Document:

EXHIBIT
4.1 10% Convertible Debenture

POLY-PACIFIC
INTERNATIONAL INC.

 

10%
CONVERTIBLE DEBENTURE

 

SUBSCRIPTION
DOCUMENT

 

(UNSIGNED)

POLY-PACIFIC
INTERNATIONAL INC.

(Incorporated
under the laws of Alberta)

 

	No.____________	
      $_________________

 

10%
CONVERTIBLE DEBENTURE

 

Due
December
15, 2004

 

Poly-Pacific
International Inc. (hereinafter referred to as the “Corporation”) for value
received hereby promises to pay to ___________, the registered holder hereof, on
December 15, 2004, or on such earlier date as the principal amount hereof may
become due in accordance with the provisions of the Indenture hereinafter
mentioned, on presentation and surrender of this Debenture, the sum of
_______________________________________ ($_________________) Dollars in lawful
money of Canada at Edmonton, Alberta and to pay interest on the principal amount
hereof at the rate of 10% per annum from the date hereof, in like money,
calculated and payable after as well as before maturity, default and judgment
(with interest on overdue interest at the said rate) semi-annually on June 15th
and December 15th in each year, the first of such payments to fall due on
December 15, 2003.

 

This
Debenture is one of the 10% Convertible Debenture (herein referred to as the
“Debenture”) in the aggregate principal amount of up to FIVE HUNDRED THOUSAND
($500,000.00) DOLLARS in lawful money of Canada issued under an Indenture
(herein referred to as the “Indenture”) dated as of June 15, 2003, and made
between the Corporation and the Trustee, to which Indenture and all instruments
supplemental thereto or in implementation thereof reference is hereby made for a
description of the rights of the holders of the said Debenture, of the
Corporation and of the Trustee and of the terms and conditions upon which the
Debenture is issued and held, all to the same effect as if the provisions of the
Indenture and such instruments supplemental thereto or in implementation thereof
were herein set forth, to all of which provisions the holder of this Debenture,
by acceptance hereof, assents.

 

The
Debenture is issuable as fully registered Debenture in minimum denominations of
One Thousand ($1,000.00) Dollars. The Debenture of any authorized denomination
may be exchanged, as provided in the Indenture, for Debenture of an equal
aggregate principal amount in any other authorized denomination or
denominations.

 

This
Debenture is convertible, at the option of the holder hereof, upon surrender of
this Debenture at the principal office of the Trustee in the City of Calgary at
any time up to the close of business on December 15, 2004, or on the business
day immediately preceding the date specified for redemption of this Debenture,
whichever is earlier, into fully paid and non-assessable Shares without par
value in the capital of the Corporation, as presently constituted at the
Conversion Price, all subject to the terms and conditions and in the manner set
forth in the Indenture. The Indenture makes provision for the adjustment of the
Conversion Price in the events therein specified.

 

1

 

This
Debenture and all other debentures now or hereafter certified and issued under
the Indenture are secured equally and rateably by the Indenture which
constitutes in favour of the Trustee a security interest in Collateral of the
Corporation as that term is defined in the Indenture in the manner and subject
to the limitations set forth in the Indenture.

 

This
Debenture may be redeemed at the option of the Corporation on the terms and
conditions set out in the Indenture at the redemption prices therein set
out.

 

The
principal hereof is repayable on December 15, 2004, in the manner, with the
effect and at the time set forth in the Indenture.

 

The
Indenture contains provisions for the holding of meetings of Debenture holders
and rendering resolutions passed at such meetings and instruments in writing
signed by the holders of a specified majority of the Debenture outstanding
binding upon all Debenture holders, subject to the provisions of the
Indenture.

 

This
Debenture may only be transferred, upon compliance with the conditions
prescribed in the Indenture, on the register to be kept at the offices of the
Trustee in the City of Calgary and at such other place or places, if any, and/or
by such other registrar or registrars, if any, as the Corporation with the
approval of the Trustee may designate, 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 writing in form and execution
satisfactory to the Trustee, and upon compliance with such reasonable
requirements as the Trustee and/or other registrar may prescribe.

 

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

 

IN
WITNESS WHEREOF Poly-Pacific International Inc. has caused its corporate seal to
be hereunto affixed and this Debenture to be signed by President of the
Corporation this 15 day of June, 2003.

 
	 	
      POLY-PACIFIC
      INTERNATIONAL INC.

	 	 	 
	 	
      per
	 
	 	 	 
	 	
      per
	 
	 	 	 
	 	
      COMPUTERSHARE
      TRUST COMPANY OF CANADA

	 	 	 
	 	
      per
	 
	 	 	 
	 	
      per
	 
	 	 	 

   

2

 

(Form of
Trustee’s Certificate)

 

This
Debenture is one of the 10% Convertible Debenture referred to in the Indenture
within mentioned.

 
	 	
      POLY-PACIFIC
      INTERNATIONAL INC.

	 	 	 
	 	
      per
	 
	 	 	 
	 	
      per
	 
	 	 	 
	 	
      COMPUTERSHARE
      TRUST COMPANY OF CANADA

	 	 	 
	 	
      per
	 
	 	 	 
	 	
      per
	 
	 	 	 

   (Form of
Registration Panel)

 

(No
writing on this panel except

by the
Trustee or other Registrar)

 

 

	
       

      Date
      of Registration
	
       

      In
      Whose Name Registered
	
       

      Signature
      of Trustee or Other Registrar

	
       

       
	 	 
	
       

       
	 	 
	
       

       
	 	 
	
       

       
	 	 

 

3

Transfer
Form

 

FOR VALUE
RECEIVED the undersigned sells, assigns and transfers unto
_____________________________________________________________________ the within
Debenture (which is in the principal amount of not less than $1,000.00) of
Poly-Pacific International Inc. and hereby irrevocably constitutes and appoints
________________________________________________________________________

________________________________________________________________________

Attorney
to transfer the said Debenture on the registers of the 10% Convertible Debenture
due December 15, 2004, of the said Corporation, with full power of substitution
in the premises.

 

	 	 	 
	(Signature of Transferor)	 	(Signature of
Guarantor)

Dated:
________________________

 

Note:

 

	
      1.
	
      THE
      SIGNATURE TO THIS TRANSFER FORM MUST CORRESPOND WITH THE NAME AS RECORDED
      ON THE DEBENTURE IN EVERY PARTICULAR WITHOUT ALTERATION, ENLARGEMENT OR
      CHANGE WHATSOEVER. THE SIGNATURE OF THE PERSON EXECUTING THIS TRANSFER
      MUST BE GUARANTEED BY A SCHEDULE A CANADIAN CHARTERED BANK, CANADIAN TRUST
      COMPANY OR A MEMBER OF A RECOGNIZED MEDALLION GUARANTEE
      PROGRAM*.

 

	
      2.
	
      WHERE
      THIS TRANSFER FORM IS EXECUTED ON BEHALF OF A CORPORATION, PARTNERSHIP OR
      ASSOCIATION, OR BY AN AGENT, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN OR
      ANY PERSON ACTING IN A REPRESENTATIVE CAPACITY, THE TRANSFER FORM MUST BE
      ACCOMPANIED BY SATISFACTORY EVIDENCE OF THE REPRESENTATIVE'S AUTHORITY TO
      ACT.

 

	
      *1.
	
      The
      guarantor must affix a stamp bearing the actual words: "signature
      guaranteed"

	
      2.
	
      Signature
      guarantees are not accepted from treasury branches or credit unions. Only
      Medallion signature guarantees are
acceptable

	
      3.
	
      Signature
      guarantees in the United States are accepted from members of a recognized
      Medallion signature guarantee program only.

 

4

 

Conversion
Form

 

To: POLY-PACIFIC
INTERNATIONAL INC. and COMPUTERSHARE TRUST COMPANY OF CANADA

 

The
undersigned registered holder of the within Debenture hereby irrevocably elects
to convert the said Debenture (or $_______________________ principal amount
thereof) into Shares of Poly-Pacific International Inc. in accordance with the
terms of the Indenture referred to in said Debenture and directs that the Shares
issuable and deliverable upon the conversion be issued and delivered to the
person indicated below.

 

	
      
	
      *
	
      If
      less than the full principal amount of the within Debenture is to be
      converted, indicate in the space provided the principal amount (which must
      be a minimum of $1,000.00) to be converted.

 

	
      Dated
	 	 	 
	 	 	
      (Signature
      of Registered Holder)

	 	 	 
	 	 	 
	
      Name
	 	
      (Signature
      of Registered Holder)

	 	 	 
	 	 	
      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 or by a trust
      company.

	 	 
	
      Address
	 
	 	 
	 	 
	 	 	 
	
      City
      and Province
	 	 
	 	 	 
	 	 	 
	
      Postal
      Code
	 	
      (Signature
      of Guarantor)

	 	 	 
	 	 	 
	
      Fax
      No.
	 	 

(Print name in which Shares issued on conversion are
to be issued, delivered and registered.)

 

 

 

5Unassociated Document

 

 

EXHIBIT
4.2 

 

Trust
Indenture

 

 

POLY-PACIFIC
INTERNATIONAL INC.

TRUST
INDENTURE WITH

COMPUTER
SHARE TRUST COMPANY OF CANADA

 

 

 

 

THIS
INDENTURE made as of the 15th day of
June, 2003.

 

BETWEEN:

 

POLY-PACIFIC
INTERNATIONAL INC., a
corporation incorporated under the laws of the Province of Alberta and having
its registered office in the City of Edmonton, in the Province of Alberta
(hereinafter referred to as the “Corporation”)

OF THE
FIRST PART

 

- and
-

 

COMPUTERSHARE
TRUST COMPANY OF CANADA, a trust
company incorporated under the laws of the Province of Alberta and having an
office in the City of Calgary, in the Province of Alberta (hereinafter referred
to as the “Trustee”)

 

OF THE
SECOND PART

 

TRUST
INDENTURE

 

WITNESSETH
THAT:

 

WHEREAS
the Corporation wishes to raise money for its corporate purposes and with a view
to so doing wishes to create and issue the Debenture, the issuance of which is
provided for by this indenture;

 

AND
WHEREAS all necessary by-laws and resolutions of the directors and shareholders
of the Corporation have been duly enacted, passed or confirmed and other
proceedings taken and conditions complied with to make the creation and issue of
the Debenture proposed to be issued hereunder and this indenture and the
execution thereof legal, valid and binding on the Corporation in accordance with
the laws relating to the Corporation;

 

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

 

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

 

WITNESSETH
THEREFORE THAT:

 

 

 

 

SECTION 1
- INTERPRETATION

 

Definitions

 

1.1     
In
this indenture and in the Debenture, unless there is something in the subject
matter or context inconsistent therewith, the expressions following shall have
the following meanings, namely:

 

		1.1.1	“this
      indenture”, “this trust indenture”, “hereto”, “herein”, “hereby”,
      “hereunder”, “hereof” and similar expressions refer to this indenture and
      not to any particular Section, Section, subsection, clause, subdivision or
      other portion hereof and include any and every instrument supplemental or
      ancillary hereto;

 

		1.1.2	“Audited
      Financial Statements” means the financial statements of the Corporation
      for any relevant fiscal year end as reported upon by the Corporation’s
      Auditors;

 

		1.1.3	“Business
      Day” or “business day” means any day
except:

 

		1.1.3.1	Saturday
      or Sunday;

 

		1.1.3.2	a
      day which is a legal or statutory holiday in the Province of Alberta;
      or

 

		1.1.3.3	a
      day on which banking institutions are not carrying on business in the
      Province of Alberta;

 

1.1.4   
“Closing
Date” means June 15, 2003 or such later date or dates as the Corporation may
decide;

 

1.1.5  
“Common
Shares” means the Common Shares in the capital of the Corporation, as such
shares exist at the close of business on the date of the execution and delivery
of this indenture; provided that in the event of a subdivision, redivision,
reduction, combination or consolidation thereof, then “Common Shares” shall
thereafter mean the shares resulting from such subdivision, redivision,
reduction, combination or consolidation;

 

1.1.6  
“Conversion
Price” means, as the case may, $0.15 per Common Share during the eighteen (18)
month period following the Closing Date or such other dollar amount for which
Common Shares may be issued from time to time upon the conversion of Debenture
in accordance with the provisions of Section 5;

 

 

2.

 

1.1.7  
“Corporation”
means the party of the First Part hereunder and includes any successor
corporation to or of the Corporation which shall have complied with the
provisions of Section 10;

 

1.1.8  
“Corporation’s
Auditors” or “Auditors of the Corporation” means an independent firm of
chartered accountants duly appointed as auditors of the
Corporation;

 

1.1.9  
“Counsel”
means a barrister or solicitor or firm of barristers and/or solicitors retained
or employed by the Trustee or retained or employed by the Corporation and
acceptable to the Trustee;

 

1.1.10  
“Date of
Conversion” has the meaning ascribed thereto in Subsection 4.3
hereof;

 

1.1.11  
“Debentures”
means the debentures of the Corporation issued or to be issued hereunder and for
the time being outstanding;

 

1.1.12  
“Debentureholders”
or “holders” means the several persons for the time being entered in the
registers hereinafter mentioned as holders of Debentures;

 

1.1.13  
“director”
means a director of the Corporation for the time being and “directors” or “board
of directors” means the board of directors of the Corporation or, if duly
constituted and whenever duly empowered, the executive committee of the board of
directors of the Corporation for the time being, and reference to action by the
directors means action by the directors of the Corporation as a board or action
by the said executive committee as such committee;

 

1.1.14  
“Exchange”
means TSX Venture Exchange or any successor exchange;

 

1.1.15  
“extraordinary
resolution” has the meaning ascribed thereto in Subsection 10.12;

 

1.1.16  
“Event of
Default” means any event specified in Subsection 7.1,
continued for the period of time, if any, therein designated;

 

1.1.17  
“Indebtedness”
includes all items of indebtedness (other than liability for deferred taxes or
for unfunded past service pension liabilities) which in accordance with
generally accepted accounting principles would be included in determining total
liabilities as shown on the liability side of a balance sheet as at the date as
of which Indebtedness is to be determined, but in any event including, without
limitation:

 

 

3.

 

		1.1.17.1	obligations
      secured by any mortgage, hypothec, pledge or lien on property owned,
      whether or not the obligations secured thereby shall have been assumed;
      and

 

		1.1.17.2	guarantees,
      endorsements (other than endorsements for collection in the ordinary
      course of business) and any obligations to purchase or otherwise acquire,
      or make payments of principal or interest on, obligations of
    others;

 

1.1.18  
“Officers’
Certificate” means a certificate signed by any one of the Chief Executive
Officer, the President, and any Vice-President, together with the
Secretary;

 

1.1.19  
“person”
means any individual, corporation, company, partnership, association or trust or
unincorporated organization and pronouns have a similar extending
meaning;

 

1.1.20  
“Securities
Laws” means the securities laws, rules, regulations and orders, as amended, from
time to time which are applicable to the Corporation;

 

1.1.21  
“Trustee”
means Computershare Trust Company of Canada or its successor or successors for
the time being as trustee hereunder;

 

1.1.22  
“written
direction of the Corporation” means an instrument in writing signed by any one
of the Chief Executive Officer, the President, and any Vice-President, together
with any one of the other such officers, and the Secretary.

 

Words
importing the singular number only shall include the plural and vice versa and
words importing the masculine gender shall include the feminine gender and words
importing persons shall include firms and corporations and vice
versa.

 

 

4.

 

 

Meaning
of “Outstanding”

 

1.2  Every
Debenture certified and delivered by the Trustee hereunder shall be deemed to be
outstanding until it shall be cancelled or delivered to the Trustee for
cancellation or money for the payment or redemption thereof shall have been set
aside provided that:

 

1.2.1  
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;

 

1.2.2  
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 outstanding pursuant to
Debentures; and

 

1.2.3  
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, Debentures owned directly or indirectly,
legally or equitably by the Corporation shall be disregarded except
that:

 

		1.2.3.1	for
      the purpose of determining whether the Trustee shall be protected in
      relying on any such vote, consent, requisition or other instrument or
      action only the Debentures which the Trustee knows are so owned shall be
      so disregarded; and

 

		1.2.3.2	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 in his discretion free from the control of the
      Corporation.

 

Headings,
Etc.

 

1.3  The
division of this indenture into Sections 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.

 

 

5.

 

 

Applicable
Law

 

1.4  This
indenture and the Debentures shall be construed in accordance with the laws of
the Province of Alberta and shall be treated in all respects as Alberta
contracts.

 

Day
Not a Business Day

 

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

 

Currency

 

1.6  All
reference to currency herein and in the Debentures shall be to lawful money of
Canada, unless otherwise expressed.

 

SECTION
2 -
THE DEBENTURES

 

Terms
of the Debentures

 

2.1  The
aggregate principal amount of Debentures authorized to be issued under this
indenture shall consist of and be limited to a maximum of FIVE HUNDRED THOUSAND
($500,000.00) DOLLARS in lawful money of Canada.

 

The
Debentures shall be designated as “10% Convertible Debentures”, shall be dated
as of the date of issue and shall mature on the 15th day of
December, 2003, and shall bear interest (subject to the provisions of Subsection
2.6) from
the date of issue, at the rate of ten (10%) per cent per annum, payable after as
well as before maturity and after as well as before default and after judgment,
with interest on amounts in default at the same rate, payable semi-annually on
June 15th and
December 15th in each
year commencing on December 15th,
2003.

 

The
principal of the Debentures, and any interest thereon, shall be repayable in
full on the 15th day of
December, 2004.

 

The
principal of the Debentures and interest thereon shall be payable in lawful
money of Canada at Calgary, Alberta through the principal office of the
Trustee.

 

6.

 

Form
and Signature of Debentures

 

2.2  The
Debentures shall be issued only as fully registered Debentures in a minimum
denomination of ONE THOUSAND ($1,000.00) DOLLARS.

 

The
Debentures and the certificate of the Trustee endorsed thereon shall be
substantially in the form set forth in the Schedules hereto. The Debentures
shall bear such distinguishing letters and numbers as the Trustee may
approve.

 

The
Debentures may be engraved, printed or lithographed, or partly in one form and
partly in another, as the Corporation may determine.

 

The
Debentures shall be under the seal of the Corporation (or a reproduction thereof
which shall be deemed to be the seal of the Corporation) and shall be signed
(either manually or by facsimile signature) by the President or the Secretary of
the Corporation. A facsimile signature upon any of the Debentures shall for all
purposes of this indenture be deemed to be the signature of the person whose
signature it purports to be and to have been signed at the time such facsimile
signature is reproduced and, notwithstanding that any person whose signature,
either manual or in facsimile, may appear on the Debentures is not, at the date
of this indenture or at the date of the Debentures or at the date of the
certifying and delivery thereof, the President or Secretary, of the Corporation,
as the case may be, any such Debentures shall be valid and binding upon the
Corporation and the holder thereof shall be entitled to the benefits of this
indenture.

 

Issue
of Debentures

 

2.3  Debentures
in the aggregate principal amount of up to FIVE HUNDRED THOUSAND ($500,000.00)
DOLLARS in lawful money of Canada shall be executed by the Corporation and,
forthwith after such execution, shall be delivered to the Trustee. Upon receipt
by the Trustee of (a) an opinion of Counsel that all legal requirements in
respect of the issue of the Debentures have been met and (b) a certificate of
the Corporation stating that all conditions in this indenture for the issue,
certification and delivery of the Debentures have been complied with, the
Trustee will certify the Debentures and, upon the written order of the
Corporation, will deliver the Debentures to or to the order of the Corporation
without receiving any additional consideration therefore.

 

Certification

 

2.4  No
Debenture shall be issued or, if issued, shall be obligatory or shall entitle
the holder to the benefits of this indenture until it has been certified by or
on behalf of the Trustee substantially in the form set out in the Schedule
hereto or in some other form approved by the Trustee. Such certificate on any
Debenture shall be conclusive evidence that such Debenture is duly issued and is
a valid obligation of the Corporation. The certificate of the Trustee signed on
the Debentures hereinafter mentioned shall not be construed as a representation
or warranty by the Trustee as to the validity of the 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 signed 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.

 

 

7.

 

 

Debentures
to Rank Pari Passu

 

2.5  The
Debentures may be issued in such amounts, to such persons, on such terms not
inconsistent with the provisions of this indenture, and either at par or at a
discount or at a premium as the directors may determine. Each Debenture as soon
as issued shall, subject to the terms hereof, be equally and proportionately
entitled to the benefits hereof, as if all of the Debentures had been issued
simultaneously.

 

Commencement
of Interest

 

2.6  All
Debentures issued hereunder, whether issued originally or in exchange for other
Debentures, shall bear interest from their date of issue or from the last
interest payment date on which interest shall have been paid or made available
for payment on the outstanding Debentures, whichever shall be the
later. Interest
on each Debenture will cease to accrue from the maturity date of such Debenture
unless upon due presentation thereof, payment of the principal is improperly
withheld or refused.

 

Registration
of Debentures

 

2.7  The
Corporation shall, at all times while any Debentures are outstanding, cause to
be kept by and at the principal office of the Trustee in the City of Calgary and
in such other place or places and by the Trustee or by such other registrar or
registrars, if any, as the Corporation with the approval of the Trustee may
designate, a register in which shall be entered the names and addresses of the
holders of Debentures and particulars of the Debentures held by them
respectively and of all transfers of Debentures. Transfers of Debentures, if
any, shall be conducted in accordance with all applicable Securities Laws,
including any resale restrictions and no transfer shall be valid unless made by
the holder or his executors or administrators or other legal representatives or
his or their attorney duly appointed by an instrument in writing in form and
execution satisfactory to the Trustee, upon compliance with such requirements as
the Trustee and/or other registrar may prescribe, unless approved by the
directors of the Corporation and unless such transfer shall have been duly
entered on the appropriate register and/or noted on such Debenture by the
Trustee or other registrar.

 

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

 

 

8.

 

The
holder of a Debenture may at any time and from time to time have such Debenture
transferred at any of the places at which a register is kept pursuant to the
provisions of this Section, in accordance with such reasonable regulations as
the Trustee may prescribe and all applicable Securities Laws.

 

Neither
the Corporation nor the Trustee nor any registrar shall be
required:

 

		2.7.1	to
      transfer or exchange any Debentures on any interest payment date or during
      a period of fifteen (15) business days immediately preceding any such
      date;

 

		2.7.2	to
      transfer or exchange any Debentures on the day of any selection by the
      Trustee of any Debentures to be redeemed or purchased or during a period
      of fifteen (15) business days immediately preceding any such date or
      thereafter until after the mailing of any notice of redemption or
      purchase;

 

		2.7.3	to
      transfer or exchange any Debenture selected or called for redemption in
      whole or in part unless upon due presentation thereof such Debenture or
      part thereof called for redemption shall not be redeemed;
or

 

		2.7.4	to
      transfer any Debentures which bear a legend to the effect that the
      Debentures are non-transferable and/or are subject to a hold period that
      has not yet expired.

 

The
Trustee and/or any registrar for any of the Debentures and/or the Corporation
shall not be charged with notice of or be bound to see to the execution of any
trust, whether expressed, implied or constructive, in respect of any Debenture
and may transfer any Debenture on the direction of the holder thereof, whether
named as trustee or otherwise, as though that person were the beneficial owner
thereof.

 

Except in
the case of the register required to be kept at the City of Calgary, the
Corporation shall have the power at any time to close any register upon which
the registration of any Debenture appears and in that event it shall transfer
the records thereof to another existing register or to a new register and
thereafter such Debentures shall be deemed to be registered on such existing or
new register, as the case may be.

 

Every
registrar shall, when requested so to do by the Corporation or the Trustee,
furnish the Corporation or the Trustee, as the case may be, with a list of names
and addresses of the holders of Debentures showing the principal amounts of such
Debentures held by each holder.

 

 

9.

 

Persons
Entitled to Payment

 

2.8         
The
person in whose name any Debenture shall be registered shall be deemed and
regarded as the owner thereof for all purposes of this indenture and payment of
or on account of the principal on such Debenture shall be made only to or upon
the order in writing of such holder thereof and such payment shall be a good and
sufficient discharge to the Trustee and any registrar and to the Corporation and
any paying agent for the amounts so paid. As interest on Debentures accrues
(except interest payable at maturity or on redemption which may be paid upon
presentation and surrender of such Debentures for payment), the Corporation
either directly through the Trustee or an agent of the Trustee, at least three
days prior to each date on which interest on such Debentures becomes due, shall
forward or cause to be forwarded by prepaid post, to the holder for the time
being, at his address appearing on the register hereinbefore mentioned, or in
the case of joint holders, to the one whose name appears first on such register,
a cheque for such interest (less any tax required by law to be deducted) payable
to the order of such holder or holders and negotiable at par at each of the
places at which interest upon such Debentures is expressed to be payable. The
forwarding of such cheque shall satisfy and discharge the liability for the
interest on such Debentures to the extent of the sum or sums represented thereby
(plus the amount of any tax deducted as aforesaid) unless such cheque be not
paid on presentation; provided that in the event of the non-receipt of such
cheque by the holder, or the loss or destruction thereof, the Corporation, upon
being furnished with reasonable evidence of such non-receipt, loss or
destruction and indemnity reasonably satisfactory to it, shall issue to such
holder a replacement cheque.

 

The
holder for the time being of any Debenture shall be entitled to the principal
monies and interest evidenced by such Debenture, free from all equities or
rights of set-off or counterclaim between the Corporation and the original or
any intermediate holder thereof, and all persons may act accordingly and a
transferee of a Debenture shall, after an appropriate form of transfer is lodged
with the Trustee or other registrar and upon compliance with all other
conditions in that behalf required by this indenture or by any conditions
contained in such Debenture or by law, including Securities Laws, be entitled to
be entered on any of the appropriate registers as the owner of such Debenture
free from all equities or rights of set-off or counterclaim between the
Corporation and his transferor or any previous holder thereof, 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.

 

Delivery
to the Corporation by a Debentureholder of a Debenture or the receipt of such
holder for the principal monies and interest evidenced by such Debenture,
respectively, shall be a good and sufficient discharge to the Corporation, which
shall not be bound to enquire into the title of such holder, save as ordered by
a court of competent jurisdiction or as required by statute. Neither the
Corporation, the Trustee nor any registrar shall be bound to see to the
execution of any trust affecting the ownership of any Debenture nor be affected
by notice of any equity that may be subsisting in respect thereof.

 

 

10.

 

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

 

In the
case of the death of one or more joint holders, the principal monies of and
interest on any Debentures may be paid to the survivor or survivors of such
registered holders whose receipt thereof shall constitute a valid discharge to
the Trustee and any registrar and to the Corporation and any paying
agent.

 

Mutilation,
Loss, Theft or Destruction

 

2.9   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 or
cancel-lation 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 equally with all other Debentures
issued or to be issued hereunder without preference or priority one over
another. In the case of loss, theft or destruction, the applicant for a
substituted Debenture shall furnish to the Corporation and to the Trustee such
evidence of such loss, theft or destruction as shall be satisfactory to them in
their discretion and shall also furnish an indemnity satisfactory to them in
their discretion. The applicant shall pay all reasonable expenses incidental to
the issuance of any substituted Debenture.

 

Trustee
Not Bound to Make Enquiries

 

2.10  The
Trustee, prior to the certification and delivery of any Debentures under any of
the provisions of this Section, shall not be bound to make any enquiry or
investigation as to the correctness of the matters set out in any of the
resolutions, opinions, certificates or other documents required by the
provisions of this indenture, but shall be entitled to accept and to act upon
the said resolutions, opinions, certificates and other documents. The Trustee
may nevertheless, in its discretion, require further proof in cases where it
deems further proof is desirable.

 

SECTION
3
-
REDEMPTION AND CANCELLATION OF DEBENTURES

 

Redemption
of Debentures

 

3.1   Subject
to the provisions of Subsection 3.2, the
Debentures shall be redeemable, without penalty or bonus, prior to maturity, in
whole or in part at the option of the Corporation if the twenty (20) day average
trading price of the Corporation's Common Shares on the Exchange is equal to or
greater than 200% of the Conversion Price (in the manner hereinafter provided
and in accordance with and subject to the provisions hereinafter set forth) at
prices equal to the principal amount thereof to be redeemed, together with
accrued and unpaid interest on the principal amount of the Debentures, or part
thereof, so redeemed to the date fixed for redemption (the applicable price,
including accrued and unpaid interest, at which Debentures may be redeemed being
hereinafter referred to as the “redemption price”). 

 

 

11.

 

Partial
Redemption of Debentures

 

3.2   In case
less than all the Debentures are to be redeemed, the Corporation shall in each
such case, at least thirty (30) days before the date upon which the notice of
redemption is to be given, notify the Trustee by written direction of the
Corporation of its intention to redeem Debentures and of the aggregate principal
amount of Debentures so to be redeemed. The Debentures so to be redeemed shall
be selected by lot by the Trustee or on a pro-rata basis or in such other manner
as the Trustee may deem equitable. For this purpose, the Trustee may make, and
from time to time amend, regulations with regard to the manner in which such
Debentures may be so selected and regulations so made shall be valid and binding
upon all holders of Debentures notwithstanding the fact that, as a result
thereof, one or more of such Debentures become subject to redemption in part
only.

 

Debentures
in denominations in excess of $1,000.00 may be selected and called for
redemption in part only (such part being $1,000.00 on an integral multiple
thereof) and unless the context otherwise requires, references to Debentures in
this Section 3 shall be deemed to include any such part of the principal amount
of Debentures which shall have been so selected and called for redemption. The
holder of any Debenture called for redemption in part only, upon surrender of
such Debenture for payment, shall be entitled to receive, without expense to
such holder, one or more new Debentures for the unredeemed part of the Debenture
so surrendered, and the Corporation shall execute and the Trustee shall certify
and deliver, at the expense of the Corporation, such new Debenture or Debentures
upon receipt from the paying agent of the Debenture so surrendered.

 

Notice
of Redemption

 

3.3   Notice of
intention to redeem any Debentures shall be given by or on behalf of the
Corporation to the holders of the Debentures which are to be redeemed, not less
than thirty (30) days prior to the date fixed for redemption, in the manner
provided in Subsection 11.2. The
notice of redemption shall, unless all of the Debentures then outstanding are to
be redeemed and, in case a Debenture is to be redeemed in part only, shall
specify that part of the principal amount thereof so to be redeemed, and shall
specify the redemption date, the redemption price and place(s) of payment and
shall state that all interest thereon shall cease from and after such redemption
date. The holders of the Debentures shall be entitled to exercise the conversion
right pursuant to Subsection 4.1 to the
extent of the redemption monies.

 

 

12.

 

Debentures
Due on Redemption Dates

 

3.4   Upon
notice having been given as aforesaid, all the Debentures so called for
redemption and which are not converted shall thereupon be and become due and
payable at the redemption price, 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 hereinafter
provided and affidavits or other proof satisfactory to the Trustee as to the
mailing of such notices shall have been lodged with it, such Debentures shall
not be considered as outstanding hereunder and interest upon such Debentures
shall cease to accrue after said date.

 

In case
any question shall arise as to whether any notice has been given as above
provided and any such deposit made, such question shall be decided by the
Trustee whose decision shall be final and binding upon all interested
parties.

 

Deposit
of Redemption Monies

 

3.5   Upon
Debentures having been called for redemption as hereinbefore provided, the
Corporation shall deposit with the Trustee or any paying agent to the order of
the Trustee, on or before the redemption date fixed in the notice of the
redemption thereof, such sums as may be sufficient to pay the redemption price
of the Debentures so to be redeemed, together with the estimated charges and
expenses to be incurred in connection with such redemption. 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 and interest to which they are respectively entitled on
redemption.

 

Failure
to Surrender Debentures Called for Redemption

 

3.6   In case
the holder of any such Debentures so called for redemption shall within thirty
(30) days from the date fixed for redemption fail so to surrender any of his
Debentures or shall not within such time accept payment of the redemption monies
payable in respect thereof or give such receipt therefor, if any, as the Trustee
may require, such redemption monies shall be set aside in trust for such holder,
at such rate of interest as the depositary may allow, either in the deposit
department of the Trustee or in a chartered bank in Canada 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 such Debentures shall thereafter not be
considered as outstanding hereunder and the Debentureholder shall have no right
except to receive payment out of the monies so paid and deposited upon surrender
and delivery up of his Debenture or Debentures of the redemption price of such
Debenture or Debentures, plus such interest thereof, if any, as the depositary
may allow.

 

 

13.

 

Cancellation
and Destruction of Debentures

 

3.7   All
Debentures so redeemed under this Section and all Debentures purchased by the
Corporation under this Section shall forthwith be delivered to the Trustee and
shall be cancelled by it and no Debentures shall be issued in substitution
therefor.

 

All
matured Debentures of which the Corporation may be able to regain possession
shall likewise be delivered to the Trustee and cancelled by it and no Debentures
shall be issued in substitution therefor.

 

Surrender
of Debentures for Cancellation

 

3.8   If the
principal monies due upon any Debenture issued hereunder shall become payable by
redemption or otherwise before the date of maturity thereof, the person
presenting such Debenture for payment must surrender the same for cancellation,
the Corporation nevertheless paying or causing to be paid the interest accrued
and unpaid thereon (computed on a per diem basis if the date fixed for payment
is not an interest due date).

 

SECTION
4
 -
CONVERSION OF DEBENTURES

 

Conversion
Privilege and Conversion Price

 

4.1   Upon and
subject to the provisions and conditions of this Section, the holder of each
Debenture shall have the right, at his option, at any time prior to the close of
business on the earlier of December 15th, 2004,
or, if such Debenture be previously called for redemption, the business day
immediately preceding the date fixed for redemption of such Debenture (such time
and date in this Section being referred to as the “Time of Expiry”), to convert
the whole or, in the case of a Debenture of a denomination in excess of One
Thousand ($1,000.00) Dollars any part which is a minimum of One Thousand
($1,000.00) Dollars, of the principal amount of such Debenture plus accrued and
unpaid interest thereon into Common Shares of the Corporation at the Conversion
Price in effect on the Date of Conversion.

 

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 plus accrued and unpaid interest thereon at any one
time by the holder thereof may be converted in accordance with the foregoing
provisions of this Section. Fractional interests in Common Shares shall be
adjusted for in the manner provided in Subsection 4.5.

 

The
Conversion Price shall be subject to adjustment as provided for in Subsection
4.4
hereof.

 

 

14.

 

“Close of
business” as used in this Section shall mean the normal closing hour of the
office of the Trustee.

 

Revival
of Right to Convert

 

4.2   If
payment of the redemption price or the purchase price of any Debenture which has
been called for redemption or 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,
the right to convert such Debenture shall revive and continue as if such
Debenture had not been called for redemption or tendered in acceptance of the
Corporation’s offer, respectively.

 

Manner
of Exercise of Right to Convert

 

4.3   The
holder of a Debenture desiring to convert such Debenture in whole or in part
into Common Shares shall prior to the Time of Expiry, surrender such Debenture
to the Trustee at its principal office in the City of Calgary, together with the
written notice, substantially in the form of the Schedule attached hereto (the
“Conversion Notice”) or any other written notice in a form satisfactory to the
Trustee, in either case duly executed by the holder or his executors,
administrators, successors, other legal representatives or his or their attorney
duly appointed by an instrument in writing and executed in a manner satisfactory
to the Trustee, exercising his right to convert such Debenture in accordance
with the provisions of this Section. Thereupon such Debentureholder shall be
entitled to be entered in the books of the Corporation as at the Date of
Conversion as the holder of the number of Common Shares into which such
Debenture is convertible in accordance with the provisions of this Section and,
as soon as practicable thereafter, the Corporation shall deliver to such
Debentureholder a certificate or certificates for such Common
Shares.

 

For the
purposes of this Section 4, a Debenture shall be deemed to be surrendered for
conversion on the date (herein called “Date of Conversion”) on which it is so
surrendered in accordance with the provisions of this Section 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; provided that if a Debenture is
surrendered for conversion on a day on which the register of Common Shares 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.

 

Any part,
being a minimum of One Thousand ($1,000.00) Dollars, of a Debenture of a
denomination in excess of One Thousand ($1,000.00) Dollars may be converted as
provided in this Section and all references in this indenture to conversion of
Debentures shall be deemed to include conversion of such portions.

 

 

15.

 

The
holder of any Debenture of which part only is converted shall, upon the exercise
of his right of conversion, surrender the said Debenture to the Trustee, 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.

 

Upon the
surrender of a Debenture for conversion in accordance with this Section, the
holder shall be entitled to receive accrued and unpaid interest in respect of
the principal amount of the Debenture so converted up to the Date of Conversion
of the Debenture and the Common Shares issued upon such conversion shall rank
only in respect of dividends declared in favour of shareholders of record on and
after the Date of Conversion or such later date as such holder shall become the
holder of record of such Common Shares pursuant to this Subsection 4.3, 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.

 

Adjustment
of Conversion Price

 

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

 

		4.4.1	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 Common Shares, (ii) reduce, combine or consolidate the
      outstanding Common Shares into a lesser number of Common Shares, or (iii)
      issue Common Shares, or securities convertible into or exchangeable into
      Common Shares of the Corporation to the holders of all or substantially
      all of the outstanding Common Shares by way of a stock dividend other than
      a dividend paid in the ordinary course, the Conversion Price in effect on
      the effective date of such subdivision, redivision, reduction, combination
      or consolidation or on the record date for such issue of Common Shares by
      way of a stock dividend, as the case may be, shall in the case of events
      referred to in clauses (i) and (iii) above be decreased in proportion to
      the number of outstanding Common Shares resulting from such subdivision,
      redivision or dividend, (including, in the case where securities
      convertible into or exchangeable for Common Shares are issued, the number
      of Common Shares that would have been outstanding had such securities been
      converted into or exchanged for Common Shares on such effective date) or
      shall, in the case of events referred to in clause (ii) above, be
      increased in proportion to the number of outstanding Common Shares
      resulting from such reduction, combination or consolidation, in each such
      case so that upon a subsequent conversion of the principal amount of any
      Debenture in accordance with the terms hereof the holder shall receive the
      same number of Common Shares that it would have owned immediately
      following such event if it had converted such principal amount of the
      Debenture immediately prior to such event. The proportion shall be
      determined by multiplying the Conversion Price times a fraction the
      numerator of which shall be the total number of Common Shares outstanding
      immediately prior to the event referred to in clauses (i), (ii) and (iii)
      above and the denominator of which shall be the total number of Common
      Shares outstanding immediately after the date of such events. Such
      adjustment shall be made successively whenever any event referred to in
      this Subsection 4.4
      shall occur. Any issue of Common Shares (or securities convertible into or
      exchangeable for Common Shares) by way of a stock dividend shall be deemed
      to have been made on the record date for the stock dividend for the
      purpose of calculating the number of outstanding Common Shares for the
      purposes of this Section; to the extent that any such securities
      convertible into or exchangeable for Common Shares are not converted into
      or exchanged for Common Shares prior to the expiration of a conversion or
      exchange right, the Conversion Price shall be readjusted effective as at
      the date of such expiration to the Conversion Price which would then be in
      effect based upon the number of Common Shares actually issued on the
      exercise of such conversion or exchange
right;

 

 

16.

 

 

		4.4.2	in
      the case of any reclassification of, or other change in, the outstanding
      Common Shares of the Corporation other than a subdivision, redivision,
      reduction, combination or consolidation, the Conversion Price shall be
      adjusted in such manner as the board of directors, with the approval of
      the Trustee, determines to be appropriate on a basis consistent with this
      Subsection 5.4;

 

		4.4.3	in
      any case in which this Subsection 5.4 shall require that an adjustment
      shall become effective immediately after a record date for an event or
      until the time that particulars of any possible re-adjustment of the
      Conversion Price are determinable hereunder, the Corporation may defer,
      until the occurrence of such event or determination, issuing to the holder
      of any Debenture, in the case of a conversion of the principal amount of
      the Debenture (or a portion thereof) after such record date or effective
      date and before the occurrence of such event or time at which a possible
      readjustment of the Conversion Price is determinable, 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
      or the final determination of any possible readjustment to the Conversion
      Price being made and the right to receive any distributions made on such
      additional Common Shares to which the Debentureholder is ultimately
      determined to be entitled to 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 provision of this paragraph 4.4.3,
      have become the holder of record of such additional Common
    Shares;

 

 

17.

 

 

		4.4.4	the
      adjustments provided for in this Subsection 5.4 are cumulative and shall
      apply to successive subdivisions, redivisions, reductions, combinations,
      consolidations, distributions, issues or other events resulting in any
      adjustment of the Conversion Price under the provisions of this Section.
      No adjustment of the Conversion Price shall be required unless such
      adjustment would require an increase or decrease of at least one (1%) per
      cent in the Conversion Price then in effect; provided, however, that any
      adjustments which by reason of this paragraph 4.4.4
      are not required to be made shall be carried forward and taken into
      account in any subsequent adjustment;

 

		4.4.5	in
      the event of any question arising with respect to the adjustments provided
      in this Subsection 5.4, such question shall be conclusively determined by
      a firm of 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;

 

		4.4.6	if
      and whenever at any time prior to the Time of Expiry reclassification of
      the Common Shares, reorganization, consolidation, merger, arrangement or
      amalgamation of the Corporation with or into any other body corporate,
      trust, partnership or other entity or person or a sale or conveyance
      whereby all or substantially all of the Corporation's undertaking and
      assets would become the property of any body corporate, trust, partnership
      or other entity or person, the holders of Debentures, if they have not
      exercised their right of conversion under Subsection 4.1
      prior to the effective date of such reclassification, reorganization,
      consolidation, merger, arrangement, amalgamation or sale shall, upon any
      such conversion at any time thereafter, be entitled to receive and shall
      accept, in lieu of the number of Common Shares to which they were
      theretofore entitled upon conversion, the aggregate number of Common
      Shares or other securities or property of the Corporation or other body
      corporate, trust, partnership or other entity or person resulting from the
      reclassification, reorganization, consolidation, merger, arrangement or
      amalgamation or to which such sale may be made, as the case may be, that
      the holder would have been entitled to receive as a result of such
      reclassification, reorganization, consolidation, merger, arrangement,
      amalgamation or sale if, on the record date or effective date thereof, as
      the case may be, the holder had been the registered holder of the number
      of Common Shares to which it was theretofore entitled upon
      conversion.

 

 

18.

 

No
Requirement to Issue Fractional Common Shares

 

4.5   The
Corporation shall not be required to issue fractional Common Shares upon the
conversion of Debentures pursuant to this Section 4. If any fractional interest
in a Common Share would, except for the provisions of this Section, be
deliverable upon the conversion of all or any principal amount of any Debenture,
the Corporation shall, in lieu of delivering any certificate or certificates of
such fractional interest, satisfy such fractional interest by paying to the
holder an amount in lawful money of Canada equal (computed to the nearest cent)
to the appropriate fraction of the value, being the last reported sale price or,
if none, the mean between the closing bid and ask quotations on the Exchange or
if the Common Shares are not then listed on the Exchange, on such stock exchange
on which the Common Shares are listed as may be selected for such purpose by the
directors or, if the Common Shares are not listed on any stock exchange, the
current market price of a Common Share on the business day next preceding the
Date of Conversion.

 

Corporation
to Reserve Shares

 

4.6   The
Corporation covenants with the Trustee that it will at all times reserve and
keep available out of its authorized Common Shares, solely for the purpose of
issue upon conversion of Debentures as in this Section provided, such number of
Common Shares as shall then be issuable upon the full 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.

 

Cancellation
of Converted Debentures

 

4.7   All
Debentures converted in whole or in part pursuant to the provisions of this
Section shall be forthwith delivered to and cancelled by the Trustee and,
subject to the provisions of Subsection 5.3, no Debenture shall be issued in
substitution therefor.

 

 

19.

 

 

Certificate
as to Adjustment

 

4.8   The
Corporation shall from time to time immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in Subsection
5.4, 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
chartered accountants appointed by the Corporation and acceptable to the Trustee
(who may be the Auditors of the Corporation) and, when approved by the Trustee,
shall be conclusive and binding on all interested parties. 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 Subsection 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 Subsection 5.9 covering all the relevant facts in respect of such event
and if the Trustee approves, no such notice need be given under this Subsection
5.8.

 

Notice
of Special Matters

 

4.9   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, of its intention to fix a record date for any
event referred to in Subsection 5.4 (other than the subdivision 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; and, if
prepared or available as at the date that such notice is required to be given
pursuant to this Subsection 4.9, such
shall be accompanied by the material (i.e. proxy circular, information booklets
etc.) sent to the holders of Common Shares in respect of the event in question;
provided that the Corporation shall only be required to specify in such notice
such particulars of such event as shall have been fixed and determined on the
date on which such notice is given. Such notice shall be given not less than
fourteen (14) days in each case prior to such applicable record
date.

 

Notice
of Rights Issue

 

4.10        
If and
whenever at any time prior to the Time of Expiry the Corporation proposes to
issue subscription warrants or other rights to the holders of its Common Shares
generally to purchase shares or other securities of the Corporation, the
Corporation shall so notify each holder of a Debenture at least fourteen (14)
days prior to the date fixed by the Corporation as the record date in connection
with the issue of such subscription warrants or other rights to purchase shares
or securities.

 

 

20.

 

 

Protection
of Trustee

 

4.11  Subject
to Subsection 13.3, the Trustee:

 

		4.11.1	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; 

 

		4.11.2	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

 

		4.11.3	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
      Section. 

 

SECTION 
5 
- REPRESENTATIONS AND WARRANTIES OF THE CORPORATION

 

For
Benefit of Debentureholders and Trustee

 

5.1         
The
Corporation acknowledges and confirms that the Debentureholders are relying upon
the representations and warranties of the Corporation in connection with the
purchase of Debentures and the conversion rights for the Common Shares herein
provided and the Corporation acknowledges and confirms that the Trustee is
relying upon the representations and warranties of the Corporation in connection
with the Trustee acting as trustee pursuant to this indenture, and the
Corporation represents and warrants to the Debentureholders and the Trustee the
following:

 

		5.1.1	the
      Corporation is duly incorporated, properly organized, validly subsisting,
      in good standing and qualified to carry on business under the laws of the
      Province of Alberta as of the date hereof;

 

		5.1.2	the
      Corporation has all requisite corporate power and capacity to carry on its
      business as such business is now being conducted and as such business is
      presently proposed to be conducted;

 

		5.1.3	upon
      full conversion of all outstanding Debentures and the issuance of the
      Common Shares, the Common Shares shall be fully paid and non-assessable
      and each Debentureholder, as the case may be, shall be the legal and
      registered owner of the number of Common Shares as each such
      Debentureholder is entitled to pursuant to his/her respective Debenture
      with good and marketable title thereto free and clear of all mortgages,
      liens, charges, security interests, adverse claims, pledges and demands
      whatsoever arising by reason of any act or omission of the
      Corporation;

 

 

21.

 

		5.1.4	this
      Debenture constitutes a valid and binding obligation of the Corporation
      and all transactions contemplated herein will not violate the provisions
      of the Articles of Incorporation of the Corporation or of any agreement to
      which the Corporation may be a party or may be
bound;

 

		5.1.5	all
      securities issued by the Corporation to date and the issuance of the
      Common Shares have been and will be issued in full compliance with all
      applicable corporate and securities legislation and policies with respect
      thereto;

 

		5.1.6	all
      necessary corporate action has been taken by the Corporation to grant
      Debentures, and to issue Common Shares;

 

		5.1.7	the
      form of definitive certificates representing the Debentures and the Common
      Shares have been approved and adopted by the directors of the Corporation
      and conform to the requirements of applicable
law.

 

The
representations and warranties contained in this Section 6 survive the issuance
of the Debentures, the closing of the issuance of any Common Shares issuable
upon conversion of the Debentures herein provided for and notwithstanding such
closing shall continue and remain in full force and effect for the benefit of
the Debentureholders and the Trustee.

 

SECTION
6 -
COVENANTS OF THE CORPORATION

 

The
Corporation hereby covenants and agrees with the Trustee for the benefit of the
Trustee and the Debentureholders as follows:

 

To
Pay Principal and Interest

 

6.1   That the
Corporation will duly and punctually pay or cause to be paid to every
Debentureholder the principal of and interest accrued on the Debentures of which
he is the holder thereof on the dates, at the places, in the monies and in the
manner mentioned herein and in the Debentures.

 

 

22.

 

 

To
Carry on Business

 

6.2   That,
subject to the express provisions hereof, the Corporation will carry on and
conduct its business in a proper manner in accordance with ordinary business
practice, will keep or cause to be kept proper books of account in relation to
its business and the businesses of its subsidiaries, if any, as the case may be;
and at all reasonable times it will furnish or cause to be furnished to the
Trustee or its duly authorized agent or attorney such information relating to
the business of the Corporation as the Trustee may reasonably require; and,
subject to the express provisions hereof, it will do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate
existence and rights.

 

To
Pay Trustee’s Remuneration

 

6.3   The
Corporation will pay the Trustee reasonable remuneration for its services as
Trustee hereunder and will repay to the Trustee on demand all moneys which shall
have been paid by the Trustee in and about the execution of the trusts hereby
created with interest, if demanded by the Trustee, from thirty (30) days after
the date of receipt by the Corporation of the invoice from the Trustee to the
Corporation in respect of such expenditure until repayment, and such money and
interest thereon, including the Trustee's remuneration, shall be payable out of
any funds coming into the possession of the Trustee in priority to any of the
Debentures or interest thereon. The said remuneration shall continue to be
payable until the trusts hereof be finally wound up and whether or not the
trusts of this indenture shall be in the course of administration by or under
the direction of a court of competent jurisdiction.

 

To
Provide Certificate of Compliance

 

6.4   The
Corporation will provide the Trustee with a Certificate of Compliance pursuant
to the Business
Corporations Act of
Alberta.

 

To
Provide Financial Statements

 

6.5   That the
Corporation will furnish to the Trustee a copy of all financial statements, and
the report of the Corporation’s Auditors thereon, including the Corporation's
Audited Financial Statements, which are furnished to the holders of Common
Shares.

 

Not
To Extend Time for Payment of Interest

 

6.6   That, in
order to prevent any accumulation after maturity of unpaid interest, the
Corporation will not directly or indirectly extend or assent to the extension of
the time for payment of any interest upon any Debentures and that it will not
directly or indirectly be or become a party to or approve any such arrangements
by purchasing or funding any interest on Debentures or in any other manner.

 

 

23.

 

Trustee
May Perform Covenants

 

6.7   That if
the Corporation shall fail to perform any covenant on its part herein contained,
the Trustee may in its discretion, but (subject to Subsection 8.2) need not,
notify the Debentureholders of such failure and it may perform any of said
covenants capable of being performed by it and, if any such covenant requires
the payment or expenditure of money, it may make such payment or expenditure
with its own funds, or with money borrowed by or advanced to it for such
purposes, but shall be under no obligation so to do and all sums so expended or
advanced shall be repayable by the Corporation in the manner provided in
Subsection 7.3, but no such performance or payment shall be deemed to relieve
the Corporation from any default hereunder. 

 

Continued
Listing

 

6.8   The
Corporation shall take all such reasonable steps and actions and do all such
things as may be required to maintain the listing and posting for trading of the
Common Shares of the Corporation on the Canadian Venture Exchange or any
successor exchange, and to maintain its status as a "reporting issuer" not in
default of the requirements of the securities acts and regulations of the
provinces of Alberta and British Columbia.

 

 

24.

 

 

Not
Pay Dividends and Make Capital Distributions

 

6.9          
The
Corporation shall not, without the prior approval of the holders of
Debentures:

 

		6.9.1	declare
      or pay any dividends (other than stock dividends in Common Shares of the
      Corporation) on any shares of the Corporation;
or

 

		6.9.2	call
      for redemption and cancellation of any Debentures or make any capital
      distribution with respect to any shares of the
Corporation;

 

at any
time when the Corporation is in arrears of payment of any principal or interest
on any Debentures.

 

25.

 

 

SECTION
7
- DEFAULT

 

Acceleration
of Maturity

 

7.1        
Upon the
happening of any one or more of the following events (an “Event of Default”)
namely:

 

		7.1.1	if
      the Corporation makes default in payment of the principal on any Debenture
      when the same becomes due and payable under any provision hereof or of the
      Debentures and any such default continues for a period of thirty (30)
      days;

 

		7.1.2	if
      the Corporation makes default in payment of any interest due on any
      Debenture and any such default continues for a period of thirty (30)
      days;

 

		7.1.3	if
      an order shall be made or an effective resolution passed for the
      winding-up or liquidation of the Corporation (except in the course of
      carrying out or pursuant to a transaction in respect of which the
      conditions of Subsection 10.1 are duly observed and performed) or if a
      petition is filed for the winding-up of the
Corporation;

 

		7.1.4	if
      the Corporation shall make an assignment for the benefit of its creditors
      or be declared bankrupt, or if a custodian or receiver or receiver and
      manager or other officer with similar powers be appointed with respect to
      the Corporation or any of its property or if the Corporation commits an
      act of bankruptcy or makes or files a notice of intention to make a
      proposal or otherwise takes advantage of provisions for relief under the
      Bankruptcy
      and Insolvency Act
      (Canada) or the Companies’
      Creditors Arrangement Act
      (Canada) as now or hereinafter in force or makes any arrangement with its
      creditors pursuant to the terms of the Business
      Corporations Act of
      Alberta as now or hereinafter in force;

 

		7.1.5	if
      any execution, distress, sequestration or any other process of any Court
      becomes enforceable against the Corporation, or if a distress or analogous
      process is levied upon the property or assets of the Corporation
      or   any part thereof provided that such execution, distress,
      sequestration or other process is not in good faith being disputed by the
      Corporation; or

 

		7.1.6	if
      the Corporation shall neglect to observe or perform any other covenant or
      condition herein contained on its part to be observed or performed and,
      after notice in writing has been given by the Trustee to the Corporation
      specifying such default and requiring the Corporation to put an end to the
      same (which said notice may be given by the Trustee, in its discretion,
      and shall be given by the Trustee upon receipt of a request in writing
      signed by the holders of not less than twenty five (25%) per cent in
      principal amount of the Debentures then outstanding), the Corporation
      shall fail to make good such default within a period of sixty (60) days,
      unless the Trustee (having regard to the subject of the default) shall
      have agreed to a longer period, and in such event, within the period
      agreed to by the Trustee;

 

 

26.

 

then in
each and every such event the Trustee may in its discretion and shall upon
receipt of a request in writing signed by the holders of not less than twenty
five (25%) per cent in principal amount of the Debentures then outstanding,
subject to the provisions of Subsection 8.3, by notice in writing to the
Corporation, declare the principal and interest on all Debentures then
outstanding and all other monies outstanding hereunder to be due and payable and
the same shall forthwith become immediately due and payable to the Trustee and
the Corporation shall forthwith pay to the Trustee, in trust, for the benefit of
the Debentureholders the principal as aforesaid, and accrued and unpaid
interest, together with interest at the rate borne by the Debentures on such
principal, interest and such other monies from the date of the said declaration
until payment in full is received by the Trustee. Such payment when made shall
be deemed to have been made in full satisfaction and discharge of the
Corporation’s obligations hereunder and any monies so received by the Trustee
shall be applied in the manner provided in Subsection 8.6.

 

Notice
of Events of Default

 

7.2   The
Corporation covenants to provide the Trustee with immediate notice of the
occurrence of any Event of Default of which it has actual knowledge. If an Event
of Default shall occur and be continuing, the Trustee may, within thirty (30)
days after it becomes aware of the occurrence of such Event of Default, give
notice of such Event of Default to the Debentureholders in the manner provided
in Subsection 12.2, provided that, notwithstanding the foregoing, unless the
Trustee shall have been requested to do so by the holders of at least twenty
five (25%) per cent of the principal amount of the Debentures then outstanding,
the Trustee shall not be required to give such notice if the Trustee reasonably
believes that it is in the best interests of the Debentureholders to withhold
such notice and so informs the Corporation in writing.

 

Waiver
of Default

 

7.3   Upon the
happening of any Event of Default hereunder:

 

		7.3.1	the
      holders of not less than fifty one (51%) per cent of the principal amount
      of the Debentures then outstanding shall have the power (in addition to
      the powers exercisable by extraordinary resolution as hereinafter
      provided) by requisition in writing to instruct the Trustee to waive any
      Event of Default and/or to cancel any declaration made by the Trustee
      pursuant to Subsection 8.1 and the Trustee shall thereupon waive the Event
      of Default and/or cancel such declaration upon such terms and conditions
      as shall be prescribed in such requisition;
or

 

27.

 

 

		7.3.2	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 the 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; 

 

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

 

Enforcement
by the Trustee

 

7.4   Subject
to the provisions of Subsection 8.3 and to the provisions of any extraordinary
resolution that may be passed by the Debentureholders, in case the Corporation
shall fail to pay to the Trustee, forthwith after the same shall have been
declared to be due and payable under Subsection 8.1, the principal and interest
on all Debentures then outstanding, together with any other amounts due
hereunder, the Trustee may in its discretion and shall upon receipt of a request
in writing signed by the holders of not less than twenty five (25%) per cent in
principal amount of the Debentures then outstanding and upon being 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 the said principal and interest on all of 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.

 

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 or assets. 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 or on
behalf of the holders of the Debentures as a class, any proof of debt,
amend-ment 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(s), and to receive payment of or on account of such claims; provided,
however, that 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.

 

 

28.

 

 

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

 

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

 

No
Suits by Debentureholders

 

7.5   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 or interest on the Debentures or for the execution of any trust or
power here-under 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:

 

		7.5.1	such
      holder shall previously have given to the Trustee written notice of the
      happening of an Event of Default hereunder;
and

 

 

29.

 

 

		7.5.2	the
      Debentureholders by extraordinary resolution (as hereinafter defined) or
      by written instrument signed by the holders of at least twenty five (25%)
      per cent in principal amount of the Debentures then
      outstanding   shall have made a request to the Trustee and the
      Trustee shall have been afforded a 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

 

		7.5.3	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

 

		7.5.4	the
      Trustee shall have failed to act within a reasonable time after such
      notification, request and offer of security and indemnity and such
      notification, request and offer of security and indemnity are hereby
      declared in every such case, at the option of the Trustee, to be
      conditions precedent to any such proceeding.

 

Application
of Monies by Trustee

 

7.6          
Except as
herein otherwise expressly provided, any monies received by the Trustee from the
Corporation pursuant to the foregoing provisions of this Section, 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:

 

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

 

		7.6.2	second,
      in payment, ratably and proportionately to the holders of Debentures, of
      the principal 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 accrued and unpaid interest and then interest
      on amounts in default unless otherwise directed by extraordinary
      resolution and in that case in such order or priority as between
      principal, accrued and unpaid interest, and interest as may be directed by
      such resolution; and

 

30.

 

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

 

provided,
however, that no payment shall be made pursuant to paragraph 7.6.2 above in
respect of the principal or interest on any Debenture held, directly or
indirectly, by or for the benefit of the Corporation (other than any Debenture
pledged for value and in good faith to a person other than the Corporation but
only to the extent of such person’s interest therein) except subject to the
prior payment in full of the principal and interest on all Debentures which are
not so held.

 

Distribution
of Proceeds

 

7.7  Payments
to holders of Debentures pursuant to paragraph 7.6.2 shall be
made as follows:

 

		7.7.1	at
      least fifteen (15) days’ notice of every such payment shall be given in
      the manner provided in Subsection 11.2 specifying the time when and the
      place or places where the Deben-tures are to be presented and the amount
      of the payment and the application thereof as between principal and
      interest; 

 

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

 

		7.7.3	from
      and after the date of payment specified in the notice, interest shall
      accrue only on the amount owing on each Debenture after giving credit for
      the amount of the payment specified in such notice unless the Debenture in
      respect of which such amount is owing be duly presented on or after the
      date so specified and payment of such amount be not made;
and

 

		7.7.4	the
      Trustee shall not be bound to apply or make any partial or interim payment
      of any monies coming into its hands if the amount so received by it, after
      reserving thereout such amount as the Trustee may think necessary to
      provide for the payments mentioned in paragraph 7.6.1,
      is insufficient to make a distribution of at least two (2%) per cent of
      the aggregate principal amount of the outstanding Debentures, but it may
      retain the money so received by it and invest or deposit the same as
      provided in Subsection 12.8
      until the money or the investments representing the same, with the income
      derived therefrom, together with any other monies for the time being under
      its control shall be sufficient for the said purpose or until it shall
      consider it advisable to apply the same in the manner hereinbefore set
      forth. The foregoing shall, however, not apply to a final payment in
      distribution hereunder. 

 

31.

 

Remedies
Cumulative

 

7.8  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.

 

Judgment
Against the Corporation

 

7.9  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 the interest thereon and any other monies
owing hereunder.

 

Immunity
of Shareholders and Others

 

7.10  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 incorporator, shareholder, director or officer of the
Corporation or of any successor corporation referred to Section 10 for the
payment of the principal or interest on any of the Debentures or on any
covenant, agreement, representation or warranty by the Corporation herein or in
the Debentures contained.

 

Trustee
Appointed Attorney

 

7.11  The
Corporation hereby irrevocably appoints the Trustee to be the attorney of the
Corporation in the name and on behalf of the Corporation to execute any
instruments and do any acts and things which the Corporation ought to execute
and do, and has not executed or done, under the covenants and provisions
contained in this indenture and generally to use the name of the Corporation in
the exercise of all or any of the powers hereby conferred on the Trustee, with
full powers of substitution and revocation.

 

Persons
Dealing with Trustee

 

7.12  No person
dealing with the Trustee or any of its agents shall be concerned to enquire
whether an Event of Default has occurred, or whether the powers which the
Trustee is purporting to exercise have become exercisable, or whether any moneys
remain due under this indenture or on the Debentures, or to see to the
application of any moneys paid to the Trustee; and in the absence of fraud on
the part of such person, such dealing shall be deemed to be within the powers
hereby conferred and to be valid and effective accordingly.

 

32.

 

SECTION
8
- SATISFACTION AND DISCHARGE

 

Cancellation
and Destruction

 

8.1  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.

 

Non-Presentation
of Debentures

 

8.2  In case
the holder of any Debenture shall fail to present the same for payment on the
date on which the principal thereof and/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:

 

		8.2.1	the
      Corporation shall be entitled to pay to the Trustee and direct it to set
      aside; or

 

		8.2.2	in
      respect of monies in the hands of the Trustee which may or should be
      applied to the payment of the Deben-tures, the Corporation shall be
      entitled to direct the Trustee to set aside;
or

 

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

 

the
principal monies and/or the interest, as the case may be, in trust to be paid to
the holder of such Debenture upon due presen-tation or surrender thereof in
accordance with the provisions of this indenture; and thereupon the principal
monies and/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 payment of the monies so set aside by the Trustee upon
due presentation and surrender thereof, subject always to the provisions of
Subsection 9.3.

 

 

33.

 

     Repayment of Unclaimed
Monies

 

8.3  Any
monies set aside under Subsection 9.2 and not claimed by and paid to holders of
Debentures as provided in Subsection 9.2 within six (6) years after the date of
such setting aside shall be repaid to the Corporation by the Trustee on demand
and thereupon the Trustee shall be released from all further liability with
respect to such monies and thereafter the holders of the Debentures in respect
of which such monies were so repaid to the Corporation shall have no rights in
respect thereof except to obtain payment of the monies due thereon from the
Corporation up to such time as the right to proceed against the Corporation for
recovery of such monies has become statute barred under the laws of the Province
of Alberta.

 

Discharge

 

8.4  The
Trustee shall at the request of the Corporation release and discharge this
indenture and execute and deliver such instru-ments 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 and interest (including interest
on amounts in default, if any) on all of the Debentures and all other monies
payable hereunder have been paid or satisfied or that all of the Debentures
having matured or having been duly called for redemption, payment of the
principal 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.

 

           
SECTION 9
- SUCCESSOR CORPORATIONS

 

Certain
Requirements

 

9.1  The
Corporation shall not, directly or indirectly, sell, lease, transfer or
otherwise dispose of all or substantially all of its property and assets as an
entirety to any other corporation, and shall not amalgamate or merge with or
into any other corporation, (any such other corporation being herein referred to
as a “successor corporation”) unless:

 

		9.1.1	the
      successor corporation shall execute, prior to or contemporaneously with
      the consummation of any such transaction, an indenture supplemental
      hereto, together with such other instruments as are satisfactory to the
      Trustee and in the opinion of Counsel are necessary or advisable to
      evidence the assumption by the successor corporation of the due and
      punctual payment of all of the Debentures and the interest thereon and all
      other monies payable hereunder and the covenant of the successor
      corporation to pay the same and its agreement to observe and perform all
      the covenants and obligations of the Corporation under this
      indenture;

 

 

34.

 

		9.1.2	such
      transaction shall, to the satisfaction of the Trustee and in the opinion
      of Counsel, be upon such terms as substantially preserve and do not impair
      any of the rights or powers of the Trustee or of the Debentureholders
      hereunder and upon terms as are in no way prejudicial to the interests of
      the Debentureholders; and

 

		9.1.3	no
      condition or event shall exist as to the Corporation or the successor
      corporation either at the time of or immediately after the consummation of
      any such transaction and after giving full effect thereto or immediately
      after the successor corporation complying with the provisions of paragraph
      9.1.1
      above which constitutes or would constitute, after notice or lapse of time
      or both, an Event of Default.

 

Vesting
of Powers in Successor

 

9.2  Whenever
the conditions of Subsection 9.1 have been duly observed and performed, the
successor corporation shall possess and from time to time may exercise each and
every right and power of the Corporation under this indenture in the name of the
Corporation or otherwise and any act or proceeding by any provision of this
indenture required to be done or performed by any directors or officers of the
Corporation may be done and performed with like force and effect by the
directors or officers of such successor corporation.

 

SECTION
10
- MEETINGS OF DEBENTUREHOLDERS

 

Right
to Convene Meeting

 

10.1  The
Trustee or the Corporation may at any time and from time to time and the Trustee
shall on receipt of a written request of the Corporation or a written request
signed by the holders of not less than twenty five (25%) per cent in principal
amount of the Debentures then outstanding and upon being funded and indemnified
to its reasonable satisfaction by the Corporation or by the Debentureholders
signing such request against the costs which may be incurred in connection with
the calling and holding of such meeting, convene a meeting of the
Debentureholders. In the event of the Trustee failing within thirty (30) days
after the later of the receipt of any such request and the receipt of such funds
and 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 Calgary or at such other place as may be
approved or determined by the Trustee.

 

 

35.

 

Notice
of Meetings

 

10.2  At least
thirty (30) days’ notice of any meeting shall be given to the Debentureholders
in the manner provided in Subsection 11.2 and a copy thereof shall be sent by
post to the Trustee, unless the meeting has been called by the Trustee, and to
the Corporation, unless the meeting has been called by the Corporation. 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 Section. The
accidental omission to give notice of a meeting to any holder of Debentures
shall not invalidate any resolution passed at any such meeting.

 

Chairman

 

10.3  Some
person, who need not be a Debentureholder, nominated in writing by the Trustee
shall be chairman of the meeting and if no person is so nominated or if the
person so nominated is not present within fifteen (15) minutes from the time
fixed for the holding of the meeting, the Debentureholders present in person or
by proxy and representing at least twenty-five (25%) percent in principal amount
of the Debentures then outstanding shall choose a person present to be
chairman.

 

Quorum

 

10.4  Subject
to the provisions of Subsection 10.12 at any meeting of the Debentureholders, a
quorum shall consist of Debentureholders present in person or by proxy and
representing at least twenty five (25%) per cent in principal amount of the
Debentures then outstanding. If a quorum of the Debentureholders shall not be
present within fifteen (15) minutes from the time fixed for holding any meeting,
the meeting, if summoned by the Debentureholders or pursuant to a request of the
Debenture-holders, 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 a non-business
day in which case it shall be adjourned to the next following business day) at
the same time and place and 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 form a quorum and may transact the business for
which the meeting was originally convened, notwith-standing that they may not
represent twenty five (25%) per cent of the principal amount of the Debentures
then outstanding. Any business may be brought before or dealt with at an
adjourned meeting which might have been brought before or dealt with at the
original meeting in accordance with the notice calling the same. No business
shall be transacted at any meeting unless the required quorum be present at the
commencement of business.

 

Power
to Adjourn

 

10.5  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
adjourn-ment need be given except such notice, if any, as the meeting may
prescribe.

 

 

36.

 

Show
of Hands

 

10.6  Every
question submitted to a meeting shall, subject to Subsection 10.7, be decided in
the first place by a majority of votes given on a show of hands. At any such
meeting, unless a poll is duly demanded as herein provided, a declaration by the
chairman that a resolution has been carried or carried unanimous-ly 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.

 

Poll

 

10.7  On every
extraordinary resolution, and on any other question submitted to a meeting when
demanded by the chairman or by one or more 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 represented at the meeting and voted on the poll.

 

Voting

 

10.8  On a show
of hands, every person who is present and entitled to vote, whether as a
Debentureholder or as a proxy for one or more Debentureholders or both shall
have one vote. On a poll, each Debentureholder present in person or by a proxy
duly appointed by an instrument in writing shall be entitled to one vote in
respect of each One Thousand ($1,000.00) Dollars principal amount of Debentures
of which he shall then be the holder. A proxy need not be a Debentureholder. In
the case of joint registered holders of a Debenture, any one of them present in
person or by proxy at the meeting may vote in the absence of the other or
others; but in case more than one of them be present in person or by proxy, they
shall vote together in respect of the Debentures of which they are the joint
registered holders.

 

Regulations

 

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

 

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

 

 

37.

 

		10.9.2	the
      deposit of instruments appointing proxies at such place(s) as the Trustee,
      the Corporation or the Debentureholders 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 shall be deposited; and

 

		10.9.3	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, cabled,
      telegraphed or sent by facsimile before the meeting to the Corporation or
      to the Trustee at the place where the same is to be held and for the
      voting of proxies so deposited as though the instruments themselves were
      produced at the meeting. 

 

    Any
regulations so made shall be binding and effective and the votes given in
accordance therewith shall be valid and shall be counted at any meeting. Save as
such regulations may provide and subject to Subsection 10.10, 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.

 

Corporation
and Trustee May be Represented

 

10.10  The
Corporation and the Trustee, by their respective officers and directors, and the
Counsel of each of the Corporation and the Trustee and the Corporation's
Auditors may attend any meeting of the Debentureholders, but shall have no vote
as such unless they are a Debentureholder.

 

Powers
Exercisable by Extraordinary Resolution

 

10.11  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:

 

		10.11.1	power
      to sanction any modification, abrogation, alteration, compromise or
      arrangement of the rights of the Debentureholders and/or the Trustee
      against the Corporation, or against its property, whether such rights
      arise under this indenture or the Debentures or otherwise;

 

38.

 

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

 

		10.11.3	power
      to sanction any scheme for the reconstruction or reorganization of the
      Corporation or for the consolidation, amalgamation or merger of the
      Corporation with any other corporation or for the sale, lease, transfer or
      other disposition 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
      Subsection 10.1 shall have been complied with;

 

		10.11.4	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 extra-ordinary resolution or to refrain from exercising any such
      power, right, remedy or authority; 

 

		10.11.5	power
      to waive and direct the Trustee to waive any default hereunder and/or
      cancel any declaration made by the Trustee pursuant to Subsection 8.1
      either unconditionally or upon any condition specified in such
      extraordinary resolution; 

 

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

 

		10.11.7	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 Subsection 8.5, of the costs, charges and expenses reasonably
      and properly incurred by such Debentureholder in connection therewith;
      

 

		10.11.8	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;
    

 

39.

 

		10.11.9	power
      to appoint a committee with power and authority (subject to such
      limitations, if any, as may be pres-cribed 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 or other resolution and 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; 

 

		10.11.10	power
      to authorize the distribution in specie of any shares, bonds, debentures
      or other securities or obligations and/or cash or other consideration
      received hereunder or the use or disposal of the whole or any part of such
      shares, bonds, debentures or other securities or obligations and/or cash
      or other consideration in such manner and for such purpose as may be
      deemed advisable and specified in such extraordinary resolution;
  

 

		10.11.11	power
      to authorize the Trustee or any other persons to bid at any sale of the
      Corporation’s properties or assets or any part thereof and to borrow the
      monies required to make any deposit at said sale or pay the balance of the
      purchase price and to hypothecate, mortgage, pledge, charge, cede and
      transfer the property or assets so purchased as security for the repayment
      of the monies so borrowed and interest thereon, or itself, himself or
      themselves, as the case may be, to advance such monies (in which event it,
      he or they shall have a lien upon the property or assets so purchased for
      the amount so advanced and interest thereon) and to hold any property or
      assets so purchased (subject to any hypothec, mort-gage, pledge, charge or
      lien to secure any monies so borrowed or advanced) in trust for all the
      holders of the Debentures outstanding at the time of such sale pro rata in
      proportion to the amounts due to them thereon respectively for principal
      and interest before such sale, and to sell, transfer and convey the whole
      or any part or parts of the property or assets so purchased for such
      consideration in cash or in the shares, bonds, debentures or other
      securities or obligations of any Corporation formed or to be formed, or
      partly in cash and partly in such securities or obligations, and upon
      terms and conditions as may be determined by such extra-ordinary
      resolution of the Debentureholders and, subject to such terms and
      conditions, to dispose of such cash, shares, bonds, debentures or other
      securities or obligations pursuant to the provisions of paragraph
      10.11.11,
      and until the sale, transfer or conveyance of the whole of such property
      or assets so purchased to maintain and operate such part of said property
      and assets as has not been disposed of, and for such purposes to borrow
      monies and to hypothecate, mort-gage, pledge, charge and cede and transfer
      the property and assets so purchased, or any part thereof, as secur-ity
      for the repayment of the monies so borrowed, with interest thereon, or
      itself, himself or themselves, as the case may be, to advance such monies
      (in which event it, he or they shall have a lien or charge upon the
      property and assets so purchased for the amounts so advanced and interest
      thereon) and otherwise deal with such property and assets and the proceeds
      of any sale, transfer or conveyance thereof as the Debentureholders may by
      such extraordinary resolution direct; 

 

 

40.

 

		10.11.12	power
      to remove the Trustee from office and to appoint a new Trustee or
      Trustees; 

 

		10.11.13	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 Corporation formed or to be formed;

 

		10.11.14	power,
      notwithstanding Subsection 7.5, to authorize the Corporation and the
      Trustee to grant extensions of time for payment of interest on any of the
      Debentures, whether or not the interest the payment in respect of which is
      extended, is at the time due or overdue;
and

 

		10.11.15	power
      to amend, alter or repeal any extraordinary resolution previously passed
      or sanctioned by the Debentureholders or by any committee appointed
      pursuant to paragraph 10.11.9.
      

 

Meaning
of “Extraordinary Resolution”

 

10.12  The
expression “extraordinary resolution” when used in this indenture means, subject
as hereinafter in this Section 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 Section at which the holders of at least fifty-one (51%) per
cent in principal amount of the Debentures then outstanding are present in
person or by proxy and passed by the favourable votes of the holders of not less
than sixty six and two-thirds (66 2/3%) per cent of the principal amount of
Debentures represented at the meeting and voted on a poll upon such
resolution.

 

 

41.

 

If, at
any such meeting, the holders of fifty-one (51%) per cent in principal amount of
the Debentures outstanding are not present in person or by proxy within fifteen
(15) 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
twenty-one (21) nor more than sixty (60) days later, and to such place and time
as may be appointed by the chairman. Not less than ten (10) days’ notice shall
be given of the time and place of such adjourned meeting in the manner provided
in Subsection 12.2. Such notice shall state that at the adjourned meeting, the
Debentureholders present in person or by proxy shall form a quorum but it shall
not be necessary to set forth the purposes for which the meeting was originally
called or any other particulars. 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 passed by the requisite vote as provided in Subsection
10.12 shall be
an extraordinary resolution within the meaning of this indenture,
notwithstanding that the holders of fifty-one (51%) per cent in principal amount
of the Debentures then outstanding are not present in person or by proxy at such
adjourned meeting.

 

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.

 

Powers
Cumulative

 

10.13 It is
hereby declared and agreed that any one or more of the powers and/or any
combination 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 or combination
of 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 or
combination of powers thereafter from time to time.

 

Minutes

 

10.14 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.

 

 

42.

 

Resolutions
in Writing

 

10.15  All
actions which may be taken and all powers that may be exercised by the
Debentureholders at a meeting held as hereinbefore in this Section provided may
also be taken and exercised by the holders of sixty-six and two-thirds (66 2/3%)
per cent of the principal amount of all the outstanding Debentures, by a
resolution in writing signed in one or more counterparts and the expression
“extraordinary resolution” when used in this indenture shall include a
resolution so signed.

 

Binding
Effect of Resolutions

 

10.16  Every
resolution and every extraordinary resolution passed in accordance with the
provisions of this Section at a meeting of Debentureholders shall be binding
upon all the Debentureholders, whether present at or absent from such meeting,
and every resolution in writing signed by the requisite number of
Debentureholders in accordance with Subsection 11.15 shall be binding upon all
of 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 resolution in writing.

 

Evidence
of Rights of Debentureholders

 

10.17  Any
request, direction, notice, consent or other instrument which this indenture may
require or permit to be signed or executed by the Debentureholders may be in any
number of concurrent instruments of similar tenor and may be signed or executed
by such Debentureholders in person or by their attorney duly appointed in
writing. Proof of the execution of any such request or other instrument or of a
writing appointing any such attorney or (subject to the provisions of this
Section with regard to voting at meetings of Debentureholders) of the holding by
any person of Debentures shall be sufficient for any purpose of this indenture
if made in the following manner, namely, the fact and date of execution by any
person of such request or other instrument or writing may be proved by the
certificate of any notary public, or other officer authorized to take
acknowledgments of deeds to be recorded at the place where such certificate is
made, that the person signing such request or other instrument in writing
acknowledged to him the execution thereof, or by an affidavit of a witness of
such execution or in any other manner which the Trustee may consider
adequate.

 

 

43.

 

The
Trustee may, nevertheless, in its discretion require further proof in cases
where it deems further proof desirable or may accept such other proof as it
shall consider proper.

 

SECTION
11
- NOTICES

 

Notice
to Corporation

 

11.1  Any
notice to the Corporation under the provisions of this indenture shall be valid
and effective if personally delivered, sent by registered mail, postage prepaid
or sent by facsimile transmission, addressed to the Corporation at 4755
Zinfandel Court, Unit A, Ontario, California, 91761, USA, Attention: the Chief
Executive Officer, the President or the Secretary, Fax No. 909-390-6777 and
shall be deemed to have been effectively given, if personally delivered, on the
date of actual delivery, if sent by registered mail, on the third (3rd) day
after the date of posting of the notice, or if sent by facsimile transmission,
on the day of transmission. In the event of a postal strike or other disruption
affecting mail delivery, any notice mailed as aforesaid shall be deemed to have
been received and given when it is actually received. 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.

 

Notice
to Debentureholders

 

11.2  All
notices to be given hereunder with respect to the Debentures shall be deemed to
be validly given to the holders thereof if personally delivered, if sent by
mail, postage prepaid, by letter or circular or if sent by facsimile
transmission addressed to such holders at their post office addresses appearing
in the register hereinbefore mentioned and shall be deemed to have been given on
the day of delivery, if personally delivered, or on the day of mailing, if
mailed, or on the day of transmission if sent by facsimile transmission. In the
event of a postal strike or other disruption affecting mail delivery, any notice
mailed as aforesaid shall be deemed to have been received and given when it is
actually received. Accidental error or omission in giving notice or accidental
failure to deliver, mail or fax 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.

 

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 register hereinbefore
mentioned, and any notice so given shall be sufficient notice to all holders of
and/or persons interested in such Debentures.

 

 

44.

 

Notice
to Trustee

 

11.3  Any
notice to the Trustee under the provisions of this indenture shall be valid and
effective if personally delivered, sent by registered mail, postage prepaid or
sent by facsimile transmission, addressed to the Trustee at its principal office
in the City of Calgary at 600,530 - 8th Ave SW,
Calgary, Alberta T2P 3S8, Attention: Manager, Corporate Trust, Fax No. (403)
267-6598 and shall be deemed to be given if personally delivered, on the date of
actual delivery, if sent by registered mail, on the third (3rd) day after the
date of posting of the notice, or if sent by facsimile transmission, on the day
of transmission. In the event of a postal strike or other disruption affecting
mail delivery, any notice mailed as aforesaid shall be deemed to have been
received and given when it is actually received. The Trustee may from time to
time notify the Corporation and Debentureholders in writing of a change of
address which thereafter, until changed by like notice, shall be the address of
the Trustee for all purposes of this indenture.

 

SECTION
12  
- CONCERNING THE TRUSTEE

 

Replacement
of Trustee

 

12.1  The
Trustee may resign its trust and be discharged from all further duties and
liabilities hereunder by giving to the Corporation three (3) months’ notice in
writing or such shorter notice as the Corporation may accept as sufficient. 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 forth-with appoint a new Trustee unless a new
Trustee has already been appointed by the Debentureholders; failing such
appointment by the Corporation, the retiring Trustee or any Debentureholder may
apply to a Justice of the Court of Queen’s Bench on such notice as such Justice
may direct, for the appointment of a new Trustee; but any new Trustee so
appointed by the Corporation or by the Court shall be subject to removal as
aforesaid by the Debentureholders. On any new appointment, the Trustee shall be
vested with the same powers, rights, duties and responsibilities as if it had
been originally named herein as Trustee.

 

Any
corporation into which the Trustee may be merged or with which it may be
consolidated or amalgamated or any corporation resulting from any merger,
consolidation or amalgamation to which the Trustee shall be a party, shall be
the successor trustee under this indenture without the execution of any
instrument or any further act. Nevertheless, upon the written request of the
successor trustee or the Corporation, the Trustee ceasing to act shall execute
and deliver an instrument assigning and trans-ferring 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. 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.

 

 

45.

 

Duties
of Trustee

 

12.2  In
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 shall exercise the care,
diligence and skill of a reasonably prudent trustee. The Trustee shall not be
bound to give any notice or do or take any act, action or proceeding by virtue
of the powers conferred on it hereby unless it is required to do so at law or
unless and until it shall have been required so to do under the terms hereof,
nor shall the Trustee be required to take notice of any Event of Default
hereunder, unless it is required to do so at law or unless and until notified in
writing of such Event of Default, which notice shall specify the Event of
Default desired to be brought to the attention of the Trustee. Except as
otherwise provided herein, no such notice shall limit any discretion given to
the Trustee to determine whether or not the Trustee shall take any action with
respect to any Event of Default.

 

Reliance
upon Declarations

 

12.3  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 Subsection 13.4, if applicable, and with any other applicable requirements
of this indenture.

 

Evidence
and Authority to Trustee

 

12.4  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 certificate and delivery of the 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 by the Trustee
in accordance with the terms of this Subsection 13.4 or (b) the Trustee, in the
exercise of its rights and duties under this indenture, gives the Corporation
written notice requiring it to furnish such evidence in relation to any
particular action or obligation specified in such notice.

 

Such
evidence shall consist of:

 

		12.4.1	a
      statutory declaration or a certificate made by any one of the President,
      the Executive Vice-President and any Vice-President, together with any one
      of the other of such officers, the Secretary, the Treasurer, an
      Assistant-Secretary, an Assistant-Treasurer and the Comptroller of the
      Corporation stating that any such condition precedent has been complied
      with in accordance with the terms of this indenture;

 

 

46.

 

		12.4.2	in
      the case of a condition precedent compliance with which is, by the terms
      of this indenture, subject to review by legal counsel, an opinion of
      Counsel that such condition precedent has been complied with in accordance
      with the terms of this indenture; and

 

		12.4.3	in
      the case of any such condition precedent compliance with which is subject
      to review or examination by an auditor or accountant, an opinion or report
      of the Auditors of the Corporation or any other chartered accountant, in
      each case 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 certification and delivery of
Debentures and the satisfaction and discharge of this indenture, and except as
otherwise specif-ically provided herein, such evidence may consist of a report
or opinion of any solicitor, auditor, accountant, engineer or appraiser or any
other person whose qualifications give authority to a statement made by him,
provided that if such report or opinion is furnished by a director, officer or
employee of the Corporation, it shall be in the form of a statutory declaration.
Such evidence shall be, so far as is 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 this indenture shall
include:

 

		12.4.4	a
      statement by the person giving the evidence that he has read and
      understands the provisions of this indenture relating to the condition
      precedent in question;

 

		12.4.5	a
      statement of the nature and scope of the examination or investigation upon
      which such person based the declaration, certificate, statement or
      opinion;

 

		12.4.6	a
      statement that such person has made such examination or investigation as
      he believes necessary to enable him to make the statements or give the
      opinions contained or expressed therein;
and

 

		12.4.7	a
      statement in the opinion of such person that the conditions precedent in
      question have been complied with or
satisfied.

 

 

47.

 

Upon the
demand of the Trustee, the Corporation shall furnish the Trustee with evidence
in such form as the Trustee may require as to compliance with any condition
thereto relating to any action required or permitted to be taken by the
Corporation under this indenture.

 

Officers’
Certificate as Evidence

 

12.5  Except as
otherwise specifically provided or prescribed by this indenture, whenever in the
administration of the pro-visions 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.

 

Experts,
Advisors and Agents

 

12.6  The
Trustee may:

 

		12.6.1	in
      relation to these presents act on the opinion or advice of or information
      obtained from any solicitor, auditor, valuer, engineer, surveyor,
      appraiser or other expert, whether obtained by the Trustee or by the
      Corporation, or otherwise, and may employ such assistants as may be
      necessary for the proper discharge of its duties and may pay proper and
      reasonable compensation for all such legal and other advice or assistance
      as aforesaid;

 

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

 

		12.6.3	the
      Trustees may employ or retain such counsel, auditors, accountants,
      appraisers or other experts or advisers, whose qualifications give
      authority to any opinion or report made by them, as it may reasonably
      require for the purpose of discharging its duties hereunder and shall not
      be responsible for any misconduct on the part of any of them, and the
      Trustee may act and rely on the advice, opinion or report of any such
      expert or adviser and shall not be responsible for any loss occasioned by
      so acting and relying, unless such action was taken in bad faith or such
      action constitutes negligence or willful misconduct. Any counsel employed
      or consulted by the Trustee may, but need not be, solicitors of the
      Corporation.

 

 

48.

 

Trustee
May Deal in Debentures

 

12.7  The
Trustee may, in its personal or any 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.

 

Investment
of Monies Held by Trustee

 

12.8  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 of or under the control of the Trustee in
securities in which, under the laws of the Province of Alberta, trustees are
authorized to invest trust monies, provided that such securities are expressed
to mature within two years after their purchase by the Trustee, and unless and
until the Trustee shall have declared the principal and interest on the
Debentures to be due and payable, the Trustee shall so invest such monies at the
request of the Corporation.

 

Pending
the investment of any monies as hereinafter provided, such monies may be
deposited in the name of the Trustee in any chartered bank of Canada or any
other loan or trust company or financial institution authorized to accept
deposits under the laws of Canada or any Province thereof at the rate of
interest then current on similar deposits.

 

Unless
and until the Trustee shall have declared the principal 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.

 

Trustee
Not Ordinarily Bound

 

12.9  Except as
provided in Subsection 8.2 and as otherwise specifically provided herein, the
Trustee shall not, subject to Subsection 13.2, 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 twenty five (25%) per cent 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 Section 11, and then only after it shall have been
  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.

 

 

49.

 

Trustee
Not Required to Give Security

 

12.10  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.

 

Trustee
Not to Be Appointed Receiver

 

12.11  The
Trustee and any person related to the Trustee shall not be appointed a receiver
or receiver and manager or liquidator of all or any part of the assets or
undertaking of the Corporation.

 

Trustee
Not Bound to Act on Corporation’s Request

 

12.12  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 or
of the directors 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.

 

Conditions
Precedent to Trustee’s Obligations to Act Hereunder 

 

12.13  The
obligation of the Trustee to commence or continue any act 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.

 

 

50.

 

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.

 

Acceptance
of Trust

 

12.14 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.

 

Protection
of Trustee

 

12.15 By way of
supplement to the provisions of any law for the time being relating to trustees,
it is expressly declared and agreed as follows:

 

		12.15.1	the
      Trustee and its directors, officers, agents and employees will at all
      times be indemnified and saved harmless by the Corporation from and
      against all claims, demands, losses, actions, causes of actions, costs,
      charges, expenses, damages and liabilities whatsoever arising in
      connection with this indenture, including without limitation, those
      arising out of or related to actions taken or omitted to be taken by the
      Trustee contemplated hereby, legal fees and disbursements on a solicitor
      and client basis, and costs and expenses incurred in connection with the
      enforcement of this indemnity, which the Trustee may suffer or incur,
      whether at law or in equity, in any way caused by or arising, directly or
      indirectly, in respect of any act, deed, matter or thing whatsoever made,
      done, acquiesced in or omitted in or about or in relation to the execution
      of its duties as Trustee and including any deed, matter or thing in
      relation to the execution of its duties as Trustee and including any deed,
      matter or thing in relation to the registration, perfection, release or
      discharge of security. The foregoing provisions of this section do not
      apply to the extent that in any circumstances there has been a failure by
      the Trustee or its employees or agents to act honestly and in good faith
      or where the Trustee or its employees or agents have acted with gross
      negligence or in willful disregard to the Trustee's obligations hereunder.
      It is understood and agreed that this indemnification shall survive the
      termination of this indenture or the resignation of the
  Trustee;

 

		12.15.2	the
      Trustee shall not be liable for or by reason of any statements of fact or
      recitals in this indenture or in the Debentures (except the representation
      contained in Subsection 12.4
      and in the certificate of the Trustee on the Debentures) or required to
      verify the same, but all such statements or recitals are and shall be
      deemed to be made by the Corporation;

 

51.

 

		12.15.3	nothing
      herein contained shall impose any obligation on the Trustee to see to or
      to require evidence of the registration or filing (or renewal thereof) of
      this indenture or any instrument ancillary or supplemental
    thereto;

 

		12.15.4	the
      Trustee shall not be bound to give notice to any person or persons of the
      execution hereof; and

 

		12.15.5	the
      Trustee shall not incur any liability or responsibility whatever or be in
      any way responsible for the consequence of any breach on the part of the
      Corporation of any of the covenants herein contained or of any acts of any
      directors, officers, employees, trustees, servants or agents of the
      Corporation.

 

SECTION
13  
- SUPPLEMENTAL INDENTURES

 

Supplemental
Indentures

 

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

 

		13.1.1	adding
      to the covenants of the Corporation herein contained for the protection of
      the holders of the Debentures and/or providing for Events of Default in
      addition to those herein specified; 

 

		13.1.2	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 Deben-tures
      which do not affect the substance thereof and which, in the opinion of the
      Trustee's counsel, it may be expedient to make, provided that the
      Trustee's counsel shall be of the opinion that such provisions and
      modifications will not be prejudicial to the interests of the
      Debentureholders; 

 

		13.1.3	evidencing
      the succession, or successive successions, of other corporations to the
      Corporation and the covenants of and obligations assumed by any such
      successor in accordance with the provisions of this indenture;
  

 

 

52.

 

		13.1.4	giving
      effect to any extraordinary resolution passed as provided in Section 11;
      and

 

		13.1.5	for
      any other purpose not inconsistent with the terms of this indenture.
      

 

The
Trustee may also, without the consent or concurrence of the Debentureholders, by
supplemental indenture or otherwise, concur with the Corporation in making any
changes or corrections in this indenture which it shall have been advised by
Counsel are required for the purpose of curing or correcting any ambiguity or
defective or inconsistent provisions or clerical omissions or mistakes or
manifest errors contained herein or in any deed or indenture supplemental or
ancillary hereto, provided that in the opinion of the Trustee the rights of the
Trustee and of the Debentureholders are in no way affected thereby.

 

SECTION
14
- EXECUTION AND FORMAL DATE

 

Execution

 

14.1  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.

 

Formal
Date

 

14.2  For the
purpose of convenience, this indenture may be referred to as bearing formal date
of June 15, 2003, irrespective of the actual date of execution
hereof.

 

IN
WITNESS WHEREOF the parties hereto have executed these presents.

 

53.

 

SCHEDULE

 

To the
annexed indenture dated as of _____________________________ between Poly-Pacific
International Inc. and Computershare Trust Company of Canada as
Trustee

 

(Form of
Debenture)

 

POLY-PACIFIC
INTERNATIONAL INC.

(Incorporated
under the laws of Alberta)

 

No.
______________________                                                         $_____________________

 

10%
CONVERTIBLE DEBENTURE

 

Due
_________________________

 

Poly-Pacific
International Inc. (hereinafter referred to as the “Corporation”) for value
received hereby promises to pay to the registered holder hereof on
__________________________________, or on such earlier date as the principal
amount hereof may become due in accordance with the provisions of the Indenture
hereinafter mentioned, on presentation and surrender of this Debenture, the sum
of ____________________________________________________ ($_________________)
Dollars in lawful money of Canada at Calgary, Alberta and to pay interest on the
principal amount hereof at the rate of 10% per annum from the date hereof, in
like money, calculated and payable after as well as before maturity, default and
judgment (with interest on overdue interest at the said rate) semi-annually on
_________________ and _________________________ in each year, the first of such
payments to fall due on _______________________.

 

This
Debenture is one of the 10% Convertible Debenture (herein referred to as the
“Debenture”) in the aggregate principal amount of up to _____________________
($________________) DOLLARS in lawful money of Canada issued under an Indenture
(herein referred to as the “Indenture”) dated as of _______________________, and
made between the Corporation and the Trustee, to which Indenture and all
instruments supplemental thereto or in implementation thereof reference is
hereby made for a description of the rights of the holders of the said
Debenture, of the Corporation and of the Trustee and of the terms and conditions
upon which the Debenture is issued and held, all to the same effect as if the
provisions of the Indenture and such instruments supplemental thereto or in
implementation thereof were herein set forth, to all of which provisions the
holder of this Debenture, by acceptance hereof, assents.

 

 

 

          The Debenture is issuable as
fully registered Debenture in minimum denominations of One Thousand ($1,000.00)
Dollars. The Debenture of any authorized denomination may be exchanged, as
provided in the Indenture, for Debenture of an equal aggregate principal amount
in any other authorized denomination or denominations.

 

This
Debenture is convertible, at the option of the holder hereof, upon surrender of
this Debenture at the principal office of the Trustee in the City of Calgary at
any time up to the close of business on ________________________________, or on
the business day immediately preceding the date specified for redemption of this
Debenture, whichever is earlier, into fully paid and non-assessable Shares
without par value in the capital of the Corporation, as presently constituted at
the Conversion Price, all subject to the terms and conditions and in the manner
set forth in the Indenture. The Indenture makes provision for the adjustment of
the Conversion Price in the events therein specified.

 

This
Debenture and all other debentures now or hereafter certified and issued under
the Indenture are secured equally and rateably by the Indenture which
constitutes in favour of the Trustee a security interest in Collateral of the
Corporation as that term is defined in the Indenture in the manner and subject
to the limitations set forth in the Indenture.

 

This
Debenture may be redeemed at the option of the Corporation on the terms and
conditions set out in the Indenture at the redemption prices therein set
out.

 

The
principal hereof is repayable on ______________________________, in the manner,
with the effect and at the time set forth in the Indenture.

 

The
Indenture contains provisions for the holding of meetings of Debentureholders
and rendering resolutions passed at such meetings and instruments in writing
signed by the holders of a specified majority of the Debenture outstanding
binding upon all Debentureholders, subject to the provisions of the
Indenture.

 

This
Debenture may only be transferred, upon compliance with the conditions
prescribed in the Indenture, on the register to be kept at the offices of the
Trustee in the City of Calgary and at such other place or places, if any, and/or
by such other registrar or registrars, if any, as the Corporation with the
approval of the Trustee may designate, 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 writing in form and execution
satisfactory to the Trustee, and upon compliance with such reasonable
requirements as the Trustee and/or other registrar may prescribe.

 

 

 

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

 

IN
WITNESS WHEREOF Poly-Pacific International Inc. has caused its corporate seal to
be hereunto affixed and this Debenture to be signed by President of the
Corporation this
_________________________________________________________.

 

	 	
       

      POLY-PACIFIC
      INTERNATIONAL INC.

	 	 	 
	 	
       

      per
	 
	 	 	 
	 	
       

      per
	
       

       

	 	 	 

 

 

 

 

 

(Form of
Trustee’s Certificate)

 

 

This
Debenture is one of the 10% Convertible Debenture referred to in the Indenture
within mentioned.

 

	 	
       

      COMPUTERSHARE
      TRUST COMPANY OF CANADA

	 	 	 
	 	
       

      per
	 
	 	 	 
	 	 	 

 

 

(Form of
Registration Panel)

 

(No
writing on this panel except

 

by the
Trustee or other Registrar)

 

 

 

	
       

      Date
      of Registration
	
       

      In
      Whose Name Registered
	
       

      Signature
      of Trustee or Other Registrar

	 	 	 
	 	 	 
	 	 	 
	 	 	 

 

 

Transfer
Form

FOR VALUE
RECEIVED the undersigned sells, assigns and transfers unto
_____________________________________________________________________ the within
Debenture (which is in the principal amount of not less than $1,000.00) of
Poly-Pacific International Inc. and hereby irrevocably constitutes and appoints
________________________________________________________________________

________________________________________________________________________

Attorney
to transfer the said Debenture on the registers of the 10% Convertible Debenture
due ________________________________, of the said Corporation, with full power
of substitution in the premises.

______________________________  _____________________________

(Signature
of Transferor)        (Signature
of Guarantor)

Dated:
________________________

Note:

	
      1.
	
      THE
      SIGNATURE TO THIS TRANSFER FORM MUST CORRESPOND WITH THE NAME AS RECORDED
      ON THE DEBENTURE IN EVERY PARTICULAR WITHOUT ALTERATION, ENLARGEMENT OR
      CHANGE WHATSOEVER. THE SIGNATURE OF THE PERSON EXECUTING THIS TRANSFER
      MUST BE GUARANTEED BY A SCHEDULE A CANADIAN CHARTERED BANK, CANADIAN TRUST
      COMPANY OR A MEMBER OF A RECOGNIZED MEDALLION GUARANTEE
      PROGRAM*.

	
      2.
	
      WHERE
      THIS TRANSFER FORM IS EXECUTED ON BEHALF OF A CORPORATION, PARTNERSHIP OR
      ASSOCIATION, OR BY AN AGENT, EXECUTOR, ADMINISTRATOR, TRUSTEE, GUARDIAN OR
      ANY PERSON ACTING IN A REPRESENTATIVE CAPACITY, THE TRANSFER FORM MUST BE
      ACCOMPANIED BY SATISFACTORY EVIDENCE OF THE REPRESENTATIVE'S AUTHORITY TO
      ACT.

	
      *1.
	
      The
      guarantor must affix a stamp bearing the actual words: "signature
      guaranteed"

	
      2.
	
      Signature
      guarantees are not accepted from treasury branches or credit unions. Only
      Medallion signature guarantees are
acceptable

	
      3.
	
      Signature
      guarantees in the United States are accepted from members of a recognized
      Medallion signature guarantee program only.

 

 

Conversion
Form

 

 

	
      To:
	
      POLY-PACIFIC
      INTERNATIONAL INC. and COMPUTERSHARE TRUST COMPANY OF
    CANADA

 

 

The
undersigned registered holder of the within Debenture hereby irrevocably elects
to convert the said Debenture (or $_______________________ principal amount
thereof) into Shares of Poly-Pacific International Inc. in accordance with the
terms of the Indenture referred to in said Debenture and directs that the Shares
issuable and deliverable upon the conversion be issued and delivered to the
person indicated below.

 

 

	
      
	
      *
	
      If
      less than the full principal amount of the within Debenture is to be
      converted, indicate in the space provided the principal amount (which must
      be a minimum of $1,000.00) to be converted.

 

	
      Dated
	 	 	 
	 	 	
      (Signature
      of Registered Holder)

	 	 	 
	 	 	 
	
      Name
	 	
      (Signature
      of Registered Holder)

	 	 	 
	 	 	
      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 or by a trust
      company.

	 	 
	 	 
	
      Address
	 
	 	 
	 	 	 
	
      City
      and Province
	 	 
	 	 	 
	 	 	 
	
      Postal
      Code
	 	
      (Signature
      of Guarantor)

	 	 	 
	 	 	 
	
      Fax
      No.
	 	 

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

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