be limited to the aggregate principal amount hereof multiplied by the sum of the Issue Price specified on the face hereof (expressed as a percentage of the aggregate principal amount) plus the original
issue discount accrued from the Interest Accrual Date to the date of repayment (expressed as a percentage of the aggregate principal amount), with the amount of original issue discount accrued being calculated using a constant yield method (as
described below). For this Note 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.

       Interest payments on this Note will include interest accrued to but excluding the Interest Payment Dates or the Maturity Date (or any earlier redemption or repayment date), as the case may be. Unless
otherwise provided on the face hereof, interest payments for this Note will be computed and paid on the basis of a 360-day year of twelve 30-day months.

       In the case where the Interest Payment Date or the Maturity Date (or any redemption or repayment date) does not fall on a Business Day, payment of interest, premium, if any, or principal otherwise
payable on such date need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date or on the Maturity Date (or any redemption or repayment date), and no
interest on such payment shall accrue for the period from and after the Interest Payment Date or the Maturity Date (or any redemption or repayment date) to such next succeeding Business Day.

  28

       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 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

  29

  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, premium, if any,
  or interest on, any series of debt securities issued under the Senior Indenture,
  including the series of Senior Medium-Term 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 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.

       If the face
  hereof indicates that this Note is subject to “Modified Payment upon Acceleration or Redemption,” then
  (i) if the principal hereof is declared to be due and payable as described
  in the preceding paragraph, the amount of principal due and payable with respect
  to this Note shall be limited to the aggregate principal amount hereof multiplied
  by the sum of the Issue Price specified on the face hereof (expressed as a
  percentage of the aggregate principal amount) plus the original issue discount
  accrued from the Interest Accrual Date to the date of declaration (expressed
  as a percentage of the aggregate principal amount), with the amount of original
  issue discount accrued being calculated using a constant yield method (as described
  in the next paragraph), (ii) for the purpose of any vote of securityholders
  taken pursuant to the Senior Indenture prior to the acceleration of payment
  of this Note, the principal amount hereof shall equal the amount that would
  be due and payable hereon, calculated as set forth in clause (i) above, if
  this Note were declared to be due and payable on the date of any such vote
  and (iii) for the purpose of any vote of securityholders taken pursuant to
the Senior Indenture following the 

  30

  acceleration of payment of this Note, the principal amount hereof shall equal the amount of principal due and payable with respect to this Note, calculated as set forth in clause (i) above.

       The constant
  yield shall be calculated using a 30-day month, 360-day year convention, a
  compounding period that, except for the initial period (as defined below),
  corresponds to the shortest period between Interest Payment Dates (with ratable
  accruals within a compounding period), and an assumption that the maturity
  will not be accelerated. If the period from the Original Issue Date to the
  first Interest Payment Date (the “initial
period”) is shorter than the compounding period for this Note, a proportionate
amount of the yield for an entire compounding period will be accrued. If the
initial period is longer than the compounding period, then the period will be
divided into a regular compounding period and a short period with the short period
being treated as provided in the preceding sentence.

       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 (except that if this Note is subject
to “Modified Payment upon Acceleration or Redemption,” the amount of
principal so payable will be limited to the aggregate principal amount hereof
multiplied by the sum of the Issue Price specified on the face hereof (expressed
as a percentage of the aggregate principal amount) plus the original issue discount
accrued from the Interest Accrual Date to the date of redemption (expressed as
a percentage of the aggregate principal amount), with the amount of original
issue discount accrued being calculated using a constant yield method (as described
above)), if the Issuer determines that, as a result of any change in or amendment
to the laws (including a holding, judgment or as ordered by a court of competent
jurisdiction), 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
occurs, becomes effective or, in the case of a change in official position, is
announced 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.

  31

       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 U.S. 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 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 U.S. 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 U.S. 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 controlled foreign corporation or passive foreign
  investment company with respect to the United States or as a corporation which
  accumulates earnings to avoid U.S. 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;

  32

       (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 U.S. 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.

       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, (a) 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 (b) 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

  33

  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 principal of,
  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 and coupons.

       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

  34

  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.

       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, 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, 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 “U.S. Alien” means any person who is, for U.S. 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 U.S. 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.

  35

  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.
	 

  36

  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. 

  37

  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.

  38

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