Document:

ex103.htm

    Exhibit
      10.3

    

    EMPLOYMENT
      AGREEMENT

    

    THIS
      EMPLOYMENT AGREEMENT is made effective as of the .....................2007 (the
“Effective Date”).

    

    BETWEEN:

    

    WPCS
      Australia Pty Ltd ACN 128 426 602, having its registered office care of
      Gilshenan & Luton Legal Group, Level 13, 259 Queen Street, Brisbane Qld
      4000 (“Employer”)

    

    AND

    

    Steven
      Peter James, an individual having an address at 167 Andrew Road,
      Greenbank in the State of Queensland(“Employee”)

    

    WHEREAS,
      Employee has accepted Employer’s offer of employment with Employer, and
      Employer has agreed to employ Employee as such pursuant to the terms and
      conditions of this employment agreement (“this Agreement”).

    

    NOW
      THEREFORE THIS AGREEMENT WITNESSETH THAT in consideration of the
      premises and the mutual covenants, agreements, representations and warranties
      contained herein and other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, Employee and Employer hereby
      agree
      as follows:

     

    ARTICLE
      1

    EMPLOYMENT

    

    Employer
      hereby affirms the offer of employment to Employee as Executive Vice President,
      and Employee hereby accepts such employment by Employer for the “Term” (as
      defined in Article 3 below), upon the terms and conditions set forth
      herein.

     

    ARTICLE
      2

    DUTIES

    

    During
      the Term, Employee shall serve Employer faithfully, diligently and to the best
      of his ability and shall use his best efforts to promote the interests and
      goodwill of Employer and any affiliates, successors, assigns, subsidiaries,
      and/or future purchasers of Employer. Employee shall render such services during
      the Term at Employer’s principal place of business or at such other place of
      business as may be determined by the Employer, as Employer may from time to
      time
      reasonably require of him, and shall devote all of his business time to the
      performance thereof. Employee shall have those duties and powers as generally
      pertain to each of the offices of which he holds, as the case may be, subject
      to
      the control of Employer.

     

    ARTICLE
      3

    TERM

    

    The
      “Term” of this Agreement shall commence on the Effective Date and continue
      thereafter for a term of two (2) years, as may be extended or earlier terminated
      pursuant to the terms and conditions of this Agreement. The Term of this
      Agreement shall automatically renew for successive one (1) year periods unless,
      prior to the 30th calendar
      day
      preceding the expiration of the then existing Term, either Employer or Employee
      provides written notice to the other that it elects not to renew the Term.
      Upon
      delivery of such notice, this Agreement shall continue until expiration of
      the
      Term, whereupon this Agreement shall terminate and neither party shall have
      any
      further obligation thereafter arising under this Agreement, except as explicitly
      set forth herein to the contrary.

     

    
      
        
        

      

      
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    ARTICLE
      4

    REMUNERATION

    

    Salary

    

    4.1

    Employer
      shall pay to Employee through James Design Pty Ltd ACN 010 768 359 (“James
      Design”) an annual salary (“the Salary”) of One Hundred and Thirty Thousand
      Dollars $130,000.00 US, exclusive of Employer’s compulsory superannuation
      contributions, to be paid in Australian dollars and cents using the AUD/USD
      spot
      exchange rate published by the Reserve Bank of Australia at midday on 30
      November 2007, in equal installments at the end of such regular payroll
      accounting periods as are established by Employer, or in such other installments
      upon which the parties hereto shall mutually agree, and in accordance with
      Employer’s usual payroll procedures, but no less frequently than
      monthly.

    

    Benefits
      including statutory entitlements

    

    4.2

    During
      the Term and in addition to Employee’s minimum entitlements under statute to
      Employer’s compulsory superannuation contributions, parental leave,
      personal/carer’s leave (including sick leave), annual leave and long service
      leave (the latter where applicable), Employee shall be entitled to participate
      in all medical and other employee benefit plans, including vacation, sick leave,
      retirement accounts and other employee benefits provided by  James
      Design to similarly situated employees on terms and conditions no less favorable
      than those offered to such employees. Such participation shall be subject to
      the
      terms of the applicable plan documents, Employer’s generally applicable
      policies, and the discretion of Employer or any administrative or other
      committee provided for in, or contemplated by, such plan. The compulsory
      superannuation contributions will be remitted by Employer into the fund chosen
      by Employee of which Employee is to inform Employer at the time of signing
      this
      Agreement. If Employee does not choose such a fund, Employer will make
      contributions into any complying fund nominated by it. The amount of any
      contributions of superannuation will form part of Employee’s remuneration
      together with the Salary and the Bonus.

    

    Expense
      Reimbursement

    

    4.3

    Employer
      shall reimburse Employee through James Design for reasonable and necessary
      expenses incurred by him on behalf of Employer in the performance of his duties
      hereunder during the Term in accordance with Employer's then customary policies,
      provided that such expenses are adequately documented.

    

    Automobile

    

    4.4

    Employer
      shall pay to Employee an automobile allowance of AUD$1000 per calendar month
      in
      accordance with Employer’s usual payroll procedures.

    

    Bonus

    

    4.5  

    In
      addition to  the Salary and superannuation contributions, Employee
      shall be entitled to receive through James Design an annual bonus equal to
      3%
      (the "Bonus") of the consolidated annual operating income, before the deduction
      of interest and taxes of designated subsidiaries as assigned by
      Employer.  The amount of the Bonus shall be determined based upon the
      operating income reported in the financial statements of each designated
      subsidiary, as calculated based on US generally accepted accounting principles
      and as audited by the Employer’s accounting firm at year end. Any Bonus amount
      will be payable within thirty (30) days from completion of the audit. The bonus
      shall be paid in AUD.  Employee shall have the right to review and
      independently verify the conclusions of any audit by delivering notice in
      writing to Employer within 30 days after receipt of such audit indicating that
      Employee wishes to exercise his right of review and verification. Within 10
      business days after receipt of any such notice, Employer shall make available
      to
      Employee and his representatives, at reasonable times during normal business
      hours, the books and records of Employer which are reasonably necessary to
      conduct such review and verification. Employee shall cause such review to be
      conducted and concluded as quickly as reasonably practicable and in such a
      manner so as not to unreasonably interfere with the business and operations
      of
      Employer. Any representatives conducting such review shall, prior to being
      given
      access to such books and records, be required to enter into confidentiality
      and
      non-disclosure agreements with Employer on terms and conditions satisfactory
      to
      Employer, acting reasonably. If Employee disputes the results of the audit,
      he
      shall, within 20 days after notice is delivered by Employee to Employer that
      there exist a dispute, be submitted to arbitration as set forth
      below.

     

    
      
        
        

      

      
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    Arbitration

    

    4.6

    Any
      unresolved disputes in regards to the Bonus due from Employer to Employee will
      be subject to arbitration by an independent chartered accountant mutually chosen
      by Employer and Employee at an expense equally borne by both parties. The
      parties shall, within 20 days after appointment of the Arbitrator present their
      written position and related evidence with respect to the unresolved
      disputes.  The Arbitrator shall review evidence accordingly and submit
      a written decision which shall be final and binding on the parties within 20
      days after submission of such evidence.. The Arbitrator shall comply, and the
      arbitration shall be conducted in accordance with the Commercial Arbitration
      Act
      1990 (Qld).

    

    ARTICLE
      5

    OTHER
      EMPLOYMENT

    

    During
      the Term of this Agreement, Employee shall devote substantially all of his
      business and professional time and effort, attention, knowledge, and skill
      to
      the management, supervision and direction of Employer’s business and affairs as
      Employee’s highest professional priority. Except as provided below, Employer
      shall be entitled to all benefits, profits or other issues arising from or
      incidental to all work, services and advice performed or provided by Employee.
      Provided that the activities listed below do not materially interfere with
      the
      duties and responsibilities under this Agreement, nothing in this Agreement
      shall preclude Employee from devoting reasonable periods required
      for:

    

    
      	
               

            	
              (a)

            	
              Serving
                as a member of any organization involving no conflict of interest
                with
                Employer, provided that Employee must obtain the written consent
                of
                Employer;

            

    

    

    
      	
               

            	
              (b)

            	
              Serving
                as a consultant in his area of expertise to government, commercial
                and
                academic panels where it does not conflict with the interests of
                Employer;
                and

            

    

    

    
      	
               

            	
              (c)

            	
              Managing
                his personal investments or engaging in any other non-competing
                business.

            

    

     

    ARTICLE
      6

    CONFIDENTIAL
      INFORMATION/INVENTIONS

    

    Confidential
      Information

    

    6.1

    Employee
      shall not, in any manner, for any reasons, either directly or indirectly,
      divulge or communicate to any person, firm or corporation, any confidential
      information concerning any matters not generally known or otherwise made public
      by Employer which affects or relates to Employer’s business, finances, marketing
      and/or operations, research, development, inventions, products, designs, plans,
      procedures, or other data (collectively, “Confidential Information”) except in
      the ordinary course of Employer’s business or as required by applicable law.
      Without regard to whether any item of Confidential Information is deemed or
      considered confidential, material, or important, the parties hereto stipulate
      that as between them, to the extent such item is not generally known, such
      item
      is important, material, and confidential and affects the successful conduct
      of
      Employer’s business and goodwill, and that any breach of the terms of this
      Section 6.1 shall be a material and incurable breach of this Agreement.
      Confidential Information shall not include information in the public domain
      at
      the time of the disclosure of such information by Employee or information that
      is disclosed by Employee with the prior consent of Employer. This provision
      in
      so far as it requires Employee to not, in any manner, for any reasons, either
      directly or indirectly divulge or communicate the Confidential Information
      to
      any person, firm or corporation except in the ordinary course of Employer’s
      business or as required by applicable law, shall survive the termination of
      this
      Agreement.

     

    
      
        
        

      

      
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    Documents

    

    6.2

    Employee
      further agrees that all documents and materials furnished to Employee by
      Employer and relating to the Employer’s business or prospective business are and
      shall remain the exclusive property of Employer. Employee shall deliver all
      such
      documents and materials, not copied, to Employer upon demand therefore and
      in
      any event upon expiration or earlier termination of this Agreement. Any payment
      of sums due and owing to Employee by Employer upon such expiration or earlier
      termination shall be conditional upon returning all such documents and
      materials, and Employee expressly authorizes Employer to withhold any payments
      due and owing pending return of such documents and materials.

    

    Inventions

    

    6.3

    All
      ideas, inventions, intellectual property, works, writings and other developments
      or improvements conceived or reduced to practice by Employee, alone or with
      others, during the Term of this Agreement, whether or not during working hours,
      that are within the scope of the business of Employer or are created by Employee
      during or arising out of Employee’s employment with Employer, or that relate to
      or result from any of Employer’s work or projects or the services provided by
      Employee to Employer pursuant to this Agreement, shall be the exclusive property
      of Employer. Employee agrees to assist Employer, at Employer’s expense, to
      obtain patents and copyrights on any such ideas, inventions, intellectual
      property, works, writings, and other developments or improvements, and agrees
      to
      execute all documents necessary to obtain such patents and copyrights in the
      name of Employer.

    

    Disclosure

    

    6.4

    During
      the Term, Employee will promptly disclose to  Employer full
      information concerning any interest, direct or indirect, of Employee (as owner,
      shareholder, partner, lender or other investor, director, officer, employee,
      consultant or otherwise) or any member of his immediate family in any business
      that is reasonably known to Employee to purchase or otherwise obtain services
      or
      products from, or to sell or otherwise provide services or products to, Employer
      or to any of its suppliers or customers.

     

    ARTICLE
      7

    COVENANT
      NOT TO COMPETE  AND POST EMPLOYMENT RESTRAINT

    

    7.1

    Except
      as
      expressly permitted in Article 5 above, during the Term of this
      Agreement:

    

    
      	
              (a)

            	
              Employee
                shall not engage, directly or indirectly, in any business or activity
                competitive to any business or activity engaged in by Employer, or
                proposed to be engaged in by Employer
                or,

            

    

    

    
      	
              (b)

            	
              soliciting
                or taking away or interfering with any contractual relationship of
                any
                employee, client, agent, representative, contractor, supplier, vendor,
                customer, franchisee, lender or investor of Employer, or using, for
                the
                benefit of any person or entity other than Employer, any Confidential
                Information of Employer.

            

    

    

    7.2

    Further,
      Employee acknowledges that during the Term of this Agreement Employer will
      not
      only have access to Employer’s Confidential Information but also will develop
      professional and business relationships, knowledge and understanding that are
      assisted by the Employee’s employment with the Employer and which will upon
      termination of this Agreement potentially put Employee in a position to cause
      harm to Employer’s business and to Employer’s legitimate business interests and
      that an award  or payment of damages on their own would not be a
      sufficient remedy for breach by Employee of any of the restraints and covenants
      contained in this Agreement. Employee further acknowledges that Employer can
      seek orders restraining Employee, in addition to any orders that a court,
      tribunal or commission might make for any other remedy which might include
      but
      which is not limited to payment of costs, interest and damages.

     

    
      
        
        

      

      
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    7.3.

    Accordingly
      as at the termination of this Agreement for any reason at all Employee will
      not
      throughout the State of Queensland in any capacity:

    

    
      	
              (a)

            	
              solicit,
                pursue or approach for the purpose of obtaining business or instructions
                to any person, organization or entity who or which is a client, agent,
                representative, contractor, supplier, vendor, customer, franchisee,
                lender
                or investor of Employer or who or which is or has been a client,
                agent,
                representative, contractor, supplier, vendor, customer, franchisee,
                lender
                or investor Employer at any time during the Term of this Agreement
                and
                with whom or with which Employee has business dealings during the
                Term of
                this Agreement or with regard to whom or with which Employee has
                obtained
                Confidential Information and with whom or with which Employer had
                a
                reasonable expectation of engaging in further business at the time
                of the
                termination of this Agreement, and

            

    

    

    
      	
              (b)

            	
              for
                any reason or purpose which competes, directly or indirectly, whatsoever
                with Employer’s business, solicit away from Employer any employee of
                Employer’s with whom Employee have had dealings on the Employer’s behalf
                and/or in respect of whom Employee obtained any confidential or personal
                information as a result of Employee’s employment with Employer, for the
                purposes of offering that person work either as an independent contractor,
                an employee or otherwise.

            

    

    

    7.4

    The
      restrictions contained herein will continue for a maximum enforceable period
      of
      six (6) months from the date of the termination of this Agreement.

     

    ARTICLE
      8

    SURVIVAL

    

    Employee
      agrees that the provisions of Articles 6, 7 and 9 shall survive expiration
      or
      earlier termination of this Agreement for any reasons, whether voluntary or
      involuntary, with or without cause, and shall remain in full force and effect
      thereafter.  Notwithstanding the foregoing, if this Agreement is
      terminated upon the dissolution of Employer, the filing of a winding up
      application by Employer or upon an assignment for the benefit of creditors
      of
      the assets of Employer, Articles 6, 7 and 9 shall be of no further force or
      effect.

     

    ARTICLE
      9

    INJUNCTIVE
      RELIEF

    

    Employee
      acknowledges and agrees that the covenants and obligations of Employee set
      forth
      in Articles 6 and 7 with respect to non-competition, non-solicitation,
      confidentiality and Employer’s property relate to special, unique and
      extraordinary matters and that a violation of any of the terms of such covenants
      and obligations will cause Employer irreparable injury for which adequate
      remedies are not available at law. Therefore, Employee agrees that Employer
      shall be entitled to an injunction, restraining order or such other equitable
      relief (without the requirement to lodge any security) as a court of competent
      jurisdiction may deem necessary or appropriate to restrain Employee from
      committing any violation of the covenants and obligations referred to in this
      Article 9. These injunctive remedies are cumulative and in addition to any
      other
      rights and remedies Employer may have at law or in equity.

    

    
      
        
        

      

      
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    ARTICLE
      10

    TERMINATION

    

    Termination
      by Employee

    

    10.1

    Employee
      may terminate this Agreement for Good Reason at any time upon 30 days written
      notice to Employer, provided the Good Reason has not been cured within such
      period of time.

    

    Good
      Reason

    

    10.2

    In
      this
      Agreement, “Good Reason” means, without Employee’s prior written consent, the
      occurrence of any of the following events, unless Employer shall have fully
      cured all grounds for such termination within thirty (30) days after Employee
      gives notice thereof:

    

    (i)           any
      reduction in Employee’s then current Salary;

    

    
      	
               

            	
              (ii)

            	
              any
                material failure to timely grant, or timely honor, any equity or
                long-term
                incentive award;

            

    

    

    
      	
               

            	
              (iii)

            	
              failure
                to pay statutory entitlements and/or to provide required remuneration
                and/or benefits;

            

    

    

    
      	
               

            	
              (iv)

            	
              the
                removal of Employee from Employee’s position or any changes in the
                reporting structure so that Employee reports to someone other than
                the
                President of Employer;

            

    

    

    
      	
               

            	
              (v)

            	
              any
                material diminution in Employee’s title or duties or the assignment to
                Employee of duties not customarily associated with Employee’s position as
                Executive Vice President of
                Employer;

            

    

    

    
      	
               

            	
              (vi)

            	
              any
                relocation of Employee’s office as assigned to Employee by Employer, to a
                location more than 25 miles from the assigned
                location;

            

    

    

    
      	
               

            	
              (vii)

            	
              the
                failure of Employer to obtain the assumption in writing of its obligation
                to perform this Agreement by any successor to all or substantially
                all of
                the assets of Employer or upon a merger, consolidation, sale or similar
                transaction of Employer or;

            

    

    

    
      	
              (viii)  

            	
              the
                voluntary or involuntary dissolution of Employer, the filing of a
                winding
                up application by Employer or upon an assignment for the benefit
                of
                creditors of the assets of
                Employer.

            

    

    

    The
      written notice given hereunder by Employee to Employer shall specify in
      reasonable detail the cause for termination, and such termination notice shall
      not be effective until thirty (30) days after Employer’s receipt of such notice,
      during which time Employer shall have the right to respond to Employee’s notice
      and cure the breach or other event giving rise to the termination.

    

    Termination
      by Employer

    

    10.3

    Employer
      may terminate its employment of Employee under this Agreement for cause at
      any
      time by written notice to Employee. For purposes of this Agreement, the term
      “cause” for termination by Employer shall be:

    

    
      	
              (a)

            	
              a
                conviction of or plea of guilty, or a consent to an order without
                an
                admission of liability, by Employee, to a felony, or any crime involving
                fraud or embezzlement;

            

    

    

    
      	
              (b)

            	
              the
                refusal by Employee to perform his material duties and obligations
                hereunder;

            

    

    

    
      	
              (c)

            	
              Employee’s
                willful and intentional misconduct in the performance of his material
                duties and obligations; or,

            

    

     

    
      
        
        

      

      
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              (d)

            	
              if
                Employee or any member of his family makes any personal profit arising
                out
                of or in connection with a transaction to which Employer is a party
                or
                with which it is associated without making disclosure to and obtaining
                the
                prior written consent of Employer.

            

    

    

    The
      written notice given hereunder by Employer to Employee shall specify in
      reasonable detail the cause for termination. In the case of a termination for
      the causes described in (a) and (d) above, such termination shall be effective
      upon receipt of the written notice. In the case of the causes described in
      (b)
      and (c) above, such termination notice shall not be effective until thirty
      (30)
      days after Employee’s receipt of such notice, during which time Employee shall
      have the right to respond to Employer’s notice and cure the breach or other
      event giving rise to the termination.

    

    Severance

    

    10.4

    Upon
      a
      termination of this Agreement without Good Reason by Employee or with cause
      by
      Employer, Employer shall pay to Employee all accrued and unpaid compensation
      as
      of the date of such termination, subject to the provision of Section 6.2. Upon
      a
      termination of this Agreement with Good Reason by Employee or without cause
      by
      Employer, Employer shall pay to Employee all accrued and unpaid compensation
      and
      expense reimbursement as of the date of such termination and the “Severance
      Payment.”  The Severance Payment shall be payable in a lump sum,
      subject to Employer’s statutory and customary withholdings.  If the
      termination of Employee hereunder is by Employee with Good Reason, the Severance
      Payment shall be paid by Employer within five (5) business days of the
      expiration of any applicable cure period. If the termination of Employee
      hereunder is by Employer without cause, the Severance Payment shall be paid
      by
      Employer within five (5) business days of termination.  The “Severance
      Payment” shall equal the amount of the Salary payable to Employee under Section
      4.1 of this Agreement from the date of such termination until the end of the
      Term of this Agreement (prorated for any partial month).

    

    Termination
      Upon Death

    

    10.5

    If
      Employee dies during the Term of this Agreement, this Agreement shall terminate,
      except that Employee’s legal representatives shall be entitled to receive any
      earned but unpaid compensation or expense reimbursement due hereunder through
      the date of death.

    

    Termination
      Upon Incapacity

    

    10.6

    If
      during
      the Term of this Agreement Employee suffers and continues to suffer from an
      “Incapacity”(as defined below), then Employer may terminate this Agreement by
      delivering to Employee thirty (30) calendar days prior written notice of
      termination based on such Incapacity, setting forth with specificity the nature
      of such Incapacity and the determination of Incapacity by Employer. For the
      purposes of this Agreement “Incapacity” means Employee’s inability, with
      reasonable accommodation, to substantially perform Employee’s duties, services
      and obligations under this Agreement due to physical or mental illness or other
      incapacity for a continuous, uninterrupted period of sixty (60) calendar days
      of
      unpaid sick leave (exclusive of any Employee’s absences which are subject to
      workers’ compensation coverage and payment) or ninety (90) days of unpaid sick
      leave (exclusive of any Employee’s absences which are subject to workers’
compensation coverage and payment) during any twelve month
      period.  Upon any such termination for Incapacity, Employee shall be
      entitled to be paid any accrued statutory entitlements and any earned but unpaid
      remuneration or expense reimbursement due hereunder through the date of
      termination.

     

    ARTICLE
      11

    PERSONNEL
      POLICIES, CONDITIONS, AND BENEFITS

    

    Except
      as
      otherwise provided herein, Employee’s employment shall be subject to the
      personnel policies and benefit plans which apply generally to Employer’s
      employees as the same may be interpreted, adopted, revised or deleted from
      time
      to time, during the Term of this Agreement, by Employer in its sole discretion.
      During the Term hereof, Employee shall be entitled to annual leave during each
      year of the Term at the rate of four (4) weeks per year. Employee shall take
      such vacation at a time approved in advance by Employer, which approval will
      not
      be unreasonably withheld but will take into account the staffing requirements
      of
      Employer and the need for the timely performance of Employee's
      responsibilities.

     

    
      
        
        

      

      
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    ARTICLE
      12

    BENEFICIARIES
      OF AGREEMENT

    

    This
      Agreement shall inure to the benefit of Employer and any affiliates, successors,
      assigns, parent corporations, subsidiaries, and/or purchasers of Employer as
      they now or shall exist while this Agreement is in effect.

     

    ARTICLE
      13

    GENERAL
      PROVISIONS

    

    No
      Waiver

    

    13.1

    No
      failure by either party to declare a default based on any breach by the other
      party of any obligation under this Agreement, nor failure of such party to
      act
      quickly with regard thereto, shall be considered to be a waiver of any such
      obligation, or of any future breach.

    

    Modification

    

    13.2

    No
      waiver
      or modification of this Agreement or of any covenant, condition, or limitation
      herein contained shall be valid unless in writing and duly executed by the
      parties to be charged therewith.

    

    Choice
      of Law/Jurisdiction

    

    13.3

    This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Queensland and Employee and Employer agree to submit to the
      non-exclusive jurisdiction of the Queensland courts.

    

    Entire
      Agreement

    

    13.4

    This
      Agreement embodies the whole agreement between the parties hereto regarding
      the
      subject matter hereof and there are no inducements, promises, terms, conditions,
      or obligations made or entered into by Employer or Employee other than contained
      herein.

    

    Severability

    

    13.5

    All
      provisions and covenants contained herein are severable, and in the event any
      of
      them, with the exception of those contained in Articles 1 and 4 hereof, shall
      be
      held or declared to be invalid, unenforceable, illegal or contrary to public
      policy by any competent court, this Agreement shall be interpreted as if such
      invalidity, unenforceability, illegality or finding of being contrary to public
      policy will vitiate that provision or covenant only and that provision or
      covenant will be deemed deleted or modified to the extent necessary to render
      the remainder of the provisions and covenants of this Agreement either valid
      or
      enforceable or legal , and will not in any way vitiate any other provision
      or
      covenant of this Agreement.

     

    
      
        
        

      

      
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    Headings

    

    13.6

    The
      headings contained herein are for the convenience of reference and are not
      to be
      used in interpreting this Agreement.

    

    Independent
      Legal Advice

    

    13.7

    Employer
      has obtained legal advice concerning this Agreement and has requested that
      Employee obtain independent legal advice with respect to same before executing
      this Agreement.  Employee in executing this Agreement represents and
      warrants to Employer that Employee has been so advised to obtain independent
      legal advice and that prior to the execution of this Agreement Employee has
      so
      obtained independent legal advice, or has, in Employee’s discretion, knowingly
      and willingly elected not to do so.

    

    No
      Assignment

    

    13.8

    Employee
      may not assign, pledge or encumber Employee’s interest in this Agreement nor
      assign any of Employee’s rights or duties under this Agreement without the prior
      written consent of Employer.

    

    

    IN
      WITNESS WHEREOF the parties have executed this Agreement effective as
      of the day and year first above written.

    

    

    Employer:

    

    

    By:          ______________________

     

    

    Employee:

    

    

    By:          ______________________

    Steven
      Peter James

     

     

     

     

     

    9exv4w1

 

Exhibit 4.1

OILSANDS QUEST INC.

and

COMPUTERSHARE TRUST COMPANY OF CANADA

 

WARRANT INDENTURE

 

December 5, 2007

 

TABLE OF CONTENTS

	 	 	 	 	 
	 	 	 	Page
	ARTICLE 1 INTERPRETATION
	 	 	1	 
	1.1 Definitions
	 	 	1	 
	1.2 Gender and Number
	 	 	5	 
	1.3 Interpretation not Affected by Headings, etc
	 	 	5	 
	1.4 Day not a Business Day
	 	 	5	 
	1.5 Time of the Essence
	 	 	5	 
	1.6 Applicable Law
	 	 	5	 
	1.7 Language
	 	 	5	 
	1.8 Severability
	 	 	5	 
	1.9 Conflicts
	 	 	5	 
	ARTICLE 2 ISSUE OF WARRANTS
	 	 	6	 
	2.1 Issue of Warrants
	 	 	6	 
	2.2 Form and Terms of Warrants
	 	 	6	 
	2.3 Warrantholder not a Shareholder
	 	 	7	 
	2.4 Warrants to Rank pari passu
	 	 	7	 
	2.5 Signing of Warrant Certificates
	 	 	7	 
	2.6 Certification by the Trustee
	 	 	8	 
	2.7 Issue in Substitution for Warrant Certificates Lost, etc
	 	 	8	 
	2.8 Exchange of Warrant Certificates
	 	 	9	 
	2.9 Transfer of Warrants
	 	 	9	 
	2.10 Registration of Warrants
	 	 	11	 
	2.11 Transferee Entitled to Registration
	 	 	11	 
	2.12 Registers Open for Inspection
	 	 	11	 
	2.13 Ownership of Warrants
	 	 	12	 
	ARTICLE 3 EXERCISE OF WARRANTS
	 	 	12	 
	3.1 Method of Exercise of Warrants
	 	 	12	 
	3.2 Effect of Exercise of Warrants
	 	 	13	 
	3.3 Partial Exercise of Warrants; Fractions
	 	 	14	 
	3.4 Expiration of Warrants
	 	 	14	 
	3.5 Cancellation of Surrendered Warrants
	 	 	14	 
	3.6 Accounting and Recording
	 	 	14	 
	ARTICLE 4 ADJUSTMENT OF NUMBER OF COMMON SHARES
	 	 	15	 
	4.1 Adjustment of Number of Common Shares
	 	 	15	 
	4.2 Entitlement to Shares on Exercise of Warrant
	 	 	18	 
	4.3 No Adjustment for Stock Options or Warrants
	 	 	18	 
	4.4 Determination by Corporation’s Auditors
	 	 	19	 
	4.5 Proceedings Prior to any Action Requiring Adjustment
	 	 	19	 
	4.6 Certificate of Adjustment
	 	 	19	 
	4.7 Notice of Special Matters
	 	 	19	 
	4.8 No Action after Notice
	 	 	19	 
	4.9 Protection of Trustee
	 	 	20	 
	4.10 Other Adjustments
	 	 	20	 
	ARTICLE 5 RIGHTS AND COVENANTS OF THE CORPORATION
	 	 	20	 
	5.1 Optional Purchases by the Corporation
	 	 	20	 
	5.2 General Covenants
	 	 	21	 
	5.3 Trustee’s Remuneration and Expenses
	 	 	21	 
	5.4 Performance of Covenants by Trustee
	 	 	22	 
	ARTICLE 6 ENFORCEMENT
	 	 	22	 

-i-

 

TABLE OF CONTENTS

(continued)

	 	 	 	 	 
	 	 	 	Page
	6.1 Suits by Warrantholders
	 	 	22	 
	6.2 Suits by the Corporation
	 	 	23	 
	6.3 Limitation of Liability
	 	 	23	 
	6.4 Waiver of Default
	 	 	23	 
	ARTICLE 7 MEETINGS OF WARRANTHOLDERS
	 	 	24	 
	7.1 Right to Convene Meetings
	 	 	24	 
	7.2 Notice
	 	 	24	 
	7.3 Chairman
	 	 	24	 
	7.4 Quorum
	 	 	25	 
	7.5 Power to Adjourn
	 	 	25	 
	7.6 Show of Hands
	 	 	25	 
	7.7 Poll and Voting
	 	 	25	 
	7.8 Regulations
	 	 	26	 
	7.9 Corporation and Trustee May be Represented
	 	 	26	 
	7.10 Powers Exercisable by Extraordinary Resolution
	 	 	26	 
	7.11 Meaning of Extraordinary Resolution
	 	 	27	 
	7.12 Powers Cumulative
	 	 	28	 
	7.13 Minutes
	 	 	28	 
	7.14 Instruments in Writing
	 	 	28	 
	7.15 Binding Effect of Resolutions
	 	 	28	 
	7.16 Holdings by Corporation Disregarded
	 	 	29	 
	ARTICLE 8 SUPPLEMENTAL INDENTURES
	 	 	29	 
	8.1 Provision for Supplemental Indentures for Certain Purposes
	 	 	29	 
	8.2 Successor Corporations
	 	 	30	 
	ARTICLE 9 CONCERNING THE TRUSTEE
	 	 	30	 
	9.1 Trust Indenture Legislation
	 	 	30	 
	9.2 Rights and Duties of Trustee
	 	 	30	 
	9.3 Evidence, Experts and Advisers
	 	 	31	 
	9.4 Documents, Monies, etc. Held by Trustee
	 	 	32	 
	9.5 Actions by Trustee to Protect Interest
	 	 	32	 
	9.6 Trustee Not Required to Give Security
	 	 	32	 
	9.7 Protection of Trustee
	 	 	32	 
	9.8 Replacement of Trustee; Successor by Merger
	 	 	33	 
	9.9 Conflict of Interest
	 	 	34	 
	9.10 Acceptance of Trust
	 	 	34	 
	9.11 Trustee Not to be Appointed Receiver
	 	 	34	 
	9.12 Knowledge of Trustee
	 	 	34	 
	9.13 Indemnification of Trustee
	 	 	34	 
	9.14 Trustee Not Required to Give Notice of Default
	 	 	35	 
	ARTICLE 10 GENERAL
	 	 	35	 
	10.1 Notice to the Corporation and the Trustee
	 	 	35	 
	10.2 Notice to Warrantholders
	 	 	36	 
	10.3 Evidence of Ownership
	 	 	36	 
	10.4 Counterparts
	 	 	37	 
	10.5 Satisfaction and Discharge of Indenture
	 	 	37	 
	10.6 Provisions of Indenture and Warrants for the Sole Benefit of
Parties and Warrantholders
	 	 	37	 
	10.7 Warrants Owned by the Corporation or its Subsidiaries
- Certificate to be Provided
	 	 	37	 
	10.8 Successors
	 	 	38	 

-ii-

 

 

 

This Warrant Indenture

is made as of December 5, 2007

Between

OILSANDS QUEST INC., a corporation incorporated under the laws of
the State of Colorado, having an office in Calgary, Alberta (the
“Corporation”)

and

COMPUTERSHARE TRUST COMPANY OF CANADA, a trust company incorporated
under the federal laws of Canada having an office in the City of
Calgary, in the Province of Alberta (the “Trustee”)

Recitals

	A.	 	The Corporation is proposing to issue up to 6,325,000 Warrants in the manner herein set
forth;
	 
	B.	 	Each Warrant shall, subject to adjustment, entitle the holder thereof to acquire one Common
Share at the price and upon the terms and conditions herein set forth; and
	 
	C.	 	All acts and deeds necessary have been done and performed to create the Warrants, when issued
as provided in this Indenture, as legal, valid and binding upon the Corporation with the
benefits and subject to the terms of this Indenture;

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

The parties agree as follows.

ARTICLE 1

Interpretation

1.1 Definitions

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

	 	 	“Adjustment Period” means the period from and including the Effective Date up to and
including the Time of Expiry;
	 
	 	 	“affiliates” has the meaning given thereto in the Securities Act (Alberta);
	 
	 	 	“Applicable Procedures” means the rules and procedures of the Depository in respect of the
Book-Based System as in effect from time to time;
	 
	 	 	“Authorized Investments” means short term interest bearing or discount debt obligations
issued or guaranteed by the Government of Canada or a province of Canada or a Canadian
chartered bank (which may include an affiliate or related party of the Trustee) provided
that each such obligation is rated at least R1 (middle) by Dominion Bond Rating Service
Limited or an equivalent rating by Standard & Poor’s, a division of McGraw Hill Companies.

 

 - 2 -

	 	 	“Book-Based System” means, in relation to a Global Warrant, the debt clearing, record entry,
transfer and pledge system and services established and operated by or on behalf of the
Depository for the Warrants (including where applicable pursuant to one or more agreements
between such Depository and its Participants establishing the rules and procedures for such
systems and services), or any successor systems or services thereof;
	 
	 	 	“Business Day” means a day which is not Saturday or Sunday or a legal holiday in the City of
Calgary in the Province of Alberta or a day on which the Trustee is closed for business;
	 
	 	 	“Change of Control” means, with respect to the Corporation, the occurrence of any of the
following events: (i) a tender offer shall be made and consummated for the ownership of 20%
or more of the outstanding voting securities of the Corporation; (ii) the Corporation shall
be merged or consolidated with another corporation (or other person) and as a result of such
merger or consolidation less than 50% of the outstanding voting securities of the surviving
or resulting corporation shall be owned in the aggregate by the former shareholders of the
Corporation, other than affiliates of any party to such merger or consolidation as the same
shall have existed immediately prior to such merger or consolidation; or (iii) the
Corporation shall sell substantially all of its assets to another corporation (or other
person) which is not a wholly owned Subsidiary;
	 
	 	 	“Common Shares” means fully paid and non-assessable Common Shares of the Corporation as
presently constituted;
	 
	 	 	“Corporate Transaction” means a transaction resulting in a Change of Control or a Capital
Reorganization pursuant to Section 4.1(d);
	 
	 	 	“Corporation” means Oilsands Quest Inc.;
	 
	 	 	“Corporation’s Auditors” means the firm of chartered accountants that is duly appointed as
auditors of the Corporation;
	 
	 	 	“Counsel” means a barrister or solicitor or a firm of barristers and solicitors retained by
the Trustee or retained by the Corporation and acceptable to the Trustee;
	 
	 	 	“Current Market Price” of a Common Share at any date means the price per share (denominated
in United States dollars based, if necessary, on the noon rate of exchange as reported by
the Bank of Canada) equal to the weighted average price at which the Common Shares have
traded (i) on the American Stock Exchange, or (ii) if the Common Shares are not traded on
the American Stock Exchange, on any other recognized exchange or market, or (iii) if the
Common Shares are not traded on such recognized exchange or market, on the over-the-counter
market, during the 20 consecutive Trading Days (on each of which at least 500 Common Shares
are traded in board lots) ending on the fifth Trading Day immediately prior to such date as
reported by such market or exchange in which the Common Shares are then trading or quoted.
The weighted average price per Common Share shall be determined by dividing the aggregate
sale price of all such shares sold on the aforementioned over-the-counter market, recognized
exchange or market, as the case may be, during the aforementioned 20 consecutive Trading
Days by the total number of such shares so sold. If the Common Shares are not then traded
in the over-the-counter market or on a recognized exchange or market, the Current Market
Price of the Common Shares shall be the fair market value of the Common Shares as determined
in good faith by the board of Directors of the Corporation after consultation with a
nationally or internationally recognized investment dealer or investment banker;

 

 - 3 -

	 	 	“Definitive Warrant” means a Warrant in the form of an individual certificate in definitive
fully registered form issued pursuant to Section 2.2 and substantially in the form set forth
in Schedule A but does not include Exhibit 1 or any information only required to be included
in a Global Warrant;
	 
	 	 	“Depository” means DTC or any other depository subsequently appointed by the Corporation as
the depository in respect of Global Warrants;
	 
	 	 	“director” means a director of the Corporation for the time being and, unless otherwise
specified herein, reference to action “by the directors” means action by the directors of
the Corporation as a board or, whenever duly empowered, action by any committee of such
board;
	 
	 	 	“Dividends Paid in the Ordinary Course” means dividends paid on the Common Shares in any
fiscal year of the Corporation in cash, provided that the amount of such dividends does not
in such fiscal year exceed 5% of the Exercise Price, and for such purpose the amount of any
dividend paid in shares shall be the aggregate stated capital of such shares, and the amount
of any dividend paid in other than cash or shares shall be the fair market value of such
dividend as determined by a resolution passed by the board of directors of the Corporation,
subject, if applicable, to the prior consent of any stock exchange or any other
over-the-counter market on which the Common Shares are traded;
	 
	 	 	“DTC” means the Depositary Trust Company together with its successors from time to time;
	 
	 	 	“Effective Date” means the date of this Indenture;
	 
	 	 	“Exercise Date” means, with respect to any Warrant, the date on which the Warrant
Certificate representing such Warrant is surrendered for exercise in accordance with the
provisions of Article 3;
	 
	 	 	“Exercise Price” with respect to the exercise of any Warrant means $6.75 in lawful money of
the United States of America per Common Share, unless such price shall have been adjusted in
accordance with the provisions of Article 4, in which case it shall mean the adjusted price
in effect at such time;
	 
	 	 	“Expiry Date” means December 5, 2009;
	 
	 	 	“Global Warrant” means Warrants in the form of one or more certificates in global form
issued pursuant to the Book-Based System and registered in the name of the Depository or its
nominee, and issued pursuant to Section 2.2, substantially the form attached as Schedule A
and deposited with the Depository or its nominee;
	 
	 	 	“Issue Date” means, in respect of each Warrant, the date upon which the Warrant is issued by
the Corporation so that it is considered outstanding for the purposes of this Indenture;
	 
	 	 	“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
securities pursuant to a Book-Based System operated by such Depository;
	 
	 	 	“person” means an individual, body corporate, partnership, trust, trustee, executor,
administrator, legal representative or any unincorporated organization;
	 
	 	 	“Shareholder” means a holder of record of one or more Common Shares;

 

 - 4 -

	 	 	“Subsidiary of the Corporation” or “Subsidiary” means any corporation or other person (other
than an individual) of which more than 50% of the outstanding voting securities are owned,
directly or indirectly, by or for the Corporation, provided that the ownership of such
securities confers the right to elect at least a majority of the board of directors (or
persons in a similar position of fiduciary responsibility) of such corporation or other
person (other than an individual) and includes any entity in like relation to a Subsidiary;
	 
	 	 	“this Warrant Indenture”, “this Indenture”, “herein”, “hereby” 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 mean
and refer to the specified article, section, subsection or paragraph of this Indenture;
	 
	 	 	“Time of Expiry” means 4:30 p.m., Calgary time, on the Expiry Date;
	 
	 	 	“Trading Day” means, with respect to a stock exchange, a day on which such exchange is open
for the transaction of business and with respect to the over-the-counter market means a day
on which the American Stock Exchange is open for the transaction of business;
	 
	 	 	“Trustee” or “Warrant Trustee” means Computershare Trust Company of Canada or its successors
from time to time in the trust hereby created;
	 
	 	 	“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, each consisting of one Common Share and one-half
of one Warrant, offered pursuant to the Underwriting Agreement dated November 21, 2007
between the Corporation and TD Securities Inc. and Genuity Capital Markets, CIBC World
Markets Inc., Desjardins Securities Inc., Blackmont Capital Inc., Canaccord Capital
Corporation and Lehman Brothers Canada Inc.;
	 
	 	 	“Warrant Agency” means either of the principal office of the Trustee in the City of
Vancouver and the principal office of an agent of the Trustee in the City of Toronto,
Calgary or the City of Golden, Colorado or such other place as may be designated in accordance with subsection 3.1(c);
	 
	 	 	“Warrant Certificate” means a certificate in the form of a Definitive Warrant evidencing
Warrants issued hereunder;
	 
	 	 	“Warrantholder”, or “holder” without reference to Common Shares, means the person who is the
registered owner of Warrants as shown on the register maintained at the Warrant Agency by
the Warrant Trustee in accordance with this Indenture;
	 
	 	 	“Warrantholders’ Request” means an instrument signed in one or more counterparts by
Warrantholders representing not less than 10% of the Warrants then unexercised and
outstanding, requesting the Trustee to take some action or proceeding specified therein;
	 
	 	 	“Warrants” means the Warrants issued and certified hereunder and for the time being
outstanding entitling the holder to acquire Common Shares; and
	 
	 	 	“written order of the Corporation”, “written request of the Corporation”, “written consent
of the Corporation”, “written direction of the Corporation” and “certificate of the
Corporation” mean, respectively, a written order, request, consent direction and certificate

 

 - 5 -

	 	 	signed in the name of the Corporation by any director or officer of the Corporation, and may
consist of one or more instruments so executed.

	1.2	 	Gender and Number

Unless herein otherwise expressly provided or unless the context otherwise requires, words
importing the singular include the plural and vice versa and words importing gender include all
genders.

	1.3	 	Interpretation not Affected by 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.

	1.4	 	Day not a Business Day

In the event that any day on or before which action is required to be taken hereunder is not a
Business Day, then such action shall be required to be taken at 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	 	Applicable Law

This Indenture and the Warrant Certificates shall be construed in accordance with the laws of the
Province of Alberta and the federal laws of Canada applicable therein and shall be treated in all
respects as Alberta contracts.

	1.7	 	Language

The parties hereto confirm their express wish that this Indenture and all documents and agreements
directly or indirectly relating thereto be drawn up in the English language. Notwithstanding such
express wish, the parties agree that any such document or agreement, or any part thereof or of this
Indenture, may be drawn up in the French language.

Les parties reconnaissent leur volonté expresse que le présent acte de fiducie ainsi que tous les
documents et contrats s’y rattachant directement ou indirectement soient rédigés en anglais.
Nonobstant cette volonté expresse, les parties conviennent que tout document ou contrat, ou toute
partie de ces derniers ou du présent acte de fiducie, puissent etre rédigés en francais.

	1.8	 	Severability

In the event that any provision under this Indenture is determined to be invalid or unenforceable
in any respect, such determination will not affect the provision in any other respect or any other
provision under this Indenture, all of which will remain in full force and effect.

	1.9	 	Conflicts

In the event there is any conflict between this Indenture and any Warrant Certificate, the
provisions under this Indenture will govern and prevail.

 

 - 6 -

ARTICLE 2

Issue of Warrants

	2.1	 	Issue of Warrants

Up to 6,325,000 Warrants are hereby created and authorized to be issued in accordance with the
terms hereof. Each Warrant entitles the holder thereof, upon exercise, together with the payment of
the Exercise Price, to acquire one Common Share, subject to adjustment in accordance with Article
4, at any time after the Issue Date and ending at the Time of Expiry.

	2.2	 	Form and Terms of Warrants

	 	(a)	 	Subject to Section 2.9(d) the Warrants may be issued pursuant to the Book-Based
System and may be represented by a Global Warrant. The Global Warrant shall be held
by, or on behalf of, the Depository as depository of the Participants in the Book-Based
System and shall be registered in the name of “CEDE & Co.” (or such other name as the
Depository may use from time to time as its nominee for the purposes of the Book-Based
System). In the event that the Warrants are issued pursuant to the Book-Based System,
no beneficial holder will receive Definitive Warrants representing their beneficial
ownership in Warrants unless the Corporation determines to terminate the Book-Based
System or the other conditions set forth in Section 2.9(d) have been satisfied.
	 
	 	(b)	 	The Warrant Certificates (including all replacements issued in accordance with
this Indenture) shall be substantially in the form set out in Schedule “A” hereto,
shall bear such legends and distinguishing letters and numbers as the Corporation may,
with the approval of the Trustee, prescribe, and shall be issuable in any denomination
excluding fractions. The aggregate amount of the Global Warrants may from time to time
be increased or decreased by notations made on the Global Warrant by the Trustee,
subject in each case to compliance with the Applicable Procedures and each Global
Warrant shall bear a legend substantially in the following form subject to modification
as required by the Depository:
	 
	 	 	 	“Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation (“DTC”), to the Corporation or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to Cede &
Co. or to such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL inasmuch as the registered owner hereof, Cede & Co., has an
interest herein.
	 
	 	 	 	Unless and until it is exchanged in whole or in part for Securities in definitive
registered form, this certificate may not be transferred except as a whole by DTC
to a nominee of DTC or by a nominee of DTC to DTC or another nominee of DTC or by
DTC or any such nominee to a successor Depositary or a nominee of such successor
Depositary.”
	 
	 	(c)	 	Each Global Warrant shall represent such of the
outstanding Warrants as shall be specified therein and each shall provide that it shall
represent the aggregate outstanding Warrants from time to time endorsed thereon and
that the aggregate outstanding Warrants represented thereby may from time to time be
reduced or increased, as appropriate, to reflect replacements, exchanges, or exercises
of such Warrants. Any adjustment of the aggregate amount of a Global Warrant to
reflect the amount of any increase or decrease in the amount of outstanding Warrants
represented thereby shall be made by the Trustee in accordance with instructions given
by the holder thereof as required by Section 2.9 and shall be made on the records of
the Trustee and the Depository.
	 
	 	 	 	Members of, or participants in, the Depository (“Agent Members”) shall have no
rights under this Indenture with respect to any Global Warrant held on their behalf
by the Depository or under the Global Warrant, and the Depository (including, for
this purpose, its nominee) may be treated by the Corporation, the Trustee and any
agent of the Corporation or the Trustee as the absolute owner and holder of such
Global Warrant for all purposes whatsoever. Notwithstanding the foregoing, nothing
herein shall (1) prevent

 

 - 7 -

	 	 	 	the Corporation, the Trustee or any agent of the Corporation or the Trustee from
giving effect to any written certification, proxy or other authorization furnished
by the Depository or (2) impair, as between the Depository and its Agent Members,
the operation of customary practices governing the exercise of the rights of a
holder of any Warrant.
	 
	 	(d)	 	The Warrant Certificates may be engraved, printed, lithographed or partly in
one form and partly in another as the Corporation with the approval of the Trustee may
determine. No change in the Warrant Certificate shall be required by reason of any
adjustment made pursuant to Article 4 in the number or class of Common Shares or other
securities to which a holder is entitled pursuant to the exercise of the Warrants.
	 
	 	(e)	 	No fractional Warrants shall be issued or otherwise provided for hereunder.
	 
	 	(f)	 	The number of Common Shares which may be purchased pursuant to the exercise of
Warrants and the Exercise Price payable therefor shall be adjusted in the events and in
the manner specified in Article 4.
	 
	 	(g)	 	Each Warrant shall entitle the holder thereof to such other rights and
privileges as are set forth in this Indenture.

	2.3	 	Warrantholder not a Shareholder

Nothing in this Indenture or in the holding of a Warrant or Warrant Certificate or otherwise,
shall, in itself, confer or be construed as conferring upon a Warrantholder as such any right or
interest whatsoever as a Shareholder or as any other shareholder of the Corporation, 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 receive dividends and other
distributions except as may be provided in this Indenture or the Warrant Certificates.

	2.4	 	Warrants to Rank pari passu

All Warrants shall rank pari passu, whatever may be the actual Issue Date thereof.

	2.5	 	Signing of Warrant Certificates

The Warrant Certificates shall be signed by any two directors or officers of the Corporation. The
signature of any such director or officer may be mechanically reproduced in facsimile and Warrant
Certificates bearing such facsimile signature shall be binding upon the Corporation as if it had
been manually signed by such director or officer. Notwithstanding that any of the persons whose
manual or facsimile signature appears on any Warrant Certificate as a director or officer may no
longer be appointed or hold office at the date of such Warrant Certificate or at the date of
certification or delivery thereof, any Warrant Certificate signed as aforesaid shall, subject to
Section 2.6, be valid and binding upon the Corporation and the holder thereof shall be entitled to
the benefits of this Indenture.

	2.6	 	Certification by the Trustee

	 	(a)	 	No Warrant Certificate shall be issued or, if issued, shall be valid for any
purpose or entitle the holder to the benefit hereof until it has been certified by
manual signature by or on behalf of the Trustee and such certification by the Trustee
upon any Warrant Certificate shall be conclusive evidence as against the Corporation
that the Warrant

 

 - 8 -

	 	 	 	Certificate so certified has been duly issued hereunder and that the holder is
entitled to the benefits hereof.
	 
	 	(b)	 	Warrant Certificates shall be certified by, or on behalf of, the Trustee upon
the written order of the Corporation and delivered by the Trustee to the Corporation in
accordance with the written direction of the Corporation. The certification of the
Trustee on Warrant Certificates issued hereunder shall not be construed as a
representation or warranty by the Trustee as to the validity of this Indenture or the
Warrant Certificates (except the due certification thereof) and the Trustee shall in no
respect be liable or answerable for the use made of the Warrant Certificate or any of
them or of the consideration therefor except as otherwise specified herein. The
countersignature of the Trustee will, however, be a representation and warranty of the
Trustee that the Warrant Certificate has been duly countersigned by or on behalf of the
Trustee pursuant to the provisions of this Indenture.

	2.7	 	Issue in Substitution for Warrant Certificates Lost, etc.

	 	(a)	 	In the event that any Warrant Certificate shall become mutilated or be lost,
destroyed or stolen, the Corporation, subject to applicable law, shall issue and
thereupon the Trustee shall certify and deliver, a new Warrant Certificate of like
tenor 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 Trustee 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.
	 
	 	(b)	 	The applicant for the issue of a new Warrant Certificate pursuant to this
Section 2.7 shall bear the cost of the issue thereof and in case of loss, destruction
or theft shall, as a condition precedent to the issue thereof, furnish to the
Corporation and to the Trustee 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 Trustee each in their sole discretion, and
such applicant shall also be required to furnish an indemnity or security in amount and
form satisfactory to the Corporation and the Trustee each in their discretion and shall
pay the reasonable charges of the Corporation and the Trustee in connection therewith.

	2.8	 	Exchange of Warrant Certificates

	 	(a)	 	Warrant Certificates representing Warrants to acquire any specified number of
Common Shares may, upon compliance with the reasonable requirements of the Trustee, be
exchanged for another Warrant Certificate or Warrant Certificates entitling the holder
thereto to acquire in the aggregate the same number of Common Shares as may be acquired
under the Warrant Certificate or Warrant Certificates so exchanged. Upon compliance
with the reasonable requirements of the Trustee and the terms and conditions hereof,
the Corporation will sign, and the Trustee will countersign, all Warrant Certificates
necessary to carry out these exchanges.
	 
	 	(b)	 	Warrant Certificates may be exchanged only at a Warrant Agency or at any other
place that is designated by the Corporation with the approval of the Trustee. Any
Warrant Certificate tendered for exchange shall be cancelled by the Trustee.

 

 

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2.9 Transfer of Warrants

	 	(a)	 	Subject to subsection 2.9(b), 2.9(c) and 2.9(d) below and such reasonable
requirements as the Trustee may prescribe and all applicable securities legislation and
requirements of regulatory authorities, the Warrants may be transferred on the register
kept at the Warrant Agency by the Warrantholder (or its legal representatives or its
attorney duly appointed by an instrument in writing in form and manner of execution
satisfactory to the Trustee) only upon the surrendering of the relevant Warrant
Certificate with the transfer form forming part thereof duly completed and signed.
After receiving the surrendered Warrant Certificate(s) and upon the person surrendering
the same meeting such reasonable requirements as the Trustee may prescribe, the Trustee
shall issue to the transferee a Warrant Certificate representing the Warrants
transferred. For clarity, the Trustee shall not be responsible to determine compliance
with securities legislation or requirements of regulatory authorities (including any
transfers between or among Agent Members or other beneficial owners of interests in any
Global Warrant) and such determination shall be the responsibility solely of the person
requesting the transfer.
	 
	 	(b)	 	No transfer of a Warrant shall be valid (i) unless made in accordance with the
provisions hereof, (ii) until, upon compliance with such reasonable requirements as the
Trustee may prescribe, such transfer is recorded on the register maintained by the
Trustee pursuant to subsection (a) of this Section 2.9, (iii) unless such registration
shall be noted on the Warrant Certificate by the Trustee, and (iv) until all
governmental or other charges arising by reason of such transfer have been paid.
	 
	 	(c)	 	A Global Warrant may not be transferred, in whole or in part, to any person
other than the Depository or a nominee or any successor thereof, and no such transfer
to any such other person may be registered; provided that the foregoing shall not
prohibit any transfer of a Warrant that is issued in exchange for a Global Warrant but
is not itself a Global Warrant. No transfer of a Warrant to any person shall be
effective under this Indenture or the Warrants unless and until such Warrant has been
registered in the name of such person. Notwithstanding any other provisions of this
Indenture or the Warrants, transfers of a Global Warrant, in whole or in part, shall be
made only in accordance with this Section 2.9(c).
	 
	 	(d)	 	The provisions below shall apply only to Global Warrants:

	 	(i)	 	Each Global Warrant authenticated under this Indenture shall be
registered in the name of the Depository or a nominee thereof and delivered to
such Depository or a nominee thereof or custodian therefor.
	 
	 	(ii)	 	Notwithstanding any other provisions of this Indenture or the
Warrants, a Global Warrant shall not be exchanged in whole or in part for a
Warrant registered, and no transfer of a Global Warrant in whole or in part
shall be registered, in the name of any person other than the Depository or one
or more nominees thereof; provided that a Global Warrant may be exchanged for
Warrants registered in the names of any person designated by the Depository in
the event that (A) the Depository has notified the Corporation that it is
unwilling or unable to continue as Depository for such Global Warrant (B) such
Depository has ceased to be a clearing agency or otherwise ceases to be
eligible to be a depository, and a successor depository is not appointed by the
Corporation within 90 days after receiving such notice or becoming aware that
the Depository has ceased to be a

 

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	 	 	 	clearing agency or otherwise ceases to be eligible to be a depository or (C)
the Corporation has determined, in its sole discretion, to terminate the
Book-Based System in respect of such Global Warrant and has communicated
such determination to the Trustee in writing. Any Global Warrant exchanged
pursuant to subclause (A), (B) or (C) above shall be so exchanged in whole
and not in part. Any Warrant issued in exchange for a Global Warrant or any
portion thereof shall be a Global Warrant; provided further that any such
Warrant so issued that is registered in the name of a person other than the
Depository or a nominee thereof shall not be a Global Warrant but shall be a
Definitive Warrant.
	 
	 	(iii)	 	Warrants issued in exchange for a Global Warrant or any
portion thereof shall be issued in definitive, fully registered form, shall
have an aggregate amount equal to that of such Global Warrant or portion
thereof to be so exchanged, shall be registered in such names and be in such
authorized denominations as the Depository shall designate. Any Global Warrant
to be exchanged in whole shall be surrendered by the Depository to the Trustee,
as Registrar. With regard to any Global Warrant to be exchanged in part, the
amount thereof shall be reduced, by an amount equal to the portion thereof to
be so exchanged, by means of a notation made on the Global Warrant as
authenticated by the Trustee and an appropriate adjustment made on the records
of the Depository and the Trustee.
	 
	 	(iv)	 	Subject to clause (vi) of this Section 2.9(d), the registered
holder may grant proxies and otherwise authorize any person, including Agent
Members and persons that may hold interests through Agent Members, to take any
action which a holder is entitled to take under this Indenture or the Warrants.
	 
	 	(v)	 	In the event of the occurrence of any of the events specified
in clause (ii) of this Section 2.9(d), the Corporation will promptly make
available to the Trustee a reasonable supply of Definitive Warrants in
definitive, fully registered form.
	 
	 	(vi)	 	Neither Agent Members nor any other persons on whose behalf
Agent Members may act shall have any rights under this Indenture with respect
to any Global Warrant registered in the name of the Depository or any nominee
thereof, or under any such Global Warrant, and the Depository or such nominee,
as the case may be, may be treated by the Corporation, the Trustee and any
Agent of the Corporation or the Trustee as the absolute owner and holder of
such Global Warrant for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Corporation, the Trustee or any
Agent of the Corporation or the Trustee from giving effect to any written
certification, proxy or other authorization furnished by the Depository or such
nominee, as the case may be, or impair, as between the Depository, its Agent
Members and any other person on whose behalf an Agent Member may act, the
operation of customary practices of such persons governing the exercise of the
rights of a holder of any Warrant.
	 
	 	(vii)	 	At such time as all interests in a Global Warrant have been
exercised, cancelled or exchanged for Definitive Warrants, such Global Warrant
shall, upon receipt thereof, be cancelled by the Trustee in accordance with
Applicable Procedures and instructions existing between the Depository and the
Trustee, subject to Section 3.5 of this Indenture. At any time prior to such
cancellation, if any interest in a Global Warrant is exercised, cancelled or
exchanged for Definitive Warrants, the amount of such Global Warrant shall, in
accordance with the

 

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	 	 	 	Applicable Procedures and instructions existing between the Depository and
the Trustee, be appropriately reduced, and an endorsement shall be made on
such Global Warrant, by the Trustee to reflect such reduction.

2.10 Registration of Warrants

The Trustee shall keep at the Warrant Agency: (i) a register of Warrantholders in which shall be
entered in alphabetical order the names and addresses of the holders of Warrants and particulars of
the Warrants held by them and (ii) a register of transfers in which all transfers of Warrants and
the date and other particulars of each transfer shall be entered. Branch registers shall also be
kept at such other place or places, if any, as the Corporation, with the approval of the Trustee,
may designate. Such registers will at all reasonable times be open for inspection by the
Corporation and/or any Warrantholder.

2.11 Transferee Entitled to Registration

The transferee of a Warrant shall, after the transfer form attached to the Warrant Certificate is
duly completed and the Warrant Certificate and form of transfer are lodged with the Trustee, and
upon compliance with all other conditions in that regard required by this Indenture and by all
applicable securities legislation and requirements of regulatory authorities, be entitled to have
his name entered on the register as the owner of such Warrant free from all equities or rights of
set-off or counterclaim between the Corporation and his transferor or any previous Warrantholder of
such Warrant, save in respect of equities of which the Corporation or the transferee is required to
take notice by statute or by order of a court of competent jurisdiction. For clarity, the Trustee
shall not be responsible to determine compliance with securities legislation or requirements of
regulatory authorities and such determination shall be the responsibility solely of the person
requesting the transfer.

2.12 Registers Open for Inspection

The registers hereinbefore referred to shall be open at the office of the Trustee during normal
business hours on each Business Day and upon reasonable written notice for inspection by the
Corporation, the Trustee or any Warrantholder. The Trustee shall, from time to time when requested
to do so by the Corporation, furnish the Corporation with a list of the names and addresses of
Warrantholders entered in the register kept by the Trustee showing the number of Warrants and the
number of Common Shares which may then be acquired upon the exercise of the Warrants held by each
such Warrantholder.

2.13 Ownership of Warrants

	 	(a)	 	The Corporation and the Trustee may deem and treat the registered Warrantholder
of any Warrant Certificate as the absolute owner of the Warrant represented thereby for
all purposes, and the Corporation and the Trustee shall not be affected by any notice
or knowledge to the contrary, except where the Corporation or the Trustee is required
to take notice by statute or by order of a court of competent jurisdiction. For greater
certainty, subject to applicable law, neither the Corporation nor the Trustee will be
bound to take notice of or see to the execution of any trust, whether express, implied
or constructive, in respect of any Warrant, and may transfer any Warrant on the
direction of the person registered as Warrantholder thereof, whether named as trustee
or otherwise, as though that person were the beneficial owner thereof.
	 
	 	(b)	 	Subject to the provisions of this Indenture and applicable law, each
Warrantholder shall be entitled to the rights and privileges attaching to the Warrants
held thereby. The exercise of the Warrants in accordance with the terms hereof and the
receipt by any such

 

 - 12 - 

	 	 	 	Warrantholder of Common Shares pursuant thereto shall be a good discharge to the
Corporation and the Trustee with respect to such Warrants and neither the
Corporation nor the Trustee shall be bound to inquire into the title of any such
holder.

ARTICLE 3

Exercise of Warrants

3.1 Method of Exercise of Warrants

	 	(a)	 	The holder of any Warrant that is not in the form of a Global Warrant may
exercise the right evidenced thereby conferred on such holder to acquire Common Shares
by surrendering, prior to the Time of Expiry, to the Trustee at a Warrant Agency:

	 	(i)	 	the Warrant Certificate representing such Warrant, with a duly
completed and executed exercise form in the form attached to the Warrant
Certificate; and
	 
	 	(ii)	 	a certified cheque or bank draft payable to or to the order of
the Corporation (or payment in such other form as the Trustee may accept), in
the amount of the aggregate Exercise Price of such Warrants being exercised.

	 	 	 	A Warrant Certificate with the duly completed and executed exercise form referred to
in this subsection 3.1(a) shall be deemed to be surrendered only upon personal
delivery thereof or, if sent by mail or other means of transmission, upon actual
receipt thereof at, in each case, a Warrant Agency or such other place or places
that may be designated by the Corporation with the approval of the Trustee, provided
that such Warrant Certificate is accompanied by the requisite payment of the
aggregate Exercise Price for the Warrants represented thereby that are being
exercised.

	 	(b)	 	Any exercise form referred to in subsection 3.1(a) shall be signed by the
Warrantholder or his executors, administrators or other legal representatives or his
attorney duly appointed (such persons being obligated to provide the Trustee at the
Warrant Agency with proof satisfactory to the Trustee of his or her authority to act on
behalf of the Warrantholder) and shall specify:

	 	(i)	 	the number of Common Shares which the holder wishes to acquire
(being not more than those which the holder is entitled to acquire pursuant to
the Warrant Certificate(s) surrendered);
	 
	 	(ii)	 	the person or persons in whose name or names such Common Shares
are to be issued, and if such persons are individuals, the relevant social
insurance numbers;
	 
	 	(iii)	 	the address or addresses of such person or persons; and
	 
	 	(iv)	 	the number of Common Shares to be issued to each such person if
more than one is so specified.

	 	 	 	If any of the Common Shares subscribed for are to be issued to a person or persons
other than the Warrantholder, the Warrantholder shall pay to the Corporation or the
Trustee on behalf of the Corporation, all applicable transfer or similar taxes and
the Corporation shall not be required to issue or deliver certificates evidencing
Common Shares unless or until such Warrantholder shall have paid to the Corporation,
or the Trustee on behalf of

 

 - 13 - 

	 	 	 	the Corporation, the amount of such tax or shall have established to the
satisfaction of the Corporation that such tax has been paid or that none is due.

	 	(c)	 	In connection with the exchange of Warrant Certificates and exercise of
Warrants and compliance with such other terms and conditions hereof as may be required,
the Corporation has appointed the principal office of the Trustee or its agent in each
of the cities of Calgary, Vancouver and Toronto as an agency at which Warrant
Certificates may be surrendered for exchange or at which Warrants may be exercised and
the Trustee has accepted such appointment. The Corporation shall give notice to the
Trustee of any change of the Warrant Agency.
	 
	 	(d)	 	Anything herein to the contrary notwithstanding, in the case of Global
Warrants, exercise notices may be delivered and such Warrants may be surrendered for
exercise in accordance with the Applicable Procedures.

3.2 Effect of Exercise of Warrants

	 	(a)	 	Upon compliance by the holder of any Warrant Certificate with the provisions of
Section 3.1, and subject to Section 3.3, the Common Shares subscribed for shall be
deemed to have been issued as fully paid and non-assessable 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 record of such Common Shares on the Exercise Date unless the transfer
registers of the Corporation 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 transfer registers are reopened.
	 
	 	(b)	 	Within three Business Days after the Exercise Date of a Warrant as set forth
above, the Corporation shall cause to be mailed to the person or persons in whose name
or names the Common Shares so subscribed for have been issued, as specified in the
exercise form completed in connection with the exercise of the Warrants, at the address
specified in such exercise form or, if so specified in such exercise form, 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 if requested, evidence of the Common Shares so subscribed for
held in the Book-Based System.

3.3 Partial Exercise of Warrants; Fractions

	 	(a)	 	The holder of any Warrants may acquire a number of Common Shares less than the
number which the holder is entitled to acquire pursuant to the surrendered Warrant
Certificate(s). 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 the Warrants upon
exercise thereof shall, in addition, be entitled to receive, without charge therefor, a
new Warrant Certificate(s) in respect of the balance of the Warrants which such holder
was entitled to exercise pursuant to the surrendered Warrant Certificate(s) and which
were not then exercised. If any interest in a Global Warrant is exercised in part, the
amounts of such Global Warrant shall, in accordance with Applicable Procedures and
instructions existing between the Depository and the Trustee, be proportionately
reduced and an endorsement shall be made on such Global Warrant, by the Trustee to
reflect such reduction.

 

 - 14 - 

	 	(b)	 	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 or to distribute certificates which evidence
fractional Common Shares. In lieu of fractional Common Shares, the Corporation shall
pay to the holder who would otherwise be entitled to receive fractional Common Shares
upon an exercise of Warrants, within 10 Business Days after the date upon which the
fractional Common Shares would have been issued, an amount in lawful money of the
United States equal to the Current Market Price of the Common Shares as of the Exercise
Date multiplied by an amount equal to the fractional interest of Common Shares such
holder would otherwise be entitled to receive upon such exercise, provided that the
Corporation shall not be required to make any payment, calculated as aforesaid, that is
less than US$10.00. The price to be paid shall be provided by the Corporation in
writing to the Trustee upon request.

3.4 Expiration of Warrants

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

3.5 Cancellation of Surrendered Warrants

All Warrant Certificates surrendered to the Trustee pursuant to Sections 2.7, 2.8, 2.9, 3.1, 3.3,
and 5.1 shall be cancelled by the Trustee and, after the expiry of any period of retention
prescribed by law, destroyed by the Trustee and, upon written request by the Corporation, the
Trustee shall furnish to the Corporation a destruction certificate identifying the Warrant
Certificates so destroyed, the number of Warrants evidenced thereby and the number of Common Shares
which could have been purchased pursuant thereto.

3.6 Accounting and Recording

	 	(a)	 	The Trustee shall as soon as reasonably practicable account to the Corporation
with respect to Warrants exercised. Any monies, securities or other instruments, from
time to time received by the Trustee shall be received in trust for and shall be
segregated and kept apart by the Trustee in trust for the Corporation.
	 
	 	(b)	 	The Trustee shall record the particulars of Warrants exercised which shall
include the names and addresses of the persons who become holders of Common Shares on
exercise and the Exercise Date. Within five Business Days of each Exercise Date, the
Trustee shall provide such particulars in writing to the Corporation.

ARTICLE 4

Adjustment of Number of Common Shares

4.1 Adjustment of Number of Common Shares

The acquisition rights as they relate to Common Shares, attaching to the Warrants in effect at any
date, and the Exercise Price in respect thereof, shall be subject to adjustment from time to time
as follows:

	 	(a)	 	If and whenever at any time during the Adjustment Period, the Corporation
shall:

 

 - 15 - 

	 	(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 lesser number of shares, or
	 
	 	(iii)	 	issue Common Shares or securities exchangeable for or
convertible into Common Shares at no additional cost to the holders of all or
substantially all of the outstanding Common Shares by way of a stock dividend
or other distribution (other than the issue of Common Shares to holders of
Common Shares pursuant to their exercise of options to receive dividends in the
form of Common Shares in lieu of Dividends Paid in the Ordinary Course on the
Common Shares),

	 	 	 	(any of such events in these clauses (i), (ii) and (iii) being called a “Common
Share Reorganization”), then effective immediately after the record date at which
the holders of Common Shares are determined for the purposes of the Common Share
Reorganization, the Exercise Price shall be adjusted by multiplying the Exercise
Price in effect immediately prior to such record date by a fraction, the numerator
of which shall be the number of Common Shares outstanding on such record date before
giving effect to such Common Share Reorganization and the denominator of which shall
be the number of Common Shares outstanding after giving effect to such Common Share
Reorganization (including, in the case where securities exchangeable for or
convertible into Common Shares at no additional cost 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). Upon any adjustment to the
Exercise Price pursuant to subsection 4.1(a), the number of Common Shares subject to
the right of purchase under each Warrant shall be contemporaneously adjusted by
multiplying the number of Common Shares which theretofore may have been purchased
under such Warrant by a fraction of which the numerator shall be the respective
Exercise Price in effect immediately prior to such adjustment and the denominator
shall be the respective 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 into or exchangeable for 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
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 or any Subsidiary shall be deemed not to be
outstanding for the purpose

 

 - 16 - 

	 	 	 	of any such computation; such adjustment shall be made successively whenever such a
record date is fixed; to the extent that any such rights, options or warrants are
not 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 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, options or warrants, as
the case may be.

	 	(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 person (other than Common Shares and other than securities
distributed to holders of Common Shares pursuant to their exercise of options to
receive dividends in the form of such securities in lieu of Dividends Paid in the
Ordinary Course on the Common Shares), (ii) rights, options or warrants (excluding
those referred to in subsection 4.1(b)), (iii) evidences of its indebtedness or (iv)
property or assets (excluding Dividends Paid in the Ordinary Course) 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 of a
Common Share on such record date, less the aggregate fair market value (as determined
by the directors, which determination shall be conclusive) of such securities shares,
rights, options, warrants, evidences of indebtedness, property or assets so
distributed, and of which the denominator shall be the total number of Common Shares
outstanding on such record date multiplied by such Current Market Price; any Common
Shares owned by or held for the account of the Corporation or any Subsidiary 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 or
to the Exercise Price which would then be in effect based upon such shares or rights,
options or warrants or evidences of indebtedness, property or assets as are actually
distributed, as the case may be; in clause (iv) of this subsection 4.1(c) the term
“Dividends Paid in the Ordinary Course” shall include the value of any securities or
other property or assets distributed in lieu of cash Dividends Paid in the Ordinary
Course at the option of Shareholders.
	 
	 	(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 subsection 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, transfer 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 or a liquidation, dissolution or
winding up of the Corporation (any of such events being hereinafter called a “Capital
Reorganization”), any Warrantholder who has not exercised its right of acquisition
prior to the effective date of such Capital Reorganization, upon the exercise of such
right thereafter, shall be entitled to receive and shall accept, in lieu of the number
of Common Shares then sought to be acquired by it, the number of shares or other
securities or property of the Corporation or of the body corporate, trust, partnership
or other entity resulting from such Capital Reorganization, or to which such sale or
conveyance may be made, as the case may be, that such

 

 - 17 - 

	 	 	 	Warrantholder would have been entitled to receive on such Capital Reorganization,
if, on the record date or the effective date thereof, as the case may be, the
Warrantholder had been the registered holder of the number of Common Shares sought
to be acquired by it and to which it was entitled to acquire upon exercise of the
Warrants. If determined appropriate by the Trustee to give effect to or to evidence
the provisions of this subsection 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 Capital Reorganization, 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 exercise of its acquisition rights thereafter. Any
indenture entered into between the Corporation and the Trustee pursuant to the
provisions of this subsection 4.1(d) shall be a supplemental indenture entered into
pursuant to the provisions of Article 8. Any indenture entered into between the
Corporation, any successor to the Corporation or such purchasing body corporate,
partnership, trust 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 4.1 and which shall apply to successive Capital
Reorganizations.
	 
	 	(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 holder of any
Warrant exercised after such record date and before the occurrence of such event the
additional Common Shares or other securities or property issuable upon such exercise by
reason of the adjustment required by such event; provided, however, that the
Corporation shall deliver to such holder an appropriate instrument evidencing such
holder’s right to receive such additional Common Shares or other securities or property
upon the occurrence of the event requiring such adjustment and the right to receive any
distributions made on such additional Common Shares or other securities or property
declared in favour of holders of record of Common Shares or such other securities or
property on and after the relevant date of exercise or such later date as such holder
would, but for the provisions of this subsection 4.1(e), have become the holder of
record of such additional Common Shares or other securities or property pursuant to
subsection 4.1(b).
	 
	 	(f)	 	In any case in which subsections 4.1(a), 4.1(b) or 4.1(c) require that an
adjustment be made to the Exercise Price, no such adjustment shall be made if, subject
to the prior approval of the American Stock Exchange (or other stock exchange or
trading system on which the Common Shares or Warrants are listed for trading), the
holders of the outstanding Warrants receive the Common Shares or securities
exchangeable for or convertible into Common Shares referred to in subsection 4.1(a),
the rights, options or warrants referred to in subsection 4.1(b) or the securities,
rights, options, warrants, evidences of indebtedness, property or assets referred to in
subsection 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 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

 

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	 	 	 	to successive subdivisions, redivisions, reductions, combinations, consolidations,
distributions, 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 or a change in the number of Common Shares purchasable upon
exercise by at least one one-hundredth of a Common Share, as the case may be;
provided, however, that any adjustments which by reason of this subsection 4.1(g)
are not required to be made shall be carried forward and taken into account in any
subsequent adjustment.
	 
	 	(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 Shares on Exercise of Warrant

All shares of any class or other securities or property which a Warrantholder is at the time in
question entitled to receive on the 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 shares which such Warrantholder is entitled to acquire pursuant to such
Warrant.

4.3 No Adjustment for Stock Options or Warrants

Anything in this Article 4 to the contrary notwithstanding, 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, pursuant to any stock option, stock purchase, stock appreciation rights or other
employee compensation plan in force from time to time for directors, officers, employees or
consultants of the Corporation or any of its Subsidiaries, as the case may be, or pursuant to any
warrant outstanding immediately prior to the Effective Date.

4.4 Determination by Corporation’s Auditors

In the event of any question arising with respect to the adjustments provided for in this Article
4, such question shall be conclusively determined by the Corporation’s Auditors or if they are
unable or unwilling to act, by such other firm of independent chartered accountants as may be
selected by the Corporation. Such Auditors or accountants shall have access to all necessary
records of the Corporation, and such determination shall be binding upon the Corporation, the
Trustee, all Warrantholders and all other persons interested therein (absent manifest error).

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 corporate 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 or other

 

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securities or property 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 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 shall be supported by a certificate of the Corporation’s Auditors verifying such
calculation. When so verified, the Trustee shall forthwith give notice, supplied by the Corporation
and at the Corporation’s expense, to the Warrantholders specifying the event requiring such
adjustment or readjustment and the results thereof including the resulting Exercise Price; provided
that, if the Corporation has given notice under Section 4.7 covering all the relevant facts in
respect of such event, no such notice need be given under this Section 4.6.

4.7 Notice of Special Matters

The Corporation covenants with the Trustee that, so long as any Warrant remains outstanding, it
will give notice to the Trustee and to the Warrantholders of its intention to fix the record date
for any event referred to in subsections 4.1(a), (b), (c) or (d) or the proposed effective date for
a Corporate Transaction. 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 notice shall be given in each case not less than 10 Business Days prior to the
applicable record date or effective date as the case may be of such event. If any of the Warrants
is in the form of a Global Warrant, then the Corporation shall modify such notice to the extent
necessary to accord with the Applicable Procedures relating to the Global Warrants.

4.8 No Action after Notice

The Corporation covenants with the Trustee that it will not close its transfer books or take any
other corporate action which might deprive the holder of a Warrant of the opportunity to exercise
its right of acquisition pursuant thereto during the period of 10 Business Days after the giving of
the certificate or notices set forth in Sections 4.6 and 4.7 or, during the period of 10 Business
Days prior to the effective date in the case of a Corporate Transaction.

4.9 Protection of Trustee

Except as provided in Section 9.2, the Trustee:

	 	(a)	 	shall be entitled to act and rely on any adjustment calculation of the
directors or the Corporation’s Auditors;
	 
	 	(b)	 	shall not 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;
	 
	 	(c)	 	shall not be accountable with respect to the validity or value (or the kind or
amount) of any Common Shares or of any shares or other securities or property which may
at any time be issued or delivered upon the exercise of the rights
attaching to any Warrant;

 

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	 	(d)	 	shall not 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
	 
	 	(e)	 	shall not incur any liability or responsibility whatsoever 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.

	4.10	 	Other Adjustments

In case the Corporation after the date hereof shall take any action affecting the Common Shares,
other than an action described in Article 4, which in the opinion of the directors would have a
material adverse affect on the rights of Warrantholders, the Exercise Price and/or the number
and/or kind of Common Shares purchasable upon exercise, there shall be an adjustment in such
manner, if any, and at such time, as determined by the directors subject to the prior consent of
the American Stock Exchange, if applicable. Failure of the taking of action by the directors so as
to provide for an adjustment prior to the effective date of any action by the Corporation affecting
the Common Shares shall be conclusive evidence that the directors have determined that it is
equitable to make no adjustment in the circumstances.

ARTICLE 5

Rights and Covenants of The Corporation

	5.1	 	Optional Purchases by the Corporation

The Corporation may from time to time purchase by private contract, in the open market, on any
stock exchange 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 subject to compliance with all
applicable laws. Any Warrant Certificates representing the Warrants purchased pursuant to this
Section 5.1 shall forthwith be delivered to and cancelled by the Trustee. No Warrants shall be
issued in replacement thereof. With respect to Global Warrants, in the event Warrants are
purchased only in part, the Trustee shall make notations on the Global Warrant of the amount
thereof so purchased in accordance with the Applicable Procedures.

	5.2	 	General Covenants

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

	 	(a)	 	the Warrants, when issued and countersigned as provided in this Indenture, will
be valid and enforceable against it in accordance with and subject to the provisions of
this Indenture;
	 
	 	(b)	 	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;
	 
	 	(c)	 	it will cause the Common Shares and the certificates representing 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 Warrant Certificates and the terms hereof;

 

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	 	(d)	 	all Common Shares which shall be issued upon exercise of the right to acquire
provided for herein and in the Warrant Certificates shall be fully paid and
non-assessable;
	 
	 	(e)	 	the Corporation will do, or cause to be done, all things necessary to preserve
and keep in full force and effect its corporate existence, provided however that
(subject to Article 4 and Section 8.2) nothing will prevent the amalgamation,
consolidation, merger or sale of, or other business combination involving the
Corporation;
	 
	 	(f)	 	it will use its best efforts to ensure that the Warrants and all Common Shares
outstanding or issuable from time to time continue to be or are listed and posted for
trading on the American Stock Exchange (or such other stock exchange acceptable to the
Corporation);
	 
	 	(g)	 	it will perform and carry out all of the acts or things to be done by it as
provided in this Indenture;
	 
	 	(h)	 	it will not close its transfer registers or take any other action which might
deprive the Warrantholders of the opportunity of exercising their right of purchase
pursuant to the Warrants held by such persons during the period of 10 Business Days
after giving of the notice required by Section 4.7; and
	 
	 	(i)	 	that it will execute, acknowledge and deliver or cause to be done, executed,
acknowledged and delivered, all other acts, deeds and assurances in law as the Trustee
may reasonably require for the better accomplishing and effecting the intentions and
provisions of this Indenture.

	5.3	 	Trustee’s Remuneration and Expenses

The Corporation covenants that it will pay to the Trustee from time to time reasonable remuneration
for its services hereunder and will pay or reimburse the Trustee upon its request for all expenses,
disbursements and advances incurred or made by the Trustee in the administration or execution of
the trusts hereby created (including the 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 Trustee hereunder shall be finally and fully performed, except
any such expense, disbursement or advance as may arise out of or result from, principally and
directly, the Trustee’s gross negligence, willful misconduct or bad faith.

	5.4	 	Performance of Covenants by Trustee

If the Corporation shall fail to perform any of its covenants contained in this Warrant Indenture,
the Trustee may notify the Warrantholders of such failure on the part of the Corporation or 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 such covenants or to notify the Warrantholders of such
performance by it. All sums expended or advanced by the Trustee in so doing shall be repayable as
provided in Section 5.3. No such performance, expenditure or advance by the Trustee shall relieve
the Corporation of any default hereunder or of its continuing obligations under the covenants
herein contained.

 

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ARTICLE 6

Enforcement

	6.1	 	Suits by Warrantholders

	 	(a)	 	No Warrantholder has the right to institute any action or proceeding or to
exercise any other remedy authorized hereunder for the purpose of enforcing any right
on behalf of the Warrantholders or for the execution of any trust or power hereunder or
for the appointment of a liquidator or receiver or receiver and manager or for a
receiving order under the Bankruptcy and Insolvency Act (Canada) or to have the
Corporation wound up or to file or prove a claim in any liquidation or bankruptcy
proceedings, unless the Trustee has received a Warrantholders’ Request directing it to
take the requested action and has been provided with sufficient funds or other security
and/or such indemnity satisfactory to the Trustee in respect of the costs, expenses and
liabilities that may be incurred by it in so proceeding and the Trustee has failed to
act within a reasonable time thereafter. If the Trustee has so failed to act, but not
otherwise, any Warrantholder acting on behalf of all Warrantholders will be entitled to
take any of the proceedings that the Trustee might have taken hereunder. No
Warrantholder has any right in any manner whatsoever to effect, disturb or prejudice
the rights hereby created by its action or to enforce any right hereunder or under any
Warrant, except subject to the conditions and in the manner herein provided. Any money
received as a result of a proceeding taken by any Warrantholder hereunder must be
forthwith paid to the Trustee.
	 
	 	(b)	 	All rights of action under this Indenture may be enforced by the Trustee
without the possession of any of the Warrants or the production thereof on any trial or
other proceedings relative thereto.
	 
	 	(c)	 	The Trustee shall be entitled and empowered, either in its own name or as
Trustee of an express trust, or as attorney-in-fact for the Warrantholders, or in any
one or more of such capacities, to file such proof of debt, amendment of proof of debt,
claim, petition or other document as may be necessary or advisable in order to have the
claim of the Trustee and the Warrantholders allowed in any insolvency, bankruptcy,
liquidation or other judicial proceedings relative to the Corporation or its creditors
or relative to or affecting its property. The Trustee is hereby irrevocably appointed
(and the successive respective Warrantholders by taking and holding the same shall be
conclusively deemed to have so appointed the Trustee) the true and lawful
attorney-in-fact of the respective Warrantholders or on behalf of the Warrantholders as
a class, subject to deduction from any such claims of the amounts of any claims filed
by any of the Warrantholders themselves if and to the extent permitted hereunder, for
any proof of debt, amendment of proof of debt, claim, petition or other document in any
such proceedings and to receive payment of any sums becoming distributable on account
thereof, and to execute any such other papers and documents and to do and perform any
and all such acts and things for and on behalf of the Warrantholders, as may be
necessary or advisable in the opinion of the Trustee, in order to have the respective
claims of the Trustee and of the Warrantholders against the Corporation or its property
allowed in any such proceeding, and to receive payment of or on account of such claims;
provided, however, that nothing contained in this Indenture shall be deemed to give the
Trustee, unless so authorized by extraordinary resolution (as provided in Section
7.11), any right to accept or consent to any plan of reorganization or otherwise by action of any character in such
proceeding to waive or change in any way any right of any Warrantholder.

 

-23-

	 	(d)	 	The Trustee shall also have the power, but not the obligation, at any time and
from time to time to institute and to maintain such suits and proceedings as it may be
advised shall be necessary or advisable to preserve and protect its interests and the
interests of the Warrantholders.
	 
	 	(e)	 	Any such suit or proceeding instituted by the Trustee may be brought in the
name of the Trustee as Trustee of an express trust, and any recovery of judgment shall
be for the rateable benefit of the Warrantholders subject to provisions of this
Indenture. In any proceeding brought by the Trustee (and also any proceeding in which
a declaratory judgment of a court may be sought as to the interpretation or
construction of any provision of this Indenture, to which the Trustee shall be a
party), the Trustee shall be held to represent all the Warrantholders, and it shall not
be necessary to make any Warrantholders parties to any such proceeding.

	6.2	 	Suits by the Corporation

The Corporation shall have the right to enforce full payment of the Exercise Price for all Common
Shares issued by the Corporation to a Warrantholder hereunder and shall be entitled to demand such
payment from the Warrantholder or alternatively to instruct the Trustee to cancel the share
certificates and amend the securities register accordingly.

	6.3	 	Limitation of Liability

The obligations of the Corporation hereunder are not 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 successor to the Corporation or any of the past, present or future officers,
employees or agents of the Corporation or any successor to the Corporation, but only the property
of the Corporation or any successor to the Corporation shall be bound in respect hereof.

	6.4	 	Waiver of Default

Upon the happening of any default hereunder:

	 	(a)	 	the holders of not less than 66 2/3% of the Warrants then outstanding shall
have power (in addition to the powers exercisable by extraordinary resolution as
provided in Section 7.10) by requisition in writing to instruct the Trustee to waive
any default hereunder and the Trustee shall thereupon waive the default upon such terms
and conditions as shall be prescribed in such requisition; or
	 
	 	(b)	 	the Trustee shall have power to waive any default hereunder upon such terms and
conditions as the Trustee may deem advisable, if, in the Trustee’s opinion, the same
shall have been cured or adequate provision made therefor;

provided that no delay or omission of the Trustee or of the Warrantholders to exercise any right or
power accruing upon any default shall impair any such right or power or shall be construed to be a
waiver of any such default or acquiescence therein and provided further that no act or omission
either of the Trustee 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.

 

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ARTICLE 7

Meetings Of Warrantholders

	7.1	 	Right to Convene Meetings

The Trustee 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 receiving sufficient funds to cover any costs
and expenses and/or being indemnified to its reasonable satisfaction by the Corporation or by the
Warrantholders signing such Warrantholders’ Request against the cost which may be incurred in
connection with the calling and holding of such meeting, convene a meeting of the Warrantholders.
In the event of the Trustee failing to so convene a meeting within 15 days after receipt of such
written request of the Corporation or such Warrantholders’ Request and sufficient funds and/or
indemnity 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 Calgary, the City of Toronto
or at such other place as may be approved or determined by the Trustee.

	7.2	 	Notice

At least 21 days’ prior 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 to the Trustee (unless the meeting has been called by the Trustee) and
to the Corporation (unless the meeting has been called by the Corporation) in the manner provided
for in Section 10.1. 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
Article 7. The notice convening any such meeting may be signed by an appropriate officer of the
Trustee or the Corporation or by the Warrantholder or Warrantholders convening the meeting.

	7.3	 	Chairman

An individual (who need not be a Warrantholder) designated in writing by the Trustee shall be
chairman of the meeting and if no individual is so designated, or if the individual so designated
is not present within 15 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 Warrantholders present in person or by proxy and entitled to purchase at least 10% of
the then outstanding Warrants, provided that at least two persons entitled to vote thereat are
personally present. If a quorum of the Warrantholders shall not be present within 30 minutes from
the time fixed for holding any meeting, the meeting, if summoned by the Warrantholders or on a
Warrantholders’ Request, shall be dissolved; but in any other case the meeting shall be adjourned
to the same day in the next week (unless such day is not a Business Day, in which case it shall be
adjourned to the next following Business Day) at the same time and place 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

 

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was originally convened, notwithstanding that they may not represent at least 10%
of the 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

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, a poll shall be taken in such manner as the chairman shall direct. Questions
other than those required to be determined by extraordinary resolution shall be decided by a
majority of the votes cast on the poll.

On a show of hands, every person who is present and entitled to vote, whether as a Warrantholder or
as proxy for one or more absent Warrantholders, or both, shall have one vote. On a poll, each
Warrantholder present in person or represented by a proxy duly appointed by instrument in writing
shall be entitled to one vote in respect of each whole Common Share which he is entitled to acquire
pursuant to the Warrant or Warrants then held or represented by him. 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.

In the case of a Global Warrant, the Depository may appoint or cause to be appointed a person or
persons as proxies and shall designate the number of votes entitled to each such person, and each
such person shall be entitled to be present at any meeting of holders and shall be the persons
entitled to vote at such meeting in accordance with the number of votes set out in the Depository’s
designation.

	7.8	 	Regulations

Subject to compliance with the provisions of this Indenture, the Trustee, or the Corporation with
the approval of the Trustee, may from time to time make and from time to time make and 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)	 	for Warrantholders to appoint a proxy or proxies to represent them and vote for
them at any such meeting (and any adjournment thereof) and the manner in which same is
to be executed, and for the production of the authority of any persons signing on
behalf of the Warrantholder appointing them;

 

-26-

	 	(c)	 	the deposit of instruments appointing proxies at such place and time as the
Trustee, the Corporation or the Warrantholders convening the meeting, as the case may
be, may in the notice convening the meeting direct;
	 
	 	(d)	 	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 sent by facsimile 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;
	 
	 	(e)	 	the form of the instrument of proxy or the manner in which it must be executed;
and
	 
	 	(f)	 	generally for the calling of meetings of Warrantholders and the conduct of
business thereat.

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, their authorized
representatives or attorneys and legal counsel, or proxies of Warrantholders.

	7.9	 	Corporation and Trustee May be Represented

The Corporation and the Trustee, by their respective directors, officers and employees, and the
Counsel for the Corporation and for the Trustee may attend any meeting of the Warrantholders, but
shall have no vote thereat, whether in respect of any Warrants held by them or otherwise.

	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 shall, subject to the provisions of Section 7.11 and prior written approval
of the American Stock Exchange (or such other stock exchange on which the Common Shares may be
listed for trading), 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, subject to the consent of the Trustee, the Trustee
in its capacity as trustee hereunder or on behalf of the Warrantholders against the
Corporation whether such rights arise under this Indenture or the Warrant Certificates
or otherwise;
	 
	 	(b)	 	to amend, alter or repeal any extraordinary resolution previously passed or
sanctioned by the Warrantholders;
	 
	 	(c)	 	to direct or to authorize the Trustee to enforce any of the covenants on the
part of the Corporation contained in this Indenture or the Warrant Certificates 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 Trustee to waive, any default on the part of the
Corporation in complying with any provisions of this Indenture or the Warrant
Certificates either unconditionally or upon any conditions specified in such
extraordinary resolution;

 

-27-

	 	(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 the Warrant Certificates 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 the
Warrant Certificates and this Indenture or any ancillary or supplemental instrument
which may be agreed to by the Corporation, and to authorize the Trustee to concur in
and execute any ancillary or supplemental indenture embodying the change or omission;
	 
	 	(h)	 	with the consent of the Corporation, to remove the Trustee or its successor in
office and to appoint a new trustee or trustees to take the place of the Trustee 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
 shares or other securities of the Corporation.

	7.11	 	Meaning of Extraordinary Resolution

	 	(a)	 	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 representing at least 10% of the then outstanding Warrants
and passed by the affirmative votes of Warrantholders representing not less than 66
2/3% of the then outstanding Warrants represented at the meeting and voted on the poll
upon such resolution.
	 
	 	(b)	 	If, at the meeting at which an extraordinary resolution is to be considered,
Warrantholders entitled to acquire at least 10% of the 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 five 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 subsection
7.11(a) shall be an extraordinary resolution within the meaning of this Indenture
notwithstanding that Warrantholders representing at least 10% of the then
outstanding Warrants are not present in person or by proxy at such adjourned
meeting.

 

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	 	(c)	 	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 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 if 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 exercised by Warrantholders
representing at least 66 2/3% of the then outstanding Warrants by an instrument in writing signed
in one or more counterparts by such Warrantholders in person or by attorney duly appointed in
writing, and the expression “extraordinary resolution” when used in this Indenture shall include an
instrument so signed.

	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 Trustee (subject to the provisions for indemnity herein
contained and subject to applicable law) 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 Warrant Certificates representing 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 or any
Subsidiary of the Corporation shall be disregarded in accordance with the provisions of Section
10.7.

 

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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 Trustee may,
subject to the provisions hereof, and they shall, when so directed in accordance with the
provisions hereof, execute and deliver by their proper directors or officers, indentures or
instruments supplemental hereto, which thereafter shall form part hereof, for any one or more or
all of the following purposes:

	 	(a)	 	setting forth any adjustments resulting from the application of the provisions
of Article 4;
	 
	 	(b)	 	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 Trustee relying on the advice of
Counsel, prejudicial to the interests of the Warrantholders;
	 
	 	(c)	 	giving effect to any extraordinary resolution passed as provided in Article 7;
	 
	 	(d)	 	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 or maintaining a listing or quotation of the Warrants on any stock
exchange, provided that such provisions are not, in the opinion of the Trustee relying
on the advice of Counsel, prejudicial to the interests of the Warrantholders;
	 
	 	(e)	 	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 Trustee relying on the advice of Counsel, such
modification or relief in no way prejudices any of the rights of the Warrantholders or
of the Trustee, and provided further that the Trustee may in its sole discretion
decline to enter into any such supplemental indenture which in its opinion may not
afford adequate protection to the Trustee when the same shall become operative; and
	 
	 	(f)	 	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 Trustee relying on
the advice of Counsel the rights of the Trustee and of the Warrantholders are in no
way prejudiced thereby.

Notwithstanding anything to the contrary in this Indenture, no supplement or amendment to this
Indenture or to the provisions of the Warrants may be made without the prior consent of the
American Stock Exchange (or such other stock exchange on which the Common Shares may be listed for
trading), if required.

	8.2	 	Successor Corporations

In the case of the consolidation, amalgamation, merger or transfer of the undertaking or assets of
the Corporation as an entirety or substantially as an entirety to another person, trust,
corporation, partnership or similar entity (“successor entity”), the successor entity resulting
from such consolidation, amalgamation, merger or transfer (if not the Corporation) shall expressly
assume, by supplemental

 

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indenture satisfactory in form to the Trustee and executed and delivered to
the Trustee, 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 unless all of the
Warrants have terminated in accordance with Section 4.1(e).

ARTICLE 9

Concerning The Trustee

	9.1	 	Trust Indenture Legislation

	 	(a)	 	If and to the extent that any provision of this Indenture limits, qualifies or
conflicts with a mandatory requirement of any legislation applicable to this Indenture,
such mandatory requirement shall prevail.
	 
	 	(b)	 	The Corporation and the Trustee 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 all legislation applicable to this Indenture.

	9.2	 	Rights and Duties of Trustee

	 	(a)	 	In the exercise of the rights and duties prescribed or conferred by the terms
of this Indenture, the Trustee shall exercise that degree of care, diligence and skill
that a reasonably prudent trustee would exercise in comparable circumstances. Except
in the event of a breach of such standard of care, the Trustee, its directors,
officers, employees, shareholders and agents shall not be liable for any action taken
in good faith in reliance on any documents that are, prima facie, properly executed;
for the loss or disposition of monies; or for any other action or failure to act by the
Trustee, including, without limitation, the failure to compel in any way any former
trustee to redress any breach of trust. If the Trustee has retained an appropriate
expert or advisor with respect to any matter connected with its duties under this
indenture, the Trustee may act or refuse to act based on the advice of such expert or
advisor and, notwithstanding any provision of the indenture, including, without
limitation, the standard of care, diligence and skill set out in this Section 9.2, the
Trustee shall not be liable for any action or refusal to act based on
the advice of any such expert or advisor which it is reasonable to conclude is
within the expertise of such expert or advisor to give.
	 
	 	(b)	 	Subject to the standard of care set forth in this Section 9.2, none of the
Trustee, any officer, director, shareholder, employee or agent thereof shall be subject
to any liability whatsoever in tort, contract or otherwise, in connection with the
affairs of the Corporation or any other person for anything done or permitted to be
done by the Trustee. The Trustee shall not be subject to any personal liability for
any debts, liabilities, obligations, claims, demands, judgments, costs, charges or
expenses arising out of anything done or permitted or omitted to be done in respect of
the execution of the duties of the office of the Trustee. No property or assets of the
Trustee, owned in its personal capacity or otherwise, will be subject to any levy,
execution or other enforcement procedure with regard to any obligations under this
indenture or under any other related agreements. No recourse may be had or taken,
directly or indirectly, against the Trustee in its personal capacity.
	 
	 	(c)	 	The obligation of the Trustee to commence or continue any act, action or
proceeding for the purpose of enforcing any rights of the Trustee or the Warrantholders
hereunder shall

 

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	 	 	 	be conditional upon the Warrantholders furnishing, when required by
notice by the Trustee, sufficient funds to commence or to continue such act, action or
proceeding and an indemnity reasonably satisfactory to the Trustee to protect and to
hold harmless the Trustee 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 Trustee 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 as
aforesaid.
	 
	 	(d)	 	The Trustee 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 Trustee the Warrants held by them, for which Warrants the
Trustee shall issue receipts.

	9.3	 	Evidence, Experts and Advisers

	 	(a)	 	In addition to the reports, certificates, opinions and other evidence required
by this Indenture, the Corporation shall furnish to the Trustee such additional
evidence of compliance with any provision hereof, and in such form, as may be
prescribed by any legislation applicable to this Indenture or as the Trustee may
reasonably require by written notice to the Corporation.
	 
	 	(b)	 	In the exercise of its rights and duties hereunder, the Trustee 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 Trustee pursuant to a request of the Trustee or otherwise
pursuant hereto, provided that such evidence complies with all legislation applicable
to this Indenture and that the Trustee complies with such legislation and that the
Trustee examines such evidence and determines that such evidence complies with the
applicable requirements of this Indenture.
	 
	 	(c)	 	Whenever it is provided in this Indenture or under any legislation applicable
to this Indenture that the Corporation shall deposit with the Trustee 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 Trustee take the
action to be based thereon.
	 
	 	(d)	 	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 public or
other officer with similar powers, that the person signing such instrument acknowledged
to it the execution thereof, or by an affidavit of a witness to such execution or in
any other manner which the Trustee may consider adequate.
	 
	 	(e)	 	The Trustee may employ or retain at the Corporation’s expense such Counsel,
accountants, appraisers or other experts or advisers as it may reasonably require for
the purpose of determining and discharging its duties hereunder and may pay reasonable
remuneration for all services so performed by any of them, without taxation of costs of

 

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	 	 	 	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 Trustee.

	9.4	 	Documents, Monies, etc. Held by Trustee

Unless herein otherwise expressly provided, any of the funds held by the Trustee may be deposited
in a trust account in the name of the Trustee (which may be held with the Trustee or an affiliate
or related party of the Trustee) which account shall be non-interest bearing. Upon the written
order of the Corporation, the Trustee shall invest in its name such funds in Authorized Investments
in accordance with such direction. Any direction by the Corporation to the Trustee as to the
investment of the funds shall be in writing and shall be provided to the Trustee no later than 9:00
a.m. on the day on which the investment is to be made. Any such direction received by the Trustee
after 9:00 a.m. or received on a non-Business Day, shall be deemed to have been given prior to 9:00
a.m. the next Business Day. Unless the Corporation shall be in default hereunder, all interest or
other income received by the Trustee in respect of such deposits and investments shall belong to
the Corporation.

	9.5	 	Actions by Trustee to Protect Interest

The Trustee 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	 	Trustee Not Required to Give Security

The Trustee shall not be required to give any bond or security in respect of the execution of the
trusts and powers of this Indenture or otherwise in respect of the premises.

	9.7	 	Protection of Trustee

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

	 	(a)	 	the Trustee 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 in the certificate of the
Trustee on the Warrant Certificates) 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 Trustee 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 Trustee shall not be bound to give notice to any person or persons of the
execution hereof; and
	 
	 	(d)	 	the Trustee 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 to
any of the covenants herein contained or of any acts of any directors, officers,
employees, agents or servants of the Corporation.

 

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	9.8	 	Replacement of Trustee; Successor by Merger

	 	(a)	 	The Trustee may resign its trust and be discharged from all further duties and
liabilities hereunder, subject to this Section 9.8, by giving to the Corporation not
less than 90 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 Trustee and to appoint a new
Trustee. In the event of the Trustee 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 trustee unless a new
trustee has already been appointed by the Warrantholders; failing such appointment by
the Corporation, the retiring Trustee, at the Corporation’s expense, or any
Warrantholder may apply to a justice of the Court of Queen’s Bench of the Province of
Alberta on such notice as such justice may direct, for the appointment of a new
trustee; but any new trustee so appointed by the Corporation or by the Court shall be
subject to removal as aforesaid by the Warrantholders. Any new trustee appointed under
any provision of this Section 9.8 shall be a corporation authorized to carry on the
business of a trust company in the Province of Alberta and, if required by any
legislation applicable to this Indenture for any other provinces, in such other
provinces. On any such appointment the new trustee shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named herein
as Trustee hereunder and there shall be immediately executed, at the expense of the
Corporation, all such conveyances or other instruments as may, in the reasonable
opinion of counsel, be necessary or advisable to vest the new trustee with such powers,
rights, duties and responsibilities, provided that the predecessor Trustee shall have
no obligation to execute any such conveyances or instruments until such time as it has
received payment of all outstanding remuneration and expenses payable by the
Corporation to such Trustee under this Indenture.
	 
	 	(b)	 	Upon the appointment of a successor trustee, the Corporation shall promptly
notify the Warrantholders thereof in the manner provided for in Section 10.2 hereof.
	 
	 	(c)	 	Any corporation into or with which the Trustee may be merged or consolidated or
amalgamated, or any corporation resulting therefrom to which the Trustee shall be a
party, or any corporation succeeding to the trust business of the Trustee shall be the
successor to the Trustee hereunder without any further act on its part or any of the
parties hereto, provided that such corporation would be eligible for appointment as a
successor trustee under subsection 9.8(a).
	 
	 	(d)	 	Any Warrant Certificates certified but not delivered by a predecessor trustee
may be certified by the successor trustee in the name of the predecessor or successor
trustee.

	9.9	 	Conflict of Interest

	 	(a)	 	The Trustee represents to the Corporation that at the time of execution and
delivery hereof no material conflict of interest exists between its role as a trustee
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
trust hereunder to a successor trustee approved by the Corporation and meeting the
requirements set forth in subsection 9.8(a). Notwithstanding the foregoing provisions
of this subsection 9.9(a), if any such material conflict of interest exists or
hereafter shall exist, the validity and enforceability of this

 

 

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	 	 	Indenture and the Warrant Certificates shall not be affected in any manner
whatsoever by reason thereof.
	 
	(b)	 	Subject to subsection 9.9(a), the Trustee, 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 or any
Subsidiary of the Corporation without being liable to account for any profit made
thereby.

	9.10	 	Acceptance of Trust

The Trustee hereby accepts the trusts in this Indenture declared and provided for and agrees to
perform the same upon the terms and conditions herein set forth.

	9.11	 	Trustee Not to be Appointed Receiver

The Trustee and any person related to the Trustee 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	 	Knowledge of Trustee

The Trustee shall not be required to take notice or be deemed to have notice, whether constructive
or actual, of any matter hereunder, unless the Trustee shall have received from the Corporation or
a Warrantholder a notice stating the matter in respect of which the Trustee should have notice.

	9.13	 	Indemnification of Trustee

In addition to and without limiting any other protection of the Trustee hereunder or otherwise by
law, the Corporation shall be liable for and indemnify and save harmless the Trustee and its
officers, directors, agents, employees and shareholders from and against any and all losses, costs,
charges, expenses, damages and liabilities whatsoever arising in connection with this Indenture,
including, without limitation, those arising out of or related to actions taken or omitted to be
taken by the Trustee contemplated hereby, 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 and
including any deed, matter or thing in relation to the execution of its duties as Trustee and
including any deed, matter or thing in relation to the registration, perfection, release or
discharge of security. The foregoing provisions of this section do not apply to the extent that
such losses, costs, charges, expenses, damages or liabilities arise principally and directly from a
failure by the Trustee or its employees or agents to act honestly and in good faith or from the
gross negligence, willful misconduct or breach of the standard of care set out in Section 9.2(a) by
the Trustee or an of its employees or agents. It is understood and agreed that this indemnification
shall survive the termination of this Indenture or the resignation of the Trustee.

	9.14	 	Trustee Not Required to Give Notice of Default

The Trustee 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 Trustee 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 Trustee and in the absence of any such notice
the Trustee may for all purposes of this

 

 

- 35 -

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 Trustee to determine whether or not
the Trustee shall take action with respect to any default.

ARTICLE 10

General

	10.1	 	Notice to the Corporation and the Trustee

	 	(a)	 	Unless herein otherwise expressly provided, any notice to be given hereunder to
the Corporation or the Trustee shall be deemed to be validly given if delivered or if
sent by registered letter, postage prepaid or by facsimile:
	 
	 	 	 	If to the Corporation:

Oilsands Quest Inc.

205, 707 — 7 Avenue SW

Calgary, AB T2P 3H6

Fax: (403) 263-9812

	 	 	 	If to the Trustee:

Computershare Trust Company of Canada

600, 530 — 8 Avenue SW

Calgary, AB T2P 3S8

Attention: Manager, Corporate Trusts

Fax: (403) 267-6598

	 	 	 	and any such notice delivered in accordance with the foregoing shall be deemed to
have been received on the date of delivery or facsimile if delivered or faxed (with
receipt confirmed) by 4:30 p.m. (local time) on a Business Day, or otherwise on the
next Business Day or, if mailed, on the 5th Business Day following the date of the
postmark on such notice.
	 
	 	(b)	 	The Corporation or the Trustee, as the case may be, may from time to time
notify the other in the manner provided in subsection 
10.1(a) 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 Trustee, as the case may be, for all purposes
of this Indenture.
	 
	 	(c)	 	If, by reason of a strike, lockout or other work stoppage, actual or
threatened, involving postal employees, any notice to be given to the Trustee 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 or, if it is delivered to such party at the
appropriate address provided in subsection 10.1(a), by facsimile or other means of
prepaid, transmitted and recorded communication.

 

 

- 36 -

	10.2	 	Notice to Warrantholders

	 	(a)	 	Any notice to the Warrantholders under the provisions of this Indenture shall
be valid and effective if delivered or if sent by ordinary post addressed to such
holders at their post office addresses appearing on the register of Warrantholders
maintained under this Indenture. Any such notice delivered in accordance with the
foregoing is deemed to have been effectively given (and received by the Warrantholders)
on the date of delivery (with receipt confirmed) if such date is a Business Day or, if
mailed, five Business Days following actual posting of the notice.
	 
	 	(b)	 	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 personally to such Warrantholders
or if delivered to the address for such Warrantholders contained in the register of
Warrants maintained by the Trustee, by other means of prepaid transmitted and recorded
communication. Accidental error or omission in giving notice or accidental failure to
mail notice to any holder will not invalidate any action or proceeding founded thereon.
	 
	 	(c)	 	In addition to the other requirements for notice under this Section, where a
Warrantholder meeting is being convened, the Trustee or Corporation may require
publication of such notice in such municipalities and filing with securities regulatory
authorities, as necessary to comply with applicable legal, regulatory or stock exchange
requirements.

	10.3	 	Evidence of Ownership

	 	(a)	 	Upon receipt of a certificate of any bank, trust company or other depositary
satisfactory to the Trustee stating that the Warrants specified therein have been
deposited by a named person with such bank, trust company or other depositary and will
remain so deposited until the expiry of the period specified therein and the
acknowledgement by the named person of such certificate, the Corporation and the
Trustee may treat the person so named as the owner, and such certificate as sufficient
evidence of the ownership by such person of such Warrant during such period, for the
purpose of any requisition, direction, consent, instrument or other document to be
made, signed or given by the holder of the Warrant so deposited.
	 
	 	(b)	 	The Corporation and the Trustee may accept as sufficient evidence of the fact
and date of the signing of any requisition, direction, consent, instrument or other
document by any person (i) the signature of any officer of any bank, trust company, or
other depositary satisfactory to the Trustee as witness of such execution, (ii) the
certificate of any notary public or other officer authorized to take acknowledgments of
deeds to be recorded at the place where such certificate is made that the person
signing acknowledged to him the execution thereof, or (iii) a satisfactory declaration
of a witness of such execution.

10.4 Counterparts

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.

 

 

- 37 -

	10.5	 	Satisfaction and Discharge of Indenture

Upon the earlier of:

	 	(a)	 	the date by which there shall have been delivered to the Trustee for exercise
or destruction all Warrant Certificates theretofore certified hereunder; or
	 
	 	(b)	 	30 days after the Time of Expiry;

this Indenture shall cease to be of further effect and the Trustee, on demand of and at the cost
and expense of the Corporation and upon delivery to the Trustee of a certificate of the Corporation
stating that all conditions precedent to the satisfaction and discharge of this Indenture have been
complied with and upon receipt by the Trustee of all amounts owing to it hereunder, shall execute
proper instruments acknowledging satisfaction of and discharging this Indenture. Notwithstanding
the foregoing, the indemnities provided to the Trustee by the Corporation hereunder and the
limitations of liability in favour of the Trustee 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 Warrant Certificates, 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	 	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 or
any Subsidiary of the Corporation in Section 7.16, the Corporation shall provide to the Trustee
from time to time and immediately upon request, 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 registered holders of
Warrants which, to the knowledge of the Corporation, are owned by or held for the
account of the Corporation or any Subsidiary of the Corporation; and
	 
	 	(b)	 	the number of Warrants owned legally or beneficially by the Corporation or any
Subsidiary of the Corporation,

and the Trustee, in making the computations in Section 7.16, shall be entitled to rely on such
certificate without any additional evidence.

	10.8	 	Successors

All provisions of this Indenture for the benefit of the Corporation and the Trustee bind and enure
to the benefit of their respective successors and assigns.

 

 

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Executed and delivered as of the 5th day of December, 2007.

	 	 	 	 	 
	 	 	OILSANDS QUEST INC.
	 
	 	 	 	 
	 

	 	Per:	 	 
	 

	 	 	 	 
	 

	 	Per:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 	 	COMPUTERSHARE TRUST COMPANY OF CANADA
	 
	 

	 	Per:	 	 
	 

	 	 	 	 
	 

	 	Per:	 	 
	 

	 	 	 	 

 

 

SCHEDULE “A” to the Warrant Indenture made as of December 5, 2007 between
OILSANDS QUEST INC. and COMPUTERSHARE TRUST COMPANY OF CANADA as Trustee

 

 

“Unless this certificate is presented by an authorized representative of The Depository Trust
Company, a New York corporation (“DTC”), to the Corporation or its agent for registration of
transfer, exchange, or payment, and any certificate issued is registered in the name of Cede & Co.
or in such other name as is requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or to such other entity as is requested by an authorized representative of DTC),
ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, Cede & Co., has an interest herein.

Unless and until it is exchanged in whole or in part for Securities in definitive registered form,
this certificate may not be transferred except as a whole by DTC to a nominee of DTC or by a
nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to a successor
Depositary or a nominee of such successor Depositary.”

THE WARRANTS REPRESENTED BY THIS CERTIFICATE WILL BE VOID AND OF NO VALUE

UNLESS EXERCISED BEFORE 4:30 P.M. (CALGARY TIME) ON DECEMBER 5, 2009

	 	 	 
	WARRANT CERTIFICATE NUMBER

	 	NO. OF WARRANTS

OILSANDS QUEST INC.

(INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO)

                     WARRANTS entitling the holder to acquire, subject to adjustment, one
Common Share for each Warrant represented 

CUSIP 678046111

(HEREINAFTER REFERRED TO AS THE “HOLDER”)

is entitled to acquire in the manner and subject to the restrictions and adjustments set forth
herein, at any time and from time to time after the date hereof from the date of issue until 4:30
p.m. (Calgary time) (the “time of Expiry”) on December 5, 2009 (the “Expiry Date”), one fully paid
and non-assessable Common Share (“Common Share”) without nominal or par value of Oilsands Quest
Inc. (the “Corporation”) as such shares were constituted on December 5, 2007, at a price per share
of $USD6.75 for each Warrant represented hereby.

The right to acquire Common Shares may only be exercised by the holder within the time set forth
above by:

	 	(a)	 	duly completing and executing the Exercise Form attached hereto:
	 
	 	(b)	 	surrendering this Warrant Certificate to Computershare Trust Company of Canada (the
“Trustee”) at the principal office of the Trustee in the City of Calgary, Toronto or
Vancouver; and
	 
	 	(c)	 	remitting a certified cheque or bank draft payable to or to the order of the Corporation
at par where this Warrant Certificate is so surrendered, for the aggregate purchase price of
the Common Shares so subscribed for.

These Warrants shall be deemed to be surrendered only upon personal delivery hereof or, if sent by
mail or other means of transmission, upon actual receipt thereof by the Trustee at the offices
referred to above.

Upon surrender of these Warrants, the person or persons in whose name or names the Common Shares
issuable upon exercise of the Warrants are to be issued shall be deemed for all purposes (except as
provided in the Indenture hereinafter referred to) to be the holder or holders of record of such
Common Shares and the Corporation covenants that it will (subject to the provisions of the
Indenture) cause a certificate or certificates representing such Common Shares to be delivered or
mailed to the person or persons at the address or addresses specified in the Exercise Form.

Certificates for the Common Shares subscribed for will be mailed to the persons specified in the
Exercise Form at their respective addresses specified therein, three Business Days after the
surrender of this Warrant Certificate and payment as aforesaid. In the event of a purchase of a
number of Common Shares fewer than the number which can be purchased upon exercise of the Warrants
represented hereby, the registered holder of this certificate shall be entitled to receive, without
charge a new Warrant certificate in respect of the balance of the Warrants not then exercised.
Under no circumstances is the Corporation obliged to issue fractional Common Shares. In lieu of
fractional Common Shares, the Corporation shall pay to the holder who would otherwise be entitled
to receive fractional Common Shares upon an exercise of Warrants, within 10 Business Days after the
date upon which the fractional Common Shares would have been issued, an amount in lawful money of
the United States equal to the Current Market Price of the Common Shares on the Exercise Date
multiplied by an amount equal to the fractional interest of Common Shares such holder would
otherwise be entitled to receive upon such exercise, provided that the Corporation shall not be
required to make any payment, calculated as aforesaid, that is less than US$10.00.

The Warrants represented by this certificate are issued under and pursuant to a Warrant Indenture
(hereinafter referred to as the “Indenture”) made as of December 5, 2007 between the Corporation
and the Trustee. Reference is made to the Indenture and any instruments supplemental thereto for a
full description of the rights of the holders of the Warrants and the terms and conditions upon
which the Warrants are, or are to be, issued and held, with the same effect as if the provisions of
the Indenture and all instruments supplemental thereto were herein set forth. By acceptance
hereof, the holder assents to all provisions of the Indenture. Capitalized terms used in this
Warrant certificate but not defined herein have the meanings given thereto in this Indenture.

The Indenture provides for adjustment in the exercise price of the Warrants and to the number of
shares to be delivered upon exercise in certain events therein set forth.

The Indenture provides for the giving of notice by the Corporation prior to taking certain actions
specified therein.

The registered holder of this Warrant Certificate may, at any time prior to the Expiry Date, upon
surrender hereof to the Trustee at its principal office in the City of Calgary, Toronto or
Vancouver, exchange this Warrant Certificate for other Warrant Certificates entitling the holder to
acquire, in aggregate, the same number of Common Shares as may be acquired under this Warrant
Certificate.

The holding of the Warrants evidenced by this Warrant Certificate shall not constitute the holder
hereof a shareholder of the Corporation or entitle the holder to any right or interest in respect
thereof except as expressly provided in the Indenture and in this Warrant Certificate.

The Indenture provides that all holders of Warrants shall be bound by any resolution passed at a
meeting of the holders held in accordance with the provisions of the Indenture and resolutions
signed by holders of a specified majority of the then outstanding Warrants.

The Warrants evidenced by this Warrant Certificate may be transferred on the register kept at the
offices of the Trustee by the registered holder hereof or its legal representatives or its attorney
duly appointed by an instrument in writing in form and execution satisfactory to the Trustee only
upon compliance with the conditions prescribed in the Indenture and upon compliance with such
reasonable requirements as the Trustee may prescribe.

This Warrant Certificate shall not be valid for any purpose whatever unless and until it has been
certified by or on behalf of the Trustee.

Time shall be of the essence hereof. This Warrant Certificate shall be governed by and construed
in accordance with the laws in force in the Province of Alberta.

IN WITNESS WHEREOF the Corporation has caused this Warrant Certificate to be signed by its duly
authorized officers as of December 5, 2007.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Certified by:	 	 	 	 	 	 	 	 
	 	 	COMPUTERSHARE TRUST COMPANY OF CANADA	 	 	 	OILSANDS QUEST INC.	 	 
	 
	 
	 	BY	 	 	 	 	 	 	 	 	 	 
	 

	 	 
	 	 

AUTHORIZED SIGNATURE
	 	 	 	BY
	 	 
 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	BY	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 	 	 

 

 

EXHIBIT 1

TO GLOBAL WARRANT

OILSANDS QUEST INC.

CUSIP/ISIN: 678046111

ADJUSTMENTS

	 	 	 	 	 	 	 	 	 
	Date	 	Amount of Increase	 	Amount of Decrease	 	New Amount	 	Authorization
	 
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 

Authorization:

COMPUTERSHARE TRUST COMPANY OF CANADA

	 	 	 	 	 	 	 
	 

	 	By:
	 	 
 

	 	 

 

 

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.

TRANSFER OF WARRANTS

	 	 	 	 	 	 	 	 	 
	FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to

	 	 	 	 	,	 	 	 
	 

	 	 
	 
	 
	 	 	 	 
	 

	 	(Name in Full)
	 	 	 	 	 	(Address)

	 	 	 	 	 
	 

	 	Warrants of Oilsands Quest Inc. registered in the name of the undersigned on the records of Computershare Trust 	 	 
	 

(Number of Warrants)
	 	 
	 	 

Company of Canada represented by the within Warrant Certificate and irrevocably appoints                                          the attorney of the undersigned to transfer the said securities on the books or register
of transfer with full power of substitution.

DATED the            day of                     , 20     .

	 	 	 
	 

	 	 
	Signature Guaranteed

	 	Signature of Warrantholder or Authorized Representative
	 
	 	 
	 

	 	 
	 

	 	Name of Warrantholder
	 
	 	 
	 

	 	 
	 

	 	Name and Title of Authorized Representative

Instructions:

	1.	 	Signature of the Warrantholder must be the signature of the person appearing on the face of
this Warrant Certificate.
	 
	2.	 	If the Transfer Form is signed by a trustee, executor, administrator, curator, guardian,
attorney, director, or officer of a corporation or any person acting in a fiduciary or
representative capacity, the certificate must be accompanied by evidence of authority to sign
satisfactory to the Trustee and the Corporation.
	 
	3.	 	The signature on the Transfer Form must be guaranteed by a Canadian Schedule 1 chartered
bank, a major trust company in Canada, or a member of the Securities Transfer Association
Medallion Program (STAMP), a member of the Stock Exchange Medallion Program (SEMP) or a member
of the New York Stock Exchange Inc. Medallion Signature Program (MSP). The guarantor must
affix a stamp bearing the actual words “Signature Guaranteed”.
	 
	4.	 	The Warrants shall only be transferable in accordance with applicable laws.

 

 

EXERCISE FORM

	 	 	 
	TO:

	 	OILSANDS QUEST INC.
	 

	 	COMPUTERSHARE TRUST COMPANY OF CANADA

The undersigned hereby irrevocably exercises the right to acquire                      Common Shares of
OILSANDS QUEST INC. (the “Corporation”), (or such number of other securities or property to which
such Warrants entitle the undersigned in lieu thereof or in addition thereto under the provisions
of the Indenture referred to in the within Warrant Certificate) in accordance with and subject to
the provisions of the Indenture and encloses herewith a certified cheque or bank draft payable to
the order of OILSANDS QUEST INC. in the amount of $USD                     representing the aggregate
purchase price for the securities so subscribed for.

The Common Shares (or other securities or property) are to be issued as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	 	 	Address in full:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	(print clearly)	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	Social Insurance Number:	 	 	 	 	 	Number of Common Shares:	 	 
	 

	 	 	 	 
	 	 	 	 	 	 	 	 

Note: If further nominees intended, please attach (and initial) schedule giving these particulars.

DATED this            day of                     , 20     .

	 	 	 
	 

	 	 
	Signature Guaranteed

	 	Signature of Warrantholder or Authorized Representative
	 
	 	 
	 

	 	 
	 

	 	Print full name and title if Authorized Representative
	 
	 	 
	 

	 	 
	 

	 	Print full address
	 
	 	 
	 

	 	 

	o	 	Please check if the Common Share certificates are to be picked up at the office of the
Trustee where the Warrant Certificate is surrendered or, failing this, Common Share
certificates will be mailed to the address set forth above, or if no address is specified, to
the address as set forth in the records of the Corporation.

Instructions:

	1.	 	The registered holder may exercise its right to receive Common Shares by completing this form
and surrendering this form and the Warrant Certificate representing the Warrants being
exercised, together with payment to COMPUTERSHARE TRUST COMPANY OF CANADA at its principal
office at Vancouver, Calgary or Toronto or if by mail to the attention of the Trustee at 600,
530 — 8 Avenue SW, Calgary, AB, T2P 3S8, Attention: Manager, Corporate Trusts. Certificates
for Common Shares will be delivered or mailed as soon as practicable after the exercise of the
Warrants. The rights of the registered holder hereof cease if the Warrants are not exercised
by 4:30 p.m. (Calgary time) on the Expiry Date.
	 
	2.	 	The signature on the Exercise Form must be guaranteed by a Canadian Schedule 1 chartered
bank, a major trust company in Canada, or a member of the Securities Transfer Association
Medallion Program (STAMP), a member of the Stock Exchange Medallion Program (SEMP) or a member
of the New York Stock Exchange Inc. Medallion Signature Program (MSP). The guarantor must
affix a stamp bearing the actual words “Signature Guaranteed”.
	 
	3.	 	If the Exercise Form is signed by a trustee, executor, administrator, curator, guardian,
attorney, director, or officer of a corporation or any person acting in a fiduciary or
representative capacity, the certificate must be accompanied by evidence of authority to sign
satisfactory to the Trustee and the Corporation.

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