Golden Queen Mining Co. Ltd. - Exhibit 10.2 - Filed by newsfilecorp.com






Exhibit 10.2

STANDBY PURCHASE AGREEMENT 

     THIS STANDBY PURCHASE AGREEMENT
(this “Agreement”), dated as of June 8, 2014, is made by and among
Golden Queen Mining Co. Ltd., a British Columbia corporation (the
“Company”), Gauss Holdings LLC, a Delaware limited liability
company, and Auvergne, LLC, a Delaware limited liability company, each an
“Investor” and collectively, the “Investors”). 

     WHEREAS, the Company proposes to
conduct a rights offering (the “Rights Offering”) by distributing,
at no charge, to each holder of record in an Eligible Jurisdiction (as defined
below) as of the Record Date (as defined below) of shares
(“Shares”) of the Company’s common shares, no par value per share
(the “Common Shares”), such number of transferable rights (the
“Rights”) for each Share held by such shareholder, to purchase
Shares, which Rights, if exercised in full, will provide gross proceeds to the
Company of up to US$45 million (the “Aggregate Offering Amount”);


     WHEREAS, each holder of a whole
Right will be entitled to purchase (the “Basic
Subscription Privilege”) up to its pro rata portion of the
Shares offered in the Rights Offering (the “Offered Shares”)
at a price per Share of US$1.10 or such lesser amount as the Company may
determine, as appropriately adjusted for any stock split, combination,
reorganization, recapitalization, stock dividend, stock distribution or similar
event (the “Exercise Price”); 

     WHEREAS, each holder of Rights
who exercises all of its Rights will be entitled, on a pro rata basis, to
subscribe for additional Shares at the Exercise Price (the
“Over-Subscription Privilege”), to the extent
that other holders of Rights do not exercise all of their respective Basic
Subscription Privileges in full; 

     WHEREAS, a Rights Offering
Registration Statement (as defined below) relating to the Rights and the Offered
Shares will be filed with the Securities and Exchange Commission (the
“SEC”) and no offer to buy securities can be accepted and no part
of the Exercise Price can be received until the Rights Offering Registration
Statement has become effective, and any such offer may be withdrawn or revoked,
without obligation or commitment of any kind, at any time prior to notice of its
acceptance given after the effective date of the Rights Offering Registration
Statement; 

     WHEREAS, a Canadian Prospectus
(as defined below) qualifying the distribution of the Rights, the Offered Shares
and the Investor Shares (as defined below) will be filed with the securities
commission of each of the Provinces of Alberta, British Columbia, Ontario, and
Quebec (together with the United States, the “Eligible
Jurisdictions”); 

     WHEREAS, concurrently with the
execution of this Agreement, the Company, the Investors and certain other
parties entered into that certain Transaction Agreement pursuant to which the
Investors, through Gauss LLC, a subsidiary of the Investors, will make an
investment into a subsidiary of the Company (the “Transaction
Agreement”);

     WHEREAS, the Board of Directors
of the Company (the “Board of Directors”) has unanimously approved
the Rights Offering, this Agreement, each of the other Investment Agreements (as
defined herein), the Transaction Agreement and the transactions contemplated
hereby and thereby (including, without limitation, the issuance of the Investor
Shares to the Investors on the terms hereof). 




     NOW, THEREFORE, in consideration
of the mutual promises, agreements, representations, warranties and covenants
contained herein, each of the parties hereto hereby agrees as follows: 

1.      Rights Offering.


     (a)      On
the terms and subject to the conditions set forth herein, the Company will
distribute, at no charge, a certain number of Rights to each holder of record of
Common Shares in the Eligible Jurisdictions (each, an “Eligible
Holder”) for each Share held by such holder as of the close of business
on a record date to be determined by the Board of Directors (the “Record
Date”). Each such Right shall be transferable separately from the
underlying Share on account of which the Right was issued. Each whole Right will
entitle the holder thereof to purchase, at the election of the holder thereof,
one Share at the Exercise Price. Each fractional Right will be rounded down to
the nearest whole number, and fractional Rights will not entitle any holder to
purchase any Shares. No fractional Shares will be issued in the Rights Offering.


     (b)      The
Rights (including the Basic Subscription Privilege and the Over-Subscription
Privilege) may be exercised during a period (the “Rights Exercise
Period”) commencing on the date on which Rights are issued to Eligible
Holders (the “Rights Offering Commencement
Date”) and ending at 5:00 p.m. Eastern Time on the Business
Day that is forty-five (45) days after the Rights Offering Commencement Date (or
the next following Business Day if such forty-fifth day is not a Business Day),
subject to extension at the reasonable discretion of the Board of Directors,
provided, however, that the Rights Exercise Period shall not be
extended by more than thirty (30) days (in the aggregate) without the prior
written consent of each of the Investors (the “Expiration Time”).
“Business Day” means each Monday, Tuesday, Wednesday, Thursday and
Friday that is not a day on which banking institutions in New York City or
Vancouver, British Columbia, are generally authorized or obligated by law or
executive order to close. 

     (c)      Each
holder of Rights who wishes to exercise all or a portion of its Rights under the
Basic Subscription Privilege shall (i) during the Rights Exercise Period return
a duly executed election form to a subscription agent selected by the Company
(the “Subscription Agent”) electing to
exercise all or a portion of the Rights held by such holder (provided that only
whole Rights may be exercised) to purchase one Share for each whole Right so
exercised and (ii) pay an amount equal to the Exercise Price for each Share that
the holder elects to purchase pursuant to the instructions set forth in the
Rights Offering Registration Statement, Canadian Prospectus and related
materials by a specified date to an escrow account established for the Rights
Offering. On the Backstop Closing Date (as defined below), the Company will
issue to each holder of Rights who validly exercised its Rights the number of
Shares to which such holder is entitled based on such exercise. 

     (d)      In
the event that all of the Offered Shares are not purchased upon exercise of the
Basic Subscription Privilege, each holder of Rights who exercises in full its
Basic Subscription Privilege will be entitled under the Over-Subscription
Privilege to subscribe for, on a pro rata basis, additional Shares at the
Exercise Price pursuant to the instructions set forth in the Rights Offering
Registration Statement, Canadian Prospectus and related materials. If the number
of Offered Shares remaining after the exercise of Rights under the Basic
Subscription Privilege (the “Remaining Offered Shares”) is not
sufficient to satisfy all requests for Shares under the Over-Subscription
Privileges, the holders who exercised their Over-Subscription Privileges will be
allocated such Remaining Offered Shares in proportion to the product (rounded to
the nearest whole number so that the Exercise Price multiplied by the aggregate
number of Offered Shares does not exceed the Aggregate Offering Amount) obtained
by multiplying the number of Offered Shares such holder subscribed for under the
Over-Subscription Privilege by a fraction the numerator of which is the number
of Remaining Offered Shares and the denominator of which is the total number of
Offered Shares sought to be subscribed for under the Over-Subscription Privilege
by all holders participating in such Over-Subscription Privilege. 

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     (e)      The
Company shall notify, or cause the Subscription Agent to notify, each Investor,
on each Friday during the Rights Exercise Period and on each Business Day during
the five (5) Business Days immediately prior to the Expiration Time (and any
extensions thereto), or more frequently if reasonably requested by any Investor,
of the aggregate number of Rights known by the Company or the Subscription Agent
to have been exercised pursuant to the Rights Offering (including, for the
avoidance of doubt, pursuant to the Basic Subscription Privilege and the
Over-Subscription Privilege) as of the close of business on the preceding
Business Day or the most recent practicable time before such request, as the
case may be. 

     (f)      The
Company hereby agrees and undertakes to give each Investor, by electronic or
facsimile transmission, the certification by an executive officer of the Company
of either (i) the number of Offered Shares elected to be purchased by holders of
Rights pursuant to validly exercised Rights (including, for the avoidance of
doubt, pursuant to the Basic Subscription Privilege and the Over-Subscription
Privilege), the aggregate Exercise Price therefor, the number of Offered Shares
issuable pursuant to the aggregate number of Rights that were not properly
exercised by the holders thereof during the Rights Offering (such Shares in the
aggregate, the “Unsubscribed Shares”) and the aggregate Exercise
Price therefor (a “Purchase Notice”) or (ii) in the absence of any
Unsubscribed Shares, the fact that there are no Unsubscribed Shares (a
“Satisfaction Notice”), in each case, as soon as practicable and,
in any event, within two (2) Business Days after the Expiration Time (the date
of transmission of confirmation of a Purchase Notice or a Satisfaction Notice,
the “Determination Date”). 

     (g)      In
accordance with, and subject to, the terms of this Agreement, the Company may,
in its sole discretion, elect to require the Investors to effect the Backstop
Commitment (as defined below) by providing written notice thereof to the
Investors in a Purchase Notice. If the Company elects to require the Investors
to effect the Backstop Commitment in accordance with the terms of this
Agreement, each Investor, severally and not jointly, hereby agrees to purchase
on the Backstop Closing Date, and the Company shall sell to each of the
Investors on the Backstop Closing Date, at a price per Unsubscribed Share equal
to the Exercise Price, all of the Unsubscribed Shares (or only a portion of the
Unsubscribed Shares if so elected by the Company in its sole discretion), with
Gauss Holdings LLC subscribing for and purchasing 67.5% of such Unsubscribed
Shares and Auvergne, LLC subscribing for and purchasing 32.5% of such
Unsubscribed Shares (each Investor’s obligation set forth in this Section
1(g), a “Backstop Commitment”). 

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     (h)      Each
Investor shall have the right to arrange for one or more of its Affiliates
(each, an “Affiliated Purchaser”) to purchase all or any portion
of the Unsubscribed Shares issuable to such Investor pursuant to its Backstop
Commitment, by providing written notice thereof to the Company at least one (1)
Business Day prior to the Backstop Closing Date, which notice shall be signed by
such Investor and each such Affiliated Purchaser, and shall contain a
confirmation by each such Affiliated Purchaser of the accuracy with respect to
it of the representations set forth in Section 4. In no event will any
such arrangement relieve an Investor from its obligations under this Agreement.
The term “Affiliate” shall have the meaning ascribed to such term
in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the
“Exchange Act”). 

     (i)      The
closing of the purchase of the Shares to be purchased in the Rights Offering and
the Shares to be purchased by each of the Investors pursuant to its Backstop
Commitment under this Agreement (the “Closing”) will occur at
10:00 a.m., Eastern time, on the fifth (5th) Business Day following the
Expiration Time, but in no event earlier than September 30, 2014 (the
“Backstop Closing Date”). Delivery of the Shares acquired by each
Investor pursuant to its Backstop Commitment (the “Investor
Shares”) will be made by the Company to the respective accounts of each
Investor (or to such other accounts, including the account of an Affiliated
Purchaser, as such Investor may designate in accordance with this Agreement).
The documents to be delivered on the Backstop Closing Date by or on behalf of
the parties hereto will be delivered at the offices of Morton Law LLP, 1200 –
750 West Pender Street, Vancouver, B.C., Canada V6C 2T8, on the Backstop Closing
Date. 

     (j)      All
Investor Shares will be delivered with any and all issue, stamp, transfer, sales
and use, or similar taxes or duties payable in connection with such delivery
duly paid by the Company. 

2.      Fees and Expenses.
On the basis of the representations and warranties herein contained, and in
consideration for each Investor’s respective Backstop Commitment and to account
for the estimated out-of-pocket costs and expenses to be incurred by each
Investor in connection with the transactions contemplated hereby (including,
without limitation, the Rights Offering, the Rights Offering Registration
Statement, the Backstop Commitment and the negotiation and execution of the
Investment Agreements), the Company shall pay, substantially concurrently with
the consummation of the transactions contemplated by the Transaction Agreement
on the Closing Date (as defined in the Transaction Agreement), an aggregate
commitment fee in an amount of two million two hundred and fifty thousand U.S.
Dollars (US$2,250,000) to the Investors, of which an amount of one million five
hundred eighteen thousand seven hundred and fifty U.S. Dollars (US$1,518,750.00)
shall be payable to Gauss Holdings LLC by wire transfer to an account designated
by Gauss Holdings LLC, and an amount of seven hundred thirty one thousand two
hundred and fifty U.S. Dollars (US$731,250.00) shall be payable to Auvergne,
LLC, by wire transfer to an account designated by Auvergne, LLC (collectively,
“Commitment Fee”). The Commitment Fee shall
be fully earned upon execution of this Agreement, shall be due and payable on
the Closing Date (as defined in the Transaction Agreement), shall be paid in
immediately available funds in U.S. dollars, and shall be non-refundable when
paid (regardless of the Aggregate Offering Amount and whether or not the Rights
Offering is consummated). For the avoidance of doubt, the Company acknowledges
and agrees that the payment of the Commitment Fee will occur prior to the
Closing of the Rights Offering. Payment of the Commitment Fee shall not be
subject to any tax withholding or any counterclaim or set-off for, or be
otherwise affected by, any claim or dispute relating to any other matter. The
Company acknowledges and agrees that the provision for the payment of the
Commitment Fee is an integral part of the transactions contemplated by this
Agreement and without this provision the Investors would not have entered into
this Agreement. 

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3.      Representations and
Warranties of the Company. The Company represents and warrants to, and
agrees with each Investor, as set forth below. Except for representations,
warranties and agreements that are expressly limited as to their date, each
representation, warranty and agreement is made as of the date hereof and as of
the Backstop Closing Date after giving effect to the transactions contemplated
hereby: 

     (a)      Organization
and Qualification. The Company and each of its Subsidiaries has been duly
organized and is validly existing in good standing under the laws of its
respective jurisdiction of incorporation, with the requisite power and authority
to own its properties and conduct its business as currently conducted. Each of
the Company and its Subsidiaries has been duly qualified as a foreign
corporation or organization for the transaction of business and is in good
standing under the laws of each other jurisdiction in which it owns or leases
properties or conducts any business so as to require such qualification, except
to the extent that the failure to be so qualified or be in good standing has not
had and would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect. For the purpose of this Agreement,
“Material Adverse Effect” means (i) any material adverse effect on
the business, condition (financial or otherwise), prospects or results of
operations of the Company or its Subsidiaries, taken as a whole, or (ii) any
material adverse effect on the ability of the Company, subject to the approvals
and other authorizations set forth in Section 3(f), to consummate the
transactions contemplated by this Agreement; provided, however,
that “Material Adverse Effect” shall not include the impact on such
business, condition (financial or otherwise), results of operations or ability
to consummate the transactions contemplated by this Agreement arising out of or
attributable to, either alone or in combination with any other change, effect,
circumstance, occurrence, event, condition or fact (“Effects”), (i)
Effects that generally affect the industries in which the Company and its
Subsidiaries operate, (ii) general economic conditions, (iii) Effects resulting
from changes affecting financial, banking, securities or commodities markets
(including in each of clauses (i), (ii) and (iii) above,
any Effects resulting from an outbreak or escalation of hostilities, acts of war
or terrorism, political instability or other national or international calamity,
crisis or emergency, or any governmental or other response to any of the
foregoing, in each case whether or not involving the United States), (iv)
Effects arising from changes in laws, rules, regulations or accounting
principles, (v) Effects resulting from the announcement of the transactions
contemplated hereby or from taking any action required by the terms and
conditions of this Agreement or any of the other agreements or transactions
contemplated hereby, (vi) the failure to meet any projections or forecasts or
(vii) any change in the price or trading volume of the Company’s outstanding
securities (it being understood that the facts or occurrences giving rise to or
contributing to such change in stock price or trading volume may be deemed to
constitute, or be taken into account in determining whether there has been, or
will be, a Material Adverse Effect); except if such Effect results from, or is
attributable to, any of the matters described in clauses (i),
(ii), (iii), (iv) or (vi) above and
disproportionately affects the Company and its Subsidiaries, taken as a whole,
relative to other businesses in the industry in which the Company and its
Subsidiaries operate (but taking into account for purposes of determining
whether a Material Adverse Effect has occurred only the disproportionate portion
of such adverse effect). For the purposes of this Agreement, a
“Subsidiary” of any person means, with respect to such person, any
corporation, partnership, joint venture or other legal entity of which such
person (either alone or through or together with any other subsidiary), owns,
directly or indirectly, more than fifty percent (50%) of the stock or other
equity interests, has the power to elect a majority of the board of directors or
similar governing body, or has the power to direct the business and policies.


5 




     (b)      Corporate
Power and Authority. The Company has the requisite corporate power and
authority to enter into, execute and deliver this Agreement and each other
agreement to which it will be a party as contemplated by this Agreement,
excluding for the avoidance of doubt the Transaction Agreement (collectively,
the “Investment Agreements”), and to perform its obligations
hereunder and thereunder and consummate the transactions contemplated hereby and
thereby, including the issuance of the Rights, the Offered Shares and the
Investor Shares. The Company has taken all necessary corporate action required
for the due authorization, execution, delivery and performance by it of this
Agreement, including the issuance of the Rights, the Offered Shares and the
Investor Shares. 

     (c)      Execution
and Delivery; Enforceability. This Agreement and each other Investment
Agreement has been, or once executed and delivered by the Company will be, duly
and validly executed and delivered by the Company, and each such document
constitutes, or will constitute, the legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except
that such enforceability may be limited by (i) bankruptcy, insolvency,
moratorium and other similar laws now or hereafter in effect relating to or
affecting creditors’ rights generally, and (ii) general principles of equity
(regardless of whether considered in a proceeding at law or in equity). 

     (d)      Issuance.
The Investor Shares to be issued and sold by the Company to each Investor or any
Affiliated Purchaser hereunder, when such Shares are issued and delivered
against payment therefor in accordance with the terms hereof, will be duly and
validly authorized, issued, fully paid and non-assessable, free and clear of all
taxes, liens, preemptive rights, rights of first refusal, subscription and
similar rights. 

     (e)      No
Conflict. None of the distribution of the Rights, the sale, issuance and
delivery of the Offered Shares upon exercise of the Rights, the consummation of
the Rights Offering by the Company, the execution and delivery by the Company of
the Investment Agreements, compliance by the Company with all of the provisions
hereof and thereof, performance of the Company’s obligations under this
Agreement, and the consummation of the transactions contemplated herein and
therein (including the issuance and sale of Investor Shares to each Investor)
(i) will, in any material respect, conflict with, or result in a breach or
violation of, any of the terms or provisions of, or constitute a default under
(with or without notice or lapse of time, or both), or result in the
acceleration of, or the creation of any lien under, any indenture, mortgage,
deed of trust, loan agreement or other material agreement or instrument to which
the Company or any of its Subsidiaries is a party or by which the Company or any
of its Subsidiaries is bound or to which any of the property or assets of the
Company or any of its Subsidiaries is subject, (ii) will result in any violation
of the provisions of the articles, articles of incorporation or bylaws or
comparable organizational documents of the Company or any of its Subsidiaries,
or (iii) will, subject to the receipt of the consents and approvals contemplated
in Section 3(f), result in any violation of, or any termination or
impairment of any rights under, any law, rule or regulation, any license,
authorization, injunction, judgment, order, decree, rule or regulation of any
court or governmental agency or body having jurisdiction over the Company or any
of its Subsidiaries or any of their properties. 

6 




     (f)      Consents
and Approvals. No consent, approval, authorization, order, registration,
notice, filing, recording or qualification of or with any court or governmental
agency or body having jurisdiction over the Company or any of its Subsidiaries
or any of their properties is required for the execution and delivery by the
Company of the Investment Agreements, the performance by the Company of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby, the distribution of the Rights, or the sale,
issuance and delivery of (i) Offered Shares upon exercise of the Rights or (ii)
the Investor Shares to each Investor hereunder and the consummation of the
Rights Offering by the Company, except (A) the registration under the United
States Securities Act of 1933, as amended (the “Securities Act”),
of the issuance of the Rights and the Offered Shares pursuant to the exercise of
Rights, (B) the qualification of the distribution of the Offered Shares, Rights
and Investor Shares under the Canadian Prospectus in the Eligible Jurisdictions
in Canada and (C) such consents, approvals, authorizations, registrations or
qualifications (x) as may be required under state securities or Blue Sky laws in
connection with the purchase of the Investor Shares by an Investor or the
distribution of the Rights and the sale of Shares to holders of Rights, (y)
pursuant to the rules of the Toronto Stock Exchange (the “TSX”),
including approval by the TSX of the issuance of Offered Shares in the Rights
Offering and the issuance of Investor Shares to each Investor hereunder. 

     (g)      No
Advice. The Company acknowledges and agrees that neither Investor is acting
as a financial advisor or a fiduciary to, or an agent of, the Company or any
other person or entity. Additionally, none of the Investors is advising the
Company or any other person or entity as to any legal, tax, investment,
accounting or regulatory matters in any jurisdiction. The Company shall consult
with its own advisors concerning such matters and shall be responsible for
making its own independent investigation and appraisal of the transactions
contemplated hereby, and no Investor shall have any responsibility or liability
to the Company, its Affiliates, or their respective shareholders, directors,
officers, employees, advisors or other representatives with respect thereto. Any
review by any Investor of the Company, the transactions contemplated hereby or
other matters relating to such transactions will be performed solely for the
benefit of such Investor and shall not be on behalf of the Company, its
Affiliates, or their respective shareholders, directors, officers, employees,
advisors or other representatives and shall not affect any of the
representations or warranties contained herein or the remedies of any Investor
with respect thereto. 

     (h)      SEC
Documents. The Company has filed with or furnished to the SEC on a timely
basis, including any filing made within the extended filing period permitted
pursuant to Rule 12b-25 under the Exchange Act, all documents required to be so
filed or furnished by the Company under the Exchange Act, including registration
statements, certifications, proxy statements and reports with the SEC since
January 1, 2010 (such documents collectively, and together with all documents
filed during such period on a voluntary basis on Form 8-K, and in each case
including all exhibits and schedules thereto and documents incorporated by
reference therein, the “Company SEC Documents”). As of their
respective effective dates (in the case of Company SEC Documents that are
registration statements filed pursuant to the requirements of the Securities
Act) and as of their respective SEC filing dates (in the case of all other
Company SEC Documents), the Company SEC Documents complied in all material
respects with the requirements of the Securities Act, the Exchange Act, and the
Sarbanes-Oxley Act of 2002, as the case may be, applicable to such Company SEC
Documents, and none of the Company SEC Documents as of such respective dates
(or, if amended prior to the date of this Agreement, the date of the filing of
such amendment) contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. As of the date of this Agreement, there are no outstanding
or unresolved comments received from the SEC staff with respect to the Company
SEC Documents. 

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     (i)      Rights
Offering Registration Statement, Rights Offering Prospectus, Canadian
Prospectus. The Rights Offering Registration Statement or any
post-effective amendment thereto will comply in all material respects with the
Securities Act, and the Canadian Prospectus or any post-effective amendment
thereto will comply in all material respects with the securities laws of the
Eligible Jurisdictions in Canada (the “Canadian Securities Acts”),
and will not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; and as of the applicable filing date of the Rights
Offering Prospectus and the Canadian Prospectus and any amendment or supplement
thereto and as of the Backstop Closing Date, neither the Rights Offering
Prospectus nor the Canadian Prospectus will contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading. On the date of distribution of the
Investment Decision Package (as defined below) to the Eligible Holders, the
Investment Decision Package will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which
they were made, not misleading. Each Issuer Free Writing Prospectus (as defined
below), at the time of use thereof, when considered together with the Investment
Decision Package, will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. The Preliminary Rights Offering Prospectus and preliminary
Canadian Prospectus, at the time of filing thereof, will comply in all material
respects with the Securities Act and the Canadian Securities Acts, as
applicable, and will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. Notwithstanding the foregoing, the Company makes no
representation and warranty with respect to any statements or omissions made in
reliance on and in conformity with information relating to an Investor furnished
to the Company in writing by such Investor expressly for use in the Rights
Offering Registration Statement, the Rights Offering Prospectus, the Canadian
Prospectus and any amendment or supplement thereto.

For purposes of this Agreement, (i) the term “Rights
Offering Registration Statement” means the Registration Statement on
Form S-3 to be filed with the SEC relating to the Rights and the Shares,
including all exhibits thereto and any post-effective amendment thereto that
becomes effective; (ii) the term “Rights Offering Prospectus”
means the final prospectus contained in the Rights Offering Registration
Statement (including information, if any, omitted pursuant to Rule 430A and
subsequently provided pursuant to Rule 424(b) under the Securities Act), and any
amended form of such prospectus provided under Rule 424(b) under the Securities
Act or contained in a post-effective amendment to the Rights Offering
Registration Statement; (iii) the term “Investment Decision
Package” means the Rights Offering Prospectus, together with any Issuer
Free Writing Prospectus, or the Canadian Prospectus, as applicable, used by the
Company to offer the Shares to Eligible Holders pursuant to the Rights Offering,
(iv) the term “Issuer Free Writing
Prospectus” means each “issuer free writing prospectus” (as defined in
Rule 433 of the rules promulgated under the Securities Act) prepared by or on
behalf of the Company or used or referred to by the Company in connection with
the Rights Offering, (v) the term “Preliminary Rights
Offering Prospectus” means each prospectus included in the Rights
Offering Registration Statement (and any amendments thereto) before it becomes
effective, any prospectus filed with the SEC pursuant to Rule 424(a) under the
Securities Act and the prospectus included in the Rights Offering Registration
Statement, at the time of effectiveness that omits information permitted to be
excluded under Rule 430A under the Securities Act, and (vi) the term
“Canadian Prospectus” means each of the preliminary and final
short form prospectus to be filed with the securities commissions in the
Eligible Jurisdictions in Canada (the “Securities Commissions”),
including all exhibits thereto and any post-effective amendment thereto. 

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     (j)      No
Violation or Default; Compliance with Laws. Neither the Company nor any of
its Subsidiaries is in violation of its articles, articles of incorporation or
bylaws or similar organizational documents. Neither the Company nor any of its
Subsidiaries is in default, and no event has occurred that, with or without
notice or lapse of time or both, would constitute such a default, in the due
performance or observance of any material term, covenant or condition contained
in any indenture, mortgage, deed of trust, loan agreement or other material
agreement or instrument to which the Company or any of its Subsidiaries is a
party or by which the Company or any of its Subsidiaries is bound or to which
any of the property or assets of the Company or any of its Subsidiaries is
subject. Neither the Company nor any of its Subsidiaries is, or has been at any
time since January 1, 2010, in violation of any law or statute or any judgment,
order, rule or regulation of any court or arbitrator or governmental or
regulatory authority that is material to the operations of the Company and its
Subsidiaries. 

     (k)      Legal
Proceedings. Except as described in the Company SEC Documents filed prior to
the date hereof, there are no (i) actions, suits or proceedings
(“Actions”) pending or threatened against the Company or any of
its Subsidiaries, or (ii) pending or threatened investigations or audits by any
governmental or regulatory authority that are required under the Exchange Act to
be described in the Company SEC Documents or the Rights Offering Registration
Statement or that if determined adversely to the Company or any of its
Subsidiaries, would be material to the operations or financial condition of the
Company and its Subsidiaries taken together as a whole. Except as described in
the Company SEC Documents filed prior to the date hereof, there are no
outstanding orders, writs, injunctions, decrees, stipulations, determinations or
awards entered by or with any governmental entity or addressed to or naming as a
party the Company or any Subsidiary, and there are no unsatisfied judgments,
penalties or awards against, relating to or affecting the Company or any
Subsidiary. 

9 




     (l)      No
Solicitation. Neither the Company nor any agent acting on its behalf has
solicited or will solicit any offers to sell or has offered to sell or will
offer to sell all or any part of the Investor Shares to any person or persons so
as to bring the sale of such Investor Shares to any of the Investors within the
registration provisions of the Securities Act or any state securities laws. 

4.      Representations and
Warranties of the Investor. Each Investor, severally and not jointly,
represents and warrants to, and agrees with the Company and each other Investor,
as set forth below. Except for representations, warranties and agreements that
are expressly limited as to their date, each representation, warranty and
agreement is made as of the date hereof and as of the Backstop Closing Date
after giving effect to the transactions contemplated hereby: 

     (a)      Authority.
Such Investor has the requisite power and authority to enter into, execute and
deliver each Investment Agreement to which it will be a party as contemplated by
this Agreement and to perform its obligations hereunder and thereunder and
consummate the transactions contemplated hereby and thereby, including the
subscription for the Investor Shares. Such Investor has taken all necessary
action required for the due authorization, execution, delivery and performance
by it or him of this Agreement, including the subscription for the Investor
Shares. 

     (b)      Execution
and Delivery; Enforceability. Each Investment Agreement to which such
Investor is a party as contemplated by this Agreement has been, or once executed
and delivered by the such Investor will be, duly and validly executed and
delivered by such Investor, and each such document constitutes, or will
constitute, the legal, valid and binding obligation of such Investor,
enforceable against such Investor in accordance with its terms subject to (i)
bankruptcy, insolvency, moratorium and other similar laws now or hereafter in
effect relating to or affecting creditors’ rights generally, and (ii) general
principles of equity (regardless of whether considered in a proceeding at law or
in equity). 

     (c)      No
Registration. Such Investor understands that the Investor Shares have not
been registered under the Securities Act by reason of a specific exemption from
the registration provisions of the Securities Act, the availability of which
depends upon, among other things, the bona fide nature of the investment intent
and the accuracy of such Investor’s representations as expressed herein or
otherwise made pursuant hereto. 

     (d)      Investment
Intent. Such Investor is acquiring its portion of the Investor Shares for
investment for its own account, not as a nominee or agent, and not with the view
to, or for resale in connection with, any distribution thereof not in compliance
with applicable securities laws, and such Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same,
except in compliance with applicable securities laws. 

     (e)      Securities
Laws Compliance. The Investor Shares will not be offered for sale, sold or
otherwise transferred by such Investor except pursuant to a registration
statement or in a transaction exempt from, or not subject to, registration under
the Securities Act and any applicable state securities laws. 

     (f)      Sophistication.
Such Investor has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of its investment
in the Investor Shares being acquired hereunder. Such Investor is a “qualified
institutional buyer” within the meaning of Rule 144A under the Securities Act or
an “accredited investor” within the meaning of Rule 501(a) of Regulation D under
the Securities Act. Such Investor understands and is able to bear any economic
risks associated with such investment (including, without limitation, the
necessity of holding the Investor Shares for an indefinite period of time).
Without derogating from or limiting the representations and warranties of the
Company, such Investor acknowledges that it has been afforded the opportunity to
ask questions and receive answers concerning the Company and to obtain
additional information that it has requested. 

10 




     (g)      Legended
Securities. Such Investor understands and acknowledges that upon the
original issuance thereof, and until such time as the same is no longer required
under any applicable requirements of the Securities Act or applicable state
securities laws, the Investor Shares shall be represented by a certificate
bearing the following legend: 

“THE SECURITIES REPRESENTED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE “SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING SUCH SECURITIES, AGREES
FOR THE BENEFIT OF THE COMPANY THAT SUCH SECURITIES MAY BE OFFERED, SOLD OR
OTHERWISE TRANSFERRED ONLY PURSUANT TO (1) AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OR (2) AN EXEMPTION FROM REGISTRATION UNDER THE
SECURITIES ACT.” 

     The foregoing legend shall be
promptly removed from Investor Shares and the Company shall issue, or cause to
be issued, to an Investor a certificate for such Investor Shares without such
legend or any other legend, or, if so requested by such Investor, by electronic
delivery at the applicable balance account at the Depository Trust Company, if
one of the following conditions is met: (a) such Investor Shares are eligible
for resale pursuant to Rule 144 of the Securities Act without regard to any
volume limitations; (b) in connection with a sale, assignment or other transfer
of such Investor Shares, such Investor provides the Company with an opinion of
counsel, in a form generally acceptable to the Company and its transfer agent,
to the effect that such sale, assignment or transfer of such Investor Shares may
be made without registration under the applicable requirements of the Securities
Act and that the legend can be removed from the Investor Shares; or (c) the
Investor Shares are registered pursuant to an effective registration statement
for resale under the Securities Act. 

     (h)      No
Conflict. None of the execution and delivery by such Investor of each of the
Investment Agreements to which it is a party, the compliance by such Investor
with all of the provisions hereof and thereof and the consummation of the
transactions contemplated herein and therein (including the subscription for and
purchase of the Investor Shares by such Investor) (i) will, in any material
respect, conflict with, or result in a breach or violation of, any of the terms
or provisions of, or constitute a default under (with or without notice or lapse
of time, or both), or result, in the acceleration of, or the creation of any
lien under, any indenture, mortgage, deed of trust, loan agreement or other
material agreement or instrument to which such Investor is a party or by which
such Investor is bound or to which any of the property or assets of such
Investor is subject, (ii) will result in any violation of the provisions of the
certificate of formation or bylaws or comparable organizational documents of
such Investor or (iii) will result in any violation of, or any termination or
material impairment of any rights under, any law, rule or regulation, any
license, authorization, injunction, judgment, order, decree, rule or regulation
of any court or governmental agency or body having jurisdiction over such
Investor or any of its properties, except in any such case described in
clause (i) for any conflict, breach, violation, default, acceleration or
lien which has not and would not reasonably be expected, individually or in the
aggregate, to prohibit, materially delay or materially and adversely impact such
Investor’s performance of its obligations under this Agreement. 

11 




     (i)      Consents
and Approvals. No consent, approval, authorization, order, registration,
notice, filing, recording or qualification of or with any court or governmental
agency or body having jurisdiction over such Investor or any of its properties
is required for the execution and delivery by such Investor of the Investment
Agreements to which it is a party, performance by such Investor of its
obligations hereunder and thereunder and the consummation of the transactions
contemplated hereby and thereby, except for any consent, approval,
authorization, order, registration or qualification which, if not made or
obtained, has not and would not reasonably be expected, individually or in the
aggregate, to prohibit, materially delay or materially and adversely impact such
Investor’s performance of its obligations under this Agreement. 

     (j)      Share
Ownership. As of the date hereof, based on the methodology for calculating
shares beneficially owned pursuant to Rules 13d-3 and 16a-1 of the Exchange Act,
Gauss Holdings LLC does not beneficially own any Common Shares and Auvergne, LLC
does not beneficially own any Common Shares. 

     (k)      Information
Furnished. Information relating to an Investor furnished to the Company in
writing by such Investor expressly for use in the Rights Offering Transaction
Documents (as defined below) will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein not misleading. 

5.      Covenants of the
Company. Without derogating from the obligations of the Company set forth
elsewhere in this Agreement, the Company agrees with each Investor as set forth
below. 

     (a)      Registration
Statement and Prospectus. 

(i)      The Rights Offering
Registration Statement, the Preliminary Rights Offering Prospectus, the Rights
Offering Prospectus, Issuer Free Writing Prospectus and any amendments thereto
(the “SEC Transaction Documents”) and the Canadian Prospectus and
any amendments thereto (together with the SEC Transaction Documents, the
“Rights Offering Transaction Documents”) when filed with the SEC
and the Securities Commissions, respectively, shall be substantially consistent
in all material respects with the last forms of such documents provided to each
Investor and its respective counsel to review prior to the filing thereof. The
Company shall: (x) provide each Investor with a reasonable opportunity to review
any Rights Offering Transaction Document prior to its filing with the SEC or
Securities Commissions, and shall duly consider in good faith any comments of
each Investor and its respective counsel; (y) advise each Investor promptly of
the time when each of the Rights Offering Transaction Documents has been filed
or when the Rights Offering Registration Statement has become effective or any
Rights Offering Prospectus, Rights Offering Prospectus supplement, Canadian
Prospectus or Canadian Prospectus amendment has been filed and shall furnish
each Investor with copies thereof; and (z) advise each Investor promptly after
it receives notice of any comments or inquiries by the SEC or Securities
Commissions (and furnish each Investor with copies of any correspondence related
thereto), of the issuance by the SEC or Securities Commissions of any stop order
or of any order preventing or suspending the use of any Rights Offering
Transaction Document, of the initiation or threatening of any proceeding for any
such purpose, or of any request by the SEC or Securities Commissions for the
amending or supplementing any Rights Offering Transaction Document or for
additional information, and in each such case, provide each Investor with a
reasonable opportunity to review any such comments, inquiries, request or other
communication from the SEC or Securities Commissions and to review any amendment
or supplement to any Rights Offering Transaction Document before any filing with
the SEC or Securities Commissions, and to duly consider in good faith any
comments consistent with this Agreement and any other reasonable comments of
each Investor and their respective counsel and in the event of the issuance of
any stop order or of any order preventing or suspending the use of a Rights
Offering Transaction Document or suspending any such qualification, to use
promptly its reasonable best efforts to obtain its withdrawal. 

12 




(ii)      The Company shall use its
reasonable best efforts to have the Rights Offering Registration Statement
cleared or declared effective, as the case may be, by the SEC as promptly as
practicable after such filing. The Company shall take all action as may be
reasonably necessary or advisable so that the Rights Offering and the issuance
and sale of the Investor Shares and the other transactions contemplated by this
Agreement will be effected in accordance with the applicable provisions of the
Securities Act and the Exchange Act and any state or foreign securities or Blue
Sky laws. 

(iii)      The Company shall use its
reasonable best efforts to obtain receipts for the Canadian Prospectus from the
Securities Commissions as promptly as practicable after such filing. The Company
shall take all action as may be reasonably necessary or advisable so that the
Rights Offering and the issuance and sale of the Investor Shares and the other
transactions contemplated by this Agreement will be effected in accordance with
the Canadian Securities Acts. 

(iv)      No later than 30 days
following the closing of the transaction in the Transaction Agreement (the
“Transaction Closing Date”), the Company shall prepare and file a
Rights Offering Registration Statement and preliminary Canadian Prospectus. 

(v)      If at any time prior to the
Expiration Time, any event occurs as a result of which the Investment Decision
Package, as then amended or supplemented, would include any untrue statement of
a material fact or omit to state any material fact necessary in order to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or if it shall be necessary to amend or supplement the
Investment Decision Package to comply with applicable law, the Company will
promptly notify each of the Investors of any such event and prepare an amendment
or supplement to the Investor Decision Package that is reasonably acceptable in
form and substance to each Investor that will correct such statement or omission
or effect such compliance. 

13 




     (b)      Listing.
The Company shall use its reasonable best efforts to list and maintain the
listing of the Rights, the Offered Shares and the Investor Shares on the TSX.


     (c)      Reasonable
Best Efforts. The Company shall use its reasonable best efforts to take or
cause to be taken all actions, and do or cause to be done all things, reasonably
necessary, proper or advisable on its or their part under this Agreement and
applicable laws to cooperate with each of the Investors and to consummate and
make effective the transactions contemplated by this Agreement, including: 

(i)      preparing and filing as
promptly as practicable all documentation to effect all necessary notices,
reports and other filings and to obtain as promptly as practicable all consents,
registrations, approvals, permits and authorizations necessary or advisable to
be obtained from any third party or governmental entity; 

(ii)      defending any lawsuits or
other actions or proceedings, whether judicial or administrative, challenging
this Agreement or any other agreement contemplated by this Agreement or the
consummation of the transactions contemplated hereby and thereby, including
seeking to have any stay or temporary restraining order entered by any court or
other governmental entity vacated or reversed; and 

(iii)      executing, delivering and
filing, as applicable, any additional ancillary instruments or agreements
reasonably necessary to consummate the transactions contemplated by this
Agreement and to fully carry out the purposes of this Agreement and the
transactions contemplated hereby and thereby. 

6.      Additional Covenants
of each of the Investors. Without derogating from the obligations of each
Investor set forth elsewhere in this Agreement, each Investor, severally and not
jointly, agrees to provide the Company with such information as the Company
reasonably requests regarding such Investor for inclusion in the Rights Offering
Transaction Documents. 

7.      Conditions to the
Obligations of the Parties. 

     (a)      The
obligations of each of the Investors hereunder to consummate the transactions
contemplated hereby shall be subject to the satisfaction prior to the Backstop
Closing Date of each of the following conditions (which may be waived in whole
or in part by each Investor, but only as to the party so waiving, in its sole
discretion): 

(i)      Rights Offering
Registration Statement Effectiveness. The Rights Offering Registration
Statement shall have been declared effective by the SEC and shall continue to be
effective and no stop order shall have been entered by the SEC with respect
thereto. 

14 




(ii)      Receipt for Canadian
Prospectus. The Company shall have received a final receipt for the Canadian
Prospectus, and no cease trade order shall have been entered by the Securities
Commissions with respect thereto. 

(iii)     Rights Offering. The
Rights Offering shall have been conducted in all material respects in accordance
with this Agreement and the Expiration Time shall have occurred. 

(iv)     Gross Proceeds. The gross
proceeds to be received by the Company for the issuance and sale of the Offered
Shares in the Rights Offering plus the issuance and sale of the Investor Shares
to each of the Investors (including any Affiliated Purchasers) party to this
Agreement immediately prior to the Closing shall not, in the aggregate, exceed
the Aggregate Offering Amount. 

(v)      Purchase Notice.
Each of the Investors shall have timely received a Purchase Notice from the
Company on the Determination Date, certifying the number of Unsubscribed Shares
to be purchased pursuant to the Backstop Commitment. 

(vi)     Consents. All
governmental and third party notifications, filings, consents, waivers and
approvals required for the consummation of the transactions contemplated by this
Agreement, other than the ones referred to in Sections 7(a)(i) and
7(a)(ii), shall have been made or received. 

(vii)     No Legal Impediment to
Issuance. No statute, rule, regulation or order shall have been enacted,
adopted or issued by any federal, state or foreign governmental or regulatory
authority, and no judgment, injunction, decree or order of any federal, state or
foreign court shall have been issued that prohibits the issuance of the Offered
Shares in the Rights Offering, the issuance of the Investor Shares to each of
the Investors or the consummation of the transactions contemplated by this
Agreement. 

(viii)     Good Standing. Each of
the Investors shall have received on and as of the Backstop Closing Date
satisfactory evidence of the good standing of the Company in the province of
British Columbia, in writing or any standard form of telecommunication from the
appropriate governmental authorities of such jurisdiction. 

(ix)      Legal Opinion. Each
of the Investors shall have received on and as of the Backstop Closing Date a
legal opinion in form reasonably satisfactory to the Investors from counsel to
the Company that (A) the Investment Agreements to which the Company is a party
have been duly authorized, executed and delivered by the Company, (B) the
Investor Shares when issued and delivered against payment therefor in accordance
with the terms hereof, will be duly and validly authorized, fully paid and
non-assessable, free and clear of all taxes, liens, preemptive rights, rights of
first refusal, subscription and similar rights, (C) the issuance of the Investor
Shares, the consummation of any other of the transactions contemplated by this
Agreement and the performance by the Company of its obligations under this
Agreement will not contravene any law, rule or regulation of Canada or the
United States of America, and (D) no authorization, approval or other action by,
and no notice to, consent of, order of, or filing with, any United States
Federal governmental authority or Canadian federal governmental authority is
required to be made or obtained by the Company for the issuance of the Investor
Shares and the consummation of any other transactions contemplated by this
Agreement, other than (1) the registration under the Securities Act of the
issuance of the Rights and the Offered Shares pursuant to the exercise of
Rights, (2) the qualification of the distribution of the Offered Shares, Rights
and Investor Shares under the Canadian Prospectus in the Eligible Jurisdictions
in Canada and (3) such consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue Sky laws in
connection with the purchase of the Investor Shares by an Investor or the
distribution of the Rights and the sale of Shares to holders of Rights, or
pursuant to the rules of the TSX. 

15 




(x)      Representations and
Warranties. The representations and warranties of Company contained in this
Agreement shall be true and correct in all respects. 

(xi)     Covenants. The Company
shall have performed and complied in all material respects with all of its
respective covenants and agreements contained in this Agreement and in any other
document delivered pursuant to this Agreement (including in any Investment
Agreement) through the Backstop Closing Date. 

(xii)      Certificates. The
Company shall have furnished to each of the Investors a certificate, dated the
Backstop Closing Date, of an officer of the Company, on behalf of the Company,
confirming the matters set forth in subsections (ix) and (x). 

(xiii)     Commitment Fee. The
Company shall have paid the Commitment Fee to the Investors in accordance with
the terms of this Agreement. 

(xiv)     No Material Adverse
Effect. Since the date of this Agreement, there shall not have occurred any
changes or events that, individually or in the aggregate would reasonably be
expected to result in a Material Adverse Effect. 

(xv)      TSX. The Company
shall have complied with the requirements of the TSX for the listing of the
Rights, the Offered Shares to be issued in the Rights Offering, and the Investor
Shares on the TSX. 

(xvi)     Transaction Agreement.
The Closing (as defined in the Transaction Agreement) shall have occurred. 

16 




     (b)      The
obligation of the Company to consummate the Rights Offering and to issue and
sell the Investor Shares (but not the Company’s obligation to pay the Commitment
Fee) are subject to the following conditions (which may be waived in whole or in
part by the Company in its sole discretion); provided, that the failure
of the condition set forth in Section 7(b)(iv) to be satisfied may not be
asserted by the Company if such failure results from a breach by the Company of
an obligation hereunder: 

(i)      No Legal Impediment to
Issuance. No statute, rule, regulation or order shall have been enacted,
adopted or issued by any federal, state or foreign governmental or regulatory
authority, and no judgment, injunction, decree or order of any federal, state or
foreign court shall have been issued that prohibits the issuance of the Offered
Shares in the Rights Offering, the issuance of the Investor Shares to each of
the Investors or the consummation of the transactions contemplated by this
Agreement. 

(ii)      Representations and
Warranties. The representations and warranties of each Investor, or each
Affiliated Purchaser (if applicable), contained in this Agreement (pursuant to
Section 1(h) with respect to Affiliated Purchasers) shall be true and
correct in all respects. 

(iii)      Covenants. Each
Investor shall have performed and complied in all material respects with all of
its covenants and agreements contained in this Agreement and in any other
document delivered pursuant to this Agreement (including in any Investment
Agreement) through the Backstop Closing Date. (iv) Expiration Time. The
Expiration Time shall have occurred. 

(v)      Rights Offering
Registration Statement Effectiveness. The Rights Offering Registration
Statement shall have been declared effective by the SEC and shall continue to be
effective and no stop order shall have been entered by the SEC with respect
thereto. 

(vi)      Receipt for Canadian
Prospectus. The Company shall have received a final receipt for the Canadian
Prospectus, and no cease trade order shall have been entered by the Securities
Commissions with respect thereto. 

(vii)     Transaction Agreement.
The Closing (as defined in the Transaction Agreement) shall have occurred. 

8.      Indemnification and
Contribution. 

          (a)      The
Company agrees to indemnify and hold harmless each Investor and each of their
respective stockholders, members and general and limited partners and the
respective officers, directors, employees, affiliates, advisors, agents,
attorneys, accountants and consultants of each such entity and to hold the
Investors and such other persons and entities (each, an “Indemnified
Person”) harmless from and against any and all losses, claims, damages,
liabilities and expenses (excluding loss of profits and any indirect, special
and consequential damages), joint or several, which any such person or entity
may incur, have asserted against it or be involved in as a result of or arising
out of or in any way related to (i) any misstatement or omission, or alleged
misstatement or omission in any registration statement, prospectus or
preliminary prospectus, including the Rights Offering Registration Statement,
the Rights Offering Prospectus, an Issuer Free Writing Prospectus, the
Preliminary Rights Offering Prospectus or the Canadian Prospectus (unless such
misstatement or omission relates to an Investor and was furnished to the Company
in writing by such Investor expressly for use in any such the Rights Offering
Transaction Document) or (ii) this Agreement or the matters referred to herein,
including the Rights Offering or the use of proceeds therefrom or any related
transaction or any claim, litigation, investigation or proceeding relating to
any of the foregoing, regardless of whether any of such Indemnified Persons is a
party thereto, and to reimburse each such Indemnified Person within five (5)
Business Days of demand for any legal or other expenses incurred in connection
with any of the foregoing; provided, however, that the foregoing
indemnity will not, as to any Indemnified Person, apply to losses, claims,
damages, liabilities or related expenses pursuant to clause (ii) above to
the extent they have resulted from the bad faith, willful misconduct or gross
negligence of such Indemnified Person. 

17 




     (b)      If
the indemnification of an Indemnified Person provided for in Section 8(a)
is for any reason held unenforceable or is otherwise unavailable, the Company
shall contribute to the losses, claims, damages, expenses and liabilities for
which such indemnification is held unenforceable (1) in such proportion as is
appropriate to reflect the relative benefits to the Company, on the one hand,
and the Investor, on the other hand, of any contemplated transaction (whether or
not such transaction is consummated); or (2) if (but only if) the allocation
provided for in clause (1) is for any reason held unenforceable, in such
proportion as is appropriate to reflect not only the relative benefits referred
to in clause (1) but also the relative fault of the Company, on the one hand,
and the Investor, on the other hand, as well as any other relevant equitable
considerations. For the purposes of this paragraph the relative benefits to the
Company and the Investor of any transaction expressly described in the Agreement
(whether or not such transaction is consummated) shall be deemed to be in the
same proportion that the maximum total value paid to or received by, or that may
potentially be paid to or received by, the Company in connection with
transactions contemplated by this Agreement, bears to the portion of the
Commitment Fee received by the Investor under the Agreement; and the relative
fault of the Company and of the Investor (i) in the case of any untrue or
alleged untrue statement of a material fact or an omission or alleged omission
to state a material fact, shall be determined by reference to, among other
things, whether such statement or omission relates to information supplied by
the Company or by the Investor and the parties’ relative intent, knowledge,
access to information, and opportunity to correct or prevent such statement or
omission, and (ii) in the case of any other action or omission, shall be
determined by reference to, among other things, whether such action or omission
was taken or omitted to be taken by the Company or by the Investor and the
parties’ relative intent, knowledge, access to information, and opportunity to
prevent such action or omission; provided, however, that, to the
extent permitted by applicable law, in no event shall the Indemnified Persons be
required to contribute an aggregate amount in excess of the Commitment Fee.
Without limiting the generality of the foregoing, if the Investor or any other
Indemnified Person is requested or required to be deposed, appear as a witness
or is otherwise involved in any action relating to this Agreement, the Rights
Offering brought by or on behalf of or against the Company in which such party
is not named as a defendant, the Company shall reimburse the Investor or the
Indemnified Person (as applicable) for all reasonable expenses incurred in
connection with such action, including, without limitation, the reasonable fees
and disbursements of its legal counsel in connection with appearing and
preparing to appear as a deponent or witness. 

18 




     (c)      The
foregoing provisions are in addition to any rights that any Indemnified Person
may have at common law or otherwise and shall be binding on and inure to the
benefit of any successors, permitted assigns, and personal representatives of
the Company and each Indemnified Person. The provisions of this Section 8
shall continue to apply and shall remain in full force and effect regardless of
any modification or termination of this Agreement or the completion of the
transactions contemplated hereunder. 

9.      Survival of
Representations and Warranties. The representations and warranties made in
this Agreement shall survive the execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby notwithstanding any
investigation at any time made by or on behalf of any party hereto until the
date that is one year after the Backstop Closing Date, and the covenants shall
survive in accordance with their specific terms; provided,
however, that the representations and warranties contained in Sections
3(b), (c), (d), (f) and (h) shall survive
indefinitely. 

10.      Termination.

     (a)      This
Agreement may be terminated and the transactions contemplated hereby may be
abandoned prior to the Backstop Closing Date: 

(i)      by mutual written consent
of the Company, on the one hand, and both Investors, on the other hand; or 

(ii)      by each of the Investors
with respect to such Investor (without the consent of the Company or any other
Investor): 

1)      if there has been a breach
of any covenant or a breach of any representation or warranty of the Company,
which breach would cause the failure of any condition precedent set forth in
Section 7(a), and such breach of a covenant or representation or warranty
is not cured on or prior to 15 Business Days following notice to the Company of
such breach of covenant or representation; 

2)      upon the occurrence of any
event which results in a failure to satisfy any of the conditions set forth
in Section 7(a), which failure is not cured on or prior to 15 Business
Days following notice to the Company of such failure to satisfy; 

3)      if the Rights Offering
Registration Statement has not been declared effective by the SEC and the Rights
Offering Commencement Date has not occurred within 120 days of the Transaction
Closing Date; 

4)      if a final receipt has not
been received from the Securities Commissions for the Canadian Prospectus within
120 days of the Transaction Closing Date; 

5)      if any other Investor
terminates this Agreement pursuant to this Section 10(b); or 

6)      on the date that is 270 days
following the Transaction Closing Date, if the Backstop Closing Date has not
occurred by such date; or 

19 




(iii)       by the Company:


1)      if there has been a breach
of any covenant or a breach of any representation or warranty of any of the
Investors, which breach would cause the failure of any condition precedent set
forth in Section 7(b), and such breach is not cured on or prior to 15
Business Days following notice to the breaching Investor of such breach; or 

2)      upon the occurrence of any
event which results in a failure to satisfy any of the conditions set forth
in Section 7(b), which failure is not cured on or prior to 15 Business
Days following notice to the failing Investor of such failure to satisfy. 

     (b)       This
Agreement shall terminate automatically upon the termination of the Transaction
Agreement in accordance with its terms. 

     (c)       Upon
termination of this Agreement pursuant to, and in accordance with, this
Section 10, all rights and obligations of the parties under this
Agreement shall terminate without any liability of any party to any other party
except that (x) nothing contained herein shall release any party hereto from
liability for any willful breach (y) the covenants and agreements made by the
parties herein in Section 2, and Sections 7 through 15 will
survive indefinitely in accordance with their terms and (z) the Commitment Fee
shall be fully earned when due and non-refundable if paid prior to such
termination. 

11.       Notices.
All notices, requests, demands and other communications under this Agreement
shall be in writing and delivered in person, or sent by facsimile, email or
reputable overnight delivery service and properly addressed as follows: 

      (a)       If
to the Company, to: 

Golden Queen Mining Co. Ltd.

6411 Imperial Avenue 
West Vancouver, British Columbia, V7W 2J5

Attn: H. Lutz Klingmann (President) and Andree St-Germain (Chief Financial
Officer) 
Email: lklingmann@goldenqueen.com and astgermain@goldenqueen.com


with copies (which shall not
constitute notice) to: 

Morton Law LLP 
1200-750
West Pender Street 
Vancouver, British Columbia, V6C 2T8 
Attn: Edward L.
Mayerhofer 
Fax: (604) 681-9652 
Email: elm@mortonlaw.ca 

20 




and: 

Dorsey & Whitney LLP

1400 Wewatta St., Suite 400 
Denver, Colorado 80202 
Attn: Kenneth
G. Sam 
Fax: 303-629-3450 
Email: sam.kenneth@dorsey.com 

     (b)      If
to Gauss Holdings LLC, to: 

Gauss Holdings LLC 
c/o
Leucadia National Corporation 
520 Madison Avenue 
New York, NY 10022

Attn: Jimmy Hallac 
Fax: 212-598-4869 
Email: jhallac@leucadia.com


with a copy (which shall not
constitute notice) to: 

Weil, Gotshal & Manges, LLP

767 Fifth Ave 
New York, NY 10153 
Attn: Andrea A. Bernstein and
Matthew J. Gilroy 
Fax: 212-310-8007 
Email: andrea.bernstein@weil.com and
matthew.gilroy@weil.com 

     (c)      If
to Auvergne, LLC, to: 

Auvergne, LLC 
c/o East Hill
Management Company 
10 Memorial Drive 
Suite 902 
Providence, RI 02903

Fax: 401-490-0749 
Email: thomas.clay@easthillmgt.com

with a copy (which shall not
constitute notice) to: 

Sullivan & Worcester LLP

One Post Office Square 
Boston, MA 02109 
Attention: William A.
Levine, Esq. 
Fax: 617-338-2880 
Email: wlevine@sandw.com 

21 




               Any
party may from time to time change its address for the purpose of notices to
that party by a similar notice specifying a new address, but no such change
shall be deemed to have been given until it is actually received by the sought
to be charged with its contents. All notices and other communications required
or permitted under this Agreement which are addressed as provided in this
Section 11 shall be effective (i) upon delivery if delivered personally
or by courier, or (ii) upon receipt of proof of transmission if sent by
facsimile or email. 

12.      Assignment; Third
Party Beneficiaries. Neither this Agreement nor any of the rights, interests
or obligations under this Agreement may be assigned by any of the parties
(whether by operation of law or otherwise) without the prior written consent of
the other parties, except to an Affiliated Purchaser pursuant to Section
1(h). Except as provided in Section 8 with respect to the Indemnified
Persons, this Agreement (including the documents and instruments referred to in
this Agreement) is not intended to and does not confer any rights or remedies
under this Agreement upon any person other than the parties hereto and any
Affiliated Purchaser. Any Indemnified Persons shall be entitled to enforce and
rely on the provisions listed in the immediately preceding sentence as if they
were a party to this Agreement. 

13.      Prior Negotiations;
Entire Agreement. This Agreement (including the Transaction Agreement, the
other documents and instruments referred to in this Agreement and the agreements
attached as exhibits thereto) constitutes the entire agreement of the parties
and supersedes all prior agreements, arrangements or understandings, whether
written or oral, between the parties with respect to the subject matter of this
Agreement, except that the parties hereto acknowledge that any confidentiality
agreements heretofore executed among the parties will continue in full force and
effect. 

14.      GOVERNING LAW;
VENUE. THIS AGREEMENT WILL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE
PERFORMED WITHIN THE STATE OF NEW YORK. EACH OF THE PARTIES HERETO (I) CONSENTS
TO SUBMIT ITSELF TO THE PERSONAL JURISDICTION OF ANY FEDERAL OR STATE COURT
LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW YORK IN THE
EVENT ANY DISPUTE ARISES OUT OF THIS AGREEMENT, (II) AGREES THAT IT WILL NOT
ATTEMPT TO DENY OR DEFEAT SUCH PERSONAL JURISDICTION BY MOTION OR OTHER REQUEST
FOR LEAVE FROM ANY SUCH COURT (III) WAIVES ANY OBJECTION BASED ON FORUM NON
CONVENIENS AND (IV) AGREES THAT IT WILL NOT BRING ANY ACTION RELATING TO THIS
AGREEMENT IN ANY COURT OTHER THAN A FEDERAL OR STATE COURT LOCATED IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK, NEW YORK. EACH PARTY ACKNOWLEDGES
AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY
TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION OR PROCEEDING DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE BREACH,
TERMINATION OR VALIDITY OF THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY
THIS AGREEMENT.

22 




EACH PARTY CERTIFIES AND ACKNOWLEDGES THAT (A) NO
REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY
OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK
TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS
CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS
WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS
AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS
SECTION 14. 

15.      Counterparts.
This Agreement may be executed in any number of counterparts, all of which will
be considered one and the same agreement and will become effective when
counterparts have been signed by each of the parties and delivered to the other
party (including via facsimile or other electronic transmission), it being
understood that each party need not sign the same counterpart. 

16.      Waivers and
Amendments. This Agreement may be amended, modified, superseded, cancelled,
renewed or extended, and the terms and conditions of this Agreement may be
waived, only by a written instrument signed by all the parties or, in the case
of a waiver, by the party waiving compliance. No delay on the part of any party
in exercising any right, power or privilege pursuant to this Agreement will
operate as a waiver thereof, nor will any waiver on the part of any party of any
right, power or privilege pursuant to this Agreement, nor will any single or
partial exercise of any right, power or privilege pursuant to this Agreement,
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege pursuant to this Agreement. The rights and remedies
provided pursuant to this Agreement are cumulative and are not exclusive of any
rights or remedies which any party otherwise may have at law or in equity. 

17.      Adjustment to
Shares. If, prior to the Backstop Closing Date, the Company effects a
reclassification, stock split (including a reverse stock split), stock dividend
or distribution, recapitalization, merger, issuer tender or exchange offer, or
other similar transaction with respect to any shares of its capital stock,
references to the numbers of such shares and the prices therefore shall be
equitably adjusted to reflect such change and, as adjusted, shall, from and
after the date of such event, be subject to further adjustment in accordance
herewith. 

18.      Headings. The
headings in this Agreement are for reference purposes only and will not in any
way affect the meaning or interpretation of this Agreement. 

23 




19.      Publicity. The
Company and each Investor shall consult with each other prior to issuing any
press releases (and provide each other a reasonable opportunity to review and
comment upon such release prior to its public issuance) or otherwise making
public announcements with respect to the transactions contemplated by this
Agreement; provided, however, that in no event shall any such
press release or other public announcement name either Investor without its
prior written consent. The Company shall consult with each Investor prior to
making any filings (and provide each Investor a reasonable opportunity to review
and comment on such filings) with any third party or any governmental entity
(including any national securities exchange or interdealer quotation service)
with respect to the transactions contemplated by this Agreement, except as may
be required by law or by the request of any governmental entity. Subject to the
Company’s foregoing obligations pursuant to this Section 19, nothing
contained in this Section 19 shall be interpreted to preclude the Company
from making any filing or disclosing any information in any filing, including
with the SEC or the Securities Commissions, that the Company acting reasonably
determines is necessary or advisable. 

[Signature Page Follows] 

24 




     IN WITNESS WHEREOF, the parties
hereto have caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written above. 


	Golden Queen Mining Co. Ltd. 
	  	  
	  	  
	By: 	/s/ H. Lutz Klingmann    
	Name: H. Lutz Klingmann 
	Title:   President and Chief Executive
      Officer 
	  	  
	Gauss Holdings LLC 
	  	  
	  	  
	By: 	/s/ Haim Jimmy Hallac    
	Name: Haim Jimmy Hallac 
	Title:   Vice President 
	  	  
	Auvergne, LLC 
	  	  
	  	  
	By: 	/s/ Thomas M. Clay    
	Name: Thomas M. Clay 
	Title:   Manager




[Signature Page to Standby Purchase Agreement]