1.1

Definitions

(a)

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

(b)

 “Acquisition Date” means the date on which Proposed Acquisition is completed;

(c)

“Agency Agreement” means the agency agreement dated as of June 20, 2018 between the Corporation and the Agent;

(d)

“Agent” means Canaccord Genuity Corp., the agent with respect to the Private Placement;

(e)

“Agent’s Commission” means $1,043,029, being an amount equal to 8% of the aggregate gross proceeds from the Private Placement;

(f)

“Applicable Legislation” means the provisions, if any, for the time being, of any statute of Canada or a province or territory thereof, and of the regulations under such statute, relating to special warrant indentures and to the rights, duties and obligations of special warrant agents under special warrant indentures, and of corporations issuing their securities under special warrant indentures, to the extent that any such provisions are in force and applicable to this Indenture;

(g)

“Authenticated” means with respect to the issuance of a Special Warrant Certificate, one which has been duly signed by the Corporation and authenticated by manual signature of an authorized officer of the Special Warrant Agent, and “Authenticate”, “Authenticating” and “Authentication” have the appropriate correlative meanings;

(h)

“Business Day” means a day other than a Saturday, Sunday or any other day on which the principal chartered banks located in Toronto, Ontario are not open for business;

(i)

“Capital Reorganization” has the meaning ascribed thereto in subsection 5.1(d);

(j)

 “Closing” means the closing on the applicable Closing Date of the Private Placement;

(k)

“Closing Date” means June 20, 2018, or such other date as agreed to by the Corporation and the Agent;

(l)

“Common Share Reorganization” has the meaning ascribed thereto in subsection 5.1(a);

(m)

“Common Shares” means common shares in the capital of the Corporation;

(n)

“Completion Notice and Direction” means the certificate executed by the Corporation and the Agent in the form attached as Schedule “B” hereto and addressed to the Special Warrant Agent confirming that the Escrow Release Conditions have been satisfied;

(o)

“Convertible Securities” has the meaning ascribed thereto in subsection 5.1(a);

(p)

“Corporate Finance Fee” means $651,893, being an amount equal to 5% of the aggregate gross proceeds from the Private Placement, payable in Special Warrants;

(q)

“Corporation” means CLS Holding USA, Inc., a corporation existing under the laws of the State of Nevada;

(r)

“Corporation’s auditors” means the firm of accountants serving as the auditors of the Corporation at the relevant time;

(s)

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

(t)

“CSE” means the Canadian Securities Exchange;

(u)

“Current Market Price” of a Common Share at any date means the price per share equal to the weighted average price at which the Common Shares have traded during the 20 consecutive Trading Days (on each of which at least 500 Common Shares are traded in board lots) ending on the third Trading Day immediately prior to such date on the CSE, or if on such date the Common Shares are not listed on the CSE, on any stock exchange on which such shares are listed as may be selected for such purpose by the directors or, if such shares are not listed on any stock exchange, then on such over-the-counter market in Canada as may be selected for such purpose by the directors, provided further that if the Common Shares are not then listed on any Canadian stock exchange or traded in the over-the counter market, then the Current Market Price shall be determined by such firm of independent chartered accountants as may be selected by the directors of the Corporation;

(v)

“Deemed Exercise Date” means, subject to Section 5.1(f), the earlier of:

(i)

the date that is the fifth Business Day after the Qualification Date; and

(ii)

the date that is four months and one day following the Acquisition Date;

(w)

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

(x)

 “Designated Jurisdictions” means, collectively, each of the provinces of Canada (which shall not include Québec) where Special Warrants are sold;

(y)

“director” means a director of the Corporation for the time being and, unless otherwise specified herein, a reference to an action by the directors means an action by the directors of the Corporation as a board or, whenever duly empowered, action by a committee of such board;

(z)

“Earnings” means any income (including interest or gains) derived from investing the Escrowed Proceeds;

(aa)

“Escrow Release Conditions” means all of the following conditions:

(i)

completion of the Proposed Acquisition;

(ii)

receipt of audited financial statements, in a form acceptable to the Agent, for the Oasis Subsidiaries for the preceding 2 years;

(iii)

the receipt of all regulatory, shareholder and third-party approvals, if any, required in connection with the Proposed Acquisition;

(iv)

the Corporation shall not be in breach or default of any of its covenants or obligations under this Indenture or the Agency Agreement;

(v)

the Corporation having delivered a certificate to the Agent that the conditions set forth in (i), (ii) (iii) and (iv) have been satisfied; and

(vi)

the Corporation and the Agent having delivered the Completion Notice and Direction to the Special Warrant Agent;

(bb)

“Escrow Release Deadline” means 5:00 p.m. (Toronto time) on June 30, 2018;

(cc)

“Escrow Release Event” means the satisfaction of the Escrow Release Conditions on or prior to the Escrow Release Deadline;

(dd)

“Escrowed Funds” at any time means the aggregate of: (i) the Escrowed Proceeds, and (ii) any Earnings derived directly or indirectly from time to time from holding the Escrowed Proceeds;

(ee)

“Escrowed Proceeds” means the amount of $12,181,538, representing the gross proceeds of the Private Placement (being $13,037,859) less (i) approximately 50% of the Agent’s Commission (being $496,582); (ii) all of the Agent’s estimated costs and expenses with respect to the Private Placement to date (being $300,000); and (iii) a portion of the fees (including disbursements and applicable taxes) incurred to date by Cassels Brock & Blackwell LLP;

(ff)

“Exercise Notice” has the meaning ascribed thereto in subsection 3.6(a);

(gg)

“Indenture”, “herein”, “hereto”, “hereunder”, “hereof”, “hereby” and similar expressions mean or refer to this special warrant indenture and not to any particular Article, Section, paragraph, clause, subdivision or portion hereof and include any indenture, deed or instrument supplemental or ancillary hereto, in each case, as may be amended from time to time; and the expressions “Article”, “Section” and “paragraph” followed by a number mean and refer to the specified Article, Section or paragraph of this Indenture;

(hh)

“Listing Date” means the date the Common Shares are listed for trading on the CSE;

(ii)

“Oasis Subsidiaries” means (i) Serenity Wellness Center, LLC dba Oasis Cannabis Dispensary/Retail Store; (ii) Serenity Wellness Products, LLC dba City Trees Fresh Cannabis Production, Wholesale; and (iii) Serenity Wellness Growers, LLC dba City Trees Fresh Cannabis Cultivation, Wholesale.

(jj)

“Officer’s Certificate” means a certificate signed by a senior officer of the Corporation;

(kk)

“Passport System” means the passport system procedures provided for under Multilateral Instrument 11-102 - Passport System and National Policy 11-202 - Process for Prospectus Reviews in Multiple Jurisdictions;

(ll)

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

(mm)

“Preliminary Prospectus” means a preliminary prospectus of the Corporation (in the English language), including documents incorporated or deemed to be incorporated by reference therein (if any), filed with the Securities Regulators by the Corporation in connection with qualifying the distribution of the Underlying Securities underlying the Special Warrants in the Designated Jurisdictions;

(nn)

“Private Placement” means the private placement of 28,973,019 Special Warrants pursuant to the Agency Agreement and the subscription agreements entered into on the Initial Closing Date between the Corporation and the purchasers of Special Warrants;

(oo)

“Proposed Acquisition” means the transaction between the Corporation and Alternative Solutions, LLC whereby the Corporation will acquire the outstanding equity interests in the Oasis Subsidiaries from Alternative Solutions, LLC for total remaining consideration of approximately USD$16,200,000 in accordance with the terms of a definitive agreement that has been entered into between the Corporation and Alternative Solutions, LLC;

(pp)

“Prospectus” means a final prospectus of the Corporation (in the English language) including documents incorporated or deemed to be incorporated by reference therein (if any),  filed with the Securities Regulators by the Corporation which qualifies the distribution of the Underlying Shares underlying the Special Warrants in the Designated Jurisdictions;

(qq)

“Qualification Deadline” means 5:00 p.m. (Toronto time) on August 20, 2018;

(rr)

“Qualification Date” means the date on which the Ontario Securities Commission, as the principal regulator under the Passport System, issues the Receipt evidencing that each Securities Regulator has issued a receipt for the Prospectus;

(ss)

 “Receipt” means the receipt issued by the Ontario Securities Commission, which is deemed to also be a receipt of the Securities Regulators of the other Designated Jurisdictions pursuant to the Passport System;

(tt)

“Rights Offering” has the meaning ascribed thereto in subsection 5.1(b);

(uu)

“Rights Period” has the meaning ascribed thereto in subsection 5.1(b);

(vv)

“Securities Regulators” means, collectively, the securities commissions or other applicable securities regulatory authorities of each of the Designated Jurisdictions;

(ww)

“SEC” means the United States Securities and Exchange Commission;

(xx)

“Special Distribution” has the meaning ascribed thereto in subsection 5.1(c);

(yy)

“Special Warrant” means a special warrant of the Corporation created by the Corporation, issued and Authenticated hereunder and entitling the holder thereof to acquire one Unit (provided that if a Receipt for the Prospectus is not issued prior to the Qualification Deadline then each holder of a Special Warrant will be entitled to 1.1 Units per Special Warrant instead of one Unit) upon deemed exercise thereof, in accordance with this Indenture, without payment of additional consideration or further action on the part of the holder of Special Warrants, subject to adjustment as set out herein; provided, however, that any fractional entitlement to Units will be rounded down to the nearest whole Unit;

(zz)

“Special Warrant Agent” means the special warrant agent under this Indenture, initially being Odyssey Trust Company, in its capacity as special warrant agent hereunder, having an office in Calgary, Alberta or such other address as it shall inform the Corporation and Special Warrantholders from time to time;

(aaa)

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

(bbb)

“Special Warrantholder” means the registered holder from time to time of an outstanding Special Warrant;

(ccc)

“Subscription Price” means the price paid per Special Warrant by each subscriber in the Private Placement;

(ddd)

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

(eee)

“Termination Date” means the date on which the Termination Event occurs;

(fff)

“Termination Event” means any one of:

(i)

the failure of the Corporation to satisfy the Escrow Release Conditions on or prior to the Escrow Release Deadline; or

(ii)

a public announcement by the Corporation, or notice from the Corporation to the Agent, prior to the Escrow Release Deadline that it does not intend to satisfy any of the Escrow Release Conditions;

(ggg)

“Termination Notice” means the notice to be provided to the Special Warrant Agent, the Agent and each Special Warrantholder by the Corporation in the form attached as Schedule “C” hereto forthwith following a Termination Event pursuant to Section 4.4 confirming that a Termination Event has occurred;

(hhh)

“Trading Day” means any day on which the facilities of the CSE, or, if the Common Shares are not listed thereon, the facilities of any stock exchange on which the Common Shares are listed, or, if the Common Shares are not listed thereon, an over-the-counter market in Canada as may be selected by the directors on which the Common Shares are traded, is open for trading;

(iii)

 “Underlying Security” means any of an Underlying Share and an Underlying Warrant;

(jjj)

(kkk)

“Underlying Warrant” means one common share purchase warrant, each being exercisable to acquire one Common Share for a period of 36 months following the Listing Date at a price of $0.65 per Common Share, subject to adjustment in accordance with Article 5;

(lll)

(mmm)

“U.S. Person” and “United States” have the meanings ascribed thereto in Regulation S under the 1933 Act;

(nnn)

“Warrant Indenture” means the warrant indenture governing the terms of the Underlying Warrants between the Corporation and Odyssey Trust Company in its capacity as warrant agent, dated June 20, 2018, and

(ooo)

 “written order of the Corporation”, “written direction of the Corporation”, “written request of the Corporation”, “written consent of the Corporation” and “certificate of the Corporation” and “any other document required to be signed by the Corporation”, means, respectively, a written order, direction, request, consent, certificate or other document signed in the name of the Corporation by any officer or director and may consist of one or more instruments so executed.

1.3

Gender

1.4

Weekends and Holidays

1.5

Meaning of “Outstanding”

1.6

Time

1.7

Applicable Law

1.8

Severability

1.9

Currency

1.10

Conflicts

1.11

Schedules

2.1

Creation, Form and Terms of Special Warrants

(a)

The Corporation hereby creates and authorizes for issuance 28,967,294 Special Warrants.

(b)

The Special Warrants shall be executed by the Corporation and Authenticated by, or on behalf of, the Special Warrant Agent upon the written order of the Corporation and delivered by the Special Warrant Agent to the Corporation or to the order of the Corporation in accordance with the written order of the Corporation.

(c)

Each Special Warrant shall entitle the holder thereof to acquire, upon deemed exercise thereof, one Unit without the payment of additional consideration and subject to adjustment in accordance with Article 4 hereof;

(d)

Subject to the provisions hereof, the Special Warrants issued under this Indenture are limited in the aggregate to 30,421,670 Special Warrants, provided that the number and type of securities to be issued upon deemed exercise of the Special Warrants is subject to increase or decrease so as to give effect to the adjustments as required by Article 4.

(e)

No fractional Special Warrants shall be issued or otherwise provided for hereunder.

2.2

Form of Special Warrants, Certificated Special Warrants

2.3

[Reserved]

2.4

Special Warrant Certificate

(a)

For Special Warrants issued in certificated form, the form of certificate representing Special Warrants shall be substantially as set out in Schedule “A” hereto or such other form as is authorized from time to time by the Special Warrant Agent. Each Special Warrant Certificate shall be Authenticated manually on behalf of the Special Warrant Agent upon the written order of the Corporation. Each Special Warrant Certificate shall be signed by at least one duly authorized signatory of the Corporation, whose signature shall appear on the Special Warrant Certificate and may be printed, lithographed or otherwise mechanically reproduced thereon and, in such event, certificates so signed are as valid and binding upon the Corporation as if it had been signed manually. Any Special Warrant Certificate which has been signed as hereinbefore provided shall be valid, and

(b)

[Reserved].

(c)

No Special Warrant shall be considered issued and shall be valid or obligatory or shall entitle the holder thereof to the benefits of this Indenture until it has been Authenticated by the Special Warrant Agent.

(d)

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

(e)

[Reserved]

(f)

The Authentication by the Special Warrant Agent of any Special Warrants whether by way of entry on the register or otherwise shall not be construed as a representation or warranty by the Special Warrant Agent as to the validity of the Indenture or such Special Warrants (except the due Authentication thereof) or as to the performance by the Corporation of its obligations under this Indenture and the Special Warrant Agent shall in no respect be liable or answerable for the use made of the Special Warrants or any of them or the proceeds thereof. Authentication by the Special Warrant Agent shall be conclusive evidence as against the Corporation that the Special Warrants so Authenticated have been duly issued hereunder and that the holder thereof is entitled to the benefits of this Indenture.

2.5

[Reserved]

2.6

Transferability and Ownership of Special Warrants

(a)

The Corporation hereby appoints the Special Warrant Agent as registrar of the Special Warrants and shall cause the Special Warrant Agent to keep at its Calgary office set forth in Section 10.1(b) a register in which the Special Warrant Agent shall enter the names and addresses of the Special Warrantholders, and the number of Special Warrants, and other particulars, prescribed by law, of the Special Warrants held by them, together with a record of transfers in which particulars of all transfers of Special Warrants will be recorded. The Special Warrant Agent shall cause the register to be open at all reasonable times for inspection by the Corporation, the Agent and any Special Warrantholder and upon payment to the Special Warrant Agent of its reasonable fees.  Any Special Warrantholder exercising such right of inspection shall first provide an affidavit in form satisfactory to the Corporation and the Special Warrant Agent stating the name and address of the Special Warrantholder and agreeing not to use the information therein except in connection with (i) an effort to call a meeting of Special Warrantholders or to influence the voting of Special Warrantholders at any meeting of Special Warrantholders;

(b)

[Reserved]

(c)

The Special Warrant Certificates may only be transferred by the Special Warrantholder (or its legal representatives or its attorney duly appointed), in accordance with Applicable Legislation and upon compliance with the conditions herein, on the register kept at the office of the Special Warrant Agent pursuant to Section 2.6(a) by delivering to the Special Warrant Agent’s Calgary office the Special Warrant Certificate, a duly executed Form of Transfer attached as Appendix “1” to the Special Warrant Certificate and complying with such other reasonable requirements as the Corporation and the Special Warrant Agent may prescribe and such transfer shall be duly noted on the register by the Special Warrant Agent.

(d)

Notwithstanding anything contained in this Indenture, in the Special Warrant Certificate or in any subscription agreements under which Special Warrants were issued and sold, the Special Warrant Agent, relying solely on the Form of Transfer attached as Appendix “1” to the Special Warrant Certificate or such other reasonable requirements as the Corporation and Special Warrant Agent may prescribe pursuant to Section 2.5(c) or this Section shall not register any transfer of a Special Warrant unless the transfer is made in compliance with this Section.

(e)

The Special Warrant Agent acknowledges and understands that the Special Warrants have not been registered under the 1933 Act or under the securities or “blue sky” laws of any state of the United States and each Special Warrant is a “restricted security” within the meaning of Rule 144 under the 1933 Act. Any Special Warrantholder may only offer, sell, or otherwise transfer such securities (A) to the Corporation,  (B) pursuant to an effective registration statement under the 1933 Act, (C) pursuant to the exemption from the registration requirements of the 1933 Act provided by Rule 144 thereunder, if available, and in accordance with any applicable state securities or “blue sky” laws, or (D) in a transaction that does not require registration under the 1933 Act or any applicable state laws and regulations governing the offer and sale of securities, ) and in each case upon delivery to the Corporation and the Special Warrant Agent of such documentation as the Corporation or the Special Warrant Agent may reasonably request, including, but not limited to, an opinion of counsel of recognized standing in form and substance reasonably satisfactory to the Corporaiton and the Special Warrant Agent. If a Special Warrant Certificate is tendered for transfer in violation of the foregoing, the Special Warrant Agent shall not register such transfer.

(f)

The Corporation shall direct the Special Warrant Agent as to matters related to the applicable hold periods and applicable securities legislation. The Special Warrant Agent shall have no obligation to ensure or verify compliance with any Applicable Legislation or regulatory requirements on the issue, exercise or transfer of any Special Warrants or any Underlying Securities issuable upon the deemed exercise of any Special Warrants. The Special Warrant Agent shall be entitled to process all proffered transfers and exercises of Special Warrants upon the presumption that such transfers or exercises are permissible pursuant to all Applicable Legislation and regulatory requirements and the terms of this Indenture. The Special Warrant Agent may assume for the purposes of this Indenture that the address on the register of Special Warrantholders of any Special Warrantholder is the Special Warrantholder’s actual address and is also determinative of

(g)

Upon any transfer of Special Warrants in accordance with the provisions of this Indenture, the Corporation shall covenant and agree with the Special Warrant Agent, on behalf of the transferee holder and with the transferee holder, that the transferee holder is a permitted assignee of the transferring holder and is entitled to the benefits of the covenant and agreement of the Corporation set forth in Section 3.15 herein subject to the restrictions and limitations described thereunder. Should a holder of Special Warrants exercise any legal, statutory, contractual or other right of withdrawal or rescission that may be available to it, the Special Warrant Agent shall not be responsible for ensuring the Special Warrants or the exercise of Special Warrants is cancelled and a refund of the holder’s funds is paid back to the holder. In such cases, the holder shall seek a refund directly from the Corporation and subsequently, the Corporation shall instruct the Special Warrant Agent in writing, to cancel the Special Warrants or exercise transaction and to cause the cancellation of any Underlying Securities on the appropriate registers, which may have already been issued upon the Special Warrant exercise.

(h)

A person who furnishes evidence that he is, to the reasonable satisfaction of the Special Warrant Agent:

(i)

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

(ii)

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

(iii)

a liquidator or a trustee in bankruptcy for a Special Warrantholder,

(i)

The Corporation and the Special Warrant Agent shall deem and treat the registered holder of any Special Warrant as the absolute legal and beneficial owner thereof for all purposes, free from all equities or rights of set off or counterclaim between the Corporation and any previous holder of such Special Warrant, and, save in respect of equities of which the Corporation is required to take notice by statute or by order of a court of competent jurisdiction, neither the Corporation nor the Special Warrant Agent is affected by any notice to the contrary.

(j)

Subject to the provisions of this Indenture and Applicable Legislation, each Special Warrantholder is entitled to the rights and privileges attaching to the Special Warrants, and the issue of the Underlying Securities by the Corporation on deemed exercise of the

(k)

A reasonable charge will be levied on a presenter of a Special Warrant Certificate pursuant to this Indenture for the transfer of any Special Warrant. Either the Special Warrantholder or the Corporation will assume this charge.

(l)

Notwithstanding any other provision of this Section 2.5, in connection with any transfer of Special Warrants, the transferor and transferee shall comply with all reasonable requirements of the Special Warrant Agent as the Special Warrant Agent may deem necessary to secure the obligations of the transferee of such Special Warrants with respect to such transfer.

2.7

Special Warrantholders Not Shareholders

2.8

Loss, Mutilation, Destruction or Theft of Special Warrants

2.9

Exchange of Special Warrants

2.10

Ranking

2.11

Purchase of Special Warrants for Cancellation

2.12

Cancellation of Surrendered Special Warrants

3.1

To Issue Special Warrants and Reserve Common Shares

(a)

That it is duly authorized to create, issue and sell the Special Warrants and that the Special Warrant Certificates, when issued and countersigned by the Special Warrant Agent, will be valid and enforceable against the Corporation in accordance with their terms and the terms of this Indenture and that the Corporation has reserved, allotted and set aside for issuance up to 33,463,837 Underlying Warrants and up to 66,927,674 Common Shares, being the number of Underlying Shares and Common Shares underlying the Underlying Warrants issuable upon the deemed exercise of Special Warrants in accordance with the terms of this Indenture (including Underlying Shares and Underlying Warrants issuable pursuant to Section 5.1) and such Common Shares, when issued upon the deemed exercise of Special Warrants pursuant to and in accordance with the terms of this Indenture or pursuant to the terms of the Underlying Warrants (as the case may be), are authorized to be issued as fully paid and non-assessable common shares of the Corporation.

(b)

Vstock Transfer, LLC is the registrar and transfer agent of the Common Shares, and is duly authorized to countersign, register and issue certificates representing, or otherwise document or evidence of ownership of, such Common Shares, in each case in accordance with and pursuant to the terms of this Indenture.

(c)

That Odyssey Trust Company is the warrant agent of the Underlying Warrants, and is duly authorized to countersign, register and issue certificates representing, or document such other evidence of ownership of, such Underlying Warrants, in each case in accordance with and pursuant to the terms of this Indenture and the Warrant Indenture.

3.2

To Execute Further Assurances

3.3

To Carry On Business

3.4

No Breach of Constating Documents

3.5

Filing Prospectus and Related Matters

(a)

prepare and file the Preliminary Prospectus with the Ontario Securities Commission (in its capacity as the principal regulator under the Passport System) and with the applicable Securities Regulator in each of the other Designated Jurisdictions;

(b)

obtain a receipt or deemed receipt, as applicable, for the Preliminary Prospectus in each of the Designated Jurisdictions;

(c)

satisfy all comments received or deficiencies raised by the applicable Securities Regulators in respect of the Preliminary Prospectus after receipt of such comments or after such deficiencies are raised; and

(d)

prepare and file the Prospectus and obtain the Receipt therefor in each of the Designated Jurisdictions after resolution of such comments and deficiencies by the Qualification Deadline.

3.6

Notices to Special Warrant Agent and Agent

(a)

give written notice to the Special Warrant Agent and the Agent of the issuance of the Receipt for the Prospectus and the date which constitutes the Deemed Exercise Date (the “Exercise Notice”) in the form of Schedule “D” hereto; and

(b)

provide written confirmation to the Special Warrant Agent and the Agent of any adjustment that has been made pursuant to Article 4.

3.7

Securities Qualification Requirements

3.8

Obtain Listing

3.9

Satisfy Covenants

3.10

Performance of Covenants by Special Warrant Agent

3.11

Special Warrant Agent’s Remuneration and Expenses

3.12

Notice to Special Warrantholders of Certain Events

(a)

pay any dividend payable in shares of any class to the holders of its Common Shares or make any other distribution  to the holders of its Common Shares;

(b)

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

(c)

make any repayment of capital on, or distribution of evidences of indebtedness on, any of its assets to the holders of Common Shares;

(d)

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

(e)

effect any subdivision, consolidation or reclassification of its Common Shares; or

(f)

liquidate, dissolve or wind-up,

3.13

Closure of Share Transfer Books

3.14

Payment of Commissions

3.15

Contractual Right of Rescission

4.1

Escrowed Proceeds and Distribution Amounts

4.2

Satisfaction of Escrow Release Conditions

(a)

Upon the satisfaction of the Escrow Release Conditions on or before the Escrow Release Deadline: (a) the Corporation shall forthwith deliver to the Agent a certificate addressed to the Agent and executed by an officer of the Corporation confirming that Escrow Release Conditions have been satisfied; and (b) thereafter, the Corporation and the Agent shall forthwith deliver to the Special Warrant Agent by facsimile, email or courier to the address of the Special Warrant Agent set out in Section 10.1(b), the Completion Notice and Direction substantially in the form attached hereto as Schedule “B”.

(b)

Upon receipt of a duly executed Completion Notice and Direction, the Special Warrant Agent shall take the actions and comply with the requirements set forth in Section 4.3 hereof. The Special Warrants will continue to be outstanding and will not be automatically exercised until the Deemed Exercise Time.

4.3

Release of Escrowed Funds

4.4

Failure to Satisfy Escrow Release Conditions by the Escrow Release Deadline

4.5

Direction

4.6

Method of Disbursement and Delivery

(a)

All disbursements of money made in accordance with the provisions of this Article 4 shall be made by cheque or wire transfer of immediately available funds drawn upon a Canadian Schedule I chartered bank or by official cheque or wire transfer of immediately available funds drawn upon the account of the Special Warrant Agent made payable to or to the order of the persons entitled to disbursement and in the correct amount (less all amounts required to be withheld by the Special Warrant Agent by law, including without limitation, under the Income Tax Act (Canada)).

(b)

If the Special Warrant Agent delivers any such cheque or wire transfer of immediately available funds as required under Subsection 4.6(a), the Special Warrant Agent shall have no further obligation or liability for the amount represented thereby, unless any such cheque or wire transfer of immediately available funds is not paid on due presentation; provided that in the event of the non-receipt of such cheque or wire transfer of

4.7

Acknowledgements of Escrowed Funds

(a)

The Special Warrant Agent shall acknowledge receipt from the Agent of certified cheque(s) and/or wire transfer(s), as applicable, in the aggregate amount of $12,181,538 as caused to be deposited by the Corporation and confirms that, once received, such funds will be deposited in a segregated account in the name of the Corporation and, pending the satisfaction of the Escrow Release Conditions, will be held in accordance with Section 4.1 hereof.

(b)

The Corporation hereby:

(i)

acknowledges that the amounts received by the Special Warrant Agent pursuant to Section 4.7(a) in accordance with the Corporation’s direction to the Agent represents the gross proceeds from the sale of the Special Warrants less 50% of the Agent’s Commission and all of the Agent’s costs and expenses with respect to the Offering to date; and

(ii)

irrevocably directs the Special Warrant Agent to retain such amounts in accordance with the terms of this Agreement pending payment of such amounts in accordance with the terms of this Agreement.

4.8

Miscellaneous

(a)

The Special Warrant Agent will disburse monies according to this Agreement only to the extent that monies have been deposited with it. The Special Warrant Agent shall be protected in acting and relying upon any written notice, request, waiver, consent, certificates, receipts, statutory declaration or other paper or document furnished to it, not only as to its due execution and the validity and effectiveness of its provisions but also as to the truth and acceptability of any information therein contained which it in good faith believes to be genuine and what it purports to be. The Special Warrant Agent shall have no duties except those which are expressly set forth herein, and it shall not be bound by any notice of a claim or demand with respect to, or any waiver, modification, amendment, termination or rescission of this Agreement, unless received by it in writing, and signed by the parties hereto and if its duties herein are affected, unless it shall have given its prior written consent thereto. The duties and obligations of the Special Warrant Agent shall be determined solely by the provisions hereof and, accordingly, the Special Warrant Agent shall not be responsible except for the performance of such duties and obligations as it has undertaken herein. The Special Warrant Agent shall retain the right not to act and shall not be held liable for refusing to act unless it has received clear and reasonable instructions which comply with the terms of this Agreement. Such documentation must not require the exercise of any discretion or independent judgment. The Special Warrant Agent is acting hereunderas escrow agent at the request of the Corporation and the Special Warrantholders and shall not be responsible as escrow agent except for its duties of receiving, holding and disbursing the Escrowed Funds pursuant to the terms and conditions of this Agreement. Any certificate of a party referred to herein,

 

unless otherwise specified, shall, in the case of the Corporation, refer to a certificate of any officer of director of the Corporation, and, in the case of any other party, refer to a certificate of an authorized officer of such party. The Special Warrant Agent shall not be liable for any error in judgment or for any act done or step taken or omitted by it in good faith or for any mistake, in fact or law, or for anything which it may do or refrain from doing in connection therewith, except arising out of its own gross negligence, wilful misconduct or fraud. None of the provisions of this Agreement shall require the Special 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. The Special Warrant Agent shall not be responsible for any losses which may occur as a result of the investment of the Escrowed Funds where the Escrowed Funds have been invested in accordance with the terms of this Agreement.

(b)

In the event that the Special Warrant Agent shall hold any amount of interest or other distributable amount which is unclaimed or which cannot be paid for any reason other than the gross negligence, wilful misconduct or fraud of the Special Warrant Agent, the Special Warrant Agent shall be under no obligation to invest or reinvest the same but shall only be obligated to hold the same on behalf of the person or persons entitled thereto in a current or other non-interest bearing account pending payment to the person or persons entitled thereto. The Special Warrant Agent shall, as and when required by law, and may at any time prior to such required time, pay all or part of such interest or other distributable amount so held to the Public Trustee of Ontario (or other appropriate official or agency), whose receipt shall be good discharge and release of the Special Warrant Agent for such amounts.

(c)

The Special Warrant Agent shall be entitled to act and rely absolutely on the Completion Notice and Direction or the Termination Notice and shall be entitled to release the Escrowed Funds upon the receipt of the Completion Notice and Direction or the Termination Notice as provided for in this Agreement.

(d)

The parties agree that the Special Warrant Agent does not have any interest in the Escrowed Funds but is serving only as escrow agent hereunder. All taxes in respect of Earnings on the Escrowed Proceeds will be the obligation of and will be paid when due by the recipient of such Earnings, who shall indemnify and hold the Special Warrant Agent harmless from and against any liability arising from such taxes, including the failure to pay such taxes. To the extent required by law, the Special Warrant Agent will perform its withholding, remittance and reporting obligations under the Income Tax Act (Canada), as amended, and the regulations promulgated thereunder and any relevant provincial legislation.

5.1

Adjustment of Number of Underlying Securities

(a)

if and whenever at any time from the date hereof and prior to the Deemed Exercise Time, the Corporation:

(i)

subdivides, re-divides or changes its outstanding Common Shares into a greater number of shares;

(ii)

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

(iii)

issues Common Shares or securities exchangeable for or convertible to Common Shares (“Convertible Securities”) to the holders of all or substantially all of the outstanding Common Shares by way of a stock dividend;

(A)

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

(B)

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

(b)

if and whenever at any time from the date hereof and prior to the Deemed Exercise Time the Corporation shall fix a record date for the issue of rights, options or warrants to all or substantially all of the holders of Common Shares under which such holders are entitled,

 

during a period expiring not more than 45 calendar days after the record date for such issue (“Rights Period”), to subscribe for or acquire Common Shares (or securities convertible or exchangeable into Common Shares) at a price per share (or having a conversion or exchange price per share) to the holder of less than 95% of the Current Market Price for the Common Shares on such record date (any such issuance being herein called a “Rights Offering), then the number of Underlying Shares obtainable upon the exercise of each Special Warrant shall be adjusted effective immediately after the end of the Rights Period to a number determined by multiplying the number of Underlying Shares obtainable upon the exercise thereof immediately prior to the end of the Rights Period by a fraction:

(i)

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

(ii)

the denominator of which shall be the aggregate of:

(A)

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

(B)

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

(c)

if and whenever at any time from the date hereof and prior to the Deemed Exercise Time the Corporation shall issue or distribute to all or to substantially all of the holders of the Common Shares:

(iii)

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

(ii)

any property or other assets,

(A)

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

(B)

the denominator of which shall be:

(1)

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

(2)

the aggregate fair market value on such record date, as determined by action by the directors (whose determination shall be conclusive), subject to approval by any stock exchange upon which the Common Shares are then listed and posted for trading, to the holders of the Common Shares of such securities or property or other assets so issued or distributed in the Special Distribution;

(d)

if and whenever at any time from the date hereof and prior to the Deemed Exercise Time there is a reclassification of the Common Shares, a change in the Common Shares into other shares or securities, or a capital reorganization of the Corporation other than as described in Section 5.1(a), including for certainty a liquidation, dissolution or winding up of the Corporation, a consolidation, amalgamation, arrangement or merger of the Corporation with or into any other body corporate, trust, partnership or other entity, or a transfer, sale or conveyance of the property and assets of the Corporation as an entirety or substantially as an entirety to any other body corporate, trust, partnership or other entity, any of such events being referred to as a “Capital Reorganization”, every Special Warrantholder, as at the effective date of such Capital Reorganization, shall be entitled to receive upon deemed exercise in accordance with the terms and conditions hereof and

 

shall accept, in lieu of the number of Underlying Securities obtainable under the Special Warrants to which it was previously entitled, the kind and number of shares or other securities or property of the Corporation or of the body corporate, trust, partnership or other entity resulting from such Capital Reorganization, that the Special Warrantholder would have been entitled to receive on such Capital Reorganization if, on the record date or the effective date thereof, as the case may be, the Special Warrantholder had been the registered holder of the number of Underlying Securities obtainable upon the exercise of Special Warrants then held, subject to adjustment thereafter in accordance with provisions of the same, as nearly as may be possible, as those contained in this Article 4. The Corporation shall not carry into effect any action requiring an adjustment pursuant to this Section 5.1(d) unless all necessary steps have been taken so that the Special Warrantholders are thereafter entitled to receive such kind and number of shares, other securities or property. The Corporation will not enter into a Capital Reorganization unless its successor, or the purchasing body corporate, partnership, trust or other entity, as the case may be, prior to or contemporaneously with any such Capital Reorganization, enters into an indenture which provides, to the extent possible, for the application of the provisions set forth in this Indenture with respect to the rights and interests thereafter of the Special Warrantholders to the end that the provisions set forth in this Indenture are correspondingly made applicable, as nearly as may reasonably be possible, with respect to any shares, other securities or property to which a Special Warrantholder is entitled on the exercise of his acquisition rights thereafter. An indenture entered into by the Corporation pursuant to the provisions of this Section 5.1(d) is deemed a supplemental indenture entered into pursuant to the provisions of Article 8. An indenture entered into between the Corporation, any successor to the Corporation or any purchasing body corporate, partnership, trust or other entity and the Special Warrant Agent must provide for adjustments which are as nearly equivalent as may be practicable to the adjustments provided in this Article 4 and which apply to successive Capital Reorganizations;

(e)

where this Section 5.1 requires that an adjustment becomes effective immediately after a record date or effective date, as the case may be, for an event referred to herein, the Corporation may defer, until the occurrence of that event, issuing to the Special Warrantholder exercising his acquisition rights after the record date or effective date, as the case may be and before the occurrence of that event the adjusted number of Underlying Securities, other securities or property issuable upon the exercise of the Special Warrants by reason of the adjustment required by that event. If the Corporation relies on this Section 5.1(e) to defer issuing an adjusted number of Underlying Securities, other securities or property to a Special Warrantholder, the Corporation shall first deliver to the Special Warrantholder an appropriate instrument evidencing the right of such person to receive such securities or other property and the Special Warrantholder has the right to receive any distributions made on the adjusted number of Underlying Securities, other securities or property declared in favour of holders of record on and after the date of exercise or such later date as the Special Warrantholder would but for the provisions of this Section 5.1(e), have become the holder of record of the adjusted number of Underlying Securities, other securities or property;

(f)

notwithstanding any other provision of this Indenture, if an event which would cause an adjustment under Section 5.1(c) or Section 5.1(d) shall become contemplated and the terms and conditions of such event are such that the rights of the Special Warrantholders to the applicable shares or other securities or property that the Special Warrantholders would be entitled to upon such adjustment are adversely affected, considering all relevant facts, by reason of them not holding prior to the Deemed Exercise Time the Underlying

(g)

the adjustments provided for in this Section 5.1 are cumulative. After any adjustment pursuant to this Section 5.1, the term “Underlying Securities” where used in this Indenture is interpreted to mean securities of any class or classes which, as a result of such adjustment and all prior adjustments pursuant to this Section, the Special Warrantholder is entitled to receive upon the exercise of his Special Warrant, and the number of Underlying Securities obtainable in any exercise made pursuant to a Special Warrant is interpreted to mean the number of Underlying Securities or other property or securities a Special Warrantholder is entitled to receive, as a result of such adjustment and all prior adjustments pursuant to this Section 5.1, upon the full exercise of a Special Warrant;

(h)

notwithstanding anything in this Article 4, no adjustment shall be made in the acquisition rights attached to the Special Warrants if the issue of Common Shares is being made pursuant to or in connection with (a) any stock option plan, share incentive plan or restricted share plan or share purchase plan in force from time to time for directors, officers, employees, consultants or other service providers of the Corporation, which plan has been approved by the Board of Directors of the Corporation; or (b) the exchange, retraction or redemption or satisfaction of existing securities and instruments issued at the date hereof;

(i)

in the event of a question arising with respect to the adjustments provided for in this Section 5.1, that question shall be conclusively determined by the Corporation’s auditors or if they are unwilling or unable to act, such independent nationally recognized chartered accountants as may be selected by the directors of the Corporation, acting reasonably, who shall have access to all necessary records of the Corporation, and a determination by the Corporation’s auditors, absent manifest error, is binding upon the Corporation, the Special Warrant Agent, all Special Warrantholders and all other persons interested therein; and

(j)

no adjustment in the number of Underlying Securities obtainable upon exercise of Special Warrants shall be made in respect of any event described in this Section 5.1 if the Special Warrantholders are entitled to participate in such event on the same terms, mutatis mutandis, as if the Special Warrantholders had exercised their Special Warrants prior to or on the effective date or record date of such event.

5.2

Proceedings Prior to any Action Requiring Adjustment

5.3

Notice of Adjustment

5.4

No Action After Notice

5.5

Protection of Special Warrant Agent

(a)

is entitled to act and rely, and shall be protected in so doing, on any adjustment calculation of the Corporation or the Corporation’s auditors and any other documents filed by the Corporation pursuant to this Article 4 for all purposes;

(b)

is not at any time under any duty or responsibility to a Special Warrantholder to determine whether any facts exist which require any adjustment contemplated by Section 5.1, or with respect to the nature or extent of any such adjustment when made, or with respect to the method employed in making the same;

(c)

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

(d)

is not responsible for any failure of the Corporation to make any cash payment or to issue, transfer or deliver certificates for the Underlying Securities upon the surrender of any Special Warrants for the purpose of the exercise of such rights or to comply with any of the covenants contained in Article 4; and

(e)

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 Corporation of any of the representations, warranties or covenants herein contained or of any acts of the agents or servants of the Corporation.

5.6

Notice of Special Matters

5.7

Underlying Warrants and Warrant Shares Treated Separately

6.1

Notice of Deemed Exercise to Special Warrantholders

6.2

No Voluntary Exercise of Special Warrants

6.3

Deemed Exercise of Special Warrants

6.4

Effect of Exercise of Special Warrants

(a)

Subject to subsection (b), upon deemed exercise of a Special Warrant, the Corporation shall cause to be issued to the person or persons in whose name or names the Underlying Securities so subscribed for are to be issued as specified in the Special Warrant register, the number of Underlying Securities to be issued to such person or persons and such person or persons shall become a holder or holders of the Underlying Securities with

 

(b)

Notwithstanding any provision herein contained to the contrary, the Corporation shall not be required to deliver certificates for Underlying Securities in any period while the transfer registers of the Corporation for the Underlying Securities are closed and, in the event of the deemed exercise of any Special Warrant during any such period, the Underlying Securities subscribed for shall be issued and such person shall be deemed to have become the holder of record of such Underlying Securities on the date on which such transfer registers are next reopened.

(c)

Upon any deemed exercise of the Special Warrants and issuance of Underlying Securities, the registered holders of the Underlying Securities so issued are deemed to have received the notice provided in Schedule “D” hereto.

6.5

Special Warrants Void After Exercise

6.6

Fractions of Underlying Securities

6.7

Accounting and Recording

6.8

Legending of Special Warrants and Underlying Securities

All Special Warrant Certificates and all certificates issued in exchange therefor or in substitution thereof will have the following legends endorsed thereon:

All Special Warrant Certificates and all certificates issued in exchange therefor or in substitution thereof and any certificates representing the Underlying Securities issued upon deemed exercise thereof will have the following legend endorsed thereon in addition to the legend set forth in 6.8(a):

6.9

(c)          Securities Restrictions

7.1

Definitions

(a)

“Adjourned Meeting” means a meeting adjourned in accordance with Section 7.8;

(b)

“Extraordinary Resolution” means a resolution proposed to be passed as an extraordinary resolution at a Meeting duly convened for that purpose and held in accordance with the provisions of this Article 7, and carried by not less than 66 2/3% of the votes cast on such resolution; and

(c)

“Meeting” means a meeting of the Special Warrantholders in respect of any resolution including an Extraordinary Resolution.

7.2

Convening Meetings

7.3

Place of Meeting

7.4

Notice

7.5

Persons Entitled to Attend

7.6

Quorum

7.7

Chairman

7.8

Power to Adjourn

7.9

Adjourned Meeting

7.10

Show of Hands

7.11

Poll

7.12

Regulations

(a)

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

(b)

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

(c)

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

(d)

the form of the instrument of proxy; and

(e)

any other matter relating to the conduct of a Meeting.

7.13

Powers of Special Warrantholders

(a)

agree to any modification, abrogation, alteration, compromise, or arrangement of the rights of the Special Warrantholders whether arising under this Indenture, or otherwise at law, including the rights of the Special Warrant Agent in its capacity as special warrant agent hereunder, subject to the consent of the Special Warrant Agent (such consent not to be unreasonably withheld), or on behalf of the Special Warrantholders against the Corporation, which has been agreed to by the Corporation;

(b)

direct and authorize the Special Warrant Agent to exercise any power, right, remedy or authority given to it by or under this Indenture in the manner specified in such resolution or to refrain from exercising any such power, right, remedy, or authority;

(c)

assent to any change in or omission from the provisions contained in this Indenture or the Special Warrant Certificates or any ancillary or supplemental instrument which is agreed to by the Corporation, or, with the consent of the Special Warrant Agent (such consent not to be unreasonably withheld), concerning any right of the Special Warrant Agent, and to authorize the Special Warrant Agent to concur in and execute any ancillary or supplemental indenture embodying the change or omission;

(d)

without limiting the generality of Sections 7.13(a) and (f), assent to an extension of time thereunder;

(e)

remove the Special Warrant Agent or its successor in office and to appoint a new registrar and agent to take the place of the Special Warrant Agent so removed;

(f)

upon the Special Warrant Agent being furnished with funding and an indemnity that is, in its discretion, sufficient, require the Special Warrant Agent to enforce any covenant or obligation of the Corporation contained in this Indenture or the Special Warrant Certificates, or to enforce any right of the Special Warrantholders in any manner specified in such Extraordinary Resolution, or to refrain from enforcing any such covenant, obligation or right;

(g)

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

(h)

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

(i)

subject to subsection 12.4 of this Indenture, waive and direct the Special Warrant Agent to waive a default by the Corporation in complying with any of the provisions of this Indenture or the Special Warrant Certificate either unconditionally or upon any conditions specified in such Extraordinary Resolution;

(j)

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

(k)

appoint a committee with power and authority to exercise, and to direct the Special Warrant Agent to exercise, on behalf of the Special Warrantholders, such of the powers of the Special Warrantholders as are exercisable by Extraordinary Resolution;

(l)

amend, alter, or repeal any Extraordinary Resolution previously passed pursuant to this Section 7.13; or

(m)

in the event that the Escrow Release Conditions are not satisfied on or prior to the Escrow Release Deadline, to extend the Escrow Release Deadline.

7.14

Powers Cumulative

7.15

Minutes of Meetings

7.16

Written Resolutions

7.17

Binding Effect

7.18

Holdings by the Corporation or Subsidiaries of the Corporation Disregarded

8.1

Provision for Supplemental Indentures for Certain Purposes

(a)

adding to the provisions hereof such additional covenants, enforcement provisions, and release provisions (if any) as in the opinion of counsel acceptable to the Corporation and the Special Warrant Agent are necessary or advisable, provided the same are not, in the opinion of the Special Warrant Agent, relying on the opinion of Counsel, prejudicial to the interests of the Special Warrantholders;

(b)

adding to the covenants of the Corporation in this Indenture for the protection of the Special Warrantholders;

(c)

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

(d)

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

(e)

making such provisions not inconsistent with this Indenture as may be deemed necessary or desirable with respect to matters or questions arising hereunder, provided that such provisions are not, in the opinion of the Special Warrant Agent, relying on the opinion of Counsel, prejudicial to the interests of the Special Warrantholders;

(f)

giving effect to an Extraordinary Resolution;

(g)

rectifying any ambiguity, defective provision, clerical omission or mistake or manifest or other error contained herein or in any amendment or deed or indenture supplemental or ancillary hereto provided that, in the opinion of the Special Warrant Agent, relying on the opinion of Counsel, the rights of the Special Warrantholders are not prejudiced thereby and provided that the Special Warrant Agent may in its discretion decline to enter into any such supplemental indenture which in its opinion, relying on the opinion of Counsel, may not afford adequate protection to the Special Warrant Agent when the same will become operative;

(h)

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

(i)

for any other purpose not inconsistent with the provisions of this Indenture, provided that, in the opinion of the Special Warrant Agent, relying on the opinion of Counsel, the rights of the Special Warrant Agent and the Special Warrantholders are in no way prejudiced thereby;

(j)

to allow for the voluntary exercise of Special Warrants if agreed to by the Corporation in accordance with Section 5.2; or

(k)

providing for the issuance of additional Special Warrants hereunder and any consequential amendments hereto as may be required by the Special Warrant Agent, provided the same are not prejudicial to the interests of the Special Warrantholders, based on the opinion of Counsel.

8.2

Corporation May Consolidate, etc. on Certain Terms

8.3

Successor Body Corporate Substituted

9.1

Duties of Special Warrant Agent

9.2

Action by Special Warrant Agent

9.3

Certificate of the Corporation

9.4

Special Warrant Agent May Employ Experts

9.5

Resignation and Replacement of Special Warrant Agent

(a)

The Special Warrant Agent may resign and be discharged from all further obligations hereunder by giving to the Corporation written notice of at least 60 calendar days, or such shorter time period if acceptable to the Corporation, before the effective date of the resignation. If the Special Warrant Agent resigns, or becomes incapable of acting hereunder, the Corporation shall forthwith appoint in writing a new special warrant agent, unless a new Special Warrant Agent has already been appointed by the Special Warrantholders.

(b)

Failing such appointment by the Corporation or by the Special Warrantholders by Extraordinary Resolution, the retiring Special Warrant Agent, at the expense of the Corporation, or any Special Warrantholder may apply to a Judge of the Ontario Superior Court of Justice on such notice as such Judge may direct, for the appointment of a new special warrant agent. The Special Warrantholders may, by Extraordinary Resolution, remove the Special Warrant Agent (including a special warrant agent appointed by the Corporation or by a Judge as aforesaid) and appoint a new special warrant agent.

(c)

Any new Special Warrant Agent appointed under the provisions of this Section 9.5 shall be a corporation authorized to carry on the business of a trust company in one or more provinces of Canada and, if required by Applicable Legislation of any province, in such province.

(d)

On any new appointment, the new Special Warrant Agent is vested with the same powers, rights, duties and obligations as if it had been originally named as Special Warrant Agent without any further assurance, conveyance, act or deed; but there will be immediately executed, at the expense of the Corporation, all such conveyances or other instruments as may, in the opinion of Counsel, be necessary or advisable for the purpose of assuring such powers, rights, duties, and responsibilities of the new Special Warrant Agent, provided that, any successor Special Warrant Agent shall have executed an appropriate instrument accepting such appointment and, at the request of the Corporation,

 

the predecessor Special Warrant Agent, upon payment of its outstanding remuneration and expenses, shall execute and deliver to the successor Special Warrant Agent an appropriate instrument transferring to such successor Special Warrant Agent all rights and powers of the Special Warrant Agent hereunder.

(e)

On the appointment of a new Special Warrant Agent, the Corporation will promptly give notice thereof to the Special Warrantholders.

(f)

Any Special Warrant Certificates certified but not delivered by a predecessor Special Warrant Agent may be delivered by the successor Special Warrant Agent in the name of the predecessor or successor Special Warrant Agent.

(g)

Any corporation into which the Special Warrant Agent may be merged or consolidated or amalgamated, or to which all or substantially all of its corporate trust business is sold or otherwise transferred or any corporation resulting therefrom to which the Special Warrant Agent shall be a party, or any corporation succeeding to substantially the corporate trust business of the Special Warrant Agent shall be the successor to the Special Warrant Agent hereunder without any further act on its part or any of the parties hereto, provided that such corporation is eligible for appointment as successor Special Warrant Agent pursuant to Section 9.5(c).

9.6

Indenture Legislation

9.7

Notice

9.8

Use of Proceeds

9.9

No Inquiries

9.10

Actions by Special Warrant Agent to Protect Interest

9.11

Special Warrant Agent Not Required to Give Security

9.12

No Conflict of Interest

9.13

Special Warrant Agent Not Ordinarily Bound

9.14

Special Warrant Agent May Deal in Instruments

9.15

Recitals or Statements of Fact Made by Corporation

9.16

Special Warrant Agent’s Discretion Absolute

9.17

No Representations as to Validity

(a)

under any responsibility in respect of the validity of this Indenture or the execution and delivery thereof or (subject to Section 2.4(a) hereof) in respect of the validity or the execution of any Special Warrant Certificate;

(b)

under any obligation to see to, or to require evidence of, the registration or filing (or renewal thereof) of this Indenture or any instrument ancillary or supplemental hereto;

(c)

bound to give notice to any person or persons of the execution hereof;

(d)

responsible for any breach by the Corporation of any covenant or condition contained in this Indenture or in any Special Warrant Certificate and will not incur any liability or responsibility whatever or be in any way responsible for the consequences of any breach by the Corporation of any obligation herein contained or of any act of any director, officer, employee, or agent of the Corporation; or

(e)

by any act hereunder, deemed to make any representation or warranty as to the authorization or reservation of any securities to be issued as provided in this Indenture or in any Special Warrant Certificate or as to whether any shares will when issued be duly authorized or be validly issued and fully paid and non-assessable. The duty and responsibility as to all the matters and things referred to in this Section 9.17 rests upon

 

the Corporation and not upon the Special Warrant Agent and the failure of the Corporation to discharge any such duty and responsibility does not in any way render the Special Warrant Agent liable or place upon it any duty or responsibility for breach of which it would be liable.

9.18

Special Warrant Agent’s Authority to Carry on Business

9.19

Indemnification of Special Warrant Agent

9.20

Third Party Interests

9.21

Compliance with Anti-Money Laundering Legislation

9.22

Not Appointed Receiver

9.23

Compliance with Privacy Policy

to provide the services required under this Indenture and other services that may be requested from time to time;

to help the Special Warrant Agent manage its servicing relationships with such individuals;

if Social Insurance Numbers are collected by the Special Warrant Agent, to perform tax reporting and to assist in verification of an individual’s identity for security purposes.

9.24

Tax Reporting

(a)

The Corporation agrees that during the term of this Agreement and until the Escrowed Funds are released and distributed, for tax reporting purposes, all interest or other taxable income earned from the Escrowed Funds in any tax year shall be taxable, and the requisite tax reporting forms shall be issued to the Corporation in the taxation year that it was earned, notwithstanding if no such amount has been distributed.

(b)

In the event the Escrowed Funds are released and distributed to the Special Warrantholders pursuant to Section 4.4, the Agent and the Corporation agree that for tax reporting purposes, all Earnings in that tax year shall be taxable, and the requisite tax reporting forms shall be issued to the Special Warrantholders, as applicable, in the taxation year that it was earned and the Special Warrant Agent shall be entitled to withhold or deduct from the Escrowed Funds to be released and distributed as applicable, on a pro rata basis to the Special Warrantholders, the amount of any such taxes or other charges payable on the Earnings.

10.1

Notice to Corporation, Special Warrant Agent and Agent

(a)

If to the Corporation:

(b)

If to the Special Warrant Agent:

(c)

If to the Agent:

(a)

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

(b)

after 5:00 p.m. in the place to which it was sent,

10.2

Notice to Special Warrantholders

11.1

Board of Directors

12.1

Further Assurances

12.2

Unenforceable Terms

12.3

No Waiver

12.4

Waiver of Default

(a)

the holders of not less than 50% of the Special Warrants plus one Special Warrant then outstanding shall have power (in addition to the powers exercisable by Extraordinary Resolution created under Article 7) by requisition in writing to instruct the Special Warrant Agent to waive any default hereunder and the Special Warrant Agent shall thereupon waive the default upon such terms and conditions as shall be prescribed in such requisition; or

(b)

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

12.5

Immunity of Shareholders

12.6

Limitation of Liability

12.7

Suits by Special Warrantholders

(a)

No Special Warrantholder has any right to institute any action, suit or proceeding at law or in equity for the purpose of enforcing the execution of any trust or power hereunder or for the appointment of a liquidator or receiver or for a receiving order under the Bankruptcy and Insolvency Act (Canada) or to have the Corporation wound up or to file or prove a claim in any liquidation or bankruptcy proceedings or for any other remedy hereunder unless the Special Warrantholders by Extraordinary Resolution have made a

 

request to the Special Warrant Agent and the Special Warrant Agent has been afforded reasonable opportunity to proceed or complete any action or suit for any such purpose whether or not in its own name and the Special Warrantholders or any of them have furnished to the Special Warrant Agent, when so requested by the Special Warrant Agent, sufficient funds and security and indemnity satisfactory to it against the costs, expenses and liabilities to be incurred therein or thereby and the Special Warrant Agent has failed to act within a reasonable time or the Special Warrant Agent has failed to actively pursue any such act or proceeding.

(b)

Subject to the provisions of Section 12.7(a) and otherwise in this Indenture, all or any of the rights conferred upon a Special Warrantholder by the terms of a Special Warrant may be enforced by such Special Warrantholder by appropriate legal proceedings without prejudice to the right which is hereby conferred upon the Special Warrant Agent to proceed in its own name to enforce each and all of the provisions herein contained for the benefit of the Special Warrantholders from time to time.

12.8

Force Majeure

12.9

Enurement

12.10

Counterparts and Formal Date

12.11

Satisfaction and Discharge of Indenture

12.12

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

12.13

Formal Date and Effective Date

the date that is the fifth Business Day after the date on which the receipt (the “Receipt”) for a (final) prospectus qualifying the distribution of the Underlying Shares issuable upon deemed exercise of the Special Warrants (the “Prospectus”) has been issued by the securities commissions or similar regulatory authority (the “Securities Regulators”) in each of the provinces of Canada in which Special Warrants are sold (the “Designated Jurisdictions”); and

the date that is 4 months and one day after the Acquisition Date (as defined in the Indenture) (the “Deemed Exercise Time”).

In order to transfer the Special Warrants represented by this Special Warrant Certificate, this transfer form must be delivered to the Special Warrant Agent, together with this Special Warrant Certificate at the following address:

The signature(s) must be guaranteed by a Medallion Signature Guarantee obtained from a member of an acceptable Medallion Signature Guarantee Program (STAMP, SEMP, NYSE MSP). Many commercial banks, savings banks, credit unions, and all broker dealers participate in a Medallion Signature Guarantee Program. The Guarantor must affix a stamp bearing the actual words “Medallion Guaranteed”, with the correct prefix covering the face value of the certificate.

(a)

an amount of $[l] to the Agent or as directed by the Agent on account of 50% of the Agent’s Commission in accordance with the instructions in the attached schedule; and

(b)

the balance to the Corporation or as directed by the Corporation, less any amount payable to the Special Warrant Agent equal to the reasonable fees for service rendered and disbursements incurred pursuant to the Special Warrant Indenture, in accordance with the instructions in the attached schedule.

(a)

the Underlying Securities so issued upon the deemed exercise of the Special Warrants have been issued to the person or persons in whose name or names the Underlying Securities so subscribed for are to be issued as specified in the Special Warrant register;

(b)

the number of Underlying Shares and Underlying Warrants issued is equal to the number of Underlying Shares and Underlying Warrants issuable, in accordance with the terms of the Indenture, per Special Warrant deemed exercised; and

(c)

the Corporation will furnish to the registered holders of the Underlying Securities, on demand and without charge, a full copy of the text of:

(1)

the rights, privileges, restrictions and conditions attached to the Common Shares; and

(2)

the authority of the directors to fix the rights, privileges, restrictions and conditions of subsequent series, if applicable.

Odyssey Trust Company, as Special Warrant Agent (the “Special Warrant Agent”)

Canaccord Genuity Corp.