Document:

ex_131702.htm

 

Exhibit 4.1

 

 

 

 

 

 

CLS HOLDINGS USA, INC.

 

 

 

and

 

 

 

ODYSSEY TRUST COMPANY

 

as Trustee

 

 

 

	
			 

			INDENTURE

			 

			Dated as of December 12, 2018

			 

			providing for the issue of 8.0% Unsecured Convertible Debentures

			 

			

 

 

 

 

 

 

TABLE OF CONTENTS

 

	
			ARTICLE 1 INTERPRETATION

				
			5

			
	
			Section 1.1

				
			Definitions

				
			5

			
	
			Section 1.2

				
			Interpretation

				
			12

			
	
			Section 1.3

				
			Accounting Terms

				
			12

			
	
			Section 1.4

				
			Headings and Table of Contents

				
			13

			
	
			Section 1.5

				
			Section and Schedule References

				
			13

			
	
			Section 1.6

				
			Governing Law

				
			13

			
	
			Section 1.7

				
			Currency

				
			13

			
	
			Section 1.8

				
			Non-Business Day

				
			13

			
	
			Section 1.9

				
			Time

				
			13

			
	
			Section 1.10

				
			Independence of Covenants

				
			13

			
	
			Section 1.11

				
			Form of Documents Delivered to Trustee

				
			13

			
	
			Section 1.12

				
			Acts of Holders

				
			14

			
	
			Section 1.13

				
			Interest Payments and Calculations

				
			14

			
	
			Section 1.14

				
			Successors and Assigns

				
			15

			
	
			Section 1.15

				
			Severability Clause

				
			15

			
	
			Section 1.16

				
			Benefits of Indenture

				
			15

			
	
			Section 1.17

				
			Unclaimed Debentures

				
			15

			
	
			Section 1.18

				
			Schedules

				
			16

			
	
			Section 1.19

				
			Benefits of Indenture through Trustee

				
			16

			
	
			Section 1.20

				
			English Language

				
			16

			
	 	 	 
	
			ARTICLE 2 THE DEBENTURES

				
			16

			
	
			Section 2.1

				
			Limit of Issue and Designation of Debentures

				
			16

			
	
			Section 2.2

				
			Form and Terms of Debentures

				
			16

			
	
			Section 2.3

				
			Interest

				
			17

			
	
			Section 2.4

				
			Prescription

				
			18

			
	
			Section 2.5

				
			Issue of Debentures

				
			18

			
	
			Section 2.6

				
			Execution of Certificated Debentures

				
			18

			
	
			Section 2.7

				
			Authentication

				
			19

			
	
			Section 2.8

				
			Uncertificated Debentures

				
			19

			
	
			Section 2.9

				
			Persons Entitled to Payment

				
			20

			
	
			Section 2.10

				
			Payment of Principal and Interest on Certificated Debentures

				
			21

			
	
			Section 2.11

				
			Rank

				
			22

			
	
			Section 2.12

				
			Register and Transfer

				
			22

			
	
			Section 2.13

				
			Certificated Debentures; Transfers and Exchanges

				
			23

			
	
			Section 2.14

				
			Uncertificated Debentures; Transfers and Exchanges

				
			23

			
	
			Section 2.15

				
			Transferee Entitled to Registration

				
			24

			
	
			Section 2.16

				
			No Notice of Trusts

				
			24

			
	
			Section 2.17

				
			Registers Open for Inspection

				
			24

			
	
			Section 2.18

				
			Exchanges of Debentures

				
			24

			
	
			Section 2.19

				
			Closing of Registers

				
			25

			
	
			Section 2.20

				
			Ownership of Debentures

				
			25

			
	
			Section 2.21

				
			Taxes

				
			26

			
	
			Section 2.22

				
			Cancellation of Debentures

				
			26

			
	
			Section 2.23

				
			Mutilated, Lost, Stolen or Destroyed Debentures

				
			26

			
	
			Section 2.24

				
			Access to Lists of Holders

				
			27

			
	
			Section 2.25

				
			Canadian Legend on the Debentures and Common Shares and Warrants

				
			27

			
	
			Section 2.26

				
			US Legend on Debentures

				
			28

			

 

 

 

 

	
			ARTICLE 3 REPURCHASE AND CANCELLATION OF DEBENTURES

				
			29

			
	
			Section 3.1

				
			Repurchase of Debentures at Option of the Holder upon a Change of Control

				
			29

			
	
			Section 3.2

				
			Optional Redemption of Outstanding Debentures after Change of Control Repurchase Date

				
			32

			
	
			Section 3.3

				
			Purchase of Debentures

				
			32

			
	
			Section 3.4

				
			Debentures Purchased in Part

				
			33

			
	
			Section 3.5

				
			Compliance with Applicable Securities Law upon Purchase of Debentures

				
			33

			
	
			Section 3.6

				
			Repayment to the Corporation

				
			33

			
	
			Section 3.7

				
			Cancellation of Purchased Debentures

				
			33

			
	 	 	 
	
			ARTICLE 4 CONVERSION OF DEBENTURES

				
			33

			
	
			Section 4.1

				
			Right to Convert

				
			33

			
	
			Section 4.2

				
			Notice of Expiry of Conversion Privilege

				
			34

			
	
			Section 4.3

				
			Revival of Right to Convert

				
			34

			
	
			Section 4.4

				
			Manner of Exercise of Right to Convert

				
			35

			
	
			Section 4.5

				
			Mandatory Conversion

				
			36

			
	
			Section 4.6

				
			Adjustment of Conversion Price

				
			36

			
	
			Section 4.7

				
			No Requirement to Issue Fractional Common Shares or Warrants

				
			42

			
	
			Section 4.8

				
			Corporation to Reserve Common Shares and Warrants

				
			42

			
	
			Section 4.9

				
			Cancellation of Converted Debentures

				
			42

			
	
			Section 4.10

				
			Certificate as to Adjustment

				
			42

			
	
			Section 4.11

				
			Notice of Special Matters

				
			42

			
	
			Section 4.12

				
			Protection of Trustee

				
			43

			
	
			Section 4.13

				
			U.S. Legends on Common Shares

				
			43

			
	
			Section 4.14

				
			Canadian Private Placement Legend on Common Shares and Warrants

				
			43

			
	 	 	 
	
			ARTICLE 5 COVENANTS

				
			44

			
	
			Section 5.1

				
			Payment of Principal, Premium and Interest

				
			44

			
	
			Section 5.2

				
			Existence; Books of Account

				
			44

			
	
			Section 5.3

				
			Change of Name

				
			44

			
	
			Section 5.4

				
			Notice of Default

				
			44

			
	
			Section 5.5

				
			Compliance Certificate

				
			44

			
	
			Section 5.6

				
			Securities Laws

				
			45

			
	
			Section 5.7

				
			Compliance with Applicable Laws

				
			45

			
	
			Section 5.8

				
			Conduct of Business

				
			45

			
	
			Section 5.9

				
			No Distribution on Shares if Event of Default

				
			45

			
	
			Section 5.10

				
			Payment of Trustee’s Remuneration

				
			45

			
	
			Section 5.11

				
			Further Instruments and Acts

				
			46

			
	
			Section 5.12

				
			Performance of Covenant by Trustee

				
			46

			
	
			Section 5.13

				
			Permits

				
			46

			
	
			Section 5.14

				
			Compliance with Material Agreements

				
			46

			
	
			Section 5.15

				
			Taxes

				
			46

			
	
			Section 5.16

				
			Information

				
			46

			
	 	 	 
	
			ARTICLE 6 EVENTS OF DEFAULT AND REMEDIES

				
			47

			
	
			Section 6.1

				
			Events of Default and Enforcement

				
			47

			
	
			Section 6.2

				
			Notice of Event of Default

				
			48

			
	
			Section 6.3

				
			Waiver of Default

				
			48

			
	
			Section 6.4

				
			Waiver of Acceleration

				
			48

			
	
			Section 6.5

				
			Other Remedies

				
			49

			
	
			Section 6.6

				
			Application of Money Collected

				
			49

			
	
			Section 6.7

				
			Control by Holders

				
			50

			

 

 

 

 

	
			Section 6.8

				
			Limitation on Suits

				
			50

			
	
			Section 6.9

				
			Collection Suit by Trustee

				
			50

			
	
			Section 6.10

				
			Trustee May File Proofs of Claim

				
			50

			
	
			Section 6.11

				
			Undertaking for Costs

				
			50

			
	
			Section 6.12

				
			Delay or Omission Not Waiver

				
			51

			
	
			Section 6.13

				
			Remedies Cumulative

				
			51

			
	
			Section 6.14

				
			Judgment Against the Corporation

				
			51

			
	
			Section 6.15

				
			Rights of Holders to Receive Payment

				
			51

			
	 	 	 
	
			ARTICLE 7 SATISFACTION AND DISCHARGE

				
			51

			
	
			Section 7.1

				
			Non-Presentation of Debentures

				
			51

			
	
			Section 7.2

				
			Discharge

				
			52

			
	 	 	 
	
			ARTICLE 8 CONCERNING THE TRUSTEE

				
			52

			
	
			Section 8.1

				
			Duties of Trustee

				
			52

			
	
			Section 8.2

				
			Employ Agents

				
			52

			
	
			Section 8.3

				
			Reliance on Evidence of Compliance

				
			52

			
	
			Section 8.4

				
			Advice of Experts

				
			53

			
	
			Section 8.5

				
			Trustee May Deal in Debentures

				
			53

			
	
			Section 8.6

				
			Conditions Precedent to Trustee’s Obligation to Act

				
			53

			
	
			Section 8.7

				
			Trustee Not Required to Give Security

				
			53

			
	
			Section 8.8

				
			Resignation or Removal of Trustee; Conflict of Interest

				
			54

			
	
			Section 8.9

				
			Authority to Carry on Business; Resignation

				
			55

			
	
			Section 8.10

				
			Protection of Trustee

				
			55

			
	
			Section 8.11

				
			Additional Representations and Warranties of Trustee

				
			56

			
	
			Section 8.12

				
			Third Party Interests

				
			56

			
	
			Section 8.13

				
			Trustee Not Bound to Act

				
			56

			
	
			Section 8.14

				
			Compliance with Privacy Laws

				
			57

			
	 	 	 
	
			ARTICLE 9 MEETINGS OF DEBENTUREHOLDERS

				
			57

			
	
			Section 9.1

				
			Purposes for Which Meetings May be Called

				
			57

			
	
			Section 9.2

				
			Call, Notice and Place of Meetings

				
			57

			
	
			Section 9.3

				
			Proxies

				
			58

			
	
			Section 9.4

				
			Persons Entitled to Vote at Meetings

				
			58

			
	
			Section 9.5

				
			Quorum; Action

				
			58

			
	
			Section 9.6

				
			Determination of Voting Rights Chairman; Conduct and Adjournment of Meetings

				
			59

			
	
			Section 9.7

				
			Counting Votes and Recording Action of Meetings

				
			59

			
	
			Section 9.8

				
			Instruments in Writing

				
			60

			
	
			Section 9.9

				
			Holdings by the Corporation Disregarded

				
			60

			
	
			Section 9.10

				
			Persons Entitled to Attend Meetings

				
			60

			
	
			Section 9.11

				
			Meaning of “Extraordinary Resolution”

				
			60

			
	
			Section 9.12

				
			Powers Cumulative

				
			61

			
	 	 	 
	
			ARTICLE 10 AMALGAMATION, CONSOLIDATION, CONVEYANCE, TRANSFER OR LEASE

				
			61

			
	
			Section 10.1

				
			Amalgamation and Consolidations of Corporation and Conveyances Permitted Subject to Certain Conditions

				
			61

			
	
			Section 10.2

				
			Rights and Duties of Successor Entity

				
			62

			
	 	 	 
	
			ARTICLE 11 NOTICES

				
			62

			
	
			Section 11.1

				
			Notice to Corporation

				
			62

			
	
			Section 11.2

				
			Notice to Holders

				
			62

			

 

 

 

 

	
			Section 11.3

				
			Notice to Trustee

				
			63

			
	
			Section 11.4

				
			Mail Service Interruption

				
			63

			
	 	 	 
	
			ARTICLE 12 AMENDMENTS, SUPPLEMENTS AND WAIVERS

				
			64

			
	
			Section 12.1

				
			Without Consent of Holders

				
			64

			
	
			Section 12.2

				
			With Consent of Holders

				
			64

			
	
			Section 12.3

				
			Additional Powers Exercisable by Extraordinary Resolution

				
			65

			
	
			Section 12.4

				
			Execution of Supplemental Indentures

				
			66

			
	
			Section 12.5

				
			Effect of Supplemental Indentures

				
			66

			
	
			Section 12.6

				
			Reference in Debentures to Supplemental Indentures

				
			66

			
	 	 	 
	
			ARTICLE 13 MISCELLANEOUS PROVISIONS

				
			67

			
	
			Section 13.1

				
			Acceptance of Trusts

				
			67

			
	
			Section 13.2

				
			No Debenture Interest Created

				
			67

			
	
			Section 13.3

				
			Protection of Trustee

				
			67

			
	
			Section 13.4

				
			Counterparts and Formal Date

				
			67

			
	 	 	 
	
			SCHEDULE 2.2 FORM OF DEBENTURE

				
			B

			
	
			SCHEDULE 2.26 FORM OF REGULATION S RULE 904 TRANSFER CERTIFICATE

				
			C

			

 

 

 

-iv-

 

 

THIS INDENTURE dated as of December 12, 2018.

 

	
			BY AND AMONG:

				
			CLS HOLDINGS USA, INC., a corporation governed by the laws of the State of Nevada;

			 

			(the “Corporation”)

			 

			
	
			AND:

				
			ODYSSEY TRUST COMPANY, a trust company existing under the laws of the Province of Alberta, in its capacity as trustee;

			 

			(the “Trustee”)

			

 

RECITALS

 

	 	
			A.

				
			The Corporation wishes to provide for the creation and issue of unsecured convertible debentures with the designation of “8.0% Unsecured Convertible Debentures” (the “Debentures”), all upon the terms and conditions set forth in this Indenture (as hereinafter defined).

			

 

	 	
			B.

				
			All necessary acts and proceedings have been done and taken and all necessary resolutions have been passed to authorize the execution and delivery of this Indenture by the Corporation, to make the same effective and binding upon the Corporation, and to make the Debentures, when certified by the Trustee and issued as provided in this Indenture, valid and legally binding obligations of the Corporation with the benefit and subject to the terms of this Indenture.

			

 

	 	
			C.

				
			The foregoing recitals are made as representations and statements of fact by the Corporation and not by the Trustee.

			

 

THEREFORE, it is hereby covenanted, agreed and declared as follows:

 

Article 1

INTERPRETATION

 

	 	
			Section 1.1

				
			Definitions

			

 

In this Indenture and in the Debentures, unless there is something in the subject matter or context inconsistent herewith, the expressions below shall have the following meanings:

 

“Act” or “Act of Holder(s)”, when used with respect to any Holder(s), shall have the meaning specified in Section 1.12(1);

 

“Affiliate” has the meaning ascribed thereto in the Securities Act (Ontario);

 

“Applicable Law” shall mean, at any time, with respect to any Person, property, transaction, event or other matter, as applicable, all laws, rules, statutes, regulations, treaties, orders, judgments and decrees, and all official requests, directives, rules, guidelines, orders, policies, practices and other requirements of any Governmental Authority relating or applicable at such time to such Person, property, transaction, event or other matter, and shall also include any interpretation thereof by any Person having jurisdiction over it or charged with its administration or interpretation;

 

“Applicable Securities Law” shall mean any Applicable Law in any jurisdiction in Canada or the United States regulating, or regulating disclosure with respect to, any sale or distribution of securities in, or to residents of, such jurisdiction;

 

-5-

 

 

“Applicants” has the meaning ascribed thereto in Section 2.24;

 

“Authenticated” means (a) with respect to the issuance of a Certificated Debenture, one which has been duly signed by the Corporation and authenticated by manual signature of an authorized officer of the Trustee, (b) with respect to the issuance of an Uncertificated Debenture, one in respect of which the Trustee has completed all Internal Procedures such that the particulars of such Uncertificated Debenture are entered in the records of the Trustee, and “Authenticate”, “Authenticating” and “Authentication” have corresponding meanings;

 

“Beneficial Holder” means a Person who is the beneficial owner of a Debenture, as shown on a list maintained by a Participant or the Depository;

 

“Board of Directors” shall mean either the Board of Directors of the Corporation, or any committee of that board duly authorized to make a decision on the matter in question;

 

“Board Resolution” shall mean a copy of a resolution certified by a Responsible Officer of the Corporation to have been duly adopted by the Board of Directors and to be in full force and effect and unamended on the date of such certification;

 

“Business Day” shall mean any day of the week, other than Saturday, Sunday or a statutory holiday in the Provinces of Alberta or Ontario, on which banking institutions are open for business in the City of Calgary, Alberta and Toronto, Ontario;

 

“CDS” shall mean CDS Clearing and Depository Services Inc., together with its successors from time to time;

 

“Certificated Debentures” means Debentures in the form of individual certificates in definitive fully registered form and substantially in the form of Schedule 2.2;

 

“Change of Control” means (i) any event as a result of or following which any person, or group of persons “acting jointly or in concert” within the meaning of applicable Canadian securities laws, beneficially owns or exercises control or direction over an aggregate of more than 50% of the then outstanding Common Shares; or (ii) the sale or other transfer of all or substantially all of the consolidated assets of the Corporation. A Change of Control will not include a sale, merger, reorganization or other similar transaction if the previous holders of the Common Shares hold at least 50% of the voting shares of such merged, reorganized or other continuing entity;

 

“Change of Control Notice” has the meaning ascribed thereto in Section 3.1(2);

 

“Change of Control Offer” has the meaning ascribed thereto in Section 3.1(1);

 

“Change of Control Repurchase Date” means the date that is not less than 30 days nor more than 45 days after the date of the Change of Control Notice;

 

“Change of Control Repurchase Notice” has the meaning ascribed thereto in Section 3.1(3);

 

“Change of Control Repurchase Price” has the meaning ascribed thereto in Section 3.1(1);

 

“Common Shares” means the common shares in the share capital of the Corporation; provided that in the event of any reclassification, subdivision, consolidation, conversion, exchange or other modification thereto shall thereafter mean the shares or other securities or property resulting therefrom;

 

“Conversion Price” means $0.80 per Unit, subject to adjustment in accordance with the provisions of Section 4.6;

 

-6-

 

 

“Corporate Trust Office” shall mean the principal office or offices of the Trustee in the City of Calgary, Province of Alberta, at which at any particular time its corporate trust business shall be administered;

 

“Corporation” shall mean CLS Holdings USA, Inc. until a successor corporation shall have become such pursuant to the applicable provisions of this Indenture, and thereafter, “Corporation” shall mean such successor corporation;

 

“Corporation Request” or “Corporation Order” shall mean a written request or order signed in the name of the Corporation by any Responsible Officer of the Corporation and delivered to the Trustee;

 

“Counsel” shall mean, in the case of Counsel to the Trustee, any barrister, solicitor or other lawyer or firm of barristers, solicitors or other lawyers retained or employed by the Trustee and, in the case of Counsel to the Corporation, any barrister, solicitor or other lawyer or firm of barristers, solicitors or other lawyers retained or employed by the Corporation and acceptable to the Trustee;

 

“CSE” means the Canadian Securities Exchange;

 

“Current Market Price” for any date means the VWAP on the CSE or OTCQB, as applicable, for the 10 consecutive trading days ending on the fifth trading day preceding the date of the applicable event (or, if the Common Shares are not listed thereon, on such Recognized Stock Exchange on which the Common Shares are listed as may be selected by the Directors and approved by the Trustee or, if the Common Shares are not listed on any Recognized Stock Exchange, then as determined by the Board of Directors, acting reasonably);

 

“Date of Conversion” has the meaning ascribed thereto in Section 4.4(2);

 

“Debentureholder(s)” or “Holder(s)” means the registered holder(s) of Debentures for the time being;

 

“Debentures” has the meaning set out in the recitals of this Indenture;

 

“Default” means any event or condition that constitutes an Event of Default or that would constitute an Event of Default with the giving of notice, passage of time, or both;

 

“Depository” or “CDS” means CDS Clearing and Depository Services Inc. and its successors in interest;

 

“Directors” means the directors of the Corporation on the date hereof or such directors as may, from time to time, be appointed or elected directors of the Corporation pursuant to the Corporation’s articles and by-laws, and applicable laws, and “Director” means any one of them, and reference to action by the Directors means action by the Directors as the Board of Directors;

 

“Equity Interests” means Stock and all warrants, options or other rights to acquire Stock (but excluding any debt security that is convertible into, or exchangeable for, Stock);

 

“Event of Default” shall mean any of the events identified in Section 6.1 as being an Event of Default;

 

“Exchange Offer” has the meaning ascribed thereto in Section 3.1(1);

 

“Exchanged Debentures” has the meaning ascribed thereto in Section 3.1(1);

 

“Extraordinary Resolution” has the meaning ascribed thereto in Section 9.8 and Section 9.11;

 

“Fair Market Value” means the value that would be paid by an informed and willing buyer to an arm’s length informed and willing seller in a transaction not involving distress or necessity of either party, determined by the Board of Directors of the Corporation acting reasonably and in good faith (unless otherwise provided in the Indenture);

 

-7-

 

 

“Fiscal Year” means any of the annual accounting periods of the Corporation ending on December 31 of each year;

 

“Freely Tradeable” means, in respect of share of capital of any class of any corporation, shares which: (i) are issuable without the necessity of filing a prospectus or any other similar offering document under Applicable Securities Law; and (ii) are not subject to a hold period under National Instrument 45-102 – Resale of Securities of the Canadian Securities Administrators (or any successor regulation to such National Instrument 45-102);

 

“GAAP” means generally accepted accounting principles in the United States, consistently applied and any change therein from time to time;

 

“Government Obligations” means securities issued or guaranteed by the Government of Canada or any province thereof;

 

“Governmental Authority” shall mean, when used with respect to any Person, any government, parliament, legislature, regulatory authority, agency, tribunal, department, commission, board, instrumentality, court, arbitration board or arbitrator or other law, regulation or rule-making entity (including a Recognized Stock Exchange) having or purporting to have jurisdiction over such Person or the business or property of such Person pursuant to the laws of Canada or any country in which such Person is residing, incorporated, continued, amalgamated, merged or otherwise created or established or in which such Person carries on business or holds property, or any province, territory, state, municipality, district or political subdivision of any such country or of any such province, territory or state of such country;

 

“Indenture” means or refers to this Indenture as amended or supplemented by any indenture, deed or instrument supplemental or ancillary thereto;

 

“Indenture Documents” means this Indenture, the Debentures and each other document, instrument, application or agreement now or hereafter executed and delivered by or on behalf of the Corporation or under or pursuant to any of them;

 

“Interest Obligation” means the obligation of the Corporation to pay interest on the Debentures, as and when the same becomes due;

 

“Interest Payment Date” means, subject to Section 2.3(4), the last day of March, the last day of June, the last day of September and the last day of December in each year and such other dates to which interest accrues and is payable pursuant to Section 2.3, it being acknowledged that for a period of eighteen (18) months from the Issue Date, any Interest Obligation payable hereunder shall automatically accrue to the principal amount of the Debentures, and shall thereafter be deemed to be part of the principal amount of the Debentures;

 

“Internal Procedures” means the minimum number of the Trustee’s internal procedures customary at such time for the making of any one or more entries to, changes in or deletions of any one or more entries in the records of the Trustee (including without limitation, original issuance or registration of transfer of ownership) to be complete under the operating procedures followed at the time by the Trustee;

 

“Issue Date” means December 12, 2018.

 

“Jurisdictions” means each of the Provinces and territories of Canada;

 

“Lien” means any hypothec, security interest, mortgage, lien, right of preference, pledge, assignment by way of security or any other agreement or encumbrance of any nature that secures the performance of an obligation, and a Person is deemed to own subject to a Lien any property or assets that it has acquired or

 

-8-

 

 

holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital or synthetic lease or similar agreement (other than an operating lease) relating to such property or assets;

 

“Mandatory Conversion Date” has the meaning ascribed thereto in Section 4.5(2);

 

“Mandatory Conversion Notice” has the meaning ascribed thereto in Section 4.5(1);

 

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations, prospects or financial or other condition of the Corporation and its Subsidiaries considered as a whole, (b) the Corporation’s ability to pay and the performance of its obligations under the Indenture Documents, or (c) the Trustee’s or any Debentureholder’s rights and remedies under the Indenture Documents;

 

“Maturity Date” means the date on which the principal amount of each Debenture becomes due and payable as provided in this Indenture.

 

“NCI” means the non-certificated inventory system operated by CDS;

 

“NCI Letter of Instruction” means the NCI letter of instruction provided by CDS to the Trustee in connection with the conversion of the Debentures;

 

“Notice” shall mean any notice, document or other communication required or permitted to be given under this Indenture;

 

“Officer’s Certificate” shall mean a certificate signed by any two officers of the Corporation, at least one of whom shall be the chief executive officer or the chief financial officer, (or officer holding a similar title), and delivered to the Trustee;

 

“Opinion of Counsel” shall mean a written opinion addressed to the Trustee (among other addressees as applicable), by Counsel and in a form which, in each case, shall be reasonably satisfactory to the Trustee;

 

“OTCQB” means the OTCQB marketplace of the OTC Markets Group;

 

“Outstanding” when used with respect to the Debentures shall mean, as of the date of determination, all Debentures theretofore certified and delivered by the Trustee under this Indenture, except:

 

	 	
			(a)

				
			Debentures theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

			

 

	 	
			(b)

				
			Debentures for whose payment, purchase, or repurchase money in the necessary amount has been theretofore deposited with the Trustee under gratuitous deposit or set aside and segregated in trust by the Corporation (if the Corporation shall act as its own paying agent) for the Holders of such Debentures; and

			

 

	 	
			(c)

				
			Debentures that have been surrendered to the Trustee pursuant to Section 3.1 or in exchange for or in lieu of which other Debentures have been certified and delivered pursuant to this Indenture, other than any such Debentures in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Debentures are held by a bona fide purchaser in whose hands such Debentures are valid obligations of the Corporation; provided, however, that: (i) in determining whether the Holders of the requisite principal amount of the Debentures then outstanding have taken any Act of Holders hereunder, Debentures owned by the Corporation or any Affiliate of the Corporation shall be disregarded and deemed not to be then Outstanding; (ii) in determining whether the Trustee shall be protected in acting and relying upon such Act of Holders, only Debentures of which the Trustee has actual notice that they are so owned

			

 

-9-

 

 

shall be so disregarded; and (iii) that Debentures so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right to act with respect to such Debentures and that the pledgee is not the Corporation or any Affiliate of the Corporation;

 

“Participant” shall mean, in relation to a Depository, a broker, dealer, bank or other financial institution or other Person on whose behalf such Depository or its nominee holds Debentures pursuant to a book-based system operated by such Depository;

 

“Payment Record Date” means (i) with respect to the Maturity Date, 15 Business Days prior to such date and (ii) with respect to an Interest Payment Date, the date determined as the record date for the determination of the Holders to which interest on Debentures is payable on such Interest Payment Date, which date shall be the 15th day of the month in which such Interest Payment Date occurs (or if such day is not a Business Day, the immediately preceding Business Day);

 

“Person” shall mean any natural Person, corporation, firm, partnership, joint venture, trustee, executor, liquidator of a succession, administrator, legal representative or other unincorporated association, trust, unincorporated organization, government or Governmental Authority and pronouns relating thereto have a similar extended meaning;

 

“Proceeding” shall mean any suit, action or other judicial or administrative proceeding;

 

“Qualified Institutional Buyer” means a “qualified institutional buyer” within the meaning of Rule 144A under the U.S. Securities Act;

 

“Recognized Stock Exchange” means the OTCQB, the CSE or, if the Common Shares are not listed on the OTCQB Exchange or the CSE, any other national securities exchange or market on which the Common Shares are then listed and posted for trading;

 

“Regulation D” means Regulation D adopted by the U.S. Securities and Exchange Commission under the U.S. Securities Act;

 

“Regulation S” means Regulation S adopted by the U.S. Securities and Exchange Commission under the U.S. Securities Act;

 

“Repayment Offer” has the meaning ascribed thereto in Section 3.1(1);

 

“Responsible Officer of the Corporation” means the Chairman, the Chief Executive Officer, the Chief Financial Officer, any Vice-President, the Secretary, any Assistant Secretary, or any other officer of the Corporation customarily performing functions similar to those performed by any of the above designated officers;

 

“Stated Maturity” shall mean, with respect to any principal of or accrued interest on a Debenture, the fixed date or dates specified on which such principal or interest is due and payable;

 

“Stock” means all shares, options, warrants, general or limited partnership interests, membership interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity whether voting or non-voting, participating or non-participating, including common stock, preferred stock or any other equity security;

 

“Subject Transaction” has the meaning ascribed thereto in Section 10.1;

 

“Subsidiary” in relation to any specified Person, shall mean (a) any corporation, association or other business entity a majority of the outstanding Voting Securities of which are beneficially owned, directly or indirectly, by or for such Person and/or by or for any subsidiary or one or more of the other

 

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Subsidiaries of that Person (or a combination thereof), and (b) any partnership (i) the sole general partner or the sole managing general partner of which is such Person or a Subsidiary of such Person or (ii) the only general partners of which are the Person or one or more Subsidiaries of that Person (or any combination thereof);

 

“Successor Entity” has the meaning ascribed thereto in Section 10.1(a);

 

“Supplemental Indenture” has the meaning ascribed thereto in Section 12.4;

 

“Taxes” has the meaning ascribed thereto in Section 2.21;

 

“Time of Expiry” has the meaning ascribed thereto in Section 4.1;

 

“Transfer Agent” shall mean Vstock Trust Company or such other Person or Persons appointed as the transfer agent for the Common Shares, in such capacity, together with such Person’s or Persons’ successor from time to time in such capacity;

 

“Trustee” shall mean Odyssey Trust Company until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter, “Trustee” shall mean or include each Person who is then a Trustee hereunder;

 

“Uncertificated Debenture” means any Debenture which is issued under the Non Certificated Inventory System and which is not evidenced by a Certificated Debenture;

 

“Unit” mean units of the Corporation, each comprised of one Common Share and one-half of one Warrant.

 

“United States” or “U.S.” means the United States of America, its territories and possessions, any state of the United States, and the District of Columbia;

 

“U.S. Accredited Investors” means “accredited investors” within the meaning of Rule 501(a) of Regulation D;

 

“U.S. Debentureholder” means any Debentureholder that acquired Debentures as a U.S. Purchaser;

 

“U.S. Dollar” or “Dollar” or “$” shall mean lawful currency of the United States of America;

 

“U.S. Legend” has the meaning ascribed thereto in Section 2.26;

 

“U.S. Marijuana Laws” means certain United States federal laws relating to the cultivation, distribution or possession of marijuana in the United States and other related judgments, orders or decrees in effect from time to time that provide that such cultivation, distribution or possession is illegal;

 

“U.S. Person” means a “U.S. Person” as that term is defined in Rule 902(k) of Regulation S;

 

“U.S. Purchaser” means with respect to the purchase of Debentures (a) any purchaser in the United States, (b) any person purchasing securities for the account or benefit of any person in the United States, (c) any person that receives or received an offer of the Debentures while in the United States, and (d) any person that is in the United States at the time the Purchaser’s buy order was made or the Subscription Agreement was executed or delivered, except that U.S. Purchaser shall not include any person excluded from the definition of “U.S. Person” pursuant to Rule 902(k)(2)(vi) of Regulation S (as defined herein) or persons holding accounts excluded from the definition of “U.S. person” pursuant to Rule 902(k)(2)(i) of Regulation S, solely in their capacities as holders of such accounts;

 

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

 

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“VWAP” means the volume-weighted average trading price of the Common Shares for the applicable period (which must be calculated utilizing days in which the Common Shares actually trade). The VWAP shall be determined by dividing the aggregate sale price of all Common Shares sold on the OTCQB over the applicable period by the total number of Shares so sold;

 

“Voting Securities” means securities having under all circumstances voting power to elect the directors, managers or trustees of the corporation, association or other business entity, provided that securities which only carry the right to vote conditionally on the happening of an event shall not be considered to be Voting Securities nor shall any securities be deemed to cease to be Voting Securities solely by reason of a right to vote accruing to shares of another class or classes by reason of the happening of such event;

“Warrant” means a Common Share purchase warrant exerciseable to acquire one Common Share at a price of $1.10 per Warrant for a period of 36 months from the Issue Date;

 

“Warrant Indenture” means the indenture between the Corporation and Odyssey Trust Company, as warrant agent, with respect to the Warrants;

 

“Wholly-Owned Subsidiary” means any Subsidiary of which the Corporation beneficially owns, directly or indirectly, all the Voting Securities and equity interests (other than qualifying equity interests required to be issued under Applicable Law) and a Subsidiary shall be deemed to beneficially own Voting Securities and equity interests beneficially owned by a Wholly-Owned Subsidiary and so on indefinitely;

 

“Written Order” means a written order or request, respectively, signed in the name of the Corporation by a Responsible Officer or director of the Corporation;

 

and all other terms which are used herein but not otherwise defined herein, and that are defined in the Securities Act (Ontario), either directly or by reference therein, shall have the meanings assigned to them therein.

 

	 	
			Section 1.2

				
			Interpretation

			

 

	
			(1)

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

			

 

	
			(2)

				
			The words “hereto”, “herein”, “hereof”, “hereby”, “hereunder”, and other words of similar import refer to this Indenture as a whole and not to any particular article, section, subsection, paragraph, clause or other part of this Indenture.

			

 

	
			(3)

				
			Except as otherwise provided herein, any reference in this Indenture to any act, statute, regulation, policy statement, instrument, agreement, or section thereof shall be deemed to be a reference to such act, statute, regulation, policy statement, instrument, agreement or section thereof as amended, re-enacted or replaced from time to time.

			

 

	 	
			Section 1.3

				
			Accounting Terms

			

 

As used in this Indenture and in any certificate or other document made or delivered pursuant to this Indenture, accounting terms not defined in this Indenture, or in any such certificate or other document, and accounting terms partly defined in this Indenture or in any such certificate or other document to the extent not defined, shall have the respective meanings given to them under GAAP. To the extent that the definitions of accounting terms in this Indenture, or in any such certificate or other document are inconsistent with the meanings of such terms under GAAP, the definitions contained in this Indenture, or in any such certificate or other document shall prevail.

 

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			Section 1.4

				
			Headings and Table of Contents

			

 

The division of this Indenture, or any related document, into articles, sections, subsections, paragraphs, clauses and other subdivisions, the provision of a table of contents and the insertion of headings are for convenience of reference only and shall not affect the construction or interpretation of this Indenture or any such related document.

 

	 	
			Section 1.5

				
			Section and Schedule References

			

 

Unless something in the subject matter or context is inconsistent therewith, references in this Indenture to articles, sections, subsections, paragraphs, clauses, other subdivisions, exhibits, appendices or schedules are to articles, sections, subsections, paragraphs, clauses other subdivisions, exhibits, appendices or schedules of or to this Indenture.

 

	 	
			Section 1.6

				
			Governing Law

			

 

The parties to this Indenture agree that any legal suit or proceeding arising with respect to this Indenture or the Debentures will be tried exclusively in the courts of the Province of Alberta in the City of Calgary, and the parties to this Indenture agree to submit to the jurisdiction of, and to venue in, such courts. This Indenture and each Debenture issued hereunder shall be governed by, and construed with, the laws of the Province of Alberta and the federal laws of Canada applicable therein and shall be treated in all respects as Ontario contracts.

 

	 	
			Section 1.7

				
			Currency

			

 

Unless expressly provided to the contrary in this Indenture or in any Debenture, all monetary amounts in this Indenture or in such Debenture refer to United States Dollars.

 

	 	
			Section 1.8

				
			Non-Business Day

			

 

Unless expressly provided to the contrary in this Indenture or in any Debenture, whenever any payment shall be due, any period of time shall begin or end, any calculation is to be made or any other action is to be taken on, or as of, or from a period ending on, a day other than a Business Day, such period of time shall begin or end and such calculation shall be made as of the day that is not a Business Day, but such actions shall be taken and such payment shall be made, as the case may be, on the next succeeding Business Day.

 

	 	
			Section 1.9

				
			Time

			

 

Unless otherwise expressly stated in this Indenture or in any Debenture, all references to a time will mean Eastern time. Time shall be of the essence of this Indenture.

 

	 	
			Section 1.10

				
			Independence of Covenants

			

 

Each covenant contained in this Indenture shall be construed (absent an express provision to the contrary) as being independent of each other covenant, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant.

 

	 	
			Section 1.11

				
			Form of Documents Delivered to Trustee

			

 

	
			(1)

				
			In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more 

			

 

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			other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

			

 

	
			(2)

				
			Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

			

 

	 	
			Section 1.12

				
			Acts of Holders

			

 

	
			(1)

				
			Any request, demand, authorization, direction, Notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in Person or by agents duly appointed in writing. Any request, demand, authorization, direction, Notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may, alternatively, be embodied in and evidenced by the record of Debentureholders voting in favour thereof, either in Person or by proxies duly appointed in writing, at any meeting of Debentureholders duly called and held in accordance with the provisions of Article 9, or a combination of such instruments and any such record. Except as herein otherwise expressly provided, such action shall become effective when such requisite instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Corporation. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act of Holders” of the “Act” of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and, subject to Section 8.1, conclusive in favour of the Trustee and the Corporation, if made in the manner provided in this Section 1.12. The record of any meeting of Debentureholders shall be provided in the manner specified in Section 9.7.

			

 

	
			(2)

				
			If the Corporation or the Trustee shall solicit from the Debentureholders any Act, the Corporation or the Trustee, as the case may be, may, at its option, fix in advance a record date for the determination of Debentureholders entitled to take such Act, but the Corporation or the Trustee, as the case may be, shall have no obligation to do so. Any such record date shall be fixed at the Corporation’s or the Trustee’s discretion, as the case may be, provided that such record date shall be fixed on a date not more than 60 days prior to the Act. If such a record date is fixed, such Act may be sought or taken before or after the record date, but only the Debentureholders of record at the close of business on such record date shall be deemed to be Debentureholders for the purpose of determining whether Holders of the requisite proportion of Debentures Outstanding have authorized or agreed or consented to such Act, and for that purpose the Debentures Outstanding shall be computed as of such record date.

			

 

	
			(3)

				
			Any Act of the Holder of any Debenture shall bind every future holder of the same Debenture and the Holder of every Debenture issued upon the registration of transfer thereof or in exchange therefore or in lieu thereof in respect of anything done, suffered or omitted by the Trustee or the Corporation in reliance thereon, whether or not notation of such action is made upon such Debenture.

			

 

	 	
			Section 1.13

				
			Interest Payments and Calculations

			

 

	
			(1)

				
			The rate of interest stipulated in this Indenture or in any Debenture will be calculated on the basis of a 360 day year composed of twelve 30 day months.

			

 

	
			(2)

				
			For purposes of the Interest Act (Canada), (i) whenever any interest under this Indenture is calculated using a rate based on a year of 360 days or 365 days, as the case may be, the rate determined pursuant to such calculation, when expressed as an annual rate, is equivalent to (x) the 

			

 

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			applicable rate based on a year of 360 days or 365 days, as the case may be, (y) multiplied by the actual number of days in the calendar year in which the period for which such interest or fee is payable (or compounded) ends, and (z) divided by 360 or 365, as the case may be, (ii) the principle of deemed reinvestment of interest does not apply to any interest calculation under this Indenture, and (iii) the rates of interest stipulated in this Indenture are intended to be nominal rates and not effective rates or yields.

			

 

	
			(3)

				
			In calculating interest under this Indenture or under a Debenture for any period, unless otherwise specifically stated, the first day of such period shall be included and the last day of such period shall be excluded.

			

 

	
			(4)

				
			If any provision in any Indenture Document would oblige the Corporation to make any payment of interest or other amount payable to the Trustee or any Holder in an amount or calculated at a rate which would be prohibited by law or would result in a receipt by the Trustee or that Holder of “interest” at a “criminal rate” (as such terms are construed under the Criminal Code (Canada)), then, notwithstanding such provision, such amount or rate shall be deemed to have been adjusted with retroactive effect to the maximum amount or rate of interest, as the case may be, as would not be so prohibited by Applicable Law or so result in a receipt by the Trustee or that Holder of “interest” at a “criminal rate”, such adjustment to be effected, to the extent necessary (but only to the extent necessary), as follows:

			

 

	 	
			(a)

				
			first, by reducing the amount or rate of interest to be paid to the Trustee or the affected Holder, as the case may be; and

			

 

	 	
			(b)

				
			thereafter, by reducing any fees, commissions, costs, expenses, premiums and other amounts required to be paid to the Trustee or the affected Holder, as the case may be, which would constitute interest for purposes of Section 347 of the Criminal Code (Canada).

			

 

	 	
			Section 1.14

				
			Successors and Assigns

			

 

All covenants and agreements in this Indenture by the Corporation shall bind its successors and assigns, whether expressed or not.

 

	 	
			Section 1.15

				
			Severability Clause

			

 

If any provision in this Indenture or in the Debentures shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

 

	 	
			Section 1.16

				
			Benefits of Indenture

			

 

Nothing in this Indenture and in the Debentures, express or implied, shall give to any Person, other than the parties hereto, the Debentureholders, and their respective successors hereunder, any paying agent, any Person maintaining the record of the Debentureholders pursuant to Section 2.12, any Transfer Agent and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture.

 

	 	
			Section 1.17

				
			Unclaimed Debentures

			

 

Subject to Applicable Law, all amounts held or set aside for the payment of Debentures together with any interest thereon which remain unclaimed after a period of three calendar years from the Maturity Date shall be forfeited and shall revert to the Corporation.

 

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			Section 1.18

				
			Schedules

			

 

The following Schedules form part of this Indenture:

 

	
			Schedule 2.2

				
			Form of Debenture Certificate

			
	
			Schedule Section 2.26

			FORM OF REGULATION S RULE 904 TRANSFER CERTIFICATE

				
			Form of Regulation S Rule 904 Transfer Certificate

			

 

	 	
			Section 1.19

				
			Benefits of Indenture through Trustee

			

 

For greater certainty, this Indenture is being entered into with the Trustee for the benefit of the Holders and the Trustee declares that it holds all rights, benefits and interests of this Indenture on behalf of and as the Person holding the power of attorney of, the Holders and each such Person who becomes a Holder of the Debentures from time to time.

 

	 	
			Section 1.20

				
			English Language

			

 

The Corporation, the Trustee and, by their acceptance of Debentures and the benefits of this Indenture, the Holders acknowledge having consented to and requested that this Indenture, each Debenture and each document related hereto and thereto be drawn up in the English language only. La Société, le fiduciaire des débentures et, par leur acceptation des débentures et des avantages de la présente convention, les porteurs, reconnaissent avoir accepté et demandé que la présente convention, chaque débenture et chaque document relié à celles-ci soient rédigés en langue anglaise.

 

Article 2

THE DEBENTURES

 

	 	
			Section 2.1

				
			Limit of Issue and Designation of Debentures

			

 

The Debentures authorized to be issued hereunder are limited to $46,000,000 aggregate principal amount, which, in each case shall be designated as “8.0% Unsecured Convertible Debentures”.

 

	 	
			Section 2.2

				
			Form and Terms of Debentures

			

 

	
			(1)

				
			The Debentures shall be dated as of the Issue Date. The Debentures shall bear interest from and including the Issue Date at the rate of 8.0% per annum (after as well as before maturity, default and judgment, with interest on overdue interest at the said rate until the earlier of the dates set out in Section 2.3(1)(b) to (d) below), payable in lawful money of the United States in equal quarterly instalments in arrears on each Interest Payment Date, subject to Section 2.3(4), and the Debentures shall mature on the Maturity Date. The first Interest Payment Date on December 31, 2018 will include interest accrued from the Issue Date to, but excluding, December 31, 2018, subject to Section 2.3(4).

			

 

	
			(2)

				
			Subject to the Debentures being converted in accordance with the terms of Article 4 or purchased prior to the Maturity Date in accordance with the terms of this Indenture, the outstanding principal of the Debentures will be payable to the Holder on the Maturity Date in lawful money of the United States against surrender thereof by said Holder at the Corporate Trust Office or at such place or places as may be designated by the Corporation for that purpose.

			

 

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			(3)

				
			The Debentures shall be issued as fully registered Debentures in denominations of $1,000 and integral multiples of $1,000, or as Uncertificated Debentures, provided that any Debentures sold to a U.S. Purchaser shall be issued as Certificated Debentures and are required to bear such legends as set out in Section 2.26.

			

 

	
			(4)

				
			The Debentures and the certificate of the Trustee endorsed thereon shall be substantially in the form set forth in Schedule 2.2 FORM OF DEBENTURE hereto. The terms and provisions contained in the Form of Debenture shall constitute, and are hereby expressly made, a part of this Indenture and, to the extent applicable, the Corporation and the Trustee, by their execution and delivery of this Indenture, expressly agree to such terms and provisions and to be bound thereby.

			

 

	
			(5)

				
			Any of the Debentures may have such letters, numbers or other marks of identification and such notations, legends, endorsements or changes as the Responsible Officer(s) of the Corporation executing the same may approve (execution thereof to be conclusive evidence of such approval) and as are not inconsistent with the provisions of this Indenture, or as may be required by the Trustee, the Depositary, or as may be required to comply with any Applicable Securities Laws or with any rule or regulation made pursuant thereto or with any rule or regulation of any securities exchange or automated quotation system on which the Debentures may be listed, or to conform to usage, or to indicate any special limitations or restrictions to which any particular Debentures are subject.

			

 

	
			(6)

				
			The Corporation in issuing the Debentures may use “CUSIP” and “ISIN” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” and “ISIN” numbers in all notices issued to Holders as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the Debentures or as contained in any notice and that reliance may be placed only on the other elements of identification printed on the Debentures. The Corporation shall promptly notify the Trustee in writing of any changes to the CUSIP and ISIN number.

			

 

	 	
			Section 2.3

				
			Interest

			

 

	
			(1)

				
			Subject to Section 2.3(4), Each Debenture issued hereunder, whether issued originally or in exchange for another Debenture, shall bear interest from the Issue Date, or from and including the last Interest Payment Date on which interest shall have been paid or made available for payment on the Debentures then Outstanding, whichever shall be the later, to but excluding the earlier of:

			

 

	 	
			(a)

				
			the following Interest Payment Date;

			

 

	 	
			(b)

				
			if purchased in accordance with Section 3.1, the date of payment;

			

 

	 	
			(c)

				
			if repurchased in accordance with Section 3.3, the Change of Control Repurchase Date;

			

 

	 	
			(d)

				
			if converted in accordance with Article 4, the Conversion Date;

			

 

	 	
			(e)

				
			if redeemed in accordance with any other provision of this Indenture, the Maturity Date, subject to certain exceptions set out in Section 3.2; and

			

 

	 	
			(f)

				
			the Maturity Date;

			

 

as the case may be (the “Interest Period”). The interest payable per $1,000 principal amount of Debentures in respect of an Interest Period other than an Interest Period that ends on an Interest Payment Date shall be calculated by multiplying $1,000 by the interest rate of 8.0% per annum, computed on the basis of a 360-day year composed of twelve 30-day months. For the purposes of

 

-17-

 

 

the Interest Act (Canada) and disclosure under such act, whenever interest to be paid is to be calculated on the basis of any period of time less than a calendar year (a “deemed year”) such rate of interest shall be expressed as a yearly rate by multiplying such rate of interest for the deemed year by the actual number of days in the calendar year in which the rate is to be ascertained and dividing it by the number of days in the deemed year.

 

	
			(2)

				
			Subject to the Debentures being converted in accordance with the terms of Article 4 or purchased prior to the Maturity Date in accordance with the terms of this Indenture, the Corporation shall pay to the Debentureholders on the Maturity Date all outstanding principal thereon and all accrued and unpaid interest thereto, up to but excluding the Maturity Date.

			

 

	
			(3)

				
			All payments of interest in cash on the Uncertificated Debentures shall be made by electronic funds transfer or certified cheque made payable to the Depository or its nominee on the day interest is payable for subsequent payment to Beneficial Holders of the applicable Uncertificated Debentures, unless the Corporation and the Depository otherwise agree.

			

 

	
			(4)

				
			For a period of 18 months from the Issue Date, any Interest Obligation payable hereunder shall automatically accrue to the principal amount of the Debentures, and shall thereafter be deemed to be part of the principal amount of the Debentures.

			

 

	 	
			Section 2.4

				
			Prescription

			

 

The right of the Debentureholders to exercise their rights under this Indenture shall become void unless the Debentures are presented for payment within a period of three years following the Maturity Date. The Corporation shall have satisfied its obligations under the Debentures upon irrevocable remittance to the Trustee for the account of the Debentureholders, upon redemption, repurchase or at the Maturity Date, of any and all consideration due hereunder in cash and such remittance shall for all purposes be deemed a payment to the Debentureholders, and to that extent such Debentures shall thereafter not be considered as Outstanding and the Debentureholders shall have no right, except to receive payment out of the moneys so paid and deposited upon surrender of its Debentures.

 

	 	
			Section 2.5

				
			Issue of Debentures

			

 

Debentures in such aggregate principal amounts as the Board of Directors shall determine in accordance with the terms hereof and in lawful money of the United States shall be executed by the Corporation from time to time and, forthwith after such execution, shall be delivered to the Trustee and shall be authenticated by the Trustee and delivered to the Corporation in accordance with the terms of Section 2.7. Other than as contemplated by Section 2.13, the Trustee shall receive no consideration for the certification or Authentication of Debentures.

 

	 	
			Section 2.6

				
			Execution of Certificated Debentures

			

 

All Certificated Debentures shall be signed (either manually or by electronic signature) by any one Responsible Officer of the Corporation holding office at the time of signing. An electronic signature upon a Certificated Debenture shall for all purposes of this Indenture be deemed to be the signature of the Person whose signature it purports to be. Notwithstanding that any Person whose signature, either in manual or in electronic form, appears on a Certificated Debenture as a director or officer may no longer hold such office at the date of the Certificated Debenture or at the date of the certification and delivery thereof, such Certificated Debenture shall be valid and binding upon the Corporation and the registered holders thereof entitled to the benefits of this Indenture. In addition, any Uncertificated Debenture shall, subject to Section 2.7, be valid and binding upon the Corporation and the registered holder thereof will be entitled to the benefits of this Indenture.

 

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			Section 2.7

				
			Authentication

			

 

	
			(1)

				
			A Debenture shall not be valid until Authenticated. Only such Debentures as shall have been Authenticated shall be enforceable against the Corporation and entitled to the benefits of this Indenture at any time or be valid or obligatory for any purpose.

			

 

	
			(2)

				
			Authentication by the Trustee of any Certificated Debenture executed by the Corporation shall be conclusive evidence that the Holder is entitled to the benefits of this Indenture.

			

 

	
			(3)

				
			No Debenture (which for greater certainty shall include any Debenture issued as an Uncertificated Debenture) shall be issued or, if issued, shall be valid for any purpose, enforceable against the Corporation or entitle the registered holder to the benefit hereof or thereof until it has been Authenticated. Such Authentication shall be conclusive evidence that such Debenture is a valid and binding obligation of the Corporation and that the holder is entitled to the benefits of this Indenture. The Authentication by the Trustee of any such Debenture hereunder shall not be construed as a representation or warranty by the Trustee as to the validity of this Indenture or of such Debenture or its issuance (except the due Authentication thereof) or as to the performance by the Corporation of its obligations under this Indenture and the Trustee shall in no respect be liable or answerable for the use made of the Debentures or any of them or the proceeds thereof.

			

 

	 	
			Section 2.8

				
			Uncertificated Debentures

			

 

	
			(1)

				
			The Corporation initially appoints CDS to act as Depositary. Subject to the provisions hereof, at the Corporation’s option, Debentures may be issued and registered in the name of CDS or its nominee as an Uncertificated Debenture and the deposit of which may be confirmed electronically by the Trustee to a particular Participant through CDS.

			

 

	
			(2)

				
			If the Corporation issues Uncertificated Debentures, Beneficial Holders of such Debentures shall not receive Debenture Certificates in definitive form and shall not be considered owners or holders thereof under this Indenture or any supplemental indenture. Beneficial interests in Debentures registered and deposited with CDS will be represented only through the NCI. Transfers of Debentures registered and deposited with CDS between Participants shall occur in accordance with the rules and procedures of CDS. Neither the Corporation nor the Trustee shall have any responsibility or liability for any aspects of the records relating to or payments made by CDS or its nominee, on account of the beneficial interests in Debentures registered and deposited with CDS. Nothing herein shall prevent the Beneficial Holders of Uncertificated Debentures from voting such Debentures using duly executed proxies or voting instruction forms.

			

 

	
			(3)

				
			All references herein to actions by, notices given or payments made to, Debentureholders shall, where Debentures are held through CDS, refer to actions taken by, or notices given or payments made to, CDS upon instruction from the Participants in accordance with its rules and procedures in the case of actions by CDS. For the purposes of any provision hereof requiring or permitting actions with the consent of or the direction of Debentureholders evidencing a specified percentage of the aggregate Debentures outstanding, such direction or consent may be given by Beneficial Holders acting through CDS and the Participants owning Debentures evidencing the requisite percentage of the Debentures. The rights of a Beneficial Holder whose Debentures are held established by law and agreements between such holders and CDS and the Participants upon instructions from the Participants. Each Trustee and the Corporation may deal with CDS for all purposes (including the making of payments) as the authorized representative of the respective Debentures or Debenture holders and such dealing with CDS shall constitute satisfaction or performance, as applicable, of their respective obligations hereunder.

			

 

-19-

 

 

	
			(4)

				
			For so long as Debentures are held through CDS, if any notice or other communication is required to be given to Debentureholders, the Trustee will give such notices and communications to CDS.

			

 

	
			(5)

				
			If CDS resigns or is removed from its responsibility as Depository and the Trustee is unable or does not wish to locate a qualified successor, CDS shall provide the Trustee with instructions for registration of Debentures in the names and in the amounts specified by CDS, and the Corporation shall issue and the Trustee shall certify and deliver the aggregate number of Debentures then outstanding in the form of Certificated Debentures representing such Debentures.

			

 

	
			(6)

				
			The rights of Beneficial Holders who hold securities entitlements in respect of the Debentures through the NCI shall be limited to those established by Applicable Law and agreements between the Depository and the Participants and between such Participants and the Beneficial Holders who hold securities entitlements in respect of the Debentures through the NCI, and such rights must be exercised through a Participant in accordance with the rules and procedures of the Depository.

			

 

	
			(7)

				
			Notwithstanding anything herein to the contrary, none of the Corporation nor the Trustee nor any agent thereof shall have any responsibility or liability for:

			

 

	 	
			(a)

				
			the electronic records maintained by the Depository relating to any ownership interests or other interests in the Debentures or the depository system maintained by the Depository, or payments made on account of any ownership interest or any other interest of any Person in any Debenture represented by an electronic position in the NCI (other than the Depository or its nominee);

			

 

	 	
			(b)

				
			for maintaining, supervising or reviewing any records of the Depository or any Participant relating to any such interest; or

			

 

	 	
			(c)

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

			

 

	
			(8)

				
			The Corporation may terminate the application of this Section 2.8 in its sole discretion in which case all Debentures shall be evidenced by Certificated Debenture registered in the name of a Person other than the Depository.

			

 

	 	
			Section 2.9

				
			Persons Entitled to Payment

			

 

	
			(1)

				
			Prior to due presentment for registration of transfer of any Debenture, the Corporation, the Trustee and any other Person, as the case may be, may treat the Person in whose name any Debenture is registered in the applicable register as the absolute and sole owner of such Debenture for all purposes including receiving payment of the principal of, and any premium, if any, interest or other amount on such Debenture, receiving any notice to be given to the Holder of such Debenture, and taking any Act of Holders with respect to such Debenture, whether or not any payment with respect to such Debenture shall be overdue, and none of the Corporation, the Trustee or any other Person, as the case may be, shall be affected by notice to the contrary.

			

 

	
			(2)

				
			Delivery of a Debenture to the Trustee by or on behalf of the Holder thereof shall, upon payment of such Debenture, be a valid discharge to the Corporation of all obligations evidenced by such Debenture. None of the Corporation, the Trustee or any other Person shall be bound to inquire into the title of any such Holder.

			

 

-20-

 

 

	
			(3)

				
			In the case of the death of one or more joint registered Holders of a Debenture, the principal of, and premium, if any, interest and any other amounts on such Debenture may be paid to the survivor or survivors of such registered Holders whose receipt of such payment, accompanied by the delivery of such Debenture, shall constitute a valid discharge to the Corporation and the Trustee.

			

 

	 	
			Section 2.10

				
			Payment of Principal and Interest on Certificated Debentures

			

 

	
			(1)

				
			Except as may otherwise be provided herein, payments of amounts due upon maturity of the Debentures will be made in the following manner. The Corporation will establish and maintain with the Trustee a maturity account for the Debentures (the “Maturity Account”). On or before 9:00 a.m. (Toronto time) not less than one Business Day immediately prior to each Maturity Date for Debentures outstanding from time to time under this Indenture, the Corporation will deliver to the Trustee a certified cheque or wire transfer for deposit in the applicable Maturity Account in an amount sufficient to pay the cash amount payable in respect of such Debentures (including the principal amount together with any accrued and unpaid interest thereon less any tax required by law to be deducted). The Trustee, on behalf of the Corporation, will pay to each holder entitled to receive payment the principal amount of and accrued and unpaid interest on the Debenture, upon surrender of the Debenture at any branch of the Trustee designated for such purpose from time to time by the Corporation and the Trustee. The delivery of such funds to the Trustee for deposit to the applicable Maturity Account will satisfy and discharge the liability of the Corporation for the Debentures to which the delivery of funds relates to the extent of the amount delivered (plus the amount of any tax deducted as aforesaid) and such Debentures will thereafter to that extent not be considered as outstanding under this Indenture and such holder will have no other right in regard thereto other than to receive out of the money so delivered or made available the amount to which it is entitled. Unless any Debenture is converted or purchased in accordance with the terms of this Indenture prior to the Maturity Date, interest shall cease to accrue on the Debentures upon the Maturity Date provided the Trustee has received, by the Maturity Date, from the Corporation all the funds due and payable on the Debentures.

			

 

	
			(2)

				
			Subject to Section 2.3(4), as interest becomes due on each Debenture (except, on conversion, on redemption, or if purchased in accordance with the terms of this Indenture, when interest shall be paid by the Corporation upon surrender of such Debenture in accordance with the terms of this Indenture), the Corporation, either directly or through the Trustee or any agent of the Trustee, shall send or forward by prepaid ordinary mail, electronic transfer of funds or such other means as may be agreed to by the Trustee, payment of such interest to the order of the registered holder of such Debenture appearing on the registers maintained by the Trustee at the close of business on the record date prior to the applicable Interest Payment Date and addressed to the holder at the holder’s last address appearing on the register, unless such holder otherwise directs. If payment is made by cheque, such cheque shall be forwarded at least three days prior to each date on which interest becomes due, and if payment is made by other means (such as electronic transfer of funds), the Trustee must receive confirmation of receipt of funds prior to being able to forward funds or cheques to holders and such payment shall be made in a manner whereby the holder receives credit for such payment on the date such interest on such Debenture becomes due. The mailing of such cheque or the making of such payment by other means shall, to the extent of the sum represented thereby, plus the amount of any tax withheld as aforesaid, satisfy and discharge all liability for interest on such Debenture, unless in the case of payment by cheque, such cheque is not paid at par on presentation. In the event of non-receipt of any cheque for or other payment of interest by the person to whom it is so sent as aforesaid, the Corporation will issue to such person a replacement cheque or other payment for a like amount upon being furnished with such evidence of non-receipt as it shall reasonably require and upon being indemnified to its satisfaction. Notwithstanding the foregoing, if the Corporation is prevented by circumstances

			

 

-21-

 

 

beyond its control (including, without limitation, any interruption in mail service) from making payment of any interest due on each Debenture in the manner provided above, the Corporation may make payment of such interest or make such interest available for payment in any other manner acceptable to the Trustee with the same effect as though payment had been made in the manner provided above.

 

	
			(3)

				
			The Trustee is authorized by the Corporation to make payments of interest and principal to Holders, by electronic funds transfer, upon the request of such Holder and the reasonable and documented Trustee’s fees in respect thereof will be for the account of the Holder.

			

 

	
			(4)

				
			If a Debenture or a portion thereof is called or presented for conversion or purchase, repurchase or redemption and the payment date is subsequent to a Payment Record Date but prior to the related Interest Payment Date, interest accrued on such Debenture will be paid upon presentation and surrender of such Debenture to the Corporate Trust Office up to but excluding the payment date.

			

 

	
			(5)

				
			Subject to the foregoing provisions of this section, each Debenture delivered upon the transfer of or in exchange for or in lieu of any other Debenture shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debenture.

			

 

	 	
			Section 2.11

				
			Rank

			

 

The Debentures certified and issued under this Indenture rank pari passu with one another.

 

	 	
			Section 2.12

				
			Register and Transfer

			

 

	
			(1)

				
			The Corporation shall cause to be kept by and at the principal office of the Trustee in Calgary, Alberta and by the Trustee or such other registrar as the Corporation, with the approval of the Trustee, may appoint at such other place or places, if any, as the Corporation may designate with the approval of the Trustee, a register in which shall be entered the names and addresses of the holders of Debentures and particulars of the Debentures held by them respectively and of all transfers of Debentures. Such registration shall be noted on any Certificated Debentures by the Trustee or other registrar unless a new Certificated Debenture shall be issued upon such transfer. If the Trustee is not the registrar, the Corporation shall furnish, or cause the registrar to furnish, to the Trustee at least five Business Days before each Interest Payment Date and at such other times as the Trustee may request in writing a list, in such form and as of such date as the Trustee may reasonably require, of the names and addresses of Holders.

			

 

	
			(2)

				
			No transfer of any Debenture shall be valid unless entered on the register referred to in Section 2.12, and upon surrender of any Certificated Debentures together with a duly executed form of transfer acceptable to the Trustee, or in the case of Uncertificated Debentures in accordance with the procedures prescribed by the Depositary and, if applicable, upon compliance with such other reasonable requirements as the Trustee or other registrar may prescribe. In the case of Certificated Debentures, the Trustee shall rely on the Form of Assignment in the form included in Schedule 2.2 signed by the transferor without further enquiry. Transfers within the systems of CDS are not the responsibility of the Trustee and will not be noted on the register maintained by the Trustee, provided however that the full position of Debentures held by or through CDS shall at all times appear on the register.

			

 

	
			(3)

				
			None of the Corporation, the Trustee or any agent of the Trustee will be liable or responsible to any Person for any aspect of the records related to or payments made on account of beneficial interests in any Uncertificated Debenture or for maintaining, reviewing, or supervising any records relating to such beneficial interests.

			

 

-22-

 

 

	 	
			Section 2.13

				
			Certificated Debentures; Transfers and Exchanges

			

 

	
			(1)

				
			Every Debenture (and all securities issued in exchange therefor or in substitution thereof) and any Common Shares issuable upon conversion of such Debenture (with appropriate modifications) shall bear the appropriate legend and be subject to the restrictions on transfer as set forth therein. Any Certificated Debenture issued to a transferee upon transfers contemplated by Section 2.12 shall bear the appropriate legends, as required by applicable Securities Laws, as set forth in Section 2.25 and Section 2.26.

			

 

	
			(2)

				
			The Trustee shall not register a transfer of a Certificated Debenture unless the transferor has complied with all Applicable Securities Laws and provided the Trustee with the Debenture and the Form of Assignment, in the form included in Schedule 2.2, stating that the transfer is being made, and the offer of the securities being transferred was made pursuant to, and in compliance with, Rule 144, Rule 144A or Rule 904 of Regulation S or an exemption from registration under the U.S. Securities Act. Notwithstanding the forgoing, the Trustee shall not register any transfer being made under Regulation S if the Trustee has reason to believe that the transferee is a Person in the United States or a U.S. Person or is acquiring the Debentures evidenced thereby for the account or benefit of a Person in the United States or a U.S. Person.

			

 

	 	
			Section 2.14

				
			Uncertificated Debentures; Transfers and Exchanges

			

 

	
			(1)

				
			Notwithstanding any other provision of this Indenture, Uncertificated Debentures may be transferred in the following circumstances and Certificated Debentures may be issued to Beneficial Holders in the following circumstances or as otherwise specified in a resolution of the Board of Directors, Officers’ Certificate, or supplemental indenture:

			

 

	 	
			(a)

				
			Uncertificated Debentures may be transferred by a Depository to a nominee of such Depository or by a nominee of a Depository to such Depository or to another nominee of such Depository or by a Depository or its nominee to a successor Depository or its nominee;

			

 

	 	
			(b)

				
			Uncertificated Debentures may be transferred at any time after the Depository for such Uncertificated Debentures (i) has notified the Trustee, or the Corporation has notified the Trustee, that it is unwilling or unable to continue as Depository for such Uncertificated Debentures, or (ii) ceases to be eligible to be a Depository, provided that at the time of such transfer the Corporation has not appointed a successor Depository for such Uncertificated Debentures;

			

 

	 	
			(c)

				
			Uncertificated Debentures may be transferred at any time after the Corporation has determined, in its sole discretion, to terminate the NCI in respect of such Uncertificated Debentures and has communicated such determination to the Trustee in writing;

			

 

	 	
			(d)

				
			Uncertificated Debentures may be transferred at any time after an Event of Default has occurred and is continuing with respect to the Debentures of the series issued as Uncertificated Debentures, provided that Beneficial Holders representing, in the aggregate, not less than 25% of the aggregate principal amount of the Debentures of such series advise the Depository in writing, through the Depository Participants, that the continuation of the NCI for such series of Debentures is no longer in their best interest and also provided that at the time of such transfer the Trustee has not waived the Event of Default pursuant to Section 6.3 and Section 12.3;

			

 

	 	
			(e)

				
			Uncertificated Debentures may be transferred or exchanged for Certificated Debentures at any time after a Depository has determined, in its sole discretion, that such transfer or 

			

 

-23-

 

 

	 	
			 

				
			exchange is required to effect conversion and/or redemption rights in accordance with the terms hereof and has communicated such determination to the Trustee in writing;

			

 

	 	
			(f)

				
			Uncertificated Debentures may be transferred if required by Applicable Law;

			

 

	 	
			(g)

				
			Uncertificated Debentures may be transferred at any time after the NCI ceases to exist; or

			

 

	 	
			(h)

				
			if requested by a Beneficial Holder and provided that such transfer or exchange for Certificated Debentures is permitted by Applicable Law and conducted in accordance with any procedures required under the NCI,

			

 

following which Certificated Debentures shall be issued to the beneficial owners of such Debentures or their nominees, as directed by the Holder. The Corporation shall provide an Officer’s Certificate giving notice to the Trustee of the occurrence of any event outlined in this Section 2.14.

 

	
			(2)

				
			With respect to the Uncertificated Debentures, unless and until Certificated Debentures have been issued to Beneficial Holders pursuant to Section 2.14(1), Section 2.8 shall continue to apply.

			

 

	 	
			Section 2.15

				
			Transferee Entitled to Registration

			

 

The transferee of a Debenture shall be entitled, after the appropriate form of transfer is lodged with the Trustee or other registrar and upon compliance with all other conditions in that behalf required by this Indenture or by law, to be entered on the register as the owner of such Debenture free from all equities or rights of set-off, compensation or counterclaim between the Corporation and the transferor or any previous holder of such Debenture, save in respect of equities of which the Corporation is required to take notice by statute or by order of a court of competent jurisdiction.

 

	 	
			Section 2.16

				
			No Notice of Trusts

			

 

Neither the Corporation nor the Trustee nor any registrar shall be bound to take notice of or see to the execution of any trust (other than that created by this Indenture) whether express, implied or constructive, in respect of any Debenture, and may transfer the same on the direction of the Person registered as the holder thereof, whether named as trustee or otherwise, as though that Person were the beneficial owner thereof.

 

	 	
			Section 2.17

				
			Registers Open for Inspection

			

 

The registers referred to in Section 2.12 shall be open for inspection by the Corporation, the Trustee or any Debentureholder. Every registrar, including the Trustee, shall from time to time when requested so to do by the Corporation or by the Trustee, in writing, furnish the Corporation or the Trustee, as the case may be, with a list of names and addresses of holders of registered Debentures entered on the register kept by them and showing the principal amount of the Debentures held by each such holder.

 

	 	
			Section 2.18

				
			Exchanges of Debentures

			

 

	
			(1)

				
			Subject to Section 2.13 and Section 2.19, Certificated Debentures in any authorized form or denomination, may be exchanged for Certificated Debentures in any other authorized form or denomination, of the same series and date of maturity, bearing the same interest rate and of the same aggregate principal amount as the Certificated Debentures so exchanged.

			

 

	
			(2)

				
			In respect of exchanges of Certificated Debentures permitted by Section 2.18(1), Certificated Debentures of any series may be exchanged only at the principal office of the Trustee in the city of Calgary, Alberta or at such other place or places, if any, as may be specified in the Debentures of such series and at such other place or places as may from time to time be designated by the 

			

 

-24-

 

 

	
			 

				
			Corporation with the approval of the Trustee. Any Certificated Debentures tendered for exchange shall be surrendered to the Trustee. The Corporation shall execute and the Trustee shall Authenticate all Certificated Debentures necessary to carry out exchanges as aforesaid. All Certificated Debentures surrendered for exchange shall be cancelled.

			

 

	
			(3)

				
			Debentures issued in exchange for Debentures which at the time of such issue have been selected or called for redemption at a later date shall be deemed to have been selected or called for redemption in the same manner and shall have noted thereon a statement to that effect.

			

 

	
			(4)

				
			Transfers of beneficial ownership of any Uncertificated Debenture will be effected only (i) with respect to the interest of a Depositary Participant, through records maintained by the Depositary or its nominee for such Debentures, and (ii) with respect to the interest of any Person other than a Participant through records maintained by Depositary Participants.

			

 

	 	
			Section 2.19

				
			Closing of Registers

			

 

	
			(1)

				
			Neither the Corporation nor the Trustee nor any registrar shall be required to make transfers or exchanges of or convert any Debentures on any Interest Payment Date for such Debentures or during the five preceding Business Days.

			

 

	
			(2)

				
			Subject to any restriction herein provided, the Corporation with the approval of the Trustee may at any time close any register for any series of Debentures, other than those kept at the principal office of the Trustee in Calgary, Alberta, and transfer the registration of any Debentures registered thereon to another register (which may be an existing register) and thereafter such Debentures shall be deemed to be registered on such other register. Notice of such transfer shall be given to the holders of such Debentures.

			

 

	 	
			Section 2.20

				
			Ownership of Debentures

			

 

	
			(1)

				
			Unless otherwise required by Applicable Law, the Person in whose name any registered Debenture is registered shall for all purposes of this Indenture be and be deemed to be the owner thereof and payment of or on account of the principal of and premium, if any, on such Debenture and interest thereon shall be made to such registered holder.

			

 

	
			(2)

				
			The registered holder for the time being of any registered Debenture shall be entitled to the principal, premium, if any, and/or interest evidenced by such instruments, respectively, free from all equities or rights of set-off, compensation or counterclaim between the Corporation and the original or any intermediate holder thereof and all Persons may act accordingly and the receipt of any such registered holder for any such principal, premium or interest shall be a good discharge to the Trustee, any registrar and to the Corporation for the same and none shall be bound to inquire into the title of any such registered holder.

			

 

	
			(3)

				
			Where Debentures are registered in more than one name, the principal, premium, if any, and interest from time to time payable in respect thereof shall be paid to the order of all such holders, and the receipt of any one of such holders therefor shall be a valid discharge, to the Trustee, any registrar and to the Corporation.

			

 

	
			(4)

				
			In the case of the death of one or more joint holders of any Debenture the principal, premium, if any, and interest from time to time payable thereon may, upon the delivery of such reasonable requirements as the Trustee may prescribe, be paid to the order of the survivor or survivors of such registered holders and the receipt of any such survivor or survivors therefor shall be a valid discharge to the Trustee and any registrar and to the Corporation.

			

 

-25-

 

 

	 	
			Section 2.21

				
			Taxes

			

 

	
			(1)

				
			Any payments made by or on behalf of the Corporation under or with respect to the Debentures will be made free and clear of and without withholding or deduction for or on account of any present or future tax, duty, levy, impost, assessment or other governmental charge, excluding, in respect of a Holder or Beneficial Holder, branch profits taxes, franchise taxes and taxes imposed on net income or capital (collectively, “Taxes”), unless the Corporation or any other payor is required to withhold or deduct Taxes by Applicable Law or by the interpretation or administration thereof by the relevant Governmental Authority. If the Corporation or any other payor of any amount under or in respect of any amount under or in respect to the Debentures (including any amount paid in respect of proceeds of disposition of the Debentures to a Debentureholder) is so required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Debentures, in respect of any payment by the Corporation the Trustee will make such withholding or deduction and will remit the full amount withheld or deducted to the relevant Governmental Authority as and when required by Applicable Law.

			

 

	 	
			Section 2.22

				
			Cancellation of Debentures

			

 

	
			(1)

				
			All Debentures surrendered for payment of the final amount required to be paid thereon, or that have been surrendered to the Trustee for registration of exchange or transfer or surrendered in connection with a conversion or purchase by the Corporation in accordance with the terms of this Indenture, shall be promptly cancelled by the Trustee on receipt. The Trustee shall give prompt written notice to the Corporation of the particulars of any Debentures cancelled by it upon its request for this information, and the Corporation shall pay the Trustee’s reasonable fees in connection therewith.

			

 

	
			(2)

				
			The Corporation may, in its discretion at any time, deliver to the Trustee for cancellation any Debentures which the Corporation has purchased as provided for in this Indenture, and all such Debentures so delivered shall be cancelled by the Trustee.

			

 

	
			(3)

				
			All Debentures which have been cancelled by the Trustee shall be destroyed by the Trustee in accordance with its standard practices, and the Trustee shall furnish to the Corporation a destruction certificate setting forth the numbers and denominations of the Debentures so destroyed.

			

 

	 	
			Section 2.23

				
			Mutilated, Lost, Stolen or Destroyed Debentures

			

 

	
			(1)

				
			If any Debenture has been mutilated or defaced or has or has been alleged to have been lost, stolen or destroyed, then, on application by the applicable Holder to the Trustee, the Corporation may, in its discretion, execute, and upon such execution the Trustee shall certify and deliver, a new Debenture of the same date and amount as the defaced, mutilated, lost, stolen or destroyed Debenture in exchange for and in place of the defaced or mutilated Debenture, and in lieu of and in substitution for the lost, stolen or destroyed Debenture. Notwithstanding the foregoing, no Debenture shall be delivered as a replacement for any Debenture which has been mutilated or defaced otherwise than upon surrender of the mutilated or defaced Debenture, and no Debenture shall be delivered as a replacement for any Debenture which has been lost, stolen or destroyed unless the applicant for the replacement Debenture has furnished to the Corporation and the Trustee evidence, satisfactory in form and substance to the Corporation and the Trustee, of its ownership of, and of such loss, theft or destruction of, such Debenture and has provided such a surety bond and indemnity to the Corporation and the Trustee in amount, form and substance satisfactory to each of them. Any instructions by the Corporation to the Trustee under this section shall include such indemnity for the protection of the Trustee as the Trustee may reasonably require.

			

 

-26-

 

 

	
			(2)

				
			If any mutilated, defaced, lost, stolen or destroyed Debenture has become or is about to become due and payable, the Corporation, in its discretion, may, instead of executing a replacement Debenture, pay to the Holder thereof the full amount outstanding on such mutilated, defaced, lost, stolen or destroyed Debenture.

			

 

	
			(3)

				
			Upon the issuance of a replacement Debenture, the Corporation may require the applicant for such replacement Debenture to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in relation to such issuance and any other expenses (including the fees and expenses of the Trustee and the Corporation) connected with such issuance.

			

 

	
			(4)

				
			Each replacement Debenture shall bear a unique serial number and legend, if applicable, and be in a form otherwise identical to the Debenture it replaces and shall be entitled to the benefits of this Indenture to the same extent and in the same manner as the Debenture it replaces.

			

 

	
			(5)

				
			Unless the Corporation instructs otherwise, the Trustee shall, in accordance with its practice, destroy each mutilated or defaced Debenture surrendered to and cancelled by it and in respect of which a replacement Debenture has been delivered or moneys have been paid and shall, as soon as reasonably practicable, furnish to the Corporation, upon its receipt of a written request, a certificate as to such destruction specifying in numerical sequence the serial numbers of the Debentures so destroyed..

			

 

	 	
			Section 2.24

				
			Access to Lists of Holders

			

 

	
			(1)

				
			The register of Debentureholders maintained by the Trustee will, at all reasonable times during the regular business hours of the Trustee, be open for inspection by the Corporation.

			

 

	
			(2)

				
			If any Beneficial Holder or group of Beneficial Holders, or such one or more Holders as may be permitted by Applicable Law (in each case, the “Applicants”) apply to the Trustee (with a copy to the Corporation), then the Trustee, after having been funded and indemnified to its reasonable satisfaction by such Applicants for its related costs and expenses, shall afford or shall cause the Corporation to afford the Applicants, access during normal business hours to the most recent list of Debentureholders within 10 Business Days after the receipt of such application by the Trustee. Such list shall be as of a date no more than 10 days (or such other date as may be mandated by Applicable Law) prior to the date of receipt of the Applicants’ request.

			

 

	 	
			Section 2.25

				
			Canadian Legend on the Debentures and Common Shares and Warrants

			

 

The certificates or other instruments representing the Debentures, and the stock certificates representing any Common Shares and Warrants issued upon conversion of such Debentures, (if issued prior to the expiration of the applicable hold periods), if any, will bear the following legend in accordance with Applicable Securities Legislation:

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE CLOSING DATE].”

 

provided that if, at any time, in the opinion of counsel to the Corporation, such legend is no longer necessary or advisable under Applicable Securities Laws, or the holder of any such legended certificate, at the holder’s expense, provides the Corporation with evidence satisfactory in form and substance to the Corporation (which may include an opinion of counsel satisfactory to the Corporation) to the effect that such legend is not required, such legended certificate may thereafter be surrendered to the Corporation in exchange for a certificate which does not bear such legend.

 

-27-

 

 

	 	
			Section 2.26

				
			US Legend on Debentures

			

 

Each certificate representing Debentures that are originally issued to a U.S. Purchaser that is a U.S. Accredited Investor, or any certificate representing Debentures issued in exchange or substitution thereof, shall be issued as Certificated Debentures, and the stock certificates resenting any Common Shares issued upon conversion of such Debentures, if any, unless otherwise determined by the Corporation, will bear the following legends or such variations thereof as the Corporation may prescribe from time to time (the “U.S. Legend”):

 

“THE SECURITIES REPRESENTED HEREBY [for the Debentures add: AND THE SECURITIES ISSUABLE PURSUANT HERETO] HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THESE SECURITIES, AGREES FOR THE BENEFIT OF CLS HOLDINGS, USA INC. (THE “CORPORATION”) THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY: (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT (“REGULATION S”) AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS, (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR (E) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE LAWS, PROVIDED THAT, IN THE CASE OF TRANSFERS PURSUANT TO (C)(2) OR (E) ABOVE THE HOLDER HAS, PRIOR TO SUCH TRANSFER, FURNISHED TO THE CORPORATION AN OPINION TO SUCH EFFECT FROM COUNSEL OF RECOGNIZED STANDING, OR OTHER EVIDENCE, IN EITHER CASE REASONABLY SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.

 

provided, that if the Debentures are listed on a Recognized Stock Exchange and are being sold outside of the United States in accordance with Rule 904 of Regulation S at a time when the Corporation is a "foreign issuer" as defined in Rule 902 of Regulation S, the first paragraph of the legend language appearing above may be removed by providing a duly completed and signed declaration to the Trustee in the form set forth in Schedule 2.26 hereto (or as the Corporation may from time to time prescribe) and, if required by the Trustee or the Corporation, an opinion of counsel of recognized standing satisfactory to the Corporation, acting reasonably, that the paragraphs of the legend language appearing above is no longer required under the applicable requirements of the U.S. Securities Act or U.S. state securities laws;

 

and provided further, that if the Debentures are not listed on a Recognized Stock Exchange and are being sold outside of the United States in accordance with Rule 904 of Regulation S at a time when the Corporation is a "foreign issuer" as defined in Rule 902 of Regulation S, the first paragraph of the legend set forth above may be removed by delivery to the Corporation of an opinion of counsel of the holder of

 

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such securities if requested by the Corporation or the Trustee, and such other documentation as the Corporation or the Trustee may reasonably request;

 

and provided further, that if any Debentures are being sold to a purchaser in the United States in accordance with Rule 144 under the U.S. Securities Act, the first paragraph of the legend set forth above may be removed by delivery to the Trustee and the Corporation of an opinion of counsel of recognized standing, satisfactory to the Corporation, acting reasonably, to the effect that the paragraphs of the legend set forth above is no longer required under applicable requirements of the U.S. Securities Act or U.S. state securities laws.

 

Article 3     

REPURCHASE AND CANCELLATION OF DEBENTURES

 

	 	
			Section 3.1

				
			Repurchase of Debentures at Option of the Holder upon a Change of Control

			

 

	
			(1)

				
			If a Change of Control occurs prior to the Maturity Date, the Corporation shall make an offer to the Debentureholders to:

			

 

	 	
			(a)

				
			repurchase for cash all or such portion of the Debentures of such Holders equal to $1,000 principal amount (or an integral multiple thereof) which are Outstanding immediately prior to such Change of Control, at a price equal to 105% of the principal amount of the Debentures then Outstanding plus any accrued and unpaid interest thereon (the “Change of Control Repurchase Price”) on the Change of Control Repurchase Date (the “Repayment Offer”); or

			

 

	 	
			(b)

				
			if as a result of the Change of Control there is or will be a Successor Entity, subject to Applicable Law, exchange all or such portion of the Debentures of such Holders equal to $1,000 principal amount (or an integral multiple thereof) which are Outstanding immediately prior to such Change of Control into debentures of the Successor Entity (the “Exchanged Debentures”), with each $1,000 principal amount (or an integral multiple thereof) being exchanged for unsecured convertible debentures of the Successor Entity with a principal amount of $1,000 with interest, payment and maturity provisions that are economically equivalent to the Debentures (the “Exchange Offer” and together with the Repayment Offer, the “Change of Control Offer”).

			

 

	
			(2)

				
			As promptly as practicable following the date on which the Corporation announces the Change of Control, but in no event less than 30 days prior to the anticipated date of completion of a Change of Control, the Corporation shall mail a written notice of the Change of Control to the Trustee and to each Holder (and to beneficial Holders as required by Applicable Securities Laws) (the “Change of Control Notice”). The Change of Control Notice shall include the form of a Change of Control Repurchase Notice (as defined below) to be completed by the Holder and shall state the Change of Control Offer and the following: (i) the events causing such Change of Control; (ii) the date (or expected date) of such Change of Control; (iii) the last date by which the Change of Control Repurchase Notice must be delivered to elect an option pursuant to this Section 3.1; (iv) the Change of Control Repurchase Date; (v) the Change of Control Repurchase Price; (vi) the Holder’s right to require the Corporation to purchase all or a portion of the Debentures or to exchange such Debentures for Exchanged Debentures pursuant to the Change of Control Offer; (vii) the name and address of the Trustee; (viii) the procedures that the Holder must follow to exercise rights under this Section 3.1; and (ix) the procedures that the Holder must follow to withdraw a Change of Control Notice.

			

 

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At the Corporation’s request, the Trustee shall give such Change of Control Notice in the Corporation’s name, at the Corporation’s expense, and within the notice period set out above; provided, that, in all cases, the text of such Change of Control Notice shall be prepared by the Corporation.

 

	
			(3)

				
			A Holder may exercise its rights specified in this Section 3.1 upon delivery of a written notice and which may be delivered by letter, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Uncertificated Debenture, may be delivered electronically or by other means in accordance with the Depository’s applicable procedures) of the exercise of such rights (a “Change of Control Repurchase Notice”) to the Corporation or the Trustee at any time prior to the close of business on the Business Day next preceding the Change of Control Repurchase Date, subject to extension to comply with Applicable Laws.

			

 

	
			(4)

				
			The Change of Control Repurchase Notice shall state: (i) the certificate number of the Debenture which the Holder will deliver to be purchased or exchanged (or, if the Debenture is in Uncertificated Debenture form, any other items required to comply with the applicable procedures), (ii) the portion of the principal amount of the Debenture which the Holder will deliver to be purchased or exchanged, in integral multiples of $1,000, and (iii) that such Debenture shall be purchased or exchanged as of the Change of Control Repurchase Date pursuant to the terms and conditions specified in the Debentures and in this Indenture.

			

 

	
			(5)

				
			The delivery of a Debenture for which a Change of Control Repurchase Notice has been timely delivered to the Trustee and not validly withdrawn prior to, on or after the Change of Control Repurchase Date (together with all necessary endorsements) at the office of the Trustee shall be a condition to the receipt by the Holder of the Change of Control Repurchase Price or Exchanged Debenturess therefor.

			

 

	
			(6)

				
			The Corporation shall only be obliged to purchase or exchange, pursuant to this Section 3.1 a portion of a Debenture if the principal amount of such portion is $1,000 or an integral multiple of $1,000 (provisions of this Indenture that apply to the purchase of all of a Debenture also apply to the purchase of such portion of such Debenture).

			

 

	
			(7)

				
			Notwithstanding anything herein to the contrary, any Holder delivering to the Trustee the Change of Control Repurchase Notice contemplated by this Section 3.1 shall have the right to withdraw such Change of Control Repurchase Notice in whole or in a portion thereof that is a principal amount of $1,000 or in an integral multiple thereof, at any time prior to the close of business on the Business Day prior to the Change of Control Repurchase Date by delivery of a written notice of withdrawal to the Trustee in accordance with the procedures set out in the Change of Control Notice or, if not set out therein, then in accordance with this Section 3.1(7).

			

 

	
			(8)

				
			The Trustee shall promptly notify the Corporation of the receipt by it of any Change of Control Repurchase Notice or written withdrawal thereof.

			

 

	
			(9)

				
			Anything herein to the contrary notwithstanding, in the case of Uncertificated Debentures, any Change of Control Repurchase Notice may be delivered or withdrawn and such securities may be surrendered or delivered for purchase in accordance with the applicable procedures of the Depository as in effect from time to time.

			

 

	
			(10)

				
			Upon receipt by the Trustee of a properly completed Change of Control Repurchase Notice from a Holder, the Holder of the Debenture in respect of which such Change of Control Repurchase Notice was given shall (unless such Change of Control Repurchase Notice is withdrawn as specified in Section 3.1(11)), thereafter be entitled to receive the Change of Control Repurchase Price or Exchanged Debenturess, as the case may be, with respect to such Debenture, subject to

			

 

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there being no Event of Default then occurring including a continuation thereof (other than a default in the payment of the Change of Control Repurchase Price). The Change of Control Repurchase Price shall be paid or the Exchanged Debenturess issued to such Holder promptly following the later of (i) the Change of Control Repurchase Date and (ii) the time of delivery of such Debenture to the Trustee by the Holder thereof in the manner required by this Section 3.1.

 

	
			(11)

				
			A Change of Control Repurchase Notice may be withdrawn by means of a written notice (which may be delivered by mail, overnight courier, hand delivery, facsimile transmission or in any other written form and, in the case of Uncertificated Debentures, may be delivered electronically or by other means in accordance with the applicable procedures of the Depository) of withdrawal delivered by the Holder to the Trustee at any time prior to the close of business on the Business Day immediately prior to the Change of Control Repurchase Date, specifying (1) the principal amount of the Debenture or portion thereof (which must be a principal amount of $1,000 or an integral multiple of $1,000 in excess thereof), with respect to which such notice of withdrawal is being submitted, (2) if Certificated Debentures have been issued, the certificate number of the Debentures being withdrawn in whole or in withdrawable part (or if the Debentures are not Uncertificated Debentures, such written notice must comply with the applicable procedures of the Depository) and (3) the portion of the principal amount of the Debentures that will remain subject to the Change of Control Repurchase Notice, which portion must be a principal amount of $1,000 or an integral multiple thereof.

			

 

	
			(12)

				
			On or before 12:00 p.m. (Toronto time) on the Business Day following the applicable Change of Control Repurchase Date, the Corporation shall deposit with the Trustee an amount of money (in immediately available funds if deposited on or after such Change of Control Repurchase Date), sufficient to pay the aggregate Change of Control Repurchase Price of all the Debentures or portions thereof that are to be purchased as of such Change of Control Repurchase Date.

			

 

	
			(13)

				
			If a Trustee holds, in accordance with the terms hereof, money sufficient to pay the Change of Control Repurchase Price of any Debenture for which a Change of Control Repurchase Notice has been tendered and not withdrawn in accordance with this Indenture then, on the Business Day following the applicable Change of Control Repurchase Date, such Debenture will cease to be outstanding, whether or not the Debenture is delivered to the Trustee, and interest shall cease to accrue, and the rights of the Holder in respect of the Debenture shall terminate (other than the right to receive the Change of Control Repurchase Price as aforesaid). The Corporation shall publicly announce the principal amount of Debentures repurchased on or as soon as practicable after the Change of Control Repurchase Date.

			

 

	
			(14)

				
			The Trustee will promptly return to the respective Holders thereof any Debentures with respect to which a Change of Control Repurchase Notice has been withdrawn in compliance with this Indenture.

			

 

	
			(15)

				
			If a Change of Control Repurchase Date falls after a Payment Record Date and on or before the related Interest Payment Date, then interest on the Debentures payable on such Interest Payment Date will be payable to the Holders in whose names the Debentures are registered at the close of business on such Payment Record Date.

			

 

	
			(16)

				
			Notwithstanding anything in this Section 3.1 to the contrary, the Corporation shall be entitled to withdraw the Change of Control Notice and, upon Written Order of the Corporation, the notice of Change of Control provided by the Trustee in accordance with Section 3.1(1) in the event that the anticipated Change of Control is terminated or does not occur. In such event, no Debentures shall be purchased hereunder and the Corporation shall be entitled to the return of any funds deposited

			

 

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as contemplated in Section 3.1(12) and any Debentures delivered by the Holders thereof to the Trustee shall be returned to such Holders.

 

	 	
			Section 3.2

				
			Optional Redemption of Outstanding Debentures after Change of Control Repurchase Date

			

 

	
			(1)

				
			Notwithstanding Section 3.1, if 90% or more of the principal amount of all of the Debentures then Outstanding on the date of the Change of Control Notice have been tendered and redeemed or exchanged pursuant to a Change of Control Offer, the Corporation shall have the right, at its option, at any time within 30 days of the Change of Control Repurchase Date of such Change of Control Offer, to elect to redeem all, but not less than all, of the remaining Debentures that are then Outstanding, on a date which shall be not more than 30 days and not less than 10 days after a notice of redemption of the Debentures pursuant to this Indenture given by the Corporation to the Trustee and the Holders (for the purposes of this Section 3.2, the "Redemption Notice"), at a redemption price equal to the Change of Control Repurchase Price (for the purposes of this Section 3.2, the "Redemption Price") of such Repayment Offer; provided that the accrued and unpaid interest thereon, if any, shall be calculated up to but excluding the date fixed for redemption (for the purposes of this Section 3.2, the "Redemption Date") set out in such Redemption Notice. Upon the giving of such Redemption Notice pursuant to this Section 3.4, the Maturity Date of the Debentures will be deemed to be the stated Redemption Date.

			

 

	
			(2)

				
			Upon a Redemption Notice being given in accordance with this Section 3.2, the Redemption Price shall be and become due and payable on the Redemption Date specified in such Redemption Notice and with the same effect as if it were the Maturity Date of such Debentures, the provisions hereof or of any such Debentures notwithstanding, and, from and after such Redemption Date and the deposit of the Redemption Price with the Trustee, interest shall cease and the Debenture shall cease to be Outstanding, whether or not the Debenture is delivered to the Trustee. Thereafter, all other rights of the Holder will terminate, other than the right to receive the Redemption Price payable in respect of such Debentures upon presentation for surrender of such Debentures at the office of the Trustee, on or after the Redemption Date.

			

 

	
			(3)

				
			Upon the Debentures being called for redemption as provided for in this Section 3.2, the Corporation shall deposit with the Trustee or for the account of the Trustee, at least one Business Day prior to the Redemption Date specified in the Redemption Notice, such sums as are sufficient to pay the Redemption Price of the Debentures. From the sums so deposited, the Trustee shall pay or cause to be paid to the Holders, upon surrender of the Debentures, the Redemption Price thereof.

			

 

	 	
			Section 3.3

				
			Purchase of Debentures

			

 

Provided that no Event of Default has occurred and is continuing, the Corporation may at any time and from time to time purchase all or any of the Debentures in the market (which shall include purchase from or through an investment dealer or a firm holding membership on a Recognized Stock Exchange) or by tender or by private contract, at any price, subject to compliance with Applicable Securities Laws and the provisions of this Indenture. Debentures so purchased by the Corporation shall be submitted to the Trustee for cancellation in accordance with Section 3.1. If an Event of Default has occurred and is continuing, the Corporation will not have the right to purchase any Debentures except as permitted by this Indenture.

 

If, upon an invitation for tenders, more Debentures than the Corporation is prepared to accept are tendered at the same lowest price, the Debentures to be purchased by the Corporation will be selected by the Trustee on a pro rata basis or in such other manner (which may include selection by lot, random selection by computer or any other method) as the Trustee may determine acting reasonably and in consultation

 

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with the Corporation and in accordance with Applicable Securities Laws, from the Debentures tendered by each tendering Debentureholder who tendered at such lowest price. For this purpose the Trustee may make, and may from time to time amend, regulations with respect to the manner in which Debentures may be so selected, and regulations so made shall be valid and binding upon all Debentureholders, notwithstanding the fact that as a result thereof one or more such Debentures becomes subject to purchase in part only. The Holder of any Debenture of which a part only is purchased upon surrender of such Debenture for payment, shall be entitled to receive, without expense to such Holder, a replacement Debenture for and evidencing the same obligation as the unpurchased part so surrendered, and the Trustee shall certify and deliver such replacement Debenture upon receipt of the Debenture so surrendered.

 

	 	
			Section 3.4

				
			Debentures Purchased in Part

			

 

Any Debenture that is to be purchased only in part pursuant to this Article 3 shall be surrendered at the office of the Trustee, and promptly after the date of such purchase, the Corporation shall execute and the Trustee shall authenticate and deliver to the Holder of such Debenture, without service charge, a new Debenture or Debentures, of such authorized denomination or denominations as may be requested by such Holder (which must be equal to $1,000 principal amount or any integral thereof), in aggregate principal amount equal to, and in exchange for, the portion of the principal amount of the Debenture so surrendered that is not purchased.

 

	 	
			Section 3.5

				
			Compliance with Applicable Securities Law upon Purchase of Debentures

			

 

In connection with any offer to purchase Debentures under this Article 3, the Corporation shall comply with all Applicable Securities Laws in connection with such offer to purchase or purchase of Debentures, all so as to permit the rights of the Holders and obligations of the Corporation under this Article 3 to be exercised in the time and in the manner specified therein. To the extent that compliance with any Applicable Securities Laws would result in a conflict with any of the terms thereof, this Indenture is hereby modified to the extent required for the Corporation to comply with such Applicable Securities Laws.

 

	 	
			Section 3.6

				
			Repayment to the Corporation

			

 

To the extent that the aggregate amount of cash deposited by the Corporation pursuant to the provisions of this Article 3 exceeds the aggregate purchase, repurchase or redemption amount or portions thereof that the Corporation is obligated to purchase, repurchase or redeem then the Trustee shall return any such excess cash to the Corporation as soon as practicable following the completion of the applicable requirements hereunder.

 

	 	
			Section 3.7

				
			Cancellation of Purchased Debentures

			

 

All Debentures purchased or redeemed in whole or in part pursuant to this Article 3 shall be forthwith delivered to and cancelled by the Trustee and may not be reissued or resold and no Debentures shall be issued in substitution therefor.

 

Article 4

CONVERSION OF DEBENTURES

 

	 	
			Section 4.1

				
			Right to Convert

			

 

	
			(1)

				
			Upon and subject to the provisions and conditions of this Article 4, the Holder of each Debenture shall have the right at such Holder’s option, at any time prior to the close of business on the earlier of (i) the Business Day immediately preceding the Maturity Date of the Debentures; and (ii) if the Debentures are called for redemption by notice to the holders of Debentures pursuant to

			

 

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this Article 4, on the Business Day immediately preceding the date specified by the Corporation for redemption of the Debentures (the earlier of which will be the “Time of Expiry” in respect of the Debentures), to convert any part, being $1,000 or an integral multiple thereof, of the principal amount of a Debenture into Units at the Conversion Price in effect on the Date of Conversion. To the extent a redemption is a redemption in part only of the Debentures, such right to convert, if not exercised prior to the applicable Time of Expiry, shall survive as to any Debentures not redeemed or converted and be applicable to the next succeeding Time of Expiry.

 

	
			(2)

				
			Except as provided below, no adjustment in the number of Units to be issued upon conversion will be made for dividends or distributions on Common Shares comprising the Units issuable upon conversion, the record date for the payment of which precedes the date upon which the holder becomes a holder of Common Shares in accordance with Article 4. No fractional Common Shares or Warrants will be issued, any fraction of a Common Share or Warrant that would otherwise be issued will be rounded down to the nearest whole number and Holders will receive a cash payment in satisfaction of any fractional interest based on the Current Market Price as of the Date of Conversion. The Conversion Price applicable to, and the Common Shares and Warrants comprising the Units, securities or other property receivable on the conversion of, the Debentures is subject to adjustment pursuant to the provisions of Section 4.5. All adjustments to the exercise price of the Warrants comprising part of the Units and issuable upon the conversion of the Debentures shall be made in accordance with the terms and conditions of the Warrant Indenture whether or not the Warrants have been issued upon the conversion of the Debentures.

			

 

	
			(3)

				
			Holders converting Debentures will receive, in addition to the applicable number of Units, accrued and unpaid interest in respect of the Debentures surrendered for conversion up to but excluding the Date of Conversion from, and including, the most recent Interest Payment Date in accordance with Section 4.4(5).

			

 

	
			(4)

				
			Notwithstanding any other provisions of this Indenture, if a Debenture is surrendered for conversion on an Interest Payment Date or during the five preceding Business Days, the Person or persons entitled to receive Units in respect of the Debenture so surrendered for conversion shall not become the holder or holders of record of such Common Shares and Warrants comprising the Units until the Business Day following such Interest Payment Date.

			

 

	
			(5)

				
			The issuance of the Common Shares and Warrants comprising the Units upon conversion of the Debentures will be issued pursuant to exemptions from registration under Section 3(a)(9) of the U.S. Securities Act and applicable state securities laws. The Warrants may not be exercised in the United States or by, or for the account or benefit of, any U.S. Person or person in the United States unless an exemption from the registration requirements under the U.S. Securities Act and applicable state securities laws is available at the time of such exercise.

			

 

	 	
			Section 4.2

				
			Notice of Expiry of Conversion Privilege

			

 

Notice of the expiry of the conversion privileges of the Debentures shall be given by or on behalf of the Corporation, not more than 60 days and not less than 40 days prior to the date fixed for the Time of Expiry, in the manner provided in Section 11.2.

 

	 	
			Section 4.3

				
			Revival of Right to Convert

			

 

If the redemption of any Debenture called for redemption by the Corporation is not made or the payment of the purchase price of any Debenture which has been tendered in acceptance of an offer by the Corporation to purchase Debentures for cancellation is not made, in the case of a redemption upon due surrender of such Debenture or in the case of a purchase on the date on which such purchase is required to be made, as the case may be, then, provided the Time of Expiry has not passed, the right to convert such

 

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Debentures shall revive and continue as if such Debenture had not been called for redemption or tendered in acceptance of the Corporation’s offer, respectively.

 

	 	
			Section 4.4

				
			Manner of Exercise of Right to Convert

			

 

	
			(1)

				
			The holder of a Debenture desiring to convert such Debenture in whole or in part into Units shall surrender such Debenture to the Trustee at its principal office in the City of Calgary, Alberta together with the conversion notice attached to the Debenture certificate set out in Schedule 2.2 or any other written notice in a form satisfactory to the Trustee, in either case duly executed by the holder or his executors or administrators or other legal representatives or his or their attorney duly appointed by an instrument in writing in form and executed in a manner satisfactory to the Trustee, exercising his right to convert such Debenture in accordance with the provisions of this Article; provided that with respect to Uncertificated Debentures, the obligation to surrender a Debenture to the Trustee shall be satisfied if the Trustee is provided with all documentation which it may request. Thereupon such Debentureholder or, subject to payment of all applicable stamp or security transfer taxes or other governmental charges and compliance with all reasonable requirements of the Trustee, his nominee(s) or assignee(s) shall be entitled to be entered in the books of the Corporation as at the Date of Conversion (or such later date as is specified in Section 4.1 and Section 4.4(2)) as the holder of the number of Common Shares and Warrants comprising the Units into which such Debenture is convertible in accordance with the provisions of this Article and, as soon as practicable thereafter, the Corporation shall electronically deposit the Common Shares and Warrants comprising the Units as directed by the Debentureholder or deliver to such Debentureholder or, subject as aforesaid, his nominee(s) or assignee(s), a certificate or certificates for such Common Shares and Warrants comprising the Units and make or cause to be made any payment of interest to which such holder is entitled in accordance with Section 4.4(5).

			

 

	
			(2)

				
			For the purposes of this Article, a Debenture shall be deemed to be surrendered for conversion on the date (herein called the “Date of Conversion”) on which it is so surrendered when the register of the Trustee is open and in accordance with the provisions of this Article or, in the case of Uncertificated Debentures which the Trustee received notice of and all necessary documentation in respect of the exercise of the conversion rights and, in the case of a Debenture so surrendered by post or other means of transmission, on the date on which it is received by the Trustee at its principal office specified in Section 4.4(1); provided that if a Debenture is surrendered for conversion on a day on which the register of Common Shares or Warrants is closed, the Person or Persons entitled to receive Common Shares and Warrants shall become the holder or holders of record of such Common Shares and Warrants as at the date on which such registers are next reopened.

			

 

	
			(3)

				
			Any part, being $1,000 or an integral multiple thereof, of a Debenture in a denomination in excess of $1,000 may be converted as provided in this Article and all references in this Indenture to conversion of Debentures shall be deemed to include conversion of such parts.

			

 

	
			(4)

				
			The holder of any Debenture of which only a part is converted shall, upon the exercise of his, her or its right of conversion surrender such Debenture to the Trustee in accordance with Section 4.4(1), and the Trustee shall cancel the same and shall without charge forthwith Authenticate and deliver to the holder a new Debenture or Debentures in an aggregate principal amount equal to the unconverted part of the principal amount of the Debenture so surrendered. It is understood and agreed by the parties hereto that, unless the Trustee is otherwise in a position to perform electronic conversions, in every instance where Uncertificated Debentures held through the NCI are to be converted in whole or in part, such Debentures being converted shall not be represented by Certificated Debentures, and it shall be sufficient for the Trustee to convert such

			

 

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Debentures upon receiving either the attached exercise form executed by the Depository or an NCI Letter of Instruction in a form agreed upon by the Trustee and the Depository, or such other form that they may require from time to time.

 

	
			(5)

				
			The holder of a Debenture surrendered for conversion in accordance with this Section 4.4 shall be entitled (subject to any applicable restriction on the right to receive interest on conversion of Debentures of any series) to receive accrued and unpaid interest in respect thereof from the date of the last Interest Payment Date up to but excluding the Date of Conversion (less applicable withholding taxes, if any), and the Common Shares comprising the Units issued upon such conversion shall rank only in respect of distributions or dividends declared in favour of shareholders of record on and after the Date of Conversion or such later date as such holder shall become the holder of record of such Common Shares pursuant to Section 4.4(2), from which applicable date they will for all purposes be and be deemed to be issued and outstanding as fully paid and non-assessable Common Shares.

			

 

	 	
			Section 4.5

				
			Mandatory Conversion

			

 

	
			(1)

				
			At any time following the date that is 4 months and one day following the Issue Date, the Corporation may force the conversion of the principal amount of the then Outstanding Debentures at the Conversion Price on not less than 30 days’ notice (the “Mandatory Conversion Notice”) to the Holders in accordance with Section 11.2 and the Trustee and concurrently issuing a press release should the VWAP of the Common Shares be greater than $1.20 for any 10 consecutive trading days.

			

 

	
			(2)

				
			The Mandatory Conversion Notice shall contain the date (the “Mandatory Conversion Date”) on which the Outstanding Debentures shall be deemed to be surrendered for conversion; provided that the Mandatory Conversion Date shall be a date on which the register of the Trustee is open.

			

 

	
			(3)

				
			On the Mandatory Conversion Date, the Trustee shall cancel the Outstanding Debentures held by the Debentureholders. Thereupon such Debentureholder or, subject to payment of all applicable stamp or security transfer taxes or other governmental charges and compliance with all reasonable requirements of the Trustee, his or her nominee(s) or assignee(s) shall be entitled to be entered in the books of the Corporation as at the Mandatory Conversion Date, as the holder of the number of Common Shares into which such Debenture is convertible in accordance with the provisions of this Article and, as soon as practicable thereafter, the Corporation shall electronically deposit the Common Shares in the name of the Debentureholder or deliver to such Debentureholder a certificate or certificates for such Common Shares pursuant to the terms of this Indenture and make or cause to be made any payment of interest to which such holder is entitled in accordance with Section 4.5(4).

			

 

	
			(4)

				
			The holder of a Debenture converted in accordance with Section 4.5 shall be entitled to receive accrued and unpaid interest in respect thereof from the date of the last Interest Payment Date up to but excluding the Mandatory Conversion Date (less applicable withholding taxes, if any), and the Common Shares issued upon such conversion shall rank only in respect of distributions or dividends declared in favour of shareholders of record on and after the Mandatory Conversion Date, from which date they will for all purposes be and be deemed to be issued and outstanding as fully paid and non-assessable Common Shares.

			

 

	 	
			Section 4.6

				
			Adjustment of Conversion Price

			

 

Subject to the requirements of the OTCQB and the CSE (or any other Recognized Stock Exchange on which the Common Shares are then listed), the Conversion Price in effect at any date shall be subject to adjustment from time to time as set forth below.

 

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			(a)

				
			If and whenever at any time prior to the Time of Expiry the Corporation shall (i) subdivide, redivide or change the outstanding Common Shares into a greater number of shares, (ii) reduce, combine or consolidate the outstanding Common Shares into a smaller number of shares, or (iii) issue Common Shares or securities convertible into Common Shares to the holders of all or substantially all of the outstanding Common Shares by way of a dividend or distribution (other than cash dividends or distributions for which an adjustment would be made under Section 4.6(b)) (a “Common Share Reorganization”), the Conversion Price in effect on the date of such subdivision, redivision, reduction, combination or consolidation or on the record date for such issue of Common Shares or securities convertible into Common Shares by way of a dividend or distribution, as the case may be, shall be adjusted effective immediately after the record date at which the holders of Common Shares are determined for the purpose of the Common Share Reorganization by multiplying the Conversion Price in effect immediately prior to such record date by a fraction: (1) the denominator of which shall be the number of Common Shares outstanding immediately after giving effect to such Common Share Reorganization (including, in the case where securities exchangeable for or convertible into Common Shares are distributed, the number of Common Shares that would have been outstanding had such securities been exchanged for or converted into Common Shares on such record date, assuming in any case where such securities are not then convertible or exchangeable but subsequently become so, that they were convertible or exchangeable on the record date on the basis upon which they first become convertible or exchangeable); and (2) the numerator of which shall be the number of Common Shares outstanding on such record date before giving effect to such Common Share Reorganization. Such adjustment shall be made successively whenever any event referred to in this Section 4.6 shall occur. Any such issue of Common Shares or securities convertible into Common Shares by way of a dividend or distribution shall be deemed to have been made on the record date for the dividend or distribution for the purpose of calculating the number of outstanding Common Shares under subsections (c) and (d) of this Section 4.6.

			

 

	 	
			(b)

				
			If and whenever at any time prior to the Time of Expiry the Corporation shall fix a record date for the payment of a cash dividend or distribution to the holders of all or substantially all of the outstanding Common Shares in respect of any applicable period, the Conversion Price shall be adjusted immediately after such record date so that it shall be equal to the price determined by multiplying the Conversion Price in effect on such record date by a fraction, of which the denominator shall be the Current Market Price per Common Share on such record date and of which the numerator shall be the Current Market Price per Common Share on such record date minus the amount in cash per Common Share distributed to holders of Common Shares. Such adjustment shall be made successively whenever such a record date is fixed. To the extent that any such cash dividend or distribution is not paid, the Conversion Price shall be re-adjusted to the Conversion Price which would then be in effect if such record date had not been fixed.

			

 

	 	
			(c)

				
			If and whenever at any time prior to the Time of Expiry the Corporation shall fix a record date for the issuance of options, rights or warrants to all or substantially all the holders of its outstanding Common Shares entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities convertible into Common Shares) at a price per share (or having a conversion or exchange price per share) less than 95% of the Current Market Price of a Common Share on such record date, the Conversion Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Conversion Price in

			

 

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effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date plus a number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible securities so offered) by such Current Market Price per Common Share, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares offered for subscription or purchase (or into which the convertible securities so offered are convertible). Such adjustment shall be made successively whenever such a record date is fixed. To the extent that any such options, rights or warrants are not so issued or any such options, rights or warrants are not exercised prior to the expiration thereof, the Conversion Price shall be re-adjusted to the Conversion Price which would then be in effect if such record date had not been fixed or to the Conversion Price which would then be in effect based upon the number of Common Shares (or securities convertible into Common Shares) actually issued upon the exercise of such options, rights or warrants were included in such fraction, as the case may be.

 

	 	
			(d)

				
			If and whenever at any time prior to the Time of Expiry, there is a reclassification of the Common Shares or a capital reorganization of the Corporation other than as described in Section 4.6(a) or a consolidation, amalgamation, arrangement, binding share exchange, merger of the Corporation with or into any other Person or other entity or acquisition of the Corporation or other combination pursuant to which the Common Shares are converted into or acquired for cash, securities or other property; or a sale or conveyance of the property and assets of the Corporation as an entirety or substantially as an entirety to any other Person (other than a direct or indirect Wholly-Owned Subsidiary of the Corporation) or other entity or a liquidation, dissolution or winding-up of the Corporation, any holder of a Debenture who has not exercised its right of conversion prior to the date of such reclassification, capital reorganization, consolidation, amalgamation, arrangement, merger, share exchange, acquisition, combination, sale or conveyance or liquidation, dissolution or winding-up, upon the exercise of such right thereafter, shall be entitled to receive and shall accept, in lieu of the number of Common Shares and Warrants comprising the Units then sought to be acquired by it, such amount of cash or the number of shares or other securities or property of the Corporation or of the Person or other entity resulting from such merger, amalgamation, arrangement, acquisition, combination or consolidation, or to which such sale or conveyance may be made or which holders of Common Shares receive pursuant to such liquidation, dissolution or winding-up, as the case may be, that such holder of a Debenture would have been entitled to receive on such reclassification, capital reorganization, consolidation, amalgamation, arrangement, merger, share exchange, acquisition, combination, sale or conveyance or liquidation, dissolution or winding-up, if, on the record date or the date of this Indenture, as the case may be, the holder had been the registered holder of the number of Common Shares and Warrants comprising the Units sought to be acquired by it and to which it was entitled to acquire upon the exercise of the conversion right. If determined appropriate by the Board of Directors, to give effect to or to evidence the provisions of this Section 4.6(d), the Corporation, its successor, or such purchasing Person or other entity, as the case may be, shall, prior to or contemporaneously with any such reclassification, capital reorganization, consolidation, amalgamation, arrangement, merger, share exchange, acquisition, combination, sale or conveyance or liquidation, dissolution or winding-up, enter into an indenture which shall provide, to the extent possible, for the application of the provisions set forth in this Indenture with respect to the rights and interests thereafter of the holder of Debentures to

			

 

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the end that the provisions set forth in this Indenture shall thereafter correspondingly be made applicable, as nearly as may reasonably be, with respect to any cash, shares or other securities or property to which a holder of Debentures is entitled on the exercise of its acquisition rights thereafter. Any indenture entered into between the Corporation and the Trustee pursuant to the provisions of this Section 4.6(d) shall be a supplemental indenture entered into pursuant to the provisions of Section 12.4. Any indenture entered into between the Corporation, any successor to the Corporation or such purchasing Person or other entity and the Trustee shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Section 4.6(d) and which shall apply to successive reclassifications, capital reorganizations, amalgamations, consolidations, mergers, share exchanges, acquisitions, combinations, sales or conveyances.

 

	 	
			(e)

				
			If the Corporation shall make a distribution to all holders of Common Shares of shares in the capital of the Corporation, other than Common Shares, or evidences of indebtedness or other assets of the Corporation, including securities (but excluding (x) any issuance of rights or warrants for which an adjustment was made pursuant to Section 4.6(c), and (y) any dividend or distribution paid exclusively in cash for which an adjustment was made pursuant to Section 4.6(b)(the “Distributed Securities”), then in each such case (unless the Corporation distributes such Distributed Securities to the holders of Debentures on such dividend or distribution date (as if each holder had converted such Debenture into Common Shares immediately preceding the record date with respect to such distribution)) the Conversion Price in effect immediately preceding the ex-distribution date fixed for the dividend or distribution shall be adjusted so that the same shall equal the price determined by multiplying the Conversion Price in effect immediately preceding such ex-distribution date by a fraction of which the denominator shall be the VWAP for the Common Shares for the five consecutive trading days immediately prior to the ex-distribution date and of which the numerator shall be the VWAP for the Common Shares for the first five consecutive trading days that occur immediately following the ex-distribution date. Such adjustment shall be made successively whenever any such distribution is made and shall become effective five Business Days immediately following the ex-distribution date. In the event that such dividend or distribution is not so paid or made, the Conversion Price shall again be adjusted to be the Conversion Price that would then be in effect if such dividend or distribution had not been declared.

			

 

Notwithstanding the foregoing, if the securities distributed by the Corporation to all holders of its Common Shares consist of capital stock of, or similar equity interests in, a Subsidiary or other business of the Corporation (the “Spinoff Securities”), the Conversion Price shall be adjusted, unless the Corporation makes an equivalent distribution to the holders of Debentures, so that the same shall be equal to the rate determined by multiplying the Conversion Price in effect on the record date fixed for the determination of shareholders entitled to receive such distribution by a fraction, the denominator of which shall be the sum of: (A) the VWAP for the Common Shares for the 20 consecutive trading day period (the “Spinoff Valuation Period”) commencing on and including the fifth trading day after the date on which ex-dividend trading commences for such distribution on the CSE, or such other national or regional exchange or market on which the Common Shares are then listed or quoted and (B) the product of: (i) the weighted average trading price (calculated in substantially the same way as the Current Market Price is calculated for the Common Shares) over the Spinoff Valuation Period of the Spinoff Securities or, if no such prices are available, the Fair Market Value of the Spinoff Securities (which determination shall be conclusive and shall be evidenced by an

 

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Officer’s Certificate delivered to the Trustee) multiplied by (ii) the number of Spinoff Securities distributed in respect of one Common Share and the numerator of which shall be the VWAP for the Common Shares for the Spinoff Valuation Period, such adjustment to become effective immediately preceding the opening of business on the 25th trading day after the date on which ex-dividend trading commences; provided, however, that the Corporation may in lieu of the foregoing adjustment elect to make adequate provision so that each holder of Debentures shall have the right to receive upon conversion thereof the amount of such Spinoff Securities that such holder of Debentures would have received if such Debentures had been converted on the record date with respect to such distribution.

 

	 	
			(f)

				
			If any issuer bid made by the Corporation or any of its Subsidiaries for all or any portion of Common Shares shall expire, then, if the issuer bid shall require the payment to shareholders of consideration per Common Share having a Fair Market Value (determined as provided below) that exceeds the Current Market Price per Common Share on the last date (the “Expiration Date”) tenders could have been made pursuant to such issuer bid (as it may be amended) (the last time at which such tenders could have been made on the Expiration Date is hereinafter sometimes called the “Expiration Time”), the Conversion Price shall be adjusted so that the same shall equal the rate determined by multiplying the Conversion Price in effect immediately preceding the close of business on the Expiration Date by a fraction of which: (i) the denominator shall be the sum of (A) the Fair Market Value of the aggregate consideration (which determination shall be conclusive evidence of such Fair Market Value and which shall be evidenced by an Officer’s Certificate delivered to the Trustee) payable to shareholders based on the acceptance (up to any maximum specified in the terms of the issuer bid) of all Common Shares validly tendered and not withdrawn as of the Expiration Time (the Common Shares deemed so accepted, up to any such maximum, being referred to as the “Purchased Common Shares”) and (B) the product of the number of Common Shares outstanding (less any Purchased Common Shares and excluding any Common Shares held in the treasury of the Corporation) at the Expiration Time and the Current Market Price per Common Share on the Expiration Date and (ii) the numerator of which shall be the product of the number of Common Shares outstanding (including Purchased Common Shares but excluding any Common Shares held in the treasury of the Corporation) at the Expiration Time multiplied by the Current Market Price per Common Share on the Expiration Date, such increase to become effective immediately preceding the opening of business on the day following the Expiration Date. In the event that the Corporation is obligated to purchase Common Shares pursuant to any such issuer bid, but the Corporation is permanently prevented by applicable law from effecting any or all such purchases or any or all such purchases are rescinded, the Conversion Price shall again be adjusted to be the Conversion Price which would have been in effect based upon the number of Common Shares actually purchased, if any. If the application of this clause (f) of Section 4.6 to any issuer bid would result in a decrease in the Conversion Price, no adjustment shall be made for such issuer bid under this clause (f).

			

 

	 	
			(g)

				
			In any case in which this Section 4.6 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the holder of any Debenture converted after such record date and before the occurrence of such event the additional Common Shares and Warrants comprising the Units issuable upon such conversion by reason of the adjustment required by such event before giving effect to such adjustment; provided, however, that the Corporation shall deliver to such holder an appropriate instrument evidencing such holder’s right to receive such additional Common Shares and

			

 

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Warrants comprising the Units upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares and Warrants comprising the Units declared in favour of holders of record of Common Shares on and after the Date of Conversion or such later date as such holder would, but for the provisions of this Section 4.6(e), have become the holder of record of such additional Common Shares pursuant to Section 4.4(2).

 

	 	
			(h)

				
			The adjustments provided for in this Section 4.6 are cumulative and shall apply to successive subdivisions, redivisions, reductions, combinations, consolidations, distributions, issues or other events resulting in any adjustment under the provisions of this Section, provided that, notwithstanding any other provision of this Section, no adjustment of the Conversion Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Conversion Price then in effect; provided however, that any adjustments which by reason of this Section 4.6(h) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.

			

 

	 	
			(i)

				
			For the purpose of calculating the number of Common Shares outstanding, Common Shares owned by or for the benefit of the Corporation shall not be counted.

			

 

	 	
			(j)

				
			In the event of any question arising with respect to the adjustments provided in this Section 4.6, such question shall be conclusively determined by a firm of nationally recognized chartered accountants appointed by the Corporation and acceptable to the Trustee (who may be the auditors of the Corporation); such accountants shall have access to all necessary records of the Corporation and such determination shall be binding upon the Corporation, the Trustee, and the Debentureholders.

			

 

	 	
			(k)

				
			In case the Corporation shall take any action affecting the Common Shares other than action described in this Section 4.6, which in the opinion of the Board of Directors, would materially affect the rights of Debentureholders, the Conversion Price shall be adjusted in such manner and at such time, by action of the Board of Directors, as the Board of Directors, in their sole discretion acting reasonably and in good faith may determine to be equitable in the circumstances. Failure of the directors to make such an adjustment shall be conclusive evidence that they have determined that it is equitable to make no adjustment in the circumstances.

			

 

	 	
			(l)

				
			No adjustment in the Conversion Price shall be made in respect of any event described in Section 4.6(a), Section 4.6(b), Section 4.6(c), Section 4.6(e), Section 4.6(f) other than the events described in Section 4.6(a)(i) or Section 4.6(a)(ii) if the holders of the Debentures are entitled to participate in such event on the same terms mutatis mutandis as if they had converted their Debentures prior to the date of this Indenture or record date, as the case may be, of such event.

			

 

	 	
			(m)

				
			Except as stated above in this Section 4.6, no adjustment will be made in the Conversion Price for any Debentures as a result of the issuance of Common Shares at less than the Current Market Price for such Common Shares on the date of issuance or the then applicable Conversion Price.

			

 

	 	
			(n)

				
			Notwithstanding any provision in this Indenture, no adjustment pursuant to this Section 4.6 shall be effective unless a corresponding adjustment is made to the Debentures if required in order to maintain the economic equivalency of the Debentures and the Debentures and to maintain the pari passu nature of the Debentures and the Debentures set out in Section 2.11.

			

 

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			Section 4.7

				
			No Requirement to Issue Fractional Common Shares or Warrants

			

 

The Corporation shall not be required to issue fractional Common Shares or Warrants upon the conversion of Debentures pursuant to this Article. If more than one Debenture shall be surrendered for conversion at one time by the same holder, the number of whole Common Shares or Warrants issuable upon conversion thereof shall be computed on the basis of the aggregate principal amount of such Debentures to be converted. If any fractional interest in a Common Share or Warrant would, except for the provisions of this Section, be deliverable upon the conversion of any principal amount of Debentures, any fraction of a Common Share or Warrant that would otherwise be issued will be rounded down to the nearest whole number and the Corporation shall, in lieu of delivering any certificate representing such fractional interest, make a cash payment to the holder of such Debenture of an amount equal to the fractional interest which would have been issuable multiplied by the Current Market Price.

 

	 	
			Section 4.8

				
			Corporation to Reserve Common Shares and Warrants

			

 

The Corporation covenants with the Trustee that it will at all times reserve and keep available out of its authorized Common Shares and Warrants (if the number thereof is or becomes limited), solely for the purpose of issue upon conversion of Debentures as in this Article provided, and conditionally allot to Debentureholders who may exercise their conversion rights hereunder, such number of Common Shares and Warrants as shall then be issuable upon the conversion of all Outstanding Debentures. The Corporation covenants with the Trustee that all Common Shares and Warrants which shall be so issuable shall be duly and validly issued as fully-paid and non-assessable.

 

	 	
			Section 4.9

				
			Cancellation of Converted Debentures

			

 

Subject to the provisions of Section 4.4 as to Debentures converted in part, all Debentures converted in whole or in part under the provisions of this Article shall be forthwith delivered to and cancelled by the Trustee and no Debenture shall be issued in substitution for those converted.

 

	 	
			Section 4.10

				
			Certificate as to Adjustment

			

 

The Corporation shall from time to time immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Section 4.6, deliver an Officer’s Certificate to the Trustee specifying the nature of the event requiring the same and the amount of the adjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based, which certificate and the amount of the adjustment specified therein shall be verified by an opinion of a firm of nationally recognized chartered accountants appointed by the Corporation and acceptable to the Trustee (who may be the Auditors of the Corporation) and shall be conclusive and binding on all parties in interest. When so approved, the Corporation shall, except in respect of any subdivision, redivision, reduction, combination or consolidation of the Common Shares, forthwith give notice to the Debentureholders in the manner provided in Section 4.3 specifying the event requiring such adjustment or readjustment and the results thereof, including the resulting Conversion Price.

 

	 	
			Section 4.11

				
			Notice of Special Matters

			

 

The Corporation covenants with the Trustee that so long as any Debenture remains outstanding, it will give notice to the Trustee, and to the Debentureholders in the manner provided in Section 11.2, of its intention to fix a record date for any event referred to Section 4.6(a), Section 4.6(b), Section 4.6(c), or Section 4.6(e) (other than the subdivision, redivision, reduction, combination or consolidation of its Common Shares) which may give rise to an adjustment in the Conversion Price, and, in each case, such notice shall specify the particulars of such event and the record date and the date of this Indenture for such event; provided that the Corporation shall only be required to specify in such notice such particulars

 

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of such event as shall have been fixed and determined on the date on which such notice is given. Such notice shall be given not less than 7 days in each case prior to such applicable record date.

 

In addition, the Corporation covenants with the Trustee that so long as any Debenture remains outstanding, it will give notice to the Trustee, and to the Debentureholders in the manner provided in Section 11.2, at least 30 days prior to the: (i) date of this Indenture of any transaction referred to in Section 4.6(d) stating the consideration into which the Debentures will be convertible after the date of this Indenture of such transaction; and (ii) Expiration Date of any transaction referred to in Section 4.6(f) stating the consideration paid per Common Share in such transaction.

 

	 	
			Section 4.12

				
			Protection of Trustee

			

 

Subject to Section 8.1, the Trustee:

 

	 	
			(a)

				
			shall not at any time be under any duty or responsibility to any Debentureholder to determine whether any facts exist which may require any adjustment in the Conversion Price, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making the same;

			

 

	 	
			(b)

				
			shall have no duty to determine when an adjustment under this Article 4 should be made, how it should be made or what such adjustment should be, but may accept as conclusive evidence of the fact or the correctness of any such adjustment, and shall be protected in acting and relying upon, an Officers’ Certificate and Opinion of Counsel with respect thereto;

			

 

	 	
			(c)

				
			shall not be accountable with respect to the validity or value (or the kind or amount) of any Common Shares, Warrants or of any shares or other securities or property which may at any time be issued or delivered upon the conversion of any Debenture; and

			

 

	 	
			(d)

				
			shall not be responsible for any failure of the Corporation to make any cash payment or to issue, transfer or deliver Common Shares, Warrants or share or warrant certificates upon the surrender of any Debenture for the purpose of conversion, or to comply with any of the covenants contained in this Article.

			

 

	 	
			Section 4.13

				
			U.S. Legends on Common Shares

			

 

Each certificate representing Common Shares and Warrants comprising the Units issued upon conversion of Debentures bearing the U.S. Legend (or in lieu of cash as interest thereon) shall have imprinted or otherwise reproduced thereon the U.S. Legend with appropriate adjustments.

 

	 	
			Section 4.14

				
			Canadian Private Placement Legend on Common Shares and Warrants

			

 

Each certificate representing Common Shares and Warrants comprising the Units issued upon conversion of Debentures (or in lieu of cash as interest thereon), shall have imprinted or otherwise reproduced thereon such legend or legends substantially in the following form, unless not required by Applicable Securities Laws in order to permit the holder to freely trade such Common Shares and Warrants:

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE CLOSING DATE].”

 

provided that if, at any time, in the opinion of counsel to the Corporation, such legend is no longer necessary or advisable under Applicable Securities Laws, or the holder of any such legended certificate,

 

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at the holder’s expense, provides the Corporation with evidence satisfactory in form and substance to the Corporation (which may include an opinion of counsel satisfactory to the Corporation) to the effect that such legend is not required, such legended certificate may thereafter be surrendered to the Corporation in exchange for a certificate which does not bear such legend.

 

Article 5

COVENANTS

 

As long as any Debentures remain outstanding, the Corporation hereby covenants and agrees with the Trustee for the benefit of the Trustee and the Holders of the then Outstanding Debentures, as follows (unless and for so long as the Corporation and/or one or more of its Subsidiaries are the only Holders (or Beneficial Holders) of the Outstanding Debentures, in which case the following provisions of this Article 5 shall not apply):

 

	 	
			Section 5.1

				
			Payment of Principal, Premium and Interest

			

 

The Corporation shall duly and punctually pay, or cause to be paid, to every Debentureholder the principal of (and premium, if any), and interest on the Debentures of which it is a Holder in accordance with their terms and the terms of this Indenture.

 

	 	
			Section 5.2

				
			Existence; Books of Account

			

 

The Corporation shall do or cause to be done all things reasonably necessary to preserve and keep in full force and effect the corporate, partnership or other legal existence, as applicable, and the corporate, partnership or other legal power and capacity, as applicable, of the Corporation to own its properties and assets. The Corporation covenants and agrees that it will keep or cause to be kept proper books of record and account, in which full and correct entries shall be made of all financial transactions and the assets and business of the Corporation in accordance with GAAP.

 

	 	
			Section 5.3

				
			Change of Name

			

 

The Corporation shall not change its name or change any location of the jurisdiction of incorporation or formation, the registered office, principal place of business or chief executive office of any of them without providing at least 30 Business Days advance notice to the Trustee.

 

	 	
			Section 5.4

				
			Notice of Default

			

 

The Corporation shall promptly notify the Trustee upon becoming aware of the occurrence of any Default or Event of Default by delivering to the Trustee an Officer's Certificate specifying such Default or Event of Default together with a statement of an officer of the Corporation setting forth details of such Default or Event of Default and the action which has been, or is proposed to be, taken with respect thereto.

 

	 	
			Section 5.5

				
			Compliance Certificate

			

 

The Corporation shall deliver to the Trustee within 120 days after the end of each Fiscal Year (and at any other reasonable time upon demand by the Trustee) beginning with the Fiscal Year ending December 31, 2018 an Officer’s Certificate stating that a review of the Corporation’s activities during the preceding fiscal year has been made under the supervision of the signing Responsible Officer of the Corporation with a view to determining whether the Corporation has kept, observed, performed and fulfilled its obligations under this Indenture and further stating, as to the Responsible Officer of the Corporation signing such certificate, whether to the best of such officer’s knowledge the Corporation during such preceding fiscal year has kept, observed, performed and fulfilled each and every such covenant contained in this Indenture, and that in the course of the performance by the signer of its duties as an officer of the Corporation it would normally have knowledge of any Default and whether or not the signer knows of

 

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any Default that occurred during such period. If the Responsible Officer of the Corporation does know of any Default, the certificate shall describe the Default, its status and what action the Corporation is taking or proposes to take with respect thereto.

 

	 	
			Section 5.6

				
			Securities Laws

			

 

The Corporation shall:

 

	 	
			(a)

				
			take all reasonable steps and actions and do all such acts and things as may be required to: (i) as long as it meets the minimum listing requirements of such institutions, maintain the listing and posting for trading of the Common Shares on a Recognized Stock Exchange and (ii) maintain its status as a reporting issuer or equivalent in good standing or equivalent under the Applicable Securities Laws in each of the Jurisdictions; and

			

 

	 	
			(b)

				
			at the relevant times and upon exercise of the relevant rights or elections, comply and take all measures necessary to comply at all times with Applicable Securities Laws including, without limitation, make application for any order, ruling, registration or filing or give any notice required under Applicable Securities Laws;

			

 

provided that this Section 5.6 shall not prohibit the Corporation from completing a merger, amalgamation, arrangement, business combination or take-over bid pursuant to which the Corporation ceases to be a "distributing corporation" (within the meaning of the Business Corporations Act (Ontario);

 

The Trustee shall have no obligation to verify information relating to the Corporation’s compliance with this Section 6.5 and may act and rely upon all information provided by the Corporation with respect to such compliance, without independent inquiry.

 

	 	
			Section 5.7

				
			Compliance with Applicable Laws

			

 

The Corporation shall comply with the requirements of all Applicable Laws, except for U.S. Marijuana Laws, where any non-compliance with such Applicable Laws, except for U.S. Marijuana Laws, would have a Material Adverse Effect.

 

	 	
			Section 5.8

				
			Conduct of Business

			

 

The Corporation shall do or cause to be done all things reasonably required to carry on its business in a commercially reasonable manner in accordance with normal industry standards and Applicable Law, other than with respect to U.S. Marijuana Laws.

 

	 	
			Section 5.9

				
			No Distribution on Shares if Event of Default

			

 

The Corporation shall not declare or pay any distribution to the holders of its issued and outstanding shares after the occurrence of an Event of Default unless and until such default shall have been cured or waived or shall have ceased to exist.

 

	 	
			Section 5.10

				
			Payment of Trustee’s Remuneration

			

 

The Corporation will pay on demand the Trustee’s reasonable remuneration for its services as Trustee hereunder and will repay to the Trustee on demand all moneys which shall have been paid by the Trustee out of its own funds in and about the execution of the trusts hereby created. The said remuneration shall continue to be payable until the trusts hereof are finally wound up and whether or not the trusts of this Indenture shall be in course of administration by or under the direction of the court. This Section 5.10 shall survive the resignation of the Trustee or the termination of this Agreement. Notwithstanding the foregoing, the Corporation need not pay or reimburse the Trustee for expenses, disbursements or

 

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advances if the Trustee incurred such expenses, disbursements or advances as a result of its bad faith, wilful misconduct or gross negligence of a right, duty or obligation by the Trustee.

 

	 	
			Section 5.11

				
			Further Instruments and Acts

			

 

Upon reasonable request of the Trustee, the Corporation will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture. Without limiting the generality of the foregoing, at any time the Corporation is not listed on a Recognized Stock Exchange, the Corporation shall, so long as any of the Debentures or any Common Shares issuable upon conversion of thereof will at such time constitute “restricted securities” within the meaning of Rule 144(a)(3) under the U.S. Securities Act, promptly provide to the Trustee and shall, upon written request, provide to any Holder, beneficial owner or prospective purchaser of such Debentures or Common Shares issuable upon conversion of such Debentures the information required to be delivered pursuant to Rule 144A(d)(4) under the U.S. Securities Act to facilitate the resale of such Debentures or Common Shares pursuant to Rule 144A.

 

	 	
			Section 5.12

				
			Performance of Covenant by Trustee

			

 

If the Corporation fails to perform any of its covenants contained in this Indenture, the Trustee may itself perform any of such covenants capable of being performed by it, but will be under no obligation to do so. All sums expended or advanced by the Trustee for such purpose will be repayable as provided in Section 5.9 of this Indenture. No such performance or advance by the Trustee shall relieve the Corporation of any default hereunder or its continuing obligations hereunder.

 

	 	
			Section 5.13

				
			Permits

			

 

The Corporation shall maintain all Permits and other agreements or contracts in good standing except in each case where the failure to do so could not reasonably be expected to result in a Material Adverse Effect; provided that this Section 5.13 shall not prohibit the Corporation from selling, pledging, granting a security interest in or otherwise encumbering any Permits.

 

	 	
			Section 5.14

				
			Compliance with Material Agreements

			

 

The Corporation shall comply in all respects and perform its obligations under all leases (whether real or personal property), and contracts and agreements to which it is a party or by which it is bound if the non-compliance or non-performance of obligations thereunder could be expected to have a Material Adverse Effect.

 

	 	
			Section 5.15

				
			Taxes

			

 

The Corporation shall pay or cause to be paid, when due, all Taxes imposed upon them or upon their income, sales, capital or profit or any property belonging to them unless any such Tax is contested by them in good faith by appropriate proceedings with adequate provision or reserve, where required by GAAP, and to withhold, collect and remit when due all payroll and withholding taxes, and to collect and remit any harmonized sales, value added, goods and services, sales or similar tax.

 

	 	
			Section 5.16

				
			Information

			

 

The Corporation shall ensure that all information, that in each case is furnished or made available to the Trustee or the Debentureholders by or on behalf of the Corporation is, or shall be, when furnished, true and correct in all material respects as of the date thereof or, if no such date is specified, then as of the date delivered to the Trustee and/or the Debentureholders, as applicable, and does not, or shall not, when furnished, contain any untrue statement of a material fact or omit to state a material fact necessary in

 

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order to make the statement contained therein not misleading in light of the circumstances under which such statements are made.

 

Article 6

EVENTS OF DEFAULT AND REMEDIES

 

	 	
			Section 6.1

				
			Events of Default and Enforcement

			

 

	
			(1)

				
			If and when any one or more of the following events (herein called an “Event of Default”) shall happen on or after the date of this Indenture, namely:

			

 

	 	
			(a)

				
			a default in payment of any principal amount or the Change of Control Repurchase Price with respect to the Debentures, when the same becomes due and payable;

			

 

	 	
			(b)

				
			a default in payment of interest on any Debentures when due and payable and the continuance of such default for 10 days;

			

 

	 	
			(c)

				
			a default by the Corporation in performing or observing any other covenants, agreements or obligations of the Corporation as described herein, and the continuance of such default for 30 days after the earlier of the Corporation becoming aware of same and written notice to the Corporation by the Trustee or by the Holders of not less than 25% in principal amount of Outstanding Debentures requiring the same to be remedied;

			

 

	 	
			(d)

				
			the failure to make a Change of Control Offer upon the occurrence of a Change of Control;

			

 

	 	
			(e)

				
			a decree, judgment, or order by a court having jurisdiction in the premises shall have been entered adjudging the Corporation bankrupt or insolvent or approving as properly filed a petition seeking reorganization, readjustment, arrangement composition or similar relief for the Corporation, under the Bankruptcy and Insolvency Act (Canada), Companies’ Creditors Arrangement Act (Canada) or any other similar bankruptcy, insolvency or analogous applicable law to include proceedings in desastre and/or the grant of a preliminary vesting order in saisie proceedings, in each case and such decree, judgment or order of a court having jurisdiction in the premises for the appointment of a receiver, liquidator, administrator, controller or trustee or assignee in bankruptcy or insolvency of the Corporation or of a substantial part of its property, or for the winding up or liquidation of its affairs, shall have remained in force for a period of 30 consecutive days;

			

 

	 	
			(f)

				
			the Corporation shall institute proceedings to be adjudicated a voluntary bankrupt, or shall consent to the filing of a bankruptcy proceeding against it, or shall file a petition or answer or consent seeking reorganization, readjustment, arrangement, composition or similar relief under the Bankruptcy and Insolvency Act (Canada), Companies’ Creditors Arrangement Act (Canada) or any other similar bankruptcy, insolvency or analogous applicable law or shall consent to the filing or any such petition in each case, or shall consent to the appointment of a receiver or liquidator or trustee or assignee in bankruptcy or insolvency for it or of a substantial part of its property, or shall make an assignment for the benefit of creditors, or shall be unable, or admit in writing its inability, to pay its debts generally as they become due, or corporate action shall be taken by the Corporation in furtherance of any of the aforesaid actions;

			

 

	 	
			(g)

				
			if a resolution is passed for the winding-up or liquidation of the Corporation except in the course of carrying out or pursuant to a transaction in respect of which the conditions of Section 10.1 are duly observed and performed; or

			

 

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			(h)

				
			if any judgment or court order for the payment of money in excess of $500,000 in the aggregate (or the equivalent amount in any other currency) is rendered against the Corporation that is not discharged in accordance with its terms or in respect of which such cash collateral or other security satisfactory to the Trustee in the amount of the judgment or court order has not been deposited with the Trustee to be set aside to pay such judgment or court order;

			

 

then, and in each and every such case which has happened and is continuing (other than an Event of Default specified in clause (e) or (f) above), the Trustee may, in its discretion, and shall, upon the written request of the holders of, collectively, not less than 25% in principal amount of the Outstanding Debentures at such time, declare the principal of (and premium, if any) together with accrued interest on all such Debentures to be due and payable immediately, by a Notice in writing to the Corporation (and to the Trustee if given by the Holders), and upon any such declaration such principal amount and premium, if any, together with accrued interest thereon, shall become immediately due and payable. If the Trustee fails to notify in writing the Corporation pursuant to the terms hereof, the Debentureholders having provided the written request to the Trustee may do so. If an Event of Default specified in clause (e) or (f) occurs, then the principal of (and premium, if any) together with accrued interest on all Outstanding Debentures shall immediately become due and payable without delivery of any Notice or other act on the part of either the Trustee of any Holder.

 

	 	
			Section 6.2

				
			Notice of Event of Default

			

 

The Trustee shall, within five Business Days after the Trustee becomes aware of the occurrence of an Event of Default, give to the Holders by way of written Notice, Notice of every Event of Default so occurring and continuing at the time the Notice is given to the Holders. When a Notice of the occurrence of an Event of Default is given by the Trustee pursuant to this Section 6.2 and the Event of Default is thereafter cured, the Trustee shall, within 5 Business Days after the Corporation provides written Notice to the Trustee that the Event of Default has been cured and is no longer outstanding, give to all Holders to whom Notice of the occurrence of the Event of Default was given, Notice that the Event of Default is no longer outstanding.

 

	 	
			Section 6.3

				
			Waiver of Default

			

 

	
			(1)

				
			The holders of, collectively, more than 50% in aggregate principal amount of the Outstanding Debentures, may on behalf of the Holders of all Debentures, by written Notice to the Trustee approved by an instrument in writing signed in one or more counterparts by such Holders or their duly appointed proxies or agents, instruct the Trustee to waive any past Default or Event of Default hereunder and its consequences, except a Default:

			

 

	 	
			(a)

				
			in the payment of the principal of (or premium, if any) or interest on any Debentures; or

			

 

	 	
			(b)

				
			in respect of a covenant or provision hereof that under Section 12.2 cannot be modified or amended without approval by Extraordinary Resolution.

			

 

 

	
			(2)

				
			Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture. No such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

			

 

	 	
			Section 6.4

				
			Waiver of Acceleration

			

 

At any time after a declaration of acceleration with respect to the Debentures has been made pursuant to this Article 6 and before a judgment or decree for payment of the money due has been obtained by the Trustee as hereinafter provided, the Holders of, collectively, more than 50% in aggregate principal

 

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amount of Outstanding Debentures by written Notice to the Trustee approved by an instrument in writing signed in one or more counterparts by such holders or their duly appointed proxies or agents, may instruct the Trustee to thereupon rescind and annul such declaration and its consequences if:

 

	 	
			(a)

				
			the Corporation has paid or deposited with the Trustee a sum sufficient to pay:

			

 

	 	
			(i)

				
			all overdue interest on all Debentures;

			

 

	 	
			(ii)

				
			the principal of or Change of Control Repurchase Price, as applicable (and premium, if any on), any of the Debentures which have become due otherwise than by such declaration of acceleration and interest thereon at the rate or rates prescribed therefore in such Debentures; and

			

 

	 	
			(iii)

				
			to the extent that payment of such interest is lawful and applicable, interest upon overdue instalments of interest at the rate or rates prescribed therefor in such Debentures;

			

 

	 	
			(b)

				
			all Events of Default with respect to the Debentures, other than the non-payment of the principal of (and premium, if any), and interest on, such Debentures which have become due solely by such declaration of acceleration, have been cured or waived in accordance with the provisions of this Indenture; and

			

 

	 	
			(c)

				
			the rescission would not conflict with any judgment or decree of a court of competent jurisdiction.

			

 

	 	
			Section 6.5

				
			Other Remedies

			

 

(1)     If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy to collect the payment of principal of (and premium, if any) or interest on Debentures or to enforce the performance of any terms of the Debentures or this Indenture.

 

(2)     the Trustee may maintain a Proceeding even if it does not possess any Debentures or does not produce any of them in the Proceeding. A delay or omission by the Trustee or any Holder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default.

 

	 	
			Section 6.6

				
			Application of Money Collected

			

 

Any money collected by the Trustee pursuant to this Article 6 in respect of Debentures shall (subject to any claims having priority under Applicable Law) be applied in the following order, at the dates fixed by the Trustee and, in case of the distribution of such money on account of principal of (and premium, if any) or interest, upon presentation of Debentures and the notation thereon of the payment (if only partially paid) and upon surrender thereof (if fully paid):

 

	 	
			(a)

				
			first, to the payment of all amounts due to the Trustee of its compensation, costs, charges, expenses, borrowing, advances or other moneys furnished or provided under this Indenture with respect to such Debentures;

			

 

	 	
			(b)

				
			second, to the payment of accrued interest on such Debentures;

			

 

	 	
			(c)

				
			third, to the payment of the principal of (and premium, if any) on such Debentures;

			

 

	 	
			(d)

				
			fourth, to the payment of any other amounts with respect to such Debentures; and

			

 

	 	
			(e)

				
			fifth, to whomever may be lawfully entitled to receive the balance of such money.

			

 

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			Section 6.7

				
			Control by Holders

			

 

	
			(1)

				
			The Holders of, collectively, at least a majority in principal amount of the Outstanding Debentures may:

			

 

	 	
			(a)

				
			direct the time, method and place in the Province of Ontario of conducting any Proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it with respect to the Debentures; and

			

 

	 	
			(b)

				
			take any other action authorized to be taken by or on behalf of the Holders of any specified aggregate principal amount of Debentures under any provisions of this Indenture or under Applicable Law.

			

 

	
			(2)

				
			the Trustee may refuse, however, to follow any direction that Counsel to the Trustee advises conflicts with Applicable Law or this Indenture.

			

 

	 	
			Section 6.8

				
			Limitation on Suits

			

 

	
			(1)

				
			No Holder of any Debenture will have any right to pursue any remedy (including any action, suit or proceeding authorized or permitted by this Indenture or pursuant to Applicable Law, except actions for payment of overdue principal, premium, if any, or interest with respect to this Indenture or the Debentures unless: (i) the Holder gives to the Trustee notice of a continuing Event of Default; (ii) the holders of, collectively, at least 25% in principal amount of the then Outstanding Debentures make a request in writing to the Trustee to pursue the remedy; (iii) such Holder or Holders offer or provide to the Trustee sufficient funding and indemnity in form satisfactory to the Trustee against any loss, liability or expense; (iv) the Trustee does not comply with the request within 30 days after receipt of such request and indemnity; and (v) during such 30-day period the Holders of, collectively, a majority in principal amount of Outstanding Debentures do not give the Trustee a direction inconsistent with the request.

			

 

	
			(2)

				
			Holders may not use this Indenture to prejudice the rights of another Holder or to obtain a preference or priority over another Holder.

			

 

	 	
			Section 6.9

				
			Collection Suit by Trustee

			

 

If an Event of Default occurs and is continuing, the Trustee may recover judgment in its own name and as trustee against the Corporation for the whole amount of principal (and premium, if any) and interest remaining unpaid on the Debentures and any other amounts owing under the terms of this Indenture.

 

	 	
			Section 6.10

				
			Trustee May File Proofs of Claim

			

 

The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders lodged or allowed in any judicial proceedings relative to the Corporation, its creditors or its property.

 

	 	
			Section 6.11

				
			Undertaking for Costs

			

 

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defences made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.8, or a suit by

 

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any Holder, group of Holders, of, collectively, more than 50% in aggregate principal amount of the Outstanding Debentures.

 

	 	
			Section 6.12

				
			Delay or Omission Not Waiver

			

 

No delay or omission of the Trustee or of any Holder of any Debenture to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

 

	 	
			Section 6.13

				
			Remedies Cumulative

			

 

No remedy herein conferred upon or reserved to the Trustee or upon or to the Holders is intended to be exclusive of any other remedy, but each remedy shall be cumulative and shall be in addition to every other remedy given hereunder or now existing or hereafter to exist by law or statute.

 

	 	
			Section 6.14

				
			Judgment Against the Corporation

			

 

The Corporation covenants and agrees with the Trustee that, in case of any Proceeding to obtain judgment for payment of the principal of, premium, if any, or interest, if any, on the Debentures, judgment may be rendered against it in favour of the Holders or in favour of the Trustee, as holder of a power of attorney for the Holders, for the amount which may remain due in respect of the Debentures and the interest and premium, if any, thereon.

 

	 	
			Section 6.15

				
			Rights of Holders to Receive Payment

			

 

Notwithstanding any other provision of this Indenture, the right of any Holder of a Debenture to receive payment of the principal amount and interest, if any, in respect of the Debentures held by such Holder, on or after the respective due dates expressed in the Debentures and this Indenture (whether upon repurchase or otherwise), and to bring suit for the enforcement of any such payment on or after such respective due dates is, subject to compliance with the provisions of Section 6.8, absolute and unconditional and shall not be impaired or affected without the consent of the Holder.

 

Article 7

SATISFACTION AND DISCHARGE

 

	 	
			Section 7.1

				
			Non-Presentation of Debentures

			

 

If any Debentureholder fails to present any Debentures for payment on the date on which the principal of, premium, if any, or interest thereon, becomes payable, whether on a payment date, Maturity Date or any other repayment date, or shall not accept payment on account thereof and give such receipt therefore, if any, as the Trustee may require:

 

	 	
			(a)

				
			the Corporation shall thereafter be entitled to pay or deliver to the Trustee and direct the Trustee to set aside; or

			

 

	 	
			(b)

				
			in respect of moneys in the hands of the Trustee which may or should be applied to the payment of the Debentures, the Corporation shall thereafter be entitled to direct the Trustee to set aside;

			

 

the principal of, premium, if any, and interest on such Holder’s Debentures, in trust to be paid to such Debentureholder upon due presentation or surrender of such Debentures in accordance with the provisions of this Indenture; and thereupon the principal of, premium, if any, and interest payable on each Debenture in respect whereof such moneys have been set aside shall be deemed to have been paid and the

 

-51-

 

 

Holder thereof shall thereafter have no right in respect thereof except to receive delivery and payment of the moneys so set aside by the Trustee upon due presentation and surrender thereof, subject to the provisions of Section 2.4.

 

	 	
			Section 7.2

				
			Discharge

			

 

The Trustee shall at the written request of the Corporation release and discharge this Indenture and execute and deliver such instruments as it shall be advised by Counsel are requisite for that purpose and release the Corporation from its covenants herein contained (other than the provisions relating to the indemnification of the Trustee), upon proof being given to the reasonable satisfaction of the Trustee that the principal of, premium, if any, and interest on (including interest on amounts in default, if any) all of the Debentures and all other moneys payable hereunder have been paid or satisfied or that, all of the Debentures having matured, payment of the principal of, premium, if any, and interest (including interest on amounts in default, if any) on such Debentures and all other moneys payable hereunder have been duly and effectually provided for in accordance with the provisions hereof.

 

Article 8

CONCERNING THE TRUSTEE

 

	 	
			Section 8.1

				
			Duties of Trustee

			

 

In the exercise of its rights, duties and obligations prescribed or conferred by this Indenture, the Trustee shall act honestly and in good faith and shall exercise that degree of care, diligence and skill that a reasonably prudent corporate trustee would exercise in comparable circumstances. Subject to the foregoing, the Trustee shall be liable only for an act or failure to act arising from or in connection with dishonesty, bad faith, wilful misconduct, gross negligence or reckless disregard of a right, duty or obligation by the Trustee. The Trustee shall not be liable for any act or default on the part of any agent employed by it or for permitting any agent or co-trustee to receive and retain any moneys payable to the Trustee under this Indenture, except as aforesaid. 

 

	 	
			Section 8.2

				
			Employ Agents

			

 

The Trustee may, but is not required to employ (at the expense of the Corporation) such Counsel, agents and other assistants as it may reasonably require for the proper determination and discharge of its duties under this Indenture, and shall not be responsible for any negligence or misconduct on the part of any such Counsel, agent or other assistant or for any liability incurred by any Person as a result of not employing such Counsel, agent or other assistant, and may pay reasonable remuneration for all services performed for it with respect to this Indenture, and shall be entitled to receive reimbursement for all reasonable disbursements, costs, liabilities and expenses made or incurred by it with respect to this Indenture. All such disbursements, costs, liabilities and expenses in relation to this Indenture and all expenses incidental to the preparation, execution, creation and issuance of the Debentures, whether done or incurred at the request of the Trustee or the Corporation, shall bear interest at the posted annual rate of interest charged by the Trustee from time to time to its corporate trust customers from the date which is 30 days following receipt by the Corporation of an invoice from the Trustee with respect to such expenses until the date of reimbursement and shall (together with such interest) be paid by the Corporation immediately upon receipt of such invoice.

 

	 	
			Section 8.3

				
			Reliance on Evidence of Compliance

			

 

In the exercise of its rights, duties and obligations under this Indenture, the Trustee may, if it is acting in good faith, act and rely, as to the truth of the statements and the accuracy of the opinions expressed therein, upon statutory declarations, Opinions of Counsel, reports, directions, orders, certificates and Officer’s Certificates of the Corporation required by the Trustee to be furnished to it in the exercise of its

 

-52-

 

 

rights, duties and obligations under this Indenture, if the Trustee examines such statutory declarations, Opinions of Counsel, reports, directions, orders, certificates or Officer’s Certificates of the Corporation and determines that they indicate compliance with the applicable requirements of this Indenture.

 

	 	
			Section 8.4

				
			Advice of Experts

			

 

The Trustee may act or not act and rely or not rely, and shall be protected in acting or not acting and relying or not relying in good faith, on the opinion, advice or information (including the Opinion of Counsel) obtained from any counsel, auditor, valuator, engineer, surveyor or other expert, whether obtained by the Trustee or by the Corporation in relation to any matter arising in the administration of the trusts hereof and the Trustee shall not be responsible for any misconduct on the part of any of them or for any loss occasioned by so acting unless such action was taken in bad faith or such action constitutes negligence or wilful misconduct, and, if acting in good faith, may rely as to the truth of the statements and the accuracy of the opinions expressed in any report or opinion furnished by such Person and may obtain such assistance as may be necessary to the proper determination and discharge of its duties and may pay proper and reasonable compensation for all such legal and other advice or assistance as aforesaid, including the disbursements of any legal or other advisor or assistants.

 

	 	
			Section 8.5

				
			Trustee May Deal in Debentures

			

 

In its personal capacity or any other capacity, the Trustee, and each Affiliate of the Trustee, may buy, sell, lend upon, become a pledgee of and deal in the Debentures and generally contract and enter into financial transactions with the Corporation and any Affiliate of the Corporation without being liable to account for any profits made thereby.

 

	 	
			Section 8.6

				
			Conditions Precedent to Trustee’s Obligation to Act

			

 

	
			(1)

				
			The Trustee shall not be bound to give any notice, or to do, observe or perform or see to the observance or performance by the Corporation of any of the obligations imposed under this Indenture or to supervise or interfere with any of the activities of the Corporation, or to do or take any act, action or Proceeding by virtue of the powers conferred on it by this Indenture, unless and until it shall have been required to do so under the terms of this Indenture; nor shall the Trustee be required to take notice of any Default or Event of Default, other than in payment of any moneys required by this Indenture to be paid to the Trustee, unless and until notified in writing of such Default or Event of Default by the Corporation or by any Holder, which notice shall distinctly specify such Default or Event of Default, and in the absence of any such notice the Trustee may conclusively assume that no Default or Event of Default has occurred. Any such notice or requisition shall in no way limit any discretion given to the Trustee in this Indenture to determine whether or not to take action with respect to any Default or Event of default or with respect to any such requisition.

			

 

	
			(2)

				
			The obligation of the Trustee to do any of the actions referred to in Section 8.6(1), including to commence or to continue any Proceeding or any right of the Trustee or the Holders, shall be conditional upon the Holders furnishing, when required by notice in writing by the Trustee, sufficient funds to commence or continue such action and an indemnity satisfactory to the Trustee to protect and hold harmless the Trustee against the costs, charges, expenses and liabilities which may result from such action and any loss and damage the Trustee may suffer by reason of such action.

			

 

	 	
			Section 8.7

				
			Trustee Not Required to Give Security

			

 

The Trustee shall not be required to grant any Lien or give security for its conduct or administration under this Indenture.

 

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			Section 8.8

				
			Resignation or Removal of Trustee; Conflict of Interest

			

 

	
			(1)

				
			The Trustee represents and warrants to the Corporation that at the time of the execution and delivery of this Indenture no material conflict of interest exists with respect to the Trustee’s role as a fiduciary hereunder.

			

 

	
			(2)

				
			The Trustee may resign as trustee hereunder by giving not less than 60 days notice in writing to the Corporation or such shorter notice as the Corporation may accept as sufficient. The Trustee shall resign if a material conflict of interest arises with respect to its role as trustee under this Indenture that is not eliminated within 90 days after the Trustee becomes aware of such conflict of interest. Immediately after the Trustee becomes aware that it has a material conflict of interest it shall provide the Corporation with written notice of the nature of that conflict. Upon any such resignation, the Trustee shall be discharged from all further duties and liabilities under this Indenture. None of the validity and enforceability of this Indenture or the Debentures shall be affected in any manner whatsoever by reason only of the existence of a material conflict of interest on the part of the Trustee (whether arising prior to or after the date of this Indenture). If the Trustee does not comply with this section, any Holder or the Corporation may apply to the Ontario Superior Court of Justice sitting in Toronto for an order that the Trustee be replaced as trustee under this Indenture.

			

 

	
			(3)

				
			In the event of the Trustee resigning or being removed by the Holders by Extraordinary Resolution or by the Corporation or being dissolved, becoming insolvent or bankrupt, going into liquidation or otherwise becoming incapable of acting as trustee under this Indenture, the Corporation shall immediately appoint a successor Trustee unless a successor Trustee has already been appointed by the Holders; failing such appointment by the Corporation, the retiring Trustee or any other Holder may apply, at the expense of the Corporation, to a judge of the Ontario Superior Court of Justice sitting in Toronto, on such notice as such judge may direct, for the appointment of a successor Trustee. The successor Trustee so appointed by the Corporation or by such court shall be subject to removal by the Holders by way of an Act of Holders. Any successor Trustee appointed under any provision of this section shall be a corporation authorized to carry on the business of a trust company in Alberta or Canada. On any appointment of the successor Trustee, the successor Trustee shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named in this Indenture as Trustee. The expenses of all acts, documents and Proceedings required under this section will be paid by the Corporation in the same manner as if the amount thereof were fees payable to the Trustee under this Indenture.

			

 

	
			(4)

				
			Any successor Trustee shall, immediately upon appointment, become vested with all the estates, properties, rights, powers and trusts of its predecessor in the trusts under this Indenture, with like effect as if originally named as Trustee hereunder. Nevertheless, upon the written request of the successor Trustee or of the Corporation and upon payment of all outstanding fees and expenses, the Trustee ceasing to act shall execute and deliver a document assigning and transferring to such successor Trustee, upon the trusts expressed in this Indenture, all the rights, powers and trusts of the Trustee so ceasing to act, and shall duly assign, transfer and deliver all property (including money) held by such Trustee to the successor Trustee in its place. Should any deed, conveyance or other document in writing from the Corporation be required by any successor Trustee for more fully and certainly vesting in and confirming to it such estates, properties, rights, powers and trusts, then any and all such deeds, conveyances and other documents in writing shall, on the request of the successor Trustee, be made, executed, acknowledged and delivered by the Corporation.

			

 

	
			(5)

				
			Any corporation into which the Trustee is amalgamated or with which it is consolidated or to which all or substantially all of its corporate trust business is sold or is otherwise transferred or

			

 

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			any corporation resulting from any consolidation or amalgamation to which the Trustee is a party shall be a successor Trustee under this Indenture without the execution of any document or any further act; provided that such successor Trustee is a corporation qualified to carry on the business of a trust company in Canada or any province thereof and in the United States, and shall not have a material conflict of interest in its role as a fiduciary under this Indenture.

			

 

	 	
			Section 8.9

				
			Authority to Carry on Business; Resignation

			

 

The Trustee represents and warrants to the Corporation that at the date of execution and delivery by it of this Indenture it is authorized to carry on the business of a trust company in Alberta. If the Trustee ceases to be so authorized to carry on business, the validity and enforceability of this Indenture and the Debentures issued hereunder shall not be affected in any manner by reason only of such event but the Trustee shall, within 90 days after ceasing to be authorized to carry on the business of a trust company in Canada or a province thereof, either become so authorized or resign in the manner and with the effect specified in Section 8.8.

 

	 	
			Section 8.10

				
			Protection of Trustee

			

 

By way of supplement to any Applicable Law from time to time relating to trustees and in addition to any other provision of this Indenture for the relief of the Trustee, it is expressly agreed that:

 

	 	
			(a)

				
			the Trustee shall not be liable for or by reason of any statements of fact or recitals in this Indenture or in the Debentures (except the representations and warranties contained in Section 8.1 and Section 8.11 which are being given by the Trustee in its personal capacity) or required to verify the same, but all such statements or recitals are and shall be deemed to be made by the Corporation;

			

 

	 	
			(b)

				
			the Trustee shall not be bound to give to any Person notice of the execution of this Indenture unless and until an Event of Default and declaration of acceleration has occurred, and the Trustee has determined or become obliged to enforce the same;

			

 

	 	
			(c)

				
			the Trustee shall not incur any liability or be in any way responsible for the consequence of any breach on the part of the Corporation of any of the covenants contained in this Indenture or of any acts of the agents or servants of the Corporation;

			

 

	 	
			(d)

				
			in addition to and without limiting any other protection of the Trustee hereunder, or otherwise by the law,      the Corporation indemnifies and saves harmless the Trustee and its officers, directors and employees and agents from and against any and all liabilities, losses, costs, claims, actions, expenses (including legal fees and disbursements on a solicitor and client basis) or demands whatsoever which may be brought against the Trustee or which it may suffer or incur as a result of or arising out of the performance of its duties and obligations under this Indenture including, without limitation, those arising out of or related to actions taken or omitted to be taken by the Trustee contemplated by this Indenture, and including legal fees and disbursements on a solicitor and client basis and costs and expenses incurred in connection with the enforcement of this indemnity, which the Trustee may suffer or incur, whether at law or in equity, in any way caused by or arising, directly or indirectly, in respect of any act, deed, matter or thing whatsoever made, done, acquiesced in or omitted in or about or in relation to the execution of its duties as Trustee, save only in the event of the gross negligence or reckless disregard in acting or failing to act, or the wilful misconduct, dishonesty or bad faith of the Trustee. It is understood and agreed that this indemnification shall survive the termination or discharge of this Indenture or the resignation or removal of the Trustee;

			

 

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			(e)

				
			without limiting the generality of (d), the Corporation will indemnify and hold harmless the Trustee and upon written request reimburse the Trustee for the amount of (i) any taxes levied or imposed and paid by the Trustee as a result of payments made under or with respect to the Debentures, (ii) any liability (including penalties and interest) arising therefrom or with respect thereto paid by the Trustee as a result of payments made under or with respect to the Debentures and (iii) any taxes levied or imposed and paid by the Trustee with respect to reimbursement under clauses (i) and (ii) of this Section 8.10(e), but excluding any taxes on the Trustee’s net income arising from fees for acting as the trustee hereunder or in respect of the Trustee’s capital.

			

 

	 	
			(f)

				
			the Trustee may, in the exercise of all or any of the trusts, powers and discretion vested in it under this Indenture, act by the responsible officers of the Trustee; the Trustee may delegate to any Person the performance of any of the trusts and powers vested in it by this Indenture, and any delegation may be made upon such terms and conditions and subject to such regulations as the Trustee may think to be in the best interest of the Holders;

			

 

	 	
			(g)

				
			the Trustee shall not be required to take notice or be deemed to have notice or actual knowledge of any matter under this Indenture, unless the Trustee shall have received from the Corporation or a Holder written notice stating the matter in respect of which the Trustee should have notice or actual knowledge; and

			

 

	 	
			(h)

				
			the Trustee shall not be responsible for any error made or act done by it resulting from reliance upon the signature of any Person on behalf of the Corporation or of any Person on whose signature the Trustee may be called upon to act or refrain from acting under this Indenture.

			

 

	 	
			Section 8.11

				
			Additional Representations and Warranties of Trustee

			

 

The Trustee represents and warrants to the Corporation that:

 

	 	
			(a)

				
			the Trustee is a trust company validly existing under the laws of its jurisdiction of incorporation;

			

 

	 	
			(b)

				
			the Trustee has full power, authority and right to execute and deliver and perform its obligations under this Indenture, and has taken all necessary action to authorize the execution, delivery and performance by it of this Indenture; and

			

 

	 	
			(c)

				
			this Indenture has been duly executed and delivered by the Trustee.

			

 

	 	
			Section 8.12

				
			Third Party Interests

			

 

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

 

	 	
			Section 8.13

				
			Trustee Not Bound to Act

			

 

The Trustee shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Trustee, acting reasonably, determines that such act might cause it to be in non- compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline. Further, should the Trustee, acting reasonably, determine at any time that its acting under this Indenture has resulted in its being in non-compliance with any applicable anti-

 

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money laundering or anti-terrorist legislation, regulation or guideline, then it shall have the right to resign on 10 days’ written notice to the Corporation provided: (i) that the Trustee’s written notice shall describe the circumstances of such non-compliance to the extent permitted under applicable anti-money laundering or anti-terrorist legislation, regulations or guidelines; and (ii) that if such circumstances are rectified to the Trustee’s satisfaction within such 10-day period, then such resignation shall not be effective.

 

	 	
			Section 8.14

				
			Compliance with Privacy Laws

			

 

The parties acknowledge that certain Applicable Laws addressing the protection of individuals’ personal information (collectively, the “Privacy Laws”) applies to obligations and activities under this Indenture. Despite any other provision of this Indenture, no party to this Indenture shall take or direct any action that would contravene, or cause the other to contravene, applicable Privacy Laws. The Corporation shall, prior to transferring or causing to be transferred personal information to the Trustee, obtain and retain required consents of the relevant individuals to the collection, use and disclosure of their personal information, or shall have determined that such consents either have previously been given upon which the parties can rely or are not required under the Privacy Laws. The Trustee shall use commercially reasonable efforts to ensure that its services hereunder comply with Privacy Laws. Specifically, the Trustee agrees: (a) to have a designated chief privacy officer; (b) to maintain policies and procedures to protect personal information and to receive and respond to any privacy complaint or inquiry; (c) to use personal information solely for the purposes of providing its services under or ancillary to this Indenture and not to use it for any other purpose except with the consent of or direction from the Corporation or the individual involved; (d) not to sell or otherwise improperly disclose personal information to any third party; and (e) to employ administrative, physical and technological safeguards to reasonably secure and protect personal information against loss, theft, or unauthorized access, use or modification.

 

Article 9

MEETINGS OF DEBENTUREHOLDERS

 

	 	
			Section 9.1

				
			Purposes for Which Meetings May be Called

			

 

A meeting of Debentureholders may be called at any time and from time to time pursuant to this Article to make, give or take any Act provided by this Indenture to be made, given or taken by Debentureholders.

 

	 	
			Section 9.2

				
			Call, Notice and Place of Meetings

			

 

	
			(1)

				
			The Trustee may at any time and from time to time and shall, on receipt of a Corporation Request or a requisition in writing made by the Holders of, collectively, at least 25% in principal amount of the Outstanding Debentures, call a meeting of Debentureholders for any purpose specified in Section 9.1, to be held at such time and at such place in the City of Toronto, Province of Ontario, as the Trustee shall determine. Notice of every meeting of Debentureholders, setting forth the time and place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 11.2, not less than 21 or more than 60 days prior to the date fixed for the meeting.

			

 

	
			(2)

				
			If at any time the Corporation, pursuant to a Board Resolution, or the Holders of, collectively, at least 25% in principal amount of the Outstanding Debentures shall have requested the Trustee to call a meeting of the Debentureholders for any purpose specified in Section 9.1, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the mailing of the notice of such meeting within 30 days after receipt of such request, funding and indemnity or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Corporation or the Debentureholders in the amount above specified, as the case may be, may determine the time and the place in the City of Toronto,

			

 

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			Province of Ontario, for such meeting and may call such meeting for such purposes by giving notice thereof as provided in (1).

			

 

	 	
			Section 9.3

				
			Proxies

			

 

A Debentureholder may be present and vote at any meeting of Debentureholders, and may sign written resolutions and other instruments in writing in lieu of a meeting as contemplated in Section 9.8, by an authorized representative. The Corporation with the approval of the Trustee may, from time to time, make and vary regulations as it shall think fit providing for and governing any or all the following matters for the purpose of enabling the Debentureholders to vote at any such meeting by proxy:

 

	 	
			(a)

				
			the form of the instrument appointing a proxy, which shall be in writing, and the manner in which the same shall be executed and the production of the authority of any Person signing on behalf of a Debentureholder;

			

 

	 	
			(b)

				
			the deposit of instruments appointing proxies at such place as the Trustee, the Corporation or the Debentureholder convening the meeting, as the case may be, may in the notice convening the meeting, direct and the time, if before the holding of the meeting or any adjournment thereof by which the same must be deposited; and

			

 

	 	
			(c)

				
			the deposit of instruments appointing proxies at such approved place or places other than the place at which the meeting is to be held and enabling particulars of such instruments appointing proxies to be mailed, faxed, or sent by other electronic communication before the meeting to the Corporation or to the Trustee at the place where the same is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting.

			

 

	 	
			Section 9.4

				
			Persons Entitled to Vote at Meetings

			

 

To be entitled to vote at any meeting of Debentureholders, a Person shall be: (a) a holder of one or more Outstanding Debentures; or (b) a Person appointed by an instrument in writing as proxy for a holder or holders of one or more Outstanding Debentures by such holder or holders. The only persons who shall be entitled to be present or to speak at any meeting of Debentureholders shall be the persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its Counsel and any representatives of the Corporation and its Counsel.

 

	 	
			Section 9.5

				
			Quorum; Action

			

 

	
			(1)

				
			Persons entitled to vote 25% in principal amount of Outstanding Debentures, collectively, shall constitute a quorum for a meeting of Debentureholders. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Debentureholders, be dissolved. In the absence of a quorum in any other case the meeting may be adjourned for a period of not less than 10 days as determined by the chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, the Debentureholders present or represented at such adjourned meeting shall constitute the quorum and the business for which the meeting was adjourned may be transacted. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 9.2(1), except that such notice need be given not less than five days prior to the date on which the meeting is scheduled to be reconvened.

			

 

	
			(2)

				
			Except as limited by Section 12.2, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is present as aforesaid may be adopted only by the affirmative vote of holders of, collectively, a majority in principal amount of the Debentures present or represented by proxy at such meeting or adjourned meeting; provided, however, that,

			

 

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			except as limited by Section 12.2, any resolution with respect to any Act that this Indenture expressly provides may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of Outstanding Debentures may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid by the affirmative vote of the holders of such specified percentage in principal amount of Outstanding Debentures.

			

 

	
			(3)

				
			Any resolution passed or decision taken at any meeting of Debentureholders duly held in accordance with this Section 9.5 will be binding on all Debentureholders, whether or not present or represented at the meeting.

			

 

	 	
			Section 9.6

				
			Determination of Voting Rights Chairman; Conduct and Adjournment of Meetings

			

 

	
			(1)

				
			Notwithstanding any other provisions of this Indenture, the Trustee or the Corporation, with the approval of the Trustee, may make and from time to time may vary such reasonable regulations as it may deem advisable for any meeting of Debentureholders in regard to proof of the holding of Debentures and the appointment of proxies and in regard to the appointment and duties of scrutineers of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate. Except as otherwise permitted by any such regulations, the holding of Debentures shall be proved in the manner specified in Section 1.12 and the appointment of any proxy shall be proved in the manner specified in Section 1.12.

			

 

	
			(2)

				
			The Trustee shall, by an instrument in writing, appoint a chairman and secretary of the meeting, unless the meeting shall have been called by the Corporation or by Debentureholders as provided in Section 1.12, in which case the Corporation or the Debentureholders calling the meeting, as the case may be, shall in like manner appoint a chairman and secretary.

			

 

	
			(3)

				
			At any meeting of Debentureholders, each Holder of a Debenture or proxy shall be entitled to one vote for each one thousand Dollars ($1,000) principal amount of Debentures held or represented by such Holder; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debenture challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding. The chairman of the meeting shall have no right to vote, except as a Holder of a Debenture or proxy.

			

 

	
			(4)

				
			Any meeting of Debentureholders duly called pursuant to Section 9.2 at which a quorum is present may be adjourned from time to time by Persons entitled to vote, collectively, a majority in principal amount of Outstanding Debentures represented at the meeting and the meeting may be held as so adjourned without further notice.

			

 

	 	
			Section 9.7

				
			Counting Votes and Recording Action of Meetings

			

 

The vote upon any resolution submitted to any meeting of Debentureholders shall be by written ballots on which shall be inscribed the signatures of the Debentureholders or of their representatives by proxy and the principal amounts and serial numbers of Outstanding Debentures held or represented by them if such Debentures are not Uncertificated Debentures. The chairman of the meeting shall appoint a scrutineer of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record of the proceedings of each meeting of Debentureholders shall be prepared by the secretary of the meeting and there shall be attached to said record the reports of the scrutineer of votes on any vote by ballot taken thereat.

 

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			Section 9.8

				
			Instruments in Writing

			

 

All actions which may be taken and all powers which may be exercised by the Holders and holders of Series Debentures at a meeting held as hereinbefore in this Article 9 may also be taken and exercised (i) by the Holders of, collectively, a majority in principal amount of Outstanding Debentures by an instrument in writing signed in one or more counterparts by such Holders or their duly appointed proxies or agents with respect to resolutions which are not Extraordinary Resolutions and (ii) by the Holders of, collectively, not less than 662⁄3% in principal amount of Outstanding Debentures by an instrument in writing signed in one or more counterparts by such Holders or their duly appointed proxies or agents with respect to resolutions which are Extraordinary Resolutions and the expression “Extraordinary Resolution” when used in this Indenture shall include an instrument so signed.

 

	 	
			Section 9.9

				
			Holdings by the Corporation Disregarded

			

 

In determining whether Holders holding Debentures evidencing the required number of Debentures are present at a meeting of Holders for the purpose of determining a quorum or for the purpose of determining whether Holders have concurred in any consent, waiver, resolution or other action under this Indenture, the Debentures owned legally or beneficially by the Corporation shall be disregarded.

 

	 	
			Section 9.10

				
			Persons Entitled to Attend Meetings

			

 

The Corporation and the Trustee, by their respective directors, officers and employees, the auditors of the Corporation and the legal advisers of the Corporation, the Trustee or any Debentureholder may attend and speak at any meeting of the Debentureholders, but shall have no vote as such.

 

	 	
			Section 9.11

				
			Meaning of “Extraordinary Resolution”

			

 

	
			(1)

				
			The expression “Extraordinary Resolution” when used in this Indenture means, subject to the provisions of Section 9.8, and except as hereinafter in this Article provided, a resolution proposed to be passed as an Extraordinary Resolution at a meeting of Debentureholders (including an adjourned meeting) duly convened for the purpose and held in accordance with the provisions of this Article at which the holders of, collectively, not less than 25% of the aggregate principal amount of the Debentures then outstanding are present in Person or by proxy and passed by the favourable votes of the holders of, collectively, not less than 662⁄3% of the aggregate principal amount of the Debentures present or represented by proxy at the meeting and voted upon on a poll on such resolution.

			

 

	
			(2)

				
			If, at any such meeting, the holders of, collectively, not less than 25% of the aggregate principal amount of the Debentures then outstanding are not present in Person or by proxy within 30 minutes after the time appointed for the meeting, then the meeting, if convened by or on the requisition of Debentureholders, shall be dissolved but in any other case it shall stand adjourned to such date, being not less than 21 nor more than 60 days later, and to such place and time as may be appointed by the chairman. Not less than 10 days’ notice shall be given of the time and place of such adjourned meeting in the manner provided in Section 9.3. Such notice shall state that at the adjourned meeting the Debentureholders present in Person or by proxy shall form a quorum. At the adjourned meeting the Debentureholders present in Person or by proxy shall form a quorum and may transact the business for which the meeting was originally convened and a resolution proposed at such adjourned meeting and passed thereat by the affirmative vote of holders of, collectively, not less than 662⁄3% of the aggregate principal amount of the Debentures present or represented by proxy at the meeting and voted upon on a poll shall be an Extraordinary Resolution within the meaning of this Indenture, notwithstanding that the holders of, collectively, not less than 25% in the aggregate principal amount of the Debentures then outstanding are not present in Person or by proxy at such adjourned meeting.

			

 

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			(3)

				
			Votes on an Extraordinary Resolution shall always be given on a poll and no demand for a poll on an Extraordinary Resolution shall be necessary.

			

 

	 	
			Section 9.12

				
			Powers Cumulative

			

 

Any one or more of the powers in this Indenture stated to be exercisable by the Debentureholders by Extraordinary Resolution or otherwise may be exercised from time to time and the exercise of any one or more of such powers from time to time shall not be deemed to exhaust the rights of the Debentureholders to exercise the same or any other such power or powers thereafter from time to time.

 

Article 10

AMALGAMATION, CONSOLIDATION, CONVEYANCE, TRANSFER OR LEASE

 

	 	
			Section 10.1

				
			Amalgamation and Consolidations of Corporation and Conveyances Permitted Subject to Certain Conditions

			

 

The Corporation will not consolidate with, amalgamate or merge into any other Person or enter into any reorganization or arrangement or effect any conveyance, sale, transfer or lease of all or substantially all of its assets (any such transaction, a “Subject Transaction”), other than with or into one or more of the Corporation’s Wholly-Owned Subsidiaries and other than such transactions as are permitted under this Indenture, unless in any such case:

 

	 	
			(a)

				
			the Corporation shall be the continuing Person, or if not, in the case of a successor Person (or the Person that leases or that acquires by conveyance, sale or transfer all or substantially all of the assets of the Corporation) (such Person being referred to as the “Successor Entity”), such Successor Entity shall (in the case where it is a successor Person to the Corporation) (i) be organized and existing under the laws of Canada or of any province thereof, and (ii) expressly assume the due and punctual payment of the principal of, the premium, if any, and interest on all Outstanding Debentures, according to their tenor (or issue Exchanged Debentures pursuant to Article 3). Such Successor Entity shall in all instances expressly assume the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed by the Corporation by supplemental indenture satisfactory to the Trustee, executed and delivered to the Trustee by the Successor Entity;

			

 

	 	
			(b)

				
			in the case where the Successor Entity is a successor Person to the Corporation, the Debentures will be valid and binding obligations of the Successor Entity entitling the Holders thereof, as against the Successor Entity, to all the rights of Debentureholders under this Indenture;

			

 

	 	
			(c)

				
			there shall not immediately after the date of this Indenture of the Subject Transaction be a Default or Event of Default; and

			

 

	 	
			(d)

				
			if the Corporation will not be the continuing Person, the Corporation shall have, at or prior to the date of this Indenture of the Subject Transaction delivered to the Trustee an Officer’s Certificate stating that the Subject Transaction complies with this Section 13.1 and, if a supplemental indenture is required in connection with the Subject Transaction, such supplemental indenture complies with this Article, and that all conditions precedent herein provided for and relating to the Subject Transaction have been complied with.

			

 

Upon the assumption of the Corporation’s obligations by the Successor Entity in such circumstances, the Corporation shall be discharged from all obligations under the Debentures and this Indenture. Although Subject Transactions are permitted under this Indenture subject to compliance with this Article 10, certain

 

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Subject Transactions may constitute a Change of Control of the Corporation, permitting each Holder to require the Corporation to purchase the Debentures of such holder as provided in this Indenture.

 

	 	
			Section 10.2

				
			Rights and Duties of Successor Entity

			

 

	
			(1)

				
			In case of any Subject Transaction and upon any such assumption by the Successor Entity, such Successor Entity shall agree to be bound by the terms of this Indenture as principal obligor in place of the Corporation with the same effect as if it had been named herein as the Corporation. Such Successor Entity to the Corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Corporation, any or all Debentures which theretofore shall not have been signed by the Corporation and delivered to the Trustee. All Debentures so issued shall in all respects have the same legal rank and benefit under this Indenture as Debentures theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debentures have been issued at the date of the execution hereof.

			

 

	
			(2)

				
			In the case of any Subject Transaction, such changes in phraseology and form (but not in substance) may be made in Debentures thereafter to be issued as may be appropriate.

			

 

Article 11

NOTICES

 

	 	
			Section 11.1

				
			Notice to Corporation

			

 

Any Notice to the Corporation shall be in writing and shall be valid and effective if delivered, sent by electronic transmission (with receipt confirmed), or mailed to the Corporation, at:

 

CLS Holdings USA, Inc.

1810 E. Sahara Avenue, Suite 613

Las Vegas, NV

89104

 

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

 

Cassels Brock & Blackwell LLP

Scotia Plaza, 40 King Street West

Suite 2100

Toronto, ON M5H 3C2

 

Attention:     Cam Mingay

Email:          cmingay@casselsbrock.com

 

and such Notice shall be deemed to have been received by the Corporation, where given by delivery, on the day of delivery, where sent by electronic transmission (with receipt confirmed), on the day of transmittal of such Notice if sent before 5:00 p.m. (Toronto time) on a Business Day and on the next succeeding Business Day if not sent before 5:00 p.m. (Toronto time) on a Business Day, and, where mailed, on the fifth Business Day following the mailing date, but only if sent by first class mail from a destination within Canada, or only by airmail, postage prepaid, if sent from a destination outside Canada. The Corporation may from time to time notify the Trustee of a change in address or electronic mail address by Notice given as provided in Section 11.3.

 

	 	
			Section 11.2

				
			Notice to Holders

			

 

	
			(1)

				
			Any Notice to Debentureholders may be effectively given if delivered, sent by electronic or facsimile transmission (with receipt confirmed), or mailed, in each case at the post office or

			

 

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			electronic mail address appearing in the relevant register and such Notice shall be deemed to have been received by a Holder, where given by delivery, on the day of delivery, where sent by electronic or facsimile transmission (with receipt confirmed) on the day of transmittal of such Notice if sent before 5:00 p.m. (Toronto time) on a Business Day, and, where mailed, on the fifth Business Day following the mailing date.

			

 

	
			(2)

				
			If the regular mail service is suspended or for any other reason it shall be impracticable to give Notice to Debentureholders by mail, then such notification to Debentureholders may be given by the publication of the Notice once in a daily newspaper with national circulation in Canada or in any other manner approved by the Trustee, and it shall constitute sufficient Notice to such Holders for every purpose hereunder. In any case where Notice to Debentureholders is given by mail, neither the failure to mail such Notice nor any defect in any Notice so mailed to any particular Holder shall affect the sufficiency of such Notice with respect to other Debentureholders.

			

 

	
			(3)

				
			Any Notice sent to the Debentureholders as provided above shall be effective notwithstanding that any such Notice has accidentally or inadvertently not been delivered or mailed to one or more such Holders.

			

 

	 	
			Section 11.3

				
			Notice to Trustee 

			

 

Any Notice to the Trustee shall be in writing and shall be valid and effective if delivered, sent by facsimile transmission (with receipt confirmed), or mailed to Odyssey Trust Company, at:

 

Odyssey Trust Company

Stock Exchange Tower

350 – 300 5th Ave SW

Calgary, Alberta, T2P 3C4

 

Attention:     Dan Sander

Email:          dsander@odysseytrust.com

 

and such Notice shall be deemed to have been received by Odyssey Trust Company, where given by delivery, on the day of delivery, where sent by electronic or facsimile transmission (with receipt confirmed), on the day of transmittal of such Notice if sent before 5:00 p.m. (Calgary time) on a Business Day and on the next succeeding Business Day if not sent before 5:00 p.m. (Calgary time) on a Business Day, and, where mailed, on the third Business Day following the mailing date. Odyssey Trust Company may from time to time notify the Corporation of a change in address or electronic mail address by Notice given as provided in Section 11.1.

 

	 	
			Section 11.4

				
			Mail Service Interruption

			

 

If by reason of any interruption of mail service, actual or threatened, any notice to be given to the Trustee would reasonably be unlikely to reach its destination by the time notice by mail is deemed to have been given pursuant to Section 11.3, such notice shall be valid and effective only if delivered at the appropriate address in accordance with Section 11.3.

 

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Article 12

AMENDMENTS, SUPPLEMENTS AND WAIVERS

 

	 	
			Section 12.1

				
			Without Consent of Holders

			

 

The Corporation and the Trustee may amend or supplement this Indenture (including the form of Warrant Indenture prior to the execution thereof) or the Debentures without notice to or consent of any Debentureholder for the purpose of:

 

	 	
			(a)

				
			evidencing a successor to the Corporation and the assumption by that successor of the Corporation’s obligations under this Indenture and the Debentures;

			

 

	 	
			(b)

				
			complying with the requirements of the Canada Business Corporations Act or other Applicable Law that may be applicable to trust indentures;

			

 

	 	
			(c)

				
			evidence and provide for the acceptance of an appointment under the Indenture of a successor trustee; provided that the successor trustee is otherwise qualified and eligible to act as such under the terms of this Indenture;

			

 

	 	
			(d)

				
			curing any ambiguity, omission, inconsistency or correcting or supplementing any defective provision contained in this Indenture; or

			

 

	 	
			(e)

				
			making any other changes to this Indenture that do not adversely affect the interest of the Holders in any material respect, (and in the case of a change affecting the rights of the Trustee, with its consent).

			

 

	 	
			Section 12.2

				
			With Consent of Holders

			

 

	 	
			(a)

				
			Subject to Section 12.1 and except as otherwise provided in this Section 12.2, the Corporation and the Trustee may amend or supplement this Indenture or the Debentures with the approval of the Holders of, collectively, at least a majority in aggregate principal amount of the Debentures then outstanding. However, without approval thereof by Extraordinary Resolution, an amendment, supplement or waiver may not:

			

 

	 	
			(i)

				
			alter the manner of calculation or rate of accrual of interest on the Debentures or change the time of payment;

			

 

	 	
			(ii)

				
			change the Stated Maturity of the Debentures or reduce the principal amount, Change of Control Repurchase Price or Redemption Price with respect to the Debentures;

			

 

	 	
			(iii)

				
			make any change that adversely affects the rights of Holders to require the Corporation to purchase the Debentures at the option of Holders or make any change to any other covenant that adversely affects the rights of the Holders;

			

 

	 	
			(iv)

				
			change the currency of payment of principal of, or interest on, the Debentures; or

			

 

	 	
			(v)

				
			change the provisions in this Indenture that relate to modifying or amending this Indenture.

			

 

	 	
			(b)

				
			After an amendment, supplement or waiver under this Section 12.2 becomes effective, the Corporation shall promptly mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Corporation to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such amendment, supplement or waiver.

			

 

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			Section 12.3

				
			Additional Powers Exercisable by Extraordinary Resolution

			

 

In addition to the powers conferred upon them by any other provisions of this Indenture (including under Section 12.2) or by law, a meeting of the Debentureholders shall have the following powers exercisable from time to time by Extraordinary Resolution, subject to receipt of the prior approval of the applicable Recognized Stock Exchange, where required:

 

	 	
			(a)

				
			power to authorize the Trustee to grant extensions of time for payment of any principal, premium or interest on the Debentures, whether or not the principal, premium or interest, the payment of which is extended, is at the time due or overdue;

			

 

	 	
			(b)

				
			power to sanction any modification, abrogation, alteration, compromise or arrangement of the rights of the Debentureholders or, subject to the consent of the Trustee, the Trustee against the Corporation, or against its property, whether such rights arise under this Indenture or the Debentures or otherwise;

			

 

	 	
			(c)

				
			power to assent to any modification of or change in or addition to or omission from the provisions contained in this Indenture or any Debenture which shall be agreed to by the Corporation and to authorize the Trustee to concur in and execute any indenture supplemental hereto embodying any modification, change, addition or omission;

			

 

	 	
			(d)

				
			power to sanction any scheme for the reconstruction, reorganization or recapitalization of the Corporation or for the consolidation, amalgamation or merger of the Corporation with any other Person or for the sale, leasing, transfer or other disposition of all or substantially all of the undertaking, property and assets of the Corporation or any part thereof, provided that no such sanction shall be necessary in respect of any such transaction if the provisions of Article 10 shall have been complied with;

			

 

	 	
			(e)

				
			power to direct or authorize the Trustee to exercise any power, right, remedy or authority given to it by this Indenture in any manner specified in any such Extraordinary Resolution or to refrain from exercising any such power, right, remedy or authority;

			

 

	 	
			(f)

				
			power to waive, and direct the Trustee to waive, any default hereunder or to cancel any declaration made by the Trustee pursuant to Section 6.1 which is not permitted to be waived or cancelled, as the case may be, in Section 6.3 by holders of, collectively, more than 50% of the principal amount of the Outstanding Debentures, either unconditionally or upon any condition specified in such Extraordinary Resolution;

			

 

	 	
			(g)

				
			power to restrain any Debentureholder from taking or instituting any suit, action or proceeding for the purpose of enforcing payment of the principal, premium or interest on the Debentures, or for the execution of any trust or power hereunder;

			

 

	 	
			(h)

				
			power to direct any Debentureholder who, as such, has brought any action, suit or proceeding, to stay or discontinue or otherwise deal with the same, if the taking of such suit, action or proceeding shall have been permitted by Article 6, upon payment of the costs, charges and expenses reasonably and properly incurred by such Debentureholder in connection therewith;

			

 

	 	
			(i)

				
			power to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of any Voting Securities or other securities of the Corporation;

			

 

	 	
			(j)

				
			power to appoint a committee with power and authority (subject to such limitations, if any, as may be prescribed in the resolution) to exercise, and to direct the Trustee to

			

 

-65-

 

 

	 	
			 

				
			exercise, on behalf of the Debentureholders, such of the powers of the Debentureholders as are exercisable by Extraordinary Resolution or other resolution as shall be included in the resolution appointing the committee. The resolution making such appointment may provide for payment of the expenses and disbursements of and compensation to such committee. Such committee shall consist of such number of persons as shall be prescribed in the resolution appointing it and the members need not be themselves Debentureholders. Every such committee may elect its chairman and may make regulations respecting its quorum, the calling of its meetings, the filling of vacancies occurring in its number and its procedure generally. Such regulations may provide that the committee may act at a meeting at which a quorum is present or may act by minutes signed by the number of members thereof necessary to constitute a quorum. All acts of any such committee within the authority delegated to it shall be binding upon all Debentureholders. Neither the committee nor any member thereof shall be liable for any loss arising from or in connection with any action taken or omitted to be taken by them in good faith;

			

 

	 	
			(k)

				
			power to remove the Trustee from office and to appoint a new Trustee or Trustees provided that no such removal shall be effective unless and until a new Trustee or Trustees shall have become bound by this Indenture; and

			

 

	 	
			(l)

				
			power to amend, alter or repeal any Extraordinary Resolution previously passed or sanctioned by the Debentureholders or by any committee appointed pursuant to (j).

			

 

	 	
			Section 12.4

				
			Execution of Supplemental Indentures

			

 

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article 12 (a “Supplemental Indenture”) or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and subject to Section 8.1, shall be fully protected in acting and relying upon, an Opinion of Counsel stating that the execution of such Supplemental Indenture is authorized or permitted by this Indenture, is not inconsistent herewith, is a valid and binding obligation of the Corporation, enforceable in accordance with its terms, subject to enforceability being limited by bankruptcy, insolvency or other laws affecting the enforcement of creditor’s rights generally and equitable remedies including the remedies of specific performance and injunction being granted only in the discretion of a court of competent jurisdiction and, in connection with a Supplemental Indenture executed pursuant to this Section 12.4, that the Trustee is authorized to execute and deliver such Supplemental Indenture without the consent of the Holders and, in connection with a Supplemental Indenture executed pursuant to Section 12.2, that the requisite consents of the Holders have been validly obtained in accordance with Section 12.2 hereof. The Trustee may, but shall not be obligated to, enter into any such Supplemental Indenture that adversely affects the Trustee’s own rights, duties or immunities under this Indenture or otherwise.

 

	 	
			Section 12.5

				
			Effect of Supplemental Indentures

			

 

Upon the execution of any Supplemental Indenture under this Article 12, this Indenture shall be modified in accordance therewith, and such Supplemental Indenture shall form a part of this Indenture for all purposes, unless otherwise so specified; and every Holder theretofore or thereafter certified and delivered under this Indenture shall be bound by the Supplemental Indenture.

 

	 	
			Section 12.6

				
			Reference in Debentures to Supplemental Indentures

			

 

Debentures certified and delivered after the execution of any Supplemental Indenture pursuant to this Article 12 may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such Supplemental Indenture. If the Corporation shall so determine, new

 

-66-

 

 

Debentures so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such Supplemental Indenture may be prepared and executed by the Corporation and certified and delivered by the Trustee in exchange for Outstanding Debentures.

 

Article 13

MISCELLANEOUS PROVISIONS

 

	 	
			Section 13.1

				
			Acceptance of Trusts

			

 

The Corporation and the Trustee hereby specifically acknowledge and agree that the Trustee is acting hereunder in its capacity as the Person holding the power of attorney of the Holders for the purposes of this Indenture and in conformity with and subject to the terms and conditions of this Indenture. Each Holder, by its acceptance thereof, accepts and confirms the appointment of the Trustee as the Person holding the power of attorney of such Holder for the purposes of this Indenture and in conformity with and subject to the terms and conditions of this Indenture.

 

	 	
			Section 13.2

				
			No Debenture Interest Created

			

 

Nothing in this Indenture or in the Debentures, express or implied, shall be construed to constitute a security interest under the Uniform Commercial Code or similar legislation, now in effect or hereafter enacted and made effective, in any jurisdiction.

 

	 	
			Section 13.3

				
			Protection of Trustee

			

 

The Trustee shall not be obligated under any circumstances whatsoever in the fulfilment of any of the circumstances and obligations hereunder, to expend or risk its funds or otherwise incur financial liability.

 

	 	
			Section 13.4

				
			Counterparts and Formal Date

			

 

This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of which shall together constitute one and the same instrument and notwithstanding their date of execution shall be deemed to bear a date as of the date hereof. Without limiting the foregoing, if the signatures on behalf of one party to this Indenture are on different counterparts, this shall be taken to be, and have the same effect as, signatures on the same counterpart and on a single copy of this Indenture.

 

 

 

[Signature page follows]

 

 

-67-

 

 

 

IN WITNESS WHEREOF the parties hereto have executed this Indenture as of the date first written above.

 

 

	 	 	
			CLS HOLDINGS, USA INC.

			
	 	 	 
	 	 	
			By:

				
			          /s/ Jeffrey Binder

			
	 	 	 	
			Name:

				
			Jeffrey Binder

			
	 	 	 	
			Title:

				
			CEO and Director

			

 

 

	 	 	
			ODYSSEY TRUST COMPANY, as Trustee

			
	 	 	 
	 	 	
			By:

				
			          /s/ Dan Sander

			
	 	 	 	
			Name:

				 
	 	 	 	
			Title:

				
			Authorized Signatory

			
	 	 	 
	 	 	
			By:

				 
	 	 	 	
			Name:

				 
	 	 	 	
			Title:

				
			Authorized Signatory

			

 

 

 

A

 

 

Schedule 2.2

FORM OF DEBENTURE

 

 [DEBENTURES WILL BE CREATED for U.S. and NON-U.S. PURCHASERS]

 

FOR CANADIAN HOLDERS:

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE [THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE CLOSING DATE].”

 

FOR UNITED STATES HOLDERS:

 

THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE PURSUANT HERETO HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “U.S. SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. THE HOLDER HEREOF, BY PURCHASING THESE SECURITIES, AGREES FOR THE BENEFIT OF CENTRAL COAST AGRICULTURE, INC. (THE “CORPORATION”) THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY: (A) TO THE CORPORATION, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S UNDER THE U.S. SECURITIES ACT (“REGULATION S”) AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, AND IN EACH CASE IN ACCORDANCE WITH APPLICABLE U.S. STATE SECURITIES LAWS, (D) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE U.S. SECURITIES ACT OR (E) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE LAWS, PROVIDED THAT, IN THE CASE OF TRANSFERS PURSUANT TO (C)(2) OR (E) ABOVE THE HOLDER HAS, PRIOR TO SUCH TRANSFER, FURNISHED TO THE CORPORATION AN OPINION TO SUCH EFFECT FROM COUNSEL OF RECOGNIZED STANDING, OR OTHER EVIDENCE, IN EITHER CASE REASONABLY SATISFACTORY TO THE CORPORATION. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.

 

	 	
			[Insert CUSIP]

			
	 	
			[Insert ISIN]

			
	
			No. ●

				
			$●

			
	 	 

CLS HOLDINGS USA, INC.

 

(A corporation incorporated under the laws of the State of Nevada)

 

8.0% UNSECURED CONVERTIBLE DEBENTURE

 

 

CLS HOLDINGS USA, INC. (the “Corporation”), for value received, hereby acknowledges itself indebted and promises to pay to the order of the registered holder on December 12, 2021 (the “Maturity Date”), or on such earlier date as the principal amount hereof may become due in accordance with the provisions of the Indenture hereinafter mentioned, the principal sum of

 

[insert amount],

 

in lawful money of the United States, on presentation and surrender of this Debenture (as defined below) at the principal office of the Trustee (defined below) in the manner specified in the Indenture (as defined below), in the City of Calgary, Province of Alberta, and to pay interest on the principal amount then

 

B

 

 

Outstanding (as defined in the Indenture) at the rate of 8.0% per annum from the date of issue or from the most recent Interest Payment Date to which interest has been paid or made available for payment on the Debentures then outstanding, whichever is later, at the option of the Corporation, in like money, in equal quarterly instalments in arrears on the last day of March, June, September and December in each year (each such date, an “Interest Payment Date”), commencing on December 31, 2018 with overdue interest, if any, at the same rate after as well as before maturity and after as well as before default in payment of principal or interest. 

 

For a period of 18 months from the Issue Date, any Interest Obligation payable hereunder shall automatically accrue to the principal amount of the Debentures, and shall thereafter be deemed to be part of the principal amount of the Debentures. As interest on this Debenture becomes due following the 18 month period from the Issue Date, the Corporation (subject to early repurchase pursuant to the terms of the Indenture (as defined below)) shall forward or cause to be forwarded by ordinary post to the registered address of the registered Holder of the Debenture for the time being, or in the case of joint Holders to the registered address of one of such joint Holders, a cheque or electronic funds transfer for such interest, payable to the order of such Holder or Holders. The forwarding of such cheque or electronic funds transfer shall satisfy and discharge the liability for interest on this Debenture to the extent of the sum represented thereby, unless such cheques, if any, be not paid on presentation.

 

For the purposes of disclosure under the Interest Act (Canada), whenever interest is computed under this Debenture on the basis of a year (the “deemed year”) which contains fewer days than the actual number of days in the calendar year of calculation, such rate of interest shall be expressed as a yearly rate by multiplying such rate of interest by the actual number of days in such calendar year of calculation and dividing it by the number of days in the deemed year.

 

This Debenture is one of the 8.0% Unsecured Convertible Debentures due December 12, 2021 (the “Debentures”) created and issued under an Indenture (the “Indenture”) dated as of December 12, 2018 made between, inter alia, the Corporation and Odyssey Trust Company, as trustee (the “Trustee”). Reference is hereby made to the Indenture for a description of the rights of the holders of the Debentures, the Corporation and the Trustee and of the terms and conditions upon which the Debentures are issued and held, all to the same effect as if the provisions of the Indenture were herein set forth, to all of which provisions the Holder of this Debenture, by acceptance hereof, agrees. To the extent that the terms and conditions stated in this Debenture conflict with the terms and conditions of the Indenture, the Indenture shall prevail. All capitalized terms used herein have the meaning ascribed thereto in the Indenture unless otherwise indicated.

 

The Debentures are issuable as fully registered Debentures in denominations of $1,000 and integral multiples of $1,000. The Debentures of any authorized denomination may be exchanged, as provided in the Indenture, for Debentures in equal aggregate principal amount, provided that Debentures tendered for exchange must be equal to $1,000 principal amount or any integral thereof.

 

Any part, being $1,000 or an integral multiple thereof, of the principal of this Debenture, provided that the principal amount of this Debenture is in a denomination in excess of $1,000, is convertible, at the option of the holder hereof, upon surrender of this Debenture at the principal office of the Trustee in Calgary, Alberta, at any time prior to the close of business on the Business Day immediately preceding the Maturity Date, or if this Debenture is called for redemption on or prior to such date, then to the extent so called for redemption, up to but not after the close of business on the last Business Day immediately preceding the date specified for redemption of this Debenture, into Units, with each Unit consisting of one Common Share and one-half of one Warrant (without adjustment for interest accrued hereon or for dividends or distributions on Common Shares issuable upon conversion) at the Conversion Price, all subject to the terms and conditions and in the manner set forth in the Indenture, including adjustment to the Conversion Price in accordance with the Indenture. No Debenture may be converted during the five

 

 

 

 

Business Days preceding and including March 31, June 30, September 30 and December 31 in each year, commencing December 31, 2018, as the registers of the Trustee will be closed during such periods. The Indenture makes provision for the adjustment of the Conversion Price in the events therein specified. No fractional Common Shares or Warrants will be issued on any conversion and any fraction of a Common Share or Warrant that would otherwise be issued will be rounded down to the nearest whole number, and in lieu thereof, the Corporation will satisfy such fractional interest by a cash payment equal to the Current Market Value of such fractional interest determined in accordance with this Indenture. Holders converting their Debentures will receive accrued and unpaid interest thereon up to but excluding the date of conversion. If a Debenture is surrendered for conversion on an Interest Payment Date or during the five preceding Business Days, the Person or persons entitled to receive Common Shares and Warrants in respect of the Debenture so surrendered for conversion shall not become the holder or holders of record of such Common Shares and Warrants until the Business Day following such Interest Payment Date.

 

This Debenture and all other Debentures certified and issued under the Indenture rank pari passu with one another, in accordance to their tenor without discrimination, preference or priority. The Indenture contains restrictions on the Corporation’s ability to pay dividends.

 

Upon the giving of notice by the Trustee of the occurrence of an Event of Default in accordance with the Indenture, the Debentures will become immediately due and payable.

 

The Corporation will be required, in connection with a Change of Control, to make an offer to repurchase the Debentures then Outstanding by notice to the Holders thereof and the Trustee. The Change of Control Repurchase Price payable to the Holders will be, depending on the date upon which the Change of Control occurs, determined in accordance with the provisions of the Indenture, plus accrued and unpaid interest thereon, if any.

 

At any time following the date that is 4 months and one day following the Issue Date, the Corporation may force the conversion of the principal amount of the then Outstanding Debentures at the Conversion Price on not less than 30 days’ notice should the VWAP of the Common Shares be greater than $1.20 for any 10 consecutive trading days.

 

Any payments made by or on behalf of the Corporation under or with respect to the Debentures will be made free and clear of and without withholding or deduction for or on account of any Taxes, unless the Corporation or any other payor is required to withhold or deduct Taxes by Applicable Law or by the interpretation or administration thereof by the relevant Governmental Authority. If the Corporation or any other payor of any amount under or in respect of any amount under or in respect to the Debentures (including any amount paid in respect of proceeds of disposition of the Debentures to a Debentureholder) is so required to withhold or deduct any amount for or on account of Taxes from any payment made under or with respect to the Debentures, in respect of any payment by the Corporation the Trustee will make such withholding or deduction and will remit the full amount withheld or deducted to the relevant Governmental Authority as and when required by Applicable Law.

 

The Indenture contains provisions for the holding of meetings of Debentureholders and rendering certain resolutions passed at such meetings by, or by instruments in writing signed by, the Holders of, collectively, not less than a majority, or in the case of matters requiring approval by Extraordinary Resolution, not less than two-thirds, in aggregate principal amount of the Outstanding Debentures, binding upon all Debentureholders, subject to the provisions of the Indenture.

 

This Debenture may only be transferred upon compliance with the conditions precedent in the Indenture on the register kept at the principal office of the Trustee and at such other place or places, if any, and/or by such other registrar or registrars, if any, as the Corporation with the approval of the Trustee may designate, and may be exchanged at any such place, by the Holder hereof or his executors or administrators or other legal representatives or his or their attorney duly appointed by an instrument in

 

 

 

 

writing in form and execution satisfactory to the Trustee, and upon compliance with such reasonable requirements as the Trustee and/or registrar may prescribe, and such transfer shall be duly noted thereon by the Trustee or other registrar.

 

Neither the Debentures nor the Common Shares or Warrants issuable upon conversion of the Debentures have been or will be registered under the U.S. Securities Act of 1933, as amended (the “U.S. Securities Act”) , or any state securities laws of the United States. The issuance of the Common Shares and Warrants comprising the Units issuable upon conversion of the Debentures will be issued pursuant to exemptions from registration under Section 3(a)(9) of the U.S. Securities Act and applicable state securities laws. The Warrants may not be exercised in the United States or by, or for the account or benefit of, any U.S. Person or person in the United States unless an exemption from the registration requirements under the U.S. Securities Act and applicable state securities laws is available at the time of such exercise.

 

This Debenture shall not become obligatory for any purpose until it shall have been certified by the Trustee for the time being under the Indenture.

 

This Debenture shall be governed by and construed in accordance with the laws of the province of Alberta and the federal laws of Canada applicable thereto.

 

The Holder of this Debenture, by receiving and holding same, hereby accepts and agrees to be bound by the terms, and to be entitled to the benefits of this Debenture and of the Indenture and confirms the appointment of the Trustee and of the Indenture, the whole in accordance with and subject to the respective provisions thereof.

 

The Corporation will furnish to any Holder, upon written request and without charge, a copy of the Indenture.

 

 

 

[signature page follows]

 

 

 

 

IN WITNESS WHEREOF CLS HOLDINGS USA, INC. has caused this debenture to be signed by an authorized signing officer.

 

DATED as of           December 12       , 2018.

 

 

	 	 	
			CLS HOLDINGS USA, INC.

			 

			
	 	 	 
	 	 	
			By:

				“Jeffrey Binder”
	 	 	 	
			Name: Jeffrey Binder

			
	 	 	 	
			Title: Chairman and CEO

			

 

 

 

 

 

 

 

 

 

TRUSTEE’S CERTIFICATE

 

This Debenture is one of the 8.0% Unsecured Debentures due December 12, 2021 referred to in the within-mentioned Indenture.

 

	 	 	
			ODYSSEY TRUST COMPANY, as Trustee

			
	 	 	 
	 	 	
			By:

				 
	 	 	 	
			Authorized Signatory

				 
	 	 	 	
			Date of Certification:

				 

 

 

 

 

 

 

 

 

 

 

 

FORM OF ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ___________________, whose address and social insurance number, if applicable, are set forth below, this Debenture (or $ principal amount hereof*) of CLS HOLDINGS USA, INC. (the “Corporation”) standing in the name(s) of the undersigned in the register maintained by the registrar appointed by the Corporation with respect to such Debenture and does hereby irrevocably appoint ____________________ as its attorney to transfer such Debenture in such register, with full power of substitution in the premises.

 

Dated: _________________________________________________________________

 

Address of Transferee:____________________________________________________

 

________________________________________________________________________

(Street Address, City, Province and Postal Code)

 

Social Insurance Number of Transferee, if applicable: ___________________________

 

*If less than the full principal amount of the within Debenture is to be transferred, indicate in the space provided above the principal amount (which must be equal to $1,000 principal amount or any integral thereof) to be transferred.

 

The signature(s) to this assignment must correspond with the name(s) as written upon the face of this Debenture in every particular without alteration or any change whatsoever. The signature(s) on this form must be guaranteed by one of the following methods:

 

Canada and the USA: A Medallion Signature Guarantee obtained from a member of an acceptable medallion Signature Guarantee Program (STAMP, SEMP, MSP). Many commercial banks, savings banks, credit unions, and all broker dealers participate in a Medallion Signature Guarantee Program. The Guarantor must affix a stamp bearing the actual words “Medallion Guaranteed”.

 

Canada: A Signature Guarantee obtained from a major Canadian Schedule I chartered bank. The Guarantor must affix a stamp bearing the actual words “Signature Guaranteed”. Signature Guarantees are not accepted from Treasury Branches, Credit Unions or Caisses Populaires unless they are members of a Medallion Signature Guarantee Program.

 

USA: The undersigned confirms that this Debenture is being transferred (please check one):

 

	
			□

				
			to the Corporation;

			
	
			□

				
			outside the United States in accordance with Rule 904 of Regulation S under the U.S. Securities Act, and the undersigned has furnished to the Trustee such documentation as the Trustee or the Corporation has reasonably requested, including, if requested, an opinion of counsel;

			
	
			□

				
			in accordance with Rule 144A (“Rule 144A”) under the U.S. Securities Act to a Person who the undersigned reasonably believes is a Qualified Institutional Buyer, as such term is defined in Rule 144A, that is purchasing for its own account or for the account of one or more Qualified Institutional Buyers and to whom notice is given that the offer, sale, pledge or transfer is being made in reliance on Rule 144A;

			
	
			□

				
			in accordance with the exemption from registration under the U.S. Securities Act provided by Rule 144 thereunder, and the undersigned has provided a legal opinion of counsel of recognized standing, satisfactory to the Corporation, acting reasonably, to the effect that the sale of such securities is not required to be registered under the U.S. Securities Act;

			

 

 

 

 

 

	
			□

				
			pursuant to an effective registration statement under the U.S. Securities Act;

			
	
			□

				
			in another transaction that does not require registration under the U.S. Securities Act, and the undersigned has provided a legal opinion of counsel of recognized standing, satisfactory to the Corporation, acting reasonably, to the effect that the sale of such securities is not required to be registered under the U.S. Securities Act;

			

 

and in each case such transfer is in accordance with any applicable securities laws of any state of the United States.

 

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

 

The registered holder of this Debenture is responsible for the payment of any documentary, stamp or other transfer taxes that may be payable in respect of the transfer of this Debenture.

 

Signature of Guarantor:

 

___________________________________________________________

Authorized Officer Signature of transferring registered Holder

 

 

 

_________________________

Name of Institution

 

 

 

 

 

 

 

 

FORM OF NOTICE OF CONVERSION

 

TO:      CLS HOLDINGS USA, INC. (the “Corporation”)

 

c/o Odyssey Trust Company

Stock Exchange Tower

350 – 300 5th Ave SW

Calgary, Alberta, T2P 3C4

 

	
			Note:

				
			All capitalized terms used herein have the meaning ascribed thereto in the indenture (the “Indenture”) dated as of December 12, 2018 between the Corporation and Odyssey Trust Company, as trustee, unless otherwise indicated.

			

 

The undersigned registered holder of 8.0% Unsecured Convertible Debentures (the “Debentures”) irrevocably elects to convert such Debentures (or $           principal amount thereof*) in accordance with the terms of the Indenture referred to in such Debentures and tenders herewith the Debentures, and, if applicable, directs that the Common Shares and Warrants of the Corporation issuable upon a conversion be issued and delivered to the person indicated below. (If Common Shares and Warrants are to be issued in the name of a person other than the holder, all requisite transfer taxes must be tendered by the undersigned).

 

	
			Dated:                                                      

				 
	 	
			(Name of Registered Holder)

			
	 	 
	 	
			(Signature of Registered Holder)

			

	
			*

				
			If less than the full principal amount of the Debentures, indicate in the space provided the principal amount (which must $1,000 integral multiples thereof).

			

 

	
			NOTE:

				
			If Common Shares and Warrants are to be issued in the name of a person other than the holder, the signature must be guaranteed by a chartered bank, a trust company or by a member of an acceptable Medallion Guarantee Program. The Guarantor must affix a stamp bearing the actual words: “SIGNATURE GUARANTEED”.

			

 

(Print name in which Common Shares and Warrants are to be issued, delivered and registered)

 

Name:                                                                      

 

                                                                                

(Address)

 

                                                                                

(City, Province and Postal Code)

 

Name of guarantor:                                                 

 

Authorized signature:                                             

 

 

 

 

Schedule Section 2.26

FORM OF REGULATION S RULE 904 TRANSFER CERTIFICATE

 

UNSECURED CONVERTIBLE DEBENTURES DUE DECEMBER 12, 2021

 

In connection with the transfer of $____________ principal amount of 8.0% Unsecured Convertible Debentures due December 12, 2021 (the “Debentures”) of CLS Holdings USA, Inc. (the “Corporation”), the undersigned transferor hereby represents and warrants to the Corporation and Odyssey Trust Company (the “Trustee”) that:

 

	 	
			(a)

				
			it acknowledges that the sale of the securities of the Corporation to which this certificate relates is being made in reliance on Rule 904 of Regulation S (“Regulation S”) under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”);

			

 

	 	
			(b)

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

			

 

	 	
			(c)

				
			the offer of the Debentures was not made to a Person in the United States and either (1) at the time the buy order was originated, the buyer was outside the United States, or the seller and any Person acting on its behalf reasonably believe that the buyer was outside the United States, or (2) the transaction was executed on or through the facilities of a “designated offshore securities market” (as such term is defined in Regulation S) such as the Toronto Stock Exchange, and neither the seller nor any Person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States or a U.S. Person;

			

 

	 	
			(d)

				
			neither the seller nor any affiliate of the seller nor any Person acting on any of their behalf has engaged or will engage in any “directed selling efforts” (as such term is defined in Regulation S) in the United States in connection with the offer and sale of the Debentures;

			

 

	 	
			(e)

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

			

 

	 	
			(f)

				
			the seller does not intend to replace the securities sold in reliance on Rule 904 of Regulation S with fungible unrestricted securities; and

			

 

	 	
			(g)

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

			

 

 

 

[signature page follows]

 

 

 

C

 

 

 

 

	 	 	
			TRANSFEROR:

			
	 	 	 
	 	 	 
	 	 	
			By:

				 
	 	 	 	
			Authorized Signing Officer

				 
	 	 	 	
			 

			Date of Certification:

				 

 

 

 

 

 

 

AFFIRMATION BY SELLER'S BROKER-DEALER [if any]

 

 

We have read the foregoing representations of our customer designated in this Declaration (the "Seller") with regard to our sale, for such Seller's account, of the securities described therein, and we hereby affirm that, following due inquiry, we are of the belief that (1) the buyer is not a “U.S. Person,” and (2) that, to the best of our knowledge and belief, all other statements made therein are full, true and correct, (A) no offer to sell the Common Shares was made to a person in the United States; (B) the sale of the Common Shares will be executed in, on or through the facilities of the Canadian Securities Exchange/Toronto Stock Exchange/TSX Venture Exchange within ten (10) trading days of receiving a certificate representing the Common Shares, and we will not knowingly sell the Common Shares to any buyer in the United States; (C) no “directed selling efforts” will be made in the United States by the undersigned, any affiliate of the undersigned, or any person acting on behalf of the undersigned; and (D) we will do no more than execute the order or orders to sell the Common Shares as agent for the Seller and will receive no more than the usual and customary broker's commission that would be received by a person executing such transaction as agent.

 

Terms used herein have the meanings given to them by Rule 902 of Regulation S (see below).

 

____________________________________________________

 

Name of Firm

 

By: ________________________________________________

 

   Signature of Authorized Officer

 

____________________________________________________

 

Name of Authorized Officer (Please Print)

 

Date: ______________________________________________ex_131703.htm

 

 Exhibit 4.2

 

 

 

CLS HOLDINGS USA, INC.

 

as the Corporation

 

 

 

 

 

and

 

 

 

 

 

 

ODYSSEY TRUST COMPANY

 

as the Warrant Agent

 

 

 

 

 

 

 

 

WARRANT INDENTURE

Providing for the Issue of Warrants

 

Dated as of December 12, 2018

 

 

 

 

 

TABLE OF CONTENTS

 

 

	 	 	
			Page

			
	
			ARTICLE 1 INTERPRETATION

				
			1

			
	
			1.1

				
			Definitions.

				
			1

			
	
			1.2

				
			Gender and Number.

				
			6

			
	
			1.3

				
			Headings, Etc.

				
			6

			
	
			1.4

				
			Day not a Business Day.

				
			7

			
	
			1.5

				
			Time of the Essence.

				
			7

			
	
			1.6

				
			Monetary References.

				
			7

			
	
			1.7

				
			Applicable Law.

				
			7

			
	 	 
	
			ARTICLE 2 ISSUE OF WARRANTS

				
			7

			
	
			2.1

				
			Creation and Issue of Warrants.

				
			7

			
	
			2.2

				
			Terms of Warrants.

				
			7

			
	
			2.3

				
			Warrantholder not a Shareholder.

				
			8

			
	
			2.4

				
			Warrants to Rank Pari Passu.

				
			8

			
	
			2.5

				
			Form of Warrants.

				
			8

			
	
			2.6

				
			Book Entry Only Warrants

				
			8

			
	
			2.7

				
			Signing of Warrant Certificates.

				
			10

			
	
			2.8

				
			Authentication by the Warrant Agent.

				
			11

			
	
			2.9

				
			Legends.

				
			12

			
	
			2.10

				
			Register of Warrants

				
			14

			
	
			2.11

				
			Issue in Substitution for Warrant Certificates Lost, etc.

				
			14

			
	
			2.12

				
			Exchange of Warrant Certificates.

				
			15

			
	
			2.13

				
			Transfer and Ownership of Warrants.

				
			15

			
	
			2.14

				
			Cancellation of Surrendered Warrants.

				
			16

			
	 	 
	
			ARTICLE 3 EXERCISE OF WARRANTS

				
			16

			
	
			3.1

				
			Right of Exercise.

				
			16

			
	
			3.2

				
			Warrant Exercise.

				
			17

			
	
			3.3

				
			U.S. Restrictions; Legended Certificates

				
			20

			
	
			3.4

				
			Transfer Fees and Taxes.

				
			22

			
	
			3.5

				
			Warrant Agency.

				
			22

			
	
			3.6

				
			Effect of Exercise of Warrants.

				
			22

			
	
			3.7

				
			Partial Exercise of Warrants; Fractions.

				
			23

			
	
			3.8

				
			Expiration of Warrants.

				
			23

			
	
			3.9

				
			Accounting and Recording.

				
			23

			
	
			3.10

				
			Securities Restrictions.

				
			24

			
	 	 
	
			ARTICLE 4 ADJUSTMENT OF NUMBER OF COMMON SHARES AND EXERCISE PRICE

				
			24

			
	
			4.1

				
			Adjustment of Number of Common Shares and Exercise Price.

				
			24

			
	
			4.2

				
			Entitlement to Common Shares on Exercise of Warrant.

				
			28

			
	
			4.3

				
			No Adjustment for Certain Transactions.

				
			28

			
	
			4.4

				
			Determination by Independent Firm.

				
			29

			
	
			4.5

				
			Proceedings Prior to any Action Requiring Adjustment.

				
			29

			

 

 

 

 

	
			4.6

				
			Certificate of Adjustment.

				
			29

			
	
			4.7

				
			Notice of Special Matters.

				
			29

			
	
			4.8

				
			No Action after Notice.

				
			30

			
	
			4.9

				
			Other Action.

				
			30

			
	
			4.10

				
			Protection of Warrant Agent.

				
			30

			
	
			4.11

				
			Participation by Warrantholder.

				
			30

			
	 	 
	
			ARTICLE 5 RIGHTS OF THE CORPORATION AND COVENANTS

				
			31

			
	
			5.1

				
			Optional Purchases by the Corporation.

				
			31

			
	
			5.2

				
			General Covenants.

				
			31

			
	
			5.3

				
			Warrant Agent’s Remuneration and Expenses.

				
			32

			
	
			5.4

				
			Performance of Covenants by Warrant Agent.

				
			32

			
	
			5.5

				
			Enforceability of Warrants.

				
			32

			
	 	 
	
			ARTICLE 6 ENFORCEMENT

				
			33

			
	
			6.1

				
			Suits by Warrantholders.

				
			33

			
	
			6.2

				
			Suits by the Corporation.

				
			33

			
	
			6.3

				
			Immunity of Shareholders, etc.

				
			33

			
	
			6.4

				
			Waiver of Default.

				
			33

			
	 	 
	
			ARTICLE 7 MEETINGS OF WARRANTHOLDERS

				
			34

			
	
			7.1

				
			Right to Convene Meetings.

				
			34

			
	
			7.2

				
			Notice.

				
			34

			
	
			7.3

				
			Chairman.

				
			34

			
	
			7.4

				
			Quorum.

				
			34

			
	
			7.5

				
			Power to Adjourn.

				
			35

			
	
			7.6

				
			Show of Hands.

				
			35

			
	
			7.7

				
			Poll and Voting.

				
			35

			
	
			7.8

				
			Regulations.

				
			36

			
	
			7.9

				
			Corporation and Warrant Agent May be Represented.

				
			36

			
	
			7.10

				
			Powers Exercisable by Extraordinary Resolution.

				
			36

			
	
			7.11

				
			Meaning of Extraordinary Resolution.

				
			37

			
	
			7.12

				
			Powers Cumulative.

				
			38

			
	
			7.13

				
			Minutes.

				
			38

			
	
			7.14

				
			Instruments in Writing.

				
			38

			
	
			7.15

				
			Binding Effect of Resolutions.

				
			39

			
	
			7.16

				
			Holdings by Corporation Disregarded.

				
			39

			
	 	 
	
			ARTICLE 8 SUPPLEMENTAL INDENTURES

				
			39

			
	
			8.1

				
			Provision for Supplemental Indentures for Certain Purposes.

				
			39

			
	
			8.2

				
			Successor Entities.

				
			40

			
	 	 
	
			ARTICLE 9 CONCERNING THE WARRANT AGENT

				
			41

			
	
			9.1

				
			Indenture Legislation.

				
			41

			
	
			9.2

				
			Rights and Duties of Warrant Agent.

				
			41

			
	
			9.3

				
			Evidence, Experts and Advisers.

				
			41

			
	
			9.4

				
			Documents, Monies, etc. Held by Warrant Agent.

				
			43

			
	
			9.5

				
			Actions by Warrant Agent to Protect Interest.

				
			43

			
	
			9.6

				
			Warrant Agent Not Required to Give Security.

				
			43

			

 

 

 

 

	
			9.7

				
			Protection of Warrant Agent.

				
			43

			
	
			9.8

				
			Replacement of Warrant Agent; Successor by Merger.

				
			44

			
	
			9.9

				
			Conflict of Interest.

				
			45

			
	
			9.10

				
			Acceptance of Agency

				
			45

			
	
			9.11

				
			Warrant Agent Not to be Appointed Receiver.

				
			46

			
	
			9.12

				
			Authorization to Carry on Business

				
			46

			
	
			9.13

				
			Warrant Agent Not Required to Give Notice of Default.

				
			46

			
	
			9.14

				
			Anti-Money Laundering.

				
			46

			
	
			9.15

				
			Compliance with Privacy Code.

				
			47

			
	 	 
	
			ARTICLE 10 GENERAL

				
			47

			
	
			10.1

				
			Notice to the Corporation and the Warrant Agent.

				
			47

			
	
			10.2

				
			Notice to Warrantholders.

				
			48

			
	
			10.3

				
			Ownership of Warrants.

				
			49

			
	
			10.4

				
			Counterparts and Electronic Copies.

				
			49

			
	
			10.5

				
			Satisfaction and Discharge of Indenture.

				
			49

			
	
			10.6

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

				
			50

			
	
			10.7

				
			Common Shares or Warrants Owned by the Corporation or its Subsidiaries - Certificate to be Provided.

				
			50

			
	
			10.8

				
			Severability

				
			50

			
	
			10.9

				
			Force Majeure

				
			51

			
	
			10.10

				
			Assignment, Successors and Assigns

				
			51

			
	
			10.11

				
			Rights of Rescission and Withdrawal for Holders

				
			51

			
	 	 
	
			SCHEDULE “A” FORM OF WARRANT

				1

 

 

 

 

WARRANT INDENTURE

 

THIS WARRANT INDENTURE is dated as of December 12, 2018.

 

BETWEEN:

 

CLS HOLDINGS USA, INC., a corporation existing under the laws of the State of Nevada (the “Corporation”),

 

- and -

 

ODYSSEY TRUST COMPANY, a trust company existing under the laws of Alberta (the “Warrant Agent”)

 

WHEREAS in connection with a private placement of Convertible Debentures (as defined herein) by the Corporation, the Corporation is proposing to issue up to 25,559,750 Warrants (as defined herein), pursuant to this Indenture on the Issue Date (as defined herein);

 

AND WHEREAS pursuant to this Indenture, each Warrant shall, subject to adjustment, entitle the holder thereof to acquire one Common Share upon payment of the Exercise Price (as defined herein) prior to the Expiry Time (as defined herein) upon the terms and conditions herein set forth;

 

AND WHEREAS all acts and deeds necessary have been done and performed to make the Warrants, when created and issued as provided in this Indenture, legal, valid and binding upon the Corporation with the benefits and subject to the terms of this Indenture;

 

AND WHEREAS the foregoing recitals are made as representations and statements of fact by the Corporation and not by the Warrant Agent;

 

NOW THEREFORE, in consideration of the premises and mutual covenants hereinafter contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Corporation hereby appoints the Warrant Agent as warrant agent to hold the rights, interests and benefits contained herein for and on behalf of those persons who from time to time become the holders of Warrants issued pursuant to this Indenture and the parties hereto agree as follows:

 

Article 1

Interpretation

 

	
			1.1

				
			Definitions.

			

 

In this Indenture, including the recitals and schedules hereto, and in all indentures supplemental hereto:

 

“Accredited Investor” means an “accredited investor” within the meaning of Rule 501(a) of Regulation D under the U.S. Securities Act;

 

 

 

 

“Adjustment Period” means the period from the Effective Date up to and including the Expiry Time;

 

“Applicable Legislation” means any statute of Canada or the United States, or a province or state thereof, and the regulations under any such named or other statute, relating to warrant indentures or to the rights, duties and obligations of warrant agents under warrant indentures, to the extent that such provisions are at the time in force and applicable to this Indenture;

 

“Auditors” means a firm of chartered accountants duly appointed as auditors of the Corporation;

 

“Authenticated” means (a) with respect to the issuance of a Warrant Certificate, one which has been duly signed by the Corporation and authenticated by manual signature of an authorized signatory of the Warrant Agent, and (b) with respect to the issuance of an Uncertificated Warrant, one in respect of which the Warrant Agent has completed all Internal Procedures such that the particulars of such Uncertificated Warrant as required by Section 2.6 are entered in the register of holders of Warrants, “Authenticate”, “Authenticating” and “Authentication” have the appropriate correlative meanings;

 

“beneficial owner” means a person that has a beneficial interest in a Warrant;

 

“Book Entry Only Participants” means institutions that participate directly or indirectly in the Depository’s book entry registration system for the Warrants;

 

“Book Entry Only Warrants” means Warrants that are to be held only by or on behalf of the Depository;

 

“Business Day” means any day other than Saturday, Sunday or a statutory or civic holiday, or any other day on which the banks are open for business in the City of Toronto, Ontario;

 

“CDS Global Warrants” means Warrants representing all or a portion of the aggregate number of Warrants issued in the name of the Depository represented by an Uncertificated Warrant, or if requested by the Depository or the Corporation, by a Warrant Certificate;

 

“Certificated Warrant” means a Warrant evidenced by a writing or writings substantially in the form of Schedule “A”, attached hereto;

 

“Common Shares” means, subject to Article 4, fully paid and non-assessable common shares of the Corporation as presently constituted;

 

“Convertible Debentures” means the 8.0% unsecured convertible debentures of the Corporation issued at a price of $1,000 per Convertible Debenture as part of the Offering;

 

- 2 -

 

 

“Counsel” means a barrister or solicitor or a firm of barristers and solicitors retained by the Warrant Agent or retained by the Corporation and acceptable to the Warrant Agent, which may or may not be counsel for the Corporation;

 

“CSE” means the Canadian Securities Exchange;

 

“Current Market Price” of the Common Shares at any date means the weighted average of the trading price per Common Share for such Common Shares for each day there was a closing price for the twenty consecutive Trading Days ending within five days prior to such date on the CSE or if on such date the Common Shares are not listed on the CSE, on such stock exchange upon which such Common Shares are listed and as selected by the Directors, or, if such Common Shares are not listed on any stock exchange then on such over-the-counter market as may be selected for such purpose by the Directors;

 

“Depository” means CDS Clearing and Depository Services Inc. or such other person as is designated in writing by the Corporation to act as depository in respect of the Warrants;

 

“Directors” means the board of directors of the Corporation;

 

“Dividends” means any dividends paid by the Corporation;

 

“Effective Date” means the date of this Indenture;

 

“Exchange Rate” means the number of Common Shares subject to the right of purchase under each Warrant which as of the date hereof is one;

 

“Exercise Date” means, in relation to a Warrant, the Business Day on which such Warrant is validly exercised or deemed to be validly exercised in accordance with Article 3 hereof;

 

“Exercise Notice” has the meaning set forth in Section 3.2(1);

 

“Exercise Price” at any time means the price at which a whole Common Share may be purchased by the exercise of a whole Warrant, which is initially $1.10 per Common Share, payable in immediately available Canadian funds, subject to adjustment in accordance with the provisions of Article 4;

 

“Expiry Date” means 36 months from the Closing Date;

 

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

 

“Extraordinary Resolution” has the meaning set forth in Section 7.11;

 

“Issue Date” for a particular Warrant means the date on which the Warrant is actually issued by or on behalf of the Corporation;

 

- 3 -

 

 

“Offering” means the private placement of Convertible Debentures completed on December 12, 2018;

 

“person” means an individual, body corporate, partnership, trust, agent, executor, administrator, legal representative or any unincorporated organization;

 

“register” means the one set of records and accounts maintained by the Warrant Agent pursuant to Section 2.10:

 

"Registration Statement" means a registration statement filed and effective with the SEC under the U.S. Securities Act registering the resale by the holders of the Warrants of the Common Shares issuable upon exercise of the Warrants;

 

“Regulation D” means Regulation D under the U.S. Securities Act;

 

“Regulation S” means Regulation S under the U.S. Securities Act;

 

“Securities Laws” means, collectively, the applicable securities laws of the United States, including without limitation, the U.S. Securities Act, the U.S. Exchange Act and the rules and regulations promulgated thereunder, and each of the states of the United States and each of the provinces of Canada and the respective regulations made and forms prescribed thereunder together with all applicable published rules, policy statements, notices and blanket orders and rulings of the securities commissions or similar regulatory authorities (including the CSE) in each of the provinces of Canada, the United Stated and in each of the states of the United States;

 

“Shareholders” means holders of Common Shares;

 

“successor entity” has the meaning ascribed thereto in Section 8.2;

 

“Tax Act” means the Income Tax Act (Canada) and the regulations thereunder;

 

“this Warrant Indenture”, “this Indenture”, “this Agreement”, “hereto” “herein”, “hereby”, “hereof” and similar expressions mean and refer to this Indenture and any indenture, deed or instrument supplemental hereto; and the expressions “Article”, “Section”, “subsection” and “paragraph” followed by a number, letter or both mean and refer to the specified article, section, subsection or paragraph of this Indenture;

 

“Trading Day” means a day on which the CSE is open for the transaction of business and with respect to another stock exchange or over-the-counter market means, a day on which such exchange or over-the-counter market is open for the transaction of business;

 

“Trading Market” means the CSE or, if the Common Shares are not then traded or quoted on the CSE, any other stock exchange or over-the-counter market on which the Common Shares are principally traded or quoted;

 

“Uncertificated Warrant” means any Warrant which is not a Certificated Warrant;

 

- 4 -

 

 

“United States” means the United States of America, its territories and possessions, any state of the United States, and the District of Columbia;

 

“Units” means the units of the Corporation underlying the Convertible Debentures issued pursuant to the Offering with each Unit comprised of one Unit Share and one half of one Warrant;

 

“Unit Share” means the Common Shares partially comprising the Units;

 

“U.S. Exchange Act” means the United States Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder;

 

“U.S. Person” means a “U.S. Person” as set forth in Regulation S and includes, subject to certain exclusions set out therein, the following: (i) any natural person resident in the United States; (ii) any partnership or corporation organized or incorporated under the laws of the United States; (iii) any estate of which any executor or administrator is a U.S. Person; (iv) any trust of which any trustee is a U.S. Person; (v) any agency or branch of a foreign entity located in the United States; (vi) any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. Person; (vii) any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; (viii) any partnership or corporation if (A) organized or incorporated under the laws of any jurisdiction other than the United States and (B) formed by a U.S. Person principally for the purpose of investing in securities not registered under the U.S. Securities Act, unless it is organized or incorporated, and owned, by “accredited investors” (as defined in Rule 501(a) of Regulation D) who are not natural persons, estates or trusts;

 

“U.S. Purchaser” is (a) any U.S. Person that purchased Convertible Debentures, (b) any person that purchased Convertible Debentures on behalf of any U.S. Person or any person in the United States, (c) any purchaser of Convertible Debentures that received an offer of the Convertible Debentures while in the United States, (d) any person that was in the United States at the time the purchaser’s buy order was made or the subscription agreement for Convertible Debentures was executed or delivered;

 

“U.S. Securities Act” means the United States Securities Act of 1933, as amended and the rules and regulations promulgated thereunder;

 

“VWAP” means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Shares are then listed or quoted on the Trading Market, the daily volume weighted average price of the Common Shares for such date (or the nearest preceding date) on the principal Trading Market, (b) if the Common Shares are not then listed or quoted for trading on a Trading Market and if prices for the Common Shares are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Shares so reported, or (c) in all other cases, the fair market value of a share of Common Shares as determined by an independent

 

- 5 -

 

 

appraiser selected in good faith by the holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Corporation, the fees and expenses of which shall be paid by the Corporation;

 

“Warrant Agency” means the principal offices of the Warrant Agent in the City of Calgary, Alberta, or such other place as may be designated in accordance with Section 3.5;

 

“Warrant Agent” means Odyssey Trust Company, in its capacity as warrant agent of the Warrants, or its successors from time to time;

 

“Warrant Certificate” means a certificate, substantially in the form set forth in Schedule “A” hereto or such other form as may be approved by the Corporation, and the Warrant Agent, to evidence those Warrants that will be evidenced by a certificate;

 

“Warrantholders”, or “holders” without reference to Warrants, means the persons entered in the register hereinafter mentioned as holders of Warrants outstanding at such time;

 

“Warrantholders’ Request” means an instrument signed in one or more counterparts by Warrantholders holding in the aggregate not less than 25% of the aggregate number of all Warrants then unexercised and outstanding, requesting the Warrant Agent to take some action or proceeding specified therein;

 

“Warrants” means the Common Share purchase warrants created by, authorized by and issuable under this Indenture, to be issued and countersigned hereunder as a Certificated Warrant and/or Uncertificated Warrant, entitling the holder thereof to purchase one Common Share (subject to adjustment as herein provided) for each Warrant upon payment of the Exercise Price prior to the Expiry Time;

 

“Warrant Shares” has the meaning ascribed to such term in Section 2.9(1) hereof; and

 

“written order of the Corporation”, “written request of the Corporation”, “written consent of the Corporation” and “certificate of the Corporation” mean, respectively, a written order, request, consent and certificate signed in the name of the Corporation by its Chief Executive Officer or Chief Financial Officer, or a person acting in any such capacity for the Corporation and may consist of one or more instruments so executed.

 

	
			1.2

				
			Gender and Number.

			

 

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

 

	
			1.3

				
			Headings, Etc.

			

 

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

 

- 6 -

 

 

	
			1.4

				
			Day not a Business Day.

			

 

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

 

	
			1.5

				
			Time of the Essence.

			

 

Time shall be of the essence of this Indenture.

 

	
			1.6

				
			Monetary References.

			

 

Whenever any amounts of money are referred to herein, such amounts shall be deemed to be in lawful money of Canada unless otherwise expressed.

 

	
			1.7

				
			Applicable Law.

			

 

This Indenture, the Warrants, the Warrant Certificates (including all documents relating thereto, which by common accord have been and will be drafted in English) shall be construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein. Each of the parties hereto, which shall include the Warrantholders, irrevocably attorns to the exclusive jurisdiction of the courts of the Province of Ontario with respect to all matters arising out of this Indenture and the transactions contemplated herein.

 

Article 2

Issue Of Warrants

 

	
			2.1

				
			Creation and Issue of Warrants.

			

 

A maximum of up to 25,559,750 Warrants (subject to adjustment as herein provided) are hereby authorized to be created and authorized to be issued in accordance with the terms and conditions hereof. By written order of the Corporation, the Warrant Agent shall deliver Authenticated Warrants to Warrantholders and record the name of the Warrantholders on the Warrant register. Registration of interests in Warrants held by the Depository may be evidenced by a position appearing on the register for Warrants of the Warrant Agent for an amount representing the aggregate number of such Warrants outstanding from time to time.

 

	
			2.2

				
			Terms of Warrants.

			

 

	
			(1)

				
			Subject to the applicable conditions for exercise set out in Article 3 having been satisfied and subject to adjustment in accordance with Article 4, each Warrant shall entitle each Warrantholder thereof, upon exercise at any time after the Issue Date and prior to the Expiry Time, to acquire one Common Share upon payment of the Exercise Price.

			

 

- 7 -

 

 

	
			(2)

				
			No fractional Warrants shall be issued or otherwise provided for hereunder and Warrants may only be exercised in a sufficient number to acquire whole numbers of Common Shares. Any fractional Common Shares shall be rounded down to the nearest whole number and the holder shall not be entitled to any compensation in respect of any fractional Common Share which is not issued.

			

 

	
			(3)

				
			Each Warrant shall entitle the holder thereof to such other rights and privileges as are set forth in this Indenture.

			

 

	
			(4)

				
			The number of Common Shares which may be purchased pursuant to the Warrants and the Exercise Price therefor shall be adjusted upon the events and in the manner specified in Article 4.

			

 

	
			2.3

				
			Warrantholder not a Shareholder.

			

 

Except as may be specifically provided herein, nothing in this Indenture or in the holding of a Warrant Certificate, entitlement to a Warrant or otherwise, shall, in itself, confer or be construed as conferring upon a Warrantholder any right or interest whatsoever as a Shareholder, including, but not limited to, the right to vote at, to receive notice of, or to attend, meetings of Shareholders or any other proceedings of the Corporation, or the right to Dividends and other allocations.

 

	
			2.4

				
			Warrants to Rank Pari Passu.

			

 

All Warrants shall rank equally and without preference over each other, whatever may be the actual date of issue thereof.

 

	
			2.5

				
			Form of Warrants.

			

 

The Warrants may be issued in both certificated and uncertificated form. All Warrants issued in certificated form shall be evidenced by a Warrant Certificate (including all replacements issued in accordance with this Indenture), substantially in the form set out in Schedule “A” hereto, which shall be dated as of the Issue Date, shall bear such distinguishing letters and numbers as the Corporation may, with the approval of the Warrant Agent, prescribe, and shall be issuable in any denomination excluding fractions. All Warrants issued to the Depository may be in either a certificated or uncertificated form, such uncertificated form being evidenced by a book position on the register of Warrantholders to be maintained by the Warrant Agent in accordance with Section 2.10.

 

	
			2.6

				
			Book Entry Only Warrants.

			

 

	
			(1)

				
			Registration of beneficial interests in and transfers of Warrants held by the Depository shall be made only through the book entry registration system and no Warrant Certificates shall be issued in respect of such Warrants except where physical certificates evidencing ownership in such securities are required or as set out herein or as may be requested by the Depository, as determined by the Corporation, from time to time. Except as provided in this Section 2.6, owners of beneficial interests in any CDS Global Warrants shall not be entitled to have Warrants registered in their names and shall not

			

 

- 8 -

 

 

receive or be entitled to receive Warrants in definitive form or to have their names appear in the register referred to in Section 2.10 herein. Notwithstanding any terms set out herein, Warrants having the legend set forth in Section 2.8(4)(1) herein may not be held in the name of the Depository or in the form of Uncertificated Warrants.

 

	
			(2)

				
			Notwithstanding any other provision in this Indenture, no CDS Global Warrants may be exchanged in whole or in part for Warrants registered, and no transfer of any CDS Global Warrants in whole or in part may be registered, in the name of any person other than the Depository for such CDS Global Warrants or a nominee thereof unless:

			

 

	 	
			(a)

				
			the Depository notifies the Corporation that it is unwilling or unable to continue to act as depository in connection with the Book Entry Only Warrants and the Corporation is unable to locate a qualified successor;

			

 

	 	
			(b)

				
			the Corporation determines that the Depository is no longer willing, able or qualified to discharge properly its responsibilities as holder of the CDS Global Warrants and the Corporation is unable to locate a qualified successor;

			

 

	 	
			(c)

				
			the Depository ceases to be a clearing agency or otherwise ceases to be eligible to be a depository and the Corporation is unable to locate a qualified successor;

			

 

	 	
			(d)

				
			the Corporation determines that the Warrants shall no longer be held as Book Entry Only Warrants through the Depository;

			

 

	 	
			(e)

				
			such right is required by applicable law, as determined by the Corporation and the Corporation’s Counsel; or

			

 

	 	
			(f)

				
			the Warrant is to be exercised by or for the account or benefit of a person in the United States or a U.S. Person, in which case such Warrantholder will request the withdrawal of the Uncertificated Warrant from the non-certificated inventory system of the Depositary and request a Certificated Warrant in exchange for such Uncertificated Warrant (in which case, the Warrant Certificate shall contain the legend set forth in Section 2.9(1), if applicable);

			

 

following which, Warrants Certificates shall be registered and issued to the beneficial owners of such Warrants or their nominees as directed by the Depository. The Corporation shall provide a certificate of the Corporation giving notice to the Warrant Agent of the occurrence of any event outlined in this Section 2.6(2)(a) to (f).

 

	
			(3)

				
			Subject to the provisions of this Section 2.6, any transfer of CDS Global Warrants for Warrants which are not CDS Global Warrants may be made in whole or in part in accordance with the provisions of Section 2.13, mutatis mutandis. All such Warrants issued in exchange for a CDS Global Warrant or any portion thereof shall be registered in such names as the Depository for such CDS Global Warrants shall direct and shall be entitled to the same benefits and subject to the same terms and conditions (except insofar as they relate specifically to CDS Global Warrants or to any legend required by Section 2.9(1) and the restrictions set out in such legend) as the CDS Global Warrants or portion thereof surrendered upon such exchange.

			

 

- 9 -

 

 

	
			(4)

				
			Every Warrant that is Authenticated upon registration or transfer of a CDS Global Warrant, or in exchange for or in lieu of a CDS Global Warrant or any portion thereof, whether pursuant to this Section 2.6, or otherwise, shall be Authenticated in the form of, and shall be, a CDS Global Warrant, unless such Warrant is registered in the name of a person other than the Depository for such CDS Global Warrant or a nominee thereof.

			

 

	
			(5)

				
			Notwithstanding anything to the contrary in this Indenture, subject to applicable law, the CDS Global Warrant will be issued as an Uncertificated Warrant, unless otherwise requested in writing by the Depository or the Corporation.

			

 

	
			(6)

				
			The rights of beneficial owners of Warrants who hold securities entitlements in respect of the Warrants through the book entry registration system shall be limited to those established by applicable law and agreements between the Depository and the Book Entry Only Participants and between such Book Entry Only Participants and the beneficial owners of Warrants who hold securities entitlements in respect of the Warrants through the book entry registration system, and such rights must be exercised through a Book Entry Only Participant in accordance with the rules and procedures of the Depository.

			

 

	
			(7)

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

			

 

	 	
			(a)

				
			the electronic records maintained by the Depository relating to any ownership interests or any other interests in the Warrants or the depository system maintained by the Depository, or payments made on account of any ownership interest or any other interest of any person in any Warrant represented by an electronic position in the book entry registration system (other than the Depository or its nominee);

			

 

	 	
			(b)

				
			maintaining, supervising or reviewing any records of the Depository or any Book Entry Only Participant relating to any such interest; or

			

 

	 	
			(c)

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

			

 

	
			(8)

				
			The Corporation may terminate the application of this Section 2.6 in its sole discretion in which case all Warrants shall be evidenced by Warrant Certificates registered in the name of a person other than the Depository.

			

 

	
			2.7

				
			Signing of Warrant Certificates.

			

 

	
			(1)

				
			The form of certificate representing Warrants shall be substantially as set out in Schedule “A” hereto or such other form as is authorized from time to time by the Warrant Agent. Each Warrant Certificate shall be Authenticated manually by or on behalf of the Warrant Agent. Each Warrant Certificate shall be signed by either of the Chief Executive Officer or Chief Financial Officer of the Corporation whose signature shall appear on the

			

 

- 10 -

 

 

Warrant Certificate and may be printed, lithographed or otherwise mechanically reproduced thereon and, in such event, certificates so signed are as valid and binding upon the Corporation as if it had been signed manually. Any Warrant Certificate which has the applicable signatures as hereinbefore provided shall be valid notwithstanding that one or more of the persons whose signature is printed, lithographed or mechanically reproduced no longer holds office at the date of issuance of such certificate. The Warrant Certificates may be engraved, printed or lithographed, or partly in one form and partly in another, as the Warrant Agent may determine.

 

	
			(2)

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

			

 

	
			2.8

				
			Authentication by the Warrant Agent.

			

 

	
			(1)

				
			No Warrant shall be considered issued and shall be valid or obligatory or shall entitle the holder thereof to the benefits of this Indenture, until it has been Authenticated by the Warrant Agent. Authentication by the Warrant Agent shall not be construed as a representation or warranty by the Warrant Agent as to the validity of this Indenture or of such Warrant Certificates or Uncertificated Warrants (except the due Authentication thereof) or as to the performance by the Corporation of its obligations under this Indenture and the Warrant Agent shall in no respect be liable or answerable for the use made of the Warrants or any of them or of the consideration therefor. Authentication by the Warrant Agent shall be conclusive evidence as against the Corporation that the Warrants so Authenticated have been duly issued hereunder and that the holder thereof is entitled to the benefits of this Indenture.

			

 

	
			(2)

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

			

 

	
			(3)

				
			No Certificated Warrant shall be considered issued and Authenticated or, if Authenticated, shall be obligatory or shall entitle the holder thereof to the benefits of this Indenture, until it has been Authenticated by manual signature by or on behalf of the Warrant Agent. Such Authentication on any such Certificated Warrant shall be conclusive evidence that such Certificated Warrant is duly Authenticated and is valid and

			

 

- 11 -

 

 

	
			 

				
			a binding obligation of the Corporation and that the holder is entitled to the benefits of this Indenture.

			

 

	
			(4)

				
			No Uncertificated Warrant shall be considered issued, shall be obligatory or shall entitle the holder thereof to the benefits of this Indenture, until it has been Authenticated by entry on the register of the particulars of the Uncertificated Warrant. Such Authentication of an Uncertificated Warrant shall be conclusive evidence that such Uncertificated Warrant is a valid and binding obligation of the Corporation and that the holder is entitled to the benefits of this Indenture.

			

 

	
			2.9

				
			Legends.

			

 

	
			(1)

				
			Neither the Warrants nor the Common Shares issuable upon exercise thereof (the “Warrant Shares”) have been, nor will they be, registered under the U.S. Securities Act or the Securities Laws of any state, and may not be offered, sold or otherwise disposed of unless an exemption from the registration requirements under the U.S. Securities Act and applicable state securities laws is available or the Warrants and Warrant Shares, as applicable, are the subject of an effective registration statement under the U.S. Securities Act. Warrants and, if applicable, Warrant Shares must be issued only in individually certificated form.

			

 

Certificates representing Warrants and, if applicable, any Warrant Shares and any certificates issued in replacement thereof or in substitution therefor, shall, until such time as the same is no longer required under applicable requirements of the U.S. Securities Act or applicable state securities laws, bear a legend in substantially the following form:

 

THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) IF THE SECURITIES HAVE BEEN REGISTERED IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT IN ACCORDANCE WITH RULE 144 THEREUNDER, IF APPLICABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING, OR OTHER EVIDENCE OF EXEMPTION, REASONABLY SATISFACTORY TO THE COMPANY. THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS SECURITY, EXCEPT AS PERMITTED BY THE SECURITIES ACT. DELIVERY OF THIS 

 

- 12 -

 

 

CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

 

[IN THE CASE OF WARRANTS ONLY: “THE SECURITIES EVIDENCED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE 1933 ACT OR U.S. STATE SECURITIES LAWS.  THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A PERSON IN THE UNITED STATES OR A U.S. PERSON UNLESS THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE.”]

 

	
			(2)

				
			Each Warrant originally issued on the date hereof and issued in exchange therefor or in substitution thereof (if issued prior to the date that a receipt is issued for a (final) prospectus qualifying the resale of the Warrants and Underlying Shares) shall bear or be deemed to bear the following legend or such variations thereof as the Corporation may prescribe from time to time:

			

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [CLOSING DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”

 

provided that if, at any time, in the opinion of counsel to the Corporation, such legend is no longer necessary or advisable under applicable Securities Laws, or the holder of any such legended certificate, at the holder’s expense, provides the Corporation with evidence satisfactory in form and substance to the Company (which may include an opinion of counsel satisfactory to the Company) to the effect that such legend is not required, such legended certificate may thereafter be surrendered to the Corporation in exchange for a certificate which does not bear such legend.

 

	
			(3)

				
			Notwithstanding any other provisions of this Indenture, in processing and registering transfers of Warrants, no duty or responsibility whatsoever shall rest upon the Warrant Agent to determine the compliance by any transferor or transferee with the terms of the legend contained in subsections 2.9(1), or 2.9(2), or with the relevant securities laws or regulations, including, without limitation, Regulation S, and the Warrant Agent shall be entitled to assume that all transfers that are processed in accordance with this Indenture are legal and proper.

			

 

- 13 -

 

 

	
			2.10

				
			Register of Warrants

			

 

	
			(1)

				
			The Warrant Agent shall maintain records and accounts concerning the Warrants, whether certificated or uncertificated, which shall contain the information called for below with respect to each Warrant, together with such other information as may be required by law or as the Warrant Agent may elect to record. All such information shall be kept in one set of accounts and records which the Warrant Agent shall designate (in such manner as shall permit it to be so identified as such by an unaffiliated party) as the register of the holders of Warrants. The information to be entered for each account in the register of Warrants at any time shall include (without limitation):

			

 

	 	
			(a)

				
			the name and address of the holder of the Warrants, the date of Authentication thereof and the number Warrants;

			

 

	 	
			(b)

				
			whether such Warrant is a Certificated Warrant or an Uncertificated Warrant and, if a Certificated Warrant, the unique number or code assigned to and imprinted thereupon and, if an Uncertificated Warrant, the unique number or code assigned thereto if any;

			

 

	 	
			(c)

				
			whether such Warrant has been cancelled; and

			

 

	 	
			(d)

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

			

 

	
			(2)

				
			The register shall be available for inspection by the Corporation and or any Warrantholder during the Warrant Agent’s regular business hours on a Business Day and upon payment to the Warrant Agent of its reasonable fees. Any Warrantholder exercising such right of inspection shall first provide an affidavit in form satisfactory to the Corporation and the Warrant Agent stating the name and address of the Warrantholder and agreeing not to use the information therein except in connection with an effort to call a meeting of Warrantholders or to influence the voting of Warrantholders at any meeting of Warrantholders.

			

 

	
			2.11

				
			Issue in Substitution for Warrant Certificates Lost, etc.

			

 

	
			(1)

				
			If any Warrant Certificate becomes mutilated or is lost, destroyed or stolen, the Corporation, subject to applicable law, and subsection 2.11(2) shall issue and thereupon the Warrant Agent shall certify and deliver, a new Warrant Certificate of like tenor, and bearing the same legend, if applicable, as the one mutilated, lost, destroyed or stolen in exchange for and in place of and upon cancellation of such mutilated Warrant Certificate, or in lieu of and in substitution for such lost, destroyed or stolen Warrant Certificate, and the substituted Warrant Certificate shall be in a form approved by the Warrant Agent and the Warrants evidenced thereby shall be entitled to the benefits hereof and shall rank equally in accordance with its terms with all other Warrants issued or to be issued hereunder.

			

 

	
			(2)

				
			The applicant for the issue of a new Warrant Certificate pursuant to this Section 2.11 shall bear the cost of the issue thereof, and in the case of mutilation shall, as a condition

			

 

- 14 -

 

 

precedent to the issue thereof, deliver to the Warrant Agent the mutilated Warrant Certificate, and in case of loss, destruction or theft shall, as a condition precedent to the issuance thereof, furnish to the Corporation and to the Warrant Agent such evidence of ownership and of the loss, destruction or theft of the Warrant Certificate so lost, destroyed or stolen as shall be satisfactory to the Corporation and to the Warrant Agent, in their sole discretion, and such applicant shall also be required to furnish an indemnity and surety bond in amount and form satisfactory to the Corporation and the Warrant Agent, in their sole discretion, and shall pay the reasonable charges of the Corporation and the Warrant Agent in connection therewith.

 

	
			2.12

				
			Exchange of Warrant Certificates.

			

 

	
			(1)

				
			Any one or more Warrant Certificates representing any number of Warrants may, upon compliance with the reasonable requirements of the Warrant Agent (including compliance with applicable Securities Laws), be exchanged for one or more other Warrant Certificates representing the same aggregate number of Warrants, and bearing the same legend, if applicable, as represented by the Warrant Certificate or Warrant Certificates so exchanged.

			

 

	
			(2)

				
			Warrant Certificates may be exchanged only at the Warrant Agency or at any other place that is designated by the Corporation with the approval of the Warrant Agent. Any Warrant Certificate tendered for exchange shall be cancelled and surrendered to the Warrant Agent.

			

 

	
			2.13

				
			Transfer and Ownership of Warrants.

			

 

	
			(1)

				
			The Warrants may only be transferred on the register kept by the Warrant Agent at the Warrant Agency by the holder or its legal representatives or its attorney duly appointed by an instrument in writing in form and execution satisfactory to the Warrant Agent only upon

			

 

	 	
			(a)

				
			surrendering to the Warrant Agent at the Warrant Agency the Warrant Certificates representing the Warrants to be transferred together with a duly executed transfer form as set forth in Schedule “A” (together with a opinion of counsel, if required by Sections 2.9(1));

			

 

	 	
			(b)

				
			in the case of Book Entry Only Warrants, in accordance with procedures prescribed by the Depository under the book entry registration system, and

			

 

	 	
			(c)

				
			upon compliance with:

			

 

	 	
			(i)

				
			the conditions herein;

			

 

	 	
			(ii)

				
			such reasonable requirements as the Warrant Agent may prescribe; and

			

 

	 	
			(iii)

				
			all applicable Securities Laws and requirements of regulatory authorities;

			

 

- 15 -

 

 

and such transfer shall be duly noted in such register by the Warrant Agent. Upon compliance with such requirements, the Warrant Agent shall issue to the transferee of a Certificated Warrant, a Warrant Certificate, representing the Warrants transferred.

 

	
			(2)

				
			The Warrant Agent shall not register a transfer unless the transferor has provided the Warrant Agent with the Warrant Certificate and such securities may be transferred only as set forth in such Section 2.9(1).

			

 

	
			(3)

				
			Subject to the provisions of this Indenture and applicable law, the Warrantholder shall be entitled to the rights and privileges attaching to the Warrants, and the issue of Common Shares by the Corporation upon the exercise of Warrants in accordance with the terms and conditions herein contained shall discharge all responsibilities of the Corporation and the Warrant Agent with respect to such Warrants and neither the Corporation nor the Warrant Agent shall be bound to inquire into the title of any such holder.

			

 

	
			(4)

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

			

 

	
			(5)

				
			Any Warrant Certificate issued to a transferee upon transfers contemplated by this section 2.13 shall bear the appropriate legends, as required by applicable Securities Laws, as set forth in subsection 2.8(4).

			

 

	
			2.14

				
			Cancellation of Surrendered Warrants.

			

 

All Warrant Certificates surrendered pursuant to Article 3 or transferred or exchanged pursuant to Article 2 shall be cancelled by the Warrant Agent and so noted on the register by the Warrant Agent and upon such circumstances all such Uncertificated Warrants shall be deemed cancelled and so noted on the register by the Warrant Agent. Upon request by the Corporation, the Warrant Agent shall furnish to the Corporation a cancellation certificate identifying the Warrant Certificates so cancelled, the number of Warrants evidenced thereby, the number of Common Shares, if any, issued pursuant to such Warrants, as applicable, and the details of any Warrant Certificates issued in substitution or exchange for such Warrant Certificates cancelled.

 

ARTICLE 3

EXERCISE OF WARRANTS

 

	
			3.1

				
			Right of Exercise.

			

 

Subject to the provisions hereof, each registered Warrantholder may exercise the right conferred on such holder to subscribe for and purchase one Common Share for each Warrant after the Issue Date and prior to the Expiry Time and in accordance with the

 

- 16 -

 

 

 

conditions herein; provided, however, that such exercise must be permitted under applicable U.S. Securities Laws and provided further that a Warrantholder holding an Uncertificated Warrant that is in the United States or that is a U.S. Person will first request the withdrawal of the Uncertificated Warrant from the non-certificated inventory system of the Depositary and request a Certificated Warrant in exchange for such Uncertificated Warrant.

 

If no Registration Statement is effective under the U.S. Securities Act, or if the prospectus contained therein is not available for the resale of the Common Shares issuable upon exercise of the Warrants by the holder exercising the Warrant, at any time prior to the Expiry Time, such Warrantholder shall be notified forthwith by the Warrant Agent that such Warrantholder is entitled to a cashless exercise, in part or in whole, in accordance with Section 3.2(2).

 

	
			3.2

				
			Warrant Exercise.

			

 

	
			(1)

				
			Holders of Certificated Warrants who wish to exercise the Warrants held by them in order to acquire Common Shares must, if permitted pursuant to the terms and conditions hereunder and as set forth in any applicable legend, complete the exercise form (the “Exercise Notice”) which form is attached to the Warrant Certificate which may be amended by the Corporation with the consent of the Warrant Agent, if such amendment does not, in the reasonable opinion of the Corporation and the Warrant Agent, materially and adversely affect the rights, entitlements and interests of the Warrantholders, and deliver such certificate(s), the executed Exercise Notice and a certified cheque, bank draft or money order payable to or to the order of the Corporation for the aggregate Exercise Price to the Warrant Agent at the Warrant Agency. The Warrants represented by a Warrant Certificate shall be deemed to be surrendered upon personal delivery of such certificate, Exercise Notice and aggregate Exercise Price or, if such documents are sent by mail or other means of transmission, upon actual receipt thereof by the Warrant Agent at the office referred to above.

			

 

	
			(2)

				
			If, at the time of exercise of any Warrant in accordance with this Indenture, there is no effective Registration Statement under the U.S. Securities Act covering the resale by the holder of a portion of the Common Shares to be issued upon exercise of the Warrant, or the prospectus contained therein is not available for the resale of the Common Shares to the Warrantholder under the U.S Securities Act by reason of a blackout or suspension of use thereof, then the Warrants may be exercised, in part for that portion of the Common Shares not registered for resale by the holder under an effective Registration Statement or in whole in the case of the prospectus not being available for the resale of such Common Shares, at such time by means of a “cashless exercise” in which the Warrantholder shall be entitled to receive a number of Common Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

			

 

	 	
			A =

				
			the last VWAP for the Trading Day immediately preceding the time of delivery of the Exercise Form giving rise to the applicable “cashless exercise” (to clarify, the “last VWAP” will be the VWAP as calculated over an entire Trading Day such

			

 

- 17 -

 

 

that, in the event that a Warrant is exercised at a time when the Trading Market is open, the prior Trading Day’s VWAP shall be used in this calculation);

 

B =     the Exercise Price of the Warrant, as adjusted hereunder (if any); and

 

X =     the number of Common Shares that would be issuable upon exercise of the Warrant in accordance with the terms of such Warrant if such exercise were by means of a cash exercise rather than a cashless exercise..

 

If Common Shares are issued pursuant to such a cashless exercise, the parties acknowledge and agree that in accordance with Section 3(a)(9) of the U.S. Securities Act, such Common Shares shall take on the registered characteristics of the Warrants being exercised. The Corporation agrees not to take any position contrary to this Section 3.2(2). Upon receipt of a duly completed Exercise Form that specifies a cashless exercise, the Warrant Agent will notify the Corporation, which will calculate and provide to the Warrant Agent the number of Common Shares to be allotted to the Warrantholder.

 

For the avoidance of doubt, a Warrantholder may only exercise his or her warrants by means of “cashless exercise” if there is no effective Registration Statement under the U.S. Securities Act registering the resale by such holder of the Common Shares issuable upon exercise of the Warrants, or the prospectus contained therein is not available for, the resale by the holder of the Common Shares acquirable upon the exercise of his or her Warrants. If there is an effective registration statement under the U.S. Securities Act registering the resale by the holder of a portion of the Common Shares issuable upon exercise, or the prospectus contained therein is available for, the the resale by the holder of the Common Shares, such Warrantholder may only exercise his or her Warrants in accordance with Section 3.2 (1) in relation to that portion of the Common Shares registered for resale under the Registration Statement.

 

	
			(3)

				
			A beneficial holder of Uncertificated Warrants evidenced by a security entitlement in respect of Warrants in the book entry registration system who desires to exercise his or her Warrants must do so by causing a Book Entry Only Participant to deliver to the Depository on behalf of the entitlement holder, notice of the owner’s intention to exercise Warrants in a manner acceptable to the Depository, provided that a Warrantholder holding an Uncertificated Warrant that is in the United States or that is a U.S. Person will first request the withdrawal of the Uncertificated Warrant from the non-certificated inventory system of the Depositary and request a Certificated Warrant in exchange for such Uncertificated Warrant. Forthwith upon receipt by the Depository of such notice, as well as payment for the Exercise Price, the Depository shall deliver to the Warrant Agent confirmation of its intention to exercise Warrants (“Confirmation”) in a manner acceptable to the Warrant Agent, including by electronic means through the book entry registration system.

			

 

	
			(4)

				
			Payment representing the aggregate Exercise Price must be provided to the appropriate office of the Book Entry Only Participant in a manner acceptable to it. A notice in form acceptable to the Book Entry Only Participant and payment from such beneficial holder should be provided to the Book Entry Only Participant sufficiently in advance so as to

			

 

- 18 -

 

 

	
			 

				
			permit the Book Entry Only Participant to deliver notice and payment to the Depository and for the Depository in turn to deliver notice and payment to the Warrant Agent prior to Expiry Time. The Depository will initiate the exercise by way of the Confirmation and forward the aggregate Exercise Price electronically to the Warrant Agent for prompt onward payment by the Warrant Agent to the Corporation which the Warrant Agent will promptly pay to the Corporation, and the Warrant Agent will execute the exercise by issuing to the Depository through the book entry registration system the Common Shares to which the exercising Warrantholder is entitled pursuant to the exercise. Any expense associated with the exercise process will be for the account of the entitlement holder exercising the Warrants and/or the Book Entry Only Participant exercising the Warrants on its behalf.

			

 

	
			(5)

				
			By causing a Book Entry Only Participant to deliver notice to the Depository, a Warrantholder shall be deemed to have irrevocably surrendered his or her Warrants so exercised and appointed such Book Entry Only Participant to act as his or her exclusive settlement agent with respect to the exercise of the Warrants and the receipt of Common Shares in connection with the obligations arising from such exercise.

			

 

	
			(6)

				
			The Exercise Notice referred to in this Section 3.2 shall be signed by the Warrantholder, or its executors or administrators or other legal representatives or an attorney of the Warrantholder, duly appointed by an instrument in writing satisfactory to the Warrant Agent.

			

 

	
			(7)

				
			Any notice which the Depository determines to be incomplete, not in proper form or not duly executed shall for all purposes be void and of no effect and the exercise to which it relates shall be considered for all purposes not to have been exercised thereby. A failure by a Book Entry Only Participant to exercise or to give effect to the settlement thereof in accordance with the Warrantholder’s instructions will not give rise to any obligations or liability on the part of the Corporation or Warrant Agent to the Book Entry Only Participant or the Warrantholder.

			

 

	
			(8)

				
			Any exercise referred to in this Section 3.2 shall require that the entire Exercise Price for Common Shares subscribed for must be paid at the time of subscription and such Exercise Price and original Exercise Notice executed by the Warrantholder must be received by the Warrant Agent prior to the Expiry Time.

			

 

	
			(9)

				
			Notwithstanding the foregoing in this Section 3.2, Warrants may only be exercised pursuant to this Section 3.2 by or on behalf of a Warrantholder, who is permitted to and makes one of the certifications set forth on the Exercise Notice and delivers, if applicable, any opinion or other evidence as required by the Corporation.

			

 

	
			(10)

				
			If the form of Exercise Notice set forth in the Warrant Certificate shall have been amended, the Corporation shall cause the amended Exercise Notice to be forwarded to all Warrantholders.

			

 

	
			(11)

				
			Exercise Notices and Confirmations must be delivered to the Warrant Agent at any time during the Warrant Agent’s actual business hours on any Business Day prior to the

			

 

- 19 -

 

 

	
			 

				
			Expiry Time. Any Exercise Notice or Confirmations received by the Warrant Agent after business hours on any Business Day will be deemed to have been received by the Warrant Agent on the next following Business Day.

			

 

	
			(12)

				
			Any Warrant with respect to which an Exercise Notice or Confirmation is not received by the Warrant Agent before the Expiry Time shall be deemed to have expired and become void and all rights with respect to such Warrants shall terminate and be cancelled.

			

 

	
			3.3

				
			U.S. Restrictions; Legended Certificates

			

 

	
			(1)

				
			The Warrants and the Common Shares issuable upon exercise thereof have not been and will not be registered under the U.S. Securities Act or the securities laws of any state of the United States, and the Warrants may not be exercised unless an exemption from the registration requirements of the U.S. Securities Act and the Securities Laws of all applicable states is available. The Warrant Agent shall not issue or register Common Shares or the certificates representing such Common Shares unless the Warrantholder provides:

			

 

	 	
			(i)

				
			a written certification that the Warrantholder at the time of exercise of the Warrants (a) is not in the United States; (b) is not a U.S. Person and is not exercising the Warrants on behalf of a U.S. Person or a person in the United States; (c) represents and warrants that the exercise of the Warrants and the acquisition of the Common Shares issuable upon exercise thereof occurred in an “offshore transaction” (as defined under Regulation S under the U.S. Securities Act) (d) will not engage in hedging transactions involving the Common Shares except as permitted under the U.S. Securities Act; (e) acknowledges that the Common Shares have not been registered under the U.S. Securities Act, are “restricted securities” under Rule 144 under the U.S. Securities Act and are subject to a one-year distribution compliance period under the U.S. Securities Act during which time they may not be offered or sold into the United States or to, or for the account or benefit of a U.S. Person, except pursuant to registration under the U.S. Securities Act or pursuant to an available exemption from such registration; (f) agrees to resell such Common Shares only in accordance with the provisions of Regulation S under the U.S. Securities Act, pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration under the U.S. Securities Act; or

			

 

	 	
			(ii)

				
			a written certification that the Warrantholder is the original U.S. Purchaser and (a) purchased the Warrants directly from the Corporation pursuant to a duly executed subscription agreement (including any required certifications set forth therein) for the purchase of Convertible Debentures; (b) is exercising the Warrants solely for its own account or for the account of the original beneficial purchaser, if any; (c) each of it and any beneficial purchaser was on the date the Convertible Debentures were purchased from the Corporation, and is on the date of exercise of the Warrants, an Accredited Investor; and (d) all the representations, warranties and

			

 

- 20 -

 

 

	 	
			 

				
			covenants set forth in the written and duly executed subscription agreement (including any required certifications set forth therein) made by the Warrantholder for the purchase of Convertible Debentures from the Corporation continue to be true and correct as if duly executed as of the date thereof; or

			

 

	 	
			(iii)

				
			an opinion of counsel of recognized standing, in form and substance reasonably satisfactory to the Corporation, to the effect that the exercise of the Warrants and the issuance of the Warrant Shares are exempt from registration under the U.S. Securities Act or any applicable state securities laws.

			

 

	
			(2)

				
			No certificates representing Common Shares will be registered or delivered to an address in the United States unless the Warrantholder complies with the requirements set forth in subsection 3.3(1)(ii) or subsection 3.3(1)(iii) and, in the case of subsection 3.3(1)(iii), the Corporation has confirmed in writing to the Warrant Agent that the opinion of counsel and such other evidence required by the Corporation is reasonably satisfactory to the Corporation. The certificates representing any Common Shares issued in connection with the exercise of Warrants shall bear the legend set forth in subsection 3.3(3) of this Indenture. Common Shares must be issued only in individually certificated form.

			

 

	
			(3)

				
			Certificates representing Common Shares issued upon the exercise of Warrants (and each certificate issued in exchange therefor or in substitution thereof) shall bear the following legend:

			

 

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) IF THE SECURITIES HAVE BEEN REGISTERED IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT IN ACCORDANCE WITH RULE 144 THEREUNDER, IF APPLICABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING, OR OTHER EVIDENCE OF EXEMPTION, REASONABLY SATISFACTORY TO THE COMPANY. THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS SECURITY, EXCEPT AS PERMITTED BY THE SECURITIES ACT. DELIVERY OF THIS

 

- 21 -

 

 

CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

 

	
			(4)

				
			Common Shares issued upon the exercise of Warrants prior to the date that a receipt is issued for a (final) prospectus qualifying the resale of the Warrants and Underlying Shares shall bear or be deemed to bear the following legend:

			

 

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE THE DATE THAT IS 4 MONTHS AND A DAY AFTER THE LATER OF (I) [CLOSING DATE], AND (II) THE DATE THE ISSUER BECAME A REPORTING ISSUER IN ANY PROVINCE OR TERRITORY.”

 

	
			3.4

				
			Transfer Fees and Taxes.

			

 

If any of the Common Shares subscribed for are to be issued to a person or persons other than the Warrantholder, the Warrantholder shall execute the form of transfer and will comply with such reasonable requirements as the Warrant Agent may stipulate and will pay to the Corporation or the Warrant Agent on behalf of the Corporation, all applicable transfer or similar taxes and the Corporation will not be required to issue or deliver certificates evidencing Common Shares unless or until such Warrantholder shall have paid to the Corporation or the Warrant Agent on behalf of the Corporation, the amount of such tax or shall have established to the satisfaction of the Corporation and the Warrant Agent that such tax has been paid or that no tax is due.

 

	
			3.5

				
			Warrant Agency.

			

 

To facilitate the exchange, transfer or exercise of Warrants and compliance with such other terms and conditions hereof as may be required, the Corporation has appointed the Warrant Agency, as the agency at which Warrants may be surrendered for exchange or transfer or at which Warrants may be exercised and the Warrant Agent has accepted such appointment. The Corporation may from time to time designate alternate or additional places as the Warrant Agency (subject to the Warrant Agent’s prior approval) and will give notice to the Warrant Agent of any proposed change of the Warrant Agency. Branch registers shall also be kept at such other place or places, if any, as the Corporation, with the approval of the Warrant Agent, may designate. The Warrant Agent will from time to time when requested to do so by the Corporation or any Warrantholder, subject to Section 2.10(1), upon payment of the Warrant Agent’s reasonable charges, furnish a list of the names and addresses of Warrantholders showing the number of Warrants held by each such Warrantholder.

 

	
			3.6

				
			Effect of Exercise of Warrants.

			

 

	
			(1)

				
			Upon the exercise of Warrants pursuant to and in compliance with Section 3.2 and subject to Section 3.3 and Section 0, the Common Shares to be issued pursuant to the

			

 

- 22 -

 

 

	
			 

				
			Warrants exercised shall be deemed to have been issued and the person or persons to whom such Common Shares are to be issued shall be deemed to have become the holder or holders of such Common Shares as of the Exercise Date, unless the registers shall be closed on such date, in which case the Common Shares subscribed for shall be deemed to have been issued and such person or persons deemed to have become the holder or holders of record of such Common Shares, on the date on which such registers are reopened.

			

 

	
			(2)

				
			Within two Business Days after the Exercise Date with respect to a Warrant, the Warrant Agent on behalf of the Corporation shall deliver or shall cause to be delivered or mailed to the person or persons in whose name or names the Warrant is registered or, if so specified in writing by the holder, cause to be delivered to such person or persons at the Warrant Agency where the Warrant Certificate was surrendered, a certificate or certificates for the appropriate number of Common Shares subscribed for, or any other appropriate evidence of the issuance of Common Shares to such person or persons.

			

 

	
			3.7

				
			Partial Exercise of Warrants; Fractions.

			

 

	
			(1)

				
			The holder of any Warrants may exercise his right to acquire a number of whole Common Shares less than the aggregate number which the holder is entitled to acquire. In the event of any exercise of a number of Warrants less than the number which the holder is entitled to exercise, the holder of Warrants upon such exercise shall, in addition, be entitled to receive, without charge therefor, a new Warrant Certificate(s), bearing the same legend, if applicable, or other appropriate evidence of Warrants, in respect of the balance of the Warrants held by such holder and which were not then exercised.

			

 

	
			(2)

				
			Notwithstanding anything herein contained including any adjustment provided for in Article 4, the Corporation shall not be required, upon the exercise of any Warrants, to issue fractions of Common Shares. Warrants may only be exercised in a sufficient number to acquire whole numbers of Common Shares. Any fractional Common Shares shall be rounded down to the nearest whole number and the holder of such Warrants shall not be entitled to any compensation in respect of any fractional Common Share which is not issued.

			

 

	
			3.8

				
			Expiration of Warrants.

			

 

	
			(1)

				
			Immediately after the Expiry Time, all rights under any Warrant in respect of which the right of acquisition provided for herein shall not have been exercised shall cease and terminate and each Warrant shall be void and of no further force or effect.

			

 

	
			3.9

				
			Accounting and Recording.

			

 

	
			(1)

				
			The Warrant Agent shall promptly account to the Corporation with respect to Warrants exercised, and shall promptly forward to the Corporation (or into an account or accounts of the Corporation with the bank or trust company designated by the Corporation for that purpose), all monies received by the Warrant Agent on the subscription of Common Shares through the exercise of Warrants and any securities or other instruments, from time to time received by the Warrant Agent shall be received as agent for, and shall be

			

 

- 23 -

 

 

	
			 

				
			segregated and kept apart by the Warrant Agent for the Warrantholders and the Corporation as their interests may appear.

			

 

	
			(2)

				
			The Warrant Agent shall record the particulars of Warrants exercised, which particulars shall include the names and addresses of the persons who become holders of Common Shares on exercise and the Exercise Date, in respect thereof. The Warrant Agent shall provide such particulars in writing to the Corporation within five Business Days of any request by the Corporation therefor.

			

 

	
			3.10

				
			Securities Restrictions.

			

 

Notwithstanding anything herein contained, Common Shares will be issued upon exercise of a Warrant only in compliance with the Securities Laws of any applicable jurisdiction.

 

Article 4

Adjustment Of Number Of Common Shares And Exercise Price

 

	
			4.1

				
			Adjustment of Number of Common Shares and Exercise Price.

			

 

The subscription rights in effect under the Warrants for Common Shares issuable upon the exercise of the Warrants shall be subject to adjustment from time to time as follows:

 

	 	
			(a)

				
			if, at any time during the Adjustment Period, the Corporation shall:

			

 

	 	
			(i)

				
			subdivide, re-divide or change its outstanding Common Shares into a greater number of Common Shares;

			

 

	 	
			(ii)

				
			reduce, combine or consolidate its outstanding Common Shares into a smaller number of Common Shares;

			

 

	 	
			(iii)

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

			

 

(any of such events in Section 4.1(a) being called a “Common Share Reorganization”) then the Exercise Price shall be adjusted as of the effective date or record date of such subdivision, re-division, change, reduction, combination, consolidation, distribution or stock dividend, as the case may be, by multiplying the Exercise Price in effect immediately prior to such effective date or record date by a fraction, the numerator of which shall be the number of Common Shares outstanding on such effective date or record date before giving effect to such Common Share Reorganization and the denominator of which shall be the number of Common Shares outstanding as of the effective date or record date after giving effect to such Common Share Reorganization (including, in the case where securities exchangeable for or convertible into Common Shares are distributed, the number of Common Shares that would have been outstanding had such

 

- 24 -

 

 

securities been exchanged for or converted into Common Shares on such record date or effective date).

 

Such adjustment shall be made successively whenever any event referred to in this Section 4.1(a) shall occur. Upon any adjustment of the Exercise Price pursuant to Section 4.1(a), the Exchange Rate shall be contemporaneously adjusted by multiplying the number of Common Shares theretofore obtainable on the exercise thereof by a fraction of which the numerator shall be the Exercise Price in effect immediately prior to such adjustment and the denominator shall be the Exercise Price resulting from such adjustment;

 

	 	
			(b)

				
			if and whenever at any time during the Adjustment Period, the Corporation shall fix a record date for the issuance of rights, options or warrants to all or substantially all the holders of its outstanding Common Shares entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares (or securities convertible or exchangeable into Common Shares) at a price per Common Share (or having a conversion or exchange price per Common Share) less than 95% of the Current Market Price on such record date (a “Rights Offering”), the Exercise Price shall be adjusted immediately after such record date so that it shall equal the amount determined by multiplying the Exercise Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date plus a number of Common Shares equal to the number arrived at by dividing the aggregate price of the total number of additional Common Shares offered for subscription or purchase (or the aggregate conversion or exchange price of the convertible or exchangeable securities so offered) by such Current Market Price, and of which the denominator shall be the total number of Common Shares outstanding on such record date plus the total number of additional Common Shares offered for subscription or purchase or into which the convertible or exchangeable securities so offered are convertible or exchangeable; any Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation; such adjustment shall be made successively whenever such a record date is fixed; to the extent that no such rights or warrants are exercised prior to the expiration thereof, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed or, if any such rights or warrants are exercised, to the Exercise Price which would then be in effect based upon the number of Common Shares (or securities convertible or exchangeable into Common Shares) actually issued upon the exercise of such rights or warrants, as the case may be. Upon any adjustment of the Exercise Price pursuant to this Section 4.1(b), the Exchange Rate will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Rate in effect on such record date by a fraction, of which the numerator shall be the Exercise Price in effect immediately prior to such adjustment and the denominator shall be the Exercise Price resulting from such adjustment. Such adjustment will be made successively whenever such a record date is fixed, provided that if two or more such record dates or record dates referred to in this Section 4.1(b) are fixed

			

 

- 25 -

 

 

within a period of 25 Trading Days, such adjustment will be made successively as if each of such record dates occurred on the earliest of such record dates;

 

	 	
			(c)

				
			if and whenever at any time during the Adjustment Period the Corporation shall fix a record date for the making of a distribution to all or substantially all the holders of its outstanding Common Shares of (i) securities of any class, whether of the Corporation or any other trust (other than Common Shares), (ii) rights, options or warrants to subscribe for or purchase Common Shares (or other securities convertible into or exchangeable for Common Shares), other than pursuant to a Rights Offering; (iii) evidences of its indebtedness, or (iv) any property or other assets then, in each such case, the Exercise Price shall be adjusted immediately after such record date so that it shall equal the price determined by multiplying the Exercise Price in effect on such record date by a fraction, of which the numerator shall be the total number of Common Shares outstanding on such record date multiplied by the Current Market Price on such record date, less the excess, if any, of the fair market value on such record date, as determined by the Directors (whose determination shall be conclusive), of such securities or other assets so issued or distributed over the fair market value of any consideration received therefor by the Corporation from the holders of the Common Shares, and of which the denominator shall be the total number of Common Shares outstanding on such record date multiplied by such Current Market Price; and Common Shares owned by or held for the account of the Corporation shall be deemed not to be outstanding for the purpose of any such computation; such adjustment shall be made successively whenever such a record date is fixed; to the extent that such distribution is not so made, the Exercise Price shall be readjusted to the Exercise Price which would then be in effect if such record date had not been fixed. Upon any adjustment of the Exercise Price pursuant to this Section 4.1(c), the Exchange Rate will be adjusted immediately after such record date so that it will equal the rate determined by multiplying the Exchange Rate in effect on such record date by a fraction, of which the numerator shall be the Exercise Price in effect immediately prior to such adjustment and the denominator shall be the Exercise Price resulting from such adjustment;

			

 

	 	
			(d)

				
			if and whenever at any time during the Adjustment Period, there is a reclassification of the Common Shares or a capital reorganization of the Corporation other than as described in Section 4.1(a) or a consolidation, amalgamation, arrangement or merger of the Corporation with or into any other body corporate, trust, partnership or other entity, or a sale or conveyance of the property and assets of the Corporation as an entirety or substantially as an entirety to any other body corporate, trust, partnership or other entity, any Warrantholder who has not exercised its right of acquisition prior to the effective date of such reclassification, capital reorganization, consolidation, amalgamation, arrangement or merger, sale or conveyance, upon the exercise of such right thereafter, shall be entitled to receive upon payment of the Exercise Price and shall accept, in lieu of the number of Common Shares that prior to such effective date the Warrantholder would have been entitled to receive, the number of shares or other securities or property of the Corporation or of the body corporate, trust, partnership or other

			 

			

 

- 26 -

 

 

	 	
			 

				
			entity resulting from such merger, amalgamation or consolidation, or to which such sale or conveyance may be made, as the case may be, that such Warrantholder would have been entitled to receive on such reclassification, capital reorganization, consolidation, amalgamation, arrangement or merger, sale or conveyance, if, on the effective date thereof, as the case may be, the Warrantholder had been the registered holder of the number of Common Shares to which prior to such effective date it was entitled to acquire upon the exercise of the Warrants. If determined appropriate by the Warrant Agent, relying on advice of Counsel, to give effect to or to evidence the provisions of this Section 4.1(d), the Corporation, its successor, or such purchasing body corporate, partnership, trust or other entity, as the case may be, shall, prior to or contemporaneously with any such reclassification, capital reorganization, consolidation, amalgamation, arrangement, merger, sale or conveyance, enter into an indenture which shall provide, to the extent possible, for the application of the provisions set forth in this Indenture with respect to the rights and interests thereafter of the Warrantholders to the end that the provisions set forth in this Indenture shall thereafter correspondingly be made applicable, as nearly as may reasonably be, with respect to any shares, other securities or property to which a Warrantholder is entitled on the exercise of its acquisition rights thereafter. Any indenture entered into between the Corporation and the Warrant Agent pursuant to the provisions of this Section 4.1(d) shall be a supplemental indenture entered into pursuant to the provisions of Article 8 hereof. Any indenture entered into between the Corporation, any successor to the Corporation or such purchasing body corporate, partnership, trust or other entity and the Warrant Agent shall provide for adjustments which shall be as nearly equivalent as may be practicable to the adjustments provided in this Section 4.1 and which shall apply to successive reclassifications, capital reorganizations, amalgamations, consolidations, mergers, sales or conveyances;

			

 

	 	
			(e)

				
			in any case in which this Section 4.1 shall require that an adjustment shall become effective immediately after a record date for an event referred to herein, the Corporation may defer, until the occurrence of such event, issuing to the Warrantholder of any Warrant exercised after the record date and prior to completion of such event the additional Common Shares issuable by reason of the adjustment required by such event before giving effect to such adjustment; provided, however, that the Corporation shall deliver to such Warrantholder an appropriate instrument evidencing such Warrantholder’s right to receive such additional Common Shares upon the occurrence of the event requiring such adjustment and the right to receive any distributions made on such additional Common Shares declared in favour of holders of record of Common Shares on and after the relevant date of exercise or such later date as such Warrantholder would, but for the provisions of this Section 4.1(e), have become the holder of record of such additional Common Shares pursuant to Section 4.1;

			

 

	 	
			(f)

				
			in any case in which Section 4.1(a)(iii), Section 4.1(b) or Section 4.1(c) require that an adjustment be made to the Exercise Price, no such adjustment shall be made if the Warrantholders of the outstanding Warrants receive, subject to the

			

 

- 27 -

 

 

	 	
			 

				
			approval of the CSE if required, the rights or warrants referred to in Section 4.1(a)(iii), Section 4.1(b) or the shares, rights, options, warrants, evidences of indebtedness or assets referred to in Section 4.1(c), as the case may be, in such kind and number as they would have received if they had been holders of Common Shares on the applicable record date or effective date, as the case may be, by virtue of their outstanding Warrant having then been exercised into Common Shares at the Exercise Price in effect on the applicable record date or effective date, as the case may be;

			

 

	 	
			(g)

				
			the adjustments provided for in this Section 4.1 are cumulative, and shall, in the case of adjustments to the Exercise Price be computed to the nearest whole cent and shall apply to successive subdivisions, re-divisions, changes, reductions, combinations, consolidations, distributions, stock dividends, issues or other events resulting in any adjustment under the provisions of this Section 4.1, provided that, notwithstanding any other provision of this Section, no adjustment of the Exercise Price shall be required unless such adjustment would require an increase or decrease of at least 1% in the Exercise Price then in effect; provided, however, that any adjustments which by reason of this Section 4.1(g) are not required to be made shall be carried forward and taken into account in any subsequent adjustment; and

			

 

	 	
			(h)

				
			after any adjustment pursuant to this Section 4.1, the term “Common Shares” where used in this Indenture shall be interpreted to mean securities of any class or classes which, as a result of such adjustment and all prior adjustments pursuant to this Section 4.1, the Warrantholder is entitled to receive upon the exercise of his Warrant, and the number of Common Shares indicated by any exercise made pursuant to a Warrant shall be interpreted to mean the number of Common Shares or other property or securities a Warrantholder is entitled to receive, as a result of such adjustment and all prior adjustments pursuant to this Section 4.1, upon the full exercise of a Warrant.

			

 

	
			4.2

				
			Entitlement to Common Shares on Exercise of Warrant.

			

 

All Common Shares or shares of any class or other securities, which a Warrantholder is at the time in question entitled to receive on the permitted exercise of its Warrant, whether or not as a result of adjustments made pursuant to this Article 4, shall, for the purposes of the interpretation of this Indenture, be deemed to be Common Shares which such Warrantholder is entitled to acquire pursuant to such Warrant.

 

	
			4.3

				
			No Adjustment for Certain Transactions.

			

 

Notwithstanding anything in this Article 4, no adjustment shall be made in the acquisition rights attached to the Warrants if the issue of Common Shares is being made pursuant to this Indenture or in connection with (a) any share incentive plan or restricted share plan or share purchase plan in force from time to time for directors, officers, employees, consultants or other service providers of the Corporation; or (b) the satisfaction of existing instruments issued at the date hereof.

 

- 28 -

 

 

	
			4.4

				
			Determination by Independent Firm.

			

 

In the event of any question or dispute arising with respect to the adjustments provided for in this Article 4 such question shall be conclusively determined by an independent firm of chartered accountants other than the Auditors, who shall have access to all necessary records of the Corporation, and such determination shall be binding upon the Corporation, the Warrant Agent, all holders and all other persons interested therein.

 

	
			4.5

				
			Proceedings Prior to any Action Requiring Adjustment.

			

 

As a condition precedent to the taking of any action which would require an adjustment in any of the acquisition rights pursuant to any of the Warrants, including the number of Common Shares which are to be received upon the exercise thereof, the Corporation shall take any action which may, in the opinion of Counsel, be necessary in order that the Corporation has unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the Common Shares which the holders of such Warrants are entitled to receive on the full exercise thereof in accordance with the provisions hereof.

 

	
			4.6

				
			Certificate of Adjustment.

			

 

The Corporation shall from time to time immediately after the occurrence of any event which requires an adjustment or readjustment as provided in Article 4, deliver a certificate of the Corporation to the Warrant Agent specifying the nature of the event requiring the same and the amount of the adjustment or readjustment necessitated thereby and setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. The Warrant Agent shall rely, and shall be protected in so doing, upon the certificate of the Corporation and any other document filed by the Corporation pursuant to this Article 4 for all purposes.

 

	
			4.7

				
			Notice of Special Matters.

			

 

The Corporation covenants with the Warrant Agent that, so long as any Warrant remains outstanding, it will give notice to the Warrant Agent and to the Warrantholders of its intention to fix a record date that is prior to the Expiry Date for any matter for which an adjustment may be required pursuant to Section 4.1. Such notice shall specify the particulars of such event and the record date for such event, provided that the Corporation shall only be required to specify in the notice such particulars of the event as shall have been fixed and determined on the date on which the notice is given. The Corporation shall use its reasonable commercial efforts to give such notice not less than 14 days prior to such applicable record date. If notice has been given and the adjustment is not then determinable, the Corporation shall promptly, after the adjustment is determinable, file with the Warrant Agent a computation of the adjustment and give notice to the Warrantholders of such adjustment computation.

 

- 29 -

 

 

	
			4.8

				
			No Action after Notice.

			

 

The Corporation covenants with the Warrant Agent that it will not close its transfer books or take any other corporate action which might deprive the Warrantholder of the opportunity to exercise its right of acquisition pursuant thereto during the period of 14 days after the giving of the certificate or notices set forth in Section 4.6 and Section 4.7.

 

	
			4.9

				
			Other Action.

			

 

If the Corporation, after the date hereof, shall take any action affecting the Common Shares other than action described in Section 4.1, which in the reasonable opinion of the Directors would materially affect the rights of Warrantholders, the Exercise Price and/or Exchange Rate, the number of Common Shares which may be acquired upon exercise of the Warrants shall be adjusted in such manner and at such time, by action of the Directors, acting reasonably and in good faith, in their sole discretion as they may determine to be equitable to the Warrantholders in the circumstances, provided that no such adjustment will be made unless any requisite prior approval of any stock exchange on which the Common Shares are listed for trading has been obtained.

 

	
			4.10

				
			Protection of Warrant Agent.

			

 

The Warrant Agent shall not:

 

	 	
			(a)

				
			at any time be under any duty or responsibility to any Warrantholder to determine whether any facts exist which may require any adjustment contemplated by Section 4.1, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making the same;

			

 

	 	
			(b)

				
			be accountable with respect to the validity or value (or the kind or amount) of any Common Shares or of any other securities or property which may at any time be issued or delivered upon the exercise of the rights attaching to any Warrant;

			

 

	 	
			(c)

				
			be responsible for any failure of the Corporation to issue, transfer or deliver Common Shares or certificates for the same upon the surrender of any Warrants for the purpose of the exercise of such rights or to comply with any of the covenants contained in this Article; and

			

 

	 	
			(d)

				
			incur any liability or be in any way responsible for the consequences of any breach on the part of the Corporation of any of the representations, warranties or covenants herein contained or of any acts of the directors, officers, employees, agents or servants of the Corporation.

			

 

	
			4.11

				
			Participation by Warrantholder.

			

 

No adjustments shall be made pursuant to this Article 4 if the Warrantholders are entitled to participate in any event described in this Article 4 on the same terms, mutatis mutandis, as if the Warrantholders had exercised their Warrants prior to, or on the effective date or record date of, such event.

 

- 30 -

 

 

Article 5

Rights Of The Corporation And Covenants

 

	
			5.1

				
			Optional Purchases by the Corporation.

			

 

Subject to compliance with applicable Securities Laws and approval of applicable regulatory authorities, the Corporation may from time to time purchase by private contract or otherwise any of the Warrants. Any such purchase shall be made at the lowest price or prices at which, in the opinion of the Directors, such Warrants are then obtainable, plus reasonable costs of purchase, and may be made in such manner, from such persons and on such other terms as the Corporation, in its sole discretion, may determine. In the case of Certificated Warrants, Warrant Certificates representing the Warrants purchased pursuant to this Section 5.1 shall forthwith be delivered to and cancelled by the Warrant Agent and reflected accordingly on the register of Warrants. In the case of Uncertificated Warrants, the Warrants purchased pursuant to this Section 5.1 shall be reflected accordingly on the register of Warrants in accordance with procedures prescribed by the Depository under the book entry registration system. No Warrants shall be issued in replacement thereof.

 

	
			5.2

				
			General Covenants.

			

 

The Corporation covenants with the Warrant Agent that so long as any Warrants remain outstanding:

 

	 	
			(a)

				
			it will reserve and keep available a sufficient number of Common Shares for the purpose of enabling it to satisfy its obligations to issue Common Shares upon the exercise of the Warrants;

			

 

	 	
			(b)

				
			it will cause the Common Shares from time to time acquired pursuant to the exercise of the Warrants to be duly issued and delivered in accordance with the Warrants and the terms hereof;

			

 

	 	
			(c)

				
			all Common Shares which shall be issued upon exercise of the right to acquire provided for herein shall be fully paid and non-assessable;

			

 

	 	
			(d)

				
			it will use reasonable commercial efforts to maintain its existence and carry on its business in the ordinary course, to maintain its status as a Canadian reporting issuer in good standing, and to preserve its listing on the Canadian Securities Exchange provided that this clause shall not be construed as limiting or restricting the Corporation to agree to a consolidation, amalgamation, arrangement, takeover bid or merger that would result in the Corporation winding up, dissolving or ceasing to exist, so long as the holders of Common Shares receive securities of an entity which is existing, or cash, or the holders of Common Shares have approved the transaction in accordance with the requirements of applicable corporate and securities laws;

			

 

- 31 -

 

 

	 	
			(e)

				
			it will give notice to the Warrant Agent and Warrantholders of a default under the terms of the Indenture which remains unrectified for a period of ten Business Days; and

			

 

	 	
			(f)

				
			generally, it will well and truly perform and carry out all of the acts or things to be done by it as provided in this Indenture.

			

 

	
			5.3

				
			Warrant Agent’s Remuneration and Expenses.

			

 

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

 

	
			5.4

				
			Performance of Covenants by Warrant Agent.

			

 

If the Corporation shall fail to perform any of its covenants contained in this Indenture, then the Corporation will notify the Warrant Agent in writing of such failure and upon receipt by the Warrant Agent of such notice, the Warrant Agent may notify the Warrantholders of such failure on the part of the Corporation and may itself perform any of the covenants capable of being performed by it but, subject to Section 9.2, shall be under no obligation to perform said covenants or to notify the Warrantholders of such performance by it. All sums expended or advanced by the Warrant Agent in so doing shall be repayable as provided in Section 5.3. No such performance, expenditure or advance by the Warrant Agent shall relieve the Corporation of any default hereunder or of its continuing obligations under the covenants herein contained.

 

	
			5.5

				
			Enforceability of Warrants.

			

 

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

 

- 32 -

 

 

Article 6

Enforcement

 

	
			6.1

				
			Suits by Warrantholders.

			

 

All or any of the rights conferred upon any Warrantholder by any of the terms of this Indenture may be enforced by the Warrantholder by appropriate proceedings but without prejudice to the right which is hereby conferred upon the Warrant Agent to proceed in its own name to enforce each and all of the provisions herein contained for the benefit of the Warrantholders.

 

	
			6.2

				
			Suits by the Corporation.

			

 

The Corporation shall have the right to enforce full payment of the Exercise Price of all Common Shares issued to a Warrantholder hereunder and shall be entitled to demand such payment from the Warrantholder or alternatively to instruct the Warrant Agent to cause the cancellation of the share certificates and the amendment of the securities register accordingly.

 

	
			6.3

				
			Immunity of Shareholders, etc.

			

 

The Warrant Agent and the Warrantholders hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any incorporator or any past, present or future shareholder, trustee, employee or agent of the Corporation or any successor Corporation on any covenant, agreement, representation or warranty by the Corporation herein. The obligations hereunder are not personally binding upon, nor shall resort hereunder be had to, the private property of any of the past, present or future Directors or Shareholders of the Corporation or any of the past, present or future officers, employees or agents of the Corporation, but only the property of the Corporation (or any successor person) shall be bound in respect hereof.

 

	
			6.4

				
			Waiver of Default.

			

 

Upon the happening of any default hereunder:

 

	 	
			(a)

				
			the Warrantholders of not less than 51% of the Warrants then outstanding shall have power (in addition to the powers exercisable by Extraordinary Resolution) by requisition in writing to instruct the Warrant Agent to waive any default hereunder and the Warrant Agent shall thereupon waive the default upon such terms and conditions as shall be prescribed in such requisition; or

			

 

	 	
			(b)

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

			

 

provided that no delay or omission of the Warrant Agent or of the Warrantholders to exercise any right or power accruing upon any default shall impair any such right or

 

- 33 -

 

 

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

 

Article 7

Meetings Of Warrantholders

 

	
			7.1

				
			Right to Convene Meetings.

			

 

The Warrant Agent may at any time and from time to time, and shall on receipt of a written request of the Corporation or of a Warrantholders’ Request and upon being indemnified and funded to its reasonable satisfaction by the Corporation or by the Warrantholders signing such Warrantholders’ Request against the costs which may be incurred in connection with the calling and holding of such meeting, convene a meeting of the Warrantholders. If the Warrant Agent fails to so call a meeting within seven days after receipt of such written request of the Corporation or such Warrantholders’ Request and the indemnity and funding given as aforesaid, the Corporation or such Warrantholders, as the case may be, may convene such meeting. Every such meeting shall be held in the City of Toronto or at such other place as may be mutually approved or determined by the Warrant Agent and the Corporation.

 

	
			7.2

				
			Notice.

			

 

At least 21 days’ prior written notice of any meeting of Warrantholders shall be given to the Warrantholders in the manner provided for in Section 10.2 and a copy of such notice shall be sent by mail to the Warrant Agent (unless the meeting has been called by the Warrant Agent) and to the Corporation (unless the meeting has been called by the Corporation). Such notice shall state the time when and the place where the meeting is to be held, shall state briefly the general nature of the business to be transacted thereat and shall contain such information as is reasonably necessary to enable the Warrantholders to make a reasoned decision on the matter, but it shall not be necessary for any such notice to set out the terms of any resolution to be proposed or any of the provisions of this Section 7.2.

 

	
			7.3

				
			Chairman.

			

 

An individual (who need not be a Warrantholder) designated in writing by the Warrant Agent and the Corporation shall be chairman of the meeting and if no individual is so designated, or if the individual so designated is not present within fifteen minutes from the time fixed for the holding of the meeting, the Warrantholders present in person or by proxy shall choose an individual present to be chairman.

 

	
			7.4

				
			Quorum.

			

 

Subject to the provisions of Section 7.11, at any meeting of the Warrantholders a quorum shall consist of Warrantholder(s) present in person or by proxy and holding at least 10% of the aggregate number of all the then outstanding Warrants. If a quorum of the

 

- 34 -

 

 

Warrantholders shall not be present within thirty minutes from the time fixed for holding any meeting, the meeting, if summoned by Warrantholders or on a Warrantholders’ Request, shall be dissolved; but in any other case the meeting shall be adjourned to the same day in the next week (unless such day is not a Business Day, in which case it shall be adjourned to the next following Business Day) at the same time and place and no notice of the adjournment need be given. Any business may be brought before or dealt with at an adjourned meeting which might have been dealt with at the original meeting in accordance with the notice calling the same. No business shall be transacted at any meeting unless a quorum be present at the commencement of business. At the adjourned meeting the Warrantholders present in person or by proxy shall form a quorum and may transact the business for which the meeting was originally convened, notwithstanding that they may not be holding at least 10% of the aggregate number of all then outstanding Warrants.

 

	
			7.5

				
			Power to Adjourn.

			

 

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

 

	
			7.6

				
			Show of Hands.

			

 

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

 

	
			7.7

				
			Poll and Voting.

			

 

	
			(1)

				
			On every Extraordinary Resolution, and on any other question submitted to a meeting and after a vote by show of hands when demanded by the chairman or by one or more of the Warrantholders acting in person or by proxy and holding in the aggregate at least 5% of all the Warrants then outstanding, a poll shall be taken in such manner as the chairman shall direct. Questions other than those required to be determined by Extraordinary Resolution shall be decided by a majority of the votes cast on the poll.

			

 

	
			(2)

				
			On a show of hands, every person who is present and entitled to vote, whether as a Warrantholder or as proxy for one or more absent Warrantholders, or both, shall have one vote. On a poll, each Warrantholder present in person or represented by a proxy duly appointed by instrument in writing shall be entitled to one vote in respect of each Warrant then held or represented by it. A proxy need not be a Warrantholder. The chairman of any meeting shall be entitled, both on a show of hands and on a poll, to vote in respect of the Warrants, if any, held or represented by him.

			

 

- 35 -

 

 

	
			7.8

				
			Regulations.

			

 

	
			(1)

				
			The Warrant Agent, or the Corporation with the approval of the Warrant Agent, may from time to time make and from time to time vary such regulations as it shall think fit for:

			

 

	 	
			(a)

				
			the setting of the record date for a meeting for the purpose of determining Warrantholders entitled to receive notice of and to vote at the meeting;

			

 

	 	
			(b)

				
			the deposit of instruments appointing proxies at such place and time as the Warrant Agent, the Corporation or the Warrantholders convening the meeting, as the case may be, may in the notice convening the meeting direct;

			

 

	 	
			(c)

				
			the deposit of instruments appointing proxies at some approved place or places other than the place at which the meeting is to be held and enabling particulars of such instruments appointing proxies to be mailed or telecopied before the meeting to the Corporation or to the Warrant Agent at the place where the same is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting;

			

 

	 	
			(d)

				
			the form of the instrument of proxy; and

			

 

	 	
			(e)

				
			generally for the calling of meetings of Warrantholders and the conduct of business thereat.

			

 

	
			(2)

				
			Any regulations so made shall be binding and effective and the votes given in accordance therewith shall be valid and shall be counted. Save as such regulations may provide, the only persons who shall be recognized at any meeting as a Warrantholder, or be entitled to vote or be present at the meeting in respect thereof (subject to Section 7.9), shall be Warrantholders or proxies of Warrantholders.

			

 

	
			7.9

				
			Corporation and Warrant Agent May be Represented.

			

 

The Corporation and the Warrant Agent, by their respective directors, officers, agents and employees and the Counsel for the Corporation and for the Warrant Agent may attend any meeting of the Warrantholders.

 

	
			7.10

				
			Powers Exercisable by Extraordinary Resolution.

			

 

In addition to all other powers conferred upon them by any other provisions of this Indenture or by law, the Warrantholders at a meeting shall, subject to the provisions of Section 7.11, have the power exercisable from time to time by Extraordinary Resolution:

 

	 	
			(a)

				
			to agree to any modification, abrogation, alteration, compromise or arrangement of the rights of Warrantholders or the Warrant Agent in its capacity as warrant agent hereunder (subject to the Warrant Agent’s prior consent, acting reasonably) or on behalf of the Warrantholders against the Corporation whether such rights arise under this Indenture or otherwise;

			

 

- 36 -

 

 

	 	
			(b)

				
			to amend, alter or repeal any Extraordinary Resolution previously passed or sanctioned by the Warrantholders;

			

 

	 	
			(c)

				
			to direct or to authorize the Warrant Agent, subject to Section 9.2(2) hereof, to enforce any of the covenants on the part of the Corporation contained in this Indenture or to enforce any of the rights of the Warrantholders in any manner specified in such Extraordinary Resolution or to refrain from enforcing any such covenant or right;

			

 

	 	
			(d)

				
			to waive, and to direct the Warrant Agent to waive, any default on the part of the Corporation in complying with any provisions of this Indenture either unconditionally or upon any conditions specified in such Extraordinary Resolution;

			

 

	 	
			(e)

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

			

 

	 	
			(f)

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

			

 

	 	
			(g)

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

			

 

	 	
			(h)

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

			

 

	 	
			(i)

				
			to assent to any compromise or arrangement with any creditor or creditors or any class or classes of creditors, whether secured or otherwise, and with holders of any shares or other securities of the Corporation.

			

 

	
			7.11

				
			Meaning of Extraordinary Resolution.

			

 

	
			(1)

				
			The expression “Extraordinary Resolution” when used in this Indenture means, subject as hereinafter provided in this Section 7.11 and in Section 7.14, a resolution proposed at a meeting of Warrantholders duly convened for that purpose and held in accordance with the provisions of this Article 7 at which there are present in person or by proxy Warrantholders holding at least 10% of the aggregate number of all then outstanding Warrants and passed by the affirmative votes of Warrantholders holding not less than 66 2/3% of the aggregate number of all then outstanding Warrants represented at the meeting and voted on the poll upon such resolution.

			

 

- 37 -

 

 

	
			(2)

				
			If, at the meeting at which an Extraordinary Resolution is to be considered, Warrantholders holding at least 10% of the aggregate number of all then outstanding Warrants are not present in person or by proxy within 30 minutes after the time appointed for the meeting, then the meeting, if convened by Warrantholders or on a Warrantholders’ Request, shall be dissolved; but in any other case it shall stand adjourned to such day, being not less than 15 or more than 60 days later, and to such place and time as may be appointed by the chairman. Not less than 14 days’ prior notice shall be given of the time and place of such adjourned meeting in the manner provided for in Section 10.2. Such notice shall state that at the adjourned meeting the Warrantholders present in person or by proxy shall form a quorum but it shall not be necessary to set forth the purposes for which the meeting was originally called or any other particulars. At the adjourned meeting the Warrantholders present in person or by proxy shall form a quorum and may transact the business for which the meeting was originally convened and a resolution proposed at such adjourned meeting and passed by the requisite vote as provided in Section 7.11(1) shall be an Extraordinary Resolution within the meaning of this Indenture notwithstanding that Warrantholders holding at least 10% of the aggregate number of all the then outstanding Warrants are not present in person or by proxy at such adjourned meeting.

			

 

	
			(3)

				
			Subject to Section 7.14, votes on an Extraordinary Resolution shall always be given on a poll and no demand for a poll on an Extraordinary Resolution shall be necessary.

			

 

	
			7.12

				
			Powers Cumulative.

			

 

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

 

	
			7.13

				
			Minutes.

			

 

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

 

	
			7.14

				
			Instruments in Writing.

			

 

All actions which may be taken and all powers that may be exercised by the Warrantholders at a meeting held as provided in this Article 7 may also be taken and

 

- 38 -

 

 

exercised by Warrantholders holding at least 66 2/3% of the aggregate number of all then outstanding Warrants by an instrument in writing signed in one or more counterparts by such Warrantholders in person or by attorney duly appointed in writing, and the expression “Extraordinary Resolution” when used in this Indenture shall include an instrument so signed.

 

	
			7.15

				
			Binding Effect of Resolutions.

			

 

Every resolution and every Extraordinary Resolution passed in accordance with the provisions of this Article 7 at a meeting of Warrantholders shall be binding upon all the Warrantholders, whether present at or absent from such meeting, and every instrument in writing signed by Warrantholders in accordance with Section 7.14 shall be binding upon all the Warrantholders, whether signatories thereto or not, and each and every Warrantholder and the Warrant Agent (subject to the provisions for indemnity herein contained) shall be bound to give effect accordingly to every such resolution and instrument in writing.

 

	
			7.16

				
			Holdings by Corporation Disregarded.

			

 

In determining whether Warrantholders holding Warrants evidencing the required number of Warrants are present at a meeting of Warrantholders for the purpose of determining a quorum or have concurred in any consent, waiver, Extraordinary Resolution, Warrantholders’ Request or other action under this Indenture, Warrants owned legally or beneficially by the Corporation shall be disregarded in accordance with the provisions of Section 10.7.

 

Article 8

Supplemental Indentures

 

	
			8.1

				
			Provision for Supplemental Indentures for Certain Purposes.

			

 

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

 

	 	
			(a)

				
			providing for the issuance of additional Warrants hereunder and any consequential amendments hereto as may be required by the Warrant Agent relying on the advice of Counsel;

			

 

	 	
			(b)

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

			

 

	 	
			(c)

				
			adding to the provisions hereof such additional covenants and enforcement provisions as, in the opinion of Counsel, are necessary or advisable in the premises, provided that the same are not in the opinion of the Warrant Agent,

			

 

- 39 -

 

 

	 	
			 

				
			relying on the advice of Counsel, prejudicial to the interests of the Warrantholders;

			

 

	 	
			(d)

				
			giving effect to any Extraordinary Resolution passed as provided in Section 7.11;

			

 

	 	
			(e)

				
			making such provisions not inconsistent with this Indenture as may be necessary or desirable with respect to matters or questions arising hereunder or for the purpose of obtaining a listing or quotation of the Warrants on any stock exchange, provided that such provisions are not, in the opinion of the Warrant Agent, relying on the advice of Counsel, prejudicial to the interests of the Warrantholders;

			

 

	 	
			(f)

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

			

 

	 	
			(g)

				
			modifying any of the provisions of this Indenture, including relieving the Corporation from any of the obligations, conditions or restrictions herein contained, provided that such modification or relief shall be or become operative or effective only if, in the opinion of the Warrant Agent, relying on the advice of Counsel, such modification or relief in no way prejudices any of the rights of the Warrantholders or of the Warrant Agent, and provided further that the Warrant Agent may in its sole discretion decline to enter into any such supplemental indenture which in its opinion may not afford adequate protection to the Warrant Agent when the same shall become operative; and

			

 

	 	
			(h)

				
			for any other purpose not inconsistent with the terms of this Indenture, including the correction or rectification of any ambiguities, defective or inconsistent provisions, errors, mistakes or omissions herein, provided that in the opinion of the Warrant Agent, relying on the advice of Counsel, the rights of the Warrant Agent and of the Warrantholders are in no way prejudiced thereby.

			

 

	
			8.2

				
			Successor Entities. 

			

 

In the case of the consolidation, amalgamation, arrangement, merger or transfer of the undertaking or assets of the Corporation as an entirety or substantially as an entirety to or with another entity (“successor entity”), the successor entity resulting from such consolidation, amalgamation, arrangement, merger or transfer (if not the Corporation) shall expressly assume, by supplemental indenture satisfactory in form to the Warrant Agent and executed and delivered to the Warrant Agent, the due and punctual performance and observance of each and every covenant and condition of this Indenture to be performed and observed by the Corporation.

 

- 40 -

 

 

Article 9

Concerning The Warrant Agent

 

	
			9.1

				
			Indenture Legislation.

			

 

	
			(1)

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

			

 

	
			(2)

				
			The Corporation and the Warrant Agent agree that each will, at all times in relation to this Indenture and any action to be taken hereunder, observe and comply with and be entitled to the benefits of Applicable Legislation.

			

 

	
			9.2

				
			Rights and Duties of Warrant Agent.

			

 

	
			(1)

				
			In the exercise of the rights and duties prescribed or conferred by the terms of this Indenture, the Warrant Agent shall act honestly and in good faith and exercise that degree of care, diligence and skill that a reasonably prudent warrant agent would exercise in comparable circumstances. No provision of this Indenture shall be construed to relieve the Warrant Agent from liability for its own gross negligence, wilful misconduct, bad faith or fraud under this Indenture.

			

 

	
			(2)

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

			

 

	
			(3)

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

			

 

	
			(4)

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

			

 

	
			9.3

				
			Evidence, Experts and Advisers.

			

 

	
			(1)

				
			In addition to the reports, certificates, opinions and other evidence required by this Indenture, the Corporation shall furnish to the Warrant Agent such additional evidence of 

			

 

- 41 -

 

 

	
			 

				
			compliance with any provision hereof, and in such form, as may be prescribed by Applicable Legislation or as the Warrant Agent may reasonably require by written notice to the Corporation.

			

 

	
			(2)

				
			In the exercise of its rights and duties hereunder, the Warrant Agent may, if it is acting in good faith, rely as to the truth of the statements and the accuracy of the opinions expressed in statutory declarations, opinions, reports, written requests, consents, or orders of the Corporation, certificates of the Corporation or other evidence furnished to the Warrant Agent pursuant to a request of the Warrant Agent, provided that the Warrant Agent examines the same and determines that such evidence complies with the applicable requirements of this Indenture.

			

 

	
			(3)

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

			

 

	
			(4)

				
			Whenever Applicable Legislation requires that evidence referred to in subsection 9.3(1) be in the form of a statutory declaration, the Warrant Agent may accept such statutory declaration in lieu of a certificate of the Corporation required by any provision hereof. Any such statutory declaration may be made by one or more of the Chairman of the Board, Chief Executive Officer, President, Chief Operating Officer, Executive Vice-President, Vice-President, Secretary, Controller, Treasurer, or any Assistant-Secretary or Assistant-Treasurer of the Corporation, or officers of the Corporation having equivalent positions.

			

 

	
			(5)

				
			The Warrant Agent may employ or retain such Counsel, accountants, appraisers or other experts or advisers as it may reasonably require for the purpose of discharging its duties hereunder and may pay reasonable remuneration for all services so performed by any of them, without taxation of costs of any Counsel, and shall not be responsible for any misconduct or negligence on the part of any such experts or advisers who have been appointed with due care by the Warrant Agent. The Corporation shall pay or reimburse the Warrant Agent for any reasonable fees, expenses and disbursements made or incurred by the Warrant Agent in the discharge of its duties and in the management of the agency hereunder.

			

 

	
			(6)

				
			The Warrant Agent may act and rely and shall be protected in acting and relying in good faith on the opinion or advice of or information obtained from any Counsel, accountant, appraiser, engineer or other expert or adviser, whether retained or employed by the Corporation or by the Warrant Agent, in relation to any matter arising in the administration of the agency hereof.

			

 

	
			(7)

				
			Proof of the execution of an instrument in writing, including a Warrantholders' Request, by any Warrantholder may be made by the certificate of a notary, solicitor or commissioner for oaths, or other officer with similar powers, that the person signing such

			

 

- 42 -

 

 

 

	
			 

				
			instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution or in any other manner which the Warrant Agent may consider adequate and in respect of a corporate Warrantholder, shall include a certificate of incumbency of such Warrantholder together with a certified resolution authorizing the person who signs such instrument to sign such instrument.

			

 

	
			9.4

				
			Documents, Monies, etc. Held by Warrant Agent.

			

 

Any monies, securities, documents of title or other instruments that may at any time be held by the Warrant Agent shall be placed in the deposit vaults of the Warrant Agent or of any Canadian chartered bank listed in Schedule I of the Bank Act (Canada), or deposited for safekeeping with any such bank. Any monies held pending the application or withdrawal thereof under any provisions of this Indenture, shall be held in a segregated non-interest bearing account.

 

	
			9.5

				
			Actions by Warrant Agent to Protect Interest.

			

 

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

 

	
			9.6

				
			Warrant Agent Not Required to Give Security.

			

 

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

 

	
			9.7

				
			Protection of Warrant Agent.

			

 

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

 

	 	
			(a)

				
			the Warrant Agent shall not be liable for or by reason of any statements of fact or recitals in this Indenture or in the Warrant Certificates (except the representation contained in Section 9.9) or be required to verify the same, but all such statements or recitals are and shall be deemed to be made by the Corporation;

			

 

	 	
			(b)

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

			

 

	 	
			(c)

				
			the Warrant Agent shall not be bound to give notice to any person or persons of the execution hereof;

			

 

	 	
			(d)

				
			the Warrant Agent shall not incur any liability or responsibility whatever or be in any way responsible for the consequence of any breach on the part of the Corporation of any of its covenants herein contained or of any acts of any directors, officers, employees, agents or servants of the Corporation; and

			

 

- 43 -

 

 

	 	
			(e)

				
			the Corporation hereby indemnifies and agrees to hold harmless the Warrant Agent, its affiliates, their current and former officers, directors, employees, agents, successors and assigns from and against any and all liabilities, losses (other than loss of profits), damages, penalties, claims, actions, suits, costs, expenses and disbursements, including legal fees and disbursements of whatever kind and nature which may at any time be imposed on or incurred by or asserted against the Warrant Agent, whether groundless or otherwise, arising from or out of any act, omission or error of the Warrant Agent, provided that the Corporation shall not be required to indemnify the Warrant Agent in the event of the gross negligence or wilful misconduct of the Warrant Agent, and this provision shall survive the resignation or removal of the Warrant Agent or the termination or discharge of this Indenture.

			

 

	 	
			(f)

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

			

 

	 	
			(g)

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

			

 

	
			9.8

				
			Replacement of Warrant Agent; Successor by Merger.

			

 

	
			(1)

				
			The Warrant Agent may resign its agency and be discharged from all further duties and liabilities hereunder, subject to this Section 9.8, by giving to the Corporation not less than 60 days’ prior notice in writing or such shorter prior notice as the Corporation may accept as sufficient. The Warrantholders by Extraordinary Resolution shall have power at any time to remove the existing Warrant Agent and to appoint a new Warrant Agent. In the event of the Warrant Agent resigning or being removed as aforesaid or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Corporation shall forthwith appoint a new Warrant Agent unless a new Warrant Agent has already been appointed by the Warrantholders; failing such appointment by the Corporation, the retiring Warrant Agent or any Warrantholder may apply to a judge of the Ontario Superior Court of Justice of the Province of Ontario on 

			

 

- 44 -

 

 

	
			 

				
			such notice as such judge may direct, for the appointment of a new Warrant Agent; but any new Warrant Agent so appointed by the Corporation or by the Court shall be subject to removal as aforesaid by the Warrantholders. Any new Warrant Agent appointed under any provision of this Section 9.8 shall be an entity authorized to carry on the business of a trust company in one or more of the provinces of Canada and, if required by the Applicable Legislation for any provinces, in such provinces. On any such appointment the new warrant agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Warrant Agent hereunder.

			

 

	
			(2)

				
			Upon the appointment of a successor Warrant Agent, the Corporation shall promptly notify the Warrantholders thereof in the manner provided for in Section 10.2.

			

 

	
			(3)

				
			Any Warrant Certificates Authenticated but not delivered by a predecessor Warrant Agent may be Authenticated by the successor Warrant Agent in the name of the predecessor or successor Warrant Agent.

			

 

	
			(4)

				
			Any corporation in to which the Warrant Agent may be merged or consolidated or amalgamated, or any corporation resulting therefrom to which the Warrant Agent shall be a party, or any corporation succeeding to substantially the corporate trust business of the Warrant Agent shall be the successor to the Warrant Agent hereunder without any further act on its part or any of the parties hereto, provided that such corporation would be eligible for appointment as successor Warrant Agent under Section 9.8(1).

			

 

	
			9.9

				
			Conflict of Interest.

			

 

	
			(1)

				
			The Warrant Agent represents to the Corporation that at the time of execution and delivery hereof no material conflict of interest exists between its role as a warrant agent hereunder and its role in any other capacity and agrees that in the event of a material conflict of interest arising hereafter it will, within 90 days after ascertaining that it has such material conflict of interest, either eliminate the same or assign its agency hereunder to a successor Warrant Agent approved by the Corporation and meeting the requirements set forth in Section 9.8(1)). Notwithstanding the foregoing provisions of this Section 9.9(1), if any such material conflict of interest exists or hereafter shall exist, the validity and enforceability of this Indenture and the Warrant Certificate shall not be affected in any manner whatsoever by reason thereof.

			

 

	
			(2)

				
			Subject to Section 9.9(1), the Warrant Agent, in its personal or any other capacity, may buy, lend upon and deal in securities of the Corporation and generally may contract and enter into financial transactions with the Corporation without being liable to account for any profit made thereby.

			

 

	
			9.10

				
			Acceptance of Agency

			

 

The Warrant Agent hereby accepts the agency in this Indenture declared and provided for and agrees to perform the same upon the terms and conditions herein set forth.

 

- 45 -

 

 

	
			9.11

				
			Warrant Agent Not to be Appointed Receiver.

			

 

The Warrant Agent and any person related to the Warrant Agent shall not be appointed a receiver, a receiver and manager or liquidator of all or any part of the assets or undertaking of the Corporation.

 

	
			9.12

				
			Authorization to Carry on Business

			

 

The Warrant Agent represents to the Corporation that as at the date of the execution and delivery of this Indenture, it is duly authorized and qualified to carry on the business of a trust company in the Province of Alberta.

 

	
			9.13

				
			Warrant Agent Not Required to Give Notice of Default.

			

 

The Warrant Agent shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereby unless and until it shall have been required so to do under the terms hereof; nor shall the Warrant Agent be required to take notice of any default hereunder, unless and until notified in writing of such default, which notice shall distinctly specify the default desired to be brought to the attention of the Warrant Agent and in the absence of any such notice the Warrant Agent may for all purposes of this Indenture conclusively assume that no default has been made in the observance or performance of any of the representations, warranties, covenants, agreements or conditions contained herein. Any such notice shall in no way limit any discretion herein given to the Warrant Agent to determine whether or not the Warrant Agent shall take action with respect to any default.

 

	
			9.14

				
			Anti-Money Laundering.

			

 

	
			(1)

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

			

 

	
			(2)

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

			

 

- 46 -

 

 

	
			9.15

				
			Compliance with Privacy Code.

			

 

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

 

	 	
			(a)

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

			

 

	 	
			(b)

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

			

 

	 	
			(c)

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

			

 

	 	
			(d)

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

			

 

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

 

Article 10

General

 

	
			10.1

				
			Notice to the Corporation and the Warrant Agent.

			

 

	
			(1)

				
			Unless herein otherwise expressly provided, any notice to be given hereunder to the Corporation or the Warrant Agent shall be deemed to be validly given if delivered, sent by registered letter, postage prepaid, faxed or emailed:

			

 

	 	
			(a)

				
			If to the Corporation:

			

 

CLS Holdings USA, Inc.

1810 E. Sahara Avenue, Suite 613

Las Vegas, Nevada 89104

 

Attention:    Jeffrey Binder – Chief Executive Officer

email:          jeff@clslabs.com

 

with a copy to:

 

- 47 -

 

 

Cassels Brock & Blackwell LLP

40 King Street West, Suite 2100

Toronto, Ontario M5H 3C2

 

Attention:    Cam Mingay

email:          cmingay@casselsbrock.com

 

	 	
			(b)

				
			If to the Warrant Agent:

			

 

Odyssey Trust Company

Stock Exchange Tower

350-300 5th Avenue SW

Calgary, Alberta T2P 3C4

 

Attention:    Dan Sander

email:          dsander@odysseytrust.com

 

and any such notice delivered in accordance with the foregoing shall be deemed to have been received and given on the date of delivery or, if mailed, on the fifth Business Day following the date of mailing such notice or, if faxed, emailed or transmitted by other electronic means, on the date of transmission, unless such day is not a Business Day and in that case it will be deemed to be received on the following Business Day.

 

	
			(2)

				
			The Corporation or the Warrant Agent, as the case may be, may from time to time notify the other in the manner provided in Section 10.1(1) of a change of address which, from the effective date of such notice and until changed by like notice, shall be the address of the Corporation or the Warrant Agent, as the case may be, for all purposes of this Indenture.

			

 

	
			(3)

				
			If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Warrant Agent or to the Corporation hereunder could reasonably be considered unlikely to reach its destination, such notice shall be valid and effective only if it is delivered to the named officer of the party to which it is addressed, as provided in Section 10.1(1), or given by fax, email or other means of prepaid, transmitted and recorded communication.

			

 

	
			10.2

				
			Notice to Warrantholders.

			

 

	
			(1)

				
			Unless otherwise provided herein, notice to the Warrantholders under the provisions of this Indenture shall be valid and effective if delivered or sent by ordinary post addressed to such holders at their post office addresses appearing on the register hereinbefore mentioned and shall be deemed to have been effectively received and given on the date of delivery or, if mailed, on the third Business Day following the date of mailing such notice. In the event that Warrants are held in the name of the Depository, a copy of such notice shall also be sent by electronic communication to the Depository and shall be deemed received and given on the day it is so sent.

			

 

- 48 -

 

 

	
			(2)

				
			If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Warrantholders hereunder could reasonably be considered unlikely to reach its destination, such notice shall be valid and effective only if it is delivered to such Warrantholders to the address for such Warrantholders contained in the register maintained by the Warrant Agent or such notice may be given, at the Corporation’s expense, by means of publication in the Globe and Mail, National Edition, or any other English language daily newspaper or newspapers of general circulation in Canada, in each two successive weeks, and any so notice published shall be deemed to have been received and given on the latest date the publication takes place.

			

 

	
			(3)

				
			Accidental error or omission in giving notice or accidental failure to mail notice to any Warrantholder will not invalidate any action or proceeding founded thereon.

			

 

	
			10.3

				
			Ownership of Warrants.

			

 

The Corporation and the Warrant Agent may deem and treat the Warrantholders as the absolute owner thereof for all purposes, and the Corporation and the Warrant Agent shall not be affected by any notice or knowledge to the contrary except where the Corporation or the Warrant Agent is required to take notice by statute or by order of a court of competent jurisdiction. The receipt of any such Warrantholder of the Common Shares which may be acquired pursuant thereto shall be a good discharge to the Corporation and the Warrant Agent for the same and neither the Corporation nor the Warrant Agent shall be bound to inquire into the title of any such holder except where the Corporation or the Warrant Agent is required to take notice by statute or by order of a court of competent jurisdiction.

 

	
			10.4

				
			Counterparts and Electronic Copies.

			

 

This Indenture may be executed in several counterparts, each of which when so executed shall be deemed to be an original and such counterparts together shall constitute one and the same instrument and notwithstanding their date of execution they shall be deemed to be dated as of the date hereof.

 

Each of the parties hereto shall be entitled to rely on delivery of a facsimile or PDF copy of this Indenture and acceptance by each such party of any such facsimile or PDF copy shall be legally effective to create a valid and binding agreement between the parties hereto in accordance with the terms hereof.

 

	
			10.5

				
			Satisfaction and Discharge of Indenture.

			

 

Upon the earlier of:

 

	 	
			(a)

				
			the date by which there shall have been delivered to the Warrant Agent for exercise or cancellation all Warrants theretofore Authenticated hereunder in the case of Certificated Warrants or by way of standard processing through the book entry only system in the case of an Uncertificated Warrant, or by way of standard

			

 

- 49 -

 

 

	 	
			 

				
			processing through the book entry only system in the case of a CDS Global Warrant; and

			

 

	 	
			(b)

				
			the Expiry Time;

			

 

this Indenture shall cease to be of further effect and the Warrant Agent, on demand of and at the cost and expense of the Corporation and upon delivery to the Warrant Agent of a certificate of the Corporation stating that all conditions precedent to the satisfaction and discharge of this Indenture have been complied with, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture. Notwithstanding the foregoing, the indemnities provided to the Warrant Agent by the Corporation hereunder shall remain in full force and effect and survive the termination of this Indenture.

 

	
			10.6

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

			

 

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

 

	
			10.7

				
			Common Shares or Warrants Owned by the Corporation or its Subsidiaries - Certificate to be Provided.

			

 

For the purpose of disregarding any Warrants owned legally or beneficially by the Corporation in Section 7.16, the Corporation shall provide to the Warrant Agent, from time to time, a certificate of the Corporation setting forth as at the date of such certificate:

 

	 	
			(a)

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

			

 

	 	
			(b)

				
			the number of Warrants owned legally or beneficially by the Corporation;

			

 

and the Warrant Agent, in making the computations in Section 7.16, shall be entitled to rely on such certificate without any additional evidence.

 

	
			10.8

				
			Severability

			

 

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

 

- 50 -

 

 

	
			10.9

				
			Force Majeure

			

 

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

 

	
			10.10

				
			Assignment, Successors and Assigns 

			

 

Neither of the parties hereto may assign its rights or interest under this Indenture without the consent of the other party, except as provided in Section 9.8 in the case of the Warrant Agent, or as provided in Section 8.2 in the case of the Corporation. Subject thereto, this Indenture shall enure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns.

 

	
			10.11

				
			Rights of Rescission and Withdrawal for Holders 

			

 

Should a holder of Warrants exercise any legal, statutory, contractual or other right of withdrawal or rescission that may be available to it, and the holder’s funds which were paid on exercise have already been released to the Corporation by the Warrant Agent, the Warrant Agent shall not be responsible for ensuring the exercise is cancelled and a refund is paid back to the holder. In such cases, the Corporation, upon surrender to the Corporation or the Warrant Agent of any underlying shares that may have been issued, or such other procedure as agreed to by the parties hereto, shall instruct the Warrant Agent in writing, to cancel the exercise transaction and to cause the cancellation of any such underlying shares on the register, which may have already been issued upon the Warrant exercise. In the event that any payment is received from the Corporation by virtue of the holder being a Shareholder for such Warrants that were subsequently rescinded, the Warrant Agent shall not be under any duty or obligation to take any steps to ensure or enforce that the funds are returned pursuant to this section, nor shall the Warrant Agent be in any other way responsible in the event that any payment is not delivered or received pursuant to this section.

 

 

 

[Signature page follows]

 

 

- 51 -

 

 

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

 

CLS HOLDINGS USA, INC. 

 

 

 

By:  /s/ Jeffrey Binder                                              

Name: Jeffrey Binder     

Title: Chief Executive Officer     

 

 

 

By:  /s/ Frank Tarantino                                          

Name: Frank Tarantino     

Title: Chief Financial Officer     

 

 

 

 

 

 

 

[CLS Holdings USA, Inc. – Warrant Indenture signature page]

 

 

 

 

ODYSSEY TRUST COMPANY

 

 

 

By:      /s/ Dan Sander                                                   

          Authorized Signatory      

 

 

 

By:                                                                                 

           Authorized Signatory      

 

 

 

 

 

 

 

 

 

 

 

 

 

 

[CLS Holdings USA, Inc. – Warrant Indenture signature page]

 

 

 

SCHEDULE “A”

FORM OF WARRANT

 

THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON THE EXERCISE HEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”). THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) IF THE SECURITIES HAVE BEEN REGISTERED IN COMPLIANCE WITH THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS (C) IN COMPLIANCE WITH THE EXEMPTION FROM THE REGISTRATION REQUIREMENTS UNDER THE SECURITIES ACT IN ACCORDANCE WITH RULE 144 THEREUNDER, IF APPLICABLE, AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN A TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE STATE LAWS AND REGULATIONS GOVERNING THE OFFER AND SALE OF SECURITIES, AND THE HOLDER HAS, PRIOR TO SUCH SALE, FURNISHED TO THE COMPANY AN OPINION OF COUNSEL OF RECOGNIZED STANDING, OR OTHER EVIDENCE OF EXEMPTION, REASONABLY SATISFACTORY TO THE COMPANY. THE HOLDER HEREOF WILL NOT, DIRECTLY OR INDIRECTLY, ENGAGE IN ANY HEDGING TRANSACTION WITH REGARD TO THIS SECURITY, EXCEPT AS PERMITTED BY THE SECURITIES ACT. DELIVERY OF THIS CERTIFICATE MAY NOT CONSTITUTE “GOOD DELIVERY” IN SETTLEMENT OF TRANSACTIONS ON STOCK EXCHANGES IN CANADA.”

 

 

THIS WARRANT MAY NOT BE EXERCISED UNLESS THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE.

 

WARRANT

 

To acquire Common Shares of

 

CLS HOLDINGS USA, INC.

 

(existing pursuant to the laws of the State of Nevada)

 

	
			Warrant

				 	
			Certificate for _____________________

			
	
			Certificate No. ●

				 	
			Warrants, each entitling the holder to

			acquire one Common Share (subject to 

			

 

 

 

 

	
			 

				 	
			adjustment as provided for in the Warrant

			Indenture (as defined below))

			
	 	 	
			CUSIP ●

			
	 	 	
			ISIN ●

			

 

THIS IS TO CERTIFY THAT, for value received,

 

 

(the “Warrantholder”) is the registered holder of the number of common share purchase warrants (the “Warrants”) of CLS Holdings USA, Inc. (the “Corporation”) specified above, and is entitled, on exercise of these Warrants upon and subject to the terms and conditions set forth herein and in the Warrant Indenture (as defined herein) to purchase at any time before 5:00 p.m. (Toronto time) (the “Expiry Time”) on the date that is 36 months from the Closing Date (the “Expiry Date”) one fully paid and non-assessable common share without par value in the capital of the Corporation as constituted on the date hereof (a “Common Share”) for each Warrant subject to adjustment in accordance with the terms of the Warrant Indenture.

 

The Warrants evidenced hereby are exercisable at or before the Expiry Time on the Expiry Date after which time the Warrants evidenced hereby shall be deemed to be void and of no further force or effect.

 

The right to purchase Common Shares may only be exercised by the Warrant holder within the time set forth above by:

 

	 	
			(a)

				
			duly completing and executing the exercise form (the “Exercise Form”) attached hereto; and

			

 

	 	
			(b)

				
			surrendering this warrant certificate (the “Warrant Certificate”), with the Exercise Form to Odyssey Trust Company (the “Warrant Agent”) at the principal office of the Warrant Agent, in the city of Calgary, Alberta, together with a certified cheque, bank draft or money order in the lawful money of Canada payable to or to the order of the Corporation in an amount equal to the purchase price of the Common Shares so subscribed for.

			

 

The surrender of this Warrant Certificate, the duly completed Exercise Form and payment as provided above will be deemed to have been effected only on personal delivery thereof to, or if sent by mail or other means of transmission on actual receipt thereof by, the Warrant Agent at its principal offices as set out above.

 

Subject to adjustment thereof in the events and in the manner set forth in the Warrant Indenture hereinafter referred to, the exercise price payable for each Common Share upon the exercise of Warrants shall be $1.10 per Common Share (the “Exercise Price”).

 

These Warrants and the Common Shares issuable upon exercise hereof have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”), or the securities laws of any state of the United States. These Warrants may not 

 

A-2

 

 

be exercised unless the Warrants and the Common Shares have been registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration requirements is available. Certificates representing Common Shares will bear a legend restricting the transfer and exercise of such securities under applicable United States federal and state securities laws. “United States” and “U.S. Person” are as defined in Regulation S under the U.S. Securities Act.

 

Pursuant to the terms set forth in Section 3.2(2) of the Warrant Indenture, if at any time prior to the Expiry Date, the Corporation determines that a registration statement under the U.S. Securities Act covering the resale of by the holder hereof of all or a portion of the Common Shares issuable upon exercise of this Warrant (the “Registration Statement”) is not effective, or the prospectus contained therein is not available for the resale by the holder of the Common Shares issuable upon exercise of the Warrants, the Corporation shall promptly provide written notice of such determination to the Warrantholder, and confirm in writing that the then outstanding Warrants may, until the earlier of the Registration Statement becoming effective or the Expiry Date, be exercised, in whole or in part, as the case may be, by means of a “cashless exercise” pursuant to the terms set forth in Section 3.2(2) of the Warrant Indenture.

 

Certificates for the Common Shares subscribed for will be mailed to the persons specified in the Exercise Form at their respective addresses specified therein or, if so specified in the Exercise Form, delivered to such persons at the office where this Warrant Certificate is surrendered. If fewer Common Shares are purchased than the number that can be purchased pursuant to this Warrant Certificate, the holder hereof will be entitled to receive without charge a new Warrant Certificate in respect of the balance of the Warrants not then exercised. No fractional Common Shares will be issued upon exercise of any Warrant and no compensation will be paid in lieu thereof.

 

This Warrant Certificate evidences Warrants of the Corporation issued or issuable under the provisions of a warrant indenture (which indenture together with all other instruments supplemental or ancillary thereto is herein referred to as the “Warrant Indenture”) dated as of June 20, 2018 between the Corporation and the Warrant Agent, as warrant agent, to which Warrant Indenture reference is hereby made for particulars of the rights of the holders of Warrants, the Corporation and the Warrant Agent in respect thereof and the terms and conditions on which the Warrants are issued and held, all to the same effect as if the provisions of the Warrant Indenture were herein set forth, to all of which the holder, by acceptance hereof, assents. The Corporation will furnish to the holder, on request and without charge, a copy of the Warrant Indenture.

 

On presentation at the principal offices of the Warrant Agent as set out above, subject to the provisions of the Warrant Indenture and on compliance with the reasonable requirements of the Warrant Agent, one or more Warrant Certificates may be exchanged for one or more Warrant Certificates reflecting in the aggregate the same number of Warrants as the Warrant Certificate(s) so exchanged.

 

The Warrant Indenture contains provisions for the adjustment of the Exercise Price payable for each Common Share upon the exercise of Warrants and the number of Common Shares issuable upon the exercise of Warrants in the events and in the manner set forth therein.

 

A-3

 

 

The Warrant Indenture also contains provisions making binding on all holders of Warrants outstanding thereunder resolutions passed at meetings of holders of Warrants held in accordance with the provisions of the Warrant Indenture and instruments in writing signed by Warrantholders of Warrants holding a specific majority of the all then outstanding Warrants.

 

Nothing contained in this Warrant Certificate, the Warrant Indenture or elsewhere shall be construed as conferring upon the holder hereof any right or interest whatsoever as a holder of Common Shares or any other right or interest except as herein and in the Warrant Indenture expressly provided. In the event of any discrepancy between anything contained in this Warrant Certificate and the terms and conditions of the Warrant Indenture, the terms and conditions of the Warrant Indenture shall govern.

 

Warrants may only be transferred in compliance with the conditions of the Warrant Indenture on the register to be kept by the Warrant Agent in Calgary, Alberta, or such other registrar as the Corporation, with the approval of the Warrant Agent, may appoint at such other place or places, if any, as may be designated, upon surrender of this Warrant Certificate to the Warrant Agent or other registrar accompanied by a written instrument of transfer in form and execution satisfactory to the Warrant Agent or other registrar and upon compliance with the conditions prescribed in the Warrant Indenture and with such reasonable requirements as the Warrant Agent or other registrar may prescribe and upon the transfer being duly noted thereon by the Warrant Agent or other registrar. Time is of the essence hereof.

 

This Warrant Certificate will not be valid for any purpose until it has been countersigned by or on behalf of the Warrant Agent from time to time under the Warrant Indenture.

 

 

[Signature page follows]

 

 

 

 

 

 

 

IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be duly executed as of the ___ day of _______________, 2018.

 

CLS HOLDINGS USA, INC.

 

By:                                                                         

          Authorized Signatory

 

Countersigned and Registered by:

 

ODYSSEY TRUST COMPANY

 

By:                                                               

          Authorized Signatory

 

Date:                                                            

 

 

 

 

FORM OF TRANSFER

 

ANY TRANSFER OF WARRANTS WILL REQUIRE COMPLIANCE WITH APPLICABLE SECURITIES LEGISLATION. TRANSFERORS AND TRANSFEREES ARE URGED TO CONTACT LEGAL COUNSEL BEFORE EFFECTING ANY SUCH TRANSFER.

 

	
			TO:

				
			CLS HOLDINGS USA, INC.

			c/o ODYSSEY TRUST COMPANY

			Stock Exchange Tower

			350-300 5th Avenue SW

			Calgary, Alberta T2P 3C4

			

 

 

FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers to ________________________________________________________________________(print name and address) the Warrants of CLS Holdings USA, Inc. (the “Corporation”) represented by this Warrant Certificate and hereby irrevocable constitutes and appoints ____________________ as its attorney with full power of substitution to transfer the said securities on the appropriate register of the Warrant Agent.

 

DATED this ____ day of_________________, 201_.

 

	
			SPACE FOR GUARANTEES OF SIGNATURES (BELOW)

				
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			Signature of Transferor

			 

			
	
			Guarantor’s Signature/Stamp

				
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			Name of Transferor

			
	 	
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Warrants shall only be transferable in accordance with the Warrant Indenture and all applicable laws. Without limiting the foregoing, this Form of Transfer must be accompanied by the documentation called for in Section 2.9(1) of the Warrant Indenture.

 

CERTAIN REQUIREMENTS RELATING TO TRANSFERS – READ CAREFULLY

 

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

 

 

 

 

	
			●

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

			

 

	
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			Canada: A Signature Guarantee obtained from the Guarantor must affix a stamp bearing the actual words “Signature Guaranteed”. Signature Guarantees are not accepted from Treasury Branches, Credit Unions or Caisse Populaires unless they are members of a Medallion Signature Guarantee Program. For corporate holders, corporate signing resolutions, including certificate of incumbency, are also required to accompany the transfer, unless there is a “Signature & Authority to Sign Guarantee” Stamp affixed to the transfer (as opposed to a “Signature Guarantee” Stamp) obtained from an authorized officer of a major Canadian Schedule 1 chartered bank.

			

 

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

			

 

 

 

 

WARRANT EXERCISE FORM

 

ANY TRANSFER OF WARRANTS WILL REQUIRE COMPLIANCE WITH APPLICABLE SECURITIES LEGISLATION. TRANSFERORS AND TRANSFEREES ARE URGED TO CONTACT LEGAL COUNSEL BEFORE EFFECTING ANY SUCH TRANSFER.

 

	
			TO:

				
			CLS Holdings USA, Inc. (the “Corporation”)

			

 

	
			AND TO:

				
			Odyssey Trust Company (the “Warrant Agent”)

			

 

The undersigned holder of the Warrants evidenced by this Warrant Certificate hereby exercises the right to acquire _____________ (A) common shares of the Corporation (“Common Shares”).

 

Check, as applicable:

 

	 	
			☐

				
			Cashless Exercise of ___________ common shares pursuant to Section 3.2(2) of the Warrant Indenture

			

 

☐ Exercise Price Payable:     ________________________________________________

                         ((A) multiplied by $1.10, subject to adjustment)

 

The undersigned hereby exercises the right of such holder to be issued, and hereby subscribes for, Common Shares that are issuable pursuant to the exercise of such Warrants on the terms specified in such Warrant Certificate and in the Warrant Indenture.

 

The undersigned hereby represents, warrants and certifies as follows (only one) of the following must be checked):

 

	
			A. ☐

				
			The undersigned holder at the time of exercise of the Warrants (a) is not in the United States; (b) is not a U.S. Person and is not exercising the Warrants on behalf of a U.S. Person or a person in the United States; and (c) represents and warrants that the exercise of the Warrants and the acquisition of the Warrant Shares occurred in an “offshore transaction” (as defined under Regulation S under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”)) (d) will not engage in hedging transactions involving the Common Shares except as permitted under the U.S. Securities Act; (e) acknowledges that the Common Shares have not been registered under the U.S. Securities Act, are “restricted securities” under Rule 144 under the U.S. Securities Act and are subject to a one-year distribution compliance period under the U.S. Securities Act during which time they may not be offered or sold into the United States or to, or for the account or benefit of a U.S. Person, except pursuant to registration under the U.S. Securities Act or pursuant to an available exemption from such registration; (f) agrees to resell such Common Shares only in accordance with the provisions of Regulation S under the U.S. Securities Act, pursuant to registration under the U.S. Securities Act, or pursuant to an available exemption from registration under the U.S. Securities Act. OR

			

 

 

 

 

	
			B. ☐

				
			The undersigned holder is the original U.S. Purchaser and (a) purchased the Convertible Debentures directly from the Corporation pursuant to the a duly executed Subscription Agreement, dated June 20, 2018 for the purchase of Convertible Debentures; (b) is exercising the Warrants solely for its own account or for the account of the original beneficial purchaser, if any; (c) each of it and any beneficial purchaser was, on the date the Convertible Debentures were purchased from the Corporation, has continued to be and is on the date of exercise of the Warrants, an Accredited Investor within the meaning of Rule 501(a) under the U.S. Securities Act; and (d) all the representations, warranties and covenants set forth in the original written and duly executed Subscription Documents made by the undersigned for the purchase of Convertible Debentures from the Corporation continue to be true and correct as if duly executed as of the date hereof. OR

			

 

	
			C. ☐

				
			The undersigned holder has delivered to the Warrant Agent an opinion of counsel of recognized standing, in form and substance reasonably satisfactory to the Corporation, to the effect that the exercise of the Warrants and the issuance of the Common Shares does not require registration under the U.S. Securities Act or any applicable state securities laws.

			

 

The undersigned holder understands that the certificate representing the Common Shares will be issued in definitive physical certificated form and bear a legend restricting transfer without registration under the U.S. Securities Act and applicable state securities laws unless an exemption from registration is available (as described in the Warrant Indenture and the subscription documents). “U.S. Person” and “United States” are as defined under Regulation S under the U.S. Securities Act. “U.S. Purchaser” is as defined in the Warrant Indenture.

 

The undersigned hereby acknowledges that the undersigned is aware that the Common Shares received on exercise may be subject to restrictions on resale under applicable securities legislation. The undersigned hereby further acknowledges that the Corporation will rely upon our confirmations, acknowledgements and agreements set forth herein, and agrees to notify the Corporation promptly in writing if any of the representations or warranties herein ceases to be accurate or complete.

 

The undersigned hereby irrevocably directs that the said Common Shares be issued, registered and delivered as follows:

 

	
			Name(s) in Full

				 	
			Address(es)

				 	
			Number of Common Shares

			
	
			 

				 	 	 	 
	
			 

				 	 	 	 

	
			 

				 	 	 	 
	
			 

				 	 	 	 
	
			 

				 	 	 	 

 

 

 

 

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

 

Once completed and executed, this Exercise Form must be mailed or delivered to CLS Holdings USA, Inc. c/o Odyssey Trust Company, Stock Exchange Tower, 350-300 5th Avenue SW, Calgary, Alberta T2P 3C4 (original copy).

 

DATED this ____day of _____, 201_.

 

	
			 

				
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			Witness

				
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			(Signature of Warrantholder, to be the same as it appears on the face of this Warrant Certificate. If an entity, the signatory represents that he or she has authority to bind such entity and duly execute this form.)

			 

			 

			
	 	
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			Name of Warrantholder

			

 

	
			☐

				
			Please check if the certificates representing the Common Shares are to be delivered at the office where this Warrant Certificate is surrendered, failing which such certificates will be mailed to the address set out above. Certificates will be delivered or mailed as soon as practicable after the surrender of this Warrant Certificate to the Warrant Agent.

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