Golden Queen Mining Co. Ltd. - Exhibit 10.5 - Filed by newsfilecorp.com





THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY
STATE, AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION
TO THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. 

NUMBER: CD4065133.003 

PRINCIPAL AMOUNT $1,732,398 

 

CONVERTIBLE DEBENTURE 

                          For
value received, Golden Queen Mining Co. Ltd. (the "Company")
hereby acknowledges itself indebted to Landon T. Clay of 188 Old Street Road,
Peterborough, New Hampshire, 03458 (the "Holder"), and promises to pay to
the Holder the amount of CAD$1,732,398 (the "Principal Amount"), on July
26, 2015 (the "Maturity Date") or such earlier date as the Principal
Amount may become due and payable (subject to and in accordance with the terms,
conditions and provisions of this Debenture (as defined herein), in lawful money
of Canada (or in lawful currency of the United States if agreed to by the Holder
and the Company on the payment date) at the head office of the Company, being
currently at 6411 Imperial Avenue, West Vancouver, British Columbia, V7W 2J5, or
at such other place or places within British Columbia, as may be designated by
the Company from time to time by notice in writing to the Holder, together with
all costs and expenses that may become payable to the Holder hereunder.

                          The
Company will pay interest annually (being each July 26 while this
Debenture remains outstanding) on the Principal Amount then outstanding at the
rate of 2% per annum from the date of issue, or from the last interest payment
date on which interest has been paid ("Interest Payment Date"), in
accordance with this Debenture money.

                          By
its acceptance of this Debenture hereof, the Holder acknowledges and agrees to
the terms and conditions hereof, including the terms and conditions set out in
Schedule "A" hereto, which are incorporated herein by reference and form a part
of this Debenture. 

                          IN
WITNESS WHEREOF, the Company has caused this Debenture to be executed as of July
25, 2014. 

GOLDEN QUEEN MINING CO. LTD.


 

	 	Per: 	“H. Lutz Klingmann” 
	 	  	Authorized Signatory
  






SCHEDULE "A" 

The following conditions are applicable to this Convertible
Debenture due July 26, 2015. 

ARTICLE 1 
INTERPRETATION 


1.1                    Definitions


                          In
this Debenture, unless there is something in the subject matter or context
inconsistent therewith, the expressions following shall have the following
meanings, namely: 

"this Debenture", "the Debenture",
"hereto", "herein", "hereby", "hereunder",
"hereof" and similar expressions refer to the convertible debenture
represented hereby and not to any particular Article, Section, subsection,
clause, subdivision or other portion hereof and include any and every instrument
supplemental or ancillary hereto and every debenture issued in replacement
hereof; 

"business day" means a day which is not a Saturday or
Sunday or a civic or statutory holiday in the city of Vancouver, British
Columbia; 

"Soledad Mountain Project" means the Company's Soledad
Mountain gold-silver project located in Kern County, California; 

"Close of Business" means 5:00 p.m. (Vancouver
Time) on a business day; 

"Company" means Golden Queen Mining Co. Ltd. and
includes any successor corporation thereto; 

"Company's Auditors" or "Auditors of the Company"
means an independent firm of chartered or certified managerial accountants duly
appointed as auditors of the Company; 

"Conversion Price" in respect of this Debenture, means
the effective price at which this Debenture may be converted into Shares, being
either (i) CAD$1.03 per Share at any time until the Maturity Date, or (ii) on
the Maturity Date, the lower of CAD$1.03 or the VWAP for the 5 trading days
immediately preceding the last business day prior to (and excluding) the
Maturity Date; 

"Counsel" means a barrister or solicitor or firm of
barristers or solicitors or other legal counsel retained or employed by the
Company; 

"director" means a director of the Company for the time
being and "directors" or "Board of Directors" means the board of
directors of the Company and reference to action by the directors means action
by the directors of the Company as a board; 

“Disinterested Shareholder Approval” means the approval
of shareholders of the Company by ordinary resolution passed at a properly
constituted meeting of such shareholders, excluding votes attached to shares
beneficially owned, or over which control and direction is exercised, by the
Holder, to the issuance to the Holder of Shares on conversion of this Debenture
in excess of the Insider Participation Limit; 

"Holder" means the Person from time to time registered
as the Holder of this Debenture; 

“Insider Participation Limit” means 9,831,338 Shares;


"Market Price" has the meaning given thereto in the
policies of the Toronto Stock Exchange; 

"Maturity Date" has the meaning given to it on the face
page hereof, provided that if such date is not a business day, then the Maturity
Date will be the immediately following business day; 




- 2 - 

"Person" means an individual, partnership, corporation
or other business or legal entity or any duly constituted government of or in
Canada and any minister, department, commission, board, bureau, agency,
authority, instrumentality or court and the like of any such government; 

"Principal Amount" has the meaning given to it on the
face page hereof; 

"Shares" means the common shares in the capital of the
Company, as such common shares exist at the close of business on the date of
execution and delivery of this Debenture and shall include any and all shares
resulting from any subdivision, redivision, reduction, combination or
consolidation, merger, amalgamation or reorganization and any common shares of
any company to which the Company may sell, lease or transfer or otherwise
dispose of all or substantially all of its property and assets; 

"Trading Day", when used with respect to the Shares,
shall mean a day on which the principal securities exchange on which the Shares
are listed or admitted to trading is open for the transaction of business or, if
the Shares are not listed or admitted to trading on any securities exchange, a
business day; 

“TSX” means the Toronto Stock Exchange;

“VWAP” means the volume weighted average price for the
Shares as reported by the TSX; and 

"written direction of the Company" means an instrument
in writing signed by and two directors or officers of the Company. 

1.2                    Interpretation


                          Words
importing the singular number only shall include the plural and vice versa and
words importing the masculine gender shall include the neuter or the feminine
gender and vice versa. 

1.3                   
Headings, Etc. 

                          The
division of this Debenture into Articles and Sections and the insertion of
headings are for convenience of reference only and shall not affect the
construction or interpretation of this Debenture. 

1.4                   
Day Not a Business Day 

                          In
the event that any day on or before which any action is required to be taken
hereunder is not a business day, then such action shall be required to be taken
on or before the requisite time on the next succeeding day that is a business
day. 

1.5                   
Currency 

                         
All references to currency herein shall be to lawful money of Canada. 

1.6                   
Exhibits 

                          The
following are the Exhibits annexed to and incorporated in this Debenture and
which are deemed to be part hereof: 

	 	Exhibit "A" 	- 	Notice of Conversion 
	 	Exhibit "B" 	- 	Form of Transfer 






- 3 - 

ARTICLE 2 
CONVERSION OF DEBENTURES 


2.1                   
Conversion Privilege and Conversion Price 

	 	(a) 	
      Upon and subject to the provisions and conditions of this
      Article:

	 	 	 	 
	 		(i) 	
      the Holder shall have the right, at their option, at any
      time, and from time to time, on any business day prior to the Close of
      Business on the Maturity Date (or such later date as may be agreed upon by
      the Company and the Holder and approved by the TSX or such other stock
      exchange upon which the Shares may be listed from time to time) (the
      "Time of Expiry"), to convert; and

	 	 	 	 
	 		(ii) 	
      if not converted by the Holder on or prior to the
      business day immediately preceding the Maturity Date, the Issuer shall
      have the right to convert,




	 		
      in either case the full, but not less than the full,
      Principal Amount into Shares at the Conversion Price in effect on the Date
      of Conversion (as defined in subsection 2.2(b)).

	 	 	 
	 	(b) 	
      The Conversion Price shall be subject to adjustment as
      provided in Section 2.3.

	 	 	 
	 	(c) 	
      Such right of conversion shall extend only to the maximum
      number of whole Shares into which the aggregate principal amount of this
      Debenture surrendered for conversion at any one time by the Holder may be
      converted in accordance with the foregoing provisions of this Section,
      except that where the number of Shares to be issued on conversion of this
      Debenture by the Holder would exceed the Insider Participation Limit
      without Disinterested Shareholder Approval having been obtained by the
      Issuer prior to such conversion, then:




	 	(i) 	
      the Company shall issue the number of Shares equal to the
      Insider Participation Limit;

	 	 	 
	 	(ii) 	
      shall promptly call a meeting of its shareholders, to be
      held no later than 60 calendar days of the Date of Conversion for the
      purpose of obtaining the Disinterested Shareholder Approval;

	 	 	 
	 	(iii) 	
      if Disinterested Shareholder Approval is obtained at the
      meeting called pursuant to subsection 2(c)(ii) above, then the Company
      shall issue the remaining shares issuable upon conversion of the Debenture
      pursuant to this Section 2.1 that have not previously been issued pursuant
      to subsection 2(c)(i); and

	 	 	 
	 	(iv) 	
      if Disinterested Shareholder Approval is not obtained at
      the meeting called pursuant to subsection 2(c)(ii) above, then the Company
      shall pay the unconverted principal amount of this Debenture and all
      accrued and unpaid interest on the Maturity Date.



2.2                   
Manner of Exercise of Right to Convert 

	 	(a) 	
      If the Holder desires to convert this Debenture into
      Shares, the Holder shall, prior to the Time of Expiry, surrender this
      Debenture to the Company at its offices specified in Section 6.3 hereof
      together with a written notice of conversion, substantially in the form of
      Exhibit "A" hereto, duly executed by the Holder or his executors or
      administrators or other legal representatives or his or their attorney
      duly appointed by an instrument in writing in form and executed in a
      manner satisfactory to the Company, exercising the right of the Holder to
      convert this Debenture in accordance with the provisions of this Article.
      Thereupon, the Holder or his nominee(s) or assignee(s) shall be entitled
      to be entered in the books of the Company as at the Date of Conversion as
      the registered holder of the number of Shares into which this Debenture is
      convertible in accordance with the provisions of this Article and, as soon
      as practicable thereafter, the Company shall deliver to the Holder or his nominee(s)
  or assignee(s), certificates representing such Shares.







- 4 - 

	 	(b) 	
      For the purposes of this Article, this Debenture shall be
      deemed to be surrendered for conversion on the first business date (herein
      called the "Date of Conversion") on or immediately following the
      day which this Debenture is received by the Company in accordance with the
      provisions of this Article.

	 	 	 
	 	(c) 	
      Upon the surrender of this Debenture for conversion in
      accordance with this Article, the Holder shall be entitled to receive
      accrued and unpaid interest in respect thereof up to the Date of
      Conversion of the Debenture, and the Shares issued upon such conversion
      shall rank only in respect of dividends declared in favour of Shareholders
      of record on and after the Date of Conversion, from which applicable date
      such Shares will for all purposes be and be deemed to be issued and
      outstanding as fully paid and non-assessable Shares.

	 	 	 
	 	(d) 	
      The conversion of this Debenture by the Holder pursuant
      to this Article shall extinguish, satisfy or relieve the Company of its
      obligation to pay the Holder the Principal Amount of this Debenture so
      converted and surrendered.



2.3                   
Adjustments 

                          The
Conversion Price, in effect as at any date shall be subject to adjustment from
time to time as follows: 

	 	(a) 	
      Share Subdivision, Consolidation and Stock Dividend:
      If and whenever at any time prior to the Time of Expiry, the Company
      shall (i) subdivide or redivide the outstanding Shares into a greater
      number of Shares, (ii) reduce, combine or consolidate the outstanding
      Shares into a smaller number of Shares, or (iii) issue Shares, or
      securities convertible into or exchangeable for Shares, to the holders of
      all or substantially all of the outstanding Shares by way of stock
      dividend other than a dividend paid in the ordinary course, the Conversion
      Price in effect on the effective date of such subdivision, redivision,
      reduction, combination or consolidation or on the record date for such
      issue of Shares, or securities convertible into or exchangeable for
      Shares, by way of a stock dividend, as the case may be, shall in the case
      of the events referred to in clauses (i) and (iii) above, be decreased in
      proportion to the number of outstanding Shares resulting from such
      subdivision, redivision or dividend (including, in the case where
      securities convertible into or exchangeable for Shares are issued, the
      number of Shares that would have been outstanding had such securities been
      converted into or exchanged for Shares on such record date) or shall, in
      the case of the events referred to in clause (ii) above, be increased in
      proportion to the number of outstanding Shares resulting from such
      reduction, combination or consolidation, in each such case so that upon a
      subsequent conversion of this Debenture in accordance with the terms
      hereof the Holder shall receive the same number of Shares which he would
      have owned immediately following such event if he had converted the
      Debenture immediately prior to such event. Such adjustment shall be made
      successively whenever any event referred to in this subsection (a) shall
      occur, any such issue of Shares (or securities convertible into or
      exchangeable for Shares) by way of a stock dividend shall be deemed to
      have been made on the record date for the stock dividend for the purpose
      of calculating the number of outstanding Shares under subsections (b) and
      (c) of this Section 2.3; to the extent that any such securities
      convertible into or exchangeable for Shares are not converted into or
      exchanged for Shares prior to the expiration of the conversion or exchange
      right, the Conversion Price shall be readjusted effective as at the date
      of such expiration to the Conversion Price which would then be in effect
      based upon the number of Shares actually issued on the exercise of such
      conversion or exchange right.

	 	 	 
	 	(b) 	
      Rights Offering: If and whenever at any time prior
      to the Time of Expiry the Company (i) shall fix a record date for the
      issuance of rights, options or warrants to all or substantially all the
      holders of its outstanding Shares entitling them, for a period expiring
      not more than 45 days after such record date, to subscribe for or purchase
      Shares (or securities convertible into or exchangeable
  for Shares) or (ii) the Company agrees in any manner
      whatsoever to issue Shares (or securities convertible into or exchangeable
      for Shares) at a price per share (or having a conversion or exchange price
      per share) less than 95% of the Market Price of a Share on such record
      date or the date of any such agreement, as the case may be, the Conversion
      Price shall be adjusted immediately after such record date or date of such
      agreement so that it shall equal the price determined by multiplying the
      Conversion Price in effect on such record date or date of such agreement
      by a fraction, of which the numerator shall be the total number of Shares
      outstanding on such record date or date of such agreement plus a number of
      Shares equal to the number arrived at by dividing the aggregate price of
      the total number of additional Shares offered for subscription or purchase
      (or the aggregate conversion or exchange price of the securities
      convertible into or exchangeable for Shares so offered) by such Market
      Price per Share, and of which the denominator shall be the total number of
      Shares outstanding on such record date or date of such agreement plus the
      total number of additional Shares offered for subscription or purchase (or
      into which the securities convertible into or exchangeable for Shares so
      offered are convertible or exchangeable); any Shares owned by or held for
      the account of the Company shall be deemed not to be outstanding for the
      purpose of any such computation; such adjustment shall be made
      successively whenever such a record date is fixed or such agreement is
      entered into; to the extent that any such rights, options or warrants are
      not so issued or any such rights, options or warrants are not exercised
      prior to the expiration thereof, the Conversion Price shall be readjusted
      to the Conversion Price which would then be in effect if such record date
had not been fixed or, effective as at the date of such expiration, to the
      Conversion Price which would then be in effect based upon the number of
      Shares (or securities convertible into or exchangeable for Shares)
      actually issued upon the exercise of such rights, options or warrants, as
the case may be.







- 5 - 

	 	(c) 	
      Other Distributions to Shareholders: If and
      whenever at any time prior to the Time of Expiry the Company shall fix a
      record date for the making of a distribution to all or substantially all
      the holders of its outstanding Shares of (i) shares of any class other
      than Shares (or other securities convertible into or exchangeable for
      Shares) or (ii) rights, options or warrants (other than rights, options or
      warrants referred to in subsection 2.3(b) and rights, options or warrants
      to subscribe for or purchase Shares, or other securities convertible into
      or exchangeable for Shares, for a period of not more than 45 days after
      such record date at a price per Share, or having a conversion or exchange
      price per Share, not less than 95% of the Market Price of a Share on such
      record date), (iii) evidences of its indebtedness, or (iv) any assets,
      then, in each such case, the Conversion Price shall be adjusted
      immediately after such record date so that it shall equal the price
      determined by multiplying the Conversion Price in effect on such record
      date by a fraction, of which the numerator shall be the total number of
      Shares outstanding on such record date multiplied by the Market Price per
      Share on such record date, less the fair market value (as determined by
      the directors of the Company, which determination shall be conclusive,
      subject to TSX approval) of such shares or rights, options or warrants or
      evidences of indebtedness or assets so distributed, and of which the
      denominator shall be the total number of Shares outstanding on such record
      date multiplied by such Market Price per Share; any Shares owned by or
      held for the account of the Company shall be deemed not to be outstanding
      for the purpose of any such computation; such adjustment shall be made
      successively whenever such a record date is fixed, to the extent that such
      distribution is not so made, the Conversion Price shall be readjusted to
      the Conversion Price which would then be in effect if such record date had
      not been fixed or to the Conversion Price which would then be in effect
      based upon such shares or rights, options or warrants or evidences of
      indebtedness or actually distributed, as the case may be. The Company
      shall not make a distribution to holders of Shares as described in this
      subsection 2.3(c) where the fair market value (as determined by the
      Auditors of the Company, which determination shall be conclusive) of the
      Shares or rights, options or warrants or evidences of indebtedness or
      assets distributed exceeds the product of the Market Price per Share on
      the record date for such distribution and the total number of Shares
      outstanding on such record date unless the Holder is permitted to
      participate in such distribution as though and to the same effect as if it
      had converted this Debenture into Shares immediately prior to the
      applicable record date.








- 6 - 

	 	(d) 	
      Other Changes to Shares: In the case of any
      reclassification of, or other change in, the outstanding Shares of the
      Company other than subdivision, reduction, combination or consolidation,
      the Conversion Price shall be adjusted in such manner, if any, and at such
      time, as the directors determine to be appropriate on a basis consistent
      with this Section 2.3.

	 	 	 
	 	(e) 	
      Capital Reorganization, Merger: If and whenever at
      any time prior to the Time of Expiry there is a capital reorganization,
      consolidation, merger, arrangement or amalgamation of the Company with or
      into any other body corporate, trust, partnership or other entity or a
      sale or conveyance (with the consent of the Holder) whereby all or
      substantially all of the Company's undertaking and assets would become the
      property of any body corporate, trust, partnership or other entity and
      without limitation, the Holder, if he has not exercised his right of
      conversion under Section 2.1 prior to the effective date of such
      reorganization, consolidation, merger, arrangement, amalgamation sale,
      upon any such conversion at any time thereafter, shall be entitled to
      receive and shall accept, in lieu of the number of Shares to which he was
      theretofore entitled upon conversion, the aggregate number of Shares or
      other securities or property of the Company or of the body corporate,
      trust, partnership or other entity resulting from the reorganization,
      consolidation, merger, arrangement or amalgamation or to which such sale
      may be made, as the case may be, that the Holder would have been entitled
      to receive as a result of such reorganization, consolidation, arrangement,
      amalgamation or sale if, on the record date or effective date thereof, as
      the case may be, the Holder had been the registered holder of the number
      of Shares to which he was theretofore entitled upon conversion.

	 	 	 
	 	(f) 	
      Equitable Adjustment for Other Actions: If and
      whenever at any time prior to the Time of Expiry the Company shall take
      any action affecting its Shares, other than an action described in Section
      2.3(a) through (d), that, in the reasonable opinion of the Board of
      Directors, would materially adversely affect the rights of the Holder,
      then the number of Shares issuable upon the conversion of the Debenture or
      the Conversion Price thereof shall, subject to receipt by the Corporation
      of all required approvals (if any) from any stock exchange on which the
      Shares are listed, and all applicable securities regulatory authorities,
      be adjusted in such manner and at such time as the Board of Directors may
      determine, in their sole discretion, to be equitable in the circumstances.
      Failure of the Board of Directors to make an adjustment in accordance with
      this Section 2.3 shall be conclusive evidence that the directors have
      determined that it is equitable to make no adjustment in the
      circumstances. In the event that any such adjustment is made, the
      Corporation shall deliver a notice to the Holder in accordance with
      Section 2.7.

	 	 	 
	 	(g) 	
      Effective Date and Procedure for Adjustment: In
      any case in which this Section 2.3 shall require that an adjustment shall
      become effective immediately after a record date for an event referred to
      herein, the Company may defer, until the occurrence of such event, issuing
      to the Holder, in the case of the Debenture being converted after such
      record date and before the occurrence of such event, the additional Shares
      issuable upon such conversion by reason of the adjustment required by such
      event before giving effect to such adjustment; provided however, that the
      Company shall deliver to the Holder an appropriate instrument evidencing
      the Holder's right to receive such additional Shares upon the occurrence
      of the event requiring such adjustment and the right to receive any
      distributions made on such additional Shares declared in favour of holders
      of record of Shares on and after the Date of Conversion or the date fixed
      for redemption or such later date as the holders would, but for the
      provisions of this subsection (g), have become the holder of record of
      such additional Shares pursuant to subsection 2.3(b).

	 	 	 
	 	(h) 	
      Adjustments Cumulative: The adjustments provided
      for in this Section 2.3 are cumulative and shall apply to successive
      subdivisions, redivisions, reductions, combinations, consolidations,
      distributions, issues or other events resulting in any adjustment under
      the provisions of this Section. No adjustment of the Conversion Price
      shall be required unless such adjustment would require an increase or
      decrease of at least 1% in the Conversion Price then in effect; provided
      however, that any adjustments which by reason of this subsection (g) are
      not required to be made shall be carried forward and taken into account in
      any subsequent adjustment.







- 7 - 

	 	(i) 	
      In the event of any question arising with respect to the
      adjustments provided in this Section 2.3, such question shall be
      conclusively determined by a firm of chartered accountants or certified
      managerial accountants appointed by the Company (who may be the Auditors
      of the Company); such accountants shall have access to all necessary
      records of the Company and such determination shall be binding upon the
      Company, and the Holder.

	 	 	 
	 	(j) 	
      No adjustment in the Conversion Price shall be made in
      respect of any event described in subsections 2.3(a)(iii), 2.3(b) and
      2.3(c) if the Holder is entitled by the Company to and, subject to the
      consent of the TSX, participates in such event on the same terms mutatis
      mutandis as if he had converted his Debenture prior to the effective date
      or record date, as the case may be, of such event.

	 	 	 
	 	(k) 	
      Notwithstanding anything contained herein, the Conversion
      Price shall not be adjusted or be subject to adjustment as a result
    of:




	 	(i) 	
      The granting by the Company of options or other rights
      under any stock option plan, stock purchase plan, phantom stock plan,
      stock appreciation rights plan, or other deferred, share or incentive
      compensation plan to officers, directors, employees or consultants of the
      Company or its affiliates;

	 	 	 
	 	(ii) 	
      The issue by the Company of any Shares or other
      securities of the Company for valuable consideration to any persons other
      than as specifically provided for in this Section 2.3 (including without
      limitation the issue of Shares upon the exercise or conversion of any
      securities of the Company outstanding as at the Issue Date that are
      exercisable or convertible into Shares); or

	 	 	 
	 	(iii) 	
      The declaration or payment of any dividends on the Shares
      in the ordinary course.




	 	(l) 	
      If a state of facts shall exist to which the provisions
      of Section 2.3 are not strictly applicable, or if strictly applicable
      would not fairly adjust the rights of the Holder against dilution in
      accordance with the intent and purposes hereof, then the Company shall
      execute and deliver to the Holder an amendment hereto providing for an
      adjustment in the application of such provisions so as to adjust such
      rights as aforesaid. The Holder shall accept the certificate or opinion of
      a firm of independent chartered accountants (who may be the Company's
      Auditors) with respect to any such adjustment in the application of such
      provision, and as to questions of law in connection therewith shall accept
      an opinion of Counsel.

	 	 	 
	 	(m) 	
      At least 15 days prior to the effective date or record
      date, as the case may be, of any event that requires or might require an
      adjustment pursuant to this Section 2.3, the Company shall give notice to
      the Holder of the particulars of such event and, if determinable, the
      required adjustment.

	 	 	 
	 	(n) 	
      In the event that any adjustment for which the notice of
      adjustment referred to in paragraph (m) above has been given is not then
      determinable, the Company will give notice to the Holder of the required
      adjustment promptly after such adjustment is
  determinable.



2.4                   
No Requirement to Issue Fractional Shares

                         
The Company shall not be required to issue fractional Shares upon the conversion
of this Debenture pursuant to this Article and no cash amount shall be payable
to the Holder in lieu of such fractional Shares. 

2.5                   
Taxes and Charges on Conversion 

                          The
Company will from time to time promptly pay or make provision satisfactory to
the Holder for the payment of any and all taxes and charges which may be imposed
by the laws of Canada or any province thereof (except income tax or security transfer tax, if any)
which shall be payable with respect to the issuance or delivery to the Holder,
upon the exercise of his right of conversion, of Shares pursuant to the terms of
this Debenture. 




- 8 - 

2.6                   
Cancellation of Converted Debentures 

                          Upon
conversion of this Debenture under the provisions of this Article, the Debenture
so converted shall be forthwith delivered to and cancelled by the Company and no
Debenture shall be issued in substitution for the Debenture after conversion.


2.7                   
Notice of Adjustment 

                          The
Company shall from time to time, immediately after the occurrence of any event
which requires an adjustment or readjustment as provided in Section 2.3, deliver
a certificate of the Company to the Holder specifying the nature of the event
requiring the adjustment or readjustment and the amount of the adjustment
necessitated thereby and setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. The Company
shall, except in respect of any subdivision, redivision, reduction, combination
or consolidation of its Shares, forthwith give notice to the Holder in the
manner provided in Section 6.3 specifying the event requiring such adjustment or
readjustment and the results thereof, including the resulting Conversion Price;
provided that, if the Company has given notice under Section 2.8 covering all
the relevant facts in respect of such event no such notice need be given under
this Section 2.7. 

2.8                   
Notice of Special Matters 

                          The
Company covenants with the Holder that, so long as this Debenture remains
outstanding, it will give notice to the Holder in the manner provided in Section
6.3, of its intention to fix a record date or an effective date for any event
referred to in subsections (a), (b), (c) and (e) of Section 2.3 (other than the
subdivision, redivision, reduction, combination or consolidation of its Shares)
which may give rise to an adjustment in the Conversion Price and, in each case,
such notice shall specify the particulars of such event and the record date and
the effective date for such event; and, if prepared or available as at the date
that such notice is required to be given pursuant to this Section 2.8, such
notice shall be accompanied by the material (ie. proxy circular, information
booklets, etc.) sent to the holders of Shares in respect of the event in
question; provided that the Company shall only be required to specify in such
notice such particulars of such event as shall have been fixed and determined on
the date on which such notice is given. In any event, such notice shall be given
not less than 14 days in each case prior to such applicable record date or
effective date. 

2.9                   
Legend 

                          The
following legends shall appear on any certificate evidencing Shares issued upon
conversion of this Debenture prior to the date which is four months and one day
from the date hereof: 

                          
“THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF EXCEPT
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE
STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS.” 




- 9 - 

ARTICLE 3 
COVENANTS OF THE COMPANY 


                         
The Company hereby covenants and agrees with the Holder as follows: 

3.1                   
To Pay Principal and Interest 

                          That
the Company will duly and punctually pay or cause to be paid to the Holder the
Principal Amount of and interest accrued on this Debenture on the dates, at the
places, in the monies, and in the manner described in this Debenture.

	 	(a) 	
      If no Event of Default has occurred and is continuing,
      interest on this Debenture may be paid at the option of the Holder by
      issuing and delivering fully-paid and non-assessable Shares in lieu of
      cash at a deemed price equal to Market Price at the time of payment,
      provided that the Holder shall give written notice of such election to the
      Company 10 business days prior to the particular Interest Payment Date,
      failing which the Company shall pay the interest in cash.

	 	 	 
	 	(b) 	
      If the interest is to be paid by the delivery of
      Shares,




	 	(i) 	
      the Holder or his nominee(s) or assignee(s) shall be
      entitled to be entered in the books of the Company as at the applicable
      Interest Payment Date as the registered holder of the number of Shares
      issued in satisfaction of the interest payment and, on or prior to the
      Interest Payment Date, the Company shall deliver to the Holder or his
      nominee(s) or assignee(s), certificates representing such
Shares;

	 	 	 
	 	(ii) 	
      certificates representing such Shares shall bear any
      legend required under applicable securities law; and

	 	 	 
	 	(iii) 	
      the Company shall not issue fractional Shares in
      satisfaction of any interest payments. The Company shall round the number
      of Shares down to the nearest whole Share and pay the equivalent dollar
      value of any fractional Shares that the Holder is otherwise entitled to
      satisfy interest payment on the applicable Interest Payment
  Date.




	 	(c) 	
      The amount received by the Holder in respect of any
      interest payable or the entitlement thereto will not be affected by
      whether the Company elects to satisfy the interest payment with Shares or
      cash.

	 	 	 
	 	(d) 	
      The delivery of the Shares (and cash equal to the value
      of fractional shares, if any) shall fully satisfy the Company's interest
      payment obligation on the applicable Interest Payment
  Date.



ARTICLE 4 
REPRESENTATIONS AND WARRANTIES



4.1                   
Representations and Warranties of the Company 

                          The
Company hereby represents and warrants with and to the Holder that the Company
is duly authorized and has the corporate and lawful power and authority to
create and issue this Debenture and that this Debenture represents a valid,
legal and binding obligation of the Corporation enforceable in accordance with
its terms. 




- 10 - 

ARTICLE 5 
EVENTS OF DEFAULT 


5.1                    Events
of Default 

                          Upon
the happening of any one or more of the following events (each an "Event of
Default"), namely: 

	 	(a) 	
      if the Company does not pay the Principal Amount of this
      Debenture when the same becomes due and payable under the terms of this
      Debenture;

	 	 	 
	 	(b) 	
      if the Company does not make payment of any interest due
      on this Debenture when the same becomes due and any such default continues
      for a period of five business days after notice of such default is given
      to the Company by the Holder.

	 	 	 
	 	(c) 	
      if a decree or order of a court having jurisdiction in
      the premises is entered adjudging the Company a bankrupt or insolvent
      under the Bankruptcy Act (Canada) or any other bankruptcy,
      insolvency or analogous laws, or issuing sequestration or process of
      execution against, or against any substantial part of, the property of the
      Company or appointing a receiver of, or of any substantial part of, the
      property of the Company or ordering the winding-up or liquidation of its
      affairs;

	 	 	 
	 	(d) 	
      if a resolution is passed for the winding-up or
      liquidation of the Company or if the Company institutes proceedings to be
      adjudicated a bankrupt or insolvent or consents to the institution of
      bankruptcy or insolvency proceedings against it under the Bankruptcy
      Act (Canada) or any other bankruptcy, insolvency or analogous laws, or
      consents to the filing of any such petition or to the appointment of a
      receiver of, or of any substantial part of, the property of the Company or
      makes a general assignment for the benefit of creditors or admits in
      writing its inability to pay its debts generally as they become due or
      takes corporate action in furtherance of any of the aforesaid purposes;
      or

	 	 	 
	 	(e) 	
      if an encumbrancer or encumbrancers, whether permitted or
      otherwise, takes possession of any part of the property of the Company or
      any execution, distress or other process of any court becomes enforceable
      against any part of the property of the Company, or a distress or like
      process is levied upon any of such property;



then in each and every such event the Holder may, by notice in
writing to the Company, declare the Principal Amount and interest on this
Debenture then outstanding and all other monies outstanding hereunder to be due
and payable and, if any such default remains unremedied for a period of three
days after receipt by the Company of such notice, the same shall forthwith
become immediately due and payable to the Holder, anything therein or herein to
the contrary notwithstanding, and the Company shall forthwith pay to the Holder
the Principal Amount and accrued and unpaid interest, together with interest at
the rate stated in this Debenture on such principal, interest and such other
monies from the date of the said declaration until payment is received by the
Holder 

ARTICLE 6 
MISCELLANEOUS 


6.1                   
Severability 

                          If
any covenant or provision herein or any portion thereof is determined to be
void, unenforceable or prohibited by the law of any province or the local
requirements of any provincial or federal governmental authority such shall not
be deemed to affect or impair the validity of any other covenant or provision
herein or portion thereof, as the case may be, nor the validity of such
covenant or provision or portion thereof, as the case may be, in any other
jurisdiction. 




- 11 - 

6.2                   
Laws of British Columbia 

                          This
Debenture shall be deemed to have been made and shall be construed in accordance
with the laws of the Province of British Columbia and the laws of Canada
applicable therein and shall be treated in all respects as a British Columbia
contract. The Holder and the Company hereby irrevocably submits to the
jurisdiction of the courts of the Province of British Columbia for any action,
suit or any other proceeding arising out of or relating to this Debenture and
any other agreement or instrument mentioned therein or any of the transactions
contemplated thereby. Each of the Holder and the Company agrees not to commence
any legal proceeding related hereto except in such court. Each of the Holder and
the Company irrevocably waives any objection which it may now or hereafter have
to the laying of the venue of any such proceeding in any such court and hereby
further irrevocably and unconditionally waives and agrees not to plead or claim
in any such court that any such action, suit or proceeding brought in any such
court has been brought in an inconvenient forum. EACH OF THE HOLDER AND THE
COMPANY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY SUCH
ACTION, SUIT OR PROCEEDING. Each of the Holder and the Company agrees that the
prevailing party in any action or proceeding arising out of or relating to this
Convertible Debenture or the transactions contemplated hereby shall be entitled
to recover its reasonable fees and expenses in connection therewith, including
legal fees. 

6.3                   
Notices 

                          All
notices, reports or other communication required or permitted by this Debenture
must be in writing and either delivered by hand or by any form of electronic
communication by means of which a written or typed copy is produced by the
receiver thereof and is effective on actual receipt unless sent by electronic
means in which case it is effective on the business day next following the date
of transmission, addressed to the relevant party, as follows: 

	 	(a) 	
      if to the Company:



Golden Queen Mining Co. Ltd. 
6411
Imperial Avenue 
West Vancouver, British Columbia, V7W 2J5 
Facsimile:
(604) 921-9446 
Attention: Lutz Klingmann, President 


	 	(b) 	
      if to the Holder:



Landon T. Clay 
188 Old Street Road

Peterborough, New Hampshire, 03458 
Facsimile: (401) 490-0749 


or the last address or telecopier number of the party
concerned, notice of which was given in accordance with this paragraph. 

6.4                   
Transfer 

                          Subject
to any applicable securities laws, this Debenture is transferable by the Holder
and the term "Holder" shall mean any successor, transferee or assignee of
the current and any future Holder. 




- 12 - 

6.5                   
Enurement 

                          This
Debenture and all its provisions shall enure to the benefit of the Holder, its
successors and permitted assigns and shall be binding upon the Company, its
successors and assigns. 

6.6                   
Amendment 

                          This
Convertible Debenture may not be amended or modified in any manner nor may any
of its provisions be waived except by written amendment executed by the Holder
and the Company. A waiver, modification or amendment by a party shall only be
effective if (a) it is in writing and signed by the Holder and the Company, (b)
it specifically refers to this Convertible Debenture and (c) it specifically
states that the party, as the case may be, is waiving, modifying or amending its
rights hereunder. Any such amendment, modification or waiver shall be effective
only in the specific instance and for the specific purpose for which it was
given. 

6.7                   
Further Assurances 

                          The
Company hereby covenants and agrees that it will do, execute, acknowledge and
deliver, or cause to be done, executed, acknowledged and delivered, all and
every such other act, deed and assurance as the Holder shall reasonably require
for the better accomplishing and effectuating of the intentions and provisions
of this Debenture. The Company shall gross up each interest payment, if any
interest is subject to withholding tax, by an amount so that after deduction of
applicable withholding taxes the Holder will be receiving interest hereunder as
if no withholding taxes were payable. 

6.8                   
Securities Requirements 

                          By
its acceptance of this Debenture, the Holder acknowledges and agrees that if
required by applicable securities legislation, policy or order or by any
securities commission, stock exchange or other regulatory authority the Holder
will execute, deliver, file and otherwise assist the Company in filing such
reports, undertakings and other documents with respect to the issuance of this
Debenture or the Shares which may be acquired upon conversion as may be
required. By its acceptance of this Debenture, the Holder further acknowledges
that the Debenture will be, and any Shares acquired upon conversion of this
Debenture may be, subject to a restriction on resale under applicable securities
legislation until the appropriate hold period has been satisfied. Any obligation
represented by this Convertible Debenture whether on account of principal,
interest, costs of collection or otherwise, shall be made in full when due and,
at the request of the Holder, may be set-off against obligations owed by the
Holder to the Company. 

ARTICLE 7 
SUCCESSOR CORPORATION 


7.1                   
Certain Requirements 

                          The
Company shall not, directly or indirectly, sell, lease, transfer or otherwise
dispose of all or substantially all of its property and assets as an entirety to
any other corporation, and shall not amalgamate or merge with or into any other
corporation including in accordance with a plan of arrangement (any such other
corporation being herein referred to as a "successor corporation") and
unless: 

	 	(a) 	
      the successor corporation shall execute, prior to or
      contemporaneously with the consummation of any such transaction, an
      agreement supplemental hereto together with such other instruments as are
      reasonably satisfactory to the Holder and in the opinion of Counsel are
      necessary or advisable to evidence the assumption by the successor
      corporation of the due and punctual payment of the Principal Amount of
      this Debenture and the interest thereon in accordance with the terms
      hereof and all other monies payable hereunder and the covenant of the
      successor corporation to pay the same and its agreement to observe and
      perform all the covenants and obligations of the Company under this
      Debenture; and







- 13 - 

	 	(b) 	
      no condition or event shall exist as to the Company or
      the successor corporation either at the time of or immediately after the
      consummation of any such transaction and after giving full effect thereto
      or immediately after the successor corporation complying with the
      provisions of clause (a) above which constitutes or would constitute,
      after notice or lapse of time or both, an Event of
  Default.



7.2                   
Vesting of Powers in Successor 

                          Whenever
the conditions of Section 7.1 have been duly observed and performed the
successor corporation shall possess and from time to time may exercise each and
every right and power of the Company under this Debenture in the name of the
Company or otherwise and any act or proceeding by any provision of this
Debenture required to be done or performed by any directors or officers of the
Company may be done and performed with like force and effect by the directors or
officers of such successor corporation and thereupon the Company may be released
and discharged from liability under this Debenture and the Holder shall execute
any document or documents which it may be advised by the Company is or are
necessary or advisable for effecting or evidencing such release and discharge.


[The remainder of this page is intentionally blank.] 




EXHIBIT "A" 
to the Convertible Debenture of

Golden Queen Mining Co. Ltd. 


NOTICE OF CONVERSION 

TO:                  
Golden Queen Mining Co. Ltd. 

                          The
undersigned registered Holder of the within convertible debenture of Golden
Queen Mining Co. Ltd. due on July 26, 2015 (the "Debenture") hereby
irrevocably elects to convert $______________ of the principal amount of the
Debenture into common shares of Golden Queen Mining Co. Ltd. (the "Conversion
Securities") in accordance with the terms of the Debenture and directs that
the Conversion Securities issuable and deliverable upon the conversion be issued
and delivered as set out below. 


	Name(s) in Full and Social
      
Insurance Number(s) or Tax 
Identification
      Number(1) 	Address(es)


	Number of Common
      Shares 


	 	 	 
	 	 	 



(1)        Please print the
full name in which certificates representing the Conversion Securities are to be
issued. If any of the said Conversion Securities are to be issued to a person or
persons other than the registered holder of the Debenture, the registered holder
must pay to the Company all eligible transfer taxes or other government charges,
and the signature of the holder must be guaranteed by a Canadian chartered bank
or a trust company or by a member of a Canadian stock exchange. 

DATED this _______________day of ________________________,
20___. 

	 	 
	(Signature of Registered Holder) 	 
	 	 
	 	 
	(Name) 	 
	 	 
	 	 
	(Address) 	 
	 	 
	 	 
	(City and Province) 	 


[   ]       
Please check if the certificates representing the said Conversion Securities are
to be delivered at the office where the Debenture is surrendered, failing which
such certificate(s) will be mailed to the address(es) set out above.
Certificates will be delivered or mailed as soon as practicable after the
surrender of the Debenture to the Company. 




EXHIBIT "B" 
to the Convertible Debenture of

Golden Queen Mining Co. Ltd. 


FORM OF TRANSFER 

FOR VALUE RECEIVED the undersigned hereby sells, assigns and
transfers unto ___________________________(the "Transferee") of
___________________________: Fax number: (____) _________________,
$___________________principal amount of the convertible debenture (the
"Debenture") of Golden Queen Mining Co. Ltd. registered in the name of
the undersigned and registered by the Debenture and hereby irrevocably appoints

______________________________
as the attorney of the undersigned to
transfer the Debenture on the register of transfers, with full power of
substitution, subject to compliance with the provisions of the Debenture. 

DATED the ________day of ________________, 20___. 

	  	) 	  
	  	) 	 
    
	  	) 	Signature of Registered Holder 
	  	) 	  
	  	) 	 
    
	Signature of Guarantee 	) 	Name of Registered Holder 
	  	) 	  


Signature of Transferor must be guaranteed by a Canadian
Schedule 1 chartered bank, a major trust company in Canada, a member firm of a
recognized stock exchange, or a member of the Securities Transfer Association
Medallion Program (Stamp) (SEMP) (MSP).