UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND ONE DAY FROM THE DATE
OF ISSUE.
NORTHCORE
TECHNOLOGIES INC.
(Organized
under the laws of Ontario)
Series
(M) Convertible Secured Debenture
Date of
Issue: July 11, 2008
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CDN.
$ .
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Interest
Rate: 10.0% per annum
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Certificate
Number: [M-.]
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NORTHCORE
TECHNOLOGIES INC. (the “Corporation”), for value
received, hereby acknowledges itself indebted to and promises to pay _____(the
“Registered Holder”) on
July 11, 2013 (the “Maturity
Date”) or on such earlier date as the principal hereof becomes payable in
accordance with the provisions of this Debenture (as defined herein), on
presentation and surrender of this Debenture, the principal sum of $__in lawful money of Canada,
at the address of the Registered Holder set forth on the register of the
Corporation to be maintained as provided in the terms and conditions attached
hereto as Schedule “A” and forming part hereof (the “Terms and Conditions”),
subject to the right of the Registered Holder in certain circumstances to elect
to receive Units (as defined herein) of the Corporation in lieu of receiving
such sum, as provided in the Terms and Conditions, and to pay interest on such
principal amount as provided in the Terms and Conditions. The Terms
and Conditions, Schedules and Exhibits attached hereto are hereby incorporated
by reference and are deemed to be an integral part hereof.
This
Debenture is convertible, at the option of the Registered Holder into Units,
upon and subject to the provisions and conditions contained in the said Terms
and Conditions.
IN WITNESS WHEREOF the
Corporation has caused this Debenture to be executed under the hand of its duly
authorized officer as of the 11th day of
July 2008.
NORTHCORE
TECHNOLOGIES INC.
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Per:
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Authorized
Signing Officer
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SCHEDULE
“A”
Terms
and Conditions applicable to
Series
‘M’ Convertible Secured Debentures
dated
as of July 11, 2008 issued by
NORTHCORE
TECHNOLOGIES INC.
ARTICLE
1- INTERPRETATION
1.1 Defined
Terms
In
addition to the terms parenthetically defined herein, in this Debenture the
following terms shall have the following meanings respectively:
“Business Day” means any day,
other than Saturday, Sunday or any statutory holiday in the City of
Toronto;
“Capital Reorganization” has
the meaning attributed to such term in subsection 4.3(4);
“Closing Date” means on or
about July 11, 2008;
“Closing Market Price” at any
date means the closing price per share for Common Shares on or through, as
applicable, the Principal Market;
“Collateral” means all of the
undertaking of the Corporation and all real and personal property and assets now
or hereafter acquired by the Corporation, wheresoever located, including the
property and assets of the Corporation referred to in Section 6.1; provided
always that the term “Collateral” where used herein shall not include any
consumer goods of the Corporation. Any reference to “Collateral”
herein shall be deemed to be a reference to the Collateral or any part
thereof;
“Common Share Reorganization”
has the meaning attributed to such term in subsection 4.3(1);
“Common Shares” means the
common shares without nominal or par value in the capital of the Corporation, as
such shares exist as at the Date of Issue; provided that, in the event of a
subdivision, redivision, reduction, combination or consolidation thereof, or
successive such subdivisions, redivisions, reductions, combinations or
consolidations, then, subject to adjustments, if any, having been made in
accordance with Section 4.3, “Common Shares” shall
thereafter mean the shares resulting from such subdivision, redivision,
reduction, combination or consolidation;
“Conversion” has the meaning
attributed to such term in subsection 4.1(1);
“Conversion Price” has the
meaning attributed to such term in Section 4.1(2);
“Date of Issue” means the date
hereof;
“Date of Conversion” has the
meaning attributed to such term in subsection 4.2(2);
“Debentures” means the Series
(M) Secured Subordinate Convertible Debentures of the Corporation due on July
11, 2013 including this Debenture;
“Event of Default” has the
meaning attributed to such term in Section 8.1;
“Generally Accepted Accounting
Principles” means generally accepted accounting principles in Canada from
time to time;
“Hold Period” means four months
and one day from the Closing Date;
“Holders” means the registered
holders from time to time of the Debentures, including the Registered
Holder;
“Including” means including
without limitation;
“Interest Rate” means 10% per
annum, calculated and payable as set forth in Section 2.3 hereof;
“Maturity Date” has the
meaning attributed to such term in Section 2.4 hereof;
“Obligations” means the
aggregate of all indebtedness, obligations and liabilities, direct or indirect,
absolute or contingent, matured or not, of the Corporation to the Registered
Holder wheresoever and howsoever incurred and whether incurred arising pursuant
to this Debenture and whether incurred at the time of, or subsequent to the
execution hereof, whether incurred alone or with another or others, including
extensions and renewals;
“Offering” means the private
placement offering of up to $678,000 principal amount of Debentures by the
Corporation to purchasers resident in Ontario, Alberta and British
Columbia.
“Ontario Act” means the Securities Act
(Ontario);
“Person” means any individual,
partnership, limited partnership, joint venture, syndicate, sole proprietorship,
company or corporation with or without share capital, unincorporated
association, trust, trustee, executor, administrator or other legal personal
representative, government or governmental authority or entity, however
designated or constituted;
“PPSA” means the Personal Property Security
Act (Ontario) as the same may from time to time hereafter be amended or
any legislation that may be substituted therefor as the same may from time to
time be amended;
“Principal Market” means such
stock exchange or quotation system on or through which the Common Shares are
listed or quoted which has the highest trading volume in the calendar month
immediately preceding the applicable date, being as at the date hereof the
TSX;
“Pro Rata Basis” means, in
respect of a Holder, the percentage determined by dividing (i) the outstanding
principal amount of the Holder’s Debenture by (ii) the aggregate outstanding
principal amount of all Debentures;
“Rights Offering” and “Rights Period” have the
respective meanings attributed to such terms in subsection 4.3(2);
“Security Interest” means,
collectively, the mortgage, charge, pledge, assignment and transfer of, and the
security interest in, the Collateral granted to the Holders by the Corporation
pursuant to Section 6.1;
“Successor Corporation” means
any corporation continuing from and which acquires all or substantially all of
the undertaking, property and assets of any other corporation pursuant to any
Capital Reorganization;
“Time of Expiry” means 5:00
p.m. (Toronto time) on the Maturity Date;
“Trading Day” means a day on
which the Principal Market is open for the trading of securities;
“Transfer Form” means the form
of transfer annexed as Exhibit 1 hereto;
“TSX” means the Toronto Stock
Exchange;
“Unit” means a unit of
securities issuable on Conversion in accordance with Article 4 hereof, each such
Unit, subject to adjustments as provided in this Debenture, to be comprised of
one Common Share and one Warrant;
“Warrant” means a Common
Share purchase warrant to acquire, subject to adjustments as provided in the
certificates representing the Warrants, one Common Share at an exercise prices
of $0.10, any time prior to the earlier of (i) the fifth anniversary of the
Closing Date; and (ii) the date which is twenty (20) days following the issuance
of a notice by Northcore to holders confirming that the closing price of the
Common Shares on the Toronto Stock Exchange was greater than or equal to $ 0.20
for any 10 consecutive trading days, to be issued in the form of the certificate
annexed hereto as Exhibit 3.
1.2 Statutory
References; Terms defined by the PPSA
Any
reference in this Debenture to a statute shall be deemed to be a reference to
such statute as amended, re-enacted or replaced from time to
time. Unless there is something in the context or subject matter
inconsistent therewith, words and phrases not otherwise herein defined that are
defined by the PPSA shall have the meanings ascribed thereto respectively by the
PPSA.
1.3 Gender
and Number
Unless
the context otherwise requires, words importing the singular include the plural
and vice-versa and words importing gender include all genders.
1.4 Monetary
References
Any
reference in this Debenture to “Dollars”, “dollars” or the symbol “$” shall be
deemed to be a reference to lawful money of Canada.
1.5 Day
Not a Business Day
In
the event that any day on which any action is required to be taken hereunder is
not a Business Day, then such action shall be required to be taken on the
requisite time on the first Business Day thereafter.
1.6 Invalidity
of Provisions
Each
of the provisions contained in this Debenture is distinct and severable and a
declaration of invalidity or unenforceability of any such provision by a court
of competent jurisdiction shall not affect the validity or enforceability of any
other provision hereof or thereof.
1.7 Governing
Law
This
Debenture shall be governed by and construed in accordance with the PPSA and the
other laws of the Province of Ontario and the laws of Canada applicable therein
and shall be treated in all respects as an Ontario contract.
1.8 Assignment
Subject
to the restrictions on, and requirements for, transfer prescribed herein, the
rights and obligations of the Corporation and the Holders shall be binding upon
and shall enure to the benefit of their respective successors, heirs, executors,
administrators and permitted transferees and assigns.
ARTICLE
2- THE DEBENTURES
2.1 Debentures
in Series
This
Debenture is one of a series of convertible debentures issued by the
Corporation, designated as “Series M Secured Subordinate Convertible
Debentures”. The maximum aggregate principal amount of the Debentures
to be issued by the Corporation is $678,000 pursuant to the
Offering.
2.2 Denominations
Debentures
shall be issued in denominations of $1,000 and integral multiples
thereof.
2.3 Terms
of Debentures
All
Debentures shall bear simple interest at the Interest Rate from the Date of
Issue (or, if issued after the Date of Issue, from the actual date of issuance
thereof) to the earlier of the Maturity Date and the Date of Conversion (in
respect of the Debentures then being Converted). Interest on the
Debentures shall accrue on the outstanding principal amount of the Debentures
from day to day both before and after default, demand, maturity and judgment,
for the actual number of days elapsed on the basis of a year of 365
days. Where the calendar year of calculation contains 366 days,
interest hereunder shall be expressed as a yearly rate for purposes of the Interest Act (Canada) as such
rate multiplied by 366 and divided by 365. Such interest shall be
calculated and payable in cash on the earlier of the conversion of the Debenture
or the Maturity date.
2.4 Maturity
Date
Subject
to Section 2.5, the Debentures shall mature and the principal hereof shall
become payable on July 11, 2013 (the “Maturity Date”).
2.5 Debentures
to Rank Equally
This
Debenture shall rank equally with all other Debentures of the same series and be
equally and rateably entitled to the benefits hereof as if all the Debentures
had been issued and negotiated simultaneously.
2.6 Registration
of Debentures
(1) The
Corporation shall cause to be kept by and at the principal office of the
Corporation in the City of Toronto a register in which shall be entered the
names and latest known addresses of the Holders of this and all other Debentures
and the other particulars, as prescribed by law, of the Debentures held by them
respectively and of all transfers of Debentures. Such registration
shall be noted on the Debentures by the Corporation. No transfer of a
Debenture shall be effective as against the Corporation unless made on the
register by the Registered Holder or his executors or administrators or other
legal representatives or his or their attorney duly appointed by an instrument
in form and execution reasonably satisfactory to the Corporation and upon
compliance with such requirements as the Corporation may reasonably prescribe,
and unless such transfer shall have been duly noted on such Debenture by the
Corporation.
(2) The
register referred to in this section shall at all reasonable times be open for
inspection by the Holders.
(3) Subject
to any restriction under applicable law or policy of any applicable regulatory
body, any Holder may at any time and from time to time have such Debenture or
any portion of the principal amount thereof transferred at the place at which
the register is kept pursuant to the provisions of this section in accordance
with such reasonable regulations as the Corporation may
prescribe. The transferor of such Debenture or any portion of the
principal amount thereof shall duly complete and exercise a Transfer
Form.
(4) The
Corporation shall not be charged with notice of or be bound to see to the
execution of any trust, whether express, implied or constructive, in respect of
any Debenture, except where the Corporation is required to take notice by
statute or order of a court of competent jurisdiction and may transfer any
Debenture on the direction of the Holder thereof, whether named as trustee or
otherwise, as though that Person were the beneficial owner thereof.
(5) The
Corporation shall not register any transfers of the Debenture or issue or
transfer any Common Shares issuable on conversion of the Debenture:
(i) to
any person in the United States or a resident of the United States or any person
for the account or benefit of any person in the United States or a resident of
the United States;
(ii) in
connection with any transfers or conversions which are otherwise not in
compliance with (a) the U.S. Securities Act and the regulations thereunder if
applicable, (b) the Ontario Act and the rules and regulations thereunder, (c)
applicable securities laws and regulations of other relevant jurisdictions, or
(d) the policies and rules of the TSX; and
(iii) within
four months and a day from the Date of Issue, unless the Corporation and its
legal counsel are satisfied, acting reasonably, that it is permitted under
Ontario securities laws and under the policies and rules of the
TSX.
The
Holder acknowledges that this Debenture and the securities underlying the
Debenture are subject to resale restrictions which provide that this Debenture
and such securities may not be resold or otherwise distributed until a period of
at least four (4) months and one day have elapsed from the Date of Issue except
as permitted by applicable securities laws and acknowledges that the
certificates representing the Debenture and if the Debenture is Converted or any
of the Warrants are exercised prior to the expiry of such hold period, the
Common Shares issuable upon Conversion, the Warrants and the Common Shares
underlying the Warrants will bear the following legend denoting the restrictions
on transfer under applicable securities laws, in addition to any other legends
required by the TSX or other stock market on which such securities may
trade:
“UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE THE DATE THAT IS [FOUR (4) MONTHS AND ONE DAY FROM THE
DATE OF CLOSING OF THE DEBENTURE].”
2.7 Ownership
of Debentures
(1) The
Holder of a Debenture shall be deemed to be the owner thereof for all purposes
and payment of or on account of the principal of a Debenture shall be made only
to or upon the order in writing of the Holder thereof and such payment shall be
a complete discharge to the Corporation and any paying agent for the amounts so
paid.
(2) The
Holder for the time being of any Debenture shall be entitled to the principal
evidenced by such Debenture, free from all equities or rights of set-off or
counterclaim between the Corporation and the original or any intermediate Holder
thereof (except any equities of which the Corporation is required to take notice
by law) and all Persons may act accordingly and a transferee of a Debenture
shall, after the Transfer Form is lodged with the Corporation and upon
compliance with all other conditions contained in such Debenture or by law or by
any policy of any regulatory body, be entitled to be entered on the register as
the owner of such Debenture free from all equities or rights of set-off or
counterclaim between the Corporation and the transferor or any previous Holder
thereof, 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. Delivery to the registered Holder by the Corporation or
the receipt by the Holder of the principal monies and interest evidenced by this
Debenture and the units issuable pursuant to this Debenture, if any, shall be a
good discharge to the Corporation of its obligations hereunder and the
Corporation shall not be bound to enquire into the title of the Registered
Holder, save as ordered by a Court of competent jurisdiction or as required by
statute.
2.8 Exchange
of Debentures
(1) Debentures
of any denomination may be exchanged for Debentures of any other authorized
denomination or denominations, any such exchange to be for Debentures of an
equivalent aggregate principal amount. Exchanges of Debentures may be
made at the principal offices of the Corporation in the City of
Toronto.
(2) Except
as otherwise provided herein, upon any exchange of Debentures of any
denomination for Debentures of any other authorized denominations and upon any
transfer of Debentures, the Corporation or other registrar of Debentures may
make a sufficient charge to reimburse it for any stamp tax, security transfer
tax or other governmental charge required to be paid, and payment of such charge
shall be made by the party requesting such exchange or transfer as a condition
precedent thereto.
2.9 Replacement
of Debentures
If
any of the Debentures shall become mutilated or be lost, stolen or destroyed and
in the absence of notice that such Debentures have been acquired by a good faith
purchaser for value without notice, the Corporation will issue and deliver a new
Debenture upon surrender and cancellation of the mutilated Debenture, or, in the
case of a lost, stolen or destroyed Debenture, in lieu of and in substitution
for the same. In case of loss, theft or destruction, the applicant
for a new Debenture shall furnish to the Corporation such evidence of such loss,
theft or destruction as shall be satisfactory to the Corporation in its
discretion and shall also furnish an indemnity in amount and form satisfactory
to the Corporation in its sole discretion. The applicant shall pay
all reasonable expenses incidental to the issuance of any such new
Debenture.
ARTICLE
3- PURCHASE FOR CANCELLATION OF DEBENTURES
3.1 Purchase
of Debentures for Cancellation
The
Corporation may purchase all or any of the Debentures in the market (which shall
include purchase from or through an investment dealer or a firm holding
membership on a recognized stock exchange) or by invitation for tenders or by
private contract; provided that the price at which any Debenture may be so
purchased shall not exceed the outstanding principal amount of such
Debenture.
If,
upon an invitation for tenders, more Debentures are tendered at the same price
than the Corporation is prepared to accept, the Debentures to be purchased by
the Corporation shall be selected by lot, or in such other manner, as the
Corporation may consider equitable, from the Debentures tendered by each Holder
who tendered at such lowest price. The Holder of any Debenture of
which a part only is purchased, upon surrender of such Debenture for payment,
shall be entitled to receive, without expense to such Holder, one or more new
Debentures for the unpurchased part so surrendered and the Corporation shall
issue and deliver such new Debenture or Debentures upon receipt of the Debenture
so surrendered.
ARTICLE
4- CONVERSION
4.1 Conversion
(1) The
conversion price is $0.05 (the “Conversion Price”) for each
Unit to be issued upon the Conversion of the Debentures, unless such price shall
have been adjusted as provided in this Article, in which case the Conversion
Price shall mean the price as so adjusted and in effect at such
time.
(2) Subject
to and upon compliance with the provisions of this Article 4, the Holder of each
Debenture shall have the right, at his option, at any time prior to the Time of
Expiry, to convert such Debenture or any portion of the principal amount thereof
which is $1,000 or an integral multiple of $1,000, into Units at the Conversion
Price (a “Conversion”).
(3) In
the event of a Conversion, the accrued and upaid interest on the principal
amount of a Holder’s Debenture which is converted to Units pursuant to this
Section 4.1 will be paid in cash, as applicable pursuant to Section 2.3
above.
4.2 Manner
of Exercise or Deemed Exercise of Right to Convert
(1) The
Holder of a Debenture wishing to Convert such Debenture in whole or in part into
Units shall surrender such Debenture to the Corporation at its principal office
in the City of Toronto, together with written notice in form and substance
satisfactory to the Corporation substantially in the form of Exhibit “2” annexed
hereto, duly executed by the Holder, his executors, administrators, other legal
representatives or his or their attorney duly appointed by an instrument in form
and substance satisfactory to the Corporation, exercising his right to convert
such Debenture in accordance with the provisions of this
Article. Thereupon such Holder or, subject to payment of all
applicable stamp taxes, security transfer taxes or other governmental charges
and compliance with all reasonable requirements of the Corporation, his nominee
or assignee, shall be entitled to be entered in the books of the Corporation as
at the Date of Conversion (or such later date as is specified in subsection
4.2(2)) as the registered holder of the numbers of Common Shares and Warrants
into which such Debenture is convertible in accordance with the provisions
hereof and, as soon as practicable thereafter, the Corporation shall deliver to
such Holder or, subject as aforesaid, his nominee or assignee certificates for
such Common Shares and Warrants for any amounts payable under Sections 2.3,
4.1(3) or 4.5.
(2) For
the purposes hereof, a Debenture shall be deemed to be surrendered for
conversion on the date (the ”Date of Conversion”) which the
date on which it is so surrendered in accordance with the provisions hereof and,
in the case of a Debenture so surrendered by mail or other means of delivery, on
the date on which it is received by the Corporation at its office specified in
subsection 4.2(1), provided that if a Debenture is surrendered for Conversion on
a day on which the register of Common Shares is closed, the Person entitled to
receive Units shall become the holder of record of such Common Shares and
Warrants as at the date on which such register is next reopened.
(3) Any
part, being $1,000 or an integral multiple thereof, of a Debenture may be
Converted as provided herein and all references in this Debenture to Conversion
of Debentures shall be deemed to include Conversion of such
parts. The Holder of any Debenture of which part only is Converted
shall, upon the exercise of his right of Conversion, surrender such Debenture to
the Corporation, and the Corporation shall cancel the same and shall forthwith
issue and deliver to the Holder a new Debenture or Debentures in an aggregate
principal amount equal to the unconverted part of the principal amount of the
Debenture so surrendered.
(4) The
Common Shares issued upon Conversion shall rank only in respect of dividends
declared in favour of holders of record of Common Shares on or after the Date of
Conversion or such later date as such Holder shall become the holder of record
of such Common Shares pursuant to subsection 4.2(2), from which applicable date
they will for all purposes be and be deemed to be issued and outstanding as
fully paid and non-assessable Common Shares.
4.3 Adjustment
of Conversion Price
The
Conversion Price will 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 Corporation:
(i) issues
Common Shares or securities exchangeable for or convertible into Common Shares
to all or substantially all the holders of Common Shares as a stock dividend or
other distribution (other than an issue of Common Shares to holders of Common
Shares pursuant to a right granted to such holders to receive such Common Shares
in lieu of dividends paid in the ordinary course);
(ii) subdivides
its outstanding Common Shares into a greater number of Common Shares;
or
(iii) consolidates
its outstanding Common Shares into a smaller number of Common
Shares,
(any
of such events in clauses (i), (ii) and (iii) of this subsection being called a
“Common Share
Reorganization”), then the Conversion Price shall be adjusted effective
immediately after the effective date or record date for the happening of a
Common Share Reorganization, as the case may be, at which the holders of Common
Shares are determined for the purpose of the Common Share Reorganization by
multiplying the Conversion Price in effect immediately prior to such effective
date or record date by a fraction, the numerator of which will be the number of
Common Shares outstanding on such effective date or record date before giving
effect to such Common Share Reorganization and the denominator of which will be
the number of Common Shares outstanding immediately after giving effect to such
Common Share Reorganization (including, in the case where securities
exchangeable for or convertible into Common Shares are distributed, the number
of Common Shares that would have been outstanding had all such securities been
exchanged for or converted into Common Shares on such effective date or record
date).
(2) If
and whenever at any time after the date hereof, and prior to the Time of Expiry,
the Corporation fixes a record date for the issue of rights, options or warrants
to all or substantially all the holders of Common Shares (the “Rights”) under which such
holders are entitled, during a period expiring not more than forty-five (45)
days after the date of such issue (the “Rights Period”), to subscribe
for or purchase Common Shares (or securities convertible into Common Shares) at
a price per share to the holder (or at an exchange or conversion price per share
during the Rights Period to the holder in the case of securities exchangeable
for or convertible into Common Shares) of less than 95% of the price (the “Current Market Price”) which
is equal to the average Closing Market Price for the period of 20 Trading Days
immediately preceding such record date (any of such events being called a “Rights Offering”), then the
Conversion Price shall be adjusted effective immediately after the end of the
Rights Period to a price determined by multiplying the Conversion Price in
effect on such record date by a fraction:
(i) the
numerator of which will be the aggregate of:
(1) the
number of Common Shares outstanding as of the record date for the Rights
Offering; plus
(2) a
number determined by dividing (a) the product of the number of Common Shares
issued or subscribed for during the Rights Period upon the exercise of the
rights, warrants or options under the Rights Offering and the price at which
such Common Shares are offered by (b) the Current Market Price of the Common
Shares as of the record date for the Rights Offering, and
(ii) the
denominator of which will 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 upon exercise of the
rights, warrants or options under the Rights Offering.
Any
Holder who has exercised the right to Convert in accordance with this Article 4
during the period beginning immediately after the record date for a Rights
Offering and ending on the last day of the Rights Period for the Rights Offering
will, in addition to the Common Shares and Warrants to which that Holder would
otherwise be entitled upon such Conversion, be entitled to that number of
additional Common Shares equal to the difference between the shares received on
such Conversion and the shares that would have been received if the Conversion
Price as adjusted for such Rights Offering pursuant to this subsection had
applied when the Holder exercised the right to Convert; provided that the
provisions of Section 4.5 will be applicable to any fractional interest in a
Common Share to which such Holder might otherwise be entitled under the
foregoing provisions of this subsection. Such additional Common
Shares will be deemed to have been issued to the Holder immediately following
the end of the Rights Period and a certificate for such additional Common Shares
will be delivered to such Holder within five Business Days following the end of
the Rights Period. To the extent that any such rights, options or
warrants are not so exercised on or before the expiry thereof, the Conversion
Price will be readjusted to the Conversion Price which would then be in effect
based on the number of Common Shares (or the securities convertible into or
exchangeable for Common Shares) actually delivered on the exercise of such
rights, options or warrants.
(3) If
and whenever at any time after the date hereof and prior to the Time of Expiry,
the Corporation fixes a record date for the issue or the distribution to all or
substantially all the holders of Common Shares of (i) securities of the
Corporation, including rights, options or warrants to acquire securities of the
Corporation or any of its property or assets and including evidences of
indebtedness or (ii) any property or other assets, including evidences of
indebtedness, and if such issuance or distribution does not constitute (A) a
dividend paid in the ordinary course; (B) a Common Share Reorganization; (C) a
Rights Offering; or (D) the issue of Rights to the holders of all or
substantially all of its outstanding Common Shares under which such holders are
entitled to subscribe for or purchase Common Shares or securities exchangeable
for or convertible into Common Shares during the Rights Period, where the cost
per Common Share during the Rights Period, is 95% or more of the Current Market
Price (any of such non-excluded events being called a “Special Distribution”),
the Conversion Price shall be adjusted effective immediately after such record
date to a price determined by multiplying the Conversion Price in effect on such
record date by a fraction:
(i) the
numerator of which will 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) subject
to the prior written consent of the Principal Market, if applicable, the excess,
if any, of (a) the fair market value, as determined by action by the
Corporation’s board of directors (whose determination will be conclusive), to
the holders of Common Shares of such securities or property or other assets so
issued or distributed in the Special Distribution over (b) the fair market value
of the consideration received therefor by the Corporation from the holders of
Common Shares, as determined by the Corporation’s board of directors (whose
determination will be conclusive); and
(ii) the
denominator of which will be 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.
To
the extent that any Special Distribution is not so made, the Conversion Price
will be readjusted effective immediately to the Conversion Price which would
then be in effect based upon such securities or property or other assets as
actually distributed.
(4) If
and whenever at any time after the date hereof, and prior to the Time of Expiry,
there is a reclassification of the Common Shares at any time outstanding or
change of the Common Shares into other shares or into other securities or other
capital reorganization (other than a Common Share Reorganization), or a
consolidation, amalgamation or merger of the Corporation with or into any other
corporation or other entity (other than a consolidation, amalgamation 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 of the
undertaking or assets of the Corporation as an entirety or substantially as an
entirety to another corporation or other entity in which the holders of Common
Shares are entitled to receive shares, other securities or other property (any
of such events being called a “Capital Reorganization”), any
Holder who exercises the right to Convert Debentures into Common Shares pursuant
to Debentures then held after the effective date of such Capital Reorganization
will be entitled to receive, and will accept for the same aggregate
consideration in lieu of the number of Common Shares to which such Holder was
previously entitled upon such Conversion, the aggregate number of shares, other
securities or other property or cash which such Holder would have been entitled
to receive as a result of such Capital Reorganization if, on the effective date
thereof, the Holder had been the registered holder of the number of Common
Shares to which such Holder was previously entitled upon Conversion subject to
adjustment thereafter in accordance with provisions the same, as nearly
possible, as those contained in this Article 4. The Corporation will
take all steps necessary to ensure that, on a Capital Reorganization, the
Holders of Debentures will receive the aggregate number of shares, other
securities or other property or cash to which they are entitled as a result of
the Capital Reorganization. Appropriate adjustments will be made as a
result of any such Capital Reorganization in the application of the provisions
set forth in this Article 4 with respect to the rights and interests thereafter
of Holders of Debentures to the end that the provisions set forth in this
Article 4 will 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 conversion of any Debenture. Subject
to the prior written consent of the Principal Market, if applicable, any such
adjustment will be made by and set forth in an instrument supplemental hereto
approved by action of the board of directors of the Corporation and will for all
purposes be conclusively deemed to be an appropriate adjustment.
(5) If
the purchase price provided for in any rights, options or warrants (the “Rights Offering Price”)
referred to in subsections 4.3(2) or (3) is decreased, the Conversion Price will
forthwith be changed so as to decrease the Conversion Price to the Conversion
Price that would have been obtained if the adjustment to the Conversion Price
made under such subsections, as the case may be, with respect to such rights,
options or warrants had been made on the basis of the Rights Offering Price as
so decreased, provided that the terms of this subsection will not apply to any
decrease in the Rights Offering Price resulting from terms in any such rights,
options or warrants designed to prevent dilution except to the extent that the
resulting decrease in the Conversion Price under this subsection would be
greater than the decrease, if any, in the Conversion Price to be made under the
terms of this section by virtue of the occurrence of the event giving rise to
such decrease in the Rights Offering Price.
(6) In
any case in which this section requires that an adjustment become effective
immediately after a record date for an event referred to herein, the Corporation
may defer, until the occurrence of such event, issuing to the Holder of any
Debenture Converted after such record date and before the occurrence of such
event the additional Common Shares issuable upon such Conversion by reason of
the adjustment required by such event; provided, however, that the Corporation
shall deliver to such Holder an appropriate instrument evidencing such Holder’s
right to receive such additional Common Shares upon the occurrence of such event
and the right to receive any distributions made on such additional Common Shares
declared in favour of holders of record of Common Shares on and after the Date
of Conversion or such later date on which such Holder would, but for the
provisions of this subsection, have become the holder of record of such
additional Common Shares pursuant to subsection 4.2(1).
4.4 Rules
Regarding Calculation of Adjustment of Conversion Price
For
the purposes of Section 4.3:
(1) The
adjustments provided for in Section 4.3 are cumulative and will be computed to
the nearest one-tenth of one cent and will be made successively whenever an
event referred to therein occurs, subject to the remaining provisions of this
section.
(2) No
adjustment in the Conversion Price will be required unless such adjustment would
result in a change of at least 1% in the prevailing Conversion Price; provided,
however, that any adjustments which, except for the provisions of this
subsection would otherwise have been required to be made, will be carried
forward and taken into account in any subsequent adjustment.
(3) No
adjustment in the Conversion Price will be made in respect of any event
described in Section 4.3 if Holders are entitled to participate in such event on
the same terms, mutatis
mutandis, as if they had converted their Debentures prior to or on the
effective date or record date of such event. Any such participation
will be subject to the prior consent of each stock exchange on which the Common
Shares are listed or quoted for unlisted trading privileges, or were listed in
the year prior to the occurrence of the event described in this subsection, if
applicable.
(4) If
at any time a dispute arises with respect to adjustments provided for in Section
4.3, subject to the prior written consent of the Principal Market, if
applicable, such dispute will be conclusively determined by the Corporation’s
auditors, or if they are unable or unwilling to act, by such other firm of
independent chartered accountants as may be selected by action of the
Corporation’s board of directors and any such determination will be binding upon
the Corporation, the Holders and shareholders of the Corporation; such auditors
or accountants will be given access to all necessary records of the
Corporation.
(5) If
the Corporation sets a record date to determine the holders of Common Shares for
the purpose of entitling them to receive any dividend or distribution or sets a
record date to take any other action and thereafter and before the distribution
to such shareholders of any such dividend or distribution or the taking of any
other action, legally abandons its plan to pay or deliver such dividend or
distribution or take such other action, then no adjustment in the Conversion
Price shall be made.
(6) In
the absence of a resolution of the Corporation’s board of directors fixing a
record date for a Special Distribution or Rights Offering, the Corporation shall
be deemed to have fixed as a record date therefor the date on which the Special
Distribution or Rights Offering is effected.
4.5 No
Requirement to Issue Fractional Shares or Warrants
The
Corporation shall not be required to issue fractional Common Shares or Warrants
upon the Conversion of Debentures. If more than one Debenture is
surrendered for Conversion at one time by the same Holder, the number of whole
Common Shares and Warrants issuable upon Conversion thereof shall be computed on
the basis of the aggregate principal amount of the Debentures to be Converted.
If any fractional interest in a Common Share or Warrant, as applicable, would,
except for the provisions of this section, be deliverable upon the Conversion of
any principal amount of Debentures, the Corporation shall, in lieu of delivering
any certificate of such fractional interest, satisfy such fractional interest by
paying to the Holder of such surrendered Debentures an amount in lawful money of
Canada equal to the value of such fractional interest based upon the Closing
Market Price of the Common Shares on the Business Day preceding the Date of
Conversion.
4.6 Corporation
to Reserve Shares
The
Corporation covenants that it will at all times reserve and keep available out
of its authorized Common Shares (if the number thereof is or becomes limited)
solely for the purpose of issue upon Conversion of Debentures as provided
herein, and conditionally issue to Holders who may exercise their Conversion
rights hereunder, such number of Common Shares as shall then be issuable upon
the Conversion of all outstanding Debentures and any Warrants which my be issued
on exercise thereof. All Common Shares which shall be so issuable shall be duly
and validly issued as fully paid and non-assessable.
4.7 Cancellation
of Converted Debentures
All
Debentures Converted in whole or in part shall be forthwith cancelled by the
Corporation (with regard to the Debenture or portion thereof which has been
Converted) and, subject to subsection 4.2(3), no Debentures shall be issued in
substitution therefor.
4.8 Certificate
as to Adjustment
The
Corporation shall from time to time, immediately after the occurrence of any
event which requires an adjustment or readjustment as provided in Section 4.3,
deliver a certificate to the Holders specifying the nature of the event
requiring the same and the amount of the adjustment or readjustment necessitated
thereby and setting forth in reasonable detail the method of calculation and the
facts upon which such calculation is based. Except in respect of any
subdivision, redivision, reduction, combination or consolidation of the Common
Shares, the Corporation shall forthwith give notice to the Holders specifying
the event requiring such adjustment or readjustment and the amount thereof,
including the resulting Conversion Price; provided that if the Corporation has
given notice under Section 4.9 covering all the relevant facts in respect of
such event, no such notice need be given under this section.
4.9 Notice
of Special Matters
The
Corporation covenants that, so long as any Debentures remain outstanding, it
will give notice to the Holders of its intention to fix a record date for any
event referred to in subsections 4.3(1), (2), (3) or (4) (other than
the subdivision, redivision, reduction, combination or consolidation of Common
Shares) or a cash dividend (other than a dividend paid in the ordinary course)
which may give rise to an adjustment in the Conversion Price, and such notice
shall specify the particulars of such event and the record date and the
effective date for such event; provided that the Corporation shall only be
required to specify in such notice such particulars of such event as shall have
been fixed and determined on the date on which such notice is
given. Such notice shall be given not less than 14 days prior to the
applicable record date.
ARTICLE
5- COVENANTS OF THE CORPORATION
5.1 General
Covenants
The
Corporation hereby covenants with the Holders as follows:
(a)
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the
Corporation will duly and punctually pay or cause to be paid to every
Holder the principal thereof and interest accrued on the Debentures (and,
in case of default, interest on the amount in default) of which he is the
Holder on the dates, at the places, and in the manner mentioned
herein;
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(b)
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at
the request of a Holder, the Corporation will furnish to the Holders a
copy of all financial statements, whether annual or interim, of the
Corporation and the report, if any, of the Corporation’s auditors thereon
and of all annual and other periodic reports of the Corporation furnished
to its shareholders after the date hereof and prior to the Time of
Expiry;
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(c)
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the
Corporation will duly and punctually perform and carry out all of the acts
or things to be done by it, and perform all covenants required to be
performed by it, as provided in this
Debenture;
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(d)
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upon
the occurrence of an Event of Default, the Corporation shall permit a
representative of the Holders to inspect the Collateral and the operations
of the Corporation and for that purpose to enter to the Corporation’s
premises and any other location where the Collateral may be situated
during reasonable business hours and upon reasonable
notice;
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(e)
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the
Corporation shall:
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(i) keep
proper books of accounts and records covering all of its business and affairs on
a current basis as well as accurate and complete records concerning the
Collateral;
(ii) notify
the Holders promptly of any loss or damage to or any seizure of any significant
portion of the Collateral;
(iii) furnish
the Holders with such information regarding the Collateral and its value and
location as the Holders may from time to time reasonably request;
(iv) upon
the occurrence of an Event of Default, permit a representative of the Holders,
during reasonable business hours and upon reasonable notice, to inspect the
Corporation’s books of account, records and documents and to make copies,
extracts and summaries therefrom; and
(v) at
any time after an Event of Default, permit the Holder or its representative to
make reasonable inquiries of third parties for the purpose of verification of
any of the foregoing; and
(f)
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the
Corporation shall promptly notify the Holder in writing of the details
of:
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(i) any
amendment to its articles, including by virtue of the filing of articles of
amalgamation, effecting a change in the Corporation’s name;
(ii) any
claim, litigation or proceeding before any court, administrative board or other
tribunal which either does or could have a material adverse effect on the
Collateral or the Corporation;
(iii) any
claim, lien, attachment, execution or other process or encumbrance made or
asserted against or with respect to the Collateral which either does or could
have material adverse effect on the validity or enforceability of the Security
Interest;
(iv) any
transfer of the Corporation’s interest in the Collateral, whether or not
permitted hereunder; or
(v) any
material loss of or damage to the Collateral, whether or not such loss or damage
is covered by insurance; and
(g)
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the
Corporation shall keep the Collateral insured as would a reasonable
prudent owner of similar property against loss or damage by fire, theft or
other usual perils, in such amounts as would a reasonably prudent owner of
similar property and with such insurers as the Holder may reasonably
require from time to time.
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5.2 Specific
Covenants
The
Corporation hereby further covenants with the Holders that:
(a)
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all
Common Shares which shall be issued upon a Conversion or upon due exercise
of any Warrants, shall be issued as fully paid and non-assessable in the
capital of the Corporation;
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(b)
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it
will at all times maintain its corporate existence and will carry on and
conduct its business in a proper and efficient manner; provided, however,
that nothing herein contained shall prevent the Corporation from ceasing
to operate any business or property if, in the opinion of its board of
directors, it shall be advisable and in the best interests of the
Corporation to do so;
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(c)
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it
will use its best efforts to maintain the listing of the Common Shares
(including the Common Shares issuable pursuant to the terms of the
Debentures) on or through the TSX or another recognized Canadian stock
exchange;
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(d)
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it
will use its best efforts to maintain its status as a reporting issuer in
each of the Provinces of Ontario, British Columbia, and Alberta not in
default;
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(e)
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it
will at all times, so long as any Debentures remain outstanding and may be
Converted, keep open the register of Debentures and the transfer registers
for the Common Shares and will not take any action which would have the
effect of preventing the Holders from Converting any of the Debentures or
receiving any of the Common Shares upon such
Conversion;
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(f)
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it
will make all requisite filings, including filings with appropriate
securities commissions and stock exchanges, in connection with the
creation and sale of the Debentures, the Conversion of the Debentures and
the issue of the underlying Common
Shares;
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(g)
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generally,
it will well and truly perform and carry out all of the acts or things to
be done by it as provided herein;
and
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(h)
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it
will use its best efforts to comply with, satisfy and fulfil promptly all
prerequisites, conditions and requirements imposed by or arising out of
legal, regulatory and administrative requirements applicable to the
Corporation with respect to the consummation of the transactions
contemplated hereby, including filing or causing to be filed all
documents, certificates, opinions, forms or undertakings required to be
filed by the Corporation in connection with the purchase and sale of the
Debentures and the issuance of the Common Shares and Warrants in
accordance with the terms of the Debentures and the listing and posting
for trading of such Common Shares on the TSX or another recognized
Canadian stock exchange, as
applicable.
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5.3 Performance
of Covenants by the Registered Holder
The
Registered Holder may, in its sole discretion and upon notice to the
Corporation, perform any covenant of the Corporation under this Debenture that
the Corporation fails to perform and that the Registered Holder is capable of
performing, including any covenant the performance of which requires the payment
of money; provided that the Registered Holder will not be obligated to perform
any such covenant on behalf of the Corporation. No such performance
by the Registered Holder will require the Registered Holder further to perform
the Corporation’s covenants nor relieve the Corporation from any default or
operate as a derogation of the rights and remedies of the Registered Holder
under this Debenture. The Corporation agrees to indemnify and to
reimburse the Registered Holder for all costs and expenses incurred by the
Registered Holder in connection with the performance by it of any such covenant,
and all such costs and expenses shall be payable by the Corporation to the
Registered Holder on demand, shall bear interest at the highest rate per annum
borne by any of the Obligations, calculated and compounded monthly, and shall
(with all such interests) be added and form part of the
Obligations.
ARTICLE
6- SECURITY INTEREST
6.1 Grant
of Security Interest, Description of Collateral
As
continuing collateral security for the due and timely payment and performance by
the Corporation of the Obligations, the Corporation hereby mortgages, charges,
pledges, assigns, transfers and sets over to the Registered Holder and grants to
the Registered Holder a general and continuing security interest in the
Collateral, which shall include but not be limited to:
(a) all
accounts, debts, amounts, claims, choses in actions and monies which now are, or
which may at any time hereafter become, due or owing to or owned by the
Corporation, whether or not earned by performance, including any and all
accounts receivable arising or resulting from the sale, lease, use, assignment
or other disposition of any property described in this section; all securities,
mortgages, bills, notes and other documents now held or owned, or
which may be hereafter taken, held or owned, by or on behalf of the Corporation,
in respect of such accounts, debts, amounts, claims, choses in actions and
monies or any parts thereof; and all books, documents and papers recording,
evidencing, or relating to such accounts, debts, amounts, claims, choses in
actions and monies or any part thereof;
(b) all
present and future agreements made between the Corporation as secured party and
others which evidence both a monetary obligation and security interest in or a
lease of specific goods;
(c) all
books of accounts and other books, invoices, writings, letters, papers and other
documents whether in written, magnetic, electronic or other form, relating to or
being records of the Collateral or by which any of the Collateral is secured,
evidenced, acknowledged or made payable;
(d) all
writings now or hereafter owned by the Corporation, each of which writing
purports to be issued by or addressed to a bailee and purports to cover such
goods and chattels in the bailee’s possession as are identified or fungible
portions of an identified mass, whether such goods and chattels are inventory or
equipment and which writing is treated in the ordinary course of business as
establishing that the person in possession of such writing is entitled to
receive, hold and dispose of such writing and the goods and chattels it covers,
and further, whether such writing is negotiable in form or otherwise, including
bills of lading and warehouse receipts;
(e) all
equipment now owned or hereafter acquired by the Corporation, including all
machinery, fixtures, plant, tools, furniture, chattels, vehicles of any kind or
description including motor vehicles, parts, accessories, installed in or
affixed or attached to any of the foregoing, all purchase warranties and claims,
drawings, specifications, plans and manuals relating thereto, any equipment
specified as equipment of the Corporation and other tangible personal property
which is not inventory;
(f) all
present and future bills, notes and cheques (as such terms are defined pursuant
to the Bills of Exchange Act (Canada)) of the Corporation, and all of the
writing and evidence a right to the payment of money and are of a type that in
the ordinary course of business are transferred by delivery and all letters of
credit and advices of credit provided that such letters of credit and advices of
credit state that they must be surrendered upon claiming payment
thereof;
(g) subject
to Section 6.5, all intangible property now owned or hereafter acquired by the
Corporation and which is not accounts, including all contractual rights,
insurance claims, goodwill, licenses, inventions, franchises, designer rights,
know-how processes and formulae, patents, patent applications, trade-marks,
trade names, copyrights and other intellectual or industrial property of the
Corporation, whether registered or not and whether under license or otherwise,
and all other choses in action of the Corporation of every kind, whether due or
owing at the present time or hereinafter to become due or owing;
(h) all
goods and chattels now or hereafter forming the inventory of the Corporation
including all goods, merchandise, raw materials, work in process, finished
goods, goods held for sale, resale or lease or that have been leased or that are
to be, or have been furnished under a contract of service, and goods used in or
procured for packing or packaging;
(i) all
money now or hereafter owned by the Corporation, whether or not such money is
authorized or adopted by the Parliament of Canada as part of its currency or by
any foreign government as part of its currency;
(j) all
present and future securities held by the Corporation, including shares,
options, rights, warrants, joint venture interests, interests in limited
partnerships, trust units, bonds, notes and all other documents which constitute
evidence of a share, participation or other interest of the Corporation in
property or in an enterprise or which constitute evidence of an obligation of
the issuer (including an uncertificated security within the meaning of Part VI
(Investment Securities) of the Business Corporations Act (Ontario)), together
with all accretions thereto, all substitutions therefor, all dividends and
income derived therefrom and all rights and claims in respect thereof;
and
(k) subject
to Section 6.4 all leases now owned or hereafter acquired by the Corporation as
tenant (whether oral or written) or any agreement therefor, together with all of
the Corporation’s erections, improvements and fixtures situate
thereupon.
6.2 Proceeds
The
Security Interest shall extend to all proceeds (other than consumer goods) of
the Collateral.
6.3 Attachment
The
Corporation hereby acknowledges that value has been given by the Registered
Holder for the granting of the Security Interest, that the Corporation has
rights in the Collateral (other than future and hereafter acquired Collateral),
and that the parties have agreed not to postpone the time for attachment of the
Security Interest.
6.4 Exception
re Last Day of Leases
The
last day of the term of any lease, sublease or agreement therefor, oral or
written, now held or hereafter acquired by the Corporation is specifically
excepted from the Security Interest and shall not form part of the Collateral,
but the Corporation agrees to stand possessed of such last day in trust for any
person as the Registered Holder may direct and the Corporation shall assign and
dispose thereof in accordance with such direction.
6.5 Exception
re Contractual Rights, Licenses, etc.
To
the extent that the Security Interest would constitute a breach or cause the
acceleration of any agreement, lease, contractual right, license, approval,
privilege, franchise or permit to which the Corporation is a party, the Security
Interest shall not attach thereto but the Corporation shall hold its interest
therein in trust for the Registered Holder and shall grant a security interest
in such agreement, contractual right, license or permit to the Registered Holder
forthwith upon obtaining the appropriate consents to the creation of such
security interest. The Corporation agrees to use commercially
reasonably efforts to obtain any such consent from time to time requested by the
Registered Holder.
6.6 Amalgamation
In
the event that the Corporation shall amalgamate with any other corporation or
corporations:
(a) the
term “Corporation” wherever used herein shall extend to and include each of the
amalgamating corporations and the amalgamated corporation and the indebtedness,
obligations, and liabilities of each of them shall be included in the
Obligations; and
(b) the
Security Interest shall extend to and the Collateral shall include all the
property and assets of each of the amalgamating corporations and the amalgamated
corporation and to any property or assets of the amalgamated corporation
thereafter owned or acquired.
ARTICLE
7- RESTRICTIONS ON DISPOSITIONS OF COLLATERAL
7.1 General
Restrictions
Except
as herein expressly provided, the Corporation shall not, without the prior
written consent of the Holder:
(a)
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create,
allow to be created, assume or suffer to exist any encumbrance upon the
Collateral ranking or purporting to rank in priority to or pari passu with
the Security Interest other than the Permitted Security
Interests;
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(b)
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sell,
lease, assign or otherwise dispose of or deal with the Collateral;
or
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(c)
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release,
surrender or abandon possession of the
Collateral.
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7.2 Permitted
Dispositions
This
Debenture and the Security Interest shall in no way hinder or prevent the
Corporation, without the prior written consent of the Holder, at any time or
from time to time until an Event of Default shall have occurred and the Security
Interest shall become enforceable:
(a)
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from
collecting and, where necessary, enforcing the collection of any and all
amounts due or to become due to the Corporation under any account;
or
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(b)
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from
selling, leasing, licensing, consigning or otherwise disposing of
inventory or of any obsolete, worn out, damaged or otherwise unsuitable
equipment forming part of the Collateral in the ordinary course of the
Corporation’s business and for the purpose of carrying on the
same.
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ARTICLE
8 - DEFAULT AND ENFORCEMENT
8.1 Events
of Default
Each
of the following events is hereinafter sometimes referred to as an “Event of
Default”:
(a) if
the Corporation makes default in payment of the principal of or, if applicable,
any interest on, any Debenture when the same becomes due and such default shall
not have been remedied within a period of 10 business days after such default
shall first have become known to any officer of the Corporation or written
notice thereof shall have been received by the Company from the Registered
Holder;
(b) if
the Corporation or any subsidiary shall make a general assignment for the
benefit of its creditors or a notice of intention to make a proposal under the
Bankruptcy and Insolvency
Act (Canada), or shall be declared or adjudged bankrupt, or a receiving
order shall be made against the Corporation or any subsidiary unless same is
being contested in good faith and is dismissed, stayed or withdrawn within 30
days thereof, or if a liquidator, trustee in bankruptcy, receiver, receiver and
manager or any other officer with similar powers shall be appointed to the
Corporation or any subsidiary or of all of its property or any material part
thereof unless same is being contested in good faith and is dismissed, stayed or
withdrawn within 30 days thereof, or if the Corporation or any subsidiary shall
propose a compromise, arrangement, or reorganization under the Companies’ Creditors Arrangement
Act (Canada) or any similar legislation of any jurisdiction providing for
the reorganization or winding-up of corporations or business entities or
providing for an agreement, composition, extension or adjustment with its
creditors; or the Corporation or any subsidiary shall admit in writing its
inability to pay its debts generally as they become due or shall take corporate
action in furtherance of any of the aforesaid purposes;
(c) if
an order shall be made or effective resolution passed for the winding-up or
liquidation of the Corporation or any subsidiary, except in the course of
carrying out or pursuant to a transaction in respect of which the conditions of
Section 8.1 are duly observed and performed, or except in the case of
voluntarily winding-up or liquidating a subsidiary of the Corporation in a
voluntary transaction pursuant to which substantially all of the assets of such
subsidiary are transferred to the Corporation or another subsidiary of the
Corporation;
(d) if
the Corporation or any subsidiary shall make default beyond any period of grace
provided with respect thereto in the payment of the principal of, or part
thereof, or interest or premium on, any indebtedness in excess of $100,000 or
observance of any term, agreement or condition in respect of such indebtedness
and the effect of such default is to accelerate the payment of such indebtedness
or to permit the holder or holders of such indebtedness (or trustee on behalf of
such holder or holders) to accelerate the payment of such indebtedness, and such
acceleration shall not be rescinded or annulled or such event of default shall
not be remedied or cured, whether by payment or otherwise, by the Corporation or
the subsidiary or waived by the holders of such indebtedness, within 30 days
after such acceleration shall have occurred;
(e) if
the Corporation shall neglect to observe or perform any other covenant or
condition contained in the Debenture on its part to be observed or performed
and, after notice in writing has been given by the Registered Holder to the
Corporation specifying such default and requiring the Corporation to put an end
to the same, the Corporation shall fail to make good such default within a
period of 30 days, unless the Registered Holder (having regard to the subject
matter of the default) shall have agreed to a longer period, and in such event,
within the period agreed to by the Registered Holder;
(f) an
encumbrancer, whether permitted or otherwise, takes possession of any
significant portion of the Collateral;
(g) an
order is made or legislation enacted for the expropriation, confiscation,
forfeiture, escheating or other taking or compulsory divestiture, whether or not
with compensation, of all or a significant portion of the Collateral unless the
same is being actively and diligently contested by the Corporation in good
faith, the Corporation shall have provided to the Registered Holder such
security therefor as it may reasonably require and such order or legislation
shall have been vacated, lifted, discharged, stayed or repealed within 30 days
from the date of being entered, pronounced or enacted, as the case may
be;
(h) any
process of a court, execution, attachment, garnishment, distress or analogous
process is issued or levied or becomes enforceable or is enforced against any
significant portion of the Collateral unless the same is being actively and
diligently contested by the Corporation in good faith, the Corporation shall
have provided to the Registered Holder such security therefor as it may
reasonably require and such court process, execution, attachment, garnishment,
distress or analogous process shall have been vacated, lifted, discharged or
stayed within 30 days after being entered, commenced or levied, as the case may
be;
(i) the
Corporation ceases or threatens to cease to carry on its business, commits an
act of bankruptcy, becomes insolvent, proposes a compromise or arrangement to
its creditors or makes an unauthorized sale in bulk of its assets;
or
(j) the
Corporation is liquidated, dissolved or its corporate charter expires or is
revoked.
8.2 Notice
of Events of Default
If
an Event of Default shall occur and is continuing the Corporation shall, within
five Business Days after it becomes aware of the occurrence of such Event of
Default, give notice thereof to the Holders.
Where
notice of the occurrence of an Event of Default has been given and the Event of
Default is thereafter cured, notice that the Event of Default is no longer
continuing shall be given by the Corporation to the Holders within five Business
Days after the Corporation becomes aware that the Event of Default has been
cured.
8.3 Acceleration
on Default
If
any Event of Default has occurred and is continuing, the Registered Holder may
in its discretion, by notice in writing to the Corporation declare the principal
amount of the Debenture held by such Registered Holder and any other monies
payable hereunder to be due and payable and the same shall forthwith become
immediately due and payable to such Registered Holder, anything herein contained
to the contrary notwithstanding.
8.4 Remedies
Upon
the occurrence of an Event of Default, the Security Interest shall immediately
become enforceable and the Registered Holder may, forthwith or at any time
thereafter and without notice to the Corporation except as required by the PPSA
or by this Debenture:
(a) commence
legal action to enforce payment or performance of any or all of the
Obligations;
(b) make
payments to discharge any claim, lien, mortgage, security interest, charge or
other encumbrance on properties on which either the Corporation or the
Registered Holder may hold charges or encumbrances (whether or not ranking in
priority to the Security Interest);
(c) enter
upon, use and occupy any and all premises owned, leased or occupied by the
Corporation where the Collateral may be located;
(d) take
immediate possession of all or any part of the Collateral and require the
Corporation to assemble or deliver possession of the Collateral at a location or
locations specified by the Registered Holder, with power to exclude the
Corporation, its officers, directors and agents therefrom;
(e) appoint
or reappoint by instrument in writing any person to be an agent or any person to
be a receiver, manager or receiver and manager (herein called a “Receiver”) of the Collateral
and to remove any Receiver so appointed and to appoint another if the Registered
Holder so desires;
(f) notify
the account debtors or obligors under any accounts of the assignment of such
accounts to the Registered Holder and direct such account debtors or obligors to
make payment of all amounts due or to become due to the Corporation thereunder
directly to the Registered Holder and give valid and binding receipts and
discharges therefor and in respect thereof and, upon such notification and at
the expense of the Corporation, enforce collection of any accounts, and adjust,
settle, or compromise the account or payment thereof in the same manner and to
the same extent as the Corporation might have done;
(g) enjoy
and exercise all of the rights and remedies of a secured party under the
PPSA;
(h) file
such proofs of claim or other documents as may be necessary or desirable to have
its claim lodged in any bankruptcy, winding-up, liquidation, dissolution or
other proceedings (voluntary or involuntary) relating to the
Corporation;
(i) preserve,
protect and maintain the Collateral and made such replacements thereof and
additions thereto as the Registered Holder shall deem advisable;
(j) sell,
consign, lease or otherwise dispose of all or any part of the Collateral whether
by public or private sale, consignment or lease or otherwise and on any terms so
long as every aspect of the disposition is commercially reasonable, including
terms that provide time for payment on credit; provided that:
(i) neither
the Registered Holder nor any Receiver will be required to sell, consign, lease
or dispose of the Collateral, but may peaceably and quietly take, hold, use,
occupy, possess and enjoy the Collateral without molestation, eviction,
hindrance, or interruption by any other person or persons whomsoever for such
period of time as is commercially reasonable;
(ii) the
Registered Holder or any Receiver may dispose of all or any part of the
Collateral in the condition in which it was on the date possession of it was
taken, or after any commercially reasonable repair, processing or preparation
for disposition;
(iii) the
Registered Holder or any Receiver may convey, transfer or assign to a purchaser
or purchasers the title to any of the Collateral so sold; and
(iv) the
Corporation will be entitled to be credited with the actual proceeds of any such
sale, consignment, lease or other disposition only when such proceeds are
received by the Registered Holder or Receiver in cash.
8.5 Powers
and Duties of Receiver
Any
Receiver appointed hereunder:
(a) shall,
subject to the provisions of the instrument appointing it, have all of the
powers of the Registered Holder hereunder, together with:
(i) the
power to carry on the business of the Corporation or any part
thereof;
(ii) the
power to borrow money in the Corporation’s name or in the Receiver’s name;
and
(iii) the
power to grant security interests in the Collateral in priority to the Security
Interest as security for the money so borrowed; and
(b) shall
be deemed to be the agent of the Corporation for the purpose of establishing
liability for the acts or omissions of the Receiver and the Registered Holder
shall not be liable for such acts or omissions.
The
Corporation hereby irrevocably authorizes the Registered Holder from time to
time after appointment of any receiver to give instructions to the Receiver
relating to the performance relating to the Receiver’s duties and to fix the
remuneration of the Receiver in connection therewith.
8.6 Other
Remedies
The
remedies provided in Section 8.4 are cumulative and in addition to (and not in
substitution for, exclusive of nor dependent on) any other remedies contained
herein or in any existing or future security document granted by the Corporation
to the Registered Holder and to all other remedies existing at law or in equity
or by statute.
8.8 Indulgences
and Releases
Either
the Registered Holder or Receiver may grant extensions of time and other
indulgences, take and give up or abstain from perfecting or taking advantage of
securities, except compositions, compound, compromise, settle, grant releases
and discharges, release any part of the Collateral to third parties and
otherwise deal with the Corporation, debtors of the Corporation, surety and
others and with the Collateral and other security as the Registered Holder or
such Receiver may see fit without prejudice to the liability of the Corporation
under the Obligations or the right of the Registered Holder and such Receiver to
hold the Collateral and realize upon the Security Interest.
8.9 Application
of Monies
Subject
to the requirements of the PPSA, all money or other proceeds of realization
collected or received by the Registered Holder or any Receiver upon the
realization of the Security Interest or on exercise of any other rights or
remedies herein contained with respect to the Collateral shall be applied on
account of the Obligations in such manner as the Registered Holder deems best
or, at the option of the Registered Holder, may be held unapportioned in a
collateral account or released to the Corporation, all without prejudice to the
liability of the Corporation or the rights of the Registered Holder
hereunder. The balance of such proceeds, if any, shall be paid in
accordance with the PPSA and any other applicable law.
8.10 Liability
for Deficiency
If
the proceeds of realization received by or on behalf of the Registered Holder
from the disposition of the Collateral are not sufficient to satisfy the
Obligations in full, the Corporation shall be liable to pay such deficiency to
the Registered Holder forthwith on demand.
8.11 Set
Off
Without
in any way limiting any other rights or remedies available to the Registered
Holder, the Registered Holder shall have the right (but shall not be obligated),
at any time and from time to time after the occurrence of an Event of Default
and without notice to the Corporation (such notice being expressly waived by the
Corporation), to set off against the Obligations or any of them deposits
(general or special) or monies held by the Registered Holder or any other
indebtedness owing by the Registered Holder to, or held by, the Registered
Holder for the credit of, the Corporation, regardless of the currency in which
such indebtedness is denominated and notwithstanding that such indebtedness is
not then due.
8.12 Waiver
The
Corporation hereby waives diligence, presentment, protest, notice of protest,
notice of dishonour and notice of non-payment of this Debenture, and
specifically consents to and waives notice of any renewal or extension of this
Debenture. No delay by the Registered Holder in exercising any power
or privilege hereunder, nor the single or partial exercise of any power or
privilege hereunder, shall preclude any other or further exercise thereof, or
the exercise of any other power or privilege hereunder.
8.13 Immunity
of Shareholders, Directors and Others
The
Holders waive and release any right, cause of action or remedy now or hereafter
existing in any jurisdiction against any past, present or future incorporator,
shareholder, director, officer, employee or agent of the Corporation or of any
Successor Corporation for the payment of the principal of any of the Debentures
or on any covenant, agreement, representation or warranty by the Corporation
contained herein.
ARTICLE
9- NOTICES
9.1 Notice
to the Corporation
Any
notice to the Corporation under the provisions of this Debenture shall be valid
and effective if delivered personally to, or if given by registered mail,
postage prepaid, addressed to, the Corporation at its offices in 302 The East
Mall, Suite 300, Toronto, Ontario, M9B 6C7 Attention: Tam Nguyen, Corporate
Controller, fax no. (416) 640-0412, and shall be deemed to have been given on
the date of delivery or on the fifth Business Day after such letter has been
mailed, as the case may be. The Corporation may from time to time
notify the Holders of a change in address which thereafter, until changed by
further notice, shall be the address of the Corporation for all purposes of the
Debentures.
9.2 Notice
to Holder
Except
as otherwise expressly provided herein, all notices to be given hereunder with
respect to the Debentures shall be valid and effective if such notice is
delivered personally or, subject to Section 9.3, sent by first class mail,
postage prepaid, addressed to such Holders at their post office addresses
appearing in any of the registers hereinbefore mentioned. Any notice
so delivered or sent by mail shall be deemed to have been given on the day upon
which it is delivered or on the fifth Business Day after such letter has been
mailed, as the case may be. Any accidental error, omission or failure
in giving or in delivering or mailing any such notice or the non-receipt of any
such notice by any Holder shall not invalidate or otherwise prejudicially affect
any action or proceeding founded thereon.
9.3 Mail
Service Interruption
If,
by reason of any actual or threatened interruption of mail service due to
strike, lock-out or otherwise, any notice to be given to the Holders or to the
Corporation would be unlikely to reach its destination in a timely manner, such
notice shall be valid and effective only if delivered personally in accordance
with Sections 9.1 or 9.2, as the case may be.
ARTICLE
10- SUCCESSOR CORPORATIONS
10.1 Certain
Requirements
The
Corporation shall not enter into any transaction (whether by way of
reconstruction, reorganization, consolidation, amalgamation, merger, transfer,
sale, lease or otherwise) whereby all or substantially all of its undertaking,
property and assets would become the property of any other person or, in the
case of such amalgamation or merger, of the continuing company resulting
therefrom unless, and may do so if:
(i) such
other person or continuing corporation is a corporation (herein called the
“Successor Corporation”)
incorporated under the laws of Canada or any province thereof;
(ii) the
Successor Corporation shall execute, prior to, contemporaneously with or
forthwith after the consummation of such transaction an instrument supplemental
hereto and such other instruments as are necessary or advisable to evidence the
assumption by the Successor Corporation of the liability for the due and
punctual payment of all amounts outstanding and payable hereunder from time to
time and the covenant of the Successor Corporation to pay the same and its
agreement to observe and perform all of the covenants and obligations of the
Corporation under this Debenture;
(iii) such
transaction shall, to the satisfaction of the Holders acting reasonably, be upon
such terms as substantially to preserve and not to impair in any material
respect the rights and powers of the Holders hereunder; and
(iv) no
condition or state of facts shall exist as to the Corporation or the Successor
Corporation, either at the time of or immediately before or after the
consummation of any such transaction and after giving full effect thereto or
immediately after the Successor Corporation complying with the provisions of
clause (b) above, that constitutes or would constitute after notice or lapse of
time or both, an Event of Default.
10.2 Vesting
of Powers in Successor
Whenever
the conditions of Section 9.1 shall have been duly observed and performed, the
Holders shall execute and deliver the supplemental instrument provided for in
Section 9.1 and thereupon the Successor Corporation shall be bound by the
covenants and obligations of the Corporation under this Debenture and shall
possess and from time to time exercise each and every power of the Corporation
under this Debenture in the name of the Corporation or otherwise, and any act or
proceeding by any provision of this Debenture required to be done or performed
by any directors or officers of the Corporation may be done and performed with
like force and effect by the directors or officers of the Successor
Corporation.
ARTICLE
11- GENERAL PROVISIONS
11.1 Further
Assurances
The
Corporation shall do, execute, acknowledge and deliver or cause to be done,
executed, acknowledged and delivered, such further acts, deeds, mortgages,
transfers, assurances or other documents as the Registered Holder shall
reasonably require to give effect to or preserve and perfect the Security
Interest in the Collateral intended to be granted to the Registered Holder
hereunder, or any security interest the Corporation may hereafter grant or
become bound to grant to the Registered Holder for the purpose of accomplishing
and effecting the intention of this Debenture. The Corporation hereby
irrevocably appoints the Registered Holder to be the attorney of the
Corporation, coupled with an interest, with full power of substitution, for and
in the name of the Corporation to execute and to do any deeds, documents,
transfers, demands, assignments, assurance, consents and things which the
Corporation is obliged to sign, execute or do hereunder.
11.2 Term
This
Debenture shall become effective according to its terms immediately upon the
execution hereof by the Corporation and shall continue as security for the
Obligations until all of the Obligations are paid and performed in full and this
Debenture is terminated.
11.3 Non-Substitution
This
Debenture and the Security Interest are in addition to and not in substitution
for any other agreement made between the Registered Holder and the Corporation
or any other security granted by the Corporation to the Registered Holder
whether before or after the execution of this Debenture.
11.4 No
Merger
Neither
the taking of any action suit or proceeding, judicial or extra-judicial nor the
exercise of any power of seizure or disposition shall extinguish the liability
of the Corporation to pay and perform the Obligations nor shall the acceptance
of any payment or alternate security constitute or create any
novation. No covenant, representation or warranty of the Corporation
herein shall merge in any judgment.
11.5 Entire
Agreement
There
are no representations, agreements, warranties, conditions, covenants or terms,
express or implied, collateral or otherwise, affecting this Debenture or the
Security Interest or the Corporation’s obligations and liabilities hereunder
other than express herein.
11.6 Time
of Essence
Time
shall be of the essence in this Debenture in all respects.
11.7 Disclosure
of Information re Corporation
The
Corporation agrees that the Registered Holder may provide, subject to applicable
law, from time to time such information concerning this Debenture, the
Collateral and the Obligations to such persons as the Registered Holder in good
faith believes are entitled to the same under the PPSA.
EXHIBIT
“1”
FORM
OF TRANSFER
Re: Series
(M) Convertible Debenture of NORTHCORE TECHNOLOGIES INC.
due
July 11, 2013
For
value received, the undersigned hereby assigns and transfers unto
______________________________________
of _____________________________________ $ of the principal amount of
the within Debenture registered in the name of the undersigned on the books of
NORTHCORE TECHNOLOGIES INC. (the “Corporation”) including the
rights thereunder to the accrued and unpaid interest on such principal amount
and hereby irrevocably constitutes and appoints ____________________________
attorney to transfer the said Debenture on the books of the Corporation with
full powers of substitution in the premises.
DATED_____________
in the presence of __________________________.
Signed:
___________________________________
EXHIBIT
“2”
FORM
OF ELECTION OF CONVERSION PRIVILEGE
TO: NORTHCORE
TECHNOLOGIES INC.
RE:
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Series
(M) Convertible Debenture of NORTHCORE TECHNOLOGIES
INC.
|
due
July 11, 2013
The
undersigned hereby irrevocably elects to convert $1,000 or any integral multiple
thereof principal amount of the within Debenture into Units of the Corporation
at the Conversion Price in accordance with the Terms and Conditions of the
Debenture. Please issue certificates for the Common Shares and
Warrants comprising such Units as follows:
Principal
amount converted: $ _____________________________
($1,000
or integral multiple thereof only)
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Name:
|
____________________________________
|
|
Address:
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____________________________________
|
____________________________________
Date:
____________________________________
Signed: ____________________________________
Witness: ____________________________________
EXHIBIT
“3”
FORM
OF SERIES (M) WARRANT
UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE DATE
OF ISSUE.
Void
after 5:00 p.m. (Toronto time) on the 11th day of
July 2013.
(“Holder”):
|
Account
#
|
# of
Warrants:
|
Series
(M) Warrant Certificate
No.:
|
|
|
|
M-W-•
|
NORTHCORE
TECHNOLOGIES INC.
(Organized
under the laws of the Province of Ontario)
This
is to certify that, for value received, Holder shall have the right to purchase
from Northcore Technologies Inc. (the “Corporation”), at any time and
from time to time up to the Expiry Time (as defined below), one fully paid and
non-assessable Common Share (as defined below) for each Series (M) Warrant
(individually, a “Warrant”) represented hereby
at a price of Cdn$0.10 per share (the “Exercise Price”), upon and
subject to the following terms and conditions:
1.
|
For
the purpose of this Warrant, the term “Common Shares” means
common shares in the capital of the Corporation as constituted on the date
hereof; provided that in the event of a change, subdivision, re-division,
reduction, combination or consolidation thereof or any other adjustment
under clause 7 hereof, or such successive changes, subdivisions,
re-divisions, reductions, combinations, consolidations or other
adjustments, then subject to the adjustments, if any, having been made in
accordance with the provisions of this Warrant Certificate, “Common Shares” shall
thereafter mean the shares, other securities or other property resulting
from such change, subdivision, re-division, reduction, combination or
consolidation or other adjustment.
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2.
|
For
the purpose of this Warrant, the term “Expiry Time” means the
earlier of: (i) 5:00 p.m. (Toronto time) on July 11, 2013; and (ii) the
date which is twenty (20) days following the issuance of a notice by the
Corporation to Holders confirming that the closing price of the common
shares of the Corporation on the Toronto Stock Exchange was greater than
or equal to $0.20 for 10 consecutive trading days, following the 4 months
and one day hold period from the Date of Issue of the Series (M)
Debentures. All rights under any of the Warrants in respect of which the
right of subscription and purchase therein provided for shall not
theretofore have been exercised shall wholly cease and determine and such
Warrants shall be wholly void and of no valid or binding effect after the
Expiry Time.
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3.
|
The
right to purchase Common Shares pursuant to the Warrants may only be
exercised by the Holder before the Expiry Time by duly completing and
executing a subscription substantially in the form attached hereto as
Schedule “A”, in the manner therein indicated and surrendering this
Warrant Certificate and the duly completed and executed subscription form
to the Corporation at the principal office of the Corporation at 302 The
East Mall, Suite 300, Toronto, Ontario, M9B 6C7, together with payment of
the purchase price for the Common Shares subscribed for in the form of
cash or a certified cheque payable to the Corporation in an amount equal
to the then applicable Exercise Price multiplied by the number of Common
Shares subscribed for.
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4.
|
Issue
of Common Shares upon Exercise.
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(a) Upon
such delivery and payment as set forth in Section 3, the Corporation shall cause
to be issued to the Holder the number of Common Shares to be issued and the
Holder shall become a shareholder of the Corporation in respect of such Common
Shares with effect from the date of such delivery and payment and shall be
entitled to delivery of a certificate or certificates evidencing such shares.
The Corporation shall cause such certificate or certificates to be delivered via
bonded overnight courier to the Holder at the address or addresses specified in
such subscription form within three (3) business days of such delivery and
payment as herein provided.
(b) The
Corporation shall not be required to issue fractional Common Shares upon the
exercise of the Warrants and no payment shall be made by the Corporation in lieu
of issuing any fractional interest in a Common Share.
5.
|
The
holding of a Warrant shall not constitute the Holder a shareholder of the
Corporation nor entitle the Holder to any right or interest in respect
thereof except as herein expressly
provided.
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6.
|
The
Corporation covenants and agrees that until the Expiry Time, while any of
the Warrants shall be outstanding, it shall reserve and there shall remain
unissued out of its authorized capital a sufficient number of Common
Shares to satisfy the right of purchase herein provided, as such right of
purchase may be adjusted pursuant to clauses 7 and 8
hereof. All Common Shares which shall be issued upon the
exercise of the right to purchase herein provided for, upon payment
therefor of the amount at which such Common Shares may at the time be
purchased pursuant to the provisions hereof, shall be issued as fully paid
and non assessable shares and the holders thereof shall not be liable to
the Corporation or its creditors in respect
thereof.
|
The
Exercise Price will 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 July 11, 2008, and prior to the Expiry Time, the
Corporation:
(i) issues
Common Shares or securities exchangeable for or convertible into Common Shares
to all or substantially all the holders of Common Shares as a stock dividend or
other distribution (other than an issue of Common Shares to holders of Common
Shares pursuant to a right granted to such holders to receive such Common Shares
in lieu of dividends paid in the ordinary course);
(ii) subdivides
its outstanding Common Shares into a greater number of Common Shares;
or
(iii) consolidates
its outstanding Common Shares into a smaller number of Common
Shares,
(any
of such events in clauses (i), (ii) and (iii) of this subsection being called a
“Common Share
Reorganization”), then the Exercise Price shall be adjusted effective
immediately after the effective date or record date for the happening of a
Common Share Reorganization, as the case may be, at which the holders of Common
Shares are determined for the purpose of the Common Share Reorganization by
multiplying the Exercise Price in effect immediately prior to such effective
date or record date by a fraction, the numerator of which will be the number of
Common Shares outstanding on such effective date or record date before giving
effect to such Common Share Reorganization and the denominator of which will be
the number of Common Shares outstanding immediately after giving effect to such
Common Share Reorganization (including, in the case where securities
exchangeable for or convertible into Common Shares are distributed, the number
of Common Shares that would have been outstanding had all such securities been
exchanged for or converted into Common Shares on such effective date or record
date).
(2) If
and whenever at any time after July 11, 2008, and prior to the Expiry Time, the
Corporation fixes a record date for the issue of rights, options or warrants to
all or substantially all the holders of Common Shares (the “Rights”) under which such
holders are entitled, during a period expiring not more than forty-five (45)
days after the date of such issue (the “Rights Period”), to subscribe
for or purchase Common Shares (or securities convertible into Common Shares) at
a price per share to the holder (or at an exchange or conversion price per share
during the Rights Period to the holder in the case of securities exchangeable
for or convertible into Common Shares) of less than 95% of the price (the “Current Market Price”) which
is equal to the average closing price on the Toronto Stock Exchange for the
period of 20 trading days immediately preceding such record date (any of such
events being called a “Rights
Offering”), then the Exercise Price shall be adjusted effective
immediately after the end of the Rights Period to a price determined by
multiplying the Exercise Price in effect on such record date by a
fraction:
(iv) the
numerator of which will be the aggregate of:
(1) the
number of Common Shares outstanding as of the record date for the Rights
Offering; plus
(2) a
number determined by dividing (a) the product of the number of Common Shares
issued or subscribed for during the Rights Period upon the exercise of the
rights, warrants or options under the Rights Offering and the price at which
such Common Shares are offered by (b) the Current Market Price of the Common
Shares as of the record date for the Rights Offering, and
(v) the
denominator of which will 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 upon exercise of the
rights, warrants or options under the Rights Offering.
Any
Holder who has exercised the Warrants represented hereby during the period
beginning immediately after the record date for a Rights Offering and ending on
the last day of the Rights Period for the Rights Offering will, in addition to
the Common Shares to which that Holder would otherwise be entitled upon such
exercise, be entitled to that number of additional Common Shares equal to the
difference between the shares received on such exercise and the shares that
would have been received if the Exercise Price as adjusted for such Rights
Offering pursuant to this subsection had applied when the Holder exercised the
Warrants; provided that the provisions of Section 4(b) will be applicable to any
fractional interest in a Common Share to which such Holder might otherwise be
entitled under the foregoing provisions of this subsection. Such
additional Common Shares will be deemed to have been issued to the Holder
immediately following the end of the Rights Period and a certificate for such
additional Common Shares will be delivered to such Holder within three business
days following the end of the Rights Period. To the extent that any
such rights, options or warrants are not so exercised on or before the expiry
thereof, the Exercise Price will be readjusted to the Exercise Price which would
then be in effect based on the number of Common Shares (or the securities
convertible into or exchangeable for Common Shares) actually delivered on the
exercise of such rights, options or warrants.
(3) If
and whenever at any time after July 11, 2008, and prior to the Expiry Time, the
Corporation fixes a record date for the issue or the distribution to all or
substantially all the holders of Common Shares of (i) securities of the
Corporation, including rights, options or warrants to acquire securities of the
Corporation or any of its property or assets and including evidences of
indebtedness or (ii) any property or other assets, including evidences of
indebtedness, and if such issuance or distribution does not constitute (A) a
dividend paid in the ordinary course; (B) a Common Share Reorganization; (C) a
Rights Offering; or (D) the issue of Rights to the holders of all or
substantially all of its outstanding Common Shares under which such holders are
entitled to subscribe for or purchase Common Shares or securities exchangeable
for or convertible into Common Shares during the Rights Period, where the cost
per Common Share during the Rights Period, is 95% or more of the Current Market
Price (any of such non-excluded events being called a “Special Distribution”), the
Exercise Price shall be adjusted effective immediately after such record date to
a price determined by multiplying the Exercise Price in effect on such record
date by a fraction:
(vi) the
numerator of which will 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) subject
to the prior written consent of the Toronto Stock Exchange, if applicable, the
excess, if any, of (a) the fair market value, as determined by action by the
Corporation’s board of directors (whose determination will be conclusive), to
the holders of Common Shares of such securities or property or other assets so
issued or distributed in the Special Distribution over (b) the fair market value
of the consideration received therefor by the Corporation from the holders of
Common Shares, as determined by the Corporation’s board of directors (whose
determination will be conclusive); and
(vii) the
denominator of which will be 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.
To
the extent that any Special Distribution is not so made, the Exercise Price will
be readjusted effective immediately to the Exercise Price which would then be in
effect based upon such securities or property or other assets as actually
distributed.
(4) If
and whenever at any time after July 11, 2008, and prior to the Expiry Time,
there is a reclassification of the Common Shares at any time outstanding or
change of the Common Shares into other shares or into other securities or other
capital reorganization (other than a Common Share Reorganization), or a
consolidation, amalgamation or merger of the Corporation with or into any other
corporation or other entity (other than a consolidation, amalgamation 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 of the
undertaking or assets of the Corporation as an entirety or substantially as an
entirety to another corporation or other entity in which the holders of Common
Shares are entitled to receive shares, other securities or other property (any
of such events being called a “Capital Reorganization”), any
Holder who exercises the Warrants represented hereby into Common Shares after
the effective date of such Capital Reorganization will be entitled to receive,
and will accept for the same aggregate consideration in lieu of the number of
Common Shares to which such Holder was previously entitled upon such exercise,
the aggregate number of shares, other securities or other property or cash which
such Holder would have been entitled to receive as a result of such Capital
Reorganization if, on the effective date thereof, the Holder had been the
registered holder of the number of Common Shares to which such Holder was
previously entitled upon exercise subject to adjustment thereafter in accordance
with provisions the same, as nearly possible, as those contained in this Section
7. The Corporation will take all steps necessary to ensure that, on a
Capital Reorganization, the Holders of Warrants will receive the aggregate
number of shares, other securities or other property or cash to which they are
entitled as a result of the Capital Reorganization. Appropriate
adjustments will be made as a result of any such Capital Reorganization in the
application of the provisions set forth in this Section 7 with respect to the
rights and interests thereafter of Holders of Warrants to the end that the
provisions set forth in this Section 7 will 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. Subject to the prior written consent of the Toronto Stock
Exchange, if applicable, any such adjustment will be made by and set forth in an
instrument supplemental hereto approved by action of the board of directors of
the Corporation and will for all purposes be conclusively deemed to be an
appropriate adjustment.
(5) If
the purchase price provided for in any rights, options or warrants (the “Rights Offering Price”)
referred to in subsections 7(2) or (3) is decreased, the Exercise Price will
forthwith be changed so as to decrease the Exercise Price to the Exercise Price
that would have been obtained if the adjustment to the Exercise Price made under
such subsections, as the case may be, with respect to such rights, options or
warrants had been made on the basis of the Rights Offering Price as so
decreased, provided that the terms of this subsection will not apply to any
decrease in the Rights Offering Price resulting from terms in any such rights,
options or warrants designed to prevent dilution except to the extent that the
resulting decrease in the Exercise Price under this subsection would be greater
than the decrease, if any, in the Exercise Price to be made under the terms of
this section by virtue of the occurrence of the event giving rise to such
decrease in the Rights Offering Price.
(6) In
any case in which this section requires that an adjustment become effective
immediately after a record date for an event referred to herein, the Corporation
may defer, until the occurrence of such event, issuing to the Holder of any
Warrant exercised after such record date and before the occurrence of such event
the additional Common Shares issuable upon such exercise by reason of the
adjustment required by such event; provided, however, that the Corporation shall
deliver to such Holder an appropriate instrument evidencing such Holder’s right
to receive such additional Common Shares upon the occurrence of such event and
the right to receive any distributions made on such additional Common Shares
declared in favour of holders of record of Common Shares on and after the date
of exercise or such later date on which such Holder would, but for the
provisions of this subsection, have become the holder of record of such
additional Common Shares.
(7) If
and whenever at any time after July 11, 2008, and prior to the Expiry Time, any
of the events set out in this clause 7 shall occur and the occurrence of such
event results in an adjustment of the Exercise Price pursuant to the provisions
of this clause 7, then the number of Common Shares purchasable pursuant to this
Warrant shall be adjusted contemporaneously with the adjustment of the Exercise
Price by multiplying the number of Common Shares then otherwise purchasable on
the exercise thereof by a fraction, the numerator of which shall be the Exercise
Price in effect immediately prior to the adjustment and the denominator of which
shall be the Exercise Price resulting from such adjustment.
(8) If
the Corporation takes any action affecting its Common Shares to which the
foregoing provisions of this clause 7, in the opinion of the board of directors
of the Corporation, acting in good faith, are not strictly applicable, or if
strictly applicable would not fairly adjust the rights of the Holder against
dilution in accordance with the intent and purposes hereof, or would otherwise
materially affect the rights of the Holder of the Warrants hereunder, then the
Corporation shall, subject to the
prior written consent of Toronto Stock Exchange, execute and deliver
to the Holder an amendment hereto providing for an adjustment in the application
of such provisions so as to adjust such rights as aforesaid in such manner as
the board of directors of the Corporation may determine to be equitable in the
circumstances, acting in good faith. The failure of the taking of action by the
board of directors of the Corporation to so provide for any adjustment on or
prior to the effective date of any action or occurrence giving rise to such
state of facts will be conclusive evidence that the board of directors has
determined that it is equitable to make no adjustment in the
circumstances.
8.
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The
following rules and procedures shall be applicable to the adjustments made
pursuant to clause 7:
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The
adjustments provided for in Section 7 are cumulative and will be computed to the
nearest one-tenth of one cent and will be made successively whenever an event
referred to therein occurs, subject to the remaining provisions of this
section.
(c)
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No
adjustment in the Exercise Price will be required unless such adjustment
would result in a change of at least 1% in the prevailing Exercise Price;
provided, however, that any adjustments which, except for the provisions
of this subsection would otherwise have been required to be made, will be
carried forward and taken into account in any subsequent
adjustment.
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(d)
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No
adjustment in the Exercise Price will be made in respect of any event
described in Section 7 if Holders are entitled to participate in such
event on the same terms, mutatis mutandis, as if
they had exercised their Warrants prior to or on the effective date or
record date of such event. Any such participation will be
subject to the prior consent of each stock exchange on which the Common
Shares are listed or quoted for unlisted trading privileges, or were
listed in the year prior to the occurrence of the event described in this
subsection, if applicable.
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(e)
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If
at any time a dispute arises with respect to adjustments provided for in
Section 7, subject to the prior written consent of the Toronto Stock
Exchange, if applicable, such dispute will be conclusively determined by
the Corporation’s auditors, or if they are unable or unwilling to act, by
such other firm of independent chartered accountants as may be selected by
action of the Corporation’s board of directors and any such determination
will be binding upon the Corporation, the Holders of Warrants and
shareholders of the Corporation; such auditors or accountants will be
given access to all necessary records of the
Corporation.
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(f)
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If
the Corporation sets a record date to determine the holders of Common
Shares for the purpose of entitling them to receive any dividend or
distribution or sets a record date to take any other action and thereafter
and before the distribution to such shareholders of any such dividend or
distribution or the taking of any other action, legally abandons its plan
to pay or deliver such dividend or distribution or take such other action,
then no adjustment in the Exercise Price shall be
made.
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(g)
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In
the absence of a resolution of the Corporation’s board of directors fixing
a record date for a Special Distribution or Rights Offering, the
Corporation shall be deemed to have fixed as a record date therefor the
date on which the Special Distribution or Rights Offering is
effected.
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9.
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On
the happening of each and every such event set out in clause 7, the
applicable provisions of this Warrant, including the Exercise Price,
shall, ipso facto, be deemed to be amended accordingly and the Corporation
shall take all necessary action so as to comply with such provisions as so
amended.
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10.
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The
Corporation shall not be required to deliver certificates for Common
Shares while the share transfer books of the Corporation are properly
closed, having regard to the provisions of clauses 7 and 8 hereof, prior
to any meeting of shareholders or for the payment of dividends or for any
other purpose and in the event of the surrender of any Warrant in
accordance with the provisions hereof and the making of any subscription
and payment for the Common Shares called for thereby during any such
period delivery of certificates for Common Shares may be postponed for not
more than five (5) days after the date of the re opening of said share
transfer books. Provided, however, that any such postponement of delivery
of certificates shall be without prejudice to the right of the Holder so
surrendering the same and making payment during such period to receive
after the share transfer books shall have been re opened such certificates
for the Common Shares called for, as the same may be adjusted pursuant to
clause 8 hereof as a result of the completion of the event in respect of
which the transfer books were
closed.
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11.
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Nothing
herein contained or done pursuant hereto shall obligate the Holder to
purchase or pay for or the Corporation to issue any securities except
those Common Shares in respect of which the Holder shall have exercised
its right to purchase hereunder in the manner provided
herein.
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12.
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All
Series (M) Warrants of the Corporation shall rank pari passu,
notwithstanding the actual date of the issue
thereof.
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13.
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The
Corporation shall not enter into any transaction whereby all or
substantially all of its undertaking, property and assets would become the
property of any other corporation (herein called a “successor corporation”)
whether by way of reorganization, reconstruction, consolidation,
amalgamation, merger, transfer, sale, disposition or otherwise, unless
prior to or contemporaneously with the consummation of such transaction
the Corporation and the successor corporation shall have executed such
instruments and done such things as, in the opinion of counsel to the
Holder, are necessary or advisable to establish that upon the consummation
of such transaction:
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(i)
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the
successor corporation will have assumed all the covenants and obligations
of the Corporation under this Warrant,
and
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(ii)
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the
Warrant will be a valid and binding obligation of the successor
corporation entitling the Holder, as against the successor corporation, to
all the rights of the Holder under this Warrant, mutatis
mutandis.
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Whenever
the conditions of this subsection 13 shall have been duly observed and performed
the successor corporation shall possess, and from time to time may exercise,
each and every right and power of the Corporation under this Warrant in the name
of the Corporation or otherwise and any act or proceeding by any provision
hereof required to be done or performed by any director or officer of the
Corporation may be done and performed with like force and effect by the like
directors or officers of the successor corporation.
14.
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The
Corporation hereby represents and warrants with and to the Holder that the
Corporation is duly authorized and has the corporate and lawful power and
authority to create and issue this Warrant and the Common Shares issuable
upon the exercise hereof and perform its obligations hereunder and that
this Warrant represents a valid, legal and binding obligation of the
Corporation enforceable in accordance with its
terms.
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15.
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If
any one or more of the provisions or parts thereof contained in this
Warrant should be or become invalid, illegal or unenforceable in any
respect in any jurisdiction, the remaining provisions or parts thereof
contained herein shall be and shall be conclusively deemed to be, as to
such jurisdiction, severable therefrom
and:
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(iii)
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the
validity, legality or enforceability of such remaining provisions or parts
thereof shall not in any way be affected or impaired by the severance of
the provisions or parts thereof severed;
and
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(iv)
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the
invalidity, illegality or unenforceability of any provision or part
thereof contained in this Warrant in any jurisdiction shall not affect or
impair such provision or part thereof or any other provisions of this
Warrant in any other jurisdiction.
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16.
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Any
notice, document or communication required or permitted by this Warrant to
be given by a party hereto shall be in writing and is sufficiently given
if delivered personally, or if sent by prepaid registered mail, or if
transmitted by any form of recorded telecommunication tested prior to
transmission, to such party addressed as
follows:
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(v)
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to
the Holder, in the register to be maintained pursuant to Section 20
hereof; and
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(vi)
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to
the Corporation at:
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302
The East Mall
Suite
300
Toronto,
Ontario
M9B
6C7
Attention: Tam
Nguyen, Controller
Fax: 416-640-0412
Notice
so mailed shall be deemed to have been given on the tenth (10th)
business day after deposit in a post office or public letter box. Neither party
shall mail any notice, request or other communication hereunder during any
period in which applicable postal workers are on strike or if such strike is
imminent and may reasonably be anticipated to affect the normal delivery of
mail. Notice transmitted by a form of recorded telecommunication or delivered
personally shall be deemed given on the day of transmission or personal
delivery, as the case may be. Any party may from time to time notify the other
in the manner provided herein of any change of address which thereafter, until
change by like notice, shall be the address of such party for all purposes
hereof.
17.
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Subject
as hereinafter provided, all or any of the rights conferred upon the
Holder by the terms hereof may be enforced by the Holder by appropriate
legal proceedings. No recourse under or upon any obligation,
covenant or agreement contained herein shall be had against any
shareholder, director or officer of the Corporation either directly or
through the Corporation, it being expressly agreed and declared that the
obligations under the Warrants are solely corporate obligations and that
no personal liability whatever shall attach to or be incurred by the
shareholders, directors or officers of the Corporation or any of them in
respect thereof, any and all rights and claims against every such
shareholder, officer or director being hereby expressly waived as a
condition of and as a consideration for the issue of the
Warrants.
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18.
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The
Holder may subscribe for and purchase any lesser number of Common Shares
than the number of shares expressed in this Warrant
Certificate. In the case of any subscription for a lesser
number of Common Shares than expressed in this Warrant Certificate, the
Holder hereof shall be entitled to receive at no cost to the Holder a new
Warrant Certificate in respect of the balance of Warrant not then
exercised. Such new Warrant Certificate shall be delivered by
bonded overnight courier to the Holder by the Corporation,
contemporaneously with the delivery of the certificate or certificates
representing the Common Shares issued pursuant to clause
4.
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19.
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If
this Warrant Certificate is stolen, lost, mutilated or destroyed, the
Corporation shall, on such terms as it may in its discretion acting
reasonably impose, issue and sign and direct the Corporation’s transfer
agent to countersign a new Warrant Certificate of like denomination, tenor
and date as the Warrant Certificate so stolen, lost, mutilated or
destroyed for delivery to the
Holder.
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20.
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The
Corporation shall keep at its principal office (or its transfer agent in
the City of Toronto): (a) a register of holders in which shall be entered
the names and addresses of the holders of the Warrants and of the number
of Warrants held by them; and (b) a register of transfers in which shall
be entered the date and other particulars of each transfer of
Warrants. The registers hereinbefore referred to shall be open
at all reasonable times for inspection by any
Holder.
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21.
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The
transferee of a Warrant Certificate shall, after the transfer form
attached to the Warrant Certificate as Schedule “B” or any other form of
transfer acceptable to the Corporation, acting reasonably, is duly
completed and the Warrant Certificate is lodged with the Corporation and
upon compliance with all other conditions in that regard required by this
Warrant, by the Toronto Stock Exchange or by law, be entitled to have his
name entered on the register of holders as the owner of the Warrants
represented thereby free from all equities or rights of set off or
counterclaim between the Corporation and the transferor or any previous
holder of such Warrant, save in respect of equities of which the
Corporation or the transferee is required to take notice by statute or by
order of a court of competent
jurisdiction.
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22.
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Warrant
Certificates may, upon compliance with the reasonable requirements of the
Corporation, be exchanged for Warrant Certificates in any other
denomination representing in the aggregate the same number of
Warrants. The Corporation shall issue and sign and direct the
Corporation’s transfer agent to countersign, all Warrant Certificates
necessary to carry out the exchanges contemplated herein,
provided:
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(i) Warrant
Certificates may be exchanged only at the principal office of the Corporation in
the City of Toronto;
(ii) any
Warrant Certificates tendered for exchange shall be surrendered to the
Corporation and cancelled; and
(iii) except
as otherwise herein provided, the Corporation shall not charge Holders
requesting an exchange any sum for any new Warrant Certificate
issued.
23.
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The
Corporation may deem and treat the registered holder of any Warrant
Certificate as the absolute owner of the Warrants represented thereby for
all purposes, and the Corporation shall not be affected by any notice or
knowledge to the contrary except where the Corporation is required to take
notice by statute or by order of a court of competent
jurisdiction. A Holder shall be entitled to the rights
evidenced by such Warrant free from all equities or rights of set off or
counterclaim between the Corporation and the original or any intermediate
holder thereof and all persons may act accordingly and the receipt by any
such Holder of the Common Shares purchasable pursuant to such Warrant
shall be a good discharge to the Corporation for the same and the
Corporation shall not be bound to inquire into the title of any such
Holder except where the Corporation is required to take notice by statute
or by order of a court of competent
jurisdiction.
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24.
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The
Holder, if resident in Canada, acknowledges that appropriate legend, as
follows, will be placed upon certificates representing any securities
issued on the exchange, assignment or exercise of the Warrants represented
by this certificate until the hold period expires for the Warrants so
represented hereby.
|
LEGEND
“UNLESS
PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT
TRADE THE SECURITY BEFORE THE DATE THAT IS FOUR MONTHS AND A DAY AFTER THE DATE
OF ISSUE.”
25. This
Warrant shall be governed by the laws of the Province of Ontario and the federal
laws ofCanada applicable herein..
27.
|
All
references herein to monetary amounts are references to lawful money of
Canada.
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28. Time
shall be of the essence hereof.
IN WITNESS WHEREOF, the
Corporation has caused this Warrant Certificate to be signed by its duly
authorized officer.
DATED this __________day of
_____________. 20_____.
NORTHCORE
TECHNOLGIES INC.
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Per:
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|
|
Name:
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|
Title:
|
SCHEDULE
“A”
SUBSCRIPTION
FORM
TO
BE COMPLETED IF WARRANTS ARE TO BE EXERCISED:
TO:
|
NORTHCORE
TECHNOLOGIES INC.
302
The East Mall, Suite 300
Toronto,
Ontario
M9B
6C7
|
RE:
|
Series
(M) Warrants
|
THE UNDERSIGNED hereby
subscribes for ___________________ common shares of Northcore Technologies Inc.
according to the terms and conditions set forth in the annexed warrant
certificate (or such number of other securities or property to which such
warrant entitles the undersigned to acquire under the terms and conditions set
forth in the annexed warrant certificate).
Address
for Delivery of
Shares:_________________________________________________
Exercise
Price Tendered:
______________________________________________________
(Cdn$0.15
per share or as
adjusted) Cdn$____________________________________
DATED at Toronto, this
_____day of _______________, 20___.
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|
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Witness
|
|
Holder’s
Name
|
|
|
|
|
|
Authorized
Signature
|
|
|
|
|
|
Title
(if
applicable)
|
SCHEDULE
“B”
ASSIGNMENT
FORM
TO
BE COMPLETED IF WARRANTS ARE TO BE ASSIGNED:
TO:
|
NORTHCORE
TECHNOLOGIES INC.
302
The East Mall, Suite 300
Toronto,
Ontario
M9B
6C7
|
RE:
|
Series
(M) Warrants
|
FOR VALUE RECEIVED,
_________Warrants represented by this Warrant Certificate are
hereby
transferred to
________________________________________________________________
residing
at
________________________________________________________________________
You
are hereby instructed to take the necessary steps to effect this
transfer.
DATED at
_____________________, this ________ day of _________________,
20___.
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|
|
Witness
|
|
Holder’s
Name
|
|
|
|
|
|
Authorized
Signature
|
|
|
|
|
|
Title
(if
applicable)
|
Signature
guaranteed:
The
signature must be guaranteed by a Canadian chartered bank or a member of a
recognized stock exchange or other entity acceptable to the
Corporation.