Document:

QuickLinks
 -- Click here to rapidly navigate through this document

 
 

EXHIBIT 4.25    
    

UNDERWRITING AGREEMENT  

       

       

Between:  

 CARDIOME PHARMA CORP.  

 and  

 YORKTON SECURITIES INC.,

SPROTT SECURITIES INC.,

TD SECURITIES INC. and

FIRST ASSOCIATES INVESTMENTS INC.  

       

       

April 10, 2003 

 
 

TABLE OF CONTENTS    
    

UNDERWRITING AGREEMENT

CARDIOME PHARMA CORP.  

	1.	Interpretation	 	1
	

2.	

Nature of Transaction	
 	

4
	

3.	

Covenants of the Underwriters	
 	

5
	

4.	

Representations, Warranties and Covenants	
 	

5
	

5.	

Conditions of the Offering	
 	

12
	

6.	

Additional Documents Upon Filing of Prospectus	
 	

13
	

7.	

Closing	
 	

14
	

8.	

Termination Provisions	
 	

14
	

9.	

Indemnity	
 	

15
	

10.	

Contribution	
 	

17
	

11.	

Fees and Expenses	
 	

17
	

12.	

Survival of Warranties, Representations, Covenants and Agreements	
 	

18
	

13.	

Authority of Yorkton Securities Inc	
 	

18
	

14.	

Underwriters' Purchase Entitlement	
 	

18
	

15.	

General Contract Provisions	
 	

19
	

 	

 	

 	
 	

 
	

SCHEDULE "A"	

DETAILS OF THE OFFERING	
 	

A1
	

SCHEDULE "B"	

TERMS AND CONDITIONS FOR UNITED STATES OFFERS AND SALES	
 	

B1
	

SCHEDULE "C"	

OUTSTANDING CONVERTIBLE SECURITIES	
 	

C1
	

SCHEDULE "D"	

PATENT RIGHTS	
 	

D1
	

SCHEDULE "E"	

FORM OF STANDSTILL AGREEMENT WITH RESPECT TO DISPOSITION OF SHARES	
 	

E1
	

SCHEDULE "F"	

OPINION OF THE COMPANY'S COUNSEL	
 	

F1
	

SCHEDULE "G"	

FORM OF THE U.S. SUBSCSRIPTION AGREEMENT	
 	

G1

 
 

UNDERWRITING AGREEMENT    
    

April 10,
2003 

Cardiome
Pharma Corp.

3650 Wesbrook Mall

Vancouver, British Columbia

V6S 2L2 

	Attention:	 	Robert W. Reider

President and Chief Executive Officer

Dear
Sirs: 

        We
understand that Cardiome Pharma Corp. (the "Company") proposes to create, issue and sell 3,810,000 special warrants (the
"Special Warrants") at a price of $2.10 per Special Warrant in respect of 3,762,000 Special Warrants and at a price of $2.30 in respect of 48,000
Special Warrants (the "Offering"). The Special Warrants shall have the terms described in Schedule "A" hereto. 

        Subject
to the terms and conditions set forth below, Yorkton Securities Inc., Sprott Securities Inc., TD Securities Inc. and First Associates Investments Inc.
(collectively, the "Underwriters") hereby offer to purchase from the Company 3,810,000 Special Warrants for aggregate gross proceeds to the Company of
$8,010,600. All of the Underwriters' obligations hereunder are several and not joint or joint and several. 

        The
Company understands that although the offer to purchase the Special Warrants is presented on behalf of the Underwriters as purchasers, the Underwriters will endeavour (if the Company
accepts this offer) to arrange for substituted purchasers (the "Substituted Purchasers") to purchase the Special Warrants directly from the Company. It
is further agreed that, subject to the conditions referred to herein being satisfied, the Underwriters are fully committed to purchase or cause to be purchased the Special Warrants with respect to
which the Underwriters are not able to arrange Substituted Purchasers and this commitment is not subject to the Underwriters being able to arrange Substituted Purchasers, subject to the terms and
conditions set forth below that allow the Underwriters to terminate their obligations hereunder. The Underwriters' commitment to purchase Special Warrants shall be reduced by the number of Special
Warrants with respect to which Subscription Agreements (as defined below) are delivered to the Company on behalf of the Substituted Purchasers by the Underwriters. Any reference to "Purchasers" herein
shall be a reference to the Underwriters as the initial purchasers of the Special Warrants and to the Substituted Purchasers, if any. 

        The
Company agrees that the Underwriters will be permitted to appoint other registered dealers (or other dealers duly qualified in their respective jurisdictions) to assist in the
Offering and that the Underwriters may determine the remuneration payable to such other dealers appointed by them (provided that such remuneration is payable from the remuneration payable to the
Underwriters pursuant hereto). 

        The
Offering is conditional upon and subject to the additional terms and conditions set forth below. 

1.     Interpretation  

        1.1   Unless expressly provided otherwise, where used in this agreement or any schedule hereto, the following terms shall have
the following meanings, respectively: 

        "Applicable Securities Laws" means, collectively, the applicable securities laws of the Designated Provinces, the rules and regulations,
rulings and orders made thereunder, the applicable policy statements issued by the Securities Commissions and the securities legislation and policies of any other relevant jurisdiction; 

 

        "business day" means any day other than a Saturday, Sunday, a public holiday or a day on which commercial banks are not open for business
in Ontario or British Columbia; 

        "Closing Date" means April 10, 2003 or such other date as the Company and the Underwriters may agree; 

        "Closing Time" means 11:00 a.m. (Toronto time) on the Closing Date or such other time on the Closing Date as the Company and the
Underwriters may agree; 

        "Company" has the meaning ascribed thereto in the first paragraph of this agreement; 

        "Company's Information Record" means any statement contained in any press release, material change report, financial statement or other
document of the Company which has been publicly disseminated pursuant to any Applicable Securities Laws or filed by or on behalf of the Company with any of the Securities Commissions since
November 30, 2002 or is publicly disseminated pursuant to any Applicable Securities Laws or filed by or on behalf of the Company with any of the Securities Commissions prior to the Closing
Time; 

        "Designated Provinces" means British Columbia, Ontario and Quebéc; 

        "Documents" has the meaning ascribed thereto in Section 4.1(a); 

        "Final Prospectus" means the (final) prospectus of the Company qualifying the distribution of the Underlying Securities; 

        "including" means including without limitation; 

        "Intellectual Property" means, collectively, all intellectual property rights of whatsoever nature, kind or description including: 

	(i)
	all
trade-marks, service marks, trade-mark and service mark registrations, trade-mark and service mark applications, rights under registered user
agreements, trade names and other trade-mark and service mark rights;

	(ii)
	all
copyrights and applications therefor, including all computer software and rights related thereto;

	(iii)
	all
Patent Rights;

	(iv)
	all
trade secrets and proprietary and confidential information;

	(v)
	all
industrial designs and registrations thereof and applications therefor;

	(vi)
	all
renewals, modifications, developments and extensions of any of the items listed in clauses (i) through (v) above; and

	(vii)
	all
patterns, plans, designs, research data, other proprietary know-how, processes, drawings, technology, inventions, formulae, specifications, performance
data, quality control information, unpatented blue prints, flow sheets, equipment and parts lists, instructions, manuals, records and procedures, and all licenses, agreements and other contracts and
commitments relating to any of the foregoing; 

        "material change" means a material change as defined under the Applicable Securities Laws or any of them or where undefined under the
Applicable Securities Laws of a jurisdiction means a change in the business, operations or capital of the Company that would reasonably be expected to have a significant effect on the market price or
value of any of the Company's securities and includes a decision to implement such a change made by the Company's board of directors or by senior management of the Company who believe that
confirmation of the decision by the board of directors is probable; 

2

 

        "material fact" means a material fact as defined under the Applicable Securities Laws or any of them or where undefined under the
Applicable Securities Laws of a jurisdiction means a fact that significantly affects, or would reasonably be expected to have a significant effect on, the market price or value of the Company's
securities; 

        "misrepresentation" means a misrepresentation as defined under the Applicable Securities Laws or any of them or where undefined under the
Applicable Securities Laws of a jurisdiction means (i) an untrue statement of a material fact, or (ii) an omission to state a material fact that is required to be stated or that is
necessary to make a statement not misleading in the light of the circumstances in which it was made; 

        "Offering" has the meaning ascribed thereto in the first paragraph of this agreement; 

        "OTC" means the Over-the-Counter Bulletin Board administered by the National Association of Securities Dealers in
the United States; 

        "Outstanding Convertible Securities" means all options, including options granted to officers, directors or employees, and other
convertible securities outstanding or agreed to be issued as at the date of this agreement, whether issued pursuant to an established plan or otherwise pursuant to which Shares may be issued, details
of which are set forth in Schedule "C"; 

        "Patent Rights" means all patents and patent applications set forth in Schedule "D" and all other patents and patent applications issuing
therefrom, claiming, relating to or associated with the business of the Company or the Subsidiaries or their respective products and all improvements thereto, including, all divisions, continuations,
partial continuations, extensions, substitutions, confirmations, registrations, revalidations, additions or reissues of or to any of the patents or patent applications; 

        "person" includes any individual, corporation, limited partnership, general partnership, joint stock company or association, joint venture
association, company, trust, bank, trust company, land trust, investment trust, society or other entity, organization, syndicate, whether incorporated or not, trustee, executor or other legal personal
representative, and governments and agencies and political subdivisions thereof; 

        "Preliminary Prospectus" means the preliminary prospectus of the Company prepared in connection with the qualification for distribution of
the Underlying Securities; 

        "Private Placement Exemptions" means the prospectus exemptions pursuant to which the Special Warrants are to be issued to the Purchasers
in the Designated Provinces; 

        "Securities Commissions" means, collectively, the securities commissions or other securities regulatory authority in each of the
Designated Provinces; 

        "Shares" means the common shares in the capital of the Company; 

        "Special Warrant Indenture" means the special warrant indenture to be entered into between the Company and the Trustee pursuant to which
the Special Warrants will be issued; 

        "Special Warrants" has the meaning ascribed thereto in the first paragraph of this agreement; 

        "Subscription Agreements" means, collectively, the subscription agreements entered into between, inter
alia, the Purchasers and the Company in respect of the Offering; 

        "Subsidiaries" means Rythm-Search Developments Inc. and Cardiome Inc., being the only subsidiaries of the Company, and such
other subsidiaries as the Company may acquire or incorporate prior to the Closing Date; 

        "Substituted Purchasers" has the meaning ascribed thereto in the third paragraph of this agreement; 

3

 

        "Supplementary Material" means, collectively, any amendment to the Preliminary Prospectus, the Final Prospectus or any amended or
supplemental prospectus or ancillary material required to be filed with any of the Securities Commissions in connection with the distribution of the Underlying Securities; 

        "TSX" means the Toronto Stock Exchange; 

        "Trustee" means Pacific Corporate Trust Company; 

        "Underlying Securities" means one Share and one-half of one Warrant issuable on exercise of each Special Warrant; 

        "Underwriters" shall have the meaning ascribed thereto in the second paragraph of this agreement; 

        "Underwriters' Fee" has the meaning ascribed thereto in Section 11.1 hereof; 

        "US Person" shall have the meaning ascribed thereto in Rule 902 of Regulation S under the United States Securities Act of
1933, as amended; 

        "Warrant Indenture" means the warrant indenture to be entered into between the Company and the Trustee pursuant to which the Warrants will
be issued; 

        "Warrant Shares" means the Shares issuable upon exercise of the Warrants; and 

        "Warrants" means common share purchase warrants issuable on exercise of the Special Warrants entitling the holders thereof to purchase, in
respect of each whole Warrant held one Share for a period of 12 months from the Closing Date for a purchase price of $2.75 per Share; 

        1.2   The division of this agreement into sections, subsections, paragraphs and other subdivisions and the insertion of
headings and an index are for convenience of reference only and shall not affect the construction or interpretation of this agreement. Unless something in the subject matter or context is inconsistent
therewith, references herein to sections, subsections, paragraphs and other subdivisions are to sections, subsections, paragraphs and other subdivisions of this agreement. 

        1.3   This agreement shall be governed by and construed in accordance with the laws of the Province of British Columbia and the
federal laws of Canada applicable therein and time shall be of the essence hereof. 

        1.4   All amounts expressed herein in terms of money refer to lawful currency of Canada and all payments to be made hereunder
shall be made in such currency. 

        1.5   The following are the schedules attached to this agreement, which schedules are deemed to be a part hereof and are hereby
incorporated by reference herein: 

Schedule
"A"    —    Details of the Offering

Schedule "B"    —    Terms and Conditions for United States Offers and Sales

Schedule "C"    —    Outstanding Convertible Securities

Schedule "D"    —    Patent Rights

Schedule "E"    —    Form of standstill agreement with respect to disposition of Shares

Schedule "F"    —    Opinion of the Company's Counsel

Schedule "G"    —    Form of the U.S. Subscription Agreement 

2.     Nature of Transaction  

        2.1   Each Purchaser resident in a Designated Province shall purchase under one or more Private Placement Exemptions so that
the purchases will be exempt from the prospectus requirements of the Applicable Securities Laws. Each other Purchaser shall purchase in accordance with such procedures as the Company and the
Underwriters may mutually agree, acting reasonably, in order to fully comply 

4

 

with
the Applicable Securities Laws. The Company hereby agrees to use all reasonable efforts to secure compliance with all securities regulatory requirements on a timely basis in connection with the
distribution of the Special Warrants to the Purchasers, including, without limitation, by filing within the periods stipulated under Applicable Securities Laws and at the Company's expense all private
placement forms required to be filed by the Company and the Purchasers, respectively, in connection with the Offering and paying all filing fees required to be paid in connection therewith so that the
distribution of the Special Warrants may lawfully occur without the necessity of filing a prospectus or any similar document under the Applicable Securities Laws. The Underwriters shall notify the
Company with respect to the identity of each Purchaser as soon as practicable and with a view to leaving sufficient time to allow the Company to secure compliance with all relevant regulatory
requirements under Applicable Securities Laws relating to the sale of the Special Warrants. 

        2.2   Any offer and sale of Special Warrants in the United States of America, or to, or for the benefit of, a U.S. Person,
shall be made in accordance with the terms and conditions set out in Schedule "B" to this agreement, which terms and conditions, and the representations, warranties and covenants of the parties hereto
are hereby incorporated by reference. 

3.     Covenants of the Underwriters  

        3.1   The Underwriters covenant with the Company that they will: (i) conduct activities in connection with arranging for
the sale of the Special Warrants in compliance with the Applicable Securities Laws; (ii) not solicit offers to purchase or sell the Special Warrants so as to require registration thereof or
filing of a prospectus with respect thereto under the laws of any jurisdiction including, without limitation, the United States of America or any state thereof, and not solicit offers to purchase or
sell the Special Warrants in any jurisdiction outside of Canada where the solicitation or sale of the Special Warrants would result in any ongoing disclosure requirements in such jurisdiction, any
registration requirements in such jurisdiction except for the filing of a notice or report of the solicitation or sale, or where the Company may be subject to liability in connection with the sale of
the Special Warrants which is materially more onerous than its liability under the Applicable Securities Laws to which it is subject as at the date of this agreement; and (iii) obtain from each
Purchaser an executed Subscription Agreement in form reasonably acceptable to the Company and to the Underwriters relating to the transactions herein contemplated, together with all documentation as
may be necessary in connection with subscriptions for Special Warrants. 

4.     Representations, Warranties and Covenants  

        4.1   The Company hereby represents, warrants and covenants to and with the Underwriters and the Purchasers and acknowledges
that the Underwriters and the Purchasers are relying upon such representations, warranties and covenants, as follows: 

	(a)
	the
Company (i) has been duly incorporated and organized and is validly existing and in good standing under the laws of Canada; (ii) has all requisite corporate power
and authority to carry on its business as now conducted and to own, lease and operate its properties and assets; and (iii) has all requisite corporate power and authority to create, issue and
sell the Special Warrants, to issue the Underlying Securities and the Warrant Shares, to enter into this agreement, the Special Warrant Indenture, the Warrant Indenture, the Special Warrants, the
Warrants and the Subscription Agreement (collectively, the "Documents") and to carry out the provisions hereof and thereof;

	(b)
	each
of the Subsidiaries (i) has been duly incorporated and organized and is validly existing and in good standing under the laws of its jurisdiction of incorporation; and
(ii) has all requisite corporate power and authority to carry on its business as now conducted and to own, lease and operate its properties and assets; 

5

 

	(c)
	the
Company is the registered and beneficial owner of all of the issued and outstanding shares of each of the Subsidiaries and no person (other than the Company) has any right to
acquire any issued or unissued shares or securities convertible or exercisable into shares of any of the Subsidiaries;

	(d)
	the
Company does not own securities of any person other than the Subsidiaries;

	(e)
	the
Company and its Subsidiaries are conducting their business in material compliance with all applicable laws, rules and regulations of each jurisdiction in which a material portion
of their business is carried on, being British Columbia, and are duly licensed, registered or qualified in all jurisdictions in which they own, lease or operate their property or carry on business to
enable their business to be carried on as now conducted and their property and assets to be owned, leased and operated and all such licences, registrations and qualifications are and will at the
Closing Time be valid, subsisting and in good standing, except in respect of matters which do not and will not result in any material adverse change to the business, business prospects or condition
(financial or otherwise) of the Company and the Subsidiaries, considered as a whole, and except for the failure to be so qualified or the absence of any such license, registration or qualification
which does not and will not have a material adverse effect on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company and the
Subsidiaries, considered as a whole;

	(f)
	neither
the Company nor the Subsidiaries has committed an act of bankruptcy or is insolvent, has proposed a compromise or arrangement to its creditors generally, has had a petition or
a receiving order in bankruptcy filed against it, has made a voluntary assignment in bankruptcy, has taken any proceedings with respect to a compromise or arrangement, has taken any proceedings to
have itself declared bankrupt or wound-up, has taken any proceedings to have a receiver appointed for any of its property or has had any execution or distress become enforceable or become
levied upon any of its property;

	(g)
	the
authorized capital of the Company consists of an unlimited number of Shares, of which, as of the date hereof, 28,308,098 Shares are outstanding;

	(h)
	attached
as Schedule "C" is a complete list of all Outstanding Convertible Securities of the Company and, except under this agreement or as disclosed in Schedule "C", no person now
has any agreement or option or right or privilege capable of becoming an agreement for the purchase, subscription or issuance of any unissued shares, securities or warrants of the Company;

	(i)
	the
Intellectual Property of the Company: (i) is validly owned by or licensed to the Company; (ii) is not the subject of any patent infringement action or other
litigation, pending or threatened, of which the Company is aware; and (iii) in the case of patents or trademarks owned by the Company, have been validly and effectively registered by or on
behalf of the Company in all jurisdictions in which it is advisable, in the Company's opinion, acting reasonably, to be registered;

	(j)
	the
Company has all requisite corporate power and authority to undertake the Offering, to enter into the Documents, to consummate the transactions contemplated hereby and thereby, and
to duly observe and perform all of its covenants and obligations set out herein and therein; 

6

 

	(k)
	since
November 30, 2002, other than in respect of material change reports filed on a confidential basis and in respect of which the material change so reported did not come to
fruition:

	(i)
	there
has not been any material change in the assets, liabilities or obligations (absolute, accrued, contingent or otherwise) of the Company or the Subsidiaries that has
not been publicly disclosed;

	(ii)
	there
has not been any material change in the capital stock or long-term debt of the Company or the Subsidiaries that has not been publicly disclosed;

	(iii)
	there
has not been any material change in the business, business prospects, condition (financial or otherwise) or results of the operations of the Company or the
Subsidiaries that has not been publicly disclosed; and

	(iv)
	the
Company and the Subsidiaries have carried on their business in the ordinary course;

	(l)
	the
audited financial statements of the Company for the most recently completed fiscal period in respect of which the Company has publicly filed financial statements and the unaudited
financial statements of the Company for any subsequent period in respect of which such statements have been publicly filed by the Company prior to the Closing Date: (i) were prepared on a basis
consistent in all material respects with the accounting policies applied in the most recent audited financial statements of the Company; (ii) reflect the assumptions disclosed therein (which
assumptions management of the Company believes to be reasonable) and do not contain any misrepresentations; and (iii) present fairly the financial condition of the Company for the periods then
ended;

	(m)
	there
is no action, proceeding or investigation (whether or not purportedly by or on behalf of the Company or the Subsidiaries) pending or, to the knowledge of the Company, threatened
against or affecting the Company (including any of its predecessor companies) or the Subsidiaries at law or in equity (whether in any court, arbitration or similar tribunal) or before or by any
federal, provincial, state, municipal or other governmental department, commission, board or agency, domestic or foreign, which, if determined adversely to the Company, in any way could materially
adversely affects the Company and the Subsidiaries considered as a whole or the condition (financial or otherwise) of the Company and the Subsidiaries considered as a whole or which questions the
validity of the Special Warrants or of the issuance of any of the Underlying Securities, or the Warrant Shares or any action taken or to be taken by the Company pursuant to or in connection with any
of the Documents;

	(n)
	neither
the Company nor any of the Subsidiaries is in default or in breach of, and the execution and delivery of the Documents by the Company, the performance and compliance with the
terms of the Documents and the sale of the Special Warrants by the Company will not result in any breach of, or be in conflict with or constitute a default under, or create a state of facts which,
after notice or lapse of time, or both, would constitute a default either directly or indirectly under any term or provision of the articles or by-laws of the Company or resolutions of the
board of directors or shareholders of the Company or any mortgage, note, indenture, contract, agreement, instrument, lease or other document to which the Company or a Subsidiary is a party or by which
it is bound or any judgment, decree, order, statute, rule or regulation applicable to it, other than any default which does not and will not (including with the giving of notice or lapse of time) have
a material adverse effect on the assets or properties, businesses, results of operations or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole;

	(o)
	the
Company is a "reporting issuer" in British Columbia, Alberta, Manitoba, Ontario, Québec, and the Yukon Territory is not in default under applicable securities
legislation in Canada and 

7

 

is
in compliance with the by-laws, rules and regulations of the TSX and of the OTC. In particular, without limiting the foregoing, the Company is in compliance with its obligations to make
timely disclosure of all material changes relating to it and since November 30, 2002 (other than in respect of material change reports filed on a confidential basis and thereafter made public
or material change reports filed on a confidential basis and in respect of which the material change never came to fruition) no such disclosure has been made on a confidential basis and there is no
material change relating to the Company which has occurred and with respect to which the requisite material change statement has not been filed, except to the extent that the Offering constitutes a
material change; 

	(p)
	the
auditors of the Company who audited the financial statements of the Company most recently delivered to the securityholders of the Company and delivered their report with respect
thereto are independent public accountants as required by the Applicable Securities Laws;

	(q)
	no
portion of the Company's Information Record contained a misrepresentation as at its date of public dissemination;

	(r)
	there
has never been any reportable disagreement (within the meaning of National Policy Statement No. 31 of the Canadian Securities Administrators) with the present or any
former auditor of the Company;

	(s)
	the
Company and the Subsidiaries have filed all federal, provincial, state, local and foreign tax returns that are required to be filed or have requested extensions thereof (except in
any case in which the failure so to file would not have a material adverse effect on the assets and properties, business, results of operations, prospects or condition (financial or otherwise) of the
Company and the Subsidiaries, taken as a whole) and have paid all taxes required to be paid by it and any other assessment, fine or penalty levied against it, to the extent that any of the foregoing
is due and payable, except for any such assessment, fine or penalty that is currently being contested in good faith;

	(t)
	neither
the Company nor any Subsidiary, nor to the Company's knowledge, any other party, is in default in the observance or performance of any term or obligation to be performed by it
under any contract entered into by the Company or any Subsidiary which is material to the business of the Company and the Subsidiaries taken as a whole and no event has occurred which with notice or
lapse of time or both would directly or indirectly constitute such a default, in any such case which default or event would have a material adverse effect on the assets or properties, business,
results of operations, prospects or condition (financial or otherwise) of the Company and the Subsidiaries taken as a whole;

	(u)
	there
is not, in the articles or by-laws of the Company or in any agreement, mortgage, note, debenture, indenture or other instrument or document to which the Company is a
party or by which it is bound, any restriction upon or impediment to, the declaration or payment of dividends by the Company;

	(v)
	none
of Canada Customs and Revenue Agency or any foreign taxation authority has asserted or, to the best of the Company's knowledge, threatened to assert any reassessment, claim or
liability for taxes due or to become due in connection with any review or examination of the tax returns of the Company or any Subsidiary filed for any year which would have a material adverse effect
on the assets or properties, business, results of operations, prospects or condition (financial or otherwise) of the Company and the Subsidiaries taken as a whole;

	(w)
	the
Shares are listed and posted for trading on the TSX and are quoted on the OTC; 

8

 

	(x)
	the
Company will obtain prior to the Closing Date the necessary consents from the TSX and OTC, if any, to the issue and sale of Special Warrants and the conditional listing on the TSX
of the Shares issuable on the exercise of the Special Warrants and the Warrants on such conditions as are acceptable to the Underwriters and the Company, acting reasonably;

	(y)
	the
Company has not withheld from the Underwriters any facts relating to the Company or to the Offering that would be material to a prospective purchaser of the Special Warrants;

	(z)
	the
proceeds of the Offering, net of the Underwriters' Fee and other expenses of the Offering, will be used as contemplated in Schedule "A";

	(aa)
	the
Company is a "qualifying issuer" as that term is defined in Multilateral Instrument 45-102;

	(bb)
	the
Company will use its best efforts to file the Preliminary Prospectus with the Securities Commissions and to obtain receipts therefrom as soon as practicable following the Closing
Date;

	(cc)
	the
Company will use its best efforts to: (i) file the Final Prospectus with the Securities Commissions and to obtain receipts therefrom prior to 5:00 p.m. (Toronto
time) on the 60th day following the Closing Date (the "Qualification Deadline"); and (ii) take all other steps and proceedings that may be
necessary in order to qualify the Underlying Securities for distribution in the Designated Provinces prior to the Qualification Deadline (the Company expressly acknowledges that its obligations in
this regard are continuing obligations and if receipts for the Final Prospectus are not issued by the Securities Commissions prior to the Qualification Deadline, the Company will continue to use its
best efforts to obtain such receipts as soon as possible thereafter until the earlier of (i) the issuance of such receipts and (ii) four months from the Closing Date);

	(dd)
	the
certificate of the Company contained in the Preliminary Prospectus, the Final Prospectus and any Supplementary Material shall be signed by at least one member of the Audit
Committee as one of two individuals signing on behalf of the board of directors of the Company;

	(ee)
	the
Company will deliver to the Underwriters copies of all correspondence and other written communications between the Company, on the other hand and the Securities Commissions, the
TSX and the OTC, on the other hand, relating to the Offering and will generally keep the Underwriters apprised of the status of, including all developments relating to, the Offering;

	(ff)
	the
Company will use its best efforts to ensure that the Shares issuable upon exercise of the Special Warrants and the Warrant Shares will be listed and posted for trading on the TSX
upon their issue; 

9

  

	(gg)
	upon
issuance by the Securities Commissions of receipts for the Final Prospectus, to cause copies of the Final Prospectus to be delivered to each of the then registered holders of
Special Warrants;

	(hh)
	prior
to the filing of the Preliminary Prospectus and thereafter and prior to the filing of the Final Prospectus and any Supplementary Material, the Company will allow the
Underwriters to participate fully in the preparation of the Preliminary Prospectus, the Final Prospectus and any Supplementary Material and will allow the Underwriters to conduct all due diligence
which they may reasonably require to conduct in order to fulfill their obligations and in order to enable them responsibly to execute the certificate required to be executed by them at the end of each
of the Preliminary Prospectus, the Final Prospectus and any Supplementary Material;

	(ii)
	the
Company will deliver from time to time without charge to the Underwriters as many copies of the Preliminary Prospectus, the Final Prospectus and any Supplementary Material as
they may reasonably request for the purposes contemplated hereunder and contemplated by the Applicable Securities Laws and such delivery shall constitute the consent of the Company to the use of such
documents in connection with the distribution or the distribution to the public, as the case may be, of the Underlying Securities, subject to the provisions of the Applicable Securities Laws and the
provisions of this agreement;

	(jj)
	all
the information and statements to be contained in the Preliminary Prospectus, the Final Prospectus and any Supplementary Material will, at the respective dates of delivery
thereof, constitute full, true and plain disclosure of all material facts relating to each of the Offering, the Company, the Special Warrants and the Underlying Securities (provided that this
representation is not intended to extend to information and statements furnished to the Company by or on behalf of the Underwriters specifically for use therein);

	(kk)
	none
of the Preliminary Prospectus, the Final Prospectus or any Supplementary Material (collectively, the "Offering Documents") will
contain a misrepresentation (provided that this representation is not intended to extend to information and statements in the Preliminary Prospectus, the Final Prospectus or any Supplementary Material
furnished to the Company by or on behalf of the Underwriters specifically for use therein);

	(ll)
	the
Preliminary Prospectus, Final Prospectus and any Supplementary Material will contain the disclosure required by all requirements of the Applicable Securities Laws;

	(mm)
	the
Documents and all other contracts required in connection with the issue and sale of the Special Warrants and the distribution of the Underlying Securities and the Warrant Shares
will be, prior to the Closing Date, and each of the other agreements to be described under the heading "Material Contracts" (or its equivalent) in the Final Prospectus shall be, as at the date of the
Final Prospectus, duly authorized, executed and delivered by the Company and will be valid and binding obligations of the Company enforceable against the Company in accordance with their respective
terms (except as the enforceability thereof may be limited by (i) bankruptcy, insolvency or similar laws affecting creditors' rights generally, (ii) general equitable principles or
(iii) with respect to this agreement, limitations under applicable law in respect of rights of indemnity, contribution and waiver of contribution);

	(nn)
	the
Preliminary Prospectus and the Final Prospectus will accurately summarize, in all material respects, the attributes of the Special Warrants, the Underlying Securities and the
Warrant Shares;

	(oo)
	other
than the Underwriters and except as may be consented to by the Underwriters, there is no person acting or purporting to act at the request of the Company, who is entitled to
any brokerage or agency fee in connection with the transactions contemplated herein; 

10

 

	(pp)
	the
Company will promptly notify the Underwriters in writing if, prior to termination of the distribution of the Underlying Securities, there shall occur any material change or
change in a material fact (in either case, whether actual, anticipated, contemplated or threatened and other than a change or fact relating solely to the Underwriters or any one of them) or any event
or development involving a prospective material change or a change in a material fact in any or all of the business, affairs, operations, assets (including information or data relating to the
estimated value or book value of assets), liabilities (contingent or otherwise), capital, ownership, control, management or prospects of the Company or any other change which is of such a nature as to
result in, or could result in, a misrepresentation in the Preliminary Prospectus, Final Prospectus or any Supplementary Material or could render any of the foregoing not in compliance with any of the
Applicable Securities Laws;

	(qq)
	the
Company will promptly notify the Underwriters in writing with full particulars of any such actual, anticipated, contemplated, threatened or prospective change referred to in the
first preceding paragraph and the Company will, to the reasonable satisfaction of the Underwriters, issue or file, as applicable, promptly and, in any event, within all applicable time limitation
periods with the Securities Commissions, in the case of a material adverse change, a new or amended Preliminary Prospectus, and, in the case of a material change, a new or amended Final Prospectus or
Supplementary Material, as the case may be, or press release and material change report as may be required under the Applicable Securities Laws and shall comply with all other applicable filing and
other requirements under the Applicable Securities Laws including, without limitation, any requirements necessary to qualify the issuance and distribution of the Underlying Securities and shall
deliver to the Underwriters as soon as practicable thereafter their reasonable requirements of conformed or commercial copies of any such new or amended Preliminary Prospectus, Final Prospectus or
Supplementary Material. The Company shall not file any such new or amended disclosure documentation without first obtaining the written approval of the form and content thereof by the Underwriters,
which approval shall be promptly considered and not unreasonably withheld, and shall not issue or file, as applicable, any press release or material change report without giving the Underwriters a
reasonable opportunity for review of the proposed forms; provided that the Company shall not be required to file a registration statement or either register or qualify the Underlying Securities
or the Warrant Shares for distribution outside of Canada;

	(rr)
	the
Company will in good faith discuss with the Underwriters as promptly as possible any circumstance or event which is of such a nature that there is or ought to be consideration
given as to whether there may be a material change or change in a material fact described in the preceding two paragraphs;

	(ss)
	the
minute books and corporate records of the Company and the Subsidiaries made available to Fasken Martineau DuMoulin LLP, counsel to the Underwriters in connection with its due
diligence investigation of the Company for the periods from their respective dates of incorporation or amalgamation, as the case may be, to the date of examination thereof are copies of the original
minute books and records of the Company and the Subsidiaries and contain copies of all proceedings (or certified copies thereof) of the shareholders, the board of directors and all committees of the
board of directors of the Company and the Subsidiaries and there have been no other meetings, resolutions or proceedings of the shareholders, board of directors or any committee of the board of
directors of the Company or the Subsidiaries to the date of review of such corporate records and minute books not reflected in such minute books and other records other than those which have been
disclosed to the Underwriters or which are not material to the Company and the Subsidiaries taken as a whole; and

	(tt)
	during
the period commencing on the date hereof and ending on the date which is 90 days following the Closing Date, the Company shall not, without the prior written consent of
the 

11

 

Underwriters,
such consent not to be unreasonably withheld: (i) reserve, allot, create or issue any Shares or other securities convertible or exchangeable into Shares or rights to acquire any
of the foregoing other than pursuant to the Outstanding Convertible Securities, Shares issued and options issued under the Company's stock option plan, in connection with a strategic alliance or
partnership for the commercialization of the Company's products, or as contemplated by this agreement; (ii) agree or become bound to do so; or (iii) publicly announce any intention to do
so. The foregoing restrictions will not prevent the Company from creating a class of preferred shares as contemplated to be created at the Company's upcoming annual and special meeting of
shareholders, but the restrictions shall apply to the issuance of any of such shares. 

        The
representations, warranties and covenants of the Company set out in the schedules to this agreement are hereby incorporated herein by reference. 

        The
Underwriters shall obtain and hold the right and benefit of the provisions of this Section 4.1 in trust for and on behalf of the Purchasers. 

5.     Conditions of the Offering  

        5.1   The following are conditions of the Underwriters' obligation to close the purchase of the Special Warrants from the
Company as contemplated hereby, which conditions the Company covenants to exercise its reasonable best efforts to have fulfilled at or prior to the Closing Date and which may be waived in writing in
whole or in part by the Underwriters on their behalf and on behalf of the Purchasers: 

	(a)
	the
Company shall have made and/or obtained the necessary filings, approvals, consents and acceptances under Applicable Securities Laws, the TSX and the OTC required to be made or
obtained by the Company in connection with the Offering, on terms which are acceptable to the Underwriters, acting reasonably, prior to the Closing Date, it being understood that the Underwriters will
do all that is reasonably required to assist the Company to fulfil this condition;

	(b)
	the
Shares issuable on exercise of the Special Warrants and the Warrant Shares shall be conditionally listed for trading on the TSX, subject to the usual conditions;

	(c)
	the
Company's board of directors shall have authorized and approved the Documents and any other agreements pursuant to which the Special Warrants, the Underlying Securities and the
Warrant Shares are to be issued, the issuance of such securities and all matters relating to the foregoing;

	(d)
	the
Company shall have entered into the Special Warrant Indenture and the Warrant Indenture in form satisfactory to the Underwriters;

	(e)
	each
officer and director of the Company shall have entered into agreements in the form of agreement attached hereto as Schedule "E" pursuant to which such persons shall have
covenanted not to sell, transfer, assign, pledge or otherwise dispose of any Shares held by them for a period of 90 days following the Closing Date;

	(f)
	the
Company shall have delivered a certificate of the Company signed on behalf of the Company by such senior officers of the Company as may be acceptable to the Underwriters, acting
reasonably, addressed to the Underwriters and dated the Closing Date, in form and content satisfactory to the Underwriters' counsel, acting reasonably, certifying that:

	(i)
	to
the knowledge of such officers, no order ceasing or suspending trading in any securities of the Company or prohibiting the issue of the Special Warrants, the
Underlying 

12

 

Securities
or the Warrant Shares or any of the Company's issued securities has been issued and no proceedings for such purpose are pending or threatened; 

	(ii)
	there
has been no material change (actual, proposed or prospective, whether financial or otherwise) in the business, affairs, operations, assets, liabilities
(contingent or otherwise) or capital of the Company since November 30, 2002 which has not been generally disclosed;

	(iii)
	the
representations and warranties of the Company contained in the Documents are true and correct at the Closing Time, with the same force and effect as if made by the
Company as at the Closing Time after giving effect to the transactions contemplated hereby;

	(iv)
	the
Company has complied with all the covenants and satisfied all the terms and conditions of the Documents on its part to be complied with or satisfied at or prior to
the Closing Time; and

	(v)
	as
to such other matters as the Underwriters may reasonably request;

	(g)
	the
Company shall have caused a favourable legal opinion to be delivered by its Canadian counsel addressed to the Underwriters, Fasken Martineau DuMoulin LLP, the Underwriters'
counsel, and the Purchasers, with respect to such matters as the Underwriters may reasonably request relating to this transaction, acceptable in all reasonable respects to the Underwriters' counsel,
including as to those matters identified in Schedule "F" hereto. In giving such opinions, Canadian counsel to the Company shall be entitled to rely, to the extent appropriate in the circumstances,
upon local counsel and shall be entitled as to matters of fact not within their knowledge to rely upon a certificate of fact from responsible persons in a position to have knowledge of such facts and
their accuracy including a certificate of the Company's registrar and transfer agent as to the outstanding securities of the Company. The Company agrees, and the aforesaid legal opinion shall
expressly provide, that the Underwriters may provide copies of the opinion to each of the Purchasers; and

	(h)
	in
the event that sales of Special Warrants are made in the United States of America, the Company shall have caused a legal opinion to be delivered by its U.S. counsel addressed to
the Underwriters [and the Purchasers], stating that the issuance of the Special Warrants has been made in compliance with the
United States Securities Act of 1933, as amended, in a form reasonably acceptable to the Underwriters. 

6.     Additional Documents Upon Filing of Prospectus  

        6.1   The Company shall cause to be delivered to the Underwriters concurrently with the filing of each of the Final Prospectus
and any Supplementary Material a comfort letter dated the date thereof from the auditors of the Company and addressed to the Underwriters and to the directors of the Company, in form and substance
satisfactory to the Underwriters, acting reasonably, relating to: 

	(a)
	the
verification of the financial information and accounting data and other numerical data of a financial nature contained or incorporated by reference therein and matters involving
changes or developments since the respective dates as of which specified financial information is given therein, to a date not more than two business days prior to the date of such letter; and

	(b)
	the
period beyond the most recent year end of the Company for which an audited financial statement appears therein to a date not more than two business days prior to the date of such
letter. 

13

 

        6.2   If Quebéc is one of the Designated Provinces, the Company shall cause to be delivered to the Underwriters
concurrently with the filing of each of the Preliminary Prospectus, Final Prospect and any Supplementary Material: 

	(a)
	an
opinion from local counsel to the Company in Quebéc in form and substance satisfactory to the Underwriters, addressed to the Underwriters and the directors of the
Company and dated the date thereof to the effect that the French language version thereof, except with respect to matters referred to in clause (b) below, is in all material respects a complete
and proper translation of the English language version thereof; and

	(b)
	a
letter from the auditors of the Company confirming that the financial statements contained or incorporated by reference in the French language version thereof are, in all material
respects, a complete and proper translation of the English language version thereof. 

7.     Closing  

        7.1   The Offering will be completed at the offices of Fasken Martineau DuMoulin LLP, Suite 4200, Toronto Dominion Bank Tower,
Toronto-Dominion Centre, Toronto, Ontario, at the Closing Time or such other place, date or time as may be mutually agreed to; provided that if the Company has not been able to comply with any of the
covenants or conditions set out herein required to be complied with by the Closing Time or such other date and time as may be mutually agreed to, the respective obligations of the parties shall
terminate without further liability or obligation except for the payment of the Underwriters' expenses and the indemnity and contribution provisions set out in this agreement. 

        7.2   At the Closing Time, the Company shall deliver to the Underwriters: 

	(a)
	certificates
duly registered as the Underwriters may direct representing the Special Warrants;

	(b)
	the
requisite legal opinions and certificates as contemplated above; and

	(c)
	such
further documentation as may be contemplated herein or as counsel to the Underwriters or the applicable regulatory authorities and stock exchanges may reasonably require, 

against
payment of the purchase price for the Special Warrants (net of the Underwriters' Fee and estimated expenses of the Underwriters by certified cheque or bank draft payable to the Trustee in
accordance with the terms of the Special Warrant Indenture and delivery of the Subscription Agreements and other documentation required to be provided by or on behalf of the Purchasers or the
Underwriters pursuant to this agreement. 

        7.3   All terms and conditions of this agreement shall be construed as conditions and any breach or failure to comply with any
such terms and conditions shall entitle the Underwriters to terminate their obligations to purchase the Special Warrants by written notice to that effect given to the Company prior to the Closing
Time. It is understood that the Underwriters may waive in whole or in part, or extend the time for compliance with, any of such terms and conditions without prejudice to their rights in respect of any
such terms and conditions or any other subsequent breach or non-compliance, provided that to be binding on the Underwriters, any such waiver or extension must be in writing. 

8.     Termination Provisions  

        8.1   Without limiting any of the foregoing provisions of this agreement, and in addition to any other remedies which may be
available to them and to the Purchasers, the Underwriters, or any of them, shall be entitled, at their option, to terminate and cancel, without any liability on their part (or on the part of the
Purchasers), all of their obligations under this agreement and the obligations of any person from whom the Underwriters have solicited an order to purchase Special Warrants that has 

14

 

executed
a Subscription Agreement, by giving written notice to the Company at any time through to the Closing Time on the Closing Date if: 

	(a)
	(i) any
inquiry, action, suit, investigation or other proceeding (whether formal or informal) is commenced, announced or threatened or any order made by any federal,
provincial, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality including, without limitation, the TSX or any securities regulatory authority (other
than any such inquiry, action, suit investigation or other proceeding or order relating solely to the Underwriters) or any law or regulation is enacted or changed which in the opinion of any of the
Underwriters, acting reasonably, operates to prevent or restrict the trading of the Shares or materially and adversely affects or will materially and adversely affect the market price or value of the
Shares or which operates to prevent or materially restrict trading in the Shares or distribution of the Special Warrants; or (ii) if there should develop, occur or come into effect or existence
any event, action, state, condition or major financial occurrence of national or international consequence or any law or regulation or other occurrence of any nature whatsoever which in the opinion of
any of the Underwriters, acting reasonably, seriously adversely affects, or would be expected to seriously adversely affect, the financial markets in Canada or the United States or the business,
operations or affairs of the Company and the Subsidiaries;

	(b)
	if
there shall occur any material change in the affairs of the Company, or change in any material fact or there should be discovered any previously undisclosed material change or
material fact (other than a material fact related solely to any of the Underwriters) required to be disclosed in the Final Prospectus or there should occur a change (other than a change related solely
to any of the Underwriters) in a material fact contained in the Final Prospectus, in each case which, in the opinion of any of the Underwriters, acting reasonably, has or would be expected to have a
significant adverse effect on the market price or value of the Shares; or

	(c)
	if
there shall occur any breach or failure to comply with any terms or conditions of this agreement by the Company, 

the
occurrence or non-occurrence of any of the foregoing events or circumstances to be determined in the sole discretion of the Underwriters, acting reasonably. 

        8.2   The Underwriters shall use reasonable best efforts to give notice to the Company (in writing or by other means) of the
occurrence of any of the events or circumstances referred to in this section, provided that neither the giving nor the failure to give such notice shall in any way affect the Underwriters' entitlement
to exercise this right at any time through to the Closing Time. 

        8.3   The Underwriters' rights of termination contained in this section are in addition to any other rights or remedies they
may have in respect of any default, act or failure to act or non-compliance by the Company in respect of any of the matters contemplated by this agreement. 

9.     Indemnity  

        9.1   The Company covenants and agrees to indemnify the Underwriters and their respective shareholders, directors, officers,
employees and agents (each being hereinafter referred to as an "Indemnified Party") against, and to reimburse the Underwriters promptly upon demand for any legal or other expenses reasonably incurred
by the Underwriters in connection with investigating or defending, all losses (other than a loss of profits), claims, damages, liabilities, costs or expenses caused or incurred by reason of: 

	(a)
	any
statement, other than a statement relating solely to the Underwriters, contained in the Offering Documents which constitutes or is alleged to constitute a misrepresentation; 

15

 

	(b)
	any
statement, other than a statement relating solely to the Underwriters, contained in the Company's Information Record which at the time and in the light of the circumstances under
which it was made, contained or is alleged to have contained a misrepresentation;

	(c)
	the
omission or alleged omission to state in any of the Offering Documents, in the Company's Information Record or any certificate of the Company delivered hereunder or pursuant
hereto any material fact required to be stated therein or necessary to make any statement therein not misleading in light of the circumstances under which it was made (other than omissions relating
solely to the Underwriters);

	(d)
	any
order made or inquiry, investigation or proceeding commenced or threatened by any securities regulatory authority or other competent authority based upon any misrepresentation or
alleged misrepresentation in any of the Offering Documents, or the Company's Information Record (other than a statement relating solely to the Underwriters and included in reliance upon and in
conformity with information furnished to the Company in writing by the Underwriters specifically for use therein) which prevents or restricts the trading in the Shares or the distribution or
distribution to the public, as the case may be, of the Underlying Securities in any of the Designated Provinces;

	(e)
	the
Company not complying with any requirement of any Applicable Securities Laws, regulatory requirements (including any private placement filing or other requirements under United
States federal and state securities laws) or rules of any stock exchange or quotation system except as such non-compliance shall be as a result of the activities of the Underwriters; or

	(f)
	any
breach of any representation or warranty of the Company contained herein or the failure of the Company to comply with any of its covenants or other obligations hereunder, 

and
will reimburse each Indemnified Party promptly upon demand for any legal expenses reasonably incurred in connection with investigating or defending any such losses, claims, damages, liabilities or
actions in respect thereof, as incurred. 

        9.2   If any action or claim shall be asserted against an Indemnified Party in respect of which indemnity may be sought from
the Company pursuant to the provisions of Section 9.1 or if any potential claim contemplated hereby shall come to the knowledge of an Indemnified Party, the Indemnified Party shall promptly
notify the Company in writing; but the omission to so notify the Company shall not relieve the Company from any liability it may otherwise have to the Indemnified Party pursuant to Section 9.1.
The Company shall be entitled but not obligated to participate in or assume the defence thereof; provided, however, that the defense shall be through legal counsel acceptable to the Indemnified Party,
acting reasonably. In addition, the Indemnified Party shall also have the right to employ separate counsel in any such action and participate in the defense thereof, and the fees and expenses of such
counsel shall be borne by the Indemnified Party unless: 

	(a)
	the
employment thereof has been specifically authorized in writing by the Company;

	(b)
	the
Indemnified Party has been advised by counsel that representation of the Company and the Indemnified Party by the same counsel would be inappropriate due to actual or potential
differing interests between them; or

	(c)
	the
Company has failed within a reasonable time after receipt of such written notice to assume the defense of such action or claim; 

provided
that in no event shall the Company be required to assume the fees and expenses of more than one counsel for all Indemnified Parties. Neither party shall effect any settlement of any such
action or claim or make any admission of liability without the written consent of the other party, such consent to be promptly considered and not to be unreasonably withheld. The indemnity hereby 

16

 

provided
for shall remain in full force and effect and shall not be limited to or affected by any other indemnity in respect of any matters specified herein obtained by the Indemnified Party from any
other person. 

        9.3   To the extent that any Indemnified Party is not a party to this agreement, the Underwriters shall obtain and hold the
right and benefit of the indemnity provisions of Section 9.1 in trust for and on behalf of such Indemnified Party. 

10.   Contribution  

        .10.1     In the event that the indemnity provided for above is, for any reason, illegal or unenforceable as being
contrary to public policy or for any other reason, the Underwriters and the Company shall contribute to the aggregate of all losses, claims, costs, damages, expenses or liabilities (including any
legal or other expenses reasonably incurred by the Indemnified Party in connection with investigating or defending any action or claim which is the subject of this section but excluding loss of
profits or consequential damages) of the nature provided for above such that the Underwriters shall be responsible for that portion represented by the percentage that the Underwriters' Fee payable by
the Company to the Underwriters bears to the gross proceeds from the sale of the Special Warrants and the Company shall be responsible for the balance, provided that, in no event, shall any
Underwriters be responsible for any amount in excess of the amount of the Underwriters' Fee actually received by it. In the event that the Company may be held to be entitled to contribution from the
Underwriters under the provisions of any statute or law, the Company shall, in respect of the Underwriters, be limited to contribution in an amount not exceeding the lesser of: (i) the portion
of the full amount of losses, claims, costs, damages, expenses and liabilities, giving rise to such contribution for which the Underwriters are responsible, as determined above, and (ii) the
amount of the Underwriters' Fee actually received by the Underwriters. Notwithstanding the foregoing, a party guilty of fraudulent misrepresentation shall not be entitled to contribution from the
other party. Any party entitled to contribution will, promptly after receiving notice of commencement of any claim, action, suit or proceeding against such party in respect of which a claim for
contribution may be made against the other party under this section, notify such party from whom contribution may be sought. In no case shall such party from whom contribution may be sought be liable
under this agreement unless such notice has been provided, but the omission to so notify such party shall not relieve the party from whom contribution may be sought from any other obligation it may
have otherwise than under this section. The right to contribution provided in this section shall be in addition and not in derogation of any other right to contribution which the Underwriters or the
Company may have by statute or otherwise by law. 

11.   Fees and Expenses  

        11.1     In consideration of the services to be rendered by the Underwriters in connection with the Offering, which
services shall include: 

	(a)
	endeavouring
to arrange for Substituted Purchasers for the Special Warrants;

	(b)
	assisting
in the preparation of the Preliminary Prospectus and the Final Prospectus together with any documents supplemental thereto or any amending or supplementary prospectus or any
Supplementary Material;

	(c)
	assisting
in the preparation of the form of the Subscription Agreements; and

	(d)
	advising
the Company with respect to the private placement of the Special Warrants, 

the
Company has agreed to pay to the Underwriters a fee equal to 6.0% of the gross proceeds of the Offering (the "Underwriters' Fee"), payable in cash
at the Closing Time. 

17

 

        11.2     Whether or not the Offering is completed, the Company shall pay all expenses and fees in connection with
the Offering, including without limitation: (i) all expenses of or incidental to the issue, sale or distribution of the Special Warrants and filing of the Preliminary Prospectus and the Final
Prospectus; (ii) the fees and expenses of the Company's legal counsel; (iii) all costs incurred in connection with the preparation of documentation relating to the Offering; and
(iv) all costs and expenses, including fees and disbursements of Underwriters' counsel and applicable taxes thereon incurred by the Underwriters or on their behalf. 

12.   Survival of Warranties, Representations, Covenants and Agreements  

        12.1     All warranties, representations, covenants and agreements of the Company and the Underwriters herein
contained or contained in any documents submitted or required to be submitted pursuant to this agreement or in connection with the Offering shall survive the purchase by the Purchasers of the Special
Warrants and shall continue in full force and effect after the Closing Date for a period of five years after the Closing Date, regardless of the closing of the sale of the Special Warrants, any
subsequent disposition or exercise of the Special Warrants or the Underlying Securities or any investigation which may be carried on by the Underwriters. 

13.   Authority of Yorkton Securities Inc.  

        13.1     The Company shall be entitled to and shall act on any notice, waiver, extension or communication given by
or on behalf of the Underwriters by Yorkton Securities Inc., which shall represent the Underwriters, and which shall have the authority to bind the Underwriters in respect of all matters
hereunder, except in respect of a consent to a settlement pursuant to Section 9, which consent shall be given by the Indemnified Party, and the matters referred to in Section 8. Yorkton
Securities Inc. shall consult fully with the other Underwriter with respect to any such notice, waiver, extension or other communication. 

14.   Underwriters' Purchase Entitlement  

        14.1     The Underwriters' entitlement to purchase the Special Warrants at the Closing Time shall be several and
not joint or joint and several and the Underwriters' respective entitlement in this respect shall be as to the following percentages of the number of the Special Warrants to be purchased at that time: 

	Yorkton Securities Inc.	 	55	%
	Sprott Securities Inc.	 	20	%
	TD Securities Inc.	 	20	%
	First Associates Investments Inc.	 	5	%

        If
an Underwriter fails to purchase its applicable percentage of the number of Special Warrants at the Time of Closing, the other Underwriters shall have the right, but shall not be
obligated, to purchase all, but not less than all, of the Special Warrants which would otherwise have been purchased by the Underwriter which failed to purchase. In the event that such right is not
exercised, the Underwriters which are able and willing to purchase shall be relieved of all obligations to the Company to purchase such Special Warrants. Nothing in this Section 14 shall oblige
the Company to sell to any or all of the Underwriters less than all of the aggregate amount of the Special Warrants or shall relieve the Underwriter(s) in default hereunder from liability to the
Company. 

18

 

15.   General Contract Provisions  

        15.1     Any notice or other communication to be given hereunder shall be in writing and shall be given by delivery
or by telecopier, as follows: 

	if to the Company:	 
	

 	

3650 Wesbrook Mall

Vancouver, British Columbia

V6S 2L2
	

 	

Attention:	

Robert W. Reider

President and Chief Executive Officer
	 	Telecopier No.:	(604) 677-6915
	

with a copy to:	

 
	 	Catalyst Corporate Finance Lawyers

Suite 1400-1055 West Hastings St.

Vancouver, British Columbia

V6E 2E9
	

 	

Attention:	

Jim Heppell
	 	Telecopier No.:	(604) 443-7000
	 	 	 

19

 

	

or if to the Underwriters:	

 
	

 	

Yorkton Securities Inc.

BCE Place 181 Bay Street, Suite 3100

Toronto, Ontario

M5J 2R9
	

 	

Attention:	

Steven Winokur
	 	Telecopier No.:	(416) 864-3650
	

 	

and	

 
	

 	

Sprott Securities Inc.

Royal Bank Plaza

Suite 3450, South Tower

Toronto, Ontario

M5J 2J2
	

 	

Attention:	

Robert Chalmers
	 	Telecopier No.:	(416) 943-6496
	

 	

and	

 
	

 	

TD Securities Inc.

66 Wellington St. West

8th Floor

Toronto Dominion Bank Tower

Toronto-Dominion Centre

Toronto, Ontario

M5K 1A2
	

 	

Attention:	

Peter Grosskopf
	 	Telecopier No.:	(416) 983-3176
	

 	

First Associates Investments Inc.

Suite 2400

BCE Place

161 Bay Street

Toronto, Ontario

M5J 2J2
	

 	

Attention:	

Paul Moase
	 	Telecopier No.:	(416) 865-1960
	with a copy to:	 
	

 	

Fasken Martineau DuMoulin LLP

P.O. Box 20, Suite 3600

Toronto Dominion Bank Tower

Toronto-Dominion Centre

66 Wellington Street West

Toronto, Ontario

M5K 1N6
	

 	

Attention:	

Richard J. Steinberg
	 	Telecopier Number:	(416) 364-7813

20

 

and
if so given, shall be deemed to have been given and received upon receipt by the addressee or a responsible officer of the addressee if delivered, or four hours after being telecopied and receipt
confirmed during normal business hours at the location of the recipient, as the case may be. Any party may, at any time, give notice in writing to the others in the manner provided for above of any
change of address or telecopier number. 

        15.2     This agreement and the other documents herein referred to constitute the entire agreement between the
Underwriters and the Company relating to the subject matter hereof and supersede all prior agreements between the Underwriters and the Company with respect to their respective rights and obligations
in respect of the Offering, including the engagement letter between Yorkton Securities Inc. and the Company dated March 31, 2003 (and reconfirmed by Yorkton Securities Inc. on
April 1, 2003). 

        15.3     The Company agrees that, if the Offering is completed, Yorkton Securities Inc. may, at its option
and expense, place an announcement in such newspapers and periodicals as it may choose stating that Yorkton Securities Inc. has acted as financial advisor to the Company in connection
therewith, provided that Yorkton Securities Inc. shall give the Company a reasonable opportunity to review the announcement prior to publication. 

        15.4     This agreement may be executed by telecopier and in one or more counterparts which, together, shall
constitute an original copy hereof as of the date first noted above. 

        If
this agreement accurately reflects the terms of the transaction which we are to enter into and if such terms are agreed to by the Company, please communicate your acceptance by
executing where indicated below and returning three originally executed copies to the Underwriters. 

Yours
very truly, 

	YORKTON SECURITIES INC.	 	SPROTT SECURITIES INC.
	

Per:	
 	

 	
 	

Per:	

 
	 	 	
	 	 	

	
TD SECURITIES INC.	
 	
FIRST ASSOCIATES INVESTMENTS INC.
	

Per:	
 	

 	
 	

Per:	

 
	 	 	
	 	 	

        The
foregoing accurately reflects the terms of the transaction which we are to enter into and such terms are agreed to with effect as of the date first above written. 

	CARDIOME PHARMA CORP.	 
	

Per:	
 	

 	

c/s
	 	 	
 Authorized Signing Officer	 

21

  

 
 

SCHEDULE "A"    
    
    CARDIOME PHARMA CORP    
    Terms and Conditions    
    

	Issuer:	 	Cardiome Pharma Corp. (the "Company")
	
Offering:	
 	

Special Warrants (the "Offering"). Each exercisable into one common share ("Share") and one-half of one common share purchase warrant ("Warrant") of the Company.
	
Common Share Purchase Warrant:	
 	

Each whole Warrant will entitle the holder to acquire one Share at a price of CDN $2.75 per Share for a period of 12 months following the Closing Date.
	
Issue Price:	
 	

CDN $2.10 per Special Warrant in respect of 3,762,000 Special Warrants and CDN $2.30 per Special Warrant in respect of 48,000 Special Warrants.
	
Commission:	
 	

6.0% cash.
	
Use of Proceeds:	
 	

The net proceeds are to be used to fund clinical trial expenses and for general corporate purposes.
	
Escrow Terms:	
 	

The gross proceeds from the issue of the Special Warrants (less commission and expenses of the Offering) will be held by a custodian, who shall also act as Trustee (the "Trustee") under the Special Warrant Indenture, and invested in short-term
obligations of the Government of Canada. Upon the earlier of the Prospectus Qualification Date and the date that is four months after the Closing Date, all of the escrowed proceeds (with interest accrued thereon) will be released to the
Company.
	
Prospectus Qualification:	
 	

The Company will use its best efforts to file a preliminary prospectus as soon as practicable following the Closing Date and to obtain receipts for a (final) prospectus in the provinces of Canada in which purchasers of Special Warrants are resident
no later than the date which is 60 days from the Closing Date ("Prospectus Qualification Date") to allow for the free tradeability of the Shares and Warrants issued upon exercise of the Special Warrants. In the event that the Company has not received
all of the receipts referred to above by such date, it will nonetheless continue to be obligated to use its reasonable best efforts to file and clear the (final) prospectus as soon as possible thereafter.

A-1

  

 
 

SCHEDULE "B"    
    
    TERMS AND CONDITIONS FOR    
    UNITED STATES OFFERS AND SALES    
    

Definitions  

	(A)
	"1933
Act" means the United States Securities Act of 1933, as amended;

	(B)
	"Accredited
Investor" means an "accredited investor" within the meaning of Rule 501(a) of Regulation D;

	(C)
	"Directed
Selling Efforts" means "directed selling efforts" as that term is defined in Rule 902 of Regulation S of the 1933 Act. Without limiting the foregoing, but for
greater clarity, such term means, subject to the exclusions from the definition of "directed selling efforts" contained in Regulation S, any activity undertaken for the purpose of, or that
could reasonably be expected to have the effect of, conditioning the market in the United States for any of the Special Warrants, Underlying Securities or Warrant Shares (the "Securities") and
includes the placement of any advertisement in a publication with a general circulation in the United States that refers to the offering of the Securities;

	(D)
	"Foreign
Issuer" means foreign issuer as that term is defined in Rule 902 of Regulation S;

	(E)
	"Regulation
D" means Regulation D promulgated under the 1933 Act;

	(F)
	"Regulation
S" means Regulation S promulgated under the 1933 Act;

	(G)
	"SEC"
means the United States Securities and Exchange Commission;

	(H)
	"Substantial
U.S. Market Interest" means "substantial U.S. market interest" as that term is defined in Rule 902 of Regulation S;

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

	(J)
	"U.S.
Person" has the meaning ascribed thereto in Rule 902 of Regulation S. 

        All
other capitalized terms used but not otherwise defined in this Schedule "B" shall have the meanings assigned to them in the Underwriting Agreement. 

        1.     The
Company represents and warrants to and covenants and agrees with the Underwriters as follows: 

	(a)
	The
Company is a Foreign Issuer which has, and on the commencement of the offering of the Special Warrants had, no Substantial U.S. Market Interest.

	(b)
	Except
with respect to securities offered and sold to Accredited Investors who are in the United States or are U.S. Persons in reliance upon an exemption from registration under
Rule 506 of Regulation D, neither the Company nor any of its affiliates, nor any person acting on its or their behalf, has made or will make:

	(i)
	any
offer to sell, or any solicitation of an offer to buy, any Securities to a U.S. Person or a person in the United States, or

	(ii)
	any
sale of Securities unless, at the time the buy order was or will have been originated, the purchaser was outside the United States or the Company, its affiliates,
and any person acting on its or their behalf reasonably believe that the purchaser is outside the United States. 

B-1

 

	(c)
	During
the period in which the Securities are offered for sale, and during the period that any Special Warrants or Warrants are outstanding, neither it nor any of its affiliates, nor
any person acting on its or their behalf has made or will make any Directed Selling Efforts, or has taken or will take any action that would cause the exemption afforded by Regulation D or the
exclusion from registration afforded by Regulation S to be unavailable for offers and sales of the Securities.

	(d)
	Neither
the Company nor any of its predecessors or affiliates (as defined in the 1933 Act) has been subject to any order, judgment, or decree of any court of competent jurisdiction
temporarily, preliminarily or permanently enjoining such person for failure to comply with Rule 503 of Regulation D.

	(e)
	None
of the Company, its affiliates or any person acting on its or their behalf has engaged or will engage in any form of general solicitation or general advertising (as those terms
are used in Regulation D) with respect to offers or sales of the Securities in the United States, including advertisements, articles, notices or other communications published in any newspaper,
magazine or similar media, or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation or general advertising in connection with the
offer or sale of the Securities in the United States.

	(f)
	Within
fifteen (15) days after the first sale of Special Warrants in the United States or to a U.S. Person, the Company will prepare and file with the SEC a notice on
Form D with respect to the Special Warrants and will file all amendments required to be filed as a result of subsequent sales of Special Warrants in the United States or to a U.S. Person.

	(g)
	Except
with respect to the offer and sale of Securities offered hereby, the Company has not in the six months prior to the Closing Date sold, offered for sale or solicited any offer
to buy any of its securities in the United States or to a U.S. Person or otherwise than to an Accredited Investor in accordance with Rule 506 of Regulation D.

	(h)
	The
Company is not an open-end investment company or unit investment trust registered or required to be registered or closed-end investment company required to
be registered, but not registered, under the United States Investment Company Act of 1940.

	(i)
	Any
press release issued in connection with the offering, issuance or sale of the Securities will comply in all respects with the requirements of Rule 135c of the 1933 Act. 

        2.     The
Underwriters severally represent and warrant to and covenant and agree with the Company as follows: 

	(a)
	The
Underwriters acknowledge that none of the Securities has been or will be registered under the 1933 Act and that such Securities are either:

	(i)
	being
offered and sold outside the United States in reliance upon an exclusion from registration under the 1933 Act provided by Regulation S, or

	(ii)
	being
offered and sold in the United States in reliance upon an exemption from registration under the 1933 Act provided under Rule 506 of Regulation D.

	(b)
	Any
offer or sale, or solicitation of an offer to buy Securities that is made to a U.S. Person or a person in the United States by the Underwriters or an affiliate thereof who is a
United States registered broker dealer will be made only to Accredited Investors or persons that the Underwriters reasonably believe to be Accredited Investors and who execute and deliver a U.S.
Subscription Agreement in the form of Schedule "G" hereto and only in states of the United States where such Underwriter or affiliate thereof is registered or otherwise exempt from registration. 

B-2

 

	(c)
	Neither
the Underwriters nor any of their respective affiliates nor any person acting on their behalf or on behalf of the affiliates has made or will make, except to the extent
permitted by paragraph 3 hereof;

	(i)
	any
offer to sell or any solicitation of an offer to buy, any Securities to any U.S. Person or person in the United States;

	(ii)
	any
sale of Securities to any purchaser unless, at the time the buy order was or will have been originated, the purchaser was outside the United States, or such Agent,
affiliate, or person acting on behalf of either reasonably believed that such purchaser was outside the United States; or

	(iii)
	any
Directed Selling Efforts with respect to the Securities.

	(d)
	The
Underwriters agree to obtain substantially identical undertakings from each member of any banking and selling group formed in connection with the distribution of the Special
Warrants contemplated hereby. Other than any banking and selling group agreement, the Underwriters have not entered and will not enter into any contractual arrangement with respect to the distribution
of the Special Warrants, except with its affiliates or with the prior written consent of the Company. 

        3.     The
Underwriters may offer the Securities in the United States to an unlimited number of Accredited Investors in accordance with the exemption from registration under
Rule 506 of Regulation D and in connection therewith represent and warrant to and covenant and agree with the Company as follows: 

	(a)
	Immediately
prior to soliciting such offerees, the Underwriters or an affiliate thereof who is a United States registered broker dealer had reasonable grounds to believe and did
believe that each offeree is an Accredited Investor;

	(b)
	No
form of general solicitation or general advertising has been or will be used (as those terms are used in Regulation D), including advertisements, articles, notices or other
communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees had been invited by general solicitation, or
general advertising, in connection with the offer or sale of the Securities in the United States;

	(c)
	The
Underwriters shall exercise reasonable care to assure that the purchasers of the Securities are not "underwriters" within the meaning of Section 2(11) of the 1933 Act by
taking the following actions;

	(i)
	reasonable
inquiry to determine if the purchaser is acquiring the Securities for itself or for other persons; and

	(ii)
	written
disclosure to each purchaser prior to sale that the Securities have not been registered under the 1933 Act and, therefore, cannot be resold unless registered
under the 1933 Act or an exemption or exclusion from registration is available.

	(d)
	Any
offer or sale, or solicitation of an offer to buy Special Warrants that has been made or will be made in the United States was or will be made only to Accredited Investors in
transactions that are exempt from registration under applicable "blue sky" securities laws of any state of the United States.

	(e)
	The
Securities will be offered and sold in the United States by the Underwriters and their affiliates in accordance with all applicable United States broker-dealer requirements. 

B-3

  

 
 

SCHEDULE "C"    
    
    OUTSTANDING CONVERTIBLE SECURITIES    
    

1.     Share Purchase Warrants

        As
at March 31, 2003 common shares issuable upon exercise of common share purchase warrants and brokers' warrants were outstanding as follows: 

	Date of Expiry
 
	 	Exercise

Price
	 	Number of

Warrants

	February 9, 2004	 	US$2.40	 	75,000
	February 9, 2004	 	US$4.80	 	25,000
	February 9, 2004	 	US$8.00	 	25,000
	February 9, 2007	 	US$2.40	 	37,500
	February 9, 2007	 	US$4.80	 	12,500
	February 9, 2007	 	US$8.00	 	12,500
	October 5, 2003	 	$3.20	 	41,667
	October 10, 2003	 	$2.40	 	16,691
	October 10, 2003	 	$3.20	 	187,625
	March 7, 2004	 	$6.64	 	2,327,414
	March 7, 2004	 	$3.80	 	930,966
	March 7, 2004	 	$6.64	 	232,741
	 	 	
	 	

	Balance as at March 31, 2003	 	 	 	3,924,604
	 	 	
	 	

2.     Stock Options

        As
at March 31, 2003, stock options to executive officers and directors, employees, consultants and clinical advisory board members were outstanding as follows: 

	 
	 	Options outstanding

March 31, 2003
	 	Options exercisable

March 31, 2003

	Range of

exercise price

$
	 	Number of

common shares

issuable
	 	Weighted average

remaining

contractual life

(years)
	 	Weighted

average

exercise price

$
	 	Number of

common shares

issuable
	 	Weighted

average

exercise price

$

	$	2.44-$2.92	 	280,625	 	4.16	 	2.84	 	267,500	 	2.84
	$	3.00-$3.82	 	2,845,375	 	5.65	 	3.27	 	1,558,750	 	3.23
	$	4.20-$4.40	 	75,000	 	2.06	 	4.24	 	72,500	 	4.24
	$	5.04-$5.96	 	327,188	 	2.10	 	5.57	 	327,188	 	5.57
	$	6.20-$7.24	 	81,250	 	2.23	 	6.45	 	81,250	 	6.45
	
	 	
	 	
	 	
	 	
	 	

	 	 	 	3,609,438	 	5.06	 	3.54	 	2,307,188	 	3.66
	
	 	
	 	
	 	
	 	
	 	

3.     Commitment to issue Shares  

        Under the terms of a licensing agreement, the Company has agreed to issue 50,000 common shares to the licensor upon the achievement of certain milestones. At
March 31, 2003, these milestones had not been achieved. 

C-1

  

 
 

SCHEDULE "D"    
    
    PATENT RIGHTS    
    

        The following table (Table 1) sets forth the issued patents licensed by Cardiome from the University of British Columbia (UBC): 

Table 1. Issued Patents—Cardiome  

	Patent/Appln. No.
	 	Country/Region
	 	Date Issued
	 	Date Expired

	Antiarrhythmia / Local Anaesthesia Program (Amides-401)
	

5,506,257	
 	

US	
 	

09 April 1996	
 	

09 April 2013
	668,932	 	Australia	 	10 September 1996	 	26 March 2013
	632,806	 	Europe	 	02 July 1997	 	26 March 2013
	1000684	 	Hong Kong	 	17 April 1998	 	26 March 2013
	632,806	 	France	 	02 July 1997	 	26 March 2013
	P69311896.2	 	Germany	 	02 July 1997	 	26 March 2013
	632,806	 	Ireland	 	02 July 1997	 	26 March 2013
	632,806	 	Italy	 	02 July 1997	 	26 March 2013
	2104142	 	Spain	 	02 July 1997	 	26 March 2013
	632,806	 	Switzerland	 	02 July 1997	 	26 March 2013
	632,806	 	United Kingdom	 	02 July 1997	 	26 March 2013
	2132841	 	Canada	 	20 March 2001	 	26 March 2013
	3190676	 	Japan	 	18 May 2001	 	26 March 2013
	
Antiarrhythmia Program (Esters-402)
	

5,637,583	
 	

US	
 	

10 June 1997	
 	

10 June 2014
	5,885,984	 	US	 	23 March 1999	 	10 June 2014
	6,174,879	 	US	 	16 January 2001	 	10 June 2014
	0720605	 	Europe(1)	 	19 December 2001	 	23 September 2014
	2,172,513(2)	 	Canada(2)	 	—	 	—

	(1)
	Registration
of the granted European patent can be effected in the following countries: Austria, Belgium, France, Denmark, Germany, United Kingdom, Ireland, Italy, Netherlands,
Portugal, Spain, Sweden and Switzerland.

	(2)
	Patent
application pending (filed 23 Sept.1994). Claims priority to US application #126575 (filed 24 Sept. 1993). 

D-1

 

        The
following table (Table 2) sets forth the patent applications assigned to and owned by Cardiome: 

Table 2. Patent Applications—Cardiome  

	Patent Application No.
	 	Country/Region
	 	Filing Date

	Antiarrhythmia Program (Ethers-403)
	

09/283,873*	
 	

US	
 	

31 March 1999(3, @)
	PCT/CA99/00280	 	PCT	 	1 April 1999(3, @)
	30215/99	 	Australia	 	1 April 1999(3, @)
	PI9909282-4	 	Brazil	 	1 April 1999(3, @)
	2326777	 	Canada	 	1 April 1999(3, @)
	99806682.6	 	China & Hong Kong	 	1 April 1999(3, @)
	PV20003485	 	Czech Republic	 	1 April 1999(3, @)
	0584/00PC	 	Estonia	 	1 April 1999(3, @)
	99/911550.4	 	Europe	 	1 April 1999(3, @)
	0040352	 	Hungary	 	1 April 1999(3, @)
	W-20002226	 	Indonesia	 	1 April 1999(3, @)
	138719	 	Israel	 	1 April 1999(3, @)
	IN/PCT2000,00490/MUM	 	India	 	1 April 1999(3, @)
	5632	 	Iceland	 	1 April 1999(3, @)
	2000-541135	 	Japan	 	1 April 1999(3, @)
	10-2000-7010894	 	South Korea	 	1 April 1999(3, @)
	0009593	 	Mexico	 	1 April 1999(3, @)
	20004897	 	Norway	 	1 April 1999(3, @)
	507169	 	New Zealand	 	1 April 1999(3, @)
	P-343425	 	Poland	 	1 April 1999(3, @)
	a/2000-00939	 	Romania	 	1 April 1999(3, @)
	2000127720	 	Russia	 	1 April 1999(3, @)
	200005298-5	 	Singapore	 	1 April 1999(3, @)
	PV1437-2000S	 	Slovak Republic	 	1 April 1999(3, @)
	2000-02796	 	Turkey	 	1 April 1999(3, @)
	2000/5195	 	South Africa	 	1 April 1999(3, @)
	09/680,988	 	US	 	6 October 2000(3, @)
	2,268,590	 	Canada	 	12 April 1999(@)
	2,388,122	 	Canada	 	28 May 2002
	2,388,682	 	Canada	 	3 June 2002
	60/368,473	 	US	 	5 June 2002
	
Antiarrhythmia / Local Anaesthesia Program (Amide Mixtures-405)
	

PCT/CA98/00905	
 	

PCT	
 	

25 September 1998(4)
	87115941	 	Taiwan	 	25 September 1998
	046295	 	Thailand	 	24 September 1998
	98/2526	 	The Philippines	 	25 September 1998
	PI 9804386	 	Malaysia	 	25 September 1998
	PI9814048-5	 	Brazil	 	25 September 1998(4)
	988107708.8	 	China	 	25 September 1998(4)
	0002969	 	Mexico	 	25 September 1998(4)
	
Antiarrhythmia Program (Cycloalkyl Amines-408)
	

PCT/CA00/00117	
 	

PCT	
 	

10 February 2000(2)
	09/913,373	 	US	 	13 August 2001(2)
	 	 	 	 	 

D-2

 

	
Antiarrhythmia Program (Cinnamides-409)
	

PCT/CA00/00217	
 	

PCT	
 	

3 March 2000(11)
	09/914,884	 	US	 	4 September 2001(11)
	
Antiarrhythmia / Kv1.5 Program
	

2311483*	
 	

Canada	
 	

12 June 2000
	PCT/CA01/00868	 	PCT	 	12 June 2001(1)
	60/395,272	 	US	 	12 July 2002
	2418978	 	Canada	 	14 February 2003
	
Cough Program (CP1) #
	

09/328,540 (Allowed)	
 	

US	
 	

9 June 1999(5)
	PCT/CA99/00535	 	PCT	 	9 June 1999(5)
	41272/99	 	Australia	 	9 June 1999(5)
	PI9911094-6	 	Brazil	 	9 June 1999(5)
	2334481	 	Canada	 	9 June 1999(5)
	99809416.1	 	China	 	9 June 1999(5)
	99/924623.4	 	Europe	 	9 June 1999(5)
	IN/PCT2000,00712/MUM	 	India	 	9 June 1999(5)
	2000-553054	 	Japan	 	9 June 1999(5)
	2000-7013938	 	South Korea	 	9 June 1999(5)
	12238	 	Mexico	 	9 June 1999(5)
	
Cough Program (CP2) #
	

09/328,541 (Allowed)	
 	

US	
 	

9 June 1999(6)
	PCT/CA99/00534	 	PCT	 	9 June 1999(6)
	41271/99	 	Australia	 	9 June 1999(6)
	PI9911095-4	 	Brazil	 	9 June 1999(6)
	2334454	 	Canada	 	9 June 1999(6)
	99809415.3	 	China	 	9 June 1999(6)
	99/924622.6	 	Europe	 	9 June 1999(6)
	IN/PCT2000,00711/MUM	 	India	 	9 June 1999(6)
	2000-553407	 	Japan	 	9 June 1999(6)
	2000-7013935	 	South Korea	 	9 June 1999(6)
	12239	 	Mexico	 	9 June 1999(6)
	
Cough Program (CP3) #
	

2,292,351*	
 	

Canada	
 	

15 December,1999
	PCT/CA00/01506	 	PCT	 	15 December, 2000
	
Cough Program (CP4) #
	

2,292,343*	
 	

Canada	
 	

15 December,1999
	PCT/CA00/01508	 	PCT	 	15 December, 2000
	
Cough Program (CP5) #
	

2,292,350*	
 	

Canada	
 	

15 December,1999
	PCT/CA00/01507	 	PCT	 	15 December, 2000
	 	 	 	 	 

D-3

 

	
Pain Management Program (NB1) #
	

09/140,027*	
 	

US	
 	

26 August 1998(7)
	PCT/CA98/00842	 	PCT	 	3 September 1998(7)
	98/941201.0 (Allowed)	 	Europe	 	3 September 1998(7)
	98810388.5	 	China	 	3 September 1998(7)
	00108104.6	 	Hong Kong	 	3 September 1998(7)
	PI9812182-0	 	Brazil	 	3 September 1998(7)
	2,303,815	 	Canada	 	3 September 1998(7)
	2000-508355	 	Japan	 	3 September 1998(7)
	2207	 	Mexico	 	3 September 1998(7)
	045858	 	Thailand	 	31 August 1998
	87114395	 	Taiwan	 	31 August 1998
	98/2246	 	The Philippines	 	31 August 1998
	PI 9804017	 	Malaysia	 	2 September 1998
	
Pro-Erectile Program (PE1-404)
	

09/111,684 (Allowed)	
 	

US	
 	

8 July 1998(8)
	PCT/CA98/00662	 	PCT	 	9 July 1998(8)
	82033/98	 	Australia	 	9 July 1998(8)
	2295640	 	Canada	 	9 July 1998(8)
	98807711.6*	 	China	 	9 July 1998(8)
	98/931867.0	 	Europe	 	9 July 1998(8)
	133822	 	Israel	 	9 July 1998(8)
	2000-501751	 	Japan	 	9 July 1998(8)
	10-2000-7000168	 	South Korea	 	9 July 1998(8)
	0000353	 	Mexico	 	9 July 1998(8)
	9906473-5	 	Singapore	 	9 July 1998(8)
	87113676	 	Taiwan	 	19 August 1998
	
Pro-Erectile Program (PE2-406)
	

PCT/US99/15571	
 	

PCT	
 	

8 July 1999(9)
	09/743,298	 	US	 	9 April 2001(9)

NOTE: In the foregoing table, "PCT" refers to a filing pursuant to the International Patent Cooperation Treaty. 

	(1)
	Claims
priority to CA application (#2311483) filed 12 June 2000.

	(2)
	Claims
priority to US application (#60/119,887) filed 12 Feb. 1999.

	(3)
	Claims
priority to US application (#60/080,347) filed 1 April 1998 and US application (#60/118,954) filed 5 February 1999. The filing date of 1 April 1999
for all non-US applications corresponds to the international filing date of the original PCT international application (PCT/CA99/00280).

	(4)
	Claims
priority to US application (#60/060,154) filed 26 September 1997.

	(5)
	Claims
priority to US application (#60/088,597) filed 9 June 1998.

	(6)
	Claims
priority to US application (#60/088,587) filed 9 June 1998.

	(7)
	Claims
priority to US application (#60/056,312) filed 3 September 1997.

	(8)
	Claims
priority to US application (#60/052,051) filed 9 July 1997.

	(9)
	Claims
priority to US application (#60/092,097) filed 8 July 1998. 

D-4

 
	(10)
	Claims
priority to US application (#60/109,255) filed 19 November 1998.

	(11)
	Claims
priority to US application (#60/122,858) filed 4 March 1999.

	@
	A
sub-group of compounds covered by the patent claims was licensed to AstraZeneca in Oct. 2000. All intellectual property rights were subsequently returned to
Cardiome in March 2002.

	*
	Application
withdrawn or abandoned.

	#
	All
technology and intellectual property pertaining to these programs were acquired by UCB, S.A. (19/9/02) 

        The
following tables (Table 3 and Table 4) set forth the issued patent and patent applications licensed by Paralex (now Cardiome) from the Johns Hopkins University (JHU): 

Table 3. Issued Patent—Paralex/Cardiome  

	Patent/Appln. No.
	 	Country/Region
	 	Date Issued
	 	Date Expired

	Congestive Heart Failure / Contractile Disorder Program (XOI/CaSen)
	

6,191,136	
 	

US	
 	

20 February 2001	
 	

5 November 2018

Table 4. Patent Applications—Paralex/Cardiome  

	Patent Application No.
	 	Country/Region
	 	Filing Date

	Congestive Heart Failure / Contractile Disorder Program (XOI/CaSen)
	

PCT/US98/23878	
 	

PCT	
 	

5 November 1998(1)
	98959400.7	 	Europe	 	5 November 1998(1)
	09/680,876 (Allowed)	 	US	 	6 October 2000(2)

	(1)
	Claims
priority to US application (#60/064,942) filed 7 November 1997.

	(2)
	A
continuation application of US Patent 6,191,136 was filed and is pending. 

Trademark  

        The OXYPRIM trademark is licensed from ILEX Oncology, Inc. 

D-5

  

 
 

SCHEDULE "E"    
    
    FORM OF STANDSTILL AGREEMENT WITH RESPECT
  TO DISPOSITION OF SHARES    
    

April 10,
2003 

Yorkton
Securities Inc.

Sprott Securities Inc.

TD Securities Inc.

First Associates Investments Inc. 

c/o
Yorkton Securities Inc.

BCE Place

181 Bay Street, Suite 3100

Toronto, Ontario

M5J 2R9 

Dear
Sirs: 

Re:    Cardiome Pharma Corp.  

        The undersigned refers to an underwriting agreement dated April 10, 2003 (the "Underwriting Agreement") between Cardiome Pharma Corp. (the "Company") and
Yorkton Securities Inc., Sprott Securities Inc., TD Securities Inc. and First Associates Investments Inc. (collectively, the "Underwriters") with respect to a private
placement of special warrants of the Company (the "Offering"). Capitalized terms used but not defined herein shall have the respective meanings attributed thereto in the Underwriting Agreement. 

        In
consideration for the Underwriters completing the Offering on the terms set out in the Underwriting Agreement and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the undersigned hereby covenants and agrees in favour of the Underwriters that the undersigned will not, directly or indirectly, offer, sell, assign,
pledge, alienate, transfer or otherwise dispose of any Shares or securities convertible or exchangeable into Shares (or enter into any swap, futures contract or other arrangement that transfers to
another, in whole or in part, any of the economic consequences of ownership of the Shares, whether settled by the delivery of Shares, other securities, cash or otherwise) from the date of this
agreement to the earlier of the Expiry Date and the 90th day following the Closing Date. The undersigned further covenants and agrees in favour of the Underwriters that any securities of the Company
acquired by the undersigned after the date hereof (other than any Underlying Securities or Warrant Shares acquired on the exercise of Special Warrants or Warrants, as applicable) will be subject to
the foregoing restrictions. The undersigned hereby represents and warrants to the Underwriters that the undersigned beneficially holds, directly or indirectly, or exercises control or direction over,
an aggregate of                         Shares. 

        This
agreement shall enure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns and shall be governed by
and construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein. 

Yours
truly, 

[Name]

Accepted
and acknowledged this                        day of April, 2003. 

	 	 	YORKTON SECURITIES INC.,
 on its behalf and on behalf of
 SPROTT SECURITIES INC.,

TD SECURITIES INC. and
 FIRST ASSOCIATES INVESTMENTS INC.
	

 	
 	
Per:	

 
	 	 	 	

E-1

  

 
 

SCHEDULE "F"    
    
    OPINION OF THE COMPANY'S COUNSEL    
    

        The opinion of the Company's counsel shall, in addition to such other matters as the Underwriters may reasonably request, state that: 

        1.     the
Company is a validly existing corporation incorporated under the laws of Canada and which has not been dissolved; there are no restrictions on the corporate power and
capacity of the Company to own and lease property and assets and to carry on business; there are no restrictions on the corporate power and capacity of the Company to execute, deliver and perform its
obligations under each of the Subscription Agreements, the Underwriting Agreement, the Special Warrant Indenture, the Warrant Indenture, the Special Warrants and the Warrants (collectively, the
"Documents"); 

        2.     each
of the Subsidiaries is a validly existing corporation incorporated under the laws of its jurisdiction of incorporation and which has not been dissolved; there are no
restrictions on the corporate power and capacity of each such corporation to own and lease property and assets and to carry on business; 

        3.     as
to the authorized and issued share capital of the Company and that all issued and outstanding shares are issued and outstanding as fully paid and
non-assessable shares; 

        4.     as
to the registered shareholders of each Subsidiary and that all issued and outstanding shares of each Subsidiary are issued and outstanding as fully paid and
non-assessable shares; 

        5.     the
Trustee has been duly appointed by the Company as the Trustee under the Special Warrant Indenture and the Warrant Indenture; 

        6.     all
necessary corporate action has been taken by the Company to authorize the execution and delivery by it of each of the Documents and to authorize the creation and
issuance of the Special Warrants and the Warrants and the issuance of the Shares issuable upon exercise of the Special Warrants and the Warrants; 

        7.     each
of the Documents, other than the Warrants, has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms; the Warrants will, when issued by the Company, constitute legal, valid and binding obligations of the Company enforceable against the
Company in accordance with their terms; 

        8.     the
execution and delivery by the Company of the Documents, the fulfillment of the terms thereof by the Company, the issue, sale and delivery of the Special Warrants and
the issue and delivery of the Underlying Securities and the Warrant Shares do not and will not result in a breach of or a default under, and do not and will not create a state of facts which, after
notice or lapse of time or both, will result in a breach of or default under, and do not and will not conflict with: 

	(a)
	the
articles or by-laws of the Company; or

	(b)
	any
laws of the Province of British Columbia or of Canada applicable therein. 

        9.     the
private placement of the Special Warrants has been accepted for filing by the TSX and the Shares issuable upon exercise of the Special Warrants and the Warrants will,
when issued, be listed and posted for trading on the TSX; 

        10.   (a)
The Special Warrants have been duly and validly created and issued and the Warrants have been duly and validly created and upon the due exercise of the Special
Warrants will be duly and validly issued; and 

F-1

 

	(b)
	the
Shares issuable upon exercise of the Special Warrants and the Warrant Shares have been duly and validly authorized and reserved for issuance and will, upon the due exercise of the
Special Warrants and the Warrants, respectively, be validly issued and outstanding as fully paid and non-assessable shares; 

        11.   the
offering, sale, issue and delivery of the Special Warrants by the Company to Purchasers resident in the Designated Provinces are exempt from the prospectus
requirements of the Applicable Securities Laws and no filing, proceeding, approval, consent or authorization is required to be made, taken or obtained by the Company to permit the offering, sale,
issue and delivery of the Special Warrants to the Purchasers, subject to the usual qualifications; 

        12.   the
first trade by a Purchaser of the Special Warrants, other than a trade which is otherwise exempt from the prospectus and registration requirements of the Applicable
Securities Laws, will be a distribution subject to the prospectus requirements of the Applicable Securities Laws, subject to the usual qualifications; 

        13.   the
issuance and delivery of the Underlying Securities by the Company upon the due exercise of the Special Warrants in accordance with their terms and the issuance and
delivery of the Warrant Shares by the Company upon the due exercise of the Warrants in accordance with their terms, prior to the issuance of receipts for the Final Prospectus by the Securities
Commissions are exempt from the prospectus and registration requirements of the Applicable Securities Laws and no filing, proceeding, approval, consent or authorization is required to be made, taken
or obtained to permit the issuance and delivery of the Underlying Securities to holders of Special Warrants and the issuance and delivery of the Warrant Shares to holders of Warrants resident in the
Designated Provinces, subject to the usual qualifications; 

        14.   in
the event that: (i) receipts for the Final Prospectus and any required amendments thereto are issued by the Securities Commissions; and (ii) copies of
the Final Prospectus and any required amendments thereto are delivered to a holder of Special Warrants resident in a Designated Province, in each case prior to the due exercise by such holder of such
Special Warrants and the issuance of the Underlying Securities to such holder, the first trade by such holder of Underlying Securities and Warrant Shares will not be subject to the prospectus
requirements under the Applicable Securities Laws and no other filing, proceeding, approval, consent or authorization will be required to be made, taken or obtained under the Applicable Securities
Laws to permit such trade through registrants or dealers registered under the Applicable Securities Laws who have complied with such laws, or in circumstances in which there is an exemption from the
registration requirements of such laws, subject to the usual qualifications; 

        15.   in
the event that receipts for the Final Prospectus and any required amendments thereto are not issued by the Securities Commissions prior to the due exercise of the
Special Warrants owned by a holder of Special Warrants resident in a Designated Province, the first trade by such holder of the Underlying Securities acquired upon the due exercise of such Special
Warrants and the Warrant Shares acquired upon the due exercise of the Warrants, other than a trade which is exempt from the prospectus requirements of the Applicable Securities Laws, will be a
distribution subject to the prospectus requirements of the Applicable Securities Laws, subject to at least four months having elapsed from the issue of the Special Warrants and the usual
qualifications; 

        16.   the
form of share certificate for the Shares conforms with the Canada Corporations Act and has been approved by the TSX and the directors of the Company; and 

        17.   the
Company is a reporting issuer in the Designated Provinces and is not included in the list of defaulting reporting issuers maintained pursuant to the securities
legislation of such provinces. 

F-2

  

 
 

SCHEDULE "G"    
    
    FORM OF THE U.S. SUBSCSRIPTION AGREEMENT    
    

SUBSCRIPTION AGREEMENT  

(for U.S. Subscribers of Special Warrants)  

        A completed and originally executed copy of this subscription agreement (together with the schedules hereto) must be delivered by no later
than 12:00 noon (Toronto time) on April 8, 2003 to Yorkton Securities Inc., BCE Place, 181 Bay Street, Suite 3100, Toronto, Ontario M5J 2T3 (Attn: Marilia
Costa).

	TO:	Cardiome Pharma Corp. (the "Company")
	

AND TO:	

Yorkton Securities Inc., on its behalf and on behalf of Sprott Securities Inc., TD Securities Inc. and First Associates Investments Inc. (collectively, the "Underwriters")
	

AND TO:	

Yorkton Capital Inc.
	

RE:	

Issue and Sale of Special Warrants of the Company

Details of Subscription

        The
undersigned (the "Subscriber") hereby irrevocably offers to purchase from the Company, subject to the terms and conditions set forth
in this subscription agreement, special warrants ("Special Warrants") of the Company with the following specific purchase instructions. Certain
representations, warranties and covenants of the Company and certain other terms of the purchase by the Subscriber of the Special Warrants are set out in Schedule "A" to this subscription agreement.
The particulars of the Special Warrants and the securities to be issued on exercise of the Special Warrants are set out in Schedule "B" to this subscription agreement. Certain representations and
warranties to be made by you so that the Company and the Underwriters can ensure compliance with applicable securities laws are set out in Schedule "C" to this subscription agreement. The Toronto
Stock Exchange Private Placement Questionnaire and Undertaking attached as Schedule "D" to this subscription agreement must be completed in full. 

        Each
such schedule forms a part of this subscription agreement and you should review each carefully. 

	Number of Special Warrants to be purchased at Cdn.$2.10 each:	 	 	 	Special Warrants
	 	 	 	
	 
	
Total Subscription Price:	
 	

Cdn.$	

 	

 
	 	 	 	
	(please refer to Schedule "C" for

representations and warranties to

be made by the Subscriber)
	
Name and Address of Subscriber:	
 	
Name:	

 	

 
	 	 	 	

	 	 	Address:	 	 
	 	 	 	

	

 	
 	

 	

 (Street Address)
	

 	
 	

 	

 (City and State)
	

 	
 	

 	

 (Zip Code)
	

 	
 	

 	

 (Phone Number)

G-1

 

        In
the event that the Subscriber is contracting hereunder on behalf of one or more disclosed principals, the particulars of such disclosed principals are set forth below (if space is
insufficient, please attach a separate list): 

	Name:	 	 	 	Name:	 
	 	 	
	 	 	

	
Address:	
 	

 	
 	
Address:	

 
	 	 	
	 	 	

	 	 	 	 	 	 
	

 	
 	

	
 	

 	

	
No. of Special Warrants purchased:	
 	

 	
 	
No. of Special Warrants purchased:	

 
	 	 	
	 	 	

	
Alternate Registration Instructions (other than in the name of the Subscriber):
	
Name:	
 	

 	
 	
Name:	

 
	 	 	
	 	 	

	No. of Special Warrants:	 	 	 	No. of Special Warrants:	 
	 	 	
	 	 	

        Delivery Instructions:    The name and address (including contact name and telephone number) of the person to whom the
certificate representing the Special Warrants is to be delivered, if other than the Subscriber: 

	 	 	Name:	 	 
	 	 	 	 	

	

 	
 	
No. of Special Warrants:	
 	

 
	 	 	 	 	

	

 	
 	
Contact Name:	
 	

 
	 	 	 	 	

	

 	
 	
Telephone No:	
 	

 
	 	 	 	 	

	

 	
 	
Address:	
 	

 
	 	 	 	 	

	

 	
 	

 	
 	

 (Street Address)
	

 	
 	

 	
 	

 (City and State)
	

 	
 	

 	
 	

 (Zip Code)

G-2

 

        IN
WITNESS WHEREOF the Subscriber has executed, or caused its duly authorized representative to execute, this subscription agreement on this
       day of April, 2003. 

	 	 	
 Name of Subscriber
	

 	
 	

Per:	

 
	 	 	 	
 (signature of authorized representative)
	
	 	 	 
	 	 	 	
 Name and Title of Authorized Representative

G-3

 
ACCEPTANCE  

        The foregoing is acknowledged, accepted and agreed to this            day of April, 2003. 

	 	 	CARDIOME PHARMA CORP.
	

 	
 	

Per:	

 
	 	 	 	

G-4

  

 
 

SCHEDULE "A"    
    
    TERMS OF OFFERING    
    

        1.    Offering.    The Special Warrants subscribed for hereunder form part of a larger sale by the Company of Special
Warrants (the "Offering") pursuant to the terms of an underwriting agreement between the Company and the Underwriters to be entered into in connection
with the Offering. The Company agrees that the Subscriber shall have the benefit of the following provisions set forth in such underwriting agreement: 

	(a)
	the
representations and warranties made by the Company to the Underwriters and to the Subscriber as a purchaser of Special Warrants;

	(b)
	the
covenants of the Company in favour of the Underwriters and the Subscriber as a purchaser of Special Warrants; and

	(c)
	the
conditions precedent to the Offering. 

The
material terms of the Special Warrants and of the securities issuable upon exercise of the Special Warrants are set out in Schedule "B" to this subscription agreement. 

        The
Subscriber acknowledges that the definitive terms and conditions of the Special Warrants sold under the Offering will be set forth in the Special Warrant Indenture (as hereinafter
defined). 

        2.    Definitions.    In this subscription agreement and the schedules to this subscription agreement, the defined
terms set out on the first page of this subscription agreement shall apply and, unless the context otherwise requires: 

        "Closing Date" means April 10, 2003 or such other date as the Company and the Underwriters may agree to pursuant to the
Underwriting Agreement; 

        "Closing Time" means 11:00 a.m. (Toronto time) on the Closing Date or such other time on the Closing Date as the Company and the
Underwriters may agree pursuant to the Underwriting Agreement; 

        "Designated Provinces" means the provinces of Canada in which purchasers of Special Warrants are resident; 

        "Final Prospectus" means the (final) Prospectus; 

        "material" means material in relation to the Company; 

        "material change" means any change in the business, operations or capital of the Company that would reasonably be expected to have a
significant effect on the market price or value of the Shares or Special Warrants and includes a decision to implement such a change made by the board of directors of the Company or by senior
management of the Company who believe that confirmation of the decision by the board of directors is probable; 

        "material fact" means any fact that significantly affects or would reasonably be expected to have a significant effect on the market price
or value of the Shares or the Special Warrants, as the case may be; 

        "misrepresentation" means, with respect to circumstances in which the Securities Laws of a Designated Province are applicable, a
misrepresentation as defined under the Securities Laws of such Designated Province and, if not so defined or in circumstances in which no particular provincial laws are applicable, a misrepresentation
as defined under the Securities Act (Ontario); 

        "OTC" means the Over-the Counter Bulletin Board administered by the National Association of Securities Dealers in the United
States; 

A-1

 

        "Preliminary Prospectus" means the preliminary Prospectus; 

        "Prospectus", as the context may require, means the preliminary prospectus and the (final) prospectus to be prepared and filed pursuant to
National Instrument 41-101 of the Canadian Securities Administrations in each Designated Province relating to the qualification for distribution of the Underlying Securities upon exercise
of the Special Warrants and, unless the context otherwise requires, includes any amendments or supplements thereto, and "Prospectuses" means both the
Preliminary Prospectus and Final Prospectus; 

        "Purchasers" means those persons who subscribe for Special Warrants under the Offering, including the Subscriber; 

        "Regulation D" means Regulation D under the U.S. Securities Act; 

        "Regulation S" means Regulation S under the U.S. Securities Act; 

        "Securities Commissions" means, collectively, the securities commission or other securities regulatory authority in each of the Designated
Provinces; 

        "Securities Laws" means, collectively, the applicable securities laws of each of the Designated Provinces and the respective regulations
made and forms prescribed thereunder together with all applicable rules and published policy statements and blanket orders and rulings of the Securities Commissions; 

        "Shares" means the common shares in the capital of the Company; 

        "Special Warrant Indenture" means the special warrant indenture between the Warrant Agent, as warrant agent, and the Company to be entered
into in respect of the creation and issuance of the Special Warrants; 

        "TSX" means the Toronto Stock Exchange; 

        "Underlying Securities" means one Share and one-half of one Warrant issuable, for no additional consideration, upon the
exercise or deemed exercise of each Special Warrant, as more particularly described in Schedule "B" to this subscription agreement; 

        "Underwriting Agreement" means the underwriting agreement to be entered into between the Company and the Underwriters in connection with
the Offering; 

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

        "U.S. Person" means a U.S. Person as that term is defined in Regulation S; 

        "U.S. Securities Act" means the Securities Act of 1933, as amended, of the United States
of America; 

        "Warrant Agent" means the Company's registrar and transfer agent, or such other warrant agent which is acceptable to the Company and the
Underwriters; 

        "Warrant Indenture" means the warrant indenture between the Warrant Agent, as warrant agent, and the Company to be entered into in respect
of the creation and issuance of the Warrants; and 

        "Warrants" means the common share purchase warrants of the Company forming part of the Underlying Securities, as more particularly
described in Schedule "B" to this subscription agreement. 

        3.    Representations and Warranties of the Company.    The Company hereby represents and warrants to the Underwriters
and to the Subscriber as follows: 

	(a)
	the
Company (i) has been duly incorporated and organized and is a valid and subsisting corporation under the laws of Canada; (ii) has all necessary corporate capacity
and authority 

A-2

 

to
carry on its business as now conducted, to own, lease and operate its properties and assets and to enter into and perform its obligations under this subscription agreement; and (iii) has
taken all required corporate action to authorize the execution and delivery of this subscription agreement and the performance of all of its covenants and obligations hereunder; 

	(b)
	this
subscription agreement has been duly authorized, executed and delivered by the Company and constitutes a legal, valid and binding obligation enforceable against the Company in
accordance with its terms and the execution and delivery of this subscription agreement by the Company, the performance and compliance with the terms hereof and the sale of the Special Warrants will
not result in any breach of, or be in conflict with or constitute a default under, or create a state of facts which, after notice or lapse of time, or both, would constitute a default either directly
or indirectly under any term or provision of the constating documents, by-laws or resolutions of the Company or any material agreement to which the Company is a party or by which it is
bound;

	(c)
	the
Company is a reporting issuer or equivalent under the securities legislation of each of the Designated Provinces and is not in default under applicable securities legislation in
such provinces;

	(d)
	all
documents publicly issued by the Company or filed by the Company with any securities commission, other securities regulatory authority or stock exchange, in each case since
November 30, 2002, were, at their respective dates of issue or filing, true and correct in all material respects, contained no misrepresentation and were prepared in accordance with and
complied, in all material respects, with the securities laws, regulations, rules, published policy statements, blanket orders and rulings applicable thereto;

	(e)
	there
has been no adverse material change in relation to the Company since November 30, 2002 which has not been publicly disclosed;

	(f)
	the
Shares are listed and posted for trading on the TSX and are quoted on the OTC, and the Company is in compliance, in all material respects, with the by-laws, rules and
policies of the TSX and of the OTC;

	(g)
	other
than the holders of Special Warrants or as disclosed in the most recent consolidated financial statements filed by the Company or as otherwise disclosed to the Underwriters in
writing, no person has any right, agreement or option, contingent or absolute, or any right capable of becoming a right, agreement or option, for the issue or allotment of any unissued Shares or any
other security convertible into or exchangeable for any Shares or to require the Company to purchase, redeem or otherwise acquire any of the issued and outstanding Shares; and

	(h)
	the
proceeds of the Offering, net of the Underwriters' fee and other expenses of the Offering, will be used to fund clinical trial expenses and for general corporate purposes. 

        4.    Covenants of the Company.    The Company hereby covenants and agrees and, in the Underwriting Agreement and/or
the Special Warrant Indenture, the Company will covenant and agree as follows: 

	(a)
	to
cause the Preliminary Prospectus and any other documents required to be filed to be prepared and filed with each of the Securities Commissions in accordance with all applicable
Securities Laws in form and substance reasonably satisfactory to the Underwriters;

	(b)
	to
use its best efforts to file the Preliminary Prospectus with the Securities Commissions and to obtain receipts therefrom as soon as practicable following the Closing Date; 

A-3

 

	(c)
	to
use its best efforts to file the Final Prospectus with the Securities Commissions and to obtain receipts therefrom as soon as possible after the filing of the Preliminary
Prospectus and, in any case, no later than 5:00 p.m. (Toronto time) on the 60th day following the Closing Date;

	(d)
	to
use its best efforts to ensure that the Shares issuable upon exercise of the Special Warrants and upon exercise of the Warrants will be listed and posted for trading on the TSX and
will be quoted on the OTC upon their issue;

	(e)
	to
promptly comply with all filing and other requirements under all applicable Securities Laws, including, where required by the Underwriting Agreement or any Securities Laws, the
filing of amendments to the Prospectuses in each of the Designated Provinces;

	(f)
	to
use its best efforts to maintain its status as a reporting issuer as set out in paragraph 3(c) above and to continue to be in compliance with its obligations thereunder,
without default;

	(g)
	upon
issuance by the Securities Commissions of receipts for the Final Prospectus, to cause the Final Prospectus to be delivered to each of the then registered holders of Special
Warrants; and

	(h)
	following
the issuance by the Securities Commissions of receipts for the Final Prospectus, to maintain its status as a reporting issuer in the Designated Provinces for a period of not
less than 12 months following the Closing Date and to comply with its obligations thereunder. 

        In
addition, the covenants and terms set forth in Schedule "B" to this subscription agreement are hereby incorporated into this section 4 as additional covenants of the Company. 

        5.    Closing of Purchase.    The Subscriber acknowledges and agrees that closing of the Offering will be completed at
the Closing Time at the offices of Fasken Martineau DuMoulin LLP, Suite 4200, Toronto Dominion Bank Tower, Toronto-Dominion Centre, Toronto, Ontario or at such other place as the Underwriters and the
Company may agree, and in the manner set forth in the Underwriting Agreement. The Subscriber hereby appoints Yorkton Securities Inc. to act as its agent to represent it with respect to all
matters relating to this subscription agreement, including negotiating and settling the terms of the Special Warrant Indenture and the Warrant Indenture, closing opinions and other documents,
representing the Subscriber at closing for the purpose of all closing matters and delivery of documents and payment of funds, and the Subscriber hereby authorizes Yorkton Securities Inc. to
extend such time periods and modify or waive such conditions as may be contemplated herein or in the Underwriting Agreement as Yorkton Securities Inc., in its absolute discretion, may deem
appropriate. 

        6.    Conditions of Closing.    The obligations of the Subscriber to complete the purchase of Special Warrants as
contemplated in this subscription agreement are conditional upon the fulfillment at or before the Closing Time of each of the conditions for the closing of the Offering to be set forth in the
Underwriting Agreement which have not been waived by the Underwriters. In addition, the Offering is subject to all required regulatory and stock exchange approvals. 

        7.    Payment and Delivery.    The Subscriber acknowledges and agrees that this agreement and any other documents
delivered in connection herewith will be held by the Underwriters on the Subscriber's behalf. At the closing, the Underwriters are hereby authorized, on behalf of the Subscriber, to deliver this
agreement and any other documents required to be delivered in connection herewith to the Company and to pay to the Company, or as the Company may direct, an amount equal to the total purchase price
for the Special Warrants being purchased by the Subscriber hereunder; and the Company will thereupon issue to the Subscriber the Special Warrants being purchased by it hereunder registered in the
Subscriber's name (or in such other name or names as are set forth under "Alternate Registration Instructions" on the second page of this subscription agreement) and cause to be issued and delivered
to the Underwriters for delivery, in accordance with the Subscriber's "Delivery 

A-4

 

Instructions"
on the third page of this subscription agreement, a definitive certificate representing the Special Warrants being purchased by the Subscriber hereunder. The Subscriber acknowledges that
the payment by an Underwriter, on the Subscriber's behalf, of the purchase price to the Company will constitute a loan made by such Underwriter to the Subscriber and the Subscriber agrees to repay
such loan to such Underwriter by delivering to such Underwriter (or to such other person as such Underwriter may direct by notice to the Subscriber), on the Closing Date, a certified cheque or bank
draft made payable on the Closing Date to or to the order of such Underwriter in an amount equal to the aggregate purchase price or by making such other arrangements for the payment of such amount as
may be acceptable to such Underwriter, against delivery to the Subscriber in accordance with the instructions on the third page of this subscription agreement of the certificate representing the
Special Warrants referred to above. In the event that the Subscriber's agreement to purchase is not accepted by the Company or the conditions for closing as set out in the Underwriting Agreement (to
the extent not waived by the Underwriters) are not satisfied by the Company within the time therein provided, this subscription agreement and any other documents delivered in connection herewith will
be returned to the Subscriber at the address under "Name and Address of Subscriber" set forth on the second page of this subscription agreement. 

        8.    Acceptance or Rejection.    The Subscriber acknowledges and agrees that the acceptance of this subscription
agreement will be conditional upon the sale of the Special Warrants to the Subscriber being exempt from the prospectus requirements of all applicable Securities Laws. The Subscriber understands and
agrees that the Company reserves the right, in its absolute discretion, to reject the Subscriber's subscription for Special Warrants, in whole or in part, at any time prior to the Closing Time. The
Company will be deemed to have accepted this subscription agreement upon the delivery at closing of the certificate representing the Special Warrants referred to in section 7 above to or upon
the direction of the Underwriters in accordance with the provisions hereof. 

        9.    Information and Documents.    As soon as practicable and in any event by no later than 12:00 noon (Toronto time)
on April 8, 2003, the Subscriber will deliver or arrange to have delivered to Yorkton Securities Inc. on behalf of the Underwriters, a copy of this subscription agreement completed and
executed by the Subscriber, together with all schedules attached hereto, and will, promptly upon request by the Company or the Underwriters, provide the Company or the Underwriters with such
information and execute and deliver to the Company or the Underwriters such additional undertakings, questionnaires and other documents as the Company or the Underwriters may request or as may be
required by applicable Securities Laws in connection with the issue and sale of the Special Warrants and the filing of the Preliminary Prospectus and the Final Prospectus. The Subscriber acknowledges
and agrees that such undertakings, questionnaires and other documents, when executed and delivered by the Subscriber, will form part of and will be incorporated into this subscription agreement with
the same effect as if each constituted a representation and warranty or covenant of the Subscriber hereunder in favour of the Company and the Underwriters. The Subscriber hereby consents to the filing
of such undertakings, questionnaires and other documents as may be required to be filed with any stock exchange or Securities Commission in connection with the transactions contemplated hereby. 

        10.    No Investigation by Underwriters.    The Subscriber acknowledges and agrees that the Subscriber has not seen or
been provided with any offering memorandum or advertisement of the Special Warrants and that the decision to enter into this agreement and purchase the Special Warrants has not, and will not, be based
upon any verbal or written representations as to fact or otherwise, warranties or covenants made by or on behalf of the Underwriters and that the decision will be based entirely upon publicly
available information. The Subscriber acknowledges and agrees that the Underwriters assume no responsibility or liability of any nature whatsoever for the accuracy or adequacy of the publicly
available information (such information having been prepared without independent investigation or verification by the Underwriters), the documents referred to in paragraph 3(d) above or as to
whether all information concerning the Company required to be 

A-5

 

disclosed
by it has been publicly disclosed. The Subscriber further acknowledges and agrees that the Underwriters have not engaged in or conducted any independent investigation or due diligence with
respect to the Company or any such information or documentation. Subscriber further acknowledges that Fasken Martineau DuMoulin LLP is acting as counsel to the Underwriters only and not as counsel to
Subscriber or to any other purchaser of Special Warrants. 

        11.    Resale Restrictions.    The Subscriber understands and acknowledges that the
Subscriber's Special Warrants, and in certain circumstances the Underlying Securities, will be subject to resale restrictions under applicable Securities Laws and the Subscriber agrees to comply with
such restrictions. The Subscriber also acknowledges that it has been advised to consult its own legal advisors with respect to applicable resale restrictions and that it is
solely responsible for complying with such restrictions (and neither the Company nor the Underwriters are in any manner responsible for ensuring compliance by the Subscriber with such restrictions). 

        12.    Legending of Certificates.    The Subscriber agrees and acknowledges that the certificates evidencing the
Subscriber's Special Warrants and, in certain circumstances, the Underlying Securities will bear legends to the effect that the securities represented thereby will be subject to resale restrictions in
accordance with applicable Securities Laws. 

        13.    No Revocation.    The Subscriber agrees that this offer is made for valuable consideration and may not be
withdrawn, cancelled, terminated or revoked by the Subscriber. 

        14.    Compensation to the Underwriters and Other Expenses of the Offering.    The Subscriber understands that in
connection with the Offering the Underwriters will receive a commission equal to 6.0% of the gross proceeds of the Offering. In addition, the Underwriters are entitled to reimbursement from the
Company of certain of their expenses in connection with the Offering in accordance with the Underwriting Agreement. 

        15.    Indemnity.    The Subscriber agrees to indemnify and hold harmless the Company, its subsidiaries and the
Underwriters and their respective directors, officers, employees, agents, advisers and shareholders from and against any and all loss, liability, claim, damage and expense whatsoever (including, but
not limited to, any and all fees, costs and expenses whatsoever reasonably incurred in investigating, preparing or defending against any claim, lawsuit, administrative proceeding or investigation
whether commenced or threatened) arising out of or based upon any representation or warranty of the Subscriber contained herein or in any document furnished by the Subscriber to the Company or the
Underwriters in connection herewith being untrue in any material respect or any breach or failure by the Subscriber to comply with any covenant or agreement made by the Subscriber herein or in any
document furnished by the Subscriber to the Company or the Underwriters in connection herewith. 

        16.    Modification.    Subject to section 5 above, neither this subscription agreement nor any provision
hereof shall be modified, changed, discharged or terminated except by an instrument in writing signed by the party against whom any waiver, change, discharge or termination is sought. 

        17.    Contractual Right of Action for Rescission.    By its acceptance and acknowledgement of this subscription
agreement, the Company hereby agrees to provide the Subscriber with the rights of action for rescission described below. 

In
the event that a holder of a Special Warrant, who acquires Underlying Securities upon exercise of the Special Warrant, is or becomes entitled under applicable securities legislation to the remedy
of rescission by reason of the Final Prospectus or any amendment thereto containing a misrepresentation, such holder shall be entitled to rescission not only of the holder's exercise of its Special
Warrant but also of the private placement transaction pursuant to which the Special Warrant was initially acquired, and shall be entitled in connection with such rescission to a full refund of all
consideration paid to the Underwriters or the Company, as the case may be, on the acquisition of the Special Warrant. In the 

A-6

 

event
such holder is a permitted assignee of the interest of the original Special Warrant subscriber, such permitted assignee shall be entitled to exercise the rights of rescission and refund granted
hereunder as if such permitted assignee were such original subscriber. The foregoing is in addition to any other right or remedy available to a holder of the Special Warrant under section 130
of the Securities Act (Ontario), under the applicable provisions of the securities laws of the Designated Provinces or otherwise at law. 

        18.    Miscellaneous.    The agreement resulting from the acceptance of this subscription agreement by the Company
constitutes the entire agreement between the Company, the Underwriters and the Subscriber in respect of the subject matter hereof and there are no warranties, representations, terms, conditions or
collateral agreements, express, implied or statutory, other than as expressly set forth herein and in any amendments hereto. All representations, warranties, agreements and covenants made or deemed to
be made by the Subscriber herein will survive the execution and delivery, and acceptance, of this subscription agreement and the closing of the Offering. Time shall be of the essence of this
subscription agreement. This subscription agreement and the rights and obligations of the parties hereunder shall be governed by and construed according to the laws of the Province of British Columbia
and the federal laws of Canada applicable therein, excluding any conflicts of law rules. This subscription agreement may be executed in any number of counterparts, each of which when delivered, either
in original or facsimile form, shall be deemed to be an original and all of which together shall constitute one and the same document. 

A-7

  

 
 

SCHEDULE "B"    
    
    CARDIOME PHARMA CORP.    
    Terms and Conditions    
    

	Issuer:	 	Cardiome Pharma Corp. (the "Company")
	
Offering:	
 	

Special Warrants (the "Offering"). Each exercisable into one common share ("Share") and one-half of one common share purchase warrant ("Warrant") of the Company.
	
Common Share Purchase Warrant:	
 	

Each whole Warrant will entitle the holder to acquire one Share at a price of CDN $2.75 per Share for a period of 12 months following the Closing Date.
	
Issue Price:	
 	

CDN $2.10 per Special Warrant.
	
Commission:	
 	

6.0% cash.
	
Use of Proceeds:	
 	

The net proceeds are to be used to fund clinical trial expenses and for general corporate purposes.
	
Escrow Terms:	
 	

The gross proceeds from the issue of the Special Warrants (less commission and expenses of the Offering) will be held by a custodian, who shall also act as warrant agent (the "Warrant Agent") under the Special Warrant Indenture, and invested in
short-term obligations of the Government of Canada. Upon the earlier of the Prospectus Qualification Date and the date that is four months after the Closing Date, all of the escrowed proceeds (with interest accrued thereon) will be released to the
Company.
	
Prospectus Qualification:	
 	

The Company will use its best efforts to file a preliminary prospectus as soon as practicable following the Closing Date and to obtain receipts for a (final) prospectus in the provinces of Canada in which purchasers of Special Warrants are
resident no later than the date which is 60 days from the Closing Date ("Prospectus Qualification Date") to allow for the free tradeability of the Shares and Warrants issued upon exercise of the Special Warrants. In the event that the Company
has not received all of the receipts referred to above by such date, it will nonetheless continue to be obligated to use its reasonable best efforts to file and clear the (final) prospectus as soon as possible thereafter.

B-1

  

 
 

SCHEDULE "C"    
    
    SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES    
    

        The Subscriber represents and warrants to the Company and the Underwriters, as representations and warranties that are true as of the date of this subscription
agreement and as of the Closing Date, that: 

	1.
	General

	(a)
	Authorization and Effectiveness. If the Subscriber is a corporation, the Subscriber is a valid and subsisting corporation, has the
necessary corporate capacity and authority to execute and deliver this subscription agreement and to observe and perform its covenants and obligations hereunder and has taken all necessary corporate
action in respect thereof. If the Subscriber is a partnership, syndicate or other form of unincorporated organization, the Subscriber has the necessary legal capacity and authority to execute and
deliver this subscription agreement and to observe and perform its covenants and obligations hereunder and has obtained all necessary approvals in respect thereof. If the Subscriber is a natural
person, he or she has obtained the age of majority and is legally competent to execute this agreement and to take all actions required pursuant thereto. 

Whether
the Subscriber is a natural person or a corporation, partnership or other entity, upon acceptance by the Company, this subscription agreement will constitute a legal, valid and binding
contract of the Subscriber, and any beneficial purchaser for whom it is purchasing, enforceable against the Subscriber and any such beneficial purchaser in accordance with its terms. 

	(b)
	Residence. The Subscriber, and any beneficial purchaser for whom the Subscriber is acting, certifies that it is a resident at the
address referred to under "Name and Address of Subscriber" on the second page of this subscription agreement, and such address is the actual address of the residence or place of business of the
Subscriber and is not being used solely for the purpose of acquiring Special Warrants.

	(c)
	Investment Intent. The Subscriber, or each beneficial purchaser for whom it is purchasing, is acquiring Special Warrants as principal
to be held for investment only and not for the benefit of any other person or company and not with a view to resale or distribution of any or all of the Special Warrants or the Underlying Securities
issuable upon exercise of the Special Warrants.

	(d)
	Purchasing as Agent or Trustee. In the case of the purchase by the Subscriber of Special Warrants as agent or trustee for any principal
whose identity is disclosed or undisclosed or identified by account number only, the Subscriber has due and proper authority to act as agent or trustee for and on behalf of such beneficial purchaser
in connection with the transactions contemplated hereby and is duly authorized to enter into this subscription agreement and to execute all documentation in connection with the purchase on behalf of
each beneficial purchaser. The Subscriber acknowledges that the Company may be required as a condition of approval of this subscription to disclose to certain regulatory authorities the identity of
each beneficial purchaser for whom the Subscriber is acting.

	(e)
	No Undisclosed Information. The Special Warrants are not being purchased by the Subscriber as a result of any information concerning
the Company which has not been publicly disclosed, and the Subscriber's decision to purchase Special Warrants has not and will not be made as a result of any written or verbal representation as to
fact or otherwise, warranty or covenant made by or on behalf of the Company, the Underwriters or any other person and is based entirely upon currently available public information concerning the
Company. The Subscriber 

C-1

 

has
not received or reviewed any material (including, without limitation, an offering memorandum or advertisement as defined in Securities Laws) which appears or purports to describe the business and
affairs of the Company that has been prepared for delivery to and review by the Subscriber so as to assist the Subscriber to make an investment decision relating to the Special Warrants. The purchase
of the Special Warrants was not accompanied by any form of general solicitation, including but not limited to any advertisement in printed public media, radio, television or telecommunications,
including electronic display, such as the Internet. The Subscriber, and each beneficial purchaser, if any, for whom the Subscriber is acting as trustee or agent, acknowledges and agrees that the
Subscriber and each such beneficial purchaser, if any, have not been solicited through an advertisement in printed public media, radio, television or telecommunications, including electronic display,
or any other form of advertising or as part of a general solicitation to purchase Special Warrants. 

	(f)
	Investment Suitability. The Subscriber, and any beneficial purchaser referred to in paragraph (d) above, has such knowledge and
experience in financial and business affairs as to be capable of evaluating the merits and risks of the investment hereunder in Special Warrants (and the Underlying Securities issuable in respect
thereof) and is able to bear the economic risk of loss of such investment.

	(g)
	Special Warrant Indenture. The Subscriber acknowledges that the Special Warrants are subject to the terms, conditions and provisions of
the Special Warrant Indenture and the terms, conditions and provisions of the Underwriting Agreement; that the sale and delivery of the Special Warrants to the Subscriber (or others for whom it is
contracting hereunder) is conditional upon such sale being exempt from the prospectus and registration requirements of the Designated Provinces; and that it (or others for whom it is contracting
hereunder) has received a term sheet in the form attached hereto as Schedule "B" setting out the principal terms of the Offering.

	(h)
	Further Assurances. The Subscriber, or (if applicable) others for whom the Subscriber is contracting hereunder, will execute and
deliver all documentation as may be required by applicable Securities Laws and policies to permit the purchase of the Special Warrants on the terms herein set forth.

	(i)
	Ownership of Shares. The Subscriber or, if applicable, others for whom the Subscriber is contracting hereunder, will not, on completion
of the Offering and after giving effect to the Special Warrants subscribed for herein and the Underlying Securities issuable on exercise thereof, beneficially own, directly or indirectly, more than
10% of the outstanding Shares.

	2.(a)
	The
Subscriber understands that the Special Warrants, the Warrants and the Shares (including the Shares issuable upon exercise of the Warrants) have not been and will not be
registered under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") or any applicable state securities laws, and that the sale contemplated hereby is being made in
reliance on an exemption from registration pursuant to Rule 506 of Regulation D under the U.S. Securities Act to accredited investors (as that term is defined in Rule 501(a) of
Regulation D under the U.S. Securities Act, (an "Accredited Investor")).

	(b)
	The
Subscriber is purchasing the Special Warrants for exchange into Shares and Warrants for investment purposes and not with a view to resale, distribution or other disposition of
such securities in violation of the United States Federal or state securities laws.

	(c)
	The
Subscriber 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 Special Warrants and is
able to bear the economic risk of such investment. 

C-2

 

	(d)
	The
Subscriber has had access to such additional information concerning the Company as it has deemed necessary in connection with an investment decision to acquire the Special
Warrants.

	(e)
	The
Subscriber has been provided the opportunity to ask questions and solicit information concerning the business and financial condition of the Company, has utilized such access to
its satisfaction and has received from the Company all the information requested.

	(f)
	The
Subscriber acknowledges and understands that there may be material tax consequences to it of the acquisition, ownership or disposition of the Special Warrants, Shares and
Warrants. The Subscriber acknowledges that neither the Company nor the Underwriters have given any opinion or made any representation with respect to tax consequences to such persons under the United
States, state, local or foreign law of the acquisition, ownership or disposition of the Special Warrants, Shares or Warrants. Such persons should consult their own tax advisors about the United
States, state, local and foreign tax consequences of acquiring, owning and disposing of the Special Warrants, Shares and Warrants.

	(g)
	The
Subscriber agrees that if it decides to offer, sell or otherwise transfer any of the Special Warrants, Shares or Warrants, it will not offer, sell or otherwise transfer any of
such Special Warrants, Shares or Warrants directly or indirectly, unless:

	(i)
	the
sale is to the Company;

	(ii)
	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
("Regulation S") (or such successor rule or regulation then in effect), if applicable, and in compliance with applicable state securities laws;

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

	(iv)
	the
Special Warrants, Shares or Warrants are sold in a transaction that does not require registration under the U.S. Securities Act or any applicable state securities
laws, and it has prior to such sale furnished to the Company an opinion of counsel, in a form reasonably satisfactory to the Company.

	(h)
	The
Subscriber understands and acknowledges that upon the issuance thereof, and until such time as the same is no longer required under applicable requirements of the U.S. Securities
Act or applicable state securities laws, the certificates representing the Special Warrants, the Shares and the Warrants shall bear, in addition to any legend(s) required by Canadian securities laws
and policies, the following legend: 

"THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT") OR THE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY
(A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT, IF APPLICABLE (C) INSIDE THE UNITED STATES
(1) 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 APPLICABLE 

C-3

 

STATE
SECURITIES LAW OR (2) IN A TRANSACTION THAT DOES NOT OTHERWISE REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, PROVIDED THE HOLDER HAS
FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING TO THE EFFECT REASONABLY SATISFACTORY TO THE COMPANY." 

and
that, in addition to the foregoing legend, the certificates representing the Shares shall bear, in addition to any legend(s) required by Canadian securities laws and policies, the following
legend: 

"DELIVERY
OF THIS CERTIFICATE MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA. A NEW CERTIFICATE BEARING NO LEGEND, DELIVERY OF WHICH WILL CONSTITUTE
"GOOD DELIVERY" MAY BE OBTAINED FROM THE REGISTRAR AND TRANSFER AGENT UPON DELIVERY OF THIS CERTIFICATE AND A DULY EXECUTED DECLARATION, IN A FORM SATISFACTORY TO THE REGISTRAR AND TRANSFER AGENT AND
THE COMPANY, TO THE EFFECT THAT THE SALE OF THE SECURITIES REPRESENTED HEREBY IS BEING
MADE IN COMPLIANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT." 

and
that all certificates representing Special Warrants, Shares and Warrants issued in exchange therefor or in substitution thereof will bear the same legend; provided, that if the Special Warrants,
Shares and Warrants are being sold outside of the United States in accordance with Rule 904 of Regulation S, the legend may be removed by providing a declaration to the Company's
registrar and transfer agent in such form as the Company may prescribe. 

	(i)
	The
Subscriber acknowledges that it has not purchased the Special Warrants as a result of any general solicitation or general advertising, including advertisements, articles, notices
or other communications published in any newspaper, magazine or similar media or broadcast over radio or television, or any seminar or meeting whose attendees have been invited by general solicitation
or general advertising.

	(j)
	The
Subscriber acknowledges that any person who exercises a Special Warrant, other than pursuant to the deemed exercise thereof, or a Warrant will be required to provide to the
Company either:

	(i)
	written
certification that it is not a U.S. Person (having the meaning given in Regulation S) and that such Special Warrant or Purchase Warrant is not being
exercised within the United States or on behalf of, or for the account or benefit of a U.S. Person;

	(ii)
	written
certification that it was an original subscriber for the Special Warrants who was a U.S. Person at the time of the acquisition of the Special Warrants and the
representations and warranties made by such person in connection with the acquisition of such Special Warrants remain true and correct on the date of exercise; or

	(iii)
	a
written opinion of counsel or other evidence satisfactory to the Company to the effect that the Shares or Warrants, as applicable, have been registered under the
U.S. Securities Act and applicable state securities laws or are exempt from registration thereunder.

	(k)
	The
Subscriber consents to the Company making a notation on its records or giving instructions to any transfer agent of the Company in order to implement the restrictions on transfer
set forth and described herein. 

C-4

 

	(l)
	The
Subscriber satisfies one of the categories indicated below (please place an "X" on the appropriate lines): 

	         Category 1	 	An organization described in Section 501(c)(3) of the United States Internal Revenue Code, a corporation, a Massachusetts or similar business trust or partnership, not formed for the specific purpose of acquiring the
Special Warrants, the Shares and the Warrants, with total assets in excess of US$5,000,000;
	

         Category 2	
 	

A natural person whose individual net worth, or joint net worth with that person's spouse, at the date hereof exceeds US$1,000,000;
	

         Category 3	
 	

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;
	

         Category 4	
 	

A trust that (a) has total assets in excess of US$5,000,000, (b) was not formed for the specific purpose of acquiring the Special Warrants, the Shares and the Warrants and (c) is directed in its purchases of securities by a person who has such
knowledge and experience in financial and business matters that he/she is capable of evaluating the merits and risks of an investment in the Special Warrants, the Shares and the Warrants;
	

         Category 5	
 	

An investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that Act;
	

         Category 6	
 	

A Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958;
	

         Category 7	
 	

A private business development company as defined in Section 202(a)(22) of the Investment Advisors Acts of 1940; or
	

         Category 8	
 	

An entity in which all of the equity owners satisfy the requirements of one or more of the foregoing categories.

	(m)
	The
Subscriber acknowledges that there is no market in the United States for the Special Warrants, the Shares or the Warrants and there is no assurance that any such market will
develop.

	(n)
	The
Subscriber is purchasing the Special Warrants for its own account, or for the account of another Accredited Investor as to which it exercises sole investment discretion.

	(o)
	The
delivery of this subscription, the acceptance of it by the Company, the issuance of the Special Warrants to the Subscriber and the acquisition of the Shares and Warrants upon the
exercise of the Special Warrants complies with all applicable laws of the Subscriber's jurisdiction of residence or domicile and all other applicable laws and will not cause the 

C-5

 

Company
to become subject to or comply with any disclosure, prospectus or reporting requirements under any such applicable laws. 

	(p)
	the
Subscriber understands that the Special Warrants, Shares, or the Warrants are "restricted securities" under applicable federal securities laws and that the U.S. Securities Act and
the rules of the Securities and Exchange Commission (the "SEC") provide in substance that the Subscriber may dispose of the Special Warrants, Shares or Warrants only pursuant to an effective
registration statement under the U.S. Securities Act or an exemption therefrom, and, other than as set out herein, the Subscriber understands that the Company has no obligation to register any of the
Special Warrants, Shares or Warrants or to take action so as to permit sales pursuant to the U.S. Securities Act (including Rule 144 thereunder). Accordingly, the Subscriber understands that
absent registration, under the rules of the SEC, the Subscriber may be required to hold the Special Warrants, Shares or Warrants indefinitely or to transfer the Special Warrants, Shares or Warrants in
transactions which are exempt from registration under the U.S. Securities Act, in which event the transferee will acquire "restricted securities" subject to the same limitations as in the hands of the
Subscriber. As a consequence, the Subscriber understands that it must bear the economic risks of the investment in the Special Warrants, Shares, Warrants for an indefinite period of time.

	3.
	The
Subscriber certifies that it is not a resident of British Columbia, and hereby acknowledges that:

	(a)
	no
securities commission or similar regulatory authority has reviewed or passed on the merits of the Special Warrants or the Underlying Securities;

	(b)
	there
is no government or other insurance covering the Special Warrants;

	(c)
	there
are risks associated with the purchase of the Special Warrants or the Underlying Securities;

	(d)
	there
are restrictions on the Subscriber's ability to resell the Special Warrants and the Underlying Securities and it is the responsibility of the Subscriber to find out what those
restrictions are and to comply with them before selling the Special Warrants or the Underlying Securities; and

	(e)
	the
Company has advised the Subscriber that the Company is relying on an exemption from the requirements to provide the Subscriber with a prospectus and to sell securities through a
person registered to sell securities under applicable securities law and, as a consequence of acquiring Special Warrants or Underlying Securities pursuant to this exemption, certain protections,
rights and remedies provided by the applicable Canadian securities laws, including statutory rights of rescission or damages, will not be available to the Subscriber.

	4.
	The
Subscriber acknowledges that the representations and warranties contained herein are made by it with the intention that they may be relied upon by the Underwriters and the Company
(and each of their legal counsel) in determining the Subscriber's eligibility, or (if applicable) the eligibility of others on whose behalf it is contracting hereunder to purchase Special Warrants
under relevant securities legislation. The Subscriber hereby agrees to notify the Company immediately of any change in any representation, warranty, covenant or other information relating to the
Subscriber or the beneficial purchaser contained in this agreement which takes place prior to the Closing Time. The Subscriber further agrees that by accepting delivery of the Special Warrants on the
Closing Date, it will be representing and warranting that the foregoing representations and warranties are true and correct as of the Closing Time with the same force and effect as if they had been
made by the Subscriber as of the Closing Time and that they will survive the purchase by the Subscriber of Special Warrants and will continue in full force and effect notwithstanding any subsequent
disposition by the Subscriber of such Special Warrants. 

C-6

  

 
 

SCHEDULE "D"    
    
    THE TORONTO STOCK EXCHANGE
  PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKING    
    

        To be completed by each proposed private placement purchaser of listed securities or securities which are convertible into listed securities. 

QUESTIONNAIRE  

	1.	 	DESCRIPTION OF TRANSACTION
	

 	
 	

(a)	
 	

Name of issuer of the Securities:
	

 	
 	

 	
 	

Cardiome Pharma Corp.
	

 	
 	

(b)	
 	

Number and Class of Securities to be Purchased:
	

 	
 	

 	
 	

                        Special Warrants, each Special Warrant entitling the holder thereof, upon exercise, to acquire one
common share in the capital of the issuer and one-half of one common share purchase warrant in the capital of the issuer
	

 	
 	

(c)	
 	

Purchase Price: $2.10 per Special Warrant
	

2.	
 	
DETAILS OF PURCHASER
	

 	
 	

(a)	
 	

Name of Purchaser:	

 
	 	 	 	 	 	

	

 	
 	

(b)	
 	

Address:	

 
	 	 	 	 	 	

	

 	
 	

 	
 	

 	

	

 	
 	

(c)	
 	

Name and addresses of persons having a greater than 10% beneficial interest in the purchaser
	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

3.	
 	
RELATIONSHIP TO ISSUER
	

 	
 	

(a)	
 	

Is the purchaser (or any person named in response to 2(c) above) an insider of the issuer for the purposes of the Ontario Securities Act (before giving effect to this private placement)? If so, state the capacity in which the purchaser (or person in
response to 2(c)) qualifies as an insider
	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

 	
 	

(b)	
 	

If the answer to (a) is "no", are the purchaser and the issuer controlled by the same person or company? If so, give details
	

 	
 	

 	
 	

	

 	
 	

 	
 	

	

4.	
 	
DEALINGS OF PURCHASER IN SECURITIES OF THE ISSUER
	

 	
 	

Give details of all trading by the purchaser, as principal, in the securities of the issuer (other than debt securities which are not convertible into equity securities), directly or indirectly, within the 60 days preceding the date
hereof
	

 	
 	

	

 	
 	

D-1

 
UNDERTAKING  

TO:    THE TORONTO STOCK EXCHANGE 

        The
undersigned has subscribed for and agreed to purchase, as principal, the securities described in Item 1 of this Private Placement Questionnaire and Undertaking. 

        The
undersigned undertakes not to sell or otherwise dispose of any of the said securities so purchased or any securities derived therefrom for the lesser of (a) a period of four
months from the date of the closing of the transaction herein or for such period as is prescribed by applicable securities legislation, whichever is longer, and (b) a period ending on the date
that a receipt for a final prospectus relating to the said securities or any securities derived therefrom has been issued by the Ontario Securities Commission, in either case without the prior consent
of The Toronto Stock Exchange and any other regulatory body having jurisdiction. 

DATED
at                                       on April
                        , 2003. 

	 	 	 	
 (Name of Purchaser—please print)
	

 	
 	

 	

 (Authorized Signature)
	

 	
 	

 	

 (Official Capacity—please print)
	

 	
 	

 	

 (please print here name of individual

whose signature appears above, if different

from name of purchaser printed above)

D-2

QuickLinks

EXHIBIT 4.25

TABLE OF CONTENTS

UNDERWRITING AGREEMENT

SCHEDULE "A" CARDIOME PHARMA CORP Terms and Conditions

SCHEDULE "B" TERMS AND CONDITIONS FOR UNITED STATES OFFERS AND SALES

SCHEDULE "C" OUTSTANDING CONVERTIBLE SECURITIES

SCHEDULE "D" PATENT RIGHTS

SCHEDULE "E" FORM OF STANDSTILL AGREEMENT WITH RESPECT TO DISPOSITION OF SHARES

SCHEDULE "F" OPINION OF THE COMPANY'S COUNSEL

SCHEDULE "G" FORM OF THE U.S. SUBSCSRIPTION AGREEMENT

SCHEDULE "A" TERMS OF OFFERING

SCHEDULE "B" CARDIOME PHARMA CORP. Terms and Conditions

SCHEDULE "C" SUBSCRIBER'S REPRESENTATIONS AND WARRANTIES

SCHEDULE "D" THE TORONTO STOCK EXCHANGE PRIVATE PLACEMENT QUESTIONNAIRE AND UNDERTAKINGQuickLinks
 -- Click here to rapidly navigate through this document

 
 

EXHIBIT 4.26    
    

 
 

CARDIOME PHARMA CORP.
  
    Special Warrant Indenture
  
    Made as of April 10, 2003    
    

 
 
 

TABLE OF CONTENTS    
    

	1.	 	INTERPRETATION	 	5
	 	 	1.1	 	Definitions	 	5
	 	 	1.2	 	Headings	 	8
	 	 	1.3	 	Gender	 	8
	 	 	1.4	 	Weekends and Holidays	 	8
	 	 	1.5	 	Meaning of "Outstanding"	 	8
	 	 	1.6	 	Time	 	8
	 	 	1.7	 	Applicable Law	 	9
	 	 	1.8	 	Currency	 	9
	 	 	1.9	 	Schedules	 	9
	

2.	
 	

ISSUE AND PURCHASE OF SPECIAL WARRANTS	
 	

9
	 	 	2.1	 	Creation, Form and Terms of Special Warrants	 	9
	 	 	2.2	 	Transferability and Ownership of Special Warrants	 	9
	 	 	2.3	 	Special Warrantholders Not Shareholders	 	11
	 	 	2.4	 	Signing of Special Warrants	 	11
	 	 	2.5	 	Countersigning	 	11
	 	 	2.6	 	Loss, Mutilation, Destruction or Theft of Special Warrants	 	11
	 	 	2.7	 	Exchange of Special Warrants	 	12
	 	 	2.8	 	Ranking	 	12
	 	 	2.9	 	Purchase of Special Warrants for Cancellation	 	12
	

3.	
 	

COVENANTS OF THE COMPANY	
 	

12
	 	 	3.1	 	To Issue Special Warrants and Reserve Shares and Warrant Shares	 	12
	 	 	3.2	 	To Execute Further Assurances	 	13
	 	 	3.3	 	To Carry On Business	 	13
	 	 	3.4	 	Reporting Issuer	 	13
	 	 	3.5	 	Breach of Constating Documents	 	13
	 	 	3.6	 	Filing Prospectus and Related Matters	 	14
	 	 	3.7	 	Notices to Trustee and Special Warrantholders	 	14
	 	 	3.8	 	Securities Qualification Requirements	 	14
	 	 	3.9	 	Maintain Listing	 	15
	 	 	3.10	 	Satisfy Covenants	 	15
	 	 	3.11	 	Performance of Covenants by Trustee	 	15
	 	 	3.12	 	Trustee's Remuneration and Expenses	 	15
	 	 	3.13	 	Trust for Special Warrantholder's Benefit	 	15
	 	 	3.14	 	Notice to Special Warrantholders of Certain Events	 	15
	 	 	3.15	 	Closure of Share Transfer Books	 	16
	

4.	
 	

ADJUSTMENT OF NUMBER OF UNITS	
 	

16
	 	 	4.1	 	Adjustment of Number of Units	 	16
	 	 	4.2	 	Proceedings Prior to any Action Requiring Adjustment	 	20
	 	 	4.3	 	Certificate of Adjustment	 	20
	 	 	4.4	 	No Action After Notice	 	20
	 	 	4.5	 	Protection of Trustee	 	20
	 	 	4.6	 	Notice of Special Matters	 	20
	

5.	
 	

EXERCISE AND CANCELLATION OF SPECIAL WARRANTS	
 	

21
	 	 	5.1	 	Notice of Prospectus to Special Warrantholders	 	21
	 	 	5.2	 	Voluntary Exercise of Special Warrants	 	21
	 	 	 	 	 	 	 

2

 

	 	 	5.3	 	Deemed Exercise of Special Warrants	 	22
	 	 	5.4	 	Effect of Exercise of Special Warrants	 	22
	 	 	5.5	 	Partial Exercise	 	22
	 	 	5.6	 	Special Warrants Void After Exercise Time	 	22
	 	 	5.7	 	Fractions of Units	 	23
	 	 	5.8	 	Accounting and Recording	 	23
	 	 	5.9	 	Escrow Funds	 	23
	 	 	5.10	 	Issuance of Special Warrants	 	24
	 	 	5.11	 	Issuance of Shares	 	25
	 	 	5.12	 	Issuance of Warrants and Warrant Shares	 	25
	 	 	5.13	 	Securities Restrictions	 	25
	

6.	
 	

MEETINGS OF SPECIAL WARRANTHOLDERS	
 	

25
	 	 	6.1	 	Definitions	 	25
	 	 	6.2	 	Convening Meetings	 	26
	 	 	6.3	 	Place of Meeting	 	26
	 	 	6.4	 	Notice	 	26
	 	 	6.5	 	Persons Entitled to Attend	 	26
	 	 	6.6	 	Quorum	 	26
	 	 	6.7	 	Chairman	 	26
	 	 	6.8	 	Power to Adjourn	 	27
	 	 	6.9	 	Adjourned Meeting	 	27
	 	 	6.10	 	Show of Hands	 	27
	 	 	6.11	 	Poll	 	27
	 	 	6.12	 	Regulations	 	27
	 	 	6.13	 	Powers of Special Warrantholders	 	28
	 	 	6.14	 	Powers Cumulative	 	29
	 	 	6.15	 	Minutes of Meetings	 	29
	 	 	6.16	 	Written Resolutions	 	29
	 	 	6.17	 	Binding Effect	 	29
	 	 	6.18	 	Holdings by the Company or Subsidiaries of the Company Disregarded	 	29
	

7.	
 	

SUPPLEMENTAL INDENTURES, MERGER, SUCCESSORS	
 	

30
	 	 	7.1	 	Provision for Supplemental Indentures for Certain Purposes	 	30
	 	 	7.2	 	Company May Consolidate, etc. on Certain Terms	 	30
	 	 	7.3	 	Successor Body Corporate Substituted	 	31
	

8.	
 	

CONCERNING THE TRUSTEE	
 	

31
	 	 	8.1	 	Duties of Trustee	 	31
	 	 	8.2	 	Action by Trustee	 	31
	 	 	8.3	 	Certificate of the Company	 	31
	 	 	8.4	 	Trustee May Employ Experts	 	31
	 	 	8.5	 	Resignation and Replacement of Trustee	 	32
	 	 	8.6	 	Indenture Legislation	 	32
	 	 	8.7	 	Notice	 	32
	 	 	8.8	 	Use of Proceeds	 	32
	 	 	8.9	 	No Inquiries	 	32
	 	 	8.10	 	Actions by Trustee to Protect Interest	 	33
	 	 	8.11	 	Trustee Not Required to Give Security	 	33
	 	 	8.12	 	No Conflict of Interest	 	33
	 	 	8.13	 	Trustee Not Ordinarily Bound	 	33
	 	 	8.14	 	Trustee May Deal in Instruments	 	33
	 	 	 	 	 	 	 

3

 

	 	 	8.15	 	Recitals or Statements of Fact Made by Company	 	33
	 	 	8.16	 	Trustee's Discretion Absolute	 	33
	 	 	8.17	 	No Representations as to Validity	 	33
	 	 	8.18	 	Acceptance of Trusts	 	34
	 	 	8.19	 	Trustee's Authority to Carry on Business	 	34
	 	 	8.20	 	Indemnification of Trustee	 	34
	 	 	8.21	 	Performance of Covenants by Trustee	 	34
	

9.	
 	

NOTICES	
 	

35
	 	 	9.1	 	Notice to Company, Trustee and Agent	 	35
	 	 	9.2	 	Notice to Special Warrantholders	 	36
	

10.	
 	

POWER OF BOARD OF DIRECTORS	
 	

36
	 	 	10.1	 	Board of Directors	 	36
	

11.	
 	

MISCELLANEOUS PROVISIONS	
 	

36
	 	 	11.1	 	Further Assurances	 	36
	 	 	11.2	 	Unenforceable Terms	 	37
	 	 	11.3	 	No Waiver	 	37
	 	 	11.4	 	Suits By Special Warrantholders	 	37
	 	 	11.5	 	Enurement	 	37
	 	 	11.6	 	Formal Date and Effective Date	 	37

4

  

 
 

SPECIAL WARRANT INDENTURE    
    

        THIS
SPECIAL WARRANT INDENTURE made as of April 10, 2003. 

	BETWEEN:	 	 
	

 	
 	
CARDIOME PHARMA CORP., a corporation continued under the Canada Business Corporations Act and having an office at 3650 Wesbrook Mall, Vancouver,
 British Columbia V6S 2L2
	

 	
 	

(the "Company")
	

 	
 	

OF THE FIRST PART
	

AND:	
 	

 
	

 	
 	
PACIFIC CORPORATE TRUST COMPANY, a trust company incorporated under the laws of British Columbia and having an office at 10th Floor, 625 Howe Street, Vancouver, British Columbia
V6C 3B8
	

 	
 	

(the "Trustee")
	

 	
 	

OF THE SECOND PART

        WHEREAS the Company is proposing to issue up to 3,810,000 Special Warrants in the manner herein set forth; 

        AND WHEREAS the Company, under the laws relating thereto, is authorized to create and issue the Special Warrants; 

        AND WHEREAS the Company represents to the Trustee that all necessary resolutions of the directors of the Company have been or will be duly
enacted, passed or confirmed and all other proceedings taken and conditions complied with to authorize the execution and delivery of this Agreement and the execution and issue of the Special Warrants
and to make the same legal, valid and binding on the Company in accordance with the laws relating to the Company; 

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

        AND WHEREAS the Trustee has been appointed by the Company and has agreed to act as trustee on behalf of the Special Warrantholders on the
terms and conditions set forth herein. 

        NOW THEREFORE THIS INDENTURE WITNESSETH THAT, in consideration of the premises and in further consideration of the mutual covenants herein
set forth, the parties hereto agree as follows: 

1. INTERPRETATION  

1.1    Definitions    

        In
this Indenture, unless there is something in the subject matter or context inconsistent therewith, the following words have the respective meaning indicated below: 

	(a)
	"Applicable
Legislation" means the provisions, if any, for the time being, of any statute of Canada or a province thereof, and of the regulations under such statute, relating to trust
indentures and to the rights, duties and obligations of trustees under trust indentures, and of corporations issuing their securities under trust indentures, to the extent that any such provisions are
in force and applicable to this Indenture; 

5

 

	(b)
	"Business
Day" means a day which is not a Saturday, Sunday or legal holiday in the City of Toronto, Ontario and the city of Vancouver, British Columbia;

	(c)
	"Clearance
Date" means the date on which a receipt for the Prospectus is issued by the last of the Commissions;

	(d)
	"Closing"
means the completion of the issuance and sale of Special Warrants to Special Warrantholders by the Company in accordance with the subscription agreements entered into by the
Company and the purchasers of Special Warrants;

	(e)
	"Closing
Date" means April 10, 2003;

	(f)
	"Commissions"
means the British Columbia Securities Commission, the Ontario Securities Commission and the Commission des valeurs mobiliers du Quebec;

	(g)
	"Common
Share" means a fully paid and non-assessable common share in the capital of the Company as such capital is presently constituted;

	(h)
	"Company's
auditors" means the firm of accountants appointed by the shareholders of the Company and serving as the auditors of the Company at the relevant time;

	(i)
	"Current
Market Price" of a Common Share at any date means the price per share equal to the weighted average price at which the Common Shares have traded during any 10 consecutive
Trading Days selected by the Company, commencing not more than 20 Trading Days and ending not less than five days before such date, on the Toronto Stock Exchange, or, if the Common Shares are not
listed thereon, on any stock exchange on which such shares are listed as may be selected for such purpose by the directors or, if such shares are not listed on any stock exchange, then on such
over-the-counter market in Canada as may be selected for such purpose by the directors. The weighted average price per share shall be determined by dividing the aggregate sale
price of all such shares sold on the aforementioned exchange or market, as the case may be, during the aforementioned 10 consecutive Trading Days by the total number of such shares so sold;

	(j)
	"Designated
Provinces" means the Provinces of British Columbia, Ontario and Quebec;

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

	(l)
	"Dividends
paid in the Ordinary Course" means such dividends payable in cash (or in securities, property or assets of equivalent value) declared payable on a Common Share in any
fiscal year of the Company to the extent that such dividends in the aggregate do not exceed in amount or value the greater of:

	(i)
	100%
of the aggregate amount or value of the dividends declared payable by the Company on the Common Shares in the period of 12 consecutive months ended immediately prior to the first
day of such fiscal year; and

	(ii)
	50%
of the consolidated net earnings of the Company, before extraordinary items and after dividends paid on any and all preferred shares of the Company (if any) for the period of 12
consecutive months ended immediately prior to the first day of such fiscal year (such consolidated net earnings to be as shown in the audited consolidated financial statements of the Company for such
12 month period or, if there are no audited financial statements in respect of such period, computed in accordance with generally accepted accounting principles consistent with those applied in
the preparation of the most recent audited consolidated financial statements of the Company); 

and
for such purposes the amount of any dividends paid in other than cash or shares of the Company shall be the fair market value of such dividends as determined by the directors; 

6

 

	(m)
	"Escrow
Funds" means the gross proceeds of the Private Placement, less the commission or fee payable to the Underwriters and less the Underwriters' expenses pursuant to the
Underwriting Agreement, which will be deposited with the Trustee and disbursed pursuant to Section 5.9 and includes all interest or other income earned thereon;

	(n)
	"Expiry
Date" means the earlier of:

	(i)
	the
fifth Business Day after the Clearance Date; and

	(ii)
	August 10,
2003;

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

	(p)
	"Indenture",
"herein", "hereto, "hereunder", "hereof", "hereby" and similar expressions mean or refer to this Indenture and not to any particular Article, Section, Subsection,
paragraph, clause, subdivision or portion hereof and include any indenture, deed or instrument supplemental or ancillary hereto; and the expressions "Article", "Section", "Subsection" and "paragraph"
followed by a number mean and refer to the specified Article, Section, Subsection or paragraph of this Indenture;

	(q)
	"Private
Placement" means the private placement of up to 3,810,000 Special Warrants pursuant to the Underwriting Agreement;

	(r)
	"Prospectus"
means a final prospectus of the Company filed with the Commissions by the Company which qualifies the proposed distribution of the Shares and Warrants comprising the
Units in the Designated Provinces pursuant to the exercise of the Special Warrants;

	(s)
	"Purchase
Price" means $2.10 per Special Warrant for 3,762,000 Special Warrants and $2.30 per Special Warrant for 48,000 Special Warrants;

	(t)
	"Qualification
Deadline" means 5:00 p.m. (Toronto time) on June 10, 2003 or such other date as may be specified by the Underwriters and the Company with notice to the
Trustee;

	(u)
	"Share"
means a previously unissued Common Share which forms part of the Unit to be issued to a Special Warrantholder upon exercise or deemed exercise of a Special Warrant;

	(v)
	"Special
Warrant" means a special warrant of the Company created by the Company and issued hereunder for a purchase price of $2.10 per Special Warrant for 3,762,000 Special Warrants
and $2.30 per Special Warrant for 48,000 Special Warrants and entitling the holder thereof to acquire one Unit upon exercise or deemed exercise thereof, subject to adjustment in accordance with this
Indenture upon exercise without payment of additional consideration;

	(w)
	"Special
Warrant Certificate" means a certificate evidencing one or more Special Warrants issuable hereunder, substantially in the form attached hereto as Schedule "A";

	(x)
	"Special
Warrantholder" means the registered holder from time to time of an outstanding Special Warrant;

	(y)
	"Subsidiary
of the Company" means a corporation of which voting securities carrying a majority of the votes attached to all outstanding voting securities are owned, directly or
indirectly, by the Company or by one or more subsidiaries of the Company, or by the Company and one or more subsidiaries of the Company, and, as used in this definition, voting securities means
securities, other than debt securities, carrying a voting right to elect directors either under all circumstances or under some circumstances that may have occurred and are continuing;

	(z)
	"Trading
Day" means any day on which the facilities of the Toronto Stock Exchange, or, if the Common Shares are not listed thereon, the facilities of any stock exchange on which the
Common Shares are listed, are open for trading; 

7

 

	(aa)
	"Trustee"
means the Company's registrar and transfer agent, Pacific Corporate Trust Company, having an office at 10th Floor, 625 Howe Street, Vancouver, British Columbia
V6C 3B8;

	(bb)
	"Underwriters"
means, collectively, Yorkton Securities Inc., Sprott Securities Inc., TD Securities Inc. and First Associates Investments Inc.;

	(cc)
	"Underwriting
Agreement" means the underwriting agreement dated April 10, 2003 between the Company and the Underwriters whereby the Underwriters agreed to act as underwriters
of the Company in relation to the Private Placement;

	(dd)
	"Unit"
means a unit comprised of one Share and one-half of one Warrant, issued on exercise or deemed exercise of each Special Warrant, subject to adjustment in accordance
with this Indenture. The term "Unit" is used herein for convenience only and is not intended to constitute a separate security;

	(ee)
	"U.S.
Person" and "United States" have the meanings ascribed thereto in Regulation "S" under the United States Securities Act of 1933, as amended, as set out in Schedule "B" hereto;

	(ff)
	"Warrant"
means a common share purchase warrant of the Company to be issued under the Warrant Indenture upon the exercise or deemed exercise of the Special Warrants. Each whole
Warrant is exercisable to purchase one Warrant Share at a price of $2.75 per Warrant Share until 5:00 p.m. (Toronto Time) on April 10, 2004;

	(gg)
	"Warrant
Indenture" means the indenture made as of April 10, 2003 between the Trustee and the Company and containing the terms and conditions applicable to and governing the
issuance of the Warrants;

	(hh)
	"Warrant
Share" means a previously unissued Common Share to be issued pursuant to the exercise of a Warrant; and

	(ii)
	"1933
Act" means the United States Securities Act of 1933, as amended. 

1.2    Headings    

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

1.3    Gender    

        Words
importing the singular number also include the plural and vice versa and words importing the masculine gender include the feminine gender. 

1.4    Weekends and Holidays    

        If
the date for the taking of any action under this Indenture expires on a day which is not a Business Day, such action may be taken on the next succeeding Business Day with the same
force and effect as if taken within the period for the taking of such action. 

1.5    Meaning of "Outstanding"    

        Every
Special Warrant represented by a Special Warrant Certificate countersigned by the Trustee and delivered to the holder thereof is deemed to be outstanding until it is cancelled or
delivered to the Trustee for cancellation or until the Expiry Time. Where a new Special Warrant Certificate has been issued pursuant to Section 2.6 to replace one which has been mutilated,
lost, stolen or destroyed, the Special Warrants represented by only one of such Special Warrant Certificates are counted for the purpose of determining the aggregate number of Special Warrants
outstanding. A Special Warrant Certificate representing a number of Special Warrants which has been partially exercised will be deemed to be outstanding only to the extent of the unexercised portion
of the Special Warrants. 

8

 

1.6    Time    

        Time
is of the essence hereof and of each Special Warrant Certificate. 

1.7    Applicable Law    

        This
Indenture and each Special Warrant Certificate are subject to and construed in accordance with the laws of the province of British Columbia and the laws of Canada. 

1.8    Currency    

        All
reference to currency herein are to Canadian dollars unless otherwise indicated 

1.9    Schedules    

        The
attached Schedules "A" and "B" are incorporated into and form part of this Indenture. 

2. ISSUE AND PURCHASE OF SPECIAL WARRANTS  

2.1    Creation, Form and Terms of Special Warrants    

	(a)
	The
Company hereby creates and authorizes for issuance up to 3,810,000 Special Warrants at a price of $2.10 per Special Warrant for 3,762,000 Special Warrants and $2.30 per Special
Warrant for 48,000 Special Warrants, each such Special Warrant entitling a Special Warrantholder to acquire one Unit.

	(b)
	Subject
to the provisions hereof, the Special Warrants issued under this Indenture are limited in the aggregate to 3,810,000 Special Warrants, provided that the number of Shares and
Warrants comprised in a Unit is subject to increase or decrease so as to give effect to the adjustments required by Article 4.

	(c)
	The
Special Warrants are to be issued in registered form and the Special Warrant Certificates shall be substantially in the form set out or referred to in Schedule "A" attached hereto
with, subject to the provisions of this Indenture, such additions, variations, or omissions as may from time to time be agreed upon between the Company and the Special Warrantholders and are numbered
in such manner as the Company may prescribe. Fractional Special Warrants will not be issued. Special Warrant Certificates may be issued in any denomination of whole Special Warrants. All Special
Warrants are, save as to denominations, of like tenor and effect. The Special Warrant Certificates may be engraved, printed, lithographed, or partly in one form and partly in another, as the Company
may determine. No change in the form of the Special Warrant Certificates is required by reason of any adjustment made pursuant to Article 4 hereof in the number of Units which may be acquired
pursuant to the exercise of the Special Warrants. 

2.2    Transferability and Ownership of Special Warrants    

	(a)
	The
Company hereby appoints the Trustee as registrar of the Special Warrants and shall cause the Trustee to keep at its Vancouver office set forth in Section 1.1 a register in
which the Trustee shall enter the names and addresses of the Special Warrantholders and other particulars, prescribed by law, of the Special Warrants held by them, together with a record of transfers
in which particulars of all transfers of Special Warrants will be recorded. The Trustee shall cause the register to be open at all reasonable times for inspection by the Company, the Underwriters and
any Special Warrantholder.

	(b)
	The
Special Warrants may only be transferred, in accordance with applicable laws and upon compliance with the conditions herein, on the register kept at the office of the Trustee
pursuant to Subsection 2.2(a) by the Special Warrantholder (or its legal representatives or its attorney duly appointed) duly executing the Form of Transfer attached as Appendix 1 to the
Special Warrant Certificate and complying with such other reasonable requirements as the 

9

 

Company
and the Trustee may prescribe and such transfer shall be duly noted on the register by the Trustee. 

	(c)
	Notwithstanding
anything contained in this Indenture, in the Special Warrant Certificate or in any subscription agreements under which Special Warrants were issued and sold, the
Trustee, relying solely on the Form of Transfer or such other reasonable requirements as the Company and Trustee may prescribe pursuant to Subsection 2.2(b) or this Subsection:

	(i)
	shall
not register any transfer of a Special Warrant unless the transfer is made in compliance with Subsection 2.2(d), the Special Warrant is transferred outside the United States to
a non-U.S. Person who properly completes, executes and delivers to the Trustee a certificate in the form attached as Appendix 4 to the Special Warrant Certificate; and

	(ii)
	shall
not register any transfer of a Special Warrant if it has reasonable grounds to believe that such transfer is otherwise not in accordance with applicable law.

	(d)
	The
Trustee shall not register a transfer of a Special Warrant to or in the name of a U.S. Person or the agent of any such U.S. Person or the name of a person who the Trustee has
reasonable grounds to believe is in the United States or is a U.S. Person or the agent of a U.S. Person, unless the Company has received a written opinion of counsel or other evidence satisfactory to
it that the transfer of Special Warrants by such person is in compliance with applicable United States Federal and State securities laws and the Company has provided a direction to the Trustee to
proceed with such registration, subject to such terms or conditions, including legending the Special Warrant Certificates, as may be required at law.

	(e)
	Upon
any transfer of Special Warrants in accordance with the provisions of this Indenture, the Company shall covenant and agree with the Trustee, on behalf of the transferee holder
and with the transferee holder, that the transferee holder is a permitted assignee of the transferring holder and is entitled to the benefits of the covenant of the Company to be set forth under the
heading "Contractual Right of Action for Rescission" in the Prospectus subject, in each case, to the restrictions and limitations described thereunder.

	(f)
	A
person who furnishes evidence that he is, to the reasonable satisfaction of the Trustee:

	(i)
	the
executor, administrator, heir or legal representative of the heirs of the estate of a deceased Special Warrantholder;

	(ii)
	a
guardian, committee, trustee, curator or tutor representing a Special Warrantholder who is an infant, an incompetent person or a missing person; or

	(iii)
	a
liquidator or, or a trustee in bankruptcy for, a Special Warrantholder, 

may,
as hereinafter stated, by surrendering such evidence together with the Special Warrant Certificate in question to the Trustee (by delivery or mail as set forth in Section 9.1 hereof), and
subject to such reasonable requirements as the Trustee may prescribe and all applicable securities legislation and requirements of regulatory authorities, become noted upon the register of Special
Warrantholders. After receiving the surrendered Special Warrant Certificate and upon the person surrendering the Special Warrant Certificate meeting the requirements as hereinbefore set forth, the
Trustee shall forthwith give written notice thereof together with confirmation as to the identity of the person entitled to become the holder to the Company. Forthwith after receiving written notice
from the Trustee as aforesaid the Company shall, in accordance with the provisions of Section 2.6 hereof, cause a new Special Warrant Certificate to be issued and sent to the new holder and the
Trustee shall alter the register of holders accordingly. 

	(g)
	The
Company and the Trustee shall deem and treat the registered holder of any Special Warrant as the absolute legal and beneficial owner thereof for all purposes, free from all
equities or rights of set off or counterclaim between the Company and any previous holder of 

10

 

such
Special Warrant, save in respect of equities of which the Company is required to take notice by statute or by order of a court of competent jurisdiction, and neither the Company nor the Trustee
is affected by any notice to the contrary. 

	(h)
	Subject
to the provisions of this Indenture and applicable law, each Special Warrantholder is entitled to the rights and privileges attaching to the Special Warrants, and the issue of
the Shares and Warrants comprising the Units by the Company on exercise of Special Warrants by any Special Warrantholder in accordance with the terms and conditions herein contained discharges all
responsibilities of the Company and the Trustee with respect to such Special Warrants and neither the Company nor the Trustee is bound to inquire into the title of any such registered holder.

	(i)
	Notwithstanding
any other provision of this Section 2.2, in connection with any transfer of Special Warrants, the transferor and transferee shall comply with all reasonable
requirements of the Trustee as the Trustee may deem necessary to secure the obligations of the transferee of such Special Warrants with respect to the sale of such Special Warrants to the Company
pursuant to Section 2.9. 

2.3    Special Warrantholders Not Shareholders    

        A
Special Warrantholder is not deemed or regarded as a shareholder of the Company nor is such Special Warrantholder entitled to any right or interest except as is expressly provided in
this Indenture and in the Special Warrant Certificates. 

2.4    Signing of Special Warrants    

        Any
one director or officer of the Company shall sign the Special Warrant Certificates either manually or by facsimile signature and need not be under the seal of the Company. A
facsimile signature upon any Special Warrant Certificate is, for all purposes hereof, deemed to be the signature of the person whose signature it purports to be and to have been signed at the time
such facsimile signature is reproduced. If a person whose signature, either manually or in facsimile, appears on a Special Warrant Certificate is not a director or officer of the Company at the date
of this Indenture or at the date of the countersigning and delivery of such Special Warrant Certificate, such fact does not affect in any way
the validity of the Special Warrants or the entitlement of the Special Warrantholder to the benefits of this Indenture or of the Special Warrant Certificate. 

2.5    Countersigning    

        The
Trustee shall certify the Special Warrant Certificates upon the written direction of the Company. No Special Warrant Certificate shall be issued, or if issued, is valid or
exercisable or entitles the holder thereof to the benefits of this Indenture until the Special Warrant Certificate has been manually countersigned by the Trustee. The countersignature by or on behalf
of the Trustee will be conclusive evidence as against the Company that the Special Warrant Certificate so countersigned has been duly issued hereunder and that the holder is entitled to the benefit
hereof. The countersignature by or on behalf of the Trustee on any Special Warrant Certificate is not to be construed as a representation or warranty by the Trustee as to the validity of this
Indenture or of the Special Warrants or as to the performance by the Company of its obligations under this Indenture and the Trustee is in no way liable or answerable for the use made of the Special
Warrants or the proceeds from the issuance thereof, except as specified by this Indenture. The countersignature by or on behalf of the Trustee is, however, a representation and warranty of the Trustee
that the Special Warrant Certificate has been duly countersigned by or on behalf of the Trustee pursuant to the provisions of this Indenture. 

2.6    Loss, Mutilation, Destruction or Theft of Special Warrants    

        In
case any of the Special Warrant Certificates issued and countersigned hereunder is mutilated or lost, destroyed or stolen, the Company, in its discretion, may issue and thereupon the
Trustee will countersign and deliver a new Special Warrant Certificate of like date and tenor in exchange for and in 

11

 

place
of the one mutilated, lost, destroyed or stolen and upon surrender and cancellation of such mutilated Special Warrant Certificate or in lieu of and in substitution for such lost, destroyed or
stolen Special Warrant Certificate and the substituted Special Warrant Certificate entitles the holder thereof to the benefits hereof and ranks equally in accordance with its terms with all other
Special Warrants issued hereunder. 

        The
Special Warrantholder applying for the issue of a new Special Warrant Certificate pursuant to this Section shall bear the cost of the issue thereof and in case of loss, destruction
or theft shall, as a condition precedent to the issue thereof, furnish to the Company and the Trustee such evidence of ownership and of the loss, destruction or theft of the Special Warrant
Certificate so lost, destroyed or stolen as is satisfactory to the Company in their discretion. The Company and the Trustee may also, as a condition precedent to issuing a new Special Warrant
Certificate, require such applicant to furnish an indemnity and surety bond in amount and form satisfactory to the Company and Trustee in their
discretion, and the applicant shall pay the reasonable charges of the Company and the Trustee in connection therewith. 

2.7    Exchange of Special Warrants    

        A
Special Warrantholder may at any time prior to the Expiry Time, by written instruction delivered to the Trustee at the office of the Trustee set forth in Section 1.1, exchange
his Special Warrant Certificates for Special Warrant Certificates evidencing Special Warrants in other denominations entitling the Special Warrantholder to acquire in the aggregate the same number of
Units to which it was entitled to acquire under the Special Warrant Certificates so surrendered, in which case the Trustee may make a charge sufficient to reimburse it for any government fees or
charges required to be paid and such reasonable fees as the Trustee may determine for every Special Warrant Certificate issued upon exchange. The Special Warrantholder surrendering such Special
Warrant Certificate shall bear such fee and charge. Payment of the charges is a condition precedent to the exchange of the Special Warrant Certificate. The Company shall sign and the Trustee shall
countersign all Special Warrant Certificates necessary to carry out exchanges as aforesaid. 

2.8    Ranking    

        All
Special Warrants will have the same attributes and rank pari passu regardless of the date of actual issue. 

2.9    Purchase of Special Warrants for Cancellation    

        Subject
to applicable law, the Company may, at any time or from time to time, purchase all or any of the Special Warrants in the market, by private contract or otherwise on such terms as
the Company may determine. Any such purchase shall be made at the lowest price or prices at which, in the opinion of the directors, such Special Warrants are then obtainable plus reasonable costs of
purchase. The Special Warrant Certificates representing the Special Warrants purchased hereunder by the Company shall immediately following purchase, be delivered to and cancelled by the Trustee and
no Special Warrants shall be issued in substitution therefor. 

3. COVENANTS OF THE COMPANY  

        The Company represents, warrants, covenants and agrees with the Trustee for the benefit of the Trustee and Special Warrantholders as follows: 

3.1    To Issue Special Warrants and Reserve Shares and Warrant Shares    

        That
it is duly authorized to create and issue the Special Warrants and that the Special Warrants, when issued and countersigned by the Trustee, will be valid and enforceable against the
Company in accordance with their terms and the terms of this Indenture and that, subject to the provisions of this Indenture, the Company shall cause the Shares and Warrants comprising the Units from
time to time acquired pursuant to the exercise or deemed exercise of Special Warrants and the certificates 

12

 

representing
the Shares and Warrants which constitute such Units, to be duly issued and delivered in accordance with the terms of the Special Warrants and this Indenture without payment of additional
consideration by the Special Warrantholders. The Company also represents and warrants that it is duly authorized to create and issue the Warrants and that the Warrants when issued and countersigned by
the Trustee will be valid and enforceable against the Company, subject to and in accordance with the terms and conditions governing the Warrants as contained in the Warrant Indenture. At all times
while any of the Special Warrants or Warrants are outstanding, the Company shall reserve and allot out of its authorized capital a number of Common Shares sufficient to enable the Company to meet its
obligation to issue Shares in respect of the exercise or deemed exercise of all Special Warrants, and Warrant Shares in respect of the exercise of all Warrants outstanding from time to time. All
Shares acquired pursuant to the exercise or deemed exercise of the Special Warrants shall be fully paid and non-assessable and free and clear of all encumbrances arising through or under
the Company. 

3.2    To Execute Further Assurances    

        That
it shall do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, all other acts, deeds and assurances in law as may reasonably be required
for the better accomplishing and effecting of the intentions and provisions of this Indenture. 

3.3    To Carry On Business    

        That
subject to the express provisions hereof, it shall carry on and conduct and shall cause to be carried on and conducted its business in the same manner as heretofore carried on and
conducted and in accordance with industry standards and good business practice, provided, however, that the Company or any Subsidiary of the Company may cease to operate or may dispose of any
business, premises, property, assets or operation if in the opinion of the directors or officers of the Company or any Subsidiary of the Company, as the case may be, it would be advisable and in the
best interests of the Company or any Subsidiary of the Company, as the case may be, to do so, and subject to the express provisions hereof, it shall do or cause to be done all things necessary to
preserve and keep in full force and effect its corporate existence, provided, however, that (subject to Article 4 hereof) nothing herein
contained shall prevent the amalgamation, consolidation, merger, sale, winding-up or liquidation of the Company or any Subsidiary of the Company or the abandonment of any rights and
franchises of the Company or any Subsidiary of the Company if, in the opinion of the directors or officers of the Company or any Subsidiary of the Company, as the case may be, it is advisable and in
the best interest of the Company or of such Subsidiary of the Company to do so. 

3.4    Reporting Issuer    

        That
the Company is presently a reporting issuer in the Designated Provinces and will use its best efforts to maintain its status as such in the Designated Provinces and in each other
province in which the Company becomes a reporting issuer following the date hereof, and will make all requisite filings under applicable Canadian securities legislation and stock exchange rules to
report the exercise of the right to acquire Units pursuant to the exercise of the Special Warrants. 

3.5    Breach of Constating Documents    

        That
the issue and sale of the Special Warrants and the issue of the Shares, the Warrants and the Warrant Shares do not and will not result in a breach by the Company of, and so not or
will not create a state of facts which, after notice or lapse of time or both, will result in a breach by the Company of, any applicable laws, and do not or will not conflict with any of the terms,
conditions or provisions of the constating documents of the Company or the bylaws or resolutions of the Company or any trust indenture, loan agreement or any other agreement or instrument to which the
Company or any Subsidiary is contractually bound as of the date of this Indenture. 

13

 

3.6    Filing Prospectus and Related Matters    

        That
as soon as practicable following the Closing, the Company shall: 

	(a)
	cause
the preliminary prospectus in connection with the proposed distribution of the Shares and Warrants comprising the Units and any other documents required to be filed to be
prepared and filed with each of the Commissions in accordance with all applicable securities laws in form and substance reasonably satisfactory to the Underwriters;

	(b)
	use
its best efforts to file the preliminary prospectus in connection with the proposed distribution of the Shares and Warrants comprising the Units with the Commissions and to obtain
receipts therefrom as soon as practicable following the Closing Date;

	(c)
	use
its best efforts to file the Prospectus with the Commissions and to obtain receipts therefrom as soon as possible after the filing of such preliminary prospectus and, in any case,
no later than the Qualification Deadline;

	(d)
	if
the receipts for the Prospectus have not been issued by the Qualification Deadline, continue to use its reasonable best efforts to file and clear the Prospectus as soon as possible
thereafter;

	(e)
	use
its best efforts to ensure that the Shares issuable upon exercise of the Special Warrants and the Warrant Shares upon exercise of the Warrants will be listed and posted for
trading on the Toronto Stock Exchange upon their issue;

	(f)
	promptly
comply with all filing and other requirements under all applicable securities laws, including, where required by the Underwriting Agreement or any applicable securities laws,
the filing of amendments to the Prospectuses with the Commissions;

	(g)
	upon
issuance by the Commissions of receipts for the Prospectus, to cause the Prospectus to be delivered to each of the then registered holders of Special Warrants; and

	(h)
	following
the issuance by the Commissions of receipts for the Prospectus, to maintain its status as a reporting issuer in the Designated Provinces for a period of not less than
12 months following the Closing Date and to comply with its obligations thereunder. 

3.7    Notices to Trustee and Special Warrantholders    

	(a)
	That
upon the issuance of a receipt for the Prospectus by the last of the Commissions to do so, as contemplated in Section 3.6, on or before the Expiry Time, the Company shall
forthwith, and in any event not later than the first Business Day thereafter:

	(i)
	give
written notice to the Trustee, each holder of a Special Warrant and the Underwriters of the issuance of the receipts for the Prospectus by the Commissions and the date upon which
the Special Warrants will be deemed to be exercised;

	(ii)
	deliver
copies of the receipts for the Prospectus to the Trustee, each Special Warrantholder and the Underwriters; and

	(iii)
	provide
written confirmation to the Trustee and the Underwriters of any adjustment that has been made pursuant to Article 4. 

3.8    Securities Qualification Requirements    

        That
if any instrument is required to be filed with or any permission, order or ruling is required to be obtained from the Commissions or any other step is required under any federal or
provincial law of the Designated Provinces before any securities or property which a Special Warrantholder is entitled to receive pursuant to the exercise or deemed exercise of a Special Warrant may
properly and legally be delivered upon the due exercise or deemed exercise of a Special Warrant, including the Shares and 

14

 

Warrants,
the Company covenants that it shall use its best efforts to make such filing, obtain such permission, order or ruling and take all such action, at its expense, as is required or appropriate
in the circumstances. 

3.9    Maintain Listing    

        That
the Company will use its best efforts to maintain the listing of the Common Shares which are outstanding on the Toronto Stock Exchange and ensure that the Shares and Warrant Shares
will be listed and posted for trading on such exchange simultaneously with or as soon as practicable following their issue. 

3.10    Satisfy Covenants    

        That
the Company will comply with all covenants and satisfy all terms and conditions on its part to be performed and satisfied under this Indenture and the Underwriting Agreement. 

3.11    Performance of Covenants by Trustee    

        If
the Company shall fail to perform any of its covenants contained in this Indenture and the Company has not rectified such failure within ten (10) Business Days after receiving
notice of such failure by the Trustee, the Trustee may notify the Special Warrantholders of such failure on the part of the Company or may itself perform any of the covenants capable of being
performed by it but, subject to Article 8, shall be under no obligation to perform said covenants or to notify the Special Warrantholders of such performance by it. No such performance,
expenditure or advance by the Trustee shall relieve the Company of any default hereunder or of its continuing obligations under the covenants herein contained. 

3.12    Trustee's Remuneration and Expenses    

        The
Company will pay the Trustee from time to time such reasonable remuneration for its services hereunder as may be agreed upon between the Company and the Trustee and will pay or
reimburse the Trustee upon its request for all reasonable expenses and disbursements and advances properly incurred or made by the Trustee in the administration or execution of the trusts hereby
created (including the reasonable compensation and disbursements of its counsel and all other advisers and assistants not regularly in its employ), both before any default hereunder and thereafter
until all duties of the Trustee hereunder shall be finally and fully performed, except any such expense, disbursement advance as may arise from the gross negligence or wilful misconduct of the Trustee
or of persons for whom the Trustee is responsible. 

3.13    Trust for Special Warrantholder's Benefit    

        The
covenants of the Company to the Trustee provided for in this Indenture shall be held in trust by the Trustee for the benefit of the Special Warrantholders. 

3.14    Notice to Special Warrantholders of Certain Events    

        The
Company covenants with the Trustee for the benefit of the Trustee and the Special Warrantholders that, so long as any of the Special Warrants are outstanding, it will not: 

	(a)
	pay
any dividend payable in shares of any class to the holders of its Shares or make any other distribution (other than a cash distribution made as a dividend out of retained earnings
or contributed surplus legally available for the payment of dividends) to the holders of its Shares;

	(b)
	offer
to the holders of its Shares rights to subscribe for or to purchase any Shares or shares of any class or any other securities, rights, warrants or options;

	(c)
	make
any repayment of capital on, or distribution of evidences of indebtedness on, any of its assets (excluding cash dividends) to the holders of Shares; 

15

 

	(d)
	amalgamate,
consolidate or merge with any other person or sell or lease the whole or substantially the whole of its assets or undertaking;

	(e)
	effect
any subdivision, consolidation or reclassification of its Shares; or

	(f)
	liquidate,
dissolve or wind-up, 

unless,
in each such case, the Company will have given notice, in the manner specified in Section 9.2, to each Special Warrantholder, of the action proposed to be taken and the date on which
(a) the books of the Company will close or a record will be taken for such dividend, repayment, distribution, subscription rights or other rights, warrants or securities, or (b) such
subdivision, consolidation, reclassification, amalgamation, merger, sale or lease, dissolution, liquidation or winding-up will take place, as the case may be, provided that the Company
will only be required to specify in the notice those particulars of the action as will have been fixed and determined
at the date on which the notice is given. The notice will also specify the date as of which the holders of Shares of record will participate in the dividend, repayment, distribution, subscription of
rights or other rights, warrants or securities, or will be entitled to exchange their Shares for securities or other property deliverable upon such reclassification, amalgamation, merger, sale or
lease, other disposition, dissolution, liquidation or winding-up, as the case may be. The notice will be given, with respect to the actions described in subsections (a), (b), (c), (d),
(e) and (f) above not less than 10 days prior to the record date or the date on which the Company's transfer books are to be closed with respect thereto. 

3.15    Closure of Share Transfer Books    

        The
Company further covenants and agrees that it will not during the period of any notice given under Section 9 close its share transfer books or take any other corporate action
which might deprive the Special Warrantholders of the opportunity of exercising their Special Warrants; provided that nothing contained in this Section 3.15 will be deemed to affect the right
of the Company to do or take part in any of the things referred to in Section 3.14 or to pay cash dividends on the shares of any class or clauses in its capital from time to time outstanding. 

4. ADJUSTMENT OF NUMBER OF UNITS  

4.1    Adjustment of Number of Units    

        The
rights to acquire Shares and Warrants comprising the Units in effect at any date attaching to the Special Warrants are subject to adjustment from time to time as follows: 

	(a)
	if
and whenever at any time from the date hereof and prior to the Expiry Time, the Company:

	(i)
	subdivides,
redivides or changes its outstanding Common Shares into a greater number of shares;

	(ii)
	consolidates,
reduces or combines its outstanding Common Shares into a smaller number of shares; or

	(iii)
	issues
Common Shares or securities exchangeable for or convertible to Common Shares ("convertible securities") to the holders of all or substantially all of the outstanding Common
Shares by way of a stock dividend (other than the issue of Common Shares or convertible securities to such holders as Dividends paid in the Ordinary Course), 

(any
of the above being a "Common Share Reorganization"), the number of Units issuable upon the exercise of each Special Warrant is adjusted immediately after the effective date of the Common Share
Reorganization or on the record date for the issue of Common Shares or convertible securities by way of stock dividend, by multiplying the 

16

 

number
of Units previously obtainable on the exercise of a Special Warrant by the fraction of which: 

	(A)
	the
numerator is the total number of Common Shares outstanding immediately after the effective or record date of the Common Share Reorganization, or, in the case of the issuance of
exchangeable or convertible securities, the total number of Common Shares outstanding immediately after the effective or record date of the Common Share Reorganization plus the total number of Common
Shares issuable upon conversion or exchange of such convertible securities; and

	(B)
	the
denominator is the total number of Common Shares outstanding immediately prior to the applicable effective or record date of such Common Share Reorganization; 

and
the Company and Trustee, upon receipt of notice pursuant to Section 4.3, shall make such adjustment successively whenever any event referred to in this Subsection 4.1(a) occurs and any such
issue of Common Shares or convertible securities by way of a stock dividend is deemed to have occurred on the record date for the stock dividend for the purpose of calculating the number of
outstanding Common Shares under this Subsection 4.1(a). To the extent that any convertible securities are not converted into or exchanged for Common Shares, prior to the expiration thereof, the number
of Units obtainable under each Special Warrant shall be readjusted to the number of Units that is then obtainable based upon the number of Common Shares actually issued on conversion or exchange of
such convertible securities; 

	(b)
	if
and whenever at any time from the date hereof and prior to the Expiry Time the Company shall fix a record date for the issue of rights, options or warrants to all or substantially
all of the holders of Common Shares under which such holders are entitled, during a period expiring not more than 45 days after the record date for such issue ("Rights Period"), to subscribe
for or acquire Common Shares at a price per share to the holder of less than 95% of the Current Market Price for the Common Shares on such record date (any of such events being called a "Rights
Offering"), then the number of Units obtainable upon the exercise of each Special Warrant shall be adjusted effective immediately after the end of the Rights Period to a number determined by
multiplying the number of Units obtainable upon the exercise thereof immediately prior to the end of the Rights Period by a fraction:

	(i)
	the
numerator of which shall be the number of Common Shares outstanding after giving effect to the Rights Offering and including the number of Common Shares actually issued or
subscribed for during the Rights Period upon exercise of the rights, warrants or options under the Rights Offering; and

	(ii)
	the
denominator of which shall be the aggregate of:

	(A)
	the
number of Common Shares outstanding as of the record date for the Rights Offering, and

	(B)
	a
number determined by dividing (1) the product of the number of Common Shares issued or subscribed during the Rights Period upon the exercise of the rights, warrants, or
options under the Rights Offering and the price at which such Common Shares are offered by (2) the Current Market Price of the Common Shares as of the record date for the Rights Offering; 

17

 

	(c)
	if
and whenever at any time from the date hereof and prior to the Expiry Time the Company shall issue or distribute to all or to substantially all of the holders of the Common Shares:

	(i)
	securities
of the Company including rights, options or warrants to acquire shares of any class or securities exchangeable for or convertible into or exchangeable into any such shares
or property or assets and including evidence of its indebtedness; or

	(ii)
	any
property (including cash) or other assets, 

and
if such issuance or distribution does not constitute Dividends paid in the Ordinary Course, a Common Share Reorganization or a Rights Offering (any of such non-excluded events being
herein called a "Special Distribution"), the number of Units obtainable upon the exercise of each Special Warrant shall be adjusted effective immediately after the record date at which the holders of
affected Common Shares are determined for purposes of the Special Distribution to a number determined by multiplying the number of Units obtainable upon the exercise thereof in effect on such record
date by a fraction: 

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

	(iv)
	the
denominator of which shall be:

	(A)
	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, less

	(B)
	the
excess, if any, of (1) the fair market value on such record date, as determined by action by the directors (whose determination shall be conclusive), to the holders of the
Common Shares of such securities or property or other assets so issued or distributed in the Special Distribution over (2) the fair market value of the consideration received therefor by the
Company from the holders of the Common Shares, as determined by action by the directors (whose determination shall be conclusive);

	(d)
	if
and whenever at any time from the date hereof and prior to the Expiry Time, there is a reclassification of the Common Shares or a change in the Common Shares into other shares or
securities, or a capital reorganization of the Company other than as described in Subsection 4.1(a) or the triggering of a shareholders' rights plan or a consolidation, amalgamation, arrangement or
merger of the Company with or into any other body corporate, trust, partnership or other entity, or a transfer, sale or conveyance of the property and assets of the Company as an entirety or
substantially as an entirety to any other body corporate, trust, partnership or other entity, any of such events being referred to as a "Capital Reorganization", every Special Warrantholder who has
not exercised its right of acquisition, as at the effective date of such Capital Reorganization is entitled to receive upon exercise in accordance with the terms and conditions hereof and shall
accept, in lieu of the number of Units obtainable under the Special Warrants to which it was previously entitled, the kind and number of Units or other securities or property of the Company that the
Special Warrantholder would have been entitled to receive on such Capital Reorganization, if, on the record date or the effective date thereof, as the case may be, the Special Warrantholder had been
the registered holder of the number of Units obtainable upon the exercise of Special Warrants then held, subject to adjustment thereafter in accordance with provisions of the same, as nearly as may be
possible, as those contained in this Section 4.1. The Company shall not carry into effect any action requiring an adjustment pursuant to this Subsection 4.1(d) unless all necessary steps have
been taken so that the Special Warrantholders are thereafter entitled to receive such kind and number of Units, other securities or property. The Company 

18

 

will
not enter into a Capital Reorganization unless its successor, or the purchasing body corporate, partnership, trust or other entity, as the case may be, prior to or contemporaneously with any such
Capital Reorganization, enters into an indenture which provides, to the extent possible, for the application of the provisions set forth in this Indenture with respect to the rights and interests
thereafter of the Special Warrantholders to the end that the provisions set forth in this Indenture are correspondingly made applicable, as nearly as may reasonably be, with respect to any shares,
other securities or property to which a Special Warrantholder is entitled on the exercise of his acquisition rights thereafter. An indenture entered into by the Company pursuant to the provisions of
this Subsection 4.1(d) is deemed a supplemental indenture entered into pursuant to the provisions of Article 7. An indenture entered into between the Company, any successor to the Company or
any purchasing body corporate, partnership, trust or other entity and the Trustee must provide for adjustments which are as nearly equivalent as may be practicable to the adjustments provided in this
Section 4.1 and which apply to successive Capital Reorganizations; 

	(e)
	where
this Section 4.1 requires that an adjustment becomes effective immediately after a record date or effective date, as the case may be, for an event referred to herein, the
Company may defer, until the occurrence of that event, issuing to the Special Warrantholder exercising his acquisition rights after the record date or effective date, as the case may be and before the
occurrence of that event the adjusted number of Units, other securities or property issuable upon the exercise or deemed exercise of the Special Warrants by reason of the adjustment required by that
event. If the Company relies on this Subsection 4.1(e) to defer issuing an adjusted number of Units, other securities or property to a Special Warrantholder, the Special Warrantholder has the right to
receive any distributions made on the adjusted number of Units, other securities or property declared in favour of holders of record on and after the date of exercise or such later date as the Special
Warrantholder would but for the provisions of this Subsection 4.1(e), have become the holder of record of the adjusted number of Units, other securities or property;

	(f)
	the
adjustments provided for in this Section 4.1 are cumulative. After any adjustment pursuant to this Section 4.1, the term "Units" where used in this Indenture is
interpreted to mean securities of any class or classes which, as a result of such adjustment and all prior adjustments pursuant to this Section, the Special Warrantholder is entitled to receive upon
the exercise of his Special Warrant, and the number of Units obtainable in any exercise made pursuant to a Special Warrant is interpreted to mean the number of Units or other property or securities a
Special Warrantholder is entitled to receive, as a result of such adjustment and all prior adjustments pursuant to this Section 4.1, upon the full exercise of a Special Warrant;

	(g)
	notwithstanding
anything in this Article 4, no adjustment shall be made in the acquisition rights attached to the Special Warrants if the issue of Common Shares is being made
in connection with the exercise of the Warrants pursuant to this Indenture or pursuant to any stock option or stock purchase plan in force from time to time for directors, officers or employees of the
Company;

	(h)
	in
the event of a question arising with respect to the adjustments provided for in this Section 4.1, that question shall be conclusively determined by the Company's auditors
who shall have access to all necessary records of the Company, and a determination by the Company's auditors is binding upon the Company, the Trustee, all Special Warrantholders and all other persons
interested therein; and

	(i)
	no
adjustment in the number of Units obtainable upon exercise of Special Warrants shall be made in respect of any event described in this Section 4.1, other than the events
referred in clauses (i) and (ii) of subsection (a) thereof, if the Special Warrantholders are entitled to 

19

 

participate
in such event on the same terms, mutatis mutandis, as if the Special Warrantholders had exercised their Special Warrants prior to or on the
effective date or record date of such event. 

4.2    Proceedings Prior to any Action Requiring Adjustment    

        As
a condition precedent to the taking of any action which requires an adjustment in any of the acquisition rights pursuant to the Special Warrants, including the number of Units
obtainable upon the exercise or deemed exercise thereof, the Company shall take any corporate action which may in its opinion be necessary in order that the Company or any successor to the Company has
unissued and reserved Common Shares in its authorized capital and may validly and legally issue as fully paid and
non-assessable all the Shares and Warrant Shares and may validly and legally deliver all other securities or property which the Special Warrantholders are entitled to receive on the full
exercise of the Special Warrants in accordance with the provisions hereof. 

4.3    Certificate of Adjustment    

        The
Company shall from time to time immediately after the occurrence of any event which requires an adjustment as provided in Section 4.1, deliver a notice to the Special
Warrantholders and the Trustee specifying the nature of the event requiring the adjustment, the amount of the adjustment necessitated thereby, and setting forth in reasonable detail the method of
calculation and the facts upon which the calculation is based. 

4.4    No Action After Notice    

        The
Company covenants with the Trustee that it will not close its transfer books or take any other corporate action which might deprive the holder of a Special Warrant of the opportunity
of exercising the Special Warrants during the period of 14 days after giving of the notice set forth in Section 4.3 hereof and 4.6 hereof. 

4.5    Protection of Trustee    

        The
Trustee: 

	(a)
	is
not at any time under any duty or responsibility to a Special Warrantholder to determine whether any facts exist which require any adjustment contemplated by Section 4.1, or
with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making the same;

	(b)
	is
not accountable with respect to the validity or value (or the kind or amount) of any shares or other securities or property which may at any time be issued or delivered upon the
exercise of the rights attaching to any Special Warrant;

	(c)
	is
not responsible for any failure of the Company to make any cash payment or to issue, transfer or deliver certificates for the Shares and Warrants comprised in the Units upon the
surrender of any Special Warrants for the purpose of the exercise of such rights or to comply with any of the covenants contained in this Article 4; and

	(d)
	shall
not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of the Company of any of the representations,
warranties or covenants herein contained or of any acts of the agents or servants of the Company. 

4.6    Notice of Special Matters    

        The
Company covenants with the Trustee that so long as any Special Warrants remain outstanding it will give 14 days prior written notice in the manner provided for in
Article 9 to the Trustee, each Special Warrantholder and to the Underwriters of any event which requires an adjustment to the 

20

 

subscription
rights attaching to any of the Special Warrants pursuant to this Article 4. The Company covenants and agrees that such notice shall contain the particulars of such event in
reasonable detail and, if determinable, the required adjustment in the manner provided for in Article 9. The Company further covenants and agrees that it shall promptly, as soon as the
adjustment calculations are reasonably determinable, file a certificate of the Company with the Trustee showing how such adjustment shall be computed. 

5. EXERCISE AND CANCELLATION OF SPECIAL WARRANTS  

5.1    Notice of Prospectus to Special Warrantholders    

        Upon
receipt of a written notice pursuant to Section 3.7, the Trustee shall forthwith give notice to the Special Warrantholders, which notice will include a statement that any
Special Warrants not exercised prior to the Expiry Time will be deemed to be exercised pursuant to Section 5.3. 

5.2    Voluntary Exercise of Special Warrants    

        A
Special Warrantholder may, at any time before the Expiry Time, exercise all or any number of the Special Warrants outstanding which are then held by the Special Warrantholder, by
surrendering to the Trustee the Special Warrant Certificate or certificates representing the number of Special Warrants to be exercised, together with a duly completed and executed exercise form(s) in
the form attached as Appendix 2 to the Special Warrant Certificate(s) in accordance with the instructions attached as Appendix 3 to the Special Warrant Certificate and subject to
compliance with such requirements as the Trustee may reasonably impose to permit the tracking of such exercises from time to time. Voluntary exercise, at a time when the Company has not received
receipts for the Prospectus from the Commissions or the Company has received receipts for the Prospectus from the Commissions but the Prospectus has not been delivered to the Special Warrantholder, is
subject to compliance with and may be restricted by the securities laws of the Designated Provinces and is further subject to the Special Warrantholders providing such assurances and executing such
documents as may, in the reasonable opinion of the Company or the Trustee, be required to ensure compliance with applicable securities legislation. If, at the time of the voluntary exercise of the
Special Warrants pursuant to this Section 5.2, there remain restrictions on resale under applicable securities legislation on the Shares and Warrants so acquired, the Company, may, if required
on the advice of counsel, endorse the certificates representing the Shares and Warrants with respect to those restrictions. Upon the voluntary exercise of Special Warrants pursuant to this
Section 5.2, the Trustee shall promptly thereafter and in any event within three Business Days: 

	(a)
	send
by registered mail certificates for Shares and Warrants to the address of the Special Warrantholder specified in the register of Special Warrants;

	(b)
	if
so specified, deliver certificates for Shares and Warrants to the Special Warrantholder at the principal office of the Trustee in Vancouver, British Columbia; or

	(c)
	send
by insured mail certificates for the Shares and Warrants to the address of the Special Warrantholder specified in writing by the Special Warrantholder to the Trustee. 

        The
exercise form attached to the Special Warrant Certificate shall not be deemed to be duly completed if the name and mailing address of the holder do not appear legibly on such
exercise form and such exercise form is not signed by the Special Warrantholder, his executor, administrator or other legal representative of such holder's attorney duly appointed. 

        If
any of the Warrant Shares in respect of which the Special Warrants are exercised are to be issued to a person or persons other than the Special Warrantholder in accordance with the
provisions of Section 5.2 hereof, the Special Warrantholder shall pay to the Trustee all requisite stamp or security transfer taxes or other governmental charges eligible in connection with the
issue of such Special 

21

 

Warrant
Shares to such other person or persons or shall establish to the satisfaction of the Trustee that such taxes and charges have been paid. 

5.3    Deemed Exercise of Special Warrants    

        Any
Special Warrants not exercised by the Warrantholder pursuant to Section 5.2 prior to the Expiry Time will be deemed to have been exercised immediately prior to the Expiry Time
and surrendered by the Special Warrantholders without any further action on the part of the Special Warrantholder. In that event, the Trustee shall, within three Business Days thereafter, mail or
deliver certificates for the Shares and Warrants issued upon deemed exercise of the Special Warrants, registered in the name of the Special Warrantholders, to the addresses of the Special
Warrantholders as specified in the register for the Special Warrants or to such address as the Special Warrantholder may specify in writing to the Trustee. 

        The
Trustee shall not issue or register Share or Warrants or the certificates representing such Shares or Warrants on the deemed exercise of Special Warrants to or in the name of any
person who the Trustee has reasonable ground to believe is in the United States or is a U.S. Person or the agent of a U.S. Person, unless the Company and the Trustee have received a written opinion of
counsel or other evidence satisfactory to them that the acquisition of the Shares and Warrants by such person is in compliance with applicable United States federal and state securities law and the
Company has provided a direction to the Trustee to proceed with such issue or registration, subject to such terms and conditions, including legending the Share and Warrant, as may be required by laws. 

5.4    Effect of Exercise of Special Warrants    

        Upon
the exercise or deemed exercise of the Special Warrants as provided in either Section 5.2 or 5.3, each Special Warrantholder is, at that time, deemed to have become the
holder or holders of record of the Shares and Warrants comprised in the Units, in respect of which such Special Warrantholder's Special Warrants are exercised or are deemed to have been exercised.
Subject to Subsection 4.1(e), the Shares comprised in the Units and issued upon the valid and voluntary exercise of Special Warrants by a Special Warrantholder will be entitled only to dividends
declared in favour of shareholders of record on and after the Closing Date until the date of exercise, from which date such Shares are for all purposes and are deemed to be issued and outstanding as
fully paid and non-assessable Common Shares. 

5.5    Partial Exercise    

        Any
Special Warrantholder may acquire a number of Shares and Warrants less than the number of Shares and Warrants which the holder is entitled to acquire pursuant to the surrendered
Special Warrant Certificate(s). In the event of any exercise of a number of Special Warrants less than the number which the holder is entitled to exercise, the Special Warrantholder upon such exercise
shall, in addition, be entitled to receive, without charge therefor, a new Special Warrant Certificate(s) in respect of the balance of the Special Warrants represented by the surrendered Special
Warrant Certificate(s) and which were not then exercised. 

5.6    Special Warrants Void After Exercise Time    

        After
the exercise or deemed exercise of a Special Warrant as provided in either Section 5.2 or 5.3, the holder of a Special Warrant Certificate representing the Special Warrant
so exercised no longer has any rights either under this Indenture or the Special Warrant Certificate, other than, in the case of exercise under Section 5.2 or 5.3, the right to receive
certificates representing its Shares and Warrants comprised in the Units, and the Special Warrant is void and of no value or effect. 

22

   
5.7    Fractions of Units    

	(a)
	Where
a Special Warrantholder is entitled to receive, as a result of the adjustments provided for in Section 4.1 or otherwise, on the exercise or partial exercise of its
Special Warrants a fraction of a Share or Warrant comprised in a Unit, such right may only be exercised in respect of such fraction in combination with another Special Warrant or other Special
Warrants which in the aggregate entitle the Special Warrantholder to receive a whole number of Shares or Warrants; and

	(b)
	If
a Special Warrantholder is not able to, or elects not to, combine Special Warrants so as to be entitled to acquire a whole number of Units, the Special Warrantholder may not
exercise the right to acquire a fractional Share or Warrant, and, as a result, has the right to acquire only that number of Shares and Warrants equal to the next lowest whole number of Shares and
Warrants. 

5.8    Accounting and Recording    

        The
Trustee shall promptly notify the Company with respect to Special Warrants exercised. The Trustee shall record the particulars of the Special Warrants exercised which include the
name or names and addresses of the persons who become holders of Shares and Warrants comprised in Units on exercise pursuant to this Article 5 and the number of Shares and Warrants issued.
Within three Business Days of the exercise of each Special Warrant pursuant to Section 5.2, the Trustee shall provide those particulars in writing to the Company. 

5.9    Escrow Funds    

        The
Company hereby deposits with the Trustee, and the Trustee hereby acknowledges receipt of, the Escrow Funds and the Trustee agrees to hold the Escrow Funds in trust upon and subject
to the following irrevocable authorizations and instructions, and the Company hereby irrevocably authorizes and instructs the Trustee as follows: 

	(a)
	Except
in accordance with clause (b)(i) below, the Trustee shall not release any of the Escrow Funds prior to the earlier of the Clearance Date and August 10,
2003. Pending disbursement of the Escrow Funds as set out below, the Trustee will hold, invest and reinvest the Escrow Funds in short term interest bearing or discount obligations issued by or
guaranteed by the Government of Canada or a Schedule I or Schedule II Canadian Chartered Bank, as determined by the Company from time to time. Failing such determination by the Company,
the Escrow Funds will be invested or reinvested in treasury bills issued by the Government of Canada (the "Qualified Investments") for such term or terms as are then available. All Qualified
Investments will, if registrable, be registered in the name of the Trustee, and if in bearer form shall be physically held by the Trustee or its agent pending their realization and shall be retained
by the Trustee in safekeeping in Vancouver to be held in trust by the Trustee on behalf of the persons who have an interest therein pursuant to this Indenture.

	(b)
	The
Trustee will release the Escrow Funds to the Company as follows:

	(i)
	If
any Special Warrantholder voluntarily exercises his Special Warrants pursuant to Section 5.2 on or before the Qualification Deadline, the Trustee will forthwith realize on
the Qualified Investments and disburse the Escrow Funds relating to the Special Warrants being exercised together with all interest earned thereon, to the Company.

	(ii)
	Any
Escrow Funds remaining in Escrow on the earlier of the Clearance Date and August 10, 2003 will be paid to the Company. 

23

 

5.10    Issuance of Special Warrants    

	(a)
	All
Special Warrant Certificates originally issued to U.S. Persons and all Special Warrant Certificates issued in exchange therefor as well as certificates representing the underlying
Shares and Share Purchase Warrants issuable upon exercise or deemed exercise of any Special Warrants represented by any such Special Warrant Certificate or in substitution thereof will bear the
following legend (the "U.S. Legend"): 

"THESE
SPECIAL WARRANTS HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER
HEREOF, BY PURCHASING THE SPECIAL WARRANTS, AGREES FOR THE BENEFIT OF THE COMPANY THAT THE SPECIAL WARRANTS MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY,
(B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144 OR
144A THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE STATE
LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES, AND THE HOLDER, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL, OF RECOGNIZED STANDING, OR OTHER EVIDENCE OF
EXEMPTION, REASONABLY SATISFACTORY TO THE COMPANY."; 

        provided
that if the Special Warrants are being sold in a transaction meeting the requirements of Rule 904 of Regulation S under the 1933 Act, the U.S. Legend may be
removed by providing a declaration to the transfer agent for the Securities, as transfer agent for the Special Warrants, Shares or Share Purchase Warrants, as the case may be, to the following effect
(or as the Company may prescribe from time to time): 

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

        In
order to ensure compliance with applicable United States securities laws, no direct or indirect transfer or sale of Special Warrants bearing the U.S. Legend may be made except in
compliance with the U.S. Legend or unless otherwise determined by the Company to be in accordance with applicable Canadian securities legislation. 

24

 

	(b)
	All
Special Warrant Certificates and all certificates issued in exchange therefor or in substitution thereof will have the following additional legend endorsed thereon: 

"UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE AUGUST 11, 2003" 

5.11    Issuance of Shares    

        All
certificates for Shares issued prior to the earlier of the Clearance Date and August 10, 2003 will have the following legend endorsed thereon: 

"UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE AUGUST 11, 2003" 

5.12    Issuance of Warrants and Warrant Shares    

        All
certificates for Warrants and Warrant Shares issued prior to the earlier of the Clearance Date and August 10, 2003 will have the following legend endorsed thereon: 

"UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE AUGUST 11, 2003" 

5.13    Securities Restrictions    

        Notwithstanding
anything herein contained, in the event that the Special Warrants are exercised pursuant to and in accordance with the provisions of Section 5.2 prior to the
issuance of a receipt for the Prospectus by the Commissions, the certificates representing the Shares and Warrants thereby issued will bear such legend as may, in the opinion of counsel to the
Company, acting reasonably, be necessary in order to avoid a violation of any applicable securities laws or to comply with the requirements of any stock exchange on which the Common Shares are listed,
provided that, if at any time, in the opinion of counsel to the Company, such legends are no longer necessary in order to avoid violation of such laws, or the holder of any such legended certificates
representing Shares or Warrants, as the case may be, at the holder's expense, provides the Company with evidence satisfactory in form and substance to the Company (which may include an opinion of
counsel satisfactory to the Company)
to the effect that such holder is entitled to sell or otherwise transfer such Shares and Warrants in a transaction in which such legends are not required, such legended certificates representing
Shares or Warrants may thereafter be surrendered to the Trustee in exchange for a certificate which does not bear such legend. 

6. MEETINGS OF SPECIAL WARRANTHOLDERS  

6.1    Definitions    

        In
this Article 6 or otherwise in this Indenture: 

	(a)
	"Adjourned
Meeting" means a meeting adjourned in accordance with Section 6.8;

	(b)
	"Extraordinary
Resolution" means a resolution proposed to be passed as an extraordinary resolution at a Meeting duly convened for that purpose and held in accordance with the
provisions of this Article 6, and carried by not less than 2/3 of the votes cast on such resolution; and

	(c)
	"Meeting"
means a meeting of the Special Warrantholders. 

25

 

6.2    Convening Meetings    

        The
Trustee or the Company may convene a Meeting at any time at the expense of the Company. Upon receipt of a written requisition signed in one or more counterparts by Special
Warrantholders having the right to acquire not less than 25% of the Units which may be acquired hereunder, the Trustee or the Company shall convene a Meeting, provided that adequate provision has been
made by the Company or the Special Warrantholders for the costs of convening and holding a Meeting. If the
Trustee or the Company fails to convene the Meeting within 15 Business Days after being duly requisitioned to do so, the Special Warrantholders having the right to acquire not less than 25% of the
Units which may be acquired hereunder may themselves convene a Meeting, the notice for which must be signed by a person that those Special Warrantholders specify, provided that the Trustee and Company
receive notice of the Meeting in accordance with Section 6.4. A written requisition must state, generally, the reason for the Meeting and business to be transacted at the Meeting. 

6.3    Place of Meeting    

        Every
Meeting must be held in Vancouver, British Columbia or at such other place that the Trustee and Company approve. 

6.4    Notice    

        The
Trustee or the Company, as the case may be, shall give written notice of each Meeting to each Special Warrantholder, the Trustee (unless the Meeting has been called by the Trustee)
the Underwriters and the Company (unless the Meeting has been called by the Company) in the manner specified in Article 9 at least 25 days before the date of the Meeting. The Trustee
shall give written notice of each Adjourned Meeting to each Special Warrantholder in the manner specified in Article 9 at least 7 days before the date of the Adjourned Meeting. The
notice for a Meeting must state the time and place of the Meeting and, generally, the reason for the Meeting and the business to be transacted at the Meeting, together with such additional information
as may be required to sufficiently inform the Special Warrantholders regarding the business to be transacted at the Meeting. The notice for an Adjourned Meeting must state the time and place of the
Adjourned Meeting but need not specify the business to be transacted at an Adjourned Meeting. The accidental omission by the Trustee or the Company, as the case may be, to give notice of a Meeting or
an Adjourned Meeting to a Special Warrantholder does not invalidate a resolution passed at a Meeting or Adjourned Meeting. 

6.5    Persons Entitled to Attend    

        The
Company and the Underwriters may and the Trustee shall, each by its authorized representatives, attend every Meeting and Adjourned Meeting but neither the Company, the Underwriters
nor the Trustee has the right to vote. The legal advisors of the Company, the Trustee, and any Special Warrantholders, respectively, may also attend a Meeting or Adjourned Meeting but do not have the
right to vote, unless they have the right to vote as a Special Warrantholder. 

6.6    Quorum    

        A
quorum for a Meeting of the Special Warrantholders shall consist of two or more persons present in person and owning or representing by proxy the right to acquire, not less than 25% of
the Units upon exercise of the Special Warrants. 

6.7    Chairman    

        The
Trustee shall nominate a natural person as the chairman of a Meeting or Adjourned Meeting. If the person so nominated is not present within 15 minutes after the time set for holding
the Meeting or Adjourned Meeting, the Special Warrantholders and proxies for Special Warrantholders present shall choose one of their number to be chairman. The chairman may vote any Special Warrants
for which he or she is the registered holder. 

26

 

6.8    Power to Adjourn    

        The
chairman of any Meeting at which a quorum of the Special Warrantholders is present may, with the consent of the Meeting, adjourn any such meeting. Notice of such adjournment will be
given in accordance with Section 6.4 with such other requirements, if any, as the Meeting may prescribe. 

6.9    Adjourned Meeting    

        If
a quorum of the Special Warrantholders is not present within 30 minutes after the time fixed for holding a Meeting, the Meeting stands adjourned to a date not less than 10 calendar
days and not more than 30 calendar days later, at a place determined in accordance with Section 6.3, and at a time specified by the chairman. The Trustee shall promptly and in accordance with
Section 6.4 send a notice of the Adjourned Meeting to each Special Warrantholder and the Company. At an Adjourned Meeting, two or more Special Warrantholders or persons representing Special
Warrantholders by proxy constitutes a quorum for the transaction of business for which the Meeting was convened. 

6.10    Show of Hands    

        Subject
to a poll and except as otherwise required herein, every question submitted to a Meeting or Adjourned Meeting, except an Extraordinary Resolution, shall be decided, in the first
instance, by the majority of votes in a show of hands. If the vote is tied, the chairman does not have a casting vote and
the motion will not be carried. On a show of hands, each Special Warrantholder present in person or represented by proxy and entitled to vote is entitled to one vote for every Special Warrant then
outstanding of which such Special Warrantholder is the registered owner. 

6.11    Poll    

        When
requested by a Special Warrantholder acting in person or by the proxy representing the Special Warrantholder, and on every Extraordinary Resolution, the chairman of a Meeting or
Adjourned Meeting shall request a poll on a question submitted to the meeting. Except as otherwise required herein, if a question has been put to a poll, that question shall be decided by the
affirmative vote of not less than a majority of the votes given on the poll. If the vote is tied, the motion shall not be carried. On a poll, each Special Warrantholder or person representing a
Special Warrantholder shall be entitled to one vote for every Unit which he or she is entitled to acquire upon exercise of the Special Warrants of which he is the registered holder. A declaration made
by the chairman that a resolution has been carried or lost is conclusive evidence thereof. In the case of joint registered Special Warrantholders, any one of them present in person or represented by
proxy may vote in the absence of the other or others but when more than one of them is present in person or by proxy, they may only vote together in respect of the Special Warrants of which they are
joint registered holders. 

6.12    Regulations    

        Subject
to the provisions of this Indenture, the Trustee, or the Company with the approval of the Trustee, may from time to time make and, thereafter, vary regulations not contrary to
the provisions of this Indenture as it deems fit providing for and governing the following: 

	(a)
	setting
a record date for a Meeting for determining Special Warrantholders entitled to receive notice of and vote at a Meeting;

	(b)
	voting
by proxy, the form of instrument appointing a proxy, the manner in which a proxy instrument must be executed, and the production of the authority of any person signing an
instrument of a proxy on behalf of a Special Warrantholder;

	(c)
	lodging
and the means of forwarding the instruments appointing proxies, and the time before a Meeting or Adjourned Meeting by which an instrument appointing a proxy must be deposited; 

27

 

	(d)
	the
form of the instrument of proxy; and

	(e)
	any
other matter relating to the conduct of a meeting of Special Warrantholders. 

        A
regulation so made is binding and effective and votes given in accordance with such a regulation are valid. The Trustee may permit Special Warrantholders to make proof of ownership in
the manner the Trustee approves. 

6.13    Powers of Special Warrantholders    

        By
Extraordinary Resolution passed pursuant to this Article 6, the Special Warrantholders may: 

	(a)
	agree
to any modification, abrogation, alteration, compromise, or arrangement of the rights of the Special Warrantholders whether arising under this Indenture, or otherwise at law,
including the rights of the Trustee in its capacity as trustee hereunder or on behalf of the Special Warrantholders against the Company, which has been agreed to by the Company;

	(b)
	direct
and authorize the Trustee to exercise any discretion, power, right, remedy or authority given to it by or under this Indenture in the manner specified in such resolution or to
refrain from exercising any such discretion, power, right, remedy, or authority;

	(c)
	direct
the Trustee to enforce any covenant or obligation on the part of the Company contained in this Indenture or to waive any default by the Company in compliance with any provision
of this Indenture either unconditionally or upon any conditions specified in such resolution;

	(d)
	assent
to any change in or omission from the provisions contained in this Indenture or the Special Warrant Certificates or any ancillary or supplemental instrument which is agreed to
by the Company, and to authorize the Trustee to concur in and execute any ancillary or supplemental indenture embodying the change or omission;

	(e)
	without
limiting the generality of Subsections 6.13(a) and (d), assent to an extension of time thereunder;

	(f)
	with
the consent of the Company, remove the Trustee or its successor in office and to appoint a new registrar and trustee to take the place of the Trustee so removed;

	(g)
	upon
the Trustee being furnished with an indemnity that is, in its discretion, sufficient, require the Trustee to enforce any covenant of the Company contained in this Indenture or
the Special Warrant Certificates, or to enforce any right of the Special Warrantholders in any manner specified in such Extraordinary Resolution, or to refrain from enforcing any such covenant or
right;

	(h)
	restrain
any Special Warrantholder from instituting or continuing any suit or proceeding against the Company for the enforcement of a covenant on the part of the Company contained in
this Indenture or any of the rights conferred upon the Special Warrantholders as set out in this Indenture or the Special Warrant Certificates;

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

	(j)
	waive
and direct the Trustee to waive a default by the Company in complying with any of the provisions of this Indenture or the Special Warrant Certificate either unconditionally or
upon any conditions specified in such Extraordinary Resolution; 

28

 

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

	(l)
	amend,
alter, or repeal any Extraordinary Resolution previously passed pursuant to this Section 6.13. 

6.14    Powers Cumulative    

        Any
one or more of the powers or any combination of the powers in this Indenture stated to be exercised by the Special Warrantholders by Extraordinary Resolution or otherwise may be
exercised from time to time and the exercise of any one or more of such powers or any combination of powers from time to time shall not be deemed to exhaust the right of the Special Warrantholder to
exercise such power or combination of powers then or thereafter from time to time. 

6.15    Minutes of Meetings    

        The
Trustee shall make and maintain minutes and records of all resolutions and proceedings at a Meeting or Adjourned Meeting at the expense of the Company and shall make available those
minutes and records at the office of the Trustee for inspection by a Special Warrantholder or his authorized representative and the Underwriters at reasonable times. If signed by the chairman of the
Meeting or by the chairman of the next succeeding Meeting of the Special Warrantholders, such minutes shall be prima facie evidence of the matters therein stated and, until the contrary is proved,
every such Meeting in respect of which minutes shall have been made shall be deemed to have been duly convened and held, and all the resolutions passed thereat or proceedings taken shall be deemed to
have been duly passed and taken. 

6.16    Written Resolutions    

        Notwithstanding
the foregoing, a written resolution or instrument signed in one or more counterparts by the Special Warrantholders holding the right to acquire not less than a majority
of the Units which may be acquired hereunder in the case of a resolution, or not less than 2/3 of the Units which may be acquired hereunder in the case of a Extraordinary Resolution, is
deemed to be the same as, and to have the same force and effect as, a resolution or Extraordinary Resolution, as the case may be, duly passed at a Meeting or Adjourned Meeting. 

6.17    Binding Effect    

        A
resolution of the Special Warrantholders passed pursuant to this Article 6 is binding upon all Special Warrantholders. Upon the passing of a Special Warrantholder's resolution
at a meeting of the Special Warrantholders, or upon the signing of a written resolution or instrument pursuant to Section 6.16 and delivery by the Company to the Trustee of an original,
certified or notarial copy, or copies, of such resolution as executed or passed by the Special Warrantholders, the Trustee is entitled to and shall give effect thereto. 

6.18    Holdings by the Company or Subsidiaries of the Company Disregarded    

        In
determining whether Special Warrantholders holding Special Warrants evidencing the required number of Common Shares which may be acquired pursuant to the exercise of the Special
Warrants are present at a meeting of Special Warrantholders for the purpose of determining a quorum or have concurred in any consent, waiver,
resolution, Extraordinary Resolution or other action under this Indenture, Special Warrants owned legally or beneficially by the Company or any
subsidiary of the Company shall be disregarded.

29

 

7. SUPPLEMENTAL INDENTURES, MERGER, SUCCESSORS  

7.1    Provision for Supplemental Indentures for Certain Purposes    

        From
time to time the Company shall, when authorized by the directors of the Company, and the Trustee may, subject to the provisions of this Indenture, execute and deliver by their
proper officers, deeds, indentures or instruments supplemental hereto, which thereafter form part hereof for any one or more or all of the following purposes: 

	(a)
	adding
to the provisions hereof such additional covenants, enforcement provisions, and release provisions (if any) as in the opinion of counsel acceptable to the Company and the
Trustee are necessary or advisable, provided the same are not, in the opinion of counsel to the Trustee prejudicial to the interests of the Special Warrantholders;

	(b)
	adding
to the covenants of the Company in this Indenture for the protection of the Special Warrantholders;

	(c)
	evidencing
any succession, (or successive successions), of other companies to the Company and the covenants of, and obligations assumed by, such successor (or successors) in
accordance with the provisions of this Indenture;

	(d)
	setting
forth any adjustments resulting from the application of the provisions of Article 4;

	(e)
	making
such provisions not inconsistent with this Indenture as may be deemed necessary or desirable with respect to matters or questions arising hereunder, provided that such
provisions are not, in the opinion of counsel to the Trustee, prejudicial to the interests of the Special Warrantholders;

	(f)
	giving
effect to an Extraordinary Resolution;

	(g)
	to
rectify any ambiguity, defective provision, clerical omission or mistake or manifest or other error contained herein or in any deed or indenture supplemental or ancillary hereto
provided that, in the opinion of the counsel to the Trustee, the rights of the Special Warrantholders are not prejudiced thereby;

	(h)
	adding
to or altering the provisions hereof in respect of the transfer of Special Warrants, making provision for the exchange of Special Warrant Certificates of different
denominations, and making any modification in the form of the Special Warrant Certificate which does not affect the substance thereof; or

	(i)
	for
any other purpose not inconsistent with the provisions of this Indenture, provided that the rights of the Special Warrantholders are in no way prejudiced thereby. 

7.2    Company May Consolidate, etc. on Certain Terms    

        Subject
to Subsection 4.1(d), nothing in this Indenture prevents any consolidation, amalgamation, arrangement or merger of the Company with or into any other body corporate or bodies
corporate, or a conveyance or transfer of all or substantially all the properties and assets of the Company as an entirety to any body corporate lawfully entitled to acquire and operate the same,
provided, however, that the body corporate formed by such consolidation, amalgamation, arrangement or into which such merger has been made, or which has acquired by conveyance or transfer all or
substantially all the properties and assets of the Company as an entirety in circumstances resulting in the Special Warrantholders being entitled to receive property from or securities of such body
corporate, shall execute prior to or contemporaneously with such consolidation, amalgamation, arrangement, merger, conveyance or transfer, an indenture supplemental hereto wherein the due and punctual
performance and observance of all the covenants and conditions of this Indenture to be performed or observed by the Company are assumed by the successor body corporate. The Trustee is entitled to
receive and is 

30

 

fully
protected in relying upon an opinion of counsel that any such consolidation, amalgamation, arrangement, merger, conveyance or transfer, and a supplemental indenture executed in connection
therewith, complies with the provisions of this Section. 

7.3    Successor Body Corporate Substituted    

        Where
the Company, pursuant to Section 7.2 hereof, is consolidated, amalgamated, arranged or merged with or into any other body corporate or bodies corporate or conveys or
transfers all of substantially all of the properties and assets of the Company as an entirety to another body corporate, the successor body corporate formed by such
consolidation, amalgamation, arrangement or into which the Company has been merged or which has received
a conveyance or transfer as aforesaid succeeds to and is substituted for the Company hereunder with the same effect as nearly as may be possible as if it had been named herein. Such changes may be
made in the Special Warrants as may be appropriate in view of such consolidation, amalgamation, arrangement, merger, conveyance or transfer. 

8. CONCERNING THE TRUSTEE  

8.1    Duties of Trustee    

        By
way of supplement to the provisions of any statute for the time being relating to trustees, and notwithstanding any other provision of this Indenture, in the exercise of the rights,
duties and obligations prescribed or conferred by the terms of this Indenture, the Trustee shall act honestly and in good faith with a view to the best interests of the Special Warrantholders and
shall exercise that degree of care, diligence and skill that a reasonably prudent trustee would exercise in comparable circumstances. 

8.2    Action by Trustee    

        The
Trustee is not obligated to do any act or thing except where required to do so by this Indenture and, in the case of a default, only when it has actual notice thereof. 

8.3    Certificate of the Company    

        If
in the administration of the trusts of this Indenture, the Trustee deems it necessary or desirable that any matter be proved or established by the Company, prior to taking or
suffering any action hereunder, the Trustee may accept and rely on a certificate of the Company as conclusive evidence of the truth of any fact relating to the Company or its assets therein stated and
proof of the regularity of any proceedings or actions associated therewith, but the Trustee may in its discretion require further evidence or information before acting or relying on any such
certificate. 

8.4    Trustee May Employ Experts    

        The
Trustee may, at the Company's expense, employ or retain such lawyers, accountants, engineers, appraisers or other experts, advisers or agents as it may reasonably require for the
purpose of discharging its duties hereunder and may pay reasonable remuneration for such services rendered to it but it is not responsible for any misconduct, mistake or error of judgment on the part
of any of them. The Company shall reimburse the Trustee for all disbursements, costs and expenses made or incurred by the Trustee in the discharge of its duties and in the management of the trusts
hereunder. The Trustee may rely upon the and act upon the opinion or advice of, or information obtained from, any such lawyer, accountant, engineer, appraiser or other expert, adviser or agent in
relation to any matter arising in the administration of the trusts hereof. The Trustee shall not incur any liability for the acts or omissions of such lawyers, accountants, engineers, appraisers or
other experts, advisers or agents employed by the Trustee in good faith. 

31

 

8.5    Resignation and Replacement of Trustee    

	(a)
	The
Trustee may resign its trust and be discharged from all further obligations hereunder by giving to the Company and the Special Warrantholders written notice at least
90 days, or such shorter time period if acceptable to the Trustee, the Company and the Special Warrantholders, before the effective date of the
resignation. If the Trustee resigns, or becomes incapable of acting hereunder, the Company shall forthwith appoint in writing a new trustee. Failing such appointment by the Company or by the Special
Warrantholders by Extraordinary Resolution, the retiring Trustee or any Special Warrantholder may apply to a Judge of the Supreme Court of British Columbia on such notice as such Judge may direct, for
the appointment of a new trustee. The Special Warrantholders may, by Extraordinary Resolution, remove the Trustee (including a trustee appointed by the Company or by a Judge as aforesaid) and appoint
a new trustee. On any new appointment, the new trustee is vested with the same powers, rights, duties and obligations as if it had been originally named as Trustee without any further assurance,
conveyance, act or deed. If for any reason it becomes necessary or expedient to execute any further deed or assurance, the former Trustee shall execute the same in favour of the new trustee.

	(b)
	Any
company resulting from a merger, consolidation, arrangement or amalgamation to which the Trustee for the time being is a party shall be the successor Trustee under this Indenture
without any further act. 

8.6    Indenture Legislation    

        The
Company and the Trustee agree that each shall at all times in relating to this Indenture and to any action to be taken hereunder, observe and comply with and be entitled to the
benefits of all Applicable Legislation. If and to the extent that any provision of this Indenture limits, qualifies or conflicts with any mandatory requirement of Applicable Legislation, such
mandatory requirement prevails. 

8.7    Notice    

        The
Trustee is not required to give notice to third parties, including the Special Warrantholders, of the execution of this Indenture. 

8.8    Use of Proceeds    

        Subject
to Section 5.9, the Trustee is in no way responsible for the use by the Company of the proceeds of the issue hereunder. 

8.9    No Inquiries    

        Prior
to the countersignature and delivery of any Special Warrant Certificates under any provisions of this Indenture, the Trustee is not bound to make any inquiry or investigation as to
the correctness of the matters set out in any of the resolutions, opinions, certificates or other documents required by the provisions of this Indenture, but is entitled to accept and act upon the
resolutions, opinions, certificates or other documents, provided that such resolutions, opinions, articles or other documents comply with the Applicable Legislation and that the Trustee complies with
the Applicable Legislation, and that the Trustee examines the same and determines that such resolutions, opinions, acts or other documents comply with the applicable requirements of this Indenture.
The Trustee may nevertheless, in its discretion, require further proof in cases where it deems further proof desirable. The Trustee is not bound to make any inquiry or investigation as to the
performance by the Company of the Company's covenants hereunder. 

32

 

8.10    Actions by Trustee to Protect Interest    

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

8.11    Trustee Not Required to Give Security    

        The
Trustee is not required to give any bonds or security with respect to the execution or administration of the trusts and powers of this Indenture. 

8.12    No Conflict of Interest    

        The
Trustee represents to the Company that, at the date of execution and delivery by it of this Indenture, there exists no material conflict of interest in the role of the Trustee as a
fiduciary hereunder but if, notwithstanding the provisions of this Section 8.12, such a material conflict of interest exists, the validity and enforceability of this Indenture and the
instruments issued hereunder is not affected in any manner whatsoever by reason only that such material conflict of interest exists or arises. The Trustee shall, within 30 days after
ascertaining that it has a material conflict of interest, either eliminate such material conflict of interest or resign in the manner and with the effect specified in Section 8.5. 

8.13    Trustee Not Ordinarily Bound    

        The
Trustee is not obligated to spend its own funds in connection with the commencement or continued exercise of its duties hereunder. The obligation of the Trustee to commence or
continue any act, action or proceeding for the purpose of enforcing any rights of the Special Warrantholders hereunder, is conditional upon Special Warrantholders furnishing, when required in writing
so to do by the Trustee, an indemnity reasonably satisfactory to the Trustee, and funds sufficient for commencing or continuing the act, action or proceeding and an indemnity reasonably satisfactory
to the Trustee to protect and hold harmless the Trustee against any loss, damage or liability by reason thereof. 

8.14    Trustee May Deal in Instruments    

        The
Trustee may in its personal or other capacity, buy, sell, lend upon and deal in and hold securities of the Company and generally contract and enter into financial transactions with
the Company or otherwise, without being liable to account for any profits made thereby. 

8.15    Recitals or Statements of Fact Made by Company    

        Subject
to the provisions hereof, the Trustee is not liable for or by reason of any of the statements of fact or recitals contained in this Indenture or in the Special Warrant
Certificates and is not required to verify the same but all such statements and recitals are and are deemed to have been made by the Company only. 

8.16    Trustee's Discretion Absolute    

        The
Trustee, except as herein otherwise provided, has, as regards all the trusts, powers, authorities and discretions vested in it, absolute and uncontrolled discretion as to the
exercise thereof, whether in relation to the manner or as to the mode and time for the exercise thereof. 

8.17    No Representations as to Validity    

        The
Trustee is not: 

	(a)
	under
any responsibility in respect of the validity of this Indenture or the execution and delivery thereof or (subject to Section 2.5 hereof) in respect of the validity or the
execution of any Special Warrant Certificate; 

33

 

	(b)
	responsible
for any breach by the Company of any covenant or condition contained in this Indenture or in any Special Warrant Certificate; or

	(c)
	by
any act hereunder, deemed to make any representation or warranty as to the authorization or reservation of any Shares or Warrant Shares to be issued as provided in this Indenture
or in any Special Warrant Certificate or as to whether any shares will when issued be duly authorized or be validly issued and fully paid and non-assessable. The duty and responsibility as
to all the matters and things referred to in this Section 8.17 rests upon the Company and not upon the Trustee and the failure of the Company to discharge any such duty and responsibility does
not in any way render the Trustee liable or place upon it any duty or responsibility for breach of which it would be liable. 

8.18    Acceptance of Trusts    

        The
Trustee hereby accepts the trusts of this Indenture and agrees to perform the same upon the terms and conditions herein set forth or referred to unless and until discharged therefrom
by resignation or in some other lawful way. 

8.19    Trustee's Authority to Carry on Business    

        The
Trustee represents to the Company that at the date hereof it is authorized to carry on business of a trust company in British Columbia. If, notwithstanding the provisions of this
Section 8.19, it ceases to be authorized to carry on such business in British Columbia, the validity and enforceability of this Indenture and of the Special Warrants issued hereunder are not
affected in any manner whatsoever by reason only of such event, provided that the Trustee shall, within 30 days after ceasing to be authorized to carry on such business in British Columbia,
either become so authorized or resign in the manner and with the effect specified in Section 8.5. 

8.20    Indemnification of Trustee    

        Without
limiting any protection or indemnity of the Trustee under any other provision hereof, or otherwise at law, the Company hereby agrees to indemnify and hold harmless the Trustee
from and against any and all liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements, including reasonable legal or advisor fees and disbursements, of
whatever kind and nature which may at any time be imposed on, incurred by or asserted against the Trustee in connection with the performance of its duties and obligations hereunder, other than such
liabilities, losses, damages, penalties, claims, actions, suits, costs, expenses and other disbursements arising by reason of the gross negligence or fraud of the Trustee. This provision shall survive
the resignation or removal of the Trustee, or the termination of this Indenture. The Trustee shall not be under any obligation to prosecute or to defend any action or suit in respect of the
relationship which, in the opinion of its counsel, may involve it in expense or liability, unless the Company shall, so often as required, furnish the Trustee with satisfactory indemnity and funding
against such expense or liability. 

8.21    Performance of Covenants by Trustee    

        If
the Company fails to perform any of its covenants contained in this Indenture, then the Company will notify the Trustee in writing of such failure and upon receipt by the Trustee of
such notice, the Trustee will notify the Special Warrantholders of such failure on the part of the Company and may itself perform any of the said covenants capable of being performed by it, but shall
be under no obligation to perform said covenants or to notify the Special Warrantholders of such performance by it. All sums expended or disbursed by the Trustee in so doing shall be reimbursed as
provided in Section 3.12. No such performance, expenditure or disbursement by the Trustee shall be deemed to relieve the Company of any default hereunder or of its continuing obligations under
the covenants herein contained. 

34

 

9. NOTICES  

9.1    Notice to Company, Trustee and Agent    

        Any
notice to the Company, Trustee or Underwriters under the provisions of this Indenture is valid and effective if in writing delivered, sent by registered letter, postage prepaid or
sent by telecopier: 

	(a)	 	to the Company at:	 	 	 	 
	

 	
 	

Cardiome Pharma Corp.

3650 Wesbrook Mall

Vancouver, BC

V6S 2L2	
 	

Attention:

 

Telecopier:	
 	

Mr. Robert Rieder

 

604-677-6915
	

 	
 	

with a copy to:	
 	

 	
 	

 
	

 	
 	

Catalyst Corporate Finance Lawyers

Suite 1400, 1055 West Hastings Street

Vancouver, BC V6E 2E9	
 	

Attention:

  

Telecopier:	
 	

James Heppell

  

604-443-7000
	

(b)	
 	

to the Trustee at:	
 	

 	
 	

 
	

 	
 	

Pacific Corporate Trust Company

10th Floor, 625 Howe Street

Vancouver, BC V6C 3B8	
 	

Attention:

  

Telecopier:	
 	

Corporate Trust Department

 

604-689-8144
	

(c)	
 	

to the Underwriters at:	
 	

 	
 	

 
	

 	
 	

Yorkton Securities Inc.

BCE Place,

181 Bay Street

Suite 3100

Toronto, Ontario M5J 2T3	
 	

Attention:

 

Telecopier:	
 	

Steven Winokur

  

416-864-3650
	

 	
 	

TD Securities Inc.

66 Wellington St. W.

Toronto Dominion Bank

Tower Toronto Dominion Centre

8th Floor,

Toronto, Ontario M5K 1A2	
 	

Attention:

 

Telecopier:	
 	

Peter Grosskopf

 

416-983-3176
	

 	
 	

Sprott Securities Inc.

Royal Bank Plaza

Suite 3450, South Tower

Toronto, Ontario M5J 2J2	
 	

Attention:

  

Telecopier:	
 	

Robert Chalmers

 

416-943-6496
	

 	
 	

First Associates Investments Inc.

Suite 2400,

BCE Place

161 Bay Street

Toronto, ON M5J 2S1	
 	

Attention:

  

Telecopier:	
 	

Paul Moase

  

(416) 865-1960
	 	 	 	 	 	 	 

35

 

	

 	
 	

with a copy to:	
 	

 	
 	

 
	

 	
 	

Fasken Martineau DuMoulin LLP

66 Wellington St. W.

Toronto Dominion Bank Tower

Toronto Dominion Centre

Suite 4200, PO Box 20

Toronto, Ontario M5K 1N6	
 	

Attention:

 

Telecopier:	
 	

Richard Steinberg

 

416-364-7813

        Any
notice, direction or other instrument aforesaid will, if delivered, be deemed to have been given and received on the day it was delivered and, if mailed, be deemed to have been
received on the fifth Business Day following the date of the postmark on such notice and, if sent by facsimile, be deemed to have been given and received on the day it was so sent unless it was sent: 

	(a)
	on
a day which is not a business day in the place to which it was sent; or

	(b)
	after
4:30 p.m. in the place to which it was sent, 

in
which cases it will be deemed to have been given and received on the next day which is a business day in the place to which it was sent. 

9.2    Notice to Special Warrantholders    

        Any
notice to the Special Warrantholders under the provisions of this Indenture is valid and effective if delivered, sent by regular mail or sent by telecopier, to each Special
Warrantholder at its address appearing on the register of Special Warrants kept by the Trustee or, in the case of joint holders, to the first such address, and, if delivered, shall be deemed to have
been given and received on the day it was delivered and, if mailed, be deemed to have been received on the fifth Business Day following the date of the postmark on such notice and, if sent by
facsimile, be deemed to have been given and received on the day it was so sent unless it was sent: 

	(a)
	on
a day which is not a business day in the place to which it was sent; or

	(b)
	after
4:30 p.m. in the place to which it was sent, 

in
which cases it will be deemed to have been given and received on the next day which is a business day in the place to which it was sent. 

        A
copy of any notice provided to the Special Warrantholders shall be concurrently provided to the Underwriters in the manner specified in Section 9.1. 

10. POWER OF BOARD OF DIRECTORS  

10.1    Board of Directors    

        In
this Indenture, where the Company is required or empowered to exercise any acts, all such acts may be exercised by the directors of the Company, by any duly appointed committee of the
directors of the Company or by those officers of the Company authorized to exercise such acts. 

11. MISCELLANEOUS PROVISIONS  

11.1    Further Assurances    

        The
parties covenant and agree from time to time, as may be reasonably required by any party hereto, to execute and deliver such further and other documents and do all matters and things
which are convenient or necessary to carry out the intention of this Indenture more effectively and completely. 

36

 

11.2    Unenforceable Terms    

        If
any term, covenant or condition of this Indenture or the application thereof to any party or circumstance is invalid or unenforceable to any extent, the remainder of this Indenture or
application of such term, covenant or condition to a party or circumstance other than those to which it is held invalid or unenforceable is not affected thereby and each remaining term, covenant or
condition of this Indenture is valid and enforceable to the fullest extent permitted by law. 

11.3    No Waiver    

        No
consent or waiver, express or implied, by either party to or of any breach or default by the other party in the performance by the other party of its obligations hereunder is deemed
or construed to be a consent or waiver to or of any other breach or default in the performance of obligations hereunder by such party. Failure on the part of either party to complain of any act or
failure to act of the other party or to declare the other party in default, irrespective of how long such failure continues, does not constitute a waiver by such party of its rights hereunder. 

11.4    Suits By Special Warrantholders    

	(a)
	No
Special Warrantholder has any right to institute any action, suit or proceeding at law or in equity for the purpose of enforcing the execution of any trust or power hereunder or
for the appointment of a liquidator or receiver or for a receiving order under the Bankruptcy and Insolvency Act (Canada) or to have the Company wound up or to file or prove a claim in any liquidation
or bankruptcy proceedings or for any other remedy hereunder unless the Special Warrantholders by Extraordinary Resolution have made a request to the Trustee and the Trustee has been afforded
reasonable opportunity to proceed or complete any action or suit for any such purpose whether or not in its own name and the Special Warrantholders or any or them have furnished to the Trustee, when
so requested by the Trustee sufficient funds and security and indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby and the Trustee has failed to
act within a reasonable time or the Trustee has failed to actively pursue any such act or proceeding.

	(b)
	Subject
to the provisions of this Section and otherwise in this Indenture, all or any of the rights conferred upon a Special Warrantholder by the terms of a Special Warrant may be
enforced by such Special Warrantholder by appropriate legal proceedings without prejudice to the right which is hereby conferred upon the Trustee to proceed in its own name to enforce each and all of
the provisions herein contained for the benefit of the Special Warrantholders from time to time. 

11.5    Enurement    

        This
Indenture enures to the benefit of and is binding upon the parties hereto and their respective successors and assigns. 

11.6    Formal Date and Effective Date    

        For
the purpose of convenience this Indenture is referred to as bearing the formal date of April 10, 2003, however notwithstanding such formal date, this Indenture becomes
effective as between 

37

 

the
Company and any particular Special Warrantholder upon the date of issuance of a Special Warrant Certificate to such Special Warrantholder. 

	

 	
 	

 	
 	

 
	
CARDIOME PHARMA CORP.	
 	

 
	

Per:	

 	

 	

 	

 
	

 	
 	
"Bob Rieder"
 Authorized Signatory	
 	

 
	

 PACIFIC CORPORATE TRUST COMPANY	

 	

 
	

Per:	

 	

 	

 	

 
	

 	
 	
"Marc Castonguay"
 Authorized Signatory	
 	

 
	

Per:	

 	

 	

 	

 
	

 	
 	
"Heather Plume"
 Authorized Signatory	
 	

 

38

 
 

SCHEDULE "A"
  
    FORM OF SPECIAL WARRANT CERTIFICATE    
    

THESE
SPECIAL WARRANTS HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "1933 ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER
HEREOF, BY PURCHASING THE SPECIAL WARRANTS, AGREES FOR THE BENEFIT OF THE COMPANY THAT THE SPECIAL WARRANTS MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY (A) TO THE COMPANY,
(B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE 1933 ACT, (C) PURSUANT TO THE EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT PROVIDED BY RULE 144 OR
144A THEREUNDER, IF AVAILABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE 1933 ACT OR ANY APPLICABLE STATE
LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES, AND THE HOLDER AS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL, OF RECOGNIZED STANDING, OR OTHER EVIDENCE OF
EXEMPTION, REASONABLY SATISFACTORY TO THE COMPANY. 

"UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE AUGUST 11, 2003" 

THE
SPECIAL WARRANTS REPRESENTED BY THIS CERTIFICATE WILL BE DEEMED TO BE EXERCISED IMMEDIATELY PRIOR TO THE EXPIRY TIME (AS DEFINED BELOW) AND WILL BE VOID THEREAFTER. 

SPECIAL WARRANT CERTIFICATE  

CARDIOME PHARMA CORP.
  (Continued under the Canada Business Corporations Act) 

	

	

No. SW-

•  	
 	

• SPECIAL WARRANTS each entitling the holder to acquire one Share and one-half Warrant for each Special Warrant subject to adjustment as set out below
	

        THIS
IS TO CERTIFY that, for value received,    •    , of    •    (the "Special Warrantholder") is the registered
holder of the number of special warrants (the "Special Warrants") stated above and is entitled to acquire in the manner and at the time, and subject to the restrictions contained in the Indenture (as
defined below) hereinafter referred to, the number of Units of CARDIOME PHARMA CORP. (the "Company") as is equal to the number of Special Warrants represented hereby (subject to adjustment as set out
in the Indenture (as defined below)), all without payment of any consideration in addition to that paid for the Special Warrants represented hereby. Each Unit consists of one common share (a "Share")
in the capital of the Company and one-half of one common share purchase warrant (a "Warrant") of the Company. Each Warrant will entitle the holder to acquire one additional common share (a
"Warrant Share") in the capital of the Company at a price of $2.75 per Warrant Share until 5:00 p.m. (Toronto time) on April 10, 2004. The Warrants will be issued under and pursuant to a
common share purchase warrant indenture made as of April 10, 2003 between the Company and Pacific Corporate Trust Company. 

        The
Special Warrants represented by this certificate are issued under and pursuant to a certain indenture (the "Indenture") made as of April 10, 2003 between the Company and
Pacific Corporate Trust Company (the "Trustee") (which expression includes any successor trustee appointed under the 

 

Indenture),
to which Indenture and any instruments supplemental thereto reference is hereby made for a full description of the rights of the holders of the Special Warrants and the terms and
conditions upon which such Special Warrants are, or are to be, issued and held, all to the same effect as if the provisions of the Indenture and all instruments supplemental thereto were herein set
forth, to all of which provisions the holder of these Special Warrants by acceptance hereof assents. All terms defined in the Indenture are used herein as so defined. In the event of any conflict or
inconsistency between the provisions of the Indenture and the provisions of this Special Warrant Certificate, except those that are necessary by context, the provisions of the Indenture shall prevail.
The Company will furnish to the holder of this Special Warrant Certificate, upon request and without charge, a copy of the Indenture. 

        The
Special Warrants represented by this Special Warrant Certificate are only exercisable voluntarily on or before 5:00 p.m. (Toronto time) on the earlier of: 

	(i)
	the
fifth Business Day after the date on which the last of the receipts for the Prospectus have been issued by the Commissions; and

	(ii)
	August 10,
2003, 

(such
earlier date being herein referred to as the "Expiry Time"), at which time they will be deemed to be exercised. 

        The
Escrow Funds, which represent all of the gross proceeds from the sale of the Special Warrants, less the Underwriters' commission and expenses, have been deposited into escrow with
the Trustee to be released in accordance with the terms of the Indenture. 

        The
holder of this Special Warrant Certificate may, at any time before the Expiry Time, exercise all or any number of the Special Warrants represented hereby, by surrendering to the
Trustee a certificate or certificates representing the number of Special Warrants to be exercised, together with the duly completed and executed exercise form attached as Appendix 2 hereto in
accordance with the instructions contained in Appendix 3 attached hereto. Any such exercise, at a time when the Company has not received the receipts for the Prospectus from the Commissions or
the Company has received the receipts for the Prospectus from the Commissions but the Prospectus has not been delivered to the Special Warrantholder, is subject to compliance with, and may be
restricted by, the securities laws of the Provinces of British Columbia, Ontario and Quebec and is further subject to the holder providing such assurances and executing such documents as may, in the
reasonable opinion of the Company or the Trustee, be required to ensure compliance with applicable securities legislation. If, at the time of the exercise of the Special Warrants, there remain
restrictions on resale under applicable securities
legislation on the Shares and Warrants acquired, the Company may, if required on the advice of counsel, endorse the certificates representing the Shares, Warrants and any Warrant Shares acquired with
respect to such resale restrictions. 

        If
any Special Warrants have not been voluntarily exercised by the holders thereof prior to the Expiry Time, then such Special Warrants will be deemed to have been exercised and
surrendered by the holder thereof immediately prior to the Expiry Time without any further action on the part of the holder. 

        The
Units, and the Shares and Warrants comprised therein, in respect of which the Special Warrants are exercised will be deemed to have been issued on the date of such exercise, at which
time each Special Warrantholder will be deemed to have become the holder of record of such Shares and Warrants. 

        After
the exercise or deemed exercise of Special Warrants, the Trustee shall within three Business Days of such exercise or deemed exercise cause to be mailed or delivered to each
Special Warrantholder at its address specified in the register for the Special Warrants maintained by the Trustee, certificates for the appropriate number of Shares and Warrants comprised in the Units
issuable 

2

 

in
respect of such Special Warrants, not exceeding those which such Special Warrantholder is entitled to acquire pursuant to the Special Warrants so exercised. If the holder of this certificate
exercises some but not all of the Special Warrants represented hereby, he or she will be entitled to receive, without charge, a new Special Warrant Certificate representing the unexercised portion of
the Special Warrants represented hereby. 

        The
holder of this Special Warrant Certificate may at any time up to the Expiry Time, upon written instruction delivered to the Trustee and payment of the charges provided for in the
Indenture and otherwise in accordance with the provisions of the Indenture, exchange this Special Warrant Certificate for other Special Warrant Certificates evidencing Special Warrants entitling the
holder to acquire in the aggregate the same number of Units as may be acquired under this Special Warrant Certificate. 

        The
number of Units, and the Shares and Warrants comprised therein, which may be acquired by a Special Warrantholder upon exercise of Special Warrants, are also subject to and governed
by Article 4 of the Indenture with respect to anti-dilution provisions, including provisions for the appropriate adjustment of the class, number and price of the securities issuable
hereunder upon the occurrence of certain events including any subdivision, consolidation, or reclassification of the shares, payment of stock dividends, or amalgamation of the Company. 

        The
holding of the Special Warrants evidenced by this Special Warrant Certificate does not constitute the Special Warrantholder a shareholder of the Company or entitle such holder to any
right or interest in respect thereof except as herein and in the Indenture expressly provided. 

        The
Special Warrants evidenced by this Special Warrant Certificate may be transferred only upon compliance with the conditions prescribed in the Indenture, on the register kept at the
offices of the Trustee, by the registered Special Warrantholder (or its legal representatives or its attorney duly appointed) and its transferee duly executing the transfer form in the form attached
hereto and complying with applicable laws and such other reasonable requirements as the Company and Trustee may prescribe. 

        In
connection with a transfer of a Special Warrant, the Company and the Trustee, prior to such transfer, must have received a properly completed and executed certificate attached as
Appendix 4 to this Special Warrant Certificate from the transferee. 

        Notwithstanding
the foregoing, the Special Warrants may only be transferred (i) to the Company, (ii) outside the United States in a transaction meeting the requirements of
Rule 904 of Regulation S under the United States Securities Act of 1933, as amended (the "1933 Act"), or any successor rule or regulation of the United States Securities and Exchange
Commission as presently in effect pursuant to the 1933 Act, unless permitted by the Indenture, (iii) pursuant to an exemption from the registration requirements under the 1933 Act provided by
Rule 144A or 144 thereunder, if available, or (iv) in a transaction that does not require registration under the 1933 Act or any applicable state securities laws. 

        In
connection with the voluntary exercise of a Special Warrant, the Trustee must have received from the holder of the Special Warrant exercising such Special Warrant a duly completed and
executed exercise form, in the form attached as Appendix 2 to this Special Warrant Certificate. 

        In
connection with the exercise of Special Warrants hereunder by a U.S. Person, the Company may, in its sole discretion, require that Special Warrantholder deliver in connection with
such exercise an opinion of counsel addressed to the Company, in form and substance satisfactory to the Company, that no violation of the registration provisions of the U.S. Securities Act or the
securities laws of any State would result in the exercise of Special Warrants by such U.S. Person. The Special Warrants represented hereby and the Units, Shares and Warrants issuable upon exercise or
deemed exercise of such Special Warrants have not been and will not be registered under the 1933 Act or any applicable state securities laws and that the sale of the Special Warrants is being made in
reliance on an 

3

 

exemption
from registration pursuant to Rule 506 of Regulation D under the 1933 Act to accredited investors (as defined in Rule 501(a) of Regulation D under the 1933 Act).
As a result, the Special Warrants represented hereby may not be exercised within the United States or to or for the benefit of a U.S. person, and the Units, Shares and Warrants issuable upon exercise
of such Special Warrants may not be delivered within the United States unless such securities are registered under the 1933 Act and the securities laws of any state in which the transferee holder is
resident or unless an exemption from such registration requirements is available and the Company has received a written opinion of counsel or other evidence satisfactory to it as to the availability
of such exemption in connection with such issuance. 

        This
Special Warrant Certificate shall be construed in accordance with the laws of the Province of British Columbia and the laws of Canada applicable therein and shall be treated in all
respects as a British Columbia contract. 

        All
certificates for Shares, Warrants and Warrant Shares issued prior to the earlier of the Clearance Date and August 10, 2003 will have the following legend endorsed thereon: 

"UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THE SECURITIES SHALL NOT TRADE THE SECURITIES BEFORE AUGUST 11, 2003" 

        This
Special Warrant Certificate is not valid for any purpose whatever unless and until it has been countersigned by or on behalf of the Trustee. 

        After
the exercise or deemed exercise of any of the Special Warrants represented by this Special Warrant Certificate, the Special Warrantholder shall no longer have any rights under
either the Indenture or this Special Warrant Certificate with respect to such Special Warrants, other than the right to receive certificates representing the Shares and Warrants issuable on the
exercise of those Special Warrants, and those Special Warrants shall be void and of no further value or effect. 

        The
Indenture contains provisions making binding upon all Special Warrantholders resolutions passed at meetings of such holders in accordance with such provisions or by instruments in
writing signed by the Special Warrantholders holding a specified percentage of the Special Warrants. 

        IN
WITNESS WHEREOF the Company has caused this Special Warrant Certificate to be executed and the Trustee has caused this Special Warrant Certificate to be countersigned by its duly
authorized officers as of this 10th day of April, 2003. 

	CARDIOME PHARMA CORP.	 	 
	

Per:	
 	

 	
 	

 
	 	 	
 Authorized Signatory	 	 
	

COUNTERSIGNED BY:	
 	

 
	
PACIFIC CORPORATE TRUST COMPANY	
 	

 
	

Per:	
 	

 	
 	

 
	 	 	
 Authorized Signatory	 	 

4

 
 

APPENDIX 1
  
    FORM OF TRANSFER    
    

FOR
VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto (name)                        (the "Transferee"), of
(residential address)                        Special Warrants of Cardiome Pharma
Corp. registered in the name of the undersigned on the records of Pacific Corporate Trust Company represented by the attached certificate, and irrevocably appoints as the attorney of the undersigned
to transfer the said securities on the books or register of transfer, with full power of substitution. 

DATED
the            day of                        , 2003. 

	

	

 	
 	

	
 	

	
 	

 
	 	 	Signature Guaranteed

(See instructions to Special Warrantholders in Appendix 3)	 	(Signature of Special Warrantholder, to be the same as appears on the face of this Special Warrant Certificate)	 	 
	

 	
 	

Name of Special Warrantholder:

Address (Please Print):	
 	

	
 	

 
	

 	
 	

 	
 	

	
 	

 
	

 	
 	

 	
 	

	
 	

 
	

 	
 	

 	
 	

	
 	

 
	

Note
to Special Warrantholders: 

	(1)
	In
order to transfer the Special Warrants represented by this Special Warrant Certificate, this transfer form must be delivered to the Trustee, together with this Special Warrant
Certificate and a duly completed and executed Certificate attached as Appendix 4 to this Special Warrant Certificate.

	(2)
	The
signature of the holder on the transfer form must be guaranteed by a Canadian Schedule 1 chartered bank, a major trust company in Canada, a member of the Securities
Transfer Association Medallion Program (STAMP), a member of the Stock Exchange Medallion Program (SEMP) or a member of the New York Stock Exchange Inc. Medallion Signature Program (MSP). 

 
 

APPENDIX 2
  
    EXERCISE FORM    
    

	TO:	 	CARDIOME PHARMA CORP.

c/o Pacific Corporate Trust Company

10th Floor, 625 Howe Street

Vancouver, British Columbia

V6C 3B8

        The
undersigned hereby exercises the right to acquire                          Units, each Unit consisting of one common share
and one-half of one share
purchase warrant of Cardiome Pharma Corp. (the "Company") as constituted on April 10, 2003 (or such number of other securities or property to which such Special Warrants entitle the undersigned
in lieu thereof or in addition thereto under the provisions of the Indenture referenced in the within Special Warrant Certificate) according to the terms of the Indenture referenced in the within
Special Warrant Certificate. 

        The
undersigned hereby represents and warrants to the Company as follows (check one): 

	      	 	(i)	 	the undersigned (a) is not (and is not exercising this Special Warrant for the account or benefit of) a U.S. person, (b) the Special Warrant is not being exercised within the United States and (c) has in
all other respects complied with the terms and conditions of Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), or any successor rule or regulation of the United States Securities and Exchange
Commission as presently in effect pursuant to the U.S. Securities Act;
	

      	
 	

(ii)	
 	

the undersigned was an original subscriber for the Special Warrants who was a U.S. person at the time of purchase of such Special Warrants; or
	

      	
 	

(iii)	
 	

the undersigned is tendering with this exercise form a written opinion of counsel to the effect that the Common Shares to be delivered upon exercise of the Special Warrants have been registered under the U.S. Securities Act and the securities
laws of all applicable states of the United States or are exempt from registration thereunder.

        "United
States" and "U.S. person" are as defined by Regulation S under the United States Securities Act of 1933. 

        The
undersigned hereby directs that the common shares and warrants be issued, registered and delivered as follows: 

	

	

 	
 	
Names(s) in Full	
 	

Address(es)	
 	

Number of Shares and Warrants
	

 	
 	

	

 	
 	

	

 	
 	

	

 	
 	

	

 	
 	

	

 	
 	

	

 

        DATED
at                         ,
                        , this              day of
                        , 2003. 

	

	

 	
 	

	
 	

	
 	

 
	 	 	Signature Witnessed or Guaranteed

(See instructions to Special Warrantholders in Appendix 3)	 	(Signature of Special Warrantholder, to be the same as appears on the face of this Special Warrant Certificate)	 	 
	

 	
 	

Name of Special Warrantholder:

Address (Please Print):	
 	

	
 	

 
	

 	
 	

 	
 	

	
 	

 
	

 	
 	

 	
 	

	
 	

 
	

 	
 	

 	
 	

	
 	

 
	

Notes
to Special Warrantholders: 

	(1)
	In
order to voluntarily exercise the Special Warrants represented by this certificate, prior to the Expiry Time pursuant to section 5.2 of the Indenture, this exercise form
must be delivered to the Trustee, together with this Special Warrant Certificate. Refer to the instructions to Special Warrantholders attached as Appendix 3 to this Special Warrant Certificate.

	(2)
	If
this exercise form indicates that the common shares and warrants are to be issued to a person or persons other than the registered holder of this Special Warrant Certificate, the
signature of such holder on the exercise form must be guaranteed by an authorized officer of a chartered bank, trust company or an investment dealer who is a member of a recognized stock exchange. 

2

 
 

APPENDIX 3
  
    INSTRUCTIONS TO SPECIAL WARRANTHOLDERS    
    

TO EXERCISE:

If
the Special Warrantholder voluntarily exercises Special Warrants prior to the Expiry Date pursuant to section 5.2 of the Indenture, it must complete, sign and deliver: 

	(a)
	the
Exercise Form, attached as Appendix 2; and

	(b)
	the
Special Warrant Certificates, 

to
the Trustee indicating the number of Shares and Warrants to be acquired. In such case, the signature of such registered holder on the Exercise Form must be witnessed. 

TO TRANSFER:

If
the Special Warrantholder wishes to transfer Special Warrants, then the Special Warrantholder must complete, sign and deliver (as appropriate): 

	(a)
	the
Transfer Form attached as Appendix 1;

	(b)
	the
Special Warrant Certificates; and

	(c)
	the
Special Warrant Purchaser's Certificate attached as Appendix 4, 

to
the Trustee. 

If
the Special Warrant Certificate is transferred, the Special Warrantholder's signature on the Transfer Form must be guaranteed by an authorized officer of a chartered bank, trust company or an
investment dealer who is a member of a recognized stock exchange. 

For
the protection of the holder, it would be prudent to use registered mail if forwarding by mail. 

GENERAL:

If
the Transfer Form or Exercise Form 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 Special Warrant Certificate must also be accompanied by evidence of authority to sign satisfactory to the Trustee. 

The
name and address of the Trustee is: 

Pacific
Corporate Trust Company

10th Floor, 625 Howe Street

Vancouver, British Columbia

V6C 3B8 

 
 

APPENDIX 4
  
    SPECIAL WARRANT PURCHASER'S CERTIFICATE    
    

	1.
	The
Purchaser 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"), which definition
includes, but is not limited to, an individual resident in the United States and an estate or trust of which any executor or administrator or trustee, respectively, is a U.S. Person and any
partnership or corporation organized or incorporated under the laws of the United States;

	2.
	The
Purchaser is resident at the address set forth on the signature page of this certificate;

	3.
	The
Purchaser acknowledges that the Special Warrants and the Shares and one share purchase warrants ("Warrants") issuable upon exercise thereof and the common shares issuable on the
exercise of such Warrants (the "Warrant Shares") (collectively, the "Securities") have not been registered under the U.S. Securities Act and may not be offered or sold in the United States unless
registered under the U.S. Securities Act and the securities laws of all applicable states of the United States or an exemption from such registration requirements is available, and that the Issuer has
no obligation or present intention of filing a registration statement under the U.S. Securities Act in respect of the Securities;

	4.
	The
Securities are not being acquired directly or indirectly for the account of benefit of a U.S. Person and the Purchaser does not have any agreement or understanding (either written
or oral) with any U.S. Person respecting:

	(i)
	the
transfer or assignment of any rights or interest in any of the Securities;

	(ii)
	the
division of profits, losses, fees, commissions, or any financial stake in connection with this purchase; or

	(iii)
	the
voting of the Shares issuable on the exercise of the Special Warrants;

	5.
	It
has no intention to distribute either directly or indirectly any of the Securities in the United States or to U.S. Persons;

	6.
	No
offers to sell the Special Warrants were made by any person to the Purchaser while the Purchaser was in the United States;

	7.
	The
Purchaser was outside the United States at the time of the Purchaser's purchase of the Special Warrants;

	8.
	The
Purchaser acknowledges that the certificates representing the Special Warrants will state that the Special Warrants, the Shares, the Warrants and the Warrant Shares have not been
registered under the United States Securities Act or the securities laws of any state of the United States and the Special Warrants may not be exercised in the United States or by or on behalf of a
U.S. Person unless registered under the U.S. Securities Act and the securities laws of all applicable states of the United States or an exemption from such registration requirements is available;

	9.
	The
Purchaser acknowledges that any person who exercises a Special Warrant will be required to provide to the Issuer written certification that it is not a U.S. Person and the Special
Warrant is not being exercised within the United States or on behalf of a U.S. Person; and

	10.
	The
Purchaser acknowledges that the Special Warrants may be transferred only if the Special Warrant is transferred outside the United States to a non-U.S. person who
properly completes, 

 

executes
and delivers to the Company the certificate attached Appendix 4 to the form of Special Warrant. 

	
	 	

	Signature	 	Address
	

 Name	
 	

 

2

 
 

SCHEDULE "B"
  
    DEFINITION OF "U.S. PERSON" AND "UNITED STATES"    
    

	"(o)
	"U.S. Person"

	(1)
	U.S.
person means:

	(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
estate of which any executor or administrator is a U.S. person;

	(iv)
	any
trust of which any trustee is a U.S. person;

	(v)
	any
agency or branch of a foreign entity located in the United States;

	(vi)
	any
non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person;

	(vii)
	any
discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the
United States; and

	(viii)
	any
partnership or corporation if:

	(A)
	organized
or incorporated under the laws of any foreign jurisdiction; and

	(B)
	formed
by a U.S. person principally for the purpose of investing in securities not registered under the 1933 Act, unless it is organized or incorporated, and owned by accredited
investors (as defined in Rule 501(a) under the 1933 Act) who are not natural persons, estates or trusts.

	(2)
	Notwithstanding
paragraph (o)(1) of this section, any discretionary account or similar account (other than an estate or trust) held for the benefit of or account of a
non-U.S. person by a dealer or other professional fiduciary organized, incorporated or (if an individual) resident in the United States shall not be deemed a U.S. person;

	(3)
	Notwithstanding
paragraph (o)(1) of this section, any estate of which any professional fiduciary acting as executor or administrator is a U.S. person shall not be deemed a U.S.
person if:

	(i)
	an
executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and

	(ii)
	the
estate is governed by foreign law.

	(4)
	Notwithstanding
paragraph (o)(1) of this section, any trust of which any professional fiduciary acting as trustee is a U.S. person shall not be deemed a U.S. person if a
trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person.

	(5)
	Notwithstanding
paragraph (o)(1) of this section, an employee benefit plan established and administered in accordance with the law of a country other than the United States and
customary practices and documentation of such country shall not be deemed a U.S. person.

	(6)
	Notwithstanding
paragraph (o)(1) of this section, any agency or branch of a U.S. person located outside the United States shall not be deemed a "U.S. person" if:

	(i)
	the
agency or branch operates for valid business reasons; and

	(ii)
	the
agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where
located.

	(7)
	The
International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development 

Bank,
the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans shall not be deemed "U.S.
persons." 

	(p)
	United States. "United States" means the United States of America, its territories and possessions, any State of the United States, and
the District of Columbia. 

QuickLinks

EXHIBIT 4.26

CARDIOME PHARMA CORP. Special Warrant Indenture Made as of April 10, 2003

TABLE OF CONTENTS

SPECIAL WARRANT INDENTURE

SCHEDULE "A" FORM OF SPECIAL WARRANT CERTIFICATE

APPENDIX 1 FORM OF TRANSFER

APPENDIX 2 EXERCISE FORM

APPENDIX 3 INSTRUCTIONS TO SPECIAL WARRANTHOLDERS

APPENDIX 4 SPECIAL WARRANT PURCHASER'S CERTIFICATE

SCHEDULE "B" DEFINITION OF "U.S. PERSON" AND "UNITED STATES"

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00051-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00051-of-00352.parquet"}]]