Document:

exv10w9

 

[***]
indicates that text has been omitted which is the subject of a
confidential treatment request. This text has been filed separately
with the SEC.

Exhibit 10.9

SUPPLY AGREEMENT

This Agreement made as of the 8th day of May, 2001 among:

	 	 	 	WESTAIM BIOMEDICAL CORP., a corporation incorporated under the laws
of Alberta
	 
	 	 	 	(hereinafter referred to as “Westaim”)

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	 	 	 	SMITH & NEPHEW INC., a corporation incorporated under the laws of
Canada, SMITH & NEPHEW, INC., a corporation incorporated under the
laws of the State of Delaware in the United States of America, and
T.J. SMITH & NEPHEW LIMITED, a corporation formed and organized under the laws of England and
Wales
	 
	 	 	 	(hereinafter collectively referred to as “S&N”)

WHEREAS Westaim, Westaim Biomedical Inc. and S&N have agreed to a license and development
arrangement concerning the development and promotion in a specified field of use of certain
existing and future products based on Westaim’s nanocrystalline silver antimicrobial coating
technology, all as set out in the License and Development Agreement (as defined herein) and will,
inter alia, enter into an asset purchase agreement and a transitional services agreement;

AND WHEREAS Westaim and S&N have agreed that Westaim will manufacture and supply exclusively
within the Field (as defined herein) to S&N and S&N will exclusively purchase from Westaim such
products, all upon the terms and subject to the conditions set forth in this Agreement;

NOW, THEREFORE, in consideration of the premises and covenants contained herein and other good and
valuable consideration, the receipt and sufficiency of which is hereby agreed to by the parties,
and intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.1 Definitions

In this Agreement, unless otherwise provided, the following terms shall have the following
meanings:

	 	1.1.1	 	“Acticoat Absorbent Dressing Product” means the Acticoat absorbent
dressing product (referred to in FDA 510 K number K002896) which has the features

 

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	 	 	 	set out in the Specifications set out in Schedule A and which was marketed and sold by
Westaim under the tradename “Acticoat Absorbent Dressing” immediately prior to the
Effective Date, together with all Improvements thereto which Westaim and S&N agree in
writing to implement;
	 
	 	1.1.2	 	“Acticoat Moisture Control Dressing Product” means the Acticoat moisture control dressing
product (referred to in FDA 510 K number K010447) which has the features set out in the
Specifications set out in Schedule B and which was marketed and sold by Westaim under the
tradename “Acticoat Moisture Control Dressing” immediately prior to the Effective Date,
together with all Improvements thereto which Westaim and S&N agree in writing to implement;
	 
	 	1.1.3	 	“Acticoat Product” means the Acticoat product (referred to in FDA 510 K numbers K955453)
which has the features set out in the Specifications set out in Schedule C and which was
marketed and sold by Westaim under the tradename “Acticoat” or “Acticoat Burn Dressing”
immediately prior to the Effective Date, together with all Improvements thereto which Westaim
and S&N agree in writing to implement;
	 
	 	1.1.4	 	“Acticoat 7 Product” means the Acticoat product (referred to in FDA 510 K number K001519)
which has the features set out in the Specifications set out in Schedule D and which was
marketed and sold by Westaim under the tradename “Acticoat 7” immediately prior to the
Effective Date, together with all Improvements thereto which Westaim and S&N agree in writing
to implement;
	 
	 	1.1.5	 	“Affiliates” means any Person that directly or indirectly controls, is controlled by, or is
under common control with another Person. A Person shall be deemed to “control” another
business entity if it owns, directly or indirectly, more than fifty percent (50%) of the
outstanding voting securities, capital stock, partnership interest or other comparable equity
or ownership interest of such Person. If the laws of the jurisdiction in which such Person
operates prohibit ownership of more than fifty percent (50%), control shall be deemed to exist
at the maximum level of ownership allowed by such jurisdiction;
	 
	 	1.1.6	 	“Agreement” means this supply agreement, together with all schedules hereto and any
amendments to or restatements of this supply agreement;
	 
	 	1.1.7	 	“Asset Purchase Agreement” means the asset purchase agreement of even date herewith between
Westaim and Smith & Nephew, Inc., together with all Schedules thereto and any amendments to or
restatements of such asset purchase agreement;
	 
	 	1.1.8	 	“Business Day” means any day except a day that is a Saturday, a Sunday or a statutory
holiday in Alberta;
	 
	 	1.1.9	 	“Claim” has the meaning attributed to that term in Section 9.4;

 

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	 	1.1.10	 	“Confidential Information” has the meaning attributed to that term in Section
8.1;
	 
	 	1.1.11	 	“Distribution Royalties” has the meaning attributed to that term in the License and
Development Agreement;
	 
	 	1.1.12	 	“Effective Date” means 11:59 pm Calgary time on the 8th day of May, 2001, or such other time
and date as the parties to this Agreement may agree upon in writing;
	 
	 	1.1.13	 	“Equipment” means the equipment listed in Schedule E and any New Equipment which
subsequently becomes Equipment as provided in Section 11.11;
	 
	 	1.1.14	 	“Escrow Agreement” means the manufacturing, technology, escrow agreement of even date
herewith among S&N, Westaim, Westaim Biomedical Inc., and Montreal Trust Company of Canada,
together with all schedules thereto and any amendments to or restatements of such
manufacturing technology escrow agreement;
	 
	 	1.1.15	 	“Event Milestone Payments” means payments under Section 6.4 of the License and Development
Agreement;
	 
	 	1.1.16	 	“FDA” means the United States Food and Drug Administration, or any successor organization;
	 
	 	1.1.17	 	“Field” has the meaning attributed to that term in the License and Development Agreement;
	 
	 	1.1.18	 	“First Refusal Free Transfer Period” has the meaning attributed to that term in Section
12.7;
	 
	 	1.1.19	 	“First Refusal Transfer Closing Date” has the meaning attributed to that term in Section
12.7;
	 
	 	1.1.20	 	“First Refusal Transfer Notice” has the meaning attributed to that term in Section 12.7;
	 
	 	1.1.21	 	“First Refusal Transfer Period” has the meaning attributed to that term in Section 12.7;
	 
	 	1.1.22	 	“Fixed Cost Portion of Fully Allocated Cost of Goods” means the portion of Fully Allocated
Cost of Goods (without regard for the proviso in such definition concerning the limitation on
the increase of the Fixed Cost Portion of Fully Allocated Cost of Goods) that does not relate
in any way to: variable costs, including, without limitation, costs relating to raw materials
and any other costs which increase or decrease depending upon the volume of Product produced;
costs not within the control of Westaim or its Affiliates, including

 

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	 	 	 	without limitation the costs of supplies or services provided by third parties; costs
incurred as a result of complying with an order or request of a governmental authority
or regulatory body that relates to manufacturing or the manufacturing facilities; costs
incurred at the request of S&N; and any costs resulting from increases in the amount of
compensation to employees of Westaim or its Affiliates if such increase was a part of a
general increase in the amount of compensation to employees in similar positions within
Westaim;

	 	1.1.23	 	“Force Majeure Event” means the events described in Section 12.1;
	 
	 	1.1.24	 	“Free Transfer Period” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.25	 	“Fully Allocated Cost of Goods” means with respect to the manufacture and supply of a
particular Product, the aggregate of

	 	1.1.25.1	 	direct material, direct labour and subcontracted costs incurred by Westaim in
connection with the procurement of raw materials or production, manufacture,
processing, labeling, testing, transportation and packaging of such Product, and
	 
	 	1.1.25.2	 	S&N’s proportionate share of indirect costs incurred by Westaim relating to
the manufacturing and manufacturing facilities (“Manufacturing Costs”)
related to such Product including administration and labour (in either
case relating to the manufacturing), depreciation on equipment owned by Westaim, rent,
insurance, utilities, taxes (excluding taxes on income), repairs, maintenance,
cleaning, training, quality control and the like, with such calculation to be made in
accordance with Canadian GAAP. S&N’s proportionate share of such indirect costs
shall be based on the percentage of the aggregate Manufacturing Costs in the
reporting period for which S&N is responsible under this Agreement, being, for
Equipment (other than New Equipment) [***] (or [***] if Westaim has relinquished its [***] reservation of capacity) less
the proportion of Production Capacity (in excess of any such reserve capacity, if
applicable) actually used by Westaim in the reporting period for purposes authorized
by this Agreement, and for New Equipment, the actual usage of such New Equipment by
Westaim in the reporting period for purposes authorized by this Agreement as a
percentage of actual use by Westaim for other purposes.

	 	 	 	provided, however, that for purposes of this Agreement, the Fixed Cost Portion of
Fully Allocated Cost of Goods shall not rise from one calendar year to the next by a
percentage amount that exceeds the greater of [***] and the percentage
increase in the Consumer Price Index, as published by Statistics Canada, from such
calendar year to the next;
	 
	 	1.1.26	 	“Governmental Permits” has the meaning attributed to that term in Section 2.4;

 

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	 	1.1.27	 	“Improvements” has the meaning attributed to that term in the License and
Development Agreement;
	 
	 	1.1.28	 	“Knowledge” means, in the case of S&N the actual knowledge of Stephen Lang, Simon Dawkins,
Jim Irvin, Janine Lepage and Martin Allen after reasonable inquiry, and, in the case of
Westaim, means the actual knowledge of Barry Heck, Scott Gillis and Dominic Vatelero, after
reasonable inquiry;
	 
	 	1.1.29	 	“License and Development Agreement” means the license and development agreement of even date
herewith among Westaim, Westaim Biomedical Inc., T.J. Smith & Nephew Limited and Smith &
Nephew, Inc., together with all schedules thereto and any amendments to or restatements of
such agreement;
	 
	 	1.1.30	 	“Lien” means, with respect to any property, any assignment, mortgage, charge, pledge, lien,
hypothec, conditional sale or title retention agreement, lease, levy, execution, seizure,
attachment, garnishment or other similar encumbrance or security interest in respect of such
property, howsoever arising (including, without limitation, pursuant to applicable law),
whether absolute or contingent, fixed or floating, legal or equitable, perfected or otherwise;
	 
	 	1.1.31	 	“Manufacturing Assets” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.32	 	“Manufacturing License” has the meaning attributed to that term in Section 4.1.1.1;
	 
	 	1.1.33	 	“Negotiation Period” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.34	 	“Net Sales” has the meaning attributed to that term in the License and Development
Agreement;
	 
	 	1.1.35	 	“New Equipment” has the meaning attributed to that term in Section 11.11;
	 
	 	1.1.36	 	“New Product” means any new product that the parties agree in writing to add to the scope of
this Agreement, with mutually agreed upon Specifications to be evidenced in writing by the
appending of an additional Schedule to this Agreement;
	 
	 	1.1.37	 	“Offered Purchase Price” has the meaning attributed to that term in Section
12.7;
	 
	 	1.1.38	 	“Offered Purchase Terms” has the meaning attributed to that term in Section 12.7;
	 
	 	1.1.39	 	“Party” means Westaim or S&N, as the case may be, and “Parties” means Westaim and S&N;
	 
	 	1.1.40	 	“Percentage Manufacturing Profit” means [***] of

 

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	 	 	 	Net Sales for all Products until the earlier of: (i) May 8, 2004, and (ii) the
first day of the calendar quarter immediately following four consecutive calendar
quarters during which Net Sales equaled at least [***], in the aggregate, whereupon “Percentage Manufacturing Profit” means
[***] of Net Sales for all Products;

	 	1.1.41	 	“Person” means an individual, corporation, company, cooperative, partnership, trust,
unincorporated association, entity with juridical personality or a governmental
authority or body, and pronouns which refer to a Person have a similarly extended meaning;
	 
	 	1.1.42	 	“Production Capacity” means the manufacturing capacity of the Equipment, reduced to take
into account all down times including scheduled and unscheduled maintenance;
	 
	 	1.1.43	 	“Products” means the Acticoat Product, the Acticoat 7 Product, the Acticoat Absorbent
Dressing Product, the Acticoat Moisture Control Dressing Product, and includes any inventory
of such Products existing as at the Effective Date, and any New Product and “Product” means
any one of the Products;
	 
	 	1.1.44	 	“Purchase Option” has the meaning attributed to that term in Section 12.7;
	 
	 	1.1.45	 	“Qualifying Offer” has the meaning attributed to that term in Section 12.7;
	 
	 	1.1.46	 	“Regulatory Authority” means, with respect to a particular Product, those government
agencies or authorities responsible for the approval of such Product in the United States,
Canada and the European Union (taken as a whole, not individual member countries);
	 
	 	1.1.47	 	“Rejection Date” has the meaning attributed to that term in Section 2.2.3;
	 
	 	1.1.48	 	“Rejection Notice” has the meaning attributed to that term in Section 2.2.3;
	 
	 	1.1.49	 	“S&N Indemnities” has the meaning attributed to that term in Section 9.1;
	 
	 	1.1.50	 	“S&N Offer” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.51	 	“S&N Production Capacity” has the meaning attributed to that term in Section 11.3;
	 
	 	1.1.52	 	“S&N Purchase Price” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.53	 	“S&N Purchase Terms” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.54	 	“Sales Milestone Payments” means payments made to Westaim under Section 6.5 of the License
and Development Agreement;
	 
	 	1.1.55	 	“Sales Report” has the meaning attributed to that term in Section 3.2;

 

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	 	1.1.56	 	“Specifications” means, with respect to a particular Product, the
specifications in relation to such Product set forth in the applicable Schedule
for that Product to this Agreement or, with respect to a New Product, as agreed
upon in writing by Westaim and S&N, as such specifications may be amended from
time to time by the written agreement of Westaim and S&N;
	 
	 	1.1.57	 	“Survival Period” has the meaning attributed to that term in Section 12.9;
	 
	 	1.1.58	 	“Term” means the term of this Agreement as specified in Section 10.1;
	 
	 	1.1.59	 	“Territory” means, subject to Sections 1.1.16.13 and 1.1.16.14 of the License and
Development Agreement, all countries of the world;
	 
	 	1.1.60	 	“Transfer Closing Date” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.61	 	“Transfer Notice” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.62	 	“Transfer Period” has the meaning attributed to that term in Section 12.6;
	 
	 	1.1.63	 	“Transition Services Agreement” means the transition services agreement of even date
herewith among Westaim and Smith & Nephew Inc. and Smith & Nephew, Inc., together with
all schedules thereto and any amendments to or restatements of such transition services
agreement;
	 
	 	1.1.64	 	“Westaim Manufacturing Technology” means, with respect to a particular Product in the
Field, the proprietary technology relating to the manufacture of such Product owned by
Westaim or licensed in by Westaim with the right to sublicense in the manner
contemplated by this Agreement and which is necessary in connection with the manufacture
of such Product;
	 
	 	1.1.65	 	“Westaim Know-How” has the meaning attributed to that term in the License and
Development Agreement;
	 
	 	1.1.66	 	“Westaim Indemnities” has the meaning attributed to that term in Section 9.2;
	 
	 	1.1.67	 	“Westaim Patent Rights” has the meaning attributed to that term in the License and
Development Agreement; and
	 
	 	1.1.68	 	“Westaim Production Capacity” has the meaning attributed to that term in Section
11.3.

Section 1.2 Number and Gender

Words importing the singular number only in this Agreement shall include the plural number and vice
versa and words importing one gender only in this Agreement shall include all genders and words
importing Persons in this Agreement shall include individuals, partnerships, corporations and any
other entities, legal or otherwise.

 

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Section 1.3 Sections and Headings

The division of this Agreement into Articles, Sections and Subsections and the insertion of
headings are for convenience of reference only and shall not affect the interpretation of this
Agreement. The terms “this Agreement”, “hereof, “hereunder” and similar expressions refer to this
Agreement and not to any particular Article, Section, Subsection, Schedule or other portion
hereof. Unless otherwise indicated, any reference in this Agreement to an Article, Section,
Subsection or Schedule refers to the specified Article, Section, Subsection or Schedule to this
Agreement.

Section 1.4 Schedules

The following schedules attached to this Agreement shall form part of this Agreement:

Schedule A — Acticoat Absorbent Dressing Product Specifications

Schedule B — Acticoat Moisture Control Dressing Product Specifications

Schedule C — Acticoat Product Specifications

Schedule D — Acticoat 7 Product Specifications

Schedule E — Equipment

Section 1.5 Effective Date

This Agreement shall commence as of the Effective Date.

Section 1.6 Calendar Quarter

Wherever calendar quarter is used in this Agreement in connection with a matter that pertains to
S&N’s financial reporting, S&N shall be entitled to interpret the provision to refer to the period
used in its quarterly reporting practice.

Section 1.7 Legislation

Any reference in this Agreement to legislation or a statute includes, unless otherwise indicated,
rules and regulations passed or in force as at the date of this Agreement and any amendments to
such rules or regulations from time to time, and any legislation or regulations substantially
replacing the same.

Section 1.8 Time of Essence

In this Agreement, time is of the essence.

 

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ARTICLE 2

MANUFACTURING AND SUPPLY OBLIGATIONS

Section 2.1 Supply of Product

Subject to the terms and conditions of this Agreement, S&N hereby appoints Westaim as S&N’s
exclusive supplier of Products in the Territory and Westaim agrees to supply Products in the
Territory exclusively to S&N, and Westaim undertakes and agrees to sell to S&N, and S&N agrees to
purchase from Westaim, such quantities of Products as are ordered by S&N from time to time. S&N
shall order all of its requirements for Products exclusively from Westaim. Westaim shall not sell
Products to any Person other than S&N or an Affiliate of S&N without the express written consent
of S&N.

Section 2.2 Forecasting; Purchase Orders; QA and QC

Unless otherwise agreed to in writing by Westaim and S&N, the supply by Westaim to S&N of a
particular Product shall be on the following terms and conditions:

	 	2.2.1	 	Westaim agrees to supply to S&N and S&N agrees to purchase exclusively
from Westaim such quantities of such Product as S&N shall request monthly by written
purchase order, all in accordance with the terms of this Agreement. S&N shall, on a
monthly basis during the Term (except during any period in which S&N is exercising its
rights under the Manufacturing License in accordance with Article 4), provide Westaim
with a twelve (12) month non-binding rolling forecast of S&N’s estimated requirements
for the Product. Such twelve (12) month non-binding rolling forecast shall be provided
to Westaim no later than five (5) Business Days preceding the beginning of each
calendar month and shall cover the twelve (12) month period commencing with the
calendar month next following such calendar month (e.g., on or before September 21,
2001, S&N is required to provide Westaim with an updated twelve (12) month rolling
non-binding forecast for the period November 1, 2001 to October 31, 2002). S&N shall
on a monthly basis request a supply of the Product from Westaim by way of written
purchase order. The purchase order for a particular month shall be delivered to
Westaim no later than five (5) Business Days preceding the beginning of the particular
month. The minimum amount of the Product ordered by S&N for any particular month shall
be [***] of the requirements last estimated for such month in the
applicable twelve (12) month non-binding rolling forecast. Each purchase order shall
be binding on S& N and Westaim, and Westaim shall fill each purchase order of S&N
within [***] days from receipt of such purchase order, provided, however,
that, with respect to a particular month, in the event S&N’s purchase order exceeds [***] of the requirements last estimated for such month in
the applicable twelve (12) month non-binding rolling forecast, Westaim shall not be
obligated to fill the amount of such purchase order in excess of [***] but shall only be required to use reasonable commercial efforts to fill
the amount of such purchase order in excess of the requirements last

 

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	 	 	 	estimated for such month in the applicable twelve (12) month non-binding
rolling forecast. Further, notwithstanding the above, but subject to Westaim complying
with Section 11.11, under no circumstances shall Westaim be obligated to supply a
quantity of Products over any period that exceeds the quantity of Products that can be
produced by the Equipment during such period using the S&N Production Capacity;
	 
	 	2.2.2	 	all Products purchased hereunder by S&N from Westaim shall conform to the applicable
Specifications at the time of delivery by Westaim to S&N; and
	 
	 	2.2.3	 	upon receipt of any Product, S&N may inspect and test such Products for conformance to the
applicable Specifications and may, up to and including the date which is thirty (30) days
after the date of receipt by S&N of such Products (the “Rejection Date”), reject the same by
sending to Westaim written notice (the “Rejection Notice”) of such rejection on or before the
Rejection Date (specifying the nature of such non-conformance) if such Product does not
conform to the Specifications. S&N shall be deemed to have accepted a particular delivery of
such Product if S&N has not sent to Westaim a Rejection Notice in connection with such
delivery on or before the Rejection Date related to such delivery; provided, however, that S&N
shall have the right to reject Product by delivery to Westaim of a Rejection Notice after the
Rejection Date, as soon as is practicable following S&N becoming aware of the non- conformance
of the Product, if such Product did not conform to the Specifications at the time it was
delivered to S&N and the non-conformance resulted from a latent defect not capable of being
detected by S&N during a reasonable inspection and testing of the Product at the time of
delivery to S&N. If Westaim disagrees with the alleged non-conformity of such Product with
the Specifications, and after the Parties have endeavoured to settle such disagreement between
themselves, then an independent laboratory, mutually agreed upon in writing by the Parties
(acting reasonably), shall analyze samples of the alleged non-conforming Product to determine
compliance with the Specifications. Westaim and S&N shall be bound by the laboratory
analysis of such alleged non-conformity of such Product with the
Specifications. The cost incurred in connection with retaining the independent laboratory
shall be borne by S&N if the Product in question is found to conform to the Specifications and
by Westaim if the Product in question is found to not conform to the Specifications. To the
extent it is determined that any Product supplied by Westaim to S&N under this Agreement does
not conform to the Specifications, Westaim’s sole obligation and S&N’s sole remedy shall be to
have Westaim replace such non-conforming Product at no additional cost to S&N.
	 
	 	2.2.4	 	S&N and Westaim agree to negotiate in good faith to conclude a “technical agreement”
required by the Regulatory Authorities in respect of a Product within ninety (90) days of the
Effective Date, and to negotiate in good faith to conclude a “technical agreement” required by
the Regulatory Authorities in respect of a New Product prior to the anticipated launch of such
New Product.

 

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Section 2.3 Delivery; Title; Risk of Loss

Westaim shall transfer Products to S&N [***] or such other facilities as Westaim and S&N, by mutual agreement in
writing, may from time to time designate.

Section 2.4 Representations

	 	2.4.1	 	Westaim represents and warrants to S&N that each Product will be produced in
compliance with all applicable laws, the non-compliance with which would have a
material adverse effect on Westaim’s ability to meet its obligations under this
Agreement in relation to such Product. Westaim shall at all times relevant throughout
the Term own, hold or possess all material licenses, franchises, permits, privileges,
immunities, registrations, approvals (including, without limitation, regulatory
approvals), authorizations and qualifications (“Government Permits”) necessary to allow
it to manufacture and produce the Products. All such Government Permits shall in all
material respects be valid, subsisting and in good standing at all relevant times
throughout the Term.
	 
	 	2.4.2	 	Westaim represents and warrants that it is the owner of the Westaim Patent
Rights and that such ownership is unencumbered by any lien or security interest granted
by Westaim and, to the Knowledge of Westaim, it is the owner of the Westaim Know-How
and that all material formal requirements in connection with the maintenance and
continuation of the patents and trade-marks (including the payment of fees and taxes
necessary for the continued use of and/or registration thereof) have been complied with
as at the Effective Date. Westaim has no Knowledge of any reason why any patent
included in the Westaim Patent Rights would be held to be invalid or otherwise
unenforceable, of any reason why any patent application included in the Westaim Patent
Rights would be refused or withdrawn, of any reason why any Person would claim that the
production, use or sale of Products would infringe its intellectual property rights or
that any trade secret of another Person has been appropriated by Westaim in the
production of the Products. Westaim has taken reasonable measures to avoid
misappropriation of trade secrets or infringement of copyright. For purposes
of this Section 2.4.2, it is acknowledged that “ownership” goes to title and not
to right to use or exploit, and that title does not necessarily give the right to use
or otherwise exploit.
	 
	 	2.4.3	 	Except as expressly provided in this Article 2, Westaim makes no representation or warranty, whether express or implied, with respect to the
Products including, without limitation, any representation as to fitness for a
particular purpose or merchantable quality.

Section 2.5 Inspection by S&N

No more frequently than once per calendar year, Westaim shall allow S&N, upon reasonable written
notice to Westaim and in any event within fifteen (15) days of such notice being given,

 

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during normal business hours and with a representative of Westaim present, if Westaim makes a
representative available, to visit Westaim’s manufacturing facility and to review the quality
control procedures and manufacturing records of Westaim, in order to assure satisfaction of the
requirements of this Agreement. Westaim shall respond to all reasonable comments or requests
provided by S&N to Westaim with respect to the foregoing.

Section 2.6 Import/Export Licenses

S&N shall be responsible for obtaining, at its expense, any import/export licenses required by any
governmental authority with respect to Products from and after its delivery to S&N pursuant to
this Agreement.

Section 2.7 Label Content

S&N shall be responsible for ensuring that the label and product insert for any Product sold in
any country in the Territory comply with all legal, governmental and regulatory requirements of
such country, and, to the extent required for Westaim to fully and effectively meet all of its
obligations under this Agreement. S&N shall be responsible for advising Westaim in writing and in
a timely manner of all such country specific requirements in connection with the packaging of
Products including without limitation label, package insert, language and other such requirements,
and Westaim shall be responsible for following all reasonable instructions and advice provided by
S&N to Westaim in this regard.

Section 2.8 Validation

All facilities, processes, equipment and analytical methods used for control of critical process
steps employed by Westaim in the manufacture and production of Products shall be validated in
accordance with the rules, regulations and guidance documents of the Regulatory Authorities and
shall otherwise be in material compliance with all applicable laws, rules and regulations.

Section 2.9 Regulatory Matters

Westaim agrees that it will allow all inspections of its facilities required by any Regulatory
Authority and will appropriately respond, forthwith upon receipt and in consultation with S&N, to
all requests of any Regulatory Authority and shall provide copies of all such responses to S&N
forthwith upon receipt.

Section 2.10 Production Records

The manufacture of Product shall be recorded in batch production record format that is in
compliance with the requirements of the Regulatory Authorities. With respect to a particular
manufacturing run, Westaim will, upon the written request of S&N, provide S&N reasonable access to
Westaim’s batch production records with respect to such manufacturing run during normal business
hours. Product and plant master files shall also be maintained by Westaim in accordance with the
requirements of the Regulatory Authorities and such files shall be available upon reasonable
written notice during normal business hours to the Regulatory Authorities or S&N.

 

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Section 2.11 Maintenance of Records

Westaim will keep or cause to be kept complete and current records relating to all of its
manufacturing supply activities under this Agreement in accordance with applicable law, rules and
regulations and also the requirements of the Regulatory Authorities.

Section 2.12 Subcontracting

Westaim shall not subcontract its obligations under this Agreement without the prior written
consent of S&N, which consent shall not be unreasonably withheld; provided, however, that Westaim
shall be entitled to subcontract all or some of its obligations under this Agreement to one or
more of its Affiliates without the consent of S&N provided Westaim remains responsible to S&N for
the performance of this Agreement by such Affiliate.

ARTICLE 3

CONSIDERATION

Section 3.1 Purchase Price

The purchase price payable by S&N to Westaim for a particular Product shall be equal to the Fully
Allocated Cost of Goods for such Product plus the Percentage Manufacturing Profit.

Section 3.2 Payment

The purchase price specified in Section 3.1 shall be paid by S&N to Westaim in the following
manner. Westaim shall issue an invoice to S&N at the time it delivers Products pursuant to a
purchase order received from S&N with respect to any particular month pursuant to Section 2.2.1.
Such invoice shall state an amount payable by S&N to Westaim as consideration for the Products and
shall include the Fully Allocated Cost of Goods, the Percentage Manufacturing Profit, and all
applicable taxes and other charges. Amounts payable by S&N under such invoices shall be paid within
[***] days of receipt of the invoice by S&N. In determining the Percentage Manufacturing
Profit, the average gross selling price for the particular Product during the previous calendar
quarter shall be used as an estimate of Net Sales. S&N shall advise Westaim in writing of the
average gross selling price for all Products (on a Product by Product basis) for each calendar
quarter and shall provide reasonable supporting documentation with respect thereto within [***]
Business Days of the end of such calendar quarter. Within [***] days of the close of each
calendar quarter, the actual Net Sales for each Product for such calendar quarter shall be
determined by S&N and provided to Westaim in a sales report (the “Sales Report”) specifying, at a
minimum, (a) [***] of each Product made during such calendar quarter, (b) [***] of each
Product made during such calendar quarter and (c) the [***] of each Product sold in
such calendar quarter. Each such Sales Report shall include reasonable supporting documentation. If
the Sales Report indicates that S&N has paid more or less than it should have paid, then such
overpayment or underpayment shall be paid by the appropriate party to the other party within [***] days following receipt of such Sales Report.

 

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Section 3.3 Audit Rights

	 	3.3.1	 	Westaim will keep and maintain proper and complete records and books of
account in such form and detail as is necessary for the determination of the Fully
Allocated Cost of Goods. Westaim shall once in each calendar year during normal
business hours and upon fifteen (15) days prior notice from S&N make those records
available for audit by a nationally recognized accounting firm designated by S&N
(except one to which Westaim shall have objection, acting reasonably) for the sole
purpose of, and Westaim will only be required to disclose information related to,
verifying the Fully Allocated Cost of Goods and the correctness of calculations and
classifications in respect thereof. Westaim shall preserve such records made in any
calendar year for a period of seven (7) years following the close of that calendar
year. In the event that such audit discloses that the actual amount of Fully Allocated
Cost of Goods are less than the amount paid by S&N to Westaim pursuant to this Article
3, then Westaim shall promptly reimburse to S&N such overpayment. In the event that
such audit discloses that the actual amount of Fully Allocated Cost of Goods payable
by S&N to Westaim are greater than the amount paid by S&N to Westaim pursuant to this
Article 3, then S&N shall promptly pay to Westaim such underpayment based on the
results disclosed by such audit. The cost of such audit shall be borne by S&N unless
such audit discloses that Fully Allocated Cost of Goods is less by [***] or
more than the amount paid by S&N to Westaim pursuant to this Article 3 or such audit
discloses that Fully Allocated Cost of Goods is more than the amount paid by S&N to
Westaim pursuant to this Article 3, in which case Westaim shall be responsible for
payment of all reasonable costs of such audit to a maximum of the amount of any
underpayment by S&N to Westaim due to an incorrect calculation of Fully Allocated Cost
of Goods and S&N shall be responsible for payment of all other costs of such audit.
Notwithstanding the foregoing, S&N shall not have the right to conduct more than once,
for the same purpose, an audit of the same information, books and records, whether
under this Agreement or the License and Development Agreement; provided, however, that
if any such audit discloses that the actual Fully Allocated Cost of Goods was
calculated incorrectly such that a reimbursement by Westaim is required pursuant to
this Section 3.3.1, then S&N shall have a further right to audit the same
information, books and records for the same purpose until such time as no further
errors are found.
	 
	 	3.3.2	 	S&N will keep and maintain proper and complete records and books of account
in such form and detail as is necessary for the determination of the Net Sales amounts
payable by S&N to Westaim under this Agreement. S&N shall once in each calendar year
during normal business hours upon fifteen (15) days prior notice from Westaim make
those records available for audit by a nationally recognized accounting firm
designated by Westaim (except one to which S&N shall have objection, acting
reasonably) for the sole purpose of, and S&N will only be required to disclose
information related to, verifying such Net Sales and deductions therefrom and the
correctness of calculations

 

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	 	 	 	and classifications in respect thereof. S&N shall preserve such records made in
any calendar year for a period of seven (7) years following the close of that
calendar year. In the event that such audit discloses that the actual Net Sales
amounts for Products are greater than the Net Sales amounts reported by S&N to
Westaim pursuant to this Article 3 for purposes of calculating the purchase price
payable by S&N to Westaim for Products, then S&N shall pay to Westaim any
additional purchase price for Products based on the results disclosed by such
audit. In the event that such audit discloses that the actual Net Sales amounts
for Products are less than the Net Sales amounts reported by S&N to Westaim
pursuant to this Article 3, then Westaim shall reimburse S&N for any such
overpayment of the purchase price for Products based on the results disclosed by
such audit. The cost of such audit shall be borne by Westaim unless such audit
discloses that the actual Net Sales amounts for Products are greater by [***] or more than the Net Sales amounts reported by S&N to Westaim
pursuant to this Article 3 or such audit discloses that the Net Sales for Products
are less than the Net Sales reported by S&N to Westaim pursuant to this Article 3,
in which cases S&N shall be responsible for payment of all reasonable costs of
such audit to a maximum of the amount of any overpayment by S&N to Westaim due to
an incorrect calculation of Net Sales and Westaim shall be responsible for payment
of all other costs of such audit. Notwithstanding the foregoing, Westaim shall
not have the right to conduct more than once, for the same purpose, an audit of
the same information, books and records, whether under this Agreement or the
License and Development Agreement; provided, however, that if any such audit
discloses that the actual Net Sales was calculated incorrectly such that a payment
by S&N is required pursuant to this Section 3.3.2, then Westaim shall have a
further right to audit the same information, books and records for the same
purpose until such time as no further errors are found.

Section 3.4 Late Payments

Any late payments of any nature made under this Agreement shall bear interest, running from the
date such payment was due until such payment is made in full, at a rate per annum equal to the
average three (3) month US dollar LIBOR rate (as published from time to time by Reuters) plus [***].

Section 3.5 Currency Conversion

The currency in which Net Sales were invoiced shall be converted to United States dollars on the
date of payment of the Percentage Manufacturing Profit using the applicable average rate of
exchange for U.S. dollars for the prior quarter quoted as bcal currency per US $1, published in
The Financial Times (London edition).

Section 3.6 Taxes and Other Withholdings

Each of Westaim and S&N shall be responsible for any and all taxes and other similar levies or
charges properly assessed against payments received by such Party from the other Party under

 

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this Agreement. If applicable laws or regulations require that taxes or other amounts be
withheld on such payments, the withholding Party will in a timely manner notify the other Party
in writing specifying the details thereof and shall:

	 	3.6.1	 	deduct those taxes or other amounts from the amount of such payment due to the
receiving Party,
	 
	 	3.6.2	 	pay the taxes or other amounts to the proper taxing authority in a timely
manner, and
	 
	 	3.6.3	 	send proof of payment to the receiving Party within sixty (60) days following
that payment.

The Parties agree to cooperate to lawfully reduce the amount of any such deductions by obtaining
the benefit of any tax treaty with respect to such deductions. Further, the withholding Party
shall cooperate with the receiving Party in obtaining for the receiving Party a credit or refund
for any such taxes, levies or charges.

Section 3.7 Set-Off

If pursuant to any of the terms of this Agreement, or any other agreement or instrument
contemplated in this Agreement, including, without limitation, the Transition
Services Agreement, the Asset Purchase Agreement or the License and Development Agreement, it is
determined pursuant to the dispute resolution procedure in Section 12.4 or otherwise by an
unappealable decision of a court of law, that a Party owes any amount to the other or to an
Affiliate of the other, then without limiting or waiving, in any respect, any rights or remedies of
the other Party, the other Party shall have the right to set-off the aggregate amount of such
amount owing against, and apply it in full or partial satisfaction of, any amounts payable by the
other Party or an Affiliate of the other Party, pursuant to the terms of this Agreement or any
other agreement or instrument contemplated in this Agreement, including, without limitation, the
Transition Services Agreement, the Asset Purchase Agreement or the License and Development
Agreement.

ARTICLE 4

MANUFACTURING LICENSE

Section 4.1 Manufacturing License

	 	4.1.1	 	License to Make and Have Made in the Territory

	 	4.1.1.1	 	With respect to Products, Westaim hereby grants to T.J. Smith & Nephew
Limited and its Affiliates a royalty-free license (or, where applicable,
sublicense) under the Westaim Manufacturing Technology to make and have made
Products for sale by S&N in the Field in the Territory pursuant to the License
and Development Agreement (the “Manufacturing License”); provided, however,
that S&N may not practice the Manufacturing License until such time, if ever,
as Westaim

 

- 17 -

	 	 	 	has failed to cure a material supply difficulty or failed to satisfy S&N,
acting reasonably, that it can cure such supply difficulty at least as well as S&N,
all as described in Section 4.1.1.3.
	 
	 	4.1.1.2	 	Notwithstanding the foregoing, Westaim agrees to advise S&N in a timely manner of any
material supply difficulties (which shall include the inability or unwillingness of Westaim to
provide assistance to S&N pursuant to Section 11.11) with respect to a Product or Products
experienced by Westaim (including any caused by a Force Majeure Event) so that the Parties
have an opportunity to discuss such difficulties and possible resolutions thereof at an
early stage with a view to avoiding the application of the Manufacturing License in relation
to the Product or Products.
	 
	 	4.1.1.3	 	If Westaim advises S&N of a supply difficulty pursuant to Section 4.1.1.2 or encounters one
but does not notify S&N thereof and S&N desires to practice the Manufacturing License with
respect to Products (in whole or in part), S&N will notify Westaim in writing of such desire
not earlier than [***] following the commencement of the discussions referred to in
Section 4.1.1.2 or, if no discussions occur because Westaim failed to notify S&N of the supply
difficulty, [***] following the date S&N becomes aware of the supply difficulty. In
that event, Westaim shall have a period of [***] following receipt of the notice
from S&N to either cure the supply difficulty or demonstrate to the satisfaction of S&N,
acting reasonably, that it can cure the supply difficulty at least as well as S&N, having
regard for the time and cost to implement the cure. If, by the end of the [***]
period, and only in such circumstances, Westaim has neither cured the supply difficulty nor
demonstrated to the satisfaction of S&N, acting reasonably, that it can cure such difficulty
at least as well as S&N, then S&N shall become entitled to practice the Manufacturing
License with respect to such Product to the extent requested by S&N in its written notice to
Westaim. Except as expressly provided in Section 9.1 (insofar as it pertains to third
party claims against S&N), the right to practice the Manufacturing License in relation to such
Product will be S&N’s sole remedy for the actions of Westaim giving rise to that right. S&N
shall purchase from Westaim such quantity of such Product and material intermediates as are
then held by or on behalf of Westaim.
	 
	 	4.1.1.4	 	During any period in which S&N is practicing the Manufacturing License with respect to
Products, S&N shall:

	 	4.1.1.4.1	 	be responsible for all aspects of the manufacture and supply of such
Products assumed by S&N and, as a result, Westaim shall, notwithstanding any
provision to the contrary in this Agreement, be relieved from all obligations

 

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	 	 	 	under this Agreement with respect to the manufacture and supply of such
Products during such period, including without limitation any liability
in respect thereof to S&N or any third party, except in relation to
Products manufactured and supplied by Westaim prior to the commencement
of such period or after the conclusion of such period;
	 
	 	4.1.1.4.2	 	only modify the label of such Product to the extent required by the
applicable Regulatory Authority.

	 	4.1.1.5	 	At the time that S&N is entitled to practice the Manufacturing License under this Section
4.1, the lease provided for in Article 11 shall be deemed to have been terminated, and Westaim
shall comply with the provisions in Section 11.8 with respect to expiry of the Term and the
return of the Equipment.
	 
	 	4.1.1.6	 	If within one year after S&N begins to practice the Manufacturing License with respect to
such Products in the Field in the Territory (to the extent requested by S&N in its written
notice to Westaim), Westaim has demonstrated to the satisfaction of S&N, acting reasonably,
the ability to once again manufacture such Products for sale in the Territory in compliance
with the provisions of this Agreement at a Fully Allocated Cost of Goods no more than the
Fully Allocated Cost of Goods incurred by S&N during its period of manufacture, and has paid
to S&N an amount equal to all of the costs directly incurred by S&N in establishing and
terminating such manufacturing operations (including all capital expenditures or commitments
to third parties in relation thereto made by S&N to enable it to manufacture and supply such
Products), S&N shall, subject to then existing third party commitments, permit Westaim to
resume such manufacturing activities of such Products for sale in the Territory. S&N will
use commercially reasonable efforts in structuring any third party arrangements to
minimize the duration and scope of any such commitments so as to facilitate the resumption by
Westaim of manufacturing activities of such Products for sale in the Field in the Territory.
Upon such resumption by Westaim, the lease provided for in Article 11 shall resume and
S&N will no longer be entitled to practice the Manufacturing License with
respect to such Products in the Territory (except to the limited extent required to enable S&N
to comply with then existing third party commitments regarding manufacture of such Products)
until such tune as the conditions described in Section 4.1.1.2 above recur and the procedures
in Section 4.1.1.3 above have once again been complied with and S&N is thereby entitled to
again practice the Manufacturing License.

 

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	 	4.1.2	 	Technology Transfer

	 	4.1.2.1	 	In order to enable S&N to effectively exercise its rights under the
Manufacturing License when applicable, Westaim, S&N and certain other named
parties have concurrently with this Agreement entered into the Escrow Agreement.
Further, in the event that S&N becomes entitled to practice the Manufacturing
License with respect to Products, Westaim will provide S&N with all assistance
reasonably required to ensure a smooth and seamless transition of manufacturing
of Products, including the ability to consult with Westaim personnel involved in
manufacturing Products and, if Westaim has provided its prior written consent,
the ability to make offers of employment to such personnel.
	 
	 	4.1.2.2	 	Any information received by S&N pursuant to Section 4.1.2 shall be subject to
the confidentiality provisions of Article 8 and shall be deemed to be the
Confidential Information of both S&N and Westaim. S&N shall return any such
information to Westaim at such time as its ability to practice the Manufacturing
License with respect to Products terminates (except that S&N may retain one copy
for legal archival purposes).

	 	4.1.3	 	Protection in Bankruptcy. The rights granted to S&N by Westaim
pursuant to this Section 4.1 constitute “intellectual property” (including as such term
is defined under Section 101 (35A) of the United States Bankruptcy Code) for purposes
of applicable bankruptcy law (including Section 365(n) of the United States Bankruptcy
Code).
	 
	 	4.1.4	 	Force Majeure Events

Notwithstanding any provision to the contrary in this Article 4, if S&N, but for the occurrence of
a Force Majeure Event with respect to Westaim, would be entitled to provide to Westaim the written
notice specified in Section 4.1.1.3, Westaim shall be presumed to be the Party that is able to take
the steps to relieve the effect of the occurrence of the Force Majeure Event (and thus rely on the
provisions of Section 12.1), unless S&N can reasonably demonstrate at such time that S&N is
materially better positioned to take the steps to relieve the effect of the occurrence of the Force
Majeure Event (in which case S&N shall become entitled to practice the Manufacturing License, all
as provided for in this Article 4, notwithstanding the occurrence of the Force Majeure Event).

Section 4.2 S&N Cost of Manufacture

S&N shall be responsible for all costs of the manufacture of the Products by or on behalf of S&N
during the time that S&N is manufacturing Products under the Manufacturing Licence.

 

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ARTICLE 5

RECALLS AND COMPLAINTS

Section 5.1 Product Recalls

S&N shall be responsible for implementing all Product recalls:, (a) required by a request,
directive or order of any applicable Regulatory Authority; (b) required by the order of a court of
competent jurisdiction; and (c) required by S&N, acting reasonably and with input from Westaim (if
time permits). To the extent that the Product recalled was sold prior to the date of this
Agreement or to the extent that the adverse event or complaint resulting in the recall was
attributable to Westaim, S&N out-of-pocket expenses incurred in connection with such recall shall
be borne by Westaim. S&N shall handle any such recall in a timely manner and in compliance with
all applicable laws and regulations. S&N shall keep Westaim informed in a timely manner with
respect to any such recall. No communications regarding any such recall shall be initiated by
either S&N or Westaim with the news media, customers, the FDA or any other Regulatory Authority,
except if and to the extent required by applicable law or regulatory requirement, without the
prior written approval of the other of them, which approval shall not be unreasonably withheld or
delayed. If a Party does not respond in writing to the other Party within the time period
requested by the other Party, acting reasonably, and in a timely fashion but in any event within
ten (10) days after receipt of any request for approval, such failure to respond will be deemed to
be a response that the Party does not have any comment in respect of the recall. In the event of a
recall, the defect giving rise to such recall shall be remedied as promptly as possible by the
Party responsible for the defect.

Section 5.2 Complaints and Adverse Events

Each of S&N and Westaim shall notify the other Party no later than the following Business Day,
after becoming aware of any report of any serious adverse event or consumer complaint, and within
ten (10) Business Days after becoming aware of any non-serious adverse events or consumer
complaints, associated with the use of a Product, whether or not determined to be attributable to
Product. Such notification shall be by facsimile or e-mail (with flagged priority). Evaluation,
follow-up and reporting of all adverse events and customer complaints shall be the responsibility
of S&N. Westaim shall provide all assistance reasonably requested by S&N in the foregoing regard.
Each Party shall maintain a record of all reported adverse events.

ARTICLE 6

INSURANCE

Section 6.1 Insurance

	 	6.1.1	 	Subject to adjustment as hereinafter provided, Westaim shall, at its sole
cost and expense, procure and maintain policies of commercial general liability
insurance in amounts of not less than [***] per incident
and [***] annual aggregate and naming S&N as an additional
insured and of business interruption insurance in amounts of not less than two million
dollars ($2,000,000) per incident and ten million dollars ($10,000,000) annual
aggregate and naming S&N as an

 

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	 	 	 	additional insured. Such commercial general liability insurance shall,
among other things, provide (a) product liability coverage and (b) contractual
liability coverage for Westaim’s indemnification under Section 9.1. If Westaim
elects to self-insure all or part of the limits described above (including
deductibles or retentions which are in excess of [***]
annual aggregate), such self-insurance program must be reasonably acceptable to
S&N. The minimum amounts of insurance coverage required under these provisions
shall not be construed to create a limit of Westaim’s liability with respect to
its indemnification obligation under Section 9.1. S&N and Westaim agree to review
on the fifth, tenth, fifteenth, etc., anniversary of the Effective Date the
adequacy of the insurance requirements set forth in this Section 6.1.1 in the then
current circumstances and to revise such requirements where appropriate, acting
reasonably, to conform with the then current industry norms.
	 
	 	6.1.2	 	Subject to adjustment as hereinafter provided, S&N shall, at its sole
cost and expense, procure and maintain policies of commercial general liability
insurance in amounts of not less than [***] per incident and
[***] annual aggregate and naming Westaim as an additional
insured and of business interruption insurance in amounts of not less than two million
dollars ($2,000,000) per incident and ten million dollars ($10,000,000) annual
aggregate and naming Westaim as an additional insured. Such commercial general
liability insurance shall, among other things, provide (a) product liability coverage
and (b) contractual liability coverage for S&N’s indemnification under Section 9.2. If
S&N elects to self-insure all or part of the limits described above (including
deductibles or retentions which are in excess of [***]
annual aggregate), such self-insurance program must be reasonably acceptable to
Westaim. The minimum amounts of insurance coverage required under these provisions
shall not be construed to create a limit of S&N’s liability with respect to its
indemnification obligation under Section 9.2. S&N and Westaim agree to review on the
fifth, tenth, fifteenth, etc., anniversary of the Effective Date the adequacy of the
insurance requirements set forth in this Section 6.1.2 in the then current
circumstances and to revise such requirements where appropriate, acting reasonably, to
conform with the then current industry norms.

Section 6.2 Notice of Insurance

Each Party shall provide the other with written evidence of such insurance upon request. Each
Party shall provide the other with written notice at least forty-five (45) days prior to the
cancellation, non-renewal or material change in such insurance.

Section 6.3 Maintenance of Insurance

Each Party shall maintain such comprehensive general liability insurance beyond the expiration or
termination of this Agreement during (a) the period that any Product manufactured by

 

- 22 -

Westaim is being commercially distributed or sold (other than for the purpose of obtaining
regulatory approvals) by S&N or by a sublicensee, Affiliate or agent of S&N and (b) a period of
not less than fifteen (15) years after the period referred to in (a) above.

ARTICLE 7

IMPROVEMENTS

Section 7.1 Improvements

If S&N requests a change to the Specifications and Westaim, acting reasonably, determines that
such change is feasible with regard to the manufacture of a particular Product, such change shall
be incorporated within the applicable Specifications pursuant to a written amendment of such
Specifications. It is the responsibility of S&N to ensure that the applicable regulatory and
governmental authorities approve the proposed change (if required) to the Specifications or method
of manufacture.

ARTICLE 8
CONFIDENTIALITY

Section 8.1 Confidentiality

The Parties to this Agreement recognize that from time to time one Party may disclose to another
Party(ies) information which is of a confidential nature (“Confidential Information”) and it is
therefore agreed that:

	 	8.1.1	 	Except as otherwise expressly authorized in writing by the discloser or
specifically provided for in this Agreement, all Confidential Information of the
disclosing Party shall be held in strict confidence by the receiving Party and the
receiving Party shall employ or cause to be employed diligent efforts and reasonable
care in order to ensure that such Confidential Information is not made available to
any third Party, excepting only as required under this Agreement including in
connection with the exercise by S&N of its rights in relation to the Manufacturing
License, where applicable or to the directors, officers, employees, agents and
consultants of the receiving Party whose duties require disclosure of the same or as
expressly authorized in writing and then (in any such case) only if the Parties to
whom such Confidential Information is being disclosed have given to the disclosing
Party an enforceable undertaking (in a form of contract used by the disclosing Party
in its normal course of business and that that deals with equivalently sensitive
information) not to disclose such Confidential Information to any other Party.
	 
	 	8.1.2	 	Subject to Section 8.1.3, Confidential Information shall not
include information that is in the public domain at the time of disclosure, that the
recipient can demonstrate based on written records was lawfully already in its
possession, that is approved in writing for release by the discloser or that is
obtained by any Party to this Agreement from a third Party without obligation

 

- 23 -

	 	 	 	of confidence (provided, however, that no third Party from which the information
is obtained has any obligation of confidence to any Parties to this Agreement)
or that becomes public knowledge otherwise than through the fault of the
recipient or any Person to whom it has disclosed the Confidential Information.
	 
	 	8.1.3	 	Disclosure of Confidential Information shall not be precluded if such
disclosure is in response to a valid order of a court or other governmental body or of
any political subdivision thereof or is otherwise required to be disclosed by law.
Notwithstanding the foregoing, in the event that a Party is required to make a
disclosure of the other Parry’s Confidential Information pursuant to this Section
8.1.3, it will, except where impractical, give reasonable advance notice to the other
Party of such disclosure and use its best efforts to secure confidential treatment of
such information.
	 
	 	8.1.4	 	Confidential Information that is specific shall not be deemed to be within the
public domain merely because it is embraced by general knowledge in the public domain.
Further, any Confidential Information dealing with any combination of features of a
specific matter shall not be deemed to be within the public domain, unless the
combination of features and the principle of operation are in the public domain.
	 
	 	8.1.5	 	Each Party to this Agreement shall, upon the termination of this Agreement,
return all corporeal Confidential Information to the owner of such Confidential
Information with a written undertaking that no copies (electronic or otherwise) have
been retained, except that the receiving Party may retain one (1) copy in its legal
files solely to allow it to monitor its obligations hereunder.
	 
	 	8.1.6	 	Each of the Parties to this Agreement acknowledges that the other Party to
this Agreement would suffer irreparable harm as a result of the breach of any of the
non-disclosure and confidentiality obligations set forth in this Section 8.1 and that
legal remedies are inadequate; therefore, each of the Parties to this Agreement agrees
that, in addition to any damages and other remedies that the other Party to this
Agreement may be entitled to as a result of such a breach, the other Party to this
Agreement shall be entitled to seek an order from a court of competent jurisdiction
restraining such Party from breaching or continuing to breach any of the provisions of
this Section 8.1.
	 
	 	8.1.7	 	The covenants of the Parties under this Section 8.1 shall continue in full
force and effect notwithstanding the termination of this Agreement by effluxion of time
or otherwise.

Section 8.2 No Disclosure

Except as required by law or any applicable regulatory authority or as otherwise provided herein,
the Parties agree that the existence of this Agreement and the contents of this Agreement shall not
be disclosed to any third Party without the prior written consent of the other Parties.

 

- 24 -

Notwithstanding the foregoing, in the event that a Party is required to make a disclosure of the
other Party’s Confidential Information pursuant to this Section 8.2, it will, except where
impractical, give reasonable advance notice to the other Party of such disclosure and use its
best efforts to secure confidential treatment of such information.

ARTICLE 9

INDEMNIFICATION

Section 9.1 Indemnification by Westaim

Westaim shall indemnify and hold S&N (its Affiliates and their respective officers, directors,
shareholders, employees, agents, and their successors and permitted assigns) (collectively the
“S&N Indemnitees”) free and harmless from any claims, demands, liabilities, losses, actions or
causes of actions, and any and all expenses associated therewith (including without limiting the
generality of the foregoing, reasonable defence costs and legal fees), arising out of or in
connection with, or that are the result of, or are otherwise related to: (i) any claim, suit,
proceeding or cause of action against any of the S&N Indemnitees alleging physical injury
(including death) or property damage as a result of the acts or omissions of Westaim or its
officers, directors, shareholders, employees or agents, except to the extent attributable to any
one or more of the S&N Indemnitees; (ii) any failure of Westaim to perform, in whole or in part,
any covenants or obligations under this Agreement except to the extent attributable to any one or
more of the S&N Indemnitees; (iii) Westaim’s non-compliance with any applicable national, federal,
provincial or state laws or regulations, except to the extent attributable to any one or more of
the S&N Indemnitees; (iv) for the period specified in Section 12.9, any breach by Westaim of any
of its representations or warranties under this Agreement.

Section 9.2 Indemnification by S&N

S&N shall indemnify and hold Westaim (its Affiliates and their respective officers, directors,
shareholders, employees, agents, and their successors and permitted assigns) (collectively the
“Westaim Indemnitees”) free and harmless from any claims, demands, liabilities, losses, actions or
causes of actions, and any and all expenses associated therewith (including without limiting the
generality of the foregoing, reasonable defence costs and legal fees), arising out of or in
connection with, or that are the result of, or are otherwise related to: (i) any claim, suit,
proceeding or cause of action against any of the Westaim Indemnitees alleging physical injury
(including death) or property damage as a result of the acts or omissions of S&N or its officers,
directors, shareholders, employees or agents, except to the extent attributable to any one or more
of the Westaim Indemnitees; (ii) any failure of S&N to perform, in whole or in part, any covenants
or obligations under this Agreement except to the extent attributable to any one or more of the
Westaim Indemnitees; (iii) S&N’s non-compliance with any applicable national, federal, provincial
or state laws or regulations, except to the extent attributable to any one or more of the Westaim
Indemnitees; (iv) for the period specified in Section 12.9, any breach by S&N of any of its
representations or warranties under this Agreement. The liability of the parties included in the
definition “S&N” shall be joint and several.

 

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Section 9.3 Infringement Indemnification

In the event of any action or threatened action against S&N in which it is asserted that the
production of the Product infringes a copyright, patent, or other industrial property right, S&N
shall promptly notify Westaim of such action or threatened action. If a court of competent
jurisdiction upholds the infringement action in a judgment that has become incapable of appeal,
or if an injunction has been granted, Westaim shall use reasonable commercial efforts to:

	 	9.3.1	 	procure the right for Westaim to continue using the allegedly infringing
Westaim Manufacturing Technology; or
	 
	 	9.3.2	 	replace or modify the Westaim Manufacturing Technology, as the case may be, so
that it becomes non-infringing but has substantially equivalent capabilities as the
infringing technology.

Without limiting or waiving, in any respect, any rights or remedies of S&N or any Affiliate of S&N
in any other Section of this Agreement, if as a result of an infringement claim in relation to the
Products other than New Products or solely to the Westaim Manufacturing Technology incorporated
into any New Product, then (a) S&N is required to pay any damages it shall be entitled to recover
such damages from Westaim, or (b) S&N is required to pay any royalty to the claimant for ongoing
rights to permit continued production of the Product, S&N shall be entitled to deduct such damages
or royalties from the amount payable to Westaim on account of Section 3.1, this being the sole
remedy for recovery of such damages or royalties unless Westaim has breached any representation
given to S&N in Section 2.4.2 in respect of the said infringement.

Section 9.4 Procedure

The indemnified party shall give prompt written notice to the indemnifying party(ies) of any suits,
claims or demands by third parties (“Chim”) which may give rise to any loss for which
indemnification may be required under this Article 9, provided however that failure to give such
notice shall not impair the obligation of the indemnifying party to provide indemnification
hereunder except if and to the extent that such failure materially impairs the ability of the
indemnifying party to defend the Claim. The indemnifying party shall be entitled to assume the
control, defence and settlement of any Claim or demand of any third party at its own cost and
expense; provided, however, that the other party shall have the right to be represented by its own
counsel at its own cost in such matters. In the event that the indemnifying party shall decline to
assume control of any such Claim, the party entitled to indemnification shall be entitled to assume
such defence of, and settle such Claim, all at the sole cost and expense of the indemnifying party.
Neither the indemnifying party nor the indemnified party shall settle or dispose of any such matter
in any manner which would adversely impact the rights and interests of the other party without the
prior written consent of the indemnified party, which shall not be unreasonably withheld. Each
party shall cooperate with the other party and its counsel in the course of the defence of any such
Claim, such cooperation to include using reasonable efforts to provide or make available documents,
information and witnesses.

 

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ARTICLE 10

TERM AND TERMINATION

Section 10.1 Term and Expiration

This Agreement shall be effective as of the Effective Date and, unless terminated earlier pursuant
to this Article 10, this Agreement shall expire on a Product-by-Product and a country-by-country
basis upon the expiration or termination of the License and Development Agreement with respect to
such Product in such country.

Section 10.2 Early Termination

This Agreement may be terminated by either Party as follows:

	 	10.2.1	 	by mutual written agreement of Westaim and S&N, effective as of the time specified
in such written agreement;
	 
	 	10.2.2	 	subject to Article 4, by one Party where the other Party fails to perform or observe
in any material respect any material covenant, condition or provision of, or fails to
rectify a material breach of, this Agreement, provided, however, that the Party
alleging such failure to perform or observe or breach must first give the other Party
written notice thereof, which notice must identify the failure to perform or observe
or breach in reasonable detail and that the Party giving such notice views such
alleged failure to perform or observe or breach as a basis for terminating this
Agreement under this Section 10.2.2 and the Party receiving such notice must have
failed to cure such alleged breach with in forty-five (45) days after receipt of such
notice;
	 
	 	10.2.3	 	by one Party where the other Party institutes proceedings to be adjudicated a
bankrupt or insolvent or to be wound-up, or consents to the institution of bankruptcy,
insolvency or winding-up proceedings against it, or files a petition, answer or
consent seeking dissolution or winding-up under any bankruptcy, insolvency or
analogous laws, or if any such proceedings are commenced in respect of the Party and
are not being contested in good faith (and with the intended result of such
contestation being to suspend any adverse effect of such proceeding on the rights of
the Party hereunder) within thirty (30) days after the other Party becomes aware
thereof or if the other Party consents to the filing of any such petition or to the
appointment of a receiver over its business and assets generally or makes a general
assignment for the benefit of creditors, or admits in writing its inability to pay its
debts generally as they become due;
	 
	 	10.2.4	 	by one Party where the other Party institutes proceedings under the
Companies’ Creditors Arrangement Act, the Bankruptcy and Insolvency Act or other
similar legislation or the other Party seeks or takes any proceeding relating to a
compromise or arrangement with creditors or claimants generally; or
	 
	 	10.2.5	 	by one Party where the other Party voluntarily suspends for more than thirty

 

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	 	 	 	(30) Business Days all or substantially all of its business operations, other
than suspensions of a temporary nature resulting from a strike or similar event
not within the control of the Party or from a lock-out.

Section 10.3 Survival of Obligations

Such provisions of this Agreement that, by their nature, would be expected to survive termination
of this Agreement, including without limitation Article 8 and Article 9, shall survive any such
termination.

Section 10.4 Continuing Liability

Termination of this Agreement for any reason shall not release any Party from any liability,
obligation or agreement which has already accrued nor affect the survival of any provision hereof
which is expressly stated to survive such termination. Termination of this Agreement for any
reason shall not constitute a waiver or release of, or otherwise be deemed to prejudice or
adversely affect, any rights, remedies or claims, whether for damages or otherwise, which a Party
may have hereunder or which may arise out of or in connection with such termination.

Section 10.5 Return of Confidential Information

Upon termination of this Agreement, each party shall return to the other all Confidential
Information of such other party that remains in its possession, except that each party shall be
entitled to retain one copy of any such information for archival purposes.

ARTICLE 11

LEASE OF EQUIPMENT

Section 11.1 Lease

S&N hereby leases the Equipment to Westaim and Westaim hereby leases the Equipment from S&N for
the duration of the Term, on the terms and subject to the conditions contained in this Agreement.

Section 11.2 S&N Ownership

The Equipment is and shall at all times be and remain the sole property of S&N and Westaim shall
have no right, title or interest therein or thereto except as set forth herein. At S&N’s request,
Westaim shall at its own expense affix and maintain on the Equipment in a manner satisfactory to
S&N, acting reasonably, labels, plates or other marks supplied by S&N to identify the Equipment as
the property of S&N. The Equipment shall at all times be and remain personal property and shall not
in any manner be permanently affixed or attached to any lands or building so that it becomes a
fixture under applicable real estate law.

 

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Section 11.3 Use of Equipment

Except as otherwise expressly set out herein, the Equipment shall be solely used by Westaim for
the purpose of manufacturing and producing Products pursuant to this Agreement. Westaim
acknowledges and agrees that [***] of the Production Capacity for the manufacture of Products shall
be primarily and on a first priority basis for S&N
(“S&N Production Capacity”). During the Term,
Westaim shall be entitled to use the remaining [***] of the Production Capacity (“Westaim Production
Capacity”) and any unused S&N Production Capacity for purposes other than the manufacture of
Products for S&N. In consideration for Westaim’s right to use the Westaim Production Capacity
during the Term, Westaim shall pay to S&N a charge of [***] per year for a period of 7 years
commencing on the 1st of June, 2001. Thereafter, Westaim shall be deemed to have fully
paid for its rights in relation to the Westaim Production Capacity. Westaim may terminate its
entitlement to use the Westaim Production Capacity at any time, with the result that the S&N
Production Capacity shall increase to 100% of Production Capacity. On such termination, Westaim’s
obligation to pay the balance of the unpaid charge for the Westaim Production Capacity shall
forthwith terminate and any prepaid portion of such charge shall be refunded by S&N to Westaim.
Westaim shall also be responsible for any additional variable costs (such as electricity)
associated with its use of the Westaim Production Capacity and for any direct or indirect costs
associated with its own use of the S&N Production Capacity.

Section 11.4 Use of Other Equipment

Westaim may use any other piece or pieces of equipment it determines appropriate to manufacture
the Products, acting reasonably. So long as the Production Capacity used in manufacturing the
Products does not exceed the S&N Production Capacity, any cost in using such other piece or pieces
of equipment, including, without limitation, depreciation, shall not cause an increase in the
amount that would otherwise constitute the Fully Allocated Cost of Goods had only the Equipment be
used. If or when the Production Capacity used in manufacturing the Product exceeds the S&N
Production Capacity, any cost in using such other piece or pieces of equipment, including, without
limitation, depreciation, shall be included in the calculation of the Fully Allocated Cost of
Goods.

Section 11.5 Quiet Possession

Except as otherwise expressly set out herein, Westaim shall have exclusive use and quiet possession
of the Equipment during the Term. S&N shall have the right, on prior reasonable notice, to enter
Westaim’s premises to inspect the Equipment during regular business hours. Westaim shall keep the
Equipment during the Term at its premises in Fort Saskatchewan, Alberta, and shall not, without
S&N’s prior written consent, not to be unreasonably withheld, move the Equipment from that
location. Westaim shall use and operate the Equipment in a careful and prudent manner and not for
any unlawful purpose and shall, at Westaim’s expense, comply with and conform to, all applicable
federal, provincial and other laws, ordinances and regulations.

Section 11.6 Westaim’s Obligations

Westaim shall:

 

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	 	11.6.1	 	keep the Equipment free of all Liens of any kind or nature arising
through Westaim;
	 
	 	11.6.2	 	not transfer, deliver up possession of, encumber or sublet the Equipment;
	 
	 	11.6.3	 	keep all Equipment in good repair, condition and working order and shall furnish all
parts, mechanisms, devices and servicing so required, subject to Section 11.8 below;
	 
	 	11.6.4	 	comply with all laws, regulations and orders relating to the Equipment; and
	 
	 	11.6.5	 	pay all taxes associated with Westaim’s use of the Equipment.

Section 11.7 Insurance, Damage

	 	11.7.1	 	For so long as the Equipment is in Westaim’s possession, Westaim assumes and shall
bear the entire risk of loss, damage to or destruction of the Equipment from any cause
whatsoever. Westaim shall obtain and maintain for the Term, at its own expense,
insurance against loss or damage to the Equipment including without limitation, loss by
fire (including extended coverage), theft, collision and such other risks of loss as
are customarily covered by insurance on such type of Equipment and by prudent operators
of businesses similar to that in which Westaim is engaged, in such amounts, in such
form and with such insurers as shall be satisfactory to S&N, acting reasonably provided
that the amount of such insurance shall not be less than the full replacement value of
the Equipment. The insurance coverage shall be in favour of both S&N and Westaim as
named insureds, shall name S&N as first loss payee, and shall contain a clause
requiring the insurer to give S&N at least fifteen (15) business days prior written
notice of any alteration in the terms of or cancellation of the policy. On request,
Westaim shall furnish to S&N a certificate of insurance or other evidence satisfactory
to S&N that such insurance coverage is in effect. Westaim shall give S&N prompt notice
of any damage to or loss of the Equipment or any part thereof.
	 
	 	11.7.2	 	If there is any damage to or loss of any part of the Equipment, Westaim will at its
expense make all proofs of loss and take all other steps necessary to recover insurance
benefits, unless advised in writing by S&N that S&N desires to do so. Westaim appoints
S&N as its agent and attorney to make any claims and receive any payments pursuant to
the insurance policies. Proceeds of insurance will be disbursed by S&N against
invoices for repair, partial repair or replacement of the Equipment. However, if any
part of the Equipment is lost, stolen, destroyed or damaged beyond repair for any
reason, the Parties shall determine in good faith discussions whether Westaim or S&N
ought to replace the Equipment, such determination to be made in a
manner substantially similar to that set out in Article 4 concerning curation of a
material supply difficulty.

 

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Section 11.8 Expiry of Term

On expiry of the Term or following earlier termination of this Agreement or the lease provided for
in this Article 11 (as provided in Section 4.1.1.5), Westaim shall at S&N’s sole cost and expense
immediately return the Equipment to S&N in good repair, condition and working order and in
substantially the same condition as at the Effective Date, reasonable wear and tear excepted, at
such place as S&N may specify and provide reasonable cooperation and assistance in connection
therewith. If Westaim fails to do so within fourteen (14) business days after expiry or termination
of this Agreement, S&N shall have the right, on reasonable notice to Westaim, to enter upon any
premises where the Equipment or any of it may be, with or without legal process, and remove the
Equipment.

Section 11.9 No Sublease or Assignment

Westaim shall not sublet, assign or part with possession of the Equipment or permit its use by any
other Person other than Westaim, except for sublets or assignments to an Affiliate of Westaim
where Westaim remains responsible to S&N for the performance of all obligations under this
Agreement. Nothing herein contained shall release Westaim from its obligations to perform any
duty, covenant or condition required to be performed under this Agreement.

Section 11.10 Representations, Warranties

	 	11.10.1	 	S&N does not make, and there are no representations or warranties, express
or implied, statutory or otherwise, with respect to the Equipment or
this Agreement or any schedule or amendment hereto or affecting the rights of
the Parties hereby and S&N shall not be deemed to make, now or hereafter at
any time, any representation or warranty, express or implied, as to the quality
of the material or workmanship of the Equipment, or the conformity of
the Equipment to the provisions and specifications of Westaim, or to the
condition, design, merchantable quality, durability, operation or fitness for
use or for any particular purpose of the Equipment or freedom thereof from any
Liens or rights of others or any other representation or warranty whatsoever,
express or implied with respect to the Equipment.
	 
	 	11.10.2	 	Westaim does not make, and there are no representations or warranties,
express or implied, statutory or otherwise, with respect to the Equipment or
this Agreement or any schedule or amendment hereto or affecting the rights of
the Parties hereby and Westaim shall not be deemed to make, now or hereafter
at any time, any representation or warranty, express or implied, as to the
quality of the material or workmanship of the Equipment, or the conformity of
the Equipment to the provisions and specifications of S&N, or to the
condition, design, merchantable quality, durability, operation or fitness for
use or for any particular purpose of the Equipment or freedom thereof from any
Liens or rights of others or any other representation or warranty whatsoever,
express or implied with respect to the Equipment.

 

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Section 11.11 New Equipment

At least once each calendar year, commencing in 2002, the Parties shall discuss in good faith
the issue of whether additional Production Capacity is required to carry out the terms of this
Agreement in view of the expected level of Net Sales for the following two year period. Such
discussion shall also consider the expected requirements of third parties with whom Westaim has
commitments to manufacture Products using the Equipment. If following such discussions:

	 	11.11.1	 	Westaim determines in its sole discretion that additional or new equipment
is required in order to carry out the terms of this Agreement (“New
Equipment”), Westaim shall manufacture, or have manufactured, the New Equipment,
at its sole cost. S&N shall have the option to purchase the New Equipment, or
any part thereof, at any time during the six (6) months following the date
Westaim advises S&N in writing that it has determined to acquire New Equipment,
or at any time during the six (6) months following its decision to practice
the Manufacturing License pursuant to Section 4.1, exercisable by written
notice to Westaim. The purchase price for the New Equipment shall be the net
book value of the New Equipment, as determined by the Parties, with
such adjustments to the purchase price as necessary such that, from
Westaim’s perspective, the purchase price shall have a neutral effect from a
tax perspective; and
	 
	 	11.11.2	 	Westaim determines that it will not acquire New Equipment, S&N shall have the
right to manufacture, or have manufactured, the New Equipment at its sole cost.
Westaim shall cooperate with S&N by providing reasonable assistance to permit S&N
to manufacture, or have manufactured, the New Equipment; provided that S&N shall
reimburse Westaim for all out-of-pocket costs it incurs in providing such
assistance.

ARTICLE 12

MISCELLANEOUS

Section 12.1 Force Majeure

Subject to Section 4.1.4:

	 	12.1.1	 	Means an event, the cause of which is beyond the reasonable control of the Party
affected thereby and which could not reasonably have been foreseen and provided
against, including, without limitation, acts of God, strikes, lock-outs or other
labour or industrial disturbances, accidents, fires, explosions, weather conditions
materially affecting or preventing work, inability to secure fuel, power, materials,
contractors or labour, mechanical breakdown, failure of equipment or machinery, delays
in transportation, wars, civil commotion, riot, sabotage, interruptions by government,
court orders, or orders or rulings by regulatory bodies; provided that an event caused
by or materially contributed to by a Party’s financial difficulty shall not be
included as a force majeure event.

 

- 32 -

	 	12.1.2	 	Notwithstanding any other provision of this Agreement, if by reason of
Force Majeure, either Party is wholly or partly unable to perform certain of its
obligations under this Agreement, it shall be relieved of those obligations to
the extent, and for the period, that it is affected by Force Majeure, provided
that the affected Party gives the other Party prompt notice of such inability and
nature, cause and expected duration of the Force Majeure. The Party affected by
Force Majeure shall use all reasonable efforts to remedy the situation and
remove, so far as possible and with reasonable dispatch, the cause of its
inability to perform, provided that there shall be no obligation on a Party so
affected to settle labour disputes or to test or to refrain from testing the
validity of any order, regulation or law in any court having jurisdiction. The
Party affected by Force Majeure shall give prompt notice of the cessation and the
cause thereof, and shall provide reports at least every seven (7) days as to its
progress in dealing with the Force Majeure. Should the Force Majeure event
continue for a period longer than thirty (30) business days, the Party shall no
longer be relieved of its obligations under this Agreement.

Section 12.2 Notice

Any notice or other communication required or permitted to be given hereunder shall be in writing
and shall be delivered in person, transmitted by facsimile or similar means of recorded electronic
communication or sent by registered mail, charges prepaid, addressed as follows:

if to S&N:

Smith & Nephew, Inc.

11775 Starkey Road

P.O. Box 1970

Largo, Florida, 33799-1970

Attention: President

Facsimile: (727) 398-4206

with a copy to:

Smith & Nephew, Inc.

1450 Brooks Road 

Memphis, Tennessee, 38116

Attention: General Counsel

Facsimile: (901)396-7824

if to Westaim:

Westaim Biomedical Corp.

10102—114 Street

Fort Saskatchewan, Alberta T8L 3W4

Attention: President

Facsimile: (780) 992-5300

 

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with a copy to:

Westaim Biomedical Corp.

1010, 144—4th Avenue S.W.

Calgary, Alberta T2P 3N4

Attention: President

Facsimile: (403) 237-8181

and a copy to:

Westaim Biomedical Corp.

One Hampton Road, Suite 302,

Exeter, New Hampshire 03833

Attention: President

Facsimile: (603)778-6393

Any such notice or other communication shall be deemed to have been given and received on the day
on which it was delivered or transmitted (or, if such day is not a Business Day, on the next
following Business Day) or, if mailed, on the fifth (5th) Business Day following the
date of mailing; provided, however, that if at the time of mailing or within five (5) Business
Days thereafter there is or occurs a labour dispute or other event that might reasonably be
expected to disrupt the delivery of documents by mail, any notice or other communication hereunder
shall be delivered or transmitted by means of recorded electronic communication as aforesaid.
Either Party may at any time change its address for service from time to time giving notice to the
other Party in accordance with this Section 12.2.

Section 12.3 Waivers

No waiver of any term, provision, or condition of this Agreement, whether by conduct or
otherwise, in any one or more instances, shall be deemed to be construed as a further or
continuing waiver of any such term, provision, or condition of this Agreement unless reduced to
writing signed by an authorized representative of each Party.

Section 12.4 Dispute Resolution

Should any dispute arise between the Parties concerning this Agreement, the Parties agree to
first attempt to resolve the dispute in good faith. If within sixty (60) days of one Party
providing written notice of such dispute to the other Party such dispute is not resolved as
aforesaid, then the dispute shall immediately thereafter be referred for resolution to the
President of T.J. Smith & Nephew Limited, and the President of Westaim before resorting to any
other forum for a remedy. If resolution of the dispute is not reached between the Presidents within
sixty (60) days of such dispute being referred to the Presidents, then the Parties shall refer the
dispute to binding arbitration by a single arbitrator under the Arbitration Act (Ontario) which
shall be held at a neutral site in Toronto, Ontario, Canada.

Section 12.5 Assignment

The Parties agree that this Agreement, (except for assignments by Westaim pursuant to Section

 

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12.6 or 12.7 which S&N shall be deemed to have consented to, assignments by S&N as a part
of the disposition by S&N of all or substantially all of its wound care business and the
assignment by a Party to one or more of its Affiliates, which may be done without consent provided
the Party remains responsible to the other Party for the performance of this Agreement by its
Affiliate) may not be assigned or otherwise transferred, nor may any right or obligations
hereunder be assigned or transferred directly or indirectly by either Party, whether voluntary, by
operation of law or otherwise, without the written consent of the other Party, such consent not to
be unreasonably withheld. In connection with Westaim determining whether to consent to an
assignment, the Parties agree that Westaim shall be deemed to be acting reasonably if it withholds
its consent in circumstances where the proposed assignee is not a corporation of equal or greater
financial resources, marketing strength and expertise (including in the burn and wound care area),
and stature in the burns and wounds industry as S&N. Any purported assignment in violation of this
Section 12.5 shall be void. Any permitted assignee (which
includes assignments by Westaim pursuant
to Section 12.6 or 12.7 and assignments by S&N as a part of the disposition by S&N of all or
substantially all of its wound care business, but excludes assignments to Affiliates without
consent) shall assume all obligations of the assignor under this Agreement other than the
obligations set out in Sections 12.6 and 12.7 and the assignor shall be released from all
obligations under this Agreement, in each case from the date of such assignment. For
clarification, nothing in this Agreement shall restrict in any manner whatsoever the ability to
transfer shares in the capital of Westaim and its Affiliates, issue shares in the capital of
Westaim or its Affiliates or to otherwise effect a change of control of Westaim or one or more of
its Affiliates.

Section 12.6 Right of First Offer

If Westaim desires to sell all or substantially all of its assets used to manufacture and supply
Product to S&N under this Agreement, including without limitation assignment of this Agreement,
(the “Manufacturing Assets”), Westaim shall give written notice (the “Transfer Notice”) to S&N of
that desire. The Transfer Notice shall describe the Manufacturing Assets in sufficient detail to
permit S&N to make an informed decision regarding whether to offer to purchase the Manufacturing
Assets and on what terms. During the [***] (the “Negotiation Period”) immediately
following the date the Transfer Notice is given, Westaim and S&N shall in good faith negotiate the
sale and purchase of the Manufacturing Assets by Westaim to S&N. If during the Negotiation Period
S&N determines that it is not interested in purchasing the Manufacturing Assets, it shall forthwith
advise Westaim of such determination in writing, and Westaim shall be free to sell the
Manufacturing Assets to any other Person on any terms at any time, and the provision of this
Section 12.6 shall have no further application. If during the Negotiation Period Westaim and S&N
reach an agreement concerning the sale and purchase of the Manufacturing Assets and such sale and
purchase transaction is completed, the provisions of this Section 12.6 shall have no further
application. If Westaim and S&N fail to reach an agreement during the Negotiation Period
concerning the sale and purchase of the Manufacturing Assets, S&N shall be entitled at any time
prior to the expiry of the Negotiation Period to make an offer (the “S&N Offer”) to purchase the
Manufacturing Assets, which offer shall be maintained in confidence by Westaim. If S&N does not
make the S&N Offer by the expiry of the Negotiation Period, Westaim shall be free to sell the
Manufacturing Assets to any other person on any terms at any time, and the provisions of this
Section 12.6 shall have no further application. The S&N Offer shall be in writing and shall
indicate the offered price (“S&N

 

- 35 -

Purchase Price”) for the purchase of the Manufacturing Assets and the proposed terms (“S&N Purchase
Terms”) for such purchase. The S&N Offer shall be capable of acceptance by Westaim for a period
(the “Transfer Period”) ending no earlier than 11:59 p.m. Calgary time on the [***] following
the expiry of the Negotiation Period. The S&N Offer shall specify a closing date (the “Transfer
Closing Date”) for the sale and purchase, which shall not be earlier than [***] or more
than [***] after the date the S&N Offer is accepted. The S&N Purchase Price shall
be paid in cash by S&N on the Transfer Closing Date. During the Transfer Period, Westaim shall have
the option of either selling the Manufacturing Assets to S&N pursuant to the S&N Offer or selling
the Manufacturing Assets to a third party on terms no less favourable than the terms of the S&N
Offer, having regard for both the S&N Purchase Price and the S&N Purchase Terms. During the [***]
(the “Free Transfer Period”) following the later of the expiry of the Transfer Period, or
the date it determined that the sale pursuant to an accepted S&N Offer will not close for any
reason other than the default of Westaim, Westaim shall be entitled to sell the Manufacturing
Assets to a third party on terms no less favourable than the terms of the S&N Offer, having regard
for both the S&N Purchase Price and the S&N Purchase Terms. Any transfer of the Manufacturing
Assets made after the last day of a Free Transfer Period, other than where S&N did not deliver the
S&N Offer, without strict compliance with the terms, provisions and conditions of this Section 12.6
and the other terms, provisions and conditions of this Agreement, shall be null, void and of no
force or effect. The provisions of this Section 12.6 shall not apply to the transfer of the
Manufacturing Assets to a transferee that is an Affiliate of Westaim; provided that the Affiliate
agrees to be bound by the terms of this Section 12.6. Any assignment of this Agreement to a third
party as a part of the transfer of the Manufacturing Assets pursuant to this Section 12.6, whether
as a result of S&N not making the S&N Offer by the expiry of the Negotiation Period or as a result
of Westaim selling the Manufacturing Assets to a third party during the Free Transfer Period on
terms no less favourable than the S&N Offer, shall be considered an assignment to a permitted
assignee for purposes of Section 12.5.

Section 12.7 Right of First Refusal

If Westaim receives from a competitor of S&N in the wound care market a bone fide offer
(“Qualifying Offer”) to purchase the Manufacturing Assets and Westaim desires to accept the
Qualifying Offer, Westaim shall give written notice (the “First Refusal Transfer Notice”) to S&N of
that desire. The First Refusal Transfer Notice shall describe the Manufacturing Assets and the
proposed price (“Offered Purchase Price”) for the sale of the Manufacturing Assets and the proposed
terms (“Offered Purchase Terms”) for such sale as set forth in the Qualifying Offer. Westaim shall
not be obligated to provide to S&N a copy of the Qualifying Offer or disclose the name of the
competitor of S&N that made the Qualifying Offer. S&N shall have the option (the “Purchase Option”)
to purchase all of the Manufacturing Assets for the Offered Purchase Price and on the Offered
Purchase Terms. The Purchase Option shall be and remain irrevocable for a period (the “First
Refusal Transfer Period”) ending on the earlier of (i) 11:59 p.m. Calgary time on the 10th day
following the date the First Refusal Transfer Notice is given by Westaim to S&N; and (ii) 11:59 pm
Calgary time on the Business Day prior to the day the Qualifying Offer expires pursuant to its
terms. S&N may elect to exercise the Purchase Option by giving written notice of its election to
Westaim, which exercise shall be maintained in confidence by Westaim. If S&N elects to exercise the
Purchase Option, S&N’s notice of election shall fix a closing date (the ‘First Refusal Transfer
Closing Date”) for the purchase of the Manufacturing Assets, which shall not be later than

 

- 36 -

the Business Day prior to the expiry of the Qualifying Offer. The Offered Purchase Price shall be
paid in cash by S&N on the First Refusal Transfer Closing Date. If S&N does not exercise the
Purchase Option or if the Purchase Option is exercised but the transition does not close by the
expiry of the First Refusal Transfer Period for any reason other than the default of Westaim,
Westaim shall be permitted to accept the Qualifying Offer or another offer on substantially similar
or better terms at any time during the period ending 365 days
(the “First Refusal Free Transfer
Period”) after the expiry of the First Refusal Transfer Period. If Westaim does not transfer the
Manufacturing Assets pursuant to the Qualifying Offer or another offer on substantially similar or
better terms within a First Refusal Free Transfer Period, Westaim’s right to transfer the
Manufacturing Assets pursuant to this Section 12.7 shall cease and terminate. Any transfer of the
Manufacturing Assets made after the last day of the First Refusal Free Transfer Period without
strict compliance with the terms, provisions and conditions of this Section 12.7 and the other
terms, provisions and conditions of this Agreement, shall be null, void and of no force or effect.
Any assignment of this Agreement to a third party as part of the transfer of the Manufacturing
Assets pursuant to this Section 12.7, whether as a result of S&N not exercising the Purchase Option
or as a result of S&N exercising the Purchase Option but the transaction not closing by the expiry
of the First Refusal Transfer Period for any reason other than the default of Westaim, shall be
considered an assignment to a permitted assignee for purposes of Section 12.5.

Section 12.8 Limitation

The maximum aggregate liability of Westaim under this Agreement, the Asset Purchase Agreement, the
License and Distribution Agreement and all other agreements and documents referred to therein
shall at no time exceed [***]. Neither Party shall have any
liability to the other Party or any other Person pursuant to this Agreement for any special,
indirect or consequential damages, including but not limited to loss of profits, loss of business
opportunities or loss of business investment.

Section 12.9 Survival

The representations and warranties of the Parties contained in this Agreement, in the Schedules
annexed to this Agreement or in any certificate or other document delivered or given pursuant to
this Agreement shall survive the expiration of the Term and will remain in full force and effect
for a period of [***] months following such expiration except for any representation and
warranty in respect of which a claim based on fraud or intentional misrepresentation is made, which
in each case shall be unlimited as to duration (“Survival Period”). Any Claim for indemnification
made during the Survival Period will result in the representations and warranties relating thereto
remaining in effect for purposes of indemnification notwithstanding such claim may not be resolved
within the Survival Period. The covenants set forth herein will survive without limitation. All
representations, warranties and covenants and agreements made by the Parties will not be affected
by any investigation made by and on behalf of a Party and will not be deemed merged into any
instruments or agreements delivered in connection with this Agreement or otherwise in connection
with the transactions contemplated hereby. Except as expressly provided in this Agreement, neither
Party makes any representation or warranty of any kind to the other Party, express or implied.

 

- 37 -

Section 12.10 Integration Clause

This Agreement is the sole agreement with respect to the subject matter hereof, and supersedes all
proposals, negotiations, conversations, discussions, agreements and/or representations, whether
oral or written, including any industry custom or past dealing between the Parties relating to the
subject matter of this Agreement. The Parties agree that any and all obligations between the
Parties that are outside the terms of this Agreement and that relate to the subject matter of this
Agreement that preceded the Effective Date of this Agreement have been satisfactorily executed or
are null and void.

Section 12.11 Independent Contractors

	 	12.11.1	 	This Agreement shall not constitute or give rise to an agency, partnership
or joint venture between the Parties and each Party’s performance hereunder
is that of a separate, independent entity.
	 
	 	12.11.2	 	Nothing in this Agreement shall be deemed to be the grant by either Party
to the other of any right, title or interest in any product, material or
proprietary rights of the other except as may be expressly provided for in this
Agreement.

Section 12.12 Severability and Survival

To the extent that any provision of this Agreement shall be prohibited by or held to be invalid or
unenforceable under applicable law, such provision shall be ineffective to the extent of such
prohibition, invalidity, or unenforceability, without invalidating the remainder of such provision
or the remaining provisions of this Agreement.

Section 12.13 U.S. Dollars

Unless otherwise provided, any reference in this Agreement to dollars shall be to U.S. dollars.

Section 12.14 Amendment of Agreement

No change, modification, extension, termination, waiver or other amendment of this Agreement or
any of the provisions contained herein, shall be valid unless made in writing and signed by a duly
authorized representative of each Party.

Section 12.15 Expenses

Each Party agrees to pay, without right of reimbursement from the other Party, the costs incurred
by such Party incident to the preparation and execution of this Agreement and performance of its
obligations hereunder, including without limitation the fees and disbursements of legal counsel,
accountants and consultants employed by such Party in connection with the transactions contemplated
by this Agreement.

 

 

Section 12.16 Governing Law and Attornment

This Agreement is subject to and shall be governed by the laws of the Province of Alberta (without
giving effect to the conflict of law provisions thereof) and the Parties agree to irrevocably
attorn to the jurisdiction of the courts of Alberta.

Section 12.17 Counterparts

This Agreement may be executed in several counterparts, each of which when so executed shall be
deemed to be an original and shall have the same force and effect as an original but such
counterparts together shall constitute but one and the same instrument.

IN WITNESS WHEREOF, the Parties hereto have each caused this Agreement to be executed by their duly
authorized representatives as of the date first above written.

	 	 	 	 	 	 	 	 	 
	Westaim Biomedical Corp.	 	Smith & Nephew Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	Per:
	 	/s/ Scott H. Gillis	 	Per:	 	/s/ David A. Trollope	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Per:

	 	/s/ [ILLEGIBLE]
	 	Per:
	 	/s/ Stephen Lang	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	Smith & Nephew, Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Per:
	 	/s/ David A. Trollope	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Per:
	 	/s/ Stephen Lang	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	T.J. Smith & Nephew Limited	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Per:
	 	/s/ David A. Trollope	 	 
	 

	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Per:
	 	/s/ Stephen Langexv10w12

 

[***]
indicates that text has been omitted which is the subject of a
confidential treatment request. This text has been filed separately
with the SEC.

Exhibit 10.12

WESTAIM BIOMEDICAL CORP.

- and -

WESTAIM BIOMEDICAL INC.

(as Grantors)

- and -

MONTREAL TRUST COMPANY OF CANADA

(as Trustee)

 

TRUST INDENTURE

 

May 8,2001

Fraser Milner Casgrain LLP

Gowling Lafleur Henderson LLP

 

 

- i -

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	Page	 
	ARTICLE 1 INTERPRETATION
	 	 	2	 
	 
	 	 	 	 
	1.1    Definitions
	 	 	2	 
	1.2    Interpretation not Affected by Headings
	 	 	6	 
	1.3    Extended Meaning
	 	 	6	 
	1.4    Applicable Law
	 	 	6	 
	1.5    Language
	 	 	7	 
	1.6    Time of Essence
	 	 	7	 
	1.7    Day not a Business Day
	 	 	7	 
	1.8    Meaning of Day
	 	 	7	 
	1.9    References to Dollar Amounts
	 	 	7	 
	1.10 Currency Conversion
	 	 	7	 
	1.11 Severability
	 	 	7	 
	1.12 Schedules
	 	 	7	 
	 
	 	 	 	 
	ARTICLE 2 LICENSES
	 	 	8	 
	 
	 	 	 	 
	2.1 Registration of Licenses
	 	 	8	 
	2.2 Licensees to Rank Equally
	 	 	9	 
	2.3 Certification of Registration by Trustee
	 	 	9	 
	 
	 	 	 	 
	ARTICLE 3 REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP
	 	 	9	 
	 
	 	 	 	 
	3.1 Register
	 	 	9	 
	3.2 Transferee Entitled to Registration
	 	 	10	 
	3.3 Charges for Transfer
	 	 	10	 
	3.4 Registers Open for Inspection
	 	 	10	 
	3.5 Ownership of Licenses
	 	 	10	 
	3.6 Record of Payments
	 	 	11	 
	 
	 	 	 	 
	ARTICLE 4 SECURITY AND RELATED COVENANTS
	 	 	11	 
	 
	 	 	 	 
	4.1 Grant of Security Interests
	 	 	11	 
	4.2 Security for Obligations
	 	 	12	 
	4.3 Effect of License Security
	 	 	12	 
	4.4 Attachment
	 	 	13	 
	4.5 Use of Collateral
	 	 	13	 
	4.6 Release and Discharge
	 	 	13	 
	4.7 Power of Attorney
	 	 	14	 
	4.8 Exception for Contractual Rights
	 	 	14	 
	4.9 Further Assurances
	 	 	14	 
	 
	 	 	 	 
	ARTICLE 5 COVENANTS
	 	 	15	 
	 
	 	 	 	 
	5.1 General Covenants of the Corporations
	 	 	15	 
	5.2 Annual Certificate of Compliance
	 	 	16	 
	5.3 Trustee’s Remuneration and Expenses
	 	 	16	 
	5.4 Performance of Covenants by Trustee
	 	 	17	 

 

 

- ii -

	 	 	 	 	 
	 	 	Page	 
	ARTICLE 6 DEFAULT AND ENFORCEMENT
	 	 	17	 
	 
	 	 	 	 
	6.1   Events of Default
	 	 	17	 
	6.2   Remedies
	 	 	18	 
	6.3   Waiver of Default
	 	 	21	 
	6.4   Restriction on Trustee
	 	 	21	 
	6.5   Reassignment to Westaim
	 	 	21	 
	6.6   Use of Proceeds
	 	 	21	 
	6.7   Proceedings by the Trustee
	 	 	22	 
	6.8
  Suits by Licenseholders
	 	 	22	 
	6.9   Application of Moneys Received by Trustee
	 	 	23	 
	6.10 Distribution of Proceeds
	 	 	23	 
	6.11 Remedies Cumulative
	 	 	23	 
	 
	 	 	 	 
	ARTICLE 7 SUCCESSOR CORPORATIONS
	 	 	24	 
	 
	 	 	 	 
	  7.1 Certain Requirements in Respect of Merger, etc
	 	 	24	 
	  7.2 Vesting of Powers in Successor
	 	 	24	 
	 
	 	 	 	 
	ARTICLE 8 MEETINGS OF LlCENSEHOLDERS
	 	 	25	 
	 
	 	 	 	 
	8.1   Right to Convene Meeting
	 	 	25	 
	8.2   Notice
	 	 	25	 
	8.3   Chairman
	 	 	25	 
	8.4   Quorum
	 	 	25	 
	8.5   Powers of Adjournment
	 	 	26	 
	8.6   Show of Hands
	 	 	26	 
	8.7   Poll
	 	 	26	 
	8.8   Voting
	 	 	26	 
	8.9   Corporations and Trustee May Be Represented
	 	 	27	 
	8.10 Powers Exercisable by Extraordinary Resolution
	 	 	27	 
	8.11
Powers not Exercisable by Extraordinary Resolution
	 	 	29	 
	8.12
Meaning of “Extraordinary
Resolution”
	 	 	29	 
	8.13 Powers Cumulative
	 	 	30	 
	8.14 Minutes
	 	 	30	 
	8.15 Instrument in Writing
	 	 	30	 
	8.16 Binding Effect of Resolutions
	 	 	30	 
	8.17 Evidence of Rights of Licenseholders
	 	 	31	 
	 
	 	 	 	 
	ARTICLE 9 SUPPLEMENTAL INDENTURES
	 	 	31	 
	 
	 	 	 	 
	  9.1 Execution of Supplemental Indentures
	 	 	31	 
	 
	 	 	 	 
	ARTICLE 10 CONCERNING THE TRUSTEE
	 	 	32	 
	 
	 	 	 	 
	10.1 Rights and Duties of Trustee
	 	 	32	 
	10.2 Evidence
	 	 	33	 
	10.3 Experts, Advisers and Agents
	 	 	33	 
	10.4 Documents, Moneys, etc. Held by Trustees
	 	 	34	 
	10.5 Action by Trustee to Protect Interests
	 	 	34	 
	10.6 Trustee not Required to Give Security
	 	 	34	 
	10.7 Protection of Trustee
	 	 	34	 

 

 

- iii -

	 	 	 	 	 
	 	 	Page	 
	10.8   Replacement of Trustee
	 	 	36	 
	10.9   Conflict of Interest
	 	 	37	 
	10.10 Acceptance of Trust
	 	 	37	 
	10.11 Trust Indenture Legislation
	 	 	37	 
	10.12 Evidence and Authority to Trustee
	 	 	38	 
	10.13 Authority to Carry on Business
	 	 	39	 
	10.14 Assignment and Enurement
	 	 	39	 
	 
	 	 	 	 
	ARTICLE 11 GENERAL
	 	 	40	 
	 
	 	 	 	 
	11.1 Notice to Licenseholders
	 	 	40	 
	11.2 Notice to Trustee
	 	 	40	 
	11.3 Notice to the Corporations
	 	 	40	 
	11.4 Mail Service Interruption
	 	 	41	 
	 
	 	 	 	 
	ARTICLE 12 EXECUTION
	 	 	42	 
	 
	 	 	 	 
	12.1 Counterparts and Formal Date
	 	 	42	 

SCHEDULE A — LIST OF WESTAIM PATENTS AND PATENT APPLICATIONS

SCHEDULE B — FORM OF CERTIFICATE

 

 

     THIS TRUST INDENTURE made as of May 8,2001.

AMONG:

     WESTAIM BIOMEDICAL CORP., a corporation incorporated under the
laws of the Province of Alberta

OF THE FIRST PART

- and -

     WESTAIM BIOMEDICAL INC., a corporation incorporated under the
laws of Delaware

OF THE SECOND PART

     (each a “Corporation” and collectively referred to as the
“Corporations” or “Westaim”)

- and -

     MONTREAL TRUST COMPANY OF CANADA, a trust company incorporated under
the laws of Canada and duly authorized to carry on a trust business
in each Province of Canada

                 (the “Trustee”)

OF THE THIRD PART

               WHEREAS Westaim is the owner of the Westaim Patent Rights and has entered into a License
Agreement pursuant to which it has granted Licenses to the Initial Licensee in respect thereof;

               AND WHEREAS the Initial Licensee has requested, and the Corporations have agreed to grant,
certain security in the Westaim Patent Rights to secure the Obligations of the Corporation in
respect of the Licenses granted to the Initial Licensee as herein provided;

 

 

- 2 -

          AND WHEREAS Westaim anticipates granting additional Licenses with respect to the Westaim
Patent Rights from time to time and intends that the Holders thereof shall also have the benefit
of such security hereunder;

          AND WHEREAS each of the Corporations, under its respective constating documents and the laws
relating thereto, is duly authorized to grant the Licenses and the security for the Obligations as
herein provided;

          AND WHEREAS all things necessary have been done and performed to make the Licenses, when
entered into by the Corporations and registered by the Trustee as in this Trust Indenture
provided, legal, valid and binding obligations of the Corporations with the benefits and subject
to the terms of this Trust Indenture;

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

          NOW THEREFORE THIS TRUST INDENTURE WITNESSES and it is hereby agreed and declared as follows:

ARTICLE 1

INTERPRETATION

1.1 Definitions

          In this Trust Indenture, unless there is something in the subject matter or context
inconsistent therewith or unless otherwise expressly provided:

     “Affiliates” means any Person that directly or indirectly controls, is controlled by or under
common control with another Person. A Person shall be deemed to “control” another Person it the
Person owns, directly or indirectly, more than fifty percent of the outstanding voting securities,
capital stock, or other comparable equity or ownership interest of such Person. If the laws of the
jurisdiction in which such Person operates prohibit ownership of more than fifty percent, control
shall be deemed to exist at the maximum level of ownership allowed by such jurisdiction.

     “Assignments” means the specific assignments of each Westaim Patent Right in the appropriate
form for registration at the applicable intellectual property registry offices, to be executed by
Westaim and deposited with the Trustee pursuant to the terms of Article 4 hereof;

     “Authorized Investments” means investments in securities, instruments or other obligations of
the Canadian or United States Government or obligations fully guaranteed by the Canadian or United
States Government, in each case due within one year from the date of purchase and payable in Canada
or the United States of America in Canadian Dollars or U.S. Dollars.

          “Business Day” means any day, other than a Saturday or Sunday, on which banks and other
financial institutions are open for business in Calgary, Alberta.

 

- 3 -

          “Canadian Dollar” or ‘Cdn. $” means a dollar or other equivalent unit in such coin or
currency of the Government of Canada as at the time shall be legal tender for the payment of
public and private debts.

          “Certificate of the Corporations”, ‘Order of the Corporations” or ‘Request of the
Corporations” mean, respectively, a written certificate, order or request signed in the name of
each of the Corporations by (a) any one of its Chairman, Chief Executive Officer, President, or
Chief Financial Officer, or (b) by any Vice-President or the Treasurer together with any other
Vice President or any Assistant Treasurer, Secretary, Assistant Secretary or Director, and may
consist of one or more instruments so executed.

          “Certified Resolution” means a copy of a resolution certified by an officer or Director of a
Corporation to have been duly passed by the Directors thereof and to be in full force and effect
on the date of such certification.

          “Collateral” has the meaning set out in Section 4.1 hereof.

          “Corporations” means Westaim Biomedical Corp., a corporation incorporated under the laws of
the Province of Alberta, and Westaim Biomedical Inc., a corporation incorporated under the laws of
Delaware, and includes any successor corporation thereto, and
“Corporation” means either of them.

          “Counsel” means a barrister, solicitor or attorney or a firm of barristers and solicitors or
attorneys (who may be counsel for the Corporations) retained or employed by the Trustee or
retained or employed by the Corporations and acceptable to the Trustee, acting reasonably.

          “Default” means any event or condition the occurrence of which would, with the lapse of time
or the giving of notice, or both, constitute an Event of Default.

          “Director” means, in respect of either Corporation, a director of the Corporation for the
time being, and “Directors” means the board of directors of such Corporation or, whenever duly
empowered, the executive committee (if any) of the board of directors of the Corporation, for the
time being, and reference without more to action by the Directors means action by the directors of
the applicable Corporation as a board or action by the executive committee of the board as a
committee.

          “Enforcement” means a declaration made by the Trustee at a time at which an Event of Default
shall have occurred and be continuing in accordance with Section 6.2, either in the Trustee’s own
discretion or upon receipt of a Licenseholders’ Request, that the Security constituted by Article 4
has become enforceable.

          “Event of Default” has the meaning set out in Section 6.1(1).

          “Extraordinary Resolution” has the meaning set out in Section 8.12.

          “Indenture Legislation” has the meaning set out in Subsection 10.11(1).

 

- 4 -

          “Initial Licensee” means, collectively, Smith & Nephew Inc., Smith & Nephew, Inc. and
T.J. Smith and Nephew Limited and their respective successors and permitted assigns.

          “License” means a license under the Westaim Patent Rights to make, have made, use, market,
promote, distribute and/or sell (or any one or more of those rights or any other rights as may
have been granted pursuant to a License Agreement) specified products in a specified field in a
specified territory.

          “Licensee” means any person to whom a License is granted by the Corporations, or either of
them, including without limitation, the Initial Licensee, and ‘Licensees” means any two or more or
such persons or all of them as the context may require.

          “License Agreement” means the agreements and instruments pursuant to which a License has been
granted, including all agreements which define the rights in respect of the Westaim Patent Rights
created thereby and prescribe the consideration payable by, and the ongoing obligations of, the
Licensee in respect thereof, as amended, supplemented, restated or replaced from time to time.

          “License Documentation” has the meaning ascribed thereto in Section 2.1.

          “License Security” has the meaning ascribed thereto in Section 4.1
hereof.

          “Licenseholders” or ‘Holders” means the persons whose names are for the time being entered in
the register as holders of Licenses.

          “Licenseholders’ Request” means an instrument signed in one or more counterparts by a Holder
requesting the Trustee to take the action or proceeding specified therein.

          “Lien” means any mortgage, pledge, hypothec, security interest, encumbrance, lien, privilege
or charge of any kind (including any agreement to give any of the foregoing and remedial or
collection rights under any conditional sale or other title retention agreement).

          “Non-Disturbance Agreement” means an agreement in form and substance satisfactory to the
Trustee pursuant to which a person who now has or may acquire any Lien or other interest in the
Westaim Patent Rights agrees to observe and be bound by all of the Licenses from time to time
registered hereunder.

          “Obligations” has the meaning set out in Section 4.2 hereof.

          “Officers’ Certificate” of any person (other than an individual) means a written certificate
signed in the name of such person by any two of its Chairman, Chief Executive Officer, President,
any Vice-President, Treasurer, any Assistant Treasurer, Secretary and any Assistant Secretary, and
may consist of one or more certificates so executed.

 

- 5 -

          “Opinion
of Counsel” means a written (opinion of a firm of barristers and solicitors, who may
be counsel to the Corporations, and who shall be retained by or acceptable to the Trustee, acting
reasonably.

          “Permitted Liens” means, with respect to any person, the following:

	 	(a)	 	Liens for taxes, rates, assessments or other governmental
charges or levies not
yet due, or for which instalments have been paid based on reasonable
estimates
pending final assessments, or if due, the validity of which is being
contested
diligently and in good faith by appropriate proceedings by or on behalf of
that person;
	 
	 	(b)	 	undetermined or inchoate statutory Liens or statutory rights of
distress which
have not at such time been filed or exercised, or which relate to obligations
not
due or payable, or if due, the validity of which is being contested
diligently and
in good faith by appropriate proceedings by or on behalf of that person; and
	 
	 	(c)	 	any Lien provided that (1) the holder thereof has expressly
agreed that, in
respect of the Collateral, such Lien shall be subordinate to the Lien created
in
favour of the Trustee hereunder in all respects, (2) such holder has entered
into
a Non-Disturbance Agreement in favour of the Trustee and the Licensees, and
(3) such holder has agreed that it will not assign or dispose of such Lien
nor any
interest it may acquire in the Westaim Patent Rights except to and in favour
of a
person who has entered into a Non-Disturbance Agreement with the Trustee.

          “PPSA” means the Personal Property Security Act (Alberta) and regulations thereunder, as
amended from time to time.

          “person” means an individual, corporation, body corporate, partnership, joint venture or
other unincorporated association, trust, government or governmental authority.

          “Replacement License” has the meaning ascribed thereto in Section 6.2(a) hereof.

          “Subsidiary” has the meaning ascribed to such term in the Business Corporations Act
(Alberta).

          “Successor” has the meaning set out Section 7.1.

          “Trust Indenture”, “this Trust Indenture”, “Indenture”, “this Indenture”, “hereto”, “herein”,
“hereby”, “hereunder”, “hereof” and similar expressions refer to this Trust Indenture and not to any
particular Article, Section, Subsection, paragraph, subparagraph, clause, subclause or other
portion hereof, and include any and every supplemental indenture; and “supplemental indenture” and
“indenture supplemental hereto” include any and every indenture, deed or instrument supplemental or
ancillary hereto or in implementation hereof; and the expressions “Article”, “Section”,
“Subsection”, “paragraph”, “subparagraph”, “clause” and “subclause” followed by a number and/or a

 

- 6 -

letter mean and refer to the specified Article, Section, Subsection, paragraph, subparagraph,
clause or subclause of this Trust Indenture.

          “Trustee” means Montreal Trust Company of Canada, and, subject to Section 10.14, any
successor to Montreal Trust Company of Canada, for the time being in the trusts hereby created, as
trustee on behalf of the various persons who shall from time to time be Holders.

          “U.S.
Dollar” or “U.S. $” means a dollar or other equivalent unit in such coin or currency of
the United States of America as at the time shall be legal tender for the payment of public and
private debts.

          “Westaim Patent Rights” means all rights owned by Westaim in any of the following:

	 	(a)	 	the patents listed on Schedule A;
	 
	 	(b)	 	any patent issuing on any patent application identified in Schedule A hereto;
and
	 
	 	(c)	 	any patent issuing from any continuing applications of those
patents or patent
applications, including any divisions, continuations, and
continuation-in-part
applications, as well as any patents issuing on any reissue and/or
reexamination
application, and including any patent term restoration of any such patents.

Westaim Patent Rights also includes all rights owned by Westaim in any foreign patents and patent
applications which correspond to those described in the preceding sentence and in any patents or
patent applications that claim improvements made solely by employees of Westaim acting in the
course of their employment or by others acting on behalf of Westaim who have assigned their rights
with respect thereto to Westaim.

          Except for the terms defined in this Indenture, all terms defined in the PPSA which are used
in this Indenture shall have the meanings specified in such Act.

1.2 Interpretation Not Affected by Headings

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

1.3 Extended Meaning

          Words importing the singular number only shall include the plural and vice versa, and words
importing the masculine gender shall include the feminine and neuter genders and vice versa.

1.4 Applicable Law

          This Trust Indenture shall be governed by and construed in accordance with the laws of the
Province of Alberta and the laws of Canada applicable therein.

 

- 7 -

1.5 Language

          The parties hereto expressly request and require that this Trust Indenture and all other
documents related thereto be drawn up in English. Les parties aux
présentes conviennent et exigent
que cette acte de fiducie et tous les documents qui s’y
rattachent soient rédigés en anglais.

1.6 Time of Essence

          Time shall be of the essence of this Trust Indenture.

1.7 Day Not a Business Day

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

1.8 Meaning of Day

          Unless otherwise expressly provided herein, any reference in this Trust Indenture to
anything to be calculated or recorded, on or before, by, as of or after any date shall mean such
thing is to be calculated or recorded, on or before, by, as of or after 4:30 p.m. (Calgary time)
on that date.

1.9 References to Dollar Amounts

          All references in this Trust Indenture and in the Licenses to sums of money shall be,
unless the contrary is expressly indicated, to sums in Cdn. Dollars.

1.10 Currency Conversion

          Where for the purposes of this Trust Indenture it is necessary to convert on any
particular day, or for any particular period, an amount expressed in Cdn. Dollars into U.S.
Dollars, such conversion, unless otherwise expressly provided herein, shall be effected at the
inverse of the noon rate of exchange for such day, or the last day of such period, as reported by
the Bank of Canada for conversion of U.S. Dollars into Cdn. Dollars.

1.11 Severability

          Each of the provisions in this Trust Indenture and each License is distinct and severable
and a declaration of invalidity or unenforceability of any such provision or part thereof by a
court of competent jurisdiction shall not affect the validity or enforceability of any of the other
provisions hereof or thereof.

1.12 Schedules

          The following schedules are annexed hereto and are deemed to be a part hereof:

 

- 8 -

Schedule A
— List of Westaim Patents and Patent Applications

Schedule B — Form of Certificate

ARTICLE 2

LICENSES

2.1
     Registration of Licenses

          The Corporations confirm to the Trustee that they have issued Licenses to the Initial
Licensee and are concurrently delivering to the Trustee the License Documentation applicable
thereto. The Corporations direct the Trustee to record such Licenses in the register maintained by
it pursuant to Section 3.1 hereof and covenant and agree that such Licenses and the Holder thereof
from time to time shall be entitled to the benefit hereof. From time to time the Corporations may
create additional Licenses, and the Licensees thereunder shall be entitled to the benefit hereof
provided that the Corporations deliver the following to the Trustee in respect of any such
License (collectively, the “License Documentation”):

	 	(a)	 	a Certified Resolution authorizing the grant of such License
and the execution,
delivery and performance of the License Agreements relating thereto and
specifying that such License shall be entitled to the benefit hereof;
	 
	 	(b)	 	a Certificate of each Corporation that (1) the rights granted
by such License do
not conflict with the rights granted pursuant to any other License which is
then in
existence and entitled to the benefit hereof, (2) the Corporation is not in
default
in the performance of any of its covenants herein contained, and (3) the
Corporation has complied with all other conditions of this Trust Indenture
in
connection with the grant of such License;
	 
	 	(c)	 	an Order of the Corporations specifying the initial Holder of
such License and
directing the registration of such License pursuant to Section 3.1 hereof;
	 
	 	(d)	 	an Opinion of Counsel in favour of the Trustee confirming the
matters referred
to in clause (b)(l) of this Section and otherwise to the effect that all
legal
requirements in connection with the grant of the License have been complied
with;
	 
	 	(e)	 	an acknowledgement of the Holder of such License agreeing to
be bound by the
provisions of Section 5.3 hereof with respect to the Trustee’s remuneration
and
expenses; and
	 
	 	(f)	 	such reports and certificates, if any, as may be required by
any provision hereof
or of Indenture Legislation in connection therewith.

 

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If and whenever any License Agreement is amended, supplemented, restated or replaced, Westaim
shall promptly provide a copy thereof to the Trustee.

2.2 Licensees to Rank Equally

          Each Licensee shall rank equally in priority with respect to the distribution of their
proportionate share of any Obligations in the nature of damages or economic losses.

2.3 Certification of Registration by Trustee

	 	(1)	 	No License shall entitle the Licensee to the benefit hereof until the Trustee
has
acknowledged in writing to the Corporations and such Licensee that such License has
been accepted for registration hereunder substantially in the form of the
certificate set
out in Schedule B or in some other form as may be approved by the Trustee, whose
approval shall be conclusively evidenced by the certification thereof by or on
behalf of
the Trustee. Such certification by or on behalf of the Trustee upon any License
shall be
conclusive evidence that the License so certified has been registered and is
entitled to
the benefit hereof.
	 
	 	(2)	 	The certificate by or on behalf of the Trustee on Licenses shall not be
construed as a
representation or warranty by the Trustee as to the validity of this Trust Indenture
or of
the License (except the due registration thereof) or as to the performance by the
Corporations of its obligations under this Trust Indenture and the Trustee shall in
no
respect be liable or answerable for the use made of the Licenses or any of them

ARTICLE 3

REGISTRATION, TRANSFER, EXCHANGE AND OWNERSHIP

3.1 Register

	 	(1)	 	Each of the Corporations shall cause to be kept by the Trustee, at the
principal offices
of the Trustee in Calgary, registers in which shall be entered the names and
addresses of
the Holders and particulars of the Licenses held by them respectively, and of all
transfers of such Licenses. Such registration shall be noted on the Licenses by
the
Trustee or other registrar.
	 
	 	(2)	 	No transfer of a License shall be valid for purposes hereof unless made on one
of the
registers herein provided for upon the delivery to the Trustee of an originally
executed
transfer of the License endorsed for transfer by the Holder or the executor,
administrator or other legal representative of, or an attorney for, the Holder duly
appointed by an instrument in writing in form and execution satisfactory to the
Trustee
or other registrar, and upon compliance with such reasonable requirements as the
Trustee or other registrar may prescribe to confirm the effectiveness of such
transfer.

 

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3.2 Transferee Entitled to Registration

          The transferee of a License shall, after the appropriate form of transfer and the
License is lodged with the Trustee or other registrar, and upon compliance with all other
conditions in that behalf required by this Trust Indenture or by law, be entitled to be entered on
the register as the Licenseholder and shall be entitled to the benefit hereof.

3.3 Charges for Transfer

	 	(1)	 	For each License registered or transferred, the Trustee or other registrar may,
subject
to any limitation prescribed by law, make a reasonable charge.
	 
	 	(2)	 	Payment of any such charges and reimbursement of the Trustee or other registrar
or the
Corporations for any transfer taxes or other governmental charges required to be
paid
shall be made by the party requesting such exchange, registration or transfer as a
condition precedent thereto.

3.4 Registers Open for Inspection

          The registers hereinbefore referred to shall at all reasonable times be open for
inspection by the Corporations, the Trustee or any registered Licenseholder. Every registrar
(including the Trustee) from time to time shall:

	 	(a)	 	at the request of the Corporations or of the Trustee, furnish
the Corporations or
the Trustee with a list of the names and addresses of the Holders entered on
the
register kept by such registrar, provided, if such request is being made by
the
Corporations, the Trustee or other registrar may, subject to any limitation
prescribed by law, make a reasonable charge; and
	 
	 	(b)	 	at the request of any registered Licenseholder made at any time
after a Default
or Event of Default has occurred and while such Default or Event of Default
is
continuing, and upon receipt of a Licenseholders’ Request, furnish such a
list to
such Holder;

in each case as soon as practicable following such request and, in any event, not later than two
Business Days thereafter.

3.5 Ownership of Licenses

	 	(1)	 	Unless otherwise required by law, the person in whose name any License is
registered shall for all purposes of this Trust Indenture be and be deemed to be the
owner thereof and all amounts payable or property deliverable under this Trust
Indenture in respect thereof shall be made only to or upon the order in writing of such
Holder.

 

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	 	(2)	 	The Trustee or either of the Corporations may at any time and from time to time
request
a Holder to confirm in writing to the Corporations within 10 days of the date of its
request that it is the beneficial owner of the Licenses registered in its name or,
if the
Holder is not the beneficial owner of the Licenses registered in its name, the name
and
country of residence of the person on whose behalf the Holder is holding the
Licenses.
	 
	 	(3)	 	Neither the Corporations nor the Trustee nor any registrar shall be bound to
take notice
of or see to the performance or observance of any duty owed to a third person,
whether under a trust, express, implied, resulting or constructive or as a result of
any
confirmation provided pursuant to Subsection 3.5(2), in respect of any License or
otherwise, by the Holder or any person whom the Corporations or the Trustee treats,
as permitted or required by law, as the owner or the Holder of such License, and the
Corporations or the Trustee, as the case may be, may transfer such License on the
direction of the person so treated or registered as the Holder thereof, whether
named as
trustee or otherwise, as though that person were the beneficial owner thereof.
	 
	 	(4)	 	The receipt of any such Holder for any amounts payable or property deliverable
hereunder shall be a good discharge to the Corporations and the Trustee for the same
and neither the Corporations nor the Trustee shall be bound to inquire into the
title of
any such Holder save as aforesaid.
	 
	 	(5)	 	Subject to Section 8.17, each of the Corporations and the Trustee may treat the
Holder
of any License as the owner thereof for the purpose of any Licenseholders’ Request,
requisition, direction, consent, instrument or other document.

3.6 Record of Payments

          The Trustee shall maintain accounts and records evidencing each payment of amounts and the
delivery of any property deliverable hereunder in respect of Licenses, which accounts and records
shall constitute, in the absence of manifest error, prima facie
evidence thereof.

ARTICLE 4

SECURITY AND RELATED COVENANTS

4.1 Grant of Security Interests

          As general and continuing collateral security for the prompt and complete payment and
performance of the Obligations, each of the Corporations hereby grants to the Trustee a security
interest (the “License Security”) in all of such Corporation’s right, title and interest in and to
the following, in each case whether now or hereafter existing or in which Westaim now has or
hereafter acquires an interest and wherever the same may be located (the “Collateral”):

	 	(a)	 	each of the Westaim Patent Rights and the rights and interests
in the Westaim Patent Rights which are presently or in the future may be owned,
held (whether

 

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	 	 	 	pursuant to a licence or otherwise) or used by Westaim, in whole or in
part, the right (but not the obligation) to register patents under any
federal law or regulation or any law or regulation of any foreign country
and to apply for, renew and extend the Westaim Patent Rights, the right
(but not the obligation) to sue or bring opposition or cancellation
proceedings in the name of Westaim or in the name of the Trustee or
otherwise for past, present and future infringements of the Westaim Patent
Rights and all rights (but not obligations) corresponding thereto in Canada
and any foreign country; and

	 	(b)	 	any proceeds of the foregoing, including any personal property
derived directly or indirectly from any dealing with the foregoing or the
proceeds of the foregoing;

and in furtherance thereof shall deposit the Assignments with the Trustee.

4.2 Security for Obligations

          This Indenture secures, and the Collateral is continuing collateral security for:

	 	(a)	 	the prompt and complete performance of the obligations of the
Corporations or
either of them to maintain in full force and effect its grant to each
Licensee of a
valid and subsisting License;
	 
	 	(b)	 	the prompt payment or performance in full when due of all
obligations and
liabilities of every nature and kind, whether voluntary or involuntary,
direct or
indirect, absolute or contingent, liquidated or unliquidated, of Westaim to
all or
any of the Licensees or the Trustee for any damages or economic losses
resulting from Westaim’s failure to perform its obligations described in
Section
4.2(a) hereof or the Trustee’s inability to grant Replacement Licenses
hereunder; and
	 
	 	(c)	 	all amounts payable to the Trustee hereunder;

(all such obligations being the “Obligations”).

4.3 Effect of License Security

	 	(1)	 	Subject to Section 2.2, to have and to hold the Collateral and the License
Security hereby created and all rights hereby conferred unto the Trustee, its
successors and assigns, forever, but in trust, nevertheless, for the equal benefit and
security of the Holders of all Licenses from time to time in effect without any
preference or priority of any Licenses over any others thereof except as otherwise
specifically provided herein, and with the powers and authorities and subject to the
terms and conditions mentioned and set for the in this Indenture.

 

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	 	(2)	 	Subject to the terms of any agreement between the Corporation and a Holder or
any person for whom a Holder is acting as agent or trustee, the License Security
hereby created will in no way hinder or prevent the Corporation, until an Event of
Default has occurred and the Trustee has determined to enforce the security of this
Indenture, from disposing of or dealing with the subject matter of the License
Security in the ordinary course of its business and for the purpose of carrying on
the same so long as it remains subject to this Indenture; provided that such action
is not in breach of any specific provision of, or covenant in, this Indenture.

4.4 Attachment

          The Corporations acknowledge conclusively that they and the Trustee intend the security
interests in the Collateral to attach immediately upon the execution of this Indenture, and in the
case of Collateral in which the Corporations subsequently acquire rights, contemporaneously with
either Corporation acquiring rights therein. If from time to time Westaim acquires or develops
patents which form part of the Westaim Patent Rights but are not then the subject of an Assignment,
the Corporations shall promptly execute and deliver to the Trustee an Assignment thereof. Westaim
acknowledges conclusively that value has been given.

4.5 Use of Collateral

          Unless and until Enforcement shall have occurred and is continuing, Westaim shall be
permitted to retain and exercise such of the Westaim Patent Rights as have not been granted to
Holders pursuant to Licenses that are then in effect.

4.6 Release and Discharge

          In addition to any other provisions of this Indenture regarding release of the License
Security, if at any time:

	 	(a)	 	all Licenses should cease to remain in effect or are otherwise
terminated or
cancelled; or
	 
	 	(b)	 	Canadian law should be amended or judicially interpreted (by an
appeal body
of a superior court of Alberta or Ontario or by the Supreme Court of Canada)
such that licenses of the nature of the Licenses cannot be disclaimed,
repudiated
or terminated by a trustee in bankruptcy of the licensor thereunder or a
receiver
or receiver and manager of such licensor’s property and assets and such that,
notwithstanding such bankruptcy or receivership, the licensees shall be
entitled
to continue to make use in accordance with such licenses of the intellectual
property subject thereto during the license period contemplated by such
licenses
without risk of such disclaimer, repudiation or termination, then upon the
receipt
by Trustee of (1) a Request of the Corporations that the License Security be
released, (2) evidence that the Westaim Patent Rights are not then subject to

 

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	 	 	 	any Liens (or, if any such Liens are in existence, Non-Disturbance
Agreements in respect thereof), (3) an Opinion of Counsel as to such
matters as the Trustee may reasonably request, and (4) evidence that copies
of items (1) and (3) have been provided to each of the Holders,

then, without in any way changing, diminishing or prejudicing the rights of the Holders under the
License Agreements then in effect, and upon payment of all costs, charges and expenses properly
incurred by the Trustee in relation to these presents and all interest thereon and the
remuneration of the Trustee, all as provided in and pursuant to Section 5.3, or upon provision
satisfactory to the Trustee being made therefore, the Trustee shall, at the request of each of the
Corporations, execute and deliver to each of the Corporations such deeds or other instruments as
shall be requisite to evidence the satisfaction and discharge of the security created pursuant
hereto and to release each of the Corporations from its covenants herein contained except those
relating to the indemnification of the Trustee. In such event the Trustee shall deliver up to each
of the Corporations all Assignments and cash or other property, if any, remaining in its
possession hereunder.

4.7 Power of Attorney

          Westaim hereby irrevocably appoints the Trustee as attorney for Westaim, with full authority
in the place and stead of Westaim and in its name or otherwise, from time to time at any time
after the occurrence of and during the continuance of an Event of Default, to execute and deliver
on its behalf (i) corresponding forms of assignment for registration at the corresponding offices
in each other jurisdiction where the registration of Assignments may from time to time be
desirable or appropriate, and (ii) any other document or instrument as may be reasonably necessary
to give effect to all such Assignments and the registration thereof. Such power of attorney shall
be a power coupled with an interest.

4.8 Exception for Contractual Rights

          The License Security granted hereby does not and will not extend to, and Collateral will not
include, any agreement, right, franchise, license or permit (the “contractual rights”) to which
either Corporation is a party or of which either Corporation has the benefit, to the extent that
the creation of the License Security herein would constitute a breach of the terms of or permit
any person to terminate such contractual rights, but the applicable Corporation must hold its
interest therein in trust for the Trustee and will assign such contractual rights to the Trustee
forthwith upon obtaining the consent of the other party thereto.

4.9 Further Assurances

          Each of the Corporations shall from time to time take all such action and execute and deliver
all such deeds, instruments, agreements, financing statements or registration forms as may in the
Opinion of Counsel be required to further perfect or protect the security interests and charges
created by this Article 4, and shall cause the registration, filing or recording of each such deed,
instrument, agreement, financing statement or registration form in each jurisdiction in which, in
the Opinion of

 

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Counsel, such registration, filing or recording may be necessary or of material advantage in
perfecting, maintaining or protecting the security hereby created or intended to be created hereby
within a reasonable time. All such further assurances shall be at the expense of the Corporations.

ARTICLE 5

COVENANTS

5.1 General Covenants of the Corporations

          Each of the Corporations covenants with the Trustee that so long as any Licenses remain
outstanding:

	 	(a)	 	it will at all times comply with all of the provisions of this
Trust Indenture to be
complied with by it;
	 
	 	(b)	 	it shall duly and timely pay all taxes, including all
instalments on account of taxes,
and all taxes required to be withheld and collected by it, and shall duly and
timely file all tax returns with complete and correct information thereon,
and
shall pay and discharge all obligations incidental to any statutory lien or
deemed
trust imposed upon it which if unpaid might become a Lien on any of the
Westaim Patent Rights;
	 
	 	(c)	 	it shall keep its chief executive office and the office where
it keeps its records
concerning the Collateral within the Province of Alberta; or, upon not less
than
thirty (30) days prior written notice to the Trustee, at such other location
or
locations in Canada or the United States where all necessary actions have
been
taken to maintain the perfected nature of the License Security created
hereby;
	 
	 	(d)	 	it will not take any actions or fail to perform any of its
duties or obligations
under this Indenture such that after giving effect to such action or inaction
the
Trustee will not then, or with the passage of time cease to, have a perfected
security interest in any of the Collateral;
	 
	 	(e)	 	from time to time, the Corporations, at their own expense, will
promptly execute
and deliver all further instruments and documents, and take all further
action,
that may be necessary or desirable, or that the Trustee may reasonably
request,
in order to perfect and protect any security interest granted or purported to
be
granted hereby (including the License Security) or to enable the Trustee to
exercise and enforce its rights and remedies hereunder with respect to any
Collateral. Without limiting the generality of the foregoing, the
Corporations
will: (i) execute and file such financing or financing change statements,
or
amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as the Trustee may request, in order to perfect
and
preserve the security interests granted or purported to be granted hereby

 

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	 	 	 	(including the License Security), (ii) use reasonable commercial efforts to
obtain any necessary consents of third parties to the grant and perfection
of a security interest and assignment to the Trustee with respect to any
Collateral, and (iii) at the Trustee’s request, appear in and defend any
action or proceeding that may affect the Corporation’s title to or the
Trustee’s security interest in all or any part of the Collateral;

	 	(f)	 	notify the Trustee of any change in such Corporation’s name or
identity within
15 days of such change;
	 
	 	(g)	 	except pursuant to Article 7, the Corporations will continue to
be the owners of
the Westaim Patent Rights, and shall not sell, assign (by operation of law
or
otherwise) or otherwise dispose of any interest in the Collateral the
disposition
of which would adversely affect, in any way, its ability to perform the
Obligations, nor create, suffer or permit to exist any Liens affecting the
Collateral other than Permitted Liens;
	 
	 	(h)	 	diligently keep reasonable records respecting the Collateral; and
	 
	 	(i)	 	take all reasonable steps consistent with its past practices
necessary to protect the secrecy of all trade secrets relating to the products
and services sold or delivered under or in connection with the Collateral,
including without limitation entering into confidentiality agreements with
employees and labelling and restricting access to secret information and
documents.

5.2 Annual Certificate of Compliance

          Within 120 days after the end of each financial year of each of the Corporations and at
any other time if requested by the Trustee, each of the Corporations shall furnish the Trustee
with an Officers’ Certificate, certifying, after reasonable investigation and inquiry, that each
of the Corporations has complied with all covenants or other requirements contained in this Trust
Indenture, the non-compliance with which would, with the giving of notice, lapse of time or
otherwise, constitute an Event of Default hereunder, or, if such is not the case, setting forth
with reasonable particulars the circumstances of any failure to comply and steps taken or proposed
to be taken to eliminate such circumstances and remedy such Event of Default, as the case may be;
such Officers’ Certificate to have attached thereto an updated version of Schedule A to this Trust
Indenture current to the date of such Officers’ Certificate.

5.3 Trustee’s Remuneration and Expenses

          Subject to the next following sentence, each of the Corporations and, pursuant to its
respective acknowledgement delivered in accordance with Subsection 2.1(e), each Licenseholder
(including the Initial Licensee) agrees that it will pay to the Trustee from time to time
reasonable remuneration for its services hereunder and will pay or reimburse the Trustee upon its
request for all

 

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reasonable expenses, disbursements and advances incurred or made by the Trustee in the
administration or execution of the trusts created hereby (including the reasonable fees and
disbursements of its agents, including, without limitation, its Counsel and all other advisers and
assistants not regularly in its employ), both before any default hereunder and thereafter until
all duties of the Trustee under such trusts are finally and fully performed, except any such
expenses, disbursements or advances as may arise from the negligence or wilful misconduct of the
Trustee. Any amount due pursuant to the preceding sentence (but excluding, for greater certainty,
any interest payable pursuant to the next following sentence) shall be payable by either
Corporation and each Licenseholder on a pro rata basis. Any amount due under this Section 5.3 and
unpaid 30 days after request for such payment will bear interest from the expiration of such 30
days at a rate per annum equal to the prime rate with respect to commercial loans in Canadian
currency made in Canada from time to time announced by Royal Bank of Canada, calculated monthly,
not in advance, both before and after the occurrence of an Event of Default, demand and judgment,
until paid, and shall be payable on demand by the Trustee. As at the date hereof, the parties
hereto agree with the Initial Licensee, being the sole Licenseholder hereunder as at the date
hereof, that, until such time as an additional Licenseholder becomes entitled to the benefit
hereof, any amount due pursuant to the first sentence of this Section 5.3 shall be payable by both
(1) either Corporation on the one hand and (2) the Initial Licensee on the other hand, each as to
50% of such amount.

5.4 Performance of Covenants by Trustee

          If either of the Corporations fails to pay or perform any of the Obligations or any of its
covenants contained in this Trust Indenture, the Trustee may itself perform any of such
Obligations or covenants capable of being performed by it, including by granting Replacement
Licenses pursuant to Section 6.2, but will be under no obligation to do so except as provided in
Section 6.2. All sums expended or advanced by the Trustee for such purpose will be repayable as
provided in Section 5.3. No such performance or advance by the Trustee shall relieve either of the
Corporations of any default hereunder or its continuing obligations hereunder.

ARTICLE 6

DEFAULT AND ENFORCEMENT

6.1 Events of Default

	 	(1)	 	Each of the following events is herein sometimes referred to herein as an
“Event of Default”:

	 	(a)	 	either Corporation becomes, admits to being or is declared
bankrupt or
insolvent;
	 
	 	(b)	 	either Corporation makes a general assignment for the benefit of creditors;
	 
	 	(c)	 	proceedings are instituted by or against either Corporation
seeking relief for
such Corporation as a debtor or to adjudicate it bankrupt or insolvent, or
seeking liquidation, winding-up, reorganization, arrangement, adjustment or

 

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	 	 	 	composition of such Corporation or its debts under any law relating to
bankruptcy, insolvency, reorganization or relief of debtors, or seeking the
appointment of a receiver, trustee or similar official of any substantial
portion of Westaim’s property and assets or of the Westaim
Patent Rights;
	 
	 	(d)	 	any notice of intention to enforce security is delivered to
either Corporation by a
person other than the Trustee, or any proceeding is instituted by a person
other
than the Trustee against either Corporation and a substantial portion of its
property and assets or against the Westaim Patent Rights seeking the
possession, foreclosure, retention, sale or other disposition of or to
enforce
security over the same;
	 
	 	(e)	 	a receiver, liquidator, trustee or official with similar powers
is appointed with
respect to, or the holder of security takes possession of, or forecloses or
retains, sells or otherwise disposes of, or proceeds to enforce security over
a
substantial portion of either Corporation’s property and assets or over the
Westaim Patent Rights;
	 
	 	(f)	 	any writ, attachment, execution, distress or similar
process becomes
enforceable against a substantial portion of Westaim’s property and assets or
against the Westaim Patent Rights; or
	 
	 	(g)	 	there is a material breach by either Corporation of its
obligations under this
Indenture which continues for 30 days after the Trustee gives the
Corporations
notice thereof.

	 	(2)	 	The Trustee shall give notice to the Licenseholders and each of the
Corporations, within 30 days after the Trustee becomes aware of the occurrence of an
Event of Default, of every Event of Default so occurring and continuing at the time
the notice is given.

	6.2	 	Remedies

          If any Event of Default shall have occurred and be continuing, the Trustee may exercise in
respect of the Collateral the following remedies:

	 	(a)	 	the Trustee may (and at the written request of all applicable
Licensees shall) proceed to enforce the License Security by registering the
Assignments and concurrently granting to each applicable Licensee a replacement
license (each, a “Replacement License”) on identical terms (excepting out any
executory provisions binding upon Westaim as licensor other than the continued
grant of license and any exclusivity provisions) as the applicable License
originally granted by Westaim to each such Licensee under the applicable
License Agreement (as amended to that date), including the requirement that
such Licensee continue to make financial payments (which would thereafter be
made

 

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	 	 	 	to the Trustee and not to Westaim) and continue to perform any other
obligations that would have been required under the applicable original
License (as amended to that date). Westaim expressly acknowledges that the
grant of one or more Replacement Licenses is a commercially reasonable
exercise of its rights and duties with respect to the Collateral; and
	 
	 	(b)	 	upon registration of the Assignments, the Trustee shall
concurrently grant to
Westaim a license to use all of the rights it had reserved to itself in
respect of the
Westaim Patent Rights.

          In the alternative, if the Trustee is unable to grant, or maintain the effective grant of,
any Replacement Licenses under applicable law, then in addition to all other rights and remedies
provided for herein or otherwise available to it, the Trustee shall have and may exercise all of
the rights and remedies of a secured party on default under the PPSA or any similar personal
property legislation in effect in any relevant jurisdiction (whether or not the PPSA or other
similar legislation applies to the affected Collateral), and in addition:

	 	(c)	 	Westaim will forthwith upon demand assemble and deliver
possession to the
Trustee of all of the Collateral at such place as may be specified by the
Trustee.
In any event, at its option, the Trustee may take such steps as it considers
necessary or desirable to enter into or obtain possession of all or any part
of the
Collateral, including proceedings in any court of competent jurisdiction, and
to
that end Westaim agrees that the Trustee may by its servants, agents or Receiver enter upon lands and premises relating to Westaim’s business where
the Collateral may be found for the purpose of taking possession of or
removing
the Collateral or any part thereof;
	 
	 	(d)	 	the Trustee may seize, collect, realize, borrow money on the
security of, release
to third parties, sell by private or public sale, or otherwise deal with the
Collateral or any part thereof in such manner, upon such terms and conditions
as to credit or otherwise and at such time or times as may seem to it
advisable
and without notice to Westaim (except as otherwise required by any applicable
law), and may charge on its own behalf and pay to others reasonable sums for
expenses incurred and for services rendered (expressly including legal advice
and services, and receivers and accounting fees) in or in connection with
seizing,
collecting, realizing, borrowing on the security of, selling or obtaining
payment of
the Collateral, may add the amount of such sums to the Obligations and all
such
sums shall be secured hereby;
	 
	 	(e)	 	at its option, to be notified to Westaim in the manner provided
by the governing
statute, the Trustee may elect to retain all or any part of the Collateral in
satisfaction of the Obligations to it of the Corporations to the extent
permitted
by applicable laws;

 

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	 	(f)	 	the Trustee may grant extensions of time and other indulgences, take and give
up securities, accept compromises, grant releases and discharges, release any
part of the Collateral to third parties and otherwise deal with Westaim, grantors
of Westaim, sureties and others and with the Collateral and other securities as
the Trustee may see fit without prejudice to the liability of Westaim or the
Trustee’s right to hold and realize the Collateral;
	 
	 	(g)	 	subject to Sections 6.9 and 6.10, all monies collected or received by the
Trustee in respect of the Collateral may be applied on account of such parts of
the Obligations as to the Trustee seems best or may be held unappropriated in a
collateral account or in the discretion of the Trustee may be released to
Westaim, all without prejudice to the Trustee’s claims upon Westaim. If the
monies collected by or received by the Trustee in respect of the Collateral are
not sufficient to satisfy all of the Obligations, Westaim shall remain responsible
to the Trustee for any deficiency, and the Trustee shall be entitled to claim such
amount and all interest and costs associated therewith from Westaim;
	 
	 	(h)	 	subject to Sections 6.9 and 6.10, the Trustee may, if it deems it necessary for the proper
realization of all or any part of the Collateral, pay any Lien or charge that may exist or be
threatened against the same and in every such case the amounts so paid together with costs,
charges and expenses incurred in connection therewith shall be added to the Obligations, and
shall bear interest at the highest rate currently charged to Westaim under its obligations to
the Trustee at the date of payment thereof by the Trustee;
	 
	 	(i)	 	subject to Sections 6.9 and 6.10, if after all the expenses of the Trustee in connection with
the preservation and realization of the Collateral as above described shall have been
satisfied and all of the Obligations, including contingent Obligations, of Westaim shall have
been satisfied and paid in full together with interest, any balance of monies in the hands of
the Trustee arising out of the realization of the Collateral, shall be paid to any person
other than Westaim whom the Trustee knows to be the owner of the Collateral, and in the
absence of such knowledge, such balance shall be paid to Westaim; and
	 
	 	(j)	 	the Trustee shall not be liable or accountable for any failure to exercise its remedies, take
possession of, collect, enforce, realize, sell, lease or otherwise dispose of all or any part
of the Collateral or to institute any proceedings for such purposes. Furthermore, the Trustee
shall have no obligation to take any steps to preserve any rights against prior parties to any
instrument or chattel paper, whether Collateral or proceeds and whether or not in the
Trustee’s possession and shall not be liable or accountable for failure to do so.

 

- 21 -

	6.3	 	Waiver of Default

          In case any Event of Default hereunder has occurred, the Trustee, so long as it has
not become bound to institute any proceedings hereunder by virtue of a Licenseholders’ Request,
shall have the power to waive the default if, in the Trustee’s opinion, the same shall have been
cured or adequate satisfaction made therefor, and in such event to annul any such declaration
theretofore made by the Trustee in the exercise of its discretion, upon such terms and conditions
as to the Trustee may seem advisable, provided that no act or omission either of the Trustee or of
the Licenseholders in the premises shall extend to or be taken in any manner whatsoever to affect
any subsequent default or the rights resulting therefrom.

	6.4	 	Restriction on Trustee

          Notwithstanding the provisions of this Article 6 or any other provisions of this
Indenture, the Trustee shall not exercise any remedies against the Westaim Patent Rights where the
Event of Default consists of proceedings under the Bankruptcy and Insolvency Act (Canada), the
Companies’ Creditors. Arrangement Act (Canada) or similar legislation in respect of a proposal or
plan of compromise or arrangement to or with Westaim’s creditors so long as Westaim continues to
perform the Obligations and its obligations under this Indenture during such proceedings. Such
restriction on the exercise of remedies shall be lifted if the plan of compromise and arrangement
or proposal in such proceedings and any order of a court of competent jurisdiction sanctioning
such plan or proposal does not require Westaim to continue to fully perform the Obligations and its
obligations under this Indenture or if such plan or proposal is not approved by the requisite
number of creditors in each class and sanctioned by final order of a court of competent
jurisdiction.

	6.5	 	Reassignment to Westaim

          If pursuant to Section 6.2 the Trustee shall have registered the Assignments such that
the Westaim Patent Rights become registered in its name, and Westaim should thereafter
successfully restructure prior to the Trustee selling or otherwise disposing of the Westaim Patent
Rights, then:

	 	(a)	 	at the request of Westaim the Trustee shall re-assign all such
Westaim Patent
Rights to Westaim for re-registration in its name, and assign all
Replacement
Licenses to Westaim, and Westaim shall grant to the Licensees any executory
provisions deleted pursuant to Section 6.2(a) hereof; and
	 
	 	(b)	 	Westaim shall concurrently create and deliver replacement
License Security
substantially in the form of Section 4.1 hereof and having the same priority
as
such License Security as the same existed at the time of the Trustee
registering the Assignments.

	6.6	 	Use of Proceeds

          All proceeds received by the Trustee either under a License, a Replacement License or
upon the sale or other disposition of the Collateral will be used firstly to satisfy the Trustee’s
expenses,

 

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then to the satisfaction of the Obligations pursuant to Sections 6.9 and 6.10, and the
balance, if any, will be paid to the party entitled at law.

	6.7	 	Proceedings by the Trustee

	 	(1)	 	Whenever any Event of Default hereunder has occurred and is continuing, but subject
to
the provisions of Section 6.3 and to the provisions of any Extraordinary Resolution:

	 	(a)	 	the Trustee may proceed to enforce the rights of the Trustee
and the
Licenseholders by any action, suit, remedy or proceeding authorized by this
Indenture or permitted by law or by equity and may file such proofs of claim
and other papers or documents as may be necessary or advisable in order to
have the claims of the Trustee and of the Licenseholders lodged in any
bankruptcy, winding-up or other judicial proceeding relative to each of the
Corporations; and
	 
	 	(b)	 	upon receipt of a Licenseholders’ Request the Trustee, subject
to Section 10.1,
shall exercise or take such one or more of the said remedies as the
Licenseholders’ Request may direct or, if such Licenseholders’ Request
contains no direction, as the Trustee may deem expedient.

	 	(2)	 	No such remedy for the enforcement of the rights of the Trustee or of the
Licenseholders shall be exclusive of or dependent on any other such remedy but any
one or more of such remedies may from time to time be exercised independently or in
combination.

	6.8	 	Suits by Licenseholders

          No Licenseholder shall have the right to institute any action, suit or proceeding or to
exercise any other remedy authorized by this Trust Indenture for the purpose of enforcing the
security created hereby on behalf of the Licenseholders or for the execution of any trust or power
hereunder or for the appointment of a custodian, sequestrator, liquidator, receiver or receiver and
manager or any officers with similar powers, or for a receiving order under any bankruptcy or
insolvency legislation or to have each of the Corporations wound up or to file or prove a claim in
any liquidation or bankruptcy proceedings, unless a Licenseholders’ Request and the funding and
indemnity referred to in Section 10.1 have been tendered to the Trustee and the Trustee shall have
failed to act within a reasonable time thereafter; in such case, but not otherwise, any
Licenseholder shall be entitled to take proceedings in any court of competent jurisdiction such as
the Trustee might have taken under Section 6.7, it being understood and intended that no one or
more Licenseholders shall have any right in any manner whatsoever to affect, disturb or prejudice
the rights hereby created by any such action, or to enforce any right hereunder or under any
License, except subject to the conditions and in the manner herein provided, and that all powers
and trusts hereunder shall be exercised and all proceedings at law shall be instituted, had and
maintained by the Trustee, except only as herein provided, and in any event for the benefit of all
Licenseholders, provided that each Licenseholder may be a party to any such action, suit

 

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or proceeding to the extent necessary or desirable to establish and enforce its claim for
damages and/or economic loss.

	6.9	 	Application of Moneys Received by Trustee

          Except as herein otherwise provided, or as otherwise required by law, the moneys and/or
property arising from any enforcement hereof shall be held by the Trustee and applied by it,
together with any other moneys and/or property then or thereafter in the hands of the Trustee
available for the purpose, as follows:

	 	(a)	 	firstly, in payment or reimbursement to the Trustee of the
remuneration,
expenses, disbursements and advances of the Trustee earned, incurred or made
in the administration or execution of the trusts hereunder or otherwise in
relation
to this Trust Indenture, with interest thereof as herein provided;
	 
	 	(b)	 	secondly, ratably and proportionately to the Licenseholders, in
or towards
payment of the unpaid Obligations which shall then be outstanding in respect
of the Licenses; and
	 
	 	(c)	 	the surplus (if any) of such moneys shall be paid to the
Corporations or its assigns otherwise required by law.

	6.10	 	Distribution of Proceeds

          Payments to Holders of Licenses pursuant to Subsection 6.9(b) shall be made as Fallows:

	 	(a)	 	at least 15 days’ notice of every such payment shall be given
in the manner
provided in Section 11.1 specifying the time when and the place or places
where the Licenses are to be presented (to the extent not theretofore
presented
in accordance with the provisions of this Trust Indenture) and the amount of
the payment and the application thereof as between interest and principal; and
	 
	 	(b)	 	from and after the date of payment specified in the notice
referred to in
Subsection 6.10(a), interest shall accrue only on the amount owing on each
License after giving credit for the amount of the payment specified in such
notice
unless such License be duly presented on or after the date so specified and payment of such amount be not made.

	6.11	 	Remedies Cumulative

          No remedy herein conferred upon or reserved to the Trustee or upon or to the
Licenseholders 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 statute.

 

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ARTICLE 7

SUCCESSOR CORPORATIONS

	7.1	 	Certain Requirements in Respect of Merger, etc.

          Neither of the Corporations, without the consent or approval of the Licenseholders expressed
by Extraordinary Resolution, shall enter into any transaction (whether by way of reconstruction,
reorganization, consolidation, arrangement, amalgamation, merger, transfer, sale, lease or
otherwise) whereby all or substantially all of its undertaking, property and assets would become
the property of any other person or of the continuing corporation, company, partnership, trust or
other entity (the “Successor”) resulting therefrom unless (but may do so if):

	 	(a)	 	the Successor, by operation of law, becomes, without more,
bound by the
terms and provisions of this Trust Indenture and the Licenses which constitute
obligations of the applicable Corporation hereunder and thereunder or, if
not so
bound, executes, prior to or contemporaneously with the consummation of such
transaction, an indenture supplemental hereto and such other instruments (if
any)
as are satisfactory to the Trustee and in the Opinion of Counsel are
necessary
or advisable to evidence the assumption by the Successor of liability for
such
obligations of the applicable Corporation and such Successor’s agreement to
observe and perform all the covenants and obligations of the applicable
Corporation under this Trust Indenture and the Licenses; and
	 
	 	(b)	 	no condition or event shall have occurred and be continuing in
respect of the Successor at the time of such transaction and after giving full effect thereto
which constitutes or would, after notice or lapse of time or both, constitute an
Event of Default hereunder.

	7.2	 	Vesting of Powers in Successor

          Whenever the conditions of Section 7.1 have been duly observed and performed, the Trustee, if
required by Section 7.1, shall execute and deliver the supplemental indenture provided for in
Article 9 and thereupon the Successor shall possess and from time to time may exercise each and
every right and power of each of the Corporations under this Trust Indenture in the name of each of
the Corporations or otherwise and any act or proceeding by any provision of this Trust Indenture
required to be done or performed by the Directors or any officers of such entity may be done and
performed with like force and effect by the directors or officers of such Successor.

 

- 25 -

ARTICLE 8

MEETINGS OF LICENSEHOLDERS

	8.1	 	Right to Convene Meeting

          The Trustee may at any time and from time to time and shall, on receipt of a Request of
the Corporations or a Licenseholders’ Request and upon being indemnified and funded to its
reasonable satisfaction by the Corporations or by the Licenseholders signing such Licenseholders’
Request, as the case may be, against the costs which may be incurred in connection with the
calling and holding of such meeting, convene a meeting of the Licenseholders. In the event of the
Trustee failing within 30 days after receipt of such request, indemnity and funding to give notice
convening such meeting, each of the Corporations or such Licenseholders, as the case may be, may
convene such meeting. Every such meeting shall be held in the City of Calgary, Alberta or at such
other place as may be approved or determined by the Trustee.

	8.2	 	Notice

          At least 30 days’ notice of any meeting shall be given to the Licenseholders in the
manner provided in Section 11.1 and a copy thereof shall be sent by post to the Trustee unless the
meeting has been called by it and to each of the Corporations unless the meeting has been called
by either 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 Article 8.

	8.3	 	Chairman

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

	8.4	 	Quorum

          Subject to the provisions of Section 8.12:

	 	(a)	 	at any meeting of Licenseholders, a quorum shall consist of
Licenseholders,
present in person or by proxy and representing at least 25% in number of the
outstanding Licenses;
	 
	 	(b)	 	if a quorum of the Licenseholders shall not be present within
30 minutes from
the time fixed for holding any meeting, the meeting, if convened by the
Licenseholders or on a Licenseholders’ Request, shall be dissolved; but in
any
other case, the meeting shall stand adjourned without notice to the same day
in
the next week (unless such day is not a Business Day in which case it shall
stand

 

- 26 -

	 	 	 	adjourned to the next following Business Day) thereafter at the same time
and place, unless the chairman shall appoint some other place, day and/or
time of which not less than seven days’ notice shall be given in the manner
provided in Section 11.1; and
	 
	 	(c)	 	at the adjourned meeting, the Licenseholders present in person
or by proxy shall constitute a quorum and may transact the business for which
the meeting was originally convened notwithstanding that they may not
represent 25% in number of the outstanding Licenses.

	8.5	 	Powers of Adjournment

          The chairman of any meeting at which a quorum of the Licenseholders is present may, with the
consent of the Holders of a majority in number of the Licenses represented thereat, adjourn any
such meeting and no notice of such adjournment need be given except such notice, if any, as the
meeting may prescribe.

	8.6	 	Show of Hands

          Every question submitted to a meeting shall be decided in the first place by a majority of
the votes given on a show of hands, except that votes on Extraordinary Resolutions shall be given
in the manner hereinafter provided. At any such meeting, unless a poll is required or duly
demanded as herein provided whether before or after a show of hands, a declaration by the chairman
that a resolution has been carried or carried unanimously or by a particular majority or lost or
not carried by a particular majority shall be conclusive evidence of the fact.

	8.7	 	Poll

          On every Extraordinary Resolution, and on any other question submitted to a meeting when
demanded after a vote by a show of hands by the chairman or by one or more of the Licenseholders,
a poll shall be taken in such manner 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 number of the Licenses represented at the meeting and voted on the poll.

	8.8	 	Voting

          On a show of hands, every person who is present and entitled to vote, whether as a
Licenseholder or as proxy for one or more absent Licenseholders, or both, shall have one vote. On a
poll, each Licenseholder present in person or represented by a proxy duly appointed by instrument
in writing shall be entitled to one vote in respect of each License of which he shall then be the
Holder. A proxy need not be a Licenseholder. In the case of joint Holders of a License, any 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
Licenses of which they are joint registered Holders.

 

- 27 -

	8.9	 	Corporations and Trustee May Be Represented

          Each of the Corporations and the Trustee, by their respective directors, officers and
employees and the legal advisers of each of the Corporations and the Trustee, may attend any
meeting of the Licenseholders, but shall have no vote thereat as such.

	8.10	 	Powers Exercisable by Extraordinary Resolution

          In addition to all other powers conferred upon them by any other provisions of this
Trust Indenture or by law, but in all cases subject to Section 8.11, a meeting of the
Licenseholders shall have the following powers, any one or combination of which may be exercised
from time to time by Extraordinary Resolution:

	 	(a)	 	power to agree to any modification, abrogation, alteration,
compromise or
arrangement of the rights of the Licenseholders and/or the Trustee against
each
of the Corporations, or against their respective undertaking, property and
assets
or any part thereof (whether such rights arise under this Trust Indenture or
the
Licenses or otherwise), in all cases which shall have been agreed to by each
of
the Corporations;
	 
	 	(b)	 	power to direct or authorize the Trustee to exercise any power,
right, remedy or
authority given to it by this Trust Indenture or the Licenses in any manner
specified in such Extraordinary Resolution or to refrain from exercising any
such
power, right, remedy or authority and the power to remove the Trustee and
appoint a new trustee hereunder;
	 
	 	(c)	 	power to waive and direct the Trustee to waive any default on
the part of each
of the Corporations in complying with any provision of this Trust Indenture
or
the Licenses and/or to annul and to direct the Trustee to annul any
declaration
made by the Trustee pursuant to Section 6.2, either unconditionally or upon
any conditions specified in such Extraordinary Resolution;
	 
	 	(d)	 	power to assent to any modification of, or change in, or
omission from, the
provisions contained herein or in any deed or instrument supplemental hereto
or
thereto which shall be agreed to by each of the Corporations and to
authorize
the Trustee to concur in and execute any deed or instrument supplemental hereto embodying such modification, change or omission;
	 
	 	(e)	 	power to restrain any Licenseholder from taking, instituting or
maintaining any
action, suit or proceeding for the purpose of enforcing payment and/or
performance of any amount payable and/or property deliverable hereunder or
for the execution of any trust or power hereunder or for the appointment of
a
custodian, sequestrator, liquidator, receiver, receiver and manager or a
trustee

 

- 28 -

	 	 	 	in bankruptcy or to have each of the Corporations wound up or for any other
remedy hereunder;
	 
	 	(f)	 	power to direct any Licenseholder who, as such, has brought any such suit,
action or proceeding against each of the Corporations hereunder to stay or
otherwise discontinue or otherwise deal with the same upon payment, if the
taking of such suit, action or proceeding shall have been permitted by Section
6.8, of the costs, charges and expenses reasonably and properly incurred by the
Licenseholder in connection therewith;
	 
	 	(g)	 	power to amend, alter or repeal any Extraordinary Resolution previously passed
or sanctioned by the Licenseholders;
	 
	 	(h)	 	power to sanction any transaction (whether by way of reconstruction, reorganization,
arrangement, consolidation, amalgamation, merger, transfer, sale, lease or otherwise) whereby
all or substantially all of the undertaking, property and assets of each of the Corporations
would become the property of any other person or, in the case of an amalgamation, of the
continuing corporation, partnership or entity resulting therefrom, provided that no such
sanction shall in any event be necessary in respect of any such transaction if the provisions
of Article 7 are complied with;
	 
	 	(i)	 	power to assent to any judgment, compromise or arrangement by each of the Corporations with
any creditor or creditors or classes of creditors or with the holders of any shares or
securities of each of the Corporations;
	 
	 	(j)	 	power to authorize the Trustee, in the event of each of the Corporations making an
unauthorized assignment, or a custodian, sequestrator, trustee or liquidator being appointed,
under applicable bankruptcy or insolvency legislation or legislation relating to winding-up,
for and on behalf of the Licenseholders, and in addition to any claim or debt proved or made
for its own account as Trustee hereunder, to file and prove a claim or debt against each of
the Corporations and its respective properties for an amount equivalent to the aggregate
amount which may be payable in respect of the Licenses, value security and vote such claim or
debt at meetings of creditors and to file any proposals and generally act for and on behalf of
the Licenseholders in such proceedings as such Extraordinary Resolution may provide; and
	 
	 	(k)	 	power to appoint and remove a committee to consult with the Trustee and to delegate to such
committee (subject to such limitations, if any, as may be prescribed in the Extraordinary
Resolution) all or any of the powers which the Licenseholders could exercise by Extraordinary
Resolution under the foregoing Subsections (b), (c), (e), (f), (i) and (j) of this Section 8.10;
the Extraordinary Resolution making such appointment may provide for payment of the expenses

 

- 29 -

and disbursements of and compensation to such committee and the Trustee;
such committee shall consist of such number of persons as shall be
prescribed in the Extraordinary Resolution appointing it, and the members
need not themselves be Licenseholders; subject to the Extraordinary
Resolution appointing it, 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, the manner in which it may act
and its procedure generally and such regulations may provide that the
committee may act by minutes signed by a majority of the members thereof or
the number of members thereof necessary to constitute a quorum, whichever is
the greater, and all acts of any such committee within the authority
delegated to it shall be binding upon all Licenseholders and the Trustee.

	8.11	 	Powers Not Exercisable by Extraordinary Resolution

          For greater certainty, no modification or abrogation of the Trust Indenture, whether or
not purported to be authorized by Extraordinary Resolution may, without the consent of the Holder
of each License affected thereby:

	 	(a)	 	modify the terms of any License or any License Agreement;
reduce the amount
or modify the currency or timing of payments of any Obligations owing to the
Holder of any License; modify the terms of the security for the obligation
of
each of the Corporations hereunder; or modify Section 9.12; or
	 
	 	(b)	 	release the License Security or subordinate the License
Security to any other Lien.

	8.12	 	Meaning of “Extraordinary Resolution”

	 	(1)	 	The expression “Extraordinary Resolution”, when used in this Trust Indenture,
means,
subject as hereinafter in this Section 8.12 and in Section 8.15 provided, a
resolution
proposed at a meeting of Licenseholders duly convened for the purpose of passing an
Extraordinary Resolution and held in accordance with the provisions of this Article
8 at
which the Holders of more than 50% in number of outstanding Licenses are present in
person or by proxy and passed by the favourable votes of the Holders of not less
than
662/3% in number of outstanding Licenses represented at the meeting and voted on a
poll upon such resolution.
	 
	 	(2)	 	If, at any such meeting called for the purpose of passing an Extraordinary
Resolution,
the Holders of more than 50% in number of outstanding Licenses are not present in
person or by proxy within 30 minutes after the time appointed for the meeting, then
the
meeting, if convened by Licenseholders, or on a Licenseholders’ Request, shall be
dissolved, but if otherwise convened, it shall stand adjourned to such date, being
not
less than 14 nor more than 60 days later, and to such place and time as may be

 

 

- 30 -

appointed by the chairman. Not less than seven days’ prior notice shall be
given of the time and place of such adjourned meeting in the manner provided in
Section 11.1. Such notice shall specify the quorum for such adjourned meeting but
it shall not be necessary to set forth the purposes for which the meeting was
originally called or any other particulars.

	 	(3)	 	Votes on an Extraordinary Resolution shall always be taken by a poll and
no demand for a poll on an Extraordinary Resolution shall be necessary.

	8.13	 	Powers Cumulative

          It is hereby declared and agreed that any one or more of the powers or any combination of the
powers in this Trust Indenture stated to be exercisable by the Licenseholders by Extraordinary
Resolution or otherwise may be exercised from time to time and the exercise of any one or more of
such powers or any combination of powers from time to time shall not be deemed to exhaust the
right of the Licenseholders to exercise such power or powers or combination of powers thereafter
from time to time.

	8.14	 	Minutes

          Minutes of all resolutions and proceedings at every meeting of the Licenseholders 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 each of the Corporations and any such minutes, 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 Licenseholders, 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 had to have been duly passed and had.

	8.15	 	Instrument in Writing

          All actions which may be taken and all powers which may be exercised by the Licenseholders at
a meeting held as hereinbefore in this Article 8 provided may also be taken and exercised by a
resolution in writing signed in one or more counterparts by the Holders of not less than 50% in
number of Licenses with respect to ordinary resolutions and by the Holders of not less than 662/3% in number of Licenses with respect to an Extraordinary Resolution, and the expression
“Extraordinary Resolution” when used in this Trust Indenture shall include a resolution so signed
by the Holders of not less than 662/3% in number of all outstanding Licenses.

	8.16	 	Binding Effect of Resolutions

          Subject as provided in any indenture, deed or instrument supplemental or ancillary hereto,
every resolution and every Extraordinary Resolution passed in accordance with the provisions of
this Article 8 at a meeting of Licenseholders and not thereafter altered, amended or repealed shall
be binding upon all the Licenseholders, whether present at or absent from such meeting, and every

 

 

- 31 -

instrument in writing signed by Licenseholders, in accordance with Section 8.15, shall be binding
upon all the Licenseholders, whether signatories thereto or not, and each and every Licenseholder
and the Trustee (subject to the provisions for its funding and indemnity hereby contained) shall
be bound to give effect accordingly to every such resolution, Extraordinary Resolution and
instrument in writing.

	8.17	 	Evidence of Rights of Licenseholders

	 	(1)	 	Any request, direction, notice, consent or other instrument which this Trust
Indenture
may require or permit to be signed or executed by the Licenseholders may be in any
number of concurrent instruments of similar tenor and may be signed or executed by
such Licenseholders in person or by attorney duly appointed in writing. Proof of the
execution of any such request, direction, notice, consent or other instrument, or of
a
writing appointing any such attorney or (subject to the provisions of this Article 8
with
regard to voting at meetings of Licenseholders) of the holding by any person of
Licenses
shall be sufficient for any purpose of this Trust Indenture if the fact and date of
the
execution by any person of such request, direction, notice, consent or other
instrument
or writing is proved (a) by the certificate of any notary public or other officer
authorized
to take acknowledgement of deeds to be recorded at the place where such certificate
is
made that the person signing such request, direction, notice, consent or other
instrument
or writing acknowledged to him the execution thereof; or (b) by an affidavit of a
witness
of such execution; or (c) in any other manner which the Trustee may consider
adequate.
	 
	 	(2)	 	The Trustee may, nevertheless, in its discretion, require further proof in
cases where it
deems further proof necessary or desirable or may accept such other proof as it
shall
consider proper.
	 
	 	(3)	 	The ownership of Licenses shall be proved by the registers as hereinbefore provided.

ARTICLE 9

SUPPLEMENTAL INDENTURES

	9.1	 	Execution of Supplemental Indentures

          From time to time and without the consent of the Licenseholders, each of the Corporations and
the Trustee may, subject to the provisions of these presents, and they shall, when so directed by
these presents, execute and deliver by their proper officers, indentures or other instruments
supplemental hereto, which thereafter shall form part hereof, for any one or more of the following
purposes:

	 	(a)	 	evidencing the succession of any Successor to either
Corporation to the covenants of and obligations assumed by such Successor in
accordance with the provisions of Article 7 and the successor of any successor
trustee in accordance with the provisions of Article 10;

 

 

- 32 -

	 	(b)	 	giving effect to any Extraordinary Resolution passed as provided in Article 8;
	 
	 	(c)	 	making any additions to, deletions from or alterations of the
provisions of this
Trust Indenture which, in the opinion of the Trustee and in the opinion of
Counsel, will not be prejudicial to the interests of the Holders and are in
the
opinion of Counsel necessary or advisable in order to incorporate, reflect or
comply with any legislation the provisions of which apply to each of the
Corporations, the Trustee or this Trust Indenture;
	 
	 	(d)	 	correcting or rectifying any patent ambiguity, defective
provision, error or
omission herein; and
	 
	 	(e)	 	for any other purposes not inconsistent with the provisions of
this Trust
Indenture, provided that, in the opinion of the Trustee and Counsel, the
rights of
the Trustee and the Licenseholders will not be prejudiced thereby;

provided that the Trustee may in its discretion decline to enter into any such supplemental
instrument which in its opinion may not afford adequate protection to the Trustee when the same
shall become operative.

ARTICLE 10

CONCERNING THE TRUSTEE

	10.1	 	Rights and Duties of Trustee

	 	(1)	 	In the exercise of the rights, duties and obligations prescribed or conferred
by the terms
of this Trust Indenture, the Trustee shall act honestly and in good faith with a
view to the
best interests of the Licenseholders and exercise that degree of care, diligence and
skill
that a reasonably prudent trustee would exercise in comparable circumstances.
	 
	 	(2)	 	Subject only to Subsection 10.1(1), the obligation of the Trustee to commence
or
continue any act, action or proceeding for the purpose of enforcing any rights of
the
Trustee or the Licenseholders hereunder shall be conditional upon the Licenseholders
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 except such as may arise from its negligence, wilful
misconduct or bad faith.
	 
	 	(3)	 	None of the provisions contained in this Trust 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 funded
and
indemnified as aforesaid.

 

 

- 33 -

	 	(4)	 	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 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 default hereunder, unless and until notified in writing of such
default, which
notice shall distinctly specify the default desired to be brought to the attention of
the
Trustee, and in the absence of any such notice the Trustee may for all purposes of
this
Trust Indenture conclusively assume that no default has been made in the observance
or
performance of any of the representations, warranties, covenants, agreements or
conditions contained herein. Any such notice shall in no way limit any discretion
herein
given to the Trustee or the duties of the Trustee to determine whether or not the
Trustee
shall take action with respect to any default
	 
	 	(5)	 	Notwithstanding anything in this Trust Indenture to the contrary, the Trustee
shall
disburse moneys according to this Trust Indenture only to the extent that such moneys
have been deposited with it.
	 
	 	(6)	 	At the request of the Trustee, any calculation required or provided for by the
terms of
this Trust Indenture will be determined and set out in writing by each of the
Corporations and sent to the Trustee as soon as practicable.

	10.2	 	Evidence

	 	(1)	 	Whenever it is provided in this Trust Indenture, with reference to any
application to the
Trustee for the taking by it of any action hereunder, that each of the Corporations
shall
deposit with the Trustee resolutions, certificates, opinions, requests, orders or
other
documents, it is intended that the truth, accuracy and good faith at the time of the
granting of such application of the facts and opinions stated in all documents so
deposited shall, in each and every such case, be conditions precedent to the right
of
each of the Corporations to have such application granted. The Trustee may act and
rely, and shall be protected in acting and relying, upon such documents deposited
with it
in purported compliance with any such provision or for any other purpose hereof, but
may in its discretion require further evidence before acting or relying thereon.
	 
	 	(2)	 	The Trustee may act and rely, and shall be protected in acting and relying,
upon any
resolution, certificate, statement, instrument, opinion, calculation, report,
notice, request,
consent, order, letter, telecopy or other paper or document believed by it to be
genuine
and to have been signed, sent or presented by or on behalf of the proper party or
parties.

	10.3	 	Experts, Advisers and Agents

	 	(1)	 	The Trustee may employ, retain or appoint such Counsel, accountants, appraisers
or other experts or advisers and such agents including, without limitation, with the
consent of each of the Corporations, paying agents or agencies as it may reasonably
require for

 

 

- 34 -

the purpose of determining and discharging its duties hereunder, may pay
reasonable remuneration for all services so performed by any of them, and shall not
be responsible for any misconduct on the part of any of them employed, retained or
appointed by the Trustee with reasonable care.

	 	(2)	 	The Trustee may act and rely and shall be protected in acting and relying in
good faith on the opinion or advice of or information obtained from any Counsel,
accountant, appraiser or other expert or adviser, whether retained, employed or
appointed by the Trustee with reasonable care or by each of the Corporations, in
relation to any matter arising in the administration of the trusts hereof.

	10.4	 	Documents, Moneys, etc. Held by Trustees

	 	(1)	 	Any securities, documents of title or other instruments that may at any time be
held by
the Trustee subject to the trusts hereof may be placed in the safekeeping or custody
vaults of the Trustee or its agent in Canada or of any Canadian chartered bank.
	 
	 	(2)	 	Unless herein otherwise expressly provided, any moneys held by the Trustee
hereunder,
pending the application or withdrawal thereof under any provision of this Trust
Indenture, shall be invested in Authorized Investments, and pending such investment,
such moneys may be deposited in a trust account maintained at the office of the
Trustee
or deposited in the name of the Trustee in any Schedule I bank of Canada at the rate
of
interest, if any, then current on similar deposits.

	10.5	 	Action by Trustee to Protect Interests

          The Trustee shall have power to institute and maintain such actions and proceedings as
it may consider necessary or expedient to preserve, protect or enforce its interests and the
interests of the Licenseholders.

	10.6	 	Trustee Not Required to Give Security

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

	10.7	 	Protection of Trustee

          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:

	 	(a)	 	the Trustee shall not be liable for or by reason of any
statements of fact or recitals in this Trust Indenture or in the Licenses
(except the representations contained in Sections 10.9 and 10.13 or deemed by
the provisions of Section 2.3 to have been made through the certification of
the Trustee on the Licenses)

 

 

- 35 -

or required to verify the same, but all such statements or recitals are
and shall be deemed to be made by each of the Corporations, as applicable;

	 	(b)	 	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 Trust
Indenture or any instrument ancillary or supplemental hereto;
	 
	 	(c)	 	the Trustee shall not be bound to give notice to any person of
the execution
hereof;
	 
	 	(d)	 	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 each of the
Corporations of any of the covenants herein contained or of any acts of the
agents or servants of each of the Corporations;
	 
	 	(e)	 	subject to Section 10.9, the Trustee, in its personal capacity
or any other
capacity, may buy, lend upon and deal in securities of each of the
Corporations or any Affiliate of each of the Corporations and generally may contract and
enter into financial transactions with each of the Corporations or any
Affiliate of
each of the Corporations without being liable to account for any profit made
thereby; and
	 
	 	(f)	 	the Trustee, its officers, directors, employees and agents will
at all times be
indemnified and saved harmless by each of the Corporations from and against
all claims, demands, losses, actions, causes of action, costs, charges,
expenses,
damages and liabilities whatsoever arising in connection with this Trust
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, its
officers, directors, employees and agents 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 registration, perfection, release or
discharge of security. The foregoing provisions of this paragraph 10.7(f) 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 to
discharge the Trustee’s obligations under Subsection 10.1(1) or where the
Trustee or its employees or agents have acted negligently or in wilful
disregard
of their obligations hereunder or have negligently or in wilful disregard of
their
obligations hereunder, failed to act. This indemnification shall survive
the
termination or discharge of this Trust Indenture or the replacement or
resignation of the Trustee.

 

 

- 36 -

	10.8	 	Replacement of Trustee

	 	(1)	 	The Trustee may resign its trust and be discharged from all further duties and
liabilities
hereunder by giving to each of the Corporations not less than 90 days’ notice in
writing
or such shorter notice as each of the Corporations may accept as sufficient. The
Licenseholders, by Extraordinary Resolution, shall have power at any time to remove
the Trustee and to appoint a new Trustee. In the event of the Trustee resigning or
being
removed as aforesaid, or being dissolved, becoming bankrupt, going into liquidation
or
otherwise becoming incapable of acting hereunder, each of the Corporations shall
forthwith appoint a new Trustee unless a new Trustee has already been appointed by
the Licenseholders; failing such appointment by each of the Corporations, the
retiring
Trustee at the expense of each of the Corporations may apply to a Justice of the
Court
of Queen’s Bench in Alberta, on such notice as such Justice of the Court may direct,
for
the appointment of a new Trustee; but any new Trustee so appointed by each of the
Corporations or by the Court shall be subject to removal as aforesaid by the
Licenseholders. Any new Trustee appointed under any provision of this Section 10.8
shall be a corporation authorized to carry on the business of a trust company in the
Province of Alberta and, if required by the Indenture Legislation of any other
province,
in such other province and shall certify that it will not have any material conflict
of
interest upon becoming Trustee hereunder. On any such appointment, the new Trustee
shall be vested with the same powers, rights, duties, security interest (if any) in
and
encumbrances (if any) on the properties and assets of each of the Corporations, as
may
be applicable, and responsibilities as if it had been originally named herein as
Trustee
without any further assurance, conveyance, act or deed; but there shall be
immediately
executed, at the expense of the Corporation, all such conveyances or other
instruments
(if any) as, in the opinion of Counsel, may be necessary or advisable for the purpose
of
assuring the same to the new Trustee. At the request of the Corporations or the new
Trustee, the retiring Trustee, upon payment of the amounts, if any, due to it
pursuant to
Section 5.3, shall duly assign, transfer and deliver to the new Trustee all property
and
money held and all records kept by the retiring Trustee hereunder or in connection
herewith.
	 
	 	(2)	 	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 Trust Indenture without the execution of any instrument
or
any further act, provided that such corporation would be entitled to act as a new
Trustee hereunder in accordance with the provisions of Subsection 10.8(1).
Nevertheless, upon the written request of the successor Trustee or of each of the
Corporations, the Trustee ceasing to act shall, at the expense of each of the
Corporations, execute and deliver an instrument assigning and transferring to such
successor Trustee, upon the trusts herein expressed, all the rights, powers and
trusts of
the Trustee so ceasing to act, and shall duly assign, transfer and deliver all
property and

 

 

- 37 -

money held and all records kept by such Trustee hereunder or in connection herewith
to the successor Trustee so appointed in its place. Should any deed, conveyance or
instrument in writing from each of the Corporations be required by any new Trustee
for more fully and certainly vesting in and confirming to it such property, money,
rights, powers and trusts, then any and all such deeds, conveyances and instruments
in writing shall, on request of such new Trustee, be made, executed, acknowledged
and delivered by each of the Corporations, as applicable.

	10.9	 	Conflict of Interest

          The Trustee represents that at the time of the execution and delivery hereof no material
conflict of interest exists in the Trustee’s role as a fiduciary hereunder and agrees that, in the
event of a material conflict of interest arising hereafter, it will, within 60 days after
ascertaining that it has such material conflict of interest, either eliminate the same or resign
in the manner and with the effect specified in Section 10.8. If any such material conflict of
interest exists or hereafter shall exist, the validity and enforceability of this Trust Indenture
and the Licenses shall not be affected in any manner whatsoever by reason thereof.

	10.10	 	Acceptance of Trust

          The Trustee hereby accepts the trusts in this Trust 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, covenants, representations and benefits conferred hereby and by law in trust for the
various persons who shall from time to time be Holders.

	10.11	 	Trust Indenture Legislation

	 	(1)	 	In this Trust Indenture, the term “Indenture Legislation” means the provisions,
if any, of
the Trust Companies Act (Alberta) and the Business Corporations Act (Alberta) and
any other statute of Canada or a province thereof, and the respective regulations
thereunder, relating to trust indentures and/or to the rights, duties and
obligations of
trustees under trust indentures and of corporations issuing debt obligations under
trust
indentures, to the extent that such provisions are at the time in force and
applicable to
this Trust Indenture.
	 
	 	(2)	 	If and to the extent that any provision of this Trust Indenture limits,
qualifies or conflicts
with a mandatory requirement of Indenture Legislation, such mandatory requirement
shall prevail.
	 
	 	(3)	 	Each of the Corporations and the Trustee agree that each will at all times in
relation to
this Trust Indenture and any action to be taken hereunder observe and comply with
and
be entitled to the benefits of the Indenture Legislation.

 

 

- 38 -

	10.12	 	  Evidence and Authority to Trustee

	 	(1)	 	Each of the Corporations shall furnish or cause to be furnished to the Trustee
evidence of compliance with every covenant, condition or other requirement relating to
any action or step required or permitted to be taken by each of the Corporations under
this Trust Indenture or as a result of any obligation imposed under this Trust
Indenture, including, without limitation, the certification and delivery of Licenses
hereunder, the release or release and substitution of property subject to a security
interest (if any) constituted by this Trust Indenture or the satisfaction and
discharge of this Trust Indenture, forthwith if and when (a) such evidence is required
by any other provision of this Trust Indenture to be furnished to the Trustee, or (b)
the Trustee, in the exercise of its rights and duties under this Trust Indenture,
gives each of the Corporations written notice requiring it to furnish such evidence in
relation to any particular action, step or obligation specified in such notice. Such
evidence shall consist of the following evidence as the Trustee may require:

	 	(a)	 	a certificate made by any one of the Chairman, the Chief
Executive Officer, the
President, any Vice-President the Treasurer, any Assistant Treasurer, the
Secretary or any Assistant Secretary of each of the Corporations stating that
any such covenant, condition or other requirement has been complied with in
accordance with the terms of this Trust Indenture,
	 
	 	(b)	 	in the case of any such covenant, condition or other
requirement, compliance
with which is subject to the delivery of an Opinion of Counsel, an Opinion of
Counsel that any such covenant, condition or other requirement has been
complied with in accordance with the terms of this Trust Indenture, or
	 
	 	(c)	 	in the case of any such covenant, condition or other
requirement, compliance
with which is subject to the review or examination of auditors or
accountants, an
opinion or report of such auditors or accountants as to the accuracy or
reliability
of the statements required to be reviewed or examined and stating whether or
not the statements have been made in accordance with the terms of this Trust
Indenture,

or any combination of the foregoing.

Whenever such evidence relates to a matter other than the certification and delivery
of Licenses, the release or release and substitution of property subject to a
security interest (if any) constituted by this Trust Indenture or the satisfaction
and discharge of this Trust Indenture or the taking of any other action required or
permitted to be taken by the Trustee, and except as otherwise specifically provided
herein, such evidence may consist of or include a report or opinion of any
solicitor, auditor, accountant, valuer, engineer, surveyor or appraiser or any other
person whose qualifications give authority to a statement made by him.

 

 

- 39 -

	 	(2)	 	Each certificate, opinion or report with respect to compliance with a
condition provided for in this Trust Indenture shall include a statement by the person
making or giving such certificate, opinion or report (a) that he has read, understands
and is familiar with the covenant, condition or other requirement, (b) stating the
nature and scope of the examination or investigation upon which the statements or
opinions contained in the certificate, opinion or report are based, (c) stating that,
in the belief of the person making the certificate or giving the opinion or report, he
has made such examination or investigation as is necessary to enable him to express an
opinion as to whether or not such covenant, condition or other requirement has been
complied with or satisfied, and (d) whether or not in the opinion of such person such
covenant, condition or other requirement has been complied with or satisfied.

	10.13	 	 Authority to Carry on Business

            The Trustee represents to each of the Corporations and each Holder that at the date of
execution and delivery by it of this Trust Indenture it is authorized to carry on the business of
a trust company in the Province of Alberta. If, notwithstanding the provisions of this Section
10.13 but subject to Section 10.14, the Trustee ceases to be so authorized to carry on business,
the validity and enforceability of this Trust Indenture and the Licenses issued hereunder shall
not be affected in any manner whatsoever by reason only of such event, but the Trustee shall,
within 60 days after ceasing to be authorized to carry on the business of a trust company in such
provinces, either become so authorized or resign in the manner and with the effect specified in
Section 10.8.

	10.14	 	Assignment and Enurement

          The parties hereto acknowledge and agree, and any beneficiaries hereunder (including each
Holder) are hereby deemed to have acknowledged and agreed, that:

	 	(a)	 	Montreal Trust Company of Canada, being the Trustee hereunder
as at the date
hereof, has sold its corporate trust business and that such business is, as
of the
date hereof, owned and operated by Computershare Trust Company of
Canada (“Computershare”); and
	 
	 	(b)	 	Montreal Trust Company of Canada, as Trustee hereunder as at
the date
hereof, may, without the consent of any other party hereto or any
beneficiary
hereunder (including each Holder), assign this Trust Indenture and any
ancillary
agreements executed in connection herewith (including, without limitation,
the
Licenses), and all of its rights and obligations hereunder and thereunder,
to
Computershare; and any such assignment shall be effective without the need
for
any further notice or advice to, or approval of, the parties hereto or any
beneficiary hereunder (including each Holder) and without any further act or
formality whatsoever.

 

 

- 40 -

ARTICLE 11

GENERAL

	11.1	 	Notice to Licenseholders

          Unless herein otherwise expressly provided, any notice to be given hereunder to
Licenseholders shall be deemed to be validly given if such notice is sent by unregistered surface
or air mail, postage prepaid, addressed to such Holders at their respective addresses appearing on
the registers mentioned in Article 3; and if, in the case of joint Holders of any License, more
than one address appears in the register in respect to such joint holding, such notice shall be
addressed only to the first address so appearing. Any notice so given by mail shall be deemed to
have been given on the third Business Day following the date such notice is mailed. In determining
under any provision hereof the date when notice of any meeting or other event must be given, the
date of giving the notice shall be included and the date of the meeting, or other event, shall be
excluded. Accidental error or omission in giving notice or accidental failure to mail notice to
any one or more Licenseholders shall not invalidate any action or proceeding founded thereon.

	11.2	 	Notice to Trustee

          Unless herein otherwise expressly provided, any notice to the Trustee under any provision of
this Trust Indenture, unless otherwise specifically provided, shall be valid and effective if given
by facsimile transmission or if delivered to an officer of the Trustee or if sent by registered
mail, postage prepaid, addressed to the Trustee at its principal office in Calgary, Alberta, which
at the date hereof is Suite 710, 530 —
8th Avenue S.W., Calgary, Alberta, T2P 3S8,
Attention: Manager of Corporate Trust, Facsimile (403) 267-6598. The Trustee may from time to time
notify each of the Corporations of a change in address which thereafter, until changed by like
notice, shall be the address of the Trustee for all purposes of this Trust Indenture. Notice by
facsimile transmission shall be deemed to have been effectively given when sent unless sent after
the close of business at the place of receipt (in which case it will be deemed to have been
effectively given on the next Business Day). Notice by delivery shall be deemed to have been
effectively given when delivered to an officer of the Trustee. Notice by mail shall be deemed to
have been given on the third Business Day following the date such notice is mailed.

	11.3	 	Notice to the Corporations

          Unless herein otherwise expressly provided, any notice to each of the Corporations under any
provision of this Trust Indenture shall be valid and effective if given by facsimile transmission
or if delivered to an officer of each of the Corporations or if sent by registered mail, postage
prepaid, addressed to each of the Corporations at the following addresses: 10102 — 114th
Street, Fort Saskatchewan, Alberta T8L 3W4, Attention: President, Facsimile: (780) 992-5300 with a
copy to: 1010, 144 — 4th Avenue S.W., Calgary, Alberta T2P 3N4, Attention: President,
Facsimile: (403) 237-8181 and a copy to: One Hampton Road, Suite 302, Exeter, New Hampshire 03833,
Attention: President, Facsimile: (603) 778-6393. Each of the Corporations may from time to time
notify the Trustee of a change in address which thereafter, until changed by like notice, shall be
the address of

 

 

- 41 -

each of the Corporations for all purposes of this Trust Indenture. Notice by facsimile
transmission shall be deemed to have been effectively given when sent unless sent after the close
of business at the place of receipt (in which case it will be deemed to have been effectively
given on the next Business Day). Notice by delivery shall be deemed to have been effectively given
when delivered to an officer of each of the Corporations. Notice by mail shall be deemed to have
been given on the third Business Day following the date such notice is mailed

	11.4	 	Mail Service Interruption

          If by reason of any interruption of mail service, actual or threatened, any notice to be given
to the Trustee or to each of the Corporations would reasonably be unlikely to reach its destination
by the time notice by mail would have been deemed to have been given pursuant to Section 11.2 or
11.3, such notice shall be valid and effective only if delivered to
an officer of the party to
which it is addressed or, if sent to such party, at the appropriate address in accordance with
Section 11.2 or 11.3, as the case may be, by facsimile transmission or other means of prepaid
transmitted or recorded communication.

 

 

- 42 -

ARTICLE 12

EXECUTION

	12.1	 	Counterparts and Formal Date

          This Trust Indenture may be executed in several counterparts, each of which so executed
shall be deemed to be an original, and such counterparts together shall constitute one and the same
instrument and notwithstanding their date of execution shall be deemed to bear date as of May 8,
2001.

          IN WITNESS WHEREOF the parties hereto have executed this Trust Indenture.

	 	 	 	 	 	 
	 	 	WESTAIM BIOMEDICAL CORP.
	 
	 	 	 	 
	 

	 	Per:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Per:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	WESTAIM BIOMEDICAL INC.
	 
	 	 	 	 
	 

	 	Per:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Per:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	MONTREAL TRUST COMPANY OF CANADA
	 
	 	 	 	 
	 

	 	Per:	 	 
	 

	 	 	 	 
	 

	 	 	 	Authorized Signing Officer
	 
	 	 	 	 
	 

	 	Per:	 	 
	 

	 	 	 	 
	 

	 	 	 	Authorized Signing Officer

 

 

SCHEDULE
A

List of Westaim Patents and Patent Applications

 

 

[***]

 

 

SCHEDULE B

Form of Certificate

CERTIFICATE OF TRUSTEE

	 	 	 
	TO:

	 	• (the “Licensee”)
	 
	 	 
	AND TO:

	 	Westaim Biomedical Corp. 
Westaim
Biomedical Inc. 

(collectively, the
“Corporations”)
	 
	 	 
	RE:

	 	Trust Indenture Dated May 8, 2001 (the “Trust Indenture”) among the
Corporations and Montreal Trust Company of Canada (the “Trustee”)

     The undersigned refers to (x) the License(s) granted to the Licensee by the Corporations
pursuant to a License Agreement, copies of such License(s) being attached hereto as Schedule A (the
“License(s)”), and (y) the requirement of the Trustee, pursuant to Section 2.3 of the Trust
Indenture, to register such License(s) in the register (the ‘Register”) maintained by the Trustee
pursuant to Section 3.1 of the Trust Indenture.

     The undersigned hereby certifies and confirms that:

	 	(a)	 	the undersigned, in its capacity as Trustee under the Trust Indenture, has
accepted for
registration under the Trust Indenture the License(s); and
	 
	 	(b)	 	the undersigned will, within the next two Business Days, register such
License(s) in the Register.

     Capitalized terms used and not otherwise defined herein shall have the same meanings as
ascribed to them in the Trust Indenture.

     Dated as of this                     day of                                        ,                    .

	 	 	 	 	 	 	 
	 	 	MONTREAL TRUST COMPANY OF CANADA	 	 
	 
	 	 	 	 	 	 
	 

	 	Per:	 	 	 	 
	 

	 	 	 	 

Authorized Signing Officer
	 	 

 

 

ARTICLE 12

EXECUTION

12.1 Counterparts and Formal Date

          This Trust Indenture may be executed in several counterparts, each of which so executed
shall be deemed to be an original, and such counterparts together shall constitute one and the
same instrument and notwithstanding their date of execution shall be deemed to bear date as of May
8, 2001.

          IN WITNESS WHEREOF the parties hereto have executed this Trust Indenture.

	 	 	 	 	 	 	 
	 	 	WESTAIM BIOMEDICAL CORP.	 	 
	 
	 	 	 	 	 	 
	 

	 	Per:
	 	/s/ Scott H. Gillis
 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Per:
	 	/s/ [ILLEGIBLE]
	 	 
	 
	 	 	 	 	 	 
	 	 	WESTAIM BIOMEDICAL INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	Per:
	 	/s/ Scott H. Gillis
 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Per:
	 	/s/ [ILLEGIBLE]
	 	 
	 
	 	 	 	 	 	 
	 	 	MONTREAL TRUST COMPANY OF
CANADA	 	 
	 
	 	 	 	 	 	 
	 

	 	Per:	 	/s/
[ILLEGIBLE]
	 	 
	 

	 	 	 	 

Authorized Signing Officer
	 	 
	 
	 	 	 	 	 	 
	 

	 	Per:	 	/s/
[ILLEGIBLE]
	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Authorized Signing Officer

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