Document:

Exhibit 10.3

 

AGENCY
AGREEMENT

 

	
  December 20,
  2005

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signet Energy Inc.

  	
   

  	
   

  
	
  1818, 144 - 4th Avenue S.W.

  	
   

  	
   

  
	
  Calgary, Alberta T2P 3N4

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attention:

  	
  Mr. C.W.
  Leigh Cassidy

  
	
   

  	
  Executive
  Chairman and Chief Executive Officer

  
				

 

Dear Sirs:

 

RE:          PRIVATE PLACEMENT OF UP TO
1,600,000 FLOW-THROUGH SHARES AND UP TO $10,000,000 CAD PRINCIPAL AMOUNT OF 7%
SECURED CONVERTIBLE DEBENTURES OF SIGNET ENERGY INC.

 

MGI Securities
Inc. (the “Agent”) understands
that Signet Energy Inc. (the “Corporation”
or “Signet”) proposes to create, issue and
sell: (i) up to 1,600,000 common shares of the Corporation to be issued on
a “flow-through” basis pursuant to the Income Tax Act
(Canada) (the “Flow-Through Shares”) at a price
of $1.30 per Flow-Through Share for total gross proceeds of up to $2,080,000;
and (ii) up to $10,000,000 CAD aggregate principal amount of 7% secured
convertible debentures due November 15, 2007 (the “Debentures”).  Subject to the terms of the Indenture (as
defined below), each Debenture is, at the option of the holder thereof,
convertible into common shares of the Corporation (“Common
Shares”).  The private
placement of the Flow-Through Shares and the Debentures on the terms and
conditions provided for herein is hereinafter referred to as the “Offering” and the Flow-Through Shares and the Debentures are
hereinafter collectively referred to as the “Offered
Securities”.

 

Subject to the
terms and conditions hereof, the Agent agrees to act, and the Corporation
appoints the Agent, as the sole and exclusive agent of the Corporation to offer
the Flow-Through Shares and Debentures for sale on the Closing Date in the
Selling Jurisdictions on a private placement basis and to use its commercially
reasonable efforts to secure subscriptions therefore.  The Flow-Through Shares shall be issued in
minimum subscription amounts of $25,000 CAD and the Debentures shall be issued
in minimum denominations of $50,000 CAD and integral multiples of $1,000 CAD
thereafter.  The Corporation acknowledges
and agrees that the Agent may, but is not obligated to, purchase any of the
Offered Securities as principal.  The
Offered Securities may be issued and sold pursuant to exemptions under
Applicable Securities Laws in the Selling Jurisdictions (as hereinafter
defined).

 

The Agent shall
be entitled, in connection with the Offering, to retain as sub-agents other
registered securities dealers and may receive (for delivery to the Corporation
at the Closing Time) subscriptions for the Offered Securities from Subscribers
from other registered dealers.  Any fees
payable to such sub-agents shall be for the account of the Agent.  The Agent shall, however, be under no
obligation to engage any sub-agent.

 

 

In consideration
for its services hereunder, including, but not limited to, the ancillary
service of acting as financial advisor to the Corporation in respect of the
issue of the Offered Securities and advising on the terms and conditions of the
Offering, the Agent shall be entitled to the fee and Agent’s Warrants (as
defined below) provided for in Section 7, and the reimbursement of its
expenses, which amounts shall be payable from the proceeds of the sale of the
Offered Securities hereunder at the time and manner as specified in Sections 7
and 8.

 

Section 1                                             Definitions

 

In
this Agreement, including the paragraphs prior to this definitional section and
any amendment hereto:

 

(a)                                  “ABCA” means the Business
Corporations Act (Alberta);

 

(b)                                 “Act” means the Income Tax
Act (Canada), together with any and all regulations promulgated
thereunder, as amended from time to time;

 

(c)                                  “affiliate” has the meaning ascribed thereto
in the Business Corporations Act (Alberta);

 

(d)                                 “Agent’s Counsel” means Davis &
Company LLP, or such other legal counsel as the Agent, with the consent of the
Corporation, may appoint;

 

(e)                                  “Agent’s Warrants” means the means the agent’s
compensation warrants to acquire Common Shares pursuant to Section 7
hereof;

 

(f)                                    “Agreement” means this agreement and not any
particular Article or Section or other portion except as may be
specified, and words such as “hereto”, “herein”, and “hereby” refer to this
Agreement as the context requires;

 

(g)                                 “Applicable Securities Laws” includes,
collectively and without limitation, all applicable Canadian securities and
corporate laws, rules, regulations, instruments, notices, blanket orders,
statements, circulars, procedures and policies in the Selling Jurisdictions;

 

(h)                                 “Business Day” means a day which is not a
Saturday or Sunday or a legal holiday in the City of Calgary, Alberta;

 

(i)                                     “Canadian Exploration Expense(s)” or “CEE” means Canadian exploration
expense described in paragraph (f) of the definition of “Canadian
exploration expense” in subsection 66.1(6) of the Act or that would
be described in paragraph (h) of such definition if the reference
therein to “paragraphs (a) to (d) and (f) to (g.1)” were a
reference to “paragraph (f)”, excluding amounts which are prescribed to
constitute “Canadian exploration and development overhead expense” under the
Act, the amount of any assistance described in paragraph 66(12.6)(a) of
the Act and any expense described in paragraph 66(12.6)(b.1) of the Act;

 

(j)                                     “Closing Date” means December 20, 2005,
or such other date or dates on or before December 31, 2005 as the Agent
and the Corporation may mutually agree upon in writing;

 

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(k)                                  “Closing Time” means 10:00 a.m.(Calgary
time) or such other time, on the Closing Date, as the Agent and the Corporation
may agree;

 

(l)                                     “Commitment Amount” means an amount equal to
$1.30 multiplied by the number of Flow-Through Shares subscribed and paid for
by Subscribers for Flow-Through Shares;

 

(m)                               “Common Shares” means the common shares in
the capital of the Corporation from time to time;

 

(n)                                 “Corporation’s Counsel” means Burnet,
Duckworth & Palmer LLP, or such other legal counsel as the
Corporation, with the consent of the Agent, may appoint;

 

(o)                                 “Debentures” means the 7% secured
convertible debentures having the rights and entitlements set forth in the
Indenture;

 

(p)                                 “Deep Alta” means Deep Well Oil &
Gas (Alberta) Ltd.;

 

(q)                                 “Deep Well” means Deep Well Oil &
Gas Inc.;

 

(r)                                    “Deep Well Shares” means collectively the
755,000 Common Shares issued to Deep Alta and the 6,795,000 Common Shares
issued to Northern;

 

(s)                                  “Dynamo Claim” means the potential legal
claim by Dynamo Energy Corporation against Surge U.S. and the Corporation
arising from letter agreements (which were not signed by Surge U.S.) wherein
Dynamo Energy Corporation requested Surge U.S. to pay a 2.5% cash finder’s fee
on the acquisition cost of the Farmout Lands and a 5% gross overriding royalty
on the Farmout Lands;

 

(t)                                    “Environmental Laws” has the meaning
ascribed to such term in Section 4(ll);

 

(u)                                 “Expenditure Period” means the period commencing
on the Closing Date and ending on the earlier of:

 

(i)                                     the date on which the Commitment Amount has been fully expended in
accordance with the terms hereof and the Subscription Agreements for
Flow-Through Shares; and

 

(ii)                                  December 31, 2006;

 

(v)                                 “Farmout Acknowledgment Agreement” means the
farmout acknowledgment agreement dated November 15, 2005 between Surge
U.S., the Corporation, Deep Well, Northern, Deep Alta and the Agent, whereby
the parties confirmed the validity, enforceability and continued existence of
the Farmout Agreement;

 

(w)                               “Farmout Agreement” means the farmout
agreement dated February 25, 2005 (as amended) between Surge U.S., the
Corporation, Deep Well and Northern, whereby the Corporation has a right to
earn a 40% working interest in the Farmout Lands;

 

(x)                                   “Farmout Lands” means the lands shown under
the heading “Farmout Lands” in Schedule ”A” to the Farmout Agreement,
provided that the “Farmout Lands” shall not

 

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include
the 6.5 Section Block (as defined in the Farmout Agreement) unless or
until Deep Well or Northern acquire a legal or beneficial interest in the Title
Documents (as defined in the Farmout Agreement) that comprise the 6.5 Section Block;

 

(y)                                 “Governmental Entity” means any (i) federal,
provincial, territorial, state, regional, municipal, local or other government,
governmental or public department, central bank, court, tribunal, arbitral
body, commission, board, bureau or agency, domestic or foreign, (ii) subdivision,
agent, commission, board, or authority of any of the foregoing, or (iii) quasi-governmental
or private body exercising any regulatory, expropriation or taxing authority
under, or for the account of, any of the foregoing;

 

(z)                                   “Indenture” means the trust indenture to be
dated on or about the Closing Date between the Corporation and the Trustee, as
trustee, governing the terms and conditions of the Debentures;

 

(aa)                            “Jurisdiction” means one of the
jurisdictions listed in Appendix B to NI 45-102;

 

(bb)                          “Laws” means all statutes, regulations,
statutory rules, orders, judgments, decrees and terms and conditions of any
grant of approval, permission, authority, permit or license of any court,
Governmental Entity, statutory body or self-regulatory authority;

 

(cc)                            “Management Group” means Messrs. Kelly
and Cassidy;

 

(dd)                          “Management Shares” means an aggregate of
5,100,000 Common Shares issued to Messrs. Kelly, Cassidy (for himself and
in trust for issuance to others) and Perez;

 

(ee)                            “Material Adverse Effect”, when used in
connection with the Corporation, means any change, effect, event or occurrence
with respect to its condition (financial or otherwise), properties, assets,
liabilities, obligations (whether absolute, accrued, conditional or otherwise),
businesses, prospects, operations or results of operations or those of its
subsidiaries, that is, or would be reasonably expected to be, material and
adverse to the current or future business, operations, regulatory status,
financial condition or results of operations of the Corporation, as the case
may be, and its subsidiaries taken as a whole;

 

(ff)                                “NI 45-102” means National Instrument 45 –
102 - Resale of Securities;

 

(gg)                          “Northern” means Northern Alberta Oil Ltd.;

 

(hh)                          “Principal Business Corporation” means a
principal-business corporation as defined in subsection 66(15) of the Act;

 

(ii)                                  “Public Record” means all information filed
by or on behalf of the Corporation with the Securities Commissions, including
without limitation, any information so filed with any Securities Commission in
compliance, or intended compliance, with any Applicable Securities Laws;

 

(jj)                                  “Qualifying Expenditures” means expenses
that are CEE at the date they are incurred;

 

(kk)                            “Release and Indemnification Agreement”
means the agreement dated November 15, 2005 between the Corporation and
Surge U.S. which provides for, among other things,

 

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the
fixing of the Corporation’s liabilities and an indemnity from Surge U.S. for
any additional liabilities above the thresholds set out therein;

 

(ll)                                  “Sawn Lake Project” means the proposed oil
and gas exploration project to be conducted on the Farmout Lands by the
Corporation;

 

(mm)                      “Securities Commissions” means the
securities commissions or similar regulatory authorities in the Selling
Jurisdictions and “Securities Commission”
means any one of them;

 

(nn)                          “Selling Jurisdictions” means the provinces
of Alberta and Ontario and such other provinces and foreign jurisdictions as
may be agreed by the Agent and the Corporation prior to the Closing Date, as evidenced
by the Corporation’s acceptance of a Subscription Agreement with respect
thereto;

 

(oo)                          “Series I  Agent’s Warrants” means the 684,000 common share purchase
warrants of the Corporation issued to the Agent entitling the Agent to purchase
up to 684,000 Common Shares at an exercise price of $1.00 per share until 4:30 p.m.
(Calgary time) on that date that is the earlier of: (i) 12 months
following the date on which the Corporation completes a Going Public
Transaction (as defined therein); and (ii) November 17, 2008;

 

(pp)                          “Series I  Debentures” means the aggregate principal amount of $8,550,000
of 7% secured convertible debentures issued on November 15, 2005 having
the rights and entitlements set forth in the Series I Indenture;

 

(qq)                          “Series I Indenture” means the trust
indenture dated November 15, 2005 among the Corporation, Surge U.S. and
the Trustee, as trustee, governing the terms and conditions of the Series I
Debentures;

 

(rr)                                “Shareholder Agreement” means the agreement
dated November 15, 2005 (as amended) among the Corporation, Surge U.S.,
Leigh Cassidy, Fred Kelly and David Perez which provides for certain voting
restrictions of the Common Shares;

 

(ss)                            “Subscriber” means a person who executes a
Subscription Agreement which is accepted by the Corporation in form and
substance satisfactory to the Corporation’s Counsel and the Agent’s Counsel,
acting reasonably;

 

(tt)                                “Subscription Agreement” means the agreement
entered into by each Subscriber for Offered Securities and accepted by the
Corporation at the Closing Time in respect of the Subscriber’s subscription for
Offered Securities pursuant to this Offering;

 

(uu)                          “subsidiary” has the meaning ascribed
thereto in the Securities Act (Alberta);

 

(vv)                          “Surge U.S.” means Surge Global Energy, Inc.;

 

(ww)                      “Tax Act” means the Income Tax
Act (Canada), together with any and all regulations, as amended from
time to time;

 

(xx)                              “to the knowledge” or “to the best of the knowledge” of the
Corporation (or words to like effect in this Agreement), means that the Corporation
shall be required, in addition

 

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to
making any other reasonable inquiries, to make inquiries of officers of the
Corporation;

 

(yy)                          “Trustee” means Valiant Trust Company, and
such successor trustee as may be appointed from time to time under the
Indenture and the Series I Indenture;

 

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

 

(aaa)                      “Voting Agreement” means the voting trust
agreement dated November 15, 2005 among Surge U.S., Northern and Deep Alta
which provides Surge U.S. with voting proxy over the Deep Well Shares until February 25,
2007.

 

“misrepresentation”, “material change” and “material fact” shall have the meanings
ascribed thereto under the Applicable Securities Laws of the Selling
Jurisdictions, “distribution”
means “distribution” or “distribution to the public”, as the case
may be, as defined under the Applicable Securities Laws of the Selling
Jurisdictions and “distribute” has
a corresponding meaning.  In this
Agreement, words importing the singular include the plural and words importing
gender include all genders.

 

Section 2                                             Corporation’s Covenants

 

The Corporation
covenants and agrees:

 

(a)                                  that
the Offered Securities will be duly and validly authorized and issued pursuant
to the terms of the Subscription Agreements;

 

(b)                                 the
Common Shares issuable upon the conversion of the Debentures will be reserved
for issuance at the Closing Time;

 

(c)                                  as
soon as reasonably possible, and in any event by the Closing Date, to take all
such steps as may reasonably be necessary to enable the Offered Securities to
be offered for sale and sold on a private placement basis to Subscribers in the
Selling Jurisdictions through the Agent or any other investment dealers or
brokers registered in any of the Selling Jurisdictions by way of the exemptions
under Applicable Securities Laws of each of the Selling Jurisdictions, and not
to take any action that would prevent the Corporation and the Agent from
relying on the exemptions from the prospectus requirements of Applicable
Securities Laws as contemplated by the Subscription Agreements;

 

(d)                                 to
duly, punctually and faithfully perform and comply with all the obligations to
be performed by it, and all of its covenants and agreements under and pursuant
to this Agreement, the Subscription Agreements and the Indenture;

 

(e)                                  it
will file all necessary forms and reports with the appropriate Securities
Commissions and other regulatory authorities in connection with the issuance of
the Offered Securities and the Agent’s Warrants;

 

(f)                                    the
Corporation will carry on its business in a prudent manner in accordance with
industry standards and good business practice and will keep or cause to be kept
proper books of accounts in accordance with applicable law;

 

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(g)                                 the
Corporation will not, from the date hereof until the earlier of the conversion
of all of the issued Debentures into Common Shares or the repayment of all of
the issued Debentures (including all interest payable thereon); approve,
implement, adopt or authorize any stock option plan, performance warrant plan
or other stock based compensation plan (collectively, the “Option Plan”) which allows for the issuance
of Common Shares in an aggregate amount greater than 5% of the issued and
outstanding Common Shares;

 

(h)                                 the
Corporation will not, from the date hereof until the earlier of: (i) the
conversion of all of the issued Debentures into Common Shares or the repayment
of all of the issued Debentures (including all interest payable thereon); or (ii) the
date on which the Corporation has completed an offering (or offerings) of
securities to the public for gross proceeds of at least an aggregate of
$10,000,000 (calculated from November 16, 2005), grant options or similar
convertible securities issuable pursuant to the Option Plan to the Management
Group or to any director nominated by Surge U.S. pursuant to the Shareholder
Agreement;

 

(i)                                     the
Corporation will not, from the date hereof until that date that is 90 days
following the Closing Date, directly or indirectly, sell, or offer to sell, or
announce the offering of, or enter into or make any agreement or understanding,
or announce the making or entry into of any agreement or understanding, to
issue, sell or exchange any Common Shares, securities exchangeable or
convertible into Common Shares without the prior written consent of the Agent,
not to be unreasonably withheld, provided that the foregoing will not restrict
the Corporation from granting options pursuant to a share option plan or
issuing Common Shares on the exercise of outstanding securities of the
Corporation;

 

(j)                                     to keep proper books,
records and accounts of all Qualifying Expenditures and all transactions
affecting the Commitment Amount and the Qualifying Expenditures and upon
reasonable notice and on a reasonable basis, to make such books, records and
accounts available for inspection and review by the Agent;

 

(k)                                  to incur, during the
Expenditure Period, Qualifying Expenditures in such amount as enables the
Corporation to renounce to the Subscribers for Flow-Through Shares, Qualifying
Expenditures in an amount equal to the Commitment Amount;

 

(l)                                     to renounce to the
Subscribers for Flow-Through Shares, pursuant to subsections 66(12.6) and
66(12.66) of the Act and effective on or before December 31, 2005,
Qualifying Expenditures incurred during the Expenditure Period in an amount
equal to the Commitment Amount;

 

(m)                               to deliver to the
Subscribers for Flow-Through Shares within the time period required by the Act
and in any event, not later than March 31, 2006, a statement setting forth
the aggregate amounts of such Qualifying Expenditures renounced to the
Subscribers for Flow-Through Shares;

 

(n)                                 that all Qualifying
Expenditures renounced to the Subscribers for Flow-Through Shares pursuant to
the Flow-Through Share Subscription Agreements will be Qualifying Expenditures
incurred by the Corporation that, but for the renunciation to the Subscribers
for Flow-Through Shares, the Corporation would be entitled to deduct in
computing its income for the purposes of Part I of the Act;

 

7

 

(o)                                 that the Corporation
will not reduce the amount to be renounced to the Subscribers for Flow-Through
Shares and, in the event the Minister of National Revenue reduces the amount
renounced to the Subscribers for Flow-Through Shares pursuant to subsection 66(12.73)
of the Act, the Corporation shall indemnify the Subscribers for Flow-Through
Shares as to, and pay in full settlement thereof to the Subscribers for
Flow-Through Shares, an amount equal to the amount of any tax payable under the
Act (and under any corresponding provincial legislation) by the Subscribers for
Flow-Through Shares as a consequence of such reduction;

 

(p)                                 that if the
Corporation does not renounce to the Subscribers for Flow-Through Shares
Qualifying Expenditures equal to the Commitment Amount effective on or before December 31,
2005, the Corporation shall indemnify the Subscribers for Flow-Through Shares
as to, and pay in full settlement thereof to the Subscribers for Flow-Through
Shares, an amount equal to the amount of any tax payable under the Act (and
under any corresponding provincial legislation) by the Subscribers for
Flow-Through Shares as a consequence of such failure;

 

(q)                                 that the Corporation
will maintain its status as a Principal Business Corporation throughout the
Expenditure Period;

 

(r)                                    to file all
prescribed forms required under the Act with respect to the issuance of the
Flow-Through Shares as “flow-through shares” as defined in subsection 66(15)
of the Act and that are necessary to renounce Qualifying Expenditures equal to
the Commitment Amount to the Subscribers for Flow-Through Shares effective on
or before December 31, 2005 and to provide the Subscribers for
Flow-Through Shares with a copy of all such forms as are required to be
provided thereto, all on a timely basis;

 

(s)                                  that the Corporation
will not be subject to the provisions of subsection 66(12.67) of the Act
in a manner which impairs its ability to renounce Qualifying Expenditures to
the Subscribers for Flow-Through Shares in an amount equal to the Commitment
Amount; and

 

(t)                                    that the Corporation
will refrain from entering into transactions or taking deductions which would
otherwise reduce its cumulative CEE to an extent it would preclude renunciation
of Qualifying Expenditures in an amount equal to the Commitment Amount as
contemplated herein and in the Subscription Agreements for Flow-Through Shares.

 

Section 3                                             Agent’s Covenants

 

The
Agent covenants and agrees with the Corporation that it will:

 

(a)                                  conduct
its activities in connection with the proposed offer and sale of the Offered
Securities in compliance with all Applicable Securities Laws in the Selling
Jurisdictions;

 

(b)                                 not
solicit subscriptions for Offered Securities, trade in Offered Securities or
otherwise do any act in furtherance of a trade of Offered Securities outside of
the Selling Jurisdictions, provided that the Agent may so solicit, trade or act
within such jurisdiction only if such solicitation, trade or act is in
compliance with Applicable Securities Laws in such jurisdiction and does not: (i) obligate
the Corporation to file a prospectus or registration statement or otherwise
take any action to qualify any of its securities or any

 

8

 

trade
of any of its securities; (ii) obligate the Corporation to establish or
maintain any office or director or officer in such jurisdiction; or (iii) subject
the Corporation to any reporting or other requirement in such jurisdiction;

 

(c)                                  obtain
from each Subscriber an executed Subscription Agreement, and all applicable
undertakings, questionnaires and other forms required under Applicable
Securities Laws of the Selling Jurisdictions and supplied to the Agent by the
Corporation for completion in connection with the distribution of the Offered
Securities; and

 

(d)                                 not:
(i) advertise the proposed Offering or sale of the Offered Securities in
printed media of general and regular paid circulation or any similar medium,
radio, television or telecommunications, including electronic display; or (ii) provide
or make available to prospective purchasers of Offered Securities any document
or material which would constitute an offering memorandum as defined under
Applicable Securities Laws in the Selling Jurisdictions.

 

Section 4                                             Representations and Warranties of the
Corporation

 

The Corporation
represents and warrants to the Agent, and acknowledges that the Agent is
relying upon such representations and warranties, that:

 

(a)                                  the
Corporation has been duly incorporated and is a valid and subsisting
corporation under the provisions of the laws of its jurisdiction of
incorporation, has all requisite corporate power and authority to carry on its
business as now being carried on by it and to own or lease and operate its
properties and assets and is duly licensed or otherwise qualified to carry on
business in each jurisdiction in which the nature of the business conducted by
it or the ownership or leasing of its properties makes such qualification
necessary, except where, individually or in the aggregate, the failure to be so
licensed or qualified would not have a Material Adverse Effect on the
Corporation;

 

(b)                                 the
authorized share capital of the Corporation consists of an unlimited number of
the Common Shares.  As at December 20,
2005, 24,000,000 Common Shares are issued and outstanding as fully paid and
non-assessable shares.  All the Common
Shares were offered, issued and sold in compliance with Applicable Securities
Laws in distributions exempt from the prospectus and registration requirements
of such securities laws, and all notices and filings in respect of such
distributions have been made by the Corporation within the time and within the
manner required by the securities laws;

 

(c)                                  except
for the Series I Debentures and the Series I Agent’s Warrants, the
Corporation does not have any outstanding agreements, subscriptions, warrants,
options or commitments (pre-emptive, contingent or otherwise), nor has it
granted any rights or privileges capable of becoming an agreement,
subscription, warrant, option or commitment, obligating the Corporation to
offer, sell, repurchase or otherwise acquire, transfer, pledge or encumber any
shares in the capital of the Corporation, or other securities, nor are there
outstanding any securities or obligations of any kind convertible into or
exercisable or exchangeable for any capital stock of the Corporation.  Except as set out above, there are no
outstanding bonds, debentures or other evidences of indebtedness of the
Corporation having the right to vote or that are exchangeable or convertible
for or exercisable into securities having the right to vote with holders of
Common Shares on any matter as of the date hereof.  There are no outstanding securities

 

9

 

of
the Corporation in addition to Common Shares having the right to vote with
holders of Common Shares on any matter;

 

(d)                                 the
Corporation has no subsidiaries;

 

(e)                                  the
Corporation has full corporate power, capacity and authority to issue the
Debentures, and at the Closing Time, all necessary corporate action will have
been taken by the Corporation to allot and authorize the issuance of the
Debentures and upon receipt of payment therefor, the Debentures will be validly
issued;

 

(f)                                    the
Corporation has full corporate power, capacity and authority to issue the
Common Shares issuable upon the conversion of the Debentures, and at the
Closing Time, all necessary corporate action will have been taken by the
Corporation to allot and authorize the issuance of the Common Shares issuable
upon the conversion of the Debentures and such Common Shares will be validly
issued as fully-paid and non-assessable Common Shares in the capital of the
Corporation;

 

(g)                                 the
Corporation has full corporate power, capacity and authority to issue the
Flow-Through Shares, and at the Closing Time, all necessary corporate action
will have been taken by the Corporation to allot and authorize the issuance of
the Flow-Through Shares and upon receipt of payment therefor, the Flow-Through
Shares will be validly issued as fully paid and non-assessable Common Shares in
the capital of the Corporation;

 

(h)                                 the
Corporation is not in default or breach of, and the execution and delivery of,
and the performance of and compliance with the terms of, this Agreement, the
Indenture and the Subscription Agreements by the Corporation or any of the
transactions contemplated thereby, do not and will not result in any breach of,
or constitute a default under, and do not and will not create a state of facts
which, after notice or lapse of time or both, will result in a breach of or
constitute a default under: (i) any applicable laws; (ii) any term or
provision of the articles, by-laws or resolutions of the directors (or
committee thereof) or shareholders of the Corporation; (iii) any mortgage,
note, indenture, contract, agreement (written or oral), instrument, lease or
other document to which the Corporation is a party or by which it is bound; or (iv) any
judgment, decree, order, statute, rule or regulation applicable to the
Corporation or its properties or assets, which default or breach might
reasonably be expected to materially adversely affect the business, operations,
capital or condition (financial or otherwise) of the Corporation or its
properties or assets (on a combined basis) or would impair the ability of the
Corporation to consummate the transaction contemplated hereby or to duly
observe and perform any of its covenants or obligations contained in this
Agreement, the Indenture and the Subscription Agreements;

 

(i)                                     the
Corporation has full corporate power, capacity and authority to enter into this
Agreement, the Indenture and the Subscription Agreements, and to perform its
obligations set out herein and therein, and this Agreement is, and the
Indenture and the Subscription Agreements will on the Closing Date be, duly
authorized, executed and delivered by the Corporation, and this Agreement is,
and the Indenture and the Subscription Agreements will on the Closing Date be,
legal, valid and binding obligations of the Corporation enforceable against the
Corporation in accordance with their respective terms, subject to the general
qualifications that:

 

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(i)                                     enforceability may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws of
general application affecting creditors’ rights generally;

 

(ii)                                  equitable remedies, including the
remedies of specific performance and injunctive relief, are available only in
the discretion of the applicable court;

 

(iii)                               the enforceability of any
provision exculpating a party from liability or duty otherwise owed by it may
be limited under applicable law;

 

(iv)                              the enforceability of any
provision may be limited by and subject to applicable laws regarding
limitations of actions;

 

(v)                                 the enforceability of provisions
which purport to sever any provision which is prohibited or unenforceable under
applicable law without affecting the enforceability or validity of the
remainder of such document would be determined only in the discretion of the
court;

 

(vi)                              enforceability may be limited by
the equitable or statutory powers of the courts in Canada having jurisdiction
to stay proceedings before them and the execution of judgments; and

 

(vii)                           rights to indemnity and
contribution hereunder may be limited under applicable law;

 

(j)                                     the
Corporation has not received any communications alleging that the Corporation
has violated or, by conducting its business as proposed, would violate any of
the patents, trademarks, service marks, trade names, copyrights or trade
secrets or other proprietary rights of any other person or entity and the
Corporation is not aware of any potential basis for such an allegation or of
any reason to believe that such an allegation may be forthcoming;

 

(k)                                  the
Corporation is not a party to or bound by any agreement of guarantee,
indemnification (other than an indemnification of directors and officers in accordance
with the by-laws of the Corporation and applicable laws, and the
indemnification provided for herein) or any other like commitment of the
obligations, liabilities (contingent or otherwise) or indebtedness of any other
person;

 

(l)                                     except
as disclosed to the Agent in the due diligence session on December 19,
2005, the Corporation does not have any loans or other indebtedness outstanding
which have been made to or from any of its shareholders, officers, directors or
employees or any other person not dealing at arm’s length with it that are
currently outstanding;

 

(m)                               except
as disclosed to the Agent in the due diligence session on December 19,
2005, no shareholder, officer, director, employee or any other person not
dealing at arm’s length with the Corporation or, to the knowledge of the
Corporation, any associate or affiliate of any such person, owns, has or is
entitled to any royalty, net profits interest, carried interest or any other
encumbrances or claims of any nature whatsoever which are based on the Sawn
Lake Project, the Farmout Agreement, the Farmout Acknowledgement Agreement or
any revenue or rights attributed thereto;

 

11

 

(n)                                 the
Corporation is not a “reporting issuer”, within the meaning of the Applicable
Securities Laws, of any jurisdiction and the Common Shares are not currently
listed for trading on any stock exchange;

 

(o)                                 the
form and terms of definitive certificates representing the Common Shares of the
Corporation have been duly approved and adopted by the Corporation and comply
with all legal requirements relating thereto;

 

(p)                                 the
form and terms of definitive certificates representing the Debentures have been
duly approved and adopted by the Corporation;

 

(q)                                 no
authorization, approval or consent of any court, governmental authority or
regulatory agency is required to be obtained by the Corporation in connection
with the issuance, sale and delivery of the Offered Securities, except as
contemplated hereby;

 

(r)                                    no
Securities Commission or any other securities commission or similar regulatory
authority has issued any order preventing or suspending trading of any
securities of the Corporation, no such proceeding is, to the knowledge of the
Corporation, pending, contemplated or threatened, the Corporation is not in
default of any requirement of Applicable Securities Laws of the Selling
Jurisdictions which would have a Material Adverse Effect on the Corporation and
the Corporation is entitled to avail itself of the applicable prospectus exemptions
available under such Applicable Securities Laws in respect of the trades in the
Offered Securities to Subscribers as contemplated by this Agreement and the
Subscription Agreements;

 

(s)                                  the
Corporation has taken or will take prior to the Closing Date all such steps as
may be necessary to comply with such requirements of Applicable Securities Laws
such that the Offered Securities may, in accordance with Applicable Securities
Laws, be offered for sale and sold on a private placement basis to the public in
the Selling Jurisdictions through the Agent or any other investment dealers or
brokers registered in any of the Selling Jurisdictions and complying with
Applicable Securities Laws by way of the exemptions to the prospectus
requirements;

 

(t)                                    to
the knowledge of the Corporation, none of its directors or officers are subject
to an order or ruling of any securities regulatory authority or stock exchange
prohibiting such individual from acting as a director or officer of a public
company or of a company listed on a particular stock exchange;

 

(u)                                 the
Corporation acts as its own registrar and transfer agent for the Common Shares;

 

(v)                                 to
its knowledge, other than the Shareholder Agreement and the Voting Agreement,
neither the Corporation nor any of its shareholders is a party to any unanimous
shareholder agreement, pooling agreement, voting trust or similar type of
arrangements in respect of outstanding securities of the Corporation;

 

(w)                               the
written responses given by the Corporation and its directors and officers in
the due diligence session held on December 19, 2005 were made in good
faith, and to the knowledge of such parties, were true and correct where they
relate to matters of fact.  Where the
responses reflect the opinion or view of the Corporation or its directors or
officers, such opinions or views were honestly held at the time they were
given.  Where

 

12

 

any
responses incorporate forward looking information, such information is
inherently subject to risks and uncertainties which cannot be warranted;

 

(x)                                   other
than the Farmout Agreement, the Corporation is not a party to any agreement or
arrangement to acquire any shares or other interests in any other companies or
persons and is not a party to any agreement or arrangement to acquire or lease
any other business operations;

 

(y)                                 except
for the Surge Canada Liabilities (as defined in the Release and Indemnification
Agreement), the Corporation does not have any liability or obligation
including, without limitation, liabilities for taxes, whether accrued,
absolute, contingent or otherwise, not reflected in the Financial Statements,
except liabilities and obligations incurred in the ordinary course of business,
which liabilities and obligations are not material in the aggregate;

 

(z)                                   other
than Dynamo Claim, the claim made by Gary Vandergrift and the claim made by
Stephen Sharp, there are no material actions, suits, proceedings,
investigations or outstanding claims or demands, whether or not purportedly on
behalf of the Corporation or, instituted, pending, or, to the knowledge of the
Corporation, threatened against or affecting the Corporation (or its assets or
properties) at law or in equity or before or by any Governmental Entity, nor is
there any material judgment, order, decree or award of any Governmental Entity
having jurisdiction, obtained, pending or, to the knowledge of the Corporation,
threatened against the Corporation, and neither the Corporation nor its assets
and properties, is subject to any outstanding material judgment, order, writ,
injunction or decree;

 

(aa)                            each
contract or agreement (including the Series I Indenture, Farmout Agreement
and Farmout Acknowledgement Agreement) between the Corporation and any other
person which is material to the ownership, use or operation of a material
portion of the business, properties or assets of the Corporation, is in full
force and effect and, to the best of the knowledge and belief of the
Corporation is valid, binding and enforceable against each of the parties
thereto in accordance with its terms and no material breach or default exists
in respect thereof on the part of any party thereto and no event has occurred
which, with the giving of notice or the lapse of time or both, would constitute
such a material breach or default;

 

(bb)                          the
Corporation has received all necessary agreements and documents, including
without limitation, duly executed notices of assignment, to validly appoint the
Corporation as the operator of the Farmout Lands;

 

(cc)                            since
incorporation, the Corporation has not: (i) declared or paid any dividends
or made any distribution of its properties or assets to its shareholders and
the Corporation has not disposed of any of its properties or assets or incurred
any material indebtedness other than the Surge Canada Liabilities or the Series I
Debentures; or (ii) made or suffered any change or changes in its
financial condition, assets, liabilities or business which, singularly or in
the aggregate, have a Material Adverse Effect or could have a Material Adverse
Effect on its financial condition, assets, liabilities or business as currently
or proposed to be conducted;

 

13

 

(dd)                          the
Corporation has timely filed, or caused to be filed, all material income tax
returns required to be filed by it (all of which returns were correct and
complete in all material respects), has timely paid, or caused to be paid, all
taxes due and payable, and has satisfied in full in all material respects all
tax withholding, deposit and remittance requirements imposed on or with respect
to the Corporation.  The Corporation has
made adequate provision in accordance with generally accepted accounting
principles in its books and records for any amount of taxes material to the
Corporation and accruing in respect of any accounting period for which tax
returns are not yet required;

 

(ee)                            the
Corporation has not received any written notification that any issue involving
an amount of taxes has been raised and is currently pending by the Canada
Revenue Agency, the United States Internal Revenue Service or any other taxing
authority, including any sales tax authority, and no waivers of statutes of
limitations or objections to any assessments or reassessments involving an
amount of taxes have been given, filed or requested with respect to the
Corporation.  The Corporation has not
received any notice from any taxing authority to the effect that any tax return
is being examined, and the Corporation has no knowledge of any tax audit or
issue.  There are no proposed (but
unassessed) additional taxes applicable by the Corporation and none has been
asserted against the Corporation.  There
are no tax liens on, or statutory trusts in respect of, any assets of the Corporation
except for taxes not yet due and payable. 
The Corporation has not received a refund of any taxes to which to the
knowledge of the Corporation, it was not entitled;

 

(ff)                                the
Corporation has withheld from each payment made to any present or former
employees, officers, and directors and to all persons who are non-residents of
Canada for the purposes of the Tax Act all amounts required by Law and has
remitted such withheld amounts within the prescribed periods to the appropriate
federal or provincial taxing authority. 
The Corporation has remitted all Canada pension plan contributions,
employment insurance premiums, employer health taxes and other taxes payable by
it and has or will have remitted such amounts to the proper taxing authority
within the time required by applicable Law. 
The Corporation charged, collected and remitted on a timely basis all
taxes required by applicable Law (including, without limitation, Part IX
of the Excise Tax Act (Canada) or the retail sales tax legislation of any
province of Canada) on any sale, supply or delivery whatsoever, made by the
Corporation;

 

(gg)                          except
for the employment agreements with Leigh Cassidy and Fred Kelly dated November 15,
2005, the Corporation is not a party to written or oral employment agreements
or consulting agreements other than as has been disclosed to the Agent in
writing;

 

(hh)                          there
are no complaints against the Corporation before any employment standards
branch or tribunal or human rights tribunal, nor, to the knowledge of the
Corporation, any complaints or any occurrence which might lead to a complaint
under any human rights legislation or employment standards legislation. There
are no outstanding decisions or settlements or pending settlements under
applicable employment standards legislation which place any obligation upon the
Corporation to do or refrain from doing any act. Except for non-compliance that
is not or would not result in a Material Adverse Effect on the Corporation, the
Corporation is currently in full compliance with all workers’ compensation,
occupational health and safety and similar legislation, including payment in
full of all amounts owing thereunder, and there are no pending claims or
outstanding

 

14

 

orders
against either of them under applicable workers’ compensation legislation,
occupational health and safety or similar legislation nor has any event
occurred which may give rise to any such claim;

 

(ii)                                  the
corporate records and minute books of the Corporation as required to be
maintained by it under the Laws of its jurisdiction of incorporation are
up-to-date, in all material respects, and contain complete and accurate minutes
of all meetings of shareholders and the board of directors and any committees
thereof and all resolutions consented to in writing;

 

(jj)                                  the
Corporation is in compliance, and at all times has complied, with all
applicable laws other than non-compliance which would not, individually or in
the aggregate, have a Material Adverse Effect on the Corporation.  No investigation or review by any
Governmental Entity with respect to the Corporation is pending or, to the
knowledge of the Corporation, is threatened, nor has any Governmental Entity
indicated in writing an intention to conduct the same, other than those the
outcome of which could not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on the Corporation;

 

(kk)                            the
Corporation is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exemptions, consents, certificates,
approvals and orders necessary to own, lease and operate its properties and to
lawfully carry on its businesses as they are now being conducted (collectively,
the “Corporation Permits”), except
where the failure to be in possession of such Corporation Permits would not,
individually or in the aggregate, have a Material Adverse Effect on the
Corporation, and there is no action, proceeding or investigation pending or, to
the knowledge of the Corporation, threatened regarding any of the Corporation
Permits which would have a Material Adverse Effect on the Corporation.  The Corporation is not in conflict with, or
in default or violation of any of the Corporation Permits, except for any such
conflicts, defaults or violations which could not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on the
Corporation;

 

(ll)                                  except
to the extent that in violation or other matter referred to in this
subparagraph does not have a Material Adverse Effect on the business, financial
condition, assets, properties, liabilities or operations of the Corporation:

 

(i)                                     the Corporation is not in violation of any applicable federal,
provincial, state, municipal or local laws, regulations, orders, government
decrees or ordinances with respect to environmental, health or safety matters
(collectively, “Environmental Laws”);

 

(ii)                                  the Corporation has operated its business at all times and has
received, handled, used, stored, treated, shipped and disposed of all
contaminants without violation of Environmental Laws;

 

(iii)                               except as have been disclosed in writing to the Agent, there have
been no spills, releases, deposits or discharges of hazardous or toxic
substances, contaminants or wastes into the earth, air or into any body of
water or any municipal or other sewer or drain water system by the Corporation
that have not been remedied;

 

15

 

(iv)                              no orders, directions or notices have been issued and remain
outstanding pursuant to any Environmental Laws relating to the business or
assets of the Corporation;

 

(v)                                 the Corporation has not failed to report to the proper Governmental
Entity the occurrence of any event which is required to be so reported by any
Environmental Law; and

 

(vi)                              the Corporation holds all licenses, permits and approvals required
under any Environmental Laws in connection with the operation of its business
and the ownership and use of its assets, all such licenses, permits and
approvals are in full force and effect, and except for (A) notifications
and conditions of general application to assets of a type owned by the
Corporation, and (B) notifications relating to the reclamation obligations
under the Environmental Protection and Enhancement Act
(Alberta), the Corporation has not received any notification pursuant to any
Environmental Laws that any work, repairs, construction or capital expenditures
are required to be made by it as a condition of continued compliance with any
Environmental Laws, or any license, permit or approval issued pursuant thereto,
or that any license, permit or approval referred to above is about to be
reviewed, made subject to limitation or conditions, revoked, withdrawn or
terminated;

 

(mm)                      any and all
operations of the Corporation and, to the knowledge of the Corporation, any and
all operations by third parties, on or in respect of the assets and properties
of the Corporation, have been conducted in accordance with good oil and gas
industry practices and in material compliance with applicable laws, rules,
regulations, orders and directions of governmental and other competent
authorities;

 

(nn)                          in respect of the
assets and properties of the Corporation that are operated by it, if any, the
Corporation holds all valid licences, permits and similar rights and privileges
that are required and necessary under applicable law to operate the assets and
properties of the Corporation as presently operated;

 

(oo)                          although it does not
warrant title, the Corporation does not have reason to believe that the
Corporation does not have title to or the right to produce and sell its
petroleum, natural gas and related hydrocarbons (for the purpose of this
clause, the foregoing are referred to as the “Interest”)
and does represent and warrant that the Interest is free and clear of adverse
claims created by, through or under the Corporation except pursuant to those
arising in the ordinary course of business and those of First Nation groups
asserting traditional land claims over a broad portion of the Province of
Alberta which may include the area of the Sawn Lake Project, and that, to its
knowledge, the Corporation holds its Interest under valid and subsisting
leases, licenses, permits, concessions, concession agreements, contracts,
subleases, reservations or other agreements except where the failure to so hold
its Interest would not have a material adverse effect on the Corporation;

 

(pp)                          to the best of the
knowledge of management of the Corporation, the Corporation does not have any
reason to believe that the representations and warranties of Surge U.S., Deep
Well, Northern and Deep Alta, respectively, in the Farmout Agreement and
Farmout Acknowledgement Agreement are not true and correct as of the date
hereof or that Surge

 

16

 

U.S., Deep Well, Northern or Deep Alta,
respectively, is in breach of any covenants in the Farmout Agreement or Farmout
Acknowledgement Agreement, except such as would not have a material adverse
effect on the business, operations, capital, properties, assets, liabilities
(absolute, accrued, contingent or otherwise) or results of operations of the
Corporation;

 

(qq)                          other than oil and
gas industry standard “permitted encumbrances”, the Corporation is not aware of
any defects, failures or impairments in the title of Deep Well, Northern or
Deep Alta in the Farmout Lands, whether or not an action, suit, proceeding or
inquiry is pending or threatened or whether or not discovered by any third
party which in aggregate could have a material adverse effect on: (A) the
quantity and pre-tax present worth values of the Farmout Lands; (B) the
future production volumes derived from the Farmout Lands; or (C) the
future cash flow of the Farmout Lands;

 

(rr)                                the Corporation
is insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts that are customary in the business in
which it is engaged; to the best of the Corporation’s knowledge, all policies
of insurance and fidelity or surety bonds insuring the Corporation or its business, assets,
employees, officers and directors are in full force and effect, the Corporation
is in compliance with the terms of such policies and instruments in all
material respects and there are no material claims by the Corporation
under any such policy or instrument as to which any insurance company is
denying liability or defending under a reservation of rights clause; the Corporation
has no reason to believe that it will not be able to renew its existing
insurance coverage as and when such coverage expires or to obtain similar
coverage from similar insurers as may be necessary to continue its business at
a cost that would not have a material adverse effect on the condition
(financial or otherwise) prospects, earnings, business or properties of the Corporation;

 

(ss)                            pursuant
to the terms of the Voting Agreement, the Deep Well Shares shall be voted by
Surge U.S. until February 25, 2007;

 

(tt)                                the Corporation has
the full corporate right, power and authority to incur and renounce to the
Subscribers for Flow-Through Shares, Qualifying Expenditures in an amount equal
to the Commitment Amount;

 

(uu)                          the incurring and
renouncing of Qualifying Expenditures to the Subscribers for Flow-Through
Shares does not and will not constitute a breach of or default under the constating
documents of the Corporation or any law, regulation, order or ruling applicable
to the Corporation or any agreement, contract or indenture to which the
Corporation is a party or by which it is bound;

 

(vv)                          the Corporation is,
and at all material times will be, a Principal Business Corporation throughout
the Expenditure Period;

 

(ww)                      subject to any
agreement respecting the Flow-Through Shares to which the Corporation is not a
party, upon issuance pursuant to the provisions hereof, the Flow-Through Shares
will be “flow-through shares” as defined in subsection 66(15) of the Act
and will not constitute “prescribed shares” for the purpose of
Regulation 6202.1 to the Act;

 

17

 

(xx)                              neither the
Corporation nor any corporation associated with it (as defined in the Act) is
party to any other agreement for the issuance of flow-through shares for which
the required expenditures have not been renounced; and

 

(yy)                          the
representations and warranties of the Corporation in the Subscription
Agreements are, or will on the Closing Date be, true and correct.

 

Section 5                                             Conditions

 

The obligations
of the Agent hereunder shall be conditional upon the Agent receiving, and the
Agent shall have the right on the Closing Date on behalf of Subscribers to
withdraw all Subscription Agreements delivered and not previously withdrawn by
Subscribers unless the Agent receives, on the Closing Date:

 

(a)                                  legal
opinions of the Corporation’s Counsel addressed to the Agent and the
Subscribers in form and substance satisfactory to the Agent, and the Agent’s
Counsel, acting reasonably, relating to the Corporation, the Offering, the
issuance and sale of the Flow-Through Shares, the Debentures, the Agent’s
Warrants and the underlying securities, including, without limitation,
compliance with Applicable Securities Laws of the Selling Jurisdictions in
which Offered Securities were sold, in any way connected with the Offering,
issuance, sale and delivery of the Offered Securities and the Agent’s Warrants
as the Agent may reasonably request.  It
is understood that the respective counsel may rely on, or arrange for separate
deliveries of, the opinions of local counsel acceptable to them as to matters
governed by the laws of jurisdictions other than Alberta and on certificates of
officers of the Corporation, and the auditors of the Corporation as to relevant
matters of fact;

 

(b)                                 a
certificate of the Corporation dated the Closing Date, addressed to the Agent
and the Subscribers and signed on the Corporation’s behalf by its Executive
Chairman and Chief Executive Officer or the Chief Operating Officer of the
Corporation, or such other officer of the Corporation satisfactory to the
Agent, acting reasonably, certifying that:

 

(i)                                     the Corporation has complied with
and satisfied all terms and conditions of this Agreement on its part to be
complied with or satisfied at or prior to the Closing Time, other than those
which have been waived by the Agent in writing;

 

(ii)                                  the representations and warranties
of the Corporation set forth in this Agreement and the Subscription Agreements
are true and correct at the Closing Time, as if made at such time;

 

(iii)                               no event of a nature referred to
in Section 10(a), (b), (d) or (e) has occurred or to the
knowledge of such officer is pending, contemplated or threatened (excluding any
requirement of the Agent to make a determination as to whether or not any event
or change has, in the Agent’s opinion, had or would have the effect specified
therein);

 

(iv)                              the Corporation has made and/or
obtained, on or prior to the Closing Time, all necessary filings, approvals,
consents and acceptances of applicable regulatory authorities and under any
applicable agreement or document to which the Corporation is a party or by
which it is bound, required for the execution and

 

18

 

delivery of this Agreement
and the Offering in the Selling Jurisdictions (subject to completion of filings
with certain regulatory authorities following the Closing Date); and

 

(v)                                 such other matters as may be
reasonably requested by the Agent or the Agent’s Counsel;

 

and the Agent shall have no
knowledge to the contrary;

 

(c)                                  evidence
satisfactory to the Agent that the Corporation has obtained all necessary
approvals, if any, for the issuance of the Flow-Through Shares and the
Debentures (and the issuance of the Common Shares on conversion of the
Debentures), subject only to the filing of required documents which are in the
possession of the Corporation, on the Closing Date and payment of applicable
fees;

 

(d)                                 definitive
certificates issued on the Closing Date representing, in the aggregate, all of
the Flow-Through Shares and Debentures subscribed for registered in such name
or names as the Agent shall notify the Corporation in writing not less than two
Business Days prior to the Closing Date, provided such certificates registered
in such names may be delivered in advance of the Closing Date to the Agent or
such other parties in such locations as the Agent may direct and the Agent and
the Corporation may agree;

 

(e)                                  executed
copies of this Agreement, the Indenture and the Subscription Agreements, each
in form and substance reasonably satisfactory to the Agent and the Agent’s
Counsel; and

 

(f)                                    such
other certificates and documents as may be reasonably requested by the Agent or
the Agent’s counsel.

 

The
foregoing conditions are for the sole benefit of the Agent and may be waived in
whole or in part by the Agent at any time and, without limitation, the Agent
shall have the right, on behalf of potential subscribers, to withdraw all
Subscription Agreements delivered and not previously withdrawn or rescinded by
such persons. If any of the foregoing conditions are not met, the Agent may
terminate its obligations under this Agreement without prejudice to any other
remedies it may have.

 

Section 6                                             Closing

 

The issue and
sale of the Offered Securities shall be completed at the Closing Time at the
offices of Burnet, Duckworth & Palmer LLP or at such other place as
the Corporation and the Agent may agree. 
Subject to the conditions set forth in Section 5, the Agent, on the
applicable Closing Date, shall deliver to the Corporation:

 

(a)                                  all
completed Subscription Agreements executed by the Subscribers (including all
applicable schedules thereto), in form and substance reasonably satisfactory to
the Corporation and the Agent and their respective counsel; and

 

(b)                                 a
certified cheque made payable to the Corporation in an amount equal to the
aggregate gross proceeds of the Offering less the Agent’s fees and expenses set
out herein;

 

19

 

against delivery
by the Corporation of:

 

(a)                                  the
certificates referred to in Section 5(d), to be delivered at the Closing
Time;

 

(b)                                 the
certificate representing the Agent’s Warrants; and

 

(c)                                  such
further documentation as may be contemplated by this Agreement or that may
reasonably be requested by the Agent’s Counsel.

 

In the event that
there is more than one closing, the conditions to closing shall apply to all of
such closings and the documents contemplated by Section 5 and Section 6
to be delivered at the closing shall be delivered at the first closing and at
any subsequent closings to the extent applicable.

 

The Corporation
may not reject any properly completed Subscription Agreement which is in
compliance with Applicable Securities Laws, unless: (i) the number of
Offered Securities subscribed for or purchased pursuant to all Subscription
Agreements tendered by the Agent exceeds the maximum number of Offered
Securities to be sold under this Agreement, in which case Subscription
Agreements representing the over-allotment shall, in consultation with the
Agent, be rejected; or (ii) unless the acceptance of such Subscription
Agreement may breach or violate any Applicable Securities Laws.

 

Section 7                                             Fees

 

In
consideration for the Agent’s services, the Corporation shall pay to the Agent
at the Closing Time a cash commission in the amount of 5% of the aggregate
gross proceeds raised pursuant to the sale of the Flow-Through Shares and a
cash commission in the amount of 8% of the aggregate gross proceeds raised
pursuant to the sale of the Debentures.

 

In
addition to the cash commission set out above, the Corporation will issue to
the Agent at the Closing Time an irrevocable warrant to purchase that number of
Common Shares equal to 8% of the Common Shares issuable on conversion of all of
the Debentures issued pursuant to the Offering, at an exercise price of $1.00
per share, which option shall be exercisable by the Agent for a period of the
earlier of: twelve (12) months following the date on which the Corporation
completes a Going Public Transaction (as defined in the Agent’s Warrant
certificate) and November 17, 2008 (the “Agent’s
Warrants”).

 

Section 8                                             Expenses

 

Whether or not
the transactions contemplated herein shall be completed, all costs and expenses
of or incidental to the creation, issue, sale or distribution of the Offered
Securities shall be borne by the Corporation, including, without limitation,
all costs and expenses of or incidental to the private placement of the Offered
Securities, the fees and expenses of the Corporation’s counsel, agent’s counsel
retained by the Corporation’s counsel, the Corporation’s auditors, the
Corporation’s engineers, the reasonable out-of-pocket expenses of the Agent,
including, but not limited to, travel and road show expenses and the Agent’s
legal fees and expenses, and all other costs and expenses relating to the
transactions contemplated herein.  All
fees and expenses incurred by the Agent which are reimbursable hereunder shall
be payable by the Corporation immediately upon receiving an invoice therefore
from the Agent or the Agent shall be authorized to deduct such fees and
expenses from the gross proceeds of the Offering.  The Agent’s legal fees excluding
disbursements and taxes will be a maximum of $30,000, unless the Corporation
otherwise consents.

 

20

 

Section 9                                             Waiver

 

The Agent may, in
respect of the Corporation, waive in whole or in part any breach of, default
under or non-compliance with any representation, warranty, covenant, term or
condition hereof on the part of the Corporation, or extend the time for
compliance therewith, without prejudice to any of its rights in respect of any
other representation, warranty, covenant, term or condition hereof or any other
breach of, default under or non-compliance with any other representation,
warranty, covenant, term or condition hereof, provided that any such waiver or
extension shall be binding on the Agent only if the same is in writing.

 

Section 10                                      Termination Events

 

The Agent may
terminate its obligations hereunder, without any liability on the Agent’s part,
by written notice to the Corporation, in the event that at or prior to the
Closing Time:

 

(a)                                  any
order to cease or suspend trading in any securities of the Corporation, or
prohibiting or restricting the distribution of the Offered Securities, is made,
or proceedings are announced, commenced or threatened for the making of any
such order, by any securities commission or similar regulatory authority, or by
any other competent authority, and the same has not been rescinded, revoked or
withdrawn;

 

(b)                                 any
inquiry, investigation (whether formal or informal) or other proceeding in
relation to the Corporation or any of its directors or officers is announced or
commenced by any securities commission or similar regulatory authority, or by
any other competent authority, or any order is issued under or pursuant to any
statute of Canada or of any of the provinces of Canada, or any other applicable
law or regulatory authority (unless based on the activities or alleged
activities of the Agent), or there is any change of law, regulation or policy
or the interpretation or administration thereof, which, in the sole opinion of
the Agent, acting reasonably, may materially adversely affect the Corporation
or the trading or distribution of the Offered Securities;

 

(c)                                  there
should develop, occur or come into effect or existence any event, action,
state, condition (including, without limitation, terrorism or accident) or
major financial occurrence of national or international consequence or any
action by government, law or regulation, or any other such occurrence of any
nature whatsoever, which, in the sole opinion of the Agent, acting reasonably,
seriously adversely affects, or involves, or will seriously adversely affect or
involve, or might seriously adversely affect or involve the financial markets
or the business, operations or affairs of the Corporation;

 

(d)                                 there
should occur any change, event, fact or circumstance (actual, contemplated or
threatened) or any development that could result in such a change, event, fact
or circumstance, which, in the sole opinion of the Agent as determined by the
Agent in its sole discretion, could reasonably be expected to have a material
adverse effect on the business, operations or affairs of the Corporation, the
value or the marketability of the Offered Securities;

 

(e)                                  the
Corporation shall not be in breach of, default under or non-compliance in any
material respect with any representation, warranty, term or condition of this
Agreement, the Indenture or the Subscription Agreements; or

 

21

 

(f)                                    the
Agent shall become aware, as a result of its due diligence review (including,
without limitation, the due diligence session) or otherwise, of any adverse
material information, fact or change (in the sole opinion of the Agent, acting
reasonably) with respect to the Corporation which had not been publicly
disclosed or disclosed in writing to the Agent, prior to the date hereof;

 

in
any of which cases, the Agent shall be entitled, at its option, to terminate
and cancel its obligations to the Corporation under this Agreement and the
obligations of any Subscriber under any Subscription Agreement by written
notice to that effect given to the Corporation prior to the Closing Date.

 

Section 11                                      Continuation of Termination Right

 

The Agent may
exercise any or all of the rights provided for in Section 5, Section 9
or Section 10 notwithstanding any material change, change, event or state
of facts and notwithstanding any act or thing taken or done by the Agent or any
inaction by the Agent, whether before or after the occurrence of any material
change, change, event or state of facts including, without limitation, any act
of the Agent related to the Offering or continued offering of the Offered
Securities for sale, and the Agent shall only be considered to have waived or
be estopped from exercising or relying upon any of its rights under or pursuant
to in Section 5, Section 9 or Section 10 if such waiver or
estoppel is in writing and specifically waives or estops such exercise or
reliance.

 

Section 12                                      Exercise of Termination Right

 

Any termination
pursuant to the terms of this Agreement shall be effected by notice in writing
delivered to the Corporation prior to the Closing Date, provided that no
termination shall discharge or otherwise affect any obligation of the
Corporation under Section 8 and Section 14 through Section 17
inclusive. The rights of the Agent to terminate its obligations hereunder are
in addition to, and without prejudice to, any other remedies it may have.

 

Section 13                                      Survival

 

It is understood
that all representations, warranties, covenants, terms and conditions herein or
contained in certificates or documents submitted pursuant to or in connection
with the transactions contemplated herein shall survive the payment by the
Agent for the Offered Securities and shall continue in full force and effect
for the benefit of the Agent and the Subscribers for a period of two years
regardless of any investigation by or on behalf of the Agent with respect
thereto.

 

Section 14                                      Indemnity

 

The Corporation
(the “Indemnitor”) shall indemnify
and save harmless each of the Agent and its affiliates, shareholders,
directors, officers, partners, employees and agents (collectively the “Indemnified Parties”) from and against all
actual or threatened claims, actions, suits, investigations and proceedings
(collectively “Proceedings”) and
all losses (other than loss of profits), expenses, fees, damages, obligations,
payments and liabilities (collectively “Liabilities”)
(including without limitation all statutory duties and obligations, and,
subject to Section 16, all amounts paid to investigate, defend and settle
any action or to satisfy any judgment or award and all legal fees and
disbursements actually incurred) which now or any time hereafter are suffered
or incurred by reason of any event, act or omission in any way caused by, or
arising directly or indirectly from or in consequence of:

 

22

 

(a)                                  any
information or statement contained in this Agreement, the Subscription
Agreements, the Indenture or any certificate or other document provided by or
on behalf of the Corporation to the Agent or a Subscriber in connection with
the Offering (other than any information or statement relating solely to the
Agent and furnished to the Corporation by the Agent expressly for inclusion therein
or forward looking information and materials prepared by third parties), which
is or is alleged to be untrue or any omission or alleged omission to provide
any information or state any fact the omission of which makes or is alleged to
make any such information or statement untrue or misleading in light of the
circumstances in which it was made;

 

(b)                                 any
misrepresentation or alleged misrepresentation (except a misrepresentation
which is based upon information relating solely to the Agent and furnished to
the Corporation by the Agent expressly for inclusion in this Agreement or the
Subscription Agreements) contained in any part of this Agreement, the Indenture
or the Subscription Agreements;

 

(c)                                  any
prohibition or restriction of trading in the securities of the Corporation or
any prohibition or restriction affecting the distribution of the Offered
Securities (not based solely upon the activities or alleged activities of the
Agent or its banking or selling group members, if any), imposed by any
competent authority if such prohibition or restriction is based on any
misrepresentation or alleged misrepresentation of a kind referred to in Section 14(b);

 

(d)                                 any
order made or any inquiry, investigation (whether formal or informal) or other
proceeding commenced or threatened by any securities commission or by any one
or more competent authorities (not based solely upon the activities or the
alleged activities of the Agent or its banking or selling group members, if
any) relating to or affecting the trading or distribution of the Debentures,
Common Shares or Flow-Through Shares; or

 

(e)                                  any
material breach of, default under or non-compliance by the Corporation with any
representation, warranty, term or condition of this Agreement, or any
certificate or other document delivered by or on behalf of the Corporation
hereunder or any requirement of Applicable Securities Laws,

 

provided that in
the event and to the extent that a court of competent jurisdiction in a final
judgment from which no appeal can be made or a regulatory authority in a final
ruling from which no appeal can be made shall determine that any matter in
respect of which indemnity may be sought hereunder resulted solely from the
gross negligence, dishonesty, fraud or wilful misconduct of any Indemnified Party
claiming indemnity, this indemnity shall not apply.

 

The Corporation
hereby waives its right to recover contribution from the Agent with respect to
any liability of the Corporation by reason of or arising out of any
misrepresentation in the Public Record provided, however, that such waiver
shall not apply in respect of liability caused or incurred by reason of or
arising out of: (i) any misrepresentation which is based solely upon
information relating solely to the Agent contained in such document and furnished
to the Corporation by the Agent expressly for inclusion in such document; or (ii) any
failure by the Agent to provide to prospective purchasers of Offered Securities
any document which the Corporation is required to provide to such prospective
purchasers and which the Corporation has provided to the Agent to forward to
such prospective purchasers.

 

23

 

Section 15                                      Notice of Indemnity Claim

 

If any Proceeding
is brought, instituted or threatened against any Indemnified Party which may
result in a claim for indemnification under this Agreement, such Indemnified
Party shall notify the Corporation as soon as possible of the nature of such
claim, and the Corporation shall be entitled (but not required) to assume
conduct of the defence thereof and retain counsel on behalf of the Indemnified
Party who is satisfactory to the Indemnified Party, acting reasonably, to
represent the Indemnified Party in such Proceeding and the Corporation shall
pay the fees and disbursements of such counsel and all other expenses of the
Indemnified Party relating to such Proceeding as incurred.  Failure to so notify the Corporation shall
not relieve the Corporation from liability except and only to the extent that
the failure materially prejudices the Corporation.  If the Corporation assumes conduct of the
defence for an Indemnified Party, the Indemnified Party shall fully cooperate
in the defence including, without limitation, the provision of documents,
appropriate officers and employees to give witness statements, attend
examinations for discovery, make affidavits, meet with counsel, testify and
divulge all information reasonably required to defend or prosecute the
Proceedings.

 

In any such
Proceeding the Indemnified Party shall have the right to employ separate
counsel and to participate in the defence thereof if:

 

(a)                                  the
Indemnified Party has been advised in writing by counsel that there may be a
reasonable legal defence available to the Indemnified Party that is different
from or in addition to those available to the Corporation or that a conflict of
interest exists which makes representation by counsel chosen by the Corporation
not advisable;

 

(b)                                 the
Indemnitor has not assumed the defence of the Proceeding and employed counsel therefor
satisfactory to the Indemnified Party within ten (10) days after receiving
notice thereof; or

 

(c)                                  employment
of such other counsel has been authorized by the Corporation;

 

in which event,
the fees and disbursements of such counsel (on a solicitor and his client
basis) shall be paid by the Corporation; it being understood, however, that the
Corporation shall not, in connection with any one such action or separate but
substantially similar or related actions in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate law firm in each jurisdiction (in
addition to any local counsel) for all such Indemnified Parties.

 

Section 16                                      Admission of Liability

 

No admission of
liability and no settlement of any Proceeding shall be made by the Corporation
without the prior written consent of the Indemnified Parties affected, such
consent not to be unreasonably withheld. 
No admission of liability and no settlement of any Proceeding shall be
made by an Indemnified Party without the prior written consent of the
Corporation and the other Indemnified Parties affected, such consent not to be
unreasonably withheld.

 

Section 17                                      Right of Contribution

 

In order to
provide for just and equitable contribution in circumstances in which the
indemnification provided for in this Agreement is due in accordance with its
terms but is (in whole or in part), for any reason, held by a court to be
unavailable from the Corporation on grounds of policy or otherwise, each of

 

24

 

the Corporation
and the party or parties seeking indemnification shall contribute to the
aggregate Liabilities (or Proceedings in respect thereof) to which they may be
subject or which they may suffer or incur:

 

(a)                                  in
such proportion as is appropriate to reflect the relative benefit received by
the Corporation on the one hand and by the Agent on the other hand from the
Offering; or

 

(b)                                 if
the allocation provided by subparagraph (a) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in subparagraph (a) above but also to
reflect the relative fault of the party or parties seeking indemnity, on the
one hand, and the parties from whom indemnity is sought, on the other hand, in
connection with the statement, omission, misrepresentation or alleged
misrepresentation, order, inquiry, investigation or other matter or thing which
resulted in such Liabilities, as well as any other relevant equitable
considerations.

 

The relative
benefits received by the Corporation, on the one hand, and the Agent, on the
other hand, shall be deemed to be in the same proportion that the total
proceeds of the Offering received by the Corporation (net of fees but before
deducting expenses) bear to the fees received by the Agent.

 

The amount paid
or payable by the Indemnitor as a result of any Proceedings or Liabilities
shall, without limitation, include any legal or other expenses reasonably
incurred by the Indemnified Person in connection with investigating or
defending such Liabilities (or Proceedings in respect thereof), whether or not
resulting in any action, suit, proceeding or claim.

 

Any liability of
the Agent under this Section 17 shall be limited to the amount of the
Agent’s fee paid to the Agent pursuant to Section 7 hereof.

 

The Corporation
agrees that it would not be just and equitable if contributions pursuant to
this Agreement were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding sections.

 

The rights to
indemnity and right of contribution provided in the foregoing paragraphs shall
be in addition to, and not in derogation of, any other right to contribution
which the Indemnified Parties may have by statute or otherwise at law or in
equity.  Subject to Section 14, the
Indemnitor waives all rights of contribution that it may have against any Indemnified
Party relating to any Liability in respect of which the Indemnitor has agreed
to indemnify the Indemnified Parties hereunder.

 

It is the
intention of the Corporation to constitute the Agent as trustee for the
Indemnified Parties for the purposes of Section 14 to Section 17
inclusive and the Agent shall be entitled, as trustee, to enforce such
covenants on behalf of any other Indemnified Parties.

 

If any Proceeding
is brought in connection with the transactions contemplated by this Agreement
and the Agent or representative of the Agent is required to testify in
connection therewith or is required to respond to procedures designed to
discover information relating thereto, the Agent will have the right to employ
their own counsel in connection therewith, and the reasonable fees and
disbursements of such counsel in connection therewith as well as its reasonable
fees at the normal per diem rate for its directors, officers, employees and
agents involved in preparation for and attendance at such Proceeding or in so
responding, and any other reasonable costs and out-of-pocket expenses incurred
by it in connection therewith, will be paid by the Corporation as they are
incurred.

 

25

 

The obligations
under the indemnity and right of contribution provided herein shall apply
whether or not the transactions contemplated by this Agreement are completed
and shall survive the completion of the transactions contemplated under this
Agreement and the termination of this Agreement.

 

Section 18                                      Notices

 

Any notice or
other communication to be given hereunder shall, in the case of notice to be
given to the Corporation, be addressed to:

 

Signet Energy Inc.

1818, 144 - 4th Avenue S.W.

Calgary, Alberta

T2P 3N4

Attention:                                         C.W. Leigh Cassidy

Telecopy No.:                     (403) 440-1114

 

and a copy to:

 

Burnet, Duckworth & Palmer LLP

1400, 350 - 7th Avenue S.W.

Calgary, Alberta

T2P 3N9

Attention:                                         Fred Davidson

Telecopy No.:                     (403) 260-0337

 

and, in the case
of notice to be given to the Agent, be addressed to:

 

MGI Securities Inc.

Suite 1420, 333 - 5th Avenue SW

Calgary, AB

T2P 3B6

Attention:                                         Tony Loria

Telecopy No.:                     (403) 705-4971

 

and a copy to:

 

Davis & Company LLP

3000 Shell Centre

400 – 4th Avenue SW

Calgary, Alberta

T2P 0J4

Attention:                                         James Bell

Telecopy No.:                     (403) 296-4474

 

or to such other
address as the party may designate by notice given to the others.  Each communication shall be personally
delivered to the addressee or sent by facsimile transmission to the addressee,
and:

 

(a)                                  a
communication which is personally delivered shall, if delivered before 4:30 p.m.
(local time) on a Business Day, be deemed to be given and received on that day
and, in any

 

26

 

other
case be deemed to be given and received on the first Business Day following the
day on which it is delivered; and

 

(b)                                 a
communication which is sent by facsimile transmission shall, if sent on a
Business Day before 4:30 p.m. (local time), be deemed to be given and
received on that day and, in any other case, be deemed to be given and received
on the first Business Day following the day on which it is sent.

 

Section 19                                      Acknowledgement and Consent

 

The Corporation: (a) acknowledges
and agrees that the Agent has certain statutory obligations as a registrant
under the Applicable Securities Laws and has fiduciary relationships with its
clients; and (b) consents to the Agent acting hereunder while continuing
to act for its clients.  To the extent
that the Agent’s statutory obligations as a registrant under Applicable
Securities Laws or fiduciary relationships with its clients conflicts with its
obligations hereunder, the Agent shall be entitled to fulfil its statutory
obligations as a registrant under Applicable Securities Laws and its duties to
its clients.  Nothing in this Agreement
shall be interpreted to prevent the Agent from fulfilling its statutory
obligations as a registrant under Applicable Securities Laws or to act as a
fiduciary of its clients.

 

Section 20                                      Trust

 

The Corporation
acknowledges and agrees that it is the intention of the parties hereto and the
Corporation hereby constitutes the Agent as trustee for each of the Subscribers
in respect of each of the respective covenants, agreements and representations
and warranties of the Corporation contained herein and the Agent shall be
entitled, as trustee, in addition to any rights of the Subscribers, to enforce
such covenants, agreements and representations and warranties on behalf of the
Subscribers.

 

Section 21                                      Severance

 

If one or more of
the provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this Agreement, but
this Agreement shall be construed as if such invalid, illegal or unenforceable
provision or provisions had never been contained herein.

 

Section 22                                      Governing Law

 

This Agreement
shall be governed by and construed in accordance with the laws of the Province
of Alberta and the laws of Canada applicable therein.

 

Section 23                                      Time of the Essence

 

Time shall be of
the essence of this Agreement.

 

Section 24                                      Counterpart Execution

 

This Agreement
may be executed in one or more counterparts and by telecopier each of which so
executed shall constitute an original and all of which together shall
constitute one and the same agreement.

 

27

 

Section 25                                      Entire Agreement

 

It is understood
that the terms and conditions of this Agreement supersede any previous verbal
or written agreement between the Agent and the Corporation in respect of the
offer for sale by the Corporation of the Offered Securities.

 

If the foregoing
is in accordance with your understanding and is agreed to by you, please
confirm your acceptance by signing the enclosed copies of this Agreement at the
place indicated and returning same to the Agent.

 

 

	
  MGI SECURITIES INC.

  
	
   

  
	
  Per:

  	
  /s/ Tony Loria

  	
   

  
	
   

  
	
   

  
	
  ACCEPTED AND
  AGREED to as of the

  
	
  20th
  day of December, 2005.

  
	
   

  
	
  SIGNET
  ENERGY INC.

  
	
   

  
	
  Per:

  	
  /s/ C.W. Leigh Cassidy

  	
   

  

 

28BP - x1-54845 - SFBC - Exhibit 4.1

EXHIBIT 4.1

RIGHTS AGREEMENT 

dated as of

December 21, 2005 

between 

SFBC International, Inc. 

and 

Wachovia Bank, N.A.

Rights Agent 

TABLE OF CONTENTS 

				
	 

	 

	 

	Page 

	Section 1.

	Definitions

	 

	1

	Section 2.

	Appointment of Rights Agent

	 

	5

	Section 3.

	Issuance of Rights Certificates

	 

	5

	Section 4.

	Form of Rights Certificates

	 

	6

	Section 5.

	Countersignature and Registration

	 

	7

	Section 6.

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

	 

	8

	Section 7.

	Exercise of Rights; Purchase Price; Expiration Date of Rights

	 

	8

	Section 8.

	Cancellation and Destruction of Rights Certificates

	 

	10

	Section 9.

	Reservation and Availability of Capital Stock

	 

	10

	Section 10.

	Preferred Stock Record Date

	 

	12

	Section 11.

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

	 

	12

	Section 12.

	Certificate of Adjusted Purchase Price or Number of Shares

	 

	19

	Section 13.

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

	 

	19

	Section 14.

	Fractional Rights and Fractional Shares

	 

	21

	Section 15.

	Rights of Action

	 

	22

	Section 16.

	Agreement of Rights Holders

	 

	23

	Section 17.

	Rights Certificate Holder Not Deemed a Stockholder

	 

	23

	Section 18.

	Concerning the Rights Agent

	 

	24

	Section 19.

	Merger or Consolidation or Change of Name of Rights Agent

	 

	24

	Section 20.

	Duties of Rights Agent

	 

	25

	Section 21.

	Change of Rights Agent

	 

	27

	Section 22.

	Issuance of New Rights Certificates

	 

	27

	Section 23.

	Redemption and Termination

	 

	28

	Section 24.

	Exchange

	 

	28

	Section 25.

	Notice of Certain Events

	 

	30

	Section 26.

	Notices

	 

	30

	Section 27.

	Supplements and Amendments

	 

	31

	Section 28.

	Successors

	 

	31

	Section 29.

	Determinations and Actions by the Board of Directors, etc.

	 

	32

	Section 30.

	Benefits of this Agreement

	 

	32

	Section 31.

	Severability

	 

	32

	Section 32.

	Governing Law; Jurisdiction; Waiver of Jury Trial

	 

	32

	Section 33.

	Counterparts

	 

	33

	Section 34.

	Descriptive Headings

	 

	33

	

EXHIBITS

	Exhibit A

	Form of Certificate of Designation, Preferences and Rights

	 

	 A-1

	Exhibit B

	Form of Rights Certificate

	 

	 B-1

	Exhibit C

	Form of Summary of Rights

	 

	 C-1

i

RIGHTS AGREEMENT

        RIGHTS AGREEMENT, dated as of December 21, 2005 (the “Agreement”), between SFBC International, Inc., a Delaware corporation (the “Company”), and Wachovia Bank, N.A., a national banking association (the “Rights Agent”). 

        WHEREAS, effective as of December 21, 2005 (the “Effective Date”), the Board of Directors of the Company 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, par value $0.001 per share, of the Company (the “Common Stock”) outstanding as of the Effective Date and each share of Common Stock issued between the Effective Date (whether originally issued or delivered from the Company’s treasury) and the Distribution Date (as hereinafter defined), each Right initially representing the right to purchase one one-thousandth of a share of Series A Junior Participating Preferred Stock of the Company (the “Preferred Stock”) having the rights, powers and preferences set forth in the form of Certificate of Designation, Preferences and Rights attached hereto as Exhibit A, upon the terms and subject to the conditions hereinafter set forth (the “Rights”); 

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

        Section 1.    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 15% or more of the shares of Common Stock then outstanding, but shall not include (i) the Company, (ii) any Subsidiary of the Company, (iii) any 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, (iv) any Person who becomes the Beneficial Owner of fifteen percent (15%) or more of the shares of Common Stock then outstanding as a result of a reduction in the number of shares of Common Stock outstanding due to the repurchase of shares of Common Stock by the Company unless and until such Person, after becoming aware that such Person has become the Beneficial Owner of fifteen percent (15%) or more of the then outstanding shares of Common Stock, acquires beneficial ownership of additional shares of Common Stock then outstanding, or (v) any such Person who has reported or is required to report such ownership (but less than 20%) on Schedule 13G under the Exchange Act (or any comparable or successor report) or on Schedule 13D under the Exchange Act (or any comparable or successor report) which Schedule 13D does not state any intention to or reserve the right to control or influence the management or policies of the Company or engage in any of the actions specified in Item 4 of such Schedule (other than the disposition of the Common Stock) and, within 10 Business Days of being requested by the Company to advise it regarding the same, certifies to the Company that such Person became the Beneficial Owner of shares of Common Stock in excess of 14.9% inadvertently or without knowledge of the terms of the Rights and who or which, together with all Affiliates and Associates, thereafter does not acquire additional shares 

1

of Common Stock while the Beneficial Owner of 15% or more of the shares of Common Stock then outstanding; provided, however, that if the Person requested to so certify fails to do so within 10 Business Days, then such Person shall become an Acquiring Person immediately after such 10-Business-Day period. 

        (b)   “Act” shall mean the Securities Act of 1933. 

        (c)   “Adjustment Shares” shall have the meaning set forth in Section 11(a)(ii) hereof. 

        (d)   “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. 

        (e)   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, other 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 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, (B) securities issuable upon exercise of Rights at any time prior to the occurrence of a Triggering Event (as hereinafter defined), 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 (as hereinafter defined) 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 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 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 Section 1(e)(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 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 

2

proviso to Section1(e)(ii) or disposing of any voting securities of the Company; provided, however, that nothing in this Section 1(e)(ii) 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 40 days after the date of such acquisition, and then only if such securities continue to be owned by such Person at such expiration of 40 days. 

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

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

        (h)   “Common Stock” shall mean the common stock, par value $0.001 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. 

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

        (j)    “Current Market Price” shall have the meaning set forth in Section 11(d) 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)  “Effective Date” shall have the meaning set forth in the Recitals of this Agreement. 

        (n)   “Equivalent Preferred Stock” shall have the meaning set forth in Section 11(b) hereof. 

        (o)   “Exchange Act” shall mean the Securities Exchange Act of 1934. 

        (p)   “Exchange Ratio” shall have the meaning set forth in Section 24(a) hereof. 

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

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

        (s)    “Person” shall mean any individual, firm, corporation, partnership, limited liability company, limited liability partnership, trust, syndicate or other entity and includes, without limitation, an unincorporated group of persons who, by formal or informal agreement or arrangement (whether or not in writing), have embarked on a common purpose or act. 

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        (t)     “Preferred Stock” shall mean shares of Series A Junior Participating Preferred Stock, par value $0.10 per share, of the Company, and, to the extent that there are not a sufficient number of shares of Series A Junior Participating Preferred Stock authorized to permit the full exercise of the Rights, any other series of preferred stock of the Company designated for such purpose containing terms substantially similar to the terms of the Series A Junior Participating Preferred Stock. 

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

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

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

        (x)   “Rights” shall have the meaning set forth in the preamble of this Agreement. 

        (y)   “Rights Agent” shall have the meaning set forth in the preamble of this Agreement. 

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

        (aa) “Section 11(a)(ii) Event” shall mean any event described in Section 11(a) (ii) hereof. 

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

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

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

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

        (ff)  “Subsidiary” shall mean, with reference to any Person, any corporation, limited liability company or other entity of which an amount of voting securities sufficient to elect at least a majority of the directors, managers or similar party of such corporation is beneficially owned, directly or indirectly, by such Person, or otherwise controlled by such Person. 

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

        (hh) “Summary of Rights” shall have the meaning set forth in Section 3(b) hereof. 

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

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

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        Section 2.    Appointment of Rights Agent.    The Company hereby appoints the Rights Agent to act as agent for the Company 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 or successors as it may deem necessary or desirable. 

        Section 3.    Issuance of Rights Certificates.    

        (a)   Until the earlier of (i) the close of business on the 10th Business Day after the Stock Acquisition Date, or (ii) the close of business on the 10th Business Day (or such later date as the Board shall determine) after the date that a tender or exchange offer by any Person (other than the Company, any Subsidiary of the Company, any 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 become an Acquiring Person (the earlier of (i) and (ii) being herein referred to as the “Distribution Date”), (x) the Rights will be evidenced (subject to the provisions of Section 3(b) and (c)) by the certificates for the Common Stock or, in the case of uncertificated shares, the balances indicated in the book-entry account system of the transfer agent for the Common Stock registered in the names of the holders of the Common Stock (which shares of 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 B 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 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)   The Company will make available, as promptly as practicable, a copy of a Summary of Rights, in substantially the form attached hereto as Exhibit C (the “Summary of Rights”) to any holder of Rights who may so request from time to time prior to the Expiration Date. Until the Distribution Date, the Rights will be evidenced by the certificates for the Common Stock or, in the case of uncertificated shares, the balances indicated in the book-entry account system of the transfer agent for the Common Stock, and the registered holders of the Common Stock shall also be the registered holders of the associated Rights. Until the earlier of the Distribution Date or the Expiration Date (as such term is defined in Section 7(a) hereof), the transfer of any 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. 

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        (c)   Rights shall be issued in respect of all shares of Common Stock which are outstanding as of the Effective Date and are issued (whether originally issued or from the Company’s treasury) after the Effective Date but prior to the earlier of the Distribution Date or the Expiration Date or, in certain circumstances provided in Section 22 hereof, after the Distribution 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 SFBC International, Inc. (the “Company”) and the Rights Agent thereunder (the “Rights Agent”) as from time to time amended (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 Company 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 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 of 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 in Exhibit B hereto and may have such marks of identification or designation and such legends, summaries or endorsements printed thereon as the Company may deem appropriate and as are not inconsistent with the provisions of this Agreement, or as may be required to comply with any 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 Effective Date and on their face shall entitle the holders thereof to purchase such number of one one-thousandths of a share of Preferred Stock as shall be set forth therein at the price set forth therein (such exercise price per one one-thousandth of a share, 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. 

        (b)   Any Rights Certificate issued pursuant to Section 3(a), Section 11(i) or Section 22 hereof that represents Rights beneficially owned by: (i) an Acquiring Person or any Associate or 

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Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom such Acquiring 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 a plan, arrangement or understanding which has as a primary purpose or effect the avoidance of Section 7(e) hereof, 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 or an Affiliate or Associate of an Acquiring Person (as such terms are defined in the Rights Agreement). Accordingly, this Rights Certificate and the Rights represented hereby may become null and void in the circumstances specified in Section 7(e) of the Rights Agreement. 

        Section 5.    Countersignature and Registration.    

        (a)   The Rights Certificates shall be executed on behalf of the Company by its Chief Executive Officer, its President or any 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 by the Rights Agent, either manually or by facsimile signature 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, the Rights Agent will keep, or cause to be kept, at its principal office or offices 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. 

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

        (a)   Subject to the provisions of Section 4(b), Section 7(e) and Section 14 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 or Certificates (other than Rights Certificates representing Rights that may have been exchanged pursuant to Section 24 hereof) may be transferred, split up, combined or exchanged for another Rights Certificate or Certificates, entitling the registered holder to purchase a like number of one one-thousandths of a share of Preferred Stock (or, following a Triggering Event, Common Stock, other securities, cash or other assets, as the case may be) as the Rights Certificate or Certificates surrendered then entitles 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 or Certificates shall make such request in writing delivered to the Rights Agent, and shall surrender the Rights Certificate or Certificates 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 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 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 shall reasonably request. Thereupon the Rights Agent shall, subject to Section 4(b), Section 7(e), Section 14 and Section 24 hereof, countersign and deliver to the Person entitled thereto a Rights Certificate or Rights Certificates, as the case may be, 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. 

        (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 reasonably 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, at any time after the Distribution Date 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 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 principal office or offices of the Rights Agent designated for such purpose, together with payment of the aggregate Purchase Price with respect to the total number of one one-thousandths of a share (or other securities, cash or other assets, as 

8

the case may be) as to which such surrendered Rights are then exercisable, at or prior to the earlier of (i) 5:00 P.M., New York City time, on December 21, 2015, or such later date as may be established by the Board of Directors prior to the expiration of the Rights (such date, as it may be extended by the Board, the (“Final Expiration Date”), (ii) the time at which the Rights are redeemed as provided in Section 23 hereof or (iii) the time at which the Rights may be exchanged as provided in Section 24 hereof (the earlier of (i), (ii) and (iii) being herein referred to as the “Expiration Date”). 

        (b)   The Purchase Price for each one one-thousandth of a share of Preferred Stock pursuant to the exercise of a Right initially shall be $130 shall be subject to adjustment from time to time as provided in Section 11 and Section 13(a) hereof and shall be payable in accordance with Section 7(c). 

        (c)   Upon receipt of a Rights Certificate representing exercisable Rights, with the form of election to purchase and the certificate duly executed, accompanied by payment, with respect to each Right so exercised, of the Purchase Price per one one-thousandth of a share of Preferred 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 transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon promptly (i) (A) requisition from any transfer agent of the shares of Preferred Stock (or make available, if the Rights Agent is the transfer agent for such shares) certificates for the total number of one one-thousandths of a share of Preferred 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 Preferred Stock issuable upon exercise of the Rights hereunder with a depositary agent, requisition from the depositary agent depositary receipts representing such number of one one-thousandths of a share of Preferred Stock as are to be purchased (in which case certificates for the shares of Preferred 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 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 (including Common Stock) 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 appropriate. 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 Preferred 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 the Rights remaining unexercised shall be issued by the Rights Agent and delivered to, or upon the order of, the registered holder 

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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 or an Associate or Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any Person with whom the Acquiring 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 a plan, 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 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 any other Person as a result of its failure to make any determinations with respect to an Acquiring Person or any of its 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) 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 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 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 Preferred Stock (and, following the occurrence of a 

10

Triggering Event, out of its authorized and unissued shares of Common Stock and/or other securities or out of its authorized and issued shares held in its treasury), the number of shares of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or 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 Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) issuable and deliverable upon the exercise of the Rights may be 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 (but only to the extent that it is reasonably likely that the Rights will be exercised), all shares reserved for such issuance to be 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 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 pursuant to this Agreement (including in accordance with Section 11(a)(iii) hereof), or as soon as is required by law following the Distribution Date, a registration statement under the Act, with respect to the securities purchasable upon exercise of the Rights on an appropriate form, (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 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 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 Section 9(c)(i), 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 has been rescinded. In addition, if the Company shall determine that a registration statement is required following the Distribution Date, the Company may temporarily suspend the exercisability of the Rights until such time as a registration statement has been declared effective. 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 one one-thousandths of a share of Preferred Stock (and, following the occurrence of a Triggering Event, Common Stock and/or other securities) delivered upon exercise of Rights shall, at the time of delivery of 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 federal and state transfer taxes and charges which may be payable in respect of the 

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issuance or delivery of the Rights Certificates and of any certificates for a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) upon the exercise of Rights. The Company shall not, however, be required to pay any transfer tax 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 one one-thousandths of a share of Preferred Stock (or Common Stock and/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 one one-thousandths of a share of Preferred Stock (or Common Stock and/or other securities, as the case may be) in a name other than that of the registered holder upon the exercise of any Rights until such tax shall have been paid (any such tax being payable by the holder of such Rights Certificates at the time of surrender) or until it has been established to the Company’s satisfaction that no such tax is due. 

        Section 10.    Preferred Stock Record Date.    Each person in whose name any certificate for a number of one one-thousandths of a share of Preferred Stock (or Common Stock and/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 fractional shares of Preferred Stock (or Common Stock and/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 transfer taxes) was made; provided, however, that if the date of such surrender and payment is a date upon which the Preferred Stock (or Common Stock and/or other securities, as the case may be) transfer books 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 Preferred Stock (or Common Stock and/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 Preferred Stock payable in shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine the outstanding Preferred Stock into a smaller number of shares, or (D) issue any shares of its capital stock in a reclassification of the Preferred 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 Section 11(a) 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, 

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and the number and kind of shares of Preferred Stock or capital stock, 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 Preferred 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 Preferred 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 which 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)   In the event any Person shall, at any time after the Effective Date, become an Acquiring Person, unless the event causing such Person to become an Acquiring Person is a transaction set forth in Section 13(a) hereof, then, promptly following the occurrence of such 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, in lieu of a number of one one-thousandths of a share of Preferred Stock, such number of shares of Common Stock of the Company as shall equal the result obtained by (x) multiplying the then current Purchase Price by the then number of one one-thousandths of a share of Preferred 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 Current Market Price (determined pursuant to Section 11(d) hereof) per share of Common Stock on the date of such first occurrence (such number of shares, the “Adjustment Shares”). 

        (iii)  In the event that the number of shares of Common Stock which is authorized by the Company’s certificate of incorporation, but not outstanding or reserved for issuance for purposes other than upon exercise of the Rights, is not sufficient to permit the exercise in full of the Rights in accordance with Section 11(a)(ii), the Company shall (A) determine the value of the Adjustment Shares issuable upon the exercise of a Right (the “Current Value”), and (B) with respect to each Right (subject to Section 7(e) hereof), make adequate provision to substitute for the Adjustment Shares, upon the exercise of a Right and 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, such as the Preferred Stock, which the Board has deemed to have essentially the same value or economic rights as shares of Common Stock (such shares of preferred stock being referred to as “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 (less the amount of any reduction in the Purchase Price), where such aggregate value has been determined by the Board based upon the advice of a nationally recognized investment banking firm selected by the Board; provided, however, that if the Company shall not have made adequate provision to deliver value pursuant to clause (B) above within thirty (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 

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(y) being referred to herein as the “Section 11(a)(iii) 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. For purposes of the preceding sentence, the term “Spread” shall mean the excess of (i) the Current Value over (ii) the Purchase Price. If the Board determines in good faith that it is likely that sufficient additional shares of Common Stock could be authorized for issuance upon exercise in full of the Rights, the thirty (30) day period set forth above may be extended to the extent necessary, but not more than ninety (90) days after the Section 11(a)(iii) Trigger Date, in order that the Company may seek stockholder approval for the authorization of such additional shares (such thirty (30) day period, as it may be extended, is herein called the “Substitution Period”). To the extent that the Company determines that action should be taken pursuant to the first and/or third sentences of this Section 11(a)(iii), the Company (1) shall provide, subject to Section 7(e) hereof, that such action shall apply uniformly to all outstanding Rights, and (2) may suspend the exercisability of the Rights until the expiration of the Substitution Period in order to seek such stockholder approval for such authorization of additional shares 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 each Adjustment Share shall be the Current Market Price per share of the Common Stock on the Section 11(a)(iii) Trigger Date and the per share or per unit value of any Common Stock Equivalent shall be deemed to equal the Current Market Price per share of 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 Preferred Stock entitling them to subscribe for or purchase (for a period expiring within forty-five (45) calendar days after such record date) Preferred Stock (or shares having the same rights, privileges and preferences as the shares of Preferred Stock (“Equivalent Preferred Stock”)) or securities convertible into Preferred Stock or Equivalent Preferred Stock at a price per share of Preferred Stock or per share of Equivalent Preferred Stock (or having a conversion price per share, if a security convertible into Preferred Stock or Equivalent Preferred Stock) less than the Current Market Price (as determined pursuant to Section 11(d)(ii) hereof) per share of Preferred 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 Preferred Stock outstanding on such record date, plus the number of shares of Preferred Stock which the aggregate offering price of the total number of shares of Preferred Stock and/or Equivalent Preferred Stock 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 Preferred Stock outstanding on such record date, plus the number of additional shares of Preferred Stock and/or Equivalent Preferred Stock 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 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 

14

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 Preferred 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 Preferred Stock (including any such distribution made in connection with a consolidation or merger in which the Company is the continuing corporation), cash (other than a regular quarterly cash dividend out of the earnings or retained earnings of the Company), assets (other than a dividend payable in Preferred Stock, but including any dividend payable in stock other than Preferred Stock) or evidences of indebtedness, or of 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)(ii) hereof) per share of Preferred 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 or evidences of indebtedness so to be distributed or of such subscription rights or warrants applicable to a share of Preferred Stock, and the denominator of which shall be such Current Market Price (as determined pursuant to Section 11(d)(ii) hereof) per share of Preferred 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)   (i) 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 thirty (30) consecutive Trading Days 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 ten (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 thirty (30) Trading Day or ten (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 by the 

15

Nasdaq Stock Market (“Nasdaq”), 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. 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 shall be used. 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, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. 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 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. 

        

(ii)   For the purpose of any computation hereunder, the Current Market Price per share of Preferred Stock shall be determined in the same manner as set forth above for the Common Stock in this Section 11(d)(i). If the Current Market Price per share of Preferred Stock cannot be determined in the manner provided above or if the Preferred Stock is not publicly held or listed or traded in a manner described in Section 11(d)(ii), the Current Market Price per share of Preferred Stock shall be conclusively deemed to be an amount equal to 1,000 (as such number may be appropriately adjusted for such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock occurring after the date of this Agreement) multiplied by the Current Market Price per share of the Common Stock. If neither the Common Stock nor the Preferred Stock is publicly held or so listed or traded, Current Market Price per share of the Preferred Stock shall mean the fair value per share as determined in good faith by the Board, whose determination shall be described in a statement filed with the Rights Agent and shall be conclusive for all purposes. 

        (e)   Notwithstanding anything herein to the contrary, no adjustment in the Purchase Price shall be required unless such adjustment would require an increase or decrease of at least one percent (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 or one-millionth of a share of Preferred Stock, 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) three (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 Preferred 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 Preferred 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 Preferred Stock shall apply on like terms to any such other shares. 

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        (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 one one-thousandths of a share of Preferred 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 to the making of such adjustment shall thereafter evidence the right to purchase, at the adjusted Purchase Price, that number of one one-thousandths of a share of Preferred Stock (calculated to the nearest one-millionth) obtained by (i) multiplying (x) the number of one one-thousandths of a share 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 one one-thousandths of a share of Preferred 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 one one-thousandths of a share of Preferred 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. 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 ten (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 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 one one-thousandths of a share of Preferred Stock issuable upon the exercise of the Rights, the Rights Certificates theretofore and thereafter issued may continue to express the Purchase Price per one 

17

one-thousandth of a share and the number of one one-thousandth of a share 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 one one-thousandths of a share of Preferred 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 one one-thousandths of a share of Preferred 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 until the occurrence of such event the issuance to the holder of any Right exercised after such record date the number of one one-thousandths of a share of Preferred Stock and other capital stock or securities of the Company, if any, issuable upon such exercise over and above the number of one one-thousandths of a share of Preferred 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)  Notwithstanding anything in this Section 11 to the contrary, 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 Preferred Stock, (ii) issuance wholly for cash of any shares of Preferred Stock at less than the Current Market Price, (iii) issuance wholly for cash of shares of Preferred Stock or securities which by their terms are convertible into or exchangeable for shares of Preferred 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 Preferred 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, cash flow 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 

18

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 23 or Section 24 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)   Notwithstanding anything in this Agreement to the contrary, in the event that the Company shall at any time after the Effective 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 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 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. 

        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 facts accounting for such adjustment, (b) promptly file with the Rights Agent, and with each transfer agent for the Preferred Stock and the Common Stock, a copy of such certificate and (c) if a Distribution Date has occurred, mail a brief summary thereof to each holder of a Rights Certificate. The Rights Agent shall be fully protected in relying on any such certificate and on any adjustment therein contained. 

        Section 13.    Consolidation, Merger or Sale or Transfer of Assets Cash Flow 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) 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 Common Stock 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, 

19

assets, cash flow or earning power aggregating more than 50% of the assets, cash flow 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, 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, non-assessable and freely tradable 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 one one-thousandths of a share of Preferred 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 one one-thousandths of a share 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 of a Section 11(a)(ii) Event), and (2) 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 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 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, cash flow or earning power transferred pursuant to such transaction or transactions; provided, however, that in any such case, (1) if the Common Stock of such Person is not at such time and has not been continuously over the preceding twelve (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; 

20

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 Act, with respect to the Rights 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)   take all such other action as may be necessary to enable the Principal Party to issue the securities purchasable upon exercise of the Rights, including but not limited to the registration or qualification of such securities under all requisite securities laws of jurisdictions of the various states and the listing of such securities on such exchanges and trading markets as may be necessary or appropriate; and 

        

(iii)  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). 

        Section 14.    Fractional Rights and Fractional Shares.    

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

21

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 Nasdaq, 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 fractions of shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock) upon exercise of the Rights or to distribute certificates which evidence fractional shares of Preferred Stock (other than fractions which are integral multiples of one one-thousandth of a share of Preferred Stock). In lieu of fractional shares of Preferred Stock that are not integral multiples of one one-thousandth of a share of Preferred 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 one one-thousandth of a share of Preferred Stock. For purposes of this Section 14(b), the current market value of one one-thousandth of a share of Preferred Stock shall be one one-thousandth of the closing price of a share of Preferred Stock (as determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of such exercise. 

        (c)   Following the occurrence of a Triggering Event, the Company shall not be required to issue fractions of 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, 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 one (1) share of Common Stock. For purposes of this Section 14(c), the current market value of one share of Common Stock shall be the closing price per share of Common Stock (as determined pursuant to Section 11(d)(i) hereof) on the Trading Day immediately prior to the date of such exercise. 

        (d)   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. 

        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). 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 

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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; 

        (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 including a medallion guarantee 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 or, in the case of uncertificated shares, the associated balance indicated in the book-entry account system of the transfer agent for the Common Stock) 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 or, in the case of uncertificated shares, the associated balance indicated in the book-entry account system of the transfer agent for the Common Stock, 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 Section 7(f) 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 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 the number of one one-thousandths of a share of Preferred Stock or any other securities of the Company which may at any time be issuable on the exercise of the Rights represented thereby, nor shall anything contained herein or in any Rights Certificate be construed 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 

23

receive notice of meetings or other actions affecting stockholders (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 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, for anything done or omitted by the Rights Agent in connection with the acceptance and administration of this Agreement, including the costs and expenses of defending against any claim of liability in the premises. 

        (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, in the case of uncertificated shares, the associated balance indicated in the book-entry account system of the transfer agent for the 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. 

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

        (a)   Any corporation into which the Rights Agent or any successor Rights Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Rights Agent or any successor Rights Agent shall be a party, or any legal business entity succeeding to the corporate trust, stock transfer or other stockholder services business of the Rights Agent or any successor Rights Agent, shall be the successor to the Rights Agent under this Agreement without the execution or filing of any paper or any further act on the part of any of the parties hereto, but only if such legal business entity 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. In all such cases such Rights Certificates shall have the full force provided in the Rights Certificates and in this Agreement. 

24

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

        (a)   The Rights Agent may consult with legal counsel (who may be legal counsel for the Company), and the opinion of such counsel shall be full and complete authorization and protection to the Rights Agent as to any action taken or omitted by it in good faith and in accordance with such opinion. 

        (b)   Whenever in the performance of its duties under this Agreement the Rights Agent shall deem it necessary or desirable that any fact or matter (including, without limitation, the identity of any Acquiring Person and the determination of Current Market Price) be proved or established by the Company prior to taking or suffering any action hereunder, such fact or matter (unless other evidence in respect thereof be herein specifically prescribed) may be deemed to be conclusively proved and established by a certificate signed by the Chief Executive Officer, President, any Vice President, the Treasurer, any Assistant Treasurer, the Secretary or any Assistant 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 or suffered in good faith 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; provided, however, that the Rights Agent shall not be liable for indirect, special, consequential or punitive damages. 

        (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 in respect of the validity of this Agreement or the execution and delivery hereof (except the due execution hereof by the Rights Agent) or in respect of the validity or execution of any Rights Certificate (except its countersignature thereof). It shall not be responsible for any breach by the Company of any covenant or condition contained in this Agreement or in any Rights Certificate, unless due to its gross negligence, bad faith or willful misconduct. It shall not be responsible for any adjustment required under the provisions of Section 11, Section 13 or Section 24 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 

25

evidenced by Rights Certificates after actual notice of any such adjustment).  The Rights Agent shall not by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any shares of Common Stock or Preferred Stock to be issued pursuant to this Agreement or any Rights Certificate or as to whether any shares of Common Stock or Preferred 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 Chief Executive Officer, the President, any Vice President, the Secretary, any Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company, and to apply to such officers for advice or instructions in connection with its duties, and it shall not be liable for any action taken or suffered to be taken by it in good faith in accordance with instructions of any such officer. 

        (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. 

        (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; provided, however, reasonable care was exercised 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. 

26

        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 thirty (30) days’ notice in writing mailed to the Company, and to each transfer agent of the Common Stock and Preferred Stock, by registered or certified mail, and, if such resignation occurs after the Distribution Date, to the record holders of the Rights Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon thirty (30) 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 and Preferred Stock, by registered or certified mail, and, if such removal occurs after the Distribution Date, to the record holders of the Rights Certificates by first-class 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 thirty (30) days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the record holder of a Rights Certificate (who shall, with such notice, submit his Rights Certificate for inspection by the Company), 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) a legal business entity organized and doing business under the laws of the United States or of the State of New York or of any other state of the United States, in good standing, having an office in the State of New York, which is authorized under such laws to exercise corporate trust, stock transfer or stockholder services powers and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $50,000,000 or (b) an affiliate of a legal business entity described in clause (a) of this sentence. 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. 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 and the Preferred Stock, and, if such appointment occurs after the Distribution Date, mail a notice thereof in writing to the record holders of the Rights Certificates. 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 the Board of Directors to reflect any adjustment or change in the Purchase Price and the number or 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 awarded as of the Distribution Date, or upon the exercise, conversion or 

27

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 may, at its option, at any time prior to the earlier of (i) the close of business on the 10th Business Day following the Stock Acquisition Date, or (ii) the Final Expiration Date, direct the Company to, and if so directed, the Company shall, redeem all but not less than all of the then outstanding Rights at a redemption price of $0.001 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”). 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, evidence of which shall have been filed with the Rights Agent 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. Promptly after the action of the Board of Directors ordering the redemption of the Rights, the Company shall give notice of such redemption to the Rights Agent and the holders of the then outstanding Rights by mailing such notice to all record holders 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 after any Person becomes an Acquiring Person, 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 Common Stock at an exchange ratio of one share of Common Stock per Right, appropriately adjusted to reflect any stock split, stock dividend or similar transaction 

28

occurring after the date hereof (such exchange ratio being hereinafter referred to as the “Exchange Ratio”). Notwithstanding the foregoing, the Board of Directors of the Company shall not be empowered to effect such exchange at any time after any Person (other than the Company, any Subsidiary of the Company, any employee benefit plan of the Company or any such Subsidiary, or any entity holding Common Stock for or pursuant to the terms of any such plan), together with all Affiliates and Associates of such Person, becomes the Beneficial Owner of 50% or more of the Common Stock then outstanding. 

        (b)   Immediately upon the action of the Board of Directors of the Company ordering the exchange of any Rights pursuant to Section 24(a) 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 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 record 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 Common Stock 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 any exchange pursuant to this Section 24, the Company, at its option, may substitute Preferred Stock (or Equivalent Preferred Stock, as such term is defined in Section 11(b) hereof) for Common Stock exchangeable for Rights, at the initial rate of one one-thousandth of a share of Preferred Stock (or Equivalent Preferred Stock) for each share of Common Stock, as appropriately adjusted to reflect stock splits, stock dividends and other similar transactions after the date hereof. 

        (d)   In the event that there shall not be sufficient shares of Common Stock issued but not outstanding or authorized but unissued to permit any exchange of Rights as contemplated in accordance with this Section 24, the Company shall take all such action as may be necessary to authorize additional shares of Common Stock for issuance upon exchange of the Rights. 

        (e)   The Company shall not be required to issue fractions of shares of Common Stock or to distribute certificates which evidence fractional shares of Common Stock. In lieu of such fractional shares of Common Stock, there shall be paid to the registered holders of the Rights Certificates 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 current market value of a whole share of Common Stock. For the purposes of this Section 24(e), the current market value of a whole share of Common Stock shall be the closing price of a share of Common Stock (as determined pursuant to the second sentence of Section 11(d)(i) hereof) for the Trading Day immediately prior to the date of exchange pursuant to this Section 24. 

29

        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 Preferred Stock or to make any other distribution to the holders of Preferred 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 Preferred Stock rights or warrants to subscribe for or to purchase any additional shares of Preferred Stock or shares of stock of any class or any other securities, rights or options, or (iii) to effect any reclassification of its Preferred Stock (other than a reclassification involving only the subdivision of outstanding shares of Preferred 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, cash flow 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, to the extent feasible and 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 Preferred 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 twenty (20) days prior to the record date for determining holders of the shares of Preferred Stock for purposes of such action, and in the case of any such other action, at least twenty (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 Preferred Stock, whichever shall be the earlier. 

        (b)   In case any Section 11(a)(ii) Event shall occur, then, in any such case, (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 Section 25(a) to Preferred Stock shall be deemed thereafter to refer to Common Stock and/or, if appropriate, other securities. 

        Section 26.    Notices.    

        (a)   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 by the Rights Agent with the Company) as follows: 

SFBC International, Inc.

11190 Biscayne Boulevard

30

Miami, Florida 33181

Attention: Corporate Secretary 

        (b)   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 by the Rights Agent with the Company) as follows: 

Wachovia Bank, N.A.

NC1153

1525 West W.T. Harris Blvd., 3C3

Charlotte, NC  28262-8522 Attention: Stock Transfer Administration 

        (c)   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 shares of Common Stock) shall be sufficiently given or made if sent by first-class mail, postage prepaid, addressed to each record 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, the Company and the Rights Agent shall, if the Company so directs, supplement or amend any provision of this Agreement without the approval of any holders of shares of Common Stock. From and after the Distribution Date, the Company and the Rights Agent shall, if the Company so directs, supplement or amend this Agreement without the approval of any holders of Rights Certificates in order (i) to cure any ambiguity or scrivener’s error, (ii) to correct or supplement any provision contained herein which may be defective or inconsistent with any other provisions herein, (iii) to shorten or lengthen any time period hereunder or (iv) 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 (other than an Acquiring Person or an Affiliate or Associate of an Acquiring Person). 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, the Rights Agent shall execute such supplement or amendment. Notwithstanding anything herein to the contrary, this Agreement may not be amended (other than pursuant to clauses (i) or (ii) of the preceding sentence) at a time when the Rights are not redeemable. 

        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. 

31

        Section 29.    Determinations and Actions by the Board of Directors, etc.    For all purposes of this Agreement, any calculation of the number of shares of Common Stock or any other class of capital stock outstanding at any particular time, including for purposes of determining the particular percentage of such outstanding shares of Common Stock 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. 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 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 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 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 or any of the directors on the Board to any liability to the holders of the Rights. 

        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 record holders of the Rights Certificates (and, prior to the Distribution Date, 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 record 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 10th Business Day following the date of such determination by the Board of Directors. 

        Section 32.    Governing Law; Jurisdiction; Waiver of Jury Trial.    This Agreement, each Right and each Rights Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts made and to be performed entirely within such State; provided, however, that the rights, obligations and duties of the Rights Agent shall be governed by and construed in accordance with the laws of the State of New York. The parties agree that all actions and proceedings against the Rights Agent or commenced by the Rights Agent, in each case, arising out of this Agreement or any of the transactions contemplated hereby, shall be brought in the U.S. District Court in the Southern District of New York or in a 

32

New York State Court in the County of New York, and, in connection with any such action or proceeding, the parties agree to submit to jurisdiction of, and venue in, such court. Each of the parties hereto also irrevocably waives all right to trial by jury in any such action or proceeding.  

        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. 

        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, all as of the day and year first above written. 

				
	 

	 

	SFBC INTERNATIONAL, INC.

	

 

	

 

	

By:

	

                                                                                         

Name:

Title:

	

 

	

 

	

WACHOVIA BANK, N.A.

	

 

	

 

	

By:

	

                                                                                         

Name:

Title:

33

Exhibit A 

        SERIES A JUNIOR PARTICIPATING PREFERRED STOCK 

of 

SFBC INTERNATIONAL, INC. 

        Section 1.    Designation and Amount.    The shares of such series shall be designated as “Series A Junior Participating Preferred Stock” and the number of shares constituting such series shall be 50,000. 

        Section 2.    Dividends and Distributions.    

        (a)   Subject to the prior and superior rights of the holder of any shares of any series of Preferred Stock ranking prior and superior to the shares of Series A Junior Participating Preferred Stock with respect to dividends, the holders of shares of Series A Junior Participating Preferred Stock shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available for the purpose, quarterly dividends payable in cash on the 15th day of May, August, November and February in each year (each such date being referred to herein as a “Quarterly Dividend Payment Date”), commencing on the first Quarterly Dividend Payment Date after the first issuance of a share or fraction of a share of Series A Junior Participating Preferred Stock, in an amount per share (rounded to the nearest cent) equal to the greater of (a) $0.01 or (b) subject to the provision for adjustment hereinafter set forth, 1,000 times the aggregate per share amount of all cash dividends, and 1,000 times the aggregate per share amount (payable in kind) of all non-cash dividends or other distributions other than a dividend payable in shares of Common Stock or a subdivision of the outstanding shares of Common Stock (by reclassification or otherwise), declared on the Common Stock, par value $0.01 per share, of the Corporation (the “Common Stock”) since the immediately preceding Quarterly Dividend Payment Date, or, with respect to the first Quarterly Dividend Payment Date, since the first issuance of any share or fraction of a share of Series A Junior Participating Preferred Stock. In the event the Corporation shall at any time after December 21, 2005 (the “Effective Date”) (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event under clause (b) of the preceding sentence shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 

        (b)   The Corporation shall declare a dividend or distribution on the Series A Junior Participating Preferred Stock as provided in Section 2(a) immediately after it declares a dividend or distribution on the Common Stock (other than a dividend payable in shares of Common Stock); provided that, in the event no dividend or distribution shall have been declared on the 

Ex. A-1

Common Stock during the period between any Quarterly Dividend Payment Date and the next subsequent Quarterly Dividend Payment Date, a dividend of $0.01 per share on the Series A Junior Participating Preferred Stock shall nevertheless be payable on such subsequent Quarterly Dividend Payment Date. 

        (c)   Dividends shall begin to accrue and be cumulative on outstanding shares of Series A Junior Participating Preferred Stock from the Quarterly Dividend Payment Date next preceding the date of issue of such shares of Series A Junior Participating Preferred Stock, unless the date of issue of such shares is prior to the record date for the first Quarterly Dividend Payment Date, in which case dividends on such shares shall begin to accrue from the date of issue of such shares, or unless the date of issue is a Quarterly Dividend Payment Date or is a date after the record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive a quarterly dividend and before such Quarterly Dividend Payment Date, in either of which events such dividends shall begin to accrue and be cumulative from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall not bear interest. Dividends paid on the shares of Series A Junior Participating Preferred Stock in an amount less than the total amount of such dividends at the time accrued and payable on such shares shall be allocated pro rata on a share-by-share basis among all such shares at the time outstanding. The Board of Directors may fix a record date for the determination of holders of shares of Series A Junior Participating Preferred Stock entitled to receive payment of a dividend or distribution declared thereon, which record date shall be no more than 30 days prior to the date fixed for the payment thereof. 

        Section 3.    Voting Rights.    The holders of shares of Series A Junior Participating Preferred Stock shall have the following voting rights: 

        (a)  Subject to the provision for adjustment hereinafter set forth, each share of Series A Junior Participating Preferred Stock shall entitle the holder thereof to 1,000 votes on all matters submitted to a vote of the stockholders of the Corporation. In the event the Corporation shall at any time after the Effective Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the number of votes per share to which holders of shares of Series A Junior Participating Preferred Stock were entitled immediately prior to such event shall be adjusted by multiplying such number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 

        (b)  Except as otherwise provided herein or by law, the holders of shares of Series A Junior Participating Preferred Stock and the holders of shares of Common Stock shall vote together as one class on all matters submitted to a vote of stockholders of the Corporation. 

(c)  (i)  If at any time dividends on any Series A Junior Participating Preferred Stock shall be in arrears in an amount equal to six (6) quarterly dividends thereon, the occurrence of such contingency shall mark the beginning of a period (a “Default Period”) which shall extend until such time when all accrued and unpaid dividends for all previous quarterly dividend periods and 

Ex. A-2

for the current quarterly dividend period on all shares of Series A Junior Participating Preferred Stock then outstanding shall have been declared and paid or set apart for payment. During each Default Period, all holders of Preferred Stock (including holders of the Series A Junior Participating Preferred Stock) with dividends in arrears in an amount equal to six (6) quarterly dividends thereon, voting as a class, irrespective of series, shall have the right to elect two (2) directors. 

        

(ii)   During any Default Period, such voting right of the holders of Series A Junior Participating Preferred Stock may be exercised initially at a special meeting called pursuant to Section 3(c)(iii) or at any annual meeting of stockholders, and thereafter at annual meetings of stockholders, provided that neither such voting right nor the right of the holders of any other series of Preferred Stock, if any, to increase, in certain cases, the authorized number of directors shall be exercised unless the holders of ten percent (10%) in number of shares of Preferred Stock outstanding shall be present in person or by proxy. The absence of a quorum of the holders of Common Stock shall not affect the exercise by the holders of Preferred Stock of such voting right. At any meeting at which the holders of Preferred Stock shall exercise such voting right initially during an existing Default Period, they shall have the right, voting as a class, to elect directors to fill such vacancies, if any, in the Board of Directors as may then exist up to two (2) directors or, if such right is exercised at an annual meeting, to elect two (2) directors. If the number which may be so elected at any special meeting does not amount to the required number, the holders of the Preferred Stock shall have the right to make such increase in the number of directors as shall be necessary to permit the election by them of the required number. After the holders of the Preferred Stock shall have exercised their right to elect directors in any Default Period and during the continuance of such period, the number of directors shall not be increased or decreased except by vote of the holders of Preferred Stock as herein provided or pursuant to the rights of any equity securities ranking senior to or pari passu with the Series A Junior Participating Preferred Stock. 

        (iii)  Unless the holders of Preferred Stock shall, during an existing Default Period, have previously exercised their right to elect directors, the Board of Directors may order, or any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding, irrespective of series, may request, the calling of a special meeting of the holders of Preferred Stock, which meeting shall thereupon be called by the Chief Executive Officer, President, a Vice-President or the Secretary of the Corporation. Notice of such meeting and of any annual meeting at which holders of Preferred Stock are entitled to vote pursuant to this Section 3 (c)(iii) shall be given to each holder of record of Preferred Stock by mailing a copy of such notice to him at his last address as the same appears on the books of the Corporation. Such meeting shall be called for a time not earlier than 20 days and not later than 60 days after such order or request or in default of the calling of such meeting within 60 days after such order or request, such meeting may be called on similar notice by any stockholder or stockholders owning in the aggregate not less than ten percent (10%) of the total number of shares of Preferred Stock outstanding. Notwithstanding the provisions of this Section 3(c)(iii), no such special meeting shall be called during the period within 60 days immediately preceding the date fixed for the next annual meeting of the stockholders. 

Ex. A-3

        (iv)  In any Default Period, the holders of Common Stock, and other classes of stock of the Corporation if applicable, shall continue to be entitled to elect the whole number of directors until the holders of Preferred Stock shall have exercised their right to elect two (2) directors voting as a class, after the exercise of which right (x) the directors so elected by the holders of Preferred Stock shall continue in office until their successors shall have been elected by such holders or until the expiration of the Default Period, and (y) any vacancy in the Board of Directors may (except as provided in Section 3(c)(ii)) be filled by vote of a majority of the remaining directors theretofore elected by the holders of the class of stock which elected the director whose office shall have become vacant. References in Section 3(c) to directors elected by the holders of a particular class of stock shall include directors elected by such directors to fill vacancies as provided in clause (y) of the foregoing sentence. 

        (v)   Immediately upon the expiration of a Default Period, (x) the right of the holders of Preferred Stock as a class to elect directors shall cease, (y) the term of any directors elected by the holders of Preferred Stock as a class shall terminate, and (z) the number of directors shall be such number as may be provided for in the certificate of incorporation or by-laws irrespective of any increase made pursuant to the provisions of Section(c)(ii) (such number being subject, however, to change thereafter in any manner provided by law or in the certificate of incorporation or by-laws). Any vacancies in the Board of Directors effected by the provisions of clauses (y) and (z) in the preceding sentence may be filled by a majority of the remaining directors. 

        (d)  Except as set forth herein, holders of Series A Junior Participating Preferred Stock shall have no special voting rights and their consent shall not be required (except to the extent they are entitled to vote with holders of Common Stock as set forth herein) for taking any corporate action. 

        Section 4.    Certain Restrictions.    

        (a)  Whenever quarterly dividends or other dividends or distributions payable on the Series A Junior Participating Preferred Stock as provided in Section 2 are in arrears, thereafter and until all accrued and unpaid dividends and distributions, whether or not declared, on shares of Series A Junior Participating Preferred Stock outstanding shall have been paid in full, the Corporation shall not 

(i)    declare or pay dividends on, make any other distributions on, or redeem or purchase or otherwise acquire for consideration any shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock; 

(ii)   declare or pay dividends on or make any other distributions on any shares of stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, except dividends paid ratably on the Series A Junior Participating Preferred Stock and all such parity stock on which dividends are payable or in arrears in proportion to the total amounts to which the holders of all such shares are then entitled; 

Ex. A-4

(iii)  redeem or purchase or otherwise acquire for consideration shares of any stock ranking on a parity (either as to dividends or upon liquidation, dissolution or winding up) with the Series A Junior Participating Preferred Stock, provided that the Corporation may at any time redeem, purchase or otherwise acquire shares of any such parity stock in exchange for shares of any stock of the Corporation ranking junior (either as to dividends or upon dissolution, liquidation or winding up) to the Series A Junior Participating Preferred Stock; or 

(iv)  purchase or otherwise acquire for consideration any shares of Series A Junior Participating Preferred Stock, or any shares of stock ranking on a parity with the Series A Junior Participating Preferred Stock, except in accordance with a purchase offer made in writing or by publication (as determined by the Board of Directors) to all holders of such shares upon such terms as the Board of Directors, after consideration of the respective annual dividend rates and other relative rights and preferences of the respective series and classes, shall determine in good faith will result in fair and equitable treatment among the respective series or classes. 

        (b)  The Corporation shall not permit any subsidiary of the Corporation to purchase or otherwise acquire for consideration any shares of stock of the Corporation unless the Corporation could, under Section 4(a), purchase or otherwise acquire such shares at such time and in such manner. 

        Section 5.    Reacquired Shares.    Any shares of Series A Junior Participating Preferred Stock purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and cancelled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of Preferred Stock and may be reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors, subject to the conditions and restrictions on issuance set forth herein. 

        Section 6.    Liquidation, Dissolution or Winding Up.    

(a) Upon any liquidation (voluntary or otherwise), dissolution or winding up of the Corporation, no distribution shall be made to the holders of shares of stock ranking junior (either as to dividends or upon liquidation, dissolution or winding up) to the Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Series A Junior Participating Preferred Stock shall have received an amount equal to $1,000 per share of Series A Participating Preferred Stock, plus an amount equal to accrued and unpaid dividends and distributions thereon, whether or not declared, to the date of such payment (the “Series A Liquidation Preference”). Following the payment of the full amount of the Series A Liquidation Preference, no additional distributions shall be made to the holders of shares of Series A Junior Participating Preferred Stock unless, prior thereto, the holders of shares of Common Stock shall have received an amount per share (the “Common Adjustment”) equal to the quotient obtained by dividing (i) the Series A Liquidation Preference by (ii) 1,000 (as appropriately adjusted as set forth in Section 6(c) below to reflect such events as stock splits, stock dividends and recapitalizations with respect to the Common Stock) (such number in clause (ii), the “Adjustment Number”). Following the payment of the full amount of the Series A Liquidation Preference and the Common Adjustment in respect of all outstanding shares of Series A Junior Participating Preferred Stock and Common Stock, respectively, holders of Series A Junior 

Ex. A-5

Participating Preferred Stock and holders of shares of Common Stock shall receive their ratable and proportionate share of the remaining assets to be distributed in the ratio of the Adjustment Number to 1 with respect to such Preferred Stock and Common Stock, on a per share basis, respectively. 

        (b)  In the event, however, that there are not sufficient assets available to permit payment in full of the Series A Liquidation Preference and the liquidation preferences of all other series of preferred stock, if any, which rank on a parity with the Series A Junior Participating Preferred Stock, then such remaining assets shall be distributed ratably to the holders of such parity shares in proportion to their respective liquidation preferences. In the event, however, that there are not sufficient assets available to permit payment in full of the Common Adjustment, then such remaining assets shall be distributed ratably to the holders of Common Stock. 

        (c)  In the event the Corporation shall at any time after the Effective Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the Adjustment Number in effect immediately prior to such event shall be adjusted by multiplying such Adjustment Number by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 

        Section 7.    Consolidation, Merger, etc.    In case the Corporation shall enter into any consolidation, merger, combination or other transaction in which the shares of Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property, then in any such case the shares of Series A Junior Participating Preferred Stock shall at the same time be similarly exchanged or changed in an amount per share (subject to the provision for adjustment hereinafter set forth) equal to 1,000 times the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, into which or for which each share of Common Stock is changed or exchanged. In the event the Corporation shall at any time after the Rights Declaration Date (i) declare any dividend on Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding Common Stock, or (iii) combine the outstanding Common Stock into a smaller number of shares, then in each such case the amount set forth in the preceding sentence with respect to the exchange or change of shares of Series A Junior Participating Preferred Stock shall be adjusted by multiplying such amount by a fraction the numerator of which is the number of shares of Common Stock outstanding immediately after such event and the denominator of which is the number of shares of Common Stock that were outstanding immediately prior to such event. 

        Section 8.    No Redemption.    The shares of Series A Junior Participating Preferred Stock shall not be redeemable. 

        Section 9.    Ranking.    The Series A Junior Participating Preferred Stock shall rank junior to all other series of the Corporation’s Preferred Stock as to the payment of dividends and the distribution of assets, unless the terms of any such series shall provide otherwise. 

Ex. A-6

        Section 10.    Amendment.    At any time when any shares of Series A Junior Participating Preferred Stock are outstanding, neither the Amended and Restated Certificate of Incorporation of the Corporation nor this Certificate of Designation shall be amended in any manner which would materially alter or change the powers, preferences or special rights of the Series A Junior Participating Preferred Stock so as to affect them adversely without the affirmative vote of the holders of a majority or more of the outstanding shares of Series A Junior Participating Preferred Stock, voting separately as a class. 

        Section 11.    Fractional Shares.    Series A Junior Participating Preferred Stock may be issued in fractions of a share which shall entitle the holder, in proportion to such holder’s fractional shares, to exercise voting rights, receive dividends, participate in distributions and to have the benefit of all other rights of holders of Series A Junior Participating Preferred Stock. 

Ex. A-7

Exhibit B 

        [Form of Rights Certificate] 

			
	Certificate No. R-

	 

	            Rights

NOT EXERCISABLE AFTER  DECEMBER 20, 2015 OR EARLIER EXPIRATION OR REDEMPTION BY THE COMPANY IN ACCORDANCE WITH THE TERMS OF THE RIGHTS AGREEMENT. THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.001 PER RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERM IS 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 PERSON OR AN AFFILIATE OR ASSOCIATE OF AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e) OF SUCH AGREEMENT.](1) 

                                    

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

Rights Certificate 

[THE COMPANY]

        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 Rights Agreement, dated as of December 21, 2005 (the “Rights Agreement”), between SFBC International, Inc., a Delaware corporation (the “Company”), and Wachovia Bank, N.A. (the “Rights Agent”), to purchase from the Company at any time prior to 5:00 P.M. (New York City time) on December 20, 2015 (unless such date is extended prior thereto by the Board of Directors) at the office or offices of the Rights Agent designated for such purpose, or its successors as Rights Agent, one one-thousandth of a fully paid, non-assessable share of Series A Junior Participating Preferred Stock (the “Preferred Stock”) of the Company, at a purchase price of $130 per one one-thousandth of a share (the “Purchase Price”), upon presentation and 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  December 21, 2005, based on the Preferred Stock as constituted at such date. The 

Ex. B-1

Company reserves the right to require prior to the occurrence of a Triggering Event (as such term is defined in the Rights Agreement) that a number of Rights be exercised so that only whole shares of Preferred Stock will be issued. 

        Upon the occurrence of a Section 11(a)(ii) Event (as such term is defined in the Rights Agreement), if the Rights evidenced by this Rights Certificate are beneficially owned by (i) an Acquiring Person or an Affiliate or Associate of any such Acquiring Person (as such terms are defined in the Rights Agreement), (ii) a transferee of any such Acquiring 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, or an Affiliate or Associate of an Acquiring 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 Preferred 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 Triggering Events. 

        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. 

        This Rights Certificate, with or without other Rights Certificates, upon surrender at the principal office or offices of the Rights Agent designated for such purpose, may be exchanged for another Rights Certificate or Rights Certificates of like tenor and date evidencing Rights entitling the holder to purchase a like aggregate number of one one-thousandths of a share of Preferred 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 may be redeemed by the Company at its option at a redemption price of $0.001 per Right at any time prior to the earlier of the close of business on (i) the 10th Business Day following the Stock Acquisition Date (as such time period may be extended pursuant to the Rights Agreement), and (ii) the Final Expiration Date. In addition, under certain circumstances following the Stock Acquisition Date, the Rights may be exchanged, in whole or in part, for shares of the Common Stock, or shares of preferred stock of the Company having essentially the same value or economic rights as such shares. Immediately upon the action of the Board of Directors of the Company authorizing any such exchange, and without any further action or any notice, the 

Ex. B-2

Rights (other than Rights which are not subject to such exchange) will terminate and the Rights will only enable holders to receive the shares issuable upon such exchange. 

        No fractional shares of Preferred Stock will be issued upon the exercise of any Right or Rights evidenced hereby (other than fractions which are integral multiples of one one-thousandth of a share of Preferred 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. The Company, at its election, may require that a number of Rights be exercised so that only whole shares of Preferred Stock would be issued. 

        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 Preferred 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 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 consent to or withhold consent from any corporate action, or, to receive notice of meetings or other actions affecting stockholders (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. 

        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                  ,                 

	 

	 

	 

	

 

	

 

	

 

	

SFBC INTERNATIONAL, INC.

	

 

	

 

	

 

	

By:

	

                                                                                 

	 

	 

	 

	 

	Title:

	

Countersigned:

	

 

	

 

	

 

	

                                             

	

 

	

 

	

 

	

By:

	

                                                        

	

 

	

 

	

 

	 

	Authorized Signature

	 

	 

	 

Ex. B-3

[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:

	 

	 

	 

	 

	                                                          

	 

	 

	 

	 

	 

	 

	

 

	

 

	

 

	

                                                                                   

Signature

	

Signature Guaranteed:

	

 

	

 

                                                                                                                                                            

Certificate

        The undersigned hereby certifies by checking the appropriate boxes that: 

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

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

				
	Dated:

	 

	 

	 

	 

	                                                          

	 

	 

	 

	 

	 

	 

	

 

	

 

	

 

	

                                                                                   

Signature

	

Signature Guaranteed:

	

 

	

 

Ex. B-4

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. 

FORM OF ELECTION TO PURCHASE 

(To be executed if holder desires

to exercise Rights represented

by the Rights Certificate.)

To: 

SFBC International, Inc.: 

        The undersigned hereby irrevocably elects to exercise ____________ Rights represented by this Rights Certificate to purchase the shares of Preferred 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)

	 

	 

	 

	                                                                                                                                                            

Ex. B-5

				
	Dated:

	                                                         

	 

	 

	 

	 	 

	 

	 

	 

	 

	                                                                                   

	 

	 

	 

	Signature

	

Signature Guaranteed:

	

 

	

 

                                                                                                                                                            

Certificate 

        The undersigned hereby certifies by checking the appropriate boxes that: 

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

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

				
	Dated:

	                                                         

	 

	 

	 

	 	 

	 

	 

	 

	 

	                                                                                   

	 

	 

	 

	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. 

Ex. B-6

Exhibit C 

        SUMMARY OF RIGHTS TO PURCHASE 

PREFERRED STOCK 

        Effective December 21, 2005 (the “Effective Date”), the Board of Directors of SFBC International, Inc. (the “Company”) authorized the issuance of one Right for each share of Common Stock of the Company outstanding as of the Effective Date and each share issued between the Effective Date and the Distribution Date (as defined below). Each Right entitles the registered holder to purchase from the Company a unit consisting of one one-thousandth of a share (a “Unit”) of Series A Junior Participating Preferred Stock, par value $0.10 per share (the “Series A Preferred Stock”) at a purchase price (the “Purchase Price”) of $130 per Unit, subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the “Rights Agreement”) between the Company and Wachovia Bank, N.A., as Rights Agent. 

        Initially, the Rights will be attached to all Common Stock certificates or, in the case of uncertificated shares, the associated balance indicated in the book-entry account system of the transfer agent for the Common Stock, representing shares then outstanding, and no separate Rights certificates will be distributed. Subject to certain exceptions specified in the Rights Agreement, the Rights will separate from the Common Stock and a distribution date (a “Distribution Date”) will occur 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 beneficial ownership of 15% or more of the outstanding shares of Common Stock (the “Stock Acquisition Date”), other than as a result of repurchases of stock by the Company or certain inadvertent actions by institutional or certain other stockholders or (ii) 10 business days (or such later date as the Board shall determine) following the commencement of a tender offer or exchange offer that would result in a person or group becoming an Acquiring Person. Until the Distribution Date, (i) the Rights will be evidenced by shares of Common Stock and will be transferred with and only with such Common Stock, (ii) new Common Stock certificates issued after the Effective Date will contain a notation incorporating the Rights Agreement by reference and (iii) the surrender for transfer of any certificates for Common Stock outstanding will also constitute the transfer of the Rights associated with the Common Stock represented by such certificate. Pursuant to the Rights Agreement, the Company reserves the right to require prior to the occurrence of a Triggering Event (as defined below) that, upon any exercise of Rights, a number of Rights be exercised so that only whole shares of Preferred Stock will be issued. 

        The Rights are not exercisable until the Distribution Date and will expire at 5:00 P.M. (New York City time) on December 21, 2015, unless such date is extended or the Rights are earlier redeemed or exchanged by the Company as described below. 

        As soon as practicable after the Distribution Date, Rights Certificates will be mailed to holders of record of the Common Stock as of the close of business on the Distribution Date and, thereafter, the separate Rights Certificates alone will represent the Rights. Except as otherwise 

Ex. C-1

determined by the Board of Directors, only shares of Common Stock issued prior to the Distribution Date will be issued with Rights. 

        In the event that a person or group becomes an Acquiring Person, each holder of a Right will thereafter have the right to receive, upon exercise, Common Stock (or, in certain circumstances, cash, property or other securities of the Company) having a value equal to two times the exercise price of the Right. Notwithstanding any of the foregoing, following the occurrence of the event set forth in this paragraph, all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. However, Rights are not exercisable following the occurrence of the event set forth above until such time as the Rights are no longer redeemable by the Company as set forth below. 

        For example, at an exercise price of $130 per Right, each Right not owned by an Acquiring Person (or by certain related parties) following an event set forth in the preceding paragraph would entitle its holder to purchase $260 worth of Common Stock (or other consideration, as noted above) for $130. Assuming that the Common Stock had a per share value of $26 at such time, the holder of each valid Right would be entitled to purchase10 shares of Common Stock for $130. 

        In the event that, at any time following the Stock Acquisition Date, (i) the Company engages in a merger or other business combination transaction in which the Company is not the surviving corporation, (ii) the Company engages in a merger or other business combination transaction in which the Company is the surviving corporation and the Common Stock of the Company is changed or exchanged, or (iii) 50% or more of the Company’s assets, cash flow or earning power is sold or transferred, each holder of a Right (except Rights which have previously been voided as set forth above) shall thereafter have the right to receive, upon exercise, common stock of the acquiring company having a value equal to two times the exercise price of the Right. The events set forth in this paragraph and in the second preceding paragraph are referred to as the “Triggering Events.” 

        At any time after a person becomes an Acquiring Person and prior to the acquisition by such person or group of 50% or more of the outstanding Common Stock, the Board may exchange the Rights (other than Rights owned by such person or group which have become void), in whole or in part, at an exchange ratio of one share of Common Stock, or one one-thousandth of a share of Preferred Stock (or of a share of a class or series of the Company’s preferred stock having equivalent rights, preferences and privileges), per Right (subject to adjustment). 

        The Purchase Price payable, and the number of Units of Preferred Stock or other securities or property issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Preferred Stock, (ii) if holders of the Preferred Stock are granted certain rights or warrants to subscribe for Preferred Stock or convertible securities at less than the current market price of the Preferred Stock, or (iii) upon the distribution to holders of the Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above). 

Ex. C-2

        With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price. No fractional Units will be issued and, in lieu thereof, an adjustment in cash will be made based on the market price of the Preferred Stock on the last trading date prior to the date of exercise. 

        At any time until 10 business days following the Stock Acquisition Date, the Company may redeem the Rights in whole, but not in part, at a price of $0.001 per Right (payable in cash, Common Stock or other consideration deemed appropriate by the Board of Directors). 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 $0.001 redemption price. 

        Until a Right is exercised, the holder thereof, as such, will have no rights as a stockholder of the Company, including, without limitation, the right to vote or to receive dividends. While the distribution of the Rights will not be taxable to stockholders or to the Company, stockholders 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 or in the event of the redemption of the Rights as set forth above. 

        Any of the provisions of the Rights Agreement may be amended by the Board of Directors of the Company 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, or to shorten or lengthen any time period under the Rights Agreement. The foregoing notwithstanding, no amendment may 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 a Registration Statement on Form 8-A/Current Report on Form 8-K. A copy of the Rights Agreement is available free of charge from the Rights Agent. 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. 

Ex. C-3

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