SCHEDULE "B"

PART 27

SPECIAL RIGHTS AND RESTRICTIONS ATTACHING TO THE

REDEEMABLE, CONVERTIBLE PREFERRED SHARES,

SERIES A, AS A SERIES

The first series of Preferred shares of the Company shall be designated the Redeemable, Convertible Preferred Shares, Series A (the "Series A Preferred Shares") and shall have attached thereto, in addition to the special rights and restrictions attaching to the Preferred shares as a class, the following special rights and restrictions (the "Series A Provisions"):

27.1

DEFINITIONS AND INTERPRETATION

27.1.1

Definitions

Where used in these Series A Provisions, the following words and phrases shall, unless there is something in the context otherwise inconsistent therewith, have the following meanings:

(a)

"Affiliate" means any company or entity controlled by, controlling, or under common control with a Party hereto and shall include any Person 50% or more of whose voting shares or participating profit interest is owned or controlled, directly or indirectly, by a Party, and any company which owns or controls, directly or indirectly, 50% or more of the voting shares of a Party;

(b)

"Amphomycin IND Filing Date" means the date of filing of an IND in a Major Market Country for an Amphomycin-Related Product;

(c)

"Amphomycin-Related Lead Compound" has the meaning set forth in the Asset Purchase Agreement;

(d)

"Amphomycin-Related Product" has the meaning set forth in the Asset Purchase Agreement;

(e)

"Amphomycin Tox Date" means the date of the achievement of the dosing of the first animal in the first GLP Toxicology Study of an Amphomycin-Related Lead Compound;

(f)

"Asset Purchase Agreement" means that certain asset purchase agreement to be entered into between the Company and the Series A Preferred Holder relating to the purchase by the Company of certain assets comprising the Series A Preferred Holder's research program for polyene and amphomycin-related compounds dated as of May 20, 2002;

(g)

"Company Act" has the meaning set forth in Article 27.1.6;

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(h)

"Common Shares" means Common shares in the capital of the Company and, when used with reference to a Successor Corporation, shall mean the class or classes of shares with the greatest per share voting power entitled to vote generally and, in particular, in the election of all directors of such Successor Corporation;

(i)

"Conversion" means the conversion of the Series A Preferred Shares into Common Shares pursuant to the terms set forth herein;

(j)

"Conversion Date" has the meaning set forth in Article ;

(k)

"Conversion Notice" has the meaning set forth in Article ;

(l)

"Conversion Price" means the Current Market Price of Common Shares as at an applicable Conversion Date;

(m)

"Corporate Reorganization" means capital reorganization, reclassification, subdivision or consolidation of the capital of the Company or a consolidation, merger, arrangement or amalgamation (statutory or otherwise) of the Company with or into another company or body corporate;

(n)

"Current Market Price" of the Common Shares on any date means the U.S. Dollar Equivalent of the average of the "closing prices" of Common Shares on The Toronto Stock Exchange for the 5 Trading Days ending on the last Trading Day prior to an applicable Milestone Date.  The "closing price" for each Trading Day shall be the last reported sales price for sales of Common Shares on The Toronto Stock Exchange (or, if the Common Shares are not then listed and posted for trading on The Toronto Stock Exchange, on any other Stock Exchange), provided however that in the event such average of the "closing prices" of Common Shares on The Toronto Stock Exchange for the 5 Trading Days ending the last Trading Day prior to an applicable Milestone Date is less than the U.S. Dollar Equivalent of Cdn $0.29, the Current Market Price shall be deemed to equal the U.S. Dollar Equivalent of Cdn $0.29, subject to adjustments from time to time in accordance with Article .  If the Common Shares are not listed on a Stock Exchange, then the provisions of Article  shall apply;

(o)

"Delisting of Common Shares" means the Common Shares have been suspended, cease traded or delisted from The Toronto Stock Exchange by any applicable regulatory authority(ies) for a period of 10 consecutive Trading Days and the Common Shares (or the Common Shares of a Successor Corporation, as may be applicable) are not otherwise listed for trading on any other Stock Exchange during that 10 day period;

(p)

"Effective Date" means the date the Asset Purchase Agreement is entered into between IntraBiotics Pharmaceuticals, Inc. and the Company;

(q)

"Entity" has the meaning set forth in the Asset Purchase Agreement;

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(r)

"Expiry Redemption" has the meaning set forth in Article 27.9.5;

(s)

"GLP Toxicology Study" has the meaning set forth in the Asset Purchase Agreement;

(t)

"Governmental Body" has the meaning set forth in the Asset Purchase Agreement;

(u)

"herein", "hereto", "hereunder", "hereof", "thereto" and similar expressions mean or refer to these Series A Provisions and not to any particular Article, and the expression "Article" followed by a number or a letter mean and refer to the specific Article of these Series A Provisions;

(v)

"IND" has the meaning as set forth in the Asset Purchase Agreement;

(w)

"Liquidation Redemption Price" means an amount equal to U.S.$0.50 per Series A Preferred Share;

(x)

"Major Market Country" has the meaning as set forth in the Asset Purchase Agreement;

(y)

"Milestone(s)" has the meaning set forth in Article ;

(z)

"Milestone Date" means the date of the occurrence or achievement of a Milestone;

(aa)

"Milestone Payments" has the meaning set forth in Article ;

(bb)

"Milestone Redemption Price" has the meaning set forth in Article , as applicable to each Milestone;

(cc)

"Party" means either the Company or the Series A Preferred Holder;

(dd)

"Person" means any individual, Entity or Governmental Body;

(ee)

"Polyene IND Filing Date" means the date of the achievement of the filing of an IND in a Major Market Country for a Polyene Product;

(ff)

"Polyene Lead Compound" has the meaning set forth in the Asset Purchase Agreement;

(gg)

"Polyene Product" has the meaning set forth in the Asset Purchase Agreement;

(hh)

"Polyene Tox Date" means the date of the achievement of the dosing of the first animal in the first GLP Toxicology Study of a Polyene Lead Compound;

(ii)

"Preferred Share Expiry Date" has the meaning set forth in Article 27.9.5;

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(jj)

"Redemption" means the redemption of the Series A Preferred Shares by the Company;

(kk)

"Redemption Date" has the meaning set forth in Article ;

(ll)

"Redemption Notice" has the meaning set forth in Article ;

(mm)

"Series A Preferred Holder" means the registered holder of the Series A Preferred Shares;

(nn)

"Stock Exchange" means the principal securities exchange on which the largest number of Common Shares are listed or posted for trading and includes any one of The Toronto Stock Exchange, the Canadian Venture Exchange, The Nasdaq National Market, American Stock Exchange or the New York Stock Exchange;

(oo)

"Successor Corporation" means the company or body corporate resulting or continuing from, or otherwise surviving a Corporate Reorganization;

(pp)

"Successor Shares" has the meaning set forth in Article ;

(qq)

"Third Party" means any entity other than IntraBiotics Pharmaceuticals, Inc. or the Company or their respective Affiliates;

(rr)

"Trading Day" means any day on which the Stock Exchange upon which the Common Shares are listed for trading is open for business and on which Common Shares have been traded; and

(ss)

"U.S. Dollar Equivalent" means the equivalent amount of U.S. dollars calculated from Canadian currency according to the rate of exchange reported in The Wall Street Journal, Western Edition.

27.1.2

Gender

Words importing the singular include the plural and vice versa and words importing any gender include all genders.

27.1.3

Currency

All monetary amounts referred to in these Series A Provisions shall be payable in U.S. dollars by wire transfer or certified cheque.  Whenever conversion from Canadian currency is required, such conversion shall be made at the rate of exchange reported in The Wall Street Journal, Western Edition on each applicable date.

27.1.4

Headings

Headings and subheadings used in these Series A Provisions are for convenience of reference only and shall not affect the construction or interpretation hereof.

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27.1.5

Business Day

In the event that any date upon which any action is required to be taken by the Company or the Series A Preferred Holder hereunder, is not a business day, then such action shall be required to be taken on or by the next succeeding day that is a business day.

27.1.6

Company Act

These Series A Provisions shall be governed by and are subject to the applicable provisions of the Company Act (British Columbia), as such statute may from time to time be amended, varied, replaced or re-enacted (the "Company Act") and all other laws binding upon the Company and, except as otherwise expressly provided herein, all terms used herein that are defined in the Company Act and not otherwise defined herein shall have the meanings ascribed to them in the Company Act.

27.2

NUMBER OF SERIES A PREFERRED SHARES

The maximum number of Series A Preferred Shares shall be 750,000.

27.3

VOTING RIGHTS

Subject to the provisions of the Company Act, the Series A Preferred Holder shall not be entitled as such to vote at any general meeting of members of the Company.  The Series A Preferred Holder shall be entitled to be given notice of and be invited to attend meetings of voting members of the Company.  Upon Conversion in accordance with the provisions hereof, the Common Shares issued in any such Conversion shall have the voting rights equivalent to the voting rights of all other Common Shares.

27.4

DIVIDENDS

The Series A Preferred Holder shall not be entitled to receive dividends of any kind.

27.5

DISSOLUTION AND LIQUIDATION

In the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company among its members for the purpose of winding up its affairs, the Series A Preferred Holder shall be entitled to receive before any distribution is made to holders of Common Shares or any other shares of the Company ranking junior to the Series A Preferred Shares with respect to repayment of capital, the amount equal to the Liquidation Redemption Price for each Series A Preferred Share then held by such Series A Preferred Holder.  After payment to the Series A Preferred Holder of the amounts so payable to it, the Series A Preferred Holder shall not be entitled to share in any further distribution of the property or assets of the Company.

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27.6

COVENANTS

27.6.1

No Impairment

Without the consent of the Series A Preferred Holder, the Company shall not, by amendment of its Memorandum or Articles or through any Corporate Reorganization, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under these Series A Provisions by the Company, but shall at all times and in good faith assist in the carrying out of all of the provisions of these Series A Provisions and in the taking of all action as may be necessary or appropriate in order to protect the rights of the Series A Preferred Holder against impairment.

27.7

MILESTONES

27.7.1

Milestones and Milestone Payments

Upon and subject to the terms and conditions of these Series A Provisions, the Series A Preferred Shares shall, at the option of the Company, either be converted, in whole or in part, into Common Shares pursuant to Article  or redeemed for the an amount equal to U.S.$1 per Series A Preferred Share for each Series A Preferred Share to be redeemed (the "Milestone Redemption Price") pursuant to Article  (or any combination thereof) for a cash amount or value equal to the appropriate U.S. dollar amount corresponding to certain time and achievement milestones (the "Milestones") described in this Article  through  (the "Milestone Payments") on or before 30 days after the occurrence or achievement of an applicable Milestone in the case of a Conversion (each such date referred to herein as a "Conversion Date") or on or before 30 days after the occurrence or achievement of an applicable Milestone in the case of a Redemption (each such date referred to as a "Redemption Date") as follows:

(a)

upon 4 months after the Effective Date, XXXXXX Series A Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof);

(b)

upon the Amphomycin Tox Date, XXXXXX Series A Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof);

(c)

upon the Polyene Tox Date, XXXXXX Series A Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof);

(d)

upon the Amphomycin IND Filing Date, XXXXXX Series A Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof); and,

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(e)

upon the Polyene IND Filing Date, XXXXXX Series A Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof).

27.8

CONVERSION

27.8.1

Conversion at Company's Option

Subject to the provisions of the Company Act and notwithstanding the special rights and restrictions attached to any other series of Preferred shares of the Company, the Company may, in its sole discretion pursuant to Article  and this Article 27.8, upon giving notice as hereinafter provided, convert on the Conversion Date the specified amount of the Series A Preferred Shares to be converted pursuant to a Milestone provided such Series A Preferred Shares are still issued and outstanding on such date and the right of Redemption attached thereto has not theretofore been exercised, and issue to the Series A Preferred Holder Common Shares as hereinafter provided in this Article .

27.8.2

Notice of Conversion

In the case of Conversion of the Series A Preferred Shares, the Company shall, not more than 5 days after the occurrence or achievement of an applicable Milestone, mail to the Series A Preferred Holder of the Series A Preferred Shares to be converted pursuant to such Milestone a notice in writing of the intention of the Company to convert such Series A Preferred Shares ("Conversion Notice").  Such Conversion Notice shall be mailed in a prepaid letter addressed to the Series A Preferred Holder at its address as it appears on the books of the Company or in the event of the address of the Series A Preferred Holder not so appearing then to the last known address of the Series A Preferred Holder and shall set out the Conversion Price and the Conversion Date for such Conversion.

27.8.3

Procedure for Conversion

(a)

On any Conversion Date, in accordance with the Conversion Notice, the Company may issue certificates for Common Shares, on presentation and surrender at the registered office of the Company or any other place designated in the Conversion Notice of the certificate or certificates representing such Series A Preferred Shares called for Conversion, in the number equal to the number of Series A Preferred Shares to be converted resulting from the occurrence or achievement of said Milestone multiplied by a fraction, the numerator of which is the Milestone Redemption Price for 1 Series A Preferred Share, and the denominator of which is the Conversion Price. The certificates for Common Shares issued by the Company to the Series A Preferred Holder shall be in accordance with the provisions hereof, or in such name or names as the Series A Preferred Holder may direct in writing (either in the said notice or otherwise), provided that such Series A Preferred Holder shall pay any applicable transfer taxes.  If only part of the Series A Preferred Shares represented by any certificate shall be converted, a new certificate representing the balance of such Series A Preferred Shares shall be issued to the Series A Preferred Holder at the expense of the Company upon presentation and surrender of the first mentioned certificate.

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(b)

The registered holder of the Common Shares resulting from a Conversion shall be entitled to rank equally with the registered holders of all other Common Shares in respect of all dividends payable to the holders of Common Shares who were holders of record at the close of business on any date on or after the date of such Conversion or the date of such declaration of such dividend.  Subject as aforesaid and subject to the provisions of Article  through  hereof, upon Conversion of all the Series A Preferred Shares, there shall be no further payment or adjustment by the Company or on the Common Shares resulting from such Conversion except that the Common Shares so resulting shall thereafter participate with all other Common Shares.

(c)

The right of the Company to convert the Series A Preferred Shares into Common Shares shall be deemed to have been exercised and the registered holder of the Series A Preferred Shares so converted (or any person or persons in whose name or names the Series A Preferred Holder of such Series A Preferred Shares shall have directed certificates representing Common Shares to be issued as provided in Article  hereof) shall be deemed to have become a holder of Common Shares of record of the Company for all purposes on the date of surrender of the certificates representing the Series A Preferred Shares to be cancelled accompanied by notice in writing as provided in Article  hereof, notwithstanding any delay in the delivery of certificates representing the Common Shares into which such Series A Preferred Shares have been converted.

(d)

The Company shall not issue fractional shares upon any Conversion but in lieu thereof the Company shall pay any fractional share amount in cash at the time of delivery of the share certificate representing the number of Series A Preferred Shares converted into Common Shares.

(e)

All Common Shares resulting from any Conversion of Series A Preferred Shares into Common Shares (including whole Common Shares resulting from the consolidation by the Company of fractions of shares which result from Conversions) shall be fully paid and non-assessable.  Nothing herein contained shall effect or restrict the right of the Company to increase the number of its Common Shares in accordance with the provisions of the Company Act and to issue such shares from time to time.

27.8.4

Termination of Conversion Alternative

To the extent permitted by applicable law, if, after any Conversion, there is a Delisting of Common Shares, then at the option of the Series A Preferred Holder, all Series A Preferred Shares that represent future Milestone Payments that are to become payable under Article  shall thereafter be redeemed by the Company for the applicable Milestone Redemption Price within 10 business days after the occurrence or achievement of the future Milestone.

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27.9 

    REDEMPTION

27.9.1

Redemption at Company's Option

Subject to the provisions of the Company Act and notwithstanding the special rights and restrictions attached to any other series of Preferred shares of the Company, the Company may, in its sole discretion pursuant to Article  and this Article , and upon giving notice as hereinafter provided, redeem on the Redemption Date the specified amount of the Series A Preferred Shares to be redeemed pursuant to such Milestone provided such Series A Preferred Shares are still issued and outstanding on such date and the right of Conversion attached thereto has not theretofore been exercised, and pay to the Series A Preferred Holder the applicable Milestone Redemption Price.

27.9.2

Notice of Redemption

In the case of Redemption of the Series A Preferred Shares, the Company shall, not more than 5 days after the occurrence or achievement of an applicable Milestone, mail to the Series A Preferred Holder of the Series A Preferred Shares to be redeemed pursuant to such Milestone a notice in writing of the intention of the Company to redeem such Series A Preferred Shares ("Redemption Notice").  Such Redemption Notice shall be mailed in a prepaid letter addressed to the Series A Preferred Holder at its address as it appears on the books of the Company or in the event of the address of the Series A Preferred Holder not so appearing then to the last known address of the Series A Preferred Holder and shall set out the applicable Milestone Redemption Price and the Redemption Date for such Redemption.

27.9.3

Procedure for Redemption

(a)

On any Redemption Date, in accordance with the Redemption Notice, the Company shall pay or cause to be paid to or to the order of the Series A Preferred Holder of the Series A Preferred Shares to be redeemed the applicable Milestone Redemption Price, on presentation and surrender at the registered office of the Company or any other place designated in such Redemption Notice of the certificate or certificates representing such Series A Preferred Shares called for Redemption.  If only part of the Series A Preferred Shares represented by any certificate shall be redeemed, a new certificate representing the balance of such Series A Preferred Shares shall be issued to the Series A Preferred Holder at the expense of the Company upon presentation and surrender of the first mentioned certificate.

(b)

From and after the Redemption Date specified in any such Redemption Notice, the Series A Preferred Shares called for Redemption shall thereupon be redeemed and the Series A Preferred Holder shall not be entitled to exercise any of the rights in respect thereof unless payment of the applicable Milestone Redemption Price shall not be made upon presentation of a certificate or certificates in accordance with the foregoing provisions in which case the rights of the Series A Preferred Holder shall remain unaffected.

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(c)

The Company shall have the right, no later than 25 days after the mailing of the Redemption Notice as aforesaid, to deposit the amount of the applicable Milestone Redemption Price of the Series A Preferred Shares so called for Redemption, or of such of the said Series A Preferred Shares as are represented by a certificate or certificates which have not at the date of such deposit been surrendered by the Series A Preferred Holder in connection with such Redemption, by wire transfer to a bank and account designated in writing by the Series A Preferred Holder named in such Redemption Notice to be paid without interest to or to the order of the Series A Preferred Holder called for Redemption upon presentation and surrender to such bank of the certificate or certificates representing the same and upon such deposit being made or upon the Redemption Date, whichever is the later, the Series A Preferred Shares in respect whereof such deposit shall have been made shall be redeemed and the rights of the Series A Preferred Holder after such deposit or such Redemption Date, as the case may be, shall be limited to receiving without interest the Milestone Redemption Price so deposited against presentation and surrender of the said certificates held by the Series A Preferred Holder.

(d)

The Series A Preferred Shares which are redeemed in accordance herewith shall be cancelled.

27.9.4

Redemption Subject to Applicable Law

If, upon the occurrence or achievement of any Milestone described in Article , the Company is not permitted by insolvency provisions or other provisions of applicable law to redeem all or any portion of the Series A Preferred Shares required to be redeemed hereunder (if not otherwise converted, as the case may be), the Company shall, pursuant to the terms of this Article , redeem only the maximum number of Series A Preferred Shares (as determined in good faith by the Board of Directors of the Company) it is then permitted to redeem.

27.9.5

Expiry Redemption

On or after 8 years following the Effective Date (the "Preferred Share Expiry Date"), the Company may elect in accordance with the provisions of Article  to redeem all of the Series A Preferred Shares then still issued and outstanding as of the Preferred Share Expiry Date for which the right of Conversion or Redemption has not theretofore been exercised for an aggregate redemption price of $1 (the "Expiry Redemption").  Any future Milestone Payments, if such Expiry Redemption is in fact effected, will be payable in accordance with the terms of the Asset Purchase Agreement.

27.10

ADJUSTMENTS

27.10.1

Adjustment for Corporate Reorganization

If and whenever there is a Corporate Reorganization whereunder the Series A Preferred Holder holds Series A Preferred Shares which have not been converted or redeemed (or are not to be converted or redeemed) prior to the record date for such Corporate Reorganization, the Series A Preferred Holder shall be entitled to receive and accept shares or other securities of the Company or of the Successor Corporation, as the case may be, having the rights of Conversion and Redemption substantially equivalent (as determined in good faith by the Board of Directors of the Company) to those attaching to the Series A Preferred Shares (the "Successor Shares"), and that, without limitation, upon the exercise of such rights of Conversion attaching to the Successor Shares at any time after the record date of such Corporate Reorganization, in lieu of the number of Common Shares to which the Series A Preferred Holder would theretofore have been entitled upon Conversion, the Series A Preferred Holder would be entitled to receive as holder of the Successor Shares the aggregate number of Common Shares of the Company or of the Successor Corporation, as applicable, that the Series A Preferred Holder would have been entitled to receive as a result of such Corporate Reorganization if, on the record date of the Corporate Reorganization, the Series A Preferred Holder had been the registered holder of the number of Common Shares to which it was theretofore entitled upon Conversion upon the occurrence or achievement of the Milestones, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in Articles  and  herein.

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27.10.2

Adjustment for Change in Common Shares

In the case of any reclassification of, or other change in, the outstanding Common Shares other than a Corporate Reorganization, the right of Conversion granted by Article  shall be adjusted immediately after the record date for such reclassification or other change so that the Series A Preferred Holder shall be entitled to receive, upon any Conversion of Series A Preferred Shares pursuant to the provisions hereof at any time after the record date of such reclassification or other change, such shares, securities or other rights as they would have received had such Series A Preferred Shares been converted into Common Shares immediately prior to such record date, subject to adjustment thereafter in accordance with provisions, the same as nearly may be possible, as those contained in Articles  through .

27.10.3

Adjustment for Other Dilutive Events

If and whenever at any time any event shall occur as to which the provisions of Articles  and  are not strictly applicable but the failure to make any adjustment would not fairly protect the rights of Conversion or other rights and privileges attached to the Series A Preferred Shares in accordance with the essential intent and principles of this Article  or, if strictly applicable would not fairly protect the rights of Conversion or other rights and privileges attached to the Series A Preferred Shares in accordance with such essential intent and principles, then the Company shall make such adjustment, if any, on a basis consistent with the essential intent and principles established in this Article , necessary to preserve, without dilution, the rights of Conversion and other rights and privileges attached to the Series A Preferred Shares.

27.10.4

Notice of Adjustment

Upon the occurrence of any of the events listed in this Article , then and in each such case the Company shall give written notice thereof, addressed to the Series A Preferred Holder at the address of the Series A Preferred Holder as shown on the books of the Company, or in the event of the address of the Series A Preferred Holder not so appearing then to the last known address of the Series A Preferred Holder.

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27.11

ISSUANCE

Series A Preferred Shares may only be issued to IntraBiotics Pharmaceuticals, Inc. or to its respective successors and permitted assigns.

27.12

TRANSFER

The Series A Preferred Shares shall be non-transferable except to an Affiliate or unrelated Third Party in connection with a merger, amalgamation or arrangement (statutory or otherwise), consolidation or sale of substantially all of the assets of IntraBiotics Pharmaceuticals, Inc. related to the Asset Purchase Agreement.

SCHEDULE "C"

PART 28

SPECIAL RIGHTS AND RESTRICTIONS ATTACHING TO THE

REDEEMABLE, CONVERTIBLE PREFERRED SHARES,

SERIES B, AS A SERIES

The second series of Preferred shares of the Company shall be designated the Redeemable, Convertible Preferred Shares, Series B (the "Series B Preferred Shares") and shall have attached thereto, in addition to the special rights and restrictions attaching to the Preferred shares as a class, the following special rights and restrictions (the "Series B Provisions"):

28.1

DEFINITIONS AND INTERPRETATION

28.1.1

Definitions

Where used in these Series B Provisions, the following words and phrases shall, unless there is something in the context otherwise inconsistent therewith, have the following meanings:

(a)

"Affiliate" means any company or entity controlled by, controlling, or under common control with a Party hereto and shall include any Person 50% or more of whose voting shares or participating profit interest is owned or controlled, directly or indirectly, by a Party, and any company which owns or controls, directly or indirectly, 50% or more of the voting shares of a Party;

(b)

"Amended Collaborative Research and License Agreement" means that certain amended collaborative research and license agreement to be entered into between the Company and the Series B Preferred Holder relating to the research, manufacture and development of novel antifungal and antibacterial pharmaceutical products dated as of May 20, 2002;

(c)

"Amphomycin IND Filing Date" means the date of filing of an IND in a Major Market Country for an Amphomycin-Related Product;

(d)

"Amphomycin NDA Date" means the date an NDA is filed in a Major Market Country for an Amphomycin-Related Product;

(e)

"Amphomycin Phase II Data Analysis Date" means the date the analysis of Phase II data for an Amphomycin-Related Product is completed;

(f)

"Amphomycin-Related Lead Compound" has the meaning set forth in the Amended Collaborative Research and License Agreement;

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(g)

"Amphomycin-Related Product" has the meaning set forth in the Amended Collaborative Research and License Agreement;

(h)

"Amphomycin Tox Date" means the date of the achievement of the dosing of the first animal in the first GLP Toxicology Study of an Amphomycin-Related Lead Compound;

(i)

"Company Act" has the meaning set forth in Article ;

(j)

"Common Shares" means Common shares in the capital of the Company and, when used with reference to a Successor Corporation, shall mean the class or classes of shares with the greatest per share voting power entitled to vote generally and, in particular, in the election of all directors of such Successor Corporation;

(k)

"Conversion" means the conversion of the Series B Preferred Shares into Common Shares pursuant to the terms set forth herein;

(l)

"Conversion Date" has the meaning set forth in Article ;

(m)

"Conversion Notice" has the meaning set forth in Article ;

(n)

"Conversion Price" means the Current Market Price of Common Shares as at an applicable Conversion Date;

(o)

"Corporate Reorganization" means capital reorganization, reclassification, subdivision or consolidation of the capital of the Company or a consolidation, merger, arrangement or amalgamation (statutory or otherwise) of the Company with or into another company or body corporate;

(p)

"Current Market Price" of the Common Shares on any date means the U.S. Dollar Equivalent of the average of the "closing prices" of Common Shares on The Toronto Stock Exchange for the 5 Trading Days ending on the last Trading Day prior to an applicable Milestone Date.  The "closing price" for each Trading Day shall be the last reported sales price for sales of Common Shares on The Toronto Stock Exchange (or, if the Common Shares are not then listed and posted for trading on The Toronto Stock Exchange, on any other Stock Exchange), provided however that in the event such average of the "closing prices" of Common Shares on The Toronto Stock Exchange for the 5 Trading Days ending the last Trading Day prior to an applicable Milestone Date is less than the U.S. Dollar Equivalent of Cdn $0.29, the Current Market Price shall be deemed to equal the U.S. Dollar Equivalent of Cdn $0.29, subject to adjustments from time to time in accordance with Article .  If the Common Shares are not listed on a Stock Exchange, then the provisions of Article  shall apply;

(q)

"Delisting of Common Shares" means the Common Shares have been suspended, cease traded or delisted from The Toronto Stock Exchange by any applicable regulatory authority(ies) for a period of 10 consecutive Trading Days and the Common Shares (or the Common Shares of a Successor Corporation, as may be applicable) are not otherwise listed for trading on any other Stock Exchange during that 10 day period;

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(r)

"Effective Date" means the date the Amended Collaborative Research and License Agreement is entered into between BioSource Pharm, Inc. and the Company;

(s)

"Entity" has the meaning set forth in the Amended Collaborative Research and License Agreement;

(t)

"Expiry Redemption" has the meaning set forth in Article ;

(u)

"GLP Toxicology Study" has the meaning set forth in the Amended Collaborative Research and License Agreement;

(v)

"Governmental Body" has the meaning set forth in the Amended Collaborative Research and License Agreement;

(w)

"herein", "hereto", "hereunder", "hereof", "thereto" and similar expressions mean or refer to these Series B Provisions and not to any particular Article, and the expression "Article" followed by a number or a letter mean and refer to the specific Article of these Series B Provisions;

(x)

"IND" has the meaning as set forth in the Amended Collaborative Research and License Agreement;

(y)

"Liquidation Redemption Price" means an amount equal to U.S.$0.50 per Series B Preferred Share;

(z)

"Major Market Country" has the meaning as set forth in the Amended Collaborative Research and License Agreement;

(aa)

"Milestone(s)" has the meaning set forth in Article ;

(bb)

"Milestone Date" means the date of the occurrence or achievement of a Milestone;

(cc)

"Milestone Payments" has the meaning set forth in Article ;

(dd)

"Milestone Redemption Price" has the meaning set forth in Article , as applicable to each Milestone;

(ee)

"Party" means either the Company or the Series B Preferred Holder;

(ff)

"Person" means any individual, Entity or Governmental Body;

(gg)

"Polyene IND Filing Date" means the date of the achievement of the filing of an IND in a Major Market Country for a Polyene Product;

(hh)

"Polyene Lead Compound" has the meaning set forth in the Amended Collaborative Research and License Agreement;

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(ii)

"Polyene NDA Date" means the date an NDA in a Major Market Country is filed for a Polyene Product;

(jj)

"Polyene Phase II Data Analysis Date" means the date the Phase II analysis for a Polyene Product is completed;

(kk)

"Polyene Product" has the meaning set forth in the Amended Collaborative Research and License Agreement;

(ll)

"Polyene Tox Date" means the date of the achievement of the dosing of the first animal in the first GLP Toxicology Study of a Polyene Lead Compound;

(mm)

"Preferred Share Expiry Date" has the meaning set forth in Article ;

(nn)

"Redemption" means the redemption of the Series B Preferred Shares by the Company;

(oo)

"Redemption Date" has the meaning set forth in Article ;

(pp)

"Redemption Notice" has the meaning set forth in Article ;

(qq)

"Series B Preferred Holder" means the registered holder of the Series B Preferred Shares;

(rr)

"Stock Exchange" means the principal securities exchange on which the largest number of Common Shares are listed or posted for trading and includes any one of The Toronto Stock Exchange, the Canadian Venture Exchange, The Nasdaq National Market, American Stock Exchange or the New York Stock Exchange;

(ss)

"Successor Corporation" means the company or body corporate resulting or continuing from, or otherwise surviving a Corporate Reorganization;

(tt)

"Successor Shares" has the meaning set forth in Article ;

(uu)

"Third Party" means any entity other than BioSource Pharm, Inc. or the Company or their respective Affiliates;

(vv)

"Trading Day" means any day on which the Stock Exchange upon which the Common Shares are listed for trading is open for business and on which Common Shares have been traded; and

(ww)

"U.S. Dollar Equivalent" means the equivalent amount of U.S. dollars calculated from Canadian currency according to the rate of exchange reported in The Wall Street Journal, Western Edition.

28.1.2

Gender

Words importing the singular include the plural and vice versa and words importing any gender include all genders.

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28.1.3

Currency

All monetary amounts referred to in these Series B Provisions shall be payable in U.S. dollars by wire transfer or certified cheque.  Whenever conversion from Canadian currency is required, such conversion shall be made at the rate of exchange reported in The Wall Street Journal, Western Edition on each applicable date.

28.1.4

Headings

Headings and subheadings used in these Series B Provisions are for convenience of reference only and shall not affect the construction or interpretation hereof.

28.1.5

Business Day

In the event that any date upon which any action is required to be taken by the Company or the Series B Preferred Holder hereunder, is not a business day, then such action shall be required to be taken on or by the next succeeding day that is a business day.

28.1.6

Company Act

These Series B Provisions shall be governed by and are subject to the applicable provisions of the Company Act (British Columbia), as such statute may from time to time be amended, varied, replaced or re-enacted (the "Company Act") and all other laws binding upon the Company and, except as otherwise expressly provided herein, all terms used herein that are defined in the Company Act and not otherwise defined herein shall have the meanings ascribed to them in the Company Act.

28.2

NUMBER OF SERIES B PREFERRED SHARES

The maximum number of Series B Preferred Shares shall be 1,000,000.

28.3

VOTING RIGHTS

Subject to the provisions of the Company Act, the Series B Preferred Holder shall not be entitled as such to vote at any general meeting of members of the Company.  The Series B Preferred Holder shall be entitled to be given notice of and be invited to attend meetings of voting members of the Company.  Upon Conversion in accordance with the provisions hereof, the Common Shares issued in any such Conversion shall have the voting rights equivalent to the voting rights of all other Common Shares.

28.4

DIVIDENDS

The Series B Preferred Holder shall not be entitled to receive dividends of any kind.

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28.5

DISSOLUTION AND LIQUIDATION

In the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company among its members for the purpose of winding up its affairs, the Series B Preferred Holder shall be entitled to receive before any distribution is made to holders of Common Shares or any other shares of the Company ranking junior to the Series B Preferred Shares with respect to repayment of capital, the amount equal to the Liquidation Redemption Price for each Series B Preferred Share then held by such Series B Preferred Holder.  After payment to the Series B Preferred Holder of the amounts so payable to it, the Series B Preferred Holder shall not be entitled to share in any further distribution of the property or assets of the Company.

28.6

COVENANTS

28.6.1

No Impairment

Without the consent of the Series B Preferred Holder, the Company shall not, by amendment of its Memorandum or Articles or through any Corporate Reorganization, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under these Series B Provisions by the Company, but shall at all times and in good faith assist in the carrying out of all of the provisions of these Series B Provisions and in the taking of all action as may be necessary or appropriate in order to protect the rights of the Series B Preferred Holder against impairment.

28.7

MILESTONES

28.7.1

Milestones and Milestone Payments

Upon and subject to the terms and conditions of these Series B Provisions, the Series B Preferred Shares shall, at the option of the Company, either be converted, in whole or in part, into Common Shares pursuant to Article  or redeemed for the an amount equal to U.S.$1 per Series B Preferred Share for each Series B Preferred Share to be redeemed (the "Milestone Redemption Price") pursuant to Article  (or any combination thereof) for a cash amount or value equal to the appropriate U.S. dollar amount corresponding to certain time and achievement milestones (the "Milestones") described in this Article  through  (the "Milestone Payments") on or before 30 days after the occurrence or achievement of an applicable Milestone in the case of a Conversion (each such date referred to herein as a "Conversion Date") or on or before 30 days after the occurrence or achievement of an applicable Milestone in the case of a Redemption (each such date referred to as a "Redemption Date") as follows:

(a)

upon the Amphomycin Tox Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof);

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(b)

upon the Polyene Tox Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof);

(c)

upon the Amphomycin IND Filing Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof);

(d)

upon the Polyene IND Filing Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof);

(e)

upon the Amphomycin Phase II Data Analysis Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof);

(f)

upon the Polyene Phase II Data Analysis Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof);

(g)

upon the Amphomycin NDA Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof); and,

(h)

upon the Polyene NDA Date, XXXXXX Series B Preferred Shares shall either be converted into such number of Common Shares representing an aggregate value of $XXXXXX or redeemed for the Milestone Redemption Price of $XXXXXX (or any combination thereof).

28.8

CONVERSION

28.8.1

Conversion at Company's Option

Subject to the provisions of the Company Act and notwithstanding the special rights and restrictions attached to any other series of Preferred shares of the Company, the Company may, in its sole discretion pursuant to Article  and this Article , upon giving notice as hereinafter provided, convert on the Conversion Date the specified amount of the Series B Preferred Shares to be converted pursuant to a Milestone provided such Series B Preferred Shares are still issued and outstanding on such date and the right of Redemption attached thereto has not theretofore been exercised, and issue to the Series B Preferred Holder Common Shares as hereinafter provided in this Article .

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28.8.2

Notice of Conversion

In the case of Conversion of the Series B Preferred Shares, the Company shall, not more than 5 days after the occurrence or achievement of an applicable Milestone, mail to the Series B Preferred Holder of the Series B Preferred Shares to be converted pursuant to such Milestone a notice in writing of the intention of the Company to convert such Series B Preferred Shares ("Conversion Notice").  Such Conversion Notice shall be mailed in a prepaid letter addressed to the Series B Preferred Holder at its address as it appears on the books of the Company or in the event of the address of the Series B Preferred Holder not so appearing then to the last known address of the Series B Preferred Holder and shall set out the Conversion Price and the Conversion Date for such Conversion.

28.8.3

Procedure for Conversion

(a)

On any Conversion Date, in accordance with the Conversion Notice, the Company may issue certificates for Common Shares, on presentation and surrender at the registered office of the Company or any other place designated in the Conversion Notice of the certificate or certificates representing such Series B Preferred Shares called for Conversion, in the number equal to the number of Series B Preferred Shares to be converted resulting from the occurrence or achievement of said Milestone multiplied by a fraction, the numerator of which is the Milestone Redemption Price for 1 Series B Preferred Share, and the denominator of which is the Conversion Price. The certificates for Common Shares issued by the Company to the Series B Preferred Holder shall be in accordance with the provisions hereof, or in such name or names as the Series B Preferred Holder may direct in writing (either in the said notice or otherwise), provided that such Series B Preferred Holder shall pay any applicable transfer taxes.  If only part of the Series B Preferred Shares represented by any certificate shall be converted, a new certificate representing the balance of such Series B Preferred Shares shall be issued to the Series B Preferred Holder at the expense of the Company upon presentation and surrender of the first mentioned certificate.

(b)

The registered holder of the Common Shares resulting from a Conversion shall be entitled to rank equally with the registered holders of all other Common Shares in respect of all dividends payable to the holders of Common Shares who were holders of record at the close of business on any date on or after the date of such Conversion or the date of such declaration of such dividend.  Subject as aforesaid and subject to the provisions of Article  through  hereof, upon Conversion of all the Series B Preferred Shares, there shall be no further payment or adjustment by the Company or on the Common Shares resulting from such Conversion except that the Common Shares so resulting shall thereafter participate with all other Common Shares.

(c)

The right of the Company to convert the Series B Preferred Shares into Common Shares shall be deemed to have been exercised and the registered holder of the Series B Preferred Shares so converted (or any person or persons in whose name or names the Series B Preferred Holder of such Series B Preferred Shares shall have directed certificates representing Common Shares to be issued as provided in Article  hereof) shall be deemed to have become a holder of Common Shares of record of the Company for all purposes on the date of surrender of the certificates representing the Series B Preferred Shares to be cancelled accompanied by notice in writing as provided in Article  hereof, notwithstanding any delay in the delivery of certificates representing the Common Shares into which such Series B Preferred Shares have been converted.

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(d)

The Company shall not issue fractional shares upon any Conversion but in lieu thereof the Company shall pay any fractional share amount in cash at the time of delivery of the share certificate representing the number of Series B Preferred Shares converted into Common Shares.

(e)

All Common Shares resulting from any Conversion of Series B Preferred Shares into Common Shares (including whole Common Shares resulting from the consolidation by the Company of fractions of shares which result from Conversions) shall be fully paid and non-assessable.  Nothing herein contained shall effect or restrict the right of the Company to increase the number of its Common Shares in accordance with the provisions of the Company Act and to issue such shares from time to time.

28.8.4

Termination of Conversion Alternative

To the extent permitted by applicable law, if, after any Conversion, there is a Delisting of Common Shares, then at the option of the Series B Preferred Holder, all Series B Preferred Shares that represent future Milestone Payments that are to become payable under Article  shall thereafter be redeemed by the Company for the applicable Milestone Redemption Price within 10 business days after the occurrence or achievement of the future Milestone.

28.9

REDEMPTION

28.9.1

Redemption at Company's Option

Subject to the provisions of the Company Act and notwithstanding the special rights and restrictions attached to any other series of Preferred shares of the Company, the Company may, in its sole discretion pursuant to Article  and this Article , and upon giving notice as hereinafter provided, redeem on the Redemption Date the specified amount of the Series B Preferred Shares to be redeemed pursuant to such Milestone provided such Series B Preferred Shares are still issued and outstanding on such date and the right of Conversion attached thereto has not theretofore been exercised, and pay to the Series B Preferred Holder the applicable Milestone Redemption Price.

28.9.2

Notice of Redemption

In the case of Redemption of the Series B Preferred Shares, the Company shall, not more than 5 days after the occurrence or achievement of an applicable Milestone, mail to the Series B Preferred Holder of the Series B Preferred Shares to be redeemed pursuant to such Milestone a notice in writing of the intention of the Company to redeem such Series B Preferred Shares ("Redemption Notice").  Such Redemption Notice shall be mailed in a prepaid letter addressed to the Series B Preferred Holder at its address as it appears on the books of the Company or in the event of the address of the Series B Preferred Holder not so appearing then to the last known address of the Series B Preferred Holder and shall set out the applicable Milestone Redemption Price and the Redemption Date for such Redemption.

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28.9.3

Procedure for Redemption

(a)

On any Redemption Date, in accordance with the Redemption Notice, the Company shall pay or cause to be paid to or to the order of the Series B Preferred Holder of the Series B Preferred Shares to be redeemed the applicable Milestone Redemption Price, on presentation and surrender at the registered office of the Company or any other place designated in such Redemption Notice of the certificate or certificates representing such Series B Preferred Shares called for Redemption.  If only part of the Series B Preferred Shares represented by any certificate shall be redeemed, a new certificate representing the balance of such Series B Preferred Shares shall be issued to the Series B Preferred Holder at the expense of the Company upon presentation and surrender of the first mentioned certificate.

(b)

From and after the Redemption Date specified in any such Redemption Notice, the Series B Preferred Shares called for Redemption shall thereupon be redeemed and the Series B Preferred Holder shall not be entitled to exercise any of the rights in respect thereof unless payment of the applicable Milestone Redemption Price shall not be made upon presentation of a certificate or certificates in accordance with the foregoing provisions in which case the rights of the Series B Preferred Holder shall remain unaffected.

(c)

The Company shall have the right, no later than 25 days after the mailing of the Redemption Notice as aforesaid, to deposit the amount of the applicable Milestone Redemption Price of the Series B Preferred Shares so called for Redemption, or of such of the said Series B Preferred Shares as are represented by a certificate or certificates which have not at the date of such deposit been surrendered by the Series B Preferred Holder in connection with such Redemption, by wire transfer to a bank and account designated in writing by the Series B Preferred Holder named in such Redemption Notice to be paid without interest to or to the order of the Series B Preferred Holder called for Redemption upon presentation and surrender to such bank of the certificate or certificates representing the same and upon such deposit being made or upon the Redemption Date, whichever is the later, the Series B Preferred Shares in respect whereof such deposit shall have been made shall be redeemed and the rights of the Series B Preferred Holder after such deposit or such Redemption Date, as the case may be, shall be limited to receiving without interest the Milestone Redemption Price so deposited against presentation and surrender of the said certificates held by the Series B Preferred Holder.

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(d)

The Series B Preferred Shares which are redeemed in accordance herewith shall be cancelled.

28.9.4

Redemption Subject to Applicable Law

If, upon the occurrence or achievement of any Milestone described in Article , the Company is not permitted by insolvency provisions or other provisions of applicable law to redeem all or any portion of the Series B Preferred Shares required to be redeemed hereunder (if not otherwise converted, as the case may be), the Company shall, pursuant to the terms of this Article , redeem only the maximum number of Series B Preferred Shares (as determined in good faith by the Board of Directors of the Company) it is then permitted to redeem.

28.9.5

Expiry Redemption

On or after 8 years following the Effective Date (the "Preferred Share Expiry Date"), the Company may elect in accordance with the provisions of Article  to redeem all of the Series B Preferred Shares then still issued and outstanding as of the Preferred Share Expiry Date for which the right of Conversion or Redemption has not theretofore been exercised for an aggregate redemption price of $1 (the "Expiry Redemption").  Any future Milestone Payments, if such Expiry Redemption is in fact effected, will be payable in accordance with the terms of the Amended Collaborative Research and License Agreement.

28.10

ADJUSTMENTS

28.10.1

Adjustment for Corporate Reorganization

If and whenever there is a Corporate Reorganization whereunder the Series B Preferred Holder holds Series B Preferred Shares which have not been converted or redeemed (or are not to be converted or redeemed) prior to the record date for such Corporate Reorganization, the Series B Preferred Holder shall be entitled to receive and accept shares or other securities of the Company or of the Successor Corporation, as the case may be, having the rights of Conversion and Redemption substantially equivalent (as determined in good faith by the Board of Directors of the Company) to those attaching to the Series B Preferred Shares (the "Successor Shares"), and that, without limitation, upon the exercise of such rights of Conversion attaching to the Successor Shares at any time after the record date of such Corporate Reorganization, in lieu of the number of Common Shares to which the Series B Preferred Holder would theretofore have been entitled upon Conversion, the Series B Preferred Holder would be entitled to receive as holder of the Successor Shares the aggregate number of Common Shares of the Company or of the Successor Corporation, as applicable, that the Series B Preferred Holder would have been entitled to receive as a result of such Corporate Reorganization if, on the record date of the Corporate Reorganization, the Series B Preferred Holder had been the registered holder of the number of Common Shares to which it was theretofore entitled upon Conversion upon the occurrence or achievement of the Milestones, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in Articles  and  herein.

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28.10.2

Adjustment for Change in Common Shares

In the case of any reclassification of, or other change in, the outstanding Common Shares other than a Corporate Reorganization, the right of Conversion granted by Article  shall be adjusted immediately after the record date for such reclassification or other change so that the Series B Preferred Holder shall be entitled to receive, upon any Conversion of Series B Preferred Shares pursuant to the provisions hereof at any time after the record date of such reclassification or other change, such shares, securities or other rights as they would have received had such Series B Preferred Shares been converted into Common Shares immediately prior to such record date, subject to adjustment thereafter in accordance with provisions, the same as nearly may be possible, as those contained in Articles  through .

28.10.3

Adjustment for Other Dilutive Events

If and whenever at any time any event shall occur as to which the provisions of Articles  and  are not strictly applicable but the failure to make any adjustment would not fairly protect the rights of Conversion or other rights and privileges attached to the Series B Preferred Shares in accordance with the essential intent and principles of this Article  or, if strictly applicable would not fairly protect the rights of Conversion or other rights and privileges attached to the Series B Preferred Shares in accordance with such essential intent and principles, then the Company shall make such adjustment, if any, on a basis consistent with the essential intent and principles established in this Article , necessary to preserve, without dilution, the rights of Conversion and other rights and privileges attached to the Series B Preferred Shares.

28.10.4

Notice of Adjustment

Upon the occurrence of any of the events listed in this Article , then and in each such case the Company shall give written notice thereof, addressed to the Series B Preferred Holder at the address of the Series B Preferred Holder as shown on the books of the Company, or in the event of the address of the Series B Preferred Holder not so appearing then to the last known address of the Series B Preferred Holder.

28.11

ISSUANCE

Series B Preferred Shares may only be issued to BioSource Pharm, Inc. or to its respective successors and permitted assigns.

28.12

TRANSFER

The Series B Preferred Shares shall be non-transferable except to an Affiliate or unrelated Third Party in connection with a merger, amalgamation or arrangement (statutory or otherwise), consolidation or sale of substantially all of the assets of BioSource Pharm, Inc. related to the Amended Collaborative Research and License Agreement, so long as such Affiliate or unrelated Third Party assumes all obligations set forth in the Amended Collaborative Research and License Agreement and can demonstrate financial solvency to assume those obligations.

Schedule "B"

Part 29

Special Rights and Restrictions Attaching to the Redeemable, Convertible Preferred Shares of Micrologix, Series C, as a Series

The third series of Preferred shares of the Company shall be designated the Redeemable, Convertible Preferred Shares, Series C (the "Series C Preferred Shares") and shall have attached thereto, in addition to the special rights and restrictions attaching to the Preferred shares as a class, the following special rights and restrictions (the "Series C Provisions"):

29.1

DEFINITIONS AND INTERPRETATION

29.1.1

Definitions

Where used in these Series C Provisions, the following words and phrases shall, unless there is something in the context otherwise inconsistent therewith, have the following meanings:

(a)

"Affiliate" means any corporation, company, partnership, joint venture or other entity which controls, is controlled by, or is under common control with a person or entity.  For purposes of this Article 29.1.1(a), "control" shall mean (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares having the right to vote for the election of directors, and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entities;

(b)

"Business Day" means any day that is not a Saturday, Sunday or holiday in British Columbia;

(c)

"Change in Control" means any of the following events unless the Series C Preferred Holder agrees in writing that such an event shall not be considered a Change in Control:

(A)

any Corporate Reorganization in which the holders of capital of the Company immediately prior to such Corporate Reorganization do not continue to hold immediately following such merger or consolidation at least 60%, by voting power and economic interest, of the capital of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation; or

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(B)

the sale, in a single transaction or series of related transactions, by the Company of all or substantially all the assets of the Company (except where such sale is to a wholly owned subsidiary of the Company);

(d)

"Change in Control Corporate Reorganization" means a Corporate Reorganization that results in a Change in Control;

(e)

"Company Act" has the meaning set forth in Article 29.1.6;

(f)

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

(g)

"Conversion" means the conversion of the Series C Preferred Shares into Common Shares pursuant to the terms set forth herein;

(h)

"Conversion Date" has the meaning set forth in Article 29.8.1;

(i)

"Conversion Notice" has the meaning set forth in Article 29.8.2;

(j)

"Conversion Price" means the Current Market Price of Common Shares as of the applicable Milestone Date;

(k)

"Corporate Reorganization" means capital reorganization, reclassification, subdivision or consolidation of the capital of the Company or a consolidation, merger, arrangement or amalgamation (statutory or otherwise) of the Company with or into another company or body corporate;

(l)

"Current Market Price" of the Common Shares on any date means the U.S. Dollar Equivalent of the weighted average of the trading prices of Common Shares on The Toronto Stock Exchange (or, if the Common Shares are not then listed and posted for trading on The Toronto Stock Exchange, on any other Stock Exchange), for the five consecutive Trading Days ending on the last Trading Day prior to an applicable Milestone Date (subject to appropriate adjustment for stock splits, stock dividends, reclassifications and similar recapitalizations affecting the Common Shares).  In the event such weighted average trading price is less than the U.S. Dollar Equivalent as of the applicable Milestone Date of Cdn $0.88 (subject to appropriate adjustment for stock splits, stock dividends, reclassifications and similar recapitalizations affecting the Common Shares), the Current Market Price shall be deemed to equal the U.S. Dollar Equivalent as of the applicable Milestone Date of Cdn $0.88, (subject to appropriate adjustment for stock splits, stock dividends, reclassifications and similar recapitalizations affecting the Common Shares);

(m)

"Delisting of Common Shares" means the Common Shares have been suspended, cease traded or have been delisted from all Stock Exchanges for a period of ninety consecutive Trading Days or are not then listed and posted for trading on any Stock Exchange for a period of ninety consecutive Trading Days;

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(n)

"EMEA" shall mean the European Medicines Evaluation Agency or any successor agency thereof;

(o)

"Expiry Redemption" has the meaning set forth in Article 29.9.5;

(p)

"FDA" means the United States Food and Drug Administration or any successor agency thereof;

(q)

"herein", "hereto", "hereunder", "hereof", "thereto" and similar expressions mean or refer to these Series C Provisions and not to any particular Article, and the expression "Article" followed by a number or a letter mean and refer to the specific Article of these Series C Provisions;

(r)

"HPV Antisense Product" has the meaning set forth in the License Agreement;

(s)

"License Agreement" means that certain collaboration and license agreement to be entered into between the Company and the Series C Preferred Holder dated as of September 11, 2002;

(t)

"Liquidation Redemption Price" means an amount equal in the aggregate to U.S.$1;

(u)

"Major European Countries" means any of France, Germany, Italy or the United Kingdom;

(v)

"Milestone(s)" has the meaning set forth in Article 29.7.1;

(w)

"Milestone Date" has the meaning set forth in Article 29.7.1;

(x)

"Milestone Payments" has the meaning set forth in Article 29.7.1;

(y)

"Milestone Redemption Price" means an amount equal to U.S. $1 for each Series C Preferred Share to be redeemed (subject to appropriate adjustment for stock splits, stock dividends, reclassifications and similar recapitalizations affecting the Series C Preferred Shares);

(z)

"NDA" has the meaning set forth in the License Agreement;

(aa)

"Phase III Clinical Study" has the meaning set forth in the License Agreement;

(bb)

"Preferred Share Expiry Date" has the meaning set forth in Article 29.9.5;

(cc)

"Redemption" means the redemption of the Series C Preferred Shares by the Company;

(dd)

"Redemption Date" has the meaning set forth in Article 29.9.1;

(ee)

"Redemption Notice" has the meaning set forth in Article 29.9.2;

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(ff)

"Regulatory Approval" has the meaning set forth in the License Agreement;

(gg)

"Series C Preferred Holder" means the registered holder of the Series C Preferred Shares;

(hh)

"Stock Exchange" means the principal securities exchange on which the Common Shares are listed or posted for trading and includes any one of The Toronto Stock Exchange, The Nasdaq National Market, the New York Stock Exchange or the American Stock Exchange;

(ii)

"Stock Purchase Agreement" means the stock purchase agreement to be entered into between the Company and the Series C Preferred Holder, dated as of December 17, 2002;

(jj)

"Trading Day" means any day on which the Stock Exchange is open for business; and

(kk)

"U.S. Dollar Equivalent" means the equivalent amount of U.S. dollars calculated from Canadian currency according to the rate of exchange reported in The Wall Street Journal (Eastern U.S. edition).  

29.1.2

Gender

Words importing the singular include the plural and vice versa and words importing any gender include all genders.

29.1.3

Currency

All monetary amounts referred to in these Series C Provisions shall be payable in U.S. dollars by wire transfer or certified cheque.  Whenever conversion from Canadian currency is required, such conversion shall be made at the rate of exchange reported in The Wall Street Journal (Eastern U.S. edition) on each applicable date.

29.1.4

Headings

Headings and subheadings used in these Series C Provisions are for convenience of reference only and shall not affect the construction or interpretation hereof.

29.1.5

Business Day

In the event that any date upon which any action is required to be taken by the Company or the Series C Preferred Holder hereunder, is not a Business Day, then such action shall be required to be taken on or by the next succeeding day that is a Business Day.

29.1.6

Company Act

These Series C Provisions shall be governed by and are subject to the applicable provisions of the Company Act (British Columbia), as such statute may from time to time be amended, varied, replaced or re-enacted (the "Company Act") and all other laws binding upon the Company and, except as otherwise expressly provided herein, all terms used herein that are defined in the Company Act and not otherwise defined herein shall have the meanings ascribed to them in the Company Act.

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29.2

NUMBER OF SERIES C PREFERRED SHARES

The maximum number of Series C Preferred Shares shall be 5,500,000.

29.3

VOTING RIGHTS

Subject to the provisions of the Company Act, the Series C Preferred Holder shall not be entitled to vote the Series C Preferred Shares held by it at any general meeting of members of the Company.  The Series C Preferred Holder shall be entitled to be given notice of and be invited to attend meetings of voting members of the Company.  Upon Conversion in accordance with the provisions hereof, the Common Shares issued in any such Conversion shall have the voting rights equivalent to the voting rights of all other Common Shares.

29.4

DIVIDENDS

No dividends shall be payable on or in respect of the Series C Preferred Shares.

29.5

DISSOLUTION AND LIQUIDATION

In the event of any liquidation, dissolution or winding-up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company among its members for the purpose of winding up its affairs, the Series C Preferred Holder shall be entitled to receive before any distribution is made to holders of Common Shares or any other shares of the Company ranking junior to the Series C Preferred Shares with respect to repayment of capital, the amount equal to the Liquidation Redemption Price.  After payment to the Series C Preferred Holder of the amounts so payable to it, the Series C Preferred Holder shall not be entitled to share in any further distribution of the property or assets of the Company in respect of the Series C Preferred Shares.  Notwithstanding the foregoing, upon such liquidation, dissolution or winding up, all payments that are or would otherwise have become payable on or after the effective date of such liquidation, dissolution or winding up under Article 29.7.1 of these Series C Provisions shall be payable in cash pursuant to Section 4.1(b) or 4.3 of the License Agreement within 10 Business Days following the occurrence of the applicable Milestone.

29.6

COVENANTS

29.6.1

No Impairment

Without the consent of the Series C Preferred Holder, the Company shall not, by amendment of its Memorandum or Articles or through any Corporate Reorganization, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed under these Series C Provisions by the Company, but shall at all times and in good faith assist in the carrying out of all of the provisions of these Series C Provisions and in the taking of all action as may be necessary or appropriate in order to protect the rights of the Series C Preferred Holder against impairment.

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29.7

MILESTONES

29.7.1

Milestones and Milestone Payments

Upon and subject to the terms and conditions of these Series C Provisions, and Section 2.4.4 of the Stock Purchase Agreement, on or before ten Business Days after the achievement of each milestone (a "Milestone") described in this Article 29.7.1(a) through (f) (the date of the occurrence or achievement of such Milestone is referred to herein as a "Milestone Date"), Micrologix shall pay to Hybridon the appropriate dollar amount corresponding to the applicable Milestone as set forth below (each, a "Milestone Payment") through the redemption of a number of Series C Preferred Shares at a price per share equal to the Milestone Redemption Price in accordance with Article 29.9 and/or through the conversion of a number of Series C Preferred Shares into Common Shares having a value based on the then applicable Conversion Price in accordance with Article 29.8 (or a combination thereof) so that in all cases, except as provided by law, the sum of the aggregate Milestone Redemption Price paid and the value of the Common Shares into which the Series C Preferred Shares are converted equals the Milestone Payment set forth below:

(a)

on April 17, 2002, $XXXXXX;

(b)

upon the commencement of the first Phase III Clinical Study of an HPV Antisense Product, $XXXXXX;

(c)

upon the first acceptance of a filing of an NDA by the FDA for an HPV Antisense Product, $XXXXX;

(d)

upon the first receipt of Regulatory Approval of an NDA for an HPV Antisense Product by the FDA, $XXXXXX;

(e)

upon the first receipt of Regulatory Approval from the EMEA for an HPV Antisense Product in the European Community, or, if earlier, the first receipt of Regulatory Approval of an HPV Antisense Product in any two Major European Countries, $XXXXXX; and

(f)

upon the first receipt of Regulatory Approval from the Japanese Koseisho for an HPV Antisense Product in Japan, $XXXXXX.

29.8

CONVERSION

29.8.1

Conversion at Company's Option

Subject to the provisions of the Company Act and notwithstanding the special rights and restrictions attached to any other series of Preferred shares of the Company, the Company may, in its sole discretion pursuant to Article 29.7.1, and this Article 29.8, but subject to the conditions in Article 29.8.5, upon giving notice as hereinafter provided, convert as of a date within ten Business Days of a Milestone Date (the "Conversion Date") up to the number of Series C Preferred Shares provided with respect to such Milestone in Article 29.7.1, provided such Series C Preferred Shares are still issued and outstanding on such date and the right of Redemption attached thereto has not theretofore been exercised, and issue to the Series C Preferred Holder Common Shares as hereinafter provided in this Article 29.8.

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29.8.2

Notice of Conversion

In the case of Conversion of the Series C Preferred Shares, the Company shall, not more than five Business Days after a Milestone Date, mail to the Series C Preferred Holder of the Series C Preferred Shares to be converted pursuant to such Milestone, a notice in writing of the intention of the Company to convert such Series C Preferred Shares ("Conversion Notice").  Such Conversion Notice shall be (a) sent by registered or certified mail, return receipt requested, postage prepaid, (b) sent via a reputable overnight courier service, (c) sent by facsimile transmission with an original to be followed the same day via a reputable overnight courier service, or (d) personally delivered, in each case properly addressed to the Series C Preferred Holder at its address as it appears on the books of Company or, in the event of the address of the Series C Preferred Holder not so appearing then to the last known address of the Series C Preferred Holder, with the effective date of the notice being the actual date of receipt by the recipient of such notice, and shall set out the number of shares being converted, the Conversion Price with respect to the applicable Milestone Date, the Conversion Date for such Conversion, the date upon which the Series C Preferred Shares to be converted must be received by the Company, as well as the place designated for Conversion.

29.8.3

Procedure for Conversion

(a)

On any Conversion Date, in accordance with a Conversion Notice, or thereafter, the Company shall issue certificates for Common Shares, on presentation and surrender at the registered office of the Company or any other place designated in the Conversion Notice of the certificate or certificates representing such Series C Preferred Shares called for Conversion, in the number equal to the number of Series C Preferred Shares to be converted resulting from the occurrence or achievement of said Milestone multiplied by a fraction, the numerator of which is the then Milestone Redemption Price for 1 Series C Preferred Share, and the denominator of which is the Conversion Price as of the date of such Milestone.  The certificates for Common Shares issued by the Company to the Series C Preferred Holder shall be in accordance with the provisions hereof, or in such name or names as the Series C Preferred Holder may direct in writing, provided that if issued in a name other than the Series C Preferred Holder such Series C Preferred Holder shall pay any applicable transfer taxes.  If only part of the Series C Preferred Shares represented by any certificate shall be converted, a new certificate representing the balance of such Series C Preferred Shares shall be issued to the Series C Preferred Holder at the expense of the Company upon presentation and surrender of the first mentioned certificate.

(b)

The registered holder of the Common Shares resulting from a Conversion shall be entitled to rank equally with the registered holders of all other Common Shares in respect of all dividends payable to the holders of Common Shares who were holders of record at the close of business on any date on or after the date of such Conversion or the date of such declaration of such dividend.  Subject as aforesaid and subject to the provisions of Article 29.10.1 and 29.10.2 hereof and Section 2.4.4 of the Stock Purchase Agreement, upon Conversion of the Series C Preferred Shares converted pursuant to the achievement of a Milestone, there shall be no further payment or adjustment by the Company on the Common Shares resulting from such Conversion except that the Common Shares so resulting shall thereafter participate with all other Common Shares.

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(c)

Upon receipt of the Conversion Notice, the holder of Series C Preferred Shares shall surrender its certificate or certificates for the Series C Preferred Shares to be converted to the Company at the place designated in the Conversion Notice, and shall thereafter receive certificates for the number of Common Shares to which such holder is entitled pursuant hereto. On the Conversion Date, all outstanding Series C Preferred Shares to be converted pursuant to the Conversion Notice shall be deemed to have been converted into Common Shares, which shall be deemed to be outstanding of record, and all rights with respect to the Series C Preferred Shares so converted, including the rights, if any, to receive notices and vote (other than as a holder of Common Shares) will terminate, but excluding the rights of holders thereof, upon surrender of their certificate or certificates therefore, to receive certificates for the number of Common Shares into which such Series C Preferred Shares have been converted, and to receive payment of any declared but unpaid dividends thereon. As soon as practicable after the Conversion Date and the surrender of the certificate or certificates for Series C Preferred Shares, the Company shall cause to be issued and delivered to such holder, or on his written order, a certificate or certificates for the number of full Common Shares issuable on such conversion in accordance with the provisions hereof.

(d)

The Company shall not issue fractional shares upon any Conversion but in lieu thereof the Company shall pay any fractional share amount in cash (based upon the Current Market Price used to calculate such fractional share) at the time of delivery of the share certificate representing the number of Common Shares into which the Series C Preferred Shares are converted.

(e)

All Common Shares resulting from any Conversion of Series C Preferred Shares into Common Shares (including whole Common Shares resulting from the consolidation by the Company of fractions of shares which result from Conversions) shall be fully paid and non-assessable.  Nothing herein contained shall effect or restrict the right of the Company to increase the number of its Common Shares in accordance with the provisions of the Company Act and to issue such shares from time to time.

(f)

The Company shall at all times when the Series C Preferred Shares shall be outstanding, reserve and keep available out of its authorized but unissued shares, for the purpose of effecting the conversion of the Series C Preferred Shares, such number of its duly authorized Common Shares as shall from time to time be sufficient to effect the conversion of all outstanding Series C Preferred Shares.

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(g)

The Company shall pay any and all issue and other similar taxes that may be payable in respect of any issuance or delivery of Common Shares upon conversion of Series C Preferred Shares pursuant hereto. The Company shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of Common Shares in a name other than that in which the shares of Series C Preferred Shares so converted were registered.

29.8.4

Termination of Conversion Alternative

To the extent permitted by applicable law, if there is a Delisting of Common Shares or a Change in Control, the Company shall, upon such Delisting of Common Shares or as of the date of the Change in Control, redeem all of the Series C Preferred Shares still issued and outstanding as of such date for which the right of Conversion or Redemption has not theretofore been exercised for an aggregate redemption price of $1 and any payments that are or would otherwise become payable in accordance with the terms of Article 29.7.1 herein shall become payable in cash under Section 4.1(b) or Section 4.3(b) of the License Agreement within 10 Business Days of the occurrence of the applicable Milestone.

29.8.5

Conditions to Conversion

Notwithstanding the foregoing, it shall be a condition to any Conversion contemplated by this Article 29.8 that, and the Company shall only have the right to convert any Series C Preferred Shares pursuant hereto if:

(a)

the Common Shares into which the Series C Preferred Shares are convertible are then listed or posted for trading on a Stock Exchange;

(b)

in the previous 90 day period the Common Shares have not been suspended, cease traded or delisted from any Stock Exchange for a period of 10 consecutive Trading Days;

(c)

the Common Shares to be issued to the Series C Preferred Holder shall, upon issuance, be immediately and freely resaleable and transferable on the Stock Exchange and a written opinion of counsel to the Company to that effect, in a form reasonably acceptable to the Series C Preferred Holder has been delivered to the Series C Preferred Holder and the Company's transfer agent in accordance with Section 2.4.3 of the Stock Purchase Agreement with the Conversion Notice; and

(d)

the Company pays to the Series C Preferred Holder any amounts owed under Section 2.4.4.2 of the Stock Purchase Agreement.

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29.9

REDEMPTION

29.9.1

Redemption at Company's Option

Subject to the provisions of the Company Act and notwithstanding the special rights and restrictions attached to any other series of Preferred shares of the Company, the Company may, in its sole discretion pursuant to Article 29.7.1 and this Article 29.9, and upon giving notice as hereinafter provided, redeem as of a date within ten Business Days of a Milestone Date (the "Redemption Date") up to the number of Series C Preferred Shares provided with respect to such Milestone in Article 29.7.1, provided such Series C Preferred Shares are still issued and outstanding on such date and the right of Conversion attached thereto has not theretofore been exercised with respect to such Series C Preferred Shares, and pay to the Series C Preferred Holder the applicable Milestone Redemption Price for such shares.

29.9.2

Notice of Redemption

In the case of Redemption of the Series C Preferred Shares, the Company shall, not more than five Business Days after a Milestone Date, mail to the Series C Preferred Holder of the Series C Preferred Shares to be redeemed pursuant to such Milestone a notice in writing of the intention of the Company to redeem such Series C Preferred Shares ("Redemption Notice").  Such Redemption Notice shall be (a) sent by registered or certified mail, return receipt requested, postage prepaid, (b) sent via a reputable overnight courier service, (c) sent by facsimile transmission with an original to be followed the same day via a reputable overnight courier service, or (d) personally delivered, in each case properly addressed to the Series C Preferred Holder at its address as it appears on the books of Company or, in the event of the address of the Series C Preferred Holder not so appearing then to the last known address of the Series C Preferred Holder with the effective date of the notice being the actual date of receipt by the recipient of such notice and shall set out the applicable number of shares being redeemed, the Milestone Redemption Price and the Redemption Date for such Redemption, the date upon which the Series C Preferred Shares called for Redemption must be received by the Company, as well as the place designated for Redemption.  

29.9.3

Procedure for Redemption

(a)

On any Redemption Date, in accordance with a Redemption Notice, the Company shall pay or cause to be paid in cash to or to the order of the Series C Preferred Holder of the Series C Preferred Shares to be redeemed the aggregate Milestone Redemption Price for such shares, on presentation and surrender at the registered office of the Company or any other place designated in such Redemption Notice of the certificate or certificates representing such Series C Preferred Shares called for Redemption.  If only part of the Series C Preferred Shares represented by any certificate shall be redeemed, a new certificate representing the balance of such Series C Preferred Shares shall be issued to the Series C Preferred Holder at the expense of the Company upon presentation and surrender of the first mentioned certificate.

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(b)

From and after the Redemption Date specified in any such Redemption Notice, the Series C Preferred Shares called for Redemption shall thereupon be redeemed and the Series C Preferred Holder shall not be entitled to exercise any of the rights in respect thereof unless payment of the applicable Milestone Redemption Price shall not be made upon presentation of a certificate or certificates in accordance with the foregoing provisions in which case the rights of the Series C Preferred Holder shall remain unaffected.

(c)

The Series C Preferred Shares which are redeemed in accordance herewith shall be cancelled.

29.9.4

Redemption Subject to Applicable Law

If, upon the achievement of any Milestone described in Article 29.7.1, the Company is not permitted by insolvency provisions or other provisions of applicable law to redeem all or any portion of the Series C Preferred Shares required to be redeemed hereunder (if not otherwise converted, as the case may be), the Company shall, pursuant to the terms of this Article 29.9, redeem only the maximum number of Series C Preferred Shares (as determined in good faith by the Board of Directors of the Company) it is then permitted to redeem and shall make any payment to the holder of the Series C Preferred Shares required by Section 2.4.4.1 of the Stock Purchase Agreement.

29.9.5

Expiry Redemption

On or after 8 years following the date of the Stock Purchase Agreement (the "Preferred Share Expiry Date"), the Company may, or upon termination of the License Agreement the Company shall, in accordance with this Article 29.9, redeem all of the Series C Preferred Shares then still issued and outstanding as of the Preferred Share Expiry Date or as of the date the License Agreement is terminated, as the case may be, for which the right of Conversion or Redemption has not theretofore been exercised for an aggregate redemption price of $1 (the "Expiry Redemption").  Notwithstanding such Expiry Redemption of the Series C Preferred Shares, the Company shall continue to be obligated to pay the Series C Preferred Holder all unpaid Milestone Payments that are or would otherwise become payable under Article 29.7.1 herein in cash under Section 4.1(b) or 4.3 of the License Agreement within ten Business Days following the achievement or occurrence of the corresponding Milestones.

29.10

ADJUSTMENTS

29.10.1

Adjustment for Corporate Reorganization

If and whenever there is a Corporate Reorganization other than a Change in Control Corporate Reorganization in which the Common Shares (but not the Series C Preferred Shares) are converted into or exchanged for securities, cash or other property, and the Series C Preferred Holder holds Series C Preferred Shares which have not been converted or redeemed (or are not to be converted or redeemed) prior to the record date for such Corporate Reorganization, then following such Corporate Reorganization, upon the exercise of the rights of Conversion provided hereby at any time after the record date of such Corporate Reorganization, in lieu of the Common Shares to which the Series C Preferred Holder would theretofore have been entitled upon Conversion, the Series C Preferred Holder would be entitled to receive such securities, cash or other property (as determined in good faith by the Board of Directors of the Company); provided that if such securities, cash or other property are not listed and posted for trading on a Stock Exchange and, as a result, the Conversion Price could not be calculated as of a Conversion Date, such Corporate Reorganization shall be deemed to be a Change of Control for purposes of Section 11.2 of the Stock Purchase Agreement and Article 29.8.4 hereof.

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29.10.2

Adjustment for Other Dilutive Events

If and whenever at any time any event shall occur as to which the provisions of Article 29.10.1 are not strictly applicable but the failure to make any adjustment would not fairly protect the rights of Conversion or other rights and privileges attached to the Series C Preferred Shares in accordance with the essential intent and principles of this Article 29 or, if strictly applicable would not fairly protect the rights of Conversion or other rights and privileges attached to the Series C Preferred Shares in accordance with such essential intent and principles, then the Company shall make such adjustment, if any, on a basis consistent with the essential intent and principles established in this Article 29.10, necessary to preserve, without dilution, the rights of Conversion and other rights and privileges attached to the Series C Preferred Shares.

29.10.3

Notice of Adjustment

Upon the occurrence of any of the events listed in this Article 29.10, then and in each such case the Company shall give written notice of the adjustment and how it was calculated, addressed to the Series C Preferred Holder.  Such notice shall set forth the adjustment contemplated hereby (including the kind and amount of securities, cash or other property into which the Series C Preferred Shares are convertible).  Such notice shall either be (a) sent by registered or certified mail, return receipt requested, postage prepaid, (b) sent via a reputable overnight courier service, (c) sent by facsimile transmission with an original to be followed the same day via a reputable overnight courier service, or (d) personally delivered, in each case properly addressed to the Series C Preferred Holder at its address as it appears on the books of Company or, in the event of the address of the Series C Preferred Holder not so appearing then to the last known at the address of the Series C Preferred Holder.  

29.11

TRANSFER

The Series C Preferred Shares shall be non-transferable except by the Series C Preferred Holder to an Affiliate or to a third party in connection with a sale of all or substantially all of such Series C Preferred Holder's business to which the License Agreement relates.