Document:

Exhibit 4.2

CRAILAR TECHNOLOGIES INC.

SECURED CONVERTIBLE DEBENTURE SUBSCRIPTION AGREEMENT

TO:                       CRAILAR TECHNOLOGIES INC. (the "Corporation").

The undersigned (the "Subscriber") hereby irrevocably subscribes for a convertible debenture of the Corporation (the "Debenture") having an aggregate principal amount set forth below (the "Principal Amount") and bearing interest at a rate of 10.0% per annum, maturing on three years from the date of issue of the Debentures (the "Closing Date"), and convertible, at any time before maturity, at the option of the holder, into common shares of the Corporation (each, a "Common Share") at CAD$2.00 per Common Share, all upon and subject to the terms and conditions set forth in Schedule "A" attached hereto.  Upon regulatory approval and on the Closing Date the Subscriber shall receive 800 transferable warrants for each CAD$1,000 Principal Amount (each, a "Warrant") with each Warrant entitling the holder thereof to acquire one additional common share of the Company (each, a "Warrant Share") at an exercise price of CAD$1.25 per Warrant Share for a period of three years from the Closing Date.

	

Aggregate Principal Amount: CAD$_____________

(Increments of CAD$1,000 only)
	 	

               Register the Debenture as follows:

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(Name)

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(Account reference, if applicable)

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(Address)

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(Address)

	 	 
	

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(Name of Subscriber - please print)

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(Authorized Signature of Subscriber)

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(Official Capacity or Title if not an individual)

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(Please print the name of the individual whose signature appears above if different from the name of the Subscriber)

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(Subscriber's Address)

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(Subscriber's Address)

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(Telephone Number)                (E-Mail Address)

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(S.I.N.)

	

	

	
                Deliver the Debenture as follows:

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(Name)

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(Contact Name)

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(Address)

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(Address)

__________

ACCEPTANCE

The Corporation hereby accepts the subscription as set forth above on the terms and conditions contained in this Subscription Agreement.

	

Accepted and agreed to by the Corporation as of the _________ day of ___________________, 2013.
	
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CRAILAR TECHNOLOGIES INC.

Per:       -------------------------------------------------

                         Authorized Signatory

__________

 

 

 

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INSTRUCTIONS FOR COMPLETING THIS SUBSCRIPTION AGREEMENT

This document contains a number of forms required by securities legislation and policy, some of which you must complete and others not depending on several factors.  Please read the following guide carefully as it will assist you in completing this Subscription Agreement correctly. 

All Subscribers:

	Enter the Principal Amount of the Debenture and your name, address and social insurance or tax number, and sign where indicated on the first page.

	Complete the information required under "Information Regarding the Subscriber" on page 4.

	All Subscribers who are not individuals must complete Schedule "B" - "Corporate Placee Registration Form", unless this form is already on file with the TSX Venture Exchange (the "Exchange") and there is no change in the information already filed.

Canadian Subscribers and Subscribers Outside the United States

	If you are an "Accredited Investor" as defined in National Instrument 45-106 (generally a high net worth or high income investor), you must complete and sign Schedule "C" - "Accredited Investor Certificate".

	Subscribers resident in a Province of Canada other than Ontario and Saskatchewan, and who are not "Accredited Investors" but who are officers, directors, employees, family, close friends or business associates thereof, must complete and sign Schedule "D" - "Statement of Friends, Family and Business Associates".

	Subscribers resident in Ontario, and who are not "Accredited Investors" but who are a founder or control person of the Corporation or are a spouse, parent, brother, sister, grandparent, grandchild or child of an executive officer, director or founder of the Corporation, must complete and sign Schedule "E" - "Statement of Ontario Founders, Control Persons and Family".

	Subscribers resident in Saskatchewan, and who are not "Accredited Investors" but who are a close personal friend or close business associate of a founder, director, executive officer or control person of the Corporation, must complete and sign Schedule "F" - "Form 45-106F5 Risk Acknowledgement for Saskatchewan Close Personal Friends and Close Business Associates".

Subscribers in the United States

If you are a U.S. Purchaser (as defined in section 7 of Schedule "A" - Terms of Subscription Agreement) complete and sign Schedule "C" - "Accredited Investor Certificate" and Schedule "G" - "Certification of U.S. Purchaser".

__________

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INFORMATION REGARDING THE SUBSCRIBER

Please check the appropriate box (and complete the required information, if applicable) in each section:

1.          Security Holdings. Prior to giving effect to the securities being subscribed for under this Subscription Agreement, the Subscriber and all persons acting jointly and in concert with the Subscriber currently own, directly or indirectly, or exercise control or direction over (provide additional detail as applicable):

	 	
£

	
_________________ common shares of Crailar Technologies Inc. (the "Corporation") and/or the following other kinds of shares and convertible securities (including but not limited to convertible debt, warrants and options) entitling the Subscriber to acquire additional common shares or other kinds of shares of the Corporation:

____________________________________________________________________________

____________________________________________________________________________

	 	
£

	
No shares of the Corporation or securities convertible into shares of the Corporation.

2.          Insider Status. The Subscriber either:

	 	
£

	
Is an "Insider" of the Corporation as defined in the Policies of the Exchange by virtue of being:

	 	 	
(a) 
	
a director or senior officer of the Corporation;

	 	 	
(b) 
	
a director or senior officer of a company that is an Insider or subsidiary of the Corporation;

	 	 	
(c) 
	
a person that beneficially owns or controls, directly or indirectly, voting shares of the Corporation carrying more than 10% of the voting rights attached to all the Corporation's outstanding voting shares; or

	 	 	
(d) 
	
the Corporation itself if it holds any of its own securities.

	 	
£

	
Is not an Insider of the Corporation.

3.         Pro Group Status. The Subscriber either:

	 	
£

	
Is a Member of the "Pro Group", which is defined in the Rules of the Exchange as either individually or as a group:

	 	 	
1. 
	
the member (i.e. a member of the Exchange under the Exchange requirements);

	 	 	
2. 
	
employees of the member;

	 	 	
3. 
	
partners, officers and directors of the member;

	 	 	
4. 
	
affiliates of the member;

	 	 	
5. 
	
such other persons as the Exchange may determine; and

	 	 	
6. 
	
associates of any parties referred to in paragraphs 1 through 5 above.

	 	
£

	
Is not a member of the Pro Group.

4.         Registrant Status. The Subscriber either:

	 	
£

	
Is a person registered or required to be registered under the Securities Act (British Columbia).

	 	
£

	
Is not a person registered or required to be registered under the Securities Act (British Columbia).

__________

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Schedule "A"

TERMS OF SUBSCRIPTION AGREEMENT

1.        Subject to the approval and consent (the "Approval") of the Exchange and the acceptance of this subscription by the Corporation, the Subscriber hereby irrevocably subscribes for and agrees to purchase from the Corporation, subject to the terms and conditions set forth herein, the Debenture in the Principal Amount set out above (the "Subscription Price") which is tendered herewith.  Subject to the terms hereof, this subscription agreement (the "Subscription Agreement") will be effective when executed by all the parties to it.  This subscription is part of an offering by the Corporation of Debentures with principal amounts, totalling in the aggregate, of up to CAD$5,000,000 (the "Offering").

2.        The Subscriber and the Corporation acknowledge and agree that the Debenture will be duly and validly created and issued pursuant to a trust indenture (the "Indenture") to be entered into between the Corporation and Computershare Trust Company of Canada (the "Trustee"), as trustee, to be dated the Closing Date.  The Indenture will govern the terms of issue of the Debenture and the conversion of the same and shall include the following terms: 
(a)        the Debenture will bear interest from the Closing Date at a rate of 10.0% per annum calculated and payable semi-annually in arrears on March 31  and September 30 in each year commencing September 30, 2013.  The September 30, 2013 interest payment will represent interest for the period commencing on the Closing Date;

(b)        repayment of the Principal Amount on the Debenture, together with interest thereon, will be made on or prior to 5:00 p.m. (Vancouver time) on the date that is three years from the Closing Date (the "Maturity Date");

(c)        upon Approval and the closing of the Offering, the Subscriber shall receive 800 transferable Warrants for each CAD$1,000 of Principal Amount tendered with each Warrant entitling the holder thereof to acquire one Warrant Share at an exercise price of CAD$1.25 per Warrant Share for a period of three years from the Closing Date;

(d)        the Debenture will be a direct obligation of the Corporation and will be secured by a charge on certain specific assets (the "Assets") of the Corporation and Crailar Inc. ("Crailar US"), a wholly owned subsidiary of the Corporation, located in South Carolina, having an initial cost/value of approximately CAD$5,000,000.  The Debentures will rank in priority to any other obligations of the Corporation to the extent secured and otherwise will rank subordinate to all present and future senior indebtedness of the Corporation and will rank pari-passu with each other series of Debentures issued under this Offering and, except as prescribed by law, with all other existing and future unsecured indebtedness of the Corporation;

(e)        the Principal Amount on the Debenture is convertible into Common Shares at the option of the Subscriber, in whole or in part, at any time following the Closing Date prior to the close of business on the earlier of: (i) the Maturity Date, and (ii) the business day immediately preceding the Redemption Date (defined below), as applicable, at a conversion price of CAD$2.00 per Common Share (the "Conversion Price"), being a conversion rate of 500 Common Shares per CAD$1,000 Principal Amount of the Debenture subject to adjustment in certain events set out in the Indenture (the "Conversion Rate").  Upon conversion of the entire Principal Amount of the Debenture, the holder of the Debenture will receive any accrued and unpaid interest thereon from and including the period of the last interest payment date on the Debenture prior to the date of conversion to the date that is one business day prior to the date of conversion (the "Date of Conversion").  If a holder surrenders a Debenture for conversion on an interest payment date or during the five preceding business days, the person or persons entitled to receive Common Shares in respect of the Debenture so surrendered for conversion shall not become a holder or holders of record of such Common Shares until the business day following such interest payment date.  No fractional Common Shares will be issued, and holders will receive a cash payment in satisfaction of any fractional interest based on the volume-weighted average trading price of the Common Shares on the Exchange for the 20 consecutive trading days ending on the fifth trading day preceding the Date of Conversion, provided, however, that the Corporation shall not be required to make any payment of less than CAD$5.00;

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(f)        if the Corporation completes an aggregate of CAD$20,000,000 or more in any equity financing(s) between the Closing Date and the Maturity Date, the Company shall, subject to providing not less than 60 days' prior notice to each then Debenture holder, redeem the Debentures, in whole, for cash at par plus accrued and unpaid interest on the Principal Amount repaid to the date of prepayment (the "Redemption Date", and such requirement to redeem being the "Mandatory Redemption").  During the notice period of the Mandatory Redemption all Debenture holders will be entitled to exercise their right of Conversion at the Conversion Price in accordance with subsection 2(e) above;

(g)        the Corporation may at its option, at any time on or after two years from the Closing Date, redeem in whole or in part from time to time the Principal Amount of the Debenture without penalty at a redemption price equal to the Principal Amount plus accrued and unpaid interest on the Principal Amount repaid to the Redemption Date.  The Corporation will be required to provide the holder of the Debenture not more than 60 and not less than 30 days' notice of the Redemption Date and the holder will have the right to accept the repayment or convert the Principal Amount at any time prior to the Redemption Date in accordance with subsection 2(e) above;

(h)        the Conversion Rate will be subject to standard anti-dilution provisions, including an adjustment to the Conversion Rate in certain events including, without limitation, the subdivision or consolidation of the outstanding Common Shares, the issue of Common Shares or securities convertible into Common Shares by way of stock dividend or distribution, a dividend or distribution paid to all or substantially all of the holders of Common Shares, the issue of rights, options or warrants to all or substantially all of the holders of Common Shares in certain circumstances, and the distribution to all or substantially all of the holders of Common Shares of any other class of shares, rights, options or warrants, evidences of indebtedness or assets.  The Conversion Rate will also be subject to standard anti-dilution adjustments upon, inter alia, share consolidations, share splits, spin-off events, rights issues and reorganizations;

(i)        if the Corporation is required to withhold or deduct any amount for or on account of Canadian taxes from any payment made under or with respect to the Debenture, the Corporation, subject to certain exceptions as set out in the Indenture, will pay to each holder as additional interest such additional amounts (the "Additional Amounts") as may be necessary so that the net amount received by the holder after such withholding or deduction (and after deducting any Canadian taxes on such Additional Amounts) will not be less than the amount the holder would have received if such Canadian taxes had not been withheld or deducted; 

(j)        the Corporation may purchase Debentures for cancellation by tender or by private contract at any time subject to regulatory requirements; and

(k)        the Indenture shall otherwise be in such form and contain such terms as shall be approved by the Corporation and the Trustee.

3.        The Subscriber, acknowledges that the offer, sale and issuance of the Debenture as contemplated by this Subscription Agreement is subject to, among other things, the following conditions being fulfilled or performed on or before 5 p.m. (Vancouver time) on the day of completing this Subscription as the Corporation may determine (the "Closing Time"):
(a)        the Subscriber delivering to the Corporation not later than the Closing Time:

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(i)        one fully completed and duly executed copy of this Subscription Agreement, including the applicable Schedules and all other documentation contemplated herein;

(ii)       a certified cheque, bank draft or evidence of completed wire transfer, payable to the Corporation, or such other method of payment acceptable to the Corporation, representing the aggregate Subscription Price payable for the Debenture subscribed for by the Subscriber;

(b)        the offer, sale and issuance of the Debenture being exempt from the prospectus and registration requirements of Applicable Securities Laws.  As used in this Agreement, "Applicable Securities Laws" means any and all securities laws including, statutes, rules, regulations, by-laws, policies, guidelines, orders, decisions, rulings and awards, applicable in the jurisdiction in which the Debenture will be offered, sold and issued hereunder;

(c)        the Subscriber executing and delivering to the Corporation all reports, undertakings or other documents required under Applicable Securities Laws in connection with the offer, sale and issuance of the Debenture to the Subscriber;

(d)        the Exchange approving the issuance of the Debenture and the Warrants and the conditional listing of the Common Shares issuable upon conversion of the Debenture and the Warrant Shares issuable upon exercise of the Warrants;

(e)        the representations and warranties of the Corporation and the Subscriber having been true and correct as of the date hereof and being true and correct at the Closing Time;

(f)        there having been no material adverse change in the business, assets or financial condition of the Corporation since the execution of this Subscription Agreement; and

(g)        all documentation relating to the offer, sale and issuance of the Debenture and Warrants being in form and substance satisfactory to the Corporation.

4.        The Subscriber acknowledges and agrees that:
(a)        the Subscriber is acquiring the Debenture and Warrants pursuant to an exemption from the prospectus requirements of the Applicable Securities Laws in all jurisdictions relevant to this Subscription Agreement, and, as a consequence, the Subscriber will not be entitled to use most of the civil remedies available under the Applicable Securities Laws and the Subscriber will not receive information that would otherwise be required to be provided to the Subscriber pursuant to the Applicable Securities Laws;

(b)        any transfer, resale or other subsequent disposition of the Debenture, the Warrants, the Common Shares issued upon conversion of the Debenture, or the Warrant Shares issuable upon exercise of the Warrants (collectively, the "Securities") will be subject to restrictions contained in the Applicable Securities Laws applicable to the holder of the Securities or to the proposed transferee, including, but not limited to, resale restrictions under the Securities Act (British Columbia), resale restrictions under the U.S. Securities Act (as defined below) and applicable state securities laws, and under the policies of the Exchange, and legends may be placed on the certificates representing the Securities noting the applicable restrictions substantially in the following form and with the necessary information inserted:
(i)        with respect to the Debentures, the Warrants and any Common Shares and Warrant Shares issued on or before four months and a day from the Closing Date, as well as all certificates issued in exchange for or in substitution of the foregoing:

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"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [insert the date that is four months and a day from the Closing Date]."

and

"WITHOUT PRIOR WRITTEN APPROVAL OF TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL [insert the date that is four months and a day from the Closing Date].";

(ii)       with respect to the Debenture and the Warrants, in addition to the legends set forth in section 4(b)(i) above, as well as all certificates issued in exchange for or in substitution of the foregoing, until such time as is no longer required under the applicable requirements of the U.S. Securities Act or applicable state securities laws:
A.         the following legend with respect to Debentures or Warrants issued in the United States or to U.S. Persons (as defined below):

"THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON CONVERSION/exercise THEREOF HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSEFERRED EXPECT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS."; or

B.         the following legend with respect to Debentures or Warrants issued outside the United States to non-U.S. Persons:

"THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON CONVERSION/exercise THEREOF HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSEFERRED EXPECT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT."; and

(iii)      with respect to any Common Shares issued upon conversion of the Debenture and any Warrant Shares issued upon exercise of Warrants, in addition to the legends set forth in section 4(b)(i) above, as well as all certificates issued in exchange for or in substitution of the foregoing, until such time as is no longer required under the applicable requirements of the U.S. Securities Act or applicable state securities laws:

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A.         the following legend with respect to any Common Shares or Warrant Shares issued in the United States or to U.S. Persons:

"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSEFERRED EXPECT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS."; or

B.         the following legend with respect to Common Shares or Warrant Shares issued outside the United States to non-U.S. Persons:

"THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSEFERRED EXPECT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  HEDGING TRANSACTIONS INVOLVING THE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE U.S. SECURITIES ACT.";

(c)        It consents to the Corporation making a notation on its records or giving instructions to any transfer agent of the Corporation in order to implement the restrictions on transfer described herein;

(d)        It understands and acknowledges that the Corporation is not currently, nor is it obligated to become, a "foreign issuer" within the meaning of Regulation S (as defined below);

(e)        It acknowledges that the Debenture, Warrants, the Common Shares issued upon conversion of the Debenture and the Warrant Shares issued upon the exercise of the Warrants will be "restricted securities", as such term is defined in Rule 144(a)(3) under the U.S. Securities Act, and may not be offered, sold, pledged, or otherwise transferred, directly or indirectly, without prior registration under the U.S. Securities Act and applicable state securities laws, and it agrees that if it decides to offer, sell, pledge or otherwise transfer, directly or indirectly, the Securities absent such registration, it will not offer, sell, pledge or otherwise transfer, directly or indirectly, the Securities, directly or indirectly, except:
(i)        to the Corporation;

(ii)       outside the United States in an "offshore transaction" meeting the requirements of Rule 904 of Regulation S under the U.S. Securities Act, if available, and in compliance with applicable local laws and regulations;

(iii)      in compliance with the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder, if available, and in accordance with any applicable state securities or "blue sky" laws; or

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(iv)       in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and regulations governing the offer and sale of securities, 

and, in the case of each of (iii) and (iv) it has prior to such sale furnished to the Corporation an opinion of counsel in form and substance reasonably satisfactory to the Corporation stating that such transaction is exempt from registration under applicable securities laws and that the legend referred to in paragraph (b)(ii) and/or (iii) above may be removed.

(f)        the Subscriber has been advised by the Corporation that the Subscriber should consult its own legal adviser before disposing of all or any of the Securities to avoid breach of the Applicable Securities Laws;

(g)        the Subscriber has knowledge in financial and business affairs, is capable of evaluating the merits and risks of an investment in the Securities and the Subscriber has not received an offering memorandum or similar disclosure documents;

(h)        the Subscriber has been given an adequate opportunity to ask questions of, and receive answers from, the officers of the Corporation concerning the sale of the Securities and to obtain such additional information as the Subscriber deems necessary in order to evaluate an investment in the Corporation and the Corporation has provided all information requested by the Subscriber;

(i)        neither the British Columbia Securities Commission nor any other securities commission or similar regulatory authority has reviewed or passed on the merits of an investment in the Securities;

(j)        finder's fees or other commissions may be paid by the Corporation in connection with this Subscription Agreement and others forming part of the Offering; 

(k)        none of the Securities have been registered under the U.S. Securities Act or under any state securities or "blue sky" laws of any state of the United States, and, unless so registered, may not be offered or sold in the United States or to U.S. Persons, as that term is defined in Regulation S, except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the U.S. Securities Act; 

(l)        it has relied solely upon publicly available information relating to the Corporation and not upon any verbal or written representation as to fact or otherwise made by or on behalf of the Corporation;

(m)        the Corporation's counsel is acting as counsel to the Corporation and not as counsel to the Subscriber (or any person on whose behalf the Subscriber is contracting); and

(n)        it is not acting jointly or in concert with any other subscriber for Securities for the purposes of acquisition of the Securities.

5.        The Subscriber hereby covenants, represents and warrants to and with the Corporation (which covenants, representations and warranties are true and correct as at the date hereof and acknowledges and confirms that the Corporation is relying on such representations and warranties in connection with the offer, sale and issuance of the Securities to the Subscriber) that:
(a)        the Subscriber is familiar with the aims and objectives of the Corporation and the proposed use of the proceeds received by the Corporation from the sale of the Securities;

(b)        the Subscriber has the legal capacity and competence to enter into and execute this Subscription Agreement and to take all actions required pursuant hereto and, if the Subscriber is a corporation, it is duly incorporated and validly subsisting under the laws of its jurisdiction of incorporation and all necessary approvals by its directors, shareholders and others have been obtained to authorize execution and performance of this Subscription Agreement on behalf of the Subscriber;

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(c)        the entering into of this Subscription Agreement and the transactions contemplated hereby do not result in the violation of any of the terms and provisions of the constating documents of, the Subscriber or of any agreement, written or oral, to which the Subscriber is a party or by which the Subscriber is bound;

(d)        the Subscriber has duly executed and delivered this Subscription Agreement and it constitutes a valid and binding agreement of the Subscriber enforceable against the Subscriber in accordance with its terms;

(e)        if the Subscriber is resident in an International Jurisdiction (which is defined herein to mean a country other than Canada or the United States), it certifies in particular that it is not resident in Canada or the United States and further acknowledges and certifies that:
(i)        no securities commission or similar regulatory authority has reviewed or passed on the merits of the Securities;

(ii)       there is no government or other insurance covering the Securities;

(iii)      there are risks associated with the purchase of the Securities;

(iv)       there are restrictions on the Subscriber's ability to resell the Securities and it is the responsibility of the Subscriber to determine what those restrictions are and to comply with them before selling the Securities;

(v)        the Corporation has advised the Subscriber that the Corporation is relying on an exemption from the requirements to provide the Subscriber with a prospectus and to sell the Securities through a person registered to sell the Securities under Applicable Securities Laws and, as a consequence of acquiring securities pursuant to this exemption, certain protections, rights and remedies provided by Applicable Securities Laws, including statutory rights of rescission or damages, will not be available to the Subscriber;

(vi)       the Subscriber is knowledgeable of securities legislation having application or jurisdiction over the Subscriber and the Offering (other than the laws of Canada) which would apply to this Subscription Agreement;

(vii)      the Subscriber is purchasing the Securities pursuant to exemptions from any prospectus, registration or similar requirements under the laws of that International Jurisdiction or, if such is not applicable, the Subscriber is permitted to purchase the Securities, and the Corporation has no filing obligations in the International Jurisdiction;

(viii)     no laws in the International Jurisdiction require the Corporation to make any filings or seek any approvals of any kind whatsoever from any regulatory authority of any kind whatsoever in the International Jurisdiction; and

(ix)       the Securities are being acquired for investment only and not with a view to resale and distribution within the International Jurisdiction.

(f)        if the Subscriber is acquiring the Securities as a fiduciary or agent for one or more investor accounts, it has sole investment discretion with respect to each such account and it has full power to make the foregoing acknowledgements, representations and agreements on behalf of such account;

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(g)        the Subscriber is not aware of any advertisement in connection with the Securities; and

(h)        no person has made to the Subscriber any written or oral representations:
(i)        that any person will resell or repurchase any of the Securities, 

(ii)       as to the future price or value of any of the Securities, or

(iii)      that application has been made to list and post the common shares of the Corporation on any stock exchange other than the Exchange.

6.        The Subscriber, by its execution of this Subscription Agreement, hereby further represents, warrants to, and covenants with, the Corporation that the Subscriber is purchasing the Securities as principal for its own account, it is purchasing such Securities not for the benefit of any other person, and not with a view to the resale or distribution of the Securities and if the Subscriber is a resident of or otherwise subject to the securities laws of any province or territory of Canada, one of the following exemptions applies to the Subscriber: 
(a)        Accredited Investor Exemption
The Subscriber is an "Accredited Investor" and the Subscriber has properly completed and duly executed the Accredited Investor Certificate attached to this Subscription Agreement as Schedule "C" indicating the means by which the Subscriber is an Accredited Investor and confirms the truth and accuracy of all statements made by the Subscriber in such certificate; or

(b)        Family, Friends and Business Associates Exemptions
(i)        The Subscriber is a resident of a Province or Territory of Canada other than Ontario or Saskatchewan, and is:
A.        a director, executive officer or control person of the Corporation, or of an affiliate of the Corporation,

B.        a spouse, parent, grandparent, brother, sister or child of a director, executive officer or control person of the Corporation, or of an affiliate of the Corporation,

C.        a parent, grandparent, brother, sister or child of the spouse of a director, executive officer or control person of the Corporation or of an affiliate of the Corporation,

D.        a close personal friend of a director, executive officer or control person of the Corporation, or of an affiliate of the Corporation, 

E.        a close business associate of a director, executive officer or control person of the Corporation, or of an affiliate of the Corporation,

F.        a founder of the Corporation or a spouse, parent, grandparent, brother, sister, child, close personal friend or close business associate of a founder of the Corporation,

G.        a parent, grandparent, brother, sister, child or grandchild of a spouse of a founder of the Corporation,

H.        a person of which a majority of the voting securities are beneficially owned by, or a majority of the directors are, persons described in paragraphs (A) to (G), or

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I.        a trust or estate of which all of the beneficiaries or a majority of the trustees or executors are persons described in paragraphs (A) to (G); or

(ii)       The Subscriber is a resident of Ontario and is:
A.        a founder of the Corporation,

B.        an affiliate of a founder of the Corporation,

C.        a spouse, parent, brother, sister, grandparent, grandchild or child of an executive officer, director or founder of the Corporation, or

D.        a person that is a control person of the Corporation; or

(iii)      The Subscriber is a resident of Saskatchewan and is:
A.        a close personal friend of a founder, director, executive officer, or control person of the Corporation, or

B.        a close business associate of a founder, director, executive officer, or control person of the Corporation; or

(c)        Employee, Executive Officer, Director and Consultant Exemptions
The Subscriber is:

(i)        an employee, executive officer, director or consultant of the Corporation,

(ii)       an employee, executive officer, director or consultant of a related entity of the Corporation, or

(iii)      a permitted assign of a person referred to in paragraphs (i) or (ii)

and the Subscriber's purchase is voluntary.

7.        In this Agreement:
(a)        "Regulation D" means Regulation D promulgated under the U.S. Securities Act;

(b)        "Regulation S" means Regulation S promulgated under the U.S. Securities Act;

(c)        "United States" means the United States of America, its territories and possessions, any state of the United States and the District of Columbia;

(d)        "U.S. Fiduciary" means a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States holding a discretionary account or similar account (other than an estate or trust) for the benefit or account of a non-U.S. Person, which U.S. Fiduciary is excluded from the definition of "U.S. Person" pursuant to paragraph (k)(2)(i) of Rule 902 of Regulation S, provided that the U.S. Fiduciary is acting solely in its capacity as the holder of such accounts;

(e)        "U.S. Person" means "U.S. person" as defined in Rule 902(k) of Regulation S, and includes but is not limited to (i) any natural person resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the United States; (iii) any partnership or corporation organized or incorporated outside the United States by a U.S. Person principally for the purpose of investing in securities not registered under the U.S. Securities Act, unless it is organized or incorporated, and owned, by "accredited investors" (as defined in Rule 501(a) of Regulation D) who are not natural persons, estates or trusts; (iv) any estate or trust of which any executor or administrator or trustee is a U.S. Person;

13

(f)        "U.S. Purchaser" means:
(i)        any person, other than a U.S. Fiduciary, resident in the United States;

(ii)       any U.S. Person;

(iii)      any person purchasing the Debenture for the account or benefit of a U.S. Person or person in the United States;

(iv)       any person, other than a U.S. Fiduciary, that receives or received an offer of the Debenture while in the United States; or

(v)        any person, other than a U.S. Fiduciary, that was (or whose authorized signatory was) in the United States at the time their buy order was originated or this Agreement was executed; and

(g)        "U.S. Securities Act" means the United States Securities Act of 1933, as amended.

8.        Unless the Subscriber is a U.S. Purchaser that has completed and delivered the Certification of U.S. Purchaser attached hereto as Schedule "G" (in which case the Subscriber makes the representations, warranties and covenants therein), the Subscriber represents and warrants that it and the disclosed principal, if any:
(a)        is not, and is not purchasing the Securities for the account or benefit of, a U.S. Person or person in the United States;

(b)        unless the Purchaser is a U.S. Fiduciary, it was not offered the Securities in the United States;  

(c)        it was not offered the Securities as the result of any "directed selling efforts", as that term is defined in Regulation S under the U.S. Securities Act; 

(d)        unless the Purchaser is a U.S. Fiduciary, at the time its order for the Securities was placed and the subscription for its Securities was executed and delivered to the Corporation, it (or its authorized signatory) was not in the United States; 

(e)        warrants that the current structure of this transaction and all transactions and activities contemplated hereunder is not a scheme to avoid the registration requirements of the U.S. Securities Act; and

(f)        has no intention to distribute either directly or indirectly any of the Securities in the United States or to, or for the account or benefit of, a person in the United States, except in compliance with the U.S. Securities Act and any applicable state securities laws.

 

9.        The Subscriber acknowledges that the Debenture and Warrants may not be converted/exercised by the holder by or for the account or benefit of a U.S. Person or a person in the United States unless the Debenture, Warrants and securities issuable upon conversion/exercise of the Debenture and Warrants, as applicable, are registered under the U.S. Securities Act and the securities laws of all applicable states of the United States, or unless an exemption is available from the registration requirements of such laws, and the holder has furnished an opinion of counsel satisfactory to the Corporation to such effect; provided that in the case of a Subscriber who delivers the Certification of U.S. Purchaser attached as Schedule "G" hereto in connection with its purchase of the Securities pursuant to this private placement, the Subscriber will not be required to deliver an opinion of counsel in connection with the due conversion of the Debenture by the Subscriber provided that no commission or other remuneration is paid or given directly or indirectly for soliciting such conversion.

14

10.      The Subscriber acknowledges that the representations and warranties in the Subscription Agreement are made by the Subscriber with the intent that they be relied upon by the Corporation and its legal counsel in determining the Subscriber's suitability as a subscriber of the Securities, and the Subscriber hereby agrees to indemnify the Corporation and its legal counsel against all losses, claims, costs, expenses and damages or liabilities which any of them may suffer or incur as a result of reliance thereon.  The Subscriber undertakes to notify the Corporation immediately of any change in any representation, warranty or other information relating to the Subscriber set forth in the Subscription Agreement which takes place prior to the Closing.  The representations and warranties of the Subscriber will survive the completion of the purchase and sale of the Securities.

11.      The Corporation represents and warrants as follows to the Subscriber at the date of this Subscription Agreement and at the time of delivery of the Securities and acknowledges and confirms that the Subscriber is relying upon such representations and warranties in connection with the offer, sale and issuance of the Securities to the Subscriber:
(a)        the Corporation is a corporation existing under the laws of the jurisdiction in which it is incorporated;

(b)        the execution and delivery of, and performance by the Corporation of this Subscription Agreement have been authorized by all necessary corporate action on the part of the Corporation;

(c)        this Subscription Agreement has been duly executed and delivered by the Corporation and constitutes a legal, valid and binding agreement of the Corporation enforceable against it in accordance with its terms;

(d)        the Corporation is current and up-to-date with all material filings required to be made under the laws of its jurisdiction of incorporation;

(e)        the Corporation is a reporting corporation in all of the provinces of Canada and is in compliance with its obligations under the Applicable Securities Laws in all material respects;

(f)        the Corporation has the power and authority to create, issue and deliver the Debenture and Warrants and perform its obligations under the Debenture and Warrants;

(g)        as of the date hereof, the Corporation will have taken all corporate steps necessary to duly authorize all matters in connection with the Subscription Agreement and such other agreements and instruments as contemplated herein or therein; 

(h)        the Corporation has complied, or will comply, with all Applicable Securities Laws in connection with the issuance of the Securities;

(i)        no approval, authorization, consent or other order of, and no filing, registration or recording with, any governmental authority is required by the Corporation in connection with the execution and delivery or with the performance by the Corporation of this Subscription Agreement except in compliance with the Applicable Securities Laws and the requirements of the Exchange;

(j)        all information contained in its public continuous disclosure relating to the Corporation or any of its subsidiaries is true and accurate in all material respects as of the date on which such information is certified or stated.  As of the date hereof (and the Closing Time), after due and careful enquiry, the Corporation is not aware of any fact or circumstance that has not been disclosed prior to the date of this Subscription, which materially and adversely effects or may materially and adversely affect the business, assets or financial condition of the Corporation or any of its subsidiaries or the ability of the Corporation to perform its obligations under this Subscription Agreement or the Securities; and

15

(k)        the Corporation's common shares are listed and posted for trading on the Exchange. 

12.      The Corporation hereby covenants and agrees with the Subscriber as follows:
(a)        the Corporation shall use its its reasonable commercial efforts to file a registration statement on Form S-1 (the "Registration Statement") with the United States Securities and Exchange Commission (the "SEC") within 60 calendar days from the Closing Date to register under the U.S. Securities Act resales of the Common Shares (including any Warrant Shares issuable upon the exercise of any of the Warrants), from time to time, by the initial purchasers and their permitted assigns and transferees (on a secondary basis and not as a primary offering by the Corporation); and the Corporation shall use its reasonable commercial efforts to have the Registration Statement declared effective by the SEC within four months from the Closing Date and to keep the Common Shares and Warrant Shares registered during the exercise term of the Warrants;

(b)        For a period of at least 12 months following the date hereof, the Corporation shall maintain its status as a "reporting issuer" and not be in material default of any requirement of the Applicable Securities Laws; and

(c)        For a period of at least 12 months following the date hereof, the Corporation shall use its reasonable commercial efforts to maintain the listing of its common shares on the Exchange.

13.      The Corporation acknowledges that the representations, warranties and covenants contained herein are made by the Corporation with the intention that they may be relied upon by the Subscriber in determining the Subscriber's eligibility to acquire the Securities under Applicable Securities Laws.  The Corporation further agrees that by executing the Debenture and Warrants, the Corporation will be representing and warranting that the foregoing representations and warranties are true and correct as at the time of delivery of such Debenture and Warrants with the same force and effect as if they had been made by the Corporation at such time, and that they shall survive the completion of the transactions contemplated under this Subscription Agreement.

14.      The Subscriber represents and warrants that the aggregate Principal Amount (purchase price) which will be advanced by the Subscriber to the Corporation hereunder will not represent proceeds of crime for the purposes of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act (Canada) (the "PCMLA") or the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (United States) (commonly referred to as the "USA PATRIOT Act"), and the Subscriber acknowledges that the Corporation may in the future be required by law to disclose the Subscriber's name and other information relating to this Agreement and the Subscriber's subscription hereunder, on a confidential basis, pursuant to the PCMLA.  To the best of its knowledge (i) none of the Principal Amount to be provided by the Subscriber (A) have been or will be derived from or related to any activity that is deemed criminal under the law of Canada, the United States of America or any other jurisdiction, or (B) are being tendered on behalf of a person or entity who has not been identified to the Subscriber, and (ii) it shall promptly notify the Corporation if the Subscriber discovers that any of such representations cease to be true, and to provide the Corporation with appropriate information in connection therewith.

15.      The Subscriber acknowledges and consents to the fact that the Corporation is collecting the Subscriber's (and any beneficial purchaser for which the Subscriber is contracting hereunder) personal information (as that term is defined under applicable privacy legislation, including, without limitation, the Personal Information Protection and Electronic Documents Act (Canada) and any other applicable similar replacement or supplemental provincial or federal legislation or laws in effect from time to time) for the purpose of completing the Subscriber's subscription. The Subscriber acknowledges and consents to the Corporation retaining the personal information for so long as permitted or required by applicable law or business practices. The Subscriber further acknowledges and consents to the fact that the Corporation may be required by Applicable Securities Laws, stock exchange rules and/or Investment Industry Regulatory Organization of Canada rules to provide regulatory authorities any personal information provided by the Subscriber respecting itself (and any beneficial purchaser for which the Subscriber is contracting hereunder). The Subscriber represents and warrants that it has the authority to provide the consents and acknowledgements set out in this paragraph on behalf of all beneficial purchasers for which the Subscriber is contracting. In addition to the foregoing, the Subscriber agrees and acknowledges that the Corporation may use and disclose the Subscriber's personal information, or that of each beneficial purchaser for whom the Subscriber are contracting hereunder, as follows:

16

(a)        for internal use with respect to managing the relationships between and contractual obligations of the Corporation and the Subscriber or any beneficial purchaser for whom the Subscriber is contracting hereunder;

(b)        for use and disclosure to the Corporation's transfer agent and registrar;

(c)        for use and disclosure for income tax related purposes, including without limitation, where required by law, disclosure to Canada Revenue Agency; 

(d)        disclosure to securities regulatory authorities (including the Exchange) and other regulatory bodies with jurisdiction with respect to reports of trade and similar regulatory filings;

(e)        disclosure to a governmental or other authority (including the Exchange) to which the disclosure is required by court order or subpoena compelling such disclosure and where there is no reasonable alternative to such disclosure;

(f)        disclosure to professional advisers of the Corporation in connection with the performance of their professional services;

(g)        disclosure to any person where such disclosure is necessary for legitimate business reasons and is made with the Subscriber's prior written consent; 

(h)        disclosure to a court determining the rights of the parties under this Subscription Agreement; or

(i)        for use and disclosure as otherwise required or permitted by law.

The Subscriber further acknowledges and agrees that the Exchange collects personal information in forms submitted by the Corporation, which will include personal information regarding the Subscriber.  The Subscriber agrees that the Exchange may use this information in the manner provided for in Appendix 6A to the TSX-V Corporate Finance Policy Manual, a copy of which may be viewed at the TSX-V website, www.tsx.com and is incorporated herein by reference.  The Subscriber further acknowledges that the Ontario Securities Commission collects personal information in forms submitted to it by the Corporation, including information about the Subscriber, the Subscriber's address and contact information, and the Subscriber's subscription.  The Subscriber acknowledges that the Ontario Securities Commission is entitled to collect the information under authority granted to it under Applicable Securities Laws for the purpose of administration and enforcement of the Applicable Securities Laws in Ontario.  The Subscriber acknowledges that it may obtain information regarding the collection of this information by contacting the Administrative Assistant to the Director of Corporate Finance, Ontario Securities Commission, Suite 1903, Box 5520, Queen Street West, Toronto, Ontario M5H 3S8, Telephone: (416) 593-3682, Facsimile: (416) 593-8252.  The Subscriber consents to the collection of personal information by the Ontario Securities Commission.

16.      The Subscriber acknowledges that all warranties, conditions, representations or stipulations, whether express or implied and whether arising hereunder or under prior agreement or statement or by statute or at common law are expressly those of the Corporation.  The Subscriber acknowledges that no information or representation concerning the Corporation has been provided to the Subscriber by the Corporation other than those contained in this Subscription Agreement and that the Subscriber is relying entirely upon this Subscription Agreement and the public record.

17

17.      The Subscriber acknowledges that, although Debentures and Warrants may be issued to other purchasers under the Offering concurrently with the Closing, there may be other sales of Debentures and Warrants under the Offering, some or all of which may close before or after the Closing.  The Subscriber further acknowledges that there is a risk that insufficient funds may be raised on the Closing to fund the Corporation's objectives and that further closings may not take place after the Closing.

18.      Unless otherwise provided, all dollar amounts referred to in this Subscription Agreement are in lawful money of Canada.

19.      This Subscription Agreement is to be governed and interpreted according to the laws of the Province of British Columbia and the federal laws of Canada applicable therein.

20.      This Subscription becomes effective when executed by all of the parties to it.  After that time, it will be binding upon and enure to the benefit of the parties and their respective successors, heirs, executors, administrators and legal representatives.  This Subscription Agreement is neither transferable nor assignable.

21.      The obligations of the parties hereunder are subject to acceptance of the terms of the Offering by the Exchange and any other required regulatory approvals.

22.      The Corporation shall be entitled to rely on delivery by facsimile machine or other electronic transmission of an executed copy of this Subscription Agreement including Schedules, and acceptance by the Corporation of such facsimile copy or electronic transmission shall be equally effective to create a valid and binding agreement in accordance with the terms hereof.

23.      The invalidity or non-enforceability of any particular provision of this Subscription Agreement shall not affect or limit the validity or enforceability of the remaining provisions of this Subscription Agreement.

24.      Except as expressly provided in this Subscription Agreement and in the agreements, instruments and other documents contemplated or provided for herein, this Subscription Agreement contains the entire agreement between the parties with respect to the sale of the Debenture and there are no other terms, conditions, representations or warranties, whether expressed, implied, oral or written, by statute, by common law, by the Corporation, by the Subscriber or by anyone else.

25.      The parties to this Convertible Debenture have expressly requested that this agreement be drawn in English; les parties aux presentes confirment qu'elles ont exige que le present emprunt obligataire convertible redige en anglais.

__________

 

18

 

Schedule "B"

FORM 4C

CORPORATE PLACEE REGISTRATION FORM

This Form will remain on file with the Exchange and must be completed if required under section 4(b) of Part II of Form 4B.  The corporation, trust, portfolio manager or other entity (the "Placee") need only file it on one time basis, and it will be referenced for all subsequent Private Placements in which it participates.  If any of the information provided in this Form changes, the Placee must notify the Exchange prior to participating in further placements with Exchange listed Issuers.  If as a result of the Private Placement, the Placee becomes an Insider of the Issuer, Insiders of the Placee are reminded that they must file a Personal Information Form (2A) or, if applicable, Declarations, with the Exchange.

1.     Placee Information:
(a)     Name: _____________________________________________________________________________

(b)     Complete Address: ___________________________________________________________________

          ___________________________________________________________________________________

(c)     Jurisdiction of Incorporation or Creation: __________________________________________________

2.     (a)     Is the Placee purchasing securities as a portfolio manager: (Yes/No)? __________________________

         (b)     Is the Placee carrying on business as a portfolio manager outside of Canada: (Yes/No)? ____________

3.     If the answer to 2(b) above was "Yes", the undersigned certifies that:
(a)     it is purchasing securities of an Issuer on behalf of managed accounts for which it is making the investment decision to purchase the securities and has full discretion to purchase or sell securities for such accounts without requiring the client's express consent to a transaction;

(b)     it carries on the business of managing the investment portfolios of clients through discretionary authority granted by those clients (a "portfolio manager" business) in ____________________ [jurisdiction], and it is permitted by law to carry on a portfolio manager business in that jurisdiction;

(c)     it was not created solely or primarily for the purpose of purchasing securities of the Issuer;

(d)     the total asset value of the investment portfolios it manages on behalf of clients is not less than CAD$20,000,000; and

(e)     it has no reasonable grounds to believe, that any of the directors, senior officers and other insiders of the Issuer, and the persons that carry on investor relations activities for the Issuer has a beneficial interest in any of the managed accounts for which it is purchasing.

- B2 -

4.     If the answer to 2(a). above was "No", please provide the names and addresses of Control Persons of the Placee:

	
Name *
	
City
	
Province or State
	
Country

	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 

*   If the Control Person is not an individual, provide the name of the individual that makes the investment decisions on behalf of the Control Person.

5.     Acknowledgement - Personal Information and Securities Laws
(a)     "Personal Information" means any information about an identifiable individual, and includes information contained in sections 1, 2 and 4, as applicable, of this Form.
The undersigned hereby acknowledges and agrees that it has obtained the express written consent of each individual to:
(i)        the disclosure of Personal Information by the undersigned to the Exchange (as defined in Appendix 6B) pursuant to this Form; and

(ii)       the collection, use and disclosure of Personal Information by the Exchange for the purposes described in Appendix 6B or as otherwise identified by the Exchange, from time to time.

(b)     The undersigned acknowledges that it is bound by the provisions of applicable Securities Law, including provisions concerning the filing of insider reports and reports of acquisitions.
Dated and certified (if applicable), acknowledged and agreed, at __________________________________________

on __________________________________________________

	 	
_____________________________________________

(Name of Purchaser - please print)

_____________________________________________

(Authorized Signature)

_____________________________________________

(Official Capacity - please print)

_____________________________________________

(Please print name of individual whose signature

appears above)

__________

THIS IS NOT A PUBLIC DOCUMENT

Schedule "C"

ACCREDITED INVESTOR CERTIFICATE 

(To be completed by Accredited Investors only)

The undersigned (the "Subscriber") hereby confirms and certifies to Crailar Technologies Inc. (the "Corporation") that the Subscriber is purchasing the Securities as principal and that the Subscriber is an "Accredited Investor" as defined in NI 45-106 and is: [check appropriate boxes]

	
£

	
(a)
	
an individual who, either alone or with a spouse, beneficially owns financial assets having an aggregate realizable value that before taxes, but net of any related liabilities, exceeds CAD$1,000,000;

	
£

	
(b)
	
an individual whose net income before taxes exceeded CAD$200,000 in each of the 2 most recent calendar years or whose net income before taxes combined with that of a spouse exceeded CAD$300,000 in each of the 2 most recent calendar years and who, in either case, reasonably expects to exceed that net income level in the current calendar year;

	
£

	
(c)
	
an individual who, either alone or with a spouse, has net assets of at least CAD$5,000,000;

	
£

	
(d)
	
a person, other than an individual or investment fund, that has net assets of at least CAD$5,000,000 as shown on its most recently prepared financial statements and that has not been created or used solely to purchase or hold securities as an accredited investor in this paragraph (d);

	
£

	
(e)
	
a person in respect of which all of the owners of interests, direct, indirect or beneficial, except the voting securities required by law to be owned by directors, are persons that are accredited investors;

	
£

	
(f)
	
a Canadian financial institution, or a Schedule III bank;

	
£

	
(g)
	
the Business Development Bank of Canada incorporated under the Business Development Bank of Canada Act (Canada);

	
£

	
(h)
	
a subsidiary of any person referred to in paragraphs (f) or (g), if the person owns all of the voting securities of the subsidiary, except the voting securities required by law to be owned by directors of that subsidiary;

	
£

	
(i)
	
a person registered under the securities legislation of a jurisdiction of Canada as an adviser or dealer, other than a person registered solely as a limited market dealer under one or both of the Securities Act (Ontario) or the Securities Act (Newfoundland and Labrador);

	
£

	
(j)
	
an individual registered or formerly registered under the securities legislation of a jurisdiction of Canada as a representative of a person referred to in paragraph (i);

	
£

	
(k)
	
the Government of Canada or a jurisdiction of Canada, or any crown corporation, agency or wholly owned entity of the Government of Canada or a jurisdiction of Canada;

	
£

	
(l)
	
a municipality, public board or commission in Canada and a metropolitan community, school board, the Comité de gestion de la taxe scolaire de l'île de Montréal or an intermunicipal management board in Québec;

	
£

	
(m)
	
any national, federal, state, provincial, territorial or municipal government of or in any foreign jurisdiction, or any agency of that government;

	
£

	
(n)
	
a pension fund that is regulated by the Office of the Superintendent of Financial Institutions (Canada), a pension commission or similar regulatory authority of a jurisdiction of Canada;

- C2 -

	
£

	
(o)
	
an investment fund that distributes or has distributed its securities only to 

	 	 	
(i)
	
a person that is or was an accredited investor at the time of the distribution;

	 	 	
(ii)
	
a person that acquires or acquired securities in the circumstances referred to in Sections 2.10 [Minimum amount investment], or 2.19 [Additional investment in investment funds] of NI 45-106; OR

	 	 	
(iii)
	
a person described in paragraph (i) or (ii) that acquires or acquired securities under Section 2.18 [Investment fund reinvestment] of NI 45-106;

	
£

	
(p)
	
an investment fund that distributes or has distributed securities under a prospectus in a jurisdiction of Canada for which the regulator or, in Québec, the securities regulatory authority, has issued a receipt;

	
£

	
(q)
	
a trust company or trust corporation registered or authorized to carry on business under the Trust and Loan Companies Act (Canada) or under comparable legislation in a jurisdiction of Canada or a foreign jurisdiction, acting on behalf of a fully managed account managed by the trust company or trust corporation, as the case may be;

	
£

	
(r)
	
a person acting on behalf of a fully managed account managed by that person, if that person

	 	 	
(i)
	
is registered or authorized to carry on business as an adviser or the equivalent under the securities legislation of a jurisdiction of Canada or a foreign jurisdiction; and

	 	 	
(ii)
	
in Ontario, is purchasing a security that is not a security of an investment fund;

	
£

	
(s)
	
a registered charity under the Income Tax Act (Canada) that, in regard to the trade, has obtained advice from an eligibility adviser or an adviser registered under the securities legislation of the jurisdiction of the registered charity to give advice on the securities being traded;

	
£

	
(t)
	
an entity organized in a foreign jurisdiction that is analogous to any of the entities referred to in paragraphs (f) to (i) or paragraph (n) in form and function;

	
£

	
(u)
	
an investment fund that is advised by a person registered as an adviser or a person that is exempt from registration as an adviser; OR

	
£

	
(v)
	
a person that is recognized or designated by the securities regulatory authority or, except in Ontario and Québec, the regulator as

	 	 	
(i)
	
an accredited investor; or

	 	 	
(ii)
	
an exempt purchaser after NI 45-106 comes into force;

- C3 -

and for purposes hereof, words and phrases which are used in this Accredited Investor Certificate and which are defined in NI 45-106 will have the meaning ascribed thereto in NI 45-106.  Certain definitions that are relevant to qualifications as an "Accredited Investor" are attached hereto as Appendix I.  You must review these definitions carefully.

EXECUTED by the Subscriber at _____________________, this ________ day of ___________________, 20__.

	
If a corporation, partnership or other entity:

___________________________________________

Signature of Authorized Signatory

___________________________________________

Name and Position of Signatory

___________________________________________

Name of Purchasing Entity

___________________________________________

Jurisdiction of Residence
	
If an Individual:

___________________________________________

Signature 

___________________________________________

Print Name

___________________________________________

Jurisdiction of Residence

__________

- C4 -

 

Appendix I to Schedule "C"

DEFINITIONS RELEVANT TO QUALIFICATIONS AS AN ACCREDITED INVESTOR

(a)        "Canadian financial institution" means:
(i)        an association governed by the Cooperative Credit Associations Act (Canada) or a central cooperative credit society for which an order has been made under section 473(1) of the Cooperative Credit Associations Act (Canada), or

(ii)       a bank, loan corporation, trust company , trust corporation, insurance company, treasury branch, credit union, caisse populaire, financial services cooperative, or league that, in each case, is authorized by an enactment of Canada or a jurisdiction of Canada to carry on business in Canada or a jurisdiction of Canada;

(b)        "control person" has the meaning ascribed to that term in securities legislation except Ontario where "control person" means any person that holds or is one of a combination of persons that hold
(i)        a sufficient number of any of the securities of an issuer so as to affect materially the control of the issuer, or

(ii)       more than 20% of the outstanding voting securities of an issuer except where there is evidence showing that the holding of those securities does not affect materially the control of that issuer;

(c)        "eligibility adviser" means a person that is registered as an investment dealer and authorized to give advice with respect to the type of security being distributed;

(d)        "executive officer" means, for an issuer, an individual who is
(i)        a chair, vice-chair or president,

(ii)       a vice-president in charge of a principal business unit, division or function including sales, finance or production,

(iii)      an officer of the issuer or any of its subsidiaries and who performs a policy-making function in respect of the issuer, or

(iv)       performing a policy-making function in respect of the issuer;

(e)        "financial assets" means (i) cash, (ii) securities or (iii) a contract of insurance, a deposit or an evidence of a deposit that is not a security for the purposes of securities legislation;

(f)        "founder" means, in respect of an issuer, a person who,
(i)        acting alone, in conjunction or in concert with one or more persons, directly or indirectly, takes the initiative in founding, organizing or substantially reorganizing the business of the Corporation, and

(ii)       at the time of the trade is actively involved in the business of the issuer;

(g)        "fully managed account" means an account of a client for which a person makes the investment decisions if that person has full discretion to trade in securities for the account without requiring the client's express consent to a transaction;

- C5 -

(h)        "investment fund" has the meaning ascribed thereto in National Instrument 81-106 - Investment Fund Continuous Disclosure;

(i)        "person" includes
(i)        an individual, 

(ii)        a corporation,

(iii)       a partnership, trust, fund and an association, syndicate, organization or other organized group of persons, whether incorporated or not, and

(iv)      an individual or other person in that person's capacity as a trustee, executor, administrator or personal or other legal representative; 

(j)        "related liabilities" means 
(i)        liabilities incurred or assumed for the purpose of financing the acquisition or ownership of financial assets, or

(ii)       liabilities that are secured by financial assets.

(k)        "spouse" means, an individual who, 
(i)        is married to another individual and is not living separate and apart within the meaning of the Divorce Act (Canada), from the other individual, 

(ii)       is living with another individual in a marriage-like relationship, including a marriage-like relationship between individuals of the same gender, or

(iii)      in Alberta, is an individual referred to in paragraph (i) or (ii) immediately above or is an adult interdependent partner within the meaning of the Adult Interdependent Relationships Act (Alberta); and

(l)        "subsidiary" means an issuer that is controlled directly or indirectly by another issuer and includes a subsidiary of that subsidiary;

Affiliated Entities and Control 

1.        An issuer is considered to be an affiliate of another issuer if one of them is a subsidiary of the other, or if each of them is controlled by the same person.

2.        A person (first person) is considered to control another person (second person) if
(a)        the first person beneficially owns or directly or indirectly exercises control or direction over securities of the second person carrying votes which, if exercised, would entitle the first person to elect a majority of the directors of the second person, unless the first person holds the voting securities only to secure an obligation,

(b)        the second person is a partnership, other than a limited partnership, and the first person holds more than 50% of the interests in the partnership, or

(c)        the second person is a limited partnership and the general partner of the limited partnership is the first person.

__________

Schedule "D"

STATEMENT OF FRIENDS, FAMILY AND BUSINESS ASSOCIATES 

This Schedule "D" must be completed by Subscribers who are relying on the "friends, family and business associates" exemption from prospectus requirements.  

For the purposes of this Subscription Agreement, a "close personal friend" of a director, executive officer, founder or control person of the Corporation is an individual who knows the director, executive officer, founder or control person well enough and has known them for a sufficient period of time to be in a position to assess their capabilities and trustworthiness. The term "close personal friend" can include a family member who is not already specifically identified in the exemptions if the family member satisfies the criteria described above.

An individual is not a close personal friend solely because the individual is:
(a)        a relative,

(b)        a member of the same organization, association or religious group, or

(c)        a client, customer, former client or former customer.

For the purposes of this Subscription Agreement, a "close business associate" is an individual who has had sufficient prior business dealings with a director, executive officer, founder or control person of the Corporation to be in a position to assess their capabilities and trustworthiness.

An individual is not a close business associate solely because the individual is:
(a)        a member of the same organization, association or religious group, or

(b)        a client, customer, former client or former customer.

The relationship between the individual and the director, executive officer, founder or control person must be direct. For example, the exemptions are not available for a close personal friend of a close personal friend of a director of the Corporation.

_____________________________________________________________________________________________

In connection with the purchase of a convertible debenture (the "Debenture") and warrants ("Warrants") (the Debenture and Warrants collectively, the "Securities") of Crailar Technologies Inc. (the "Corporation") by the undersigned Subscriber, or if applicable, the principal on whose behalf the undersigned is purchasing as agent, the Subscriber hereby represents, warrants, covenants and ratifies to the Corporation that:

	
1.
	
The Subscriber is resident in or is subject to the laws of a Province or Territory of Canada other than Ontario or Saskatchewan;

	
2.
	
The Subscriber is purchasing the Securities as principal for its own account;

	
3.
	
It is (please initial):

	
___
	
(a)
	
a founder, director, executive officer or control person of the Corporation, or of an affiliate of the Corporation; or 

	
___
	
(b)
	
a spouse, parent, grandparent, brother, sister, grandchild or child of a founder, director, executive officer or control person of the Corporation, or of an affiliate of the Corporation; or

- D2 -

	
___
	
(c)
	
a parent, grandparent, brother, sister, grandchild or child of the spouse of a director, senior officer or control person of the Corporation or of an affiliate of the Corporation; or 

	
___
	
(d)
	
a close personal friend of a founder, director, executive officer or control person of the Corporation, or of an affiliate of the Corporation, the details of whose relationship is as follows; or

______________________________________________________________________________

(insert name of applicable person)

______________________________________________________________________________

Length of Relationship

______________________________________________________________________________

Details of Relationship

	
___
	
(e)
	
a close business associate of a founder, director, executive officer or control person of the Corporation, or of an affiliate of the Corporation, the details of whose relationship is as follows; or

______________________________________________________________________________

(insert name of applicable person)

______________________________________________________________________________

Length of Relationship

______________________________________________________________________________

Prior Business Dealings

______________________________________________________________________________

Details of Relationship

	
___
	
(f)
	
a person or company of which a majority of the voting securities are beneficially owned by, or a majority of the directors are, persons or companies described in paragraphs (a) to (e) (and in the case of paragraphs (d) or (e), the following information is provided):

______________________________________________________________________________

(insert name of applicable person)

______________________________________________________________________________

Length of Relationship

______________________________________________________________________________

Prior Business Dealings (if applicable)

______________________________________________________________________________

Details of Relationship

- D3 -

	
___
	
(g)
	
a trust or estate of which all of the beneficiaries or a majority of the trustees are persons or companies described in paragraphs (a) to (e) (and in the case of paragraphs (d) or (e), the following information is provided):

______________________________________________________________________________

(insert name of applicable person)

______________________________________________________________________________

Length of Relationship

______________________________________________________________________________

Prior Business Dealings (if applicable)

______________________________________________________________________________

Details of Relationship

	
4.
	
For the purposes hereof, words and phrases used in this Schedule "D" and which are defined in NI 45-106 will have the meaning ascribed thereto in NI 45-106.

	
5.
	
Upon execution of this Schedule "D" by the Subscriber, this Schedule "D" will be incorporated into and form a part of the Subscription Agreement.

EXECUTED by the Subscriber at _________________, this ____ day of  _______________________, 20____.

	
If a corporation, partnership or other entity:
	
If an individual:

	
_________________________________________

Name of Corporate Subscriber

	
_________________________________________

Signature of Subscriber

	 	 
	
_________________________________________

Signature of Authorized Signatory
	
_________________________________________

Name of Subscriber

	 	 
	
_________________________________________

Name and Title of Authorized Signatory
	 
	 	 

__________

Schedule "E"

STATEMENT OF ONTARIO FOUNDERS, CONTROL PERSONS AND FAMILY

This Schedule "E" must be completed by Ontario Subscribers who are relying on the "founder, control person and family - Ontario" exemption from prospectus requirements.  In connection with the purchase of a convertible debenture ("Debenture") and warrants ("Warrants") (the Debenture and Warrants collectively, the "Securities") of Crailar Technologies Inc. (the "Corporation") by the undersigned Subscriber, or if applicable, the principal on whose behalf the undersigned is purchasing as agent, the Subscriber hereby represents, warrants, covenants and ratifies to the Corporation that:

1.        The Subscriber is resident in or is subject to the laws of Ontario;

2.        The Subscriber is purchasing the Securities as principal for its own account; and

3.        It is (please initial):
£
        a founder of the Corporation;

£
        an affiliate of a founder of the Corporation;

£
        a spouse, parent, brother, sister, grandparent, grandchild or child of the following executive officer, director or founder of the Corporation:_____________________; OR

£
        a person that is a control person of the Corporation. 

4.        For the purposes hereof, words and phrases used in this Schedule "E" and which are defined in NI 45-106 will have the meaning ascribed thereto in NI 45-106.

5.        Upon execution of this Schedule "E" by the Subscriber, this Schedule "E" will be incorporated into and form a part of the Subscription Agreement.

EXECUTED by the Subscriber at __________________________, this ___________ day of 

________________________________________, 20_____.

	
If a corporation, partnership or other entity:
	
If an individual:

	
______________________________________

Name of Corporate Subscriber
	
______________________________________

Signature of Subscriber

	 	 
	
______________________________________

Signature of Authorized Signatory
	
______________________________________

Name of Subscriber

	 	 
	
______________________________________

Name and Title of Authorized Signatory
	 
	 	 

__________

Schedule "F"

FORM 45-106F5 RISK ACKNOWLEDGEMENT FOR SASKATCHEWAN CLOSE PERSONAL FRIENDS AND CLOSE BUSINESS ASSOCIATES

	
Risk Acknowledgement

Saskatchewan Close Personal Friends and Close Business Associates

I acknowledge that this is a risky investment:

—
      I am investing entirely at my own risk.

—
      No securities regulatory authority or regulator has evaluated or endorsed the merits of these securities. 

—
      The person selling me these securities is not registered with a securities regulatory authority or regulator and has no duty to tell me whether this investment is suitable for me. [Instruction: Delete if sold by registrant]

—
      I will not be able to sell these securities for 4 months. 

—
      I could lose all the money I invest.

—
      I do not have a 2-day right to cancel my purchase of these securities or the statutory rights of action for misrepresentation I would have if I were purchasing the securities under a prospectus.  I do have a 2-day right to cancel my purchase of these securities if I receive an amended offering document.

I am investing $____________ [total consideration] in total; this includes any amount I am obliged to pay in future. 

I am a close personal friend or close business associate of ______________________ [state name], who is a ____________ [state title - founder, director, executive officer or control person] of ____________________

_______________________________ [state name of issuer or its affiliate - if an affiliate state "an affiliate of the issuer" and give the issuer's name]. 

I acknowledge that I am purchasing based on my close relationship with ______________________ [state name of founder, director, executive officer or control person] whom I know well enough and for a sufficient period of time to be able to assess her/his capabilities and trustworthiness.

I acknowledge that this is a risky investment and that I could lose all the money I invest.

	
_______________________________________

Date
	
_______________________________________

Signature of Purchaser

_______________________________________

Print name of Purchaser

	
Sign 2 copies of this document.  Keep one copy for your records.

You are buying Exempt Market Securities

They are called exempt market securities because two parts of securities law do not apply to them. If an issuer wants to sell exempt market securities to you:

—
        the issuer does not have to give you a prospectus (a document that describes the investment in detail and gives you some legal protections), and

—
        the securities do not have to be sold by an investment dealer registered with a securities regulatory authority or regulator.

There are restrictions on your ability to resell exempt market securities.  Exempt market securities are more risky than other securities.

You may not receive any written information about the issuer or its business

If you have any questions about the issuer or its business, ask for written clarification before you purchase the securities.  You should consult your own professional advisers before investing in the securities.

You will not receive advice  [Instruction:  Delete if sold by registrant]

Unless you consult your own professional advisers, you will not get professional advice about whether the investment is suitable for you. 

For more information on the exempt market, refer to the Saskatchewan Financial Services Commission's website at http://www.sfsc.gov.sk.ca.

[Instruction:  The purchaser must sign 2 copies of this form.  The purchaser and the issuer must each receive a signed copy.]

__________

Schedule "G"

CERTIFICATION OF U.S. PURCHASER

TO:                      CRAILAR TECHNOLOGIES INC. (the "Corporation").

RE:                      SUBSCRIPTION FOR SECURITIES OF THE CORPORATION.

Capitalized terms not specifically defined in this certification have the meaning ascribed to them in the Subscription Agreement to which this Schedule is attached.  In the event of a conflict between the terms of this certification and such Subscription Agreement, the terms of this certification shall prevail.

In addition to the covenants, representations and warranties contained in the Subscription Agreement to which this Schedule is attached, the undersigned Subscriber covenants, represents and warrants to the Corporation that:

(a)        It has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Securities and it is able to bear the economic risk of loss of its entire investment.

(b)        The Corporation has provided to it the opportunity to ask questions and receive answers concerning the terms and conditions of the private placement, and it has had access to such information concerning the Corporation (including access to the Corporation's public filings available on the Internet at www.sedar.com) as it has considered necessary or appropriate in connection with its investment decision to acquire the Securities, and that any answers to questions and any request for information have been complied with to the Subscriber's satisfaction.

(c)        It is acquiring the Securities for its own account, or for the account of one or more persons for whom it is exercising sole investment discretion, (a "Beneficial Purchaser"), for investment purposes only and not with a view to resale or distribution and, in particular, neither it nor any Beneficial Purchaser for whose account it is purchasing the Securities has any intention to distribute either directly or indirectly the Securities in the United States or to, or for the account or benefit of, a U.S. Person or person in the United States; provided, however, that this paragraph shall not restrict the Subscriber from selling or otherwise disposing of any of the Securities pursuant to registration thereof pursuant to the U.S. Securities Act and any applicable state securities laws or under an exemption from such registration requirements.

(d)        The address of the Subscriber set out on the front page of the Subscription Agreement is the true and correct principal address of the Subscriber and can be relied on by the Corporation for the purposes of state blue-sky laws and the Subscriber has not been formed for the specific purpose of purchasing the Securities.

(e)        It understands (i) that the Securities have not been registered under the U.S. Securities Act or the securities laws of any state of the United States; and (ii) the offer and sale contemplated hereby is being made in reliance on an exemption from such registration requirements in reliance on Rule 506 of Regulation D under the U.S. Securities Act and/or Section 4(a)(2) of the U.S. Securities Act.

(f)        It, and if applicable, each Beneficial Purchaser for whose account it is purchasing the Securities, is (are) an "accredited investor" as defined in Rule 501(a) of Regulation D under the U.S. Securities Act by virtue of meeting one of the following criteria (please hand-write your initials on the appropriate lines and write "SUB" for the criteria the Subscriber meets and "BEN" for the criteria any persons for whose account or benefit the Subscriber is purchasing the Securities meets):

	
1.

Initials _______
	
A bank, as defined in Section 3(a)(2) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or

	
2.

Initials _______
	
A savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act, whether acting in its individual or fiduciary capacity; or

	
3.

Initials _______
	
A broker or dealer registered pursuant to Section 15 of the United States Securities Exchange Act of 1934; or

	
4.

Initials _______
	
An insurance company as defined in Section 2(a)(13) of the U.S. Securities Act; or

	
5.

Initials _______
	
An investment company registered under the United States Investment Company Act of 1940; or

	
6.

Initials _______
	
A business development company as defined in Section 2(a)(48) of the United States Investment Company Act of 1940; or

	
7.

Initials _______
	
A small business investment company licensed by the U.S. Small Business Administration under Section 301 (c) or (d) of the United States Small Business Investment Act of 1958; or

	
8.

Initials _______
	
A plan established and maintained by a state, its political subdivisions or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, with total assets in excess of US$5,000,000; or

	
9.

Initials _______
	
An employee benefit plan within the meaning of the United States Employee Retirement Income Security Act of 1974 in which the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company or registered investment adviser, or an employee benefit plan with total assets in excess of US$5,000,000 or, if a self-directed plan, with investment decisions made solely by persons who are Accredited Investors; or

	
10.

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

	
11.

Initials _______
	
An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust, or a partnership, not formed for the specific purpose of acquiring the Debenture offered, with total assets in excess of US$5,000,000; or

	
12.

Initials _______
	
Any director or executive officer of the Corporation; or

	
13.

Initials _______
	
A natural person whose individual net worth, or joint net worth with that person's spouse, at the time of this purchase exceeds US$1,000,000 (for the purposes of calculating net worth: (i) the person's primary residence shall not be included as an asset; (ii) indebtedness that is secured by the person's primary residence, up to the estimated fair market value of the primary residence at the time of the sale and purchase of securities contemplated by this Subscription Agreement, shall not be included as a liability (except that if the amount of such indebtedness outstanding at the time of the sale and purchase of securities contemplated by this Subscription Agreement exceeds the amount outstanding 60 days before such time, other than as a result of the acquisition of the primary residence, the amount of such excess shall be included as a liability); and (iii) indebtedness that is secured by the person's primary residence in excess of the estimated fair market value of the primary residence shall be included as a liability); or

	
14.

Initials _______ 
	
A natural person who had an individual income in excess of US$200,000 in each of the two most recent years or joint income with that person's spouse in excess of US$300,000 in each of those years, and has a reasonable expectation of reaching the same income level in the current year; or

	
15.

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

	
16.

Initials _______ 
	
Any entity in which all of the equity owners meet the requirements of at least one of the above categories.

(g)        It has not purchased the Securities as a result of any form of general solicitation or general advertising (as those terms are used in Regulation D under the U.S. Securities Act), including advertisements, articles, press releases, notices or other communications published in any newspaper, magazine or similar media or on the Internet, or broadcast over radio or television, or the Internet or other form of telecommunications, including electronic display, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

(h)        It understands and agrees that there may be material tax consequences to the Subscriber of an acquisition or disposition of the Securities.  The Corporation does not give any opinion or make any representation with respect to the tax consequences to the Subscriber under United States, state, local or foreign tax law of the undersigned's acquisition or disposition of such Securities.  In particular, no determination has been made whether the Corporation will be a "passive foreign investment company" (commonly known as a "PFIC") within the meaning of Section 1297 of the United States Internal Revenue Code.

(i)        It understands and acknowledges that the Corporation is incorporated outside the United States, consequently, it may be difficult to provide service of process on the Corporation and it may be difficult to enforce any judgment against the Corporation.

ONLY U.S. PURCHASERS NEED COMPLETE AND SIGN

Dated _______________ 2013.

	 	
X __________________________________________

Signature of individual (if Subscriber is an individual)

X __________________________________________

Authorized signatory (if Subscriber is not an individual)

_____________________________________________

Name of Subscriber (please print)

_____________________________________________

Name of authorized signatory (please print)

_____________________________________________

Official capacity of authorized signatory (please print)

__________Exhibit 4.3

WARRANT CERTIFICATE

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE u
, 2013.

WITHOUT PRIOR WRITTEN APPROVAL OF TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL u
, 2013.

THESE WARRANTS AND THE SECURITIES DELIVERABLE UPON EXERCISE THEREOF HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR APPLICABLE STATE SECURITIES LAWS.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  THESE SECURITIES CANNOT BE THE SUBJECT OF HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE U.S. SECURITIES ACT.

THESE WARRANTS MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF A PERSON IN THE UNITED STATES OR A U.S. PERSON UNLESS THESE WARRANTS AND THE SECURITIES DELIVERABLE UPON EXERCISE OF THESE WARRANTS HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY SUCH STATE OR AN EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE.  "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT.

THE WARRANTS REPRESENTED HEREBY WILL BE VOID AND OF NO VALUE AFTER 5:00 PM (VANCOUVER TIME) ON u
, 2016

WARRANT TO PURCHASE

COMMON SHARES OF CRAILAR TECHNOLOGIES INC.

Warrant Certificate Number:  <<Number>>                                         Number of Warrants:  <<Warrants>>

THIS IS TO CERTIFY THAT for value received, <<NAME>>, <<Address>> (the "Warrantholder") has the right to purchase in respect of each warrant (the "Warrants") represented by this certificate or by a replacement certificate (in either case this "Warrant Certificate"), at any time up to 5:00 p.m. (Vancouver time) on u
, 2016 (the "Expiry Time") one fully paid and non-assessable common share ("Common Shares" and which term shall include any shares or other securities to be issued in addition thereto or in substitution or replacement therefor as provided herein) of Crailar Technologies Inc. (the "Corporation"), a corporation incorporated under the Business Corporations Act (British Columbia), as constituted on the date hereof at a purchase price (the purchase price in effect from time to time being called the "Exercise Price") of CAD$1.25 per Common Share if exercised on or before u
, 2016, subject to adjustment as provided herein.

- 2 -

 

The Corporation agrees that the Common Shares purchased pursuant to the exercise of the Warrants shall be and be deemed to be issued to the Warrantholder as of the close of business on the date on which this Warrant Certificate shall have been surrendered and payment made for such Common Shares as aforesaid.

Nothing contained herein shall confer any right upon the Warrantholder to subscribe for or purchase any Common Shares at any time after the Expiry Time and from and after the Expiry Time the Warrants and all rights under this Warrant Certificate shall be void and of no value.

The above provisions are subject to the following: 

1.                     Exercise

1.1                   In the event that the Warrantholder desires to exercise the right to purchase Common Shares conferred hereby, the Warrantholder shall (a) surrender this Warrant Certificate to the Corporation in accordance with section 9 hereof, (b) complete and execute a subscription form in the form attached as Schedule A to this Warrant Certificate, and (c) pay the amount payable on the exercise of this Warrant in respect of the Common Shares subscribed for either by bank draft or cheque payable to the Corporation. Upon such surrender and payment as aforesaid, the Warrantholder shall be deemed for all purposes to be the holder of record of the number of Common Shares to be so issued and the Warrantholder shall be entitled to delivery of a certificate or certificates representing such Common Shares and the Corporation shall cause such certificate or certificates to be delivered to the Warrantholder at the address specified in the subscription form within five business days after such surrender and payment as aforesaid. No fractional Common Shares will be issuable upon any exercise of this Warrant and the Warrantholder will not be entitled to any cash payment or compensation in lieu of a fractional Common Share.

2.                     Partial Exercise

2.1                   The Warrantholder may from time to time subscribe for and purchase any lesser number of Common Shares than the number of Common Shares expressed in this Warrant Certificate. In the event that the Warrantholder subscribes for and purchases any such lesser number of Common Shares prior to the Expiry Time, the Warrantholder shall be entitled to receive a replacement certificate representing the unexercised balance of the Warrants.

3.                     Not a Shareholder

3.1                   The holding of the Warrants shall not constitute the Warrantholder a shareholder of the Corporation nor entitle the Warrantholder to any right or interest in respect thereof except as expressly provided in this Warrant Certificate.

- 3 -

 

4.                     Covenants and Representations

4.1                   The Corporation hereby represents and warrants that it is authorized to issue and that it will cause the Common Shares from time to time subscribed for and purchased in the manner provided in this Warrant Certificate and the certificate representing such Common Shares to be issued and that, at all times prior to the Expiry Time, it will reserve and there will remain unissued a sufficient number of Common Shares to satisfy the right of purchase provided in this Warrant Certificate. The Corporation hereby further covenants and agrees that it will at its expense expeditiously use its best efforts to obtain the listing of such Common Shares (subject to issue or notice of issue) on each stock exchange or over-the-counter market on which the Common Shares may be listed from time to time. All Common Shares which are issued upon the exercise of the right of purchase provided in this Warrant Certificate, upon payment therefor of the amount at which such Common Shares may be purchased pursuant to the provisions of this Warrant Certificate, shall be and be deemed to be fully paid and non-assessable shares and free from all taxes, liens and charges with respect to the issue thereof. The Corporation hereby represents and warrants that this Warrant Certificate is a valid and enforceable obligation of the Corporation, enforceable in accordance with the provisions of this Warrant Certificate.  The Corporation hereby further covenants and agrees that it shall make all requisite filings under the securities laws of each Province of Canada and the respective regulations made thereunder including those necessary to remain a reporting issuer not in default of any requirement of such acts and regulations.

5.                     Anti-Dilution Protection:

5.1                   Definitions: For the purposes of this section 5, unless there is something in the subject matter or context inconsistent therewith, the words and terms defined below shall have the respective meanings specified therefor in this subsection 5.1:
(a)       "Adjustment Period" means the period commencing on u
, 2013 and ending at the Expiry Time;

(b)       "Current Market Price" of the Common Shares at any date means the price per share equal to the weighted average price at which the Common Shares have traded on the TSX Venture Exchange or, if the Common Shares are not then listed on the TSX Venture Exchange, on such other Canadian stock exchange as may be selected by the directors of the Corporation for such purpose or, if the Common Shares are not then listed on any Canadian stock exchange, in the over-the-counter market, during the period of any 20 consecutive trading days ending not more than five business days before such date; provided that the weighted average price shall be determined by dividing the aggregate sale price of all Common Shares sold on the said exchange or market, as the case may be, during such 20 consecutive trading days by the total number of Common Shares so sold; and provided further that if the Common Shares are not then listed on any Canadian stock exchange or traded in the over-the-counter market, then the Current Market Price shall be determined by such firm of independent chartered accountants as may be selected by the directors of the Corporation;

(c)       "director" means a director of the Corporation for the time being and, unless otherwise specified herein, a reference to action "by the directors" means action by the directors of the Corporation as a board or, whenever empowered, action by any committee of the directors of the Corporation; and

- 4 -

 
(d)       "trading day" with respect to a stock exchange or over-the-counter market means a day on which such stock exchange or market is open for business.

5.2                   Adjustments:  The Exercise Price and the number of Common Shares issuable to the Warrantholder pursuant to this Warrant Certificate shall be subject to adjustment from time to time in the events and in the manner provided as follows:
(a)       If at any time during the Adjustment Period the Corporation shall:
(i)       fix a record date for the issue of, or issue, Common Shares to the holders of all or substantially all of the outstanding Common Shares by way of a stock dividend;

(ii)      fix a record date for the distribution to, or make a distribution to, the holders of all or substantially all of the outstanding Common Shares payable in Common Shares or securities exchangeable for or convertible into Common Shares;

(iii)     subdivide the outstanding Common Shares into a greater number of Common Shares; or

(iv)      consolidate the outstanding Common Shares into a lesser number of Common Shares,

(any of such events in subclauses 5.2(a)(i), 5.2(a)(ii), 5.2(a)(iii) and 5.2(a)(iv) above being herein called a "Common Share Reorganization"), the Exercise Price shall be adjusted on the earlier of the record date on which holders of Common Shares are determined for the purposes of the Common Share Reorganization and the effective date of the Common Share Reorganization to the amount determined by multiplying the Exercise Price in effect immediately prior to such record date or effective date, as the case may be, by a fraction:
(A)       the numerator of which shall be the number of Common Shares outstanding on such record date or effective date, as the case may be, before giving effect to such Common Share Reorganization; and

(B)       the denominator of which shall be the number of Common Shares which will be outstanding immediately after giving effect to such Common Share Reorganization (including in the case of a distribution of securities exchangeable for or convertible into Common Shares the number of Common Shares that would have been outstanding had such securities been exchanged for or converted into Common Shares on such date).

- 5 -

 
To the extent that any adjustment in the Exercise Price occurs pursuant to this clause 5.2(a) as a result of the fixing by the Corporation of a record date for the distribution of securities exchangeable for or convertible into Common Shares, the Exercise Price shall be readjusted immediately after the expiry of any relevant exchange or conversion right to the Exercise Price which would then be in effect based upon the number of Common Shares actually issued and remaining issuable after such expiry and shall be further readjusted in such manner upon the expiry of any further such right. If the Warrantholder has not exercised its right to subscribe for and purchase Common Shares on or prior to the record date of such stock dividend or distribution or the effective date of such subdivision or consolidation, as the case may be, upon the exercise of such right thereafter shall be entitled to receive and shall accept in lieu of the number of Common Shares then subscribed for and purchased by the Warrantholder, at the Exercise Price determined in accordance with this clause 5.2(a) the aggregate number of Common Shares that the Warrantholder would have been entitled to receive as a result of such Common Share Reorganization, if, on such record date or effective date, as the case may be, the Warrantholder had been the holder of record of the number of Common Shares so subscribed for and purchased.

(b)       If at any time during the Adjustment Period the Corporation shall fix a record date for the issue or distribution to the holders of all or substantially all of the outstanding Common Shares of rights, options or warrants pursuant to which such holders are entitled, during a period expiring not more than 45 days after the record date for such issue (such period being the "Rights Period"), 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 in the case of securities exchangeable for or convertible into Common Shares, at an exchange or conversion price per share) at the date of issue of such securities of less than 95% of the Current Market Price of the Common Shares on such record date (any of such events being called a "Rights Offering"), the Exercise Price shall be adjusted effective immediately after the record date for such Rights Offering to the amount determined by multiplying the Exercise Price in effect on such record date by a fraction:
(i)       the numerator of which shall be the aggregate of
(A)       the number of Common Shares outstanding on the record date for the Rights Offering, and

(B)       the quotient determined by dividing
(I)       either (a) the product of the number of Common Shares offered during the Rights Period pursuant to the Rights Offering and the price at which such Common Shares are offered, or, (b) the product of the exchange, exercise or conversion price of the securities so offered and the number of Common Shares for or into which the securities offered pursuant to the Rights Offering may be exchanged, exercised or converted, as the case may be, by

(II)      the Current Market Price of the Common Shares as of the record date for the Rights Offering; and

- 6 -

 
(ii)      the denominator of which shall be the aggregate of the number of Common Shares outstanding on such record date and the number of Common Shares offered pursuant to the Rights Offering (including in the case of the issue or distribution of securities exchangeable or exercisable for or convertible into Common Shares the number of Common Shares into which such securities may be exchanged, exercised or converted).

If by the terms of the rights, options, or warrants referred to in this clause 5.2(b), there is more than one purchase, conversion or exchange price per Common Share, the aggregate price of the total number of additional Common Shares offered for subscription or purchase, or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered, shall be calculated for purposes of the adjustment on the basis of the lowest purchase, conversion or exchange price per Common Share, as the case may be. Any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such calculation. To the extent that any adjustment in the Exercise Price occurs pursuant to this clause 5.2(b) as a result of the fixing by the Corporation of a record date for the issue or distribution of rights, options or warrants referred to in this clause 5.2(b), the Exercise Price shall be readjusted immediately after the expiry of any relevant exchange, conversion or exercise right to the Exercise Price which would then be in effect based upon the number of Common Shares actually issued and remaining issuable after such expiry and shall be further readjusted in such manner upon the expiry of any further such right.

(c)       If at any time during the Adjustment Period the Corporation shall fix a record date for the issue or distribution to the holders of all or substantially all of the Common Shares of:
(i)       shares of the Corporation of any class other than Common Shares;

(ii)      rights, options or warrants to acquire Common Shares or securities exchangeable or exercisable for or convertible into Common Shares (other than rights, options or warrants pursuant to which holders of Common Shares are entitled, during a period expiring not more than 45 days after the record date for such issue, to subscribe for or purchase Common Shares or securities exchangeable for or convertible into Common Shares at a price per share (or in the case of securities exchangeable or exercisable for or convertible into Common Shares at an exchange, exercise or conversion price per share on the record date for the issue of such securities) of at least 95% of the Current Market Price of the Common Shares on such record date);

(iii)     evidences of indebtedness of the Corporation; or

(iv)      any property or assets of the Corporation;

and if such issue 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 Exercise Price shall be adjusted effective immediately after the record date for the Special Distribution to the amount determined by multiplying the Exercise Price in effect on the record date for the Special Distribution by a fraction:

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(A)       the numerator of which shall be the difference between
(I)       the product of the number of Common Shares outstanding on such record date and the Current Market Price of the Common Shares on such record date, and

(II)      the fair value, as determined by the directors of the Corporation, to the holders of Common Shares of the shares, rights, options, warrants, evidences of indebtedness or property or assets to be issued or distributed in the Special Distribution, and

(B)       the denominator of which shall be the product obtained by multiplying the number of Common Shares outstanding on such record date by the Current Market Price of the Common Shares on such record date.

Any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of such calculation. To the extent that any adjustment in the Exercise Price occurs pursuant to this clause 5.2(c) as a result of the fixing by the Corporation of a record date for the issue or distribution of rights, options or warrants to acquire Common Shares or securities exchangeable or exercisable for or convertible into Common Shares referred to in this clause 5.2(c), the Exercise Price shall be readjusted immediately after the expiry of any relevant exchange, exercise or conversion right to the amount which would then be in effect if the current market value of the Common Shares had been determined on the basis of the number of Common Shares issued and remaining issuable immediately after such expiry,. and shall be further readjusted in such manner upon the expiry of any further such right.

(d)       If at any time during the Adjustment Period there shall occur:
(i)       a reclassification or redesignation of the Common Shares, any change of the Common Shares into other shares or securities or any other capital reorganization involving the Common Shares other than a Common Share Reorganization;

(ii)      a consolidation, amalgamation or merger of the Corporation with or into any other body corporate which results in a reclassification or redesignation of the Common Shares or a change of the Common Shares into other shares or securities; or

(iii)     the transfer of the undertaking or assets of the Corporation as an entirety or substantially as an entirety to another corporation or entity;

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(any of such events being herein called a "Capital Reorganization"), after the effective date of the Capital Reorganization 
(iv)      the Warrantholder shall be entitled to receive, and shall accept, for the same aggregate consideration, upon exercise of this Warrant, in lieu of the number of Common Shares which the Warrantholder was theretofore entitled to purchase or receive upon the exercise of this Warrant, the kind and aggregate number of shares and other securities or property resulting from the Capital Reorganization which the Warrantholder would have been entitled to receive as a result of the Capital Reorganization if, on the effective date thereof, the Warrantholder had been the registered holder of the number of Common Shares to which the Warrantholder was theretofore entitled to purchase or receive upon the exercise of this Warrant, and 

(v)       the Exercise Price shall, on the effective date of the Capital Reoganization, be adjusted by multiplying the Exercise Price in effect immediately prior to such Capital Reorganization by the number of Common Shares purchasable pursuant to this Warrant Certificate immediately prior to the Capital Reorganization, and dividing the product thereof by the number of successor securities determined in Section 5.2(d)(iv) above.

(e)       If necessary, as a result of any Capital Reorganization, appropriate adjustments shall be made in the application of the provisions of this Warrant Certificate with respect to the rights and interest thereafter of the Warrantholder to the end that the provisions of this Warrant Certificate shall thereafter correspondingly be made applicable as nearly as may reasonably be possible in relation to any shares or other securities or property thereafter deliverable upon the exercise of this Warrant.

(f)       If at any time during the Adjustment Period any adjustment or readjustment in the Exercise Price shall occur pursuant to the provisions of clauses 5.2(a), 5.2(b) or 5.2(c) hereof, then the number of Common Shares purchasable upon the subsequent exercise of this Warrant shall be simultaneously adjusted or readjusted, as the case may be, by multiplying the number of Common Shares purchasable upon the exercise of this Warrant immediately prior to such adjustment or readjustment by a fraction which shall be the reciprocal of the fraction used in the adjustment or readjustment of the Exercise Price.

5.3                   Rules: The following rules and procedures shall be applicable to adjustments made pursuant to subsection 5.2 hereof.
(a)       Subject to the following provisions of this subsection 5.3, any adjustment made pursuant to subsection 5.2 hereof shall be made successively whenever an event referred to therein shall occur.

(b)       No adjustment in the Exercise Price shall be required unless such adjustment would result in a change of at least one per cent in the then Exercise Price and no adjustment shall be made in the number of Common Shares purchasable or issuable on the exercise of this Warrant unless it would result in a change of at least one one-hundredth of a Common Share; provided, however, that any adjustments which except for the provision of this clause 5.3(b) would otherwise have been required to be made shall be carried forward and taken into account in any subsequent adjustment. Notwithstanding any other provision of subsection 5.2 hereof, no adjustment of the Exercise Price shall be made which would result in an increase in the Exercise Price or a decrease in the number of Common Shares issuable upon the exercise of this Warrant (except in respect of the Common Share Reorganization described in subclause 5.2(a)(iv) hereof or a Capital Reorganization described in subclause 5.2(d)(ii) hereof).

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(c)       No adjustment in the Exercise Price or in the number or kind of securities purchasable upon the exercise of this Warrant shall be made in respect of any event described in section 5 hereof if the Warrantholder is entitled to participate in such event on the same terms mutatis mutandis as if the Warrantholder had exercised this Warrant prior to or on the record date or effective date, as the case may be, of such event.

(d)       No adjustment in the Exercise Price or in the number of Common Shares purchasable upon the exercise of this Warrant shall be made pursuant to subsection 5.2 hereof in respect of the issue from time to time of Common Shares pursuant to this Warrant Certificate or pursuant to any stock option, stock purchase or stock bonus plan in effect from time to time for directors, officers or employees of the Corporation and/or any subsidiary of the Corporation and any such issue, and any grant of options in connection therewith, shall be deemed not to be a Common Share Reorganization, a Rights Offering nor any other event described in subsection 5.2 hereof.

(e)       If at any time during the Adjustment Period the Corporation shall take any action affecting the Common Shares, other than an action described in subsection 5.2 hereof, which in the opinion of the directors would have a material adverse effect upon the rights of the Warrantholder, either or both the Exercise Price and the number of Common Shares purchasable upon exercise of this Warrant shall be adjusted in such manner and at such time by action by the directors, in their sole discretion, as may be equitable in the circumstances. Failure of the taking of action by the directors so as to provide for an adjustment prior to the effective date of any action by the Corporation affecting the Common Shares shall be deemed to be conclusive evidence that the directors have determined that it is equitable to make no adjustment in the circumstances.

(f)       If the Corporation shall set a record date to determine holders of Common Shares for the purpose of entitling such holders to receive any dividend or distribution or any subscription or purchase rights and shall, thereafter and before the distribution to such holders of any such dividend, distribution or subscription or purchase rights, legally abandon its plan to payor deliver such dividend, distribution or subscription or purchase rights, then no adjustment in the Exercise Price or the number of Common Shares purchasable upon exercise of this Warrant shall be required by reason of the setting of such record date.

(g)       In any case in which this Warrant shall require that an adjustment shall become effective immediately after a record date for an event referred to in subsection 5.2 hereof, the Corporation may defer, until the occurrence of such event:

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(i)       issuing to the Warrantholder, to the extent that this Warrant is exercised after such record date and before the occurrence of such event, the additional Common Shares issuable upon such exercise by reason of the adjustment required by such event; and

(ii)      delivering to the Warrantholder any distribution declared with respect to such additional Common Shares after such record date and before such event;

provided, however, that the Corporation shall deliver to the Warrantholder an appropriate instrument evidencing the right of the Warrantholder, upon the occurrence of the event requiring the adjustment, to an adjustment in the Exercise Price and the number of Common Shares purchasable upon the exercise of this Warrant and to such distribution declared with respect to any such additional Common Shares issuable on this exercise of this Warrant.

(h)       In the absence of a resolution of the directors fixing a record date for a Rights Offering, the Corporation shall be deemed to have fixed as the record date therefor the date of the issue of the rights, options or warrants issued pursuant to the Rights Offering.

(i)       If a dispute shall at any time arise with respect to adjustments of the Exercise Price or the number of Common Shares purchasable upon the exercise of this Warrant, such disputes shall be conclusively determined by the auditors of the Corporation 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 such determination shall be conclusive evidence of the correctness of any adjustment made pursuant to subsection 5.2 hereof and shall be binding upon the Corporation and the Warrantholder.

(j)       As a condition precedent to the taking of any action which would require an adjustment pursuant to subsection 5.2 hereof, including the Exercise Price and the number or class of Common Shares or other securities which are to be received upon the exercise thereof, the Corporation shall take any action which may, in the opinion of counsel to the Corporation, be necessary in order that the Corporation may validly and legally issue as fully paid and non-assessable shares all of the Common Shares or other securities which the Warrantholder is entitled to receive in accordance with the provisions of this Warrant Certificate.

5.4                   Notice:  At least 21 days prior to any record date or effective date, as the case may be, for any event which requires or might require an adjustment in any of the rights of the Warrantholder under this Warrant, including the Exercise Price and 'the number of Common Shares which are purchasable under this Warrant, the Corporation shall deliver to the Warrantholder a certificate of the Corporation specifying the particulars of such event and, if determinable, the required adjustment and the calculation of such adjustment. In case any adjustment for which a notice in this subsection 5.4 has been given is not then determinable, the Corporation shall promptly after such adjustment is determinable deliver to the Warrantholder a certificate providing the calculation of such adjustment. The Corporation hereby covenants and agrees that the register of transfers and transfer books for the Common Shares will be open, and that the Corporation will not take any action which might deprive the Warrantholder of the opportunity of exercising the rights of subscription contained in this Warrant Certificate, during such 21 day period.

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6.                     Further Assurances 

The Corporation hereby covenants and agrees that it will do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged and delivered, all and every such other act, deed and assurance as the Warrantholder shall reasonably require for the better accomplishing and effectuating of the intentions and provisions of this Warrant Certificate.

7.                     Time of Essence

Time is of the essence of this Warrant Certificate.

8.                     Governing Laws

This Warrant Certificate shall be construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein.

9.                     Notices

All notices or other communications to be given under this Warrant Certificate shall be delivered by hand or by telecopier and, if delivered by hand, shall be deemed to have been given on the delivery date and, if sent by telecopier, on the date of transmission if sent before 4:00 p.m. on a business day or, if such day is not a business day, on the first business day following the date of transmission.

Notices to the Corporation shall be addressed to:
Crailar Technologies Inc.

305-4420 Chatterton Way

Victoria, British Columbia

V8X 5J2

Attention: Guy Prevost, Director

Fax Number:  (250) 658-8586

The Corporation or the Warrantholder may change its address for service by notice in writing to the other of them specifying its new address for service under this Warrant Certificate.

10.                   Legends on Common Shares:

10.1                 Canadian Legends: Any certificate representing Common Shares issued upon the exercise of this Warrant prior to the date which is four months and one day after the date hereof will bear the following legends:
"UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE u
, 2013."

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and
"WITHOUT PRIOR WRITTEN APPROVAL OF TSX VENTURE EXCHANGE AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL u
, 2013."

provided that at any time subsequent to the date which is four months and one day after the date hereof any certificate representing such Common Shares may be exchanged for a certificate bearing no such legends.

10.2                 U.S. Legends: The Warrantholder acknowledges that the Corporation is considered a U.S. "domestic issuer" under applicable U.S. securities laws and, as such, all certificates representing Common Shares issued upon the exercise of Warrants shall bear one of the restrictive legends as set forth hereinbelow.

These Warrants and the Common Shares to be issued upon its exercise have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the "U.S. Securities Act"), or the securities laws of any state of the United States.  These Warrants may not be exercised in the United States, or by or for the account or benefit of a U.S. person or a person in the United State, unless (i) the Common Shares are registered under the U.S. Securities Act and the applicable laws of any such state, or (ii) an exemption from such registration requirements is available, and (iii) the Warrantholder has complied with the requirements set forth in subscription form attached hereto as Schedule A.  "United States" and "U.S. person" are as defined in Regulation S under the U.S. Securities Act.

Any Common Shares issued upon exercise of these Warrants in the United States, or to or for the account or benefit of a U.S. person or a person in the United States, will be "restricted securities", as defined in Rule 144(a)(3) under the U.S. Securities Act.  The certificates representing such Common Shares, as well as all certificates issued in exchange or in substitution therefor, until such time as is no longer required under the applicable requirements of the U.S. Securities Act, or applicable state securities laws, will bear, on the face of such certificate, the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR APPLICABLE STATE SECURITIES LAWS.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS."

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Any Common Shares issued upon exercise of these Warrants outside the United States to a person who is not a U.S. person and is not exercising these Warrants for the account or benefit of a U.S. person or a person in the United States, and who did not execute or deliver the subscription form attached hereto as Schedule A in the United States, will be "restricted securities", as defined in Rule 144(a)(3) under the U.S. Securities Act, and will bear, on the face of such certificate the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR APPLICABLE STATE SECURITIES LAWS.  THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE STATE SECURITIES LAWS, OR PURSUANT TO AN EXEMPTION OR EXCLUSION FROM REGISTRATION UNDER THE U.S. SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES REPRESENTED BY THE CERTIFICATE CANNOT BE THE SUBJECT OF HEDGING TRANSACTIONS UNLESS SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE U.S. SECURITIES ACT."

11.                   Lost Certificate

11.1                 If this Warrant Certificate or any replacement hereof becomes stolen, lost, mutilated or destroyed, the Corporation shall, on such terms as it may in its discretion impose, acting reasonably, issue and deliver a new certificate, in form identical hereto but with appropriate changes, representing any unexercised portion of the subscription rights represented hereby to replace the certificate so stolen, lost, mutilated or destroyed.

12.                   Language

The parties hereto acknowledge and confirm that they have requested that this Warrant Certificate as well as all notices and other documents contemplated hereby be drawn up in the English language. Les parties aux présentes reconnaissent et confirment qu'elles ont exigé que la présente convention ainsi que tous les avis et documents qui s'y rattachent soient rédigés dans la langue anglaise.

13.                   Transfer

13.1                 The Warrants are transferable and the term "Warrantholder" shall mean and include any successor, transferee or assignee of the current or any future Warrantholder. The term "Warrantholder" shall mean and include any successor of the Warrantholder. The Warrants may by transferred by the Warrantholder completing and delivering to the Corporation the transfer form attached hereto as Schedule B.

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14.                   Successors and Assigns

14.1                 This Warrant Certificate shall enure to the benefit of the Warrantholder and the successors and assignees thereof and shall be binding upon the Corporation and the successors thereof.

IN WITNESS WHEREOF, the Corporation has caused this Warrant Certificate to be signed by an authorized officer as of the u
 day of ______, 2013.

CRAILAR TECHNOLOGIES INC.

Per:      ____________________________

            Authorized Signatory

SCHEDULE A

TO:                 CRAILAR TECHNOLOGIES INC.

SUBSCRIPTION FORM

The undersigned hereby subscribes for ____________ common shares ("Common Shares") of Crailar Technologies Inc. (the "Corporation") (or such other number of Common Shares or other securities to which such subscription entitles the undersigned in lieu thereof or in addition thereto) pursuant to the provisions of the warrant certificate (the "Warrant Certificate") dated as of the u
 day of ______, 2013 issued by the Corporation to the Warrantholder (as defined in the Warrant Certificate) at the purchase price of CAD$1.25 per Common Share if exercised on or before 5:00 p.m. (Vancouver time) on u
, 2016, (or at such other purchase price as may then be in effect under the provisions of the Warrant Certificate) and on and subject to the other terms and conditions specified in the Warrant and encloses herewith a cheque, bank draft or money order or has transmitted good same day funds by wire or other similar transfer in lawful money of Canada payable to or to the order of the Corporation in payment of the subscription price.

The undersigned hereby directs that the Common Shares subscribed for be registered and delivered as follows:

	
Name in Full
	
Address (include Postal/Zip Code)
	
Number of Common Shares

	 	 	 
	 	 	 

As at the time of exercise hereunder, the undersigned Warrantholder represents, warrants and certifies as follows (check one):

	 	
(A)
	
£

	
the undersigned Warrantholder at the time of exercise of the Warrant is not in the United States, is not a "U.S. person" as defined in Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), and is not exercising the Warrant for the account or benefit of a U.S. person or a person in the United States (as defined in Regulation S), and did not execute or deliver this subscription form in the United States; OR

	 	
(B)
	
£

	
the undersigned Warrantholder is resident in the United States, is a U.S. person, or is exercising the Warrant for the account or benefit of a U.S. person or a person in the United States (a "U.S. Holder"), and is an "accredited investor", as defined in Rule 501(a) of Regulation D under the U.S. Securities Act (a "U.S. Accredited Investor"), and has completed the U.S. Accredited Investor Status Certificate in the form attached to this subscription form; OR 

 

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(C)
	
£

	
if the undersigned Warrantholder is a U.S. Holder, the undersigned Warrantholder has delivered to the Corporation and the Corporation's transfer agent an opinion of counsel (which will not be sufficient unless it is in form and substance satisfactory to the Corporation) or such other evidence satisfactory to the Corporation to the effect that with respect to the common shares to be delivered upon exercise of the Warrant, the issuance of such securities has been registered under the U.S. Securities Act and applicable state securities laws, or an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws is available.

Note:  Certificates representing common shares will not be registered or delivered to an address in the United States unless box (B) or (C) immediately above is checked.

If the undersigned Warrantholder has indicated that the undersigned Warrantholder is a U.S. Accredited Investor by marking box (B) above, the undersigned Warrantholder additionally represents and warrants to the Corporation that:

1       the undersigned Warrantholder has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of an investment in the Common Shares, and the undersigned is able to bear the economic risk of loss of his or her entire investment;

2.       the undersigned is: (i) purchasing the Common Shares for his or her own account or for the account of one or more U.S. Accredited Investors with respect to which the undersigned is exercising sole investment discretion, and not on behalf of any other person; (ii) is purchasing the Common Shares for investment purposes only and not with a view to resale, distribution or other disposition in violation of United States federal or state securities laws; and (iii) in the case of the purchase by the undersigned of the Common Shares as agent or trustee for any other person or persons (each a "Beneficial Owner"), the undersigned Warrantholder has due and proper authority to act as agent or trustee for and on behalf of each such Beneficial Owner in connection with the transactions contemplated hereby; provided that: (x) if the undersigned Warrantholder, or any Beneficial Owner, is a corporation or a partnership, syndicate, trust or other form of unincorporated organization, the undersigned Warrantholder or each such Beneficial Owner was not incorporated or created solely, nor is it being used primarily to permit purchases without a prospectus or registration statement under applicable law; and (y) each Beneficial Owner, if any, is a U.S. Accredited Investor; and

3.       the undersigned has not exercised the Warrants as a result of any form of general solicitation or general advertising (as such terms are used in Rule 502 of Regulation D under the U.S. Securities Act), including advertisements, articles, notices or other communications published in any newspaper, magazine or similar media, or broadcast over radio, television, the Internet or other form of telecommunications, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising.

If the undersigned has indicated that the undersigned is a U.S. Accredited Investor by marking box (B) above, the undersigned also acknowledges and agrees that:

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1.       the Corporation has provided to the undersigned the opportunity to ask questions and receive answers concerning the terms and conditions of the offering, and the undersigned has had access to such information concerning the Corporation as the undersigned has considered necessary or appropriate in connection with the undersigned's investment decision to acquire the Common Shares;

2.       if the undersigned decides to offer, sell or otherwise transfer any of the Common Shares, the undersigned must not, and will not, offer, sell or otherwise transfer any of such Common Shares directly or indirectly, unless:
(a)       the sale is to the Corporation;

(b)       the sale is made outside the United States in a transaction meeting the requirements of Rule 904 of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations;

(c)       the sale is made pursuant to the exemption from the registration requirements under the U.S. Securities Act provided by Rule 144 thereunder, if available, and in accordance with any applicable state securities or "blue sky" laws; or

(d)       the Common Shares are sold in a transaction that does not require registration under the U.S. Securities Act or any applicable state laws and regulations governing the offer and sale of securities, and it has prior to such sale furnished to the Corporation an opinion of counsel reasonably satisfactory to the Corporation;

3.       the Common Shares are "restricted securities" under applicable federal securities laws and that the U.S. Securities Act and the rules of the United States Securities and Exchange Commission provide in substance that the undersigned may dispose of the Common Shares only pursuant to an effective registration statement under the U.S. Securities Act or an exemption therefrom;

4.       the Corporation has no obligation to register any of the Common Shares or to take action so as to permit sales pursuant to the U.S. Securities Act (including Rule 144 thereunder);

5.       the certificates representing the Common Shares (and any certificates issued in exchange or substitution for the Common Shares) will bear a legend stating that such securities have not been registered under the U.S. Securities Act or the securities laws of any state of the United States, and may not be offered for sale or sold unless registered under the U.S. Securities Act and the securities laws of all applicable states of the United States, or unless an exemption from such registration requirements is available;

6.       the legend may be removed by delivery to the registrar and transfer agent and the Corporation of an opinion of counsel, of recognized standing reasonably satisfactory to the Corporation, that such legend is no longer required under applicable requirements of the U.S. Securities Act or state securities laws; 

7.       there may be material tax consequences to the undersigned of an acquisition or disposition of the Common Shares;

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8.       the Corporation gives no opinion and makes no representation with respect to the tax consequences to the undersigned under United States, state, local or foreign tax law of the undersigned's acquisition or disposition of any Common Shares; in particular, no determination has been made whether the Corporation will be a "passive foreign investment company" (commonly known as a "PFIC") within the meaning of Section 1297 of the United States Internal Revenue Code; 

9.       funds representing the subscription price for the Common Shares which will be advanced by the undersigned to the Corporation upon exercise of the Warrants will not represent proceeds of crime for the purposes of the United States Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act (the "PATRIOT Act"), and the undersigned acknowledges that the Corporation may in the future be required by law to disclose the undersigned's name and other information relating to this exercise form and the undersigned's subscription hereunder, on a confidential basis, pursuant to the PATRIOT Act.  No portion of the subscription price to be provided by the undersigned (i) has been or will be derived from or related to any activity that is deemed criminal under the laws of the United States of America, or any other jurisdiction, or (ii) is being tendered on behalf of a person or entity who has not been identified to or by the undersigned, and it shall promptly notify the Corporation if the undersigned discovers that any of such representations ceases to be true and provide the Corporation with appropriate information in connection therewith;

10.      the Corporation is not currently, nor it is obligated to become a "foreign issuer"; and

11.     the undersigned consents to the Corporation making a notation on its records or giving instructions to any transfer agent of the Corporation in order to implement the restrictions on transfer set forth and described in this subscription form.

In the absence of instructions to the contrary, the securities or other property will be issued in the name of or to the Warrantholder hereof and will be sent by first class mail to the last address of the Warrantholder appearing on the register maintained for the Warrants.

DATED this _________ day of _______________, 20_____.

	
In the presence of:

__________________________________

Signature of Witness

__________________________________

Witness's Name
	
 

__________________________________

Signature of Warrantholder

__________________________________

Name and Title of Authorized Signatory for 

the Warrantholder

Please print below your name and address in full.

	
Legal Name 
	
_______________________________________________________________

	
Address
	
_______________________________________________________________

_______________________________________________________________

 

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INSTRUCTIONS FOR SUBSCRIPTION

The signature to the subscription must correspond in every particular with the name written upon the face of the Warrant Certificate without alteration.  If the certificates representing the common shares to be issued upon exercise of the Warrants differs from the registration of the Warrant Certificates the signature of the registered Warrantholder must be guaranteed by an authorized officer of a Canadian chartered bank, or of a major Canadian trust company, or by a medallion signature guarantee from a member recognized under the Signature Medallion Guarantee Program, or from a similar entity in the United States, if this transfer is executed in the United States, or in accordance with industry standards.

In the case of persons signing by agent or attorney or by personal representative(s), the authority of such agent, attorney or representative(s) to sign must be proven to the satisfaction of the Corporation.

If the Warrant Certificate and the form of subscription are being forwarded by mail, registered mail must be employed.

U.S. ACCREDITED INVESTOR STATUS CERTIFICATE

In connection with the exercise of certain outstanding warrants of CRAILAR TECHNOLOGIES INC. (the "Company") by the Warrantholder, the Warrantholder hereby represents and warrants to the Company that the Warrantholder, and each beneficial owner (each a "Beneficial Owner"), if any, on whose behalf the Warrantholder is exercising such warrants, satisfies one or more of the following categories of Accredited Investor (please write "W/H" for the undersigned Warrantholder, and "B/O" for each beneficial owner, if any, on each line that applies):

	
_______ (1)
	
Any bank as defined in Section 3(a)(2) of the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the U.S. Securities Act whether acting in its individual or fiduciary capacity; any broker or dealer registered pursuant to Section 15 of the U.S. Securities Exchange Act of 1934; any insurance company as defined in Section 2(a)(13) of the U.S. Securities Act; any investment company registered under the U.S. Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act; any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the U.S. Small Business Investment Act of 1958; any plan established and maintained by a state, its political subdivisions, or any agency or instrumentality of a state or its political subdivisions, for the benefit of its employees, if such plan has total assets in excess of US$5,000,000; any employee benefit plan within the meaning of the U.S. Employee Retirement Income Security Act of 1974 if the investment decision is made by a plan fiduciary, as defined in Section 3(21) of such Act, which is either a bank, savings and loan association, insurance company, or registered investment adviser, or if the employee benefit plan has total assets in excess of US$5,000,000, or, if a self-directed plan, with investment decisions made solely by persons that are "accredited investors" (as such term is defined in Rule 501 of Regulation D of the U.S. Securities Act);

	
_______ (2)
	
Any private business development company as defined in Section 202(a)(22) of the U.S. Investment Advisers Act of 1940;

	
_______ (3)
	
Any organization described in Section 501(c)(3) of the U.S. Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of US$5,000,000; 

	
_______ (4)
	
Any trust with total assets in excess of US$5,000,000, not formed for the specific purpose of acquiring the securities offered, whose purchase is directed by a sophisticated person (being defined as a person who has such knowledge and experience in financial and business matters that he or she is capable of evaluating the merits and risks of the prospective investment);

 

- 2 -

 

 

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

	
_______ (6)
	
A natural person who had annual gross income during each of the last two full calendar years in excess of US$200,000 (or together with his or her spouse in excess of US$300,000) and reasonably expects to have annual gross income in excess of US$200,000 (or together with his or her spouse in excess of US$300,000) during the current calendar year, and no reason to believe that his or her annual gross income will not remain in excess of US$200,000 (or that together with his or her spouse will not remain in excess of US$300,000) for the foreseeable future;

	
_______ (7)
	
Any director or executive officer of the Company; or

	
_______ (8)
	
Any entity in which all of the equity owners meet the requirements of at least one of the above categories.

 

SCHEDULE B

FORM OF TRANSFER

TO:      Crailar Technologies Inc.

            305-4420 Chatterton Way

            Victoria, British Columbia  V8X 5J2

            Attention:  Chief Financial Officer

            Telephone: 604-658-8582; Fax: 604-658-8586

FOR VALUE RECEIVED, the undersigned (the "Transferor") hereby sells, assigns and transfers unto __________________________________ (the "Transferee") ________________ Warrants exercisable for common shares of Crailar Technologies Inc. (the "Corporation") registered in the name of the Transferor on the register of the Corporation maintained therefor, and hereby irrevocably appoints _________________________ the attorney of the Transferor to transfer the said securities on the books maintained by the Corporation with full power of substitution.

The Transferor hereby directs that the Warrants hereby transferred be issued and delivered as follows:

	
NAME IN FULL
	
ADDRESS
	
NUMBER OF WARRANTS

	
 

 
	 	 

The Transferor hereby certifies that (check either A or B):

	
____
	
(A)
	
if the Transferee is (i) a U.S. person, (ii) a person in the United States, or (ii) any person who is acting for the account or benefit of a U.S. person or a person in the United States, the transfer of the Warrants is being completed pursuant to an exemption from the registration requirements of the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), in which case the Transferor has delivered or caused to be delivered by the Transferee a written opinion of U.S. legal counsel of recognized standing in form and substance satisfactory to the Corporation to the effect that the transfer of the Warrants is exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws; or 

	
____
	
(B)
	
the transfer of the Warrants is being made in reliance on Rule 904 of Regulation S ("Regulation S") under the U.S. Securities Act, and the Transferor certifies that:

	 	 	
(1)
	
the undersigned is not an "affiliate" (as defined in Rule 405 under the U.S. Securities Act) of the Corporation or a "distributor", as defined in Regulation S, or an affiliate of a "distributor";

 

- 2 -

 

 

	 	 	
(2)
	
the offer of such securities was not made in the United States, or to or for the benefit or account of a U.S. person or a person in the United States and at the time the offer was accepted, the Transferor and any person acting on its behalf reasonably believed that the Transferee was outside the United States and not a U.S. person;

	 	 	
(3)
	
neither the Transferor nor any person acting on its behalf engaged in any "directed selling efforts" (as such term is defined in Regulation S) in connection with the offer and sale of the Warrants;

	 	 	
(4)
	
the sale is bona fide and not for the purpose of "washing off" the resale restrictions imposed because the Warrants are "restricted securities" (as such term is defined in Rule 144(a)(3) under the U.S. Securities Act);

	 	 	
(5)
	
the Transferor 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 contemplated sale is not a transaction, or part of a series of transactions which, although in technical compliance with Regulation S, is part of a plan or a scheme to evade the registration provisions of the U.S. Securities Act;

	 	 	
and, if requested by the Corporation or its transfer agent, the undersigned has delivered or caused to be delivered an opinion of legal counsel of recognized standing in form and substance satisfactory to the Corporation to the effect that the transfer of the Warrants is exempt from the registration requirements of the U.S. Securities Act.

"United States" and "U.S. person" are as defined in Regulation S under the U.S. Securities Act.

[The rest of this page intentionally left blank]

- 3 -

 

 

DATED this _______ day of ___________________, 20___.

Signature of Transferor guaranteed by:

	
_____________________________________

Medallion Signature Guarantee

Stamp of Transferor

_____________________________________

Authorized Officer

_____________________________________

Name of Institution
	
_____________________________________

Signature of Transferor

_____________________________________

(print name of Transferor)

_____________________________________

(if applicable, print name of signatory and

office)

_____________________________________

_____________________________________

Address of Transferor

- 4 -

 

 

Instructions for Transfer

Signature of the Warrantholder must be the signature of the person appearing on the face of this Warrant Certificate in every particular, without alteration or change.

If the Form of Transfer is signed by a trustee, executor, administrator, curator, guardian, attorney, officer of a corporation or any person acting in a fiduciary or representative capacity, the certificate must be accompanied by evidence of authority to sign satisfactory to the Corporation.

The signature on the Form of Transfer must be guaranteed by one of the following methods:

In Canada and the US: a Medallion Guarantee obtained from a member of an acceptable Medallion Guarantee Program (STAMP, SEMP or MSP). Many banks, credit unions and broker dealers are members of a Medallion Guarantee Program. The guarantor must affix a stamp in the space above bearing the actual words "Medallion Guaranteed".

In Canada: a Signature Guarantee obtained from a major Canadian Schedule I bank that is not a member of a Medallion Guarantee Program. The guarantor must affix a stamp in the space above bearing the actual words "Signature Guaranteed".

Outside Canada and the US: Warrantholders must obtain a guarantee from a local financial institution that has a corresponding affiliate in Canada or the US that is a member of an acceptable Medallion Guarantee Program. The corresponding affiliate must overguarantee the guarantee provided by the local financial institution.

The Warrants will only be transferable in accordance with applicable laws.  The Warrants and the common shares issuable upon exercise thereof have not been and will not be registered under the U.S. Securities Act, or under the securities laws of any state of the United States, and may not be transferred to or for the account or benefit of a U.S. person or any person in the United States without registration under the U.S. Securities Act and applicable state securities laws, or compliance with the requirements of an exemption from registration.

- 5 -

 

 

TRANSFEREE ACKNOWLEDGMENT

The undersigned transferee (the "Transferee") acknowledges and agrees that the Warrants may not be offered, sold, pledged or otherwise transferred in the absence of: (a) an effective registration statement under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") and the applicable laws of any such state, relating thereto; or (b) an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws.  Each Warrant Certificate, and each certificate representing Common Shares issuable upon exercise thereof, shall contain a legend on the face thereof, in the appropriate form, setting forth the restrictions on transfer referred to in the Warrant Certificate, unless in the opinion of counsel for the holder thereof (which is in form and substance satisfactory to the Corporation), the securities represented thereby are not, at such time, required by law to bear such legend, or in the case of the Common Shares, are transferred pursuant to an effective registration statement under the U.S. Securities Act and the applicable state securities laws.  The holder acknowledges and agrees that the Warrants represented by this Warrant Certificate, and the Common Shares issuable upon exercise thereof, constitute "restricted securities" under the U.S. Securities Act.  

If the Transferee acquires the Warrants pursuant to a resale transaction pursuant to Rule 904 of Regulation S under the U.S. Securities Act, then the Transferee acknowledges that the Warrants still continue to be deemed restricted securities and will continue to bear a restrictive legend. 

Any certificate issued at any time in exchange or substitution for any certificate bearing a restrictive legend shall also bear such legend unless in the opinion of counsel for the holder thereof (which is in form and substance satisfactory to the Corporation), the securities represented thereby are not, at such time, required by law to bear such legend.

The Transferee acknowledges that it shall notify the Corporation prior to any exercise or deemed exercise of the Warrants if the representations, warranties and certifications contained in the Form of Transfer are no longer true and correct.

	
Dated the ___ day of ________________, 20___.
	
 
	

___________________________________

	
In the presence of:
	
 
	
(Signature of Transferee)

	 	
 
	
 

	
___________________________________

(Witness)
	
 
	
___________________________________

(Name of Transferee - Please print)

	

___________________________________

(Name of Witness - Please print)
	 	

_____________________________________

(Name and Capacity of Authorized Representative - please print)

	
	
	

The Warrants and the Common Shares issuable upon exercise of the Warrants shall only be transferable in accordance with applicable laws.  The Warrants may only be exercised in the manner required by the Warrant Certificate and the underlying subscription agreement.  Any securities acquired pursuant to this exercise of Warrants shall be subject to applicable hold periods and any certificate representing such securities may bear restrictive legends.

__________

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