Document:

EXHIBIT 4.1

 

SHAREHOLDER RIGHTS PLAN AGREEMENT

DATED AS OF APRIL 24, 2003

BETWEEN

TRANSCANADA CORPORATION

AND

COMPUTERSHARE TRUST COMPANY OF CANADA

AS RIGHTS AGENT

 

 

SHAREHOLDER  RIGHTS  PLAN 
AGREEMENT

TABLE OF CONTENTS

	
  ARTICLE 1 – INTERPRETATION

  	
   

  
	
  1.1

  	
  Certain Definitions

  	
   

  
	
  1.2

  	
  Currency

  	
   

  
	
  1.3

  	
  Headings

  	
   

  
	
  1.4

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

  	
   

  
	
  1.5

  	
  Acting Jointly or in
  Concert

  	
   

  
	
  1.6

  	
  Generally
  Accepted Accounting Principles

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 – THE RIGHTS

  	
   

  
	
  2.1

  	
  Issue
  of Rights:  Legend on Common Share
  Certificates

  	
   

  
	
  2.2

  	
  Initial
  Exercise Price; Exercise of Rights; Detachment of Rights

  	
   

  
	
  2.3

  	
  Adjustments
  to Exercise Price; Number of Rights

  	
   

  

 

 

i

 

	
  2.4

  	
  Date on Which
  Exercise Is Effective

  	
   

  
	
  2.5

  	
  Execution,
  Authentication, Delivery and Dating of Rights Certificates

  	
   

  
	
  2.6

  	
  Registration,
  Transfer and Exchange

  	
   

  
	
  2.7

  	
  Mutilated,
  Destroyed, Lost and Stolen Rights Certificates

  	
   

  
	
  2.8

  	
  Persons Deemed Owners
  of Rights

  	
   

  
	
  2.9

  	
  Delivery and
  Cancellation of Certificates

  	
   

  
	
  2.10

  	
  Agreement of Rights Holders

  	
   

  
	
  2.11

  	
  Rights
  Certificate Holder Not Deemed a Shareholder

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 –
  ADJUSTMENTS TO THE RIGHTS

  	
   

  
	
  3.1

  	
  Flip–in Event

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 – THE RIGHTS
  AGENT

  	
   

  
	
  4.1

  	
  General

  	
   

  
	
  4.2

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

  	
   

  
	
  4.3

  	
  Duties of Rights Agent

  	
   

  
	
  4.4

  	
  Change of Rights Agent

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5 – MISCELLANEOUS

  	
   

  
	
  5.1

  	
  Redemption and Waiver

  	
   

  
	
  5.2

  	
  Expiration

  	
   

  
	
  5.3

  	
  Issuance of New
  Rights Certificates

  	
   

  
	
  5.4

  	
  Supplements and Amendments

  	
   

  
	
  5.5

  	
  Fractional
  Rights and Fractional Shares

  	
   

  
	
  5.6

  	
  Rights of Action

  	
   

  
	
  5.7

  	
  Regulatory Approvals

  	
   

  
	
  5.8

  	
  Declaration
  as to Non–Canadian or Non–U.S. Holders

  	
   

  
	
  5.9

  	
  Notices

  	
   

  
	
  5.10

  	
  Costs of Enforcement

  	
   

  
	
  5.11

  	
  Successors

  	
   

  
	
  5.12

  	
  Benefits of this Agreement

  	
   

  
	
  5.13

  	
  Governing Law

  	
   

  
	
  5.14

  	
  Severability

  	
   

  
	
  5.15

  	
  Effective Date of Agreement

  	
   

  
	
  5.16

  	
  Reconfirmation
  and Approval: Reconfirmation

  	
   

  
	
  5.17

  	
  Determinations
  and Actions by the Board of Directors

  	
   

  
	
  5.18

  	
  Time of the Essence

  	
   

  
	
  5.19

  	
  Execution in Counterparts

  	
   

  

 

ii

SHAREHOLDER RIGHTS PLAN AGREEMENT

 

MEMORANDUM OF AGREEMENT
dated as of April 24, 2003 between TransCanada Corporation (the
“Corporation”), a corporation incorporated under the Canada Business Corporations Act
and Computershare Trust Company of Canada, a trust company incorporated under
the laws of Canada (the “Rights Agent”);

WHEREAS in connection with
the completion of the Plan of Arrangement pursuant to the Arrangement Agreement
the board of directors of the Corporation has determined that it is in the best
interests of the Corporation to adopt a shareholder rights plan to insure, to
the extent possible, that all shareholders of the Corporation are treated
fairly in connection with any take-over bid for the Corporation;

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

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

AND WHEREAS the Board of
Directors of the Corporation proposes that this Agreement be in place until the
Expiration Time, subject to the Agreement being reconfirmed by shareholders of
the Corporation at the 2004 annual meeting of the Corporation;

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

ARTICLE
1 – INTERPRETATION

 

1.1                                                                                 Certain Definitions

 

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

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

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

(ii)                                  any
Person who becomes the Beneficial Owner of 20% or more of the outstanding
Voting Shares as a result of one or any combination of (A) a Voting Share
Reduction, (B) Permitted Bid Acquisitions, (C) an Exempt Acquisition
or (D) Pro Rata Acquisitions; provided, however, that if a Person becomes
the Beneficial Owner of 20% or more of the outstanding Voting Shares by reason
of one or any combination of the operation of Paragraphs (A), (B), (C) or
(D) above and such Person’s Beneficial Ownership of Voting Shares thereafter
increases by more than 1.0% of the number of Voting Shares outstanding (other
than pursuant

 

1

 

                                                to
one or any combination of a Voting Share Reduction, a Permitted Bid
Acquisition, an Exempt Acquisition or a Pro Rata Acquisition), then as of the
date such Person becomes the Beneficial Owner of such additional Voting Shares,
such Person shall become an “Acquiring Person”;

(iii)                               for
a period of ten days after the Disqualification Date (as defined below), any
Person who becomes the Beneficial Owner of 20% or more of the outstanding
Voting Shares as a result of such Person becoming disqualified from relying on
Clause 1.1(g)(v) solely because such Person or the Beneficial Owner of
such Voting Shares is making or has announced an intention to make a Take-over
Bid, either alone or by acting jointly or in concert with any other Person. For
the purposes of this definition, “Disqualification Date” means the first date
of public announcement that any Person is making or has announced an intention
to make a Take-over Bid;

(iv)                              an
underwriter or member of a banking or selling group that becomes the Beneficial
Owner of 20% or more of the Voting Shares in connection with a distribution of
securities of the Corporation; or

(v)                                 a
Person (a “Grandfathered Person”) who is the Beneficial Owner of 20% or more of
the outstanding Voting Shares of the Corporation determined as at the Record
Time, provided, however, that this exception shall not be, and shall cease to
be, applicable to a Grandfathered Person in the event that such Grandfathered
Person shall, after the Record Time, become the Beneficial Owner of additional
Voting Shares of the Corporation that increases its Beneficial Ownership of
Voting Shares by more than 1% of the number of Voting Shares outstanding as at
the Record Time (other than pursuant to one or any combination of a Voting
Share Reduction, a Permitted Bid Acquisition, an Exempt Acquisition or a Pro
Rata Acquisition);

(b)                                 “Affiliate”
when used to indicate a relationship with a Person means a Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, such specified Person;

(c)                                  “Agreement”
shall mean this shareholder rights plan agreement dated as of April 24,
2003 between the Corporation and the Rights Agent, as the same may be further
amended or supplemented from time to time; “hereof”, “herein”, “hereto” and
similar expressions mean and refer to this Agreement as a whole and not to any
particular part of this Agreement;

(d)                                 “annual cash
dividend” shall mean cash dividends paid in any fiscal year of the
Corporation to the extent that such cash dividends do not exceed, in the
aggregate, the greatest of:

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

(ii)                                  300
per cent of the arithmetic mean of the aggregate amounts of the annual cash
dividends declared payable by the Corporation on its Common Shares in its three
immediately preceding fiscal years; and

2

 

(iii)                               100
per cent of the aggregate consolidated net income of the Corporation, before
extraordinary items, for its immediately preceding fiscal year;

(e)                                  “Arrangement
Agreement” means the Arrangement Agreement made as of March 4, 2003
between TransCanada Pipelines Limited and TransCanada Corporation providing for
the implementation of the Plan of Arrangement;

(f)                                    “Associate”
means, when used to indicate a relationship with a specified Person, a spouse
of that Person, any Person of the same or opposite sex with whom that Person is
living in a conjugal relationship outside marriage, a child of that Person or a
relative of that Person if that relative has the same residence as that Person;

(g)                                 A
Person shall be deemed the “Beneficial Owner” of, and to have “Beneficial
Ownership” of, and to “Beneficially Own”,

(i)                                     any
securities as to which such Person or any of such Person’s Affiliates or
Associates is the owner at law or in equity;

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

(iii)                               any
securities which are Beneficially Owned within the meaning of
Clauses 1.1(g)(i) and (ii) by any other Person with whom such Person is
acting jointly or in concert;

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

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

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

(A)                              the
ordinary business of any such Person (the “Investment Manager”) includes the
management of investment funds for others (which others, for greater certainty,
may include or be limited to one or more employee

3

 

benefit plans or pension plans) and such security is held by the
Investment Manager in the ordinary course of such business in the performance  of such Investment Manager’s duties for the
account of any other Person (a “Client”);

(B)                                such
Person (the “Trust Company”) is licensed to carry on the business of a trust
company under applicable laws and, as such, acts as trustee or administrator or
in a similar capacity in relation to the estates of deceased or incompetent
Persons (each an “Estate Account”) or in relation to other accounts (each an
“Other Account”) and holds such security in the ordinary course of such duties
for the estate of any such deceased or incompetent Person or for such other
accounts;

(C)                                such
Person is established by statute for purposes that include, and the ordinary
business or activity of such Person (the “Statutory Body”) includes, the
management of investment funds for employee benefit plans, pension plans,
insurance plans or various public bodies;

(D)                               such
Person (the “Administrator”) is the administrator or trustee of one or more
pension funds or plans (a “Plan”), or is a Plan, registered under the laws of
Canada or any Province thereof or the laws of the United States of America or
any State thereof;

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

(vi)                              where
such Person is (A) a Client of the same Investment Manager as another Person on
whose account the Investment Manager holds such security, (B) an Estate
Account or an Other Account of the same Trust Company as another Person on whose
account the Trust Company holds such security or (C) a Plan with the same
Administrator as another Plan on whose account the Administrator holds such
security;

(vii)                           where
such Person is (A) a Client of an Investment Manager and such security is
owned at law or in equity by the Investment Manager, (B) an Estate Account
or an Other Account of a Trust Company and such security is owned at law or in
equity by the Trust Company or (C) a Plan and such security is owned at
law or in equity by the Administrator of the Plan; or

(viii)                        where
such Person is a registered holder of such security as a result of carrying on
the business of, or acting as a nominee of, a securities depositary;

(h)                                 “Board of
Directors” shall mean the board of directors of the Corporation or
any duly constituted and empowered committee thereof;

4

 

(i)                                     “Business Day”
shall mean any day other than a Saturday, Sunday or a day on which banking
institutions in Calgary are authorized or obligated by law to close;

(j)                                     “Canada Business Corporations Act”
means the Canada
Business Corporations Act, R.S.C. 1985, c. C-44, as amended,
and the regulations made thereunder, and any comparable or successor laws or
regulations thereto or, if applicable, the comparable legislation of any other
jurisdiction pursuant to which the Corporation may be continued;

(k)                                  “Canadian
Dollar Equivalent” of any amount which is expressed in United States
Dollars means, on any date, the Canadian dollar equivalent of such amount determined
by multiplying such amount by the U.S. - Canadian Exchange Rate in effect
on such date;

(l)                                     “Canadian -
U.S. Exchange Rate” means, on any date, the inverse of the U.S. -
Canadian Exchange Rate in effect on such date;

(m)                               “close of
business” on any given date shall mean the time on such date (or, if
such date is not a Business Day, the time on the next succeeding Business Day)
at which the principal transfer office in Calgary of the transfer agent for the
Common Shares of the Corporation (or, after the Separation Time, the principal
transfer office in Calgary of the Rights Agent) is closed to the public;

(n)                                 “Common
Shares” shall mean the Common Shares in the capital of the
Corporation;

(o)                                 “Competing
Permitted Bid” means a Take-over Bid that:

(i)                                     is
made after a Permitted Bid has been made and prior to the expiry of the
Permitted Bid;

(ii)                                  satisfies
all components of the definition of a Permitted Bid other than the requirements
set out in Clause 1.1(kk)(ii)(A) of the definition of a Permitted Bid; and

(iii)                               contains,
and the take-up and payment for securities tendered or deposited is
subject to, an irrevocable and unqualified condition that no Voting Shares will
be taken up or paid for pursuant to the Take-over Bid prior to the close
of business on a date that is no earlier than the later of: (A) the 60th
day after the date on which the earliest Permitted Bid which preceded the
Competing Permitted Bid was made; and (B) 21 days after the date of the
Take-over Bid constituting the Competing Permitted Bid;

(p)                                 “controlled”:
a corporation is “controlled” by another Person if:

(i)                                     securities
entitled to vote in the election of directors carrying more than 50 per cent of
the votes for the election of directors are held, directly or indirectly, by or
for the benefit of the other Person; and

(ii)                                  the
votes carried by such securities are entitled, if exercised, to elect a
majority of the board of directors of such corporation;

and “controls”,
“controlling” and “under common control with” shall be interpreted accordingly;

5

 

(q)                                 “Co-Rights
Agents” shall have the meaning ascribed thereto in Subsection
4.1(a);

(r)                                    “Disposition
Date” shall have the meaning ascribed thereto in
Subsection 5.1(h);

(s)                                  “Dividend
Reinvestment Acquisition” shall mean an acquisition of Voting Shares
pursuant to a Dividend Reinvestment Plan;

(t)                                    “Dividend
Reinvestment Plan” means a regular dividend reinvestment or other
plan of the Corporation made available by the Corporation to holders of its
securities where such plan permits the holder to direct that some or all of:

(i)                                     dividends
paid in respect of shares of any class of the Corporation;

(ii)                                  proceeds
of redemption of shares of the Corporation;

(iii)                               interest
paid on evidences of indebtedness of the Corporation; or

(iv)                              optional
cash payments;

be applied to the purchase
from the Corporation of Voting Shares;

(u)                                 “Election to
Exercise” shall have the meaning ascribed thereto in
Clause 2.2(d)(ii);

(v)                                 “Effective
Date” means the date the Plan of Arrangement takes effect;

(w)                               “Exempt
Acquisition” means a share acquisition in respect of which the Board
of Directors has waived the application of Section 3.1 pursuant to the
provisions of Subsection 5.1(a) or (h);

(x)                                   “Exercise
Price” shall mean, as of any date, the price at which a holder may
purchase the securities issuable upon exercise of one whole Right which, until
adjustment thereof in accordance with the terms hereof, shall be $100;

(y)                                 “Expansion
Factor” shall have the meaning ascribed thereto in
Clause 2.3(a)(x);

(z)                                   “Expiration
Time” shall mean the close of business on that date which is the
earliest of the date of termination of this Agreement pursuant to
Section 5.16 or, if this Agreement is confirmed pursuant to
Section 5.16, December 2, 2004;

(aa)                            “Flip-in
Event” shall mean a transaction in or pursuant to which any Person
becomes an Acquiring Person;

(bb)                          “holder”
shall have the meaning ascribed thereto in Section 2.8;

(cc)                            “Independent
Shareholders” shall mean holders of Voting Shares, other than:

(i)                                     any
Acquiring Person;

(ii)                                  any
Offeror (other than any Person who by virtue of Clause 1.1(g)(v) is not
deemed to Beneficially Own the Voting Shares held by such Person);

(iii)                               any
Affiliate or Associate of any Acquiring Person or Offeror;

6

 

(iv)                              any
Person acting jointly or in concert with any Acquiring Person or Offeror; and

(v)                                 any
employee benefit plan, deferred profit sharing plan, stock participation plan
and any other similar plan or trust for the benefit of employees of the
Corporation unless the beneficiaries of the plan or trust direct the manner in
which the Voting Shares are to be voted or withheld from voting or direct
whether the Voting Shares are to be tendered to a Take-over Bid;

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

(i)                                     the
agreement permits the Locked-up Person to withdraw the Voting Shares from
the agreement in order to tender or deposit the Voting Shares to another Take-over
bid or to support another transaction that in either case will provide greater
value to the Locked-up Person than the Subject Bid; or

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

and, for greater clarity, an
agreement may contain a right of first refusal or require a period of delay to
give an Offeror an opportunity to match a higher price in another take-over
bid or other similar limitation on a Locked-up Person as long as the
Locked-up Person can accept another bid or tender to another transaction.

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

7

 

(i)                                     the
closing board lot sale price or, in case no such sale takes place on such date,
the average of the closing bid and asked prices for each of such securities as
reported by the principal Canadian stock exchange (as determined by volume of
trading) on which such securities are listed or admitted to trading;

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

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

(iv)                              if
for any reason none of such prices is available on such day or the securities
are not listed or admitted to trading on a Canadian stock exchange or a
national United States securities exchange or quoted by any such reporting
system, the average of the closing bid and asked prices as furnished by a
recognized professional market maker making a market in the securities;

provided, however, that if
for any reason none of such prices is available on such day, the closing price
per share of such securities on such date means the fair value per share of
such securities on such date as determined by a nationally recognized investment
dealer or investment banker; and provided further that if an event of a type
analogous to any of the events described in Section 2.3 hereof shall have
caused any price used to determine the Market Price on any Trading Day not to
be fully comparable with the price as so determined on the Trading Day
immediately preceding such date of determination, each such price so used shall
be appropriately adjusted in a manner analogous to the applicable adjustment
provided for in Section 2.3 hereof in order to make it fully comparable
with the price on the Trading Day immediately preceding such date of
determination.  The Market Price shall
be expressed in Canadian dollars and, if initially determined in respect of any
day forming part of the 20 consecutive Trading Day period in question in United
States dollars, such amount shall be translated into Canadian dollars on such
date at the Canadian Dollar Equivalent thereof;

(ff)                                “1934 Exchange Act”
means the Securities
Exchange Act of 1934 of the United States, as amended, and the rules
and regulations thereunder as now in effect or as the same may from time to
time be amended, re-enacted or replaced;

(gg)                          “Nominee”
shall have the meaning ascribed thereto in Subsection 2.2(c);

(hh)                          “Offer  to Acquire” shall include:

(i)                                     an
offer to purchase or a solicitation of an offer to sell Voting Shares; and

8

 

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

or any combination thereof,
and the Person accepting an offer to sell shall be deemed to be making an Offer
to Acquire to the Person that made the offer to sell;

(ii)                                  “Offeror”
shall mean a Person who has announced, and has not withdrawn, an intention to
make or who has made, and has not withdrawn, a Take-over Bid, other than
a Person who has completed a Permitted Bid, a Competing Permitted Bid or an
Exempt Acquisition;

(jj)                                  “Offeror’s  Securities” means Voting Shares
Beneficially Owned by an Offeror on the date of the Offer to Acquire;

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

(i)                                     the
Take-over Bid is made to all holders of Voting Shares as registered on the
books of the Corporation, other than the Offeror;

(ii)                                  the
Take-over Bid contains, and the take-up and payment for securities
tendered or deposited is subject to, an irrevocable and unqualified provision
that no Voting Shares will be taken up or paid for pursuant to the Take-over
Bid (A) prior to the close of business on the date which is not less than 60
days following the date of the Take-over Bid and (B) only if at such date
more than 50% of the Voting Shares held by Independent Shareholders shall have
been deposited or tendered pursuant to the Take-over Bid and not
withdrawn;

(iii)                               unless
the Take-over Bid is withdrawn, the Take-over Bid contains an
irrevocable and unqualified provision that Voting Shares may be deposited
pursuant to such Take-over Bid at any time during the period of time
described in Clause 1.1(kk)(ii) and that any Voting Shares deposited
pursuant to the Take-over Bid may be withdrawn until taken up and paid
for; and

(iv)                              the
Take-over Bid contains an irrevocable and unqualified provision that in
the event that the deposit condition set forth in Clause 1.1(kk)(ii) is
satisfied the Offeror will make a public announcement of that fact and the Take-over
Bid will remain open for deposits and tenders of Voting Shares for not less
than ten Business Days from the date of such public announcement;

(ll)                                  “Permitted
Bid Acquisition” shall mean an acquisition of Voting Shares made
pursuant to a Permitted Bid or a Competing Permitted Bid;

(mm)                      “Person”
shall include any individual, firm, partnership, association, trust, trustee,
executor, administrator, legal personal representative, body corporate,
corporation, unincorporated organization, syndicate, governmental entity or
other entity;

(nn)                          “Plan of
Arrangement” means the Plan of Arrangement set forth as Appendix 1
to the Arrangement Agreement;

(oo)                          “Pro Rata
Acquisition” means an acquisition by a Person of Voting Shares
pursuant to:

9

 

(i)                                     a
Dividend Reinvestment Acquisition;

(ii)                                  a
stock dividend, stock split or other event in respect of securities of the
Corporation of one or more particular classes or series pursuant to which such
Person becomes the Beneficial Owner of Voting Shares on the same pro rata basis
as all other holders of securities of the particular class, classes or series;

(iii)                               the
acquisition or the exercise by the Person of only those rights to purchase
Voting Shares distributed to that Person in the course of a distribution to all
holders of securities of the Corporation of one or more particular classes or
series pursuant to a rights offering or pursuant to a prospectus; or

(iv)                              a
distribution of Voting Shares, or securities convertible into or exchangeable
for Voting Shares (and the conversion or exchange of such convertible or exchangeable
securities), made pursuant to a prospectus or by way of a private placement,
provided that the Person does not thereby acquire a greater percentage of such
Voting Shares, or securities convertible into or exchangeable for Voting
Shares, so offered than the Person’s percentage of Voting Shares Beneficially
Owned immediately prior to such acquisition;

(pp)                          “Record Time”
has the meaning set forth in Section 2.1(a);

(qq)                          “Right”
means a right to purchase a Common Share of the Corporation upon the terms and
subject to the conditions set forth in this Agreement;

(rr)                                “Rights
Certificate” means the certificates representing the Rights after
the Separation Time, which shall be substantially in the form attached hereto
as Attachment 1;

(ss)                            “Rights  Register” shall have the meaning
ascribed thereto in Subsection 2.6(a);

(tt)                                “Securities Act (Alberta)”
shall mean the Securities Act, S.A. 1991, c.S-6.1, as amended, and
the regulations thereunder, and any comparable or successor laws or regulations
thereto;

(uu)                          “Separation
Time” shall mean the close of business on the eighth Trading Day
after the earlier of:

(i)                                     the
Stock Acquisition Date; and

(ii)                                  the
date of the commencement of or first public announcement of the intent of any
Person (other than the Corporation or any Subsidiary of the Corporation) to
commence a Take-over Bid (other than a Permitted Bid or a Competing
Permitted Bid), or such later time as may be determined by the Board of
Directors, provided that, if any Take-over Bid referred to in this Clause (ii)
expires, is cancelled, terminated or otherwise withdrawn prior to the
Separation Time, such Take-over Bid shall be deemed, for the purposes of
this definition, never to have been made;

(vv)                          “Stock
Acquisition Date” shall mean the first date of public announcement
(which, for purposes of this definition, shall include, without limitation, a
report filed pursuant to

10

 

section 176 of the Securities Act (Alberta) or
Section 13(d) of the 1934 Exchange Act) by the Corporation or an
Acquiring Person that an Acquiring Person has become such;

(ww)                      “Subsidiary”:
a corporation is a Subsidiary of another corporation if:

(i)                                     it
is controlled by:

(A)                              that
other; or

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

(C)                                two
or more corporations each of which is controlled by that other; or

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

(xx)                              “Take-over  Bid” shall mean an Offer to
Acquire Voting Shares, or securities convertible into Voting Shares if,
assuming that the Voting Shares or convertible securities subject to the Offer
to Acquire are acquired and are Beneficially Owned at the date of such Offer to
Acquire by the Person making such Offer to Acquire, such Voting Shares
(including Voting Shares that may be acquired upon conversion of securities
convertible into Voting Shares) together with the Offeror’s Securities,
constitute in the aggregate 20% or more of the outstanding Voting Shares at the
date of the Offer to Acquire;

(yy)                          “Trading  Day”, when used with respect to
any securities, shall mean a day on which the principal Canadian stock exchange
on which such securities are listed or admitted to trading is open for the
transaction of business or, if the securities are not listed or admitted to
trading on any Canadian stock exchange, a Business Day;

(zz)                              “U.S.-Canadian
Exchange Rate” means, on any date:

(i)                                     if
on such date the Bank of Canada sets an average noon spot rate of exchange for
the conversion of one United States dollar into Canadian dollars, such rate;
and

(ii)                                  in
any other case, the rate for such date for the conversion of one United States
dollar into Canadian dollars calculated in such manner as may be determined by
the Board of Directors from time to time acting in good faith;

(aaa)                      “U.S. Dollar
Equivalent” of any amount which is expressed in Canadian dollars
means, on any date, the United States dollar equivalent of such amount
determined by multiplying such amount by the Canadian-U.S. Exchange Rate
in effect on such date; and

(bbb)                   “Voting Share
Reduction” means an acquisition or redemption by the Corporation of
Voting Shares which, by reducing the number of Voting Shares outstanding,
increases the proportionate number of Voting Shares Beneficially Owned by any
person to 20% or more of the Voting Shares then outstanding; and

(ccc)                      “Voting  Shares” shall mean the Common
Shares of the Corporation and any other shares in the capital of the
Corporation entitled to vote generally in the election of all directors.

11

 

1.2                                                                                 Currency

 

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

1.3                                                                                 Headings

 

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

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

 

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

100 x A/B

where:

	
  A

  	
  =

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

  
	
   

  	
   

  	
   

  
	
  B

  	
  =

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

  

 

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

1.5                                                                                 Acting
Jointly or in Concert

 

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

1.6                                                                                 Generally
Accepted Accounting Principles

 

Wherever in this Agreement
reference is made to generally accepted accounting principles, such reference
shall be deemed to be the recommendations at the relevant time of the Canadian
Institute of Chartered Accountants, or any successor institute, applicable on a
consolidated basis (unless otherwise specifically provided herein to be
applicable on an unconsolidated basis) as at the date on which a calculation is
made or required to be made in accordance with generally accepted accounting
principles.  Where the character or
amount of any asset or liability or item of revenue or expense is

12

 

required to be determined, or any consolidation or other accounting
computation is required to be made for the purpose of this Agreement or any
document, such determination or calculation shall, to the extent applicable and
except as otherwise specified herein or as otherwise agreed in writing by the
parties, be made in accordance with generally accepted accounting principles
applied on a consistent basis.

ARTICLE
2 – THE RIGHTS

 

2.1                                                                                 Issue of
Rights:  Legend on Common Share
Certificates

 

(a)                                  One
Right shall be issued on the Effective Date in respect of each Common Share of
the Corporation issued under the Plan of Arrangement (the time of issue of such
Rights being herein called the “Record Time”) and one Right shall be issued in
respect of each Common Share of the Corporation issued after the Record Time
and prior to the earlier of the Separation Time and the Expiration Time.

 

(b)                                 Certificates
representing Common Shares which are issued at and after the Record Time but
prior to the earlier of the Separation Time and the Expiration Time, shall also
evidence one Right for each Common Share represented thereby and shall have
impressed on, printed on, written on or otherwise affixed to them the following
legend:

Until the
Separation Time (defined in the Agreement below), this certificate also
evidences the holder’s rights described in a Shareholder Rights Plan Agreement
dated as of April 24, 2003 (the ‘Agreement’) between TransCanada
Corporation and Computershare Trust Company of Canada, as amended from time to
time, the terms of which are incorporated herein and a copy of which is
available on demand without charge. 
Under certain circumstances set out in the Agreement, the rights may
expire, may become null and void or may be evidenced by separate certificates
and no longer evidenced by this certificate.

Certificates for Common
Shares of the Corporation which by the terms of the Plan of Arrangement will
represent, on the Effective Date, Common Shares of the Corporation that are
issued and outstanding shall also evidence one Right for each Common Share
represented thereby, notwithstanding the absence of the foregoing legend, until
the close of business on the earlier of the Separation Time and the Expiration
Time.

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

 

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

(b)                                 Until
the Separation Time,

(i)                                     the
Rights shall not be exercisable and no Right may be exercised; and

(ii)                                  each
Right will be evidenced by the certificate for the associated Common Share of
the Corporation registered in the name of the holder thereof (which certificate
shall also be deemed to represent a Rights Certificate) and will be
transferable

13

only together with, and will be transferred by a transfer of, such
associated Common Share of the Corporation.

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

(i)                                     the
Rights shall be exercisable; and

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

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

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

(y)                                 a disclosure
statement describing the Rights,

provided that a Nominee
shall be sent the materials provided for in (x) and (y) in respect of all
Common Shares of the Corporation held of record by it which are not
Beneficially Owned by an Acquiring Person.

(d)                                 Rights
may be exercised, in whole or in part, on any Business Day after the Separation
Time and prior to the Expiration Time by submitting to the Rights Agent:

(i)                                     the
Rights Certificate evidencing such Rights;

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

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

14

 

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

(i)                                     requisition
from the transfer agent certificates representing the number of such Common
Shares to be purchased (the Corporation hereby irrevocably authorizing its
transfer agent to comply with all such requisitions);

(ii)                                  when
appropriate, requisition from the Corporation the amount of cash to be paid in
lieu of issuing fractional Common Shares;

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

(iv)                              when
appropriate, after receipt, deliver the cash referred to in
Clause 2.2(e)(ii) to or to the order of the registered holder of such
Rights Certificate; and

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

(g)                                 The
Corporation covenants and agrees that it will:

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

(ii)                                  take
all such action as may be necessary and within its power to comply with the
requirements of the Canada Business Corporations Act, the Securities
Act (Alberta) and the securities laws or comparable legislation of
each of the provinces of Canada and any other applicable law, rule or
regulation, in connection with the issuance and delivery of the Rights
Certificates and the issuance of any Common Shares upon exercise of Rights;

(iii)                               use
reasonable efforts to cause all Common Shares issued upon exercise of Rights to
be listed on the stock exchanges on which such Common Shares were traded
immediately prior to the Stock Acquisition Date;

(iv)                              cause
to be reserved and kept available out of the authorized and unissued Common
Shares, the number of Common Shares that, as provided in this Agreement, will
from time to time be sufficient to permit the exercise in full of all
outstanding Rights;

15

 

(v)                                 pay
when due and payable, if applicable, any and all federal, provincial and
municipal transfer taxes and charges (not including any income or capital taxes
of the holder or exercising holder or any liability of the Corporation to
withhold tax) which may be payable in respect of the original issuance or
delivery of the Rights Certificates, or certificates for Common Shares to be
issued upon exercise of any Rights, provided that the Corporation shall not be
required to pay any transfer tax or charge which may be payable in respect of
any transfer involved in the transfer or delivery of Rights Certificates or the
issuance or delivery of certificates for Common Shares in a name other than
that of the holder of the Rights being transferred or exercised; and

(vi)                              after
the Separation Time, except as permitted by Section 5.1, not take (or
permit any Subsidiary to take) any action if at the time such action is taken
it is reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.

2.3                                                                                 Adjustments
to Exercise Price; Number of Rights

 

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

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

(i)                                     declare
or pay a dividend on Common Shares payable in Common Shares (or other
securities exchangeable for or convertible into or giving a right to acquire
Common Shares or other securities of the Corporation) other than pursuant to
any optional stock dividend program;

(ii)                                  subdivide
or change the then outstanding Common Shares into a greater number of Common
Shares;

(iii)                               consolidate
or change the then outstanding Common Shares into a smaller number of Common
Shares; or

(iv)                              issue
any Common Shares (or other securities exchangeable for or convertible into or
giving a right to acquire Common Shares or other securities of the Corporation)
in respect of, in lieu of or in exchange for existing Common Shares except as
otherwise provided in this Section 2.3,

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

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

(x)                                   the Exercise
Price in effect after such adjustment will be equal to the Exercise Price in
effect immediately prior to such adjustment divided by the number of Common Shares
(or other capital stock) (the “Expansion Factor”) that a holder of

16

 

one Common Share immediately prior to such dividend, subdivision,
change, consolidation or issuance would hold thereafter as a result thereof;
and

(y)                                 each Right held
prior to such adjustment will become that number of Rights equal to the
Expansion Factor,

and the adjusted number of
Rights will be deemed to be distributed among the Common Shares with respect to
which the original Rights were associated (if they remain outstanding) and the
shares issued in respect of such dividend, subdivision, change, consolidation
or issuance, so that each such Common Share (or other capital stock) will have
exactly one Right associated with it following the payment or effective date of
the event referred to in Clause 2.3(a)(i), (ii), (iii) or (iv), as the
case may be.

For greater certainty, if
the securities purchasable upon exercise of Rights are to be adjusted, the
securities purchasable upon exercise of each Right after such adjustment will
be the securities that a holder of the securities purchasable upon exercise of
one Right immediately prior to such dividend, subdivision, change,
consolidation or issuance would hold thereafter as a result of such dividend,
subdivision, change, consolidation or issuance.

If, after the Record Time
and prior to the Expiration Time, the Corporation shall issue any shares of
capital stock other than Common Shares in a transaction of a type described in
Clause 2.3(a)(i) or (iv), shares of such capital stock shall be treated
herein as nearly equivalent to Common Shares as may be practicable and
appropriate under the circumstances and the Corporation and the Rights Agent
agree to amend this Agreement in order to effect such treatment.

In the event the Corporation
shall at any time after the Record Time and prior to the Separation Time issue
any Common Shares otherwise than in a transaction referred to in this
Subsection 2.3(a), each such Common Share so issued shall automatically
have one new Right associated with it, which Right shall be evidenced by the
certificate representing such associated Common Share.

(b)                                 In
the event the Corporation shall at any time after the Record Time and prior to
the Separation Time fix a record date for the issuance of rights, options or
warrants to all holders of Common Shares entitling them (for a period expiring
within 45 calendar days after such record date) to subscribe for or purchase
Common Shares (or securities convertible into or exchangeable for or carrying a
right to purchase Common Shares) at a price per Common Share (or, if a security
convertible into or exchangeable for or carrying a right to purchase or
subscribe for Common Shares, having a conversion, exchange or exercise price,
including the price required to be paid to purchase such convertible or
exchangeable security or right per share) less than the Market Price per Common
Share on such record date, the Exercise Price to be in effect after such record
date shall be determined by multiplying the Exercise Price in effect
immediately prior to such record date by a fraction:

(i)                                     the
numerator of which shall be the number of Common Shares outstanding on such
record date, plus the number of Common Shares that the aggregate offering price
of the total number of Common Shares so to be offered (and/or the aggregate
initial conversion, exchange or exercise price of the convertible or
exchangeable securities or rights so to be offered, including the price
required to

17

 

be paid to purchase such convertible or
exchangeable securities or rights) would purchase at such Market Price per
Common Share; and

(ii)                                  the
denominator of which shall be the number of Common Shares outstanding on such
record date, plus the number of additional Common Shares to be offered for
subscription or purchase (or into which the convertible or exchangeable
securities or rights so to be offered are initially convertible, exchangeable
or exercisable).

In case such subscription
price may be paid by delivery of consideration, part or all of which may be in
a form other than cash, the value of such consideration shall be as determined
in good faith by the Board of Directors, whose determination shall be described
in a statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of Rights.  Such
adjustment shall be made successively whenever such a record date is fixed, and
in the event that such rights, options or warrants are not so issued, or if
issued, are not exercised prior to the expiration thereof, the Exercise Price
shall be readjusted to the Exercise Price which would then be in effect if such
record date had not been fixed, or to the Exercise Price which would be in
effect based upon the number of Common Shares (or securities convertible into,
or exchangeable or exercisable for Common Shares) actually issued upon the
exercise of such rights, options or warrants, as the case may be.

For purposes of this
Agreement, the granting of the right to purchase Common Shares (whether from
treasury or otherwise) pursuant to the Dividend Reinvestment Plan or any
employee benefit, stock option or similar plans shall be deemed not to
constitute an issue of rights, options or warrants by the Corporation;
provided, however, that, in all such cases, the right to purchase Common Shares
is at a price per share of not less than 95 per cent of the current market
price per share (determined as provided in such plans) of the Common Shares.

(c)                                  In
the event the Corporation shall at any time after the Record Time and prior to
the Separation Time fix a record date for the making of a distribution to all
holders of Common Shares (including any such distribution made in connection
with a merger or amalgamation) of evidences of indebtedness, cash (other than
an annual cash dividend or a dividend paid in Common Shares, but including any
dividend payable in securities other than Common Shares), assets or rights,
options or warrants (excluding those referred to in Subsection 2.3(b)),
the Exercise Price to be in effect after such record date shall be determined
by multiplying the Exercise Price in effect immediately prior to such record
date by a fraction:

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

(ii)                                  the
denominator of which shall be such Market Price per Common Share.

Such adjustments shall be
made successively whenever such a record date is fixed, and in the event that
such a distribution is not so made, the Exercise Price shall be adjusted to be

18

 

the Exercise Price which
would have been in effect if such record date had not been fixed.

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

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

(ii)                                  the
Expiration Date.

(e)                                  In
the event the Corporation shall at any time after the Record Time and prior to
the Separation Time issue any shares of capital stock (other than Common
Shares), or rights, options or warrants to subscribe for or purchase any such
capital stock, or securities convertible into or exchangeable for any such
capital stock, in a transaction referred to in Clause 2.3(a)(i) or (iv),
if the Board of Directors acting in good faith determines that the adjustments
contemplated by Subsections 2.3(a), (b) and (c) in connection with such
transaction will not appropriately protect the interests of the holders of
Rights, the Board of Directors may determine what other adjustments to the
Exercise Price, number of Rights and/or securities purchasable upon exercise of
Rights would be appropriate and, notwithstanding Subsections 2.3(a), (b)
and (c), such adjustments, rather than the adjustments contemplated by
Subsections 2.3(a), (b) and (c), shall be made.  Subject to the prior consent of the holders of the Voting Shares
or the Rights obtained as set forth in Subsection 5.4(b) or (c), the
Corporation and the Rights Agent shall have authority to amend this Agreement
as appropriate to provide for such adjustments.

(f)                                    Each
Right originally issued by the Corporation subsequent to any adjustment made to
the Exercise Price hereunder shall evidence the right to purchase, at the
adjusted Exercise Price, the number of Common Shares purchasable from time to
time hereunder upon exercise of a Right immediately prior to such issue, all
subject to further adjustment as provided herein.

(g)                                 Irrespective
of any adjustment or change in the Exercise Price or the number of Common
Shares issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Exercise Price
per Common Share and the number of Common Shares which were expressed in the
initial Rights Certificates issued hereunder.

(h)                                 In
any case in which this Section 2.3 shall require that an adjustment in the
Exercise Price be made effective as of a record date for a specified event, the
Corporation may elect to defer until the occurrence of such event the issuance
to the holder of any Right exercised after such record date the number of
Common Shares and other securities of the Corporation, if any, issuable upon
such exercise over and above the number of Common Shares and other securities
of the Corporation, if any, issuable upon such exercise on the basis of the
Exercise Price in effect prior to such adjustment; provided, however, that the

19

 

Corporation shall deliver to
such holder an appropriate instrument evidencing such holder’s right to receive
such additional shares (fractional or otherwise) or other securities upon the
occurrence of the event requiring such adjustment.

(i)                                     Notwithstanding
anything contained in this Section 2.3 to the contrary, the Corporation
shall be entitled to make such reductions in the Exercise Price, in addition to
those adjustments expressly required by this Section 2.3, as and to the
extent that in their good faith judgment the Board of Directors shall determine
to be advisable, in order that any:

(i)                                     consolidation
or subdivision of Common Shares;

(ii)                                  issuance
(wholly or in part for cash) of Common Shares or securities that by their terms
are convertible into or exchangeable for Common Shares;

(iii)                               stock
dividends; or

(iv)                              issuance
of rights, options or warrants referred to in this Section 2.3,

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

2.4                                                                                 Date on
Which Exercise Is Effective

 

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

2.5                                                                                 Execution,
Authentication, Delivery and Dating of Rights Certificates

 

(a)                                  The
Rights Certificates shall be executed on behalf of the Corporation by its
Chairman of the Board, President or any Vice-President and by its
Corporate Secretary or any Assistant Secretary under the corporate seal of the
Corporation reproduced thereon.  The
signature of any of these officers on the Rights Certificates may be manual or
facsimile.  Rights Certificates bearing
the manual or facsimile signatures of individuals who were at any time the
proper officers of the Corporation shall bind the Corporation, notwithstanding
that such individuals or any of them have ceased to hold such offices either
before or after the countersignature and delivery of such Rights Certificates.

(b)                                 Promptly
after the Corporation learns of the Separation Time, the Corporation will
notify the Rights Agent of such Separation Time and will deliver Rights
Certificates executed by the Corporation to the Rights Agent for
countersignature, and the Rights Agent shall manually countersign (in a manner
satisfactory to the Corporation) and send such Rights Certificates to the
holders of the Rights pursuant to Subsection 2.2(c) hereof.  No Rights

20

 

Certificate shall be valid
for any purpose until countersigned by the Rights Agent as aforesaid.

(c)                                  Each
Rights Certificate shall be dated the date of countersignature thereof.

2.6                                                                                 Registration,
Transfer and Exchange

 

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

After the Separation Time
and prior to the Expiration Time, upon surrender for registration of transfer
or exchange of any Rights Certificate, and subject to the provisions of
Subsection 2.6(c), the Corporation will execute, and the Rights Agent will
manually countersign and deliver, in the name of the holder or the designated
transferee or transferees, as required pursuant to the holder’s instructions,
one or more new Rights Certificates evidencing the same aggregate number of
Rights as did the Rights Certificates so surrendered.

(b)                                 All
Rights issued upon any registration of transfer or exchange of Rights
Certificates shall be the valid obligations of the Corporation, and such Rights
shall be entitled to the same benefits under this Agreement as the Rights
surrendered upon such registration of transfer or exchange.

(c)                                  Every
Rights Certificate surrendered for registration of transfer or exchange shall
be duly endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Corporation or the Rights Agent, as the case may be, duly
executed by the holder thereof or such holder’s attorney duly authorized in
writing.  As a condition to the issuance
of any new Rights Certificate under this Section 2.6, the Corporation may
require the payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and any other expenses
(including the reasonable fees and expenses of the Rights Agent) connected
therewith.

2.7                                                                                 Mutilated,
Destroyed, Lost and Stolen Rights Certificates

 

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

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

(i)                                     evidence
to their reasonable satisfaction of the destruction, loss or theft of any
Rights Certificate; and

21

 

(ii)                                  such
security or indemnity as may be reasonably required by them to save each of
them and any of their agents harmless;

then, in the absence of notice
to the Corporation or the Rights Agent that such Rights Certificate has been
acquired by a bona fide purchaser, the Corporation shall execute and upon
the Corporation’s request the Rights Agent shall countersign and deliver, in
lieu of any such destroyed, lost or stolen Rights Certificate, a new Rights
Certificate evidencing the same number of Rights as did the Rights Certificate
so destroyed, lost or stolen.

(c)                                  As a
condition to the issuance of any new Rights Certificate under this
Section 2.7, the Corporation may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and any other expenses (including the reasonable fees and expenses of
the Rights Agent) connected therewith.

(d)                                 Every
new Rights Certificate issued pursuant to this Section 2.7 in lieu of any
destroyed, lost or stolen Rights Certificate shall evidence the contractual
obligation of the Corporation, whether or not the destroyed, lost or stolen
Rights Certificate shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Agreement equally and proportionately with
any and all other Rights duly issued hereunder.

2.8                                                                                 Persons
Deemed Owners of Rights

 

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

2.9                                                                                 Delivery
and Cancellation of Certificates

 

All Rights Certificates
surrendered upon exercise or for redemption, registration of transfer or
exchange shall, if surrendered to any Person other than the Rights Agent, be
delivered to the Rights Agent and, in any case, shall be promptly cancelled by
the Rights Agent.  The Corporation may
at any time deliver to the Rights Agent for cancellation any Rights
Certificates previously countersigned and delivered hereunder which the
Corporation may have acquired in any manner whatsoever, and all Rights
Certificates so delivered shall be promptly cancelled by the Rights Agent.  No Rights Certificate shall be countersigned
in lieu of or in exchange for any Rights Certificates cancelled as provided in
this Section 2.9, except as expressly permitted by this Agreement.  The Rights Agent shall, subject to
applicable laws, destroy all cancelled Rights Certificates and deliver a
certificate of destruction to the Corporation.

2.10                                                                           Agreement
of Rights Holders

 

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

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

22

 

(b)                                 that
prior to the Separation Time, each Right will be transferable only together
with, and will be transferred by a transfer of, the associated Common Share
certificate representing such Right;

(c)                                  that
after the Separation Time, the Rights Certificates will be transferable only on
the Rights Register as provided herein;

(d)                                 that
prior to due presentment of a Rights Certificate (or, prior to the Separation
Time, the associated Common Share certificate) for registration of transfer,
the Corporation, the Rights Agent and any agent of the Corporation or the
Rights Agent may deem and treat the Person in whose name the Rights Certificate
(or, prior to the Separation Time, the associated Common Share certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on such Rights
Certificate or the associated Common Share certificate made by anyone other
than the Corporation or the Rights Agent) for all purposes whatsoever, and
neither the Corporation nor the Rights Agent shall be affected by any notice to
the contrary;

(e)                                  that
such holder of Rights has waived his right to receive any fractional Rights or
any fractional shares or other securities upon exercise of a Right (except as
provided herein); and

(f)                                    that,
subject to the provisions of Section 5.4, without the approval of any
holder of Rights or Voting Shares and upon the sole authority of the Board of
Directors, acting in good faith, this Agreement may be supplemented or amended
from time to time to cure any ambiguity or to correct or supplement any
provision contained herein which may be inconsistent with the intent of this
Agreement or is otherwise defective, as provided herein.

2.11                                                                           Rights
Certificate Holder Not Deemed a Shareholder

 

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

ARTICLE
3 – ADJUSTMENTS TO THE RIGHTS

 

3.1                                                                                 Flip–in
Event

 

(a)                                  Subject
to Subsection 3.1(b) and Section 5.1, in the event that prior to the
Expiration Time a Flip-in Event shall occur, each Right shall constitute,
effective at the close of business on the eighth Trading Day after the Stock
Acquisition Date, the right to

23

 

purchase from the
Corporation, upon exercise thereof in accordance with the terms hereof, that
number of Common Shares having an aggregate Market Price on the date of
consummation or occurrence of such Flip-in Event equal to twice the
Exercise Price for an amount in cash equal to the Exercise Price (such right to
be appropriately adjusted in a manner analogous to the applicable adjustment
provided for in Section 2.3 in the event that after such consummation or
occurrence, an event of a type analogous to any of the events described in Section 2.3
shall have occurred).

(b)                                 Notwithstanding
anything in this Agreement to the contrary, upon the occurrence of any Flip-in
Event, any Rights that are or were Beneficially Owned on or after the earlier
of the Separation Time or the Stock Acquisition Date by:

(i)                                     an
Acquiring Person (or any Affiliate or Associate of an Acquiring Person or any
Person acting jointly or in concert with an Acquiring Person or any Affiliate
or Associate of an Acquiring Person); or

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

shall become null and void
without any further action, and any holder of such Rights (including
transferees) shall thereafter have no right to exercise such Rights under any
provision of this Agreement and further shall thereafter not have any other
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise.

(c)                                  From
and after the Separation Time, the Corporation shall do all such acts and
things as shall be necessary and within its power to ensure compliance with the
provisions of this Section 3.1, including without limitation, all such
acts and things as may be required to satisfy the requirements of the Canada
Business Corporations Act, the Securities Act (Alberta) and the
securities laws or comparable legislation of each of the provinces of Canada
and of the United States and each of the states thereof in respect of the issue
of Common Shares upon the exercise of Rights in accordance with this Agreement.

(d)                                 Any
Rights Certificate that represents Rights Beneficially Owned by a Person
described in either Clause 3.1(b)(i) or (ii) or transferred to any nominee
of any such Person, and any Rights Certificate issued upon transfer, exchange,
replacement or adjustment of any other Rights Certificate referred to in this
sentence, shall contain the following legend:

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

24

 

represented hereby are void
or shall become void in the circumstances specified in Subsection 3.1(b)
of the Shareholder Rights Plan Agreement.

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

ARTICLE 4 – THE
RIGHTS AGENT

4.1                                                                                 General

 

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

(b)                                 The
Rights Agent shall be protected and shall incur no liability for or in respect
of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any certificate for Common
Shares, Rights Certificate, certificate for other securities of the
Corporation, 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.

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

 

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

25

 

been countersigned, any
successor Rights Agent may countersign such Rights Certificates in the name of
the predecessor Rights Agent or in the name of the successor Rights Agent; and
in all such cases such Rights Certificates will have the full force provided in
the Rights Certificates and in this Agreement.

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

4.3                                                                                 Duties of Rights Agent

 

The Rights Agent undertakes
the duties and obligations imposed by this Agreement upon the following terms
and conditions, all of which the Corporation and the holders of certificates
for Common Shares and 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
Corporation) and the opinion of such counsel will be full and complete
authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion;

(b)                                 whenever
in the performance of its duties under this Agreement, the Rights Agent deems
it necessary or desirable that any fact or matter be proved or established by
the Corporation 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 a Person believed by the Rights Agent to be the Chairman
of the Board, President, any Vice-President, Treasurer, Corporate
Secretary, or any Assistant Secretary of the Corporation and delivered to the
Rights Agent; and such certificate will be full authorization to the Rights
Agent for any action taken or suffered in good faith by it under the provisions
of this Agreement in reliance upon such certificate;

(c)                                  the
Rights Agent will be liable hereunder for its own negligence, bad faith or
wilful misconduct;

(d)                                 the
Rights Agent will not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement, or in the certificates for Common
Shares or in the Rights Certificates (except its countersignature thereof) or
be required to verify the same, but all such statements and recitals are and
will be deemed to have been made by the Corporation only;

(e)                                  the
Rights Agent will not be under any responsibility in respect of the validity of
this Agreement or the execution and delivery hereof (except the due
authorization, execution and delivery hereof by the Rights Agent) or in respect
of the validity or execution of any certificate for a Common Share or Rights
Certificate (except its countersignature thereof); nor will it be responsible
for any breach by the Corporation of any covenant or condition contained in
this Agreement or in any Rights Certificate; nor will it be responsible for any
change in the exerciseability of the Rights (including the Rights

26

 

becoming void pursuant to
Subsection 3.1(b) hereof) or any adjustment required under the provisions
of Section 2.3 hereof or responsible for the manner, method or amount of
any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
after receipt of the certificate contemplated by Section 2.3 describing
any such adjustment); nor will it by any act hereunder be deemed to make any
representation or warranty as to the authorization of any Common Shares to be
issued pursuant to this Agreement or any Rights or as to whether any Common
Shares will, when issued, be duly and validly authorized, executed, issued and
delivered and fully paid and non-assessable;

(f)                                    the
Corporation agrees that it will perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such further
and other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement;

(g)                                 the
Rights Agent is hereby authorized and directed to accept instructions in
writing with respect to the performance of its duties hereunder from any
individual believed by the Rights Agent to be the Chairman of the Board,
President, any Vice-President, Treasurer, Corporate Secretary or any
Assistant Secretary of the Corporation, and to apply to such individuals for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered by it in good faith in accordance with
instructions of any such individual;

(h)                                 the
Rights Agent and any shareholder or stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in Common Shares, Rights or other
securities of the Corporation or become pecuniarily interested in any
transaction in which the Corporation may be interested, or contract with or
lend money to the Corporation or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude the
Rights Agent from acting in any other capacity for the Corporation or for any
other legal entity; and

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

4.4                                                                                 Change of Rights Agent

 

The Rights Agent may resign
and be discharged from its duties under this Agreement upon 60 days’ notice (or
such lesser notice as is acceptable to the Corporation) in writing mailed to
the Corporation and to each transfer agent of Common Shares by registered or
certified mail.  The Corporation may
remove the Rights Agent upon 60 days’ notice in writing, mailed to the Rights
Agent and to each transfer agent of the Common Shares by registered or
certified mail.  If the Rights Agent
should resign or be removed or otherwise become incapable of acting, the
Corporation will appoint a successor to the Rights Agent.  If the Corporation fails to make such
appointment within a period of 60 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent, then by prior written notice to the Corporation the
resigning Rights Agent or the holder of any Rights (which holder shall, with
such notice, submit such holder’s Rights Certificate, if any, for inspection by
the Corporation), may apply to any court of competent

27

 

jurisdiction for the appointment of a new Rights Agent.  Any successor Rights Agent, whether
appointed by the Corporation or by such a court, shall be a corporation
incorporated under the laws of Canada or a province thereof authorized to carry
on the business of a trust company in the Province of Alberta.  After appointment, the successor Rights
Agent will be vested with the same powers, rights, duties and responsibilities
as if it had been originally named as Rights Agent without further act or deed;
but the predecessor Rights Agent shall deliver and transfer to the successor
Rights Agent any property at the time held by it hereunder, and execute and
deliver any further assurance, conveyance, act or deed necessary for the
purpose.  Not later than the effective
date of any such appointment, the Corporation will file notice thereof in
writing with the predecessor Rights Agent and each transfer agent of the Common
Shares and mail a notice thereof in writing to the holders of the Rights in
accordance with Section 5.9. 
Failure to give any notice provided for in this Section 4.4,
however, or any defect therein, shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of any
successor Rights Agent, as the case may be.

ARTICLE 5 –
MISCELLANEOUS

5.1                                                                                 Redemption and Waiver

 

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

(b)                                 Subject
to the prior consent of the holders of the Voting Shares or the Rights obtained
as set forth in Subsection 5.4(b) or (c), the Board of Directors of the
Corporation acting in good faith may, at its option, at any time prior to the
provisions of Section 3.1 becoming applicable as a result of the
occurrence of a Flip-in Event, elect to redeem all but not less than all
of the outstanding Rights at a redemption price of $0.001 per Right
appropriately adjusted in a manner analogous to the applicable adjustment
provided for in Section 2.3 if an event of the type analogous to any of
the events described in Section 2.3 shall have occurred (such redemption
price being herein referred to as the “Redemption Price”).

(c)                                  Where
a Person acquires pursuant to a Permitted Bid, a Competing Permitted Bid or an
Exempt Acquisition under Subsection 5.1(a) outstanding Voting Shares,
other than Voting Shares Beneficially Owned at the date of the Permitted Bid,
the Competing Permitted Bid or the Exempt Acquisition under
Subsection 5.1(a) by such Person, then the Board of Directors of the
Corporation shall immediately upon the consummation of such acquisition without
further formality and without any approval under Subsection 5.4(b) or (c)
be deemed to have elected to redeem the Rights at the Redemption Price.

(d)                                 Where
a Take-over Bid that is not a Permitted Bid Acquisition is withdrawn or
otherwise terminated after the Separation Time has occurred and prior to the
occurrence of a Flip-in

28

 

Event, the Board of
Directors may elect to redeem all the outstanding Rights at the Redemption
Price.

(e)                                  If
the Board of Directors is deemed under Subsection 5.1(c) to have elected,
or elects under either of Subsection 5.1(b) or (d), to redeem the Rights,
the right to exercise the Rights will thereupon, without further action and
without notice, terminate and the only right thereafter of the holders of
Rights shall be to receive the Redemption Price.

(f)                                    Within
10 days after the Board of Directors is deemed under Subsection 5.1(c) to
have elected, or elects under Subsection 5.1(b) or (d), to redeem the
Rights, the Corporation shall give notice of redemption to the holders of the
then outstanding Rights by mailing such notice to each such holder at his last
address as it appears upon the registry books of the Rights Agent or, prior to
the Separation Time, on the registry books of the transfer agent for the Voting
Shares.  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.

(g)                                 Upon
the Rights being redeemed pursuant to Subsection 5.1(d), all the
provisions of this Agreement shall continue to apply as if the Separation Time
had not occurred and Rights Certificates representing the number of Rights held
by each holder of record of Common Shares as of the Separation Time had not
been mailed to each such holder and for all purposes of this Agreement the
Separation Time shall be deemed not to have occurred.

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

5.2                                                                                 Expiration

 

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

5.3                                                                                 Issuance of
New Rights Certificates

 

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

29

 

of securities purchasable upon exercise of Rights made in accordance
with the provisions of this Agreement.

5.4                                                                                 Supplements
and Amendments

 

(a)                                  The
Corporation may make amendments to this Agreement to correct any clerical or
typographical error or, subject to Subsection 5.4(e), which are required
to maintain the validity of this Agreement as a result of any change in any
applicable legislation, rules or regulations thereunder.  Notwithstanding anything in this
Section 5.4 to the contrary, no such supplement or amendment shall be made
to the provisions of Article 4 except with the written concurrence of the
Rights Agent to such supplement or amendment.

(b)                                 Subject
to Section 5.4(a), the Corporation may, with the prior consent of the
holders of Voting Shares obtained as set forth below, at any time prior to the
Separation Time, amend, vary or rescind any of the provisions of this Agreement
and the Rights (whether or not such action would materially adversely affect
the interests of the holders of Rights generally).  Such consent shall be deemed to have been given if the action
requiring such approval is authorized by the affirmative vote of a majority of
the votes cast by Independent Shareholders present or represented at and
entitled to be voted at a meeting of the holders of Voting Shares duly called
and held in compliance with applicable laws and the articles and by-laws
of the Corporation.

(c)                                  The
Corporation may, with the prior consent of the holders of Rights, at any time
on or after the Stock Acquisition Date, amend, vary or delete any of the
provisions of this Agreement and the Rights (whether or not such action would
materially adversely affect the interests of the holders of Rights generally),
provided that no such amendment, variation or deletion shall be made to the
provisions of Article 4 except with the written concurrence of the Rights Agent
thereto.  Such consent shall be deemed
to have been given if such amendment, variation or deletion is authorized by
the affirmative votes of the holders of Rights present or represented at and
entitled to be voted at a meeting of the holders and representing 50% plus one
of the votes cast in respect thereof.

(d)                                 Any
approval of the holders of Rights shall be deemed to have been given if the
action requiring such approval is authorized by the affirmative votes of the
holders of Rights present or represented at and entitled to be voted at a
meeting of the holders of Rights and representing a majority of the votes cast
in respect thereof.  For the purposes
hereof, each outstanding Right (other than Rights which are void pursuant to
the provisions hereof) shall be entitled to one vote, and the procedures for
the calling, holding and conduct of the meeting shall be those, as nearly as
may be, which are provided in the Corporation’s by-laws and the Canada
Business Corporations Act with respect to meetings of shareholders
of the Corporation.

(e)                                  Any
amendments made by the Corporation to this Agreement pursuant to
Subsection 5.4(a) which are required to maintain the validity of this
Agreement as a result of any change in any applicable legislation, rule or
regulation thereunder shall:

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

30

 

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

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

5.5                                                                                 Fractional
Rights and Fractional Shares

 

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

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

5.6                                                                                 Rights of Action

 

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

31

 

5.7                                                                                 Regulatory Approvals

 

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

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

 

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

5.9                                                                                 Notices

 

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

	
  TransCanada Corporation

  TransCanada PipeLines Tower

  450 - 1st
  Street S.W.

  P.O. Box 1000, Station M

  Calgary, Alberta

  T2P 4K5

  
	
   

  
	
  Attention:  Corporate Secretary

  Telecopy No.:  (403) 920-2460

  
	
   

  

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

	
  Computershare Trust
  Company of Canada

  600, 530 - 8  Avenue S.W.

  Calgary, Alberta

  T2P 358

  
	
   

  
	
  Attention:  Manager, Corporate Trust Department

  

 

32

 

	
  Telecopy No.:  (403) 267-6598

  
	
   

  

(c)                                  Notices
or demands authorized or required by this Agreement to be given or made by the
Corporation or the Rights Agent to or on the holder of any Rights shall be
sufficiently given or made if delivered or sent by first class mail, postage
prepaid, addressed to such holder at the address of such holder as it appears
upon the register of the Rights Agent or, prior to the Separation Time, on the
register of the Corporation for its Common Shares.  Any notice which is mailed or sent in the manner herein provided
shall be deemed given, whether or not the holder receives the notice.

(d)                                 Any
notice given or made in accordance with this Section 5.9 shall be deemed
to have been given and to have been received on the day of delivery, if so
delivered, on the third Business Day (excluding each day during which there
exists any general interruption of postal service due to strike, lockout or
other cause) following the mailing thereof, if so mailed, and on the day of
telegraphing, telecopying or sending of the same by other means of recorded
electronic communication (provided such sending is during the normal business
hours of the addressee on a Business Day and if not, on the first Business Day
thereafter).  Each of the Corporation
and the Rights Agent may from time to time change its address for notice by
notice to the other given in the manner aforesaid.

5.10                                                                           Costs of Enforcement

 

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

5.11                                                                           Successors

 

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

5.12                                                                           Benefits of
this Agreement

 

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

5.13                                                                           Governing Law

 

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

5.14                                                                           Severability

 

If any term or provision
hereof or the application thereof to any circumstance shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such term or
provision shall be ineffective

33

 

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

5.15                                                                           Effective
Date of Agreement

 

This Agreement shall be
effective and in full force and effect in accordance with its terms from and
after the date hereof.

5.16                                                                           Reconfirmation
and Approval: Reconfirmation

 

This Agreement must be
reconfirmed by a resolution passed by a majority of greater than 50 percent of
the votes cast by all holders of Voting Shares who vote in respect of such
reconfirmation at the 2004 annual meeting of the Corporation.  If the Agreement is not so reconfirmed or is
not presented for reconfirmation at such annual meeting, the Agreement and all
outstanding Rights shall terminate and be void and of no further force and
effect on and from the date of termination of the annual meeting; provided that
termination shall not occur if a Flip-in Event has occurred (other than a
Flip-in Event which has been waived pursuant to Subsection 5.1(a) or
(h) hereof), prior to the date upon which this Agreement would otherwise
terminate pursuant to this Section 5.16.

5.17                                                                           Determinations
and Actions by the Board of Directors

 

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

5.18                                                                           Time of the Essence

 

Time shall be of the essence
in this Agreement.

5.19                                                                           Execution in Counterparts

 

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

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

	
  TRANSCANADA CORPORATION

  
	
   

  
	
   

  
	
  By:

  	
   /S/ Dale E. Skinner

  
	
   

  	
  Director

  
	
   

  
	
   

  
	
  By

  	
   

  
	
   

  	
  Corporate Secretary

  	
  c/s

  

 

34

 

	
  COMPUTERSHARE TRUST COMPANY OF CANADA

  
	
   

  
	
   

  
	
  By:

  	
   /S/ Stephen Bandola

  
	
   

  	
   

  
	
   

  
	
   

  
	
  By

  	
   /S/ Marilyne Paynter

  
	
   

  	
   

  	
  c/s

  

 

35

ATTACHMENT  1

TRANSCANADA CORPORATION

SHAREHOLDER RIGHTS PLAN
AGREEMENT

[Form of Rights Certificate]

	
  Certificate No.

  	
  
   

  

  	
   

  	
  Rights

  	
  
   

  

  
	
   

  	
   

  

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

Rights Certificate

This certifies that                                                              ,
or registered assigns, is the registered holder of the number of Rights set
forth above, each of which entitles the registered holder thereof, subject to
the terms, provisions and conditions of the Shareholder Rights Plan Agreement,
dated as of April 24, 2003, as the same may be amended or supplemented from
time to time (the “Shareholder Rights Agreement”), between TransCanada
Corporation, a corporation duly incorporated under the Canada Business Corporations Act
(the “Corporation”) and Computershare Trust Company of Canada, a trust company
incorporated under the laws of Canada (the “Rights Agent”) (which term shall
include any successor Rights Agent under the Shareholder Rights Agreement), to
purchase from the Corporation at any time after the Separation Time (as such
term is defined in the Shareholder Rights Agreement) and prior to the
Expiration Time (as such term is defined in the Shareholder Rights Agreement),
one fully paid common share of the Corporation (a “Common Share”) at the
Exercise Price referred to below, upon presentation and surrender of this
Rights Certificate with the Form of Election to Exercise (in the form provided
hereinafter) duly executed and submitted to the Rights Agent at its principal
office in any of the cities of Vancouver, Calgary, Regina, Winnipeg, Toronto
and Montreal or to the principal office of The Bank of Montreal Trust Company
in New York City, New York.  The
Exercise Price shall initially be $100 (Cdn.) per Right and shall be subject to
adjustment in certain events as provided in the Shareholder Rights Agreement.

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

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

 

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

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

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

	
  Date:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  TRANSCANADA CORPORATION

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
  [President]

  	
   

  	
   

  	
  [Corporate Secretary]

  
	
   

  	
   

  	
   

  
	
  Countersigned:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  COMPUTERSHARE TRUST COMPANY OF CANADA

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Signature

  	
   

  	
   

  

 

FORM OF ASSIGNMENT

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

FOR VALUE RECEIVED                                                      hereby
sells, assigns and transfers unto

	
   

  
	
  (Please print name and address of transferee.)

  

 

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

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guaranteed:

  	
  Signature

  
	
   

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

  
	
   

  	
   

  
				

Signature must be guaranteed by a member firm of a recognized stock
exchange in Canada, or a commercial bank or trust company having an office or
correspondent in Canada.

 

CERTIFICATE

(To be completed if true.)

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

	
   

  
	
  Signature

  

 

(To be attached to each
Rights Certificate.)

FORM OF ELECTION TO EXERCISE

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

	
  TO:

  	
   

  

 

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

	
   

  
	
  (Name)

  
	
   

  
	
   

  
	
  (Address)

  
	
   

  
	
   

  
	
  (City and Province)

  
	
   

  
	
   

  
	
  Social Insurance Number or
  other taxpayer identification number.

  
	
   

  

 

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

	
   

  
	
  (Name)

  
	
   

  
	
   

  
	
  (Address)

  
	
   

  
	
   

  
	
  (City and Province)

  
	
   

  
	
   

  
	
  Social Insurance Number or
  other taxpayer identification number.

  

 

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  
	
  Signature Guaranteed:

  	
  Signature

  
	
   

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

  
	
   

  	
   

  
				

Signature must be guaranteed by a member firm of a
recognized stock exchange in Canada, or a commercial bank or trust company
having an office or correspondent in Canada.

 

CERTIFICATE

(To be completed if true.)

The undersigned party
exercising Rights hereunder, hereby represents, for the benefit of all holders
of Rights and Common Shares, that the Rights evidenced by this Rights
Certificate are not,

and, to the knowledge of the undersigned, have never been, Beneficially
Owned by an Acquiring Person or an Affiliate or Associate thereof or a Person
acting jointly or in concert with an Acquiring Person or an Affiliate or
Associate thereof.  Capitalized terms
shall have the meaning ascribed thereto in the Shareholder Rights Agreement.

	
   

  
	
  Signature

  

 

(To be attached to each
Rights Certificate.)

NOTICE

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

                                                                   Exhibit 10(a)

================================================================================

                           PURCHASE AND SALE AGREEMENT

                                     Between

                                   SIBS, LLC,
                                    AS SELLER

                                       and

                               RFR HOLDING CORP.,
                                  AS PURCHASER

                         Dated: As of December 16, 2002

                       Property:       1334 York Avenue

                                       New York, New York 10021

================================================================================

<Page>

                                TABLE OF CONTENTS
<Table>
<Caption>
                                                                            Page
                                                                            ----
<S>                                                                          <C>
ARTICLE I      DEFINITIONS.....................................................1

     Section 1.1    Definitions................................................1

ARTICLE II     PURCHASE AND SALE; LEASEBACK....................................3

     Section 2.1    Purchase and Sale..........................................3

     Section 2.2    Payment of the Purchase Price..............................4

     Section 2.3    Scope of Sale..............................................4

     Section 2.4    Leaseback..................................................5

ARTICLE III    STATUS OF THE TITLE.............................................5

     Section 3.1    Permitted Encumbrances.....................................5

ARTICLE IV     TITLE INSURANCE, LIENS/ADJOURNMENT OF CLOSING DATE..............6

     Section 4.1    Title Objections...........................................6

     Section 4.2    Purchaser's Right to Adjourn Closing.......................6

     Section 4.3    No Actions.................................................7

     Section 4.4    Seller Affidavits..........................................7

     Section 4.5    Title Insurance............................................7

ARTICLE V      CLOSING.........................................................8

     Section 5.1     Closing...................................................8

     Section 5.2     Seller's Closing Items....................................8

     Section 5.3     Purchaser's Closing Items.................................9

     Section 5.4     Documents Jointly Executed by Seller and Purchaser.......10

     Section 5.5     Transfer and Recordation Taxes...........................10

     Section 5.6     Title Insurance and Survey Costs.........................11

     Section 5.7     1099 Compliance..........................................11

     Section 5.8     Attorney's Fees..........................................11

     Section 5.9     Closing Conditions.......................................11

ARTICLE VI     CLOSING ADJUSTMENTS............................................12

     Section 6.1    Closing Adjustments.......................................12

ARTICLE VII    COVENANTS OF SELLER............................................12

     Section 7.1    Covenants.................................................12

ARTICLE VIII   REPRESENTATIONS AND WARRANTIES.................................13
</Table>

                                        i
<Page>

<Table>
<Caption>
                                                                            Page
                                                                            ----
<S>                                                                          <C>
     Section 8.1    Representations and Warranties By Seller..................13

     Section 8.2    Representations and Warranties By Purchaser...............15

     Section 8.3    Acknowledgments of Purchaser..............................16

     Section 8.4    No Financing Contingency..................................17

     Section 8.5    Damages for Breach of Representations.....................17

ARTICLE IX     NOTICES........................................................17

     Section 9.1    Notices...................................................17

ARTICLE X      CONFIDENTIALITY................................................18

     Section 10.1   Confidentiality...........................................18

     Section 10.2   Survival..................................................19

ARTICLE XI     DAMAGE AND DESTRUCTION.........................................19

     Section 11.1   Effect of Damage..........................................19

     Section 11.2   Estimates.................................................19

     Section 11.3   Disputes..................................................20

ARTICLE XII    CONDEMNATION...................................................20

     Section 12.1   Effect of Condemnation....................................20

ARTICLE XIII   DEFAULT BY PURCHASER OR SELLER.................................21

     Section 13.1   Purchaser Default.........................................21

     Section 13.2   Seller Default............................................21

     Section 13.3   Survival..................................................22

ARTICLE XIV    MISCELLANEOUS PROVISIONS.......................................22

     Section 14.1   Severability..............................................22

     Section 14.2   Rights Cumulative; Waivers................................22

     Section 14.3   Headings..................................................22

     Section 14.4   Construction..............................................22

     Section 14.5   Assignment................................................22

     Section 14.6   Counterparts..............................................23

     Section 14.7   Governing Law.............................................23

     Section 14.8   Jurisdiction; Venue.......................................23

     Section 14.9   Waiver of Trial by Jury...................................23

     Section 14.10  Brokers and Advisors......................................23

     Section 14.11  Integration...............................................23
</Table>

                                       ii
<Page>

<Table>
<Caption>
                                                                            Page
                                                                            ----
<S>                                                                          <C>
     Section 14.12  Amendments................................................24

     Section 14.13  Further Assurances; Cooperation...........................24

     Section 14.14  No Recording..............................................24

     Section 14.15  Transaction Characterization..............................24
</Table>

                                       iii
<Page>

EXHIBITS AND SCHEDULES

Exhibit A           Land
Exhibit B           Escrow Agreement
Exhibit D           Deed
Exhibit E           FIRPTA Affidavit
Exhibit F           SNDA Agreement

Schedule 3.1(a)     Certain Permitted Encumbrances
Schedule 3.1(e)     Subleases
Schedule 8.1        Disclosure Schedules
                    Schedule 8.1(h)    Service Contracts
                    Schedule 8.1(i)    Occupancy Agreements
                    Schedule 8.1(t)    Tax Certiorari Proceedings

<Page>

                           PURCHASE AND SALE AGREEMENT

          THIS PURCHASE AND SALE AGREEMENT is entered into as of the 16 day of
December, 2002, by and between SIBS, LLC, a New York limited liability company
(the "SELLER"), and RFR HOLDING CORP. a New York corporation (the "PURCHASER").

                               W I T N E S S E T H

          WHEREAS, Seller is the owner of the land described in EXHIBIT A
attached hereto (the "LAND"), together with the improvements erected thereon
(the "BUILDING") known by the street address 1334 York Avenue, New York, NY; and

          WHEREAS, Seller has agreed to sell to Purchaser all of Seller's right,
title and interest in the Land, the Building, and all other items included
within the term "Property" in Section 2.3; and

          WHEREAS, Purchaser has agreed to purchase the Property from Seller;
and

          WHEREAS, Purchaser has agreed to lease to Sotheby's,  Inc.,  and
Sotheby's,  Inc. has agreed to lease from  Purchaser,  the Property pursuant to
the Lease (as defined below); and

          WHEREAS, the parties desire to set forth their respective rights and
obligations with respect to the transactions contemplated herein.

          NOW THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Seller and Purchaser agree as
follows:

                                    ARTICLE I

                                   DEFINITIONS

          Section 1.1    DEFINITIONS.  For purposes of this Agreement, the
following terms shall have the meanings indicated below:

          "ACTIONS" has the meaning given to such term in Section 8.1(c).

          "ADJOURNED CLOSING DATE" has the meaning given to such term in Section
4.1(c).

          "AGREEMENT" means this Purchase and Sale Agreement, including all
Exhibits and Schedules hereto.

          "BUILDING" has the meaning given to such term in the first "WHEREAS"
clause of this Agreement.

          "BUSINESS DAY" has the meaning given to such term in Section 2.2.

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          "CITY TRANSFER TAX" has the meaning given to such term in Section
5.5(b).

          "CLOSING" means the consummation of the transactions described in
Article II.

          "CLOSING DATE" means either the Scheduled Closing Date or the
Adjourned Closing Date.

          "CODE" means the Internal Revenue Code of 1986, as amended.

          "COMMITMENT" has the meaning given to such term in Section 4.1(a).

          "CONTRACTS" has the meaning given to such term in Section 8.1(h).

          "DEED" has the meaning given to such term in Section 5.2(a).

          "DEPOSIT" has the meaning given to such term in Section 2.2(a).

          "ESCROW AGENT" has the meaning given to such term in Section 2.2(a).

          "EXCLUDED PROPERTY" has the meaning given to such term in Section 2.3.

          "FIRPTA AFFIDAVIT" has the meaning given to such term in Section
5.2(f).

          "GUARANTOR" has the meaning given to such term in Section 2.4.

          "JPMORGAN CHASE MORTGAGE" has the meaning given to such term in
Section 4.1(c).

          "LAND" has the meaning given to such term in the first "WHEREAS"
clause of this Agreement.

          "LEASE" has the meaning given to such term in Section 2.4.

          "LEASE GUARANTEE" has the meaning given to such term in Section 2.4.

          "LEASE SNDA" has the meaning given to such term in Section 5.4(d).

          "MAXIMUM AMOUNT" has the meaning given to such term in Section 14.16.

          "NOTICES" has the meaning given to such term in Section 9.1.

          "OCCUPANCY AGREEMENTS" has the meaning given to such term in Section
8.1(i).

          "PERMITTED ENCUMBRANCES" has the meaning given to such term in Section
3.1.

          "PROPERTY" has the meaning given to such term in Section 2.3.

          "PURCHASE PRICE" has the meaning given to such term in Section 2.2.

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          "PURCHASER" has the meaning given to such term in the preamble to this
Agreement.

          "REPRESENTATIVES" means, with respect to any person or entity, such
person's or entity's agents or representatives, including, without limitation,
its directors, officers, members, employees, affiliates, partners, agents,
contractors, engineers, attorneys, accountants, consultants, brokers or
financial advisors.

          "SCHEDULED CLOSING DATE" has the meaning given to such term in Section
5.1.

          "SELLER" has the meaning given to such term in the preamble to this
Agreement.

          "SELLER KNOWLEDGE INDIVIDUALS" has the meaning given to such term in
Section 8.1.

          "STATE TRANSFER TAX" has the meaning given to such term in Section
5.5(b).

          "SUBTENANT" has the meaning given to such term in Section 3.1(e)(2).

          "SURVIVING REPRESENTATIONS" has the meaning given to such term in
Section 8.3(a).

          "SURVIVAL PERIOD" has the meaning given to such term in Section 8.5.

          "TAKING" has the meaning given to such term in Section 12.1.

          "TITLE COMPANY" means Counsel  Abstract,  Inc., as agent for a
reputable title  insurance  company,  licensed by the New York State Insurance
Department.

          "TITLE CURE PERIOD" has the meaning given to such term in Section
4.1(c).

          "TITLE OBJECTIONS" has the meaning given to such term in Section
4.1(a), as expanded to include certain Update Exceptions referred to in Section
4.1(b).

          "TITLE POLICY" has the meaning given to such term in Section 4.5.

          "UPDATE EXCEPTION" has the meaning given to such term in Section
4.1(b).

                                   ARTICLE II

                          PURCHASE AND SALE; LEASEBACK

          Section 2.1 PURCHASE AND SALE. Subject to the terms and provisions
set forth in this Agreement, on the Closing Date: (a) Seller shall transfer all
of Seller's right, title and interest in the Property to Purchaser and (b)
Purchaser shall pay the Purchase Price to Seller as provided in Section 2.2.

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<Page>

          Section 2.2 PAYMENT OF THE PURCHASE PRICE. The purchase price (the
"PURCHASE PRICE") for the Property is One Hundred Seventy-Five Million Dollars
($175,000,000), payable by Purchaser as follows:

                    (a)  A deposit (the "DEPOSIT") in the amount of Five Million
Dollars ($5,000,000), payable simultaneously with the execution of this
Agreement by wire transfer, in immediately available Federal Funds, to the
escrow account of Counsel Abstract, Inc., as escrow agent (the "ESCROW AGENT").
The Deposit shall be held by Escrow Agent in accordance with the terms of that
certain Escrow Agreement of even date herewith between Seller, Purchaser and
Escrow Agent in the form of EXHIBIT B attached hereto.

                    (b)  The balance of the Purchase Price, in the amount of One
Hundred Seventy Million Dollars ($170,000,000), subject to any adjustment
pursuant to Section 6.1(b), payable by wire transfer, in immediately available
Federal Funds, to the account of Seller held at JPMorgan Chase Bank, or such
other account as Seller may designate in writing on not less than two (2)
business days notice to Purchaser prior to the Closing, (which amount includes
the amount necessary to effect the assignment of the JPMorgan Chase Mortgage
(defined below) to Purchaser's lender at Closing)).

                    (c)  If the Closing shall occur, the proceeds of the Deposit
shall be delivered to Seller, and the interest on the Deposit, if any, shall be
paid one-half to each of Purchaser and Seller, all as contemplated under the
Escrow Agreement. If the Closing shall not occur and this Agreement shall be
terminated, then the interest earned on the Deposit shall be paid to the party
entitled to receive the Deposit as provided in this Agreement. The party
receiving such interest shall pay any income taxes thereon. Seller represents
that Seller's tax identification number is 13-4029878. Purchaser represents that
Purchaser's tax identification number is 13-3673089.

As used in this Agreement, the term "BUSINESS DAY" means every day other than
Saturdays, Sundays, all days observed by the federal or New York State
government as legal holidays and all days on which commercial banks in New York
State are required by law to be closed.

          Section 2.3 SCOPE OF SALE. As used in this Agreement, the term
"PROPERTY" shall mean all of the Seller's right, title and interest in and to
the following:

                    (a)  the Land;

                    (b)  the Building;

                    (c)  easements, covenants, servitudes and other rights now
belonging or appertaining to, or comprising a part of, the Land, and all right,
title and interest of the Seller in and to any land lying in the bed of any
street, road, avenue or alley, open or closed, in front of or behind or
otherwise adjoining the Land and to the center line thereof;

                    (d)  fixtures, equipment and machinery, exclusive of the
Excluded Property and used in connection with the operation, management,
maintenance or occupation of the Property in contradistinction to the operation
of Seller's business;

                                        4
<Page>

                    (e)  such licenses, permits, approvals and authorizations,
if any, which are customarily required to be transferred to evidence Seller's
ownership of the Property in contradistinction to the operation of Seller's
business; and

                    (f)  any unpaid awards for any taking by  condemnation or
any damage to the Land by reason of the change of grade of any street or
highway.

          As used in this Agreement, the term "EXCLUDED PROPERTY" shall mean (i)
all art work located in the Building, which art work is owned, leased or
otherwise held, including on consignment, by Seller, and will continue to be
owned, leased or otherwise held, including on consignment, by Seller or an
affiliate of Seller and its affiliates or a client of Seller and its affiliates
after the Closing Date and will continue to be located in the Building to permit
Seller's operation of its business under the terms of the Lease, (ii) all
fixtures, furniture, furnishings, equipment, supplies, tools, machinery,
security systems (relating to Seller's business as opposed to base building
security systems, if any), computer software or other personal property
(including, without limitation, trade fixtures in, on, around or affixed to the
Property) owned or leased by any contractor or employee or any client of Seller
and its affiliates, or by any tenant of Seller currently in occupancy at the
Property, or by any Subtenant of Seller in occupancy of the Property after
Closing and (iii) all fixtures, furniture, furnishings, equipment, supplies,
tools, machinery, security systems (relating to Seller's business as opposed to
base building security systems, if any), computer software and other personal
property (including, without limitation, trade fixtures in, on, around or
affixed to the Property) which is owned or leased by Seller or its affiliates or
otherwise used by Seller or its affiliates in connection with the operation of
Seller's or its affiliates' business (in contradistinction to the operation of
the Property), including, but not limited to, all specialized fixtures and
equipment used by Seller or its affiliates, such as, for example, audio-visual
equipment.

          Section 2.4    LEASEBACK. On the Closing Date, immediately following
conveyance of title to the Property to Seller, Purchaser shall lease to
Sotheby's, Inc., and Sotheby's, Inc. shall lease from Purchaser, the Property,
pursuant to the terms and conditions of the lease attached hereto as EXHIBIT C
(the "LEASE"), which shall be guaranteed by Sotheby's Holdings, Inc. (the
"GUARANTOR"), pursuant to the terms and conditions of the lease guarantee, the
form of which is attached to the Lease (the "LEASE GUARANTEE"). It is intended
by the parties that the Lease shall be treated as a "capital lease" under
Generally Accepted Accounting Principles.

                                   ARTICLE III

                               STATUS OF THE TITLE

          Section 3.1    PERMITTED ENCUMBRANCES. Subject to the terms and
provisions of this Agreement, Seller's right, title and interest in the Property
shall be sold, assigned and conveyed by Seller to Purchaser, and Purchaser shall
accept same, subject only to the matters described on Schedule 3.1 (a) attached
hereto (collectively, the "PERMITTED ENCUMBRANCES").

                                        5
<Page>

                                   ARTICLE IV

               TITLE INSURANCE, LIENS/ADJOURNMENT OF CLOSING DATE

          Section 4.1    TITLE OBJECTIONS. (a) Purchaser, at Purchaser's
expense, has engaged the Title Company to commence a search and examination of
title to the Property. Purchaser has caused to be delivered to Seller a copy of
the commitment to issue an owner's policy issued by the Title Company No.
TAB-U02-00454M, dated October 10, 2002 (the "COMMITMENT"). Seller acknowledges
that Purchaser has objected to all liens and encumbrances and noted violations
which appear in the Commitment other than the Permitted Encumbrances set forth
in Schedule 3.1 (a). Purchaser shall deliver to Seller a notice by Purchaser of
any liens, encumbrances and noted violations that are not Permitted Encumbrances
and that can be removed or satisfied by the payment of a present liquidated
amount (the "TITLE OBJECTIONS") revealed by the Commitment which Purchaser is
not required to accept. Subject to subparagraph (c) below, Seller shall be
obligated to cure any Title Objection on or before the Scheduled Closing Date.

                    (b)  If, on or prior to the Closing Date, the Title Company
shall deliver any update to the Commitment which discloses additional liens,
encumbrances or noted violations which were not disclosed in the Commitment,
that are not Permitted Encumbrances and that can be removed or satisfied by the
payment of a present liquidated amount (each, an "UPDATE EXCEPTION"), then
Purchaser shall have until the Closing Date to deliver notice to Seller, which
Update Exceptions shall become Title Objections.

                    (c)  Title Objections shall be deemed cured (1) over which
the Title Company is willing to insure (without additional cost to Purchaser),
(2) against which the Title Company is willing to provide affirmative insurance
(without additional cost to Purchaser), (3) which relate to the existing
$75,000,000 mortgage encumbering the Property held by JPMorgan Chase Bank (the
"JPMORGAN CHASE MORTGAGE"), which will be assigned at Closing to Purchaser's
lender and (4) which will be extinguished upon the transfer of the Property,
which Title Objections shall be deemed Permitted Encumbrances for all purposes
of this Agreement. Seller acknowledges that in order to cure a Title Objection
in the manner contemplated by the preceding sentence, Seller may be required to
deposit funds in escrow with the Title Company. Notwithstanding anything to the
contrary contained herein, if Seller is unable to eliminate the Title Objections
by the Scheduled Closing Date (defined below in Section 5.1), Seller may, upon
prior notice to Purchaser, adjourn the Scheduled Closing Date (such adjourned
Closing Date is herein referred to as the "ADJOURNED CLOSING DATE"), for a
period (the "TITLE CURE PERIOD") reasonably determined to be necessary by Seller
in order to cure Title Objections. Seller shall also have the right to invoke
the aforesaid mechanism and adjourn the Scheduled Closing Date to an Adjourned
Closing Date for any other commercially valid business reason on written notice
to Purchaser at least three (3) business days' prior to the Scheduled Closing
Date (or the Adjourned Closing Date if Purchaser previously adjourned the
Closing to a date earlier than February 11, 2003) setting forth the Adjourned
Closing Date. The parties hereby expressly agree that the Adjourned Closing Date
selected by the Seller in either instance shall not be a date beyond February
11, 2003. If the Adjourned Closing Date selected by Seller shall fall on
February 11, 2003, then, in such event, "time shall be of the essence" with
respect to both parties' obligation to close on such Adjourned Closing Date.

                                        6
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          Section 4.2    PURCHASER'S RIGHT TO ADJOURN CLOSING. If Purchaser
desires to adjourn the Scheduled Closing Date for a commercially valid business
reason, Purchaser shall provide Seller with at least three (3) business days
notice prior to the Scheduled Closing Date (or the Adjourned Closing Date if
Seller previously adjourned the Closing to a date earlier than February 11,
2003) setting forth the date of the Adjourned Closing Date, which can be no
later than February 11, 2003, which date shall be "time of the essence" with
respect to both parties' obligation to close on such Adjourned Closing Date,
subject to Seller's rights under Section 4.1(c).

          Section 4.3    NO ACTIONS. It is expressly understood that, should
there be an objection to title which does not fall within the definition of
Title Objections, in no event shall Seller be required to bring any action or
institute any proceeding, or to incur any costs or expenses in order to attempt
to eliminate any such objection to title. If Seller is unable to eliminate the
same within the Title Cure Period, unless the same is waived by Purchaser, then,
Purchaser may (i) accept the Property subject to such objection to title without
abatement of the Purchase Price, in which event (x) such objection to title
shall be deemed to be, for all purposes, a Permitted Encumbrance, (y) Purchaser
shall close hereunder notwithstanding the existence of same, and (z) Seller
shall have no obligations whatsoever after the Closing Date with respect to
Seller's failure to cause such objection to title to be eliminated, or (ii)
terminate this Agreement by notice given to Seller within five (5) business days
following the earlier of (A) the expiration of the Title Cure Period or (B)
Seller notifying Purchaser that such objection to title shall not be eliminated,
in which event Purchaser shall be entitled to a return of the Deposit (together
with any interest accrued thereon). If Purchaser shall fail to deliver the
termination notice described in clause (ii) within the five (5) business day
period described herein, Purchaser shall be deemed to have made the election
under clause (ii). Upon the timely giving of any termination notice under clause
(ii) or upon deemed termination pursuant to the immediately preceding sentence,
this Agreement shall terminate, the Deposit together with any interest accrued
thereon shall be returned to Purchaser and neither party hereto shall have any
further rights or obligations hereunder other than those which are expressly
provided to survive the termination hereof.

          Section 4.4    SELLER AFFIDAVITS. If the Commitment discloses
judgments, bankruptcies or other returns against other persons having names the
same as, or similar to, that of Seller, Seller shall deliver to the Title
Company an affidavit showing that such judgments, bankruptcies or other returns
are not against Seller in order to induce the Title Company to omit exceptions
with respect to such judgments, bankruptcies or other returns or to insure over
same. In addition, Seller shall deliver to the Title Company, all customary
affidavits required to omit (i) exceptions with respect to municipal emergency
repairs, (ii) exceptions with respect to (A) retroactive street vault charges,
together with interest and penalties thereon, and (B) work done by the City of
New York upon the Property or any demand made by the City of New York for any
such work that may result in charges by the New York City Department of
Environmental Protection for water tap closings or any related work, (iii)
exceptions with respect to fees for inspections, reinspections, examinations and
services performed by the Department of Buildings or for permits issued by the
Department of Buildings, and (iv) any other exceptions of a similar type;
provided that any of the exceptions enumerated in clauses (i) - (iv) are
customarily omitted from a title report on the basis of an affidavit from the
owner of the property being insured, without the expenditure of money and
without an indemnity by such owner (except to the extent provided in Section
4.1(c) above).

                                        7
<Page>

          Section 4.5    TITLE INSURANCE. It is contemplated that, at the
Closing, the Title Company shall issue to Purchaser or be irrevocably committed
to issue to Purchaser an owner's form title insurance policy (the "TITLE
POLICY"), in the amount of the Purchase Price, insuring that title to the
Property is vested in Purchaser in accordance with this Agreement. Purchaser
shall be entitled to request that the Title Company provide such endorsements
(or amendments) to the Title Policy as Purchaser may reasonably require,
provided that (a) such endorsements (or amendments) shall be at no cost to
Seller, (b) Purchaser's obligations under this Agreement shall not be
conditioned upon Purchaser's ability to obtain such endorsements or amendments
so long as Seller complies with its obligations under Section 4.1(c) and, if
Purchaser is unable to obtain such endorsements or amendments, Purchaser shall
nevertheless be obligated to proceed to close the transaction contemplated by
this Agreement without reduction or set off against the Purchase Price, and (c)
the Closing shall not be delayed beyond February 11, 2003 as a result of
Purchaser's request.

                                    ARTICLE V

                                     CLOSING

          Section 5.1    CLOSING. The Closing shall be held on January 31, 2003
(the "SCHEDULED CLOSING DATE") or on such Adjourned Closing Date as may be set
pursuant to the provisions of Article IV. The Closing on the Scheduled Closing
Date or the Adjourned Closing Date, as applicable, shall occur at 9:30 a.m.
Eastern Time, at the offices of Jones, Day, Reavis & Pogue, 222 East 41st
Street, New York, New York 10017 or at the offices in Manhattan of a lender, if
any, to Purchaser in connection with the transaction contemplated by this
Agreement, as Purchaser may request not less than three (3) business days prior
to the Scheduled Closing Date. If the Adjourned Closing Date shall fall on
February 11, 2003, then in such event time shall be of the essence with respect
to both parties' obligations to close on the applicable Adjourned Closing Date.
In order to facilitate the timely and expeditious closing of title and the
payment of the Purchase Price at the Closing, Seller and Purchaser shall conduct
and complete a comprehensive pre-closing at the offices of Jones, Day, Reavis &
Pogue on the business day immediately prior to the applicable Closing Date.

          Section 5.2    SELLER'S CLOSING ITEMS. At the Closing, Seller agrees
to execute, deliver, furnish or provide to Purchaser, or cause to be executed,
delivered, furnished or provided to Purchaser, the following:

                    (a)  a bargain and sale deed for the Land and Building with
covenants against grantor's acts and otherwise in accordance with all
requirements of applicable law and subject to certain of the Permitted
Encumbrances (the "DEED"), in the form attached hereto as EXHIBIT D.

                    (b)  the Lease Guarantee;

                    (c)  a Secretary's Certificate certifying that the
Management Committee of Seller has duly adopted resolutions authorizing the
within transaction and an executed and acknowledged Incumbency Certificate
certifying to the authority of the officers of such entity to execute the
documents to be delivered by such entity on the Closing Date;

                                        8
<Page>

                    (d)  a copy of the Articles of Organization and Operating
Agreement of Seller, certified to be true and correct by an officer of Seller;

                    (e)  a  certificate  from the  Secretary of State of the
State of New York as to Seller's good standing under the laws of the State of
New York;

                    (f)  a "non-foreign person" certification from Seller
pursuant to Section 1445 of the Code in the form attached hereto as EXHIBIT E
(the "FIRPTA AFFIDAVIT");

                    (g)  the affidavits or similar documents contemplated by
Section 4.4;

                    (h)  termination of the Lease, made by and between The
Benenson Capital Company, as landlord, and Sotheby Parke-Bernet, Inc., as
tenant, dated July 25, 1979, as referenced in the Memorandum of Lease dated as
of July 25, 1979, recorded August 8, 1979 in Reel 490 page 1477, affecting the
Property (in recordable form);

                    (i)  Certificate of Seller's Representations and Warranties;

                    (j)  set of plans and specifications of the Property;

                    (k)  Certificate  of Occupancy  (or copy  thereof,
certified by Seller as true and correct and the most current Certificate of
Occupancy issued for the Property);

                    (l)  copies of all permits, approvals, warranties,
variances, approvals and licenses, in connection with the ownership, occupancy,
maintenance or operation of the Property, to the extent Seller is in possession;
and

                    (m)  such other documents as may be reasonably necessary or
appropriate to effect the consummation of the transactions that are the subject
of this Agreement.

          Section 5.3    PURCHASER'S CLOSING ITEMS. At the Closing, Purchaser
agrees to execute, deliver, furnish or provide to Seller, or cause to be
executed, delivered, furnished or provided to Seller, the following:

                    (a)  the balance of the Purchase Price in the manner
required by Section 2.2(b);

                    (b)  a Secretary's Certificate certifying that the Board of
Directors of Purchaser has duly adopted resolutions authorizing the within
transaction and an executed and acknowledged Incumbency Certificate certifying
to the authority of the officers of such entity to execute the documents to be
delivered by such entity on the Closing Date;

                    (c)  a certificate  from the Secretary of State of the State
of New York as to Purchaser's good standing under the laws of New York if
applicable;

                    (d)  Certificate of Purchaser's Representations and
Warranties; and

                                        9
<Page>

                    (e)  such other documents as may be reasonably necessary or
appropriate to effect the consummation of the transactions that are the subject
of this Agreement.

          Section 5.4    DOCUMENTS  JOINTLY  EXECUTED  BY SELLER AND  PURCHASER.
At the  Closing,  Seller and  Purchaser  shall each execute and deliver  (and,
to the extent  applicable,  Seller  shall cause  Sotheby's,  Inc.  to execute
and  deliver)  the  following documents:

                    (a)  the City Transfer Tax and State Transfer Tax returns
provided for in Section 5.5 and the State of New York Real Property Transfer
Report, Form RP-5217NYC, all to be delivered to the Title Company;

                    (b)  the Lease;

                    (c)  a Memorandum of Lease, in proper statutory form for
recording;

                    (d)  a subordination, non-disturbance and attornment
agreement among Seller, Purchaser and Purchaser's lender, if any, substantially
in the form attached as EXHIBIT F, in proper form for recording (the "LEASE
SNDA");

                    (e)  the documentation necessary to comply with Section 5.7;

                    (f)  a letter of  direction  to the Escrow  Agent to
disburse the Deposit to Seller and to disburse one-half of the interest earned
thereon to each of Seller and Purchaser;

                    (g)  such other  documents as may be reasonably  necessary
or appropriate to effect the consummation of the transactions that are the
subject of this Agreement; and

                    (h)  a closing statement.

          Section 5.5    TRANSFER AND RECORDATION TAXES. (a) At the Closing, all
recording fees, recording taxes and sales taxes, if any, imposed in connection
with the conveyance of the Property pursuant to this Agreement shall be paid by
Purchaser.

                    (b)  At the Closing, Seller shall pay the New York State
Real Estate Transfer Tax (the "STATE TRANSFER TAX") in accordance with Article
31 of the Tax Law of the State of New York, and the New York City Real Property
Transfer Tax (the "CITY TRANSFER TAX") imposed by Chapter 21, Title 11 of the
Administrative Code of the City of New York, in connection with the conveyance
of the Property to Purchaser in accordance with the provisions of this
Agreement.

                    (c)  Seller and Purchaser shall each execute and/or swear to
the returns or statements required in connection with the State Transfer Tax and
the City Transfer Tax, and any other taxes referred to in this Section 5.5 or
otherwise applicable to the transactions contemplated by this Agreement, and
shall deliver same, together with the check or checks of Seller in payment
thereof which are required of Seller, to the Title Company on the Closing Date.
All such tax payments shall be made by certified or bank check payable directly
to the

                                       10
<Page>

order of the appropriate governmental officer, or in such manner as the
Title Company shall reasonably require and accept.

                    (d)  The provisions of this Section 5.5 shall survive the
Closing.

          Section 5.6    TITLE INSURANCE AND SURVEY COSTS. The costs of
examination of title (including all UCC, tax and other searches) and title
premiums for the issuance by the Title Company of policies of title insurance
insuring Purchaser's fee interest in the Property, conforming to the
requirements of Purchaser, shall be paid by Purchaser. The cost of obtaining new
or updated surveys for the Property, conforming to the requirements of
Purchaser, shall be paid by Purchaser. The provisions of this Section 5.6 shall
survive the Closing.

          Section 5.7    1099 COMPLIANCE. Seller and Purchaser shall execute,
acknowledge and deliver to the other party such instruments, and take such other
actions, as such other party may reasonably request in order to comply with
Section 6045(e) of the Code, or any successor provision or any regulations
promulgated pursuant thereto, insofar as the same requires reporting of
information in respect of real estate transactions. The parties designate the
Title Company as the responsible party for reporting this information as
required by law. The provisions of this Section 5.7 shall survive the Closing.

          Section 5.8    ATTORNEY'S FEES.  Seller and Purchaser shall each bear
the costs of their  respective  counsel in connection with the sale and purchase
of the Property.

          Section 5.9    CLOSING CONDITIONS. The obligation of Seller and
Purchaser to consummate the transaction contemplated by this Agreement shall be
conditioned on the following conditions, as of the Closing Date, provided the
party owed the condition may waive the non-performance thereof and the other
party owing such condition shall still be obligated to close hereunder:

                    (a)  all representations and warranties of Seller and
Purchaser are true and correct in all material respects as of the Closing Date,
except to the extent that any such representations and warranties expressly
relate to an earlier date and Purchaser has been provided with any updates
necessary to make the representations and warranties updated at closing true and
correct in all material respects on the Closing Date;

                    (b)  neither Seller nor Guarantor has filed nor has become
the subject of a bankruptcy proceeding;

                    (c)  there has been no material adverse change in the
financial condition of Seller or Guarantor since such financial condition was
represented to Purchaser pursuant to Section 8.1(n), except to the extent there
may be a material adverse change in such financial condition due to facts which
have been disclosed to Purchaser in writing which Purchaser has acknowledged
receipt of in such writing;

                    (d)  Seller shall have provided to Purchaser a legal opinion
from Jones, Day, Reavis and Pogue, in form and substance reasonably acceptable
to Purchaser, (i) as to the due authorization and execution of the Lease by the
tenant under the Lease and (ii) as to the due authorization and execution by
Guarantor of the Lease Guarantee; and

                                       11
<Page>

                    (e)  Purchaser shall have provided to Seller a legal opinion
of Fried, Frank, Harris, Shriver & Jacobson, in form and substance reasonably
acceptable to Seller, as to the due authorization and execution of the Lease by
Purchaser.

                                   ARTICLE VI

                               CLOSING ADJUSTMENTS

          Section 6.1    CLOSING ADJUSTMENTS. (a) Seller and Purchaser
acknowledge and agree that there shall be no closing adjustments, because of the
execution and delivery of the Lease at closing and that payments usually
adjusted will be paid by Seller or the tenant under the Lease.

                    (b)  If the covenants of Seller contained in Section 4.1(c)
and Section 7.1(f) below are not accomplished at Closing, other than due to the
act or omission of Purchaser or its lender, as to such condition, Seller shall
not be deemed in default hereunder and the balance of the Purchase Price payable
by Purchaser at closing will be reduced by $1,030,000.00, provided however, to
the extent the covenant is satisfied in part, the Purchase Price shall be
reduced by a pro rata amount so that Purchaser will be in the same economic
position as if the covenant had been fully satisfied.

                                   ARTICLE VII

                               COVENANTS OF SELLER

          Section 7.1    COVENANTS.  During the period from the date hereof
until the Closing Date, Seller shall:

                    (a)  operate, maintain and manage the Property in a manner
consistent with current practice, including, without limitation, maintaining
property and terrorism insurance coverage in effect on the date hereof;

                    (b)  not enter into any leases, subleases, rental
agreements, licenses and other occupancy agreements, for the use or occupancy of
all or any portion of the Property, nor cancel, modify, extend or renew or
accept any surrender, nor waive any default under any leases, subleases, rental
agreements, licenses and other occupancy agreements, in each instance without
the prior written consent of Purchaser, which consent shall not be unreasonably
withheld, conditioned or delayed;

                    (c)  not enter into any service contracts that cannot be
terminated on thirty (30) days written notice from the owner of the Property nor
modify, cancel, extend or renew any existing Contracts, in each instance without
the prior written consent of Purchaser, which consent shall not be unreasonably
withheld, conditioned or delayed;

                    (d)  not perform, nor permit to be performed, alterations to
the Property, except as necessary for ordinary repair and maintenance of the
Property and in the ordinary course of Seller's business, without the prior
consent of Purchaser, except to the extent

                                       12
<Page>

Landlord's (as such term is defined in the Lease) consent would be required to
any such alteration, pursuant to Section 9 of the Lease;

                    (e)  provide prompt notice of any condemnation or casualty
affecting the Property; and

                    (f)  Seller shall cause the JPMorgan Chase Mortgage to be
assigned to Purchaser's lender at Closing.

                                  ARTICLE VIII

                         REPRESENTATIONS AND WARRANTIES

          Section 8.1    REPRESENTATIONS AND WARRANTIES BY SELLER. Seller hereby
represents and warrants to Purchaser as of the date hereof that (except as noted
in Schedule 8.1):

                    (a)  Seller is a limited liability company, duly organized,
validly existing and in good standing under the laws of the State of New York;

                    (b)  Seller has the legal right, power and authority to
enter into this Agreement and perform all of its obligations hereunder, and the
execution and delivery of this Agreement and the performance by Seller of its
obligation hereunder, (x) has been duly authorized, and (y) will not conflict
with, or result in a breach of, any of the terms, conditions and provisions of
its organizational and governance documents or any law, statute, rule or
regulation, or order, judgment, writ, injunction or decree of any court or
governmental instrumentality, or any contract, agreement or instrument to which
it is a party or by which it is bound, or to which it or any portion of its
property is subject and (z) will not require the consent, approval, authority or
order of any court or governmental agency that has not been previously obtained
in writing or delivered to the Purchaser;

                    (c)  other than the three Lis Pendens identified in the
Commitment currently relating to mechanics' liens, there are no actions, suits,
hearings, litigations, governmental or administrative proceedings or
arbitrations presently pending or, to Seller's actual knowledge, threatened in
writing (collectively, the "ACTIONS") with respect to the Property and Seller
has delivered to Purchaser copies of all relevant documents, filings and other
materials relating to any such Actions (regardless of whether adequate insurance
coverage is available);

                    (d)  Seller has no actual knowledge of any pending
condemnation, eminent domain or similar proceedings with respect to the
Property, and has no actual knowledge that any such proceedings are threatened
or contemplated;

                    (e)  Seller has not granted any unrecorded rights of first
offer to purchase, rights of first refusal to purchase, purchase options or
similar rights or contractually required consents to transfer pertaining to the
Property;

                    (f)  the fixtures, furniture, furnishings, equipment,
machinery and other personal property attached to, appurtenant to or located on
the Property (other than the Excluded

                                       13
<Page>

Property which is not being transferred) have been fully paid for and are or
will, at Closing, be owned by Seller free and clear of all liens and
encumbrances;

                    (g)  Seller is not a "foreign person" within the meaning of
Section 1445(f)(3) of the Code;

                    (h)  attached hereto as Schedule 8.1(h) is a list of all
material service contracts (the "CONTRACTS") in effect as of the date hereof,
each of which Seller has heretofore delivered true, correct and complete copies
of to Purchaser; Seller has no knowledge of any default from any party to the
Contracts that has not been cured by any such defaulting party;

                    (i)  attached here to as Schedule 8.1(i) is a list of all
leases, subleases, licenses and occupancy agreements in effect as of the date
hereof (the "Occupancy Agreements"), each of which Seller has heretobefore
delivered true, correct and complete copies of to Purchaser, together with any
amendments, supplements, renewals or modifications thereof; Seller has no
knowledge of any material default by any party to such Occupancy Agreements that
has not been cured by any such defaulting party;

                    (j)  neither Seller nor Guarantor has (i) commenced a
voluntary case, or had entered against it a petition for relief under any
federal bankruptcy act or similar petition order or decree under any federal or
state law or statute relative to bankruptcy, insolvency or other relief for
debtors, (ii) caused, suffered or consented to the appointment of a receiver,
trustee, administrator, conservator, liquidator, or similar official in any
federal, state or foreign judicial or nonjudicial proceeding, to hold,
administer and/or liquidate all or substantially all of its asset, or (iii) made
an assignment for the benefit of creditors;

                    (k)  Seller has delivered heretobefore true, correct and
complete copies of Seller's property insurance against fire and other hazards
covered by extended coverage endorsement, including terrorism insurance and
commercial general liability insurance against claims for bodily injury, death,
and property damage occurring in, on or about the Property; all such policies
are currently in full force and effect;

                    (l)  there has been no work done upon the Property by order
of the City of New York, nor has the City of New York made any demand for any
such work that may result in charges by the City of New York or liens against
the Property;

                    (m)  Seller has granted no options, rights of first refusal,
contracts or other obligations outstanding (written or oral) for the sale,
exchange or transfer of the Property or any interest therein which would be
superior to the rights of Purchaser under this Agreement or which could survive
Closing;

                    (n)  Seller has heretofore delivered true and complete
copies of each of Guarantor's most current financial statements, which fairly
reflect the financial condition of Guarantor and Seller, and there has been no
material adverse change in the financial condition of Guarantor or Seller since
the date of such financial statements, except to the extent there may be a
material adverse change in such financial condition due to facts which have been
disclosed to Purchaser in writing which Purchaser has acknowledged receipt of in
such writing;

                                       14
<Page>

                    (o)  all  Impositions (as such term is defined in the
Lease) have been paid to date or are otherwise liens not yet due and payable;

                    (p)  Seller has no actual knowledge of a violation of any
applicable federal, state or local environmental regulations regarding the
Property and there are no suits, actions or proceedings pending or, to the
actual knowledge of Seller, threatened against Seller in connection therewith;

                    (q)  Seller has no actual knowledge of any zoning violations
relating to the Property issued against Seller;

                    (r)  Seller has no more recent environmental report with
respect to the Property than that certain Phase I Environmental Site Assessment
prepared by Emteque Corporation dated December, 2002;

                    (s)  There are no Actions against Seller or Guarantor and to
the actual knowledge of Seller or Guarantor, respectively, threatened which
would materially adversely affect the validity or enforceability of Seller's
obligations hereunder and under the Lease or the validity or enforceability of
Guarantor's obligations under the Lease Guarantee;

                    (t)  Attached as Schedule 8.1(t) is a true, correct and
complete schedule of the tax certiorari proceedings currently pending with
respect to the Property, the counsel acting in connection with such proceeding,
and the fee arrangement in effect with respect to each such proceeding, and
except as otherwise set forth in Schedule 8.1(t), (i) there are no tax
abatements or exemptions specifically affecting the Property, and (ii) no
written notice has been received, and Seller has no actual knowledge of any such
pending increase, any proposed increase in the assessed valuation of the
Property or of any proposed public improvement assessments, but Purchaser has
been advised that the Property may be reassessed as a result of (i) its recent
expansion and renovation and (ii) the transaction contemplated by this
Agreement; and

                    (u)   No portion of the Purchase Price is allocated to
personal property and the personal property included in the sale, if any, is de
minimus.

Any and all uses of the phrase, "to Seller's (or Guarantor's) actual knowledge"
or other references to Seller's or Guarantor's knowledge in this Agreement shall
mean the actual knowledge of Donaldson C. Pillsbury and William Sheridan (the
"SELLER KNOWLEDGE INDIVIDUALS") as to a fact at the time given. The actual or
constructive knowledge of any other individual or entity shall not be imputed to
the Seller Knowledge Individuals.

          Section 8.2    REPRESENTATIONS  AND WARRANTIES BY PURCHASER.
Purchaser hereby represents and warrants to Seller as of the date hereof that:

                    (a)  Purchaser is a corporation duly organized,  validly
existing and in good standing under the laws of the State of New York; and

                    (b)  Purchaser has the legal right, power and authority to
enter into this Agreement and perform all its obligations hereunder, and the
execution and delivery of this

                                       15
<Page>

Agreement and the performance by Purchaser of its obligations hereunder, (x) has
been duly authorized, and (y) will not conflict with, or result in a breach of,
any of the terms, conditions and provisions of its organizational and governance
documents or any law, statute, rule or regulation, or order, judgment, writ,
injunction or decree of any court or governmental instrumentality, or any
contract, agreement or instrument to which Purchaser is a party or by which it
is bound, or to which it or any portion of its property is subject and (z) will
not require the consent, approval, authority or order of any court or
governmental agency that has not been previously obtained in writing and
delivered to Seller.

          Section 8.3    ACKNOWLEDGMENTS OF PURCHASER.  Purchaser acknowledges
and agrees for the benefit of Seller that:

                    (a)  Except as otherwise expressly stated in this Agreement
or in any agreement or instrument executed and delivered by Seller to Purchaser
contemporaneously herewith, including, by way of example, but not limited to
representations and warranties set forth in Section 8.1 of this Agreement and
the limited warranty of title expressly set forth in the Deed (hereinafter
collectively referred to in this Section 8.3 as the "SURVIVING
REPRESENTATIONS"), Seller hereby expressly disclaims any and all representations
and warranties of any kind or character, express or implied, written or oral,
with respect to the Property, and Purchaser agrees to accept the Property "AS
IS, WHERE IS, WITH ALL FAULTS". Without limiting the generality of the preceding
sentence or any other disclaimer set forth herein, Seller and Purchaser hereby
agree that, except for the Surviving Representations, Seller has not made and is
not making any representations or warranties, express or implied, written or
oral, as to (a) the nature or condition, physical or otherwise, of the Property
or any aspect thereof, including, without limitation, any warranties of
habitability, suitability, merchantability or fitness for a particular use or
purpose, or the absence of latent or other defects in the Property, (b) the
nature or quality of construction, structural design or engineering of the
improvements or the state of repair or lack of repair of any of the
improvements, (c) the quality of the labor or materials included in the
improvements, (d) the soil conditions, drainage conditions, topographical
features, access to public rights-of-way, availability of utilities or other
conditions or circumstances which affect or may affect the Property or any use
to which the Property may be put, (e) any conditions which affect or may affect
the Property with respect to any particular purpose, use, development potential
or otherwise, (f) the area, size, shape, configuration, location, capacity,
quantity, quality, cash flow, expenses or value of the Property or any part
thereof, (g) the nature or extent of title to the Property, or any easement,
servitude, right-of-way, possession, lien, encumbrance, license, reservation,
condition or otherwise that may affect title to the Property, (h) any
environmental, geological, structural, or other condition or hazard or the
absence thereof heretofore, now or hereafter affecting in any manner the
Property, including but not limited to, the presence or absence of asbestos or
any environmentally hazardous substance on, in, under or adjacent to the
Property, (i) the compliance of the Property or the operation or use of the
Property with any applicable restrictive covenants, or with any laws, ordinances
or regulations of any governmental body (including specifically, without
limitation, any zoning laws or regulations, any building codes, any
environmental laws, and the Americans with Disabilities Act of 1990, 42 U.S.C.
12101 et seq.). The provisions of this Section 8.3 shall be binding on Purchaser
and shall survive the Closing.

                                       16
<Page>

                    (b)  Purchaser has been given the opportunity to inspect the
Property, and the leases, contracts and other materials (including, without
limitation, title materials and financial reports) relating to the Property that
Purchaser deemed necessary to inspect and review in connection with the
transaction contemplated by this Agreement, and Purchaser has had the
opportunity to retain such environmental consultants, structural engineers and
other experts as it deemed necessary to inspect the Property and review such
materials. Purchaser is relying on its own investigation and the advice of its
experts regarding the Property, and upon its review of leases, contracts, and
other materials, and not on any representations or warranties of Seller (other
than the Surviving Representations). Purchaser acknowledges that Seller makes
absolutely no representations or warranties with respect to the accuracy or
completeness of any information, reports or other materials delivered to
Purchaser except as may be expressly set forth in the Surviving Representations
or elsewhere in this Agreement or in the instruments executed and delivered at
Closing.

          Section 8.4    NO FINANCING  CONTINGENCY.  Purchaser  acknowledges
and agrees that its obligations under this Agreement shall not be subject to any
financing or other contingency.

          Section 8.5    DAMAGES FOR BREACH OF REPRESENTATIONS. In the event of
a material breach with respect to any representation or warranty made by Seller
or Purchaser under this Agreement, the non-breaching party shall be entitled to
pursue a claim with respect to such breach if and only if (i) written notice of
such breach is given to the breaching party on or prior to the expiration of the
applicable Survival Period (as defined below in this Section 8.5) for such
breach, which notice must contain a reasonably detailed description of the facts
relating to the claimed breach and (ii) the liability and losses arising out of
such breach, when aggregated with all other breaches, if any, of representations
and warranties under this Agreement, shall exceed $100,000. With respect to the
liability incurred by Seller for any breach of any representation or warranty
made by Seller, any such liability shall be joint and several with Guarantor.
For purposes of this Section 8.5, "SURVIVAL PERIOD" shall mean: with respect to
the representations and warranties in Sections 8.1(a), 8.1(b), 8.2(a) and
8.2(b), a period without expiration, with respect to the representation and
warranty in Section 8.1(n), a period of three (3) years and with respect to all
other representations and warranties, a period of one (1) year commencing on the
day following the Closing Date. The provisions of this Section 8.5 shall survive
the Closing.

                                   ARTICLE IX

                                     NOTICES

          Section 9.1    NOTICES. All notices, demands, requests, approvals or
other communications ("NOTICES") required to be given or which may be given
hereunder shall be in writing and shall be given by personal delivery with
receipt acknowledged or by United States registered or certified mail, return
receipt requested, postage prepaid or by Federal Express or other reputable
national overnight courier service, and shall be deemed given when received or
refused at the following addresses:

                                       17
<Page>

          If to Seller:       SIBS, LLC
                              c/o Sotheby's Holdings, Inc.
                              1334 York Avenue
                              New York, New York 10021
                              Attention:  Donaldson C. Pillsbury, Esq.
                                   Executive Vice President and General Counsel

          With copies to:     Sotheby's Holdings, Inc.
                              1334 York Avenue
                              New York, New York 10021
                              Attention:  Mr. William Sheridan
                                   Executive Vice President and Chief Financial
                                   Officer

          and:                Sotheby's Holdings, Inc.
                              1334 York Avenue
                              New York, New York 10021
                              Attention:  Mr. Robert Wolcott
                                   Senior Vice President/Director-Tax Department
                                   and Treasurer

          and:                Jones, Day, Reavis & Pogue
                              222 East 41st Street
                              New York, New York 10017
                              Attention:  Susanna S. Fodor, Esq.

          If to Purchaser:    c/o RFR Holding LLC
                              400 Park Avenue
                              15th Floor
                              New York, New York 10022
                              Attention:  Mr. Aby Rosen

          With a copy to:     Fried, Frank, Harris, Shriver & Jacobson
                              One New York Plaza
                              New York, New York  10004
                              Attention:  Jonathan L. Mechanic, Esq.

Each party may designate a change of address (or additional or substitute
parties for notice) by notice to the other party, given at least fifteen (15)
days before such change of address is to become effective. The giving of any
notice required hereunder may be waived in writing by the party entitled to
receive such notice.

                                    ARTICLE X

                                 CONFIDENTIALITY

          Section 10.1   CONFIDENTIALITY.  Purchaser  acknowledges  and  agrees
that it shall be bound by all of the terms and conditions of that certain
confidentiality letter agreement

                                       18
<Page>

between J.P. Morgan Securities Inc., on behalf of Sotheby's Holdings Inc. and
RFR Holding Corp., dated as of November 4, 2002. Between the date hereof through
and including the Closing Date, Purchaser and Seller shall not (and shall each
use reasonable efforts to cause their respective Representatives, including,
without limitation, financial institutions not to) disclose, make known,
divulge, disseminate or communicate the Purchase Price or any of the terms of
this Agreement or this transaction or any agreement, document or understanding
pertinent to the instant transaction without the consent of the other party,
except (i) as required by law, (ii) to their respective Representatives involved
in the transaction or their respective businesses, (iii) to Purchaser's
prospective lenders or investors or (iv) to Seller's lender or investors.

          Section 10.2   SURVIVAL.  The provisions of Section 10.1 shall survive
the termination of this Agreement.

                                   ARTICLE XI

                             DAMAGE AND DESTRUCTION

          Section 11.1   EFFECT OF DAMAGE. If all or any part of the Property is
damaged by fire or other casualty occurring following the date hereof and prior
to the Closing Date, whether or not such damage affects a material part of the
Property,

                    (a)  if the estimated cost of repair or restoration is less
than or equal to Fifteen Million Dollars ($15,000,000), neither party shall have
the right to terminate this Agreement and the parties shall nonetheless
consummate this transaction in accordance with this Agreement, without any
abatement of the Purchase Price or any liability or obligation on the part of
Seller by reason of said destruction or damage. In such event, Seller, in
consultation with Purchaser shall make a claim for and to collect any casualty
insurance proceeds received under the casualty insurance policies in effect with
respect to the Property on account of said physical damage or destruction and
the parties will proceed in such event in accordance with Section 12 of the
Lease, as though Seller was the tenant and Purchaser was the landlord,
respectively; and

                    (b)  if the estimated cost of repair or restoration exceeds
Fifteen Million Dollars ($15,000,000), Purchaser shall have the option,
exercisable within thirty (30) days after receipt of notice of the occurrence of
such fire or other casualty and such factual information regarding the casualty
and availability of insurance proceeds as is reasonably sufficient to enable
Purchaser to make an informed decision about whether or not to proceed to
Closing, to terminate this Agreement by delivering notice thereof to the other
party, whereupon the Deposit (together with any interest accrued thereon) shall
be returned to Purchaser and this Agreement shall be deemed canceled and of no
further force or effect, and neither party shall have any further rights or
liabilities against or to the other except for such provisions which are
expressly provided in this Agreement to survive the termination hereof. If a
fire or other casualty described in this clause (b) shall occur and Purchaser
shall have elected to proceed with the consummation of the transaction
contemplated by this Agreement, then in such event, irrespective of the cost of
repair or restoration exceeding Fifteen Million Dollars ($15,000,000), the
parties shall proceed to the Closing and consummate this transaction and their
rights and obligations shall be the same as those set forth under Section
11.1(a).

                                       19
<Page>

          Section 11.2   ESTIMATES. The estimated cost to repair and/or restore
contemplated in Section 11.1 above shall be established by estimates obtained by
Seller from independent contractors, subject to Purchaser's review and
reasonable approval of the same and the provisions of Section 11.3 below.

          Section 11.3   DISPUTES. The provisions of this Article XI supersede
the provisions of Section 5-1311 of the General Obligations Law of the State of
New York. Any disputes under this Article XI as to the cost of repair or
restoration shall be resolved by expedited arbitration before a single
arbitrator acceptable to both Seller and Purchaser in their reasonable judgment
in accordance with the expedited construction rules then obtaining of the
American Arbitration Association; provided that if Seller and Purchaser fail to
agree on an arbitrator within five (5) days after a dispute arises, then either
party may request The Real Estate Board of New York, Inc., to designate an
arbitrator. Such arbitrator shall be an independent architect or engineer having
at least ten (10) years of experience in the construction of comparable office
buildings in Manhattan. The determination of the arbitrator shall be conclusive
and binding upon the parties. The costs and expenses of such arbitrator shall be
borne equally by Seller and Purchaser.

                                   ARTICLE XII

                                  CONDEMNATION

          Section 12.1   EFFECT OF CONDEMNATION. If, prior to the Closing Date,
any part of the Property is taken, or if Seller shall receive an official notice
from any governmental authority having eminent domain power over the Property of
its intention to take, by eminent domain proceeding, any part of the Property (a
"TAKING"), then:

                    (a)  if such Taking is less than or equal to Fifteen Million
Dollars ($15,000,000), neither party shall have any right to terminate this
Agreement, and the parties shall nonetheless consummate this transaction in
accordance with this Agreement, without any abatement of the Purchase Price or
any liability or obligation on the part of Seller by reason of such Taking and
in such event the parties shall proceed in accordance with the terms of Section
13 of the Lease as if Seller was the tenant thereunder and Purchaser the
landlord, respectively.

                    (b)  if such Taking is more than Fifteen Million Dollars
($15,000,000), Purchaser shall have the option, exercisable within thirty (30)
days after receipt of notice of such Taking and such factual information
regarding the Taking and the availability of awards or other proceeds of such
Taking as is reasonably sufficient to enable Purchaser to make an informed
decision about whether or not to proceed to Closing, to terminate this Agreement
by delivering notice thereof to the other party, whereupon the Deposit (together
with any interest earned thereon) shall be returned to Purchaser and this
Agreement shall be deemed canceled and of no further force or effect, and
neither party shall have any further rights or liabilities against or to the
other except pursuant to the provisions of this Agreement which are expressly
provided to survive the termination hereof. If a Taking described in this clause
(b) shall occur and Purchaser shall have elected to consummate the transaction
contemplated by this Agreement, then Purchaser and Seller shall consummate this
transaction in accordance with this Agreement, without any abatement of the
Purchase Price or any liability or obligation on the part of Seller by

                                       20
<Page>

reason of such Taking and in such event the parties shall proceed in accordance
with the terms of Section 13 of the Lease as if Seller was the tenant thereunder
and Purchaser the landlord, respectively.

                    (c)  The provisions of this Article XII supersede the
provisions of Section 5-1311 of the General Obligations Law of the State of New
York. Any disputes under this Article XII as to whether the Taking is less than
or equal to Fifteen Million Dollars ($15,000,000) shall be resolved by expedited
arbitration before a single arbitrator acceptable to both Seller and Purchaser
in their reasonable judgment in accordance with the expedited commercial rules
then obtaining of the American Arbitration Association; provided that if Seller
and Purchaser fail to agree on an arbitrator within five (5) days after a
dispute arises, then either party may request The Real Estate Board of New York,
Inc. to designate an arbitrator. Such arbitrator shall be an independent
appraiser having at least ten (10) years of experience in the valuation of
comparable office buildings in Manhattan. The costs and expenses of such
arbitrator shall be borne equally by Seller and Purchaser.

                                  ARTICLE XIII

                         DEFAULT BY PURCHASER OR SELLER

          Section 13.1   PURCHASER DEFAULT. If Purchaser shall default in the
payment of the Purchase Price or if Purchaser shall default in the performance
of any of its other obligations to be performed on the Closing Date, Seller's
sole remedy by reason thereof shall be to terminate this Agreement and, upon
such termination, Seller shall be entitled to retain the Deposit (and any
interest earned thereon) as liquidated damages for Purchaser's default
hereunder, it being agreed that the damages by reason of Purchaser's default are
difficult, if not impossible, to ascertain, and thereafter Purchaser and Seller
shall have no further rights or obligations under this Agreement except for
those rights and obligations that are expressly provided in this Agreement to
survive termination hereof. If Seller terminates this Agreement pursuant to a
right given to it hereunder and Purchaser takes any action which interferes with
Seller's ability to sell, exchange, transfer, lease, dispose of or finance the
Property or take any other actions with respect thereto (including, without
limitation, the filing of any lis pendens or other form of attachment against
the Property), then the named Purchaser (and any assignee of Purchaser's
interest hereunder) shall be liable for all loss, cost, damage, liability or
expense (including, without limitation, reasonable attorneys' fees, court costs
and disbursements) incurred by Seller by reason of such action to contest by
Purchaser.

          Section 13.2   SELLER DEFAULT. If Seller shall default in any of its
obligations to be performed on or before the Closing Date, Purchaser as its sole
remedy by reason thereof (in lieu of prosecuting an action for damages or
proceeding with any other legal course of conduct, the right to bring such
actions or proceedings being expressly and voluntarily waived by Purchaser, to
the extent legally permissible, following and upon advice of its counsel) shall
have the right subject to the other provisions of this Section 13.2: (i) to seek
to obtain specific performance of Seller's obligations hereunder, provided that
any action for specific performance shall be commenced within ninety (90) days
after Purchaser has knowledge of such default, and if Purchaser prevails
thereunder, Seller shall reimburse Purchaser for all reasonable legal fees,
court costs and all other reasonable costs of such action or (ii) to receive a
return of the Deposit (together with any interest earned thereon), it being
understood that if Purchaser fails to commence an action for specific
performance within ninety (90) days after Purchaser has knowledge of such
default, Purchaser's sole remedy shall be to receive a return of the Deposit

                                       21
<Page>

(together with any interest earned thereon). Upon such return and delivery, this
Agreement shall terminate and neither party hereto shall have any further rights
or obligations hereunder except for those rights and obligations set forth in
Article X. Notwithstanding the foregoing, Purchaser shall have no right to seek
specific performance if Seller fails to cure or remedy a state of facts that
Seller is not obligated to cure, pursuant to Article IV.

          Section 13.3   SURVIVAL.  The provisions of this Article XIII shall
survive the termination hereof.

                                   ARTICLE XIV

                            MISCELLANEOUS PROVISIONS

          Section 14.1   SEVERABILITY. Each part of this Agreement is intended
to be severable. If any term, covenant, condition or provision hereof is
unlawful, invalid, or unenforceable for any reason whatsoever, this Agreement
shall be construed without such term, covenant, condition or provision.

          Section 14.2   RIGHTS CUMULATIVE; WAIVERS. The rights of each of the
parties under this Agreement are cumulative and may be exercised as often as any
party considers appropriate. The rights of any of the parties hereunder shall
not be capable of being waived or varied otherwise than by an express waiver or
variation in writing executed by all of the parties hereto. Failure to exercise
or any delay in exercising any of such rights also shall not operate as a waiver
or variation of that or any other such right. Defective or partial exercise of
any of such rights shall not preclude any other or further exercise of that or
any other such right. No act or course of conduct or negotiation on the part of
any party shall in any way preclude such party from exercising any such right or
constitute a suspension or any variation of any such right.

          Section 14.3   HEADINGS. The headings contained in this Agreement are
inserted for convenience only and shall not affect the meaning or interpretation
of this Agreement or any provision hereof.

          Section 14.4   CONSTRUCTION. Unless the context otherwise requires,
singular nouns and pronouns, when used herein, shall be deemed to include the
plurals of such nouns or pronouns and pronouns of one gender shall be deemed to
include the equivalent pronouns of the other gender.

          Section 14.5   ASSIGNMENT. Purchaser shall not assign its rights under
this Agreement to any other party without the prior written consent of Seller;
provided, however, on or before closing, Purchase may assign this Agreement to
an entity (i) in which the principals of Purchaser on the date hereof continue
to hold not less than a ten percent (10%) ownership interest in Purchaser or the
Assignee entity; (ii) such principals control the day-to-day management of such
entity and (iii) such principals have the powers customarily reserved to a
managing general partner, managing member or equivalent party (subject to
certain approval

                                       22
<Page>

rights of the type customarily reserved to other partners, members or equivalent
parties of the entity over certain major decisions). Purchaser will not sell the
Property to a third party within twenty-four (24) months of the Closing Date.
The provisions of this Section 14.5 shall survive the Closing.

          Section 14.6   COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original, and all of which
taken together shall constitute one and the same Agreement.

          Section 14.7   GOVERNING LAW. This Agreement shall be construed, and
the rights and obligations of Seller and Purchaser hereunder shall be
determined, in accordance with the laws of the State of New York.

          Section 14.8   JURISDICTION; VENUE. For the purposes of any suit,
action or proceeding involving this Agreement, the parties hereto hereby
expressly submit to the jurisdiction of all federal and state courts sitting in
New York County in the State of New York and consent that any order, process,
notice of motion or other application to or by any such court or a judge thereof
may be served within or without such court's jurisdiction by registered mail or
by personal service, PROVIDED that a reasonable time for appearance is allowed,
and the parties hereto agree that such court shall have exclusive jurisdiction
over any such suit, action or proceeding commenced under this Agreement. Each
party hereby irrevocably waives any objection that it may have now or hereafter
to the laying of venue of any suit, action or proceeding arising out of or
relating to this Agreement brought in any federal or state court sitting in New
York County in the State of New York and hereby further irrevocably waives any
claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum.

          Section 14.9   WAIVER OF TRIAL BY JURY. The parties hereto waive any
right to a trial by jury of any dispute arising under or relating to this
Agreement.

          Section 14.10  BROKERS AND ADVISORS. (a) Seller and Purchaser each
warrants and represents to the other that it has not dealt or negotiated with
any broker in connection with the sale of the Property as provided by this
Agreement. Seller and Purchaser each hereby agrees to indemnify and hold the
other harmless from all loss, cost, damage or expense (including reasonable
attorneys' fees) incurred by the other as a result of any claim arising out of
the acts of the indemnifying party (or others on its behalf) for a commission,
finder's fee or similar compensation made by any broker, finder or any party who
claims to have dealt with such party.

                    (b)  Seller shall be responsible  for the payment of any
sums due J.P. Morgan Securities Inc. and J.P. Morgan Real Estate Advisors, Inc.
in their capacity as financial advisors to Seller and for the payment of all
professionals and other advisors retained by the Seller in connection with the
sale of the Property. Purchaser shall be responsible for the payment of all
professionals and advisors retained by Purchaser in connection with the sale of
the Property.

                    (c)  The provisions of this Section 14.10 shall survive the
Closing.

                                       23
<Page>

          Section 14.11  INTEGRATION. This Agreement sets forth the entire
agreement and understanding of the parties hereto with respect to the specific
matters agreed to herein and supersedes all prior agreements or understandings
between the parties with respect to the matters contained herein. The parties
hereto acknowledge that no oral or other agreements, understandings,
representations or warranties exist with respect to this Agreement or with
respect to the obligations of the parties hereto under this Agreement, except
those specifically set forth in this Agreement.

          Section 14.12  AMENDMENTS.  This Agreement may not be changed,
modified or terminated, except by an instrument in writing signed by the parties
hereto.

          Section 14.13  FURTHER ASSURANCES; COOPERATION. The parties will
execute, acknowledge and deliver all and every such further acts, deeds,
conveyances, assignments, notices, transfers and assurances as may be reasonably
required for the better assuring, conveying, assigning, transferring and
confirming unto Purchaser the Property and for carrying out the intentions or
facilitating the consummation of the transactions contemplated by this
Agreement. In furtherance thereof, the parties hereto shall cooperate with each
other to effectuate the transactions contemplated by this Agreement and to
minimize transaction costs. The provisions of this Section 14.13 shall survive
the Closing.

          Section 14.14  NO RECORDING. Neither this Agreement nor any memorandum
hereof may be recorded without first obtaining Seller's consent thereto.

          Section 14.15  TRANSACTION CHARACTERIZATION. (a) It is the intent of
the parties that the conveyance of the Property to Purchaser be an absolute
conveyance in effect as well as form, and the instruments of conveyance to be
delivered at Closing are not intended to serve or operate as a mortgage,
equitable mortgage, security agreement, trust conveyance or financing or trust
arrangement of any kind, nor as a preference or fraudulent conveyance against
any creditors of Seller. After the execution and delivery of the instruments of
conveyance described in Section 5.2, Seller will have no legal or equitable
interest or any other claim or interest in the Property other than as set forth
in the Lease. Furthermore, the parties intend for the Lease to be a "capital
lease" under Generally Accepted Accounting Principles and not a transaction
creating an operating lease, a financing lease, equitable mortgage, mortgage,
deed of trust, security interest or other financing arrangement, and the
economic realities of the Lease are those of a capital lease.

                    (b)  Notwithstanding the existence of the Lease, none of the
parties shall contest the validity, enforceability or characterization of the
sale and purchase of the Property by Purchaser pursuant to this Agreement as an
absolute conveyance, and both parties shall support the intent expressed herein
that the purchase of the Property by Purchaser pursuant to this Agreement
provides for an absolute conveyance and does not create a joint venture,
partnership, equitable mortgage, trust, financing device or arrangement,
security interest or the like, if, and to the extent that, any challenge occurs.
The provisions of this Section 14.15 shall survive the Closing.

          IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first referenced above.

                                       24
<Page>

                              SELLER:

                              SIBS, LLC

                              By: /s/ WILLIAM S. SHERIDAN
                                  ----------------------------------------------
                                  Name:  William S. Sheridan
                                  Title: Executive Vice President and
                                         Chief Financial Officer

                              PURCHASER:

                              RFR HOLDING CORP.

                              By: /s/ ABY ROSEN
                                  ----------------------------------------------
                                  Name:  Aby Rosen

Guarantor, solely with respect to the Guarantor's
representations contained in Section
8 of the Agreement and Section
8.5 thereof

SOTHEBY'S HOLDINGS, INC.

By: /s/ WILLIAM S. SHERIDAN
    --------------------------------------------
    Name:  William S. Sheridan
    Title: Executive Vice President and
           Chief Financial Officer

                                       25
<Page>

                                    EXHIBIT A

                             Description of the Land

ALL the certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:

BEGINNING at the corner formed by the intersection of the easterly side of York
Avenue (formerly Avenue A) and the southerly side of 72nd Street; running thence
in a southerly direction along the easterly side of York Avenue 204 feet 4
inches to the corner formed by the intersection of the easterly side of York
Avenue and the northerly side of 71st Street; running thence in an easterly
direction along the northern side of 71st Street, 198 feet; thence in a
northerly direction and parallel with York Avenue 204 feet 4 inches to the
southerly side of 72nd Street; and thence in a westerly direction along with
southerly side of 72nd Street 198 feet to the point or place of BEGINNING.

<Page>

                                    EXHIBIT B

                                Escrow Agreement

                                              As of December 16, 2002

SIBS, LLC
1334 York Avenue
New York, New York  10021

RFR HOLDING CORP.
c/o RFR Holding LLC
400 Park Avenue
15th Floor
New York, New York 10022

[Ladies and Gentlemen]:

          Reference is made to that certain Purchase and Sale Agreement dated as
of December [ ], 2002 (the "CONTRACT OF SALE") by and between SIBS, LLC
("SELLER") and RFR HOLDING CORP. ("PURCHASER"). Pursuant to the Contract of
Sale, Purchaser has deposited with Counsel Abstract, Inc. ("ESCROW AGENT") the
sum of $5,000,000 (the "DEPOSIT"), receipt of which is hereby acknowledged.
Escrow Agent agrees to hold the Escrow Funds (defined in Section 2) in
accordance with the terms hereof and of the Contract of Sale, including, without
limitation, Section 2.2 of the Contract of Sale. Seller, Purchaser and Escrow
Agent further agree as follows:

          1.        APPOINTMENT OF ESCROW AGENT. Each of Seller and Purchaser
hereby appoints Escrow Agent to act as its agent in accordance with this Escrow
Agreement and the Contract of Sale and Escrow Agent hereby accepts such
appointment and agrees to serve as their agent in accordance with the terms and
conditions of this Escrow Agreement and the Contract of Sale.

          2.        ESCROW DEPOSIT. The Deposit shall be invested in an interest
bearing savings or money market account (any interest earned on the Deposit is
hereinafter referred to as the "INTEREST" and the Interest and the Deposit are
hereinafter collectively referred to as the "ESCROW FUNDS") in accordance with
the provisions of Section 2.2 of the Contract of Sale.

          3.        RELEASE OF ESCROW FUNDS. (a) Without any further action or
direction given by Seller or Purchaser, on the Closing Date (such term is
defined in the Contract of Sale) (i) the Deposit shall be released from escrow
and delivered by Escrow Agent to Seller, and (ii) the Interest, if any, shall be
released from escrow and one-half of the Interest shall be delivered by Escrow
Agent to each of Purchaser and Seller; provided, however, if for any reason

<Page>

(other than extended by Seller or Purchaser as set forth in Sections 4.1(c) and
4.2, respectively, of the Contract of Sale), the Closing shall not occur, Escrow
Agent shall promptly deliver the Escrow Funds to the appropriate party or
parties pursuant to the Contract of Sale.

          (b)       If for any reason the Closing does not occur on or before
the Scheduled Closing Date, as the same may be adjourned to the Adjourned
Closing Date (as such terms are defined in the Contract of Sale) and either
Seller or Purchaser makes a written demand upon Escrow Agent for payment or
refund, as the case may be, of the Escrow Funds or any portion thereof, Escrow
Agent shall give written notice to the other party of such demand. If Escrow
Agent does not receive a written objection from the other party to the proposed
payment or refund, as the case may be, within ten (10) business days (such term
is defined in the Contract of Sale) after the giving of such notice, Escrow
Agent is hereby authorized to make such payment or refund, as the case may be;
PROVIDED, HOWEVER, if for any reason Escrow Agent in good faith shall elect not
to make such payment, Escrow Agent shall continue to hold such amount until
otherwise directed by written instructions from the parties to this Escrow
Agreement or a final judgment of a court of competent jurisdiction.
Notwithstanding the foregoing, Escrow Agent shall have the right at any time to
deposit the Escrow Funds with the Clerk of the Supreme Court of New York, First
Department. Escrow Agent shall give written notice of such deposit to Seller and
Purchaser. Upon such deposit, Escrow Agent shall be relieved and discharged of
all further obligations and responsibilities hereunder.

          4.        ESCROW AGENT DUTIES AND LIABILITIES. It is expressly
understood and agreed by each of Seller and Purchaser that (i) the duties of
Escrow Agent, as herein specifically provided, are purely ministerial in nature;
(ii) Escrow Agent shall not be responsible or liable in any manner whatsoever
for, or have any duty to inquire into, the sufficiency, correctness, genuineness
or validity of the notices it receives hereunder, or the identity, authority or
rights of either of Seller or Purchaser; (iii) Escrow Agent shall have no duties
or responsibilities in connection with the Escrow Funds, other than those
specifically set forth in this Escrow Agreement; (iv) Escrow Agent shall not
incur any liability in acting upon any signature, notice, request, waiver,
consent, receipt or any other paper or document believed by Escrow Agent, in
good faith, to be genuine; (v) Escrow Agent may assume (in the absence of
knowledge to the contrary) that any person purporting to have authority to give
notices on behalf of each of Seller and Purchaser in accordance with the
provisions hereof has been duly authorized to do so; (vi) Escrow Agent shall
incur no liability whatsoever except for such resulting from its willful
misconduct or gross negligence, as long as Escrow Agent has acted in good faith
in the performance of its duties hereunder; and (vii) upon Escrow Agent's
performance of its obligations under Sections 2 and 3 hereof, Escrow Agent shall
be relieved of all liability, responsibility and obligation with respect to the
Escrow Funds or arising out of or under this Escrow Agreement, except to the
extent resulting from its willful misconduct or gross negligence. Escrow Agent
may, at its own expense, consult with legal counsel in the event of any dispute
or questions as to the construction of any provisions hereof or its duties
hereunder, and it shall be fully protected in acting in accordance with the
opinion or instructions of such counsel.

          5.        DISPUTE RESOLUTION. Each of Seller and Purchaser
acknowledges that in receiving the Escrow Funds, Escrow Agent is acting only as
a stakeholder for the accommodation of Seller and Purchaser. It is further
expressly understood and agreed that if at any time prior to the release of the
Escrow Funds by Escrow Agent in accordance with the terms

<Page>

of this Escrow Agreement there is any dispute, or Escrow Agent is uncertain, as
to whether Escrow Agent is obligated or required to release and deliver the
Escrow Funds, Escrow Agent shall not make any delivery of the Escrow Funds, but
shall hold the same until final determination of the rights of Seller and
Purchaser by further written agreement among them or in an appropriate
proceeding before a tribunal having jurisdiction thereover. If a proceeding for
such determination is not begun by either of Seller and Purchaser and diligently
continued, Escrow Agent may make an ex parte application, or bring any
appropriate action, for leave to deposit the Escrow Funds in the Supreme Court
of New York, First Department seeking such determination or such declaratory
relief as Escrow Agent shall deem reasonably necessary under the circumstances,
and each of Seller and Purchaser consents to the entering of an ex parte order
pursuant to all applicable laws, rules and procedures of the State of New York
and such court. Escrow Agent shall be reimbursed by Seller and Purchaser,
jointly and severally, for all of Escrow Agent's costs and expenses of such
action or proceeding, including, without limitation, reasonable attorney's fees
and disbursements.

          6.        TERMINATION. This Escrow Agreement (except for Sections 4, 5
and 7 hereof, which shall survive termination hereof) shall terminate upon the
release and delivery of the Escrow Funds by Escrow Agent in accordance with the
terms hereof.

          7.        INDEMNIFICATION. Each of Seller and Purchaser hereby agrees
to jointly and severally indemnify and hold Escrow Agent harmless from and
against any and all losses, costs, damages, injuries, expenses and claims
(including, without limitation, court costs and reasonable attorneys fees)
arising hereunder or under or with respect to the Escrow Funds, except for any
of the foregoing resulting from the willful misconduct or gross negligence of
Escrow Agent. Promptly after the receipt by Escrow Agent of notice of any demand
or claim or the commencement of any action, suit or proceeding, Escrow Agent
shall, if a claim in respect thereof is to be made against any of the other
parties hereto, notify such other parties hereto in writing; but the failure by
Escrow Agent to give such notice shall not relieve any party from any liability
which such party may have to Escrow Agent hereunder.

          8.        NOTICES. All notices, demands, requests, approvals or other
communications required to be given or which may be given hereunder shall be in
writing and shall be given by personal delivery with receipt acknowledged or by
United States registered or certified mail, return receipt requested, postage
prepaid or by Federal Express or other reputable national overnight courier
service, and shall be deemed given when received or refused at the following
addresses:

          Escrow Agent:       Counsel Abstract, Inc.
                              [address]
                              Attention:

          If to Seller:       SIBS, LLC
                              c/o Sotheby's Holdings, Inc.
                              1334 York Avenue
                              New York, New York 10021
                              Attention:  Donaldson C. Pillsbury, Esq.

<Page>

          With copies to:     Sotheby's Holdings, Inc.
                              1334 York Avenue
                              New York, New York 10021
                              Attention:  Mr. William Sheridan

          and:                Sotheby's Holdings, Inc.
                              1334 York Avenue
                              New York, New York 10021
                              Attention:  Mr. Robert Wolcott

          and:                Jones, Day, Reavis & Pogue
                              222 East 41st Street
                              New York, New York 10017
                              Attention:  Susanna S. Fodor, Esq.

          If to Purchaser:    c/o RFR Holding LLC
                              400 Park Avenue
                              15th Floor
                              New York, New York 10022
                              Attention: Mr. Aby Rosen

          With a copy to:     Fried, Frank, Harris, Shriver & Jacobson
                              One New York Plaza
                              New York, New York  10004
                              Attention: Jonathan L. Mechanic, Esq.

          9.        NO THIRD PARTY BENEFICIARIES. The terms and provisions of
this Escrow Agreement shall not create any right in any person, firm,
corporation or entity other than Seller, Purchaser and Escrow Agent and no other
party shall have the right to enforce or benefit from the terms hereof.

          10.       CONFLICTS. To the extent that there exists any conflict
between the provisions of this Escrow Agreement and the provisions of the
Contract of Sale, the provisions of the Contract of Sale shall govern.

          11.       RESIGNATION OF ESCROW AGENT; SUCCESSORS AND ASSIGNS;
COUNTERPARTS; AMENDMENTS. Escrow Agent may resign at any time as escrow agent
hereunder upon giving five (5) business days' prior written notice to that
effect to each of Seller and Purchaser. In such event, the successor Escrow
Agent shall be a reputable title insurance company or nationally recognized law
firm selected by Seller and accepted by Purchaser. Such party that will no
longer be serving as Escrow Agent shall deliver, against receipt, to such
successor Escrow Agent, the Escrow Funds held by such party, to be held by such
successor Escrow Agent pursuant to the terms and provisions of this Escrow
Agreement. If no such successor has been designated on or before such party
ceases to be Escrow Agent hereunder, whether by resignation or otherwise, its
obligations as Escrow Agent shall continue until such successor is appointed;
provided, however, its sole obligation thereafter shall be to safely keep all
monies then held by it and to deliver the same to the person, firm or
corporation designated as its successor or until directed by a final

<Page>

order or judgment of a court of competent jurisdiction, whereupon Escrow Agent
shall make disposition thereof in accordance with such order. If no successor
Escrow Agent is designated and qualified within five (5) business days after its
resignation is effective, such party that will no longer be serving as Escrow
Agent shall apply to the Chief Judge of the Supreme Court of New York, First
Department for the appointment of a successor Escrow Agent.

          12.       MISCELLANEOUS. This Escrow Agreement (i) shall bind Seller,
Purchaser, Escrow Agent and their respective successors, assigns and legal
representatives, and (ii) may be executed in one or more counterparts, each of
which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument. This Escrow Agreement shall not be
amended or modified, except by a writing executed by each of Seller, Purchaser
and Escrow Agent.

                   [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

<Page>

          Please indicate your acceptance of the terms hereof by signing below
where indicated.

                                                 COUNSEL ABSTRACT, INC.

                                                 By:  /s/ PHILIP NARATZKY
                                                    ------------------------
                                                     Name:  Philip Naratzky
                                                     Title: General Counsel

Accepted and Agreed:

SIBS, LLC

By: /s/ WILLIAM S. SHERIDAN
    ----------------------------------------
     Name:  William S. Sheridan
     Title: Executive Vice President and
            Chief Financial Officer

RFR HOLDING CORP.

By: /s/ ABY ROSEN
    ----------------------------------------
     Name: Aby Rosen

<Page>

                                    EXHIBIT D

                                  Form of Deed

THIS INDENTURE, made as of the 7th day of February, Two Thousand and Three

BETWEEN SIBS, LLC, a New York limited liability company, having an address at
1334 York Avenue, New York, New York 10021,

party of the first part, and RFR HOLDING CORP., a New York corporation having an
address at 400 Park Avenue, 15th Floor, New York, New York 10022,

party of the second part

WITNESSETH, that the party of the first part, in consideration of ten dollars
and other valuable consideration paid by the party of the second part does
hereby grant and release unto the party of the second part, the heirs or
successors and assigns of the party of the second part forever.

ALL, that certain plot, piece or parcel of land, situate, lying and being in the
City, County and State of New York, being more fully bonded and described as set
forth on Schedule A annexed hereto and forming a part hereof.

TOGETHER with strips, gores and easements, if any, next to and adjoining the
above-described premises.

SUBJECT to the encumbrances and exceptions set forth on Schedule B, annexed
hereto and forming a part hereof.

TOGETHER with all right, title and interest, if any, of the party of the first
part in and to any streets and roads abutting the above described premises to
the center lines thereof; TOGETHER with the appurtenances and all the estate and
rights of the party of the first part in and to said premises; TO HAVE AND TO
HOLD the premises herein granted unto the party of the second part, the heirs or
successors and assigns of the party of the second part forever.

AND the party of the first part, in compliance with Section 13 of the Lien Law,
covenants that the party of the first part will receive the consideration for
this conveyance and will hold the right to receive such consideration as a trust
fund to be applied first for the purpose of paying the cost of the improvement
and will apply the same first to the payment of the cost of the improvement
before using any part of the total of the same for any other purpose.

AND the party of the first part covenants that the party of the first part has
not done or suffered anything whereby the premises have been encumbered in any
way whatsoever, except as aforesaid.

<Page>

     IN WITNESS WHEREOF, the party of the first part has duly executed this deed
the day and year first above written.

IN PRESENCE OF

                                 SIBS, LLC, a New York limited liability company

                                 By: /s/ WILLIAM S. SHERIDAN
                                     -------------------------------------------
                                     Name:  William S. Sheridan
                                     Title: Executive Vice President and
                                            Chief Financial Officer

<Page>

STATE OF NEW YORK   )
                       ss:
COUNTY OF NEW YORK  )

On the 7th day of February in the year 2003 before me, the undersigned a
notary public in and for said state, personally appeared known to me,
personally known to me or proved to me on the basis of satisfactory evidence
to be the individual whose name is subscribed to the within instrument and
acknowledged to me that he executed the same in his capacity, and that by his
signature on the instrument, the individual, or the person upon behalf of
which the individual acted, executed the instrument.

                                     Julian Entner
                                     -------------------------------
                                     Notary Public

My commission expires:

   July 29, 2006
--------------------------

<Page>

                              BARGAIN AND SALE DEED
                      WITH COVENANTS AGAINST GRANTOR'S ACTS

                                    SIBS, LLC

                                       TO

                                RFR HOLDING CORP.

SECTION 5
BLOCK 1483
LOT 1
COUNTY OR TOWN        New York
STREET ADDRESS        1334 York Avenue
                      New York, New York  10021

TAX BILLING ADDRESS   1334 York Avenue
                      New York, New York  10021

                      RETURN BY MAIL TO:

                      Susanna S. Fodor, Esq.
                      Jones, Day, Reavis & Pogue
                      222 East 41st Street
                      New York, New York 10017

<Page>

                                   Schedule A

ALL that certain plot, piece or parcel of land, situate, lying and being in the
Borough of Manhattan, City, County and State of New York, bounded and described
as follows:

BEGINNING at the corner formed by the intersection of the easterly side of York
Avenue (formerly Avenue A) and the southerly side of 72nd Street; running thence
in a southerly direction along the easterly side of York Avenue 204 feet 4
inches to the corner formed by the intersection of the easterly side of York
Avenue and the northerly side of 71st Street; running thence in an easterly
direction along the northern side of 71st Street, 198 feet; thence in a
northerly direction and parallel with York Avenue 204 feet 4 inches to the
southerly side of 72nd Street; and thence in a westerly direction along the
southerly side of 72nd Street 198 feet to the point or place of BEGINNING.

[Subject to Items 3 and 4 on Schedule 3.1(a)]

<Page>

                                   Schedule B

                           [To be provided at closing]

<Page>

                                    EXHIBIT E

                            Form of FIRPTA Affidavit

<Page>

                         FOREIGN INVESTORS REAL PROPERTY
                       TAX ACT CERTIFICATION AND AFFIDAVIT

          Section 1445 of the Internal Revenue Code of 1986, as amended (the
"CODE"), provides that a transferee of a U.S. real property interest must
withhold tax if the transferor is a foreign person. To inform RFR HOLDING CORP.,
a New York corporation (the "Transferee") that withholding tax is not required
upon disposition of a U.S. real property interest by SIBS, LLC, a New York
limited liability company (the "TRANSFEROR"), the undersigned hereby certifies
the following on behalf of the Transferor:

          Transferor is not a foreign corporation, foreign partnership, foreign
trust or foreign estate (as those terms are defined in the Code and any
regulations, promulgated in connection therewith);

          The U.S. employer identification number of Transferor is 13-4029878.

          Transferor has an address at 1334 York Avenue, New York, New York
10021.

          The address of the subject property is 1334 York Avenue, New York, New
York 10021.

          Transferor understands that this Certification may be disclosed to the
Internal Revenue Service by Transferee and that any false statement contained
herein could be punished by fine, imprisonment or both.

          Under penalties of perjury, I declare that I have examined this
Certification and to the best of my knowledge and belief it is true, correct and
complete, and I further declare that I have the authority to sign this document
on behalf of Transferor.

February 7, 2003.

                                          SIBS, LLC

                                          By: /s/ WILLIAM S. SHERIDAN
                                             ----------------------------
                                             Name:  William S. Sheridan
                                             Title: Executive Vice President
                                                    and Chief Financial Officer

<Page>

                                    EXHIBIT F

                   SUBORDINATION, NONDISTURBANCE, RECOGNITION
                            AND ATTORNMENT AGREEMENT

                                See attached form

<Page>

                         SUBORDINATION, NON-DISTURBANCE
                            AND ATTORNMENT AGREEMENT

     THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (the
"AGREEMENT") is made as of this _______ day of ____________________, 2003, which
date shall be the effective date of this Agreement, between
______________________________________, a _______________ (the "TENANT") and
BANK OF AMERICA, N.A., a national banking association, a wholly owned subsidiary
of BankAmerica Corporation, and having its principal offices in Charlotte, North
Carolina (together with its successors and/or assigns the "Lender").

     The Tenant is the lessee under the lease described in EXHIBIT A attached
hereto (as the same may from time to time be assigned, subleased, renewed,
extended, amended, modified or supplemented, collectively the "LEASE").

     The Lender has previously made or is about to make a loan to
___________________________________, a ____________________________ or its
successor and/or assigns with respect to the landlord's interest under the Lease
(the "LANDLORD"), evidenced by a promissory note in the original principal
amount of approximately $_______________ executed by the Landlord and payable to
the Lender and secured by a first priority deed of trust, mortgage or deed to
secure debt on certain real and personal property and improvements (the
"PREMISES"), recorded or to be recorded in the appropriate records of
______________ County, _____________________ (the "SECURITY INSTRUMENT").

     The Lender has requested the Tenant to confirm the fact that the Lease is
subject and subordinate to the Security Instrument.

     The Tenant is willing to confirm the subordination of the Lease, provided
it obtains assurance from the Lender that its possession of the premises demised
under the Lease (the "DEMISED PREMISES"), which Demised Premises is all or a
portion of the Premises, and its right to use any common areas will not be
disturbed by reason of or in the event of the foreclosure of the Security
Instrument.

     The Lender is willing to give such assurance.

     NOW, THEREFORE, for and in consideration of the mutual agreements herein
contained and other good and valuable consideration, the parties hereto do
hereby mutually covenant and agree as follows:

     1.   (a)  The Tenant hereby subordinates the Lease and all terms and
conditions contained therein and all rights, options, liens and charges created
thereby to the lien of the Security Instrument, and to all present or future
advances under the obligations secured thereby and to all renewals, extensions,
amendments, modifications and/or supplements of same, to the full extent of all
amounts secured thereby from time to time.

                                        1
<Page>

          (b)  Lender hereby consents to the execution and delivery of the Lease
by Landlord and, subject to the applicable terms and conditions hereof, Lender
agrees to recognize all of Tenant's rights, remedies and options under and as
described in the Lease which may be exercised in accordance with the terms of
the Lease without Lender's consent.

     2.   So long as no event of default on the part of the Tenant under the
Lease shall exist which would entitle the Landlord to terminate the Lease, or if
such an event of default shall exist, so long as the Tenant's time to cure the
default shall not have expired, the term of the Lease shall not be terminated or
modified in any respect whatsoever and the Tenant's right of possession to the
Demised Premises and its rights in and to any common areas and its other rights
arising out of the Lease will all be fully recognized and protected by the
Lender and shall not be disturbed, canceled, terminated or otherwise affected by
reason of the Security Instrument or any action or proceeding instituted by the
Lender to foreclose the Security Instrument, or any extension, renewal,
consolidation or replacement of same, or other exercise of Lender's rights and
remedies under the Security Instrument, irrespective of whether the Tenant shall
have been joined in any action or proceeding.

     3.   In the event that the Lender takes possession of the Premises, either
as the result of foreclosure of the Security Instrument or accepting a deed to
the Premises in lieu of foreclosure, or otherwise, or the Premises shall be
purchased at such a foreclosure by a third party unaffiliated with Landlord, the
Tenant shall attorn to the Lender or such third party and recognize the Lender
or such third party as its landlord under the Lease, and the Lender or such
third party will recognize and accept the Tenant as its tenant thereunder,
whereupon, the Lease shall continue in full force and effect as a direct lease
between the Lender or such third party and the Tenant for the full term thereof,
together with all extensions and renewals thereof, and the Lender or such third
party shall thereafter assume and perform all of the Landlord's obligations, as
the landlord under the Lease with the same force and effect as if the Lender or
such third party were originally named therein as the Landlord; provided,
however, that the Lender or such third party unaffiliated with Landlord shall
not be:

     (a)  liable for any act or omission of any prior landlord (including the
Landlord), except to the extent the Lender was furnished notice and opportunity
to cure the same in accordance with the provisions of this Agreement prior to
taking possession of such Premises; or

     (b)  subject to any offsets or defenses which the Tenant might have against
any prior landlord (including the Landlord), except to the extent the Lender was
furnished notice and opportunity to cure the same in accordance with the
provisions of this Agreement prior to taking possession of such Premises; or

     (c)  bound by any rent or additional rent which the Tenant might have paid
for more than two (2) months in advance to any prior landlord (including the
Landlord); or

     (d)  bound by any amendment or modification of the Lease not consented to
in writing by the Lender (excluding any amendment or modification reflecting the
exercise by Landlord or Tenant of any right or option contained in the Lease in
accordance with the applicable terms and provisions thereof).

                                        2
<Page>

     Except as expressly and specifically set forth above, nothing contained in
this paragraph 3 shall diminish any of Landlord's obligations under the Lease.

     4.   Notwithstanding anything to the contrary in this Agreement or
otherwise, in the event the Lender or a third party takes possession of the
Premises as provided in paragraph 3 above, the personal liability of the Lender
or such third party under the Lease shall be limited to the Lender's or such
third party's, as the case may be, interest in the Premises, and upon any
assignment or other transfer of the Lender's or such third-party's interest in
the Premises, the Lender or such third party, as applicable, shall be discharged
and released from any obligation or liability under the Lease arising or
accruing after the date of such assignment or transfer.

     5.   Except as Tenant may be required to do under the Lease, Tenant agrees
not to subordinate the Lease to any other lien or encumbrance which (i) affects
the Premises under the Lease, or any part thereof, or (ii) is junior to the
Security Instrument, without the express written consent of the Lender, and any
such subordination or any such attempted subordination or agreement to
subordinate without such consent of Lender, shall be void and of no force and
effect. The foregoing provision shall not affect Tenant's right under the Lease
to encumber its interest in the Lease and, except as expressly and specifically
set forth in the Lease, no consent of Lender shall be required in connection
with such encumbrance.

     6.   Tenant agrees to provide copies of all notices given Landlord under
the Lease to the following parties at the following addresses:

          Lender:        [_________________________________]

          [______]       [_________________________________]

or to such other address as such parties shall designate in writing; and all
such notices shall be in writing and shall be considered as properly given if
(i) mailed to the addressee by first class United States mail, postage prepaid,
registered or certified with return receipt requested, (ii) by delivering same
in person to the addressee, or (iii) by delivery to a third party commercial
delivery service for same day or next day delivery to the office of the
addressee with proof of delivery; any notice so given shall be effective, as
applicable, upon (a) the third (3rd) day following the day such notice is
deposited with the United States mail, (b) delivery to the addressee, or (c)
upon delivery to such third party delivery service; and any notice given in any
other manner shall be effective only if and when received by the addressee.

     7.   In the event Landlord shall fail to perform or observe any of the
terms, conditions or agreements in the Lease, Tenant shall give written notice
thereof to Lender and Lender shall have the right (but not the obligation) to
cure such default. Except in the case of an emergency, Tenant shall not take any
action with respect to such default under the Lease (including without
limitation any action in order to terminate, rescind or avoid the Lease or to
withhold any rent or other monetary obligations thereunder) for a period of
thirty (30) days following receipt of written notice by Lender that it intends
to cure such default; provided, however, that in the case of any default which
cannot with diligence be cured within such thirty (30) day period, if Lender

                                        3
<Page>

proceeds to promptly to cure such default or thereafter prosecutes the curing of
such default with diligence and continuity, then the time within which such
default may be cured shall be extended for such period as may be reasonably
necessary to complete the curing of such default with diligence and continuity.

     8.   Nothing contained in this Agreement shall in any way impair or affect
the lien created by the Security Instrument, except as specifically set forth
herein.

     9.   This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and assigns, including, without
limitation, any subtenant, assignee or leasehold mortgagee of Tenant permitted
pursuant to the applicable terms and conditions of the Lease; provided, however,
that in the event of the assignment or transfer of the interest of the Lender to
a party that assumes the Lender's obligations and liabilities hereunder, all
obligations and liabilities of the Lender under this Agreement shall terminate,
and thereupon all such obligations and liabilities shall be the responsibility
of the party to whom the Lender's interest is assigned or transferred.

     10.  In the event of any litigation or other legal proceeding arising
between the parties to this Agreement, whether relating to the enforcement of a
party's rights under this Agreement or otherwise, the prevailing party shall be
entitled to receive its reasonable attorney's fees and costs of suit from the
non-prevailing party in such amount as the court shall determine.

                         [NO FURTHER TEXT ON THIS PAGE]

                                        4
<Page>

          IN WITNESS WHEREOF the undersigned have executed this Agreement as of
the date and year first written above.

WITNESS/ATTEST:                          TENANT:

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

WITNESS/ATTEST:                          By:
                                            ------------------------------------
                                         Name:
                                              ----------------------------------
-------------------------                Title:
                                               ---------------------------------

WITNESS/ATTEST:                          LENDER:

                                         BANK OF AMERICA, N.A., a national
                                         banking association
-------------------------

WITNESS/ATTEST:                          By:
                                            ------------------------------------
                                         Name:
                                              ----------------------------------
-------------------------                Title:
                                               ---------------------------------

                                        5
<Page>

STATE OF _________________

COUNTY OF __________________

     I, _________________________, a Notary Public of the County and State
aforesaid, certify that ____________________________, personally came before me
this day and acknowledged that (s)he is a _________________________ of
_________________________________________, the ____________________ of
________________________________________________________, that executed the
foregoing instrument, and acknowledged to me that the same was the act of the
said __________________, and that (s)he executed the same as the act of such
__________________ for the purposes and consideration therein expressed and in
the capacity therein stated.

     WITNESS my hand and official stamp or seal, this ______ day of
_________________, 20___.

                                     -----------------------------------------
                                     Notary Public

My Commission Expires:

--------------------------
     (Notary Seal)

                                        6
<Page>

STATE OF _________________

COUNTY OF __________________

     I, _________________________, a Notary Public of the County and State
aforesaid, certify that ____________________________, personally came before me
this day and acknowledged that (s)he is a ____________________ of Bank of
America, N.A., a national banking association, that executed the foregoing
instrument, and acknowledged to me that the same was the act of the said
association, and that (s)he executed the same as the act of such association for
the purposes and consideration therein expressed and in the capacity therein
stated.

     WITNESS my hand and official stamp or seal, this ______ day of
____________, 20___.

                                     -----------------------------------------
                                     Notary Public

My Commission Expires:

--------------------------
     (Notary Seal)

                                        7
<Page>

                                    EXHIBIT A

                                      LEASE

     That certain __________________________________, dated as of
_________________, by and between __________________________________________, as
tenant, and _______________________________________, as landlord, relating to
the Premises generally described as
_____________________________________________
_____________________________________________, as assigned, subleased, renewed,
extended, amended, modified or supplemented from time to time.

<Page>

                                 Schedule 3.1(a)

                         Certain Permitted Encumbrances

          1.   SURVEY MADE BY EARL B. LOVELL - S.P. BELCHER, INC. DATED
SEPTEMBER 8, 1997 REDATED BY VISUAL INSPECTION MADE BY EARL B. LOVELL-S.P.
BELCHER, INC. DATED JULY 17, 2000 SHOWS:

          (a)  Entrances encroach on East 71st Street;

          (b)  Building on premises encroaches on East 71st Street by
5 1/4 inches and by 6 inches at roof.

          (c)  Building on premises encroaches on York Avenue by 3 1/4inches;

          (d)  Entrance encroaches on York Avenue;

          (e)  Building on premises encroaches on East 72nd Street by
3 1/2inches at grade, 4 inches at roof and, 2 1/2inches at second floor;

          (f)  Line of granite from second story to roof projects over East 72nd
Street;

          (g)  Remains of chimney breach project over premises adjoining on the
east by 4 inches more or less;

          (h)  Building on premises encroaches on premises adjoining on the east
by1/2 inch at grade, 2 1/4inches at second floor and 2 1/2inches at roof; and

          (i)  Shaft on easterly part of premises not visible.

          Subject to any changes since July 17, 2000, provided such changes
would not impair the present or intended use and occupancy of the Property or
otherwise materially affect the Property.

          2.   Restrictive Covenants contained in deed made by Nathaniel P.
Rogers and Emily Rogers to Griffith Rome dated July 10, 1871 recorded October 9,
1871 in Liber 1199 cp 151.

          3.   Zoning Lot Description and Ownership Statement made by Kohn
Pedersen Fox Associates, PC, dated September 28, 2001, recorded October 1, 2001
in Reel 3364 page 1287.

          4.   Preliminary Certification of Parties in Interest pursuant to
Subdivision (c) of the Definition of Zoning Lot set forth in Section 12-10 of
the Zoning Resolution of The City of New York effective December 15, 1961 as
amended, dated September 17, 2001, recorded October 1, 2001 in Reel 3364 page
1290.

<Page>

          5.   Any laws, rules, regulations, statutes, ordinances, orders or
other legal requirements affecting the Property, including, without limitation,
those relating to zoning and land use;

          6.   Any utility company rights, easements and franchises for
electricity, water, gas, telephone or other service or the right to use and
maintain poles, lines, wires, cables, pipes, boxes, mains and other fixtures and
facilities in, over, under and upon the Property, provided that, in the case of
any of the foregoing items which shall not be of record, the same do not
adversely affect the Property;

          7.   The rights and interests held by (1) Sotheby's, Inc. as tenant
under the Lease and (2) Subtenants under the subleases set forth on SCHEDULE
3.1(e) in effect at Closing; and

          8.   JPMorgan Chase Mortgage which will be assigned to Purchaser's
lender in connection with the purchaser of the Property.

<Page>

                                 Schedule 3.1(e)

                                    Subleases

1.   Lease Agreement for Foodservice dated as of ________ __, ____, between
     Sotheby's, Inc. and Tentation TPC Special Events Catering, Inc.
     (Restaurant, cafe and other catering services.)*

2.   Agreement of Lease dated as of January _, 2002, between SIBS, LLC, as
     Owner, and Sunrise Liquors & Wines, Inc., d/b/a Aulden Cellars, as Tenant.
     (Wine store.)*

3.   Lease Agreement dated as of October 2, 2000 by and between Omnipoint
     Communications, Inc., as Tenant, and SIBS, LLC, as Landlord. (Antenna)*

----------
     *Purchser and Seller agree that such leases shall be converted into
subleases under the Lease immediately following conveyance of title to the
Property to Seller on the Closing Date.

<Page>

                                 Schedule 8.1(h)

                                Service Contracts

1.   Letter Agreement dated April 19, 2002, between United Fire Protection Corp.
     and Sotheby's.

2.   Agreement dated September 3, 2002, between AFA Protective Systems, Inc. and
     Sotheby's, Inc.

3.   H.O. Penn Maintenance Service Agreement dated February 1, 2002, between
     H.O. Penn Machinery Co. Inc. and Sotheby's.

4.   Complete Maintenance Agreement for Elevators and Escalators dated March 17,
     2000, between KONE Inc. and Sotheby's.

5.   Medallion Service Agreement for HVAC Equipment dated February 28, 2001,
     between York International and Sotheby's.

6.   Agreement dated December 19, 1999, between Colin Service Systems, Inc. and
     Sotheby's.

<Page>

                           SELECTED SERVICE PROVIDERS

VENDOR                           DESCRIPTION OF SERVICES
--------------------------------------------------------------------------------
AFA FIRE PROTECTION              CENTRAL MONITORING FOR CLASS E FIRE ALARM
                                 SYSTEM
ALLIED EXTERMINATING             EXTERMINATING SERVICE
ALTUS METAL & MARBLE
MAINTENANCE                      COMMON AREA METAL AND MARBLE POLISHING
ASHLAND CHEMICAL                 HVAC WATER TREATMENT
ATLIS PLUMBING                   PLUMBING AND WELDING
BALTIMORE AIRE COIL              COOLING TOWER SERVICE
BRESLAW PLUMBING                 PLUMBING SERVICES
COLIN SERVICE SYSTEMS            CLEANING AND PORTER SERVICES
CUMMINS ALLISON                  OFFICE PAPER SHREDDING - BUILDING WIDE
DO-ALL HVAC                      AIR DISTRIBUTION REPAIR AND MODIFICATIONS
FALSO/BRUCKNER                   RUBBISH REMOVAL
FILTA CLEAN                      GREASE TRAP & STOVE VENT CLEANING FOR
                                 RESTAURANT & 8th FLOOR KITCHEN
FIRE COMM                        BUILDING WIDE FIRE ALARM SYSTEM SERVICE
FISCHBACH ELECTRIC               ELECTRICAL SYSTEM MAINTENANCE AND MODIFICATION
SPARKLE MAINTENANCE              WINDOW CLEANING
HO PENN GENERATOR                ROOFTOP EMERGENCY GENERATOR PREVENTATIVE
                                 MAINTENANCE AND SERVICE
HOBART                           KITCHEN EQUIPMENT AND REPAIR
HONEYWELL                        ELECTRICITY MONITORING SERVICE
INTEGRATE                        HVAC - COOLING TOWER SERVICE CONTRACT
KONE ELEVATOR                    ELEVATOR & ESCALATOR SERVICE
LIEBERT A/C                      COMPUTER ROOM AIR CONDITIONING SERVICE
LUND FIRE SYSTEMS                FIRE EXTINGUISHER SERVICE & RECHARGING
POWERWARE GLOBAL SVC             COMPUTER ROOM ELECTRICITY CONDITIONING SERVICE
PARAMOUNT CONSTRUCTION           BUILD-OUTS AND PROJECT WORK
RC DOLNER                        BUILD-OUTS AND PROJECT WORK
SPIDER, INC.                     POWER SCAFFOLDING SERVICE (WINDOW CLEANING RIG)
TEC                              DIGITAL BUILDING MANAGEMENT SYSTEM SERVICE
UNITED FIRE                      COMPUTER ROOM FIRE ALARM SYSTEM SERVICE
YORK CONTRACT                    SERVICE CONTRACT FOR (2) CHILLERS (BUILDING
                                 WIDE SERVICE)

<Page>

                                 Schedule 8.1(i)

                              Occupancy Agreements

                                    Subleases

1.   Lease Agreement for Foodservice dated as of ________ __, ____, between
     Sotheby's, Inc. and Tentation TPC Special Events Catering, Inc.
     (Restaurant, cafe and other catering services.)*

2.   Agreement of Lease dated as of January _, 2002, between SIBS, LLC, as
     Owner, and Sunrise Liquors & Wines, Inc., d/b/a Aulden Cellars, as Tenant.
     (Wine store.)*

3.   Lease Agreement dated as of October 2, 2000 by and between Omnipoint
     Communications, Inc., as Tenant, and SIBS, LLC, as Landlord. (Antenna)*

----------
     *Purchser and Seller agree that such leases shall be converted into
subleases under the Lease immediately following conveyance of title to the
Property to Seller on the Closing Date.

<Page>

                                 Schedule 8.1(t)

                           Tax Certiorari: Proceedings

Pending tax certiorari proceedings for the Sotheby's Building at 1334-52 York
Avenue, are as follows:

<Table>
<Caption>
                      ACTUAL           ACTUAL        TRANSITIONAL     TRANSITIONAL
                       LAND            TOTAL             LAND            TOTAL
  TAX YEAR          ASSESSMENT       ASSESSMENT       ASSESSMENT       ASSESSMENT
-----------------------------------------------------------------------------------
<S>                    <C>              <C>              <C>              <C>
1999 / 2000            4,500,000        9,000,000        3,960,000        9,038,000
2000 / 2001            4,950,000        9,180,000        4,230,000        9,047,000
2001 / 2002            4,950,000        9,540,000        4,500,000        9,101,000
2002 / 2003            4,950,000        9,540,000         4,770,00        9,208,000
</Table>

Tax Certiorari counsel is Joel R. Marcus, Esq. at Pottish, Freyberg Marcus &
Velazquez, LLP, 641 Lexington Avenue, New York, New York 10022. Tax certiorari
counsel's retainer provides for a contingency fee of 20% of tax savings obtained
by their office in reducing each of the above assessments.

                                        i

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