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SCHEDULE
"B"

PART
27

SPECIAL
RIGHTS AND RESTRICTIONS ATTACHING TO THE

REDEEMABLE,
CONVERTIBLE PREFERRED SHARES,

SERIES
A, AS A SERIES



The
first series of Preferred shares of the Company shall be designated the
Redeemable, Convertible Preferred Shares, Series A (the "Series A Preferred
Shares") and shall have attached thereto, in addition to the special rights
and restrictions attaching to the Preferred shares as a class, the following
special rights and restrictions (the "Series A Provisions"):

27.1

DEFINITIONS
AND INTERPRETATION

27.1.1

Definitions

Where
used in these Series A Provisions, the following words and phrases shall, unless
there is something in the context otherwise inconsistent therewith, have the
following meanings:

(a)

"Affiliate"
means any company or entity controlled by, controlling, or under common control
with a Party hereto and shall include any Person 50% or more of whose voting
shares or participating profit interest is owned or controlled, directly or
indirectly, by a Party, and any company which owns or controls, directly or
indirectly, 50% or more of the voting shares of a Party;

(b)

"Amphomycin
IND Filing Date" means the date of filing of an IND in a Major Market Country
for an Amphomycin-Related Product;

(c)

"Amphomycin-Related
Lead Compound" has the meaning set forth in the Asset Purchase Agreement;

(d)

"Amphomycin-Related
Product" has the meaning set forth in the Asset Purchase Agreement;

(e)

"Amphomycin
Tox Date" means the date of the achievement of the dosing of the first animal
in the first GLP Toxicology Study of an Amphomycin-Related Lead Compound;

(f)

"Asset
Purchase Agreement" means that certain asset purchase agreement to be entered
into between the Company and the Series A Preferred Holder relating to the
purchase by the Company of certain assets comprising the Series A Preferred
Holder's research program for polyene and amphomycin-related compounds dated
as of May 20, 2002;

(g)

"Company
Act" has the meaning set forth in Article 27.1.6;

---

-2-



(h)

"Common
Shares" means Common shares in the capital of the Company and, when used with
reference to a Successor Corporation, shall mean the class or classes of shares
with the greatest per share voting power entitled to vote generally and, in
particular, in the election of all directors of such Successor Corporation;

(i)

"Conversion"
means the conversion of the Series A Preferred Shares into Common Shares
pursuant to the terms set forth herein;

(j)

"Conversion
Date" has the meaning set forth in Article ;

(k)

"Conversion
Notice" has the meaning set forth in Article ;

(l)

"Conversion
Price" means the Current Market Price of Common Shares as at an applicable
Conversion Date;

(m)

"Corporate
Reorganization" means capital reorganization, reclassification, subdivision or
consolidation of the capital of the Company or a consolidation, merger,
arrangement or amalgamation (statutory or otherwise) of the Company with or into
another company or body corporate;

(n)

"Current
Market Price" of the Common Shares on any date means the U.S. Dollar
Equivalent of the average of the "closing prices" of Common Shares on The
Toronto Stock Exchange for the 5 Trading Days ending on the last Trading Day
prior to an applicable Milestone Date.  The "closing price" for each
Trading Day shall be the last reported sales price for sales of Common Shares on
The Toronto Stock Exchange (or, if the Common Shares are not then listed and
posted for trading on The Toronto Stock Exchange, on any other Stock Exchange),
provided however that in the event such average of the "closing prices" of
Common Shares on The Toronto Stock Exchange for the 5 Trading Days ending the
last Trading Day prior to an applicable Milestone Date is less than the U.S.
Dollar Equivalent of Cdn $0.29, the Current Market Price shall be deemed to
equal the U.S. Dollar Equivalent of Cdn $0.29, subject to adjustments from time
to time in accordance with Article .  If the Common Shares are not listed
on a Stock Exchange, then the provisions of Article  shall apply;

(o)

"Delisting
of Common Shares" means the Common Shares have been suspended, cease traded or
delisted from The Toronto Stock Exchange by any applicable regulatory
authority(ies) for a period of 10 consecutive Trading Days and the Common Shares
(or the Common Shares of a Successor Corporation, as may be applicable) are not
otherwise listed for trading on any other Stock Exchange during that 10 day
period;

(p)

"Effective
Date" means the date the Asset Purchase Agreement is entered into between
IntraBiotics Pharmaceuticals, Inc. and the Company;

(q)

"Entity"
has the meaning set forth in the Asset Purchase Agreement;

---

-3-



(r)

"Expiry
Redemption" has the meaning set forth in Article 27.9.5;

(s)

"GLP
Toxicology Study" has the meaning set forth in the Asset Purchase Agreement;

(t)

"Governmental
Body" has the meaning set forth in the Asset Purchase Agreement;

(u)

"herein",
"hereto", "hereunder", "hereof", "thereto" and similar
expressions mean or refer to these Series A Provisions and not to any particular
Article, and the expression "Article" followed by a number or a letter mean
and refer to the specific Article of these Series A Provisions;

(v)

"IND"
has the meaning as set forth in the Asset Purchase Agreement;

(w)

"Liquidation
Redemption Price" means an amount equal to U.S.$0.50 per Series A Preferred
Share;

(x)

"Major
Market Country" has the meaning as set forth in the Asset Purchase Agreement;

(y)

"Milestone(s)"
has the meaning set forth in Article ;

(z)

"Milestone
Date" means the date of the occurrence or achievement of a Milestone;

(aa)

"Milestone
Payments" has the meaning set forth in Article ;

(bb)

"Milestone
Redemption Price" has the meaning set forth in Article , as applicable to each
Milestone;

(cc)

"Party"
means either the Company or the Series A Preferred Holder;

(dd)

"Person"
means any individual, Entity or Governmental Body;

(ee)

"Polyene
IND Filing Date" means the date of the achievement of the filing of an IND in
a Major Market Country for a Polyene Product;

(ff)

"Polyene
Lead Compound" has the meaning set forth in the Asset Purchase Agreement;

(gg)

"Polyene
Product" has the meaning set forth in the Asset Purchase Agreement;

(hh)

"Polyene
Tox Date" means the date of the achievement of the dosing of the first animal
in the first GLP Toxicology Study of a Polyene Lead Compound;

(ii)

"Preferred
Share Expiry Date" has the meaning set forth in Article 27.9.5;

---

-4-



(jj)

"Redemption"
means the redemption of the Series A Preferred Shares by the Company;

(kk)

"Redemption
Date" has the meaning set forth in Article ;

(ll)

"Redemption
Notice" has the meaning set forth in Article ;

(mm)

"Series
A Preferred Holder" means the registered holder of the Series A Preferred
Shares;

(nn)

"Stock
Exchange" means the principal securities exchange on which the largest number
of Common Shares are listed or posted for trading and includes any one of The
Toronto Stock Exchange, the Canadian Venture Exchange, The Nasdaq National
Market, American Stock Exchange or the New York Stock Exchange;

(oo)

"Successor
Corporation" means the company or body corporate resulting or continuing from,
or otherwise surviving a Corporate Reorganization;

(pp)

"Successor
Shares" has the meaning set forth in Article ;

(qq)

"Third
Party" means any entity other than IntraBiotics Pharmaceuticals, Inc. or the
Company or their respective Affiliates;

(rr)

"Trading
Day" means any day on which the Stock Exchange upon which the Common Shares
are listed for trading is open for business and on which Common Shares have been
traded; and

(ss)

"U.S.
Dollar Equivalent" means the equivalent amount of U.S. dollars calculated from
Canadian currency according to the rate of exchange reported in The Wall
Street Journal, Western Edition.

27.1.2

Gender

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

27.1.3

Currency

All
monetary amounts referred to in these Series A Provisions shall be payable in
U.S. dollars by wire transfer or certified cheque.  Whenever conversion
from Canadian currency is required, such conversion shall be made at the rate of
exchange reported in The Wall Street Journal, Western Edition on each
applicable date.

27.1.4

Headings

Headings
and subheadings used in these Series A Provisions are for convenience of
reference only and shall not affect the construction or interpretation hereof.

---

-5-



27.1.5

Business
Day

In
the event that any date upon which any action is required to be taken by the
Company or the Series A Preferred Holder hereunder, is not a business day, then
such action shall be required to be taken on or by the next succeeding day that
is a business day.

27.1.6

Company
Act

These
Series A Provisions shall be governed by and are subject to the applicable
provisions of the Company Act (British Columbia), as such statute may
from time to time be amended, varied, replaced or re-enacted (the "Company Act")
and all other laws binding upon the Company and, except as otherwise expressly
provided herein, all terms used herein that are defined in the Company Act and
not otherwise defined herein shall have the meanings ascribed to them in the
Company Act.

27.2

NUMBER
OF SERIES A PREFERRED SHARES

The
maximum number of Series A Preferred Shares shall be 750,000.

27.3

VOTING
RIGHTS

Subject
to the provisions of the Company Act, the Series A Preferred Holder shall not be
entitled as such to vote at any general meeting of members of the Company.
 The Series A Preferred Holder shall be entitled to be given notice of and
be invited to attend meetings of voting members of the Company.  Upon
Conversion in accordance with the provisions hereof, the Common Shares issued in
any such Conversion shall have the voting rights equivalent to the voting rights
of all other Common Shares.

27.4

DIVIDENDS

The
Series A Preferred Holder shall not be entitled to receive dividends of any
kind.

27.5

DISSOLUTION
AND LIQUIDATION

In
the event of any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, or any other distribution of the assets of the Company
among its members for the purpose of winding up its affairs, the Series A
Preferred Holder shall be entitled to receive before any distribution is made to
holders of Common Shares or any other shares of the Company ranking junior to
the Series A Preferred Shares with respect to repayment of capital, the amount
equal to the Liquidation Redemption Price for each Series A Preferred Share then
held by such Series A Preferred Holder.  After payment to the Series A
Preferred Holder of the amounts so payable to it, the Series A Preferred Holder
shall not be entitled to share in any further distribution of the property or
assets of the Company.

---

-6-



27.6

COVENANTS

27.6.1

No
Impairment

Without
the consent of the Series A Preferred Holder, the Company shall not, by
amendment of its Memorandum or Articles or through any Corporate Reorganization,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under these Series A Provisions by the Company, but shall
at all times and in good faith assist in the carrying out of all of the
provisions of these Series A Provisions and in the taking of all action as may
be necessary or appropriate in order to protect the rights of the Series A
Preferred Holder against impairment.

27.7

MILESTONES

27.7.1

Milestones
and Milestone Payments

Upon
and subject to the terms and conditions of these Series A Provisions, the Series
A Preferred Shares shall, at the option of the Company, either be converted, in
whole or in part, into Common Shares pursuant to Article  or redeemed for
the an amount equal to U.S.$1 per Series A Preferred Share for each Series A
Preferred Share to be redeemed (the "Milestone Redemption Price") pursuant
to Article  (or any combination thereof) for a cash amount or value equal
to the appropriate U.S. dollar amount corresponding to certain time and
achievement milestones (the "Milestones") described in this Article
 through  (the "Milestone Payments") on or before 30 days after
the occurrence or achievement of an applicable Milestone in the case of a
Conversion (each such date referred to herein as a "Conversion Date") or on
or before 30 days after the occurrence or achievement of an applicable Milestone
in the case of a Redemption (each such date referred to as a "Redemption Date")
as follows:

(a)

upon
4 months after the Effective Date, XXXXXX Series A Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof);

(b)

upon
the Amphomycin Tox Date, XXXXXX Series A Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof);

(c)

upon
the Polyene Tox Date, XXXXXX Series A Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof);

(d)

upon
the Amphomycin IND Filing Date, XXXXXX Series A Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof); and,

---

-7-



(e)

upon
the Polyene IND Filing Date, XXXXXX Series A Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof).

27.8

CONVERSION

27.8.1

Conversion
at Company's Option

Subject
to the provisions of the Company Act and notwithstanding the special rights and
restrictions attached to any other series of Preferred shares of the Company,
the Company may, in its sole discretion pursuant to Article  and this
Article 27.8, upon giving notice as hereinafter provided, convert on the
Conversion Date the specified amount of the Series A Preferred Shares to be
converted pursuant to a Milestone provided such Series A Preferred Shares are
still issued and outstanding on such date and the right of Redemption attached
thereto has not theretofore been exercised, and issue to the Series A Preferred
Holder Common Shares as hereinafter provided in this Article .

27.8.2

Notice
of Conversion

In
the case of Conversion of the Series A Preferred Shares, the Company shall, not
more than 5 days after the occurrence or achievement of an applicable Milestone,
mail to the Series A Preferred Holder of the Series A Preferred Shares to be
converted pursuant to such Milestone a notice in writing of the intention of the
Company to convert such Series A Preferred Shares ("Conversion Notice").
 Such Conversion Notice shall be mailed in a prepaid letter addressed to
the Series A Preferred Holder at its address as it appears on the books of the
Company or in the event of the address of the Series A Preferred Holder not so
appearing then to the last known address of the Series A Preferred Holder and
shall set out the Conversion Price and the Conversion Date for such Conversion.

27.8.3

Procedure
for Conversion

(a)

On
any Conversion Date, in accordance with the Conversion Notice, the Company may
issue certificates for Common Shares, on presentation and surrender at the
registered office of the Company or any other place designated in the Conversion
Notice of the certificate or certificates representing such Series A Preferred
Shares called for Conversion, in the number equal to the number of Series A
Preferred Shares to be converted resulting from the occurrence or achievement of
said Milestone multiplied by a fraction, the numerator of which is the Milestone
Redemption Price for 1 Series A Preferred Share, and the denominator of which is
the Conversion Price. The certificates for Common Shares issued by the Company
to the Series A Preferred Holder shall be in accordance with the provisions
hereof, or in such name or names as the Series A Preferred Holder may direct in
writing (either in the said notice or otherwise), provided that such Series A
Preferred Holder shall pay any applicable transfer taxes.  If only part of
the Series A Preferred Shares represented by any certificate shall be
converted, a new certificate representing the balance of such Series A
Preferred Shares shall be issued to the Series A Preferred Holder at the
expense of the Company upon presentation and surrender of the first mentioned
certificate.

---

-8-



(b)

The
registered holder of the Common Shares resulting from a Conversion shall be
entitled to rank equally with the registered holders of all other Common Shares
in respect of all dividends payable to the holders of Common Shares who were
holders of record at the close of business on any date on or after the date of
such Conversion or the date of such declaration of such dividend.  Subject
as aforesaid and subject to the provisions of Article  through
 hereof, upon Conversion of all the Series A Preferred Shares, there shall
be no further payment or adjustment by the Company or on the Common Shares
resulting from such Conversion except that the Common Shares so resulting shall
thereafter participate with all other Common Shares.

(c)

The
right of the Company to convert the Series A Preferred Shares into Common Shares
shall be deemed to have been exercised and the registered holder of the Series A
Preferred Shares so converted (or any person or persons in whose name or names
the Series A Preferred Holder of such Series A Preferred Shares shall have
directed certificates representing Common Shares to be issued as provided in
Article  hereof) shall be deemed to have become a holder of Common Shares
of record of the Company for all purposes on the date of surrender of the
certificates representing the Series A Preferred Shares to be cancelled
accompanied by notice in writing as provided in Article  hereof,
notwithstanding any delay in the delivery of certificates representing the
Common Shares into which such Series A Preferred Shares have been converted.

(d)

The
Company shall not issue fractional shares upon any Conversion but in lieu
thereof the Company shall pay any fractional share amount in cash at the time of
delivery of the share certificate representing the number of Series A Preferred
Shares converted into Common Shares.

(e)

All
Common Shares resulting from any Conversion of Series A Preferred Shares into
Common Shares (including whole Common Shares resulting from the consolidation by
the Company of fractions of shares which result from Conversions) shall be fully
paid and non-assessable.  Nothing herein contained shall effect or restrict
the right of the Company to increase the number of its Common Shares in
accordance with the provisions of the Company Act and to issue such shares from
time to time.

27.8.4

Termination
of Conversion Alternative

To
the extent permitted by applicable law, if, after any Conversion, there is a
Delisting of Common Shares, then at the option of the Series A Preferred
Holder, all Series A Preferred Shares that represent future Milestone
Payments that are to become payable under Article  shall thereafter be
redeemed by the Company for the applicable Milestone Redemption Price within
10 business days after the occurrence or achievement of the future
Milestone.

---

-9-



27.9

REDEMPTION

27.9.1

Redemption
at Company's Option

Subject
to the provisions of the Company Act and notwithstanding the special rights and
restrictions attached to any other series of Preferred shares of the Company,
the Company may, in its sole discretion pursuant to Article  and this
Article , and upon giving notice as hereinafter provided, redeem on the
Redemption Date the specified amount of the Series A Preferred Shares to be
redeemed pursuant to such Milestone provided such Series A Preferred Shares are
still issued and outstanding on such date and the right of Conversion attached
thereto has not theretofore been exercised, and pay to the Series A Preferred
Holder the applicable Milestone Redemption Price.

27.9.2

Notice
of Redemption

In
the case of Redemption of the Series A Preferred Shares, the Company shall, not
more than 5 days after the occurrence or achievement of an applicable Milestone,
mail to the Series A Preferred Holder of the Series A Preferred Shares to be
redeemed pursuant to such Milestone a notice in writing of the intention of the
Company to redeem such Series A Preferred Shares ("Redemption Notice").
 Such Redemption Notice shall be mailed in a prepaid letter addressed to
the Series A Preferred Holder at its address as it appears on the books of the
Company or in the event of the address of the Series A Preferred Holder not so
appearing then to the last known address of the Series A Preferred Holder and
shall set out the applicable Milestone Redemption Price and the Redemption Date
for such Redemption.

27.9.3

Procedure
for Redemption

(a)

On
any Redemption Date, in accordance with the Redemption Notice, the Company shall
pay or cause to be paid to or to the order of the Series A Preferred Holder of
the Series A Preferred Shares to be redeemed the applicable Milestone Redemption
Price, on presentation and surrender at the registered office of the Company or
any other place designated in such Redemption Notice of the certificate or
certificates representing such Series A Preferred Shares called for Redemption.
 If only part of the Series A Preferred Shares represented by any
certificate shall be redeemed, a new certificate representing the balance of
such Series A Preferred Shares shall be issued to the Series A Preferred Holder
at the expense of the Company upon presentation and surrender of the first
mentioned certificate.

(b)

From
and after the Redemption Date specified in any such Redemption Notice, the
Series A Preferred Shares called for Redemption shall thereupon be redeemed and
the Series A Preferred Holder shall not be entitled to exercise any of the
rights in respect thereof unless payment of the applicable Milestone Redemption
Price shall not be made upon presentation of a certificate or certificates in
accordance with the foregoing provisions in which case the rights of the Series
A Preferred Holder shall remain unaffected.

---

-10-



(c)

The
Company shall have the right, no later than 25 days after the mailing of the
Redemption Notice as aforesaid, to deposit the amount of the applicable
Milestone Redemption Price of the Series A Preferred Shares so called for
Redemption, or of such of the said Series A Preferred Shares as are represented
by a certificate or certificates which have not at the date of such deposit been
surrendered by the Series A Preferred Holder in connection with such Redemption,
by wire transfer to a bank and account designated in writing by the Series A
Preferred Holder named in such Redemption Notice to be paid without interest to
or to the order of the Series A Preferred Holder called for Redemption upon
presentation and surrender to such bank of the certificate or certificates
representing the same and upon such deposit being made or upon the Redemption
Date, whichever is the later, the Series A Preferred Shares in respect whereof
such deposit shall have been made shall be redeemed and the rights of the Series
A Preferred Holder after such deposit or such Redemption Date, as the case may
be, shall be limited to receiving without interest the Milestone Redemption
Price so deposited against presentation and surrender of the said certificates
held by the Series A Preferred Holder.

(d)

The
Series A Preferred Shares which are redeemed in accordance herewith shall be
cancelled.

27.9.4

Redemption
Subject to Applicable Law

If,
upon the occurrence or achievement of any Milestone described in Article ,
the Company is not permitted by insolvency provisions or other provisions of
applicable law to redeem all or any portion of the Series A Preferred
Shares required to be redeemed hereunder (if not otherwise converted, as the
case may be), the Company shall, pursuant to the terms of this Article ,
redeem only the maximum number of Series A Preferred Shares (as determined
in good faith by the Board of Directors of the Company) it is then permitted to
redeem.

27.9.5

Expiry
Redemption

On
or after 8 years following the Effective Date (the "Preferred Share Expiry
Date"), the Company may elect in accordance with the provisions of Article
 to redeem all of the Series A Preferred Shares then still issued and
outstanding as of the Preferred Share Expiry Date for which the right of
Conversion or Redemption has not theretofore been exercised for an aggregate
redemption price of $1 (the "Expiry Redemption").  Any future Milestone
Payments, if such Expiry Redemption is in fact effected, will be payable in
accordance with the terms of the Asset Purchase Agreement.

27.10

ADJUSTMENTS

27.10.1

Adjustment
for Corporate Reorganization

If
and whenever there is a Corporate Reorganization whereunder the Series A
Preferred Holder holds Series A Preferred Shares which have not been converted
or redeemed (or are not to be converted or redeemed) prior to the record date
for such Corporate Reorganization, the Series A Preferred Holder shall be
entitled to receive and accept shares or other securities of the Company or of
the Successor Corporation, as the case may be, having the rights of Conversion
and Redemption substantially equivalent (as determined in good faith by the
Board of Directors of the Company) to those attaching to the Series A Preferred
Shares (the "Successor Shares"), and that, without limitation, upon the
exercise of such rights of Conversion attaching to the Successor Shares at any
time after the record date of such Corporate Reorganization, in lieu of the
number of Common Shares to which the Series A Preferred Holder would theretofore
have been entitled upon Conversion, the Series A Preferred Holder would be
entitled to receive as holder of the Successor Shares the aggregate number of
Common Shares of the Company or of the Successor Corporation, as applicable,
that the Series A Preferred Holder would have been entitled to receive as a
result of such Corporate Reorganization if, on the record date of the Corporate
Reorganization, the Series A Preferred Holder had been the registered holder of
the number of Common Shares to which it was theretofore entitled upon Conversion
upon the occurrence or achievement of the Milestones, subject to adjustment
thereafter in accordance with provisions the same, as nearly as may be possible,
as those contained in Articles  and  herein.

---

-11-



27.10.2

Adjustment
for Change in Common Shares

In
the case of any reclassification of, or other change in, the outstanding Common
Shares other than a Corporate Reorganization, the right of Conversion granted by
Article  shall be adjusted immediately after the record date for such
reclassification or other change so that the Series A Preferred Holder shall be
entitled to receive, upon any Conversion of Series A Preferred Shares pursuant
to the provisions hereof at any time after the record date of such
reclassification or other change, such shares, securities or other rights as
they would have received had such Series A Preferred Shares been converted into
Common Shares immediately prior to such record date, subject to adjustment
thereafter in accordance with provisions, the same as nearly may be possible, as
those contained in Articles  through .

27.10.3

Adjustment
for Other Dilutive Events

If
and whenever at any time any event shall occur as to which the provisions of
Articles  and  are not strictly applicable but the failure to make any
adjustment would not fairly protect the rights of Conversion or other rights and
privileges attached to the Series A Preferred Shares in accordance with the
essential intent and principles of this Article  or, if strictly applicable
would not fairly protect the rights of Conversion or other rights and privileges
attached to the Series A Preferred Shares in accordance with such essential
intent and principles, then the Company shall make such adjustment, if any, on a
basis consistent with the essential intent and principles established in this
Article , necessary to preserve, without dilution, the rights of Conversion and
other rights and privileges attached to the Series A Preferred Shares.

27.10.4

Notice
of Adjustment

Upon
the occurrence of any of the events listed in this Article , then and in each
such case the Company shall give written notice thereof, addressed to the Series
A Preferred Holder at the address of the Series A Preferred Holder as shown on
the books of the Company, or in the event of the address of the Series A
Preferred Holder not so appearing then to the last known address of the Series A
Preferred Holder.

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-12-



27.11

ISSUANCE

Series
A Preferred Shares may only be issued to IntraBiotics Pharmaceuticals, Inc. or
to its respective successors and permitted assigns.

27.12

TRANSFER

The
Series A Preferred Shares shall be non-transferable except to an Affiliate or
unrelated Third Party in connection with a merger, amalgamation or arrangement
(statutory or otherwise), consolidation or sale of substantially all of the
assets of IntraBiotics Pharmaceuticals, Inc. related to the Asset Purchase
Agreement.

---



SCHEDULE
"C"

PART
28

SPECIAL
RIGHTS AND RESTRICTIONS ATTACHING TO THE

REDEEMABLE,
CONVERTIBLE PREFERRED SHARES,

SERIES
B, AS A SERIES



The
second series of Preferred shares of the Company shall be designated the
Redeemable, Convertible Preferred Shares, Series B (the "Series B Preferred
Shares") and shall have attached thereto, in addition to the special rights
and restrictions attaching to the Preferred shares as a class, the following
special rights and restrictions (the "Series B Provisions"):

28.1

DEFINITIONS
AND INTERPRETATION

28.1.1

Definitions

Where
used in these Series B Provisions, the following words and phrases shall, unless
there is something in the context otherwise inconsistent therewith, have the
following meanings:

(a)

"Affiliate"
means any company or entity controlled by, controlling, or under common control
with a Party hereto and shall include any Person 50% or more of whose voting
shares or participating profit interest is owned or controlled, directly or
indirectly, by a Party, and any company which owns or controls, directly or
indirectly, 50% or more of the voting shares of a Party;

(b)

"Amended
Collaborative Research and License Agreement" means that certain amended
collaborative research and license agreement to be entered into between the
Company and the Series B Preferred Holder relating to the research, manufacture
and development of novel antifungal and antibacterial pharmaceutical products
dated as of May 20, 2002;

(c)

"Amphomycin
IND Filing Date" means the date of filing of an IND in a Major Market Country
for an Amphomycin-Related Product;

(d)

"Amphomycin
NDA Date" means the date an NDA is filed in a Major Market Country for an
Amphomycin-Related Product;

(e)

"Amphomycin
Phase II Data Analysis Date" means the date the analysis of Phase II data for
an Amphomycin-Related Product is completed;

(f)

"Amphomycin-Related
Lead Compound" has the meaning set forth in the Amended Collaborative Research
and License Agreement;

---

-2-



(g)

"Amphomycin-Related
Product" has the meaning set forth in the Amended Collaborative Research and
License Agreement;

(h)

"Amphomycin
Tox Date" means the date of the achievement of the dosing of the first animal
in the first GLP Toxicology Study of an Amphomycin-Related Lead Compound;

(i)

"Company
Act" has the meaning set forth in Article ;

(j)

"Common
Shares" means Common shares in the capital of the Company and, when used with
reference to a Successor Corporation, shall mean the class or classes of shares
with the greatest per share voting power entitled to vote generally and, in
particular, in the election of all directors of such Successor Corporation;

(k)

"Conversion"
means the conversion of the Series B Preferred Shares into Common Shares
pursuant to the terms set forth herein;

(l)

"Conversion
Date" has the meaning set forth in Article ;

(m)

"Conversion
Notice" has the meaning set forth in Article ;

(n)

"Conversion
Price" means the Current Market Price of Common Shares as at an applicable
Conversion Date;

(o)

"Corporate
Reorganization" means capital reorganization, reclassification, subdivision or
consolidation of the capital of the Company or a consolidation, merger,
arrangement or amalgamation (statutory or otherwise) of the Company with or into
another company or body corporate;

(p)

"Current
Market Price" of the Common Shares on any date means the U.S. Dollar
Equivalent of the average of the "closing prices" of Common Shares on The
Toronto Stock Exchange for the 5 Trading Days ending on the last Trading Day
prior to an applicable Milestone Date.  The "closing price" for each
Trading Day shall be the last reported sales price for sales of Common Shares on
The Toronto Stock Exchange (or, if the Common Shares are not then listed and
posted for trading on The Toronto Stock Exchange, on any other Stock Exchange),
provided however that in the event such average of the "closing prices" of
Common Shares on The Toronto Stock Exchange for the 5 Trading Days ending the
last Trading Day prior to an applicable Milestone Date is less than the U.S.
Dollar Equivalent of Cdn $0.29, the Current Market Price shall be deemed to
equal the U.S. Dollar Equivalent of Cdn $0.29, subject to adjustments from time
to time in accordance with Article .  If the Common Shares are not listed
on a Stock Exchange, then the provisions of Article  shall apply;

(q)

"Delisting
of Common Shares" means the Common Shares have been suspended, cease traded or
delisted from The Toronto Stock Exchange by any applicable regulatory
authority(ies) for a period of 10 consecutive Trading Days and the Common Shares
(or the Common Shares of a Successor Corporation, as may be applicable) are not
otherwise listed for trading on any other Stock Exchange during that 10 day
period;

---

-3-



(r)

"Effective
Date" means the date the Amended Collaborative Research and License Agreement
is entered into between BioSource Pharm, Inc. and the Company;

(s)

"Entity"
has the meaning set forth in the Amended Collaborative Research and License
Agreement;

(t)

"Expiry
Redemption" has the meaning set forth in Article ;

(u)

"GLP
Toxicology Study" has the meaning set forth in the Amended Collaborative
Research and License Agreement;

(v)

"Governmental
Body" has the meaning set forth in the Amended Collaborative Research and
License Agreement;

(w)

"herein",
"hereto", "hereunder", "hereof", "thereto" and similar
expressions mean or refer to these Series B Provisions and not to any particular
Article, and the expression "Article" followed by a number or a letter mean
and refer to the specific Article of these Series B Provisions;

(x)

"IND"
has the meaning as set forth in the Amended Collaborative Research and License
Agreement;

(y)

"Liquidation
Redemption Price" means an amount equal to U.S.$0.50 per Series B Preferred
Share;

(z)

"Major
Market Country" has the meaning as set forth in the Amended Collaborative
Research and License Agreement;

(aa)

"Milestone(s)"
has the meaning set forth in Article ;

(bb)

"Milestone
Date" means the date of the occurrence or achievement of a Milestone;

(cc)

"Milestone
Payments" has the meaning set forth in Article ;

(dd)

"Milestone
Redemption Price" has the meaning set forth in Article , as applicable to each
Milestone;

(ee)

"Party"
means either the Company or the Series B Preferred Holder;

(ff)

"Person"
means any individual, Entity or Governmental Body;

(gg)

"Polyene
IND Filing Date" means the date of the achievement of the filing of an IND in
a Major Market Country for a Polyene Product;

(hh)

"Polyene
Lead Compound" has the meaning set forth in the Amended Collaborative Research
and License Agreement;

---

-4-



(ii)

"Polyene
NDA Date" means the date an NDA in a Major Market Country is filed for a
Polyene Product;

(jj)

"Polyene
Phase II Data Analysis Date" means the date the Phase II analysis for a
Polyene Product is completed;

(kk)

"Polyene
Product" has the meaning set forth in the Amended Collaborative Research and
License Agreement;

(ll)

"Polyene
Tox Date" means the date of the achievement of the dosing of the first animal
in the first GLP Toxicology Study of a Polyene Lead Compound;

(mm)

"Preferred
Share Expiry Date" has the meaning set forth in Article ;

(nn)

"Redemption"
means the redemption of the Series B Preferred Shares by the Company;

(oo)

"Redemption
Date" has the meaning set forth in Article ;

(pp)

"Redemption
Notice" has the meaning set forth in Article ;

(qq)

"Series
B Preferred Holder" means the registered holder of the Series B Preferred
Shares;

(rr)

"Stock
Exchange" means the principal securities exchange on which the largest number
of Common Shares are listed or posted for trading and includes any one of The
Toronto Stock Exchange, the Canadian Venture Exchange, The Nasdaq National
Market, American Stock Exchange or the New York Stock Exchange;

(ss)

"Successor
Corporation" means the company or body corporate resulting or continuing from,
or otherwise surviving a Corporate Reorganization;

(tt)

"Successor
Shares" has the meaning set forth in Article ;

(uu)

"Third
Party" means any entity other than BioSource Pharm, Inc. or the Company or
their respective Affiliates;

(vv)

"Trading
Day" means any day on which the Stock Exchange upon which the Common Shares
are listed for trading is open for business and on which Common Shares have been
traded; and

(ww)

"U.S.
Dollar Equivalent" means the equivalent amount of U.S. dollars calculated from
Canadian currency according to the rate of exchange reported in The Wall
Street Journal, Western Edition.

28.1.2

Gender

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

---

-5-



28.1.3

Currency

All
monetary amounts referred to in these Series B Provisions shall be payable in
U.S. dollars by wire transfer or certified cheque.  Whenever conversion
from Canadian currency is required, such conversion shall be made at the rate of
exchange reported in The Wall Street Journal, Western Edition on each
applicable date.

28.1.4

Headings

Headings
and subheadings used in these Series B Provisions are for convenience of
reference only and shall not affect the construction or interpretation hereof.

28.1.5

Business
Day

In
the event that any date upon which any action is required to be taken by the
Company or the Series B Preferred Holder hereunder, is not a business day, then
such action shall be required to be taken on or by the next succeeding day that
is a business day.

28.1.6

Company
Act

These
Series B Provisions shall be governed by and are subject to the applicable
provisions of the Company Act (British Columbia), as such statute may
from time to time be amended, varied, replaced or re-enacted (the "Company Act")
and all other laws binding upon the Company and, except as otherwise expressly
provided herein, all terms used herein that are defined in the Company Act and
not otherwise defined herein shall have the meanings ascribed to them in the
Company Act.

28.2

NUMBER
OF SERIES B PREFERRED SHARES

The
maximum number of Series B Preferred Shares shall be 1,000,000.

28.3

VOTING
RIGHTS

Subject
to the provisions of the Company Act, the Series B Preferred Holder shall not be
entitled as such to vote at any general meeting of members of the Company.
 The Series B Preferred Holder shall be entitled to be given notice of and
be invited to attend meetings of voting members of the Company.  Upon
Conversion in accordance with the provisions hereof, the Common Shares issued in
any such Conversion shall have the voting rights equivalent to the voting rights
of all other Common Shares.

28.4

DIVIDENDS

The
Series B Preferred Holder shall not be entitled to receive dividends of any
kind.

---

-6-



28.5

DISSOLUTION
AND LIQUIDATION

In
the event of any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, or any other distribution of the assets of the Company
among its members for the purpose of winding up its affairs, the Series B
Preferred Holder shall be entitled to receive before any distribution is made to
holders of Common Shares or any other shares of the Company ranking junior to
the Series B Preferred Shares with respect to repayment of capital, the amount
equal to the Liquidation Redemption Price for each Series B Preferred Share then
held by such Series B Preferred Holder.  After payment to the Series B
Preferred Holder of the amounts so payable to it, the Series B Preferred Holder
shall not be entitled to share in any further distribution of the property or
assets of the Company.

28.6

COVENANTS

28.6.1

No
Impairment

Without
the consent of the Series B Preferred Holder, the Company shall not, by
amendment of its Memorandum or Articles or through any Corporate Reorganization,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under these Series B Provisions by the Company, but shall
at all times and in good faith assist in the carrying out of all of the
provisions of these Series B Provisions and in the taking of all action as may
be necessary or appropriate in order to protect the rights of the Series B
Preferred Holder against impairment.

28.7

MILESTONES

28.7.1

Milestones
and Milestone Payments

Upon
and subject to the terms and conditions of these Series B Provisions, the Series
B Preferred Shares shall, at the option of the Company, either be converted, in
whole or in part, into Common Shares pursuant to Article  or redeemed for
the an amount equal to U.S.$1 per Series B Preferred Share for each Series B
Preferred Share to be redeemed (the "Milestone Redemption Price") pursuant
to Article  (or any combination thereof) for a cash amount or value equal
to the appropriate U.S. dollar amount corresponding to certain time and
achievement milestones (the "Milestones") described in this Article
 through  (the "Milestone Payments") on or before 30 days after
the occurrence or achievement of an applicable Milestone in the case of a
Conversion (each such date referred to herein as a "Conversion Date") or on
or before 30 days after the occurrence or achievement of an applicable Milestone
in the case of a Redemption (each such date referred to as a "Redemption Date")
as follows:

(a)

upon
the Amphomycin Tox Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof);

---

-7-



(b)

upon
the Polyene Tox Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof);

(c)

upon
the Amphomycin IND Filing Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof);

(d)

upon
the Polyene IND Filing Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof);

(e)

upon
the Amphomycin Phase II Data Analysis Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof);

(f)

upon
the Polyene Phase II Data Analysis Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof);

(g)

upon
the Amphomycin NDA Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common
Shares representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof); and,

(h)

upon
the Polyene NDA Date, XXXXXX Series
B Preferred Shares shall either be converted into such number of Common Shares
representing an aggregate value of $XXXXXX
or redeemed for the Milestone Redemption Price of $XXXXXX
(or any combination thereof).

28.8

CONVERSION

28.8.1

Conversion
at Company's Option

Subject
to the provisions of the Company Act and notwithstanding the special rights and
restrictions attached to any other series of Preferred shares of the Company,
the Company may, in its sole discretion pursuant to Article  and this
Article , upon giving notice as hereinafter provided, convert on the
Conversion Date the specified amount of the Series B Preferred Shares to be
converted pursuant to a Milestone provided such Series B Preferred Shares are
still issued and outstanding on such date and the right of Redemption attached
thereto has not theretofore been exercised, and issue to the Series B Preferred
Holder Common Shares as hereinafter provided in this Article .

---

-8-



28.8.2

Notice
of Conversion

In
the case of Conversion of the Series B Preferred Shares, the Company shall, not
more than 5 days after the occurrence or achievement of an applicable Milestone,
mail to the Series B Preferred Holder of the Series B Preferred Shares to be
converted pursuant to such Milestone a notice in writing of the intention of the
Company to convert such Series B Preferred Shares ("Conversion Notice").
 Such Conversion Notice shall be mailed in a prepaid letter addressed to
the Series B Preferred Holder at its address as it appears on the books of the
Company or in the event of the address of the Series B Preferred Holder not so
appearing then to the last known address of the Series B Preferred Holder and
shall set out the Conversion Price and the Conversion Date for such Conversion.

28.8.3

Procedure
for Conversion

(a)

On
any Conversion Date, in accordance with the Conversion Notice, the Company may
issue certificates for Common Shares, on presentation and surrender at the
registered office of the Company or any other place designated in the Conversion
Notice of the certificate or certificates representing such Series B Preferred
Shares called for Conversion, in the number equal to the number of Series B
Preferred Shares to be converted resulting from the occurrence or achievement of
said Milestone multiplied by a fraction, the numerator of which is the Milestone
Redemption Price for 1 Series B Preferred Share, and the denominator of which is
the Conversion Price. The certificates for Common Shares issued by the Company
to the Series B Preferred Holder shall be in accordance with the provisions
hereof, or in such name or names as the Series B Preferred Holder may direct in
writing (either in the said notice or otherwise), provided that such Series B
Preferred Holder shall pay any applicable transfer taxes.  If only part of
the Series B Preferred Shares represented by any certificate shall be converted,
a new certificate representing the balance of such Series B Preferred Shares
shall be issued to the Series B Preferred Holder at the expense of the Company
upon presentation and surrender of the first mentioned certificate.

(b)

The
registered holder of the Common Shares resulting from a Conversion shall be
entitled to rank equally with the registered holders of all other Common Shares
in respect of all dividends payable to the holders of Common Shares who were
holders of record at the close of business on any date on or after the date of
such Conversion or the date of such declaration of such dividend.  Subject
as aforesaid and subject to the provisions of Article  through
 hereof, upon Conversion of all the Series B Preferred Shares, there shall
be no further payment or adjustment by the Company or on the Common Shares
resulting from such Conversion except that the Common Shares so resulting shall
thereafter participate with all other Common Shares.

(c)

The
right of the Company to convert the Series B Preferred Shares into Common Shares
shall be deemed to have been exercised and the registered holder of the Series B
Preferred Shares so converted (or any person or persons in whose name or names
the Series B Preferred Holder of such Series B Preferred Shares shall have
directed certificates representing Common Shares to be issued as provided in
Article  hereof) shall be deemed to have become a holder of Common Shares
of record of the Company for all purposes on the date of surrender of the
certificates representing the Series B Preferred Shares to be cancelled
accompanied by notice in writing as provided in Article  hereof,
notwithstanding any delay in the delivery of certificates representing the
Common Shares into which such Series B Preferred Shares have been converted.

---

-9-



(d)

The
Company shall not issue fractional shares upon any Conversion but in lieu
thereof the Company shall pay any fractional share amount in cash at the time of
delivery of the share certificate representing the number of Series B Preferred
Shares converted into Common Shares.

(e)

All
Common Shares resulting from any Conversion of Series B Preferred Shares into
Common Shares (including whole Common Shares resulting from the consolidation by
the Company of fractions of shares which result from Conversions) shall be fully
paid and non-assessable.  Nothing herein contained shall effect or restrict
the right of the Company to increase the number of its Common Shares in
accordance with the provisions of the Company Act and to issue such shares from
time to time.

28.8.4

Termination
of Conversion Alternative

To
the extent permitted by applicable law, if, after any Conversion, there is a
Delisting of Common Shares, then at the option of the Series B Preferred Holder,
all Series B Preferred Shares that represent future Milestone Payments that are
to become payable under Article  shall thereafter be redeemed by the
Company for the applicable Milestone Redemption Price within 10 business
days after the occurrence or achievement of the future Milestone.

28.9

REDEMPTION

28.9.1

Redemption
at Company's Option

Subject
to the provisions of the Company Act and notwithstanding the special rights and
restrictions attached to any other series of Preferred shares of the Company,
the Company may, in its sole discretion pursuant to Article  and this
Article , and upon giving notice as hereinafter provided, redeem on the
Redemption Date the specified amount of the Series B Preferred Shares to be
redeemed pursuant to such Milestone provided such Series B Preferred Shares are
still issued and outstanding on such date and the right of Conversion attached
thereto has not theretofore been exercised, and pay to the Series B Preferred
Holder the applicable Milestone Redemption Price.

28.9.2

Notice
of Redemption

In
the case of Redemption of the Series B Preferred Shares, the Company shall, not
more than 5 days after the occurrence or achievement of an applicable Milestone,
mail to the Series B Preferred Holder of the Series B Preferred Shares to be
redeemed pursuant to such Milestone a notice in writing of the intention of the
Company to redeem such Series B Preferred Shares ("Redemption Notice").
 Such Redemption Notice shall be mailed in a prepaid letter addressed to
the Series B Preferred Holder at its address as it appears on the books of the
Company or in the event of the address of the Series B Preferred Holder not so
appearing then to the last known address of the Series B Preferred Holder and
shall set out the applicable Milestone Redemption Price and the Redemption Date
for such Redemption.

---

-10-



28.9.3

Procedure
for Redemption

(a)

On
any Redemption Date, in accordance with the Redemption Notice, the Company shall
pay or cause to be paid to or to the order of the Series B Preferred Holder of
the Series B Preferred Shares to be redeemed the applicable Milestone Redemption
Price, on presentation and surrender at the registered office of the Company or
any other place designated in such Redemption Notice of the certificate or
certificates representing such Series B Preferred Shares called for Redemption.
 If only part of the Series B Preferred Shares represented by any
certificate shall be redeemed, a new certificate representing the balance of
such Series B Preferred Shares shall be issued to the Series B Preferred Holder
at the expense of the Company upon presentation and surrender of the first
mentioned certificate.

(b)

From
and after the Redemption Date specified in any such Redemption Notice, the
Series B Preferred Shares called for Redemption shall thereupon be redeemed and
the Series B Preferred Holder shall not be entitled to exercise any of the
rights in respect thereof unless payment of the applicable Milestone Redemption
Price shall not be made upon presentation of a certificate or certificates in
accordance with the foregoing provisions in which case the rights of the Series
B Preferred Holder shall remain unaffected.

(c)

The
Company shall have the right, no later than 25 days after the mailing of the
Redemption Notice as aforesaid, to deposit the amount of the applicable
Milestone Redemption Price of the Series B Preferred Shares so called for
Redemption, or of such of the said Series B Preferred Shares as are represented
by a certificate or certificates which have not at the date of such deposit been
surrendered by the Series B Preferred Holder in connection with such Redemption,
by wire transfer to a bank and account designated in writing by the Series B
Preferred Holder named in such Redemption Notice to be paid without interest to
or to the order of the Series B Preferred Holder called for Redemption upon
presentation and surrender to such bank of the certificate or certificates
representing the same and upon such deposit being made or upon the Redemption
Date, whichever is the later, the Series B Preferred Shares in respect whereof
such deposit shall have been made shall be redeemed and the rights of the Series
B Preferred Holder after such deposit or such Redemption Date, as the case may
be, shall be limited to receiving without interest the Milestone Redemption
Price so deposited against presentation and surrender of the said certificates
held by the Series B Preferred Holder.

---

-11-



(d)

The
Series B Preferred Shares which are redeemed in accordance herewith shall be
cancelled.

28.9.4

Redemption
Subject to Applicable Law

If,
upon the occurrence or achievement of any Milestone described in Article ,
the Company is not permitted by insolvency provisions or other provisions of
applicable law to redeem all or any portion of the Series B Preferred Shares
required to be redeemed hereunder (if not otherwise converted, as the case may
be), the Company shall, pursuant to the terms of this Article , redeem only
the maximum number of Series B Preferred Shares (as determined in good faith by
the Board of Directors of the Company) it is then permitted to redeem.

28.9.5

Expiry
Redemption

On
or after 8 years following the Effective Date (the "Preferred Share Expiry
Date"), the Company may elect in accordance with the provisions of Article
 to redeem all of the Series B Preferred Shares then still issued and
outstanding as of the Preferred Share Expiry Date for which the right of
Conversion or Redemption has not theretofore been exercised for an aggregate
redemption price of $1 (the "Expiry Redemption").  Any future Milestone
Payments, if such Expiry Redemption is in fact effected, will be payable in
accordance with the terms of the Amended Collaborative Research and License
Agreement.

28.10

ADJUSTMENTS

28.10.1

Adjustment
for Corporate Reorganization

If
and whenever there is a Corporate Reorganization whereunder the Series B
Preferred Holder holds Series B Preferred Shares which have not been converted
or redeemed (or are not to be converted or redeemed) prior to the record date
for such Corporate Reorganization, the Series B Preferred Holder shall be
entitled to receive and accept shares or other securities of the Company or of
the Successor Corporation, as the case may be, having the rights of Conversion
and Redemption substantially equivalent (as determined in good faith by the
Board of Directors of the Company) to those attaching to the Series B Preferred
Shares (the "Successor Shares"), and that, without limitation, upon the
exercise of such rights of Conversion attaching to the Successor Shares at any
time after the record date of such Corporate Reorganization, in lieu of the
number of Common Shares to which the Series B Preferred Holder would theretofore
have been entitled upon Conversion, the Series B Preferred Holder would be
entitled to receive as holder of the Successor Shares the aggregate number of
Common Shares of the Company or of the Successor Corporation, as applicable,
that the Series B Preferred Holder would have been entitled to receive as a
result of such Corporate Reorganization if, on the record date of the Corporate
Reorganization, the Series B Preferred Holder had been the registered holder of
the number of Common Shares to which it was theretofore entitled upon Conversion
upon the occurrence or achievement of the Milestones, subject to adjustment
thereafter in accordance with provisions the same, as nearly as may be possible,
as those contained in Articles  and  herein.

---

-12-



28.10.2

Adjustment
for Change in Common Shares

In
the case of any reclassification of, or other change in, the outstanding Common
Shares other than a Corporate Reorganization, the right of Conversion granted by
Article  shall be adjusted immediately after the record date for such
reclassification or other change so that the Series B Preferred Holder shall be
entitled to receive, upon any Conversion of Series B Preferred Shares pursuant
to the provisions hereof at any time after the record date of such
reclassification or other change, such shares, securities or other rights as
they would have received had such Series B Preferred Shares been converted into
Common Shares immediately prior to such record date, subject to adjustment
thereafter in accordance with provisions, the same as nearly may be possible, as
those contained in Articles  through .

28.10.3

Adjustment
for Other Dilutive Events

If
and whenever at any time any event shall occur as to which the provisions of
Articles  and  are not strictly applicable but the failure to make any
adjustment would not fairly protect the rights of Conversion or other rights and
privileges attached to the Series B Preferred Shares in accordance with the
essential intent and principles of this Article  or, if strictly applicable
would not fairly protect the rights of Conversion or other rights and privileges
attached to the Series B Preferred Shares in accordance with such essential
intent and principles, then the Company shall make such adjustment, if any, on a
basis consistent with the essential intent and principles established in this
Article , necessary to preserve, without dilution, the rights of Conversion and
other rights and privileges attached to the Series B Preferred Shares.

28.10.4

Notice
of Adjustment

Upon
the occurrence of any of the events listed in this Article , then and in each
such case the Company shall give written notice thereof, addressed to the Series
B Preferred Holder at the address of the Series B Preferred Holder as shown on
the books of the Company, or in the event of the address of the Series B
Preferred Holder not so appearing then to the last known address of the Series B
Preferred Holder.

28.11

ISSUANCE

Series
B Preferred Shares may only be issued to BioSource Pharm, Inc. or to its
respective successors and permitted assigns.

28.12

TRANSFER

The
Series B Preferred Shares shall be non-transferable except to an Affiliate or
unrelated Third Party in connection with a merger, amalgamation or arrangement
(statutory or otherwise), consolidation or sale of substantially all of the
assets of BioSource Pharm, Inc. related to the Amended Collaborative Research
and License Agreement, so long as such Affiliate or unrelated Third Party
assumes all obligations set forth in the Amended Collaborative Research and
License Agreement and can demonstrate financial solvency to assume those
obligations.

---

Schedule
"B"

Part
29

Special
Rights and Restrictions Attaching to the Redeemable, Convertible Preferred
Shares of Micrologix, Series C, as a Series

The
third series of Preferred shares of the Company shall be designated the
Redeemable, Convertible Preferred Shares, Series C (the "Series C Preferred
Shares") and shall have attached thereto, in addition to the special rights
and restrictions attaching to the Preferred shares as a class, the following
special rights and restrictions (the "Series C Provisions"):

29.1

DEFINITIONS
AND INTERPRETATION

29.1.1

Definitions

Where
used in these Series C Provisions, the following words and phrases shall, unless
there is something in the context otherwise inconsistent therewith, have the
following meanings:

(a)

"Affiliate"
means any corporation, company, partnership, joint venture or other entity which
controls, is controlled by, or is under common control with a person or entity.
 For purposes of this Article 29.1.1(a), "control" shall mean (a) in
the case of corporate entities, direct or indirect ownership of at least fifty
percent (50%) of the stock or shares having the right to vote for the election
of directors, and (b) in the case of non-corporate entities, direct or indirect
ownership of at least fifty percent (50%) of the equity interest with the power
to direct the management and policies of such non-corporate entities;

(b)

"Business
Day" means any day that is not a Saturday, Sunday or holiday in British
Columbia;

(c)

"Change
in Control" means any of the following events unless the Series C Preferred
Holder agrees in writing that such an event shall not be considered a Change in
Control:

(A)

any
Corporate Reorganization in which the holders of capital of the Company
immediately prior to such Corporate Reorganization do not continue to hold
immediately following such merger or consolidation at least 60%, by voting power
and economic interest, of the capital of (1) the surviving or resulting
corporation or (2) if the surviving or resulting corporation is a wholly owned
subsidiary of another corporation immediately following such merger or
consolidation, the parent corporation of such surviving or resulting
corporation; or

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-2-



(B)

the
sale, in a single transaction or series of related transactions, by the Company
of all or substantially all the assets of the Company (except where such sale is
to a wholly owned subsidiary of the Company);

(d)

"Change
in Control Corporate Reorganization" means a Corporate Reorganization that
results in a Change in Control;

(e)

"Company
Act" has the meaning set forth in Article 29.1.6;

(f)

"Common
Shares" means Common shares in the capital of the Company;

(g)

"Conversion"
means the conversion of the Series C Preferred Shares into Common Shares
pursuant to the terms set forth herein;

(h)

"Conversion
Date" has the meaning set forth in Article 29.8.1;

(i)

"Conversion
Notice" has the meaning set forth in Article 29.8.2;

(j)

"Conversion
Price" means the Current Market Price of Common Shares as of the applicable
Milestone Date;

(k)

"Corporate
Reorganization" means capital reorganization, reclassification, subdivision or
consolidation of the capital of the Company or a consolidation, merger,
arrangement or amalgamation (statutory or otherwise) of the Company with or into
another company or body corporate;

(l)

"Current
Market Price" of the Common Shares on any date means the U.S. Dollar
Equivalent of the weighted average of the trading prices of Common Shares on The
Toronto Stock Exchange (or, if the Common Shares are not then listed and posted
for trading on The Toronto Stock Exchange, on any other Stock Exchange), for the
five consecutive Trading Days ending on the last Trading Day prior to an
applicable Milestone Date (subject to appropriate adjustment for stock splits,
stock dividends, reclassifications and similar recapitalizations affecting the
Common Shares).  In the event such weighted average trading price is less
than the U.S. Dollar Equivalent as of the applicable Milestone Date of Cdn $0.88
(subject to appropriate adjustment for stock splits, stock dividends,
reclassifications and similar recapitalizations affecting the Common Shares),
the Current Market Price shall be deemed to equal the U.S. Dollar Equivalent as
of the applicable Milestone Date of Cdn $0.88, (subject to appropriate
adjustment for stock splits, stock dividends, reclassifications and similar
recapitalizations affecting the Common Shares);

(m)

"Delisting
of Common Shares" means the Common Shares have been suspended, cease traded or
have been delisted from all Stock Exchanges for a period of ninety consecutive
Trading Days or are not then listed and posted for trading on any Stock Exchange
for a period of ninety consecutive Trading Days;

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-3-



(n)

"EMEA"
shall mean the European Medicines Evaluation Agency or any successor agency
thereof;

(o)

"Expiry
Redemption" has the meaning set forth in Article 29.9.5;

(p)

"FDA"
means the United States Food and Drug Administration or any successor agency
thereof;

(q)

"herein",
"hereto", "hereunder", "hereof", "thereto" and similar
expressions mean or refer to these Series C Provisions and not to any particular
Article, and the expression "Article" followed by a number or a letter mean
and refer to the specific Article of these Series C Provisions;

(r)

"HPV
Antisense Product" has the meaning set forth in the License Agreement;

(s)

"License
Agreement" means that certain collaboration and license agreement to be
entered into between the Company and the Series C Preferred Holder dated as of
September 11, 2002;

(t)

"Liquidation
Redemption Price" means an amount equal in the aggregate to U.S.$1;

(u)

"Major
European Countries" means any of France, Germany, Italy or the United Kingdom;

(v)

"Milestone(s)"
has the meaning set forth in Article 29.7.1;

(w)

"Milestone
Date" has the meaning set forth in Article 29.7.1;

(x)

"Milestone
Payments" has the meaning set forth in Article 29.7.1;

(y)

"Milestone
Redemption Price" means an amount equal to U.S. $1 for each Series C Preferred
Share to be redeemed (subject to appropriate adjustment for stock splits, stock
dividends, reclassifications and similar recapitalizations affecting the Series
C Preferred Shares);

(z)

"NDA"
has the meaning set forth in the License Agreement;

(aa)

"Phase
III Clinical Study" has the meaning set forth in the License Agreement;

(bb)

"Preferred
Share Expiry Date" has the meaning set forth in Article 29.9.5;

(cc)

"Redemption"
means the redemption of the Series C Preferred Shares by the Company;

(dd)

"Redemption
Date" has the meaning set forth in Article 29.9.1;

(ee)

"Redemption
Notice" has the meaning set forth in Article 29.9.2;

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-4-



(ff)

"Regulatory
Approval" has the meaning set forth in the License Agreement;

(gg)

"Series
C Preferred Holder" means the registered holder of the Series C Preferred
Shares;

(hh)

"Stock
Exchange" means the principal securities exchange on which the Common Shares
are listed or posted for trading and includes any one of The Toronto Stock
Exchange, The Nasdaq National Market, the New York Stock Exchange or the
American Stock Exchange;

(ii)

"Stock
Purchase Agreement" means the stock purchase agreement to be entered into
between the Company and the Series C Preferred Holder, dated as of December 17,
2002;

(jj)

"Trading
Day" means any day on which the Stock Exchange is open for business; and

(kk)

"U.S.
Dollar Equivalent" means the equivalent amount of U.S. dollars calculated from
Canadian currency according to the rate of exchange reported in The Wall
Street Journal(Eastern U.S. edition).

29.1.2

Gender

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

29.1.3

Currency

All
monetary amounts referred to in these Series C Provisions shall be payable in
U.S. dollars by wire transfer or certified cheque.  Whenever conversion
from Canadian currency is required, such conversion shall be made at the rate of
exchange reported in The Wall Street Journal(Eastern U.S. edition) on
each applicable date.

29.1.4

Headings

Headings
and subheadings used in these Series C Provisions are for convenience of
reference only and shall not affect the construction or interpretation hereof.

29.1.5

Business
Day

In
the event that any date upon which any action is required to be taken by the
Company or the Series C Preferred Holder hereunder, is not a Business Day, then
such action shall be required to be taken on or by the next succeeding day that
is a Business Day.

29.1.6

Company
Act

These
Series C Provisions shall be governed by and are subject to the applicable
provisions of the Company Act (British Columbia), as such statute may from time
to time be amended, varied, replaced or re-enacted (the "Company Act") and
all other laws binding upon the Company and, except as otherwise expressly
provided herein, all terms used herein that are defined in the Company Act and
not otherwise defined herein shall have the meanings ascribed to them in the
Company Act.

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-5-



29.2

NUMBER
OF SERIES C PREFERRED SHARES

The
maximum number of Series C Preferred Shares shall be 5,500,000.

29.3

VOTING
RIGHTS

Subject
to the provisions of the Company Act, the Series C Preferred Holder shall not be
entitled to vote the Series C Preferred Shares held by it at any general meeting
of members of the Company.  The Series C Preferred Holder shall be entitled
to be given notice of and be invited to attend meetings of voting members of the
Company.  Upon Conversion in accordance with the provisions hereof, the
Common Shares issued in any such Conversion shall have the voting rights
equivalent to the voting rights of all other Common Shares.

29.4

DIVIDENDS

No
dividends shall be payable on or in respect of the Series C Preferred Shares.

29.5

DISSOLUTION
AND LIQUIDATION

In
the event of any liquidation, dissolution or winding-up of the Company, whether
voluntary or involuntary, or any other distribution of the assets of the Company
among its members for the purpose of winding up its affairs, the Series C
Preferred Holder shall be entitled to receive before any distribution is made to
holders of Common Shares or any other shares of the Company ranking junior to
the Series C Preferred Shares with respect to repayment of capital, the amount
equal to the Liquidation Redemption Price.  After payment to the Series C
Preferred Holder of the amounts so payable to it, the Series C Preferred Holder
shall not be entitled to share in any further distribution of the property or
assets of the Company in respect of the Series C Preferred Shares.
 Notwithstanding the foregoing, upon such liquidation, dissolution or
winding up, all payments that are or would otherwise have become payable on or
after the effective date of such liquidation, dissolution or winding up under
Article 29.7.1 of these Series C Provisions shall be payable in cash pursuant to
Section 4.1(b) or 4.3 of the License Agreement within 10 Business Days following
the occurrence of the applicable Milestone.

29.6

COVENANTS

29.6.1

No
Impairment

Without
the consent of the Series C Preferred Holder, the Company shall not, by
amendment of its Memorandum or Articles or through any Corporate Reorganization,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed under these Series C Provisions by the Company, but shall
at all times and in good faith assist in the carrying out of all of the
provisions of these Series C Provisions and in the taking of all action as may
be necessary or appropriate in order to protect the rights of the Series C
Preferred Holder against impairment.

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-6-



29.7

MILESTONES

29.7.1

Milestones
and Milestone Payments

Upon
and subject to the terms and conditions of these Series C Provisions, and
Section 2.4.4 of the Stock Purchase Agreement, on or before ten Business Days
after the achievement of each milestone (a "Milestone") described in this
Article 29.7.1(a) through (f) (the date of the occurrence or achievement of such
Milestone is referred to herein as a "Milestone Date"), Micrologix shall pay
to Hybridon the appropriate dollar amount corresponding to the applicable
Milestone as set forth below (each, a "Milestone Payment") through the
redemption of a number of Series C Preferred Shares at a price per share equal
to the Milestone Redemption Price in accordance with Article 29.9 and/or through
the conversion of a number of Series C Preferred Shares into Common Shares
having a value based on the then applicable Conversion Price in accordance with
Article 29.8 (or a combination thereof) so that in all cases, except as
provided by law, the sum of the aggregate Milestone Redemption Price paid and
the value of the Common Shares into which the Series C Preferred Shares are
converted equals the Milestone Payment set forth below:

(a)

on
April 17, 2002, $XXXXXX;

(b)

upon
the commencement of the first Phase III Clinical Study of an HPV Antisense
Product, $XXXXXX;

(c)

upon
the first acceptance of a filing of an NDA by the FDA for an HPV Antisense
Product, $XXXXX;

(d)

upon
the first receipt of Regulatory Approval of an NDA for an HPV Antisense Product
by the FDA, $XXXXXX;

(e)

upon
the first receipt of Regulatory Approval from the EMEA for an HPV Antisense
Product in the European Community, or, if earlier, the first receipt of
Regulatory Approval of an HPV Antisense Product in any two Major European
Countries, $XXXXXX; and

(f)

upon
the first receipt of Regulatory Approval from the Japanese Koseisho for an HPV
Antisense Product in Japan, $XXXXXX.

29.8

CONVERSION

29.8.1

Conversion
at Company's Option

Subject
to the provisions of the Company Act and notwithstanding the special rights and
restrictions attached to any other series of Preferred shares of the Company,
the Company may, in its sole discretion pursuant to Article 29.7.1, and this
Article 29.8, but subject to the conditions in Article 29.8.5, upon giving
notice as hereinafter provided, convert as of a date within ten Business Days of
a Milestone Date (the "Conversion Date") up to the number of Series C
Preferred Shares provided with respect to such Milestone in Article 29.7.1,
provided such Series C Preferred Shares are still issued and outstanding on such
date and the right of Redemption attached thereto has not theretofore been
exercised, and issue to the Series C Preferred Holder Common Shares as
hereinafter provided in this Article 29.8.

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-7-



29.8.2

Notice
of Conversion

In
the case of Conversion of the Series C Preferred Shares, the Company shall, not
more than five Business Days after a Milestone Date, mail to the Series C
Preferred Holder of the Series C Preferred Shares to be converted pursuant to
such Milestone, a notice in writing of the intention of the Company to convert
such Series C Preferred Shares ("Conversion Notice").  Such Conversion
Notice shall be (a) sent by registered or certified mail, return receipt
requested, postage prepaid, (b) sent via a reputable overnight courier service,
(c) sent by facsimile transmission with an original to be followed the same day
via a reputable overnight courier service, or (d) personally delivered, in each
case properly addressed to the Series C Preferred Holder at its address as it
appears on the books of Company or,in the event of the address of the
Series C Preferred Holder not so appearing then to the last known address of the
Series C Preferred Holder, with the effective date of the notice being the
actual date of receipt by the recipient of such notice, and shall set out the
number of shares being converted, the Conversion Price with respect to the
applicable Milestone Date, the Conversion Date for such Conversion, the date
upon which the Series C Preferred Shares to be converted must be received by the
Company, as well as the place designated for Conversion.

29.8.3

Procedure
for Conversion

(a)

On
any Conversion Date, in accordance with a Conversion Notice, or thereafter, the
Company shall issue certificates for Common Shares, on presentation and
surrender at the registered office of the Company or any other place designated
in the Conversion Notice of the certificate or certificates representing such
Series C Preferred Shares called for Conversion, in the number equal to the
number of Series C Preferred Shares to be converted resulting from the
occurrence or achievement of said Milestone multiplied by a fraction, the
numerator of which is the then Milestone Redemption Price for 1 Series C
Preferred Share, and the denominator of which is the Conversion Price as of the
date of such Milestone.  The certificates for Common Shares issued by the
Company to the Series C Preferred Holder shall be in accordance with the
provisions hereof, or in such name or names as the Series C Preferred Holder may
direct in writing, provided that if issued in a name other than the Series C
Preferred Holder such Series C Preferred Holder shall pay any applicable
transfer taxes.  If only part of the Series C Preferred Shares represented
by any certificate shall be converted, a new certificate representing the
balance of such Series C Preferred Shares shall be issued to the Series C
Preferred Holder at the expense of the Company upon presentation and surrender
of the first mentioned certificate.

(b)

The
registered holder of the Common Shares resulting from a Conversion shall be
entitled to rank equally with the registered holders of all other Common Shares
in respect of all dividends payable to the holders of Common Shares who were
holders of record at the close of business on any date on or after the date of
such Conversion or the date of such declaration of such dividend.  Subject
as aforesaid and subject to the provisions of Article 29.10.1 and 29.10.2 hereof
and Section 2.4.4 of the Stock Purchase Agreement, upon Conversion of the Series
C Preferred Shares converted pursuant to the achievement of a Milestone, there
shall be no further payment or adjustment by the Company on the Common Shares
resulting from such Conversion except that the Common Shares so resulting shall
thereafter participate with all other Common Shares.

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-8-



(c)

Upon
receipt of the Conversion Notice, the holder of Series C Preferred Shares shall
surrender its certificate or certificates for the Series C Preferred Shares to
be converted to the Company at the place designated in the Conversion Notice,
and shall thereafter receive certificates for the number of Common Shares to
which such holder is entitled pursuant hereto. On the Conversion Date, all
outstanding Series C Preferred Shares to be converted pursuant to the Conversion
Notice shall be deemed to have been converted into Common Shares, which shall be
deemed to be outstanding of record, and all rights with respect to the Series C
Preferred Shares so converted, including the rights, if any, to receive notices
and vote (other than as a holder of Common Shares) will terminate, but excluding
the rights of holders thereof, upon surrender of their certificate or
certificates therefore, to receive certificates for the number of Common Shares
into which such Series C Preferred Shares have been converted, and to receive
payment of any declared but unpaid dividends thereon. As soon as practicable
after the Conversion Date and the surrender of the certificate or certificates
for Series C Preferred Shares, the Company shall cause to be issued and
delivered to such holder, or on his written order, a certificate or certificates
for the number of full Common Shares issuable on such conversion in accordance
with the provisions hereof.

(d)

The
Company shall not issue fractional shares upon any Conversion but in lieu
thereof the Company shall pay any fractional share amount in cash (based upon
the Current Market Price used to calculate such fractional share) at the time of
delivery of the share certificate representing the number of Common Shares into
which the Series C Preferred Shares are converted.

(e)

All
Common Shares resulting from any Conversion of Series C Preferred Shares into
Common Shares (including whole Common Shares resulting from the consolidation by
the Company of fractions of shares which result from Conversions) shall be fully
paid and non-assessable.  Nothing herein contained shall effect or restrict
the right of the Company to increase the number of its Common Shares in
accordance with the provisions of the Company Act and to issue such shares from
time to time.

(f)

The
Company shall at all times when the Series C Preferred Shares shall be
outstanding, reserve and keep available out of its authorized but unissued
shares, for the purpose of effecting the conversion of the Series C Preferred
Shares, such number of its duly authorized Common Shares as shall from time to
time be sufficient to effect the conversion of all outstanding Series C
Preferred Shares.

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-9-



(g)

The
Company shall pay any and all issue and other similar taxes that may be payable
in respect of any issuance or delivery of Common Shares upon conversion of
Series C Preferred Shares pursuant hereto. The Company shall not, however, be
required to pay any tax which may be payable in respect of any transfer involved
in the issuance and delivery of Common Shares in a name other than that in which
the shares of Series C Preferred Shares so converted were registered.

29.8.4

Termination
of Conversion Alternative

To
the extent permitted by applicable law, if there is a Delisting of Common Shares
or a Change in Control, the Company shall, upon such Delisting of Common Shares
or as of the date of the Change in Control, redeem all of the Series C Preferred
Shares still issued and outstanding as of such date for which the right of
Conversion or Redemption has not theretofore been exercised for an aggregate
redemption price of $1 and any payments that are or would otherwise become
payable in accordance with the terms of Article 29.7.1 herein shall become
payable in cash under Section 4.1(b) or Section 4.3(b) of the License Agreement
within 10 Business Days of the occurrence of the applicable Milestone.

29.8.5

Conditions
to Conversion

Notwithstanding
the foregoing, it shall be a condition to any Conversion contemplated by this
Article 29.8 that, and the Company shall only have the right to convert any
Series C Preferred Shares pursuant hereto if:

(a)

the
Common Shares into which the Series C Preferred Shares are convertible are then
listed or posted for trading on a Stock Exchange;

(b)

in
the previous 90 day period the Common Shares have not been suspended, cease
traded or delisted from any Stock Exchange for a period of 10 consecutive
Trading Days;

(c)

the
Common Shares to be issued to the Series C Preferred Holder shall, upon
issuance, be immediately and freely resaleable and transferable on the Stock
Exchange and a written opinion of counsel to the Company to that effect, in a
form reasonably acceptable to the Series C Preferred Holder has been delivered
to the Series C Preferred Holder and the Company's transfer agent in
accordance with Section 2.4.3 of the Stock Purchase Agreement with the
Conversion Notice; and

(d)

the
Company pays to the Series C Preferred Holder any amounts owed under Section
2.4.4.2 of the Stock Purchase Agreement.

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-10-



29.9

REDEMPTION

29.9.1

Redemption
at Company's Option

Subject
to the provisions of the Company Act and notwithstanding the special rights and
restrictions attached to any other series of Preferred shares of the Company,
the Company may, in its sole discretion pursuant to Article 29.7.1 and this
Article 29.9, and upon giving notice as hereinafter provided, redeem as of a
date within ten Business Days of a Milestone Date (the "Redemption Date") up
to the number of Series C Preferred Shares provided with respect to such
Milestone in Article 29.7.1, provided such Series C Preferred Shares are still
issued and outstanding on such date and the right of Conversion attached thereto
has not theretofore been exercised with respect to such Series C Preferred
Shares, and pay to the Series C Preferred Holder the applicable Milestone
Redemption Price for such shares.

29.9.2

Notice
of Redemption

In
the case of Redemption of the Series C Preferred Shares, the Company shall, not
more than five Business Days after a Milestone Date, mail to the Series C
Preferred Holder of the Series C Preferred Shares to be redeemed pursuant to
such Milestone a notice in writing of the intention of the Company to redeem
such Series C Preferred Shares ("Redemption Notice").  Such Redemption
Notice shall be (a) sent by registered or certified mail, return receipt
requested, postage prepaid, (b) sent via a reputable overnight courier service,
(c) sent by facsimile transmission with an original to be followed the same day
via a reputable overnight courier service, or (d) personally delivered, in each
case properly addressed to the Series C Preferred Holder at its address as it
appears on the books of Company or,in the event of the address of the
Series C Preferred Holder not so appearing then to the last known address of the
Series C Preferred Holder with the effective date of the notice being the actual
date of receipt by the recipient of such notice and shall set out the applicable
number of shares being redeemed, the Milestone Redemption Price and the
Redemption Date for such Redemption, the date upon which the Series C Preferred
Shares called for Redemption must be received by the Company, as well as the
place designated for Redemption.

29.9.3

Procedure
for Redemption

(a)

On
any Redemption Date, in accordance with a Redemption Notice, the Company shall
pay or cause to be paid in cash to or to the order of the Series C Preferred
Holder of the Series C Preferred Shares to be redeemed the aggregate Milestone
Redemption Price for such shares, on presentation and surrender at the
registered office of the Company or any other place designated in such
Redemption Notice of the certificate or certificates representing such Series C
Preferred Shares called for Redemption.  If only part of the Series C
Preferred Shares represented by any certificate shall be redeemed, a new
certificate representing the balance of such Series C Preferred Shares shall be
issued to the Series C Preferred Holder at the expense of the Company upon
presentation and surrender of the first mentioned certificate.

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-11-



(b)

From
and after the Redemption Date specified in any such Redemption Notice, the
Series C Preferred Shares called for Redemption shall thereupon be redeemed and
the Series C Preferred Holder shall not be entitled to exercise any of the
rights in respect thereof unless payment of the applicable Milestone Redemption
Price shall not be made upon presentation of a certificate or certificates in
accordance with the foregoing provisions in which case the rights of the Series
C Preferred Holder shall remain unaffected.

(c)

The
Series C Preferred Shares which are redeemed in accordance herewith shall be
cancelled.

29.9.4

Redemption
Subject to Applicable Law

If,
upon the achievement of any Milestone described in Article 29.7.1, the Company
is not permitted by insolvency provisions or other provisions of applicable law
to redeem all or any portion of the Series C Preferred Shares required to be
redeemed hereunder (if not otherwise converted, as the case may be), the Company
shall, pursuant to the terms of this Article 29.9, redeem only the maximum
number of Series C Preferred Shares (as determined in good faith by the Board of
Directors of the Company) it is then permitted to redeem and shall make any
payment to the holder of the Series C Preferred Shares required by Section
2.4.4.1 of the Stock Purchase Agreement.

29.9.5

Expiry
Redemption

On
or after 8 years following the date of the Stock Purchase Agreement (the "Preferred
Share Expiry Date"), the Company may, or upon termination of the License
Agreement the Company shall, in accordance with this Article 29.9, redeem all of
the Series C Preferred Shares then still issued and outstanding as of the
Preferred Share Expiry Date or as of the date the License Agreement is
terminated, as the case may be, for which the right of Conversion or Redemption
has not theretofore been exercised for an aggregate redemption price of $1 (the "Expiry Redemption").  Notwithstanding such Expiry Redemption of the
Series C Preferred Shares, the Company shall continue to be obligated to pay the
Series C Preferred Holder all unpaid Milestone Payments that are or would
otherwise become payable under Article 29.7.1 herein in cash under Section
4.1(b) or 4.3 of the License Agreement within ten Business Days following the
achievement or occurrence of the corresponding Milestones.

29.10

ADJUSTMENTS

29.10.1

Adjustment
for Corporate Reorganization

If
and whenever there is a Corporate Reorganization other than a Change in Control
Corporate Reorganization in which the Common Shares (but not the Series C
Preferred Shares) are converted into or exchanged for securities, cash or other
property, and the Series C Preferred Holder holds Series C Preferred Shares
which have not been converted or redeemed (or are not to be converted or
redeemed) prior to the record date for such Corporate Reorganization, then
following such Corporate Reorganization, upon the exercise of the rights of
Conversion provided hereby at any time after the record date of such Corporate
Reorganization, in lieu of the Common Shares to which the Series C Preferred
Holder would theretofore have been entitled upon Conversion, the Series C
Preferred Holder would be entitled to receive such securities, cash or other
property (as determined in good faith by the Board of Directors of the Company);
provided that if such securities, cash or other property are not listed and
posted for trading on a Stock Exchange and, as a result, the Conversion Price
could not be calculated as of a Conversion Date, such Corporate Reorganization
shall be deemed to be a Change of Control for purposes of Section 11.2 of the
Stock Purchase Agreement and Article 29.8.4 hereof.

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29.10.2

Adjustment
for Other Dilutive Events

If
and whenever at any time any event shall occur as to which the provisions of
Article 29.10.1 are not strictly applicable but the failure to make any
adjustment would not fairly protect the rights of Conversion or other rights and
privileges attached to the Series C Preferred Shares in accordance with the
essential intent and principles of this Article 29 or, if strictly applicable
would not fairly protect the rights of Conversion or other rights and privileges
attached to the Series C Preferred Shares in accordance with such essential
intent and principles, then the Company shall make such adjustment, if any, on a
basis consistent with the essential intent and principles established in this
Article 29.10, necessary to preserve, without dilution, the rights of Conversion
and other rights and privileges attached to the Series C Preferred Shares.

29.10.3

Notice
of Adjustment

Upon
the occurrence of any of the events listed in this Article 29.10, then and in
each such case the Company shall give written notice of the adjustment and how
it was calculated, addressed to the Series C Preferred Holder.  Such notice
shall set forth the adjustment contemplated hereby (including the kind and
amount of securities, cash or other property into which the Series C Preferred
Shares are convertible).  Such notice shall either be (a) sent by
registered or certified mail, return receipt requested, postage prepaid, (b)
sent via a reputable overnight courier service, (c) sent by facsimile
transmission with an original to be followed the same day via a reputable
overnight courier service, or (d) personally delivered, in each case properly
addressed to the Series C Preferred Holder at its address as it appears on the
books of Company or,in the event of the address of the Series C
Preferred Holder not so appearing then to the last known at the address of the
Series C Preferred Holder.

29.11

TRANSFER

The
Series C Preferred Shares shall be non-transferable except by the Series C
Preferred Holder to an Affiliate or to a third party in connection with a sale
of all or substantially all of such Series C Preferred Holder's business to
which the License Agreement relates.