Document:

Exhibit 4.1

 

 

VIST FINANCIAL
CORP.

 

AND

 

AMERICAN STOCK
TRANSFER & TRUST COMPANY

 

Rights Agent

 

 

AMENDED AND
RESTATED RIGHTS AGREEMENT

 

Dated as of March 3,
2008

 

 

 

Table of Contents

 

	
  Section

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Certain Definitions

  	
  1

  
	
  2.

  	
   

  	
  Appointment of Rights
  Agent

  	
  5

  
	
  3.

  	
   

  	
  Issue of Rights
  Certificates

  	
  6

  
	
  4.

  	
   

  	
  Form of Rights
  Certificates

  	
  8

  
	
  5.

  	
   

  	
  Countersignature and
  Registration

  	
  9

  
	
  6.

  	
   

  	
  Transfer, Split Up,
  Combination, or Exchange of Rights Certificates; Mutilated, Destroyed, Lost, or
  Stolen Rights Certificates

  	
  

  10

  
	
  7.

  	
   

  	
  Exercise of Rights;
  Purchase Price; Expiration Date of Rights

  	
  11

  
	
  8.

  	
   

  	
  Cancellation and
  Destruction of Rights Certificates

  	
  14

  
	
  9.

  	
   

  	
  Reservation and
  Availability of Capital Stock

  	
  15

  
	
  10.

  	
   

  	
  Record Date for
  Securities Issued Upon Exercise

  	
  17

  
	
  11.

  	
   

  	
  Adjustment of Purchase
  Price, Number and Kind of Shares or Number of Rights

  	
  17

  
	
  12.

  	
   

  	
  Certificate of Adjusted
  Purchase Price or Number of Shares

  	
  29

  
	
  13.

  	
   

  	
  Consolidation, Merger,
  or Sale or Transfer of Assets or Earning Power

  	
  29

  
	
  14.

  	
   

  	
  Fractional Rights and
  Fractional Shares

  	
  32

  
	
  15.

  	
   

  	
  Rights of Action

  	
  34

  
	
  16.

  	
   

  	
  Agreement of Rights
  Holders

  	
  34

  
	
  17.

  	
   

  	
  Rights Certificate
  Holder Not Deemed a Stockholder

  	
  35

  
	
  18.

  	
   

  	
  Concerning the Rights
  Agent

  	
  36

  
	
  19.

  	
   

  	
  Merger or Consolidation
  or Change of Name of Rights Agent

  	
  37

  
	
  20.

  	
   

  	
  Duties of Rights Agent

  	
  37

  
	
  21.

  	
   

  	
  Change of Rights Agent

  	
  40

  
	
  22.

  	
   

  	
  Issuance of New Rights
  Certificates

  	
  41

  
	
  23.

  	
   

  	
  Redemption and
  Termination

  	
  42

  
	
  24.

  	
   

  	
  Exchange

  	
  43

  
	
  25.

  	
   

  	
  Notice of Certain
  Events

  	
  45

  
	
  26.

  	
   

  	
  Notices

  	
  46

  
	
  27.

  	
   

  	
  Supplements and
  Amendments

  	
  47

  
	
  28.

  	
   

  	
  Successors

  	
  48

  
	
  29.

  	
   

  	
  Determinations and
  Actions by the Board of Directors; No Waiver

  	
  48

  
	
  30.

  	
   

  	
  Benefits of this
  Agreement

  	
  48

  
	
  31.

  	
   

  	
  Severability

  	
  49

  
	
  32.

  	
   

  	
  Governing Law

  	
  49

  

 

i

 

	
  33.

  	
   

  	
  Counterparts

  	
  49

  
	
  34.

  	
   

  	
  Descriptive Headings

  	
  50

  

 

ii

 

AMENDED AND
RESTATED RIGHTS AGREEMENT

 

AMENDED AND RESTATED
RIGHTS AGREEMENT, dated as of March 3, 2008 (the “Agreement”), between
VIST FINANCIAL CORP. (formerly known as LEESPORT FINANCIAL CORP. and FIRST
LEESPORT BANCORP, INC.), a Pennsylvania business corporation (the “Company”),
and AMERICAN STOCK TRANSFER & TRUST COMPANY, a New York corporation
(the “Rights Agent”).

 

W I T N E S S E T
H

 

WHEREAS, on September 19,
2001 (the “Rights Dividend Declaration Date”), the Board of Directors of the
Company authorized and declared a dividend distribution of one Right (as
hereinafter defined) for each share of Common Stock (as hereinafter defined) of
the Company outstanding at the close of business on October 10, 2001 (the “Record
Date”), and authorized the issuance of one Right (as such number may
hereinafter be adjusted pursuant to the provisions of Section 11(p) hereof)
for each share of Common Stock issued between the Record Date (whether
originally issued or delivered from the Company’s treasury) and the
Distribution Date (as hereinafter defined) and under circumstances thereafter,
each Right initially representing the right to purchase one share of Common
Stock having the rights, powers, and preferences, and upon the terms and
subject to the conditions set forth herein (the “Rights”);

 

WHEREAS, on February 19,
2008, the Board of Directors of the Company desiring to modify the terms and
conditions of the Rights, authorized certain amendments to the Rights Agreement,
dated September 19, 2001, and the Company and the Rights Agent desire to
restate the terms of the Rights herein as so amended.

 

NOW, THEREFORE, in
consideration of the premises and the mutual agreements herein set forth, the
parties hereto, intending to be legally bound, hereby agree as follows:

 

Section 1.  Certain Definitions.  For purposes of this Agreement, the following
terms have the meanings indicated:

 

(a) “Acquiring
Person” shall mean any Person who or which, together with all Affiliates and
Associates of such Person, shall be the Beneficial Owner of (i) 15% or
more of the shares of Common Stock or (ii) Voting Securities that in the
aggregate represent 15% or more of the Total Voting Power, but shall not
include the Company, any Subsidiary of the Company,

 

1

 

any employee stock option
plan or other employee benefit plan of the Company or of any Subsidiary of the
Company, or any Person or entity organized, appointed, or established by the
Company for or pursuant to the terms of any such plan.

 

(b)  “Adverse Person”
shall mean any Person declared to be an Adverse Person by the Board of
Directors upon a determination that the criteria set forth in Section 11(a)(ii)(B) apply
to such Person.

 

(c)  “Affiliate” and
“Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2
of the General Rules and Regulations under the Exchange Act, as in effect
on the date of this Agreement.

 

(d)  A Person shall
be deemed the “Beneficial Owner” of, and shall be deemed to “beneficially own,”
any securities:

 

(i)  which such
Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement, or understanding (whether or not in writing) or upon the exercise
of conversion rights, exchange rights, rights, warrants or options, or
otherwise; provided, however, that a Person shall not be deemed the “Beneficial
Owner” of, or to “beneficially own,” (A) securities tendered pursuant to a
tender offer or exchange offer made by such Person or any of such Person’s
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange, or (B) securities issuable upon exercise of Rights
at any time prior to the occurrence of a Triggering Event, or (C) securities
issuable upon exercise of Rights from and after the occurrence of a Triggering
Event which Rights were acquired by such Person or any of such Person’s
Affiliates or Associates prior to the Distribution Date or pursuant to Section 3(a) or
Section 22 hereof (the “Original Rights”) or pursuant to Section 11(i) hereof
in connection with an adjustment made with respect to any Original Rights;

 

(ii)  which such
Person or any of such Person’s Affiliates or Associates, directly or
indirectly, has the right to vote (without regard to any regulatory
restrictions or restrictions included in the Company’s Articles of
Incorporation) or dispose of or has “beneficial ownership” of (as determined
pursuant to Rule 13d-3 of the General Rules and Regulations under the
Exchange Act), including pursuant to any

 

2

 

agreement, arrangement, or understanding, whether or not in writing; provided,
however, that a Person shall not be deemed the “Beneficial Owner” of, or to “beneficially
own,” any security under this subparagraph (ii) as a result of an
agreement, arrangement, or understanding to vote such security if such
agreement, arrangement, or understanding (A) arises solely from a
revocable proxy given in response to a public proxy or consent solicitation
made pursuant to, and in accordance with, the applicable provisions of the
General Rules and Regulations under the Exchange Act and (B) is not
also then reportable by such Person on Schedule 13D under the Exchange Act
(or any comparable or successor report); or

 

(iii)  which are
beneficially owned, directly or indirectly, by any other Person (or any Affiliate
or Associate thereof) with which such Person (or any of such Person’s
Affiliates or Associates) has any agreement, arrangement, or understanding
(whether or not in writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in the proviso to
subparagraph (ii) of this paragraph (d)), or disposing of any
Voting Securities; provided, however, that nothing in this
paragraph (c) shall cause a person engaged in business as an
underwriter of securities to be the “Beneficial Owner” of, or to “beneficially
own,” any securities acquired through such person’s participation in good faith
in a firm commitment underwriting until the expiration of forty days after the
date of such acquisition.

 

(e)  “Business Day”
shall mean any day other than a Saturday, Sunday, or a day on which banking
institutions in the Commonwealth of Pennsylvania or the State of New Jersey are
authorized or obligated by law or executive order to close.

 

(f)  “Close of
business” on any given date shall mean 5:00 P.M., New York time, on such
date; provided, however, that if such date is not a Business Day it
shall mean 5:00 P.M., New York time, on the next succeeding Business Day.

 

(g)  “Common Stock”
shall mean the common stock, par value $5.00 per share, of the Company, except
that “Common Stock” when used with reference to any Person other than the
Company shall mean the capital stock of such Person with the greatest voting
power, or the equity securities or other equity interest having power to control
or direct the management, of such Person.

 

3

 

(h)  “Common Stock
Equivalents” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(i)   [Intentionally
Omitted].

 

(j)  “Current market
price” shall have the meaning set forth in Section 11(d)(i) hereof.

 

(k)  “Current Value”
shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(l)  “Distribution
Date” shall have the meaning set forth in Section 3(a) hereof.

 

(m)  “Exchange Act”
shall mean the Securities Exchange Act of 1934, as amended.

 

(n)  “Expiration
Date” shall have the meaning set forth in Section 7(a) hereof.

 

(o)  “Final
Expiration Date” shall have the meaning set forth in Section 7(a) hereof.

 

(p)  “Person” shall
mean any individual, firm, corporation, partnership, or other entity.

 

(q)  “Principal
Party” shall have the meaning set forth in Section 13(b) hereof.

 

(r)  “Purchase Price”
shall have the meaning set forth in Section 4(a) hereof.

 

(s)  “Record Date”
shall have the meaning set forth in the WHEREAS clause in the recital to this
Agreement.

 

(t)  “Redemption
Price” shall have the meaning set forth in Section 23(a) hereof.

 

(u)  “Rights” shall
have the meaning set forth in the WHEREAS clause in the recital to this
Agreement.

 

(v)  “Rights
Certificates” shall have the meaning set forth in Section 3(a) hereof.

 

(w)  “Rights
Dividend Declaration Date” shall have the meaning set forth in the WHEREAS
clause in the recital to this Agreement.

 

4

 

(x)  “Section 11(a)(ii) Event”
shall mean any event described in clauses (A) or (B) of Section 11(a)(ii) hereof.

 

(y)  “Section 11(a)(ii) Trigger
Date” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(z)  “Section 13
Event” shall mean any event described in clauses (x), (y), or (z) of Section 13(a) hereof.

 

(aa)  “Securities Act” shall mean the Securities
Act of 1933, as amended.

 

(bb)  “Spread” shall have the meaning set forth in Section 11(a)(iii) hereof.

 

(cc)  “Stock Acquisition Date” shall mean the first
date of public announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to Section 13(d) under
the Exchange Act) by the Company or an Acquiring Person that an Acquiring Person
has become such.

 

(dd)  “Subsidiary” shall mean, with reference to
any Person, any corporation of which an amount of voting securities sufficient
to elect at least a majority of the directors of such corporation is
beneficially owned, directly or indirectly, by such Person, or otherwise
controlled by such Person.

 

(ee)  “Substitution Period” shall have the meaning
set forth in Section 11(a)(iii) hereof.

 

(ff)   “Total
Voting Power” on any given date shall mean the total number of votes eligible
to be cast in a general election of directors of the Company.

 

(gg)  “Trading Day” shall have the meaning set
forth in Section 11(d)(i) hereof.

 

(hh)  “Triggering Event” shall mean any Section 11(a)(ii) Event
or Section 13 Event.

 

(ii)    “Voting
Securities” shall mean any class or classes of capital stock of the Company
entitled to vote generally in the election of directors.

 

Section 2.  Appointment of Rights Agent.  The Company hereby appoints the Rights Agent
to act as agent for the Company

 

5

 

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 as it
may deem necessary or desirable. 
Notwithstanding the foregoing, the Rights Agent shall have no duty to
supervise, and in no event shall be liable for the acts or omissions of any
such Co-Rights Agent.

 

Section 3.  Issue of Rights Certificates.

 

(a)  Until the
earliest of (i) the close of business on the tenth Business Day after the
Stock Acquisition Date, (ii) the close of business on the tenth Business
Day (or such later date as may be determined by the Board of Directors) after
the date that a tender offer or exchange offer by any Person (other than the
Company, any Subsidiary of the Company, any employee stock option plan or other
employee benefit plan of the Company or of any Subsidiary of the Company, or
any Person or entity organized, appointed, or established by the Company for or
pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and
Regulations under the Exchange Act, if, upon consummation thereof, such Person
would be the Beneficial Owner of (x) 15% or more of the shares of Common
Stock then outstanding or (y) Voting Securities representing 15% or more
of the Total Voting Power, or (iii) the close of business on the tenth
Business Day after the Board of Directors determines, pursuant to the criteria
set forth in Section 11(a)(ii)(B) hereof, that a Person is an Adverse
Person (the earliest of (i), (ii), and (iii) being herein referred to as
the “Distribution Date”), (x) the Rights will be evidenced (subject to the
provisions of paragraph (b) of this Section 3) by the certificates
for the Common Stock registered in the names of the holders of such Common
Stock (which certificates for Common Stock shall be deemed also to be
certificates for Rights) and not by separate certificates, and (y) the
Rights will be transferable only in connection with the transfer of the
underlying shares of Common Stock (including a transfer to the Company).  As soon as practicable after the Distribution
Date, the Rights Agent will send by first-class, insured, postage prepaid mail,
to each record holder of the Common Stock as of the close of business on the
Distribution Date, at the address of such holder shown on the records of the
Company, one or more rights certificates, in substantially the form of Exhibit A
hereto (the “Rights Certificates”), evidencing one Right for each share of
Common Stock so held, subject to adjustment as provided herein.  In the event that an adjustment in the number
of Rights per share of Common Stock has been made pursuant to

 

6

 

Section 11(p) hereof, at the time of distribution of the
Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights.  As of and after the Distribution Date, the
Rights will be evidenced solely by such Rights Certificates.

 

(b)  As promptly as
practicable following the Record Date, the Company will send a copy of a
Summary of Rights, in substantially the form attached hereto as Exhibit B
(the “Summary of Rights”), by first-class, postage prepaid mail, to each record
holder of the Common Stock as of the close of business on the Record Date, at
the address of such holder shown on the records of the Company.  With respect to certificates for shares of
Common Stock outstanding as of the Record Date, until the Distribution Date,
the Rights will be evidenced by such certificates for shares of Common Stock
and the registered holders of shares of Common Stock shall also be the
registered holders of the associated Rights. 
Until the earlier of the Distribution Date or the Expiration Date, the
transfer of any certificates representing shares of Common Stock in respect of
which Rights have been issued shall also constitute the transfer of the Rights
associated with such shares of Common Stock.

 

(c)  Rights shall be
issued in respect of all shares of Common Stock which are issued (whether
originally issued or from the Company’s treasury) after the Record Date but
prior to the earlier of the Distribution Date or the Expiration Date.  Certificates representing such shares of
Common Stock shall also be deemed to be certificates for Rights, and shall bear
the following legend:

 

This
certificate also evidences and entitles the holder hereof to certain Rights as
set forth in the Rights Agreement between VIST Financial Corp. (the “Company”)
and American Stock Transfer & Trust Company, (the “Rights Agent”), dated
as of September 19, 2001 as amended and restated as of March 3, 2008
(the “Rights Agreement”), the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal offices of the
Company.  Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate.  The

 

7

 

Company or the Rights
Agent will mail to the holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing, without charge promptly after
receipt of a written request therefor. 
Under certain circumstances set forth in the Rights Agreement, Rights
issued to, or held by, any Person who is, was or becomes an Acquiring Person,
an Adverse Person, or any Affiliate or Associate thereof (as such terms are
defined in the Rights Agreement), whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and void.

 

With respect to such certificates containing the foregoing legend,
until the earlier of (i) the Distribution Date or (ii) the Expiration Date, the
Rights associated with the Common Stock represented by such certificates shall
be evidenced by such certificates alone and registered holders of Common Stock
shall also be the registered holders of the associated Rights, and the transfer
of any such certificates shall also constitute the transfer of the Rights
associated with the Common Stock represented by such certificates.

 

Section 4.  Form
of Rights Certificates.

 

(a)  The Rights Certificates (and the forms of
election to purchase and of assignment to be printed on the reverse thereof)
shall each be substantially in the form set forth on Exhibit A hereto and may
have such marks of identification or designation and such legends, summaries,
or endorsements printed thereon as the Company may deem appropriate (but which
do not affect the rights, duties or responsibilities of the Rights Agent) and
as are not inconsistent with the provisions of this Agreement, or as may be
required to comply with any applicable law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any stock exchange on which
the Rights may from time to time be listed, or to conform to usage.  Subject to the provisions of Section 11 and
Section 22 hereof, the Rights Certificates, whenever distributed, shall be
dated as of the Record Date and on their face shall entitle the holders thereof
to purchase such number of shares of Common Stock as shall be set forth therein
at the price set forth therein (such exercise price per share of Common Stock,
as adjusted from time to time hereunder, the "Purchase Price"), but
the amount and type of securities purchasable upon the exercise of each Right
and the Purchase Price thereof shall be subject to adjustment as provided
herein.

 

8

 

(b)  Any Rights
Certificate issued pursuant to Section 3(a) or Section 22 hereof
that represents Rights beneficially owned by: 
(i) an Acquiring Person or an Adverse Person or any Associate or
Affiliate of an Acquiring Person or an Adverse Person, (ii) a transferee
of an Acquiring Person or an Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee after such Acquiring Person or Adverse
Person becomes such, or (iii) a transferee of an Acquiring Person or an
Adverse Person (or of any such Associate or Affiliate) who becomes a transferee
prior to or concurrently with the Acquiring Person or Adverse Person becoming
such and receives such Rights pursuant to either (A) a transfer (whether
or not for consideration) from the Acquiring Person or Adverse Person to
holders of equity interests in such Acquiring Person or Adverse Person or to
any Person with whom such Acquiring Person or Adverse Person has any continuing
agreement, arrangement, or understanding regarding the transferred Rights or (B) a
transfer that the Board of Directors of the Company has determined is part of
an agreement, arrangement, or understanding which has as a primary purpose or
effect avoidance of Section 7(e) hereof, and provided that the
Company shall have notified the Rights Agent that this Section 4(b) applies,
and any Rights Certificate issued pursuant to Section 6 or Section 11
hereof upon transfer, exchange, replacement, or adjustment of any other Rights
Certificate referred to in this sentence, shall contain (to the extent
feasible) the following legend:

 

The Rights
represented by this Rights Certificate are or were beneficially owned by a
Person who was or became an [Acquiring Person] [Adverse Person] or an Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement).  Accordingly, this Rights Certificate and the
Rights represented hereby have become null and void in the circumstances and
with the effect specified in Section 7(e) of such Agreement.

 

Section 5.  Countersignature and Registration.

 

(a)  The Rights
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, Chief Executive Officer, President, or any Vice Chairman or Executive
Vice President either manually or by facsimile signature, and shall have affixed
thereto the Company’s seal or a facsimile thereof which shall be attested by
the Secretary or an Assistant Secretary of the Company, either manually or by
facsimile signature.  The Rights
Certificates shall be countersigned 

 

9

 

manually by the Rights
Agent and shall not be valid for any purpose unless so countersigned.  In case any officer of the Company who shall
have signed any of the Rights Certificates shall cease to be such officer of the
Company before countersignature by the Rights Agent and issuance and delivery
by the Company, such Rights Certificates, nevertheless, may be countersigned by
the Rights Agent and issued and delivered by the Company with the same force
and effect as though the person who signed such Rights Certificates had not
ceased to be such officer of the Company; and any Rights Certificates may be
signed on behalf of the Company by any person who, at the actual date of the
execution of such Rights Certificate, shall be a proper officer of the Company
to sign such Rights Certificate, although at the date of the execution of this
Rights Agreement any such person was not such an officer.

 

(b)  Following the
Distribution Date and receipt by the Rights Agent of all necessary information,
the Rights Agent will keep or cause to be kept, at its office designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder.  Such books shall show the
names and addresses of the respective holders of the Rights Certificates, the
number of Rights evidenced on its face by each of the Rights Certificates and
the date of each of the Rights Certificates.

 

Section 6.  Transfer, Split Up, Combination, or
Exchange of Rights Certificates; Mutilated, Destroyed, Lost, or Stolen Rights
Certificates.

 

(a)  Subject to the
provisions of Section 4(b), Section 7(e), Section 14, and Section 24
hereof, at any time after the close of business on the Distribution Date, and
at or prior to the close of business on the Expiration Date, any Rights
Certificate may be transferred, split up, combined, or exchanged for another
Rights Certificate entitling the registered holder to purchase a like number of
shares of Common Stock(or, following a Triggering Event, Common Stock, other
securities, cash, or other assets, as the case may be) as the Rights
Certificate surrendered then entitled such holder (or former holder in the case
of a transfer) to purchase.  Any
registered holder desiring to transfer, split up, combine, or exchange any
Rights Certificate shall make such request in writing delivered to the Rights
Agent, and shall surrender the Rights Certificate to be transferred, split up,
combined, or exchanged at the principal office or offices of the Rights Agent
designated for such purpose.  Neither the
Rights Agent nor the 

 

10

 

Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have properly
completed and signed the certificate contained in the form of assignment on the
reverse side of such Rights Certificate and shall have provided such additional
evidence of the identity of the Beneficial Owner (or former Beneficial Owner)
or Affiliates or Associates thereof as the Company or the Rights Agent shall
reasonably request.  Thereupon the Rights
Agent shall, subject to Section 4(b), Section 7(e), and Section 14
hereof, countersign and deliver to the Person entitled thereto a Rights
Certificate as so requested.  The Company
may require payment of a sum sufficient to cover any tax or governmental charge
that may be imposed in connection with any transfer, split up, combination, or
exchange of Rights Certificates.  The
Rights Agent shall have no duty to take any action under any Section of
this Agreement which requires the payment by a Rights holder of applicable
taxes and governmental charges unless and until the Rights Agent is satisfied
that all such taxes and/or charges have been paid.

 

(b)  Upon receipt by
the Company and the Rights Agent of evidence reasonably satisfactory to them of
the loss, theft, destruction, or mutilation of a Rights Certificate, and, in
case of loss, theft, or destruction, of indemnity or security satisfactory to
them, and reimbursement to the Company and the Rights Agent of all reasonable
expenses incidental thereto, and upon surrender to the Rights Agent and
cancellation of the Rights Certificate if mutilated, the Company will execute
and deliver a new Rights Certificate of like tenor to the Rights Agent for
countersignature and delivery to the registered owner in lieu of the Rights
Certificate so lost, stolen, destroyed, or mutilated.

 

Section 7.  Exercise of Rights; Purchase Price;  Expiration
Date of Rights.

 

(a) Subject to Section 7(e) hereof,
the registered holder of any Rights Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein including, without limitation,
the restrictions on exercisability set forth in Section 9(c), Section 11(a)(iii),
and Section 23(a) hereof) in whole or in part at any time after the
Distribution Date upon surrender of the Rights Certificate, with the form of
election to purchase and the certificate on the reverse side thereof duly
executed, to the Rights Agent at the office of the Rights Agent designated for
such purpose, together with payment of the aggregate Purchase Price with
respect to the

 

11

 

total number of shares of
Common Stock (or other securities, cash, or other assets, as the case may be)
as to which such surrendered Rights are then exercisable, at or prior to the
earliest of (i) the close of business on September 19, 2011 (the “Final
Expiration Date”),(ii) the time at which the Rights are redeemed as
provided in Section 23 hereof (the earlier of (i) and (ii) being
herein referred to as the “Expiration Date”), or (iii) the time at which
such Rights are exchanged as provided in Section 24 hereof.

 

(b)  The Purchase
Price for each share of Common Stock pursuant to the exercise of a Right shall
be $70.00, and shall be subject to adjustment from time to time as provided in
Sections 11 and 13(a) hereof and shall be payable in accordance with
paragraph (c) below.

 

(c)  Upon receipt of
a Rights Certificate representing exercisable Rights, with the form of election
to purchase and the certificate on the reverse side thereof duly executed,
accompanied by payment, with respect to each Right so exercised, of the
Purchase Price per share of Common Stock (or other shares, securities, cash, or
other assets, as the case may be) to be purchased as set forth below and an
amount equal to any applicable tax or charge, the Rights Agent shall, subject
to Section 20(k) hereof, thereupon promptly (i) (A) requisition
from any transfer agent of the shares of Common Stock (or make available, if
the Rights Agent is the transfer agent for such shares) certificates for the
total number of shares of Common Stock to be purchased and the Company hereby
irrevocably authorizes its transfer agent to comply with all such requests, or (B) if
the Company shall have elected to deposit the total number of shares of Common
Stock issuable upon exercise of the Rights hereunder with a depositary agent,
requisition from the depositary agent depositary receipts representing such
number of shares of Common Stock as are to be purchased (in which case
certificates for the shares of Common Stock represented by such receipts shall
be deposited by the transfer agent with the depositary agent) and the Company
will direct the depositary agent to comply with such request, (ii) requisition
from the Company the amount of cash, if any, to be paid in lieu of fractional
shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the order of the
registered holder of such Rights Certificate. 
The payment of the Purchase Price (as such amount

 

12

 

may be reduced pursuant
to Section 11(a)(iii) hereof) shall be made in cash or by certified
bank check or bank draft payable to the order of the Company.  In the event that the Company is obligated to
issue other securities of the Company, pay cash, and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such other securities, cash, and/or other
property are available for distribution by the Rights Agent, if and when
necessary to comply with this Agreement. 
In the event that, immediately prior to the occurrence of a Distribution
Date, the number of shares of Common Stock which are authorized by the Company’s
articles of incorporation, as amended and in effect at such time, but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights is not sufficient to permit exercise in full of the Rights in
accordance with their terms, the Company, acting by resolution of the Board of
Directors, shall follow the same procedures and may take any of the same
actions in connection with the exercise of Rights under this Section 7(c) as
are required or permitted to be followed or taken pursuant to Section 11(a)(iii) hereof
with respect to substitution of value in connection with the exercise of Rights
under Section 11(a)(ii) hereof. 
The Company reserves the right to require prior to the occurrence of a
Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Common Stock would be issued.

 

(d)  In case the
registered holder of any Rights Certificate shall exercise less than all the
Rights evidenced thereby, a new Rights Certificate evidencing Rights equivalent
to the Rights remaining unexercised shall be issued by the Rights Agent and
delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.

 

(e)  Notwithstanding
anything in this Agreement to the contrary, from and after the first occurrence
of a Section 11(a)(ii) Event, any Rights beneficially owned by (i) an
Acquiring Person, an Adverse Person, or an Associate or Affiliate of an
Acquiring Person or an Adverse Person, (ii) a direct or indirect
transferee of an Acquiring Person or an Adverse Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person or
Adverse Person becomes such, or (iii) a direct or indirect transferee of
an Acquiring Person or an Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person or Adverse Person becoming such and receives such Rights pursuant to
either (A) a 

 

13

 

transfer (whether or not
for consideration) from the Acquiring Person or Adverse Person to holders of
equity interests in such Acquiring Person or Adverse Person or to any Person
with whom the Acquiring Person or Adverse Person has any continuing agreement,
arrangement, or understanding regarding the transferred Rights or (B) a
transfer which the Board of Directors of the Company has determined is part of
an agreement, arrangement or understanding which has as a primary purpose or
effect the avoidance of this Section 7(e), shall become null and void
without any further action and no holder of such Rights shall have any rights
whatsoever with respect to such Rights, whether under any provision of this
Agreement or otherwise.  The Company
shall notify the Rights Agent when this Section 7(e) applies and
shall use all reasonable efforts to insure that the provisions of this Section 7(e) and
Section 4(b) hereof are complied with, but shall have no liability to
any holder of Rights Certificates or other Person as a result of its failure to
make any determinations with respect to an Acquiring Person or an Adverse
Person or any of their respective Affiliates, Associates, or transferees
hereunder.

 

(f)  Notwithstanding
anything in this Agreement to the contrary, neither the Rights Agent nor the
Company shall be obligated to undertake any action with respect to a registered
holder upon the occurrence of any purported exercise as set forth in this Section 7
unless such registered holder shall have (i) duly and properly completed
and signed the certificate contained in the form of election to purchase set
forth on the reverse side of the Rights Certificate surrendered for such
exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial owner) or Affiliates or Associates
thereof as the Company or the Rights Agent shall reasonably request.

 

Section 8.  Cancellation and Destruction of Rights
Certificates.  All Rights
Certificates surrendered for the purpose of exercise, transfer, split up,
combination, or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions of this Agreement. 
The Company shall deliver to the Rights Agent for cancellation and
retirement, and the Rights Agent shall so cancel and retire, any other Rights
Certificate purchased or acquired by the Company otherwise than upon the
exercise thereof.  The Rights Agent shall
deliver all cancelled Rights Certificates to the Company, or shall, at the
written

 

14

 

request of the Company,
destroy such cancelled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.

 

Section 9.  Reservation and Availability of Capital
Stock.

 

(a)  The Company
covenants and agrees that it will cause to be reserved and kept available out
of its authorized and unissued shares of Common Stock (and, following the
occurrence of a Triggering Event, other securities) or out of its authorized
and issued shares of Common Stock held in its treasury, the number of shares of
Common Stock (and, following the occurrence of a Triggering Event, other
securities) that, as provided in this Agreement, including Section 11(a)(iii) hereof,
will be sufficient to permit the exercise in full of all outstanding Rights.

 

(b)  So long as the
shares of Common Stock (and, following the occurrence of a Triggering Event,
other securities) issuable and deliverable upon the exercise of the Rights may
be quoted on any automated quotation system of the National Association of
Securities Dealers, Inc. or listed on any national securities exchange,
the Company shall use its best efforts to cause, from and after such time as
the Rights become exercisable, all shares reserved for such issuance to be so
quoted or listed on such exchange upon official notice of issuance upon such
exercise.

 

(c)  The Company
shall use its best efforts to (i) file, as soon as practicable following
the first occurrence of a Section 11(a)(ii) Event, or, if applicable,
as soon as practicable following the earliest date after the first occurrence
of a Section 11(a)(ii) Event on which the consideration to be
delivered by the Company upon exercise of the Rights has been determined in
accordance with Section 11(a)(iii) hereof, a registration statement
on an appropriate form under the Securities Act, with respect to the securities
purchasable upon exercise of the Rights, (ii) cause such registration
statement to become effective as soon as practicable after such filing, and (iii) cause
such registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Securities Act) until the earlier of (A) the
date as of which the Rights are no longer exercisable for such securities, and (B) the
date of the expiration of the Rights. 
The Company will also take such action as may be appropriate under, or
to ensure compliance with, the securities or “blue sky” laws of the various
states in

 

15

 

connection with the
exercisability of the Rights.  The
Company may temporarily suspend, for a period of time not to exceed ninety (90)
days after the date set forth in clause (i) of the first sentence of
this Section 9(c), the exercisability of the Rights in order to prepare
and file such registration statement and permit it to become effective.  Upon any such suspension, the Company shall
issue a public announcement stating that the exercisability of the Rights has
been temporarily suspended, as well as a public announcement at such time as
the suspension is no longer in effect. 
In addition, if the Company shall determine that a registration
statement is required following the Distribution Date, the Company may by
issuing a public announcement temporarily suspend (and shall give the Rights
Agent prompt notice thereof) the exercisability of the Rights until such time
as a registration statement has been declared effective.  The Company shall promptly provide the Rights
Agent with copies of such announcements. 
Notwithstanding any provision of this Agreement to the contrary, the
Rights shall not be exercisable in any jurisdiction if the requisite
qualification in such jurisdiction shall not have been obtained, the exercise
thereof shall not be permitted under applicable law, or a registration statement
shall not have been declared effective.

 

(d)  The Company
covenants and agrees that it will take all such action as may be necessary to
ensure that all shares of Common Stock (and, following the occurrence of a
Triggering Event, other securities) delivered upon exercise of Rights shall, at
the time of delivery of the certificates for such shares (subject to payment of
the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.

 

(e)  The Company
further covenants and agrees that it will pay when due and payable any and all
taxes and governmental charges which may be payable in respect of the issuance
or delivery of the Rights Certificates and of any certificates for a number of
shares of Common Stock (or other securities, as the case may be) upon the
exercise of Rights.  The Company shall
not, however, be required to pay any tax or charge which may be payable in
respect of any transfer or delivery of Rights Certificates to a Person other
than, or the issuance or delivery of a number of shares of Common Stock (or
other securities, as the case may be) in respect of a name other than that of,
the registered holder of the Rights Certificates evidencing Rights surrendered
for exercise or to issue or deliver any certificates for a number of shares of
Common Stock (or other securities, as the case may be) in a name other than

 

16

 

that of the registered
holder upon the exercise of any Rights until such tax or charge shall have been
paid (any such tax or charge being payable by the holder of such Rights
Certificate at the time of surrender) or until it has been established to the
Company’s satisfaction that no such tax or charge is due.

 

Section 10.  Record Date for Securities Issued Upon
Exercise.  Each Person in whose name
any certificate for a number of shares of Common Stock (or other securities, as
the case may be) is issued upon the exercise of Rights shall for all purposes
be deemed to have become the holder of record of such shares of Common Stock
(or other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable taxes and charges) was made; provided, however, that if the
date of such surrender and payment is a date upon which the transfer books for
the Common Stock (or other securities, as the case may be) of the Company are
closed, such Person shall be deemed to have become the record holder of such
shares (fractional or otherwise) on, and such certificate shall be dated, the
next succeeding Business Day on which the Common Stock (or other securities, as
the case may be) transfer books of the Company are open.  Prior to the exercise of the Rights evidenced
thereby, the holder of a Rights Certificate shall not be entitled to any rights
of a stockholder of the Company with respect to shares for which the Rights shall
be exercisable, including, without limitation, the right to vote, to receive
dividends, or other distributions or to exercise any preemptive rights, and
shall not be entitled to receive any notice of any proceedings of the Company,
except as provided herein.

 

Section 11.  Adjustment of Purchase Price, Number and
Kind of Shares or Number of Rights. 
The Purchase Price, the number and kind of shares covered by each Right
and the number of Rights outstanding are subject to adjustment from time to
time as provided in this Section 11.

 

(a)  (i)  In
the event the Company shall at any time after the date of this Agreement (A) declare
a dividend on the outstanding shares of Common Stock payable in shares of
Common Stock, (B) subdivide the outstanding shares of Common Stock, (C) combine
the outstanding shares of Common Stock into a smaller number of shares, or (D) issue
any shares of its capital stock in a reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing or surviving corporation), except
as otherwise provided in this Section 11(a)

 

17

 

and Section 7(e) hereof,
the Purchase Price in effect at the time of the record date for such dividend
or of the effective date of such subdivision, combination, or reclassification,
and the number and kind of shares of Common Stock (or other securities, as the
case may be), issuable on such date, shall be proportionately adjusted so that
the holder of any Right exercised after such time shall be entitled to receive,
upon payment of the Purchase Price then in effect, the aggregate number and
kind of shares of Common Stock or capital stock, as the case may be, which, if
such Right had been exercised immediately prior to such date and at a time when
the Common Stock transfer books of the Company were open, such holder would
have owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination, or reclassification.  If an event occurs that would require an
adjustment under both this Section 11(a)(i) and Section 11(a)(ii) hereof,
the adjustment provided for in this Section 11(a)(i) shall be in
addition to, and shall be made prior to, any adjustment required pursuant to Section 11(a)(ii) hereof.

 

(ii)  Subject to Section 24
of this Agreement, in the event:

 

(A)  any Person
shall at any time after the Rights Dividend Declaration Date become an
Acquiring Person, unless the event causing such Person to become an Acquiring
Person (I) is a transaction set forth in Section 13(a) hereof,
or (II) is an acquisition of shares of Common Stock and/or Voting
Securities pursuant to a tender offer or an exchange offer for all outstanding
shares of Common Stock and other Voting Securities, if any, at a price and on
terms determined by at least a majority of the members of the Board Directors
of the Company who are not representatives, nominees, Affiliates or Associates
of an Acquiring Person, after receiving advice from one or more investment
banking firms, to be (x) at a price which is fair to stockholders (taking
into account all factors which the Board of Directors deems relevant including,
without limitation, prices which could reasonably be achieved if the Company or
its assets were sold on an orderly basis designed to realize maximum value) and
(y) otherwise in the best interests of the Company and its stockholders;
or

 

(B)  the Board of
Directors of the Company shall declare any Person to be an Adverse Person, upon
a determination that such Person, alone or together with its Affiliates and
Associates, has, at any time after the Rights Dividend Declaration Date, become
the beneficial owner of Voting 

 

18

 

Securities representing
at least 4.9% of the Total Voting Power and a determination, after reasonable
inquiry and investigation, including consultation with such persons as the
Board of Directors shall deem appropriate, that such beneficial ownership by
such Person is intended to cause the Company to repurchase the Voting
Securities beneficially owned by such Person or to cause pressure on the
Company to take action or enter into a transaction or series of transactions
intended to provide such Person (and not stockholders generally) with
short-term financial gain under circumstances where the Board of Directors
determines that the best long-term interests of the Company and its
stockholders would not be served by taking such action or entering into such
transaction or series of transactions at that time; or

 

(C)  any Acquiring
Person or any Associate or Affiliate of any Acquiring Person, at any time after
the date of this Agreement, directly or indirectly, (1) shall merge into
the Company or otherwise combine with the Company and the Company shall be the
continuing or surviving corporation of such merger or combination and the
Voting Securities of the Company shall remain outstanding and unchanged, (2) shall,
in one transaction or a series of transactions, other than in connection with
the exercise of the Rights or the exercise or conversion of securities
exercisable or convertible into capital stock of the Company or any of its
Subsidiaries, transfer any assets to the Company or to any of its Subsidiaries
in exchange (in whole or in part) for shares of Voting Securities, for shares
of other equity securities of the Company, or for securities exercisable for or
convertible into shares of equity securities of the Company (Common Stock or
otherwise) or otherwise obtain from the Company, with or without consideration,
any additional shares of such equity securities or securities exercisable for
or convertible into shares of such equity securities (other than pursuant to a
pro rata distribution to all holders of Common Stock), (3) shall sell,
purchase, lease, exchange, mortgage, pledge, transfer, or otherwise acquire or
dispose of, in one transaction or a series of transactions, to, from, with, or
of (as the case may be) the Company or any of its Subsidiaries, assets on terms
and conditions less favorable to the Company than the Company would be able to
obtain in arm’s-length negotiation with an unaffiliated third party, other than
pursuant to a transaction set forth in Section 13(a) hereof, (4) shall
receive any compensation from the Company or any of the Company’s Subsidiaries
other than compensation for services as a director or for full-time employment
as a regular employee at rates in accordance with the Company’s (or its
Subsidiaries’) past 

 

19

 

practices, or (5) shall receive the benefit, directly or
indirectly (except proportionately as a stockholder and except if resulting
from a requirement of law or governmental regulation), of any loans, advances,
guarantees, pledges, or other financial assistance or any tax credits or other
tax advantage provided by the Company or any of its Subsidiaries; or

 

(D)  during such
time as there is an Acquiring Person, there shall be any reclassification of
securities (including any reverse stock split), or recapitalization of the
Company, or any merger or consolidation of the Company with any of its
Subsidiaries or any other transaction or series of transactions involving the
Company or any of its Subsidiaries, other than a transaction or transactions to
which the provisions of Section 13(a) apply (whether or not with or
into or otherwise involving an Acquiring Person) which has the effect, directly
or indirectly, of increasing by more than 1% the proportionate share of the
outstanding shares of any class of equity securities of the Company or any of
its Subsidiaries which is directly or indirectly beneficially owned by any
Acquiring Person or any Associate or Affiliate of any Acquiring Person;

 

then, promptly following
the first occurrence of a Section 11(a)(ii) Event, proper provision
shall be made so that each holder of a Right (except as provided below and in Section 7(e) hereof)
shall thereafter have the right to receive, upon exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, such
number of shares of Common Stock as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the then number of shares of Common Stock
for which a Right was exercisable immediately prior to the first occurrence of
a Section 11(a)(ii) Event, and (y) dividing that product (which,
following such first occurrence, shall thereafter be referred to as the “Purchase
Price” for each Right and for all purposes of this Agreement) by 50% of the
lowest closing price (as determined pursuant to the second sentence of Section 11(d)(i) hereof)
per share of Common Stock on any Trading Day (as defined in Section 11(d)(i) hereof)
occurring within the twelve-month period immediately preceding the date of such
first occurrence (such number of shares, the “Adjustment Shares”).

 

(iii)  In the event
that:

 

(a) the number of
shares of Common Stock which are authorized by the Company’s articles of
incorporation but not outstanding or reserved for issuance for purposes other

 

20

 

than upon exercise of the
Rights are not sufficient to permit the exercise in full of the Rights in
accordance with the foregoing subparagraph (ii) of this Section 11(a),
or (b) the quotient (the “Quotient”) obtained by dividing the Purchase
Price by the number of Adjustment Shares issuable upon exercise of a Right is
less than the then par value per share of the Common Stock, the Company shall,
to the extent permitted by applicable law and regulation and subject to such
limitations as are necessary to prevent a default under any agreement to which
the Company is a party: (A) determine the excess of (1) the value of
the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”)
over (2) the Purchase Price (such excess, the “Spread”), and (B) with
respect to each Right, make adequate provision to substitute for the Adjustment
Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares, or units of
shares, of preferred stock which the Board of Directors of the Company has
deemed to have the same value as shares of Common Stock (such shares of
preferred Stock, “Common Stock Equivalents”)), (4) debt securities of the
Company, (5) other assets, or (6) any combination of the foregoing,
having an aggregate value equal to the Current Value, where such aggregate
value has been determined by the Board of Directors of the Company based upon
the advice of a nationally recognized investment banking firm selected by the
Board of Directors of the Company; provided, however, if the Company
shall not have made adequate provision to deliver value pursuant to
clause (B) above within 30 days following the later of (x) the
first occurrence of a Section 11(a)(ii) Event and (y) the date
on which the Company’s right of redemption pursuant to Section 23(a) expires
(the later of (x) and (y) being referred to herein as the “Section 11(a)(ii) Trigger
Date”), then the Company shall be obligated to deliver, upon the surrender for
exercise of a Right and without requiring payment of the Purchase Price, shares
of Common Stock (to the extent available) and then, if necessary, cash, which
shares and/or cash have an aggregate value equal to the Spread.  If the Board of Directors of the Company
shall determine in good faith that it is likely that (a) sufficient
additional shares of Common Stock could be authorized for issuance upon
exercise in full of the Rights or (b) a reduction in the par value per
share of Common Stock to an amount that is equal to or less than the Quotient
could be authorized, the 30 day period set forth above may be extended to
the extent necessary, but not more than 90 days after the Section 11(a)(ii) Trigger
Date, in order that the Company may seek stockholder approval for the
authorization of such additional shares or for the reduction of such par value,
as the 

 

21

 

case may be (such period,
as it may be extended, the “Substitution Period”).  To the extent that the Company determines
that some action need be taken pursuant to the first and/or second sentences of
this Section 11(a)(iii), the Company (x) shall provide, subject to Section 7(e) hereof,
that such action shall apply uniformly to all outstanding Rights, and (y) may
suspend the exercisability of the Rights until the expiration of the
Substitution Period in order to seek any authorization of additional shares or
reduction in par value and/or to decide the appropriate form of distribution to
be made pursuant to such first sentence and to determine the value
thereof.  In the event of any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a
public announcement at such time as the suspension is no longer in effect.  For purposes of this Section 11(a)(iii),
the value of the Common Stock shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of the Common Stock on
the Section 11(a)(ii) Trigger Date and the value of any Common Stock
Equivalents shall be deemed to have the same value as the Common Stock on such
date.

 

(b)  In case the
Company shall fix a record date for the issuance of rights, options, or
warrants to all holders of Common Stock entitling them to subscribe for or
purchase (for a period expiring within 45 calendar days after such record
date) Common Stock or securities convertible into Common Stock or Common Stock
Equivalents at a price per share of Common Stock or per share of Common Stock
Equivalents (or having a conversion price per share, if a security convertible
into Common Stock or Common Stock Equivalents) less than the current market
price (as determined pursuant to Section 11(d) hereof) per share of
Common Stock on such record date, the Purchase Price to be in effect after such
record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the number of shares of Common Stock outstanding on such record date,
plus the number of shares of Common Stock which the aggregate offering price of
the total number of shares of Common Stock and/or Common Stock Equivalents so
to be offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such current market price, and
the denominator of which shall be the number of shares of Common Stock
outstanding on such record date, plus the number of additional shares of Common
Stock and/or Common Stock Equivalents to be offered for subscription or
purchase (or into which the convertible securities so to be offered are
initially convertible).  In case such
subscription price may be paid by 

 

22

 

delivery of consideration
part or all of which may be in a form other than cash, the value of such
consideration shall be as determined in good faith by the Board of Directors of
the Company, 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
the Rights.  Shares of Common Stock owned
by or held for the account of the Company shall not be deemed outstanding for
the purpose of any such computation. 
Such adjustment shall be made successively whenever such a record date
is fixed, and in the event that such rights or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be
in effect if such record date had not been fixed.

 

(c)  In case the
Company shall fix a record date for a distribution to all holders of Common
Stock (including any such distribution made in connection with a consolidation
or merger in which the Company is the continuing corporation) of evidences of
indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets, stock (other than a dividend
payable in Common Stock, but including any dividend payable in stock other than
Common Stock), or subscription rights or warrants (excluding those referred to
in Section 11(b) hereof), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in
effect immediately prior to such record date by a fraction, the numerator of
which shall be the current market price (as determined pursuant to Section 11(d) hereof)
per share of Common Stock on such record date, less the fair market value (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent) of
the portion of the cash, assets, stock, or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to a share of
Common Stock and the denominator of which shall be such current market price
(as determined pursuant to Section 11(d) hereof) per share of Common
Stock.  Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that such
distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.

 

(d)  For the purpose
of any computation hereunder, other than computations made pursuant to Section 11(a)(iii) hereof,
the “current market price” per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such Common
Stock for the 

 

23

 

30 consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date, and for purposes of computations made pursuant to Section 11(a)(iii) hereof,
the “current market price” per share of Common Stock on any date shall be
deemed to be the average of the daily closing prices per share of such Common
Stock for the 10 consecutive Trading Days immediately following such date;
provided, however, that in the event that the current market price per
share of the Common Stock is determined during a period following the
announcement by the issuer of such Common Stock of (A) a dividend or
distribution on such Common Stock payable in shares of such Common Stock or
securities convertible into shares of such Common Stock (other than the
Rights), or (B) any subdivision, combination, or reclassification of such
Common Stock, and the ex-dividend date for such dividend or distribution, or
the record date for such subdivision, combination or reclassification shall not
have occurred prior to the commencement of the requisite 30 Trading Day or
10 Trading Day period, as set forth above, then, and in each such case,
the “current market price” shall be properly adjusted to take into account
ex-dividend trading.  The closing price
for each day shall be the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices, regular
way, in either case as reported in the principal consolidated transaction
reporting system with respect to securities listed or admitted to trading on
the New York Stock Exchange or, if the shares of Common Stock are not listed or
admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common
Stock are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotation
System (“NASDAQ”) or such other system then in use, or, if on any such date the
shares of Common Stock are not quoted by any such organization, the average of
the closing bid and asked prices as furnished by a professional market maker
making a market in the Common Stock selected by the Board of Directors of the
Company.  If on any such date no market
maker is making a market in the Common Stock, the fair value of such shares on
such date as determined in good faith by the Board of Directors of the Company
shall be used.  The term “Trading Day”
shall mean a day on which the principal national securities exchange on which
the shares of Common Stock are listed or admitted to trading is open for the 

 

24

 

transaction of business
or, if the shares of Common Stock are not listed or admitted to trading on any
national securities exchange, a Business Day. 
If the Common Stock is not publicly held or not so listed or traded, “current
market price” per share shall mean the fair value per share as determined in
good faith by the Board of Directors of the Company, whose determination shall
be described in a statement filed with the Rights Agent and shall be conclusive
for all purposes.

 

(e)  Anything herein
to the contrary notwithstanding, no adjustment in the Purchase Price shall be
required unless such adjustment would require an increase or decrease of at
least 1% in the Purchase Price; provided, however, that any adjustments
which by reason of this Section 11(e) are not required to be made
shall be carried forward and taken into account in any subsequent
adjustment.  All calculations under this Section 11
shall be made to the nearest cent or to the nearest ten-thousandth of a share
of Common Stock or other share, as the case may be.  Notwithstanding the first sentence of this Section 11(e),
any adjustment required by this Section 11 shall be made no later than the
earlier of (i) 3 years from the date of the transaction which
mandates such adjustment, or (ii) the Expiration Date.

 

(f)  If as a result
of an adjustment made pursuant to Section 11(a)(ii) or Section 13(a) hereof,
the holder of any Right thereafter exercised shall become entitled to receive
any shares of capital stock other than Common Stock, thereafter the number of
such other shares so receivable upon exercise of any Right and the Purchase
Price thereof shall be subject to adjustment from time to time in a manner and
on terms as nearly equivalent as practicable to the provisions with respect to
the Common Stock contained in Sections 11(a), (b), (c), (e), (g), (h),
(i), (j), (k), and (m), and the provisions of Sections 7, 9, 10, 13, and
14 hereof with respect to the Common Stock shall apply on like terms to any
such other shares.

 

(g)  All Rights
originally issued by the Company subsequent to any adjustment made to the
Purchase Price hereunder shall evidence the right to purchase, at the adjusted
Purchase Price, the number of shares of Common Stock purchasable from time to
time hereunder upon exercise of the Rights, all subject to further adjustment
as provided herein.

 

(h)  Unless the
Company shall have exercised its election as provided in Section 11(i),
upon each adjustment of the Purchase Price as a result of the calculations made
in Sections 11(b) and (c), each Right outstanding immediately prior

 

25

 

to the making of such
adjustment shall thereafter evidence the right to purchase, at the adjusted
Purchase Price, that number of shares of Common Stock (calculated to the
nearest one-millionth) obtained by (i) multiplying (x) the number of
shares of Common Stock covered by a Right immediately prior to this adjustment,
by (y) the Purchase Price in effect immediately prior to such adjustment
of the Purchase Price, and (ii) dividing the product so obtained by the
Purchase Price in effect immediately after such adjustment of the Purchase
Price.

 

(i)  The Company may
elect on or after the date of any adjustment of the Purchase Price to adjust
the number of Rights, in lieu of any adjustment in the number of shares of
Common Stock purchasable upon the exercise of a Right.  Each of the Rights outstanding after the
adjustment in the number of Rights shall be exercisable for the number of
shares of Common Stock for which a Right was exercisable immediately prior to
such adjustment.  Each Right held of
record prior to such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest one-ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of the
Purchase Price by the Purchase Price in effect immediately after adjustment of
the Purchase Price.  The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made, and shall promptly give the Rights Agent a
copy of such announcement.  This record
date may be the date on which the Purchase Price is adjusted or any day
thereafter, but, if the Rights Certificates have been issued, shall be at least
10 days later than the date of the public announcement.  If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i),
the Company shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 14 hereof, the additional
Rights to which such holders shall be entitled as a result of such adjustment,
or, at the option of the Company, shall cause to be distributed to such holders
of record in substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender thereof, if
required by the Company, new Rights Certificates evidencing all the Rights to
which such holders shall be entitled after such adjustment.  Rights Certificates so to be distributed shall
be issued, executed, and countersigned in the manner provided for herein (and
may bear, at the option of the Company, the adjusted Purchase Price) and shall
be registered in 

 

26

 

the names of the holders
of record of Rights Certificates on the record date specified in the public
announcement.

 

(j)  Irrespective of
any adjustment or change in the Purchase Price or the number of shares of
Common Stock issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Purchase Price
per share and the number of shares which were expressed in the initial Rights
Certificates issued hereunder.

 

(k)  Before taking
any action that would cause an adjustment reducing the Purchase Price below the
then stated value, if any, of the number of shares of Common Stock issuable
upon exercise of the Rights, the Company shall take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable such number of shares of
Common Stock at such adjusted Purchase Price.

 

(l)  In any case in
which this Section 11 shall require that an adjustment in the Purchase
Price be made effective as of a record date for a specified event, the Company
may elect to defer (and shall give prompt written notice of such election to
the Rights Agent) until the occurrence of such event the issuance to the holder
of any Right exercised after such record date the number of shares of Common Stock
and other capital stock or securities of the Company, if any, issuable upon
such exercise over and above the number of shares of Common Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
on the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder’s right to receive such
additional shares (fractional or otherwise) or securities upon the occurrence
of the event requiring such adjustment.

 

(m)  Anything in
this Section 11 to the contrary notwithstanding, the Company shall be
entitled to make such reductions in the Purchase Price, in addition to those
adjustments expressly required by this Section 11, as and to the extent
that in their good faith judgment the Board of Directors of the Company shall
determine to be advisable in order that any (i) consolidation or
subdivision of the Common Stock, (ii) issuance wholly for cash of any
shares of Common Stock at less than the current market price, (iii) issuance
wholly for cash of shares of Common Stock or securities which by their

 

27

 

terms are convertible
into or exchangeable for shares of Common Stock, (iv) stock dividends, or (v) issuance
of rights, options, or warrants referred to in this Section 11, hereafter
made by the Company to holders of its Common Stock shall not be taxable to such
stockholders.

 

(n)  The Company
covenants and agrees that it shall not, at any time after the Distribution
Date, (i) consolidate with any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof),
(ii) merge with or into any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof),
or (iii) sell or transfer (or permit any Subsidiary to sell or transfer),
in one transaction, or a series of related transactions, assets or earning
power aggregating more than 50% of the assets or earning power of the Company
and its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more transactions
each of which complies with Section 11(o) hereof), if (x) at the
time of or immediately after such consolidation, merger, or sale there are any
rights, warrants, or, other instruments or securities outstanding or agreements
in effect which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with, or immediately after such consolidation, merger, or sale,
the stockholders of the Person who constitutes, or would constitute, the “Principal
Party” for purposes of Section 13(a) hereof shall have received a
distribution of Rights previously owned by such Person or any of its Affiliates
and Associates.

 

(o)  The Company
covenants and agrees that, after the Distribution Date, it will not, except as
permitted by Section 27 hereof, take (or permit any Subsidiary to take)
any action if at the time such action is taken it is reasonably foreseeable
that such action will diminish substantially or otherwise eliminate the
benefits intended to be afforded by the Rights.

 

(p)  Anything in
this Agreement to the contrary notwithstanding, in the event that the Company
shall at any time after the Rights Dividend Declaration Date and prior to the
Distribution Date (i) declare a dividend on the outstanding shares of
Common Stock payable in shares of Common Stock, (ii) subdivide the
outstanding shares of Common Stock, or (iii) combine the outstanding
shares of Common Stock into a smaller number of shares, the number of Rights
associated with each share of Common Stock then outstanding, or issued or 

 

28

 

delivered thereafter but
prior to the Distribution Date, shall be proportionately adjusted so that the
number of Rights thereafter associated with each share of Common Stock
following any such event shall equal the result obtained by multiplying the
number of Rights associated with each share of Common Stock immediately prior
to such event by a fraction the numerator of which shall be the total number of
shares of Common Stock outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of shares of
Common Stock outstanding immediately following the occurrence of such event.

 

(q)  The
failure by the Board of Directors to declare a Person to be an Adverse Person
following such Person becoming the Beneficial Owner of Voting Securities
representing 4.9% or more of the Total Voting Power shall not imply that such
Person is not an Adverse Person or limit the Board of Directors’ right at any
time in the future to declare such Person to be an Adverse Person.

 

Section 12.  Certificate of Adjusted Purchase Price or
Number of Shares.  Whenever an
adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the computations and facts accounting for
such adjustment, (b) promptly file with the Rights Agent, and with each
transfer agent for the Common Stock, a copy of such certificate, and (c) mail
a brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 26 hereof.  The Rights Agent shall be fully protected in
relying on any such certificate and on any adjustment therein contained and
shall have no duty with respect to, and shall not be deemed to have any
knowledge of, such adjustment unless and until it shall have received such
certificate.

 

Section 13.  Consolidation, Merger, or Sale or Transfer
of Assets or Earning Power.

 

(a)  In the event
that, following the Stock Acquisition Date, directly or indirectly, (x) the
Company shall consolidate with, or merge with and into, any other Person (other
than a Subsidiary of the Company in a transaction which complies with Section 11(o) hereof),
and the Company shall not be the continuing or surviving corporation of such
consolidation or merger, (y) any Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o)

 

29

 

hereof) shall consolidate
with, or merge with or into, the Company, and the Company shall be the
continuing or surviving corporation of such consolidation or merger and, in connection
with such consolidation or merger, all or part of the outstanding shares of
Voting Securities shall be changed into or exchanged for stock or other
securities of any other Person or cash or any other property, or (z) the
Company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer), in one transaction or a series of related
transactions, assets or earning power aggregating more than 50% of the assets
or earning power of the Company and its Subsidiaries (taken as a whole) to any
Person or Persons (other than the Company or any Subsidiary of the Company in
one or more transactions each of which complies with Section 11(o) hereof);
then, and in each such case (except as may be contemplated by Section 13(d) hereof),
proper provision shall be made so that:  (i) each
holder of a Right, except as provided in Section 7(e) hereof, shall
thereafter have the right to receive, upon the exercise thereof at the then
current Purchase Price in accordance with the terms of this Agreement, such
number of validly authorized and issued, fully paid, nonassessable, and freely
tradeable shares of Common Stock of the Principal Party (as such term is
hereinafter defined), not subject to any liens, encumbrances, rights of first
refusal, or other adverse claims, as shall be equal to the result obtained by (1) multiplying
the then current Purchase Price by the number of shares of Common Stock for
which a Right is exercisable immediately prior to the first occurrence of a Section 13
Event (or, if a Section 11(a)(ii) Event has occurred prior to the
first occurrence of a Section 13 Event, multiplying the number of such
shares for which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event by the Purchase Price in
effect immediately prior to such first occurrence), and dividing that product
(which, following the first occurrence of a Section 13 Event, shall be
referred to as the “Purchase Price” for each Right and for all purposes of this
Agreement) by (2) 50% of the current market price (determined pursuant to Section 11(d)(i) hereof)
per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party
shall thereafter be liable for, and shall assume, by virtue of such Section 13
Event, all the obligations and duties of the Company pursuant to this
Agreement; (iii) the term “Company” shall thereafter be deemed to refer to
such Principal Party, it being specifically intended that the provisions of Section 11
hereof shall apply only to such Principal Party following the first occurrence
of a Section 13 Event; (iv) such Principal Party shall take such
steps (including, but not limited to, the

 

30

 

reservation of a
sufficient number of shares of its Common Stock) in connection with the
consummation of any such transaction as may be necessary to assure that the
provisions hereof shall thereafter be applicable, as nearly as reasonably may
be, in relation to its shares of Common Stock thereafter deliverable upon the
exercise of the Rights; and (v) the provisions of Section 11(a)(ii) hereof
shall be of no effect following the first occurrence of any Section 13
Event.

 

(b)  “Principal
Party” shall mean (i) in the case of any transaction described in
clause (x) or (y) of the first sentence of Section 13(a),
the Person that is the issuer of any securities into which shares of Common
Stock of the Company are converted in such merger or consolidation and if no
securities are so issued, the Person that is the other party to such merger or
consolidation and (ii) in the case of any transaction described in
clause (z) of the first sentence of Section 13(a), the Person
that is the party receiving the greatest portion of the assets or earning power
transferred pursuant to such transaction or transactions; provided,
however, that in any such case described in the foregoing clause (i) or
(ii) of this Section 13(b), (1) if the Common Stock of such
Person is not at such time and has not been continuously over the preceding
12 month period registered under Section 12 of the Exchange Act, and
such Person is a direct or indirect Subsidiary of another Person the Common
Stock of which is and has been so registered, “Principal Party” shall refer to
such other Person; and (2) in case such Person is a Subsidiary, directly
or indirectly, of more than one Person, the Common Stock of two or more of
which are and have been so registered, “Principal Party” shall refer to whichever
of such Persons is the issuer of the Common Stock having the greatest aggregate
market value.

 

(c)  The Company
shall not consummate any such consolidation, merger, sale, or transfer unless
the Principal Party shall have a sufficient number of authorized shares of its
Common Stock which have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and
unless prior thereto the Company and such Principal Party shall have executed
and delivered to the Rights Agent a supplemental agreement providing for the
terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger or sale of assets mentioned in paragraph (a) of
this Section 13, the Principal Party will

 

(i)  prepare and
file a registration statement under the Securities Act, with respect to the
Rights 

 

31

 

and the securities
purchasable upon exercise of the Rights on an appropriate form, and will use
its best efforts to cause such registration statement to (A) become
effective as soon as practicable after such filing and (B) remain
effective (with a prospectus at all times meeting the requirements of the Act)
until the Expiration Date; and

 

(ii)  will deliver
to holders of the Rights historical financial statements for the Principal
Party and each of its Affiliates which comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.

 

The provisions of this Section 13
shall similarly apply to successive mergers or consolidations or sales or other
transfers.  In the event that a Section 13
Event shall occur at any time after the occurrence of a Section 11(a)(ii) Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).

 

(d)  Notwithstanding
anything in this Agreement to the contrary, Section 13 shall not be
applicable to a transaction described in subparagraphs (x) and (y) of
Section 13(a) if (i) such transaction is consummated with a
Person or Persons (or a wholly-owned subsidiary of any such Person or Persons)
who acquired shares of Common Stock pursuant to a tender offer or exchange
offer for all outstanding shares of Common Stock at a price and on terms
determined to be in accordance with Section 11(a)(ii)(A) hereof, (ii) the
price per share of Common Stock offered in such transaction is not less than
the price per share of Common Stock paid to all holders of shares of Common
Stock whose shares were purchased pursuant to such tender offer or exchange
offer, and (iii) the form of consideration being offered to the remaining
holders of shares of Common Stock pursuant to such transaction is the same as
the form of consideration paid pursuant to such tender offer or exchange
offer.  Upon consummation of any such
transaction contemplated by this Section 13(d), all Rights hereunder shall
expire.

 

Section 14.  Fractional Rights and Fractional Shares.

 

(a)  The Company
shall not be required to issue fractional Rights, except prior to the
Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates that evidence fractional Rights.  In lieu of such fractional 

 

32

 

Rights, there shall be
paid to the registered holders of the Rights Certificates with regard to which
such fractional Rights would otherwise be issuable, an amount in cash equal to
the same fraction of the current market value of a whole Right.  For purposes of this Section 14(a), the
current market value of a whole Right shall be the closing price of the Rights
for the Trading Day immediately prior to the date on which such fractional
Rights would have been otherwise issuable. 
The closing price of the Rights for any day shall be the last sale
price, regular way, or, in case no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New
York Stock Exchange, as reported in the principal consolidated transaction
reporting system with respect to Securities listed on the principal national
securities exchange on which the Rights are listed or admitted to trading, or
if the Rights are not listed or admitted to trading on any national securities
exchange, the last quoted price or, if not so quoted, the average of the high
bid and low asked prices in the over-the-counter market, as reported by NASDAQ
or such other system then in use or, if on any such date the Rights are not
quoted by any such organization, the average of the closing bid and asked
prices as furnished by a professional market maker making a market in the
Rights selected by the Board of Directors of the Company.  If on any such date no such market maker is
making a market in the Rights the fair value of the Rights on such date as
determined in good faith by the Board of Directors of the Company shall be
used.

 

(b)  The Company
shall not be required to issue fractional shares of Common Stock upon exercise
of the Rights or to distribute certificates which evidence fractional shares of
Common Stock.  In lieu of fractional
shares of Common Stock that are not integral multiples of shares of Common
Stock, the Company may 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 same fraction of the current market value of shares of Common
Stock.  For purposes of this Section 14(b),
the current market value of shares of Common Stock shall be the closing price
of a share of Common Stock (as determined pursuant to Section 11(d)(ii) hereof)
for the Trading Day immediately prior to the date of such exercise.

 

(c)  The holder of a
Right by the acceptance of the Rights expressly waives his right to receive any
fractional Rights or any fractional shares upon exercise of a Right, except as
permitted by this Section 14.

 

33

 

(d)  Whenever a
payment for fractional Rights or fractional shares is to be made by the Rights
Agent, the Corporation shall (i) promptly prepare and deliver to the
Rights Agent a certificate setting forth in reasonable detail the facts related
to such payments and the prices and/or formulas utilized in calculating such
payments, and (ii) provide sufficient monies to the Rights Agent in the
form of fully collected funds to make such payments.  The Rights Agent shall be fully protected in
relying upon such a certificate and shall have no duty with respect to, and
shall not be deemed to have knowledge of, any payment for fractional Rights or
fractional shares under any Section of this Agreement relating to the
payment of fractional Rights or fractional shares unless and until the Rights
Agent shall have received such a certificate and sufficient monies.

 

Section 15.  Rights of Action.  All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior
to the Distribution Date, of the Common Stock), without the consent of the
Rights Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action, or
proceeding against the Company to enforce, or otherwise act in respect of, his
right to exercise the Rights evidenced by such Rights Certificate in the manner
provided in such 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 shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.

 

Section 16.  Agreement of Rights Holders.  Every holder of a Right by accepting the same
consents and agrees with the Company and the Rights Agent and with every other
holder of a Right that:

 

(a)  prior to the
Distribution Date, the Rights will be transferable only in connection with the
transfer of Common Stock;

 

34

 

(b)  after the
Distribution Date, the Rights Certificates are transferable only on the
registry books of the Rights Agent if surrendered at the principal office or
offices of the Rights Agent designated for such purposes, duly endorsed or
accompanied by a proper instrument of transfer and with the appropriate forms
and certificates fully executed;

 

(c)  subject to Section 6(a) and
Section 7(f) hereof, the Company and the Rights Agent may deem and
treat the person in whose name a Rights Certificate (or, prior to the
Distribution Date, the associated Common Stock certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby (notwithstanding
any notations of ownership or writing on the Rights Certificates or the
associated Common Stock certificate made by anyone other than the Company or
the Rights Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent, subject to the last sentence of Section 7(e) hereof, shall be
required to be affected by any notice to the contrary; and

 

(d)  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 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;
provided, however, the Company must use its best efforts to have any
such order, decree, or ruling (whether interlocutory or final) lifted or
otherwise overturned as soon as possible.

 

Section 17.  Rights Certificate Holder Not Deemed a
Stockholder.  No holder, as such, of
any Rights Certificate shall be entitled to vote, receive dividends, or be
deemed for any purpose the holder of shares of Common Stock or any other
securities of the Company which may at any time be issuable upon the exercise
of the Rights represented thereby, nor shall anything contained herein or in
any Rights Certificate be construed to confer upon the holder of any Rights
Certificate, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders

 

35

 

(except as provided in Section 25
hereof), or to receive dividends or subscription rights, or otherwise, until
the Right or Rights evidenced by such Rights Certificate shall have been
exercised in accordance with the provisions hereof.

 

Section 18.  Concerning the Rights Agent.

 

(a)  The Company
agrees to pay to the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of the Rights Agent,
its reasonable expenses and counsel fees and disbursements and other
disbursements incurred in the preparation, execution, delivery, amendment,
administration and execution of this Agreement and the exercise and performance
of its duties hereunder.  The Company
also agrees to indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense, incurred without gross negligence, bad faith,
or willful misconduct on the part of the Rights Agent (each as determined by a
final, non-appealable order, judgment, decree or ruling of a court of competent
jurisdiction) for any action taken, suffered or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including,
without limitation, the costs and expenses of defending against any claim of liability
in the premises.  The costs and expenses
incurred in enforcing this right of indemnification shall be paid by the
Company.  The provisions of this Section 18
and Section 20 below shall survive the termination of this Agreement, the
exercise or expiration of the Rights and the resignation or removal of the
Rights Agent.

 

(b)  The Rights
Agent shall be protected and shall incur no liability for or in respect of any
action taken, suffered, or omitted by it in connection with its administration
of this Agreement in reliance upon any Rights Certificate or certificate for
Common Stock or for other securities of the Company, instrument of assignment
or transfer, power of attorney, endorsement, affidavit, letter, notice,
direction, consent, certificate, statement, or other paper or document believed
by it to be genuine and to be signed, executed and, where necessary, verified
or acknowledged, by the proper Person or Persons, or otherwise upon the advice
of counsel as set forth in Section 20. 
The Rights Agent shall not be deemed to have knowledge of any event of
which it was supposed to receive notice thereof hereunder, and the Rights Agent
shall be fully protected and shall incur no liability for failing to take any
action in connection therewith unless and until it has received such notice in
writing.

 

36

 

Section 19.  Merger or Consolidation or Change of Name
of Rights Agent.

 

(a)  Any Person into
which the Rights Agent or any successor Rights Agent may be merged or with
which it may be consolidated, or any Person resulting from any merger or
consolidation to which the Rights Agent or any successor Rights Agent shall be
a party, or any Person succeeding to the business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on
the part of any of the parties hereto; provided, however, that such
Person would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof.  In
case at the time such successor Rights Agent shall succeed to the agency
created by this Agreement, any of the Rights Certificates shall have been
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of a predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor or
in the name of the successor Rights Agent; and in all such cases such Rights
Certificates shall have the full force provided in the Rights Certificates and
in this Agreement.

 

(b)  In case at any
time the name of the Rights Agent shall be changed and at such time any of the
Rights Certificates shall have been countersigned but not delivered, the Rights
Agent may adopt the countersignature under its prior name and deliver Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, the Rights Agent may
countersign such Rights Certificates either in its prior name or in its changed
name; and in all such cases such Rights Certificates shall have the full force
provided in the Rights Certificates and in this Agreement.

 

Section 20.  Duties of Rights Agent.  The Rights Agent undertakes only the duties
and obligations imposed by this 

Agreement (and no implied
duties or obligations) upon the following terms and conditions, by all of which
the Company and the holders of Rights Certificates, by their acceptance
thereof, shall be bound:

 

(a)  The Rights
Agent may consult with legal counsel (who may be legal counsel for the
Company), and the

 

37

 

advice or opinion of such
counsel shall be full and complete authorization and protection to the Rights
Agent, and the Rights Agent shall incur no liability for, or in respect of, any
action taken, suffered or omitted by it and in accordance with such advice or
opinion.

 

(b)  Whenever in the
performance of its duties under this Agreement the Rights Agent shall deem it
necessary or desirable that any fact or matter (including, without limitation,
the identity of any Acquiring Person or Adverse Person and the determination of
“current market price”) be proved or established by the Company prior to
taking, suffering or omitting to take any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed)
may be deemed to be conclusively proved and established by a certificate signed
by the Chairman of the Board, the President, any Vice Chairman or Executive
Vice President, the Chief Financial Officer, or the Secretary of the Company
and delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken, suffered or omitted to
be taken by it under the provisions of this Agreement in reliance upon such
certificate.

 

(c)  The Rights
Agent shall be liable hereunder only for its own gross negligence, bad faith,
or willful misconduct (each as determined by a final, non-appealable order,
judgment, decree or ruling of a court of competent jurisdiction).  Anything to the contrary notwithstanding, in
no event shall the Rights Agent be liable for special, punitive, indirect,
consequential or incidental loss or damage of any kinds whatsoever (including
but not limited to lost profits), even if the Rights Agent has been advised of
the likelihood of such loss or damage. 
Any liability of the Rights Agent under this Rights Agreement will be
limited to the amount of fees paid by the Company to the Rights Agent.

 

(d)  The
Rights Agent shall not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the Rights Certificates or
be required to verify the same (except as to its countersignature on such
Rights Certificates), but all such statements and recitals are and shall be
deemed to have been made by the Company only.

 

(e)  The Rights
Agent shall not be under any responsibility or have any liability in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution and delivery hereof by the Rights Agent) or in respect of the
validity or execution of any Rights Certificate 

 

38

 

(except its
countersignature thereof); nor shall it be responsible for any breach by the
Company of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming null and void
pursuant to Section 7(e)) or any adjustment required under the provisions
of Section 11 or Section 13 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 evidenced by Rights Certificates after actual notice of any
such adjustment); nor shall it by any act hereunder be deemed to make any
representation or warranty as to the authorization or reservation of any shares
of Common Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock will, when so issued,
be validly authorized and issued, fully paid and nonassessable.

 

(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 with respect to
the performance of its duties hereunder from the Chairman of the Board, the
President, any Vice Chairman or Executive Vice President, the Chief Financial
Officer, or the Secretary of the Company, and to apply to such officers for
advice or instructions in connection with its duties, and such instructions
shall be full authorization and protection to the Rights Agent and it shall not
be liable for any action taken, suffered or omitted to be taken by it in
accordance with instructions of any such officer or for any delay in acting
while waiting for such instructions.

 

(h)  The Rights
Agent and any stockholder, director, officer, or employee of the Rights Agent
may buy, sell, or deal in any of the 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.  Nothing herein shall preclude the Rights
Agent from acting in any other capacity for the Company or for any other legal
entity.

 

39

 

(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 shall not be answerable or accountable for any
act, default, neglect, or misconduct of any such attorneys or agents or for any
loss to the Company resulting from any such act, default, neglect, or
misconduct absent gross negligence, bad faith or willful misconduct (each as
determined by a final, non-appealable order, judgment, or decree of a court of
competent jurisdiction) in the selection and continued employment thereof.

 

(j)  No provision of
this Agreement shall require the Rights Agent to expend or risk its own funds
or otherwise incur any financial liability in the performance of any of its
duties hereunder or in the exercise of its rights if there shall be reasonable
grounds for believing that repayment of such funds or adequate indemnification
against such risk or liability is not reasonably assured to it.

 

(k)  If, with
respect to any Rights Certificate surrendered to the Rights Agent for exercise
or transfer, the certificate attached to the form of assignment or form of
election to purchase, as the case may be, has either not been completed or
indicates an affirmative response to clause 1 and/or 2 thereof, the Rights
Agent shall not take any further action with respect to such requested exercise
or transfer without first consulting with the Company.

 

Section 21.  Change of Rights Agent.  The Rights Agent or any successor Rights
Agent may resign and be discharged from its duties under this Agreement upon 30
days’ notice in writing mailed to the Company, and to each transfer agent of
the Common Stock, by registered or certified mail, and to the holders, if any,
of the Rights Certificates by first-class mail. 
The Company may remove the Rights Agent or any successor Rights Agent
upon 10 days’ notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock by
registered or certified mail.  If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent.  If the Company shall fail to make such
appointment within a period of 10 days after giving notice of such removal, or
within a period of 30 days after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), as the case

 

40

 

may be, then any
registered holder of any Rights Certificate may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation or other entity
organized and doing business under the laws of the United States or of any
state of the United States so long as such corporation or entity is either (i) authorized
under such laws to exercise corporate trust or stock transfer powers and is
subject to supervision or examination by federal or state authority, and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000 or the performance of which is guaranteed by a
corporation with a combined capital and surplus of at least $50,000,000 or (ii) an
affiliate of such corporation or entity. 
After appointment, the successor Rights Agent shall be vested with the
same powers, rights, duties, and responsibilities as if it had been originally
named as Rights Agent without further act or deed; but the predecessor Rights
Agent shall deliver and transfer to the successor Rights Agent any property at
the time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose.  Not later than the effective date of any such
appointment, the Company shall file notice thereof in writing with the
predecessor Rights Agent and each transfer agent of the Common Stock.  The Company shall also notify the registered
holders of the Rights Certificates of such appointment by any reasonable means,
including without limitation, by means of including information on such
appointment in a filing under the Exchange Act. 
Failure to give any notice provided for in this Section 21,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of, the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.

 

Section 22.  Issuance of New Rights Certificates.  Notwithstanding any of the provisions of this
Agreement or of the Rights to the contrary, the Company may, at its option,
issue new Rights Certificates evidencing Rights in such form as may be approved
by its Board of Directors to reflect any adjustment or change in the Purchase
Price and the number, kind, or class of shares or other securities or property
purchasable under the Rights Certificates made in accordance with the
provisions of this Agreement.  In
addition, in connection with the issuance or sale of shares of Common Stock
following the Distribution Date and prior to the redemption or expiration of the
Rights, the Company (a) shall, with respect to shares of Common Stock so
issued or sold pursuant to the exercise of stock options or under any employee
plan or arrangement, granted or

 

41

 

awarded on or prior to
the Distribution Date, or upon the exercise, conversion, or exchange of
securities hereinafter issued by the Company, and (b) may, in any other
case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number of
Rights in connection with such issuance or sale; provided, however, that (i) no
such Rights Certificate shall be issued if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate
shall be issued if, and to the extent that, appropriate adjustment shall otherwise
have been made in lieu of the issuance thereof.

 

Section 23.  Redemption and Termination.

 

(a)  The Board of
Directors of the Company, by the affirmative vote of at least a majority of the
members of the Board of Directors, in addition to any other vote required by
law or by the articles of incorporation or bylaws of the Company, may, at its
option, at any time prior to the earlier of (i) the close of business on
the tenth Business Day following notice to the Board of Directors of the
occurrence of the Stock Acquisition Date (or such later date as may be
determined by a majority of the members of the Board of Directors; provided,
however, that such date shall not be extended at such time as the Rights are
not then redeemable), or (ii) the Final Expiration Date, redeem all but
not less than all the then outstanding Rights at a redemption price of $.001
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend, or similar transaction occurring after the date hereof (such
redemption price being hereinafter referred to as the “Redemption Price”);
provided, however, that if, following the occurrence of the Stock Acquisition
Date and following the expiration of the right of redemption hereunder but
prior to any Triggering Event, (i) a Person who is an Acquiring Person
shall have transferred or otherwise disposed of a number of shares of Common
Stock in one transaction or series of transactions, not directly or indirectly
involving the Company or any of its Subsidiaries, such that such Person is
thereafter a Beneficial Owner of 10% or less of the outstanding shares of
Common Stock or Voting Securities representing 10% or less of Total Voting
Power, and (ii) there are not other Persons, immediately following the
occurrence of the event described in clause (i), who are Acquiring Persons,
then the right of redemption shall be reinstated and thereafter be subject to
the provisions of this Section 23. 
Notwithstanding

 

42

 

the foregoing, the Board
of Directors may not redeem any Rights following a determination pursuant to Section 11(a)(ii)(B) that
any Person is an Adverse Person. 
Notwithstanding anything contained in this Agreement to the contrary,
the Rights shall not be exercisable after the first occurrence of a Section 11(a)(ii) Event
until such time as the Company’s right of redemption hereunder has
expired.  The Company may, at its option,
pay the Redemption Price in cash, shares of Common Stock (based on the “current
market price”, as defined in Section 11(d)(i) hereof, of the Common
Stock at the time of redemption), or any other form of consideration deemed
appropriate by the Board of Directors.

 

(b)  Immediately
upon the action of the Board of Directors of the Company ordering the
redemption of the Rights (by the affirmative vote of at least a majority of the
members of the Board of Directors), and without any further action and without
any notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price
for each Right so held.  The Company
shall promptly give public notice of such redemption and prompt written notice
to the Rights Agent; provided, however, the failure to give, or any defect in,
any such notice shall not affect the validity of such redemption.  Within 10 days after such action of the
Board of Directors ordering the redemption of the Rights, the Company shall
mail a notice to all holders of the then outstanding Rights at each holder’s
last address as it appears upon the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the transfer agent for
the Common Stock.  Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.  Each such
notice of redemption will state the method by which the payment of the
Redemption Price will be made.

 

Section 24.  Exchange.

 

(a)  The Board of
Directors of the Company may, at its option, at any time and from time to time
after the first occurrence of a Section 11(a)(ii) Event, exchange all
or part of the then outstanding and exercisable Rights (which shall not include
Rights that have become void pursuant to the provisions of Section 7(e) hereof)
for shares of Common Stock or Common Stock Equivalents, or any combination
thereof, at an exchange ratio of one share of Common Stock, or such number of
Common Stock Equivalents or units representing fractions thereof as would be
deemed to have the same value as one share of Common Stock, per Right,
appropriately adjusted to reflect any stock

 

43

 

split, stock dividend, or
similar transaction occurring after the date hereof (such exchange ratio being
hereinafter referred to as the “Exchange Ratio”).

 

(b)  Immediately
upon the action of the Board of Directors of the Company ordering the exchange
of any Rights pursuant to subsection (a) of this Section 24 and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of shares of Common Stock and/or Common Stock
Equivalents equal to the number of such Rights held by such holder multiplied
by the Exchange Ratio.  The Company shall
promptly give public notice of any such exchange; provided, however,
that the failure to give, or any defect in, such notice shall not affect the
validity of such exchange.  The Company
promptly shall mail a notice of any such exchange to all of the holders of such
Rights at their last addresses as they appear upon the registry books of the
Rights Agent.  Any notice which is mailed
in the manner herein provided shall be deemed given, whether or not the holder
receives the notice.  Each such notice of
exchange will state the method by which the exchange of the shares of Common
Stock and/or common stock equivalents for Rights will be effected and, in the
event of any partial exchange, the number of Rights which will be
exchanged.  Any partial exchange shall be
effected pro rata based on the number of Rights (other than Rights which have
become void pursuant to the provisions of Section 7(e) hereof) held
by each holder of Rights.

 

(c)  In the event
that the number of shares of Common Stock which are authorized by the Company’s
Articles of Incorporation but not outstanding or reserved for issuance for purposes
other than upon exercise of the Rights are not sufficient to permit an exchange
of Rights as contemplated in accordance with this Section 24, the Company
may, at its option, take all such action as may be necessary to authorize
additional shares of Common Stock for issuance upon exchange of the Rights.

 

(d)  The Company
shall not be required to issue fractional shares of Common Stock or to
distribute certificates which evidence fractional shares of Common Stock.  In lieu of such fractional shares of Common
Stock, the Company shall pay to the registered holders of Rights with regard to
which such fractional shares of Common Stock would otherwise be issuable an
amount in cash equal to the same fraction of the value of a whole share of
Common Stock.  For purposes of this Section 24,
the value of a whole share of Common Stock shall be the closing price (as
determined pursuant to the second sentence of Section 

44

 

11(d)(i) hereof) for
the Trading Day immediately prior to the date of exchange pursuant to this Section 24,
and the value of any common stock equivalent shall be deemed to have the same
value as the Common Stock on such date.

 

Section 25.  Notice of Certain Events.

 

(a) 
In case the Company shall propose, at any time after the Distribution Date, (i) to
pay any dividend payable in stock of any class to the holders of Common Stock
or to make any other distribution to the holders of Common Stock (other than a
regular quarterly cash dividend out of earnings or retained earnings of the
Company), or (ii) to offer to the holders of Common Stock rights or
warrants to subscribe for or to purchase any additional shares of Common Stock
or shares of stock of any class or any other securities, rights or options, or (iii) to
effect any reclassification of its Common Stock (other than a reclassification
involving only the subdivision of outstanding shares of Common Stock), or (iv) to
effect any consolidation or merger into or with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o) hereof),
or to effect any sale or other transfer (or to permit one or more of its
Subsidiaries to effect any sale or other transfer), in one transaction or a
series of related transactions of more than 50% of the assets or earning power
of the Company and its Subsidiaries (taken as a whole) to any other Person or
Persons (other than the Company and/or any of its Subsidiaries in one or more
transactions each of which complies with Section 11(o) hereof), or (v) to
effect the liquidation, dissolution, or winding up of the Company, then, in
each such case, the Company shall give to each holder of a Rights Certificate
in accordance with Section 26 hereof, a notice of such proposed action, which
shall specify the record date for the purposes of such stock dividend,
distribution of rights or warrants, or the date on which such reclassification,
consolidation, merger, sale, transfer, liquidation, dissolution, or winding up
is to take place and the date of participation therein by the holders of the
shares of Common Stock, if any such date is to be fixed, and such notice shall
be so given in the case of any action covered by clause (i) or (ii) above
at least 20 days prior to the record date for determining holders of the shares
of Common Stock for purposes of such action, and in the case of any such other
action, at least 20 days prior to the date of the taking of such proposed
action or the date of participation therein by the holders of the shares of
Common Stock whichever shall be the earlier.

 

45

 

(b) 
In case any Section 11(a)(ii) Event shall occur, then, (i) the
Company shall as soon as practicable thereafter give to each holder of a Rights
Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights under Section 11(a)(ii) hereof,
and (ii) all references in the preceding paragraph to Common Stock shall
be deemed thereafter to refer to, if appropriate, Common Stock Equivalents.

 

Section 26.  Notices.  Notices or demands authorized by this
Agreement to be given or made by the Rights Agent or by the holder of any
Rights Certificate to or on the Company shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Rights Agent) or by facsimile transmission as
follows:

 

	
   

  	
   

  	
  VIST Financial Corp.

  
	
   

  	
   

  	
  1240 Broadcasting Road

  
	
   

  	
   

  	
  Wyomissing,
  Pennsylvania 19610

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  Jenette L. Eck

  
	
   

  	
   

  	
   

  	
  Corporate
  Secretary

  
	
   

  	
   

  	
  Facsimile No.:

  	
  (610) 603-2050

  
	
   

  	
   

  	
   

  
	
   

  	
  with a copy to:

  	
   

  	
  Stevens & Lee,
  P.C.

  
	
   

  	
   

  	
  111 North Sixth Street

  
	
   

  	
   

  	
  P.O. Box 679

  
	
   

  	
   

  	
  Reading, Pennsylvania
  19603-0679

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:

  	
  David W. Swartz

  
	
   

  	
   

  	
  Facsimile No.: (610)
  988-0815

  
						

 

Subject to the provisions
of Section 21, any notice or demand authorized by this Agreement to be
given or made by the Company or by the holder of any Rights Certificate to or
on the Rights Agent shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing
with the Company) or by facsimile transmission as follows:

 

	
   

  	
   

  	
  American Stock Transfer &
  Trust Company

  
	
   

  	
   

  	
  59 Maiden Lane

  
	
   

  	
   

  	
  Plaza Level

  
	
   

  	
   

  	
  New York, New York

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:  Herbert Lemmer

  

 

46

 

	
   

  	
   

  	
  Facsimile No.:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  American Stock Transfer &
  Trust Company

  
	
   

  	
   

  	
  59 Maiden Lane

  
	
   

  	
   

  	
  Plaza Level

  
	
   

  	
   

  	
  New York, New York

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:  Wilbert Myles

  
	
   

  	
   

  	
  Facsimile No.:  (718) 921-8247

  

 

Notices or demands
authorized by this Agreement to be given or made by the Company or the Rights
Agent to the holder of any Rights Certificate (or, if prior to the Distribution
Date, to the holder of certificates representing shares of Common Stock) shall
be sufficiently given or made if sent by first-class mail, postage prepaid,
addressed to such holder at the address of such holder as shown on the registry
books of the Company.

 

Section 27.  Supplements and Amendments.  Prior to the Distribution Date and subject to
the last sentence of this Section 27, the Company, by the affirmative vote
of at least a majority of the members of the Board of Directors, in addition to
any other vote required by law or by the articles of incorporation or bylaws of
the Company, may, and the Rights Agent shall, if the Company so directs but
subject to the other provisions of this Section, supplement or amend any provision
of this Agreement without the approval of any holders of certificates
representing shares of Common Stock. 
From and after the Distribution Date and subject to the last sentence of
this Section 27, the Company, by the affirmative vote of at least a majority
of the members of the Board of Directors in addition to any other vote required
by law or by the articles of incorporation or bylaws of the Company, and, the
Rights Agent shall, if the Company so directs but subject to the other
provisions of this Section, supplement or amend this Agreement without the
approval of any holders of Rights Certificates in order (i) to cure any
ambiguity, (ii) to correct or supplement any provision contained herein
which may be defective or inconsistent with any other provisions herein, or (iii) to
change or supplement the provisions hereunder in any manner which the Company
may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates.  Upon the delivery of a certificate from an
appropriate officer of the Company which states that the proposed supplement or
amendment is in compliance with the terms of this Section 27, and provided
such supplement or amendment

 

47

 

does not change or
increase the Rights Agent’s rights, duties, liabilities or obligations, the
Rights Agent shall execute such supplement or amendment.

 

Section 28.  Successors.  All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.

 

Section 29.  Determinations and Actions by the Board of
Directors; No Waiver.  For all
purposes of this Agreement, any calculation of the number of shares of Voting
Securities outstanding at any particular time, including for purposes of
determining the particular percentage of such outstanding shares of Voting
Securities of which any Person is the Beneficial Owner, shall be made in accordance
with the last sentence of Rule 13d-3(d)(1)(i) of the General Rules and
Regulations under the Exchange Act as in effect on the date hereof.  The Board of Directors of the Company shall
have the exclusive power and authority to administer this Agreement and to
exercise all rights and powers specifically granted to the Board of Directors
or to the Company, or as may be necessary or advisable in the administration of
this Agreement, including, without limitation, the right and power to (i) interpret
the provisions of this Agreement, and (ii) make all determinations deemed
necessary or advisable for the administration of this Agreement (including (i) a
determination as to the identity of the Affiliates and Associates of any
person, (ii) a determination as to the extent of the Beneficial Ownership
of any Person, and (iii) a determination to redeem or not redeem the
Rights or to amend the Agreement).  All
such actions, calculations, interpretations, and determinations (including, for
purposes of clause (y) below, all omissions with respect to the foregoing)
which are done or made by the Board of Directors in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
the Rights and all other parties, and (y) not subject the Board of
Directors of the Company to any liability to the holders of the Rights.  Nothing contained herein shall be deemed to
waive or abrogate the provisions of any statute, regulation or other provision
of law applicable to the Company.  The
Rights Agent shall always be entitled to assume that the Company’s Board of
Directors acted in good faith and shall be fully protected and incur no
liability in reliance thereon.

 

Section 30.  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
registered holders of the Rights Certificates (and, prior to the Distribution
Date, 

 

48

 

registered holders
of the Common Stock) any legal or equitable right, remedy, or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Rights Agent, and the registered holders of the Rights
Certificates (and, prior to the Distribution Date, registered holders of the
Common Stock).

 

Section 31.  Severability.  If any term, provision, covenant, or
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void, or unenforceable, the remainder of the
terms, provisions, covenants, and restrictions of this Agreement shall remain
in full force and effect and shall in no way be affected, impaired, or
invalidated; provided, however, that notwithstanding anything in this Agreement
to the contrary, if any such term, provision, covenant or restriction is held
by such court or authority to be invalid, void, or unenforceable and the Board
of Directors of the Company determines in its good faith judgment that severing
the invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23
hereof shall be reinstated and shall not expire until the close of business on
the tenth day following the date of such determination by the Board of
Directors.  Without limiting the
foregoing, if any provision requiring that a determination be made by less than
the entire Board is held by a court of competent jurisdiction or other
authority to be invalid, void, or unenforceable, such determination shall then
be made by the entire Board.

 

Section 32.  Governing Law.  This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the Commonwealth of Pennsylvania and for all purposes shall be governed
by and construed in accordance with the laws of the Commonwealth applicable to
contracts made and to be performed entirely within the Commonwealth; provided,
however, that all provisions regarding the rights, duties and obligations of the
Rights Agent shall be governed by and construed in accordance with the laws of
the State of New York applicable to contracts made and to be performed entirely
within such State.

 

Section 33.  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 but one
and the same instrument.

 

49

 

Section 34.  Descriptive Headings.  Descriptive headings of the several Sections
of this Agreement are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.

 

IN WITNESS WHEREOF, the
parties hereto have caused this Agreement to be duly executed and their
respective corporate seals to be hereunto affixed and attested, all as of the
day and year first above written.

 

	
   

  	
  VIST FINANCIAL
  CORP.

  
	
   

  	
   

  
	
   

  	
  By

  	
  /s/ Robert D.
  Davis

  	
   

  
	
   

  	
   

  	
  President

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
  /s/ Jenette L.
  Eck

  	
   

  
	
   

  	
   

  	
  Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
  AMERICAN STOCK
  TRANSFER & TRUST

  COMPANY

  
	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Herbert Lemmer

  	
   

  
	
   

  	
   

  	
  Authorized
  Representative

  	
   

  
	
   

  	
   

  
						

 

50

 

Exhibit A

 

[Form of
Rights Certificate)

 

	
  Certificate No. R-

  	
                        Rights

  

 

NOT EXERCISABLE AFTER
SEPTEMBER 19, 2011, OR EARLIER IF REDEEMED OR EXCHANGED BY THE COMPANY.  THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE
OPTION OF THE COMPANY, AT $.       PER RIGHT ON
THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. 
UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING
PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT)
AND ANY SUBSEQUENT HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID. [THE
RIGHTS REPRESENTED BY THIS RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY
A PERSON WHO WAS OR BECAME AN (ACQUIRING) (ADVERSE) PERSON OR AN AFFILIATE OR
ASSOCIATE OF AN (ACQUIRING) (ADVERSE) PERSON (AS SUCH TERMS ARE DEFINED IN THE
RIGHTS AGREEMENT).  ACCORDINGLY, THIS
RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND
VOID UNDER THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH
AGREEMENT.](1)

 

Rights Certificate

 

VIST FINANCIAL
CORP.

 

This certifies that
                                        ,
or registered assigns, is the registered owner of the number of Rights set
forth above, each of which entitles the owner thereof, subject to the terms,
provisions and conditions of the Amended and Restated Rights Agreement, Rights
Agreement, dated as of March 3, 2008 (the “Rights Agreement”), between
VIST Financial Corp., a Pennsylvania business corporation (the “Company”), and
American Stock Transfer & Trust Company, a New York corporation (the “Rights
Agent), to purchase from the Company at any time prior to 5:00 P.M. (New
York City time) on September 19, 2011, at the office or offices of the
Rights Agent designated for such purpose, or its successors as Rights Agent,
one share of Common Stock (the “Common Stock”) of the Company, at a purchase
price of $         per share (the “Purchase
Price”), upon presentation and

 

 

A-1

 

(1)  The portion of
the legend in brackets shall be inserted only if applicable and shall replace
the preceding sentence.

 

A-2

 

surrender of this Rights
Certificate with the Form of Election to Purchase and related Certificate
duly executed.  The number of Rights
evidenced by this Rights Certificate (and the number of shares which may be
purchased upon exercise thereof) set forth above, and the Purchase Price per
share set forth above, are the number and Purchase Price as of
                  ,
based on the Common Stock as constituted at such date.  The Company reserves the right to require
prior to the occurrence of a Triggering Event (as defined in the Rights
Agreement) that a number of Rights be exercised so that only whole shares of
Common Stock will be issued.

 

Upon the occurrence of a Section 11(a)(ii) Event
(as defined in the Rights Agreement), if the Rights evidenced by this Rights
Certificate are beneficially owned by (i) an Acquiring Person, an Adverse
Person, or an Affiliate or Associate of any such Person (as such terms are defined
in the Rights Agreement), (ii) a transferee of any such Acquiring Person,
Adverse Person, Associate, or Affiliate, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of a person who,
after such transfer, became an Acquiring Person, an Adverse Person, or an
Affiliate or Associate of any such Person, such Rights shall become null and
void and no holder hereof shall have any right with respect to such Rights from
and after the occurrence of such Section 11(a)(ii) Event.

 

As provided in the Rights
Agreement, the Purchase Price and the number and kind of shares of Common Stock
or other securities which may be purchased upon the exercise of the Rights
evidenced by this Rights Certificate are subject to modification and adjustment
upon the happening of certain events, including a Triggering Event.

 

This Rights Certificate
is subject to all of the terms, provisions, and conditions of the Rights
Agreement, which terms, provisions, and conditions are hereby incorporated
herein by reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties, and immunities hereunder of the Rights Agent, the
Company, and the holders of the Rights Certificates, which limitations of
rights include the temporary suspension of the exercisability of such Rights
under the specific circumstances set forth in the Rights Agreement.  Copies of the Rights Agreement are on file at
the above-mentioned office of the Rights Agent and are also available upon
written request to the Rights Agent.

 

A-3

 

This Rights Certificate,
with or without other Rights Certificates, upon surrender at the office of the
Rights Agent designated for such purpose, may be exchanged for another Rights
Certificate or Rights Certificates of like tenor and date evidencing Rights
entitling the holder to purchase a like aggregate number of shares of Common
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase.  If this Rights Certificate shall be exercised
in part, the holder shall be entitled to receive upon surrender hereof another
Rights Certificate or Rights Certificates for the number of whole Rights not
exercised.

 

Subject to the provisions
of the Rights Agreement, the Rights evidenced by this Certificate (i) may
(unless the Board of Directors shall have made a determination pursuant to Section 11(a)(ii)(B) of
the Rights Agreement that a Person is an Adverse Person) be redeemed by the
Company at its option at a redemption price of $.001 per Right at any time
prior to the earlier of the close of business on (a) the tenth business
day following notice to the Board of Directors of the occurrence of the Stock
Acquisition Date (as such time period may be extended pursuant to the Rights
Agreement), and (b) the Final Expiration Date.

 

No fractional shares of
Common Stock will be issued upon the exercise of any Right or Rights evidenced
hereby (other than fractions which are integral multiples of shares of Common
Stock, which may, at the election of the Company, be evidenced by depositary
receipts), but in lieu thereof a cash payment will be made, as provided in the
Rights Agreement.

 

No holder of this Rights
Certificate shall be entitled to vote or receive dividends or be deemed for any
purpose the holder of shares of Common Stock or of any other securities of the
Company which may at any time be issuable on the exercise hereof, nor shall
anything contained in the 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 Rights Agreement), or
to receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by this Rights Certificate shall have been exercised as
provided in the Rights Agreement.

 

A-4

 

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.

Dated as of
                        ,
20    

 

	
   

  	
  VIST FINANCIAL CORP.

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
  Secretary

  
	
   

  	
   

  
	
  Countersigned:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  
	
  Authorized
  Signature

  	
   

  
					

 

A-5

 

[Form of
Reverse Side of Rights Certificate]

 

FORM OF
ASSIGNMENT

 

(To be executed by
the registered holder if such

holder desires to
transfer the Rights Certificate.)

 

FOR VALUE RECEIVED
                                                                            
hereby sells, assigns and transfers unto                                

 

(Please print name and
address of transferee)

 

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

appoint
                                        
Attorney, to transfer the within Rights Certificate on the books of the
within-named Company, with full power of substitution.

 

Dated:                                      ,
20    

 

	
   

  	
   

  
	
   

  	
  Signature

  
	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  
				

 

Signatures must be
guaranteed by a participant in a Securities Transfer Association, Inc.
recognized Signature Guarantee Medallion Program.

 

A-6

 

Certificate

 

The undersigned hereby
certifies by checking the appropriate boxes that:

 

(1)           this Rights Certificate [  ]
is [  ] is not being sold, assigned and transferred by or on behalf
of a Person who is or was an Acquiring Person, an Adverse Person, or an
Affiliate or Associate of any such Person (as such terms are defined pursuant
to the Rights Agreement);

 

(2)           after due inquiry and to the best
knowledge of the undersigned, it [  ] did [  ] did not
acquire the Rights evidenced by this Rights Certificate from any Person who is,
was or subsequently became an Acquiring Person, an Adverse Person, or an
Affiliate or Associate of any such Person.

	
   

  	
   

  
	
  Dated:
                          ,
  20     

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  

 

NOTICE

 

The signature to the
foregoing Assignment and Certificate must correspond to the name as written
upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.

 

A-7

 

FORM OF
ELECTION TO PURCHASE

 

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

 

To:  VIST FINANCIAL CORP.:

 

The undersigned hereby
irrevocably elects to exercise
                            
Rights represented by this Rights Certificate to purchase the shares of Common
Stock issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:

 

Please insert social
security

or other identifying
number

 

 

(Please print name and
address)

 

 

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:

 

Please insert social
security

or other identifying
number

 

 

(Please print name and
address)

 

 

 

 

Dated:
                                ,
20   

 

 

	
   

  	
  Signature

  
	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  
				

 

Signatures must be
guaranteed by a member firm of a registered national securities exchange, a
member of the National Association of Securities Dealers, Inc., or a 

 

A-8

 

commercial bank or trust
company having an office or correspondent in the United States.

 

A-9

 

Certificate

 

The undersigned hereby
certifies by checking the appropriate boxes that:

 

(1)           the Rights evidenced by this Rights
Certificate [  ] are [  ] are not being exercised by or on
behalf of a Person who is or was an Acquiring Person, an Adverse Person or an
Affiliate or Associate of any such Person (as such terms are defined pursuant
to the Rights Agreement);

 

(2)           after due inquiry and to the best
knowledge of the undersigned, it [  ] did [  ] did not
acquire the Rights evidenced by this Rights Certificate from any Person who is,
was or became an Acquiring Person, an Adverse Person or an Affiliate or
Associate of any such Person.

 

	
  Dated:
                            ,
  20

  	
   

  
	
   

  	
  Signature

  
	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  

 

NOTICE

 

The signature to the
foregoing Election to Purchase and Certificate must correspond to the name as
written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.

 

A-10

 

Exhibit B

 

SUMMARY OF RIGHTS
TO PURCHASE

COMMON STOCK

 

On September 19,
2001, the Board of Directors of VIST Financial Corp. (formerly known as
Leesport Financial Corp. and First Leesport Bancorp, Inc.) (the “Company”)
declared a dividend distribution of one right (a “Right”) for each outstanding
share of the Company’s common stock, par value $5.00 per share (the “Common
Stock”), to shareholders of record at the close of business on October 10,
2001.  The Board of Directors amended and
restated the terms and conditions of the Rights as of March 3, 2008.  Each Right entitles the registered holder to
purchase from the Company one share of Common Stock, at a purchase price of
$70.00, subject to adjustment.  The
description and terms of the Rights are set forth in the Amended and Restated
Rights Agreement, dated as of March 3, 2008, (the “Rights Agreement”)
between the Company and American Stock Transfer & Trust Company, as
Rights Agent.

 

Initially, the Rights
will be evidenced by Common Stock certificates representing shares then
outstanding, and no separate Rights certificates will be distributed.  The Rights will separate from the Common
Stock and be distributed (the “Distribution Date”) upon the earlier of (i) 10
business days following a public announcement that a person or group of affiliated
or associated persons (an “Acquiring Person”) has acquired 15% or more of the
outstanding shares of Common Stock or voting securities representing 15% or
more of the total voting power of the Company; (ii) 10 business days (or
such later date as the Board of Directors shall determine) following the
commencement of a tender offer or exchange offer that would result in a person
or group acquiring 15% or more of such outstanding shares of Common Stock or
total voting power; or (iii) 10 business days following the determination
by the Board of Directors that, with respect to any person who, alone or
together with his affiliates or associates, has acquired 4.9% or more of such
outstanding shares of Common Stock or total voting power of the Company, such
beneficial ownership by such person is intended in the view of the Board of
Directors to cause the Company to take actions to provide short-term financial
gain to such person under circumstances not in the best long-term interests of
the Company and its other shareholders (any such person referred to as an “Adverse
Person”).

 

B-1

 

Until the Distribution
Date, the Rights will be evidenced by the Common Stock certificates and will be
transferred with and only with such Common Stock certificates, and the
surrender for transfer of any certificate for Common Stock outstanding will
also constitute the transfer of the Rights associated with the Common Stock
represented by such certificate.  The
Rights are not exercisable until the Distribution Date and will expire at the
close of business on September 19, 2011, unless earlier redeemed as
described below.

 

After the Rights become
exercisable, upon the occurrence of certain events specified in the Rights
Agreement, including the acquisition of the Company in a merger transaction or
a sale of 50% or more of the Company’s assets or earning power, each holder of
a Right will thereafter have the right to receive upon exercise of the Right,
Common Stock (or common stock of the acquiring company depending on the type of
transaction) having a market value equal to twice the exercise price of the
Right.  If the Rights become exercisable,
all Rights beneficially owned by an Acquiring Person or an Adverse Person will
be null and void.  Rights are not
exercisable under any circumstances until such time as the Rights are no longer
redeemable as described below.

 

For example, at an
exercise price of $70 per Right, each Right not owned by an Acquiring Person or
an Adverse Person following an acquisition of the Company in a merger
transaction in which the Company is the legally surviving entity would entitle
its holder to purchase $140 worth of Common Stock (based on the lowest closing
price over the prior twelve months) for $70. 
Assuming that the lowest closing price of the Common Stock during the
prior twelve months was $17.50, the holder of each valid Right would be
entitled to purchase eight shares of Common Stock for $70.

 

At any time until ten
business days following the Stock Acquisition Date, the Company may, by action
of a majority of the Board of Directors, redeem the Rights at a price of $.001
per Right.  At any time prior to the date
the Rights would otherwise become nonredeemable, a majority of the Board of
Directors may extend the period for redemption.

 

Immediately upon the
action of the Board of Directors ordering redemption of the Rights, the Rights
will terminate and the only right of the holders of Rights will be to receive
the $.001 redemption price.  The Board of
Directors may not redeem the Rights following a determination that any person
is an Adverse Person.

 

B-2

 

Until exercised, a Right
will not entitle the holder to any voting or dividend rights.  While the distribution of the Rights will not
be taxable to shareholders or to the Company, shareholders may, depending upon
the circumstances, recognize taxable income in the event that the Rights become
exercisable for Common Stock (or other consideration) of the Company or for
common stock of the acquiring company as set forth above, or are exchanged as
provided in the preceding paragraph.

 

Other than those
provisions relating to the principal economic terms of the Rights, any of the
provisions of the Rights Agreement may be amended prior to the Distribution
Date.  After the Distribution Date, the
provisions of the Rights Agreement may be amended by the board in order to cure
any ambiguity, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person or Adverse
Person or an affiliate or associate of any such person), or to shorten or
lengthen any time period under the Rights Agreement; however, no amendment to
adjust the time period governing redemption can be made at such time as the
Rights are not redeemable.

 

A copy of the Rights
Agreement will be filed with the Securities and Exchange Commission as an Exhibit to
Company’s Current Report on Form 8-K dated March 3, 2008.  A copy of the Rights Agreement is available
free of charge from the Company.  This
summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Rights Agreement, which is
incorporated herein by reference.

 

B-3Exhibit 4.1

 

SENIOR SECURED NOTE INDENTURE

 

among

 

VISTA GOLD
CORP.

 

and

 

Minera
Paredones Amarillos S.A. de C.V., as Guarantor

 

and

 

HSBC BANK
USA, N.A. , as Trustee

 

and

 

HSBC México, S.A. de C.V.,
Institución de Banca Múltiple, Grupo

Financiero HSBC, División Fiduciaria, as Collateral Agent

 

PROVIDING
FOR THE ISSUE OF

Senior
Secured Notes

of Vista
Gold Corp.

 

Made as
of March 4, 2008

 

 

TABLE OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  
	
  1.

  	
  DEFINITIONS

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  1.1

  	
  Definitions and Interpretation

  	
  1

  
	
   

  	
  1.2

  	
  Meaning of “outstanding” for Certain Purposes

  	
  7

  
	
   

  	
  1.3

  	
  [Intentionally Deleted]

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  THE NOTES

  	
  7

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  2.1

  	
  Designation, Terms and Form of Notes

  	
  7

  
	
   

  	
  2.2

  	
  Payment of Principal

  	
  8

  
	
   

  	
  2.3

  	
  Interest

  	
  8

  
	
   

  	
  2.4

  	
  Prescription

  	
  9

  
	
   

  	
  2.5

  	
  Issue of Notes

  	
  9

  
	
   

  	
  2.6

  	
  Trustee’s Reliance

  	
  9

  
	
   

  	
  2.7

  	
  Execution of Notes

  	
  10

  
	
   

  	
  2.8

  	
  Authentication by the Trustee

  	
  10

  
	
   

  	
  2.9

  	
  Registration of Notes

  	
  10

  
	
   

  	
  2.10

  	
  Person Entitled to Payment

  	
  11

  
	
   

  	
  2.11

  	
  Replacement of Notes

  	
  12

  
	
   

  	
  2.12

  	
  Exchange of Notes

  	
  12

  
	
   

  	
  2.13

  	
  Payment of Interest and Principal

  	
  13

  
	
   

  	
  2.14

  	
  [Intentionally Deleted]

  	
  13

  
	
   

  	
  2.15

  	
  Taxes

  	
  13

  
	
   

  	
  2.16

  	
  Redemption and Prepayment

  	
  14

  
	
   

  	
  2.17

  	
  Legends

  	
  15

  
	
   

  	
  2.18

  	
  Transfer

  	
  16

  
	
   

  	
   

  	
   

  
	
  3.

  	
  CONVERSION OF NOTES

  	
  17

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  3.1

  	
  Conversion Privilege of the Noteholder

  	
  17

  
	
   

  	
  3.2

  	
  Conversion Privilege of VGZ

  	
  17

  
	
   

  	
  3.3

  	
  Notice of Conversion

  	
  17

  
	
   

  	
  3.4

  	
  Manner of Exercise of Right to Convert

  	
  18

  
	
   

  	
  3.5

  	
  Adjustment of Conversion Price

  	
  18

  
	
   

  	
  3.6

  	
  No Requirement to Issue Fractional Shares

  	
  23

  
	
   

  	
  3.7

  	
  Corporation to Reserve Common Shares

  	
  24

  
	
   

  	
  3.8

  	
  Taxes and Charges on Conversion

  	
  24

  
	
   

  	
  3.9

  	
  Cancellation of Converted Notes

  	
  24

  
	
   

  	
  3.10

  	
  Certificate as to Adjustment

  	
  24

  
	
   

  	
  3.11

  	
  Notice of Special Matters

  	
  25

  
	
   

  	
  3.12

  	
  Obligations of VGZ Regarding Calculations

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  SECURITY

  	
  25

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  4.1

  	
  Security

  	
  25

  

 

 

	
   

  	
  4.2

  	
  Title to Pledged Assets

  	
  25

  
	
   

  	
  4.3

  	
  Further Assurances

  	
  26

  
	
   

  	
  4.4

  	
  Registration

  	
  27

  
	
   

  	
  4.5

  	
  Security Valid Irrespective of Advance

  	
  27

  
	
   

  	
  4.6

  	
  Final Discharge

  	
  27

  
	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
  SENIORITY

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  5.1

  	
  Seniority

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
  COVENANTS OF VGZ AND THE GUARANTOR

  	
  28

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  6.1

  	
  General Covenants

  	
  28

  
	
   

  	
  6.2

  	
  Trustee’s Remuneration and Expenses

  	
  29

  
	
   

  	
  6.3

  	
  Trustee to Give Notice of Default

  	
  30

  
	
   

  	
  6.4

  	
  Performance of Covenants by Trustee

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
  DEFAULT AND ENFORCEMENT

  	
  30

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  7.1

  	
  Events of Default

  	
  30

  
	
   

  	
  7.2

  	
  Acceleration on Default

  	
  31

  
	
   

  	
  7.3

  	
  Waiver of Default or Breach

  	
  32

  
	
   

  	
  7.4

  	
  Proceedings by the Trustee

  	
  32

  
	
   

  	
  7.5

  	
  Suits by Noteholders

  	
  33

  
	
   

  	
  7.6

  	
  Application of Moneys Received by Trustee

  	
  33

  
	
   

  	
  7.7

  	
  Distribution of Proceeds

  	
  34

  
	
   

  	
  7.8

  	
  Trustee Appointed Attorney

  	
  34

  
	
   

  	
  7.9

  	
  Remedies Cumulative

  	
  34

  
	
   

  	
  7.10

  	
  Judgment Against VGZ

  	
  34

  
	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
  SATISFACTION AND DISCHARGE

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  8.1

  	
  Cancellation and Destruction

  	
  35

  
	
   

  	
  8.2

  	
  Non-Presentation of Notes

  	
  35

  
	
   

  	
  8.3

  	
  Repayment of Unclaimed Moneys to VGZ

  	
  35

  
	
   

  	
  8.4

  	
  Release from Covenants

  	
  35

  
	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
  CONSOLIDATION, MERGER, CONVEYANCE
  OR TRANSFER

  	
  36

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  9.1

  	
  Certain Requirements in Respect of Merger, etc.

  	
  36

  
	
   

  	
  9.2

  	
  Vesting of Powers in Successor

  	
  36

  
	
   

  	
  9.3

  	
  Execution of Supplemental Indenture

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  MEETINGS OF NOTEHOLDERS

  	
  37

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  10.1

  	
  Right to Convene Meeting

  	
  37

  
	
   

  	
  10.2

  	
  Notice of Meeting of Noteholders

  	
  37

  
	
   

  	
  10.3

  	
  Quorum

  	
  37

  
	
   

  	
  10.4

  	
  Chairman

  	
  38

  
	
   

  	
  10.5

  	
  Power to Adjourn

  	
  38

  

 

ii

 

	
   

  	
  10.6

  	
  Show of Hands

  	
  38

  
	
   

  	
  10.7

  	
  Poll

  	
  38

  
	
   

  	
  10.8

  	
  Voting

  	
  38

  
	
   

  	
  10.9

  	
  Record Dates

  	
  39

  
	
   

  	
  10.10

  	
  Proxies

  	
  39

  
	
   

  	
  10.11

  	
  Resolution in Lieu of Meeting

  	
  39

  
	
   

  	
  10.12

  	
  VGZ and Trustee may be Represented

  	
  39

  
	
   

  	
  10.13

  	
  Powers Exercisable by Special Resolution

  	
  40

  
	
   

  	
  10.14

  	
  Meaning of “Special Resolution”

  	
  41

  
	
   

  	
  10.15

  	
  Minutes

  	
  42

  
	
   

  	
  10.16

  	
  Effect of Resolutions

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  SUPPLEMENTAL INDENTURES

  	
  42

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  11.1

  	
  Provision for Supplemental Indentures for Certain Purposes

  	
  42

  
	
   

  	
  11.2

  	
  Binding Effect of Modifications

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  CONCERNING THE TRUSTEE

  	
  43

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  12.1

  	
  Conditions Precedent to Trustee’s Obligation to Act

  	
  43

  
	
   

  	
  12.2

  	
  Requirement for Funds and Indemnity

  	
  44

  
	
   

  	
  12.3

  	
  Evidence

  	
  44

  
	
   

  	
  12.4

  	
  Experts and Advisers

  	
  44

  
	
   

  	
  12.5

  	
  Documents, Moneys, etc. Held by Trustee

  	
  45

  
	
   

  	
  12.6

  	
  Action by Trustee to Protect Interests

  	
  45

  
	
   

  	
  12.7

  	
  Trustee not Required to give Security

  	
  45

  
	
   

  	
  12.8

  	
  Protection of Trustee

  	
  45

  
	
   

  	
  12.9

  	
  Replacement of Trustee

  	
  46

  
	
   

  	
  12.10

  	
  Trustee Not Bound to Act

  	
  47

  
	
   

  	
  12.11

  	
  Conflict of Interest

  	
  47

  
	
   

  	
  12.12

  	
  Delegation of Powers

  	
  47

  
	
   

  	
  12.13

  	
  Acceptance of Trust

  	
  47

  
	
   

  	
  12.14

  	
  Privacy Issues

  	
  48

  
	
   

  	
  12.15

  	
  Environmental Indemnity

  	
  48

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  GUARANTEE

  	
  49

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  13.1

  	
  Guarantee

  	
  49

  
	
   

  	
  13.2

  	
  Subordination of Claims and Postponement of
  Subordination

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  MISCELLANEOUS

  	
  52

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Manner of Giving Notice

  	
  52

  
	
   

  	
  14.2

  	
  Day not a Business Day

  	
  54

  
	
   

  	
  14.3

  	
  Execution and Effect of Restated Indenture

  	
  54

  
	
   

  	
  14.4

  	
  Consolidations

  	
  54

  
	
   

  	
  14.5

  	
  Counterparts

  	
  54

  
	
   

  	
  14.6

  	
  Severability

  	
  54

  
	
   

  	
  14.7

  	
  Headings for Reference Only and Preamble

  	
  54

  

 

iii

 

	
   

  	
  14.8

  	
  Successors and Assigns

  	
  54

  
	
   

  	
  14.9

  	
  Time of the Essence

  	
  55

  
	
   

  	
  14.10

  	
  Governing Law

  	
  55

  
	
   

  	
  14.11

  	
  Entire Agreement

  	
  55

  

 

Schedule “A” – Form of Notes

 

iv

 

VISTA GOLD CORP.

 

Senior Secured Note Indenture

 

THIS INDENTURE is made as of
the 4th day of March, 2008,

 

	
  BETWEEN:

  	
   

  	
  VISTA GOLD CORP. (“VGZ”) ;

  
	
   

  	
   

  	
   

  
	
  AND:

  	
   

  	
  MINERA PAREDONES AMARILLOS S.A.
  DE C.V. (“GUARANTOR”) ;

  
	
   

  	
   

  	
   

  
	
  AND:

  	
   

  	
  HSBC BANK USA, N.A., a national association (the “Trustee”).

  
	
   

  	
   

  	
   

  
	
  AND:

  	
   

  	
  HSBC México,
  S.A. de C.V., Institución de Banca Múltiple, Grupo Financiero HSBC,
  División Fiduciaria, an entity under the laws of
  Mexico (the “Collateral Agent”).

  

 

WITNESSETH THAT:

 

WHEREAS VGZ is authorized to
create and issue the Notes as herein provided;

 

WHEREAS the Trustee has full
power and authority to execute this Indenture and to accept and execute the
rights, powers, duties, obligations and responsibilities and any trusts herein
imposed upon it;

 

NOW THEREFORE THIS SECURED NOTE INDENTURE WITNESSETH THAT the parties hereto hereby agree and declare as follows:

 

1.                   DEFINITIONS

 

1.1                       Definitions and Interpretation

 

In
this Indenture, words in the singular number include the plural and words in
the plural number include the singular, and the masculine includes the feminine
and neuter. In this Indenture, except where the context otherwise requires:

 

“Acceleration Event” has the meaning
ascribed thereto in section 3.2;

 

“Adjusted Current Market Price” has the
meaning ascribed thereto in section 3.5(a);

 

“Affiliate” of any specified Person means
any other Person which directly or indirectly through one or more
intermediaries controls, or is controlled by, or is under common control with,
such specified Person.  For the purposes
of this definition, “control” (including, with correlative meanings, the terms “controlling,”
“controlled by,” and 

 

 

“under
common control with”), as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise;

 

“Asset Disposition” means the disposition,
in any transaction or series of related transactions, whether by sale, lease or
transfer of any, all, or substantially all, of the Pledged Assets or which has
the effect of selling or otherwise disposing of the whole or a major part of
the Pledged Assets unless (A) such disposed assets are replaced within a
reasonable time (taking the location and availability of such assets and
replacement assets into account), with property of at least the same value or (B) such
disposition is of obsolete assets, which are no longer used or useful in
connection with the mining project known as Mineras Paredones Amarillos in Baja
California Sur, Mexico;

 

“Bankruptcy Act” has the meaning ascribed
thereto in subsection 7.1(f);

 

“Business Day” means any day other than a
Saturday, Sunday or a day on which the principal chartered banks located at
either Vancouver, British Columbia or the City of New York are not open for
business during normal banking hours;

 

“Capital Reorganization” has the meaning
ascribed thereto in section 3.5(f);

 

“Collateral Agent” means HSBC México, S.A. de C.V.,
Institución de Banca Múltiple, Grupo Financiero HSBC, División Fiduciaria;

 

“Common Shares” means the
common shares in the capital of VGZ; provided that in the event of a
subdivision, redivision, reduction, combination or consolidation thereof, or
such subdivisions, redivisions, reductions, combinations or consolidations,
then, subject to adjustments, if any, having been made in accordance with the
provisions of Article 3 below, “Common
Share” shall thereafter mean the shares resulting from such
subdivision, redivision, reduction, combination or consolidation;

 

“Conversion Price” means
US$6.00 per Common Share as adjusted as provided herein, in each case issuable
from time to time upon the conversion of the Notes in accordance with the provisions
hereof;

 

“Convertible Securities” has the meaning
ascribed thereto in section 3.5(i);

 

“Corporate Trust Office”  means the principal office of the Trustee at
which the Trustee administers its trust activities, currently located at
452 Fifth Avenue, New York, NY 10018, Attention: Corporate Trust
and Loan Agency Division, facsimile number: (212) 525-1300, or such other
location in the United States as the Trustee may advise by notice given in
accordance with this Agreement;

 

“Counsel” means the firm of legal counsel
retained by the Trustee or retained by VGZ and acceptable to the Trustee;

 

“Current Market Price” has the meaning
ascribed thereto in section 3.5(e);

 

2

 

“Date of Conversion” has the meaning ascribed
thereto in section 3.4;

 

“Dollar” and “$” unless otherwise specified, mean lawful money of the United
States;

 

“Event of Default” has the meaning ascribed
thereto in section 7.1;

 

“Excluded Taxes” means  (i) taxes, levies, imposts, deductions,
charges or withholdings, including interest, penalties or additions thereto,
and all related liabilities, imposed on or measured by revenue, net receipts,
net income or net profits of the relevant Holder or imposed as a result of the
Holder not dealing at arm’s length (within the meaning of the Income Tax Act (Canada)) with VGZ or the
Guarantor at the time of payment,  (ii) capital
taxes, franchise taxes or similar taxes imposed pursuant to the Laws of Canada,
the United States of America or by the jurisdiction under the laws of which the
Holder is organized, in which such person is resident for tax purposes or in
which the principal office or applicable lending office of such Holder is
located or in which it is otherwise deemed to be engaged in a trade or business
for Tax purposes or any subdivision thereof or therein, and (iii) any
branch profits taxes imposed by the United States of America or any similar tax
imposed by any jurisdiction on the Holder;

 

“GAAP” means generally accepted accounting
principles in effect from time to time in Canada;

 

“Guarantor” means Minera Paredones Amarillos
S.A. de C.V.;

 

“Guarantee” has the meaning ascribed thereto
in section 13.1;

 

“Indebtedness” means any liability of VGZ
and the Guarantor;

 

“Indemnified Taxes” means Taxes (including
Other Taxes) other than Excluded Taxes;

 

“Indenture”, “herein”, “hereby”,
“hereof” and similar expressions
mean or refer to this Secured Note Indenture and any indenture, deed or
instrument supplemental or ancillary hereto; and the expressions “Article”, “section”, “subsection”,
“paragraph” and “clause” followed by numbers or letters mean
and refer to the specified Article, section, subsection, paragraph or clause of
this Indenture; the whole as same may be amended, supplemented, restated or
replaced from time to time;

 

“Interest Payment Date” means the 15th
day of the months of June and December of each year, provided that,
if any Interest Payment Date would otherwise fall on a day which is not a
Business Day, it shall be postponed to the next following Business Day.  The first Interest Payment Date shall be June 15,
2008, in respect of interest accrued from the date of issuance of the Notes;

 

“Lien” shall mean any hypothec, mortgage,
charge, pledge, lien (statutory or otherwise), security interest or other
encumbrance of any nature however arising, or any other security agreement or
arrangement creating in favour of any creditor a right in respect of any asset
that is prior to the right of any other creditor in respect of such asset;

 

3

 

“Maturity Date” means the date on which the
Notes are to mature pursuant to subsection 2.1(d);

 

“Non-Possessory Pledge Agreement” means the
Non-Possessory Pledge Agreement dated as of March 4, 2008 granted by the
Guarantor in favour of the Collateral Agent for and on behalf of the
Noteholders pursuant to which the Guarantor pledges the Pledged Assets to
secure the Secured Obligations the whole as same may be amended, supplemented,
restated or replaced from time to time;

 

“Noteholder(s)” or “Holder(s)” means the registered holder(s) of
Notes;

 

“Noteholders’ Request” means an instrument,
signed in one or more counterparts by the Holders of at least 25% in the
aggregate principal amount of Notes then outstanding, requesting the Trustee to
take some action or proceeding specified therein;

 

“Notes” means collectively the 10% senior
secured notes of VGZ authorized to be issued hereunder each in principal amount
denominations of US$1,000 and any integral multiple thereof;

 

“Note Share Legend” has the meaning ascribed
thereto in section 2.17(b);

 

“Note Shares” means the Common Shares issued
upon conversion of the Notes;

 

“Officer’s Certificate” means a certificate
signed in the name of VGZ by any of the Chairman, the President, an Executive
Vice-President, Senior Vice-President, Vice-President or any other officer of
VGZ;

 

“Other Taxes” means any present or future
transfer, mortgage, stamp or documentary taxes or any other excise or property
taxes, charges, financial institutions duties, debits taxes or similar levies
imposed by Canada, or any province or territory thereof, the United States or
any other jurisdiction that arise from any payment under this Agreement or
under the Notes or from the execution, delivery, enforcement or registration
of, or otherwise with respect to, this Agreement or the Notes;

 

“Permitted Liens” means, at any time, the
following Liens:

 

	
  (i)

  	
   

  	
  Liens for
  taxes, assessments or governmental levies not yet due or which are being
  contested if adequate reserves with respect thereto are maintained in
  accordance with GAAP, so long as the same do not involve any imminent danger
  of the sale, forfeiture or loss of any of the material property of the
  Guarantor or any interest therein;

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  undetermined
  or inchoate Liens arising in the ordinary course of business, a claim for
  which has not been filed or registered pursuant to law or of which notice
  shall not have been given or become known to the Guarantor or the Trustee;

  

 

4

 

	
  (iii)

  	
   

  	
  carriers’,
  warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar Liens
  arising in the ordinary course of business which are not overdue for a period
  of more than 30 days or which are being contested;

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
   

  	
  servitudes, rights-of-way,
  restrictions and other similar encumbrances which, in the aggregate, do not
  materially detract from the value of the property subject thereto or
  interfere with the ordinary conduct of the business of the Guarantor;

  
	
   

  	
   

  	
   

  
	
  (v)

  	
   

  	
  statutory
  Liens incurred or deposits made in the ordinary course of business of the
  Guarantor in connection with worker’s compensation, employment insurance and
  other social security legislation;

  
	
   

  	
   

  	
   

  
	
  (vi)

  	
   

  	
  the
  reservations and exceptions contained in, or implied by statute in, original
  dispositions of property from a government and grants made by a government of
  interests so reserved or excepted;

  
	
   

  	
   

  	
   

  
	
  (vii)

  	
   

  	
  Liens given
  to a public utility or similar operating authority when ordinarily required
  as part of the normal operating practices of such utility or operating
  authority but only to the extent that the same provide security to such
  utility or operating authority for payments required to be made by the
  Guarantor in the ordinary course of business for services provided to the
  Guarantor by such utility or operating authority in the normal course of its
  business;

  
	
   

  	
   

  	
   

  
	
  (viii)

  	
   

  	
  Purchase
  Money Obligations in respect of purchases or leases of equipment and other personal
  property entered into after the date hereof not exceeding in the
  aggregate US$2,000,000;

  
	
   

  	
   

  	
   

  
	
  (ix)

  	
   

  	
  any
  obligations previously acquired by the Guarantor and as existing on the date
  hereof, to pay net smelter return royalties to third parties, with respect to
  the production of minerals to be obtained from the mining concessions forming
  part of the Pledged Assets;

  

 

“Person” or “person” means and includes individuals, corporations, limited
partnerships, general partnerships, joint stock companies, unlimited liability
companies, limited liability corporations, joint ventures, associations,
companies, trusts, banks, trust companies, pension funds, business trusts or
other organizations, whether or not legal entities and governments and agencies
and political subdivisions thereof;

 

“Pledged Assets” means Guarantor’s personal
property and real property in respect of the mining project known as Mineras
Paredones Amarillos in Baja California Sur, Mexico;

 

“Purchase Money Obligations” means:

 

	
  (a)

  	
   

  	
  any Lienany
  Lien created, issued or assumed after the date of this Indenture to secure
  Indebtedness not in excess of the value of the underlying property assumed as
  a part of, or issued or incurred to provide funds to pay, the purchase price
  or lease payments in respect of any movable property; and

  

 

5

 

(b)                                 any renewal, refunding or extension of any such Lien securing
Indebtedness in a principal amount not in excess of the unpaid principal amount
of the indebtedness secured thereby immediately prior to such renewal,
refunding or extension;

 

“Record Date” has the meaning ascribed
thereto in section 2.3;

 

“Redemption Date” when used with respect to
any Note to be redeemed means the date fixed for such redemption by or pursuant
to this Indenture;

 

“Regulation D” means
Regulation D promulgated by the SEC under the U.S. Securities Act;

 

“Regulation S” means Regulation S
promulgated by the SEC under the U.S. Securities Act;

 

“SEC” means the United States Securities and
Exchange Commission;

 

“Secured Obligations” has the meaning
ascribed thereto in section 4.1;

 

“Security Interests” means, collectively,
all of the Liens on the Pledged Assets created or granted under the
Non-Possessory Pledge Agreement or any other security document delivered from
time to time under section 4.3;

 

“Special Resolution” has the meaning
ascribed thereto in section 10.14;

 

“Subsidiary” of any specified Person means
any corporation, partnership, joint venture, association or other business
entity, whether now existing or hereafter organized or acquired, (i) in
the case of a corporation, of which more than 50% of the total voting power of
the capital shares entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, officers or trustees thereof
is held by such first-named Person or any of its Subsidiaries; or (ii) in
the case of a partnership, joint venture, association or other business entity,
with respect to which such first named Person or any of its Subsidiaries has
the power to direct or cause the direction of the management and policies of
such entity by contract or otherwise or if in accordance with GAAP such entity
is consolidated with the first-named Person for financial statement purposes;

 

“Successor” has the meaning ascribed thereto
in section 9.1;

 

“Taxes” means all taxes, levies, imposts,
deductions, charges or withholdings and all related liabilities;

 

“Time of Expiry” has the meaning ascribed
thereto in section 3.1;

 

“Trustee” means HSBC Bank USA, N.A. and its
successors hereunder;

 

“United States” means the United States of
America, its territories and possessions, any state of the United States and
the District of Columbia;

 

6

 

“U.S. Person” means a U.S.
person as defined in Regulation S;

 

“U.S. Securities Act”
means the United States Securities Act of 1933, as amended;

 

“VGZ” means Vista Gold
Corp., a corporation under the laws of the Yukon Territory;

 

“Wholly-Owned Subsidiary”
means any Subsidiary, all of the outstanding voting, securities (other than
directors’ qualifying shares) of which are owned, directly or indirectly, by
VGZ.

 

“Written Order” or “Written Request” means a written order or
request, respectively, signed in the name of VGZ by any of the Chairman, the
President, an Executive Vice-President, Senior Vice-President, Vice-President
or any other officer of VGZ.

 

1.2       Meaning of “outstanding” for Certain Purposes

 

Every Note shall be deemed to be outstanding until it shall be
cancelled or delivered to the Trustee for cancellation, or until moneys for the
payment thereof shall be set aside under Article 8, or until it shall have
become void pursuant to section 2.4. Where a new Note has been issued in
substitution for a Note which has been lost, stolen or destroyed, only one of
such Notes shall be counted for all purposes, including, without limitation,
the purpose of determining the aggregate principal amount of Notes outstanding.
Notes owned, directly or indirectly, legally or beneficially by VGZ or any
Affiliate of VGZ shall be disregarded for the purpose of any provision of this
Indenture entitling Holders of outstanding Notes to vote, constitute a quorum
for the purpose of voting, sign consents, requisitions or other instruments or
take any other action under this Indenture, except that (a) for the
purpose of determining whether the Trustee shall be protected in relying on any
vote, constitution of a quorum, consent, requisition or other action, only
those Notes which the Trustee knows are so owned shall be disregarded and (b) Notes
so owned which have been pledged in good faith other than to VGZ or any
Affiliate of VGZ shall not be so disregarded if the pledgee shall establish to
the satisfaction of the Trustee the pledgee’s right to vote such Notes in his
discretion, free from the control of VGZ or any Affiliate of VGZ.

 

1.3       [Intentionally Deleted]

 

2.      THE NOTES

 

2.1       Designation, Terms and Form of Notes

 

The aggregate principal amount of Notes authorized to be issued under
this Indenture and outstanding at any one time shall consist of and be limited
to US$32,000,000.  Each Note authorized
to be issued under this Indenture shall:

 

	
  (a)

  	
  consist of and be limited to an aggregate principal amount
  denominations of US$1,000 and any integral multiple
  thereof;

  
	
   

  	
   

  
	
  (b)

  	
  be designated Senior Secured Notes;

  

 

7

 

	
  (c)

  	
  be dated March 4, 2008;

  
	
   

  	
   

  
	
  (d)

  	
  mature on March 4, 2011;

  
	
   

  	
   

  
	
  (e)

  	
  bear interest at 10%per annum (after as well as before maturity,
  default and judgment, with interest on overdue interest at such rate), which
  shall be paid on each Interest Payment Date;

  
	
   

  	
   

  
	
  (f)

  	
  be substantially in the form set out in Schedule “A” hereto with
  such appropriate insertions, deletions, substitutions and variations as may
  be required or permitted by the terms of this Indenture, as may be required
  to comply with any law or the rules of any securities exchange or as may
  be not inconsistent with the terms hereof and as the officers of VGZ executing
  any Notes may deem necessary or desirable, in their sole discretion;

  
	
   

  	
   

  
	
  (g)

  	
  bear such distinguishing letters and numbers as the Trustee may
  approve; and

  
	
   

  	
   

  
	
  (h)

  	
  bear restrictive legends pursuant to section 2.18 hereof.

  
	
   

  	
   

  

2.2       Payment of Principal

 

The principal of each Note will be payable on the Maturity Date of such
Note in lawful money of the United States against the surrender of such Note by
the registered Holder thereof at the Corporate Trust Office pursuant to
section 2.9.

 

2.3       Interest

 

Each Note issued hereunder, whether issued originally or in exchange
for another Note, shall bear interest at a rate equal to 10% per annum from and
including the date of issuance thereof to the Maturity Date (unless converted
into Common Shares or redeemed or repaid prior to the Maturity Date in
accordance with the provisions hereof), which amount shall be calculated
semi-annually and payable on each Interest Payment Date, from and including the
date of issuance thereof or from and including the last Interest Payment Date
on which interest shall have been paid or made available for payment with
respect to the outstanding Notes, whichever shall be the later, up to and
including the day preceding the earliest of: (i) the Maturity Date; and (ii) if
converted for Common Shares pursuant to Article 3 or if redeemed, on the
date of such conversion or Redemption Date provided herein.  Interest will be computed on the basis of a
360-day year of twelve 30-day months.

 

Wherever in this Indenture the payment of interest is referred to, such
reference shall be deemed to include the payment of interest on amounts in
default to the extent that, in such context, such interest is, was or would be
payable, and express mention of interest on amounts in default in any
provisions hereof shall not be construed as excluding such interest in those
provisions hereof where such express mention is not made.

 

VGZ, through the Trustee, will pay interest on the Notes (except
defaulted interest) on the Interest Payment Date to the registered Holders of
Notes as of the close of business 15 Business Days prior to such Interest
Payment Date (whether or not a Business Day, each a 

 

8

 

“Record Date”).   Interest shall
be paid in accordance with the provisions set forth in section 2.10 hereto.

 

2.4       Prescription

 

The right of a Noteholder to exercise his rights under this Indenture
with respect to a Note shall become void unless the Note is presented for
payment within a period of three (3) years from the earlier of (i) the
Maturity Date and (ii) the date of such conversion or Redemption Date
thereof, after which payment with respect to such Note shall be governed by the
provisions of Article 8. VGZ shall have satisfied its obligations under
each Note upon remittance to the Trustee for the account of the Holder of such
Note upon redemption, conversion or at the Maturity Date thereof of any and all
considerations due hereunder in cash with respect to such Note, subject to and
in accordance with the provisions of this Indenture. Such remittance shall for
all purposes be deemed a payment to the Noteholder, and to such extent such
Note shall thereafter not be considered as outstanding and the Noteholder shall
have no right with respect to such Note, except to receive payment out of the
moneys so paid and deposited upon surrender of the Note.  For purposes of this Agreement, (a) all
deposits with, and payments, deliveries, surrenders, and presentations to, the
Trustee shall be made at the Corporate Trust Office, (b) all payments
made, or other deliverables provided, by the Trustee shall be made from the
Corporate Trust Office, and (c) the Trustee, in performing its duties  and exercising its rights hereunder, shall be
acting from the Corporate Trust Office or another location outside of Canada,
except as may otherwise be determined by the Trustee, as it determines in its
sole discretion.

 

2.5       Issue of Notes

 

Notes in the aggregate principal amount in denominations of US$1,000
(or any integral multiple thereof) shall be executed by VGZ and, immediately
after such execution, shall be delivered to the Trustee and shall be
authenticated by the Trustee and delivered by the Trustee to each Noteholder
upon receipt by the Trustee of the following:

 

	
  (a)

  	
  a Written Order for the authentication and delivery of such Notes;

  
	
   

  	
   

  
	
  (b)

  	
  an opinion of Counsel in favour of the Trustee in form acceptable to
  the Trustee;

  
	
   

  	
   

  
	
  (c)

  	
  an Officer’s Certificate certifying that VGZ is not in default in the
  performance of any of its covenants contained herein and in all documents
  relating hereto and that VGZ has complied with the requirements of this
  Indenture in connection with the issue of the Notes; and

  
	
   

  	
   

  
	
  (d)

  	
  such Officer’s Certificate, if any, as may be required by any
  provision of applicable indenture legislation in connection with the issue,
  authentication and delivery of the Notes.

  

 

2.6       Trustee’s Reliance

 

The Trustee, prior to the authentication of the Notes, shall not be
bound to make any enquiry or investigation as to the correctness of the matters
set forth in any of the opinions,

 

9

 

certificates or other documents required by the
provisions hereof. The Trustee may rely and shall be protected in acting upon
any such opinions, certificates or other documents, but may in its discretion
(but shall not be required to) require additional evidence before acting or
relying thereon. The Trustee shall have no duty or responsibility with respect
to the use or application of any of the Notes so authenticated and delivered or
of the proceeds thereof.

 

2.7       Execution of Notes

 

Notes shall be signed by at least one officer of VGZ holding office at
the time of signing. The signatures of officers of VGZ required on Notes may be
printed or otherwise mechanically reproduced thereon and Notes so signed are as
valid as if they had been signed manually. If a Note contains a printed or
mechanically reproduced signature of a person, then VGZ may issue the Note even
though the person has ceased to be an officer of VGZ and such Note is as valid
as if the person were an officer of VGZ at the date of its issue.

 

2.8       Authentication by the Trustee

 

No Note shall be issued or, if issued, shall be obligatory or entitle
the Holder to the benefit hereof, until it has been authenticated by or on
behalf of the Trustee substantially in the form of the certificate set out in
Schedule “A” hereto, or in some other form approved by the Trustee. Such
authentication by the Trustee upon any Note shall be conclusive evidence that
the Note has been duly issued hereunder, is a valid obligation of VGZ and that
the Holder is entitled to the benefit hereof.

 

The certificate of the Trustee on Notes issued hereunder shall not be
construed as a representation or warranty by the Trustee as to the validity of
this Indenture or of the Notes (except the due authentication thereof) and the
Trustee shall in no respect be liable or answerable for the use made of the
Notes or any of them or of the proceeds thereof (other than disbursement of
amounts received from VGZ in respect of the payment of interest or principal
pursuant to Article 8 and Article 9).

 

2.9       Registration of Notes

 

VGZ shall cause to be kept, by and at the Corporate Trust Office, a
central Notes register in which shall be entered the names and latest known
addresses of the Holders of Notes and the other particulars, prescribed by law,
of the Notes held by them respectively and of all transfers of Notes. Such name
registration shall be noted on the Notes by the Trustee. No transfer of a Note
shall be effective as against VGZ unless made on the register and made by the
registered Holder or his executors or administrators or other legal
representatives or his or their attorney duly appointed by an instrument in
writing in form and execution satisfactory to the Trustee, upon compliance with
such requirements as the Trustee may prescribe, and unless such transfer shall
have been duly noted on such Note by the Trustee.

 

The register referred to in this section shall at all reasonable times
be open for inspection by VGZ and by any Noteholder.

 

Neither the Trustee nor VGZ shall be charged with
notice of or be bound to see to the execution of any trust, whether express,
implied or constructive, in respect of any Note and may 

 

10

 

transfer any Note on the direction of the Holder
thereof, whether named as trustee or otherwise, as though that person were the
beneficial owner thereof.

 

In the event that the register is closed and the records transferred to
a different register, notice of such change shall be given, in the manner
provided in section 14.1, to the Holders of the Notes registered in the
register so closed and in addition the particulars of such change shall be
recorded in the register required to be kept in the Corporate Trust Office.

 

The Trustee shall, when requested to do so by VGZ, furnish VGZ with a
list of the names and addresses of the Holders of Notes showing the principal
amounts and serial numbers of such Notes held by each Holder.

 

2.10     Person Entitled to Payment

 

The person in whose name any Notes shall be registered shall be deemed
the owner thereof for all purposes of this Indenture and payment of or on
account of the principal and accrued interest on such Notes shall be made only
to or upon the order in writing of such Holder thereof and such payment shall
be a good and sufficient discharge to the Trustee and any registrar and to VGZ
and any paying agent for the amount so paid.

 

As the interest and/or the principal on the Notes becomes payable, VGZ
shall have deposited with the Trustee on or prior to 11:00 a.m., New York
City time, on each Interest Payment Date, or on or prior to 11:00 a.m.,
New York City time on the Business Day prior to the Maturity Date, money
sufficient, in immediately available funds, to make cash payments due on such
Maturity Date or Interest Payment Date, as applicable, in a timely manner which
permits the Trustee to remit payment to the Holders on such Interest Payment
Date or Maturity Date, as applicable.  On
the Interest Payment Date or Maturity Date, as applicable, the Trustee shall
either pay by wire transfer in immediately available funds, or forward or cause
to be forwarded by prepaid post (or in the event of mail service interruption
by such other means as the Trustee and VGZ shall determine to be appropriate),
to the Holder for the time being of each such Note, at his address appearing on
the appropriate register hereinbefore mentioned, or in the case of joint
Holders, to the one whose name appears first on such register, a cheque for
such interest and/or principal, as applicable (and any additional amounts
payable under section 2.15), payable to the order of such Holder or Holders and
negotiable at par at each of the places at which interest and/or principal, as
applicable, upon such Notes is payable. 
The initiation of such wire or the forwarding of such cheque shall
satisfy and discharge the liability for the interest and/or principal, as
applicable, on the Notes to the extent of the sums represented thereby, unless such
cheque be not paid on presentation; provided that, in the event of the
non-receipt of such wire or cheque by the Holder, or the loss or destruction of
the cheque thereof, the Trustee, on being furnished with reasonable evidence of
such non-receipt, loss or destruction and indemnity reasonably satisfactory to
it shall either initiate a new wire or issue a replacement cheque for the
amount of such cheque to such Holder.

 

The registered Holder for the time being of any Note shall be entitled
to the principal and interest, if any, evidenced by such Note, free from all
equities or rights of set-off, compensation or counterclaim between VGZ and the
original or any intermediate Holder thereof and all persons may act
accordingly, and a transferee of a Note shall, after the appropriate form of
transfer is lodged with the Trustee and upon compliance with all other

 

11

 

conditions in such respect required by this
Indenture or by any conditions contained in such Note or by law, be entitled to
be entered on the register as the owner of such Note, free from all equities or
rights of set-off, compensation or counterclaim between VGZ and his transferor
or any previous Holder thereof, save in respect of equities of which VGZ is
required to take notice by statute or by order of a court of competent
jurisdiction.

 

Where Notes are registered in more than one name, the principal and
interest, if any, from time to time payable in respect thereof in accordance
with this section 2.10 may be paid by wire transfer or cheque payable to
the order of all such Holders, failing written instructions from them to the
contrary, and such payment shall be a valid discharge to the Trustee and to VGZ
and any paying agent for the amount so paid.

 

2.11     Replacement of Notes

 

If any of the Notes shall become mutilated or defaced, or be lost,
stolen or destroyed and in the absence of notice that such Notes have been
acquired by a bona fide purchaser for value, VGZ shall issue and thereupon the
Trustee shall authenticate and deliver a new Note of like date and tenor as the
one mutilated, defaced, lost, stolen or destroyed in exchange for, in place of
and upon cancellation of such mutilated or defaced Note or in lieu of and in
substitution for such lost, stolen or destroyed Note and the new Note shall be
in a form approved by the Trustee. The new Note shall be entitled to the
benefit hereof and shall rank equally in accordance with its terms with all
other Notes issued hereunder.

 

The applicant for the issue of a new Note shall bear the cost, charges,
and expenses of the issue thereof and in case of loss, destruction or theft
shall, as a condition precedent to the issue thereof, furnish to VGZ and the
Trustee such evidence of ownership and of the loss, destruction or theft of the
Note so lost, destroyed or stolen as shall be satisfactory to VGZ and the
Trustee in their respective discretion and such applicant may also be required
to furnish indemnity and surety bond in amount and form satisfactory to VGZ and
the Trustee in their respective discretion, and shall pay the reasonable
charges of VGZ and the Trustee in connection therewith.

 

2.12     Exchange of Notes

 

Notes in any denomination may be exchanged at any time for Notes of the
same aggregate principal amount in any other authorized denomination. Notes may
be so exchanged at the Corporate Trust Office pursuant to section 2.9 or
other convenient place of delivery by VGZ and acceptable to the Trustee.

 

VGZ shall execute and the Trustee shall authenticate all Notes
necessary to carry out exchanges pursuant to this section 2.12. All Notes
surrendered for exchange shall be cancelled.

 

The party requesting any exchange pursuant to this section 2.12
shall, as a condition precedent to such exchange, reimburse the Trustee for any
costs or expenses, including, without limitation, stamp or other security
transfer tax or governmental charge required to be paid in respect of such
exchange or the related issue of Notes, and in addition, a reasonable charge
for its services for each Note exchanged or transferred and a reasonable charge
for every Note

 

12

 

issued upon such exchange or transfer, and payment
of the said charges shall be made by the party requesting such exchange or transfer
as a condition precedent thereto.

 

2.13     Payment of Interest and Principal

 

Except as herein otherwise provided, all sums which may at any time
become payable, whether at maturity or otherwise, on account of any Note or any
interest thereon, if any, shall be payable at the option of the Holder at any
of the places at which the principal and interest, if any, of such Note are
payable.

 

Whenever any payment of principal or interest to be made hereunder
shall be stated to be due on a day which is not a Business Day in the place in
which a Note is presented for payment, then the Noteholder shall not be
entitled to payment of the amount due in such place until the next succeeding
Business Day.

 

2.14     [Intentionally Deleted]

 

2.15     Taxes

 

All payments to a Holder (or any successor or assignee thereof) by VGZ
or the Trustee under this Agreement or under the Notes shall be made free and
clear of and without deduction or withholding for any and all Indemnified Taxes
unless required by law or interpretation thereof.  If VGZ or the Trustee shall be required by
law or the interpretation thereof by the relevant governmental authority to
deduct or withhold any such Indemnified Taxes from or in respect of any sum
payable under this Agreement or under the Notes: (i) the amount payable
shall be increased by such additional amount as may be necessary so that after
making all required deductions or withholdings (including, without limitation,
deductions or withholdings applicable to additional amounts paid under this
section 2.15), the Holder receives a net amount equal to the full amount it
would have received if no deduction or withholding had been made; (ii) VGZ
or the Trustee shall make such required deductions or withholdings; (iii) VGZ
or the Trustee shall immediately pay the full amount deducted or withheld to
the relevant governmental authority in accordance with applicable law; and (iv) VGZ
or the Trustee shall deliver to the Holder as soon as practicable after it has
made such payment to the applicable governmental authority (x) a copy of
any receipt issued by such governmental authority evidencing the payment of all
amounts required to be deducted or withheld from the sum payable hereunder or (y) if
such a receipt is not available from such governmental authority, notice of the
payment of such amount deducted or withheld. 
In addition, VGZ or the Trustee shall immediately pay any and all Other
Taxes.

 

VGZ shall indemnify and hold harmless each Holder of Notes for the full
amount of Indemnified Taxes imposed on or paid by such Holder and any liability
(including penalties, interest and expenses payable or incurred in connection
therewith) arising from or with respect to such Indemnified Taxes, whether or
not they were correctly or legally asserted.

 

Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this section 2.15 shall
survive the termination of this Agreement and the payment in full of principal,
interest, fees and any other amounts payable under this Agreement and under the
Notes.

 

13

 

2.16     Redemption and Prepayment

 

The Notes may be prepaid prior to maturity at VGZ’s option, in whole at
any time after the 1st anniversary of the date hereof, on not more than sixty
(60) and not less than thirty (30) days’
prior written notice, for an amount equal to the sum of the following (i) the
principal amount of the Note, (ii) accrued and unpaid interest to the
Redemption Date and (iii) an amount equal to the interest that would be
payable on such Note from the Redemption Date to the date that is
12 calendar months following the Redemption Date (the sum of (i), (ii) and (iii), the “Redemption Amount”). The election of VGZ to redeem any
Notes shall be evidenced by a resolution of the board of director’s of VGZ.

 

All notices of redemption shall be sent to each Noteholder to be
redeemed not less than thirty (30) days prior to the Redemption Date and
shall state:

 

	
  (a)

  	
   

  	
  the
  Redemption Date, and

  
	
   

  	
   

  	
   

  
	
  (b)

  	
   

  	
  the place where such Notes are to be surrendered for payment of the
  Redemption Amount thereof.

  

 

Notice of redemption of Notes to be redeemed at the election of VGZ
shall be given by VGZ to the Noteholders and the Trustee or, at VGZ’s request,
by the Trustee in the name of and at the expense of VGZ.

 

Except as may otherwise be provided in any supplemental indenture, upon
Notes being called for redemption, VGZ will deposit with the Trustee or any
paying agent to the order of the Trustee, on or before 11:00 a.m. (Eastern
Standard Time) on the Business Day immediately prior to the Redemption Date
specified in such notice, such sums of money as may be sufficient to pay the
Redemption Amount of all the Notes. At the request of the Trustee, VGZ shall
also deposit with the Trustee a sum of money sufficient to pay any charges or
expenses which may be reasonably incurred by the Trustee in connection with
such redemption.  Every such deposit shall be irrevocable. From the sums
so deposited, the Trustee shall pay or cause to be paid, or issue or cause to
be issued, to the Holders of such Notes so called for redemption, upon
surrender of such Notes, the principal to which they are respectively entitled
on redemption.

 

Notice of redemption having been given as aforesaid, the Notes so to be
redeemed shall, on the Redemption Date, become due and payable at the principal
amount thereof and on and after such date such Notes shall only bear interest
if VGZ shall default in the payment of the Redemption Amount.  Upon surrender of any such Note for
redemption in accordance with such notice, such Note shall be paid by VGZ.

 

If any Note called for redemption shall not be so paid upon surrender
thereof for redemption, the principal shall, until paid, bear interest from the
Redemption Date at a rate equal to 20% per annum.   In such event, VGZ shall have deposited with
the Trustee money sufficient, in immediately available funds, in order for the
Trustee to remit such payment to the Holder.

 

14

 

2.17     Legends

 

(a)                                 The
Trustee understands and acknowledges that the Notes and the Common Shares
issuable upon conversion thereof have not been and will not be registered under
the U.S. Securities Act or applicable state securities laws.  Therefore, all certificates representing the
Notes, and all certificates issued in exchange therefor or in substitution
thereof, shall bear the following legend until such time as it is no longer
required under the requirements of applicable United States federal and state
securities laws:

 

NEITHER THE SECURITIES REPRESENTED HEREBY, NOR ANY
SECURITIES ISSUABLE UPON THE CONVERSION THEREOF, NOR ANY INTEREST IN OR RIGHTS
UNDER SAME, HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “1933 ACT”).  THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED
STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT OR (C) THE
SALE IS MADE IN THE UNITED STATES (i) IN ACCORDANCE WITH THE EXEMPTION
FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF
AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR (ii) PURSUANT
TO A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS, AND IN THE CASE OF (ii), ONLY WITH THE PRIOR WRITTEN CONSENT OF THE CORPORATION
(WHICH WILL BE DELIVERED PROMPTLY AND WILL NOT BE UNREASONABLY WITHHELD, BUT
WHICH MAY BE CONDITIONAL ON DELIVERY OF A LEGAL OPINION OR OTHER EVIDENCE
IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION).

 

(b)                                The
issuance of the Common Shares upon conversion of the Notes is expected to be
exempt from registration under the U.S. Securities Act on the basis of Section 3(a)(9) of
the U.S. Securities Act. Therefore, all certificates evidencing Common Shares
issued upon conversion of Notes evidenced by a certificate or certificates
bearing the U.S. legend set forth above will bear the following legend (the “Note Share Legend”):

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933
ACT”).  THE HOLDER HEREOF AGREES FOR THE
BENEFIT OF THE CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT OR
(C) THE SALE IS MADE IN THE UNITED STATES (i) IN ACCORDANCE WITH THE
EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER,
IF AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR (ii) PURSUANT
TO A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR APPLICABLE
STATE SECURITIES LAWS, AND IN THE CASE OF (ii), ONLY WITH THE PRIOR WRITTEN CONSENT OF THE CORPORATION
(WHICH WILL BE DELIVERED PROMPTLY AND WILL NOT BE UNREASONABLY WITHHELD, BUT
WHICH MAY BE CONDITIONAL ON DELIVERY OF A LEGAL OPINION OR OTHER EVIDENCE
IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION).

 

(c)                                 All
certificates representing the Notes, all certificates issued in exchange
therefor or in substitution thereof, all certificates representing Common
Shares issued upon

 

15

 

conversion of the
Notes and all certificates issued in exchange therefor or in substitution
thereof (or the ownership statement issued under a direct registration system
or other electronic book-entry system, as the case may be) shall bear the
following legend (with the necessary information inserted), provided however
that, if any such certificate is issued after that date which is four months
and one day after the Closing Date, the first paragraph of such legend shall be
omitted:

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE
HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE <INSERT DATE THAT
IS FOUR (4) MONTHS AND ONE (1) DAY AFTER CLOSING DATE>.

 

THE SECURITIES [IN THE CASE OF THE NOTES, INSERT: , AND
THE SECURITIES ISSUABLE UPON CONVERSION THEREOF,] REPRESENTED BY THIS
CERTIFICATE ARE LISTED ON THE TORONTO STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID
SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF TSX SINCE THEY ARE NOT
FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH
SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON TSX.

 

2.18     Transfer

 

The Notes may only be transferred on the register kept at the Corporate
Trust Office in accordance with applicable laws and upon compliance with the
conditions hereof by the Noteholder or his legal representatives or his
attorney duly appointed by an instrument in writing in form and substance
satisfactory to the Trustee and upon due execution by the Noteholder and its
transferee of the transfer and acknowledgement in the form set forth in the
Note and delivery of the same to the Trustee and compliance with such other
reasonable requirements as VGZ and the Trustee may prescribe, such transfer
shall be duly noted on the register by the Trustee. The reasonable transfer
charges of the Trustee with respect to the transfer of Notes shall be payable
by the applicable Noteholders.

 

If a certificate representing Notes is tendered for transfer once
permitted by applicable laws and bears the U.S. legend set forth in section
2.17(a) above and the Holder has not obtained the prior written consent of
VGZ, the Trustee shall not register such transfer unless the transferor has
provided the certificate representing the Notes, and the transfer is being made
(i) to VGZ, (ii) outside the United States in compliance with the
requirements of Rule 904 of Regulation S and in compliance with applicable
local laws and regulations of the jurisdiction(s) where such sale is made,
(iii) pursuant to the exemption from the registration requirements under
the U.S. Securities Act provided by Rule 144 thereunder, if available, and
in accordance with applicable state securities laws, or (iv) in another
transaction that does not require registration under the U.S. Securities Act or
any applicable state securities laws, and the Holder has prior to such sale
furnished to VGZ an opinion of counsel of recognized standing in form and
substance reasonably satisfactory to VGZ to such effect.

 

If a certificate representing Note Shares is tendered for transfer once
permitted by applicable laws and bears the U.S. legend set forth in section
2.17(b) above and the Holder has not obtained the prior written consent of
VGZ, the Trustee shall not register such transfer unless the transferor has
provided the certificate representing the Note Shares, and the transfer is
being made (i) to VGZ, (ii) outside the United States in compliance
with the requirements of

 

16

 

Rule 904 of Regulation S and in compliance with
applicable local laws and regulations of the jurisdiction(s) where such
sale is made, (iii) pursuant to the exemption from the registration
requirements under the U.S. Securities Act provided by Rule 144
thereunder, if available, and in accordance with applicable state securities
laws, or (iv) in another transaction that does not require registration
under the U.S. Securities Act or any applicable state securities laws, and the
Holder has prior to such sale furnished to VGZ an opinion of counsel of
recognized standing in form and substance reasonably satisfactory to VGZ to
such effect.

 

3.      CONVERSION OF NOTES

 

3.1       Conversion Privilege of the Noteholder

 

Upon and subject to the provisions and conditions hereof, the Holder of
each Note shall have the right, at its option, at any time prior to 5:00 p.m.
(Eastern Standard Time) on the earlier of: (i) the Maturity Date and (ii) if
such Note has been previously called for redemption pursuant to section 2.16,
the Business Day immediately preceding the Redemption Date (such time and date
in this Article 3 being referred to as the “Time of Expiry”), to convert the whole or any part of the
principal amount of such Note into fully paid and non-assessable Common Shares
of VGZ at the Conversion Price.  Such
right of conversion shall extend only to the maximum number of whole Common
Shares into which the aggregate principal amount of the Note or Notes
surrendered for conversion at any one time by the Holder thereof may be
converted in accordance with the foregoing provisions of this section 3.1.  Fractional interests in Common Shares shall
be adjusted for in the manner provided in section 3.6.

 

3.2       Conversion Privilege of VGZ

 

Provided no Event of Default exists and the Common Shares continue to
be listed on the American Stock Exchange at the time of conversion, in
circumstances where after March 4, 2009 and prior to the Time of Expiry
the weighted average price of the Common Shares on the American Stock Exchange
has been equal to or greater than $9.00 for a period of at least 15 consecutive
trading days (an “Acceleration Event”),
VGZ shall have the right, at its option, exercisable in accordance with
section 3.3 within ten (10) Business Days after any such 15 day
period, to cause the conversion of the whole of the principal amount of the
Notes outstanding into Common Shares at the Conversion Price provided that at
such time VGZ delivers the notice set out below; provided however that the
closing price of the Common Shares on the American Stock Exchange must be equal
to or greater than $9.00 on the date VGZ delivers the notice or such notice
will be ineffective in respect of that particular exercise of VGZ’s conversion
privilege.

 

3.3       Notice of Conversion

 

Notice of VGZ’s intention to cause the conversion of all of the
outstanding Notes pursuant to section 3.2 following an Acceleration Event shall
be given by VGZ to the Holders of such Notes and the Trustee, not more than 60
days and not less than 30 days prior to the date fixed for conversion, in the
manner provided for herein.  The notice
of conversion shall state that all such Notes then outstanding are to be
converted, shall specify the date that such Notes will have been deemed to have
converted and shall state that all interest on such Notes called

 

17

 

for conversion shall cease to accrue from and after
such conversion date.  On the Date of
Conversion, all of such outstanding Notes shall be converted in accordance with
section 3.4, as though the Holders of such Notes had elected to convert them.

 

3.4       Manner of Exercise of Right to Convert

 

The Holder of a Note desiring to convert such Note in whole or in part
into Common Shares in accordance with section 3.1 shall surrender such Note to
the Trustee at the Corporate Trust Office together with the Conversion Form on
the back of such Note or any other written notice, in either case duly executed
by the Holder or its executors or administrators or other legal representatives
or its or their attorney duly appointed by an instrument in writing in form and
executed in a manner satisfactory to the Trustee and VGZ, in each case acting
reasonably, exercising its right to convert such Note in accordance with the
provisions of this Article 3. 
Thereupon such Noteholder and/or its nominee(s) or assignee(s) shall
be entitled to be entered in the books of VGZ as at the Date of Conversion (as
defined below) as the Holder of the number of Common Shares into which such
Note is convertible in accordance with the provisions of this Article 3
and, as soon as practicable thereafter and in any event within five (5) Business
Days, VGZ shall deliver or cause to be delivered to such Noteholder and/or,
subject as aforesaid, its nominee(s) or assignee(s) a certificate or
certificates for such Common Shares registered in the name of the Noteholder or
as otherwise directed by the Noteholder, and, if applicable, a cheque for any
amount payable under section 3.6.

 

The deemed date of conversion (the “Date
of Conversion”) of a Note shall be the date on which it is
surrendered in accordance with this section 3.4 or the date of conversion
specified in the notice provided by VGZ in accordance with section 3.3.  In the case of a Note surrendered by post or
other means of transmission, the Date of Conversion shall be the date on which
it is received by the Trustee.

 

Any part, being $1,000 or an integral multiple thereof, of a Note may
be converted as provided in this Article 3 and all references in this
Indenture to conversion of Notes shall be deemed to include conversion of such
parts.

 

The Holder of any Note of which part only is converted shall, upon the
exercise of its right of conversion, surrender the said Note to the Trustee,
and the Trustee shall cancel the same and shall without charge forthwith
deliver to the Holder a new Note or Notes in an aggregate principal amount
equal to the unconverted part of the principal amount of the Note so
surrendered.

 

 

3.5       Adjustment of Conversion Price

 

The Conversion Price in effect at any date shall be subject to
adjustment from time to time as follows:

 

(a)                                  automatically
on the 1st anniversary of the date hereof the Conversion Price shall
be adjusted to the lesser of (i) the then current Conversion Price or (ii) 120%
of the Adjusted Current Market Price (as defined below) per Common Share; provided
however that in no event shall the Conversion Price be less than US$4.80 as the
result of this adjustment in this section 3.5(a).  The “Adjusted
Current Market Price” per Common Share at any

 

18

 

date shall be the
weighted average price of the Common Shares for the 20 consecutive trading days
ending not less than three (3) trading days prior to such date on the
American Stock Exchange or, if the Common Shares are not listed on the American
Stock Exchange, on such national stock exchange on which the Common Shares are
listed as may be selected for such purpose by the Board of Directors, or, if
the Common Shares are not listed on a national stock exchange, then on the
over-the-counter market where an “active trading market” for the Common Shares
exists).  An “active trading market”
shall not be deemed to exist when the spread between the bid and ask prices per
Common Shares exceeds 10%.  If there is
no active trading market, the “Adjusted Current Market Price” shall be
determined in the good faith and reasonable judgment of a nationally-recognized
investment banking firm selected by VGZ and the Holders of a majority in
principal amount of the outstanding Notes;

 

(b)                                 if
and whenever at any time prior to the Time of Expiry VGZ shall: (i) subdivide
or redivide the outstanding Common Shares into a greater number of Common
Shares; (ii) reduce, combine or consolidate the outstanding Common Shares
into a smaller number of Common Shares; or (iii) issue Common Shares to
the Holders of all or substantially all of the outstanding Common Shares by way
of a stock dividend (other than the issue of Common Shares pursuant to the
exercise of options to receive dividends in the form of Common Shares in lieu
of dividends paid in the ordinary course), the Conversion Price in effect on
the effective date of such subdivision, redivision, reduction, combination or
consolidation or on the record date for such issuance of Common Shares by way
of a stock dividend, as the case may be, shall, in the case of the events
referred to in clauses (i) and (iii) above, be decreased in
proportion to the number of outstanding Common Shares resulting from such
subdivision, redivision or dividend, or shall, in the case of the events
referred to in clause (ii) above, be increased in proportion to the number
of outstanding Common Shares resulting from such reduction, combination or
consolidation.  Such adjustment shall be
made successively whenever any event referred to in this section 3.5(b) shall
occur; any such issuance of Common Shares by way of a stock dividend shall be
deemed to have been made on the record date for the stock dividend for the
purpose of calculating the number of outstanding Common Shares under sections
3.5(c) and (d);

 

(c)                                  if
and whenever at any time prior to the Time of Expiry VGZ shall fix a record
date for the issuance of rights or warrants to all or substantially all the
Holders of its outstanding Common Shares entitling them, to subscribe for or
purchase Common Shares (or securities convertible into Common Shares) at a
price per Common Share (or having a conversion or exchange price per Common
Share) less than 95% of the Current Market Price of a Common Share on such
record date, the Conversion Price shall be adjusted immediately after such
record date so that it shall equal the price determined by multiplying the
Conversion Price in effect on such record date by a fraction, the numerator of
which shall be the total number of Common Shares outstanding on such record
date plus a number of Common Shares equal to the number arrived at by dividing
the aggregate price of the total number of additional Common Shares offered for
subscription or purchase (or the aggregate conversion or exchange price of the
convertible securities so offered) by such Current Market Price per Common
Share, and the denominator of which shall be the total number of Common Shares
outstanding on

 

19

 

such record date
plus the total number of additional Common Shares offered for subscription or
purchase (or into which the convertible securities so offered are convertible);
any Common Shares owned by or held for the account of VGZ shall be deemed not
to be outstanding for the purpose of any such computation; such adjustment shall
be made successively whenever such a record date is fixed; to the extent that
any such rights or warrants are not so issued or any such rights or warrants
are not exercised prior to the expiration thereof, the Conversion Price shall
be readjusted to the Conversion Price which would then be in effect if such
record date had not been fixed or to the Conversion Price which would then be
in effect based upon the number of Common Shares (or securities convertible
into Common Shares) actually issued upon the exercise of such rights or
warrants, as the case may be;

 

(d)                                 if
and whenever at any time prior to the Time of Expiry VGZ shall fix a record
date for the making of a distribution to all or substantially all the holders
of its outstanding Common Shares of: (i) shares of any class other than
Common Shares; (ii) rights, options, warrants or securities convertible
into or exchangeable for Common Shares (excluding those referred to in section
3.5(c)); (iii) evidence of its indebtedness; or (iv) assets
(including cash, but excluding dividends paid in the ordinary course) then, in
each such case, the Conversion Price shall be adjusted immediately after such
record date so that it shall equal the price determined by multiplying the
Conversion Price in effect on such record date by a fraction, the numerator of
which shall be the total number of Common Shares outstanding on such record
date multiplied by the Current Market Price per Common Share on such record
date, less the fair market value (as determined by the Board of Directors with
the approval of the Noteholders, and if the Common Shares are then listed on
the Toronto Stock Exchange, the approval of the Toronto Stock Exchange, which
determination shall be conclusive) of such shares or rights, options, warrants
or securities convertible into or exchangeable for Common Shares or evidence of
indebtedness or assets so distributed, and the denominator of which shall be
the total number of Common Shares outstanding on such record date multiplied by
such Current Market Price per Common Share; any Common Shares owned by or held
for the account of VGZ shall be deemed not to be outstanding for the purpose of
any such computation; such adjustment shall be made successively whenever such
a record date is fixed; to the extent that such distribution is not so made,
the Conversion Price shall be readjusted to the Conversion Price which would
then be in effect if such record date had not been fixed or to the Conversion
Price which would then be in effect based upon such shares, rights, options,
warrants or securities convertible into or exchangeable for Common Shares or
evidence of indebtedness or assets actually distributed, as the case may be;

 

(e)                                  for
the purpose of any computation under section 3.5(c) or (d), the “Current Market Price” per Common Share at
any date shall be the weighted average price of the Common Shares for the 30
consecutive trading days ending not less than three (3) trading days prior
to such date on the American Stock Exchange or, if the Common Shares are not listed
on the American Stock Exchange, on such national stock exchange on which the
Common Shares are listed as may be selected for such purpose by the Board of
Directors, or, if the Common Shares are not listed on a national stock
exchange, then on the over-the-counter market (provided that an “active trading
market” for the

 

20

 

Common Shares
exists on such over-the-counter market). 
An “active trading market” shall not be deemed to exist when the spread
between the bid and ask prices per Common Shares exceeds 10%.  If there is no active trading market, the “Current
Market Price” shall be determined in the good faith and reasonable judgment of
a nationally-recognized investment banking firm selected by VGZ and the Holders
of a majority in principal amount of the outstanding Notes;

 

(f)                                    if
and whenever at any time after the date hereof and prior to the Time of Expiry,
there is a consolidation, amalgamation or merger of VGZ with or into any other
corporation or other entity (other than a vertical short-form amalgamation with
one or more of its Subsidiaries), or a transfer of the undertaking or assets of
VGZ as an entirety or substantially as an entirety to another corporation or
other entity in which the holders of Common Shares are entitled to receive
shares, other securities or other property (any of such events being called a “Capital Reorganization”), the holder upon
conversion of the Notes after the effective date of such Capital Reorganization
will be entitled to receive upon conversion of the Notes, and will accept for
the same aggregate consideration in lieu of the number of Common Shares to
which the holder was previously entitled upon such conversion, the aggregate
number of shares, other securities or other property, including cash, which the
holder would have been entitled to receive as a result of such Capital
Reorganization if, on the effective date thereof, the holder had been the
registered holder of the number of Common Shares to which the holder would have
been entitled upon conversion of the Notes;

 

(g)                                 in
the case of any reclassification of, or other change in, the outstanding Common
Shares of VGZ other than a subdivision, redivision, reduction, combination or
consolidation, the Conversion Price shall be adjusted in such manner, if any,
and at such time, as, the Board of Directors, in their sole discretion, may
determine to be equitable in the circumstances and if the Common Shares are
then listed on the Toronto Stock Exchange, with the approval of the Toronto
Stock Exchange.  Failure of the Board of
Directors to provide for an adjustment on or prior to the effective date of any
such reclassification of, or change in, the outstanding Common Shares of VGZ
shall be conclusive evidence that the Board of Directors have determined that
it is equitable to make no adjustment in the circumstances;

 

(h)                                 if
and whenever at any time after the date hereof and prior to the Time of Expiry
VGZ shall issue or sell any Common Shares for a consideration per share less than
the Conversion Price then in effect, then, forthwith upon such issue or sale,
the Conversion Price shall be reduced to a price equal to the effective price
of the additional Common Shares so issued which is a quotient determined by
dividing (i) the total number of such additional Common Shares issued by
VGZ into (ii) the aggregate consideration received by VGZ for the total
number of Common Shares so issued; provided however that in no event
shall the Conversion Price be less than US$4.80 as the result of adjustments in
this section 3.5(h) or sections 3.5(i), (j) or (k).

 

(i)                                     In case at any time after the
date hereof VGZ shall in any manner grant (whether directly or by assumption in
a merger or otherwise) issue, sell any rights to subscribe for or to purchase,
or any options for the purchase of, Common Shares or any stock
or

 

21

 

securities
convertible into or exchangeable for Common Shares (such convertible or
exchangeable stock or securities being herein called “Convertible Securities”), other than
options to purchase Common Shares issued to directors, officers, employees or
consultants of VGZ in such capacity and approved by the Board of Directors of
VGZ, whether or not such rights or options or the right to convert or exchange
any such Convertible Securities issuable upon the exercise of such rights or
options are immediately exercisable, and the price per share for which Common
Shares are issuable upon the exercise of such rights or options or upon conversion
or exchange of such Convertible Securities (determined by dividing (i) the
total amount, if any, received or receivable by VGZ as consideration for the
granting of such rights or options, plus the minimum aggregate amount of
additional consideration, if any, payable to VGZ upon the exercise of such
rights or options, plus, in the case of such rights or options which are
exercisable for Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable to VGZ upon the conversion or
exchange thereof, by (ii) the total maximum number of Common Shares
issuable upon the exercise of such rights or options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
rights or options) shall be less than the then existing Conversion Price, then
the total maximum number of Common Shares issuable upon the exercise of such
rights or options or upon conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or options shall be deemed
to be outstanding as of the date of the granting of such rights or options and
to have been issued for such price per share, with the effect on the Conversion
Price specified in section 3.5(h). Except as provided in section 3.5(j), no
further adjustment of the Conversion Price shall be made upon the actual issue
of such Common Shares or Convertible Securities upon exercise of such rights or
options or upon the actual issue of such Common Shares upon conversion or
exchange of such Convertible Securities;

 

(j)                                     upon
the happening of any of the following events, namely, if the purchase price
provided for in any right or option referred to in section 3.5(i), the
additional consideration, if any, payable upon the conversion or exchange of
any Convertible Securities referred to in sections 3.5(i), or the rate at which
any Convertible Securities referred to in sections 3.5(i) are convertible
into or exchangeable for Common Shares shall change (other than under or by
reason of provisions designed to protect against dilution), the Conversion
Price then in effect hereunder shall forthwith be readjusted (increased or
decreased, as the case may be) to the Conversion Price which would have been in
effect at the time of such readjustment had such rights, options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or changed conversion rate, as the case may be, at the
time initially granted, issued or sold. 
On the expiration of any option or right referred to in section 3.5(i),
or the termination of any right to convert or exchange any Convertible
Securities referred to in sections 3.5(i), the Conversion Price then in effect
hereunder shall forthwith be readjusted (increased or decreased, as the case
may be) to the Conversion Price which would have been in effect at the time of
such expiration or termination had such right, option or right to convert or
exchange Convertible Securities, to the extent outstanding immediately prior to
such expiration or termination, never been granted or issued or included in
such Convertible Securities, and the Common Shares issuable thereunder shall no
longer be deemed to be outstanding. If the purchase price provided

 

22

 

for in any such
right or option referred to in section 3.5(i) or the rate at which any
Convertible Securities referred to in sections 3.5(i) are convertible into
or exchangeable for Common Shares shall be reduced at any time under or by reason
of provisions with respect thereto designed to protect against dilution, then
in case of the delivery of Common Shares upon the exercise of any such right or
option or upon conversion or exchange of any such Convertible Securities, the
Conversion Price then in effect hereunder, if not already adjusted for such
reduction, shall forthwith be adjusted to the amount it would have been had
such right, option or Convertible Securities never been issued as to such
Common Shares and had adjustments been made upon the issuance of the Common
Shares delivered as aforesaid; provided, however, that no such adjustment to
the Conversion Price shall be made pursuant to this sentence unless the
Conversion Price is reduced thereby;

 

(k)                                  subject
to the prior written consent of the Toronto Stock Exchange, in any case in
which this section 3.5 shall require that an adjustment shall become effective
immediately after a record date for an event referred to herein, VGZ may defer,
until the occurrence of such event, issuing to the Holder of any Note converted
after such record date and before the occurrence of such event the additional
Common Shares issuable upon such conversion by reason of the adjustment
required by such event before giving effect to such adjustment; provided, however,
that VGZ shall deliver to such Holder an appropriate instrument evidencing such
holder’s right to receive such additional Common Shares upon the occurrence of
the event requiring such adjustment and the right to receive any distributions
made on such additional Common Shares declared in favour of holders of record
of Common Shares on and after the Date of Conversion or such later date as such
holder would, but for the provisions of this section 3.5, have become the
holder of record of such additional Common Shares;

 

(l)                                     the
adjustments provided for in this section 3.5 are cumulative and shall apply to
successive subdivisions, redivisions, reductions, combinations, consolidations,
distributions, issues or other events resulting in any adjustment under the
provisions of this section 3.5; provided that, notwithstanding any other
provision of this section 3.5, no adjustment of the Conversion Price shall be
required unless such adjustment would require an increase or decrease of at
least 1% in the Conversion Price then in effect; provided, however, that any
adjustments which by reason of this section 3.5(l) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment; and

 

(m)                               in
the event of any question arising with respect to the adjustments provided in
this section 3.5, such question, subject to prior written consent of the
Toronto Stock Exchange, shall be conclusively determined by a firm of chartered
accountants appointed by VGZ and acceptable to the Noteholders (who may be the
auditors of VGZ); such accountants shall have access to all necessary records
of VGZ and such determination shall be binding upon VGZ and the Noteholders.

 

3.6       No Requirement to Issue Fractional Shares

 

VGZ shall not be required to issue fractional Common Shares upon the
conversion of Notes pursuant to this section 3.6.  If more than one Note shall be surrendered
for conversion at

 

23

 

one time by the same holder, the number of whole
Common Shares issuable upon conversion thereof shall be computed on the basis
of the aggregate principal amount of such Notes to be converted.  If any fractional interest in a Common Share
would, except for the provisions of this section 3.6, be deliverable upon the
conversion of any principal amount of Notes, VGZ shall, in lieu of delivering
any certificate of such fractional interest, satisfy such fractional interest
by paying to the Trustee an amount in U.S. dollars an amount equal (computed to
the nearest cent) to the appropriate fraction of the value (being the last
reported sale price or, if none, the mean between the closing bid and ask
quotations on the American Stock Exchange, or, if the Common Shares are not
listed on the American Stock Exchange, on such national stock exchange on which
the Common Shares are listed as may be selected for such purpose by the Board
of Directors and approved by the Noteholders or, if the Common Shares are not
listed on any national stock exchange, then on the over-the-counter market
where an “active trading market” exists) of a Common Share on the Business Day
next preceding the Date of Conversion.  
The Trustee shall then remit such payment it has received from VGZ to
the Holder of such surrendered Note.

 

3.7       Corporation to Reserve Common Shares

 

VGZ covenants with the Noteholders that it will at all times reserve
and keep available out of its authorized Common Shares, solely for the purpose
of issue upon conversion of Notes as in this Article 3 provided, and
conditionally allot to Noteholders who may exercise their conversion rights
hereunder, such number of Common Shares as shall then be issuable upon the
conversion of all outstanding Notes.  VGZ
covenants with the Noteholders that all Common Shares which shall be so issuable
shall be duly and validly issued as fully paid and non-assessable Common Shares
of VGZ.

 

3.8       Taxes and Charges on Conversion

 

VGZ will from time to time promptly pay or make provision satisfactory
to the Noteholders for the payment of any and all taxes and charges which may
be imposed by the laws of federal government or any state or province thereof
(except income tax, if any) which shall be payable with respect to the issuance
and/or delivery to the Holders of Notes, upon the exercise of their right to
conversion, of Common Shares pursuant to the terms of the Notes and of this
Indenture.

 

3.9       Cancellation of Converted Notes

 

All Notes converted in whole or in part under the provisions of this Article 3
shall be forthwith delivered to and cancelled by the Trustee.

 

3.10     Certificate as to Adjustment

 

VGZ shall from time to time, immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in section 3.5,
deliver an Officers’ Certificate to the Noteholders and the Trustee specifying
the nature of the event requiring the same and the amount of the adjustment
necessitated thereby and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based, which
certificate and the amount of the adjustment specified therein shall, subject
to the provisions of

 

24

 

section 3.5(k), be conclusive and binding on all
parties in interest.  VGZ shall, except
in respect of any subdivision, redivision, reduction, combination or
consolidation of the Common Shares, forthwith give notice to the Noteholders in
the manner provided herein specifying the event requiring such adjustment or
readjustment and the results thereof, including the resulting Conversion Price.

 

3.11     Notice of Special Matters

 

VGZ covenants with the Noteholders and the Trustee, that, at any such
time that any Notes remain outstanding, it will give notice to the Noteholders
in the manner provided in section 14.1, of its intention to fix a record date
for any event referred to in section 3.5(b), (c) or (d) which may
give rise to an adjustment in the Conversion Price, and, in each case, such
notice shall specify the particulars of such event and the record date and the
effective date for such event; provided that VGZ shall only be required to
specify in such notice such particulars of such event as shall have been fixed
and determined on the date on which such notice is given.  Such notice shall be given not less than 15
Business Days in each case prior to such applicable record date or effective
date, whichever is earlier.

 

3.12     Obligations of VGZ Regarding Calculations

 

VGZ shall provide Trustee with all calculations pursuant to section 3.5
hereunder, and VGZ acknowledges and agrees that Trustee shall be permitted to
rely on such calculations, but  shall not
be liable for any errors or omissions associated with such calculations.

 

4.      SECURITY

 

4.1       Security

 

The Trustee hereby appoints the Collateral Agent as its agent under the
Security Interests, and the Collateral Agent is hereby authorized to act on
behalf of the Trustee, with full authority and powers of the Trustee hereunder.

 

As general and continuing security for the due and punctual payment of
all of the principal of and interest on the Notes, all other amounts from time
to time payable to the Trustee and the Noteholders under or in respect of this
Indenture and the performance of VGZ’s obligations contained in the Notes and
this Indenture, (the “Secured Obligations”)
the Guarantor shall forthwith after the execution hereof, execute and deliver
the Non-Possessory Pledge Agreement creating a security interest in the Pledged
Assets in favour of the Collateral Agent for and on behalf of the Noteholders.

 

4.2       Title to Pledged Assets

 

The Guarantor represents, warrants and covenants with the Trustee, the
Collateral Agent and the Noteholders that (a) the Guarantor has authority
to grant the Security Interests on the Pledged Assets; and (b) such
Pledged Assets are and will be and remain free and clear of any Liens thereon
other than the Security Interests and other than Permitted Liens.

 

25

 

4.3       Further Assurances

 

Each of VGZ and the Guarantor, as the case may be, acknowledges to and
covenants with the Trustee and the Collateral Agent that:

 

(a)                                  it
shall from time to time execute and deliver all such agreements, documents and
other instruments, and do all such things and give all such assurances as, in
the opinion of Counsel, acting reasonably, are necessary or of advantage for
validly granting to the Collateral Agent the Security Interests intended to be
created by the Non-Possessory Pledge Agreement upon the Pledged Assets, whether
now owned or hereafter acquired by the Guarantor, subject to Permitted Liens;

 

(b)                                 it
shall from time to time, after the Security Interests shall have become
enforceable and the Trustee or the Collateral Agent shall have been directed by
the Noteholders to enforce the same after the occurrence and during the continuance
of an event of default thereunder, execute and deliver all such agreements,
documents and other instruments, and do all such things and give all such
assurances as the Trustee or the Collateral Agent may reasonably require for
facilitating the enforcement of the Security Interests and the realization of
the Pledged Assets and for exercising all of the powers, authorities and
discretions conferred upon the Collateral Agent by the Non-Possessory Pledge
Agreement and for transferring to any purchaser of any such property, whether
sold by the Collateral Agent under the Non-Possessory Pledge Agreement or by
judicial proceedings, the title to the assets so sold and the Guarantor shall
give all such notices which the Collateral Agent may consider expedient; and

 

(c)                                  it
will, on reasonable request from the Trustee or Collateral Agent from time to
time, deliver to the Collateral Agent such additional security documents and
amend or supplement the Non-Possessory Pledge Agreement:

 

	
  (i)

  	
   

  	
  to
  reflect any changes in laws, whether arising as a result of statutory
  amendments, court decisions or otherwise to ensure the effectiveness and
  enforceability of the Security Interests in the Pledged Assets intended to be
  created by the Non-Possessory Pledge Agreement; or

  
	
   

  	
   

  	
   

  
	
  (ii)

  	
   

  	
  to
  facilitate the registration of appropriate forms of security documents
  against all property subject to, or intended to be subject to, the Security
  Interests created or intended to be created by the Non-Possessory Pledge
  Agreement; or

  
	
   

  	
   

  	
   

  
	
  (iii)

  	
   

  	
  to
  facilitate the registration of the Security Interests in all applicable
  jurisdictions where such registrations are necessary or of advantage to
  preserve or perfect the Security Interest in any Pledged Asset; or

  
	
   

  	
   

  	
   

  
	
  (iv)

  	
   

  	
  if
  VGZ or the Guarantor merges with or enters into a reorganization with any
  person;

  
	
   

  	
   

  	
   

  
	
   

  	
  in
  each case in order to confer upon the Collateral Agent such Security
  Interests with such priority as is intended to be created by the
  Non-Possessory Pledge Agreement.

  
				

 

26

 

4.4       Registration

 

The Guarantor covenants with the Trustee and the Collateral Agent that
immediately after the execution of the Non-Possessory Pledge Agreement, the
Guarantor shall register, file or record the Non-Possessory Pledge Agreement in
all registry offices (or the equivalent filing offices in any other applicable
jurisdictions, including, without limitation, Mexico) in all registration
divisions where, in the reasonable opinion of the Trustee, Collateral Agent,
Counsel or Noteholders representing a majority in principal amount of the
Notes, such registration, filing or recording is necessary or of advantage to
preserve or perfect the Security Interests in any Pledged Assets. The Guarantor
and VGZ shall deliver to the Collateral Agent certificates establishing each
such registration, filing or recording, and shall do, observe and perform all
matters and things including renewals of such registrations, filings or
recordings necessary or expedient to be done, observed and performed for the
purpose of creating, perfecting, setting up, rendering opposable, protecting
and maintaining the Security Interests as valid and effective Liens with the
priority intended to be created and maintained by the Non-Possessory Pledge
Agreement in the Pledged Assets.  The
Guarantor will pay or indemnify the Trustee, Collateral Agent and the
Noteholders against any and all stamp duties, registration fees and similar
taxes or charges which may be payable or determined to be payable in connection
with the execution, delivery, performance, registration or enforcement of any
of the Non-Possessory Pledge Agreement or any of the transactions contemplated
by the Non-Possessory Pledge Agreement.

 

4.5       Security Valid Irrespective of Advance

 

The Security Interests shall be effective whether the consideration in
respect of which the Notes are issued or any part of such consideration shall
be made or given before or after or at the same time as the execution and
delivery of this Indenture or the issue of any of the Notes. The Security
Interests shall be effective notwithstanding that from time to time no Notes
may be outstanding and the obligations of VGZ and the Guarantor shall not be
deemed extinguished until VGZ and the Guarantor shall have been released from their
covenants under this Indenture, the Notes and the Non-Possessory Pledge
Agreement in accordance with section 8.4.

 

4.6       Final Discharge

 

	
   

  	
  Upon proof
  being given to the satisfaction of the Trustee and the Collateral Agent that:

  
	
   

  	
   

  
	
  (a)

  	
  all of the principal of and interest on, if any, the Notes have been
  paid and satisfied in full; and

  
	
   

  	
   

  
	
  (b)

  	
  all other amounts owing under this Indenture (including, without
  limitation, with respect to the Guarantee), and the Non-Possessory Pledge
  Agreement have been paid and satisfied in full,

  

 

the Collateral Agent shall, at the request and at the expense of VGZ or
the Guarantor, execute and deliver to VGZ or the Guarantor such deeds or other
instruments as shall be requisite to evidence the satisfaction and discharge of
the Security Interests and to release or reconvey to the Guarantor all Pledged
Assets freed and discharged from the Security Interests.

 

27

 

5.      SENIORITY

 

5.1       Seniority

 

Except for Permitted Liens, the Guarantor owns each
item of the Pledged Assets free and clear of any and all Liens or claims of
others.  No security agreement, financing
statement or other public notice with respect to all or any part of the Pledged
Assets that evidences a Lien securing any material Indebtedness is on file or
of record in any public office, except such as have been filed in favor of
Collateral Agent for the ratable benefit of the Noteholders pursuant to this
Indenture.  The Guarantor shall maintain
each of the  Security Interests as
a perfected, set up, opposable and protected Lien having at least the priority
described in this section 5.1 and shall defend such security interest against
the claims and demands of all Persons whomsoever.  All Notes issued pursuant to the provisions of
this Indenture shall rank pari passu and be secured equally and ratably without
discrimination or preference, whatever may be the actual date thereof or of the
authentication thereof respectively.  Neither
the Trustee nor the Collateral Agent will have any obligation to register, make
any filings with respect to, perfect, or verify the seniority of, the Security
Interests.

 

6.      COVENANTS OF VGZ AND THE GUARANTOR

 

6.1       General Covenants

 

	
   

  	
  VGZ and the Guarantor covenant with the Trustee
  that so long as any of the Notes remain outstanding:

  
	
   

  	
   

  
	
  (a)

  	
  VGZ will well, duly and punctually pay or cause to be paid to every
  Noteholder, or to the Trustee on behalf of every Noteholder, all principal
  thereof and accrued interest, if any, on the Notes, at the dates and places,
  in the currency and in the manner mentioned herein and in the Notes;

  
	
   

  	
   

  
	
  (b)

  	
  each of VGZ and the Guarantor will carry on and conduct, and will
  cause to be carried on and conducted, its business in a proper and efficient
  manner and do or cause to be done all things necessary to preserve and keep
  in full force and effect its existence and all consents, rights, franchises,
  licences, approvals, permits and qualifications necessary to own their
  respective properties and assets and perform their respective obligations
  under this Indenture; but VGZ and the Guarantor may not cease to operate or
  dispose of all or substantially all of its undertaking or assets, except in
  accordance with Article 9, and VGZ will keep or cause to be kept proper
  books of account, and will forthwith file with the Trustee copies of all
  annual and periodic reports of VGZ furnished to its shareholders after the
  date hereof, and at all reasonable times it will furnish or cause to be
  furnished to the Trustee or its duly authorized agent or attorney such
  information relating to its business as the Trustee may reasonably require;

  
	
   

  	
   

  
	
  (c)

  	
  each of VGZ and the Guarantor will provide, or cause to be provided,
  prompt notice in writing to the Trustee of any Default or Event of Default;

  
	
   

  	
   

  
	
  (d)

  	
  each of VGZ and the Guarantor shall pay or discharge or cause to be
  paid or discharged, before the same shall become delinquent, (a) all
  taxes, assessments and governmental charges levied or imposed upon its or its
  Subsidiaries’ income, profits or property and (b) all lawful claims for
  labor, materials and supplies which, if unpaid, might by law

  

 

28

 

become a Lien
upon its property; provided that VGZ and the Guarantor shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate negotiations or proceedings and for
which disputed amounts any reserves required in accordance with GAAP have been
made;

 

(e)           each of VGZ and the
Guarantor shall, and shall cause each of its Subsidiaries to, at all times
cause all properties used and material to the operations of its business to be
maintained and kept in good condition, repair and working order in accordance
with industry standards (reasonable wear and tear excepted) and supplied with
all necessary equipment required for the operations of its business consistent
with industry standards and past practice and given the stage and status of the
relevant operations, and shall cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereto consistent with
industry standards and past practice and given the stage and status of the
relevant operations;

 

(f)            each of VGZ and the
Guarantor shall maintain insurance in such amounts and covering such risks as
are usually and customarily carried with respect to similar facilities
according to their respective locations;

 

(g)           each of VGZ and the
Guarantor will use or cause to be used the proceeds of the Notes exclusively at
the Paredones Amarillos project in Mexico (including, without limitation, the
purchase of equipment for such project and US$12 million which may be retained
by VGZ to reimburse VGZ for payments previously mad by VGZ in respect of the
purchase of equipment for the Paredones Amarillos project in Mexico);

 

(h)           VGZ will annually, within
140 days of the end of each fiscal year of VGZ, deliver to the Trustee (i) an
Officer’s Certificate confirming that it has complied with all requirements
contained in this Indenture that, if not complied with, would, with the giving
of notice, lapse of time or otherwise, constitute an Event of Default, or, if
there has been any failure to comply, giving particulars thereof and (ii) audited
consolidated financial statements for the previous fiscal year;

 

(i)            each of VGZ and the
Guarantor shall not complete an Asset Disposition; and

 

(j)            generally, VGZ and the
Guarantor will well, duly and punctually perform and carry out all of the acts
or things to be done by it as provided in this Indenture.

 

6.2       Trustee’s Remuneration and Expenses

 

VGZ
will pay to the Trustee and/or the Collateral Agent from time to time such
remuneration for its services hereunder as shall be negotiated by VGZ and the
Trustee and/or the Collateral Agent, and VGZ will pay or reimburse the Trustee
and/or the Collateral Agent upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee and/or the
Collateral Agent in the execution of its rights, powers, duties and obligations
hereunder and in the administration or execution of the trusts hereby created (including
the reasonable fees and the disbursements of its Counsel and all other advisers
and assistants not regularly in its employ), both before any default hereunder
and thereafter until all

 

29

 

duties
of the Trustee hereunder and/or the Collateral Agent under the Non-Possessory
Pledge Agreement shall be finally and fully performed, except any such expense,
disbursement or advance as may arise from the gross negligence or wilful
misconduct of the Trustee and/or the Collateral Agent. Any amount due under
this section and unpaid 30 days after a request for such payment shall
bear interest at the then current rate charged by the Trustee and/or the
Collateral Agent. After default, all amounts so payable and the interest
thereon shall be payable out of any funds coming into the possession of the
Trustee and/or the Collateral Agent in priority to the principal of and
interest on, if any, the Notes.

 

6.3       Trustee to Give Notice of Default

 

The
Trustee shall give to VGZ, the Guarantor and the Noteholders in the manner
provided in section 14.1 promptly after the Trustee becomes aware of any
default on the part of VGZ or the Guarantor in the performance of any covenant
or condition herein or of the occurrence of any Event of Default, notice of
every such default or Event of Default, as the case may be.

 

6.4       Performance of Covenants by Trustee

 

If
VGZ or the Guarantor shall fail to perform any of its covenants contained in
this Indenture, the Trustee may itself perform any of such covenants capable of
being performed by it, but shall be under no obligation to do so. All sums so
expended or advanced by the Trustee shall be repayable as provided in
section 6.2.   No such performance
or advance by the Trustee shall be deemed to relieve VGZ of a default
hereunder.

 

7.      DEFAULT AND ENFORCEMENT

 

7.1       Events of Default

 

Each
of the following events is herein referred to as an “Event of Default”:

 

(a)                                  if default is made in the payment of any principal due on any of the
Notes when the same becomes due under any provision hereof or of the Notes as
required hereunder and such default shall have continued for a period of ten (10) Business
Days; or

 

(b)                                 if default is made in the payment of any interest due on any of the
Notes and such default shall have continued for a period of five (5) Business
Days; or

 

(c)                                  if default is made in the performance or breach by VGZ or the
Guarantor of any other covenant or agreement under the provisions of the Notes,
this Indenture or any document relating hereto or thereto and continues for a
period of 20 days after written notice specifying such default and
requiring such default to be remedied has been given to VGZ or the Guarantor,
as the case may be, by the Trustee; or

 

(d)                                 any order to cease, halt or
suspend trading in the Common Shares is made by a competent regulatory
authority that would have the effect of precluding the Holders from exercising
their conversion rights hereunder or from trading Notes Shares and that order
is still in effect for a period of ten (10) consecutive days; or

 

30

 

(e)                                  if there occurs with respect to any Indebtedness of VGZ or the
Guarantor having an outstanding principal amount of $2,000,000 or more an event
of default that has caused the holder thereof to declare such Indebtedness to
be due and payable prior to its maturity and such Indebtedness has not been
discharged in full or such acceleration has not been rescinded or annulled
within 30 days of such acceleration; or

 

(f)                                    if a proceeding or case shall be commenced against VGZ or the
Guarantor, except in the course of carrying out, or pursuant to, a transaction
which is permitted by Article 9, in any court of competent jurisdiction,
seeking (i) its reorganization, liquidation, termination or winding-up, or
the composition or readjustment of its debts, (ii) the appointment of a
receiver, custodian, liquidator or the like of VGZ or the Guarantor or all or
any substantial part of its respective property, or (iii) similar relief
in respect of VGZ or the Guarantor under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts,
and such proceeding or case shall continue undismissed, or an order, judgment
or decree approving or ordering any of the foregoing shall be entered and
continue unstayed and in effect, for a period of 60 or more days, or an order
for relief against VGZ or the Guarantor shall be entered in an involuntary case
under the Bankruptcy and Insolvency Act
(Canada) (as amended, the “Bankruptcy Act”);
or

 

(g)                                 if VGZ or the Guarantor shall (i) apply for or consent to the
appointment of, or the taking of possession by, a receiver, custodian,
examiner, liquidator or the like of itself or of all or any substantial part of
its property, (ii) make a general assignment for the benefit of its
creditors, (iii) commence a voluntary case under the Bankruptcy Act or any
other similar foreign statute, (iv) institute any proceeding or file a
petition seeking to take advantage of any other law relating to bankruptcy,
insolvency, reorganization, liquidation, termination, winding-up or composition
or readjustment of debts, (v) fail to contest in a timely and appropriate
manner, or acquiesce in writing to, any petition filed against it in an
involuntary case under the Bankruptcy Act or any other similar foreign statute,
or (vi) take any action for the purpose of effecting any of the foregoing.

 

7.2       Acceleration on Default

 

In
case of any Event of Default that has occurred and is continuing, the Trustee
may in its discretion (but shall have no obligation to) and shall, if so
directed by the Holders of not less than 33% in principal amount of the Notes
then outstanding by instrument in writing, subject to the provisions of
section 7.3, declare the principal of all Notes then outstanding and all
other moneys payable hereunder to be due and payable and the same shall
forthwith become immediately due and payable to the Trustee on written demand,
anything therein or herein to the contrary notwithstanding. VGZ shall in either
case forthwith pay to the Trustee for the benefit of the Noteholders the
principal of such Notes and all other moneys payable hereunder, together with
subsequent interest thereon at the rate of 12% per annum
from the date of such declaration (subject to the proviso below) until the date
payment is received by the Trustee, such subsequent interest to be payable at
the times and places and according to the tenor of the Notes. Such payment when
made shall be deemed to have been made in discharge of VGZ’s obligations
hereunder and any moneys so received by the Trustee shall be applied in the
manner provided in section 7.6.

 

31

 

7.3       Waiver of Default or Breach

 

In
case any Event of Default hereunder has occurred:

 

(a)                                  the Holders of not less than 66 2/3% in principal amount of the
Notes then outstanding shall have the power (in addition to and subject to the
powers exercisable by Special Resolution) by instrument in writing to instruct
the Trustee to waive the default and/or to annul any declaration and/or demand
made by the Trustee pursuant to section 7.2 and the Trustee shall
thereupon waive the default and/or annul such declaration and/or demand upon
such terms and conditions as such Noteholders may prescribe; and

 

(b)                                 the Trustee, so long as it has not become bound to institute any
proceedings hereunder, shall have power to waive the default if, in the Trustee’s
opinion, the same shall have been cured or adequate satisfaction made therefore,
and in such event to annul any such declaration and/or demand therefor, made by
the Trustee in the exercise of its discretion, upon such terms and conditions
as the Trustee may deem advisable, provided, however, that no act or omission
of the Trustee or the Noteholders shall extend to or be taken in any manner
whatsoever to affect any subsequent default or the rights resulting therefrom.
The Trustee may waive or authorize any breach or proposed breach of any of the
terms, conditions or provisions of this Indenture or the Notes if, in the
opinion of the Trustee, such breach or proposed breach is not materially
prejudicial to the interests of the Noteholders.

 

7.4       Proceedings by the Trustee

 

Whenever
any Event of Default hereunder has occurred and is continuing, but subject to
section 7.3 and to the provisions of any Special Resolution:

 

(a)                                  the Trustee, in the exercise of its discretion and without further
notice, may proceed to enforce the rights of the Trustee and the Noteholders by
any action, suit, remedy or proceeding authorized or permitted by law or by
equity and may file such proofs of claim and other papers or documents as may
be necessary or advisable in order to have the claims of the Trustee and of the
Holders lodged in any bankruptcy, termination or other proceedings relative to
VGZ or the Guarantor; and

 

(b)                                 if so directed by a Special Resolution and, upon being indemnified
to its satisfaction as provided in section 12.2, the Trustee shall
exercise or take such one or more of such remedies as the Special Resolution
may direct or, if such Special Resolution contains no direction, as the Trustee
may deem expedient.

 

No
delay or omission of the Trustee or of the Noteholders to exercise any remedy
referred to in this paragraph shall impair any such remedy or shall be
construed to be a waiver of any default hereunder or acquiescence therein.

 

VGZ
shall be liable to the Trustee for all costs incurred by the Trustee in
connection with the enforcement of rights under this Indenture.

 

32

 

No
such remedy for the enforcement of the rights of the Trustee or of the
Noteholders shall be exclusive of or dependent on any other such remedy but any
one or more of such remedies may from time to time be exercised independently
or in combination.

 

Upon
the exercise or taking by the Trustee of any such remedies, whether or not a
declaration and demand have been made pursuant to section 7.2, the
principal and interest on, if any, all Notes and other moneys payable under section 7.2
shall forthwith become due and payable to the Trustee as though such a
declaration and a demand therefor had actually been made.

 

All
rights of action hereunder may be enforced by the Trustee, without the
possession of any of the Notes or the production thereof on the trial or other
proceedings relative thereto.

 

7.5       Suits by Noteholders

 

No
Holder of any Note shall have the right to institute any action or proceedings
or to exercise any other remedy authorized by this Indenture for the purpose of
enforcing any right hereunder or under any Note or for the execution of any
trust or power hereunder or for the appointment of a liquidator or receiver or
for a receiving order under any bankruptcy legislation or to have VGZ
terminated or to file or prove a claim in any liquidation or bankruptcy
proceedings, unless a Special Resolution and indemnity referred to in
section 12.2 have been tendered to the Trustee and the Trustee shall have
failed to act within a reasonable time thereafter. In such case, but not
otherwise, any Noteholder acting on behalf of himself and all other Noteholders
shall be entitled to take proceedings in any court of competent jurisdiction
such as the Trustee might have taken under section 7.4. No one or more
Noteholders shall have any right in any manner whatsoever to affect, disturb or
prejudice the rights hereby created by his or their action, or to enforce any
right hereunder or under any Note, except subject to the conditions and in the
manner herein provided, and all powers and trusts hereunder shall be exercised
and all proceedings at law shall be instituted, had and maintained by the
Trustee, except only as herein provided, and in any event for the equal benefit
of all Noteholders.

 

7.6       Application of Moneys Received by Trustee

 

Except
as otherwise herein provided, the moneys arising from any enforcement hereof
shall be held in trust by the Trustee and by it applied, together with any
other moneys then or thereafter in the hands of the Trustee available for the
purpose, as follows:

 

(a)                                  first, in payment or reimbursement to the Trustee of the
remuneration, expenses, disbursements and advances of the Trustee earned,
incurred or made in the execution of its obligations and responsibilities
hereunder and in the administration or execution of any trusts hereunder or
otherwise in relation to this Indenture with interest thereon as herein
provided;

 

(b)                                 thereafter, in or towards payment ratably and proportionately
firstly of the principal of the Notes, secondly of the accrued and unpaid
interest on the Notes and thirdly of the other moneys payable hereunder, unless
the order or priority of payment shall be otherwise directed by Special
Resolution and, in that case, in such order or priority as between such
principal and interest as may be directed by such Special Resolution; and

 

33

 

(c)                                  lastly, the surplus (if any) of such moneys shall be paid to VGZ or
its assigns, unless otherwise required by law.

 

7.7       Distribution of Proceeds

 

Payments
to Holders pursuant to section 7.6 shall be made as follows:

 

(a)                                  at least 10 days’ notice of every such payment shall be given
in the manner provided in section 14.1 specifying the time when and the
place or places where the Notes are to be presented and the amount of the
payment and the application thereof as between principal, interest and any
other moneys payable hereunder;

 

(b)                                 payment of any Note shall be made upon presentation thereof at any
one of the places specified in such notice, any such Note thereby paid in full
shall be surrendered and otherwise such payment shall be recorded by
endorsement thereon; but the Trustee may in its discretion (but shall have no
obligation to) dispense with presentation and surrender in any special case
upon such indemnity being given as it shall deem sufficient;

 

(c)                                  from and after the date of payment specified in the notice, interest
shall accrue only on the amount owing on each Note after giving credit for the
amount of the payment specified in such notice, unless such Note be duly
presented on or after the date so specified and payment of such amount be not
made; and

 

(d)                                 the Trustee shall not be required to make any interim payment to
Noteholders, unless the moneys in its hands, after reserving therefrom such
amount as the Trustee may think necessary to provide for the payments mentioned
in subsection 7.6(a), exceed 5% of the principal amount of the Notes.

 

7.8       Trustee Appointed Attorney

 

VGZ
hereby irrevocably appoints the Trustee to be the attorney of VGZ for and in
the name and on behalf of VGZ to execute any instrument and do any acts and
things which VGZ ought to sign, execute and do hereunder and generally to use
the name of VGZ in the exercise of all or any of the powers hereby conferred on
the Trustee, with full powers of substitution and revocation.

 

7.9       Remedies Cumulative

 

Each
and every remedy herein conferred upon or reserved to the Trustee, or upon or
to the Noteholders, shall, to the extent permitted by law, be cumulative and
shall be in addition to every other remedy given hereunder or now existing or
hereafter to exist by law or by statute.

 

7.10     Judgment Against VGZ

 

VGZ
covenants and agrees with the Trustee that, in case of any proceedings to
obtain judgment for the principal of or interest on, if any, the Notes,
judgment may be rendered against it in favour of the Noteholders hereunder, or
in favour of the Trustee, as fondé de
pouvoir

 

34

 

(holder
of the power of attorney) for all the Noteholders, for any amount which may
remain due in respect of the Notes and interest thereon and any other moneys
payable by VGZ hereunder and under all documents relating hereto.

 

8.      SATISFACTION AND DISCHARGE

 

8.1       Cancellation and Destruction

 

All
Notes shall forthwith after full payment thereof be delivered to the Trustee or
to a person appointed by it or by VGZ with the approval of the Trustee and
cancelled. The Trustee shall prepare and retain a certificate of such  cancellation and deliver a duplicate thereof
to VGZ.

 

8.2       Non-Presentation of Notes

 

In
case the Holder of any Note should fail to present the same for payment on the
date on which the principal thereon or represented thereby becomes payable at
maturity or otherwise or should fail to accept payment on account thereof or
give such receipt therefor, as may be required by the Trustee:

 

(a)                                  VGZ shall be entitled to pay to the Trustee and direct it to set
aside; or

 

(b)                                 in respect of moneys in the hands of the Trustee which may or should
be applied to the payment of the Notes, VGZ shall be entitled to direct the
Trustee to set aside,

 

the
principal to be paid without interest to the Holder of such Note, upon due
presentation or surrender thereof in accordance with the provisions of this
Indenture; and thereupon the principal and interest payable on or represented
by each Note in respect whereof such moneys have been set aside shall be deemed
to have been paid and the Holder thereof shall thereafter have no right in
respect thereof, except that of receiving payment of the moneys so set aside by
the Trustee upon due presentation and surrender thereof, subject always to the
provisions of section 8.3.

 

8.3       Repayment of Unclaimed Moneys to VGZ

 

Any
moneys in the hands of the Trustee and set aside under section 8.2 and not
claimed by and paid or delivered as provided in section 8.2 to Holders of
Notes within three (3) years after the date of such setting aside shall be
repaid to VGZ by the Trustee on demand or otherwise as required by the
provisions of applicable laws of public order, and thereupon the Trustee shall
be released from all further liability with respect to such moneys and
thereafter the Holders of the Notes in respect of which such moneys were so
repaid or delivered to VGZ shall have no rights in respect thereof, except to
obtain payment of the moneys due thereon from VGZ up to the fifth anniversary
of the date hereof.

 

8.4       Release from Covenants

 

Upon
Written Request and proof being given to the reasonable satisfaction of the
Trustee that the principal of all the Notes and interest thereon, if any, and
other moneys payable

 

35

 

hereunder
have been paid or satisfied, or that all the outstanding Notes having matured,
such payments have been duly and effectually provided for by payment to the
Trustee or otherwise and upon payment of all costs, charges and expenses
properly incurred by the Trustee in relation to these presents and all
documents relating hereto, and all interest thereon, and the remuneration of
the Trustee, or upon provision satisfactory to the Trustee being made therefor,
the Trustee shall, at the request and at the expense of VGZ, execute and
deliver to VGZ and the Guarantor such deeds or other instruments as shall be
requisite to release VGZ and the Guarantor from the terms of the Indenture and
Notes, except those terms of the Indenture relating to the indemnification of
the Trustee.

 

9.      CONSOLIDATION, MERGER, CONVEYANCE 
OR TRANSFER

 

9.1       Certain Requirements in Respect of Merger, etc.

 

VGZ
shall not enter into any transaction (whether by way of merger, consolidation,
reorganization, lease, sale, conveyance, transfer, or otherwise) whereby all or
substantially all of its undertaking or assets would become the property of any
other person as long as any Notes are outstanding, unless:

 

(a)                                  such other person (herein called the “Successor”) is a trust, partnership or corporation constituted
under the laws of a province of Canada or the laws of Canada;

 

(b)                                 the Successor executes, prior to the consummation of such
transaction, such indenture supplemental hereto and other instruments (if any)
as are satisfactory to the Trustee and in the opinion of Counsel necessary or
advisable to evidence the assumption by the Successor of the liability for the
due and punctual payment of all the Notes and the interest thereon, if any, and
all other moneys payable hereunder and the covenant of such Successor to pay
the same and its agreement to observe and perform all the covenants and
obligations of VGZ under this Indenture and Notes;

 

(c)                                  such transaction is to the satisfaction of the Trustee and in the
opinion of Counsel upon such terms as substantially to preserve and not to
impair any of the rights and powers of the Trustee and of the Noteholders
hereunder; and

 

(d)                                 at the time of or immediately after the consummation of such
transaction, no condition or event shall exist which constitutes or which
would, after the lapse of time or giving of notice or both, constitute an Event
of Default hereunder.

 

9.2       Vesting of Powers in Successor

 

Upon
satisfaction of the conditions of section 9.1, the Successor shall succeed
to and be substituted for VGZ with the same effect as if the Successor had been
named herein and the Successor shall possess and from time to time may exercise
each and every right and power of VGZ under this Indenture in the name of VGZ
or otherwise and any act or proceeding by any provisions of this Indenture
required to be done or performed by any trustees or officers of VGZ may be done
and performed with like force and effect by the like trustees (if any),
directors (if any) or officers of such Successor.

 

36

 

9.3       Execution of Supplemental Indenture

 

Upon
being satisfied that the conditions of section 9.1 have been duly observed
and performed, the Trustee shall execute any supplemental indenture required,
as provided in Article 11.

 

10.    MEETINGS OF NOTEHOLDERS

 

10.1     Right to Convene Meeting

 

The
Trustee shall have power at any time to call meetings of the Noteholders at
such time and place as the Trustee may determine. Noteholders may, by
Noteholders’ Request or Written Request, respectively, requisition the Trustee
to call a meeting of the Noteholders for the purposes stated in the
requisition. The requisition shall state in reasonable detail the business to
be transacted at the meeting and shall be sent to the Trustee at the Corporate
Trust Office. Upon receiving the requisition, the Trustee shall call a meeting
of Noteholders to transact the business referred to in the requisition, unless:

 

(a)                                  a record date for a meeting of the Noteholders has been fixed;

 

(b)                                 the Trustee has called a meeting of the Noteholders and has given
notice thereof pursuant to section 10.2; or

 

(c)                                  in connection with the business as stated in the requisition the
requisition is not submitted to the Trustee at least ninety (90) days before
the date of the next scheduled meeting, if any, of the Noteholders.

 

If
the Trustee does not within 21 days after receiving the requisition call a
meeting, any Noteholders who signed the requisition may call the meeting in
accordance with the provisions of sections 10.2 and 10.9, mutatis mutandis. If there shall be no
Trustee, VGZ shall promptly appoint a successor Trustee in the manner provided
in section 12.9.

 

10.2     Notice of Meeting of Noteholders

 

Notice
of all meetings of the Noteholders shall be mailed or delivered by the Trustee
to each Noteholder and VGZ in the manner provided in section 14.1 and to
the auditors of VGZ not less than 21 nor more than 50 days (or within such
other delays as required by law) before the meeting but may be waived in
writing by any Noteholders either before or after such meeting. The attendance
of a Noteholder at a meeting shall constitute a waiver of notice of such
meeting except where a Noteholder attends a meeting for the express purpose of
objecting to the transaction of any business on the ground that the meeting has
not been lawfully called or convened. Notice of any meeting of the Noteholders
shall state the purposes of the meeting.

 

10.3     Quorum

 

A
quorum for any meeting of Noteholders shall be individuals present not being
less than two in number and being Noteholders or representing by proxy
Noteholders who hold in the aggregate not less than 25% in principal amount of
the Notes then outstanding.

 

37

 

If a quorum of
the Noteholders shall not be present within 30 minutes from the time fixed
for holding any meeting, the meeting, if convened by the Noteholders on a
Noteholders’ Request, shall be dissolved; but in any other case the meeting
shall be adjourned to the same day in the next week (unless such day is not a
business day in the place where the meeting is to be held, in which case it
shall be adjourned to the next following business day in such place) at the
same time and place. At the adjourned meeting, the Noteholders present in
person or represented by proxy shall form a quorum and may transact the
business for which the meeting was originally convened, notwithstanding that
they may not represent 25% of the principal amount of the Notes then
outstanding.

 

10.4     Chairman

 

An
individual, who need not be a Noteholder, nominated in writing by the Trustee
shall be chairman of the meeting and if no individual is so nominated, or if
the individual so nominated is not present within 15 minutes from the time
fixed for the holding of the meeting, the Noteholders present in person or by
proxy shall choose an individual present to be chairman.

 

10.5     Power to Adjourn

 

The
chairman of any meeting at which a quorum of the Noteholders is present may
with the consent of the Holders of a majority in principal amount of Notes
represented thereat and voting thereon adjourn any such meeting and no notice
of such adjournment need be given, except such notice (if any) as the meeting
may prescribe.

 

10.6     Show of Hands

 

Every
question submitted to a meeting shall be decided in the first place by a
majority of the votes given on a show of hands, except that a vote on any
Special Resolution shall be given in the manner hereinafter provided. At any
such meeting, unless a poll is required or duly demanded as herein provided, a
declaration by the chairman that a resolution has been carried or carried
unanimously or by a particular majority or lost or not carried by a particular
majority shall be conclusive evidence of the fact.

 

10.7     Poll

 

On
every Special Resolution, and on any other question submitted to a meeting when
demanded, after a vote by a show of hands, by the chairman or by one or more of
the Noteholders acting in person or by proxy and holding at least 5% of the
principal amount of the Notes then outstanding, a poll shall be taken in such
manner as the chairman shall direct. Questions other than Special Resolutions
shall be decided by the votes of the Holders of a majority of the principal
amount of the Notes represented at the meeting who voted on the poll.

 

10.8     Voting

 

Holders
of Notes may attend and vote at all meetings of the Noteholders either in
person or by proxy. On a show of hands every individual who is present and
entitled to vote, whether as a Noteholder or as proxy for one or more absent
Noteholders, or both, shall have

 

38

 

one
vote. On a poll, each Noteholder present in person or represented by proxy
shall be entitled to one vote in respect of each $1,000 principal amount of
Notes of which he shall be a Holder. The chairman of any such meeting shall not
have a second or casting vote.

 

10.9     Record Dates

 

For
the purpose of determining the Noteholders who are entitled to receive notice
of and vote at any meeting or any adjournment thereof, or for the purpose of
any other action, the Trustee may from time to time, without notice to
Noteholders, close the transfer books for such period, not exceeding
30 days, as the Trustee may determine; or with or without closing the
transfer books the Trustee may fix a date not more than 60 days prior to
the date of any meeting of the Noteholders or other action as a record date for
the determination of Noteholders entitled to receive notice of and to vote at
such meeting or any adjournment thereof or to be treated as Noteholders of
record for purposes of such other action, as the case may be, and any
Noteholder who was a Noteholder at the time so fixed shall be entitled to
receive notice of and vote at such meeting or any adjournment thereof, even
though he has since that date disposed of his Notes, and no person who becomes
a Noteholder after that date shall be entitled to receive notice of and vote at
such meeting or any adjournment thereof or to be treated as a Noteholder of
record for purposes of such other action.

 

10.10  Proxies

 

Whenever
the vote or consent of Noteholders is required or permitted under this
Indenture, such vote or consent may be given either directly by the Noteholder
or by a proxy in such form as is acceptable to the Trustee acting reasonably. A
Noteholder may appoint a maximum of five proxyholders to act singly, jointly,
unanimously, in succession or in the alternative.  A proxyholder need not be a Noteholder. The
Trustee may solicit such proxies from the Noteholders or any of them in any
matter requiring or permitting the Noteholders’ vote, approval or consent in
such manner as may be required by applicable law.

 

The
Trustee may adopt, amend or repeal such rules relating to the appointment
of proxyholders and the solicitation, execution, validity, revocation and
deposit of proxies, as it in its discretion from time to time determines.

 

10.11  Resolution in Lieu of Meeting

 

A
resolution signed in writing by Noteholders holding a proportion of the
principal amount of the aggregate principal amount of all outstanding Notes
equal to the proportion of the principal amount of Notes required to vote in
favour thereof at a meeting of Noteholders to approve that resolution is as
valid as if it had been passed at a duly called meeting of Noteholders.

 

10.12  VGZ and Trustee may be Represented

 

The
officers of VGZ and the Trustee, by their respective representatives, and with
their respective advisers, may attend any meeting of the Noteholders but shall
have no vote as such.

 

39

 

10.13  Powers Exercisable by Special Resolution

 

In
addition to all other powers stated in this Indenture to be exercisable by
Special Resolution and all other powers conferred by law, a meeting of the
Noteholders shall have the following powers exercisable from time to time by
Special Resolution:

 

(a)                                 power to agree to any
modification, abrogation, alteration, compromise or arrangement of the rights
of Noteholders or the Trustee (subject to the approval of the Trustee) against
VGZ, whether such rights arise under this Indenture, the Notes or otherwise and
to authorize the Trustee to concur in and to execute any deed or instrument
supplemental hereto or thereto embodying any such modification, abrogation,
alteration, compromise or arrangement, provided that any such modification,
abrogation, alteration, compromise or arrangement shall have been agreed to by
VGZ;

 

(b)                                power to direct or authorize the
Trustee to exercise any power, right, remedy or authority given to it by this
Indenture, the Notes or otherwise in any manner specified in such Special
Resolution or to refrain from exercising any such power, right, remedy or
authority;

 

(c)                                 power to waive and direct the
Trustee to waive any default on the part of VGZ or the Guarantor in complying
with any provision of this Indenture, the Notes or any other document relating
hereto or thereto, or to annul and to direct the Trustee to annul any
declaration in respect of such default made by the Trustee pursuant to
section 7.2 either unconditionally or upon any conditions specified in
such Special Resolution;

 

(d)                                power, with the approval of VGZ,
to sanction the exchange of Notes for any other securities or obligations of
VGZ or any other person;

 

(e)                               power to restrain any Noteholder
from taking or instituting any suit, action or proceeding for the purpose of
enforcing payment by VGZ of principal or interest or for the execution of any
trust or power under this Indenture, the Notes or any other document relating
hereto or thereto or for the appointment of a liquidator or a receiver or a
trustee in bankruptcy or for any other remedy hereunder or thereunder;

 

(f)                                   power to direct any Noteholder who,
as such, has brought any suit, action or proceeding, to stay or discontinue or
otherwise deal with the same upon payment, if the taking of such suit, action
or proceeding shall have been permitted by section 7.5, of the costs,
charges and expenses reasonably and properly incurred by such Noteholder in
connection therewith;

 

(g)                                power to sanction any scheme for
the reconstruction or reorganization of VGZ or for the consolidation or merger
of VGZ with any other person or for the sale, leasing, transfer or other
disposition of the undertaking, property and assets of VGZ or any part thereof,
provided that no such sanction shall be necessary in respect of any such
transaction if the provisions of section 9.1 shall have been complied
with;

 

(h)                                power to assent to any compromise
or arrangement with any creditor or creditors or any class or classes of
creditors, whether secured or otherwise, and with holders of any securities of
VGZ;

 

40

 

(i)                                    power to amend, alter or repeal any Special Resolution previously
passed or sanctioned by the Noteholders;

 

(j)                                    power to appoint and remove a committee to consult with the Trustee
and to delegate to such committee (subject to such limitations, if any, as may
be prescribed in such Special Resolution) all or any of the powers which the
Noteholders could exercise by Special Resolution under this section 10.13.
The Special Resolution making such appointment may provide for payment of the
expenses and disbursements of and compensation to such committee. Such
committee shall consist of such number of persons as shall be prescribed in the
Special Resolution appointing it, and the members need not be themselves
Noteholders. Subject to the Special Resolution appointing it, every such
committee may elect its chairman and may make regulations respecting its
quorum, the calling of its meetings, the filling of vacancies occurring in its
number, the manner in which it may act and its procedure generally and such regulations
may provide that the committee may act at a meeting at which a quorum is
present or may act by minutes signed by a majority of the members thereof or
the number of members thereof necessary to constitute a quorum, whichever is
the greater. All acts of any such committee within the authority delegated to
it shall be binding upon all Noteholders. Neither such committee nor any member
thereof shall be liable for any loss arising from or in connection with any
action taken or omitted to be taken in good faith;

 

(k)                                 power to remove the Trustee and appoint a new Trustee; and

 

(l)                                    power to authorize the Trustee to grant extensions of time for
payment of any principal or interest on the Notes, whether or not the principal
or interest, the payment of which is extended, is at the time due or overdue.

 

Notwithstanding
paragraphs (a) to (l) above, no resolution shall modify,
abrogate, alter, compromise, arrange or otherwise affect the rights of the
Trustee hereunder without the Trustee’s written consent, such consent not to be
unreasonably withheld.

 

10.14    Meaning of “Special Resolution”

 

The expression
“Special Resolution” when used in
this Indenture means, subject to section 10.11 provided, a resolution
proposed at a meeting of Noteholders duly convened for the purpose of passing a
Special Resolution and held in accordance with the provisions in this Article 10
at which, subject as hereinafter provided, the Holders of at least 51% of the
principal amount of the Notes then outstanding are present in person or represented
by proxy and passed by the favourable votes of the Holders of not less than 51%
of the principal amount of Notes represented at the meeting and voted on a poll
upon such resolution.

 

If, at any
such meeting called for the purpose of passing a Special Resolution, the
Holders of at least 51% of the principal amount of the Notes are not present in
person or represented by proxy within 30 minutes after the time appointed
for the meeting, then the meeting if convened by Noteholders on a Noteholders’
Request, shall be dissolved, but in any other case it shall stand adjourned to
such date, being not less than 14 nor more than 21 days later, and to such
place and time as may be appointed by the chairman. Not less than 7 days’
notice shall be given of the time and place of such adjourned meeting in the
manner provided in

 

41

 

section 14.1.
Such notice shall state that at the adjourned meeting, the Noteholders present
in person or represented by proxy shall form a quorum but it shall not be
necessary to set forth the purposes for which the meeting was originally called
or any other particulars. At the adjourned meeting, the Noteholders present in
person or represented by proxy shall form a quorum and may transact the
business for which the meeting was originally convened and a resolution
proposed at such adjourned meeting and passed by the requisite vote as provided
in the preceding paragraph shall be a Special Resolution within the meaning of
this Indenture, notwithstanding that the Holders of at least 51% of the
principal amount of the Notes then outstanding are not present in person or
represented by proxy at such adjourned meeting.

 

10.15    Minutes

 

Minutes of all
resolutions and proceedings at every such meeting as aforesaid shall be made
and duly entered in books to be from time to time provided for that purpose by
the Trustee at the expense of VGZ, and any such minutes as aforesaid, if signed
by the chairman of the meeting at which such resolutions were passed or
proceedings had, shall constitute prima
facie evidence of the matters
therein stated and, until the contrary is proved, every such meeting, in
respect of the proceedings of which minutes shall have been made and signed as
aforesaid, shall be deemed to have been duly held and convened and all
resolutions passed or proceedings had thereat to have been duly passed and had.

 

10.16    Effect of Resolutions

 

Every
resolution and every Special Resolution passed in accordance with the
provisions of this Article 10 at a meeting of Noteholders shall be binding
upon all the Noteholders, whether present at or absent from such meeting, and
every instrument in writing signed by the Noteholders in accordance with
section 10.11 shall be binding upon all the Noteholders, whether
signatories thereto or not, and each and every Noteholder and the Trustee
(subject to any provisions for its indemnity herein contained) shall be bound
to give effect accordingly to every such resolution, Special Resolution and
instrument in writing. Unless the Trustee agrees otherwise, notice of the
passing of every resolution and every Special Resolution shall be given to the
Noteholders in the manner provided in section 14.1.

 

11.            SUPPLEMENTAL
INDENTURES

 

11.1              Provision for Supplemental Indentures for Certain Purposes

 

From time to
time VGZ and the Trustee may, without any further approval or consent of the
Noteholders (subject to the provisions of this Indenture), and they shall, when
so required by the provisions hereof, execute and deliver indentures or
instruments supplemental hereto, which thereafter shall form part hereof, for
any one or more or all of the following purposes:

 

(a)                                 evidencing
the succession of Successors and the covenants of and obligations assumed by
such Successors in accordance with the provisions of Article 9;

 

(b)                                giving
effect to any Special Resolution passed as provided in Article 10;

 

42

 

(c)                                  adding to the provisions hereof such additional covenants,
enforcement provisions, release provisions and other provisions as, in the
opinion of Counsel, are necessary or advisable, provided that, in the opinion
of the Trustee, the same are not prejudicial to the legal rights of the
Noteholders;

 

(d)                                 making any modification of any of the provisions of this Indenture
or the Notes which is of a formal, minor or technical nature;

 

(e)                                  making any additions to, deletions from or alterations of the
provisions of this Indenture (including any of the terms and conditions of the
Notes) which in the opinion of the Trustee are not prejudicial to the interests
of the Noteholders and which are necessary or advisable in order to
incorporate, reflect or comply with any legislation the provisions of which
apply to this Indenture;

 

(f)                                    adding to or altering the provisions hereof in respect of the
transfer of Notes, including provision for the exchange of Notes of different
denominations and making any modification in the form of the Notes which does
not affect the substance thereof and which, in the opinion of the Trustee, is
not prejudicial to the interests of the Noteholders;

 

(g)                                 correcting or rectifying any ambiguities, defective provisions,
errors or omissions herein, provided that, in the opinion of the Trustee, the
rights of the Trustee and the Noteholders are not materially prejudiced
thereby; and

 

(h)                                 any other purpose not inconsistent with the terms of this Indenture
provided that, in the opinion of the Trustee, the rights of the Trustee and of
the Noteholders are not materially prejudiced thereby.

 

11.2              Binding Effect of Modifications

 

Every
modification, addition, deletion, alteration, correction or rectification to,
from or of the provisions hereof shall bind the Noteholders and notice thereof
shall be given as soon as practicable in accordance with section 14.1,
unless the Trustee agrees otherwise.

 

12.            CONCERNING
THE TRUSTEE

 

12.1              Conditions Precedent to Trustee’s Obligation to Act

 

The Trustee
shall not be bound to give any notice or do or take any act, action or
proceeding in virtue of the powers conferred on it hereby unless and until it
shall have been required so to do under the terms hereof. Nor, subject to any
default which may come to the attention of the Trustee by virtue of VGZ’s
compliance with subsection 6.1(c), shall the Trustee be required to take
notice of any default hereunder, other than in payment of any moneys required
by any provision hereof to be paid to it, unless and until notified in writing
of such default, which notice shall distinctly specify the default desired to
be brought to the attention of the Trustee, and in the absence of any such
notice the Trustee may for all purposes of this Indenture conclusively assume
that VGZ is not in default hereunder and that no default has been made with
respect to the payment of principal or interest on the Notes or in the
observance or performance of any of the covenants, agreements or conditions
contained herein.

 

43

 

Any
such notice or requisition shall in no way limit any discretion herein given to
the Trustee to determine whether or not the Trustee shall take action with
respect to any default or take action without any such requisition.

 

12.2              Requirement for Funds and Indemnity

 

The obligation
of the Trustee to commence or continue any act, action or proceeding for the
purpose of enforcing any right of the Trustee or the Noteholders hereunder
shall be conditional upon the Noteholders furnishing, when required by notice
in writing by the Trustee, sufficient funds to commence or continue such act,
action or proceeding and an indemnity reasonably satisfactory to the Trustee to
protect and hold harmless the Trustee and its officers, directors and employees
against the costs, charges and expenses and liabilities to be incurred thereby
and any loss and damage it may suffer by reason thereof. None of the provisions
contained in this Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur financial liability in the performance of any of its
duties or in the exercise of any of its rights or powers.

 

The Trustee
may, before commencing or at any time during the continuance of any such act,
action or proceeding, require the Noteholders at whose instance it is acting to
deposit with the Trustee the Notes held by them, for which Notes the Trustee
shall issue receipts.

 

12.3              Evidence

 

Whenever it is
provided in this Indenture, with reference to any application to the Trustee
for the authentication and delivery of Notes or other action hereunder, that
VGZ shall deposit with the Trustee resolutions, certificates, opinions,
requests, orders or other documents, it is intended that the truth, accuracy
and good faith at the time of the granting of such application (or on the
effective date of any such certificate or report, as the case may be) of the
facts and opinions stated in all documents so deposited shall, in each and
every such case, be conditions precedent to the right of VGZ to have such
application granted. The Trustee may rely and shall be protected in acting upon
any such documents deposited with it in purported compliance with any such
provision or of any other purpose hereof, but may in its discretion require
further evidence before acting or relying thereon.

 

The Trustee
may rely and shall be protected in acting upon any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, order,
letter, or other paper or document believed by it to be genuine and to have
been signed, sent or presented by or on behalf of the proper party or parties.

 

12.4              Experts and Advisers

 

The Trustee
may employ or retain such Counsel, accountants, appraisers or other experts or
advisers as it may reasonably require for the purpose of discharging its duties
hereunder, and shall not be responsible for any misconduct on the part of any
of them.  VGZ shall advance or otherwise
pay to Trustee upon receipt of the requisite invoices, the funds required to
pay for the services contemplated under this section 12.4.  The Trustee shall not be required to advance
fees and expenses out of pocket and then seek reimbursement.

 

44

 

The Trustee
may act, or not act, and shall be protected in acting, or not acting, in good
faith on the opinion or advice of or information obtained from any counsel,
accountant, appraiser or other expert or adviser, whether retained or employed
by VGZ or by the Trustee, in relation to any matter arising in the
administration of the trusts hereunder and the fulfilment of its obligations
and the exercise of its rights hereunder.

 

12.5              Documents, Moneys, etc. Held by Trustee

 

Any
securities, documents of title or other instruments that may at any time be
held by the Trustee subject to the trusts hereof may be placed by the Trustee
in any of the following: (a)  the deposit vaults of the Trustee, (b) any
money market or mutual funds registered under the Investment Company Act of
1940, (c) commercial paper (having original maturities of not more than
270 days) of any corporation which on the date of acquisition has been rated by
any nationally recognized statistical rating organization in its highest
short-term unsecured debt rating category available, or (d) direct
obligations of, or obligations fully guaranteed as to principal and interest
by, the United States or any agency or instrumentality thereof, provided such
obligations are backed by the full faith and credit of the United States.   All interest or other income received by the
Trustee in respect of such deposits and investments shall belong to VGZ and be
remitted to VGZ or in accordance with the provisions of applicable laws of
public order, three (3) years from the earlier of (i) the Maturity
Date or (ii) the date of such conversion 
or Redemption Date of the Notes in respect of which such moneys were
held by the Trustee, unless an Event of Default shall have occurred and be
continuing, in which case all such interest and income shall be held by the
Trustee and applied in accordance with section 7.6.

 

12.6              Action by Trustee to Protect Interests

 

The Trustee shall
have power to institute and to maintain such actions and proceedings as it may
consider necessary or expedient to preserve, protect and enforce its interests
and the interests of the Noteholders.

 

12.7              Trustee not Required to give Security

 

The Trustee
shall not be required to give any bond or security in respect of the execution
of the trusts and powers of this Indenture or otherwise in respect of this
Indenture.

 

12.8              Protection of Trustee

 

By way of
supplement to the provisions of any law for the time being relating to
trustees:

 

(a)                                  the Trustee shall not be liable for or by reason of any statements
of fact or recitals in this Indenture, in the Notes or in any other document
relating hereto or thereto (except the representation contained in
section 12.1 and in the certificate of the Trustee on the Notes) or
required to verify the same, but any such statements or recitals are and shall
be deemed to be made by VGZ;

 

45

 

(b)                                 nothing herein contained shall impose any obligation on the Trustee
to see to or require evidence of the registration or filing (or renewal
thereof) of this Indenture or any instrument ancillary or supplemental hereto
or thereto;

 

(c)                                  the Trustee shall not be bound to give to any person notice of the
execution hereof;

 

(d)                                 the Trustee shall not incur any liability or responsibility whatever
or be in any way responsible for the consequence of any breach on the part of
VGZ of any of the covenants contained in this Indenture or in any other
document relating hereto or thereto or of any acts of the agents or servants of
VGZ or the Guarantor; and

 

(e)                                  VGZ hereby indemnifies and saves harmless the Trustee and its
officers, directors,  employees and
agents from and against any and all liabilities, losses, costs, claims, actions
or demands whatsoever which may be brought against the Trustee or which it may
suffer or incur as a result or arising out of the performance of its duties and
obligations hereunder (including without limitation the fees and disbursements
of any advisers and legal counsel it may retain), save only in the event of
gross negligence or wilful misconduct of the Trustee or any of its officers,
directors, employees or agents. This indemnification shall survive the
termination of this Indenture or the resignation or removal of the Trustee.

 

12.9              Replacement of Trustee

 

The Trustee
may resign and be discharged from all further duties and liabilities hereunder
by giving to VGZ not less than 60 days’ notice in writing or such shorter
notice as VGZ may accept as sufficient. The Noteholders, by Special Resolution,
shall have power at any time to remove the Trustee and to appoint a new
trustee. In the event of the Trustee resigning or being removed as aforesaid or
being dissolved, becoming bankrupt, going into liquidation or otherwise
becoming incapable of acting hereunder, VGZ shall forthwith appoint a new
trustee unless a new trustee has already been appointed by the Noteholders;
failing such appointment by VGZ, the retiring Trustee or any Noteholder may
apply to the Ontario Superior Court (District of Toronto), on such notice as
the Court may direct, for the appointment of a new trustee; but any new trustee
so appointed by VGZ or by the Court shall be subject to removal as aforesaid by
the Noteholders. Any new trustee appointed under these provisions must be a
corporation authorized to carry on the business of a trust company in the
Province of Ontario and the Province of British Columbia.  On any new appointment, the new trustee shall
be vested with the same powers, rights, duties and responsibilities as if it
had been originally named herein as Trustee without any further assurance,
conveyance, act or deed, but there shall be immediately executed, at the
expense of VGZ, all such conveyances or other instruments as may, in the
opinion of Counsel, be necessary or advisable for the purpose of assuring the
same to the new trustee. At the request of VGZ or the new trustee, the retiring
Trustee, upon payment of the amounts, if any, due to it pursuant to
section 6.2, shall duly assign, transfer and deliver to the new trustee
all property and money held and all records kept by the retiring Trustee
hereunder or in connection herewith.

 

Any
corporation into which the Trustee may be merged or with which it may be
consolidated or amalgamated or any corporation resulting from any merger,
consolidation or 

 

46

 

amalgamation
to which the Trustee shall be a party, shall be the successor trustee under
this Indenture without the execution of any instrument or any further act.

 

12.10       Trustee Not Bound to Act

 

The Trustee
shall retain the right not to act and shall not be liable for refusing to act
if, due to a lack of information or for any other reason whatsoever, the
Trustee, in its sole judgment, determines that such act might cause it to be in
non-compliance with any applicable anti-money laundering or anti-terrorist
legislation, regulation or guideline. Further, should the Trustee, in its sole
judgment, determine at any time that its acting under this Agreement has
resulted in its being in non-compliance with any applicable anti-money
laundering or anti-terrorist legislation, regulation or guideline, then it
shall have the right to resign on 10 Business Days’ written notice to VGZ, or
any shorter period of time as agreed to by the parties, notwithstanding the
provisions of section 12.9 of this Indenture, provided that (i) the
Trustee’s written notice shall describe the circumstances of such
non-compliance; and (ii) if such circumstances are rectified to the
Trustee’s satisfaction within such notification period, then such resignation
shall not be effective.

 

12.11       Conflict of Interest

 

The Trustee
represents to VGZ that at the time of the execution and delivery hereof no
material conflict of interest exists in the Trustee’s role as a fiduciary
hereunder and agrees that in the event of a material conflict of interest
arising hereafter it will, within 90 days after ascertaining that it has
such material conflict of interest, either eliminate same or resign its trust
hereunder.

 

Subject to the
preceding paragraph, the Trustee, in its personal or any other capacity, may
buy, lend upon and deal in securities of VGZ and generally may contract and
enter into business transactions with VGZ or any of its Affiliates without
being liable to account for any profit made thereby.

 

12.12       Delegation of Powers

 

The Trustee
may delegate to any person the performance of any of the trusts and powers
vested in it by this Indenture and any such delegation may be made upon such
terms and conditions and subject to such regulations as the Trustee may think
to be in the interests of the Noteholders.

 

12.13       Acceptance of Trust

 

The Trustee
hereby accepts any and all trusts created or constituted for the purposes of
such sections, agrees to perform the same upon the terms and conditions herein
set forth and in acting as Trustee hereunder shall not be subject to any
personal liability for any debts, liabilities, obligations, claims, demands, judgments,
costs, charges or expenses against or with respect to this Indenture and the
trusts established hereunder.

 

47

 

12.14       Privacy Issues

 

The parties
acknowledge that the Trustee may, in the course of providing services
hereunder, collect or receive financial and other personal information about
such parties and/or their representatives, as individuals, or about other
individuals related to the subject matter hereof, and use such information for
the following purposes:

 

(a)                                  to provide the services required under this agreement and other
services that may be requested from time to time;

 

(b)                                 to help the Trustee manage its servicing relationships with such
individuals;

 

(c)                                  to meet the Trustee’s legal and regulatory requirements; and

 

(d)                                 if Social Insurance Numbers or Social Security Numbers are collected
by the Trustee, to perform tax reporting and to assist in verification of an
individual’s identity for security purposes.

 

Each party acknowledges and agrees that the Trustee may receive,
collect, use and disclose personal information provided to it or acquired by it
in the course of this Indenture for the purposes described above and,
generally, in the manner and on the terms described in its privacy code, which
code the Trustee shall make available on its website or upon request, including
revisions thereto.  Each party hereto
further acknowledges and agrees that all personal information contemplated by
this section that is collected or received by Trustee will be kept at the
Corporate Trust Office, and may be subject to access or review by any relevant governmental authority in compliance with applicable
laws.  Further, each party agrees that it shall not
provide or cause to be provided to the Trustee any personal information
relating to an individual who is not a party to this Indenture unless that
party has assured itself that such individual understands and has consented to
the aforementioned uses and disclosures.

 

12.15       Environmental Indemnity

 

VGZ shall indemnify
the Trustee, its directors, officers, employees, and agents, and all of their
successors and assigns (collectively the “Indemnified Parties”) against any
loss (other than a loss of profit), expense, claim, liability or asserted
liability (including strict liability) and including costs and expenses of
abatement and remediation of spills or releases of contaminants and including
liabilities of the Indemnified Parties to third parties (including governmental
agencies) in respect of bodily injuries, property damage, damage to or
impairment of the environment or any other injury or damage and including
liabilities of the Indemnified Parties to third parties for the third parties’
foreseeable and unforeseeable consequential damages incurred as a result of: (i) the
exercise by the Trustee of any rights hereunder; which result from or relate,
directly or indirectly, to: (ii) the presence or release of any
contaminants, by any means or for any reason, on the Pledged Assets, whether or
not release or presence of the contaminants was under control, care or
management of VGZ or of a previous owner, or of a tenant; or (iii) the
breach or alleged breach of any environmental laws, including, without
limitation, those laws applicable in Mexico, by VGZ.  For the purposes of this section 12.15, “liability”
shall include (i) liability of an Indemnified Party for costs and expenses
of abatement and remediation of spills and releases of contaminants, (ii) liability
of an Indemnified Party to a third party to reimburse the third party for
bodily injuries, property damages and other injuries or damages which the third
party suffers, including (to the extent, if any, that the Indemnified 

 

48

 

Party
is liable therefor) foreseeable and unforeseeable consequential damages
suffered by the third party and (iii) liability of the Indemnified Party
for damage to or impairment of the environment. 
In no event shall VGZ be liable to indemnify an Indemnified Party
against any loss, expense, claims, liability or asserted liability to the
extent resulting from the gross negligence or wilful misconduct of the
Indemnified Party.

 

13.            GUARANTEE

 

13.1              Guarantee

 

The Guarantor
hereby absolutely, unconditionally and irrevocably guarantees (the “Guarantee”) to each Noteholder and to the
Trustee and their respective successors, irrespective of the validity and
enforceability of this Indenture, the Notes or the obligations of VGZ to the
Noteholders or the Trustee hereunder or thereunder, that: (a) the principal
of, interest on, and any additional amounts, if any, with respect to the Notes
will be duly and punctually paid in full when due, whether at maturity, by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest on, or additional amounts, if any, with
respect to the Notes, and (b) all other obligations of VGZ to the
Noteholders or the Trustee hereunder or under the Notes (including amounts due
the Trustee) and all other obligations of VGZ to the Noteholders or the Trustee
hereunder or under the Notes, or any other document relating hereto or thereto
(including fees, expenses or other), will be promptly paid in full or
performed, all in accordance with the terms hereof and thereof.  Failing payment when due of any amount so
guaranteed, or failing performance of any other obligation of VGZ to the
Noteholders, for whatever reason, the Guarantor will be obligated to pay, or to
perform or cause the performance of, the same immediately.

 

An Event of
Default shall constitute an event of default under this Guarantee, and shall
entitle the Noteholders or the Trustee to accelerate the obligations of the
Guarantor hereunder in the same manner and to the same extent as the
obligations of VGZ.  The Guarantor further
agrees that, as between it, on the one hand, and the Noteholders and the
Trustee, on the other hand, (a) subject to this Article 13, the
maturity of the obligations guaranteed hereby may be accelerated as provided
herein for the purposes of this Guarantee, notwithstanding any stay, injunction
or other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (b) in the event of any acceleration of such
guaranteed obligations as provided herein, such obligations (whether or not due
and payable) shall forthwith become due and payable by the Guarantor for the
purpose of this Guarantee.

 

The Guarantor
hereby agrees that its obligations hereunder shall be unconditional,
irrespective of the loss or diminution of capacity of VGZ, any change in the
name of VGZ, the acquisition of the business of VGZ by another person, any
change whatsoever in the objects, capital structure or constitution of VGZ, the
amalgamation of VGZ or its business with any other person or with the business
of any such other person, the validity, regularity or enforceability of the
Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against VGZ, any action to
enforce the same, whether or not a guarantee is affixed to any particular Note,
or any other circumstance which might otherwise constitute a legal or equitable
discharge or defense of a guarantor.  The
Guarantor hereby 

 

49

 

waives
the benefit of diligence, presentment, demand for payment, filing of claims
with a court in the event of insolvency or bankruptcy of VGZ, any right to
require a proceeding first against VGZ, protest, notice and all demands
whatsoever  This Guarantee is a guarantee
of payment and not of collection.  No
settlement or discharge of the obligations guaranteed pursuant to this
Guarantee shall be effective if any payment by VGZ in respect of such
guaranteed obligations is avoided, affected or reduced including by virtue of
any provisions or enactments relating to bankruptcy, insolvency, liquidation or
similar or other laws of general application from time to time, and if such
payment is so avoided, affected or reduced, the Trustee and the Noteholders
shall be entitled to recover the amount of such payment as if such settlement
or discharge had not occurred and this Guarantee, to the extent theretofore
discharged, shall be reinstated in full force and effect.

 

The Trustee
and the Noteholders, without thereby releasing the Guarantor, in whole or in
part, under this Guarantee, may, in accordance with this Indenture, grant
extensions of time, renewals, postponements and releases; they may also (i) take
and give up Liens or guarantees or abandon same, in whole or in part, (ii) abstain
from taking, perfecting, registering, publishing, renewing or enforcing any
Lien or guarantee, (iii) accept arrangements or otherwise deal with the
Company and others including any other guarantor, (iv) dispose of any Lien
or guarantee and (v) amend, terminate, waive or otherwise modify any
provision of this Indenture, the Notes or this Guarantee.

 

The
obligations of the Guarantor hereunder will constitute and be continuing
obligations and will apply to and secure any ultimate balance due or remaining
due in respect of the obligations guaranteed pursuant to this Guarantee and
will not be considered as wholly or partially satisfied by the payment or
liquidation at any time of any sum of money for the time being due or remaining
unpaid.  The only circumstance where the
Guarantor will be automatically released from its obligations hereunder is the
case where the Guarantor is no longer required by the terms of the Indenture to
maintain its Guarantee hereunder.

 

This Guarantee
shall remain in full force and effect and continue to be effective should any
petition be filed by or against VGZ for liquidation or reorganization, should
VGZ become insolvent or make an assignment for the benefit of creditors or
should a receiver or trustee be appointed for all or any significant part of
VGZ’s assets, and shall, to the fullest extent permitted by law, continue to be
effective or be reinstated, as the case may be, if at any time payment or
performance of the Notes are, pursuant to applicable law, rescinded or reduced
in amount, or must otherwise be restored or returned by any obligee on the
Notes, whether as a “voidable preference,” “fraudulent transfer” or otherwise,
all as though such payment or performance had not been made.  In the event that any such payment, or any
part thereof, is rescinded, reduced, restored or returned, the Notes shall, to
the fullest extent permitted by law, be reinstated and deemed reduced only by
such amount paid and not so rescinded, reduced, restored or returned.

 

All payments
due to the Trustee or the Noteholders pursuant to the terms of this Guarantee
or all other provisions, conditions, covenants and agreements to be observed
and executed by the Guarantor shall be made, observed and executed by the
Guarantor without any reduction whatsoever including all reductions resulting
from any means of defence, right of action, right of set-off or compensation or
from a reconventional demand of whatever nature, 

 

50

 

which
the Guarantor has at any time against the Trustee or the Noteholders, in
connection with this Guarantee, the Indenture, the Notes or otherwise.

 

The Trustee
and the Noteholders shall not be bound to exhaust their recourse against VGZ or
the Guarantor or under any other Lien or guarantee before being entitled to
payment from the Guarantor under this Guarantee.  The Guarantor hereby irrevocably renounces
the benefits of discussion and division.

 

Notwithstanding
anything contained herein to the contrary, the Guarantor shall, under this
Guarantee, only be liable, directly or indirectly, for the maximum amount that
can be guaranteed by the Guarantor without contravening the provisions of
applicable law.

 

No shareholder,
officer, director, employee or incorporator, past, present or future, of the
Guarantor, as such, shall have any personal liability under this Guarantee by
reason of his, her or its status as such shareholder, officer, director,
employee or incorporator.

 

The Guarantor
agrees, at its expense and upon the written request of the Trustee, to do all
such things and to execute and deliver to the Trustee and the Noteholders, from
time to time, any such additional instruments or documents considered necessary
by the Trustee to cause the Guarantee of the Guarantor to be, become or remain
valid and effective in accordance with the terms of this Article 13, or to
otherwise give full force and effect to the terms of this Article 13.

 

13.2              Subordination of Claims and Postponement of Subordination

 

The Guarantor
hereby subordinates all its claims, whether present or future, against VGZ to
the obligations guaranteed pursuant to this Guarantee, so as to enable the
Trustee and the Noteholders, in all circumstances, to be fully paid such
guaranteed obligations in priority over such claims of the Guarantor.

 

The Guarantor hereby absolutely, unconditionally and irrevocably agrees
to refrain, until the obligations guaranteed pursuant to this Guarantee shall
have been fully and indefeasibly paid and performed and until the Trustee and
the Noteholders shall have received the entire amount of their claims in
connection with such guaranteed obligations, from exercising any right which it
may now or hereafter acquire against VGZ that arises from the existence,
payment, performance or enforcement of the Guarantor’s obligations under this
Guarantee and this Indenture, including, without limitation, any right of
subrogation, reimbursement, exoneration, indemnification, and any right to
participate in any claim or remedy of any Holder of Notes against VGZ, whether
or not such claim, remedy or right arises in equity, or under contract, statute
or common law, including, without limitation, the right to take or receive from
VGZ, directly or indirectly, in cash or other property or by set-off or
compensation or in any other manner, payment or Lien on account of such claim
or other rights.

 

If any amount
shall be paid to the Guarantor in violation of any of the preceding
subparagraphs of this section 13.2 and the obligations guaranteed pursuant to
this Guarantee shall not have been fully and indefeasibly paid and performed,
such amount shall be deemed to have been paid to the Guarantor for the benefit
of, and shall be held in trust for the benefit of, the Noteholders, and shall
forthwith be paid to the Trustee for the benefit of such Noteholders,

 

51

 

to be credited and applied upon such guaranteed obligations, whether
matured or unmatured, in accordance with the terms of this Indenture.

 

The Guarantor
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by this Indenture and that the
subordination and postponement set forth in this section 13.2 are
knowingly made in contemplation of such benefits.

 

	
  14.

  	
   

  	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  
	
  14.1

  	
   

  	
  Manner of Giving Notice

  

 

Any notice
required or permitted by the provisions of this Indenture to be given to a
Noteholder, the Trustee or VGZ shall be deemed conclusively to have been made
if given either by hand delivery or by prepaid first class mail addressed:

 

(a)                                  in
the case of the Noteholders, at their addresses shown on the register kept by
the Trustee pursuant to section 2.9;

 

(b)                                 in
the case of the Trustee, as follows:

 

HSBC BANK USA,
N.A.      
 Corporate Trust & Loan
Agency

452 Fifth Avenue

New York, NY 10016

Attention:              International
Finance Unit

Telecopier :           (212) 525-1300

(c)                                  in
the case of the Collateral Agent, as follows:

HSBC
MÉXICO, S.A., INSTITUCIÓN DE BANCA MÚLTIPLE, GRUPO FINANCIERO HSBC, DIVISIÓN
FIDUCIARIA

Reforma
355, Anexo B, Diso 8

Col. Cuauhtémoc, CP. 06500

Mexico, D.F.

Attention:          Hector Loyo           / Samantha Barquera / Mariana Vasquez
Mellado

Telecopier:        (5255) 5721-6049 /         5721-5231       /               5721-2943

 

(d)                                 in
the case of VGZ, as follows:

 

VISTA GOLD CORP.

7961 Shaffer Parkway

Suite 5

52

 

Littleton,
CO   80127  U.S.A.

Attention:              President

Telecopier:            (720) 981-1186

 

With a copy to:

BORDEN LADNER GERVAIS  LLP

1200 Waterfront Centre

200 Burrard Street

P.O. Box 48600

Vancouver, BC 
Canada   V7X 1T2

Attention :             G. Eric Doherty

Telecopier :           (604) 687-1415

 

(e)                                  in
the case of the Guarantor, as follows:

 

MINERA
PAREDONES AMARILLOS S.A. DE C.V.

Sonora No. 760

Col Pueblo Nuevo

23060 La Paz, B.C.S., Mexico

Attention:              General Manager

Telecopier:            ·

 

 

provided that if
there is a general discontinuance of postal service due to strike, lockout or
otherwise, such notice may be given by publication twice in the Report on
Business section of the National Edition of The Globe and Mail or a similar
section of any other newspaper having national circulation in Canada; provided
further that if there is no such newspaper having national circulation, then by
publishing twice in the business section of a newspaper in the city where the
Corporate Trust Office is maintained. Any notice so given shall be deemed to
have been given on the day of hand delivery or the day following that on which
the notice was mailed or, in the case of notice being given by publication,
after publishing such notice twice in the designated newspaper or newspapers.
In proving notice was mailed, it shall be sufficient to prove that such notice
was properly addressed, stamped and mailed. Notice to any one of several joint
Holders of Notes shall be deemed effective notice to the other joint Holders.
Any notice sent by mail to or left at the address of a Noteholder pursuant to
this section shall, notwithstanding the death or bankruptcy of such Noteholder,
and whether or not the Trustee has notice of such death or bankruptcy, be
deemed to have been fully given and shall be deemed sufficient notice to all
persons having an interest in the Notes concerned.

 

53

 

14.2  Day not a
Business Day

 

In the event that
any day on which any action is required to be taken hereunder is not a Business
Day, then such action shall be required to be taken at or before the requisite
time on the next succeeding day that is a Business Day.

 

14.3  Execution and
Effect of Restated Indenture

 

Subject to Article 11,
a restated Indenture, setting forth the terms of this Indenture, as amended to
the time of execution, may be executed at any time or from time to time by the
Trustee and such restated Indenture as so executed shall thereafter be
effective and may thereafter be referred to in lieu of the original Indenture as
so amended; provided, however, that no such execution of a restated Indenture
shall be deemed to constitute a termination of this Indenture or the trusts
constituted hereunder.

 

14.4  Consolidations

 

The Trustee may
prepare consolidated copies of this Indenture as it may from time to time be
amended or amended and restated and may certify the same to be a true
consolidated copy of this Indenture, as amended or amended and restated.

 

14.5  Counterparts

 

This Indenture
may be executed in several counterparts, each of which when so executed shall
be deemed to be an original and such counterparts together shall constitute one
and the same instrument, which shall be sufficiently evidenced by any such
original counterpart and notwithstanding their date of execution shall be
deemed to be dated the date of this Indenture.

 

14.6  Severability

 

The provisions of
this Indenture are severable and if any provisions are in conflict with any
applicable law, the conflicting provisions shall be deemed never to have
constituted a part of this Indenture and shall not affect or impair any of the
remaining provisions thereof. If any provision of this Indenture shall be held
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall attach only to such provision in such jurisdiction and
shall not in any manner affect or render invalid or unenforceable such
provision in any other jurisdiction or any other provision of this Indenture in
any jurisdiction.

 

14.7  Headings for
Reference Only and Preamble

 

The headings
preceding the Articles and sections hereof have been inserted for convenience
and reference only and shall not be construed to affect the meaning,
construction or effect of this Indenture. The preamble and recitals hereto (and
all definitions therein contained) shall form an integral part of this
Indenture.

 

14.8  Successors and
Assigns

 

The provisions of
this Indenture shall enure to the benefit of, and be binding upon, the parties
and their respective successors and assigns.

 

54

 

14.9  Time
of the Essence

 

Time shall be of
the essence of this Indenture.

 

14.10 Governing
Law

 

This Indenture
and the Notes shall be interpreted and governed by, take effect and be
construed exclusively in accordance with the laws of the Province of British
Columbia and the laws of Canada applicable therein. Any and all disputes
arising under this Indenture, whether as to interpretation, performance or
otherwise, shall be subject to the exclusive jurisdiction of the courts of the
Province of British Columbia and the parties hereto hereby irrevocably attorn,
and each Noteholder shall be deemed to hereby irrevocably attorn, to the
exclusive jurisdiction of the courts of such province.

 

14.11 Entire
Agreement

 

This Indenture
and all documents contemplated by or delivered under or in connection with this
Indenture, constitute the entire agreement between the parties with respect to
the subject matter and supersede all prior agreements, negotiations,
discussions, undertakings, representations, warranties and undertakings,
whether written or verbal.

 

IN
WITNESS WHEREOF each of the parties has
caused these presents to be executed as of the date indicated on the first page of
this Indenture.

 

 

	
   

  	
  VISTA
  GOLD CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  MINERA PAREDONES AMARILLOS S.A.
  DE C.V.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

55

 

	
   

  	
  HSBC BANK
  USA N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

56

 

	
   

  	
  HSBC MÉXICO,
  S.A. DE C.V., INSTITUCIÓN 

  
	
   

  	
  DE BANCA
  MÚLTIPLE, GRUPO

  
	
   

  	
  FINANCIERO
  HSBC, DIVISIÓN FIDUCIARIA

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Mariana Vazquez Mellado 

  
	
   

  	
   

  	
   

  	
  Floresvillar

  
	
   

  	
   

  	
  Title:

  	
  Attorney In Fact

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Per:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

57

 

SCHEDULE “A”

                

To the Secured
Note Indenture between Vista Gold Corp. and HSBC Bank USA N.A. providing for
the issue of Senior Secured Notes of Vista Gold Corp.

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE
HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE <INSERT DATE THAT
IS FOUR (4) MONTHS AND ONE (1) DAY AFTER CLOSING DATE>.

 

THE SECURITIES, AND THE SECURITIES ISSUABLE UPON
CONVERSION THEREOF, REPRESENTED BY THIS CERTIFICATE ARE LISTED ON THE TORONTO
STOCK EXCHANGE (“TSX”); HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH
THE FACILITIES OF TSX SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY
ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT “GOOD DELIVERY” IN SETTLEMENT
OF TRANSACTIONS ON TSX.

 

NEITHER THE SECURITIES REPRESENTED HEREBY, NOR ANY
SECURITIES ISSUABLE UPON THE CONVERSION THEREOF, NOR ANY INTEREST IN OR RIGHTS
UNDER SAME, HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE “1933 ACT”).  THE
HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE
CORPORATION THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED ONLY (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED
STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT OR (C) THE
SALE IS MADE IN THE UNITED STATES (i) IN ACCORDANCE WITH THE EXEMPTION
FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144 THEREUNDER, IF
AVAILABLE, AND IN COMPLIANCE WITH ANY APPLICABLE STATE SECURITIES LAWS OR (ii) PURSUANT
TO A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR
APPLICABLE STATE SECURITIES LAWS, AND IN THE CASE OF (ii), ONLY WITH THE PRIOR WRITTEN CONSENT OF THE CORPORATION
(WHICH WILL BE DELIVERED PROMPTLY AND WILL NOT BE UNREASONABLY WITHHELD, BUT
WHICH MAY BE CONDITIONAL ON DELIVERY OF A LEGAL OPINION OR OTHER EVIDENCE
IN FORM AND SUBSTANCE SATISFACTORY TO THE CORPORATION).

 

FORM OF SENIOR
SECURED NOTES

 

	
  NO. ·

  	
  US$·

  

 

VISTA GOLD CORP.

(A corporation continued under the laws of the Yukon)

SENIOR SECURED NOTE

DUE  March 4, 2011

 

 

Vista Gold Corp.
(“VGZ” or the “Corporation”) for value received hereby
promises to pay to the order of                                       
on March 4, 2011 (the “Maturity Date”)
or on such earlier date as the principal amount hereof may become due in
accordance with the provisions of the Indenture hereinafter mentioned, the sum
of ·
DOLLARS (US $·) in
lawful money of the United States, on presentation and surrender of this Note
at the Corporate Trust Office.

 

This Note is one
of the Senior Secured Notes due March 4, 2011 in the aggregate principal
amount denominations of $1,000 in lawful money of the United States issued
under a Senior Secured Note Indenture (the “Indenture”)
made as of March 4, 2008 and made between VGZ and HSBC Bank USA N.A., as
trustee (the “Trustee”). Reference
is hereby made to the Indenture for a description of the rights of the holders
of the said Notes, VGZ and the Trustee and of the terms and conditions upon which
the Notes are issued and held, all to the same effect as if the provisions of
the Indenture were herein set forth, to all of which provisions the holder of
this Note, by acceptance hereof, assents. All capitalized terms used herein
have the meaning ascribed thereto in the Indenture unless otherwise indicated.

 

The Notes are
issuable as fully registered Notes in denominations of US$1,000 and integral
multiples of US$1,000 and in other authorized denominations. The Notes of any
authorized denomination may be exchanged, as provided in the Indenture, for
Notes in an equal aggregate principal amount in some authorized denomination or
denominations.

 

This Note and all
other Notes authenticated and issued under the Indenture rank pari passu with one another, in accordance
to their tenor without discrimination, preference or priority. The Indenture
does not restrict VGZ from incurring additional Indebtedness for borrowed money
or from mortgaging, pledging or charging its properties to secure any
Indebtedness.

 

Subject to
regulatory requirements, Notes may be purchased by VGZ in the open market or by
tender or private contract at any price. Notes purchased by VGZ shall be
cancelled and shall not be reissued.

 

The Indenture
contains provisions for the holding of meetings of Noteholders and rendering
resolutions passed at such meetings and instruments in writing signed by the
holders of 51% of the Notes outstanding binding upon all Noteholders, subject
to the provisions of the Indenture.

 

This Note may
only be transferred upon compliance with the conditions precedent in the
Indenture on the register kept at the Corporate Trust Office, and may be
exchanged at any such place, by the registered holder hereof or his executors
or administrators or other legal representatives or his or their attorney duly
appointed by an instrument in writing in form and execution satisfactory to the
Trustee, and upon compliance with such reasonable requirements as the Trustee
and/or registrar may prescribe, and such transfer shall be duly noted thereon
by the Trustee.

 

This Note shall
not become obligatory for any purpose until it shall have been authenticated by
the Trustee for the time being under the Indenture.

 

2

 

The holder of
this Note, by receiving and holding same, hereby accepts and agrees to be bound
by the terms, and to be entitled to the benefits of this Note and of the
Indenture and confirms and ratifies the appointment of the Trustee as the fondé de pouvoir (holder of the power of
attorney) of the holder of this Note to the extent necessary for the purposes
hereof and of the Indenture, the whole in accordance with and subject to the
respective provisions thereof.

 

IN
WITNESS WHEREOF VGZ has caused this Note to
be signed by its duly authorized signing authorities.

 

DATED as
of the 4th
day of March, 2008.

 

 

	
   

  	
  VISTA
  GOLD CORP.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  (Authorized Officer)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  (Authorized Officer)

  

 

3

 

TRUSTEE’S CERTIFICATE

 

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

 

 

	
   

  	
  HSBC BANK
  USA N.A.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  ·

  

 

 

FORM OF
ASSIGNMENT

 

FOR
VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto                                                                ,
whose address and social insurance number, if applicable, are set forth below,
this Note (or $                                        
principal amount hereof) of Vista Gold Corp. standing in the name(s) of
the undersigned in the register maintained by or on behalf of Vista Gold Corp.
with respect to such Note and does hereby irrevocably authorize and direct the
Trustee to transfer such Note in such register, with full power of substitution
in the premises. The transferee of all or part of the Notes referred to in this
Form of Assignment acknowledges, by his acceptance of such Notes, that the
Notes are governed by the Indenture.

 

	
  Dated:

  	
   

  	
   

  

 

	
  Address of Transferee:

  	
                                                                                                                                                                         

  
	
   

  	
  (Street

  	
  Address)

  
	
   

  	
                                                                                                                                                                          

  
	
   

  	
  (City, Province and Postal
  Code)

  

 

Social Insurance
Number of Transferee, if applicable:

 

*                 If less than the
full principal amount of the within Note is to be transferred, indicate in the
space provided the principal amount (which must be US$1,000 or an integral
multiple thereof).

 

	
  1.

  	
   

  	
  The
  signature(s) to this assignment must correspond with the name(s) as
  written upon the face of this Note in every particular without alteration or
  any change whatsoever. The signature(s) must be guaranteed by an
  eligible guarantor institution with membership in an approved signature
  guarantee medallion program. Notarized or witnessed signatures are not
  acceptable as guaranteed signatures.

  
	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  The registered
  holder of this Note is responsible for the payment of any documentary, stamp
  or other transfer taxes that may be payable in respect of the transfer of
  this Note.

  

 

Signature of
Guarantor:

 

	
   

  	
   

  	
   

  
	
  Authorized Officer

  	
   

  	
  Signature of transferring
  registered holder

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of Institution

  	
   

  	
   

  

 

INSTRUCTIONS:  If the Note Certificate being assigned
includes a legend restricting the transfer of the Notes pursuant to the U.S.
Securities Act of 1933, as amended (the “U.S. Securities Act”) and if the
holder has not obtained the prior written consent of the Corporation, the Form of
Assignment must be accompanied by a written opinion of counsel of recognized
standing in form and substance reasonably satisfactory to the Corporation to
the effect that the transfer has either been registered under the U.S.
Securities Act and applicable United States state securities laws, or is exempt
from such registration requirements.

 

2

 

CONVERSION
FORM

 

TO:                                                                            VISTA GOLD CORP.

 

The undersigned
registered holder of the within Note hereby irrevocably elects to convert such
Note (or US$  principal amount thereof*)
into Common Shares of Vista Gold Corp. in accordance with the terms of the
Indenture referred to in such Note and directs that the Common Shares issuable
and deliverable upon the conversion be issued and delivered to the Person
indicated below.

 

*                 If less than the full principal amount of the within Note is to be
converted, indicate in the space provided the principal amount (which must be
US$1,000 or integral multiples thereof) to be converted.

 

	
  Dated

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SIGNATURE OF REGISTERED
  HOLDER

  
	
  Name

  	
   

  	
  If shares are to be issued
  in the name of a Person other than the holder, the signature must be
  guaranteed by a chartered bank, a trust company or a member firm of the
  Toronto Stock Exchange.

  
	
   

  	
   

  	
   

  
	
  (ADDRESS)

  	
   

  	
  (CITY AND PROVINCE)

  

 

Print name in which Common Shares issued on conversion are to
be issued, delivered and registered

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