Document:

Exhibit 10.1

 

THIS
CONTRACT IS SUBJECT TO ARBITRATION

 

MEMBERSHIP INTEREST PURCHASE AGREEMENT

 

THIS MEMBERSHIP INTEREST PURCHASE
AGREEMENT (this “Agreement”) is made and entered into effective as of this 9th day of December, 2021 (the “Effective
Date”), by and between LMP FINANCE, LLC, a Delaware limited liability
company, and or its assigns (“LMP”), on the one hand, and KEVIN SISTI, MURDO SMITH and RANDAL ROBERGE,
each an individual resident of Connecticut (each, a “Buyer” and collectively,
the “Buyers”).

 

W I T N E S S E T H :

 

WHEREAS, LMP and the Buyers
(each, a “Party” and, collectively, the “Parties”) collectively own 100% of the outstanding membership
interests of LTO Holdings, LLC, a Connecticut limited liability company (the “Company”), and LMP owns a 51% Membership
Interest in the Company (the “Acquired Interest”); and

 

WHEREAS, the Buyers desires
to purchase, and LMP desires to sell, the Acquired Interest for the consideration and on the terms set forth in this Agreement; and

 

WHEREAS, the Parties desire
to set forth certain representations, warranties and covenants made by each to the other as an inducement to the execution and delivery
of this Agreement, and to set forth certain additional agreements related to the transactions contemplated by this Agreement; and

 

NOW, THEREFORE, for and in
consideration of the premises, the mutual representations, warranties and covenants herein contained and other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Parties hereby agree as follows:

 

Article
1.SALE AND TRANSFER OF ACQUIRED INTEREST; CLOSING DATE; PURCHASE PRICE DELIVERY.

 

1.1 Purchase
and Sale. At the Closing and subject to and upon the terms and conditions of this Agreement, LMP shall sell, transfer and deliver
to the Buyers, and the Buyers shall jointly and severally purchase and acquire from LMP, all right, title and interest in and to all of
the Acquired Interest, free and clear of all Liens in consideration for the Purchase Price. In reliance upon the representations and warranties
of LMP contained herein, and on the terms and subject to the conditions herein set forth, the Buyers jointly and severally agree that
at Closing they will purchase the Acquired Interest from LMP. The Buyers shall purchase the Acquired Interest pro rata from the LMP as
set forth below:

 

	Name of Company Member	 	Percentage Interest of Company Held Before Closing	 	 	Percentage Interest of Company Held After Closing	 	 	Percentage of Purchase Price Attributable to each Member	 
	Kevin Sisti	 	 	24.5	%	 	 	50	%	 	 	50	%
	Murdo Smith	 	 	14.7	%	 	 	30	%	 	 	30	%
	Randal Roberge	 	 	9.8	%	 	 	20	%	 	 	20	%
	LMP Finance, LLC	 	 	51	%	 	 	N/A	 	 	 	N/A	 
	Total:	 	 	100	%	 	 	100	%	 	 	100	%

 

     

     

    

 

As used herein, “Lien” means
any claim, lien (statutory or otherwise), encumbrance, pledge, liability, restriction, charge, instrument, license, preference, priority,
security agreement, covenant, right of recovery, option, charge, hypothecation, easement, security interest, interest, mortgage, deed
of trust, imperfection of title, prior assignments, Tax (including foreign, federal, state and local Tax), order or other encumbrance
or charge of any kind or nature whatsoever or any conditional sale or other title retention agreement or other contract or arrangement
having substantially the same effect as any of the foregoing.

 

1.2 Closing;
Closing Date. Subject to the terms and conditions herein contained, the consummation of the transactions contemplated by this Agreement
(the “Closing”) shall take place on the date hereof (the “Closing Date”). For financial accounting
purposes, the Closing shall be effective as of 12:01 a.m. Eastern Time on December 1, 2021 and all activities and sales on such date shall
belong to and be reportable by the Buyers. For all other purposes, the Closing shall be effective at 12:01 a.m. Eastern Time on the Closing
Date.

 

1.3 Purchase
Price. Subject to the adjustments set forth herein, the purchase price for the Acquired Interest (the “Purchase Price”)
shall be forgiveness by the Buyers of (a) the aggregate amount of the Valuation Shortfall (as defined in that certain Membership Interest
Purchase Agreement, dated as of March 9, 2021, by and between LMP and Buyers (the “March MIPA”)) payable by LMP to
the Buyers and (b) the amount of the Indemnification Holdback (as defined in the March MIPA) currently outstanding.

 

Article
2.REPRESENTATIONS AND WARRANTIES OF LMP.

 

LMP represents and warrants
to the Buyers that the statements contained in this Article 2 are correct and complete in all material respects as of the date
hereof:

 

2.1 Due
Organization and Capacity. LMP is a limited liability company duly organized, validly existing and in good standing in the state of
its organization and in each state in which the nature of its operations, assets or employees require it to be registered or qualified.
LMP has the right, power, capacity and authority to execute, deliver and perform its obligations pursuant to this Agreement and to execute,
deliver and perform its obligations hereunder.

 

2.2 Enforceability.
This Agreement has been duly and validly executed and delivered by LMP and constitutes the legal, valid and binding obligation of LMP,
enforceable against LMP in accordance with its terms.

 

2.3 Consents;
Absence of Conflicts. Neither the execution and delivery of this Agreement or any other Transaction Document by LMP, nor the consummation
of the transactions contemplated by this Agreement or compliance by LMP with any of the provisions hereof or thereof, will (a) violate
or breach the terms of, cause a default under or conflict with any applicable law, or (b) result in the creation or imposition of any
Lien on any assets of LMP or its affiliates. LMP is not required to obtain any consent from any government or governmental or regulatory
body, or any agency, political subdivision, authority or instrumentality thereof, whether foreign, federal, provincial, state, municipal
or local or any court or arbitrator (whether public or private) (each, a “Governmental Authority”) or, except for Truist
Bank, any other Person or provide any notice to any Governmental Authority or any other Person in connection with the consummation of
the transactions contemplated by this Agreement.

 

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2.4 Acquired
Interest Ownership. LMP is the sole record and beneficial owner of the Acquired Interests, free and clear of all Liens, other than
(a) granted in favor of Truist Bank and (b) restrictions on transfer that may be imposed by state or federal securities laws. By way of
clarification, the Acquired Interest is not be subject to any Liens other than granted in favor of Truist Bank.

 

2.5 Brokers’
Fees; Expenses. LMP has no liability or obligation to pay any fees or expenses of attorneys, investment bankers, accountants or other
advisors or service providers in connection with the transactions contemplated by this Agreement for which the Company or the Buyers could
become liable or obligated.

 

Article
3.REPRESENTATIONS AND WARRANTIES OF THE BUYERS.

 

The Buyers jointly and severally
represent and warrant to LMP that the statements contained in this Article 3 are correct and complete in all material respects
as of the date hereof.

 

3.1 Capacity.
Each of the Buyers has full legal right, power, capacity and authority to execute, deliver and perform his obligations pursuant to this
Agreement and to execute, deliver and perform his obligations under each instrument, document or agreement required hereby to be executed
and delivered by the Buyers at, or prior to, the Closing (the “Transaction Documents”).

 

3.2 Enforceability.
This Agreement has been duly and validly executed and delivered by the Buyers and constitutes the legal, valid and binding obligation
of each Buyer, enforceable against the Buyers in accordance with its terms.

 

3.3 Consents;
Absence of Conflicts. Neither the execution and delivery of this Agreement or any other Transaction Document by the Buyers, nor the
consummation of the transactions contemplated by this Agreement or compliance by the Buyers with any of the provisions hereof or thereof,
will (a) violate or breach the terms of, cause a default under or conflict with any applicable law, or (b) result in the creation or imposition
of any Lien on any assets of the Buyers. The Buyers are not required to obtain any consent from any government or governmental or regulatory
body, or any agency, political subdivision, authority or instrumentality thereof, whether foreign, federal, provincial, state, municipal
or local or any court or arbitrator (whether public or private) (each, a “Governmental Authority”) or any other Person
or provide any notice to any Governmental Authority or any other Person in connection with the consummation of the transactions contemplated
by this Agreement.

 

3.4 Brokers’
Fees. No Buyer has any liability or obligation to pay any fees or commissions to any broker, finder, or agent with respect to the
transactions contemplated hereby for which LMP or any of its affiliates could become liable or obligated.

 

Article
4.NATURE OF STATEMENTS AND SURVIVAL OF, REPRESENTATIONS AND WARRANTIES OF LMP.

 

The representations and warranties
of LMP and Buyers contained in this Agreement constitute fundamental representations and shal1 survive the Closing until the expiration
of the applicable statutes of limitation plus a period of 60 days. The representation of LMP under Section 2.4 shall survive
indefinitely.

 

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Article
5.CLOSING DELIVERABLES.

 

5.1 Deliveries
by the Buyers. At the Closing, the Buyers shall deliver or cause to be delivered to LMP:

 

(a) a
countersigned assignment agreement (the “Assignment Agreement”) evidencing the assignment and transfer of the Acquired
Interests from LMP to the Buyers;

 

(b) an
executed Second Amended and Restated Operating Agreement of the Company, in a form reasonably acceptable to LMP, which reflects the Buyers
as the sole members of the Company and relieves LMP and its affiliates (including without limitation LMPX) of all liabilities and obligations
pursuant to the March Operating Agreement (including without limitation Section 8.6 of the March Operating Agreement);

 

(c) duly
executed counterparts to that certain master finance agreement by and among LMP (or an affiliate), the Company and Elite Auto Rentals,
LLC substantially in the form of Exhibit A attached hereto (the “Master Finance Agreement”) providing
for the financing by LMP (or its affiliate) of the Company’s vehicles currently on open-end lease;

 

(d) such
other documents, instruments or opinions as may be required or otherwise reasonably contemplated pursuant to this Agreement; and

 

(e) copies
of any third party consents required in connection with the consummation of the transactions contemplated by this Agreement.

 

5.2 Deliveries
by LMP. At the Closing, LMP shall deliver or cause to be delivered to the Buyers:

 

(a) a
duly executed counterpart to the Master Finance Agreement;

 

(b) a
countersigned Assignment Agreement; and

 

(c) such
other documents, instruments or opinions as may be required or otherwise reasonably contemplated pursuant to this Agreement.

 

Article
6.CLOSING AND POST-CLOSING COVENANTS

 

6.1 Third
Party Consents. Each Party shall cooperate in good faith and shall use its respective reasonable best efforts to obtain any consents
contemplated or required under this Agreement or in connection with the consummation of the transactions contemplated by this Agreement.

 

6.2 Further
Assurances. After Closing, as and when requested by any Party from time to time, the other Parties shall and shall cause their affiliates
to execute and deliver, or cause to be executed and delivered, such documents and instruments and shall take, or cause to be taken, such
further or other actions as may be reasonably necessary to carry out the purposes of this Agreement including, without limitation, executing
and delivering any instrument LMP may reasonably request in connection with its prior ownership of the Acquired Interest. In furtherance
and not in limitation of the foregoing, the Buyers shall (and shall cause the Company and its affiliates to) reasonably cooperate with
LMP and its affiliates in connection with all regulatory and financial reporting obligations of LMP its affiliates, including without
limitation LMP Automotive Holdings, Inc.’s (“LMPX”) reporting obligations with the Securities and Exchange Commission.
In connection therewith, the Buyers shall (and shall cause the Company and its affiliates to) provide access to LMP, LMPX and/or its internal
or external accountants or auditors to all books and records of the Company and its affiliates until no earlier than the fifth (5th)
anniversary of the Closing. LMP acknowledges that its obligations under Section 5.2(j) of the March MIPA with respect to Rule 144 shall
survive the Closing

 

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6.3 Access
to Files. For a period that is the later of 5 years or applicable records retention requirements under applicable law, after
the Closing or such longer term as LMP may reasonably require if LMP is then involved in litigation or under investigation or audit by
a Governmental Authority relating to the Buyers or the Company, the Buyers shall (and shall cause the Company to) maintain and provide
LMP and its representatives reasonable access to, and shall permit LMP and its representatives, at LMP’s expense, to make photocopies
of, all originals of the files and records relating to the Company.

 

6.4 Tax
Matters. The Company shall provide, or shall cause to be provided, to LMP a draft of all income tax returns for the Company
and its affiliates for all taxable periods during which LMP was a partner of the Company for U.S. federal income tax purposes a reasonable
time in advance of the applicable due date for such return (including relevant extensions).   The Company shall not file such tax
returns without the consent of LMP, which consent will not be unreasonably withheld. The Parties agree that income of the Company shall
be allocated to LMP in proportion to its Membership Interest in the Company during the period from the March MIPA through the date of
Closing.

 

6.5 Buyers’
and LMP’s Mutual Release of Claims.

 

(a) Buyer’s
Release

 

(i) As
of the Closing, each Buyer and the Company, for himself or itself and on behalf of his or its respective affiliates, successors, assigns,
heirs, executors, administrators and legal representatives (all collectively, the “Buyer Releasors”), hereby remises,
releases, acquits and forever discharges LMP, LMPX and each of their current and former employees, officers, directors, members, managers,
partners, shareholders, trustees, parent companies, sister companies, affiliates, subsidiaries, assigns, employers, attorneys, suppliers,
accountants, predecessors, successors, insurers, representatives and agents (the “LMP Releasees”), of and from any
and all claims, duties, obligations, disputes, liabilities, damages, or causes of action (“Claims”) of every nature
whatsoever, liquidated or unliquidated, known or unknown, matured or unmatured, fixed or contingent, that such of the Buyer Releasors
now or in the future has, owns or holds, or has at any time previously had, owned or held, against any of the LMP Releasees, including
without limitation all Claims arising as a result of the negligence, gross negligence or willful acts of any of the LMP Releasees existing
as of the Closing or relating to any matter that occurred on or prior to the Closing, and including without limitation all Claims arising
under or in connection with the March MIPA and/or the First Amended and Restated Operating Agreement of the Company entered into by the
Parties in connection with the March MIPA and dated on or about the date thereof (the “March Operating Agreement”);
provided, however, that any Claims that may arise in connection with any of the Parties’ respective obligations hereunder
or under any other agreement in connection and contemporaneously with the transactions contemplated by this Agreement or from any breaches
by any of them of any representations or warranties herein or in connection with any of such other agreements shall not be released
or discharged pursuant to this Agreement.

 

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(ii) Each
Buyer and the Company for himself or itself, and respectively on behalf of all of the other Buyer Releasors, represents and warrants that
the Buyer Releasors have not previously assigned or transferred, or purported to assign or transfer, to any person or entity whatsoever
all or any part of the Claims released herein. The Buyers and the Company, for themselves and respectively on behalf of all of the other
Buyer Releasors, covenant and agree that none of the Buyer Releasors will assign or transfer to any person or entity whatsoever all or
any part of the Claims to be released herein. Each of the Buyers and the Company for himself or itself, and respectively on behalf of
all of the other Buyer Releasors represents and warrants that he or it has read and understands all of the provisions of this Section
6.5 and that he or it has been represented by legal counsel of his or its own choosing in connection with the negotiation, execution
and delivery of this Agreement.

 

(b) LMP’s
Release

 

(i) As
of the Closing, LMP, for itself and on behalf of its successors, assigns, heirs, executors, administrators and legal representatives (all
collectively, the “LMP Releasors”), hereby remises, releases, acquits and forever discharges the Buyers, the Company,
and each of their current and former employees, officers, directors, members, managers, partners, shareholders, trustees, parent companies,
sister companies, affiliates, subsidiaries, assigns, employers, attorneys, suppliers, accountants, predecessors, successors, insurers,
representatives, and agents (the “Buyer Releasees”), of and from any and all Claims of every nature whatsoever, liquidated
or unliquidated, known or unknown, matured or unmatured, fixed or contingent, that such of the LMP Releasors now or in the future has,
owns or holds, or has at any time previously had, owned or held, against any of the Buyer Releasees, including without limitation all
Claims arising as a result of the negligence, gross negligence or willful acts of any of the Buyer Releasees or their employees and agents
existing as of the Closing or relating to any matter that occurred on or prior to the Closing, and including without limitation all Claims
arising under or in connection with the March MIPA and/or the March Operating Agreement; provided, however, that any Claims
that may arise in connection with any of the Parties’ respective obligations hereunder or under any other agreement in connection
and contemporaneously with the transactions contemplated by this Agreement or from any breaches by any of them of any representations
or warranties herein or in connection with any of such other agreements shall not be released or discharged pursuant to this Agreement.

 

(ii) LMP
for itself and on behalf of all of the other LMP Releasors represents and warrants that the LMP Releasors have not previously assigned
or transferred, or purported to assign or transfer, to any person or entity whatsoever all or any part of the Claims released herein.
LMP, for itself and on behalf of all of the other LMP Releasors, covenants and agrees that none of the LMP Releasors will assign or transfer
to any person or entity whatsoever all or any part of the Claims to be released herein. LMP for itself and on behalf of all of the other
LMP Releasors represents and warrants that it has read and understands all of the provisions of this Section 6.5 and that it has
been represented by legal counsel of its own choosing in connection with the negotiation, execution and delivery of this Agreement.

 

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6.6 Transfer
Taxes. The Parties do not expect any state and local transfer, sales, use, stamp, registration or other similar taxes to arise by
reason of the consummation of the transactions contemplated by this Agreement (“Transfer Taxes”). The Parties agree
that the Buyers shall be responsible for any and all Transfer Taxes that are actually incurred as a result of the transfer of the Acquired
Interests. The Parties will cooperate in good faith to minimize, to the extent permissible under applicable law, the amount of any Transfer
Taxes.

 

6.7 Cooperation
on Tax Matters. Each Party will cooperate fully as and to the extent reasonably requested by the other Party in connection with the
filing of tax returns and any audit, litigation, or other proceeding with respect to taxes imposed on or with respect to the assets, operations
or activities of the Company and its affiliates (each a “Tax Proceeding”). Such cooperation will include the retention
and (upon the other Party’s request) the provision of records and information that are reasonably relevant to any such tax return
or Tax Proceeding, and making employees available on a mutually convenient basis to provide additional information and explanation of
any material provided hereunder. Notwithstanding the above, the control and conduct of any tax proceeding that is a Third-Party Claim
will be governed by Section 8.4. Any information obtained by a Party or its affiliates from another Party or its affiliates in
connection with any tax matters to which this Agreement applies will be kept confidential, except as may be otherwise necessary in connection
with the filing of tax returns or in conducting a Tax Proceeding, or as may otherwise be necessary to enforce the provisions of this Agreement.

 

Article
7.OTHER AGREEMENTS. 

 

The Parties hereby acknowledge and agree that any
and all open ended vehicle leases between LMP (or its affiliates) and the Company and/or Elite Auto Rentals, LLC are hereby terminated
in their entirety and the Parties shall have no further obligations pursuant to any such leases. For the avoidance of doubt, all payments
between the Parties with respect to any vehicles previously subject to such leases shall be made in accordance with the applicable Master
Finance Agreement.

 

Article
8.INDEMNIFICATION.

 

8.1 Indemnities
of the Buyers.

 

(a) The
Buyers shall, and hereby do, jointly and severally, indemnify, hold harmless and agree to defend LMP and its affiliates and all of their
respective officers, directors, employees, agents, consultants, representatives, stockholders, members, and controlling Persons and their
respective successors and assigns (collectively, the “LMP Indemnified Parties”) at all times from and after the date
of this Agreement, from and against any and all liabilities, actions, demands, judgments, settlements, injuries, claims, Liens, costs,
and expenses (including, without limitation, reasonable attorneys’ fees and expert witness fees) (“Damages”),
of or to any of the LMP Indemnified Parties, which may now or in the future be paid, incurred or suffered by or asserted against the LMP
Indemnified Parties by any Person resulting or arising from or incurred in connection with any one or more of the following:

 

(i) any
liabilities or claims for liability (whether in contract, in tort or otherwise, and whether or not successful) related in any way to the
Company and its affiliates, whether arising prior to, on or after the Closing Date;

 

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(ii) any
breach or nonfulfillment of any covenant or agreement of the Buyers contained in this Agreement or in any other agreement, document or
instrument delivered hereunder or pursuant hereto;

 

(iii) any
untruth or breach of any representation and warranty of Buyers contained in or made pursuant to this Agreement, including in any other
agreement, document or instrument delivered hereunder or pursuant hereto; and

 

(iv) all
actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including costs of court and reasonable attorneys’
fees) incident to sub-parts (i) through (iv).

 

(b) Insurance.
The Buyers’ indemnification obligations shall be reduced to the extent that the subject matter of any indemnification claim brought
by LMP is covered by and paid to LMP pursuant to a warranty or indemnification from a third party or third-party insurance.

 

(c) Limitations
on Indemnification. Notwithstanding anything to the contrary in this Article 8, the total indemnification obligations of Buyers
for claims for indemnification pursuant to Section 8.1(a) shall not, in the aggregate, exceed the Purchase Price.

 

8.2 Indemnities
of LMP.

 

(a) LMP
shall, and hereby does, indemnify, hold harmless and agrees to defend the Buyers at all times from and after the date of this Agreement,
from and against any and all Damages, of or to the Company and/or the Buyers, which may now or in the future be paid, incurred or suffered
by or asserted against the Buyers and/or the Company by any Person resulting or arising from or incurred in connection with any one or
more of the following:

 

(i) any
breach or nonfulfillment of any covenant or agreement of LMP contained in this Agreement or in any other agreement, document or instrument
delivered hereunder or pursuant hereto;

 

(ii) any
untruth, inaccuracy, or breach of any representation and warranty of LMP contained in or made pursuant to this Agreement, including in
any other agreement, document or instrument delivered hereunder or pursuant hereto; and

 

(iii) all
actions, suits, proceedings, demands, assessments, adjustments, costs and expenses (including costs of court and reasonable attorneys’
fees) incident to sub-parts (i) through (ii) any of the foregoing.

 

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(b) Insurance.
LMP’s indemnification obligations shall be reduced to the extent that the subject matter of any indemnification claim brought by
a Buyer is covered by and paid to such Buyer pursuant to a warranty or indemnification from a third party or third-party insurance.

 

(c) Limitations
on Indemnification. Notwithstanding anything to the contrary in this Article 8, the total indemnification obligations of LMP
for claims for indemnification pursuant to Section 8.2(a) shall not, in the aggregate, exceed the Purchase Price.

 

8.3 Claim
Procedures. Each Person that desires to make a claim for indemnification pursuant to this Article 8 (an “Indemnified
Party”) will provide notice (a “Claim Notice”) thereof in writing to LMP (if the Indemnified Party is Buyers)
or to Buyers (if the Indemnified Party is an LMP Indemnified Party) (in each such case, an “Indemnifying Party”), specifying
the nature and basis for such claim and a copy of all papers served with respect to such claim (if any). For purposes of this Section 8.3,
receipt by a Person of written notice of any claim by a third-party made against any Buyer or LMP Indemnified Party with respect to which
such Buyer or LMP Indemnified Party intends to seek indemnification hereunder for any Damages under this Article 8 (a “Third-Party
Claim”) which gives rise to a claim on behalf of such Person will require delivery of a Claim Notice to the Indemnifying Party
within 20 days following the receipt of such Third-Party Claim; provided, however, that an Indemnified Party’s failure
to send or delay in sending a Claim Notice will not relieve an Indemnifying Party from liability hereunder with respect to such Third-Party
Claim except to the extent and only to the extent the Indemnifying Party is materially prejudiced by such failure or delay.

 

8.4 Third-Party
Claims.

 

(a) In
the event of the assertion of any Third-Party Claim, the Indemnifying Party, at its option, may assume (with legal counsel reasonably
acceptable to the Indemnified Party) at its sole cost and expense the defense of such Third-Party Claim if it acknowledges to the Indemnified
Party in writing its obligations to indemnify the Indemnified Party with respect to all elements of such Third-Party Claim and may assert
any defense of the Indemnified Party or the Indemnifying Party; provided that the Indemnified Party will have the right at its
own expense to participate jointly with the Indemnifying Party in the defense of any such Third-Party Claim. Counsel representing both
the Indemnifying Party and the Indemnified Party must acknowledge in writing its obligation to act as counsel for all parties being represented
and must acknowledge and respect separate attorney-client privileges with respect to each party represented. If the Indemnifying Party
elects to undertake the defense of any Third-Party Claim under this Agreement, the Indemnified Party will reasonably cooperate with the
Indemnifying Party in the defense or settlement of the Third-Party Claim, including providing access to information, making documents
available for inspection and copying, and making employees reasonably available for interviews, depositions and trial, in each case, at
the Indemnifying Party’s expense. The Indemnifying Party will not be entitled to settle any Third-Party Claim without the prior
written consent of the Indemnified Party, which consent will not be unreasonably withheld or delayed.

 

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(b) If
the Indemnifying Party, by the 30th day after receipt of notice of any Third-Party Claim (or, if earlier, by the 10th
day preceding the day on which an answer or other pleading must be served in order to prevent Judgment by default in favor of the
Person asserting such Third-Party Claim) does not assume actively and in good faith the defense of any such Third-Party Claim or action
resulting therefrom, the Indemnified Party may, at the Indemnifying Party’s expense, defend against such Third-Party Claim, after
giving notice of the same to the Indemnifying Party, on such terms as the Indemnified Party may deem appropriate, and the Indemnifying
Party will be entitled to participate in (but not control) the defense of such action, with its counsel and at its own expense. The Indemnified
Party will not settle or compromise any Third-Party Claim for which it is entitled to indemnification under this Agreement, without the
prior written consent of the Indemnifying Party, which consent will not be unreasonably withheld or delayed.

 

(c) Notwithstanding
anything in this Section 8.4 to the contrary, LMP will in all cases be entitled to control the defense of a Third-Party Claim
if LMP reasonably believes (i) such Third-Party Claim could result in liabilities which, taken together with other then outstanding indemnification
claims by LMP under this Agreement, could exceed the remaining potential Damages payable by Buyers under this Agreement or the amount
that LMP believes it will be able to collect from Buyers under this Agreement or (ii) such Third-Party Claim could adversely affect in
any material respect LMP or its affiliates (other than the Company) other than as a result of money damages or if injunctive or other
non-monetary relief has been sought against LMP or its affiliates (other than the Company).

 

8.5 Calculation,
Timing, Manner and Characterization of Indemnification Payments.

 

(a) Subject
to subsection (c), below, payments of all amounts owed by an Indemnifying Party, other than as a result of a Third-Party Claim, will be
made within 15 Business Days after the later of (i) the date the Indemnifying Party is deemed liable therefor pursuant to this
Article 8 or (ii) if disputed, the date of the adjudication of the Indemnifying Party’s Liability to the Indemnified
Party under this Agreement.

 

(b) Subject
to subsection (c), below, payments of all amounts owing by an Indemnifying Party as a result of a Third-Party Claim will be made as and
when Damages with respect thereto are incurred by the Indemnified Party and within 15 Business Days after the Indemnified Party
makes demand therefor to the Indemnifying Party.

 

(c) All
amounts due and payable under this Agreement (i) with respect to a Third-Party Claim, will bear interest at the then-current long-term
Applicable Federal Rate from the date due and payable hereunder until the date paid and (ii) with respect to an indemnification claim
other than a Third-Party Claim, will bear interest at the then-current long-term Applicable Federal Rate from the date the Indemnified
Party suffers the Damages until the date paid. Such interest shall be calculated daily on the basis of a 365-day year and the actual number
of days elapsed.

 

8.6 Express
Negligence. THE PARTIES INTEND THAT THE INDEMNITIES SET FORTH IN THIS Article 8
BE CONSTRUED AND APPLIED AS WRITTEN ABOVE, NOTWITHSTANDING ANY RULE OF CONSTRUCTION TO THE CONTRARY. WITHOUT LIMITING THE FOREGOING, SUCH
INDEMNITIES WILL APPLY NOTWITHSTANDING ANY STATE’S “EXPRESS NEGLIGENCE” OR SIMILAR RULE THAT WOULD DENY COVERAGE BASED
ON AN INDEMNIFIED PARTY’S SOLE OR CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE OR GROSS NEGLIGENCE. IT IS THE INTENT OF THE PARTIES
THAT, TO THE EXTENT PROVIDED ABOVE, THE INDEMNITIES SET FORTH IN THIS Article 8
WILL APPLY TO AND NOTWITHSTANDING AN INDEMNIFIED PARTY’S SOLE OR CONCURRENT, ACTIVE OR PASSIVE NEGLIGENCE OR GROSS NEGLIGENCE. THE
PARTIES AGREE THAT THIS PROVISION IS “CONSPICUOUS” FOR PURPOSES OF ALL STATE LAWS.

 

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8.7 Materiality. For
purposes of determining whether there has been a breach or inaccuracy and the amount of Damages that are the subject matter of a claim
(including a Third-Party Claim) for indemnification or reimbursement hereunder, each such representation or warranty shall be read without
regard and without giving effect to the term “material” or “Material Adverse Effect” or similar phrases contained
in such representation or warranty.

 

8.8 Treatment.
Any indemnity payments made under this Agreement will be treated for all U.S. federal income tax purposes as an adjustment to the aggregate
Purchase Price, unless otherwise required by any applicable law.

 

Article
9.[RESERVED].

 

Article
10.NOTICES. Unless otherwise provided in this Agreement, any notice, demand and other communications to be given
or delivered under or by reason of the provisions of this Agreement will be in writing and will be deemed to have been given (a) when
delivered if personally delivered by hand, (b) when received if sent by a nationally recognized overnight courier service (receipt requested),
(c) 5 Business Days after being mailed, if sent by first class mail, return receipt requested, or (d) when receipt is acknowledged
by an affirmative act of the Party confirmed, if sent by electronic mail, facsimile, telecopy or other similar electronic transmission
device (including an acknowledgment generated automatically by a facsimile or telecopy machine or other electronic transmission device);
provided, however, that where a Party delivers a notice, demand or other communication by electronic mail, such Party shall
cause a copy of such notice to be delivered by nationally recognized overnight courier
(charges prepaid) the next business day. Notices, demands and communications to the Parties will, unless another address is specified
in writing by notice to the other Parties pursuant to this Article 10, be sent to the address indicated below.

 

If to the Buyers, addressed to:

 

Kevin Sisti, Murdo Smith, and Randal Roberge

LTO Holdings, LLC

93B Deming Rd.

Berlin, CT 06037 – 1514

Email addresses: kevin@ltoauto.com; murdo@ltoauto.com;
and randy@ltoauto.com

 

With a copy (which shall not constitute
notice) to:

Rome Clifford Katz & Koerner, LLP

214 Main Street

Hartford, CT 06106

Attention: Allan W. Koerner

Email: akoerner@rckklaw.com

 

    11

     

    

 

If to LMP, addressed to:

 

c/o LMP Automotive Holdings, Inc.

500 East Broward Boulevard, Suite 1900

Fort Lauderdale, Florida 33394

Attention: Sam Tawfik

Email: sam@lmpmotors.com

 

With a copy (which shall not constitute
notice) to:

Pryor Cashman LLP

7 Times Square

New York, New York 10036

Attention: David Rose, Esq.

Email: drose@pryorcashman.com

or to such other place and with such other copies
as the Buyers or LMP may designate by written notice to the others in accordance with this Article 10.

 

Article
11.GENERAL PROVISIONS.

 

11.1 Governing
Law.

 

(a) Except
as provided in Section 11.2(b), THIS AGREEMENT IS GOVERNED AND SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAW OF THE
STATE OF NEW YORK WITHOUT REGARD TO THE CONFLICTS OF LAW PRINCIPLES OF SUCH STATE.

 

(b) Except
as provided in Section 11.2, the parties hereto irrevocably submit to the exclusive jurisdiction of the State and U.S. federal
courts located in New York, New York and appropriate appellate courts therefrom, over any dispute arising out of or relating to this Agreement
or the other Transaction Documents or any of the transactions contemplated hereby or thereby, and each party hereby irrevocably agrees
that all claims in respect of such dispute may be heard and determined in such courts. The parties hereby irrevocably waive, to the fullest
extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any dispute arising out
of or relating to this Agreement or the other Transaction Documents or any of the transactions contemplated hereby or thereby brought
in such courts or any defense of inconvenient forum for the maintenance of such dispute. Each of the parties hereto agrees that a judgement
in any such dispute may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. This consent
to jurisdiction is being given solely for purposes of this Agreement and the other Transaction Documents and is not intended to, and shall
not, confer consent to jurisdiction with respect to any other dispute in which a party to this Agreement may become involved. Each of
the parties hereto hereby consents to process being served by any party to this Agreement in any suit, action, proceeding or counterclaim
of the nature specified in this subsection (b) by the mailing of a copy thereof in the manner specified by the provisions of Article
10. EACH OF THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE OTHER TRANSACTION DOCUMENTS OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.

 

    12

     

    

 

11.2 Dispute
Resolution. Any dispute between, among, or involving the Parties that arises from or relates to this Agreement or any of the other
Transaction Documents (except to the extent expressly provided in a Transaction Document), the relationship between such Parties that
is created pursuant to such agreements, any alleged breach of any provision thereof, or in any way relating to the subject matter of such
agreements (all of which are referred to herein as “Disputes”), including any Disputes that are extra-contractual in
nature, or that are based on contract, tort, state or federal law, or other legal or equitable bases, regardless of whether a Party is
seeking Damages or any other relief and regardless of whether or not any specific Transaction Document refers to this Section 11.2
will be resolved as provided in this Section 11.2; provided, however, that a Party will be permitted to take the actions
contemplated by Section 11.2(a)(iv).

 

(a) Mandatory
Mediation. Prior to and as a condition precedent to the initiation of any other dispute resolution procedures, the Parties will first
attempt to resolve their Dispute through mediation administered by the American Arbitration Association (the “AAA”).
The mediation process shall be initiated through service of a “Notice of Mediation” in accordance with the notice provisions
of Article 10 of this Agreement. The Parties shall agree on a mediator; however, if they cannot agree within 14 days of
service of the Notice of Mediation, then the AAA shall appoint the mediator. The mediation session shall be held within 30 days of the
retention of the mediator, and last for at least one full mediation day, before any Party has the option to withdraw from the process.
The Parties may agree to continue the mediation process beyond one day, until a settlement is reached, or one Party or the mediator states
that there is no reason to continue because of an impasse that cannot be overcome and the mediator sends the parties a “Notice of
Termination of Mediation.” All reasonable efforts will be made to complete the mediation within 30 days of the first mediation session.
The service of the Notice of Mediation shall toll the running of any applicable statute of limitations regarding the dispute at issue
until 30 days after the mediator sends a Notice of Termination of Mediation. Each side shall bear an equal share of the mediator’s
fees and costs unless the Parties agree otherwise, except that each Party shall be responsible for and bear its own attorneys’ fees
and costs for the mediation with the understanding that the prevailing party in any non-mediation dispute resolution proceeding that follows
an unsuccessful mediation may seek to recover such attorneys’ fees and costs, as well as the share of the mediator’s fees
and costs it has paid. All communications, both written and oral, during the mediation are confidential and shall be treated as settlement
negotiations for purposes of applicable rules of evidence; however, documents generated in the ordinary course of business prior to the
dispute at issue, that would otherwise be discoverable, do not become confidential or admissible simply because they are used in the mediation
process. The process shall be confidential based on terms acceptable to the mediator and/or the AAA. No Party to this Agreement shall
bring legal action or proceeding against another party to this Agreement without first participating in mediation, unless one Party refuses
to submit to mediation and legal action or a proceeding is brought to specifically enforce this mandatory mediation provision of this
Agreement. The foregoing, however, shall not preclude any of the Parties from applying for any preliminary, provisional or injunctive
remedies (including, without limitation, remedies such as attachment, preliminary injunction and replevin) available under applicable
laws for any purpose, nor shall it prevent any Party from appealing any adverse determination with respect to any such application for
preliminary, provisional or injunctive relief. Further to the foregoing and for the avoidance of doubt, nothing in this Section 11.2(a),
or in Section 11.2(b) below, will not be construed to prevent LMP or the Buyers from instituting, and LMP and the Buyers are hereby
authorized to institute, formal proceedings (including seeking provisional remedies such as attachment, preliminary injunction and replevin
from the appropriate court) to avoid the expiration of any applicable limitations period, to avoid irreparable harm (including irreparable
harm caused by the Buyers’ breach of the covenants set forth in Section 6.16), to preserve a superior position with respect
to other creditors, or, to the extent contemplated by Section 11.2, to pursue injunctive or other equitable remedies.,

 

    13

     

    

 

(b) Arbitration.
If the Parties are unable to resolve any Dispute arising under this Agreement as contemplated by Section 11.2(a), then (subject
to the exceptions referred to in Section 11.2(a)) such Dispute will be submitted to mandatory and binding arbitration at the
election of any Party (the “Disputing Party”) pursuant to the following conditions:

 

(i) Procedures.
The arbitration will be conducted pursuant to the then applicable Commercial Arbitration Rules of the AAA, except as expressly provided
in this Section 11.2 (the “AAA Rules”). The arbitrator(s) (the “Arbitrator(s)”) will
be selected pursuant to the procedures set forth in Section 11.2(b)(iii) below. In resolving the substance of the Dispute,
the Arbitrator(s) will apply substantive Delaware law or applicable substantive federal law without regard to the conflicts of law principles
of such state.

 

(ii) Submission
to Arbitration. The Disputing Party will notify the other applicable Parties that it is submitting the Dispute to final and binding
arbitration to be conducted privately and confidentially in accordance with the terms of Article 10.

 

(iii) Selection
of Arbitrator(s). If the amount in dispute is less than an aggregate of $1,000,000 (together with other agreements executed
by the Parties on or about the date hereof), such Dispute will be resolved by a single Arbitrator mutually acceptable to the applicable
Parties. If LMP and Buyers are unable to agree upon a mutually acceptable Arbitrator within 30 days of the submission of the Dispute
to arbitration, such Arbitrator will be appointed in accordance with the AAA Rules. If the amount in dispute is an aggregate of $1,000,000
(together with other agreements executed by the Parties on or about the date hereof) or more, within 30 days after the notice of
initiation of the arbitration procedure, each of LMP (on the one hand) and Buyers (on the other hand) will nominate one Arbitrator, who
need not be neutral. If any Party fails or refuses to timely nominate an Arbitrator, such Arbitrator will be appointed in accordance with
the AAA Rules. Upon selection of the two Arbitrators by the applicable Parties, the two Arbitrators will select a third Arbitrator within
15 days after their appointment, failing agreement on which such third Arbitrator will be appointed in accordance with the AAA
Rules. The Arbitrators, acting by majority vote, will resolve all Disputes between the applicable Parties. If one of the Party-appointed
Arbitrators refuses to participate in the proceedings or refuses to vote, the unanimous decision of the other two Arbitrators will be
binding.

 

    14

     

    

 

(iv) Replacement
of Arbitrator. Should any Arbitrator refuse or be unable to proceed with arbitration proceedings as called for by this Section 11.2(b),
such Arbitrator will be replaced in the same manner by which he or she was appointed (e.g., if LMP appointed the departing Arbitrator,
LMP would appoint his or her replacement, and if the two Party-appointed Arbitrators appointed the departing Arbitrator, then they would
appoint his or her replacement).

 

(v) Place
of Arbitration. The arbitration will be conducted in the Miami, Florida office of the AAA. The Parties expressly consent to the location
of such arbitration and agree not to contest this venue provision or the choice of law provision set forth in Section 11.2(b)(i)
above, it being acknowledged and agreed that Florida bears a reasonable relation to this Agreement and the Parties have knowingly and
voluntarily elected a Florida forum. Any action in order to enforce this arbitration clause or an award granted hereunder may be brought
in the courts of the State of Florida, Miami-Dade County, and the federal courts with jurisdiction thereover. Each of the Parties (A)
consents to the exclusive jurisdiction of such courts in any such suit, action or proceeding, (B) irrevocably waives, to the fullest extent
permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in
any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum,
(C) will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court, and (D) will
not bring any action relating to this Agreement or any of the transactions contemplated by this Agreement in any other court. Process
in any such suit, action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of
any such court. Without limiting the foregoing, each Party agrees that notice on such Party as provided in Article 10 will be deemed
effective service of process on such Party.

 

(vi) Conduct
of Arbitration. The Arbitrator(s) shall have the authority to determine the enforceability of this Section 11.2, including
whether the terms of the provisions under this Section 11.2 are conscionable. Upon the service of an arbitration demand, the
Parties will discuss and attempt to agree upon the manner, timing and extent of discovery that may be conducted prior to and in preparation
for the arbitration hearing. In the event the Parties are unable to agree upon the manner, timing and extent of discovery, such issues
will be submitted to the Arbitrator(s) for resolution. However, under no circumstances will the Arbitrator(s) allow more depositions,
interrogatories, requests for production of documents and requests for admission than permitted by the presumptive limitations set forth
in the Federal Rules of Civil Procedure. The Arbitrator(s) will have the authority to impose appropriate sanctions, including an award
of reasonable attorneys’ fees, against any party that fails to cooperate in good faith in discovery permitted by this Section 11.2(b)(vi)
or ordered by the Arbitrator(s). If the amount in dispute is less than an aggregate of $1,000,000 (together with other agreements
executed by the Parties on or about the date hereof), unless otherwise agreed by the Parties the arbitration hearing will commence no
later than 150 days after the selection of the Arbitrator in accordance with the procedures set forth in Section 11.2(b)(iii).
If the amount in dispute is an aggregate of $1,000,000 (together with other agreements executed by the Parties on or about the
date hereof) or more, the arbitration hearing will commence after such time as the Parties have completed the discovery permitted
by this Section 11.2(b)(vi) and as determined by the Arbitrators. Unless otherwise agreed by the Parties, the arbitration
hearing will be conducted on consecutive days. The Arbitrator(s) must give effect to legal privileges including the attorney-client privilege
and the work-product immunity.

 

    15

     

    

 

(vii) Arbitration
Award. The Arbitrator(s) will render a binding, reasoned decision within 20 days following the completion of the arbitration
hearing. The award of the Arbitrator(s) will be in writing. The Arbitrator(s) must certify in the award that such award conforms to the
terms and conditions set forth in this Agreement (e.g., the award must comply with the parameters set forth in Article 8).
The award rendered by the Arbitrator(s) will be binding and conclusive, and judgment on the award may be entered pursuant to Section 11.2(b)(v).

 

(viii) Time
of the Essence. The Arbitrator(s) are instructed that time is of the essence in the arbitration proceeding, and that the Arbitrator(s)
will have the right and authority to issue reasonable monetary sanctions against either LMP (on the one hand) or the Buyers (on the other
hand) if, upon a showing of good cause, such Party is unreasonably delaying the proceeding. The amount of such sanction will be related
to the additional harm, if any, caused by the delay.

 

(ix) Expenses.
The Arbitrator(s) will have the authority to assess the costs and expenses of the arbitration proceeding (including the Arbitrator(s)’
fees and expenses) against either LMP (on the one hand) or the Buyers (on the other hand). The Arbitrator(s) will also have the authority
to award attorneys’ fees and expenses to the prevailing side.

 

(x) Confidentiality.
To the fullest extent permitted by law, the arbitration proceedings and award will be maintained in confidence by the Parties, except
as otherwise required by applicable law and, provided that nothing shall prevent any Party from filing the award in connection with any
proceeding to enforce it and nothing in this Agreement shall require such filing to be under seal.

 

(xi) Severability.
The provisions of this Section 11.2 are independent of the remaining provisions of this Agreement and the Parties intend that
the provisions of this Section 11.2 will continue in effect even though one or more provisions of the Agreement (including,
for the avoidance of doubt, any provision of this Section 11.2) will be determined to be invalid or unenforceable by a court
of competent jurisdiction. This agreement to arbitrate will also survive the termination or expiration of this Agreement.

 

(c) Acknowledgment.
THE PARTIES EXPRESSLY ACKNOWLEDGE AND AGREE THAT THEY HAVE READ AND UNDERSTOOD THIS SECTION 11.2 AND THAT THEY ARE HEREBY
KNOWINGLY AND VOLUNTARILY WAIVING THEIR RIGHT TO A JURY TRIAL. 

 

11.3 Waiver
of Compliance; Consents. Except as otherwise provided in this Agreement, any failure of any of the Parties to comply with any obligation,
covenant, agreement or condition in this Agreement may be waived by the Person or Persons entitled to the benefits thereof only by a written
instrument signed by the Person or Persons granting such waiver, but such waiver or failure to insist upon strict compliance with such
obligation, covenant, agreement or condition will not operate as a waiver of, or estoppel with respect to, any subsequent or other failure.

 

11.4 Expenses.
Except as otherwise provided in this Agreement, (a) the Buyers will be responsible for all legal fees, accountant’s fees, consultant’s
fees, broker fees, investment banker’s fees, other advisory fees and other costs and expenses that the Buyers may incur in connection
with the negotiation, preparation, execution or performance of this Agreement, and (b) LMP will be responsible for all legal fees, accountant’s
fees, consultant’s fees, broker fees, investment banker’s fees, other advisory fees and other costs and expenses that LMP
and its affiliates incur in connection with the negotiation, preparation, execution or performance of this Agreement.

 

    16

     

    

 

11.5 Waiver.
The Parties hereby agree to waive each of the provisions of Article VII of the March Operating Agreement in connection with the consummation
of the transactions contemplated by this Agreement and the other Transaction Documents.

 

11.6 Invalidity.
In the event that any one or more of the provisions set forth in this Agreement or in any other instrument referred to in this Agreement
will, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability
will not affect any other provision of this Agreement or any other such instrument; provided, however, that if the invalidity,
illegality, or unenforceability of such provision or provisions deprives a Party of any material benefit under this Agreement, the Parties
will substitute a new provision or new provisions to restore such material benefit or benefits that is or are valid, legal, and enforceable,
consistent with Section 11.12 below.

 

11.7 No
Third-Party Beneficiaries. This Agreement is solely for the benefit of (a) the Parties and their successors and assigns permitted
under this Agreement, (b) the LMP Releasees and the Buyer Releasees, and (c) the Indemnified Parties (solely with respect to such Persons’
rights to indemnification pursuant to Article 8 and the rights to enforce such rights to indemnification pursuant to this
Article 11), and no provisions of this Agreement will be deemed to confer upon any other Person any remedy, claim, liability,
reimbursement, cause of action or other right except as expressly provided in this Agreement.

 

11.8 No
Presumption Against Any Party. Neither this Agreement nor any uncertainty or ambiguity herein will be construed or resolved against
any Party, whether under any rule of construction or otherwise. On the contrary, this Agreement has been reviewed by each of the Parties
and their counsel and will be construed and interpreted according to the ordinary meaning of the words used so as to fairly accomplish
the purposes and intentions of all Parties.

 

11.9 Counterparts.
This Agreement may be executed in one or more counterparts, each of which will be deemed an original, but all of which together will constitute
one and the same instrument.

 

11.10 Entire
Agreement; Amendments. This Agreement, together with all Exhibits, Annexes and Schedules hereto, and the other Transaction Documents
constitute the entire agreement of the Parties with regard to the subject matter hereof and supersede all prior and contemporaneous agreements,
understandings, negotiations and discussions, whether oral or written, of the Parties. No amendment, supplement or modification of this
Agreement will be binding unless executed in writing by all Parties

 

11.11 Electronic
Execution and Delivery. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or more Parties , and
an executed copy of this Agreement may be delivered by one or more Parties by facsimile or similar instantaneous electronic transmission
device pursuant to which the signature of or on behalf of such party can be seen, and such execution and delivery shall be considered
valid, binding and effective for all purposes. At the request of any Party, all Parties agree to execute an original of this Agreement
as well as any facsimile, telecopy or other reproduction hereof.

 

11.12 Severability.
Should any provision of this Agreement be held unenforceable or invalid under the laws of the United States of America or the State of
Delaware, or under any other applicable laws of any other jurisdiction, then the Parties agree that such provision shall be deemed modified
for purposes of performance of this Agreement in such jurisdiction to the extent necessary to render it lawful and enforceable, or if
such a modification is not possible without materially altering the intention of the Parties , then such provision shall be severed here
from for purposes of performance of this Agreement in such jurisdiction. The validity of the remaining provisions of this Agreement shall
not be affected by any such modification or severance, except that if any severance materially alters the intentions of the Parties as
expressed herein (a modification being permitted only if there is no material alteration), then the Parties shall use commercially reasonable
efforts to agree to appropriate equitable amendments to this Agreement in light of such severance, and if no such agreement can be reached
within a reasonable time, any party may initiate arbitration under the then current commercial arbitration rules of the American Arbitration
Association to determine and effect such appropriate equitable amendments.

 

    17

     

    

 

11.13 Binding
Effect. All the terms, provisions, covenants and conditions of this Agreement shall be binding upon and inure to the benefit of and
be enforceable by the Parties and their respective heirs, executors, administrators, representatives, successors and permitted assigns.

 

11.14 Assignment.
This Agreement and the rights under this Agreement may not be assigned by LMP without the prior written consent of the Buyers; provided,
however, that LMP will be permitted, without the Buyers’ consent, to (a) collaterally assign this Agreement and its rights
herein and in the other Transaction Documents to any of LMP’s or its affiliate’s lenders, (b) assign the provisions and benefits
of this Agreement and the other Transaction Documents to any affiliate of LMP provided that, unless otherwise consented to in writing
by the Buyers, LMP shall remain contractually liable hereunder for any payment obligations of LMP, and each of the Buyers hereby consent
to any such assignment. This Agreement and the rights hereunder may not be assigned by the Buyers without the prior written consent of
LMP. Subject to the foregoing, this Agreement will be binding upon and inure to the benefit of the Parties and their respective successors
and assigns.

 

11.15 Computation
of Time. Whenever this Agreement requires that something be done within a period of days, such period shall: (a) not include the day
from which such period commences; (b) include the day upon which such period expires; (c) expire at 8:00 p.m. Eastern Time on the date
by which such thing is to be done; or (d) be extended by 2 Business Days if the final day of such period falls on a Saturday, Sunday,
or bank holiday in the state where such thing is to be done

 

11.16 Interpretation
& Administration. The words “include”, “includes”, “included”, “including” and
“such as” do not limit the preceding words or terms and will be deemed to be followed by the words “without limitation.”
The Parties have a duty of good faith and fair dealing. All captions and headings contained in this Agreement are for convenience of reference
only and will not be construed to limit or extend the terms or conditions of this Agreement. All pronouns and any variations thereof refer
to the masculine, feminine or neuter, singular or plural, as the context may require. All terms defined in this Agreement in their singular
or plural forms, have correlative meanings when used herein in their plural or singular forms, respectively. Each Party and its counsel
have reviewed this Agreement and the rule of construction that any ambiguities are to be resolved against the drafter will not be employed
in the interpretation of this Agreement or any amendments, schedules or exhibits hereto.

 

(signatures on the following
page)

 

    18

     

    

 

IN WITNESS WHEREOF, the Parties
have executed this Membership Interest Purchase Agreement effective as of the Effective Date.

 

	 	LMP:
	 	 
	 	LMP FINANCE, LLC
	 	 
	 	By:	/s/ Sam Tawfik
	 	Name:	Sam Tawfik
	 	Title:	Chief Executive Officer
	 	 
	 	BUYERS:
	 	 
	 	/s/ Kevin Sisti
	 	Kevin Sisti
	 	 
	 	/s/ Murdo Smith
	 	Murdo Smith
	 	 
	 	/s/ Randal Roberge
	 	Randal Roberge

 

[Signature Page to Membership Interest Purchase
Agreement]plth_ex41

 

Exhibit 4.1

 

 

PLANET 13 HOLDINGS INC.

 

- and
-

 

ODYSSEY TRUST COMPANY

 

WARRANT INDENTURE

 

Providing
for the Issue of

 

up to
2,679,500 Common Share Purchase Warrants

 

 

July 3,
2020

 

 

 

 

TABLE OF CONTENTS

 

	

ARTICLE 1 INTERPRETATION

	

6

	

1.1

	

Definitions

	

6

	

1.2

	

Words Importing the Singular

	

10

	

1.3

	

Interpretation not Affected by Headings

	

10

	

1.4

	

Day not a Business Day

	

10

	

1.5

	

Time of the Essence

	

11

	

1.6

	

Governing Law

	

11

	

1.7

	

Meaning of "outstanding" for Certain Purposes

	

11

	

1.8

	

Currency

	

11

	

1.9

	

Termination

	

11

	

ARTICLE 2 ISSUE OF WARRANTS

	

11

	

2.1

	

Issue of Warrants

	

11

	

2.2

	

Form and Terms of Warrants

	

12

	

2.3

	

Signing of Warrant Certificates

	

12

	

2.4

	

Authentication by the Warrant Agent

	

13

	

2.5

	

Warrantholder not a Shareholder, etc.

	

13

	

2.6

	

Issue in Substitution for Lost Warrant Certificates

	

13

	

2.7

	

Warrants to Rank Pari Passu

	

14

	

2.8

	

Registration and Transfer of Warrants

	

14

	

2.9

	

Registers Open for Inspection

	

16

	

2.10

	

Exchange of Warrants

	

16

	

2.11

	

Ownership of Warrants

	

16

	

2.12

	

Uncertificated Warrants

	

16

	

2.13

	

Adjustment of Exchange Basis

	

18

	

2.14

	

Rules Regarding Calculation of Adjustment of Exchange
Basis

	

22

	

2.15

	

Postponement of Subscription

	

24

	

2.16

	

Notice of Adjustment

	

24

	

2.17

	

No Action after Notice

	

24

	

2.18

	

Purchase of Warrants for Cancellation

	

25

	

2.19

	

Protection of Warrant Agent

	

25

	

2.20

	

U.S. Legend on Warrant Certificates and Warrant Share
certificates

	

25

	

ARTICLE 3 EXERCISE OF WARRANTS

	

27

	

3.1

	

Method of Exercise of Warrants

	

27

	

3.2

	

No Fractional Shares

	

29

	

3.3

	

Effect of Exercise of Warrants

	

29

	

3.4

	

Cancellation of Warrants

	

30

	

3.5

	

Subscription for less than Entitlement

	

30

 

 

 

 

	

3.6

	

Expiration of Warrant

	

30

	

3.7

	

Prohibition on Exercise by U.S. Persons; Exception

	

30

	

ARTICLE 4 COVENANTS FOR WARRANTHOLDERS' BENEFIT

	

31

	

4.1

	

General Covenants of the Company

	

31

	

4.2

	

Warrant Agent's Remuneration and Expenses

	

33

	

4.3

	

Performance of Covenants by Warrant Agent

	

33

	

4.4

	

Enforceability of Warrants

	

33

	

ARTICLE 5 ENFORCEMENT

	

33

	

5.1

	

Suits by Warrantholders

	

33

	

5.2

	

Limitation of Liability

	

34

	

5.3

	

Waiver of Default

	

34

	

ARTICLE 6 MEETINGS OF WARRANTHOLDERS

	

34

	

6.1

	

Right to Convene Meetings

	

34

	

6.2

	

Notice

	

35

	

6.3

	

Chairman

	

35

	

6.4

	

Quorum

	

35

	

6.5

	

Power to Adjourn

	

36

	

6.6

	

Show of Hands

	

36

	

6.7

	

Poll and Voting

	

36

	

6.8

	

Regulations

	

36

	

6.9

	

Company, Warrant Agent and Counsel may be Represented

	

36

	

6.10

	

Powers Exercisable by Extraordinary Resolution

	

36

	

6.11

	

Meaning of "Extraordinary Resolution"

	

37

	

6.12

	

Powers Cumulative

	

38

	

6.13

	

Minutes

	

38

	

6.14

	

Instruments in Writing

	

38

	

6.15

	

Binding Effect of Resolutions

	

39

	

6.16

	

Holdings by the Company or Subsidiaries of the Company
Disregarded

	

39

	

6.17

	

Common Shares or Warrants Owned by the Company or its Subsidiaries
–

	

Certificate to be Provided

	

39

	

ARTICLE 7

	
 

	

40

	

7.1

	

Provision for Supplemental Indentures for Certain
Purposes

	

40

	

7.2

	

Successor Companies

	

41

	

ARTICLE 8 CONCERNING THE WARRANT AGENT

	

41

	

8.1

	

Indenture Legislation

	

41

	

8.2

	

Rights and Duties of Warrant Agent

	

41

	

8.3

	

Evidence, Experts and Advisers

	

42

	

8.4

	

Securities, Documents and Monies Held by Warrant Agent

	

44

	

8.5

	

Actions by Warrant Agent to Protect Interests

	

44

	

8.6

	

Warrant Agent not Required to Give Security

	

44

 

 

 

 

	

8.7

	

Protection of Warrant Agent

	

44

	

8.8

	

Replacement of Warrant Agent

	

46

	

8.9

	

Conflict of Interest

	

47

	

8.10

	

Acceptance of Duties and Obligations

	

47

	

8.11

	

Warrant Agent not to be Appointed Receiver

	

47

	

8.12

	

Authorization to Carry on Business

	

48

	

ARTICLE 9 GENERAL

	

48

	

9.1

	

Notice to the Company and the Warrant Agent

	

48

	

9.2

	

Notice to the Warrantholders

	

49

	

9.3

	

Privacy

	

49

	

9.4

	

Third Party Interests

	

50

	

9.5

	

Securities Exchange Commission Certification

	

50

	

9.6

	

Discretion of Directors

	

50

	

9.7

	

Satisfaction and Discharge of Indenture

	

51

	

9.8

	

Provisions of Indenture and Warrants for the Sole Benefit of
Parties and

	

Warrantholders

	

51

	

9.9

	

Indenture to Prevail

	

51

	

9.10

	

Assignment

	

51

	

9.11

	

Severability

	

51

	

9.12

	

Force Majeure

	

51

	

9.13

	

Counterparts and Formal Date

	

52

Schedule
“A” Form of Warrant Certificate

 

Schedule
“B” Form of Declaration for Removal of
Legend

 

 

 

THIS WARRANT INDENTURE dated as of July 3, 2020

 

BETWEEN:

 

PLANET
13 HOLDINGS INC.,

a
company existing under the laws of British Columbia

 

(the
"Company")

 

 

AND

 

 

ODYSSEY
TRUST COMPANY,

a trust
company incorporated under the laws of Alberta and authorized to
carry on business in the provinces of Alberta and British
Columbia

 

(the
"Warrant
Agent")

 

RECITALS

 

WHEREAS:

 

A.

In connection with
the public offering by the Company of up to 5,359,000 Units (as
defined below) pursuant to a short form prospectus dated June 26,
2020 (the "Offering"), the
Company proposes to issue and sell to the public up to 2,679,500
Warrants (as defined below), of which 2,330,000 Warrants will be
issuable as a part of the base Offering and up to 349,500 Warrants
will be issuable upon the due exercise of the Over-Allotment Option
(as defined below);

 

B.

Each Warrant
entitles the holder thereof to purchase, subject to adjustment in
certain events, one Warrant Share (as defined below) at a price of
$2.85 at any time prior to 5:00 p.m. (Toronto time) on July 3,
2022;

 

C.

For such purpose
the Company deems it necessary to create and issue Warrants and
Warrant Certificates (as defined below) to be constituted and
issued in the manner hereinafter set forth;

 

D.

The Company is duly
authorized to create and issue the Warrants to be issued as herein
provided;

 

E.

All things
necessary have been done and performed to make the Warrants, when
Authenticated (as defined below) or certified by the Warrant Agent
and issued as provided in this Indenture, legal, valid and binding
upon the Company with the benefits of and subject to the terms of
this Indenture;

 

F.

The foregoing
recitals are made as statements of fact by the Company and not by
the Warrant Agent; and

 

G.

The Warrant Agent
has agreed to enter into this Indenture and to hold all rights,
interests and benefits contained herein for and on behalf of those
persons who become holders of Warrants issued pursuant to this
Indenture from time to time;

 

 

5

 

 

NOW THEREFORE THIS INDENTURE WITNESSES
that for good and valuable consideration mutually given and
received, the receipt and sufficiency of which are hereby
acknowledged, it is hereby agreed and declared as
follows:

 

ARTICLE 1 INTERPRETATION

 

1.1            

Definitions

 

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

 

"Applicable Legislation" means the
provisions of the statutes of Canada and its provinces and the
regulations under those statutes relating to warrant indentures
and/or the rights, duties or obligations of issuers and warrant
agents under warrant indentures as are from time to time in force
and applicable to this Indenture;

 

"Authenticated" means (a) with respect to
the issuance of a Warrant Certificate, one which has been duly
signed by the Company and authenticated by manual signature of an
authorized officer of the Warrant Agent, and (b) with respect to
the issuance of an Uncertificated Warrant, one in respect of which
the Warrant Agent has completed all Internal Procedures such that
the particulars of such Uncertificated Warrant as required by
Section 2.4 are entered in the register of Warrantholders,
"Authenticate",
"Authenticating" and
"Authentication" have the
appropriate correlative meanings;

 

"Beneficial Owner" means a person that
has a beneficial interest in a Warrant;

 

"Book-Entry Only System" means the
book-based securities system administered by CDS in accordance with
its operating rules and procedures in force from time to
time;

 

"Business Day" means a day that is not a
Saturday, Sunday, or a day on which banks are closed or which is a
civic or statutory holiday in the City of Toronto, Ontario or
Calgary, Alberta;

"Capital Reorganization" has the meaning
ascribed to that term in Section 2.13(4); "CDS" means CDS Clearing and Depository
Services Inc. and its successors in interest;

 

"CDSX" means the CDS settlement and
clearing system for equity and debt securities in
Canada;

 

"Closing Date" means July 3, 2020 or such
other date as agreed to by the Company and the
Underwriters;

 

"Common Share Reorganization" has the
meaning ascribed to that term in Section 2.13(1); "Common Shares" means the common shares
in the capital of the Company;

 

"Company" means Planet 13 Holdings Inc.,
a corporation existing under the laws of British Columbia, and its
lawful successors from time to time;

 

"Company's Auditors" means the chartered
(professional) accountant or firm of chartered (professional)
accountants duly appointed as auditor or auditors of the Company
from time to time, including prior auditors of the Company, as
applicable;

 

"Confirmation" has the meaning ascribed
that term in Section 3.1(4);

 

 

6

 

 

"counsel" means a barrister and solicitor
or lawyer or a firm of barristers and solicitors or lawyers, in
both cases acceptable to the Warrant Agent;

 

"CSE" means the Canadian Securities
Exchange;

 

"Current Market Price" means, at any
date, the volume weighted average price per share at which the
Common Shares have traded:

 

(a)

on the
CSE;

 

(b)

if the Common
Shares are not listed on the CSE, on any stock exchange upon which
the Common Shares are listed, as may be selected for this purpose
by the board of directors of the Company, acting reasonably;
or

 

(c)

if the Common
Shares are not listed on any stock exchange, on any
over-the-counter market on which the Common Shares are trading, as
may be selected for this purpose by the board of directors of the
Company, acting reasonably;

 

during
the 20 consecutive trading days (on each of which at least 500
Common Share are traded in board lots) ending the second trading
day before such date; provided that the volume weighted average
price shall be determined by dividing the aggregate sale price of
all Common Shares sold in board lots on the exchange or market, as
the case may be, during the 20 consecutive trading days by the
number of Common Shares so sold on said exchange or market or, if
not traded on any recognized exchange or market, as determined by
the directors of the Company, acting reasonably;

 

"director" means a member of the board of
directors of the Company for the time being, and unless otherwise
specified herein, reference to "action by the board of directors" means
action by the board of directors of the Company as a board or,
whenever duly empowered, action by a committee of the
board;

 

"Dividend Paid in the Ordinary Course"
means dividends paid in any financial year of the Company, whether
in (i) cash, (ii) shares of the Company, (iii) warrants or similar
rights to purchase any shares of the Company or property or other
assets of the Company provided that the value of such dividends per
outstanding Common Share does not in such financial year exceed in
aggregate 5% of the Exercise Price;

 

"Exchange Basis" means, at any time, the
number of Warrant Shares or other classes of shares or securities
or property which a Warrantholder is entitled to receive upon the
exercise of the rights attached to the Warrants pursuant to the
terms of this Indenture, as the number may be adjusted pursuant to
Article 2 hereof, such number being equal to one Warrant Share per
Warrant as of the date hereof;

 

"Exercise Date" with respect to any
Warrant means the date on which such Warrant is duly surrendered
for exercise in accordance with the provisions of Article 3
hereof;

 

 

7

 

 

"Exercise Notice" has the meaning
ascribed that term in Section 3.1(4);

 

"Exercise Price" means $2.85 for each
Warrant Share, subject to adjustment in accordance with the
provisions of Article 2 hereof;

 

“Expiry Date” means July 3,
2022;

 

"extraordinary resolution" has the
meaning ascribed to that term in sections 6.12 and
6.15;

 

"Internal Procedures" means in respect of
the making of any one or more entries to, changes in or deletions
of any one or more entries in the register at any time (including
without limitation, original issuance or registration of transfer
of ownership) the minimum number of the Warrant Agent's internal
procedures customary at such time for the entry, change or deletion
made to be complete under the operating procedures followed at the
time by the Warrant Agent;

 

"Offering" has the meaning ascribed
thereto in Recital A of this Indenture;

 

“Original U.S. Purchaser” means a
Qualified Institutional Buyer who purchased Warrants as part of the
Offering;

 

"Over-Allotment Option" means the option
granted by the Company to the Underwriters, which may be exercised
in the Underwriters' sole discretion and without obligation, to
purchase up to an additional 699,000 Units, including up to 699,000
Unit Shares and up to 349,500 Warrants, for the purpose of covering
over-allotments made in connection with the Offering and for market
stabilization purposes, and which is exercisable for any
combination of additional Units, additional Unit Shares and/or
additional Warrants, from and including thirty (30) days following
the Closing Date;

 

"Participant" means a person recognized
by CDS as a participant in the Book-Entry Only System;

 

"person" means an individual, a
corporation, a limited liability company, a partnership, a
syndicate, a trustee or any unincorporated organization and words
importing persons are intended to have a similarly extended
meaning;

 

“Price” means the Exercise
Price;

 

“Qualified Institutional Buyer”
means a “qualified institutional buyer” as such term is
defined in Rule 144A under the U.S. Securities Act;

 

"QIB Letter" means the Qualified
Institutional Buyer Letter signed by the Original U.S.
Purchaser;

 

"Regulation S" means Regulation S as
promulgated under the U.S. Securities Act; "Rights Offering" has the meaning
ascribed to that term in Section 2.13(2); "Rights Offering Price" has the meaning
ascribed to that term in Section 2.14(8);

 

"Securities Laws" means, collectively,
the applicable securities laws and regulations of each of the
provinces of Canada, except Quebec, the United States and each of
the states of the United States, together with all respective
regulations made and forms prescribed thereunder,
published rules,
policy statements, notices, orders and rulings of the securities
commissions or similar regulatory authorities thereto, as
applicable, including the rules and policies of the
CSE;

 

 

8

 

 

"shareholder" means an owner of record of
one or more Common Shares or shares of any other class or series of
the Company;

 

"Special Distribution" has the meaning
ascribed to that term in Section 2.13(3);

 

"Subsidiary" means a corporation, a
majority of the outstanding voting shares of which are owned,
directly or indirectly, by the Company or by one or more
subsidiaries of the Company and, as used in this definition,
"voting shares" means shares of a class or classes ordinarily
entitled to vote for the election of the majority of the directors
of a corporation irrespective of whether or not shares of any other
class or classes shall have or might have the right to vote for
directors by reason of the happening of any
contingency;

 

"successor company" has the meaning
ascribed to that term in Section 7.2;

 

"this Indenture", "herein", "hereby" and similar expressions mean or
refer to this Common Share purchase warrant indenture and any
indenture, deed or instrument supplemental or ancillary hereto; and
the expressions "Article",
"section", or "paragraph" followed by a number or
letter mean and refer to the specified Article, section, or
paragraph of this Indenture;

 

"Time of Expiry" means 5:00 p.m. (Toronto
time) on the Expiry Date;

 

"trading day" means a day on which the
CSE (or such other exchange on which the Common Shares are listed)
is open for trading, and if the Common Shares are not listed on a
stock exchange, a day on which an over-the-counter market where
such shares are traded is open for business;

 

"transaction instruction" means a written
order signed by the holder or CDS, entitled to request that one or
more actions be taken, or such other form as may be reasonably
acceptable to the Warrant Agent, requesting one or more such
actions to be taken in respect of an Uncertificated
Warrant;

 

"Transfer Agent" means the transfer agent
or agents for the time being for the Common Shares;

 

"U.S. Person" means a U.S. person as that
term is defined under Regulation S; "U.S. Securities Act" means the United
States Securities Act of 1933, as amended;

 

"Uncertificated Warrant" means any
Warrant which is issued under the Book-Entry Only System or any
Warrant which is not a certificated Warrant;

 

"Underwriters" means collectively Beacon
Securities Limited and Canaccord Genuity Corp.;

 

"Unit Share" means a Common Share
comprising part of each Unit;

 

"United States" means the United States
as that term is defined in Regulation S;

 

9

 

"Units" means the units of the Company,
each Unit being comprised of one Unit Share and one-half
Warrant;

 

"Warrant Agent" means Odyssey Trust
Company, a trust company incorporated under the laws of Alberta and
authorized to carry on business in the provinces of Alberta and
British Columbia or any lawful successor thereto including through
the operation of Section 8.8;

 

"Warrant Certificates" means the
certificates representing Warrants substantially in the form
attached as Schedule "A" hereto or such other form as may be
approved by the Company and the Warrant Agent;

 

"Warrant Shares" means the Common Shares
or, as a result of any adjustment to the subscription rights
pursuant to Article 2 hereof, other securities or property issuable
upon the exercise of the Warrants;

 

"Warrantholders" or "holders" means the persons whose names
are entered for the time being in the register maintained pursuant
to Section 2.8;

 

"Warrantholders' Request" means an
instrument, signed in one or more counterparts by Warrantholders
representing, in the aggregate, at least 20% of the aggregate
number of Warrants then outstanding, which requests the Warrant
Agent to take some action or proceeding specified
therein;

 

"Warrants" means the Common Share
purchase warrants of the Company issued and Authenticated hereunder
as Uncertificated Warrants or to be issued and countersigned in the
form of Warrant Certificates, in either case, entitling the holders
thereof to purchase Warrant Shares on the basis of one Warrant
Share for each Warrant upon payment of the Exercise Price prior to
the Time of Expiry; provided that in each case the number and/or
class of securities or property receivable on the exercise of the
Warrants may be subject to increase or decrease or change in
accordance with the terms and provisions hereof; and

 

"written direction of the Company",
"written request of the
Company", "written consent
of the Company", "Officer's
Certificate" and "certificate of the Company" and any
other document required to be signed by the Company, means,
respectively, a written direction, request, consent, certificate or
other document signed in the name of the Company by any officer or
director and may consist of one or more instruments so
executed.

 

1.2            

Words Importing the Singular

 

Unless
elsewhere otherwise expressly provided, or unless the context
otherwise requires, words importing the singular include the plural
and vice versa and words importing the masculine gender include the
feminine and neuter genders.

 

1.3            

Interpretation not Affected by Headings

 

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

 

1.4            

Day not a Business Day

 

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

 

 

10

 

 

1.5            

Time of the Essence

 

Time
shall be of the essence in all respects of this Indenture and the
Warrants issued hereunder.

 

1.6            

Governing Law

 

This
Indenture and the Warrants issued hereunder shall be construed and
enforced in accordance with the laws of the Province of Ontario and
the federal laws of Canada applicable therein and shall be treated
in all respects as Ontario contracts.

 

1.7            

Meaning of "outstanding" for Certain Purposes

 

Every
Warrant Authenticated or certified by the Warrant Agent hereunder
shall be deemed to be outstanding until it shall be cancelled or
delivered to the Warrant Agent for cancellation, exercised pursuant
to Section 3.1 or until the Time of Expiry; provided that where a
new Warrant Certificate has been issued pursuant to Section 2.6 to
replace one which is lost, mutilated, stolen or destroyed, the
Warrants represented by only one of such Warrant Certificates shall
be counted for the purpose of determining the aggregate number of
Warrants outstanding.

 

1.8            

Currency

 

Unless
otherwise stated, all dollar amounts referred to in this Indenture
are in Canadian dollars.

 

1.9            

Termination

 

This
Indenture shall continue in full force and effect until the earlier
of: (a) the Time of Expiry; and (b) provided that no Warrants
remain issuable pursuant to the terms of this Indenture, the date
that no Warrants are outstanding hereunder; provided that this
Indenture shall continue in effect thereafter, if applicable, until
the Company and the Warrant Agent have fulfilled all of their
respective obligations under this Indenture.

 

ARTICLE 2 ISSUE OF WARRANTS

 

2.1            

Issue of Warrants

 

Subject
to adjustment in accordance with the provisions hereof, the Company
creates and authorizes the issuance of up to 2,679,500 Warrants
entitling the registered holders thereof to acquire an aggregate of
up to 2,679,500 Warrant Shares, all of which are hereby created and
authorized to be issued hereunder at the Exercise Price upon the
terms and conditions as set forth herein. Uncertificated Warrants
shall be Authenticated by the Warrant Agent and deposited in CDS
and Warrant Certificates evidencing the Warrants shall be executed
by the Company, certified by or on behalf of the Warrant Agent and
delivered by the Warrant Agent in accordance with a written
direction of the Company, all in accordance with sections 2.3 and
2.4. Subject to adjustment in accordance with the provisions of
this Indenture, each of the
Warrants issued hereunder shall entitle the holder thereof to
receive from the Company, at the Exercise Price, the number of
Warrant Shares equal to the Exchange Basis in effect on the
Exercise Date.

 

 

11

 

 

2.2            

Form and Terms of Warrants

 

(1) The Warrants may be
issued in either certificated or uncertificated form. The Warrant
Certificates shall be substantially in the form attached as
Schedule "A" hereto, subject to the provisions of this Indenture,
with such additions, variations and changes as may be required or
permitted by the terms of this Indenture, and to give effect to any
Warrants not being issued as Uncertificated Warrants, and which may
from time to time be agreed upon by the Warrant Agent and the
Company, and shall have such legends, distinguishing letters and
numbers as the Company may, with the approval of the Warrant Agent,
prescribe. Except as hereinafter provided in this Article 2, all
Warrants shall, save as to denominations, be of like tenor and
effect. The Warrant Certificates may be engraved, printed,
lithographed, photocopied or be partially in one form or another,
as the Company may determine. No change in the form of the Warrant
Certificate shall be required by reason of any adjustment made
pursuant to this Article 2 in the number and/or class of securities
or type of securities or property that may be acquired pursuant to
the Warrants. All Warrants issued to CDS may be in either a
certificated or uncertificated form, such uncertificated form being
evidenced by a book position on the register of Warrantholders to
be maintained by the Warrant Agent in accordance with Section
2.8.

 

(2) Each Warrant
authorized to be issued hereunder shall entitle the registered
holder thereof to acquire (subject to sections 2.13, 2.14 and 2.15)
upon due exercise and upon the transaction instruction or due
execution of the exercise form endorsed on the Warrant Certificate,
as applicable, or other instrument of exercise in such form as the
Warrant Agent and/or the Company may from time to time prescribe
and upon payment of the Exercise Price, one Warrant Share or such
other kind and amount of shares or securities or property,
calculated pursuant to the provisions of sections 2.13 and 2.14, as
the case may be, at any time after the date of issuance of such
Warrants and prior to the Time of Expiry, in accordance with the
provisions of this Indenture.

 

(3) Fractional Warrants
shall not be issued or otherwise provided for. If any fraction of a
Warrant would otherwise be issuable and result in a fraction of a
Warrant Share being issuable, any such fractional Warrant so issued
shall be rounded down to the nearest whole Warrant without
compensation therefor.

 

2.3            

Signing of Warrant Certificates

 

Warrant
Certificates shall be signed by any one of the directors or
officers of the Company and may, but need not be under the
corporate seal of the Company or a reproduction thereof. The
signature of any such director or officer may be mechanically
reproduced in facsimile or other electronic format and Warrant
Certificates bearing such facsimile or other electronic format
signatures shall be binding upon the Company as if they had been
manually signed by such director or officer. Notwithstanding that
the person whose manual or electronic signature appears on any
Warrant Certificate as a director or officer may no longer hold
office at the date of issue of the Warrant Certificate or at the
date of certification or delivery thereof, any Warrant Certificate
Authenticated or signed as aforesaid shall, subject to Section 2.4,
be valid and binding upon the Company and the registered holder
thereof will be entitled to the benefits of this
Indenture.

 

 

12

 

 

2.4            

Authentication by the Warrant Agent

 

(1) No Warrant shall be
issued or, if issued, shall be valid for any purpose or entitle the
registered holder to the benefit hereof or thereof until it has
been Authenticated by or on behalf of the Warrant Agent, as
applicable, and such Authentication by the Warrant Agent shall be
conclusive evidence as against the Company that the Warrant so
Authenticated has been duly issued hereunder and the holder is
entitled to the benefits hereof.

 

(2) The Warrant Agent
shall Authenticate Uncertificated Warrants (whether upon original
issuance, exchange, registration of transfer, partial payment, or
otherwise) by completing its Internal Procedures and the Company
shall, and hereby acknowledges that it shall, thereupon be deemed
to have duly and validly issued such Uncertificated Warrants under
this Indenture. Such Authentication shall be conclusive evidence
that such Uncertificated Warrant has been duly issued hereunder and
that the holder or holders are entitled to the benefits of this
Indenture. The register shall be final and conclusive evidence as
to all matters relating to Uncertificated Warrants with respect to
which this Indenture requires the Warrant Agent to maintain records
or accounts. In case of differences between the register at any
time and any other time, the register at the later time shall be
controlling, absent manifest error and such Uncertificated Warrants
are binding on the Company.

 

(3) Any Warrant
Certificate validly issued in accordance with the terms of this
Indenture in effect at the time of issue shall, subject to the
terms of this Indenture and applicable law, validly entitle the
holder to acquire Warrant Shares, notwithstanding that the form of
such Warrant Certificate may not be in the form currently required
by this Indenture.

 

(4) No Warrant
Certificate shall be considered issued or shall be obligatory or
shall entitle the holder thereof to the benefits of this Indenture,
until it has been Authenticated by or on behalf of the Warrant
Agent substantially in the form of the Warrant Certificate set out
in Schedule "A" hereto. Such Authentication on any such Warrant
Certificate shall be conclusive evidence that such Warrant
Certificate is duly Authenticated and is valid and a binding
obligation of the Company and that the holder is entitled to the
benefits of this Indenture.

 

(5) The Authentication
or certification of the Warrant Agent on the Warrants issued
hereunder, including by way of entry on the register, shall not be
construed as a representation or warranty by the Warrant Agent as
to the validity of this Indenture or the Warrants (except the due
Authentication and certification thereof) or as to the performance
by the Company of its obligations under this Indenture and the
Warrant Agent shall in no respect be liable or answerable for the
use made of the Warrants or any of them or of the consideration
therefor except as otherwise specified herein.

 

2.5            

Warrantholder not a Shareholder, etc.

 

Nothing
in this Indenture or the holding of a Warrant shall be construed as
conferring upon a Warrantholder any right or interest whatsoever as
a shareholder, including but not limited to the right to vote at,
to receive notice of, or to attend meetings of shareholders or any
other proceedings of the Company, nor entitle the holder to any
right or interest in respect thereof except as herein and in the
Warrants expressly provided.

 

2.6            

Issue in Substitution for Lost Warrant Certificates

 

(1) If any Warrant
Certificates issued and certified under this Indenture shall become
mutilated or be lost, destroyed or stolen, the Company, subject to
applicable law, and Section 2.6(2), shall issue and thereupon the
Warrant Agent shall certify and deliver a new Warrant Certificate
of like denomination, date and tenor as the one mutilated, lost,
destroyed or stolen in exchange for, in place of and upon
cancellation of such mutilated Warrant Certificate, or in lieu of
and in substitution for such lost, destroyed or stolen Warrant
Certificate, and the substituted Warrant Certificate shall be
substantially in the form set out in Schedule "A" hereto and
Warrants evidenced by it will entitle the holder thereof to the
benefits hereof and shall rank equally in accordance with its terms
with all other Warrant Certificates issued or to be issued
hereunder.

 

 

13

 

 

(2) The applicant for
the issue of a new Warrant Certificate pursuant to this Section
shall bear the reasonable cost of the issue thereof and in the case
of mutilation shall, as a condition precedent to the issue thereof,
deliver to the Warrant Agent the mutilated Warrant Certificate, and
in the case of loss, destruction or theft shall, as a condition
precedent to the issue thereof, furnish to the Company and to the
Warrant Agent such evidence of ownership and of the loss,
destruction or theft of the Warrant Certificate so lost, destroyed
or stolen as shall be satisfactory to the Company and to the
Warrant Agent in their sole discretion, acting reasonably, and such
applicant may be required to furnish an indemnity and surety bond
in amount and form satisfactory to the Company and the Warrant
Agent in their sole discretion, acting reasonably, and shall pay
the reasonable charges of the Company and the Warrant Agent in
connection therewith.

 

2.7            

Warrants to Rank Pari Passu

 

All
Warrants shall rank pari
passu with all other Warrants, whatever may be the actual
date of issue of the Warrants.

 

2.8            

Registration and Transfer of Warrants

 

(1)           The
Warrant Agent will create and keep at the principal stock transfer
offices of the Warrant Agent in the City of Calgary,
Alberta:

 

(a)

a register of
holders in which shall be entered in alphabetical order the names
and addresses of the holders of Warrants and particulars of the
Warrants held by them and the Warrant Agent shall be entitled to
rely on such register in connection with the exchange, transfer,
exercise or deemed exercise of any Warrant(s) pursuant to the terms
of this Indenture or the terms thereof; and

 

(b)

a register of
transfers in which all transfers of Warrants and the date and other
particulars of each such transfer shall be entered.

 

 

14

 

(2)           No
transfer of any Warrant will be valid unless entered on the
register of transfers referred to in Section 2.8(1), upon surrender
to the Warrant Agent of the Warrant Certificate evidencing such
Warrant, and a duly completed and executed transfer form endorsed
on the Warrant Certificate or in the case of Uncertificated
Warrants a duly executed transaction instruction from the holder
(or such other instructions, in form satisfactory to the Warrant
Agent) executed by the registered holder or his executors,
administrators or other legal representatives or his attorney duly
appointed by an instrument in writing in form and execution
satisfactory to the Warrant Agent, if applicable, and, upon
compliance with such requirements and such other reasonable
requirements as the Warrant Agent may prescribe and all applicable
securities requirements of regulatory authorities, such transfer
will be recorded on the register of transfers by the Warrant Agent.
Upon compliance with such requirements, the Warrant Agent shall
issue to the transferee a Warrant Certificate, or in the case of an
Uncertificated Warrant, the Warrant Agent shall Authenticate and
deliver a Warrant Certificate upon request that part of the
Uncertificated Warrant be certificated. Transfers within the
systems of CDS are not the responsibility of the Warrant Agent and
will not be noted on the register maintained by the Warrant
Agent.
 

(3) The transferee of
any Warrant will, after surrender to the Warrant Agent of the
Warrant as required by Section 2.8(2) and upon compliance with all
other conditions in respect thereof required by this Indenture or
by law, be entitled to be entered on the register of holders
referred to in Section 2.8(1) as the owner of such Warrant free
from all equities or rights of setoff or counterclaim between the
Company and the transferor or any previous holder of such Warrant,
except in respect of equities of which the Company is required to
take notice by statute or by order of a court of competent
jurisdiction.

 

(4) The Company will be
entitled, and may direct the Warrant Agent, to refuse to recognize
any transfer, or enter the name of any transferee, of any Warrant
on the registers referred to in Section 2.8(1), if such transfer
would constitute a violation of the Securities Laws of any
applicable jurisdiction or the rules, regulations or policies of
any regulatory authority having jurisdiction. The Warrant Agent is
entitled to assume compliance with all applicable Securities Laws
unless otherwise notified in writing by the Company. No duty shall
rest with the Warrant Agent to determine compliance of the
transferee or transferor of any Warrant with applicable Securities
Laws.

 

(5) Any Warrant issued
to a transferee upon transfers contemplated by this section 2.8
shall bear the appropriate legend as set forth in Section 2.20(2),
if applicable.

 

(6) If a Warrant
tendered for transfer bears the legend set forth in Section
2.20(2), the Warrant Agent shall not register such transfer unless
the transferor has provided the Warrant Agent with the Warrant and
complies with the requirements of the said Section
2.20(2).

 

(7) Warrants, in
certificated form, bearing the legend set forth in Section 2.20(2)
shall not be offered, sold, pledged or otherwise transferred,
directly or indirectly, except (A) to the Company; (B) outside the
United States in compliance with Rule 904 of Regulation S, if
available, and in compliance with applicable local laws and
regulations; (C) pursuant to an exemption from registration under
the U.S. Securities Act provided by (i) Rule 144 or (ii) Rule 144A
thereunder, if available, and in compliance with applicable U.S.
state securities laws; (D) in compliance with another exemption
from registration under the U.S. Securities Act and applicable
state securities laws; or (E) under an effective registration
statement under the U.S. Securities Act, provided that in the case
of transfers pursuant to (C)(i) or (D) above, a legal opinion or
other evidence, reasonably satisfactory to the Company, must first
be provided to the Company and the Warrant Agent to the effect that
such transfer is exempt from registration under the U.S. Securities
Act and applicable state securities laws..

 

    (8)  
  The Warrant Agent shall give notice to the Company of the
transfer made by a Warrantholder pursuant to Section 2.8(7) and the
Company shall provide written authorization to proceed with the
transfer before such transfer is made effective by the issuance of
the Warrant.

 

15

 

 

2.9

Registers Open for Inspection

 

The
registers referred to in Section 2.8(1) shall be open at all
reasonable times during business hours on a Business Day for
inspection by the Company or any Warrantholder. The Warrant Agent
shall, from time to time when requested to do so in writing by the
Company, furnish the Company with a list of the names and addresses
of holders of Warrants entered in the register of holders kept by
the Warrant Agent and showing the number of Warrants held by each
such holder.

 

2.10                     

Exchange of Warrants

 

(1) Warrants may, upon
compliance with the reasonable requirements of the Warrant Agent,
be exchanged for Warrants in any other authorized denomination
representing in the aggregate an equal number of Warrants as the
number of Warrants represented by the Warrants being exchanged. The
Company shall sign and the Warrant Agent shall Authenticate or
certify, in accordance with sections 2.3 and 2.4, all Warrants
necessary to carry out the exchanges contemplated
herein.

 

(2) Warrants may be
exchanged only at the principal stock transfer offices of the
Warrant Agent in the City of Calgary, Alberta or at any other place
that is designated by the Company with the approval of the Warrant
Agent. Any Warrants tendered for exchange shall be surrendered to
the Warrant Agent and cancelled.

 

(3) Except as otherwise
herein provided, the Warrant Agent may charge Warrantholders
requesting an exchange a reasonable sum for each Warrant
Certificate issued; and payment of such charges and reimbursement
of the Warrant Agent or the Company for any and all taxes or
governmental or other charges required to be paid shall be made by
the party requesting such exchange as a condition precedent to such
exchange.

 

2.11              

Ownership of Warrants

 

The
Company and the Warrant Agent and their respective agents may deem
and treat the registered holder of any Warrant as the absolute
owner of the Warrant represented thereby for all purposes and the
Company and the Warrant Agent and their respective agents shall not
be affected by any notice or knowledge to the contrary except as
required by statute or order of a court of competent jurisdiction.
The holder of any Warrant shall be entitled to the rights evidenced
by that Warrant free from all equities or rights of set-off or
counterclaim between the Company and the original or any
intermediate holder thereof, except in respect of equities of which
the Company is required to take notice by statute or by order of a
court of competent jurisdiction and all persons may act accordingly
and the receipt by any holder of the Warrant Shares or monies
obtainable pursuant to the exercise of the Warrant shall be a good
discharge to the Company and the Warrant Agent for the same and
neither the Company nor the Warrant Agent shall be bound to inquire
into the title of any holder.

 

2.12         

Uncertificated
Warrants

 

(1)   
Registration and re-registration of beneficial interests in and
transfers of Warrants held by CDS shall be made only through the
Book-Entry Only System and no Warrant Certificates shall be issued
in respect of such Warrants except where physical certificates
evidencing
ownership in such securities are required or as set out herein or
as may be requested by CDS, as determined by the Company, from time
to time. Except as provided in this Section 2.12, owners of
beneficial interests in any Uncertificated Warrants shall not be
entitled to have Warrants registered in their names and shall not
receive or be entitled to receive Warrants in definitive form or to
have their names appear in the register referred to in Section 2.8
herein. Notwithstanding any terms set out herein, Warrants subject
to the restrictions and any legend set forth in Section 2.20 herein
and held in the name of CDS may only be held in the form of
Uncertificated Warrants with the prior consent of the Company and
CDS.

 

16

 

(2)         
If any Warrant is issued in uncertificated form and any of the
following events occurs:

 

(a)

CDS or the Company
has notified the Warrant Agent that (A) CDS is unwilling or unable
to continue as depository or (B) CDS ceases to be a clearing agency
in good standing under applicable laws and, in either case, the
Company is unable to locate a qualified successor depository within
ninety (90) days of delivery of such notice;

 

(b)

the Company has
determined, in its sole discretion, acting reasonably, to terminate
the Book-Entry Only System in respect of such Uncertificated
Warrants and has communicated such determination to the Warrant
Agent in writing;

 

(c)

the Company or CDS
is required by applicable law to take the action contemplated in
this section;

 

(d)

there is an
exercise of Warrants pursuant to 3.1(4) and the Warrantholder is
unable to make the representations in 3.1(4) (a), (b), (c) and (d)
thereto; or

 

(e)

the Book-Entry Only
System administered by CDS ceases to exist,

 

then
one or more definitive fully registered Warrant Certificates shall
be executed by the Company and certified and delivered by the
Warrant Agent to CDS in exchange for the Uncertificated Warrants
held by CDS. The Company shall provide an Officer's Certificate
giving notice to the Warrant Agent of the occurrence of any event
outlined in this Section 2.12(2).

 

Fully
registered Warrant Certificates issued and exchanged pursuant to
this section shall be registered in such names and in such
denominations as CDS shall instruct the Warrant Agent, provided
that the aggregate number of Warrants represented by such Warrant
Certificates shall be equal to the aggregate number of
Uncertificated Warrants so exchanged. Upon exchange of
Uncertificated Warrants for one or more Warrant Certificates in
definitive form, such Uncertificated Warrants shall be cancelled by
the Warrant Agent.

 

(3)          
Subject to the provisions of this Section 2.12, any exchange of
Warrants for Warrants which are
not Uncertificated Warrants may be made in whole or in part in
accordance with the provisions of Section 2.10, mutatis mutandis. All such Warrants
issued in exchange for Uncertificated Warrants or any portion
thereof shall be registered in such names as CDS for such
Uncertificated Warrants shall direct and shall be entitled to the
same benefits and subject to the same terms and conditions (except
insofar as they relate specifically to Uncertificated
Warrants) as the Uncertificated Warrants or portion thereof
surrendered upon such exchange.

 

 

17

 

 

(4)           Every
Warrant Authenticated upon registration of transfer of
Uncertificated Warrants, or in exchange for or in lieu of
Uncertificated Warrants or any portion thereof, whether pursuant to
this Section 2.12, or otherwise, shall be Authenticated in the form
of, and shall be, an Uncertificated Warrant, unless such Warrant is
registered in the name of a person other than CDS for such
Uncertificated Warrant or a nominee thereof.

 

(5)           Notwithstanding
anything to the contrary in this Indenture, subject to Applicable
Legislation, the Warrants to be issued to CDS or a nominee thereof
will be issued as an Uncertificated Warrant, unless otherwise
requested in writing by CDS or the Company.

 

(6)           The
rights of Beneficial Owners of Warrants who hold securities
entitlements in respect of the Warrants through the Book-Entry Only
System shall be limited to those established by applicable law and
agreements between CDS and the Participants and between such
Participants and the Beneficial Owners of Warrants who hold
securities entitlements in respect of the Warrants through the
Book-Entry Only System, and such rights must be exercised through a
Participant in accordance with the rules and procedures of
CDS.

 

(7)           Notwithstanding
anything herein to the contrary, neither the Company nor the
Warrant Agent nor any agent thereof shall have any responsibility
or liability for:

 

(a)

the electronic
records maintained by CDS relating to any ownership interests or
any other interests in the Warrants or the depository system
maintained by CDS, or payments made on account of any ownership
interest or any other interest of any person in any Warrant
represented by an electronic position in the Book-Entry Only System
(other than CDS or its nominee);

 

(b)

maintaining,
supervising or reviewing any records of CDS or any Participant
relating to any such interest; or

 

(c)

any advice or
representation made or given by CDS or those contained herein that
relate to the rules and regulations of CDS or any action to be
taken by CDS on its own direction or at the direction of any
Participant.

 

(8)           The
Company may terminate the application of this Section 2.12 in its
sole discretion, acting reasonably, in which case all Warrants
shall be evidenced by Warrant Certificates registered in the
name(s) of a person other than CDS.

 

2.13             

Adjustment of Exchange Basis

 

Subject
to Section 2.14, the Exchange Basis shall be subject to adjustment
from time to time in the events and in the manner provided as
follows:

 

(1)           If
and whenever, at any time after the date hereof and prior to the
Time of Expiry, the Company shall:

 

(a) 

issue Common Shares
or securities exchangeable for or convertible into Common Shares to
all or substantially all the holders of the Common Shares as a stock
dividend or other distribution (other than a distribution of Common
Shares upon the exercise of Warrants); or

 

 

18

 

 

(b)

subdivide, redivide
or change its then outstanding Common Shares into a greater number
of Common Shares; or

 

(c)

reduce, combine or
consolidate its then outstanding Common Shares into a lesser number
of Common Shares,

 

(any of
such events in these paragraphs (a), (b) or (c) being called a
"Common Share
Reorganization"), then the Exchange Basis in effect on the
effective date of such subdivision or consolidation, or on the
record date of such stock dividend or other distribution, as the
case may be, shall be adjusted by multiplying the Exchange Basis in
effect immediately prior to such effective or record date by a
fraction:

 

(a)

the numerator of
which shall be the total number of Common Shares outstanding on
such date immediately after giving effect to such Common Share
Reorganization (including, in the case where securities
exchangeable for or convertible into Common Shares are distributed,
the number of Common Shares that would have been outstanding had
such securities been exchanged for or converted into Common Shares
on such record date, assuming in any case where such securities are
not then convertible or exchangeable but subsequently become so,
that they were convertible or exchangeable on the record date on
the basis upon which they first become convertible or
exchangeable), and

 

(b)

the denominator of
which shall be the total number of Common Shares outstanding on
such date before giving effect to such Common Share
Reorganization.

 

The
resulting product, adjusted to the nearest 1/100th, shall
thereafter be the Exchange Basis until further adjusted as provided
in this Article 2. To the extent that any adjustment in the
Exchange Basis occurs pursuant to this Section 2.13(1) as a result
of the fixing by the Company of a record date for the distribution
of securities exchangeable for or convertible into Common Shares
and the Common Share Reorganization does not occur or any
conversion or exchange rights are not fully exercised, the Exchange
Basis shall be readjusted immediately after the expiry of any
relevant exchange or conversion right or the termination of the
Common Share Reorganization, as the case may be, to the Exchange
Basis that would then be in effect, based upon the number of Common
Shares actually issued and remaining issuable pursuant to the
Common Share Reorganization after such expiry and shall be further
readjusted in such manner upon the expiry of any further such
right.

 

(2)           If
and whenever, at any time after the date hereof and prior to the
Time of Expiry, the Company shall fix a record date for the
distribution to all or substantially all of the holders of its
outstanding Common Shares of rights, options or warrants entitling
them, for a period expiring not more than forty-five (45) days
after such record date, to subscribe for or purchase Common Shares,
or securities exchangeable for or convertible into Common Shares,
at a price per share to the holder (or at an exchange or conversion
price per share) of less than 95% of the Current Market Price on
such record date (any of such events being called a "Rights Offering"), then the Exchange
Basis shall be adjusted effective immediately after such record
date
for the Rights Offering by multiplying the Exchange Basis in effect
immediately prior to such record date by a
fraction:

 

 

19

 

 

(a)

the numerator of
which shall be the number of Common Shares which would be
outstanding after giving effect to the Rights Offering (assuming
the exercise of all of the rights, options or warrants under the
Rights Offering and assuming the exchange for or conversion into
Common Shares of all exchangeable or convertible securities issued
upon exercise of such rights, options or warrants, if any),
and

 

(b)

the denominator of
which shall be the aggregate of:

 

(i)

the total number of
Common Shares outstanding as of the record date for the Rights
Offering, and

 

(ii)

a number of Common
Shares determined by dividing

 

(A)

the amount equal to
the aggregate consideration payable on the exercise of all of the
rights, options and warrants under the Rights Offering plus the
aggregate consideration, if any, payable on the exchange or
conversion of the exchangeable or convertible securities issued
upon exercise of such rights, options or warrants (assuming the
exercise of all rights, options and warrants under the Rights
Offering and assuming the exchange or conversion of all
exchangeable or convertible securities issued upon exercise of such
rights, options and warrants);

 

by

 

(B)

the Current Market
Price as of the record date for the Rights Offering.

 

The
resulting product, adjusted to the nearest 1/100th, shall thereafter
be the Exchange Basis until further adjusted as provided in this
Article 2. Any Common Shares owned by or held for the account of
the Company or any of its Subsidiaries or a partnership in which
the Company is directly or indirectly a party to will be deemed not
to be outstanding for the purpose of any computation. If, at the
date of expiry of the rights, options or warrants subject to the
Rights Offering, less than all the rights, options or warrants have
been exercised, then the Exchange Basis shall be readjusted
immediately after the date of expiry to the Exchange Basis that
would have been in effect on the date of expiry if only the rights,
options or warrants issued had been those exercised. If at the date
of expiry of the rights of exchange or conversion of any securities
issued pursuant to the Rights Offering less than all of such
securities have been exchanged or converted into Common Shares,
then the Exchange Basis shall be readjusted immediately after the
date of expiry to the Exchange Basis that would have been in effect
on the date of expiry if only the exchangeable or convertible
securities issued had been those securities actually exchanged for
or converted into Common Shares.

 

(3)           If
and whenever, at any time after the date hereof and prior to the
Time of Expiry, the Company shall fix a record date for the
issuance or distribution to all or substantially all the
holders
of its outstanding Common Shares of:

 

 

20

 

 

(a)

shares of the
Company of any class other than Common Shares; or

 

(b)

rights, options or
warrants to acquire Common Shares or securities exchangeable for or
convertible into Common Shares; or

 

(c)

evidences of
indebtedness; or

 

(d)

cash, securities or
any property or other assets,

 

and if
such issuance or distribution does not constitute a Common Share
Reorganization or a Rights Offering (any of such non-excluded
events being herein called a "Special Distribution"), the Exchange
Basis shall be adjusted effective immediately after such record
date for the Special Distribution by multiplying the Exchange Basis
in effect immediately prior to such record date by a
fraction:

 

(a)

the numerator of
which shall be the number of Common Shares outstanding on such
record date multiplied by the Current Market Price on such record
date, and

 

(b)

the denominator of
which shall be:

 

(A)

the number of
Common Shares outstanding on such record date multiplied by the
Current Market Price on such record date, less

 

(B)

the fair market
value, as determined by action by the board of directors acting
reasonably and in good faith (whose determination, absent manifest
error, shall be conclusive), to the holders of the Common Shares of
the shares, rights, options, warrants, evidences of indebtedness or
securities, property or other assets issued or distributed in the
Special Distribution provided that no such adjustment shall be made
if the result of such adjustment would be to decrease the Exchange
Basis in effect immediately before such record date.

 

The
resulting product, adjusted to the nearest 1/100th, shall thereafter
be the Exchange Basis until further adjusted as provided in this
Article 2. Any Common Shares owned by or held for the account of
the Company or any of its Subsidiaries or a partnership of which
the Company is directly or indirectly a party, will be deemed not
to be outstanding for the purpose of any such
computation.

 

21

 

 

(4)           If
and whenever, at any time after the date hereof and prior to the
Time of Expiry, there shall be a reclassification of the Common
Shares at any time outstanding or change or exchange of the Common
Shares into or for other shares or into or for other securities or
property (other than a Common Share Reorganization), or a
consolidation, amalgamation, arrangement or merger of the Company
with or into any other corporation or other entity (other than a
consolidation, amalgamation, arrangement or merger which does not
result in any reclassification of the outstanding Common Shares or
a change or exchange of the Common Shares into or for other shares,
securities or property), or a transfer (other than to a Subsidiary)
of the undertaking or assets of the Company as an entirety or
substantially as an entirety to another corporation
or other entity (any of such events being herein called a
"Capital Reorganization"),
any Warrantholder who thereafter shall exercise his right to
receive Warrant Shares pursuant to Warrant(s) shall be entitled to
receive, and shall accept in lieu of the number of Warrant Shares
to which such holder was theretofore entitled upon such exercise,
the aggregate number of shares, other securities or other property
resulting from the Capital Reorganization which such holder would
have been entitled to receive as a result of such Capital
Reorganization if, on the effective date or record date thereof, as
the case may be, the Warrantholder had been the registered holder
of the number of Warrant Shares to which such holder was
theretofore entitled upon exercise. If appropriate, adjustments
shall be made as a result of any such Capital Reorganization in the
application of the provisions in this Indenture with respect to the
rights and interests thereafter of Warrantholders to the end that
the provisions in this Indenture shall thereafter correspondingly
be made applicable as nearly as may reasonably be possible in
relation to any shares, other securities or other property
thereafter deliverable upon the exercise of any Warrant. Any such
adjustment shall be made by and set forth in an indenture
supplemental hereto approved by the directors of the Company and by
the Warrant Agent and entered into pursuant to the provisions of
this Indenture and shall for all purposes be conclusively deemed to
be an appropriate adjustment.

 

(5) Any adjustment to
the Exchange Basis as set forth herein shall also include a
corresponding adjustment to the Price which shall be calculated by
multiplying the Price by a fraction: (a) the numerator of which
shall be the Exchange Basis prior to the adjustment,
and

 

(b) the
denominator of which shall be the Exchange Basis after the
adjustment.

 

2.14             

Rules Regarding Calculation of Adjustment of Exchange
Basis

 

For the
purposes of Section 2.13:

 

(1) The adjustments
provided for in Section 2.13 shall be cumulative and such
adjustments shall be made successively whenever an event referred
to in Section 2.13 shall occur, subject to the following
subsections of this Section 2.14.

 

(2) No adjustment in
the: (a) Exchange Basis shall be required unless such adjustment
would result in a change of at least 0.01 of a Warrant Share based
on the prevailing Exchange Basis; or (b) the Price shall be
required unless such adjustment would result in a change of at
least 1% of the Price, provided that any adjustments which, except
for the provisions of this subsection, would otherwise have been
required to be made, shall be carried forward and taken into
account in any subsequent adjustment.

 

(3) No adjustment in
the Exchange Basis or the Price shall be made in respect of any
event described in Section 2.13, other than the events referred to
in paragraphs (b) and

 

(c) of
subsection (1) thereof, if Warrantholders are entitled to
participate in such event on the same terms, mutatis mutandis, as if Warrantholders
had exercised their Warrants prior to or on the effective date or
record date of such event, any such participation being subject to
regulatory approval.

 

(4) No adjustment in
the Exchange Basis or the Price shall be made pursuant to Section
2.13 in respect of (i) the issue from time to time of Warrant
Shares purchasable on exercise of the Warrants and any such issue
shall be deemed not to be a Common Share Reorganization; (ii) a
Dividend Paid in the Ordinary Course; or (iii) a distribution of
Common Shares pursuant to the exercise of stock options granted
under stock option plans of the Company.

 

 

22

 

 

(5) If a dispute shall
at any time arise with respect to adjustments provided for in
Section 2.13, such dispute shall, absent manifest error, be
conclusively determined by the Company's Auditors, or if they are
unable or unwilling to act, by such other firm of independent
chartered accountants as may be selected by the directors and any
further determination, absent manifest error, shall be binding upon
the Company, the Warrant Agent and the Warrantholders.

 

(6) If the Company
shall set a record date to determine the holders of the Common
Shares for the purpose of entitling them to receive any dividend or
distribution or any subscription or purchase rights and shall,
thereafter and before the distribution to such shareholders of any
such dividend, distribution, or subscription or purchase rights,
legally abandon its plan to pay or deliver such dividend,
distribution, or subscription or purchase rights, then no
adjustment in the Exchange Basis shall be required by reason of the
setting of such record date.

 

(7) In the absence of a
resolution of the directors fixing a record date for a Rights
Offering or Special Distribution, the Company shall be deemed to
have fixed as the record date therefor the date on which the Rights
Offering or Special Distribution is effected.

 

(8) If the purchase
price provided for in any Rights Offering (the "Rights Offering Price") is decreased,
the Exchange Basis shall forthwith be changed so as to increase the
Exchange Basis to such Exchange Basis as would have been obtained
had the adjustment to the Exchange Basis made pursuant to Section
2.13(2) upon the issuance of such Rights Offering been made upon
the basis of the Rights Offering Price as so decreased, provided
that the provisions of this subsection shall not apply to any
decrease in the Rights Offering Price resulting from provisions in
any such Rights Offering designed to prevent dilution if the event
giving rise to such decrease in the Rights Offering Price itself
requires an adjustment to the Exchange Basis pursuant to the
provisions of Section 2.13.

 

(9) As a condition
precedent to the taking of any action that would require any
adjustment in any of the subscription rights pursuant to any of the
Warrants, including the Exchange Basis, the Company shall take any
corporate action which may, in the opinion of counsel, be necessary
in order that the Company have unissued and reserved in its
authorized capital and may validly and legally issue as fully paid
and non-assessable all the shares or other securities that all the
holders of such Warrants are entitled to receive on the exercise of
all the subscription rights attaching thereto in accordance with
the provisions thereof.

 

(10) In
case the Company, after the date hereof, shall take any action
affecting any Common Shares, other than action described in Section
2.13, which in the opinion of the directors acting reasonably and
in good faith would materially affect the rights of Warrantholders,
the Exchange Basis shall be adjusted in such manner, if any, and at
such time, as the directors, in their sole discretion acting
reasonably and in good faith, may determine to be equitable in the
circumstances. Failure of the taking of any action by the directors
so as to provide for an adjustment in the Exchange Basis prior to
the effective date of any action by the Company affecting the
Common Shares shall be conclusive evidence that the directors have
determined that it is equitable to make no adjustment in the
circumstances.

 

(11) The
Warrant Agent shall be entitled to act and rely on any adjustment
calculations by the Company or the Company's Auditors.

 

23

 

 

2.15             

Postponement of Subscription

 

In any
case where the application of Section 2.13 results in an increase
in the number of Common Shares that are issuable upon exercise of
the Warrants taking effect immediately after the record date for a
specific event, if any Warrant is exercised after that record date
and prior to completion of such specific event, the Company may
postpone the issuance to the Warrantholder of the Warrant Shares to
which he is entitled by reason of such adjustment, but such Warrant
Shares shall be so issued and delivered to that holder upon
completion of that event, with the number of such Warrant Shares
calculated on the basis of the number of Warrant Shares on the date
that the Warrant was exercised, adjusted for completion of that
event and the Company shall deliver to the person or persons in
whose name or names the Warrant Shares are to be issued an
appropriate instrument evidencing the right of such person or
persons to receive such Warrant Shares and the right to receive any
dividends or other distributions which, but for the provisions of
this Section 2.15, such person or persons would have been entitled
to receive in respect of such Warrant Shares from and after the
date that the Warrant was exercised in respect
thereof.

 

2.16             

Notice of Adjustment

 

(1)           At
least fourteen (14) days prior to the effective date or record
date, as the case may be, of any event which requires or might
require adjustment pursuant to Section 2.13, the Company
shall:

 

(a)

file with the
Warrant Agent a certificate of the Company specifying the
particulars of such event (including the record date or the
effective date for such event) and, if determinable, the required
adjustment and the computation of such adjustment and setting forth
in reasonable detail the method of calculation and the facts upon
which such calculation is based; and

 

(b)

give notice to the
Warrantholders of the particulars of such event (including the
record date or the effective date for such event) and, if
determinable, the required adjustment.

 

(2)           In
case any adjustment for which a notice in Section 2.16(1) has been
given is not then determinable, the Company shall promptly after
such adjustment is determinable:

 

(a)

file with the
Warrant Agent a computation of such adjustment; and

 

(b)

give notice to the
Warrantholders of the adjustment.

 

(3)           The
Warrant Agent may and shall be protected in so doing, absent
manifest error, act and rely upon certificates of the Company and
other documents filed by the Company pursuant to this Section 2.16
for all purposes of the adjustment.

 

2.17             

No Action after Notice

 

The
Company covenants with the Warrant Agent that it will not close its
books nor take any other corporate action which might deprive a
Warrantholder of the opportunity of exercising the rights of
acquisition pursuant thereto during the period of ten (10) days
after the giving of the notice set forth in paragraph (b) of
Sections 2.16(1) and (2).

 

 

24

 

 

2.18                     

Purchase of Warrants for Cancellation

 

The
Company may, at any time and from time to time, purchase Warrants
by invitation to tender, by private contract, on any stock exchange
(if then listed) or otherwise (which shall include a purchase
through an investment dealer or firm holding membership on a
Canadian stock exchange) on such terms as the Company may
determine. All Warrants purchased pursuant to the provisions of
this Section 2.18 shall be forthwith delivered to and cancelled by
the Warrant Agent and shall not be reissued. If required by the
Company, the Warrant Agent shall furnish the Company with a
certificate as to such destruction.

 

2.19
Protection of Warrant
Agent

 

The
Warrant Agent shall not:

 

(a)

at any time be
under any duty or responsibility to any registered holder of
Warrants to determine whether any facts exist that may require any
adjustment contemplated by this Article 2, nor to verify the nature
and extent of any such adjustment when made or the method employed
in making the same;

 

(b)

be accountable with
respect to the validity or value or the kind or amount of any
Warrant Shares or of any other securities or property that may at
any time be issued or delivered upon the exercise of the
Warrants;

 

(c)

be responsible for
any failure of the Company to make any cash payment, to issue,
transfer or deliver Warrant Shares or certificates upon the
surrender of any Warrants for the purpose of the exercise of such
rights or to comply with any of the covenants contained in Section
2.13; or

 

(d)

incur any liability
or responsibility whatsoever or be in any way responsible for the
consequence of any breach on the part of the Company of any of the
representations, warranties or covenants of the Company or any acts
or deeds of the agents or servants of the Company.

 

2.20
U.S. Legend on Warrant
Certificates and Warrant Share certificates

 

(1) The Warrant Agent
understands and acknowledges that the Warrants and the Warrant
Shares issuable upon exercise of the Warrants have not been, and
will not be, registered under the U.S. Securities Act or the
securities laws of any state of the United States.

 

(2) Each Warrant, in
certificated form, originally issued in the United States or, to or
for the account or benefit of, a U.S. Person, and all Warrant
Shares issued upon exercise of such Warrants, and all certificates
issued in exchange or in substitution thereof or upon transfer
thereof, shall bear the following legend:

 

 

25

 

 

"THE
SECURITIES REPRESENTED HEREBY [for
Warrants, add: AND THE SECURITIES ISSUABLE ON EXERCISE
HEREOF] HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS
AMENDED (THE "U.S. SECURITIES ACT") OR UNDER ANY STATE SECURITIES
LAWS, AND THE SECURITIES REPRESENTED HEREBY [for Warrants, add: AND THE SECURITIES
ISSUABLE ON EXERCISE HEREOF] MAY BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B)
OUTSIDE THE UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE
U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS
AND REGULATIONS, (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER THE U.S. SECURITIES ACT PROVIDED BY (i) RULE 144 OR (ii)
RULE144A THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH
APPLICABLE U.S. STATE SECURITIES LAWS, (D) IN COMPLIANCE WITH
ANOTHER EXEMPTION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT
AND APPLICABLE STATE SECURITIES LAWS, OR (E) UNDER AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT, PROVIDED THAT
IN THE CASE OF TRANSFERS PURSUANT TO (C)(i) OR (D) ABOVE, A LEGAL
OPINION OR OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY,
MUST FIRST BE PROVIDED TO THE COMPANY AND THE COMPANY'S TRANSFER
AGENT TO THE EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION
UNDER THE U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.
DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN
SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN
CANADA.”

 

[for Warrants, include: "THIS WARRANT
MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR
FOR THE ACCOUNT OR BENEFIT OF, A PERSON IN THE UNITED STATES OR A
U.S. PERSON UNLESS THIS WARRANT AND THE COMMON SHARES ISSUABLE UPON
EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE. "UNITED
STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE
U.S. SECURITIES ACT."]

 

provided that, if the Warrants or
Warrant Shares issuable upon exercise of the Warrants are being
sold in accordance with Rule 904 of Regulation S, the legend may be
removed by providing to the Warrant Agent or the Transfer Agent, as
the case may be, (i) a declaration in the form attached hereto as
Schedule "B" (or as the Company may prescribe from time to time in
order to address changes in applicable laws) and (ii) if required
by the Transfer Agent, an opinion of counsel, of recognized
standing reasonably satisfactory to the Company, or other evidence
reasonably satisfactory to the Company, that the proposed transfer
may be effected without registration under the U.S. Securities
Act.

 

provided further, that if the Warrants
or Warrant Shares are being sold pursuant to Rule 144 under the
U.S. Securities Act, if available, the legend may be removed by
delivering to the Company and the Warrant Agent or the Transfer
Agent, as the case may be, an opinion of counsel of recognized
standing in form and substance reasonably satisfactory to the
Company, to the effect that the legend is no longer required under
applicable requirements of the U.S. Securities Act.

 

(3)           If
a Warrant or Warrant Share issued with respect to an exercise of
Warrants is tendered for transfer and bears the legend set forth in
Section 2.20(2) herein and the holder thereof has not obtained the
prior written consent of the Company, the Warrant Agent or the
Transfer Agent, as the case may be, shall not register such
transfer unless the holder complies with the requirements of the
said Section 2.20(2) hereof.

 

26

 

 

ARTICLE 3 EXERCISE OF WARRANTS

 

3.1            

Method of Exercise of Warrants

 

(1) The registered
holder of any Warrant may exercise the rights thereby conferred on
him to acquire all or any part of the Warrant Shares to which such
Warrant entitles the holder, by surrendering the Warrant
Certificate representing such Warrants to the Warrant Agent at any
time prior to the Time of Expiry at its principal stock transfer
offices in the City of Calgary, Alberta (or at such additional
place or places as may be decided by the Company from time to time
with the approval of the Warrant Agent), with a duly completed and
executed exercise form of the registered holder or his executors,
administrators or other legal representative or his attorney duly
appointed by an instrument in writing in the form and manner
satisfactory to the Warrant Agent, substantially in the form
endorsed on the Warrant Certificate specifying the number of
Warrant Shares subscribed for together with a certified cheque,
bank draft or money order in lawful money of Canada, payable to or
to the order of the Company in an amount equal to the Exercise
Price multiplied by the number of Warrant Shares subscribed for. A
Warrant Certificate with the duly completed and executed exercise
form and payment of the Exercise Price shall be deemed to be
surrendered only upon personal delivery thereof to or, if sent by
mail or other means of transmission, upon actual receipt thereof by
the Warrant Agent.

 

(2) Any exercise form
referred to in Section 3.1(1) shall be signed by the Warrantholder,
or his executors, or administrators or other legal representative
or his attorney duly appointed by an instrument in writing in the
form and manner satisfactory to the Warrant Agent, but such
exercise form need not be executed by CDS. Such exercise form shall
specify the person(s) in whose name such Warrant Shares are to be
issued, the address(es) of such person(s) and the number of Warrant
Shares to be issued to each person, if more than one is so
specified. If any of the Warrant Shares subscribed for are to be
issued to person(s) other than the Warrantholder, the Warrantholder
shall also complete the transfer form, substantially in the form
endorsed on the Warrant Certificate. The signatures set out in the
exercise form referred to in Section 3.1(1) and the signatures set
out in the transfer form shall be guaranteed by a Canadian Schedule
1 chartered bank or a medallion signature guarantee from a member
of a recognized Signature Medallion Guarantee Program and the
Warrantholder shall pay to the Company or the Warrant Agent all
applicable transfer or similar taxes and the Company shall not be
required to issue or deliver certificates evidencing Warrant Shares
unless or until such Warrantholder shall have paid to the Company
or the Warrant Agent on behalf of the Company the amount of such
tax or shall have established to the satisfaction of the Company
that such tax has been paid or that no tax is due.

 

(3) If, at the time of
exercise of the Warrants, in accordance with the provisions of
Section 3.1(1), there are any trading restrictions on the Warrant
Shares pursuant to applicable Securities Laws or stock exchange
requirements, the Company shall, on the advice of counsel, endorse
any certificates representing the Warrant Shares to such effect.
The Warrant Agent is entitled to assume
compliance with all applicable Securities Laws unless otherwise
notified in writing by the Company.

 

27

 

 

(4) A Beneficial Owner
who desires to exercise his, her or its Uncertificated Warrants,
must do so by causing a Participant to deliver to CDS (at its
office in the City of Toronto, Ontario), on behalf of the
Beneficial Owner at any time prior to the Time of Expiry, a written
notice of the Beneficial Owner's intention to exercise Warrants
(the "Exercise Notice");
provided, that a Beneficial Owner holding Uncertificated Warrants
that is in the United States or that is a U.S. Person will first
request the withdrawal of the Uncertificated Warrant(s) from the
Book-Entry Only System and request certificated Warrant(s) in
exchange for such Uncertificated Warrant(s). Forthwith upon receipt
by CDS of such notice, as well as payment for the Exercise Price,
CDS shall deliver to the Warrant Agent confirmation of its
intention to exercise Warrants (the "Confirmation") in a manner acceptable to
the Warrant Agent, including by electronic means through the
Book-Entry Only System, including CDSX. An electronic exercise of
the Warrants initiated by the Beneficial Owner through a Book-Entry
Only System, including CDSX, shall constitute a representation to
both the Company and the Warrant Agent that the Beneficial Owner at
the time of exercise of such Warrants (a) is not in the United
States; (b) did not acquire the Warrants in the United States or on
behalf of, or for the account or benefit of, a U.S. Person or a
person in the United States; (c) is not a U.S. Person and is not
exercising such Warrants on behalf of a U.S. Person or a person in
the United States; and (d) did not execute or deliver the notice of
the owner's intention to exercise such Warrants in the United
States. If the Participant is not able to make or deliver the
foregoing representation by initiating the electronic exercise of
the Warrants, then such Warrants shall be withdrawn from the
Book-Entry Only System, including CDSX, by the Participant and an
individually registered Warrant Certificate shall be issued by the
Warrant Agent to such Beneficial Owner or Participant and the
exercise procedures set forth in Section 3.1(1) shall be followed.
Payment representing the aggregate Exercise Price must be provided
to the appropriate office of the Participant in a manner acceptable
to it. A notice in form acceptable to the Participant and payment
from such Beneficial Owner should be provided through the
Book-Entry Only System sufficiently in advance so as to permit the
Participant to deliver notice and payment to CDS and for CDS in
turn to deliver notice and payment to the Warrant Agent prior to
Time of Expiry. CDS will initiate the exercise by way of the
Confirmation and forward the aggregate Exercise Price
electronically to the Warrant Agent and the Warrant Agent will
execute the exercise by issuing to CDS through the Book- Entry Only
System the Warrant Shares to which the exercising Beneficial Owner
is entitled pursuant to the exercise. Any expense associated with
the preparation and delivery of Exercise Notices will be for the
account of the Beneficial Owner exercising the
Warrants.

 

(5) By causing a
Participant to deliver notice to CDS, a Warrantholder shall be
deemed to have irrevocably surrendered his, her or its Warrants so
exercised and appointed such Participant to act as his, her or its
exclusive settlement agent with respect to the exercise and the
receipt of Warrant Shares in connection with the obligations
arising from such exercise.

 

(6) Any notice which
CDS determines to be incomplete, not in proper form or not duly
executed shall for all purposes be void and of no effect and the
exercise to which it relates shall be considered for all purposes
not to have been exercised thereby. A failure by a Participant to
exercise or to give effect to the settlement thereof in accordance
with the Beneficial Owner's instructions will not give rise to any
obligations or liability on the part of the Company or Warrant
Agent to the Participant or the Beneficial Owner.

 

(7)   
Any exercise referred to in this Section 3.1 shall require that the
entire Exercise

 

 

28

 

 

Price
for the Warrant Shares subscribed for must be paid at the time of
subscription and such Exercise Price and original Exercise Notice
or exercise form executed by the Registered Warrantholder or the
Confirmation from CDS must be received by the Warrant Agent prior
to the Time of Expiry.

 

(8) Warrants may only
be exercised pursuant to this Section 3.1 by or on behalf of a
Warrantholder, as applicable, who makes the certifications set
forth on the exercise form substantially in the form endorsed on
the Warrant Certificate.

 

(9) If the exercise
form set forth in the Warrant Certificate shall have been amended,
the Company shall cause the amended exercise form to be forwarded
to all registered Warrantholders.

 

(10) Exercise
forms, Exercise Notices and Confirmations must be delivered to the
Warrant Agent at any time during the Warrant Agent's actual
business hours on any Business Day prior to the Time of Expiry. Any
exercise form, Exercise Notice or Confirmation received by the
Warrant Agent after business hours on any Business Day other than
the Time of Expiry will be deemed to have been received by the
Warrant Agent on the next following Business Day.

 

(11) Any
Warrant with respect to which a Confirmation is not received by the
Warrant Agent before the Time of Expiry shall be deemed to have
expired and become void and all rights with respect to such
Warrants shall terminate and be cancelled.

 

3.2            

No Fractional Shares

 

Under
no circumstances shall the Company be obliged to issue any
fractional Warrant Shares or any cash or other consideration in
lieu thereof upon the exercise of one or more Warrants. To the
extent that the holder of one or more Warrants would otherwise have
been entitled to receive on the exercise or partial exercise
thereof a fraction of a Warrant Share, that holder may exercise
that right in respect of the fraction only in combination with
another Warrant or Warrants that in the aggregate entitle the
holder to purchase a whole number of Warrant Shares.

 

3.3            

Effect of Exercise of Warrants

 

(1) Upon compliance by
the Warrantholder with the provisions of Section 3.1, the Warrant
Shares subscribed for shall be deemed to have been issued and the
person to whom such Warrant Shares are to be issued shall be deemed
to have become the holder of record of such Warrant Shares on the
Exercise Date unless the transfer registers of the Company for the
Common Shares shall be closed on such date, in which case the
Warrant Shares subscribed for shall be deemed to have been issued
and such person shall be deemed to have become the holder of record
of such Warrant Shares on the date on which such transfer registers
are reopened.

 

(2)
   The Warrant Agent shall as soon as practicable account
to the Company with respect to Warrants exercised, and shall as
soon as practicable forward to the Company (or into an account or
accounts of the Company with the bank or trust company designated
by the Company for that purpose), all monies received by the
Warrant Agent on the subscription of Warrant Shares through the
exercise of Warrants. All such monies and any securities or other
instruments, from time to time received by the Warrant Agent, shall
be received in trust for the Warrantholders and
the Company as their interests may appear and shall be segregated
and kept apart by the Warrant Agent.

 

 

29

 

 

(3)     
Within five Business Days following the due exercise of a Warrant
pursuant to Section 3.1, the Company shall cause the Transfer Agent
to issue and the Warrant Agent to deliver, within such five
Business Day period, to CDS through the Book-Entry Only System the
Warrant Shares to which the exercising Warrantholder is entitled
pursuant to the exercise or mail to the person in whose name the
Warrant Shares so subscribed for are to be issued, as specified in
the exercise form completed on the Warrant Certificate, at the
address specified in such exercise form, a certificate or
certificates for the Warrant Shares to which the Warrantholder is
entitled or, if so specified in writing by the holder, cause to be
delivered to such person or persons at the office of the Warrant
Agent where the Warrant Certificate was surrendered, a certificate
or certificates for the appropriate number of Warrant Shares
subscribed for, or any other appropriate evidence of the issuance
of Warrant Shares to such person or persons in respect of Warrant
Shares issued under the Book-Entry Only System and, if applicable,
shall cause the Warrant Agent to mail a Warrant Certificate
representing any Warrants not then exercised.

 

3.4            

Cancellation of Warrants

 

All
Warrants surrendered to the Warrant Agent pursuant to sections 2.6,
2.8(2), 2.10 or 3.1 shall be cancelled by the Warrant Agent and the
Warrant Agent shall record the cancellation of such Warrants on the
register of holders maintained by the Warrant Agent pursuant to
Section 2.8(1). The Warrant Agent shall, if required by the
Company, furnish the Company with a certificate identifying the
Warrants so cancelled. All Warrants that have been duly cancelled
shall be without further force or effect whatsoever.

 

3.5            

Subscription for less than Entitlement

 

The
holder of any Warrant may subscribe for and purchase a whole number
of Warrant Shares that is less than the number that the holder is
entitled to purchase pursuant to a surrendered Warrant. In such
event, the holder thereof shall be entitled to receive a new
Warrant Certificate in respect of the balance of Warrants that were
not then exercised, such new Warrant Certificate to contain the
same legend as provided for in Section 2.20(2), if
applicable.

 

3.6            

Expiration of Warrant

 

After
the Time of Expiry, all rights under any Warrant in respect of
which the right of subscription and purchase herein and therein
provided for shall not theretofore have been exercised shall wholly
cease and terminate and such Warrant shall be void and of no
effect.

 

3.7            

Prohibition on Exercise by U.S. Persons; Exception

 

(1)           Warrants
may not be exercised within the United States or by or on behalf
of, or for the account or benefit of, any U.S. Person or any person
in the United States unless an exemption is available from the
registration requirements of the U.S. Securities Act and applicable
state securities laws. The Warrant Agent shall be entitled to rely
upon the registered address of the Warrantholder as set forth in
the Warrantholders register for the purchase of Units in
determining whether the address is in the United States or the
Warrantholder is a U.S. Person.

 

 

30

 

 

(2)            

Any holder which
exercises any Warrants shall provide to the Company
either:

 

(a)

a written
certification that such holder (a) at the time of exercise of the
Warrants is not in the United States; (b) is not a U.S. Person and
is not exercising the Warrants on behalf of a U.S. Person or person
in the United States; (c) did not execute or deliver the exercise
form for the Warrants in the United States; and (d) has in all
other aspects complied with the terms of an "offshore transaction"
as defined under Regulation S (which written certification shall be
deemed delivered by checking Box 1 in the Exercise Form attached to
the Warrant, as provided for in Schedule “A” hereof);
or

 

(b)

a written
certification that the holder (i) purchased the Warrants as part of
the Units in the Offering; (ii) is exercising the Warrants solely
for its own account or for the benefit of a U.S. Person or a person
in the United States for whose account such holder acquired the
Warrants as a part of the Units in the Offering and for whose
account such holders exercises sole investment discretion; (iii)
was and is, and any beneficial purchaser for whose account such
holder acquired the Warrant and is exercising the Warrants was and
is, a Qualified Institutional Buyer both on the date the Units were
purchased in the Offering and on the Exercise Date; and (iv) the
representations and warranties made by the holder or any beneficial
purchaser, as the case may be, to the Company in such
holder’s QIB Letter remain true and correct on the Exercise
Date (which written certification shall be deemed delivered by
checking Box 2 in the Exercise Form attached to the Warrant, as
provided for in Schedule “A” hereof); or

 

(c)

a written opinion
of counsel of recognized standing in form and substance
satisfactory to the Company or evidence satisfactory to the Company
to the effect that an exemption from the registration requirements
of the U.S. Securities Act and applicable state securities laws is
available for the issuance of the Warrant Shares issuable on
exercise of the Warrants.

 

(3)           No
Warrant Shares will be registered or delivered to an address in the
United States unless the holder of Warrants complies with the
requirements of paragraph (b) or (c) of Section
3.7(2).

 

ARTICLE 4 COVENANTS FOR WARRANTHOLDERS' BENEFIT

 

4.1            

General Covenants of the Company

 

The
Company represents, warrants and covenants with the Warrant Agent
for the benefit of the Warrant Agent and the Warrantholders
that:

 

   (1)           The
Company will at all times, so long as any Warrants remain
outstanding or issuable hereunder, maintain its existence, unless
otherwise inconsistent with the fiduciary duties of the board of
directors of the Company, and will keep or cause to be kept proper
books of account in
accordance with applicable law until the Time of
Expiry.

 

 

31

 

 

(2) The Company is duly
authorized to create and issue the Warrants to be issued hereunder
and the Warrants, when issued, Authenticated and countersigned, as
applicable, will be legal, valid, binding and enforceable
obligations of the Company.

 

(3) The Company will
reserve and keep available a sufficient number of Warrant Shares
for the purpose of enabling the Company to satisfy its obligations
to issue Common Shares upon the exercise of the Warrants, and all
Warrants Shares shall, when issued as provided herein, be valid and
enforceable against the Company.

 

(4) The Company will
cause the Warrant Shares from time to time subscribed for pursuant
to the Warrants issued by the Company hereunder, in the manner
herein provided, to be duly issued in accordance with the Warrants
and the terms hereof.

 

(5) All Warrant Shares
that shall be issued by the Company upon exercise of the rights
provided for herein shall be issued as fully paid and
non-assessable Common Shares of the Company.

 

(6) The Company will
use commercially reasonable efforts to ensure that the Warrants,
and the Common Shares outstanding on the date hereof and issuable
from time to time on the exercise of the Warrants, continue to be
or are listed and posted for trading on the CSE (or such other
Canadian stock exchange acceptable to the Company), provided that
this Section 4.1(6) shall not be construed as limiting or
restricting the Company from completing a consolidation,
amalgamation, arrangement, takeover bid, merger or other form of
business combination that would result in the Warrants and/or the
Common Shares ceasing to be listed and posted for trading on such
exchanges, so long as the holders of Common Shares have approved
the transaction in accordance with the requirements of applicable
corporate and securities laws and the policies of such exchanges or
the holders of Common Shares receive securities of an entity which
is listed on a stock exchange in North America or
cash.

 

(7) Except to the
extent that the Company participates in a takeover bid,
consolidation, merger, arrangement, amalgamation, or other form of
business combination transaction, the Company will use its
commercially reasonable efforts to maintain its status as a
"reporting issuer" (or the equivalent thereof) in each of the
provinces of Canada and other Canadian jurisdictions in which it is
currently or becomes a reporting issuer, make all requisite filings
under applicable Securities Laws including those necessary to
remain a reporting issuer not in default of the requirements of the
applicable Securities Laws of such province or jurisdiction, until
the Time of Expiry.

 

(8) The Company will
perform and carry out all of the acts or things to be done by it as
provided in this Indenture.

 

(9) The Company will
not take any action or omit to take any action which would have the
effect of preventing the Warrantholders from receiving any of the
Warrant Shares issuable upon the exercise of the
Warrants.

 

(10) The
Company will promptly advise the Warrant Agent and the
Warrantholders in writing of any breach or default under the terms
of this Indenture no later than five (5) Business Days following
the occurrence of such breach or default.

 

   (11)    
If, in the opinion of counsel, any instrument is required to be
filed with, or any permission, order or ruling is required to be
obtained from any securities regulatory authority, or any other
step is required under any federal or provincial law of Canada
before the Warrant Shares may be issued and delivered to a
Warrantholder, the Company covenants that it will use its best
efforts to file such instrument, obtain such permission, order or
ruling or take all such other actions, at its expense, as is
required or appropriate in the circumstances.

 

 

32

 

 

4.2            

Warrant Agent's Remuneration and Expenses

 

The
Company covenants that it will pay to the Warrant Agent from time
to time reasonable remuneration for its services hereunder and will
pay or reimburse the Warrant Agent upon its request for all
reasonable expenses and disbursements and advances incurred or made
by the Warrant Agent in the administration or execution of the
trusts hereby created (including the reasonable compensation and
the disbursements of its counsel and all other advisers, experts,
accountants and assistants not regularly in its employ) both before
any default hereunder and thereafter until all duties of the
Warrant Agent hereunder shall be finally and fully performed. Any
amount owing hereunder and remaining unpaid after thirty (30) days
from the invoice date will bear interest at the then current rate
charged by the Warrant Agent against unpaid invoices and shall be
payable upon demand. This section shall survive the resignation or
removal of the Warrant Agent and/or the termination of this
Indenture.

 

4.3            

Performance of Covenants by Warrant Agent

 

Subject
to Section 8.7, if the Company shall fail to perform any of its
covenants contained in this Indenture and the Company has not
rectified such failure within twenty-five (25) Business Days after
either giving notice of such default pursuant to Section 4.1(10) or
receiving written notice from the Warrant Agent of such failure,
the Warrant Agent may notify the Warrantholders of such failure on
the part of the Company or may itself perform any of the said
covenants capable of being performed by it, but shall be under no
obligation to perform said covenants. All reasonable sums expended
or disbursed by the Warrant Agent in so doing shall be repayable as
provided in Section 4.2. No such performance, expenditure or
advance by the Warrant Agent shall be deemed to relieve the Company
of any default hereunder or of its continuing obligations under the
covenants herein contained.

 

4.4            

Enforceability of Warrants

 

The
Company covenants and agrees that it is duly authorized to create
and issue the Warrants to be issued hereunder and that the
Warrants, when issued and Authenticated as herein provided, will be
valid and enforceable against the Company in accordance with the
provisions hereof and that, subject to the provisions of this
Indenture, the Company will cause the Warrant Shares from time to
time acquired upon exercise of Warrants issued under this Indenture
to be duly issued and delivered in accordance with the terms of
this Indenture.

 

ARTICLE 5 ENFORCEMENT

 

5.1            

Suits by Warrantholders

 

Subject
to Section 6.10, all or any of the rights conferred upon a
Warrantholder by the terms of the Warrants held by him and/or this
Indenture may be enforced by such Warrantholder by
appropriate legal proceedings but without prejudice to the right
that is hereby conferred upon the Warrant Agent to proceed in its
own name to enforce each and all of the provisions herein contained
for the benefit of the holders of the Warrants from time to time
outstanding. The Warrant Agent shall also have the power at any
time and from time to time to institute and to maintain such suits
and proceedings as it may reasonably be advised shall be necessary
or advisable to preserve and protect its interests and the
interests of the Warrantholders.

 

 

33

 

 

5.2            

Limitation of Liability

 

The
obligations hereunder (including without limitation under Section
8.7(5)) are not personally binding upon, nor shall resort hereunder
be had to, the private property of any of the past, present or
future directors or shareholders of the Company or any of the past,
present or future officers, employees or agents of the Company, but
only the property of the Company (or any successor person) shall be
bound in respect hereof.

 

5.3            

Waiver of Default

 

Upon
the happening of any default hereunder:

 

(a)

the Warrantholders
of not less than 50% plus 1 of the Warrants then outstanding shall
have power (in addition to the powers exercisable by Extraordinary
Resolution) by requisition in writing to instruct the Warrant Agent
to waive any default hereunder and the Warrant Agent shall
thereupon waive the default upon such terms and conditions as shall
be prescribed in such requisition; or

 

(b)

the Warrant Agent
shall have power to waive any default hereunder upon such terms and
conditions as the Warrant Agent may deem advisable, on the advice
of counsel, if, in the Warrant Agent's opinion, based on the advice
of counsel, the same shall have been cured or adequate provision
made therefor,

 

provided that no
delay or omission of the Warrant Agent or of the Warrantholders to
exercise any right or power accruing upon any default shall impair
any such right or power or shall be construed to be a waiver of any
such default or acquiescence therein and provided further that no
act or omission either of the Warrant Agent or of the
Warrantholders in the premises shall extend to or be taken in any
manner whatsoever to affect any subsequent default hereunder of the
rights resulting therefrom.

 

ARTICLE 6 MEETINGS OF WARRANTHOLDERS

 

6.1            

Right to Convene Meetings

 

The
Warrant Agent may at any time and from time to time, and shall on
receipt of a written request of the Company or of a Warrantholders'
Request, convene a meeting of the Warrantholders provided that the
Warrant Agent has been provided with sufficient funds and is
indemnified to its reasonable satisfaction by the Company or by the
Warrantholders signing such Warrantholders' Request against the
costs, charges, expenses and liabilities that may be incurred in
connection with the calling and holding of such meeting. If within
fifteen (15) Business Days after the receipt of a written request
of the Company or a Warrantholders' Request, funding and indemnity
given as aforesaid the Warrant Agent fails to give the requisite
notice specified in Section 6.2 to convene a meeting, the Company
or such Warrantholders, as the case may be, may convene such
meeting. Every such meeting shall be held in the City of Toronto,
Ontario or at such other place as may be approved or determined by
the Warrant Agent.

 

 

34

 

 

6.2            

Notice

 

At
least fourteen (14) days prior notice of any meeting of
Warrantholders shall be given to the Warrantholders at the expense
of the Company in the manner provided for in Section 9.2 and a copy
of such notice shall be delivered to the Warrant Agent unless the
meeting has been called by it, and to the Company unless the
meeting has been called by it. Such notice shall state the date,
time and place of the meeting, the general nature of the business
to be transacted and shall contain such information as is
reasonably necessary to enable the Warrantholders to make a
reasoned decision on the matter, but 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 6. The notice
convening any such meeting may be signed by an appropriate officer
of the Warrant Agent or of the Company or the person designated by
such Warrantholders, as the case may be.

 

6.3            

Chairman

 

The
Warrant Agent may nominate in writing an individual (who need not
be a Warrantholder) to be chairman of the meeting and if no
individual is so nominated, or if the individual so nominated is
not present within fifteen (15) minutes after the time fixed for
the holding of the meeting, the Warrantholders present in person or
by proxy shall appoint an individual present to be chairman of the
meeting. The chairman of the meeting need not be a
Warrantholder.

 

6.4            

Quorum

 

Subject
to the provisions of Section 6.11, at any meeting of the
Warrantholders a quorum shall consist of two Warrantholders present
in person or represented by proxy and representing at least 20% of
the aggregate number of Warrants then outstanding. If a quorum of
the Warrantholders shall not be present within one-half hour from
the time fixed for holding any meeting, the meeting, if summoned by
the Warrantholders or on a Warrantholders' Request, shall be
dissolved; but in any other case the meeting shall be adjourned to
the same day in the next week (unless such day is not a Business
Day in which case it shall be adjourned to the next following
Business Day) at the same time and place to the extent possible
and, subject to the provisions of Section 6.11, no notice of the
adjournment need be given. Any business may be brought before or
dealt with at an adjourned meeting that might have been dealt with
at the original meeting in accordance with the notice calling the
same. At the adjourned meeting the Warrantholders present in person
or represented by proxy shall form a quorum and may transact the
business for which the meeting was originally convened,
notwithstanding that they may not represent at least 20% of the
aggregate number of Warrants then unexercised and outstanding. No
business shall be transacted at any meeting, except an adjourned
meeting as described above, unless a quorum is present at the
commencement of business.

 

 

35

 

 

6.5            

Power to Adjourn

 

The
chairman of any meeting at which a quorum of the Warrantholders is
present may, with the consent of the meeting, adjourn any such
meeting, and no notice of such adjournment need be given except
such notice, if any, as the meeting may prescribe.

 

6.6            

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 an extraordinary resolution shall be given in the manner
hereinafter provided. At any such meeting, unless a poll is duly
demanded as herein provided, a declaration by the chairman that a
resolution has been carried or carried unanimously or by a
particular majority or lost or not carried by a particular majority
shall be conclusive evidence of the fact.

 

6.7            

Poll and Voting

 

On
every extraordinary resolution, and when demanded by the chairman
or by one or more of the Warrantholders acting in person or by
proxy on any other question submitted to a meeting and after a vote
by show of hands, a poll shall be taken in such manner as the
chairman shall direct. Questions other than those required to be
determined by extraordinary resolution shall be decided by a
majority of the votes cast on the poll. On a show of hands, every
person who is present and entitled to vote, whether as a
Warrantholder or as proxy for one or more absent Warrantholders, or
both, shall have one vote. On a poll, each Warrantholder present in
person or represented by a proxy duly appointed by instrument in
writing shall be entitled to one vote in respect of each whole
Warrant then held by her. A proxy need not be a Warrantholder. The
chairman of any meeting shall be entitled, both on a show of hands
and on a poll, to vote in respect of the Warrants, if any, held or
represented by her.

 

6.8            

Regulations

 

Subject
to the provisions of this Indenture, the Warrant Agent or the
Company with the approval of the Warrant Agent may from time to
time make and from time to time vary such regulations as it shall
consider necessary or appropriate generally for the calling of
meetings of Warrantholders and the conduct of business thereat
including setting a record date for Warrantholders entitled to
receive notice of or to vote at such meeting.

 

Any
regulations so made shall be binding and effective and the votes
given in accordance therewith shall be valid and shall be counted.
Save as such regulations may provide, the only persons who shall be
recognized at any meeting as a Warrantholder, or be entitled to
vote or be present at the meeting in respect thereof (subject to
Section 6.9), shall be Warrantholders or persons holding proxies of
Warrantholders.

 

6.9            

Company, Warrant Agent and Counsel may be Represented

 

The
Company and the Warrant Agent, by their respective directors,
officers and employees and the counsel for each of the Company, the
Warrantholders and the Warrant Agent may attend any meeting of the
Warrantholders and speak thereat but shall not be entitled to vote
unless in their capacities as Warrantholders or proxies
therefor.

 

 

36

 

6.10
      Powers Exercisable by Extraordinary
Resolution

 

In
addition to all other powers conferred upon them by any other
provisions of this Indenture or by law, the Warrantholders at a
meeting shall have the power, exercisable from time to time by
extraordinary resolution:

 

(a)

to agree with the
Company to any modification, alteration, compromise or arrangement
of the rights of Warrantholders and/or the Warrant Agent in its
capacity as Warrant Agent hereunder (subject to the Warrant Agent's
approval) or on behalf of the Warrantholders against the Company,
whether such rights arise under this Indenture or the Warrants or
otherwise;

 

(b)

to amend, modify or
repeal any extraordinary resolution previously passed or sanctioned
by the Warrantholders;

 

(c)

to direct or
authorize the Warrant Agent (subject to the Warrant Agent receiving
funding and indemnity) to enforce any of the covenants on the part
of the Company contained in this Indenture or the Warrants or to
enforce any of the rights of the Warrantholders in any manner
specified in such extraordinary resolution or to refrain from
enforcing any such covenant or right;

 

(d)

to waive, authorize
and direct the Warrant Agent to waive any default on the part of
the Company in complying with any provisions of this Indenture or
the Warrants either unconditionally or upon any conditions
specified in such extraordinary resolution;

 

(e)

to restrain any
Warrantholder from taking or instituting any suit, action or
proceeding against the Company for the enforcement of any of the
covenants on the part of the Company contained in this Indenture or
the Warrants or to enforce any of the rights of the
Warrantholders;

 

(f)

to direct any
Warrantholder who, as such, has brought any suit, action or
proceeding to stay or discontinue or otherwise deal with any such
suit, action or proceeding, upon payment of the costs, charges and
expenses reasonably and properly incurred by such Warrantholder in
connection therewith;

 

(g)

to assent to any
change in or omission from the provisions contained in this
Indenture or any ancillary or supplemental instrument which may be
agreed to by the Company, and to authorize the Warrant Agent to
concur in and execute any ancillary or supplemental indenture
embodying the change or omission; and

 

(h)

with the consent of
the Company, such consent not to be unreasonably withheld, to
remove the Warrant Agent or its successor in office and to appoint
a new warrant agent or warrant agents to take the place of the
Warrant Agent so removed.

 

6.11
Meaning of "Extraordinary
Resolution"

 

(1)            

The expression
"extraordinary resolution"
when used in this Indenture means, subject as
hereinafter in this Section 6.11 and in Section 6.14 provided, a
resolution proposed at a meeting of Warrantholders duly convened
for that purpose and held in accordance with the provisions of this
Article 6 at which there are present in person or by proxy at least
two Warrantholders representing at least 20% of the aggregate
number of all the then outstanding Warrants and passed by the
affirmative votes of Warrantholders representing not less than
662/3% of the aggregate
number of all the then outstanding Warrants represented at the
meeting and voted on the poll upon such resolution.

 

 

37

 

 

(2) If, at any meeting
called for the purpose of passing an extraordinary resolution,
Warrantholders representing at least 20% of the aggregate number of
all the then outstanding Warrants are not present in person or by
proxy within one-half hour after the time appointed for the
meeting, then the meeting, if convened by Warrantholders or on a
Warrantholders' Request, shall be dissolved; but in any other case
it shall stand adjourned to such day, being not less than ten (10)
Business Days later, and to such place and time as may be appointed
by the chairman. Not less than three (3) Business Days prior notice
shall be given of the time and place of such adjourned meeting in
the manner provided in sections 9.1 and 9.2. Such notice shall
state that at the adjourned meeting the Warrantholders present in
person or represented by proxy shall form a quorum but it shall not
be necessary to set forth the purposes for which the meeting was
originally called or any other particulars. At the adjourned
meeting the Warrantholders present in person or represented by
proxy shall form a quorum and may transact the business for which
the meeting was originally convened and a resolution proposed at
such adjourned meeting and passed by the requisite vote as provided
in Section 6.11(1) shall be an extraordinary resolution within the
meaning of this Indenture notwithstanding that Warrantholders
representing at least 20% of all the then outstanding Warrants are
not present in person or represented by proxy at such adjourned
meeting.

 

(3) Votes on an
extraordinary resolution shall always be given on a poll and no
demand for a poll on an extraordinary resolution shall be
necessary.

 

6.12
Powers
Cumulative

 

It is
hereby declared and agreed that any one or more of the powers or
any combination of the powers in this Indenture stated to be
exercisable by the Warrantholders 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
Warrantholders to exercise such powers or combination of powers
then or thereafter from time to time.

 

6.13
Minutes

 

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

 

38

 

 

6.14
Instruments in
Writing

 

All
actions that may be taken and all powers that may be exercised by
the Warrantholders at a meeting held as provided in this Article 6
may also be taken and exercised by Warrantholders representing a
majority, or in the case of an extraordinary resolution at least
662/3%, of the
aggregate number of all the then outstanding Warrants by an
instrument in writing signed in one or more counterparts by such
Warrantholders in person or by attorney duly appointed in writing,
and the expression "extraordinary resolution" when used in this
Indenture shall include an instrument so signed.

 

6.15
Binding Effect of
Resolutions

 

Every
resolution and every extraordinary resolution passed in accordance
with the provisions of this Article 6 at a meeting of
Warrantholders shall be binding upon all the Warrantholders,
whether present at or absent from such meeting, and every
instrument in writing signed by Warrantholders in accordance with
Section 6.14 shall be binding upon all the Warrantholders, whether
signatories thereto or not, and each and every Warrantholder and
the Warrant Agent (subject to the provisions for indemnity herein
contained) shall be bound to give effect accordingly to every such
resolution and instrument in writing. In the case of an instrument
in writing, the Warrant Agent shall give notice in the manner
contemplated in sections 9.1 and 9.2 of the effect of the
instrument in writing to all Warrantholders and the Company as soon
as is reasonably practicable.

 

6.16
Holdings by the Company or
Subsidiaries of the Company Disregarded

 

In
determining whether Warrantholders are present at a meeting of
Warrantholders for the purpose of determining a quorum or have
concurred in any consent, waiver, extraordinary resolution,
Warrantholders' Request or other action under this Indenture,
Warrants owned legally or beneficially by the Company or its
Subsidiaries or in partnership of which the Company is directly or
indirectly a party to shall be disregarded.

 

6.17
Common Shares or Warrants
Owned by the Company or its Subsidiaries – Certificate to be
Provided

 

For the
purpose of disregarding any Warrants owned legally or beneficially
by the Company in Section 6.16, the Company shall provide to the
Warrant Agent, upon written request, a certificate of the Company
setting forth as at the date of such certificate:

 

(a)

the names (other
than the name of the Company) of the Warrantholders which, to the
knowledge of the Company, hold Warrants that are owned by or held
for the account of the Company; and

(b)

the number of
Warrants owned legally or beneficially by the Company, and the
Warrant Agent, in making the computations in Section 6.16, shall be
entitled to rely on such certificate without any additional
evidence

 

 

 

39

 

 

ARTICLE 7

SUPPLEMENTAL INDENTURES AND SUCCESSOR COMPANIES

 

7.1            

Provision for Supplemental Indentures for Certain
Purposes

 

From
time to time the Company (if properly authorized by its directors)
and the Warrant Agent may, subject to the provisions hereof, and
they shall, when so directed in accordance with the provisions
hereof, execute and deliver by their proper officers, indentures or
instruments supplemental hereto, which thereafter shall form part
hereof, for any one or more or all of the following
purposes:

 

(a)

providing for the
issuance of additional Warrants hereunder including Warrants in
excess of the number set out in Section 2.1 and any consequential
amendments hereto as may be required by the Warrant Agent, relying
on the advice of counsel;

 

(b)

setting forth
adjustments in the application of Article 2;

 

(c)

adding to the
provisions hereof such additional covenants and enforcement
provisions as, in the opinion of counsel are necessary or
advisable, provided that the same are not in the opinion of the
Warrant Agent, relying on the advice of counsel, prejudicial to the
interests of the Warrantholders as a group;

 

(d)

giving effect to
any extraordinary resolution passed as provided in Article
6;

 

(e)

making such
provisions not inconsistent with this Indenture as may be necessary
or desirable with respect to matters or questions arising hereunder
provided that such provisions are not, in the opinion of the
Warrant Agent, relying on the advice of counsel, prejudicial to the
interests of the Warrantholders as a group;

 

(f)

adding to or
amending the provisions hereof in respect of the transfer of
Warrants, making provision for the exchange of Warrants and making
any modification in the form of the Warrant Certificate that does
not affect the substance thereof;

 

(g)

amending any of the
provisions of this Indenture or relieving the Company from any of
the obligations, conditions or restrictions herein contained,
provided that no such amendment or relief shall be or become
operative or effective if, in the opinion of the Warrant Agent,
relying on the advice of counsel, such amendment or relief impairs
any of the rights of the Warrantholders as a group or of the
Warrant Agent, and provided further that the Warrant Agent may in
its sole discretion decline to enter into any supplemental
indenture that in its opinion may not afford adequate protection to
the Warrant Agent when the same shall become operative;
and

 

(h) 

for any other
purpose not inconsistent with the terms of this
Indenture, 40 

 

including the
correction or rectification of any ambiguities, defective or
inconsistent provisions, errors or omissions herein, provided that,
in the opinion of the Warrant Agent, relying on the advice of
counsel, the rights of the Warrant Agent and the Warrantholders as
a group are in no way prejudiced thereby.

 

 

40

 

 

7.2            

Successor Companies

 

In the
case of the amalgamation, consolidation, arrangement, merger or
transfer of the undertaking or assets of the Company as an entirety
or substantially as an entirety to or with another person (a
"successor company"), the
successor company resulting from the amalgamation, consolidation,
arrangement, merger or transfer (if not the Company) shall be bound
by the provisions hereof and all obligations for the due and
punctual performance and observance of each and every covenant and
obligation contained in this Indenture to be performed by the
Company and the successor company shall by supplemental indenture
satisfactory in form to the Warrant Agent and executed and
delivered to the Warrant Agent, expressly assume those
obligations.

 

ARTICLE 8 CONCERNING THE WARRANT AGENT

 

8.1            

Indenture Legislation

 

(1) If and to the
extent that any provision of this Indenture limits, qualifies or
conflicts with a mandatory requirement of Applicable Legislation,
such mandatory requirement shall prevail.

 

(2) The Company and the
Warrant Agent agree that each will at all times in relation to this
Indenture and any action to be taken hereunder observe and comply
with and be entitled to the benefit of Applicable
Legislation.

 

8.2            

Rights and Duties of Warrant Agent

 

(1) The Warrant Agent
accepts the duties and responsibilities under this Indenture,
solely as custodian, bailee and agent. No trust is intended to be,
or is or will be, created hereby and the Warrant Agent shall owe no
duties hereunder as a trustee.

 

(2) In the exercise of
the rights and duties prescribed or conferred by the terms of this
Indenture, the Warrant Agent shall act honestly and in good faith
with a view to the best interests of the Warrantholders and shall
exercise the degree of care, diligence and skill that a reasonably
prudent warrant agent would exercise in comparable circumstances.
No provision of this Indenture shall be construed to relieve the
Warrant Agent from, or require any other person to indemnify the
Warrant Agent against liability for its own gross negligence,
wilful misconduct, bad faith or fraud.

 

(3) The Warrant Agent
shall not be bound to do or take any act, action or proceeding for
the enforcement of any of the obligations of the Company under this
Indenture unless and until it shall have received a Warrantholders'
Request specifying the act, action or proceeding that the Warrant
Agent is requested to take. The obligation of the Warrant Agent to
commence or continue any act, action or proceeding for the purpose
of enforcing any rights of the Warrant Agent or the Warrantholders
hereunder shall be conditional upon the

 

 

41

 

 

Warrantholders
furnishing, when required by notice in writing by the Warrant
Agent, sufficient funds to commence or continue such act, action or
proceeding and an indemnity reasonably satisfactory to the Warrant
Agent and its counsel to protect and hold harmless the Warrant
Agent, its officers, directors, employees, agents, successors and
assigns against the costs, charges and expenses and liabilities to
be incurred thereby and any loss and damage it may suffer by reason
thereof. None of the provisions contained in this Indenture shall
require the Warrant Agent to expend or risk its own funds or
otherwise incur financial liability in the performance of any of
its duties or in the exercise of any of its rights or powers unless
indemnified and funded as aforesaid.

 

(4) The Warrant Agent
may, before commencing any act, action or proceeding, or at any
time during the continuance thereof require the Warrantholders at
whose instance it is acting to deposit with the Warrant Agent the
Warrants held by them, for which Warrants the Warrant Agent shall
issue receipts.

 

(5) Every provision of
this Indenture that, by its terms, relieves the Warrant Agent of
liability or entitles it to rely upon any evidence submitted to it
is subject to the provisions of Applicable
Legislation.

 

(6) The Warrant Agent
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 hereunder
unless and until it shall have been required to do so under the
terms hereof; nor shall the Warrant Agent be required to take
notice of any default hereunder, unless and until notified in
writing of such default, which notice shall specifically set out
the default desired to be brought to the attention of the Warrant
Agent and in the absence of such notice the Warrant Agent may for
all purposes of this Indenture conclusively assume that no default
has occurred or been made in the performance or observance of the
representations, warranties and covenants, agreements or conditions
herein contained. Any such notice shall in no way limit any
discretion herein given to the Warrant Agent to determine whether
or not the Warrant Agent shall take action with respect to any
default.

 

(7) In this Indenture,
whenever confirmations or instructions are required to be given to
the Warrant Agent, in order to be valid, such confirmations and
instructions shall be in writing.

 

8.3            

Evidence, Experts and Advisers

 

(1) In addition to the
reports, certificates, opinions and other evidence required by this
Indenture, the Company shall furnish to the Warrant Agent such
additional evidence of compliance with any provision hereof and in
such form as may be prescribed by Applicable Legislation or as the
Warrant Agent may reasonably require by written notice to the
Company.

 

(2) In the exercise of
its rights and duties hereunder, the Warrant Agent may, if it is
acting in good faith, act and rely absolutely as to the truth of
the statements and the accuracy of the opinions expressed therein,
upon statutory declarations, opinions, reports, written requests,
consents, or orders of the Company, certificates of the Company or
other evidence furnished to the Warrant Agent pursuant to any
provision hereof or of Applicable Legislation or pursuant to a
request of the Warrant Agent, provided that such evidence complies
with Applicable Legislation and that the Warrant Agent complies
with Applicable Legislation and that the Warrant Agent examines the
same and determines that such evidence complies with the applicable
requirements of this Indenture. The Warrant Agent shall be under no
responsibility in
respect of the validity of this Indenture or the execution and
delivery hereof by or on behalf of the Company or in respect of the
validity or the execution of any Warrant Certificate by the Company
and issued hereunder, nor shall it be responsible for any breach by
the Company of any covenant or condition contained in this
Indenture or in any such Warrant Certificate; nor shall it by any
act hereunder be deemed to make any representation or warranty as
to the authorization or reservation of any securities to be issued
upon the right to acquire provided for in this Indenture and/or in
any Warrant or as to whether any securities will when issued be
duly authorized or be validly issued and fully paid and
non-assessable.

 

 

42

 

 

(3) Whenever provided
for in this Indenture or Applicable Legislation requires that the
Company deposit with the Warrant Agent resolutions, certificates,
reports, opinions, requests, orders or other documents, it is
intended that the truth, accuracy and good faith on the effective
date thereof and the facts and opinions stated in all such
documents so deposited shall, in each and every such case, be
conditions precedent to the right of the Company to have the
Warrant Agent take the action to be based thereon.

 

(4) Proof of the
execution of an instrument in writing, including a Warrantholders'
Request, by any Warrantholder may be made by a certificate of a
notary public or other person with similar powers that the person
signing such instrument acknowledged to him the execution thereof,
or by an affidavit of a witness to such execution or in any other
manner which the Warrant Agent may consider adequate and in respect
of a corporate Warrantholder, shall include a certificate of
incumbency of such Warrantholder together with a certified
resolution authorizing the person who signs such instrument to sign
such instrument.

 

(5) The Warrant Agent
may act and rely and shall be protected in acting and relying upon
any resolution, certificate, statement, instrument, opinion,
report, notice, request, consent, order, letter, or other paper
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. The
Warrant Agent has sole discretion and shall be protected in acting
and relying upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order,
letter or other paper document received in facsimile or e-mail
form.

 

(6) The Warrant Agent
may employ or retain such counsel, accountants, engineers,
appraisers or other experts or advisers as it may reasonably
require for the purpose of determining and discharging its duties
hereunder and shall pay reasonable remuneration for all services so
performed by any of them, without taxation of costs of any counsel
and shall not be responsible for any misconduct or negligence on
the part of any of them who has been selected with due care by the
Warrant Agent. Any reasonable remuneration paid by the Warrant
Agent shall be paid by the Company in accordance with Section
4.2.

 

(7) The Warrant Agent
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, engineer or other expert or
advisor, whether retained or employed by the Company or the Warrant
Agent, in relation to any matter arising in fulfilling its duties
and obligations hereof.

 

(8) The Warrant Agent
may, as a condition precedent to any action to be taken by it under
this Indenture, require such opinions, statutory declarations,
reports, certificates or other evidence as it, acting reasonably,
considers necessary or advisable in the circumstances.

 

(9)    
The Warrant Agent is not required to expend or place its own funds
at risk in executing its duties and obligations.

 

 

43

 

 

8.4            

Securities, Documents and Monies Held by Warrant Agent

 

(90)         
Any securities, documents of title, monies or other instruments
that may at any time be held by the Warrant Agent subject to the
duties and obligations hereof, for the benefit of the Company, may
be placed in the deposit vaults of the Warrant Agent or of any
Schedule 1 Canadian chartered bank under the Bank Act (Canada) or deposited for
safekeeping with any such bank or the Warrant Agent. Any monies
held pending the application or withdrawal thereof under any
provisions of this Indenture, shall be held, invested and
reinvested in "Permitted Investments" as directed in writing by the
Company. "Permitted Investments" shall be treasury bills guaranteed
by the Government of Canada having a term to maturity not to exceed
ninety (90) days, or term deposits or bankers' acceptances of a
Canadian chartered bank having a term to maturity not to exceed
ninety (90) days, or such other investments that is in accordance
with the Warrant Agent's standard type of investments. Unless
otherwise specifically provided herein, all interest or other
income received by the Warrant Agent in respect of such deposits
and investments shall belong to the Company and shall be paid to
the Company upon discharge of this Indenture.

 

(2) Any written
direction for the investment or release of funds received shall be
received by the Warrant Agent by 9:00 a.m. (Calgary time) on the
Business Day on which such investment or release is to be made,
failing which such direction will be handled on a commercially
reasonable efforts basis and may result in funds being invested or
released on the next Business Day.

 

(3) The Warrant Agent
shall have no responsibility or liability for any diminution of any
funds resulting from any investment made in accordance with this
Indenture, including any losses on any investment liquidated prior
to maturity in order to make a payment required
hereunder.

 

(4) In the event that
the Warrant Agent does not receive a direction or only a partial
direction, the Warrant Agent may hold cash balances constituting
part or all of such monies and may, but need not, invest same in
its deposit department, the deposit department of one of its
affiliates, or the deposit department of a Canadian chartered bank;
but the Warrant Agent, its affiliates or a Canadian chartered bank
shall not be liable to account for any profit to any parties to
this Indenture or to any other person or entity.

 

8.5            

Actions by Warrant Agent to Protect Interests

 

The
Warrant Agent shall have the power to institute and to maintain
such actions and proceedings as it may consider necessary or
expedient to preserve, protect or enforce its interests and the
interests of the Warrantholders pursuant to the provisions of this
Indenture.

 

8.6            

Warrant Agent not Required to Give Security

 

The
Warrant Agent shall not be required to give any bond or security in
respect of the execution of the duties and obligations of this
Indenture or otherwise.

 

8.7            

Protection of Warrant Agent

 

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

 

 

44

 

 

(1) The Warrant Agent
shall not be liable for or by reason of any representations,
statements of fact or recitals in this Indenture or in the Warrants
(except the representation contained in Section 8.9 or in the
Authentication of the Warrant Agent on the Warrants) or be required
to verify the same and all such statements of fact or recitals are
and shall be deemed to be made by the Company.

 

(2) Nothing herein
contained shall impose any obligation on the Warrant Agent to see
to or to require evidence of the registration or filing (or renewal
thereof) of this Indenture or any instrument ancillary or
supplemental hereto.

 

(3) The Warrant Agent
shall not be bound to give notice to any person or persons of the
execution hereof.

 

(4) The Warrant Agent
shall not incur any liability or responsibility whatsoever or be in
any way responsible for the consequence of any breach on the part
of the Company of any of the covenants or warranties herein
contained or of any acts of any directors, officers, employees,
agents or servants of the Company.

 

(5) Without limiting
any protection or indemnity of the Warrant Agent under any other
provision hereof, or otherwise at law, the Company hereby agrees to
indemnify and hold harmless the Warrant Agent and its affiliates,
directors, officers, agents and employees, successors and assigns
(the "Indemnified Parties")
from and against any and all liabilities whatsoever, losses,
damages, penalties, claims, demands, proceedings, charges, actions,
suits, costs, expenses and disbursements, including reasonable
legal or advisor fees and disbursements on a solicitor and client
basis, of whatever kind and nature which may at any time be imposed
on, incurred by or asserted against the Indemnified Parties, or any
of them, whether at law or in equity, in any way caused by or
arising from the performance of its duties hereunder, 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 the Indemnified Parties' duties, or any other
services that Warrant Agent may provide in connection with or in
any way relating to this Indenture. The Company agrees that its
liability hereunder shall be absolute and unconditional regardless
of the correctness of any representations of any third parties and
regardless of any liability of third parties to the Indemnified
Parties, and shall accrue and become enforceable without prior
demand or any other precedent action or proceeding; provided that
the Company shall not be required to indemnify the Indemnified
Parties in the event of the gross negligence, fraud or wilful
misconduct of the Warrant Agent, and this provision shall survive
the resignation or removal of the Warrant Agent or the termination
or discharge of this Indenture.

 

(6) Notwithstanding the
foregoing or any other provision of this Indenture, any liability
of the Warrant Agent shall be limited, in the aggregate, to the
amount of annual retainer fees paid by the Company to the Warrant
Agent under this Indenture in the twelve (12) months immediately
prior to the Warrant Agent receiving the first notice of the claim;
provided that this limitation shall not apply in respect of any
gross negligence, fraud or wilful misconduct of the Warrant Agent.
Notwithstanding any other provision of this Indenture, and whether
such losses or damages are foreseeable or unforeseeable, the
Warrant Agent shall not be liable under any circumstances
whatsoever for any (a) breach by any other party of securities law
or other rule of any securities regulatory authority, (b) lost
profits or (c) special, indirect, incidental, consequential,
exemplary, aggravated or punitive losses or damages.

 

 

45

 

 

(7) If any of the funds
provided to the Warrant Agent hereunder are received by it in the
form of an uncertified cheque or bank draft, the Warrant Agent
shall delay the release of such funds and the related Warrant
Shares until such uncertified cheque has cleared the financial
institution upon which the same is drawn.

 

(8) The forwarding of a
cheque or the sending of funds by wire transfer by the Warrant
Agent will satisfy and discharge the liability of any amounts due
to the extent of the sum represented thereby unless such cheque is
not honoured on presentation, provided that in the event of the
non-receipt of such cheque by the payee, or the loss or destruction
thereof, the Warrant Agent, upon being furnished with reasonable
evidence of such non-receipt, loss or destruction and indemnity
reasonably satisfactory to it, will issue to such payee a
replacement cheque for the amount of such cheque.

 

(9) The Warrant Agent
shall retain the right not to act and shall not be liable for
refusing to act if, due to a lack of information or for any other
reason whatsoever, the Warrant Agent, in its sole judgement,
determines that such act might cause it to be in non-compliance
with any applicable anti-money laundering, anti-terrorist or
economic sanctions legislation, regulation or guideline. Further,
should the Warrant Agent, in its sole judgement, determine at any
time that its acting under this Indenture has resulted in its being
in non-compliance with any applicable anti-money laundering,
anti-terrorist or economic sanctions legislation, regulation or
guideline, then it shall have the right to resign on ten (10) days'
written notice to the Company provided: (i) that the Warrant
Agent's written notice shall describe the circumstances of such
non-compliance; and (ii) that if such circumstances are rectified
to the Warrant Agent's satisfaction within such ten (10) day
period, then such resignation shall not be effective.

 

8.8            

Replacement of Warrant Agent

 

(1)           The
Warrant Agent may resign its appointment and be discharged from all
further duties and liabilities hereunder by giving to the Company
not less than sixty (60) days prior notice in writing or such
shorter prior notice as the Company may accept as sufficient. The
Warrantholders by extraordinary resolution shall have the power at
any time to remove the existing Warrant Agent and to appoint a new
warrant agent. In the event of the Warrant Agent resigning or being
removed as aforesaid or being dissolved, becoming bankrupt, going
into liquidation or otherwise becoming incapable of acting
hereunder, the Company shall forthwith appoint a new warrant agent
unless a new warrant agent has already been appointed by the
Warrantholders; failing such appointment by the Company, the
retiring Warrant Agent or any Warrantholder may apply to a justice
of the Ontario Superior Court of Justice (the "Court") at the Company's expense, on
such notice as such justice may direct, for the appointment of a
new warrant agent; but any new warrant agent so appointed by the
Company or by the Court shall be subject to removal as aforesaid by
the Warrantholders. Any new warrant agent appointed under any
provision of this Section 8.8 shall be a corporation authorized to
carry on the business of a transfer agent or a trust company in one
or more provinces of Canada and, if required by Applicable
Legislation of any province, in such province. On any such
appointment the new warrant agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been
originally named herein as Warrant Agent without any further
assurance, conveyance, act or deed; but there shall be immediately
executed, at the expense of the Company, all such conveyances or
other instruments as may, in the opinion of counsel, be necessary
or advisable for the purpose of assuring the same to the new
warrant agent, provided that any resignation or removal of the
Warrant Agent and appointment of a
successor warrant agent shall not become effective until the
successor warrant agent shall have executed an appropriate
instrument accepting such appointment and, at the request of the
Company, the predecessor Warrant Agent, upon payment of its
outstanding remuneration and expenses, shall execute and deliver to
the successor warrant agent an appropriate instrument transferring
to such successor warrant agent all rights and powers of the
Warrant Agent hereunder and all securities, documents of title and
other instruments and all monies and properties held by the Warrant
Agent hereunder.

 

46

 

 

(2) Upon the
appointment of a successor warrant agent, the Company shall
promptly notify the Warrantholders thereof in the manner provided
for in Section 9.2.

 

(3) Any corporation
into or with which the Warrant Agent may be merged or consolidated
or amalgamated, or any corporation succeeding to the corporate
trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without any further act on its part or of
any of the parties hereto, provided that such corporation would be
eligible for appointment as a new warrant agent under Section
8.8(1).

 

(4) Any Warrants
Authenticated or certified but not delivered by a predecessor
Warrant Agent may be Authenticated or certified by the new or
successor warrant agent in the name of the predecessor or the new
or successor warrant agent.

 

8.9            

Conflict of Interest

 

(1) The Warrant Agent
represents to the Company, to the best of its knowledge, that at
the time of execution and delivery hereof no material conflict of
interest exists which it is aware of in the Warrant Agent's role
hereunder and agrees that in the event of a material conflict of
interest arising which it becomes aware of hereafter it will,
within ninety (90) days after ascertaining that it has such a
material conflict of interest, either eliminate the same or resign
its appointment hereunder. If any such material conflict of
interest exists or hereafter shall exist, the validity and
enforceability of this Indenture and the Warrants shall not be
affected in any manner whatsoever by reason thereof.

 

(2) Subject to Section
8.9(1), the Warrant Agent, in its personal or any other capacity,
may buy, lend upon and deal in securities of the Company and
generally may contract and enter into financial transactions with
the Company or any Subsidiary without being liable to account for
any profit made thereby.

 

8.10
Acceptance of Duties and
Obligations

 

The
Warrant Agent hereby accepts the duties and obligations in this
Indenture declared and provided for and agrees to perform the same
upon the terms and conditions herein set forth and agrees to hold
all rights, interests and benefits contained herein on behalf of
those persons who become holders of Warrants from time to time
issued under this Indenture.

 

8.11
Warrant Agent not to be
Appointed Receiver

 

The
Warrant Agent and any person related to the Warrant Agent shall not
be appointed a receiver or receiver and manager or liquidator of
all or any part of the assets or undertaking of the Company or any
Subsidiary or any partnership of which the Company is directly or
indirectly involved.

 

 

47

 

 

8.12
Authorization to Carry on
Business

 

The
Warrant Agent represents to the Company that it is registered to
carry on business under Applicable Legislation in the provinces of
Alberta and British Columbia.

 

ARTICLE 9 GENERAL

 

9.1            

Notice to the Company and the Warrant Agent

 

(1)           Unless
herein otherwise expressly provided, any notice to be given
hereunder to the Company or the Warrant Agent shall be deemed to be
validly given if delivered, if sent by registered letter, postage
prepaid or if transmitted by email to the following addresses or
facsimile numbers:

 

(a) If to the Company,
to:

Planet 13 Holdings
Inc.

2548 West Desert
Inn Road

Las Vegas,
Nevada

89109

 

Attention:                   
Leighton Koehler

E-mail:                       
[REDACTED]

 

with a copy
to:

 

Wildeboer Dellelce
LLP

396 Bay Street,
Suite 80

Toronto,
ON

M5H
2V1

 

Attention:                   
Charlie Malone

E-mail:                       
[REDACTED]

 

(b) If to the Warrant
Agent, to:

 

Odyssey
Trust Company

Suite
1230, 300 5th Avenue
SW

Calgary,
Alberta

T2P
3C4

 

Attention:                  
Dan Sander

Email:                       
[REDACTED]

 

and any
notice given in accordance with the foregoing shall be deemed to
have been received on the date of delivery if that date is a
Business Day (and if that date is not a Business Day, on the next
Business Day) or, if mailed, on the fifth Business Day following
the date of the postmark on such notice or, if transmitted by
email, on the Business Day following the transmission.

 

(2)            

The Company or the
Warrant Agent, as the case may be, may from time to tim
notify
the other in the manner provided in Section 9.1(1) of a change of
address which, from the effective date of such notice and until
changed by like notice, shall be the address of the Company or the
Warrant Agent, as the case may be, for all purposes of this
Indenture.e

 

(3)           If,
by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to
the Warrant Agent or to the Company hereunder could reasonably be
considered unlikely to reach its destination, the notice shall be
valid and effective only if it is delivered to an officer of the
party to which it is addressed or if it is delivered to that party
at the appropriate address provided in Section 9.1(1) by facsimile
or other means of prepaid, transmitted or recorded communication
and any notice delivered in accordance with the foregoing shall be
deemed to have been received on the date of delivery to the officer
or if delivered by facsimile or other means of prepaid,
transmitted, recorded communication on the third Business Day
following the date of the sending of the notice by the person
giving the notice.

 

48

 

 

9.2            

Notice to the Warrantholders

 

(1)           Any
notice to the Warrantholders under the provisions of this Indenture
shall be deemed to be validly given if the notice is sent by
prepaid mail or, if delivered by hand, to the holders at their
addresses appearing in the register of holders. Any notice so
delivered shall be deemed to have been received on the date of
delivery if that date is a Business Day or the Business Day
following the date of delivery if such date is not a Business Day
or on the third Business Day if delivered by mail. All notices may
be given to whichever one of the Warrantholders (if more than one)
is named first in the appropriate register hereinbefore mentioned,
and any notice so given shall be sufficient notice to all
Warrantholders and any other persons (if any) interested in such
Warrants. Accidental error or omission in giving notice or
accidental failure to mail notice to any Warrantholder will not
invalidate any action or proceeding founded thereon.

 

(2)           If,
by reason of strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to
the Warrantholders could reasonably be considered unlikely to reach
its destination, the notice may be given in a news release
disseminated through a newswire service, filed on SEDAR and posted
on the Company's website; provided that in the case of a notice
convening a meeting of the holders of Warrants, the Warrant Agent
may require such additional publications of that notice, in
Toronto, Ontario or in other cities or both, as it may deem
necessary for the reasonable notification of the holders of
Warrants or to comply with any applicable requirement of law or any
stock exchange. Any notice so given shall be deemed to have been
given on the day on which it has been published in all of the
cities in which publication was required.

 

9.3            

Privacy

 

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

 

(a)

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

 

(b)

to help the Warrant
Agent manage its servicing relationships with such
individuals

 

(c)

to meet the Warrant
Agent's legal and regulatory requirements; and

 

(d)

if Social Insurance
Numbers are collected by the Warrant Agent, to perform tax
reporting and to assist in verification of an individual's identity
for security purposes.

 

 

49

 

 

The
Company acknowledges and agrees that the Warrant Agent may receive,
collect, use and disclose personal information provided to it or
acquired by it in the course of its acting as agent hereunder for
the purposes described above and, generally, in the manner and on
the terms described in its privacy code, which the Warrant Agent
shall make available on its website or upon request, including
revisions thereto. Some of this personal information may be
transferred to servicers in the United States for data processing
and/or storage. Further, the Company agrees that it shall not
provide or cause to be provided to the Warrant Agent any personal
information relating to an individual who is not a party to this
Indenture unless the Company has assured itself that such
individual understands and has consented to the aforementioned uses
and disclosures.

 

9.4            

Third Party Interests

 

The
Company represents to the Warrant Agent that any account to be
opened by, or interest to held by the Warrant Agent in connection
with this Indenture, for or to the credit of such party, either (i)
is not intended to be used by or on behalf of any third party; or
(ii) is intended to be used by or on behalf of a third party, in
which case such party hereto agrees to complete and execute
forthwith a declaration in the Warrant Agent prescribed form as to
the particulars of such third party.

 

9.5            

Securities Exchange Commission Certification

 

The
Company confirms that as at the date of this Indenture it does not
have a class of securities registered pursuant to section 12 of the
U.S. Securities and Exchange Act of 1934, as amended (the
"Exchange Act") or have a
reporting obligation pursuant to section 15(d) of the Exchange
Act.

 

The
Company covenants that in the event that (i) any class of its
securities shall become registered pursuant to section 12 of the
Exchange Act or the Company shall incur a reporting obligation
pursuant to section 15(d) of the Exchange Act, or (ii) any such
registration or reporting obligation shall be terminated by the
Company in accordance with the Exchange Act, the Company shall
promptly deliver to the Warrant Agent an Officer's Certificate (in
a form provided by the Warrant Agent) notifying the Warrant Agent
of such registration or termination and such other information as
the Warrant Agent may reasonably require at the time. The Company
acknowledges that the Warrant Agent is relying upon the foregoing
representation and covenants in order to meet certain United States
Securities and Exchange Commission ("SEC") obligations with respect to those
clients who are filing with the SEC.

 

9.6            

Discretion of Directors

 

Any
matter provided herein to be determined by the directors in their
sole discretion and determination so made will be
conclusive.

 

 

50

 

 

9.7              

Satisfaction and Discharge of Indenture

 

 

Upon
the earlier of the Time of Expiry or the date by which there shall
have been delivered to the Warrant Agent for exercise or
destruction in accordance with the provisions hereof all Warrants
theretofore Authenticated or certified hereunder and by which no
Warrants shall remain issuable hereunder, this Indenture, except to
the extent that Warrant Shares and any certificates therefor have
not been issued and delivered hereunder or the Company has not
performed any of its obligations hereunder, shall cease to be of
further effect in respect of the Company, and the Warrant Agent, on
written demand of and at the cost and expense of the Company, and
upon delivery to the Warrant Agent of a certificate of the Company
stating that all conditions precedent to the satisfaction and
discharge of this Indenture have been complied with and upon
payment to the Warrant Agent of the expenses, fees and other
remuneration payable to the Warrant Agent, shall execute proper
instruments acknowledging satisfaction of and discharging this
Indenture; provided that if the Warrant Agent has not then
performed any of its obligations hereunder any such satisfaction
and discharge of the Company's obligations hereunder shall not
affect or diminish the rights of any Warrantholder or the Company
against the Warrant Agent.

 

9.8              

Provisions of Indenture and Warrants for the Sole Benefit of
Parties and Warrantholders

 

Nothing
in this Indenture or the Warrant Certificates, expressed or
implied, shall give or be construed to give to any person other
than the parties hereto and the holders from time to time of the
Warrants any legal or equitable right, remedy or claim under this
Indenture, or under any covenant or provision therein contained,
all such covenants and provisions being for the sole benefit of the
parties hereto and the Warrantholders.

 

9.9              

Indenture to Prevail

 

To the
extent of any discrepancy or inconsistency between the terms and
conditions of this Indenture and the Warrant Certificate, the terms
of this Indenture will prevail.

 

9.10
           Assignment

 

This
Indenture nor any benefits or burdens under this Indenture shall be
assignable by the Company or the Warrant Agent without the prior
written consent of the other party, such consent not to be
unreasonably withheld. Subject to the foregoing, this Indenture
shall enure to the benefit of and be binding upon the Company and
the Warrant Agent and their respective successors (including any
successor by reason of amalgamation) and permitted
assigns.

 

9.11              

Severability

 

If, in
any jurisdiction, any provision of this Indenture or its
application to any party or circumstance is restricted, prohibited
or unenforceable, such provision will, as to such jurisdiction, be
ineffective only to the extent of such restriction, prohibition or
unenforceability without invalidating the remaining provisions of
this Indenture and without affecting the validity or enforceability
of such provision in any other jurisdiction or without affecting
its application to other parties or circumstances.

 

 

51

 

 

9.12
Force
Majeure

 

No
party shall be liable to the other, or held in breach of this
Indenture, if prevented, hindered, or
delayed in the performance or observance of any provision contained
herein by reason of act of God, riots, terrorism, acts of war,
epidemics, governmental action or judicial order, earthquakes, or
any other similar causes (including, but not limited to,
mechanical, electronic or communication interruptions, disruptions
or failures). Performance times under this Indenture shall be
extended for a period of time equivalent to the time lost because
of any delay that is excusable under this
section.

 

9.13
Counterparts and Formal
Date

 

This
Indenture may be simultaneously executed in several counterparts,
each of which when so executed shall be deemed to be an original
and such counterparts together shall constitute one and the same
instrument and notwithstanding their date of execution shall be
deemed to bear the date set out at the top of the first page of
this Indenture.

 

(Signature page follows)

 

52

 

 

 

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

 

 

	

 

	
PLANET 13 HOLDINGS
INC.

	

 

	

 

	

 

	

 

	

 

	

	
By:  

	
/s/ Dennis
Logan

	

 

	

 

	

 

	
Dennis
Logan 

	

 

	

 

	

 

	

Chief
Financial Officer 

	

 

 

 

	

 

	
ODYSSEY TRUST COMPANY

	

 

	

 

	

 

	

 

	

 

	

	
By:  

	
/s/ Dan
Sander

	

 

	

 

	

 

	
Authorized
Signatory  

 

 

	

 

	

 

	

By: 

	

/s/ Amy
Douglas 

	

 

	

 

	

 

	

Authorized
Signatory 

	

 

 

 

 

 

 

SCHEDULE “A”

 

FORM OF WARRANT CERTIFICATE

 

WARRANTS TO PURCHASE COMMON SHARES

OF PLANET 13 HOLDINGS INC.

(a
company existing under the laws of British Columbia)

 

[For
Warrants issued in the United States or to, or for the account or
benefit of, U.S. Persons, also include the following
legends:]

 

THE
SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE ON
EXERCISE HEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S.
SECURITIES ACT") OR UNDER ANY STATE SECURITIES LAWS, AND THE
SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE ON
EXERCISE HEREOF MAY BE OFFERED, SOLD OR OTHERWISE TRANSFERRED,
DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) OUTSIDE THE
UNITED STATES IN ACCORDANCE WITH REGULATION S UNDER THE U.S.
SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND
REGULATIONS, (C) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE U.S. SECURITIES ACT PROVIDED BY (i) RULE 144 OR (ii) RULE144A
THEREUNDER, IF AVAILABLE, AND IN COMPLIANCE WITH APPLICABLE U.S.
STATE SECURITIES LAWS, (D) IN COMPLIANCE WITH ANOTHER EXEMPTION
FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND APPLICABLE
STATE SECURITIES LAWS, OR (E) UNDER AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE U.S. SECURITIES ACT, PROVIDED THAT IN THE CASE
OF TRANSFERS PURSUANT TO (C)(i) OR (D) ABOVE, A LEGAL OPINION OR
OTHER EVIDENCE, REASONABLY SATISFACTORY TO THE COMPANY, MUST FIRST
BE PROVIDED TO THE COMPANY AND THE COMPANY'S TRANSFER AGENT TO THE
EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE
U.S. SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS. DELIVERY
OF THIS CERTIFICATE MAY NOT CONSTITUTE GOOD DELIVERY" IN SETTLEMENT
OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.

 

THIS
WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON
BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A PERSON IN THE UNITED
STATES OR A U.S. PERSON UNLESS THIS WARRANT AND THE COMMON SHARES
ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT AND APPLICABLE STATE SECURITIES
LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS
AVAILABLE. "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY
REGULATION S UNDER THE U.S. SECURITIES ACT.

 

 

CUSIP
No. 72706K135

ISIN
No.

CA72706K1350

 

 

 

 

 

Warrant Certificate
Number: ●

Representing
●
Warrants to

 

purchase Common
shares

 

(as defined
below)

 

THIS CERTIFIES that, for value received,
the registered holder hereof, ●
(the "holder") is entitled
at any time at or before the Expiry Time (as defined below) to
acquire, subject to

 

 

 

 

adjustment
in certain events, the number of Common Shares ("Common Shares") of Planet 13 Holdings
Inc. (the "Company")
specified above, as presently constituted, by surrendering to
Odyssey Trust Company (the "Warrant
Agent") at its principal office in Calgary, Alberta, this
Warrant Certificate with the duly completed and executed Exercise
Form endorsed on the back of this Warrant Certificate, and
accompanied by payment of $2.85 per Common Share (the "Warrant Exercise Price") by certified
cheque, bank draft or money order in lawful money of Canada payable
to, or to the order of, the Company at par at the above-mentioned
office of the Warrant Agent. The holder of this Warrant Certificate
may purchase less than the number of Common Shares which he is
entitled to purchase on the exercise of the Warrants represented by
this Warrant Certificate, in which event a new Warrant Certificate
representing the Warrants not then exercised will be issued to the
holder.

 

The
Warrants evidenced under this Warrant Certificate are exercisable
on or before 5:00 p.m. (Toronto time) (the "Expiry Time") on July 3, 2022 (the
"Expiry Date"). After the
Expiry Time, Warrants evidenced hereby shall be deemed to be void
and of no further force or effect.

 

This
Warrant Certificate represents Warrants of the Company issued or
issuable under the provisions of a warrant indenture (which
indenture together with all other instruments supplemental or
ancillary thereto is herein referred to as the "Warrant Indenture") dated as of July 3,
2020, between the Company and the Warrant Agent, as may be amended
from time to time, which contains particulars of the rights of the
holders of the Warrants and the Company and of the Warrant Agent in
respect thereof and the terms and conditions upon which the
Warrants are issued and held, all to the same effect as if the
provisions of the Warrant Indenture were herein set forth, to all
of which the holder of this Warrant Certificate by acceptance
hereof assents. Unless otherwise defined herein, all capitalized
terms shall have the meanings ascribed to them in the Warrant
Indenture. A copy of the Warrant Indenture can be requested by
contacting the Warrant Agent. In
the event of any conflict between the provisions contained in this
Warrant Certificate and the provisions of the Warrant Indenture,
the provisions of the Warrant Indenture shall
prevail.

 

Upon
acceptance hereof, the holder hereof hereby expressly waives the
right to receive any fractional Common Shares upon the exercise
hereof in full or in part and further waives the right to receive
any cash or other consideration in lieu thereof. The Warrants
represented by this Warrant Certificate shall be deemed to have
been surrendered, and payment by certified cheque, bank draft or
money order shall be deemed to have been made only upon personal
delivery thereof or, if sent by post or other means of
transmission, upon actual receipt thereof by the Warrant Agent at
its office in the City of Calgary, Alberta.

 

Upon
due exercise of the Warrants represented by this Warrant
Certificate and payment of the Warrant Exercise Price, the Company
shall cause to be issued to the person(s) in whose name(s) the
Common Shares have been so subscribed for, the number of Common
Shares to be issued to such person(s) (provided that if the Common
Shares are to be issued to a person other than the registered
holder of this Warrant Certificate, the holder's signature on the
Exercise Form herein shall be guaranteed by a Schedule I Canadian
chartered bank or by a medallion signature guarantee from a member
of a recognized Signature Medallion Guarantee Program), and the
holder shall pay to the Company or the Warrant Agent all applicable
transfer or similar taxes and the Company shall not be required to
issue or deliver certificates evidencing the Common Shares unless
or until the holder shall have paid the Company or the Warrant
Agent the amount of such tax (or shall have satisfied the Company
that such tax has been paid or that no tax is due), and such
person(s) shall become a holder in respect of such Common Shares
with effect from the date of such exercise, and upon due surrender
of this Warrant Certificate, the Transfer Agent shall issue a
certificate(s) representing such Common Shares to be issued within
five Business Days after the exercise of the Warrants (or portion
thereof) represented hereby.

 

 

 

Neither
the Warrants represented by this Warrant Certificate nor the Common
Shares issuable upon exercise hereof have been or will be
registered under the United States Securities Act of 1933, as
amended (the “U.S. Securities
Act”), or any state securities laws. The Warrants
represented by this Warrant Certificate may not be exercised within
the United States or by, or for the account or benefit of, a U.S.
person or a person within the United States unless registered under
the U.S. Securities Act and any applicable state securities laws or
unless an exemption from such registration is available.
Certificates representing Common Shares issued in the United States
or to, or for the account or benefit of, U.S. persons will bear a
legend restricting the transfer and exercise of such securities
under applicable United States federal and state securities laws.
"United States" and "U.S. person" are as defined in Regulation S
under the U.S. Securities Act.

 

The
holder acknowledges that the Warrants represented by this Warrant
Certificate and the Common Shares issuable upon exercise hereof may
be offered, sold or otherwise transferred only in compliance with
all applicable securities laws.

 

No
transfer of any Warrant will be valid unless entered on the
register of transfers, upon surrender to the Warrant Agent of the
Warrant Certificate evidencing such Warrant, duly endorsed by, or
accompanied by a transfer form or other written instrument of
transfer in form satisfactory to the Warrant Agent executed by the
registered holder or his executors, administrators or other legal
representatives or his or their attorney duly appointed by an
instrument in writing in form and execution satisfactory to the
Warrant Agent. Subject to the provisions of the Warrant Indenture
and upon compliance with the reasonable requirements of the Warrant
Agent, Warrant Certificates may be exchanged for Warrants
Certificates entitling the holder thereof to acquire an equal
aggregate number of Common Shares subject to adjustment as provided
for in the Warrant Indenture. The Company and the Warrant Agent may
treat the registered holder of this Warrant Certificate for all
purposes as the absolute owner hereof. The holding of the Warrants
represented by this Warrant Certificate shall not constitute the
holder hereof a holder of Common Shares nor entitle him to any
right or interest in respect thereof except as herein and in the
Warrant Indenture expressly provided.

 

The
Warrant Indenture provides for adjustment in the number of Common
Shares to be delivered upon exercise of the right of purchase
hereby granted and to the Warrant Exercise Price in certain events
therein set forth.

 

The
Warrant Indenture contains provisions making binding upon all
holders of Warrants outstanding thereunder resolutions passed at
meetings of such holders held in accordance with such provisions
and instruments in writing signed by the Warrantholders entitled to
acquire upon the exercise of the Warrants a specified percentage of
the Common Shares.

 

The
Warrants and the Warrant Indenture shall be governed by and
performed, construed and enforced in accordance with the laws of
the Province of Ontario and the federal laws of Canada applicable
therein and shall be treated in all respects as Ontario contracts.
Time shall be of the essence hereof and of the Warrant
Indenture.

 

The
Company may from time to time at any time prior to the Expiry Time
purchase any of the Warrants by private agreement or
otherwise.

	

This
Warrant Certificate shall not be valid for any purpose until it has
been certified by or on behalf of the
Warrant Agent for the time being under the Warrant Indenture. All
dollar amounts herein are expressed in the lawful money of
Canada.

(Signature page follows)

 

 

 

 

IN WITNESS WHEREOF the Company has
caused this Warrant Certificate to be signed by its duly
authorized officer as of this _________ day of ________,
20     
 

 

	
 

	
PLANET 13 HOLDINGS
INC.

	
 

	
 

	
 

	
 

	
 

	

	
By:  

	

	
 

	
 

	
 

	
Authorized Signing
Officer

 

Countersigned this
_______ day

 

of ______,
20

 

	
 

	
 

	
 

	

	
 

	
 

	
ODYSSEY
TRUST COMPANY

	
 

	
 

	
 

	
 

	
 

	

	
By:  

	

	
 

	
 

	
 

	
Authorized Signing
Officer

 

 

	
 

 

 

 

 

EXERCISE FORM

 

TO:       

Planet 13 Holdings
Inc.

c/o
Odyssey Trust Company

Suite
1230, 300 5th Avenue
SW

Calgary,
Alberta

T2P
3C4

 

The
undersigned holder of the within Warrants hereby irrevocably
exercises the right of such holder to be issued and hereby
subscribes
for           
Common Shares of Planet 13 Holdings Inc. (the "Company") at the Warrant Exercise Price
referred to in the attached Warrant Certificate on the terms and
conditions set forth in such certificate and the Warrant Indenture
and encloses herewith a certified cheque, bank draft or money order
payable at par in the City of Calgary, in the Province of Alberta
to the order of the Company in payment in full of the subscription
price of the Common Shares hereby subscribed for.

 

Unless
otherwise defined herein, all capitalized terms shall have the
meanings ascribed to them in the warrant indenture between the
Company and Odyssey Trust Company dated July 3, 2020.

 

(Please
check the ONE box
applicable):

 

☐            

1.The undersigned
certifies that it (i) is not in the United States and is not a
"U.S.

person", within the
meaning of Regulation S under the United States Securities Act of
1933, as amended (the "U.S.
Securities Act"), (ii) is not exercising this Warrant for
the account or benefit of any U.S. Person or person in the United
States, (iii) did not execute or deliver this Exercise Form within
the United States and (iv) has in all other aspects complied with
the terms of Regulation S under the U.S. Securities
Act.

 

☐            

2.The undersigned
certifies that it (i) purchased the Warrants as a part of the
Units

in the
Offering; (ii) is exercising the Warrants solely for its own
account or for the benefit of a U.S. Person or a person in the
United States for whose account such holder acquired the Warrants
as a part of the Units in the Offering and for whose account such
holders exercises sole investment discretion; (iii) was and is, and
any beneficial purchaser for whose account such holder acquired the
Warrant and is exercising the Warrants was and is, a Qualified
Institutional Buyer both on the date the Units were purchased in
the Offering and on the Exercise Date; and (iv) the representations
and warranties made by the holder or any beneficial purchaser, as
the case may be, to the Company in such holder’s QIB Letter
remain true and correct on the Exercise Date.

 

☐            

3.The undersigned
is delivering a written opinion of United States legal counsel
or

 

evidence
satisfactory to the Company to the effect that the Warrant and the
Common Shares to be delivered upon exercise hereof have been
registered under the U.S. Securities Act or are exempt from the
registration requirements of the U.S. Securities Act and applicable
state securities laws.

 

It is
understood that the Company may require evidence to verify the
foregoing representations.

 

The
undersigned hereby directs that the said Common Shares be issued as
follows:

 

	

NAME(S)
IN FULL

	

ADDRESS(ES)

	

NUMBER OFCOMMON SHARES

 

 

 

 

Please
print full name in which certificates representing the Common
Shares are to be issued. If any Common Shares are to be issued to a
person or persons other than the registered holder, the registered
holder must pay to the Warrant Agent all eligible transfer taxes or
other government charges, if any, and the Transfer Form must be
duly executed.

 

Once
completed and executed, this Exercise Form must be mailed or
delivered to Odyssey Trust Company, c/o Corporate
Trust.

 

DATED
this            

day
of                                 

,              

.

 

)

 

)

 

 )                                                                             

Witness                                                                    

) (Signature of
Warrantholder, to be the same as

 

)
appears on the face of this Warrant Certificate)

)

 

)   

 

Name of
Registered Warrantholder

 

[        

] Please check this
box if the securities are to be delivered at the office where these
Warrants are surrendered, failing which the securities will be
mailed.

 

NOTES:

 

1.

Certificates will
not be registered or delivered to an address in the United States
unless Box 2 or Box 3 above is checked.

 

2.

If Box 3 above is
checked, holders are encouraged to contact the Company in advance
to determine that the legal opinion or evidence tendered in
connection with exercise will be satisfactory in form and substance
to the Company.

 

 

 

TRANSFER FORM

 

TO:       

Planet 13 Holdings
Inc.

c/o
Odyssey Trust Company

Suite
1230, 300 5th Avenue
SW

Calgary,
Alberta

T2P
3C4

 

FOR VALUE RECEIVED, the undersigned
transferor hereby sells, assigns and transfers unto

 

(Transferee)

 

 

(Address)

 

 

(Social
Insurance Number)

 

                           
of the Warrants registered in the name of the undersigned
transferor represented by the Warrant Certificate.

 

In the
case of a Warrant Certificate that contains a U.S. restrictive
legend, the undersigned hereby represents, warrants and certifies
that (one (only) of the following must be checked):

 

☐

(A) the transfer is
being made only to the Company; or

 

☐

(B) the transfer is
being made outside the United States in accordance with Regulation
S under the United States Securities Act of 1933, as amended (the
“U.S. Securities
Act”), and in compliance with any applicable local
securities laws and regulations and the holder has provided
herewith the Declaration for Removal of Legend attached as Schedule
"B" to the Warrant Indenture; or

 

☐

(C) the transfer is
being made pursuant to the exemption from the registration
requirements of the U.S. Securities Act provided by (i) Rule 144 or
(ii) Rule 144A thereunder, and in either case in accordance with
applicable state securities laws; or

 

☐

(D) the transfer is
being made within the United States or to, or for the account or
benefit of, U.S. persons, in accordance with a transaction that
does not require registration under the U.S. Securities Act or any
applicable state securities laws and the undersigned has furnished
to the Company and the Warrant Agent an opinion of counsel of
recognized standing in form and substance reasonably satisfactory
to the Company to such effect.

 

In the
case of a transfer in accordance with (C)(i) or (D) above, the
Company and the Warrant Agent shall first have received an opinion
of counsel of recognized standing in form and substance reasonably
satisfactory to the Company, to such effect.

 

 

In the
case of a Warrant Certificate that does not contain a U.S.
restrictive legend, if the proposed transfer is to, or for the
account or benefit of a U.S. person or to a person in the United
States, the undersigned hereby represents, warrants and certifies
that the transfer of the Warrants is being completed pursuant to an
exemption from the registration requirements of the U.S. Securities
Act and any applicable state securities laws, in which case the
undersigned has furnished to the Company and the Warrant Agent an
opinion of counsel of recognized standing in form and substance
reasonably satisfactory to the Company to such effect.

 

"United
States" and "U.S. Person" are as defined by Regulation S under the
U.S. Securities Act.

 

DATED
this  

day
of                                   

,              

.

 

	

SPACE FOR GUARANTEES)

	
 

	
 

	
 

	

OF SIGNATURES (BELOW

	
 

	

)

	
 

	
 

	
 

	

)

	
 

	
 

	
 

	

)

	

Signature
of Transferor

	
 

	
 

	

)

	
 

	
 

	
 

	

)

	
 

	
 

	
 

	

)

	
 

	

Guarantor's
Signature/Stamp

	
 

	

)

	

Name of
Transferor

 

REASON
FOR TRANSFER – For US Residents only (where the individual(s)
or corporation receiving the securities is a US resident). Please
select only one (see instructions below).

 

 

☐ 
Gift                                              

☐
Estate 

☐
Private Sale

☐
Other (or no change

in
ownership)

 

Date
of Event (Date of gift, death or sale):

Value
per Warrant on the date of event:

 

 
	

	
 

	
 

	
 

	
 

	
 

	

CAD OR

	
 

 

 

   

  
USD

NOTES:

 

1.

The signature to
this transfer must correspond with the name as recorded on the
Warrants in every particular without alteration or enlargement or
any change whatever. The signature of the person executing this
transfer must be guaranteed by a Schedule I Canadian chartered
bank, or by a medallion signature guarantee from a member of a
recognized Signature Medallion Guarantee Program.

 

2.

Warrants shall only
be transferable in accordance with the warrant indenture between
Planet 13 Holdings Inc. and Odyssey Trust Company dated July 3,
2020 (the "Warrant
Indenture"),applicable laws and the rules and policies of
any applicable stock exchange. Without limiting the foregoing, if
the Warrant Certificate bears a legend restricting the transfer of
the Warrants except pursuant to an exemption from registration
under the U.S. Securities Act, and applicable state securities
laws, this Transfer Form must be accompanied by a properly
completed and executed declaration for removal of legend in the
form attached as Schedule "B" to the Warrant
Indenture.

 

CERTAIN
REQUIREMENTS RELATING TO TRANSFERS – READ
CAREFULLY

 

The
signature(s) of the transferor(s) must correspond with the name(s)
as written upon the face of this certificate(s), in every
particular, without alteration or enlargement, or any change
whatsoever. All securityholders or a legally authorized
representative must sign this form. The signature(s) on this form
must be guaranteed in accordance with the transfer agent's then
current guidelines and requirements at the time of transfer.
Notarized or witnessed signatures are not acceptable as guaranteed
signatures. As at the time of closing, you may choose one of the
following methods (although subject to change in accordance with
industry practice and standards):

 

●

Canada and the USA: A Medallion
Signature Guarantee obtained from a member of an acceptable
Medallion Signature Guarantee Program (STAMP, SEMP, NYSE, MSP).
Many commercial banks, savings banks, credit unions, and all broker
dealers participate in a Medallion Signature Guarantee Program. The
Guarantor must affix a stamp bearing the actual words "Medallion
Guaranteed", with the correct prefix covering the face value of the
certificate.

 

●

Canada: A Signature Guarantee obtained
from an authorized officer of the Royal Bank of Canada, Scotia Bank
or TD Canada Trust. The Guarantor must affix a stamp bearing the
actual words "Signature Guaranteed", sign and print their full name
and alpha numeric signing number. Signature Guarantees are not
accepted from Treasury Branches, Credit Unions or Caisse Populaires
unless they are members of a Medallion Signature Guarantee Program.
For corporate holders, corporate signing resolutions, including
certificate of incumbency, are also required to accompany the
transfer, unless there is a "Signature & Authority to Sign
Guarantee" Stamp affixed to the transfer (as opposed to a
"Signature Guaranteed" Stamp) obtained from an authorized officer
of the Royal Bank of Canada, Scotia Bank or TD Canada Trust or a
Medallion Signature Guarantee with the correct prefix covering the
face value of the certificate.

 

●

Outside North America: For holders
located outside North America, present the certificates(s) and/or
document(s) that require a guarantee to a local financial
institution that has a corresponding Canadian or American affiliate
which is a member of an acceptable Medallion Signature Guarantee
Program. The corresponding affiliate will arrange for the signature
to be over-guaranteed.

 

 

 

 

OR

 

The
signature(s) of the transferor(s) must correspond with the name(s)
as written upon the face of this certificate(s), in every
particular, without alteration or enlargement, or any change
whatsoever. The signature(s) on this form must be guaranteed by an
authorized officer of Royal Bank of Canada, Scotia Bank or TD
Canada Trust whose sample signature(s) are on file with the
transfer agent, or by a member of an acceptable Medallion Signature
Guarantee Program (STAMP, SEMP, NYSE, MSP). Notarized or witnessed
signatures are not acceptable as guaranteed signatures. The
Guarantor must affix a stamp bearing the actual words: "SIGNATURE
GUARANTEED", "MEDALLION GUARANTEED" OR "SIGNATURE & AUTHORITY
TO SIGN GUARANTEE", all in accordance with the transfer agent's
then current guidelines and
requirements at the time of transfer. For corporate holders,
corporate signing resolutions, including certificate of incumbency,
will also be required to accompany the transfer unless there is a
"SIGNATURE & AUTHORITY TO SIGN GUARANTEE" Stamp affixed to the
Form of Transfer obtained from an authorized officer of the Royal
Bank of Canada, Scotia Bank or TD Canada Trust or a "MEDALLION
GUARANTEED" Stamp affixed to the Form of Transfer, with the correct
prefix covering the face value of the
certificate.

 

REASON FOR TRANSFER – FOR US RESIDENTS ONLY

 

Consistent with US
IRS regulations, Odyssey Trust Company is required to request cost
basis information from US securityholders. Please indicate the
reason for requesting the transfer as well as the date of event
relating to the reason. The event date is not the day in which the
transfer is finalized, but rather the date of the event which led
to the transfer request (i.e. date of gift, date of death of the
securityholder, or the date the private sale took
place).

 

 

 

SCHEDULE “B”

 

FORM OF DECLARATION FOR REMOVAL OF LEGEND

 

TO:     

Planet 13 Holdings
Inc.

c/o
Odyssey Trust Company

Suite
1230, 300 5th Avenue
SW

Calgary,
Alberta

T2P
3C4

 

The
undersigned (a) acknowledges that the sale of the securities of
Planet 13 Holdings Inc. (the "Company") to which this declaration
relates is being made in reliance on Rule 904 of Regulation S
("Regulation S") under the
United States Securities Act of 1933, as amended (the "U.S. Securities Act") and (b) certifies
that (1) it is not an affiliate of the Company (as defined in Rule
405 under the U.S. Securities Act), (2) the offer of such
securities was not made to a person in the United States and either
(A) at the time the buy order was originated, the buyer was outside
the United States, or the seller and any person acting on its
behalf reasonably believe that the buyer was outside the United
States, or (B) the transaction was executed on or through the
facilities of the Canadian Securities Exchange and neither the
seller nor any person acting on its behalf knows that the
transaction has been prearranged with a buyer in the United States,
(3) neither the seller nor any affiliate of the seller nor any
person acting on any of their behalf has engaged or will engage in
any directed selling efforts in the United States in connection
with the offer and sale of such securities, (4) the sale is bona
fide and not for the purpose of "washing off" the resale
restrictions imposed because the securities are "restricted
securities" (as such term is defined in Rule 144(a)(3) under the
U.S. Securities Act), (5) the seller does not intend to replace the
securities sold in reliance on Rule 904 of the U.S. Securities Act
with fungible unrestricted securities, and (6) the sale was not a
transaction, or part of a series of transactions which, although in
technical compliance with Regulation S, is part of a plan or scheme
to evade the registration provisions of the U.S. Securities Act.
Terms used herein have the meanings given to them by Regulation
S.

 

Dated:                                                                        

By:                                                      

 

Name:

 

Title:

 

Affirmation By Seller's Broker-Dealer (required for sales in
accordance with Section (b)(2)(B)

 

above)

 

We have
read the foregoing representations of our customer, 
                                                  
(the "Seller") dated                                                   
, with regard to our sale, for such Seller's account, of the
securities of the Company described therein, and on behalf of
ourselves we certify and affirm that (A) we have no knowledge that
the transaction had been prearranged with a buyer in the United
States, (B) the transaction was executed on or through the
facilities of designated offshore securities market, (C) neither
we, nor any person acting on our behalf, engaged in any directed
selling efforts in connection with the offer and sale of such
securities, and (D) no selling concession, fee or other
remuneration is being paid to us in connection with this offer and
sale other than the usual and customary broker's commission that
would be received by a person executing such transaction as agent.
Terms used herein have the meanings given to them by Regulation
S.

 

Name of
Firm

 

By: 
          
    
                                  

 

Authorized
officer

 

Date:

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