Exhibit 10.1

EXECUTION COPY

SERIES A NOTE PURCHASE AGREEMENT

THIS SERIES A NOTE PURCHASE AGREEMENT (this “Agreement”) is made and entered
into as of this 19th day of January, 2007 (the “Execution Date”) by and among
Storm Cat Energy Corporation, a company incorporated under the laws of the
Province of British Columbia, Canada (the “Company”), and each of the purchasers
set forth on Schedule I affixed hereto (each a “Purchaser” and collectively the
“Purchasers”).

Recitals:

A.            The Company is engaged in the exploration and development of large
unconventional gas reserves from fractured shales, coal beds and tight sand
formations and is seeking capital to fund its drilling program and repay its
existing mezzanine debt;

B.            The Company desires to sell and issue to each Purchaser, and each
Purchaser desires to purchase from the Company, upon the terms and conditions
stated in this Agreement, the Series A Subordinated Convertible Notes due March
31, 2012 (the “Notes”) in the aggregate principal amount of US$18,535,000,
substantially in the form attached hereto as Exhibit A (the “Private
Placement”);

C.            The Company has engaged Banc of America Securities LLC, Coker &
Palmer, Inc. and First Albany Capital Inc. as its placement agents (the
“Placement Agents”) for the Private Placement on a “best efforts” basis;

D.            The Notes shall be convertible into the Company’s common shares,
without par value per share (the “Common Shares”) and contemporaneous with the
purchase and sale of the Notes, the parties hereto will enter into a Convertible
Notes Registration Rights Agreement, substantially in the form attached hereto
as Exhibit B (the “Registration Rights Agreement”), pursuant to which, among
other things, the Company will agree to provide certain registration rights with
respect to the Common Shares issuable upon conversion of the Notes under the
Securities Act of 1933, as amended, and the rules and regulations promulgated
thereunder (the “1933 Act”), and applicable state securities laws;

E.             Concurrently with this Private Placement, the Company intends to
commence an offering of Series B Subordinated Convertible Notes due March 31,
2012 (the “Series B Notes”) in the aggregate principal amount of US$31,660,000
(the “Series B Note Offering”);

F.             The Company and the Purchasers are executing and delivering this
Agreement in reliance upon the exemption from securities registration afforded
by the provisions of Regulation D (“Regulation D”), as promulgated by the U.S.
Securities and Exchange Commission (the “SEC”) under the 1933 Act, and in
reliance on the exemption from Canadian prospectus and registration requirements
contained in Canadian National Instrument 45-106 as adopted by the British
Columbia Securities Commission, the Alberta Securities Commission and the
Ontario Securities Commission (“NI 45-106”); and

G.            The parties desire to set forth the terms and conditions of and to
provide for the issuance by the Company of the Notes as described herein.

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NOW, THEREFORE, in consideration of the mutual promises made herein and for
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereto agree as follows:

1.             DEFINITIONS.  IN ADDITION TO THOSE TERMS DEFINED ABOVE AND
ELSEWHERE IN THIS AGREEMENT, FOR THE PURPOSES OF THIS AGREEMENT, THE FOLLOWING
TERMS SHALL HAVE THE MEANINGS SET FORTH IN THIS SECTION 1:

“Affiliate” means, with respect to any Person, any other Person which directly
or indirectly Controls, is Controlled by, or is under common Control with, such
Person.

“Allocation Percentage” means a fraction, the numerator of which is the
aggregate principal amount of Notes issued to a Purchaser on the Closing Date
and the denominator of which is the aggregate principal amount of all Notes
issued on the Closing Date.

“AMEX” means the American Stock Exchange.

“Approved Shares Plan” means any employee benefit plan currently existing or
hereinafter created which has been approved by the Board of Directors of the
Company, pursuant to which the Company’s securities may be issued to any
employee, consultant, officer or director for services provided to the Company.

“Bloomberg” means Bloomberg Financial Markets.

“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.

“Capital Shares” means: (1)  in the case of a corporation, corporate stock; (2)
in the case of an association or business entity, any and all shares, interests,
participations, rights or other equivalents (however designated) of corporate
stock;  (3) in the case of a partnership or limited liability company,
partnership interests (whether general or limited) or membership interests; and
(4) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.

“Change of Control” means any Fundamental Transaction other than (i) any
reorganization, recapitalization or reclassification of the Common Shares in
which holders of the Company’s voting power immediately prior to such
reorganization, recapitalization or reclassification continue after such
reorganization, recapitalization or reclassification to hold publicly traded
securities and, directly or indirectly, the voting power of the surviving entity
or entities necessary to elect a majority of the members of the board of
directors (or their equivalent if other than a corporation) of such entity or
entities, or (ii) pursuant to a migratory merger effected solely for the purpose
of changing the jurisdiction of incorporation of the Company.

“Change of Control Prepayment Premium” means (i) for Change of Control Notice
delivered or required to be delivered in connection with a Change of Control
prior to the first (1st) anniversary of the Closing Date, 115%, (ii) for Change
of Control Notice delivered or required to be delivered in connection with a
Change of Control on or following the first (1st) anniversary of the Closing
Date but prior to the second (2nd) anniversary of the Closing Date,

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112%, and (iii) for any Change of Control Notice delivered or required to be
delivered in connection with a Change of Control on or following the second
(2nd) anniversary of the Closing Date, 110%.

“Closing Sale Price” means, for any security as of any date, the last closing
trade price for such security on the Principal Market, as reported by Bloomberg,
or, if the Principal Market begins to operate on an extended hours basis and
does not designate the closing trade price then the last trade price of such
security prior to 4:00:00 p.m., New York Time, as reported by Bloomberg, or, if
the Principal Market is not the principal securities exchange or trading market
for such security the last trade price of such security on the principal
securities exchange or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last trade price of
such security in the over-the-counter market on the electronic bulletin board
for such security as reported by Bloomberg, or, if no last trade price is
reported for such security by Bloomberg, the average of the ask prices of any
market makers for such security as reported in the “pink sheets” by Pink Sheets
LLC (formerly the National Quotation Bureau, Inc.).  If the Closing Sale Price
cannot be calculated for a security on a particular date on any of the foregoing
bases, the Closing Sale Price of such security on such date shall be the fair
market value as mutually determined by the Company and the Requisite Holders. 
If the Company and the Requisite Holders are unable to agree upon the fair
market value of such security, then such dispute shall be resolved pursuant to
Section 4.1(b)(iii).  All such determinations to be appropriately adjusted for
any stock dividend, stock split, stock combination or other similar transaction
during the applicable calculation period.

“Common Shares” has the meaning set forth in the Recitals, and also includes any
securities into which the Common Shares may be reclassified, which in all cases
shall be prescribed securities under Regulation 6208 of the Income Tax Act
(Canada).

“Company’s Knowledge” means the actual knowledge of the officers of the Company,
after reasonable due inquiry and investigation.

“Confidential Information” means trade secrets, confidential information and
know-how (including but not limited to ideas, formulae, compositions, processes,
procedures and techniques, research and development information, computer
program code, performance specifications, support documentation, drawings,
specifications, designs, business and marketing plans, and customer and supplier
lists and related information).

“Control” means the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a Person, whether through
the ownership of voting securities, by contract or otherwise.

“Conversion Amount” means the sum of (1) accrued interest since the last payment
of interest and Additional Amounts, if any, and (2) the aggregate principal
amount of the Note being converted or redeemed.

“Conversion Price” means US$1.20, subject to adjustment as provided herein.

“Convertible Securities” means any stock or securities (other than Options)
directly or indirectly convertible into or exchangeable or exercisable for
Common Shares.

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“Cumulative Dividend Adjustment” means, for each Note, as of any date of
determination, the sum of all Dividend Adjustments for such Note made in respect
of all dividends or distributions declared or paid on the Common Shares (other
than a dividend or distribution in Common Shares) prior to such date of
determination.

“Dividend Adjustment” means, for each Note, an amount equal to the quotient of
(x) the aggregate amount of any dividend or distribution (other than a dividend
or distribution in Common Shares) that the Purchaser of such Note would have
received had such Purchaser converted the entire amount of such Note into Common
Shares at the Conversion Rate in effect immediately prior to the record date for
such dividend or distribution, divided by (y) the average of the Weighted
Average Price of the Common Shares for the five consecutive Trading Days ended
on such record date.

“Eligible Market” means the TSX, New York Stock Exchange, The NASDAQ Global
Select Market, The NASDAQ Global Market or The NASDAQ Capital Market.

“Equity Conditions” means:  (i) on each day during the period beginning six (6)
months prior to the applicable date of determination and ending on and including
the applicable date of determination (the “Equity Conditions Measuring Period”),
either (x) the Registration Statement (as defined in the Registration Rights
Agreement) filed pursuant to the Registration Rights Agreement shall be
effective and available for the resale of all of the Registrable Securities in
accordance with the terms of the Registration Rights Agreement or (y) all Common
Shares issuable upon conversion of the Notes shall be eligible for sale without
restriction and without the need for registration under any applicable federal
or state securities laws; (ii) on each day during the Equity Conditions
Measuring Period, the Common Shares are designated for quotation on a Principal
Market or any applicable Eligible Market and shall not have been suspended from
trading on such exchange or market (other than suspensions of not more than
three (3) days and occurring prior to the applicable date of determination due
to business announcements by the Company) nor shall proceedings for such
delisting or suspension be pending or threatened in writing by such exchange or
market nor shall such proceeding have been commenced as a result of falling
below the minimum listing maintenance requirements of such exchange or market;
(iii) on each day during the Equity Conditions Measuring Period, the Company
shall have delivered Common Shares upon conversion of the Notes to the
Purchasers on a timely basis as set forth in Section 4.1(b)(ii) hereof,
respectively; (iv) any applicable Common Shares to be issued in connection with
the event requiring determination may be issued in full without violating
Section 4.5 hereof or the rules or regulations of the exchange or market upon
which the Company’s Common Shares are then listed or quoted and from and after
the Shareholder Meeting Deadline, the Company shall have obtained the
Shareholder Approval; (v) during the Equity Conditions Measuring Period, the
Company shall not have failed to timely make any payments within five (5)
Business Days of when such payment is due pursuant to any Note Document; (vi)
during the Equity Conditions Measuring Period, there shall not have occurred
either (A) the public announcement of a pending, proposed or intended
Fundamental Transaction which has not been abandoned, terminated or consummated
or (B) a Event of Default or an event that with the passage of time or giving of
notice would constitute a Event of Default; (vii) the Company shall have no
knowledge of any fact that would cause (x) the Registration Statements required
pursuant to the Registration Rights Agreement not to be effective and available
for the resale of at least all of the Registrable Securities in accordance

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with the terms of the Registration Rights Agreement or (y) any Common Shares
issuable upon conversion of the Notes not to be eligible for sale without
restriction pursuant to Rule 144(k) and any applicable state or Canadian
provincial securities laws; and (viii) the Company otherwise shall have been in
material compliance with and shall not have materially breached any provision,
covenant, representation or warranty of any Note Document.

“Equity Interests” means Capital Shares and all warrants, options or other
rights to acquire Capital Shares.

“Excluded Securities” means any Common Shares issued or issuable or deemed to be
issued in accordance with Section 4.4 hereof by the Company: (i) in connection
with any Approved Shares Plan; (ii) upon conversion of the Notes; (iii) upon
conversion of the Series B Notes; (iv) upon conversion, exercise or exchange of
any Options or Convertible Securities which are outstanding on the day
immediately preceding the Execution Date, provided that such issuance of Common
Shares upon exercise of such Options or Convertible Securities is made pursuant
to the terms of such Options or Convertible Securities in effect on the date
immediately preceding the Execution Date and such Options or Convertible
Securities are not amended, modified or changed on or after the Execution Date;
and (v) in connection with any stock split, stock dividend, recapitalization or
similar transaction by the Company for which adjustment is made pursuant to
Section 4.4(b).

“Fundamental Transaction” means that the Company shall (or in the case of clause
(v) any “person” or “group” (as these terms are used for purposes of Sections
13(d) and 14(d) of the 1934 Act)), directly or indirectly, in one or more
related transactions, (i) sell, assign, transfer, convey or otherwise dispose of
all or substantially all of the properties or assets of the Company to another
Person, or (ii) allow another Person or Persons (other than a Person or Persons
already holding more than 50% of the aggregate ordinary voting power represented
by issued and outstanding common shares) to make a purchase, tender or exchange
offer that is accepted by the holders of more than the 50% of the outstanding
shares of Voting Shares (not including any shares of Voting Shares held by the
Person or Persons making or party to, or associated or Affiliated with the
Person or Persons making or party to, such purchase, tender or exchange offer),
or (iii) consummate a share purchase agreement or other business combination
(including, without limitation, a merger, consolidation, reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person whereby
such other Person acquires more than the 50% of the outstanding shares of Voting
Shares (not including any shares of Voting Shares held by the other Person or
other Persons making or party to, or associated or Affiliated with the other
Persons making or party to, such stock purchase agreement or other business
combination), or (iv) reorganize, recapitalize or reclassify its Common Shares,
or (v) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under
the 1934 Act), directly or indirectly, of 50% of the aggregate ordinary voting
power represented by issued and outstanding Common Shares.

“Indebtedness” means, without duplication (i) all indebtedness for borrowed
money, (ii) all obligations issued, undertaken or assumed as the deferred
purchase price of property or services (including, without limitation, “capital
leases” in accordance with generally accepted accounting principles) (other than
trade payables entered into in the ordinary course of business), (iii) all
reimbursement or payment obligations with respect to letters of credit, surety
bonds and other similar instruments, (iv) all obligations evidenced by notes,
bonds, debentures or

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similar instruments, including obligations so evidenced incurred in connection
with the acquisition of property, assets or businesses, (v) all indebtedness
created or arising under any conditional sale or other title retention
agreement, or incurred as financing, in either case with respect to any property
or assets acquired with the proceeds of such indebtedness (even though the
rights and remedies of the seller or bank under such agreement in the event of
default are limited to repossession or sale of such property), (vi) all monetary
obligations under any leasing or similar arrangement which, in connection with
generally accepted accounting principles, consistently applied for the periods
covered thereby, is classified as a capital lease, (vii) all indebtedness
referred to in clauses (i) through (vi) above secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any mortgage, lien, pledge, charge, security interest or other
encumbrance upon or in any property or assets (including accounts and contract
rights) owned by any Person, even though the Person which owns such assets or
property has not assumed or become liable for the payment of such indebtedness,
and (viii) all contingent obligations in respect of indebtedness or obligations
of others of the kinds referred to in clauses (i) through (vii) above.

“Intellectual Property” means all of the following: (i) patents and patent
applications, patent disclosures and inventions (whether or not patentable and
whether or not reduced to practice); (ii) trademarks, service marks, trade
dress, trade names, corporate names, logos, slogans and Internet domain names,
together with all goodwill associated with each of the foregoing; (iii)
copyrights; (iv) registrations, applications and renewals for any of the
foregoing; (v) Confidential Information; and (vi) computer software (including,
but not limited to, data, data bases and documentation).

“Material Adverse Effect” means a material adverse effect on (i) the assets,
liabilities, results of operations, condition (financial or otherwise), or
business of the Company or any Subsidiary; or (ii) the ability of the Company to
issue and sell the securities contemplated hereby and to perform its obligations
under the Note Documents.

“Material Contract” means any contract of the Company or any Subsidiary that was
actually filed, or required to be filed, (i) as an exhibit to the SEC Filings
pursuant to Item 601(b)(4) or Item 601(b)(10) of Regulation S-K; or (ii) with
the securities regulatory authorities in the provinces and territories of Canada
through the System for Electronic Document Analysis and Retrieval (“SEDAR”)
under applicable Canadian securities laws.

“Maturity Date” means, with respect to each Note, March 31, 2012.

“Note” or “Notes” has the meaning set forth in the Recitals, and also includes
any securities into which the Notes may be reclassified.

“Note Documents” means this Agreement, the Notes, the Subordination Agreement
and the Registration Rights Agreement.

“Options” means any rights, warrants or options to subscribe for or purchase
Common Shares or Convertible Securities.

“Person” means an individual, corporation, partnership, limited liability
company, trust, business trust, association, joint stock company, joint venture,
sole

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proprietorship, unincorporated organization, governmental authority or any other
form of entity not specifically listed herein.

“Placement Agents Agreement” means that certain Letter Agreement, dated as of
November 17, 2006, by and among the Company, Banc of America Securities LLC, and
Coker & Palmer, Inc., as amended on November 22, 2006, to join First Albany
Capital Inc. and to amend the terms of compensation to be paid to the Placement
Agents.

“Principal Market” means AMEX, or if the Common Shares are not traded on the
Principal Market, an Eligible Market.

“Redemption Date” means any Event of Default Redemption Date and any Change of
Control Redemption Date.

“Requisite Holders”means, with respect to any consent, vote or other action, (i)
prior to the Closing Date (as defined in Section 2.2), the Purchasers who have
subscribed to purchase a majority of the aggregate principal amount of the
Notes; and (ii) following the Closing Date, the Purchasers holding a majority of
the aggregate principal amount of the Notes then outstanding.

“SEC Filings” has the meaning set forth in Section 5.7.

“SEDAR Filings” has the meaning set forth in Section 5.7.

“Senior Debt” means the principal of (and premium, if any), interest on, and all
fees and other amounts (including, without limitation, any out-of-pocket costs,
enforcement expenses (including out-of-pocket legal fees and disbursements),
collateral protection expenses and other reimbursement or indemnity obligations
relating thereto) whether now or hereafter outstanding and payable by Company
and/or its Subsidiaries under or in connection with the (i) Credit Agreement,
dated as of July 28, 2006, as amended by the First Amendment to Credit Agreement
dated as of August 29, 2006, among the Company, Storm Cat Energy (USA)
Corporation, a Colorado corporation, various financial institutions party
thereto as lenders and JPMorgan Chase Bank, N.A., as Global Administrative
Agent, (ii) Credit Agreement, dated as of July 28, 2006, among the Company,
various financial institutions party thereto as lenders, JPMorgan Chase Bank,
N.A., Toronto Branch, as Canadian Administrative Agent, and JPMorgan Chase Bank,
N.A., as Global Administrative Agent, as the same may be further amended,
supplemented, restated, refinanced, or otherwise modified from time to time; and
(iii) any other Indebtedness ranking senior in right of payment to the Notes
incurred in the future by the Company.

“Series B Note Purchase Agreement” means that certain Series B Note Purchase
Agreement, dated as  January 19, 2007, by and among the Company and each of the
purchasers party thereto.

“Subordination Agreement” means that certain Subordination and Intercreditor
Agreement, dated as of the Closing Date, among the Company, Storm Cat Energy
(USA) Corporation, a Colorado corporation, JPMorgan Chase Bank, N.A., as Global
Administrative

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Agent, JPMorgan Chase Bank, N.A., Toronto Branch, as Canadian Administrative
Agent, and any other Person thereto.

“Subsidiary” of any Person means another Person, an amount of the voting
securities of which, other voting ownership or voting partnership interests of
which is sufficient to elect at least a majority of its Board of Directors or
other governing body (or, if there are no such voting interests, 50% or more of
the equity interests of which), is owned directly or indirectly by such first
Person.

“Successor Entity” means the Person, which may be the Company, formed by,
resulting from or surviving any Fundamental Transaction or the Person with which
such Fundamental Transaction shall have been made.

“Tax” means any tax, levy, impost, duty or other charge or withholding of a
similar nature (including any related penalty or interest).

“Tax Deduction” means a deduction or withholding for or on account of Tax from a
payment under the Notes.

“TSX” means the Toronto Stock Exchange.

“Trading Day” means any day on which the Common Shares are traded on the
Principal Market, or, if the Principal Market is not the principal trading
market for the Common Shares, then on the principal securities exchange or
securities market on which the Common Shares are then traded; provided that
“Trading Day” shall not include any day on which the Common Shares are scheduled
to trade on such exchange or market for less than 4.5 hours or any day that the
Common Shares are suspended from trading during the final hour of trading on
such exchange or market (or if such exchange or market does not designate in
advance the closing time of trading on such exchange or market, then during the
hour ending at 4:00:00 p.m., New York Time).

“Voting Shares” of a Person means Capital Shares of such Person of the class or
classes pursuant to which the holders thereof have the general voting power to
elect, or the general power to appoint, at least a majority of the board of
directors, managers or trustees of such Person (irrespective of whether or not
at the time Capital Shares of any other class or classes shall have or might
have voting power by reason of the happening of any contingency).

“Weighted Average Price” means, for any security as of any date, the dollar
volume-weighted average price for such security on the Principal Market during
the period beginning at 9:30:01 a.m., New York City Time, and ending at 4:00:00
p.m., New York City Time, as reported by Bloomberg through its “Volume at Price”
function or, if the foregoing does not apply, the dollar volume-weighted average
price of such security in the over-the-counter market on the electronic bulletin
board for such security during the period beginning at 9:30:01 a.m., New York
City Time, and ending at 4:00:00 p.m., New York City Time, as reported by
Bloomberg, or, if no dollar volume-weighted average price is reported for such
security by Bloomberg for such hours, the average of the highest closing bid
price and the lowest closing ask price of any of the market makers for such
security as reported in the “pink sheets” by Pink Sheets LLC (formerly the
National Quotation Bureau, Inc.).  If the Weighted Average

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Price cannot be calculated for such security on such date on any of the
foregoing bases, the Weighted Average Price of such security on such date shall
be the fair market value as mutually determined by the Company and the Requisite
Holders.  If the Company and the Requisite Holders are unable to agree upon the
fair market value of the Common Shares, then such dispute shall be resolved
pursuant to Section 4.1(b)(iii) below with the term “Weighted Average Price”
being substituted for the term “Closing Sale Price.” All such determinations
shall be appropriately adjusted for any share dividend, share split or other
similar transaction during such period.

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

2.             PURCHASE AND SALE OF THE NOTES; CLOSING.

2.1           PURCHASE AND SALE OF THE NOTES.  THE COMPANY HAS DULY AUTHORIZED
US$18,535,000 IN AGGREGATE PRINCIPAL AMOUNT OF THE NOTES, FOR ISSUANCE TO THE
PURCHASERS ON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THIS
AGREEMENT, AND WILL BE IN SUBSTANTIALLY THE FORM OF EXHIBIT A ATTACHED HERETO,
WITH SUCH CHANGES THERETO, IF ANY, AS MAY BE APPROVED BY THE REQUISITE HOLDERS. 
SUBJECT TO THE TERMS AND CONDITIONS OF THIS AGREEMENT, ON THE CLOSING DATE (AS
DEFINED BELOW), EACH OF THE PURCHASERS SHALL SEVERALLY, AND NOT JOINTLY,
PURCHASE, AND THE COMPANY SHALL SELL AND ISSUE TO THE PURCHASERS, THE NOTES IN
THE RESPECTIVE AMOUNTS SET FORTH OPPOSITE THE PURCHASERS’ NAMES ON SCHEDULE I
ATTACHED HERETO IN EXCHANGE FOR THE CASH CONSIDERATION SET FORTH OPPOSITE THEIR
RESPECTIVE NAMES ON SCHEDULE I.

2.2           CLOSING.

(A)           THE CLOSING (THE “CLOSING”) OF THE PURCHASE AND SALE OF THE NOTES
TO THE PURCHASERS SHALL TAKE PLACE AT THE OFFICES OF KING & SPALDING LLP, 1185
AVENUE OF THE AMERICAS, NEW YORK, NEW YORK 10036, OR AT SUCH OTHER LOCATION AND
ON SUCH OTHER DATE AS THE COMPANY AND THE REQUISITE HOLDERS SHALL MUTUALLY
AGREE. THE DATE AND TIME OF THE CLOSING (THE “CLOSING DATE”) SHALL TAKE PLACE ON
10:00 AM, EASTERN STANDARD TIME, ONE (1) BUSINESS DAY FOLLOWING THE CONFIRMATION
THAT THE CONDITIONS TO CLOSING SPECIFIED HEREIN HAVE BEEN SATISFIED OR DULY
WAIVED BY THE REQUISITE HOLDERS OR THE COMPANY, AS APPLICABLE (OR SUCH OTHER
TIME AND DATE MUTUALLY AGREED TO BY THE COMPANY AND THE REQUISITE HOLDERS).

(B)           ON THE CLOSING DATE, EACH PURCHASER SHALL (I) PAY BY WIRE TRANSFER
OF IMMEDIATELY AVAILABLE FUNDS (U.S. DOLLARS) AN AMOUNT REPRESENTING SUCH
PURCHASER’S “AGGREGATE PURCHASE PRICE”, AS SET FORTH ON SUCH PURCHASER’S
SIGNATURE PAGE AND OPPOSITE SUCH PURCHASER’S NAME ON SCHEDULE I ATTACHED HERETO,
IN ACCORDANCE WITH THE COMPANY WRITTEN WIRE INSTRUCTIONS SET FORTH ON SCHEDULE
II ATTACHED HERETO; AND (II) DELIVER TO THE PLACEMENT AGENTS AND THE COMPANY A
DULY EXECUTED COUNTERPART TO THE REGISTRATION RIGHTS AGREEMENT AND SUBORDINATION
AGREEMENT.

(C)           ON THE CLOSING DATE, (I) THE COMPANY SHALL DELIVER TO THE KING &
SPALDING LLP, IN TRUST, THE NOTES, REGISTERED IN SUCH NAME OR NAMES AND SUCH
DENOMINATION OR DENOMINATIONS AS THE PURCHASERS MAY DESIGNATE, WITH INSTRUCTIONS
THAT SUCH NOTES ARE TO BE HELD FOR RELEASE TO THE PURCHASERS ONLY UPON PAYMENT
IN FULL OF THE AGGREGATE PURCHASE PRICE TO THE

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Company and (ii) the Company shall wire in immediately available funds following
receipt of the Aggregate Purchase Price (A) the Cash Placement Agents Fee to the
Placement Agents and (C) the Placement Agents Counsel Fees to King & Spalding
LLP and Osler, Hoskin & Harcourt LLP (collectively, “Placement Agents Counsel”).

3.             INTEREST AND REPAYMENT.  WITH RESPECT TO EACH NOTE:

3.1.          INTEREST ON THE NOTES.  INTEREST WILL ACCRUE ON THE NOTES FROM AND
INCLUDING THE ISSUE DATE UNTIL SUCH PRINCIPAL IS PAID IN FULL (WHETHER AT
MATURITY OR BY REDEMPTION OR CONVERSION) AND BE PAYABLE IN ARREARS ON EACH OF
MARCH 31, JUNE 30, SEPTEMBER 30, DECEMBER 31 OF EACH YEAR, COMMENCING JUNE 30,
2007, AND ON THE DATE ON WHICH SUCH PRINCIPAL IS REPAID IN FULL (WHETHER AT
MATURITY OR BY REDEMPTION OR CONVERSION).  THE NOTES WILL BEAR INTEREST ON THE
OUTSTANDING PRINCIPAL AMOUNT THEREOF AT A RATE EQUAL TO 9 1/4% PER ANNUM.  EACH
PAYMENT OF PRINCIPAL OR INTEREST ON THE NOTES WILL BE MADE TO EACH PURCHASER BY
CERTIFIED OR BANK CASHIER’S CHECK OR WIRE TRANSFER OF IMMEDIATELY AVAILABLE
FUNDS, AT SUCH ADDRESS OR TO SUCH ACCOUNT AS SUCH PURCHASER SPECIFIES IN WRITING
TO THE COMPANY AT LEAST FIVE BUSINESS DAYS BEFORE SUCH PAYMENT IS TO BE MADE.

3.2.          INTEREST AFTER MATURITY.  IN THE EVENT THE COMPANY SHALL FAIL TO
MAKE ANY PAYMENT OF THE PRINCIPAL AMOUNT OF, OR INTEREST ON, ANY NOTE WHEN DUE,
THE COMPANY SHALL PAY INTEREST ON SUCH UNPAID AMOUNT, PAYABLE FROM TIME TO TIME
ON DEMAND, FROM THE DATE SUCH AMOUNT SHALL HAVE BECOME DUE TO THE DATE OF
PAYMENT THEREOF (AFTER AS WELL AS BEFORE JUDGMENT), ACCRUING ON A DAILY BASIS,
AT A PER ANNUM RATE OF 12%.

3.3.          PAYMENTS AND COMPUTATIONS.

(a)           The Company will pay all sums becoming due on each Note for
interest or principal, without the presentation or surrender of the Note or the
making of any notation thereon, except that if a Note is paid in full (either in
cash or upon conversion), following such payment, the Note shall be surrendered
to the Company at their principal office for cancellation.

(b)           Interest on each Note shall be calculated for the actual number of
days (including the first day but excluding the last day of any relevant period)
elapsed and shall be computed on the basis of a 360-day year of twelve 30-day
months.  Each interest rate which is calculated under this Agreement and the
Note on any basis other than the actual number of days in a calendar year (the
“deemed interest period”) is, for purposes of the Interest Act (Canada),
equivalent to a yearly rate calculated by dividing such interest rate by the
number of day in the deemed interest period, then multiplying such result by the
actual number of days in the calendar year (365 or 366).

(c)           If a payment date is not a Business Day at a place of payment,
then (notwithstanding any other provision of this Agreement or the Notes)
payment of interest, premium or principal otherwise due on such date shall
instead be made at that place on the next succeeding Business Day and no
interest shall accrue on such payment for the intervening period.

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3.4.          PAYMENT AT MATURITY OR UPON CONVERSION.

(a)           The outstanding principal amount of each Note, together with any
accrued interest thereon, shall be due and payable in full in cash on the
earlier of:  (i) the Maturity Date, or (ii) such other date as the Note becomes
due and payable or purchasable pursuant to this Agreement.  Payment of principal
on the Notes will be made to each Purchaser by certified or bank cashier’s check
or wire transfer of immediately available funds, at such address and to such
account as the Purchaser shall specify in writing to the Company at least five
Business Days before such payment is to be made.

(B)           UPON ANY CONVERSION OF ANY NOTE IN ACCORDANCE WITH THE TERMS OF
SECTION 4 HEREUNDER, THE CONVERSION AMOUNT SHALL BE CONVERTED INTO A NUMBER OF
WHOLE COMMON SHARES AT THE CONVERSION RATE (AS DEFINED BELOW), WITH ANY
FRACTIONAL SHARES THAT MAY RESULT TREATED IN THE MANNER SET FORTH IN SECTION
4.1(A) OF THIS AGREEMENT.

4.             Conversion of Notes.  The Notes shall be convertible into Common
Shares on the terms and conditions set forth in this Section 4.

4.1.          Purchaser’s Conversion Right.  Subject to the provisions of
Section 4.5, at any time or times on or after the Closing Date, any Purchaser
shall be entitled to convert the Conversion Amount into fully paid and
nonassessable Common Shares in accordance with Section 4.1(a) at the Conversion
Rate (as defined below):

(a)           Conversion.  The number of Common Shares issuable upon conversion
of each Note pursuant to this Section 4.1 shall be determined according to the
following formula (the “Conversion Rate”):

(Conversion Amount/Conversion Price) + the Cumulative Dividend Adjustment for
that Note

No fractional Common Shares are to be issued upon the conversion of any Note,
but rather the Company, at its option, shall either (a) round up such fraction
to the nearest whole share, or (b) pay an amount in cash equal to the product of
(i) such fraction, multiplied by (ii) the Closing Sale Price of a Common Share
on the date of the Conversion Notice (as defined below), computed to the nearest
whole cent, in lieu of issuing a fractional share.

(b)           Mechanics of Conversion.  The conversion of Notes shall be
conducted in the following manner:

(i)            Purchaser’s Delivery Requirements.  To convert Notes into Common
Shares on any date (a “Conversion Date”), the Purchaser shall (A) transmit by
facsimile (or otherwise deliver), for receipt on or prior to 11:59 p.m., New
York City Time, on such date, a copy of a properly completed notice of
conversion executed by the registered Purchaser of the Notes subject to such
conversion in the form attached hereto as Exhibit C (the “Conversion Notice”) to
the Company and the Company’s designated transfer agent (the “Transfer Agent”)
and (B) surrender to a common carrier for delivery to the Company as soon as
practicable following such date the original Notes being converted (or
compliance with the procedures set forth in Section 10.3).

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(ii)           Company’s Response.  Upon receipt by the Company of copy of the
later of a Conversion Notice and the original Note, the Company shall (I) as
soon as practicable, but in any event within two (2) Trading Days, send, via
facsimile, a confirmation of receipt of such Conversion Notice to such Purchaser
and the Transfer Agent, which confirmation shall constitute an instruction to
the Transfer Agent to process such Conversion Notice in accordance with the
terms herein and (II) on or before the third (3rd) Trading Day following the
date of receipt by the Company of the later of such Conversion Notice and the
original Note (the “Share Delivery Date”), (A) provided the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer Program and the
Registration Statement (as defined in the Registration Rights Agreement) upon
which the Common Shares issuable upon conversion of the Notes has been declared
effective by the SEC, credit such aggregate number of Common Shares to which the
Purchaser shall be entitled to the Purchaser’s or its designee’s balance account
with DTC through its Deposit Withdrawal Agent Commission system, or (B) if the
Transfer Agent is not participating in the DTC Fast Automated Securities
Transfer Program, issue and deliver to the address as specified in the
Conversion Notice, a certificate, registered in the name of the Purchaser or its
designee, for the number of Common Shares to which the Purchaser shall be
entitled.  If the aggregate principal amount of the Note that is being converted
in accordance with the Conversion Note is less than that aggregate principal
amount of such Note being converted, then the Company shall, as soon as
practicable and in no event later than three (3) Business Days after receipt of
the original Note  (the “Note Delivery Date”) and at its own expense, issue and
deliver to the Purchaser a new Note representing the aggregate principal amount
of the Note not converted.

(iii)          Dispute Resolution.  In the case of a dispute as to the
determination of the Closing Sale Price or the arithmetic calculation of the
Conversion Rate, the Company shall instruct the Transfer Agent to issue to the
Purchaser the number of Common Shares that is not disputed and shall transmit an
explanation of the disputed determinations or arithmetic calculations to the
Purchaser via facsimile within two (2) Business Days of receipt of such
Purchaser’s Conversion Notice or other date of determination.  If such Purchaser
and the Company are unable to agree upon the determination of the Closing Sale
Price or arithmetic calculation of the Conversion Rate within two (2) Business
Days of such disputed determination or arithmetic calculation being transmitted
to the Purchaser, then the Company shall within two (2) Business Days submit via
facsimile (A) the disputed determination of the Closing Sale Price to an
independent, reputable investment bank selected by the Company and approved by
the Requisite Holders or (B) the disputed arithmetic calculation of the
Conversion Rate to the Company’s independent, outside accountant.  The Company
shall cause, at the Company’s expense, the investment bank or the accountant, as
the case may be, to perform the determinations or calculations and notify the
Company and the Purchasers of the results no later than two (2) Business Days
from the time it receives the disputed determinations or calculations.  Such
investment bank’s or accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent error.

(iv)          Record Holder.  The Person or Persons entitled to receive the
Common Shares issuable upon a conversion of Notes shall be treated for all
purposes as the record holder or holders of such Common Shares on the Conversion
Date.

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(v)           Pro Rata Conversion; Disputes.  In the event the Company receives
a Conversion Notice from more than one Purchaser for the same Conversion Date
and the Company can convert some, but not all, of such Notes, the Company shall
convert from each Purchaser electing to have Notes converted at such time a pro
rata amount of such Purchaser’s Notes submitted for conversion based on the
number of Notes submitted for conversion on such date by such Purchaser relative
to the number of Notes submitted for conversion on such date.  In the event of a
dispute as to the number of Common Shares issuable to a Purchaser in connection
with a conversion of Notes, the Company shall issue to such Purchaser the number
of Common Shares not in dispute and resolve such dispute in accordance with
Section 4.1(b)(iii).

4.2.          Conversion at the Company’s Election.  On any date (the
“Conversion Election Date”) after the eighteen (18) month anniversary of the
Closing Date, so long as (A) the Equity Conditions shall have been satisfied or
waived in writing by the applicable Purchaser from and including the date of the
Company Conversion Election Notice (as defined below) through and including the
Company Election Conversion Date (as defined below) and (B) on any twenty (20)
out of thirty (30) consecutive Trading Days immediately preceding the date of
the Company Conversion Election Notice, the Weighted Average Price of the Common
Shares exceeds 175% of the Conversion Price (as adjusted for any stock dividend,
stock split, stock combination or other similar transaction during such period),
the Company shall have the right, in its sole discretion, to require that some
or all of the outstanding Notes be converted (the “Company Conversion Election”)
at the applicable Conversion Rate; provided, however, that the Company may not
consummate more than one (1) Company Conversion in any thirty (30) Trading Day
period. The Company shall exercise its right to Company Conversion Election by
providing each Purchaser written notice (“Company Conversion Notice”) by
facsimile and overnight courier on the Conversion Election Date. The date on
which each of such Purchasers actually receives the Company Conversion Election
Notice is referred to herein as the “Company Conversion Election Notice Date.” 
If the Company elects to require conversion of some, but not all, of such Notes
then outstanding, the Company shall require conversion of an amount from each
Purchaser equal to the product of (I) the total number of Notes which the
Company has elected to convert multiplied by (II) such Purchaser’s Allocation
Percentage (such amount with respect to each Purchaser of such Notes being
referred to herein as its “Pro Rata Conversion Amount”). In the event that any
initial Purchaser of the Notes shall sell or otherwise transfer any of such
Purchaser’s Notes, the transferee shall be allocated a pro rata portion of such
Purchaser’s Allocation Percentage. The Company Conversion Election Notice shall
indicate (x) the aggregate principal amount of such Notes the Company has
selected for conversion, (y) the date selected by the Company for conversion
(the “Company Delivery Date”), which date shall be not less than twenty (20)
Trading Days or more than sixty (60) Trading Days after the Company Conversion
Election Notice Date, and (z) each Purchaser’s Pro Rata Conversion Amount.
Subject to the satisfaction of all the conditions of this Section 4.2, on the
Company Election Conversion Date each Purchaser of Notes selected for conversion
will be deemed to have submitted a Conversion Notice in accordance with Section
4.1(b)(i) for a the aggregate principal amount of Notes equal to such
Purchaser’s Pro Rata Conversion Amount. Notwithstanding the above, any Purchaser
may convert such Notes selected for conversion hereunder which shall reduce such
Purchaser’s Pro Rata Conversion Amount into Common Shares pursuant to Section
4.1 on or prior to the date immediately preceding the Company Election
Conversion Date.

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4.3.          Taxes.

(a)           Any and all payments made by the Company hereunder, including any
amounts received on a conversion or redemption of the Notes and any amounts on
account of interest payments or deemed interest payments, must be made by it
without any Tax Deduction, unless a Tax Deduction is required by law.  If the
Company is aware that it must make a Tax Deduction (or that there is a change in
the rate or the basis of a Tax Deduction), it must notify the affected
Purchasers promptly.

(b)           If a Tax Deduction is required by law to be made by the Company as
it applies on the Closing Date and to the affected Purchaser or Purchasers
according to their legal status and domicile as at the Closing Date, then the
amount of the payment due from the Company will be increased to an amount which
(after making the Tax Deduction including any Tax Deduction applicable to
additional sums payable pursuant to this Section 4.3(b)) leaves an amount equal
to the payment which would have been due if no Tax Deduction had been required
(“Additional Amount”).

(c)           If the Company is required to make a Tax Deduction, it must make
the minimum Tax Deduction allowed by law and must make any payment required in
connection with that Tax Deduction within the time allowed by law.  As soon as
practicable after making a Tax Deduction or a payment required in connection
with a Tax Deduction, the Company must deliver to the Purchaser any official
receipt or form, if any, provided by or required by the taxing authority to whom
the Tax Deduction was paid.

(d)           In the event that the Company fails to make a required Tax
Deduction or fails to remit a Tax Deduction to the applicable taxing authority,
the Company shall indemnify and hold harmless each Purchaser for the full amount
of any taxes, interest payments and penalties assessed against such Purchaser,
including the amount of any taxes payable by such Purchaser in respect of
payments received pursuant to this Section 4.3(d).

(e)           In addition, the Company agrees to pay in accordance with
applicable law any present or future stamp or documentary taxes or any other
excise or property taxes, charges or similar levies that arise from any payment
made hereunder or in connection with the execution, delivery, registration or
performance of, or otherwise with respect to, the Notes (“Other Taxes”). As soon
as practicable after making a payment of Other Taxes, the Company must deliver
to such Purchaser any official receipt or form, if any, provided by or required
by the taxing authority to whom the Tax Deduction was paid.

(f)            The obligations of the Company under this Section 4.3 shall
survive the Maturity Date of the Notes and the payment for the Notes and all
other amounts payable hereunder.

4.4.          Adjustments to Conversion Price. The Conversion Price will be
subject to adjustment from time to time as provided in this Section 4.4.

(a)           Adjustment of Conversion Price upon Issuance of Common Shares. If
and whenever on or after the Execution Date, the Company issues or sells, or in
accordance with this Section 4.4(a) is deemed to have issued or sold, any Common
Shares

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(including the issuance or sale of Common Shares owned or held by or for the
account of the Company, but excluding Common Shares deemed to have been issued
or sold by the Company in connection with any Excluded Security) for a
consideration per share (the “New Issuance Price”) less than the Conversion
Price in effect immediately prior to such issue or sale (the foregoing a
“Dilutive Issuance”), then immediately after such Dilutive Issuance, the
Conversion Price then in effect shall be reduced to an amount equal to the
product of (x) the Conversion Price in effect immediately prior to such issuance
or sale, and (y) the following fraction:

N(0) + N(1)
---------------
N(0) + N(2)

where:

N(0) =                  the number of Common Shares of the Company outstanding
immediately prior to such Dilutive Issuance (without taking into account the
conversion, exercise or exchange of any Convertible Securities, including the
Notes);

N(1) =                  the number of Common Shares of such the Company for
which the aggregate consideration, if any, received or receivable by the Company
for the total number of such additional Common Shares so issued, sold or deemed
issued or sold in such dilutive issuance would be convertible or exchangeable at
the Conversion Price for such Common Shares in effect immediately prior to such
Dilutive Issuance; and

N(2) =                  the number of such additional Common Shares
of the Company so issued, sold or deemed issued or sold in such Dilutive
Issuance.

For purposes of determining the adjusted Conversion Price under this Section
4.4(a), the following shall be applicable:

(i)            Issuance of Options. If the Company in any manner grants or sells
any Options and the lowest price per share for which one Common Share is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option is
less than the Conversion Price in effect immediately prior to such issue or
sale, then each such Common Share underlying such Option shall be deemed to be
outstanding and to have been issued and sold by the Company at the time of the
granting or sale of such Option for such price per share. For purposes of this
Section 4.4(a)(i), the “lowest price per share for which one Common Share is
issuable upon the exercise of any such Option or upon conversion or exchange or
exercise of any Convertible Securities issuable upon exercise of such Option”
shall be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one Common Share upon
granting or sale of the Option, upon exercise of the Option and upon conversion
or exchange or exercise of any Convertible Security issuable upon exercise of
such Option. No further adjustment of the Conversion Price shall be made upon
the actual issuance of such Common Share or of such Convertible Securities upon
the exercise of such Options or

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upon the actual issuance of such Common Shares upon conversion or exchange or
exercise of such Convertible Securities.

(ii)           Issuance of Convertible Securities. If the Company in any manner
issues or sells any Convertible Securities and the lowest price per share for
which one Common Share is issuable upon such conversion or exchange or exercise
thereof is less than the Conversion Price in effect immediately prior to such
issue or sale, then each such Common Share underlying such Convertible
Securities shall be deemed to be outstanding and to have been issued and sold by
the Company at the time of the issuance or sale of such Convertible Securities
for such price per share. For the purposes of this Section 4.4(a)(ii), the
“lowest price per share for which one Common Share is issuable upon such
conversion or exchange or exercise” shall be equal to the sum of the lowest
amounts of consideration (if any) received or receivable by the Company with
respect to any one Common Share upon the issuance or sale of the Convertible
Security and upon the conversion or exchange or exercise of such Convertible
Security. No further adjustment of the Conversion Price shall be made upon the
actual issuance of such Common Share upon conversion or exchange or exercise of
such Convertible Securities, and if any such issue or sale of such Convertible
Securities is made upon exercise of any Options for which adjustment of the
Conversion Price had been or are to be made pursuant to other provisions of this
Section 4.4(a), no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.

(iii)          Change in Option Price or Rate of Conversion. If the purchase
price provided for in any Options, the additional consideration, if any, payable
upon the issue, conversion,  exchange or exercise of any Convertible Securities,
or the rate at which any Convertible Securities are convertible into or
exchangeable or exercisable for Common Shares changes at any time, the
Conversion Price in effect at the time of such change shall be adjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities provided for such changed purchase price, additional
consideration or changed conversion rate, as the case may be, at the time
initially granted, issued or sold. For purposes of this Section 4.4(a)(iii), if
the terms of any Option or Convertible Security that was outstanding as of the
Execution Date are changed in the manner described in the immediately preceding
sentence, then such Option or Convertible Security and the Common Shares deemed
issuable upon exercise, conversion or exchange thereof shall be deemed to have
been issued as of the date of such change. No adjustment shall be made if such
adjustment would result in an increase of the Conversion Price then in effect.

(iv)          Calculation of Consideration Received. In case any Option is
issued in connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the Options
will be deemed to have been issued for a consideration of $0.01. If any Common
Shares, Options or Convertible Securities are issued or sold or deemed to have
been issued or sold for cash, the consideration received therefor will be deemed
to be the net amount received by the Company therefor. If any Common Shares,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company will be the fair value of such consideration, except where such
consideration consists of publicly traded securities, in which case the amount
of consideration received by the Company will be the Closing Sale Price of such

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securities on the date of receipt of such securities. If any Common Shares,
Options or Convertible Securities are issued to the owners of the non-surviving
entity in connection with any merger in which the Company is the surviving
entity, the amount of consideration therefor will be deemed to be the fair value
of such portion of the net assets and business of the non-surviving entity as is
attributable to such Common Shares, Options or Convertible Securities, as the
case may be. The fair value of any consideration other than cash or publicly
traded securities will be determined jointly by the Company and the Requisite
Holders. If such parties are unable to reach agreement within ten (10) days
after the occurrence of an event requiring valuation (the “Valuation Event”),
the fair value of such consideration will be determined within ten (10) Business
Days after the tenth (10th) day following the Valuation Event by an independent,
reputable appraiser jointly selected by the Company and the Requisite Holders.
The determination of such appraiser shall be deemed binding upon all parties
absent manifest error and the fees and expenses of such appraiser shall be borne
by the Company.

(v)           Record Date. If the Company takes a record of the holders of
Common Shares for the purpose of entitling them (I) to receive a dividend or
other distribution payable in Common Shares, Options or in Convertible
Securities or (II) to subscribe for or purchase Common Shares, Options or
Convertible Securities, then such record date will be deemed to be the date of
the issue or sale of the Common Shares deemed to have been issued or sold upon
the declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.

(b)           Adjustment of Conversion Price upon Subdivision or Combination of
Common Shares. If the Company at any time after the Execution Date subdivides
(by any share split, share dividend, recapitalization or otherwise) its
outstanding Common Shares into a greater number of shares, the Conversion Price
in effect immediately prior to such subdivision will be proportionately reduced.
If the Company at any time after the Execution Date combines (by combination,
reverse share split or otherwise) its outstanding Common Shares into a smaller
number of shares and the Conversion Price in effect immediately prior to such
combination will be proportionately increased.

(c)           Other Events. If any event occurs of the type contemplated by the
provisions of this Section 4.4 but not expressly provided for by such provisions
(including, without limitation, the granting of share appreciation rights,
“phantom stock rights” or other rights with equity features), then the Company’s
Board of Directors will make an appropriate adjustment in the Conversion Price
so as to protect the rights of the Purchasers; provided that no such adjustment
will increase the Conversion Price as otherwise determined pursuant to this
Section 4.4.

(d)           Notices.

(i)            Immediately upon any adjustment of the Conversion Price pursuant
to Section 4.4, the Company will give written notice thereof to each Purchaser,
setting forth in reasonable detail, and certifying, the calculation of such
adjustment. In the case of a dispute as to the determination of such adjustment,
then such dispute shall be resolved in accordance with the procedures set forth
in Section 4.1(b)(iii).

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(ii)           The Company will give written notice to each Purchaser at least
ten (10) Business Days prior to the date on which the Company closes its books
or takes a record (I) with respect to any dividend or distribution upon the
Common Shares, (II) with respect to any pro rata subscription offer to holders
of Common Shares or (III) for determining rights to vote with respect to any
Fundamental Transaction, provided that such information shall be made known to
the public prior to or in conjunction with such notice being provided to such
Purchaser.

(iii)          The Company will also give written notice to each Purchaser at
least ten (10) Business Days prior to the date on which any Fundamental
Transaction will take place, provided that such information shall be made known
to the public prior to or in conjunction with such notice being provided to such
Purchaser.

(e)           Additional Notes; Variable Securities; Dilutive Issuances. For so
long as any Notes are outstanding, the Company will not, without the prior
written consent of the Requisite Holders, issue any Notes and the Company shall
not issue any other securities that would cause a breach or default under this
Agreement other than those issued pursuant to the Series B Note Purchase
Agreement. For so long as any Notes remain outstanding, the Company shall not,
in any manner, issue or sell any rights, warrants or options to subscribe for or
purchase Common Shares or directly or indirectly convertible into or
exchangeable or exercisable for Common Shares at a conversion, exchange or
exercise price which varies or may vary after issuance with the market price of
the Common Shares, including by way of one or more reset(s) to any fixed price
unless the conversion, exchange or exercise price of any such security cannot be
less than the then applicable Conversion Price with respect to the Common Shares
into which any Notes are convertible.

4.5.          Limitation on Beneficial Ownership. The Company shall not effect
any conversion of Notes, and no Purchaser shall have the right to convert any
Notes, to the extent that after giving effect to such conversion, the beneficial
owner of such shares (together with such Person’s Affiliates) would have
acquired, through conversion of Notes or otherwise, beneficial ownership of a
number of Common Shares that exceeds 9.99% (“Maximum Percentage”) of the number
of Common Shares outstanding immediately after giving effect to such
conversion.  For purposes of the foregoing, the number of Common Shares
beneficially owned by a Person and its Affiliates shall include the number of
Common Shares issuable upon conversion of the Notes with respect to which the
determination of such sentence is being made, but shall exclude the number of
Common Shares which would be issuable upon (A) conversion of the remaining,
nonconverted Notes beneficially owned by such Person or any of its Affiliates
and (B) exercise or conversion of the unexercised or unconverted portion of any
other securities of the Company (including, without limitation, any other notes,
preferred shares or warrants) subject to a limitation on conversion or exercise
analogous to the limitation contained in this Section beneficially owned by such
Person or any of its Affiliates. Except as set forth in the preceding sentence,
for purposes of this Section 4.5, beneficial ownership shall be calculated in
accordance with Section 13(d) of the 1934 Act. For purposes of this Section 4.5,
in determining the number of outstanding Common Shares, a Purchaser may rely on
the number of outstanding Common Shares as reflected in (1) the Company’s most
recent Form 10-K, Form 10-KSB, Form 10-Q, Form 10-QSB or Form 8-K, as the case
may be, (2) a more recent public announcement by the Company, or (3) any other
notice by the Company or the Transfer Agent setting forth the number of Common
Shares outstanding. For any reason at any time, upon the written request of

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any Purchaser, the Company shall within one (1) Business Day following the
receipt of such notice, confirm orally and in writing to any such Purchaser the
number of Common Shares then outstanding. In any case, the number of outstanding
Common Shares shall be determined after giving effect to the conversion or
exercise of securities of the Company, including the Notes, by such Purchaser
and its Affiliates since the date as of which such number of outstanding Common
Shares was reported. By written notice to the Company, any Purchaser may from
time to time increase or decrease the Maximum Percentage to any other percentage
not in excess of 19.99% nor below 9.99% as specified in such notice; provided,
that (I) any such increase or decrease will not be effective until the
sixty-first (61st) day after such written notice is delivered to the Company,
and (II) any such increase or decrease will apply only to the Purchaser
providing such written notice and not to any other Purchaser.

4.6.          LIMITATION ON NUMBER OF COMMON SHARES ISSUABLE UPON CONVERSION OF
NOTES. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE COMPANY
SHALL NOT ISSUE ANY COMMON SHARES UPON CONVERSION OF THE NOTES IF THE ISSUANCE
OF SUCH COMMON SHARES WOULD:

(A)           EXCEED THAT NUMBER COMMON SHARES WHICH THE COMPANY MAY ISSUE UPON
CONVERSION OF THE NOTES WITHOUT BREACHING THE COMPANY’S OBLIGATIONS UNDER THE
RULES OR REGULATIONS OF THE PRINCIPAL MARKET, OR ANY OTHER THE MARKET OR
EXCHANGE WHERE THE COMMON SHARES ARE THEN TRADED (THE “EXCHANGE CAP”); OR

(b)           be an issuance of Common Shares at an effective issue price per
Common Share that is less than the market price for the Common Shares (as
defined pursuant to Section 601 of the Toronto Stock Exchange Company Manual) as
at the date on which the Company entered into this Agreement, less a discount of
twenty percent (20%), except that such limitations shall not apply in the event
that the Company (c) obtains Shareholder Approval as required by the applicable
rules of both the Principal Market and the Toronto Stock Exchange (and any
successor rules or regulations) for issuances of Common Shares in excess of such
number of Common Shares, or at an effective price per Common Share that is less
than such discount from the market price, or (d) obtains a written opinion from
outside counsel to the Company that such approval is not required, which opinion
shall be reasonably satisfactory to the Required Holders. Until such approval or
written opinion is obtained, no Purchaser shall be issued, in the aggregate,
upon conversion of the Notes, Common Shares in an amount greater than the
product of (i) the Exchange Cap amount multiplied by (ii) their Allocation
Percentage (the “Exchange Cap Allocation”) nor shall the Company issue any
Common Shares at an effective price per Common Share that is less than such
discount from the market price. In the event that any Purchaser shall sell or
otherwise transfer any of such Purchaser’s Notes, the transferee shall be
allocated a pro rata portion of such Purchaser’s Exchange Cap Allocation. In the
event that any Purchaser shall convert all of such Purchaser’s Notes into a
number of Common Shares which, in the aggregate, is less than such Purchaser’s
Exchange Cap Allocation, then the difference between such Purchaser’s Exchange
Cap Allocation and the number of Common Shares actually issued to such Purchaser
shall be allocated to the respective Exchange Cap Allocations of the remaining
Purchasers on a pro rata basis in proportion to the number of Notes then held by
each such Purchaser.

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5.             REPRESENTATIONS AND WARRANTIES OF THE COMPANY.  THE COMPANY
HEREBY REPRESENTS AND WARRANTS TO THE PURCHASERS AND THE PLACEMENT AGENTS THAT,
EXCEPT AS SET FORTH IN THE SCHEDULES DELIVERED HEREWITH (COLLECTIVELY, THE
“DISCLOSURE SCHEDULES”):

5.1.          ORGANIZATION, GOOD STANDING AND QUALIFICATION.  THE COMPANY IS A
COMPANY VALIDLY EXISTING AND IN GOOD STANDING UNDER THE BUSINESS CORPORATIONS
ACT (BRITISH COLUMBIA) AND HAS ALL REQUISITE POWER AND AUTHORITY TO CARRY ON ITS
BUSINESS AS NOW CONDUCTED AND TO OWN ITS PROPERTIES.  EACH SUBSIDIARY IS AN
ENTITY DULY INCORPORATED OR OTHERWISE ORGANIZED, VALIDLY EXISTING AND IN GOOD
STANDING UNDER THE LAWS OF THE JURISDICTION OF ITS INCORPORATION OR ORGANIZATION
(AS APPLICABLE), WITH THE REQUISITE POWER AND AUTHORITY TO OWN AND USE ITS
PROPERTIES AND ASSETS AND TO CARRY ON ITS BUSINESS AS CURRENTLY CONDUCTED. THE
COMPANY AND EACH SUBSIDIARY IS DULY QUALIFIED TO DO BUSINESS AND IS IN GOOD
STANDING IN EACH JURISDICTION IN WHICH THE CONDUCT OF ITS BUSINESS OR ITS
OWNERSHIP OR ITS LEASING OF PROPERTY MAKES SUCH QUALIFICATION NECESSARY, UNLESS
THE FAILURE TO SO QUALIFY WOULD HAVE A MATERIAL ADVERSE EFFECT.  THE COMPANY IS
PRESENTLY A REPORTING ISSUER IN THE CANADIAN PROVINCES OF BRITISH COLUMBIA,
ALBERTA AND ONTARIO AND IS NOT IN DEFAULT OF THE APPLICABLE SECURITIES
LEGISLATION OF SUCH PROVINCES.

5.2.          AUTHORIZATION.  THE COMPANY HAS FULL POWER AND AUTHORITY AND HAS
TAKEN ALL REQUISITE ACTION ON THE PART OF THE COMPANY, ITS OFFICERS, DIRECTORS
AND SHAREHOLDERS NECESSARY FOR (I) THE AUTHORIZATION, EXECUTION AND DELIVERY OF
THE NOTE DOCUMENTS; (II) AUTHORIZATION OF THE PERFORMANCE OF ALL OBLIGATIONS OF
THE COMPANY HEREUNDER OR THEREUNDER; AND (III) THE AUTHORIZATION, ISSUANCE AND
DELIVERY OF THE NOTES AND THE COMMON SHARES UPON CONVERSION OF THE NOTES IN
ACCORDANCE WITH THE TERMS THEREOF  THE NOTE DOCUMENTS CONSTITUTE THE LEGAL,
VALID AND BINDING OBLIGATIONS OF THE COMPANY, ENFORCEABLE AGAINST THE COMPANY IN
ACCORDANCE WITH THEIR RESPECTIVE TERMS, SUBJECT TO BANKRUPTCY, INSOLVENCY,
FRAUDULENT TRANSFER, REORGANIZATION, MORATORIUM AND SIMILAR LAWS OF GENERAL
APPLICABILITY, RELATING TO OR AFFECTING CREDITORS’ RIGHTS GENERALLY.

5.3.          CAPITALIZATION.

(A)           SCHEDULE 5.3 SETS FORTH (I) THE AUTHORIZED CAPITAL SHARES OF THE
COMPANY ON THE DATE HEREOF, (II) THE NUMBER OF CAPITAL SHARES ISSUED AND
OUTSTANDING AS OF DECEMBER 31, 2006, (III) THE NUMBER OF CAPITAL SHARES ISSUABLE
PURSUANT TO THE COMPANY’S SHARE PLANS AS OF DECEMBER 31, 2006, AND (IV) THE
NUMBER OF CAPITAL SHARES ISSUABLE AND RESERVED FOR ISSUANCE PURSUANT TO
SECURITIES EXERCISABLE FOR, OR CONVERTIBLE INTO OR EXCHANGEABLE FOR ANY CAPITAL
SHARES OF THE COMPANY AS OF DECEMBER 31, 2006.  ALL OF THE ISSUED AND
OUTSTANDING COMPANY CAPITAL SHARES HAVE BEEN DULY AUTHORIZED AND VALIDLY ISSUED
AND ARE FULLY PAID, NONASSESSABLE AND FREE OF PRE-EMPTIVE RIGHTS.  OTHER THAN
THE PURCHASERS UPON CLOSING, NO PERSON IS ENTITLED TO PRE-EMPTIVE OR SIMILAR
STATUTORY OR CONTRACTUAL RIGHTS WITH RESPECT TO ANY SECURITIES OF THE COMPANY. 
EXCEPT AS DESCRIBED ON SCHEDULE 5.3 OR PURSUANT TO THIS AGREEMENT, (I) THERE ARE
NO OUTSTANDING WARRANTS, OPTIONS, CONVERTIBLE SECURITIES OR OTHER RIGHTS,
AGREEMENTS OR ARRANGEMENTS OF ANY CHARACTER UNDER WHICH THE COMPANY IS OR MAY BE
OBLIGATED TO ISSUE ANY EQUITY SECURITIES OF ANY KIND AND, EXCEPT AS CONTEMPLATED
BY THIS AGREEMENT, (II) THERE ARE NO OUTSTANDING DEBT SECURITIES, NOTES,
INDENTURES, CREDIT AGREEMENTS, OR CREDIT FACILITIES OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES OR BY WHICH THE COMPANY OR ANY OF ITS SUBSIDIARIES IS OR MAY BECOME
BOUND, (III) THERE ARE NO OUTSTANDING SECURITIES OR INSTRUMENTS OF THE COMPANY
OR ANY OF ITS SUBSIDIARIES WHICH CONTAIN ANY REDEMPTION OR SIMILAR PROVISIONS,
AND THERE ARE NO CONTRACTS, COMMITMENTS, UNDERSTANDINGS

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or arrangements by which the Company or any of its Subsidiaries is or may become
bound to redeem a security of the Company or any of its Subsidiaries, (iv) the
Company does not have any stock appreciation rights or “phantom stock” plans or
agreements or any similar plan or agreement, and (v) the Company is not
currently in negotiations for the issuance of any equity securities of any
kind.  Except as described on Schedule 5.3, there are no voting agreements,
buy-sell agreements, option or right of first purchase agreements or other
agreements of any kind among the Company and any of the security holders of the
Company relating to the securities of the Company.  Except as described on
Schedule 5.3, the Company has not granted any Person the right to require the
Company to register any securities of the Company under the 1933 Act, or qualify
the distribution of any securities of the Company by prospectus under any
Canadian securities laws whether on a demand basis or in connection with the
registration or qualification by prospectus of securities of the Company for its
own account or for the account of any other Person, except as contemplated by
the Registration Rights Agreement.

(B)           EXCEPT AS DESCRIBED ON SCHEDULE 5.3 AND IN THIS AGREEMENT, THE
ISSUANCE AND SALE OF THE NOTES HEREUNDER WILL NOT OBLIGATE THE COMPANY TO ISSUE
COMMON SHARES OR OTHER SECURITIES TO ANY OTHER PERSON (OTHER THAN THE
PURCHASERS) AND WILL NOT RESULT IN THE ADJUSTMENT OF THE EXERCISE, CONVERSION,
EXCHANGE OR RESET PRICE OF ANY OUTSTANDING SECURITY.

(C)           EXCEPT AS SET FORTH ON SCHEDULE 5.3 AND IN THIS AGREEMENT, THE
COMPANY DOES NOT HAVE OUTSTANDING SHAREHOLDER PURCHASE RIGHTS OR ANY SIMILAR
ARRANGEMENT IN EFFECT GIVING ANY PERSON THE RIGHT TO PURCHASE ANY EQUITY
INTEREST IN THE COMPANY UPON THE OCCURRENCE OF CERTAIN EVENTS OR OTHERWISE.

5.4.          Subsidiaries.  Schedule 5.4 sets forth the direct and indirect
subsidiaries of the Company.  The Company owns, directly or indirectly, all of
the capital stock of each Subsidiary free and clear of any and all liens,
encumbrances and restrictions, and all the issued and outstanding shares of
capital stock of each Subsidiary are validly issued and are fully paid,
nonassessable and free of preemptive and similar rights.  The Company or one of
its Subsidiaries has the unrestricted right to vote, and (subject to limitations
imposed by applicable law) to receive dividends and distributions on, all
capital securities of its Subsidiaries as owned by the Company or such
Subsidiary.  Neither the Company nor any Subsidiary is party to any material
joint venture, nor has any ownership interest in any other entity that is
material to the Company and not disclosed in the SEC Filings and the SEDAR
Filings.

5.5.          VALID ISSUANCE.

(A)           THE NOTES HAVE BEEN DULY AND VALIDLY AUTHORIZED AND, WHEN ISSUED
AND PAID FOR PURSUANT TO THIS AGREEMENT, WILL BE VALIDLY ISSUED, FULLY PAID AND
NONASSESSABLE, AND SHALL BE FREE AND CLEAR OF ALL LIENS, ENCUMBRANCES AND
RESTRICTIONS, EXCEPT FOR RESTRICTIONS ON TRANSFER SET FORTH IN THE NOTE
DOCUMENTS OR IMPOSED BY APPLICABLE SECURITIES LAWS.

(b)           Upon conversion of the Notes in accordance with this Agreement,
the Common Shares will be validly issued, fully paid and nonassessable free and
clear of all encumbrances and restrictions, except for restrictions on transfers
and preemptive rights set forth in the Note Documents or imposed by applicable
securities laws. The Company has reserved sufficient number of Common Shares for
issuance upon the conversion of the Notes, free and

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clear of all encumbrances and restrictions, except for restrictions on transfers
and preemptive rights set forth  in the Note Documents or imposed by applicable
securities laws.

5.6.          CONSENTS.  THE EXECUTION, DELIVERY AND PERFORMANCE BY THE COMPANY
OF THE NOTE DOCUMENTS AND THE OFFER, ISSUANCE AND SALE OF THE NOTES REQUIRE NO
CONSENT OF, ACTION BY OR IN RESPECT OF, OR FILING WITH, ANY PERSON, GOVERNMENTAL
BODY, AGENCY, OR OFFICIAL OTHER THAN THOSE FILINGS AND CONSENTS SET FORTH ON
SCHEDULE 5.6, CONSENTS OR FILINGS THAT HAVE ALREADY BEEN OBTAINED, FILINGS WITH
AND APPROVAL BY AMEX AND TSX, THE FILINGS WITH THE SEC OF ONE OR MORE
REGISTRATION STATEMENTS IN ACCORDANCE WITH THE REGISTRATION RIGHTS AGREEMENT,
FILINGS REQUIRED BY SECTION 12.7 HEREOF, AND FILINGS THAT HAVE BEEN MADE
PURSUANT TO APPLICABLE STATE SECURITIES LAWS AND POST-SALE FILINGS PURSUANT TO
APPLICABLE STATE AND FEDERAL SECURITIES LAWS AND APPLICABLE LAWS OF THE
SECURITIES REGULATORY AUTHORITIES IN THE PROVINCES AND TERRITORIES OF CANADA
WHICH THE COMPANY UNDERTAKES TO FILE WITHIN THE APPLICABLE TIME PERIODS.

5.7.          DELIVERY OF SEC FILINGS AND SEDAR FILINGS; BUSINESS.  ALL REPORTS
AND OTHER DOCUMENTS FILED BY THE COMPANY SINCE JANUARY 1, 2004 (I) PURSUANT TO
THE 1934 ACT THROUGH THE SEC’S ELECTRONIC DATA GATHERING, ANALYSIS AND RETRIEVAL
(“EDGAR”) SYSTEM AND PRIOR TO THE DATE HEREOF (COLLECTIVELY, THE “SEC FILINGS”)
AND (II) WITH THE SECURITIES REGULATORY AUTHORITIES IN THE PROVINCES AND
TERRITORIES OF CANADA THROUGH THE SYSTEM FOR ELECTRONIC DOCUMENT ANALYSIS AND
RETRIEVAL AND PRIOR TO THE DATE HEREOF (COLLECTIVELY, THE “SEDAR FILINGS”) ARE
PUBLICLY AVAILABLE FOR VIEWING BY PURCHASERS.  THE SEC FILINGS ARE THE ONLY
FILINGS REQUIRED OF THE COMPANY PURSUANT TO THE 1934 ACT FOR SUCH PERIOD AND THE
SEDAR FILINGS ARE THE ONLY FILINGS REQUIRED OF THE COMPANY PURSUANT TO THE LAWS,
RULES AND REGULATIONS OF THE SECURITIES REGULATORY AUTHORITIES IN THE PROVINCES
AND TERRITORIES OF CANADA FOR SUCH PERIOD.

5.8.          USE OF PROCEEDS.  THE PROCEEDS OF THE SALE OF THE NOTES HEREUNDER
SHALL BE USED BY THE COMPANY TO REPAY DEBT AND FOR GENERAL CORPORATE AND WORKING
CAPITAL PURPOSES.

5.9.          NO MATERIAL ADVERSE CHANGE.  EXCEPT AS IDENTIFIED AND DESCRIBED IN
THE SEC FILINGS OR THE SEDAR FILINGS OR AS DESCRIBED ON SCHEDULE 5.9(A), SINCE
SEPTEMBER 30, 2006, THERE HAS NOT BEEN:

(a)           any change in the consolidated assets, liabilities, financial
condition or operating results of the Company from that reflected in the
financial statements included in the SEC Filings or the SEDAR Filings, except
for changes in the ordinary course of business which would not have a Material
Adverse Effect, individually or in the aggregate;

(b)           any declaration or payment of any dividend, or any authorization
or payment of any distribution, on any of the capital shares of the Company, or
any redemption or repurchase of any securities of the Company;

(c)           any material damage, destruction or loss, whether or not covered
by insurance to any assets or properties of the Company;

(d)           any waiver, not in the ordinary course of business, by the Company
of a material right or of a material debt owed to it;

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(e)           any satisfaction or discharge of any lien, claim or encumbrance or
payment of any obligation by the Company, except in the ordinary course of
business and which is not material to the assets, properties, financial
condition, operating results or business of the Company;

(f)            any change or amendment to the Company’s Notice of Articles and
Articles or material change to any Material Contract by which the Company is
bound or to which any of their respective assets or properties is subject;

(g)           any material labor difficulties or labor union organizing
activities with respect to employees of the Company;

(h)           any transaction entered into by the Company other than in the
ordinary course of business (other than as contemplated by the Note Documents);

(i)            the loss of the services of any key employee, or material change
in the composition or duties of the senior management of the Company;

(j)            the loss or threatened loss of any customer which had or would
have a Material Adverse Effect;

(k)           sold any assets, individually or in the aggregate, in excess of
US$500,000 outside of the ordinary course of business;

(l)            had capital expenditures, individually or in the aggregate, in
excess of US$1,500,000; or

(m)          any other event or condition of any character that had or would
have a Material Adverse Effect; provided, however, any decline in the market
price of the Company’s Common Shares as a result of the transactions
contemplated by the Note Documents, the public announcement thereof, or change
in the general economic or industry conditions shall not be deemed to be such an
event or condition.

5.10.        SEC FILINGS; SEDAR FILINGS.  AT THE TIME OF FILING THEREOF, (I) THE
SEC FILINGS COMPLIED AS TO FORM IN ALL MATERIAL RESPECTS WITH THE REQUIREMENTS
OF THE 1934 ACT; AND (II) THE SEDAR FILINGS COMPLIED AS TO FORM IN ALL MATERIAL
RESPECTS WITH THE LAWS, RULES AND REGULATIONS OF THE SECURITIES REGULATORY
AUTHORITIES IN THE PROVINCES AND TERRITORIES OF CANADA, AND NEITHER THE SEC
FILINGS NOR THE SEDAR FILINGS CONTAINED ANY UNTRUE STATEMENT OF A MATERIAL FACT
OR OMITTED TO STATE ANY MATERIAL FACT NECESSARY IN ORDER TO MAKE THE STATEMENTS
MADE THEREIN, IN THE LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT
MISLEADING.  THE SEDAR FILINGS DID NOT CONTAIN ANY “MISREPRESENTATION” WITHIN
THE MEANING OF CANADIAN SECURITIES LAWS.  THE COMPANY IS NOT (WITH OR WITHOUT
THE LAPSE OF TIME OR THE GIVING OF NOTICE, OR BOTH) IN MATERIAL BREACH OR
DEFAULT OF ANY MATERIAL CONTRACT AND, TO THE COMPANY’S KNOWLEDGE, NO OTHER PARTY
TO ANY MATERIAL CONTRACT IS (WITH OR WITHOUT THE LAPSE OF TIME OR THE GIVING OF
NOTICE, OR BOTH) IN MATERIAL BREACH OR DEFAULT OF ANY MATERIAL CONTRACT.  THE
COMPANY HAS NOT RECEIVED ANY NOTICE OF THE INTENTION OF ANY PARTY TO TERMINATE
ANY MATERIAL CONTRACT.

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5.11.        NO CONFLICT, BREACH, VIOLATION OR DEFAULT.  THE EXECUTION, DELIVERY
AND PERFORMANCE OF THE NOTE DOCUMENTS BY THE COMPANY AND THE ISSUANCE AND SALE
OF THE NOTES WILL NOT CONFLICT WITH OR RESULT IN A BREACH OR VIOLATION OF ANY OF
THE TERMS AND PROVISIONS OF, OR CONSTITUTE A DEFAULT UNDER (I) THE COMPANY’S
NOTICE OF ARTICLES AND ARTICLES, BOTH AS IN EFFECT ON THE DATE HEREOF, OR ANY
SUBSIDIARY’S CERTIFICATE OR ARTICLES OF INCORPORATION, BYLAWS OR OTHER
ORGANIZATIONAL OR CHARTER DOCUMENTS, EACH AS IN EFFECT ON THE DATE HEREOF; OR
(II)(A) ANY STATUTE, RULE, REGULATION OR ORDER OF ANY GOVERNMENTAL AGENCY OR
BODY OR ANY COURT, DOMESTIC OR FOREIGN, HAVING JURISDICTION OVER THE COMPANY,
ANY SUBSIDIARY OR ANY OF THEIR RESPECTIVE ASSETS OR PROPERTIES, OR (B) EXCEPT AS
SET FORTH ON SCHEDULE 5.11, ANY MATERIAL CONTRACT TO WHICH THE COMPANY OR ANY
SUBSIDIARY IS A PARTY OR BY WHICH THE COMPANY OR ANY SUBSIDIARY IS BOUND OR TO
WHICH ANY OF ITS ASSETS OR PROPERTIES IS SUBJECT.

5.12.        TAX MATTERS.  THE COMPANY AND EACH OF ITS SUBSIDIARIES HAS TIMELY
PREPARED AND FILED ALL TAX RETURNS REQUIRED TO HAVE BEEN FILED BY THE COMPANY
AND EACH OF ITS SUBSIDIARIES WITH ALL APPROPRIATE GOVERNMENTAL AGENCIES AND
TIMELY PAID ALL TAXES SHOWN THEREON OR OTHERWISE OWED BY THEM, EXCEPT TO THE
EXTENT BEING DISPUTED IN GOOD FAITH OR WOULD NOT HAVE A MATERIAL ADVERSE
EFFECT.  THE CHARGES, ACCRUALS AND RESERVES ON THE BOOKS OF THE COMPANY IN
RESPECT OF TAXES FOR ALL FISCAL PERIODS ARE ADEQUATE IN ALL MATERIAL RESPECTS,
AND THERE ARE NO MATERIAL UNPAID ASSESSMENTS AGAINST THE COMPANY NOR, TO THE
COMPANY’S KNOWLEDGE, ANY BASIS FOR THE ASSESSMENT OF ANY ADDITIONAL TAXES,
PENALTIES OR INTEREST FOR ANY FISCAL PERIOD OR AUDITS BY ANY FOREIGN, FEDERAL,
STATE OR LOCAL TAXING AUTHORITY EXCEPT FOR ANY ASSESSMENT THAT IS NOT MATERIAL
TO THE COMPANY.  ALL TAXES AND OTHER ASSESSMENTS AND LEVIES THAT THE COMPANY IS
REQUIRED TO WITHHOLD OR TO COLLECT FOR PAYMENT HAVE BEEN DULY WITHHELD AND
COLLECTED AND PAID TO THE PROPER GOVERNMENTAL ENTITY OR THIRD PARTY WHEN DUE,
EXCEPT TO THE EXTENT BEING DISPUTED IN GOOD FAITH OR WOULD NOT HAVE A MATERIAL
ADVERSE EFFECT.  THERE ARE NO TAX LIENS OR CLAIMS PENDING OR, TO THE COMPANY’S
KNOWLEDGE, THREATENED AGAINST THE COMPANY, ANY OF ITS SUBSIDIARIES OR ANY OF ITS
ASSETS OR PROPERTY.  EXCEPT AS DESCRIBED ON SCHEDULE 5.12, THERE ARE NO
OUTSTANDING TAX SHARING AGREEMENTS OR OTHER SUCH ARRANGEMENTS BETWEEN THE
COMPANY OR ANY SUBSIDIARY AND ANY OTHER ENTITY AND NEITHER THE COMPANY NOR ANY
SUBSIDIARY IS PRESENTLY UNDERGOING ANY AUDIT BY A TAXING AUTHORITY, OR HAS
WAIVED OR EXTENDED ANY STATUTE OF LIMITATIONS AT THE REQUEST OF ANY TAKING
AUTHORITY.

5.13.        TITLE TO PROPERTIES.

(A)           EXCEPT AS DISCLOSED IN THE SEC FILINGS OR THE SEDAR FILINGS, EACH
OF THE COMPANY AND ITS SUBSIDIARIES HAS GOOD TITLE TO ALL REAL PROPERTIES AND
ALL OTHER PROPERTIES AND ASSETS OWNED BY IT, IN EACH CASE FREE FROM LIENS,
ENCUMBRANCES AND DEFECTS, EXCEPT AS WOULD NOT INDIVIDUALLY OR IN THE AGGREGATE
WOULD HAVE A MATERIAL ADVERSE EFFECT; AND EXCEPT AS DISCLOSED IN THE SEC FILINGS
OR THE SEDAR FILINGS, THE COMPANY AND EACH SUBSIDIARY HOLDS ANY LEASED REAL OR
PERSONAL PROPERTY UNDER VALID AND ENFORCEABLE LEASES WITH NO EXCEPTIONS THAT
WOULD MATERIALLY INTERFERE WITH THE USE MADE OR CURRENTLY PLANNED TO BE MADE
THEREOF BY THEM, EXCEPT AS WOULD NOT INDIVIDUALLY OR IN THE AGGREGATE WOULD HAVE
A MATERIAL ADVERSE EFFECT.

(b)           All interests in natural resource properties of the Company and
its Subsidiaries as disclosed in the SEC Filings and the SEDAR Filings are in
all material respects: (i) owned or held by the Company or a Subsidiary as owner
thereof with good title; (ii) valid and enforceable; and (iii) free and clear of
any liens, charges or encumbrances, and no royalty is

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payable in respect of any of them except as disclosed in the SEC Filings and the
SEDAR Filings, except as would not individually or in the aggregate would have a
Material Adverse Effect; no other material property rights are necessary for the
conduct of the Company’s and each Subsidiary’s business, and there are no
material restrictions on the ability of the Company or any Subsidiary to use,
transfer or otherwise exploit any such property rights except as disclosed in
the SEC Filings and the SEDAR Filings, and the Company does not know of any
claim or basis for a claim that may adversely affect such rights in any material
respects except as disclosed in the SEC Filings and the SEDAR Filings.

5.14.        CERTIFICATES, AUTHORITIES AND PERMITS.  THE COMPANY AND ITS
SUBSIDIARIES POSSESS ADEQUATE CERTIFICATES, AUTHORITIES OR PERMITS ISSUED BY
APPROPRIATE GOVERNMENTAL AGENCIES OR BODIES NECESSARY TO CONDUCT THE BUSINESS
NOW OPERATED BY IT, AND NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS
RECEIVED ANY NOTICE OF PROCEEDINGS RELATING TO THE REVOCATION OR MODIFICATION OF
ANY SUCH CERTIFICATE, AUTHORITY OR PERMIT THAT, IF DETERMINED ADVERSELY TO THE
COMPANY OR ANY SUBSIDIARY, WOULD HAVE A MATERIAL ADVERSE EFFECT, INDIVIDUALLY OR
IN THE AGGREGATE.

5.15.        Employee Relations.

(a) Neither the Company nor any of its Subsidiaries is a party to any collective
bargaining agreement or employs any member of a union. The Company and its
Subsidiaries believe that their relations with their employees are good. No
executive officer of the Company or any of its Subsidiaries has notified the
Company or any such Subsidiary that such officer intends to leave the Company or
any such Subsidiary or otherwise terminate such officer’s employment with the
Company or any such Subsidiary. No executive officer of the Company or any of
its Subsidiaries is to the Company’s Knowledge, or is to the Company’s Knowledge
expected to be, in violation of any material term of any employment contract,
confidentiality, disclosure or proprietary information agreement,
non-competition agreement, or any other contract or agreement or any restrictive
covenant, and the continued employment of each such executive officer does not
subject the Company or any of its Subsidiaries to any liability with respect to
any of the foregoing matters.

(B)           THE COMPANY AND ITS SUBSIDIARIES ARE IN COMPLIANCE WITH ALL U.S.
AND CANADIAN FEDERAL, STATE, PROVINCIAL, LOCAL AND FOREIGN LAWS AND REGULATIONS
RESPECTING LABOR, EMPLOYMENT AND EMPLOYMENT PRACTICES AND BENEFITS, TERMS AND
CONDITIONS OF EMPLOYMENT AND WAGES AND HOURS, EXCEPT WHERE FAILURE TO BE IN
COMPLIANCE WOULD NOT, EITHER INDIVIDUALLY OR IN THE AGGREGATE, HAVE A MATERIAL
ADVERSE EFFECT.

5.16.        INTELLECTUAL PROPERTY.

(A)           ALL INTELLECTUAL PROPERTY OF THE COMPANY IS CURRENTLY IN
COMPLIANCE WITH ALL LEGAL REQUIREMENTS (INCLUDING TIMELY FILINGS, PROOFS AND
PAYMENTS OF FEES) AND IS VALID AND ENFORCEABLE, EXCEPT TO THE EXTENT THAT ANY
NON-COMPLIANCE WOULD NOT INDIVIDUALLY OR IN THE AGGREGATE HAVE A MATERIAL
ADVERSE EFFECT.  NO INTELLECTUAL PROPERTY OF THE COMPANY THAT IS NECESSARY FOR
THE CONDUCT OF COMPANY’S BUSINESS AS CURRENTLY CONDUCTED OR AS CURRENTLY
PROPOSED TO BE CONDUCTED HAS BEEN OR IS NOW INVOLVED IN ANY CANCELLATION,
DISPUTE OR LITIGATION,

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and, to the Company’s Knowledge, no such action is threatened.  No patent of the
Company has been or is now involved in any interference, reissue, re-examination
or opposition proceeding.

(B)           ALL OF THE LICENSES AND SUBLICENSES AND CONSENT, ROYALTY OR OTHER
AGREEMENTS CONCERNING INTELLECTUAL PROPERTY THAT ARE NECESSARY FOR THE CONDUCT
OF THE COMPANY’S BUSINESS AS CURRENTLY CONDUCTED OR AS CURRENTLY PROPOSED TO BE
CONDUCTED TO WHICH THE COMPANY IS A PARTY OR BY WHICH ANY OF ITS ASSETS ARE
BOUND (OTHER THAN  GENERALLY COMMERCIALLY AVAILABLE, NON-CUSTOM, OFF-THE-SHELF
SOFTWARE APPLICATION PROGRAMS HAVING A RETAIL ACQUISITION PRICE OF LESS THAN
US$10,000 PER LICENSE) (COLLECTIVELY, “LICENSE AGREEMENTS”) ARE VALID AND
BINDING OBLIGATIONS OF THE COMPANY THAT ARE PARTIES THERETO AND, TO THE
COMPANY’S KNOWLEDGE, THE OTHER PARTIES THERETO, ENFORCEABLE IN ACCORDANCE WITH
THEIR TERMS, EXCEPT TO THE EXTENT THAT ENFORCEMENT THEREOF MAY BE LIMITED BY
BANKRUPTCY, INSOLVENCY, REORGANIZATION, MORATORIUM, FRAUDULENT CONVEYANCE OR
OTHER SIMILAR LAWS AFFECTING THE ENFORCEMENT OF CREDITORS’ RIGHTS GENERALLY, AND
TO THE COMPANY’S KNOWLEDGE THERE EXISTS NO EVENT OR CONDITION THAT WOULD RESULT
IN A MATERIAL VIOLATION OR BREACH OF OR CONSTITUTE (WITH OR WITHOUT DUE NOTICE
OR LAPSE OF TIME OR BOTH) A DEFAULT BY THE COMPANY UNDER ANY SUCH LICENSE
AGREEMENT.

(C)           THE COMPANY OWNS OR HAS THE VALID RIGHT TO USE ALL OF THE
INTELLECTUAL PROPERTY THAT IS NECESSARY FOR THE CONDUCT OF THE COMPANY’S
BUSINESS AS CURRENTLY CONDUCTED OR AS CURRENTLY PROPOSED TO BE CONDUCTED, FREE
AND CLEAR OF ALL LIENS, ENCUMBRANCES, ADVERSE CLAIMS OR OBLIGATIONS TO LICENSE
ALL SUCH OWNED INTELLECTUAL PROPERTY AND CONFIDENTIAL INFORMATION, OTHER THAN
LICENSES ENTERED INTO IN THE ORDINARY COURSE OF THE COMPANY’S BUSINESS, EXCEPT
THAT ANY SUCH INVALIDITY OR LIENS, ENCUMBRANCES, OR OBLIGATIONS WOULD NOT HAVE A
MATERIAL ADVERSE EFFECT.  THE COMPANY HAS A VALID AND ENFORCEABLE RIGHT TO USE
ALL THIRD PARTY INTELLECTUAL PROPERTY AND CONFIDENTIAL INFORMATION USED OR HELD
FOR USE IN THE BUSINESS OF THE COMPANY AS CURRENTLY CONDUCTED OR AS CURRENTLY
PROPOSED TO BE CONDUCTED, EXCEPT SUCH INVALIDITY OR UNENFORCEABLE RIGHT SHALL
NOT HAVE A MATERIAL ADVERSE EFFECT.

(D)           TO THE COMPANY’S KNOWLEDGE, THE CONDUCT OF THE COMPANY’S BUSINESS
AS CURRENTLY CONDUCTED AND AS CURRENTLY PROPOSED TO BE CONDUCTED DOES NOT AND
WILL NOT INFRINGE ANY INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY OR ANY
CONFIDENTIALITY OBLIGATION OWED TO A THIRD PARTY. TO THE COMPANY’S KNOWLEDGE,
THE INTELLECTUAL PROPERTY AND CONFIDENTIAL INFORMATION OF THE COMPANY THAT ARE
NECESSARY FOR THE CONDUCT OF COMPANY’S BUSINESS AS CURRENTLY CONDUCTED OR AS
CURRENTLY PROPOSED TO BE CONDUCTED ARE NOT BEING INFRINGED BY ANY THIRD PARTY. 
THERE IS NO LITIGATION OR ORDER PENDING OR OUTSTANDING OR, TO THE COMPANY’S
KNOWLEDGE, THREATENED OR IMMINENT, THAT SEEKS TO LIMIT OR CHALLENGE OR THAT
CONCERNS THE OWNERSHIP, USE, VALIDITY OR ENFORCEABILITY OF ANY INTELLECTUAL
PROPERTY OR CONFIDENTIAL INFORMATION OF THE COMPANY AND THE COMPANY’S USE OF ANY
INTELLECTUAL PROPERTY OR CONFIDENTIAL INFORMATION OWNED BY A THIRD PARTY, AND,
TO THE COMPANY’S KNOWLEDGE, THERE IS NO VALID BASIS FOR THE SAME.

(E)           THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED HEREBY WILL NOT
RESULT IN THE ALTERATION, LOSS, IMPAIRMENT OF OR RESTRICTION ON THE COMPANY’S
OWNERSHIP OR RIGHT TO USE ANY OF THE INTELLECTUAL PROPERTY OR CONFIDENTIAL
INFORMATION THAT IS NECESSARY FOR THE CONDUCT OF THE COMPANY’S BUSINESS AS
CURRENTLY CONDUCTED OR AS CURRENTLY PROPOSED TO BE CONDUCTED, EXCEPT AS WOULD
NOT HAVE A MATERIAL ADVERSE EFFECT.

5.17.        ENVIRONMENTAL MATTERS.

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(A)           THE COMPANY AND EACH OF ITS SUBSIDIARIES HAS BEEN AND IS IN
COMPLIANCE WITH ALL APPLICABLE U.S. AND CANADIAN FEDERAL, STATE, PROVINCIAL,
MUNICIPAL AND LOCAL LAWS, STATUTES, ORDINANCES, BYLAWS AND REGULATIONS AND
ORDERS, DIRECTIVES AND DECISIONS RENDERED BY ANY MINISTRY, DEPARTMENT OR
ADMINISTRATIVE OR REGULATORY AGENCY, DOMESTIC OR FOREIGN, (“ENVIRONMENTAL LAWS”)
RELATING TO THE PROTECTION OF THE ENVIRONMENT, OCCUPATIONAL HEALTH AND SAFETY OR
THE PROCESSING, USE, TREATMENT, STORAGE, DISPOSAL, DISCHARGE, TRANSPORT OR
HANDLING OF ANY POLLUTANTS, CONTAMINANTS, CHEMICALS OR INDUSTRIAL, TOXIC OR
HAZARDOUS WASTES OR SUBSTANCE EXCEPT WHERE SUCH NON-COMPLIANCE WOULD NOT HAVE A
MATERIAL ADVERSE EFFECT ON THE COMPANY ON A CONSOLIDATED BASIS.

(b)           The Company and each of its Subsidiaries has obtained all
licenses, permits, approvals, consents, certificates, registrations and other
authorizations under Environmental Laws (the “Environmental Permits”) necessary
for the operation of its projects as currently operated and each Environmental
Permit is valid, subsisting and in good standing and the holders of the
Environmental Permits are not in default or breach thereof and no proceeding is
pending or threatened to revoke or limit any Environmental Permit, except in
each case where the result would not have a Material Adverse Effect on the
Company and its Subsidiaries, on a consolidated basis.

(C)           NEITHER THE COMPANY (INCLUDING, IF APPLICABLE, ANY PREDECESSOR
COMPANIES THEREOF) NOR ANY OF ITS SUBSIDIARIES HAS RECEIVED ANY NOTICE OF, OR
BEEN PROSECUTED FOR AN OFFENCE ALLEGING, MATERIAL NON-COMPLIANCE WITH ANY
ENVIRONMENTAL LAWS, AND NEITHER THE COMPANY NOR ANY OF ITS SUBSIDIARIES HAS
SETTLED ANY ALLEGATION OF MATERIAL NON-COMPLIANCE SHORT OF PROSECUTION.  THERE
ARE NO ORDER OR DIRECTIONS RELATING TO ENVIRONMENTAL MATTERS REQUIRING ANY
MATERIAL WORK, REPAIRS, CONSTRUCTION OR CAPITAL EXPENDITURES TO BE MADE WITH
RESPECT TO ANY OF THE ASSETS OF THE COMPANY OR ITS SUBSIDIARIES, NOR HAS THE
COMPANY OR ANY OF ITS SUBSIDIARIES RECEIVED NOTICE OF ANY OF THE SAME AND WHICH
ORDERS DIRECTIONS OR NOTICES REMAIN OUTSTANDING AS UNRESOLVED, THAT IF ADVERSELY
DETERMINED WOULD HAVE A MATERIAL ADVERSE EFFECT.

5.18.        LITIGATION.  EXCEPT AS DISCLOSED IN THE SEC FILINGS OR THE SEDAR
FILINGS, THERE ARE NO PENDING INVESTIGATIONS, ACTIONS, SUITS OR PROCEEDINGS
AGAINST OR AFFECTING THE COMPANY, ANY SUBSIDIARY OR ANY OF THEIR RESPECTIVE
PROPERTIES BEFORE OR BY ANY COURT OR GOVERNMENTAL OR REGULATORY AGENCY,
AUTHORITY OR BODY; AND EXCEPT AS DISCLOSED IN THE SEC FILINGS OR THE SEDAR
FILINGS, TO THE COMPANY’S KNOWLEDGE, NO SUCH LEGAL, GOVERNMENTAL OR REGULATORY
INVESTIGATIONS, ACTIONS, SUITS OR PROCEEDINGS ARE THREATENED OR CONTEMPLATED
THAT IF ADVERSELY DETERMINED WOULD HAVE A MATERIAL ADVERSE EFFECT.

5.19.        FINANCIAL STATEMENTS.  THE FINANCIAL STATEMENTS INCLUDED IN EACH
SEC FILING AND EACH SEDAR FILING FAIRLY PRESENT THE FINANCIAL POSITION OF THE
COMPANY AND ITS SUBSIDIARIES AS OF THE DATES SHOWN AND ITS RESULTS OF OPERATIONS
AND CASH FLOWS FOR THE PERIODS SHOWN, AND SUCH FINANCIAL STATEMENTS HAVE BEEN
PREPARED IN CONFORMITY WITH CANADIAN OR UNITED STATES (AS APPLICABLE) GENERALLY
ACCEPTED ACCOUNTING PRINCIPLES APPLIED ON A CONSISTENT BASIS; PROVIDED, HOWEVER,
THAT THE UNAUDITED FINANCIAL STATEMENTS ARE SUBJECT TO NORMAL YEAR END AND
QUARTER END AUDIT ADJUSTMENTS (WHICH ARE NOT EXPECTED TO BE MATERIAL EITHER
INDIVIDUALLY OR IN THE AGGREGATE), AND DO NOT CONTAIN ALL FOOTNOTES REQUIRED
UNDER GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.  EXCEPT AS SET FORTH IN THE
FINANCIAL STATEMENTS OF THE COMPANY AND ITS SUBSIDIARIES INCLUDED IN THE SEC
FILINGS AND THE SEDAR FILINGS, NEITHER THE COMPANY NOR ANY SUBSIDIARY

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has incurred any liabilities, contingent or otherwise, except those which,
individually or in the aggregate, would not have a Material Adverse Effect.

5.20.        INSURANCE COVERAGE.  THE COMPANY AND EACH OF ITS SUBSIDIARIES
MAINTAINS IN FULL FORCE AND EFFECT INSURANCE COVERAGE BY INSURERS OF RECOGNIZED
FINANCIAL RESPONSIBILITY AGAINST LOSSES AND RISKS AND IN AMOUNTS AS ARE PRUDENT
AND CUSTOMARY IN IT BUSINESS; AND THE COMPANY REASONABLY BELIEVES SUCH INSURANCE
COVERAGE IS ADEQUATE. NEITHER THE COMPANY NOR ANY SUCH SUBSIDIARY HAS BEEN
REFUSED ANY INSURANCE COVERAGE SOUGHT OR APPLIED FOR AND NEITHER THE COMPANY NOR
ANY SUCH SUBSIDIARY HAS ANY REASON TO BELIEVE THAT IT WILL NOT BE ABLE TO RENEW
ITS EXISTING INSURANCE COVERAGE AS AND WHEN SUCH COVERAGE EXPIRES OR TO OBTAIN
SIMILAR COVERAGE FROM SIMILAR INSURERS AS MAY BE NECESSARY TO CONTINUE ITS
BUSINESS AT A COST THAT WOULD NOT HAVE A MATERIAL ADVERSE EFFECT.

5.21.        Brokers and Finders.  Except for the cash commission to be paid
(the “Cash Placement Agents Fee”) to the Placement Agents pursuant to the terms
of the Placement Agents Agreement in respect of the transactions contemplated
hereby, no Person will have, as a result of the transactions contemplated by
this Agreement, any valid right, interest or claim against or upon the Company
or any Purchaser for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Company.  The Company acknowledges that the Cash Placement Agents Fee relates
wholly to services performed by the Placement Agents outside Canada and that
such fee will not be subject to any Canadian withholding tax.

5.22.        NO GENERAL SOLICITATION.  NEITHER THE COMPANY NOR TO THE COMPANY’S
KNOWLEDGE ANY PERSON ACTING ON ITS BEHALF HAS CONDUCTED ANY “GENERAL
SOLICITATION” OR “GENERAL ADVERTISING” (AS THOSE TERMS ARE USED IN REGULATION D)
IN CONNECTION WITH THE OFFER OR SALE OF ANY OF THE NOTES.

5.23.        NO INTEGRATED OFFERING.  NEITHER THE COMPANY NOR ANY OF ITS
AFFILIATES, NOR TO THE COMPANY’S KNOWLEDGE ANY PERSON ACTING ON ITS OR THEIR
BEHALF HAS, DIRECTLY OR INDIRECTLY, MADE ANY OFFERS OR SALES OF ANY COMPANY
SECURITY OR SOLICITED ANY OFFERS TO BUY ANY SECURITY, UNDER CIRCUMSTANCES THAT
WOULD ADVERSELY AFFECT RELIANCE BY THE COMPANY ON SECTION 4(2) OF THE 1933 ACT
FOR THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS IMPOSED UNDER SECTION 5 OF
THE 1933 ACT FOR THE TRANSACTIONS CONTEMPLATED HEREBY OR THAT WOULD REQUIRE SUCH
REGISTRATION UNDER THE 1933 ACT.

5.24.        PRIVATE PLACEMENT.  SUBJECT TO THE ACCURACY OF THE REPRESENTATIONS
AND WARRANTIES OF THE PURCHASERS CONTAINED IN SECTION 6 HEREOF, THE OFFER AND
SALE OF THE NOTES TO THE PURCHASERS AS CONTEMPLATED HEREBY IS EXEMPT FROM THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT AND FROM THE PROSPECTUS AND
REGISTRATION REQUIREMENTS OF APPLICABLE CANADIAN SECURITIES LAWS.

5.25.        FOREIGN CORRUPT PRACTICES ACT.  NEITHER THE COMPANY NOR, TO THE
COMPANY’S KNOWLEDGE, ANY OF ITS CURRENT OR FORMER SHAREHOLDERS, DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS OR OTHER PERSONS ACTING ON BEHALF OF THE COMPANY HAS
ON BEHALF OF THE COMPANY OR IN CONNECTION WITH ITS BUSINESS, TAKEN ANY ACTION,
DIRECTLY OR INDIRECTLY, THAT WOULD RESULT IN A VIOLATION BY SUCH PERSONS OF THE
FOREIGN CORRUPT PRACTICES ACT OF 1977, AS AMENDED, AND THE RULES AND REGULATIONS
THEREUNDER OR ANY CANADIAN LEGISLATION TO THE CORRESPONDING EFFECT

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(“FCPA”), including, without limitation, making use of the mails or any means or
instrumentality of interstate commerce corruptly in furtherance of an offer,
payment, promise to pay or authorization of the payment of any money, or other
property, gift, promise to give, or authorization of the giving of anything of
value to any “foreign official” (as such term is defined in the FCPA) or any
foreign political party or official thereof or any candidate for foreign
political office, in contravention of the FCPA and the Company has conducted its
businesses in compliance with the FCPA and have instituted and maintain policies
and procedures designed to ensure, and which are reasonably expected to continue
to ensure, continued compliance therewith.

5.26.        TRANSACTIONS WITH AFFILIATES.  EXCEPT AS DISCLOSED IN SEC FILINGS
OR SEDAR FILINGS MADE ON OR PRIOR TO THE DATE HEREOF, NONE OF THE OFFICERS OR
DIRECTORS OF THE COMPANY AND, TO THE COMPANY’S KNOWLEDGE, NONE OF THE EMPLOYEES
OF THE COMPANY IS PRESENTLY A PARTY TO ANY TRANSACTION WITH THE COMPANY OR TO A
PRESENTLY CONTEMPLATED TRANSACTION (OTHER THAN FOR SERVICES AS EMPLOYEES,
OFFICERS AND DIRECTORS) THAT WOULD BE REQUIRED TO BE DISCLOSED PURSUANT TO ITEM
404 OF REGULATION S-K PROMULGATED UNDER THE 1933 ACT OR PURSUANT TO ITEM 13 OF
FORM 51-102F2 OF THE CANADIAN SECURITIES ADMINISTRATORS.

5.27.        Internal Controls.  The Company is in material compliance with the
provisions of the Sarbanes-Oxley Act of 2002 currently applicable to the
Company.  The Company maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed in
accordance with management’s general or specific authorizations; (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain asset accountability; (iii) access to assets is permitted only in
accordance with management’s general or specific authorization; and (iv) the
recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.  The Company has established disclosure controls and procedures (as
defined in 1934 Act Rules 13a-15 and 15d-15) for the Company and designed such
disclosure controls and procedures with the intent of ensuring that material
information relating to the Company is made known to the certifying officers by
others within those entities, particularly during the period in which the
Company’s most recently filed period report under the 1934 Act, as the case may
be, is being prepared.  Under the supervision and with the participation of the
Company’s management, the Company evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the most recent periodic
reporting period under the 1934 Act (such date, the “Evaluation Date”).  The
Company presented in its most recently filed periodic report under the 1934 Act
the conclusions of the certifying officers about the effectiveness of the
disclosure controls and procedures based on their evaluations as of the
Evaluation Date and such conclusions are accurate in all material respects. 
Since the Evaluation Date, there have been no significant changes in the
Company’s internal controls (as such term is defined in Item 308(c) of
Regulation S-K) or, to the Company’s Knowledge, in other factors that could
significantly affect the Company’s internal controls.  The Company maintains a
standard system of accounting established and administered in accordance with
generally accepted accounting principles and the applicable requirements of the
1934 Act.

5.28.        LISTING; TRADING.  THE COMMON SHARES ARE LISTED AND POSTED FOR
TRADING ON AMEX AND TSX AND THE COMPANY HAS NOT RECEIVED ANY NOTIFICATION
(WRITTEN OR ORAL) FROM

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AMEX or TSX to the effect that the Company is not in compliance with the listing
or maintenance requirements of such exchange, nor to the Company’s Knowledge,
are there any facts or circumstances that would reasonably be expected to lead
to delisting or suspension of the Common Shares by AMEX or TSX in the
foreseeable future.  Since its approval for listing, (i) the Common Shares have
been designated for quotation on AMEX or TSX (as applicable), (ii) trading in
the Common Shares has not been suspended by the SEC, AMEX or TSX, and (iii) the
Company has received no communication, written or oral, from the SEC, AMEX or
TSX regarding the suspension or delisting of the Common Shares from AMEX or TSX
(as applicable).

5.29.        CONDUCT OF BUSINESS. NEITHER THE COMPANY NOR ITS SUBSIDIARIES IS IN
VIOLATION OF ANY TERM OF OR IN DEFAULT UNDER ITS NOTICE OF ARTICLES OR ARTICLES,
ANY OTHER CERTIFICATE OF DESIGNATION, PREFERENCES OR RIGHTS OF ANY OTHER
OUTSTANDING SERIES OF PREFERRED SHARES OF THE COMPANY OR THEIR ORGANIZATIONAL
CHARTER OR CERTIFICATE OF INCORPORATION, CERTIFICATE OF FORMATION, BYLAWS OR
OPERATING AGREEMENT, RESPECTIVELY. NEITHER THE COMPANY NOR ANY OF ITS
SUBSIDIARIES IS IN VIOLATION OF ANY JUDGMENT, DECREE OR ORDER OR ANY STATUTE,
ORDINANCE, RULE OR REGULATION APPLICABLE TO THE COMPANY OR ITS SUBSIDIARIES,
EXCEPT IN ALL CASES FOR VIOLATIONS WHICH WOULD NOT, INDIVIDUALLY OR IN THE
AGGREGATE, HAVE A MATERIAL ADVERSE EFFECT.

5.30.        DILUTIVE EFFECT. THE COMPANY UNDERSTANDS AND ACKNOWLEDGES THAT THE
NUMBER OF COMMON SHARES ISSUABLE UPON CONVERSION OF THE NOTES WILL INCREASE IN
CERTAIN CIRCUMSTANCES. THE COMPANY FURTHER ACKNOWLEDGES THAT ITS OBLIGATION TO
ISSUE COMMON SHARES UPON CONVERSION OF THE NOTES IN ACCORDANCE WITH THIS
AGREEMENT IS ABSOLUTE AND UNCONDITIONAL REGARDLESS OF THE DILUTIVE EFFECT THAT
SUCH ISSUANCE MAY HAVE ON THE OWNERSHIP INTERESTS OF OTHER SHAREHOLDERS OF THE
COMPANY.

5.31.        Application of Takeover Protections; Rights Agreement. The Company
and its board of directors have taken all necessary action, if any, in order to
render inapplicable any control share acquisition, business combination, poison
pill (including any distribution under a rights agreement) or other similar
anti-takeover provision under the Notice of Articles and Articles or the laws of
the jurisdiction of its formation or incorporation which is or could become
applicable to any Purchaser as a result of the transactions contemplated by this
Agreement, including, without limitation, the Company’s issuance of the Notes
and Common Shares upon conversion thereof and any Purchaser’s ownership of the
Notes or Common Shares. The Company has not adopted a shareholder rights plan or
similar arrangement relating to accumulations of beneficial ownership of Common
Shares or a change in control of the Company.

5.32.        Off Balance Sheet Arrangements. There is no material transaction,
arrangement, or other relationship between the Company and an unconsolidated or
other off balance sheet entity that is required to be disclosed by the Company
in its 1934 Act filings and is not so disclosed.

5.33.        Investment Company Status. The Company is not, and upon
consummation of the sale of the Notes will not be, an “investment company” as
such term is defined in the Investment Company Act of 1940, as amended.

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5.34.        Transfer Taxes. On the Closing Date, all transfer or other taxes
(other than income or similar taxes) that are required to be paid in connection
with the sale and transfer of the Notes to be sold to each Purchaser hereunder
will be, or will have been, fully paid or provided for by the Company, and all
laws imposing such taxes will be or will have been complied with.

5.35.        Manipulation of Price. The Company has not, and to the Company’s
Knowledge no one acting on its behalf has, in violation of Regulation M, (i)
taken, directly or indirectly, any action designed to cause or to result in the
stabilization or manipulation of the price of any security of the Company to
facilitate the sale or resale of any of the Common Shares, (ii) sold, bid for,
purchased, or paid any compensation for soliciting purchases of, any of the
Common Shares, or (iii) paid or agreed to pay to any person any compensation for
soliciting another to purchase any other securities of the Company.

5.36.        Disclosure. The Company confirms that neither it nor any other
Person acting on its behalf has provided any of the Purchasers or their agents
or counsel with any information that constitutes material, nonpublic
information, other than the existence of the transactions contemplated by this
Agreement. The Company understands and confirms that each of the Purchasers will
rely on the foregoing representations in effecting transactions in securities of
the Company.

6.             REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.  EACH OF THE
PURCHASERS HEREBY SEVERALLY, AND NOT JOINTLY, REPRESENTS AND WARRANTS TO THE
COMPANY AND THE PLACEMENT AGENTS THAT:

6.1.          ORGANIZATION; AUTHORIZATION.  FOR EACH PURCHASER THAT IS AN
ENTITY, SUCH PURCHASER IS DULY ORGANIZED, VALIDLY EXISTING AND IN GOOD STANDING
UNDER THE LAWS OF THE JURISDICTION OF ITS ORGANIZATION WITH THE REQUISITE
CORPORATE OR ORGANIZATIONAL POWER AND AUTHORITY TO ENTER INTO AND TO CONSUMMATE
THE TRANSACTIONS CONTEMPLATED IN THE NOTE DOCUMENTS AND TO OTHERWISE CARRY OUT
ITS OBLIGATIONS THEREUNDER.  THE EXECUTION, DELIVERY AND PERFORMANCE BY THE
PURCHASER OF THE TRANSACTIONS CONTEMPLATED BY THE NOTE DOCUMENTS TO WHICH SUCH
PURCHASER IS A PARTY HAVE BEEN DULY AUTHORIZED AND WILL EACH CONSTITUTE THE
VALID AND LEGALLY BINDING OBLIGATION OF THE PURCHASER, ENFORCEABLE AGAINST THE
PURCHASER IN ACCORDANCE WITH THEIR RESPECTIVE TERMS, SUBJECT TO BANKRUPTCY,
INSOLVENCY, FRAUDULENT TRANSFER, REORGANIZATION, MORATORIUM AND SIMILAR LAWS OF
GENERAL APPLICABILITY, RELATING TO OR AFFECTING CREDITORS’ RIGHTS GENERALLY.

6.2.          PURCHASE ENTIRELY FOR OWN ACCOUNT.  THE NOTES TO BE PURCHASED BY
THE PURCHASER HEREUNDER WILL BE ACQUIRED BY THE PURCHASER AS PRINCIPAL FOR THE
PURCHASER’S OWN ACCOUNT, FOR INVESTMENT PURPOSES, NOT AS NOMINEE OR AGENT, AND
NOT WITH A VIEW TO THE RESALE OR DISTRIBUTION OF ANY PART THEREOF IN VIOLATION
OF THE 1933 ACT, AND THE PURCHASER HAS NO PRESENT INTENTION OF SELLING, GRANTING
ANY PARTICIPATION IN, OR OTHERWISE DISTRIBUTING THE SAME IN VIOLATION OF THE
1933 ACT.  THE PURCHASER IS NOT A REGISTERED BROKER DEALER OR AN ENTITY ENGAGED
IN THE BUSINESS OF BEING A BROKER DEALER.

6.3.          INVESTMENT EXPERIENCE.  THE PURCHASER ACKNOWLEDGES THAT IT CAN
BEAR THE ECONOMIC RISK AND COMPLETE LOSS OF ITS INVESTMENT IN THE NOTES AND HAS
SUCH KNOWLEDGE AND EXPERIENCE IN FINANCIAL OR BUSINESS MATTERS THAT IT IS
CAPABLE OF EVALUATING THE MERITS AND RISKS OF

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the investment contemplated hereby.  The Purchaser is experienced in making
private investments in public equities, similar to the purchase of the Notes
hereunder.

6.4.          DISCLOSURE OF INFORMATION.  THE PURCHASER HAS NO KNOWLEDGE OF ANY
“MATERIAL FACT” OR “MATERIAL CHANGE” (AS THOSE TERMS ARE DEFINED IN THE
SECURITIES ACT  (BRITISH COLUMBIA)) IN THE AFFAIRS OF THE COMPANY THAT HAS NOT
BEEN GENERALLY DISCLOSED TO THE PUBLIC, OTHER THAN THIS PARTICULAR TRANSACTION;
THE PURCHASER’S DECISION TO TENDER THIS OFFER AND PURCHASE THE NOTES HAS NOT
BEEN MADE AS A RESULT OF ANY VERBAL OR WRITTEN REPRESENTATION AS TO FACT OR
OTHERWISE MADE BY OR ON BEHALF OF THE COMPANY, OR ANY OTHER PERSON AND IS BASED
ENTIRELY UPON CURRENTLY AVAILABLE PUBLIC INFORMATION CONCERNING THE COMPANY. THE
PURCHASER HAS HAD AN OPPORTUNITY TO RECEIVE ALL ADDITIONAL INFORMATION RELATED
TO THE COMPANY REQUESTED BY IT AND TO ASK QUESTIONS OF AND RECEIVE ANSWERS FROM
THE COMPANY REGARDING THE COMPANY AND ITS BUSINESS, TO THE EXTENT SUCH
INFORMATION IS NOT MATERIAL NONPUBLIC INFORMATION, AND THE TERMS AND CONDITIONS
OF THE OFFERING OF THE NOTES.  THE PURCHASER ACKNOWLEDGES ITS SATISFACTORY
REVIEW OF THE SEC FILINGS AND SEDAR FILINGS.  THE PURCHASER ACKNOWLEDGES THAT IT
HAS BEEN AFFORDED THE OPPORTUNITY TO OBTAIN SUCH ADDITIONAL INFORMATION, OTHER
THAN MATERIAL NONPUBLIC INFORMATION, THAT THE COMPANY POSSESSES OR CAN ACQUIRE
WITHOUT UNREASONABLE EFFORT OR EXPENSE THAT IS NECESSARY TO MAKE AN INFORMED
INVESTMENT DECISION WITH RESPECT TO THE INVESTMENT.

6.5.          RESTRICTED SECURITIES.  THE PURCHASER UNDERSTANDS THAT THE NOTES
AND THE COMMON SHARES ISSUABLE UPON CONVERSION THEREOF ARE “RESTRICTED
SECURITIES” UNDER THE U.S. FEDERAL SECURITIES LAWS INASMUCH AS THEY ARE BEING
ACQUIRED FROM THE COMPANY IN A TRANSACTION NOT INVOLVING A PUBLIC OFFERING AND
AGREES NOT TO RESELL SUCH NOTES AND SUCH COMMON SHARES ISSUABLE UPON CONVERSION
THEREOF UNLESS THE NOTES AND THE COMMON SHARES ISSUABLE UPON CONVERSION THEREOF
ARE REGISTERED PURSUANT TO THE 1933 ACT, OR RESOLD IN ACCORDANCE WITH RULE 144
OR ANOTHER EXEMPTION FROM REGISTRATION IS AVAILABLE THEREFROM.  IN CONNECTION
WITH ANY TRANSFER OF THE NOTES OR THE COMMON SHARES ISSUABLE UPON CONVERSION
THEREOF OTHER THAN PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT, EXCEPT AS
PROVIDED FOR IN SECTION 8.9, THE COMPANY MAY REQUIRE THE TRANSFEROR THEREOF TO
PROVIDE TO THE COMPANY AN OPINION OF COUNSEL SELECTED BY THE TRANSFEROR, THE
FORM AND SUBSTANCE OF WHICH OPINION SHALL BE REASONABLY SATISFACTORY TO THE
COMPANY, TO THE EFFECT THAT SUCH TRANSFER DOES NOT REQUIRE REGISTRATION OF SUCH
TRANSFERRED NOTES OR SUCH COMMON SHARES ISSUABLE UPON CONVERSION THEREOF, AS
APPLICABLE, UNDER THE 1933 ACT AND SUCH TRANSFER IS IN COMPLIANCE WITH RULE 144
OR ANOTHER EXEMPTION FROM REGISTRATION.  THE PURCHASER UNDERSTANDS THAT THE
NOTES AND THE COMMON SHARES ISSUABLE UPON CONVERSION THEREOF ARE SUBJECT TO
RESALE RESTRICTIONS IN CANADA UNDER APPLICABLE CANADIAN SECURITIES LAWS.

6.6.          LEGENDS.

(A)           IT IS UNDERSTOOD THAT NOTES SHALL BEAR THE FOLLOWING LEGEND:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND MAY NOT BE TRANSFERRED UNLESS (I)
SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE 1933 ACT, OR (II)
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH
TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER RULE 144 UNDER THE 1933
ACT OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.”

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“In Canada, unless permitted under securities legislation, the holder of this
security must not trade the security before ________________ [NOTE: Insert the
date that is 4 months plus one (1) day after issuance].”

(B)           IT IS UNDERSTOOD THAT CERTIFICATES EVIDENCING THE COMMON SHARES
ISSUED UPON CONVERSION OF THE NOTES SHALL BEAR THE FOLLOWING LEGENDS:

“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “1933 ACT”), AND MAY NOT BE TRANSFERRED UNLESS (I)
SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE 1933 ACT, OR (II)
THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO IT THAT SUCH
TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER RULE 144 UNDER THE 1933
ACT OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.”

“In Canada, unless permitted under securities legislation, the holder of this
security must not trade the security before ________________ [NOTE: Insert the
date that is 4 months plus one (1) day after issuance].

The securities represented by this certificate are listed on the Toronto Stock
Exchange (“TSX”); however, the said securities cannot be traded through the
facilities of TSX since they are not freely transferable, and consequently any
certificate representing such securities is not “good delivery” in settlement of
transactions on TSX.”

(C)           IF REQUIRED BY THE AUTHORITIES OF ANY STATE OR PROVINCE IN
CONNECTION WITH THE ISSUANCE OF SALE OF THE NOTES, THE LEGEND REQUIRED BY SUCH
STATE OR PROVINCIAL AUTHORITY.

6.7.          INVESTOR STATUS.  AT THE TIME SUCH PURCHASER WAS OFFERED THE
NOTES, IT WAS, AND AT THE DATE HEREOF IT IS, AN “ACCREDITED INVESTOR” AS DEFINED
IN RULE 501(A) OF REGULATION D, AS AMENDED, UNDER THE 1933 ACT, AND HAS
COMPLETED AND DELIVERED WITH THIS AGREEMENT THE U.S. ACCREDITED INVESTOR
CERTIFICATE ATTACHED AS SCHEDULE III, THE REPRESENTATIONS AND WARRANTIES
CONTAINED IN SUCH CERTIFICATE BEING INCORPORATED AND FORMING PART OF THIS
AGREEMENT, AND IT WAS, AND AT THE DATE HEREOF IT IS, AN “ACCREDITED INVESTOR” AS
DEFINED IN NI 45-106, AND HAS COMPLETED AND DELIVERED WITH THIS AGREEMENT THE
CANADIAN ACCREDITED INVESTOR CERTIFICATE ATTACHED AS SCHEDULE IV, THE
REPRESENTATIONS AND WARRANTIES CONTAINED IN SUCH CERTIFICATE BEING INCORPORATED
AND FORMING PART OF THIS AGREEMENT.  THE PURCHASER IS A RESIDENT OF THAT
JURISDICTION SPECIFIED IN ITS ADDRESS ON THE SCHEDULE OF PURCHASERS ATTACHED
HERETO.

6.8.          NO GENERAL SOLICITATION.  THE PURCHASER DID NOT LEARN OF THE
INVESTMENT IN THE NOTES AS A RESULT OF ANY “GENERAL ADVERTISING” OR “GENERAL
SOLICITATION” AS THOSE TERMS ARE CONTEMPLATED IN REGULATION D, AS AMENDED, UNDER
THE 1933 ACT.

6.9.          BROKERS AND FINDERS.  NO PERSON WILL HAVE, AS A RESULT OF THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, ANY VALID RIGHT, INTEREST OR CLAIM
AGAINST OR UPON THE COMPANY,

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or any Purchaser for any commission, fee or other compensation pursuant to any
agreement, arrangement or understanding entered into by or on behalf of the
Purchaser.

6.10.        Prohibited Transactions.  During the last thirty (30) days prior to
the Execution Date, neither the Purchaser nor any Affiliate of such Purchaser
that (x) has or had knowledge of the transactions contemplated hereby, (y) has
or shares discretion relating to such Purchaser’s investments or trading or
information concerning such Purchaser’s investments, including in respect of the
Notes, or (z) is subject to such Purchaser’s review or input concerning such
Affiliate’s investments or trading (collectively, “Trading Affiliates”) has,
directly or indirectly, effected or agreed to effect any transactions in the
securities of the Company, including any short sale, whether or not against the
box, established any “put equivalent position” (as defined in Rule 16a-1(h)
under the 1934 Act) with respect to the Common Shares, granted any other right
(including, without limitation, any put or call option) with respect to the
Common Shares or with respect to any security that includes, relates to or
derived any significant part of its value from the Common Shares or otherwise
sought to hedge its position in the Notes (each, a “Prohibited Transaction”). 
Such Purchaser shall not, and shall cause its Trading Affiliates not to, engage,
directly or indirectly, in a Prohibited Transaction during the period from the
date hereof until such time as (i) the closing of the transactions contemplated
by this Agreement are first publicly announced or (ii) this Agreement is
terminated pursuant to Section 7.3 hereof.

6.11         Limited Ownership.  The purchase by such Purchaser of the Notes
issuable to it at the Closing will not result in such Purchaser (individually or
together with other Person with whom such Purchaser has identified, or will have
identified, itself as part of a “group” in a public filing made with the SEC
involving the Company’s securities) acquiring, or obtaining the right to
acquire, in excess of 19.999% of the outstanding Common Shares or the voting
power of the Company on a post transaction basis that assumes that such Closing
shall have occurred or otherwise becoming a “control person” of the Company as
such term is defined under applicable securities laws.  Such Purchaser does not
presently intend to, alone or together with others, make a public filing with
the SEC to disclose that it has (or that it together with such other Persons
have) acquired, or obtained the right to acquire, as a result of such Closing
(when added to any other securities of the Company that it or they then own or
have the right to acquire), in excess of 19.999% of the outstanding Common
Shares or the voting power of the Company on a post transaction basis that
assumes that the Closing at issue shall have occurred.

6.12.        Independent Investment Decision.  Such Purchaser has independently
evaluated the merits of its decision to purchase Notes pursuant to the Note
Documents, and such Purchaser confirms that it has not relied on the advice of
any other Purchaser’s business and/or legal counsel in making such decision. 
Such Purchaser has not relied on the business or legal advice of the Company or
the Placement Agents or any of their agents, counsel or Affiliates in making its
investment decision hereunder.

6.13.        Use of Personal Information.  The Purchaser hereby acknowledges and
consents to: (a) the disclosure by the Purchaser and the Company of Personal
Information concerning the Purchaser to a securities commission or other
regulatory authority (a “Securities Commission”), or to AMEX or TSX and its
affiliates, authorized agents, subsidiaries and divisions (collectively referred
to in this section as the “Exchange”), and any subsequent public

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disclosure of Personal Information concerning the Purchaser made by a Securities
Commission or by an Exchange; and (b) the collection, use and disclosure of
Personal Information by the Exchange for the following purposes (or as otherwise
identified by the Exchange, from time to time): (i) to conduct background
checks; (ii) to verify the Personal Information that has been provided about the
Purchaser; (iii) to consider the suitability of the Purchaser as a holder of
securities of the Company; (iv) to consider the eligibility of the Company to
continue to list on the Exchange; (v) to provide disclosure to market
participants as the security holdings of the Company’s shareholders, and their
involvement with any other reporting issuers, issuers subject to a cease trade
order or bankruptcy, and information respecting penalties, sanctions or personal
bankruptcies, and possible conflicts of interest with the Company; (vi) to
detect and prevent fraud; (vii) to conduct enforcement proceedings; and (viii)
to perform other investigations as required by and to ensure compliance with all
applicable rules, policies, rulings and regulations of the Exchange, securities
legislation and other legal and regulatory requirements governing the conduct
and protection of the public markets in the United States and Canada.  The
Purchaser also acknowledges that: (c) the Exchange may also collect additional
Personal Information from other sources, including securities regulatory
authorities or elsewhere, investigative law enforcement or self regulatory
organizations, and regulations service providers to ensure that the purposes set
forth above can be accomplished; (d) the Personal Information the Exchange
collects may also be disclosed to the agencies and organizations referred to
above or as otherwise permitted or required by law, and they may use it in their
own investigations for the purposes described above; (e) the Personal
Information may be disclosed on the Exchange’s website or through printed
materials published by or pursuant to the direction of the Exchange; and (f) the
Exchange may from time to time use third parties to process information and
provide other administrative services, and may share the information with such
providers.  Without limiting the generality of the foregoing, Purchaser
acknowledges that Personal Information will be delivered to the Ontario
Securities Commission (the “OSC”) and that such personal information is being
collected indirectly by the OSC under the authority granted to it in securities
legislation for the purposes of the administration and enforcement of the
securities legislation of Ontario. The Purchaser authorizes such indirect
collection of personal information by the OSC, and acknowledges that questions
about such indirect collection of personal information should be directed to the
OSC’s Administrative Assistant to the Director of Corporate Finance, Suite 1903,
Box 5520 Queen Street West, Toronto, Ontario M5H 3S8 or to the following
telephone number: (416) 593-8086.  Herein, “Personal Information” means any
information about the Purchaser required to be disclosed to a Securities
Commission or the Exchange, whether pursuant to a Securities Commission or
Exchange form or a request made by a Securities Commission or the Exchange.

6.14.        Reliance on Canadian Prospectus and Registration Exemptions.

(a)           If the Purchaser is resident in the Province of Ontario (an
“Ontario Resident Purchaser”), it has provided an address in the Province of
Ontario either in the space designated for the address for delivery of notices
or the address for delivery of the Notes on its signature page to this
Agreement.

(b)           Each Ontario Resident Purchaser acknowledges that the Notes may
only be purchased by it through an Ontario registered securities dealer.

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(c)           Each Purchaser, whether resident in Canada, the United States, or
elsewhere, is an “accredited investor” within the meaning of NI 45-106 of the
Canadian Securities Administrators, and has indicated on Schedule IV attached
the basis upon which it so qualifies.

6.15.        Present Ownership of Securities.  The Purchaser has fully and
accurately disclosed to the Company its present ownership of securities of the
Company by completing the disclosure statement attached as Schedule V to this
Agreement, and acknowledges that the Company will rely on the information
entered on Schedule V in completing its filings with TSX.

6.16.        Proceeds of Crime Legislation.  The funds representing the
Purchaser’s Aggregate Purchase Price set forth opposite the Purchaser’s name on
Schedule I affixed hereto will not represent proceeds of crime for the purposes
of the Proceeds of Crime (Money Laundering) Act (Canada) (the “PCMLA”) and the
Purchaser acknowledges that the Company may in the future be required by law to
disclose the name of the Purchaser and other information relating to this
Agreement pursuant to the PCMLA.  To the best of its knowledge (a) none of the
funds representing such Aggregate Purchase Price for the Notes, (i) have been or
will be derived from or related to any activity that is deemed criminal under
the law of Canada, the United States of America, or any other jurisdiction, or
(ii) are being tendered on behalf of a person or entity who has not been
identified to the Purchaser, and (b) it shall promptly notify the Company if the
Purchaser discovers that any of such representations cease to be true, and
provide the Company with appropriate information in connection therewith.

6.17.        Series B Note Offering.  The Purchaser acknowledges that the
Company, in addition to this offering of Notes, intends to complete the Series B
Note Offering

7.             CONDITIONS TO CLOSING.

7.1.          CONDITIONS TO THE PURCHASERS’ OBLIGATIONS. THE OBLIGATION OF EACH
PURCHASER TO PURCHASE THE NOTES AT THE CLOSING IS SUBJECT TO THE FULFILLMENT TO
THE REQUISITE HOLDERS’ REASONABLE SATISFACTION, ON OR PRIOR TO THE CLOSING DATE,
OF THE FOLLOWING CONDITIONS, ANY OF WHICH MAY BE WAIVED IN WRITING BY THE
REQUISITE HOLDERS:

(A)           THE REPRESENTATIONS AND WARRANTIES MADE BY THE COMPANY IN SECTION
5 HEREOF QUALIFIED AS TO MATERIALITY SHALL BE TRUE AND CORRECT AT ALL TIMES
PRIOR TO AND ON THE CLOSING DATE, EXCEPT TO THE EXTENT ANY SUCH REPRESENTATION
OR WARRANTY EXPRESSLY SPEAKS AS OF AN EARLIER DATE, IN WHICH CASE SUCH
REPRESENTATION OR WARRANTY SHALL BE TRUE AND CORRECT AS OF SUCH EARLIER DATE,
AND, THE REPRESENTATIONS AND WARRANTIES MADE BY THE COMPANY IN SECTION 5 HEREOF
NOT QUALIFIED AS TO MATERIALITY SHALL BE TRUE AND CORRECT IN ALL MATERIAL
RESPECTS AT ALL TIMES PRIOR TO AND ON THE CLOSING DATE, EXCEPT TO THE EXTENT ANY
SUCH REPRESENTATION OR WARRANTY EXPRESSLY SPEAKS AS OF AN EARLIER DATE, IN WHICH
CASE SUCH REPRESENTATION OR WARRANTY SHALL BE TRUE AND CORRECT IN ALL MATERIAL
RESPECTS AS OF SUCH EARLIER DATE.  THE COMPANY SHALL HAVE PERFORMED IN ALL
MATERIAL RESPECTS ALL OBLIGATIONS AND CONDITIONS HEREIN REQUIRED TO BE PERFORMED
OR OBSERVED BY IT ON OR PRIOR TO THE CLOSING DATE (INCLUDING THE DELIVERY OF THE
CERTIFICATES REPRESENTING THE NOTES IN ACCORDANCE WITH SECTION 4 HEREOF).

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(B)           THE COMPANY SHALL HAVE OBTAINED IN A TIMELY FASHION ANY AND ALL
CONSENTS, PERMITS, APPROVALS, REGISTRATIONS AND WAIVERS NECESSARY OR APPROPRIATE
FOR CONSUMMATION OF THE PURCHASE AND SALE OF THE NOTES INCLUDING, WITHOUT
LIMITATION, THE ACCEPTANCE OF TSX AND THE APPROVAL OF AMEX, AND ALL OF WHICH
SHALL BE AND REMAIN SO LONG AS NECESSARY IN FULL FORCE AND EFFECT.

(C)           THE COMPANY SHALL HAVE EXECUTED AND DELIVERED THE REGISTRATION
RIGHTS AGREEMENT AND THE SUBORDINATION AGREEMENT TO THE PURCHASERS.

(D)           NO JUDGMENT, WRIT, ORDER, INJUNCTION, AWARD OR DECREE OF OR BY ANY
COURT, OR JUDGE, JUSTICE OR MAGISTRATE, INCLUDING ANY BANKRUPTCY COURT OR JUDGE,
OR ANY ORDER OF OR BY ANY GOVERNMENTAL AUTHORITY, SHALL HAVE BEEN ISSUED, AND NO
ACTION OR PROCEEDING SHALL HAVE BEEN INSTITUTED BY ANY GOVERNMENTAL AUTHORITY,
OR SELF-REGULATORY ORGANIZATION ENJOINING OR PREVENTING THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR IN THE OTHER NOTE DOCUMENTS.

(E)           THE COMPANY SHALL HAVE DELIVERED A CERTIFICATE, EXECUTED ON BEHALF
OF THE COMPANY BY ITS CHIEF EXECUTIVE OFFICER OR ITS CHIEF FINANCIAL OFFICER,
DATED AS OF THE CLOSING DATE, CERTIFYING TO THE FULFILLMENT OF THE CONDITIONS
SPECIFIED IN SUBSECTIONS (A), (B), (D), AND (H) OF THIS SECTION 7.1.

(F)            THE COMPANY SHALL HAVE DELIVERED A CERTIFICATE, EXECUTED ON
BEHALF OF THE COMPANY BY ITS SECRETARY, DATED AS OF THE CLOSING DATE, CERTIFYING
THE RESOLUTIONS ADOPTED BY THE BOARD OF DIRECTORS OF THE COMPANY APPROVING THE
TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THE OTHER NOTE DOCUMENTS AND THE
ISSUANCE OF THE NOTES AND THE COMMON SHARES UPON CONVERSION THEREOF, CERTIFYING
THE CURRENT VERSIONS OF THE NOTICE OF ARTICLES AND ARTICLES OF THE COMPANY AND
CERTIFYING AS TO THE SIGNATURES AND AUTHORITY OF PERSONS SIGNING THE NOTE
DOCUMENTS AND RELATED DOCUMENTS ON BEHALF OF THE COMPANY.

(G)           THE PURCHASERS SHALL HAVE RECEIVED (I) AN OPINION FROM HOGAN &
HARTSON L.L.P., THE COMPANY’S U.S. COUNSEL, DATED AS OF THE CLOSING DATE, IN THE
FORM ATTACHED HERETO AS EXHIBIT D-1; AND (II) AN OPINION FROM BULL, HOUSSER &
TUPPER LLP, THE COMPANY’S CANADIAN COUNSEL, DATED AS OF THE CLOSING DATE, IN THE
FORM ATTACHED HERETO AS EXHIBIT D-2.

(H)           NO STOP ORDER, CEASE TRADE ORDER OR SUSPENSION OF TRADING SHALL
HAVE BEEN IMPOSED BY ANY PERSON WITH RESPECT TO PUBLIC TRADING IN THE COMMON
SHARES.

(i)            The Common Shares to be issued upon conversion of the Notes shall
have been approved for inclusion on AMEX and Toronto Stock Exchange and listed
and admitted and authorized for trading on AMEX and Toronto Stock Exchange. 
Satisfactory evidence of such actions shall have been provided to the Placement
Agents.

(j)            The Company shall have obtained the consent of JPMorgan Chase
Bank, N.A. with respect to the consummation of the Private Placement and the
transactions contemplated by the Note Documents and shall have deliver a written
copy of such consent to the Purchasers.

7.2.          CONDITIONS TO OBLIGATIONS OF THE COMPANY. THE COMPANY’S OBLIGATION
TO SELL AND ISSUE THE NOTES AT THE CLOSING IS SUBJECT TO THE FULFILLMENT TO THE
SATISFACTION OF THE

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Company on or prior to the Closing Date of the following conditions, any of
which may be waived by the Company:

(A)           THE REPRESENTATIONS AND WARRANTIES MADE BY THE PURCHASERS IN
SECTION 6 HEREOF SHALL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS WHEN MADE,
AND SHALL BE TRUE AND CORRECT IN ALL MATERIAL RESPECTS ON THE CLOSING DATE WITH
THE SAME FORCE AND EFFECT AS IF THEY HAD BEEN MADE ON AND AS OF SAID DATE.  THE
PURCHASERS SHALL HAVE PERFORMED IN ALL MATERIAL RESPECTS ALL OBLIGATIONS AND
CONDITIONS HEREIN REQUIRED TO BE PERFORMED OR OBSERVED BY THEM ON OR PRIOR TO
THE CLOSING DATE.

(B)           THE PURCHASERS SHALL HAVE EXECUTED AND DELIVERED THE REGISTRATION
RIGHTS AGREEMENT AND THE SUBORDINATION AGREEMENT TO THE COMPANY AT OR PRIOR TO
CLOSING; PROVIDED, THAT, THIS CONDITION SHALL BE SATISFIED WITH RESPECT TO EACH
PURCHASER WHO HAS EXECUTED AND DELIVERED THE REGISTRATION RIGHTS AGREEMENT AND
THE SUBORDINATION AGREEMENT.

(C)           EACH OF THE PURCHASERS SHALL HAVE DELIVERED TO THE COMPANY THE
AGGREGATE PURCHASE PRICE SET FORTH OPPOSITE SUCH PURCHASER’S NAME ON SCHEDULE I
AFFIXED HERETO.

(D)           THE COMPANY SHALL HAVE OBTAINED THE ACCEPTANCE OF TSX AND THE
APPROVAL OF AMEX, AND ALL OF WHICH SHALL BE AND REMAIN SO LONG AS NECESSARY IN
FULL FORCE AND EFFECT.

(E)           NO JUDGMENT, WRIT, ORDER, INJUNCTION, AWARD OR DECREE OF OR BY ANY
COURT, OR JUDGE, JUSTICE OR MAGISTRATE, INCLUDING ANY BANKRUPTCY COURT OR JUDGE,
OR ANY ORDER OF OR BY ANY GOVERNMENTAL AUTHORITY, SHALL HAVE BEEN ISSUED, AND NO
ACTION OR PROCEEDING SHALL HAVE BEEN INSTITUTED BY ANY GOVERNMENTAL AUTHORITY,
OR SELF-REGULATORY ORGANIZATION ENJOINING OR PREVENTING THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREBY OR IN THE OTHER NOTE DOCUMENTS.

(f)            The Company shall have received from each of the Purchasers duly
and accurately completed disclosures as required under this Agreement in the
forms specified in Schedule III, Schedule IV and Schedule V to this Agreement.

(g)           The Company shall have obtained the consent of JPMorgan Chase
Bank, N.A. with respect to the consummation of the Private Placement and the
transactions contemplated by the Note Documents.

7.3.          Termination of Obligations to Effect Closing; Effects.

(a)           The obligations of the Company, on the one hand, and the
Purchasers, on the other hand, to effect the Closing shall terminate as follows:

(i)            Upon the mutual written consent of the Company and the Requisite
Holders;

(ii)           By the Company if any of the conditions set forth in Section 7.2
shall have become incapable of fulfillment, and shall not have been waived by
the Company;

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(iii)          By the Requisite Holders if any of the conditions set forth in
Section 7.1 shall have become incapable of fulfillment, and shall not have been
waived by the Requisite Holders; or

(iv)          By any Purchaser (with respect to itself only) if the Closing has
not occurred on or prior to January 31, 2007;

provided, however, that, except in the case of clause (i) above, the party
seeking to terminate its obligation to effect the Closing shall not then be in
breach of any of its representations, warranties, covenants or agreements
contained in this Agreement or the other Note Documents if such breach has
resulted in the circumstances giving rise to such party’s seeking to terminate
its obligation to effect the Closing.

(b)           Nothing in this Section 7.3 shall be deemed to release any party
from any liability for any breach by such party of the terms and provisions of
this Agreement or the other Note Documents or to impair the right of any party
to compel specific performance by any other party of its obligations under this
Agreement or the other Note Documents.

8.             COVENANTS AND AGREEMENTS OF THE COMPANY.

8.1.          COMMERCIALLY REASONABLE EFFORTS. EACH PARTY SHALL USE ITS
COMMERCIALLY REASONABLE EFFORTS TIMELY TO SATISFY EACH OF THE CONDITIONS TO BE
SATISFIED BY IT AS PROVIDED IN SECTIONS 7.1 AND 7.2 OF THIS AGREEMENT.

8.2.          TERMINATION OF CERTAIN COVENANTS.  THE COVENANTS SET FORTH IN
SECTION 8 SHALL TERMINATE AND BE OF NO FURTHER FORCE AND EFFECT UPON THE DATE ON
WHICH THE COMPANY’S OBLIGATIONS UNDER THE REGISTRATION RIGHTS AGREEMENT TO
REGISTER AND MAINTAIN THE EFFECTIVENESS OF ANY REGISTRATION COVERING THE
REGISTRABLE SECURITIES (AS SUCH TERM IS DEFINED IN THE REGISTRATION RIGHTS
AGREEMENT) SHALL TERMINATE, UNLESS SUCH COVENANT IS REQUIRED TO SATISFIED AT
SUCH EARLIER DATE.

8.3.          REPORTS.  THE COMPANY COVENANTS AND AGREES THAT NEITHER IT NOR ANY
OTHER PERSON ACTING ON ITS BEHALF WILL PROVIDE ANY PURCHASER OR ITS AGENTS OR
COUNSEL WITH ANY INFORMATION THAT THE COMPANY BELIEVES CONSTITUTES MATERIAL
NON-PUBLIC INFORMATION, UNLESS PRIOR THERETO SUCH PURCHASER SHALL HAVE EXECUTED
A WRITTEN AGREEMENT REGARDING THE CONFIDENTIALITY AND USE OF SUCH INFORMATION.
THE COMPANY UNDERSTANDS AND CONFIRMS THAT EACH PURCHASER SHALL BE RELYING ON THE
FOREGOING REPRESENTATIONS IN EFFECTING TRANSACTIONS IN SECURITIES OF THE
COMPANY.

8.4.          NO CONFLICTING AGREEMENTS.  THE COMPANY WILL NOT TAKE ANY ACTION,
ENTER INTO ANY AGREEMENT OR MAKE ANY COMMITMENT THAT WOULD CONFLICT OR INTERFERE
IN ANY MATERIAL RESPECT WITH THE OBLIGATIONS TO THE PURCHASERS UNDER THE NOTE
DOCUMENTS.

8.5.          INSURANCE.  THE COMPANY SHALL NOT MATERIALLY REDUCE THE INSURANCE
COVERAGES DESCRIBED IN SECTION 5.20.

8.6.          COMPLIANCE WITH LAWS.  THE COMPANY WILL COMPLY WITH ALL APPLICABLE
LAWS, RULES, REGULATIONS, ORDERS AND DECREES OF ALL GOVERNMENTAL AUTHORITIES,
EXCEPT WHERE SUCH

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non-compliance would result, either individually or in the aggregate, in a
Material Adverse Effect.

8.7.          Listing of Common Shares and Related Matters.  Promptly following
the date hereof, the Company shall take all necessary action to cause the Common
Shares to be issued upon conversion of the Notes to be approved for listing on
AMEX and TSX.  Further, if the Company applies to have its Common Shares or
other securities traded on any other Eligible Market, it shall include in such
application the Common Shares issuable upon conversion of the Notes and will
take such other action as is necessary to cause such Common Shares to be so
listed.  The Company will use commercially reasonable efforts to continue the
listing and trading of its Common Shares on AMEX and TSX and, in accordance,
therewith, will use commercially reasonable efforts to comply in all respects
with the Company’s reporting, filing and other obligations applicable to issuers
whose securities are listed on such market.  The Company shall pay all fees and
expenses in connection with satisfying its obligations under this Section 8.7.

8.8.          Securities Filings.  The Company will make all filings required by
the laws, rules and regulations of the securities regulatory authorities in the
provinces and territories of Canada, as applicable, in connection with the sale
of the Notes, including with the securities regulatory authorities of the
Province of Canada.  The Company agrees to file a Form D with respect to the
Notes as required under Regulation D, and Form 45-106F1 as required under
Canadian securities laws, and to provide copies thereof to the Placement Agents
Counsel promptly after such filing.  The Company shall make all filings and
reports relating to the offer and sale of the Notes required under applicable
securities or “Blue Sky” laws of the states of the United States following the
Closing Date.

8.9.          Removal of Legends.  Upon the earlier of (i) registration for
resale of the Common Shares issued upon conversion of the Notes pursuant to the
Registration Rights Agreement and receipt by the Company of the Purchaser’s
written confirmation that such Common Shares have been disposed of in compliance
with the prospectus filed with such registration statement and the prospectus
delivery requirements of the 1933 Act or (ii) delivery to the Company of a
representation letter in customary form that Rule 144(k) has become available,
the Company shall, upon a Purchaser’s written request, promptly cause
certificates evidencing the Purchaser’s Common Shares issued upon conversion of
the Notes to be replaced with certificates which do not bear the restrictive
legend appearing in the first paragraph of Section 6.6(b).  The restrictive
legend appearing in the second paragraph of Section 6.6(b) may be removed at the
time of a transfer occurring on or after the date specified therein.  The
restrictive legend appearing in the third paragraph of Section 6.6(b) may be
removed at such time as both the first and second paragraphs have been removed
or are eligible for removal.  When the Company is required to cause unlegended
certificates to replace previously issued legended certificates, if unlegended
certificates are not delivered to a Purchaser within three (3) Business Days of
submission by that Purchaser of legended certificate(s) to the Company’s
transfer agent together with a representation letter in customary form, the
Company shall be liable to the Purchaser for damages in an amount equal to 1.0%
of the Aggregate Purchase Price of the Notes evidenced by such certificate(s)
for each thirty (30) day period (or portion thereof) beyond such three (3)
Business Day that the unlegended certificates have not been so delivered.

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8.10.        Consent of JPMorgan Chase Bank.  The Company shall use its
commercially reasonable efforts, acting diligently and in good faith, to obtain
consent of JPMorgan Chase Bank, N.A. with respect to the Private Placement and
the transactions contemplated by the Note Documents as soon as practicable.

8.11.        Shareholder Approval.  The Company shall provide each shareholder
entitled to vote at a special or annual meeting of shareholders of the Company
(the “Shareholder Meeting”), which initially shall be promptly called and held
not later than March 31, 2007 (the “Shareholder Meeting Deadline”), a proxy
statement, substantially in the form which has been previously reviewed by the
Purchasers and Placement Agents Counsel at the expense of the Company,
soliciting each such shareholder’s affirmative vote at the Shareholder Meeting
for approval of resolutions (the “Resolutions”) providing for the Company’s
issuance of all of the Notes and Common Shares upon conversion thereof as
described in the Note Documents in accordance with applicable law and the rules
and regulations of the Exchange (such affirmative approval being referred to
herein as the “Shareholder Approval” and the date such approval is obtained, the
“Shareholder Approval Date”), and the Company shall use its commercially
reasonable efforts to solicit its shareholders’ approval of the Resolutions and
to cause the Board to recommend to the shareholders that they approve the
Resolutions.  The Company shall be obligated to seek to obtain the Shareholder
Approval by the Shareholder Meeting Deadline.  If, despite the Company’s
commercially reasonable efforts, the Shareholder Approval is not obtained on or
prior to the Shareholder Meeting Deadline, the Company shall solicit Shareholder
Approval at the annual shareholders meeting each year and use its commercially
reasonable efforts to obtain such Shareholder Approval until Shareholder
Approval is obtained.  Notwithstanding the foregoing, in the event that
Shareholder Approval is required in order to issue Common Shares upon conversion
of the Notes in excess of the Exchange Cap, then the Company shall use
commercially reasonable efforts to obtain such Shareholder Approval on a
quarterly basis, rather than annually, until Shareholder Approval is obtained.

8.12.        Pledge of Securities.  The Company acknowledges and agrees that the
Notes or Common Shares upon conversion thereof may be pledged by a Purchaser in
connection with a bona fide margin agreement or other loan or financing
arrangement that is secured by the Notes or Common Shares.  The pledge of such
Notes or Common Shares shall not be deemed to be a transfer, sale or assignment
of the securities hereunder; provided that Purchaser acknowledges that if the
Company is deemed to be a PFIC (as defined below) then such pledge will be a
taxable disposition for U.S. tax purposes.  No Purchaser effecting a pledge of
Notes or Common Shares shall be required to provide the Company with any notice
thereof or otherwise make any delivery to the Company pursuant to this Agreement
or any other Note Document.  The Company hereby agrees to execute and deliver
such documentation as a pledgee of the Notes or Common Shares may reasonably
request in connection with a pledge of the Notes or Common Shares to such
pledgee by a Purchaser.

8.13.        Reservation of Common Shares.  The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than the sum of 130% of the maximum number of Common Shares
issuable upon conversion of the Notes (assuming for purposes hereof, that the
Notes are convertible at the Conversion Price).

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8.14.        No Future Integrated Offerings.  None of the Company, its
Subsidiaries, their Affiliates and any Person acting on their behalf will take
any action or steps referred to in Section 5.23 that would require registration
of any of the Notes or Common Shares (other than for resale) upon conversion
thereof under the 1933 Act.

8.15.        Reporting Status. Until the later of the date on which none of the
Notes are outstanding or the Purchasers shall have sold all the Common Shares
upon conversion of the Notes (the “Reporting Period”), the Company shall timely
file all reports required to be filed with the SEC pursuant to the 1934 Act and
with Canadian securities regulators pursuant to Canadian securities laws, and
the Company shall not terminate its status as an issuer required to file reports
under the 1934 Act even if the 1934 Act or the rules and regulations thereunder
would no longer require or otherwise permit such termination. From and after the
Closing Date, the Company shall take all actions necessary to maintain its
eligibility to register the Common Shares for resale by the Purchasers on Form
S-1 or whatever registration form is then available to the Company and will
register the Common Shares for resale in accordance with the Registration Rights
Agreement.

8.16.        Financial Information. The Company agrees to send the following to
each Purchaser during the Reporting Period (i) unless the following are filed
with the SEC through EDGAR and are available to the public through the EDGAR
system, within one (1) Business Day after the filing thereof with the SEC, a
copy of its Annual Reports and Quarterly Reports on Form 10-K, 10-KSB, 10-Q or
10-QSB, any interim reports or any consolidated balance sheets, income
statements, stockholders’ equity statements and/or cash flow statements for any
period other than annual, any Current Reports on Form 8-K and any registration
statements (other than on Form S-8) or amendments filed pursuant to the 1933 Act
and (ii) copies of any notices and other information made available or given to
the shareholders of the Company generally, contemporaneously with the making
available or giving thereof to the shareholders.

8.17.        Disclosure. Upon receipt or delivery by the Company of any notice
in accordance with the terms of this Agreement, unless the Company has in good
faith determined that the matters relating to such notice do not constitute
material, nonpublic information relating to the Company or its Subsidiaries, the
Company shall within one (1) Business Day after any such receipt or delivery
publicly disclose such material, nonpublic information on a Current Report on
Form 8-K or otherwise. In the event that the Company believes that a notice
contains material, nonpublic information relating to the Company or its
Subsidiaries, the Company so shall indicate to the Purchasers contemporaneously
with delivery of such notice, and in the absence of any such indication, the
Purchasers shall be allowed to presume that all matters relating to such notice
do not constitute material, nonpublic information relating to the Company or its
Subsidiaries.

8.18.        Assumption. The Company shall not enter into or be party to a
Fundamental Transaction unless (i) the Successor Entity assumes (in addition to
the Company, if the Company then remains in existence) in writing all of the
obligations of the Company under this Agreement and the other Note Documents in
accordance with the provisions of this Section 8.18 pursuant to written
agreements in form and substance satisfactory to the Requisite Holders and
approved by the Requisite Holders prior to such Fundamental Transaction; and
(ii) to following the Fundamental Transaction, the Company shall be able to
deliver to Purchasers,

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upon conversion of the Notes, securities that are prescribed securities under
Regulation 6208 of the Income Tax Act (Canada).  Upon consummation of the
Fundamental Transaction, the Successor Entity shall deliver to the Purchasers
confirmation that there shall be issued upon conversion of the Notes at any time
after the consummation of the Fundamental Transaction, either Common Shares or
shares of common stock (or their equivalent) of the Successor Entity, as
adjusted in accordance with the provisions of this Agreement.  The provisions of
this Section 8.18 shall apply similarly and equally to successive Fundamental
Transactions and shall be applied without regard to any limitations on the
conversion of the Notes.

8.19.        Pre-Emptive Rights.

(a)           If the Company intends, directly or indirectly, to offer, sell,
grant any option to purchase, or otherwise dispose of (or announce any offer,
sale, grant or any option to purchase or other disposition of) any of its equity
or equity equivalent securities, including without limitation any debt,
preferred shares or other instrument or security that is, at any time during its
life and under any circumstances, convertible into or exchangeable or
exercisable for its Common Shares or securities convertible or exchangeable into
its Common Shares, other than pursuant to the Series B Note Offering or Common
Shares issued for strategic investments or bona fide acquisitions, firmly
underwritten public offerings with gross proceeds in excess of US $50,000,000
and any Approved Shares Plan (any such offer, sale, grant, disposition or
announcement being referred to as a “Subsequent Placement”), the Company shall
have first complied with this Section 8.19.

(b)           The Company shall deliver to each Purchaser, so long as such
Purchaser is then a holder of outstanding Notes, a written notice (the “Offer
Notice”) of any proposed or intended issuance or sale (the “Offer”) of the
securities being offered (the “Offered Securities”) in a Subsequent Placement,
which Offer Notice shall (w) identify and describe the Offered Securities, (x)
describe the price and other terms upon which they are to be issued or sold, and
the number or amount of the Offered Securities to be issued or sold, (y)
identify the persons or entities (if known) to which or with which the Offered
Securities are to be offered, issued or sold and (z) offer to issue and sell to
such Purchasers, so long as such Purchasers are then a holder of outstanding
Notes, an aggregate amount representing thirty percent (30%) of the amount of
the Subsequent Placement, to be allocated among such Purchasers (i) based on
such Purchaser’s Allocation Percentage (the “Basic Amount”), and (ii) with
respect to each Purchaser that elects to purchase its Basic Amount, any
additional portion of the Offered Securities attributable to the Basic Amounts
of other Purchasers as such Purchaser shall indicate it will purchase or acquire
should the other Purchasers subscribe for less than their Basic Amounts (the
“Undersubscription Amount”).

(c)           To accept an Offer, in whole or in part, such Purchaser must
deliver a written notice to the Company prior to the end of the second (2nd)
Business Day by 5:00 p.m New York City time after such Purchaser’s receipt of
the Offer Notice containing the final definitive terms of the Subsequent
Placement (the “Offer Period”), setting forth the portion of such Purchaser’s
Basic Amount that such Purchaser elects to purchase and, if such Purchaser shall
elect to purchase all of its Basic Amount, the Undersubscription Amount, if any,
that such Purchaser elects to purchase (in either case, the “Notice Of
Acceptance”). If the Basic Amounts subscribed for by all Purchasers are less
than the total of all of the Basic Amounts, then each

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Purchaser who has set forth an Undersubscription Amount in its Notice of
Acceptance shall be entitled to purchase, in addition to the Basic Amounts
subscribed for, the Undersubscription Amount it has subscribed for; provided,
however, that if the Undersubscription Amounts subscribed for exceed the
difference between the total of all the Basic Amounts and the Basic Amounts
subscribed for (the “Available Undersubscription Amount”), each Purchaser who
has subscribed for any Undersubscription Amount shall be entitled to purchase
only that portion of the Available Undersubscription Amount as the Basic Amount
of such Purchaser bears to the total Basic Amounts of all Purchasers that have
subscribed for Undersubscription Amounts, subject to rounding by the Company to
the extent its deems reasonably necessary.

(d)           If the Purchasers, collectively, do not elect to purchase 30% of
the Subsequent Placement which may be purchased by such Purchasers pursuant to
this Section 8.19, the Issuer may offer and sell the securities to which the
Purchasers were entitled to purchase hereunder, or the securities not
purchasable by the Purchasers hereunder, as the case may be, to a third party
(which may include any Purchaser), provided that such sale must occur within
thirty (30) days of the Subsequent Placement Closing Date and on the same terms
and conditions set forth in the Offer Notice. Any such sale made after such
thirty-day period, or on terms or conditions different than the terms set forth
in the Offer Note, must again be offered to the Purchasers in accordance with
Section 8.19 above.  Each purchase of securities by Purchasers pursuant to this
Section 8.19 shall take place on the Subsequent Placement Closing Date

8.20.        Change of Control Repayment Right.

(a)           No sooner than fifteen (15) days nor later than ten (10) days
prior to the consummation of a Change of Control, but not prior to the public
announcement of such Change of Control, the Company shall deliver written notice
thereof via facsimile and overnight courier to the Purchasers, which notice
shall include an offer to repay the Notes for the Change of Control Prepayment
Price, as defined below (a “Change of Control  Notice”). At any time during the
period (the “Change of Control Period”) beginning after a Purchaser’s receipt of
a Change of Control Notice and ending on the date that is twenty (20) Trading
Days after the consummation of such Change of Control, such Purchaser may accept
the Company’ offer to prepay all or any portion of such Purchaser’s Notes by
delivering written notice thereof (“Change of Control Prepayment Notice”) to the
Company, which Change of Control Prepayment Notice shall indicate the Conversion
Amount the Purchaser is electing to receive payment of. Any Notes subject to
prepayment pursuant to this Section 8.20 shall be prepayed by the Company in
cash at a price equal to the greater of (i) the product of (A) the Change of
Control Prepayment Premium and (B) the Conversion Amount being prepayed and (ii)
(1) the product of (A) the Conversion Amount being prepayed multiplied by (B)
the quotient determined by dividing (I) the aggregate cash consideration and the
aggregate cash value of any non-cash consideration per Common Share to be paid
to the holders of the Common Shares upon consummation of the Change of Control
(any such non-cash consideration consisting of marketable securities to be
valued at the higher of (x) the Closing Sale Price of such securities as of the
Trading Day immediately prior to the consummation of such Change of Control, (y)
the Closing Sale Price as of the Trading Day immediately following the public
announcement of such proposed Change of Control and (z) the Closing Sale Price
as of the Trading Day immediately prior to the public announcement of such
proposed Change of Control) by (II) the Conversion Price (the “Change of Control
Prepayment Price”).

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(b)           The Company shall, subject to the terms and conditions of any
Senior Debt then outstanding, make payment in cash of the Change of Control
Prepayment Price concurrently with the consummation of such Change of Control if
such a Change of Control Redemption Notice is received prior to the consummation
of such Change of Control and within five (5) Trading Days after the Company’s
receipt of such notice otherwise (the “Change of Control Prepayment Date”). To
the extent redemptions required by this Section 8.20 are deemed or determined by
a court of competent jurisdiction to be prepayments of the Notes by the Company,
such redemptions shall be deemed to be voluntary prepayments.

(c)           Notwithstanding anything to the contrary in this Section 8.20,
until the Change of Control Prepayment Price is paid in full, the Conversion
Amount submitted for Prepayment under this Section 8.20 may be converted, in
whole or in part, by the Purchaser into Common Shares, or in the event the
Conversion Date is after the consummation of the Change of Control, shares or
equity interests of the Successor Entity substantially equivalent to the
Company’s Common Shares pursuant to Section 4.1(b)(i).

(d)           The parties hereto agree that in the event of the Company’s
prepayment of any portion of the Notes under this Section 8.20, the Purchaser’s
damages would be uncertain and difficult to estimate because of the parties’
inability to predict future interest rates and the uncertainty of the
availability of a suitable substitute investment opportunity for the Purchaser.
Accordingly, any prepayment premium due under this Section 8.20 is intended by
the parties to be, and shall be deemed, a reasonable estimate of the Purchaser’s
actual loss of its investment opportunity and not as a penalty. In the event
that the Company does not pay the Change of Control Prepayment Price on the
Change of Control Prepayment Date, then the Purchaser shall have the option to,
in lieu of prepayment, require the Company to promptly return to such Purchaser
any or all of the Notes that were submitted for prepayment by such Purchaser
under this Section 8.20 and for which the applicable Change of Control
Prepayment Price (together with any interest thereon) has not been paid, by
sending written notice thereof to the Company via facsimile (the “Void Change of
Control Prepayment Notice”). Upon the Company’s receipt of such Void Change of
Control Prepayment Notice, (i) the Change of Control Prepayment Notice shall be
null and void with respect to those Notes subject to the Void Change of Control
Prepayment Notice, (ii) the Company shall immediately return any Notes subject
to the Void Change of Control Prepayment Notice, and (iii) the Conversion Price
of such returned Notes shall be adjusted to the lesser of (A) the Conversion
Price as in effect on the date on which the Void Change of Control Prepayment
Notice is delivered to the Company and (B) the lowest Weighted Average Price of
the Common Shares during the period beginning on the date on which the Change of
Control Prepayment Notice is delivered to the Company and ending on the date on
which the Void Change of Control Prepayment Notice is delivered to the Company.

8.21.        Tax Matters.  The Company and, by its acceptance of the Note or a
beneficial interest therein, each Purchaser (and any person that acquires a
beneficial interest in) a Note, agree to treat the Notes for U.S. federal income
tax purposes as indebtedness of the Company that is not subject to the rules
governing contingent payment debt instruments under U.S. Treasury Regulations
Section 1.1275-4.

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8.22.        PFIC Status.  The Company shall use commercially reasonable efforts
to ensure that it does not become a passive foreign investment company (a
“PFIC”) within the meaning of Section 1297 of the U.S. Internal Revenue Code of
1986, as amended.  If the Company determines that it is a PFIC for any taxable
year in which the Notes are outstanding, it shall notify the Purchasers of such
determination as soon as reasonably practicable, but in no event later than the
45th day following the close of such taxable year.  If the Company becomes a
PFIC, the Company agrees to provide all information requested by any Purchaser
that is necessary for such Purchaser to make a “qualified electing fund”
election.  The Company’s obligation under this Section 8.22 shall survive until
the 180th day following the close of the last taxable year of the Company in
which any Notes are outstanding

9.             DEFAULTS AND REMEDIES.

9.1.          Event of Default. An “Event of Default” shall be deemed to have
occurred at such time as any of the following events:

(a)           the Company defaults in the payment when due of interest (and
Additional Amounts, if any) on the Notes and such default continues for a period
of 30 days;

(b)           the Company defaults in the payment when due of principal on the
Notes when the same becomes due and payable upon the earlier of:  (i) the
Maturity Date, or (ii) such other date as the Note becomes due and payable or
purchasable or redeemable pursuant to this Agreement;

(c)           the Company fails to observe or perform any other covenant or
other agreement in this Agreement (other than the delivery of a Change of
Control Notice as required by Section 8.20 hereof), the Notes or the other Note
Documents for 30 days after notice to the Company by the Purchasers of at least
50% in aggregate principal amount of the Notes then outstanding;

(d)           the entry by a court having jurisdiction in the premises of (i) a
decree or order for relief in respect of the Company or any Subsidiary of a
voluntary case or proceeding under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or (ii) a decree or order
adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving
as properly filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Subsidiary under any
applicable Federal or State law or (iii) appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of the
Company or any Subsidiary or of any substantial part of its property, or
ordering the winding up or liquidation of its affairs, and the continuance of
any such decree or order for relief or any such other decree or order unstayed
and in effect for a period of 60 consecutive days;

(e)           the commencement by the Company or any Subsidiary of a voluntary
case or proceeding under any applicable Federal or State bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of the Company or any Subsidiary in an
involuntary case or proceeding under any applicable

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Federal or State bankruptcy, insolvency, reorganization or other similar law or
to the commencement of any bankruptcy or insolvency case or proceeding against
it, or the filing by it of a petition or answer or consent seeking
reorganization or relief under any applicable Federal or State law, or the
consent by it to the filing of such petition or to the appointment of or taking
possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or any Subsidiary or of any substantial
part of its property, or the making by it of an assignment for the benefit of
creditors, or the admission by it in writing of its inability to pay its debts
generally as they become due, or the taking of corporate action by the Company
or any Subsidiary in furtherance of any such action;

(f)            a default occurs with respect to any Indebtedness of the Company
or any of its Subsidiaries, and any applicable grace periods in such
Indebtedness with respect to such event of default shall have expired and which
default results in the acceleration of such Indebtedness prior to its stated
maturity; provided that (i) if such event of default is waived by the holders of
such Indebtedness prior to any Purchaser taking any action pursuant to this
Agreement, no Event of Default under this clause (f) shall be deemed to have
occurred, or (ii) the principal amount of such Indebtedness under which the
maturity has been so accelerated exceeds US$500,000;

(g)           a final money judgment for more than US$500,000 is issued and not
discharged within 60 days; or

(h)           the Company fails to deliver a Change of Control Notice as
required by Section 8.20 by the date that is ten (10) Trading Days after the
consummation of such Change of Control.

9.2.          Notice.  Within one (1) Business Day after the occurrence of an
Event of Default, the Company shall deliver written notice thereof via facsimile
and overnight courier (“Notice of Event of Default”) to each Purchaser.

9.3.          Default Interest.  If any Event of Default has occurred and is
continuing, the holders of the Notes shall be entitled to receive, to the extent
permitted by applicable law, interest on the outstanding balance of, overdue
interest and Additional Amounts, if any, on the Notes at a rate per annum equal
to 12%.

9.4.          Acceleration.  If any Event of Default has occurred and is
continuing and subject to the Subordination Agreement, the Requisite Holders
may, without notice: (i) declare all or any portion of the Notes immediately due
and payable, all without presentment, demand, protest or further notice of any
kind, all of which are expressly waived by the Company and each of its
Subsidiaries; or (ii) exercise any other rights and remedies provided to
Purchasers under the Note Documents or at law or equity.

9.5.          Redemption Option Upon Event of Default.

(a)           In addition to all other rights of the Purchasers contained
herein, after a Event of Default, each Purchaser shall have the right, at such
Purchaser’s option, to require the Company to redeem all or a portion of such
Purchaser’s Notes at a redemption price per Note equal to the greater of (i)
110% of the Conversion Amount and (ii) the product of (A)

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the Conversion Rate in effect at such time as such Purchaser delivers a Notice
of Redemption at Option of Purchaser (as defined below) and (B) the greater of
the Closing Sale Price of the Common Shares on the Trading Day immediately
preceding such Event of Default, the Closing Sale Price of the Common Shares on
the day immediately following such Event of Default and the Closing Sale Price
of the Common Shares on the date the Purchaser delivers the Notice of Redemption
at Option of Purchaser (the “Redemption Price”).

(b)           At any time after the earlier of a Purchaser’s receipt of a Notice
of Event of Default and such Purchaser becoming aware of a Event of Default, any
Purchaser of Notes then outstanding may require the Company to redeem up to all
of such Purchaser’s Notes by delivering written notice thereof via facsimile and
overnight courier (“Notice of Redemption at Option of Purchaser”) to the
Company, which Notice of Redemption at Option of Purchaser shall indicate the
number of Notes that such Purchaser is electing to redeem.

(c)           Upon the Company’s receipt of a Notice(s) of Redemption at Option
of Purchaser from any Purchaser, the Company shall within one (1) Business Day
of such receipt notify each other Purchaser by facsimile of the Company’s
receipt of such notice(s). The Company shall, subject to the terms and
conditions of any Senior Debt then outstanding, make payment in cash on the
fifth (5th) Business Day after the Company’s receipt of the first Notice of
Redemption at Option of Purchaser of the applicable Redemption Price (the “Event
of Default Redemption Date”) to all Purchasers that deliver a Notice of
Redemption at Option of Purchaser prior to the fifth (5th) Business Day after
the Company’s receipt of the first Notice of Redemption at Option of Purchaser.
To the extent redemptions required by this Section 9.5 are deemed or determined
by a court of competent jurisdiction to be prepayments of the Notes by the
Company, such redemptions shall be deemed to be voluntary prepayments. If the
Company is unable to redeem all of the Notes submitted for redemption, the
Company shall redeem a pro rata amount from each Purchaser based on the
aggregate principal amount of Notes submitted for redemption by such Purchaser
relative to the total number of Notes submitted for redemption by all
Purchasers. The Purchasers and Company agree that in the event of the Company’s
redemption of any Notes under this Section 9.5, the Purchasers’ damages would be
uncertain and difficult to estimate because of the parties’ inability to predict
future interest rates and the uncertainty of the availability of a suitable
substitute investment opportunity for the Purchasers. Accordingly, any
redemption premium due under this Section 9.5 is intended by the parties to be,
and shall be deemed, a reasonable estimate of the Purchasers’ actual loss of its
investment opportunity and not as a penalty.

(d)           In the event that the Company does not pay the Redemption Price
within the time period set forth in Section 9.5(f), at any time thereafter and
until the Company pays such unpaid applicable Redemption Price in full, a
Purchaser shall have the option to, in lieu of redemption, require the Company
to promptly return to such Purchaser any or all of the Notes that were submitted
for redemption by such Purchaser under this Section 3 and for which the
applicable Redemption Price has not been paid, by sending written notice thereof
to the Company via facsimile (the “Void Optional Redemption Notice”). Upon the
Company’s receipt of such Void Optional Redemption Notice, (i) the Notice of
Redemption at Option of Purchaser shall be null and void with respect to those
Notes subject to the Void Optional Redemption Notice, (ii) the Company shall
immediately return any Notes subject to the Void Optional Redemption Notice, and
(iii) the Conversion Price of such returned Notes shall be

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adjusted to the lesser of (A) the Conversion Price as in effect on the date on
which the Void Optional Redemption Notice is delivered to the Company and (B)
the lowest Weighted Average Price of the Common Shares during the period
beginning on the date on which the Notice of Redemption at Option of Purchaser
is delivered to the Company and ending on the date on which the Void Optional
Redemption Notice is delivered to the Company.

(e)           In the event of a dispute as to the determination of the
arithmetic calculation of the Redemption Price, such dispute shall be resolved
pursuant to Section 4.1(b)(iii) with the term “Redemption Price” being
substituted for the term “Conversion Rate”. A Purchaser’s delivery of a Void
Optional Redemption Notice and exercise of its rights following such notice
shall not affect the Company’s obligations to make any payments which have
accrued prior to the date of such notice. In the event of a redemption pursuant
to this Section 9.5 of less than all of the Notes represented by a particular
Note tendered for partial redemption, the Company shall promptly cause to be
issued and delivered to the Purchaser of such Notes a new Note representing the
remaining principal amount of the Notes which have not been redeemed, if
necessary.

10.           Registration and Transfer of Notes.

10.1.        Note Register.  The Company shall maintain at its principal
executive offices (or such other office or agency of the Company as it may
designate by notice to the Purchasers), a register for the Notes, in which the
Company shall record the name and address of the persons in whose name the Notes
have been issued, as well as the name and address of each transferee. The
Company shall treat the person in whose name any Note is registered on the
register as the owner and holder thereof for all purposes, notwithstanding any
notice to the contrary, but in all events recognizing any properly made
transfers.  The Company shall only pay principal and interest to the registered
owners of the Notes.

10.2.        Transfer and Conversion of Note.  Upon surrender of one or more
Notes for registration of transfer or for exchange to the Company at their
principal office with evidence that all applicable transfer taxes have been paid
and that such transfer is in compliance with applicable securities laws, the
Company at their expense will execute and deliver in exchange therefore one or
more Notes in the aggregate unpaid principal amount(s) of such surrendered
Note(s).  Each such new Note shall be registered in the name of such Person, or
its nominee, as such Purchaser or transferee may request, dated so that there
will be no loss of interest on such surrendered Note and otherwise of like
tenor. Transfer of the Notes may be effected only in accordance with the
procedures set forth in this Section 10.2.

10.3.        Lost or Stolen Notes. Upon receipt by the Company of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any Notes, and, in the case of loss, theft or destruction, of an
indemnification undertaking by the Purchaser to the Company in customary form
and, in the case of mutilation, upon surrender and cancellation of such Notes,
the Company shall execute and deliver a new Note of like tenor and date;
provided, however, the Company shall not be obligated to re-issue such new Note
if the Purchaser contemporaneously requests the Company to convert such Notes
into Common Shares.

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11.           SURVIVAL AND INDEMNIFICATION.

11.1.        SURVIVAL.  ALL REPRESENTATIONS, WARRANTIES, COVENANTS AND
AGREEMENTS CONTAINED IN THIS AGREEMENT SHALL SURVIVE THE CLOSING DATE FOR A
PERIOD OF TWELVE (12) MONTHS; PROVIDED, HOWEVER, THAT THE PROVISIONS CONTAINED
IN SECTION 4.3 AND SECTION 8 HEREOF SHALL SURVIVE IN ACCORDANCE THEREWITH AND
THE REPRESENTATIONS CONTAINED IN SECTION 5.12 SHALL SURVIVE UNTIL THE EXPIRATION
OF THE APPLICABLE STATUTE OF LIMITATIONS.

11.2.        INDEMNIFICATION.  THE COMPANY AGREES TO INDEMNIFY AND HOLD
HARMLESS, EACH PURCHASER AND THEIR RESPECTIVE AFFILIATES AND THE DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS OF EACH PURCHASER AND THEIR RESPECTIVE
AFFILIATES, FROM AND AGAINST ANY AND ALL LOSSES, CLAIMS, DAMAGES, LIABILITIES
AND EXPENSES (INCLUDING WITHOUT LIMITATION REASONABLE ATTORNEY FEES AND
DISBURSEMENTS AND OTHER EXPENSES INCURRED IN CONNECTION WITH INVESTIGATING,
PREPARING OR DEFENDING ANY ACTION, CLAIM OR PROCEEDING, PENDING OR THREATENED
AND THE COSTS OF ENFORCEMENT HEREOF) (COLLECTIVELY, “LOSSES”) TO WHICH SUCH
PERSON MAY BECOME SUBJECT AS A RESULT OF ANY BREACH OF REPRESENTATION, WARRANTY,
COVENANT OR AGREEMENT MADE BY, OR TO BE PERFORMED ON THE PART OF, THE COMPANY
UNDER THE NOTE DOCUMENTS, AND WILL REIMBURSE ANY SUCH PERSON FOR ALL SUCH
AMOUNTS AS THEY ARE INCURRED BY SUCH PERSON.

11.3.        CONDUCT OF INDEMNIFICATION PROCEEDINGS.  PROMPTLY AFTER RECEIPT BY
ANY PERSON (THE “INDEMNIFIED PERSON”) OF NOTICE OF ANY DEMAND, CLAIM OR
CIRCUMSTANCES WHICH WOULD OR MIGHT GIVE RISE TO A CLAIM OR THE COMMENCEMENT OF
ANY ACTION, PROCEEDING OR INVESTIGATION IN RESPECT OF WHICH INDEMNITY MAY BE
SOUGHT PURSUANT TO SECTION 11.2, SUCH INDEMNIFIED PERSON SHALL PROMPTLY NOTIFY
THE COMPANY IN WRITING AND THE COMPANY SHALL ASSUME THE DEFENSE THEREOF,
INCLUDING THE EMPLOYMENT OF COUNSEL REASONABLY SATISFACTORY TO SUCH INDEMNIFIED
PERSON, AND SHALL ASSUME THE PAYMENT OF ALL FEES AND EXPENSES; PROVIDED,
HOWEVER, THAT THE FAILURE OF ANY INDEMNIFIED PERSON SO TO NOTIFY THE COMPANY
SHALL NOT RELIEVE THE COMPANY OF ITS OBLIGATIONS HEREUNDER EXCEPT TO THE EXTENT
THAT THE COMPANY IS ACTUALLY AND MATERIALLY PREJUDICED BY SUCH FAILURE TO
NOTIFY.  IN ANY SUCH PROCEEDING, ANY INDEMNIFIED PERSON SHALL HAVE THE RIGHT TO
RETAIN ITS OWN COUNSEL, BUT THE FEES AND EXPENSES OF SUCH COUNSEL SHALL BE AT
THE EXPENSE OF SUCH INDEMNIFIED PERSON UNLESS: (I) THE COMPANY AND THE
INDEMNIFIED PERSON SHALL HAVE MUTUALLY AGREED TO THE RETENTION OF SUCH COUNSEL;
OR (II) IN THE REASONABLE JUDGMENT OF COUNSEL TO SUCH INDEMNIFIED PERSON
REPRESENTATION OF BOTH PARTIES BY THE SAME COUNSEL WOULD BE INAPPROPRIATE DUE TO
ACTUAL OR POTENTIAL DIFFERING INTERESTS BETWEEN THEM.  THE COMPANY SHALL NOT BE
LIABLE FOR ANY SETTLEMENT OF ANY PROCEEDING EFFECTED WITHOUT ITS WRITTEN
CONSENT, WHICH CONSENT SHALL NOT BE UNREASONABLY WITHHELD, DELAYED OR
CONDITIONS, BUT IF THERE BE A FINAL JUDGMENT FOR THE PLAINTIFF, THE COMPANY
SHALL INDEMNIFY AND HOLD HARMLESS SUCH INDEMNIFIED PERSON FROM AND AGAINST ANY
LOSSES BY REASON OF SUCH JUDGMENT.  WITHOUT THE PRIOR WRITTEN CONSENT OF THE
INDEMNIFIED PERSON, THE COMPANY SHALL NOT EFFECT ANY SETTLEMENT OF ANY PENDING
OR THREATENED PROCEEDING IN RESPECT OF WHICH ANY INDEMNIFIED PERSON IS OR COULD
HAVE BEEN A PARTY AND INDEMNITY COULD HAVE BEEN SOUGHT HEREUNDER BY SUCH
INDEMNIFIED PARTY, UNLESS SUCH SETTLEMENT INCLUDES AN UNCONDITIONAL RELEASE OF
SUCH INDEMNIFIED PERSON FROM ALL LIABILITY ARISING OUT OF SUCH PROCEEDING.

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12.           MISCELLANEOUS.

12.1.        SUCCESSORS AND ASSIGNS.  THIS AGREEMENT MAY NOT BE ASSIGNED BY A
PARTY HERETO WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY OR THE PURCHASERS,
AS APPLICABLE; PROVIDED, HOWEVER, THAT A PURCHASER MAY ASSIGN ITS RIGHTS AND
DELEGATE ITS DUTIES HEREUNDER IN WHOLE OR IN PART TO AN AFFILIATE OR TO A THIRD
PARTY, THAT IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A) OF REGULATION
D, AS AMENDED UNDER THE 1933 ACT AND IS AN “ACCREDITED INVESTOR” WITHIN THE
MEANING OF CANADIAN SECURITIES LAWS, AND THAT SHALL AGREE IN WRITING TO BE BOUND
BY THE TERMS AND CONDITIONS OF THIS AGREEMENT.  THE PROVISIONS OF THIS AGREEMENT
SHALL INURE TO THE BENEFIT OF AND BE BINDING UPON THE RESPECTIVE PERMITTED
SUCCESSORS AND ASSIGNS OF THE PARTIES.  EXCEPT FOR THE PLACEMENT AGENTS, WHICH
ARE EXPRESS INTENDED THIRD PARTY BENEFICIARIES OF THIS AGREEMENT, AND EXCEPT FOR
PROVISIONS OF THIS AGREEMENT EXPRESSLY TO THE CONTRARY, NOTHING IN THIS
AGREEMENT, EXPRESS OR IMPLIED, IS INTENDED TO CONFER UPON ANY PARTY OTHER THAN
THE PARTIES HERETO OR THEIR RESPECTIVE SUCCESSORS AND ASSIGNS ANY RIGHTS,
REMEDIES, OBLIGATIONS, OR LIABILITIES UNDER OR BY REASON OF THIS AGREEMENT.

12.2.        COUNTERPARTS; FAXES.  THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE
COUNTERPARTS, EACH OF WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH
TOGETHER SHALL CONSTITUTE ONE AND THE SAME INSTRUMENT.  THIS AGREEMENT MAY ALSO
BE EXECUTED VIA FACSIMILE, WHICH SHALL BE DEEMED AN ORIGINAL.

12.3.        TITLES AND SUBTITLES.  THE TITLES AND SUBTITLES USED IN THIS
AGREEMENT ARE USED FOR CONVENIENCE ONLY AND ARE NOT TO BE CONSIDERED IN
CONSTRUING OR INTERPRETING THIS AGREEMENT.

12.4.        NOTICES.  UNLESS OTHERWISE PROVIDED, ANY NOTICE REQUIRED OR
PERMITTED UNDER THIS AGREEMENT SHALL BE GIVEN IN WRITING AND SHALL BE DEEMED
EFFECTIVELY GIVEN AS HEREINAFTER DESCRIBED ON THE EARLIER OF (I) IF GIVEN BY
PERSONAL DELIVERY, THEN SUCH NOTICE SHALL BE DEEMED GIVEN UPON SUCH DELIVERY;
(II) IF GIVEN BY FACSIMILE OR ELECTRONIC MAIL, THEN SUCH NOTICE SHALL BE DEEMED
GIVEN UPON RECEIPT OF CONFIRMATION OF COMPLETE TRANSMITTAL; (III) IF GIVEN BY
MAIL, THEN SUCH NOTICE SHALL BE DEEMED GIVEN UPON THE EARLIER OF (A) RECEIPT OF
SUCH NOTICE BY THE RECIPIENT, OR (B) THREE DAYS AFTER SUCH NOTICE IS DEPOSITED
IN FIRST CLASS MAIL, POSTAGE PREPAID; (IV) IF GIVEN BY AN INTERNATIONALLY
RECOGNIZED OVERNIGHT AIR COURIER, THEN SUCH NOTICE SHALL BE DEEMED GIVEN ONE DAY
AFTER DELIVERY TO SUCH CARRIER; AND (V) UPON ACTUAL RECEIPT BY THE PARTY TO WHOM
THE NOTICE IS REQUIRED TO BE GIVEN.  ALL NOTICES SHALL BE ADDRESSED TO THE PARTY
TO BE NOTIFIED AT THE ADDRESS AS FOLLOWS, OR AT SUCH OTHER ADDRESS AS SUCH PARTY
MAY DESIGNATE BY TEN DAYS’ ADVANCE WRITTEN NOTICE TO THE OTHER PARTY:

If to the Company:

Storm Cat Energy Corporation

1125 17th Street; Suite 2310

Denver, CO 80202

Attn: J. Scott Zimmerman

Fax:  (303) 991-5075

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With a copy to:

Hogan & Hartson L.L.P.

One Tabor Center, Suite 1500

1200 Seventeenth Street

Denver, CO 80202

Attn: Richard J. Mattera

Fax:  (303) 899-7333

and to:

Bull, Housser & Tupper LLP

Suite 3000 Royal Centre

1055 West Georgia Street

Vancouver, British Columbia

Attn: David M. Hunter

Fax: (604) 646-2634

If to any of the Purchasers:

to the addresses set forth on Schedule I hereto.

With a copy to:

Banc of America Securities LLC

9 West 57th Street

New York, NY 10019

Attn:  Raymond Ko

Fax:   (212) 457-3745

and to:

Coker & Palmer, Inc.

3900 N. Causeway Blvd, Suite 860

Metairie, LA  70002

Attn:  J. David Coker

Fax:   (504) 799-3568

and to:

First Albany Capital Inc.

One Penn Plaza, 42nd Floor

New York, NY 10019

Attn:  Philip Keating or James Hansen

Fax:   (212) 273-7320

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and to:

King & Spalding LLP

1185 Avenue of Americas

New York, NY  10036

Attn: Christopher C. Paci

Fax:  (212) 556-2222

 

12.5.        Expenses.  The Company shall pay the reasonable fees and expenses
of Placement Agents Counsel in connection with the Private Placement (the
“Placement Agents Counsel Fees”), but in no event in an amount to exceed, when
aggregated with placements agents counsel fees reimbursable under the Series B
Note Purchase Agreement, US$25,000.  The breakdown of Placement Agents Counsel
Fees between King & Spalding LLP and Osler, Hoskin & Harcourt LLP shall be
provided by Banc of America Securities LLC at least two (2) Business Days prior
to the Closing Date.  The Placement Agents Counsel Fees shall be paid to
Placement Agents Counsel at the Closing.  Except as set forth above, the Company
and the Purchasers shall each bear their own expenses in connection with the
negotiation, preparation, execution and delivery of this Agreement.  In the
event that legal proceedings are commenced by any party to this Agreement
against another party to this Agreement in connection with this Agreement or the
other Note Documents, the party or parties which do not prevail in such
proceedings shall severally, but not jointly, pay their pro rata share of the
reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses
incurred by the prevailing party in such proceedings.

12.6.        AMENDMENTS AND WAIVERS.  ANY TERM OF THIS AGREEMENT MAY BE AMENDED
AND THE OBSERVANCE OF ANY TERM OF THIS AGREEMENT SHALL NOT BE WAIVED (EITHER
GENERALLY OR IN A PARTICULAR INSTANCE AND EITHER RETROACTIVELY OR
PROSPECTIVELY), WITHOUT THE PRIOR WRITTEN CONSENT OF THE COMPANY AND THE
REQUISITE HOLDERS; PROVIDED, HOWEVER, THAT ANY PROVISION HEREOF WHICH IMPAIRS
THE RIGHTS OR INCREASES THE OBLIGATIONS OF A SPECIFIC PURCHASER
DISPROPORTIONATELY TO OTHER PURCHASERS SHALL NOT BE AMENDED OR WAIVED WITHOUT
THE PRIOR WRITTEN CONSENT OF THE COMPANY AND THAT PARTICULAR PURCHASER. ANY
AMENDMENT OR WAIVER EFFECTED IN ACCORDANCE WITH THIS SECTION 12.6 SHALL BE
BINDING UPON EACH HOLDER OF ANY NOTES PURCHASED UNDER THIS AGREEMENT AT THE TIME
OUTSTANDING, EACH FUTURE HOLDER OF ALL SUCH NOTES, AND THE COMPANY.

12.7.        Publicity.  No public release or announcement concerning the
transactions contemplated hereby shall be issued by the Purchasers without the
prior consent of the Company, which consents shall not be unreasonably withheld,
except as such release or announcement may be required by law or the applicable
rules or regulations of any securities exchange or securities market, in which
case the Purchasers shall allow the Company to the extent reasonably practicable
in the circumstances, reasonable time to comment on such release or announcement
in advance of such issuance.  On the trading day immediately following the
Execution Date, the Company shall issue a press release disclosing the execution
of this Agreement.  No later than the fourth Business Day following the
Execution Date, the Company will file a Form 8-K, as applicable, attaching the
press release described in the foregoing sentence as well as copies of the Note
Documents.  On the trading day immediately following the Closing Date, the
Company shall issue a press release disclosing the consummation of the
transactions contemplated by this

53

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

Agreement.  No later than the fourth Business Day following the Closing Date,
the Company will file a Form 8-K, as applicable, attaching the press release
described in the foregoing sentence.  In addition, the Company will make such
other filings and notices in the manner and time required by the SEC and the
securities regulatory authorities in the provinces and territories of Canada in
which such filings and notices are required.  Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Purchaser, or include the
name of any Purchaser in any filing with the SEC (other than the Registration
Statement and any exhibits to filings made in respect of this transaction in
accordance with periodic filing requirements under the 1934 Act), AMEX, TSX, the
securities regulatory authorities in the provinces and territories of Canada or
any other regulatory agency, without the prior written consent of such
Purchaser, except as disclosed in Section 6.13 or otherwise in this Agreement or
such disclosure is required by law or trading market regulations.

12.8.        SEVERABILITY.  ANY PROVISION OF THIS AGREEMENT THAT IS PROHIBITED
OR UNENFORCEABLE IN ANY JURISDICTION SHALL, AS TO SUCH JURISDICTION, BE
INEFFECTIVE TO THE EXTENT OF SUCH PROHIBITION OR UNENFORCEABILITY WITHOUT
INVALIDATING THE REMAINING PROVISIONS HEREOF BUT SHALL BE INTERPRETED AS IF IT
WERE WRITTEN SO AS TO BE ENFORCEABLE TO THE MAXIMUM EXTENT PERMITTED BY
APPLICABLE LAW, AND ANY SUCH PROHIBITION OR UNENFORCEABILITY IN ANY JURISDICTION
SHALL NOT INVALIDATE OR RENDER UNENFORCEABLE SUCH PROVISION IN ANY OTHER
JURISDICTION.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, THE PARTIES HEREBY
WAIVE ANY PROVISION OF LAW WHICH RENDERS ANY PROVISION HEREOF PROHIBITED OR
UNENFORCEABLE IN ANY RESPECT.

12.9.        ENTIRE AGREEMENT.  THIS AGREEMENT, INCLUDING THE SCHEDULES,
EXHIBITS AND THE DISCLOSURE SCHEDULES, AND THE OTHER NOTE DOCUMENTS, CONSTITUTE
THE ENTIRE AGREEMENT AMONG THE COMPANY AND THE PURCHASERS WITH RESPECT TO THE
PRIVATE PLACEMENT AND THE SUBJECT MATTER HEREOF AND THEREOF AND SUPERSEDE ALL
PRIOR AGREEMENTS AND UNDERSTANDINGS, BOTH ORAL AND WRITTEN, BETWEEN THE COMPANY
AND THE PURCHASERS WITH RESPECT TO THE PRIVATE PLACEMENT AND THE SUBJECT MATTER
HEREOF AND THEREOF; PROVIDED, HOWEVER, THE OBLIGATIONS OF A PURCHASER UNDER ANY
NONDISCLOSURE AGREEMENT OR CONFIDENTIALITY LETTER ENTERED INTO BY SUCH PURCHASER
IN CONNECTION WITH THE OFFERING OF THE NOTES SHALL CONTINUE TO APPLY IN
ACCORDANCE WITH THE TERMS THEREOF.

12.10.      FURTHER ASSURANCES.  THE PARTIES SHALL EXECUTE AND DELIVER ALL SUCH
FURTHER INSTRUMENTS AND DOCUMENTS AND TAKE ALL SUCH OTHER ACTIONS AS MAY
REASONABLY BE REQUIRED TO CARRY OUT THE TRANSACTIONS CONTEMPLATED HEREBY AND TO
EVIDENCE THE FULFILLMENT OF THE AGREEMENTS HEREIN CONTAINED.

12.11.      GOVERNING LAW; CONSENT TO JURISDICTION.  THIS AGREEMENT SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF
NEW YORK WITHOUT REGARD TO ANY CONFLICTS OF LAW PRINCIPLES THAT WOULD RESULT IN
THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION.  EACH OF THE PARTIES
HERETO IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE COURTS OF THE
STATE OF NEW YORK LOCATED IN NEW YORK COUNTY AND THE UNITED STATES DISTRICT
COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR THE PURPOSE OF ANY SUIT, ACTION,
PROCEEDING OR JUDGMENT RELATING TO OR ARISING OUT OF THIS AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED HEREBY.  SERVICE OF PROCESS IN CONNECTION WITH ANY
SUCH SUIT, ACTION OR PROCEEDING MAY BE SERVED ON EACH PARTY HERETO ANYWHERE IN
THE WORLD BY THE SAME METHODS AS ARE SPECIFIED FOR THE GIVING OF NOTICES UNDER
THIS AGREEMENT.  EACH OF THE PARTIES HERETO IRREVOCABLY CONSENTS TO THE
JURISDICTION OF ANY SUCH COURT IN ANY SUCH SUIT, ACTION OR PROCEEDING AND TO THE
LAYING OF

54

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

venue in such court.  Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum.

12.12.      SUBORDINATION.

(a)           NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS
AGREEMENT OR ANY OTHER AGREEMENT, DOCUMENT, CERTIFICATE, OR INSTRUMENT GIVEN IN
CONNECTION WITH, RELATED TO OR AFFECTING THE NOTES, the Company’s obligation to
make, and the Purchasers right to receive, any interest payments or distribution
(whether in cash, securities (other than Common Shares issuable upon conversion
of the Notes) or other property) or any direct or indirect payment of any kind
or character (whether in cash, securities (other than Common Shares issuable
upon conversion of the Notes) or other property) in consideration for or
otherwise in connection the Notes, including, without limitation, any
amortization, retirement, purchase, redemption or other acquisition of any Note,
or any options, warrants or rights to purchase or acquire any Notes or Common
Shares of the Company (collectively, the “Restricted Payments”) are strictly
junior and fully subordinated to the right of payment held by the holders of the
Senior Debt (the “Senior Debt Holders”). If a default (however defined) under
any document, instrument, or other agreement in any way related to the Senior
Debt, whether such document, instrument, or other agreement exists on the
Closing Date or is entered into after the Closing Date, exists at the time a
Restricted Payment is to be made or would exist as a result of such Restricted
Payment being made, (i) the Company shall not make, and no Purchaser is entitled
to receive, any Restricted Payment unless and until the “Payment in Full of the
Senior Debt” (as defined below); and (ii) no Purchaser shall be entitled to ask,
demand, sue for, take or receive from the Company or any of its Subsidiaries,
directly or indirectly, in cash or other property, or by set-off or in any other
manner (including without limitation from or by way of collateral) payment of
any Restricted Payment unless and until the Payment in Full of the Senior Debt.

(b)           The subordination of the rights of the Purchasers to the Senior
Debt Holders shall be effective both before and after the commencement of any
Insolvency Proceeding (as defined below). All references in this Section 12.12
to the Company or any of its Subsidiaries shall include such entity as a
debtor-in-possession and any receiver or trustee for such entity in any
Insolvency Proceeding.

(c)           As between the Purchasers and the Senior Debt Holders and without
releasing or affecting any of its senior rights as to the Purchasers, any Senior
Debt Holder may, one or more times, in its sole discretion, without notice to or
the consent of any Purchaser, take any action with respect to the Company, any
of its Subsidiaries or any of the Senior Debt, including, without limitation,
one or more of the following actions: (i) extend credit to the Company or any of
its Subsidiaries in such amounts as such Senior Debt Holder may determine or
withhold credit from the Company or any of its Subsidiaries;  (ii) release,
renew or modify the obligations of the Company or any of its Subsidiaries or any
other person or entity obligated on any of the Senior Debt; (iii) release,
exchange, modify, or surrender in whole or in part such Senior Debt Holder’s
rights with respect to any security for any of the Senior Debt; (iv)

55

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

modify or alter the term, interest rate or due date of any payment of any of the
Senior Debt; (v) grant any postponements, compromises, indulgences, waivers,
surrenders or discharges or modify the terms of its agreements with the Company
or any of its Subsidiaries; (vi) change its manner of doing business with the
Company or any of its Subsidiaries or any other person or entity; (vii) obtain
additional security for the Senior Debt; or (viii) impute payments or proceeds
of any security furnished for any of the Senior Debt, in whole or in part, to
any of the Senior Debt, or retain the payments or proceeds as security for the
Senior Debt without applying same toward payment of the Senior Debt. Each
Purchaser waives and releases all claims and defenses arising from any such
actions by any holder of Senior Debt, including, without limitation, claims and
defenses relating to the inability to collect any Restricted Payment. No Senior
Debt Holder will be liable for any action or failure to act under or in
connection with any of the documents or instruments evidencing or securing the
Senior Debt, it being understood that the decision of whether and when to act
and the manner of proceeding under such instruments and documents are within the
sole discretion of such Senior Debt Holders, and shall not be affected in any
manner by the existence of the Company’s obligations hereunder.

(d)           For purposes hereof, “Payment in Full of the Senior Debt” means
the satisfaction of all of the following: (i) the passage of 90 days after the
indefeasible and final payment in full in cash of the Senior Debt, (ii) the
termination of all hedging transactions with any Senior Debt Holder, (iii) the
termination or expiration of all commitments of each Senior Debt Holder to
advance funds or issue letters of credit, and (iv) the termination or expiration
and return of all letters of credit issued by any Senior Debt Holder. For
purposes hereof, “Insolvency Proceeding” means any distribution of all or any of
the assets of any entity to creditors of such entity upon the dissolution,
winding up, liquidation, arrangement, reorganization, adjustment, protection,
relief, or composition of such entity or its debts, whether in any bankruptcy,
insolvency, arrangement, reorganization, receivership, relief or similar
proceedings or upon an assignment for the benefit of creditors or any other
marshalling of the assets and liabilities of such entity or otherwise.

(e)           In the event there is a conflict between the provisions in this
Section 12.12 and the provisions of the Subordination Agreement, the
Subordination Agreement shall control.

 

[Signature Pages to Follow]

56

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

 

[Company Signature Page]

IN WITNESS WHEREOF, the undersigned has executed this Series A Note Purchase
Agreement or caused its duly authorized officers to execute this Series A Note
Purchase Agreement as of the date first above written.

STORM CAT ENERGY CORPORATION

 

 

 

 

 

By:

/s/ J. Scott Zimmerman

 

 

Name:

J. Scott Zimmerman

 

Title:

President and Chief Executive Officer

 

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

 

[Purchaser Signature Page]

IN WITNESS WHEREOF, the undersigned has executed this Series A Note Purchase
Agreement or caused its duly authorized officers to execute this Series A Note
Purchase Agreement as of the date first above written.

Date:

January 22, 2007

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

Crestview Capital Master, LLC

 

 

By Crestview Capital Partners, LLC

 

 

Its Sole Manager

 

(Signature)

 

Print name of entity

 

 

 

 

 

 

(Printed Name)

 

By:

  /s/ Robert Hoyt

 

 

 

 

 

 

Name:

Robert Hoyt

 

 

 

 

 

 

Title:

  Manager

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$920,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date

  19-JAN-2007

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

GLG NORTH AMERICAN OPPORTUNITY FUND

 

 

 

Print name of entity

 

 

 

(Signature)

 

By:

GLG Partners LP

 

 

 

 

As Investment Manager of GLG

 

 

 

North American Opportunity Fund

Printed Name

 

 

 

 

 

 

 

 

Signature:

  /s/ Victoria Parry

 

 

 

 

 

 

Name:

Victoria Parry

 

 

 

Title:

Senior Legal Counsel, GLG Partners LP

 

 

 

 

Address for Notices:

 

Signature:

  /s/ Simon White

 

 

 

 

 

 

Title:

Chief Operating Officer, GLG Partners LP

 

 

 

 

Address for Delivery of Notes:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed to be purchased pursuant to the terms
of the Agreement:  US$4,600,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date:

 January 18, 2007

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

  Capital Ventures International

 

 

By Heights Capital Management, Inc., its

(Signature)

 

authorized agent

 

 

 

Print name of entity

 

 

 

(Printed Name)

 

Signature:

/s/ Martin Kobinger

 

 

 

 

 

 

Name:

Martin Kobinger

 

 

 

 

 

 

Title:

Investment Manager

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$460,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date:

 January 18, 2007

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

Iroquois Master Fund Ltd.

 

(Signature)

 

Print name of entity

 

 

 

 

(Printed Name)

 

Signature:

 /s/ Joshua Silverman

 

 

 

 

 

 

Name:

Joshua Silverman

 

 

 

 

 

 

Title:

Authorized signator

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$460,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date:

1/24/07

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

Kellogg Capital Group LLC

 

(Signature)

 

Print name of entity

 

 

 

 

(Printed Name)

 

Signature:

/s/ Nicholas Cappelleni

 

 

 

 

 

 

Name:

Nicholas Cappelleni

 

 

 

 

 

 

Title:

Director of Finance & Operations

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$920,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date:

 1/19/07

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

William Herbert Hunt Trust Estate

 

(Signature)

 

Print name of entity

 

 

 

 

(Printed Name)

 

Signature:

  /s/ J.W. Beavers, Jr., Trustee

 

 

 

 

 

 

Name:

J.W. Beavers, Jr., Trustee

 

 

 

 

 

 

Title:

Trustee

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$2,300,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date

    1/18/07

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

SANDELMAN PARTNERS MULTI-
STRATEGY MASTER FUND, LTD.

(Signature)

 

By: Sandelman Partners LP, as
Investment Advisor

 

 

 

By:

Printed Name

 

Signature:

/s/ Trevor Ganshaw

 

 

 

 

 

 

Name:

Trevor Ganshaw

 

 

 

 

 

 

Title:

 

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$1,380,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date

1/18/07

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

Summit Capital Partners, LP

 

 

 

Print name of entity

 

(Signature)

 

 

 

 

 

Signature:

 /s/ Matthew C. Rudolf

 

 

 

 

Printed Name

 

 

 

 

 

 

 

 

 

 

 

Name:

Matthew C. Rudolf

 

 

 

 

 

 

Title:

  Principal, Summit Capital Partners I, LLC

 

 

 

General Partner, Summit Capital Partners, LP

 

 

 

 

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$460,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date

January 18, 07

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

TRAPEZE ASSET MANAGEMENT INC.

 

 

 

Print name of entity

 

(Signature)

 

 

 

 

 

 

 

 

Signature:

 /s/ Randall Abramson

 

Printed Name

 

 

 

 

 

 

 

Name:

RANDALL ABRAMSON

 

 

 

 

 

 

Title:

Chief Executive Officer

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$2,970,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date:

January 18, 2007

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

TRAPEZE CAPITAL CORP.

 

 

 

Print name of entity

 

(Signature)

 

 

 

 

 

 

 

 

Signature:

/s/ Randall Abramson

 

Printed Name

 

 

 

 

 

 

 

Name:

RANDALL ABRAMSON

 

 

 

 

 

 

Title:

President

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$730,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date

Jan. 19, 2007

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

WOLVERINE CONVERTIBLE ARBITRAGE

 

 

 

 FUND TRADING LTD

 

(Signature)

 

Print name of entity

 

 

 

 

 

 

 

Printed Name

 

Signature:

/s/ James V. Harkness

 

 

 

 

 

 

Name:

JAMES V. HARKNESS

 

 

 

 

 

 

Title:

Director

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$932,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date

1/22/07

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

GPC LX, LLC

 

 

 

Print name of entity

 

(Signature)

 

 

 

 

 

By:

Wolverine Asset Management, LLC,

 

 

 

 

Its Investment Manager

Printed Name

 

 

 

 

 

 

 

 

Signature:

/s/ Andrew R. Sujdak

 

 

 

 

 

 

Name:

Andrew R. Sujdak

 

 

 

 

 

 

Title:

Trader

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$103,000.00

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

STORM CAT ENERGY CORPORATION
SERIES A NOTE PURCHASE AGREEMENT SIGNATURE PAGE

IN WITNESS WHEREOF, the undersigned has executed this Note Purchase Agreement or
caused its duly authorized officers to execute this Note Purchase Agreement as
of the date first above written.

Date

Jan. 23, 2007

 

 

 

 

 

 

IF AN INDIVIDUAL:

 

IF A CORPORATION, PARTNERSHIP,

 

 

  TRUST, ESTATE OR OTHER ENTITY:

 

 

 

 

 

UBS AG Canada Branch

 

 

 

Print name of entity

 

(Signature)

 

 

 

 

 

 

 

 

Signature:

/s/ James Estey

 

Printed Name

 

 

 

 

 

 

 

Name:

James Estey

 

 

 

 

 

 

Title:

Principal Officer

 

 

 

 

Address for Notices:

 

Address for Notices:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Address for Delivery of Notes:

 

Address for Delivery of Notes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Taxpayer Identification Number:

 

Taxpayer Identification Number:

 

 

 

 

 

Aggregate dollar amount of Notes committed
to be purchased pursuant to the terms of the Agreement:  US$2,300,000.00

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

 

SCHEDULE I

PURCHASERS

Purchaser
Name

 

Address

 

Registration

 

USD Amount of
Series A Notes

Crestview
Capital Master,
LLC

 

95 Revere Drive,
Suite A,
Northbrook, IL 60062
Attn: Robert Hoyt
Fax: 847-559-0060

 

95 Revere Drive,
Suite A,
Northbrook, IL 60062

 

$920,000.00

 

 

 

 

 

 

 

GLG North
American
Opportunity
Fund

 

GLP Partners
Attn: Jim O’Sullivan
One Curzon Street
London W1J 5HB
United Kingdom
Fax: 44 20 7016 7200

 

GLP Partners
Attn: Jim O’Sullivan
One Curzon Street
London W1J 5HB
United Kingdom

 

$4,600,000.00

 

 

 

 

 

 

 

Capital
Ventures
International

 

c/o Heights Capital
Management, Inc.
101 California St.,
Suite 3250
San Francisco, CA
94111
Attn: Sam Winer or
Martin Kobinger
Fax: 415-403-6525

 

c/o Heights Capital
Management, Inc.
101 California St.
Suite 3250
San Francisco, CA
94111

 

$460,000.00

 

 

 

 

 

 

 

Iroquois
Master Fund
Ltd.

 

641 Lexington Avenue
26th Floor
New York, NY 10022
Attn: Josh Silverman
Fax: 212-207-3452

 

641 Lexington Avenue
26th Floor
New York, NY 10022

 

$460,000.00

 

 

 

 

 

 

 

Kellogg
Capital Group
LLC

 

55 Broadway
4th Floor
New York, NY 10006
Attn: Nick Cappelleni
Fax: 212-380-5665

 

55 Broadway
4th Floor
New York, NY 10006

 

$920,000.00

 

 

 

 

 

 

 

William
Herbert Hunt
Trust Estate

 

Attn: David S. Hunt
1601 Elm Street
Suite 3400
Dallas, Texas 75201
Fax: 214-880-7101

 

Attn: David S. Hunt
1601 Elm Street
Suite 3400
Dallas, Texas 75201

 

$2,300,000.00

 

 

 

 

 

 

 

Sandelman

 

Citco Funds Services

 

Citco Funds Services

 

$1,380,000.00

 

I-1

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

 

Purchaser
Name

 

Address

 

Registration

 

USD Amount of
Series A Notes

 

Partners Multi-
Strategy
Master Fund,
Ltd.

 

Regatta Office Park
West Bay Road
Grand Cayman,
Cayman Islands
Fax: 212-299-7666

 

Regatta Office Park
West Bay Road
Grand Cayman,
Cayman Islands

 

 

 

 

 

 

 

 

 

 

 

Summit Capital
Partners, LP

 

One Union Square
Suite 2304
600 University Street
Seattle, WA 98101
Attn: Matt Rudolf
Fax: 206-447-6204

 

One Union Square
Suite 2304
600 University Street
Seattle, WA 98101

 

$460,000.00

 

 

 

 

 

 

 

Trapeze Asset
Management
Inc.

 

22 St. Clair Ave East
18th Floor
Toronto, ON M4T 253
Attn: Randall Abramson
Fax: 416-867-9771

 

22 St. Clair Ave East
18th Floor
Toronto, ON M4T 253

 

$2,970,000.00

 

 

 

 

 

 

 

Trapeze
Capital Corp.

 

22 St. Clair Ave East
18th Floor
Toronto, ON M4T 253
Attn: Randall Abramson
Fax: 416-867-9771

 

22 St. Clair Ave East
18th Floor
Toronto, ON M4T 253

 

$730,000.00

 

 

 

 

 

 

 

Wolverine
Convertible
Arbitrage Fund
Trading Ltd.

 

c/o Wolverine Asset
Management LLC
175 West Jackson,
Suite 208
Chicago, IL 60604
Attn: Andrew Sujdak
Fax: 312-884-3831

 

c/o Wolverine Asset
Management LLC
175 West Jackson,
Suite 208
Chicago, IL 60604

 

$932,000.00

 

 

 

 

 

 

 

GPC LX, LLC

 

c/o Wolverine Asset
Management LLC
175 West Jackson,
Suite 208
Chicago, IL 60604
Attn: Andrew Sujdak
Fax: 312-884-3831

 

c/o Wolverine Asset
Management LLC
175 West Jackson,
Suite 208
Chicago, IL 60604

 

$103,000.00

 

 

 

 

 

 

 

UBS AG
Canada Branch

 

161 Bay Street
Suite 4100
Toronto, ON M5J 251

 

161 Bay Street
Suite 4100
Toronto, ON M5J 251

 

$2,300,000.00

 

I-2

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

 

Purchaser
Name

 

Address

 

Registration

 

USD Amount of
Series A Notes

 

 

 

Canada
Attn: Dave Hanslip
Fax: 416-364-1221

 

Canada

 

 

 

I-3

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

 

SCHEDULE II

THE COMPANY’S WIRE INSTRUCTIONS

American National Bank
3033 East First Avenue
Denver, CO 80206
(303) 394-5307

ABA: 107001232

Account Name: Storm Cat Energy Corporation
Account Number: 70611319

II-1

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

 

SCHEDULE III

U.S. ACCREDITED INVESTOR CERTIFICATE

As required by U.S. state and federal securities laws, the following information
must be obtained regarding the Purchaser’s accredited investor status under U.S.
federal securities laws for all Purchasers, including those located in Canada. 
All dollar amounts are referenced in U.S. dollars.

If the Purchaser is an individual, please answer the following items:

 

 

o
True

 

o
False

 

(1)

 

The Purchaser is a natural person whose net worth,(1) either individually or
jointly with such Purchaser’s spouse, exceeds $1,000,000.

 

 

 

 

 

 

 

 

 

 

 

 

 

o
True

 

o
False

 

(2)

 

The Purchaser is a natural person who had individual income in excess of
$200,000, or joint income with such Purchaser’s spouse in excess of $300,000, in
each of 2003 and 2004 and reasonably expects to reach the same income level in
2005.(2)

 

 

 

 

 

 

 

 

 

 

 

 

 

o
True

 

o
False

 

(3)

 

The Purchaser is a director or executive officer of the Company.

 

 

If the Purchaser is an entity (not an individual), please check each applicable
statement:

 

 

 

o

 

(4)

 

The Purchaser is a bank as defined in Section 3(a)(2) of the Securities Act of
1933 (the “Securities Act”), or a savings and loan association or other
institution as defined in Section 3(a)(5)(A) of the Securities Act, whether
acting in its individual or fiduciary capacity;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

 

(5)

 

The Purchaser is a broker or dealer registered pursuant to Section 15 of the
Securities Exchange Act of 1934;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

 

(6)

 

The Purchaser is an insurance company as defined in Section 2(13) of the
Securities Act;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

 

(7)

 

The Purchaser is an investment company registered under the 1940 Act or a
business development company as defined in Section 2(a)(48) of that Act;

 

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

(1)             The term “net worth” means the excess of total assets over total
liabilities.  In calculating “net worth,” the Purchaser may include the
estimated fair market value of the Purchaser’s principal residence as an asset.

(2)             In determining “income,” the Purchaser should (i) add to
adjusted gross income any amounts attributable to tax exempt income received,
losses claimed as a limited partner in any limited partnership, deductions
claimed for depletion, contributions to an IRA or Keogh retirement plan to the
extent vested and any amount by which income from long-term capital gains has
been reduced in arriving at adjusted gross income and (ii) subtract from
adjusted gross income any unrealized capital gain.

III-1

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

 

(8)

 

The Purchaser is a Small Business Investment Company licensed by the U.S. Small
Business Administration under Section 301(c) or (d) of the Small Business
Investment Act of 1958;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

 

(9)

 

The Purchaser is a plan established and maintained by a state, its political
subdivisions, or any agency or instrumentality of a state or its political
subdivisions, for the benefit of its employees, and such plan has total assets
in excess of $5,000,000;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

 

(10)

 

The Purchaser is an employee benefit plan within the meaning of Title I of the
Employee Retirement Income Security Act of 1974 and (i) the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, or (ii) the employee benefit plan has total assets in excess
of $5,000,000, or (iii) if a self-directed plan, the investment decisions are
made solely by persons that are accredited investors;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

 

(11)

 

The Purchaser is a private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1940;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

 

(12)

 

The Purchaser is an organization described in Section 501(c)(3) of the Internal
Revenue Code, a corporation, a Massachusetts or similar business trust, a
partnership, or a limited liability company, not formed for the specific purpose
of acquiring the Notes or the Common Shares in the Company, with total assets in
excess of $5,000,000;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

 

(13)

 

The Purchaser is a trust, with total assets in excess of $5,000,000, not formed
for the specific purpose of acquiring the Notes or Common Shares in the Company,
whose purchase is directed by a person who has such knowledge and experience in
financial and business matters that such person is capable of evaluating the
merits and risks of investing in the Notes and Warrants of the Company;

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

o

 

(14)

 

The Purchaser is an entity in which all of the equity owners qualify as an
“accredited investor” under any of items (1) through (13) above. If the
Purchaser qualifies under this “accredited investor” category only, list the
equity owners of the Purchaser, their respective percentage interests in the
Purchaser and the item number above under which each such equity owner qualifies
as an “accredited investor” (including categories for individuals listed above)
and include a completed copy of this Certificate for each such equity owner:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(Continue on a separate piece of paper, if necessary.)

 

 

III-2

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

 

THE UNDERSIGNED ACKNOWLEDGES AND UNDERSTANDS THAT THE COMPANY IS RELYING ON HIS,
HER OR ITS REPRESENTATIONS AND WARRANTIES SET FORTH ABOVE IN DETERMINING WHETHER
PURCHASER WILL BE PERMITTED TO INVEST IN THE COMPANY PURSUANT TO THE AGREEMENT.

IN WITNESS WHEREOF, the undersigned has/have executed and made effective this
U.S. Accredited Investor Certification on this                  day of
                          , 2007.

ACCREDITED INVESTOR:

 

 

 

 

If an entity:

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

Name:

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

If an individual or individuals:

 

 

 

 

 

 

 

 

 

 

 

(Signature)

 

 

 

 

 

 

 

 

 

 

 

(Print Name)

 

 

 

 

 

 

 

 

 

 

 

(Signature)

 

 

 

 

 

 

 

 

 

 

 

(Print Name)

 

 

III-3

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

 

SCHEDULE IV

CANADIAN ACCREDITED INVESTOR CERTIFICATE

To:          Storm Cat Energy Corporation

The undersigned Purchaser is an “accredited investor”, as such term is defined
in National Instrument 45-106 “Prospectus and Registration Exemptions” published
by the Canadian Securities Administrators and adopted by the Commissions (“NI
45-106”) and, as at the time the subscription is accepted by the Issuer
(“Closing”), the Purchaser will fall within one or more of the following
categories (Please check one or more, as applicable)  All dollar amounts are
referenced in Canadian dollars

(Note: Unless otherwise indicated, section references in this Appendix are
references to sections of NI 45-106.  Upon the request of the Purchaser, the
Issuer will provide the Purchaser with a copy of NI 45-106 as currently
published by the Canadian Securities Administrators.)

o

 

(a)

 

a Canadian financial institution, or a Schedule III bank,

 

 

 

 

 

 

 

o

 

(b)

 

the Business Development Bank of Canada incorporated under the Business
Development Bank of Canada Act (Canada),

 

 

 

 

 

 

 

o

 

(c)

 

a subsidiary of any person referred to in paragraphs (a) or (b), if the person
owns all of the voting securities of the subsidiary, except the voting
securities required by law to be owned by directors of that subsidiary,

 

 

 

 

 

 

 

o

 

(d)

 

a person registered under the securities legislation of a jurisdiction of Canada
as an adviser or dealer, other than a person registered solely as a limited
market dealer under one or both of the Securities Act (Ontario) or the
Securities Act (Newfoundland and Labrador),

 

 

 

 

 

 

 

o

 

(e)

 

an individual registered or formerly registered under the securities legislation
of a jurisdiction of Canada as a representative of a person referred to in
paragraph (d),

 

 

 

 

 

 

 

o

 

(f)

 

the Government of Canada or a jurisdiction of Canada, or any crown corporation,
agency or wholly owned entity of the Government of Canada or a jurisdiction of
Canada,

 

 

 

 

 

 

 

o

 

(g)

 

a municipality, public board or commission in Canada and a metropolitan
community, school board, the Comité de gestion de la taxe scolaire de l’île de
Montréal or an intermunicipal management board in Québec,

 

 

 

 

 

 

 

o

 

(h)

 

any national, federal, state, provincial, territorial or municipal government of
or in any foreign jurisdiction, or any agency of that government,

 

 

IV-1

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

 

 

 

 

 

 

o

 

(i)

 

a pension fund that is regulated by either the Office of the Superintendent of
Financial Institutions (Canada) or a pension commission or similar regulatory
authority of a jurisdiction of,

 

 

 

 

 

 

 

o

 

(j)

 

an individual who, either alone or with a spouse, beneficially owns, directly or
indirectly, financial assets having an aggregate realizable value that before
taxes, but net of any related liabilities, exceeds $1,000,000,

 

 

 

 

 

 

 

o

 

(k)

 

an individual whose net income before taxes exceeded $200,000 in each of the 2
most recent calendar years or whose net income before taxes combined with that
of a spouse exceeded $300,000 in each of the two most recent calendar years and
who, in either case, reasonably expects to exceed that net income level in the
current,

 

 

 

 

 

 

 

o

 

(l)

 

an individual who, either alone or with a spouse, has net assets of at least
$5,000,000,

 

 

 

 

 

 

 

o

 

(m)

 

a person, other than an individual or investment fund, that has net assets of at
least $5,000,000 as shown on its most recently prepared financial statements,

 

 

 

 

 

 

 

o

 

(n)

 

an investment fund that distributes or has distributed its securities only to:
(i) a person that is or was an accredited investor at the time of the
distribution; (ii) a person that acquires or acquired securities in the
circumstances referred to in sections 2.10 [Minimum amount investment], and 2.19
[Additional investment in investment funds], or (iii) a person described in
paragraph (i) or (ii) that acquires or acquired securities under section 2.18
[Investment fund reinvestment],

 

 

 

 

 

 

 

o

 

(o)

 

an investment fund that distributes or has distributed securities under a
prospectus in a jurisdiction of Canada for which the regulator or, in Québec,
the securities regulatory authority, has issued a receipt,

 

 

 

 

 

 

 

o

 

(p)

 

a trust company or trust corporation registered or authorized to carry on
business under the Trust and Loan Companies Act (Canada) or under comparable
legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on
behalf of a fully managed account managed by the trust company or trust
corporation, as the case may be,

 

 

 

 

 

 

 

o

 

(q)

 

a person acting on behalf of a fully managed account managed by that person, if
that person: (i) is registered or authorized to carry on business as an adviser
or the equivalent under the securities legislation of a jurisdiction of Canada
or a foreign jurisdiction; and (ii) in Ontario, is purchasing a security that is
not a security of an investment fund,

 

 

 

 

 

 

 

o

 

(r)

 

a registered charity under the Income Tax Act (Canada) that, in regard to the
trade, has obtained advice from an eligibility adviser or an adviser registered
under the securities legislation of the jurisdiction of the registered charity
to give advice on the securities being traded,

 

 

IV-2

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

 

 

 

 

 

 

o

 

(s)

 

an entity organized in a foreign jurisdiction that is analogous to any of the
entities referred to in paragraphs (a) to (d) or paragraph (i) in form and
function,

 

 

 

 

 

 

 

o

 

(t)

 

a person in respect of which all of the owners of interests, direct, indirect or
beneficial, except the voting securities required by law to be owned by
directors, are persons that are accredited investors,

 

 

 

 

 

 

 

o

 

(u)

 

an investment fund that is advised by a person registered as an adviser or a
person that is exempt from registration as an adviser, or

 

 

 

 

 

 

 

o

 

(v)

 

a person that is recognized or designated by the securities regulatory authority
or, except in Ontario and Québec, the regulator as: (i) an accredited investor;
or (ii) an exempt purchaser in Alberta or British Columbia after NI 45-106 comes
into force.

 

 

For the purposes hereof, the following definitions are included for convenience:

“affiliate” means an issuer connected with another issuer because

 

(a)

 

one of them is the subsidiary of the other, or

 

 

 

 

 

 

 

 

 

(b)

 

each of them is controlled by the same person or corporation;

 

 

“beneficial” or “beneficially”, when used to describe an ownership interest,
includes

 

 

 

(a)

 

for the purposes of British Columbia law, when a person beneficially owns
securities that are beneficially owned by

 

 

 

 

 

 

(i)

 

an issuer controlled by that person, or

 

 

 

 

 

 

 

 

 

 

 

 

 

(ii)

 

an affiliate of that person or an affiliate of an issuer controlled by that
person;

 

 

“Canadian financial institution” means (a) an association governed by the
Cooperative Credit Associations Act (Canada) or a central cooperative credit
society for which an order has been made under section 473(1) of that Act, or
(b) a bank, loan corporation, trust company, trust corporation, insurance
company, treasury branch, credit union, caisse populaire, financial services
cooperative, or league that, in each case, is authorized by an enactment of
Canada or a jurisdiction of Canada to carry on business in Canada or a
jurisdiction of Canada;

“control” occurs if, for the purposes of British Columbia law,

 

 

 

 

(i)

 

voting securities of a first party (person or corporation) are held, other than
by way of security only, by or for the benefit of a second party (person or
corporation), and

 

 

IV-3

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

 

 

 

 

 

(ii)

 

the voting rights attached to those voting securities are entitled, if
exercised, to elect a majority of the directors of the first party; and

 

 

“director” means, for the purpose of British Columbia law, a director of a
corporation or an individual occupying or performing, with respect to a
corporation or any other person, a similar position or similar functions;

“financial assets” means (a) cash, (b) securities, or (c) a contract of
insurance, a deposit or an evidence of a deposit that is not a security for the
purposes of securities legislation;

“foreign jurisdiction” means a country other than Canada or a political
subdivision of a country other than Canada;

“jurisdiction” means a province or territory of Canada except when used in the
term foreign jurisdiction;

“local jurisdiction” means the jurisdiction in which the applicable securities
regulatory authority is situate;

“mutual fund” includes an issuer of securities that entitles the holder to
receive on demand, or within a specified period after demand, an amount computed
by reference to the value of a proportionate interest in the whole or in a part
of the net assets, including a separate fund or trust account, of the issuer of
the securities;

“person” or “company” includes, for the purposes of British Columbia law, an
individual, corporation, partnership, party, trust, fund, association and any
other organized group of persons and the personal or other legal representative
of a person to whom the context can apply according to law;

“regulator” means (a) the Executive Director, as defined under section 1 of the
Securities Act (British Columbia), (b) the Executive Director, as defined under
section 1 of the Securities Act (Alberta), and (c) such other person as is
referred to in Appendix D of National Instrument 14-101 — Definitions;

“related liabilities” means (a) liabilities incurred or assumed for the purpose
of financing the acquisition or ownership of financial assets, or (b)
liabilities that are secured by financial assets;

“securities legislation” means securities legislation as such term is defined in
National Instrument 14-101 — Definitions;

“securities regulatory authority” means (a) the British Columbia Securities
Commission, (b) the Alberta Securities Commission, and (c) in respect of any
local jurisdiction other than British Columbia or Alberta means the securities
commission or other regulatory authority listed in Appendix C of National
Instrument 14-101 — Definitions;

“subsidiary” means an issuer that is controlled directly or indirectly by
another issuer and includes a subsidiary of that subsidiary;

IV-4

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

 

“voting security” means any security which (a) is not a debt security, and (b)
carries a voting right either under all circumstances or under some
circumstances that have occurred and are continuing; and

“$” means Canadian Dollars.

The foregoing representation, warranty and certificate is true an accurate as of
the date of this certificate and will be true and accurate as of Closing.  If
any such representation, warranty or certificate will not be true and accurate
prior to Closing, the undersigned will give immediate written notice of such
fact to the Issuer.

IN WITNESS WHEREOF, the undersigned Purchaser has executed this Canadian
Accredited Investor Certificate as of the          day of
                        , 2007.

If a Corporation, Partnership or Other Entity:

If an Individual:

 

 

 

 

 

 

Name of Entity

 

Signature

 

 

 

 

 

 

 

 

 

Type of Entity

 

Print or Type Name

 

 

 

 

 

 

 

 

 

Signature of Person Signing

 

 

 

 

 

 

 

 

 

 

 

Print or Type Name and Tile of Person Signing

 

 

 

 

 

IV-5

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SCHEDULE V

PURCHASER’S CERTIFICATE REGARDING
PRESENT OWNERSHIP OF SECURITIES

(to be completed by each Purchaser)

To:          Storm Cat Energy Corporation

The Purchaser certifies that the information set out in this Certificate below
accurately describers the Purchaser’s presentation ownership of securities of
Storm Cat Energy Corporation.

The Purchaser either [check appropriate box]:

o

 

owns directly or indirectly, or exercises control or direction over, no common
shares in the capital stock of the Company or securities convertible into common
shares in the capital stock of the Company; or

 

o

 

owns directly or indirectly, or exercises control or direction over,
                 common shares in the capital stock of the Company and
convertible securities entitling the Purchaser to acquire an additional common
shares in the capital stock of the Company.

 

 

Insider Status

The Purchaser either [check appropriate box]:

o

 

is an “Insider” of the Company as defined in the Securities Act (Ontario)(1); or

 

o

 

is not an Insider of the Company.

 

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(1)             Under the Securities Act (Ontario) the term “insider” is defined
to mean, if used in relation to the Storm Cat Energy Corporation (the
“Company”): (a) a director or senior officer of the Company; (b) a director or
senior officer of a person that is itself an insider or subsidiary of the
Company, (c) a person that has: (i) direct or indirect beneficial ownership of,
(ii) control or direction over, or (iii) a combination of direct or indirect
beneficial ownership of and of control or direction over securities of the
issuer carrying more than 10% of the voting rights attached to all the Company’s
outstanding voting securities (excluding, for the purpose of the calculation of
the percentage held, any securities held by the person as underwriter in the
course of a distribution); or (d) the Company itself, if it has purchased,
redeemed or otherwise acquired any securities of its own issue, for so long as
it continues to hold those securities

V-1

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EXECUTED by the Purchaser at                                                   
this        day of                               , 2007.

If a corporation, partnership or other entity:

If an individual:

 

 

 

 

 

 

 

 

Print Name of Purchaser

 

Print Name

 

 

 

 

 

 

 

 

 

Signature of Authorized Signatory

 

Signature

 

 

 

 

 

 

 

 

 

Name and Position of Authorized Signatory

 

Jurisdiction of Residence

 

 

 

 

 

 

 

 

 

Jurisdiction of Residence

 

 

 

 

V-2

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