<PAGE> 1
Exhibit #3
SHAREHOLDERS RIGHTS PLAN AGREEMENT
DATED AS OF
MAY 17, 2000
BETWEEN
BIRCH MOUNTAIN RESOURCES LTD.
AND
MONTREAL TRUST COMPANY OF CANADA
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE 1
INTERPRETATION........................................................................................ -2-
1.1 Definitions.................................................................................. -2-
1.2 Currency..................................................................................... -13-
1.3 Headings..................................................................................... -13-
1.4 References to Agreement...................................................................... -13-
1.5 Grandfathered Person......................................................................... -14-
1.6 Calculation of Number and Percentage of Beneficial Ownership of Outstanding Voting
Shares....................................................................................... -14-
1.7 Acting Jointly or in Concert................................................................. -14-
1.8 Generally Accepted Accounting Principles..................................................... -15-
ARTICLE 2
THE RIGHTS............................................................................................ -15-
2.1 Legend on Common Share Certificates.......................................................... -15-
2.2 Initial Exercise Price, Exercise of Rights and Detachment of Rights.......................... -16-
2.3 Adjustments to Exercise Price and Number of Rights........................................... -18-
2.4 Date on Which Exercise is Effective.......................................................... -23-
2.5 Execution, Authentication, Delivery and Dating of Rights Certificates........................ -23-
2.6 Registration, Registration of Transfer and Exchange.......................................... -23-
2.7 Mutilated, Destroyed, Lost and Stolen Rights Certificates.................................... -24-
2.8 Persons Deemed Owners........................................................................ -25-
2.9 Delivery and Cancellation of Certificates.................................................... -25-
2.10 Agreement of Rights Holders.................................................................. -25-
2.11 Rights Certificate Holder not Deemed a Shareholder........................................... -26-
ARTICLE 3
ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS........................................ -26-
3.1 Flip-in Event................................................................................ -26-
3.2 Exchange Option.............................................................................. -28-
3.3 Fiduciary Duties of the Board of Directors of the Corporation................................ -29-
ARTICLE 4
THE RIGHTS AGENT...................................................................................... -29-
4.1 General...................................................................................... -29-
4.2 Merger or Amalgamation or Change of Name of Rights Agent..................................... -30-
4.3 Duties of Rights Agent....................................................................... -30-
4.4 Change of Rights Agent....................................................................... -32-
ARTICLE 5
MISCELLANEOUS......................................................................................... -32-
5.1 Redemption and Waiver........................................................................ -32-
5.2 Expiration................................................................................... -34-
5.3 Issuance of New Rights Certificates.......................................................... -34-
5.4 Supplements and Amendments................................................................... -34-
5.5 Fractional Rights and Fractional Shares...................................................... -36-
5.6 Rights of Action............................................................................. -36-
5.7 Regulatory Approvals......................................................................... -36-
5.8 Unlawful Distributions....................................................................... -36-
5.9 Notices...................................................................................... -37-
5.10 Costs of Enforcement......................................................................... -38-
5.11 Successors................................................................................... -38-
</TABLE>
-i-
<PAGE> 3
<TABLE>
<S> <C>
5.12 Benefits of this Agreement................................................................... -38-
5.13 Governing Law................................................................................ -38-
5.14 Severability................................................................................. -38-
5.15 Effective Date............................................................................... -38-
5.16 Determinations and Actions by the Board of Directors......................................... -38-
5.17 Time of the Essence.......................................................................... -39-
5.18 Execution in Counterparts.................................................................... -39-
5.19 Language..................................................................................... -39-
</TABLE>
-ii-
<PAGE> 4
THIS SHAREHOLDER RIGHTS PLAN AGREEMENT made as of the 17th day of May, 2000.
BETWEEN:
BIRCH MOUNTAIN RESOURCES LTD., a corporation amalgamated
under the Business Corporations Act (Alberta),
(hereinafter referred to as the "Corporation")
OF THE FIRST PART
- and -
MONTREAL TRUST COMPANY OF CANADA, a trust company
incorporated under the laws of Canada,
(hereinafter referred to as the "Rights Agent")
OF THE SECOND PART
WHEREAS the Board of Directors has determined that it is in the best interests
of the Corporation and all of its shareholders to adopt a shareholder protection
rights plan;
AND WHEREAS in order to implement the adoption of a shareholder protection
rights plan the Board of Directors has:
1. authorized the issuance and distribution of one Right in respect of
each Common Share outstanding at the Record Time; and
2. authorized the issuance of one Right in respect of each Common Share
issued after the Record Time and prior to the earlier of the Separation
Time and the Expiration Time;
AND WHEREAS each Right entitles the holder thereof, after the Separation Time,
to purchase securities or other assets 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, the exercise of Rights and other matters referred to
herein;
NOW THEREFORE, in consideration of the premises and the respective covenants and
agreements set forth herein, the parties hereby agree as follows:
-1-
<PAGE> 5
ARTICLE 1
INTERPRETATION
1.1 DEFINITIONS
In this Agreement:
a. "ACQUIRING PERSON" means any Person who is the Beneficial
Owner of 20% or more of the outstanding Voting Shares;
provided, however, that the term "ACQUIRING PERSON" shall not
include:
i. the 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
any one or more Voting Share Reductions, Permitted
Bid Acquisitions, Exempt Acquisitions or Pro Rata
Acquisitions; provided that if a Person shall become
the Beneficial Owner of 20% or more of the
outstanding Voting Shares by reason of any one or
more Voting Share Reductions, Permitted Bid
Acquisitions, Exempt Acquisitions or Pro Rata
Acquisitions and, if thereafter, such Person, while
such Person is the Beneficial Owner of 20% or more of
the outstanding Voting Shares, becomes the Beneficial
Owner of additional Voting Shares which result in an
increase of such Person's Beneficial Ownership of
Voting Shares by more than 1% of the number of such
Voting Shares outstanding as at the time of the
acquisition (other than pursuant to one or more
Permitted Bid Acquisitions, Exempt Acquisitions or
Pro Rata Acquisitions), then, as of the date such
Person becomes the Beneficial Owner of such
additional outstanding Voting Shares, such Person
shall be an "Acquiring Person";
iii. for the period of ten days after the Disqualification
Date, 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 paragraph 1.1(d)(viii) solely because such
Person makes or proposes to make a Take-over Bid
alone or acting jointly or in concert with any other
Person; or
iv. an underwriter or member of a banking or selling
group that becomes the Beneficial Owner of 20% or
more of the outstanding Voting Shares in connection
with a bona fide distribution to the public of
securities;
b. "AFFILIATE", when used to indicate a relationship with a
specified Person, means a Person that, directly or indirectly
(including through one or more intermediaries), controls, is
controlled by or is under common control with, such specified
Person;
c. "ASSOCIATE", when used to indicate a relationship with a
specified Person, means:
i. any body corporate of which such Person owns at law
or in equity shares or securities currently
convertible into or exchangeable for shares carrying
more than 10% of the voting rights exercisable with
respect to the election of directors under all
circumstances or by reason of the occurrence of an
event that has occurred and is continuing, or a
currently exercisable option or right to purchase
such shares or
-2-
<PAGE> 6
such convertible or exchangeable securities, and with
whom such Person is acting jointly or in concert;
ii. any partner of such Person;
iii. any trust or estate in which such Person has a
substantial beneficial interest or as to which such
Person serves as trustee or in a similar capacity;
iv. a spouse of such Person or any Person of the same or
opposite sex with whom such Person is living in a
conjugal relationship outside marriage or a child of
such Person; and
v. any relative of such Person or of a spouse or other
Person mentioned in paragraph 1.1(c)(iv), if that
relative has the same residence as such Person;
d. 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 is the direct or indirect
owner at law or in equity and, for the purpose of
this paragraph i. a Person shall be deemed to be the
Beneficial Owner of all securities:
(1) owned by a partnership of which the Person
is a partner;
(2) owned jointly or in common with others; and
(3) which are directly or indirectly owned at
law or in equity by an Associate of such
Person;
ii. any securities as to which such Person or any or of
such Person's Affiliates or Associates has or shares,
directly or indirectly:
(1) the right to acquire (whether such right is
exercisable immediately or after the lapse
or passage of time and whether or not on
condition or the occurrence of any
contingency or otherwise) pursuant to any
agreement, arrangement, pledge or
understanding (whether or not in writing)
(other than customary agreements with and
between underwriters and banking group or
selling group members with respect to a bona
fide public offering of securities and other
than pledges of securities in the ordinary
course of business that meet all of the
conditions specified in Rule 13d-3(d)(3)
under the 1934 Exchange Act other than the
condition in Rule 13d-3(d)(3)(ii) and other
than a pledge agreement with a registered
securities dealer relating to the extension
of credit for purchases of securities on
margin in the ordinary course of the
dealer's business), or upon the exercise of
any conversion right, exchange right,
purchase right (other than a Right), warrant
or option, or otherwise; or
(2) the right to vote (whether such right is
exercisable immediately or after the lapse
or passage of time and whether or not on
condition or the occurrence of any
contingency or otherwise), pursuant to any
agreement, arrangement,
-3-
<PAGE> 7
pledge or understanding (whether or not in
writing), or otherwise (other than pledges
of securities in the ordinary course of
business that meet all of the circumstances
specified in Rule 13-3(d)(3) under the 1934
Exchange Act other than the condition in
Rule 13d-3(d)(3)(ii) and other than a pledge
agreement with a registered securities
dealer relating to the extension of credit
for purchases of securities on margin in the
ordinary course of the dealer's business);
and
iii. any securities which are Beneficially Owned within
the meaning of paragraphs (i) or (ii) of this
definition by any other Person with which such Person
or any of such Person's Affiliates or Associates is
acting jointly or in concert or has any agreement,
arrangement, or understanding, other than a pledge,
(whether or not in writing) (other than customary
agreements with and between underwriters and banking
group or selling group members with respect to a bona
fide public offering of such securities) with respect
to or for the purpose of acquiring, holding, voting
or disposing of any Voting Shares;
provided, however, that a Person shall not be deemed the
"BENEFICIAL OWNER" or to have "BENEFICIAL OWNERSHIP" of, or to
"BENEFICIALLY OWN", any security:
iv. solely because such security has been deposited or
tendered pursuant to any Takeover Bid made by such
Person, any of such Person's Affiliates or Associates
or any other Person referred to in paragraph (iii) or
(iv) of this definition until such deposited or
tendered security has been unconditionally accepted
for payment or exchange or taken up and paid for,
whichever shall first occur;
v. solely because such Person, any of such Person's
Affiliates or Associates or any other Person referred
to in paragraph (iii) of this definition has or
shares the power to vote or direct the voting of such
security pursuant to a revocable proxy given in
response to a public proxy solicitation;
vi. solely because such Person, any of such Person's
Affiliates or Associates or any other Person referred
to in paragraph (iii) of this definition has or
shares the power to vote or direct the voting of such
security in connection with or in order to
participate in a public proxy solicitation;
vii. solely because any such Person, any of such Person's
Affiliates or Associates or any other Person referred
to in paragraph (iii) of this definition has an
agreement, arrangement or understanding (whether or
not in writing) with respect to a shareholder
proposal or a matter or matters to come before a
meeting of shareholders, including the election of
directors;
viii. solely because such Person, any of such Person's
Affiliates or Associates or any other Person referred
to in paragraph (iii) of this definition holds or
exercises voting or despositive power over such
security provided that:
(1) the ordinary business of such Person (the
"INVESTMENT MANAGER") includes the
management of investment funds for others
(which others, for greater certainty, may
include and be limited to one or more
employee benefit plans or pension plans) and
such voting or despositive power over such
-4-
<PAGE> 8
security is held in the ordinary course of
such business in the performance of the
duties of the Investment Manager for the
account of any other Person (the "CLIENT");
(2) such Person (the "TRUST COMPANY") is
licensed to carry on the business of a trust
company under applicable law and, as such,
acts as trustee or administrator or in a
similar capacity in relation to the estates
of deceased or incompetent Persons (each an
"ESTATE ACCOUNT") or in relation to other
accounts (each an "OTHER ACCOUNT") and holds
such voting or despositive power over such
security in the ordinary course of such
duties for the estate of any such deceased
or incompetent Person or for such other
accounts; and
(3) the Investment Manager or the Trust Company,
as the case may be, does not make or propose
to make a Take-over Bid by means of a
Take-over Bid circular or any other means,
other than an Offer to Acquire Voting Shares
or other securities by means of a
distribution by the Corporation or by means
of ordinary market transactions (including
prearranged trades) executed through the
facilities of a stock exchange or organized
over-the-counter market, alone or acting
jointly or in concert with any other Person;
ix. solely because such Person is a Client of the same
Investment Manager as another Person on whose account
the Investment Manager holds or exercises voting or
despositive power over such security, or solely
because such Person is an Estate Account or an Other
Account of the same Trust Company as another Person
on whose account the Trust Company holds or exercises
voting or despositive power over such security;
x. solely because such Person, any of such Person's
Affiliates or Associates or any other Person referred
to in paragraph (iii) of this definition would be the
Beneficial Owner, as defined in paragraphs (i) to
(iii) of this definition, of such security provided
that such Person is:
(1) a Crown agent or agency; or
(2) the administrator or the trustee of one or
more pension funds or plans registered under
the laws of Canada or any Province thereof;
and such securities are held solely for the purposes
of its activity as a Person described in (1) or (2)
above, provided that such Person (1)(a) is precluded
by its governing legislation from owning more than
30% of the shares of any company including the
Corporation or (b) where not so precluded, is
generally so precluded and in such event does not own
more than 30% of the shares of the Corporation; (2)
holds its Voting Shares for investment purposes; and
(3) is not acting jointly or in concert with any
other Person. For greater certainty, and without
limitation to the generality of section 5.14, if for
any reason the existence of this paragraph (x) of
this definition is judicially determined to affect
the validity or enforceability of this Agreement, it
is the expressed desire of the parties to this
Agreement that this paragraph (x) of this definition
be severed from the balance of this Agreement and
that in such circumstances the provisions of
subsection 5.1(e) shall apply mutatis
-5-
<PAGE> 9
mutandis and the reference therein to the ten days
shall be read to be 60 days or such later date as the
Board of Directors may determine;
e. "BOARD OF DIRECTORS" means the board of directors of the
Corporation or any duly constituted and empowered committee
thereof;
f. "BUSINESS CORPORATIONS ACT" means the Business Corporations
Act (Alberta), S.A. 1981, c. B-15, as amended from time to
time, and the regulations made thereunder, as in effect on the
date of this Agreement or as the same may be amended,
re-enacted or replaced by any comparable or successor laws or
regulations thereto;
g. "BUSINESS DAY" means any day other than a Saturday, Sunday or
a day on which banking institutions in Calgary, Alberta are
authorized or obligated by law to close;
h. "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 on such date;
i. "CLOSE OF BUSINESS" on any given date means the time on such
date (or, if such date is not a Business Day, the time on the
next succeeding Business Day) at which the office of the
principal transfer agent for the Common Shares (or, after the
Separation Time, the office of the Rights Agent) is closed to
the public;
j. "COMMON SHARES" means the common shares without par value in
the capital of the Corporation and any other shares in the
capital of the Corporation into which such shares may be
subdivided, consolidated, reclassified or changed; provided,
however, that "COMMON SHARES", when used with reference to any
Person other than the Corporation, shall mean the class or
classes of shares (or similar equity interest) with the
greatest per share voting power entitled to vote generally in
the election of all directors of such other Person or the
equity securities or other equity interest having power
(whether or not exercised) to control or direct the management
of such other Person; if such other Person is a Subsidiary of
another Person, "such other Person" as used herein shall mean
the Person or Persons which ultimately control such
first-mentioned Person;
k. "COMPETING PERMITTED BID" means a Take-over Bid made while
another Permitted Bid is in existence and that satisfies all
of the provisions of a Permitted Bid except that the condition
set forth in clause 1.1(ag)(ii)(1)(a) may provide that the
Voting Shares may be taken up or paid for on a date which is
not earlier than the later of 21 days after the date of the
Take-over Bid or the earliest date on which Voting Shares may
be taken up or paid for under any other Permitted Bid that is
then in existence for the Voting Shares;
l. a corporation shall be deemed to be "CONTROLLED" by another
Person or Persons if:
i. securities entitled to vote in the election of
directors carrying more than 50% of the votes for the
election of directors are held, directly or
indirectly, by or for the benefit of the other Person
or Persons; and
ii. the votes carried by such securities are entitled, if
exercised, to elect a majority of the board of
directors of such corporation;
-6-
<PAGE> 10
and "CONTROL", "CONTROLS" and "CONTROLLING" shall be
interpreted accordingly;
m. "CO-RIGHTS AGENTS" has the meaning ascribed thereto in
subsection 4.1(a);
n. "DISQUALIFICATION DATE" means the first date of public
announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to
Section 141 or 142 of the Securities Act (Alberta), Section
111 of the Securities Act (British Columbia) or Section 13(d)
under the 1934 Exchange Act) that any Person has made or
proposes to make a Take-over Bid alone or acting jointly or in
concert with any other Person;
o. "DIVIDEND REINVESTMENT ACQUISITION" means an acquisition of
Voting Shares pursuant to a Dividend Reinvestment Plan;
p. "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 Common
Shares;
q. "ELECTION TO EXERCISE" has the meaning ascribed thereto in
subsection 2.2(d);
r. "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(d) or
5.1(e) or which was made on or prior to the date of this
Agreement;
s. "EXERCISE PRICE" means the price at which a holder may
purchase the securities issuable upon exercise of one whole
Right and, until adjustment thereof in accordance with the
terms hereof, the Exercise Price shall be an amount equal to
one-half of the Market Price for the Common Shares of the
Corporation at the time the Right is exercised;
t. "EXPANSION FACTOR" has the meaning ascribed thereto in
subsection 2.3(a);
u. "EXPIRATION TIME" means the earlier of:
i. the Termination Time; or
ii. the close of business on May 17, 2005;
v. "FLIP-IN EVENT" means a transaction in or pursuant to which
any Person becomes or may become an Acquiring Person;
w. "HOLDER" has the meaning ascribed thereto in section 2.8;
-7-
<PAGE> 11
x. "INDEPENDENT SHAREHOLDERS" means holders of Voting Shares
other than:
i. any Acquiring Person;
ii. any Offeror;
iii. any Associate or Affiliate of any Acquiring Person or
Offeror;
iv. any Person acting jointly or in concert with any
Acquiring Person, any Offeror or any Associate or
Affiliate of any Acquiring Person or Offeror; and
v. any employee benefit plan, deferred profit sharing
plan, stock participation plan or trust for the
benefit of employees of the Corporation or any
Subsidiary of the Corporation but excluding in any
event a plan or trust in respect of which the
employee directs the manner in which Voting Shares
are to be voted and directs whether the Voting Shares
are to be tendered to a Take-over Bid;
y. "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 twenty (20) consecutive Trading Days
through and including the Trading Day immediately preceding
such date; provided, however, that if an event analogous to
any of the events described in section 2.3 shall have caused
the closing price in respect of any Trading Day used to
determine the Market Price 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 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:
i. the closing board lot sale price or, if no such sale
takes place on such date, the average of the closing
bid and asked prices, as reported by the principal
stock exchange (as determined by the Board of
Directors) on which such securities are listed or
admitted to trading; or
ii. 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 stock exchange, the closing board lot
sale price or, if no such sale takes place on such
date, the average of the closing bid and asked
prices, as reported by another stock exchange (as
determined by the Board of Directors) on which such
securities are listed or admitted to trading; or
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 stock exchange, the last quoted
price, or if not so quoted, the average of the high
bid and low asked prices for each share of such
securities in the over-the-counter market, as
reported by any reporting system then in use (as
determined by the Board of Directors); or
iv. if for any reason none of such prices is available on
such day or the securities are not listed or admitted
to trading on a Canadian stock exchange or a national
United
-8-
<PAGE> 12
States securities exchange or quoted by any such
reporting system, the average of the closing bid and
asked prices as furnished by a professional market
maker making a market in the securities selected by
the Board of Directors;
provided, however, that if for any reason none of such prices
is available on any such date, the closing price per share of
such securities on such date shall mean the fair value per
share of such securities on such date as determined in good
faith by the Board of Directors, after consultation with a
nationally or internationally recognized Canadian investment
dealer or investment banker with respect to the fair value per
share of such securities. The Market Price shall be expressed
in Canadian dollars and, if initially determined in respect of
any day forming part of the twenty (20) consecutive Trading
Day period in United States dollars, such amount shall be
translated into Canadian dollars at the Canadian Dollar
Equivalent thereof on the relevant Trading Day.
Notwithstanding the foregoing, where the Board of Directors is
satisfied that the Market Price of securities as determined
herein was affected by an anticipated or actual Take-over Bid
or by improper manipulation, the Board of Directors may,
acting in good faith, determine the Market Price of
securities, such determination to be based on a finding as to
the price at which a holder of securities of that class could
reasonably have expected to dispose of his securities
immediately prior to the relevant date excluding any change in
price reasonably attributable to the anticipated or actual
Take-over Bid or to the improper manipulation;
z. "1933 SECURITIES ACT" means the Securities Act of 1933 of the
United States, as amended, and the rules and regulations
thereunder, as in effect on the date of this Agreement or as
the same may be amended, re-enacted or replaced by any
comparable or successor laws or regulations thereto;
aa. "1934 EXCHANGE ACT" means the Securities Exchange Act of 1934
of the United States, as amended, and the rules and
regulations thereunder, as in effect on the date of this
Agreement or as the same may be amended, re-enacted or
replaced by any comparable or successor laws or regulations
thereto;
ab. "NOMINEE" has the meaning ascribed thereto in subsection
2.2(c);
ac. "OFFER TO ACQUIRE" shall include:
i. an offer to purchase, or a solicitation of an offer
to sell, Voting Shares, and
ii. an acceptance of an offer to sell Voting Shares,
whether or not such offer to sell has been solicited,
or any combination thereof, and the Person accepting an offer
to sell shall be deemed to be making an Offer to Acquire to
the Person that made the offer to sell;
ad. "OFFEROR" means a Person who has announced an intention to
make or who has made a Take- over Bid;
ae. "OFFEROR'S SECURITIES" means the Voting Shares Beneficially
Owned by an Offeror on the date of an Offer to Acquire;
-9-
<PAGE> 13
af. "ORDINARY COURSE DIVIDENDS" means cash dividends paid in any
fiscal year of the Corporation to the extent that such cash
dividends, in the aggregate, do not exceed the greatest of:
i. 200% of the aggregate amount of cash dividends
declared payable by the Corporation on its Common
Shares in its immediately preceding fiscal year;
ii. 300% of the arithmetic mean of the aggregate amounts
of cash dividends declared payable by the Corporation
on its Common Shares in its three immediately
preceding fiscal years; and
iii. 100% of the aggregate consolidated net income of the
Corporation, before extraordinary items, for its
immediately preceding fiscal year;
ag. "PERMITTED BID" means a Take-over Bid made by an Offeror by
way of a Take-over Bid circular which also complies with the
following additional provisions:
i. the Take-over Bid is made for all of the Voting
Shares (other than those Voting Shares owned by the
Offeror) by sending a Take-over Bid circular to all
holders of record of Voting Shares wherever resident
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
thereunder shall be subject to, an irrevocable and
unqualified provision that:
(1) 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 90th day following the date of
the Take-over Bid; and
(b) if less than 50% of the Voting
Shares held by Independent
Shareholders have been deposited
pursuant to the Take-over Bid and
not withdrawn;
(2) unless the Take-over Bid is withdrawn in
accordance with applicable law, Voting
Shares may be deposited pursuant to such
Take-over Bid at any time during the period
described in clause (ii)(1)(a) of this
definition and that any Voting Shares
deposited pursuant to the Take-over Bid may
be withdrawn until taken up and paid for;
and
(3) if more than 50% of the voting Shares held
by Independent Shareholders have been
deposited pursuant to a Take-over Bid and
not withdrawn, 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;
-10-
<PAGE> 14
ah. "PERMITTED BID ACQUISITION" means an acquisition made pursuant
to a Permitted Bid or a Competing Permitted Bid;
ai. "PERSON" shall include any individual, firm, partnership,
association, trust, trustee, executor, administrator, legal
personal representative, body corporate, corporation,
unincorporated organization, syndicate or other entity;
aj. "PRO RATA ACQUISITION" means an acquisition by a Person of
Beneficial Ownership of Voting Shares as a result of: a
Dividend Reinvestment Acquisition; a stock dividend, a stock
split or other event pursuant to which a Person becomes
Beneficial Owner of Voting Shares on the same pro rata basis
as all other holders of Voting Shares; the acquisition or
exercise by such Person of rights to purchase Voting Shares
distributed to such Person in the course of a distribution to
all holders of Voting Shares pursuant to a bona fide rights
offering or pursuant to a prospectus; or a distribution to the
public of Voting Shares or securities convertible into or
exchangeable for Voting Shares (and the conversion or exchange
of such convertible or exchangeable securities), made pursuant
to a prospectus or a distribution 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;
ak. "RECORD TIME" means 5:00 p.m. (Calgary time) on May 17, 2000;
al. "REDEMPTION PRICE" has the meaning ascribed thereto in
subsection 5.1(a);
am. "RIGHT" means a right to purchase a Common Share, upon the
terms and subject to the conditions set forth in this
Agreement;
an. "RIGHTS CERTIFICATE" has the meaning ascribed thereto in
subsection 2.2(c) and shall be in substantially the form of
Exhibit A to this Agreement;
ao. "RIGHTS REGISTER" has the meaning ascribed thereto in
subsection 2.6(a);
ap. "SECURITIES ACT (ALBERTA)" shall mean the Securities Act, S.A.
1981, c. S-6.1, as amended, and the regulations thereunder, as
in effect on the date of this Agreement or as the same may be
amended, re-enacted or replaced by any comparable or successor
laws or regulations thereto;
aq. "SECURITIES ACT (BRITISH COLUMBIA)" shall mean the Securities
Act, R.S.B.C. 1996, c.418, as amended, and the regulations
thereunder, as in effect on the date of this Agreement or as
the same may be amended, re-enacted or replaced by any
comparable or successor laws or regulations thereto;
ar. "SEPARATION TIME" means the close of business on the tenth
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
-11-
<PAGE> 15
commence a Take-over Bid (other than a Permitted Bid
or Competing Permitted Bid);
or such earlier or later time as may be determined by the
Board of Directors, provided that:
(1) if any Take-over Bid referred to in
paragraph (ii) of this definition expires,
or is canceled, terminated or otherwise
withdrawn prior to the Separation Time, such
Take-over Bid shall be deemed, for the
purposes of this definition, never to have
been made; and
(2) if the Board of Directors determines
pursuant to subsection 5.1(d) or (e) to
waive the application of section 3.1 to a
Flip-in Event, the Separation Time in
respect of such Flip-in Event shall be
deemed never to have occurred;
as. "SPECIAL MEETING" means a special meeting of the holders of
Voting Shares called by the Board of Directors for the purpose
of:
i. ratifying the distribution and the continued
existence of the Rights in accordance with subsection
5.4(f); or
ii. approving an amendment, variation or rescission of
any of the provisions of this Agreement pursuant to
subsections 5.4(b), 5.4(c) or 5.4(e);
at. "STOCK ACQUISITION DATE" means the first date of public
announcement (which, for purposes of this definition, shall
include, without limitation, a report filed pursuant to
Section 141 of the Securities Act (Alberta), Section 111 of
the Securities Act (British Columbia) or Section 13(d) of the
1934 Exchange Act) by the Corporation or an Acquiring Person
indicating that a Person has become an Acquiring Person;
au. a corporation shall be deemed to be a "SUBSIDIARY" of another
corporation if:
i. it is controlled by:
(1) that other; or
(2) that other and one or more corporations each
of which is controlled by that other; or
(3) 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;
av. "TAKE-OVER BID" means an Offer to Acquire Voting Shares or
other securities if, assuming the Voting Shares or other
securities subject to the Offer to Acquire are acquired at the
date of the Offer to Acquire by the Person making the Offer to
Acquire, such Voting Shares (including all Voting Shares that
may be acquired upon exercise of all rights of conversion,
exchange or purchase attaching to the other securities)
together with the Offeror's Securities would constitute in the
aggregate 20% or more of the outstanding Voting Shares at the
date of the Offer to Acquire;
-12-
<PAGE> 16
aw. "TERMINATION TIME" means the time at which the right to
exercise Rights shall terminate pursuant to section 3.2 or
5.1;
ax. "TRADING DAY", when used with respect to any securities, means
a day on which the principal Canadian stock exchange or U.S.
securities exchange on which such securities are listed or
admitted to trading and on which the greatest volume of
transactions in such securities has occurred in the previous
month is open for the transaction of business or, if the
securities are not listed or admitted to trading on any
Canadian stock exchange or U.S. securities exchange, a
Business Day;
ay. "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
Canadian dollar into United States dollars, such
rate, and
ii. in any other case, the rate for such date for the
conversion of one Canadian dollar into United States
dollars which is calculated in the manner which shall
be determined by the Board of Directors from time to
time acting in good faith;
az. "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 U.S. - Canadian Exchange Rate in effect on such
date;
ba. "VOTING SHARES" means the Common Shares and any other shares
of capital stock or voting interests of the Corporation
entitled to vote generally in the election of all directors;
and
bb. "VOTING SHARE REDUCTION" means an acquisition or redemption by
the Corporation or a Subsidiary of the Corporation of Voting
Shares which, by reducing the number of Voting Shares
outstanding or which may be voted, increases the proportionate
number of Voting Shares Beneficially Owned by such Person to
15% or more of the outstanding Voting Shares.
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, paragraphs,
subparagraphs and clauses 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 REFERENCES TO AGREEMENT
References to "this Agreement", "hereto", "herein", "hereby", "hereunder",
"hereof" and similar expressions refer to this Agreement, as amended or
supplemented from time to time, and not to any particular Article, section,
subsection, paragraph, subparagraph or other provision hereof and include any
and every instrument supplemental or ancillary hereto. Unless the context
otherwise requires, references in this Agreement to an Article, section,
subsection, paragraph, subparagraph, clause or Exhibit by number, letter or
otherwise refer
-13-
<PAGE> 17
to the Article, section, subsection, paragraph, subparagraph, clause or Exhibit,
respectively, bearing that designation in this Agreement
1.5 GRANDFATHERED PERSON
For the purposes of determining whether a Person is an Acquiring Person and
interpreting the definition of "Acquiring Person", a Person shall not be and
shall not be deemed to be an Acquiring Person if such Person (a "GRANDFATHERED
PERSON") is the Beneficial Owner of more than 20% of the outstanding Voting
Shares 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 constituting 1% or more of the
outstanding Voting Shares otherwise than pursuant to one or more Permitted Bid
Acquisitions, Exempt Acquisitions or Pro Rata Acquisitions, provided further,
however, that such Grandfathered Person shall not become an Acquiring Person as
a result of one or more Voting Share Reductions; and provided further that, if
this exception shall cease to be applicable to a Grandfathered Person as
aforesaid, such a Grandfathered Person shall be and shall be deemed to be an
Acquiring Person as at and from the time that this exception shall not be so
applicable.
1.6 CALCULATION OF NUMBER AND PERCENTAGE OF BENEFICIAL OWNERSHIP OF
OUTSTANDING VOTING SHARES
For purposes of this Agreement:
a. in determining the percentage of outstanding Voting Shares
Beneficially Owned by any Person, all unissued Voting Shares
as to which such Person is deemed the Beneficial Owner shall
be deemed to be outstanding; and
b. the percentage of outstanding Voting Shares Beneficially Owned
by any Person shall be and be deemed to be the product
determined by the formula:
100 x A
-
B
where:
A = the number of votes for the election of
all directors generally attaching to the
outstanding 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.
1.7 ACTING JOINTLY OR IN CONCERT
For the purposes of this Agreement, whether Persons are acting jointly or in
concert is a question of fact in each circumstance. However, a Person shall be
deemed to be acting jointly or in concert with another Person if such Person
would be deemed to be acting jointly or in concert with such other Person for
purposes of section 131.1 of the Securities Act (Alberta) or section 96 of the
Securities Act (British Columbia), as such sections exist on the date of this
Agreement. Notwithstanding the foregoing, and for greater certainty, the phrase,
"acting jointly or in concert", wherever used in this Agreement, shall not
include conduct:
a. unrelated to Voting Shares of the Corporation; or
-14-
<PAGE> 18
b. consisting solely of:
i. voting or directing the vote of securities of the
Corporation pursuant to a revocable proxy given in
response to a public proxy solicitation;
ii. voting or directing the vote of securities of the
Corporation in connection with or in order to
participate in a public proxy solicitation made or to
be made; or
iii. having an agreement, arrangement or understanding
with respect to a shareholder proposal or a matter or
matters to come before a meeting of shareholders,
including the election of directors.
1.8 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 required to be
determined, or any consolidation or other accounting computation is required to
be made for the purpose of this Agreement or any document, such determination or
calculation shall, to the extent applicable and except as otherwise specified
herein or as otherwise agreed in writing by the parties, be made in accordance
with generally accepted accounting principles applied on a consistent basis.
ARTICLE 2
THE RIGHTS
2.1 LEGEND ON COMMON SHARE CERTIFICATES
Certificates representing Common Shares issued after the Record Time but prior
to the earlier of the Separation Time and the Expiration Time shall evidence, in
addition to the Common Shares, one Right for each Common Share evidenced thereby
and shall have impressed on, printed on, written on or otherwise affixed to them
the following legend:
Until the Separation Time (as defined in the Rights Agreement referred
to below), this certificate also evidences and entitles the holder
hereof to certain Rights as set forth in a Shareholder Rights Plan
Agreement, dated as of May 17, 2000 (the "Rights Agreement"), between
Birch Mountain Resources Ltd. (the "Corporation") and Montreal Trust
Company of Canada, as rights agent, as amended from time to time, the
terms of which are incorporated herein by reference and a copy of which
may be inspected during normal business hours at the principal office
of the Corporation. Under certain circumstances as set out in the
Rights Agreement, the Rights may be amended, redeemed, may expire, may
become null and void or may be evidenced by separate certificates and
no longer evidenced by this certificate. The Corporation will mail or
arrange for the mailing of a copy of the Rights Agreement to the holder
of this certificate without charge as soon as practicable after the
receipt of a written request therefor.
-15-
<PAGE> 19
Certificates representing Common Shares that are issued and outstanding at the
Record Time shall also evidence one Right for each Common Share evidenced
thereby, notwithstanding the absence of the foregoing legend, until the earlier
of the Separation Time and the Expiration Time.
2.2 INITIAL EXERCISE PRICE, EXERCISE OF RIGHTS AND 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, for the
Exercise Price, one Common Share. 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 and will be transferable
only together with, and will be transferred by a
transfer of, such associated Common Share.
c. From and after the Separation Time and prior to the Expiration
Time:
i. the Rights shall be exercisable; and
ii. the registration and transfer of the Rights shall be
separate from and independent of Common Shares.
Immediately following the Separation Time, the Corporation
will prepare and the Rights Agent will mail or arrange to be
mailed to each holder of record of Rights 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):
(1) a rights certificate (the "RIGHTS
CERTIFICATE") representing the number of
Rights held by such holder at the Separation
Time and having such markers 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,
regulation or judicial or administrative
order 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
(2) a disclosure statement describing the
Rights;
provided that a Nominee shall be sent the materials provided
for in subparagraphs (1) and (2) above in respect of all
Common Shares held of record by it which are not Beneficially
Owned by an Acquiring Person.
-16-
<PAGE> 20
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 at its principal office the
Rights Certificate evidencing such Rights together with:
i. an election to exercise such Rights (an "ELECTION TO
EXERCISE") substantially in the form attached to the
Rights Certificate duly 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
ii. payment in cash or by certified cheque, bank 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.
e. Upon receipt of a Rights Certificate, which is accompanied by
a completed Election to Exercise that does not indicate that
such Right is null and void as provided by subsection 3.1(b)
and payment as set forth in subsection 2.2(d), the Rights
Agent (unless otherwise instructed by the Corporation if the
Corporation is of the opinion that the Rights cannot be
exercised in accordance with this Agreement) will thereupon
immediately:
i. requisition from the transfer agent for the Common
Shares 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. after receipt of such certificate, deliver the same
to or upon the order of the registered holder of such
Rights Certificate, registered in such name or names
as may be designated by such holder,
iii. when appropriate, requisition from the Corporation
the amount of cash to be paid in lieu of issuing
fractional Common Shares,
iv. when appropriate, after receipt of such cash, deliver
the same to or to the order of the registered holder
of the Rights Certificate, and
v. tender to the Corporation all payments received on
exercise of the Rights.
f. If 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 section 5.5) 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 securities delivered
upon exercise of Rights shall, at the time of
delivery of the certificates for such securities
(subject to payment of the Exercise Price), be duly
-17-
<PAGE> 21
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 any applicable requirements
of the Business Corporations Act, the Securities Act
(Alberta), the Securities Act (British Columbia) and
any other applicable law in connection with the
issuance and delivery of the Rights, the Rights
Certificates and the issuance of any securities upon
exercise of Rights;
iii. use reasonable efforts to cause all securities issued
upon exercise of Rights to be listed on the stock
exchanges on which the Common Shares were traded
immediately prior to the Stock Acquisition Date;
iv. cause to be reserved and kept available out of its
authorized and unissued classes of securities, the
number of securities that, as provided in this
Agreement, will from time to time be sufficient to
permit the exercise in full of all outstanding
Rights;
v. pay when due and payable any and all Canadian and, if
applicable, United States, federal, provincial and
state 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 form Common Shares,
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 securities
in a name other than that of the holder of the Rights
being transferred or exercised; and
vi. after the Separation Time 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 AND 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. If Corporation shall at any time after the Record Time and
prior to the Expiration Time:
i. declare or pay a dividend on its Common Shares
payable in Common Shares (or other securities
exchangeable for or convertible into or giving a
right to acquire Common Shares) other than pursuant
to any optional stock dividend program;
ii. subdivide or change the outstanding Common Shares
into a greater number of Common Shares;
iii. combine or change the outstanding Common Shares into
a smaller number of Common Shares; or
-18-
<PAGE> 22
iv. issue any Common Shares (or other securities
exchangeable for or convertible into or giving a
right to acquire Common Shares) in respect of, in
lieu of or in exchange for existing Common Shares;
except as otherwise provided in this section 2.3, the Exercise
Price and the number of Rights outstanding, or, if the payment
or effective date therefor shall occur after the Separation
Time, the securities purchasable upon exercise of Rights shall
be adjusted as of the payment or effective date such that:
(1) if the Exercise Price and number of Rights
outstanding are to be adjusted;
(a) the Exercise Price in effect after
such adjustment will be equal to the
Exercise Price in effect immediately
prior to such adjustment divided by
the number of Common Shares (or
other capital stock) (the "EXPANSION
FACTOR") that a holder of one Common
Share immediately prior to such
dividend, subdivision, change,
combination or issuance would hold
thereafter as a result thereof; and
(b) 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, combination or issuance, so that
each such Common Share (or other capital
stock) will have exactly one Right
associated with it; and
(2) 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,
combination or issuance would hold
thereafter as a result thereof.
If after the Record Time and prior to the Expiration Time the
Corporation shall issue any securities other than Common
Shares in a transaction of a type described in paragraphs
2.3(a)(i) or (iv), such securities 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.
b. If 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
ninety (90) 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
-19-
<PAGE> 23
Price to be in effect after such record date shall be adjusted
to that price 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 to be so
offered (and/or the aggregate initial conversion,
exchange or exercise price of the convertible or
exchangeable securities or rights so to be offered,
including the price required to be paid to purchase
such convertible or exchangeable securities or
rights) would purchase at such Market Price per
Common Share; and
ii. the denominator of which shall be the number of
Common Shares outstanding on such record date, plus
the number of additional Common Shares to be offered
for subscription or purchase (or into which the
convertible or exchangeable securities or rights so
to be offered are initially convertible, exchangeable
or exercisable).
If 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 the Rights. Such adjustment shall be made
successively whenever such a record date is fixed, and in the
event that such rights or warrants are not so issued, the
Exercise Price shall be adjusted to be the Exercise Price
which would then be in effect if such record date had not been
fixed.
For purposes of this Agreement, the granting of the right to
purchase Common Shares (whether from treasury shares or
otherwise) pursuant to any dividend or interest reinvestment
plan and/or any Common Share purchase plan providing for the
reinvestment of dividends or interest payable on securities of
the Corporation and/or the investment of periodic optional
payments and/or employee benefit, stock option or similar
plans (so long as such right to purchase is in no case
evidenced by the delivery of rights or warrants) shall not be
deemed to constitute an issue of rights or warrants by the
Corporation; provided, however, that, in the case of any
Dividend Reinvestment Plan, the right to purchase Common
Shares is at a price per share of not less than 90% of the
current market price per share (determined as provided in such
plans) of the Common Shares.
c. If the Corporation shall at any time after the Record Time and
prior to the Separation Time fix a record date for a
distribution to all holders of Common Shares (including any
such distribution made in connection with a merger or
amalgamation in which the Corporation is the continuing
corporation) of evidences of indebtedness, cash (other than an
ordinary course dividend or a dividend referred to in
paragraph 2.3(a)(i)), assets, rights 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),
-20-
<PAGE> 24
on a per share basis, of the portion of the cash,
assets, evidences of indebtedness, rights, options or
warrants so to be distributed; and
ii. the denominator of which shall be such Market Price
per Common Share.
Such adjustments shall be made successively whenever such a
record date is fixed, and in the event that such a
distribution is not so made, the Exercise Price shall be
adjusted to be the Exercise Price which would have been in
effect if such record date had not been fixed.
d. Each adjustment made pursuant to this section 2.3 shall be
made as of:
i. the payment or effective date for the applicable
dividend, subdivision, change, combination or
issuance, in the case of an adjustment made pursuant
to subsection (a) above; and
ii. the record date for the applicable distribution, in
the case of an adjustment made pursuant to subsection
(b) or (c) above, subject to readjustment to reverse
the same if such distribution shall not be made.
e. 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 percent
in the Exercise Price; provided, however, that any adjustments
which by reason of this subsection 2.3(e) are not required to
be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations under this section 2.3
shall be made to the nearest cent or to the nearest hundredth
of a share. Notwithstanding the first sentence of this
subsection 2.3(e), any adjustment required by this section 2.3
shall be made no later than the earlier of: (i) three years
from the date of the transaction which mandates such
adjustments; and (ii) the Termination Date. Whenever an
adjustment to the Exercise Price is made pursuant to this
section 2.3, the Corporation shall:
i. Immediately prepare a certificate setting forth such
adjustment and a brief statement of the facts
accounting for such adjustment,
ii. Immediately file with the Rights Agent and with each
transfer agent for the Common Shares a copy of such
certificate and mail a brief summary thereof to each
holder of Rights.
f. If 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 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 paragraph (a)(i) or (a)(iv)
above, if the Board of Directors acting in good faith
determines that the adjustments contemplated by subsections
(a), (b) and (c) above in connection with such transaction
will not appropriately protect the interests of the holders of
Rights, the Corporation 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 (a), (b) and (c) above, such
adjustments, rather than the adjustments contemplated by
subsections (a), (b) and (c) above, shall be made. The
Corporation and the Rights Agent shall amend this Agreement as
appropriate to provide for such adjustments.
-21-
<PAGE> 25
g. 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, all subject to
further adjustment as provided herein.
h. 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 issued before and after
such adjustment or change 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.
i. 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 Corporation shall deliver to such
holder an appropriate instrument evidencing such holder's
right to receive such additional shares (fractional or
otherwise) or securities upon the occurrence of the event
requiring such adjustment.
j. Notwithstanding anything 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 the
Board of Directors shall in good faith determine to be
advisable in order that any (i) consolidation or subdivision
of the 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.
k. The Corporation covenants and agrees that, after the
Separation Time, it will not, except as permitted by section
5.1 or section 5.3, take (or permit any Subsidiary of the
Corporation 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.
l. If an event occurs which would require an adjustment under
both this section 2.3 and section 3.1, the adjustment provided
for in this section 2.3 shall be in addition to and shall be
made prior to, any adjustment required pursuant to section
3.1.
m. If the Corporation shall at any time after the Record Time and
prior to the earlier of the Separation Time and the Expiration
Time issue any Common Shares other than in a transaction
referred to in 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 share.
-22-
<PAGE> 26
2.4 DATE ON WHICH EXERCISE IS EFFECTIVE
Each Person in whose name any certificate for Common Shares or other securities,
property or assets, 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, property or assets, if applicable, represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered (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 Common Shares or other securities,
property or assets 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 any two of its officers or directors. The
signature of any of these officers or directors 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 or directors of the
Corporation shall bind the Corporation notwithstanding that
such individuals or any of them have ceased to hold such
offices prior to the countersignature and delivery of such
Rights Certificates.
b. Immediately after the Corporation learns of the Separation
Time, the Corporation will notify the Rights Agent in writing
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 and send such Rights Certificates to the holders
of the Rights pursuant to subsection 2.2(c). No Rights
Certificate shall be valid for any purpose until countersigned
by the Rights Agent as aforesaid.
c. Each Rights Certificate shall be dated the date of
countersignature thereof.
2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
a. After the Separation Time, 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. If 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.
b. After the Separation Time and prior to the Expiration Time,
upon surrender for registration of transfer or exchange of any
Rights Certificate, and subject to the provisions of
subsections 2.6(d) and 3.1(b), 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
-23-
<PAGE> 27
Certificates evidencing the same aggregate number of Rights as
did the Rights Certificates so surrendered.
c. All Rights issued upon any registration of transfer or
exchange of Rights Certificates shall be 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.
d. 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 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 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
ii. such security or indemnity as may be reasonably
required by them in their sole discretion 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 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 by the Corporation.
-24-
<PAGE> 28
2.8 PERSONS DEEMED OWNERS
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 the Rights evidenced thereby for
all purposes whatsoever. As used in this Agreement, unless the context otherwise
requires, the term "HOLDER" of any Rights shall mean the registered holder of
such Rights (or, prior to the Separation Time, the associated Common Shares).
2.9 DELIVERY AND CANCELLATION OF CERTIFICATES
All Rights Certificates surrendered upon exercise or for redemption,
registration of transfer or exchange shall, if surrendered to any Person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be immediately canceled 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
immediately canceled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates canceled as
provided in this section 2.9, except as expressly permitted by this Agreement.
The Rights Agent shall destroy all canceled Rights Certificates and deliver a
certificate of destruction to the 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;
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;
c. that after the Separation Time, the Rights Certificate will be
transferable only upon registration of the transfer 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 upon exercise of a
Right except as provided herein;
-25-
<PAGE> 29
f. that, without the approval of any holder of Rights 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 pursuant to and as provided herein; and
g. that, notwithstanding anything in this Agreement to the
contrary, neither the Corporation nor the Rights Agent shall
have any liability to any holder of a Right or a Person as a
result of its inability to perform any of its obligations
under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court
of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule,
regulation or executive order promulgated or enacted by any
governmental authority prohibiting or otherwise restraining
performance of such obligation.
2.11 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 of the rights, titles, benefits or privileges 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 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 or securities 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 IN THE EVENT OF CERTAIN TRANSACTIONS
3.1 FLIP-IN EVENT
a. Subject to subsection 3.1(b), section 3.2 and subsections
5.1(d) and 5.1(e), if prior to the Expiration Time a Flip-in
Event occurs, each Right shall constitute, effective at the
close of business on the tenth Trading Day after the Stock
Acquisition Date, on and after such occurrence the right to
purchase from the Corporation, upon payment of the Exercise
Price and otherwise exercising such Right 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 event
that after the Stock Acquisition Date an event of a type
analogous to any of the events described in section 2.3 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 and the Stock Acquisition Date by:
-26-
<PAGE> 30
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 Associate
or Affiliate of an Acquiring Person); or
ii. a transferee of Rights, direct or indirect, of an
Acquiring Person (or of any Affiliate or Associate of
an Acquiring Person or of any Person acting jointly
or in concert with an Acquiring Person or any
Associate or Affiliate of an Acquiring Person) who
becomes a transferee 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 Associate or Affiliate of an Acquiring
Person), that has the purpose or effect of avoiding
paragraph 3.1(b)(i);
shall become null and void without any further action, and any
holder of such Rights (including any transferee of, or other
successor to, such Rights, whether directly or indirectly)
shall not have any right whatsoever to exercise such Rights
under any provision of this Agreement and shall not have
thereafter any right whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise.
The holder of any Rights represented by a Rights Certificate
which is submitted to the Rights Agent upon exercise or for
registration of transfer or exchange which does not contain
the necessary certifications set forth in the Rights
Certificate establishing that such Rights are not void under
this subsection 3.1(b) shall be deemed to be an Acquiring
Person for the purposes of this subsection 3.1(b) and such
Rights shall become null and void.
c. Any Rights Certificate that represents Rights Beneficially
Owned by a Person described in either paragraph 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 Beneficially Owned by a Person who was an
Acquiring Person or an Affiliate or an Associate of
an Acquiring Person (as such terms are defined in the
Rights Agreement) or by a Person acting jointly or in
concert with any of them. This Rights Certificate and
the Rights represented hereby are void in the
circumstances specified in subsection 3.1(b) of the
Rights Agreement.
provided that the Rights Agent shall not be under any
responsibility to ascertain the existence of facts that would
require the imposition of such legend but shall be required to
impose such legend only if instructed to do so in writing by
the Corporation 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 either paragraph
3.1(b)(i) or (ii).
d. In the event that there shall not be sufficient Common Shares
authorized for issuance to permit the exercise in full of the
Rights in accordance with this section 3.1, the Corporation
shall take all such action as may be necessary to authorize
additional Common Shares for issuance upon the exercise of the
Rights, failing which the Board of Directors shall consider
the exercise of the options set forth in section 3.2.
-27-
<PAGE> 31
e. 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 Business
Corporations Act, the Securities Act (Alberta), the Securities
Act (British Columbia) and any other applicable law in respect
of the issue of Common Shares upon the exercise of Rights in
accordance with this Agreement.
3.2 EXCHANGE OPTION
a. If the Board of Directors acting in good faith shall determine
that conditions exist which would eliminate or otherwise
materially diminish in any respect the benefits intended to be
afforded to the holders of Rights pursuant to this Agreement
the Board of Directors may, at its option and without seeking
the approval of holders of Common Shares or Rights, at any
time after a Flip-in Event has occurred, authorize the
Corporation to issue or deliver in respect of each Right which
is not void pursuant to subsection 3.1(b), either:
i. in return for the Exercise Price and the Right, debt,
equity or other securities or property or assets (or
a combination thereof) having a value equal to twice
the Exercise Price; or
ii. in return for the Right, subject to any amounts that
may be required to be paid under applicable law,
cash, debt, equity or other securities or property or
assets (or a combination thereof) having a value
equal to the Exercise Price;
in full and final settlement of all rights attaching to the
Rights; provided that the value of any debt, equity or other
securities or properties or assets shall be determined by a
nationally or internationally recognized Canadian firm of
investment dealers or investment bankers selected by the Board
of Directors. To the extent that the Board of Directors
determines in good faith that some action need be taken
pursuant to this section 3.2, the Board of Directors may
suspend the exercisability of the Rights for a period of up to
ninety (90) days following the date of the occurrence of the
relevant Flip-in Event in order to decide the appropriate form
of distribution to be made and to determine the value thereof.
In the event of any such suspension, the Corporation shall
notify the Rights Agent and issue as immediately as
practicable a public announcement stating that the
exercisability of the Rights has been temporarily suspended.
b. If the Board of Directors authorizes the exchange of debt,
equity or other securities or property or assets (or a
combination thereof) pursuant to subsection 3.2(a), without
any further action or notice the only right thereafter of a
holder of Rights shall be to receive upon due exercise of the
Rights such debt, equity or other securities or property or
assets (or a combination thereof) in accordance with the
determination of the Board of Directors. Within ten Business
Days after the Board of Directors has authorized the exchange
of such debt, equity or other securities or property or assets
(or a combination thereof) pursuant to subsection 3.2(a), the
Corporation shall give notice of such exchange to the holders
of Rights in accordance with section 5.9. Each such notice
will state the method by which the exchange of debt, equity or
other securities or property or assets (or a combination
thereof) for Rights will be effected.
c. If there shall not be sufficient securities authorized but
unissued to permit the exchange in full of such Rights
pursuant to this section 3.2, the Corporation shall take all
such action as
-28-
<PAGE> 32
may be necessary to authorize additional securities for
issuance upon the exchange of Rights.
d. The Corporation shall not be required to issue fractions of
securities or to distribute certificates evidencing fractional
securities. In lieu of issuing such fractional securities,
subject to subsection 5.5(b), there shall be paid to the
registered holders of Rights to whom such fractional
securities would otherwise be issuable, an amount in cash
equal to the same fraction of the Market Price of a whole
security.
3.3 FIDUCIARY DUTIES OF THE BOARD OF DIRECTORS OF THE CORPORATION
Nothing contained in this Article 3 shall be considered to affect the obligation
of the Board of Directors to exercise its fiduciary duties. Without limiting the
generality of the foregoing, nothing contained herein shall be construed to
suggest or imply that the Board of Directors shall not be entitled to recommend
that holders of the Voting Shares reject or accept any Take-over Bid or take any
other action (including, without limitation, the commencement, prosecution,
defence or settlement of any litigation and the submission of additional or
alternative Take-over Bids or other proposals to the shareholders of the
Corporation with respect to any Takeover Bid) that the Board of Directors
believes is necessary or appropriate in the exercise of its fiduciary duties.
ARTICLE 4
THE RIGHTS AGENT
4.1 GENERAL
a. The Corporation hereby appoints the Rights Agent to act as
agent for the Corporation 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 Agents and the Co-Rights Agents shall be as the
Corporation may determine. The Corporation agrees to pay to
the Rights Agent reasonable compensation for all services
rendered by it hereunder and, from time to time, on demand of
the Rights Agent, its reasonable expenses and counsel fees and
other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance
of its duties hereunder, including the reasonable fees and
disbursements of any expert retained by the Rights Agent. The
Corporation also agrees to indemnify the Rights Agent for, and
to hold it harmless against, any loss, liability, costs,
claims, actions, damages or expenses, incurred without
negligence, bad faith or wilful default on the part of the
Rights Agent, for anything done or suffered or omitted by the
Rights Agent in connection with the acceptance, execution and
administration of this Agreement and the performance of its
duties hereunder, including the costs and expenses of
defending against any claim of liability, which right to
indemnification will survive the termination of this Agreement
or the resignation of the Rights Agent.
b. The Rights Agent shall be protected and shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in connection with its acceptance, execution and
administration of this Agreement in reliance upon any
certificate for Voting Shares or Common Shares, or any Rights
Certificate or 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
-29-
<PAGE> 33
by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or
Persons.
c. The Corporation shall inform the Rights Agent in a reasonably
timely manner of events which may materially affect the
administration of this Agreement by the Rights Agent.
4.2 MERGER OR AMALGAMATION OR CHANGE OF NAME OF RIGHTS AGENT
a. Any corporation into which the Rights Agent or any successor
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 or any successor Rights Agent is a party, or
any corporation succeeding to the shareholder or stockholder
services business of the Rights Agent or any successor 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. If
at the time any successor Rights Agent succeeds to the agency
created by this Agreement any of the Right Certificates have
been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of the predecessor
Rights Agent and deliver such Rights Certificates so
countersigned; and if at that time any of the Right
Certificates have not been countersigned, any successor Rights
Agent may countersign such Right Certificates either in the
name of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases such Right
Certificates will have the full force provided in the Right
Certificates and in this Agreement.
b. If at any time the name of the Rights Agent is changed and at
such time any of the Right Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt
the countersignature under its prior name and deliver Right
Certificates so countersigned; and if at that time any of the
Right Certificate shall not have been countersigned, the
Rights Agent may countersign such Right Certificates either in
its prior name or in its changed name; and in all such cases
such Right Certificates shall have the full force provided in
the Right 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, by all of which the Corporation and the
holders of Right 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, suffered or
omitted by it in good faith and in accordance with such
opinion; the Rights Agent may also, with the approval of the
Corporation (such approval not to be unreasonably withheld),
consult with such other experts as the Rights Agent shall
consider necessary or appropriate to properly carry out the
duties and obligations imposed under this Agreement and the
Rights Agent shall be entitled to rely in good faith on the
advice of any such expert;
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
-30-
<PAGE> 34
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, the President
or any Vice President, or the Secretary or 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 only for its own
negligence, bad faith or wilful default;
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 Voting Shares or Common Shares or
the Rights Certificates (except its countersignature thereof)
or be required to verify the same, but all such statements and
recitals are and will be deemed to have been made by the
Corporation only;
e. the Rights Agent will not be under any responsibility in
respect of the validity of this Agreement or the
authorization, 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
Common Share certificate 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 exercisability of
the Rights (including the Rights becoming void pursuant to
subsection 3.1(b)) or any adjustment required under the
provisions of section 2.3 or be 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
written instructions with respect to the performance of its
duties hereunder from any person believed by the Rights Agent
to be the Chairman of the Board, President, Chief Executive
Officer, Chief Financial Officer, a Vice President or the
Secretary or any Assistant Secretary of the Corporation, and
to apply to such individual 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 reliance upon
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 financially interested in any
transaction in which the Corporation may be interested, or
contract with or lend money to the Corporation or otherwise
act as
-31-
<PAGE> 35
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 thirty (30) days' notice (or such lesser notice as is acceptable
to the Corporation) in writing delivered or mailed to the Corporation and to
each transfer agent of Common Shares by registered or certified mail and to the
holders of the Rights in accordance with section 5.9. The Corporation may remove
the Rights Agent upon thirty (30) days' notice in writing, mailed to the Rights
Agent and to each transfer agent of the Common Shares by registered or certified
mail and to the holders of the Rights in accordance with section 5.9. If the
Rights Agent should resign or be removed or otherwise become incapable of
acting, the Corporation will appoint a successor to the Right Agent. If the
Corporation fails to make such appointment within a period of thirty (30) 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 the resigning
Rights Agent or the holder of any Rights may apply to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the 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. 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 upon payment of its outstanding fees and expenses 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 give notice 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
the 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, at its
option, at any time prior to the occurrence of a Flip-in
Event, elect to redeem all but not less than all of the then
outstanding Rights at a redemption price of $0.0001 per Right
appropriately adjusted in a manner analogous to the applicable
adjustment provided for in section 2.3 if an event of the type
analogous to any of the events described in section 2.3 shall
have occurred (such redemption price being herein referred to
as the "REDEMPTION PRICE"). The redemption of the Rights by
the Board of Directors may be made effective at such time, on
such basis and with such conditions as the Board of Directors
in its sole discretion may establish.
-32-
<PAGE> 36
b. If the Board of Directors elects or is deemed to have elected
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.
c. Within ten days after the Board of Directors electing or
having been deemed to have elected to redeem the Rights, the
Corporation shall give notice of redemption to the holders of
the Rights in accordance with section 5.9. Each such notice of
redemption will state the method by which the payment of the
Redemption Price will be made. The Corporation may not redeem,
acquire or purchase for value any Rights at any time in any
manner other than that specifically set forth in this section
5.1 or other than in connection with the purchase of Common
Shares prior to the Separation Time.
d. The Board of Directors may prior to the occurrence of a
Flip-in Event determine, upon prior written notice to the
Rights Agent, to waive the application of section 3.1 to any
particular Flip-in Event.
e. The Board of Directors may waive the application of section
3.1 in respect to the occurrence of any Flip-in Event if the
Board of Directors has determined within ten Trading Days
following a Stock Acquisition Date that a Person became an
Acquiring Person by inadvertence and without any intention to
become, or knowledge that it would become, an Acquiring Person
under this Agreement and, in the event that such a waiver is
granted by the Board of Directors, such Stock Acquisition Date
shall be deemed not to have occurred. Any such waiver pursuant
to subsection 5.1(e) must be on the condition that such
Person, within ten 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.
f. If a Person makes a Permitted Bid or a Competing Permitted Bid
pursuant to which more than 50% of the then outstanding Voting
Shares (other than those Voting Shares Beneficially Owned by
the Persons making the Permitted Bid or the Competing
Permitted Bid, at the date of the Permitted Bid or the
Competing Permitted Bid) are taken up and paid for by such
Person, then the Board of Directors shall, immediately upon
the consummation of such acquisition, without further
formality, be deemed to have elected to redeem the Rights at
the Redemption Price on the expiry date of the Permitted Bid
or Competing Permitted Bid, as the case may be.
g. Where a Take-over Bid that is not a Permitted Bid or Competing
Permitted Bid is withdrawn or otherwise terminated after the
Separation Time has occurred and prior to the occurrence of a
Flip-in Event, the Board of Directors may elect to redeem all
the outstanding Rights at the Redemption Price.
h. Upon the Rights being redeemed pursuant to subsection 5.1(g),
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
-33-
<PAGE> 37
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.
5.2 EXPIRATION
No Person shall have any rights whatsoever pursuant to or arising out of this
Agreement or in respect of any Right after the Expiration Time, except the
Rights Agent as specified in subsections 4.1(a) and (b).
5.3 ISSUANCE OF NEW RIGHTS CERTIFICATES
Notwithstanding any of the provisions of this Agreement or of 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 of shares
purchasable upon exercise of Rights made in accordance with the provisions of
this Agreement.
5.4 SUPPLEMENTS AND AMENDMENTS
a. Without the approval of any holders of Voting Shares or
Rights, the Corporation may make amendments to this Agreement
to correct any clerical or typographical error or which are
required to maintain the validity of the Agreement as a result
of any change in any applicable legislation or regulations
thereunder. The Corporation may, prior to the date of the
shareholders' meeting referred to in subsection 5.4(f),
supplement or amend this Agreement without the approval of any
holders of Rights or Voting Shares in order to make any
changes which the Board of Directors acting in good faith may
deem necessary or desirable. Notwithstanding anything in this
section 5.4 to the contrary, no supplement or amendment shall
be made to the provisions of Article 4 except with the written
concurrence of the Rights Agent to such change, supplement or
amendment.
b. Subject to subsection 5.4(a), the Corporation may, with the
prior consent of the holders of Voting Shares obtained as set
forth below, at any time before 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 approved by the
affirmative vote of a majority of the votes cast by
Independent Shareholders represented in person or by proxy at
the Special Meeting.
c. The Corporation may, with the prior consent of the holders of
Rights obtained as set forth below, at any time after the
Stock Acquisition Date 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), 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 vote at a meeting of
the holders and representing 50% plus one of the votes cast in
respect thereof.
-34-
<PAGE> 38
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 and entitled to vote 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 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 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;
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 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.
f. In conjunction with the Corporation's next annual general
meeting of shareholders, the Board of Directors shall call and
hold a Special Meeting of holders of Voting Shares to consider
and, if thought appropriate, ratify the distribution and the
continued existence of the Rights. The Special Meeting shall
be held on a date fixed by the Board of Directors, which date
shall be no later than that date which is one year after the
date of this Agreement. The Board of Directors shall fix a
record date for determining the holders of Voting Shares
entitled to receive notice of the Special Meeting in
accordance with all applicable laws and the articles and
by-laws of the Corporation. Unless a majority of the votes
cast on such resolution are voted in favour of the continued
existence of the Rights, then the Board of Directors shall
immediately upon the confirmation by the Chairman of such
shareholders' meeting of the result of the vote on such
resolution, without further formality, be deemed to have
elected to redeem the Rights at the Redemption Price.
-35-
<PAGE> 39
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. In lieu of such fractional Rights, there
shall be paid to the registered holders of the Rights
Certificates with regard to which such fractional Rights would
otherwise be issuable an amount in cash equal to the same
fraction of the Market Price of a whole Right determined on
the date on which such fractional Right would otherwise be
issuable.
b. The Corporation shall not be required to issue fractions of
Common Shares upon exercise of the Rights or to distribute
certificates which evidence fractional Common Shares.
Fractions of Common Shares may, at the election of the
Corporation, be evidenced by scrip certificates or 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 same fraction of the Market Price of one
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 registered holders of the Rights; and any registered
holder of any rights, without the consent of the Rights Agent or of the
registered 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 in
the manner provided in such holder's Rights Certificate and in this Agreement.
Without limiting the foregoing or any remedies available to the holders of
Rights, it is specifically acknowledged that the holders of Rights would not
have an adequate remedy at law for any breach of this Agreement and will be
entitled to specific performance of the obligations under, and injunctive relief
against actual or threatened violations of the obligations of any person subject
to, this Agreement.
5.7 REGULATORY APPROVALS
Any obligation of the 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 to the issuance of Common Shares
upon the exercise of Rights under subsection 2.2(d).
5.8 UNLAWFUL DISTRIBUTIONS
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
may take such actions as it may deem appropriate to ensure that such compliance
is not required, including, without limitation, establishing procedures for the
issuance to a Canadian resident trustee of Rights or securities issuable on
exercise of Rights, the holding thereof in trust for the Persons entitled
thereto (but reserving to the trustee or to the trustee and the Corporation, as
the Corporation may determine, absolute investment discretion with respect
thereto) and the sale thereof and remittance of proceeds of such sale, if any,
to the Persons entitled thereto. 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, in which such issue or delivery would be
unlawful without registration of the
-36-
<PAGE> 40
relevant Persons or securities for such purposes. Notwithstanding the foregoing,
to the extent that the issuance or delivery of the Rights or securities issuable
on exercise of Rights to Persons who are citizens, residents or nationals of any
such jurisdiction in which such issue or delivery would be so unlawful, such
Rights or securities shall be issued and delivered to such Persons to the extent
the same may be so issued and delivered in reliance upon applicable exemptions
from registration requirements in such jurisdictions.
5.9 NOTICES
Any notice or demand 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 or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Rights Agent) as follows:
BIRCH MOUNTAIN RESOURCES LTD.
31st Floor, Bow Valley Square II
205 - 5th Avenue S.W.
Calgary, Alberta
T2P 2V7
ATTENTION: PRESIDENT
Any such notice or demand shall be deemed to have been received if delivered, on
the date of delivery, or if sent by prepaid first class mail, on the fifth
Business Day after mailing thereof, except in the interruption of regular mail
service, in which case such notice shall be delivered.
Any notice or demand 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 or sent by first-class mail,
postage prepaid, addressed (until another address is filed in writing with the
Corporation) as follows:
MONTREAL TRUST COMPANY OF CANADA
6th Floor
530 - 8th Avenue S.W.
Calgary, Alberta
T2P 3S8
ATTENTION: MANAGER OF CLIENT SERVICES
Any such notice or demand shall be deemed to have been received if delivered, on
the date of delivery, or if sent by prepaid first class mail, on the fifth
Business Day after mailing thereof, except in the interruption of regular mail
service, in which case such notice shall be delivered.
Any notice or demand 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 in the manner herein provided shall be deemed given, whether or not the
holder receives the notice. In the event of any interruption of mail service,
such notice required or permitted to be given hereunder will be deemed to be
sufficiently given by advertisement of such notice in daily newspapers published
in the City of Calgary.
-37-
<PAGE> 41
5.10 COSTS OF ENFORCEMENT
The Corporation agrees that if the Corporation or any other Person the
securities of which are purchasable upon exercise of Rights fails to fulfil any
of its obligations pursuant to this Agreement, then the Corporation or such
Person will reimburse the holder of any Rights for the costs and expenses
(including legal fees) incurred by such holder in actions to enforce his rights
pursuant to any Rights or this Agreement.
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; but 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 section, subsection, paragraph, subparagraph or other provision hereof or
the application hereof to any circumstances or any right hereunder shall, in any
jurisdiction and to any extent, be invalid or unenforceable, such section,
subsection, paragraph, subparagraph or other provision or such right shall be
ineffective only as to such jurisdiction and to the extent of such invalidity or
unenforceability in such jurisdiction without invalidating or rendering
unenforceable or ineffective the remaining sections, subsections, paragraphs,
subparagraphs and other provisions hereof or rights hereunder in such
jurisdiction or the application of such section, subsection, paragraph,
subparagraph or other provision or rights hereunder in any other jurisdiction or
to circumstances other than those as to which it is specifically held invalid or
unenforceable.
5.15 EFFECTIVE DATE
This Agreement is effective and in full force and effect in accordance with its
terms from the date hereof. If this Agreement is not approved, ratified and
confirmed by resolution passed by a majority of votes cast by Independent
Shareholders who vote in respect of the ratification, approval and confirmation
of this Agreement at a meeting to be held no later than October 17, 2000, then
this agreement and all outstanding Rights shall be of no further force and
effect from the earlier of: (a) the date of such meeting; and (b) October 17,
2000.
5.16 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS
The Board of Directors shall have the power and authority to administer and
amend this Agreement and to exercise all rights and powers specifically granted
hereunder to the Board of Directors or the Corporation, or as may be necessary
or advisable in the administration of this Agreement, including, without
limitation,
-38-
<PAGE> 42
the right and power to interpret the provisions of this Agreement and to make
all calculations and determinations deemed necessary or advisable for the
administration of this Agreement (including a determination to redeem or not to
redeem the Rights or to amend this Agreement in accordance with the terms
hereof). All such actions, calculations and determinations (including, for
purposes of paragraph ii. below, all omissions with respect to the foregoing)
which are done or made by the Board of Directors, in good faith, shall: (i) be
final, conclusive and binding on the Corporation, the Rights Agent, the holders
of the Rights and all other parties, provided that no amendment to this
Agreement shall be binding on the Rights Agent unless the Rights Agent shall
have agreed in writing to such amendment; and (ii) not subject the Board of
Directors or any director of the Corporation to any liability to the holders of
the Rights.
5.17 TIME OF THE ESSENCE
Time shall be of the essence in this Agreement.
5.18 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.
5.19 LANGUAGE
Les parties aux presentes ont exige que la presente convention ainsi que tous
les documents et avis qui s'y rattachent et/ou que en decoulent soient rediges
en langue anglaise. The parties hereto have required that this Agreement and all
documents and notices related thereto and/or resulting therefrom be drawn up in
English.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the date first above written.
BIRCH MOUNTAIN RESOURCES LTD.
Per: /s/ Donald Dabbs
--------------------------------
MONTREAL TRUST COMPANY OF CANADA
Per: (Illegible Signature)
--------------------------------
Per: (Illegible Signature)
--------------------------------
-39-
<PAGE> 43
EXHIBIT A
[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 SECTION 3.1(b) OF THE SHAREHOLDER
RIGHTS PLAN AGREEMENT), RIGHTS BENEFICIALLY OWNED BY AN
ACQUIRING PERSON OR TRANSFEREES OF AN ACQUIRING PERSON OR ITS
AFFILIATES OR ASSOCIATES (AS SUCH TERMS ARE DEFINED IN THE
SHAREHOLDER RIGHTS PLAN AGREEMENT) OR ANY PERSON ACTING
JOINTLY OR IN CONCERT WITH ANY OF THEM 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 the 17th day of
May, 2000 (the "Rights Agreement") between Birch Mountain Resources Ltd., a
corporation amalgamated under the Business Corporations Act (Alberta) (the
"Corporation") and Montreal Trust Company of Canada, a trust company, as rights
agent (the "Rights Agent") (which term shall include any successor Rights Agent
under the Rights Agreement), to purchase from the Corporation at any time after
the Separation Time (as such term is defined in the Rights Agreement) and prior
to the Expiration Time (as such term is defined in the 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 together with the Form of Election to Exercise duly executed and
submitted to the Rights Agent at its principal office in the City of Calgary.
Until adjustment thereof in certain events as provided in the Rights Agreement,
the Exercise Price shall be an amount equal to one-half of the Market Price of
the Common Shares at the time the Right is exercised.
In certain circumstances described in the Rights Agreement, each Right evidenced
hereby may entitle the registered holder thereof to purchase or receive
securities of an entity other than the Corporation, assets, debt, equity or
other securities or property or assets of the Corporation, or more or less than
one Common Share (or a combination thereof), all as provided in the Rights
Agreement.
The Rights Certificate is subject to all of the terms, provisions and conditions
of the Rights Agreement which terms, provisions and conditions are hereby
incorporated herein by reference and made a part thereof and to which 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 Rights Agreement are on file at the principal office of the Corporation
and are available upon written request.
The 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 the 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 fractional
-40-
<PAGE> 44
Common Shares will be issued upon the exercise of any Rights evidenced hereby,
but in lieu thereof a cash payment will be made as provided in the Rights
Agreement.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be redeemed by the Corporation at a redemption price of $0.0001
per Right, subject to adjustment in certain events, under certain circumstances
at its option.
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 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 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 Rights Agreement.
The 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: BIRCH MOUNTAIN RESOURCES LTD.
-----------------------
Per:
--------------------------------
Per:
--------------------------------
Countersigned:
MONTREAL TRUST COMPANY OF CANADA
Per:
--------------------------------
Authorized Signature
-41-
<PAGE> 45
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to
transfer the Rights Certificates)
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
__________________ attorney, to transfer the within Rights Certificate on the
books of the within-named Corporation, with full power of substitution.
DATE: _________________________ ___________________________________
SIGNATURE
Signature Guarantee: (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 stock exchange in Canada, a
registered national securities exchange in the United States, a member of the
Investment Dealers Association of Canada or National Association of Securities
Dealers, Inc., or a commercial bank or trust company having an office or
correspondent in Canada or the United States.
________________________________________________________________________________
(To be completed by the assignor if true)
The undersigned 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 by any Person acting
jointly or in concert therewith. Capitalized terms shall have the meaning
ascribed thereto in the Rights Agreement.
___________________________________
SIGNATURE
___________________________________
(PLEASE PRINT NAME OF SIGNATOR)
-42-
<PAGE> 46
FORM OF ELECTION TO EXERCISE
TO:
The undersigned hereby irrevocably elects to exercise ________ whole Rights
represented by the Rights Certificate to purchase the Common Shares issuable
upon the exercise of such Rights and requests that certificates for such shares
be issued in the name of:
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
Address
_________________________________________________________________________
Social Insurance, Social Security 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:
_________________________________________________________________________
_________________________________________________________________________
_________________________________________________________________________
Address
_________________________________________________________________________
Social Insurance, Social Security or Other Taxpayer Identification Number
DATE: _________________________ ___________________________________
SIGNATURE
Signature Guaranteed: (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, a registered national securities exchange in the United States, a member
of the Investment Dealers Association of Canada or National Association of
Securities Dealers, Inc. or a commercial bank or trust company having an office
or correspondent in Canada or the United States.
-43-
<PAGE> 47
________________________________________________________________________________
(TO BE COMPLETED BY EXERCISOR IF TRUE)
The undersigned 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 by any Person acting
jointly or in concert therewith. Capitalized terms shall have the meaning
ascribed thereto in the Rights Agreement.
___________________________________
SIGNATURE
___________________________________
(PLEASE PRINT NAME OF SIGNATOR)
NOTICE
In the event the Certificate set forth above in the applicable Forms of
Assignment or 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 and, in the case of an
Assignment, will affix a legend to that effect on any Rights Certificates issued
in exchange for this Rights Certificate. Capitalized terms shall have the
meaning ascribed thereto in the Rights Agreement.
-44-
