Document:

exv10w2

 

EXHIBIT 10.2

SERVICES AGREEMENT

     THIS AGREEMENT is made the 22nd day of December, 2005, between The Westaim
Corporation, a corporation incorporated under the laws of the Province of Alberta with its head
office located in Fort Saskatchewan, Alberta (hereinafter referred to as “Westaim”), and NUCRYST
Pharmaceuticals Corp., a corporation incorporated under the laws of the Province of Alberta with
its head office located in Fort Saskatchewan, Alberta (hereinafter referred to as “NUCRYST”).

RECITALS:

     WHEREAS Westaim currently owns 100% of the issued and outstanding shares in the capital stock
of NUCRYST;

     AND WHEREAS Westaim has been providing services to NUCRYST, and Westaim and NUCRYST wish to
document the terms of an agreement for the provision of such services;

     NOW THEREFORE in consideration of the mutual covenants and agreements contained in this
Agreement and other good and valuable consideration (the receipt and sufficiency of which
consideration is hereby acknowledged), Westaim and NUCRYST (collectively the “Parties” and each a
“Party”) agree as follows:

ARTICLE 1: INTERPRETATION

	1.1	 	Definitions
	 
	 	 	In this Agreement:
	 
	 	 	“Agreement” means this Agreement and the Schedules attached to this Agreement, in each case
as they may be amended or supplemented from time to time, and the expressions “hereof”,
“herein”, “hereto”, “hereunder”, “hereby” and similar expressions refer to this Agreement
and, unless otherwise indicated, references to articles and sections are to articles and
sections in this Agreement;
	 
	 	 	“Business Day” means any day, other than Saturday, Sunday or any statutory holiday in the
Province of Alberta;
	 
	 	 	“Effective Date” means the date hereof;
	 
	 	 	“Force Majeure” means any cause beyond the reasonable control of Westaim and affecting the
ability of Westaim to supply the Westaim Services in accordance with the terms of this
Agreement including, without limitation, strikes, supply shortages, riots, insurrection,
fires, flood, storm, explosions, acts of God, war, terrorism, governmental action, labor
conditions, material shortages or accidents.
	 
	 	 	“Losses” means any and all liabilities, losses, judgments, damages, claims, fees, costs,
actions, causes of action, obligations, suits, proceedings, fines, penalties, charges and
expenses of whatever kind or nature including, without limitation, legal fees and expenses
on a solicitor and his own client full indemnity basis;

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	 	 	“Westaim Services” means those services provided by Westaim to NUCRYST pursuant to Section
2.1.
	 
	1.2	 	Schedules

     The following Schedules form part of and are attached to this Agreement:

Schedule “A”  —  Westaim Services

Schedule “B” —  Consideration

	1.3	 	Headings

     The inclusion of headings in this Agreement is for convenience of reference only and will not
affect the construction or interpretation hereof.

	1.4.	 	Gender and Number

     In this Agreement, unless the context otherwise requires, words importing the singular include
the plural and vice versa and words importing gender include all genders.

	1.5	 	Currency

     Except where otherwise expressly provided, all amounts in this Agreement are stated and will
be paid in Canadian currency.

	1.6	 	Invalidity of Provisions

     Each provision of this Agreement is distinct and severable and a declaration of invalidity,
illegality or unenforceability of any provision or part thereof by a court of competent
jurisdiction will not affect the validity or enforceability of any other provision. Any provision
which would otherwise be held by a court or tribunal of competent jurisdiction to be void, illegal
or unenforceable shall be deemed to be modified (by reducing its scope, duration or applicability)
to the extent necessary to render it valid and enforceable, but if such modification is not
possible then such provision shall be deemed to be severed from this Agreement and the remaining
provisions shall be binding and enforceable and construed without such severed provision. Any rule
of construction to the effect that any ambiguity is to be resolved against the drafting Party shall
not be applicable in the interpretation of this Agreement.

	1.7	 	Waiver, Amendment

     This Agreement constitutes the entire and only agreement between the Parties with respect to
the subject matter hereof and no amendment or waiver of this Agreement will be binding unless
executed in writing by the Party to be bound thereby. No waiver of any provision of this Agreement
constitutes a waiver of any other provision and no waiver of any provision of this Agreement
constitutes a continuing waiver thereof unless otherwise expressly provided.

	1.8	 	Governing Law

     This Agreement is governed by and will be construed in accordance with the laws of the
Province of Alberta and the laws of Canada applicable therein and, with respect to matters arising
out of this Agreement, the Parties hereby irrevocably attorn to the non-exclusive jurisdiction of
the courts of the Province of Alberta, but any judgment or order of a court of competent
jurisdiction may be enforced in any other jurisdiction.

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ARTICLE 2: SUPPLY OF WESTAIM SERVICES

	2.1	 	Westaim Services

     Westaim will provide to NUCRYST the following services on an ongoing basis:

	 	(a)	 	the services described in Schedule “A” on the terms and conditions as set out
therein or pursuant to Section 2.2; and
	 
	 	(b)	 	such additional services as are agreed from time to time by the Parties
pursuant to Section 2.3.

	2.2	 	Outside Contractors, Consultants and Specialists

     Westaim may from time to time, when warranted in its judgment, employ the services of outside
contractors, consultants, and specialists for the purpose of delivering the Westaim Services when
Westaim lacks the expertise or labour force necessary in respect of any matter.

	2.3	 	Additional Services

     From time to time, NUCRYST may require or request additional services not specifically
addressed in Schedule “A”. Provided that Westaim agrees to the provision of such additional
services, Westaim will be compensated therefor by payment from NUCRYST of the fully-allocated
actual cost of such services, on a flow-through basis which allows Westaim only to recover its
costs and expenses in regard to such services, or by amounts otherwise agreed between the Parties.

	2.4	 	Pass Through Services

     Notwithstanding the foregoing Section 2.1, if any Westaim Services are in whole or in part a
pass through of or dependent upon a service received by Westaim from any third party, then Westaim
will use reasonable efforts to maintain the availability of such services for the benefit of
NUCRYST; provided that if any such party(ies) do(es) not perform or act(s) in such a way as to
prevent Westaim from meeting its obligations to NUCRYST under this Agreement in relation to the
provision of such Westaim Services, then Westaim shall be relieved (to the extent of and during the
period of such impairment) of its obligation to provide to NUCRYST such Westaim Services.

	2.5	 	Standard of Care

     The standard of care to be observed by Westaim in the performance of the Westaim Services will
be that of a reasonable and prudent person providing such services, and Westaim does not assume any
responsibility under this Agreement other than as set out in this Section 2.5.

	2.6	 	Relationship of the Parties

     The relationship of Westaim and NUCRYST is that of independent contractors and nothing in
this Agreement shall be construed to create a partnership, joint venture, or employee-employer
relationship between the Parties. Neither Party is the agent of the other Party and neither Party
shall have authority, express or implied, to make any representation, or enter into any contract or
commitment on behalf of the other Party, and shall not hold itself out as having authority to do
so.

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2.7 Westaim Employees not Employees of NUCRYST

     Neither Westaim nor any employee of Westaim shall be deemed or considered to be an employee of
NUCRYST, nor eligible for nor participate in any of NUCRYST’s employee benefits programs, and
consequently no deductions whatsoever will be made from any fees or costs payable by NUCRYST for
the Westaim Services including, without limitation:

	 	(a)	 	for employee benefits of Westaim such as disability insurance, health or
pension plans. Provision of any such benefits for the personnel of Westaim, or for the
dependents of such personnel, shall be the sole responsibility of Westaim; or
	 
	 	(b)	 	for Unemployment Insurance contributions, Canada Pension Plan contributions,
Income Tax, or Workers’ Compensation payments. Payments related to any of the foregoing
shall be the sole responsibility of Westaim and shall be forwarded, as appropriate,
directly to the applicable government agency involved. Proof of compliance with this
requirement shall be available to NUCRYST on request.

ARTICLE 3: CONSIDERATION FOR WESTAIM SERVICES

3.1 Cost of Westaim Services

     In consideration of the performance and provision by Westaim of the Westaim Services, NUCRYST
agrees to pay to Westaim the fully-allocated cost to Westaim of providing or obtaining such
services, without duplication, and consistent with the provision of the Westaim Services prior to
the Effective Date or as otherwise agreed between the Parties, and on such additional terms and
conditions as are set out in Schedule “B”. The costs provided in Schedule “B” are indicative costs
based on the current budget for the Westaim Services which is effective until December 31, 2005. An
indicative budget for the Westaim Services will be established between the Parties for each year
during the term of this Agreement, subject to adjustment as provided in this Agreement to reflect
the actual costs of the Westaim Services.

3.2 Invoices

     As soon as practical after the beginning of each calendar month, and in any case no later than
the 25th day of each calendar month, Westaim will invoice NUCRYST for the amount owing in respect
of Westaim Services rendered during the previous calendar month. NUCRYST will pay to Westaim, no
later than the last day of each calendar month, the full amount of all unpaid but invoiced amounts.
Westaim at its option may invoice NUCRYST for any or all of the Westaim Services on the basis of
monthly estimates, and appropriate adjustments will be made between the Parties within twenty five
(25) days after the end of each fiscal quarter during any fiscal year of NUCRYST, based on actual
costs for the provision of such Westaim Services during the preceding fiscal quarter. NUCRYST will
pay interest on overdue amounts at the rate of interest determined from time to time by Canadian
Imperial Bank of Commerce as its prime rate of interest for Canadian dollar loans in Canada plus
two (2%) per cent.

3.4 Records

     Westaim will maintain accurate and complete records of the costs incurred by it for the
purpose of determining the amounts payable for Westaim Services performed under this

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Agreement. Such records will be prepared and maintained in accordance with prudent financial and
business practice. NUCRYST and its designated agents will have access to such records as are
reasonably necessary to substantiate amounts payable for Westaim Services performed under this
Agreement. All records will be preserved in accordance with the record retention practices of
Westaim in force from time to time.

ARTICLE 4: TERM AND TERMINATION

	4.1	 	Term

     This Agreement shall commence on the Effective Date and continue until terminated.

	4.2	 	Termination

     This Agreement may be terminated as follows:

	 	(a)	 	in whole, or with respect to any specific Westaim Service, by written agreement
between the Parties;
	 
	 	(b)	 	by either Party immediately upon provision of written notice to the other, in
the event that the other Party has breached any of the provisions of this Agreement or
failed to observe or perform any of its obligations under this Agreement and fails to
cure such breach or failure within ten (10) Business Days after written notice thereof
describing the breach or failure in sufficient detail that the same may be remedied or
performed;
	 
	 	(c)	 	by Westaim upon the provision of written notice to NUCRYST in the event that
Westaim wishes to discontinue the provision of any specific Westaim Service due to the
resignation or termination of (a) key employee(s) or contractor(s) reasonably necessary
for the performance of such Westaim Service; or
	 
	 	(d)	 	by either Westaim or NUCRYST, with respect to any specific Westaim Service or
with respect to the entire Agreement, by not less than six months’ prior written notice
delivered to the other Party on or after the first anniversary of the Effective Date
and detailing the Westaim Services to be terminated or that the entire Agreement is to
be terminated.

ARTICLE 5: LIMITATION OF LIABILITY

5.1 THE TOTAL CUMULATIVE LIABILITY OF WESTAIM ARISING FROM OR RELATING TO THIS AGREEMENT OR THE
WESTAIM SERVICES WILL BE LIMITED TO THE AGGREGATE AMOUNT PAID TO WESTAIM BY NUCRYST UNDER THIS
AGREEMENT.

5.2 WESTAIM SHALL NOT BE LIABLE TO NUCRYST FOR ANY CONSEQUENTIAL, INDIRECT, PUNITIVE OR SPECIAL
DAMAGES, EVEN IF WESTAIM HAS BEEN ADVISED OF THE POSSIBILITY OF ANY OF THESE DAMAGES.

Page 5 of 9

 

5.3 THE PARTIES ACKNOWLEDGE THAT THEY HAVE ENTERED INTO THIS AGREEMENT IN RELIANCE UPON THE
LIMITATIONS OF LIABILITY SET FORTH IN THIS AGREEMENT, AND THAT THE SAME FORM AN ESSENTIAL BASIS OF
THE BARGAIN BETWEEN THE PARTIES AS REFLECTED HEREIN.

5.4 THE PROVISIONS OF THIS ARTICLE 5 SHALL APPLY IRRESPECTIVE OF THE NATURE OF THE CAUSE OF ACTION
UNDERLYING A CLAIM, DEMAND OR ACTION, INCLUDING BUT NOT LIMITED TO BREACH OF CONTRACT, TORT
(INCLUDING BUT NOT LIMITED TO NEGLIGENCE), OR STRICT LIABILITY.

5.5 ANY REFERENCE TO WESTAIM IN THIS ARTICLE 5 SHALL INCLUDE THE DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS, CONSULTANTS, SERVANTS, AND CONTRACTORS OF WESTAIM.

ARTICLE 6: INDEMNITY

     NUCRYST hereby defends, indemnifies and holds harmless Westaim together with its directors,
officers, employees, agents, consultants, servants and contractors from all Losses which any of
them may suffer as the result of third party claims, demands, suits, proceedings or judgments
arising out of the performance of the Westaim Services, unless such Losses result from any willful
breach of or reckless disregard for Westaim’s obligations under this Agreement.

ARTICLE 7: FORCE MAJEURE

     Notwithstanding any other provisions of this Agreement if, by reason of Force Majeure, Westaim
fails, wholly or in part, to perform or comply with its obligations under this Agreement, then
Westaim will be relieved of liability and will suffer no prejudice for failing to perform or comply
or for delaying such performance or compliance during the continuance and to the extent of the
failure so caused from and after the happening of the event of Force Majeure, provided that Westaim
gives to NUCRYST prompt written notice of such failure and reasonably full particulars of the cause
thereof. Westaim will only be relieved from such performance or compliance after giving such
written notice to NUCRYST. Westaim will use all reasonable commercial efforts to (i) perform its
obligations under this Agreement to the extent possible; and (ii) remedy the situation and remove,
so far as possible and with reasonable dispatch, the cause of its failure to perform or comply;
provided that there will be no obligation on Westaim to settle labour disputes. Westaim will give
prompt written notice to NUCRYST of the cessation of the cause of any Force Majeure.

ARTICLE 8: GENERAL

8.1 Taxes NUCRYST agrees to pay all federal and provincial sales taxes, goods and services
taxes, and all other taxes or other like charges payable upon or in connection with the

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provision of any Westaim Service, except for taxes related to employees as provided in Section 2.7
of this Agreement.

8.2 Assignment Neither Party may assign, sublicense or transfer, directly or indirectly,
any of its rights or obligations under this Agreement, except pursuant to a corporate
re-organization, amalgamation or merger or the sale of all or substantially all of its assets, or
with the prior written consent of the other Party, not to be unreasonably withheld or delayed.
Notwithstanding the foregoing, either Party (the “assignor”) may assign this Agreement, without the
consent of the other Party, to an affiliate (as defined in the Business Corporations Act (Alberta))
of the assignor, provided that the assignor shall not be released from its obligations under this
Agreement and that such affiliate shall first covenant in writing with the other Party to this
Agreement to be bound by all terms of this Agreement.

8.3 Enurement

     This Agreement is binding upon and enures to the benefit of the Parties and their respective
successors and permitted assigns.

8.4 Notices

     Any notice or other communication required or permitted to be given hereunder will be in
writing and will be given by facsimile or other means of electronic communication or by hand as
hereinafter provided. Any such communication, if sent by facsimile or other means of electronic
communication, will be deemed to have been received on the Business Day following the sending or,
if delivered by hand, will be deemed to have been received at the time it is delivered to the
applicable address noted below either to the individual designated below or to an individual at
such address having apparent authority to accept deliveries on behalf of the addressee. Notice of
change of address is also governed by this section. Notices and other communications will be
addressed as follows:

	 	(a)	 	If to NUCRYST:
	 
	 	 	 	NUCRYST Pharmaceuticals Corp.

50 Audubon Road

Wakefield, Massachusetts 01880

U.S.A.
	 
	 	 	 	Attention: President

Fax no.: 781-246-6032
	 
	 	(b)	 	If to Westaim:
	 
	 	 	 	The Westaim Corporation

10102 — 114th Street

Fort Saskatchewan, Alberta

Canada T8L 3W4
	 
	 	 	 	Attention: General Counsel

Fax: 780-992-5301

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	 	 	 	With a copy to:
	 
	 	 	 	The Westaim Corporation

1010, 144 — 4th Avenue S.W.

Calgary, Alberta

Canada            T2P 3N4
	 
	 	 	 	Attention: Chief Financial Officer

Fax: 403-237-8181

8.5 Further Assurances

     Each of Westaim and NUCRYST will promptly do, make, execute or deliver, or cause to be done,
made, executed or delivered, all such further acts, documents and things as the other Party may
reasonably require from time to time for the purpose of giving effect to this Agreement and will
use reasonable efforts and take all such steps as may reasonably be within its power to implement
to their full extent the provisions of this Agreement.

8.6 Confidentiality

     The Parties acknowledge and agree that the provision of the Westaim Services may give each of
the Parties access to certain confidential information and proprietary data of the other Party.
Therefore, each of the Parties agrees not to disclose, duplicate or use, nor allow to be disclosed,
duplicated or used any information of the other Party to which it will have access by virtue of
this Agreement except for the purposes of performing their respective obligations pursuant to this
Agreement and in compliance with all relevant laws, rules and regulations of governmental
authorities. Notwithstanding any other provision of this Agreement, either of the Parties may:

	 	(a)	 	disclose information of or relating to the other Party and which, in the
reasonable opinion of legal counsel, is required to be disclosed in order to comply
with the legal obligations of the Party making the disclosure, including but not
limited to obligations pursuant to securities laws or regulations; provided, however,
that prior to making any disclosure thereunder the Party wishing to make such
disclosure shall first provide to the other Party details of the proposed disclosure;
or
	 
	 	(b)	 	in response only to a valid order of a governmental agency or judicial body,
disclose confidential information but only as much as that requested to be disclosed by
such governmental agency or judicial body; provided, however, that: (i) after receiving
the order and prior to making any disclosure thereunder, the Party receiving the order
(the “disclosing Party”) shall first promptly forward a copy of the order to the other
Party in order to allow that other Party the opportunity to oppose the order or seek a
protective order; and (ii) the disclosing Party shall use commercially reasonable
efforts to obtain confidential treatment for any confidential information so disclosed.

8.7 Dispute Resolution

     All matters in dispute between the Parties in relation to this Agreement shall be resolved by
a decision of three arbitrators. Each Party shall name one arbitrator and the two arbitrators so
chosen shall select a third arbitrator. The majority decision of the three arbitrators shall be

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binding upon the Parties and their respective successors and assigns, and the expense of the three
arbitrators shall be borne equally between the Parties. If either Party fails to appoint an
arbitrator, or if the two arbitrators appointed by the Parties fail to appoint a third arbitrator,
in either case within five days from the receipt of written notice from the other Party to do so,
then the matter shall be determined pursuant to the provisions of the Arbitration Act (Alberta), as
amended from time to time. Any decision or award of any arbitrator shall be enforceable in any
court of competent jurisdiction. No person shall be nominated to serve as an arbitrator who is or
who may be in any way financially interested in the performance of this Agreement or in the
business affairs of either Party.

8.8 Counterparts

     This Agreement may be signed in counterparts and each counterpart constitutes an original
document and the counterparts, taken together, constitute one and the same instrument. Delivery of
counterparts may be made by facsimile or electronic transmission.

     IN WITNESS WHEREOF the Parties hereto have executed this Agreement under seal and by the hands
of their duly authorized officers in that regard, whose signatures alone are sufficient to bind
them to the terms of this Agreement.

	 	 	 	 	 	 	 	 	 
	The Westaim Corporation	 	 	 	NUCRYST Pharmaceuticals Corp.
	 
	 	 	 	 	 	 	 	 
	Per:

	 	 	 	 	 	Per:	 	 
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 
	Title:

	 	 	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 	 	 
	Per:

	 	 	 	 	 	Per:	 	 
	 

	 	 
	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Name:	 	 
	Title:

	 	 	 	 	 	Title:	 	 

Page 9 of 9

 

SCHEDULE “A”

Westaim Services

	1.	 	Insurance and risk management services and administration including, but not limited to
obtaining on behalf of NUCRYST as part of Westaim’s insurance coverage: (i) directors’ and
officers’ insurance including crime, kidnap and ransom coverage and fiduciary insurance; (ii)
commercial general liability insurance; (iii) umbrella liability coverage excess to commercial
general liability insurance; (iv) property, business interruption and equipment breakdown
insurance; and (v) clinical trial insurance. In respect of all such insurance, Westaim will
arrange for NUCRYST to be included under the applicable insurance policies, will utilize
reasonable efforts to maintain such policies of insurance in respect of the types of insurance
coverage listed above and notify NUCRYST promptly in the event of any cancellation or
threatened cancellation of insurance coverage affecting NUCRYST, will pay all insurance
premiums and brokerage fees related to the insurance coverage listed above (subject to
recovery of such costs from NUCRYST under this Agreement), and will handle on behalf of
NUCRYST the monitoring and filing of claims by NUCRYST under any policies of insurance listed
above.
	 
	2.	 	Legal services through the General Counsel of Westaim, any of Westaim’s Corporate Counsel,
Westaim’s Director of Legal Services and other Westaim legal department staff, including, but
not limited to: (i) providing general legal services; (ii) coordinating use of outside
counsel as needed; (iii) providing corporate secretary and related services; (iv) general
corporate legal services, advice and representation (i.e., contract preparation, negotiating,
and review; technology agreements; confidentiality agreements; intellectual property
management and administration; leases; acquisition documents/negotiations, asset disposition
or acquisition); (v) shareholder relations services including, but not limited to liaison for
shareholder communications, coordination with the transfer agent, and coordination of
communication with NASDAQ (and any other applicable exchange) and other reporting
requirements; and (vi) filings with the Securities and Exchange Commission (U.S.), Canadian
securities commissions, NASDAQ stock market, and Toronto Stock Exchange.
	 
	3.	 	Human resources personnel and services, including employee benefit programs administered by
Westaim (including but not limited to medical, dental, long-term disability insurance,
short-term disability insurance, life insurance and defined contribution pension plans), and
additional services, with costs allocated on the basis of head count or on an hourly basis.
	 
	4.	 	Payroll processing and related accounting services, which include third-party payroll
processing services, data entry and related reconciliation services, and annual T4
preparation, with costs allocated on the basis of head count or on an hourly basis.
	 
	5.	 	Environmental, health & safety (“EH&S”) services, including effluent and environmental
control, and the services of Westaim EH&S personnel as reasonably required.
	 
	6.	 	Specified tax and accounting services, particularly through Westaim’s Controller and
Westaim’s Tax Manager, as required and allocated on an hourly basis.

 

 

	7.	 	Cash Management services, as reasonably required, on a cost-recovery basis.
	 
	8.	 	Intellectual property licensing services, for software owned or licensed by Westaim but used
by NUCRYST.

 

 

SCHEDULE “B”

Consideration for Westaim Services, on an indicative budget basis (per month) for the year

ending December 31, 2005

	1.	 	Insurance and Risk Management — $29,000 per month.
	 
	 	 	Insurance premiums from underwriters in respect of NUCRYST assets and operations are charged
directly to NUCRYST or are allocated using a methodology appropriate to the coverage
provided. As an example, property insurance is allocated based on the cost of assets
insured.
	 
	 	 	Clinical trial insurance is budgeted as an additional $3,000
per month. Actual premiums are dependant on the number of trial participants.
	 
	 	 	The annual budget includes an allocation of director and officer insurance premiums for

Westaim which reflects the current NUCRYST organization structure. Additional coverage for
any new NUCRYST directors or as a result of the offering of NUCRYST common shares will be in
addition to this allocation.
	 
	2.	 	Legal — $21,000 per month. Actual charges will be determined on the basis of time incurred.
	 
	3.	 	Human resources and payroll processing — $6,000 per month, plus costs in regard to employee
benefits programs for Canadian employees continuing to be administered by Westaim, on a
fully-allocated cost-recovery basis at a rate of approximately 16% of salaries and wages or
approximately $60,000 per month.
	 
	4.	 	EH&S — $10,000 per month.
	 
	5.	 	Specified tax and accounting  — Not budgeted. Specific services requested for a project not
initiated by Westaim will be billed on an hourly basis depending on the level of staff engaged
in the service.
	 
	6.	 	Cash management services — Not budgeted. Specific services requested for a project not
initiated by Westaim will be billed on an hourly basis depending on the level of staff engaged
in the service.
	 
	7.	 	Intellectual property licensing services (for example, Microsoft licenses) — as agreed by the
Parties on the basis of services provided, or billed on an hourly basis depending on the level
of staff engaged in the service.
	 
	8.	 	For any services provided by outside contractors, consultants, and specialists, the actual
costs invoiced to Westaim for such services.
	 
	9.	 	Third party service providers such as, but not limited to, accountants, actuaries,
consultants, lawyers; fee paid to banks, exchanges, regulatory bodies; insurance;

 

 

	 	 	directors’ fees and expenses; annual report, proxy solicitations; and other purchased
services; will be paid directly by NUCRYST or reimbursed to Westaim.
	 
	10.	 	All other services, on the fully-allocated cost to Westaim of providing or obtaining such
services, without duplication, including without limitation all costs, disbursements and
expenses.

Any reference to billing on an hourly basis, in this Schedule or in Schedule “A”, shall mean at an
hourly rate which fully captures Westaim’s actual cost of providing the service in question, as
determined by Westaim acting reasonably. Any reference to costs or charges in this Agreement shall
be read in all cases as a reference to Westaim’s fully-allocated costs.exv10w3

 

Exhibit 10.3

FORM OF

REGISTRATION RIGHTS AGREEMENT

     THIS REGISTRATION RIGHTS AGREEMENT (this “Agreement”), dated as of December [___], 2005,
between NUCRYST Pharmaceuticals Corp., a corporation incorporated under the laws of Alberta, Canada
(the “Company”), and The Westaim Corporation, a corporation incorporated under the laws of Alberta,
Canada (“Westaim”).

RECITALS

     A. The Company and Westaim are parties to a Master Separation Agreement dated as of the date
hereof relating to the separation of the Company and Westaim, and this Agreement is a condition
precedent to the obligations of Westaim thereunder.

     B. The Company intends to effect an initial public offering of its common shares pursuant to a
Registration Statement on Form F-1 filed with the U.S. Securities and Exchange Commission and a
preliminary and final prospectus filed with the Canadian Securities Commissions (as hereinafter
defined) (the “IPO”).

     C. After the completion of the IPO, Westaim will beneficially own approximately [___]%
(approximately [___]% if the over-allotment option granted to the underwriters in the IPO is
exercised in full) of the outstanding common shares of the Company.

     D. The Company has agreed to provide the registration rights specified in this Agreement to
Westaim and its affiliates and other holders of the Registrable Shares (as defined below),
following the IPO, and the Company and Westaim are entering into this Agreement to set forth the
terms and conditions applicable to the grant and exercise of such registration rights.

     NOW, THEREFORE, in consideration of the promises and the mutual covenants and agreements
contained in the Master Separation Agreement and herein and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged by the parties hereto,
the Company and Westaim hereby agree as follows:

     Section 1. Definitions. In addition to the capitalized terms defined elsewhere in
this Agreement, the following capitalized terms shall have the following meanings when used in this
Agreement:

     “applicable securities laws” shall mean all applicable securities and corporate laws, rules,
regulations, instruments, notices, blanket orders, statements, circulars, procedures and policies
in the Filing Provinces.

     “Board” means the board of directors of the Company.

     “Canadian Prospectus” has the meaning ascribed thereto in subsection 7(a).

 

 

     “Canadian Prospectus Expenses” has the meaning ascribed thereto in subsection 8(d).

     “Canadian Prospectus Request” has the meaning ascribed thereto in subsection 7(d).

     “Canadian Securities Commissions” means the securities commissions or similar regulatory body
in each of the Filing Provinces.

     “Canadian Shelf Expiry Date” shall mean the date that is twenty-five (25) months from the date
of the Canadian Shelf Prospectus or such earlier date as the Holder is not considered a “control
person” pursuant to applicable securities laws in Canada.

     “Canadian Shelf Procedures” means the procedures for filing a Canadian Shelf Prospectus
prescribed by National Instrument 44-102 — Shelf Distributions.

     “Canadian Shelf Prospectus” means a prospectus filed in accordance with the Canadian Shelf
Procedures.

     “Commission” means the U.S. Securities and Exchange Commission.

     “Common Shares” means the common shares of the Company.

     “Demand Canadian Prospectus Shares” has the meaning ascribed thereto in subsection 7(a).

     “Effective Period” means the period beginning on the Shelf Effective Date and ending on the
earlier of (1) 36 months after the Shelf Effective Date or (2) the date that the Holders have
received an opinion of counsel to the Company, in form and substance reasonably acceptable to the
Holders, that the Holders can sell all of their Registrable Shares pursuant to Rule 144 promulgated
under the Securities Act without regard to the volume limitations contained in paragraph (e) of
such Rule.

     “Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended.

     “Filing Provinces” means those provinces of Canada whose securities legislation imposes (at
the relevant time) resale restrictions on any of the Common Shares held by the Holder.

     “Holder” means each of the Westaim Entities that holds Common Shares and their respective
successors and assigns contemplated by Section 13 hereof.

     “Offered Shares” has the meaning ascribed to that term in subsection 7(e).

     “Person” means a natural person, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated organization or
other entity, or a governmental entity or any department, agency or political subdivision thereof.

     “Registrable Shares” means, at any time, the Common Shares owned by the Westaim Entities and
Common Shares transferred by the Westaim Entities in accordance with Section 13 hereof.

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     “Securities Act” means the U.S. Securities Act of 1933, as amended.

     “Shelf Effective Date” means the date that the Shelf Registration Statement is declared
effective by the Commission or a final receipt is issued for the Canadian Shelf Prospectus by any
of the Canadian Securities Commissions, as applicable.

     “Subsidiary” of any Person means any other Person of which securities or other ownership
interests representing 50% or more of the ordinary voting power are, at the time as of which any
determination is being made, owned or controlled by such Person and/or one or more Subsidiaries of
such Person.

     “Target Effective Date” means the date that is 90 days after the Target Filing Date.

     “Target Filing Date” means 30 days following receipt of written notice from Westaim pursuant
to Section 2(b).

     “Westaim Entity” means Westaim and any and all Subsidiaries of Westaim but excluding the
Company and its Subsidiaries.

     Section 2. U.S. Demand Registrations.

     (a) Long-Form Registrations. Subject to the terms of this Agreement, the Holders of at least a
majority of the Registrable Shares may at any time request registration under the Securities Act on
Form F-1, Form F-2 or any similar long-form registration, of Registrable Shares with an expected
aggregate price to the public of at least $5.0 million. A registration requested pursuant to this
Section 2(a) is referred to as a “Long-Form Demand Registration.” The Company is required to
effect no more than two Long-Form Demand Registrations.

     (b) Short-Form Registration. If at any time the Company becomes eligible to register Common
Shares for resale by a Holder thereof on Form F-3 (or any successor short-form registration
statement), it shall promptly give notice thereof to each Holder and, at any time thereafter, a
majority of the Holders may give written notice to the Company to register their Registrable Shares
for resale on such Form F-3 (or successor form). Upon receipt of such notice, the Company shall
prepare and file with the Commission no later than the Target Filing Date a “shelf registration
statement” on Form F-3 (or successor form) for an offering to be made on a delayed or continuous
basis pursuant to Rule 415 under the Securities Act, covering all of the Registrable Shares then
owned by the Holders that have notified the Company of their intention to participate (the “Shelf
Registration Statement,” and collectively with the Long-Form Demand Registration, the “Demand
Registrations”). The Company will use its reasonable best efforts to have the Shelf Registration
Statement declared effective on or before the Target Effective Date and to keep such Shelf
Registration Statement continuously effective for the Effective Period (or such shorter period
which will terminate when all Registrable Shares covered by such Shelf Registration Statement have
been sold or withdrawn by the Holders, but not prior to the expiration of the applicable period
referred to in Section 4(3) of the Securities Act and Rule 174 thereunder, if applicable).
The Company further agrees, if necessary, to supplement or
amend the Shelf Registration Statement, as required by the rules, regulations or instructions
applicable to the

3

 

registration form used by the Company for such Shelf Registration Statement or by
the Securities Act or as reasonably requested (which request shall result in the filing of a
supplement or amendment) by any Holder of Registrable Shares to which such Shelf Registration
Statement relates, and the Company agrees to furnish to the Holders, their counsel and any managing
underwriter copies of any such supplement or amendment prior to its being used and/or filed with
the Commission.

     (i) The Company may require each Holder of Registrable Shares to which such Shelf
Registration Statement relates to furnish to the Company, upon reasonable notice, such
information concerning the Holder and the distribution of the Registrable Shares as the
Company may from time to time reasonably request, upon reasonable notice.

     (ii) The Company shall not be deemed to have satisfied its obligations under this
Section 2(b) until the Shelf Registration Statement has been declared effective by the
Commission and the Company has complied in all material respects with its obligations under
this Agreement with respect thereto (including keeping the Shelf Registration Statement
effective for the Effective Period), provided, however, that if after it has been declared
effective, the offering of Registrable Shares pursuant to a Shelf Registration Statement is
interfered with by any stop order, injunction or other order or requirement of the
Commission or any other governmental agency or court, such Shelf Registration Statement will
be deemed not to have been effective during the period of such interference until the
offering of Registrable Shares pursuant to such Shelf Registration Statement may legally
resume and the period of time during which sales under the Shelf Registration Statement were
suspended shall be added to the Effective Period. If a registration requested pursuant to
this Section 2(b) is deemed not to have been effected, then the Company shall continue to be
obligated to effect a registration pursuant to this Section 2(b).

     (c) Notice of Demand Registrations. Whenever securities of the Company are to be registered
under the Securities Act pursuant to a Demand Registration, the Company will give prompt written
notice (and in any event within three business days after its receipt of notice of any exercise of
the demand registration rights pursuant to this Section 2 and at least 20 days prior to the filing
of any registration statement) to the Holders of its intention to effect such a registration and
will include in such registration all Registrable Shares with respect to which the Company has
received written requests for inclusion therein within 10 days after the Company’s notice has been
given, subject to Section 2(e) hereof.

     (d) Selection of Underwriters. If the Holders so elect, the offering of Registrable Shares
pursuant to a Demand Registration shall be in the form of an underwritten offering. If they so
elect, the Holders participating in such Demand Registration shall select one or more firms of
investment bankers nationally recognized in the United States and reasonably satisfactory to the
Company to act as the book-running managing underwriter or underwriters in connection with such
offering and shall select any additional investment bankers and managers reasonably satisfactory to
the Company to be used in connection with the offering.

     (e) Priority on Demand Registrations. If a Demand Registration is an underwritten public
offering and the managing underwriters advise the Company in writing that, in their opinion, the
inclusion of the number of Registrable Shares and other securities requested to be included in such

4

 

offering creates a substantial risk that the price per share of the Common Shares will be reduced,
the Company will include in such Registration, prior to the inclusion of any securities which are
not Registrable Shares, the number of Registrable Shares requested to be included which in the
opinion of such underwriters can be sold in such offering without creating such a risk, allocated
pro rata among the participating Holders (or, if a Westaim Entity is a participating Holder, as
designated by Westaim).

     (f) Restrictions on Registrations. The Company may postpone for a reasonable period not to
exceed 90 days the filing or the effectiveness of a registration statement for a Demand
Registration if the Company shall furnish to the Holders of Registrable Shares to be included in
such Demand Registration a certificate signed by the Company’s Chief Executive Officer stating that
the Board has determined reasonably and in good faith that such filing would require disclosure of
a material fact concerning the Company (which the Company is not otherwise required to disclose)
that would have a material adverse effect on the Company or adversely affect any plan by the
Company or any of its Subsidiaries to engage in any acquisition of assets (other than in the
ordinary course of business) or capital stock or other securities of any other entity, or any
financing, acquisition, reorganization, merger, consolidation, tender offer or other significant
transaction; provided, that the right to postpone may not be exercised for more than 120 days in
any 12-month period. The Company will not include in any Demand Registration that is an
underwritten offering any securities which are not Registrable Shares without the written consent
of the Holders of a majority of the Registrable Shares to be included in such registration.

     Section 3. U.S. Piggyback Registrations.

     (a) Right to Piggyback. Whenever Common Shares of the Company are to be registered under the
Securities Act (other than pursuant to a Demand Registration and other than pursuant to a
registration statement on Form F-4 or any similar form for the registration of Common Shares to be
issued in connection with business combination transactions or similar transactions or Form S-8 or
any similar form for the registration of Common Shares to be issued to benefit or incentive plans
or arrangements, or successor forms) and the registration form to be used may be used for the
registration of Registrable Shares (a “Piggyback Registration”), the Company will give prompt
written notice (and in any event within three business days after its receipt of notice of any
exercise of demand registration rights by holders of the Company’s securities other than the
Registrable Shares and at least 20 days prior to the filing of any registration statement) to the
Holders of its intention to effect such a registration and will include in such registration all
Registrable Shares with respect to which the Company has received written requests for inclusion
therein within 10 days after the Company’s notice has been given, subject to Sections 3(b) and 3(c)
hereof. The Company will have the right to select the managing underwriters in any underwritten
Piggyback Registration in which the Company is selling Common Shares. If a Holder desires to
include such Holder’s Registrable Shares in a Piggyback Registration that is an underwritten
offering, such Holder shall, as a condition to including such Holder’s Registrable Shares, enter
into an underwriting agreement containing customary terms and conditions, including customary
representations and indemnities (provided that such indemnities shall not be given by any
subsidiary of the Company where such subsidiary may not give such indemnity without being in breach
of applicable law or with minimum solvency or liquidity regulation).

     (b) Priority on Primary Registrations. If a Piggyback Registration is an underwritten primary
registration on behalf of the Company, and the managing underwriters advise the Company

5

 

that in their opinion the number of securities requested to be included in such offering in the
registration creates a substantial risk that the price per share of the Common Shares will be
reduced in such offering, the Company will include in such registration (i) first, the securities
the Company proposes to sell, (ii) second, the Registrable Shares requested to be included in such
registration, allocated pro rata among the participating Holders (or, if a Westaim Entity is a
participating Holder, as designated by Westaim), and (iii) third, other securities requested to be
included in such registration.

     (c) Priority on Secondary Registrations. If a Piggyback Registration is an underwritten
secondary registration on behalf of holders of the Company’s securities (an “Initiating
Securityholder”), and the managing underwriters advise the Company that in their opinion the
inclusion of the number of securities requested to be included in such offering creates a
substantial risk that the price per share of the Common Shares will be reduced in such offering,
the Company will include in such registration (i) first, the Registrable Shares requested to be
included in such registration, allocated pro rata among the participating Holders (or, if a Westaim
Entity is a participating Holder, as designated by Westaim), and (ii) second, the securities to be
offered by the Initiating Securityholder and the Company in such amounts as agreed upon between the
Initiating Securityholder and the Company.

     (d) Other Registrations. If the Company has previously filed a registration statement which
includes Registrable Shares pursuant to Section 2 or pursuant to this Section 3, and if such
previous registration has not been withdrawn or abandoned, the Company will not file or cause to be
effected any other registration of any of its equity securities or securities convertible or
exchangeable into or exercisable for its equity securities under the Securities Act (except on Form
F-4 or any similar form for the registration of Common Shares to be issued in connection with
business combination transactions or similar transactions or Form S-8 or any similar form for the
registration of Common Shares to be issued to benefit or incentive plans or arrangements, or
successor forms), whether on its own behalf or at the request of any holder or holders of such
securities, until a period of 90 days has elapsed from the effective date of such previous
registration, without the prior consent of the Holders of a majority of the Registrable Shares
covered by such previous registration statement.

     Section 4. Holdback Agreements for U.S. Offerings. (a) Unless the underwriters
managing the registered public offering otherwise agree, (i) the Company will not effect any public
sale or distribution of its equity securities or any securities convertible into or exchangeable or
exercisable for such securities during the seven days prior to and during the 90-day period
beginning on the effective date of the underwriting agreement relating to any underwritten Demand
Registration or any underwritten Piggyback Registration (except as part of such underwritten
registration or pursuant to a registration on Form F-4 or any similar form for the registration of
Common Shares to be issued in connection with business combination transactions or similar
transactions or Form S-8 or any similar form for the registration of Common Shares to be issued to
benefit or incentive plans or arrangements, or successor forms) (the “Holdback Period”).

     (b) Unless the underwriters managing the registered public offering otherwise agree, no Holder
will effect any public sale or distribution of the equity securities of the Company held by such
Holder (including sales pursuant to Rule 144), or any securities convertible into or exchangeable
or exercisable for such securities, or engage in any hedging transactions relating to the same,
during the Holdback Period relating to an underwritten Demand Registration or an underwritten
Piggyback Registration.

6

 

     5. U.S. Registration Procedures.

     (a) Whenever a Holder has requested that any Registrable Shares be registered pursuant to the
terms of this Agreement, the Company will use its best efforts to effect the registration and the
sale of such Registrable Shares in accordance with the intended method of disposition thereof, and
pursuant thereto the Company will as expeditiously as possible:

     (i) prepare and file with the Commission a registration statement on the appropriate
form with respect to such Registrable Shares and use its best efforts to cause such
registration statement to become effective as soon as practicable after such filing;

     (ii) prepare and file with the Commission such amendments and supplements to such
registration statement and the prospectus used in connection therewith as may be necessary
to keep such registration statement effective and such prospectus usable and to comply with
the provisions of the Securities Act with respect to the disposition of all securities
covered by such registration statement until such time as the Registrable Shares registered
thereunder have been disposed of in accordance with the intended methods of disposition by
the sellers thereof set forth in such registration statement; provided that, at least five
business days prior to filing a registration statement or prospectus or any amendments or
supplements thereto, excluding documents incorporated by reference after the initial filing
of the registration statement, the Company shall furnish to the Holders of the Registrable
Shares covered by such registration statement (the “Selling Holders”), Selling Holders’
counsel and the underwriters, if any, draft copies of all such documents proposed to be
filed, which documents will be subject to the review of such Holders’ counsel and the
underwriters, if any, and the Company will not, unless required by law, file any
registration statement or amendment thereto or any prospectus or any supplement thereto to
which Holders of at least a majority of the Registrable Shares covered thereby (the
“Objecting Party”) shall reasonably object, pursuant to notice given to the Company prior to
the filing of such amendment or supplement (the “Objection Notice”) and no later than five
business days after receipt of the documents to which the Objection Notice relates. The
Objection Notice shall set forth the objections and the specific areas in the draft
documents where such objections arise. The Company shall have five business days after
receipt of the Objection Notice to correct such deficiencies to the satisfaction of the
Objecting Party, and will notify each Selling Holder of any stop order issued or threatened
by the Commission in connection therewith and shall use its best efforts to prevent the
entry of such stop order or to remove it at the earliest possible moment if entered;

     (iii) furnish to each Selling Holder and the underwriters of the securities being
registered such number of copies of such registration statement, each amendment and
supplement thereto, the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Selling Holder or underwriters may
reasonably request in order to facilitate the disposition of the Registrable Shares owned by
such Selling Holder or the sale of such securities by such underwriters;

     (iv) use its reasonable best efforts to comply with all applicable rules and
regulations of the Commission and make generally available to the security holders as soon
as practicable

7

 

after the effective date of the applicable registration statement an earnings
statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
promulgated thereunder;

     (v) use its reasonable best efforts to register or qualify such Registrable Shares
under such other securities or “blue sky” laws of such jurisdictions as any Selling Holder
reasonably requests and do any and all other acts and things which may be necessary or
desirable to enable such seller to consummate the public sale or other disposition in such
jurisdictions of the Registrable Shares owned by such Selling Holder (provided, however,
that the Company will not be required to qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for this subparagraph
or consent to general service of process in any such jurisdiction);

     (vi) cause all such Registrable Shares to be listed on each securities exchange on
which similar securities issued by the Company are then listed;

     (vii) enter into customary agreements (including underwriting agreements) and take all
such other actions as a Selling Holder or the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such Registrable Shares;

     (viii) make available for inspection by the Selling Holders, any underwriter
participating in any disposition pursuant to such registration statement, and any attorney,
accountant or other agent designated by any such Selling Holder or underwriter, all
financial and other records, pertinent corporate documents and properties of the Company,
and cause the Company’s officers, directors, employees and independent accountants to supply
all information reasonably requested by any such Selling Holder, underwriter, attorney,
accountant or agent in connection with such registration statement; provided, however, that
any such records, documents, properties and information provided by the Company that is
designated in writing by the Company in good faith as confidential at the time of delivery
of such records, documents, properties or information, as applicable, shall be kept
confidential by all such Persons unless (x) disclosure thereof is made in connection with a
court proceeding or required by law (provided, however that each such Person shall, upon
learning that disclosure of such records, documents, properties or information, as
applicable, is sought in a court proceeding or required by law, give notice to the Company
to allow the Company to undertake appropriate action to prevent disclosure at the Company’s
sole expense), or (y) such records, documents, properties or information, as applicable, has
previously been made or becomes available to the public generally through the Company or
through a third party without an accompanying obligation of confidentiality;

     (ix) cause the Company’s officers, directors and employees to participate in marketing
efforts as reasonably requested by the underwriters, including participating in “roadshow”
meetings with potential investors;

     (x) notify each Selling Holder, promptly after it shall receive notice thereof, of the
time when such registration statement has become effective or a supplement to any prospectus
forming apart of such registration statement has been filed;

8

 

     (xi) notify each Selling Holder of any request by the Commission for the amending or
supplementing of such registration statement or prospectus or for additional information;

     (xii) prepare and file promptly upon the request of any Selling Holder, any amendments
or supplements to such registration statement or prospectus which, in the reasonable opinion
of counsel selected by such Selling Holder, with the Commission as required under the
Securities Act or Exchange Act or the rules and regulations thereunder and elsewhere as may
be required under applicable law in connection with the distribution of Registrable Shares
by such Selling Holder;

     (xiii) prepare and promptly file with the Commission and elsewhere as may be required
under any applicable law and promptly notify each Selling Holder of such Registrable Shares
of the filing of such amendment or supplement to such registration statement or prospectus
as may be necessary to correct any statements or omissions if, at the time when a prospectus
relating to such securities is required to be delivered under the Securities Act or under
any applicable law, any event shall have occurred as the result of which any such prospectus
would include an untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein, in the light of the circumstances in which they
were made, not misleading;

     (xiv) at the request of Westaim in connection with an underwritten offering, furnish on
the date or dates provided for in the underwriting agreement a customary opinion of counsel,
addressed to the underwriters and Westaim, covering such matters as such underwriters and
Westaim may reasonably request;

     (xv) obtain “cold comfort” letters and updates thereof from the independent chartered
accountants of the Company (and, if necessary, any other independent chartered accountants
of any subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each Selling Holder (provided such Selling Holder
furnishes the accountants with such representations as the accountants customarily require
in similar situations) and the underwriters, if any, in customary form and covering matters
of the type customarily covered in “cold comfort” letters in connection with underwritten
offerings; and

     (xvi) deliver such documents and certificates as may be reasonably requested by the
Selling Holders and the underwriters, including those to evidence compliance with any
customary conditions contained in the underwriting agreement.

     (b) The Company may require the Holders to furnish to the Company such information regarding
the distribution of such securities and such other information relating to the Holders
participating in such distribution and the ownership by the Holders of Registrable Shares as the
Company may from time to time reasonably request in writing. Each Holder shall furnish such
information to the Company and cooperate with the Company as reasonably necessary to enable
the Company to comply with the provisions of this Agreement.

9

 

     Section 6. U.S. Registration Expenses. All expenses incident to the Company’s
performance of or compliance with this Agreement, including, but not limited to, all registration
and filing fees, fees and expenses of compliance with federal, state and foreign securities laws,
printing expenses, messenger and delivery expenses, and fees and disbursements of counsel for the
Company and its independent chartered accountants, underwriters (excluding discounts and
commissions attributable to the Registrable Shares included in such registration) and other Persons
retained by the Company (all such expenses being herein called “Registration Expenses”), will be
borne by the Company. In addition, the Company will pay its internal expenses (including, but not
limited to, all salaries and expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit or quarterly review, the expense of any liability
insurance obtained by the Company and the expenses and fees for listing the securities to be
registered on each securities exchange. In addition, the Company shall reimburse the Holders for
the reasonable fees and disbursements of one firm of legal counsel in connection with any
registration under this Agreement.

     Section 7: Canadian Offering.

     (a) Demand Canadian Prospectus. Subject the provisions of this Agreement, the Holders of at
least a majority of the Registrable Shares shall have the right to request at any time that the
Company effect the filing of a preliminary prospectus and a final prospectus (collectively, a
“Canadian Prospectus”) with the Canadian Securities Commissions for any or all of the Registrable
Shares with an expected aggregate price to the public of at least C$5.0 million (the Common Shares
requested to be cleared under this subsection 7(a) are hereinafter referred to as the “Demand
Canadian Prospectus Shares”); provided that such request by the Holders hereunder shall specify the
intended method of disposition thereof by the Holders whether by the long-form prospectus
procedures or the short-form or shelf prospectus procedures, if the Company is at such time,
qualified to use such procedures provided for under the applicable securities laws provided that
upon completion of the IPO, the Company shall use its reasonable best efforts to qualify under NI
44-101 to file a prospectus in the form of a short-form prospectus under NI 44-101 and a shelf
prospectus under NI 44-102.

     (b) Restrictions on Demand Canadian Prospectus. In the event that any of the Holders, if they
have the right to do so, exercise their rights under subsection (a) of this Section 7, the Company
shall use its reasonable best efforts to cause the sale of the Demand Canadian Prospectus Shares to
be cleared pursuant to a Canadian Prospectus filed with the Canadian Securities Commissions and, in
the case of a Canadian Shelf Prospectus filed pursuant to the Canadian Shelf Procedures, to cause
such Canadian Shelf Prospectus to remain effective until the Canadian Shelf Expiry Date, and to
effect and to comply with all such regulatory qualifications, compliances and requirements as may
be necessary to permit the sale or other transfer of such Demand Canadian Prospectus Shares, in the
manner described in such request; provided, however, that (i) if any firm of counsel representing
the Company in connection with any such Canadian Prospectus filing request (“Canadian Prospectus
Request”), reasonably acceptable to Westaim, shall advise the Company and any such Holder in
writing that in its opinion the filing of a Canadian Prospectus contemplated hereby is not
necessary to permit the sale of Demand Canadian Prospectus Shares in Canada in the intended method
of disposition by such requesting Holder, then the Company shall not be required to take any action
with respect to such Canadian Prospectus Request or other steps contemplated hereby with respect to
such Demand Canadian Prospectus Shares and (ii) the Company shall have the right to delay such Canadian
Prospectus filing for one period of up to 90 days by written notice to the Holders in the event
that the Board determines in good faith that such delay is in the best interests of the Company,
provided that the

10

 

Holders shall be entitled to withdraw such request at any time prior to the
expiry of such delay and if such request is withdrawn, such Canadian Prospectus Request shall not
constitute a Canadian Prospectus Request to which the Holders are entitled pursuant to subsection
7(a) above. The Company shall furnish to the Holders of Registrable Shares to be included in such
Canadian Prospectus Request a certificate signed by the Company’s Chief Executive Officer stating
that the Board has determined reasonably and in good faith that such filing would require
disclosure of a material fact concerning the Company (which the Company is not otherwise required
to disclose) that would have a material adverse effect on the Company or adversely affect any plan
by the Company or any of its Subsidiaries to engage in any acquisition of assets (other than in the
ordinary course of business) or capital stock or other securities of any other entity, or any
financing, acquisition, reorganization, merger, consolidation, tender offer or other significant
transaction; provided, that the right to postpone may not be exercised for more than 120 days in
any 12-month period.

     (c) Selection of Underwriters. If the Holders so elect, the offering of Registrable Shares
pursuant to a Demand Canadian Prospectus shall be in the form of an underwritten offering. If they
so elect, the Holders participating in such Demand Canadian Prospectus shall elect one or more
firms of investment bankers nationally recognized in Canada and reasonably satisfactory to the
Company to act as the book-running managing underwriter or underwriters in connection with such
offering and shall select any additional investment bankers and managers reasonably satisfactory to
the Company to be used in connection with the offering.

     (d) Canadian Shelf Prospectus Supplements and Amendments. The Company further agrees, if
applicable and necessary, to supplement or amend the Canadian Shelf Prospectus, as required by the
rules, regulations or instructions applicable to the prospectus form used by the Company for such
Canadian Shelf Prospectus or by the applicable securities laws or as reasonably requested (which
request shall result in the filing of a supplement or amendment) by any Holder of Registrable
Shares to which such Canadian Shelf Prospectus relates, and the Company agrees to furnish to the
Holders, their counsel and any managing underwriter copies of any such supplement or amendment
prior to its being used and/or filed with the Canadian Securities Commissions.

     (e) Canadian Piggyback Offering. In the event that, at any time, the Company proposes to file
a Canadian Prospectus for the sale of any Common Shares to be issued by the Company or sold by any
holder of Common Shares (the “Offered Shares”) with the Canadian Securities Commissions, the
Company will give prompt written notice (and in any event within three business days after its
receipt of notice of any exercise of demand registration rights by holders of the Company’s
securities other than the Registrable Shares and at least 20 days prior to the filing of any
Canadian Prospectus) to the Holders of its intention to effect such an offering (the “Canadian
Prospectus Notice”) and will include in such offering all Registrable Shares (the “Canadian
Piggyback Offering”) with respect to which the Company has received written requests for inclusion
therein within 10 days after the Company’s notice has been given, subject to Sections 7(b) hereof.
The Company will have the right to select the managing underwriters in any underwritten Canadian
Piggyback Offering in which the Company is selling Common Shares. If a Holder desires to include
such Holder’s Registrable Shares in a Canadian Piggyback Offering that is an underwritten offering,
such Holder shall, as a condition to including such Holder’s Registrable Shares, enter into an
underwriting agreement containing customary terms and conditions, including customary representations and indemnities (provided that such
indemnities shall not be given by any subsidiary of the Company where such subsidiary may not give
such indemnity without being in breach of applicable law or with minimum solvency or liquidity
regulation).

11

 

     (f) Supplemental Canadian Prospectus Notice. In the event that a Canadian Prospectus Notice
shall have been so given, each of the Holders, at such person’s election, may give to the Company a
written notice or notices (a “Supplemental Canadian Prospectus Notice”) (i) specifying the number
of Registrable Shares (“Supplemental Canadian Prospectus Shares”) proposed to be sold or otherwise
transferred by such Holder, (ii) describing the proposed manner of sale or other transfer thereof
and (iii) requesting the inclusion thereof in the Canadian Prospectus; provided, however, that such
Supplemental Canadian Prospectus Notice shall be so given by any such Holder not later than the
date specified in the Canadian Prospectus Notice.

     (g) Restrictions on Canadian Piggyback Offerings. From and after receipt or deemed receipt of
a Supplemental Canadian Prospectus Notice, the Company shall, subject to the prior sale or other
transfer of some or all of such Registrable Shares and subject to the provisions of this Section 7,
use its reasonable best efforts to cause the Supplemental Canadian Prospectus Shares specified in
such Supplemental Canadian Prospectus Notice to be included in the Canadian Prospectus and to
effect and to comply with all such regulatory qualifications and requirements as may be necessary
to permit the sale or other transfer of such Supplemental Canadian Prospectus Shares in the manner
described in such Supplemental Canadian Prospectus Notice; provided, however, that (i) if in the
case of an underwritten public offering of the Offered Shares the managing underwriter shall advise
the Company that the inclusion of some or all of such Supplemental Canadian Prospectus Shares
would, in such managing underwriter’s judgment, materially interfere with the proposed distribution
of the Offered Shares, then the Company may, upon written notice to the Holders holding
Supplemental Canadian Prospectus Shares, allocate or eliminate the Supplemental Canadian Prospectus
Shares otherwise to be included in the Canadian Prospectus (if and to the extent such allocation or
elimination is indicated by such managing underwriter as necessary to eliminate such interference)
pro rata among the holders of the Supplemental Canadian Prospectus Shares on the basis of the
number of Supplemental Canadian Prospectus Shares held by the holders thereof, provided that there
shall first have been eliminated from such Canadian Prospectus any Common Shares proposed to be
sold by (x) any other holder exercising “piggyback” registration rights or (y) any employee,
director or independent contractor of the Company, or corporations controlled by them, or any
holder of 10% or more of the outstanding shares of any class of securities of the Company, (ii) if
any firm of counsel representing the Company in connection with such Canadian Prospectus,
reasonably acceptable to Westaim, shall advise the Company and any of the Holders who have
exercised their rights pursuant to this Section 7 in writing that in its opinion the filing of the
Canadian Prospectus contemplated hereby is not necessary to permit the sale of Supplemental
Canadian Prospectus Shares in the intended method of disposition by such requesting Holder, then
the Company shall not be required to take any action with respect to such Canadian Prospectus or
other steps contemplated hereby with respect to such Supplemental Canadian Prospectus Shares and
(iii) the Company shall have the right to delay or abandon the filing of such Canadian Prospectus
at any time (subject to the restrictions set out this Section 7, if applicable) in the event that
the Board of Directors of the Company determines in good faith that such delay or abandonment is in
the best interest of the Company.

     Section 8. Canadian Prospectus Procedures.

     (a) If and whenever the Company is required by the provisions of Section 7 to use its
reasonable best efforts to file a Canadian Prospectus with the Canadian Securities Commissions with
respect to any securities requested to be included by any Holder, the Company will, as promptly as
practicable:

12

 

     (i) prepare and file with the Canadian Securities Commissions a Canadian Prospectus
with respect to such securities and use its reasonable best efforts to cause such Canadian
Prospectus to become effective;

     (ii) prepare and file with the applicable Canadian Securities Commissions such
amendments and supplements to such preliminary prospectus and prospectus as may be necessary
to comply with the provisions of applicable securities laws with respect to the distribution
of the Registrable Shares covered thereby and take such steps as are necessary to maintain
the effectiveness of such prospectus until the time at which the distribution is completed
but no longer than 120 days (unless the distribution is being made on a continuous or
delayed basis under the Canadian Shelf Procedures, in which case such 120 day period shall
be extended until all such Registrable Shares are sold);

     (iii) comply with the applicable securities laws with respect to the sale or other
disposition of all Common Shares included in such Canadian Prospectus whenever such Holders
shall desire to sell or otherwise dispose of the same within such period;

     (iv) furnish to such Holders, as applicable, such number of copies of the Canadian
Prospectus, including a preliminary prospectus and final prospectus, in conformity with the
requirements of the applicable securities laws, and such other documents as they may
reasonably request in order to facilitate the public sale or other disposition of such
Common Shares owned thereby;

     (v) notify the Holders, as applicable, promptly of any request by any Canadian
Securities Commission for the amendment or supplement of such Canadian Prospectus or for
additional information, including any information necessary to understand the tenor, scope
and content of such request, and notify such Holders promptly of the filing of each
amendment or supplement to such Canadian Prospectus;

     (vi) advise the Holders, promptly after it shall receive notice, of the issuance of any
stop order by any Canadian Securities Commission suspending the use of such Canadian
Prospectus or the initiation or threatening of any proceeding for that purpose and promptly
use its reasonable best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued;

     (vii) with respect to any Canadian Prospectus being prepared as a result of the
exercise of rights pursuant to Section 7 relating to an underwritten offering, upon the
request of the Holders, the Company shall cooperate with the Holders to obtain and furnish
at the closing provided for in the underwriting agreement (1) an opinion of counsel to the
Company, dated such date, addressed to the underwriters of the subject Common Shares, and
(2) a “comfort” letter from the independent chartered accountants of the Company, dated such
date, addressed to the underwriters, in each case, covering substantially the same matters
with respect to the issuer, such Canadian Prospectus and with respect to the events subsequent to the date of the
financial statements included in such Canadian Prospectus, as are customarily covered in
opinions of issuer’s counsel and in accountants’ letters delivered to the underwriters in
underwritten public offerings of securities in Canada; and

13

 

     (viii) notify such Holders, in writing, at any time when the Canadian Prospectus
relating to such Common Shares is required to be delivered under the applicable securities
laws within the appropriate period mentioned in clause 8(a)(ii), of the happening of any
event as a result of which the Canadian Prospectus includes an untrue statement of a
material fact or omits to state a material fact required to be stated therein or necessary
to make the statements therein not misleading in the light of the circumstances then
existing, and promptly prepare (and file with the Canadian Securities Commissions) and
furnish to the Holders whose Common Shares are offered in such Canadian Prospectus such
number of copies of a supplement to or an amendment of such Canadian Prospectus as they may
reasonably request so that, as thereafter delivered to the purchasers and prospective
purchasers of Common Shares such Canadian Prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the circumstances
then existing.

     (b) The Holders agree to furnish the Company such information regarding themselves and the
proposed distribution of Demand Canadian Prospectus Shares or Supplemental Canadian Prospectus
Shares, as the case may be, by such Holders as the Company may from time to time reasonably request
in writing in order to prepare the Canadian Prospectus or any supplement or amendment thereto
pursuant to the applicable securities laws.

     (c) The Holders agree that, upon receipt of a written notice from the Company of the happening
of any event of the kind described in clause (viii) of subsection 8(a) above, they will forthwith
discontinue their disposition of Demand Canadian Prospectus Shares or Supplemental Canadian
Prospectus Shares, as the case may be, pursuant to the Canadian Prospectus relating to such Demand
Canadian Prospectus Shares or Supplemental Canadian Prospectus Shares, as the case may be, until
their receipt of the copies of the supplemented or amended Canadian Prospectus contemplated by
clause (viii) of subsection 8(a) above and, if so requested by the Company in writing, will deliver
to the Company (at the Company’s expense) all copies then in their possession, other than permanent
file copies, of the Canadian Prospectus relating to such Demand Canadian Prospectus Shares or
Supplemental Canadian Prospectus Shares, as the case may be.

     (d) The Company shall pay all expenses (the “Canadian Prospectus Expenses”) necessary to file
and clear the Canadian Prospectus under the applicable securities laws, amendments or supplements
filed pursuant to this Section 8 (other than any underwriters’ discounts and commissions and any
brokerage commissions payable with respect to Common Shares sold by any Holder and legal fees and
expenses of counsel to the Holders), including, without limitation, printing expenses, fees of the
Canadian Securities Commissions, and accounting and legal fees and expenses of counsel to the
Company.

     (e) In the event of a Canadian Prospectus Request pursuant to subsection (a) of Section 7, the
Holders shall have, subject to the reasonable prior approval of the Company (including based on
recognized standing), the right to select the managing underwriter(s) to administer the offering.
In the event of an underwritten public offering as aforesaid, the Company agrees reasonably to
cooperate (and to cause its officers reasonably to cooperate) with the managing underwriter(s) in a
manner customary for issuers of securities in an underwritten secondary public offering. If the
Company at any time proposes to file a Canadian Prospectus with respect to any of its securities
under the applicable securities laws for sale for its own account (otherwise than pursuant to a
Canadian Prospectus requested

14

 

pursuant to subsection (a) of Section 7) and such securities are to
be distributed by or through one or more underwriter(s), the Company will have the right to select
the managing underwriter(s) to administer the offering.

     Section 9. Indemnification.

     (a) The Company agrees to indemnify, to the fullest extent permitted by law, each seller of
Registrable Shares, its officers and directors and each Person who controls such seller (within the
meaning of the applicable securities laws or the Securities Act or the Exchange Act) from and
against all losses, claims, damages, liabilities and expenses (including, but not limited to,
reasonable attorneys’ fees except as limited by Section 9(c)) arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in any registration statement,
preliminary prospectus or prospectus, or any amendment thereof or supplement thereto, or any
omission or alleged omission of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading,
or any violation by the Company of any applicable Canadian or U.S. federal, state or provincial
securities laws, except insofar as the same are caused by or contained in any information furnished
in writing to the Company by such seller expressly for use therein or by such seller’s failure to
deliver a copy of the prospectus or any amendments or supplements thereto after the Company has
furnished such seller with a sufficient number of copies of the same. In connection with an
underwritten offering, the Company will indemnify the underwriters, their officers and directors
and each Person who controls such underwriters (within the meaning of the applicable securities
laws or the Securities Act or the Exchange Act) to the same extent as provided above with respect
to the indemnification of the sellers of Registrable Shares. The reimbursements required by this
Section 9(a) will be made by periodic payments during the course of the investigation or defense,
promptly after bills are received or expenses incurred.

     (b) In connection with any registration statement or prospectus in which a seller of
Registrable Shares is participating, each seller will furnish to the Company in writing such
information as the Company reasonably requests for use in connection with any such registration
statement or prospectus and, to the fullest extent permitted by law, will indemnify the Company,
its directors and officers and each Person who controls the Company (within the meaning of the
applicable securities laws or the Securities Act or the Exchange Act) from and against any losses,
claims, damages, liabilities and expenses (including, but not limited to, reasonable attorneys’
fees except as limited by Section 9(c)) resulting from any untrue statement or alleged untrue
statement of a material fact contained in the registration statement, preliminary prospectus or
prospectus, or any amendment thereof or supplement thereto, or any omission or alleged omission of
a material fact required to be stated therein or necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, but only to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission is contained in any
information so furnished in writing by such seller; provided that the obligation to indemnify will
be several, not joint and several, among such sellers of Registrable Shares, and the liability of
each such seller of Registrable Shares will be in proportion to the number of Registrable Shares
sold by each such seller divided by the total number of Registrable Shares included in such registration statement or prospectus, and provided further that such
liability will be limited to, in any event, the net amount received by such seller from the sale of
Registrable Shares pursuant to such registration statement or prospectus.

15

 

     (c) If any action is brought in respect of which indemnity may be sought pursuant to this
Agreement, the Person seeking indemnification (the “indemnified party”) shall promptly notify the
Person against whom indemnification is sought (the “indemnifying party”) in writing of the
institution of such action (but the failure so to notify will not relieve the indemnifying party
from any liability that it may have to the indemnified party under this Section 9 to the extent the
indemnifying party is not materially prejudiced as a result thereof, and in no event shall it
relieve the indemnifying party from any liability it may have otherwise than pursuant to this
Section 9), and the indemnifying party shall assume the defense of such action, including the
employment of counsel reasonably satisfactory to the indemnified party or parties and payment of
expenses. The indemnified party or parties shall have the right to employ its or their own counsel
in any such case, but the fees and expenses of such counsel shall be at the expense of indemnified
party or parties unless (i) the employment of such counsel shall have been authorized in writing by
the indemnifying party, or (ii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party or parties within a reasonable time or (iii) such indemnified
party or parties shall have reasonably concluded (based on the advice of counsel) that there may be
defenses available to it or them which are different from or additional to those available to the
indemnifying party and may present a conflict for counsel representing the indemnified party or
parties and the indemnifying party (in which case the indemnifying party shall not have the right
to direct the defense of such action on behalf of the indemnified party or parties), in any of
which events such fees and expenses shall be borne by the indemnifying party and paid as incurred
(it being understood, however, that the indemnifying party shall not be liable for the fees and
expenses of more than one separate counsel (in addition to local counsel) for the indemnified
parties in any one action or series of related actions in the same jurisdiction representing the
indemnified parties who are parties to such action). Anything in this paragraph to the contrary
notwithstanding, the indemnifying party shall not be liable for any settlement effected without its
written consent unless the indemnifying party shall have failed to assume the defense of such
action or reimburse the indemnified party for fees and expenses of counsel as contemplated by this
Section 9(c) within 30 days after receipt by the indemnifying party of the request therefor. An
indemnifying party will not, without the prior written consent of the indemnified parties, settle
or compromise or consent to the entry of any judgment in any action in respect of which
indemnification may be sought hereunder unless such settlement, compromise or consent includes an
unconditional release of the indemnified parties from all liability arising out of the action.

     (d) If the indemnification provided for in this Section is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any losses, claims, damages
or liabilities referred to herein, the indemnifying party, in lieu of indemnifying such indemnified
party thereunder, shall to the fullest extent permitted by applicable law contribute to the amount
paid or payable by such indemnified party as a result of such loss, claim, damage or liability in
such proportion as is appropriate to reflect the relative fault of the indemnifying party on the
one hand and of the indemnified party on the other in connection with the matters that resulted in
such loss, claim, damage or liability, as well as any other relevant equitable considerations. The
relative fault of the indemnifying party and of the indemnified party shall be determined by a
court of law by reference to, among other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a material fact related to information
supplied by the indemnifying party or by the indemnified party and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement of omission; provided, that in no event shall the
amounts payable in indemnity by a Holder under Section 7 exceed the net proceeds received by such
Holder in the registered offering out of which such indemnification arises. No party guilty of
fraudulent misrepresentation under Section 11(f) of the Securities Act shall be entitled to
contribution under this Section 9(d).

16

 

     (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten pubic offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.

     (f) The indemnification provided for under this Agreement will remain in full force and effect
regardless of any investigation made by or on behalf of the indemnified party or any officer,
director or controlling Person of such indemnified party and will survive the transfer of
securities.

     Section 10. Reporting. At any time and from time to time after the Company has a
class of securities registered under Section 12 of the Exchange Act, the Company will (i) make
available to the public and the Holders such information as will enable the Holders to make sales
pursuant to Rule 144 promulgated under the Securities Act, (ii) file with the Commission in a
timely manner all reports and other documents required of the Company under the Exchange Act, and
(iii) use its reasonable best efforts to maintain its status as a “reporting issuer” (or the
equivalent) not in default of applicable securities laws in each jurisdiction in which the Company
becomes a reporting issuer (or the equivalent) as a result of the IPO.

     Section 11. Underwritten Registrations. Each Holder shall agrees that, in connection
with any underwritten offering, such Holder will (a) sell its Registrable Shares on the basis
provided in any underwriting arrangements governing such underwritten offering and (b) complete and
execute all questionnaires, powers of attorney, indemnities, underwriting agreements and other
documents required under the terms of such underwriting arrangements.

     Section 12. Adjustments Affecting Registrable Shares. The Company will not knowingly
take any action, or knowingly permit any change to occur, with respect to its securities which
would materially adversely affect the ability of the Holders to include Registrable Shares in a
registration or offering undertaken pursuant to this Agreement or which would materially adversely
affect the marketability of such Registrable Shares in any such registration or offering.

     Section 13. Remedies. Any Person having rights under any provision of this Agreement
will be entitled to enforce such rights specifically, to recover damages caused by reason of any
breach of any provision of this Agreement and to exercise all other rights granted by law.

     Section 14. Amendments and Waivers. Except as otherwise expressly provided herein,
the provisions of this Agreement may be amended or waived at any time only by the written agreement
of the Company and Westaim. Any waiver, permit, consent or approval of any kind or character on
the part of any Holders of any provision or condition of this Agreement must be made in writing and
shall be effective only to the extent specifically set forth in writing.

     Section 15. Successors and Assigns. The rights to cause the Company to register
Registrable Shares granted pursuant to this Agreement may be transferred or assigned by any Holder
to a transferee or assignee that acquires from such Holder and any other Holder a number of
Registrable Shares equal

17

 

to at least 5% of the Common Shares then outstanding, provided, however,
that the transferee or assignee of such rights assumes the obligations of such transferor or
assignor, as the case may be, under this Agreement and that such transferee or assignee executes
and delivers a copy of this Agreement to the Company.

     Section 16. Termination. Except as otherwise provided in this Agreement and except
for the provisions of Section 9, the rights of a Holder under this Agreement shall remain in effect
with respect to the Registrable Shares of such Holder until such Registrable Shares (i) have been
sold under an effective registration statement; (ii) have been sold to the public pursuant to Rule
144 under the Securities Act; (iii) have been sold pursuant to an exemption from the prospectus
delivery requirements under the applicable securities laws; or (iv) may be resold, without regard
to the volume limitations, under Rule 144 under the Securities Act.

     Section 17. Entire Agreement. This Agreement constitutes the entire agreement of the
parties concerning the matters referred to herein, and supersedes all prior agreements and
understandings.

     Section 18. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law, but if any
provision of this Agreement is held to be prohibited by or invalid under applicable law, such
provision will be ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.

     Section 19. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience of reference only and do not constitute a part of and shall not be
utilized in interpreting this Agreement.

     Section 20. Notices. Any notices required or permitted to be sent hereunder shall be
delivered personally, or mailed, certified mail, return receipt requested, or delivered by
overnight courier service to the following addresses, or such other addresses as shall be given by
notice delivered hereunder, and shall be deemed to have been given upon receipt, if delivered
personally, or mailed, or one business day after delivery to the courier, if delivered by overnight
courier service:

     If to the Company, to:

NUCRYST Pharmaceuticals Corp.

50 Audubon Road, Suite B

Wakefield, MA 01880 U.S.A.

Attention: President

     If to a Westaim Entity:

The Westaim Corporation

Sun Life Plaza 1, West Tower, 10th Floor

144 - 4 Ave SW

Calgary, AB T2P 3N4 Canada

Attention: Senior Vice President and Chief Financial Officer

18

 

     If to any other Holder:

To the address specified in writing by such Holder.

     Section 21. Governing Law; Dispute Resolution. (a) The validity, meaning and effect
of this Agreement shall be determined in accordance with and governed by the laws of the Province
of Alberta, Canada, and the federal laws of Canada applicable in Alberta, and the parties agree
that the courts of the Province of Alberta, Canada, shall have jurisdiction for purposes of
enforcement of their agreement to submit Disputes to arbitration and of any award of the
Arbitrator. The Parties irrevocably submit to the non-exclusive jurisdiction of the courts of the
Province of Alberta, Canada, but any judgment, order or ruling of any competent court or other
authority may be enforced in any other jurisdiction.

     (b) Mandatory Arbitration. The parties hereto shall promptly submit any dispute,
claim, or controversy arising out of or relating to this Agreement and/or the transactions
contemplated hereunder, including effect, validity, breach, interpretation, performance, or
enforcement (collectively, a “Dispute”) to binding arbitration before a panel of three arbitrators.
Any arbitration will be conducted in the City of Calgary, Alberta unless the parties otherwise
mutually agree. In any arbitration, the Company shall name one arbitrator and Westaim (or, if
Westaim is not a party to the Dispute, the other party or parties to the Dispute) shall name one
arbitrator, and the two arbitrators so chosen shall select a third arbitrator. The majority
decision of the three arbitrators shall be binding upon the parties to the Dispute. If either party
fails to appoint an arbitrator, or if the two arbitrators appointed by the parties fail to agree
upon or to appoint a third arbitrator, in either case within five days from the receipt of written
notice from the other party to do so, then the matter shall be determined pursuant to the
provisions of the Arbitration Act (Alberta), as amended from time to time. Any decision or award of
any arbitrator shall be enforceable in any court of competent jurisdiction. Other than as set out
herein, the arbitration shall be governed by the provisions of the Arbitration Act (Alberta), as
amended from time to time. The parties agree that, except as otherwise provided herein respecting
temporary or preliminary injunctive relief, binding arbitration shall be the sole means of
resolving any Dispute.

     (c) Costs. The costs of the arbitration proceeding and any proceeding in court to confirm or
to vacate any arbitration award or to obtain temporary or preliminary injunctive relief as provided
in Section 19(d) hereof, as applicable (including, without limitation, fees, disbursements and
costs on a solicitor and own client full indemnity basis), shall be borne by the unsuccessful party
and shall be awarded as part of the Arbitrator’s decision, unless the Arbitrator shall otherwise
allocate such costs in such decision.

     (d) Injunctive Relief. Nothing herein prevents the parties hereto from seeking or obtaining
temporary or preliminary injunctive relief in a court for any breach or threatened breach of any
provision hereof pending the hearing before and determination of the Arbitrator. The parties
hereby agree that they shall continue to perform any and all obligations under this Agreement
pending the hearing before and determination of the Arbitrator, it being agreed and understood that
the failure to so perform will cause irreparable harm to each party and its affiliates and that the putative
breaching party has assumed all of the commercial risks associated with such breach or threatened
breach of any provision hereof by such party.

19

 

     (e) Discovery. The parties shall be entitled to reasonable discovery, including a production
of non-privileged documents and answers to a reasonable number of interrogatories. Depositions may
be ordered by the arbitrator upon a showing of need.

     Section 22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be deemed an original, and such
counterparts together shall constitute one instrument. Each party shall receive a duplicate
original of the counterpart copy or copies executed by it and the Company.

[Intentionally left blank]

20

 

     IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first set
forth above.

	 	 	 	 	 
	 	NUCRYST PHARMACEUTICALS CORP.

 	 
	 	By:  	 	 
	 	Name:  	Scott H. Gillis 	 
	 	Title:  	President and Chief Executive Officer 	 
	 
	 	THE WESTAIM CORPORATION

 	 
	 	By:  	 	 
	 	Name:  	G.A. Fitch 	 
	 	Title:  	Senior Vice President and Chief Financial
Officer 	 
	 

21

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