Document:

KWESST Micro Systems Inc.: Exhibit 10.6 - Filed by newsfilecorp.com

    

    
        	

    

    FORM 5D

ESCROW AGREEMENT
VALUE SECURITY

    THIS AGREEMENT is made as of the 17 day of September 2020

    AMONG:

    KWESST Micro Systems Inc., a corporation with an office in the City of Ottawa, Ontario

    (the "Issuer")

    AND:

    TSX Trust Company,

    (the "Escrow Agent")

    AND:

    Mary Lou Parise, an individual resident in the city of Vancouver, BC;

    Fiducie Familiale du Clan Brady, a trust created under the laws of the Province of Quebec; and

    10040932 Canada Inc., a corporation with an office in the City of Ottawa, Ontario

    EACH OF THE UNDERSIGNED SECURITYHOLDERS OF THE ISSUER (a "Securityholder" or "you")

    (collectively, the "Parties")

    This Agreement is being entered into by the Parties under Exchange Policy 5.4 - Escrow, Vendor Consideration and Resale Restrictions (the Policy) in connection with a Qualifying Transaction.  The Issuer is a Tier 2 Issuer as described in Policy 2.1 - Initial Listing Requirements.

    For good and valuable consideration, the Parties agree as follows:

    
        	FORM 5D	ESCROW AGREEMENTS	Page 1
	
                    (as at June 14, 2010)

                	 	 

    

    

    PART 1 ESCROW

    1.1 Appointment of Escrow Agent

    The Issuer and the Securityholders appoint the Escrow Agent to act as escrow agent under this Agreement.  The Escrow Agent accepts the appointment.

    1.2 Deposit of Escrow Securities in Escrow

    (1) You are depositing the securities listed opposite your name in Schedule "A" with the Escrow Agent to be held in escrow under this Agreement.  You will immediately deliver or cause to be delivered to the Escrow Agent any share certificates or other evidence of these securities which you have or which you may later receive.

    (2) If you receive any other securities:

    (a) as a dividend or other distribution on escrow securities;

    (b) on the exercise of a right of purchase, conversion or exchange attaching to escrow securities, including securities received on conversion of special warrants;

    (c) on a subdivision, or compulsory or automatic conversion or exchange of escrow securities; or

    (d) from a successor issuer in a business combination, if Part 6 of this Agreement applies,

    you will deposit them in escrow with the Escrow Agent.  You will deliver or cause to be delivered to the Escrow Agent any share certificates or other evidence of those additional escrow securities.  When this Agreement refers to escrow securities, it includes additional escrow securities.

    (3) You will immediately deliver to the Escrow Agent any replacement share certificates or other evidence of additional escrow securities issued to you.

    1.3 Direction to Escrow Agent

    The Issuer and the Securityholders direct the Escrow Agent to hold the escrow securities in escrow until they are released from escrow under this Agreement.

    PART 2 RELEASE OF ESCROW SECURITIES

    2.1 Release Provisions

    The provisions of Schedules B (1) and B (2) are incorporated into and form part of this Agreement.

    
        	FORM 5D	ESCROW AGREEMENTS	Page 2
	
                    (as at June 14, 2010)

                	 	 

    

    

    2.2 Additional escrow securities

    If you acquire additional escrow securities in connection with the transaction to which this agreement relates, those securities will be added to the securities already in escrow, to increase the number of remaining escrow securities.  After that, all of the escrow securities will be released in accordance with the applicable release schedule.

    2.3 Additional Requirements for Tier 2 Surplus Escrow Securities

    Where securities are subject to a Tier 2 Surplus Security Escrow Agreement [Schedule B(4)], the following additional conditions apply:

    (1) The escrow securities will be cancelled if the asset, property, business or interest, therein in consideration of which the securities were issued, is lost, or abandoned, or the operations or development of such asset, property or business is discontinued.

    (2) The Escrow Agent will not release escrow securities from escrow under schedule B(4) unless the Escrow Agent has received, within the 15 days prior to the release date, a certificate from the Issuer that:

    (a) is signed by two directors or officers of the Issuer;

    (b) is dated not more than 30 days prior to the release date;

    (c) states that the assets for which the escrow securities were issued (the "Assets") were included as assets on the balance sheet of the Issuer in the most recent financial statements filed by the Issuer with the Exchange; and

    (d) states that the Issuer has no reasonable knowledge that the Assets will not be included as assets on the balance sheet of the Issuer in the next financial statements to be filed by the Issuer with the Exchange.

    (3) If, at any time during the term of this Agreement, the Escrow Agent is prohibited from releasing escrow securities on a release date specified schedule 13(4) as a result of section 2.3(2) above, then the Escrow Agent will not release any further escrow securities from escrow without the written consent of the Exchange.

    (4) If as a result of this section 2.3, the Escrow Agent does not release escrow securities from escrow for a period of five years, then:

    (a) the Escrow Agent will deliver a notice to the Issuer, and will include with the notice any certificates that the Escrow Agent holds which evidence the escrow securities; and

    (b) the Issuer and the Escrow Agent will take such action as is necessary to cancel the escrow securities.

    
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                    (as at June 14, 2010)

                	 	 

    

    

    (5) For the purposes of cancellation of escrow securities under this section, each Securityholder irrevocably appoints the Escrow Agent as his or her attorney, with authority to appoint substitute attorneys, as necessary.

    2.4 Delivery of Share Certificates for Escrow Securities

    The Escrow Agent will send to each Securityholder any share certificates or other evidence of that Securityholder's escrow securities in the possession of the Escrow Agent released from escrow as soon as reasonably practicable after the release.

    2.5 Replacement Certificates

    If, on the date a Securityholder's escrow securities are to be released, the Escrow Agent holds a share certificate or other evidence representing more escrow securities than are to be released, the Escrow Agent will deliver the share certificate or other evidence to the Issuer or its transfer agent and request replacement share certificates or other evidence.  The Issuer will cause replacement share certificates or other evidence to be prepared and delivered to the Escrow Agent.  After the Escrow Agent receives the replacement share certificates or other evidence, the Escrow Agent will send to the Securityholder or at the Securityholder's direction, the replacement share certificate or other evidence of the escrow securities released.  The Escrow Agent and Issuer will act as soon as reasonably practicable.

    2.6 Release upon Death

    (1) If a Securityholder dies, the Securityholder's escrow securities will be released from escrow.  The Escrow Agent will deliver any share certificates or other evidence of the escrow securities in the possession of the Escrow Agent to the Securityholder's legal representative provided that:

    (a) the legal representative of the deceased Securityholder provides written notice to the Exchange of the intent to release the escrow securities as at a specified date which is at least 10 business days and not more than 30 business days prior to the proposed release; and

    (b) the Exchange does not provide notice of its objection to the Escrow Agent prior to 10:00 a.m.  (Vancouver time) or 11:00 a.m.  (Calgary time) on such specified date.

    (2) Prior to delivery the Escrow Agent must receive:

    (a) a certified copy of the death certificate; and

    (b) any evidence of the legal representative's status that the Escrow Agent may reasonably require.

    
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                    (as at June 14, 2010)

                	 	 

    

    

    2.7 Exchange Discretion to Terminate

    If the Escrow Agent receives a request from the Exchange to halt or terminate the release of escrow securities from escrow, then the Escrow Agent will comply with that request, and will not release any escrow securities from escrow until it receives the written consent of the Exchange.

    2.8 Discretionary Applications

    The Exchange may consent to the release from escrow of escrow securities in other circumstances and on terms and on conditions it deems appropriate.  Securities may be released from escrow provided that the Escrow Agent receives written notice from the Exchange.

    PART 3 EARLY RELEASE ON CHANGE OF ISSUER STATUS

    3.1 Early Release - Graduation to Tier I

    (1) When a Tier 2 Issuer becomes a Tier 1 Issuer, the release schedule for its escrow securities changes.

    (2) If the Issuer reasonably believes that it meets the Initial Listing Requirements of a Tier 1 Issuer as described in Policy 2.1 - Initial Listing Requirements, the Issuer may make application to the Exchange to be listed as a Tier 1 Issuer.  The Issuer must also concurrently provide notice to the Escrow Agent that it is making such an application.

    (3) If the graduation to Tier 1 is accepted by the Exchange, the Exchange will issue an Exchange Bulletin confirming final acceptance for listing of the Issuer on Tier I.  Upon issuance of this Bulletin the Issuer must immediately:

    (a) issue a news release:

    (i) disclosing that it has been accepted for graduation to Tier 1; and

    (ii) disclosing the number of escrow securities to be released and the dates of release under the new schedule; and

    (b) provide the news release, together with a copy of the Exchange Bulletin, to the Escrow Agent.

    (4) Upon completion of the steps in section 3.1(3) above, the Issuer's release schedule will be replaced as follows:

    	
                Applicable Schedule Pre-Graduation

            	
                Applicable Schedule Post-Graduation

            
	
                Schedule B (2)

            	
                Schedule B (1)

            

    (5) Within 10 days of the Exchange Bulletin confirming the Issuer's listing on Tier 1, the Escrow Agent must release any escrow securities from escrow securities which under the new release schedule would have been releasable at a date prior to the Exchange Bulletin.

    
        	FORM 5D	ESCROW AGREEMENTS	Page 5
	
                    (as at June 14, 2010)

                	 	 

    

    

    PART 4 DEALING WITH ESCROW SECURITIES

    4.1 Restriction on Transfer, etc.

    Unless it is expressly permitted in this Agreement, you will not sell, transfer, assign, mortgage, enter into a derivative transaction concerning, or otherwise deal in any way with your escrow securities or any related share certificates or other evidence of the escrow securities.  If a Securityholder is a private company controlled by one or more Principals of the Issuer, the Securityholder may not participate in a transaction that results in a change of its control or a change in the economic exposure of the Principals to the risks of holding escrow securities.

    4.2 Pledge, Mortgage or Charge as Collateral for a Loan

    Subject to Exchange acceptance, you may pledge, mortgage or charge your escrow securities to a financial institution as collateral for a loan, provided that no escrow securities or any share certificates or other evidence of escrow securities will be transferred or delivered by the Escrow Agent to the financial institution for this purpose.  The loan agreement must provide that the escrow securities will remain in escrow if the lender realizes on the escrow securities to satisfy the loan.

    4.3 Voting of Escrow Securities

    Although you may exercise voting rights attached to your escrow securities, you may not, while your securities are held in escrow, exercise voting rights attached to any securities (whether in escrow or not) in support of one or more arrangements that would result in the repayment of capital being made on the escrow securities prior to a winding up of the Issuer.

    4.4 Dividends on Escrow Securities

    You may receive a dividend or other distribution on your escrow securities and elect the manner of payment from the standard options offered by the Issuer.  If the Escrow Agent receives a dividend or other distribution on your escrow securities, other than additional escrow securities, the Escrow Agent will pay the dividend or other distribution to you on receipt.

    4.5 Exercise of Other Rights Attaching to Escrow Securities

    You may exercise your rights to exchange or convert your escrow securities in accordance with this agreement.

    PART 5 PERMITTED TRANSFERS WITHIN ESCROW

    5.1 Transfer to Directors and Senior Officers

    (1) You may transfer escrow securities within escrow to existing or, upon their appointment, incoming directors or senior officers of the Issuer or any of its material operating subsidiaries, if the Issuer's board of directors has approved the transfer and provided that:

    
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                    (as at June 14, 2010)

                	 	 

    

    

    (a) you make application to transfer under the Policy at least 10 business days and not more than 30 business days prior to the date of the proposed transfer; and

    (b) the Exchange does not provide notice of its objection to the Escrow Agent prior to 10:00 a.m.  (Vancouver time) or 11:00 a.m. (Calgary time) on such specified date.

    (2) Prior to the transfer the Escrow Agent must receive:

    (a) a certified copy of the resolution of the board of directors of the Issuer approving the transfer;

    (b) a certificate signed by a director or officer of the Issuer authorized to sign, stating that the transfer is to a director or senior officer of the Issuer or a material operating subsidiary and that any required acceptance from the Exchange the Issuer is listed on has been received;

    (c) an acknowledgment in the form of Form 5E signed by the transferee; and

    (d) a transfer power of attorney completed and executed by the transferor in accordance with the requirements of the Issuer's transfer agent.

    5.2 Transfer to Other Principals

    (1) You may transfer escrow securities within escrow:

    (a) to a person or company that before the proposed transfer holds more than 20% of the voting rights attached to the Issuer's outstanding securities; or

    (b) to a person or company that after the proposed transfer

    (i) will hold more than 10% of the voting rights attached to the Issuer's outstanding securities, and

    (ii) has the right to elect or appoint one or more directors or senior officers of the Issuer or any of its material operating subsidiaries,

    provided that:

    (c) you make an application to transfer under the Policy at least 10 business days and not more than 30 business days prior to the date of the proposed transfer; and

    (d) the Exchange does not provide notice of its objection to the Escrow Agent prior to 10:00 a.m.  (Vancouver time) or 11:00 a.m.  (Calgary time) on such specified date.

    
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                    (as at June 14, 2010)

                	 	 

    

    

    (2) Prior to the transfer the Escrow Agent must receive:

    (a) a certificate signed by a director or officer of the Issuer authorized to sign, stating that:

    (i) the transfer is to a person or company that the officer believes, after reasonable investigation, holds more than 20% of the voting rights attached to the Issuer's outstanding securities before the proposed transfer; or

    (ii) the transfer is to a person or company that:

    (A) the officer believes, after reasonable investigation, will hold more than 10% of the voting rights attached to the Issuer's outstanding securities; and

    (B) has the right to elect or appoint one or more directors or senior officers of the Issuer or any of its material operating subsidiaries

    after the proposed transfer; and

    (iii) any required approval from the Exchange or any other exchange on which the Issuer is listed has been received;

    (b) an acknowledgment in the form of Form 5E signed by the transferee; and

    (c) a transfer power of attorney completed and executed by the transferor in accordance with the requirements of the Issuer's transfer agent.

    5.3 Transfer upon Bankruptcy

    (1) You may transfer escrow securities within escrow to a trustee in bankruptcy or another person or company entitled to escrow securities on bankruptcy provided that:

    (a) you make application to transfer under the Policy at least 10 business days and not more than 30 business days prior to the date of the proposed transfer; and

    (b) the Exchange does not provide notice of its objection to the Escrow Agent prior to 10:00 a.m.  (Vancouver time) or 11:00 a.m.  (Calgary time) on such specified date.

    (2) Prior to the transfer, the Escrow Agent must receive:

    (a) a certified copy of either

    (i) the assignment in bankruptcy filed with the Superintendent of Bankruptcy, or

    (ii) the receiving order adjudging the Securityholder bankrupt;

    (b) a certified copy of a certificate of appointment of the trustee in bankruptcy;

    
        	FORM 5D	ESCROW AGREEMENTS	Page 8
	
                    (as at June 14, 2010)

                	 	 

    

    

    (c) a transfer power of attorney, duly completed and executed by the transferor in accordance with the requirements of the Issuer's transfer agent; and

    (d) an acknowledgment in the form of Form 5E signed by

    (i) the trustee in bankruptcy or

    (ii) on direction from the trustee, with evidence of that direction attached to the acknowledgement form, another person or company legally entitled to the escrow securities.

    5.4 Transfer Upon Realization of Pledged, Mortgaged or Charged Escrow Securities

    (1) You may transfer escrow securities you have pledged, mortgaged or charged under section 4.2 to a financial institution as collateral for a loan within escrow to the lender on realization provided that:

    (a) you make application to transfer under the Policy at least 10 business days and not more than 30 business days prior to the date of the proposed transfer; and

    (b) the Exchange does not provide notice of its objection to the Escrow Agent prior to 10:00 a.m. (Vancouver time) or 11:00 a.m. (Calgary time) on such specified date.

    (2) Prior to the transfer the Escrow Agent must receive:

    (a) a statutory declaration of an officer of the financial institution that the financial institution is legally entitled to the escrow securities;

    (b) evidence that the Exchange has accepted the pledge, mortgage or charge of escrow securities to the financial institution;

    (c) a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer's transfer agent; and

    (d) an acknowledgement in the form of Form SE signed by the financial institution.

    5.5 Transfer to Certain Plans and Funds

    (1) You may transfer escrow securities within escrow to or between a registered retirement savings plan (RRSP), registered retirement income fund (RRIF) or other similar registered plan or fund with a trustee, where the beneficiaries of the plan or fund are limited to you and your spouse, children and parents provided that:

    (a) you make application to transfer under the Policy at least 10 business days and not more than 30 business days prior to the date of the proposed transfer; and

    (b) the Exchange does not provide notice of its objection to the Escrow Agent prior to 10:00 a.m. (Vancouver time) or 11:00 a.m. (Calgary time) on such specified date.

    
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                    (as at June 14, 2010)

                	 	 

    

    

    (2) Prior to the transfer the Escrow Agent must receive:

    (a) evidence from the trustee of the transferee plan or fund, or the trustee's agent, stating that, to the best of the trustee's knowledge, the annuitant of the RRSP or RRIF or the beneficiaries of the other registered plan or fund do not include any person or company other than you and your spouse, children and parents;

    (b) a transfer power of attorney, executed by the transferor in accordance with the requirements of the Issuer's transfer agent; and

    (c) an acknowledgement in the form of Form 5E signed by the trustee of the plan or fund.

    5.6 Effect of Transfer Within Escrow

    After the transfer of escrow securities within escrow, the escrow securities will remain in escrow and released from escrow under this Agreement as if no transfer has occurred, on the same terms that applied before the transfer.  The Escrow Agent will not deliver any share certificates or other evidence of the escrow securities to transferees under this Part 5.

    5.7 Discretionary Applications

    The Exchange may consent to the transfer within escrow of escrow securities in other circumstances and on such terms and conditions as it deems appropriate.

    PART 6 BUSINESS COMBINATIONS

    6.1 Business Combinations

    This Part applies to the following:

    (a) a formal take-over bid for all outstanding securities of the Issuer or which, if successful, would result in a change of control of the Issuer

    (b) a formal issuer bid for all outstanding equity securities of the Issuer

    (c) a statutory arrangement

    (d) an amalgamation

    (e) a merger

    (f) a reorganization that has an effect similar to an amalgamation or merger

    6.2 Delivery to Escrow Agent

    (1) You may tender your escrow securities to a person or company in a business combination.  At least five business days prior to the date the escrow securities must be tendered under the business combination, you must deliver to the Escrow Agent:

    
        	FORM 5D	ESCROW AGREEMENTS	Page 10
	
                    (as at June 14, 2010)

                	 	 

    

    

    (a) a written direction signed by you that directs the Escrow Agent to deliver to the depositary under the business combination any share certificates or other evidence of the escrow securities and a completed and executed cover letter or similar document and, where required, transfer power of attorney completed and executed for transfer in accordance with the requirements of the Issuer's depository, and any other documentation specified or provided by you and required to be delivered to the depositary under the business combination;

    (b) written consent of the Exchange; and

    (c) any other information concerning the business combination as the Escrow Agent may reasonably require.

    6.3 Delivery to Depositary

    (1) As soon as reasonably practicable, and in any event no later than three business days after the Escrow Agent receives the documents and information required under section 6.2, the Escrow Agent will deliver to the depositary, in accordance with the direction, any share certificates or other evidence of the escrow securities, and a letter addressed to the depositary that

    (a) identifies the escrow securities that are being tendered;

    (b) states that the escrow securities are held in escrow;

    (c) states that the escrow securities are delivered only for the purposes of the business combination and that they will be released from escrow only after the Escrow Agent receives the information described in section 6.4;

    (d) if any share certificates or other evidence of the escrow securities have been delivered to the depositary, requires the depositary to return to the Escrow Agent, as soon as practicable, the share certificates or other evidence of escrow securities that are not released from escrow into the business combination; and

    (e) where applicable, requires the depositary to deliver or cause to be delivered to the Escrow Agent, as soon as practicable, share certificates or other evidence of additional escrow securities that you acquire under the business combination.

    6.4 Release of Escrow Securities to Depositary

    (1) The Escrow Agent will release from escrow the tendered escrow securities provided that:

    (a) you or the Issuer make application to release the tendered securities under the Policy on a date at least 10 business days and not more than 30 business days prior to the date of the proposed release date; and

    (b) the Exchange does not provide notice of its objection to the Escrow Agent prior to 10:00 a.m.  (Vancouver time) or 11:00 a.m.  (Calgary time) on such specified date;

    
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                    (as at June 14, 2010)

                	 	 

    

    

    (c) the Escrow Agent receives a declaration signed by the depositary or, if the direction identifies the depositary as acting on behalf of another person or company in respect of the business combination, by that other person or company, that

    (i) the terms and conditions of the business combination have been met or waived; and

    (ii) the escrow securities have either been taken up and paid for or are subject to an unconditional obligation to be taken up and paid for under the business combination.

    6.5 Escrow of New Securities

    (1) If you receive securities of another issuer in exchange for your escrow securities, the new securities will be subject to escrow in substitution for the tendered escrow securities, unless, immediately after completion of the business combination,

    (a) the successor issuer is an exempt issuer as defined in the National Policy;

    (b) the escrow holder was subject to a Value Security Escrow Agreement and is not a Principal of the successor issuer; and

    (c) the escrow holder holds less than 1% of the voting rights attached to the successor issuer's outstanding securities.  (In calculating this percentage, include securities that may be issued to the escrow holder under outstanding convertible securities in both the escrow holder's securities and the total securities outstanding.)

    6.6 Release from Escrow of New Securities

    (1) The Escrow Agent will send to a Securityholder share certificates or other evidence of the Securityholder's new securities as soon as reasonably practicable after the Escrow Agent receives:

    (a) a certificate from the successor issuer signed by a director or officer of the successor issuer authorized to sign

    (i) stating that it is a successor issuer to the Issuer as a result of a business combination;

    (ii) containing a list of the securityholders whose new securities are subject to escrow under section 6.5;

    (iii) containing a list of the securityholders whose new securities are not subject to escrow under section 6.5;

    (b) written confirmation from the Exchange that it has accepted the list of Securityholders whose new securities are not subject to escrow under section 6.5.

    
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                    (as at June 14, 2010)

                	 	 

    

    

    (2) The escrow securities of the Securityholders, whose securities are not subject to escrow under section 6.5, will be released, and the Escrow Agent will send any share certificates or other evidence of the escrow securities in the possession of the Escrow Agent in accordance with section 2.4.

    (3) If your new securities are subject to escrow, unless subsection (4) applies, the Escrow Agent will hold your new securities in escrow on the same terms and conditions, including release dates, as applied to the escrow securities that you exchanged.

    (4) If the Issuer is a Tier 2 Issuer and the successor issuer is a Tier 1 Issuer, the release provisions in section 3.1(4) relating to graduation will apply.

    PART 7 RESIGNATION OF ESCROW AGENT

    7.1 Resignation of Escrow Agent

    (1) If the Escrow Agent wishes to resign as escrow agent, the Escrow Agent will give written notice to the Issuer and the Exchange.

    (2) If the Issuer wishes to terminate the Escrow Agent as escrow agent, the Issuer will give written notice to the Escrow Agent and the Exchange.

    (3) If the Escrow Agent resigns or is terminated, the Issuer will be responsible for ensuring that the Escrow Agent is replaced not later than the resignation or termination date by another escrow agent that is acceptable to the Exchange and that has accepted such appointment, which appointment will be binding on the Issuer and the Securityholders.

    (4) The resignation or termination of the Escrow Agent will be effective, and the Escrow Agent will cease to be bound by this Agreement, on the date that is 60 days after the date of receipt of the notices referred to above by the Escrow Agent or Issuer, as applicable, or on such other date as the Escrow Agent and the Issuer may agree upon (the "resignation or termination date"), provided that the resignation or termination date will not be less than 10 business days before a release date.

    (5) If the Issuer has not appointed a successor escrow agent within 60 days of the resignation or termination date, the Escrow Agent will apply, at the Issuer's expense, to a court of competent jurisdiction for the appointment of a successor escrow agent, and the duties and responsibilities of the Escrow Agent will cease immediately upon such appointment.

    (6) On any new appointment under this section, the successor Escrow Agent will be vested with the same powers, rights, duties and obligations as if it had been originally named herein as Escrow Agent, without any further assurance, conveyance, act or deed.  The predecessor Escrow Agent, upon receipt of payment for any outstanding account for its services and expenses then unpaid, will transfer, deliver and pay over to the successor Escrow Agent, who will be entitled to receive, all securities, records or other property on deposit with the predecessor Escrow Agent in relation to this Agreement and the predecessor Escrow Agent will thereupon be discharged as Escrow Agent.

    
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                    (as at June 14, 2010)

                	 	 

    

    

    (7) If any changes are made to Part 8 of this Agreement as a result of the appointment of the successor Escrow Agent, those changes must not be inconsistent with the Policy and the terms of this Agreement and the Issuer to this Agreement will fie a copy of the new Agreement with the Exchange.

    PART 8 OTHER CONTRACTUAL ARRANGEMENTS

    8.1 Escrow Agent Not a Trustee

    The Escrow Agent accepts duties and responsibilities under this Agreement, and the escrow securities and any share certificates or other evidence of these securities, solely as a custodian, bailee and agent.  No trust is intended to be, or is or will be, created hereby and the Escrow Agent shall owe no duties hereunder as a trustee.

    8.2 Escrow Agent Not Responsible for Genuineness

    The Escrow Agent will not be responsible or liable in any manner whatsoever for the sufficiency, correctness, genuineness or validity of any escrow security deposited with it.

    8.3 Escrow Agent Not Responsible for Furnished Information

    The Escrow Agent will have no responsibility for seeking, obtaining, compiling, preparing or determining the accuracy of any information or document, including the representative capacity in which a party purports to act, that the Escrow Agent receives as a condition to a release from escrow or a transfer of escrow securities within escrow under this Agreement.

    8.4 Escrow Agent Not Responsible after Release

    The Escrow Agent will have no responsibility for escrow securities that it has released to a Securityholder or at a Securityholder's direction according to this Agreement.

    8.5 Indemnification of Escrow Agent

    The Issuer and each Securityholder hereby jointly and severally agree to indemnify and hold harmless the Escrow Agent, its affiliates, and their current and former directors, officers, employees and agents from and against any and all claims, demands, losses, penalties, costs, expenses, fees and liabilities, including, without limitation, legal fees and expenses, directly or indirectly arising out of, in connection with, or in respect of, this Agreement, except where same result directly and principally from gross negligence, willful misconduct or bad faith on the part of the Escrow Agent.  This indemnity survives the release of the escrow securities, the resignation or termination of the Escrow Agent and the termination of this Agreement.

    8.6 Additional Provisions

    (1) The Escrow Agent will be protected in acting and relying reasonably upon any notice, direction, instruction, order, certificate, confirmation, request, waiver, consent, receipt, statutory declaration or other paper or document (collectively referred to as "Documents") furnished to it and purportedly signed by any officer or person required to or entitled to execute and deliver to the Escrow Agent any such Document in connection with this Agreement, not only as to its due execution and the validity and effectiveness of its provisions, but also as to the truth or accuracy of any information therein contained, which it in good faith believes to be genuine.

    
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                    (as at June 14, 2010)

                	 	 

    

    

    (2) The Escrow Agent will not be bound by any notice of a claim or demand with respect thereto, or any waiver, modification, amendment, termination or rescission of this Agreement unless received by it in writing, and signed by the other Parties and approved by the Exchange, and, if the duties or indemnification of the Escrow Agent in this Agreement are affected, unless it has given its prior written consent.

    (3) The Escrow Agent may consult with or retain such legal counsel and advisors as it may reasonably require for the purpose of discharging its duties or determining its rights under this Agreement and may rely and act upon the advice of such counsel or advisor.  The Escrow Agent will give written notice to the Issuer as soon as practicable that it has retained legal counsel or other advisors.  The Issuer will pay or reimburse the Escrow Agent for any reasonable fees, expenses and disbursements of such counsel or advisors.

    (4) In the event of any disagreement arising under the terms of this Agreement, the Escrow Agent will be entitled, at its option, to refuse to comply with any and all demands whatsoever until the dispute is settled either by a written agreement among the Parties or by a court of competent jurisdiction.

    (5) The Escrow Agent will have no duties or responsibilities except as expressly provided in this Agreement and will have no duty or responsibility under the Policy or arising under any other agreement, including any agreement referred to in this Agreement, to which the Escrow Agent is not a party.

    (6) The Escrow Agent will have the right not to act and will not be liable for refusing to act unless it has received clear and reasonable documentation that complies with the terms of this Agreement.  Such documentation must not require the exercise of any discretion or independent judgment.

    (7) The Escrow Agent is authorized to cancel any share certificate delivered to it and hold such Securityholder's escrow securities in electronic or uncertificated form only, pending release of such securities from escrow.

    (8) The Escrow Agent will have no responsibility with respect to any escrow securities in respect of which no share certificate or other evidence or electronic or uncertificated form of these securities has been delivered to it, or otherwise received by it.

    8.7 Limitation of Liability of Escrow Agent

    The Escrow Agent will not be liable to any of the Parties hereunder for any action taken or omitted to be taken by it under or in connection with this Agreement, except for losses directly, principally and immediately caused by its bad faith, willful misconduct or gross negligence.  Under no circumstances will the Escrow Agent be liable for any special, indirect, incidental, consequential, exemplary, aggravated or punitive losses or damages hereunder, including any loss of profits, whether foreseeable or unforeseeable.  Notwithstanding the foregoing or any other provision of this Agreement, in no event will the collective liability of the Escrow Agent under or in connection with this Agreement to any one or more Parties, except for losses directly caused by its bad faith or willful misconduct, exceed the amount of its annual fees under this Agreement or the amount of three thousand dollars ($3,000.00), whichever amount shall be greater.

    
        	FORM 5D	ESCROW AGREEMENTS	Page 15
	
                    (as at June 14, 2010)

                	 	 

    

    

    8.8 Remuneration of Escrow Agent

    The Issuer will pay the Escrow Agent reasonable remuneration for its services under this Agreement, which fees are subject to revision from time to time on 30 days' written notice.  The Issuer will reimburse the Escrow Agent for its expenses and disbursements.  Any amount due under this section and unpaid 30 days after request for such payment, will bear interest from the expiration of such period at a rate per annum equal to the then current rate charged by the Escrow Agent, payable on demand.

    In the event the Issuer or the Securityholders fail to pay the Escrow Agent any amounts owing to the Escrow Agent hereunder, the Escrow Agent shall have the right not to act (including the right not to release any additional securities from escrow) and will not be liable for refusing to act until it has been fully paid all amounts owing to it hereunder.  Further, in the event the Issuer fails to pay the Escrow Agent its reasonable remuneration for its services hereunder, the Escrow Agent shall be entitled to charge the Securityholders for any further release of escrowed securities and shall have the right not to act (including the right not to release any additional securities from escrow) until the Securityholders have paid such amounts to the Escrow Agent.

    In the event the Issuer or the Securityholders have failed to pay the amounts owing the Escrow Agent hereunder, the Escrow Agent shall not be liable for any loss caused by a delay in the release of the escrowed securities.

    8.9 Notice to Escrow Agent

    The Issuer shall forthwith provide a copy of the Exchange Bulletin, confirmation of listing and posting for trading of the subject escrowed shares or such other relevant document to the Escrow Agent as it shall require in order to make the required releases.  No duty shall rest with the Escrow Agent to obtain this information independently nor shall it be held liable for any loss, claim, suit or action, howsoever caused by any delay in providing this information to it.

    PART 9 INDEMNIFICATION OF THE EXCHANGE

    9.1 Indemnification

    (1) The Issuer and each Securityholder jointly and severally:

    (a) release, indemnify and save harmless the Exchange from all costs (including legal cost, expenses and disbursements), charges, claims, demands, damages, liabilities, losses and expenses incurred by the Exchange;

    (b) agree not to make or bring a claim or demand, or commence any action, against the Exchange; and

    
        	FORM 5D	ESCROW AGREEMENTS	Page 16
	
                    (as at June 14, 2010)

                	 	 

    

    

    (c) agree to indemnify and save harmless the Exchange from all costs (including legal costs) and damages that the Exchange incurs or is required by law to pay as a result of any person's claim, demand or action,

    arising from any and every act or omission committed or omitted by the Exchange, in connection with this Agreement, even if said act or omission was negligent, or constituted a breach of the terms of this Agreement.

    (2) This indemnity survives the release of the escrow securities and the termination of this Agreement.

    PART 10 NOTICES

    10.1 Notice to Escrow Agent

    Documents will be considered to have been delivered to the Escrow Agent on the next business day following the date of transmission, if delivered by fax, the date of delivery, if delivered by hand during normal business hours or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the following:

    Name:  TSX Trust Company
Attention:  VP Client Management
Address:  301 - 100 Adelaide Street West, Toronto, ON, M5H 4H1
Telephone number:  1 (888) 873-8392
E-mail address:  TMXEClientManagement@tmx.com

    10.2 Notice to Issuer

    Documents will be considered to have been delivered to the Issuer on the next business day following the date of transmission, if delivered by fax, the date of delivery, if delivered by hand or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the following:

    KWESST Micro Systems Inc.
Unit 1, 155 Terence Matthews Crescent
Ottawa, Ontario
K2M 2A8

    Contact:                                                                        

    10.3 Deliveries to Securityholders

    Documents will be considered to have been delivered to a Securityholder on the date of delivery, if delivered by hand or by prepaid courier, or 5 business days after the date of mailing, if delivered by mail, to the address on the Issuer's share register.

    Any share certificates or other evidence of a Securityholder's escrow securities will be sent to the Securityholder's address on the Issuer's share register unless the Securityholder has advised the Escrow Agent in writing otherwise at least ten business days before the escrow securities are released from escrow.  The Issuer will provide the Escrow Agent with each Securityholder's address as listed on the Issuer's share register.

    
        	FORM 5D	ESCROW AGREEMENTS	Page 17
	
                    (as at June 14, 2010)

                	 	 

    

    

    10.4 Change of Address

    (1) The Escrow Agent may change its address for delivery by delivering notice of the change of address to the Issuer and to each Securityholder.

    (2) The Issuer may change its address for delivery by delivering notice of the change of address to the Escrow Agent and to each Securityholder.

    (3) A Securityholder may change that Securityholder's address for delivery by delivering notice of the change of address to the Issuer and to the Escrow Agent.

    10.5 Postal Interruption

    A party to this Agreement will not mail a Document if the party is aware of an actual or impending disruption of postal service.

    PART 11 GENERAL

    11.1 Interpretation - "holding securities"

    Unless the context otherwise requires, all capitalized terms that are not otherwise defined in this Agreement, shall have the meanings as defined in Policy 1.1 - Interpretation or in Policy 5.4 -Escrow, Vendor Consideration and Resale Restrictions.

    When this Agreement refers to securities that a Securityholder "holds", it means that the Securityholder has direct or indirect beneficial ownership of or control or direction over the securities.

    11.2 Enforcement by Third Parties

    The Issuer enters this Agreement both on its own behalf and as trustee for the Exchange and the Securityholders of the Issuer, and this Agreement may be enforced by either the Exchange, or the Securityholders of the Issuer, or both.

    11.3 Termination, Amendment, and Waiver of Agreement

    (1) Subject to subsection 11.3(3), this Agreement shall only terminate:

    (a) with respect to all the Parties:

    (i) as specifically provided in this Agreement;

    (ii) subject to subsection 11.3(2), upon the agreement of all Parties; or

    
        	FORM 5D	ESCROW AGREEMENTS	Page 18
	
                    (as at June 14, 2010)

                	 	 

    

    

    (iii) when the Securities of all Securityholders have been released from escrow pursuant to this Agreement; and

    (b) with respect to a Party:

    (i) as specifically provided in this Agreement; or

    (ii) if the Party is a Securityholder, when all of the Securityholder's Securities have been released from escrow pursuant to this Agreement.

    (2) An agreement to terminate this Agreement pursuant to section 11.3(1)(a)(ii) shall not be effective unless and until the agreement to terminate

    (a) is evidenced by a memorandum in writing signed by all Parties;

    (b) if the Issuer is listed on the Exchange, the termination of this Agreement has been consented to in writing by the Exchange; and

    (c) has been approved by a majority vote of securityholders of the Issuer excluding in each case, Securityholders.

    (3) Notwithstanding any other provision in this Agreement, the obligations set forth in section 9.1 shall survive the termination of this Agreement and the resignation or removal of the Escrow Agent.

    (4) No amendment or waiver of this Agreement or any part of this Agreement shall be effective unless the amendment or waiver:

    (a) is evidenced by a memorandum in writing signed by all Parties;

    (b) if the Issuer is listed on the Exchange, the amendment or waiver of this Agreement has been approved in writing by the Exchange; and

    (c) has been approved by a majority vote of securityholders of the Issuer excluding in each case, Securityholders.

    (5) No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision (whether similar or not), nor shall any waiver constitute a continuing waiver, unless expressly provided.

    11.4 Severance of Illegal Provision

    Any provision or part of a provision of this Agreement determined by a court of competent jurisdiction to be invalid, illegal or unenforceable shall be deemed stricken to the extent necessary to eliminate any invalidity, illegality or unenforceability, and the rest of the Agreement and all other provisions and parts thereof shall remain in full force and effect and be binding upon the parties hereto as though the said illegal and/or unenforceable provision or part thereof had never been included in this Agreement.

    
        	FORM 5D	ESCROW AGREEMENTS	Page 19
	
                    (as at June 14, 2010)

                	 	 

    

    

    11.5 Further Assurances

    The Parties will execute and deliver any further documents and perform any further acts reasonably requested by any of the Parties to this agreement which are necessary to carry out the intent of this Agreement.

    11.6 Time

    Time is of the essence of this Agreement.

    11.7 Consent of Exchange to Amendment

    The Exchange must approve any amendment to this Agreement if the Issuer is listed on the Exchange at the time of the proposed amendment.

    11.8 Additional Escrow Requirements

    A Canadian exchange may impose escrow terms or conditions in addition to those set out in this Agreement.

    11.9 Governing Laws

    The laws of Ontario and the applicable laws of Canada will govern this Agreement.

    11.10 Counterparts

    The Parties may execute this Agreement by fax and in counterparts, each of which will be considered an original and all of which will be one agreement.

    11.11 Singular and Plural

    Wherever a singular expression is used in this Agreement, that expression is considered as including the plural or the body corporate where required by the context.

    11.12 Language

    This Agreement has been drawn up in the English language at the request of all parties.  Cet acte a été rédigé en anglais à la demande de toutes les parties.

    11.13 Benefit and Binding Effect

    This Agreement will benefit and bind the Parties and their heirs, executors, administrators, successors and permitted assigns and all persons claiming through them as if they had been a Party to this Agreement.

    11.14 Entire Agreement

    This is the entire agreement among the Parties concerning the subject matter set out in this Agreement and supersedes any and all prior understandings and agreements.

    
        	FORM 5D	ESCROW AGREEMENTS	Page 20
	
                    (as at June 14, 2010)

                	 	 

    

    

    11.15 Successor to Escrow Agent

    Any corporation with which the Escrow Agent may be amalgamated, merged or consolidated, or any corporation succeeding to the business of the Escrow Agent will be the successor of the Escrow Agent under this Agreement without any further act on its part or on the part or any of the Parties, provided that the successor is recognized by the Exchange.

    (Signatures on following page)

    
        	FORM 5D	ESCROW AGREEMENTS	Page 21
	
                    (as at June 14, 2010)

                	 	 

    

    

    The Parties have executed and delivered this Agreement as of the date set out above.

    TSX Trust Company

    	"Deanna Guilfoyle"
	Authorized signatory

    

    	"Sandy Hunter"
	Authorized signatory

    KWESST Micro System Inc.

    	"Jeffrey McLeod"
	Jeffrey McLeod, CEO
	Authorized signatory

    

    	"David Luxton"
	David Luxton, Executive Chairman
	Authorized signatory

     

    	
                Signed, sealed and delivered by

            	
                )

            	
                 

            
	
                Mary Lou Parise in the presence of:

            	
                )

            	
                 

            
	
                 

            	
                )

            	
                 

            
	Alain Lambert	
                )

            	
                 

            
	
                Name

            	
                )

            	
                 

            
	
                 

            	
                )

            	
                 

            
	
                                                                       

            	
                )

            	
                "Mary Lou Parise"

            
	
                Address

            	
                )

            	
                Mary Lou Parise

            
	
                 

            	
                )

            	
                 

            
	
                Businessman

            	
                )

            	
                 

            
	
                Occupation

            	
                )

            	
                 

            

    Fiducie Familiale du Clan Brady

    	"Alain Lambert"
	Alain Lambert, Trustee
	Authorized signatory

    10040932 Canada Inc.

    	"Laura Brown"
	Laura Brown
	Authorized signatory

     

    
        	FORM 5D	ESCROW AGREEMENTS	Page 22
	
                    (as at June 14, 2010)

                	 	 

    

    

    Schedule "A" to Escrow Agreement

    Securityholder

    Name:                                                                                         

    Signature:                                                          

    Securities:

    	
                Class and Type
(i.e. Value Securities)

            	
                Number

            	
                Certificate(s) (if applicable)

            
	
                Common shares

            	
                500,000

            	
                 

            
	
                 

            	
                 

            	
                 

            

    

    
        	FORM 5D	ESCROW AGREEMENTS	Page 23
	
                    (as at June 14, 2010)

                	 	 

    

    

    Securityholder

    Name:                                                                                                

    	Signature:	                                       
	 	                                                

     

    Securities:

    	
                Class and Type
(i.e. Value Securities)

            	
                Number

            	
                Certificate(s) (if applicable)

            
	
                Common shares

            	
                1,000,000

            	
                 

            
	
                 

            	
                 

            	
                 

            

    

    
        	FORM 5D	ESCROW AGREEMENTS	Page 24
	
                    (as at June 14, 2010)

                	 	 

    

    

    Securityholder

    Name:                                                                                  

    	Signature:	                                       
	 	                                       

    Securities:

    	
                Class and Type
(i.e. Value Securities)

            	
                Number

            	
                Certificate(s) (if applicable)

            
	
                Common shares

            	
                2,000,000

            	
                 

            
	
                 

            	
                 

            	
                 

            

    

    
        	FORM 5D	ESCROW AGREEMENTS	Page 25
	
                    (as at June 14, 2010)

                	 	 

    

    

    SCHEDULE B (1) - TIER 1 VALUE SECURITY ESCROW AGREEMENT

RELEASE OF SECURITIES

    Timed Release

    	
                Release Dates

            	
                Percentage of 
Total Escrowed 
Securities to be 
Released

            	
                Total Number 
of Escrowed 
Securities to be 
Released

(Mary Lou 
Parise)

            	
                Total Number 
of Escrowed 
Securities to be 
Released

(Fiducie 
Familiale du 
Clan Brady)

            	
                Total Number 
of Escrowed 
Securities to be 
Released

(10040932 
Canada Inc.)

            
	
                September 17, 2020

            	
                25%

            	
                125,000

            	
                250,000

            	
                500,000

            
	
                March 17, 2021

            	
                25%

            	
                125,000

            	
                250,000

            	
                500,000

            
	
                September 17, 2021

            	
                25%

            	
                125,000

            	
                250,000

            	
                500,000

            
	
                March 17, 2022

            	
                25%

            	
                125,000

            	
                250,000

            	
                500,000

            
	
                TOTAL

            	
                100%

            	
                500,000

            	
                1,000,000

            	
                2,000,000

            

    *In the simplest case where there are no changes to the escrow securities initially deposited and no additional escrow securities, then the release schedule outlined above results in the escrow securities being released in equal tranches of 25%.

    
        	FORM 5D	ESCROW AGREEMENTS	Page 26
	
                    (as at June 14, 2010)

                	 	 

    

    

    SCHEDULE 13 (2) - TIER 2 VALUE SECURITY ESCROW AGREEMENT

RELEASE OF SECURITIES

    Timed Release

    	
                Release Dates

            	
                Percentage of 
Total 
Escrowed 
Securities to 
be Released

            	
                Total Number 
of Escrowed 
Securities to 
be Released

(Mary Lou 
Parise)

            	
                Total Number 
of Escrowed 
Securities to 
be Released

(Fiducie 
Familiale du 
Clan Brady)

            	
                Total Number 
of Escrowed 
Securities to 
be Released

(10040932 
Canada Inc.)

            
	
                September 17, 2020

            	
                10%

            	
                50,000

            	
                100,000

            	
                200,000

            
	
                March 17, 2021

            	
                15%

            	
                75,000

            	
                150,00

            	
                300,000

            
	
                September 17, 2021

            	
                15%

            	
                75,000

            	
                150,000

            	
                300,000

            
	
                March 17, 2022

            	
                15%

            	
                75,000

            	
                150,000

            	
                300,000

            
	
                September 17, 2022

            	
                15%

            	
                75,000

            	
                150,000

            	
                300,000

            
	
                March 17, 2023

            	
                15%

            	
                75,000

            	
                150,000

            	
                300,000

            
	
                September 17, 2023

            	
                15%

            	
                75,000

            	
                150,000

            	
                300,000

            
	
                TOTAL

            	
                100%

            	
                500,000

            	
                1,00000

            	
                2,000,000

            

    *In the simplest case where there are no changes to the escrow securities initially deposited and no additional escrow securities, the release schedule outlined above results in the escrow securities being released in equal tranches of 15% after completion of the release on the date of the Exchange Bulletin.

    
        	FORM 5D	ESCROW AGREEMENTS	Page 27
	
                    (as at June 14, 2010)

                	 	 

    

    

    SCHEDULE B (5)

UNDERTAKING OF HOLDING COMPANY

    TO:  THE TSX VENTURE EXCHANGE

    10040932 Canada Inc. (the "Securityholder") has subscribed for and agreed to purchase, as principal, 2,000,000 Common Shares of KWESST Micro Systems Inc. (the "Escrowed Securities").  The Escrowed Securities will be held in escrow as detailed in the escrow agreement entered into between KWESST Micro Systems Inc. (the "Issuer"), TSX Trust Company and the Securityholder.

    The undersigned Securityholder undertakes that, to the extent reasonably possible, it will not permit or authorize its securities to be issued or transferred, nor will it otherwise authorize any transaction involving any of its securities that could reasonably result in a change of its control without the prior consent of the TSX Venture Exchange, as long as any Escrowed Securities remain held or are required to be held in escrow.

    DATED this     17    day of September 2020.

    	 	10040932 Canada Inc
	 	(Name of Securityholder - please print)
	 	 
	 	"Laura Brown"
	 	(Authorized Signature)
	 	 
	 	President
	 	(Official Capacity - please print)
	 	 
	 	Laura Brown
	 	(Please print here name of individual whose signature appears above)

    

    
        	FORM 5D	ESCROW AGREEMENTS	Page 28
	
                    (as at June 14, 2010)

                	 	 

    

    

    The Securityholder is directly controlled by the undersigned who undertakes that, to the extent reasonably possible, he will not permit or authorize securities of the Securityholder to be issued or transferred, nor otherwise carry out any transaction that could reasonably result in a change of control of the Securityholder without the prior consent of the TSX Venture Exchange, as long as any Escrowed Securities remain held or are required to be held in escrow.

    DATED this    17    day of September 2020.

    	 	"Laura Brown"
	 	(Signature)
	 	 
	 	 
	 	(Name of Controlling Securityholder - please print)
	 	 
	 	Laura Brown
	 	 
	 	 
	 	(Signature)
	 	 
	 	 
	 	(Name of Controlling Securityholder - please print)

    

    
        	FORM 5D	ESCROW AGREEMENTS	Page 29
	
                    (as at June 14, 2010)

                	 	 

    

    

    SCHEDULE B (5)

UNDERTAKING OF TRUST

    TO:  THE TSX VENTURE EXCHANGE

    Fiducie Familiale du Clan Brady (the "Securityholder") owns, as principal, 1,000,000 Common Shares of KWESST Micro Systems Inc. (the "Escrowed Securities").  The Escrowed Securities will be held in escrow as detailed in the escrow agreement entered into between KWESST Micro Systems Inc. (the "Issuer"), TSX Trust Company and the Securityholder.

    The undersigned Securityholder undertakes that, to the extent reasonably possible, it will not permit or authorize its securities to be issued or transferred, nor will it otherwise authorize any transaction involving any of its securities that could reasonably result in a change of its control without the prior consent of the TSX Venture Exchange, as long as any Escrowed Securities remain held or are required to be held in escrow.

    DATED this     17    day of September 2020.

    	 	Fiducie Familiale du Clan Brady
	 	(Name of Securityholder - please print)
	 	 
	 	"Alain Lambert"
	 	(Authorized Signature)
	 	 
	 	Trustee
	 	(Official Capacity - please print)
	 	 
	 	Alain Lambert
	 	(Please print here name of individual whose signature appears above)

    

    
        	FORM 5D	ESCROW AGREEMENTS	Page 30
	
                    (as at June 14, 2010)

                	 	 

    

    

    The Securityholder is directly controlled by the undersigned as trustee who undertakes that, to the extent reasonably possible, he will not permit or authorize or otherwise carry out any transaction that could reasonably result in a change of control of the Securityholder without the prior consent of the TSX Venture Exchange, as long as any Escrowed Securities remain held or are required to be held in escrow.

    DATED this    17   day of September 2020.

    	 	"Alain Lambert"
	 	(Signature)
	 	 
	 	Alain Lambert,  Trusteee
	 	(Name of Controlling Securityholder - please print)
	 	 
	 	 
	 	(Signature)
	 	 
	 	 
	 	(Name of Controlling Securityholder - please print)

    
         

    

    
        	FORM 5D	ESCROW AGREEMENTS	Page 31
	
                    (as at June 14, 2010)KWESST Micro Systems Inc.: Exhibit 10.7 - Filed by newsfilecorp.com

    

     

     

     

     

     

     

    KWESST MICRO SYSTEMS INC.

- and -

TSX TRUST COMPANY

COMMON SHARE PURCHASE WARRANT INDENTURE

     

     

    Providing for the Issue of
up to 3,766,781 Common Share Purchase Warrants

     

     

    APRIL 29, 2021

     

     

     

     

     

     

    

    TABLE OF CONTENTS

    	Article 1. - INTERPRETATION	1
	 	 
	1.1 Definitions	2
	1.2 Words Importing the Singular	7
	1.3 Interpretation not Affected by Headings	7
	1.4 Day not a Business Day	7
	1.5 Time of the Essence	7
	1.6 Governing Law	7
	1.7 Meaning of "outstanding" for Certain Purposes	8
	1.8 Currency	8
	1.9 Termination	8
	 	 
	Article 2. - ISSUE OF WARRANTS	8
	 	 
	2.1 Issue of Warrants	8
	2.2 Form and Terms of Warrants	8
	2.3 Signing of Warrant Certificates	10
	2.4 Authentication or Certification by the Warrant Agent	10
	2.5 Warrantholder not a Shareholder, etc.	10
	2.6 Issue in Substitution for Lost Warrant Certificates	10
	2.7 Warrants to Rank Pari Passu	11
	2.8 Registration and Transfer of Warrants	11
	2.9 Registers Open for Inspection	12
	2.10 Exchange of Warrants	13
	2.11 Ownership of Warrants	13
	2.12 Uncertificated Warrants	13
	2.13 Adjustment of Exchange Basis	15
	2.14 Rules Regarding Calculation of Adjustment of Exchange Basis For the purposes of section 2.13:	19
	2.15 Postponement of Subscription	21
	2.16 Notice of Adjustment	21
	2.17 No Action after Notice	22
	2.18 Purchase of Warrants for Cancellation	22
	2.19 Optional Purchases by the Company	22
	2.20 Protection of Warrant Agent	22
	2.21 Legend on Warrant Certificate or Uncertificated Warrants and Warrant Share certificates under the Private Placement	23
	2.22 U.S. Legend on Warrant Certificates and Warrant Share certificates	24
	 	 
	Article 3. - EXERCISE OF WARRANTS	25
	 	 
	3.1 Method of Exercise of Warrants	25
	3.2 No Fractional Shares	27
	3.3 Effect of Exercise of Warrants	27

    

    

    
        - ii -

    

    

    	3.4 Cancellation of Warrants	28
	3.5 Subscription for less than Entitlement	28
	3.6 Expiration of Warrant	28
	3.7 Prohibition on Exercise by U.S. Persons; Exception	28
	 	 
	Article 4. - COVENANTS	30
	 	 
	4.1 General Covenants of the Company	30
	4.2 Securities Qualification Requirements	31
	4.3 Warrant Agent's Remuneration and Expenses	31
	4.4 Performance of Covenants by Warrant Agent	31
	 	 
	Article 5. - ENFORCEMENT	32
	 	 
	5.1 Suits by Warrantholders	32
	5.2 Limitation of Liability	32
	 	 
	Article 6. - MEETINGS OF WARRANTHOLDERS	32
	 	 
	6.1 Right to Convene Meetings	32
	6.2 Notice	33
	6.3 Chairman	33
	6.4 Quorum	33
	6.5 Power to Adjourn	34
	6.6 Show of Hands	34
	6.7 Poll and Voting	34
	6.8 Regulations	34
	6.9 Company, Warrant Agent and Counsel may be Represented	35
	6.10 Powers Exercisable by Extraordinary Resolution	35
	6.11 Meaning of "Extraordinary Resolution"	36
	6.12 Powers Cumulative	36
	6.13 Minutes	37
	6.14 Instruments in Writing	37
	6.15 Binding Effect of Resolutions	37
	6.16 Holdings by the Company or Subsidiaries of the Company Disregarded	37
	 	 
	Article 7. - SUPPLEMENTAL INDENTURES AND SUCCESSOR COMPANIES	38
	 	 
	7.1 Provision for Supplemental Indentures for Certain Purposes	38
	7.2 Successor Companies	39
	 	 
	Article 8. - CONCERNING THE WARRANT AGENT	39
	8.1 Indenture Legislation	39
	8.2 Rights and Duties of Warrant Agent	40
	8.3 Evidence, Experts and Advisers	40
	8.4 Securities, Documents and Monies Held by Warrant Agent	42
	8.5 Actions by Warrant Agent to Protect Interests	42

    

    

    
        - iii -

    

    

    	8.6 Warrant Agent not Required to Give Security	42
	8.7 Protection of Warrant Agent	42
	8.8 Replacement of Warrant Agent	43
	8.9 Conflict of Interest	44
	8.10 Acceptance of Duties and Obligations	45
	8.11 Warrant Agent not to be Appointed Receiver	45
	8.12 Authorization to Carry on Business	45
	 	 
	Article 9. - GENERAL	46
	 	 
	9.1 Notice to the Company and the Warrant Agent	46
	9.2 Notice to the Warrantholders	46
	9.3 Privacy	47
	9.4 Third Party Interests	47
	9.5 Discretion of Directors	48
	9.6 Satisfaction and Discharge of Indenture	48
	9.7 Provisions of Indenture and Warrants for the Sole Benefit of Parties and Warrantholders	48
	9.8 Indenture to Prevail	48
	9.9 Assignment	48
	9.10 Counterparts and Formal Date	49
	 	 
	SCHEDULE "A" - FORM OF WARRANT CERTIFICATE	52
	 	 
	SCHEDULE "B" - FORM OF DECLARATION FOR REMOVAL OF LEGEND.	65

    

    

    THIS WARRANT INDENTURE dated as of April 29, 2021

    BETWEEN:

    KWESST MICRO SYSTEMS INC.
a company incorporated under the laws of the Province of British Columbia

    (hereinafter called the "Company")

    AND

    TSX TRUST COMPANY
a trust company continued under the laws of Canada and registered to carry on business in the Province of Ontario

    (hereinafter called the "Warrant Agent")

    RECITALS

    WHEREAS:

    A. In connection with a brokered private placement by the Company of 3,536,057 Units (the "Private Placement"), the Company proposes to issue up to 3,766,781 Warrants, including Compensation Option Warrants which may be issued pursuant to the exercise of Compensation Options;

    B. Each Warrant entitles the holder thereof to purchase, subject to adjustment in certain events, one Warrant Share at a price of $1.75 at any time prior to 5:00 p.m.  (Eastern time) on April 29, 2023 (the "Expiry Date");

    C. For such purpose the Company deems it necessary to create and issue Warrants and Warrant Certificates to be constituted and issued in the manner hereinafter set forth;

    D. The Company is duly authorized to create and issue the Warrants to be issued as herein provided;

    E. All things necessary have been done and performed to make the Warrants, when Authenticated or certified by the Warrant Agent and issued as provided in this Indenture, legal, valid and binding upon the Company with the benefits of and subject to the terms of this Indenture;

    F. The foregoing recitals are made as statements of fact by the Company and not by the Warrant Agent;

    G. The Warrant Agent has agreed to enter into this Indenture and to hold all rights, interests and benefits contained herein for and on behalf of those persons who become holders of Warrants issued pursuant to this Indenture from time to time;

    

    NOW THEREFORE THIS INDENTURE WITNESSES that for good and valuable consideration mutually given and received, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed and declared as follows:

    ARTICLE 1 - INTERPRETATION

    1.1 Definitions

    In this Indenture, unless there is something in the subject matter or context inconsistent therewith:

    "Acceleration Event" means the occurrence, at any time following the date which is four (4) months and one (1) day following the Closing Date, of the closing price of the Common Shares on the TSXV, or such other stock exchange on which the Common Shares are listed or quoted, being equal to or greater than three dollars ($3.00) for a period of ten (10) consecutive Trading Days;

    "Acceleration Notice" has the meaning set forth in Section 2.2(3)(b) of this Warrant Indenture;

    "Acceleration Right" means in the case of an Acceleration Event, the option of the Company to accelerate the Expiry Date of the Warrants to the date that is thirty (30) days following the deemed receipt by holders of Warrants of the Acceleration Notice;

    "Accredited Investor" means an "accredited investor" as defined in Rule 501(a) of Regulation D;

    "Agents" means the agents of the Private Placement, being PI Financial Corp. and Beacon Securities Limited;

    "Applicable Legislation" means the provisions of the statutes of Canada and its provinces and the regulations under those statutes relating to warrant indentures and/or the rights, duties or obligations of issuers and warrant agents under warrant indentures as are from time to time in force and applicable to this Indenture;

    "Authenticated" means with respect to the issuance of an Uncertificated Warrant, one in respect of which the Warrant Agent has completed all Internal Procedures such that the particulars of such Uncertificated Warrant are entered in the register of Warrantholders, "Authenticate", "Authenticating" and "Authentication" have the appropriate correlative meanings;

    "Beneficial Owner" means a person that has a beneficial interest in a Warrant;

    "Book-Entry Only System" means the book-based securities system administered by CDS in accordance with its operating rules and procedures in force from time to time;

    "Business Day" means a day that is not a Saturday, Sunday, or a day on which banks are closed or which is a civic or statutory holiday in the City of Toronto, Ontario;

    "Capital Reorganization" has the meaning ascribed to that term in subsection 2.13(4);

    
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    "CDS" means CDS Clearing and Depository Services Inc. and its successors in interest;

    "Closing Date" means April 29, 2021;

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

    "Common Share Reorganization" has the meaning ascribed to that term in subsection 2.13(1);

    "Company" means KWESST Micro Systems Inc., a corporation incorporated under the Business Corporations Act (British Columbia), and its lawful successors from time to time;

    "Company's Auditors" means the chartered (professional) accountant or firm of chartered (professional) accountants duly appointed as auditor or auditors of the Company from time to time;

    "Compensation Option Warrants" means the Warrants comprising the Units issued pursuant to the exercise of the Compensation Options, if any;

    "Compensation Options" means the 230,724 compensation options issued to the Agents pursuant to the Private Placement, each such Compensation Option entitling the holder thereof to purchase one Unit at any time on or before the date that is 24 months from the date hereof;

    "Confirmation" means that CDS shall deliver to the Warrant Agent confirmation of its intention to exercise Warrants in a manner acceptable to the Warrant Agent, including by electronic means through the Book-Entry Only System;

    "counsel" means a barrister and solicitor or lawyer (who may be an employee of the Company) or a firm of barristers and solicitors or lawyers (who may be counsel to the Company), in both cases acceptable to the Warrant Agent;

    "Current Market Price" means, at any date, the volume weighted average price per share at which the Common Shares have traded:

    (i) on the TSXV;

    (ii) if the Common Shares are not listed on the TSXV, on any stock exchange upon which the Common Shares are listed as may be selected for this purpose by the board of directors of the Company, acting reasonably; or

    (iii) if the Common Shares are not listed on any stock exchange, on any over-the-counter market on which the Common Shares are trading, as may be selected for this purpose by the board of directors of the Company, acting reasonably;

    during the 20 consecutive trading days (on each of which at least 100 Common Shares are traded in board lots) ending the third trading day before such date and the weighted average price shall be determined by dividing the aggregate sale price of all Common Shares sold in board lots on the exchange or market, as the case may be, during the 20 consecutive trading days by the number of Common Shares sold or, if not traded on any recognized market or exchange, as determined by the directors of the Company, acting reasonably;

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

    "Dividends Paid in Ordinary Course" means dividends declared payable on the Common Shares in any fiscal year of the Company in cash to the extent that such cash dividends do not 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 resolution passed by the board of directors of the Company, 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 and for such purpose the amount of any dividends paid in other than cash or shares shall be the fair market value of such dividend as determined by the directors;

    "DRS" means the Direct Registration System;

    "Exchange Basis" means, at any time, the number of Warrant Shares or other classes of shares or securities which a Warrantholder is entitled to receive upon the exercise of the rights attached to the Warrants pursuant to the terms of this Indenture, as the number may be adjusted pursuant to Article 2 hereof, such number being equal to one Warrant Share per Warrant as of the date hereof;

    "Exercise Date" with respect to any Warrant means the date on which such Warrant is duly surrendered for exercise in accordance with the provisions of Article 3 hereof;

    "Exercise Notice" has the meaning ascribed to that term in subsection 3.1(4);

    "Exercise Price" means $1.75 for each Warrant Share, subject to adjustment in accordance with the provisions of this Indenture;

    "Expiry Date" has the meaning ascribed to that term in the recitals;

    "extraordinary resolution" has the meaning ascribed to that term in sections 6.11 and 6.14;

    "Internal Procedures" means in respect of the making of any one or more entries to, changes in or deletions of any one or more entries in the register at any time (including without limitation, original issuance or registration of transfer of ownership) the minimum number of the Warrant Agent's internal procedures customary at such time for the entry, change or deletion made to be complete under the operating procedures followed at the time by the Warrant Agent;

    "Issue Date" means, for a Warrant, the date on which the Warrant is actually issued by or on behalf of the Company;

    "Participant" means a person recognized by CDS as a participant in the Book-Entry Only System;

    
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    "person" means an individual, a corporation, a partnership, a syndicate, a trustee or any unincorporated organization and words importing persons are intended to have a similarly extended meaning;

    "Privacy Laws" has the meaning ascribed to that term in section 9.3;

    "Private Placement" has the meaning ascribed to that term in the recitals;

    "Purchaser" means a purchaser of Units;

    "Qualified Institutional Buyer" means a qualified institutional buyer within the meaning of Rule 144A;

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

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

    "Rights Offering" has the meaning ascribed to that term in subsection 2.13(2);

    "Rights Offering Price" has the meaning ascribed to that term in subsection 2.14(8);

    "Rule 144A" means Rule 144A as promulgated under the U.S. Securities Act;

    "Securities Laws" means, collectively, the applicable securities laws of each of the provinces of Canada, the United States and each of the states of the United States, as applicable, and the respective regulations made and forms prescribed thereunder together with all applicable published rules, policy statements, notices and blanket orders and rulings of the securities commissions or similar regulatory authorities in each of the provinces of Canada;

    "shareholder" means an owner of record of one or more Common Shares or shares of any other class or series of the Company;

    "Special Distribution" has the meaning ascribed to that term in subsection 2.13(3);

    "Subsidiary" means a corporation, a majority of the outstanding voting shares of which are owned, directly or indirectly, by the Company or by one or more subsidiaries of the Company and, as used in this definition, "voting shares" means shares of a class or classes ordinarily entitled to vote for the election of the majority of the directors of a corporation irrespective of whether or not shares of any other class or classes shall have or might have the right to vote for directors by reason of the happening of any contingency;

    "successor company" has the meaning ascribed to that term in section 7.2;

    "this Indenture", "herein", "hereby" and similar expressions mean or refer to this common share purchase warrant indenture and any indenture, deed or instrument supplemental or ancillary hereto; and the expressions "Article", "section", "subsection" or "paragraph" followed by a number or letter mean and refer to the specified Article, section, subsection or paragraph of this Indenture;

    
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    "Time of Expiry" means the earlier of (i) 5:00 p.m. (Eastern time) on the Expiry Date and (ii) thirty (30) days following the date of delivery of an Acceleration Notice;

    "trading day" means a day on which the TSXV (or such other exchange on which the Common Shares are listed and which forms the primary trading market for such shares) is open for trading, and if the Common Shares are not listed on a stock exchange, a day on which an over-the-counter market where such shares are traded is open for business;

    "transaction instruction" means a written order signed by the holder or CDS, entitled to request that one or more actions be taken, or such other form as may be reasonably acceptable to the Warrant Agent, requesting one or more such actions to be taken in respect of an Uncertificated Warrant;

    "Transfer Agent" means the transfer agent or agents for the time being for the Common Shares;

    "TSXV" means the TSX Venture Exchange;

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

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

    "Uncertificated Warrant" means any Warrant which is issued under the Book-Entry Only System;

    "Unit Share" means a Common Share comprising part of each Unit;

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

    "Units" means the units of the Company, each Unit being comprised of one Unit Share and one Warrant;

    "Warrant Agent" means TSX TRUST COMPANY, a trust company existing under the laws of Canada, or any lawful successor thereto including through the operation of section 8.8;

    "Warrant Certificates" means the certificates representing Warrants substantially in the form attached as Schedule "A" hereto or such other form as may be approved by the Company, the Agents and the Warrant Agent;

    "Warrant Shares" means the Common Shares or other securities or property issuable upon the exercise of the Warrants as a result of any adjustment to the subscription rights pursuant to Article 2 hereof;

    "Warrantholders" or "holders" means the persons whose names are entered for the time being in the register maintained pursuant to section 2.8;

    "Warrantholders' Request" means an instrument, signed in one or more counterparts by Warrantholders representing, in the aggregate, at least 25% of the aggregate number of Warrants then outstanding, which requests the Warrant Agent to take some action or proceeding specified therein;

    
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    "Warrants" means the common share purchase warrants of the Company issued and Authenticated hereunder as Uncertificated Warrants or to be issued and countersigned in the form of Warrant Certificates, in either case, entitling the holders thereof to purchase Warrant Shares on the basis of one Warrant Share for each whole Warrant upon payment of the Exercise Price prior to the Time of Expiry; provided that in each case the number and/or class of shares or securities receivable on the exercise of the Warrants may be subject to increase or decrease or change in accordance with the terms and provisions hereof; for clarity, the "Warrants" include the Compensation Option Warrants where the context requires; and

    "written direction of the Company", "written request of the Company", "written consent of the Company" and "certificate of the Company" and any other document required to be signed by the Company, means, respectively, a written direction, request, consent, certificate or other document signed in the name of the Company by the Chief Executive Officer and/or the Chief Financial Officer and may consist of one or more instruments so executed.

    1.2 Words Importing the Singular

    Unless elsewhere otherwise expressly provided, or unless the context otherwise requires, words importing the singular include the plural and vice versa and words importing the masculine gender include the feminine and neuter genders.

    1.3 Interpretation not Affected by Headings

    The division of this Indenture into Articles, sections, subsections and paragraphs, 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

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

    1.5 Time of the Essence

    Time shall be of the essence in all respects of this Indenture and the Warrants issued hereunder.

    1.6 Governing Law

    This Indenture and the Warrants issued hereunder shall be construed and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and shall be treated in all respects as Ontario contracts.

    
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    1.7 Meaning of "outstanding" for Certain Purposes

    Every Warrant Authenticated or certified by the Warrant Agent hereunder shall be deemed to be outstanding until it shall be cancelled or delivered to the Warrant Agent for cancellation, exercised pursuant to section 3.1 or until the Time of Expiry; provided that where a new Warrant Certificate has been issued pursuant to section 2.6 hereof to replace one which is lost, mutilated, stolen or destroyed, the Warrants represented by only one of such Warrant Certificates shall be counted for the purpose of determining the aggregate number of Warrants outstanding.

    1.8 Currency

    Unless otherwise stated, all dollar amounts referred to in this Indenture are in Canadian dollars.

    1.9 Termination

    This Indenture shall continue in full force and effect until the earlier of:  (a) the Time of Expiry; and (b) the date that no Warrants are outstanding hereunder; provided that this Indenture shall continue in effect thereafter, if applicable, until the Company and the Warrant Agent have fulfilled all of their respective obligations under this Indenture.

    ARTICLE 2 - ISSUE OF WARRANTS

    2.1 Issue of Warrants

    A total of 3,766,781 Warrants, of which 3,536,057 Warrants shall be issuable to purchasers of Units, and of which up to a maximum of 230,724 Compensation Option Warrants shall be issuable pursuant to the exercise of Compensation Options, are hereby created and authorized to be issued on the applicable Issue Date in accordance with the terms and conditions hereof.  The Warrants created hereunder shall entitle the registered holders thereof to acquire an aggregate of 3,766,781 Warrant Shares, including 230,724 Warrant Shares issuable upon the exercise of Compensation Option Warrants, are hereby authorized to be issued hereunder at the Exercise Price upon the terms and conditions herein set forth.  Uncertificated Warrants shall be Authenticated by the Warrant Agent and deposited in CDS and Warrant Certificates evidencing the Warrants, if any, shall be executed by the Company, certified by or on behalf of the Warrant Agent and delivered by the Warrant Agent to the Company, as applicable, in accordance with a written direction of the Company, all in accordance with sections 2.3 and 2.4.  Subject to adjustment in accordance with the provisions of this Indenture, each of the Warrants issued hereunder shall entitle the holder thereof to receive from the Company, at the Exercise Price, the number of Warrant Shares equal to the Exchange Basis in effect on the Exercise Date.

    2.2 Form and Terms of Warrants

    (1) The Warrants may be issued in either certificated or uncertificated form, or issued via DRS.  The Warrant Certificates shall be substantially in the form attached as Schedule "A" hereto, subject to the provisions of this Indenture, with such additions, variations and changes as may be required or permitted by the terms of this Indenture, and to give effect to any Warrants not being issued as Uncertificated Warrants, and which may from time to time be agreed upon by the Warrant Agent and the Company, and shall have such legends, distinguishing letters and numbers as the Company may, with the approval of the Warrant Agent, prescribe.  Except as hereinafter provided in this Article 2, all Warrants shall, save as to denominations, be of like tenor and effect.  The Warrant Certificates may be engraved, printed, lithographed, photocopied or be partially in one form or another, as the Company may determine.  No change in the form of the Warrant Certificate shall be required by reason of any adjustment made pursuant to this Article 2 in the number and/or class of securities or type of securities that may be acquired pursuant to the Warrants.  All Warrants issued to CDS may be in either a certificated or uncertificated form, such uncertificated form being evidenced by a book position on the register of Warrantholders to be maintained by the Warrant Agent in accordance with section 2.8.

    
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    (2) Each Warrant authorized to be issued hereunder shall entitle the registered holder thereof to acquire (subject to sections 2.13, 2.14 and 2.15) upon due exercise and upon the transaction instruction or due execution of the exercise form endorsed on the Warrant Certificate, as applicable, or other instrument of exercise in such form as the Warrant Agent and/or the Company may from time to time prescribe and upon payment of the Exercise Price, one Warrant Share or such other kind and amount of shares or securities or property, calculated pursuant to the provisions of sections 2.13 and 2.14, as the case may be, at any time after the Issue Date of such Warrants and prior to the Time of Expiry, in accordance with the provisions of this Indenture.

    (3) If at any time after the date which is four (4) months and one (1) day following the Closing Date, an Acceleration Event occurs:

    (a) the Company shall be entitled to accelerate the Expiry Date of the Warrants such that the Warrantholders shall only have a period of thirty (30) days to exercise the Warrants upon deemed receipt of the Acceleration Notice as defined in Section 2.2(3)(b);

    (b) in the case of an Acceleration Event, no later than the date which is five (5) Trading Days following the tenth (10th) consecutive Trading Day of such Acceleration Event (or if the Acceleration Event continues for greater than 10 consecutive Trading Days, no later than five (5) Trading Days following the last Trading Day upon which the closing price was equal to or greater than $3.00 during such Acceleration Event), the Company may deliver to the Warrant Agent and each Warrantholder a notice advising that the Company has exercised its option pursuant to the Acceleration Right and notifying them of the accelerated Expiry Date of the Warrants (the "Acceleration Notice").  The Acceleration Notice shall be deemed to be validly given if delivered, or sent by registered letter, postage prepaid, to the Subscriber at the address on the register maintained by the Warrant Agent, and the Acceleration Notice shall be deemed to have been received and given on the third Business Day following the date of transmission; and

    (c) a Warrantholder shall have the option to exercise its Warrants in accordance with the terms of this Warrant Indenture within the 30-day period after the deemed receipt of the Acceleration Notice.  Any Warrants that have not been exercised by a Warrantholder in accordance with the provisions of the Warrant Certificates shall expire on 5:00 p.m.  (Eastern Standard Time) on the thirtieth (30th) day after the date on which the Acceleration Notice was deemed to have been received by such holder of Warrants.

    
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    (4) Fractional Warrants shall not be issued or otherwise provided for.  If any fraction of a Warrant would otherwise be issuable, the number of Warrants so issued shall be rounded down to the nearest whole Warrant without compensation therefor.

    2.3 Signing of Warrant Certificates

    Warrant Certificates shall be signed by an authorised officer of the Company and may, but need not be under the corporate seal of the Company or a reproduction thereof.  The signature of any such director or officer may be mechanically reproduced in facsimile or other electronic format and Warrant Certificates bearing such facsimile or other electronic format signatures shall be binding upon the Company as if they had been manually signed by such director or officer.  Notwithstanding that the person whose manual or electronic signature appears on any Warrant Certificate as a director or officer may no longer hold office at the Issue Date of the Warrant Certificate or at the date of certification or delivery thereof, any Warrant Certificate signed as aforesaid shall, subject to section 2.4, be valid and binding upon the Company and the registered holder thereof will be entitled to the benefits of this Indenture.

    2.4 Authentication or Certification by the Warrant Agent

    (1) No Warrant shall be issued or, if issued, shall be valid for any purpose or entitle the registered holder to the benefit hereof or thereof until it has been Authenticated or certified by manual signature by or on behalf of the Warrant Agent, as applicable, and such Authentication or certification by the Warrant Agent shall be conclusive evidence as against the Company that the Warrant so Authenticated or certified has been duly issued hereunder and the holder is entitled to the benefits hereof.

    (2) The Authentication or certification of the Warrant Agent on the Warrants issued hereunder shall not be construed as a representation or warranty by the Warrant Agent as to the validity of this Indenture or the Warrants (except the due Authentication and certification thereof) and the Warrant Agent shall in no respect be liable or answerable for the use made of the Warrants or any of them or of the consideration therefor except as otherwise specified herein.

    2.5 Warrantholder not a Shareholder, etc.

    Nothing in this Indenture or the holding of a Warrant shall be construed as conferring upon a Warrantholder any right or interest whatsoever as a shareholder, including but not limited to the right to vote at, to receive notice of, or to attend meetings of shareholders or any other proceedings of the Company, nor entitle the holder to any right or interest in respect thereof except as herein and in the Warrants expressly provided.

    2.6 Issue in Substitution for Lost Warrant Certificates

    (1) If any Warrant Certificates issued and certified under this Indenture shall become mutilated or be lost, destroyed or stolen, the Company, subject to applicable law, and subsection 2.6(2), shall issue and thereupon the Warrant Agent shall certify and deliver a new Warrant Certificate of like denomination, date and tenor as the one mutilated, lost, destroyed or stolen in exchange for, 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 substantially in the form set out in Schedule "A" hereto and Warrants evidenced by it will entitle the holder thereof to the benefits hereof and shall rank equally in accordance with its terms with all other Warrant Certificates issued or to be issued hereunder.

    
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    (2) The applicant for the issue of a new Warrant Certificate pursuant to this section 2.6 shall bear the cost of the issue thereof and in the case of mutilation shall, as a condition precedent to the issue thereof, deliver to the Warrant Agent the mutilated Warrant Certificate, and in the case of loss, destruction or theft shall, as a condition precedent to the issue thereof, furnish to the Company and to the Warrant Agent such evidence of ownership and of the loss, destruction or theft of the Warrant Certificate so lost, destroyed or stolen as shall be satisfactory to the Company and to the Warrant Agent in their sole discretion and such applicant may be required to furnish an indemnity and surety bond in amount and form satisfactory to the Company and the Warrant Agent in their sole discretion and shall pay the reasonable charges of the Company and the Warrant Agent in connection therewith.

    2.7 Warrants to Rank Pari Passu

    All Warrants shall rank pari passu with all other Warrants, whatever may be the actual Issue Date of the Warrants.

    2.8 Registration and Transfer of Warrants

    (1) The Warrant Agent will create and keep at the principal stock transfer offices of the Warrant Agent in the City of Toronto, Ontario:

    (a) a register of holders 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 the Warrant Agent shall be entitled to rely on such register in connection with the exchange, transfer, exercise or deemed exercise of any Warrant(s) pursuant to the terms of this Indenture or the terms thereof; and

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

    (2) No transfer of any Warrant will be valid unless entered on the register of transfers referred to in subsection 2.8(1), upon surrender to the Warrant Agent of the Warrant Certificate evidencing such Warrant, and a duly completed and executed transfer form endorsed on the Warrant Certificate executed by the registered holder or his executors, administrators or other legal representatives or his attorney duly appointed by an instrument in writing in form and execution satisfactory to the Warrant Agent, if applicable, and, upon compliance with such requirements and such other reasonable requirements as the Warrant Agent may prescribe, such transfer will be recorded on the register of transfers by the Warrant Agent.

    
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    (3) The transferee of any Warrant will, after surrender to the Warrant Agent of the Warrant as required by subsection 2.8(2) and upon compliance with all other conditions in respect thereof required by this Indenture or by law, be entitled to be entered on the register of holders referred to in subsection 2.8(1) as the owner of such Warrant free from all equities or rights of set-off or counterclaim between the Company and the transferor or any previous holder of such Warrant, except in respect of equities of which the Company is required to take notice by statute or by order of a court of competent jurisdiction.

    (4) The Company will be entitled, and may direct the Warrant Agent, to refuse to recognize any transfer, or enter the name of any transferee, of any Warrant on the registers referred to in subsection 2.8(1), if such transfer would constitute a violation of the Securities Laws of any applicable jurisdiction or the rules, regulations or policies of any regulatory authority having jurisdiction or the representations and warranties made by the Warrantholder in the United States pursuant to the Private Placement under which the Warrants were acquired.  The Warrant Agent is entitled to assume compliance with all applicable Securities Laws unless otherwise notified in writing by the Company.  No duty shall rest with the Warrant Agent to determine compliance of the transferee or transferor of any Warrant with applicable Securities Laws.

    (5) Any Warrant issued to a transferee upon transfers contemplated by this section 2.8 shall bear the appropriate legend(s) as set forth in subsections 2.21(1), (2) and 2.22(2), if applicable.

    (6) If a Warrant tendered for transfer bears the legend set forth in subsection 2.22(2), the Warrant Agent shall not register such transfer unless the transferor has provided the Warrant Agent with the Warrant Certificate and complies with the requirements of the said subsection 2.22(2).

    (7) Warrants, in certificated form, bearing the legend set forth in subsection 2.22(2) shall not be offered, sold or otherwise transferred except (A) to the Company, (B) outside the United States in accordance with Rule 904 of Regulation S under the U.S. Securities Act and in compliance with applicable local laws and regulations, (C) within the United States in accordance with (i) Rule 144A under the U.S. Securities Act or (ii) Rule 144 under the U.S. Securities Act, if available, and in compliance with applicable state securities laws, or (D) in another transaction that does not require registration under the U.S. Securities Act or any applicable state securities laws, provided that in the case of transfers pursuant to (C)(ii) or (D) above, the Company has received an opinion of counsel satisfactory to it to such effect, and, in each case, in accordance with applicable state securities laws.  Warrants, in uncertificated form, held by a Warrantholder in the United States or a U.S. Person may be offered, sold or otherwise transferred only in accordance with this section 2.8(7) (A) or (B).

    2.9 Registers Open for Inspection

    The registers referred to in subsection 2.8(1) shall be open at all reasonable times during business hours on a Business Day for inspection by the Company or any Warrantholder.  The Warrant Agent shall, from time to time when requested to do so in writing by the Company, furnish the Company with a list of the names and addresses of holders of Warrants entered in the register of holders kept by the Warrant Agent and showing the number of Warrants held by each such holder.

    
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    2.10 Exchange of Warrants

    (1) Warrants may, upon compliance with the reasonable requirements of the Warrant Agent, be exchanged for Warrants in any other authorized denomination representing in the aggregate an equal number of Warrants as the number of Warrants represented by the Warrants being exchanged.  The Company shall sign and the Warrant Agent shall Authenticate or certify, in accordance with sections 2.3 and 2.4, all Warrants necessary to carry out the exchanges contemplated herein.

    (2) Warrants may be exchanged only at the principal stock transfer offices of the Warrant Agent in the City of Toronto, Ontario or at any other place that is designated by the Company with the approval of the Warrant Agent.  Any Warrants tendered for exchange shall be surrendered to the Warrant Agent and cancelled.

    (3) Except as otherwise herein provided, the Warrant Agent may charge Warrantholders requesting an exchange a reasonable sum for each Warrant Certificate issued; and payment of such charges and reimbursement of the Warrant Agent or the Company for any and all taxes or governmental or other charges required to be paid shall be made by the party requesting such exchange as a condition precedent to such exchange.

    2.11 Ownership of Warrants

    The Company and the Warrant Agent and their respective agents may deem and treat the registered holder of any Warrant as the absolute owner of the Warrant represented thereby for all purposes and the Company and the Warrant Agent and their respective agents shall not be affected by any notice or knowledge to the contrary except as required by statute or order of a court of competent jurisdiction.  The holder of any Warrant shall be entitled to the rights evidenced by that Warrant free from all equities or rights of set-off or counterclaim between the Company and the original or any intermediate holder thereof and all persons may act accordingly and the receipt by any holder of the Warrant Shares or monies obtainable pursuant to the exercise of the Warrant shall be a good discharge to the Company and the Warrant Agent for the same and neither the Company nor the Warrant Agent shall be bound to inquire into the title of any holder.

    2.12 Uncertificated Warrants

    (1) Registration and re-registration of beneficial interests in and transfers of Warrants held by CDS shall be made only through the Book-Entry Only System and no Warrant Certificates shall be issued in respect of such Warrants except where physical certificates evidencing ownership in such securities are required or as set out herein or as may be requested by CDS, as determined by the Company, from time to time.  Except as provided in this section 2.12, owners of beneficial interests in any Uncertificated Warrants shall not be entitled to have Warrants registered in their names and shall not receive or be entitled to receive Warrants in definitive form or to have their names appear in the register referred to in section 2.8 herein.  Notwithstanding any terms set out herein, Warrants subject to the restrictions and any legend set forth in section 2.21 or 2.22, as applicable, herein and held in the name of CDS may only be held in the form of Uncertificated Warrants with the prior consent of the Company and CDS.

    
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    (2) If any Warrant is issued in uncertificated form and any of the following events occurs:

    (a) CDS or the Company has notified the Warrant Agent that (A) CDS is unwilling or unable to continue as depository or (B) CDS ceases to be a clearing agency in good standing under applicable laws and, in either case, the Company is unable to locate a qualified successor depository within 90 days of delivery of such notice;

    (b) the Company has determined, in its sole discretion, with the consent of the Warrant Agent, to terminate the Book-Entry Only System in respect of such Uncertificated Warrants and has communicated such determination to the Warrant Agent in writing;

    (c) the Company or CDS is required by applicable law to take the action contemplated in this subsection; or

    (d) the Book-Entry Only System administered by CDS ceases to exist,

    then one or more definitive fully registered Warrant Certificates shall be executed by the Company and certified and delivered by the Warrant Agent to CDS in exchange for the Uncertificated Warrants form held by CDS.

    Fully registered Warrant Certificates issued and exchanged pursuant to this subsection shall be registered in such names and in such denominations as CDS shall instruct the Warrant Agent, provided that the aggregate number of Warrants represented by such Warrant Certificates shall be equal to the aggregate number of Uncertificated Warrants so exchanged.  Upon exchange of Uncertificated Warrants for one or more Warrant Certificates in definitive form, such Uncertificated Warrants shall be cancelled by the Warrant Agent.

    (3) Subject to the provisions of this section 2.12, any exchange of Warrants for Warrants which are not Uncertificated Warrants may be made in whole or in part in accordance with the provisions of section 2.10, mutatis mutandis.  All such Warrants issued in exchange for Uncertificated Warrants or any portion thereof shall be registered in such names as CDS for such Uncertificated Warrants shall direct and shall be entitled to the same benefits and subject to the same terms and conditions (except insofar as they relate specifically to Warrants) as the Warrants or portion thereof surrendered upon such exchange.

    (4) Every Warrant Authenticated upon registration of transfer of Warrants, or in exchange for or in lieu of Uncertificated Warrants or any portion thereof, whether pursuant to this section 2.12, or otherwise, shall be Authenticated in the form of, and shall be, an Uncertificated Warrant, unless such Warrant is registered in the name of a person other than CDS for such Uncertificated Warrant or a nominee thereof.

    
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    (5) Notwithstanding anything to the contrary in this Indenture, subject to Applicable Legislation, the Uncertificated Warrants will be issued as an Uncertificated Warrant, unless otherwise requested in writing by CDS or the Company.

    (6) The rights of beneficial owners of Warrants who hold securities entitlements in respect of the Warrants through the Book-Entry Only System shall be limited to those established by applicable law and agreements between CDS and the Participants and between such Participants and the beneficial owners of Warrants who hold securities entitlements in respect of the Warrants through the Book-Entry Only System, and such rights must be exercised through a Participant in accordance with the rules and procedures of CDS.

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

    (a) the electronic records maintained by CDS relating to any ownership interests or any other interests in the Warrants or the depository system maintained by CDS, or payments made on account of any ownership interest or any other interest of any person in any Warrant represented by an electronic position in the Book-Entry Only System (other than CDS or its nominee);

    (b) maintaining, supervising or reviewing any records of CDS or any Participant relating to any such interest; or

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

    (8) The Company may terminate the application of this section 2.12 in its sole discretion in which case all Warrants shall be evidenced by Warrant Certificates registered in the name of a person other than CDS.

    2.13 Adjustment of Exchange Basis

    Subject to section 2.14, the Exchange Basis shall be subject to adjustment from time to time in the events and in the manner provided as follows:

    (1) If and whenever, at any time after the date hereof and prior to the Time of Expiry, the Company shall:

    (i) issue Common Shares or securities exchangeable for or convertible into Common Shares to all or substantially all the holders of the Common Shares as a stock dividend or other distribution (other than as a Dividend Paid in the Ordinary Course or a distribution of Warrant Shares upon exercise of the Warrants or pursuant to the exercise of incentive stock options granted under stock option plans of the Company), or

    
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    (ii) subdivide, redivide or change its then outstanding Common Shares into a greater number of Common Shares, or

    (iii) reduce, combine or consolidate its then outstanding Common Shares into a lesser number of Common Shares,

    (any of such events in these paragraphs (i), (ii) or (iii) being called a "Common Share Reorganization"), then the Exchange Basis in effect on the effective date of such subdivision or consolidation, or on the record date of such stock dividend or other distribution, as the case may be, shall be adjusted by multiplying the Exchange Basis in effect immediately prior to such effective or record date by a fraction:

    (a) the numerator of which shall be the total number of Common Shares outstanding on such date immediately after giving effect to such Common Share Reorganization (including, in the case where securities exchangeable for or convertible into Common Shares are distributed, the number of Common Shares that would have been outstanding had such securities been exchanged for or converted into Common Shares on such record date, assuming in any case where such securities are not then convertible or exchangeable but subsequently become so, that they were convertible or exchangeable on the record date on the basis upon which they first become convertible or exchangeable), and

    (b) the denominator of which shall be the total number of Common Shares outstanding on such date before giving effect to such Common Share Reorganization.  The resulting product, adjusted to the nearest 1/100th, shall thereafter be the Exchange Basis until further adjusted as provided in this Article 2.

    To the extent that any adjustment in the Exchange Basis occurs pursuant to this subsection 2.13(1) as a result of the fixing by the Company of a record date for the distribution of securities exchangeable for or convertible into Common Shares and the Common Share Reorganization does not occur or any conversion or exchange rights are not fully exercised, the Exchange Basis shall be readjusted immediately after the expiry of any relevant exchange or conversion right or the termination of the Common Share Reorganization, as the case may be, to the Exchange Basis that would then be in effect, based upon the number of Common Shares actually issued and remaining issuable after such expiry and shall be further readjusted in such manner upon the expiry of any further such right.

    (2) If and whenever, at any time after the date hereof and prior to the Time of Expiry, the Company shall fix a record date for the distribution to all or substantially all of the holders of its outstanding Common Shares of rights, options or warrants entitling them, for a period expiring not more than 45 days after such record date, to subscribe for or purchase Common Shares, or securities exchangeable for or convertible into Common Shares, at a price per share to the holder (or at an exchange or conversion price per share) of less than 95% of the Current Market Price on such record date (any of such events being called a "Rights Offering"), then the Exchange Basis shall be adjusted effective immediately after such record date for the Rights Offering by multiplying the Exchange Basis in effect immediately prior to such record date by a fraction:

    
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    (a) the numerator of which shall be the number of Common Shares which would be outstanding after giving effect to the Rights Offering (assuming the exercise of all of the rights, options or warrants under the Rights Offering and assuming the exchange or conversion into Common Shares of all exchangeable or convertible securities issued upon exercise of such rights, options or warrants, if any), and

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

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

    (ii) a number of Common Shares determined by dividing

    (A) the amount equal to the aggregate consideration payable on the exercise of all of the rights, options and warrants under the Rights Offering plus the aggregate consideration, if any, payable on the exchange or conversion of the exchangeable or convertible securities issued upon exercise of such rights, options or warrants (assuming the exercise of all rights, options and warrants under the Rights Offering and assuming the exchange or conversion of all exchangeable or convertible securities issued upon exercise of such rights, options and warrants);

    by

    (B) the Current Market Price as of the record date for the Rights Offering.

    The resulting product, adjusted to the nearest 1/100th, shall thereafter be the Exchange Basis until further adjusted as provided in this Article 2.  Any Common Shares owned by or held for the account of the Company or any of its Subsidiaries or a partnership in which the Company is directly or indirectly a party to will be deemed not to be outstanding for the purpose of any computation.  If, at the date of expiry of the rights, options or warrants subject to the Rights Offering, less than all the rights, options or warrants have been exercised, then the Exchange Basis shall be readjusted effective immediately after the date of expiry to the Exchange Basis which would have been in effect on the date of expiry if only the rights, options or warrants issued had been those exercised.  If at the date of expiry of the rights of exchange or conversion of any securities issued pursuant to the Rights Offering less than all of such securities have been exchanged or converted into Common Shares, then the Exchange Basis shall be readjusted effective immediately after the date of expiry to the Exchange Basis which would have been in effect on the date of expiry if only the exchangeable or convertible securities issued had been those securities actually exchanged for or converted into Common Shares.

    
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    (3) If and whenever, at any time after the date hereof and prior to the Time of Expiry, the Company shall fix a record date for the issuance or distribution to all or substantially all the holders of its outstanding Common Shares of:

    (i) shares of the Company of any class other than Common Shares; or

    (ii) rights, options or warrants to acquire Common Shares or securities exchangeable for or convertible into Common Shares; or

    (iii) evidences of indebtedness; or

    (iv) cash, securities or any property or other assets,

    and if such issuance or distribution does not constitute a Dividend Paid in the Ordinary Course, a Common Share Reorganization or a Rights Offering (any of such non-excluded events being herein called a "Special Distribution"), the Exchange Basis shall be adjusted effective immediately after the record date for the Special Distribution by multiplying the Exchange Basis in effect on such record date by a fraction:

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

    (b) the denominator of which shall be:

    (A) the product of the number of Common Shares outstanding on such record date and the Current Market Price on such record date, less

    (B) the fair market value, as determined by action by the board of directors acting reasonably and in good faith (whose determination shall be conclusive), to the holders of the Common Shares of the shares, rights, options, warrants, evidences of indebtedness or property or other assets issued or distributed in the Special Distribution,

    provided that no such adjustment shall be made if the result of such adjustment would be to decrease the Exchange Basis in effect immediately before such record date.  The resulting product, adjusted to the nearest 1/100th, shall thereafter be the Exchange Basis until further adjusted as provided in this Article 2.  Any shares owned by or held for the account of the Company or its Subsidiaries or a partnership of which the Company is directly or indirectly a party to shall be deemed not to be outstanding for the purpose of any such computation.

    (4) If and whenever, at any time after the date hereof and prior to the Time of Expiry, there shall be a reclassification of the Common Shares at any time outstanding or change or exchange of the Common Shares into other shares or into other securities (other than a Common Share Reorganization), or a consolidation, amalgamation, plan of arrangement or merger of the Company with or into any other corporation or other entity (other than a consolidation, amalgamation, plan of arrangement or merger which does not result in any reclassification of the outstanding Common Shares or a change of the Common Shares into other shares), or a transfer (other than to a Subsidiary) of the undertaking or assets of the Company as an entirety or substantially as an entirety to another corporation or other entity (any of such events being herein called a "Capital Reorganization"), any Warrantholder who thereafter shall exercise his right to receive Warrant Shares pursuant to Warrant(s) shall be entitled to receive, and shall accept in lieu of the number of Warrant Shares to which such holder was theretofore entitled upon such exercise, the aggregate number of shares, other securities or other property resulting from the Capital Reorganization which such holder would have been entitled to receive as a result of such Capital Reorganization if, on the effective date or record date thereof, as the case may be, the Warrantholder had been the registered holder of the number of Warrant Shares to which such holder was theretofore entitled upon exercise.  If appropriate, adjustments shall be made as a result of any such Capital Reorganization in the application of the provisions set forth in this Article 2 with respect to the rights and interests thereafter of Warrantholders to the end that the provisions set forth in this Article 2 shall thereafter correspondingly be made applicable as nearly as may reasonably be in relation to any shares, other securities or other property thereafter deliverable upon the exercise of any Warrant.  Any such adjustment shall be made by and set forth in an indenture supplemental hereto approved by the directors and by the Warrant Agent and entered into pursuant to the provisions of this Indenture and shall for all purposes be conclusively deemed to be an appropriate adjustment.

    
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    (5) Any adjustment to the Exchange Basis as set forth herein shall also include a corresponding adjustment to the Exercise Price which shall be calculated by multiplying the Exercise Price by a fraction:  (a) the numerator of which shall be the Exchange Basis prior to the adjustment, and (b) the denominator of which shall be the Exchange Basis after the adjustment.

    2.14 Rules Regarding Calculation of Adjustment of Exchange Basis

    For the purposes of section 2.13:

    (1) The adjustments provided for in section 2.13 shall be cumulative and such adjustments shall be made successively whenever an event referred to in section 2.13 shall occur, subject to the following subsections of this section 2.14.

    (2) No adjustment in the:  (a) Exchange Basis shall be required unless such adjustment would result in a change of at least 0.01 of a Warrant Share based on the prevailing Exchange Basis; or (b) Exercise Price shall be required unless such adjustment would result in a change of at least 1%, provided that any adjustments which, except for the provisions of this subsection, would otherwise have been required to be made, shall be carried forward and taken into account in any subsequent adjustment.

    (3) No adjustment in the Exchange Basis shall be made in respect of any event described in section 2.13, other than the events referred to in paragraphs (ii) and (iii) of subsection (1) thereof, if Warrantholders are entitled to participate in such event on the same terms, mutatis mutandis, as if Warrantholders had exercised their Warrants prior to or on the effective date or record date of such event, any such participation being subject to regulatory approval.

    
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    (4) No adjustment in the Exchange Basis shall be made pursuant to section 2.13 in respect of the issue from time to time of Warrant Shares purchasable on exercise of the Warrants or in respect of the issue from time to time of a Dividend Paid in the Ordinary Course to holders of Common Shares who exercise an option or election to receive substantially equivalent dividends in Common Shares in lieu of receiving a cash dividend, and any such issue shall be deemed not to be a Common Share Reorganization.

    (5) If a dispute shall at any time arise with respect to adjustments provided for in section 2.13, such dispute shall, absent manifest error, be conclusively determined by the Company'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 directors and any further determination, absent manifest error, shall be binding upon the Company, the Warrant Agent and the Warrantholders.

    (6) If the Company shall set a record date to determine the holders of the Common Shares for the purpose of entitling them to receive any dividend or distribution or any subscription or purchase rights and shall, thereafter and before the distribution to such shareholders of any such dividend, distribution, or subscription or purchase rights, legally abandon its plan to pay or deliver such dividend, distribution, or subscription or purchase rights, then no adjustment in the Exchange Basis shall be required by reason of the setting of such record date.

    (7) In the absence of a resolution of the directors fixing a record date for a Rights Offering or Special Distribution, the Company shall be deemed to have fixed as the record date therefor the date on which the Rights Offering or Special Distribution is effected.

    (8) If the purchase price provided for in any Rights Offering (the "Rights Offering Price") is decreased, the Exchange Basis shall forthwith be changed so as to increase the Exchange Basis to such Exchange Basis as would have been obtained had the adjustment to the Exchange Basis made pursuant to subsection 2.13(2) upon the issuance of such Rights Offering been made upon the basis of the Rights Offering Price as so decreased, provided that the provisions of this subsection shall not apply to any decrease in the Rights Offering Price resulting from provisions in any such Rights Offering designed to prevent dilution if the event giving rise to such decrease in the Rights Offering Price itself requires an adjustment to the Exchange Basis pursuant to the provisions of section 2.13.

    (9) As a condition precedent to the taking of any action that would require any adjustment in any of the subscription rights pursuant to any of the Warrants, including the Exchange Basis, the Company shall take any corporate action which may, in the opinion of counsel, be necessary in order that the Company have unissued and reserved in its authorized capital and may validly and legally issue as fully paid and non-assessable all the shares or other securities that all the holders of such Warrants are entitled to receive on the exercise of all the subscription rights attaching thereto in accordance with the provisions thereof.

    (10) In case the Company, after the date hereof, shall take any action affecting any Common Shares, other than action described in section 2.13, which in the opinion of the directors acting reasonably and in good faith would materially affect the rights of Warrantholders, the Exchange Basis shall be adjusted in such manner, if any, and at such time, as the directors, in their sole discretion acting in good faith, may determine to be equitable in the circumstances.  Failure of the taking of action by the directors so as to provide for an adjustment in the Exchange Basis prior to the effective date of any action by the Company affecting the Common Shares shall be conclusive evidence that the directors have determined that it is equitable to make no adjustment in the circumstances.

    
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    (11) The Warrant Agent shall be entitled to act and rely on any adjustment calculations by the Company or the Company's Auditors.

    2.15 Postponement of Subscription

    In any case where the application of section 2.13 results in an increase in the number of Common Shares that are issuable upon exercise of the Warrants taking effect immediately after the record date for a specific event, if any Warrant is exercised after that record date and prior to completion of such specific event, the Company may postpone the issuance to the Warrantholder of the Warrant Shares to which he is entitled by reason of such adjustment, but such Warrant Shares shall be so issued and delivered to that holder upon completion of that event, with the number of such Warrant Shares calculated on the basis of the number of Warrant Shares on the date that the Warrant was exercised, adjusted for completion of that event and the Company shall deliver to the person or persons in whose name or names the Warrant Shares are to be issued an appropriate instrument evidencing the right of such person or persons to receive such Warrant Shares and the right to receive any dividends or other distributions which, but for the provisions of this section 2.15, such person or persons would have been entitled to receive in respect of such Warrant Shares from and after the date that the Warrant was exercised in respect thereof.

    2.16 Notice of Adjustment

    (1) At least 14 days prior to the effective date or record date, as the case may be, of any event which requires or might require adjustment pursuant to section 2.13, the Company shall:

    (a) file with the Warrant Agent a certificate of the Company specifying the particulars of such event (including the record date or the effective date for such event) and, if determinable, the required adjustment and the computation of such adjustment; and

    (b) give notice to the Warrantholders of the particulars of such event (including the record date or the effective date for such event) and, if determinable, the required adjustment.

    (2) In case any adjustment for which a notice in subsection 2.16(1) has been given is not then determinable, the Company shall promptly after such adjustment is determinable:

    (a) file with the Warrant Agent a computation of such adjustment; and

    (b) give notice to the Warrantholders of the adjustment.

    (3) The Warrant Agent may, absent manifest error, act and rely upon certificates and other documents filed by the Company pursuant to this section 2.16 for all purposes of the adjustment.

    
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    2.17 No Action after Notice

    The Company covenants with the Warrant Agent that it will not take any other corporate action which might deprive a Warrantholder of the opportunity of exercising the rights of acquisition pursuant thereto during the period of 10 days after the giving of the notice set forth in paragraph (b) of subsections 2.16(1) and (2).

    2.18 Purchase of Warrants for Cancellation

    The Company may, at any time and from time to time, purchase Warrants by invitation for tender, by private contract or otherwise (which shall include a purchase through an investment dealer or firm holding membership on a Canadian stock exchange) on such terms as the Company may determine.  All Warrants purchased pursuant to the provisions of this section 2.18 shall be forthwith delivered to, cancelled and destroyed by the Warrant Agent and shall not be reissued.  If required by the Company, the Warrant Agent shall furnish the Company with a certificate as to such destruction.

    2.19 Optional Purchases by the Company

    Subject to applicable law and prior approval of the TSXV, if required, the Company may from time to time purchase on any stock exchange (if then listed), in the open market, by private agreement 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 board of directors of the Company, 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 Company in its sole discretion may determine.  The Warrant Certificates representing the Warrants purchased pursuant to this section 2.19 shall forthwith be delivered to, cancelled and destroyed by the Warrant Agent.

    2.20 Protection of Warrant Agent

    Subject to Article 8, the Warrant Agent shall not:

    (a) at any time be under any duty or responsibility to any registered holder of Warrants to determine whether any facts exist that may require any adjustment contemplated by this Article 2, nor to verify the nature and extent of any such adjustment when made or the method employed in making the same;

    (b) be accountable with respect to the validity or value or the kind or amount of any Warrant Shares that may at any time be issued or delivered upon the exercise of the Warrants;

    (c) be responsible for any failure of the Company to make any cash payment 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 2; or

    (d) incur any liability or responsibility whatsoever or be in any way responsible for the consequence of any breach on the part of the Company of any of the representations, warranties or covenants of the Company or any acts or deeds of the agents or servants of the Company.

    
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    2.21 Legend on Warrant Certificate or Uncertificated Warrants and Warrant Share certificates under the Private Placement

    (1) Each Warrant Certificate originally issued to a Purchaser pursuant to the Private Placement and all certificates for Warrant Shares if issued prior to four months and one day from the Closing Date upon exercise of Warrants issued under the Private Placement, shall bear the following legend(s):

    "UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY [AND FOR THE WARRANTS INCLUDE:  OR ANY SECURITY ISSUED ON ITS EXERCISE] BEFORE AUGUST 30, 2021

    and, if applicable, the additional legend:

    WITHOUT PRIOR WRITTEN APPROVAL OF [Insert applicable stock exchange] AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL AUGUST 30, 2021.

    (2) Each Warrant originally issued and held by CDS and each Warrant issued in exchange therefor or in substitution thereof shall bear or be deemed to bear the following legend or such variations thereof as the Company may prescribe from time to time:

    "UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF CDS CLEARING AND DEPOSITORY SERVICES INC.  ("CDS") TO KWESST MICRO SYSTEMS INC.  (THE "ISSUER") OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IN RESPECT THEREOF IS REGISTERED IN THE NAME OF CDS & CO., OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS (AND ANY PAYMENT IS MADE TO CDS & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED HOLDER HEREOF, CDS & CO., HAS A PROPERTY INTEREST IN THE SECURITIES REPRESENTED BY THIS CERTIFICATE HEREIN AND IT IS A VIOLATION OF ITS RIGHTS FOR ANOTHER PERSON TO HOLD, TRANSFER OR DEAL WITH THIS CERTIFICATE."

    
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    2.22 U.S. Legend on Warrant Certificates and Warrant Share certificates

    (1) The Warrant Agent understands and acknowledges that the Warrants and the Warrant Shares issuable upon exercise of the Warrants have not been, and will not be, registered under the U.S. Securities Act or the securities laws of any state of the United States.

    (2) Each Warrant, in certificated form, originally issued in the United States or, to or for the account or benefit of, a U.S. Person, and all Warrant Shares issued upon exercise of such Warrants, and all certificates issued in exchange or in substitution thereof or upon transfer thereof, shall bear the following legend(s):

    "THE SECURITIES REPRESENTED HEREBY [for Warrants include:  AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF] HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR STATE SECURITIES LAWS.  THE HOLDER HEREOF, BY PURCHASING THESE SECURITIES, AGREES FOR THE BENEFIT OF KWESST MICRO SYSTEMS INC.  (THE "COMPANY") THAT THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S ("REGULATION S") UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(2) OR (D) ABOVE, A LEGAL OPINION SATISFACTORY TO THE COMPANY MUST FIRST BE PROVIDED TO TSX TRUST COMPANY.THESE SECURITIES MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON CANADIAN STOCK EXCHANGES."

    [if a Warrant:  "THIS WARRANT AND THE SECURITIES DELIVERABLE UPON EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON UNLESS THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY SUCH STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE.  "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT."]

    
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    provided that, if any Warrants or Warrant Shares issuable upon exercise of the Warrants are being sold in accordance with Rule 904 of Regulation S, the legend may be removed by providing to the Warrant Agent or the Transfer Agent, as applicable, (i) a declaration in the form attached hereto as Schedule "B" (or as the Company may prescribe from time to time in order to address changes in applicable laws) and (ii) if required by the Warrant Agent or the Transfer Agent, as applicable, an opinion of counsel, of recognized standing reasonably satisfactory to the Company, or other evidence reasonably satisfactory to the Company, that the proposed transfer may be effected without registration under the U.S. Securities Act;

    and provided, further, that, if any Warrants or Warrant Shares issuable upon exercise of the Warrants are being sold under Rule 144, the legend may be removed by delivering to the Warrant Agent or the Transfer Agent, as applicable, an opinion of counsel of recognized standing reasonably satisfactory to the Company, that the legend is no longer required under applicable requirements of the U.S. Securities Act or state securities laws;

    (3) If a Warrant or Warrant Share issued with respect to an exercise of Warrants is tendered for transfer and bears the legend set forth in subsection 2.22(2) herein and the holder thereof has not obtained the prior written consent of the Company, the Warrant Agent or the Transfer Agent, as the case may be, shall not register such transfer unless the holder complies with the requirements of the said subsection 2.22(2) hereof.

    ARTICLE 3 - EXERCISE OF WARRANTS

    3.1 Method of Exercise of Warrants

    (1) The registered Warrantholder may exercise the rights thereby conferred on them to acquire all or any part of the Warrant Shares to which such Warrant entitles the holder, by surrendering the Warrant Certificate representing such Warrants to the Warrant Agent at any time prior to the Time of Expiry at its principal stock transfer offices in the City of Toronto, Ontario (or at such additional place or places as may be decided by the Company from time to time with the approval of the Warrant Agent), with a duly completed and executed exercise form of the registered holder or his executors, administrators or other legal representative or his attorney duly appointed by an instrument in writing in the form and manner satisfactory to the Warrant Agent, substantially in the form endorsed on the Warrant Certificate specifying the number of Warrant Shares subscribed for together with a certified cheque, bank draft or money order in lawful money of Canada, payable to or to the order of the Company in an amount equal to the Exercise Price multiplied by the number of Warrant Shares subscribed for.  A Warrant Certificate with the duly completed and executed exercise form and payment of the Exercise Price shall be deemed to be surrendered only upon personal delivery thereof to or, if sent by mail or other means of transmission, upon actual receipt thereof by the Warrant Agent.

    
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    (2) Any exercise form referred to in subsection 3.1(1) shall be signed by the Warrantholder, or his executors, or administrators or other legal representative or his attorney duly appointed by an instrument in writing in the form and manner satisfactory to the Warrant Agent, shall specify the person(s) in whose name such Warrant Shares are to be issued, the address(es) of such person(s) and the number of Warrant Shares to be issued to each person, if more than one is so specified.  If any of the Warrant Shares subscribed for are to be issued to (a) person(s) other than the Warrantholder, the signatures set out in the exercise form referred to in subsection 3.1(1) shall be guaranteed by a Canadian Schedule 1 chartered bank or a medallion signature guarantee from a member of a recognized Signature Medallion Guarantee Program and the Warrantholder shall pay to the Company or the Warrant Agent all applicable transfer or similar taxes and the Company shall not be required to issue or deliver certificates evidencing Warrant Shares unless or until such Warrantholder shall have paid to the Company or the Warrant Agent on behalf of the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid or that no tax is due.

    (3) If, at the time of exercise of the Warrants, in accordance with the provisions of subsection 3.1(1), there are any trading restrictions on the Warrant Shares pursuant to applicable securities legislation or stock exchange requirements, the Company shall, on the advice of counsel, endorse any certificates representing the Warrant Shares to such effect.  The Warrant Agent is entitled to assume compliance with all applicable securities legislation unless otherwise notified in writing by the Company.

    (4) A Beneficial Owner who desires to exercise his Uncertificated Warrants, must do so by causing a Participant to deliver to CDS (at its office in the City of Toronto), on behalf of the Beneficial Owner at any time prior to the Time of Expiry, a written notice of the Beneficial Owner's intention to exercise Warrants (the "Exercise Notice").  Forthwith upon receipt by CDS of such notice, as well as payment for the Exercise Price, CDS shall deliver to the Warrant Agent confirmation of its intention to exercise Warrants (the "Confirmation") in a manner acceptable to the Warrant Agent, including by electronic means through the Book-Entry Only System.  CDS will initiate the exercise by way of the Confirmation and forward the aggregate Exercise Price electronically to the Warrant Agent and the Warrant Agent will execute the exercise by issuing to CDS through the Book-Entry Only System the Warrant Shares to which the exercising Beneficial Owner is entitled pursuant to the exercise.  Any expense associated with the preparation and delivery of Exercise Notices will be for the account of the Beneficial Owner exercising the Warrants.

    (5) An electronic exercise of the Uncertificated Warrants initiated by the Book-Entry Only Participant through the Book-Entry Only System shall constitute a representation to both the Company and the Warrant Agent that the beneficial holder at the time of exercise of such Uncertificated Warrants (a) is not in the United States; (b) is not a U.S. Person and is not exercising such Uncertificated Warrants on behalf of a U.S. Person or a person in the United States; and (c) did not execute or deliver the Exercise Notice of the owner's intention to exercise such Uncertificated Warrants in the United States.  If the Book-Entry Only Participant is not able to make or deliver the foregoing representation by initiating the electronic exercise of the Uncertificated Warrants, then such Warrants shall be withdrawn from the Book-Entry Only System, by the Book-Entry Only Participant and an individually registered Warrant Certificate shall be issued by the Warrant Agent to such beneficial owner or Book-Entry Only Participant, which certificate shall be impressed with the appropriate legends, and the exercise procedures set forth in Section 3.7 shall be followed.

    
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    (6) By causing a Participant to deliver notice to CDS, a Beneficial Owner shall be deemed to have irrevocably surrendered his Warrants so exercised and appointed such Participant to act as his or her exclusive settlement agent with respect to the exercise and the receipt of Warrant Shares in connection with the obligations arising from such exercise.

    (7) Any notice which CDS determines to be incomplete, not in proper form or not duly executed shall for all purposes be void and of no effect and the exercise to which it relates shall be considered for all purposes not to have been exercised thereby.  A failure by a Participant to exercise or to give effect to the settlement thereof in accordance with the Beneficial Owner's instructions will not give rise to any obligations or liability on the part of the Company or Warrant Agent to the Participant or the Beneficial Owner.

    3.2 No Fractional Shares

    Under no circumstances shall the Company be obliged to issue any fractional Warrant Shares or any cash or other consideration in lieu thereof upon the exercise of one or more Warrants.  To the extent that the holder of one or more Warrants would otherwise have been entitled to receive on the exercise or partial exercise thereof a fraction of a Warrant Share, that holder may exercise that right in respect of the fraction only in combination with another Warrant or Warrants that in the aggregate entitle the holder to purchase a whole number of Warrant Shares.

    3.3 Effect of Exercise of Warrants

    (1) Upon compliance by the Warrantholder with the provisions of section 3.1, the Warrant Shares subscribed for shall be deemed to have been issued and the person to whom such Warrant Shares are to be issued shall be deemed to have become the holder of record of such Warrant Shares on the Exercise Date unless the transfer registers of the Company for the Common Shares shall be closed on such date, in which case the Warrant Shares subscribed for shall be deemed to have been issued and such person shall be deemed to have become the holder of record of such Warrant Shares on the date on which such transfer registers are reopened.

    (2) Within three Business Days following the due exercise of a Warrant pursuant to section 3.1 and forthwith after the Time of Expiry, the Warrant Agent shall deliver to the Company a notice setting forth the particulars of all Warrants exercised, if any, and the persons in whose names the Warrant Shares are to be issued (as applicable) and the addresses of such holders of the Warrant Shares.

    (3) Within three Business Days of the due exercise of a Warrant pursuant to section 3.1, the Company shall cause the Transfer Agent to issue, within such three Business Day period, to CDS through the Book-Entry Only System the Warrant Shares (which shall include Warrant Shares issued to a Purchaser that is a Qualified Institutional Buyer pursuant to Section 3.7(2)(b)) to which the exercising Warrantholder is entitled pursuant to the exercise or mail to the person in whose name the Warrant Shares so subscribed for are to be issued, as specified in the exercise form completed on the Warrant Certificate, at the address specified in such exercise form, a certificate or certificates for the Warrant Shares to which the Warrantholder is entitled and, if applicable, shall cause the Warrant Agent to mail a Warrant Certificate representing any Warrants not then exercised.

    
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    3.4 Cancellation of Warrants

    All Warrants surrendered to the Warrant Agent pursuant to sections 2.6, 2.8(2), 2.10 or 3.1 shall be cancelled by the Warrant Agent and the Warrant Agent shall record the cancellation of such Warrants on the register of holders maintained by the Warrant Agent pursuant to subsection 2.8(1).  The Warrant Agent shall, if required by the Company, furnish the Company with a certificate identifying the Warrants so cancelled.  All Warrants that have been duly cancelled shall be without further force or effect whatsoever.

    3.5 Subscription for less than Entitlement

    The holder of any Warrant may subscribe for and purchase a whole number of Warrant Shares that is less than the number that the holder is entitled to purchase pursuant to a surrendered Warrant.  In such event, the holder thereof shall be entitled to receive a new Warrant in respect of the balance of Warrants that were not then exercised, such new Warrant to contain the same legend as provided for in subsections 2.21(1) and (2) and 2.22(2) if applicable.

    3.6 Expiration of Warrant

    After the Time of Expiry, all rights under any Warrant in respect of which the right of subscription and purchase herein and therein provided for shall not theretofore have been exercised shall wholly cease and terminate and such Warrant shall be void and of no effect.

    3.7 Prohibition on Exercise by U.S. Persons; Exception

    (1) Warrants may not be exercised within the United States or by or on behalf of, or for the account or benefit of, any U.S. Person or any person in the United States unless an exemption is available from the registration requirements of the U.S. Securities Act and applicable state securities laws and the holder of the Warrants has furnished an opinion of counsel of recognized standing in form and substance satisfactory to the Company to such effect; provided that a Qualified Institutional Buyer that purchased the Units in the Private Placement will not be required to deliver an opinion of counsel in connection with the exercise of Warrants forming part of the Units, provided it provides the certification required in paragraph 3.7(2)(b) below.  The Warrant Agent shall be entitled to rely upon the registered address of the Warrantholder as set forth in such Warrantholder's register for the purchase of Units in determining whether the address is in the United States or the Warrantholder is a U.S. Person.

    (2) Any holder which exercises any Warrants shall provide to the Company either:

    (a) a written certification that such holder (a) at the time of exercise of the Warrants is not in the United States; (b) is not a U.S. Person and is not exercising the Warrants on behalf of a U.S. Person or person in the United States; and (c) did not execute or deliver the exercise form for the Warrants in the United States; and (d) has in all other aspects complied with the terms of an "offshore transaction" within the meaning of Regulation S under the U.S. Securities Act;

    
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    (b) a written certification that the holder (a) purchased the Warrants as a part of the Units in the Private Placement; (b) is exercising the Warrants solely for its own account or for the benefit of a U.S. Person or a person in the United States for whose account such holder acquired the Warrants as a part of the Units in the Private Placement and for whose account such holders exercises sole investment discretion; (c) was and is, and any beneficial purchaser for whose account such holder acquired the Warrant and is exercising the Warrants was and is, a Qualified Institutional Buyer both on the date the Units were purchased in the Private Placement and on the Exercise Date; and (d) the representations and warranties made by the holder or any beneficial purchaser, as the case may be, to the Company in connection with the acquisition of the Units in the Private Placement remain true and correct on the Exercise Date;

    (c) a written certification that the holder (a) purchased the Warrants as a part of the Units in the Private Placement; (b) is exercising the Warrants solely for its own account or for the benefit of a U.S. Person or a person in the United States for whose account such holder acquired the Warrants as a part of the Units in the Private Placement and for whose account such holders exercises sole investment discretion; (c) was and is, and any beneficial purchaser for whose account such holder acquired the Warrant and is exercising the Warrants was and is an Accredited Investor both on the date the Units were purchased in the Private Placement and on the Exercise Date; and (d) the representations and warranties made by the holder or any beneficial purchaser, as the case may be, to the Company in connection with the acquisition of the Units in the Private Placement remain true and correct on the Exercise Date; or

    (d) a written opinion of counsel of recognized standing in form and substance satisfactory to the Company to the effect that an exemption from the registration requirements of the U.S. Securities Act and applicable state securities laws is available for the issuance of the Warrant Shares issuable on exercise of the Warrants.

    (3) No Warrant Shares will be registered or delivered to an address in the United States unless the holder of Warrants complies with the requirements of paragraphs (b), (c) or (d) of subsection 3.7(2).

    
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    ARTICLE 4 - COVENANTS

    4.1 General Covenants of the Company

    The Company represents, warrants and covenants with the Warrant Agent for the benefit of the Warrant Agent and the Warrantholders that:

    (1) The Company will at all times, so long as any Warrants remain outstanding, maintain its existence, unless otherwise inconsistent with the fiduciary duties of the board of directors of the Company, and will carry on and conduct its business in a prudent manner in accordance with industry standards and good business practice, and will keep or cause to be kept proper books of account in accordance with applicable law until the Time of Expiry.

    (2) The Company is duly authorized to create and issue the Warrants to be issued hereunder and the Warrants, when issued, Authenticated and countersigned, as applicable, will be legal, valid, binding and enforceable obligations of the Company.

    (3) The issue of the Warrants and the issue of the Warrant Shares issuable upon exercise thereof does not and will not, so long as any Warrants remain outstanding, result in a breach by the Company of, and does not and will not create a state of facts which, after notice or lapse of time or both, will result in a breach by the Company of any Applicable Legislation, and does not and will not conflict with any of the terms, conditions or provisions of the articles, by-laws or resolutions of the Company or any trust indenture, loan agreement or any other agreement or instrument to which the Company is a party or by which it is contractually bound on the date of this Indenture.

    (4) Unless otherwise inconsistent with the fiduciary duties of the board of directors of the Company, the Company will use its commercially reasonable efforts to maintain the listing of the Common Shares on the TSXV or such other recognized stock exchange or quotation system, so long as any Warrants remain outstanding, and to have the Warrant Shares issued pursuant to the exercise of the Warrants listed and posted for trading on the TSXV as expeditiously as possible.

    (5) Unless otherwise inconsistent with the fiduciary duties of the board of directors of the Company, use commercially reasonable efforts to maintain its status as a "reporting issuer" (or the equivalent thereof) in each of the provinces of Canada in which it is currently a reporting issuer, not in default of the requirements of the applicable Securities Laws of such province until the Time of Expiry.

    (6) The Company will reserve and keep available a sufficient number of Warrant Shares for issuance upon the exercise of Warrants issued by the Company.

    (7) The Company will cause the Warrant Shares from time to time subscribed for pursuant to the Warrants issued by the Company hereunder, in the manner herein provided, to be duly issued in accordance with the Warrants and the terms hereof.

    (8) The Company will cause the certificates representing the Warrant Shares from time to time to be acquired, pursuant to the Warrants in the manner herein provided, to be duly issued and delivered in accordance with the Warrants and the terms hereof.

    
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    (9) All Warrant Shares that shall be issued by the Company upon exercise of the rights provided for herein shall be issued as fully paid and non-assessable.

    (10) If the Company is a party to any transaction in which the Company is not the continuing corporation, the Company shall use its commercially reasonable efforts to obtain all consents which may be necessary or appropriate to enable the continuing corporation to give effect to this Indenture.

    (11) The Company will perform and carry out all of the acts or things to be done by it as provided in this Indenture.

    (12) The Company will promptly advise the Warrant Agent and the Warrantholders in writing of any breach or default under the terms of this Indenture no later than five Business Days following the occurrence of such breach or default.

    4.2 Securities Qualification Requirements

    (1) If, in the opinion of counsel, any instrument is required to be filed with, or any permission, order or ruling is required to be obtained from, any securities administrator or any other step is required under any federal or provincial law of Canada before the Warrant Shares may be issued or delivered to a Warrantholder, the Company covenants that it will use its best efforts to file such instrument, obtain such permission, order or ruling or take all such other actions, at its expense, as is required or appropriate in the circumstances.

    (2) The Company will give written notice of the issue of Warrant Shares pursuant to the exercise of Warrants, in such detail as may be required, to each securities administrator in each jurisdiction in which there is legislation requiring the giving of any such notice.

    4.3 Warrant Agent's Remuneration and Expenses

    The Company covenants that it will pay to the Warrant Agent from time to time the agreed remuneration for its services hereunder and will pay or reimburse the Warrant Agent upon its request for all reasonable expenses and disbursements of the Warrant Agent in the administration or execution of the duties and obligations hereby created (including the reasonable compensation and the disbursements of its counsel and all other advisers, experts, accountants and assistants not regularly in its employ) both before any default hereunder and thereafter until all duties of the Warrant Agent hereunder shall be finally and fully performed, except any such expense or disbursement in connection with or related to or required to be made as a result of the gross negligence, wilful misconduct, bad faith or fraud of the Warrant Agent.  Any amount owing hereunder and remaining unpaid after 30 days from the invoice date will bear interest at the then current rate charged by the Warrant Agent against unpaid invoices and shall be payable upon demand.  This Section shall survive the resignation or removal of the Warrant Agent and/or the termination of this Indenture.

    4.4 Performance of Covenants by Warrant Agent

    Subject to section 8.7, if the Company shall fail to perform any of its covenants contained in this Indenture and the Company has not rectified such failure within 25 Business Days after either giving notice of such default pursuant to subsection 4.1(12) or receiving written notice from the Warrant Agent of such failure, the Warrant Agent may notify the Warrantholders of such failure on the part of the Company or may itself perform any of the said covenants capable of being performed by it, but shall be under no obligation to perform said covenants.  All reasonable sums expended or disbursed by the Warrant Agent in so doing shall be repayable as provided in section 4.3.  No such performance, expenditure or advance by the Warrant Agent shall be deemed to relieve the Company of any default hereunder or of its continuing obligations under the covenants herein contained.

    
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    ARTICLE 5 - ENFORCEMENT

    5.1 Suits by Warrantholders

    Subject to section 6.10, all or any of the rights conferred upon a Warrantholder by the terms of the Warrants held by him and/or this Indenture may be enforced by such Warrantholder by appropriate legal proceedings but without prejudice to the right that is hereby conferred upon the Warrant Agent to proceed in its own name to enforce each and all of the provisions herein contained for the benefit of the holders of the Warrants from time to time outstanding.  The Warrant Agent shall also have the power at any time and from time to time to institute and to maintain such suits and proceedings as it may reasonably be advised shall be necessary or advisable to preserve and protect its interests and the interests of the Warrantholders.

    Subject to applicable law, the Warrant Agent and, by acceptance of the Warrant Certificate or Uncertificated Warrant, as applicable, and as part of the consideration for the issue of the Warrants, the Warrantholders hereby waive and release any right, cause of action or remedy now or hereafter existing in any jurisdiction against any person in its capacity as an incorporator or any past, present or future shareholder, director, officer, employee or agent of the Company for the creation and issue of the shares pursuant to any warrant or any covenant, agreement, representation or warranty by the Company herein or contained in the Warrant Certificate or Uncertificated Warrant, as applicable.

    5.2 Limitation of Liability

    The obligations hereunder (including without limitation under subsection 8.7(5)) are not personally binding upon, nor shall resort hereunder be had to, the private property of any of the past, present or future directors or shareholders of the Company or any of the past, present or future officers, employees or agents of the Company, but only the property of the Company (or any successor person) shall be bound in respect hereof.

    ARTICLE 6 - MEETINGS OF WARRANTHOLDERS

    6.1 Right to Convene Meetings

    The Warrant Agent may at any time and from time to time, and shall on receipt of a written request of the Company or of a Warrantholders' Request, convene a meeting of the Warrantholders provided that the Warrant Agent has been provided with sufficient funds and is indemnified to its reasonable satisfaction by the Company or by the Warrantholders signing such Warrantholders' Request against the costs, charges, expenses and liabilities that may be incurred in connection with the calling and holding of such meeting.  If within 7 Business Days after the receipt of a written request of the Company or a Warrantholders' Request, funding and indemnity given as aforesaid the Warrant Agent fails to give the requisite notice specified in section 6.2 to convene a meeting, the Company or such Warrantholders, as the case may be, may convene such meeting.  Every such meeting shall be held in the City of Toronto, Ontario or at such other place as may be approved or determined by the Warrant Agent.

    
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    6.2 Notice

    At least 14 days prior notice of any meeting of Warrantholders shall be given to the Warrantholders at the expense of the Company in the manner provided for in section 9.2 and a copy of such notice shall be delivered to the Warrant Agent unless the meeting has been called by it, and to the Company unless the meeting has been called by it.  Such notice shall state the date, time and place of the meeting, the general nature of the business to be transacted 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 6.  The notice convening any such meeting may be signed by an appropriate officer of the Warrant Agent or of the Company or the person designated by such Warrantholders, as the case may be.

    6.3 Chairman

    The Warrant Agent may nominate in writing an individual (who need not be a Warrantholder) to be chairman of the meeting and if no individual is so nominated, or if the individual so nominated is not present within 15 minutes after the time fixed for the holding of the meeting, the Warrantholders present in person or by proxy shall appoint an individual present to be chairman of the meeting.  The chairman of the meeting need not be a Warrantholder.

    6.4 Quorum

    Subject to the provisions of section 6.11, at any meeting of the Warrantholders a quorum shall consist of two Warrantholders present in person or represented by proxy and representing at least 20% of the aggregate number of Warrants then outstanding.  If a quorum of the Warrantholders shall not be present within one-half hour 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 to the extent possible and, subject to the provisions of section 6.11, no notice of the adjournment need be given.  Any business may be brought before or dealt with at an adjourned meeting that might have been dealt with at the original meeting in accordance with the notice calling the same.  At the adjourned meeting the Warrantholders present in person or represented by proxy shall form a quorum and may transact the business for which the meeting was originally convened, notwithstanding that they may not represent at least 20% of the aggregate number of Warrants then unexercised and outstanding.  No business shall be transacted at any meeting, except an adjourned meeting as described above, unless a quorum is present at the commencement of business.

    
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    6.5 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.

    6.6 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.

    6.7 Poll and Voting

    On every extraordinary resolution, and when demanded by the chairman or by one or more of the Warrantholders acting in person or by proxy on any other question submitted to a meeting and after a vote by show of hands, 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 Warrant then held 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.

    6.8 Regulations

    Subject to the provisions of this Indenture, the Warrant Agent or the Company with the approval of the Warrant Agent may from time to time make and from time to time vary such regulations as it shall consider necessary or appropriate:

    (a) for the deposit of instruments appointing proxies at such place and time as the Warrant Agent, the Company or the Warrantholders convening the meeting, as the case may be, may in the notice convening the meeting direct;

    (b) for the deposit of instruments appointing proxies at some approved place other than the place at which the meeting is to be held and enabling particulars of such instruments appointing proxies to be mailed or forwarded via facsimile or email before the meeting to the Company or to the Warrant Agent at the place where the same is to be held and for the voting of proxies so deposited as though the instruments themselves were produced at the meeting;

    
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    (c) for the form of instrument appointing a proxy and the manner in which the form of proxy may be executed; and

    (d) generally for the calling of meetings of Warrantholders and the conduct of business thereat including setting a record date for Warrantholders entitled to receive notice of or to vote at such meeting.

    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 6.9), shall be Warrantholders or persons holding proxies of Warrantholders.

    6.9 Company, Warrant Agent and Counsel may be Represented

    The Company and the Warrant Agent, by their respective directors, officers and employees and the counsel for each of the Company, the Warrantholders and the Warrant Agent may attend any meeting of the Warrantholders and speak thereat but shall not be entitled to vote unless in their capacities as Warrantholders or proxies therefor.

    6.10 Powers Exercisable by Extraordinary Resolution

    In addition to all other powers conferred upon them by any other provisions of this Indenture or by law, the Warrantholders at a meeting shall have the power, exercisable from time to time by extraordinary resolution:

    (a) to agree with the Company to any modification, alteration, compromise or arrangement of the rights of Warrantholders and/or the Warrant Agent in its capacity as Warrant Agent hereunder (subject to the Warrant Agent's approval) or on behalf of the Warrantholders against the Company, whether such rights arise under this Indenture or the Warrants or otherwise;

    (b) to amend, modify or repeal any extraordinary resolution previously passed or sanctioned by the Warrantholders;

    (c) to direct or authorize the Warrant Agent (subject to the Warrant Agent receiving funding and indemnity) to enforce any of the covenants on the part of the Company contained in this Indenture or the Warrants 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, authorize and direct the Warrant Agent to waive any default on the part of the Company in complying with any provisions of this Indenture or the Warrants either unconditionally or upon any conditions specified in such extraordinary resolution;

    
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    (e) to restrain any Warrantholder from taking or instituting any suit, action or proceeding against the Company for the enforcement of any of the covenants on the part of the Company contained in this Indenture or the Warrants or to enforce any of the rights of the Warrantholders; and

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

    6.11 Meaning of "Extraordinary Resolution"

    (1) The expression "extraordinary resolution" when used in this Indenture means, subject as hereinafter in this section 6.11 and in section 6.14 provided, a resolution proposed at a meeting of Warrantholders duly convened for that purpose and held in accordance with the provisions of this Article 6 at which there are present in person or by proxy Warrantholders representing at least 20% of the aggregate number of all the then outstanding Warrants and passed by the affirmative votes of Warrantholders representing not less than 662/3% of the aggregate number of all the then outstanding Warrants represented at the meeting and voted on the poll upon such resolution.

    (2) If, at any meeting called for the purpose of passing an extraordinary resolution, Warrantholders representing at least 20% of the aggregate number of all the then outstanding Warrants are not present in person or by proxy within one-half hour 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 10 Business Days later, and to such place and time as may be appointed by the chairman.  Not less than three Business Days prior notice shall be given of the time and place of such adjourned meeting in the manner provided in sections 9.1 and 9.2.  Such notice shall state that at the adjourned meeting the Warrantholders present in person or represented 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 represented 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 6.11(1) shall be an extraordinary resolution within the meaning of this Indenture notwithstanding that Warrantholders representing at least 20% of all the then outstanding Warrants are not present in person or represented by proxy at such adjourned meeting.

    (3) Votes on an extraordinary resolution shall always be given on a poll and no demand for a poll on an extraordinary resolution shall be necessary.

    6.12 Powers Cumulative

    It is hereby declared and agreed that 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 powers or combination of powers then or thereafter from time to time.

    
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    6.13 Minutes

    Minutes of all resolutions and proceedings at every meeting of Warrantholders as aforesaid shall be made and duly entered in books to be provided for that purpose by the Warrant Agent at the expense of the Company and any minutes as aforesaid, if signed by the chairman of the meeting at which resolutions were passed or proceedings had, or by the chairman of the next succeeding meeting of the Warrantholders, shall be prima facie evidence of the matters therein stated and, until the contrary is proved, every 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, to have been duly passed and taken.

    6.14 Instruments in Writing

    All actions that may be taken and all powers that may be exercised by the Warrantholders at a meeting held as provided in this Article 6 also may be taken and exercised by Warrantholders representing a majority, or in the case of an extraordinary resolution at least 662/3%, of the aggregate number of all 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.

    6.15 Binding Effect of Resolutions

    Every resolution and every extraordinary resolution passed in accordance with the provisions of this Article 6 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 6.14 shall be binding upon all the Warrantholders, whether signatories thereto or not, and each and every Warrantholder and the Warrant Agent (subject to the provisions for indemnity herein contained) shall be bound to give effect accordingly to every such resolution and instrument in writing.  In the case of an instrument in writing, the Warrant Agent shall give notice in the manner contemplated in sections 9.1 and 9.2 of the effect of the instrument in writing to all Warrantholders and the Company as soon as is reasonably practicable.

    6.16 Holdings by the Company or Subsidiaries of the Company Disregarded

    In determining whether Warrantholders 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 Company or its Subsidiaries or in partnership of which the Company is directly or indirectly a party to shall be disregarded.  The Company shall provide, upon the written request of the Warrant Agent, a certificate as to the registration particulars of any Warrants held by the Company.

    
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    ARTICLE 7 - SUPPLEMENTAL INDENTURES AND SUCCESSOR COMPANIES

    7.1 Provision for Supplemental Indentures for Certain Purposes

    From time to time the Company (if properly authorized by its directors) and the Warrant Agent may, subject to the provisions hereof, and they shall, when so directed hereby, execute and deliver by their proper officers, indentures or instruments supplemental hereto, which thereafter shall form part hereof, for any one or more or all of the following purposes:

    (a) providing for the issuance of additional Warrants, including Warrants in excess of the number set out in Section 2.1 hereunder and any consequential amendments hereto as may be required by the Warrant Agent, relying on the advice (but for certainty, not an opinion) of counsel;

    (b) setting forth adjustments in the application of Article 2;

    (c) adding to the provisions hereof such additional covenants and enforcement provisions as, in the opinion of counsel are necessary or advisable, provided that the same are not in the opinion of the Warrant Agent, relying on the advice of counsel, prejudicial to the interests of the Warrantholders as a group;

    (d) giving effect to any extraordinary resolution passed as provided in Article 6;

    (e) making such provisions not inconsistent with this Indenture as may be necessary or desirable with respect to matters or questions arising hereunder provided that such provisions are not, in the opinion of the Warrant Agent, relying on the advice of counsel, prejudicial to the interests of the Warrantholders as a group;

    (f) adding to or amending the provisions hereof in respect of the transfer of Warrants, making provision for the exchange of Warrants and making any modification in the form of the Warrant Certificate that does not affect the substance thereof;

    (g) amending any of the provisions of this Indenture or relieving the Company from any of the obligations, conditions or restrictions herein contained, provided that no such amendment or relief shall be or become operative or effective if, in the opinion of the Warrant Agent, relying on the advice of counsel, such amendment or relief impairs any of the rights of the Warrantholders as a group or of the Warrant Agent, and provided further that the Warrant Agent may in its sole discretion decline to enter into any supplemental indenture that in its opinion may not afford adequate protection to the Warrant Agent when the same shall become operative; and

    (h) for any other purpose not inconsistent with the terms of this Indenture, including the correction or rectification of any ambiguities, defective or inconsistent provisions, errors or omissions herein, provided that, in the opinion of the Warrant Agent, relying on the advice of counsel, the rights of the Warrant Agent and the Warrantholders as a group are in no way prejudiced thereby.

    
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    7.2 Successor Companies

    In the case of the amalgamation, consolidation, arrangement, merger or transfer of the undertaking or assets of the Company as an entirety or substantially as an entirety to another person (a "successor company"), the successor company resulting from the amalgamation, consolidation, arrangement, merger or transfer (if not the Company) shall be bound by the provisions hereof and all obligations for the due and punctual performance and observance of each and every covenant and obligation contained in this Indenture to be performed by the Company and the successor company shall by supplemental indenture satisfactory in form to the Warrant Agent and executed and delivered to the Warrant Agent, expressly assume those obligations.

    ARTICLE 8 - CONCERNING THE WARRANT AGENT

    8.1 Indenture Legislation

    (1) If and to the extent that any provision of this Indenture limits, qualifies or conflicts with a mandatory requirement of Applicable Legislation, such mandatory requirement shall prevail.

    (2) The Company and the Warrant Agent agree that each will at all times in relation to this Indenture and any action to be taken hereunder observe and comply with and be entitled to the benefit of Applicable Legislation.

    8.2 Rights and Duties of Warrant Agent

    (1) The Warrant Agent accepts the duties and responsibilities under this Indenture, solely as custodian, bailee and agent.  No trust is intended to be, or is or will be, created hereby and the Warrant Agent shall owe no duties hereunder as a trustee.

    (2) In the exercise of the rights and duties prescribed or conferred by the terms of this Indenture, the Warrant Agent shall act honestly and in good faith and shall exercise the degree of care, diligence and skill that a reasonably prudent warrant agent would exercise in comparable circumstances.  No provision of this Indenture shall be construed to relieve the Warrant Agent from, or require any other person to indemnify the Warrant Agent against liability for its own gross negligence, wilful misconduct, bad faith or fraud.

    (3) The Warrant Agent shall not be bound to do or take any act, action or proceeding for the enforcement of any of the obligations of the Company under this Indenture unless and until it shall have received a Warrantholders' Request specifying the act, action or proceeding that the Warrant Agent is requested to take.  The obligation of the Warrant Agent to commence or continue any act, action or proceeding for the purpose of enforcing any rights of the Warrant Agent or the Warrantholders hereunder shall be conditional upon the Warrantholders furnishing, when required by notice in writing by the Warrant Agent, sufficient funds to commence or continue such act, action or proceeding and an indemnity reasonably satisfactory to the Warrant Agent and its counsel to protect and hold harmless the Warrant Agent, its officers, directors, employees, agents, successors and assigns against the costs, charges and expenses and liabilities to be incurred thereby and any loss and damage it may suffer by reason thereof.  None of the provisions contained in this Indenture shall require the Warrant Agent to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties or in the exercise of any of its rights or powers unless indemnified and funded as aforesaid.

    
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    (4) The Warrant Agent may, before commencing any act, action or proceeding, or at any time during the continuance thereof require the Warrantholders at whose instance it is acting to deposit with the Warrant Agent the Warrants held by them, for which Warrants the Warrant Agent shall issue receipts.

    (5) Every provision of this Indenture that, by its terms, relieves the Warrant Agent of liability or entitles it to rely upon any evidence submitted to it is subject to the provisions of Applicable Legislation, this section 8.2 and section 8.3.

    (6) The Warrant Agent shall not be bound to give any notice or do or take any act, action or proceeding by virtue of the powers conferred on it hereunder unless and until it shall have been required to do so under the terms hereof; nor shall the Warrant Agent be required to take notice of any default hereunder, unless and until notified in writing of such default, which notice shall specifically set out the default desired to be brought to the attention of the Warrant Agent and in the absence of such notice the Warrant Agent may for all purposes of this Indenture conclusively assume that no default has occurred or been made in the performance or observance of the representations, warranties and covenants, agreements or conditions herein contained.  Any such notice shall in no way limit any discretion herein given to the Warrant Agent to determine whether or not the Warrant Agent shall take action with respect to any default.

    (7) In this Indenture, whenever confirmations or instructions are required to be given to the Warrant Agent, in order to be valid, such confirmations and instructions shall be in writing.

    8.3 Evidence, Experts and Advisers

    (1) In addition to the reports, certificates, opinions and other evidence required by this Indenture, the Company shall furnish to the Warrant Agent such additional evidence of compliance with any provision hereof and in such form as may be prescribed by Applicable Legislation or as the Warrant Agent may reasonably require by written notice to the Company.

    (2) In the exercise of its rights and duties hereunder, the Warrant Agent may, if it is acting in good faith, act and rely absolutely as to the truth of the statements and the accuracy of the opinions expressed therein, upon statutory declarations, opinions, reports, written requests, consents, or orders of the Company, certificates of the Company or other evidence furnished to the Warrant Agent pursuant to any provision hereof or of Applicable Legislation or pursuant to a request of the Warrant Agent.  The Warrant Agent shall be under no responsibility in respect of the validity of this Indenture or the execution and delivery hereof by or on behalf of the Company or in respect of the validity or the execution of any Warrant Certificate by the Company and issued hereunder, nor shall it be responsible for any breach by the Company of any covenant or condition contained in this Indenture or in any such Warrant Certificate; nor shall it by any act hereunder be deemed to make any representation or warranty as to the authorization or reservation of any securities to be issued upon the right to acquire provided for in this Indenture and/or in any Warrant or as to whether any securities will when issued be duly authorized or be validly issued and fully paid and non-assessable.

    
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    (3) Whenever Applicable Legislation requires that evidence referred to in subsection 8.3(1) be in the form of a statutory declaration, the Warrant Agent may accept the statutory declaration in lieu of a certificate of the Company required by any provision hereof.  Any such statutory declaration may be made by one or more of the directors or officers of the Company and may be relied upon by the Warrant Agent in good faith without further inquiry.

    (4) Proof of the execution of an instrument in writing, including a Warrantholders' Request, by any Warrantholder may be made by a certificate of a notary public or other person with similar powers that the person signing such instrument acknowledged to him the execution thereof, or by an affidavit of a witness to such execution or in any other manner which the Warrant Agent may consider adequate and in respect of a corporate Warrantholder, shall include a certificate of incumbency of such Warrantholder together with a certified resolution authorizing the person who signs such instrument to sign such instrument.

    (5) The Warrant Agent may act and rely and shall be protected in acting and relying upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, letter, or other paper document believed by it to be genuine and to have been signed, sent or presented by or on behalf of the proper party or parties.  The Warrant Agent has sole discretion and shall be protected in acting and relying upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, letter or other paper document received in facsimile or email form.

    (6) The Warrant Agent may employ or retain such counsel, accountants, engineers, 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 any counsel and shall not be responsible for any misconduct on the part of any of them who has been selected with due care by the Warrant Agent.  Any reasonable remuneration paid by the Warrant Agent shall be paid by the Company in accordance with section 4.3.

    (7) The Warrant Agent may act and rely and shall be protected in acting and relying in good faith on the opinion or advice of or information obtained from any counsel, accountant, appraiser, engineer or other expert or advisor, whether retained or employed by the Company or the Warrant Agent, in relation to any matter arising in fulfilling its duties and obligations hereof.

    (8) The Warrant Agent may, as a condition precedent to any action to be taken by it under this Indenture, require such opinions, statutory declarations, reports, certificates or other evidence as it, acting reasonably, considers necessary or advisable in the circumstances.

    (9) The Warrant Agent is not required to expend or place its own funds at risk in executing its duties and obligations.

    
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    8.4 Securities, Documents and Monies Held by Warrant Agent

    Any securities, documents of title, monies or other instruments that may at any time be held by the Warrant Agent subject to the duties and obligations hereof, for the benefit of the Company, may be placed in the deposit vaults of the Warrant Agent or of any Schedule 1 Canadian chartered bank for safekeeping with any such bank or the Warrant Agent.  All interest or other income received by the Warrant Agent in respect of such deposits and investments shall, subject to section 4.4, belong to the Company and shall be paid to the Company upon discharge of this Indenture.

    8.5 Actions by Warrant Agent to Protect Interests

    Subject to the provisions of this Indenture and Applicable Legislation, the Warrant Agent shall have the power to institute and to maintain such actions and proceedings as it may consider necessary or expedient to preserve, protect or enforce its interests and the interests of the Warrantholders.

    8.6 Warrant Agent not Required to Give Security

    The Warrant Agent shall not be required to give any bond or security in respect of the execution of the duties and obligations of this Indenture or otherwise, subject to section 8.8.

    8.7 Protection of Warrant Agent

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

    (1) The Warrant Agent shall not be liable for or by reason of any representations, statements of fact or recitals in this Indenture or in the Warrants (except the representation contained in section 8.9 or in the certificate of the Warrant Agent on the Warrants) or be required to verify the same and all such statements of fact or recitals are and shall be deemed to be made by the Company (except the representation contained in section 8.9 or in the certificate of the Warrant Agent on the Warrants).

    (2) Nothing herein contained shall impose any obligation on the Warrant Agent to see to or to require evidence of the registration or filing (or renewal thereof) of this Indenture or any instrument ancillary or supplemental hereto.

    (3) The Warrant Agent shall not be bound to give notice to any person or persons of the execution hereof.

    (4) The Warrant Agent shall not incur any liability or responsibility whatsoever or be in any way responsible for the consequence of any breach on the part of the Company of any of the covenants or warranties herein contained or of any acts of any directors, officers, employees, agents or servants of the Company.

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

    
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    (6) If any of the funds provided to the Warrant Agent hereunder are received by it in the form of an uncertified cheque or bank draft, the Warrant Agent shall delay the release of such funds and the related Warrant Shares until such uncertified cheque has cleared the financial institution upon which the same is drawn.

    (7) The forwarding of a cheque or the sending of funds by wire transfer by the Warrant Agent will satisfy and discharge the liability of any amounts due to the extent of the sum represented thereby unless such cheque is not honoured on presentation, provided that in the event of the non-receipt of such cheque by the payee, or the loss or destruction thereof, the Warrant Agent, upon being furnished with reasonable evidence of such non-receipt, loss or destruction and indemnity reasonably satisfactory to it, will issue to such payee a replacement cheque for the amount of such cheque.

    (8) The Warrant Agent shall retain the right not to act and shall not be liable for refusing to act if, due to a lack of information or for any other reason whatsoever, the Warrant Agent, in its sole judgement, determines that such act might cause it to be in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline.  Further, should the Warrant Agent, in its sole judgement, determine at any time that its acting under this Warrant Indenture has resulted in its being in non-compliance with any applicable anti-money laundering or anti-terrorist legislation, regulation or guideline, then it shall have the right to resign on 10 days' written notice to the Company provided:  (i) that the Warrant Agent's written notice shall describe the circumstances of such non-compliance; and (ii) that if such circumstances are rectified to the Warrant Agent's satisfaction within such 10-day period, then such resignation shall not be effective.

    8.8 Replacement of Warrant Agent

    (1) The Warrant Agent may resign its appointment and be discharged from all further duties and liabilities hereunder by giving to the Company not less than 60 days prior notice in writing or such shorter prior notice as the Company may accept as sufficient.  The Warrantholders by extraordinary resolution shall have the power at any time to remove the existing Warrant Agent and to appoint a new Warrant Agent.  In the event of the Warrant Agent resigning or being removed as aforesaid or being dissolved, becoming bankrupt, going into liquidation or otherwise becoming incapable of acting hereunder, the Company shall forthwith appoint a new Warrant Agent unless a new Warrant Agent has already been appointed by the Warrantholders; failing such appointment by the Company, the retiring Warrant Agent or any Warrantholder may apply to a justice of the Ontario Superior Court of Justice at the Company's expense, on such notice as such justice may direct, for the appointment of a new Warrant Agent; but any new Warrant Agent so appointed by the Company or by the Court shall be subject to removal as aforesaid by the Warrantholders.  Any new Warrant Agent appointed under any provision of this section 8.8 shall be a corporation authorized to carry on the business of a transfer agent or a trust company in the Province of Ontario and, if required by Applicable Legislation of any other province, in such other province.  On any such appointment the new Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named herein as Warrant Agent without any further assurance, conveyance, act or deed; but there shall be immediately executed, at the expense of the Company, all such conveyances or other instruments as may, in the opinion of counsel, be necessary or advisable for the purpose of assuring the same to the new Warrant Agent, provided that any resignation or removal of the Warrant Agent and appointment of a successor Warrant Agent shall not become effective until the successor Warrant Agent shall have executed an appropriate instrument accepting such appointment and, at the request of the Company, the predecessor Warrant Agent, upon payment of its outstanding remuneration and expenses, shall execute and deliver to the successor Warrant Agent an appropriate instrument transferring to such successor Warrant Agent all rights and powers of the Warrant Agent hereunder and all securities, documents of title and other instruments and all monies and properties held by the Warrant Agent hereunder.

    
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    (2) Upon the appointment of a successor Warrant Agent, the Company shall promptly notify the Warrantholders thereof in the manner provided for in section 9.1.

    (3) Any corporation into or with which the Warrant Agent may be merged or consolidated or amalgamated, or to which all or substantially all of the corporate trust business is sold or any corporation succeeding to the stock transfer business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder without any further act on its part or of any of the parties hereto, provided that such corporation would be eligible for appointment as a new Warrant Agent under subsection 8.8(1).

    (4) Any Warrants Authenticated or certified but not delivered by a predecessor Warrant Agent may be Authenticated or certified by the new or successor Warrant Agent in the name of the predecessor or the new or successor Warrant Agent.

    8.9 Conflict of Interest

    (1) The Warrant Agent represents to the Company that at the time of execution and delivery hereof no material conflict of interest exists which it is aware of in the Warrant Agent's role hereunder and agrees that in the event of a material conflict of interest arising which it becomes aware of hereafter it will, within 90 days after ascertaining that it has such a material conflict of interest, either eliminate the same or resign its appointment hereunder.  If any such material conflict of interest exists or hereafter shall exist, the validity and enforceability of this Indenture and the Warrants shall not be affected in any manner whatsoever by reason thereof.

    
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    (2) Subject to subsection 8.9(1), the Warrant Agent, in its personal or any other capacity, may buy, lend upon and deal in securities of the Company and generally may contract and enter into financial transactions with the Company or any Subsidiary without being liable to account for any profit made thereby.

    8.10 Acceptance of Duties and Obligations

    The Warrant Agent hereby accepts the duties and obligations in this Indenture declared and provided for and agrees to perform the same upon the terms and conditions herein set forth and agrees to hold all rights, interests and benefits contained herein on behalf of those persons who become holders of Warrants from time to time issued under this Indenture.

    8.11 Warrant Agent not to be Appointed Receiver

    The Warrant Agent and any person related to the Warrant Agent shall not be appointed a receiver or receiver and manager or liquidator of all or any part of the assets or undertaking of the Company or any Subsidiary or any partnership of which the Company is directly or indirectly involved.

    8.12 Authorization to Carry on Business

    The Warrant Agent represents to the Company that it is registered to carry on the business of a transfer agent and warrant agent under Applicable Legislation in the Province of Ontario.

    ARTICLE 9 - GENERAL

    9.1 Notice to the Company and the Warrant Agent

    (1) Unless herein otherwise expressly provided, any notice to be given hereunder to the Company or the Warrant Agent shall be deemed to be validly given if delivered, if sent by registered letter, postage prepaid or if transmitted by email to the following email addresses:

    (a) If to the Company, to:

    KWESST MICRO SYSTEMS INC.
155 Terence Matthews Crescent
Kanata, Ontario, K2M 2A8
Attention: Steve Archambault
 Email:  archambault@kwesst.com

    
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    with a copy to:

    Fasken Martineau DuMoulin LLP
3500-800, Square-Victoria Street
Montréal, Québec H4Z 1E9

Attention: Frank Mariage
 Email :  fmariage@fasken.com

    (b) If to the Warrant Agent, to:

    TSX TRUST COMPANY
301-100 Adelaide Street West
Toronto, Ontario M5H 4H1

Attention: Vice President, Corporate Trust
 Email:  tmxestaff-corporatetrust@tmx.com

    and any notice given in accordance with the foregoing shall be deemed to have been received on the date of delivery if that date is a Business Day or, if mailed, on the fifth Business Day following the date of the postmark on such notice or, if transmitted by email, on the Business Day of the date of delivery.

    (2) The Company or the Warrant Agent, as the case may be, may from time to time notify the other in the manner provided in subsection 9.1(1) of a change of address which, from the effective date of such notice and until changed by like notice, shall be the address of the Company or the Warrant Agent, as the case may be, for all purposes of this Indenture.  A copy of any notice of change of address given pursuant to this subsection 9.1(2) shall be available for inspection at the principal stock transfer offices of the Warrant Agent in the City of Toronto, Ontario by Warrantholders during normal business hours.

    (3) If, by reason of a strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Warrant Agent or to the Company hereunder could reasonably be considered unlikely to reach its destination, the notice shall be valid and effective only if it is delivered to an officer of the party to which it is addressed or if it is delivered to that party at the appropriate address provided in subsection 9.1(1) by email or other means of prepaid, transmitted or recorded communication and any notice delivered in accordance with the foregoing shall be deemed to have been received on the date of delivery to the officer if delivered by email or if delivered by other means of prepaid, transmitted, recorded communication on the third Business Day following the date of the sending of the notice by the person giving the notice.

    9.2 Notice to the Warrantholders

    (1) Any notice to the Warrantholders under the provisions of this Indenture shall be deemed to be validly given if the notice is sent by prepaid mail or, if delivered by hand, to the holders at their addresses appearing in the register of holders.  Any notice so delivered shall be deemed to have been received on the date of delivery if that date is a Business Day or the Business Day following the date of delivery if such date is not a Business Day or on the third Business Day if delivered by mail.  All notices may be given to whichever one of the Warrantholders (if more than one) is named first in the appropriate register hereinbefore mentioned, and any notice so given shall be sufficient notice to all Warrantholders and any other persons (if any) interested in such Warrants.  Accidental error or omission in giving notice or accidental failure to mail notice to any Warrantholder will not invalidate any action or proceeding founded thereon.

    
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    (2) If, by reason of strike, lockout or other work stoppage, actual or threatened, involving postal employees, any notice to be given to the Warrantholders could reasonably be considered unlikely to reach its destination, the notice may be given in a news release disseminated through a newswire service, filed on SEDAR and posted on the Company's website; provided that in the case of a notice convening a meeting of the holders of Warrants, the Warrant Agent may require such additional publications of that notice, in Toronto, Ontario or in other cities or both, as it may deem necessary for the reasonable notification of the holders of Warrants or to comply with any applicable requirement of law or any stock exchange.  Any notice so given shall be deemed to have been given on the day on which it has been published in all of the cities in which publication was required.

    9.3 Privacy

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

    9.4 Third Party Interests

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

    
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    9.5 Discretion of Directors

    Any matter provided herein to be determined by the directors in their sole discretion and determination so made will be conclusive.

    9.6 Satisfaction and Discharge of Indenture

    Upon the earlier of the Time of Expiry or the date by which there shall have been delivered to the Warrant Agent for exercise or destruction in accordance with the provisions hereof all Warrants theretofore Authenticated or certified hereunder, this Indenture, except to the extent that Warrant Shares and any certificates therefor have not been issued and delivered hereunder or the Company has not performed any of its obligations hereunder, shall cease to be of further effect in respect of the Company, and the Warrant Agent, on written demand of and at the cost and expense of the Company, and upon delivery to the Warrant Agent of a certificate of the Company stating that all conditions precedent to the satisfaction and discharge of this Indenture have been complied with and upon payment to the Warrant Agent of the expenses, fees and other remuneration payable to the Warrant Agent, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture; provided that if the Warrant Agent has not then performed any of its obligations hereunder any such satisfaction and discharge of the Company's obligations hereunder shall not affect or diminish the rights of any Warrantholder or the Company against the Warrant Agent.

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

    Nothing in this Indenture or the Warrant Certificates, expressed or implied, shall give or be construed to give to any person other than the parties hereto and the holders from time to time of the Warrants any legal or equitable right, remedy or claim under this Indenture, or under any covenant or provision therein contained, all such covenants and provisions being for the sole benefit of the parties hereto and the Warrantholders.

    9.8 Indenture to Prevail

    To the extent of any discrepancy or inconsistency between the terms and conditions of this Indenture and the Warrant Certificate, the terms of this Indenture will prevail.

    9.9 Assignment

    Except as provided in subsection 8.8(3), this Indenture nor any benefits or burdens under this Indenture shall be assignable by the Company or the Warrant Agent without the prior written consent of the other party, such consent not to be unreasonably withheld.  Subject to the foregoing, this Indenture shall enure to the benefit of and be binding upon the Company and the Warrant Agent and their respective successors (including any successor by reason of amalgamation) and permitted assigns.

    
        48

    

    

    9.10 Counterparts and Formal Date

    This Indenture may be simultaneously 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 shall be deemed to bear the date set out at the top of the first page of this Indenture.

    (Signature page follows)

    
        49

    

    

    IN WITNESS WHEREOF the parties hereto have executed this Indenture under the hands of their proper officers in that behalf.

    	
                 

            	
                KWESST MICRO SYSTEMS INC.

            
	 	 	 
	 	 	 
	
                 

            	
                Per:  

            	   "Steven Archambault"
	
                 

            	
                Authorized Signing Officer

            
	 	 
	
                 

            	
                TSX TRUST COMPANY

            
	 	 
	 	 
	
                 

            	
                Per:

            	   "Bolanle Oyelade"
	
                 

            	
                Authorized Signing Officer

            
	 	 
	 	 
	
                 

            	
                Per:

            	    "Beatriz Fedozzi"
	
                 

            	
                Authorized Signing Officer

            

    

    
        50

    

    

    SCHEDULE "A"

    FORM OF WARRANT CERTIFICATE

    [Include on Warrant Certificates issued to U.S. Purchasers:  "THE SECURITIES REPRESENTED HEREBY AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR STATE SECURITIES LAWS.  THE HOLDER HEREOF, BY PURCHASING THESE SECURITIES, AGREES FOR THE BENEFIT OF KWESST MICRO SYSTEMS INC.  (THE "COMPANY") THAT THESE SECURITIES MAY BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED, DIRECTLY OR INDIRECTLY, ONLY (A) TO THE COMPANY, (B) OUTSIDE THE UNITED STATES IN ACCORDANCE WITH RULE 904 OF REGULATION S ("REGULATION S") UNDER THE U.S. SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE LOCAL LAWS AND REGULATIONS, (C) WITHIN THE UNITED STATES IN ACCORDANCE WITH (1) RULE 144A UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, OR (2) RULE 144 UNDER THE U.S. SECURITIES ACT, IF AVAILABLE, AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES LAWS, OR (D) IN ANOTHER TRANSACTION THAT DOES NOT REQUIRE REGISTRATION UNDER THE U.S. SECURITIES ACT OR ANY APPLICABLE STATE SECURITIES LAWS, PROVIDED THAT IN THE CASE OF TRANSFERS PURSUANT TO (C)(2) OR (D) ABOVE, A LEGAL OPINION SATISFACTORY TO THE COMPANY MUST FIRST BE PROVIDED TO TSX TRUST COMPANY.  THESE SECURITIES MAY NOT CONSTITUTE "GOOD DELIVERY" IN SETTLEMENT OF TRANSACTIONS ON CANADIAN STOCK EXCHANGES."

    "THIS WARRANT AND THE SECURITIES DELIVERABLE UPON EXERCISE THEREOF HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "U.S. SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES.  THIS WARRANT MAY NOT BE EXERCISED IN THE UNITED STATES OR BY OR ON BEHALF OF, OR FOR THE ACCOUNT OR BENEFIT OF, A U.S. PERSON UNLESS THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE BEEN REGISTERED UNDER THE U.S. SECURITIES ACT AND THE APPLICABLE SECURITIES LEGISLATION OF ANY SUCH STATE OR AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE.  "UNITED STATES" AND "U.S. PERSON" ARE AS DEFINED BY REGULATION S UNDER THE U.S. SECURITIES ACT."]

    [For Warrants issued under the Private Placement include:  "UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY OR ANY SECURITY ISSUED ON ITS EXERCISE BEFORE •"

    [and, if applicable, include:  "WITHOUT PRIOR WRITTEN APPROVAL OF [Insert applicable stock exchange] AND COMPLIANCE WITH ALL APPLICABLE SECURITIES LEGISLATION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF MAY NOT BE SOLD, TRANSFERRED, HYPOTHECATED OR OTHERWISE TRADED ON OR THROUGH THE FACILITIES OF TSX VENTURE EXCHANGE OR OTHERWISE IN CANADA OR TO OR FOR THE BENEFIT OF A CANADIAN RESIDENT UNTIL •."]

    

    WARRANTS TO PURCHASE COMMON SHARES
OF KWESST MICRO SYSTEMS INC. (a company incorporated pursuant to the Business Corporations Act (British Columbia))

    CUSIP No.•
ISIN No.•

    	Warrant Certificate Number:  •	Representing • Warrants to
	 	purchase Common Shares

    THIS CERTIFIES that, for value received, the registered holder hereof, • (the "holder") is entitled at any time at or before 5:00 p.m.  (Eastern time) on April 29, 2023 (the "Expiry Time") to acquire, subject to adjustment in certain events, the number of common shares ("Common Shares") of KWESST Micro Systems Inc. specified above (the "Company"), as presently constituted, by surrendering to TSX TRUST COMPANY (the "Warrant Agent") at its principal office in Toronto, Ontario, this Warrant Certificate with the duly completed and executed Exercise Form endorsed on the back of this Warrant Certificate, and accompanied by payment of $1.75 per Common Share (the "Warrant Exercise Price") by certified cheque, bank draft or money order in lawful money of Canada payable to, or to the order of, the Company at par at the above-mentioned office of the Warrant Agent.  The holder of this Warrant Certificate may purchase less than the number of Common Shares which he is entitled to purchase on the exercise of the Warrants represented by this Warrant Certificate, in which event a new Warrant Certificate representing the Warrants not then exercised will be issued to the holder.

    The Warrants evidenced hereby are exercisable on or before the Expiry Time, after which time the Warrants evidenced hereby shall be deemed to be void and of no further force or effect.

    This Warrant Certificate represents Warrants of the Company issued or issuable under the provisions of a warrant indenture (which indenture together with all other instruments supplemental or ancillary thereto is herein referred to as the "Warrant Indenture") dated as of •, between the Company and the Warrant Agent, as may be amended from time to time, which contains particulars of the rights of the holders of the Warrants and the Company and of the Warrant Agent in respect thereof and the terms and conditions upon which the Warrants are issued and held, all to the same effect as if the provisions of the Warrant Indenture were herein set forth, to all of which the holder of this Warrant Certificate by acceptance hereof assents.  Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the Warrant Indenture.  A copy of the Warrant Indenture will be available for inspection at the principal office of the Warrant Agent in the City of Toronto, in the Province of Ontario.  In the event of any conflict between the provisions contained in this Warrant Certificate and the provisions of the Warrant Indenture, the provisions of the Warrant Indenture shall prevail.

    Upon acceptance hereof, the holder hereof hereby expressly waives the right to receive any fractional Common Shares upon the exercise hereof in full or in part and further waives the right to receive any cash or other consideration in lieu thereof.  The Warrants represented by this Warrant Certificate shall be deemed to have been surrendered, and payment by certified cheque, bank draft or money order shall be deemed to have been made only upon personal delivery thereof or, if sent by post or other means of transmission, upon actual receipt thereof by the Warrant Agent at its office in the City of Toronto, Ontario.

    
        2

    

    

    Upon due exercise of the Warrants represented by this Warrant Certificate and payment of the Warrant Exercise Price, the Company shall cause to be issued to the person(s) in whose name(s) the Common Shares so subscribed for (provided that if the Common Shares are to be issued to a person other than the registered holder of this Warrant Certificate, the holder's signature on the Exercise Form herein shall be guaranteed by a Schedule I Canadian chartered bank, or by a medallion signature guarantee from a member of a recognized Signature Medallion Guarantee Program and the holder shall pay to the Company or the Warrant Agent all applicable transfer or similar taxes and the Company shall not be required to issue or deliver certificates evidencing the Common Shares unless or until the holder shall have paid the Company or the Warrant Agent the amount of such tax (or shall have satisfied the Company that such tax has been paid or that no tax is due) the number of Common Shares to be issued to such person(s) and such person(s) shall become a holder in respect of such Common Shares with effect from the date of such exercise, and upon due surrender of this Warrant Certificate, the Warrant Agent shall issue a certificate(s) representing such Common Shares to be issued within three Business Days after the exercise of the Warrants (or portion thereof) represented hereby.

    Neither the Warrants represented by this Warrant Certificate nor the Common Shares issuable upon exercise hereof have been or will be registered under the U.S. Securities Act or any state securities laws.  The Warrants represented by this Warrant Certificate may not be exercised within the United States or by, or for the account or benefit of, a U.S. Person (as defined by Regulation S under the U.S. Securities Act) or a person within the United States unless registered under the U.S. Securities Act and any applicable state securities laws or unless an exemption from such registration is available.

    The holder acknowledges that the Warrants represented by this Warrant Certificate and the Common Shares issuable upon exercise hereof may be offered, sold or otherwise transferred only in compliance with all applicable securities laws.

    No transfer of any Warrant will be valid unless entered on the register of transfers, upon surrender to the Warrant Agent of the Warrant Certificate evidencing such Warrant, duly endorsed by, or accompanied by a transfer form or other written instrument of transfer in form satisfactory to the Warrant Agent executed by the registered holder or his executors, administrators or other legal representatives or his or their attorney duly appointed by an instrument in writing in form and execution satisfactory to the Warrant Agent.  Subject to the provisions of the Warrant Indenture and upon compliance with the reasonable requirements of the Warrant Agent, Warrant Certificates may be exchanged for Warrant Certificates representing in the aggregate an equal number of Warrants.  The Company and the Warrant Agent may treat the registered holder of this Warrant Certificate for all purposes as the absolute owner hereof.  The holding of the Warrants represented by this Warrant Certificate shall not constitute the holder hereof a holder of Common Shares nor entitle him to any right or interest in respect thereof except as herein and in the Warrant Indenture expressly provided.

    
        3

    

    

    The Warrant Indenture provides for adjustment in the number of Common Shares to be delivered upon exercise of the right of purchase hereby granted and to the Warrant Exercise Price in certain events therein set forth.

    The Warrant Indenture contains provisions making binding upon all holders of Warrants outstanding thereunder resolutions passed at meetings of such holders held in accordance with such provisions and instruments in writing signed by the Warrantholders entitled to acquire upon the exercise of the Warrants a specified percentage of the Common Shares.

    The Warrants and the Warrant Indenture shall be governed by and performed, construed and enforced in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and shall be treated in all respects as Ontario contracts.  Time shall be of the essence hereof and of the Warrant Indenture.

    The Company may from time to time at any time prior to the Expiry Time purchase any of the Warrants by private agreement or otherwise.

    This Warrant Certificate shall not be valid for any purpose until it has been certified by or on behalf of the Warrant Agent for the time being under the Warrant Indenture.

    All dollar amounts herein are expressed in the lawful money of Canada.

    
        4

    

    

    IN WITNESS WHEREOF the Company has caused this Warrant Certificate to be signed by its duly authorized officer as of this _____ day of •.

    	
                 

            	
                KWESST MICRO SYSTEMS INC.

            
	 	 	 
	
                 

            	By: 	
                 

            
	
                 

            	 	
                Authorized Signing Officer

            
	 	 	 
	
                 

            	
                Countersigned this ____ day of •

            
	 	 
	
                 

            	
                TSX TRUST COMPANY

            
	 	 
	
                 

            	By: 	
                 

            
	
                 

            	 	
                Authorized Signing Officer

            

    

    

    EXERCISE FORM

    TO: KWESST MICRO SYSTEMS INC.
c/o TSX TRUST COMPANY
301-100 Adelaide Street West
Toronto, Ontario M5H 4H1

    The undersigned holder of the within Warrants hereby irrevocably exercises the right of such holder to be issued and hereby subscribes for ____________ Common Shares of KWESST MICRO SYSTEMS INC.  (the "Company") at the Warrant Exercise Price referred to in the attached Warrant Certificate on the terms and conditions set forth in such certificate and the Warrant Indenture and encloses herewith a certified cheque, bank draft or money order payable at par in the City of Toronto, in the Province of Ontario to the order of the Company in payment in full of the subscription price of the Common Shares hereby subscribed for.

    Unless otherwise defined herein, all capitalized terms shall have the meanings ascribed to them in the warrant indenture between the Company and TSX TRUST COMPANY dated •.

    (Please check the ONE box applicable):

    ☐ 1. The undersigned certifies that it (i) is not in the United States and is not a "U.S. Person", within the meaning of Regulation S under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), (ii) is not exercising this Warrant for the account or benefit of any U.S. Person, (iii) did not execute or deliver this Exercise Form within the United States and (iv) has in all other aspects complied with the terms of Regulation S under the U.S. Securities Act.

    ☐ 2. The undersigned holder (i) purchased the Warrants as a part of the Units in the Private Placement; (b) is exercising the Warrants solely for its own account or for the benefit of a U.S. Person or a person in the United States for whose account such holder acquired the Warrants as a part of the Units in the Private Placement and for whose account such holders exercises sole investment discretion; (c) was and is, and any beneficial purchaser for whose account such holder acquired the Warrant and is exercising the Warrants was and is a Qualified Institutional Buyer both on the date the Units were purchased in the Private Placement and on the Exercise Date; and (d) the representations and warranties made by the holder or any beneficial purchaser, as the case may be, to the Company in connection with the acquisition of the Units in the Private Placement remain true and correct on the Exercise Date.

    ☐ 3. The undersigned holder (i) purchased the Warrants as a part of the Units in the Private Placement; (b) is exercising the Warrants solely for its own account or for the benefit of a U.S. Person or a person in the United States for whose account such holder acquired the Warrants as a part of the Units in the Private Placement and for whose account such holders exercises sole investment discretion; (c) was and is, and any beneficial purchaser for whose account such holder acquired the Warrant and is exercising the Warrants was and is an Accredited Investor both on the date the Units were purchased in the Private Placement and on the Exercise Date; and (d) the representations and warranties made by the holder or any beneficial purchaser, as the case may be, to the Company in connection with the acquisition of the Units in the Private Placement remain true and correct on the Exercise Date.

    
        1

    

    

    ☐ 4. The undersigned is delivering a written opinion of United States legal counsel or evidence satisfactory to the Company to the effect that the Warrant and the Common Shares to be delivered upon exercise hereof have been registered under the U.S. Securities Act or are exempt from the registration requirements of the U.S. Securities Act and applicable state securities laws.

    The undersigned hereby directs that the said Common Shares be issued as follows:

    	
                NAME(S) IN FULL

            	
                ADDRESS(ES)

            	
                NUMBER OF COMMON 
SHARES

            
	
                 

            	
                 

            	
                 

            
	
                 

            	
                 

            	
                 

            
	
                 

            	
                 

            	
                 

            

    (Please print.  If securities are issued to a person other than the registered Warrantholder, the holder must pay to the Warrant Agent all applicable taxes and the signature of the holder must be guaranteed by a Schedule I Canadian chartered bank, or by a medallion signature guarantee from a member of a recognized Signature Medallion Guarantee Program).

    	
                DATED this _______ day of _________________, _____.

            
	 	         	
                 

            
	 	 	 
	 	 	 
	
                Signature of Warrantholder

            	 	
                Signature Guarantee

            
	 	 	 
	 	 	
                 

            
	
                Print name

            	 	
                 

            
	 	 	
                 

            
	 	 	 
	 	 	 
	 	 	
                 

            
	
                Address

            	 	
                 

            

    [ ] Please check this box if the securities are to be delivered at the office where these Warrants are surrendered, failing which the securities will be mailed.

    NOTES:

    1. Certificates will not be registered or delivered to an address in the United States unless Box 2, 3 or 4 above is checked.

    2. If Box 4 is checked, holders are encouraged to contact the Company in advance to determine that the legal opinion tendered in connection with exercise will be satisfactory in form and substance to the Company.

    
        2

    

    

    TRANSFER FORM

    TO: KWESST MICRO SYSTEMS INC.
c/o TSX TRUST COMPANY
301-100 Adelaide Street West
Toronto, Ontario M5H 4H1

    FOR VALUE RECEIVED, the undersigned transferor hereby sells, assigns and transfers unto

    	 
	
                (Transferee)

            
	 
	 
	
                (Address)

            
	 
	 
	
                (Social Insurance Number)

            

    ________________ of the Warrants registered in the name of the undersigned transferor represented by the Warrant Certificate.

    THE UNDERSIGNED TRANSFEROR HEREBY CERTIFIES AND DECLARES that the Warrants are not being offered, sold or transferred to, or for the account or benefit of, a U.S. Person (as defined in Regulation S under the U.S. Securities Act of 1933 as amended) or a person within the United States unless registered under the U.S. Securities Act and any applicable state securities laws or unless an exemption from such registration is available.

    	
                DATED this _______ day of _____________, _____.

            
	 	 	 
	 	 	 
	
                Signature of Warrantholder (Transferor)

            	 	
                Signature Guarantee

            
	 	 	
                 

            
	 	 	 
	
                Print name

            	 	
                 

            
	 	 	
                 

            
	 	 	 
	 	 	 
	 	 	 
	 	 	
                 

            
	
                Address

            	 	
                 

            

    NOTES:

    1. The signature to this transfer must correspond with the name as recorded on the Warrants in every particular without alteration or enlargement or any change whatever.  The signature of the person executing this transfer must be guaranteed by a Schedule I Canadian chartered bank, or by a medallion signature guarantee from a member of a recognized Signature Medallion Guarantee Program.

    
        3

    

    

    2. Warrants shall only be transferable in accordance with the Warrant Indenture between KWESST MICRO SYSTEMS INC. (the "Company") and TSX TRUST COMPANY (the "Warrant Agent") dated as of •, applicable laws and the rules and policies of any applicable stock exchange.  Without limiting the foregoing, if the Warrant Certificate bears a legend restricting the transfer of the Warrants except pursuant to an exemption from registration under the United States Securities Act of 1933, as amended (the "U.S. Securities Act"), and applicable state securities laws, this Transfer Form must be accompanied by a properly completed and executed declaration for removal of legend in the form attached as Schedule "B" to the Warrant Indenture or if Warrants are transferred in compliance pursuant to an exemption from the registration requirements of the U.S. Securities Act, an opinion of counsel of recognized standing, reasonably satisfactory to the Company, to the effect that such legend is no longer required under applicable requirements of the U.S. Securities Act or state securities laws, together with such other documents or instruments as the Company or the Warrant Agent may require.

    
        4

    

    

    SCHEDULE "B"

    FORM OF DECLARATION FOR REMOVAL OF LEGEND

    TO: KWESST MICRO SYSTEMS INC.
c/o TSX TRUST COMPANY
301-100 Adelaide Street West
Toronto, Ontario M5H 4H1

    The undersigned (a) acknowledges that the sale of ______________ of KWESST MICRO SYSTEMS INC.  (the "Company") represented by certificate number ______________ to which this declaration relates is being made in reliance on Rule 904 of Regulation S ("Regulation S") under the United States Securities Act of 1933, as amended (the "U.S. Securities Act") and (b) certifies that (1) it is not an affiliate of the Company (as defined in Rule 405 under the U.S. Securities Act), (2) the offer of such securities was not made to a person in the United States and either (A) at the time the buy order was originated, the buyer was outside the United States, or the seller and any person acting on its behalf reasonably believe that the buyer was outside the United States, or (B) the transaction was executed on or through the facilities of the TSX Venture Exchange or another "designated offshore securities market" and neither the seller nor any person acting on its behalf knows that the transaction has been prearranged with a buyer in the United States, (3) neither the seller nor any affiliate of the seller nor any person acting on any of their behalf has engaged or will engage in any directed selling efforts in the United States in connection with the offer and sale of such securities, (4) the sale is bona fide and not for the purpose of "washing off" the resale restrictions imposed because the securities are "restricted securities" (as such term is defined in Rule 144(a)(3) under the U.S. Securities Act), (5) the seller does not intend to replace the securities sold in reliance on Rule 904 of the U.S. Securities Act with fungible unrestricted securities, and (6) the sale was not a transaction, or part of a series of transactions which, although in technical compliance with Regulation S, is part of a plan or scheme to evade the registration provisions of the U.S. Securities Act.  Terms used herein have the meanings given to them by Regulation S

    	
                Dated:    

            	 	      	
                By: 

            	 
	
                 

            	 	 	
                Name:  

            	 
	
                 

            	 	 	
                Title:

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