Filed by sedaredgar.com - Endeavour Silver Corp. - Exhibit 4.1






 

 

 

 

TRUST INDENTURE 

 

DATED AS OF THE 26TH DAY OF
FEBRUARY, 2009 

 

BETWEEN 

 

ENDEAVOUR SILVER CORP. 

 

AND 

 

COMPUTERSHARE TRUST COMPANY OF CANADA 

 

PROVIDING FOR THE ISSUE OF DEBENTURES 




TABLE OF CONTENTS 

	  	  	Page 
	  	  	  
	  	  	  
	  	  	  
	  	  	  
	ARTICLE
      1 INTERPRETATION 	1
      
	  	  	  
	           
             1.1
      	Definitions
      	1
      
	               
         1.2
      	Meaning
      of “outstanding” 	6
      
	           
             1.3
      	Interpretation
      	6
      
	               
         1.4
      	Headings,
      Etc 	7
      
	           
             1.5
      	Day
      not a Business Day 	7
      
	               
         1.6
      	Applicable
      Law 	7
      
	           
             1.7
      	Monetary
      References 	7
      
	               
         1.8
      	Invalidity,
      Etc 	7
      
	           
             1.9
      	Enurement
      	7
      
	               
         1.10
      	Schedules
      	7
      
	  	  	  
	ARTICLE
      2 THE DEBENTURES 	8
      
	  	  	  
	               
         2.1
      	Limit
      of Debentures 	8
      
	           
             2.2
      	Terms
      of Debentures of any Series 	8
      
	               
         2.3
      	Form
      of Debentures 	9
      
	           
             2.4
      	Form
      and Terms of Initial Debentures 	9
      
	               
         2.5
      	Certification
      and Delivery of Additional Debentures 	12
      
	           
             2.6
      	Execution
      of Debentures 	13
      
	               
         2.7
      	Certification
      of Debentures 	13
      
	           
             2.8
      	Interim
      Debentures 	13
      
	               
         2.9
      	Restrictions
      on Transfer; Legends 	14
      
	           
             2.10
      	Debentures
      to Rank Pari Passu 	14
      
	               
         2.11
      	Concerning
      Interest 	14
      
	           
             2.12
      	Registration
      of Debentures 	15
      
	               
         2.13
      	Transfer
      of Debentures 	15
      
	           
             2.14
      	Ownership
      of Debentures 	16
      
	               
         2.15
      	Payment
      of Interest 	17
      
	           
             2.16
      	Payments
      of Amounts Due on Maturity 	18
      
	               
         2.17
      	Mutilation,
      Loss, Theft or Destruction 	18
      
	           
             2.18
      	Exchanges
      of Debentures 	19
      
	               
         2.19
      	Closing
      of Registers 	19
      
	           
             2.20
      	Debentureholder
      not a Shareholder 	20
      
	               
         2.21
      	Trustee
      Not Bound to Make Enquiries 	20
      
	  	  	  
	ARTICLE
      3 SUBORDINATION OF DEBENTURES 	20
      
	  	  	  
	               
         3.1
      	Subordination
      	20
      
	           
             3.2
      	Order
      of Payment 	20
      
	               
         3.3
      	Subrogation
      to Rights of Holders of Senior Secured Indebtedness 	22
      
	           
             3.4
      	Obligation
      to Pay Not Impaired 	22
      
	               
         3.5
      	No
      Payment if Senior Secured Indebtedness in Default 	22
      


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TABLE OF CONTENTS 
(continued) 

	  	  	Page 
	  	  	  
	  	  	  
	           
             3.6
      	Payment
      on Debentures Permitted 	23
      
	               
         3.7
      	Confirmation
      of Subordination 	23
      
	           
             3.8
      	Issue
      of Subordinated Securities in Reorganization 	23
      
	               
         3.9
      	Knowledge
      of Trustee 	24
      
	           
             3.10
      	Rights
      of Holders of Senior Secured Indebtedness Not Impaired 	24
      
	               
         3.11
      	Altering
      the Senior Secured Indebtedness 	24
      
	           
             3.12
      	Additional
      Indebtedness 	24
      
	               
         3.13
      	Right
      of Debentureholder to Convert Not Impaired 	24
      
	           
             3.14
      	Acknowledgement
      of Trustee 	24
      
	  	  	  
	ARTICLE
      4 CONVERSION OF DEBENTURES 	25
      
	  	  	  
	           
             4.1
      	Conversion
      Privilege and Conversion Price 	25
      
	               
         4.2
      	Manner
      of Exercise of Right to Convert 	25
      
	           
             4.3
      	Adjustment
      of Conversion Price 	26
      
	               
         4.4
      	No
      Requirement to Issue Fractional Units 	29
      
	           
             4.5
      	Corporation
      to Reserve Shares 	29
      
	               
         4.6
      	Taxes
      and Charges on Conversion 	29
      
	           
             4.7
      	Cancellation
      of Converted Debentures 	29
      
	               
         4.8
      	Certificate
      as to Adjustment 	29
      
	           
             4.9
      	Notice
      of Special Matters 	30
      
	               
         4.10
      	Protection
      of Trustee 	30
      
	           
             4.11
      	Legend
      on Common Shares, Warrants or Other Securities 	30
      
	  	  	  
	ARTICLE
      5 REDEMPTION AND PURCHASE OF DEBENTURES 	32
      
	  	  	  
	           
             5.1
      	Applicability
      of Article 	32
      
	               
         5.2
      	Partial
      Redemption 	32
      
	           
             5.3
      	Notice
      of Redemption 	32
      
	               
         5.4
      	Debentures
      Due on Redemption Dates 	33
      
	           
             5.5
      	Deposit
      of Redemption Monies 	33
      
	               
         5.6
      	Failure
      to Surrender Debentures Called for Redemption 	33
      
	           
             5.7
      	Cancellation
      of Debentures Redeemed 	34
      
	               
         5.8
      	Purchase
      of Debentures by the Corporation 	34
      
	  	  	  
	ARTICLE
      6 COVENANTS OF THE CORPORATION 	35
      
	  	  	  
	               
         6.1
      	To
      Pay Principal and Interest 	35
      
	           
             6.2
      	To
      Carry on Business 	35
      
	               
         6.3
      	To
      Pay Trustee’s Remuneration 	35
      
	           
             6.4
      	To
      Provide Financial Statements 	35
      
	               
         6.5
      	Trustee
      May Perform Covenants 	35
      
	           
             6.6
      	Compliance
      Certificate 	35
      
	               
         6.7
      	Keep
      Proper Books 	36
      
	           
             6.8
      	Maintenance
      of Office or Agency 	36
      
	               
         6.9
      	Maintenance
      of Properties 	36
      
	           
             6.10
      	Payment
      of Taxes and Other Claims 	37
      
	               
         6.11
      	Government
      Approvals and Licenses; Compliance with Law 	37
      


-ii- 




TABLE OF CONTENTS
 (continued) 

	  	  	Page 
	  	  	  
	  	  	  
	           
             6.12
      	Use
      of Proceeds 	37
      
	               
         6.13
      	Debentures
      to Rank Senior 	37
      
	           
             6.14
      	Maintenance
      of Insurance 	37
      
	  	  	  
	ARTICLE
      7 DEFAULT 	37
      
	  	  	  
	           
             7.1
      	Event
      of Default 	37
      
	               
         7.2
      	Notice
      of Events of Default 	39
      
	           
             7.3
      	Waiver
      of Default 	40
      
	               
         7.4
      	Enforcement
      by the Trustee 	40
      
	           
             7.5
      	No
      Suits by Debentureholders 	41
      
	               
         7.6
      	Application
      of Monies by Trustee 	42
      
	           
             7.7
      	Distribution
      of Proceeds 	43
      
	               
         7.8
      	Remedies
      Cumulative 	43
      
	           
             7.9
      	Judgment
      Against the Corporation 	43
      
	               
         7.10
      	Immunity
      of Trustee and Others 	43
      
	  	  	  
	ARTICLE
      8 SATISFACTION AND DISCHARGE 	44
      
	  	  	  
	               
         8.1
      	Cancellation
      and Destruction 	44
      
	           
             8.2
      	Non-Presentation
      of Debentures 	44
      
	               
         8.3
      	Repayment
      of Unclaimed Monies 	44
      
	           
             8.4
      	Discharge
      	44
      
	  	  	  
	ARTICLE
      9 SUCCESSORS 	45
      
	  	  	  
	           
             9.1
      	Certain
      Requirements 	45
      
	               
         9.2
      	Vesting
      of Powers in Successor 	46
      
	  	  	  
	ARTICLE
      10 MEETINGS OF DEBENTUREHOLDERS 	46
      
	  	  	  
	               
         10.1
      	Right
      to Convene Meeting 	46
      
	           
             10.2
      	Notice
      of Meetings 	46
      
	               
         10.3
      	Chairman
      	48
      
	           
             10.4
      	Quorum
      	48
      
	               
         10.5
      	Power
      to Adjourn 	48
      
	           
             10.6
      	Show
      of Hands 	48
      
	               
         10.7
      	Poll
      	49
      
	           
             10.8
      	Voting
      	49
      
	               
         10.9
      	Regulations
      	49
      
	           
             10.10
      	Persons
      Entitled to Attend Meetings 	50
      
	               
         10.11
      	Powers
      Exercisable by Extraordinary Resolution 	50
      
	           
             10.12
      	Meaning
      of “Extraordinary Resolution” 	51
      
	               
         10.13
      	Powers
      Cumulative 	52
      
	           
             10.14
      	Minutes
      	52
      
	               
         10.15
      	Instruments
      in Writing 	53
      
	           
             10.16
      	Binding
      Effect of Resolutions 	53
      
	               
         10.17
      	Evidence
      of Rights of Debentureholders 	53
      


-iii- 




TABLE OF CONTENTS
 (continued) 

	  	  	Page 
	  	  	  
	  	  	  
	           
             10.18
      	Concerning
      Serial Meetings 	53
      
	               
         10.19
      	Concerning
      the Initial Debentures 	53
      
	  	  	  
	ARTICLE
      11 NOTICES 	54
      
	  	  	  
	               
         11.1
      	Notice
      to Corporation 	54
      
	           
             11.2
      	Notice
      to Debentureholders 	55
      
	               
         11.3
      	Notice
      to Trustee 	55
      
	           
             11.4
      	Mail
      Service Interruption 	55
      
	  	  	  
	ARTICLE
      12 CONCERNING THE TRUSTEE 	56
      
	  	  	  
	           
             12.1
      	No
      Conflict of Interest 	56
      
	               
         12.2
      	Replacement
      of Trustee 	56
      
	           
             12.3
      	Duties
      of Trustee 	57
      
	               
         12.4
      	Reliance
      Upon Declarations, Opinions, etc. 	57
      
	           
             12.5
      	Evidence
      and Authority to Trustee, Opinions, etc 	57
      
	               
         12.6
      	Officer’s
      Certificate as Evidence 	58
      
	           
             12.7
      	Experts,
      Advisers and Agents 	58
      
	               
         12.8
      	Investment
      of Monies Held by Trustee 	59
      
	           
             12.9
      	Trustee
      Not Ordinarily Bound 	59
      
	               
         12.10
      	Trustee
      Not Required to Give Security 	59
      
	           
             12.11
      	Trustee
      Not Bound to Act on Corporation’s Request 	59
      
	               
         12.12
      	Conditions
      Precedent to Trustee’s Obligations to Act Hereunder 	59
      
	           
             12.13
      	Authority
      to Carry on Business 	60
      
	               
         12.14
      	Acceptance
      of Trust 	60
      
	           
             12.15
      	Indemnity
      of Trustee 	60
      
	               
         12.16
      	Satisfaction
      and Discharge of Indenture 	61
      
	           
             12.17
      	Third
      Party Interests 	61
      
	               
         12.18
      	Not
      Bound to Act 	61
      
	           
             12.19
      	Withholding
      Obligation 	61
      
	  	  	  
	ARTICLE
      13 SUPPLEMENTAL INDENTURES 	62
      
	  	  	  
	           
             13.1
      	Supplemental
      Indentures 	62
      
	  	  	  
	ARTICLE
      14 EXECUTION AND FORMAL DATE 	63
      
	  	  	  
	           
             14.1
      	Execution
      	63
      
	               
         14.2
      	Formal
      Date 	63
      


-iv- 




          THIS
INDENTURE made as of the 26th day of February, 2009 

BETWEEN: 


  
    
      ENDEAVOUR SILVER CORP., a corporation incorporated
        under the laws of the Province of British Columbia and having its head
        office in the City of Vancouver, in the Province of British Columbia (hereinafter
        called the “Corporation”)

    

  



- and - 


  
    
      COMPUTERSHARE TRUST COMPANY OF CANADA, a trust
        company authorized to carry on business in all the provinces of Canada
        (hereinafter called the “Trustee”) 

    

  



          WITNESSETH
THAT: 

          WHEREAS
the Corporation deems it desirable for its corporate purposes to create and
issue Debentures to be created and issued in the manner hereinafter provided;


          AND
WHEREAS the Corporation, under the laws relating thereto, is duly authorized
to create and issue the Debentures to be issued as herein provided; 

          AND
WHEREAS when certified by the Trustee and issued as in this Indenture
provided, all necessary by-laws and resolutions of the directors of the
Corporation shall have been duly enacted, passed and/or confirmed and other
proceedings taken and conditions complied with to make the creation and issue of
the Debentures proposed to be issued hereunder legal, valid and binding on the
Corporation in accordance with the laws relating to the Corporation; 

          AND
WHEREAS the foregoing recitals are made as representations and statements of
fact by the Corporation and not by the Trustee; 

          NOW
THEREFORE it is hereby covenanted, agreed and declared as follows: 

ARTICLE 1 
INTERPRETATION 

1.1      Definitions


       
    In this Indenture and in the Debentures, unless there is
something in the subject matter or context inconsistent therewith, the
expressions following shall have the following meanings, namely: 

	 	(a) 	
      “this Indenture”, “this Trust
      Indenture”, “hereto”, “herein”, “hereby”,
      “hereunder”, “hereof” and similar expressions refer to this
      Indenture and not to any particular Article, Section, subsection, clause,
      subdivision or other portion hereof and include any and every instrument
      supplemental or ancillary hereto;

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

	 	 	 
	 	(c) 	
      “Additional Debentures” means Debentures of any
      one or more series issued under this Indenture from time to
  time;



-1-





	 	(d) 	
      “Business Day” means any day other than a
      Saturday, Sunday or any other day that the Trustee in Vancouver, British
      Columbia is not generally open for business;

	 	 	 
	 	(e) 	
      “Common Shares” means the common shares in the
      capital of the Corporation, as such shares exist at the close of business
      on the date of execution and delivery of this Indenture; provided that in
      the event of a change or a subdivision, redivision, reduction, combination
      or consolidation thereof, or successive such changes, subdivisions,
      redivisions, reductions, combinations or consolidations then, subject to
      adjustments, if any, having been made in accordance with the provisions of
      Section 4.3, “Common Shares” shall thereafter mean the shares resulting
      from such change, subdivision, redivision, reduction, combination or
      consolidation;

	 	 	 
	 	(f) 	
      “Conversion Price” means the dollar amount for
      which each Common Share, Unit or other security underlying a Debenture may
      be issued from time to time upon the conversion of any series of
      Debentures which are by their terms convertible in accordance with the
      provisions of Article 4 and, in respect of the Initial Debentures, means
      the amount described in Section 2.4(e) for which each Unit may be issued
      from time to time upon the conversion of the Initial Debentures;

	 	 	 
	 	(g) 	
      “Corporation” means Endeavour Silver Corp. and
      includes any successor corporation to the Corporation which shall have
      complied with the provisions of Article 9;

	 	 	 
	 	(h) 	
      “Corporation’s Auditors” or “Auditors of the
      Corporation” means an independent firm of chartered accountants duly
      appointed as auditors of the Corporation;

	 	 	 
	 	(i) 	
      “Counsel” means a barrister or solicitor or firm
      of barristers or solicitors retained or employed by the Trustee or
      retained or employed by the Corporation and acceptable to the
    Trustee;

	 	 	 
	 	(j) 	
      “Current Market Price” means, on any day, the
      volume weighted average trading price per Common Share on the Toronto
      Stock Exchange (or, if the Common Shares are not listed thereon, on such
      stock exchange on which the Common Shares are listed as may be selected
      for such purpose by a duly authorized director of the Corporation and
      approved by the Trustee, or if the Common Shares are not listed on any
      stock exchange, then on the over-the-counter market) for the 30
      consecutive trading days ending preceding the date of
  determination;

	 	 	 
	 	(k) 	
      “Debenture Exercise Date” shall have the meaning
      ascribed thereto in Section 4.2;

	 	 	 
	 	(l) 	
      “Debentureholders” or “holders” means, except as
      the context otherwise requires, the persons for the time being entered in
      the registers for Debentures as registered holders of
Debentures;

	 	 	 
	 	(m) 	
      “Debentures” means the debentures, notes or other
      evidence of indebtedness of the Corporation issued and certified
      hereunder, or deemed to be issued and certified hereunder, including
      without limitation, the Initial Debentures, and for the time being
      outstanding, whether in definitive or interim form;

	 	 	 
	 	(n) 	
      “Default Interest” has the meaning ascribed
      thereto in Section 2.4(b);

	 	 	 
	 	(o) 	
      “Event of Default” has the meaning ascribed
      thereto in Section 7.1;



-2-





	 	(p) 	
      “Extraordinary Resolution” has the meaning
      ascribed thereto in Section 10.12;

	 	 	 	 
	 	(q) 	
      “GAAP” means the generally accepted accounting
      principles in Canada;

	 	 	 	 
	 	(r) 	
      “Guarantee” means any obligation, contingent or
      otherwise, of any Person directly or indirectly guaranteeing any
      Indebtedness of any other Person and any obligation, direct or indirect,
      contingent or otherwise, of such Person:

	 	 	 	 
	 		(i) 	
      to purchase or pay (or advance or supply funds for the
      purchase or payment of) such Indebtedness of such other Person (whether
      arising by virtue of partnership arrangements, or by agreements to
      keep-well, to purchase assets, goods, securities or services, to
      take-or-pay or to maintain financial statement conditions or otherwise),
      or

	 	 	 	 
	 		(ii) 	
      entered into for the purpose of assuring in any other
      manner the obligee against loss in respect thereof (in whole or in
      part);

	 	 	 	 
	 		
      provided, however, that the term “guarantee” shall
        not include endorsements for collection or deposit in the ordinary course
        of business. The term “guarantee” used as a verb has a corresponding
        meaning. The term “guarantor” shall mean any Person Guaranteeing any
    obligation.

	 	 	 	 
	 	(s) 	
      “Indebtedness” of any Person shall mean, without
      duplication, all indebtedness, liabilities and other obligations of such
      Person (other than items of shareholders’ equity) that would, in
      accordance with GAAP, be classified upon a balance sheet of each Person as
      liabilities of such Person, but in any event including:

	 	 	 	 
	 		(i) 	
      all Guarantees of such Person;

	 	 	 	 
	 		(ii) 	
      all indebtedness, liabilities and other obligations
      secured by any mortgage, Lien, pledge, charge, security interest or other
      encumbrance in respect of property owned by such Person, whether or not
      such Person has assumed or become liable for the payment of such
      obligations;

	 	 	 	 
	 		(iii) 	
      all indebtedness, liabilities and other obligations of
      such Person arising under any conditional sale or other title retention
      agreement, whether or not the rights and remedies of the seller or lender
      under such agreement in the event of default are limited to repossession
      or sale of such property;

	 	 	 	 
	 		(iv) 	
      the amount of the obligation required to be recorded by
      the lessee in respect of any capital lease under which such Person is
      lessee; and

	 	 	 	 
	 		(v) 	
      the face amount of any letter of credit issued on behalf
      of such Person.

	 	 	 	 
	 	(t) 	
      “Initial Debentures” means the Debentures
      designated as “10% Subordinated Unsecured Convertible Redeemable
      Debentures” as described in Section 2.4;

	 	 	 	 
	 	(u) 	
      “Interest Payment Date” means a date specified in
      a Debenture as the date on which an instalment of interest on such
      Debenture shall become due and payable;



-3-





	 	(v) 	
      “Lien” means, with respect to any Property of any
      Person, any mortgage or deed of trust, pledge, hypothecation, assignment,
      deposit arrangement, security interest, lien, charge, easement (other than
      any easement not materially impairing usefulness or marketability),
      encumbrance, preference, priority or other security agreement or
      preferential arrangement of any kind or nature whatsoever on or with
      respect to such Property (including any capital lease obligation,
      conditional sale or other title retention agreement having substantially
      the same economic effect as any of the foregoing or any Sale and Leaseback
      Transaction);

	 	 	 
	 	(w) 	
      “Maturity Account” means an account or accounts
      required to be established by the Corporation (and which shall be
      maintained by and subject to the control of the Trustee) for each series
      of Debentures pursuant to and in accordance with this Indenture;

	 	 	 
	 	(x) 	
      “Maturity Date” means the maturity date of the
      Debentures, being the date described in Section 2.4 in respect of the
      Initial Debentures, except as otherwise provided herein or in the
      Debentures;

	 	 	 
	 	(y) 	
      “Obligations” means any and all present and future
      indebtedness and all performance obligations which may at any time be due
      and owing by the Corporation to the Debentureholders pursuant to this
      Indenture, whether such indebtedness or performance obligations are
      absolute or contingent, matured or unmatured, direct or indirect, and
      whether the Corporation is liable for such indebtedness as principal,
      surety, endorser, guarantor or otherwise in connection with or arising in
      respect of all interest, expenses and costs of enforcement as provided in
      this Indenture;

	 	 	 
	 	(z) 	
      “Officer’s Certificate” means a certificate signed
      by any one authorized director or officer of the Corporation in his or her
      capacity as an officer or director of the Corporation, as the case may be,
      and not in his or her personal capacity;

	 	 	 
	 	(aa) 	
      “Periodic Offering” means an offering of
      Debentures of a series from time to time, the specific terms of which
      Debentures, including, without limitation, the rate or rates of interest,
      if any, thereon, the stated maturity or maturities thereof and the
      redemption provisions, if any, with respect thereto, are to be determined
      by the Corporation upon the issuance of such Debentures from time to
      time;

	 	 	 
	 	(bb) 	
      “person” includes an individual, corporation,
      company, partnership, joint venture, association, trust, trustee,
      unincorporated organization or government or any agency or political
      subdivision thereof;

	 	 	 
	 	(cc) 	
      “Property “ means, with respect to any Person, any
      interest of such Person in any kind of property or asset, whether real,
      personal or mixed, or tangible or intangible, including intellectual
      property rights and equity securities in, and other securities of, any
      other Person;

	 	 	 
	 	(dd) 	
      “Redemption Date” has the meaning attributed
      thereto in Section 5.3;

	 	 	 
	 	(ee) 	
      “Redemption Notice” has the meaning attributed
      thereto in Section 5.3;

	 	 	 
	 	(ff) 	
      “Redemption Price” means, in respect of a
      Debenture, the amount, excluding interest, payable on the Redemption Date
      fixed for such Debenture and, for the Initial Debentures, means the
      Redemption Price for the Initial Debentures set out in Section
    2.4(c);



-4-





	 	(gg) 	
      “Refinance” means, in respect of any Indebtedness,
      to refinance, extend, renew, refund or repay (in whole or in part), or to
      issue other Indebtedness, in exchange or replacement for (in whole or in
      part), such Indebtedness. “Refinanced” and “Refinancing” shall have
      correlative meanings;

	 	 	 	 
	 	(hh) 	
      “Sale and Leaseback Transaction” means any direct
      or indirect arrangement relating to Property now owned or hereafter
      acquired whereby the Corporation or any of its Subsidiaries transfers such
      Property to another Person and the Corporation or any of its Subsidiaries
      leases it from such Person;

	 	 	 	 
	 	(ii) 	
      “Senior Creditor” means a holder or holders of
      Senior Secured Indebtedness and includes any representative or
      representatives or trustee or trustees of any such holder or
    holders;

	 	 	 	 
	 	(jj) 	
      “Senior Secured Indebtedness” means principal of
      and the interest and premium (and any other amounts payable thereunder),
      if any, on and any costs, expenses and indebtedness arising out of or
      relating to:

	 	 	 	 
	 		(i) 	
      all existing secured debt, if any, of the Corporation and
      any Subsidiary, whether outstanding on the date of this Indenture or
      hereafter created, incurred, assumed or guaranteed, the payment of which
      the Corporation is responsible or liable, whether absolutely or
      contingently; and

	 	 	 	 
	 		(ii) 	
      Refinancings of any such secured debt referred to in
      clause (a) above,

	 	 	 	 
	 		
      unless in each case it is provided by the terms of the
      instrument creating or evidencing such indebtedness, liabilities or
      obligations that such indebtedness are not superior in right of payment to
      Debentures, which by their terms are subordinated.

	 	 	 	 
	 	(kk) 	
      “Senior Creditor” means a holder or holders of
      Senior Secured Indebtedness and includes any representative or
      representatives or trustee or trustees of any such holder or
    holders;

	 	 	 	 
	 	(ll) 	
      “Senior Security” means all Liens, held by or on
      behalf of any Senior Creditor and in any manner securing any Senior
      Secured Indebtedness;

	 	 	 	 
	 	(mm) 	
      “Subsidiary” has the meaning ascribed thereto in
      the Securities Act (British Columbia);

	 	 	 	 
	 	(nn) 	
      “Time of Expiry” means the time of expiry of
      certain rights with respect to the conversion of Debentures under Article
      4 which is to be set forth for each series of Debentures which by their
      terms are to be convertible;

	 	 	 	 
	 	(oo) 	
      “trading day” means, with respect to the Toronto
      Stock Exchange or other market for securities, any day on which such
      exchange or market is open for trading or quotation;

	 	 	 	 
	 	(pp) 	
      “Trustee” means Computershare Trust Company of
      Canada or its successor or successors for the time being in the trusts
      created hereunder;

	 	 	 	 
	 	(qq) 	
      “Units” means, for the Initial Debentures, Units
      of the Corporation comprised of one Common Share and one-half of a
      Warrant;



-5-





	 	(rr) 	
      “Warrant” means a share purchase warrant of the
      Corporation entitling the holder thereof to acquire, in accordance with
      the terms thereof, one Common Share of the Corporation and, for the
      Initial Debenture means the share purchase warrants in the form attached
      hereto as Schedule B; and

	 	 	 
	 	(ss) 	
      “Written Direction of the Corporation” means an
      instrument in writing signed by any one officer on behalf of the
      Corporation.



1.2     
Meaning of “outstanding” 

       
    Every Debenture certified and delivered by the Trustee
hereunder shall be deemed to be outstanding until it is cancelled, converted or
redeemed or delivered to the Trustee for cancellation, conversion or redemption,
as the case may be, or until monies for the payment thereof shall have been set
aside provided that: 

	 	(i) 	
      Debentures which have been partially redeemed, purchased
      or converted shall be deemed to be outstanding only to the extent of the
      unredeemed, unpurchased or unconverted part of the principal amount
      thereof;

	 	 	 	 
	 	(ii) 	
      when a new Debenture has been issued in substitution for
      a Debenture which has been lost, stolen or destroyed, only one of such
      Debentures shall be counted for the purpose of determining the aggregate
      principal amount of Debentures outstanding; and

	 	 	 	 
	 	(iii) 	
      for the purposes of any provision of this Indenture
      entitling holders of outstanding Debentures to vote, sign consents,
      requisitions or other instruments or take any other action under this
      Indenture, or to constitute a quorum at any meeting of Debentureholders,
      Debentures owned directly or indirectly, legally or equitably, by the
      Corporation or any Subsidiary shall be disregarded except that:

	 	 	 	 
	 		(A) 	
      for the purpose of determining whether the Trustee shall
      be protected in relying on any such vote, consent, requisition or other
      instrument or action, or on the holders of Debentures present or
      represented at any meeting of Debentureholders, only the Debentures which
      the Trustee knows are so owned shall be so disregarded; and

	 	 	 	 
	 		(B) 	
      Debentures so owned which have been pledged in good faith
      other than to the Corporation or a Subsidiary shall not be so disregarded
      if the pledgee shall establish to the satisfaction of the Trustee the
      pledgee’s right to vote such Debentures in his discretion free from the
      control of the Corporation or any Subsidiary.



1.3      Interpretation


           
In this Indenture: 

	 	(a) 	
      words importing the singular number or masculine gender
      shall include the plural number or the feminine or neuter genders, and
      vice versa;

	 	 	 
	 	(b) 	
      all references to Articles and Schedules refer, unless
      otherwise specified, to articles of and schedules to this
  Indenture;



-6-





	 	(c) 	
      all references to Sections, subsections, or clauses
      refer, unless otherwise provided, to sections, subsections, or clauses of
      this Indenture; and

	 	 	 
	 	(d) 	
      words and terms denoting inclusiveness (such as “include”
      or “includes” or “including”), whether or not so stated, are not limited
      by and do not imply limitation of their context or the words or phrases
      which precede or succeed them.



1.4     
Headings, Etc. 

        
   The division of this Indenture into Articles and Sections, 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 of this Indenture or of the Debentures. 

1.5     
Day not a Business Day 

         
  In the event that any day on or before which any action required to
be taken hereunder is not a Business Day, then such action shall be required to
be taken on or before the requisite time on the next succeeding day that is a
Business Day. 

1.6     
Applicable Law 

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

1.7     
Monetary References 

      
     Whenever any amounts of money are referred to
herein, such amounts shall be deemed to be in lawful money of Canada unless
otherwise expressed. 

1.8      Invalidity,
Etc. 

       
    Any provision hereof which is prohibited or
unenforceable shall be ineffective only to the extent of such prohibition or
unenforceability, without invalidating the remaining provisions hereof. 

1.9     
Enurement 

      
     Nothing in this Indenture or in the Debentures,
express or implied, shall give to any person, other than the parties hereto and
their successors hereunder, any paying agent, the holders of Debentures, the
holders of Senior Secured Indebtedness and (to the extent provided in Section
7.9) the holders of Common Shares, any benefit or any legal or equitable right,
remedy or claim under this Indenture. 

1.10    Schedules


          
 Appended hereto are the following schedules, which are incorporated into
this Indenture by reference and are deemed to part hereof: 

Schedule A - Debenture Certificate

Schedule B – Form of Warrant Certificate 
Schedule C – Redemption Notice


-7-




          Whenever
any provisions of any schedule to this Indenture conflicts with any provisions
of the body of this Indenture, the provisions of the body of this Indenture
shall prevail. References herein to a schedule shall mean a reference to a
schedule to this Indenture. 

ARTICLE 2 
THE DEBENTURES 

2.1     
Limit of Debentures 

         
  The aggregate principal amount of Debentures of any series
whatsoever authorized to be issued under this Indenture is unlimited, but
Debentures may be issued only upon and subject to the conditions and limitations
herein set forth. 

2.2      Terms
of Debentures of any Series 

         
  The Debentures may be issued in one or more series. There shall be
established herein or in or pursuant to one or more indentures supplemental
hereto, prior to the initial issuance of Debentures of any particular series:


	 	(a) 	
      the designation of the Debentures of the series (which
      need not include the term “Debentures”), which shall distinguish the
      Debentures of the series from the Debentures of all other
series;

	 	 	 
	 	(b) 	
      any limit upon the aggregate principal amount of the
      Debentures of the series that may be certified and delivered under this
      Indenture (except for Debentures certified and delivered upon registration
      of, transfer of, amendment of, or in exchange for, or in lieu of, other
      Debentures of the series pursuant to Sections 2.8, 2.13, 2.17 and
      2.18);

	 	 	 
	 	(c) 	
      the date or dates on which the principal of the
      Debentures of the series is payable;

	 	 	 
	 	(d) 	
      the rate or rates at which the Debentures of the series
      shall bear interest, if any, the date or dates from which such interest
      shall accrue, on which such interest shall be payable and on which a
      record, if any, shall be taken for the determination of holders to whom
      such interest shall be payable and/or the method or methods by which such
      rate or rates or date or dates shall be determined;

	 	 	 
	 	(e) 	
      the place or places where the principal of and any
      interest on Debentures of the series shall be payable or where any
      Debentures of the series may be surrendered for registration of transfer
      or exchange;

	 	 	 
	 	(f) 	
      the right, if any, of the Corporation to redeem
      Debentures of the series, in whole or in part, at its option and the
      period or periods within which, the price or prices at which and any terms
      and conditions upon which, Debentures of the series may be so redeemed,
      pursuant to any sinking fund or otherwise;

	 	 	 
	 	(g) 	
      the obligation, if any, of the Corporation to repay
      Debentures of the series pursuant to any mandatory redemption, sinking
      fund or analogous provisions and the price or prices at which, the period
      or periods within which, the date or dates on which, and any terms and
      conditions upon which, Debentures of the series shall be redeemed,
      purchased or repaid, in whole or in part, pursuant to such
    obligations;



-8-





	 	(h) 	
      if other than denominations of $1,000 and any integral
      multiple thereof, the denominations in which Debentures of the series
      shall be issuable;

	 	 	 
	 	(i) 	
      subject to the provisions of this Indenture, any trustee,
      authenticating or paying agents, transfer agents or registrars or any
      other agents with respect to the Debentures of the series;

	 	 	 
	 	(j) 	
      any other events of default or covenants with respect to
      the Debentures of the series;

	 	 	 
	 	(k) 	
      whether and under what circumstances the Debentures of
      the series will be convertible into or exchangeable for securities of any
      person;

	 	 	 
	 	(l) 	
      the form and terms of the Debentures of the
  series;

	 	 	 
	 	(m) 	
      if other than Canadian currency, the currency in which
      the Debentures of the series are issuable; and

	 	 	 
	 	(n) 	
      any other terms of the Debentures of the series (which
      terms shall not be inconsistent with the provisions of this
    Indenture).



      
     All Debentures of any one series shall be
substantially identical, except as may otherwise be established herein or by or
pursuant to a resolution of the directors of the Corporation, as evidenced by an
Officer’s Certificate or in an indenture supplemental hereto. All Debentures of
any one series need not be issued at the same time and may be issued from time
to time, including pursuant to a Periodic Offering, consistent with the terms of
this Indenture, if so provided herein, by or pursuant to such resolution of the
directors of the Corporation, as evidenced by an Officer’s Certificate or in an
indenture supplemental hereto. 

2.3      Form
of Debentures 

     
      Except in respect of the Initial Debentures,
the form of which is provided for herein as Schedule A, the Debentures of each
series shall be substantially in such form or forms (not inconsistent with this
Indenture) as shall be established herein or by or pursuant to one or more
resolutions of the directors of the Corporation (or to the extent established
pursuant to, rather than set forth in, a resolution of the directors of the
Corporation, in an Officer’s Certificate detailing such establishment) or in one
or more indentures supplemental hereto, in each case with such appropriate
insertions, omissions, substitutions and other variations as are required or
permitted by this Indenture and may have imprinted or otherwise reproduced
thereon such legend or legends or endorsements, not inconsistent with the
provisions of this Indenture, as may be required to comply with any law or with
any rules or regulations pursuant thereto or with any rules or regulations of
any securities exchange or securities regulatory authority or to conform to
general usage, all as may be determined by the trustee executing such
Debentures, as conclusively evidenced by their execution of such Debentures. The
Trustee shall not be required to ensure compliance with any law or with any
rules or regulations pursuant thereto or with any rules or regulations of any
securities exchange or securities regulatory authority or to conform to general
usage in connection with the issue, transfer or exchange of the Debentures. The
responsibility for compliance with the foregoing shall be that the Corporation
or the holder, as applicable. 

2.4      Form
and Terms of Initial Debentures 

           
Notwithstanding anything to the contrary contained in this Indenture, the
Initial Debenture shall be subject to the following terms. 

-9-





	 	(a) 	
      The first series of Debentures (the “Initial
      Debentures”) authorized for issue immediately shall be designated as
      “10% Subordinated Unsecured Convertible Redeemable Debentures”, shall be
      limited to an aggregate principal amount of up to $14,000,000 and shall
      mature on February 26, 2014 (“Maturity Date”).

	 	 	 
	 	(b) 	
      The Initial Debentures shall bear interest from and
      including the date of issuance at the rate of 10% per annum, payable in
      quarterly payments in arrears on April 15, July 15, October 15 and January
      15 in each year, the first such payment to fall due, subject as
      hereinafter provided, on April 15, 2009 and the last such payment
      (representing interest payable from and including the last Interest
      Payment Date to, but excluding, the Maturity Date of the Initial
      Debentures), subject as hereinafter provided, to fall due on the Maturity
      Date. To the extent that any Initial Debentures are converted or redeemed
      as hereinafter provided, such converted or redeemed Initial Debentures
      shall not bear interest on or after the Debenture Exercise Date (as
      defined herein) or the Redemption Date (as defined herein), as applicable.
      For greater certainty, the first interest payment will include interest
      accrued from and including February26, 2009 to, but excluding April 15,
      2009, which will be equal to $13.61111 for each $1,000 principal amount of
      Initial Debentures. Interest on the Initial Debentures shall be computed
      on the basis of a 360-day year comprised of twelve 30-day months. Upon the
      occurrence and during the continuance of an Event of Default (as defined
      herein), the Corporation shall be obligated to pay the holders of Initial
      Debenture an interest rate that is equal to the then current interest rate
      under the Initial Debenture plus five percent (5%) (the “Default
      Interest”). Notwithstanding anything to the contrary contained in this
      Indenture, all references to “interest” herein shall include Default
      Interest, when applicable.

	 	 	 
	 	(c) 	
      The Initial Debentures will be redeemable by the
      Corporation in accordance with the terms of Article 5, provided that the
      Initial Debentures will not be redeemable on or before August 26, 2010.
      Subsequent to August 26, 2010, if and only if the Common Shares underlying
      the Units may be transferred pursuant to an effective registration
      statement or are otherwise freely transferable without restriction under
      applicable laws, the Initial Debentures may be redeemed at the option of
      the Corporation from time to time on notice as provided for in Section 5.3
      at a price equal to the principal amount of the Initial Debenture plus
      accrued and unpaid interest from and including the Last Interest Payment
      Date to, but excluding the Redemption Date (and any other accrued and
      unpaid interest, if any), plus a redemption fee equal to 7% of the
      principal amount of Initial Debentures to be redeemed (the “Redemption
      Price for the Initial Debentures”); provided, however, that the
      Current Market Price on the date on which such Redemption Notice is given
      is at least 150% of the Conversion Price of the Initial Debentures and the
      Corporation shall have provided to the Trustee an Officer’s Certificate
      confirming such Current Market Price. The Redemption Notice for the
      Initial Debentures shall be substantially in the form of Schedule “C”
      hereto. The Redemption Price for the Initial Debentures and interest
      accrued and unpaid on the Initial Debentures on the Redemption Date will
      be paid to holders of Initial Debentures, in cash, in the manner
      contemplated in Section 5.4.

	 	 	 
	 	(d) 	
      The Initial Debentures will be direct unsecured
      obligations of the Corporation and will be subordinated to the Senior
      Secured Indebtedness and shall be ranked pari passu in right and
      priority of payment, without any preference or priority among themselves
      and at least equally, with all other present and future unsecured
      Indebtedness (actual or contingent) of the
Corporation.



-10-





	 	(e) 	
      Upon and subject to the provisions and conditions of
      Article 4, the holder of each Initial Debenture shall have the right at
      such holder’s option, at any time prior to the close of business on the
      earlier of the last Business Day immediately preceding the Maturity Date
      or if applicable, the last Business Day immediately preceding the
      Redemption Date specified by the Corporation in a Redemption Notice given
      to the holder in accordance with subsection 2.4(b) and Section 5.3 (the
      earlier of which will be the “Time of Expiry” for the purposes of
      Article 4 in respect of the Initial Debentures), to convert the whole of
      the principal amount of the Initial Debenture, or any portion of such
      principal amount which is a multiple of $1,000, into fully paid and
      non-assessable Units at the Conversion Price in effect on the Debenture
      Exercise Date (as defined in subsection 4.2(b) under the circumstances
      described in this Section and in the manner provided in Article
  4.

	 	 	 	 
	 		
      The Conversion Price in effect on the date hereof for
      each Unit to be issued upon the conversion of Initial Debentures shall be
      $1.90.

	 	 	 	 
	 		(i) 	
      (such that 526 Units, comprised of 526 Common Shares and
      263 Warrants, will be issued for each $1,000 principal amount of Initial
      Debentures so converted).

	 	 	 	 
	 	(f) 	
      So long as at least ten (10) days prior advance written
      notice is given to the holders of the Initial Debentures of any planned
      distributions or dividends on Common Shares during which period the
      holders of the Initial Debentures may opt to convert the Initial
      Debentures, no adjustment in the number of Units to be issued upon
      conversion will be made for distributions or dividends on Common Shares
      underlying the Units issuable upon conversion or for interest accrued on
      Initial Debentures surrendered for conversion; provided, however, that any
      and all accrued interest on the Initial Debentures through the date of
      conversion is paid to the holders of the Initial Debentures. The
      Conversion Price applicable to the Units and to the securities or other
      property receivable on the conversion of the Initial Debentures is subject
      to adjustment pursuant to the provisions of Section 4.3.

	 	 	 	 
	 	(g) 	
      No fractional Units will be issued on any conversion but
      in lieu thereof, the Corporation will satisfy such fractional interest in
      accordance with Section 4.4. In addition, upon the conversion of a
      Debenture, that portion of the accrued but unpaid interest to the
      Debenture Exercise Date, with respect to the converted Debenture shall not
      be cancelled, extinguished or forfeited. Holders converting their Initial
      Debentures will receive, in addition to the applicable number of Units, a
      cash payment in satisfaction of any accrued and unpaid interest in respect
      of the Initial Debentures surrendered for conversion up to but excluding
      the Debenture Exercise Date.

	 	 	 	 
	 	(h) 	
      The Initial Debentures shall be issued in denominations
      of $1,000 and integral multiples of $1,000. Each Initial Debenture and the
      certificate of the Trustee endorsed thereon shall be issued in
      substantially the form set out in Schedule “A”, with such insertions,
      omissions, substitutions or other variations as shall be required or
      permitted by this Indenture, and may have imprinted or otherwise
      reproduced thereon such legend or legends or endorsements, not
      inconsistent with the provisions of this Indenture, as may be required to
      comply with any law or with any rules or regulations pursuant thereto or
      with any rules or regulations of any securities exchange or securities
      regulatory authority or to conform with general usage, all as may be
      determined by the directors of the Corporation executing such Initial
      Debenture in accordance with this Section, as conclusively evidenced by
      their execution of an Initial Debenture. Each Initial Debenture shall
      additionally bear such distinguishing letters and numbers as the Trustee
      shall approve.



-11-




2.5      Certification
and Delivery of Additional Debentures 

      
     The Corporation may from time to time request the
Trustee to certify and deliver Additional Debentures of any series (other than
Initial Debentures) by delivering to the Trustee the documents referred to below
in this Section 2.5 whereupon the Trustee shall certify such Debentures
and cause the same to be delivered in accordance with the Written Direction of
the Corporation referred to below or pursuant to such procedures acceptable to
the Trustee as may be specified from time to time by a Written Direction of the
Corporation, provided, however, that other than the Initial Debentures
originally issued hereunder on the date hereof, no additional Initial Debentures
shall be delivered and issued after the date of this Indenture. The maturity
date, issue date, interest rate (if any) and any other terms of the Debentures
of such series shall be set forth in or determined by or pursuant to such
Written Direction of the Corporation. In certifying such Debentures, the Trustee
shall be entitled to receive and shall be fully protected in relying upon,
unless and until such documents have been superseded or revoked: 

	 	(a) 	
      an Officer’s Certificate and/or executed supplemental
      indenture by or pursuant to which the form and terms of such Additional
      Debentures were established;

	 	 	 	 
	 	(b) 	
      a Written Direction of the Corporation requesting
      certification and delivery of such Additional Debentures and setting forth
      delivery instructions, provided that, with respect to Debentures of a
      series subject to a Periodic Offering:

	 	 	 	 
	 		(i) 	
      such Written Direction of the Corporation may be
      delivered by the Corporation to the Trustee prior to the delivery to the
      Trustee of such Additional Debentures of such series for certification and
      delivery;

	 	 	 	 
	 		(ii) 	
      the Trustee shall certify and deliver Additional
      Debentures of such series for original issue from time to time, in an
      aggregate principal amount not exceeding the aggregate principal amount,
      if any, established for such series, pursuant to a Written Direction of
      the Corporation or pursuant to procedures acceptable to the Trustee as may
      be specified from time to time by a Written Direction of the
      Corporation;

	 	 	 	 
	 		(iii) 	
      the maturity date or dates, issue date or dates, interest
      rate or rates (if any) and any other terms of Additional Debentures of
      such series shall be determined by an executed supplemental indenture or
      by Written Direction of the Corporation or pursuant to such procedures;
      and

	 	 	 	 
	 		(iv) 	
      if provided for in such procedures, such Written
      Direction of the Corporation may authorize certification and delivery
      pursuant to oral or electronic instructions from the Corporation which
      oral or electronic instructions shall be promptly confirmed in
    writing;

	 	 	 	 
	 	(c) 	
      an opinion of Counsel, in form and substance satisfactory
      to the Trustee, acting reasonably, to the effect that all requirements
      imposed by this Indenture or by law in connection with the proposed issue
      of Additional Debentures have been complied with, subject to the delivery
      of certain documents or instruments specified in such opinion;
  and

	 	 	 	 
	 	(d) 	
      an Officer’s Certificate certifying that the Corporation
      is not in default under this Indenture, that the terms and conditions for
      the certification and delivery of Additional Debentures (including those
      set forth in Section 12.5), have been complied with
  subject



-12-




 to the delivery of any documents or instruments specified in
such Officer’s Certificate and that no Event of Default exists or will exist
upon such certification and delivery. 

2.6     
Execution of Debentures 

      
     The Debentures shall be signed (either manually or
by facsimile signature) by any one authorized director or officer of the
Corporation, holding office at the time of the signing. A facsimile signature
upon a Debenture shall for all purposes of this Indenture be deemed to be the
signature of the person whose signature it purports to be. Notwithstanding that
any person whose signature, either manual or in facsimile, appears on a
Debenture as a director or officer may no longer hold such office at the date of
the Debenture or at the date of the certification and delivery thereof, such
Debenture shall be valid and binding upon the Corporation and entitled to the
benefits of this Indenture. 

2.7      Certification
of Debentures 

       
    No Debenture shall be issued or, if issued, shall be
obligatory or shall entitle the holder to the benefits of this Indenture, until
it has been certified by or on behalf of the Trustee substantially in the form
set out in Schedule “A” hereto, in a supplemental indenture, or in some other
form approved by the Trustee. Such certification on any Debenture shall be
conclusive evidence that such Debenture is duly issued, is a valid obligation of
the Corporation and that the Debentureholder is entitled to the benefits hereof.


      
     The certificate of the Trustee signed on the
Debentures, or interim Debentures hereinafter mentioned, shall not be construed
as a representation or warranty by the Trustee as to the validity of this
Indenture or of the Debentures or interim Debentures or as to the issuance of
the Debentures or interim Debentures and the Trustee shall in no respect be
liable or answerable for the use made of the Debentures or interim Debentures or
any of them or the proceeds thereof. The certificate of the Trustee signed on
the Debentures or interim Debentures shall, however, be a representation and
warranty by the Trustee that the Debentures or interim Debentures have been duly
certified by or on behalf of the Trustee pursuant to the provisions of this
Indenture. 

2.8     
Interim Debentures 

        
   Pending the delivery to the Trustee of definitive Debentures
of any series, the Corporation may issue (but subject to the same provisions,
conditions and limitations as herein set forth), and the Trustee may certify in
lieu thereof interim printed, mimeographed or typewritten Debentures in such
form and in such denominations and with such appropriate insertions, omissions,
substitutions and variations as the Trustee and the Corporation may approve
(such approval to be conclusively evidenced by the certification of such
Debentures by or on behalf of the Trustee and the signature thereof, either
manual or in facsimile, by the President or another officer of the Corporation)
entitling the holders thereof to definitive Debentures of the series in any
authorized denominations when the same are ready for delivery, without expense
to the holders, but the total amount of interim Debentures of any series shall
not exceed the aggregate principal amount of such series of Debentures
authorized to be issued hereunder. Forthwith after the issuance of any such
interim Debentures, the Corporation shall cause to be prepared the appropriate
definitive Debentures for delivery to the holders of such interim Debentures.


      
     Any such interim Debentures when duly issued
shall, until exchanged for definitive Debentures, entitle the holders thereof to
rank for all purposes as Debentureholders and otherwise in respect of this
Indenture to the same extent and in the same manner as though the said exchange
had actually been made. When exchanged for definitive Debentures such interim
Debentures shall forthwith be cancelled by the Trustee. 

-13-




2.9     
Restrictions on Transfer; Legends 

       
    The Initial Debentures have not been and will not be
registered under the 1933 Act or any applicable state securities laws, and are,
therefore, subject to restrictions on resale under applicable United States
federal and state securities laws. Each certificate representing an Initial
Debenture, and all certificates issued in exchange therefor or in substitution
thereof, shall bear the following legend until such time as it is no longer
required under applicable requirements of the 1933 Act or applicable state
securities laws: 

THESE SECURITIES AND THE SECURITIES
ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY APPLICABLE STATE
SECURITIES LAWS, “), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN
ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION
OF COUNSEL TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE
TO THE COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT SECURED BY SUCH SECURITIES. 

provided, that with respect to any such pledge that the
transferee is an “accredited investor”, as such term is defined in Rule 501(a)
of Regulation D under the 1933 Act, and such transfer complies with applicable
United States federal and state securities laws and Canadian federal and
provincial securities laws. 

      
     Each certificate representing an Initial
Debenture, and all certificates issued in exchange therefor or in substitution
thereof, shall bear the following legend until such time as it is no longer
required under applicable Canadian securities laws:

UNLESS PERMITTED UNDER SECURITIES
LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JUNE
27, 2009. 

2.10    Debentures
to Rank Pari Passu 

      
     The Debentures will be direct unsecured
obligations of the Corporation. Each Debenture of the same series of Debentures
will rank pari passu with each other Debenture of the same series
(regardless of their actual date or terms of issue) and, subject to statutory
preferred exceptions, with all present and future unsecured indebtedness of the
Corporation except for sinking fund provisions (if any) applicable to different
series of Debentures or other similar types of obligations of the
Corporation.

2.11    Concerning
Interest 

	 	(a) 	
      Unless otherwise specifically provided in the terms of
      the Debentures of any series, all Debentures issued hereunder, whether
      originally or upon exchange or in substitution for previously issued
      Debentures which are interest bearing, shall bear interest: (i) from and
      including their issue date; or (ii) from and including the last Interest
      Payment Date to which interest shall have been paid or made available for
      payment on the outstanding Debentures of that series, whichever shall be
      the later, or, in respect of Debentures subject to a Periodic Offering,
      from and including their issue date or from and including the last
      Interest Payment Date to which interest shall have been paid or made
      available



-14-





	 		
      for payment on such Debentures, in all cases, to but
      excluding the next Interest Payment Date. If the Maturity Date of a
      particular series of Debentures is not an Interest Payment Date then such
      Debentures shall also bear interest from the last Interest Payment Date to
      but excluding the Maturity Date of such Debentures.

	 	 	 
	 	(b) 	
      Unless otherwise specifically provided in the terms of
      the Debentures of any series, interest for any period of less than six
      months shall be computed on the basis of a year of 365 or 366 days, as the
      case may be. Subject to Section 2.4(b) in respect of the method for
      calculating the amount of interest to be paid on the Initial Debentures on
      the first interest Payment Date in respect thereof, with respect to any
      series of Debentures, whenever interest is computed on the basis of a year
      (the “deemed year”) which contains fewer days than the actual
      number of days in the calendar year of calculation, such rate of interest
      shall be expressed as a yearly rate for purposes of the Interest Act
      (Canada) by multiplying such rate of interest by the actual number of
      days in the calendar year of calculation and dividing it by the number of
      days in the deemed year.



2.12    Registration
of Debentures 

	 	(a) 	
      The Corporation shall, at all times while any series of
      Debentures are outstanding, cause to be kept by and at the principal
      office of the Trustee in the City of Vancouver and in such other places as
      the Corporation with the approval of the Trustee may designate, registers
      in which shall be entered the names and addresses of the holders of each
      series Debentures, particulars of the Debentures held by them
      respectively, and particulars of all transfers of Debentures.

	 	 	 
	 	(b) 	
      In respect of the registers maintained by it, the Trustee
      shall, when requested so to do by the Corporation, furnish the Corporation
      with a list of the names and addresses of holders of registered Debentures
      showing the principal amounts and serial numbers of such Debentures held
      by each such holder.

	 	 	 
	 	(c) 	
      The registers referred to in this Section shall at all
      reasonable times be open for inspection by the Corporation, by the Trustee
      and by any Debentureholder.



2.13    Transfer of
Debentures 

	 	(a) 	
      No transfer of a Debenture shall be valid unless: (i)
      made by the holder or his executors or administrators or other legal
      representatives or his or their attorney duly appointed by an instrument
      in writing in form and execution reasonably satisfactory to the Trustee,
      (ii) made in compliance with subsections 2.13(b), 1.13(c) and 2.13(e) and
      such reasonable requirements as the Trustee may prescribe, and (iii) such
      transfer shall have been duly entered on one of the appropriate
      registers.

	 	 	 
	 	(b) 	
      No Debentures shall be transferred or assigned unless
      such transfer of assignment is made in compliance with applicable law
      including Canadian and United States securities laws.

	 	 	 
	 	(c) 	
      No Debentures shall be assigned unless all of the
      Obligations due to the assignor are also assigned to the assignee of the
      Debenture.

	 	 	 
	 	(d) 	
      Subject to this Section 2.13, Debentures may be
      transferred at any of the places at which a register is kept pursuant to
      the provisions of Section 2.12.



-15-





	 	(e) 	
      Neither the Corporation nor the Trustee shall be required
      to transfer any Debentures during any period in which the registers of
      Debentures are closed in accordance with Section 2.19.

	 	 	 
	 	(f) 	
      A transferee of a Debenture shall, after an appropriate
      form of transfer is lodged with the Trustee or other registrar and upon
      compliance with all other conditions in that regard required by this
      Indenture or by any conditions contained in such Debenture or by law, be
      entitled to be entered on any of the appropriate registers as the owner of
      such Debenture, free from all equities or rights of set-off or
      counterclaim between the Corporation and his transferor or any previous
      holder thereof, except for equities which the Corporation is required to
      take notice of by statute or by order of a court of competent
      jurisdiction.

	 	 	 
	 	(g) 	
      Except as herein otherwise provided, upon any transfer of
      Debentures the Trustee may make a sufficient charge to reimburse it for
      any stamp or security transfer taxes or other governmental charge required
      to be paid and, in addition, a reasonable charge for its services, and
      payment of the said charge shall be made by the party requesting such
      transfer as a condition precedent thereto.

	 	 	 
	 	(h) 	
      If a Debenture is tendered for transfer and the
      certificate representing such Debenture bears the legend set forth in
      Section 2.9 and the holder thereof has not obtained the prior written
      consent of the Corporation, the Trustee shall not register such transfer
      unless the transferor has provided the Trustee with the applicable
      certificate and the transfer is being made pursuant to an effective
      registration statement under the 1933 Act or pursuant to an available
      exemption from, or in a transaction not subject to, the registration
      requirements of the 1933 Act and in accordance with applicable state
      securities laws as evidenced by a legal opinion of counsel to such effect,
      the substance of which will be reasonably acceptable to the
      Corporation.



2.14    Ownership
of Debentures 

	 	(a) 	
      Unless otherwise required by law, the person in whose
      name any Debenture shall be registered shall be and shall be deemed to be
      the owner thereof for all purposes of this Indenture and payment of or on
      account of the principal of and interest on such Debenture shall be made
      only to such registered holder.

	 	 	 
	 	(b) 	
      The registered holder for the time being of any Debenture
      shall be entitled to the principal and interest evidenced by such
      Debenture, free from all equities or rights of set- off or counterclaim
      between the Corporation and the original or any intermediate holder
      thereof and all persons may act accordingly. The receipt of any such
      registered holder for any such principal or interest shall be a good
      discharge to the Trustee for the same and neither the Trustee nor the
      Corporation shall be bound to inquire into the title of any such
      registered holder.

	 	 	 
	 	(c) 	
      Delivery to the Corporation by a Debentureholder of a
      Debenture or delivery of the receipt of such holder for the principal and
      interest evidenced by such Debenture respectively shall be a good and
      valid discharge to the Corporation, which shall not be bound to enquire
      into the title of such holder, save as ordered by a court of competent
      jurisdiction or as required by statute.

	 	 	 
	 	(d) 	
      Subject to applicable law, neither the Trustee nor the
      Corporation shall be charged with notice of or be bound to see to the
      execution of any trust (other than that created by
this



-16-





	 		
      Indenture), whether expressed, implied or constructive,
      nor be affected by any notice of any subsisting equity, in respect of any
      Debenture and may transfer the same on the direction of the person
      registered as the holder thereof, whether named as trustee or otherwise,
      as though that person were the beneficial owner thereof.

	 	 	 
	 	(e) 	
      Where Debentures are registered in more than one name,
      the principal and interest from time to time payable in respect thereof
      may be paid to the order of all such holders, failing written instruction
      from them to the contrary, and such payment shall be a valid discharge to
      the Trustee, to any registrar, to the Corporation, and to any paying
      agent.

	 	 	 
	 	(f) 	
      In the case of the death of one or more joint holders,
      the principal and interest from time to time payable in respect thereof
      may be paid to the survivor or survivors of such registered holders and
      the receipt of any such survivor or survivors therefor shall be a valid
      discharge to the Trustee, to any registrar, to the Corporation and to any
      paying agent.



2.15    Payment
of Interest 

           
The following provision shall apply to Debentures, except as otherwise specified
in Section 2.4(b) a resolution of the directors of the Corporation, an Officer’s
Certificate or a supplemental indenture relating to a particular series of
Additional Debentures: 

	 	(a) 	
      As interest on the Debentures becomes due (except
      interest payable at maturity, on conversion, or on redemption, which may,
      at the option of the Corporation, be paid upon presentation and surrender
      of such Debentures) the Corporation, either directly or through the
      Trustee or an agent of the Trustee, at least three (3) days prior to each
      date on which interest on such Debentures becomes due, shall forward or
      cause to be forwarded by prepaid post, electronic transfer of funds or
      such other means as may be agreed to by the Trustee, to the registered
      holders of Debentures appearing on the registers maintained by the Trustee
      as of the close of business on the tenth Business Day prior to the
      applicable Interest Payment Date, a cheque for or other payment of such
      interest (less any tax required by law to be deducted) payable to the
      order of such Debentureholders at their last known addresses appearing on
      the appropriate register hereinbefore mentioned, or in the case of joint
      holders, to the one whose name appears first on such register, unless a
      Debentureholder directs otherwise. The forwarding of such cheque or the
      making of such payment by other means shall, to the extent of the sum
      represented thereby, plus the amount of any tax withheld as aforesaid,
      satisfy and discharge all liability for interest on such Debentures,
      unless in the case of payment by cheque, such cheque is not paid at par on
      presentation. In the event of non-receipt of any cheque for or other
      payment of interest by the person to whom it is so sent as aforesaid, the
      Corporation will issue to such person a replacement cheque or other
      payment for a like amount upon being furnished with such evidence of
      non-receipt as it shall reasonably require and upon being indemnified to
      its satisfaction. Notwithstanding the foregoing, if the Corporation is
      prevented by circumstances beyond its control (including, without
      limitation, any interruption in mail service) from making payment of any
      interest due on each Debenture in the manner provided above, the
      Corporation may make payment of such interest or make such interest
      available for payment in any other manner acceptable to the Trustee with
      the same effect as though payment had been made in the manner provided
      above. If payment of an interest Obligation is made through the Trustee,
      at least one Business Day prior to each Interest Payment Date or the date
      of mailing the cheques for the interest due on an Interest Payment Date,
      whichever is earlier, the Corporation shall deliver
  sufficient



-17-




funds to the Trustee by electronic
transfer or certified cheque or make such other arrangements for the provision
of funds as may be agreeable between the Trustee and the Corporation in order to
effect such payment. The Debenture Trustee shall disburse such payments only
upon receiving, at least one Business Day prior to each such date, funds in an
amount sufficient for the payment of the interest Obligation. 

2.16    Payments
of Amounts Due on Maturity 

           
Except as may otherwise be provided in any supplemental indenture in respect of
any series of Debentures, payments of amounts due upon maturity of the
Debentures will be made in the following manner. The Corporation will establish
and maintain with the Trustee a Maturity Account for each series of Debentures.
Each such Maturity Account shall be maintained by and be subject to the control
of the Trustee for the purposes of this Indenture. On or before 11:00 a.m.,
Vancouver time on the Business Day immediately prior to each Maturity Date for
Debentures outstanding from time to time under this Indenture, the Corporation
will deliver to the Trustee an electronic transfer of funds or a cheque for
deposit in the applicable Maturity Account in an amount sufficient to pay the
cash amount payable in respect of such Debentures (including the principal
amount together with any accrued and unpaid interest thereon less any tax
required by law to be deducted), provided the Corporation may elect to satisfy
this requirement by providing the Trustee with a cheque for such amounts
required under this Section 2.16 post-dated to the applicable Maturity Date.


           
The Trustee, on behalf of the Corporation, will pay to each holder entitled to
receive payment the principal amount of (to the extent that the Debenture has
not been converted or redeemed) and unpaid interest (accrued up to but excluding
the Maturity Date) on the Debenture, upon surrender of the Debenture at the
principal office of the Trustee in Vancouver, British Columbia. The delivery of
such funds to the Trustee for deposit to the applicable Maturity Account will
satisfy and discharge the liability of the Corporation for the Debentures to
which the delivery of funds relates to the extent of the amount delivered (plus
the amount of any tax deducted as aforesaid) and such Debentures will thereafter
to that extent not be considered as outstanding under this Indenture and such
holder will have no other right in regard thereto other than to receive out of
the money so delivered or made available the amount to which it is entitled.


           
The Trustee shall have no obligation to disburse funds pursuant to this Section
2.15 unless it has received written confirmation satisfactory to it that the
funds have been deposited with it in sufficient amount to pay in full all
amounts due and payable on the applicable Maturity Date. The Trustee shall, if
any funds are received by it in the form of uncertified cheques, be entitled to
delay the time for release of such funds until such uncertified cheques shall be
determined to have cleared the financial institution upon which the same are
drawn. 

2.17    Mutilation,
Loss, Theft or Destruction 

      
     In case any of the Debentures issued hereunder
shall become mutilated or be lost, stolen or destroyed, the Corporation, in its
discretion, may issue, and thereupon the Trustee shall certify and deliver, a
new Debenture upon surrender and cancellation of the mutilated Debenture, or in
the case of a lost, stolen or destroyed Debenture, in lieu of and in
substitution for the same, and the substituted Debenture shall be in a form
approved by the Trustee and shall be entitled to the benefits of this Indenture
and rank equally in accordance with its terms with all other Debentures issued
or to be issued hereunder. The new or substituted Debenture may have endorsed
upon it the fact that it is in replacement of a previous Debenture. In case of
loss, theft or destruction, the applicant for a substituted Debenture shall
furnish to the Corporation and to the Trustee such evidence of the loss, theft
or destruction of the 

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Debenture as shall be satisfactory to them in their discretion
and shall also furnish an indemnity satisfactory to them in their discretion.
The applicant shall pay all reasonable expenses incidental to the issuance of
any substituted Debenture. 

2.18    Exchanges
of Debentures 

	 	(a) 	
      Subject to Section 2.19, Debentures of any denomination
      may be exchanged for Debentures of any other authorized form or
      denomination of the same series, aggregate principal amount, date of
      maturity, and same interest rate as the Debentures so exchanged.

	 	 	 	 
	 	(b) 	
      Any exchange of any series of Debentures may be made at
      the offices of the Trustee referred to in Section 2.12. Any Debentures
      tendered for exchange shall be surrendered to the Trustee. The Corporation
      shall execute and the Trustee shall certify all Debentures necessary to
      carry out exchanges as aforesaid. All debentures surrendered for exchange
      shall be cancelled.

	 	 	 	 
	 	(c) 	
      Debentures issued in exchange for Debentures which at the
      time of such issue have been selected or called for redemption at a later
      date shall be deemed to have been selected or called for redemption in the
      same manner and shall have noted thereon a statement to that
  effect.

	 	 	 	 
	 	(d) 	
      Except as herein otherwise provided, upon any exchange of
      Debentures the Trustee may make a sufficient charge to reimburse it for
      any stamp or security transfer taxes or other governmental charge required
      to be paid and, in addition, a reasonable charge for its services, and
      payment of the said charge shall be made by the party requesting such
      transfer as a condition precedent thereto. Notwithstanding the foregoing,
      no charge shall be made to a Debentureholder hereunder:

	 	 	 	 
	 		(i) 	
      for any exchange of any interim or temporary Debenture
      that has been issued under Section 2.8 for a definitive Debenture;
    or

	 	 	 	 
	 		(ii) 	
      for any exchange of any Debenture resulting from a
      partial redemption under Section 5.2.



2.19    Closing
of Registers 

	 	(a) 	
      Neither the Corporation nor the Trustee nor any registrar
      shall be required to:

	 	 	 	 
	 		(i) 	
      make transfers or exchanges of any Debentures on any
      Interest Payment Date for such Debentures or during the ten preceding
      Business Days;

	 	 	 	 
	 		(ii) 	
      make transfers or exchanges of any Debentures on the day
      of any selection by the Trustee of Debentures to be redeemed or during the
      ten preceding Business Days;

	 	 	 	 
	 		(iii) 	
      make exchanges of or convert any Debentures which will
      have been selected or called for redemption unless upon due presentation
      thereof for redemption such Debentures shall not be redeemed; or

	 	 	 	 
	 		(iv) 	
      convert any Debentures on any Interest Payment Date for
      such Debentures or during the ten preceding Business
  Days.



-19-





	 	(b) 	
      Subject to any restriction herein provided, the
      Corporation with the approval of the Trustee may at any time close any
      register for any series of Debentures, other than those kept at the
      principal offices of the Trustee in Vancouver, and transfer the
      registration of any Debentures registered thereon to another register
      (which may be an existing register) and thereafter such Debentures shall
      be deemed to be registered on such other register. Notice of such transfer
      shall be given to the holders of such Debentures.



2.20   
Debentureholder not a Shareholder 

      
     Nothing in this Indenture or in the holding of a
Debenture or Debenture certificate or otherwise, shall, in itself confer or be
construed as conferring upon the holder any right or interest whatsoever as a
shareholder of the Corporation, including, without limitation, the right to vote
at, to receive notice of, or to attend at meeting of shareholders or any other
proceedings of the Corporation, or the right to receive dividends or other
distributions. 

2.21    Trustee Not Bound
  to Make Enquiries

        
   The Trustee shall not be bound to make any enquiry or
investigation as to the correctness of the matters set out in any of the
resolutions, opinions, certificates or other documents required to be provided
by the Corporations under the terms of this Indenture, but shall be entitled to
accept and act upon the said resolutions, opinions, certificates and other
documents. The Trustee may nevertheless, in its discretion, require further
proof in cases where it deems further proof desirable. 

ARTICLE 3 
SUBORDINATION OF DEBENTURES 

3.1     
Subordination 

      
     The Obligations of the Corporation hereunder
(except as provided by Section 12.15) or under the Debentures, including the
principal thereof and interest thereon, shall be subordinated and postponed and
subject in right of payment, to the extent and in the manner hereinafter set
forth in the following sections of this Article 3, to the full and final payment
of all Senior Secured Indebtedness of the Corporation and each holder of
Debentures by his acceptance thereof agrees to and shall be bound by the
provisions of this Article 3. 

3.2     
Order of Payment 

      
     In the event of any dissolution, winding-up,
liquidation, bankruptcy, insolvency, receivership, creditor enforcement or
realization or other similar proceedings relating to the Corporation or any of
its property (whether voluntary or involuntary, partial or complete) or any
other marshalling of the assets and liabilities of the Corporation or any sale
of all or substantially all of the assets of the Corporation: 

	 	(a) 	
      all Senior Secured Indebtedness shall first be paid in
      full, or provision made for such payment, before any payment is made on
      account of the principal of or interest on the indebtedness evidenced by
      the Debentures or any costs or expenses related thereto;

	 	 	 
	 	(b) 	
      any payment or distribution of assets of the Corporation,
      whether in cash, property or securities, to which the Debentureholders or
      the Trustee on behalf of such Debentureholders would be entitled except
      for the provisions of this Article 3, shall be paid or delivered by the
      trustee in bankruptcy, receiver, assignee for the benefit of creditors, or
      other liquidating agent making such payment or distribution, directly to
      the



-20-





	 		
      holders of Senior Secured Indebtedness or their
      representative or representatives, or to the agent or trustee under any
      agreement or indenture pursuant to which any instruments evidencing any of
      such Senior Secured Indebtedness may have been issued, to the extent
      necessary to pay all Senior Secured Indebtedness in full after giving
      effect to any concurrent payment or distribution, or provision therefor,
      to the holders of such Senior Secured Indebtedness before any payment or
      distribution is made to the Debentureholders or the Trustee;

	 	 	 
	 	(c) 	
      in the event that, notwithstanding the foregoing, any
      payment or distribution of assets of the Corporation, whether in cash,
      property or securities, shall be received by the Debentureholders or by
      the Trustee on behalf of such Debentureholders before all the Senior
      Secured Indebtedness is paid in full, or provision made for its payment,
      such payment or distribution shall be held in trust for the benefit of,
      and shall be paid over or delivered to, the holders of such Senior Secured
      Indebtedness or their representative or representatives, or to the agent
      or trustee under any agreement or indenture pursuant to which any
      instruments evidencing any of such Senior Secured Indebtedness may have
      been issued, for application to the payment of all Senior Secured
      Indebtedness remaining unpaid to the extent necessary to pay all such
      Senior Secured Indebtedness after giving effect to any concurrent payment
      or distribution, or provision therefor, to the holders of such Senior
      Secured Indebtedness before any payment or distribution is made to the
      Debentureholders or the Trustee;

	 	 	 
	 	(d) 	
      upon the payment or distribution of assets of the
      Corporation referred to in this Article 3, the Trustee and the
      Debentureholders shall be entitled to rely upon a certificate of the
      liquidating trustee or agent or other person making such payment or
      distribution to the Trustee or to the Debentureholders for the purpose of
      ascertaining the persons entitled to participate in such distribution to
      the holders of the Senior Secured Indebtedness and other indebtedness of
      the Corporation, the amount thereof or payable thereon, the amount paid or
      distributed thereon and all other facts pertinent thereto or to this
      Article 3.



       
    The rights and priority of the Senior Secured
Indebtedness and the subordination pursuant hereto shall not be affected by:


	 	(i) 	
      the time, sequence or order of creating, granting,
      executing, delivering of, or registering, perfecting or failing to
      register or perfect any security notice, caveat, financing statement or
      other notice in respect of the Senior Security;

	 	 	 
	 	(ii) 	
      the time or order of the attachment, perfection or
      crystallization of any security constituted by the Senior
  Security;

	 	 	 
	 	(iii) 	
      the taking of any collection, enforcement or realization
      proceedings pursuant to the Senior Security;

	 	 	 
	 	(iv) 	
      the date of obtaining of any judgment or order of any
      bankruptcy court or any court administering bankruptcy, insolvency or
      similar proceedings as to the entitlement of the Senior Creditors, or any
      of them or the Debentureholders or other Trustee or any of them to any
      money or property of the Corporation;

	 	 	 
	 	(v) 	
      the failure to exercise any power or remedy reserved to
      the Senior Creditors under the Senior Security or to insist upon a strict
      compliance with any terms thereof;



-21-





	 	(vi) 	
      whether any Senior Security is now perfected, hereafter
      ceases to be perfected, is voidable by any trustee in bankruptcy or like
      official or is otherwise set aside, invalidated or lapses; or

	 	 	 
	 	(vii) 	
      the date of giving or failing to give notice to or making
      demand upon the Corporation.



3.3      Subrogation
to Rights of Holders of Senior Secured
Indebtedness 

      
     Subject to the payment in full of all Senior
Secured Indebtedness, the Debentureholders shall be subrogated to the rights of
the holders of Senior Secured Indebtedness to receive payments or distributions
of assets of the Corporation to the extent of the application thereto of such
payments or other assets which would have been received by the Debentureholders
but for the provisions hereof until the principal of and interest on the
Debentures and costs and expenses related thereto shall be paid in full, and no
such payments or distributions to the Debentureholders of cash, property or
securities, which otherwise would be payable or distributable to the holders of
the Senior Secured Indebtedness, shall, as between the Corporation, its
creditors other than the holders of Senior Secured Indebtedness, and the
Debentureholders, be deemed to be a payment by the Corporation to the holders of
Senior Secured Indebtedness or on account of the Senior Secured Indebtedness, it
being understood that the provisions of this Article 3 are and are intended
solely for the purpose of defining the relative rights of the Debentureholders,
on the one hand, and the holders of Senior Secured Indebtedness, on the other
hand.

         
  The Trustee, for itself and on behalf of each of the
Debentureholders, hereby waives any and all rights to require a Senior Creditor
to pursue or exhaust any rights or remedies with respect to the Corporation or
any property and assets subject to the Senior Security or in any other manner to
require the marshalling of property, assets or security in connection with the
exercise by the Senior Creditors of any rights, remedies or recourses available
to them. 

3.4     
Obligation to Pay Not Impaired 

      
     Nothing contained in this Article 3or elsewhere in
this Indenture or in the Debentures is intended to or shall impair, as between
the Corporation, its creditors other than the holders of Senior Secured
Indebtedness, and the Debentureholders, the obligation of the Corporation, which
is absolute and unconditional, to pay to the Debentureholders the principal of
and interest on the Debentures and any costs or expenses related thereto, as and
when the same shall become due and payable in accordance with their terms, or
affect the relative rights of the Debentureholders and creditors of the
Corporation other than the holders of the Senior Secured Indebtedness, nor shall
anything contained in this Indenture or in the Debentures prevent the Trustee or
the holder of any Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article 3 of the holders of Senior Secured Indebtedness. 

3.5      No
  Payment if Senior Secured Indebtedness in Default

      
     Upon the maturity of any Senior Secured
Indebtedness by lapse of time, acceleration or otherwise, or any other
enforcement of any Senior Secured Indebtedness, then all such matured Senior
Secured Indebtedness shall first be paid in full, or shall first have been duly
provided for, before any payment on account of principal or interest on the
Debentures or on account of costs or expenses related thereto is made. 

      
     In case of default with respect to any Senior
Secured Indebtedness permitting a Senior Creditor to demand payment or
accelerate the maturity thereof, then, unless and until such default shall have
been 

-22-




cured or waived or shall have ceased to exist, no payment (by
redemption or purchase of Debentures or otherwise) shall be made by the
Corporation with respect to the principal or interest on the Debentures or costs
and expenses related thereto and neither the Trustee nor the Debentureholders
shall be entitled to demand, institute proceedings for the collection of, or
receive any payment or benefit (including without limitation by set-off,
combination of accounts or otherwise in any manner whatsoever) on account of the
Debentures after the happening of such a default (except as provided in Section
3.9), and unless and until such default shall have been cured or waived or shall
have ceased to exist, such payments shall be held in trust for the benefit of,
and, if and when such Senior Secured Indebtedness shall have become due and
payable, shall be paid over to, the holders of the Senior Secured Indebtedness
or to the trustee or trustees or agent or agents under any indenture or
agreement under which any instruments evidencing an amount of the Senior Secured
Indebtedness remain unpaid until all such Senior Secured Indebtedness shall have
been paid in full, after giving effect to any concurrent payment or distribution
to the holders of such Senior Secured Indebtedness. 

         
  The fact that any payment hereunder is prohibited by this Section
3.5 shall not prevent the failure to make such payment from being an Event of
Default. 

3.6     
Payment on Debentures Permitted 

        
   Nothing contained in this Article 3 or elsewhere in this
Indenture, or in any of the Debentures, shall affect the obligation of the
Corporation to make, or prevent the Corporation from making, at any time except
as prohibited by, Sections 3.2 or 3.5, any payment of principal of or interest
on the Debentures or any costs or expenses related thereto. The fact that any
such payment is prohibited by Sections 3.2 or 3.5 shall not prevent the failure
to make such payment from being an Event of Default hereunder. Nothing contained
in this Article 3 or elsewhere in this Indenture, or in any of the Debentures,
shall prevent the conversion of the Debentures or, except as prohibited by
Sections 3.2 or 3.5, the application by the Trustee of any monies deposited with
the Trustee hereunder for the purpose, to the payment of or on account of the
principal of or interest on the Debentures or any costs or expenses related
thereto. 

3.7     
Confirmation of Subordination 

      
     Each holder of Debentures by his acceptance
thereof irrevocably authorizes and directs the Trustee on his behalf to take
such action as the Corporation determines may be necessary or appropriate to
effect the subordination as provided in this Indenture and appoints the Trustee
as his attorney-in-fact for any and all such purposes. This power of attorney,
being coupled with an interest and rights, is irrevocable. Upon request of the
Corporation, and upon being furnished with an Officer’s Certificate stating that
one or more named persons are Senior Creditors, and specifying the amount and
nature of such Senior Secured Indebtedness, the Trustee shall enter into a
written agreement or agreements with the Corporation and the person or persons
named in such Officer’s Certificate providing that such person or persons are
entitled to all the rights and benefits of this Indenture as the holder or
holders, representative or representatives, or trustee or trustees of the Senior
Secured Indebtedness specified in such Officer’s Certificate and for such other
matters as holders of Senior Secured Indebtedness may reasonably request. Such
agreement shall be conclusive evidence that the indebtedness specified therein
is Senior Secured Indebtedness, however, nothing herein shall impair the rights
of any holder of Senior Secured Indebtedness who has not entered into such an
agreement. 

3.8     
Issue of Subordinated Securities in Reorganization 

      
     For purposes of this Article 3, the words “cash,
property or securities” shall be deemed not to include shares of the Corporation
as reorganized or readjusted, or securities of the Corporation or any 

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other corporation provided for by a plan of reorganization or
readjustment, the payment of which is subordinated, at least to the extent
provided in this Article 3 with respect to the Debentures, to the payment of all
Senior Secured Indebtedness which may at the time be outstanding, provided that
the Senior Secured Indebtedness is assumed by the new corporation, if any,
resulting from such reorganization or readjustment. 

3.9     
Knowledge of Trustee 

        
   Notwithstanding the provisions of this Article 3 or any
provision contained in this Indenture or in the Debentures, the Trustee will not
be charged with knowledge of any Senior Secured Indebtedness or of any default
in the payment thereof, or of the existence of any other fact that would
prohibit the making of any payment of monies to or by the Trustee, or the taking
of any other action by the Trustee, unless and until the Trustee has received
written notice thereof from the Corporation, any Debentureholder or any holder
of Senior Secured Indebtedness. 

3.10    Rights
  of Holders of Senior Secured Indebtedness Not Impaired

      
     No right of any present or future holder of any
Senior Secured Indebtedness to enforce the subordination herein will at any time
or in any way be prejudiced or impaired by any act or failure to act on the part
of the Corporation or by any non-compliance by the Corporation with the terms,
provisions and covenants of this Indenture, regardless of any knowledge thereof
which any such holder may have or be otherwise charged with. 

3.11    Altering the Senior
  Secured Indebtedness

            The
holders of the Senior Secured Indebtedness have the right to extend, renew,
modify or amend the terms of the Senior Secured Indebtedness or any security
therefor and to release, sell or exchange such security and otherwise to deal
freely with the Corporation, all without notice to or consent of the
Debentureholders or the Trustee and without affecting the liabilities and
obligations of the parties to this Indenture or the Debentureholders or the
Trustee. 

3.12    Additional Indebtedness

        
   This Indenture does not restrict the Corporation from
incurring additional indebtedness for borrowed money or otherwise or mortgaging,
pledging or charging its properties to secure any indebtedness. 

3.13    Right of Debentureholder
  to Convert Not Impaired

      
     The subordination of the Debentures to the Senior
Secured Indebtedness and the provisions of this Article 3 do not impair in any
way the right of a Debentureholder to convert its Debentures pursuant to Article
4. 

3.14    Acknowledgement of
  Trustee

         
  The Trustee, on its own behalf and on behalf of the
Debentureholders, by its acceptance hereof hereby acknowledges and agrees that
the holders of the Senior Secured Indebtedness shall have the benefit of and may
on behalf of the holders of Senior Secured Indebtedness enforce the covenants of
the Corporation and the Trustee set out in this Article 3 and the Trustee, on
its own behalf and on behalf of the Debentureholders, agrees to execute any
confirmation or acknowledgement as may be necessary or appropriate to effectuate
the subordination as provided in this Article 3 

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ARTICLE 4 
CONVERSION OF DEBENTURES 

4.1      Conversion
Privilege and Conversion Price 

	 	(a) 	
      Subject to any applicable restrictions on the conversion
      of Debentures of a particular series and to compliance with the provisions
      of this Article 4, any Debentures issued hereunder of any series which by
      their terms are convertible will be convertible into Common Shares, Units
      or other securities, as the case may be, at such Conversion Price or
      prices, and on such date or dates and in accordance with such other
      provisions as shall have been determined at the time of the issue of such
      Debentures and shall have been expressed in this Indenture, in such
      Debentures, in an Officer’s Certificate, or in a Supplemental Indenture
      authorizing or providing for the issue thereof.

	 	 	 
	 	(b) 	
      The Conversion Price shall be adjusted in certain
      circumstances as provided in Section 4.3.

	 	 	 
	 	(c) 	
      Subject to Section 2.4, such right of conversion shall
      extend only to the maximum number of whole Common Shares, Units or other
      securities into which the aggregate principal amount of the Debenture or
      Debentures surrendered for conversion at any one time by the holder
      thereof may be converted in accordance with the foregoing provisions of
      this Section. Fractional interests in Common Shares, Units or other
      securities shall be adjusted for in the manner provided in Section
    4.4.

	 	 	 
	 	(d) 	
      If a Debenture is called for redemption or submitted or
      presented for purchase pursuant to Article 5, the conversion rights
      granted by this Article 4 in respect of such Debenture shall terminate on
      the close of business on the Business Day immediately prior to the
      Redemption Date set out in the Redemption Notice in accordance with the
      terms of this Indenture in accordance with Section 5.3 and Section 11.2
      (unless the Corporation shall fail to pay the Redemption Price when due in
      accordance with Article 5, in which case the conversion right shall
      terminate at the close of business on the date such failure is cured and
      such Debenture is redeemed or purchased, as the case may be).

	 	 	 
	 	(e) 	
      In the event of conversion of a Debenture, any accrued
      but unpaid interest due on such Debenture through to but excluding the
      Debenture Exercise Date (as defined herein) shall be payable by the
      Corporation to the Debentureholder within thirty (30) days of the
      Debenture Exercise Date.



4.2     
Manner of Exercise of Right to Convert 

	 	(a) 	
      The holder of a Debenture desiring to convert such
      Debenture in whole into Common Shares, Units or other securities, as the
      case may be, in accordance with the terms of such series of Debentures,
      shall surrender such Debenture to the Trustee at its principal office in
      the City of Vancouver together with the conversion form on the back of
      such Debenture or any other written notice in a form satisfactory to the
      Trustee, in either case duly executed by the holder or his executors or
      administrators or other legal representatives or his or their attorney
      duly appointed by an instrument in writing in form and executed in a
      manner satisfactory to the Trustee, exercising his right to convert such
      Debenture in accordance with the provisions of this Article 4. Thereupon
      such Debentureholder or, subject to payment of all applicable stamp or
      security transfer taxes or other governmental charges and compliance with
      all reasonable requirements of the



-25-





	 		
      Trustee, his nominee(s) or assignee(s), shall be entitled
      to be entered in the books of the Corporation as at the Debenture Exercise
      Date (or such later date as is specified in subsection (b)) as the holder
      of the number of Common Shares or Common Shares and Warrants, or other
      securities into which such Debenture is convertible in accordance with the
      provisions of this Article 4 and, as soon as practicable thereafter, the
      Corporation shall, if requested, deliver to such Debentureholder or,
      subject as aforesaid, his nominee(s) or assignee(s), a certificate or
      certificates for the securities to be issued upon such conversion. In case
      any Debenture of a denomination greater than $1,000 shall be surrendered
      for partial conversion, the Corporation shall execute and the Trustee
      shall authenticate and deliver to the holder of debenture so surrendered,
      without charge to such holder, a new Debenture or Debentures in authorized
      denominations in an aggregate principal amount equal to the unconverted
      portion of the surrendered Debenture.

	 	 	 
	 	(b) 	
      For the purposes of this Article 4, a Debenture shall be
      deemed to be surrendered for conversion on the date (herein called the
      “Debenture Exercise Date”) on which it is so surrendered in
      accordance with the provisions of this Article 4 and, in the case of a
      Debenture so surrendered by post or other means of transmission, on the
      date on which it is received by the Trustee at its office specified in
      subsection (a); provided that, if a Debenture is surrendered for
      conversion on a day on which the register(s) of Common Shares or
      Debentures is closed, the person or persons entitled to receive Common
      Shares or Common Shares and Warrants or such other securities into which
      such Debentures are by their terms convertible shall become the holder or
      holders of record of such Common Shares, Common Shares and Warrants or
      such other securities and such Debenture shall be deemed to be surrendered
      for conversion as at the date on which both such registers are next
      reopened.

	 	 	 
	 	(c) 	
      The holder of a Debenture surrendered for conversion or
      deemed to be converted in accordance with this Section 4.2 shall be
      entitled (subject to any applicable restriction on the right to receive
      interest on conversion of Debentures of any series) to receive accrued and
      unpaid interest in cash in respect thereof up to but excluding the
      Debenture Exercise Date and the Common Shares issued upon such conversion
      shall rank only in respect of dividends declared in favour of shareholders
      of record on and after the Debenture Exercise Date, from which applicable
      date they will for all purposes be and be deemed to be issued and
      outstanding Common Shares, fully paid and non-assessable, and from which
      date the Debenture so surrendered shall be deemed to have been paid and
      the holder of such surrendered Debenture shall thereafter have no right in
      respect thereof except that of receiving delivery and payment of the
      accrued and unpaid interest up to but excluding the Debenture Exercise
      Date.

	 	 	 
	 	(d) 	
      The Debentures may not be converted unless an exemption
      is available from the registration requirements of the 1933 Act and the
      securities laws of any applicable states, and the holder has furnished an
      opinion of counsel of recognized standing or other evidence reasonably
      satisfactory to the Corporation to such effect; provided, however, that a
      holder who purchased Debentures in the Corporation’s private placement of
      Initial Debentures will not be required to deliver an opinion of counsel
      in connection with the conversion of those
Debentures.



4.3     
Adjustment of Conversion Price 

       
    The Conversion Price in effect at any date shall be
subject to adjustment from time to time as follows: 

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	 	(a) 	
      if and whenever at any time prior to the Time of Expiry
      the Corporation shall (i) subdivide or redivide the outstanding Common
      Shares into a greater number of shares, (ii) reduce, combine or
      consolidate the outstanding Common Shares into a smaller number of shares,
      or (iii) issue Common Shares to the holders of all or substantially all of
      the outstanding Common Shares by way of a stock dividend (other than the
      issue of Common Shares to holders of Common Shares who have elected to
      receive dividends in the form of Common Shares in lieu of cash dividends
      paid in the ordinary course on the Common Shares), the Conversion Price in
      effect on the effective date of such subdivision, redivision, reduction,
      combination or consolidation or on the record date for such issue of
      Common Shares by way of a stock dividend, as the case may be, shall in the
      case of any of the events referred to in (i) and (iii) above be decreased
      in proportion to the number of outstanding Common Shares resulting from
      such subdivision, redivision or dividend, or shall, in the case of any of
      the events referred to in (ii) above, be increased in proportion to the
      number of outstanding Common Shares resulting from such reduction,
      combination or consolidation. Such adjustment shall be made successively
      whenever any event referred to in this subsection 4.3(a) shall
    occur.

	 	 	 
	 	(b) 	
      If and whenever at any time prior to the Time of Expiry,
      there is a reclassification of the Common Shares or a capital
      reorganization of the Corporation (other than as described in subsection
      4.3(a)) of the Common Shares or in case of any amalgamation, consolidation
      or merger of the Corporation with or into any other corporation, or in the
      case of any sale of the properties and assets of the Corporation, as or
      substantially as, an entirety to any other corporation, the Conversion
      Price shall be adjusted so that each Debenture shall, after such
      reclassification, change, amalgamation, consolidation, merger or sale, be
      convertible into the number of shares or the number, kind or amount of
      other securities or property of the Corporation, or such continuing,
      successor or purchaser corporation, as the case may be, which the holder
      thereof would have been entitled to receive as a result of such
      reclassification, change, amalgamation, consolidation, merger or sale if
      on the effective date thereof he had been the holder of the number of
      Common Shares, Units or other securities into which the Debenture was
      convertible prior to the effective date of such reclassification, change,
      amalgamation, consolidation, merger or sale. No such reclassification,
      change, amalgamation, consolidation, merger or sale shall be carried into
      effect unless, in the opinion of the directors of the Corporation, all
      necessary steps shall have been taken to ensure that the holders shall
      thereafter be entitled to receive such number of shares or other
      securities or property of the Corporation, or such continuing, successor
      or purchaser corporation, as the case may be, subject to adjustment
      thereafter in accordance with provisions similar, as nearly as may be, to
      those contained in this Section 4.3;

	 	 	 
	 	(c) 	
      If holders of Debentures would otherwise be entitled to
      receive, upon conversion of the Debentures, after a reclassification,
      change, amalgamation, consolidation, merger or sale, any property
      (including cash) or securities that would not constitute “prescribed
      securities” for the purposes of clause 212(1)(b)(vii)(E) of the
      Income Tax Act (Canada), as it applied for the 2007 taxation year,
      (referred to herein as “Ineligible Consideration”), such holders
      shall not be entitled to receive such Ineligible Consideration but the
      Corporation or any successor or acquirer, as the case may be, shall have
      the right (at the sole option of the Corporation or any successor or
      acquirer, as the case may be) to deliver either such Ineligible
      Consideration or prescribed securities for the purposes of clause
      212(1)(b)(vii)(E) of the Income Tax Act (Canada), as it applied for
      the 2007 taxation year, with a market value equal to the market value of
      such Ineligible Consideration. In general, prescribed securities would
      include Common Shares and other



-27-





	 		
      shares which are not redeemable by the holder within five
      years of the date of issuance of the Debentures. The Corporation shall
      give notice to the holders of Debentures at least 30 days prior to the
      effective date of such transaction in writing and by release to a business
      newswire stating the consideration into which the Debentures will be
      convertible after the effective date of such transaction. After such
      notice, the Corporation or the successor acquirer, as the case may be, may
      not change the consideration to be delivered upon conversion of the
      Debenture except in accordance with any other provision of this
      Indenture.

	 	 	 
	 	(d) 	
      in any case in which this Section 4.3 shall require that
      an adjustment shall become effective immediately after a record date for
      an event referred to herein, the Corporation may defer, until the
      occurrence of such event, issuing to the holder of any Debenture converted
      after such record date and before the occurrence of such event the
      additional Common Shares, Units or other securities, as the case may be,
      issuable upon such conversion by reason of the adjustment required by such
      event; provided, however, that the Corporation shall deliver to such
      Debentureholder an appropriate instrument evidencing such
      Debentureholder’s right to receive such additional Common Shares, Units or
      other securities, as the case may be, upon the occurrence of the event
      requiring such adjustment and the right to receive any distributions made
      on such additional Common Shares declared in favour of Debentureholders of
      record of Common Shares on and after the Debenture Exercise Date or such
      later date as such Debentureholder would, but for the provisions of this
      subsection 4.3(c), have become the holder of record of such additional
      Common Shares pursuant to subsection 4.2(b);

	 	 	 
	 	(e) 	
      the adjustments provided for in this Section 4.3 are
      cumulative and will be computed to the nearest one tenth of one cent and
      shall apply to successive subdivisions, redivisions, reductions,
      combinations, consolidations, distributions, issues or other events
      resulting in any adjustment under the provisions of this Section 4.3,
      provided that, notwithstanding any other provision of this Section 4.3, no
      adjustment of the Conversion Price shall be required unless such
      adjustment would require an increase of at least 1% in the Conversion
      Price then in effect; provided however, that any adjustments which by
      reason of this subsection 4.3(e) are not required to be made shall be
      carried forward and taken into account in any subsequent
  adjustment;

	 	 	 
	 	(f) 	
      for the purpose of calculating the number of Common
      Shares of the Corporation outstanding, Common Shares owned by or for the
      benefit of the Corporation shall not be counted;

	 	 	 
	 	(g) 	
      in the event of any question arising with respect to the
      adjustments provided in this Section 4.3, such questions shall be
      conclusively determined by the Corporation’s Auditors who shall have
      access to all necessary records of the Corporation, and such determination
      shall be binding upon the Corporation, the Trustee, and the
      Debentureholders;

	 	 	 
	 	(h) 	
      in case the Corporation shall take any action affecting
      the Common Shares other than action described in this Section 4.3, which
      in the opinion of the directors of the Corporation would materially
      adversely affect the rights of Debentureholders, the Conversion Price
      shall be adjusted in such manner and at such time, by action of the
      directors of the Corporation, as the board of the directors of the
      Corporation may reasonably determine to be equitable in the circumstances
      after consultation and after taking into consideration the advice of its
      outside legal advisors;



-28-





	 	(i) 	
      no adjustment in the Conversion Price shall be made in
      respect of any event described in subsection (a)(iii), if all of the
      holders of the Debentures are entitled to participate in such event on the
      same terms mutatis mutandis as if they had converted their
      Debentures prior to the effective date or record date, as the case may be,
      of such event; and

	 	 	 
	 	(j) 	
      except as stated above in this Section 4.3, no adjustment
      will be made in the Conversion Price for any Debentures as a result of the
      issuance of Common Shares at less than the then applicable Conversion
      Price.



4.4     
No Requirement to Issue Fractional Units 

        
   The Corporation shall not be required to issue fractional
Common Shares, Units or other securities, as the case may be, upon the
conversion of Debentures pursuant to this Article. If more than one Debenture
shall be surrendered for conversion at one time by the same Debentureholder, the
number of whole Common Shares, Units or other securities which by the terms of
any series of Debentures are issuable upon conversion thereof shall be computed
on the basis of the aggregate principal amount of such Debentures to be
converted. If any fractional interest in a Common Share, Unit or other security
would, except for the provisions of this Section 4.4, be deliverable upon the
conversion of any principal amount of Debentures, the Corporation shall instead
make a cash payment to the holder of the Debenture of an amount equal to the
fractional interest which would have been issuable multiplied by the Current
Market Price less applicable withholding taxes, if any. 

4.5      Corporation
to Reserve Shares 

           
The Corporation covenants with the Trustee that it will at all times reserve and
keep available out of its authorized Common Shares, solely for the purpose of
issue upon conversion of Debentures as in this Article provided, and
conditionally allot to Debentureholders who may exercise their conversion rights
hereunder such number of Common Shares as shall then be issuable upon the
conversion of all outstanding Debentures and upon the exercise of any Warrants
that may be issued upon the conversion of any Debentures. The Corporation
covenants with the Trustee that all Common Shares which shall be so issuable
shall be duly and validly issued as fully paid and non-assessable.

4.6      Taxes
and Charges on Conversion 

          
 The Corporation will from time to time promptly pay or make provision
satisfactory to the Trustee for the payment of any and all taxes and charges
which may be imposed by the laws of Canada or any province of Canada (except
income tax or security transfer tax, if any) which shall be payable with respect
to the issuance or delivery to holders of Debentures, upon the exercise of their
right to conversion, of the Common Shares, Units and/or Warrants, as the case
may be, of Corporation pursuant to the terms of the Debentures and of this
Indenture. 

4.7      Cancellation
of Converted Debentures 

        
   All Debentures converted in whole under the provisions of this
Article shall be forthwith delivered to and cancelled by the Trustee and no
Debenture shall be issued in substitution therefor. 

4.8      Certificate
as to Adjustment 

          
 The Corporation shall from time to time immediately, but in any event
within five (5) Business Days, after the occurrence of any event which requires
an adjustment or readjustment as provided in Section 4.3, deliver an Officer’s
Certificate to the Trustee specifying the nature of the event requiring the 

-29-




same and the amount of the adjustment necessitated thereby and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based, which certificate and the amount of the
adjustment specified therein shall be verified by an opinion of a firm of
chartered accountants appointed by the Corporation and acceptable to the Trustee
(who may be the Auditors of the Corporation) and shall be conclusive and binding
on all parties in interest. When so approved, the Corporation shall, except in
respect of any subdivision, redivision, reduction, combination or consolidation
of the Common Shares, forthwith give notice to the Debentureholders in the
manner provided in Section 11.2 specifying the event requiring such adjustment
or readjustment and the results thereof, including the resulting Conversion
Price; provided that, if the Corporation has given notice otherwise than under
this Section 4.8 covering all the relevant facts in respect of such event and if
the Trustee approves, no such notice need be given under this Section 4.8.
Failure to provide or mail any such notice or any defect therein shall not
affect the validity of any such adjustment. 

4.9     
Notice of Special Matters 

        
   The Corporation covenants with the Trustee that so long as any
Debenture remains outstanding, it will give notice to the Trustee, and to the
Debentureholders in the manner provided in Section 11.2, of its intention to fix
a record date for any event referred to in subsections 4.3(a) (other than a
subdivision, redivision, reduction, combination or consolidation of its Common
Shares) which may give rise to an adjustment in the Conversion Price, and, in
each case, such notice shall specify the particulars of such event and the
record date and the effective date for such event; provided that the Corporation
shall only be required to specify in such notice such particulars of such event
as shall have been fixed and determined on the date on which such notice is
given. Such notice shall be given not less than fourteen (14) days in each case
prior to such applicable record date. Failure to mail such notice or any defect
therein shall not affect the validity of any transaction referred to in this
Section 4.9. 

4.10    Protection of Trustee

           
The Trustee: 

	 	(a) 	
      shall not at any time be under any duty or responsibility
      to any Debentureholder to determine whether any facts exist which may
      require any adjustment in the Conversion Price, 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;

	 	 	 
	 	(b) 	
      shall not be accountable with respect to the validity or
      value (or the kind or amount) of any Common Shares or of any shares or
      other securities or property which may at any time be issued or delivered
      upon the conversion of any Debenture; and

	 	 	 
	 	(c) 	
      shall not be responsible for any failure of the
      Corporation to make any cash payment or to issue, transfer or deliver
      Common Shares or share certificates upon the surrender of any Debenture
      for the purpose of conversion, or to comply with any of the covenants
      contained in this Article 4.



4.11    Legend on Common
Shares, Warrants or Other Securities 

      
     Each certificate representing Common Shares,
Common Shares and Warrants or other securities issued upon conversion of
Debentures pursuant to this Article 4, as well as all certificates issued in
exchange for or in substitution of the foregoing securities, may have imprinted
or otherwise reproduced thereon such legend or legends or endorsements, not
inconsistent with the provisions of this Indenture, as may be required to comply
with any law or with any rules or regulations pursuant thereto or with any 

-30-




rules or regulations of any securities exchange or securities
regulatory authority or to conform to general usage, all as may be determined by
the Corporation, as conclusively evidenced by the issue of such certificates.


        
   The Warrants and Common Shares issuable upon conversion of the
Initial Debentures and Common Shares underlying such Warrants have not been
registered under the 1933 Act or any applicable state securities laws, and are,
therefore, subject to restrictions on resale under applicable United States
federal and state securities laws. Except as otherwise set forth in the Warrant
Certificate in the form attached hereto as Schedule B, each certificate
representing such securities, and all certificates issued in exchange therefor
or in substitution thereof, shall bear the following legend until such time as
it is no longer required under applicable requirements of the 1933 Act or
applicable state securities laws: 

THESE SECURITIES [AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF] HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR ANY APPLICABLE STATE
SECURITIES LAWS AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
1933 ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL THE
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT SECURED BY SUCH SECURITIES. 

provided, that with respect to any such pledge that the
transferee is an “accredited investor”, as such term is defined in Rule 501(a)
of Regulation D under the 1933 Act, and such transfer complies with applicable
United States federal and state securities laws and Canadian federal and
provincial securities laws. 

      
     Each certificate representing the Warrants and
Common Shares issuable upon conversion of the Initial Debentures and Common
Shares underlying such Warrants, shall bear the following legend until such time
as it is no longer required under applicable Canadian securities laws:

UNLESS PERMITTED UNDER SECURITIES
LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JUNE
27, 2009. 

         
  If any Common Share, Warrant or Warrant Share underlying the Initial
Debentures is tendered for transfer and the certificate representing such
securities bears the U.S. restrictive legend set forth above and the holder
thereof has not obtained the prior written consent of the Corporation, the
Corporation’s registrar and transfer agent shall not register such transfer
unless the transferor has provided the Corporation’s registrar and transfer
agent with the applicable certificate and the transfer is being made pursuant to
an effective registration statement under the 1933 Act or pursuant to an
available exemption from, or in a transaction not subject to, the registration
requirements of the 1933 Act and in accordance with applicable state securities
laws as evidenced by a legal opinion of counsel to such effect, the substance of
which will be acceptable to the Corporation. 

-31-




ARTICLE 5 
REDEMPTION AND PURCHASE OF DEBENTURES


5.1      Applicability
of Article 

       
    Except as set forth in Section 2.4 and subject to
regulatory approval, if applicable, the Corporation shall have the right at its
option to redeem, in whole at any time from time to time before maturity by
payment of money, any Debentures issued hereunder of any series which by their
terms are made so redeemable (subject, however, to any applicable restriction on
the redemption of Debentures of such series) at such rate or rates of premium,
if any, and on such date or dates and in accordance with such other provisions
as shall have been determined at the time of issue of such Debentures and as
shall have been expressed in this Indenture, in the Debentures, in an Officer’s
Certificate, or in a supplemental indenture authorizing or providing for the
issue thereof, or in the case of Additional Debentures issued pursuant to a
Periodic Offering, in the Written Direction of the Corporation requesting the
certification and delivery thereof. 

5.2      Partial
Redemption 

        
   If less than all the Debentures of any series for the time
being outstanding are at any time to be redeemed, the Debentures shall be
redeemed on pro rata basis among all debenture holders of such series. Unless
otherwise specifically provided in the terms of any series of Debentures, no
Debenture shall be redeemed in part, unless the principal amount redeemed is
$1,000 or a multiple thereof. For this purpose, the Trustee upon Written
Direction of the Corporation may make, and from time to time vary, regulations
with respect to the manner in which such Debentures may be drawn for redemption
and regulations so made shall be valid and binding upon all holders of such
Debentures. Unless the context otherwise requires, the terms “Debenture” or
“Debentures” as used in this Article 5 shall be deemed to mean the principal
amount of any Debenture which in accordance with the foregoing provisions has
become subject to redemption. 

5.3     
Notice of Redemption 

      
     Notice of redemption (the “Redemption
Notice”) of any series of Debentures shall be given to the holders of the
Debentures so to be redeemed not more than 30 days nor less than 10 days prior
to the date fixed for redemption (the “Redemption Date”) in the manner
provided in Section 11.2. Every such notice shall specify the aggregate
principal amount of Debentures called for redemption, the Redemption Date, the
Redemption Price, the places of payment, the then effective Conversion Price,
the places of conversion that holders who wish to convert their Debentures must
surrender such Debentures for conversion no later than the close of business on
the Business Day immediately preceding the date which is nine (9) days after the
date that the Redemption Notice is deemed to be given to the holders of the
Debentures to be redeemed and must satisfy the other requirements of Article 4
and shall state that interest upon the principal amount of Debentures called for
redemption shall cease to be payable from and after the Redemption Date. In
addition, unless all the outstanding Debentures are to be redeemed, the
Redemption Notice shall specify: 

	 	(a) 	
      the distinguishing letters and numbers of the registered
      Debentures which are to be redeemed (or of such thereof as are registered
      in the name of such Debentureholder);

	 	 	 
	 	(b) 	
      in the case of a published notice, the distinguishing
      letters and numbers of the Debentures which are to be redeemed or, if such
      Debentures are selected by terminal digit or other similar system, such
      particulars as may be sufficient to identify the Debentures so selected;
      and



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	 	(c) 	
      in all cases, the principal amounts of such
      Debentures.



In the event that all Debentures to be redeemed are registered
Debentures, publication shall not be required. 

5.4     
Debentures Due on Redemption Dates 

        
   Notice having been given as aforesaid, all the Debentures so
called for redemption shall thereupon be and become due and payable at the
Redemption Price, together with accrued interest to but excluding the Redemption
Date, on the Redemption Date specified in such notice, in the same manner and
with the same effect as if it were the date of maturity specified in such
Debentures, anything therein or herein to the contrary notwithstanding, and from
and after such Redemption Date, if the monies necessary to redeem such
Debentures shall have been deposited as provided in Section 5.5 and affidavits
or other proof satisfactory to the Trustee as to the publication and/or mailing
of such notices shall have been lodged with it, interest upon the Debentures
shall cease. If any question shall arise as to whether any notice has been given
as above provided and such deposit made, such question shall be decided by the
Trustee whose decision shall be final and binding upon all parties in interest.


5.5      Deposit
of Redemption Monies 

         
  Redemption of Debentures shall be provided for by the Corporation
depositing with the Trustee or any paying agent to the order of the Trustee, on
or before 11:00 a.m. (Vancouver time) on the Business Day immediately preceding
the Redemption Date specified in such notice, such sums of money, as may be
sufficient to pay the Redemption Price of the Debentures so called for
redemption, plus accrued and unpaid interest thereon up to but excluding the
Redemption Date, provided the Corporation may elect to satisfy this requirement
by providing the Trustee with an electronic transfer of funds or a cheque
postdated to the Redemption Date for such amounts required under this Section
5.5. The Corporation shall also deposit with the Trustee a sum of money
sufficient to pay any charges or expenses which may be incurred by the Trustee
in connection with such redemption. Every such deposit shall be irrevocable.
From the sums so deposited, the Trustee shall pay or cause to be paid to the
holders of such Debentures so called for redemption, upon surrender of such
Debentures, the principal, premium (if any) and interest (if any) to which they
are respectively entitled on redemption, net of any tax required to be deducted.
The Trustee shall have no obligation to disburse funds pursuant to this Section
5.5 unless it has received written confirmation satisfactory to it that the
funds have been deposited with it in sufficient amount to pay in full all
amounts due and payable on the applicable Redemption Date. The Trustee shall, if
any funds are received by it in the form of uncertified cheques, be entitled to
delay the time for release of such funds until such uncertified cheques shall be
determined to have cleared the financial institution upon which the same are
drawn. For the avoidance of doubt, if any funds are received by the Trustee in
the form of uncertified cheques, the Corporation’s payment obligation under this
Section 5.5 shall not be treated as satisfied until such uncertified cheques
shall be determined to have cleared the financial institution upon which the
same are drawn. 

5.6      Failure
to Surrender Debentures Called for Redemption 

         
  In case the holder of any Debenture so called for redemption shall
fail on or before the Redemption Date so to surrender such holder’s Debenture,
or shall not within such time accept payment of the redemption monies payable,
or give such receipt therefor, if any, as the Trustee may require, such
redemption monies may be set aside in trust, without interest, either in the
deposit department of the Trustee or in a chartered bank, and such setting aside
shall for all purposes be deemed a payment to the Debentureholder of the sum so
set aside and, to that extent, the Debenture shall thereafter not be considered
as outstanding hereunder and the Debentureholder shall have no other right
except to receive, 

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without interest, payment out of the monies so paid and
deposited, upon surrender and delivery up of such holder’s Debenture for the
Redemption Price, of such Debenture. In the event that any money required to be
deposited hereunder with the Trustee or any depository or paying agent on
account of principal, premium, if any, or interest, if any, on Debentures issued
hereunder shall remain so deposited for a period of six years from the
Redemption Date, then such monies shall at the end of such period be paid over
or delivered over by the Trustee or such depository or paying agent to the
Corporation on its demand, and thereupon the Trustee shall not be responsible to
Debentureholders for any amounts owing to them and subject to applicable law,
thereafter the holder of a Debenture in respect of which such money was so
repaid to the Corporation shall have no rights in respect thereof except to
obtain payment of the money or certificates due from the Corporation, subject to
any limitation period provided by the laws of British Columbia. Notwithstanding
the foregoing, the Trustee will pay any remaining funds prior to the expiry of
six years after the Redemption Date to the Corporation upon receipt from the
Corporation, or one of its Subsidiaries, of an unconditional letter of credit
from a Canadian chartered bank in an amount equal to or in excess of the amount
of the remaining funds. If the remaining funds are paid to the Corporation prior
to the expiry of six years after the Redemption Date, and such funds or any
portion thereof are claimed by a Debentureholder after the date of such payment
of the remaining funds to the Corporation but prior to six years after the
Redemption Date, then the Trustee shall provide to the Corporation written
notice of such claim and the Corporation shall promptly deposit with the Trustee
funds in the amount necessary to satisfy such claim. 

5.7      Cancellation
of Debentures Redeemed 

        
   Subject to the provisions of Section 5.8 as to Debentures
redeemed or purchased in part, all Debentures redeemed and paid under this
Article 5 shall forthwith be delivered to the Trustee and cancelled and no
Debentures shall be issued in substitution therefor. 

5.8     
Purchase of Debentures by the Corporation 

      
     Unless otherwise specifically provided with
respect to a particular series of Debentures, the Corporation may, if it is not
at the time in default hereunder, at any time and from time to time, purchase
Debentures in the market (which shall include purchases from or through an
investment dealer or a firm holding membership on a recognized stock exchange)
or by tender or by contract, at any price. All Debentures so purchased may, at
the option of the Corporation, be delivered to the Trustee and shall be
cancelled and no Debentures shall be issued in substitution therefor. 

       
    If, upon an invitation for tenders, more Debentures are
tendered at the same lowest price that the Corporation is prepared to accept,
the Debentures to be purchased by the Corporation shall be selected by the
Trustee on a pro rata basis, from the Debentures tendered by each
tendering Debentureholder who tendered at such lowest price. For this purpose
the Trustee may make, and from time to time amend, regulations with respect to
the manner in which Debentures may be so selected, and regulations so made shall
be valid and binding upon all Debentureholders, notwithstanding the fact that as
a result thereof one or more of such Debentures become subject to purchase in
part only. The holder of a Debenture of which a part only is purchased, upon
surrender of such Debenture for payment, shall be entitled to receive, without
expense to such holder, one or more new Debentures for the unpurchased part so
surrendered, and the Trustee shall certify and deliver such new Debenture or
Debentures upon receipt of the Debenture so surrendered. 

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ARTICLE 6 
COVENANTS OF THE CORPORATION 

      
     The Corporation covenants and agrees with the
Trustee for the benefit of the Trustee and the Debentureholders, that so long as
any Debentures remain outstanding: 

6.1     
To Pay Principal and Interest 

        
   The Corporation, for value received, acknowledges and confirms
itself to be indebted to the Debentureholders and promises to pay to the
Debentureholders the principal amount of Debentures and any accrued interest
thereon, outstanding from time to time, and any Default Interest, if any, in
accordance with the terms of this Indenture and the Debenture. 

6.2     
To Carry on Business 

       
    Subject to the express provisions hereof, the
Corporation will carry on and conduct its business in a proper and efficient
manner; and, subject to the express provisions hereof, it will do or cause to be
done all things necessary to preserve and keep in full force and effect its
corporate existence and rights. 

6.3     
To Pay Trustee’s Remuneration 

         
  The Corporation will pay the Trustee reasonable remuneration for its
services as Trustee hereunder and will repay to the Trustee on demand all monies
which shall have been paid by the Trustee in connection with the execution of
the trusts hereby created and such monies including the Trustee’s remuneration,
shall be payable out of any funds coming into the possession of the Trustee in
priority to payment of any principal of the Debentures or interest or premium
thereon. The said remuneration shall continue to be payable until the trusts
hereof be finally wound up and whether or not the trusts of this Indenture shall
be in the course of administration by or under the direction of a court of
competent jurisdiction. 

6.4      To
Provide Financial Statements 

       
    The Corporation will furnish to the Trustee, upon
request, a copy of all financial statements, and the report, if any, of the
Corporation’s Auditors thereon, which are delivered to the holders of Common
Shares. 

6.5     
Trustee May Perform Covenants 

      
     If the Corporation shall fail to perform any of
its covenants contained in this Indenture, the Trustee may advise the
Debentureholders of such failure or may itself perform any of the covenants
capable of being performed by it, but shall be under no obligation to do so or
to notify the Debentureholders. If any such covenant requires the expenditure or
advance of money, the Trustee may make such expenditure or advance with its own
funds, or with money borrowed by or advanced to it for such purposes, and all
sums so expended or advanced shall be repayable by the Corporation in the manner
provided in Section 6.3. No such performance, expenditure or advance shall be
deemed to relieve the Corporation from any default hereunder. 

6.6      Compliance
Certificate 

        
   The Corporation shall deliver to the Trustee, within one
hundred twenty (120) days after the end of each fiscal year of the Corporation,
an Officer’s Certificate, stating whether or not to the best 

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knowledge of the signer thereof the Corporation is in default
in the performance and observance of any of the terms, provisions and conditions
of this Indenture (without regard to any period of grace or requirement of
notice provided hereunder) and, if the Corporation shall be in default,
specifying all such defaults and the nature and the status thereof of which the
signer may have knowledge. 

         
  The Corporation will deliver to the Trustee, forthwith upon becoming
aware of any Event of Default, an Officers’ Certificate specifying with
particularity such Event of Default and further stating what action the
Corporation has taken, is taking or proposes to take with respect thereto. 

6.7      Keep
Proper Books 

         
  The Corporation shall keep or cause to be kept proper books of
record and account, in accordance with generally accepted accounting principles.


6.8      Maintenance
of Office or Agency 

        
   The Corporation will maintain an office or agency in the City
of Vancouver, where the Debentures may be surrendered for registration of
transfer or exchange or for presentation for payment or for conversion,
redemption or repurchase and where notices and demands to or upon the
Corporation in respect of the Debentures and this Indenture may be served. As of
the date of this Indenture, such office is located at the office of the Trustee
specified in Section 11.3 hereof and, at any other time, at such other address
as the Trustee may designate from time to time by notice to the Corporation. The
Corporation will give prompt written notice to the Trustee of the location, and
any change in the location, of such office or agency not designated or appointed
by the Trustee. If at any time the Corporation shall fail to maintain any such
required office or agency or shall fail to furnish the Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the address of the Trustee specified in Section 11.3 hereof, or such
other address as to which the Trustee may give notice to the Corporation. 

      
     The Corporation may also from time to time
designate co-registrars and one or more offices or agencies where the Debentures
may be presented or surrendered for any or all such purposes and may from time
to time rescind such designations. The Corporation will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency. 

      
     So long as the Trustee is the registrar, the
Trustee agrees to mail, or cause to be mailed, the notices set forth in Section
12.2. If co-registrars have been appointed in accordance with this Section, the
Trustee shall mail such notices only to the Corporation and the Holders of
Debentures it can identify from its records. 

6.9     
Maintenance of Properties 

           
The Corporation will use commercially reasonable efforts to cause all material
properties used or useful in the conduct of its business or the business of any
Subsidiary to be maintained in such condition as is necessary in the sole
judgment of the Corporation to properly carry on the business of the
Corporation; provided that nothing in this Section shall prevent the Corporation
from discontinuing the operation or maintenance of any of such properties if
such discontinuance is, in the judgement of the Corporation, desirable in the
conduct of its business or the business of any Subsidiary.

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6.10    Payment of Taxes and
Other Claims 

           
The Corporation will use commercially reasonable efforts to pay or discharge, or
cause to be paid or discharged, before the same may become delinquent (i) all
taxes, assessments and governmental charges levied or imposed on the Corporation
or any Subsidiary and (ii) any reasonable claims against the Corporation or a
Subsidiary for unpaid expenses; provided that the Corporation shall not be
required to pay or discharge, or cause to be paid or discharged any such tax,
assessment, charge or reasonable claim (A) if the failure to do so will not have
a material adverse impact on the Corporation, or (B) if the amount,
applicability or validity is being contested in good faith by the Corporation or
a Subsidiary.

6.11    Government Approvals
and Licenses; Compliance with Law 

           
The Corporation shall use commercially reasonable efforts to, and shall cause
its Subsidiaries to use commercially reasonable efforts to, obtain and maintain
all material governmental approvals, authorizations, consents, permits,
concessions and licences as are necessary to conduct the business of the
Corporation in compliance with all laws, regulations, orders, judgements and
decrees of any governmental body, except to the extent that failure so to
obtain, maintain and comply would not reasonably be expected to have a material
adverse effect on the business or results of operations of the Corporation and
its Subsidiaries as take as a whole.   

6.12    Use of Proceeds

           
The Corporation will not use the net proceeds from the sale of the Initial
Debentures, in any amount, for any purpose other than for acquiring mining
equipment, developing underground access to mineralized zones and upgrading
certain plan circuits at the Corporation’s Guanacevi and Guanajuato mines in
Mexico, and for general corporate purposes.

6.13    Debentures
to Rank Senior 

       
    The Debentures and all other obligations of the
Corporation under this Indenture are and at all times shall remain direct and
unsecured obligations of the Corporation ranking pari passu in right and
priority of payment, without any preference or priority among themselves and at
least equally with all other present and future unsecured Indebtedness (actual
or contingent) of the Corporation (except as otherwise required by law). 

6.14    Maintenance of Insurance

        
   The Corporation shall use commercially reasonable efforts to,
and shall cause its Subsidiaries to use commercially reasonable efforts to,
maintain insurance policies covering such risks, in such amounts and with such
terms consistent with industry standards for similar companies engaged in a
similar business to the Corporation. 

ARTICLE 7
 DEFAULT 

7.1     
Event of Default 

           
Each of the following events (whatever the reason such events and whether it
shall be voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of 

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 any court or any order, rule or regulation of any
administrative or governmental body) constitutes, and is herein sometimes
referred to as, an “Event of Default”: 

	 	(a) 	
      failure to make payment of any amount due or secured
      hereunder or under the Debentures, including, but not limited to, the
      principal of, premium, if any, or interest on any of the Debenture and the
      Redemption Price which failure continues for a period of twenty (20)
      days

	 	 	 
	 	(b) 	
      failure to deliver when due all cash, Common Shares,
      Warrants or other consideration deliverable upon conversion of the
      Debentures which failure continues for a period of twenty (20)
  days;

	 	 	 
	 	(c) 	
      default in the observance or performance of any covenant
      or condition of this Indenture or the Debenture by the Corporation for a
      period of twenty (20) days after notice in writing has been given by the
      Trustee to the Corporation specifying such default and requiring the
      Corporation to remedy such default;

	 	 	 
	 	(d) 	
      if a decree or order of a court having jurisdiction is
      entered adjudging the Corporation a bankrupt or insolvent under the
      Bankruptcy and Insolvency Act (Canada) or any other bankruptcy,
      insolvency or analogous laws, or issuing sequestration or process of
      execution against, or against any substantial part of, the property of the
      Corporation, or appointing a receiver of, or of any substantial part of,
      the property of the Corporation or ordering the winding-up or liquidation
      of its affairs, and any such decree or order continues unstayed and in
      effect for a period of sixty (60) days;

	 	 	 
	 	(e) 	
      if the Corporation institutes proceedings to be
      adjudicated a bankrupt or insolvent, or consents to the institution of
      bankruptcy or insolvency proceedings against it under the Bankruptcy
      and Insolvency Act (Canada) for such bankruptcy or insolvency or any
      other bankruptcy, insolvency or analogous laws, or consents to the filing
      of any such petition or to the appointment of a receiver of, or of any
      substantial part of, the property of the Corporation or makes a general
      assignment for the benefit of creditors, or admits in writing its
      inability to pay its debts generally as they become due;

	 	 	 
	 	(f) 	
      if a resolution is passed for the winding-up or
      liquidation of the Corporation except in the course of carrying out or
      pursuant to a transaction in respect of which the conditions of Section
      9.1 are duly observed and performed;

	 	 	 
	 	(g) 	
      if, after the date of this Indenture, any proceedings
      with respect to the Corporation are taken with respect to a compromise or
      arrangement, with respect to creditors of the Corporation generally, under
      the applicable legislation of any jurisdiction;

	 	 	 
	 	(h) 	
      any event or condition occurs that results in any Senior
      Secured Indebtedness in an aggregate amount of at least Cdn.$4,000,000 (or
      its then equivalent in any other currency) becoming due prior to its
      scheduled maturity; provided that this Section 7.1(h) shall not apply to
      Senior Security that becomes due as a result of the voluntary sale or
      transfer of property or assets securing such Senior Security;

	 	 	 
	 	(i) 	
      any event or condition occurs that results in any
      Indebtedness in an aggregate amount of at least Cdn.$4,000,000 (or its
      then equivalent in any other currency) that ranks pari passu with the
      Debentures becoming due prior to its scheduled maturity within eighteen
      months after the date of this Indenture;



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	 	(j) 	
      one or more judgments for the payment of money in an
      amount in excess of Cdn.$4,000,000 (or its then equivalent in any other
      currency) in the aggregate is rendered against the Corporation or any one
      of its Subsidiaries and they have not (i) provided for its discharge in
      accordance with its terms within 20 days from the date of entry thereof,
      or (ii) procured a stay of execution thereof within 20 days from the date
      of entry thereof and within such period, or such longer period during
      which execution of such judgment has not been stayed, appealed such
      judgment and caused the execution thereof to be stayed during such appeal,
      provided that if enforcement and/or realization proceedings are lawfully
      commenced in respect thereof in the interim, such grace period will cease
      to apply;

	 	 	 
	 	(k) 	
      the Indenture and the Debenture shall be declared by any
      governmental authority to be illegal or
unenforceable.



Upon the occurrence of an Event of Default (other than an Event
of Default specified in Section 7.1 (d), (e), (f) or (g)), the Trustee may, in
its discretion, and shall, upon receipt of a request in writing signed by the
holders of not less than twenty-five (25%) percent of the aggregate principal
amount of the Debentures then outstanding, subject to the provisions of Section
7.3, by notice in writing to the Corporation declare the principal of and
accrued and unpaid interest on all Debentures then outstanding and all other
monies outstanding hereunder to be due and payable and the same shall forthwith
become immediately due and payable to the Trustee, anything in this Indenture or
in the Debenture contained to the contrary notwithstanding. If an Event of
Default specified in Section 7.1 (d), (e), (f) or (g) occurs, the principal of
and accrued and unpaid interest on all Debentures then outstanding and all other
monies outstanding hereunder to be immediately and automatically due and payable
without the necessity of further action. 

       
    The Corporation shall forthwith
pay to the Trustee for the benefit of the Debentureholders such principal,
accrued and unpaid interest and interest on amounts in default on such Debenture
and all other monies outstanding hereunder, together with subsequent interest at
the rate borne by the Debentures on such principal, interest and such other
monies from the date of such declaration until payment is received by the
Trustee, such subsequent interest to be payable at the times and places and in
the manner mentioned in and according to the tenor of the Debentures. Such
payment when made shall be deemed to have been made in discharge of the
Corporation’s Obligations hereunder and any monies so received by the Trustee
shall be applied in the manner provided in Section 7.6. 

       
    For greater certainty, for the
purposes of this Section 7.1, a series of Debentures shall be in default in
respect of an Event of Default if such Event of Default relates to a default in
the payment of principal, premium, if any, or interest on the Debentures of such
series in which case references to Debentures in this Section 7.1, refer to
Debentures of that particular series. 

       
    For purposes of this Article 7,
where the Event of Default refers to an Event of Default with respect to a
particular series of Debentures as described in this Section 7.1, then this
Article 7 shall apply mutatis mutandis to the Debentures of such series
and references in this Article 7 to the Debentures shall mean Debentures of the
particular series and references to the Debentureholders shall refer to the
Debentureholders of the particular series, as applicable, unless the context
otherwise requires. 

7.2      Notice
of Events of Default 

       
    If an Event of Default shall occur and be continuing the
Trustee shall, within thirty (30) days after it receives written notice of the
occurrence of such Event of Default, give notice of such Event of Default to the
Debentureholders in the manner provided in Section 11.2, provided that
notwithstanding the 

-39-




foregoing, unless the Trustee shall have been requested to do
so by the holders of at least 66 2/3% of the aggregate principal amount of the
Debentures then outstanding or in the case of default in the payment of
principal of or interest on any of the Debenture, the Trustee shall not be
required to give such notice if the Trustee in good faith shall have determined
that the withholding of such notice is in the best interests of the
Debentureholders and shall have so advised the Corporation in writing. 

7.3      Waiver
of Default 

           
Upon the happening of any Event of Default hereunder: 

	 	(a) 	
      the holders of greater than 50% of the aggregate
      principal amount of the Debentures then outstanding shall have the power
      (in addition to the powers exercisable by Extraordinary Resolution, as
      hereinafter provided) by requisition in writing to instruct the Trustee to
      waive any Event of Default and to cancel any declaration made by the
      Trustee pursuant to Section 7.1 and the Trustee shall thereupon waive the
      Event of Default and cancel such declaration, or either, upon such terms
      and conditions as shall be prescribed in such requisition; provided that,
      notwithstanding the foregoing, if the Event of Default has occurred by
      reason of the non-observance or non-performance by the Corporation of any
      covenant applicable only to one or more series of Debentures, then the
      holders of more than 50% of the principal amount of the outstanding
      Debentures of that series shall be entitled to exercise the foregoing
      power and the Trustee shall so act and it shall not be necessary to obtain
      a waiver from the holders of any other series of Debentures; and

	 	 	 
	 	(b) 	
      the Trustee, so long as it has not become bound to
      declare the principal and interest on the Debentures then outstanding to
      be due and payable, or to obtain or enforce payment of the same, shall
      have power to waive any Event of Default if, in the Trustee’s opinion, the
      same shall have been cured or adequate satisfaction made therefor, and in
      such event to cancel any such declaration theretofore made by the Trustee
      in the exercise of its discretion, upon such terms and conditions as the
      Trustee may deem advisable.



       
    No such act or omission either of the Trustee or of the
Debentureholders shall extend to or be taken in any manner whatsoever to affect
any subsequent Event of Default or the rights resulting therefrom. 

7.4     
Enforcement by the Trustee 

	 	(a) 	
      Subject to the provisions of Section 7.3 and to the
      provisions of any Extraordinary Resolution that may be passed by the
      Debentureholders, if the Corporation shall fail to pay to the Trustee,
      forthwith after the same shall have been declared to be due and payable
      under Section 7.1, the principal of and interest on all Debentures then
      outstanding, together with any other amounts due hereunder, the Trustee
      may in its discretion and shall upon receipt of a request in writing
      signed by the holders of not less than twenty-five (25%) percent of the
      aggregate principal amount of the Debentures then outstanding and upon
      being funded and indemnified to its reasonable satisfaction against all
      costs, expenses and liabilities to be incurred, proceed in its name as
      trustee hereunder to obtain or enforce payment of such principal of and
      premium (if any) and interest on all the Debentures then outstanding
      together with any other amounts due hereunder by such proceedings
      authorized by this Indenture or by law or equity as the Trustee in such
      request shall have been directed to take, or if such request contains no
      such direction, or if the Trustee shall act without such request, then by
      such proceedings authorized by this Indenture or by suit at law or in
      equity as the Trustee shall deem expedient.



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	 	(b) 	
      The Trustee shall be entitled and empowered, either in
      its own name or as trustee of an express trust, or as attorney-in-fact for
      the holders of Debentures, or in any one or more of such capacities, to
      file such proof of debt, amendment of proof of debt, claim, petition or
      other document as may be necessary or advisable in order to have the
      claims of the Trustee and of the holders of Debentures allowed in any
      insolvency, bankruptcy, liquidation or other judicial proceedings relative
      to the Corporation or its creditors or relative to or affecting its
      property. The Trustee is hereby irrevocably appointed (and the successive
      respective holders of Debentures by taking and holding the same shall be
      conclusively deemed to have so appointed the Trustee) the true and lawful
      attorney-in- fact of the respective holders of Debentures with authority
      to make and file in the respective names of the holders of Debentures or
      on behalf of the holders of Debentures as a class, subject to deduction
      from any such claims of the amounts of any claims filed by any of the
      holders of Debentures themselves, any proof of debt, amendment of proof of
      debt, claim, petition or other document in any such proceedings and to
      receive payment of any sums becoming distributable on account thereof, and
      to execute any such other papers and documents and to do and perform any
      and all such acts and things for and on behalf of such holders of the
      Debentures, as may be necessary or advisable in the opinion of the
      Trustee, in order to have the respective claims of the Trustee and of the
      holders of the Debentures against the Corporation or its property allowed
      in any such proceeding, and to receive payment of or on account of such
      claims; provided, however, that subject to Section 7.3, nothing contained
      in this Indenture shall be deemed to give to the Trustee, unless so
      authorized by Extraordinary Resolution, any right to accept or consent to
      any plan of reorganization or otherwise by action of any character in such
      proceeding to waive or change in any way any right of any
      Debentureholder.

	 	 	 
	 	(c) 	
      The Trustee shall also have the power at any time and
      from time to time to institute and maintain such suits and proceedings as
      it may be advised shall be necessary or advisable to preserve and protect
      its interests and the interest of the Debentureholders.

	 	 	 
	 	(d) 	
      All rights of action hereunder may be enforced by the
      Trustee without the possession of any of the Debentures or the production
      thereof on the trial or other proceedings relating thereto. Any such suit
      or proceeding instituted by the Trustee shall be brought in the name of
      the Trustee as trustee of an express trust, and any recovery of judgment
      shall be for the rateable benefit of the holders of the Debentures subject
      to the provisions of this Indenture. In any proceeding brought by the
      Trustee (and also any proceeding in which a declaratory judgment of a
      court may be sought as to the interpretation or construction of any
      provision of this Indenture, to which the Trustee shall be a party) the
      Trustee shall be held to represent all of the holders of the Debentures,
      and it shall not be necessary to make any holders of the Debentures
      parties to any such proceeding.



7.5     
No Suits by Debentureholders 

       
    No holder of any Debenture shall have any right to
institute any action, suit or proceeding at law or in equity for the purpose of
enforcing payment of the principal of or interest on the Debentures or for the
execution of any trust or power hereunder or for the appointment of a liquidator
or receiver or for a receiving order under the Bankruptcy and Insolvency Act
(Canada) or to have the Corporation wound up or to file or prove a claim in
any liquidation or bankruptcy proceeding or for any other remedy
hereunder, unless (a) such Debentureholder shall previously have given to the
Trustee written notice of the happening of an Event of Default hereunder; and
(b) the Debentureholders by Extraordinary Resolution or by written instrument
signed by the holders of at least twenty-five (25%) percent of the aggregate
principal amount of the Debentures then outstanding shall have made a request to
the Trustee and the 

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Trustee shall have been afforded reasonable opportunity either
itself to proceed to exercise the powers hereinbefore granted or to institute an
action, suit or proceeding in its name for such purpose; and (c) the
Debentureholders or any of them shall have furnished to the Trustee, when so
requested by the Trustee, sufficient funds and security and indemnity
satisfactory to it against the costs, expenses and liabilities to be incurred
therein or thereby; and (d) the Trustee shall have failed to act within a
reasonable time after such notification, request, funds, and offer of indemnity
and such notification, request, funds, and offer of indemnity are hereby
declared in every such case, at the option of the Trustee, to be conditions
precedent to any such proceeding or for any other remedy hereunder by or on
behalf of the holders of any Debentures. 

7.6     
Application of Monies by Trustee 

	 	(a) 	
      Except as herein otherwise expressly provided, any monies
      received by the Trustee from the Corporation pursuant to the foregoing
      provisions of this Article 7, or as a result of legal or other proceedings
      or from any trustee in bankruptcy or liquidator of the Corporation, shall
      be applied, together with any other monies in the hands of the Trustee
      available for such purpose, as follows:

	 	 	 	 
	 		(i) 	
      first, in payment or in reimbursement to the Trustee of
      its compensation, costs, charges, expenses, borrowings, advances or other
      monies furnished or provided by or at the instance of the Trustee in or
      about the execution of its trusts under, or otherwise in relation to, this
      Indenture, with interest thereon as herein provided;

	 	 	 	 
	 		(ii) 	
      second, but subject as hereinafter in this Section 7.6
      provided, in payment, rateably and proportionately to the holders of
      Debentures, of the principal of and accrued and unpaid interest and
      interest on amounts in default on the Debentures which shall then be
      outstanding in the priority of: (i) principal first and then (ii) accrued
      and unpaid interest and (iii) interest on amounts in default, unless
      otherwise directed by Extraordinary Resolution and in that case in such
      order or priority as between principal and interest as may be directed by
      such resolution; and

	 	 	 	 
	 		(iii) 	
      third, in payment of the surplus, if any, of such monies
      to the Corporation or its assigns;

	 	 	 	 
	 		
      provided, however, that no payment shall be made pursuant
      to subsection (a) above in respect of the principal or interest on any
      Debenture held, directly or indirectly, by or for the benefit of the
      Corporation or any Subsidiary of the Corporation (other than any Debenture
      pledged for value and in good faith to a person other than the Corporation
      or any Subsidiary of the Corporation but only to the extent of such
      person’s interest therein) except subject to the prior payment in full of
      the principal and interest on all Debentures which are not so
  held.

	 	 	 	 
	 	(b) 	
      The Trustee shall not be bound to apply or make any
      partial or interim payment of any monies coming into its hands if the
      amount so received by it, after reserving such amount as the Trustee may
      think necessary to provide for the payments mentioned in subsection (a),
      is insufficient to make a distribution of at least 2% of the aggregate
      principal amount of the outstanding Debentures, but it may retain the
      money so received by it and invest or deposit the same as provided in
      Section 12.8 until the money or the investments representing the same,
      with the income derived therefrom, together with any other monies for the
      time being under its control shall be sufficient for the said purpose or
      until



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it shall consider it advisable to
apply the same in the manner hereinbefore set forth. The foregoing shall,
however, not apply to a final payment in distribution hereunder. 

7.7      Distribution
of Proceeds 

           
Payments to holders of Debentures pursuant to subsection 7.6(a)(ii) shall be
made as follows: 

	 	(a) 	
      at least fifteen (15) days notice of every such payment
      shall be given in the manner provided in Section 11.2 specifying the time
      when and the place where the Debentures are to be presented and the amount
      of the payment and the application thereof as between principal, interest,
      or other liability under this Indenture to which it is to be
    applied;

	 	 	 
	 	(b) 	
      payment of any Debenture shall be made upon presentation
      of the Debenture at the place specified in such notice and any such
      Debenture thereby paid in full shall be surrendered, otherwise a
      memorandum of such payment shall be endorsed thereon; but the Trustee may
      in its discretion dispense with presentation and surrender for endorsement
      in any special case upon such indemnity being given to it and to the
      Corporation as the Trustee shall deem sufficient;

	 	 	 
	 	(c) 	
      after the date so fixed for payment specified in the
      notice, unless payment shall have been duly demanded and have been
      refused, the Debentureholders will be entitled to interest only on the
      balance (if any) of the principal monies, and interest (if any) due to
      them, respectively, on the Debentures, after deduction of the
      respective amounts payable in respect thereof on the day so fixed in the
      notice;



7.8     
Remedies Cumulative 

         
  No remedy herein conferred upon or reserved to the Trustee, or upon
or to the holders of Debentures is intended to be exclusive of any other remedy,
but each and every such remedy shall be cumulative and shall be in addition to
every other remedy given hereunder or now existing or hereafter to exist by law
or by equity. 

7.9      Judgment
Against the Corporation 

        
   The Corporation covenants and agrees with the Trustee that, in
case of any judicial or other proceedings to enforce the rights of the
Debentureholders, judgment may be rendered against it in favour of the
Debentureholders or in favour of the Trustee, as trustee for the
Debentureholders, for any amounts which may remain due in respect of the
Debentures and the interest thereon and any other monies owing hereunder. 

7.10    Immunity of Trustee
  and Others

          The
Debentureholders and the Trustee hereby waive and release any right, cause of
action or remedy now or hereafter existing in any jurisdiction against any past,
present or future officer or director of the Corporation, or holder of Common
Shares of the Corporation or of any successor thereto, for the payment of the
principal of or interest on any of the Debentures or on any covenant, agreement,
representation or warranty by the Corporation herein or in the Debentures
contained. 

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ARTICLE 8 
SATISFACTION AND DISCHARGE 

8.1      Cancellation
and Destruction 

      
     All Debentures shall forthwith after payment of
all obligations thereunder be delivered to the Trustee for payment and such
Debentures shall then be cancelled by it. All Debentures cancelled or required
to be cancelled under this or any other provision of this Indenture shall be
destroyed by the Trustee and, if required by the Corporation, the Trustee shall
furnish to the Corporation a destruction certificate setting out the designating
numbers of the Debentures so destroyed. 

8.2      Non-Presentation
of Debentures 

        
   In case the holder of any Debenture shall fail to present the
same for payment on the date on which the principal thereof or the interest
thereon or represented thereby becomes payable either at maturity or otherwise
or shall not accept payment on account thereof and give such receipt therefor,
if any, as the Trustee may require: 

	 	(a) 	
      the Corporation shall be entitled to pay to the Trustee
      and direct it to set aside; or

	 	 	 
	 	(b) 	
      in respect of monies in the hands of the Trustee which
      may or should be applied to the payment of the Debentures, the Corporation
      shall be entitled to direct the Trustee to set aside; or

	 	 	 
	 	(c) 	
      if the redemption was pursuant to notice given by the
      Trustee, the Trustee may itself set aside;



the principal or the interest, as the case may be, in trust to
be paid to the holder of such Debenture upon due presentation or surrender
thereof in accordance with the provisions of this Indenture; and thereupon the
principal or the interest payable on or represented by each Debenture in respect
whereof such monies have been set aside shall be deemed to have been paid and
the holder thereof shall thereafter have no right in respect thereof except that
of receiving delivery and payment of the monies so set aside by the Trustee upon
due presentation and surrender thereof, subject always to the provisions of
Section 8.3. 

8.3     
Repayment of Unclaimed Monies 

       
    Any monies set aside under Section 8.2 and not claimed
by and paid to holders of Debentures as provided in Section 8.2 within six (6)
years after the date of such setting aside shall be repaid and delivered to the
Corporation by the Trustee on demand and thereupon the Trustee shall be released
from all further liability with respect to such monies and thereafter the
holders of the Debentures in respect of which such monies were so repaid to the
Corporation shall have no rights in respect thereof except to obtain payment and
delivery of the monies from the Corporation subject to any applicable limitation
period provided by the laws of the Province of British Columbia. 

8.4      Discharge


         
  The Trustee shall at the written request of the Corporation release
and discharge this Indenture and execute and deliver such instruments as it
shall be advised by Counsel are requisite for that purpose and to release the
Corporation from its covenants contained herein (other than the provisions
relating to the indemnification of the Trustee), upon proof being given to the
reasonable satisfaction of the Trustee that the principal of and interest
(including interest on amounts in default, if any), on all the Debentures 

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and all other monies payable hereunder have been paid or
satisfied or that all the Debentures having matured or having been duly called
for redemption, payment of the principal of and interest (including interest on
amounts in default, if any) on such Debentures and of all other monies payable
hereunder has been duly and effectually provided for in accordance with the
provisions of this Indenture. 

ARTICLE 9 
SUCCESSORS 

9.1     
Certain Requirements 

         
  The Corporation shall not enter into any transaction or series of
transactions (including by way of arrangement, re-organization, consolidation,
amalgamation, merger, liquidation, transfer, sale or otherwise) whereby all or
substantially all of its undertaking, property and assets would become the
property of any other person (herein called a “Successor”), unless: 

	 	(a) 	
      prior to or contemporaneously with the consummation of
      such transaction the Corporation and the Successor shall have executed
      such instruments and done such things as, in the opinion of Counsel, are
      necessary or advisable to establish that upon the consummation of such
      transaction:

	 	 	 	 
	 		(i) 	
      the Successor will have assumed all the covenants and
      obligations of the Corporation under this Indenture in respect of the
      Debentures;

	 	 	 	 
	 		(ii) 	
      the Debentures will be valid and binding obligations of
      the Successor entitling the holders thereof, as against the Successor, to
      all the rights of Debentureholders under this Indenture; and

	 	 	 	 
	 		(iii) 	
      in the case of an entity organized otherwise than under
      the laws of the Province of British Columbia, the Successor shall attorn
      to the jurisdiction of the courts of the Province of British
    Columbia;

	 	 	 	 
	 		(iv) 	
      if holder of Debentures would otherwise be entitled to
      receive, upon conversion of the Debentures, any Ineligible Consideration
      (as defined in subsection 4.3(c)), such holders shall not be entitled to
      receive such Ineligible Consideration but the Successor shall have the
      right (at the sole option of the Successor) to deliver either such
      Ineligible Consideration or prescribed securities for the purposes of
      clause 212(1)(b)(vii)(E) of the Income Tax Act (Canada), as it
      applied for the 2007 taxation year, with a market value equal to the
      market value of such Ineligible Consideration.

	 	 	 	 
	 	(b) 	
      such transaction or series of transactions, in the
      opinion of Counsel, shall be on such terms as to substantially preserve
      and not impair any of the rights and powers of the Trustee or of the
      Debentureholders hereunder; and

	 	 	 	 
	 	(c) 	
      the Corporation shall deliver, or cause to be delivered,
      to the Trustee, an Officer’s Certificate stating that such transaction or
      series of transactions comply with this covenant and all conditions
      precedent herein provided for related to such transaction or series of
      transactions have been satisfied;

	 	 	 	 
	 	(d) 	
      no condition or event shall exist as to the Corporation
      (at the time of such transaction) or the Successor (immediately after such
      transaction) and after giving full effect thereto
or



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immediately after the Successor shall
become liable to pay the principal monies, premium, if any, interest and other
monies due or which may become due hereunder, which constitutes or would
constitute an Event of Default hereunder; 

provided however, that the provisions of this Section 9.1 shall
not apply in respect of any reorganization, reconstruction, amalgamation,
merger, arrangement, liquidation, transfer, sale or otherwise, involving the
Corporation and its Subsidiaries whereby there is no effective change in control
or effective change in ownership of the assets, undertakings and property of the
Corporation or its Subsidiaries. 

9.2      Vesting
of Powers in Successor 

         
  Whenever the conditions of Section 9.1 shall have been duly observed
and performed, any Successor formed by or resulting from such transaction shall
succeed to, and be substituted for, and may exercise every right and power of
the Corporation under this Indenture with the same effect as though the
Successor had been named as the Corporation herein and the Corporation shall be
relieved of all obligations and covenants under this Indenture and the
Debentures forthwith upon the Corporation delivering to the Trustee an opinion
of Counsel to the effect that the conditions of Section 9.1 will have been duly
observed and performed on completion of the transaction. The Trustee will, at
the expense of the Successor, execute any documents which it may be advised by
Counsel are necessary or advisable for effecting or evidencing such release and
discharge. 

ARTICLE 10 
MEETINGS OF DEBENTUREHOLDERS 

10.1    Right to Convene
Meeting 

           
The Trustee or the Corporation, pursuant to a resolution of its board of
directors may at any time and from time to time, and the Trustee shall, on
receipt of a written request of the Corporation or a written request signed by
the holders of not less than twenty-five (25%) percent of the aggregate
principal amount of the Debentures then outstanding and upon receiving funding
and being indemnified to its reasonable satisfaction by the Corporation or by
the Debentureholders signing such request against the costs which may be
incurred in connection with the calling and holding of such meeting, convene a
meeting of the Debentureholders. In the event of the Trustee failing within
thirty (30) days after receipt of any such request and such funding or indemnity
to give notice convening a meeting, the Corporation or such Debentureholders, as
the case may be, may convene such meeting. Every such meeting shall be held in
the City of Vancouver or at such other place as may be approved or determined by
the Trustee. 

10.2    Notice of Meetings

	 	(a) 	
      At least twenty-one (21) days notice of any meeting shall
      be given to the Debentureholders in the manner provided in Section 11.2
      and a copy of such notice shall be sent by post to the Trustee, unless the
      meeting has been called by it, and the Corporation, unless the meeting has
      been called by it. Such notice shall state the time when and the place
      where the meeting is to be held and shall state briefly the general nature
      of the business to be transacted thereat and it shall not be necessary for
      any such notice to set out the terms of any resolution to be proposed or
      any of the provisions of this Article 10. The accidental omission to give
      notice of a meeting to any holder of Debentures shall not invalidate any
      resolution passed at any such meeting. A Debentureholder may waive notice
      of the meeting in writing either before or after the
  meeting.



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	 	(b) 	
      If the business to be transacted at any meeting by
      Extraordinary Resolution or otherwise, or any action to be taken or power
      exercised by instrument in writing under Section 10.15, especially affects
      the rights of holders of Debentures of one or more series in a manner or
      to an extent differing in any material way from that in or to which the
      rights of holders of Debentures of any other series are affected
      (determined as provided in Subsections 10.2(c) and 10.2(d)),
  then:




	 	(i) 	
      a reference to such fact, indicating each series of
      Debentures in the opinion of the Trustee (or the person calling the
      meeting) so especially affected (hereinafter referred to as the
      “especially affected series”) shall be made in the notice of such
      meeting, and in any such case the meeting shall be and be deemed to be and
      is herein referred to as a “Serial Meeting”; and

	 	 	 
	 	(ii) 	
      the holders of Debentures of an especially affected
      series shall not be bound by any action taken at a Serial Meeting or by
      instrument in writing under Section 10.15 unless in addition to compliance
      with the other provisions of this Article 10:




	 	(A) 	
      at such Serial Meeting: (I) there are Debentureholders
      present in person or by proxy and representing at least 20% in principal
      amount of the Debentures then outstanding of such series, subject to the
      provisions of this Article 10 as to quorum at adjourned meetings; and (II)
      the resolution is passed by the affirmative vote of the holders of more
      than 50% (or in the case of an Extraordinary Resolution not less than 66
      2/3%) of the principal amount of the Debentures of such series then
      outstanding who voted on the resolution; or

	 	 	 
	 	(B) 	
      in the case of action taken or power exercised by
      instrument in writing under Section 10.15, such instrument is signed in
      one or more counterparts by the holders of not less than 66 2/3% in
      principal amount of the Debentures of such series then
  outstanding.




	 	(c) 	
      Subject to Subsection 10.2(d), the determination as to
      whether any business to be transacted at a meeting of Debentureholders, or
      any action to be taken or power to be exercised by instrument in writing
      under Section 10.15, especially affects the rights of the Debentureholders
      of one or more series in a manner or to an extent differing in any
      material way from that in or to which it affects the rights of
      Debentureholders of any other series (and is therefore an especially
      affected series) shall be determined by an opinion of Counsel, which shall
      be binding on all Debentureholders, the Trustee and the Corporation for
      all purposes hereof.

	 	 	 	 
	 	(d) 	
      A proposal:

	 	 	 	 
	 		(i) 	
      to extend the maturity of Debentures of any particular
      series or to reduce the principal amount thereof, the rate of interest or
      redemption premium thereon or to impair any conversion right
    thereof;

	 	 	 	 
	 		(ii) 	
      to modify or terminate any covenant or agreement which by
      its terms is effective only so long as Debentures of a particular series
      are outstanding; or



-47-





	 	(iii) 	
      to reduce with respect to Debentureholders of any
      particular series any percentage stated in this Section 10.2 or any of
      Sections 10.4, 10.12 and 10.15;



shall be deemed to especially affect
the rights of the Debentureholders of such series in a manner differing in a
material way from that in which it affects the rights of holders of Debentures
of any other series, whether or not a similar extension, reduction, modification
or termination is proposed with respect to Debentures of any or all other
series. 

10.3    Chairman

      
     Some person, who need not be a Debentureholder,
nominated in writing by the Trustee shall be chairman of the meeting and if no
person is so nominated, or if the person so nominated is not present within
fifteen (15) minutes from the time fixed for the holding of the meeting, the
Debentureholders present in person or by proxy shall choose some person present
to be chairman. 

10.4    Quorum

       
    Subject to the provisions of Section 10.12, at any
meeting of the Debentureholders a quorum shall consist of Debentureholders
present in person or by proxy and representing at least 20% of the aggregate
principal amount of the outstanding Debentures and, if the meeting is a Serial
Meeting, at least 20% of the Debentures then outstanding of each especially
affected series. If a quorum of the Debentureholders shall not be present within
thirty (30) minutes from the time fixed for holding any meeting, the meeting, if
summoned by the Debentureholders or pursuant to a request of the
Debentureholders, shall be dissolved, but in any other case the meeting shall be
adjourned to the same day in the next week (unless such day is not a Business
Day in which case the meeting shall be adjourned to the next following Business
Day thereafter) at the same time and place and no notice shall be required to be
given in respect of such adjourned meeting. At the adjourned meeting, the
Debentureholders present in person or by proxy shall, subject to the provisions
of Section 10.12, form a quorum and may transact the business for which the
meeting was originally convened notwithstanding that they may not represent 20%
of the aggregate principal amount of the outstanding Debentures or of the
Debentures then outstanding of each especially affected series. Any business may
be brought before or dealt with at an adjourned meeting which might have been
brought before or dealt with at the original meeting in accordance with the
notice calling the same. No business shall be transacted at any meeting unless
the required quorum be present at the commencement of business. 

10.5    Power to Adjourn

      
     The chairman of any meeting at which a quorum of
the Debentureholders is present may, with the consent of the holders of a
majority of the aggregate principal amount of the Debentures represented thereat
adjourn any such meeting and no notice of such adjournment need be given except
such notice, if any, as the meeting may prescribe. 

10.6    Show of Hands

      
     Every question submitted to a meeting
shall, subject to Section 10.7, be decided in the first place by a majority of
the votes given on a show of hands. At any such meeting, 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 the fact. The
chairman of any meeting shall be entitled, both on a show of hands and on a
poll, to vote in respect of the Debentures, if any, held by him. 

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10.7    Poll


       
    On every Extraordinary Resolution, and on any other
question submitted to a meeting when demanded by the chairman or by one or more
Debentureholders or proxies for Debentureholders, a poll shall be taken in such
manner and either at once or after an adjournment as the chairman shall direct.
Questions other than Extraordinary Resolutions shall, if a poll be taken, be
decided by the votes of the holders of a majority of the aggregate principal
amount of the Debentures and of each especially affected series, if applicable,
represented at the meeting and voted on the poll. 

10.8    Voting

      
     On a show of hands every person who is present and
entitled to vote, whether as a Debentureholder or as proxy for one or more
Debentureholders or both, shall have one vote. On a poll each Debentureholder
present in person or represented by a proxy duly appointed by an instrument in
writing shall be entitled to one vote in respect of each $1,000 principal amount
of Debentures of which he shall then be the holder. A proxy need not be a
Debentureholder. In the case of joint registered holders of a Debenture, any one
of them present in person or by proxy at the meeting may vote in the absence of
the other or others but in case more than one of them be present in person or by
proxy, they shall vote together in respect of the Debentures of which they are
joint registered holders. 

10.9    Regulations

      
     The Trustee, or the Corporation with the approval
of the Trustee, may from time to time make and from time to time vary or revoke
such regulations as it shall from time to time think fit providing for and
governing: 

	 	(a) 	
      the form of the instrument appointing a proxy, which
      shall be in writing, and the manner in which the same shall be executed
      and the production of the authority of any person signing on behalf of a
      Debentureholder;

	 	 	 
	 	(b) 	
      the deposit of instruments appointing proxies at such
      place as the Trustee, the Corporation or the Debentureholder convening the
      meeting, 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 any
      adjournment thereof by which the same must be deposited; and

	 	 	 
	 	(c) 	
      the deposit of instruments appointing proxies at some
      approved place or places other than the place at which the meeting is to
      be held and enabling particulars of such instruments appointing proxies to
      be mailed, faxed or sent by other electronic means before the meeting to
      the Corporation or to the Trustee at the place where the same is to be
      held and for the voting of proxies so deposited as though the instruments
      themselves were produced at the meeting.



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


-49-




10.10  Persons Entitled to Attend
Meetings 

      
     The Corporation and the Trustee, by their
respective officers and directors, the Auditors of the Corporation, and the
legal advisers of the Corporation, of the Trustee or of any Debentureholder may
attend any meeting of the Debentureholders, but shall have no vote in such
capacity. Notwithstanding the foregoing, if any such persons are holders of
Debentures, such persons may vote such Debentures in accordance with the terms
of this Indenture. 

10.11  Powers Exercisable by Extraordinary
  Resolution

        
   In addition to the powers conferred upon them by law, a
meeting of the Debentureholders shall have the following powers exercisable from
time to time by Extraordinary Resolution: 

	 	(a) 	
      power to authorize the Trustee and the Corporation to
      grant extensions of time for payment of any principal or interest on the
      Debentures, whether or not the principal or interest, the payment of which
      is extended, is at the time due or overdue;

	 	 	 
	 	(b) 	
      power to approve any modification, abrogation,
      alteration, compromise or arrangement of the rights of the
      Debentureholders or the Trustee against the Corporation, or against its
      property, when such rights arise under this Indenture or under the
      Debentures or otherwise;

	 	 	 
	 	(c) 	
      power to assent to any modification of or change in or
      addition to or omission from the provisions contained in this Indenture or
      any Debenture which shall be agreed to by the Corporation and to authorize
      the Trustee to concur in and execute any indenture supplemental hereto
      embodying any modification, change, addition or omission;

	 	 	 
	 	(d) 	
      power to approve any scheme for the reconstruction or
      reorganization of the Corporation or for the consolidation, amalgamation
      or merger of the Corporation with any other person or for the sale,
      leasing, transfer or other disposition of all or substantially all of the
      undertaking, property and assets of the Corporation or any part thereof,
      provided that no such approval shall be necessary in respect of any such
      transaction if the provisions of Section 9.1 shall have been complied
      with;

	 	 	 
	 	(e) 	
      power to direct or authorize the Trustee to exercise any
      power, right, remedy or authority given to it by this Indenture in any
      manner specified in any such Extraordinary Resolution or to refrain from
      exercising any such power, right, remedy or authority;

	 	 	 
	 	(f) 	
      power to waive and direct the Trustee to waive, any
      default hereunder or cancel any declaration made by the Trustee pursuant
      to Section 7.1 either unconditionally or upon any condition specified in
      such Extraordinary Resolution;

	 	 	 
	 	(g) 	
      power to restrain any Debentureholder from taking or
      instituting any suit, action or proceeding for the purpose of enforcing
      payment of the principal or interest on the Debentures, or for the
      execution of any trust or power hereunder;

	 	 	 
	 	(h) 	
      power to direct any Debentureholder who, as such, has
      brought any action, suit or proceeding to stay or discontinue or otherwise
      deal with the same upon payment, if the taking of such suit, action or
      proceeding shall have been permitted by Section 7.5, of the costs, charges
      and expenses reasonably and properly incurred by such Debentureholder in
      connection therewith;



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	 	(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 Common Shares or other
      securities of the Corporation;

	 	 	 
	 	(j) 	
      power to appoint a committee with power and authority
      (subject to such limitations, if any, as may be prescribed in the
      resolution) to exercise, and to direct the Trustee to exercise, on behalf
      of the Debentureholders, such of the powers of the Debentureholders as are
      exercisable by Extraordinary Resolution or other resolution as shall be
      included in the resolution appointing the committee. The resolution making
      such appointment may provide for payment of the expenses and disbursements
      of and compensation to such committee. Such committee shall consist of
      such number of persons as shall be prescribed in the resolution appointing
      it and the members need not be themselves Debentureholders. Every such
      committee may elect its chairman and may make regulations respecting its
      quorum, the calling of its meetings, the filling of vacancies occurring in
      its number and its procedure generally. Such regulations may provide that
      the committee may act at a meeting at which a quorum is present or may act
      by minutes signed by the number of members thereof necessary to constitute
      a quorum. All acts of any such committee within the authority delegated to
      it shall be binding upon all Debentureholders. Neither the committee nor
      any member thereof shall be liable for any loss arising from or in
      connection with any action taken or omitted to be taken by them in good
      faith;

	 	 	 
	 	(k) 	
      power to remove the Trustee from office and to appoint a
      new Trustee or Trustees;

	 	 	 
	 	(l) 	
      power to authorize the Corporation and the Trustee to
      grant extensions of time for payment of interest on any of the Debentures,
      whether or not the interest the payment in respect of which is extended,
      is at the time due or overdue;

	 	 	 
	 	(m) 	
      power to sanction the exchange of the Debentures for or
      the conversion thereof into shares, or other securities or obligations of
      the Corporation or of any other person formed or to be formed; provided
      that any such change will not result in the holders being entitled to
      receive Ineligible Consideration as defined in (paragraph
  4.3(c));

	 	 	 
	 	(n) 	
      power to authorize the distribution in specie of any
      shares or securities received pursuant to a transaction authorized under
      the provisions of subsection 10.11(m); and

	 	 	 
	 	(o) 	
      power to amend, alter or repeal any Extraordinary
      Resolution previously passed or sanctioned by the Debentureholders or by
      any committee appointed pursuant to this
Indenture.



Notwithstanding the foregoing
provisions of this Section 10.11 none of such provisions shall in any manner
allow or permit any amendment, modification, abrogation or addition to the
provisions of Article 3 which could reasonably be expected to detrimentally
affect the rights, remedies or recourse of the priority of the holders of the
Senior Secured Indebtedness. 

10.12   Meaning of “Extraordinary
  Resolution”

	 	(a) 	
      The expression “Extraordinary Resolution” when
      used in this Indenture means, subject as hereinafter in this Article 10
      provided, a resolution proposed to be passed as an Extraordinary
      Resolution at a meeting of Debentureholders (including an adjourned
      meeting) duly convened for the purpose and held in accordance with the
      provisions of



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      this Article at which the holders of not less than 20% of
      the aggregate principal amount of the Debentures then outstanding, and if
      the meeting is a Serial Meeting, at which holders of not less than 20% of
      the principal amount of the Debentures then outstanding of each especially
      affected series, are present in person or by proxy and passed by the
      affirmative vote of the holders of not less than 66 2/3% of the principal
      amount of the Debentures, and if the meeting is a Serial Meeting by the
      affirmative vote of the holders of not less than 66 2/3% of each
      especially affected series, in each case present or represented by proxy
      at the meeting and voted on a poll upon such resolution.

	 	 	 
	 	(b) 	
      If, at any such meeting, the holders of not less than 20%
      of the aggregate principal amount of the Debentures outstanding and, if
      the meeting is a Serial Meeting, the holders of not less than 20% of the
      principal amount of the Debentures then outstanding of each especially
      affected series, in each case are not present in person or by proxy within
      thirty (30) minutes after the time appointed for the meeting, then the
      meeting, if convened by or on the requisition of Debentureholders, shall
      be dissolved, but in any other case it shall stand adjourned to such date
      being not less than fourteen (14) nor more than sixty (60) days later, and
      to such place and time as may be determined by the chairman. Not less than
      ten (10) days notice shall be given of the time and place of such
      adjourned meeting in the manner provided in Section 11.2. Such notice
      shall state that at the adjourned meeting the Debentureholders present in
      person or by proxy shall form a quorum. At the adjourned meeting, the
      Debentureholders present in person or by proxy shall form a quorum and may
      transact the business for which the meeting was originally convened and a
      resolution proposed at such adjourned meeting and passed by the
      affirmative vote of the holders of not less than 66 2/3% of the principal
      amount of the Debentures and, if the meeting is a Serial Meeting, by the
      affirmative vote of the holders of not less than 66 2/3% of the principal
      amount of the Debentures of each especially affected series, in each case
      present or represented by proxy at the meeting voted upon a poll shall be
      an Extraordinary Resolution within the meaning of this Indenture,
      notwithstanding that the holders of not less than 20% of the aggregate
      principal amount of the Debentures then outstanding, and if the meeting is
      a Serial Meeting, holders of not less than 20% of the principal amount of
      the Debentures then outstanding of each especially affected series, are
      not present in person or by proxy at such adjourned meeting.

	 	 	 
	 	(c) 	
      Votes on an Extraordinary Resolution shall always be
      given on a poll and no demand for a poll on an Extraordinary Resolution
      shall be necessary.



10.13   Powers
Cumulative 

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

10.14   Minutes

           
Minutes of all resolutions and proceedings at every meeting as aforesaid shall
be made and duly entered in books to be from time to time provided for that
purpose by the Trustee at the expense of the Corporation, and any such minutes
as aforesaid, if signed by the chairman of the meeting at which such resolutions
were passed or proceedings had, or by the chairman of the next succeeding
meeting of the Debentureholders, shall be prima facie evidence of the
matters therein stated and, until the contrary is proved, every such meeting, in
respect of the proceedings of which minutes shall have been made, shall 

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be deemed to have been duly held and convened, and all
resolutions passed thereat or proceedings taken thereat to have been duly passed
and taken. 

10.15   Instruments in Writing

       
    All actions which may be taken and all powers
that may be exercised by the Debentureholders at a meeting held as hereinbefore
in this Article 10 provided may also be taken and exercised by the holders of 66
2/3% of the aggregate principal amount of all the outstanding Debentures and, if
the meeting at which such actions might be taken would be a Serial Meeting, by
holders of 66 2/3% of the principal amount of the Debentures then outstanding of
each especially affected series, by an instrument in writing signed in one or
more counterparts and the expression “Extraordinary Resolution” when used
in this Indenture shall include an instrument so signed. 

10.16   Binding Effect of Resolutions

      
     Every resolution and every Extraordinary
Resolution passed in accordance with the provisions of this Article 10 at a
meeting of Debentureholders shall be binding upon all the Debentureholders,
whether present at or absent from such meeting, and every instrument in writing
signed by Debentureholders in accordance with Section 10.15 shall be binding
upon all the Debentureholders, whether signatories thereto or not, and each and
every Debentureholder and the Trustee (subject to the provisions for its
indemnity herein contained) shall be bound to give effect accordingly to every
such resolution, Extraordinary Resolution and instrument in writing. 

10.17   Evidence of Rights of Debentureholders

	 	(a) 	
      Any request, direction, notice, consent or other
      instrument which this Indenture may require or permit to be signed or
      executed by the Debentureholders may be in any number of concurrent
      instruments of similar tenor and may be signed or executed by such
      Debentureholders.

	 	 	 
	 	(b) 	
      The Trustee may, in its discretion, require proof of
      execution in cases where it deems proof desirable or may accept such other
      proof as it shall consider proper.



10.18   Concerning Serial
Meetings 

        
   If in the opinion of Counsel any business to be transacted at
any meeting, or any action to be taken or power to be exercised by instrument in
writing under Section 10.15, does not adversely affect the rights of the holders
of Debentures of one or more series, the provisions of this Article 10 shall
apply as if the Debentures of such series were not outstanding and no notice of
any such meeting need be given to the holders of Debentures of such series.
Without limiting the generality of the foregoing, a proposal to modify or
terminate any covenant or agreement which is effective only so long as
Debentures of a particular series are outstanding shall be deemed not to
adversely affect the rights of the holders of Debentures of any other series.


10.19   Concerning the Initial
  Debentures

         
  Notwithstanding anything to the contrary contained in this
Indenture, with respect to the Initial Debentures, without unanimous consent
from holders of the Initial Debentures, the Corporation or the Trustee shall
not: 

	 	(a) 	
      extend the Maturity Date (as defined in subsection
      2.4(a)) thereof;



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	 	(b) 	
      reduce the rate or extend the time of payment of interest
      thereon;

	 	 	 
	 	(c) 	
      reduce the principal amount thereof or reduce any amount
      payable on redemption thereof;

	 	 	 
	 	(d) 	
      impair the right of any holder of Initial Debentures to
      institute suit for the payment thereof;

	 	 	 
	 	(e) 	
      make the principal thereof or interest thereon payable in
      any coin or currency other than that provided in the Initial
      Debentures;

	 	 	 
	 	(f) 	
      subject to compliance with applicable securities laws,
      impair the right to convert the Initial Debentures into Units or reduce
      the number of Units or any other property receivable by a holder of
      Initial Debenture upon conversion, subject to the terms set forth herein,
      including Article 4;

	 	 	 
	 	(g) 	
      modify any of the provisions of this Section 10.19 or
      Article 7 as they apply to the Initial Debentures;

	 	 	 
	 	(h) 	
      change any obligation of the Corporation to maintain an
      office or agency in the places and for the purposes set forth in Article
      6;

	 	 	 
	 	(i) 	
      subordinate the Initial Debentures to any other
      obligation of the Corporation other than to Senior Secured Indebtedness;
      or

	 	 	 
	 	(j) 	
      reduce the percentage of Initial Debentures, the holders
      of which are required to consent to any of the foregoing actions and the
      actions stated in the paragraph below.



      
     Notwithstanding anything to the contrary contained
in this Indenture and subject to this Section 10.19, if the business to be
transacted at any meeting by Extraordinary Resolution affects the rights of
holders of Initial Debentures in any aspects, then at any such meeting of the
Debentureholders, a quorum shall consist of holders of the Initial Debentures
present in person or by proxy and representing at least 50.01% of the aggregate
principal amount of the outstanding Initial Debentures and any action must be
approved by the affirmative vote of the holders of no less than 50.01% of the
principal amount of the outstanding Initial Debentures. 

ARTICLE 11 
NOTICES 

11.1    Notice to
Corporation 

         
  Any notice to the Corporation under the provisions of this Indenture
shall be valid and effective if given in writing and, within normal business
hours, either personally delivered, sent by prepaid registered or receipted
mail, sent by same day or next day courier or sent by telecopier to the
Corporation at 300 - 700 West Pender Street, Vancouver, British Columbia, V6C
1G8, Facsimile (604) 685-9744, and a copy delivered to Blake, Cassels &
Graydon LLP, Barristers & Solicitors, Attn: Kathleen Keilty, 595 Burrard
Street, Suite 2600, Three Bentall Centre, Vancouver, British Columbia, V7X 1L3,
Facsimile (604) 631-3309. Any notice sent by registered and receipted mail or by
courier shall be deemed to have been effectively given three days following the
mailing thereof and any notice sent by telecopier or personal delivery shall be
deemed to be received on the day of sending the telecopy or of the personal
delivery. The Corporation may from time to time notify the Trustee in writing of
a change of address which 

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thereafter, until changed by like notice, shall be the address
of the Corporation for all purposes of this Indenture. 

11.2    Notice to Debentureholders

          
 All notices to be given hereunder with respect to the Debentures shall be
deemed to be validly given to the holders thereof if personally delivered or
sent by mail, postage prepaid, by letter or circular addressed to such holders
at their post office addresses appearing in any of the registers hereinbefore
mentioned and shall be deemed to have been effectively given three days
following the day of mailing (or in the case of personal delivery, on the date
of such delivery). Accidental error or omission in giving notice or accidental
failure to mail notice to any Debentureholder or the inability of the
Corporation to give or mail any notice due to anything beyond the reasonable
control of the Corporation shall not invalidate any action or proceeding founded
thereon. 

         
  If any notice given in accordance with the foregoing paragraph would
be unlikely to reach the Debentureholders to whom it is addressed in the
ordinary course of post by reason of an interruption in mail service, whether at
the place of dispatch or receipt or both, the Corporation shall give such notice
by publication at least once in the City of Vancouver and the City of New York
(or in such of those cities as, in the opinion of the Trustee, is sufficient in
the particular circumstances), each such publication to be made in a daily
newspaper of general circulation in the designated city. 

        
   Any notice given to Debentureholders by publication shall be
deemed to have been given on the day on which publication shall have been
effected at least once in each of the newspapers in which publication was
required. 

          
 All notices with respect to any Debenture may be given to whichever one of
the holders thereof (if more than one) is named first in the registers
hereinbefore mentioned, and any notice so given shall be sufficient notice to
all holders of and persons interested in such Debenture. 

11.3    Notice to Trustee

      
     Any notice to the Trustee under the provisions of
this Indenture shall be valid and effective if given in writing and either
personally delivered, sent by prepaid registered or receipted mail, sent by same
day or next day courier or sent by telecopier to the Trustee at its principal
office at 510 Burrard Street Vancouver, British Columbia, V3C 3B9, Attention:
General Manager, Corporate Trust, Facsimile: (604) 661-9403. Any notice sent by
registered and receipted mail or by courier shall be deemed to have been
effectively given three days following the mailing thereof and any notice sent
by telecopier or personal delivery shall be deemed to be received on the day of
sending the telecopy or of the personal delivery. 

11.4    Mail Service Interruption

       
    If by reason of any interruption of mail
service, actual or threatened, any notice to be given to the Trustee or the
Corporation would reasonably be considered unlikely to reach its destination by
the time notice by mail is deemed to have been given pursuant to Section 11.1 or
11.3, as applicable, then such notice shall be valid and effective only if
delivered at the appropriate address or sent to the appropriate telecopier
number in accordance with 11.3 or Section 11.1, as applicable. 

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ARTICLE 12 
CONCERNING THE TRUSTEE 

12.1    No Conflict of
Interest 

      
     The Trustee represents to the Corporation that at
the date of execution and delivery by it of this Indenture there exists no
material conflict of interest in the role of the Trustee as a fiduciary
hereunder but if, notwithstanding the provisions of this Section 12.1, such a
material conflict of interest exists, the validity and enforceability of this
Indenture, and the securities issued hereunder, shall not be affected in any
manner whatsoever by reason only that such material conflict of interest exists
but the Trustee shall, within 90 days after ascertaining that it has a material
conflict of interest, either eliminate such material conflict of interest or
resign in the manner and with the effect specified in Section 12.2. 

12.2    Replacement of Trustee

       
    The Trustee may resign its trust and be discharged from
all further duties and liabilities hereunder by giving to the Corporation sixty
(60) days’ notice in writing or such shorter notice as the Corporation may
accept as sufficient. If at any time a material conflict of interest exists in
the Trustee’s role as a fiduciary hereunder the Trustee shall, within thirty
(30) days after ascertaining that such a material conflict of interest exists,
either eliminate such material conflict of interest or resign in the manner and
with the effect specified in this Section 12.2. The validity and enforceability
of this Indenture and of the Debentures issued hereunder shall not be affected
in any manner whatsoever by reason only that such material conflict of interest
exists. In the event of the Trustee resigning or being removed or being
dissolved, becoming bankrupt, going into liquidation or otherwise becoming
incapable of acting hereunder, the Corporation shall forthwith appoint a new
Trustee unless a new Trustee has already been appointed by the Debentureholders.
Failing such appointment by the Corporation, the retiring Trustee or any
Debentureholder may apply to a Judge of the Court of Queen’s Bench of British
Columbia, on such notice as such Judge may direct, for the appointment of a new
Trustee but any new Trustee so appointed by the Corporation or by the Court
shall be subject to removal as aforesaid by the Debentureholders. Any new
Trustee appointed under any provision of this Section shall be a corporation
authorized to carry on the business of a trust corporation in the Province of
British Columbia. On any new appointment the new Trustee shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named herein as Trustee. 

      
     Any corporation into which the Trustee may be
merged or with which it may be consolidated or amalgamated, or any corporation
resulting from any merger, consolidation or amalgamation to which the Trustee
shall be a party, shall be the successor Trustee under this Indenture without
the execution of any instrument or any further act. Nevertheless, upon the
written request of the successor Trustee or of the Corporation, the Trustee
ceasing to act shall execute and deliver an instrument assigning and
transferring to such successor Trustee, upon the trusts herein expressed, all of
the rights, powers and trusts of the Trustee so ceasing to act, and shall duly
assign, transfer and deliver all property and money held by such Trustee to the
successor Trustee so appointed in its place. Should any deed, conveyance or
instrument in writing from the Corporation be required by any new Trustee for
more fully and certainly vesting in and confirming to it such estates,
properties, rights, powers and trusts, then any and all such deeds, conveyances
and instruments in writing shall on request of said new Trustee, be made,
executed, acknowledged and delivered by the Corporation. 

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12.3    Duties of
Trustee 

       
    In the exercise of the rights, duties and obligations
prescribed or conferred by the terms of this Indenture, the Trustee shall act
honestly and in good faith and exercise that degree of care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances.


12.4    Reliance Upon Declarations,
  Opinions, etc.

      
     In the exercise of its rights, duties and
obligations hereunder, the Trustee may, if acting in good faith, rely, as to the
truth of the statements and accuracy of the opinions expressed therein, upon
statutory declarations, opinions, reports or certificates furnished pursuant to
any covenant, condition or requirement of this Indenture or required by the
Trustee to be furnished to it in the exercise of its rights and duties
hereunder, if the Trustee examines such statutory declarations, opinions,
reports or certificates and determines that they comply with Section 12.5, if
applicable, and with any other applicable requirements of this Indenture.
Without restricting the foregoing, the Trustee may rely on an opinion of Counsel
satisfactory to the Trustee notwithstanding that it is delivered by a solicitor
or firm which acts as solicitors for the Corporation. 

12.5    Evidence and Authority
  to Trustee, Opinions, etc.

      
     The Corporation shall furnish to the Trustee
evidence of compliance with the conditions precedent provided for in this
Indenture relating to any action or step required or permitted to be taken by
the Corporation or the Trustee under this Indenture or as a result of any
obligation imposed under this Indenture, including without limitation, the
certification and delivery of Debentures hereunder, the satisfaction and
discharge of this Indenture and the taking of any other action to be taken by
the Trustee at the request of or on the application of the Corporation,
forthwith if and when such evidence is required by any other Section of this
Indenture to be furnished to the Trustee in accordance with the terms of this
Section 12.5 or, when the Trustee, in the exercise of its rights and duties
under this Indenture, gives the Corporation written notice requiring it to
furnish such evidence in relation to any particular action or obligation
specified in such notice. 

Such evidence shall consist of: 

	 	(a) 	
      an Officer’s Certificate stating that any such condition
      precedent has been complied with in accordance with the terms of this
      Indenture;

	 	 	 
	 	(b) 	
      in the case of a condition precedent, compliance with
      which is, by the terms of this Indenture, made subject to review or
      examination by a solicitor, an opinion of Counsel that such condition
      precedent has been complied with in accordance with the terms of this
      Indenture; and

	 	 	 
	 	(c) 	
      in the case of any such condition precedent, compliance
      with which is subject to review or examination by auditors or accountants,
      an opinion or report of the Auditors of the Corporation whom the Trustee
      for such purposes hereby approves, that such condition precedent has been
      complied with in accordance with the terms of this
  Indenture.



            Whenever
such evidence relates to a matter other than the certificates and delivery of
Debentures and the satisfaction and discharge of this Indenture, and except as
otherwise specifically provided herein, such evidence may consist of a report or
opinion of any solicitor, auditor, accountant, engineer or appraiser or any
other person whose qualifications give authority to a statement made by him,
provided that if such report or opinion is furnished by a director, officer or
employer of the Corporation it shall be 

-57-




in the form of a statutory declaration. Such evidence shall be,
so far as appropriate, in accordance with the immediately preceding paragraph of
this Section 12.5. 

            Each
statutory declaration, certificate, opinion or report with respect to compliance
with a condition precedent provided for in this Indenture shall include: (a) a
statement by the person giving the evidence that he has read and is familiar
with those provisions of this Indenture relating to the condition precedent in
question; (b) a brief statement of the nature and scope of the examination or
investigation upon which the statements or opinions contained in such evidence
are based; (c) a statement that, in the belief of the person giving such
evidence, he has made such examination or investigation as is necessary to
enable him to make the statements or give the opinions contained or expressed
therein; and (d) a statement whether in the opinion of such person the
conditions precedent in question have been complied with or satisfied. 

            The
Corporation shall furnish to the Trustee annually, within one hundred-and-twenty
(120) days of the Corporation’s fiscal year end, and at any time if the Trustee
reasonably so requires, a certificate that the Corporation has complied with all
covenants, conditions or other requirements contained in this Indenture, the
non-compliance with which would, with the giving of notice or the lapse of time,
or both, or otherwise, constitute an Event of Default, or if such is not the
case, specifying the covenant, condition or other requirement which has not been
complied with and giving particulars of such non-compliance. The Corporation
shall, whenever the Trustee so requires, furnish the Trustee with evidence by
way of statutory declaration, opinion, report or certificate as specified by the
Trustee as to any action or step required or permitted to be taken by the
Corporation or as a result of any obligation imposed by this Indenture. 

12.6    Officer’s Certificate
  as Evidence

            Except
as otherwise specifically provided or prescribed by this Indenture, whenever in
the administration of the provisions of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
omitting any action hereunder, the Trustee, if acting in good faith, may rely
upon an Officer’s Certificate. 

12.7    Experts, Advisers
  and Agents

            The
Trustee may: 

	 	(a) 	
      employ or retain and act on the opinion or advice of or
      information obtained from any solicitor, auditor, valuer, engineer,
      surveyor, appraiser or other expert, whether obtained by the Trustee or by
      the Corporation, or otherwise, and shall not be liable for acting, or
      refusing to act, in good faith on any such opinion or advice and may pay
      proper and reasonable compensation for all such legal and other advice or
      assistance as aforesaid; and

	 	 	 
	 	(b) 	
      employ such agents and other assistants as it may
      reasonably require for the proper discharge of its duties hereunder, and
      may pay reasonable remuneration for all services performed for it (and
      shall be entitled to receive reasonable remuneration for all services
      performed by it) in the discharge of the trusts hereof and compensation
      for all disbursements, costs and expenses made or incurred by it in the
      discharge of its duties hereunder and in the management of the trusts
      hereof any solicitors employed or consulted by the Trustee may, but need
      not be, solicitors for the Corporation.



-58-




12.8    Investment of Monies
Held by Trustee 

            Unless
otherwise provided in this Indenture any funds held by the Trustee under the
trusts of this Indenture shall be deposited in a trust account in the name of
the Trustee and the Corporation shall receive the Trustee’s prevailing rate for
all monies held by it, as the same may change from time to time. 

12.9    Trustee Not Ordinarily
  Bound

            Except
as provided in Section 7.2 and as otherwise specifically provided herein, the
Trustee shall not, subject to Section 12.3, be bound to give notice to any
person of the execution hereof, nor to do, observe or perform or see to the
observance or performance by the Corporation of any of the Obligations herein
imposed upon the Corporation or of the covenants on the part of the Corporation
herein contained, nor in any way to supervise or interfere with the conduct of
the Corporation’s business, unless the Trustee shall have been required to do so
in writing by the holders of not less than 66 2/3% of the aggregate principal
amount of the Debentures then outstanding or by any Extraordinary Resolution of
the Debentureholders passed in accordance with the provisions contained in
Article 10, and then only after it shall have been funded and indemnified to its
satisfaction against all actions, proceedings, claims and demands to which it
may render itself liable and all costs, charges, damages and expenses which it
may incur by so doing. 

12.10   Trustee Not Required to
  Give Security

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

12.11   Trustee Not Bound to Act
  on Corporation’s Request

            Except
as otherwise specifically provided in this Indenture, the Trustee shall not be
bound to act in accordance with any direction or request of the Corporation or
of the board of directors of the Corporation until a duly authenticated copy of
the instrument or resolution containing such direction or request shall have
been delivered to the Trustee, and the Trustee shall be empowered to act upon
any such copy purporting to be authenticated and believed by the Trustee to be
genuine. 

12.12   Conditions Precedent to
  Trustee’s Obligations to Act Hereunder

            The
obligation of the Trustee to commence or continue any act, action or proceeding
for the purpose of enforcing the rights of the Trustee and of the
Debentureholders hereunder shall be conditional upon the Debentureholders
furnishing, when required by notice in writing by the Trustee, sufficient funds
to commence or continue such act, action or proceeding and indemnity reasonably
satisfactory to the Trustee to protect and hold harmless the Trustee against the
costs, charges and expenses and liabilities to be incurred thereby and any loss
or damage it may suffer by reason thereof. 

            None
of the provisions contained in this Indenture shall require the Trustee 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 unless indemnified as aforesaid. 

            The
Trustee may, before commencing or at any time during the continuance of any such
act, action or proceeding require the Debentureholders at whose instance it is
acting to deposit with the Trustee the Debentures held by them for which
Debentures the Trustee shall issue receipts. 

-59-




12.13   Authority to Carry on
Business 

            The
Trustee represents to the Corporation that at the date of execution and delivery
by it of this Indenture it is authorized to carry on the business of a trust
corporation in the Province of British Columbia but if, notwithstanding the
provisions of this Section 12.13, it ceases to be so authorized to carry on
business, the validity and enforceability of this Indenture and the securities
issued hereunder shall not be affected in any manner whatsoever by reason only
of such event but the Trustee shall, within ninety (90) days after ceasing to be
authorized to carry on the business of a trust corporation in the Province of
British Columbia either become so authorized or resign in the manner and with
the effect specified in Section 12.2. 

12.14   Acceptance of Trust

            The
Trustee hereby accepts the trusts in this Indenture declared and provided for
and agrees to perform the same upon the terms and conditions herein set forth
and to hold all rights, privileges and benefits conferred hereby and by law in
trust for the various persons who shall from time to time be Debentureholders,
subject to all the terms and conditions herein set forth. 

12.15   Indemnity of Trustee

	 	(a) 	
      The Corporation shall pay to the Trustee from time to
      time compensation for its services hereunder as agreed separately by the
      Corporation and the Trustee, and shall pay or reimburse the Trustee upon
      its request for all expenses, disbursements and advances reasonably
      incurred or made by the Trustee in the administration or execution of its
      duties under this Indenture (including the reasonable and documented
      compensation and disbursements of its Counsel and all other advisers and
      assistants not regularly in its employ), both before any default hereunder
      and thereafter until all duties of the Trustee under this Indenture shall
      be finally and fully performed. The Trustee’s compensation shall not be
      limited by any law on compensation of a trustee of an express
  trust.

	 	 	 
	 	(b) 	
      The Corporation hereby indemnifies and saves harmless the
      Trustee and each of its directors, officers, shareholders, representatives
      and employees (collectively, the “Indemnified Parties”) from and
      against any and all loss, damages, charges, expenses, claims, demands,
      actions or liability whatsoever (collectively, “Claims”) which may
      be brought against any of the Indemnified Parties or which any of them may
      suffer or incur as a result of or arising out of the performance of the
      Trustee’s duties and obligations hereunder provided that the Trustee
      complies with Section 12.3. This indemnity will survive the termination or
      discharge of this Indenture and the resignation or removal of the Trustee.
      The Trustee shall notify the Corporation promptly of any claim for which
      it may seek indemnity. The Corporation shall defend the claim and the
      Trustee shall co- operate in the defence. The Trustee may have separate
      counsel and the Corporation shall pay the reasonable fees and expenses of
      such Counsel. The Corporation need not pay for any settlement made without
      its consent, which consent must not be unreasonably withheld. This
      indemnity shall survive the resignation or removal of the Trustee or the
      discharge of this Indenture.

	 	 	 
	 	(c) 	
      The Corporation need not reimburse any expense or
      indemnify against any loss or liability incurred by the Trustee through
      its gross negligence, wilful misconduct or failure to act honestly or in
      good faith.



-60-




12.16   Satisfaction and Discharge
  of Indenture

	 	(a) 	
      The Corporation shall be deemed to have fully paid,
      satisfied and discharged all of the outstanding Debentures of any series
      and the Trustee, at the expense of the Corporation, shall execute and
      deliver proper instruments acknowledging the full payment, satisfaction
      and discharge of such Debentures, when, with respect to all of the
      outstanding Debentures of any series:

	 	 	 	 
	 		(i) 	
      the Corporation has paid, caused to be paid or made
      provisions to the satisfaction of the Trustee for the payment of all other
      sums payable with respect to all of such Debentures (together with all
      applicable expenses of the Trustee in connection with the payment of such
      Debentures); and

	 	 	 	 
	 		(ii) 	
      the Corporation has delivered to the Trustee an Officer’s
      Certificate stating that all conditions precedent herein provided relating
      to the payment, satisfaction and discharge of all such Debentures have
      been complied with.

	 	 	 	 
	 	(b) 	
      Upon the satisfaction of the conditions set forth in this
      Section 12.16 with respect to all of the outstanding Debentures, or all
      the outstanding Debentures of any series, as applicable, the terms and
      conditions of the Debentures, including the terms and conditions with
      respect thereto set forth in this Indenture (other than those contained in
      Article 2, Article 4 and Article 5 and the provisions of Article 1
      pertaining to the foregoing provisions, and the indemnities provided by
      the Corporation to the Trustee hereunder) shall no longer be binding upon
      or applicable to the Corporation.



12.17   Third Party
Interests 

         
  Each party to this Indenture hereby represents to the Trustee that
any account to be opened by, or interest to be held by the Trustee in connection
with this Indenture, for or to the credit of such party, 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 such party hereto agrees
to complete and execute forthwith a declaration in the Trustee’s prescribed form
as to the particulars of such third party. 

12.18   Not Bound to Act

       
    The Trustee 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 Trustee, 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 Trustee, 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 ten (10) days’ written
notice to the Corporation, provided (i) that the Trustee’s written notice shall
describe the circumstances of such non-compliance; and (ii) that if such
circumstances are rectified to the Trustee’s satisfaction within such ten (10)
day period, then such resignation shall not be effective. 

12.19   Withholding Obligation

       
    For greater certainty, the Trustee shall, as directed by
the Corporation, withhold, from any payment made to a holder of a Debenture
pursuant to the terms of this Indenture, the amount of any applicable taxes
required to be withheld in respect of such payment, and the Trustee shall remit
such 

-61-




withheld amounts to the appropriate governmental authority, as
and when required. For the purposes of determining the appropriate withholdings
to be made from any payment to be made to a holder of a Debenture, the
Corporation and the Trustee agree to co-operate and to provide each other with
any relevant information they have with respect to the holders of the
Debentures. 

ARTICLE 13 
SUPPLEMENTAL INDENTURES 

13.1    Supplemental
Indentures 

      
     From time to time the Trustee and, when authorized
by a resolution of its directors, the Corporation, may, and they shall when
required by this Indenture, execute, acknowledge and deliver by their proper
officers deeds or indentures supplemental hereto, which thereafter shall form
part hereof, for any one or more of the following purposes: 

	 	(a) 	
      providing for the issuance of Additional Debentures under
      this Indenture (but for greater certainty a supplemental indenture is not
      required for certain issuances of Additional Debentures set forth in this
      Indenture, including additional issuances of Initial Debentures pursuant
      to Section 2.4(l) hereof);

	 	 	 
	 	(b) 	
      adding to the covenants of the Corporation herein
      contained for the protection of the Debentureholders, or of the Debentures
      of any series, or providing for events of default in addition to those
      herein specified;

	 	 	 
	 	(c) 	
      making such provisions not inconsistent with this
      Indenture as may be necessary or desirable with respect to matters or
      questions arising hereunder, including the making of any modifications in
      the form of the Debentures which do not affect the substance thereof and
      which, in the opinion of the Trustee, relying on an opinion of Counsel,
      will not be prejudicial to the interests of the
Debentureholders;

	 	 	 
	 	(d) 	
      evidencing the succession, or successive successions, of
      others to the Corporation and the covenants of and Obligations assumed by
      any such successor in accordance with the provisions of this
    Indenture;

	 	 	 
	 	(e) 	
      giving effect to any Extraordinary Resolution passed as
      provided in Article 10; and

	 	 	 
	 	(f) 	
      for any other purpose not inconsistent with the terms of
      this Indenture, provided that in the opinion of the Trustee (relying on an
      opinion of Counsel) neither the rights of the Debentureholders nor the
      rights of the Trustee are prejudiced thereby.



      
     Unless the supplemental indenture requires the
consent or concurrence of Debentureholders or the holders of a particular series
of Debentures, as the case may be, by Extraordinary Resolution, the consent or
concurrence of Debentureholders or the holders of a particular series of
Debentures, as the case may be, shall not be required in connection with the
execution, acknowledgement or delivery of a supplemental indenture. The Trustee
may also, without the consent or concurrence of the Debentureholders or the
holders of a particular series of Debentures, as the case may be, by
supplemental indenture or otherwise, concur with the Corporation in making any
changes or corrections in this Indenture which it shall have been advised by
Counsel are required for the purpose of curing or correcting any ambiguity or
defective or inconsistent provisions or clerical omissions or mistakes or
manifest errors contained herein or in any deed or indenture supplemental or
ancillary hereto, provided that in the opinion 

-62-




of the Trustee, relying on an opinion of Counsel, the rights of
the Trustee and of the Debentureholders are not in any way prejudiced thereby.


ARTICLE 14 
EXECUTION AND FORMAL DATE 

14.1    Execution


            This
Indenture may be simultaneously executed in several counterparts, each of which
when so executed shall be deemed to be an original and such counterparts
together shall constitute one and the same instrument. 

14.2    Formal Date

            For
the purpose of convenience this Indenture may be referred to as bearing the
formal date of February 26, 2009, irrespective of the actual date of execution
hereof. 

            IN
  WITNESS whereof the parties hereto have executed these presents under their
  respective corporate seals and the hands of their proper officers in that
behalf. 

ENDEAVOUR SILVER CORP. 

By: /s/
  Dan
  Dickson                                       

                 
  Dan
  Dickson 

                 
  Chief Financial Officer 



COMPUTERSHARE TRUST COMPANY OF
  CANADA 

By: /s/ Karl Burgess                                        

By: /s/ Gabriel Ducharme                                

 

 

-63-




SCHEDULE “A” - FORM OF DEBENTURE 
To the annexed Trust
Indenture dated as of February 26, 2009 between 
Endeavour Silver Corp. and
Computershare Trust Company of Canada, as Trustee 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF
THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JUNE 27, 2009. 

THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION
HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE “1933 ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE CORPORATION. THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES. 

ENDEAVOUR SILVER CORP. 
(Incorporated under the laws
of British Columbia) 

	No. •	CDN$  •


10% SUBORDINATED UNSECURED CONVERTIBLE REDEEMABLE
DEBENTURE 

          ENDEAVOUR
  SILVER CORP. (the “Corporation”) for value received
  hereby acknowledges itself indebted and, subject to the provisions of the trust
  indenture (the “Indenture”) dated as of February 26, 2009 between
  the Corporation and Computershare Trust Company of Canada (the “Trustee”),
  promises to pay to the registered holder hereof, [name] or [address]
  on the Maturity Date (as defined herein) or on such earlier date as the principal
  amount hereof may become due in accordance with the provisions of the Indenture
  the principal sum of $ • in lawful money of Canada on presentation and
  surrender of this Initial Debenture at the main branch of the Trustee in Vancouver,
  British Columbia in accordance with the terms of the Indenture and, subject
  as hereinafter provided, to pay interest on the principal amount hereof from
  the date hereof, or from the last Interest Payment Date to which interest shall
  have been paid or made available for payment hereon, whichever is later, at
  the rate of 10% per annum, in like money, in arrears in quarterly instalments
  (less any tax required by law to be deducted) on April 15, July 15, October
  15 and January 15 in each year commencing on April 15, 2009 and the last payment
  (representing interest payable from and including the last Interest Payment
  Date up to but excluding the Maturity Date, and any other accrued and unpaid
  interest, if any) to fall due on the Maturity Date and, should the Corporation
  at any time make default in the payment of any principal or interest, to pay
  interest on the amount in default at the same rate plus five percent (5%), compounded
  quarterly. For certainty, the first interest payment will include interest accrued
  from February 26, 2009 to, but excluding April 15, 2009, which shall be equal
  to $13.61111 for each principal amount of Initial Debenture. 

          Interest
hereon shall be payable by cheque mailed by prepaid ordinary mail to the
registered holder hereof or by electronic transfer of funds to the registered
holder hereof and, subject to the provisions of the Indenture, the mailing of
such cheque or the sending of such electronic transfer of funds shall, to the
extent of the sum represented thereby (plus the amount of any tax withheld),
satisfy and discharge all liability for interest on this Initial Debenture. No
Debentures may be transferred or exchanged during the ten Business Days
preceding April 15, July 15, October 15 and January 15 in each 

A-1




year, commencing April 15, 2009, or during the ten Business
Days preceding any Redemption Date, as the registers of the Trustee will be
closed during such periods. 

          This
Initial Debenture is one of the Debentures of the Corporation issued or issuable
in one or more series under the provisions of the Indenture. This Initial
Debenture shall mature on February 26, 2014 (the “Maturity Date”). The
aggregate principal amount of Initial Debentures issued pursuant to the
Indenture is limited to $14,000,000 in lawful money of Canada. Reference is
hereby expressly made to the Indenture for a description of the terms and
conditions upon which the Initial Debentures are or are to be issued and held
and the rights and remedies of the holders of the Initial Debentures and of the
Corporation and of the Trustee, all to the same effect as if the provisions of
the Indenture were herein set forth to all of which provisions the holder of
this Initial Debenture by acceptance hereof assents. 

          The
Initial Debentures are issuable only in denominations of $1,000 and integral
multiples thereof. Upon compliance with the provisions of the Indenture,
Debentures of any denomination may be exchanged for an equal aggregate principal
amount of Debentures in any other authorized denomination or denominations. 

          The
principal amount of this Initial Debenture in whole, or any portion of such
principal amount which is a multiple of $1,000, is convertible, at the option of
the holder hereof, upon surrender of this Initial Debenture at the principal
office of the Trustee in Vancouver, British Columbia, at any time prior to the
close of business on the Maturity Date (unless this Initial Debenture is called
for redemption on or prior to such date, in which case this Initial Debenture
can no longer be converted after the close of business on the Business Day
immediately preceding the Redemption Date specified by the Corporation in the
Redemption Notice given to the holder of such Initial Debenture) into fully paid
and non-assessable Units (without adjustment for interest accrued hereon or for
dividends on Common Shares underlying the Units issuable upon conversion) at a
conversion price (the “Conversion Price”) in effect at the Debenture
Exercise Date. The Conversion Price in effect as of February 26, 2009 is $1.90,
such that 526 Units, comprised of 526 Common Shares and 263 Warrants, will be
issued for each $1,000 principal amount of Debentures so converted, all subject
to the terms and conditions and in the manner set forth in the Indenture. 

          No
Debentures may be converted during the ten Business Days preceding and including
April 15, July 15, October 15 and January 15 in each year, commencing April 15,
2009, as the registers of the Trustee will be closed during such periods. The
Indenture makes provision for the adjustment of the Conversion Price in the
events therein specified. No fractional Units will be issued on any conversion
and, in such case, the holder hereof shall instead receive a cash payment equal
to the fractional interest that would have been issuable multiplied by the
Current Market Price less applicable withholding taxes, if any. No adjustment in
the number of Units to be issued upon conversion will be made for dividends on
the underlying Common Shares issuable upon conversion or for interest accrued on
Initial Debentures surrendered for conversion. 

          This
Initial Debenture may be redeemed at the option of the Corporation on the terms
and conditions set out in the Indenture at the redemption price therein and
herein set out provided that this Initial Debenture is not redeemable on or
before August 26, 2010. After August 26, 2010, if and only if the Common Shares
underlying the Units may be transferred pursuant to an effective registration
statement or are otherwise freely transferable without restriction under
applicable laws, the Initial Debentures are redeemable at the option of the
Corporation at a Redemption Price equal to the principal amount of the Initial
Debenture plus accrued and unpaid interest, if any, plus a redemption fee equal
to 7% of the principal amount of the Initial Debenture to be redeemed and
otherwise on the terms and conditions described in the Indenture. 

A-2




          The
indebtedness evidenced by this Initial Debenture, and by all other Initial
Debentures now or hereafter certified and delivered under the Indenture, is a
direct unsecured obligation of the Corporation, and is subordinated in right of
payment, to the extent and in the manner provided in the Indenture, to the prior
payment of all Senior Secured Indebtedness, whether outstanding at the date of
the Indenture or thereafter created, incurred, assumed or guaranteed.

          The
principal hereof may become or be declared due and payable before the stated
maturity in the events, in the manner, with the effect and at the times provided
in the Indenture. 

          The
Indenture contains provisions making binding upon all holders of Debentures
outstanding thereunder (or in certain circumstances specific series of
Debentures) resolutions passed at meetings of such holders held in accordance
with such provisions and instruments signed by the holders of a specified
majority of Debentures outstanding (or specific series), which resolutions or
instruments may have the effect of amending the terms of this Initial Debenture
or the Indenture. 

          The
Indenture contains provisions disclaiming any personal liability on the part of
holders of Common Shares and officers or directors of the Corporation in respect
of any obligation or claim arising out of the Indenture or this Debenture. 

          This
Initial Debenture may only be transferred upon compliance with the conditions
prescribed in the Indenture, in one of the registers to be kept at the principal
office of the Trustee in the City of Vancouver and in such other place or places
and/or by such other registrars (if any) as the Corporation with the approval of
the Trustee may designate. No transfer of this Initial Debenture shall be valid
unless made on the register by the registered holder hereof or his executors or
administrators or other legal representatives, or his or their attorney duly
appointed by an instrument in form and substance satisfactory to the Trustee or
other registrar, and upon compliance with such reasonable requirements as the
Trustee and/or other registrar may prescribe and upon surrender of this Initial
Debenture for cancellation. Thereupon a new Initial Debenture or Initial
Debentures in the same aggregate principal amount shall be issued to the
transferee in exchange hereof. 

          This
Initial Debenture is subject to restrictions on resale under United States
federal and state securities laws, and it may not be transferred unless such
security is registered under the 1933 Act, and applicable state securities laws
or an exemption from such registration requirements is available. 

          This
Initial Debenture may not be converted unless an exemption is available from the
registration requirements of the 1933 Act, and the securities laws of any
applicable states, and the holder has furnished an opinion of counsel of
recognized standing or other evidence reasonably satisfactory to the Corporation
to such effect; provided, however, that a holder who purchased Initial
Debentures in the Corporation’s private placement of Initial Debentures will not
be required to deliver an opinion of counsel in connection with the conversion
of those Initial Debentures. 

          The
Warrants and Common Shares of the Corporation issuable upon conversion of this
Initial Debenture will bear a legend restricting transfer without registration
under the 1933 Act and applicable state securities laws unless an exemption from
such registration requirements is available. 

THIS DEBENTURE IS SUBJECT TO RESALE RESTRICTIONS AND MAY NOT
BE SOLD OR OTHERWISE TRADED OR TRANSFERRED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF APPLICABLE SECURITIES LEGISLATION. 

          This
Initial Debenture shall not become obligatory for any purpose until it shall
have been certified by the Trustee under the Indenture. 

A-3




          By
acceptance hereof, the holder of this Initial Debenture assents to all
provisions of the Indenture. 

          Capitalized
  words or expressions used in this Initial Debenture shall, unless otherwise
  defined herein, have the meaning ascribed thereto in the Indenture. In the event
  of a conflict between the provisions of this certificate and the provisions
  of the Indenture, the provisions of the Indenture shall prevail.

         
IN WITNESS WHEREOF the Corporation has caused this Debenture to
be signed by its proper officers in that behalf as of February 26, 2009.


ENDEAVOUR SILVER CORP. 


By:
__________________________________________

A-4




(FORM OF TRUSTEE’S CERTIFICATE) 

This Initial Debenture is one of the 10% Subordinated Unsecured
Convertible Redeemable Debentures referred to in the Indenture within mentioned.


COMPUTERSHARE TRUST COMPANY OF
CANADA 


By:  
_________________________________________
         
Authority Signatory 

Date certified:
__________________________________

(FORM OF REGISTRATION PANEL) 


	DATE OF REGISTRATION 
	IN WHOSE NAME 
REGISTERED
	SIGNATURE OF TRUSTEE 
OR OTHER
      REGISTRAR 
	

        
	 	 



A-5




TRANSFER FORM 

FOR VALUE RECEIVED the undersigned sells, assigns and transfers
unto 

__________________________________________
(Please print
name of transferee) 

__________________________________________
(Please print
address of transferee) 

__________________________________________


__________________________________________

the
attached Debenture (or CDN$ ________________ principal amount thereof*) of
Endeavour Silver Corp. and hereby irrevocably constitutes and appoints 

__________________________________________
the attorney to
transfer the said Debenture on the registers of the Corporation, with full power
of substitution. 

*If less than all of the Debentures represented by this
Debenture Certificate are being transferred, the Debenture Certificate
representing those Debentures not transferred will be registered in the name of
the person whose name appears on the face of the attached Debenture and such new
certificates (please check one): 

	 	(a) 	[   ]	
      should be sent by first class mail to the following
      address: 



____________________________________________________________________________________

____________________________________________________________________________________


	 	(b) 	[   ]	
      should be held for pick up at the office of the Trustee
      at which this Debenture is deposited. 



 

DATED the _____day of
___________________________, 20__. 

 

	Signature Guaranteed
    	 	(Signature of transferring Debentureholder or Authorized

	  	 	Representative) 
	 	 	 
	 	 	 
	Name of Institution guaranteeing 	 	Print Full Name of transferring Debentureholder
      or 
	signature 	 	Authorized Representative 
	 	 	 
	 	 	 
	  	 	Print Full Address 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	  	 	  
	  	 	Daytime Telephone Number 


A-6




Instructions: 

	1. 	
      The signature of the Debentureholder must be the
      signature of the person appearing on the face of the attached
      Debenture.

	 	 
	2. 	
      If this Transfer Form is signed by a trustee, executor,
      administrator, curator, guardian, attorney, officer of a corporation or
      any person acting in a judiciary or representative capacity, the
      certificate must be accompanied by evidence of authority to sign
      satisfactory to the Corporation and the Trustee.

	 	 
	3. 	
      THE SIGNATURE ON THIS FORM MUST
      BE GUARANTEED BY A SCHEDULE “A” CANADIAN CHARTERED BANK, TRUST COMPANY OR
      A MEMBER OF AN ACCEPTABLE MEDALLION SIGNATURE GUARANTEE PROGRAM. THE
      GUARANTOR MUST AFFIX A STAMP BEARING THE ACTUAL WORDS “SIGNATURE
      GUARANTEED”

	 	 
	4. 	
      Debentures shall only be transferable in accordance
      with applicable laws.

	 	 
	5. 	
      The registered holder of the Debenture is responsible for
      the payment of any documentary, stamp or other transfer taxes that may be
      payable in respect of the transfer of the Debenture.

	 	 
	6. 	
      The Debentures have not been and will not be registered
      under the United States Securities Act of 1933, as amended (the
      “1933 Act”), or the securities laws of any state of the United
      States, and may not be offered, sold, pledged or otherwise transferred
      unless an exemption from the registration requirements under the 1933 Act
      and the securities laws of all applicable states of the United States is
      available.



A-7




CONVERSION FORM 

TO: ENDEAVOUR SILVER CORP. and COMPUTERSHARE TRUST COMPANY OF
CANADA 

	
      Note: 
	 All capitalized terms used herein
        have the meaning described thereto in the Indenture between Endeavour
        Silver Corp. and Computershare Trust Company of Canada dated February
        •, 2009. 




	(A) 	 The undersigned registered holder of the attached Debenture
        hereby irrevocably elects to convert such Debenture (or $ • principal
        amount thereof*) into Units in accordance with the terms of the Indenture
        referred to in such Debenture and directs that the Common Shares and Warrants
        underlying the Units which are issuable and deliverable upon the conversion
        (net of withholding taxes, if any) be delivered to the person indicated
        below.

	 	 
		
      (*) If less than the full principal amount of the
      Debentures, indicate in the space provided the principal amount (which
      much be $1,000 or integral multiples thereof).

	 	 
		
      I/we understand that the Common Shares and Warrants will
      be issued in the name appearing on the face of the attached Debenture
      Certificate.

	 	 
		
      I understand and acknowledge that the Warrants and Common
      Shares issuable upon conversion of this Debenture will bear a legend
      restricting transfer without registration under the United States
      Securities Act of 1933, as amended, and applicable state securities laws
      unless an exemption from such registration requirements is
    available.

	 	 
	(B) 	
      Such Common Shares (please check
one):




	 	(i) 	[   ] 	should be sent by first class
      mail to the following address: 
	 	 	 	 
	 	  	  	OR 
	 	 	 	 
		
      (ii) 
	
      [   ] 
	
      should be held for pick up at the office of the Trustee
      at which this Debenture Certificate is deposited. 



DATED the ___________day of _________________,
20__. 

 

	 	(Signature of Debentureholder or Authorized 
	 	Representative) 
	 	  
	 	  
	 	Print Full Name of Debentureholder or
      Authorized 
	 	Representative 


A-8





	 	 
	 	Print Full Address 
	 	 
	 	 
	 	 
	 	 
	 	 
	 	Daytime Telephone Number 


Instructions: 

	1. 	 The registered holder may exercise its conversion right
        to receive Units by completing this form and surrendering this form and
        the Debenture Certificate to the Trustee at its principal office at •,
        Attention: •. Certificates for Common Shares and Warrants underlying
        the Units will be delivered or mailed within thirty (30) days after the
        conversion of the Debentures.

	 	 
	2. 	
      If the Conversion Form is signed by a trustee, executor,
      administrator, curator, guardian, attorney, officer of a corporation or
      any person acting in a fiduciary or representative capacity, the
      certificate must be accompanied by evidence of authority to sign
      satisfactory to the Corporation and the Trustee.



A-9




SCHEDULE “B” - FORM OF WARRANT 
To the annexed Trust
Indenture dated as of February 26, 2009 between Endeavour Silver Corp. and

Computershare Trust Company of Canada, as trustee 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF
THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [INSERT DATE THAT IS FOUR
MONTHS AND A DAY AFTER THE DISTRIBUTION DATE]. 

THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933,
AS AMENDED (THE “1933 ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT
TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE 1933 ACT AND IN ACCORDANCE WITH APPLICABLE
STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO SUCH EFFECT,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE
SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED
BY SUCH SECURITIES. 

THIS CERTIFICATE IS VOID UNLESS EXERCISED ON OR PRIOR TO
4:00 P.M. (VANCOUVER TIME) ON FEBRUARY 26, 2014. 

No. WB09-• 

SHARE PURCHASE WARRANT CERTIFICATE 

Right to Purchase 
• Common Shares 

Warrant to Purchase Common Shares of 

ENDEAVOUR SILVER CORP. 

(Incorporated under the Laws of British Columbia) 

On the terms hereof, this is to certify that FOR VALUE RECEIVED
by Endeavour Silver Corp. (the “Company”), •, the registered holder
hereof (the “Holder”), has the right to purchase at any time and from
time to time, up to and including 5:00 p.m. (Vancouver time) on February 26,
2014 (the “Expiry Time”), • fully paid and non-assessable common shares
(the “Common Shares”) without par value in the capital of the Company at
a purchase price of Cdn$2.05 per Common Share (the “Exercise Price”),
subject to adjustment as hereinafter set forth. 

The Company agrees that the Common Shares so purchased shall be
and be deemed to be issued to the Holder as of the close of business on the date
on which this Warrant Certificate shall have been surrendered and payment made
for such Common Shares as aforesaid. 

Nothing contained herein shall confer any right upon the Holder
to subscribe for or purchase any Common Shares of the Company at any time after
the Expiry Time, and from and after the Expiry Time, the Warrants represented
hereby (the “Warrants”) and all rights hereunder shall be void and of no
value. 

No fractional Common Shares will be issued. The undersigned
shall not be entitled to any compensation or other right in lieu of a fractional
Common Share, as the case may be. 

B-1 




          The
above provisions are, however, subject to the following: 

         
SECTION 1 - In the event the Holder desires to exercise the right
conferred hereby to purchase Common Shares, the Holder shall at or before the
Expiry Time: (a) duly complete, execute and deliver to the Company a
Subscription Form for such Common Shares, in the form annexed hereto as Schedule
“A”, together with any additional documentation required thereby, (b) surrender
this Warrant Certificate to the Company at the address of the Company indicated
in Section 18 hereof, and (c) subject to a Cashless Exercise Election (as
defined below), pay the aggregate Exercise Price in respect of the Common Shares
subscribed for either in cash, by bank draft or by certified cheque drawn on a
Canadian chartered bank and payable to the Company. Upon such delivery,
surrender and payment as aforesaid and subject to the provisions hereof, the
Holder shall be deemed for all purposes to be a shareholder of record of the
number of Common Shares to be so issued and the Holder shall be entitled to
delivery of a certificate or certificates evidencing such Common Shares (which
certificates, as well as all certificates issued in exchange for or in
substitution thereof, shall bear any applicable restrictive legends) and the
Company shall cause such certificate or certificates to be delivered to the
Holder at the address specified in such Subscription Form within 3 business days
of said surrender and payment as aforesaid. 

The Holder may notify the Company in
its Subscription Form of its election to utilize cashless exercise (a
“Cashless Exercise Election”), in which event no payment of the Exercise
Price is required pursuant to this Section 1 and the Company shall, upon
completion of a Subscription Form and surrender of the Warrant Certificate in
accordance with this Section 1, issue to the Holder the number of Common Shares
determined as follows: 

X = Y [(A-B)/A] 

where: 

X = the number of Common Shares to be
issued to the Holder. 

Y = the number of Common Shares with
respect to which this Warrant is being exercised. 

A = the average of the closing prices
for the five Trading Days immediately prior to (but not including) the Exercise
Date. 

B = the Exercise Price. 

For purposes of Rule 144 promulgated under the United State
Securities Act of 1933, as amended, (the “1933 Act”), it is intended,
understood and acknowledged that the Common Shares issued in a cashless exercise
transaction shall be deemed to have been acquired by the Holder, and the holding
period for such Common Shares shall be deemed to have commenced, on the date
this Warrant was originally issued. For purposes of this section, Trading Day
means a day on which the Common Shares are traded on the Toronto Stock Exchange.


For purposes of complying with applicable securities laws,
regulations and rules, and the blanket rulings, policies and written
interpretations of and multilateral or national instruments adopted by the
securities regulators in Canada and the rules and policies of the Toronto Stock
Exchange (collectively, “Securities Laws”), the Holder understands and
acknowledges that, if any of the Warrants are exercised on or before June 27,
2009, upon the issuance of the Common Shares, all the certificates representing
such Common Shares, as well as all certificates issued in exchange for or in
substitution of the foregoing Common Shares, shall bear the following legend:


B-2 





  
    
      “UNLESS PERMITTED UNDER SECURITIES LEGISLATION,
        THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JUNE 27,
        2009”. 

    

  



          In
addition and except as otherwise set forth herein, in order to ensure compliance
with applicable U.S. federal and state securities laws, the Holder understands
and acknowledges that the certificate or each certificate representing such
Holder’s Common Shares, and until such time as is no longer required under
applicable requirements of the 1933 Act, or applicable state securities laws, as
well as all certificates issued in exchange for or in substitution of the
foregoing Common Shares, shall bear the following additional legend: 


  
    
      THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED
        STATES SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”),
        OR ANY APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
        OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
        EFFECTIVE REGISTRATION STATEMENT UNDER THE 1933 ACT OR PURSUANT TO AN
        AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
        REQUIREMENTS OF THE 1933 ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES
        LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO SUCH EFFECT, THE SUBSTANCE
        OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THESE SECURITIES
        MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY
        SUCH SECURITIES. 

    

  



provided, that with respect to any such pledge that the
transferee is an “accredited investor” as such term is defined in Rule
501(a) of Regulation D under the 1933 Act (“U.S. Accredited Investor”),
and such transfer complies with applicable United States federal and state
securities laws and Canadian federal and provincial securities laws. 

         
SECTION 2 - The right to purchase Common Shares conferred hereby may be
exercised in whole or in part. In the event that prior to the Expiry Time the
Holder subscribes for and purchases any number of Common Shares which is less
than the number of Common Shares referred to in this Warrant Certificate, the
Holder shall present the original of this Warrant Certificate to the Company and
the Holder will be entitled to receive a further Warrant Certificate in respect
of the Common Shares referred to in this Warrant Certificate but not subscribed
for. 

          The
Warrants will not be exercisable unless an exemption from registration under the
1933 Act and applicable state securities laws is available and the Company has
received an opinion of counsel of recognized standing in form and substance
reasonably satisfactory to the Company to such effect; provided, however, that a
holder who is a U.S. Accredited Investor at the time of exercise of Warrants and
purchased convertible debentures in the Company’s private placement of
convertible debentures will not be required to deliver an opinion of counsel in
connection with the exercise of Warrants that are a part of units underlying
those convertible debentures. 

         
SECTION 3 – Except as otherwise set forth herein, in the event of any
exercise of this Warrant in accordance with and subject to the terms and
conditions hereof, certificates for the Common Shares so purchased shall be
dated the date of such exercise and delivered to the Holder hereof within a
reasonable time, not exceeding three (3) business days after such exercise (the
“Delivery Date”) or, at the request of the Holder (provided that a
registration statement under the 1933 Act providing for the resale of the Common
Shares issuable upon exercise of the Warrant is then in effect and except as
permitted under applicable securities laws), issued and delivered to the
Depository Trust Company (“DTC”) account on the Holder’s behalf via the
Deposit Withdrawal Agent Commission System (“DWAC”) within a reasonable
time, not exceeding three (3) business days after such exercise. Notwithstanding
the foregoing to the contrary, the Company or its transfer agent shall only be
obligated to issue and deliver the shares to 

B-3 




the DTC on a Holder’s behalf via DWAC if such exercise is in
connection with a sale or other exemption from registration by which the shares
may be issued without a restrictive legend and the Company and its transfer
agent are participating in DTC through the DWAC system. The Holder shall deliver
this original Warrant, or an indemnification undertaking with respect to such
Warrant in the case of its loss, theft or destruction, at such time that this
Warrant is fully exercised. With respect to partial exercises of this Warrant,
the Company shall keep written records for the Holder of the number of Common
Shares exercised as of each date of exercise. 

         
SECTION 4 - In addition to any other rights available to the Holder, if
(1) the Company fails to transmit to the Holder a certificate or certificates
representing the Common Shares issued pursuant to an exercise on or before the
Delivery Date, and (2) following such third trading day after the Delivery Date
and prior to the time such Common Shares are received free from any U.S.
restrictive legends, the Holder, or any third party on behalf of such Holder,
purchases (in an open market transaction or otherwise) common shares to deliver
in satisfaction of a sale by the Holder of such Common Shares (a
“Buy-In”), then, in addition to any other rights available to the Holder,
the Company shall pay in cash to the Holder (for costs incurred either directly
by such Holder or on behalf of a third party) the amount by which the total
purchase price paid for common shares as a result of the Buy-In (including
brokerage commissions, if any) exceed the proceeds received by such Purchaser as
a result of the sale to which such Buy-In relates. The Holder shall provide the
Company written notice indicating the amounts payable to the Purchaser in
respect of the Buy-In.

         
SECTION 5 - The Holder may transfer Warrants subject to the limitations
noted on any legend appearing on this Warrant Certificate. Subject to the
foregoing, a transferee shall, by surrendering this Warrant Certificate to the
Company at the address of the Company indicated in Section 18 hereof and
delivering to the Company an executed Assignment Form and Certificate of
Assignee, each in the respective form annexed hereto as Schedule “B” and
Schedule “C”, be entitled to become a registered holder and to receive a new
Warrant Certificate registered in such transferee’s name in respect of the
Common Shares referred to in this Warrant Certificate and not then subscribed
for. Subject to the limitations noted on any legend on this Warrant Certificate,
the Company shall cause the new Warrant Certificate to be delivered to the
transferee at the address specified in such Assignment Form within 10 days of
said surrender as aforesaid. These securities may be pledged; provided, however,
the transferee must be a U.S. Accredited Investor and such transfer must comply
with applicable United States federal and state securities laws and Canadian
federal and provincial securities laws. 

         
SECTION 6 - This Warrant Certificate may be exchanged for Warrant
Certificates in any other denomination representing in the aggregate the same
number of underlying Common Shares. The Holder may exercise this right by
surrendering this Warrant Certificate, together with a written direction, to the
Company at the address of the Company indicated in Section 18 below and the
Company shall cause the new Warrant Certificates to be delivered to the Holder
at the address specified in such direction within 10 days of said surrender as
aforesaid. 

         
SECTION 7 - In case this Warrant Certificate becomes mutilated, lost,
destroyed or stolen, the Company shall, upon the Holder complying with this
Section 7 and upon the surrender and cancellation of such mutilated Warrant
Certificate or in substitution for such lost, destroyed or stolen Warrant
Certificate, issue and deliver a new Warrant Certificate of like date and tenor
in exchange for and in place of the one mutilated, lost, destroyed or stolen.
The applicant for the issue of a new Warrant Certificate pursuant to this
Section 7 shall bear the cost of the issue thereof and in case of loss,
destruction or theft shall, as a condition precedent to the issue thereof,
furnish to the Company such evidence of ownership and of the loss, destruction
or theft of the Warrant Certificate so lost, destroyed or stolen as shall be
reasonably satisfactory to the Company and such applicant may be required to
furnish an indemnity in amount and form satisfactory to the Company. 

B-4 




         
SECTION 8 - The holding of the Warrants shall not constitute the Holder a
shareholder of the Company nor entitle the Holder to any right or interest in
respect thereof except as herein expressly provided. 

         
SECTION 9 - The Company represents and warrants that:

	 	(a) 	
      it is duly authorized to create and issue the
      Warrants;

	 	 	 
	 	(b) 	
      the Warrants are a valid and enforceable obligation of
      the Company in accordance with the terms hereof;

	 	 	 
	 	(c) 	
      it will take all such action as may be necessary to
      ensure that all Common Shares issuable hereunder, may be so issued without
      violation of any applicable requirements of any stock exchange upon which
      the Common Shares may be listed or in respect of which the Common Shares
      are qualified for trading privileges;

	 	 	 
	 	(d) 	
      the issuance of a certificate or certificates
      representing Common Shares upon the due exercise of any Warrants shall be
      made without charge to the Holder for any issuance tax in respect thereto,
      provided that the Company shall not be required to pay any tax which may
      be payable in respect of any transfer involved in the issuance and
      delivery of any certificate in a name other than that of the Holder;
      and

	 	 	 
	 	(e) 	
      it will attend to all filings required to be made by it
      under applicable securities legislation in respect of the exercise of any
      Warrants in accordance with the terms hereof.



          The
Company covenants and agrees that it will cause the Common Shares subscribed for
and purchased in the manner herein provided and the certificate or certificates
evidencing such Common Shares to be duly issued and that, at all times prior to
the Expiry Time, it shall reserve and there shall remain unissued out of its
authorized capital a sufficient number of shares to satisfy the right of
purchase herein provided for. All Common Shares which shall be issued upon the
due exercise of the right of purchase herein provided for, upon payment therefor
of the aggregate Exercise Price for such Common Shares, shall be and be deemed
to be fully paid and non-assessable and the Holder shall not be liable to the
Company or its creditors in respect thereof. 

         
SECTION 10 - In Section 10 and Section 11: 

         
“Equity Shares” means the Common Shares together with any shares
of any class or series of the Company which may from time to time be authorized
for issue if by their terms such shares confer on the holders thereof the right
to participate in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution, or winding-up of the Company beyond a fixed sum or a
fixed sum plus accrued dividends; and 

         
“Current Market Price” of the Common Shares at any date means the
weighted average price per share at which the Common Shares have traded on such
stock exchange on which the Common Shares are listed as shall be selected by the
directors of the Company as a board or, if duly empowered, a committee of
directors (the “directors”) during any 20 consecutive trading days ending not
more than 5 days and not less than 3 days, immediately preceding such date,
provided that in the event the Common Shares are not listed on any stock
exchange, the Current Market Price of the Common Shares shall be determined by
the directors acting reasonably and in good faith. 

          If at
any time from February 26, 2009 and prior to the Expiry Time, and while any
Warrants are outstanding, there shall be a reclassification of the Common Shares
outstanding at such time or a change of the Common Shares into other shares or
securities, or any other capital reorganization except as 

B-5 




described in each of Subsection 11(a) and 11(b), or a
consolidation, amalgamation or merger of the Company with or into any other
corporation or other entity (other than a consolidation, amalgamation or merger
which does not result in any reclassification of the outstanding Common Shares
or a change of the Common Shares into other shares or securities), or a transfer
of the undertaking or assets of the Company as an entirety or substantially as
an entirety to another corporation or other entity (any of such events being
called a “Capital Reorganization”), should the Holder exercise thereafter
its right to purchase Common Shares hereunder, the Holder shall be entitled to
receive, and shall accept for the same aggregate consideration, in lieu of the
number of Common Shares to which it was theretofore entitled upon the exercise
of the right to purchase Common Shares hereunder, the kind and amount of shares
or other securities or property which the Holder would have been entitled to
receive as a result of such Capital Reorganization if, on the effective date
thereof, it had been the registered holder of the number of Common Shares to
which it was theretofore entitled upon such exercise. 

          If at
any time from February 26, 2009 and prior to the Expiry Time, and while any
Warrants are outstanding, any adjustment in the Exercise Price shall occur as a
result of: 

	 	(i) 	
      an event referred to in Subsection 11(b); or

	 	 	 
	 	(ii) 	
      the fixing by the Company of a record date for an event
      referred to in Subsection 11(b),



then the number of Common Shares purchasable upon any
subsequent exercise of any Warrants shall be simultaneously adjusted by
multiplying the number of Common Shares purchasable upon the exercise of such
number of Warrants immediately prior to such adjustment by a fraction which
shall be the reciprocal of the fraction employed in the adjustment of the
Exercise Price as specified in Section 11(a) To the extent that any adjustment
in subscription rights occurs pursuant to this Section 10 as a result of a
distribution of exchangeable or convertible securities referred to in Subsection
11(a)(iii) other than Equity Shares or as a result of the fixing by the Company
of a record date for the distribution of rights, options or warrants referred to
in Subsection 11(b), the number of Common Shares purchasable upon the exercise
of any Warrants shall be readjusted immediately after the expiration of any
relevant exchange, conversion or exercise right to the number of Common Shares
which would be purchasable based upon the number of Common Shares actually
issued and remaining issuable immediately after such expiration, and shall be
further readjusted in such manner upon expiration of any further such right.

         
SECTION 11 - The Exercise Price in effect at any date shall be subject to
adjustment from time to time as follows: 

	 	(a) 	
      If and whenever at any time from February 26, 2009 and
      prior to the Expiry Time and while any Warrants are outstanding, the
      Company shall:

	 	 	 	 
	 		(i) 	
      subdivide the outstanding Common Shares into a greater
      number of Common Shares,

	 	 	 	 
	 		(ii) 	
      consolidate the outstanding Common Shares into a lesser
      number of Common Shares, or

	 	 	 	 
	 		(iii) 	
      make any distribution, other than by way of a dividend in
      the ordinary course, to the holders of all or substantially all of the
      outstanding Common Shares payable in Common Shares or securities
      exchangeable for or convertible into Common
Shares,



(any of such events being called a “Common Share
Reorganization”), the Exercise Price shall be adjusted effective after the
effective date or record date, as the case may be, on which the holders of
Common Shares are determined for the purpose of the Common Share Reorganization
by multiplying the 

B-6 




Exercise Price in effect immediately prior to such effective
date or record date by a fraction, the numerator of which shall be the number of
Common Shares of the Company outstanding on such effective date or record date
before giving effect to such Common Share Reorganization and the denominator of
which shall be the number of Common Shares outstanding immediately after giving
effect to such Common Share Reorganization including, in the case where
securities exchangeable for or convertible into Common Shares are distributed,
the number of Common Shares that would have been outstanding had all such
securities been exchanged for or converted into Common Shares on such record
date. For purposes of this Subsection 11(a), “dividend in the ordinary course”
means dividends having a value which does not exceed, in the aggregate, the
greater of (i) 50% of the retained earnings of the Company as at the end of its
immediately preceding fiscal year; and (ii) 100% of the aggregate consolidated
net income of the Company determined before computation of extraordinary or
unusual items, for its immediately preceding fiscal year. 

	 	(b) 	
      If and whenever at any time from February 26, 2009 and
      prior to the Expiry Time and while any Warrants are outstanding, the
      Company shall fix a record date for the issue of rights, options or
      warrants to the holders of all or substantially all of its outstanding
      Common Shares under which such holders are entitled, during a period
      expiring not more than 90 days after the record date for such issue, to
      subscribe for or purchase Common Shares at a price per Common Share or
      having a conversion or exchange price per Common Share less than 95% of
      the Current Market Price per Common Share on such record date, the
      Exercise Price shall be adjusted immediately after such record date so
      that it shall equal the price determined by multiplying the Exercise Price
      in effect on such record date by a fraction, the numerator of which shall
      be the total number of Common Shares outstanding on such record date plus
      a number equal to the number arrived at by dividing the aggregate price of
      the total number of additional Common Shares offered for subscription or
      purchase, or the aggregate conversion or exchange price of the convertible
      securities so offered, by such Current Market Price per Common Share, and
      of which the denominator shall be the total number of Common Shares
      outstanding on such record date plus the total number of additional Common
      Shares offered for subscription or purchase (or into which the convertible
      securities so offered are convertible or exchangeable). Any Common Shares
      owned by or held for the account of the Company or any subsidiary of the
      Company shall be deemed not to be outstanding for the purpose of any such
      computation. To the extent that any adjustment in the Exercise Price
      occurs pursuant to this Subsection 11(b) as a result of the fixing by the
      Company of a record date for the distribution of rights, options or
      warrants referred to in this Subsection 11(b), the Exercise Price shall be
      readjusted immediately after the expiration of any relevant exchange,
      conversion or exercise right to the Exercise Price which would then be in
      effect based upon the number of Common Shares actually issued and
      remaining issuable after such expiration, and shall be further readjusted
      in such manner upon expiration of any further such
right.



         
SECTION 12 - In any case in which it shall be required that an adjustment
shall become effective immediately after a record date for an event referred to
herein, the Company may defer, until the occurrence of such event, 

	 	(a) 	
      issuing to the Holder, if Warrants are exercised after
      such record date and before the occurrence of such event (the date of such
      exercise being herein referred to as the “Exercise Date”), the
      additional Common Shares issuable upon such exercise by reason of the
      adjustment required by such event, and

	 	 	 
	 	(b) 	
      delivering to the Holder any distributions declared with
      respect to such additional Common Shares after such Exercise Date and
      before such event,



B-7 




provided, however, that the Company
    shall deliver to the Holder an appropriate instrument evidencing its right,
    upon the occurrence of the event requiring the adjustment, to an adjustment
    in the Exercise Price or the number of Common Shares purchasable upon the
    exercise of Warrants and to such distributions declared with respect to any
    such additional Common Shares issuable on the exercise of such Warrants. 

The adjustments provided for herein are
cumulative, shall, in the case of adjustments to the Exercise Price, be computed
to the nearest one-tenth of one cent, and shall apply (without duplication) to
successive subdivisions, consolidations, distributions, issuances or other
events resulting in any adjustment under the provisions hereof provided that,
notwithstanding any other provision hereof, no adjustment of the Exercise Price
shall be required unless such adjustment would require an increase or decrease
of at least 1% in the Exercise Price then in effect and no adjustment shall be
made in the number of Common Shares purchasable on the exercise of any Warrants
unless it would result in a change of at least one-hundredth of a share
(provided, however, that any adjustments which by reason of this Section 12 are
not required to be made shall be carried forward and taken into account in any
subsequent adjustment). 

In the event of any question arising
with respect to the adjustments provided for herein such question shall be
conclusively determined by a firm of chartered accountants (who may be the
Company’s auditors) appointed by the Company; such accountants shall have access
to all necessary records of the Company and such determination shall, in the
absence of manifest error, be binding upon the Company and the Holder. 

In case the Company after the date of
this Warrant Certificate shall take any action affecting the Common Shares,
other than an action described herein, which in the opinion of the directors of
the Company would materially affect the rights of the Holder, the Exercise Price
and/or the number of Common Shares purchasable upon exercise of any Warrants
shall be adjusted, subject to the prior written consent of the TSX if
applicable, in such manner, if any, and at such time, by action by the
directors, in their discretion as they may determine to be equitable in the
circumstances. Failure of the directors to make an adjustment in accordance with
this Section 12 shall be conclusive evidence that the directors have determined
that it is equitable to make no adjustment in the circumstances. 

If the Company shall set a record date
to determine the holders of the Common Shares for the purpose of entitling them
to receive any issue or distribution or for the issue of any rights, options or
warrants and shall thereafter and before such distribution or issue to such
shareholders legally abandon its plan to make such distribution or issue, then
no adjustment in the Exercise Price or the number of Common Shares purchasable
upon exercise of Warrants shall be required by reason of the setting of such
record date. 

In the absence of a resolution of the
directors fixing a record date for any of the events referred to in Subsection
11(b), the Company shall be deemed to have fixed as the record date therefor the
date on which any of such events is effected. 

         
SECTION 13 - As a condition precedent to the taking of any action which
would require an adjustment pursuant to Section 10 or Section 11, the Company
shall take any action which may, in the opinion of counsel, be necessary in
order that the Company may validly and legally issue as fully paid and
non-assessable all the Common Shares to which Holder is entitled to receive on
the full exercise hereof in accordance with the provisions hereof. 

B-8 




         
SECTION 14 - At least 10 days prior to the effective date or record date,
as the case may be, of any event which, if implemented, will require an
adjustment in any of the subscription rights pursuant to the Warrants, including
the Exercise Price and the number of Common Shares which are purchasable upon
the exercise hereof, the Company shall give notice to the Holder of the
particulars of such event and, if determinable and applicable, the required or
anticipated adjustment and the computation of such adjustment. 

          In case
any adjustment for which a notice in this Section 14 has been given is not then
determinable, the Company shall promptly after such adjustment is determinable
give notice to the Holder of the adjustment and the computation of such
adjustment. 

         
SECTION 15 - The Company covenants and agrees that at the expense of the
Holder, it will do, acknowledge and deliver, or cause to be done, executed,
acknowledged and delivered, all such other acts, deeds and assurances as the
Holder shall reasonably require for the better accomplishing and completion of
the intentions and provisions of the Warrants. 

         
SECTION 16 - Time shall be of the essence hereof. 

         
SECTION 17 - The Warrants, any amendment, addendum, exhibit, supplement
or other document relating thereto, and any and all disputes arising herefrom or
related thereto, shall be governed by and construed in accordance with the
internal laws of the Province of British Columbia, and the federal laws of
Canada applicable therein, governing disputes occurring, and contracts made and
to be performed, wholly therein, and without reference to its principles
governing the choice or conflict of laws. The parties hereto irrevocably attorn
and submit to the exclusive jurisdiction of the courts of the Province of
British Columbia, sitting in the City of Vancouver, with respect to any dispute
related to or arising from this Agreement. 

         
SECTION 18 - Any notice required or permitted to be given hereunder shall
be in writing and may be given by delivery or by facsimile transmission of same
addressed as follows:

	 	(i) 	
      if to the Company:



Endeavour Silver Corp. 
Suite 301 –
700 West Pender Street 
Vancouver, B.C. V6C 1G8 

Facsimile: (604) 685-9744

Attention: President 

	 	(ii) 	
      if to the Holder, at the address shown on the first page
      of this Warrant Certificate.



          Any
notice aforesaid shall, if delivered, be deemed to have been given and received
on the date on which it was delivered to the address provided herein (if a
business day, and if not, on the next succeeding business day) and if sent by
facsimile transmission be deemed to have been given and received at the time of
receipt unless actually received after 5:00 p.m. at the point of delivery in
which case it shall be deemed to have been given and received on the next
business day. Any of such parties may change its address for service from time
to time by notice given in accordance with the foregoing. 

           SECTION
19 - The Warrants shall enure to the benefit of the Holder and its
successors and assigns and be binding upon the Company and its successors
including successors by way of amalgamation. 

B-9 




IN WITNESS WHEREOF Endeavour Silver Corp. has caused this
Warrant Certificate to be signed by a duly authorized signatory as of the
_______ day of __________________, 20____. 

ENDEAVOUR SILVER CORP. 

 

By:   
__________________________________________
          
Authorized Signatory 

B-10 




Schedule “A” (to SCHEDULE “B”) 

  SUBSCRIPTION FORM

	TO: 	ENDEAVOUR SILVER CORP.



          The
undersigned holder of the enclosed Warrant Certificate (the “Warrant
Certificate”) hereby irrevocably subscribes for __________________ common shares
(the “Common Shares”) of ENDEAVOUR SILVER CORP. (the “Company”) pursuant
to the Warrant Certificate at the Exercise Price per Common Share specified in
the said Warrant Certificate and, except in the case of a Cashless Exercise
Election (as defined in the Warrant Certificate), encloses herewith cash or a
certified cheque, money order, bank draft or wire transfer payable to the order
of the Company in payment of the subscription price therefor. 

          In
connection with the exercise of the Warrants represented by the Warrant
Certificate (the “Warrants”), the undersigned represents and warrants as follows
(please check the ONE box applicable): 

         
[   ]  (i) The undersigned holder (i) purchased these Warrants
directly from the Company pursuant to a written subscription agreement for the
purchase of convertible debentures (the “Convertible Debentures”), (ii) is
exercising these Warrants solely for its own account and not on behalf of any
other person and (iii) was an “accredited investor”, as such term is defined in
Rule 501(A) of Regulation D under the United States Securities Act of 1933, as
amended (the “1933 Act”), both on the date the Convertible Debentures were
purchased from the Company and on the date of exercise of these Warrants; or


         
[   ]   (ii) The undersigned holder has delivered a written
opinion of counsel of recognized standing in form and substance reasonably
satisfactory to the Company to the effect that an exemption from the
registration requirements of the 1933 Act and applicable state securities laws
is available for the issuance of the Common Shares underlying the exercised
Warrants.

         
Note: Except as otherwise set forth in the Warrant Certificate,
the undersigned holder understands that the certificates representing the Common
Shares issued upon the exercise of Warrants will bear a legend restricting
transfer without registration under the 1933 Act and applicable state securities
laws unless an exemption from registration is available. 

         
Note: If Box (ii) is checked, any opinion tendered must be in
form and substance reasonably satisfactory to the Company. Holders planning to
deliver an opinion of counsel in connection with the exercise of a Warrant
should contact the Company in advance to determine whether any opinions to be
tendered will be acceptable to the Company. 

          If any
Warrants represented by the Warrant Certificate are not being exercised, a new
Warrant Certificate will be issued and delivered with the Common Share
certificates. 

Cashless Exercise Election: If the undersigned wishes to
make a Cashless Exercise Election (as defined in the Warrant Certificate), the
undersigned must check the following box. 


	 	[   ]	The undersigned hereby makes a Cashless
      Exercise Election in respect of the Common Shares subscribed for herein.
    



B-11 




          The
undersigned hereby directs that the Common Shares hereby subscribed for be
issued and delivered as follows: 

	Name in Full 	Address in Full 	Number of Shares 
	 	 	 
	______________________________	______________________________	______________________________
	 	______________________________	
	 	______________________________	


(Please state full names in which share certificates are to
be issued, stating whether Mr., Mrs., Ms. or Miss is applicable. If any of the
Common Shares are to be issued to a person other than the Holder, the Holder
must pay to the Company all exigible transfer taxes and/or fees) 

          Dated
this ________ day of __________________, 20___.

 

	Witness 	 	Signature
      of Holder or Assignee 
	 	 	 
	 	 	 
	 	 	 
	  	 	Address of Holder or Assignee



Instructions For Subscription 

          The
above subscription form is to be signed by the Holder or an Assignee. The
signature to the subscription as signed by the Holder must correspond in every
particular with the name written upon the face of this Warrant Certificate or if
the subscription is signed by an Assignee, must correspond in every particular
with the name of the Assignee shown on the Assignment Form, in the form annexed
to the Warrant Certificate as Schedule “B”, which must accompany this
subscription form. 

          The above
  subscription form must be (i) signed and (ii), subject to a Cashless Exercise
  Election, accompanied by payment in Canadian funds of the subscription price
  specified in the Warrant by cash, certified cheque or bank draft payable to
  the Company at par in Vancouver and (iii) must be surrendered at the office
  of the Company, 301 – 700 West Pender Street, Vancouver, B.C. V6C 1G8,
  at or before 5:00 p.m. (Eastern time) on February •, 2014, at which time
  the right to subscribe will expire. 

          No
fractional Common Shares will be issued. The undersigned shall not be entitled
to any compensation or other right in lieu of a fractional Common Share, as the
case may be. 

          Upon
surrender and payment (if applicable) and otherwise subject to the terms of the
Warrant, the Company will issue to the person named in the subscription form the
number of Common Shares subscribed for (or, in the case of a Cashless Exercise
Election, the number of Common Shares to be issued in respect of such
subscription pursuant to the formula set out in Section 1 of the Warrant
Certificate) and within 3 business days, deliver to such person at the address
specified in the subscription form a certificate evidencing the Common Shares
subscribed for( or in the case of a Cashless Exercise Election, evidencing the
Common Shares entitled to). If the Holder subscribes for a lesser number of
Common Shares than the number of Common Shares referred to in the Warrant
Certificate, the Holder will be entitled to receive a further Warrant
Certificate in respect of the Common Shares referred to in the Warrant
Certificate but not subscribed for. All certificates representing the foregoing
securities shall bear any applicable restrictive legends. 

B-12 

    




Schedule “B” (to SCHEDULE “B”) 
ASSIGNMENT
FORM 

(Any transfer of warrants will require compliance with
applicable securities legislation. 
Transferors and Assignees are urged to
contact legal counsel before effecting any such transfer.) 

	TO: 	ENDEAVOUR SILVER CORP.
  


FOR VALUE RECEIVED, the undersigned (the “Transferor”) (i)
hereby sells, transfers and assigns to _________________________________ (the
“Assignee”), ________________ common share purchase warrants (the “Warrants”) of
Endeavour Silver Corp. (the “Company”) registered in the name of the undersigned
represented by Warrant Certificate No. _____________ and does hereby irrevocably
appoint the Company as its attorney with full power of substitution to transfer
the Warrants on the appropriate register of the transfers for the Warrants; and
(ii) hereby confirms that the transfer is made in compliance with all applicable
securities legislation and requirements of regulatory authorities. 

	 	DATED this ____ day of ____________________, 20____. 
	 	 	 
	 	 	 
	 	 	 
	 	Signature Guarantee 	 
	 	 	 
	 	Signature of Registered Holder	 
	 	 	 
	 	Name of Registered Holder (Please
      Print) 	 
	 	 	 
	 	 	 
	 	(The following to be completed by
      the Assignee) 	 
	 	 	 
	 	Signature Guarantee 	 
	 	 	 
	 	Signature of Assignee 	 
	 	 	 
	 	Name of Assignee (Please Print)    	 
	 	 	 
	 	Date 	 


Instructions: 

Signature of the Warrant Holder must be the signature of the
person appearing on the face of this Warrant Certificate. 

If the Assignment Form is signed by a trustee, executor,
administrator, curator, guardian, attorney, officer of a corporation or any
person acting in a fiduciary or representative capacity, the certificate must be
accompanied by evidence of authority to sign satisfactory to the Company. 

B-13 




The signature of the Warrant Holder on the Assignment Form must
be guaranteed by an authorized officer of a chartered bank, trust company or
medallion guaranteed by a member of a recognized medallion guarantee program.


Warrants shall only be transferable in accordance with the
Terms and Conditions of the Warrant Certificate, applicable laws and the rules
and policies of any applicable stock exchange. The Warrants may be pledged;
provided, however, that the assignee must be a U.S. Accredited Investor and such
transfer must comply with applicable United States federal and state securities
laws and Canadian federal and provincial securities laws. 

B-14 




Schedule “C” (to SCHEDULE “B”) 
CERTIFICATE OF
ASSIGNEE 

The undersigned (the “Assignee”) hereby confirms that
the transfer of Warrants to the Assignee is made in compliance with all,
provided for in the accompanying Assignment Form, applicable securities
legislation and requirements of regulatory authorities. 

          DATED
the _________ day of ________________________, 20_____. 

 

	Signature Guaranteed
    	 	(Signature of Assignee) 
	(by a Canadian chartered bank, trust 	 	  
	company or Medallion Guaranteed by a 	 	  
	recognized Medallion Guarantee Program) 	 	  


                   
Instructions: 

1.          
The Warrants may be pledged; provided, however, that the Assignee must be a U.S.
Accredited Investor and such transfer must comply with applicable United States
federal and state securities laws and Canadian federal and provincial securities
laws and the Company may seek additional documentation from the Assignee to
satisfy itself of these facts. 

2.          
Signature of the Warrant holder must be the signature of the registered holder
appearing on the face of the Warrant Certificate. 

3.          
If the Assignment Form is signed by an agent, executor, administrator, curator,
guardian, attorney, officer of a corporation or any Person acting in a fiduciary
or representative capacity, it must be accompanied by evidence of authority to
sign satisfactory to the Company, acting reasonably. 

4.          
The signatures on the Assignment Form must be guaranteed by a Schedule 1 major
chartered bank/trust company or a member of an acceptable medallion guarantee
program. The guarantor must affix a stamp bearing the actual words “Signature
Guaranteed”. Signature guarantees are not accepted from Treasury Branches or
credit unions unless they are members of the Stamp Medallion Program. In the
United States, signature guarantees must be done by members of the “Medallion
Signature Guarantee Program” only. 

5.          
Warrants shall only be transferable in accordance with applicable laws. The
transfer of warrants may result in the Common Shares received upon the exercise
of the warrants not being freely tradable in the jurisdiction of the purchaser.


B-15 




SCHEDULE “C” - FORM OF REDEMPTION NOTICE 

To the annexed Trust Indenture dated as of February •, 2009
between Endeavour Silver Corp. and Computershare Trust Company of Canada, as
trustee 

ENDEAVOUR SILVER CORP. 

10% SUBORDINATED UNSECURED CONVERTIBLE REDEEMABLE DEBENTURES


REDEMPTION NOTICE 

	To: 	
      Holders of 10% Subordinated Unsecured Convertible
      Redeemable Debentures (the “Debentures”) of Endeavour Silver Corp.
      (the “Corporation”) 

	  	
      

	Note: 	
      All capitalized terms used herein have the meaning
      ascribed thereto in the Indenture (as defined below), unless otherwise
      indicated. 



          Notice
  is hereby given pursuant to Section 5.3 of the trust indenture (the “Indenture”)
  dated as of February •, 2009 between the Corporation and Computershare
  Trust Company of Canada (the “Trustee”), that the aggregate
  principal amount of $• of the $• of Debentures outstanding will be
  redeemed as of • (the “Redemption Date”), upon payment
  of a redemption amount of $• (the “Redemption Price) for each
  $1,000 principal amount of Debentures, representing the principal amount of
  Debentures redeemed plus all accrued and unpaid interest thereon to but excluding
  the Redemption Date, plus a redemption fee equal to 7% of the principal amount
  of the Debentures to be redeemed. 

          The
Total Redemption Price will be payable upon presentation and surrender of the
Debentures called for redemption at the following corporate trust office: 

Computershare Trust Company of
Canada 
510 Burrard Street 
Vancouver, British Columbia 
V3C 3B9


          The
interest upon the principal amount of Debentures called for redemption shall
cease to be payable from and after the Redemption Date, unless payment of the
total Redemption Price shall not be made on presentation for surrender of such
Debentures at the above-mentioned corporate trust office on or after the
Redemption Date or prior to the setting aside of the total Redemption Price
pursuant to the Indenture. 

          A
Debenture called for redemption may be converted into Units of the Corporation,
subject to and in accordance with the terms (including the time limitations)
contained in such Debenture, by delivering such Debenture together with a
completed conversion form to Computershare Trust Company of Canada at the
address above. 

DATED: 

ENDEAVOUR SILVER CORP. 

_______________________________
(Authorized Director or
Officer of Endeavour Silver Corp.) 

C - 1