Document:

Osprey Ventures, Inc.: Exhibit 10.4 - Filed by newsfilecorp.com

I N D E X

	  	 	Page
  
	PART
      1	INTERPRETATION
      	1
      
	PART
      2	REPRESENTATIONS
      AND WARRANTIES 	7
      
	PART
      3	SALE
      OF 35% INTEREST 	9
      
	PART
      4 	FORMATION
      OF THE JOINT VENTURE 	10
      
	PART
      5	INTERESTS
      	10
      
	PART
      6	MANAGEMENT
      COMMITTEE 	10
      
	PART
      7 	OPERATOR
      	12
      
	PART
      8	RIGHTS,
      DUTIES AND STATUS OF OPERATOR 	13
      
	PART
      9 	EXPLORATION
      PROGRAMS 	14
      
	PART
      10 	FEASIBILITY
      REPORT 	18
      
	PART
      11	PRODUCTION
      NOTICE 	18
      
	PART
      12 	ELECTION
      TO CONTRIBUTE 	19
      
	PART
      13 	OPERATOR’S
      FEE 	20
      
	PART
      14	MINE
      FINANCING 	20
      
	PART
      15	CONSTRUCTION
      	21
      
	PART
      16 	OPERATION
      OF THE MINE 	21
      
	PART
      17 	PAYMENT
      OF MINE COSTS 	22
      
	PART
      18	DISTRIBUTION
      IN KIND 	23
      
	PART
      19 	SURRENDER
      OF INTEREST 	24
      
	PART
      20 	TERMINATION
      OF MINING OPERATIONS 	24
      
	PART
      21 	THE
      PROPERTY 	25
      
	PART
      22	INFORMATION
      AND DATA 	26
      
	PART
      23 	LIABILITY
      OF THE OPERATOR 	26
      
	PART
      24 	INSURANCE
      	27
      
	PART
      25 	RELATIONSHIP
      OF PARTIES 	27
      
	PART
      26 	PARTITION
      	28
      
	PART
      27	TAXATION
      	28
      
	PART
      28	FORCE
      MAJEURE 	28
      
	PART
      29 	NOTICE
      	28
      
	PART
      30 	WAIVER
      	29
      
	PART
      31	AMENDMENTS
      	29
      
	PART
      32 	TERM
      	29
      
	PART
      33 	TIME
      OF ESSENCE 	29
      
	PART
      34 	ASSIGNMENT
      RIGHT OF FIRST REFUSAL 	29
      
	PART
      35 	SUCCESSORS
      AND ASSIGNS 	30
      
	PART
      36 	GOVERNING
      LAW 	31
      

	Appendix I 	The Property 
	Appendix II 	Accounting Procedure 
	Appendix III 	Net Proceeds of
      Production 
	Appendix IV 	Mineral Property Option Agreement between
      TAC Gold Corporation and Minquest Inc. dated January 20, 2010    

THIS AGREEMENT made the _____ day of August, 2010.

BETWEEN:

TAC GOLD CORPORATION., suite
203-2780 Granville Street, 
Vancouver, British Columbia, V6H 3J3

(hereinafter referred to as
“TAC’)

OF THE FIRST PART

AND:

OSPREY VENTURES, INC., suite 8
Hart Avenue, 15 Floor, Flat 
D, Tsim Sha Tsui, Kowloon, K3 V7Y2V1

(hereinafter referred to as
“Osprey”)

OF THE SECOND PART

WHEREAS:

(A)          
Pursuant to a mineral property option agreement between TAC and Minquest Inc.
(“Minquest”) dated January 20, 2010 (the “Option Agreement”), a
copy of which is attached hereto as Appendix IV, TAC was granted the right to
acquire all of Minquest’s 100% interest in the Property (as hereinafter defined)
subject only to the Royalty (as hereinafter defined);

(B)          
TAC has agreed to sell, assign and transfer to Osprey the right to acquire a 35%
interest in the Property, subject to the Royalty, on the terms and conditions
set forth herein;

(C)          
In connection with the acquisition by Osprey of the right to acquire a 35%
interest in the Property, TAC and Osprey have agreed to enter into this joint
venture agreement; 

NOW THEREFORE THIS AGREEMENT WITNESSES THAT in
consideration of the premises, and the mutual covenants herein set forth, the
Parties hereto do hereby mutually covenant and agree as follows: 

PART 1 
INTERPRETATION

1.1          
In this Agreement the following words, phrases and expressions shall have the
following meanings:

- 2 -

(a)          
“Accounting Procedure” means the procedure attached to this Agreement as
Appendix II.

(b)          
“Affiliate” shall have the meaning attributed to it in the Business
Corporations Act (British Columbia), as amended.

(c)          
“Assets” means all tangible and intangible goods, chattels, improvements
or other items including, without limiting generality, land, buildings, and
equipment but excluding the Property, acquired for or made to the Property under
this Agreement in connection with the Mining Operations.

(d)          
“Commercial Production” means the milling and sale of ores, concentrates,
metals or other mineral products, which result form ore extracted from the
Property, or any portion thereof, but shall not include the milling from the
purpose of testing or milling by a pilot plant, or milling during an initial
tune-up period of a plant. The Property, or any portion thereof, shall be
deemed, for all purposes of the Agreement to have been placed in Commercial
Production when the production of ores, concentrates, metals or other mineral
products therefrom for sale on a commercial basis has begun and the precise date
shall be fixed as the first date of the month immediately following the
beginning of such production.

(e)          
“Completion Date” means the date determined by the Management Committee
on which it is demonstrated to the satisfaction of the Management Committee that
the preparing and equipping of the Mine is complete and is the date on which
commercial production commences.

(f)          
“Construction” means every kind of work carried out during the
Construction Period by the Operator in accordance with the Feasibility Report
and Production Notice related thereto, as approved by the Management
Committee.

(i)          
“Construction Costs” means those Costs recorded by the Operator during
the Construction Period, including, without limiting generality, the Operator’s
fee contemplated in Part 13;

(g)          
“Construction Period” means, unless the Production Notice is subsequently
withdrawn, the period beginning on the date a Production Notice is given and
ending on the Completion Date.

(h)          
“Costs” means, except as to Prior Exploration Costs, all items of outlay
and expense whatsoever, direct or indirect, with respect to Mining Operations,
recorded by the Operator in accordance with this Agreement and shall include all
obligations and liabilities incurred or to be incurred with respect to the
protection of the environment such as future decommissioning, reclamation and
long-term care and monitoring, even if not then due and payable so long as the
amounts can be estimated with reasonable accuracy, and whether or not a mine
reclamation trust fund has been established. Without limiting generality, the
following categories of Costs shall have the following meanings:

- 3 -

(i)           
“Exploration Costs” means those Costs recorded by the Operator during the
Exploration Period, including, without limiting the generality of the foregoing,
the monies payable to Minquest under the Option Agreement and the Operator’s fee
contemplated in Part 13;

(ii)           
“Mine Costs” means Construction Costs and Operating Costs;

(iii)           
“Operating Costs” means those Costs recorded by the Operator subsequent
to the Completion Date, including, without limiting generality, the Operator’s
fee contemplated in Part 13; and

(iv)           
“Prior Exploration Costs” means the deemed Expenditures of the parties
under §9.9.

(i)           
“Environmental Claims” means any and all administrative, regulatory, or
judicial actions, suits, demands, claims, liens, notices of non-compliance or
violation, investigations, or proceedings relating in any way to any
Environmental Law or any permit issued under any Environmental Law, including,
without limitation:

(i)           
any and all claims by government or regulatory authorities for enforcement,
clean-up, removal, response, remedial, or other actions or damages under any
applicable Environmental Law; and

(ii)           
any and all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation, or injunctive or other relief
resulting from hazardous materials, including any release of those claims, or
arising from alleged injury or threat of injury to human health or safety
(arising from environmental matters) or the environment.

(j)           
“Environmental Laws” means all requirements of the common law, civil
code, or of environmental, health, or safety statutes of any agency, board, or
governmental authority including, but not limited to, those relating to (i)
noise, (ii) pollution or protection of the air, surface water, ground water, or
land, (iii) solid, gaseous, or liquid waste generation, handling, treatment,
storage, disposal, or transportation, (iv) exposure to hazardous or toxic
substances, or (v) the closure, decommissioning, dismantling, or abandonment of
any facilities, mines, or workings and the reclamation or restoration of
lands.

(k)           
“Exploration Period” means the period beginning the Operative Date and
ending the date a Production Notice is given and Construction Costs are fully
committed.

(l)           
“Feasibility Report” means a detailed report, in form and substance
sufficient for presentation to arm’s length institutional lenders considering
project financing, showing the feasibility of placing any part of the Property
into commercial production as a Mine and shall include a reasonable assessment
of the various categories of ore reserves and their amenability to metallurgical
treatment, a complete description of the work, equipment and supplies required
to bring such part of the Property into commercial production and the estimated
cost thereof, a description of the mining methods to be 

- 4 -

employed and a financial appraisal of
the proposed operations and including at least the following:

(i)           
a description of that part of the Property to be covered by the proposed
Mine;

(ii)           
the estimated recoverable reserves of Minerals and the estimated composition and
content thereof;

(iii)           
the proposed procedure for development, mining and production;

(iv)           
results of ore amenability treatment tests (if any);

(v)           
the nature and extent of the facilities proposed to be acquired, which may
include mill facilities if the size, extent and location of the ore body makes
such mill facilities feasible, in which event the study shall also include a
preliminary design for such mill;

(vi)           
the total costs, including capital budget, which are reasonably required to
purchase, construct and install all structures, machinery and equipment required
for the proposed Mine, including a schedule of timing of such requirements;

(vii)           
all environmental impact studies and costs of implementation;

(viii)           
the period in which it is proposed the Property shall be brought to commercial
production; and

(ix)           
such other data and information as are reasonably necessary to substantiate the
existence of an ore deposit of sufficient size and grade to justify development
of a mine, taking into account all relevant business, tax and other economic
considerations including a cost comparison between purchasing or leasing and
renting of facilities and equipment required for the operation of the Property
as a Mine.

(m)           
“Interest” means an undivided beneficial percentage interest in the
Option Agreement, the Property, the Assets and any Mine, in each case subject to
the Royalty, calculated, during the Exploration Period, according to Part 9 and
subsequent to the Exploration Period according to Part 12.

(n)           
“Joint Operation” shall have the meaning attributed to it in §4.1.

(o)           
“Management Committee” means the committee established pursuant to Part
6.

(p)           
“Mine” means the workings established and Assets acquired, including,
without limiting generality, development headings, plant and concentrator
installations, infrastructure, housing, airport and other facilities in order to
bring the Property into commercial production in accordance with the Production
Notice.

- 5 -

(q)           
“Minerals” means any and all ores (and concentrates derived therefrom)
and minerals, precious and base, metallic and nonmetallic, in, on or under the
Property which may lawfully be explored for, mined and sold.

(r)           
“Mining Operations” means every kind of work done by the Operator:

(i)           
on or in respect of the Property in accordance with a Program or Production
Notice or Operating Plan; or

(ii)           
if not provided for in a Program or Production Notice or Operating Plan,
unilaterally and in good faith to maintain the Property in good standing, to
prevent waste or to otherwise discharge any obligation which is imposed upon it
pursuant to this Agreement and in respect of which the Management Committee has
not given it directions;

including, without limiting generality,
investigating, prospecting, exploring, developing, property maintenance,
preparing reports, estimates and studies, designing, equipping, improving,
surveying, construction and mining, milling, concentrating, rehabilitation,
reclamation, and environmental protection.

(s)           
“Net Proceeds of Production” has the meaning attributed to it in Appendix
III.

(t)           
“Operating Costs” means all costs, expenses, obligations liabilities and
charges incurred or chargeable indirectly by Osprey and TAC after the date in
which the Property are placed in Commercial Production in accordance with
generally accepted accounting principles for mining.

(u)           
“Operating Plan” means the annual plan of Mining Operations submitted
pursuant to §16.2.

(v)           
“Operating Revenue” means the gross revenue received from the sale of
ores, concentrates, metals or other mineral products from Commercial Production
of the Property.

(w)           
“Operative Date” means the date upon which this Agreement becomes
effective.

(x)           
“Operator” means the party appointed as the Operator in accordance with
Part 7.

(y)           
“Option” means the Option granted by Minquest to TAC pursuant to the
Option Agreement.

(z)           
“Participant” means a party that is contributing to Exploration Costs or
Mine Costs, as the case may be.

(aa)         
“party” or “parties” means the parties to this Agreement and their
respective successors and permitted assigns which become parties pursuant to
this Agreement.

- 6 -

(bb)           
“Postproduction Costs” means all costs expended or incurred by Osprey and
TAC under the terms of the Agreement, including the injection of new working
capital, in order to maintain Commercial Production on a commercial basis.

(cc)           
“Preproduction Costs” means all exploration and development expenditures
and all other costs, expenses including cash payments, obligations, and
liabilities, including those of a capital nature, directly or indirectly
incurred prior to the date in which the Property are placed in Commercial
Production, plus an amount equal to 10% of the foregoing, calculated annually,
as compensation for general overhead expenses which Osprey and TAC will incur
but which cannot be specifically allocated, all in accordance with the generally
accepted accounting principles form mining operations consistently applied.

(dd)           
“Prime Rate” means the rate of interest stated by the Royal Bank, Main
Branch, Vancouver, British Columbia, as being charged by it on Canadian Dollar
demand loans to its most creditworthy domestic commercial customers.

(ee)           
“Production Notice” means a notice which is given to each of the parties
pursuant to §11.2.

(ff)           
“Program” means the work plan and budget of Mining Operations conducted
during the Exploration Period and adopted pursuant to §9.2.

(gg)           
“Property” “Property” means the mineral interests described in Appendix I
as they may be augmented pursuant to Part 17 of the Option Agreement or reduced
under Part 12 of the Option Agreement, and all mining leases and other mining
interests derived therefrom, and a reference herein to a mineral claim comprised
in the Property includes any mineral leases or other interests into which such
mineral claim may have been converted and Property includes all Property
Rights;

(hh)           
“Property Rights” means all licenses, permits, easements, rights-of-way,
surface or water rights and other rights, approvals obtained by either of the
parties either before or after the date of this Agreement and necessary or
desirable for the development of the Property, or for the purpose of placing the
Property into production or continuing production therefrom; 

(ii)           
“Proportionate Share” means that share which is equal to a party’s
percentage Interest.

(jj)           
“Royalty” means that 3% royalty or net smelter returns as more
particularly defined in the Option Agreement.

(kk)           
“Simple Majority” means a decision made by the Management Committee by
more than 50% of the votes represented and entitled to be cast at a meeting
thereof.

(ll)           
“Special Majority” means a decision made by the Management Committee by
more than 66.67% of the votes represented and entitled to be cast at a meeting
thereof.

- 7 -

(mm)           
“Total Outlay” means the total of all Preproduction Costs and
Postproduction Costs excepting thereout amounts payable as compensation for
general overhead expenses, plus interest on such costs at the Prime Rate.

(nn)           
“$” means Canadian Dollars.

1.2           
The words “part”, “paragraph”, “subparagraph”,
“herein” and “hereunder” refer to this Agreement. The words “this
Agreement” include every Schedule or Appendix attached hereto.

1.3           
The captions and the emphases of the defined terms have been inserted for
convenience and do not define the scope of any provision.

PART 2 
REPRESENTATIONS AND WARRANTIES

2.1           
TAC represents, warrants and covenants to and with Osprey as follows:

(a)           
TAC is a company duly organized validly existing and in good standing under the
laws of the Province of British Columbia;

(b)           
TAC has full power and authority to carry on its business and to enter into this
Agreement and any agreement or instrument referred to or contemplated by this
Agreement;

(c)           
neither the execution and delivery of this Agreement, nor any of the agreements
referred to herein or contemplated hereby, nor the consummation of the
transactions hereby contemplated conflict with, result in the breach of or
accelerate the performance required by, any agreement to which he is a
party;

(d)           
to the knowledge of TAC, all taxes, assessment, rentals, levies, or other
payments relating to the Property required to be made to any federal, state, or
municipal government instrumentality have been made;

(e)           
during the period of the Option Agreement the Property has been operated
substantially in accordance with all applicable and Environmental Laws and, to
the knowledge of TAC there are no environmental conditions existing in the
Property to which any material remedial action is required or any material
liability has or may be imposed under applicable Environmental Laws;

(f)           
TAC has not received from any government instrumentality any notice of or
communication relating to any actual or alleged Environmental Claims, and there
are no outstanding work orders or actions required to be taken relating to
environmental matters respecting the Property or any operations carried out on
the Property;

(g)           
the Option Agreement is in good standing and TAC has the exclusive right to
enter into this Agreement and all necessary authority to transfer an undivided
35%

- 8 -

interest in the Property, subject to
the Royalty, in accordance with the terms of this Agreement and subject to the
exercise of the Option Agreement;

(h)           
with the exception of the Royalty and the rights of Minquest under the Option
Agreement, no person, firm or corporation has any proprietary or possessory
interest in the Property other than TAC, and no person, firm or corporation is
entitled to any royalty or other payment in the nature of rent or royalty on any
Minerals removed from the Property;

(i)           
to the knowledge of TAC, there are no actions, suits, investigations or
proceedings before any court, arbitrator, administrative agency or other
tribunal or governmental authority, whether current, pending or threatened,
which directly or indirectly relate to or affect the Property or the interests
of TAC therein nor is TAC aware of any acts that would lead it to suspect that
the same might be initiated or threatened;

(j)           
other than the Option Agreement there are no outstanding agreements or options
to purchase or otherwise acquire the Property or any portion thereof or any
interest therein; and

(k)           
upon request by Osprey, and at the sole cost of Osprey, TAC shall deliver or
cause to be delivered to Osprey copies of all available maps and other documents
and make available to Osprey all information and data in its possession or
control respecting the Property. 

2.2           
Osprey represents, warrants and covenants to and with TAC that:

(a)           
Osprey is a company duly organized validly existing and in good standing under
the laws of the state of Wyoming;

(b)           
Osprey has full power and authority to carry on its business and to enter into
this Agreement and any agreement or instrument referred to or contemplated by
this Agreement;

(c)           
neither the execution and delivery of this Agreement, nor any of the agreements
referred to herein or contemplated hereby, nor the consummation of the
transactions hereby contemplated conflict with, result in the breach of or
accelerate the performance required by, any agreement to which it is a
party;

(d)           
the execution and delivery of this Agreement and the agreements contemplated
hereby will not violate or result in the breach of the laws of any jurisdiction
applicable or pertaining thereto or of its constating documents; and

(e)           
this Agreement constitutes a legal, valid and binding obligation of Osprey.

2.3           
The representations and warranties hereinbefore set out are conditions on which
the parties have relied in entering into this Agreement and shall survive the
acquisition of any interest in the Property by Osprey and each of the parties
will indemnify and save the other harmless from all loss, damage, costs, actions
and suits arising out of or in connection with any 

- 9 -

breach of any representation, warranty, covenant, agreement or
condition made by them and contained in this Agreement.

PART 3
SALE OF 35% INTEREST

3.1           
TAC hereby agrees to sell assign and transfer to Osprey and Osprey hereby agrees
to acquire from TAC the right to acquire a 35% interest in and to the Property
in accordance with the terms of the Option Agreement, subject only to the
Royalty, in consideration of the payment to TAC by Osprey of the sum of
US$300,000 payable as to US$200,000 payable by August 31st 2010, and
a further US$100,000 within 90 days of the date hereof.

3.2           
TAC hereby grants to Osprey the right and option to acquire a further 10%
Interest, said option being exercisable by Osprey paying TAC the sum of
US$5,000,000 on or before the date the Property is deemed to have been placed
into Commercial Production, following which date the option shall expire.

3.3           
TAC agrees that it holds the Option Agreement and the interest in the Property
arising therefrom in trust for Osprey as to its Interest under this Agreement,
as adjusted from time to time in accordance with the terms hereof.

3.4           
Should Osprey fail to make either of the payments contemplated by §3.1 hereof
this Agreement shall terminate and be of no further force and effect and Osprey
shall have no interest in the Property or the Option Agreement.

3.5           
In connection with the transfer contemplated by this section it is acknowledged
that partial consideration for the exercise of the Option is the issuance to
Minquest from time to time of common shares of TAC. In this regard Osprey shall,
upon receipt of notice by TAC of the issuance of any such shares (the “Issued
Shares”), pay to TAC an amount as is equal to that percentage of the market
value of the Issued Shares as is represented by Osprey’s Interest at the time of
such issuance. For the purposes hereof, the market value of the Issued Shares
shall be determined by multiplying the number of Issued Shares by a dollar
amount equal to the average closing price of the shares of TAC on the CNSX (or
such other market as the shares then trade) for the ten trading days prior to
the date of such issuance. The obligations of Osprey in this regard may be
satisfied, at Osprey’s sole discretion, in respect of any such payment by the
issuance to TAC of such number of shares of Osprey as have a market value equal
to the amount of the payment then due. In this regard the market value of any
such shares of the Optionee shall be calculated using the average closing price
of the shares of the Optionee on the OTCBB (or such other market as the shares
then trade) for the ten trading days preceding the date of issue;

3.6           
The obligations of Osprey under §3.5 hereof are direct contractual obligations
of Osprey to TAC and failure by Osprey to make any such payment shall give rise
to a right of TAC to sue for the unpaid amount.

- 10 -

PART 4
FORMATION OF THE JOINT VENTURE

4.1           
The parties hereby agree to associate and participate in a joint operation
(herein called the “Joint Operation”) for the purpose of exploring the
Property and exercising the Option and, if deemed warranted, bringing the
Property or a portion thereof into commercial production by establishing and
operating a Mine.

4.2           
Except as expressly provided in this Agreement, each party shall have the right
independently to engage in and receive full benefits from business activities,
whether or not competitive with the Joint Operation, without consulting any
other party. The doctrines of “corporate opportunity” or “business opportunity”
shall not be applied to any other activity, venture or operation of any party
and no party shall have any obligation to another party with respect to any
opportunity to acquire any assets outside of the Property at any time, or within
the Property after the termination of this Agreement. Unless otherwise agreed in
writing, no party shall have any obligation to mill, beneficiate or otherwise
treat any Minerals or any other party’s share of Minerals in any facility owned
or controlled by such party.

PART 5
 INTERESTS

5.1           
Except as otherwise provided herein, the parties shall bear all Costs and all
liabilities arising under this Agreement and shall own the Property, the Assets
and any Mine all in proportion to their respective Interests.

5.2           
On the Operative Date the respective Interests of the parties shall be as
follows:

	TAC 	65% 
	Osprey 	35% 

PART 6 
MANAGEMENT COMMITTEE

6.1           
A Management Committee shall be established on or forthwith after the Operative
Date. Except as herein otherwise provided, the Management Committee shall make
all decisions in respect of Mining Operations.

6.2           
Each party owning an Interest shall forthwith appoint one representative and one
alternate representative to the Management Committee. The alternate
representative may act for a party’s representative in his absence.

6.3           
The Operator shall call a Management Committee meeting at least once every 12
months, and, in any event within 14 days of being requested to do so by any
representative.

6.4           
The Operator shall give notice, specifying the time and place of, and the agenda
for, the meeting to all representatives at least seven days before the time
appointed for the meeting.

- 11 -

Unless otherwise agreed to by the Management Committee, all
meetings of the Management Committee shall be held in Vancouver, British
Columbia. Each agenda for a meeting shall include the consideration and approval
of the minutes of the immediately preceding meeting of the Management
Committee.

6.5           
Notice of a meeting shall not be required if representatives of all of the
parties are present and unanimously agree upon the agenda.

6.6           
A quorum for any Management Committee meeting shall be present if a
representative of each of the parties holding an Interest is present. If a
quorum is present at the meeting, the Management Committee shall be competent to
exercise all of the authorities, powers and discretions herein bestowed upon it
hereunder. The Management Committee shall not transact any business at a meeting
unless a quorum is present at the commencement of the meeting. If a quorum is
not present within 30 minutes following the time appointed for the commencement
of the Management Committee meeting, the meeting shall be automatically
re-scheduled for the same time of day and at the same place five business days
later, and the Operator shall be under no obligation to give any party notice
thereof. A quorum shall be deemed to be present at such re-scheduled meeting for
all purposes under this Agreement if at least one representative is present, and
a party or parties holding not less than 25% in Interest is or are represented.
A representative may attend and vote at a meeting of the Management Committee by
telephone conference call in which each representative may hear, and be heard
by, the other representatives.

6.7           
The Management Committee shall decide every question submitted to it by a vote
with each representative being entitled to cast that number of votes which is
equal to its party’s Interest percentage. Other than as is expressly set out
herein to the contrary, the Management Committee shall make decisions by Simple
Majority. In the event of a tied vote, the chairman shall have a casting vote in
addition to the votes to which the chairman is entitled to cast as the
representative of a party.

6.8           
The representative and alternate representative of the Operator shall be the
chairman and secretary, respectively, of the Management Committee meeting.

6.9           
The secretary of the Management Committee meeting shall take minutes of that
meeting and circulate copies thereof to each representative within a reasonable
time following the termination of the meeting, and in any event no later than
the time of delivery of the notice of the next following meeting of the
Management Committee.

6.10          The
Management Committee may make decisions by obtaining the consent in writing of
the representatives of all parties. Any decision so made shall be as valid as a
decision made at a duly called and held meeting of the Management Committee.

6.11         
Management Committee decisions made in accordance with this Agreement shall be
binding upon all of the parties.

6.12          Each
party shall bear the expenses incurred by its representative and alternate
representative in attending meetings of the Management Committee.

- 12 -

6.13           
The Management Committee may, by agreement of the representatives of all the
parties, establish such other rules of procedure, not inconsistent with this
Agreement, as the Management Committee deems fit.

6.14           
Reference in this part to the “parties” shall apply during the Exploration
Period. After the date of a Production Notice this part shall be read as if the
word “Participant” appeared wherever the word “party” appears.

PART 7 
OPERATOR

7.1           
TAC shall act as Operator for so long as its Interest is 50% or more. If TAC’s
Interest is less than 50%, the Management Committee shall select a party, if it
so consents, to be the Operator.

7.2           
The party acting as Operator may resign as Operator on at least 90 days’ notice
to all the parties.

7.3           
The Management Committee may, by Special Majority (with the Operator not being
entitled to vote on such resolution), remove the party acting as Operator,
effective the date designated by the Management Committee if:

(a)           
that party makes an assignment for the benefit of its creditors, or consents to
the appointment of a receiver for all or substantially all of its property, or
files a petition in bankruptcy or is adjudicated bankrupt or insolvent; or

(b)           
a court order is entered without that party’s consent:

(i)           
appointing a receiver or trustee for all or substantially all of its property;
or

(ii)           
approving a petition in bankruptcy or for a reorganization pursuant to the
applicable bankruptcy legislation or for any other judicial modification or
alteration of the rights of creditors; or

(c)           
the Operator is in default under this Agreement and fails to cure such default,
or to commence bona fide curative measures, within 30 days of receiving notice
of the default from a non-Operator;

(d)           
the Operator fails to meet any of its obligations pursuant to §8.4; or

(e)           
the Operator undergoes a change in “Control” (as hereinafter defined).

7.4           
In §7.3, “Control” means the ability, directly or indirectly through one
or more intermediaries, to direct or cause the direction of the management and
policies of the Operator through (i) the legal or beneficial ownership of voting
securities; (ii) the right to appoint 

- 13 -

managers, directors or corporate management; (iii) contract;
(iv) operating agreement; (v) voting trust; or otherwise.

7.5           
If a party resigns or is removed as Operator, the Management Committee (the
representative of the former Operator not being entitled to vote on the
resolution) shall thereupon select another party to become the Operator
effective the date established by the Management Committee.

7.6           
The new Operator shall assume all of the rights, duties, liabilities and status
of the previous Operator as provided in this Agreement. The new Operator shall
have no obligation to hire any employees of the former Operator resulting from
this change of Operator.

7.7           
Upon ceasing to be Operator, the former Operator shall forthwith deliver to the
new Operator custody of all Assets, Property, books, records, and other property
both real and personal which it prepared or maintained in its capacity as
Operator.

7.8           
If the Operator resigns or is removed and no other party consents to act as
Operator, the Joint Operation shall be terminated and the party which was the
Operator may, if it consents to act, continue to act as Operator to effect the
termination and the other parties shall be obligated to fund their respective
Proportionate Shares of the Costs incurred.

PART 8
RIGHTS, DUTIES AND STATUS OF
OPERATOR

8.1           
The Operator in its operations hereunder shall be deemed to be an independent
contractor. The Operator shall not act or hold itself out as agent for any of
the parties nor make any commitments on behalf of any of the parties unless
specifically permitted by this Agreement or directed in writing by a party.

8.2           
Subject to any specific provision of this Agreement and subject to it having the
right to reject any direction on reasonable grounds by virtue of its status as
an independent contractor, the Operator shall perform its duties hereunder in
accordance with the directions of the Management Committee and in accordance
with this Agreement.

8.3           
The Operator shall manage and carry out Mining Operations substantially in
accordance with Programs, Feasibility Reports and Production Notices, Operating
Plans, Mine Maintenance Plans and Mine Closure Plans adopted by the Management
Committee and in connection therewith shall, in advance if reasonably possible,
notify the Management Committee of any change in Mining Operations which the
Operator considers material and if it is not reasonably possible, the Operator
shall notify the Management Committee so soon thereafter as is reasonably
possible.

8.4           
The Operator shall have the sole and exclusive right and authority to manage and
carry out all Mining Operations in accordance herewith and to incur the Costs
required for that purpose. In so doing the Operator shall: 

- 14 -

(a)           
comply with the provisions of all agreements or instruments of title under which
the Property or Assets are held;

(b)           
pay all Costs properly incurred promptly as and when due;

(c)           
keep the Property and Assets free of all liens and encumbrances (other than
those, if any, in effect on the Operative Date, those the creation of which is
permitted pursuant to this Agreement, or builder’s or mechanic’s liens) arising
out of the Mining Operations and, in the event of any lien being filed as
aforesaid, proceed with diligence to contest or discharge the same;

(d)           
with the approval of the Management Committee prosecute claims and, where a
defence is available, defend litigation arising out of the Mining Operations,
provided that any Participant may join in the prosecution or defence at its own
expense;

(e)           
perform such assessment work or make payments in lieu thereof and pay such
rentals, taxes or other payments and do all such other things as may be
necessary to maintain the Property in good standing, including, without limiting
generality, staking and restaking mining claims, and applying for licenses,
leases, grants, concessions, permits, patents and other rights to and interests
in the Minerals;

(f)           
maintain books of account in accordance with the Accounting Procedure, provided
that the judgment of the Operator as to matters related to the accounting, for
which provision is not made in the Accounting Procedure, shall govern if the
Operator’s accounting practices are in accordance with accounting principles
generally accepted in the mining industry in Canada;

(g)           
perform its duties and obligations hereunder in a sound and workmanlike manner,
in accordance with sound mining and engineering practices and other practices
customary in the mining industry, and in substantial compliance with all
applicable federal, state, Territorial and municipal laws, by laws, ordinances,
rules and regulations and this Agreement;

(h)           
prepare and deliver the reports provided for in §22.2; and

(i)           
have such additional duties and obligations as the Management Committee may from
time to time determine.

PART 9 
EXPLORATION PROGRAMS

9.1           
The Operator shall prepare draft Programs for consideration by the Management
Committee. Unless otherwise agreed to by a Special Majority, each Program shall
cover a calendar year (with the exception of the initial Program which will
cover the period from the formation of the joint venture hereunder until
December 31, 2011) and shall, at a minimum, be sufficient to satisfy the
monetary obligations under the Option Agreement for such year. The draft Program
shall contain a statement in reasonable detail of the proposed Mining
Operations, 

- 15 -

estimates of all Exploration Costs to be incurred and an
estimate of the time when they will be incurred, and shall be delivered to each
Participant by no later than 60 days prior to the period to which the draft
Program relates. Each draft Program shall be accompanied by such reports and
data as are reasonably necessary for each party to evaluate and assess the
results from the Program for the then current year and, to the extent not
previously delivered, from earlier Programs.

9.2           
The Management Committee shall review the draft Program prepared and, if it
deems fit, adopt the Program with such modifications, if any, as the Management
Committee deems necessary. The Operator shall be entitled to an allowance for a
Cost overrun of 10 % in addition to any budgeted Exploration Costs and any Costs
so incurred shall be deemed to be included in the Program, as adopted.

9.3           
The Operator shall forthwith submit the adopted Program to the parties. Each
party may, within 30 days of receipt of the Program, give notice to the Operator
committing to contribute its Proportionate Share of the Exploration Costs for
that Program. A party which fails to give that notice within the 30 day period
shall be deemed to have elected not to contribute to that Program.

9.4           
If any party elected not to contribute to a Program, the amounts to be
contributed by the parties who elected to contribute shall be increased pro
rata, subject to the right of any of them to elect, prior to the
commencement of the Program, not to contribute more than its Proportionate
Share. If one or more party so elects to contribute no more than its
Proportionate Share and the other parties do not elect to contribute pro
rata to the resulting shortfall, the Operator shall in good faith revise the
Program and Budget such that the technical objectives of the original Program
are retained to the extent that is reasonably practicable given the reduced
contributions to Costs. The Operator shall, within 15 days following the end of
the 30-day period set out in §9.3, deliver to each party a copy of the said
revised Program which, if the budget contemplates Costs of at least 80% of those
contemplated in the original adopted Program, shall then be deemed for all
purposes under this Agreement to be the adopted Program. If the budget for the
revised Program contemplates Costs of less than 80% of those contemplated in the
original adopted Program, the revised Program shall be re-submitted to the
Management Committee as a draft Program pursuant to §9.1, and the procedure set
out in §9.1 to §9.4 inclusive shall be repeated.

9.5           
The Operator shall be entitled to invoice each Participant:

(a)           
no more frequently than monthly, for its Proportionate Share of Exploration
Costs incurred and paid by the Operator in carrying out a Program; or

(b)           
not more than 60 days in advance of requirements, for an advance of that
Participant’s Proportionate Share of Exploration Costs estimated to be incurred
and paid by the Operator in carrying out a Program.

Each invoice shall be signed by a financial officer of the
Operator. Each Participant shall pay to the Operator the amount invoiced within
30 days of receipt of the invoice. If a Participant protests the correctness of
an invoice it shall nevertheless be required to make the payment.

- 16 -

9.6           
If any Participant, after having committed to contribute pursuant to §7.3, fails
to pay an invoice within the 30 day period referred to in §9.5 the Operator may
by notice demand payment. If no payment is made within the period of 30 days
next succeeding the receipt of the demand notice, that Participant shall be
deemed to have forfeited its right to contribute to any further Costs under this
Agreement and it shall be deemed to have elected not to contribute to each
Program subsequently conducted and to any Production Notice, and accordingly,
shall have its Interest reduced in the manner contemplated in §9.9 and §12.2(b)
..

9.7           
The Operator shall expend all monies advanced by a Participant rateably with the
advances of the other Participants. If the Operator suspends or prematurely
terminates a Program, any funds advanced by a Participant in excess of that
Participant’s Proportionate Share of Exploration Costs incurred prior to the
suspension or premature termination shall be refunded within 60 days of the
suspension or premature termination. Unless approved unanimously by the
Management Committee, the Operator shall be exclusively liable for the payment
of all Costs incurred in excess of 110% of any budgeted Exploration Costs.

9.8           
Unless otherwise directed by the Management Committee, the Operator may suspend
or terminate prematurely any Program when the Operator, in good faith, considers
that conditions are not suitable for the proper continuation or completion of
the Program or the results obtained to that time eliminate or substantially
impair the technical rationale on which the Program was based. If any Program is
altered, suspended or terminated prematurely so that the Exploration Costs
incurred on that Program as altered, suspended or terminated are less than 80%
of the Exploration Costs set out in the adopted Program, any party which elected
not to contribute to that Program shall be given notice of the alteration,
suspension or termination by the Operator and shall be entitled to contribute
its Proportionate Share of the Exploration Costs incurred on that Program by
payment thereof to the Operator within 30 days after receipt of the notice, but
shall not be entitled to review the results of the Program until it has made
full payment. If payment is not made by that party within the 30 days aforesaid
it shall forfeit its right to contribute to that Program without a demand for
payment being required to be made thereafter by the Management Committee. If
payment is made by that party within the 30 days as aforesaid, the Operator
shall distribute the payment to the original Participants pro rata according to
their respective contributions to the Program, and shall deliver to the new
Participant copies of all data previously delivered to the other Participants
with respect to that Program

9.9           
If a party elected not to contribute to the Exploration Costs of any Program the
Interest of that party shall be decreased and the Interest of each Participant
contributing in excess of its Proportionate Share of the Exploration Costs shall
be increased so that, subject to §9.10, at all times during the Exploration
Period the Interest of each party will be that percentage which is equivalent to
its Exploration Costs and Prior Exploration Costs expressed as a percentage of
the Exploration Costs and Prior Exploration Costs of all parties.
Notwithstanding the foregoing but subject to §0 hereof, the party whose Interest
has been reduced (other than a party who has forfeited the right to contribute
pursuant to §9.6) shall be entitled to receive details of and to contribute to
future Programs to the extent of its then Interest. On the Operative Date, the
parties’ respective Interests and Prior Exploration Costs shall be deemed to be
as follows:

	  	Prior Exploration Costs 	Interest 
	TAC 	US$560,000 	65%
    

- 17 -

	  	Prior Exploration Costs 	Interest 
	Osprey 	US$300,000 	35%
    

     provided that if Osprey exercises
the option to acquire a further 10% Interest in accordance with the provisions
of §3.2 hereof, the parties respective Interests will be adjusted by increasing
Osprey’s then Interest by 10% and correspondingly reducing TAC’s Interest by 10%
and the parties Prior Exploration Costs shall be deemed to be increased by, in
the case of Osprey, US$5,000,000 and, in the case of TAC, by an amount
calculated by multiplying US$5,000,000 by an amount equal to TAC’s Interest as
adjusted hereunder and dividing the product by an amount equal to Osprey’s
Interest, as adjusted hereunder.

9.10           
If the effect of the application of §9.9 is to reduce the Interest of any party
to less than 5%, such party shall then be deemed to have assigned and conveyed
its Interest to the Participants, if more than one then in proportion to their
respective Interests, and such party shall have no further interest in the
Property or this Agreement.

9.11           
If the Operator fails to submit a draft Program or a revised Program by the date
set out in this Agreement, the following shall apply:

(a)           
the Operator shall not be entitled to submit a draft Program or revised Program
for the subject period;

(b)           
any Participant other than the Operator whose Interest is not less than 20% may,
within 15 days following the date by which the Operator’s draft Program or
revised Program was due, submit a draft Program (the “Non-Operator’s
Program”) for the subject period for consideration by the Management
Committee;

(c)           
the Management Committee shall review the Non-Operator’s Program and, if it
deems fit (the Operator not being entitled to vote with respect thereto), adopt
the Non-Operator’s Program with such modifications, if any, as the Management
Committee deems necessary; the adopted Program shall then be submitted to the
parties pursuant to §9.3;

(d)           
If the Operator is a party and elects to contribute to the Non-Operator’s
Program, it shall remain as the Operator for the duration of the Non-Operator’s
Program.

(e)           
if the Operator is a party and elects not to contribute to the Non-Operator’s
Program, it shall cease to be the Operator for the duration of the
Non-Operator’s Program, and the Management Committee shall appoint another party
as Operator (the former Operator not being entitled to vote with respect
thereto);

(f)           
following the completion of the Non-Operator’s Program the former Operator
shall, subject to the provisions of §7.1, automatically become the Operator.

- 18 -

PART 10 
FEASIBILITY REPORT

10.1           
Except as provided in §10.2, a Feasibility Report shall only be prepared with
the approval of the Management Committee. The Operator shall provide copies of
the completed Feasibility Report to each of the parties forthwith upon receipt,
together with copies of all of the latest technical data and information
generated or received by the Operator from the immediately preceding Program and
not contained in the Feasibility Report.

10.2           
Notwithstanding the provisions of §10.1, if a party (the “Proponent”) is
of the view that a Feasibility Report should be prepared, such party shall give
notice thereof to the Operator and the Operator shall call a Management
Committee meeting to consider the matter. If the Management Committee fails to
approve the preparation of the Feasibility Report supported by the Proponent,
the Proponent may, either alone or with other parties, at its or their sole
cost, prepare a Feasibility Report. If such Feasibility Report indicates that
production from the Property would be profitable to the Proponent, the Proponent
shall deliver the Feasibility Report to the Operator who shall then call a
Management Committee meeting to consider the Proponent’s Feasibility Report. If
the Management Committee adopts the Feasibility Report, the non-contributing
parties may either pay the Proponent an amount equal to 150% of their respective
proportionate costs of the preparation of the Feasibility Report, or shall
suffer reduction of their respective Interests pursuant to §9.9. Upon the
adoption by the Management Committee of the Proponent’s Feasibility Report, it
shall become a Feasibility Report for all purposes hereunder.

10.3           
The parties shall meet at reasonable intervals and times to review the
Feasibility Report and discuss whether the establishing and bringing of a Mine
into commercial production in conformity with the Feasibility Report is feasible
or desirable.

PART 11
 PRODUCTION NOTICE

11.1           
The Operator shall call a Management Committee meeting to consider the
Feasibility Report for a date no sooner than three months and no later than six
months after the Feasibility Report was provided to each of the parties.

11.2           
The Management Committee shall consider the Feasibility Report prepared and may
by Special Majority, approve the Feasibility Report, with such modifications, if
any, as it considers necessary or desirable, together with an estimate of
Construction Costs. If a Feasibility Report is approved as aforesaid the
Management Committee shall forthwith cause a Production Notice to be given to
each of the parties by the Operator stating that the Management Committee has
approved that a Mine be established and brought into production in conformity
with the Feasibility Report and estimated Construction Costs as so approved.

- 19 -

PART 12 
ELECTION TO CONTRIBUTE

12.1           
Each party with an Interest may, within 60 days of the receipt of the Production
Notice, give the Operator notice committing to contribute its Proportionate
Share of Construction Costs. A party which fails to give that notice within the
60-day period shall be deemed to have elected not to contribute to Construction
Costs.

12.2           
If any party elects not to contribute to Construction Costs that party, subject
to its rights under §12.4, shall forfeit the right to contribute to any further
Costs under this Agreement, and those parties which elected to contribute as
aforesaid may thereupon elect to increase their contribution to Construction
Costs, if more than one party then in proportion to their respective Interests,
by the amount which any party has declined to contribute. If elections are made
so that Construction Costs are fully committed:

(a)           
the Interest of each Participant shall be increased and that of each non
Participant shall be decreased as Costs are incurred so that the Interest of
each party at all times is that percentage which is equivalent to

(i)           
the sum of its Exploration Costs, its Prior Exploration Costs and its
contribution to Construction Costs;

divided by

(ii)           
the sum of the total Exploration Costs, total Prior Exploration Costs and the
total Construction Costs of all the parties;

multiplied by

(iii)           
100;

(b)           
then, at the Completion Date, each non Participant shall be deemed to have
assigned and conveyed its Interest to the Participants, if more than one then in
proportion to their respective Interests, and shall be entitled to receive as
its sole remuneration and benefit in consideration of that assignment and
conveyance, by way of royalty, that percent of the Net Proceeds of Production,
as and when available, which is equivalent to the Interest, calculated at the
Completion Date.

(c)           
each Participant shall severally calculate and cause to be paid to each non
Participant any Net Proceeds of Production derived from the Property in the
manner provided in Appendix III; and

(d)           
notwithstanding the provisions of §12.2(b) and (c), if the effect of the
application of §12.2(a) reduces any party’s Interest to less than 1% it shall
forfeit its Interest to the Participants, if more than one then in proportion to
their respective Interests, and that party shall have no further right or
interest under this Agreement. 

- 20 -

12.3           
If, after the operation of §12.2, Construction Costs are not fully committed the
Production Notice shall be deemed to be withdrawn, and shall not be resubmitted,
either in the same or a revised form, for a period of at least six months
following such withdrawal.

12.4           
If, after the operation of §12.2, Construction Costs are fully committed, the
Participants shall diligently proceed with bringing a Mine into production in
substantial conformity with the Feasibility Report. If the Participants fail to
commence the implementation of the Feasibility Report within twelve months of
Construction Costs being fully committed, for reasons other than general
economic conditions in the mining industry, any party which forfeited the right
to contribute to Construction Costs pursuant to §12.2 shall have the right,
exercisable in the 30 days following the expiration of such twelve month period,
to reacquire from the Participants not less than all of its Interest as last
held, by paying its Proportionate Share of Construction Costs incurred to the
end of such twelve month period (together with interest at the Prime Rate plus
3%) to the Participants in proportion to their respective Interests.

12.5           
During the twelve-month period referred to in §12.4, neither the Operator nor
any Participant shall be obliged to provide any non-Participant with the results
of any work carried out on the Property, the Participants’ sole obligation
during such period being to provide any non-Participant, on the written request
of such non-Participant made only once during the said twelve months, with a
summary of the nature of the work carried out and the total Costs thereof.

PART 13 
OPERATOR’S
FEE

13.1           
The Operator may charge the following sums in return for its head office
overhead functions which are not charged directly:

(a)           
with respect to Programs:

(i)           
10% for each individual contract up to $100,000;

(ii)           
5% for each individual contract which exceeds $100,000;

PART 14 
MINE FINANCING

14.1           
The contributions of the Participants toward the Mine Costs shall be
individually and separately provided by them.

14.2           
Any party may pledge, mortgage, charge or otherwise encumber its Interest in
order to secure moneys borrowed and used by that party for the sole purpose of
enabling it to finance its participation under this Agreement or in order to
secure by way of floating charge as a part of the general corporate assets of
that party moneys borrowed for its general corporate purposes, provided that the
pledgee, mortgagee, holder of the charge or encumbrance (in this subpart called
the “Chargee”) shall hold the same subject to the provisions of this
Agreement and that if the Chargee realizes upon any of its security it will
comply with this Agreement. The Agreement 

- 21 -

between the party hereto, as borrower, and the Chargee shall
contain specific provisions to the same effect as the provisions of this
§14.2.

PART 15 
CONSTRUCTION

15.1           
Subject to §12.2 and §12.3, the Management Committee shall cause the Operator
to, and the Operator shall, proceed with Construction with all reasonable
dispatch after a Production Notice has been given. Construction shall be
substantially in accordance with the Feasibility Report subject to any
variations proposed in the Production Notice, and subject also to the right of
the Management Committee to cause such other reasonable variations in
Construction to be made as the Management Committee, by Special Majority, deems
necessary and advisable.

PART 16 
OPERATION OF THE MINE

16.1           
Commencing on the Completion Date, all Mining Operations shall be planned and
conducted and all estimates, reports and statements shall be prepared and made
on the basis of a calendar year.

16.2           
With the exception of the year in which the Completion Date occurs, an Operating
Plan for each calendar year shall be submitted by the Operator to the
Participants not later than November 1 in the year immediately preceding the
calendar year to which the Operating Plan relates. Each Operating Plan shall
contain the following:

(a)           
a description of the proposed Mining Operations;

(b)           
a detailed estimate of all Mine Costs plus a reasonable allowance for
contingencies;

(c)           
an estimate of the quantity and quality of the ore to be mined and the
concentrates or metals or other products and by-products to be produced; and

(d)           
such other facts as may be necessary to reasonably illustrate the results
intended to be achieved by the Operating Plan.

Upon request of any Participant the Operator shall meet with
that Participant to discuss the Operating Plan and shall provide such additional
or supplemental information as that Participant may reasonably require with
respect thereto.

16.3           
The Management Committee shall adopt each Operating Plan, with such changes as
it deems necessary, by November 30 in the year immediately preceding the
calendar year to which the Operating Plan relates; provided, however, that the
Management Committee, by Special Majority, may from time to time and any time
amend any Operating Plan.

- 22 -

16.4           
The Operator shall include in the estimate of Mine Costs referred to in §16.2(b)
hereof the establishment of a trust or escrow fund providing for the reasonably
estimated costs of satisfying continuing obligations that may remain after the
permanent termination of Mining Operations, in excess of amounts actually
expended. Such continuing obligations are or will be incurred as a result of the
Joint Operation and shall include such things as monitoring, stabilization,
reclamation or restoration obligations, severance and other employee benefit
costs and all other obligations incurred or imposed as a result of the Joint
Operation which continue or arise after the permanent termination of Mining
Operations and the termination of this Agreement and settlement of all accounts.
The payment of such continuing obligations shall be made on the basis of units
of production, and shall be in amounts reasonably estimated to provide over the
lifetime of proven and probable reserves funds adequate to pay for such
reclamation and long term care and monitoring. The Participants shall contribute
to the trust or escrow fund cash (or provide letters of credit or other forms of
security readily convertible to cash in form approved by the Management
Committee). The amount contributed from time to time for the satisfaction of
such continuing obligations shall be classified as Costs hereunder but shall be
segregated into a separate account.

PART 17
 PAYMENT OF MINE COSTS

17.1           
The Operator may invoice each Participant, from time to time, for that
Participant’s Proportionate Share of Construction Costs or Operating Costs
incurred to the date of the invoice, or at the beginning of each month for an
advance equal to that Participant’s Proportionate Share of the estimated cash
disbursements to be made during the month. Each Participant shall pay its
Proportionate Share of the Construction Costs or Operating Costs or the
estimated cash disbursements aforesaid to the Operator within 30 days after
receipt of the invoice. If the payment or advance requested is not so made, the
amount of the payment or advance shall bear interest calculated monthly not in
advance from the 30th day after the date of receipt of the invoice thereof by
that Participant at a rate equivalent to the weighted average Prime Rate for the
month plus 3% until paid. The Operator shall have a lien on each Participant’s
Interest in order to secure that payment or advance together with interest which
has accrued thereon.

17.2           
If any Participant fails to pay an invoice contemplated in §17.1 within the 30
day period aforesaid, the Operator may, by notice, demand payment. If no payment
is made within 30 days of the Operator’s demand notice, the Operator may,
without limiting its other rights at law, enforce the lien created by §17.1 by
taking possession of all or any part of that Participant’s Interest. The
Operator may sell and dispose of the Interest which it has so taken into its
possession by:

(a)           
first offering that Interest to the other Participants, if more than one then in
proportion to the respective Interests of the Participants who wish to accept
that offer, for that price which is the fair market value stated in the lower of
two appraisals obtained by the Operator from independent, well recognized
appraisers competent in the appraisal of mining properties; and

- 23 -

(b)           
if the Participants have not purchased all or part of that Interest as
aforesaid, then by selling the balance, if any, either in whole or in part or in
separate parcels at public auction or by private tender (the Participants being
entitled to bid) at a time and on whatever terms the Operator shall arrange,
having first given notice to the defaulting Participant of the time and place of
the sale.

As a condition of the sale as contemplated in §17.2(b), the
purchaser shall agree to be bound by this Agreement and, prior to acquiring the
Interest, shall deliver notice to that effect to the parties, in form acceptable
to the Operator. The proceeds of the sale shall be applied by the Operator in
payment of the amount due from the defaulting Participant and interest as
aforesaid, and the balance remaining, if any, shall be paid to the defaulting
Participant after deducting reasonable costs of the sale. Any sale or disposal
made as aforesaid shall be a perpetual bar both at law and in equity by the
defaulting Participant and its successors and assigns against all other
Participants.

PART 18
 DISTRIBUTION IN KIND

18.1           
It is expressly intended that, upon implementation of any Production Notice
hereunder, the association of the parties hereto shall be limited to the
efficient production of Minerals from the Property and related activities, and
that each of the parties shall be entitled to use, dispose of or otherwise deal
with its Proportionate Share of Minerals as it sees fit. Each Participant shall
take in kind, f.o.b. truck or railcar on the Property, and separately dispose of
its Proportionate Share of the Minerals produced from the Mine. From the time of
delivery, each Participant shall have ownership of and title to its
Proportionate Share of Minerals separate from, and not as tenant in common with,
the other Participants, and shall bear all risk of loss of Minerals. Extra costs
and expenses incurred by reason of the Participants taking in kind and making
separate dispositions shall be paid by each Participant directly and not through
the Operator or Management Committee.

18.2           
Each Participant shall construct, operate and maintain, all at its own cost and
expense, any and all facilities which may be necessary to receive and store and
dispose of its Proportionate Share of the Minerals at the rate the same are
produced.

18.3           
If a Participant has not made the necessary arrangements to take in kind and
store its share of production as aforesaid the Operator shall, at the sole cost
and risk of that Participant store, in any location where it will not interfere
with Mining Operations, the production owned by that Participant. The Operator
and the other parties shall be under no responsibility with respect thereto. All
of the Costs involved in arranging and providing storage shall be billed
directly to, and be the sole responsibility of the Participant whose share of
production is so stored. The Operator’s charges for such assistance and any
other related matters shall be billed directly to and be the sole responsibility
of the Participant. All such billings shall be subject to the provisions of
§17.1 and §17.2 hereof.

- 24 -

PART 19 
SURRENDER OF INTEREST

19.1           
Any party not in default hereunder may, at any time upon notice, surrender its
entire Interest to the other parties by giving those parties notice of
surrender.

The notice of surrender shall:

(a)           
indicate a date for surrender not less than three months after the date on which
the notice is given; and

(b)           
contain an undertaking that the surrendering party will:

(i)           
satisfy its Proportionate Share, based on its then Interest, of all obligations
and liabilities which arose at any time prior to the date of surrender;

(ii)           
if the Operator has not included in Mine Costs the costs of continuing
obligations as set out in §16.4 hereof, pay on the date of surrender its
reasonably estimated Proportionate Share, based on the surrendering party’s then
Interest, of the Costs of rehabilitating the Mine site and of reclamation based
on the Mining Operations completed as at the date of surrender; and

(iii)           
will hold in confidence, for a period of two years from the date of surrender,
all information and data which it acquired pursuant to this Agreement.

19.2           
Upon the surrender of its entire Interest as contemplated in §19.1 and upon
delivery of a release in writing, in form acceptable to counsel for the
Operator, releasing the other parties from all claims and demands hereunder, the
surrendering party shall be relieved of all obligations or liabilities hereunder
except for those which arose or accrued or were accruing due on or before the
date of the surrender.

19.3           
A party to whom a notice of surrender has been given as contemplated in §19.1
may elect, by notice within 90 days to the party which first gave the notice to
accept the surrender, in which case §19.1 and §19.2 shall apply, or to join in
the surrender. If all of the parties join in the surrender the Joint Operation
shall be terminated in accordance with Part 20.

PART 20
TERMINATION OF MINING OPERATIONS

20.1           
The Operator may, at any time subsequent to the Completion Date, on at least 30
days notice to all Participants, recommend that the Management Committee approve
that the Mining Operations be suspended. The Operator’s recommendation shall
include a plan and budget (in this Part 20 called the “Mine Maintenance
Plan”), in reasonable detail, of the activities to be performed to maintain
the Assets and Property during the period of suspension and the Costs to be
incurred. The Management Committee may, by Special Majority, at any time
subsequent to the Completion Date, cause the Operator to suspend Mining
Operations in accordance with the Operator’s recommendation with such changes to
the Mine Maintenance Plan as the 

- 25 -

Management Committee deems necessary. The Participants shall be
committed to contribute their Proportionate Share of the Costs incurred in
connection with the Mine Maintenance Plan. The Management Committee, by Special
Majority, may cause Mining Operations to be resumed at any time.

20.2           
The Operator may, at any time following a period of at least 90 days during
which Mining Operations have been suspended, upon at least 30 days notice to all
Participants, or in the events described in §20.1, recommend that the Management
Committee approve the permanent termination of Mining Operations. The Operator’s
recommendation shall include a plan and budget (in this Part 20 called the
“Mine Closure Plan”), in reasonable detail, of the activities to be
performed to close the Mine and reclaim and rehabilitate the Property, as
required by applicable law, regulation or contract by reason of this Agreement.
The Management Committee may, by unanimous approval of the representatives of
all Participants, approve the Operator’s recommendation with such changes to the
Mine Closure Plan as the Management Committee deems necessary.

20.3           
If the Management Committee approves the Operator’s recommendation as aforesaid,
it shall cause the Operator to:

(a)           
implement the Mine Closure Plan, whereupon the Participants shall be committed
to pay, in proportion to their respective Interests, such Costs as may be
required to implement that Mine Closure Plan;

(b)           
remove, sell and dispose of such Assets as may reasonably be removed and
disposed of profitably and such other Assets as the Operator may be required to
remove pursuant to applicable environmental and mining laws; and

(c)           
sell, abandon or otherwise dispose of the Assets and the Property.

The disposal price for the Assets and the Property shall be the
best price reasonably obtainable and the net revenues, if any, from the removal
and sale shall be credited to the Participants in proportion to their respective
Interests.

20.4           
If the Management Committee does not approve the Operator’s recommendation
contemplated in §20.2, the Operator shall maintain Mining Operations in
accordance with the Mine Maintenance Plan as pursuant to §20.1.

PART 21
 THE PROPERTY

21.1           
On exercise of the Option, title to the Property shall be held in the name of
the Operator in trust for the parties in proportion to their respective
Interests as adjusted from time to time. Each of the parties shall have the
right to receive, forthwith upon making demand therefor from the Operator, such
documents as it may reasonably require to confirm its Interest.

21.2           
This Agreement, or a memorandum of this Agreement, shall, upon the written
request of any party, be recorded in the office of any governmental agency so
requested, in order to give 

- 26 -

notice to third parties of the respective interests of the
parties in the Property and this Agreement. Each party hereby covenants and
agrees with the requesting party to execute such documents as may be necessary
to perfect such recording.

PART 22 
INFORMATION AND DATA

22.1           
At all times during the subsistence of this Agreement the duly authorized
representatives of each Participant shall, at its and their sole risk and
expense and at reasonable intervals and times, have access to the Property and
to all technical records and other factual engineering data and information
relating to the Property which is in the possession of the Operator.

22.2           
During the Exploration Period while Programs are being carried out, the Operator
shall furnish the Participants with monthly progress reports and with a final
report within 60 days following the conclusion of each Program. The final report
shall show the Mining Operations performed and the results obtained and shall be
accompanied by a statement of Costs and copies of pertinent plans, assay maps,
diamond drill records and other factual engineering data. During the
Construction Period and during the implementation of an Operating Plan the
Operator shall provide monthly progress reports to the Participants, which
report shall include information on any changes or developments affecting the
Mine that the Operator considers are material.

22.3           
All information and data concerning or derived from the Mining Operations shall
be kept confidential and, except to the extent required by law or by regulation
of any Securities Commission or Stock Exchange, shall not be disclosed to any
person other than an Affiliate without the prior consent of all the
Participants, which consent shall not unreasonably be withheld.

22.4           
The text of any news releases or other public statements which a party intends
to make with respect to the Property or this Agreement shall, to the extent
practicable, be made available to the other parties prior to publication and the
other parties shall have the right to make suggestions for changes therein.

PART 23
 LIABILITY OF THE OPERATOR

23.1           
Subject to §22.2, each party shall indemnify and save the Operator harmless from
and against any loss, liability, claim, demand, damage, expense, injury or death
(including, without limiting the generality of the foregoing, legal fees)
resulting from any acts or omissions of the Operator or its officers, employees
or agents.

23.2           
Notwithstanding §22.1, the Operator shall not be indemnified nor held harmless
by any of the parties for any loss, liability, claim, damage, expense, injury or
death, (including, without limiting the generality of the foregoing, legal fees)
resulting from the negligence or willful misconduct of the Operator or its
officers, employees or agents.

- 27 -

23.3           
An act or omission of the Operator or its officers, employees or agents done or
omitted to be done:

(a)           
at the direction of, or with the concurrence of, the Management Committee; or

(b)           
unilaterally and in good faith by the Operator to protect life or property shall
be deemed not to be negligence or willful misconduct.

23.4           
The obligation of each party to indemnify and save the Operator harmless
pursuant to §22.1 shall be in proportion to its Interest as at the date that the
loss, liability, claim, demand, damage, expense, injury or death occurred or
arose.

23.5           
The Operator shall not be liable to any other party nor shall any party be
liable to the Operator in contract, tort or otherwise for special or
consequential damages, including, without limiting the generality of the
foregoing, loss of profits or revenues.

PART 24 
INSURANCE

24.1           
Commencing on the Operative Date, the Management Committee shall cause the
Operator to place and maintain with a reputable insurer or insurers such
insurance, if any, as the Management Committee in its discretion deems advisable
in order to protect the parties together with such other insurance as any
Participant may by notice reasonably request. The Operator shall, upon the
written request of any Participant, provide it with evidence of that
insurance.

24.2           
§23.1 shall not preclude any party from placing, for its own account insurance
for greater or other coverage than that placed by the Operator.

PART 25 
RELATIONSHIP OF PARTIES

25.1           
The rights, duties, obligations and liabilities of the parties shall be several
and not joint nor joint and several, it being the express purpose and intention
of the parties that their respective Interests shall be held as tenants in
common.

25.2           
Nothing herein contained shall be construed as creating a partnership of any
kind or as imposing upon any party any partnership duty, obligation or liability
to any other party hereto.

25.3           
No party shall, except when required by this Agreement or by any law, by law,
ordinance, rule, order or regulation, use, suffer or permit to be used, directly
or indirectly, the name of any other party for any purpose related to the
Property or this Agreement.

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PART 26
 PARTITION

26.1           
Each of the parties hereto waives, during the term of this Agreement, any right
to partition of the Property or the Assets or any part thereof and no party
shall seek to be entitled to partition of the Property or the Assets whether by
way of physical partition, judicial sale or otherwise during the term of this
Agreement.

PART 27 
TAXATION

27.1           
All Costs incurred hereunder shall be for the account of the party or parties
making or incurring the same, if more than one then in proportion to their
respective Interests, and each party on whose behalf any Costs have been
incurred shall be entitled to claim all tax benefits, write offs, and deductions
with respect thereto.

PART 28 
FORCE MAJEURE

28.1           
Notwithstanding anything herein contained to the contrary, if any Participant is
prevented from or delayed in performing any obligation under this Agreement, and
such failure is occasioned by any cause beyond its reasonable control, excluding
only lack of finances, then, subject to §28.2 the time for the observance of the
condition or performance of the obligation in question shall be extended for a
period equivalent to the total period the cause of the prevention or delay
persists or remains in effect regardless of the length of such total period.

28.2           
Any party hereto claiming suspension of its obligations as aforesaid shall
promptly notify the other parties to that effect and shall take all reasonable
steps to remove or remedy the cause and effect of the force majeure
described in the said notice insofar as it is reasonably able so to do and as
soon as possible; provided that the terms of settlement of any labour
disturbance or dispute, strike or lockout shall be wholly in the discretion of
the party claiming suspension of its obligations by reason thereof, and that
party shall not be required to accede to the demands of its opponents in any
such labour disturbance or dispute, strike, or lockout solely to remedy or
remove the force majeure thereby constituted. The party claiming
suspension of its obligations shall promptly notify the other parties when the
cause of the Force Majeure has been removed.

28.3           
The extension of time for the observance of conditions or performance of
obligations as a result of force majeure shall not relieve the Operator
from its obligations to keep the Property in good standing pursuant to
sub-§8.4(a) and §8.4(e) .

PART 29 
NOTICE

29.1           
All invoices, notices, consents and demands under this Agreement shall be in
writing and may be delivered personally, transmitted by fax (with transmission
confirmed in writing), or may 

- 29 -

be forwarded by first class prepaid registered mail to the
address for each party specified in this Agreement or to such addresses as each
party may from time to time specify by notice. Any notice delivered or sent by
fax shall be deemed to have been given and received on the business day next
following the date of delivery or transmission. Any notice mailed as aforesaid
shall be deemed to have been given and received on the fifth business day
following the date it is posted, provided that if between the time of mailing
and the actual receipt of the notice there shall be a mail strike, slowdown or
other labour dispute which affects delivery of the notice by mails, then the
notice shall be effective only if actually delivered.

PART 30 
WAIVER

30.1           
No waiver of any breach of this Agreement shall be binding unless evidenced in
writing executed by the party against whom charged. Any waiver shall extend only
to the particular breach so waived and shall not limit any rights with respect
to any future breach.

PART 31 
AMENDMENTS

31.1           
This Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof. An amendment or variation of this
Agreement shall only be binding upon a party if evidenced in writing executed by
that party.

PART 32 
TERM

32.1           
Unless earlier terminated in accordance with the terms hereof, by agreement of
all parties having an Interest or as a result of one party acquiring both a 100%
Interest and a 100% interest in the Net Proceeds of Production, the Joint
Operation and this Agreement shall remain in full force and effect for so long
as any party has any right, title or interest in the Property. Termination of
this Agreement shall not, however, relieve any party from any obligations
theretofore accrued but unsatisfied, nor from its obligations with respect to
rehabilitation of the Mine site and reclamation.

PART 33 
TIME OF ESSENCE

33.1           
Time is of the essence of this Agreement.

PART 34
ASSIGNMENT RIGHT OF FIRST REFUSAL

34.1           
If a party (hereinafter in this paragraph referred to as the
“Owner”):

- 30 -

(a)           
receives a bona fide offer from an independent third party (the “Proposed
Purchaser”) dealing at arm’s length with the Owner to purchase all or any
part all of the Owner’s Interest or its interest in this Agreement, which offer
the Owner desires to accept; 

(b)           
or if the Owner intends to sell all or any part of its Interest or its interest
in this Agreement;

the Owner shall first offer (the “Offer”) such interest
in writing to the other party upon terms no less favourable than those offered
by the Proposed Purchaser or intended to be offered by the Owner, as the case
may be. The Offer shall specify the price and terms and conditions of such sale,
the name of the Proposed Purchaser (which term shall, in the case of an intended
offer by the Owner, mean the person or persons to whom the Owner intends to
offer its interest) and, if the offer received by the Owner from the Proposed
Purchaser provides for any consideration payable to the Owner otherwise than in
cash, the Offer shall include the Owner’s good faith estimate of the cash
equivalent of the non cash consideration. If within a period of 60 days of the
receipt of the Offer, the other party notifies the Owner in writing that it will
accept the same, the Owner shall be bound to sell such interest to the other
party (subject as hereinafter provided with respect to price) on the terms and
conditions of the Offer. If the Offer so accepted by the other party contains
the Owner’s good faith estimate of the cash equivalent consideration as
aforesaid, and if the other party disagrees with the Owner’s best estimate, the
other party shall so notify the Owner at the time of acceptance and the other
party shall, in such notice, specify what it considers, in good faith, the fair
cash equivalent to be and the resulting total purchase price. If the other party
so notifies the Owner, the acceptance by the other party shall be effective and
binding upon the Owner and the other party and the cash equivalent of any such
non cash consideration shall be determined by binding arbitration under the
Commercial Arbitration Act (British Columbia) and shall be payable by the other
party, subject to prepayment as hereinafter provided, within 60 days following
its determination by arbitration. The other party shall in such case pay to the
Owner, against receipt of an absolute transfer of clear and unencumbered title
to the interest of the Owner being sold, the total purchase price which it
specified in its notice to the Owner and such amount shall be credited to the
amount determined following arbitration of the cash equivalent of any non cash
consideration. If the other party fails to notify the Owner before the
expiration of the time limited therefor that it will purchase the interest
offered, the Owner may sell and transfer such interest to the Proposed Purchaser
at the price and on the terms and conditions specified in the Offer for a period
of 60 days, provided that the terms of this paragraph shall again apply to such
interest if the sale to the Proposed Purchaser is not completed within the said
60 days. Any sale hereunder shall be conditional upon the Proposed Purchaser
delivering a written undertaking to the other party, in form and content
satisfactory to its counsel, to be bound by the terms and conditions of this
Agreement.

PART 35 
SUCCESSORS AND ASSIGNS

35.1           
This Agreement shall enure to the benefit of and be binding upon the parties
hereto and their respective successors and permitted assigns. 

- 31 -

PART 36
 GOVERNING LAW

36.1           
This Agreement shall be governed by and interpreted in accordance with the laws
of the Province of British Columbia.

IN WITNESS WHEREOF the parties hereto have executed this
agreement as of the day and year first above written.

OSPREY VENTURES, INC.

	Per: 		 
	 	Authorized Signatory 	 

TAC GOLD CORPORATION

	Per: 		 
	 	Authorized Signatory 	 

This is page ____ to an agreement made the ________day of
___________ , 2010, between TAC Gold Corporation of the first part and Osprey
Ventures, Inc. of the second part.

APPENDIX I

TO THAT CERTAIN AGREEMENT BETWEEN TAC GOLD CORPORATION AND
OSPREY VENTURES, INC. MADE AS OF THE ____ DAY OF ___________ , 2010.

THE PROPERTY

- 2 -

- 3 -

APPENDIX II

TO THAT CERTAIN AGREEMENT BETWEEN TAC GOLD CORPORATION AND
OSPREY VENTURES, INC. MADE AS OF THE ____ DAY OF ___________, 2010.

ACCOUNTING PROCEDURE

1.              
INTERPRETATION

1.1            
Terms defined in the Agreement shall, subject to any contrary intention, have
the same meanings herein. In this Appendix the following words, phrases and
expressions shall have the following meanings:

(a)            
“Agreement” means the Agreement to which this Accounting Procedure is
attached as Appendix II.

(b)            
“Count” means a physical inventory count.

(c)            
“Employee” means those employees of the Operator who are assigned to and
directly engaged in the conduct of Mining Operations, whether on a full time or
part time basis.

(d)            
“Employee Benefits” means the Operator’s cost of holiday, vacation,
sickness, disability benefits, field bonuses, amounts paid to and the Operator’s
costs of established plans for employee’s group life insurance, hospitalisation,
pension, retirement and other customary plans maintained for the benefit of
Employees and Personnel, as the case may be, which costs may be charged as a
percentage assessment on the salaries and wages of Employees or Personnel, as
the case may be, on a basis consistent with the Operator’s cost experience.

(e)            
“Field Offices” means the necessary sub office or sub offices in each
place where a Program or Construction is being conducted or a Mine is being
operated.

(f)            
“Government Contributions” means the cost or contributions made by the
Operator pursuant to assessments imposed by governmental authority which are
applicable to the salaries or wages of Employees or Personnel, as the case may
be.

(g)            
“Joint Account” means the books of account maintained by the Operator to
record all assets, liabilities, costs, expenses, credits and other transactions
arising out of or in connection with the Mining Operations.

(h)            
“Material” means the personal property, equipment and supplies acquired
or held, at the direction or with the approval of the Management Committee, for
use in the Mining Operations and, without limiting the generality, more
particularly “Controllable Material” means such Material which is ordinarily
classified as Controllable Material, as that classification is determined or
approved by the Management Committee, and controlled in mining operations.

- 2 -

(i)            
“Personnel” means those management, supervisory, administrative, clerical
or other personnel of the Operator normally associated with the Supervision
Offices whose salaries and wages are charged directly to the Supervision Office
in question.

(j)            
“Reasonable Expenses” means the reasonable expenses of Employees or
Personnel, as the case may be, for which those Employees or Personnel may be
reimbursed under the Operator’s usual expense account practice, as accepted by
the Management Committee; including without limiting generality, any relocation
expenses necessarily incurred in order to properly staff the Mining Operations
if the relocation is approved by the Management Committee.

(k)            
“Supervision Offices” means the Operator’s offices or department within
the Operator’s offices from which the Mining Operations are generally
supervised.

2.              
STATEMENTS AND BILLINGS

2.1            
The Operator shall, by invoice, charge each Participant with its Proportionate
Share of Exploration Costs and Mine Costs in the manner provided in Part 9 and
Part 17 of the Agreement respectively.

2.2            
The Operator shall deliver, with each invoice rendered for Costs incurred a
statement indicating:

(a)            
all charges or credits to the Joint Account relating to Controllable Material;
and

(b)            
all other charges and credits to the Joint Account summarised by appropriate
classification indicative of the nature of the charges and credits.

2.3            
The Operator shall deliver with each invoice for an advance of Costs a statement
indicating:

(a)            
the estimated Exploration Costs or, in the case of Mine Costs the estimated cash
disbursements, to be made during the next succeeding month;

(b)            
the addition thereto or subtraction therefrom, as the case may be, made in
respect of Exploration Costs or Mine Costs actually having been incurred in an
amount greater or lesser than the advance which was made by each Participant for
the penultimate month preceding the month of the invoice; and

(c)            
the advances made by each Participant to date and the Exploration Costs or Mine
Costs incurred to the end of the penultimate month preceding the month of the
invoice.

3.              
DIRECT CHARGES

3.1            
The Operator shall charge the Joint Account with the following items:

(a)            
Contractor’s Charges:

- 3 -

All costs directly relating to the
Mining Operations incurred under contracts entered into by the Operator with
third parties.

(b)            
Labour Charges:

(i)            
The salaries and wages of Employees in an amount calculated by taking the full
salary or wage of each Employee multiplied by that fraction which has as its
numerator the total time for the month that the Employees were directly engaged
in the conduct of Mining Operations and as its denominator the total normal
working time for the month of the Employee;

(ii)            
the Reasonable Expenses of the Employees; and

(iii)            
Employee Benefits and Government Contributions in respect of the Employees in an
amount proportionate to the charge made to the Joint Account in respect to their
salaries and wages.

(c)            
Office Maintenance:

(i)            
The cost or a pro rata portion of the costs, as the case may be, of maintaining
and operating the Field Offices and the Supervision Offices. The basis for
charging the Joint Account for such maintenance costs shall be as follows:

(A)            
the expense of maintaining and operating Field Offices, less any revenue
therefrom; and

(B)            
that portion of maintaining and operating the Supervision Offices which is equal
to

(I)            
the anticipated total operating expenses of the Supervision Offices

divided by

(II)            
the anticipated total staff man days for the Employees whether in connection
with the Mining Operations or not;

multiplied by

(III)            
the actual total time spent on the Mining Operations by the Employee expressed
in man days.

(ii)            
Without limiting generality, the anticipated total operating expenses of the
Supervision Offices shall include:

(A)            
the salaries and wages of the Operator’s Personnel which have been directly
charged to the Supervision Offices;

- 4 -

(B)            
the Reasonable Expense of the Personnel; and

(C)            
Employee Benefits.

(iii)            
The Operator shall make an adjustment in respect of the Office Maintenance cost
forthwith after the end of each Operating Year upon having determined the actual
operating expenses and actual total staff man days referred to in §3.1(c)(i)(B)
of this Appendix II.

(d)            
Material:

Material purchased or furnished by the
Operator for use on the Property as provided under §4 of this Appendix II.

(e)            
Transportation Charges:

The cost of transporting Employees and
Material necessary for the Mining Operations.

(f)            
Service Charges:

(i)            
The cost of services and utilities procured from outside sources other than
services covered by §3.1(h) . The cost of consultant services shall not be
charged to the Joint Account unless the retaining of the consultant is approved
in advance by the Management Committee; and

(ii)            
Use and service of equipment and facilities furnished by the Operator as
provided in §4.4 of this Appendix II.

(g)            
Damages and Losses to Joint Property:

All costs necessary for the repair or
replacement of Assets made necessary because of damages or losses by fire,
flood, storms, theft, accident or other cause. If the damage or loss is
estimated by the Operator to exceed $10,000, the Operator shall furnish each
Participant with written particulars of the damages or losses incurred as soon
as practicable after the damage or loss has been discovered. The proceeds, if
any, received on claims against any policies of insurance in respect of those
damages or losses shall be credited to the Joint Account.

(h)            
Legal Expense:

All costs of handling, investigating
and settling litigation or recovering the Assets, including, without limiting
generality, attorney’s fees, court costs, costs of investigation or procuring
evidence and amounts paid in settlement or satisfaction of any litigation or
claims; provided, however, that, unless otherwise approved in advance by the
Management Committee, no charge shall be made for the services of the Operator’s
legal staff or the fees and expenses of outside solicitors.

- 5 -

(i)            
Taxes:

All taxes, duties or assessments of
every kind and nature (except income taxes) assessed or levied upon or in
connection with the Property, the Mining Operations thereon, or the production
therefrom, which have been paid by the Operator for the benefit of the
parties.

(j)            
Insurance:

Net premiums paid for

(i)            
such policies of insurance on or in connection with Mining Operations as may be
required to be carried by law; and

(ii)            
such other policies of insurance as the Operator may carry for the protection of
the parties in accordance with the Agreement; and

the applicable deductibles in event of
an insured loss.

(k)            
Rentals:

Fees, rentals and other similar
charges required to be paid for acquiring, recording and maintaining permits,
mineral claims and mining leases and rentals and royalties which are paid as a
consequence of the Mining Operations.

(l)            
Permits:

Permit costs, fees and other similar
charges which are assessed by various governmental agencies.

(m)            
Other Expenditures:

Such other costs and expenses which
are not covered or dealt with in the foregoing provisions of this §3.1 of this
Appendix II as are incurred with the approval of the Management Committee for
Mining Operations or as may be contemplated in the Agreement.

4.              
PURCHASE OF MATERIAL

4.1            
Subject to §4.4 of this Appendix II the Operator shall purchase all Materials
and procure all services required in the Mining Operations.

4.2            
Materials purchased and services procured by the Operator directly for the
Mining Operations shall be charged to the Joint Account at the price paid by the
Operator less all discounts actually received.

4.3            
Any Participant may sell Material or services required in the Mining Operations
to the Operator for such price and upon such terms and conditions as the
Management Committee may approve.

- 6 -

4.4            
Notwithstanding the foregoing provisions of this §4, the Operator, after having
obtained the prior approval of the Management Committee, shall be entitled to
supply for use in connection with the Mining Operations equipment and facilities
which are owned by the Operator and to charge the Joint Account with such
reasonable costs as are commensurate with the ownership and use thereof.

5.             
 DISPOSAL OF MATERIAL

5.1            
The Operator, with the approval of the Management Committee may, from time to
time, sell any Material which has become surplus to the foreseeable needs of the
Mining Operations for the best price and upon the most favourable terms and
conditions available.

5.2            
Any Participant may purchase from the Operator any Material which may from time
to time become surplus to the foreseeable need of the Mining Operations for such
price and upon such terms and conditions as the Management Committee may
approve.

5.3            
Upon termination of the Agreement, the Management Committee may approve the
division of any Material held by the Operator at that date, which Material may
be taken by the Participants in kind or be taken by a Participant in lieu of a
portion of its Proportionate Share of the net revenues received from the
disposal of the Assets and Property. If the division to a Participant be in
lieu, it shall be for such price and on such terms and conditions as the
Management Committee may approve.

5.4            
The net revenues received from the sale of any Material to third parties or to a
Participant shall be credited to the Joint Account.

6.             
 INVENTORIES

6.1            
The Operator shall maintain records of Material in reasonable detail and records
of Controllable Material in detail.

6.2            
The Operator shall perform Counts from time to time at reasonable intervals, and
in any event at the end of each calendar year. The independent external auditor
of the Operator shall be given reasonable notice of each Count, and shall be
given the opportunity to attend the Count.

6.3            
Forthwith after performing a Count, the Operator shall reconcile the inventory
with the Joint Account. The Operator shall not be held accountable for any
shortages of inventory except such shortages as may have arisen due to a lack of
diligence on the part of the Operator.

7.              
ADJUSTMENTS

7.1            
Payment of any invoice by a Participant shall not prejudice the right of that
Participant to protest the correctness of the statement supporting the payment;
provided, however, that all invoices and statements presented to each
Participant by the Operator during any calendar year shall conclusively be
presumed to be true and correct upon the expiration of 12 months following the
end of the calendar year to which the invoice or statement relates, unless 

- 7 -

within that 12 month period that Participant gives notice to
the Operator making claim on the Operator for an adjustment to the invoice or
statement.

7.2            
The Operator shall not adjust any invoice or statement in favour of itself after
the expiration of 12 months following the end of the calendar year to which the
invoice or statement relates.

7.3            
Notwithstanding §9.1 and §7.2of this Appendix II, the Operator may make
adjustments to an invoice or statement which arise out of a Count of Material or
Assets within 60 days of the completion of the Count.

7.4            
A Participant shall be entitled upon notice to the Operator to request that the
independent external auditor of the Operator provide that Participant with its
opinion that any invoice or statement delivered pursuant to the Agreement in
respect of the period referred to in §9.1 of this Appendix II has been prepared
in accordance with this Agreement.

7.5            
The time for giving the audit opinion contemplated in §7.4 of this Appendix II
shall not extend the time for the taking of exception to and making claims on
the Operator for adjustment as provided in §9.1 of this Appendix II.

7.6            
The cost of the auditor’s opinion referred to in §7.4 of this Appendix II shall
be solely for the account of the Participant requesting the auditor’s opinion,
unless the audit disclosed a material error adverse to that Participant, in
which case the cost shall be solely for the account of the Operator.

7.7            
Upon not less than 10 business days’ notice to the Operator, and no more
frequently than twice during the currency of each Operating Plan, a Participant
shall be entitled to inspect the Joint Account , at the location(s) where such
records are normally kept. All costs incurred in carrying out such inspection
shall be borne by the Participant. All disagreements or discrepancies identified
by the Participant shall be referred to the independent external auditor for
final resolution.

APPENDIX III

TO THAT CERTAIN AGREEMENT BETWEEN TAC GOLD CORPORATION AND
OSPREY VENTURES, INC. MADE AS OF THE ____ DAY OF ___________, 2010.

NET PROCEEDS OF PRODUCTION

1.              
OBLIGATION

1.1            
If any non-Participant becomes entitled to a royalty pursuant to subparagraph
11.2(b) of the Agreement, each Participant shall separately calculate, as at the
end of each calendar quarter subsequent to the Completion Date, the Net Proceeds
of Production.

1.2            
Each Participant shall within 60 days of the end of each calendar quarter, as
and when any Net Proceeds of Production are available for distribution:

(a)            
severally pay or cause to be paid to each non-Participant that percentage of the
Net Proceeds of Production to which that non-Participant is entitled under
subparagraph 11.2(b) of the Agreement;

(b)            
deliver to each non-Participant a statement indicating:

(i)            
the Gross Receipts during the calendar quarter;

(ii)            
the deductions therefrom made in the order itemized in subsection 3.1 of this
Appendix III;

(iii)            
the amount of Net Proceeds of Production remaining; and

(iv)            
the amount of those Net Proceeds of Production to which that non-Participant is
entitled;

provided, however, that until such time as there are Net
Proceeds of Production available, each Participant shall deliver to each
non-Participant, within 60 days of the end of each calendar quarter commencing
with the first calendar quarter following the Completion Date, a statement
indicating the Gross Receipts during the calendar quarter less the deductions
therefrom made in the order itemized in subsection 3. 1 of this Appendix
III.

1.3            
Nothing contained in the Agreement or this Appendix III shall be construed
as:

(a)            
imposing on a Participant any obligation with respect to the payments of royalty
due hereunder to a non-Participant from any other Participant; or

(b)            
conferring on any non-Participant any right to or interest in any Property or
Assets except the right to receive royalty payments from each Participant as and
when due.

- 2 -

1.4            
The Participants agree that on the request of any non-Participant they will
execute and deliver such documents as may be necessary to permit that
non-Participant to record its royalty right against the Property.

2.              
DEFINITIONS

2.1            
Terms defined in the Agreement shall, subject to any contrary intention, bear
the same meaning herein.

2.2            
In addition to the definitions of the classes of Costs provided in paragraph
1.1(h) of the Agreement and without limiting the generality thereof:

(a)            
"Distribution Costs" means all costs of:

(i) transporting ore or concentrates
from a Mine or a concentrating plant to a smelter, refinery or other place of
delivery designated by the purchaser and, in the case of concentrates tolled, of
transporting the concentrate or metal from a smelter or refinery to the place of
delivery designated by the purchaser;

(ii)            
handling, warehousing and insuring the concentrates and metal; and

(iii)            
in the case of concentrates tolled, of smelting and refining, including any
penalties thereon or in connection therewith.

(b)            
"Interest Costs" means interest computed each calendar quarter and
calculated as follows:

(i)            
the average of the opening and closing monthly outstanding balances for each
month during the quarter of the net unrecovered amounts of all costs in the
classes enumerated in subparagraphs 1.1(h)(i), (ii), (iv) and (v) of the
Agreement, and in paragraphs 2.2 (a), (b), (c) and (d) of this Appendix III;

multiplied by:

(ii)            
the Prime Rate plus two percent;

 multiplied by:

(iii)            
the number of days in the quarter; 

divided by:

(iv)            
the number of days in the Year;

(c)            
"Marketing Costs" means such reasonable charge for marketing of diamonds,
ores and concentrates sold or of concentrates tolled as is consistent with
generally accepted industry marketing practices including, without limitation,
costs of market analysis, preparation of diamonds for sale, collection of sale
proceeds and the costs of all associated activities; and

- 3 -

(d)            
"Taxes and Royalties" means all taxes (other than income taxes),
royalties or other charges or imposts provided for pursuant to any law or legal
obligation imposed by any government in connection with a Participant's
involvement in the Joint Operation if paid by the Participant.

2.3            
Wherever used in this Appendix III, "Gross Receipts" means the aggregate of all
receipts, recoveries or amounts received by or credited to a Participant in
connection with its participation under the Agreement including, without
limiting the generality of the foregoing:

(a)            
the receipts from the sale of that Participant's proportionate share of the
concentrates derived from the Mineral produced from the Mine;

(b)            
all proceeds received from the sale of the Property or Assets subsequent to the
Operative Date;

(c)            
all insurance recoveries (including amounts received to settle claims) in
respect of loss of, or damage to any portion of the Property or Assets
subsequent to the Operative Date;

(d)            
all amounts received as compensation for the expropriation or forceable taking
of any portion of the Property or Assets subsequent to the Operative Date;

(e)            
the fair market value, at the Property, of those Assets, if any, purchased for
the Joint Account, that are transferred from the Property for use by a
Participant elsewhere subsequent to the Operative Date; and

(f)            
the amount of any negative balance remaining after the reallocation of negative
balances pursuant to subsection 3.1 of this Appendix III;

to the extent that those receipts, recoveries or amounts have
not been applied by the Participant as a recovery of any of the classes of Costs
itemized in subsection 3.1 of this Appendix III.

3.              
NET PROCEEDS OF PRODUCTION

3.1            
"Net Proceeds of Production" means the Gross Receipts minus deductions
therefrom, to the extent of but not exceeding the amount of those Gross
Receipts, of the then net unrecovered amounts of the following classes of Costs
made in the following itemized order:

(a)            
Marketing Costs; 

(b)            
Distribution Costs; 

(c)            
Operating Costs; 

(d)            
Taxes and Royalties; 

(e)            
Interest Costs; 

(f)            
Construction Costs;

- 4 -

(g)            
Exploration Costs; and

(h)            
Prior Exploration Costs;

it being understood that the deductions in respect of the Costs
referred to in paragraphs 3.1(a), (b), (d) and (e) of this Appendix III shall be
based on those Costs as recorded by that Participant and the deductions in
respect of the Costs referred to in paragraphs 3.1(c), (f), (g) and (h) of this
Appendix III shall be based on that Participant's Proportionate Share of those
Costs as recorded by the Operator.

3.2            
Any amount by which the aggregate of the Costs set out in paragraphs 3.1(a) to
(h) inclusive in any quarter exceeds Gross Receipts for such quarter shall,
together with any negative balance carried forward from the previous quarter, be
carried forward for deduction from Gross Receipts in the immediately succeeding
quarter.

4.              
ADJUSTMENTS AND VERIFICATION

4.1            
Payment of any Net Proceeds of Production by a Participant shall not prejudice
the right of that Participant to adjust its own statement supporting the
payment; provided, however, that all statements presented to the non-Participant
by that Participant for any quarter shall conclusively be presumed to be true
and correct upon the expiration of 12 months following the end of the quarter to
which the statement relates, unless within that 12 month period that Participant
gives notice to the non-Participant making claim on the non-Participant for an
adjustment to the statement which will be reflected in subsequent payment of Net
Proceeds of Production.

4.2            
The Participant shall not adjust any statement in favour of itself after the
expiration of 12 months following the end of the quarter to which the statement
relates.

4.3            
The non-Participant shall be entitled upon notice to any Participant to request
that the auditor of that Participant provide the non-Participant with its
opinion that any statement delivered pursuant to subsection 1.1 of this Appendix
III in respect of any quarterly period falling within the 12 month period
immediately preceding the date of the non-Participant's notice has been prepared
in accordance with this Agreement.

4.4            
The time for giving the audit opinion contemplated in subsection 4.3 of this
Appendix III shall not extend the time for the taking of exception to and making
claim on the non-Participant for adjustment as provided in subsection 4.1 of
this Appendix III.

4.5            
The cost of the auditor's opinion referred to in subsection 4.3 of this Appendix
III shall be solely for the account of the non-Participant requesting the
auditor's opinion, except where the said opinion is to the effect that the
statement has not been prepared substantially in accordance with this Agreement,
in which case the cost shall be solely for the account of the Participant.

APPENDIX IV

TO THAT CERTAIN AGREEMENT BETWEEN TAC GOLD CORPORATION AND
OSPREY VENTURES, INC. MADE AS OF THE ____ DAY OF ___________, 2010.

OPTION AGREEMENT

See Next Pageex4x2.htm

Exhibit 4.2

 

 

	
CERTIFICATE NUMBER:

	
NUMBER OF SHARES OF COMMON STOCK:

 

THIS WARRANT WILL BE VOID IF NOT EXERCISED PRIOR TO 5:00 P.M. MOUNTAIN TIME, MAY 3, 2020

 

WARRANTS

to Purchase

        SHARES OF COMMON STOCK

NO PAR VALUE

of

LIFELOC TECHNOLOGIES, INC.

a Colorado Corporation

 

ORIGINAL ISSUE DATE:                , 2010

 

This Warrant Certificate certifies that the undersigned, or his, her or its registered assigns, is the registered holder of warrants (the “Warrants”) to purchase shares of Common Stock, no par value (the “Common Stock”), of Lifeloc Technologies, Inc., a Colorado corporation (the “Company”). Each Warrant entitles the holder, upon exercise during the period set forth in the Warrant Agreement referred to below, to receive from the Company that number of fully paid and nonassessable shares of Common Stock (each, a “Warrant Share”) as set forth below, at the exercise price of $1.00 per share (the “Exercise Price”), payable in lawful money of the United States of America upon surrender of this Warrant Certificate and payment of the Exercise Price at the office or agency of the Warrant Agent referred to below, subject to the conditions set forth herein and in the Warrant Agreement. Defined terms used in this Warrant Certificate but not defined herein shall have the meanings given to them in the Warrant Agreement.

 

Each Warrant is initially exercisable for one fully paid and non-assessable share of Common Stock. The number of Warrant Shares issuable upon exercise of the Warrants is subject to adjustment upon the occurrence of certain events set forth in the Warrant Agreement.

 

Warrants may be exercised only during the Exercise Period subject to the conditions set forth in the Warrant Agreement, and to the extent not exercised by the end of such Exercise Period such Warrants shall become void.

 

Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place.

 

This Warrant Certificate shall not be valid unless countersigned by the Warrant Agent, as such term is used in the Warrant Agreement.

 

This Warrant Certificate shall be governed and construed in accordance with the internal laws of the State of Colorado, without regard to conflicts of laws principles thereof.

 

	LIFELOC TECHNOLOGIES, INC.	 	
Countersigned:

 

CORPORATE STOCK TRANSFER, INC.

	 
	 	 	 	 	 	 
	By:	 	 	By:	 	 
	Name:	 Barry R. Knott	 	Name:	 Carylyn K. Bell	 
	Title:	 Chief Executive Officer, President	 	Title:	 President	 

 

 

 

 

 

THE WARRANTS EVIDENCED BY THIS WARRANT CERTIFICATE ARE PART OF A DULY AUTHORIZED ISSUE OF WARRANTS ENTITLING THE HOLDER ON EXERCISE TO RECEIVE SHARES OF COMMON STOCK AND ARE ISSUED OR TO BE ISSUED PURSUANT TO A WARRANT AGREEMENT DATED AS OF               , 2010 (THE “WARRANT AGREEMENT”), DULY EXECUTED AND DELIVERED BY THE COMPANY TO CORPORATE STOCK TRANSFER, INC., A COLORADO CORPORATION, AS WARRANT AGENT (THE “WARRANT AGENT”), WHICH WARRANT AGREEMENT IS HEREBY INCORPORATED BY REFERENCE IN AND MADE A PART OF THIS INSTRUMENT AND IS HEREBY REFERRED TO FOR A DESCRIPTION OF THE RIGHTS, LIMITATION OF RIGHTS, OBLIGATIONS, DUTIES AND IMMUNITIES THEREUNDER OF THE WARRANT AGENT, THE COMPANY AND THE HOLDERS (THE WORDS “HOLDERS” OR “HOLDER” MEANING THE REGISTERED HOLDERS OR REGISTERED HOLDER) OF THE WARRANTS. A COPY OF THE WARRANT AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF UPON WRITTEN REQUEST TO THE COMPANY. DEFINED TERMS USED IN THIS WARRANT CERTIFICATE BUT NOT DEFINED HEREIN SHALL HAVE THE MEANINGS GIVEN TO THEM IN THE WARRANT AGREEMENT.

 

WARRANTS MAY BE EXERCISED AT ANY TIME DURING THE WARRANT EXERCISE PERIOD SET FORTH IN THE WARRANT AGREEMENT. THE HOLDER OF WARRANTS EVIDENCED BY THIS WARRANT CERTIFICATE MAY EXERCISE THEM BY SURRENDERING THIS WARRANT CERTIFICATE, WITH THE FORM OF ELECTION TO PURCHASE SET FORTH HEREON PROPERLY COMPLETED AND EXECUTED, TOGETHER WITH PAYMENT OF THE EXERCISE PRICE AS SPECIFIED IN THE WARRANT AGREEMENT AT THE PRINCIPAL CORPORATE TRUST OFFICE OF THE WARRANT AGENT, AND SHALL BECOME EFFECTIVE UPON ACCEPTANCE AND ACKNOWLEDGMENT OF SUCH PAYMENT AND FORM OF ELECTION BY THE COMPANY PURSUANT TO THE PROCESS SET FORTH IN THE WARRANT AGREEMENT. IN THE EVENT THAT UPON ANY EXERCISE OF WARRANTS EVIDENCED HEREBY THE NUMBER OF WARRANTS EXERCISED SHALL BE LESS THAN THE TOTAL NUMBER OF WARRANTS EVIDENCED HEREBY, THERE SHALL BE ISSUED TO THE HOLDER HEREOF OR HIS ASSIGNEE A NEW WARRANT CERTIFICATE EVIDENCING THE NUMBER OF WARRANTS NOT EXERCISED.

 

NOTWITHSTANDING ANYTHING ELSE IN THIS WARRANT CERTIFICATE OR THE WARRANT AGREEMENT, NO WARRANT MAY BE EXERCISED UNLESS AT THE TIME OF EXERCISE (I) A REGISTRATION STATEMENT COVERING THE WARRANT SHARES TO BE ISSUED UPON EXERCISE IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND A PROSPECTUS THEREUNDER RELATING TO THE WARRANT SHARES IS CURRENT, OR (II) AN APPLICABLE EXCEPTION ALLOWS THE ISSUANCE OF THE WARRANT SHARES WITHOUT REGISTRATION. IN NO EVENT SHALL THE COMPANY BE REQUIRED TO ISSUE UNREGISTERED SHARES UPON THE EXERCISE OF ANY WARRANT IF PROHIBITED BY LAW, OR TO SETTLE WARRANTS ON A NET CASH BASIS.

 

THE WARRANT AGREEMENT PROVIDES THAT UPON THE OCCURRENCE OF CERTAIN EVENTS THE NUMBER OF WARRANT SHARES SET FORTH ON THE FACE HEREOF MAY, SUBJECT TO CERTAIN CONDITIONS, BE ADJUSTED. IF, UPON EXERCISE OF A WARRANT, THE HOLDER THEREOF WOULD BE ENTITLED TO RECEIVE A FRACTIONAL INTEREST IN A SHARE OF COMMON STOCK, THE COMPANY WILL, UPON EXERCISE, ROUND UP TO THE NEAREST WHOLE NUMBER OF SHARES OF COMMON STOCK TO BE ISSUED TO THE WARRANT HOLDER.

 

WARRANT CERTIFICATES, WHEN SURRENDERED AT THE PRINCIPAL CORPORATE TRUST OFFICE OF THE WARRANT AGENT BY THE REGISTERED HOLDER THEREOF IN PERSON OR BY LEGAL REPRESENTATIVE OR ATTORNEY DULY AUTHORIZED IN WRITING, MAY BE EXCHANGED, IN THE MANNER AND SUBJECT TO THE LIMITATIONS PROVIDED IN THE WARRANT AGREEMENT, BUT WITHOUT PAYMENT OF ANY SERVICE CHARGE, FOR ANOTHER WARRANT CERTIFICATE OR WARRANT CERTIFICATES OF LIKE TENOR EVIDENCING IN THE AGGREGATE A LIKE NUMBER OF WARRANTS.

 

UPON DUE PRESENTATION FOR REGISTRATION OF TRANSFER OF THIS WARRANT CERTIFICATE AT THE OFFICE OF THE WARRANT AGENT, A NEW WARRANT CERTIFICATE OR WARRANT CERTIFICATES OF LIKE TENOR AND EVIDENCING IN THE AGGREGATE A LIKE NUMBER OF WARRANTS SHALL BE ISSUED TO THE TRANSFEREE(S) IN EXCHANGE FOR THIS WARRANT CERTIFICATE, SUBJECT TO THE LIMITATIONS PROVIDED IN THE WARRANT AGREEMENT, WITHOUT CHARGE EXCEPT FOR ANY TAX OR OTHER GOVERNMENTAL CHARGE IMPOSED IN CONNECTION THEREWITH.

 

THE COMPANY AND THE WARRANT AGENT MAY DEEM AND TREAT THE REGISTERED HOLDER(S) THEREOF AS THE ABSOLUTE OWNER(S) OF THIS WARRANT CERTIFICATE (NOTWITHSTANDING ANY NOTATION OF OWNERSHIP OR OTHER WRITING HEREON MADE BY ANYONE), FOR THE PURPOSE OF ANY EXERCISE HEREOF, OF ANY DISTRIBUTION TO THE HOLDER(S) HEREOF, AND FOR ALL OTHER PURPOSES, AND NEITHER THE COMPANY NOR THE WARRANT AGENT SHALL BE AFFECTED BY ANY NOTICE TO THE CONTRARY. NEITHER THE WARRANTS NOR THIS WARRANT CERTIFICATE ENTITLES ANY HOLDER HEREOF TO ANY RIGHTS OF A STOCKHOLDER OF THE COMPANY.

 

 

 

 

 

WARRANT AGREEMENT

by and  between

LIFELOC TECHNOLOGIES, INC.

and

CORPORATE STOCK TRANSFER, INC.,

as Warrant Agent

Dated as of      , 2010

 

THIS WARRANT AGREEMENT (this “Agreement”), dated as of            , 2010, is by and between Lifeloc Technologies, Inc., a Colorado corporation (the “Company”), and Corporate Stock Transfer, Inc., a Colorado corporation, as Warrant Agent (the “Warrant Agent”).

 

WHEREAS, the Company has filed with the Securities and Exchange Commission a Registration Statement on Form S-1, No. 333-167659 (the “Registration Statement”), for the registration, under the Securities Act of 1933, as amended (the “Securities Act”), of the Warrants and the Warrant Shares;

 

WHEREAS, following the closing of the offering, the Warrants will be tradeable separately from the Warrant Shares and other common stock of the Company, and may be listed on the OTC Bulletin Board commencing after the effective date of the Registration Statement and through May 3, 2020, when the Warrants will expire;

 

WHEREAS, the Company desires the Warrant Agent to act on behalf of the Company, and the Warrant Agent is willing to so act, in connection with the issuance, registration, transfer, exchange and exercise of the Warrants;

 

WHEREAS, the Company desires to provide for the form and provisions of the Warrants, the terms upon which they shall be issued and exercised, and the respective rights, limitation of rights, and immunities of the Company, the Warrant Agent, and the holders of the Warrants; and

 

WHEREAS, all acts and things have been done and performed which are necessary to make the Warrants, when executed on behalf of the Company and countersigned by or on behalf of the Warrant Agent, as provided herein, the valid, binding and legal obligations of the Company, and to authorize the execution and delivery of this Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual agreements set forth herein, the parties hereto, intending to be legally bound, hereby agree as follows:

 

Section 1. Appointment of Warrant Agent. The Company hereby appoints the Warrant Agent to act as agent for the Company in accordance with the instructions set forth in this Agreement, and the Warrant Agent hereby accepts such appointment.

 

Section 2. Warrant Certificates. The certificates evidencing the Warrants (the “Warrant Certificates”) to be delivered pursuant to this Agreement shall be in registered form only and shall be substantially in the form set forth in Exhibit A attached hereto.

 

 

 

 

 

Section 3. Execution of Warrant Certificates. Warrant Certificates shall be signed on behalf of the Company by its Chairman of the Board or its President or Chief Executive Officer or a Vice President and by its Secretary or an Assistant Secretary. Each such signature upon the Warrant Certificates may be in the form of a facsimile signature of the present or any future Chairman of the Board, President, Chief Executive Officer, Vice President, Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on the Warrant Certificates and for that purpose the Company may adopt and use the facsimile signature of any person who shall have been Chairman of the Board, President, Chief Executive Officer, Vice President, Secretary or Assistant Secretary, notwithstanding the fact that at the time the Warrant Certificates shall be countersigned and delivered or disposed of he or she shall have ceased to hold such office.

 

In case any officer of the Company who shall have signed any of the Warrant Certificates shall cease to be such officer before the Warrant Certificates so signed shall have been countersigned by the Warrant Agent, or disposed of by the Company, such Warrant Certificates nevertheless may be countersigned and delivered or disposed of as though such person had not ceased to be such officer of the Company; and any Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Warrant Agreement any such person was not such officer. Warrant Certificates shall be dated the date of countersignature by the Warrant Agent.

 

Section 4. Registration and Countersignature. Warrant Certificates shall be countersigned by the Warrant Agent and shall not be valid for any purpose unless so countersigned. The Warrant Agent shall, upon the written instructions of the Chairman of the Board, the President or Chief Executive Officer, a Vice President, the Treasurer or the Chief Financial Officer of the Company, countersign, issue and deliver Warrants as provided in this Agreement.

 

The Company and the Warrant Agent may deem and treat the registered holder(s) of the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any notation of ownership or other writing thereon made by anyone), for all purposes, and neither the Company nor the Warrant Agent shall be affected by any notice to the contrary.

 

Section 5. Registration of Transfers and Exchanges. The Warrant Agent shall from time to time, subject to the limitations of this Section 5, register the transfer of any outstanding Warrant Certificates upon the records to be maintained by it for that purpose, upon surrender thereof duly endorsed or accompanied by an assignment substantially in the form attached hereto as Exhibit B executed by the registered holder or by his duly authorized attorney or representative, or accompanied by proper evidence of succession, assignment or authority to transfer. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled by the Warrant Agent. Cancelled Warrant Certificates shall thereafter be disposed of by the Warrant Agent in its customary manner.

 

The Warrant Agent is hereby authorized to countersign, in accordance with the provisions of this Section 5 and of Section 4 hereof, the new Warrant Certificates required pursuant to the provisions of this Section 5.

 

Section 6. Terms of Warrants.

 

(a) Exercise Price and Exercise Period.

 

The initial exercise price per share at which Warrant Shares shall be purchasable upon the exercise of Warrants (the “Exercise Price”) shall be $1.00 per share, and each Warrant shall be initially exercisable to purchase one share of Common Stock.

 

2

 

 

 

Subject to the terms of this Agreement (including without limitation Section 6(c) below), each Warrant holder shall have the right, which may be exercised commencing at the opening of business on the first day of the applicable Warrant Exercise Period set forth below and until 5:00 p.m., Mountain time, on the last day of such Warrant Exercise Period, to receive from the Company the number of fully paid and nonassessable Warrant Shares which the holder may at the time be entitled to receive on exercise of such Warrants and payment of the Exercise Price then in effect for such Warrant Shares.

 

The “Warrant Exercise Period” shall commence (subject to Section 6(c) below) on the original issue date set forth in the Warrant Certificates and shall end at 5:00 p.m. Mountain Time on May 3, 2020. Each Warrant not exercised prior to 5:00 p.m., Mountain Time, on the last day of the Warrant Exercise Period shall become void and all rights thereunder and all rights in respect thereof under this Agreement shall cease as of such time.

 

(b) Exercise Procedure.

 

All Warrants must be exercised through a broker-dealer registered pursuant to Section 15(b) of the Securities Exchange Act of 1934. The Company shall pay a commission equal to six percent (6%) of the aggregate Exercise Price (the “Broker Fee”) to all such broker-dealers. The holder of the Warrant shall be liable for any additional commission charged by such broker-dealer.

 

A Warrant may be exercised upon surrender, through a broker-dealer, to the Company at its principal office, as designated in Section 16 hereof, of (i) a fully complete and executed Election to Exercise Warrants, (ii) the certificate or certificates evidencing the Warrants to be exercised with the form of election to purchase substantially in the form set forth in Exhibit C attached hereto, duly filled in and signed, and such other documentation as the Company or the Warrant Agent may reasonably request, and (iii) payment of the Exercise Price (adjusted to give effect to the Broker Fee) for the number of Warrant Shares in respect of which such Warrants are exercised (together, the “Exercise Materials”). Payment of the adjusted aggregate Exercise Price shall be made in cash or by certified or official bank check payable to the order of the Company. In no event will any Warrants be settled on a net cash basis.

 

Upon such surrender of Warrants, delivery of a complete Notice of Intent to Exercise Warrants, and payment of the Exercise Price, the Chief Executive Officer of the Company or such other person as the Chief Executive Officer or the Board of Directors of the Company shall designate from time to time (the “Designee”) shall acknowledge and countersign such Notice of Intent to Exercise Warrant within two business days following receipt of such Notice of Intent to Exercise Warrants, or as soon thereafter as reasonably practicable. The date on which the Chief Executive Officer or the Designee acknowledges and countersigns a Notice of Intent to Exercise Warrants shall be deemed the effective date of such exercise.

 

If the Chief Executive Officer or the Designee determines for any reason that Warrant Shares cannot legally be issued within two business days following receipt of a Notice of Intent to Exercise Warrants, the Chief Executive Officer or Designee shall return such Notice of Intent to Exercise Warrants, along with the Warrant certificates and payment submitted by such holder, and shall inform such holder that such legal impediment to issuance of Warrant Shares at that time exists. In the event that such legal impediment exists, the Company shall take all commercially reasonable steps necessary to remove such impediment such that the Warrant Shares may be issued as soon as reasonably practicable after receipt of such Notice of Intent to Exercise Warrant.

 

Once the Chief Executive Officer or Designee has acknowledged and countersigned a Notice of Intent to Exercise Warrants, he or she shall deliver the Exercise Materials to the Warrant Agent at the principal stock transfer office of the Warrant Agent, which is currently located at the address listed in Section 16 hereof. Subject to the provisions of Section 7 hereof, upon receipt of such Exercise Materials, the Warrant Agent shall issue and cause to be delivered with all reasonable dispatch to and in such name or names as the Warrant holder may designate, a certificate or certificates for the number of full Warrant Shares issuable upon the exercise of such Warrants. Such certificate or certificates shall be deemed to have been issued and any person so designated to be named therein shall be deemed to have become a holder of record of such Warrant Shares as of the date of the surrender of such Warrants to the Company and payment of the Exercise Price.

3

 

 

 

 

 

The Warrants shall be exercisable, at the election of the holders thereof, either in full or from time to time in part and, in the event that a certificate evidencing Warrants is exercised in respect of fewer than all of the Warrant Shares issuable on such exercise at any time prior to the date of expiration of the Warrants, a new certificate evidencing the remaining Warrant or Warrants will be issued, and the Warrant Agent is hereby irrevocably authorized to countersign and to deliver the required new Warrant Certificate or Certificates pursuant to the provisions of this Section 6 and of Section 4 hereof, and the Company, whenever required by the Warrant Agent, shall supply the Warrant Agent with Warrant Certificates duly executed on behalf of the Company for such purpose. The Warrant Agent may assume that any Warrant presented for exercise is permitted to be so exercised under applicable law and shall have no liability for acting in reliance on such assumption.

 

All Warrant Certificates surrendered upon exercise of Warrants shall be canceled by the Warrant Agent. Such canceled Warrant Certificates shall then be disposed of by the Warrant Agent in its customary manner. The Warrant Agent shall account promptly to the Company with respect to Warrants exercised and concurrently pay to the Company all monies received by the Warrant Agent for the purchase of the Warrant Shares through the exercise of such Warrants.

 

The Warrant Agent shall keep copies of this Agreement and any notices given or received hereunder available for inspection by the holders with reasonable prior written notice during normal business hours at its office. The Company shall supply the Warrant Agent from time to time with such numbers of copies of this Agreement as the Warrant Agent may request.

 

(c) Registration Requirement. Notwithstanding anything else in this Section 6, no Warrant may be exercised unless at the time of exercise (A) (i) a registration statement covering the Warrant Shares to be issued upon exercise is effective under the Securities Act, and a prospectus thereunder relating to the Warrant Shares is current,  or (ii) an applicable exception allows the issuance of the Warrant Shares without registration and (B)  the Company has not determined that the exercise of the Warrant or the issuance of the Warrant Shares would otherwise violate applicable law. The Company shall use its commercially reasonable efforts to have a registration statement in effect covering Warrant Shares issuable upon exercise of the Warrants from the date the Warrants become exercisable and to maintain a current prospectus relating to those Warrant Shares until the Warrants expire. In no event shall the Company be required to issue unregistered shares upon the exercise of any Warrant if the Company determines that issuance of such Warrants would violate applicable law, or to settle Warrants on a net cash basis.

 

Section 7. Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Warrant Shares upon the exercise of Warrants; provided, however, that the Company shall not be required to pay any tax or taxes which may be payable in respect of any transfer involved in the issue of any Warrant Certificates or any certificates for Warrant Shares in a name other than that of the registered holder of a Warrant Certificate surrendered upon the exercise of a Warrant, and the Company shall not be required to issue or deliver such Warrant Certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

 

Section 8. Mutilated or Missing Warrant Certificates. In case any of the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company shall issue and the Warrant Agent shall countersign, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of and substitution for the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Warrants, but only upon receipt of evidence satisfactory to the Company and the Warrant Agent of such loss, theft or destruction of such Warrant Certificate and indemnity, also satisfactory to the Company and the Warrant Agent. Applicants for such new Warrant Certificates must pay such reasonable charges as the Company may prescribe.

 

Section 9. Reservation of Warrant Shares. The Company will at all times reserve and keep available, free from preemptive rights, out of the aggregate of its authorized but unissued Common Stock or its authorized and issued Common Stock held in its treasury, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the maximum number of shares of Common Stock which may then be deliverable upon the exercise of all outstanding Warrants. The Warrant Agent shall have no duty to verify availability of such shares set aside by the Company.

 

The Company or, if appointed, the transfer agent for the Common Stock (the “Transfer Agent”) and every subsequent transfer agent for any shares of the Common Stock issuable upon the exercise of any of the Warrants will be irrevocably authorized and directed at all times to reserve such number of authorized shares as shall be required for such purpose. The Company will keep a copy of this Agreement on file with the Transfer Agent and with every subsequent Transfer Agent for any shares of the Common Stock issuable upon the exercise of the Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from time to time from such Transfer Agent the stock certificates required to honor outstanding Warrants upon exercise thereof in accordance with the terms of this Agreement. The Company will supply such Transfer Agent with duly executed certificates for such purposes. The Company will furnish such Transfer Agent a copy of all notices of adjustments and certificates related thereto, transmitted to each holder pursuant to Section 12 hereof.

 

 

4

 

 

 

Before taking any action which would cause an adjustment pursuant to Section 10 hereof to reduce the Exercise Price below the then par value (if any) of the Warrant Shares, the Company will take any commercially reasonable corporate action which may, in the opinion of its counsel (which may be counsel employed by the Company), be necessary in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares at the Exercise Price as so adjusted.

 

The Company covenants that all Warrant Shares which may be issued upon exercise of Warrants will, upon payment of the Exercise Price therefor and the issuance thereof, be fully paid, nonassessable, free of preemptive rights and free from all taxes, liens, charges and security interests with respect to the issue thereof.

 

Section 10. Adjustment of Number of Warrant Shares. The number of Warrant Shares issuable upon the exercise of each Warrant is subject to adjustment from time to time upon the occurrence of the events enumerated in this Section 10. For purposes of this Section 10, “Common Stock ” means shares now or hereafter authorized of any class of common stock of the Company and any other stock of the Company, however designated, that has the right (subject to any prior rights of any class or series of preferred stock) to participate in any distribution of the assets or earnings of the Company without limit as to per share amount.

 

(a) Stock Dividends — Split-Ups. If after the date hereof, and subject to the provisions of Section 11 hereof, the number of outstanding shares of Common Stock is increased by a stock dividend payable in shares of Common Stock, or by a split-up of shares of Common Stock, or other similar event, then, on the effective date of such stock dividend, split-up or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be increased in proportion to such increase in outstanding shares of Common Stock.

 

(b) Aggregation of Shares. If after the date hereof, and subject to the provisions of Section 11 hereof, the number of outstanding shares of Common Stock is decreased by a consolidation, combination, reverse stock split or reclassification of shares of Common Stock or other similar event, then, on the effective date of such consolidation, combination, reverse stock split, reclassification or similar event, the number of shares of Common Stock issuable on exercise of each Warrant shall be decreased in proportion to such decrease in outstanding shares of Common Stock.

 

(c) Merger, Reorganization, etc. Upon a merger, consolidation, sale of substantially all of the assets of the Company, or other similar transaction, the Warrants shall automatically expire unless exercised prior to the closing of such transaction. Upon such exercise, the holders of the Common Stock issued upon exercise of the warrants will participate on the same basis as the other holders of Common Stock in connection with the transaction. The Company shall give written notice to each Warrant holder, at the last address set forth for such holder in the warrant register, of the Company’s entry or intention to enter into such a transction, and shall provide a commercially reasonable period in which to effect such exercise. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such transaction.

 

(d) Form of Warrant. The form of Warrant need not be changed because of any adjustment pursuant to this Section 10, and Warrants issued after such adjustment may state the same Exercise Price and the same number of shares as is stated in the Warrants initially issued pursuant to this Agreement. However, the Company may at any time in its sole discretion make any change in the form of Warrant that the Company may deem appropriate and that does not affect the substance thereof, and any Warrant thereafter issued or countersigned, whether in exchange or substitution for an outstanding Warrant or otherwise, may be in the form as so changed.

 

 

5

 

 

 

(e) Other Events. If any event occurs as to which the foregoing provisions of this Section 10 are not strictly applicable or, if strictly applicable, would not, in the good faith judgment of the Board, fairly and adequately protect the purchase rights of the registered holders of the Warrants in accordance with the essential intent and principles of such provisions, then the Board shall make such adjustments in the application of such provisions, in accordance with such essential intent and principles, as shall be reasonably necessary, in the good faith opinion of the Board, to protect such purchase rights as aforesaid.

 

Section 11. Fractional Interests. If, upon exercise of the Warrants, a holder would be entitled to receive a fractional interest in a share, the Company may, but shall not be required to, issue fractions of a share.  If the Company does not issue fractions of a share, it shall (1) pay in cash the fair value of fractions of a share as of the time when those entitled to receive such fractions are determined, or (2) issue scrip or warrants in registered form (either represented by a certificate or uncertificated) or bearer form (represented by a certificate) which shall entitle the holder to receive a full share upon the surrender of such scrip or warrants aggregating a full share.

 

Section 12. Notices to Warrant Holders. Upon every adjustment of the number of shares issuable upon exercise of a Warrant, the Company shall give written notice thereof to the Warrant Agent, which notice shall state the increase or decrease, if any, in the number of shares purchasable at such price upon the exercise of a Warrant, setting forth in reasonable detail the method of calculation and the facts upon which such calculation is based. Upon the occurrence of any event specified in Section 10(a), (b), or (c) hereof, then, in any such event, the Company shall give written notice to each Warrant holder, at the last address set forth for such holder in the warrant register, of the record date or the effective date of the event. Failure to give such notice, or any defect therein, shall not affect the legality or validity of such event.

 

Section 13. Merger, Consolidation or Change of Name of Warrant Agent. Any corporation into which the Warrant Agent may be merged or with which it may be consolidated, or any corporation resulting from any merger or consolidation to which the Warrant Agent shall be a party, or any corporation succeeding to all or substantially all the corporate trust or agency business of the Warrant Agent, shall be the successor to the Warrant Agent hereunder (the “Successor Warrant Agent”) without the execution or filing of any paper or any further act on the part of any of the parties hereto, provided that such corporation would be eligible for appointment as a Successor Warrant Agent under the provisions of Section 15 hereof. In case at the time such Successor Warrant Agent shall succeed to the agency created by this Agreement, and in case at that time any of the Warrant Certificates shall have been countersigned but not delivered, any such successor to the Warrant Agent may adopt the countersignature of the original Warrant Agent; and in case at that time any of the Warrant Certificates shall not have been countersigned, any Successor Warrant Agent may countersign such Warrant Certificates either in the name of the predecessor Warrant Agent or in the name of the Successor Warrant Agent; and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement.

 

In case at any time the name of the Warrant Agent shall be changed and at such time any of the Warrant Certificates shall have been countersigned but not delivered, the Warrant Agent whose name has been changed may adopt the countersignature under its prior name, and in case at that time any of the Warrant Certificates shall not have been countersigned, the Warrant Agent may countersign such Warrant Certificates either in its prior name or in its changed name, and in all such cases such Warrant Certificates shall have the full force and effect provided in the Warrant Certificates and in this Agreement.

 

Section 14. Warrant Agent. The Warrant Agent undertakes the duties and obligations imposed by this Agreement (and no implied duties or obligations shall be read into this Agreement against the Warrant Agent) upon the following terms and conditions, by all of which the Company and the holders of Warrants, by their acceptance thereof, shall be bound:

 

 

6

 

 

 

(a) The statements contained herein and in the Warrant Certificates shall be taken as statements of the Company, and the Warrant Agent assumes no responsibility for the correctness of any of the same except to the extent that any such statements describe the Warrant Agent or action taken or to be taken by it. The Warrant Agent assumes no responsibility with respect to the distribution of the Warrant Certificates except as otherwise provided herein.

 

(b) The Warrant Agent shall not be responsible for any failure of the Company to comply with any of the covenants contained in this Agreement or in the Warrant Certificates to be complied with by the Company.

 

(c) The Warrant Agent may consult at any time with counsel of its own selection (who may be counsel for the Company), and the Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with the opinion or the advice of such counsel. The Warrant Agent may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or through agents or attorneys, and the Warrant Agent shall not be responsible for any misconduct or negligence on the part of any agent or attorney appointed with due care by it hereunder.

 

(d) The Warrant Agent may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Warrant Agent and conforming to the requirements of this Agreement. The Warrant Agent shall incur no liability or responsibility to the Company or to any holder of any Warrant Certificate for any action taken in reliance on any Warrant Certificate, certificate of shares, notice, resolution, waiver, consent, order, certificate, or other paper, document or instrument (whether in its original or facsimile form) believed by it to be genuine and to have been signed, sent or presented by the proper party or parties.

 

(e) The Company hereby agrees to (A) pay to the Warrant Agent such compensation for all services rendered by the Warrant Agent in the administration and execution of this Agreement as the Company and the Warrant Agent shall agree to in writing, (B) reimburse the Warrant Agent for all expenses, taxes and governmental charges and other charges of any kind and nature incurred by the Warrant Agent in the execution of this Agreement (including fees and expenses of its counsel) and (C) indemnify the Warrant Agent (and any predecessor Warrant Agent) and hold it harmless against any and all claims (whether asserted by the Company, a holder or any other person), damages, losses, expenses (including taxes other than taxes based on the income of the Warrant Agent) and liabilities (including judgments, costs and counsel fees and expenses), suffered or incurred by the Warrant Agent for anything done or omitted by the Warrant Agent in the execution of this Agreement except as a result of its negligence or willful misconduct. The provisions of this Section 15(e) shall survive the expiration of the Warrants and the termination of this Agreement.

 

(f) The Warrant Agent shall be under no obligation to institute any action, suit or legal proceeding or to take any other action likely to involve expense unless the Company or one or more registered holders of Warrant Certificates shall furnish the Warrant Agent with security and indemnity satisfactory to it for any costs and expenses which may be incurred, but this provision shall not affect the power of the Warrant Agent to take such action as it may consider proper, whether with or without any such security or indemnity. All rights of action under this Agreement or under any of the Warrants may be enforced by the Warrant Agent without the possession of any of the Warrant Certificates or the production thereof at any trial or other proceeding relative thereto, and any such action, suit or proceeding instituted by the Warrant Agent shall be brought in its name as Warrant Agent and any recovery of judgment shall be for the ratable benefit of the registered holders of the Warrants, as their respective rights or interests may appear.

 

 

7

 

 

 

(g) The Warrant Agent, and any stockholder, director, officer or employee of it, may buy, sell or deal in any of the Warrants or other securities of the Company or become pecuniarily interested in any transaction in which the Company may be interested, or contract with or lend money to the Company or otherwise act as fully and freely as though it were not Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant Agent from acting in any other capacity for the Company or for any other legal entity.

 

(h) The Warrant Agent shall act hereunder solely as agent for the Company, and its duties shall be determined solely by the provisions hereof. The Warrant Agent shall not be liable for anything which it may do or refrain from doing in connection with this Agreement except for its own negligence or willful misconduct. The Warrant Agent shall not be liable for any error of judgment made in good faith by it, unless it shall be proved that the Warrant Agent was negligent in ascertaining the pertinent facts. Notwithstanding anything in this Agreement to the contrary, in no event shall the Warrant Agent be liable for any special, indirect, punitive or consequential loss or damage of any kind whatsoever (including but not limited to lost profits), even if the Warrant Agent has been advised of the likelihood of the loss or damage and regardless of the form of the action.

 

(i) The Warrant Agent shall not at any time be under any duty or responsibility to any holder of any Warrant Certificate to make or cause to be made any adjustment of the number of the Warrant Shares or other securities or property deliverable as provided in this Agreement, or to determine whether any facts exist which may require any such adjustments, or with respect to the nature or extent of any such adjustments, when made, or with respect to the method employed in making the same. The Warrant Agent shall not be accountable with respect to the validity or value or the kind or amount of any Warrant Shares or of any securities or property which may at any time be issued or delivered upon the exercise of any Warrant or with respect to whether any such Warrant Shares or other securities will when issued be validly issued and fully paid and nonassessable, and makes no representation with respect thereto.

 

(j) Notwithstanding anything in this Agreement to the contrary, neither the Company nor the Warrant Agent shall have any liability to any holder of a Warrant Certificate or other Person as a result of its inability to perform any of its obligations under this Agreement by reason of any preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or by a governmental, regulatory or administrative agency or commission, or any statute, rule, regulation or executive order promulgated or enacted by any governmental authority prohibiting or otherwise restraining performance of such obligation; provided, however, that the Company must use its commercially reasonable efforts to have any such order, decree or ruling lifted or otherwise overturned as soon as possible.

 

(k) Any application by the Warrant Agent for written instructions from the Company may, at the option of the Warrant Agent, set forth in writing any action proposed to be taken or omitted by the Warrant Agent under this Agreement and the date on and/or after which such action shall be taken or such omission shall be effective. The Warrant Agent shall not be liable for any action taken by, or omission of, the Warrant Agent in accordance with a proposal included in such application on or after the date specified in such application (which date shall not be less than three Business Days after the date any officer of the Company actually receives such application, unless any such officer shall have consented in writing to any earlier date) unless prior to taking any such action (or the effective date in the case of an omission), the Warrant Agent shall have received written instructions in response to such application specifying the action to be taken or omitted.

 

(l) No provision of this Agreement shall require the Warrant Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of its rights.

 

 

8

 

 

 

(m) In addition to the foregoing, the Warrant Agent shall be protected and shall incur no liability for, or in respect of, any action taken or omitted by it in connection with its administration of this Agreement if such acts or omissions are not the result of the Warrant Agent’s reckless disregard of its duty, gross negligence or willful misconduct and are in reliance upon (A) the proper execution of the certification concerning beneficial ownership appended to the form of assignment and the form of the election attached hereto unless the Warrant Agent shall have actual knowledge that, as executed, such certification is untrue, or (B) the non-execution of such certification including, without limitation, any refusal to honor any otherwise permissible assignment or election by reason of such non-execution.

 

Section 15. Change of Warrant Agent. The Warrant Agent may at any time resign as Warrant Agent upon written notice to the Company. If the Warrant Agent shall become incapable of acting as Warrant Agent, the Company shall appoint a Successor Warrant Agent. If the Company shall fail to make such appointment within a period of 30 days after it has been notified in writing of such resignation or of such incapacity by the Warrant Agent or by the registered holder of a Warrant Certificate, then the registered holder of any Warrant Certificate or the Warrant Agent may apply, at the expense of the Company, to any court of competent jurisdiction for the appointment of a Successor Warrant Agent. Pending appointment of a Successor Warrant Agent, either by the Company or by such a court, the duties of the Warrant Agent shall be carried out by the Company. In the event that the Warrant Agent resigns or becomes incapable of acting as Warrant Agent, the Company shall not be liable for any applicable termination fee.

 

The holders of a majority of the unexercised Warrants shall be entitled at any time to remove the Warrant Agent and appoint a Successor Warrant Agent. If a Successor Warrant Agent shall not have been appointed within 30 days of such removal, the Warrant Agent may apply, at the expense of the Company, to any court of competent jurisdiction for the appointment of a Successor Warrant Agent. Such Successor Warrant Agent need not be approved by the Company or the former Warrant Agent. After appointment the Successor Warrant Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Warrant Agent without further act or deed; but the former Warrant Agent upon payment of all fees and expenses due it and its agents and counsel shall deliver and transfer to the Successor Warrant Agent any property at the time held by it hereunder and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Failure to give any notice provided for in this Section 15, however, or any defect therein, shall not affect the legality or validity of the appointment of a Successor Warrant Agent.

 

Section 16. Notices to Company and Warrant Agent. Any notice or demand authorized by this Agreement to be given or made by the Warrant Agent or by the registered holder of any Warrant Certificate to or on the Company shall be sufficiently given or made when and if deposited in the mail, first class or registered, postage prepaid, or sent via a nationally recognized overnight courier service, addressed (until another address is filed in writing by the Company with the Warrant Agent), as follows:

 

If to the Company:

Lifeloc Technologies, Inc.

12441 West 49th Ave., Unit 4

Wheat Ridge, Colorado 80033

Attention: Secretary

with a copy to:

Davis Graham & Stubbs LLP

1550 Seventeenth Street, Suite 500

Denver, Colorado 80202

Attention: Lester R. Woodward

9

 

 

 

In case the Company shall fail to maintain such office or agency or shall fail to give such notice of the location or of any change in the location thereof, presentations may be made and notices and demands may be served at the principal corporate trust office of the Warrant Agent.

 

Any notice pursuant to this Agreement to be given by the Company or by the registered holder(s) of any Warrant Certificate to the Warrant Agent shall be sufficiently given when and if deposited in the mail, first-class or registered, postage prepaid, addressed (until another address is filed in writing by the Warrant Agent with the Company) to the Warrant Agent as follows:

 

Corporate Stock Transfer, Inc.

3200 Cherry Creek Drive South, Suite 430

Denver, Colorado 80209

 

Section 17. Supplements and Amendments. The Company and the Warrant Agent may from time to time supplement or amend this Agreement without the approval of any holders of Warrant Certificates in order to cure any ambiguity or to correct or supplement any provision contained herein which may be defective or inconsistent with any other provision herein, or to make any other provisions in regard to matters or questions arising hereunder which the Company and the Warrant Agent may deem necessary or desirable and which shall not have a material adverse effect on the interests of the holders of Warrant Certificates theretofore outstanding. Upon the delivery of a certificate from an appropriate officer of the Company which states that the proposed supplement or amendment is in compliance with the terms of this Section 17, the Warrant Agent shall execute such supplement or amendment. Notwithstanding anything in this Agreement to the contrary, the prior written consent of the Warrant Agent must be obtained in connection with any supplement or amendment which alters the rights or duties of the Warrant Agent. The Company and the Warrant Agent may amend any provision herein with the consent of the holders of Warrants exercisable for a majority of the Warrant Shares issuable on exercise of all outstanding Warrants that would be affected by such amendment. 

 

Section 18. Successors. All the covenants and provisions of this Agreement by or for the benefit of the Company or the Warrant Agent shall bind and inure to the benefit of their respective successors and assigns hereunder.

 

Section 19. Termination. This Agreement will terminate on any earlier date if all Warrants have been exercised or expired without exercise. The provisions of Section 14 hereof shall survive such termination.

 

Section 20. Governing Law. This Agreement and each Warrant Certificate issued hereunder shall be deemed to be a contract made under the laws of the State of Colorado and for all purposes shall be construed in accordance with the internal laws of the State of Colorado. The parties agree that all actions and proceedings arising out of this Agreement or any of the transactions contemplated hereby shall be brought in the United States District Court for the District of Colorado or in any Colorado State Court and that, in connection with any such action or proceeding, the parties will submit to the jurisdiction of, and venue in, such court. Each of the parties hereto also irrevocably waives all right to trial by jury in any action, proceeding or counterclaim arising out of this Agreement or the transactions contemplated hereby.

 

Section 21. Benefits of this Agreement. Nothing in this Agreement shall be construed to give to any person or corporation other than the Company, the Warrant Agent and the registered holders of the Warrant Certificates any legal or equitable right, remedy or claim under this Agreement, and this Agreement shall be for the sole and exclusive benefit of the Company, the Warrant Agent and the registered holders of the Warrant Certificates.

 

Section 22. Counterparts. This Agreement may be executed in any number of counterparts and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.

 

Section 23. Force Majeure. In no event shall the Warrant Agent or the Company be responsible or liable for any failure or delay in the performance of its obligations under this Agreement arising out of or caused by, directly or indirectly, forces beyond its reasonable control, including without limitation strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software or hardware) services.

 

[Signatures on Following Page]

 

 

10

 

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the date first above written.

 

 

 

	 	
LIFELOC TECHNOLOGIES, INC.

 

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name:	 Barry R. Knott	 
	 	Title:	 Chief Executive Officer, President	 
	 	 	 	 

 

 

	
 

	CORPORATE STOCK TRANSFER, INC.	 
	 	 	 	 	 

 

	 	
 

	 
	 	 	 	 
	
 

	
By: 

	 	 
	 	Name:	 Carylyn K. Bell	 
	 	Title:	 President	 
	 	 	 	 

 

 

 

 

 

 

 

12

 

 

 

 

 

Exhibit A

Form of Warrant Certificate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

A-1

 

 

 

 

 

Exhibit B

NOTICE OF INTENT TO EXERCISE WARRANT

(To be executed only upon exercise of Warrant)

The undersigned irrevocably elects to exercise the right of purchase represented by its Warrant for __________ Warrant Shares, and elects to purchase _____________ Warrant Shares, and tenders payment of the purchase price in full in the form of a certified or official bank check, or wire transfer, in the amount of $___________.

 

Please issue a certificate or certificates for such Warrant Shares in the name of:

 

	Name	 	 
	Address:	 	 
	 	 	 
	Tel: 	 	 
	Tax ID No.: 	 	 
	
(Please Print Name, Address and Social

Security or Taxpayer Identification Number)

	 

 

If the number of shares purchased are not all the shares purchasable under the Warrant, a new Warrant is to be issued in the name of the undersigned for the balance of the shares remaining purchasable thereunder.

 

Note:  The signature below must correspond exactly with the name on the face of the Warrant, in every particular, without alteration or change.

 

	 	 	
Acknowledged by:

 

 

LIFELOC TECHNOLOGIES, INC.

 

 

	(Signature of Registered Owner)	 	By: 
	
 

 

	 	 
	(Print Name of Registered Owner)	 	Name: 
	
 

 

	 	 
	(Street Address) 	 	Title:
	
 

 

	 	 
	(City)                      (State)                      (Zip)	 	Date:
	
 

 

	 	 
	 	 	 

 

 

 

 

 

 

 B-1

 

 

 

                                                                          

Exhibit C

 

ASSIGNMENT

(To be executed only upon assignment of Warrant)

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to:

 

	Name	 	 
	Address:	 	 
	 	 	 
	Tel: 	 	 
	Tax ID No.: 	 	 
	
(Please Print Name, Address and Social

Security or Taxpayer Identification Number)

	 

 

the Warrant, to purchase ______________ Warrant Shares, hereby irrevocably constituting and appointing _________________________________________, Attorney to transfer said Warrant on the books of the Company, with full power of substitution in the premises.

 

	 	 	 	 	 
	
Dated:  

	 	 	
 

	 
	
 

	 	 	

Signature of Registered Holder

	 
	
 

	 	 	
 

 

Note:  The above signature must correspond exactly with the name on the face of this Warrant.

	 

 

	 	 	 	 	 
	
 

	 	
 

	 
	
Signature Guarantee

	 	
 

	 
	
 

	 	 	
 

	 

 

 

Signatures should be guaranteed by an eligible guarantor institution which is a member of a signature guarantee program satisfactory to the Company.

 

 

 

 

 

C-1

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