Crailar Technologies Inc.: Exhibit 4.1 - Filed by newsfilecorp.com








	 
	CONVERTIBLE DEBENTURE INDENTURE 
	 
	Made as of the 20th day of September, 2012
  
	 
	Between 
	 
	NATURALLY ADVANCED TECHNOLOGIES INC. 
	 
	and 
	 
	COMPUTERSHARE TRUST COMPANY OF CANADA 
	 






CONVERTIBLE DEBENTURE INDENTURE 




TABLE OF CONTENTS 

	ARTICLE
      1 – INTERPRETATION 	1
      
	               
         1.1
      	Definitions
      	1
      
	           
             1.2
      	Meaning
      of “Outstanding” 	9
      
	               
         1.3
      	Interpretation
      	9
      
	           
             1.4
      	Headings,
      Etc. 	10
      
	               
         1.5
      	Time
      of Essence 	10
      
	           
             1.6
      	Monetary
      References 	10
      
	               
         1.7
      	Invalidity,
      Etc. 	10
      
	           
             1.8
      	Language
      	10
      
	               
         1.9
      	Successors
      and Assigns 	11
      
	           
             1.10
      	Severability
      	11
      
	               
         1.11
      	Entire
      Agreement 	11
      
	           
             1.12
      	Benefits
      of Indenture 	11
      
	               
         1.13
      	Applicable
      Law and Attornment 	11
      
	           
             1.14
      	Currency
      of Payment 	12
      
	               
         1.15
      	Non-Business
      Days 	12
      
	           
             1.16
      	Accounting
      Terms 	12
      
	               
         1.17
      	Calculations
      	12
      
	           
             1.18
      	Schedules
      	12
      
	ARTICLE
      2 THE DEBENTURES 	13
      
	           
             2.1
      	Limit
      of Debentures 	13
      
	               
         2.2
      	Terms
      of Debentures of any Series 	13
      
	           
             2.3
      	Form
      of Debentures 	15
      
	               
         2.4
      	Form
      and Terms of Initial Debentures 	15
      
	           
             2.5
      	Certification
      and Delivery of Additional Debentures 	22
      
	               
         2.6
      	Issue
      of Global Debentures 	23
      
	           
             2.7
      	Execution
      of Debentures 	24
      
	               
         2.8
      	Certification
      	24
      
	           
             2.9
      	Mutilation,
      Loss, Theft or Destruction 	25
      
	               
         2.10
      	Concerning
      Interest 	25
      
	           
             2.11
      	Rank
      	25
      
	               
         2.12
      	Payments
      of Amounts Due on Maturity 	26
      
	           
             2.13
      	U.S.
      Legend on the Debentures and Common Shares 	26
      
	               
         2.14
      	Payment
      of Interest 	28
      
	           
             2.15
      	Additional
      Amounts 	29
      
	ARTICLE
      3 REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP 	30
      
	           
             3.1
      	Definitive
      Debentures 	30
      
	               
         3.2
      	Global
      Debentures 	31
      
	           
             3.3
      	Transferee
      Entitled to Registration 	33
      
	               
         3.4
      	No
      Notice of Trusts 	33
      
	           
             3.5
      	Registers
      Open for Inspection 	33
      
	               
         3.6
      	Exchanges
      of Debentures 	33
      
	           
             3.7
      	Closing
      of Registers 	34
      
	               
         3.8
      	Charges
      for Registration, Transfer and Exchange 	34
      



	 	(i) 	CONVERTIBLE DEBENTURE INDENTURE








	           
             3.9
      	Ownership
      of Debentures 	35
      
	ARTICLE
      4 REDEMPTION AND PURCHASE OF DEBENTURES 	35
      
	           
             4.1
      	Applicability
      of Article 	35
      
	               
         4.2
      	Partial
      Redemption 	36
      
	           
             4.3
      	Notice
      of Redemption 	36
      
	               
         4.4
      	Debentures
      Due on Redemption Dates 	37
      
	           
             4.5
      	Deposit
      of Redemption Monies 	37
      
	               
         4.6
      	Failure
      to Surrender Debentures Called for Redemption 	38
      
	           
             4.7
      	Cancellation
      of Debentures Redeemed 	38
      
	               
         4.8
      	Purchase
      of Debentures by the Corporation 	38
      
	           
             4.9
      	Deposit
      of Maturity Monies 	39
      
	ARTICLE
      5 SECURITY FOR AND SUBORDINATION OF DEBENTURES 	39
      
	           
             5.1
      	NAT
      US Guaranty and Security Agreement 	39
      
	               
         5.2
      	Registration
      of Security 	39
      
	           
             5.3
      	Permitted
      Dispositions of Secured Assets Before Default 	40
      
	               
         5.4
      	Applicability
      of Article 	40
      
	           
             5.5
      	Order
      of Payment – NAT US 	40
      
	               
         5.6
      	Order
      of Payment – The Corporation 	42
      
	           
             5.7
      	Subrogation
      to Rights of Holders of Senior Indebtedness 	43
      
	               
         5.8
      	Obligation
      to Pay Not Impaired 	44
      
	           
             5.9
      	No
      Payment if Senior Indebtedness in Default 	44
      
	               
         5.10
      	Payment
      on Debentures Permitted 	45
      
	           
             5.11
      	Confirmation
      of Subordination 	45
      
	               
         5.12
      	Knowledge
      of Trustee 	45
      
	           
             5.13
      	Trustee
      May Hold Senior Indebtedness 	46
      
	               
         5.14
      	Rights
      of Holders of Senior Indebtedness Not Impaired 	46
      
	           
             5.15
      	Altering
      the Senior Indebtedness 	46
      
	               
         5.16
      	Additional
      Indebtedness 	46
      
	           
             5.17
      	Right
      of Debentureholder to Convert Not Impaired 	46
      
	               
         5.18
      	Invalidated
      Payments 	46
      
	           
             5.19
      	Contesting
      Security 	47
      
	               
         5.20
      	Subordination
      to Security Interest 	47
      
	ARTICLE
      6 CONVERSION OF DEBENTURES 	47
      
	               
         6.1
      	Applicability
      of Article 	47
      
	           
             6.2
      	Notice
      of Expiry of Conversion Privilege 	48
      
	               
         6.3
      	Revival
      of Right to Convert 	48
      
	           
             6.4
      	Manner
      of Exercise of Right to Convert 	48
      
	               
         6.5
      	Adjustment
      of Conversion Price 	49
      
	           
             6.6
      	No
      Requirement to Issue Fractional Common Shares 	55
      
	               
         6.7
      	Corporation
      to Reserve Common Shares 	55
      
	           
             6.8
      	Cancellation
      of Converted Debentures 	55
      
	               
         6.9
      	Certificate
      as to Adjustment 	55
      
	           
             6.10
      	Notice
      of Special Matters 	56
      
	               
         6.11
      	Protection
      of Trustee 	56
      
	           
             6.12
      	U.S.
      Legend on Common Shares 	57
      
	ARTICLE
      7 COVENANTS OF THE CORPORATION 	57
      





	 	(ii) 	CONVERTIBLE DEBENTURE INDENTURE 






	           
             7.1 	To Pay Principal, Premium (if any) and Interest 	57 
	               
         7.2 	To Pay
      Trustee’s Remuneration 	57 
	           
             7.3 	To Give Notice of Default 	57 
	               
         7.4 	Preservation
      of Existence, etc. 	57 
	           
             7.5 	Keeping of Books 	58 
	               
         7.6 	Certificate of
      Compliance 	58 
	           
             7.7 	Performance of Covenants by Trustee 	58 
	               
         7.8 	SEC Notice
    	58 
	           
             7.9 	No Dividends on Common Shares if Event of Default 	58 
	               
         7.10 	Maintain
      Listing 	59 
	           
             7.11 	Use of Proceeds 	59 
	               
         7.12 	Covenants as
      to Security 	59 
	ARTICLE 8
      DEFAULT 	60 
	               
         8.1 	Events of
      Default 	60 
	           
             8.2 	Notice of Events of Default 	61 
	               
         8.3 	Waiver of
      Default 	62 
	           
             8.4 	Enforcement by the Trustee 	62 
	               
         8.5 	No Suits by
      Debentureholders 	64 
	           
             8.6 	Application of Monies by Trustee 	64 
	               
         8.7 	Notice of
      Payment by Trustee 	65 
	           
             8.8 	Trustee May Demand Production of Debentures 	65 
	               
         8.9 	Remedies
      Cumulative 	65 
	           
             8.10 	Judgment Against the Corporation 	65 
	               
         8.11 	Immunity of
      Directors, Officers and Others 	66 
	ARTICLE 9
      SATISFACTION AND DISCHARGE 	66 
	               
         9.1 	Cancellation
      and Destruction 	66 
	           
             9.2 	Non-Presentation of Debentures 	66 
	               
         9.3 	Repayment of
      Unclaimed Monies 	67 
	           
             9.4 	Discharge 	67 
	               
         9.5 	Satisfaction
      	67 
	           
             9.6 	Continuance of Rights, Duties and Obligations 	69 
	ARTICLE 10 SUCCESSORS 	70 
	           
             10.1 	Corporation may Consolidate, Etc., Only on Certain Terms
      	70 
	               
         10.2 	Successor
      Substituted 	71 
	ARTICLE 11
      MEETINGS OF DEBENTUREHOLDERS 	72 
	               
         11.1 	Right to
      Convene Meeting 	72 
	           
             11.2 	Notice of Meetings 	72 
	               
         11.3 	Chairman
    	73 
	           
             11.4 	Quorum 	74 
	               
         11.5 	Power to
      Adjourn 	74 
	           
             11.6 	Show of Hands 	74 
	               
         11.7 	Poll 	74 
	           
             11.8 	Voting 	75 
	               
         11.9 	Proxies
	75 
	           
             11.10 	Persons Entitled to Attend Meetings 	76 
	               
         11.11 	Powers Exercisable by Extraordinary Resolution 	76
  





	 	(iii) 	CONVERTIBLE DEBENTURE INDENTURE 






	           
             11.12 	Meaning of “Extraordinary Resolution” 	78 
	               
         11.13 	Powers Cumulative 	79 
	           
             11.14 	Minutes 	79 
	               
         11.15 	Instruments in Writing 	79 
	           
             11.16
      	Binding
      Effect of Resolutions 	80
      
	               
         11.17
      	Evidence
      of Rights Of Debentureholders 	80
      
	           
             11.18
      	Concerning
      Serial Meetings 	80
      
	ARTICLE
      12 NOTICES 	80
      
	           
             12.1
      	Notice
      to Corporation 	80
      
	               
         12.2
      	Notice
      to Debentureholders 	81
      
	           
             12.3
      	Notice
      to Trustee 	81
      
	               
         12.4
      	Mail
      Service Interruption 	81
      
	ARTICLE
      13 CONCERNING THE TRUSTEE 	82
      
	               
         13.1
      	No
      Conflict of Interest 	82
      
	           
             13.2
      	Replacement
      of Trustee 	82
      
	               
         13.3
      	Duties
      of Trustee 	83
      
	           
             13.4
      	Reliance
      Upon Declarations, Opinions, etc. 	83
      
	               
         13.5
      	Evidence
      and Authority to Trustee, Opinions, etc. 	83
      
	           
             13.6
      	Officers’
      Certificates Evidence 	84
      
	               
         13.7
      	Experts,
      Advisers and Agents 	85
      
	           
             13.8
      	Trustee
      May Deal in Debentures 	85
      
	               
         13.9
      	Investment
      of Monies Held by Trustee 	85
      
	           
             13.10
      	Trustee
      Not Ordinarily Bound  	86
      
	               
         13.11
      	Trustee
      Not Required to Give Security 	86
      
	           
             13.12
      	Trustee
      Not Bound to Act on Corporation’s Request 	86
      
	               
         13.13
      	Conditions
      Precedent to Trustee’s Obligations to Act Hereunder 	86
      
	           
             13.14
      	Authority
      to Carry on Business 	87
      
	               
         13.15
      	Compensation
      and Indemnity 	87
      
	           
             13.16
      	Acceptance
      of Trust 	88
      
	               
         13.17
      	Third
      Party Interests 	88
      
	           
             13.18
      	Privacy
      Laws 	88
      
	               
         13.19
      	Force
      Majeure 	88
      
	           
             13.20
      	Anti-Money
      Laundering 	89
      
	ARTICLE
      14 SUPPLEMENTAL INDENTURES 	89
      
	           
             14.1
      	Supplemental
      Indentures 	89
      
	ARTICLE
      15 EXECUTION AND FORMAL DATE 	90
      
	           
             15.1
      	Execution
      	90
      
	               
         15.2
      	Formal
      Date 	90
      





	 	(iv) 	CONVERTIBLE DEBENTURE INDENTURE 






	SCHEDULE
      A – FORM OF DEBENTURE 
	 
	SCHEDULE
      B – FORM OF REDEMPTION NOTICE 
	 
	SCHEDULE
      C – FORM OF NOTICE OF CONVERSION 
	 
	SCHEDULE
      D – COMMON SHARE LEGENDS 
	 
	SCHEDULE
      E – FORM OF DECLARATION FOR REMOVAL OF LEGEND 
	 
	SCHEDULE
      F – SECURED ASSETS 
	 
	SCHEDULE
      G – FORM OF NAT US GUARANTY AND SECURITY AGREEMENT






	 	(v) 	CONVERTIBLE DEBENTURE INDENTURE 





CONVERTIBLE DEBENTURE INDENTURE

This Agreement is made as of the 20th day of September,
2012, between 


  
    
      
        

              NATURALLY ADVANCED TECHNOLOGIES INC.,
                a corporation existing under the laws of British Columbia and
                having its head office in Victoria, in the Province of British
                Columbia (hereinafter called “NAT” or the “Corporation”)
              

        

      

    

  



and 


  
    
      
        

              COMPUTERSHARE TRUST COMPANY OF CANADA a
                trust company having an office in the City of Vancouver, in the
                Province of British Columbia (hereinafter called the “Trustee”)
              

        

      

    

  



WITNESSETH THAT: 

          WHEREAS
the Corporation wishes to create and issue the Debentures in the manner and
subject to the terms and conditions of this Indenture; 

          NOW
THEREFORE THIS INDENTURE WITNESSES that in consideration of the respective
covenants and agreements contained herein and for other good and valuable
consideration (the receipt and sufficiency of which are acknowledged), the
Corporation and the Trustee covenant and agree, for the benefit of each other
and for the equal and rateable benefit of the holders, as follows: 

ARTICLE 1 – INTERPRETATION 

1.1   
Definitions 

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

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

	 	 	 
	 	(b) 	
      “Additional Amounts” has the meaning ascribed
      thereto in Section 2.15(a);

	 	 	 
	 	(c) 	
      “Additional Debentures” means Debentures of any
      one or more series, other than the first series of Debentures, being the
      Initial Debentures, issued under this Indenture;

	 	 	 
	 	(d) 	
      “Applicable Period” means any period announced by
      the Board of Directors as a period of time for which a cash dividend or
      distribution will be declared and paid by the Corporation to the holders of all or substantially
  all of the outstanding Common Shares;






	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 2 - 

	 	(e) 	
      “Applicable Securities Legislation” means
      applicable securities laws (including rules, regulations, policies and
      instruments) in each of the provinces of Canada;

	 	 	 
	 	(f) 	
      “Auditors of the Corporation” means an independent
      firm of chartered accountants duly appointed as auditors of the
      Corporation;

	 	 	 
	 	(g) 	
      “Beneficial Holder” means any Person who holds a
      beneficial interest in a Global Debenture as shown on the books of the
      Depository or a Depository Participant;

	 	 	 
	 	(h) 	
      “Board of Directors” means the board of directors
      of the Corporation or any committee thereof;

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

	 	 	 
	 	(j) 	
      “Capital Stock” of any Person means any and all
      shares, partnership interests, common shares, participations, rights in or
      other equivalents of, or interests in, the equity of such
Person.

	 	 	 
	 	(k) 	
      “CDS” means CDS Clearing and Depository Services
      Inc.;

	 	 	 
	 	(l) 	
      “Change of Control” means (i) any transaction
      (whether by purchase, merger or otherwise) resulting in the acquisition,
      directly or indirectly, by any Person, or group of Persons acting jointly
      or in concert (within the meanings of Multilateral Instrument 62-104 –
      Take-Over Bids and Issuer Bids), of voting control or direction
      over more than 50% of the outstanding voting securities of the
      Corporation; or (ii) the amalgamation, consolidation or merger of the
      Corporation with or into any other Person or any merger of another Person
      into the Corporation, unless the holders of voting securities of the
      Corporation immediately prior to such amalgamation, consolidation or
      merger hold securities representing 50% or more of the voting control or
      direction of the Corporation or the successor entity upon completion of
      the amalgamation, consolidation or merger; or (iii) any conveyance,
      transfer, sale, lease or other disposition of more than 50% of the
      Corporation’s and the Corporation’s subsidiaries’ assets and properties,
      taken as a whole, to another arm’s length Person whether in one or more
      transactions;

	 	 	 
	 	(m) 	
      “Change of Control Conversion Price” has the
      meaning ascribed thereto in Section 2.4(h)(ii);

	 	 	 
	 	(n) 	
      “Change of Control Notice” has the meaning
      ascribed thereto in Section 2.4(h)(i);

	 	 	 
	 	(o) 	
      “Change of Control Purchase Date” has the meaning
      ascribed thereto in Section 2.4(h)(i);





	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 3 - 

	 	(p) 	
      “Change of Control Purchase Offer” has the meaning
      ascribed thereto in Section 2.4(h)(i);

	 	 	 
	 	(q) 	
      “Common Shares” means common shares in the capital
      of the Corporation, as such common shares are constituted on the date of
      execution and delivery of this Indenture; provided that in the event of a
      change or a subdivision, revision, reduction, combination or consolidation
      thereof, any reclassification, capital reorganization, consolidation,
      amalgamation, arrangement, merger, sale or conveyance or liquidation,
      dissolution or winding-up, or such successive changes, subdivisions,
      redivisions, reductions, combinations or consolidations,
      reclassifications, capital reorganizations, consolidations, amalgamations,
      arrangements, mergers, sales or conveyances or liquidations, dissolutions
      or windings-up, then, subject to adjustments, if any, having been made in
      accordance with the provisions of Section 6.5, “Common Shares”
      shall mean the shares or other securities or property resulting from such
      change, subdivision, redivision, reduction, combination or consolidation,
      reclassification, capital reorganization, consolidation, amalgamation,
      arrangement, merger, sale or conveyance or liquidation, dissolution or
      winding-up;

	 	 	 
	 	(r) 	
      “Conversion Price” means the dollar amount for
      which each Common Share may be issued from time to time upon the
      conversion of Debentures or any series of Debentures which are by their
      terms convertible in accordance with the provisions of Article 6, and
      without limiting the generality of the foregoing, the Conversion Price for
      the Initial Debentures is as set out in Section 2.4(f);

	 	 	 
	 	(s) 	
      “Corporation” means Naturally Advanced
      Technologies Inc. and includes any successor to or of the Corporation that
      shall have complied with the provisions of Article 10;

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

	 	 	 
	 	(u) 	
      “Current Market Price” means, generally, the
      volume weighted average trading price of the Common Shares on the TSXV, if
      the Common Shares are listed on the TSXV, for the 20 consecutive trading
      days ending on the fifth trading day preceding the applicable date. If the
      Common Shares are not listed on the TSXV, reference shall be made for the
      purpose of the above calculation to the principal securities exchange or
      market on which the Common Shares are listed or quoted or if no such
      prices are available “Current Market Price” shall be the fair value of a
      Common Share as reasonably determined by the Board of Directors;

	 	 	 
	 	(v) 	
      “Date of Conversion” has the meaning ascribed
      thereto in Section 6.4(b);

	 	 	 
	 	(w) 	
      “Debentureholders” or “holders” means the
      Persons for the time being entered in the register for Debentures as
      registered holders of Debentures or any transferees of such Persons by
      endorsement or delivery;




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 4 - 

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

	 	 	
       

	 	(y) 	
      “Defeased Debentures” has the meaning ascribed
      thereto in Section 9.6(b);

	 	 	
       

	 	(z) 	
      “Definitive Debenture” means a certificated
      Debenture fully registered in the name of the holder thereof;

	 	 	
       

	 	
      (aa) 
	
      “Depository” means, with respect to the Debentures
      of any series issuable or issued in whole or in part in the form of one or
      more Global Debentures, the person designated as depository by the
      Corporation pursuant to Section 3.2 until a successor depository shall
      have become such pursuant to the applicable provisions of this Indenture,
      and thereafter “Depository” shall mean each person who is then a
      depository hereunder, and if at any time there is more than one such
      person, “Depository” as used with respect to the Debentures of any series
      shall mean each depository with respect to the Global Debentures of such
      series and, in the case of the Initial Debentures, the Depository shall
      initially be CDS;

	 	 	
       

	 	(bb) 	
      “Depository Participant” means a broker, dealer,
      bank, other financial institution or other person for whom, from time to
      time, a Depository effects book entries for a Global Debenture deposited
      with the Depository;

	 	 	
       

	 	(cc) 	
      “Distributed Securities” has the meaning ascribed
      thereto in Section 6.5(e);

	 	 	
       

	 	(dd) 	
      “Event of Default” has the meaning ascribed
      thereto in Section 8.1;

	 	 	
       

	 	(ee) 	
      “Extraordinary Resolution” has the meaning
      ascribed thereto in Section 11.12;

	 	 	
       

	 	(ff) 	
      “Freely Tradeable” means, in respect of shares of
      capital of any class of any corporation, shares which: (i) are issuable
      without the necessity of filing a prospectus or any other similar offering
      document (other than such prospectus or similar offering document that has
      already been filed) under Applicable Securities Legislation and such issue
      does not constitute a distribution (other than a distribution already
      qualified by prospectus or similar offering document) under Applicable
      Securities Legislation; and (ii) can be traded by the holder thereof
      without any restriction under Applicable Securities Legislation, such as
      hold periods, except in the case of a control distribution (as defined in
      National Instrument 45-102 – “Resale of Securities” of the Canadian
      Securities Administrators), or a transaction or series of transaction
      incidental to a control distribution (for the avoidance of doubt, the term
      “Freely Tradeable” shall not be construed to mean that any such securities
      are not subject to any applicable resale restriction under applicable U.S.
      federal or state securities laws or regulations);

	 	 	
       

	 	(gg) 	
      “generally accepted accounting principles” or
      “GAAP” means generally accepted accounting principles established
      by the Financial Accounting Standards Board of the United States, as amended from time to time
  (including as further described in Section 1.16);




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 5 - 

	 	(hh) 	
      “Global Debenture” means a Debenture that is
      issued to and registered in the name of the Depository, or its nominee,
      pursuant to Section 2.6 for purposes of being held by or on behalf of the
      Depository as custodian for participants in the Depository’s book-entry
      only registration system;

	 	 	 
	 	(ii) 	
      “Global Debenture Legend” means the legend
      identified as such in Schedule “A”;

	 	 	 
	 	(jj) 	
      “Guarantee Liabilities” has the meaning ascribed
      thereto in Section 5.4;

	 	 	 
	 	(kk) 	
      “Guarantees” means any guarantee, undertaking to
      assume, endorse, contingently agree to purchase, or to provide funds for
      the payment of, or otherwise become liable in respect of, any
      indebtedness, liability or obligation of any Person;

	 	 	 
	 	(ll) 	
      “IFRS” means International Financial Reporting
      Standards;

	 	 	 
	 	(mm) 	
      “Ineligible Consideration” has the meaning
      ascribed thereto in Section 6.5(d);

	 	 	 
	 	(nn) 	
      “Initial Debentures” means the Debentures
      designated as “10% Convertible Secured Debentures” and described in
      Section 2.4;

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

	 	 	 
	 	(pp) 	
      “Issue Price” has the meaning ascribed thereto in
      Section 2.4(a);

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

	 	 	 
	 	(rr) 	
      “Maturity Date” means the date specified for
      maturity of any Debentures;

	 	 	 
	 	(ss) 	
      “MI 62-104” means Multilateral Instrument 62-104 –
      Take-Over Bids and Issuer Bids of the Canadian Securities
      Administrators;

	 	 	 
	 	(tt) 	
      “NAT” means Naturally Advanced Technologies Inc.
      and includes any successor to or of NAT that shall have complied with the
      provisions of Article 10;

	 	 	 
	 	(uu) 	
      “NAT US” means Naturally Advanced Technologies US
      Inc., a wholly-owned subsidiary of the Corporation incorporated under the
      laws of the State of Nevada, U.S.A.;

	 	 	 
	 	(vv) 	
      “NAT US Guaranty and Security Agreement” means the
      guaranty and security agreement in the form attached as Schedule “G”
      entered into by NAT US in favour of the Trustee, on behalf of itself and the
      Debentureholders, providing for, inter alia, a guarantee by NAT US of the
      Corporation's obligations under the Debentures and this Indenture, limited
      to the value of the Secured Assets, on the terms set forth in such
      agreement, and a Security Interest on the Secured Assets;





	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	(ww) 	
      “NCI Letter of Instruction” means the
      Non-Certificated Inventory system letter of instruction provided by CDS to
      the Trustee in connection with the conversion of the Debentures;

	 	 	 	 
	 	(xx) 	
      “Offer Price” has the meaning ascribed thereto in
      Section 2.4(h)(i);

	 	 	 	 
	 	(yy) 	
      “Offering” means the public offering by short form
      prospectus dated September 11, 2012 of up to $11,500,000 (including any
      Debentures sold pursuant to the Over-Allotment Option) aggregate principal
      amount of Initial Debentures;

	 	 	 	 
	 	(zz) 	
      “Officers’ Certificate” means a certificate of the
      Corporation signed by any two authorized officers or directors of the
      Corporation, in their capacities as officers or directors of the
      Corporation, and not in their personal capacities;

	 	 	 	 
	 	(aaa) 	
      “Over-Allotment Option” has the meaning ascribed
      thereto in Section 2.4(a);

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

	 	 	 	 
	 	(ccc) 	
      “Permitted Priority Encumbrances” means as of any
      particular time any of the following encumbrances on the Secured Assets or
      property intended to form part of the Secured Assets or any part
      thereof:

	 	 	 	 
	 		(i) 	
      liens for taxes, assessments or governmental charges not
      at the time due or delinquent or the validity of which are being contested
      at the time in good faith by NAT US by proceedings diligently
      conducted;

	 	 	 	 
	 		(ii) 	
      security given by NAT US to a public utility or any
      municipality or governmental or other public authority which is required
      by such utility or municipality or other authority in connection with the
      operations of NAT US, all in the ordinary course of its business which
      singly or in the aggregate does not materially detract from the value of
      the assets concerned or materially impair their use in the operation of
      the business of NAT US; and

	 	 	 	 
	 		(iii) 	
      any security interest consented to in writing by an
      Extraordinary Resolution delivered to the Trustee;

	 	 	 	 
	 	(ddd) 	
      “Person” includes an individual, corporation,
      company, partnership, joint venture, association, trust, trustee,
      unincorporated organization or government or any agency or political
      subdivision thereof (and for the purposes of the
  definition of “Change of Control”, in addition to the foregoing,
      “Person” shall include any syndicate or group that would be deemed to be a
  “Person” under MI 62-104);





	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	(eee) 	
      “Prescribed Securities” has the meaning ascribed
      thereto in Section 6.5(d);

	 	 	 
	 	(fff) 	
      “Prospectus” means the short form prospectus of
      the Corporation dated September 11, 2012 wherein the Corporation is
      offering the Debentures in the aggregate principal amount of $10,000,000
      (plus the Over-Allotment Option), which prospectus has been filed in each
      of the Provinces of Canada, other than Quebec, Prince Edward Island and
      Newfoundland, to qualify the distribution of the
  Debentures;





	 	(ggg) 	
      “Receiver” means a receiver or a
      receiver-manager;

	 	 	 
	 	(hhh) 	
      “Redemption Date” has the meaning ascribed thereto
      in Section 4.3;

	 	 	 
	 	(iii) 	
      “Redemption Notice” has the meaning ascribed
      thereto in Section 4.3;

	 	 	 
	 	(jjj) 	
      “Redemption Price” means, in respect of a
      Debenture, the amount payable on the Redemption Date;

	 	 	 
	 	(kkk) 	
      “Regulation S” means Regulation S adopted by the
      United States Exchange Commission under the U.S. Securities Act;

	 	 	 
	 	(lll) 	
      “Secured Assets” means those certain assets of the
      Corporation set out in Schedule “F” subject to, or intended to be subject
      to, the Security Interest created pursuant to the Security Documents and
      any proceeds thereof and includes any part thereof as the context
      requires;




	 	
      (mmm) 
	
      “Security Documents” means, collectively, the NAT
      US Guaranty and Security Agreement and such further agreements,
      instruments and other documents that may at any time be required to be
      provided by NAT US hereunder to ensure that the Trustee (for itself and
      the Debentureholders) has, subject to the Permitted Priority Encumbrances,
      a first priority Security Interest in all of the Secured Assets;
  




	 	(nnn) 	
      “Security Interest” means the security interest
      granted to the Trustee on behalf of itself and the Debentureholders in the
      Secured Assets pursuant to the terms and conditions of the NAT US Guaranty
      and Security Agreement;

	 	 	 
	 	(ooo) 	
      “Senior Creditor” means a holder or holders of
      Senior Indebtedness and includes any representative or representatives,
      agent or agents or trustee or trustees of any such holder or
    holders;

	 	 	 
	 	(ppp) 	
      “Senior Indebtedness” (i) with respect to the
      Corporation means the principal of and premium, if any, and interest on
      and other amounts in respect of secured debt, statutory liens, secured
      bank or other institutional debt or renewals, extension and refunding of
      such indebtedness of the Corporation, whether outstanding on the date of
      this Indenture or thereafter created, incurred, assumed or guaranteed,
      and (ii) with respect to NAT US means statutory liens;
      provided that in the case of both (i) and (ii) “Senior
      Indebtedness” shall not include any indebtedness that would otherwise
      be Senior Indebtedness if it is expressly stated to be subordinate to or
      rank pari passu with the Security Documents or the
Debentures;




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	(qqq) 	
      “Senior Security” means all mortgages, liens,
      pledges, charges (whether fixed or floating), security interests,
      hypothecs or other encumbrances of any kind, contingent or absolute, held
      by or on behalf of any Senior Creditor and in any manner securing any
      Senior Indebtedness. Solely for the purposes of determining whether a
      Senior Security exists for the purposes of this Indenture, a Person shall
      be deemed to be the owner of any property which it has acquired or holds
      subject to a conditional sale or capital lease or other title retention
      agreement and any lease in the nature thereof (excluding, for the
      avoidance of doubt, operating leases) and such retention of title by
      another Person shall constitute a Senior Security;

	 	 	 
	 	(rrr) 	
      “Spinoff Securities” has the meaning ascribed
      thereto in Section 6.5(e);

	 	 	 
	 	(sss) 	
      “Serial Meeting” has the meaning ascribed thereto
      in Section 11.2(b)(i);

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

	 	 	 
	 	(uuu) 	
      “Tax Act” means the Income Tax Act
      (Canada), as amended from time to time;

	 	 	 
	 	(vvv) 	
      “Taxes” has the meaning ascribed thereto in
      Section 2.15(a);

	 	 	 
	 	(www) 	
      “Taxing Jurisdiction” has the meaning ascribed
      thereto in Section 2.15(a);

	 	 	 
	 	(xxx) 	
      “Time of Expiry” means the time of expiry of
      certain rights with respect to the conversion of Debentures under Article
      6 or under Section 2.4(f) with respect to the Initial Debentures, which is
      to be set forth separately in the form and terms for each series of
      Debentures which by their terms are to be convertible;

	 	 	 
	 	(yyy) 	
      “Total Offer Price” has the meaning ascribed
      thereto in Section 2.4(h)(i);

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

	 	 	 
	 	(aaaa) 	
      “Trustee” means Computershare Trust Company of
      Canada, or its successor or successors for the time being as trustee
      hereunder;

	 	 	 
	 	(bbbb) 	
      “TSXV” means the TSX Venture Exchange or its
      successor or successors;

	 	 	 
	 	(cccc) 	
      “United States” or “U.S.” means the United
      States of America, its territories and possessions, any state of the
      United States and the District of Columbia;

	 	 	 
	 	(dddd) 	
      “U.S. Legend” has the meaning ascribed thereto in
      Section 2.13;





	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	(eeee) 	
      “U.S. Person” means “U.S. person” as defined in
      Regulation S;

	 	 	 
	 	(ffff) 	
      “U.S. Securities Act” means the United States
      Securities Act of 1933, as amended;

	 	 	 
	 	(gggg) 	
      “Written Direction of the Corporation” means an
      instrument in writing signed by any one officer or director of the
      Corporation; and

	 	 	 
	 	(hhhh) 	
      “90% Redemption Right” has the meaning ascribed
      thereto in Section 2.4(h)(iii).



1.2    Meaning of
“Outstanding” 

          Every
Debenture certified and delivered by the Trustee hereunder shall be deemed to be
outstanding until it is cancelled, converted or redeemed or delivered to the
Trustee for cancellation, conversion or redemption for monies and/or Common
Shares, as the case may be, or the payment thereof shall have been set aside
under Section 9.2, provided that: 

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

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

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

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

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



1.3   
Interpretation 

          In
this Indenture: 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 10 - 

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

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

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

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

	 	 	 
	 	(e) 	
      reference to any agreement or other instrument in writing
      means such agreement or other instrument in writing as amended, modified,
      replaced or supplemented from time to time;

	 	 	 
	 	(f) 	
      unless otherwise indicated, reference to a statute shall
      be deemed to be a reference to such statute as amended, re-enacted or
      replaced from time to time; and

	 	 	 
	 	(g) 	
      unless otherwise indicated, time periods within which a
      payment is to be made or any other action is to be taken hereunder shall
      be calculated by including the day on which the period commences and
      excluding the day on which the period ends.



1.4    Headings,
Etc. 

          The
division of this Indenture into Articles and Sections, the provision of a Table
of Contents and the insertion of headings are for convenience of reference only
and shall not affect the construction or interpretation of this Indenture or of
the Debentures. 

1.5   Time of Essence

          Time
shall be of the essence of this Indenture. 

1.6    Monetary References

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

1.7    Invalidity, Etc.

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

1.8    Language

          Each
of the parties hereto hereby acknowledges that it has consented to and requested
that this Indenture and all documents relating thereto, including the form of
Debenture attached hereto as Schedule “A”, be drawn up in the English language
only. Chacune des parties aux presentes reconnait avoir accepte et demande
que cette acte de fiducie et tous les documents y relies, y compris le modele de
debenture joint aux presentes a titre d’Annexe a « A », soient rediges en
anglais seulement. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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1.9    Successors and Assigns

          All
covenants and agreements of the Corporation in this Indenture and the Debentures
shall bind its successors and assigns, whether so expressed or not. All
covenants and agreements of the Trustee in this Indenture shall bind its
successors. 

1.10   Severability

          In
case any provision in this Indenture or in the Debentures shall be invalid,
illegal or unenforceable, such provision shall be deemed to be severed herefrom
or therefrom and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected, prejudiced or impaired thereby.


1.11   Entire Agreement

          This
Indenture and all supplemental indentures and Schedules hereto and thereto, and
the Debentures issued hereunder and thereunder, together constitute the entire
agreement between the parties hereto with respect to the indebtedness created
hereunder and thereunder and under the Debentures and supersedes as of the date
hereof all prior memoranda, agreements, negotiations, discussions and term
sheets, whether oral or written, with respect to the indebtedness created
hereunder or thereunder and under the Debentures. 

1.12   Benefits of Indenture

         Nothing
in this Indenture or in the Debentures, express or implied, shall give to any
Person, other than the parties hereto and their successors hereunder, any paying
agent, the holders of Debentures, the Senior Creditors (to the extent provided
in Article 5 only), and (to the extent provided in Section 8.11) the holders of
Common Shares, any benefit or any legal or equitable right, remedy or claim
under this Indenture. 

1.13   Applicable Law and Attornment

          This
Indenture, any supplemental indenture and the Debentures shall be governed by
and interpreted in accordance with the laws of the Province of British Columbia
and the federal laws of Canada applicable therein and shall be treated in all
respects as British Columbia contracts. With respect to any suit, action or
proceedings relating to this Indenture, any supplemental indenture or any
Debenture, the Corporation, the Trustee and each holder irrevocably submit and
attorn to the non-exclusive jurisdiction of the courts of the Province of
British Columbia. The parties hereto hereby waive any right they may have to
require a trial by jury of any proceeding commenced in connection herewith. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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1.14   Currency of Payment

          Unless
otherwise indicated in a supplemental indenture with respect to any particular
series of Debentures, all payments to be made under this Indenture or a
supplemental indenture shall be made in Canadian dollars. 

1.15   Non-Business Days

          Whenever
any payment to be made hereunder shall be due, any period of time would begin or
end, any calculation is to be made or any other action is to be taken on, or as
of, or from a period ending on, a day other than a Business Day, such payment
shall be made, such period of time shall begin or end, such calculation shall be
made and such other action shall be taken, as the case may be, unless otherwise
specifically provided herein, on or as of the next succeeding Business Day
without any additional interest, cost or charge to the Corporation. 

1.16   Accounting Terms

          Except
as hereinafter provided or as otherwise indicated in this Indenture, all
calculations required or permitted to be made hereunder pursuant to the terms of
this Indenture shall be made in accordance with GAAP. For greater certainty,
GAAP shall include any accounting standards, including IFRS, that may from time
to time be approved for general application by the Financial Accounting
Standards Board of the United States. 

1.17   Calculations

          The
Corporation shall be responsible for making all calculations called for
hereunder including, without limitation, calculations of Current Market Price.
The Corporation shall make such calculations in good faith and, absent manifest
error, the Corporation’s calculations shall be final and binding on holders and
the Trustee. The Corporation will provide a schedule of its calculations to the
Trustee and the Trustee shall be entitled to rely conclusively on the accuracy
of such calculations without independent verification. 

1.18   Schedules

          The
following Schedules are incorporated into and form part of this Indenture: 

	 	Schedule “A” 	- 	Form of Debenture 
	 	 	 	 
	 	Schedule “B” 	- 	Form of Redemption Notice 
	 	 	 	 
	 	Schedule “C” 	- 	Form of Notice of Conversion
  
	 	 	 	 
	 	Schedule “D” 	- 	Common Share Legends 
	 	 	 	 
	 	Schedule “E” 	- 	Form of Declaration for Removal
      of Legend 
	 	 	 	 
	 	Schedule “F” 	- 	Secured Assets




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	Schedule “G” 	Form of NAT US Guaranty and
      Security Agreement 


          In
the event of any inconsistency between the provisions of any Section of this
Indenture and the provisions of the Schedules which form a part hereof, the
provisions of this Indenture shall prevail to the extent of the inconsistency.


ARTICLE 2 
THE DEBENTURES 

2.1    Limit of
Debentures 

          Subject
to the limitation in respect of the Initial Debentures set out in Section
2.4(b), the aggregate principal amount of Debentures authorized to be issued
under this Indenture is unlimited, but Debentures may be issued only upon and
subject to the conditions and limitations herein set forth. 

2.2    Terms of Debentures
  of any Series

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

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

	 	 	 
	 	(b) 	
      any limit upon the aggregate principal amount of the
      Debentures of the series that may be certified and delivered under this
      Indenture (except for Debentures certified and delivered upon registration
      of, transfer of, amendment of, or in exchange for, or in lieu of, other
      Debentures of the series pursuant to Sections 2.9, 3.2, 3.3 and 3.6 and
      Article 4 and Article 6);

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

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

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

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




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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

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

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

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

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

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

	 	 	 
	 	(m) 	
      if applicable, that the Debentures of the series shall be
      issuable in whole or in part as one or more Global Debentures and, in such
      case, the Depository or Depositories for such Global Debentures in whose
      name the Global Debentures will be registered, and any circumstances other
      than or in addition to those set forth in Section 3.2 or those applicable
      with respect to any specific series of Debentures, as the case may be, in
      which any such Global Debenture may be exchanged for Definitive
      Debentures, or transferred to and registered in the name of a person other
      than the Depository for such Global Debentures or a nominee
  thereof;

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

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



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

          No
payment (by purchase of Debentures or otherwise) shall be made by the
Corporation under the Debentures and neither the Trustee nor the holders of
Debentures shall be entitled to demand, institute proceedings for the collection
of (which shall, for certainty include proceedings related to an adjudication or
declaration as to the insolvency or bankruptcy of the Corporation and other similar creditor proceedings), or receive any payment
or benefit (including without limitation by set-off, combination of accounts or
otherwise in any manner whatsoever) on account of the Debentures in a manner
inconsistent with the terms (as they exist on the date of issue) of the
Debentures. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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2.3    Form of Debentures

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

2.4    Form and Terms of Initial
  Debentures

	 	(a) 	
      The first series of Debentures (the “Initial
      Debentures”) authorized for issue immediately is limited to an
      aggregate principal amount of $10,000,000 (before giving effect to the
      Over-Allotment Option) at an issue price of $1,000 per Debenture (the
      “Issue Price”) and shall be designated as “10% Convertible Secured
      Debentures”, which consists of the Debentures offered in the Offering. The
      Corporation has granted the underwriter of the Offering an option,
      exercisable at the Issue Price at any time until 30 days following the
      Closing of the Offering, to purchase up to 15% of the principal amount of
      the Initial Debentures on the same terms and conditions as the Offering
      for the purposes of covering over-allotments, if any (the
      “Over-Allotment Option”). In the event the Over-Allotment Option is
      exercised in full, the Initial Debentures authorized for issue immediately
      shall be limited to an aggregate principal amount of
$11,500,000.

	 	 	 
	 	(b) 	
      The Initial Debentures shall be dated as of the date of
      issue of the Initial Debentures and shall mature on September 30, 2017
      (the “Maturity Date” for the Initial Debentures).

	 	 	 
	 	(c) 	
      The Initial Debentures shall bear interest from the date
      of issue at the rate of 10% per annum (based on a year of 365 days and the
      actual number of days in the relevant interest period), payable in arrears
      in equal (with the exception of the first interest payment, which will
      include interest from and including the date of issue of the Initial
      Debentures as set forth below) semi-annual payments in arrears on March 31
      and September 30 in each year, the first such payment to fall due on March
      31, 2013 and the last such payment (representing interest payable from
      the last Interest Payment Date to, but excluding, the
      Maturity Date of the Initial Debentures) to fall due on September 30,
      2017, payable after as well as before maturity and after as well as before
      default, with interest on amounts in default at the same rate, compounded
      semi-annually. For certainty, the first interest payment will include
      interest accrued from and including the date of issue of the Initial
      Debentures to, but excluding, March 31, 2013. Any payment required to be
      made on any day that is not a Business Day will be made on the next
      succeeding Business Day. The record dates for the payment of interest on
      the Initial Debentures will be the fifth Business Day prior to the
  applicable Interest Payment Date.




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	 	(d) 	
      The Initial Debentures will be redeemable in accordance
      with the terms of Article 4, provided that the Initial Debentures will not
      be redeemable before September 30, 2015, except in the event of the
      satisfaction of certain conditions after a Change of Control has occurred
      as outlined herein. On and after September 30, 2015 and at any time prior
      to the Maturity Date of the Initial Debentures, provided that the Current
      Market Price at the time of the Redemption Notice is not less than 125% of
      the Conversion Price, the Initial Debentures may be redeemed at the option
      of the Corporation in whole or in part from time to time on notice as
      provided for in Section 4.3 at a Redemption Price equal to their principal
      amount plus accrued and unpaid interest thereon up to (but excluding) the
      Redemption Date. The Redemption Notice for the Initial Debentures shall be
      substantially in the form of Schedule “B”. The Redemption Price, including
      any accrued and unpaid interest on such Initial Debentures to be redeemed,
      will be paid in cash.

	 	 	 
	 	(e) 	
      The Guarantee Liabilities will rank in priority to any
      other obligations of NAT US to the extent the Guarantee Liabilities are
      secured by the Security Interest constituted by the Security Documents and
      otherwise will be subordinated to the Senior Indebtedness of NAT US in
      accordance with the provisions of Article 5. In accordance with Section
      2.11, and except to the extent the Guarantee Liabilities are secured by
      the Security Interest, the Initial Debentures will rank pari passu with
      each other series of Debentures issued under this Indenture or under
      indentures supplemental to this Indenture (regardless of their actual date
      or terms of issue) and, except as prescribed by law, with all other
      existing and future unsecured indebtedness of the Corporation other than
      Senior Indebtedness.

	 	 	 
	 	(f) 	
      Upon and subject to the provisions and conditions of
      Article 6 and Section 3.7, the holder of each Initial Debenture shall have
      the right at such holder’s option, at any time prior to the close of
      business on the earlier of: (i) the Maturity Date of the Initial
      Debentures; and (ii) the Business Day immediately preceding the Redemption
      Date if the Initial Debentures are called for redemption by notice to the
      holders of Initial Debentures in accordance with Sections 2.4(d) and 4.3
      (the earlier of which will be the “Time of Expiry” for the purposes
      of Article 6 in respect of the Initial Debentures), to convert any part,
      being $1,000 or an integral multiple thereof, of the principal amount of a
      Debenture into Common Shares at the Conversion Price in effect on the Date
      of Conversion. To the extent a redemption is a redemption in part only of
      the Initial Debentures, such right to convert, if not exercised prior to the applicable Time of
      Expiry, shall survive as to any Initial Debentures not redeemed or
      converted and be applicable to the next succeeding Time of
  Expiry.





	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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      The Conversion Price in effect on the date hereof for
      each Common Share to be issued upon the conversion of Initial Debentures
      shall be equal to $2.90 such that approximately 344.8276 Common Shares
      shall be issued for each $1,000 principal amount of Initial Debentures so
      converted. Except as provided below, no adjustment in the number of Common
      Shares to be issued upon conversion will be made for dividends or
      distributions on Common Shares issuable upon conversion, the record date
      for the payment of which precedes the date upon which the holder becomes a
      holder of Common Shares in accordance with Article 6, or for interest
      accrued on Initial Debentures surrendered. No fractional Common Shares
      will be issued, and holders will receive a cash payment in satisfaction of
      any fractional interest based on the Current Market Price as of the Date
      of Conversion, provided, however, that the Corporation shall not be
      required to make any payment of less than $5.00. The Conversion Price
      applicable to, and the Common Shares, securities or other property
      receivable on the conversion of, the Initial Debentures is subject to
      adjustment pursuant to the provisions of Section 6.5.

	 	 	 
	 		
      Holders converting Debentures shall receive accrued and
      unpaid interest thereon from the period of the last Interest Payment Date
      prior to the Date of Conversion to the date that is one Business Day prior
      to the Date of Conversion.

	 	 	 
	 		
      Notwithstanding any other provisions of this Indenture,
      if a Debenture is surrendered for conversion on an Interest Payment Date
      or during the five preceding Business Days, the person or persons entitled
      to receive Common Shares in respect of the Debenture so surrendered for
      conversion shall not become the holder or holders of record of such Common
      Shares until the Business Day following such Interest Payment
  Date.

	 	 	 
	 		
      A Debenture in respect of which a holder has accepted a
      notice in respect of a Change of Control Purchase Offer pursuant to the
      provisions of Section 2.4(h) may be surrendered for conversion only if
      such notice is withdrawn in accordance with this Indenture.

	 	 	 
	 	(g) 	
      The Initial Debentures shall be issued in denominations
      of $1,000 and integral multiples of $1,000. Each Initial Debenture and the
      certificate of the Trustee endorsed thereon shall be issued in
      substantially the form set out in Schedule “A” (provided that Initial
      Debentures issued in the form of Definitive Debentures shall be issued
      without the Global Debenture Legend), with such insertions, omissions,
      substitutions or other variations as shall be required or permitted by
      this Indenture, and may have imprinted or otherwise reproduced thereon
      such legend or legends or endorsements, not inconsistent with the
      provisions of this Indenture, as may be required to comply with any law or
      with any rules or regulations pursuant thereto or with any rules or
      regulations of any securities exchange or securities regulatory authority
      or to conform with general usage, all as may
be determined by the Board of Directors executing such
      Initial Debenture in accordance with Section 2.7, as conclusively
      evidenced by their execution of an Initial Debenture. Each Initial
      Debenture shall additionally bear such distinguishing letters and numbers
      as the Trustee shall approve. Notwithstanding the foregoing, an Initial
      Debenture may be in such other form or forms as may, from time to time, be
      approved by a resolution of the Board of Directors, or as specified in an
  Officers’ Certificate.





	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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      The Initial Debentures may be engraved, lithographed,
      printed, mimeographed or typewritten or partly in one form and partly in
      another.

	 	 	 	 
	 		
      The Initial Debentures shall be issued in the form of one
      or more Global Debentures and/or one or more Definitive Debentures at the
      option of the Corporation; provided however that any Initial Debentures
      that are required to bear the U.S. Legend shall be issued in the form of
      one or more Definitive Debentures and may not be issued in the form of one
      or more Global Debentures.

	 	 	 	 
	 		
      The Global Debentures will be registered in the name of
      the Depository which, as of the date hereof, shall be CDS (or any nominee
      of the Depository). No Beneficial Holder will receive definitive
      certificates representing their interest in Debentures except as provided
      in this Section 2.4(g) and Section 3.2. A Global Debenture may be
      exchanged for Definitive Debentures, or transferred to and registered in
      the name of a person other than the Depository for such Global Debentures
      or a nominee thereof, as provided in Section 3.2.

	 	 	 	 
	 		
      The Definitive Debentures will be registered in the names
      of each holder thereof as provided in Section 3.1. A Definitive Debenture
      may be exchanged, or transferred to and registered in the name of a person
      other than the registered holder thereof, as provided in Section
    3.2.

	 	 	 	 
	 	(h) 	
      Within 30 days following the occurrence of a Change of
      Control, and subject to the provisions and conditions of this Section
      2.4(h), the Corporation shall be obligated to offer to purchase all of the
      Initial Debentures then outstanding. The terms and conditions of such
      obligation are set forth below:

	 	 	 	 
	 		(i) 	
      Within 30 days following the occurrence of a Change of
      Control, the Corporation shall deliver to the Trustee, and the Trustee
      shall promptly deliver to the holders of the Initial Debentures, a notice
      stating that there has been a Change of Control and specifying the date on
      which such Change of Control occurred and the circumstances or events
      giving rise to such Change of Control (a “Change of Control
      Notice”) together with an offer in writing (the “Change of Control
      Purchase Offer”) to, at the option of the holder of the Initial
      Debentures, either: (i) purchase, on the Change of Control Purchase Date
      (as defined below), all (or any portion actually tendered to such offer)
      of the Initial Debentures then outstanding from the holders thereof made
      in accordance with the requirements of all applicable laws, including
      Applicable Securities Legislation, at a price per Initial Debenture equal
      to 100% of the principal amount thereof (the “Offer Price”) plus accrued and unpaid interest on
      such Initial Debentures up to, but excluding, the Change of Control
      Purchase Date (collectively, the “Total Offer Price”); or (ii)
      convert the Initial Debentures at the Change of Control Conversion Price.
      If such Change of Control Purchase Date is after a record date for the
      payment of interest on the Initial Debentures but on or prior to an
      Interest Payment Date, then the interest payable on such date will be paid
      to the holder of record of the Debentures on the relevant record date. The
      “Change of Control Purchase Date” shall be the date that is 30
      Business Days after the date that the Change of Control Notice and Change
      of Control Purchase Offer are delivered to holders of Initial
      Debentures.





	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	(ii) 	
      The “Change of Control Conversion Price” will be
      calculated as follows:





	 	COCCP 	= 	
      ECP/( 1 +(CP x (c/t))) where: 

	 	 	 	 
	 	COCCP 	= 	
      is the Change of Control Conversion Price; 

	 	 	 	 
		ECP 	= 	
      is the Conversion Price in effect on the date of the
      Change of Control; 

	 	 	 	 
	 	CP 	= 	
      31.2%; 

	 	 	 	 
		c 	= 	
      the number of days from and including the date of the
      Change of Control to but excluding the Maturity Date; and 

	 	 	 	 
		t 	= 	
      the number of days from and including the issuance date
      to but excluding the Maturity Date. 




	 	(iii) 	
      If 90% or more in aggregate principal amount of the
      Initial Debentures outstanding on the date the Corporation provides the
      Change of Control Notice and the Change of Control Purchase Offer to
      holders of the Initial Debentures have been tendered for purchase pursuant
      to the Change of Control Purchase Offer on or before the expiration
      thereof, the Corporation has the right upon written notice provided to the
      Trustee within 10 days following the expiration of the Change of Control
      Purchase Offer, to redeem all the Initial Debentures remaining outstanding
      on the expiration of the Change of Control Purchase Offer at the Total
      Offer Price as at the Change of Control Purchase Date (the “90%
      Redemption Right”).

	 	 	 
	 	(iv) 	
      Upon receipt of notice that the Corporation has exercised
      or is exercising the 90% Redemption Right and is acquiring the remaining
      Initial Debentures, the Trustee shall promptly provide written notice to
      each holder of an Initial Debenture that did not previously accept the
      Offer that:




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	(A) 	
      the Corporation has exercised the 90% Redemption Right
      and is purchasing all outstanding Initial Debentures effective on the
      expiry of the Change of Control Purchase Offer at the Total Offer Price,
      and shall include a calculation of the amount payable to such holder as
      payment of the Total Offer Price as at the Change of Control Purchase
      Date;

	 	 	 
	 	(B) 	
      each such holder must transfer their Initial Debentures
      to the Trustee on the same terms as those holders that accepted the Change
      of Control Purchase Offer and must send their respective Initial
      Debentures, duly endorsed for transfer, to the Trustee within 10 days
      after the sending of such notice; and

	 	 	 
	 	(C) 	
      the rights of such holder under the terms of the Initial
      Debentures and this Indenture cease to be effective as of the date of
      expiry of the Change of Control Purchase Offer provided the Corporation
      has, on or before the time of notifying the Trustee of the exercise of the
      90% Redemption Right, paid the Total Offer Price to, or to the order of,
      the Trustee and thereafter the Initial Debentures shall not be considered
      to be outstanding and the holder shall not have any right except to
      receive such holder’s Total Offer Price upon surrender and delivery of
      such holder’s Initial Debentures in accordance with the
  Indenture.




	 	(v) 	
      The Corporation shall, on or before 11:00 a.m., Vancouver
      time, on the Business Day immediately prior to the Change of Control
      Purchase Date, deposit with the Trustee or any paying agent to the order
      of the Trustee, such sums of money as are sufficient to pay the Total
      Offer Price of the Initial Debentures to be purchased or redeemed by the
      Corporation on the Change of Control Purchase Date, provided the
      Corporation may elect to satisfy this requirement by providing the Trustee
      with a certified cheque or wire transfer for such amounts required under
      this Section 2.4(h)(v) post- dated to the date of expiry of the Change of
      Control Purchase Offer. The Corporation shall also deposit with the
      Trustee a sum of money sufficient to pay any charges or expenses which may
      be incurred by the Trustee in connection with such purchase. Every such
      deposit shall be irrevocable. From the sums so deposited, the Trustee
      shall pay or cause to be paid to the holders of such Initial Debentures,
      the Total Offer Price to which they are entitled on the Corporation’s
      purchase.

	 	 	 
	 	(vi) 	
      In the event that one or more of such Initial Debentures
      being purchased in accordance with this Section 2.4(h) becomes subject to
      purchase in part only, upon surrender of such Initial Debentures for
      payment of the Total Offer Price, the Corporation shall execute and the
      Trustee shall certify and deliver to the holder thereof or upon the
      holder’s order, one or more new Initial Debentures for the portion of the
      principal amount of the Initial Debentures not
purchased.




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	(vii) 	
      Initial Debentures for which holders have accepted the
      Change of Control Purchase Offer and Initial Debentures which the
      Corporation has elected to redeem in accordance with this Section 2.4(h)
      shall become due and payable at the Total Offer Price on the Change of
      Control Purchase Date, in the same manner and with the same effect as if
      it were the date of maturity specified in such Initial Debentures,
      anything therein or herein to the contrary notwithstanding, and from and
      after the Change of Control Purchase Date, if the money necessary to
      purchase or redeem, or the Common Shares necessary to purchase or redeem,
      the Initial Debentures shall have been deposited as provided in this
      Section 2.4(h) and affidavits or other proofs satisfactory to the Trustee
      as to the publication and/or mailing of such notices shall have been
      lodged with it, interest on the Initial Debentures shall cease. If any
      question shall arise as to whether any notice has been given as above
      provided and such deposit made, such question shall be decided by the
      Trustee whose decision shall be final and binding upon all
  parties.

	 	 	 
	 	(viii) 	
      In case the holder of any Initial Debenture to be
      purchased or redeemed in accordance with this Section 2.4(h) shall fail on
      or before the Change of Control Purchase Date to so surrender such
      holder’s Initial Debenture or shall not within such time accept payment of
      the monies payable or give such receipt therefor, if any, as the Trustee
      may require, such monies may be set aside in trust, without interest,
      either in the deposit department of the Trustee or in a chartered bank,
      and such setting aside shall for all purposes be deemed a payment to the
      Debentureholder of the sum or the Common Shares so set aside and the
      Debentureholder shall have no other right except to receive payment of the
      monies so paid and deposited upon surrender and delivery of such holder’s
      Initial Debenture. In the event that any money or certificates
      representing Common Shares required to be deposited hereunder with the
      Trustee or any depository or paying agent on account of principal,
      premium, if any, or interest, if any, on Initial Debentures issued
      hereunder shall remain so deposited for a period of six years from the
      Change of Control Purchase Date, then such monies, or certificates
      representing Common Shares, together with any accumulated interest
      thereon, or any distributions paid thereon, shall at the end of such
      period be paid over or delivered over by the Trustee or such depository or
      paying agent to the Corporation and the Trustee shall not be responsible
      to Debentureholders of such Initial Debentures for any amounts owing to
      them.

	 	 	 
	 	(ix) 	
      Subject to the provisions above related to Initial
      Debentures purchased in part, all Initial Debentures redeemed and paid
      under this Section 2.4(h) shall forthwith be delivered to the Trustee and
      cancelled and no Initial Debentures shall be issued in substitution
      therefor.




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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2.5     Certification
and Delivery of Additional Debentures 

          The
Corporation may from time to time request the Trustee to certify and deliver
Additional Debentures of any series by delivering to the Trustee the documents
referred to below in this Section 2.5 whereupon the Trustee shall certify such
Debentures and cause the same to be delivered in accordance with the Written
Direction of the Corporation referred to below or pursuant to such procedures
acceptable to the Trustee as may be specified from time to time by a Written
Direction of the Corporation. The maturity date, issue date, interest rate (if
any) and any other terms of the Debentures of such series shall be set forth in
or determined by or pursuant to such Written Direction of the Corporation and
procedures. In certifying such Debentures, the Trustee shall be entitled to
receive and shall be fully protected in relying upon, unless and until such
documents have been superseded or revoked: 

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

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

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

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

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

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

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




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	(d) 	 an Officers’ Certificate (which Officers’
        Certificate shall be in such form that satisfies all applicable laws)
        certifying that the Corporation is not in default under this Indenture,
        that the terms and conditions for the certification and delivery of Additional
        Debentures (including those set forth in Section 13.5), have been complied
        with subject to the delivery of any documents or instruments specified
        in such Officers’ Certificate and that no Event of Default exists
        or will exist upon such certification and delivery; and

	 	 	 
	 	(e) 	 a certificate of good standing of the Corporation.



2.6     Issue of Global
  Debentures

	 	(a) 	
      The Corporation may specify that the Debentures of a
      series are to be issued in whole or in part as one or more Global
      Debentures registered in the name of a Depository, or its nominee,
      designated by the Corporation in the Written Direction of the Corporation
      delivered to the Trustee at the time of issue of such Debentures, and in
      such event the Corporation shall execute and the Trustee shall certify and
      deliver one or more Global Debentures that shall:

	 	 	 	 
	 		(i) 	
      represent an aggregate amount equal to the principal
      amount of the outstanding Debentures of such series to be represented by
      one or more Global Debentures;

	 	 	 	 
	 		(ii) 	
      be delivered by the Trustee to such Depository or
      pursuant to such Depository’s instructions; and

	 	 	 	 
	 		(iii) 	
      bear a legend substantially to the following
    effect:

	 	 	 	 
	 			
      “THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING
      OF THE INDENTURE HEREIN REFERRED TO AND IS REGISTERED IN THE NAME OF A
      DEPOSITORY OR A NOMINEE THEREOF. THIS DEBENTURE MAY NOT BE TRANSFERRED TO
      OR EXCHANGED FOR DEBENTURES REGISTERED IN THE NAME OF ANY PERSON OTHER
      THAN THE DEPOSITORY OR A NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE
      REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.
      EVERY DEBENTURE AUTHENTICATED AND DELIVERED UPON REGISTRATION OF, TRANSFER
      OF, OR IN EXCHANGE FOR, OR IN LIEU OF, THIS DEBENTURE SHALL BE A GLOBAL
      DEBENTURE SUBJECT TO THE FOREGOING, EXCEPT IN SUCH LIMITED CIRCUMSTANCES
      DESCRIBED IN THE INDENTURE.

	 	 	 	 
	 			
      UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
      REPRESENTATIVE OF CDS CLEARING AND DEPOSITORY SERVICES INC. (“CDS”) TO
      NATURALLY ADVANCED TECHNOLOGIES INC. (THE “ISSUER”) OR ITS AGENT FOR
      REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IN RESPECT THEREOF IS REGISTERED IN THE NAME OF CDS & CO., OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS (AND ANY PAYMENT IS MADE TO CDS & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED HOLDER HEREOF, CDS & CO., HAS A PROPERTY INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE HEREIN AND IT IS A VIOLATION OF ITS RIGHTS FOR ANOTHER PERSON TO HOLD, TRANSFER OR DEAL WITH THIS CERTIFICATE. 




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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TRANSFERS OF THIS DEBENTURE SHALL BE
LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF CDS & CO. OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR’S NOMINEE.” 

	 	(b) 	
      Each Depository designated for a Global Debenture must,
      at the time of its designation and at all times while it serves as such
      Depository, be a clearing agency registered or designated under the
      securities legislation of the jurisdiction where the Depository has its
      principal offices.



2.7     Execution of
Debentures 

          All
Debentures shall be manually signed by any one authorized director or officer of
the Corporation holding office at the time of signing.

          Notwithstanding
that any person whose signature appears on a Debenture as a director or officer
may no longer hold such office at the date of the Debenture or at the date of
the certification and delivery thereof, such Debenture shall be valid and
binding upon the Corporation and entitled to the benefits of this Indenture.


2.8     Certification

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

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

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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2.9     Mutilation, Loss,
  Theft or Destruction

          In
case any of the Debentures issued hereunder shall become mutilated or be lost,
stolen or destroyed, the Corporation, in its discretion, may issue, and
thereupon the Trustee shall certify and deliver, a new Debenture upon surrender
and cancellation of the mutilated Debenture, or in the case of a lost, stolen or
destroyed Debenture, in lieu of and in substitution for the same, and the
substituted Debenture shall be in a form approved by the Trustee and shall be
entitled to the benefits of this Indenture and rank equally in accordance with
its terms with all other Debentures of such series issued or to be issued
hereunder. In case of loss, theft or destruction the applicant for a substituted
Debenture shall furnish to the Corporation and to the Trustee such evidence of
the loss, theft or destruction of the Debenture as shall be satisfactory to them
in their discretion and shall also furnish an indemnity and surety bond
satisfactory to them in their discretion. The applicant shall pay all reasonable
expenses incidental to the issuance of any substituted Debenture. 

2.10   Concerning Interest

	 	(a) 	
      All Debentures issued hereunder, whether originally or
      upon exchange or in substitution for previously issued Debentures which
      are interest bearing, shall bear interest (i) from and including their
      issue date, or (ii) from and including the last Interest Payment Date to
      which interest shall have been paid or made available for payment on the
      outstanding Debentures of that series, whichever shall be the later, or,
      in respect of Debentures subject to a Periodic Offering, from and
      including their issue date or from and including the last Interest Payment
      Date to which interest shall have been paid or made available for payment
      on such Debentures, in all cases, to and excluding the next Interest
      Payment Date.

	 	 	 
	 	(b) 	
      Unless otherwise specifically provided in the terms of
      the Debentures of any series, interest for any period shall be computed on
      the basis of a year of 365 days and the actual number of days elapsed in
      such period. With respect to any series of Debentures, for the purposes of
      disclosure under the Interest Act (Canada), whenever interest is computed
      on the basis of a year (the “deemed year”) which contains fewer days than
      the actual number of days in the calendar year of calculation, such rate
      of interest shall be expressed as a yearly rate for purposes of the
      Interest Act (Canada) by multiplying such rate of interest by the actual
      number of days in such calendar year of calculation and dividing it by the
      number of days in the deemed year.



2.11   Rank 

          The
Debentures will be direct unsecured obligations of the Corporation. Each
Debenture of the same series of Debentures will rank pari passu with each other
Debenture of the same series (regardless of their actual date or terms of issue)
and, subject to statutory preferred exceptions, with all other present and
future indebtedness of the Corporation, other than Senior Indebtedness. The
Guarantee Obligations will rank in priority to any other obligations of NAT US to the extent the Guarantee Obligations are secured by the
Security Interest constituted by the Security Documents and otherwise will be
subordinated to the Senior Indebtedness of NAT US in accordance with the
provisions of Article 5. 

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2.12   Payments of Amounts Due
  on Maturity

          Except
as may otherwise be provided herein or in any supplemental indenture in respect
of any series of Debentures, payments of amounts due upon maturity of the
Debentures will be made in the following manner. The Corporation will establish
and maintain with the Trustee a Maturity Account for each series of Debentures.
Each such Maturity Account shall be maintained by and be subject to the control
of the Trustee for the purposes of this Indenture. On or before 11:00 a.m.
(Vancouver time) on the Business Day immediately prior to each Maturity Date for
Debentures outstanding from time to time under this Indenture, the Corporation
will deliver to the Trustee a certified cheque or wire transfer for deposit in
the applicable Maturity Account in an amount sufficient to pay the cash amount
payable in respect of such Debentures (including the principal amount together
with any accrued and unpaid interest thereon). The Trustee, on behalf of the
Corporation, will pay to each holder entitled to receive payment the principal
amount of and premium (if any) and accrued and unpaid interest on the Debenture,
upon surrender of the Debenture at any branch of the Trustee designated for such
purpose from time to time by the Corporation and the Trustee. The delivery of
such funds to the Trustee for deposit to the applicable Maturity Account will
satisfy and discharge the liability of the Corporation for the Debentures to
which the delivery of funds relates to the extent of the amount delivered and
such Debentures will thereafter to that extent not be considered as outstanding
under this Indenture and such holder will have no other right in regard thereto
other than to receive out of the money so delivered or made available the amount
to which it is entitled. 

     2.13   U.S.
Legend on the Debentures and Common Shares 

	 	
      (a) 
	
      The Debentures and the Common Shares issuable upon
      conversion thereof have not been and will not be registered under the U.S.
      Securities Act or under the securities laws of any U.S. States. Any
      Debentures issued in the U.S. or to a U.S. Person, or to a person acting
      for the account or benefit of a person in the U.S. or a U. S. Person are,
      and any Common Shares issued upon conversion of such Debentures will be,
      “restricted securities” as defined in Rule 144(a)(3) under the U. S.
      Securities Act, and shall be issued in definitive (not global) form, and
      the certificates or other instruments representing such Debentures and the
      stock certificates representing any Common Shares issued upon conversion
      of such Debentures shall bear a restrictive legend in substantially the
      following form (and a stop-transfer order may be placed against transfer
      of such stock certificates):

	 	 	 
	 		
      “[THE SALE OF THIS DEBENTURE AND ANY COMMON SHARES
      ISSUABLE UPON ITS CONVERSION][THE COMMON SHARES REPRESENTED BY THIS
      CERTIFICATE] HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
      1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR ANY U.S. STATE SECURITIES
      LAWS, AND ACCORDINGLY, [THIS DEBENTURE AND ANY SHARES OF COMMON STOCK
      ISSUABLE UPON ITS CONVERSION] [THE COMMON
SHARES REPRESENTED BY THIS CERTIFICATE] MAY NOT BE OFFERED OR
      SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
      HEREOF OR A BENEFICIAL INTEREST HEREIN, THE HOLDER AGREES FOR THE BENEFIT
      OF THE ISSUER (THE “COMPANY”) THAT IT WILL NOT OFFER, RESELL, PLEDGE OR
      OTHERWISE TRANSFER [THE DEBENTURES EVIDENCED HEREBY OR THE SHARES OF
      COMMON STOCK ISSUABLE UPON THEIR CONVERSION] [THE COMMON SHARES
      REPRESENTED BY THIS CERTIFICATE] EXCEPT (A) TO THE COMPANY; (B) TO A
      PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL
      BUYER (“QIB”) WITHIN THE MEANING OF RULE 144A UNDER THE U.S. SECURITIES
      ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER
      QIB AND TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
      RELIANCE ON RULE 144A, ALL IN ACCORDANCE WITH RULE 144A (IF AVAILABLE);
      (C) UNDER AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE
      U.S. SECURITIES ACT, IF AVAILABLE; (D) UNDER A REGISTRATION STATEMENT THAT
      HAS BEEN DECLARED EFFECTIVE UNDER THE U.S. SECURITIES ACT; (E) OUTSIDE THE
      UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S.
      SECURITIES ACT OR (F) UNDER ANY OTHER AVAILABLE EXEMPTION FROM THE
      REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT; PROVIDED THAT IN THE
      CASE OF TRANSFERS PURSUANT TO (C) OR (E) ABOVE, AN OPINION OF COUNSEL OF
      RECOGNIZED STANDING IN FORM SATISFACTORY TO THE COMPANY MAY BE REQUIRED BY
      THE COMPANY PRIOR TO SUCH OFFER, SALE OR TRANSFER; AND IN THE CASE OF
      TRANSFERS PURSUANT TO (F) ABOVE, AN OPINION OF COUNSEL OF RECOGNIZED
      STANDING IN FORM SATISFACTORY TO THE COMPANY WILL BE REQUIRED PRIOR TO
      SUCH OFFER, SALE OR TRANSFER. DELIVERY OF THIS CERTIFICATE MAY NOT
      CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON A CANADIAN
STOCK EXCHANGE.”




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	 	(b) 	
      Notwithstanding Section 2.13(a), provided that the
      Debentures or the Common Shares issuable upon conversion, redemption or
      maturity thereof are being sold in compliance with the requirements of
      Rule 904 of Regulation S, and provided that the Corporation is a “foreign
      issuer” within the meaning of Regulation S at the time of sale, the U.S.
      Legend may be removed by providing a declaration to the Trustee
      substantially as set forth in Schedule “E” hereto (or as the Corporation
      may prescribe from time to time); together with any other evidence
      reasonably requested by the Corporation or Trustee, which evidence may
      include an opinion of Counsel of recognized standing, in form and
      substance reasonably satisfactory to the Corporation or the Trustee, to
      the effect that the U.S. Legend is no longer required pursuant to the
      requirements of the U.S. Securities Act or applicable state securities
      laws; and provided, further, that if the Securities are being sold under
      Rule 144 of the U.S. Securities Act, the U.S. Legend may be removed by
      delivery to the Trustee of an opinion of Counsel, of recognized standing or other evidence reasonably satisfactory to the Corporation, that the U.S. Legend is no longer required under the U.S. Securities Act or applicable state securities laws. Provided that the Trustee obtains confirmation from the Corporation that such Counsel is satisfactory to it, the Trustee shall be entitled to rely on such opinion of Counsel without further inquiry. 





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2.14   Payment of Interest

          The
following provisions shall apply to Debentures, except as otherwise provided in
Section 2.4(c) or specified in a resolution of the Board of Directors, an
Officers’ Certificate or a supplemental indenture relating to a particular
series of Additional Debentures: 

	 	(a) 	
      As interest becomes due on each Debenture (except,
      subject to certain exceptions set forth herein including in Section 2.4,
      on conversion or on redemption, when interest may at the option of the
      Corporation be paid upon surrender of such Debenture), the Corporation,
      through the Trustee or any agent of the Trustee, shall send or forward by
      prepaid ordinary mail, electronic transfer of funds or such other means as
      may be agreed to by the Trustee, payment of such interest to the order of
      the registered holder of such Debenture appearing on the registers
      maintained by the Trustee at the close of business on the fifth Business
      Day prior to the applicable Interest Payment Date and addressed to the
      holder at the holder’s last address appearing on the register, unless such
      holder otherwise directs. If payment is made by cheque, such cheque shall
      be forwarded at least three days prior to each date on which interest
      becomes due and if payment is made by other means (such as electronic
      transfer of funds, provided the Trustee must receive confirmation of
      receipt of funds prior to being able to wire funds to holders), such
      payment shall be made in a manner whereby the holder receives credit for
      such payment on the date such interest on such Debenture becomes due. The
      mailing of such cheque or the making of such payment by other means shall,
      to the extent of the sum represented thereby, plus the amount of any tax
      withheld as aforesaid, satisfy and discharge all liability for interest on
      such Debenture, unless in the case of payment by cheque, such cheque is
      not paid at par on presentation. In the event of non-receipt of any cheque
      for or other payment of interest by the person to whom it is so sent as
      aforesaid, the Corporation will issue to such person a replacement cheque
      or other payment for a like amount upon being furnished with such evidence
      of non-receipt as it shall reasonably require and upon being indemnified
      to its satisfaction. Notwithstanding the foregoing, if the Corporation is
      prevented by circumstances beyond its control (including, without
      limitation, any interruption in mail service) from making payment of any
      interest due on each Debenture in the manner provided above, the
      Corporation may make payment of such interest or make such interest
      available for payment in any other manner acceptable to the Trustee,
      acting reasonably, with the same effect as though payment had been made in
      the manner provided above.

	 	 	 
	 	(b) 	
      All payments of interest on the Global Debenture shall be
      made by electronic funds transfer or certified cheque made payable to the
      Depository or its nominee on the day interest is payable for subsequent
payment to Beneficial Holders of the applicable Global Debenture, unless the Corporation, the Trustee and the Depository otherwise agree. None of the Corporation, the Trustee or any agent of the Trustee for any Debenture issued as a Global Debenture will be liable or responsible to any person for any aspect of the records related to or payments made on account of beneficial interests in any Global Debenture or for maintaining, reviewing, or supervising any records relating to such beneficial interests. 




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2.15   Additional Amounts

	 	(a) 	
      All payments of interest by the Corporation in respect of
      the Initial Debentures will be made free and clear of, and without
      withholding or deduction for or on account of any taxes or similar imposts
      (“Taxes”) imposed, levied, collected, withheld or assessed by or on
      behalf of the Government of Canada or of any province or territory thereof
      or by any authority or agency therein having power to tax (“Taxing
      Jurisdiction”), unless such withholding or deduction is so required by
      law or by the interpretation or administration thereof by the relevant
      governmental authority or agency. If any such withholding or deduction is
      so required, the Corporation will pay as additional interest such
      additional amounts (“Additional Amounts”) as will result in receipt
      by the holders of Initial Debentures of such amounts as would have been
      received by them had no such withholding or deduction been required,
      except that no Additional Amounts will be payable with respect to a
      payment made to a holder of Initial Debentures for or in respect
  of:

	 	 	 	 	 
	 		(i) 	
      Taxes that would not have been imposed but for:

	 	 	 	 	 
	 			(A) 	
      the holder or Beneficial Holder of Initial Debentures
      being a resident, domicile or national of, or engaged in business or
      maintaining an establishment or other presence in, or otherwise having
      some present or former connection with, the Taxing Jurisdiction
      (including, without limitation, by virtue of the holder or Beneficial
      Holder carrying on a business or having a place of business in such
      jurisdiction), other than merely holding or ownership of such Initial
      Debenture; or

	 	 	 	 	 
	 			(B) 	
      the holder or Beneficial Holder not dealing at arm’s
      length, within the meaning of the Tax Act, with the Corporation at the
      relevant time; or

	 	 	 	 	 
	 			(C) 	
      all or any portion of the payment being deemed to be a
      dividend paid to the holder or Beneficial Holder pursuant to proposed
      subsection 214(16) of the Tax Act or any amended or successor provision
      substantially similar thereto;

	 	 	 	 	 
	 		(ii) 	
      any estate, inheritance, gift, sales, transfer, personal
      property or similar Taxes; or




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	 	(iii) 	
      any Taxes, deduction or withholding imposed by reason of
      the failure of the holder or Beneficial Holder of a Initial Debenture to
      comply with certification, information or other reporting requirements if
      such compliance is required or imposed by a statute, treaty or regulation
      or is in accordance with administrative practice of the relevant Taxing
      Jurisdiction as a precondition to exemption from or reduction in all or
      part of such Taxes, deduction or withholding.




	 	(b) 	
      If any such withholding or deduction is so required, the
      Corporation will (i) make such withholding or deduction and (ii) remit the
      full amount deducted or withheld to the relevant authority in accordance
      with applicable law.

	 	 	 
	 	(c) 	
      Whenever in this Indenture there is mentioned, in any
      context, the payment of amounts based upon interest payable under or with
      respect to any Initial Debenture, such mention will be deemed to include
      mention of the payment of Additional Amounts to the extent that, in such
      context, Additional Amounts are, were or would be payable in respect
      thereof.

	 	 	 
	 	(d) 	
      If the Corporation fails to make any payment required by
      this Section 2.15, the Trustee shall in no circumstances be required to
      make any such payment.



ARTICLE 3 
REGISTRATION, TRANSFER, EXCHANGE AND
OWNERSHIP 

3.1     Definitive Debentures

	 	(a) 	
      With respect to each series of Debentures issuable as
      Definitive Debentures, the Corporation shall cause to be kept by and at
      the principal office of the Trustee in Vancouver, British Columbia or such
      other registrar as the Corporation, with the approval of the Trustee, may
      appoint at such other place or places, if any, as may be specified in the
      Debentures of such series or as the Corporation may designate with the
      approval of the Trustee, a register in which shall be entered the names
      and addresses of the holders of Definitive Debentures and particulars of
      the Debentures held by them respectively and of all transfers of
      Definitive Debentures. Such registration shall be noted on the Debentures
      by the Trustee or other registrar unless a new Debenture shall be issued
      upon such transfer.

	 	 	 
	 	(b) 	
      No transfer of a Definitive Debenture shall be valid
      unless made on such register referred to in Section 3.1 by the registered
      holder or such holder’s executors, administrators or other legal
      representatives or an attorney duly appointed by an instrument in writing
      in form and executed in a manner satisfactory to the Trustee or other
      registrar upon surrender of the Debentures together with a duly executed
      form of transfer acceptable to the Trustee and upon compliance with such
      other reasonable requirements as the Trustee or other registrar may
      prescribe, or unless the name of the transferee shall have been noted on
      the Debenture by the Trustee or other
registrar.




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	3.2 	
      Global Debentures

	 	 	 	 
		(a) 	
      With respect to each series of Debentures issuable in
      whole or in part as one or more Global Debentures, the Corporation shall
      cause to be kept by and at the principal offices of the Trustee in
      Vancouver, British Columbia or such other registrar as the Corporation,
      with the approval of the Trustee, may appoint at such other place or
      places, if any, as the Corporation may designate with the approval of the
      Trustee, a register in which shall be entered the name and address of the
      holder of each such Global Debenture (being the Depository, or its
      nominee, for such Global Debenture) as holder thereof and particulars of
      the Global Debenture held by it, and of all transfers thereof.

	 	 	 	 
		(b) 	
      Notwithstanding any other provision of this Indenture, a
      Global Debenture may not be transferred by the registered holder thereof
      and accordingly, no definitive certificates shall be issued to Beneficial
      Holders except in the following circumstances or as otherwise specified in
      a resolution of the Trustee, a resolution of the Board of Directors,
      Officers’ Certificate or supplemental indenture relating to a particular
      series of Additional Debentures:

	 	 	 	 
			(i) 	
      Global Debentures may be transferred by a Depository to a
      nominee of such Depository or by a nominee of a Depository to such
      Depository or to another nominee of such Depository or by a Depository or
      its nominee to a successor Depository or its nominee;

	 	 	 	 
			(ii) 	
      Global Debentures may be transferred at any time after
      the Depository for such Global Debentures (i) has notified the Trustee, or
      the Corporation has notified the Trustee, that it is unwilling or unable
      to continue as Depository for such Global Debentures, or (ii) ceases to be
      eligible to be a Depository under Section 2.6(b), provided that at the
      time of such transfer the Corporation has not appointed a successor
      Depository for such Global Debentures;

	 	 	 	 
			(iii) 	
      Global Debentures may be transferred at any time after
      the Corporation has determined, in its sole discretion, to terminate the
      book-entry only registration system in respect of such Global Debentures
      and has communicated such determination to the Trustee in
  writing;

	 	 	 	 
			(iv) 	
      Global Debentures may be transferred at any time after
      the Trustee has determined that an Event of Default has occurred and is
      continuing with respect to the Debentures of the series issued as a Global
      Debenture, provided that Beneficial Holders representing, in the
      aggregate, not less than 25% of the aggregate principal amount of the
      Debentures of such series advise the Depository in writing, through the
      Depository Participants, that the continuation of the book-entry only
      registration system for such series of Debentures is no longer in their
      best interest and also provided that at the time of such transfer the
      Trustee has not waived the Event of Default pursuant to Section
  8.3;




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	 	(v) 	
      Global Debentures may be transferred or exchanged for
      definitive certificates at any time after a Depository has determined, in
      its sole discretion, that such transfer or exchange is required to effect
      conversion and/or redemption rights in accordance with the terms hereof
      and has communicated such determination to the Trustee in
  writing;

	 	 	 
	 	(vi) 	
      Global Debentures may be transferred if required by
      applicable law;

	 	 	 
	 	(vii) 	
      Global Debentures may be transferred if the book-entry
      only registration system ceases to exist; or

	 	 	 
	 	(viii) 	
      Global Debentures may be transferred if it is determined
      that they must bear a U.S. Legend (in which case they must be transferred
      or exchanged for Definitive Debentures).




	 	(c) 	
      With respect to the Global Debentures, unless and until
      definitive certificates have been issued to Beneficial Holders pursuant to
      Section 3.2(b):

	 	 	 	 
	 		(i) 	
      the Corporation and the Trustee may deal with the
      Depository for all purposes (including paying interest on the Debentures)
      as the sole holder of such series of Debentures and the authorized
      representative of the Beneficial Holders;

	 	 	 	 
	 		(ii) 	
      the rights of the Beneficial Holders shall be exercised
      only through the Depository and shall be limited to those established by
      law and agreements between such Beneficial Holders and the Depository or
      the Depository Participants;

	 	 	 	 
	 		(iii) 	
      the Depository will make book-entry transfers among the
      Depository Participants; and

	 	 	 	 
	 		(iv) 	
      whenever this Indenture requires or permits actions to be
      taken based upon instruction or directions of Debentureholders evidencing
      a specified percentage of the outstanding Debentures, the Depository shall
      be deemed to be counted in that percentage only to the extent that it has
      received instructions to such effect from the Beneficial Holders or the
      Depository Participants, and has delivered such instructions to the
      Trustee.

	 	 	 	 
	 	(d) 	
      Whenever a notice or other communication is required to
      be provided to Debentureholders, unless and until definitive
      certificate(s) have been issued to Beneficial Holders pursuant to this
      Section 3.2, the Trustee shall provide all such notices and communications
      to the Depository and the Depository shall deliver such notices and
      communications to such Beneficial Holders in accordance with all
      applicable laws and Applicable Securities Legislation. Upon the
      termination of the book-entry only registration system on the occurrence
      of one or more of the conditions specified in Section 3.2(b) with respect
      to a series of Debentures issued hereunder, the Trustee shall notify all
      applicable Depository Participants and Beneficial Holders, through the
Depository, of the availability of Definitive Debenture certificates. Upon surrender by the Depository of the certificate(s) representing the Global Debentures and receipt of new registration instructions from the Depository, the Trustee shall deliver the Definitive Debenture certificates for such Debentures to the holders thereof in accordance with the new registration instructions and thereafter, the registration and transfer of such Debentures will be governed by Section 3.1 and the remaining Sections of this Article 3. 




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3.3     Transferee Entitled
  to Registration

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

3.4     No Notice of
  Trusts

          Neither
the Corporation nor the Trustee nor any registrar shall be bound to take notice
of or see to the execution of any trust (other than that created by this
Indenture) whether express, implied or constructive, in respect of any
Debenture, and may transfer the same on the direction of the person registered
as the holder thereof, whether named as trustee or otherwise, as though that
person were the beneficial owner thereof. 

3.5     Registers Open
  for Inspection

          The
registers referred to in Sections 3.1 and 3.2 shall at all reasonable times be
open for inspection by the Corporation, the Trustee or any Debentureholder.
Every registrar, including the Trustee, shall from time to time when requested
so to do by the Corporation or by the Trustee, in writing, furnish the
Corporation or the Trustee, as the case may be, with a list of names and
addresses of holders of registered Debentures entered on the register kept by
them and showing the principal amount and serial numbers of the Debentures held
by each such holder, provided the Trustee shall be entitled to charge a
reasonable fee to provide such a list. 

3.6     Exchanges of
  Debentures

	 	(a) 	
      Subject to Sections 3.1, 3.2 and 3.7, Debentures in any
      authorized form or denomination, other than Global Debentures, may be
      exchanged for Debentures in any other authorized form or denomination, of
      the same series and date of maturity, bearing the same interest rate and
      of the same aggregate principal amount as the Debentures so
    exchanged.

	 	 	 
	 	(b) 	
      In respect of exchanges of Debentures permitted by
      Section 3.6(a), Debentures of any series may be exchanged only at the
      principal office of the Trustee in the city of Vancouver, British Columbia
      or at such other place or places, if any, as may be specified in the
      Debentures of such series and at such other place or places as may from
      time to time be designated by the Corporation with the approval of
    the Trustee. Any Debentures tendered for exchange shall be
      surrendered to the Trustee. The Corporation shall execute and the Trustee
      shall certify all Debentures necessary to carry out exchanges as
      aforesaid. All Debentures surrendered for exchange shall be
  cancelled.




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





	3.7 	
      Closing of Registers

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

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

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

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

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

	 	 	 	 
	3.8 	
      Charges for Registration, Transfer and
      Exchange



          For
each Debenture exchanged, registered, transferred or discharged from
registration, the Trustee or other registrar, except as otherwise herein
provided, may make a reasonable charge for its services and in addition may
charge a reasonable sum for each new Debenture issued (such amounts to be agreed
upon from time to time by the Trustee and the Corporation), and payment of such
charges and reimbursement of the Trustee or other registrar for any stamp taxes
or governmental or other charges required to be paid shall be made by the party
requesting such exchange, registration, transfer or discharge from registration
as a condition precedent thereto. Notwithstanding the foregoing provisions, no
charge shall be made to a Debentureholder hereunder: 

	 	(a) 	
      for any exchange of a Global Debenture as contemplated in
      Section 3.2; or




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	 	(b) 	
      for any exchange of any Debenture resulting from a
      partial redemption under Section 4.2.




	3.9 	
      Ownership of Debentures

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

	 	 	 
		(b) 	
      The registered holder for the time being of any
      registered Debenture shall be entitled to the principal, premium, if any,
      and/or interest evidenced by such instruments, respectively, free from all
      equities or rights of set-off or counterclaim between the Corporation and
      the original or any intermediate holder thereof and all persons may act
      accordingly and the receipt of any such registered holder for any such
      principal, premium, if any, or interest shall be a good discharge to the
      Trustee, any registrar and to the Corporation for the same and none shall
      be bound to inquire into the title of any such registered
holder.

	 	 	 
		(c) 	
      Where Debentures are registered in more than one name,
      the principal, premium, if any, and interest from time to time payable in
      respect thereof may be paid to the order of all such holders, failing
      written instructions from them to the contrary, and the receipt of any one
      of such holders therefor shall be a valid discharge, to the Trustee, any
      registrar and to the Corporation.

	 	 	 
		(d) 	
      In the case of the death of one or more joint holders of
      any Debenture the principal, premium, if any, and interest from time to
      time payable thereon may be paid to the order of the survivor or survivors
      of such registered holders and the receipt of any such survivor or
      survivors therefor shall be a valid discharge to the Trustee and any
      registrar and to the Corporation.



ARTICLE 4 
REDEMPTION AND PURCHASE OF DEBENTURES


4.1     Applicability
of Article 

          Subject
to regulatory approval, Section 2.4(d) and Article 5, the Corporation shall have
the right at its option to redeem, either in whole at any time or in part from
time to time before maturity, by payment of money, any Debentures issued
hereunder of any series which by their terms are made so redeemable (subject,
however, to any applicable restriction on the redemption of Debentures of such
series) at such rate or rates of premium, if any, and on such date or dates and
in accordance with such other provisions as shall have been determined at the
time of issue of such Debentures and as shall have been expressed in this
Indenture, in the Debentures, in an Officers’ Certificate, or in a supplemental
indenture authorizing or providing for the issue thereof, or in the case of
Additional Debentures issued pursuant to a Periodic Offering, in the Written
Direction of the Corporation requesting the certification and delivery thereof.


	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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          Subject
to regulatory approval and Article 5, the Corporation shall also have the right
at its option to repay, either in whole or in part, on maturity, by payment of
money in accordance with Section 2.12, any Debentures issued hereunder of any
series which by their terms are made so repayable on maturity (subject however,
to any applicable restriction on the repayment of the principal amount of the
Debentures of such series) at such rate or rates of premium, if any, and on such
date or dates and in accordance with such other provisions as shall have been
determined at the time of issue of such Debenture and shall have been expressed
in this Indenture, in the Debentures, in an Officers’ Certificate, or in a
supplemental indenture authorizing or providing for the issue thereof, or in the
case of Additional Debentures issued pursuant to a Periodic Offering, in the
Written Direction of the Corporation requesting the certification and delivery
thereof. 

4.2     Partial Redemption

         If less
than all the Debentures of any series for the time being outstanding are at any
time to be redeemed, the Debentures to be so redeemed shall be selected by the
Trustee on a pro rata basis to the nearest multiple of $1,000 in accordance with
the principal amount of the Debentures registered in the name of each holder or
in such other manner as the Trustee deems equitable, subject to the approval of
the TSXV or such other exchange on which the Debentures are then listed, as may
be required from time to time. Unless otherwise specifically provided in the
terms of any series of Debentures, no Debenture shall be redeemed in part unless
the principal amount redeemed is $1,000 or a multiple thereof. For this purpose,
the Trustee may make, and from time to time vary, regulations with respect to
the manner in which such Debentures may be drawn for redemption and regulations
so made shall be valid and binding upon all holders of such Debentures
notwithstanding that as a result thereof one or more of such Debentures may
become subject to redemption in part only or for cash only. In the event that
one or more of such Debentures becomes subject to redemption in part only, upon
surrender of any such Debentures for payment of the Redemption Price, together
with interest accrued to but excluding the Redemption Date, the Corporation
shall execute and the Trustee shall certify and deliver without charge to the
holder thereof or upon the holder’s order one or more new Debentures for the
unredeemed part of the principal amount of the Debenture or Debentures so
surrendered or, with respect to a Global Debenture, the Trustee shall make
notations on the Global Debenture of the principal amount thereof so redeemed.
Unless the context otherwise requires, the terms “Debenture” or “Debentures” as
used in this Article 4 shall be deemed to mean or include any part of the
principal amount of any Debenture which in accordance with the foregoing
provisions has become subject to redemption. 

4.3     Notice of Redemption

          Notice
of redemption (the “Redemption Notice”) of any series of Debentures shall
be given to the holders of the Debentures so to be redeemed not more than 60
days nor less than 30 days prior to the date fixed for redemption (the
“Redemption Date”) in the manner provided in Section 12.2. Every such
notice shall specify the aggregate principal amount of Debentures called for
redemption, the Redemption Date, the Redemption Price and the places of payment
and shall state that interest upon the principal amount of Debentures called for
redemption shall cease to be payable from and after the Redemption Date. In
addition, unless all the outstanding Debentures are to be redeemed, the
Redemption Notice shall specify: 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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

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

	 	 	 
	 	(c) 	
      in the case of a Global Debenture, that the redemption
      will take place in such manner as may be agreed upon by the Depository,
      the Trustee and the Corporation; and

	 	 	 
	 	(d) 	
      in all cases, the principal amounts of such Debentures
      or, if any such Debenture is to be redeemed in part only, the principal
      amount of such part.



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

4.4     Debentures Due
  on Redemption Dates

          Notice
having been given as aforesaid, all the Debentures so called for redemption
shall thereupon be and become due and payable at the Redemption Price, together
with accrued interest to but excluding the Redemption Date, on the Redemption
Date specified in such notice, in the same manner and with the same effect as if
it were the date of maturity specified in such Debentures, anything therein or
herein to the contrary notwithstanding, and from and after such Redemption Date,
if the monies necessary to redeem such Debentures shall have been deposited as
provided in Section 4.5 and affidavits or other proof satisfactory to the
Trustee as to the publication and/or mailing of such notices shall have been
lodged with it, interest upon the Debentures shall cease. If any question shall
arise as to whether any notice has been given as above provided and such deposit
made, such question shall be decided by the Trustee whose decision shall be
final and binding upon all parties in interest. 

4.5     Deposit of Redemption
  Monies

          Redemption
of Debentures shall be provided for by the Corporation depositing with the
Trustee or any paying agent to the order of the Trustee, on or before 11:00 a.m.
(Vancouver time) on the Business Day immediately prior to the Redemption Date
specified in such notice, such sums of money as may be sufficient to pay the
Redemption Price of the Debentures so called for redemption, plus accrued and
unpaid interest thereon up to but excluding the Redemption Date, provided the
Corporation may elect to satisfy this requirement by providing the Trustee with
a certified cheque or wire transfer for such amounts required under this Section
4.5 post-dated to the Redemption Date. The Corporation shall also deposit with
the Trustee a sum of money sufficient to pay any charges or expenses which may
be incurred by the Trustee in connection with such redemption. Every such
deposit shall be irrevocable. From the sums so deposited, the Trustee shall pay
or cause to be paid, to the holders of such Debentures so called for redemption,
upon surrender of such Debentures, the principal, premium (if any) and interest
(if any) to which they are respectively entitled on redemption. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 38 - 

4.6     Failure to Surrender
  Debentures Called for Redemption

          In
case the holder of any Debenture so called for redemption shall fail on or
before the Redemption Date to so surrender such holder’s Debenture, or shall not
within such time accept payment of the redemption monies payable, or give such
receipt therefor, if any, as the Trustee may require, such redemption monies may
be set aside in trust, either in the deposit department of the Trustee or in a
chartered bank, and such setting aside shall for all purposes be deemed a
payment to the Debentureholder of the sum so set aside and, to that extent, the
Debenture shall thereafter not be considered as outstanding hereunder and the
Debentureholder shall have no other right except to receive payment out of the
monies so paid and deposited, upon surrender and delivery of such holder’s
Debenture, plus any accrued but unpaid interest thereon to but excluding the
Redemption Date. In the event that any money required to be deposited hereunder
with the Trustee or any depository or paying agent on account of principal,
premium, if any, or interest, if any, on Debentures issued hereunder shall
remain so deposited for a period of six years from the Redemption Date, then
such monies, together with any accumulated interest thereon, shall at the end of
such period be paid over or delivered over by the Trustee or such depository or
paying agent to the Corporation on its demand, and thereupon the Trustee shall
not be responsible to Debentureholders for any amounts owing to them and,
subject to applicable law, thereafter the holder of a Debenture in respect of
which such money was so repaid to the Corporation shall have no rights in
respect thereof except to obtain payment of the money due from the Corporation,
subject to any limitation period provided by the laws of British Columbia. 

4.7     Cancellation
  of Debentures Redeemed

          Subject
to the provisions of Sections 4.2 as to Debentures redeemed or purchased in
part, all Debentures redeemed and paid under this Article 4 shall forthwith be
delivered to the Trustee and cancelled and no Debentures shall be issued in
substitution for those redeemed. 

4.8     Purchase of Debentures
  by the Corporation

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

          If,
upon an invitation for tenders, more Debentures are tendered at the same lowest
price than the Corporation is prepared to accept, the Debentures to be purchased
by the Corporation shall be selected by the Trustee on a pro rata basis or in
such other manner as consented to by the TSXV or such other exchange on which
the Debentures are then listed which the Trustee considers appropriate, from the
Debentures tendered by each tendering Debentureholder who tendered at such
lowest price. For this purpose the Trustee may make, and from time to time
amend, regulations with respect to the manner in which Debentures may be so
selected, and regulations so made shall be valid and binding upon all
Debentureholders, notwithstanding the fact that as a result thereof one or more
of such Debentures become subject to purchase in part only. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 39 - 

          The
holder of a Debenture of which a part only is purchased, upon surrender of such
Debenture for payment, shall be entitled to receive, without expense to such
holder, one or more new Debentures for the unpurchased part so surrendered, and
the Trustee shall certify and deliver such new Debenture or Debentures upon
receipt of the Debenture so surrendered or, with respect to a Global Debenture,
the Trustee shall make notations on the Global Debenture of the principal amount
thereof so purchased. 

4.9     Deposit of Maturity
  Monies

          Payment
on maturity of Debentures shall be provided for by the Corporation depositing
with the Trustee or any paying agent to the order of the Trustee, on or before
11:00 a.m. (Vancouver time) on the Business Day immediately prior to the
Maturity Date such sums of money as may be sufficient to pay the principal
amount of the Debentures, together with a sum of money sufficient to pay all
accrued and unpaid interest thereon up to but excluding the Maturity Date,
provided the Corporation may elect to satisfy this requirement by providing the
Trustee with one or more certified cheques or with funds by electronic transfer,
for such amounts required under this Section 4.9. The Corporation shall also
deposit with the Debenture Trustee a sum of money sufficient to pay any charges
or expenses which may be incurred by the Trustee in connection therewith. Every
such deposit shall be irrevocable. From the sums so deposited, the Trustee shall
pay or cause to be paid to the holders of such Debentures, upon surrender of
such Debentures, the principal and interest to which they are respectively
entitled on the Maturity Date. 

ARTICLE 5 
SECURITY FOR AND SUBORDINATION OF
DEBENTURES 

5.1     NAT US Guaranty
and Security Agreement 

          The
Corporation shall cause NAT US to execute and deliver to the Trustee for the
benefit of the Trustee and the Debentureholders, the NAT US Guaranty and
Security Agreement. The Corporation will ensure that immediately following the
completion of the Offering a minimum of $5,500,000 of the proceeds of the
Offering are paid by the Corporation to NAT US, whether by way of intercompany
loan, subscription for shares, or otherwise, as determined by the Corporation in
its sole discretion. 

5.2     Registration
  of Security

          The
Corporation shall, at the Corporation’s expense, ensure that the Security
Documents and all documents, caveats, security notices, financing statements and
financing change statements in respect thereof, are promptly filed and re-filed
and registered as often as may be required by applicable law or as may be
necessary or desirable to perfect and preserve the Security Interest created by
the Security Documents and to ensure that such Security Interest is first
ranking, subject only to Permitted Priority Encumbrances, and will promptly
provide the Trustee with evidence (satisfactory to the Trustee) of such filing,
registration and deposit after the making thereof. The Corporation shall, if and
when requested to do so by the Trustee, furnish to the Trustee an opinion of
Counsel to establish compliance with the provisions of this Section 5.2. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 40 - 

5.3     Permitted Dispositions
  of Secured Assets Before Default

          Until
an Event of Default has occurred, NAT US, without the consent of the Trustee,
shall be entitled: 

	 	(a) 	
      to transfer or sell any item of Secured Assets only as
      expressly permitted pursuant to the terms of this Indenture; and

	 	 	 
	 	(b) 	
      to sell, assign, transfer, abandon, surrender or
      otherwise dispose of Secured Assets which have become worn out,
      unserviceable, obsolete, unsuitable or unnecessary in the conduct of its
      business or in the operation of any of the Secured Assets, free of the
      Security Interest constituted by the Security Documents, provided that
      there shall have been or shall be substituted for the same other fixtures,
      equipment, machinery, tools, implements, apparatus, facilities or
      appliances not necessarily of the same character but at least of equal
      utility at the date of such substitution or replacement (which forthwith
      shall become subject to the Security Interest of the NAT US Guaranty and
      Security Agreement) of and to the extent that such replacement or
      substitution is necessary or desirable for the proper and efficient
      conduct of the business of NAT US or in the operation of the Secured
      Assets;



and the Trustee will, at the expense of the Corporation,
execute and deliver from time to time releases and discharges necessary or
required as advised by Counsel with respect to the foregoing Subsections. Except
as specifically permitted above, NAT US will not dispose of any of the Secured
Assets to any Person. 

5.4     Applicability
  of Article

          The
indebtedness, liabilities and obligations of NAT US under the NAT US Guaranty
and Security Agreement (collectively, the “Guarantee Liabilities”)
and the Corporation hereunder or under the Debentures (whether on account of
principal, premium, if any, interest, or otherwise but excluding the issuance of
Common Shares on any conversion pursuant to Article 6), shall be, except to the
extent the Debentures are secured by the Security Interest constituted by the
Security Documents, subordinated and postponed and subject in right of payment,
to the extent and in the manner hereinafter set forth in the following Sections
of this Article 5, to the full and final payment of all Senior Indebtedness, and
each holder of any such Debenture by his acceptance thereof agrees to and shall
be bound by the provisions of this Article 5. 

5.5     Order of Payment
  – NAT US

          In
the event of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization or other similar proceedings relative to NAT US, or
to its property or assets (including, without limitation, the Secured Assets) or
in the event of any proceedings for voluntary liquidation, dissolution or
voluntary winding-up of NAT US, whether or not involving insolvency or
bankruptcy, or any marshalling of the assets (including, without limitation, the
Secured Assets) and liabilities of NAT US: 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 41 - 

	 	(a) 	
      to extent of the Security Interest constituted by the
      Security Documents, any payment or distribution of the Secured Assets to
      which the holders of the Debentures or the Trustee on behalf of such
      holders would be entitled pursuant to the Guarantee Liabilities pursuant
      to the provisions of this Article 5 shall be paid or delivered by the
      trustee in bankruptcy, receiver, assignee for the benefit of creditors, or
      other liquidating agent making such payment or distribution, directly to
      the Trustee on behalf of the holders of the Debentures;

	 	 	 	 
	 	(b) 	
      subject to 5.5(a), all Senior Indebtedness of NAT US
      shall be paid in full, or provision made for such payment, before any
      payment is made on account of Guarantee Liabilities;

	 	 	 	 
	 	(c) 	
      subject to 5.5(a), any payment or distribution of assets
      of NAT US, whether in cash, property or securities, to which the holders
      of the Debentures or the Trustee on behalf of such holders would be
      entitled, except for the provisions of this Article 5, shall be paid or
      delivered by the trustee in bankruptcy, receiver, assignee for the benefit
      of creditors, or other liquidating agent making such payment or
      distribution, directly to the holders of Senior Indebtedness of NAT US or
      their representative or representatives, or to the trustee or trustees
      under any indenture pursuant to which any instruments evidencing any of
      such Senior Indebtedness of NAT US may have been issued, to the extent
      necessary to pay all Senior Indebtedness of NAT US in full after giving
      effect to any concurrent payment or distribution, or provision therefor,
      to the holders of such Senior Indebtedness of NAT US;

	 	 	 	 
	 	(d) 	
      the Senior Creditors or a receiver or a receiver-manager
      of NAT US or of all or part of its assets or any other enforcement agent
      may sell, mortgage or otherwise dispose of NAT US’s assets, other than the
      Secured Assets, in whole or in part, free and clear of all Guarantee
      Liabilities, and without the approval of the Debentureholders or the
      Trustee or any requirement to account to the Trustee or the
      Debentureholders; and

	 	 	 	 
	 	(e) 	
      the rights and priority of the Senior Indebtedness of NAT
      US and the subordination pursuant hereto shall not be affected
  by:

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

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

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

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




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 42 - 

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

	 	 	 
	 	(vi) 	
      the date of giving or failing to give notice to or making
      demand upon NAT US; or

	 	 	 
	 	(vii) 	
      any other fact or circumstance
  whatsoever.



5.6     Order of
Payment – The Corporation 

          In
the event of any insolvency or bankruptcy proceedings, or any receivership,
liquidation, reorganization or other similar proceedings relative to the
Corporation, or to its property or assets or in the event of any proceedings for
voluntary liquidation, dissolution or voluntary winding-up of the Corporation,
whether or not involving insolvency or bankruptcy, or any marshalling of the
assets and liabilities of the Corporation: 

	 	(a) 	
      all Senior Indebtedness of the Corporation shall be paid
      in full, or provision made for such payment, before any payment is made on
      account of the Debentures;

	 	 	 	 
	 	(b) 	
      any payment or distribution of assets of the Corporation,
      whether in cash, property or securities, to which the holders of the
      Debentures or the Trustee on behalf of such holders would be entitled,
      except for the provisions of this Article 5, shall be paid or delivered by
      the trustee in bankruptcy, receiver, assignee for the benefit of
      creditors, or other liquidating agent making such payment or distribution,
      directly to the holders of Senior Indebtedness of the Corporation or their
      representative or representatives, or to the trustee or trustees under any
      indenture pursuant to which any instruments evidencing any of such Senior
      Indebtedness of the Corporation may have been issued, to the extent
      necessary to pay all Senior Indebtedness of the Corporation in full after
      giving effect to any concurrent payment or distribution, or provision
      therefor, to the holders of such Senior Indebtedness of the
      Corporation;

	 	 	 	 
	 	(c) 	
      the Senior Creditors or a receiver or a receiver-manager
      of the Corporation or of all or part of its assets or any other
      enforcement agent may sell, mortgage or otherwise dispose of the
      Corporation’s assets in whole or in part, free and clear of all
      Debentures, and without the approval of the Debentureholders or the
      Trustee to the extent necessary to pay all Senior Indebtedness of the
      Corporation in full after giving effect to any concurrent payment or
      distribution, or provision therefor, to the holders of such Senior
      Indebtedness of the Corporation; and

	 	 	 	 
	 	(d) 	
      the rights and priority of the Senior Indebtedness of the
      Corporation and the subordination pursuant hereto shall not be affected
      by:

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




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 43 - 

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

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

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

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

	 	 	 
	 	(vi) 	
      the date of giving or failing to give notice to or making
      demand upon the Corporation; or

	 	 	 
	 	(vii) 	
      any other fact or circumstance
  whatsoever.



5.7     Subrogation to
Rights of Holders of Senior Indebtedness 

          Subject
to the Security Interest constituted by the Security Documents and prior payment
in full of all Senior Indebtedness, the holders of the Debentures shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Corporation and NAT US, as the case
may be, to the extent of the application thereto of such payments or other
assets which would have been received by the holders of the Debentures but for
the provisions hereof until the principal of, premium, if any, and interest on
the Debentures shall be paid in full, and no such payments or distributions to
the holders of the Debentures of cash, property or securities, which otherwise
would be payable or distributable to the holders of the Senior Indebtedness,
shall, as between NAT US and the Corporation, their creditors other than the
holders of Senior Indebtedness, and the holders of Debentures, be deemed to be a
payment by the Corporation or NAT US, as applicable, to the holders of the
Senior Indebtedness or on account of the Senior Indebtedness, it being
understood that the provisions of this Article 5 are and are intended solely for
the purpose of defining the relative rights of the holders of the Debentures, on
the one hand, and the holders of Senior Indebtedness, on the other hand. 

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


	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 44 - 

5.8     Obligation to
  Pay Not Impaired

          Nothing
contained in this Article 5 or elsewhere in this Indenture or in the Debentures
is intended to or shall impair, as between the Corporation, its creditors, and
the holders of the Debentures, the obligation of the Corporation, which is
absolute and unconditional, to pay to the holders of the Debentures the
principal of, premium, if any, and interest on the Debentures, as and when the
same shall become due and payable in accordance with their terms, or affect the
relative rights of the holders of the Debentures and creditors of the
Corporation, nor shall anything herein or therein prevent the Trustee or the
holder of any Debenture from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture. 

          Nothing
contained in this Article 5 or elsewhere in this Indenture or in the Debentures
is intended to or shall impair, as between NAT US, its creditors other than the
holders of Senior Indebtedness, and the holders of the Debentures, the
obligation of NAT US, which is absolute and unconditional, to pay to the holders
of the Debentures the Guarantee Liabilities, as and when the same shall become
due and payable in accordance with their terms, or affect the relative rights of
the holders of the Debentures and creditors of NAT US other than the holders of
the Senior Indebtedness, nor shall anything herein or therein prevent the
Trustee or the holder of any Debenture from exercising all remedies otherwise
permitted by applicable law upon default under this Indenture, subject to the
rights, if any, under this Article 5 of the holders of Senior Indebtedness. 

5.9     No Payment if
  Senior Indebtedness in Default

          Upon
the maturity of any Senior Indebtedness by lapse of time, acceleration or
otherwise, or any other enforcement of any Senior Indebtedness, then, except as
provided in Section 5.12, all such Senior Indebtedness of NAT US shall first be
paid in full, or shall first have been duly provided for, before any payment is
made by NAT US under the NAT US Guaranty and Security Agreement and all such
Senior Indebtedness of the Corporation shall first be paid in full, or shall
first have been duly provided for, before any payment is made by the Corporation
under the Debentures. 

          In
case of a circumstance constituting a default or event of default with respect
to any Senior Indebtedness of the Corporation permitting (whether at that time
or upon notice, lapse of time, or satisfaction of any other condition precedent)
a Senior Creditor to demand payment or accelerate the maturity thereof where the
notice of such default or event of default has been given by or on behalf of the
holders of Senior Indebtedness to the Corporation or the Corporation otherwise
has knowledge thereof, unless and until such default or event of default shall
have been cured or waived or shall have ceased to exist, no payment (by purchase
of Debentures or otherwise) shall be made by the Corporation (except as provided
in Section 5.12) under the Debentures and neither the Trustee nor the holders of
Debentures shall be entitled to demand, institute proceedings for the collection
of (which shall, for certainty include proceedings related to an adjudication or
declaration as to the insolvency or bankruptcy of the Corporation and other
similar creditor proceedings), or receive any payment or benefit (including
without limitation by set-off, combination of accounts or otherwise in any
manner whatsoever) on account of the Debentures after the happening of such a
default or event of default (except as provided in Section 5.12), and unless and
until such default or event of default shall have been cured or waived or shall
have ceased to exist, such payments shall be held in trust for the benefit of,
and, if and when such Senior Indebtedness shall have become due and
payable, shall be paid over to, the holders of the Senior Indebtedness or their
representative or representatives or to the trustee or trustees under any
indenture under which any instruments evidencing an amount of the Senior
Indebtedness remaining unpaid until all such Senior Indebtedness shall have been
paid in full, after giving effect to any concurrent payment or distribution to
the holders of such Senior Indebtedness. For greater certainty, this Section 5.9
shall not restrict the Debentureholders or the Trustee from demanding or
instituting proceedings in respect of the guarantee of NAT US or the Secured
Assets or receiving any payment or benefit on account of the proceeds thereof
provided that any such proceeds are distributed in accordance with Section 5.5.

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 45 - 

          The
fact that any payment hereunder is prohibited by this Section 5.9 shall not
prevent the failure to make such payment from being an Event of Default
hereunder. 

5.10   Payment on Debentures Permitted

          Nothing
contained in this Article 5 or elsewhere in this Indenture, or in any of the
Debentures, shall affect the obligation of the Corporation to make, or prevent
the Corporation from making, at any time except as prohibited by Sections 5.6 or
5.9, any payment of principal of or, premium, if any, or interest on the
Debentures. The fact that any such payment is prohibited by Sections 5.6 or 5.9
shall not prevent the failure to make such payment from being an Event of
Default hereunder. Nothing contained in this Article 5 or elsewhere in this
Indenture, or in any of the Debentures, shall prevent the conversion of the
Debentures, or, except as prohibited by Sections 5.5, 5.6 or 5.9, the
application by the Trustee of any monies deposited with the Trustee hereunder
for the purpose, to the payment of or on account of the Debentures or the
Guarantee Liabilities. 

5.11   Confirmation of Subordination

          Each
holder of Debentures by his acceptance thereof authorizes and directs the
Trustee on his behalf to take such action as may be necessary or appropriate to
effect the subordination as provided in this Article 5 and appoints the Trustee
his attorney-in-fact for any and all such purposes. Upon request of the
Corporation or NAT US, and upon being furnished an Officers’ Certificate stating
that one or more named persons are Senior Creditors and specifying the amount
and nature of the Senior Indebtedness of such Senior Creditor, the Trustee shall
enter into a written agreement or agreements with the Corporation or NAT US, as
the case may be, and the person or persons named in such Officers’ Certificate
providing that such person or persons are entitled to all the rights and
benefits of this Article 5 as a Senior Creditor and for such other matters, such
as an agreement not to amend the provisions of this Article 5 and the
definitions herein without the consent of such Senior Creditor, as the Senior
Creditor may reasonably request. Such agreement shall be conclusive evidence
that the indebtedness specified therein is Senior Indebtedness, however, nothing
herein shall impair the rights of any Senior Creditor who has not entered into
such an agreement. 

5.12   Knowledge of Trustee

          Notwithstanding
the provisions of this Article 5 or any provision in this Indenture or in the
Debentures contained, the Trustee will not be charged with knowledge of any
Senior Indebtedness or of any default in the payment thereof, or of the
existence of any Event of Default or any other fact that would prohibit the making of any payment
of monies to or by the Trustee, or the taking of any other action by the
Trustee, unless and until the Trustee has received written notice thereof from
the Corporation, NAT US any Debentureholder or any Senior Creditor. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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5.13   Trustee May Hold Senior
  Indebtedness

          The
Trustee is entitled to all the rights set forth in this Article 5 with respect
to any Senior Indebtedness at the time held by it, to the same extent as any
other holder of Senior Indebtedness, and nothing in this Indenture deprives the
Trustee of any of its rights as such holder. 

5.14   Rights of Holders of Senior
  Indebtedness Not Impaired

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

5.15   Altering the Senior Indebtedness

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

5.16   Additional Indebtedness

          This
Indenture does not restrict the Corporation or NAT US from incurring additional
indebtedness for borrowed money or other obligations or liabilities (including
Senior Indebtedness) or mortgaging, pledging or charging its properties to
secure any indebtedness or obligations or liabilities. 

5.17   Right of Debentureholder
  to Convert Not Impaired

          The
subordination of the Debentures to the Senior Indebtedness and the provisions of
this Article 5 do not impair in any way the right of a Debentureholder to
convert its Debentures pursuant to Article 6. 

5.18   Invalidated Payments

          In
the event that any of the Senior Indebtedness shall be paid in full and
subsequently, for whatever reason, such formerly paid or satisfied Senior
Indebtedness becomes unpaid or unsatisfied, the terms and conditions of this
Article 5 shall be reinstated and the provisions of this Article 5 shall again
be operative until all Senior Indebtedness is repaid in full, provided that such
reinstatement shall not give the Senior Creditors any rights or recourses
against the Trustee or the Debentureholders for amounts paid to the
Debentureholders subsequent to such payment or satisfaction in full and prior to
such reinstatement. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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5.19   Contesting Security

          The
Trustee, for itself and on behalf of the Debentureholders, agrees that it shall
not contest or bring into question the validity, perfection or enforceability of
any of the Senior Indebtedness, the Senior Security, or the relative priority of
the Senior Security. 

5.20   Subordination to Security
  Interest

          The
Corporation hereby grants to the Trustee, for the benefit of the Trustee and the
Debentureholders, and the Security Interest priority over any interest, lien,
claim, encumbrance, mortgage, charge, or security interest that the Corporation
may now or hereafter have in or to the Secured Assets such that the Security
Interest shall have a prior claim to the Secured Assets. The Corporation hereby
postpones all its right, title and interest in and to the Secured Assets with
and to the intent that the interest of the Corporation therein and thereto shall
be subordinate to and shall rank subsequent and subject in all respects to the
rights of the Trustee in and to the Secured Assets. The priorities and
postponements granted herein shall be effective notwithstanding the respective
dates of crystallization of any security, the priorities or rights that might
otherwise apply at law or by virtue of the respective dates or times of
execution, registration, attachment, perfection, default or enforcement of the
respective security or any notice or filing with respect thereto, any priority
granted by any principle of law or any statute, including any legislation
dealing with personal property security, and the order of any bankruptcy court
having jurisdiction over NAT US or the Secured Assets. 

ARTICLE 6
 CONVERSION OF DEBENTURES 

6.1     Applicability
of Article 

          Any
Debentures issued hereunder of any series which by their terms are convertible
(subject, however, to any applicable restriction of the conversion of Debentures
of such series) will be convertible into Common Shares or other securities of
the Corporation, at such conversion rate or rates, and on such date or dates and
in accordance with such other provisions as shall have been determined at the
time of issue of such Debentures and shall have been expressed in this Indenture
(including Sections 2.4(f), 2.4(h) and 3.7 hereof), in such Debentures, in an
Officers’ Certificate, or in a supplemental indenture authorizing or providing
for the issue thereof. 

          Such
right of conversion shall extend only to the maximum number of whole Common
Shares into which the aggregate principal amount of the Debenture or Debentures
surrendered for conversion at any one time by the holder thereof may be
converted. Fractional interests in Common Shares shall be adjusted for in the
manner provided in Section 6.6. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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6.2     Notice of Expiry
  of Conversion Privilege

          Notice
of the expiry of the conversion privileges of the Debentures shall be given by
or on behalf of the Corporation, not more than 60 days and not less than 30 days
prior to the date fixed for the Time of Expiry, in the manner provided in
Section 12.2. 

6.3     Revival of Right
  to Convert

          If
the redemption of any Debenture called for redemption by the Corporation is not
made or the payment of the purchase price of any Debenture which has been
tendered in acceptance of an offer by the Corporation to purchase Debentures for
cancellation is not made, in the case of a redemption upon due surrender of such
Debenture or in the case of a purchase on the date on which such purchase is
required to be made, as the case may be, then the right to convert such
Debentures shall revive and continue as if such Debenture had not been called
for redemption or tendered in acceptance of the Corporation’s offer,
respectively. 

6.4     Manner of Exercise
  of Right to Convert

	 	(a) 	
      The holder of a Debenture desiring to convert such
      Debenture in whole or in part into Common Shares shall surrender such
      Debenture to the Trustee at its principal office in the City of Vancouver,
      British Columbia together with the conversion notice attached hereto as
      Schedule “D” or any other written notice in a form satisfactory to the
      Trustee, in either case duly executed by the holder or his executors or
      administrators or other legal representatives or his or their attorney
      duly appointed by an instrument in writing in form and executed in a
      manner satisfactory to the Trustee, exercising his right to convert such
      Debenture in accordance with the provisions of this Article 6; provided
      that with respect to a Global Debenture, the obligation to surrender a
      Debenture to the Trustee shall be satisfied if the Trustee makes notation
      on the Global Debenture of the principal amount thereof so converted and
      the Trustee is provided with all other documentation which it may request.
      Thereupon such Debentureholder or, subject to payment of all applicable
      stamp or security transfer taxes or other governmental charges and
      compliance with all reasonable requirements of the Trustee, his nominee(s)
      or assignee(s) shall be entitled to be entered in the books of the
      Corporation as at the Date of Conversion (or such later date as is
      specified in Section 6.4(b)) as the holder of the number of Common Shares
      into which such Debenture is convertible in accordance with the provisions
      of this Article 6 and, as soon as practicable thereafter, the Corporation
      shall deliver to such Debentureholder or, subject as aforesaid, his
      nominee(s) or assignee(s), a certificate or certificates for such Common
      Shares.

	 	 	 
	 	(b) 	
      For the purposes of this Article, a Debenture shall be
      deemed to be surrendered for conversion on the date (herein called the
      “Date of Conversion”) on which it is so surrendered when the
      register of the Trustee is open and in accordance with the provisions of
      this Article 6 or, in the case of a Global Debenture which the Trustee
      received notice of and all necessary documentation in respect of the
      exercise of the conversion rights and, in the case of a Debenture so
      surrendered by post or other means of transmission, on the date on which
      it is received by the Trustee at one of its offices specified in Section
      6.4(a); provided that if a Debenture is surrendered for conversion on a
      day on which the register of Common Shares or Debentures is closed, the
      person or persons entitled to receive Common Shares shall become the
      holder or holders of record of such Common Shares as at the date on which
  such registers are next reopened.




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	(c) 	
      Any part, being $1,000 or an integral multiple thereof,
      of a Debenture in a denomination in excess of $1,000 may be converted as
      provided in this Article 6 and all references in this Indenture to
      conversion of Debentures shall be deemed to include conversion of such
      parts.

	 	 	 
	 	(d) 	
      The holder of any Debenture of which only a part is
      converted shall, upon the exercise of his right of conversion surrender
      such Debenture to the Trustee in accordance with Section 6.4(a), and the
      Trustee shall cancel the same and shall without charge forthwith certify
      and deliver to the holder a new Debenture or Debentures in an aggregate
      principal amount equal to the unconverted part of the principal amount of
      the Debenture so surrendered or, with respect to a Global Debenture, the
      Trustee shall make notations on the Global Debentures of the principal
      amount thereof so converted.

	 	 	 
	 	(e) 	
      Holders converting Debentures shall receive accrued and
      unpaid interest thereon from the period of the last Interest Payment Date
      prior to the Date of Conversion to the date that is one Business Day prior
      to the Date of Conversion. The Common Shares issued upon such conversion
      shall rank only in respect of distributions or dividends declared in
      favour of shareholders of record on and after the Date of Conversion or
      such later date as such holder shall become the holder of record of such
      Common Shares pursuant to Section 6.4(b), from which applicable date they
      will for all purposes be and be deemed to be issued and outstanding as
      fully paid and non-assessable Common Shares.



6.5     Adjustment of
Conversion Price 

          Subject
to the requirements of the TSXV, the Conversion Price in effect at any date
shall be subject to adjustment from time to time as set forth below. 

	 	(a) 	
      If and whenever at any time prior to the Time of Expiry
      the Corporation shall (i) subdivide or redivide the outstanding Common
      Shares into a greater number of shares, (ii) reduce, combine or
      consolidate the outstanding Common Shares into a smaller number of shares,
      or (iii) issue Common Shares to the holders of all or substantially all of
      the outstanding Common Shares by way of a dividend in the ordinary course,
      distribution (other than the issue of Common Shares to holders of Common
      Shares who have elected to receive dividends or distributions in the form
      of Common Shares in lieu of cash dividends or cash distributions paid in
      the ordinary course on the Common Shares), or otherwise, the Conversion
      Price in effect on the effective date of such subdivision, redivision,
      reduction, combination or consolidation or on the record date for such
      issue of Common Shares by way of a dividend or distribution, as the case
      may be, shall in the case of any of the events referred to in (i) and
      (iii) above be decreased in proportion to the
number of outstanding Common Shares resulting from such
      subdivision, redivision or dividend, or shall, in the case of any of the
      events referred to in (ii) above, be increased in proportion to the number
      of outstanding Common Shares resulting from such reduction, combination or
      consolidation. Such adjustment shall be made successively whenever any
      event referred to in this Section 6.5(a) shall occur. Any such issue of
      Common Shares by way of a dividend or distribution shall be deemed to have
      been made on the record date for the dividend or distribution for the
      purpose of calculating the number of outstanding Common Shares under
  subsections (c) and (d) of this Section 6.5.




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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	 	(b) 	
      If and whenever at any time prior to the Time of Expiry
      the Corporation shall fix a record date for the payment of a cash dividend
      or distribution to the holders of all or substantially all of the
      outstanding Common Shares in respect of any Applicable Period, the
      Conversion Price shall be adjusted immediately after such record date so
      that it shall be equal to the price determined by multiplying the
      Conversion Price in effect on such record date by a fraction, of which the
      denominator shall be the Current Market Price per Common Share on such
      record date and of which the numerator shall be the Current Market Price
      per Common Share on such record date minus the amount in cash per Common
      Share distributed to holders of Common Shares, provided that the
      Conversion Price so adjusted is not less than $2.58, which represents the
      volume weighted average trading price of the Common Shares on the TSXV for
      the five consecutive trading days prior to and including August 23, 2012,
      the date the Offering was announced, less the maximum permitted discount
      pursuant to the policies of the TSXV. Such adjustment shall be made
      successively whenever such a record date is fixed. To the extent that any
      such cash dividend or distribution is not paid, the Conversion Price shall
      be re-adjusted to the Conversion Price which would then be in effect if
      such record date had not been fixed.

	 	 	
       

	 	(c) 	
      If and whenever at any time prior to the Time of Expiry
      the Corporation shall fix a record date for the issuance of options,
      rights or warrants to all or substantially all the holders of its
      outstanding Common Shares entitling them, for a period expiring not more
      than 45 days after such record date, to subscribe for or purchase Common
      Shares (or securities convertible into Common Shares) at a price per share
      (or having a conversion or exchange price per share) less than 95% of the
      Current Market Price of a Common Share on such record date, the Conversion
      Price shall be adjusted immediately after such record date so that it
      shall equal the price determined by multiplying the Conversion Price in
      effect on such record date by a fraction, of which the numerator shall be
      the total number of Common Shares outstanding on such record date plus a
      number of Common Shares equal to the number arrived at by dividing the
      aggregate price of the total number of additional Common Shares offered
      for subscription or purchase (or the aggregate conversion or exchange
      price of the convertible securities so offered) by such Current Market
      Price per Common Share, and of which the denominator shall be the total
      number of Common Shares outstanding on such record date plus the total
      number of additional Common Shares offered for subscription or purchase
      (or into which the convertible securities so offered are convertible).
      Such adjustment shall be made successively whenever such a record date is
      fixed. To the extent that any such options, rights or warrants are not so
      issued or any such options, rights or warrants are not exercised prior to
      the expiration thereof, the Conversion Price shall be re-adjusted to the
      Conversion Price which would then be in effect if such record date had not
      been fixed or to the Conversion Price which would then be in effect based
      upon the number of Common Shares (or securities convertible into Common
      Shares) actually issued upon the exercise of such options, rights or
      warrants were included in such fraction, as the case may be.





	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 51 - 

	 	(d) 	
      If and whenever at any time prior to the Time of Expiry,
      there is a reclassification of the Common Shares or a capital
      reorganization of the Corporation other than as described in Section
      6.5(a) or a consolidation, amalgamation, arrangement, binding share
      exchange, merger of the Corporation with or into any other Person or other
      entity or acquisition of the Corporation or other combination pursuant to
      which the Common Shares are converted into or acquired for cash,
      securities or other property; or a sale or conveyance of the property and
      assets of the Corporation as an entirety or substantially as an entirety
      to any other Person (other than a direct or indirect wholly-owned
      subsidiary of the Corporation) or other entity or a liquidation,
      dissolution or winding-up of the Corporation, any holder of a Debenture
      who has not exercised its right of conversion prior to the effective date
      of such reclassification, capital reorganization, consolidation,
      amalgamation, arrangement, merger, share exchange, acquisition,
      combination, sale or conveyance or liquidation, dissolution or winding-up,
      upon the exercise of such right thereafter, shall, subject to the
      immediately following paragraph, be entitled to receive and shall accept,
      in lieu of the number of Common Shares then sought to be acquired by it,
      such amount of cash or the number of shares or other securities or
      property of the Corporation or of the Person or other entity resulting
      from such merger, amalgamation, arrangement, acquisition, combination or
      consolidation, or to which such sale or conveyance may be made or which
      holders of Common Shares receive pursuant to such liquidation, dissolution
      or winding- up, as the case may be, that such holder of a Debenture would
      have been entitled to receive on such reclassification, capital
      reorganization, consolidation, amalgamation, arrangement, merger, share
      exchange, acquisition, combination, sale or conveyance or liquidation,
      dissolution or winding-up, if, on the record date or the effective date
      thereof, as the case may be, the holder had been the registered holder of
      the number of Common Shares sought to be acquired by it and to which it
      was entitled to acquire upon the exercise of the conversion right. If
      determined appropriate by the Board of Directors, to give effect to or to
      evidence the provisions of this Section 6.5(d), the Corporation, its
      successor, or such purchasing Person or other entity, as the case may be,
      shall, prior to or contemporaneously with any such reclassification,
      capital reorganization, consolidation, amalgamation, arrangement, merger,
      share exchange, acquisition, combination, sale or conveyance or
      liquidation, dissolution or winding-up, enter into an indenture which
      shall provide, to the extent possible, for the application of the
      provisions set forth in this Indenture with respect to the rights and
      interests thereafter of the holder of Debentures to the end that the
      provisions set forth in this Indenture shall thereafter correspondingly be
      made applicable, as nearly as may reasonably be, with respect to any cash,
      shares or other securities or property to which a holder of Debentures is entitled on the
      exercise of its acquisition rights thereafter. Any indenture entered into
      between the Corporation and the Trustee pursuant to the provisions of this
      Section 6.5(d) shall be a supplemental indenture entered into pursuant to
      the provisions of Article 14. Any indenture entered into between the
      Corporation, any successor to the Corporation or such purchasing Person or
      other entity and the Trustee shall provide for adjustments which shall be
      as nearly equivalent as may be practicable to the adjustments provided in
      this Section 6.5(d) and which shall apply to successive reclassifications,
      capital reorganizations, amalgamations, consolidations, mergers, share
      exchanges, acquisitions, combinations, sales or conveyances. For greater
      certainty, nothing in this Section 6.5(d) shall affect or reduce the
      requirement for any Person to make a Change of Control Purchase Offer or
      any payment in connection therewith in accordance with Section 2.4, and
      notice of any transaction to which this Section 6.5(d) applies shall be
      given in accordance with Section 6.10.





	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 52 - 

	 		
      Notwithstanding any other provision in this Indenture or
      in the form of any Debenture, if a holder would otherwise become entitled
      to receive, upon conversion of a Debenture, any property or securities
      (herein, “Ineligible Consideration”) that would not constitute
      prescribed securities for the purposes of Section 212(1)(b)(vii)(E) of the
      Tax Act as it applied on December 31, 2007 (“Prescribed
      Securities”), such holder shall not be entitled to receive such
      Ineligible Consideration upon conversion of the Debenture, but shall
      instead be entitled to receive Prescribed Securities of the Corporation
      (or a successor, as the case may be) with a fair market value equal to the
      fair market value of such Ineligible Consideration, as reasonably
      determined by the Board of Directors (which determination shall be
      conclusive and shall be evidenced by an Officer’s Certificate delivered to
      the Trustee); provided, however, that the Corporation or a successor, as
      the case may be, shall have the right (at the sole option of the
      Corporation or the successor, as the case may be) but not the obligation
      to deliver such Ineligible Consideration to the holder upon the conversion
      of the Debenture in lieu of such Prescribed Securities. At least 30 days
      prior to the effective date of a transaction that would otherwise cause
      holders of Debentures to become entitled to receive Ineligible
      Consideration upon a conversion of the Debentures, the Corporation will
      give notice to such holders of the consideration into which the Debentures
      will be convertible following such transaction.

	 	 	 
	 	(e) 	
      If the Corporation shall make a distribution to all or
      substantially all of the holders of Common Shares of shares in the capital
      of the Corporation, other than Common Shares, or evidences of indebtedness
      or other assets of the Corporation, including securities (but excluding
      (x) any issuance of rights or warrants for which an adjustment was made
      pursuant to Section 6.5(c) and (y) any dividend or distribution paid
      exclusively in cash for which an adjustment was made pursuant to Section
      6.5(b)) (the “Distributed Securities”), then in each such case
      (unless the Corporation at its option chooses to distribute such
      Distributed Securities to the holders of Debentures on such dividend or
      distribution date (as if each holder had converted such Debenture into
      Common Shares immediately preceding the record date with respect to such
      distribution)) the Conversion Price in effect immediately preceding the
      record date fixed for the dividend or distribution
shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately preceding such record date by a fraction of which the denominator shall be the Current Market Price for the Common Shares immediately prior to the record date and of which the numerator shall be the Current Market Price per Common Share on such record date less the fair market value (as determined by the Board of Directors, whose determination shall be conclusive evidence of such fair market value and which shall be evidenced by an Officers' Certificate delivered to the Trustee, all subject to the approval of the TSXV) on such record date of the portion of the Distributed Securities so distributed applicable to one Common Share (determined on the basis of the number of Common Shares outstanding at the close of business on such record date). Such adjustment shall be made successively whenever any such distribution is made and shall become effective immediately after the record date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price that would then be in effect if such dividend or distribution had not been declared. 





	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 53 - 

Notwithstanding the foregoing, if the
securities distributed by the Corporation to all holders of its Common Shares
consist of capital stock of, or similar equity interests in, a Subsidiary or
other business of the Corporation (the “Spinoff Securities”), the
Conversion Price shall be adjusted, unless the Corporation at its option chooses
to make an equivalent distribution to the holders of Debentures, so that the
same shall be equal to the rate determined by multiplying the Conversion Price
in effect on the record date fixed for the determination of shareholders
entitled to receive such distribution by a fraction, the denominator of which
shall be the sum of (A) the weighted average trading price of one Common Share
over the 20 consecutive trading day period (the “Spinoff Valuation
Period”) commencing on and including the fifth trading day after the date on
which ex-dividend trading commences for such distribution on the TSXV, or such
other national or regional exchange or market on which the Common Shares are
then listed or quoted and (B) the product of (i) the weighted average trading
price (calculated in substantially the same way as the Current Market Price is
calculated for the Common Shares) over the Spinoff Valuation Period of the
Spinoff Securities or, if no such prices are available, the fair market value of
the Spinoff Securities as reasonably determined by the Board of Directors (which
determination shall be conclusive and shall be evidenced by an Officers’
Certificate delivered to the Trustee but shall be subject to the approval of the
TSXV) multiplied by (ii) the number of Spinoff Securities distributed in respect
of one Common Share and the numerator of which shall be the weighted average
trading price of one Common Share over the Spinoff Valuation Period, such
adjustment to become effective immediately preceding the opening of business on
the 25th trading day after the date on which ex-dividend trading commences;
provided, however, that the Corporation may in lieu of the foregoing adjustment
elect to make adequate provision so that each holder of Debentures shall have
the right to receive upon conversion thereof the amount of such Spinoff
Securities that such holder of Debentures would have received if such Debentures
had been converted on the record date with respect to such distribution. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 54 - 

	 	(f) 	
      In any case in which this Section 6.5 shall require that
      an adjustment shall become effective immediately after a record date for
      an event referred to herein, the Corporation may defer, until the
      occurrence of such event, issuing to the holder of any Debenture converted
      after such record date and before the occurrence of such event the
      additional Common Shares issuable upon such conversion by reason of the
      adjustment required by such event before giving effect to such adjustment;
      provided, however, that the Corporation shall deliver to such holder an
      appropriate instrument evidencing such holder’s right to receive such
      additional Common Shares upon the occurrence of the event requiring such
      adjustment and the right to receive any distributions made on such
      additional Common Shares declared in favour of holders of record of Common
      Shares on and after the Date of Conversion or such later date as such
      holder would, but for the provisions of this Section 6.5(f), have become
      the holder of record of such additional Common Shares pursuant to Section
      6.4(b).

	 	 	 
	 	(g) 	
      The adjustments provided for in this Section 6.5 are
      cumulative and shall apply to successive subdivisions, redivisions,
      reductions, combinations, consolidations, distributions, issues or other
      events resulting in any adjustment under the provisions of this Section
      6.5, provided that, notwithstanding any other provision of this Section
      6.5, no adjustment of the Conversion Price shall be required unless such
      adjustment would require an increase or decrease of at least 1% in the
      Conversion Price then in effect; provided however, that any adjustments
      which by reason of this Section 6.5(g) are not required to be made shall
      be carried forward and taken into account in any subsequent
    adjustment.

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

	 	 	 
	 	(i) 	
      In the event of any question arising with respect to the
      adjustments provided in this Section 6.5, such question shall be
      conclusively determined by a firm of nationally recognized chartered
      accountants appointed by the Corporation and acceptable to the Trustee
      (who may be the Auditors of the Corporation); such accountants shall have
      access to all necessary records of the Corporation and such determination
      shall be binding upon the Corporation, the Trustee and the
      Debentureholders.

	 	 	 
	 	(j) 	
      In case the Corporation shall take any action affecting
      the Common Shares other than action described in this Section 6.5, which
      in the opinion of the Board of Directors, would materially affect the
      rights of Debentureholders, the Conversion Price shall be adjusted in such
      manner and at such time, by action of the Board of Directors, subject to
      the prior written consent of the TSXV or such other exchange on which the
      Debentures are then listed, as the Board of Directors in their sole
      discretion may determine to be equitable in the circumstances. Failure of
      the directors to make such an adjustment shall be conclusive evidence that
      they have determined that it is equitable to make no adjustment in the
      circumstances.




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	 	(k) 	
      Subject to the prior written consent of the TSXV or such
      other exchange on which the Debentures are then listed, no adjustment in
      the Conversion Price shall be made in respect of any event described in
      Sections 6.5(a), 6.5(b), 6.5(c) or 6.5(e) other than the events described
      in Section 6.5(a)(i) or (a)(ii) if the holders of the Debentures are
      entitled to participate in such event on the same terms mutatis
      mutandis as if they had converted their Debentures prior to the
      effective date or record date, as the case may be, of such
event.

	 	 	 
	 	(l) 	
      Except as stated above in this Section 6.5, no adjustment
      will be made in the Conversion Price for any Debentures as a result of the
      issuance of Common Shares at less than the Current Market Price for such
      Common Shares on the date of issuance or the then applicable Conversion
      Price.



6.6     No Requirement
to Issue Fractional Common Shares 

          The
Corporation shall not be required to issue fractional Common Shares upon the
conversion of Debentures pursuant to this Article. If more than one Debenture
shall be surrendered for conversion at one time by the same holder, the number
of whole Common Shares issuable upon conversion thereof shall be computed on the
basis of the aggregate principal amount of such Debentures to be converted. If
any fractional interest in a Common Share would, except for the provisions of
this Section, be deliverable upon the conversion of any principal amount of
Debentures, the Corporation shall, in lieu of delivering any certificate
representing such fractional interest, make a cash payment to the holder of such
Debenture of an amount equal to the fractional interest which would have been
issuable multiplied by the Current Market Price, provided, however, that the
Corporation shall not be required to make any payment of less than $5.00. 

6.7     Corporation to
  Reserve Common Shares

          The
Corporation covenants with the Trustee that it will at all times reserve and
keep available out of its authorized Common Shares (if the number thereof is or
becomes limited), solely for the purpose of issue upon conversion of Debentures
as in this Article 6 provided, and conditionally allot to Debentureholders who
may exercise their conversion rights hereunder, such number of Common Shares as
shall then be issuable upon the conversion of all outstanding Debentures. The
Corporation covenants with the Trustee that all Common Shares which shall be so
issuable shall be duly and validly issued as fully-paid and non-assessable. 

6.8     Cancellation
  of Converted Debentures

          Subject
to the provisions of Section 6.4 as to Debentures converted in part, all
Debentures converted in whole or in part under the provisions of this Article 6
shall be forthwith delivered to and cancelled by the Trustee and no Debenture
shall be issued in substitution for those converted. 

6.9     Certificate as
  to Adjustment

          The
Corporation shall from time to time immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in Section 6.5,
deliver an Officers’ Certificate to the Trustee specifying the nature of the event
requiring the same and the amount of the adjustment necessitated thereby and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based, which certificate and the amount of the
adjustment specified therein shall be verified by an opinion of a firm of
nationally recognized chartered accountants appointed by the Corporation and
acceptable to the Trustee (who may be the Auditors of the Corporation) and shall
be conclusive and binding on all parties in interest. When so approved, the
Corporation shall, except in respect of any subdivision, redivision, reduction,
combination or consolidation of the Common Shares, forthwith give notice to the
Debentureholders in the manner provided in Section 12.2 specifying the event
requiring such adjustment or readjustment and the results thereof, including the
resulting Conversion Price; provided that, if the Corporation has given notice
under this Section 6.9 covering all the relevant facts in respect of such event
and if the Trustee approves, no such notice need be given under this Section
6.9. 

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6.10   Notice of Special Matters

          The
Corporation covenants with the Trustee that so long as any Debenture remains
outstanding, it will give notice to the Trustee, and to the Debentureholders in
the manner provided in Section 12.2, of its intention to fix a record date for
any event referred to in Sections 6.5(a), 6.5(b), 6.5(c) or 6.5(e) (other than
the subdivision, redivision, reduction, combination or consolidation of its
Common Shares) which may give rise to an adjustment in the Conversion Price,
and, in each case, such notice shall specify the particulars of such event and
the record date and the effective date for such event; provided that the
Corporation shall only be required to specify in such notice such particulars of
such event as shall have been fixed and determined on the date on which such
notice is given. Such notice shall be given not less than 14 days in each case
prior to such applicable record date. 

          In
addition, the Corporation covenants with the Trustee that so long as any
Debenture remains outstanding, it will give notice to the Trustee, and to the
Debentureholders in the manner provided in Section 12.2, at least 40 days prior
to the effective date of any transaction referred to in Section 6.5(d) stating
the consideration into which the Debentures will be convertible after the
effective date of such transaction. 

6.11   Protection of Trustee

          Subject
to Section 13.3, the Trustee: 

	 	(a) 	
      shall not at any time be under any duty or responsibility
      to any Debentureholder to determine whether any facts exist which may
      require any adjustment in the Conversion Price, or with respect to the
      nature or extent of any such adjustment when made, or with respect to the
      method employed in making the same;

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




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	 	(c) 	
      shall not be responsible for any failure of the
      Corporation to make any cash payment or to issue, transfer or deliver
      Common Shares or share certificates upon the surrender of any Debenture
      for the purpose of conversion, or to comply with any of the covenants
      contained in this Article 6.



6.12   U.S. Legend on Common
Shares 

          Each
certificate representing Common Shares issued to a U.S. Person, a person in the
United States, or for the account or benefit of a U.S. Person or a person in the
United States, upon conversion of Debentures shall have imprinted or otherwise
reproduced thereon such legend or legends in substantially the form of Schedule
“D” attached hereto. 

ARTICLE 7 
COVENANTS OF THE CORPORATION 

7.1     To Pay
Principal, Premium (if any) and Interest 

          The
Corporation will duly and punctually pay or cause to be paid to every
Debentureholder the principal of, premium (if any) and interest accrued on the
Debentures of which it is the holder on the dates, at the places and in the
manner mentioned herein and in the Debentures. 

7.2     To Pay Trustee’s
  Remuneration

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

7.3     To Give Notice
  of Default

          The
Corporation shall notify the Trustee immediately upon obtaining knowledge of any
Event of Default hereunder. 

7.4     Preservation
  of Existence, etc.

          Subject
to the express provisions hereof, the Corporation will carry on and conduct its
activities, and cause its Subsidiaries to carry on and conduct their businesses,
in a business-like manner and in accordance with good business practices; and,
subject to the express provisions hereof, it will do or cause to be done all
things necessary to preserve and keep in full force and effect its existence and
rights. 

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7.5     Keeping of Books

          The
Corporation will keep or cause to be kept proper books of record and account, in
which full and correct entries shall be made of all financial transactions and
the assets and business of the Corporation in accordance with generally accepted
accounting principles. 

7.6     Certificate of
  Compliance

          The
Corporation shall deliver to the Trustee, within 120 days after the end of each
calendar year or at any other time within one Business Day of receipt of a
request from the Trustee, an Officers’ Certificate as to the knowledge of such
officers of the Corporation who execute the Officers’ Certificate of the
Corporation’s compliance with all conditions and covenants in this Indenture
certifying that after reasonable investigation and inquiry, the Corporation has
complied with all covenants, conditions or other requirements contained in this
Indenture, the non-compliance with which could, with the giving of notice, lapse
of time or otherwise, constitute an Event of Default hereunder, or if such is
not the case, setting forth with reasonable particulars the circumstances of any
failure to comply and steps taken or proposed to be taken to eliminate such
circumstances and remedy such Event of Default, as the case may be. 

7.7     Performance of
  Covenants by Trustee

          If
the Corporation shall fail to perform any of its covenants contained in this
Indenture, the Trustee may notify the Debentureholders of such failure on the
part of the Corporation or may itself perform any of the covenants capable of
being performed by it, but shall be under no obligation to do so or to notify
the Debentureholders. All sums so expended or advanced by the Trustee shall be
repayable as provided in Section 7.2. No such performance, expenditure or
advance by the Trustee shall be deemed to relieve the Corporation of any default
hereunder. 

7.8     SEC Notice

          The
Corporation confirms that it has a class of securities registered pursuant to
Section 12 of the U.S. Securities Exchange Act or has a reporting obligation
pursuant to Section 15(d) of the U.S. Securities Exchange Act and has provided
the Trustee with an Officers’ Certificate (in a form provided by the Trustee)
certifying such reporting obligation and other information as requested by the
Trustee. The Corporation covenants that in the event that any such registration
or reporting obligation shall be terminated by the Corporation in accordance
with the U.S. Securities Exchange Act, the Corporation shall promptly notify the
Trustee of such termination and such other information as the Trustee may
require at the time. The Corporation acknowledges that Computershare is relying
upon the foregoing representation and covenants in order to meet certain SEC
obligations with respect to those clients who are filing with the SEC. 

7.9     No Dividends
  on Common Shares if Event of Default

          The
Corporation shall not declare or pay any dividend to the holders of its issued
and outstanding Common Shares after the occurrence of an Event of Default unless
and until such default shall have been cured or waived or shall have ceased to
exist. 

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7.10   Maintain Listing

          The
Corporation will use reasonable commercial efforts to maintain the listing of
the Common Shares and the Debentures on the TSXV, and to maintain the
Corporation’s status as a “reporting issuer” not in default of the requirements
of the Applicable Securities Legislation; provided that the foregoing covenant
shall not prevent or restrict the Corporation from carrying out a transaction to
which Article 10 would apply if carried out in compliance with Article 10 even
if as a result of such transaction the Corporation ceases to be a “reporting
issuer” in all or any of the provinces of Canada or the Common Shares or
Debentures cease to be listed on the TSXV or any other stock exchange. 

7.11   Use of Proceeds

          The
Corporation shall only use the net proceeds from the issuance of the Debentures
as set forth in the Prospectus and for no other purpose whatsoever. 

7.12   Covenants as to Security

          The
Corporation will, and will cause NAT US to: 

	 	(a) 	
      ensure that each of the Security Documents will at all
      times constitute valid and perfected first ranking security on the Secured
      Assets, subject only to Permitted Priority Encumbrances, and at all times
      take all actions necessary or desirable to create, perfect and maintain
      the Security Interests granted pursuant to the Security Documents as
      perfected first ranking security over the Secured Assets, subject only to
      Permitted Priority Encumbrances;

	 	 	 
	 	(b) 	
      at all times do, execute, acknowledge and deliver or
      cause to be done, executed, acknowledged and delivered all such acts,
      deeds, mortgages, hypothecs, transfers, assignments and assurances in law
      (including consents, approvals or waivers from third parties under
      applicable documents or applicable legislation) as may be necessary or
      desirable to ensure that the Trustee (for itself and the Debentureholders)
      has a first priority (subject only to Permitted Priority Encumbrances) and
      perfected Security Interest upon the Secured Assets;

	 	 	 
	 	(c) 	
      cause all necessary and proper steps to be taken
      diligently to protect and defend the Secured Assets and the proceeds
      thereof against any adverse claims or demands, including without
      limitation, the employment or use of counsel for the prosecution or
      defence of litigation and the contest, settlement, release or discharge of
      any such claim or demand; and

	 	 	 
	 	(d) 	
      if the Security Interests created by the Security
      Documents shall have become enforceable and the Trustee shall have become
      bound to enforce or has commenced enforcing the same, it shall from time
      to time execute and do all such assurances and things as the Trustee may
      reasonably require for facilitating the realization of the Security
      Interests created by the Security Documents and for exercising all the
      powers, authorities and discretions conferred upon the Trustee under this
      Indenture and for confirming to any purchaser of the Secured
Assets, whether sold by the Trustee hereunder or by judicial proceedings, the title to the Secured Assets so sold, and will give all notices and directions as the Trustee may consider expedient. 




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ARTICLE 8 
DEFAULT 

8.1     Events of
Default 

          Each
of the following events constitutes, and is herein sometimes referred to as, an
“Event of Default”: 

	 	(a) 	
      failure for 15 days to pay interest on the Debentures
      when due;

	 	 	 
	 	(b) 	
      failure to pay principal or premium, if any, when due on
      the Debentures whether at maturity, upon redemption, by declaration or
      otherwise;

	 	 	 
	 	(c) 	
      default in the delivery, when due, of all cash and any
      Common Shares or other consideration, if any, payable on conversion with
      respect to the Debentures, which default continues for 15 days;

	 	 	 
	 	(d) 	
      default in the observance or performance of any covenant
      or condition of the Indenture by the Corporation, or of the NAT US
      Guaranty and Security Agreement by NAT US, and the failure to cure (or
      obtain a waiver for) such default for a period of 60 days after notice in
      writing has been given by the Trustee or from holders of not less than
      66-2/3% in aggregate principal amount of the Debentures to the Corporation
      specifying such default and requiring the Corporation or NAT US, as
      applicable, to rectify such default or obtain a waiver for same;

	 	 	 
	 	(e) 	
      if a decree or order of a Court having jurisdiction is
      entered adjudging the Corporation or NAT US a bankrupt or insolvent under
      the Bankruptcy and Insolvency Act (Canada) or any other bankruptcy,
      insolvency or analogous laws, or issuing sequestration or process of
      execution against, or against any substantial part of, the property of the
      Corporation or NAT US, or appointing a receiver of, or of any substantial
      part of, the property of the Corporation or the Secured Assets or ordering
      the winding-up or liquidation of either one’s, and any such decree or
      order continues unstayed and in effect for a period of 60 days;

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




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	 	(g) 	
      if a resolution is passed for the winding-up or
      liquidation of the Corporation or NAT US except in the course of carrying
      out or pursuant to a transaction in respect of which the conditions of
      Section 10.1 are duly observed and performed;



then in each and every such event
listed above, the Trustee may, in its discretion, and shall, upon receipt of a
request in writing signed by the holders of not less than 25% in principal
amount of the Debentures then outstanding, subject to the provisions of Section
8.3, by notice in writing to the Corporation declare the principal of and
interest and premium, if any, on all Debentures then outstanding and all other
monies outstanding hereunder to be due and payable and the same shall thereupon
forthwith become immediately due and payable to the Trustee, and upon such
amounts becoming due and payable, the Corporation shall forthwith pay to the
Trustee for the benefit of the Debentureholders such principal, accrued and
unpaid interest and premium, if any, and interest on amounts in default on such
Debenture and all other monies outstanding hereunder, together with subsequent
interest at the rate borne by the Debentures on such principal, interest,
premium and such other monies from the date of such declaration or event until
payment is received by the Trustee, such subsequent interest to be payable at
the times and places and in the manner mentioned in and according to the tenor
of the Debentures. Such payment when made shall be deemed to have been made in
discharge of the Corporation’s obligations hereunder and any monies so received
by the Trustee shall be applied in the manner provided in Section 8.6. 

For greater certainty, for the purposes
of this Section 8.1, a series of Debentures shall be in default in respect of an
Event of Default if such Event of Default relates to a default in the payment of
principal, premium, if any, or interest on the Debentures of such series in
which case references to Debentures in this Section 8.1 refer to Debentures of
that particular series. 

For purposes of this Article 8, where
the Event of Default refers to an Event of Default with respect to a particular
series of Debentures as described in this Section 8.1, then this Article 8 shall
apply mutatis mutandis to the Debentures of such series and references in this
Article 8 to the Debentures shall mean Debentures of the particular series and
references to the Debentureholders shall refer to the Debentureholders of the
particular series, as applicable. 

8.2     Notice of Events
  of Default

          If
an Event of Default shall occur and be continuing the Trustee shall, within 30
days after it receives written notice of the occurrence of such Event of
Default, give notice of such Event of Default to the Debentureholders in the
manner provided in Section 12.2, provided that notwithstanding the foregoing,
unless the Trustee shall have been requested to do so by the holders of at least
25% of the principal amount of the Debentures then outstanding, the Trustee
shall not be required to give such notice if the Trustee in good faith shall
have determined that the withholding of such notice is in the best interests of
the Debentureholders and shall have so advised the Corporation in writing. 

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	8.3 	
      Waiver of Default

	 	 	 
		
      Upon the occurrence of any Event of Default
    hereunder:

	 	 	 
		(a) 	
      the holders of the Debentures shall have the power (in
      addition to the powers exercisable by Extraordinary Resolution as
      hereinafter provided) by requisition in writing by the holders of more
      than 50% of the principal amount of Debentures then outstanding, to
      instruct the Trustee to waive any Event of Default and to cancel any
      declaration made by the Trustee pursuant to Section 8.1 and the Trustee
      shall thereupon waive the Event of Default and cancel such declaration, or
      either, upon such terms and conditions as shall be prescribed in such
      requisition; provided that notwithstanding the foregoing if the Event of
      Default has occurred by reason of the non-observance or non-performance by
      the Corporation of any covenant applicable only to one or more series of
      Debentures, then the holders of more than 50% of the principal amount of
      the outstanding Debentures of that series shall be entitled to exercise
      the foregoing power and the Trustee shall so act and it shall not be
      necessary to obtain a waiver from the holders of any other series of
      Debentures; and

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



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

8.4     Enforcement by
  the Trustee

	 	(a) 	
      Subject to the provisions of Section 8.3 and to the
      provisions of any Extraordinary Resolution that may be passed by the
      Debentureholders, if the Corporation shall fail to pay to the Trustee,
      forthwith after the same shall have been declared (or have been deemed to
      be declared) to be due and payable under Section 8.1, the principal of and
      premium (if any) and interest on all Debentures then outstanding, together
      with any other amounts due hereunder, the Trustee may in its discretion
      and shall upon receipt of a request in writing signed by the holders of
      not less than 25% in principal amount of the Debentures then outstanding
      and upon being funded and indemnified to its reasonable satisfaction
      against all costs, expenses and liabilities to be incurred, proceed in its
      name as trustee hereunder to obtain or enforce payment of such principal
      of and premium (if any) and interest on all the Debentures then
      outstanding together with any other amounts due hereunder by such
      proceedings authorized by this Indenture or by law or equity as the
      Trustee in such request shall have been directed to take, or if such
      request contains no such direction, or if the Trustee shall act without
      such request, then by such proceedings authorized by this Indenture or by suit at
  law or in equity as the Trustee shall deem expedient.




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	 	(b) 	
      The Trustee shall be entitled and empowered, either in
      its own name or as trustee of an express trust, or as attorney-in-fact for
      the holders of the Debentures, or in any one or more of such capacities,
      to file such proof of debt, amendment of proof of debt, claim, petition or
      other document as may be necessary or advisable in order to have the
      claims of the Trustee and of the holders of the Debentures allowed in any
      insolvency, bankruptcy, liquidation or other judicial proceedings relative
      to the Corporation or its creditors or relative to or affecting its
      property. The Trustee is hereby irrevocably appointed (and the successive
      respective holders of the Debentures by taking and holding the same shall
      be conclusively deemed to have so appointed the Trustee) the true and
      lawful attorney-in-fact of the respective holders of the Debentures with
      authority to make and file in the respective names of the holders of the
      Debentures or on behalf of the holders of the Debentures as a class,
      subject to deduction from any such claims of the amounts of any claims
      filed by any of the holders of the Debentures themselves, any proof of
      debt, amendment of proof of debt, claim, petition or other document in any
      such proceedings and to receive payment of any sums becoming distributable
      on account thereof, and to execute any such other papers and documents and
      to do and perform any and all such acts and things for and on behalf of
      such holders of the Debentures, as may be necessary or advisable in the
      opinion of the Trustee, in order to have the respective claims of the
      Trustee and of the holders of the Debentures against the Corporation or
      its property allowed in any such proceeding, and to receive payment of or
      on account of such claims; provided, however, that subject to Section 8.3,
      nothing contained in this Indenture shall be deemed to give to the
      Trustee, unless so authorized by Extraordinary Resolution, any right to
      accept or consent to any plan of reorganization or otherwise by action of
      any character in such proceeding to waive or change in any way any right
      of any Debentureholder.

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

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





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8.5     No Suits by Debentureholders

          No
holder of any Debenture shall have any right to institute any action, suit or
proceeding at law or in equity for the purpose of enforcing payment of the
principal of or interest on the Debentures or for the execution of any trust or
power hereunder or for the appointment of a liquidator or receiver or for a
receiving order under the Bankruptcy and Insolvency Act (Canada) or to
have the Corporation wound up or to file or prove a claim in any liquidation or
bankruptcy proceeding or for any other remedy hereunder, unless: (a) such holder
shall previously have given to the Trustee written notice of the happening of an
Event of Default hereunder; and (b) the Debentureholders by Extraordinary
Resolution or by written instrument signed by the holders of at least 66-2/3% in
principal amount of the Debentures then outstanding shall have made a request to
the Trustee and the Trustee shall have been afforded reasonable opportunity
either itself to proceed to exercise the powers hereinbefore granted or to
institute an action, suit or proceeding in its name for such purpose; and (c)
the Debentureholders or any of them shall have furnished to the Trustee, when so
requested by the Trustee, sufficient funds and security and indemnity
satisfactory to it against the costs, expenses and liabilities to be incurred
therein or thereby; and (d) the Trustee shall have failed to act within a
reasonable time after such notification, request, receipt of sufficient funds,
security and offer of indemnity and such notification, request, receipt of
sufficient funds, security and offer of indemnity are hereby declared in every
such case, at the option of the Trustee, to be conditions precedent to any such
proceeding or for any other remedy hereunder by or on behalf of the holder of
any Debentures. 

8.6     Application of
  Monies by Trustee

          Except
as herein otherwise expressly provided, any monies received by the Trustee from
the Corporation pursuant to the foregoing provisions of this Article 8, or as a
result of legal or other proceedings or from any trustee in bankruptcy or
liquidator of the Corporation, shall be applied, together with any other monies
in the hands of the Trustee available for such purpose, as follows:

	 	(a) 	
      first, if and to the extent that the Debenture Trustee
      deems it in the interest of the Debentureholders generally, in payment of
      all liens, Security Interests and other encumbrances (if any) on the
      Secured Assets ranking or capable of ranking in priority to the Security
      Interest granted pursuant to the Security Documents or to keep in good
      standing any such prior encumbrances, including without limitation the
      Senior Security (if applicable);

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

	 	 	 
	 	(c) 	
      third, but subject as hereinafter in this Section 8.6
      provided, in payment, rateably and proportionately to the holders of
      Debentures, of the principal of and premium (if any) and accrued and
      unpaid interest and interest on amounts in default on the Debentures which
      shall then be outstanding in the priority of principal first and then
      premium and then accrued and unpaid interest and interest on amounts
    in default unless otherwise directed by Extraordinary
      Resolution and in that case in such order or priority as between
      principal, premium (if any) and interest as may be directed by such
  resolution; and




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	 	(d) 	
      fourth, in payment of the amount owing on any mortgages,
      charges, liens, Security Interests and other encumbrances ranking junior
      to the Security Interest pursuant to the Security Documents; and

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



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

8.7     Notice of Payment
  by Trustee

          Not
less than 15 days’ notice shall be given in the manner provided in Section 12.2
by the Trustee to the Debentureholders of any payment to be made under this
Article 8. Such notice shall state the time when and place where such payment is
to be made and also the liability under this Indenture to which it is to be
applied. After the day so fixed, unless payment shall have been duly demanded
and have been refused, the Debentureholders will be entitled to interest only on
the balance (if any) of the principal monies, premium (if any) and interest due
(if any) to them, respectively, on the Debentures, after deduction of the
respective amounts payable in respect thereof on the day so fixed. 

8.8     Trustee May Demand
  Production of Debentures

          The
Trustee shall have the right to demand production of the Debentures in respect
of which any payment of principal, interest or premium required by this Article
8 is made and may cause to be endorsed on the same a memorandum of the amount so
paid and the date of payment, but the Trustee may, in its discretion, dispense
with such production and endorsement, upon such indemnity being given to it and
to the Corporation and such surety bond being posted, as the Trustee shall deem
sufficient. 

8.9     Remedies Cumulative

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

8.10   Judgment Against the Corporation

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

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8.11   Immunity of Directors, Officers
  and Others

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

ARTICLE 9 
SATISFACTION AND DISCHARGE 

9.1     Cancellation
and Destruction 

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


9.2     Non-Presentation
  of Debentures

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

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

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



if the redemption was pursuant to
notice given by the Trustee, the Trustee may itself set aside, the principal,
premium (if any) or the interest, as the case may be, in trust to be paid to the
holder of such Debenture upon due presentation or surrender thereof in
accordance with the provisions of this Indenture; and thereupon the principal
of, premium (if any) or the interest payable on or represented by each Debenture
in respect whereof such monies have been set aside shall be deemed to have been
paid and the holder thereof shall thereafter have no right in respect thereof
except that of receiving delivery and payment of the monies so set aside by the
Trustee upon due presentation and surrender thereof, subject always to the
provisions of Section 9.3. 

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9.3     Repayment of
Unclaimed Monies

          Subject
to applicable law, any monies set aside under Section 9.2 and not claimed by and
paid to holders of Debentures as provided in Section 9.2 within six years after
the date of such setting aside shall be repaid and delivered to the Corporation
by the Trustee and thereupon the Trustee shall be released from all further
liability with respect to such monies and thereafter the holders of the
Debentures in respect of which such monies were so repaid to the Corporation
shall have no rights in respect thereof except to obtain payment and delivery of
the monies from the Corporation subject to any limitation provided by the laws
of the Province of British Columbia. 

9.4     Discharge

          The
Trustee shall at the written request of the Corporation release and discharge
this Indenture and the Security Documents and the Security Interest constituted
thereby and execute and deliver such instruments as it shall be advised by
Counsel are requisite for that purpose and to release the Corporation from its
covenants herein contained (other than the provisions relating to the
indemnification of the Trustee), upon proof being given to the reasonable
satisfaction of the Trustee that the principal of, premium (if any) and interest
(including interest on amounts in default, if any), on all the Debentures and
all other monies payable hereunder have been paid, satisfied or delivered or
that all the Debentures having matured or having been duly called for
redemption, payment of the principal of and interest (including interest on
amounts in default, if any) on such Debentures and of all other monies payable
hereunder has been duly and effectually provided for in accordance with the
provisions hereof. 

9.5     Satisfaction

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

	 	 	 	 	 
	 		(i) 	
      the Corporation has deposited or caused to be deposited
      with the Trustee as trust funds or property in trust for the purpose of
      making payment on such Debentures, an amount in money or Common Shares, if
      applicable, sufficient to pay, satisfy and discharge the entire amount of
      principal of, premium, if any, and interest, if any, to maturity, or any
      repayment date or Redemption Dates, or any Change of Control Purchase
      Date, or upon conversion or otherwise as the case may be, of such
      Debentures;

	 	 	 	 	 
	 		(ii) 	
      the Corporation has deposited or caused to be deposited
      with the Trustee as trust property in trust for the purpose of making
      payment on such Debentures:

	 	 	 	 	 
	 			(A) 	
      if the Debentures are issued in Canadian dollars, such
      amount in Canadian dollars of direct obligations of, or obligations
    the principal and interest of which are guaranteed by, the
  Government of Canada or Common Shares, if applicable; or




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	 	(B) 	
      if the Debentures are issued in a currency or currency
      unit other than Canadian dollars, cash in the currency or currency unit in
      which the Debentures are payable and/or such amount in such currency or
      currency unit of direct obligations of, or obligations the principal and
      interest of which are guaranteed by, the Government of Canada or the
      government that issued the currency or currency unit in which the
      Debentures are payable,





	 		
      as will, together with the income to accrue thereon and
      reinvestment thereof, be sufficient to pay and discharge the entire amount
      of principal of, premium, if any, and accrued and unpaid interest to
      maturity or any repayment date, as the case may be, of all such
      Debentures; or

	 	 	 
	 	(iii) 	
      all Debentures authenticated and delivered (other than
      (A) Debentures which have been destroyed, lost or stolen and which have
      been replaced or paid as provided in Section 2.9 and (B) Debentures for
      whose payment has been deposited in trust and thereafter repaid to the
      Corporation as provided in Section 9.3) have been delivered to the Trustee
      for cancellation;



so long as in any such event: 

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

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




	 		
      Any deposits with the Trustee referred to in this Section
      9.5 shall be irrevocable, subject to Section 9.6, and shall be made under
      the terms of an escrow and/or trust agreement in form and substance
      satisfactory to the Trustee and which provides for the due and punctual
      payment of the principal of, premium, if any, and interest on the
      Debentures being satisfied.

	 	 	 
	 	(b) 	
      Upon the satisfaction of the conditions set forth in this
      Section 9.5 with respect to all the outstanding Debentures, or all the
      outstanding Debentures of any series, as applicable, the terms and
      conditions of the Debentures, including the terms and conditions with
      respect thereto set forth in this Indenture (other than those contained in
      Article 2 and Article 4 and the provisions of Article 1 pertaining
    to Article 2 and Article 4) shall no longer be binding upon
  or applicable to the Corporation.




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	 	(c) 	
      Any funds or obligations deposited with the Trustee
      pursuant to this Section 9.5 shall be denominated in the currency or
      denomination of the Debentures in respect of which such deposit is
      made.

	 	 	 
	 	(d) 	
      If the Trustee is unable to apply any money or securities
      in accordance with this Section 9.5 by reason of any legal proceeding or
      any order or judgment of any court or governmental authority enjoining,
      restraining or otherwise prohibiting such application, the Corporation’s
      obligations under this Indenture and the affected Debentures shall be
      revived and reinstated as though no money or securities had been deposited
      pursuant to this Section 9.5 until such time as the Trustee is permitted
      to apply all such money or securities in accordance with this Section 9.5,
      provided that if the Corporation has made any payment in respect of
      principal of, premium, if any, or interest on Debentures or, as
      applicable, other amounts because of the reinstatement of its obligations,
      the Corporation shall be subrogated to the rights of the holders of such
      Debentures to receive such payment from the money or securities held by
      the Trustee.





	9.6 	
      Continuance of Rights, Duties and
      Obligations

	 	 	 
		(a) 	
      Where trust funds or trust property have been deposited
      pursuant to Section 9.5, the holders of Debentures and the Corporation
      shall continue to have and be subject to their respective rights, duties
      and obligations under Article 2 and Article 4.

	 	 	 
		(b) 	
      In the event that, after the deposit of trust funds or
      trust property pursuant to Section 9.5 in respect of a series of
      Debentures (the “Defeased Debentures”), any holder of any of the
      Defeased Debentures from time to time converts its Debentures to Common
      Shares or other securities of the Corporation in accordance with Section
      2.4(f) (in respect of Initial Debentures or the comparable provision of
      any other series of Debentures), Article 6 or any other provision of this
      Indenture, the Trustee shall upon receipt of a Written Direction of the
      Corporation return to the Corporation from time to time the proportionate
      amount of the trust funds or other trust property deposited with the
      Trustee pursuant to Section 9.5 in respect of the Defeased Debentures
      which is applicable to the Defeased Debentures so converted (which amount
      shall be based on the applicable principal amount of the Defeased
      Debentures being converted in relation to the aggregate outstanding
      principal amount of all the Defeased Debentures).

	 	 	 
		(c) 	
      In the event that, after the deposit of trust funds or
      trust property pursuant to Section 9.5, the Corporation is required to
      make a Change of Control Purchase Offer to purchase any outstanding
      Debentures pursuant to Section 2.4(h) (in respect of Initial Debentures or
      the comparable provision of any other series of Debentures), in relation
      to Initial Debentures or to make an offer to purchase Debentures pursuant
      to any other similar provisions relating to any other series
of Debentures, the Corporation shall be entitled to use any trust money or trust property deposited with the Trustee pursuant to Section 9.5 for the purpose of paying to any holders of Defeased Debentures who have accepted any such offer of the Corporation the Total Offer Price payable to such holders in respect of such Change of Control Purchase Offer in respect of Initial Debentures (or the total offer price payable in respect of an offer relating to any other series of Debentures). Upon receipt of a Written Direction from the Corporation, the Trustee shall be entitled to pay to such holder from such trust money or trust property deposited with the Trustee pursuant to Section 9.5 in respect of the Defeased Debentures which is applicable to the Defeased Debentures held by such holders who have accepted any such offer to the Corporation (which amount shall be based on the applicable principal amount of the Defeased Debentures held by accepting offerees in relation to the aggregate outstanding principal amount of all the Defeased Debentures). 




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ARTICLE 10 
SUCCESSORS 

10.1   Corporation may Consolidate,
  Etc., Only on Certain Terms

	 	(a) 	
      The Corporation may not, without the consent of the
      holders, consolidate with or amalgamate or merge with or into any Person
      (other than a directly or indirectly wholly-owned Subsidiary of the
      Corporation) or sell, convey, transfer or lease all or substantially all
      of the properties and assets of the Corporation to another Person (other
      than a directly or indirectly wholly-owned Subsidiary of the Corporation)
      unless:

	 	 	 	 
	 		(i) 	
      the Person formed by such consolidation or into which the
      Corporation is amalgamated or merged, or the Person which acquires by
      sale, conveyance, transfer or lease all or substantially all of the
      properties and assets of the Corporation is a corporation, organized and
      existing under the laws of Canada or any province or territory thereof or
      the laws of the United States or any state thereof and such corporation
      (if other than the Corporation or the continuing corporation resulting
      from the amalgamation of the Corporation with another corporation under
      the laws of Canada or any province or territory thereof) expressly
      assumes, by an indenture supplemental hereto, executed and delivered to
      the Trustee, in form satisfactory to the Trustee, the obligations of the
      Corporation under the Debentures and this Indenture and the performance or
      observance of every covenant and provision of this Indenture and the
      Debentures required on the part of the Corporation to be performed or
      observed and the conversion rights shall be provided for in accordance
      with Article 6, by supplemental indenture satisfactory in form to the
      Trustee, executed and delivered to the Trustee, by the Person (if other
      than the Corporation or the continuing corporation resulting from the
      amalgamation of the Corporation with another corporation under the laws of
      Canada or any province or territory thereof) formed by such consolidation
      or into which the Corporation shall have been merged or by the Person
  which shall have acquired the Corporation’s assets;




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	 	(ii) 	
      after giving effect to such transaction, no Event of
      Default, and no event which, after notice or lapse of time or both, would
      become an Event of Default, shall have occurred and be continuing;
    and

	 	 	 
	 	(iii) 	
      if the Corporation or the continuing corporation
      resulting from the amalgamation or merger of the Corporation with another
      Person under the laws of Canada or any province or territory thereof or
      the laws of the United States or any state thereof will not be the
      resulting, continuing or surviving corporation, the Corporation shall
      have, at or prior to the effective date of such consolidation,
      amalgamation, merger or sale, conveyance, transfer or lease, delivered to
      the Trustee an Officers’ Certificate and an opinion of Counsel, each
      stating that such consolidation, merger or transfer complies with this
      Article and, if a supplemental indenture is required in connection with
      such transaction, such supplemental indenture complies with this Article,
      and that all conditions precedent herein provided for relating to such
      transaction have been complied with.





	 	(b) 	
      For purposes of the foregoing, the sale, conveyance,
      transfer or lease (in a single transaction or a series of related
      transactions) of the properties or assets of one or more Subsidiaries of
      the Corporation (other than to the Corporation or another wholly-owned
      Subsidiary of the Corporation), which, if such properties or assets were
      directly owned by the Corporation, would constitute all or substantially
      all of the properties and assets of the Corporation and its Subsidiaries,
      taken as a whole, shall be deemed to be the sale, conveyance, transfer or
      lease of all or substantially all of the properties and assets of the
      Corporation.



10.2   Successor
Substituted 

          Upon
any consolidation of the Corporation or the Trustee with, or amalgamation or
merger of the Corporation or the Trustee into, any other Person or any sale,
conveyance, transfer or lease of all or substantially all of the properties and
assets of the Corporation and its Subsidiaries, taken as a whole, in accordance
with Section 10.1, the successor Person formed by such consolidation or into
which the Corporation or the Trustee is amalgamated or merged or to which such
sale, conveyance, transfer or lease is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Corporation or the Trustee,
as the case may be, under this Indenture with the same effect as if such
successor Person had been named as the Corporation or the Trustee, as the case
may be, herein, and thereafter, except in the case of a lease, and except for
obligations the predecessor Person may have under a supplemental indenture
entered into pursuant to Section 10.1(a)(iii), the predecessor Person shall be
relieved of all obligations and covenants under this Indenture and the
Debentures. 

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ARTICLE 11 
MEETINGS OF DEBENTUREHOLDERS 

11.1   Right to Convene
Meeting 

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

11.2   Notice of Meetings

	 	(a) 	
      At least 21 days’ notice of any meeting shall be given to
      the Debentureholders in the manner provided in Section 12.2 and a copy of
      such notice shall be sent by post to the Trustee, unless the meeting has
      been called by it. Such notice shall state the time when and the place
      where the meeting is to be held and shall state briefly the general nature
      of the business to be transacted thereat and it shall not be necessary for
      any such notice to set out the terms of any resolution to be proposed or
      any of the provisions of this Article. The accidental omission to give
      notice of a meeting to any holder of Debentures shall not invalidate any
      resolution passed at any such meeting. A holder may waive notice of a
      meeting either before or after the meeting.

	 	 	 	 
	 	(b) 	
      If the business to be transacted at any meeting by
      Extraordinary Resolution or otherwise, or any action to be taken or power
      exercised by instrument in writing under Section 11.15, especially affects
      the rights of holders of Debentures of one or more series in a manner or
      to an extent differing in any material way from that in or to which the
      rights of holders of Debentures of any other series are affected
      (determined as provided in Sections 11.2(c) and (d)), then:

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

	 	 	 	 
	 		(ii) 	
      the holders of Debentures of an especially affected
      series shall not be bound by any action taken at a Serial Meeting or by
      instrument in writing under Section 11.15 unless in addition to compliance
      with the other provisions of this Article 11:




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	 	(A) 	
      at such Serial Meeting: (I) there are Debentureholders
      present in person or by proxy and representing at least 25% in principal
      amount of the Debentures then outstanding of such series, subject to the
      provisions of this Article 11 as to quorum at adjourned meetings; and (II)
      the resolution is passed by the affirmative vote of the holders of more
      than 50% (or in the case of an Extraordinary Resolution not less than
      66-2/3%) of the principal amount of the Debentures of such series then
      outstanding voted on the resolution; or

	 	 	 
	 	(B) 	
      in the case of action taken or power exercised by
      instrument in writing under Section 11.15, such instrument is signed in
      one or more counterparts by the holders of not less than 66-2/3% in
      principal amount of the Debentures of such series then
  outstanding.




	 	(c) 	
      Subject to Section 11.2(d), the determination as to
      whether any business to be transacted at a meeting of Debentureholders, or
      any action to be taken or power to be exercised by instrument in writing
      under Section 11.15, especially affects the rights of the Debentureholders
      of one or more series in a manner or to an extent differing in any
      material way from that in or to which it affects the rights of
      Debentureholders of any other series (and is therefore an especially
      affected series) shall be determined by an opinion of Counsel, which shall
      be binding on all Debentureholders, the Trustee and the Corporation for
      all purposes hereof.

	 	 	 	 
	 	(d) 	
      A proposal:

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

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

	 	 	 	 
	 		(iii) 	
      to reduce with respect to Debentureholders of any
      particular series any percentage stated in this Section 11.2 or Sections
      11.4, 11.12 or 11.15;



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


11.3   Chairman

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

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11.4   Quorum

          Subject
to the provisions of Section 11.12, at any meeting of the Debentureholders a
quorum shall consist of Debentureholders present in person or by proxy and
representing at least 25% in principal amount of the outstanding Debentures and,
if the meeting is a Serial Meeting, at least 25% of the Debentures then
outstanding of each especially affected series. If a quorum of the
Debentureholders shall not be present within 30 minutes from the time fixed for
holding any meeting, the meeting, if summoned by the Debentureholders or
pursuant to a request of the Debentureholders, shall be dissolved, but in any
other case the meeting shall be adjourned to the same day in the next week
(unless such day is not a Business Day in which case it shall be adjourned to
the next following Business Day thereafter) at the same time and place and no
notice shall be required to be given in respect of such adjourned meeting. At
the adjourned meeting, the Debentureholders present in person or by proxy shall,
subject to the provisions of Section 11.12, constitute a quorum and may transact
the business for which the meeting was originally convened notwithstanding that
they may not represent 25% of the principal amount of the outstanding Debentures
or of the Debentures then outstanding of each especially affected series. Any
business may be brought before or dealt with at an adjourned meeting which might
have been brought before or dealt with at the original meeting in accordance
with the notice calling the same. No business shall be transacted at any meeting
unless the required quorum is present at the commencement of business. 

11.5   Power to Adjourn

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

11.6   Show of Hands

          Every
question submitted to a meeting shall, subject to Section 11.7, be decided in
the first place by a majority of the votes given on a show of hands except that
votes on Extraordinary Resolutions shall be given in the manner hereinafter
provided. At any such meeting, unless a poll is duly demanded as herein
provided, a declaration by the chairman that a resolution has been carried or
carried unanimously or by a particular majority or lost or not carried by a
particular majority shall be conclusive evidence of the fact. The chairman of
any meeting shall be entitled, both on a show of hands and on a poll, to vote in
respect of the Debentures, if any, held by him. 

11.7   Poll

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

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11.8   Voting

          On
a show of hands every person who is present and entitled to vote, whether as a
Debentureholder or as proxy for one or more Debentureholders or both, shall have
one vote. On a poll each Debentureholder present in person or represented by a
proxy duly appointed by an instrument in writing shall be entitled to one vote
in respect of each $1,000 principal amount of Debentures of which he shall then
be the holder. In the case of any Debenture denominated in a currency or
currency unit other than Canadian dollars, the principal amount thereof for
these purposes shall be computed in Canadian dollars on the basis of the
conversion of the principal amount thereof at the applicable spot buying rate of
exchange for such other currency or currency unit as reported by the Bank of
Canada at the close of business on the Business Day preceding the meeting. Any
fractional amounts resulting from such conversion shall be rounded to the
nearest $100. A proxy need not be a Debentureholder. In the case of joint
holders of a Debenture, any one of them present in person or by proxy at the
meeting may vote in the absence of the other or others but in case more than one
of them be present in person or by proxy, they shall vote together in respect of
the Debentures of which they are joint holders. 

11.9   Proxies

          A
Debentureholder may be present and vote at any meeting of Debentureholders by an
authorized representative. The Corporation (in case it convenes the meeting) or
the Trustee (in any other case) for the purpose of enabling the Debentureholders
to be present and vote at any meeting without producing their Debentures, and of
enabling them to be present and vote at any such meeting by proxy and of lodging
instruments appointing such proxies at some place other than the place where the
meeting is to be held, may from time to time make and vary such regulations as
it shall think fit providing for and governing any or all of the following
matters: 

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

	 	 	 
	 	(b) 	
      the deposit of instruments appointing proxies at such
      place as the Trustee, the Corporation or the Debentureholder convening the
      meeting, as the case may be, may, in the notice convening the meeting,
      direct and the time, if any, before the holding of the meeting or any
      adjournment thereof by which the same must be deposited; and

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




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


11.10 Persons Entitled to Attend Meetings

          The
Corporation and the Trustee, by their respective officers and directors, the
Auditors of the Corporation and the legal advisors of the Corporation, the
Trustee or any Debentureholder may attend any meeting of the Debentureholders,
but shall have no vote as such. 

11.11 Powers Exercisable by Extraordinary
  Resolution

          In
addition to the powers conferred upon them by any other provisions of this
Indenture or by law, a meeting of the Debentureholders shall have the following
powers exercisable from time to time by Extraordinary Resolution, subject in the
case of the matters in paragraphs (a), (b), (c), (d) and (1) to receipt of the
prior approval of the TSXV or such other exchange on which the Debentures are
then listed: 

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

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

	 	 	 
	 	(c) 	
      power to assent to any modification of or change in or
      addition to or omission from the provisions contained in this Indenture or
      any Debenture which shall be agreed to by the Corporation and consented to
      by the Trustee, relying on an opinion of Counsel, such consent not to be
      unreasonably withheld, to authorize the Trustee to concur in and execute
      any indenture supplemental hereto embodying any modification, change,
      addition or omission, and to consent to the assignment by the Corporation
      of its rights or obligations pursuant to any Security Document;

	 	 	 
	 	(d) 	
      power to sanction any scheme for the reconstruction,
      reorganization or recapitalization of the Corporation or for the
      consolidation, amalgamation, arrangement, combination or merger of the
      Corporation with any other Person or for the sale, leasing, transfer or
      other disposition of all or substantially all of the undertaking, property
      and assets of the Corporation or any part thereof, provided that no such
      sanction shall be necessary in respect of any such transaction if the
      provisions of Section 10.1 shall have been complied
with;




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

	 	 	 
	 	(f) 	
      power to waive, and direct the Trustee to waive, any
      default hereunder and/or cancel any declaration made by the Trustee
      pursuant to Section 8.1 either unconditionally or upon any condition
      specified in such Extraordinary Resolution;

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

	 	 	 
	 	(h) 	
      power to direct any Debentureholder who, as such, has
      brought any action, suit or proceeding to stay or discontinue or otherwise
      deal with the same upon payment, if the taking of such suit, action or
      proceeding shall have been permitted by Section 8.5, of the costs, charges
      and expenses reasonably and properly incurred by such Debentureholder in
      connection therewith;

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

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

	 	 	 
	 	(k) 	
      power to remove the Trustee from office and to appoint a
      new Trustee or Trustees provided that no such removal shall be effective
      unless and until a new Trustee or Trustees shall have become bound by this
      Indenture;




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	 	(l) 	
      power to sanction the exchange of the Debentures for or
      the conversion thereof into shares, bonds, debentures or other securities
      or obligations of the Corporation or of any other Person formed or to be
      formed;

	 	 	 
	 	(m) 	
      power to authorize the distribution in specie of any
      shares or securities received pursuant to a transaction authorized under
      the provisions of Section 11.11(l); and

	 	 	 
	 	(n) 	
      power to amend, alter or repeal any Extraordinary
      Resolution previously passed or sanctioned by the Debentureholders or by
      any committee appointed pursuant to Section
11.11(j).



Except as otherwise provided in this
Indenture, all other powers of and matters to be determined by the
Debentureholders may be exercised or determined from time to time by Ordinary
Resolution. 

The expression “Ordinary
Resolution” when used in this Indenture means, except as otherwise provided
in this Indenture, a resolution proposed to be passed as an ordinary resolution
at a meeting of Debentureholders duly convened for the purpose and held in
accordance with the provisions of this Article 11 at which a quorum of the
Debentureholders is present and passed by the affirmative votes of
Debentureholders present in person or represented by proxy at the meeting who
hold more than 50% of the principal amount of the Debentures voted in respect of
such resolution 

Notwithstanding the foregoing
provisions of this Section 11.11 none of such provisions shall in any manner
allow or permit any amendment, modification, abrogation or addition to the
provisions of Article 5 which could reasonably be expected to detrimentally
affect the rights, remedies or recourse of the priority of the Senior Creditors.


11.12 Meaning of “Extraordinary Resolution”

	 	(a) 	
      The expression “Extraordinary Resolution” when
      used in this Indenture means, subject as hereinafter in this Article
      provided, a resolution proposed to be passed as an Extraordinary
      Resolution at a meeting of Debentureholders (including an adjourned
      meeting) duly convened for the purpose and held in accordance with the
      provisions of this Article at which the holders of not less than 25% of
      the principal amount of the Debentures then outstanding, and if the
      meeting is a Serial Meeting, at which holders of not less than 25% of the
      principal amount of the Debentures then outstanding of each especially
      affected series, are present in person or by proxy and passed by the
      favourable votes of the holders of not less than 66-2/3% of the principal
      amount of the Debentures, and if the meeting is a Serial Meeting by the
      affirmative vote of the holders of not less than 66-2/3% of each
      especially affected series, in each case present or represented by proxy
      at the meeting and voted upon on a poll on such resolution.

	 	 	 
	 	(b) 	
      If, at any such meeting, the holders of not less than 25%
      of the principal amount of the Debentures then outstanding and, if the
      meeting is a Serial Meeting, 25% of the principal amount of the Debentures
      then outstanding of each especially affected series, in each case are not
      present in person or by proxy within 30 minutes after the time appointed for the meeting, then
      the meeting, if convened by or on the requisition of Debentureholders,
      shall be dissolved but in any other case it shall stand adjourned to such
      date, being not less than 14 nor more than 60 days later, and to such
      place and time as may be appointed by the chairman. Not less than 10 days’
      notice shall be given of the time and place of such adjourned meeting in
      the manner provided in Section 12.2. Such notice shall state that at the
      adjourned meeting the Debentureholders present in person or by proxy shall
      form a quorum. At the adjourned meeting the Debentureholders present in
      person or by proxy shall form a quorum and may transact the business for
      which the meeting was originally convened and a resolution proposed at
      such adjourned meeting and passed thereat by the affirmative vote of
      holders of not less than 66-2/3% of the principal amount of the Debentures
      and, if the meeting is a Serial Meeting, by the affirmative vote of the
      holders of not less than 66-2/3% of the principal amount of the Debentures
      of each especially affected series, in each case present or represented by
      proxy at the meeting voted upon on a poll shall be an Extraordinary
      Resolution within the meaning of this Indenture, notwithstanding that the
      holders of not less than 25% in principal amount of the Debentures then
      outstanding, and if the meeting is a Serial Meeting, holders of not less
      than 25% of the principal amount of the Debentures then outstanding of
      each especially affected series, are not present in person or by proxy at
such adjourned meeting.




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



11.13 Powers Cumulative 

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

11.14 Minutes

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

11.15 Instruments in Writing

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

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11.16 Binding Effect of Resolutions

          Every
resolution and every Extraordinary Resolution passed in accordance with the
provisions of this Article at a meeting of Debentureholders shall be binding
upon all the Debentureholders, whether present at or absent from such meeting,
and every instrument in writing signed by Debentureholders in accordance with
Section 11.15 shall be binding upon all the Debentureholders, whether
signatories thereto or not, and each and every Debentureholder and the Trustee
(subject to the provisions for its indemnity herein contained) shall be bound to
give effect accordingly to every such resolution, Extraordinary Resolution and
instrument in writing. 

11.17 Evidence of Rights Of Debentureholders

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

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



11.18 Concerning Serial Meetings


          If
in the opinion of Counsel any business to be transacted at any meeting, or any
action to be taken or power to be exercised by instrument in writing under
Section 11.15, does not adversely affect the rights of the holders of Debentures
of one or more series, the provisions of this Article 11 shall apply as if the
Debentures of such series were not outstanding and no notice of any such meeting
need be given to the holders of Debentures of such series. Without limiting the
generality of the foregoing, a proposal to modify or terminate any covenant or
agreement which is effective only so long as Debentures of a particular series
are outstanding shall be deemed not to adversely affect the rights of the
holders of Debentures of any other series. 

ARTICLE 12 
NOTICES 

12.1   Notice to
Corporation 

          Any
notice to the Corporation under the provisions of this Indenture shall be valid
and effective if delivered to the Corporation at: 4420 Chatterton Way, Suite
305, Victoria, British Columbia, Canada, V8X 5ZJ2, Attention: Chief Financial
Officer, and a copy delivered to McMillan LLP, 1055 West Georgia Street, Suite
1500, PO Box 11117, Vancouver, British Columbia, Canada, V6E 4N7, Attention:
Thomas Wachowski, or if given by registered letter, postage prepaid, to such offices and so addressed and if
mailed, shall be deemed to have been effectively given three days following the
mailing thereof. The Corporation may from time to time notify the Trustee in
writing of a change of address which thereafter, until changed by like notice,
shall be the address of the Corporation for all purposes of this Indenture. 

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12.2   Notice to Debentureholders

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

          If
any notice given in accordance with the foregoing paragraph would be unlikely to
reach the Debentureholders to whom it is addressed in the ordinary course of
post by reason of an interruption in mail service, whether at the place of
dispatch or receipt or both, the Corporation shall give such notice by
publication at least once in the city of Vancouver, British Columbia and each
such publication to be made in a daily newspaper of general circulation in the
designated city. 

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

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

12.3   Notice to Trustee

          Any
notice to the Trustee under the provisions of this Indenture shall be valid and
effective if delivered to the Trustee at: 510 Burrard Street, 2nd
Floor, Vancouver, British Columbia, Canada, V6C 3B9, Attention: Manager,
Corporate Trust, Facsimile No: 604-661-9549 or if given by registered letter,
postage prepaid, to such office and so addressed and, if mailed, shall be deemed
to have been effectively given three days following the mailing thereof. 

12.4   Mail Service Interruption

          If
by reason of any interruption of mail service, actual or threatened, any notice
to be given to the Trustee would reasonably be unlikely to reach its destination
by the time notice by mail is deemed to have been given pursuant to Section
12.3, such notice shall be valid and effective only if delivered at the
appropriate address in accordance with Section 12.3. 

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ARTICLE 13 
CONCERNING THE TRUSTEE 

13.1   No Conflict of
Interest 

          The
Trustee represents to the Corporation that at the date of execution and delivery
by it of this Indenture there exists no material conflict of interest between
the role of the Trustee as a fiduciary hereunder and its role in any other
capacity but if, notwithstanding the provisions of this Section 13.1, such a
material conflict of interest exists, or hereafter arises, the validity and
enforceability of this Indenture, and the Debentures issued hereunder, shall not
be affected in any manner whatsoever by reason only that such material conflict
of interest exists or arises but the Trustee shall, within 30 days after
ascertaining that it has a material conflict of interest, either eliminate such
material conflict of interest or resign in the manner and with the effect
specified in Section 13.2. 

13.2   Replacement of Trustee

          The
Trustee may resign its trust and be discharged from all further duties and
liabilities hereunder by giving to the Corporation 90 days’ notice in writing or
such shorter notice as the Corporation may accept as sufficient. If at any time
a material conflict of interest exists in the Trustee’s role as a fiduciary
hereunder the Trustee shall, within 30 days after ascertaining that such a
material conflict of interest exists, either eliminate such material conflict of
interest or resign in the manner and with the effect specified in this Section
13.2. The validity and enforceability of this Indenture and of the Debentures
issued hereunder shall not be affected in any manner whatsoever by reason only
that such a material conflict of interest exists. In the event of the Trustee
resigning or being removed or being dissolved, becoming bankrupt, going into
liquidation or otherwise becoming incapable of acting hereunder, the Corporation
shall forthwith appoint a new Trustee unless a new Trustee has already been
appointed by the Debentureholders. Failing such appointment by the Corporation,
the retiring Trustee or any Debentureholder may apply to an British Columbia
Court, on such notice as such Court may direct at the Corporation’s expense, for
the appointment of a new Trustee but any new Trustee so appointed by the
Corporation or by the Court shall be subject to removal as aforesaid by the
Debentureholders and the appointment of such new Trustee shall be effective only
upon such new Trustee becoming bound by this Indenture. Any new Trustee
appointed under any provision of this Section 13.2 shall be a corporation
authorized to carry on the business of a trust company in all of the Provinces
of Canada. On any new appointment the new Trustee shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as Trustee. 

          Any
company into which the Trustee may be merged or, with or to which it may be
consolidated, amalgamated or sold, or any company resulting from any merger,
consolidation, sale or amalgamation to which the Trustee shall be a party, shall
be the successor trustee under this Indenture without the execution of any
instrument or any further act. Nevertheless, upon the written request of the
successor Trustee or of the Corporation, the Trustee ceasing to act shall
execute and deliver an instrument assigning and transferring to such successor
Trustee, upon the trusts herein expressed, all the rights, powers and trusts of
the Trustee so ceasing to act, and shall duly assign, transfer and deliver all
property and money held by such Trustee to the successor Trustee so appointed in
its place. 

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         Should
any deed, conveyance or instrument in writing from the Corporation be required
by any new Trustee for more fully and certainly vesting in and confirming to it
such estates, properties, rights, powers and trusts, then any and all such
deeds, conveyances and instruments in writing shall on request of said new
Trustee, be made, executed, acknowledged and delivered by the Corporation. 

13.3   Duties of Trustee

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

13.4   Reliance Upon Declarations,
  Opinions, etc.

          In
the exercise of its rights, duties and obligations hereunder the Trustee may, if
acting in good faith, rely, as to the truth of the statements and accuracy of
the opinions expressed therein, upon statutory declarations, opinions, reports
or certificates furnished pursuant to any covenant, condition or requirement of
this Indenture or required by the Trustee to be furnished to it in the exercise
of its rights and duties hereunder, if the Trustee examines such statutory
declarations, opinions, reports or certificates and determines that they comply
with Section 13.5, if applicable, and with any other applicable requirements of
this Indenture. The Trustee may nevertheless, in its discretion, require further
proof in cases where it deems further proof desirable. Without restricting the
foregoing, the Trustee may rely on an opinion of Counsel satisfactory to the
Trustee notwithstanding that it is delivered by a solicitor or firm which acts
as solicitors for the Corporation. 

13.5   Evidence and Authority to
  Trustee, Opinions, etc.

          The
Corporation shall furnish to the Trustee evidence of compliance with the
conditions precedent provided for in this Indenture relating to any action or
step required or permitted to be taken by the Corporation or the Trustee under
this Indenture or as a result of any obligation imposed under this Indenture,
including without limitation, the certification and delivery of Debentures
hereunder, the satisfaction and discharge of this Indenture and the taking of
any other action to be taken by the Trustee at the request of or on the
application of the Corporation, forthwith if and when (a) such evidence is
required by any other Section of this Indenture to be furnished to the Trustee
in accordance with the terms of this Section 13.5, or (b) written notice
requiring it to furnish such evidence in relation to any particular action or
obligation specified in such notice. 

          Such
evidence shall consist of: 

	 	(a) 	
      a certificate made by any two officers or directors of
      the Corporation, stating that any such condition precedent has been
      complied with in accordance with the terms of this Indenture;

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




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



          Whenever
such evidence relates to a matter other than the certificates and delivery of
Debentures and the satisfaction and discharge of this Indenture, and except as
otherwise specifically provided herein, such evidence may consist of a report or
opinion of any solicitor, auditor, accountant, engineer or appraiser or any
other person whose qualifications give authority to a statement made by him,
provided that if such report or opinion is furnished by a trustee, officer or
employee of the Corporation it shall be in the form of a statutory declaration.
Such evidence shall be, so far as appropriate, in accordance with the
immediately preceding paragraph of this Section. 

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

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

13.6   Officers’ Certificates
  Evidence

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

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13.7   Experts, Advisers and
Agents

          The
Trustee may: 

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

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



13.8   Trustee May Deal in
Debentures 

          Subject
to Sections 13.1 and 13.3, the Trustee may, in its personal or other capacity,
buy, sell, lend upon and deal in the Debentures and generally contract and enter
into financial transactions with the Corporation or otherwise, without being
liable to account for any profits made thereby. 

13.9 I  nvestment of Monies Held by
  Trustee

          Unless
otherwise provided in this Indenture, any monies held by the Trustee, which,
under the trusts of this Indenture, may or ought to be invested or which may be
on deposit with the Trustee or which may be in the hands of the Trustee, may be
invested and reinvested in the name or under the control of the Trustee in
securities in which, under the laws of the Province of British Columbia,
trustees are authorized to invest trust monies, provided that such securities
are expressed to mature within two years or such shorter period selected to
facilitate any payments expected to be made under this Indenture, after their
purchase by the Trustee, and unless and until the Trustee shall have declared
the principal of and interest on the Debentures to be due and payable, the
Trustee shall so invest such monies at the Written Direction of the Corporation
given in a reasonably timely manner. Pending the investment of any monies as
hereinbefore provided, such monies may be deposited in the name of the Trustee
in any chartered bank of Canada or, with the consent of the Corporation, in the
deposit department of the Trustee or any other loan or trust company authorized
to accept deposits under the laws of Canada or any Province thereof at the rate
of interest, if any, then current on similar deposits. 

          Unless
and until the Trustee shall have declared the principal of and interest on the
Debentures to be due and payable, the Trustee shall pay over to the Corporation
all interest received by the Trustee in respect of any investments or deposits
made pursuant to the provisions of this Section. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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13.10 Trustee Not Ordinarily Bound

          Except
as provided in Section 8.2 and as otherwise specifically provided herein, the
Trustee shall not, subject to Section 13.3, be bound to give notice to any
person of the execution hereof, nor to do, observe or perform or see to the
observance or performance by the Corporation of any of the obligations herein
imposed upon the Corporation or of the covenants on the part of the Corporation
herein contained, nor in any way to supervise or interfere with the conduct of
the Corporation’s business, unless the Trustee shall have been required to do so
in writing by the holders of not less than 25% of the aggregate principal amount
of the Debentures then outstanding or by any Extraordinary Resolution of the
Debentureholders passed in accordance with the provisions contained in Article
11, and then only after it shall have been funded and indemnified to its
satisfaction against all actions, proceedings, claims and demands to which it
may render itself liable and all costs, charges, damages and expenses which it
may incur by so doing. 

13.11 Trustee Not Required to Give Security

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

13.12 Trustee Not Bound to Act on Corporation’s
  Request

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

13.13 Conditions Precedent to Trustee’s
  Obligations to Act Hereunder

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

          None
of the provisions contained in this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur financial liability in the
performance of any of its duties or in the exercise of any of its rights or
powers unless indemnified as aforesaid. 

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

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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13.14 Authority to Carry on Business

          The
Trustee represents to the Corporation that at the date of execution and delivery
by it of this Indenture it is authorized to carry on the business of a trust
company in each of the provinces of Canada but if, notwithstanding the
provisions of this Section 13.4, it ceases to be so authorized to carry on
business, the validity and enforceability of this Indenture and the securities
issued hereunder shall not be affected in any manner whatsoever by reason only
of such event but the Trustee shall, within 90 days after ceasing to be
authorized to carry on the business of a trust company in any of the provinces
of Canada, either become so authorized or resign in the manner and with the
effect specified in Section 13.2. 

13.15 Compensation and Indemnity

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

	 	 	 
	 	(b) 	
      The Corporation hereby indemnifies and saves harmless the
      Trustee and its directors, officers and employees from and against any and
      all loss, damages, charges, expenses, claims, demands, actions or
      liability whatsoever which may be brought against the Trustee or which it
      may suffer or incur as a result of or arising out of the performance of
      its duties and obligations hereunder save only in the event of the gross
      negligence, wilful misconduct or fraud of the Trustee. This indemnity will
      survive the termination or discharge of this Indenture and the resignation
      or removal of the Trustee. The Trustee shall notify the Corporation
      promptly of any claim for which it may seek indemnity. The Corporation
      shall defend the claim and the Trustee shall co-operate in the defence.
      The Trustee may have separate Counsel and the Corporation shall pay the
      reasonable fees and expenses of such Counsel. The Corporation need not pay
      for any settlement made without its consent, which consent must not be
      unreasonably withheld. This indemnity shall survive the resignation or
      removal of the Trustee or the discharge of this Indenture. Without
      limiting the generality of the foregoing and for greater certainty, the
      indemnity provided by the Corporation in favour of the Trustee pursuant to
      this Section 13.15(b) includes an indemnity in respect of any interest
      payments that are required to be made to non-residents of Canada pursuant
      to Section 2.15.

	 	 	 
	 	(c) 	
      The Corporation need not reimburse any expense or
      indemnify against any loss or liability incurred by the Trustee through
      gross negligence, wilful misconduct or fraud.




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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13.16 Acceptance of Trust

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

13.17 Third Party Interests

         Each
party to this Indenture (in this paragraph referred to as a “representing
party”) hereby represents to the Trustee that any account to be opened by, or
interest to held by, the Trustee in connection with this Indenture, for or to
the credit of such representing party, either (i) is not intended to be used by
or on behalf of any third party; or (ii) is intended to be used by or on behalf
of a third party, in which case such representing party hereby agrees to
complete, execute and deliver forthwith to the Trustee a declaration, in the
Trustee’s prescribed form or in such other form as may be satisfactory to it, as
to the particulars of such third party. 

13.18 Privacy Laws

          The
parties acknowledge that the Trustee may, in the course of providing services
hereunder, collect or receive financial and other personal information about
such parties and/or their representatives, as individuals, or about other
individuals related to the subject matter hereof, and use such information for
the following purposes: 

	 	(a) 	
      to provide the services required under this Indenture and
      other services that may be requested from to time;

	 	 	 
	 	(b) 	
      to help the Trustee manage its servicing relationships
      with such individuals;

	 	 	 
	 	(c) 	
      to meet the Trustee’s legal and regulatory requirements;
      and

	 	 	 
	 	(d) 	
      if Social Insurance Numbers are collected by the Trustee,
      to perform tax reporting and to assist in verification of any individual’s
      identity for security purposes.



          Each
party acknowledges and agrees that the Trustee may receive, collect, use and
disclose personal information provided to it or acquired by it in the course of
this Indenture for the purposes described above and, generally, in the manner
and on the terms described in its Privacy Code, which the Trustee shall make
available on its website or upon request, including revisions thereto. The
Trustee may transfer some of that personal information to service providers in
the United States for data processing and/or storage. Further, each party agrees
that it shall not provide or cause to be provided to the Trustee any personal
information relating to an individual who is not a party to this Indenture
unless that parry has assured itself that such individual understands and has
consented to the aforementioned uses and discloses. 

13.19 Force Majeure

          Neither
the Trustee nor the Corporation shall be liable to the other, or held in breach
of this Indenture, if prevented, hindered, or delayed in the performance or
observance of any provision contained herein by reason of act of God, riots,
terrorism, acts of war, epidemics, governmental action or judicial order, earthquakes, or any other
similar causes (including, but not limited to, mechanical, electronic or
communication interruptions, disruptions or failures). Performance times under
this Indenture shall be extended for a period of time equivalent to the time
lost because of any delay that is excusable under this Section. 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





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13.20 Anti-Money Laundering

          The
Trustee shall retain the right not to act and shall not be liable for refusing
to act if, due to a lack of information or for any other reason whatsoever, the
Trustee, in its sole judgment and acting reasonably, determines that such act
might cause it to be in non-compliance with any applicable anti-money laundering
or anti-terrorist legislation, regulation or guideline. Further, should the
Trustee, in its sole judgment and acting reasonably, determine at any time that
its acting under this Indenture has resulted in its being in non-compliance with
any applicable anti-money laundering or anti-terrorist legislation, regulation
or guideline, then it shall have the right to resign on 10 days’ prior written
notice sent to the Corporation or any shorter period of time as agreed to by the
Corporation provided that: 

	 	(a) 	
      the Trustee’s written notice shall describe the
      circumstances of such non- compliance; and

	 	 	 
	 	(b) 	
      if such circumstances are rectified to the Trustee’s
      satisfaction within such 10-day period, then such resignation shall not be
      effective.



ARTICLE 14 
SUPPLEMENTAL INDENTURES 

14.1   Supplemental
Indentures 

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

	 	(a) 	
      providing for the issuance of Additional Debentures under
      this Indenture;

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

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

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




	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 90 - 

	 	(e) 	
      giving effect to any Extraordinary Resolution passed as
      provided in Article 11; and

	 	 	 
	 	(f) 	
      for any other purpose not inconsistent with the terms of
      this Indenture.



Unless the supplemental indenture requires the consent or
concurrence of Debentureholders or the holders of a particular series of
Debentures, as the case may be, by Extraordinary Resolution, the consent or
concurrence of Debentureholders or the holders of a particular series of
Debentures, as the case may be, shall not be required in connection with the
execution, acknowledgement or delivery of a supplemental indenture. The
Corporation and the Trustee may amend any of the provisions of this Indenture
related to matters of United States law or the issuance of Debentures into the
United States in order to ensure that such issuances can be made in accordance
with applicable law in the United States without the consent or approval of the
Debentureholders. Further, the Corporation and the Trustee may without the
consent or concurrence of the Debentureholders or the holders of a particular
series of Debentures, as the case may be, by supplemental indenture or
otherwise, make any changes or corrections in this Indenture which it shall have
been advised by Counsel are required for the purpose of curing or correcting any
ambiguity or defective or inconsistent provisions or clerical omissions or
mistakes or manifest errors contained herein or in any indenture supplemental
hereto or any Written Direction of the Corporation provided for the issue of
Debentures, providing that in the opinion of the Trustee (relying upon an
opinion of Counsel) the rights of the Debentureholders are in no way prejudiced
thereby. 

ARTICLE 15 
EXECUTION AND FORMAL DATE 

15.1   Execution


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

15.2   Formal Date

          For
the purpose of convenience this Indenture may be referred to as bearing the
formal date of September 20, 2012 irrespective of the actual date of execution
hereof. 

[The remainder of this page is intentionally blank.] 

	 	 	CONVERTIBLE DEBENTURE INDENTURE 





- 91 - 

IN WITNESS WHEREOF the parties hereto have executed this
Convertible Debenture Indenture by the hands of their proper officers in that
behalf. 

NATURALLY ADVANCED TECHNOLOGIES
INC.

	 	By: 	“Ken Barker” 
	 	  	Name: Ken Barker 
	 	  	Title: CEO 


COMPUTERSHARE TRUST COMPANY OF
CANADA

	 	By: 	“Gabriel Ducharme” 
	 	  	Name: Gabriel Ducharme 
	 	  	Title: Corporate Trust Officer
  
	 	  	 
	 	  	 
	 	By: 	“Margarita Zubiran” 
	 	  	Name: Margarita Zubiran 
	 	  	Title: Associate Trust Officer
  



	 	 	CONVERTIBLE DEBENTURE INDENTURE 





SCHEDULE A – FORM OF DEBENTURE 

[GLOBAL DEBENTURE LEGEND] 

THIS DEBENTURE IS A GLOBAL DEBENTURE WITHIN THE MEANING OF
THE INDENTURE HEREIN REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE THEREOF. THIS DEBENTURE MAY NOT BE TRANSFERRED TO OR EXCHANGED FOR
DEBENTURES REGISTERED IN THE NAME OF ANY PERSON OTHER THAN THE DEPOSITORY OR A
NOMINEE THEREOF AND NO SUCH TRANSFER MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE INDENTURE. EVERY DEBENTURE AUTHENTICATED AND
DELIVERED UPON REGISTRATION OF, TRANSFER OF, OR IN EXCHANGE FOR, OR IN LIEU OF,
THIS DEBENTURE SHALL BE A GLOBAL DEBENTURE SUBJECT TO THE FOREGOING, EXCEPT IN
SUCH LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE. 

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF CDS CLEARING AND DEPOSITORY SERVICES INC. (“CDS”) TO NATURALLY
ADVANCED TECHNOLOGIES INC. (THE “ISSUER”) OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN RESPECT THEREOF IS
REGISTERED IN THE NAME OF CDS & CO., OR IN SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF CDS (AND ANY PAYMENT IS MADE TO CDS & CO.
OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS),
ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED HOLDER HEREOF, CDS & CO., HAS A
PROPERTY INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE HEREIN AND
IT IS A VIOLATION OF ITS RIGHTS FOR ANOTHER PERSON TO HOLD, TRANSFER OR DEAL
WITH THIS CERTIFICATE. 

TRANSFERS OF THIS DEBENTURE SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF CDS & CO. OR TO A SUCCESSOR THEREOF
OR SUCH SUCCESSOR’S NOMINEE. 

[U.S. LEGEND] 

THE SALE OF THIS DEBENTURE AND ANY COMMON SHARES ISSUABLE
  UPON ITS CONVERSION HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
  1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR ANY U.S. STATE SECURITIES
  LAWS, AND ACCORDINGLY, THIS DEBENTURE AND ANY SHARES OF COMMON STOCK ISSUABLE
  UPON ITS CONVERSION MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING
  SENTENCE. BY ITS ACQUISITION HEREOF OR A BENEFICIAL INTEREST HEREIN, THE HOLDER
  AGREES FOR THE BENEFIT OF THE ISSUER (THE “COMPANY”) THAT IT WILL
  NOT OFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER THE DEBENTURES EVIDENCED HEREBY
  OR THE SHARES OF COMMON STOCK ISSUABLE UPON THEIR CONVERSION EXCEPT (A) TO THE
  COMPANY; (B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
  INSTITUTIONAL BUYER (“QIB”) WITHIN THE MEANING OF RULE 144A
UNDER THE U.S. SECURITIES ACT THAT IS PURCHASING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF ANOTHER QIB AND TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING
MADE IN RELIANCE ON RULE 144A, ALL IN ACCORDANCE WITH RULE 144A (IF AVAILABLE);
(C) UNDER AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE U.S.
SECURITIES ACT, IF AVAILABLE; (D) UNDER A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE U.S. SECURITIES ACT; (E) OUTSIDE THE UNITED STATES
IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT OR (F)
UNDER ANY OTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
U.S. SECURITIES ACT; PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C) OR
(E) ABOVE, AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM SATISFACTORY TO
THE COMPANY MAY BE REQUIRED BY THE COMPANY PRIOR TO SUCH OFFER, SALE OR
TRANSFER; AND IN THE CASE OF TRANSFERS PURSUANT TO (F) ABOVE, AN OPINION OF
COUNSEL OF RECOGNIZED STANDING IN FORM SATISFACTORY TO THE COMPANY WILL BE
REQUIRED PRIOR TO SUCH OFFER, SALE OR TRANSFER. DELIVERY OF THIS CERTIFICATE MAY
NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON A CANADIAN STOCK
EXCHANGE.” 

	 	A - 1 	CONVERTIBLE DEBENTURE INDENTURE 







CUSIP <> 
ISIN <> 

No. [•] 

NATURALLY ADVANCED TECHNOLOGIES INC. 

(A corporation formed under the laws of British Columbia)


10% CONVERTIBLE SECURED DEBENTURES 

NATURALLY ADVANCED TECHNOLOGIES INC. (the “Corporation”)
  for value received hereby acknowledges itself indebted and, subject to the provisions
  of the Debenture Indenture (the “Indenture”) dated as of September
  20, 2012 between the Corporation and Computershare Trust Company of Canada (the
  “Trustee”), promises to pay to the registered holder hereof
  on September 30, 2017 or on such earlier date as the principal amount hereof
  may become due in accordance with the provisions of the Indenture (any such
  date, the “Maturity Date”) the principal sum of [•
  ] Dollars [$•] in lawful money of Canada on presentation and surrender
  of this Initial Debenture at the main branch of the Trustee in Vancouver, British
  Columbia in accordance with the terms of the Indenture and, subject as hereinafter
  provided, to pay interest on the principal amount hereof from the date hereof,
  or from the last Interest Payment Date to which interest shall have been paid
  or made available for payment hereon, whichever is later, at the rate of 10%
  per annum (based on a 365-day year and the actual number of days elapsed in
  that period), in like money, in arrears in equal (with the exception of the
  first interest payment which will include interest from September 20, 2012 as
  set forth below) semi-annual instalments on March 31 and September 30 in each
  year commencing on March 31, 2013 and the last payment (representing interest payable from the
last Interest Payment Date to, but excluding, the Maturity Date) to fall due on
the Maturity Date and, should the Corporation at any time make default in the
payment of any principal, premium, if any, or interest, to pay interest on the
amount in default at the same rate, in like money and on the same dates. For
certainty, the first interest payment will include interest accrued from
September 20, 2012 to, but excluding March 31, 2013. For the purposes of
disclosure under the Interest Act (Canada), whenever interest is computed under
this Initial Debenture on the basis of a year (the “deemed year”) which
contains fewer days than the actual number of days in the calendar year of
calculation, such rate of interest shall be expressed as a yearly rate by
multiplying such rate of interest by the actual number of days in such calendar
year of calculation and dividing it by the number of days in the deemed year. 

	 	A - 2	CONVERTIBLE DEBENTURE INDENTURE 








This Initial Debenture is one of the 10% Convertible Secured
Debentures (referred to herein as the “Initial Debentures”) of the
Corporation issued or issuable in one or more series under the provisions of the
Indenture. The Initial Debentures authorized for issue immediately are limited
to an aggregate principal amount of $10,000,000 in lawful money of Canada
($11,500,000 if the underwriter’s over-allotment option is exercised in full).
Reference is hereby expressly made to the Indenture for a description of the
terms and conditions upon which the Initial Debentures are or are to be issued
and held and the rights and remedies of the holders of the Initial Debentures
and of the Corporation and of the Trustee, all to the same effect as if the
provisions of the Indenture were herein set forth to all of which provisions the
holder of this Initial Debenture by acceptance hereof assents. 

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

Any part, being $1,000 or an integral multiple thereof, of the
  principal of this Initial Debenture, provided that the principal amount of this
  Initial Debenture is in a denomination in excess of $1,000, is convertible,
  at the option of the holder hereof, upon surrender of this Initial Debenture
  at the principal office of the Trustee in Vancouver, British Columbia, at any
  time prior to the close of business on the Maturity Date or, if this Initial
  Debenture is called for redemption on or prior to such date, then, to the extent
  so called for redemption, up to but not after the close of business on the last
  Business Day immediately preceding the date specified for redemption of this
  Initial Debenture, into Common Shares (without adjustment for interest accrued
  hereon or for dividends or distributions on Common Shares issuable upon conversion)
  at a conversion price of $2.90 (the “Conversion Price”) per
  Common Share, being a rate of approximately 344.8276 Common Shares for each
  $1,000 principal amount of Initial Debentures, all subject to the terms and
  conditions and in the manner set forth in the Indenture. No Initial Debentures
  may be converted during the ten Business Days preceding and including March
  31 and September 30 in each year, commencing March 31, 2013, as the registers
  of the Trustee will be closed during such periods. The Indenture makes provision
  for the adjustment of the Conversion Price in the events therein specified.
  No fractional Common Shares will be issued on any conversion but in lieu thereof,
  the Corporation will satisfy such fractional interest by a cash payment equal
  to the market price of such fractional interest determined in accordance with
  the Indenture. Holders converting Debentures shall receive accrued and unpaid
  interest thereon from the period of the last Interest Payment Date prior to
  the Date of Conversion to the date that is one Business Day prior to the Date
  of Conversion. If a Debenture is surrendered for conversion on an Interest Payment Date or during the five preceding Business Days, the
person or persons entitled to receive Common Shares in respect of the Debentures
so surrendered for conversion shall not become the holder or holders of record
of such Common Shares until the Business Day following such Interest Payment
Date. 

	 	A - 3	CONVERTIBLE DEBENTURE INDENTURE 







This Initial Debenture may be redeemed at the option of the
Corporation on the terms and conditions set out in the Indenture at the
redemption price therein and herein set out provided that this Initial Debenture
is not redeemable before September 30, 2015, except in the event of the
satisfaction of certain conditions after a Change of Control has occurred. On
and after September 30, 2015 and at any time prior to the Maturity Date of the
Initial Debentures, and provided that the Current Market Price of the Common
Shares of the Corporation is at least 125% of the Conversion Price of the
Initial Debentures, the Initial Debentures are redeemable at the option of the
Corporation at a price equal to $1,000 per Initial Debenture plus accrued and
unpaid interest and otherwise on the terms and conditions described in the
Indenture.

Upon the occurrence of a Change of Control of the Corporation,
the Corporation is required to make an offer to purchase all of the Initial
Debentures at a price equal to 100% of the principal amount of such Initial
Debentures plus accrued and unpaid interest (if any) up to, but excluding, the
date the Initial Debentures are so repurchased (the “Change of Control
Purchase Offer”). If 90% or more of the principal amount of all Debentures
outstanding on the date the Corporation provides notice of a Change of Control
to the Trustee have been tendered for purchase pursuant to the Change of Control
Purchase Offer, the Corporation has the right to redeem all the remaining
outstanding Initial Debentures on the same date and at the same price. 

If an offer is made for the Initial Debentures which is a
take-over bid for the Initial Debentures within the meaning of applicable
Canadian securities laws and 90% or more of the principal amount of all the
Initial Debentures (other than Initial Debentures held at the date of the offer
by or on behalf of the Offeror, associates or affiliates of the Offeror or
anyone acting jointly or in concert with the Offeror) are taken up and paid for
by the Offeror, the Offeror will be entitled to acquire the Initial Debentures
of those holders who did not accept the offer on the same terms as the Offeror
acquired the first 90% of the principal amount of the Initial Debentures. 

The indebtedness evidenced by this Initial Debenture, and by
all other Initial Debentures now or hereafter certified and delivered under the
Indenture, is a direct unsecured obligation of the Corporation. Each Debenture
of the same series of Debentures will rank pari passu with each other Debenture
of the same series (regardless of their actual date or terms of issue) and,
subject to statutory preferred exceptions, with all other present and future
indebtedness of the Corporation, other than Senior Indebtedness as set out in
the Indenture.

The indebtedness evidenced by this Initial Debenture, and by
all other Initial Debentures now or hereafter certified and delivered under the
Indenture shall be guaranteed by NAT US with recourse under the guarantee
limited to certain Secured Assets of NAT US as set out in the Indenture. NAT US
shall provide a security interest over the Secured Assets as security for its
guarantee obligations which shall rank in priority to all other indebtedness of
NAT US except statutory preferred exceptions in accordance with the provisions
of the Indenture. 

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

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

	 	A - 4	CONVERTIBLE DEBENTURE INDENTURE 







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

This Debenture and the Common Shares issuable upon conversion
of this Debenture have not been and will not be registered under the United
States Securities Act of 1933, as amended, or under the securities laws of any
state of the United States. Each certificate representing Common Shares issued
to a U.S. Person, a person in the United States, or for the account or benefit
of a U.S. Person or a person in the United States upon conversion of this
Debenture shall bear a U.S. restrictive legend. 

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

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


Capitalized words or expressions used in this Initial Debenture
shall, unless otherwise defined herein, have the meaning ascribed thereto in the
Indenture. 

IN WITNESS WHEREOF NATURALLY ADVANCED TECHNOLOGIES INC.
has caused this Debenture to be signed by its authorized representatives as of
the 20th day of September, 2012. 

NATURALLY ADVANCED TECHNOLOGIES INC.

	 	By: 	  
	 	 	Name: •
	 	 	Title: •




	 	A - 5	CONVERTIBLE DEBENTURE INDENTURE 







(FORM OF TRUSTEE’S CERTIFICATE) 

This Initial Debenture is one of the 10% Convertible Secured
Debentures due September 30, 2017 referred to in the Indenture within mentioned.


COMPUTERSHARE TRUST COMPANY OF CANADA

By:
_______________________________________________
                                   
(Authorized Officer) 


	 	A - 6	CONVERTIBLE DEBENTURE INDENTURE 







(FORM OF REGISTRATION PANEL) 

(No writing hereon except by Trustee or other registrar) 


	Date of Registration 	In Whose Name Registered 	Signature of Trustee or Registrar
  
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 


  



	 	A - 7	CONVERTIBLE DEBENTURE INDENTURE 







FORM OF ASSIGNMENT 

FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto _________________________, whose address and social
insurance number, if applicable, are set forth below, this Initial Debenture (or
$_____________________________ principal amount hereof) of NATURALLY ADVANCED
TECHNOLOGIES INC. standing in the name(s) of the undersigned in the register
maintained by the Corporation with respect to such Initial Debenture and does
hereby irrevocably authorize and direct the Trustee to transfer such Initial
Debenture in such register, with full power of substitution in the premises.


Dated:
________________________________________________________________________


Address of Transferee:
___________________________________________________________
                                                            
(Street Address, City, Province and Postal Code) 

Social Insurance Number of Transferee, if applicable:
__________________________________

*If less than the full principal amount of the within
Initial Debenture is to be transferred, indicate in the space provided the
principal amount (which must be $1,000 or an integral multiple thereof unless
you hold an Initial Debenture in a non-integral multiple of $1,000 by reason of
your having exercised your right to exchange upon the making of a Change of
Control Purchase Offer, in which case such Initial Debenture is transferable
only in its entirety) to be transferred. 

	1. 	
      The signature(s) to this assignment must correspond with
      the name(s) as written upon the face of this Initial Debenture in every
      particular without alteration or any change whatsoever. The signature(s)
      must be guaranteed by a Canadian chartered bank or trust company or by a
      member of an acceptable Medallion Guarantee Program. Notarized or
      witnessed signatures are not acceptable as guaranteed signatures. The
      Guarantor must affix a stamp bearing the actual words: “SIGNATURE
      GUARANTEED”.

	 	 
	2. 	
      The registered holder of this Initial Debenture is
      responsible for the payment of any documentary, stamp or other transfer
      taxes that may be payable in respect of the transfer of this
    Debenture.



In connection with the transfer of this Initial Debenture, the
undersigned confirms that it has not utilized any general solicitation or
general advertising in connection with the transfer and that this Initial
Debenture is being transferred: 

[Check One] 

	(1) 	
      to the Company or a subsidiary thereof; or

	 	 
	(2) 	
      to a “Qualified Institutional Buyer” pursuant to and in
      compliance with Rule 144A under the U.S. Securities Act, as amended (the
      “U.S. Securities Act”) to which notice has been given that this transfer
      is being made in reliance on Rule 144A; or

	 	 
	(3) 	
      pursuant to and in compliance with the exemption from
      registration provided by Rule 144 under the U.S. Securities Act;
  or





	 	A - 8	CONVERTIBLE DEBENTURE INDENTURE 








	(4) 	
      pursuant to a registration statement that has been
      declared effective under the U.S. Securities Act and that continues to be
      effective at the time of transfer;

	 	 
	(5) 	
      outside the United States, in accordance with Rule 904 of
      Regulation S under the U.S. Securities Act; or

	 	 
	(6) 	
      pursuant to another available exemption from registration
      under U.S. Securities Act.



If none of the foregoing boxes is checked, the Trustee shall
not be obligated to register this Initial Debenture in the name of any Person
other than the holder hereof unless and until the conditions to any such
transfer of registration set forth herein and in the Indenture shall have been
satisfied. 

Signature of Guarantor: 

 

	 	 	 
	Authorized Officer 	 	Signature of transferring registered holder
  
	 	 	 
	 	 	 
	 	 	 
	Name of Institution 	 	  


 

	 	A - 9	CONVERTIBLE DEBENTURE INDENTURE 







EXHIBIT “1” 

TO CDS GLOBAL DEBENTURE 

NATURALLY ADVANCED TECHNOLOGIES INC. 

10% CONVERTIBLE SECURED DEBENTURES 

DUE SEPTEMBER 30, 2017 

	Initial Principal Amount: $ [z] 	CUSIP <> 
	  	ISIN <> 
	  	  
	  	  
	Authorization: ________________________________________	  


ADJUSTMENTS


	Date 	Amount of
      Increase 	Amount of
      
Decrease 	New Principal
      
Amount 	Authorization 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 
	 	 	 	 	 



 

	 	A - 10	CONVERTIBLE DEBENTURE INDENTURE 







SCHEDULE B – FORM OF REDEMPTION NOTICE 

NATURALLY ADVANCED TECHNOLOGIES INC. 
10% CONVERTIBLE
SECURED DEBENTURES 
REDEMPTION NOTICE 

	To: 	
      Holders of 10% Convertible Secured Debentures (the
      “Debentures”) of Naturally Advanced Technologies Inc. (the
      “Corporation”) 

	  	
       

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



Notice is hereby given pursuant to Section 4.3 of the
convertible debenture indenture (the “Indenture”) dated as of September
20, 2012 between the Corporation and Computershare Trust Company of Canada (the
“Trustee”), that the aggregate principal amount of [$z] of
the [$z] of Debentures outstanding will be redeemed as of
[z] (the “Redemption Date”), upon payment of a redemption
amount of [$z] for each $1,000 principal amount of Debentures,
being equal to the aggregate of (i) [$z] (the “Redemption
Price”), and (ii) all accrued and unpaid interest hereon to but excluding
the Redemption Date (collectively, the “Total Redemption Price”). 

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

Computershare Trust Company of
Canada 
510 Burrard Street, 2nd Floor 
Vancouver, British Columbia V6C
3B9 

Attention:       
 <> 
Facsimile No:    <> 

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

No fractional Common Shares shall be delivered upon the
exercise by the Corporation of the abovementioned redemption right but, in lieu
thereof, the Corporation shall pay the cash equivalent thereof determined on the
basis of the Current Market Price of Common Shares on the Redemption Date,
provided, however, that the Corporation shall not be required to make any
payment of less than $5.00. 

DATED: _____________________________

NATURALLY ADVANCED TECHNOLOGIES INC. 

 

_____________________________________________________________
(Authorized
Director or Officer of NATURALLY ADVANCED TECHNOLOGIES INC.) 

 

	 	B - 1 	CONVERTIBLE DEBENTURE INDENTURE 







SCHEDULE C – FORM OF NOTICE OF CONVERSION 

CONVERSION NOTICE


	TO: 	NATURALLY ADVANCED TECHNOLOGIES
      INC. 
	 	 
	AND TO: 	COMPUTERSHARE TRUST COMPANY OF
      CANADA 
	 	 
	Note: 	All capitalized terms used herein
      have the meaning ascribed thereto in the Indenture mentioned below, unless
      otherwise indicated. 



The undersigned registered holder of 10% Convertible Secured
Debentures irrevocably elects to convert such Debentures (or $[•] principal
amount thereof`) in accordance with the terms of the Indenture referred to in
such Debentures and tenders herewith the Debentures, and, if applicable, directs
that the Common Shares of NATURALLY ADVANCED TECHNOLOGIES INC. issuable upon a
conversion be issued and delivered to the person indicated below. (If Common
Shares are to be issued in the name of a person other than the holder, all
requisite transfer taxes must be tendered by the undersigned). 

Conversion Price: ____________________________

          The
undersigned hereby acknowledges that the undersigned is aware that the Common
Shares received on conversion may be subject to restrictions on resale under
applicable securities legislation. 

          The
undersigned represents, warrants and certifies as follows (one (only) of the
following must be checked): 

	 	[   ] 	
      (A) the undersigned holder at the time of conversion of
      the Debentures (i) is not in the United States, (ii) is not a U.S. Person,
      (iii) is not converting the Debentures for the account or benefit of a
      U.S. Person or a person in the United States, (iv) did not execute or
      deliver this conversion notice in the United States and (v) delivery of
      the underlying Common Shares will not be to an address in the United
      States; OR 

	 	 	
       

	 	[   ] 	
      (B) if the undersigned holder is (i) a holder in the
      United States, (ii) a U.S. Person, (iii) a person converting for the
      account or benefit of a U.S. Person, (iv) executing or delivering this
      conversion notice in the United States or (v) requesting delivery of the
      underlying Common Shares in the United States, the undersigned holder has
      delivered to the Corporation and the Corporation’s transfer agent (a) a
      completed and executed U.S. Purchaser Letter in substantially the form
      attached to this conversion notice as Annex “I” or (b) an opinion of
      counsel (which will not be sufficient unless it is in form and substance
      reasonably satisfactory to the Corporation) or such other evidence
      reasonably satisfactory to the Corporation to the effect that with respect
      to the Common Shares to be delivered upon conversion of the Debentures,
the issuance of such securities has been registered under the U.S. Securities Act and applicable state securities laws, or an exemption from such registration requirements is available. 



 

	 	C - 1 	CONVERTIBLE DEBENTURE INDENTURE 







          It is
understood that the Corporation and Computershare Trust Company of Canada may
require evidence to verify the foregoing representations. 

Notes:

	 	1) 	
      Certificates will not be registered or delivered to an
      address in the United States unless Box B above is checked. 

	 	  	
       

	 	2) 	
      If Box B above is checked, holders are encouraged to
      consult with the Corporation and the Trustee in advance to determine that
      the legal opinion tendered in connection with the conversion will be
      satisfactory in form and substance to the Corporation and the Trustee.
    



“United States” and “U.S. Person” are as defined in Rule 902 of
Regulation S under the U.S. Securities Act. 

	Date: ___________________________________________	 
	 	(Signature of Registered Holder)



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

	
      NOTE: 
	
      If Common Shares are to be issued in the name of a person
      other than the holder, the signature must be guaranteed by a chartered
      bank, a trust company or by a member of an acceptable Medallion Guarantee
      Program. The Guarantor must affix a stamp bearing the actual words:
      “SIGNATURE GUARANTEED”. 



(Print name in which Common Shares are to be issued,
delivered and registered) 

Name: _______________________________________________

____________________________________________________
(Address)


____________________________________________________
(City,
Province and Postal Code) 

Name of Guarantor: _____________________________________

Authorized Signature: ___________________________________

 

	 	C - 2	CONVERTIBLE DEBENTURE INDENTURE 







Appendix “I” 
to 

SCHEDULE C – FORM OF NOTICE OF CONVERSION 

FORM OF U.S. PURCHASER LETTER UPON CONVERSION OF DEBENTURES


NATURALLY ADVANCED TECHNOLOGIES INC. 

Attention: Chief Executive Officer 

- and to - 

Computershare Trust Company of Canada. 

as Trustee 

Dear Sirs: 

We are delivering this letter in connection with the
acquisition of common shares (the “Common Shares”) of NATURALLY ADVANCED
TECHNOLOGIES INC., a corporation incorporated under the laws of the Province of
British Columbia (the “Corporation”) upon the conversion of debentures of the
Corporation (“Debentures”), issued under the indenture dated as of
______________, 2012 between the Corporation and Computershare Trust Company of
Canada. We hereby confirm that: 

	 	a) 	
      we are acquiring the Common Shares for our own
      account;

	 	 	 
	 	b) 	
      we have such knowledge and experience in financial and
      business matters that we are capable of evaluating the merits and risks of
      acquiring the Common Shares;

	 	 	 
	 	c) 	
      we are not acquiring the Common Shares with a view to
      distribution thereof or with any present intention of offering or selling
      any of the Common Shares, except (A) to the Corporation, (B) outside the
      United States in accordance with Rule 904 under the U.S. Securities Act or
      (C) inside the United States in accordance with Rule 144 under the U.S.
      Securities Act, if applicable, and in compliance with applicable state
      securities laws;

	 	 	 
	 	d) 	
      we acknowledge that we have had access to such financial
      and other information as we deem necessary in connection with our decision
      to convert the Debentures and acquire the Common Shares;

	 	 	 
	 	e) 	
      we acknowledge that we are not acquiring the Common
      Shares as a result of any general solicitation or general advertising,
      including advertisements, articles, notices or other communications
      published in any newspaper, magazine or similar media or broadcast over
      radio, television, or any seminar or meeting whose attendees have been
      invited by general solicitation or general advertising; and

	 	 	 
	 	f) 	
      we are an “accredited investor” satisfying one or more of
      the criteria set forth in Rule 501(a) of Regulation D under the U.S.
      Securities Act, as follows (please write “SUB” on each line that applies to you, and “BP” on each
      line that applies to each beneficial purchaser, if any, on whose behalf
you are acting as a fiduciary or agent): 



 

	 	C - 3	CONVERTIBLE DEBENTURE INDENTURE 








	_________	
      Category 1. A bank, as defined in Section 3(a)(2)
      of the U.S. Securities Act, whether acting in its individual or fiduciary
      capacity; a savings and loan association or other institution as defined
      in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its
      individual or fiduciary capacity; a broker or dealer registered pursuant
      to Section 15 of the United States Securities Exchange Act of 1934; an
      insurance company as defined in Section 2(a)(13) of the U.S. Securities
      Act; an investment company registered under the United States Investment
      Company Act of 1940; a business development company as defined in Section
      2(a)(48) of the United States Investment Company Act of 1940; a small
      business investment company licensed by the U.S. Small Business
      Administration under Section 301 (c) or (d) of the United States Small
      Business Investment Act of 1958; a plan established and maintained by a
      state, its political subdivisions or any agency or instrumentality of a
      state or its political subdivisions, for the benefit of its employees,
      with total assets in excess of U.S. $5,000,000; or an employee benefit
      plan within the meaning of the United States Employee Retirement Income
      Security Act of 1974 in which the investment decision is made by a plan
      fiduciary, as defined in Section 3(21) of such Act, which is either a
      bank, savings and loan association, insurance company or registered
      investment adviser, or an employee benefit plan with total assets in
      excess of U.S. $5,000,000 or, if a self-directed plan, with investment
  decisions made solely by persons who are Accredited Investors; or  

	 	
       

	_________	
      Category 2. A private business development company
      as defined in Section 202(a)(22) of the United States Investment Advisers
      Act of 1940; or 

	 	
       

	_________	
      Category 3. An organization described in Section
      501(c)(3) of the United States Internal Revenue Code, a corporation, a
      Massachusetts or similar business trust, or a partnership, not formed for
      the specific purpose of acquiring the Purchased Securities offered, with
      total assets in excess of U.S. $5,000,000; or 

	 	
       

	 _________	
      Category 4. A director or executive officer of the
      Corporation; or 

	 	
       

	_________	
      Category 5. Any natural person whose individual
      net worth, or joint net worth with that person’s spouse, at the time of
      his or her purchase exceeds US$1,000,000 (for the purposes of calculating
      net worth: (i) the person’s primary residence shall not be included as an
      asset; (ii) indebtedness that is secured by the person’s primary
      residence, up to the estimated fair market value of the primary residence
      at the time of the conversion of the debenture, shall not be included as a
      liability (except that if the amount of such indebtedness outstanding at
      the time of the conversion of the debenture exceeds the amount outstanding
      60 days before such time, other than as a result of the acquisition of the
      primary residence, the amount of such excess shall be included as a
      liability); and (iii) indebtedness that is secured by the person’s primary
      residence in excess of the estimated fair market value of the primary
      residence shall be included as a liability); 

	 	
       

	_________	
      Category 6. A natural person who had an individual
      income in excess of U.S.$200,000 in each of the two most recent years or
      joint income with that person’s spouse in excess of U.S.$300,000 in each
      of those years and has a reasonable expectation of reaching the same
      income level in the current year; or 



 

	 	C - 4	CONVERTIBLE DEBENTURE INDENTURE 








	_________ 	
      Category 7. A trust, with total assets in
      excess of U.S.$5,000,000, not formed for the specific purpose of acquiring
      the Purchased Securities offered, whose purchase is directed by a
      sophisticated person as described in Rule 506(b)(2)(ii) under the U.S.
      Securities Act; or 

	 	
       

	_________	
      Category 8. An entity in which all of the
      equity owners are accredited investors. 



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


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

DATED this ____day of _____, 20__.

X
______________________________________________
Signature of individual
(if purchaser is an individual) 

X
______________________________________________
Authorized signatory (if
purchaser is not an individual) 

______________________________________________
Name
of purchaser (please print) 

______________________________________________
Name
of authorized signatory (please print) 

______________________________________________
Official
capacity of authorized signatory (please print) 

 

	 	C - 5	CONVERTIBLE DEBENTURE INDENTURE 







SCHEDULE D – COMMON SHARE LEGENDS 

THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “U.S.
SECURITIES ACT”), OR ANY U.S. STATE SECURITIES LAWS, AND ACCORDINGLY, THE COMMON
SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED OR SOLD EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF OR A BENEFICIAL
INTEREST HEREIN, THE HOLDER AGREES FOR THE BENEFIT OF THE ISSUER (THE “COMPANY”)
THAT IT WILL NOT OFFER, RESELL, PLEDGE OR OTHERWISE TRANSFER THE COMMON SHARES
REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO THE COMPANY; (B) TO A PERSON WHOM
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (“QIB”) WITHIN
THE MEANING OF RULE 144A UNDER THE U.S. SECURITIES ACT THAT IS PURCHASING FOR
ITS OWN ACCOUNT OR FOR THE ACCOUNT OF ANOTHER QIB AND TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, ALL IN ACCORDANCE WITH
RULE 144A (IF AVAILABLE); (C) UNDER AN EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE; (D) UNDER A REGISTRATION
STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE U.S. SECURITIES ACT; (E)
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE
U.S. SECURITIES ACT OR (F) UNDER ANY OTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE U.S. SECURITIES ACT; PROVIDED THAT IN THE CASE
OF TRANSFERS PURSUANT TO (C) OR (E) ABOVE, AN OPINION OF COUNSEL OF RECOGNIZED
STANDING IN FORM SATISFACTORY TO THE COMPANY MAY BE REQUIRED BY THE COMPANY
PRIOR TO SUCH OFFER, SALE OR TRANSFER; AND IN THE CASE OF TRANSFERS PURSUANT TO
(F) ABOVE, AN OPINION OF COUNSEL OF RECOGNIZED STANDING IN FORM SATISFACTORY TO
THE COMPANY WILL BE REQUIRED PRIOR TO SUCH OFFER, SALE OR TRANSFER. DELIVERY OF
THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF
TRANSACTIONS ON A CANADIAN STOCK EXCHANGE. 

 

	 	D - 1 	CONVERTIBLE DEBENTURE INDENTURE 







SCHEDULE E – FORM OF DECLARATION FOR REMOVAL OF LEGEND


	
      TO: 
	
      Computershare Trust Company of Canada, as trustee and
      registrar of the 10% Convertible Secured Debentures and Common Shares of
      NATURALLY ADVANCED TECHNOLOGIES INC. (the “Corporation”) 

	  	  
	AND TO: 	The Corporation 


The undersigned (a) acknowledges that the sale of the
securities of the Corporation to which this declaration relates is being made in
reliance on Rule 904 of Regulation S (“Regulation S”) under the United
States Securities Act of 1933, as amended (the “U.S. Securities Act”) and
(b) certifies that (1) it is not an affiliate of the Corporation (as defined in
Rule 405 under the U.S. Securities Act), (2) the offer of such securities was
not made to a person in the United States and either (A) at the time the buy
order was originated, the buyer was outside the United States, or the seller and
any person acting on its behalf reasonably believe that the buyer was outside
the United States, or (B) the transaction was executed on or through the
facilities of the TSX Venture Exchange and neither the seller nor any person
acting on its behalf knows that the transaction has been prearranged with a
buyer in the United States, (3) neither the seller nor any affiliate of the
seller nor any person acting on any of their behalf has engaged or will engage
in any “directed selling efforts” (as defined in Regulation 5) in the United
States in connection with the offer and sale of the securities, (4) the sale is
bona fide and not for the purpose of “washing off” the resale restrictions
imposed because the securities are “restricted securities” (as defined in Rule
144(a)(3) under the U.S. Securities Act), (5) the seller does not intend to and
will not replace the securities sold in reliance on Rule 904 of Regulation S
with fungible unrestricted securities and (6) the contemplated sale is not a
transaction, or part of a series of transactions which, although in technical
compliance with Regulation S, is part of a plan or scheme to evade the
registration provisions of the U.S. Securities Act. 

Certificate Number: __________________________________

Number of Debentures: _______________________________

	Dated: _______________________________________________	By:
      ___________________________________________________
	 	 
	 	 
	  	Name:
      _________________________________________________
	 	 
	 	 
	  	Title:
      __________________________________________________


Affirmation by Seller’s Broker-Dealer (required for sales

pursuant to Section (b)(2)(B)above) 

We have read the foregoing representations of our customer,
_____________________________(the “Seller”), dated _______________________, with
regard to our sale, for such Seller’s account, of the securities of the
Corporation referenced above which are represented by certificate number
______________(the “Securities”), and on behalf of ourselves we certify and
affirm that (A) we have no knowledge that the transaction had been prearranged
with a buyer in the United States, (B) the transaction was executed on or
through the facilities of the TSX Venture Exchange, or another designated
offshore securities market, and (C) neither we, nor any person acting on our
behalf, engaged in any directed selling efforts in connection with the offer and
sale of such Securities. Terms used herein have the meanings given to them by
Regulation S. 

 

	 	E - 1 	CONVERTIBLE DEBENTURE INDENTURE 








_________________________________

Name of Firm
By: ______________________________


 

	 	E - 2	CONVERTIBLE DEBENTURE INDENTURE 







SCHEDULE F – SECURED ASSETS 

The following equipment located at NAT US's facility in
Pamplico, South Carolina, U.S.A. or to be acquired using part of the proceeds of
the Offering and installed at NAT US's facility in Pamplico, South Carolina,
U.S.A., having an aggregate acquisition cost of no less than $5,500,000: 

Shive handling system,
including: 
         
Conveyor - Roach Model, Basic System (Handling Solutions) 

Decortication system, including:

          One Decortication
Line for Flax Straw (LaRoche S.A.),
including: 
                   
-Two bale openers – 1.6m
wide 
                   
-Two conveyors with electronic metal
detectors 
                   
-Two fine openers type “EXEL
2000” 
                   
-Two
diverters 
                   
-Two blowers VT
540 
                   
-Two condensers type “FC
1400” 
                   
-Two step cleaners – 2m
wide 
                   
-One blower VT
540 
                   
-One condenser “FC
1400” 
                   
-One Fine opener “EXEL 2000” with chute
feed 
                   
-One blower VT
540 
                   
-One condenser “FC
1400” 
                   
-One step cleaner – 2m
wide 
                   
-One fine opener “EXEL
2000” 
                   
-One double flap
diverter 
                   
-One dust blower VT
540 
                   
-One floor conveyor for collection of
shives 
                   
-Collection of shives under 3 “EXEL 2000” openers with conveyor, blower and
cyclone 
                   
-One electrical control panel 

          One
Opening Line for Flax Fibres (LaRoche S.A.),
including: 
                   
-One bale opener – 1.6m
wide 
                   
-One conveyor with electronic metal
detector 
                   
-One fine opener type “EXEL
2000” 
                   
-One blower VT
540 
                   
-Two
diverters 
                   
-Extension of control panel 

         
Additional Equipment for Decortication Line (LaRoche S.A.),
including: 
                   
-One Blower VT
540 
                   
-One Condenser “FC
1400” 
                   
-One fine opener “EXEL 2000” with chute
feed 
                   
-One Blower VT
540 
                   
-One Condenser “FC 1400” to feed the bale
press 
                   
-Extension of electrical control panel 

 

	 	F - 1 	CONVERTIBLE DEBENTURE INDENTURE 







Harvesting equipment,
including: 
                   
6 - Shelborn Stripper Head (Stuckey Farm
Supply) 
                   
2 - Kuhn Drum Mowers with Hydraulic Cylinders (Adam Coastal
Farm 
                   
2 – Shelbourne 24’ Stripper Head (Sparrow & Kennedy Tractor Company) 

HVAC, Humidifier, Electrical systems and mechanical systems


	 	F - 2	CONVERTIBLE DEBENTURE INDENTURE 







SCHEDULE G – FORM OF NAT US GUARANTY AND SECURITY AGREEMENT


 

Please see attached. 

 

	 	G - 1 	CONVERTIBLE DEBENTURE INDENTURE