Exhibit 4.1


 


COMMON
SHARE PURCHASE WARRANT INDENTURE


 


 


TERRANE
METALS CORP.


 


-
AND -


 


PACIFIC
CORPORATE TRUST COMPANY


 


 


Providing
for the issue


of
up to 18,178,750 Common Share Purchase Warrants


 


 


June 21,
2007


 

















 


TABLE
OF CONTENTS


 


	
  ARTICLE 1 INTERPRETATION

  	
  2

  
	
   

  	
   

  	
   

  
	
  1.1

  	
  Definitions

  	
  2

  
	
  1.2

  	
  Meaning
  of “outstanding” for Certain Purposes

  	
  5

  
	
  1.3

  	
  Day not a
  Business Day

  	
  6

  
	
  1.4

  	
  Words
  Importing the Singular

  	
  6

  
	
  1.5

  	
  Time of
  the Essence

  	
  6

  
	
  1.6

  	
  Interpretation
  not Affected by Headings, etc.

  	
  6

  
	
  1.7

  	
  Applicable
  Law

  	
  6

  
	
  1.8

  	
  Warrant
  Indenture Legislation

  	
  6

  
	
  1.9

  	
  Severability

  	
  7

  
	
  1.10

  	
  Entire
  Agreement

  	
  7

  
	
  1.11

  	
  Currency

  	
  7

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2 ISSUE OF WARRANTS

  	
  7

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Creation
  and Issue of Warrants

  	
  7

  
	
  2.2

  	
  Form and
  Terms of Warrant Certificates

  	
  7

  
	
  2.3

  	
  Issue of
  Warrant Certificates

  	
  8

  
	
  2.4

  	
  Warrantholder
  not a Shareholder

  	
  8

  
	
  2.5

  	
  Execution
  of Warrant Certificates

  	
  8

  
	
  2.6

  	
  Certification
  by Warrant Agent

  	
  8

  
	
  2.7

  	
  Exchange
  of Warrant Certificates

  	
  9

  
	
  2.8

  	
  Issue in
  Substitution for Lost Certificates

  	
  9

  
	
  2.9

  	
  Registration
  and Transfer of Warrants

  	
  9

  
	
  2.10

  	
  Enforcement
  of Rights of Warrantholders

  	
  11

  
	
  2.11

  	
  Warrants
  to Rank Pari Passu

  	
  12

  
	
  2.12

  	
  Notice to
  Warrantholders

  	
  12

  
	
  2.13

  	
  Notice to
  the Company or the Warrant Agent

  	
  12

  
	
  2.14

  	
  Transfer
  Restrictions and Legends

  	
  14

  
	
  2.15

  	
  Reliance
  by the Warrant Agent

  	
  17

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3 EXERCISE OF WARRANTS

  	
  17

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Method of
  Exercise of Warrants

  	
  17

  
	
  3.2

  	
  Effect of
  the Exercise of Warrants

  	
  19

  
	
  3.3

  	
  Partial
  Exercise of Warrants

  	
  19

  
	
  3.4

  	
  Cancellation
  of Warrants

  	
  19

  
	
  3.5

  	
  Expiration
  of Warrants

  	
  20

  
	
  3.6

  	
  Adjustment
  of the Exercise Price and Subscription Rights

  	
  20

  
	
  3.7

  	
  Adjustment
  Rules for Exercise Price

  	
  25

  
	
  3.8

  	
  Postponement
  of Issue of Shares, etc.

  	
  26

  
	
  3.9

  	
  Notice of
  Certain Events

  	
  27

  
	
  3.10

  	
  No
  Fractional Shares

  	
  27

  
	
  3.11

  	
  Reclassification,
  Reorganizations, etc.

  	
  28

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4 COVENANTS OF THE COMPANY

  	
  29

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  General
  Covenants

  	
  29

  
	
  4.2

  	
  Securities
  Qualification Requirements

  	
  31

  
	
  4.3

  	
  Warrant
  Agent’s Remuneration and Expenses

  	
  31

  
	
  4.4

  	
  Notice to
  Warrantholders of Certain Events

  	
  31

  
	
  4.5

  	
  Closure
  of Share Transfer Books

  	
  32

  
	
  4.6

  	
  Performance
  of Covenants by Warrant Agent

  	
  32

  
	
  4.7

  	
  Representation
  and Warranty

  	
  33

  



 

















 


	
  ARTICLE 5 MEETINGS OF WARRANTHOLDERS

  	
  33

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Right to
  Convene Meeting

  	
  33

  
	
  5.2

  	
  Notice

  	
  33

  
	
  5.3

  	
  Chairman

  	
  33

  
	
  5.4

  	
  Quorum

  	
  34

  
	
  5.5

  	
  Power to
  Adjourn

  	
  34

  
	
  5.6

  	
  Show of
  Hands

  	
  34

  
	
  5.7

  	
  Poll

  	
  34

  
	
  5.8

  	
  Voting

  	
  35

  
	
  5.9

  	
  Persons
  Entitled to be Present

  	
  35

  
	
  5.10

  	
  Regulations

  	
  35

  
	
  5.11

  	
  Certain
  Powers Exercisable by Extraordinary Resolution

  	
  36

  
	
  5.12

  	
  Definition
  of “Extraordinary Resolution”

  	
  37

  
	
  5.13

  	
  Resolutions
  Binding on all Warrantholders

  	
  38

  
	
  5.14

  	
  Holdings
  by Company Disregarded

  	
  38

  
	
  5.15

  	
  Minutes

  	
  38

  
	
  5.16

  	
  Powers
  Cumulative

  	
  38

  
	
  5.17

  	
  Instruments
  in Writing

  	
  38

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6 SUPPLEMENTAL INDENTURES AND SUCCESSOR
  COMPANIES

  	
  39

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Provision
  for Supplemental Indenture for Certain Purposes

  	
  39

  
	
  6.2

  	
  Successor
  Companies

  	
  39

  
	
  6.3

  	
  Successor
  Body Corporate Substituted

  	
  40

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7 CONCERNING THE WARRANT AGENT

  	
  40

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Rights
  and Duties of Warrant Agent

  	
  40

  
	
  7.2

  	
  Evidence,
  Experts and Advisors

  	
  41

  
	
  7.3

  	
  Documents,
  Moneys, etc. Held by Warrant Agent

  	
  42

  
	
  7.4

  	
  Action by
  Warrant Agent to Protect Interests

  	
  42

  
	
  7.5

  	
  Warrant
  Agent not Required to give Security

  	
  43

  
	
  7.6

  	
  Protection
  of Warrant Agent

  	
  43

  
	
  7.7

  	
  Replacement
  of Warrant Agent

  	
  44

  
	
  7.8

  	
  Conflict
  of Interest

  	
  45

  
	
  7.9

  	
  Acceptance
  of Appointment

  	
  46

  
	
  7.10

  	
  Accounts

  	
  46

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8 GENERAL

  	
  46

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Satisfaction
  and Discharge of Indenture

  	
  46

  
	
  8.2

  	
  Sole
  Benefit of Parties and Warrantholders

  	
  47

  
	
  8.3

  	
  Discretion
  of Directors

  	
  47

  
	
  8.4

  	
  Privacy

  	
  47

  
	
  8.5

  	
  Counterparts
  and Formal Date

  	
  48

  
	
   

  	
   

  	
   

  
	
  SCHEDULE “A”

  	
   

  
	
  FORM OF WARRANT CERTIFICATE

  	
   

  
	
  SCHEDULE “B”

  	
   

  
	
  FORM OF U.S. PURCHASER LETTER

  	
   

  



 


ii

















 


THIS COMMON SHARE PURCHASE
WARRANT INDENTURE is
made as of the 21st day of June, 2007.


 


BETWEEN:


 


TERRANE METALS CORP., a company existing under the laws of British
Columbia


 


(hereinafter the “Company”)


 


AND:


 


PACIFIC CORPORATE TRUST
COMPANY, a trust company
incorporated under the laws of British Columbia and duly authorized to carry on
business in the Province of British Columbia


 


(hereinafter the “Warrant Agent”).


 


RECITALS


 


WHEREAS:


 


A.                                                                                  The Company may issue up to 18,178,750 Warrants under
this Indenture pursuant to the Offering of Units and Flow-Through Shares;


 


B.                                                                                  Each whole Warrant will be exercisable to acquire one
Share at the Exercise Price at any time before the Warrant Expiry Time on the
Warrant Expiry Date on the terms and conditions set forth herein;


 


C.                                                                                  The Company is duly authorized to create and issue the
Warrants to be issued as herein provided;


 


D.                                                                                  The Warrant Agent has agreed to enter into this Indenture
and to hold all rights, interests and benefits contained herein for and on
behalf of the persons who become Warrantholders; and


 


E.                                                                                   The foregoing recitals A, B and C are made as
representations and statements of fact by the Company and not by the Warrant
Agent.


 


NOW THEREFORE, in consideration of the premises and for other good
and valuable consideration, the receipt and sufficiency whereof is hereby
acknowledged, the Company hereby appoints the Warrant Agent as warrant agent,
for the Warrantholders, to hold all rights, interests and benefits contained
herein for and on behalf of those persons who become holders of Warrants from
time to time issued pursuant to this Indenture and the parties hereto agree as
follows:


 














 


ARTICLE 1

INTERPRETATION


 


1.1                                                                               Definitions


 


In this Indenture and
in the Warrant Certificates:


 


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


 


“Accredited
Investor” means an “accredited investor” as that term is defined in Rule 501
of Regulation D;


 


“Applicable
Legislation” means the provisions of the Business
Corporations Ac (British Columbia), as from time to time amended,
and any statute of Canada or a province thereof, and the regulations and rules under
any such named or other statute relating to warrant indentures or the rights,
duties or obligations of corporations and warrant agents under warrant
indentures as are from time to time in force and applicable to this Indenture;


 


“auditors”
of the Company means a chartered accountant or firm of chartered accountants as
may be duly appointed as auditor of the Company from time to time;


 


“business day”
means a day that is not a Saturday, Sunday or civic or statutory holiday in the
City of Vancouver, British Columbia;


 


“Closing Date”
means June 21, 2007, being  the date of
closing of the Offering;


 


“Convertible
Securities” means securities of the Company or any other issuer that
are convertible into or exchangeable or exercisable for or otherwise carry the
right to acquire Shares, and “Convertible Security”
means any one of them;


 


“Corporate
Reorganization” has the meaning ascribed thereto in Section 3.6(7);


 


“Current
Market Price”, at any date, means the volume weighted average
trading price per Share at which the Shares have traded on the Exchange or such
other stock exchange which constitutes the principal trading market (by volume)
for the Shares during the twenty consecutive trading days before such date, and
the volume weighted average trading price shall be determined by dividing the
aggregate sale price of all Shares sold on the Exchange or market, as the case
may be, during the twenty consecutive trading days by the total number of
Shares so sold.  Whenever the Current
Market Price is required to be determined hereunder, the Company shall deliver
to the Warrant Agent a certificate of an officer specifying such Current Market
Price and setting out the details of its calculation.  In the event of any subsequent dispute as to
the determination of the Current Market Price, the Company’s auditors shall
make such determination which, absent manifest error, shall be binding for all
purposes hereunder;


 


“Date of
Issue” means the date hereof, notwithstanding that Warrants may be
issued and countersigned later than the date hereof;


 


2

















 


“Director”
means a director of the Company from time to time and reference without more to
action by the Directors shall mean action by the Directors as a board or by any
authorized committee thereof;


 


“dividends”
means dividends (payable in cash or in securities, property or assets of
equivalent value) declared payable on the Shares;


 


“Exchange”
means the TSX Venture Exchange, or if the Shares are not listed on that
exchange, such other stock exchange or quotation system on which the Shares may
then be listed as may be selected for such purpose by the directors of the
Company or, if the Shares are not then listed on any stock exchange then on the
over-the-counter market;


 


“Exercise
Price” means $0.85 per Share, as adjusted in accordance with the
terms of this Indenture, from time to time;


 


“Extraordinary
Resolution” means an extraordinary resolution of Warrantholders as
defined in Section 5.12 and includes a written instrument signed by
Warrantholders pursuant to the provisions of Section 5.17;


 


“Flow-Through
Shares” means the 6,250,000 common shares of the Company issued the
date hereof, issued on a flow-through basis;


 


“Offering”
means the public offering of up to 30,800,000 Units and 6,250,000 Flow-Though
Shares of the Company by way of short form prospectus in certain Provinces of
Canada, and by way of private placement in the United States;


 


“Original
U.S. Purchaser” means an Institutional Accredited Investor that
purchased the Warrants in the United States directly from the U.S. registered
broker-dealer affiliate of one of the Underwriters in a purchase of Units made
pursuant to the Underwriting Agreement;


 


“person”
means an individual, a corporation, a partnership, a government or any
department, agency or instrumentality thereof, a joint venture, a trust, a
trustee, an estate, an unincorporated organization and the heirs, executors,
administrators or other legal representatives of an individual; and pronouns
and other words importing persons have a similarly extended meaning;


 


“Qualifying
Jurisdictions” means the Provinces of British Columbia, Alberta,
Manitoba and Ontario and the United States, and other jurisdictions which are
agreed to by the Company and the Underwriters;


 


“Regulation D”
means Regulation D under the 1933 Act;


 


“Regulation S”
means Regulation S under the 1933 Act;


 


“Securities
Commissions” means, collectively, the securities commissions or
other securities regulatory authorities under the applicable Securities Laws of
each of the Canadian Qualifying Jurisdictions;


 


3

















 


“Securities
Laws” means, collectively, the applicable securities laws of each of
the Canadian Qualifying Jurisdictions and the respective regulations made and
forms prescribed thereunder together with all applicable published policy
statements, rules, instruments, blanket orders and rulings of the Securities
Commissions;


 


“Shares”
means the common shares without par value in the capital of the Company as
constituted on the date hereof, provided that in the event of any adjustment
pursuant to Article 3, “Shares” will
thereafter mean the shares or other securities or property resulting from such
adjustment that a Warrantholder is entitled to acquire on exercise of a Warrant
after the adjustment;


 


“Shareholder”
means an owner of record of one or more Shares or shares of any other class or
series of the Company;


 


“Share
Reorganization” has the meaning ascribed thereto in Section 3.6(2);


 


“Subsidiary”
means a corporation, a majority of the outstanding voting shares of which is
owned, directly or indirectly, by the Company, or by one or more Subsidiaries
of the Company and, as used in this definition, “voting
shares” means shares of a class or classes ordinarily entitled to
vote for the election of a majority of the directors of a corporation
irrespective of whether or not shares of any other class or classes shall have
or might have the right to vote for directors by reason of the happening of any
contingency, whether or not such contingency shall have happened;


 


“this
Indenture”, “hereto”, “herein”, “hereby”, “hereunder”, “hereof” and
similar expressions refer to this instrument 
and include any and every instrument supplemental or ancillary hereto or
in implementation hereof and the expressions “article”, “section”, “subsection”
and “paragraph” followed by a number, letter or both mean and refer to the
specified article, section, subsection or paragraph of this Indenture;


 


“Time of
Exercise” means the time that surrender of the Warrant Certificate,
the Warrant Exercise Form (attached hereto as part of Schedule “A”) and
payment of the Exercise Price is effected by a Warrantholder according to the
provisions of Section 3.1 hereof;


 


“trading day”
means, with respect to a stock exchange, a day on which such exchange is open
for the transaction of business and with respect to the over-the-counter market
means a day on which the TSX Venture Exchange is open for the transaction of
business;


 


“Underwriters”
means Canaccord Capital Corporation, Genuity Capital Markets, Haywood
Securities Inc. and Blackmont Capital Inc;


 


“Underwriting
Agreement” means the underwriting agreement dated May 23, 2007
between the Company and the Underwriters;


 


“Units”
means the units issued pursuant to the Offering at the purchase price of $0.65
per Unit, each Unit consisting of one Share and one-half of one Warrant;


 


4

















 


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


 


“U.S. Person”
means a U.S. person as that term is defined in Regulation S under the 1933 Act;


 


“Warrant
Agent” means Pacific Corporate Trust Company or any lawful successor
thereto from time to time under this Indenture;


 


“Warrant
Certificate” means a certificate substantially in the form specified
in Schedule “A” hereto evidencing one or more Warrants;


 


“Warrant
Exercise Form” means the exercise form forming part of each Warrant
Certificate as more particularly described in Section 3.1(3) hereof;


 


“Warrant
Expiry Date” means the date that is five years after the Closing
Date;


 


“Warrant
Expiry Time” means 4:30 p.m. (Vancouver time) on the Warrant
Expiry Date;


 


“Warrantholder”,
“holder” or “holder of
Warrants” means with respect to the Warrants, a person entered on
the register to be maintained under Section 2.9 as the registered holder
of a Warrant for the time being; and


 


“Warrants”
means the share purchase warrants of the Company issued and countersigned
hereunder and for the time being outstanding, each exercisable into one Share
upon due exercise and payment of the Exercise Price.


 


1.2                                                                               Meaning of “outstanding” for
Certain Purposes


 


Every Warrant
represented by a Warrant Certificate countersigned and delivered by the Warrant
Agent hereunder shall be deemed to be outstanding until the Warrant Expiry
Time, or until such Warrant Certificate shall be surrendered to the Warrant
Agent upon the exercise thereof pursuant to Article 3, provided however
that:


 


(a)                                  a Warrant which has been partially exercised shall be
deemed to be outstanding only to the extent of the unexercised part of the
Warrant;


 


(b)                                 where a Warrant Certificate has been issued in
substitution for a Warrant Certificate which has been lost, stolen or
destroyed, the Warrants represented by only one of them shall be counted for
the purpose of determining the number of Warrants outstanding; and


 


(c)                                  for the purpose of any provision of this Indenture
entitling holders of outstanding Warrants to vote, sign consents, requests or
other instruments or take any other action under this Indenture, Warrants owned
legally or equitably by the Company or any Subsidiary thereof shall be
disregarded, except that:


 


5

















 


(i)                                     for the purpose of determining whether the Warrant
Agent shall be protected in relying on any such vote, consent, request or other
instrument or other action, only the Warrants of which the Warrant Agent has
notice that they are so owned by the Company or any Subsidiary shall be so
disregarded; and


 


(ii)                                  Warrants so owned which have been pledged in good
faith other than to the Company or any Subsidiary thereof shall not be so
disregarded if the pledgee shall establish to the satisfaction of the Warrant
Agent the pledgee’s right to vote the Warrants in his discretion free from the
control of the Company or any Subsidiary thereof, as the case may be, and the
terms of the pledge thereof as to the right to vote shall govern.


 


1.3                                                                               Day not a Business Day


 


If the day on or
before which any action (other than the exercise of a Warrant) would otherwise
be required to be taken or is contemplated to commence hereunder is not a
business day, that action will be required to be taken and such procedure will
commence on or before the requisite time on the next succeeding day that is a
business day.


 


1.4                                                                               Words Importing the Singular


 


Words importing the
singular include the plural and vice versa and
words importing a particular gender include all genders.


 


1.5                                                                               Time of the Essence


 


Time shall be of the
essence in this Indenture and in the Warrant Certificates.


 


1.6                                                                               Interpretation not Affected by
Headings, etc.


 


The division of this
Indenture into Articles, and Sections and subsections, the provision of a table
of contents and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation hereof.


 


1.7                                                                               Applicable Law


 


This Indenture and
the Warrant Certificates shall be governed by and construed in accordance with
the laws of the Province of British Columbia and the federal laws of Canada
applicable therein and shall be treated in all respects as British Columbia
contracts.


 


1.8                                                                               Warrant Indenture Legislation


 


(1)                                  If and to the extent that any provision of this
Indenture limits, qualifies or conflicts with a mandatory requirement of
Applicable Legislation, the mandatory requirement will prevail.


 


6

















 


(2)                                  Each of the Company and the Warrant Agent will at all
times in relation to this Indenture and any action to be taken hereunder
observe and comply with and be entitled to the benefits of Applicable
Legislation.


 


1.9                                                                               Severability


 


In the event that any
provision hereof shall be determined to be invalid or unenforceable in any
respect, such determination shall not affect such provision in any other
respect or any other provision hereof, all of which shall remain in full force
and effect.


 


1.10                                                                        Entire Agreement


 


This Indenture
constitutes the entire agreement between the parties hereto relating to the subject
matter hereof and supersedes all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the
parties and there are no general or specific warranties, representations or
other agreement by or among the parties in connection with the entering into of
this Indenture or the subject matter hereof except as specifically set forth
herein.


 


1.11                                                                        Currency


 


Unless otherwise
stated, all dollar amounts referred to in this Indenture are references to
Canadian dollars.


 


ARTICLE 2

ISSUE OF WARRANTS


 


2.1                                                                               Creation and Issue of Warrants


 


(1)                                  A total of 18,178,750 Warrants are hereby created and
authorized to be issued.


 


(2)                                  Subject to adjustment as provided in this Indenture,
each Warrant issued hereunder will entitle the holder thereof to purchase one
Share at any time from and after the Date of Issue of the Warrant to and
including the Warrant Expiry Time upon payment of the Exercise Price.


 


2.2                                                                               Form and Terms of Warrant
Certificates


 


Warrant Certificates
shall be substantially in the form set out in Schedule “A” hereto with such
additions, variations or omissions as may be permitted by the provisions of
this Indenture or may from time to time be agreed upon between the Company and
the Warrant Agent and shall be numbered in the manner as the Company, with the
approval of the Warrant Agent, may prescribe. No Warrant Certificates
representing fractional Warrants will be issued under this Indenture, and any
fractional Warrants will be rounded down to the nearest whole Warrant.


 


7

















 


2.3                                                                               Issue of Warrant Certificates


 


Warrant Certificates
to be issued and delivered from time to time under this Indenture shall be
executed by the Company and countersigned by the Warrant Agent pursuant to or
upon the written order of the Company, without the Warrant Agent receiving any
consideration therefor, except as otherwise provided herein.


 


2.4                                                                               Warrantholder not a Shareholder


 


Nothing in this
Indenture or in the ownership of a Warrant evidenced by a Warrant Certificate,
or otherwise, will be construed as conferring on a Warrantholder any right or
interest whatsoever as a Shareholder of the Company, including but not limited
to any right to vote at, to receive notice of, or to attend, any meeting of
Shareholders or any other proceeding of the Company or any right to receive any
dividend or other distribution.


 


2.5                                                                               Execution of Warrant Certificates


 


Warrant Certificates
shall be signed by any one director or officer of the Company manually or the
signature of such director or officer may be engraved, lithographed or printed
in facsimile and shall be dated the Date of Issue.  Notwithstanding that any of the persons whose
signature appears on any Warrant Certificates as one of the officers or directors
may no longer, before the certification and delivery of the Warrant
Certificate, hold the official capacity in which he signed, any Warrant
Certificate signed as aforesaid shall be valid and binding upon the Company
when the Warrant Certificate has been countersigned by the Warrant Agent in
accordance with Section 2.6 and the registered holder thereof shall be
entitled to the benefits of this Indenture.


 


2.6                                                                               Certification by Warrant Agent


 


(1)                                  No Warrant Certificate shall be issued, or if issued,
shall be valid or entitle the holder to the benefit hereof until it has been
countersigned by the Warrant Agent by being countersigned by or on behalf of
the Warrant Agent and the countersignature upon any Warrant Certificate shall
be conclusive evidence as against the Company that the Warrant Certificate so
countersigned has been duly issued hereunder and is a valid obligation of the
Company, and that the holder is entitled to the benefit hereof.


 


(2)                                  The countersigning by or on behalf of the Warrant
Agent on any Warrant Certificate issued hereunder shall not be construed as a
representation or warranty by the Warrant Agent as to the validity of this
Indenture or of the Warrants and the Warrant Agent shall in no respect be
liable or answerable for the use made of any Warrant Certificate or of the
consideration therefor, except as otherwise specified herein. The
countersignature of or on behalf of the Warrant Agent shall, however, be a
representation and warranty by the Warrant Agent that the Warrant Certificate
has been duly countersigned by or on behalf of the Warrant Agent pursuant to
the provisions of this Indenture.


 


8

















 


2.7                                                                               Exchange of Warrant Certificates


 


The holder of a
Warrant Certificate may at any time after the date of issue thereof and before
the Warrant Expiry Time, upon surrender thereof to the Warrant Agent at its
principal transfer office in the City of Vancouver or at any other place that
is designated by the Company with the approval of the Warrant Agent, exchange
the same for one or more Warrant Certificates entitling the holder to subscribe
in the aggregate for the same number of Shares for which the holder may
subscribe under the surrendered Warrant Certificate. On each exchange the
Warrant Agent may levy a charge sufficient to reimburse it for any tax or other
governmental charge required to be paid, which shall be paid by the party
requesting the exchange, and, in addition, a reasonable charge for every
Warrant Certificate issued upon the exchange and such additional charge may be
made to the Company, as a condition precedent thereto. The Company shall
execute and the Warrant Agent shall countersign in accordance with
Sections 2.5 and 2.6 all Warrant Certificates necessary to carry out
exchanges contemplated herein.


 


2.8                                                                               Issue in Substitution for Lost
Certificates


 


(1)                                  If a Warrant Certificate becomes mutilated or is lost,
destroyed or stolen, the Company, subject to applicable law and subject to
subsection (2), will issue and thereupon the Warrant Agent will countersign and
deliver a new certificate of like denomination, date and tenor as the one
mutilated, lost, destroyed or stolen in exchange for and in place of and on
surrender and cancellation of the mutilated certificate or in lieu of and in
substitution for the lost, destroyed or stolen certificate, and the substituted
Warrant Certificate shall entitle the holder thereof to the same rights and
benefits and will bear the same legends, if any, as the certificate being
replaced and shall rank equally in accordance with its terms with all other
Warrant Certificates issued or to be issued hereunder.


 


(2)                                  The applicant for the issue of a new certificate
pursuant to this section will bear the cost of the issue thereof and in case of
loss, destruction or theft will, as a condition precedent to the issue thereof:


 


(a)                                  furnish to the Company and the Warrant Agent such
evidence of ownership and of the loss, destruction or theft of the certificate
to be replaced as is satisfactory to the Company and to the Warrant Agent in
their discretion;


 


(b)                                 furnish an indemnity or security in amount and form
satisfactory to the Company and to the Warrant Agent, in their discretion; and


 


(c)                                  pay the reasonable charges of the Company and the
Warrant Agent in connection therewith.


 


2.9                                                                               Registration and Transfer of
Warrants


 


(1)                                  The Company shall cause to be kept by and at the
principal office of the Warrant Agent in the City of Vancouver and by the
Warrant Agent or such other registrar as the Company, with the approval of the
Warrant Agent, may appoint, at such 


 


9

















 


other place or places, if any, as the Company may designate with the
approval of the Warrant Agent, registers in which shall be entered in
alphabetical order the names and addresses (including street and number, if
any) of the holders of Warrants and particulars of the Warrants held by them
respectively. Such registration shall be noted on the Warrant Certificates by
the Warrant Agent or other registrar.


 


(2)                                  The Company and the Warrant Agent will deem and treat
the registered holder of any Warrant as the absolute owner thereof for all
purposes and neither the Company nor the Warrant Agent shall be affected by any
knowledge or notice to the contrary, except where the Company or the Warrant
Agent is required to take notice by applicable law or by order of a court of
competent jurisdiction.


 


(3)                                  No transfer of a Warrant shall be valid unless entered
on any one of the registers upon surrender of the Warrant Certificate representing
such Warrant to the Warrant Agent or other registrar accompanied by a written
instrument of transfer in form satisfactory to the Warrant Agent or other
registrar executed by the registered holder or his executors, administrators or
other legal representatives or his or their attorney duly appointed by an
instrument in writing in form and execution satisfactory to the Warrant Agent
or other registrar and upon compliance with such reasonable requirements,
including those set forth in Section 2.14 hereof, if applicable, as the
Warrant Agent or other registrar may prescribe.


 


(4)                                  The registered holder of Warrants may at any time and
from time to time have the registration of the Warrants transferred from the
register in which the registration thereof appears to another authorized
register upon compliance with such reasonable requirements as the Warrant Agent
or other registrar may prescribe.


 


(5)                                  The Company shall also cause to be kept by and at the
principal office of the Warrant Agent in the City of Vancouver and by the
Warrant Agent or such other registrar as the Company may appoint, with the
approval of the Warrant Agent, at such other place or places, if any, as the
Company may designate with the approval of the Warrant Agent, registers in which
all transfers of Warrants and the date and other particulars of each transfer
shall be set out.


 


(6)                                  The transferee of Warrants shall, after the Warrant
Certificate and the appropriate form of transfer are lodged with the Warrant
Agent or other registrar and upon compliance with all other conditions in that
behalf required by this Indenture or by law, be entitled to be entered on one
of the registers as the owner of the Warrants free from all equities or rights
of set-off or counterclaim between the Company and his transferor or any
previous holder of the Warrants, save in respect of the equities of which the
Company is required to take notice by statute or by order of a court of
competent jurisdiction or by applicable law. The receipt by the registered holder
of Warrants of the Shares purchasable pursuant thereto will be a good discharge
to the Company and the Warrant Agent therefor and 


 


10

















 


neither the Company nor the Warrant Agent will be bound to inquire into
the title of the holder except as aforesaid.


 


(7)                                  Subject to applicable law, neither the Company nor the
Warrant Agent nor any registrar shall be bound to take notice of or see to the
execution of any trust, whether express, implied or constructive, in respect of
any Warrant or Warrant Certificate, and may transfer the same on the direction
of the person registered as the holder thereof, as though that person were the
beneficial owner thereof.


 


(8)                                  The registers required to be kept in the City of
Vancouver shall at all reasonable times be open for inspection by the Company
or any Warrantholder.  The Warrant Agent
and every registrar shall from time to time when requested to do so by the
Company, by the Warrant Agent or by a Warrantholder, furnish the Warrant Agent
or upon payment by the Company or Warrantholder of a reasonable fee, the
Company or the Warrantholder, as the case may be, with a list of names and
addresses of holders of Warrants entered on the registers kept by them and
showing the number of Warrants held by each such holder.


 


2.10                                                                        Enforcement of Rights of
Warrantholders


 


(1)                                  All or any of the rights conferred upon a
Warrantholder by the terms of the Warrants held by him and/or by the terms of
this Indenture may be enforced by such Warrantholder by appropriate legal
proceedings, but subject to the rights which are hereby conferred upon the
Warrant Agent and subject to the provisions of Section 7.1. The Warrant
Agent shall also have the power at any time and from time to time to institute,
in its own name or on behalf of the Warrantholders, and to maintain such suits
and proceedings as it may reasonably be advised shall be necessary or advisable
to preserve and protect the interests of the Warrantholders.


 


(2)                                  No recourse under or upon any obligation, covenant or
agreement contained in this Indenture or in the Warrant Certificates shall be
had against any shareholder, officer or director, past, present or future, of
the Company or of any of its Subsidiaries or of any successor corporation or
any subsidiary, either directly or through the Company, or the Subsidiaries or
otherwise, by any legal or equitable proceeding by virtue of any statute or
otherwise.


 


(3)                                  This Indenture and the Warrants issued hereunder are
solely obligations of the Company and no personal liability whatsoever shall
attach to or be incurred by the shareholders, officers or directors, past,
present or future, of the Company, or of any of its Subsidiaries, or any
successor corporations, under or by reason of the obligations, covenants or
agreements contained in this Indenture or in the Warrant Certificates; and any
personal liability of any nature whatsoever either at common law, in equity or
by statute, and any right or claim against any such shareholder, officer or
director are hereby expressly waived as a condition of and as consideration for
the execution of this Indenture and the issue of the Warrants.


 


11














 


2.11                                                                        Warrants to Rank Pari Passu


 


Except as otherwise
provided herein, all Warrants will rank pari passu,
whatever may be the actual dates of issue thereof.


 


2.12                                                                        Notice to Warrantholders


 


(1)                                  Unless herein otherwise expressly provided, a notice
to be given hereunder to Warrantholders will be deemed to be validly given if
the notice is sent by ordinary mail or air mail, postage prepaid, addressed to
the holders or delivered by hand or prepaid courier (or so mailed to certain
holders and so delivered to the other holders) at their respective addresses
appearing on any of the registers above mentioned.  The Warrant Agent shall give, in the same
manner as for Warrantholders set out above, a copy of each such notice to Canaccord
Capital Corporation, Attention: Syndication (Facsimile No. 604-687-7099,
with a copy to McCullough, O’Connor, Irwin LLP, Attention: Victor O’Connor
(Facsimile No. 604-687-7099).  Any
notice so given by mail or so delivered by hand shall be deemed to have been
given on the fifth business day after it has been mailed or on the day upon
which it has been delivered, respectively, or if sent by facsimile on the first
business day following the transmission, as the case may be. In determining
under any provision hereof the date when notice of any meeting or other event
must be given, the date of giving the notice shall be included and the date of
the meeting or other event shall be excluded. Accidental error or omission in
giving notice or accidental failure to mail notice to any Warrantholder shall
not invalidate any action or proceeding founded thereon.


 


(2)                                  If, by reason of a strike, lockout or other work
stoppage, actual or threatened, involving postal employees, a notice to be
given to the Warrantholders hereunder could reasonably be considered unlikely
to reach or to be delayed in reaching its destination, the notice will be valid
and effective only if it is delivered personally to such Warrantholders or if
delivered to the address for such Warrantholders contained in the register of
Warrants maintained by the Warrant Agent, by telecopy or other means of prepaid
transmittal and recorded communication.


 


(3)                                  Any mailings to or from outside of Canada shall be
made by postage prepaid mail or by prepaid courier.


 


2.13                                                                        Notice to the Company or the Warrant
Agent


 


(1)                                  Unless herein otherwise expressly provided, a notice
to be given hereunder to the Company or the Warrant Agent will be validly given
if delivered or if sent by postage prepaid mail or if transmitted by facsimile:


 


(a)                                  if to the Company:


 


Terrane Metals Corp.


#1500-999 West
Hastings Street


Vancouver, British
Columbia


V6C 2W2


 


12

















 


Attention:                                         Edward Farrauto


Facsimile:                                            (604) 630-2090


 


with a copy, which
shall not constitute notice to the Company, to:


 


Lang Michener LLP


Barristers and Solicitors


PO Box 11117, Royal Centre


1500 — 1055 West Georgia Street


Vancouver, British Columbia


V6E 4N7


 


Attention:                                         Thomas Deutsch


Facsimile:                                            (604) 685-7084


 


(b)                                 if to the Warrant Agent:


 


Pacific Corporate Trust Company


510
Burrard Street, 2nd Floor


Vancouver,
British Columbia


V6C
3B9


 


Attention:                                         Manager, Client Services


Facsimile:                                            (604) 689-8144


 


and any notice
delivered in accordance with the foregoing will be deemed to have been received
on the date of delivery or, if mailed, on the fifth business day following the
day of the mailing of the notice, or if transmitted by facsimile, on the first
business day following the transmission.


 


(2)                                  The Company or the Warrant Agent, as the case may be,
may from time to time notify the other in the manner provided in subsection (1) of
a change of address which, from the effective date of the notice and until
changed by like notice, will be the address of the Company or the Warrant
Agent, as the case may be, for all purposes of this Indenture.


 


(3)                                  If, by reason of a strike, lockout or other work
stoppage, actual or threatened, involving postal employees, a notice to be
given to the Warrant Agent or to the Company hereunder by registered mail could
reasonably be considered unlikely to reach or to be delayed in reaching its
destination, the notice will be valid and effective only if it is delivered to
an officer of the party to which it is addressed or if it is delivered to that
party at the appropriate address provided in subsection (1) by cable,
facsimile, telegram, or other means of prepaid transmitted, recorded
communication, and any notice delivered in accordance with the foregoing will
be deemed to have been received on the date of delivery to the officer or if
delivered 


 


13

















 


by cable, facsimile, telegram, telex or other means of prepaid,
transmitted, recorded communication, on the first business day following the
date of the sending of the notice.


 


(4)                                  Any mailings to or from outside of Canada shall be
made by airmail, postage prepaid or by prepaid courier.


 


2.14                                                                        Transfer Restrictions and Legends


 


(1)                                  The Warrant Agent understands and acknowledges that
the Warrants and the Shares issuable upon exercise of the Warrants have not
been and will not be registered under the 1933 Act or the securities laws of
any state of the United States.


 


(2)                                  Certificates representing Warrants issued in the
United States or to a U.S. Person or on behalf of a U.S. Person and Shares
issued in the United States or to a U.S. Person upon exercise of Warrants in
the United States or by or on behalf of a U.S. Person, and all certificates
issued in exchange thereof or in substitution thereof, until such time as it is
no longer required under the applicable requirements of the 1933 Act or
applicable U.S. state laws and regulations, shall bear the following legend:


 


“THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”) OR ANY STATE SECURITIES
LAWS. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT
OF TERRANE METALS CORP. (THE “COMPANY”) THAT SUCH SECURITIES MAY BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY, (B) OUTSIDE
THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
SECURITIES ACT, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH (I) RULE
144A TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT
OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE OFFER,
SALE, OR TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, OR (II) THE
EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT PROVIDED BY RULE 144
AFTER PROVIDING A LEGAL OPINION SATISFACTORY TO THE COMPANY, OR (D) PURSUANT
TO ANOTHER EXEMPTION FROM REGISTRATION AFTER PROVIDING A LEGAL OPINION
SATISFACTORY TO THE COMPANY.


 


14

















 


DELIVERY OF THIS
CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF
TRANSACTIONS ON STOCK EXCHANGES IN CANADA. IF THE COMPANY IS A “FOREIGN ISSUER”
WITHIN THE MEANING OF REGULATION S UNDER THE U.S. SECURITIES ACT AT THE TIME OF
TRANSFER, A NEW CERTIFICATE BEARING NO LEGEND MAY BE OBTAINED FROM THE
TRANSFER AGENT FOR THE COMPANY’S SECURITIES UPON DELIVERY OF THIS CERTIFICATE
AND A DULY EXECUTED DECLARATION, AND, IF REQUIRED BY THE COMPANY OR THE
TRANSFER AGENT, A LEGAL OPINION, IN EACH CASE IN A FORM SATISFACTORY
TO THE TRANSFER AGENT AND THE COMPANY, TO THE EFFECT THAT THE SALE OF THE
SECURITIES REPRESENTED HEREBY IS BEING MADE IN COMPLIANCE WITH RULE 904 OF
REGULATION S UNDER THE U.S. SECURITIES ACT.”


 


provided that:


 


(i)                                     if any such securities are being sold under clause (B) of
the above legend and in compliance with Canadian local laws and regulations,
and provided that the Company is a “foreign issuer” within the meaning of
Regulation S at the time of sale, the legend may be removed by providing a
declaration to the Company and the Warrant Agent, in the form attached as
Appendix C to Schedule A to this Warrant Indenture to the effect that the
securities are being sold in compliance with Rule 904 of Regulation S,
together with any documentation as may be required by the Company or its
transfer agent to the effect that an exemption from the registration
requirements of the 1933 Act is available, provided that the Company will use
its best efforts to remove the legend within three business days of receipt of
such declaration; and


 


(ii)                                  if any such securities are being sold under clause (C)(II) or
(D) of the above legend, the legend may be removed by delivery to the
Company and the Warrant Agent of an opinion of counsel, of recognized standing
reasonably satisfactory to the Company, that such legend is no longer required
under applicable requirements of the 1933 Act or state securities laws.


 


In addition, the
Warrants with the above legend will bear the following legend:


 


“THE SECURITIES
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED UNDER U.S.
SECURITIES ACT OR ANY STATE SECURITIES LAWS. 
THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON
BEHALF OF A PERSON IN 


 


15

















 


THE UNITED STATES OR
A U.S. PERSON UNLESS THE WARRANT AND THE UNDERLYING SECURITIES HAVE BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE SECURITIES
LEGISLATION OF ANY SUCH STATE OR AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS IS AVAILABLE.  THE TERMS “UNITED
STATES” AND “U.S. PERSON” HAVE THE MEANINGS GIVEN THEM UNDER REGULATION S
PROMULGATED PURSUANT TO THE U.S. SECURITIES ACT.”


 


The Company shall use
its best efforts to cause the Warrant Agent to remove such legend, and to
deliver a certificate which does not bear such legend, within three business
days of the receipt of such a declaration or, in the case of Shares being sold
pursuant to Rule 144 under the 1933 Act, receipt of the foregoing
evidence.


 


(3)                                  The Warrant Agent acknowledges that the Warrants
evidenced by any Warrant Certificate or Share certificate issued with respect
to an exercise of Warrants which includes the legend set forth in
subsection 2.14(2) above may not be transferred except pursuant to
registration or compliance with exemptions therefrom under the 1933 Act and all
applicable state securities laws, and the Warrant Agent agrees not to register
any transfer of the Warrants or Shares so legended unless, in addition to the
other requirements set forth herein:


 


(a)                                  the transferor has executed and delivered to the
Warrant Agent a declaration in the form set forth in subsection 2.14(2) (or
as the Company may otherwise prescribe) to the effect that the transfer is
being made pursuant to Rule 904 of Regulation S under the 1933 Act, and in
such case the Warrant Certificate or Share certificate issued to the transferee
shall not include the legend set forth in subsection 2.14(2) unless the
Company has, before the issuance thereof, informed the Warrant Agent in writing
that it has ceased to be a “foreign issuer” as defined in Rule 902 under
the U.S. Securities Act; or


 


(b)                                 the transferor has delivered to the Warrant Agent and
the Company an opinion of counsel to the effect that the transfer is in
compliance with the requirements of the 1933 Act and all applicable  state securities laws, and the Company has confirmed in
writing to the Warrant Agent that such opinion is satisfactory to the Company,
and in such case the Warrant Certificate or Share certificate issued to the
transferee shall include the legend set forth in subsection 2.14(2) unless
such opinion states that the legend is no longer required; or


 


(c)                                  the Company has confirmed in writing to the Warrant
Agent that it has received other evidence satisfactory to it that the transfer
is in compliance with the requirements of the 1933 Act and all applicable state
securities laws, and has instructed the Warrant Agent regarding the inclusion
or 


 


16

















 


omission of the legend set forth in subsection 2.14(2) on the Warrant
Certificate or Share certificate issued to the transferee; or


 


(d)                                 the transferee is the Company.


 


2.15                                                                        Reliance by the Warrant Agent


 


The Warrant Agent
shall have no obligation to ensure or verify compliance with any applicable
laws or regulatory requirements on the issue, exercise or transfer of any
Warrants or any Shares issuable upon the exercise thereof, provided such issue,
exercise or transfer, as the case may be, is effected in accordance with the
terms of this Indenture.  The Warrant
Agent shall be entitled to process all transfers and exercises of Warrants upon
the presumption that such transfers or exercises are permissible pursuant to
all applicable laws and regulatory requirements.  The Warrant Agent may assume for the purposes
of this Indenture that any address on the register of the Warrantholders is the
holder’s actual address and is also determinative as to residency and that the
address of any transferee to whom any Shares or Warrants are to be registered,
as shown on the transfer document, is the transferee’s residency.  The Warrant Agent shall have no obligation to
ensure that legends appearing on the Share certificates or Warrant Certificates
comply with regulatory requirements or securities laws of any applicable jurisdiction,
but shall ensure that the applicable legends required to be placed on the
certificates evidencing the Shares and Warrants pursuant to this Indenture are
placed thereon.


 


ARTICLE 3

EXERCISE OF WARRANTS


 


3.1                                                                               Method of Exercise of Warrants


 


(1)                                  Each Warrant may be exercised by the holder thereof at
any time on or after the Date of Issue, but not after the Warrant Expiry Time,
upon the terms and subject to the conditions set forth herein.


 


(2)                                  Subject to and upon compliance with the provisions of
this Article, the holder of any Warrant Certificate may exercise the right of
purchase therein provided for by surrendering the Warrant Certificate to the
Warrant Agent at its principal transfer office in the City of Vancouver or at
such additional place or places as may be designated by the Company from time
to time with the approval of the Warrant Agent during normal business hours on
a business day at that place before the Warrant Expiry Time, together with the
Warrant Exercise Form duly completed and executed by the holder for the
number of Shares which the holder desires to purchase and payment of the
aggregate Exercise Price applicable at the time of the surrender calculated in
accordance with the provisions of this Indenture.  The aggregate Exercise Price for Shares subscribed
for under the Warrants shall be paid by certified cheque, bank draft or money
order payable to or to the order of the Company at par at the city where the
Warrant Certificate is surrendered. 
Surrender of a Warrant Certificate with the Warrant Exercise Form duly
completed and payment of the aggregate Exercise Price will be deemed to have
been effected, and Warrants shall be deemed to have been exercised, only on 


 


17

















 


personal delivery thereof to, or if sent by mail or other means of
transmission on actual receipt thereof by, the Warrant Agent at one of the
offices specified in this section.


 


(3)                                  Every Warrant Exercise Form shall be signed by
the holder of the Warrant Certificate who desires to exercise in whole or in
part the right of purchase therein provided for; shall specify the number of
Shares that such holder wishes to purchase (being not more than he is entitled
to purchase under the applicable Warrant Certificate), the person or persons in
whose name or names the Shares which such holder desires to purchase are to be
issued and his or their address or addresses and the number of Shares to be
issued to each such person, and if more than one is so specified, the form
shall have one of the boxes in Appendix A to the Warrant Exercise Form checked;
and shall be substantially in the form set out in the Warrant Certificate.


 


(4)                                  If any Shares subscribed for are to be issued to a
person or persons other than the Warrantholder, the Warrantholder must pay to
the Company or to the Warrant Agent on his behalf an amount equal to all
applicable transfer taxes or other government charges, and the Company will not
be required to issue or deliver any certificate evidencing any Shares unless or
until that amount has been so paid or the Warrantholder has established to the
satisfaction of the Company that the taxes and charges have been paid or that
no taxes or charges are owing.


 


(5)                                  The Warrants and the Shares issuable upon exercise
thereof have not been registered under the 1933 Act or the securities law of
any state of the United States, and the Warrants may not be exercised within
the United States or by or on behalf of any U.S. Person unless the Shares are
registered under the 1933 Act and the securities laws of all applicable states
of the United States or an exemption from such registration requirements is
available. No exercise of any Warrants shall be effective, and no certificate
representing Shares shall be issued pursuant to the exercise of Warrants, unless
the appropriate box on the Warrant Exercise Form is selected specifying
one of the following:


 


(a)                                  the holder is not in the United States or a U.S.
Person, is not exercising the Warrants on behalf of a U.S. Person, and did not
execute or deliver the Warrant Exercise Form in the United States;


 


(b)                                 the holder is an Original U.S. Purchaser that remains
an Accredited Investor and is exercising the Warrants on its own behalf and not
for the account or benefit of any other person in which case the holder shall,
concurrent with exercise of the Warrants, provide a letter in substantially the
form set out in Schedule “B” hereto; or


 


(c)                                  the holder is resident in the United States or is a
U.S. Person and provides an opinion of counsel of recognized standing in form
and substance satisfactory to the Company to the effect that registration under
the 1933 Act  and applicable state securities laws is
not required.


 


18

















 


The certificates
representing any Shares issued in connection with the exercise of Warrants
pursuant to clause (b) or (c) of this Section 3.1(5) shall
bear the legend set forth in Section 2.14(2) of this Indenture. No
certificates for Shares shall be registered or delivered to an address in the
United States unless the holder complies with clause (b) or (c) of
this Section 3.1(5).


 


3.2                                                                               Effect of the Exercise of
Warrants


 


(1)                                  Subject to subsection (2) and Section 3.8,
on exercise of a Warrant, the Company shall cause to be issued to the person or
persons in whose name or names the Shares so subscribed for are to be issued as
specified in the Warrant Exercise Form, the number of Shares to be issued to
such person or persons and such person or persons shall become a Shareholder or
Shareholders of the Company in respect of those Shares with effect from the
date on which the Warrant is exercised and shall be entitled to delivery of a
certificate or certificates evidencing the Shares and the Company shall cause
the certificate or certificates to be mailed by insured mail or delivered as
specified to such person or persons (or, if applicable, the trustee under the
registered retirement savings plan which holds the Shares) at the address or
addresses specified in the Warrant Exercise Form within five business days
of the date on which the Warrant is exercised.


 


(2)                                  Notwithstanding any provision herein contained to the
contrary, the Company shall not be required to deliver certificates for Shares
in any period while the share transfer books of the Company are closed and, in
the event of the exercise of any Warrant during any such period, the Shares
subscribed for shall be issued and such person shall be deemed to have become
the holder of record of such Shares on the date on which such share transfer
books are opened.


 


3.3                                                                               Partial Exercise of Warrants


 


A Warrantholder may
subscribe for and purchase any lesser number of Shares than the number of
Shares to which such holder is entitled upon the exercise of Warrants, in which
case the Warrantholder shall be entitled to receive forthwith a new Warrant
Certificate in respect of the Shares purchasable under the original Warrant
Certificate and not then subscribed for and purchased, and the Warrant Agent
shall issue a new Warrant Certificate upon surrender of the original Warrant Certificate,
if satisfied that the new Warrant Certificate is properly issuable.


 


3.4                                                                               Cancellation of Warrants


 


All Warrants
exercised as provided in Section 3.1, partially exercised as provided in Section 3.3,
or all Warrant Certificates exchanged for other Warrants as provided in Section 2.7
or otherwise surrendered to the Warrant Agent shall be cancelled and either
held by the Warrant Agent until termination of this Indenture or resignation of
the Warrant Agent or destroyed by the Warrant Agent at the direction of the
Company and, if required by the Company, the Warrant Agent shall furnish the
Company with a certificate as to the destruction.


 


19

















 


3.5                                                                               Expiration of Warrants


 


After the Warrant
Expiry Time, all rights under this Indenture and under any Warrant that has not
been exercised shall wholly cease and terminate and the Warrant Certificate
therefor shall be wholly void and of no effect.


 


3.6                                                                               Adjustment of the Exercise Price
and Subscription Rights


 


(1)                                  In this section, the terms “record date”
and “effective date” where used herein,
shall mean the close of business on the relevant date.


 


(2)                                  If and whenever at any time from the date hereof until
the Warrant Expiry Time, the Company:


 


(a)                                  issues Shares or Convertible Securities to all or
substantially all of the holders of Shares by way of stock dividend or other
distribution, other than: a dividend paid in the ordinary course, or a
distribution of Shares upon the exercise of the Warrants pursuant to the exercise
of directors, officers or employee stock options granted under the Company’s
stock option plan;


 


(b)                                 subdivides, redivides or changes the outstanding
Shares into a greater number of shares, or


 


(c)                                  combines, consolidates or reduces the outstanding Shares
into a lesser number of shares,


 


(each of such events
being herein called a “Share Reorganization”),
the Exercise Price will be adjusted effective immediately on the record date
for the dividend or, in the case of a subdivision, redivision, change, combination,
consolidation or reduction, effective immediately on the record date, or the
effective date if no record date is fixed, to the number that is the product
of:


 


(d)                                 the Exercise Price in effect immediately before that
effective date or record date; and


 


(e)                                  the fraction of which:


 


(i)                                     the numerator is the total number of Shares
outstanding on that effective date or record date before giving effect to the
Share Reorganization, and


 


(ii)                                  the denominator is the total number of Shares that are
or would be outstanding immediately after that effective date or record date
after giving effect to the Share Reorganization and assuming all Convertible
Securities issued as part of the Share Reorganization had then been converted
into or exchanged for Shares or all rights to acquire Shares had then been
exercised.


 


20

















 


For the purpose of
determining the number of Shares outstanding at any particular time there shall
be included that number of Shares which would have resulted from the conversion
or exchange at that time of all Convertible Securities of the Company (other
than any Convertible Securities issued to holders of Shares by way of a stock
dividend or other distribution and otherwise included in computing the denominator
in clause (ii) hereof). Shares (and Shares issuable upon conversion or
exchange of Convertible Securities) issued or to be issued under a Share
Reorganization shall be deemed to be outstanding on the record date or
effective date for such Share Reorganization for the purpose of calculating the
number of outstanding Shares under subsections (3) and (5). To the
extent that any Convertible Securities issued to holders of Shares by way of a
stock dividend or other distribution are not so converted or exchanged into or
for Shares before the expiration of the right to do so, the conversion price
shall then be readjusted to the conversion price which would then be in effect
based upon the number of Shares actually issued upon the conversion or exchange
of the Convertible Securities.


 


(3)                                  If and whenever at any time from the date hereof to
the Warrant Expiry Time, the Company shall fix a record date for the issuance
or distribution of rights, options or warrants to all or substantially all of
the holders of the outstanding Shares entitling them, for a period expiring not
more than 45 days after the record date, to subscribe for or purchase Shares or
Convertible Securities at a price per Share (or having a conversion price per
Share) less than 95% of the Current Market Price on the record date (any such
issuance being herein called a “Rights Offering”),
the Exercise Price will be adjusted on the record date for the Rights Offering
to the number which is the product of the Exercise Price in effect immediately
before the record date and the fraction:


 


(i)                                     the numerator of which shall be the total of
(A) the number of Shares outstanding immediately before the record date
and (B) a number of Shares equal to the number arrived at by multiplying
the total number of additional Shares offered for subscription or purchase or
into or for which the total number of Convertible Securities so offered are
convertible or exchangeable by the quotient obtained by dividing the purchase
or subscription price for each Share offered for subscription or purchase or
the conversion price for each Convertible Security so offered by such Current
Market Price for the Shares, and


 


(ii)                                  the denominator of which shall be the total number of
Shares outstanding immediately before such record date plus the total number of
additional Shares offered for subscription or purchase or into or for which the
total number of Convertible Securities so offered are convertible or
exchangeable.


 


The adjustment shall
be made successively whenever a record date is fixed, and shall become
effective immediately after the record date for determination of


 


21














 


shareholders entitled
to receive such Shares or Convertible Securities, provided that if two or more
such record dates or dates of announcement, as applicable, referred to in
subsection (3) are fixed within a period of 35 trading days, the
adjustment shall be made successively as if each of such record dates occurred
on the earliest of such record dates. To the extent that any rights, options or
warrants are not so issued or any of the rights, options or warrants so issued
are not exercised before the expiration thereof, or any Convertible Securities
are not so converted into or exchanged for Shares before the expiration of the
right to do so, the Exercise Price will be readjusted to the Exercise Price in
effect immediately before the record date, and the Exercise Price will be
further adjusted based upon the number of additional Shares actually delivered
upon the exercise of the rights, options or warrants, or issued upon the
conversion or exchange of the Convertible Securities, as the case may be.


 


(4)                                  If and whenever at any time from the date hereof to
the Warrant Expiry Time, the Company shall fix a record date for the issue of
rights, options or warrants to all or substantially all the holders of the
outstanding Shares entitling them, for a period expiring not more than 45 days
after such record date, to subscribe for or purchase Shares or Convertible
Securities at a price per Share (or having a conversion price per Share) not
less than 95% of the Current Market Price on the record date, the Exercise Price
will not be adjusted.


 


(5)                                  If and whenever at any time from the date hereof to
the Warrant Expiry Time the Company shall fix a record date for the making of
an issue or distribution to all or substantially all the holders of its
outstanding Shares of (a) shares or securities of any class, excluding
Shares or Convertible Securities referred to in paragraph 2(a), whether of the
Company or any other corporation, or (b) rights, options or warrants,
excluding those referred to in subsection (3) or (4), or (c) evidences
of its indebtedness, or (d) property, cash or other assets, excluding
dividends in the ordinary course or property distributed in lieu thereof at the
option of the Shareholders (any of such events being herein called a “Special Distribution”) then, in each such case, the Exercise
Price shall be adjusted on the record date to the number that is the product of
the Exercise Price in effect immediately before the record date and the
fraction:


 


(i)                                     the numerator of which shall be the total number of Shares
outstanding immediately before the record date multiplied by the Current Market
Price on the day immediately before such record date, less the aggregate fair
market value (as determined by the Directors, subject to prior written approval
of the Exchange which determination, absent manifest error, shall be
conclusive) of the shares or rights, options or warrants or evidence of
indebtedness or property, cash or assets so distributed pursuant to such
Special Distribution, and


 


22

















 


(ii)                                  the denominator of which shall be the total number of
Shares outstanding immediately before the record date multiplied by such
Current Market Price.


 


The adjustment shall
be made successively whenever a record date is fixed, and shall become
effective immediately after the record date for the determination of
Shareholders entitled to receive such Special Distribution, provided that if
two or more such record dates or dates of announcement, as applicable, referred
to in subsection (5) are fixed within a period of 35 trading
days, the adjustment shall be made successively as if each of such record dates
occurred on the earliest of such record dates. To the extent that any Special
Distribution is not so made, the Exercise Price shall then be readjusted to the
Exercise Price which would then be in effect if the record date had not been
fixed or to the Exercise Price which would then be in effect based upon the
shares or rights, options or warrants or evidences of indebtedness or property,
cash or assets actually distributed, as the case may be.


 


(6)                                  On any adjustment of the Exercise Price pursuant to
subsection (2), (3) or (5), including any readjustment, the number of
Shares purchasable on exercise of a Warrant will be adjusted, effective at the
same time as the adjustment of the Exercise Price, by multiplying the number of
Shares so purchasable immediately before the adjustment by a fraction, the
numerator of which shall be the Exercise Price in effect immediately before the
adjustment and the denominator of which shall be the Exercise Price resulting
from such adjustment.


 


(7)                                  Subject to the prior written approval of the Exchange
if and whenever at any time from the date hereof to the Warrant Expiry Time
there is:


 


(a)                                  a reclassification or redesignation of the Shares
outstanding, a change of Shares into other shares or securities, or any other
capital reorganization of the Company except as described in
subsections (2), (3) and (5),


 


(b)                                 a consolidation, merger, arrangement or amalgamation
of the Company with or into another body corporate or other entity resulting in
a reclassification or redesignation of outstanding Shares or a change of Shares
into other shares or securities, or


 


(c)                                  a transaction whereby all or substantially all the
Company’s undertaking and assets become the property of another corporation or
other entity,


 


(any of those events
being herein called a “Corporate Reorganization”),
a holder who thereafter exercises Warrants will be entitled to receive and will
accept, for the Exercise Price then in effect, in lieu of the Shares (and any
other securities to which Warrantholders are then entitled on the exercise of
Warrants) to which he would otherwise have been entitled on exercise
immediately before the Corporate Reorganization, the kind and amount of shares
or other securities or property (including cash) that he would have been
entitled to receive as a result of 


 


23

















 


the Corporation
Reorganization if, on the effective date thereof, he had been the holder of the
number of Shares (and any other securities to which Warrantholders are then
entitled on the exercise of Warrants) to which he would have been entitled on
the exercise of the Warrant or Warrants immediately before the Corporation
Reorganization.


 


(8)                                  As a condition precedent to taking any action that
would require an adjustment pursuant to subsection (7), the Company will take
all action that, in the opinion of counsel, is necessary in order that the
Company, any successor or any successor to its assets and undertaking, shall be
obligated to and may validly and legally issue as fully paid and non-assessable
all the Shares or other shares or securities or property to which
Warrantholders will be entitled on the exercise of Warrants thereafter.


 


(9)                                  Subject to the prior written consent of the Exchange,
if necessary as a result of any Corporate Reorganization, appropriate
adjustments will be made in the application of the provisions set forth in this
Article 3 with respect to the rights and interests of Warrantholders to
the end that the provisions set forth in this Article 3 will thereafter
correspondingly be made applicable as nearly as may reasonably be possible to
any shares or other securities or property thereafter deliverable on the
exercise of a Warrant. Any such adjustment will be made by and set forth in an
amendment hereto approved by the Directors and by the Warrant Agent, each
acting reasonably, and will for all purposes, absent manifest error, be conclusively
deemed to be an appropriate adjustment.


 


(10)                            Subject to the prior written consent of the Exchange,
if the purchase price provided for in any right, warrant or option issued in
connection with a Rights Offering is decreased, or the conversion price for
Convertible Securities issued in connection with a Share Reorganization is
increased, the Exercise Price shall forthwith be changed to whatever Exercise
Price would have been obtained had the adjustment made in connection with the
issuance of all such rights, warrants, options or Convertible Securities been
made upon the basis of the purchase price as so decreased or the conversion
price as so increased, provided that the provisions of this subparagraph shall
not apply to any increase or decrease resulting from provisions in any rights,
warrants, options or securities designed to prevent dilution if the increase or
decrease shall not have been proportionately greater than the change, if any,
in the Exercise Price to be made at the same time pursuant to the provisions of
this section.


 


(11)                            Subject to the prior written consent of the Exchange,
if and whenever at any time before the Warrant Expiry Time the Company shall
take any action affecting or relating to the Warrants, other than any action
described in this section, which in the opinion of the Warrant Agent, acting
reasonably and in good faith, based upon the advice of counsel, would
prejudicially affect the rights of any holders of Warrants, the Exercise Price
will be adjusted in such manner, if any, and at such time, as the Warrant
Agent, may in its sole discretion determine to be equitable in the
circumstances to such holders.


 


24

















 


3.7                                                                               Adjustment Rules for
Exercise Price


 


The following rules and
procedures will be applicable to adjustments made pursuant to Section 3.6:


 


(a)                                  the adjustments and readjustments provided for in Section 3.6
shall be cumulative and, subject to paragraph (b), will apply (without
duplication) to successive issues, subdivisions, combinations, consolidations,
distributions and other events that require an adjustment;


 


(b)                                 no adjustment in the Exercise Price, or resulting
adjustment in the number of Shares issuable on exercise of Warrants, will be
made unless the adjustment would result in a change of at least 1% in the
prevailing Exercise Price and the number of Shares purchasable upon the
exercise of the Warrants would change by at least one one-hundredth of a Share;
provided, that any adjustment that would have been required to be made except
for the provisions of this paragraph will be carried forward and taken into
account in the next adjustment;


 


(c)                                  no adjustment will be made in respect of an event
described in paragraph 3.6(2)(a) or subsections 3.6(3) or 3.6(5) if
the Warrantholders are entitled to participate in the event on the same terms, mutatis mutandis, as if they had exercised their Warrants
immediately before the effective date of or record date for the event, such
participation being subject to the prior written consent of the Exchange if so
required;


 


(d)                                 for the purposes of subsections (2), (3), (4) and
(5) of Section 3.6, there will be deemed not to be outstanding:


 


(i)                                     any Share owned by or held for the account of the
Company,


 


(ii)                                  any Share owned by or held for the account of any
Subsidiary of the Company;


 


(e)                                  subject to the prior written consent of the Exchange,
any dispute that arises at any time with respect to any adjustment pursuant to
this Indenture will be conclusively determined (as between the Company, the Warrantholders,
the Warrant Agent and all transfer agents and shareholders of the Company) by
the auditor of the Company or, if the auditor of the Company is unable or
unwilling to act, by such firm of independent chartered accountants as is
selected by the Directors and is acceptable to the Warrant Agent and any
determination by them, absent manifest error, will be binding on the Company,
the Warrantholders, the Warrant Agent and all transfer agents and Shareholders
of the Company, and the Company shall notify the Warrantholders thereof;


 


(f)                                    in the absence of a resolution of the Directors fixing
the record date for an event referred to in Section 3.6, the Company will
be deemed to have 


 


25

















 


fixed as the record date therefor the date on which the event is
effected or such other date as may be required by law;


 


(g)                                 subject to the prior written consent of the Exchange
if required as a condition precedent to the taking of any action which would
require an adjustment in any of the rights under the Warrants, the Company will
take any action which, in the opinion of counsel to the Company, may be
necessary in order that the Company, or any successor to the Company or
successor to the undertaking or assets of the Company will be obligated to and
may validly and legally issue all the Shares or securities which the holders of
the Warrants would be entitled to receive thereafter and to exercise such
Warrants in accordance with the provisions hereof;


 


(h)                                 subject to Sections 7.2 and 7.3, the Warrant Agent
shall not at any time be under any duty or responsibility to any Warrantholder
to determine whether any facts exist which may require any adjustment
contemplated by Section 3.6, or with respect to the nature or extent of
any such adjustment made, or with respect to the method employed in making
same. The Warrant Agent shall not be accountable for the validity or value of
any Shares delivered upon the exercise or deemed exercise of any Warrants and
shall not be responsible for any failure of the Company to make any payment, or
to issue or deliver any securities or certificates represented hereby upon the
exercise or deemed exercise of any Warrants; and


 


(i)                                     if the Company, after the date hereof, shall take any
action affecting any Shares which in the opinion of the Directors acting
reasonably and in good faith would materially affect the rights of
Warrantholders, the Exercise Price and number of Shares issuable upon exercise
of Warrants shall be adjusted in such manner, if any, and at such time, as the
Directors, in their sole discretion acting reasonably and in good faith, may
determine to be equitable in the circumstances to adjust the rights of the
Warrantholders to protect against dilution in accordance with the intent and purposes
of Section 3.6 and Section 3.7. Failure of the taking of action by
the Directors so as to provide for an adjustment in the Exercise Price before
the effective date of any action by the Company affecting the Shares shall be
conclusive evidence (absent manifest error) that the Directors have determined
that it is equitable to make no adjustment in the circumstances, subject to the
prior written consent of the Exchange.


 


3.8                                                                               Postponement of Issue of Shares, etc.


 


In any case in which Section 3.6
requires an adjustment to take effect immediately after the effective date of
or record date for an event, and a Warrant is exercised after that date and
before the consummation of the event (which in the case of rights, options and
warrants will be the date the rights, options and warrants are issued), the
Company may postpone until consummation issuing to the Warrantholder such of
the Shares, securities or property to which 


 


26

















 


he is entitled if the Warrant had been
exercised immediately before that date, provided however, that the Company will
deliver to the Warrantholder an appropriate instrument evidencing such holder’s
right to receive such additional Shares, securities or property upon the
occurrence and consummation of such event and the right to receive any dividend
or other distribution in respect of such additional Shares, securities or
property declared in favour of the holders of record of Shares or of such
securities or property on or after that date or such later date as such holder
would, but for the provisions of this Section, have become the holder of record
of such additional Shares or of such securities or property pursuant to Section 3.6.


 


3.9                                                                               Notice of Certain Events


 


(1)                                  At least 14 business days before the effective
date of or record date for any event referred to in Section 3.6, other
than a subdivision or consolidation of the Shares, that requires or might
require an adjustment in the subscription rights pursuant to a Warrant,
including the Exercise Price and the number of Shares purchasable on exercise
of a Warrant, the Company will:


 


(a)                                  file with the Warrant Agent a certificate of the
Company specifying the particulars of the event and, to the extent
determinable, any adjustment required and the computation of the adjustment,
and


 


(b)                                 give notice to the Warrantholders of the particulars
of the event and, to the extent, determinable, any adjustment required.


 


The notice need only
set forth particulars as have been determined at the date that notice is given.


 


(2)                                  If any adjustment for which a notice pursuant to
subsection (1) is given is not then determinable, the Company will
promptly after the adjustment is determinable:


 


(a)                                  file with the Warrant Agent a certificate of the
Company showing the computation of the adjustment, and


 


(b)                                 give notice to the Warrantholders of the adjustment.


 


(3)                                  In the event of a subdivision or consolidation of the
Shares, the Company will, before giving effect thereto, file with the Warrant
Agent a certificate of the Company specifying the particulars of the
subdivision or consolidation and specifying the number of Shares purchasable
upon exercise of a Warrant after giving effect to such subdivision or
consolidation.


 


3.10                                                                        No Fractional Shares


 


The Company will not,
pursuant to Section 3.6 or under any other circumstances, be obligated to
issue any fraction of a Share upon the exercise of a Warrant or Warrants. To
the extent that the holder of one or more Warrants would otherwise have been
entitled to receive on the exercise or partial exercise thereof a fraction of a
Share, that holder may exercise such right in respect of the fraction only in
combination with another Warrant or Warrants that in the 


 


27

















 


aggregate entitle the holder to purchase a
whole number of Shares. If not so exercised, the Company shall not pay any
amounts to the holder in satisfaction of the right to otherwise have received a
fraction of a Share.


 


3.11                                                                        Reclassification, Reorganizations, etc.


 


(1)                                  In case of:


 


(a)                                  any reclassifications or change of the Shares (other
than a change in par value, or from par value to no par value, or from no par
value to par value, or as a result of a subdivision or consolidation);


 


(b)                                 any amalgamation, consolidation or merger of the
Company with, or amalgamation, consolidation or merger of the Company into, any
other corporation (other than an amalgamation, consolidation or merger in which
the Company is the continuing corporation and which does not result in any reclassification
or change, other than as aforesaid, of the Shares);


 


(c)                                  a reorganization of the Company; or


 


(d)                                 any sale, transfer or other disposition of all or
substantially all of the assets of the Company,


 


the Company or the
corporation formed by the amalgamation or the corporation into which the
Company shall have been merged or been consolidated or the reorganized Company,
or the corporation which shall have acquired such assets, as the case may be,
shall execute and deliver to the Warrant Agent a supplemental indenture
providing that the holder of each Warrant then outstanding shall have the right
thereafter (until the Warrant Expiry Time) to exercise Warrants only into the
kind and amount of shares and other securities and property (including cash) receivable
upon such reclassification, change, amalgamation, consolidation, merger,
reorganization, sale, transfer or other disposition by a holder of the number
of Shares which were purchasable upon the exercise of the Warrants had the
Warrants been exercised immediately before the reclassification, change,
amalgamation, consolidation, merger, reorganization, sale, transfer or other
disposition.


 


(2)                                  The supplemental indenture shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article.


 


(3)                                  The provisions of this section shall apply to
successive reclassifications, changes, amalgamations, consolidations, mergers,
reorganizations, sales, transfers or other dispositions.


 


28

















 


ARTICLE 4

COVENANTS OF THE COMPANY


 


4.1                                                                               General Covenants


 


The Company
represents, warrants and covenants with the Warrant Agent for the benefit of
the Warrantholders that:


 


(a)                                  it will at all times maintain its existence, carry on
and conduct its business in a proper, efficient and business-like manner and,
in accordance with good business practice, keep or cause to be kept proper
books of account in accordance with generally accepted accounting principles;


 


(b)                                 it is duly authorized to create and issue the Warrants
to be issued hereunder and the Warrant Certificates when issued and certified
as herein provided will be legal, valid, binding and enforceable obligations of
the Company;


 


(c)                                  subject to the provisions of this Indenture, it will
cause the Shares from time to time subscribed for and purchased pursuant to the
exercise of Warrants and the certificates representing such Shares to be duly
issued and delivered in accordance with the Warrants and the terms hereof;


 


(d)                                 at all times while any Warrants are outstanding it
shall reserve and there shall remain unissued and conditionally allotted out of
its authorized capital a number of Shares sufficient to enable the Company to
meet its obligations to issue Shares on the exercise of Warrants outstanding
hereunder from time to time;


 


(e)                                  upon the exercise by the holder of any Warrant of the
right of purchase provided for therein and herein and upon payment of the
Exercise Price applicable thereto for each Share in respect of which the right
of purchase is so exercised, all Shares issuable upon the exercise shall be
issued as fully paid and non-assessable;


 


(f)                                    it will use its commercial best efforts to ensure that
the Warrants and the Shares issuable upon exercise of the Warrants will be
listed for trading on the Exchange and, in respect of the Shares only, any
other stock exchange on which the Shares are then listed and posted for trading
upon their issue;


 


(g)                                 the Company will use its commercial best efforts to
maintain its status as a “reporting issuer” (or the equivalent thereof) not in
default of the requirements of the Securities Laws in each of the Provinces of
British Columbia, Alberta, Manitoba and Ontario;


 


(h)                                 the issue of the Warrants does not and will not result
in a breach by the Company of, and does not and will not create a state of
facts which, after notice or lapse of time or both, will result in a breach by
the Company of 


 


29

















 


any applicable laws, and does not and will not conflict with any of the
terms, conditions or provisions of the memorandum of the Company or the
articles or resolutions of the Company or any trust indenture, loan agreement
or any other agreement or instrument to which the Company is a party or by
which it is contractually bound on the date of this Indenture;


 


(i)                                     it shall do, execute, acknowledge and deliver or cause
to be done, executed, acknowledged or delivered all other acts, deeds and
assurances in law as the Warrant Agent may reasonably require for better
accomplishing and effecting the intentions and provisions of this Indenture;


 


(j)                                     it will duly and punctually perform all of its
covenants contained in this Indenture governing the due authorization, creation
and issue of the Warrants and the Warrant Certificates, and the reservation,
allotment and issuance of the Shares issuable on the exercise thereof;


 


(k)                                  it will make all requisite filings under applicable
laws and regulations, including, without limitation, Securities Laws, including
those necessary to remain a reporting issuer not in default of the requirements
of the Securities Laws in the provinces of Canada in which it is a reporting
issuer and those required on the exercise of the Warrants;


 


(l)                                     for so long as any Warrants or the Shares issued on
the exercise of Warrants are outstanding, the Company will use its best efforts
to remain a “foreign issuer” within the meaning of Regulation S under the 1933
Act;


 


(m)                               with respect to any notices to be given or other acts
to be performed or which may be given or performed by the Warrant Agent under
or pursuant to this Indenture, the Company shall provide to the Warrant Agent
in a timely manner all such information and documents as the Warrant Agent may
reasonably request and are within the knowledge or control of the Company in
order to verify the factual circumstances relating to such notices or acts and,
if requested, such notices or acts and, if requested, such information and
documents shall be certified as correct by an officer of the Company;


 


(n)                                 generally, it will well and truly perform and carry
out all of the acts or things to be done by it as provided in this Indenture
and will not take any action which might reasonably be expected to deprive
holders of Warrants their rights to acquire Shares on the exercise thereof; and


 


(o)                                 it will promptly notify the Warrant Agent of any
material default under the terms of this Indenture.


 


30














 


4.2                                                                              Securities Qualification
Requirements


 


(1)                                  If, in the opinion of either counsel to the Warrant Agent or counsel to
the Company, any instrument is required to be filed with, or any permission,
order or ruling is required to be obtained from, any governmental authority,
securities administrator or any other step is required under any federal or
provincial law of Canada or any other Qualifying Jurisdiction before the Shares
may be issued or delivered to an initial Warrantholder on the exercise of the
Warrants or resold by such Warrantholder, the Company covenants that it will
use its commercial best efforts to file such instrument, obtain such
permission, order or ruling or take all such other actions, at its expense, as
is required or appropriate in the circumstances.


 


(2)                                  The Company will give written notice of the issue of Shares pursuant to
the exercise of Warrants, in such detail as may be required, to each securities
administrator in each jurisdiction in which there is legislation requiring the
giving of any such notice.


 


4.3                                                                              Warrant Agent’s Remuneration and
Expenses


 


The Company will pay to the Warrant Agent from
time to time such remuneration for its services hereunder as may be agreed upon
between the Company and the Warrant Agent and will pay or reimburse the Warrant
Agent upon its request for all expenses, disbursements and advances properly
incurred or made by the Warrant Agent in the administration or execution of its
duties hereunder (including the reasonable compensation and the disbursements of
its counsel and all other advisors and assistants not regularly in its employ),
both before any default hereunder and thereafter until all duties of the
Warrant Agent shall be finally and fully performed, except any such expense,
disbursement or advance as may arise from the gross negligence or fraud of the
Warrant Agent, its servants or its agents or other advisors or assistants
aforesaid.


 


4.4                                                                              Notice to Warrantholders of
Certain Events


 


The Company covenants with the Warrant Agent
for the benefit of the Warrant Agent and the Warrantholders that, so long as
any of the Warrants are outstanding and capable of being exercised, it will
not:


 


(a)                                  pay any dividend payable in shares of any class to the holders of its
Shares or make any other distribution (other than a cash distribution made as a
dividend out of retained earnings or contributed surplus legally available for
the payment of dividends) to the holders of its Shares;


 


(b)                                 offer to the holders of its Shares rights to subscribe for or to
purchase any Shares or shares of any class or any other securities, rights,
warrants or options;


 


31

















 


(c)                                  make any repayment of capital on, or distribution of evidences of
indebtedness on any of its assets (excluding cash dividends) to the holders of,
its Shares;


 


(d)                                 amalgamate, consolidate or merge with any other person or sell or lease
the whole or substantially the whole of its assets or undertaking;


 


(e)                                  effect any subdivision, redivision, consolidation, reduction or
reclassification of its Shares; or


 


(f)                                    liquidate, dissolve or wind-up,


 


unless, in each such case, the Company shall
have given notice, in the manner specified in Section 2.12, to each
Warrantholder, of the action proposed to be taken and the date on which:
(i) the books of the Company shall close or a record shall be taken for
such dividend, repayment, distribution, subscription rights or other rights,
warrants or securities; or (ii) such subdivision, redivision,
consolidation, reduction, reclassification, amalgamation, merger, sale or
lease, dissolution, liquidation or winding-up shall take place, as the case may
be, provided that the Company shall only be required to specify in the notice
those particulars of the action as shall have been fixed and determined at the
date on which the notice is given. The notice shall also specify the date as of
which the holders of Shares of record shall participate in the dividend,
repayment, distribution, subscription of rights or other rights, warrants or
securities, subdivision, redivision, consolidation, reduction, reclassification
,or shall be entitled to exchange their Shares for securities or other property
deliverable upon such reclassification, amalgamation, merger, sale or lease,
other disposition, dissolution, liquidation or winding-up, as the case may be.
The notice shall be given, with respect to the actions described above not less
than 14 business days before the record date or the date on which the
Company’s transfer books are to be closed with respect thereto.


 


4.5                                                                              Closure of Share Transfer Books


 


The Company further covenants and agrees that
it will not during the period of any notice given under Section 4.4 close
its share transfer books or take any other corporate action which might deprive
the Warrantholders of the opportunity of exercising their Warrants; provided
that nothing contained in this section shall be deemed to affect the right of
the Company to do or take part in any of the things referred to in Section 4.4
or to pay any cash dividends on the shares of any class or classes in its
capital from time to time outstanding.


 


4.6                                                                              Performance of Covenants by
Warrant Agent


 


If the Company shall fail to perform any of its
covenants contained in this Indenture, the Warrant Agent may notify the
Warrantholders of the failure on the part of the Company or may itself perform
any of the said covenants capable of being performed by it, but shall be under
no obligation to do so or to notify the Warrantholders. All sums expended or
advanced by the Warrant Agent in so doing shall be repayable as provided in Section 4.3.
No performance, expenditure or advance by the Warrant Agent shall be deemed to
relieve the Company of any default hereunder or of its continuing obligations
under this Indenture.


 


32

















 


4.7                                                                              Representation and Warranty


 


The Company represents and warrants to the
Warrant Agent and the holders of the Warrants and/or Shares that as of the date
hereof it is a “foreign issuer” as that term is defined in Regulation S.


 


ARTICLE 5

MEETINGS OF WARRANTHOLDERS


 


5.1                                                                              Right to Convene Meeting


 


(1)                                  The Warrant Agent or the Company may at any time and from time to time,
and the Warrant Agent shall on receipt of a requisition in writing signed by
the holders of Warrants sufficient to purchase not less than 10% of the
aggregate number of Shares which would be purchased under the Warrants then
outstanding and upon being indemnified and funded to its reasonable
satisfaction by the Company or by the Warrantholders signing the requisition
against the costs which may be incurred in connection with the calling and
holding of the meeting, convene a meeting of the Warrantholders.


 


(2)                                  If the Warrant Agent fails to convene a meeting within 14 days
after receipt of the requisition and indemnity referred to in subsection (1),
the Company or the Warrantholders, as the case may be, may convene the meeting.


 


(3)                                  Every meeting of Warrantholders shall be held in the City of Vancouver,
British Columbia.


 


5.2                                                                              Notice


 


(1)                                  At least ten business days’ prior notice specifying the place, day and
hour of meeting and the general nature of business to be transacted and
containing such information as is reasonably necessary to enable the
Warrantholders to make a reasoned decision on the matter shall be given before
any meeting of Warrantholders but it shall not be necessary to specify in the
notice the terms of any resolution to be proposed.


 


(2)                                  Notice of a meeting of Warrantholders shall be given to the
Warrantholders in the manner provided in Section 2.12. Notice shall be
given to the Company unless the meeting is convened by the Company and to the
Warrant Agent unless the meeting is convened by the Warrant Agent. Any
accidental omission in the notice of a meeting shall not invalidate any
resolution passed at the meeting.  The
notice must be signed by an appropriate officer of the Warrant Agent or of the
Company, or the person designated by the Warrantholders, as the case may be.


 


5.3                                                                              Chairman


 


The person, who need not be a Warrantholder,
nominated in writing by the Warrant Agent shall be entitled to act as the
chairman at any meeting of Warrantholders, but if 


 


33

















 


no such person is nominated or if the person
nominated shall not be present within 15 minutes after the time appointed for
holding the meeting, the Warrantholders present in person shall choose a person
present to be chairman.


 


5.4                                                                              Quorum


 


(1)                                  At any meeting of the Warrantholders a quorum shall consist of one or
more Warrantholders present in person or by proxy holding not less than 10% of
the Warrants then outstanding.


 


(2)                                  If a quorum of the Warrantholders is not present within half an hour
from the time fixed for holding any meeting, the meeting, if convened by
Warrantholders or by a requisition of Warrantholders, shall be dissolved; but
if otherwise convened, the meeting shall stand adjourned without notice to the
same day in the next week following (unless that day is not a business day, in
which case the meeting shall stand adjourned to the next business day
thereafter) at the same time and place. At the adjourned meeting, the
Warrantholders present in person or by proxy shall form a quorum and may
transact the business for which the meeting was originally convened
notwithstanding that they may not hold 10% of the Warrants then outstanding.


 


5.5                                                                              Power to Adjourn


 


The chairman of any meeting at which a quorum
of Warrantholders is present may, with the consent of the meeting, adjourn any
meeting and no notice of the adjournment need be given except such notice, if
any, as the meeting may prescribe.


 


5.6                                                                              Show of Hands


 


Every question submitted to a meeting other
than a question to be resolved by an Extraordinary Resolution shall be decided
in the first place by a majority of the votes given on a show of hands and
unless a poll is duly demanded as herein provided, a declaration by the
chairman that a resolution has been carried or carried unanimously or by a
particular majority or lost or not carried by a particular majority shall be
conclusive evidence of that fact.


 


5.7                                                                              Poll


 


On every Extraordinary Resolution to be passed
at a meeting and on any other question submitted to a meeting when directed by
the chairman or when demanded by one or more of the Warrantholders acting in
person or by proxy, a poll shall be taken in the manner as the chairman shall
direct. Questions other than those to be resolved by Extraordinary Resolution
shall, if a poll be taken, be decided by the votes of the holders of a majority
of the Warrants represented at the meeting and voted on the poll. If at any
meeting a poll is so demanded as aforesaid on the election of a chairman or on
a question of adjournment, it shall be taken forthwith. If at any meeting a
poll is so demanded on any other question, or an Extraordinary Resolution is to
be voted upon, a poll shall be taken in such manner and either at once or after
an adjournment as the chairman directs. The result of a poll shall be deemed to
be the decision of the meeting at which the poll was demanded and shall be
binding on all holders of Warrants.


 


34

















 


5.8                                                                              Voting


 


On a show of hands, every person who is present
and entitled to vote, whether as a Warrantholder or as proxy for one or more
absent Warrantholders or both, shall have one vote. On a poll, each
Warrantholder present in person or represented by a proxy duly appointed by
instrument in writing shall be entitled to one vote in respect of each Share
purchasable under Warrants of which he shall then be the holder. A proxy need
not be a Warrantholder. The chairman of any meeting shall be entitled both on a
show of hands and on a poll to vote in respect of the Warrants, if any, held or
represented by him but shall not be entitled to a casting vote in the case of
an equality of votes.


 


5.9                                                                              Persons Entitled to be Present


 


The Company and the Warrant Agent by their
respective officers and directors and the counsel of the Company and the
Warrant Agent may attend any meeting of Warrantholders but shall have no vote
as such.


 


5.10                                                                       Regulations


 


The Warrant Agent, or the Company with the
approval of the Warrant Agent, may from time to time make or vary such
regulations as it shall think fit providing for and governing the following:


 


(a)                                  the issue of voting certificates:


 


(i)                                     by any bank, trust company or other depository approved by the Warrant
Agent, certifying that specified Warrants have been deposited with it by a
named holder and will remain on deposit until after the meeting; or


 


(ii)                                  by any bank, trust company, insurance company, governmental department
or agency approved by the Warrant Agent, certifying that it is the holder of
specified Warrants and will continue to hold the same until after the meeting,


 


which voting certificates shall entitle the
holders named therein to be present and vote at any meeting and at any
adjournment thereof or to appoint a proxy or proxies to represent them and vote
for them at any meeting and at any adjournment thereof, in the same manner and
with the same effect as though the holders named in the voting certificates
were the actual holders of the specified Warrants;


 


(b)                                 the setting of the record date for a meeting for the purposes of
determining the Warrantholders entitled to receive notice of and to vote at a
meeting;


 


(c)                                  the form of the instrument appointing a proxy (which shall be in
writing), the manner in which the same shall be executed and the form of any 


 


35

















 


authority
under which a person executes a proxy on behalf of a Warrantholder;


 


(d)                                 the deposit certificates, instruments appointing proxies or authorities
at such place or places as the Warrant Agent (or the Company or Warrantholders
in case the meeting is convened by the Company or the Warrantholders, as the
case may be) may in the notice convening the meeting direct and the time (if
any) before the holding of the meeting or adjourned meeting at which the same
shall be deposited;


 


(e)                                  the deposit of voting certificates or instruments appointing proxies at
some place or places other than the place at which the meeting is to be held
and for particulars of the voting certificates or instruments appointing
proxies to be cabled or telegraphed or notified by other means of communication
before the meeting to the Company or to the Warrant Agent and for the voting of
voting certificates and proxies so deposited as if the voting certificates or
the instruments themselves were produced at the meeting or deposited at any
other place required pursuant to subsection (d); and


 


(f)                                    generally for the calling of meetings of Warrantholders and the conduct
of business thereat.


 


Any regulations so made shall be binding and
effective and votes given in accordance therewith shall be valid and shall be
counted. Except as the regulations may provide, the only persons who shall be
recognized at any meeting as the holders of any Warrants, or as entitled to
vote or to be present at the meeting in respect thereof, shall be registered
Warrantholders and persons whom registered Warrantholders have by instrument in
writing duly appointed as their proxies.


 


5.11                                                                       Certain Powers Exercisable by
Extraordinary Resolution


 


In addition to all other powers conferred on
them by the other provisions of this Indenture or by law but subject to
obtaining the approval of the Exchange, the Warrantholders shall have the
following powers, exercisable from time to time by Extraordinary Resolution:


 


(a)                                  power to agree to any amendment, modification, abrogation, alteration,
compromise or arrangement of the rights of Warrantholders or the Warrant Agent
(subject to the Warrant Agent’s prior consent) in its capacity as warrant agent
hereunder or on behalf of the Warrantholders against the Company whether the
rights arise under this Indenture or otherwise;


 


(b)                                 power to agree to any change in or omission from the provisions of the
Warrant Certificate and this Indenture or any ancillary or supplemental
instrument which may be agreed to by the Company and to authorize the Warrant
Agent to concur in and execute any ancillary or supplemental indenture embodying
any change or omission;


 


(c)                                  power to require the Warrant Agent, subject to compliance with Section 7.3,
to enforce any of the obligations of the Company under this Indenture 


 


36

















 


or
any supplemental instrument or to enforce any of the rights of the
Warrantholders in any manner specified in an Extraordinary Resolution or to
refrain from enforcing any such covenant or right, upon the Warrant Agent being
furnished with such funding and indemnity as it may in its discretion
reasonably require;


 


(d)                                 power to remove the Warrant Agent or its successor or successors in
office and to appoint a new Warrant Agent or Warrant Agents to take the place
of the Warrant Agent or Warrant Agents so removed;


 


(e)                                  power to waive and direct the Warrant Agent to waive any default on the
part of the Company in complying with any provision of this Indenture either
unconditionally or upon conditions specified in the Extraordinary Resolution;


 


(f)                                    power to restrain any Warrantholder from taking or instituting or
continuing any suit, action or proceeding against the Company for the
enforcement of any of the obligations of the Company under this Indenture and
in the Warrant Certificates or to enforce any right of the Warrantholders under
this Indenture and the Warrant Certificates;


 


(g)                                 power to amend, alter or repeal any Extraordinary Resolution previously
passed or consented to by Warrantholders;


 


(h)                                 power to appoint a committee with power and authority to exercise, and
to direct the Warrant Agent (upon the Warrant Agent being furnished with such
funding and indemnity as it may in its discretion reasonably require) to
exercise, on behalf of the Warrantholders, such powers of the Warrantholders as
are exercisable by extraordinary resolution; and


 


(i)                                     power to assent to any compromise or arrangement with any creditor or
creditors or any class or classes of creditors, whether secured or otherwise,
and with holders of any shares or other securities of the Company.


 


5.12                                                                       Definition of “Extraordinary
Resolution”


 


The expression “Extraordinary
Resolution” when used in this Indenture means a resolution passed at
a meeting (including an adjourned meeting) of Warrantholders duly convened and
held in accordance with the provisions of this Indenture at which there are
Warrantholders present in person or represented by proxy representing at least
25% of the aggregate number of the then outstanding Warrants and carried by the
affirmative vote of Warrantholders representing not less than 66 2/3% of the
aggregate number of then outstanding Warrants represented at the meeting and
voted on such resolution or by the consent in writing, which may be in one or
more instruments, of the holders representing not less than 66 2/3% of the
aggregate number of Warrants then outstanding.


 


37

















 


5.13                                                                       Resolutions Binding on all
Warrantholders


 


Every resolution and every Extraordinary
Resolution duly passed at a meeting of the Warrantholders duly convened and
held or any consent in writing in accordance with Section 5.17 shall be
binding upon all the Warrantholders (including their successors and assigns)
whether or not present or represented or voting at the meting or signatories to
the consent, as the case may be, and each of the Warrantholders and the Warrant
Agent, subject to the provisions for its indemnity contained in this Indenture,
shall be bound to give effect thereto.


 


5.14                                                                       Holdings by Company Disregarded


 


In determining whether the requisite number of
Warrantholders are present for the purpose of obtaining a quorum or have voted
or consented to any resolution, Extraordinary Resolution, consent, waiver or
other action under this Indenture, Warrants owned by the Company or any
Subsidiary of the Company shall be deemed to be not outstanding.


 


5.15                                                                       Minutes


 


Minutes of all resolutions and proceedings at
every meeting of Warrantholders shall be made and duly entered in books to be
provided for that purpose by the Warrant Agent at the expense of the Company
and any minutes signed or purported to be signed by the chairman of the
meeting, or by the chairman of the next succeeding meeting of Warrantholders,
shall be prima facie evidence of the matters
therein stated and, until the contrary is proved, every meeting for which minutes
have been made shall be deemed to have been duly convened and held and all
resolutions passed or proceedings taken thereat to have been duly passed and
taken.


 


5.16                                                                       Powers Cumulative


 


Any one or more of the powers or combination of
the powers in this Indenture exercisable by the Warrantholders by Extraordinary
Resolution or otherwise may be exercised from time to time and the exercise of
any one or more of the powers or any combination of powers from time to time
shall not be deemed to exhaust the rights of the Warrantholders to exercise the
same or any other power or powers or combination of powers then or any power or
powers or combinations of powers thereafter.


 


5.17                                                                       Instruments in Writing


 


All actions that may be taken and all powers
that may be exercised by the Warrantholders at a meeting held as hereinbefore
in this Article provided may also be taken and exercised by Warrantholders
entitled to acquire 66 2/3% of the aggregate number of Shares that can be
acquired pursuant to all of the then outstanding Warrants by an instrument in
writing, signed in one or more counterparts by Warrantholders in person or by
attorney duly appointed in writing and the expression “resolution” or “Extraordinary
Resolution” respectively when used in this Indenture shall include an
instrument so signed.


 


38














 


ARTICLE 6

SUPPLEMENTAL INDENTURES AND SUCCESSOR COMPANIES


 


6.1                                                                              Provision for Supplemental
Indenture for Certain Purposes


 


From time to time the Company and the Warrant
Agent may, subject to the provisions of this Indenture and the obtaining of the
prior written consent of the Exchange, and shall, when so directed by this
Indenture, execute and deliver by their proper officers or directors, as the
case may be, indentures or instruments supplemental hereto, which thereafter
shall form part hereof, for any one or more or all of the following purposes:


 


(a)                                adding hereto such additional covenants and enforcement provisions as in
the opinion of counsel are necessary or advisable and are not in the opinion of
the Warrant Agent, based on the advice of counsel, prejudicial to the interest
of the Warrantholders as a group;


 


(b)                                giving effect to any Extraordinary Resolution passed as provided in
Article 5;


 


(c)                                 making any modification in the form of Warrant Certificate which, in the
opinion of the Warrant Agent, based on the advice of counsel, does not affect
the substance thereof;


 


(d)                                making any additions to, deletions from or alterations of the provisions
of this Indenture which, in the opinion of the Warrant Agent based on the
advice of counsel, do not materially and adversely affect the interests of the
Warrantholders and are necessary or advisable in order to incorporate, reflect
or comply with any Applicable Legislation;


 


(e)                                 for any other purpose not inconsistent with the terms of this Indenture,
including the correction or rectification of any ambiguities, defective
provisions, errors or omissions herein, provided that in the opinion of the
Warrant Agent, based on the advice of counsel, the rights of the Warrant Agent
or of the Warrantholders, as a group, are in no way prejudiced thereby;


 


(f)                                  evidencing the succession of successor companies to the Company  and the assumption by any successor of the covenants of and
obligations assumed by such successor companies; and


 


(g)                                 setting forth any adjustments resulting from the application of the
provisions of Article 3 hereof.


 


6.2                                                                              Successor Companies


 


Subject to Section 3.9, nothing in this
Indenture shall prevent any consolidation, reorganization, amalgamation,
arrangement or merger of the Company with or into any other body corporate,
bodies corporate, or person, or a conveyance or transfer of all or
substantially all 


 


39

















 


the property and assets of the Company as an
entirety to any body corporate or person lawfully entitled to acquire and
operate the same; provided, however, that the body corporate formed by such
consolidation, amalgamation or arrangement or into which such merger shall have
been made or the person which acquires by conveyance or transfer all or substantially
all the property and assets of the Company as an entirety shall execute and
deliver to the Warrant Agent before or contemporaneously with such
consolidation, reorganization, amalgamation, arrangement, merger, conveyance or
transfer and as a condition precedent thereto, an agreement supplemental hereto
wherein the due and punctual performance and observance of all the covenants
and conditions of this Indenture to be performed or observed by the Company
shall be assumed by such successor body corporate or person. The Warrant Agent
shall be entitled to receive and shall be fully protected in relying upon an
opinion of counsel that any such consolidation, reorganization, amalgamation,
arrangement, merger, conveyance or transfer and any supplemental agreement
executed in connection therewith, complies with the provisions of this section.


 


6.3                                                                              Successor Body Corporate
Substituted


 


Subject to Section 3.9, in case the
Company, pursuant to Section 6.2 hereof, shall be consolidated,
amalgamated, reorganized, arranged or merged with or into any other body
corporate or bodies corporate or person or shall convey or transfer all or
substantially all of the property and assets of the Company as an entirety to
another body corporate or person, the successor body corporate or person formed
by such consolidation, reorganization, arrangement or amalgamation or into
which the Company shall have been merged or which shall have received a
conveyance or transfer as aforesaid shall succeed to and be substituted for the
Company hereunder with the same effect as nearly as may be possible as if it
had been named herein as the party of the first part. Such changes may be made
in the Warrants as may be appropriate in view of such consolidation,
amalgamation, reorganization, arrangement, merger, conveyance or transfer.


 


ARTICLE 7

CONCERNING THE WARRANT AGENT


 


7.1                                                                              Rights and Duties of Warrant
Agent


 


(1)                                No trust is intended to be, or is or will be, created hereby and the
Warrant Agent shall owe no duties hereunder as a trustee.


 


(2)                                In the exercise of the rights, duties and obligations prescribed or
conferred by the terms of this Indenture, the Warrant Agent will act honestly
and in good faith and will exercise that degree of care, diligence and skill
that a reasonably prudent warrant agent would exercise in comparable
circumstances.


 


(3)                                No provision of this Indenture will be construed to relieve the Warrant
Agent from liability for its own gross negligence or fraud.


 


(4)                                The obligation of the Warrant Agent to commence or continue any act,
action or proceeding for the purpose of enforcing any rights of the Warrant
Agent or the 


 


40

















 


Warrantholders
hereunder shall be conditional upon the Warrantholders furnishing, when
required by notice in writing by the Warrant Agent, sufficient funds to
commence or continue such act, action or proceeding and an indemnity reasonably
satisfactory to the Warrant Agent to protect and hold harmless the Warrant
Agent against the costs, charges and expenses and liabilities to be incurred
thereto and any loss and damage it may suffer by reason thereof.


 


(5)                                No provision of this Indenture shall require the Warrant Agent to expend
or risk its own funds or otherwise incur financial liability in the performance
of any of its duties or in the exercise of any of its rights or powers.


 


(6)                                The Warrant Agent may, before commencing or at any time during the
continuance of such act, action or proceeding require the Warrantholders at
whose instance it is acting to deposit with the Warrant Agent the Warrant
Certificates held by them, for which Warrant Certificates the Warrant Agent
shall issue receipts.


 


7.2                                                                              Evidence, Experts and Advisors


 


(1)                                In addition to the reports, certificates, opinions and other evidence
required by this Indenture, the Company will furnish to the Warrant Agent such
additional evidence of compliance with any provision hereof and in such form as
is prescribed by Applicable Legislation or as the Warrant Agent reasonably
requires by written notice to the Company.


 


(2)                                In the exercise of any right or duty hereunder the Warrant Agent, if it
is acting in good faith, may rely, as to the truth of any statement or the
accuracy of any opinion expressed therein, on any statutory declaration,
opinion, report, certificate or other evidence furnished to the Warrant Agent
pursuant to a provision hereof or Applicable Legislation or pursuant to a
request of the Warrant Agent.


 


(3)                                Whenever Applicable Legislation requires that evidence referred to in
subsection (1) be in the form of a statutory declaration, the Warrant
Agent may accept the statutory declaration in lieu of a certificate of the
Company required by any provision hereof.


 


(4)                                Any statutory declaration may be made by one or more officers or
Directors of the Company.


 


(5)                                Proof of the execution of an instrument in writing by a Warrantholder
may be made by the certificate of a notary public, or other officer with
similar powers, that the person signing the instrument acknowledged to him the
execution thereof, or by an affidavit of a witness to the execution, or in any
other manner that the Warrant Agent considers adequate.


 


(6)                                The Warrant Agent may employ or retain such counsel, accountants,
engineers, appraisers or other experts or advisers as it reasonably requires
for the purpose of 


 


41

















 


discharging
its duties hereunder and may pay reasonable remuneration for all services so
performed by any of them payable by the Company in accordance with
Section 4.3, without taxation of costs of any counsel and will not be
responsible for any misconduct or negligence on the part of any of them who has
been selected with due care by the Warrant Agent.  The Warrant Agent may act and rely and shall
be protected in acting and relying in good faith on the opinion, advice or
information from any outside counsel, accountant or other expert retained by
the Company or by the Warrant Agent, relating to any matter arising in the
administration of this Indenture.


 


(7)                                The Warrant Agent may as a condition precedent to any action to be taken
by it under this Indenture require such opinions, statutory declarations,
reports, certificates or other evidence as it, acting reasonably, considers
necessary or advisable in the circumstances.


 


7.3                                                                              Documents, Moneys, etc. Held
by Warrant Agent


 


(1)                                Any security, document of title or other instrument that may be at any
time held by the Warrant Agent subject to the terms hereof may be placed in the
deposit vaults of the Warrant Agent or of any Canadian chartered bank or
deposited for safekeeping with such bank.


 


(2)                                Unless herein otherwise expressly provided, any money held pending the
application or withdrawal thereof under any provision of this Indenture may be
deposited in the name of the Warrant Agent in any Canadian chartered bank at
the rate of interest (if any) then current on similar deposits or:


 


(a)                                deposited in the deposit department of the Warrant Agent or of any other
loan or trust company authorized to accept deposits under the laws of Canada or
a province thereof, or


 


(b)                                upon the written direction of the Company may be invested in securities
issued or guaranteed by the Government of Canada or a province thereof or in
obligations, maturing not more than one year from the date of investment, of
any Canadian chartered bank or loan or trust company.


 


(3)                                Unless the Company is in default hereunder, all interest or other income
received by the Warrant Agent in respect of deposits and investments will
belong to the Company.


 


7.4                                                                              Action by Warrant Agent to
Protect Interests


 


The Warrant Agent shall have power to institute
and to maintain such actions and proceedings as it may consider necessary or
expedient to preserve or protect its interests and the interests of the
Warrantholders.


 


42

















 


7.5                                                                              Warrant Agent not Required to
give Security


 


The Warrant Agent shall not be required to give
any bond or security in respect of the execution of the terms and powers of
this Indenture or otherwise in respect of the premises.


 


7.6                                                                              Protection of Warrant Agent


 


By way of supplement to the provisions of any
law for the time being relating to the Warrant Agent, it is expressly declared
and agreed that:


 


(a)                                the Warrant Agent shall not be liable for or by reason of any representations,
statements of fact or recitals in this Indenture (except the representation
contained in Section 7.8 and by virtue of the countersignature of the
Warrant Agent on the Warrant Certificates) or required to verify the same, but
all such representations, statements or recitals are and shall be deemed to be
made by the Company;


 


(b)                                the Warrant Agent shall not be obligated to see or to require evidence
of registration (a filing or renewal thereof) of this Indenture or any
instrument ancillary or supplemental hereto;


 


(c)                                 the Warrant Agent shall not be bound to give notice to any person or
persons of the execution hereof;


 


(d)                                the Warrant Agent shall not incur any liability or responsibility
whatever or be in any way responsible for the consequence of any breach on the
part of the Company of any obligation herein contained or of any acts of the
directors, officers, employees or agents of the Company;


 


(e)                                 in addition to and without limiting any other protection of the Warrant
Agent hereunder or otherwise at law, the Company shall indemnify and hold
harmless the Warrant Agent and its agents, employees, directors and officers
and all of their respective representatives, heirs, successors and assigns from
and against any and all liabilities, losses, costs (including any and all
reasonable legal fees and disbursements), claims, actions or demands whatsoever
which may be brought against the Warrant Agent or which it may suffer or incur
in connection with or arising out of the performance of its duties and obligations
under this Indenture, save only in the event of the gross negligence, wilful
misconduct or fraud of the Warrant Agent. It is understood and agreed that this
indemnification shall survive the termination or discharge of this Indenture or
the resignation of the Warrant Agent;


 


(f)                                  the Warrant Agent shall not be bound to give any notice or to do or take
any act, action or proceeding by virtue of the powers conferred on it hereby
unless and until it shall have been required so to do under the terms hereof nor
shall the Warrant Agent be required to take notice of any default of the
Company hereunder unless and until notified in writing of 


 


43

















 


the
default (which notice must specify the nature of the default) and, in the
absence of that notice, the Warrant Agent may for all purposes hereunder
conclusively assume that no default by the Company hereunder has occurred. The
giving of any notice shall in no way limit the discretion of the Warrant Agent
hereunder as to whether any action is required to be taken in respect of any
default hereunder;


 


(g)                                 the Warrant Agent is not at any time under any duty or responsibility to
a Warrantholder to determine whether any facts exist which require any
adjustment contemplated by Section 3.6 or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making the same;


 


(h)                                the Warrant Agent is not accountable with respect to the validity or
value (or the kind or amount) of any Shares or other securities or property
which may at any time be issued or delivered upon the exercise of the rights
attaching to any Warrant;


 


(i)                                    the Warrant Agent is not responsible for any failure of the Company to
make any cash payment or any failure of the Company to issue, transfer or
deliver Shares or certificates for the same upon the exercise and surrender of
any Warrants for the purpose of the exercise of such rights or to comply with
any of the covenants contained in this Section 7;


 


(j)                                   the Warrant Agent is entitled to act and rely on any adjustment,
calculation or certificate of the Company, without verification or liability;


 


(k)                                the Warrant Agent shall incur no liability and shall be fully protected
in acting and relying upon any written notice, direction, instruction, request,
waiver, consent, receipt or other paper or document furnished to it and signed
by the parties thereto, not only as to its due execution and validity and the
effectiveness of its provision but also to the truth and accuracy of any
information therein contained which it in good faith believes to be genuine;
and


 


(l)                                    the Warrant Agent shall have no duties except those which are expressly
set forth herein and it shall not be bound by any notice of a claim or demand
with respect to, or any waiver, modification, amendment, termination or
rescission of this Indenture, unless received by it in writing, and signed by
the parties hereto and, if its duties are herein affected, unless it shall have
given prior written consent thereto.


 


7.7                                                                              Replacement of Warrant Agent


 


(1)                                The Warrant Agent may resign its agency and be discharged from all
further duties and liabilities hereunder, except as otherwise provided in this
Indenture, by giving to the Company and the Warrantholders not less than
45 days’ notice in 


 


44

















 


writing
or, if a new Warrant Agent has been appointed, such shorter notice as the
Company accepts as sufficient.


 


(2)                                The Warrantholders by Extraordinary Resolution may at any time remove
the Warrant Agent and appoint a new Warrant Agent.


 


(3)                                If the Warrant Agent so resigns or is so removed or is dissolved,
becomes bankrupt, goes into liquidation or otherwise becomes incapable of
acting hereunder, the Company will forthwith appoint a new Warrant Agent unless
a new Warrant Agent has already been appointed by the Warrantholders.


 


(4)                                Failing appointment by the Company, the retiring Warrant Agent or any
Warrantholder may apply to the British Columbia Supreme Court for the
appointment of a new Warrant Agent.


 


(5)                                Any new Warrant Agent so appointed by the Company or by the Court will
be subject to removal by Extraordinary Resolution of the Warrantholders.


 


(6)                                Any new Warrant Agent appointed under any provision of this section must
be a corporation authorized to carry on the business of a trust company in the
Qualifying Jurisdictions in Canada.


 


(7)                                On any appointment, the new Warrant Agent will be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as Warrant Agent without any further assurance, conveyance, act or deed,
but there will be immediately executed, at the expense of the Company, all such
conveyances or other instruments as, in the opinion of counsel, are necessary
or advisable for the purpose of assuring the powers, rights, duties and
responsibilities to the new Warrant Agent.


 


(8)                                On the appointment of a new Warrant Agent, the Company will promptly
give notice thereof to the Warrantholders.


 


(9)                                A corporation into or with which the Warrant Agent is merged or
consolidated or amalgamated, or a corporation succeeding to the business of the
Warrant Agent, will be the successor to the Warrant Agent hereunder without any
further act on its part or on the part of any party hereto if the corporation
would be eligible for appointment as a new Warrant Agent under
subsection (6).


 


(10)                         A
Warrant Certificate certified but not delivered by a predecessor Warrant Agent
may be delivered by the new or successor Warrant Agent in the name of the
predecessor Warrant Agent or successor Warrant Agent.


 


7.8                                                                              Conflict of Interest


 


(1)                                The Warrant Agent represents to the Company that at the time of the
execution and delivery hereof no material conflict of interest exists between
its role as a fiduciary hereunder and its role in any other capacity and if a
material conflict of 


 


45

















 


interest
arises hereafter it will, within 90 days after ascertaining that it has a
material conflict of interest, either eliminate the conflict of interest or
resign its agency hereunder.


 


(2)                                Subject to subsection (1), the Warrant Agent in its personal or any
other capacity may buy, lend upon and deal in securities of the Company and
generally may contract and enter into financial transactions with the Company
or any subsidiary of the Company without being liable to account for any profit
made thereby.


 


7.9                                                                              Acceptance of Appointment


 


The Warrant Agent hereby accepts the agency in
this Indenture declared and provided for and agrees to perform them on the
terms and conditions herein set forth and agrees to hold all rights, interests
and benefits contained herein for and on behalf of those persons who become
holders of Warrants from time to time issued pursuant to this Indenture.


 


7.10                                                                       Accounts


 


(1)                                The Company hereby represents to the Warrant Agent that any account to
be opened by, or interest to held by, the Warrant Agent in connection with this
Indenture, for or to the credit of the Company, either (i) is not intended
to be used by or on behalf of any third party; or (ii) is intended to be
used by or on behalf of a third party, in which case the Company agrees to
complete and execute forthwith a declaration in the form prescribed by the
Warrant Agent as to the particulars of such third party.


 


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


 


ARTICLE 8

GENERAL


 


8.1                                                                              Satisfaction and Discharge of
Indenture


 


This Indenture shall expire and terminate on
the earlier of:


 


46

















 


(a)                                 the date by which there has been delivered to the Warrant Agent for
exercise or destruction all Warrant Certificates theretofore countersigned
hereunder, or


 


(b)                                 the 61st day following the Warrant Expiry Date,


 


and if all Shares required to be issued in
compliance with the provisions hereof have been issued and delivered hereunder,
this Indenture will cease to be of further effect and the Warrant Agent, on
demand of and at the cost and expense of the Company and on delivery to the
Warrant Agent of a certificate of the Company stating that all conditions
precedent to the satisfaction and discharge of this Indenture have been
complied with and on payment to the Warrant Agent of the fees and other
remuneration payable to the Warrant Agent, will execute proper instruments
acknowledging satisfaction of and discharging this Indenture.


 


8.2                                                                              Sole Benefit of Parties and Warrantholders


 


Nothing in this Indenture expressed or implied
will give or be construed to give to any person other than the parties hereto
and the Warrantholders, as the case may be, any legal or equitable right,
remedy or claim under this Indenture, or under any covenant or provision herein
contained, all covenants and provisions being for the sole benefit of the
parties hereto and the Warrantholders.


 


8.3                                                                              Discretion of Directors


 


Any matter to be determined by the Directors
will be determined by the Directors in their sole discretion and a
determination so made, absent manifest error, will be conclusive.


 


8.4                                                                              Privacy


 


The parties acknowledge that federal and/or provincial legislation that addresses the protection of
individuals’ personal information (collectively, “Privacy Laws”)
applies to obligations and activities under this Indenture. Despite any other
provision of this Indenture, neither party shall take or direct any action that
would contravene, or cause the other party to contravene, applicable Privacy
Laws. The Company shall, before transferring or causing to be transferred
personal information to the Warrant Agent, obtain and retain required consents
of the relevant individuals to the collection, use and disclosure of their
personal information, or shall have determined that such consents either have
previously been given upon which the parties can rely or are not required under
the Privacy Laws. The Warrant Agent shall use commercially reasonable efforts
to ensure that its services hereunder comply with Privacy Laws. Specifically,
the Warrant Agent agrees: (a) to have a designated chief privacy officer; (b) to maintain policies and procedures to protect personal information and to
receive and respond to any privacy complaint or inquiry; (c) to use
personal information solely for the purposes of providing its services under or
ancillary to this Indenture and not to use it for any other purpose except with
the consent of or direction from the Company or the individual involved; (d) not
to sell or otherwise improperly disclose personal information to any third
party; and (e) to employ
administrative, physical and technological safeguards to reasonably secure and
protect personal information against loss, theft, or unauthorized access, use
or modification.


 


47

















 


8.5                                                                              Counterparts and Formal Date


 


This Indenture may be executed in several
counterparts, each of which when so executed will be deemed to be an original,
and the counterparts together will constitute one and the same instrument and
notwithstanding the date of their execution will be deemed to bear the date set
out at the top of the first page of this Indenture.


 


IN WITNESS WHEREOF the parties hereto have
executed this indenture as of the date first written above.


 


	
   

  	
  TERRANE METALS CORP.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rob Pease

  
	
   

  	
   

  	
  Name:  Rob Pease

  
	
   

  	
   

  	
  Title:    President and CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PACIFIC CORPORATE TRUST COMPANY

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Jeff Lunshof

  
	
   

  	
   

  	
  Name:  Jeff Lunshof

  
	
   

  	
   

  	
  Title:    Client Services

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Sandy Hunter

  
	
   

  	
   

  	
  Name:  Sandy Hunter

  
	
   

  	
   

  	
  Title:    Client Services

  



 


48














 


SCHEDULE “A” TO INDENTURE


 


FORM OF WARRANT
CERTIFICATE


 

















 





 

















 





 

















 


SCHEDULE
“B” TO INDENTURE


 


Form of
Letter to be Delivered by

Original U.S. Purchaser upon

Exercise of Warrants


 


Terrane Metals Corp.


 


- and -


 


Pacific Corporate Trust
Company, as Warrant Agent


 


Dear Sirs/Mesdames:


 


We are delivering this
letter in connection with the purchase of common shares (the “Shares”) of Terrane Metals Corp. (the “Company”)
upon the exercise of warrants of the Company (the “Warrants”),
issued under the warrant indenture dated as of June 21, 2007 between the
Company and Pacific Corporate Trust Company.


 


We hereby confirm that:


 


(a)                                we are an “accredited investor”
within the meaning of Rule 501 (a) of Regulation D under the United
States Securities Act of 1933, as amended (the “U.S. Securities Act”);


 


(b)                                we are purchasing the Shares for
our own account;


 


(c)                                 we have such knowledge and
experience in financial and business matters that we are capable of evaluating
the merits and risks of purchasing the Shares;


 


(d)                                we are not acquiring the Shares
with a view to distribution thereof or with any present intention of offering
or selling any of the Shares, except (a) to the Company, (b) outside
the United States in accordance with Rule 904 of Regulation S under the
U.S. Securities Act, (c) within the United States in accordance with (i) Rule 144A
to a person who we reasonably believe is a Qualified Institutional Buyer that
is purchasing for its own account or for the account of a Qualified
Institutional Buyer to whom notice is given that the offer, sale, or transfer
is being made in reliance on Rule 144A, or (ii) the exemption from
registration under the U.S. Securities Act provided by Rule 144 after
providing a legal opinion satisfactory to the Company, or (d) pursuant to
another exemption from registration after providing a legal opinion
satisfactory to the Company.


 


(e)                                 we acknowledge that we have had
access to such financial and other information as we deem necessary in
connection with our decision to purchase the Shares; and


 


(f)                                  we acknowledge that we are not
purchasing the Shares as a result of any general solicitation or general
advertising, including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar media or broadcast



 


2

















 


over radio, television,
or any seminar or meeting whose attendees have been invited by general
solicitation or general advertising.


 


We understand that the
Shares are being offered in a transaction not involving any public offering
within the United States within the meaning of U.S. Securities Act and that the
Shares have not been and will not be registered under the U.S. Securities
Act.  We further understand that any
Shares acquired by us will be in the form of definitive physical certificates
and that such certificates will bear a legend reflecting the substance of
paragraph (d) above.


 


We acknowledge that you
will rely upon our confirmations, acknowledgements and agreements set forth
herein, and we agree to notify you promptly in writing if any of our
representations or warranties herein ceases to be accurate or complete.


 


 


	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Name
  of Purchaser)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


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