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FINAL TSX ACCEPTED VERSION





NORTHERN DYNASTY MINERALS LTD.







SHARE OPTION PLAN








Last Amended May 16, 2014





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FINAL TSX ACCEPTED VERSION

TABLE OF CONTENTS

|                                                                       | Page
|---------------------------------------------------------------------- | ----
|                                                                       |     
|ARTICLE
      1 INTERPRETATION                                         | 3   
|                                                                       |     
|PURPOSE
      AND OVERVIEW                                             | 3   
|DEFINITIONS                                                            | 3   
|OTHER
      WORDS AND PHRASES                                          | 8   
|GENDER                                                                 | 8   
|                                                                       |     
|ARTICLE
      2 SHARE OPTION PLAN                                      | 8   
|                                                                       |     
|ESTABLISHMENT
      OF SHARE OPTION PLAN                               | 8   
|MAXIMUM
      PLAN SHARES AND MAXIMUM SHARES FOR US OPTIONEES          | 8   
|ELIGIBILITY                                                            | 8   
|OPTIONS
      GRANTED UNDER THE PLAN                                   | 8   
|OPTIONS
      NOT EXERCISED                                            | 9   
|POWERS
      OF THE BOARD                                              | 9   
|TERMS
      OR AMENDMENTS REQUIRING DISINTERESTED SHAREHOLDER APPROVAL | 9   
|AMENDMENT
      OF THE PLAN BY THE BOARD OF DIRECTORS                  | 11  
|                                                                       |     
|ARTICLE
      3 TERMS AND CONDITIONS OF OPTIONS                        | 11  
|                                                                       |     
|EXERCISE
      PRICE                                                   | 11  
|TERM
      OF OPTION                                                   | 11  
|OPTIONEE
      CEASING TO BE DIRECTOR, EMPLOYEE OR SERVICE PROVIDER    | 12  
|NON
      ASSIGNABLE                                                   | 12  
|ADJUSTMENT
      OF THE NUMBER OF OPTIONED SHARES                      | 13  
|                                                                       |     
|ARTICLE
      4 COMMITMENT AND EXERCISE PROCEDURES                     | 15  
|                                                                       |     
|OPTION
      COMMITMENT                                                | 15  
|MANNER
      OF EXERCISE                                               | 15  
|TAX
      WITHHOLDING AND PROCEDURES                                   | 15  
|DELIVERY
      OF OPTIONED SHARES AND HOLD PERIODS                     | 16  
|US
      OPTIONEES                                                     | 16  
|                                                                       |     
|ARTICLE
      5 GENERAL                                                | 17  
|                                                                       |     
|EMPLOYMENT
      AND SERVICES                                          | 17  
|NO
      REPRESENTATION OR WARRANTY                                    | 17  
|INTERPRETATION                                                         | 17  
|CONTINUATION
      OF THE PLAN                                         | 17  
|TERMINATION                                                            | 18  

Schedules:

|Schedule
      A  Option Commitment Form                
|---------------------------------------------------------
|Schedule
      B  Incentive Stock Option Commitment Form
|Schedule
      C  U.S. Optionee Reporting Form          

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FINAL TSX ACCEPTED VERSION

NORTHERN DYNASTY MINERALS LTD.(the
Company)

SHARE OPTION PLAN(the Plan)Dated
for Reference June 20, 2006 as amended November 24, 2006,June 17,
2008, May 5, 2011, June 20, 2012 and May 16, 2014.

ARTICLE 1INTERPRETATION

Purpose and Overview

1.1                        
The purpose of this Plan is to advance the interests of the Company by
encouraging equity participation in the Company through the acquisition of
Common Shares of the Company through considered grants of options to purchase
Common Shares. It is the intention of the Company that this Plan will at all
times be in compliance with the Company Manual of The Toronto Stock Exchange (or
TSX) (the TSX Policies) and any inconsistencies between this Plan and the
TSX Policies, whether due to inadvertence or changes in TSX Policies, will be
resolved in favour of the latter.

1.2                        
It is further intended that all Incentive Stock Options issued under the Plan to
a person who qualifies as a U.S. Optionee are intended to comply with the
requirements of Section 422 of the U.S. Internal Revenue Code. Any person who
would otherwise qualify as a US Optionee and who is granted an Option that would
otherwise be an Incentive Stock Option, but who prefers to receive a
Non-Qualified Option, is free to do so upon written request to the Company at
the time of receiving an Option Commitment Form in the form of Schedule B
hereto.

Definitions

1.3                        
In this Plan the following capitalized words have the assigned meanings.

(a)            
Affiliate means a company that is a parent or subsidiary of the Company,
or that is controlled by the same entity as the Company.

(b)            
Associate has the meaning set out in the Securities Act.

(c)            
Blackout Periodmeans any period of time during which a participant in
the Plan is unable to trade securities of the Company as a consequence of the
implementation of a general restriction on such trading by an authorized Officer
or Director pursuant to the Companys governance policies that authorize general
and/or specific restrictions on trading by Service Providers in circumstances
where there may exist undisclosed material changes or undisclosed material facts
in connection with the Companys affairs.

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(d)            
Board means the board of directors of the Company or any committee
thereof duly empowered or authorized to grant Options under this Plan.

(e)            
Business Day means a day that the TSX is open for trading.

(f)            
Change of Control includes situations where after giving effect to the
contemplated transaction and as a result of such transaction:

(i)            
any one Person holds a sufficient number of voting shares of the Company or
resulting company to affect materially the control of the Company or resulting
company, or,

(ii)            any
combination of Persons, acting in concert by virtue of an agreement,
arrangement, commitment or understanding, holds in total a sufficient number of
voting shares of the Company or its successor to affect materially the control
of the Company or its successor, where such Person or combination of Persons did
not previously hold a sufficient number of voting shares to affect materially
control of the Company or its successor. In the absence of evidence to the
contrary, any Person or combination of Persons acting in concert by virtue of an
agreement, arrangement, commitment or understanding, holding more than 20% of
the voting shares of the Company or resulting company is deemed to materially
affect control of the Company or resulting company.

(g)            
Code means U.S. Internal Revenue Code of 1986 as amended from time to
time and including any successor legislation thereto.

(h)            
Common Shares means common shares without par value in the capital of the
Company.

(i)            
Company means the company named at the top hereof and includes, unless
the context otherwise requires, all of its Affiliates and successors according
to law.

(j)            
Consultant means a Person or Consultant Company, other than an Employee,
Officer or Director that:

(i)            
provides on an ongoing bona fide basis, consulting, technical, managerial or
like services to the Company or an Affiliate of the Company, other than services
provided in relation to a Distribution;

(ii)           provides
the services under a written contract between the Company or an Affiliate and
the Person or the Consultant Company;

(iii)           in
the reasonable opinion of the Company, spends or will spend a significant amount
of time and attention on the business and affairs of the Company or an Affiliate
of the Company; and

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(iv)            has
a relationship to provide services to the Company or an Affiliate of the Company
that enables the Person or Consultant Company to be knowledgeable about the
business and affairs of the Company.

(k)            
Consultant Company means for a Person consultant, a company or
partnership of which the Person is an employee, shareholder or partner.

(l)            
Director(s) mean a member of the board of directors of the Company as may
be elected from time to time and Directors means the full Board and any
committee thereof, duly authorized to administer this Plan.

(m)            
Disinterested Shareholder Approval means approval by a majority of the
votes cast by all the Companys shareholders at a duly constituted shareholders
meeting, excluding votes attached to Common Shares beneficially owned by
Insiders who are Service Providers or their Associates.

(n)            
Distribution has the meaning assigned by the Securities Act, and
generally refers to a distribution of securities by the Company from treasury.

(o)            
Effective Date for an Option means the date of grant thereof by the
Board.

(p)            
Employee means:

(i)            
a Person who is considered an employee under the Income Tax Act (Canada)
generally meaning a person for whom income tax and other source deductions must
be made but does not include a person who serves the Company only as a Director
or as a Consultant;

(ii)            a
Person who works full-time for the Company or a subsidiary thereof providing
services normally provided by an employee and who is subject to the same control
and direction by the Company over the details and methods of work as an employee
of the Company, but for whom income tax deductions are not made at source;

(iii)           a
Person who works for the Company or its subsidiary on a continuing and regular
basis for a minimum amount of time per week providing services normally provided
by an employee and who is subject to the same control and direction by the
Company over the details and methods of work as an employee of the Company, but
for whom source tax deductions need not be made; or

(iv)           a
Person who is qualified as a US Optionee.

(q)            
Exercise Price means the amount payable per Common Share on the exercise
of an Option, as determined in accordance with the terms hereof.

(r)            
Expiry Date means the day on which an Option lapses as specified in the
Option Commitment therefor or in accordance with the terms of this Plan.

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(s)            
Incentive Stock Optionmeans an Option intended to satisfy the
requirements of section 422 of the Code, and thereby qualify for the deferred
tax treatment under section 421(a) of the Code.

(t)            
Insider means

(i)            
an insider as defined in the TSX Policies or as defined in the Securities Act;
and

(ii)            an
Associate of any person who is an Insider by virtue of §(i) above.

(u)            
Investor Relations Activities means generally any activities or
communications that can reasonably be seen to be intended to or be primarily
intended to promote the merits or awareness of or the purchase or sale of
securities of the Company.

(v)            
Listed Shares means the number of issued and outstanding shares of the
Company that have been accepted for listing on the TSX, but excluding dilutive
securities not yet converted into Listed Shares.

(w)            
Management Company Employee means a Person employed by another Person or
a corporation providing management services to the Company which are required
for the ongoing successful operation of the business enterprise of the Company,
but excluding a corporation or Person engaged primarily in Investor Relations
Activities.

(x)            
Market Price means the 5-day volume weighted average trading price as
calculated pursuant to TSX Policies.

(y)            
Non-Qualified Optionsmeans for persons who are otherwise US Optionees or
US Taxpayers, an Option which does not qualify for deferred compensation
treatment under Section 421(a) of the Code.

(z)            
Officer means a duly appointed senior officer of the Company.

(aa)         
Option means the right to purchase Common Shares granted hereunder to a
Service Provider and unless the context otherwise clearly requires, includes an
Incentive Stock Option.

(bb)        
 Option Commitment means the notice of grant of an Option delivered
by the Company hereunder to a Service Provider and substantially in the form of
Schedule A attached hereto.

(cc)         
Optioned Shares means Common Shares that may be issued in the future to a
Service Provider upon the exercise of an Option.

(dd)         
Optionee means the recipient of an Option hereunder.

(ee)         
Outstanding Shares means at the relevant time, the number of issued and
outstanding Common Shares of the Company from time to time.

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(ff)         
Participant means a Service Provider that becomes an Optionee or a US
Optionee. (gg) Person means a company or an individual.

(hh)        
 Plan means this share option plan, the terms of which are set out
herein or as may be amended.

(ii)          Plan
Shares means the total number of Common Shares which may be reserved for
issuance as Optioned Shares under the Plan as provided in §2.2.

(jj)         
Regulatory Approval means any approval required under TSX Policies and
any other approval of any other stock exchange where the Companys shares may be
listed. (kk) Securities Act means the Securities Act, R.S.B.C.
1996, c. 418, or any successor legislation.

(ll)         
Service Provider means a Person who is a bona fide Director, Officer,
Employee, Management Company Employee, Consultant or Consultant Company, and
also includes a company, of which 100% of the share capital of which is
beneficially owned by one or more Service Providers.

(mm)            
Share Compensation Arrangement means any Option under this Plan but also
includes any other stock option, stock option plan, employee stock purchase plan
or any other compensation or incentive mechanism involving the issuance or
potential issuance of Common Shares to a Service Provider.

(nn)         
Shareholder Approval means approval by a majority of the votes cast by
eligible shareholders of the Company at a duly constituted shareholders
meeting.

(oo)          Take
Over Bid means a take over bid as defined in National Policy 62-203 or the
analogous provisions of any other securities legislation applicable to the
Outstanding Shares.

(pp)          TSXmeans the Toronto Stock Exchange and any successor thereto.

(qq)          TSX
Policies means the rules and policies of the TSX as amended from time to
time.

(rr)         
US means United States of America.

(ss)          US
Optioneemeans a Service Provider who qualifies as an employee of the
Company or an Affiliate under the Code, generally meaning a person for whom
income tax and other source deductions must be made pursuant to the Code, and
who by virtue of being an employee is eligible to receive an Incentive Stock
Option but for avoidance of doubt does not include a person who serves solely as
a Director.

(tt)          US
Taxpayermeans a Service Provider who to the knowledge or belief of the
Company is a US citizen or resident who is obligated to file a tax return under
the Code.

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Other Words and Phrases

1.4                        
Words and phrases used in this Plan but which are not defined in the Plan, but
are defined in the TSX Policies or the Code, will have the meaning assigned to
them in the TSX Policies or Code as the case may be.

Gender

1.5                        
Words importing the masculine gender include the feminine or neuter, words in
the singular include the plural, words importing a corporate entity include
individuals, and vice versa.

ARTICLE 2 SHARE OPTION PLAN

Establishment of Share Option Plan

2.1                        
The Plan is hereby established to recognize contributions made by Service
Providers and to create an incentive for their continuing assistance to the
Company and its Affiliates.

Maximum Plan Shares and Maximum Shares for US Optionees

2.2                        
The maximum aggregate number of Plan Shares that may be reserved for issuance
under the Plan at any point in time is 10% of the Outstanding Shares at the time
Plan Shares are reserved for issuance as a result of the grant of an Option,
less any Common Shares reserved for issuance under share options granted under
Share Compensation Arrangements other than this Plan, unless this Plan is
amended pursuant to the requirements of the TSX Policies.
Notwithstandinganythingtothecontrary, subject to the provisions of section 3.6
relating to adjustments and subject to TSX Policies, the aggregate maximum
number of Shares that may be issued pursuant to Incentive Stock Options is
5,000,000.

Eligibility

2.3                        
Options to purchase Common Shares may be granted hereunder to Service Providers
from time to time by the Board. Service Providers that are not individuals will
be required to undertake in writing not to effect or permit any transfer of
ownership or option of any of its securities, or to issue more of its securities
(so as to indirectly transfer the benefits of an Option), as long as such Option
remains outstanding, unless the written permission of the TSX and the Company is
obtained.

Options Granted Under the Plan

2.4                        
All Options granted under the Plan to other than US Optionees will be evidenced
by an Option Commitment in the form attached as Schedule A, showing the number
of Optioned Shares, the term of the Option, a reference to vesting terms, if
any, and the Exercise Price.

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2.5                        
All Options granted under the Plan to US Optionees will be evidenced by an
Option Commitment in the form attached as Schedule B, showing the number of
Optioned Shares, the term of the Option, a reference to vesting terms, if any,
and the Exercise Price.

2.6                        
Subject to specific variations approved by the Board, all terms and conditions
set out herein will be deemed to be incorporated into and form part of an Option
Commitment made hereunder.

Options Not Exercised

2.7                        
In the event an Option granted under the Plan expires unexercised or is
terminated by reason of dismissal of the Optionee for cause or is otherwise
lawfully cancelled prior to exercise of the Option, the Optioned Shares that
were issuable thereunder will be returned to the Plan and will be eligible for
re-issue. For greater certainty options which are exercised thereupon increase
the number available to the Plan by the relevant percentage of outstanding
shares as provided hereunder.

Powers of the Board

2.8                        
The Board will be responsible for the general administration of the Plan and the
proper execution of its provisions, the interpretation of the Plan and the
determination of all questions arising hereunder. Without limiting the
generality of the foregoing, the Board has the power to

(a)            
allot Common Shares for issuance in connection with the exercise of Options;

(b)            
grant Options hereunder;

(c)            
subject to any necessary Regulatory Approval, amend, suspend, terminate or
discontinue the Plan, or revoke or alter any action taken in connection
therewith, except that no general amendment or suspension of the Plan will,
without the prior written consent of all Optionees, alter or impair any Option
previously granted under the Plan unless the alteration or impairment occurred
as a result of a change in the TSX Policies or other applicable legal
requirements;

(d)            
delegate all or such portion of its powers hereunder as it may determine to one
or more committees of the Board, either indefinitely or for such period of time
as it may specify, and thereafter each such committee may exercise the powers
and discharge the duties of the Board in respect of the Plan so delegated to the
same extent as the Board is hereby authorized so to do; and

(e)            
in its sole discretion amend this Plan (except for previously granted and
outstanding Options) to reduce the benefits that may be granted to Service
Providers (before a particular Option is granted) subject to the other terms
hereof.

Terms or Amendments Requiring Disinterested Shareholder
Approval

2.9                        
The Plan is subject to restrictions that:

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(a)            
the number of Common Shares that may be issued to Insiders as a group under the
Plan, when combined with Common Shares that may be issued to Insiders under all
the Companys other security based compensation plans may not exceed 10% of the
issued Common Shares within any 12 month period;

(b)            
the number of Common Shares issuable to Insiders as a group under the Plan, when
combined with Common Shares issuable to Insiders under all the Companys other
security based compensation plans, may not exceed 10% of the Companys issued
Common Shares;

(c)            
Common Shares being issuable to directors who are independent directors (as
defined in §§1.4 and 1.5 of National Instrument 52-110) of the Company, which
when combined with all of the Companys other Share Compensation Arrangements
currently in effect for their benefit (for avoidance of doubt excluding any
previously exercised Options or other Share Compensation Arrangement already
paid), may not exceed 1% of the Outstanding Shares; provided as well that Common
Shares issuable under Options and other Share Compensation Arrangements
currently in effect which have been granted to:

(i)             
any director who was non-independent at the time of grant of Options but who
subsequently became an independent director; and

(ii)            
any director who was an independent director at the time of grant of Options but
subsequently becomes a non-independent director;

shall in either such case, be excluded
from the calculation of 1% of the Outstanding Shares issuable under the Plan;

(d)            
Disinterested Shareholder approval shall be required in respect of:

(i)              
any amendment which reduces the Exercise Price of an Option;

(ii)             
any amendment to extend the term of an option granted to an Insider;

(iii)            
amendments to increase any of the limits on the number of Options that may be
granted;

(iv)           
any amendment to eligible participants that may permit an increase to the
proposed limit independent director participation;

(v)            
any amendment to the transferability or assignability of an Option; and

(vi)          
 any amendments required to be approved by shareholders under applicable
law.

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(e)            
no exercise price of an option granted to an Insider may be reduced nor an
extension to the term of an option granted to an Insider extended without
further approval of the disinterested shareholders of the Company.

Amendment of the Plan by the Board of Directors

2.10 Subject to the requirements of the TSX Policies and the
prior receipt of any necessary Regulatory Approval, the Board may in its
absolute discretion, without shareholder approval, amend or modify the Plan or
any Option granted as follows: (a) it may make amendments which are of a
typographical, grammatical or clerical nature; (b) it may change the vesting
provisions of an Option granted hereunder; (c) it may change the termination
provision of an Option granted hereunder which does not entail an extension
beyond the original Expiry Date of such Option; (d) it may add a cashless
exercise feature payable in cash or Common Shares; (e) it may make amendments
necessary as a result of changes in securities laws applicable to the Company;
and (f) if the Company becomes listed or quoted on a stock exchange or stock
market senior to the TSX, it may make such amendments as may be required by the
policies of such senior stock exchange or stock market.

ARTICLE 3TERMS AND CONDITIONS OF OPTIONS

Exercise Price

3.1                        
The Exercise Price of an Option will be set by the Board at the time such Option
is allocated under the Plan, and cannot be less than the Market Price calculated
the day before the grant.

Term of Option

3.2                        
An Option can be exercisable for a maximum of 5 years from the Effective Date.
If the Expiry Date for an Option occurs during a Blackout Period applicable to
the relevant Service Provider, or within five business days after the expiry of
a Blackout Period applicable to the relevant Service Provider, then the Expiry
Date for that Option will be the date that is the tenth business day after the
expiry date of the Blackout Period.

Vesting of Options

3.3                        
Vesting of Options shall be at the discretion of the Board, and will generally
be subject to:

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(a)            
the Service Provider remaining employed by or continuing to provide services to
the Company or any of its subsidiaries and Affiliates as well as, at the
discretion of the Board, achieving certain milestones which may be defined by
the Board from time to time or receiving a satisfactory performance review by
the Company or any of its subsidiaries and Affiliates during the vesting period;
or

(b)            
the Service Provider remaining as a Director of the Company or any of its
Affiliates during the vesting period.

Optionee Ceasing to be Director, Employee or Service
Provider

3.4                        
No Option may be exercised after the Service Provider has left his employ/office
or has been advised by the Company that his services are no longer required or
his service contract has expired, except as follows:

(a)            
in the case of the death of an Optionee, any vested Option held by him at the
date of death will become exercisable by the Optionees lawful personal
representatives, heirs or executors until the earlier of one year after the date
of death of such Optionee and the date of expiration of the term otherwise
applicable to such Option;

(b)            
subject to the other provisions of this §3.4, an Option granted to any Service
Provider will expire the earlier of the date of expiration of the term or 90
days after the date the Optionee ceases to be employed by or provide services to
the Company, but only to the extent that such Option has vested at the date the
Optionee ceased to be so employed by or to provide services to the Company;

(c)            
in the case of an Optionee being dismissed from employment or service for cause,
such Optionees Options, whether or not vested at the date of dismissal, will
immediately terminate without right to exercise same.

(d)            
in the event of a Change of Control occurring, Options which are subject to
vesting provisions shall be deemed to have immediately vested upon the
occurrence of the Change of Control; and

(e)            
in the event of a Director not being nominated for re-election as a Director of
the Company, although consenting to act and being under no legal incapacity
which would prevent the Director from being a member of the Board, Options
granted which are subject to a vesting provision shall be deemed to have vested
on the date of Meeting upon which the Director is not re-elected.

Non Assignable

3.5                        
Subject to §3.4(a), all Options will be exercisable only by the Optionee to whom
they are granted and will not be assignable or transferable.

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- 13 -

Adjustment of the Number of Optioned Shares

3.6                        
The number of Common Shares subject to an Option will be subject to adjustment
in the events and in the manner following:

(a)            
in the event of a subdivision of Common Shares as constituted on the date
hereof, at any time while an Option is in effect, into a greater number of
Common Shares, the Company will thereafter deliver at the time of purchase of
Optioned Shares hereunder, in addition to the number of Optioned Shares in
respect of which the right to purchase is then being exercised, such additional
number of Common Shares as result from the subdivision without an Optionee
making any additional payment or giving any other consideration therefor;

(b)            
in the event of a consolidation of the Common Shares as constituted on the date
hereof, at any time while an Option is in effect, into a lesser number of Common
Shares, the Company will thereafter deliver and an Optionee will accept, at the
time of purchase of Optioned Shares hereunder, in lieu of the number of Optioned
Shares in respect of which the right to purchase is then being exercised, the
lesser number of Common Shares as result from the consolidation;

(c)            
in the event of any change of the Common Shares as constituted on the date
hereof, at any time while an Option is in effect, the Company will thereafter
deliver at the time of purchase of Optioned Shares hereunder the number of
shares of the appropriate class resulting from the said change as an Optionee
would have been entitled to receive in respect of the number of Common Shares so
purchased had the right to purchase been exercised before such change;

(d)            
in the event of a capital reorganization, reclassification or change of
outstanding equity shares (other than a change in the par value thereof) of the
Company, a consolidation, merger or amalgamation of the Company with or into any
other company or a sale of the property of the Company as or substantially as an
entirety at any time while an Option is in effect, an Optionee will thereafter
have the right to purchase and receive, in lieu of the Optioned Shares
immediately theretofore purchasable and receivable upon the exercise of the
Option, the kind and amount of shares and other securities and property
receivable upon such capital reorganization, reclassification, change,
consolidation, merger, amalgamation or sale which the holder of a number of
Common Shares equal to the number of Optioned Shares immediately theretofore
purchasable and receivable upon the exercise of the Option would have received
as a result thereof. The subdivision or consolidation of Common Shares at any
time outstanding (whether with or without par value) will not be deemed to be a
capital reorganization or a reclassification of the capital of the Company for
the purposes of this §3.6;

(e)            
an adjustment will take effect at the time of the event giving rise to the
adjustment, and the adjustments provided for in this section are cumulative;

(f)            
the Company will not be required to issue fractional shares in satisfaction of
its obligations hereunder. Any fractional interest in a Common Share that would,
except for the provisions of this §3.6, be
deliverable upon the exercise of an Option will be cancelled and not be
deliverable by the Company; and

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- 14 -

(g)            
if any questions arise at any time with respect to the Exercise Price or number
of Optioned Shares deliverable upon exercise of an Option in any of the events
set out in this §3.6, such questions will be conclusively determined by the
Companys auditors, or, if they decline to so act, any other firm of Chartered
Accountants, in Vancouver, British Columbia (or in the city of the Companys
principal executive office) that the Company may designate and who will be
granted access to all appropriate records. Such determination will be binding
upon the Company and all Optionees.

Effect of Take Over Bid

3.7                        
If a Take Over Bid is made to the shareholders generally then the Company shall,
immediately upon receipt of notice of the Take Over Bid, notify each Optionee
currently holding an Option of the Take Over Bid, with full particulars thereof
whereupon such Option may, notwithstanding any vesting requirements set out in
any Option Commitment, be permitted to exercise in whole or in part by the
Optionee, provided that the Board considers the Take Over Bid to be successful.
A Take Over Bid will be deemed successful in the event that:

(a)            
a competing bid emerges with superior terms or conditions;

(b)            
the Board endorses the Take Over Bid and recommends that shareholders tender
into it;

(c)            
holders of at least 20% of the Companys Listed Shares, or Insiders who hold at
least 50% of Listed Shares held by Insiders, agree to, or announce their
intention to, tender such shares to the Take Over Bid; but provided always that
the Board may also consider other criteria to be adequate evidence that the Take
Over Bid is a successful one.

Adjustment of Options Expiring During Blackout Period

3.8                        
Should the Expiry Date for an Option fall within a Blackout Period, or within
five (5) Business Days following the expiration of a Blackout Period, such
Expiry Date shall be automatically adjusted without any further act or formality
to that day which is the tenth (10th) Business Day after the end of
the Blackout Period, such tenth Business Day to be considered the Expiry Date
for such Option for all purposes under the Plan. Notwithstanding §2.7, the tenth
Business Day period referred to in this §3.8 may not be extended by the Board.

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ARTICLE 4COMMITMENT AND EXERCISE PROCEDURES

Option Commitment

4.1                        
Upon grant of an Option hereunder, an authorized officer of the Company will
deliver to the Optionee an Option Commitment in the form of either Schedule A or
Schedule B (US Optionees) detailing the terms of such Options and upon such
delivery the Optionee will be subject to the Plan and have the right to purchase
the Optioned Shares at the Exercise Price set out therein subject to the terms
and conditions hereof.

Manner of Exercise

4.2                        
An Optionee who wishes to exercise his Option may do so by delivering

(a)            
a written notice to the Company specifying the number of Optioned Shares being
acquired pursuant to the Option; and

(b)            
cash or a certified cheque, wire transfer or bank draft payable to the Company
for the aggregate Exercise Price by the Optioned Shares being acquired plus the
required withholding amount under section 4.3.

Tax Withholding and Procedures

4.3                        
Notwithstanding anything else contained in this Plan, the Company may, from time
to time, implement such procedures and conditions as it determines appropriate
with respect to the withholding and remittance of taxes imposed under applicable
law, or the funding of related amounts for which liability may arise under such
applicable law. Without limiting the generality of the foregoing, an Optionee
who wishes to exercise an Option must, in addition to following the procedures
set out in §4.2 and elsewhere in this Plan, and as a condition of exercise:

(a)            
deliver a certified cheque, wire transfer or bank draft payable to the Company
for the amount determined by the Company to be the appropriate amount on account
of such taxes or related amounts; or

(b)            
otherwise ensure, in a manner acceptable to the Company (if at all) in its sole
and unfettered discretion, that the amount will be securely funded;

and must in all other respects follow any related procedures
and conditions imposed by the Company.

The Company may appoint a share compensation administrative
service at the Companys discretion and expense, to co-ordinate and administer
the exercise of Optioned Shares and to coordinate the payment of the Exercise
Price therefor, including establishment of a web-based exercise and accounting
function.

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Delivery of Optioned Shares and Hold Periods

4.4                        
As soon as practicable after receipt of the notice of exercise described in §4.2
and payment in full for the Optioned Shares being acquired, the Company will
direct its transfer agent, or a share compensation administrative service
(administrative service) chosen by the Company, to issue to the Optionee the
appropriate number of Optioned Shares. The transfer agent or administrative
service will either issue a certificate representing the Option Shares or a
written notice in the case of uncertificated shares. Such certificate or written
notice, as the case may be, will bear a legend stipulating any resale
restrictions required under applicable securities laws.

US Optionees and US Taxpayers

|4.5 | (a)            
      The Corporation and its Affiliates, if applicable, shall withhold taxes
      according to the requirements of applicable laws, rules and regulations,
      including the withholding of taxes at source to satisfy any applicable US
      federal, state or local tax withholding obligation and employment taxes in
      addition to any such federal Canadian requirements. Without limiting the
      generality of the foregoing, if the U.S. Optionee sells or otherwise
      disposes of any of the Shares acquired pursuant to an Incentive Stock
      Option on or before the later of:
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(i)            
the date two years after the date the Option is granted, or

(ii)            
the date one year after the issuance of such Shares to the U.S. Optionee upon
exercise of the Option,

the U.S. Optionee shall notify the
Corporation in writing within 30 days after the date of any such disposition and
shall remit to the Corporation or its Affiliate, as applicable, the amount of
any applicable federal, state, provincial and local withholding and employment
taxes.

(b)            
All Incentive Stock Options granted to U.S. Optionees under the Plan are
designed so as not to constitute a deferral of compensation for purposes of
Section 409A of the Code. No U.S. Optionee or U.S. Taxpayer shall be permitted
to defer the recognition of income beyond the exercise date of a Non-Qualified
Option or beyond the date that the Shares received upon the exercise of an
Option are sold.

(c)            
Non-Qualified Options (i.e., not Incentive Stock Options) may be granted to U.S.
Optionees and U.S. Taxpayers who are officers, employees, directors or
Consultants of the Corporation, and its Affiliates, if applicable, as may be
designated from time to time by the Board. A U.S. Taxpayer who is a Consultant
or who is a director but is not an employee as defined by the Code shall only be
eligible to receive Non-Qualified Options. (d) To the extent that the aggregate
fair market value (determined as of the time the Option is granted) of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the U.S. Optionee during any calendar year under all plans of the
Corporation and its Affiliates, if applicable, exceeds US$100,000, the Options
or portions thereof that exceed such limit (according to the order in which they
are granted) shall be treated as
Non-Qualified Options, notwithstanding any contrary provision of the Plan, any
applicable Option or Stock Option Agreement, in accordance with Section 422(d)
of the Code or any successor thereto.

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(e)            
The Company will provide an exercise report in the form attached as Schedule C
to each US Optionee who exercises an Incentive Stock Option and will also report
the exercise of an Incentive Stock Option to the applicable US governmental
authority under the Code.

(f)            
The Company will report and withhold applicable taxes, to the extent required by
law, with respect to each US Taxpayer that exercises an Option (other than under
subsection (e)) and, for avoidance of doubt, will report and withhold applicable
taxes, to the extent required by law on any other income or benefit paid that
person by the Company.

ARTICLE 5 GENERAL

Employment and Services

5.1                        
Nothing contained in the Plan will confer upon or imply in favour of any
Optionee any right with respect to office, employment or provision of services
with the Company, or interfere in any way with the right of the Company to
lawfully terminate the Optionees office, employment or service at any time
pursuant to the arrangements pertaining to same. Participation in the Plan by an
Optionee will be voluntary.

No Representation or Warranty

5.2                        
The Company makes no representation or warranty as to the future market value of
Common Shares issued in accordance with the provisions of the Plan or to the
effect of the Income Tax Act (Canada) or any other taxing statute
governing the Options or the Common shares issuable thereunder or the tax
consequences to a Service Provider. Compliance with applicable securities laws
as to the disclosure and resale obligations of each Participant is the
responsibility of such Participant and not the Company.

Interpretation

5.3                        
The Plan will be governed and construed in accordance with the laws of the
Province of British Columbia.

Continuation of the Plan

5.4                        
This Plan will become effective from and after the date hereof, subject to any
required Regulatory Approval, and will remain effective provided that the Plan,
or any amended version thereof, receives Shareholder Approval on or before each
third annual general meeting of the Company.

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- 18 -

Termination

5.5                        
The Board reserves the right in its absolute discretion to terminate the Plan
with respect to all Plan Shares in respect of Options which have not yet been
granted hereunder.

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SCHEDULE A

TO NORTHERN DYNASTY MINERALS LTD SHARE OPTION PLAN

OPTION COMMITMENT FORM

Notice is hereby given that, effective this ________ day of
________________, __________ (the Effective Date) Northern Dynasty Minerals
Ltd. (the Company) has granted to ___________________________________________
(the Optionee), an Option to acquire ______________ Common Shares (Optioned
Shares) up to 5:00 p.m. Vancouver Time on the __________ day of
____________________, ______ (the Expiry Date) at an Exercise Price of
Cdn$____________ per share.

Optioned Shares will vest and may be exercised as follows:

{COMPLETE ONE}

____________ In accordance with Section 3.3 of the Plan

or

____________ As follows:

The grant of the Option evidenced hereby is made subject to the
terms and conditions of the Plan, which are hereby incorporated herein and forms
part hereof.

[Note: if the Option is granted to a US employee and is
intended to qualify as an Incentive Stock Option, include the following
statement:

The Option qualifies as an Incentive Stock Option, except to
the extent that the aggregate fair market value of the common shares with
respect to which such Option (together with any other Incentive Stock Options
that have been granted to you) is exercisable for the first time in any calendar
year, exceeds US$100,000.]

To exercise your Option, deliver a written notice
  specifying the number of Optioned Shares you wish to acquire, together with cash
  or a certified cheque, wire transfer or bank draft payable to the Company for
  the aggregate Exercise Price plus the required tax withholding amount to the
  Company. A certificate, or written notice, for the Optioned Shares so acquired
  will be issued by the transfer agent as soon as practicable thereafter.

The Company and the Optionee represent that the Optionee under
the terms and conditions of the Plan is a bona fide Service Provider (as defined
in the Plan), entitled to receive Options under TSX Policies.

NORTHERN DYNASTY MINERALS LTD.



___________________________________________________Authorized
Signatory

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SCHEDULE B

TO NORTHERN DYNASTY MINERALS LTD SHARE OPTION PLAN INCENTIVE
STOCK

OPTION COMMITMENT FORM

Notice is hereby given that, effective this ________ day of
________________, __________ (the Effective Date) Northern Dynasty Minerals
Ltd. (the Company) has granted to ___________________________________________
(the US Optionee), an Incentive Stock Option as contemplated by Section 422 of
the U.S. Internal Revenue Code to acquire ______________ Common Shares
(Optioned Shares) up to 5:00 p.m. Vancouver Time on the __________ day of
____________________, ______ (the Expiry Date) at an Exercise Price of
Cdn$____________ per share.

Optioned Shares will vest and may be exercised as follows:

{COMPLETE ONE}

____________ In accordance with Section 3.3 of the Plan

or

____________ As follows:

The grant of the Incentive Stock Option evidenced hereby is
made subject to the terms and conditions of the Plan, which are hereby
incorporated herein and forms part hereof.

Note: if the Option is granted to a US employee and is
intended to qualify as an Incentive Stock Option, include the following
statement:

The Option qualifies as an Incentive Stock Option, except to
the extent that the aggregate fair market value of the common shares with
respect to which such Option (together with any other Incentive Stock Options
that have been granted to you) is exercisable for the first time in any calendar
year, exceeds US$100,000. To exercise your Incentive Stock Option, deliver a
written notice specifying the number of Optioned Shares you wish to acquire,
together with cash or a certified cheque, wire transfer or bank draft payable to
the Company for the aggregate Exercise Price to the Company plus the required
Code withholding amount (if any). A certificate, or written notice, for the
Optioned Shares so acquired will be issued by the transfer agent as soon as
practicable thereafter.

The Company and the US Optionee represent that the Optionee
under the terms and conditions of the Plan is a bona fide Service Provider (as
defined in the Plan), entitled to receive Options under TSX Policies and is an
employee as defined by the Code.

NORTHERN DYNASTY MINERALS LTD.



___________________________________________________Authorized
Signatory

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SCHEDULE C

TO NORTHERN DYNASTY MINERALS LTD SHARE OPTION PLAN

U.S. OPTIONEE REPORTING FORM

|TO:   | [______________ _________ who
      as US Optionee who exercised an Incentive Stock Option during
      20__]                                                      
|----- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|      |                                                                                                                                                                    
|FROM: | Northern Dynasty Minerals
      Ltd.                                                                                                                               
|      |                                                                                                                                                                    
|RE:   | Exercise of Incentive Stock
      Option (as described in §422 of the Internal Revenue Code) Section
      6039 Notice Regarding Exercise of Incentive Stock Option
|      |                                                                                                                                                                    
|      |                                                                                                                                                                    

Dear ___________________ :

Pursuant to § 6039(a)(1) of the Internal Revenue Code of 1986,
as amended (the Code), the following information is being furnished to you
with regard to your exercise during 20__ of an incentive stock option under
Northern Dynasty Minerals Ltd.s Share Option Plan, as last amended June 1,
2012:

|1. | Corporation transferring the stock to you upon exercise
      of the option:
      Name:           
      Address:           
      Employer Identification Number:    
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                        
|2. | Corporation whose stock was transferred upon exercise of
      the option (if different from corporation named in item 1):
      Name: 
                
      Address:
|   |                                                                                                                                                                        
|3. | Person to whom stock was transferred upon exercise of the
      option:
      Name: 
                
      Address: 
                
      Social Security Number:   
|   |                                                                                                                                                                        
|4. | Date option granted:                                                                                                                                                   
|   |                                                                                                                                                                        
|5. | Date of transfer of stock to you upon exercise of the
      option:                                                                                                    
|   |                                                                                                                                                                        
|6. | Total fair market value (at time of exercise) of stock
      transferred to you upon exercise of the option*:                                                          
|   |                                                                                                                                                                        
|7. | Number of shares transferred to you upon exercise of the
      option:                                                                                                 
|   |                                                                                                                                                                        
|8. | The shares transferred were acquired pursuant to the
      exercise of an incentive stock option described in § 422(b) of the
      Code.                              
|   |                                                                                                                                                                        
|9. | Aggregate option exercise
price:                                                                                                                                       

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- 2 -

Please keep this statement for income tax purposes.

Dated: __________________________________

Northern Dynasty Minerals Ltd.

By:
_____________________________________

* This amount is used to determine the adjustment to income
made in calculating alternative minimum tax for optionees whose stock is not
subject to a substantial risk of forfeiture pursuant to § 83 of the Internal
Revenue Code. US Optionees whose stock was subject to a substantial risk of
forfeiture at the time of exercise should consult their own tax advisors
regarding the amount and timing of the adjustment.

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