Document:

Northern Dynasty Minerals Ltd. - Exhibit 4.3 - Filed by newsfilecorp.com

FINAL TSX ACCEPTED VERSION 

 

 

NORTHERN DYNASTY MINERALS LTD. 

 

 

 

	SHARE OPTION PLAN 

 

 

 

Last Amended May 16, 2014 

 

 

FINAL TSX ACCEPTED VERSION 

TABLE OF CONTENTS 

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

Schedules: 

	Schedule
      A – Option Commitment Form 
	Schedule
      B – Incentive Stock Option Commitment Form 
	Schedule
      C – U.S. Optionee Reporting Form 

FINAL TSX ACCEPTED VERSION 

NORTHERN DYNASTY MINERALS LTD. 
(the
“Company”) 

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

ARTICLE 1 
INTERPRETATION 

Purpose and Overview 

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

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

Definitions 

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

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

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

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

- 4 - 

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

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

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

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

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

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

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

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

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

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

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

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

- 5 - 

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

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

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

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

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

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

(p)            
Employee means:

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

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

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

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

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

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

- 6 - 

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

(t)            
Insider means 

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

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

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

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

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

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

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

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

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

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

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

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

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

- 7 - 

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

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

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

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

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

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

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

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

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

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

(rr)         
US means United States of America. 

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

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

- 8 - 

Other Words and Phrases 

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

Gender 

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

ARTICLE 2 
SHARE OPTION PLAN 

Establishment of Share Option Plan 

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

Maximum Plan Shares and Maximum Shares for US Optionees

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

Eligibility 

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

Options Granted Under the Plan 

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

- 9 - 

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

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

Options Not Exercised 

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

Powers of the Board 

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

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

 (b)            
grant Options hereunder; 

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

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

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

Terms or Amendments Requiring Disinterested Shareholder
Approval 

2.9                        
The Plan is subject to restrictions that:

- 10 - 

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

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

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

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

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

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

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

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

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

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

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

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

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

- 11 - 

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

Amendment of the Plan by the Board of Directors 

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

ARTICLE 3 
TERMS AND CONDITIONS OF OPTIONS 

Exercise Price 

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

Term of Option 

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

Vesting of Options 

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

- 12 - 

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

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

Optionee Ceasing to be Director, Employee or Service
Provider 

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

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

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

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

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

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

Non Assignable 

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

- 13 - 

Adjustment of the Number of Optioned Shares 

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

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

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

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

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

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

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

- 14 - 

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

Effect of Take Over Bid 

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

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

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

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

Adjustment of Options Expiring During Blackout Period

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

- 15 - 

ARTICLE 4 
COMMITMENT AND EXERCISE PROCEDURES

Option Commitment 

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

Manner of Exercise 

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

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

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

Tax Withholding and Procedures 

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

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

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

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

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

- 16 - 

Delivery of Optioned Shares and Hold Periods 

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

US Optionees and US Taxpayers 

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

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

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

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

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

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

- 17 - 

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

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

ARTICLE 5 
GENERAL 

Employment and Services 

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

No Representation or Warranty 

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

Interpretation 

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

Continuation of the Plan 

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

- 18 - 

Termination 

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

SCHEDULE A 

TO NORTHERN DYNASTY MINERALS LTD SHARE OPTION PLAN 

OPTION COMMITMENT FORM 

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

Optioned Shares will vest and may be exercised as follows: 

{COMPLETE ONE} 

____________ In accordance with Section 3.3 of the Plan

or 

____________ As follows:

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

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

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

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

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

NORTHERN DYNASTY MINERALS LTD.

 

___________________________________________________
Authorized
Signatory 

SCHEDULE B 

TO NORTHERN DYNASTY MINERALS LTD SHARE OPTION PLAN INCENTIVE
STOCK 

OPTION COMMITMENT FORM 

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

Optioned Shares will vest and may be exercised as follows: 

{COMPLETE ONE} 

____________ In accordance with Section 3.3 of the Plan

or 

____________ As follows:

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

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

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

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

NORTHERN DYNASTY MINERALS LTD. 

 

___________________________________________________
Authorized
Signatory 

SCHEDULE C 

TO NORTHERN DYNASTY MINERALS LTD SHARE OPTION PLAN 

U.S. OPTIONEE REPORTING FORM 

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

Dear ___________________ : 

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

	1. 	
      Corporation transferring the stock to you upon exercise
      of the option: 

                
      Name: 
          
      Address: 
          
      Employer Identification Number:

	 	 
	2. 	
      Corporation whose stock was transferred upon exercise of
      the option (if different from corporation named in item 1): 

                
      Name: 

                
      Address:

    
	 	 
	3. 	
      Person to whom stock was transferred upon exercise of the
      option: 

                
      Name: 

                
      Address: 

                
      Social Security Number:

      
	 	 
	4. 	
      Date option granted:

	 	 
	5. 	
      Date of transfer of stock to you upon exercise of the
      option:

	 	 
	6. 	
      Total fair market value (at time of exercise) of stock
      transferred to you upon exercise of the option*:

	 	 
	7. 	
      Number of shares transferred to you upon exercise of the
      option:

	 	 
	8. 	
      The shares transferred were acquired pursuant to the
      exercise of an incentive stock option described in § 422(b) of the
      Code.

	 	 
	9. 	
      Aggregate option exercise
price:

- 2 - 

Please keep this statement for income tax purposes.

Dated: __________________________________

Northern Dynasty Minerals Ltd.

By:
_____________________________________

* This amount is used to determine the adjustment to income
made in calculating alternative minimum tax for optionees whose stock is not
subject to a “substantial risk of forfeiture” pursuant to § 83 of the Internal
Revenue Code. US Optionees whose stock was subject to a “substantial risk of
forfeiture” at the time of exercise should consult their own tax advisors
regarding the amount and timing of the adjustment.Northern Dynasty Minerals Ltd. - Exhibit 4.4 - Filed by newsfilecorp.com

SHAREHOLDER RIGHTS PLAN AGREEMENT 

 

 

DATED AS OF 

 

May 17, 2013 

BETWEEN 

NORTHERN DYNASTY MINERALS LTD. 

AND 

COMPUTERSHARE INVESTOR SERVICES INC. 

 

 

 

i 

TABLE OF CONTENTS 

	 	  	 	Page 
	 	  	 	  
	ARTICLE 1 INTERPRETATION 	2
    
	 	  	 	  
	 	1.1 	CERTAIN
      DEFINITIONS 	2 
	 	1.2 	CURRENCY 	15 
	 	1.3 	HEADINGS
    	15

	 	1.4 	CALCULATION OF NUMBER AND
      PERCENTAGE OF BENEFICIAL OWNERSHIP OF OUTSTANDING VOTING SHARES 	15 
	 	1.5 	ACTING
      JOINTLY OR IN CONCERT 	16

	 	1.6 	GENERALLY ACCEPTED
      ACCOUNTING PRINCIPLES 	16 
	 	  	 	  
	ARTICLE 2 THE
    RIGHTS 	16 
	 	  	 	  
	 	2.1 	LEGEND ON SHARE CERTIFICATES
      	16
	 	2.2 	INITIAL
      EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF RIGHTS 	17

	 	2.3 	ADJUSTMENTS TO EXERCISE
      PRICE; NUMBER OF RIGHTS 	20 
	 	2.4 	DATE ON
      WHICH EXERCISE IS EFFECTIVE 	24

	 	2.5 	EXECUTION, AUTHENTICATION,
      DELIVERY AND DATING OF RIGHTS CERTIFICATES 	25 
	 	2.6 	REGISTRATION, TRANSFER AND EXCHANGE 	25

	 	2.7 	MUTILATED, DESTROYED, LOST
      AND STOLEN RIGHTS CERTIFICATES 	26 
	 	2.8 	PERSONS
      DEEMED OWNERS OF RIGHTS 	27

	 	2.9 	DELIVERY AND CANCELLATION OF
      CERTIFICATES 	27 
	 	2.10 	AGREEMENT OF
      RIGHTS HOLDERS 	27

	 	2.11 	RIGHTS CERTIFICATE HOLDER
      NOT DEEMED A SHAREHOLDER 	28 
	 	  	 	  
	ARTICLE 3
    ADJUSTMENTS TO THE RIGHTS 	28 
	 	  	 	  
	 	3.1 	FLIP-IN EVENT 	28 
	 	  	 	  
	ARTICLE 4 THE RIGHTS
    AGENT 	30 
	 	  	 	  
	 	4.1 	GENERAL 	30 
	 	4.2 	MERGER,
      AMALGAMATION OR CONSOLIDATION OR CHANGE OF NAME OF RIGHTS AGENT 	31

	 	4.3 	DUTIES OF RIGHTS AGENT
    	32 
	 	4.4 	CHANGE OF
      RIGHTS AGENT 	33

	 	  	 	  
	ARTICLE 5 MISCELLANEOUS 	34
      
	 	  	 	  
	 	5.1 	REDEMPTION
      AND WAIVER 	34

	 	5.2 	EXPIRATION 	37 
	 	5.3 	ISSUANCE OF
      NEW RIGHTS CERTIFICATES 	37

	 	5.4 	SUPPLEMENTS AND AMENDMENTS
      	37 
	 	5.5 	FRACTIONAL
      RIGHTS AND FRACTIONAL SHARES 	38

	 	5.6 	RIGHTS OF ACTION 	39 
	 	5.7 	REGULATORY
      APPROVALS 	39

	 	5.8 	NOTICE OF PROPOSED ACTIONS
      	39 
	 	5.9 	NOTICES
    	39

	 	5.10 	COSTS OF ENFORCEMENT 	40 
	 	5.11 	SUCCESSORS
      	41

	 	5.12 	BENEFITS OF THIS AGREEMENT
      	41 
	 	5.13 	GOVERNING
      LAW 	41

	 	5.14 	SEVERABILITY 	41 
	 	5.15 	EFFECTIVE
      DATE 	41

	 	5.16 	DETERMINATIONS AND ACTIONS
      BY THE BOARD OF DIRECTORS 	42 
	 	5.17 	COMPLIANCE
      WITH MONEY LAUNDERING LEGISLATION 	42

	 	5.18 	PRIVACY PROVISION 	42 
	 	5.19 	DECLARATION
      AS TO NON-CANADIAN HOLDERS 	42
  

ii 

	 	5.20 	TIME OF THE
      ESSENCE 	43 
	 	5.21 	EXECUTION IN COUNTERPARTS
      	43
  

iii 

SHAREHOLDER RIGHTS PLAN AGREEMENT 

MEMORANDUM OF AGREEMENT, dated as of May 17, 2013
between Northern Dynasty Minerals Ltd. (the “Company”), a company
incorporated under the laws of British Columbia and Computershare Investor
Services Inc., a corporation existing under the laws of Canada (the “Rights
Agent”); 

WHEREAS the Board of Directors of the Company, in the
exercise of its fiduciary duties to the Company, has determined that it is
advisable for the Company to adopt a shareholder rights plan (the “Rights
Plan”) to take effect on the Effective Date (as hereinafter defined) to
prevent, to the extent possible, a creeping takeover of the Company and to
ensure that any offer to acquire shares of the Company is made to all
shareholders and cannot be completed unless shareholders holding at least 50% of
the outstanding shares (other than the offeror and related parties) are
deposited or tendered in acceptance of the offer, to ensure, to the extent
possible, the fair treatment of all shareholders in connection with any
take-over bid for the securities of the Company, and to ensure that the Board of
Directors is provided with sufficient time to evaluate unsolicited take-over
bids and to explore and develop alternatives to maximize shareholder value; 

AND WHEREAS in order to implement the adoption of a
shareholder rights plan as established by this Agreement, the board of directors
of the Company has: 

(a)           
 authorized the issuance, effective at the close of business (Vancouver
time) on the Effective Date, of one Right (as hereinafter defined) in respect of
each Share (as hereinafter defined) outstanding at the close of business
(Vancouver time) on the Effective Date (the “Record Time”); 

(b)             authorized
the issuance of one Right in respect of each Voting Share (as hereinafter
defined) of the Company issued after the Record Time and prior to the earlier of
the Separation Time (as hereinafter defined) and the Expiration Time (as
hereinafter defined); and 

(c)            
authorized the issuance of Rights Certificates (as hereinafter defined) to
holders of Rights pursuant to the terms and subject to the conditions set forth
herein; 

AND WHEREAS each Right entitles the holder thereof,
after the Separation Time, to purchase securities of the Company pursuant to the
terms and subject to the conditions set forth herein; 

AND WHEREAS the Company desires to appoint the Rights
Agent to act on behalf of the Company and the holders of Rights, and the Rights
Agent is willing to so act, in connection with the issuance, transfer, exchange
and replacement of Rights Certificates, the exercise of Rights and other matters
referred to herein; 

NOW THEREFORE, in consideration of the premises and the
respective covenants and agreements set forth herein, and subject to such
covenants and agreements, the parties hereby agree as follows: 

1 

ARTICLE 1 

INTERPRETATION 

1.1                        
Certain Definitions 

For purposes of this Agreement, the following terms have the
meanings indicated: 

(a)            
“1934 Exchange Act” means the Securities Exchange Act of 1934 of
the United States, as amended, and the rules and regulations thereunder as now
in effect or as the same may from time to time be amended, re-enacted or
replaced; 

(b)            
“Acquiring Person” shall mean any Person who is the Beneficial Owner of
20% or more of the outstanding Voting Shares; provided, however, that the term
“Acquiring Person” shall not include: 

(i)            
the Company or any Subsidiary of the Company; 

(ii)           
any Person who becomes the Beneficial Owner of 20% or more of the outstanding
Voting Shares as a result of one or any combination of: 

(A)             a
Voting Share Reduction; 

(B)            
Permitted Bid Acquisitions; 

(C)            
an Exempt Acquisition; 

(D)            
Pro Rata Acquisitions; or 

(E)             a
Convertible Security Acquisition; 

provided, however, that if a Person
becomes the Beneficial Owner of 20% or more of the outstanding Voting Shares by
reason of one or any combination of the operation of Paragraphs (A), (B), (C),
(D) or (E) above and such Person’s Beneficial Ownership of Voting Shares
thereafter increases by more than 1% of the number of Voting Shares outstanding
(other than pursuant to one or any combination of a Voting Share Reduction, a
Permitted Bid Acquisition, an Exempt Acquisition, a Pro Rata Acquisition or a
Convertible Security Acquisition), then as of the date such Person becomes the
Beneficial Owner of such additional Voting Shares, such Person shall become an
“Acquiring Person”; 

(iii)           for
a period of ten days after the Disqualification Date (as defined below), any
Person who becomes the Beneficial Owner of 20% or more of the outstanding Voting
Shares as a result of such Person becoming disqualified from relying on Clause
1.1(g)(iii)(B) because such Person is making or has announced a current
intention to make a Take-over Bid, either alone or by acting jointly or in
concert with any other Person. For the purposes of this definition,
“Disqualification Date” means the first date of
public announcement that any Person is making or intends to make a Take-over
Bid; 

2 

(iv)             an
underwriter or member of a banking or selling group that becomes the Beneficial
Owner of 20% or more of the Voting Shares in connection with a distribution of
securities of the Company pursuant to an underwriting agreement with the
Company; or 

(v)             a
Person (a “Grandfathered Person”) who is the Beneficial Owner of 20% or
more of the outstanding Voting Shares determined as at the Record Time,
provided, however, that this exception shall not be, and shall cease to be,
applicable to a Grandfathered Person in the event that such Grandfathered Person
shall, after the Record Time, become the Beneficial Owner of any additional
Voting Shares that increases its Beneficial Ownership of Voting Shares by more
than 1% of the number of Voting Shares outstanding, other than through one or
any combination of a Permitted Bid Acquisition, an Exempt Acquisition, a Voting
Share Reduction, a Pro Rata Acquisition or a Convertible Security Acquisition;
and provided, further, that a Person shall cease to be a Grandfathered Person in
the event that such Person ceases to Beneficially Own 20% or more of the then
outstanding Voting Shares at any time after the Record Time; 

(c)             “Affiliate”,
when used to indicate a relationship with a specified Person, shall mean a
Person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, such specified
Person; 

(d)            
“Agreement” or “Shareholder Rights Plan Agreement” shall mean this
shareholder rights plan agreement dated as of May 17, 2013 between the Company
and the Rights Agent, as amended or supplemented from time to time;
“hereof”, “herein”, “hereto” and similar expressions mean
and refer to this Agreement as a whole and not to any particular part of this
Agreement; 

(e)            
“annual cash dividend” shall mean cash dividends paid in any fiscal year
of the Company to the extent that such cash dividends do not exceed, in the
aggregate on a per share basis, in any fiscal year, the greatest of: 

(i)             
200% of the aggregate amount of cash dividends, on a per share basis, declared
payable by the Company on its Shares in its immediately preceding fiscal year;
and 

(ii)             300%
of the arithmetic mean of the aggregate amounts of the cash dividends, on a per
share basis, declared payable by the Company on its Shares in its three
immediately preceding fiscal years; 

(f)            
“Associate” shall mean, when used to indicate a relationship with a
specified Person, a spouse of that Person, any Person of the same or opposite
sex with whom that Person is living in a conjugal relationship outside marriage,
a child of that Person or a relative of that Person if that relative has the
same residence as that Person; 

3 

(g)             A
Person shall be deemed the “Beneficial Owner” of, and to have
“Beneficial Ownership” of, and to “Beneficially Own”,

 (i)            
any securities as to which such Person or any of such Person’s Affiliates or
Associates is the owner at law or in equity; 

(ii)            any
securities as to which such Person or any of such Person’s Affiliates or
Associates has the right to become the owner at law or in equity (where such
right is exercisable within a period of 60 days, whether or not on condition or
on the happening of any contingency) pursuant to any agreement, arrangement,
pledge or understanding, whether or not in writing, or upon the exercise of any
conversion, exchange or purchase right (other than the Rights) attaching to a
Convertible Security; other than pursuant to (x) customary agreements between
the Company and underwriters or between underwriters and/or banking group
members and/or selling group members with respect to a distribution of
securities by the Company, (y) pledges of securities in the ordinary course of
business), and (z) any agreement between the Company and any Person or Persons
relating to a plan of arrangement, amalgamation or other statutory procedure
which is subject to the approval of the holders of Voting Shares; 

(iii)           any
securities which are Beneficially Owned within the meaning of Clauses 1.1(g)(i)
or (ii) by any other Person with which such Person is acting jointly or in
concert; 

provided, however, that a Person shall
not be deemed the “Beneficial Owner” of, or to have “Beneficial
Ownership” of, or to “Beneficially Own”, any security: 

(A)             where
such security has been deposited or tendered pursuant to any Take-over Bid or
where the holder of such security has agreed pursuant to a Permitted Lock-Up
Agreement to deposit or tender such security pursuant to a Take-Over Bid, in
each case made by such Person, made by any of such Person’s Affiliates or
Associates or made by any other Person acting jointly or in concert with such
Person, until such deposited or tendered security has been taken up or paid for,
whichever shall first occur; 

(B)            
where such Person, any of such Person’s Affiliates or Associates or any other
Person referred to in Clause 1.1(g)(iii), holds such security provided that (1)
the ordinary business of any such Person (the “Investment Manager”)
includes the management of mutual funds or investment funds for others (which
others, for greater certainty, may include or be limited to one or more employee
benefit plans or pension plans and/or includes the acquisition or holding of
securities for a non-discretionary account of a Client (as defined below) by a
dealer or broker registered under applicable securities laws to the extent
required) and such security is held by the Investment Manager in the ordinary
course of such business and in the performance of such Investment Manager’s
duties for the account of any other Person or
Persons (a “Client”); or (2) such Person (the “Trust Company”) is
licensed to carry on the business of a trust company under applicable laws and,
as such, acts as trustee or administrator or in a similar capacity in relation
to the estates of deceased or incompetent Persons (each an “Estate
Account”) or in relation to other accounts (each an “Other Account”)
and holds such security in the ordinary course of such duties for such Estate
Accounts or for such Other Accounts, or (3) such Person is a pension plan or
fund registered under the laws of Canada or any Province thereof or the laws of
the United States of America (a “Plan”) or is a Person established by
statute for purposes that include, and the ordinary business or activity of such
Person (the “Statutory Body”) includes, the management of investment
funds for employee benefit plans, pension plans, insurance plans of various
public bodies; or (4) such Person (the “Administrator”) is the
administrator or trustee of one or more Plans and holds such security for the
purposes of its activities as an Administrator; provided, in any of the above
cases, that the Investment Manager, the Trust Company, the Statutory Body, the
Administrator or the Plan, as the case may be, is not then making and has not
then announced an intention to make a Take-over Bid (other than an Offer to
Acquire Voting Shares or other securities by means of a distribution by the
Company or by means of ordinary market transactions (including prearranged
trades) executed through the facilities of a stock exchange or organized
over-the-counter market), alone or by acting jointly or in concert with any
other Person;

4 

 (C)             where
such Person or any of such Person’s Affiliates or Associates is (1) a Client of
the same Investment Manager as another Person on whose account the Investment
Manager holds such security, (2) an Estate Account or an Other Account of the
same Trust Company as another Person on whose account the Trust Company holds
such security, or (3) a Plan with the same Administrator as another Plan on
whose account the Administrator holds such security; 

(D)            
where such Person is (1) a Client of an Investment Manager and such security is
owned at law or in equity by the Investment Manager, (2) an Estate Account or an
Other Account of a Trust Company and such security is owned at law or in equity
by the Trust Company or (3) a Plan and such security is owned at law or in
equity by the Administrator of the Plan; or 

(E)             where
such person is the registered holder of securities as a result of carrying on
the business of or acting as a nominee of a securities depository. 

(h)             “Board
of Directors” shall mean the board of directors of the Company or any duly
constituted and empowered committee thereof; 

5 

(i)            
“Business Day” shall mean any day other than a Saturday, Sunday or a day
on which banking institutions in Vancouver, British Columbia are authorized or
obligated by law to close; 

(j)            
“Business Corporations Act” shall mean the British Columbia Business
Corporations Act, S.B.C. 2002, c.57, as amended, and the regulations made
thereunder and any comparable or successor laws or regulations thereto; 

(k)            
“Canadian Dollar Equivalent” of any amount which is expressed in United
States dollars shall mean on any day the Canadian dollar equivalent of such
amount determined by reference to the U.S.- Canadian Exchange Rate in effect on
such date;

 (l)            
“close of business” on any given date shall mean the time on such date
(or, if such date is not a Business Day, the time on the next succeeding
Business Day) at which the transfer office of the transfer agent for the Shares
(or, after the Separation Time, the principal transfer office of the Rights
Agent) is closed to the public in the city in which such transfer agent or
rights agent has an office for the purposes of this Agreement;

 (m)             “Competing
Permitted Bid” shall mean a Take-over Bid that: 

(i)            
is made after a Permitted Bid or another Competing Permitted Bid has been made
and prior to the expiry, termination or withdrawal of such Permitted Bid or
Competing Permitted Bid; 

(ii)           
satisfies all of the provisions of a Permitted Bid other than the condition set
forth in Clause (iii) of the definition of a Permitted Bid; and 

(iii)          
contains, and the take-up and payment for securities tendered or deposited is
subject to, an irrevocable and unqualified provision that no Voting Shares will
be taken up or paid for pursuant to the Take-over Bid prior to the close of
business on the date that is no earlier than the later of (A) 35 days after the
date of the Take-over Bid constituting the Competing Permitted Bid; and (B) 60
days following the date on which the earliest Permitted Bid or Competing
Permitted Bid which preceded the Competing Permitting Bid was made; 

(n)             “controlled”:
a body corporate is “controlled” by another Person or two or more Persons acting
jointly or in concert if: 

(i)             securities
entitled to vote in the election of directors carrying more than 50% of the
votes for the election of directors are held, directly or indirectly, by or on
behalf of the other Person or two or more Persons acting jointly or in concert;
and 

(ii)            the
votes carried by such securities are entitled, if exercised, to elect a majority
of the board of directors of such body corporate; 

and “controls”,
“controlling” and “under common control with” shall be interpreted
accordingly; 

6 

(o)            
“Convertible Security” shall mean a security convertible, exercisable or
exchangeable into a Voting Share and a “Convertible Security Acquisition”
shall mean an acquisition by a Person of Voting Shares upon the exercise,
conversion or exchange of a Convertible Security received by a Person pursuant
to a Permitted Bid Acquisition, an Exempt Acquisition or a Pro Rata
Acquisition;

 (p)            
“Co-Rights Agents” shall have the meaning ascribed thereto in Subsection
4.1(a); 

(q)            
“Disposition Date” shall have the meaning ascribed thereto in Subsection
5.1(d);

 (r)             “Dividend
Reinvestment Acquisition” shall mean an acquisition of Voting Shares of any
class pursuant to a Distribution Reinvestment Plan;

 (s)             “Dividend
Reinvestment Plan” shall mean a regular dividend reinvestment or other plan
of the Company made available by the Company to holders of its securities where
such plan permits the holder to direct that some or all of: 

(i)            
dividends paid in respect of shares of any class of the Company; 

(ii)            proceeds
of redemption of shares of the Company; 

(iii)          
interest paid on evidences of indebtedness of the Company; or (iv) optional cash
payments; be applied to the purchase from the Company of Shares; 

(t)            
“early warning requirements” shall have the meaning ascribed thereto
under National Instrument 62-103 The Early Warning System promulgated under the
Securities Act; 

(u)            
“Effective Date” shall mean May 17, 2013; 

(v)            
“Election to Exercise” shall have the meaning ascribed thereto in Clause
2.2(d)(ii); 

(w)            
“Exempt Acquisition” shall mean an acquisition by a Person of Voting
Shares and/or Convertible Securities (i) in respect of which the Board of
Directors has waived the application of Section 3.1 pursuant to the provisions
of Subsection 5.1(b), (c) or (d); (ii) pursuant to a distribution of Voting
Shares and/or Convertible Securities made by the Company: (A) to the public
pursuant to a prospectus, provided that such Person does not thereby become the
Beneficial Owner of a greater percentage of Voting Shares so offered than the
percentage of Voting Shares Beneficially Owned by such Person immediately prior
to such distribution; or (B) pursuant to a private placement provided that: (x)
all necessary stock exchange approvals for such private placement have been
obtained and such private placement complies with the terms and conditions of
such approvals; and (y) such Person does not thereby become the Beneficial Owner
of Voting Shares equal in number to more than 25% of the Voting
Shares outstanding immediately prior to the private placement and, in making
this determination, the securities to be issued to such Person on the private
placement shall be deemed to be held by such Person but shall not be included in
the aggregate number of Voting Shares outstanding immediately prior to the
private placement; or (iii) pursuant to an amalgamation, merger, arrangement or
other statutory procedure requiring shareholder approval; 

7 

(x)            
“Exercise Price” shall mean, as of any date, the price at which a holder
may purchase the securities issuable upon exercise of one whole Right which,
until adjustment thereof in accordance with the terms hereof, shall be: 

(i)             until
the Separation Time, an amount equal to three times the Market Price, from time
to time, per Share; and 

(ii)           
from and after the Separation Time, an amount equal to three times the Market
Price, as at the Separation Time, per Share; 

(y)            
“Expansion Factor” shall have the meaning ascribed thereto in Clause
2.3(a)(x); 

(z)            
“Expiration Time” shall have the meaning ascribed thereto in Clause
5.15(a); 

(aa)        
 “Flip-in Event” shall mean a transaction in or pursuant to which
any Person becomes an Acquiring Person; 

(bb)        
 “holder” shall have the meaning ascribed thereto in Section 2.8;

(cc)        
 “Independent Shareholders” shall mean holders of Voting Shares,
other than: 

(i)             
any Acquiring Person;

(ii)             any
Offeror, other than a Person referred to in Clause 1.1(g)(iii)(B); 

(iii)           
any Affiliate or Associate of such Acquiring Person or Offeror; 

(iv)           
any Person acting jointly or in concert with such Acquiring Person or Offeror;
and 

(v)             any
employee benefit plan, deferred profit sharing plan, stock participation plan
and any other similar plan or trust for the benefit of employees of the Company
or a Subsidiary of the Company, unless the beneficiaries of the plan or trust
direct the manner in which the Voting Shares are to be voted or direct whether
the Voting Shares are to be tendered to a Take-over Bid;

(dd)        
 “Market Price” per share of any securities on any date of
determination shall mean the average of the daily closing prices per share of
such securities (determined as described below) on each of the 20 consecutive
Trading Days through and including the Trading Day immediately preceding such
date; provided, however, that if an event of a type analogous to any of the
events described in Section 2.3 hereof shall have caused the closing prices used to determine the
Market Price on any Trading Days not to be fully comparable with the closing
price on such date of determination or, if the date of determination is not a
Trading Day, on the immediately preceding Trading Day, each such closing price
so used shall be appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.3 hereof in order to make it fully
comparable with the closing price on such date of determination or, if the date
of determination is not a Trading Day, on the immediately preceding Trading Day.
The closing price per share of any securities on any date shall be: 

8 

(i)             the
closing board lot sale price or, in case no such sale takes place on such date,
the average of the closing bid and asked prices for each of such securities as
reported by the principal Canadian stock exchange on which such securities are
listed or admitted to trading; 

(ii)            if
for any reason none of such prices is available on such day or the securities
are not listed or admitted to trading on a Canadian stock exchange, the last
sale price or, in case no such sale takes place on such date, the average of the
high bid and low asked prices for each of such securities in the Canadian
over-the-counter market, as quoted by any reporting system then in use; or 

(iii)           
if for any reason none of such prices is available on such day or the securities
are not listed or admitted to trading on a Canadian stock exchange or quoted by
any such reporting system, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the securities
selected in good faith by the Board of Directors; 

provided, however, that if for any
reason none of such prices is available on such day, the closing price per share
of such securities on such date means the fair value per share of such
securities on such date as determined by a nationally or internationally
recognized investment dealer or investment banker with respect to the fair value
per share of such securities. The Market Price shall be expressed in Canadian
dollars and, if initially determined in respect of any day forming part of the
20 consecutive Trading Day period in question in United States dollars, such
amount shall be translated into Canadian dollars on such date at the Canadian
Dollar Equivalent thereof; 

(ee)        
 “Meeting Deadline Date” is the date six months after the Effective
Date or if such date is not a Business Day then the next Business Day following
such date. 

(ff)          
“Nominee” shall have the meaning ascribed thereto in Subsection 2.2(c);

(gg)        
 “Offer to Acquire” shall include: 

(i)            
 an offer to purchase or a solicitation of an offer to sell or a public
announcement of an intention to make such an offer or solicitation; and 

(ii)             an
acceptance of an offer to sell, whether or not such offer to sell has been
solicited; 

9 

or any combination thereof, and the
Person accepting an offer to sell shall be deemed to be making an Offer to
Acquire to the Person that made the offer to sell; 

(hh)        
 “Offeror” shall mean a Person who has made a public announcement of
a current intention to make or who is making a Take-over Bid but only so long as
the Take-over Bid so announced or made has not been withdrawn or terminated or
has not expired; 

(ii)             “Permitted
Bid” shall mean a Take-over Bid made by an Offeror by way of take-over bid
circular which also complies with the following additional provisions: 

(i)             the
Take-over Bid is made to all holders of Voting Shares on the books of the
Company, other than the Offeror; 

(ii)             no
Voting Shares are taken up or paid for pursuant to the Take-over Bid unless more
than 50% of the Voting Shares held by Independent Shareholders shall have been
deposited or tendered pursuant to the Take-over Bid and not withdrawn; 

(iii)             the
Take-over Bid contains, and the take-up and payment for securities tendered or
deposited is subject to, an irrevocable and unqualified provision that no Voting
Shares will be taken up or paid for pursuant to the Take-over Bid prior to the
close of business on the date which is not less than 60 days following the date
of the Take-over Bid; 

(iv)             the
Take-over Bid contains an irrevocable and unqualified provision that unless the
Take-over Bid is withdrawn, Voting Shares may be deposited pursuant to such
Take-over Bid at any time during the period of time between the date of the
Take- over Bid and the date on which Voting Shares may be taken up and paid for
and that any Voting Shares deposited pursuant to the Take-over Bid may be
withdrawn until taken up and paid for; and 

(v)            
the Take-over Bid contains an irrevocable and unqualified provision that if, on
the date on which Voting Shares may be taken up and paid for, more than 50% of
the Voting Shares held by Independent Shareholders shall have been deposited
pursuant to the Take-over Bid and not withdrawn, the Offeror will make a public
announcement of that fact and the Take-over Bid will remain open for deposits
and tenders of Voting Shares for not less than ten Business Days from the date
of such public announcement; 

For purposes of this Agreement, (A)
should a Take-over Bid which qualified as a Permitted Bid cease to be a
Permitted Bid because it ceases to meet any or all of the requirements mentioned
above prior to the time it expires (after giving effect to any extension) or is
withdrawn, any acquisition of Voting Shares made pursuant to such Take-over Bid
shall not be a Permitted Bid Acquisition and (B) the term “Permitted Bid”
shall include a Competing Permitted Bid. 

(jj)        
 “Permitted Bid Acquisition” shall mean an acquisition of Voting
Shares made pursuant to a Permitted Bid or a Competing Permitted Bid; 

10 

(kk)        
 “Permitted Lock-Up Agreement” shall mean an agreement between a
Person and one or more holders of Voting Shares pursuant to which such holders
(each a “Locked-Up Person”) agree to deposit or tender Voting Shares to a
Take-Over Bid (the “Lock-Up Bid”) made or to be made by such Person or
any of such Person’s Affiliates or Associates or any other Person with which
such Person is acting jointly or in concert, provided that: 

(i)            
 the terms of such agreement are publicly disclosed and a copy of such
agreement is made available to the public (including the Company) not later than
the date of the Lock-Up Bid or, if the Lock-Up Bid has been made prior to the
date on which such agreement is entered into, not later than the first business
day following the date of such agreement; 

(ii)            
the agreement permits a Locked-Up Person to terminate its obligation to deposit
or tender Voting Shares to or not to withdraw such Voting Shares from the
Lock-Up Bid, and to terminate any obligation with respect to the voting of such
Voting Shares, in order to tender or deposit the Voting Shares to another
Take-over Bid or to support another transaction: 

(A)             where
the price or value of the consideration per Voting Share offered under such
other Take-over Bid or transaction: 

(I)              is
greater than the price or value of the consideration per Voting Share at which
the Locked-Up Person has agreed to deposit or tender Voting Shares to the
Lock-Up Bid; or 

(II)             exceeds
by as much as or more than a specified amount (the “Specified Amount”)
the price or value of the consideration per Voting Share at which the Locked-Up
Person has agreed to deposit or tender Voting Shares to the Lock-Up Bid,
provided that such Specified Amount is not greater than 7% of the price or value
of the consideration per Voting Share at which the Locked-Up Person has agreed
to deposit or tender Voting Shares to the LockUp Bid; and

 (B)            
if the number of Voting Shares offered to be purchased under the Lock-Up Bid is
less than 100% of the Voting Shares held by Independent Shareholders, where the
number of Voting Shares to be purchased under such other Take-over Bid or
transaction at a price or value per Voting Share that is not less than the price
or value per Voting Share offered under the Lock-Up Bid: 

(I)              is
greater than the number of Voting Shares that the Offeror has offered to
purchase under the Lock-Up Bid; or 

(II)            
exceeds by as much as or more than a specified number (the “Specified
Number”) the number of Voting Shares that the Offeror has offered to
purchase under the Lock-Up Bid, provided that the Specified Number is not
greater than 7% of the number of Voting Shares offered to purchased under the
Lock-Up Bid, 

11 

and, for greater clarity, the
agreement may contain a right of first refusal or require a period of delay to
give such Person an opportunity to match a higher price in another Take-over Bid
or transaction or other similar limitation on a Locked-up Person’s right to
withdraw Voting Shares from the agreement, so long as the limitation does not
preclude the exercise by the Locked-up Person of the right to withdraw Voting
Shares during the period of the other Take-over Bid or transaction; and 

(iii)             no
“break-up” fees, “top-up” fees, penalties, expenses or other
amounts that exceed in aggregate the greater of: 

(A)             2.5%
of the price or value of the consideration payable under the Lock-Up Bid to a
Locked-Up Person; and 

(B)            
50% of the amount by which the price or value of the consideration received by a
Locked-Up Person under another Take-over Bid or transaction exceeds the price or
value of the consideration that the Locked-Up Person would have received under
the Lock-Up Bid, 

shall be payable by such Locked-Up
Person pursuant to the agreement if the Locked-Up Person fails to deposit or
tender Voting Shares to the Lock-Up Bid, withdraws Voting Shares previously
tendered thereto or supports another transaction; 

(ll)           
 “Person” shall include an individual, body corporate, firm,
partnership, syndicate or other form of unincorporated association, trust,
trustee, executor, administrator, legal personal representative, group,
unincorporated organization, a government and its agencies or instrumentalities,
or other entity whether or not having legal personality; 

(mm)          “Pro
Rata Acquisition” shall mean an acquisition by a Person of Voting Shares
pursuant to: 

(i)              
a Dividend Reinvestment Acquisition; 

(ii)            
 a stock dividend, stock split or other event in respect of securities of
the Company of one or more particular classes or series pursuant to which such
Person becomes the Beneficial Owner of Voting Shares on the same pro rata basis
as all other holders of securities of the particular class, classes or series;
or 

(iii)            
the acquisition or the exercise by the Person of rights to purchase Voting
Shares issued by the Company to all holders of securities of the Company (other
than holders resident in any jurisdiction where such issuance is restricted or
impractical as a result of applicable law) of one or more particular classes or
series pursuant to a rights offering or pursuant to a prospectus, provided that
such rights are acquired directly from the Company and not from any other Person
and the Person does not thereby acquire a
greater percentage of such Voting Shares than the Person’s percentage of Voting
Shares Beneficially Owned immediately prior to such acquisition; 

12 

(nn)        
 “Record Time” has the meaning set forth in the recitals hereto;

(oo)        
 “Redemption Price” shall have the meaning attributed thereto in
Subsection 5.1(a);

(pp)        
 “Right” shall mean a right to purchase a Share of the Company, upon
the terms and subject to the conditions set forth in this Agreement; 

(qq)        
 “Rights Certificate” shall mean a certificate representing the
Rights after the Separation Time, which shall be substantially in the form
attached hereto as Attachment 1; 

(rr)          
 “Rights Register” shall have the meaning ascribed thereto in
Subsection 2.6(a); 

(ss)        
 “Securities Act” shall mean the Securities Act (British
Columbia), as amended, and the regulations thereunder, and any comparable or
successor laws or regulations thereto; 

(tt)            
“Separation Time” shall mean, subject to Subsection 5.1(d), the close of
business on the tenth Trading Day after the earlier of: 

(i)              
the Share Acquisition Date; 

(ii)             
the date of the commencement of or first public announcement of the intent of
any Person (other than the Company or any Subsidiary of the Company) to commence
a Take-over Bid (other than a Permitted Bid or a Competing Permitted Bid); and

(iii)             the
date on which a Permitted Bid or Competing Permitted Bid ceases to qualify as
such; 

or such later time as may be determined
by the Board of Directors, provided that, if any Take-over Bid referred to in
clause (ii) above expires, is not made, is cancelled, terminated or otherwise
withdrawn prior to the Separation Time, such Take-over Bid shall be deemed, for
the purposes of this definition, never to have been commenced, made or announced
and further provided that if the Board of Directors determines, pursuant to
Section 5.1, to waive the application of Section 3.1 to a Flip-In Event, then
the Separation Time in respect of such Flip-In Event shall be deemed never to
have occurred and further provided that if the foregoing results in the
Separation Time being prior to the Record Time, the Separation Time shall be the
Record Time; 

(uu)        
 “Share Acquisition Date” shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to early warning requirements
under applicable securities laws) by the Company or an Acquiring Person of facts
indicating that a Person has become an Acquiring Person; 

13 

(vv)        
 “Shares” shall mean the common shares in the capital of the Company
as presently constituted, as such shares may be subdivided, consolidated,
reclassified or otherwise changed from time to time; 

(ww)         
“Subsidiary”: a Person is a Subsidiary of another Person if: 

(i)            
 it is controlled by: 

(A)             that
other; or 

(B)             that
other and one or more Persons each of which is controlled by that other; or 

(C)            
two or more Persons each of which is controlled by that other; or 

(ii)             it
is a Subsidiary of a Person that is that other’s Subsidiary; 

(xx)        
 “Take-over Bid” shall mean an Offer to Acquire Voting Shares or
Convertible Securities, if, assuming that the Voting Shares or Convertible
Securities subject to the Offer to Acquire are acquired and are Beneficially
Owned at the date of such Offer to Acquire by the Person making such Offer to
Acquire, the Voting Shares Beneficially Owned by the Person making the Offer to
Acquire would constitute in the aggregate 20% or more of the outstanding Voting
Shares at the date of the Offer to Acquire; 

(yy)         
“Termination Time” shall mean the time at which the right to exercise
Rights shall terminate pursuant to Section 5.1(g);

(zz)        
 “Trading Day”, when used with respect to any securities, shall mean
a day on which the principal Canadian stock exchange on which such securities
are listed or admitted to trading is open for the transaction of business or, if
the securities are not listed or admitted to trading on any Canadian stock
exchange, a Business Day; 

(aaa)        “U.S. –
Canadian Exchange Rate” on any date shall mean:

 (i)             
if on such date the Bank of Canada sets an average noon spot rate of exchange
for the conversion of one United States dollar into Canadian dollars, such rate;
and 

(ii)            
in any other case, the rate for such date for the conversion of one United
States dollar into Canadian dollars which is calculated in the manner which
shall be determined by the Board of Directors from time to time acting in good
faith; 

(bbb)         
 “Voting Share Reduction” shall mean an acquisition or redemption by
the Company of Voting Shares which, by reducing the number of Voting Shares
outstanding, increases the percentage of outstanding
Voting Shares Beneficially Owned by any Person to 20% or more of the Voting
Shares then outstanding; and 

14 

(ccc)        “Voting
Shares” shall mean the Shares and any other shares in the capital of the
Company entitled to vote generally in the election of all directors of the
Company. 

1.2                         Currency

All sums of money which are referred to in this Agreement are
expressed in lawful money of Canada, unless otherwise specified. 

1.3                        
Headings 

The division of this Agreement into Articles, Sections,
Subsections, Clauses, Paragraphs, Subparagraphs or other portions hereof and the
insertion of headings, subheadings and a table of contents are for convenience
of reference only and shall not affect the construction or interpretation of
this Agreement. 

1.4                         Calculation
of Number and Percentage of Beneficial Ownership of Outstanding Voting Shares

(a)            
For purposes of this Agreement, in determining the percentage of outstanding
Voting Shares with respect to which a Person is or is deemed to be the
Beneficial Owner, all unissued Voting Shares of which such person is deemed to
be the Beneficial Owner shall be deemed to be outstanding. 

(b)            
For purposes of this Agreement, the percentage of Voting Shares Beneficially
Owned by any Person shall be and be deemed to be the product (expressed as a
percentage) determined by the formula: 

100 x A/B 

where: 

A            
=             the
number of votes for the election of all directors of the Company generally
attaching to the Voting Shares Beneficially Owned by such Person; and 

B             =             the
number of votes for the election of all directors of the Company generally
attaching to all outstanding Voting Shares. 

The percentage of outstanding Voting
Shares represented by any particular group of Voting Shares acquired or held by
any Person shall be determined in like manner mutatis mutandis. 

15 

1.5                         Acting
Jointly or in Concert 

For purposes of this Agreement a Person is acting jointly or in
concert with every Person who is a party to an agreement, commitment,
arrangement or understanding, whether formal or informal or written or
unwritten, with the first Person to acquire or Offer to Acquire any Voting
Shares or Convertible Securities (other than (x) customary agreements with and
between underwriters and/or banking group members and/or selling group members
with respect to a distribution of securities by the Company, (y) pledges of
securities in the ordinary course of business, and (z) Permitted Lock-Up
Agreements). 

1.6                         Generally
Accepted Accounting Principles 

Wherever in this Agreement reference is made to generally
accepted accounting principles, such reference shall be deemed to be the
recommendations at the relevant time of the Canadian Institute of Chartered
Accountants, or any successor institute, applicable on a consolidated basis
(unless otherwise specifically provided herein to be applicable on an
unconsolidated basis) and which incorporates International Financial Reporting
Standards as adopted by the Canadian Accounting Standards Board for periods
beginning on or after January 1, 2011, as at the date on which a calculation is
made or required to be made in accordance with generally accepted accounting
principles. Where the character or amount of any asset or liability or item of
revenue or expense is required to be determined, or any consolidation or other
accounting computation is required to be made for the purpose of this Agreement
or any document, such determination or calculation shall, to the extent
applicable and except as otherwise specified herein or as otherwise agreed in
writing by the parties, be made in accordance with such generally accepted
accounting principles applied on a consistent basis. 

ARTICLE 2 

THE RIGHTS 

2.1                         Issue
of Rights: Legend on Common Share Certificates 

(a)             One
Right shall be issued on the Effective Date in respect of each Common Share
outstanding at the Record Time and one Right shall be issued in respect of each
Common Share issued after the Record Time and prior to the earlier of the
Separation Time and the Expiration Time. 

(b)            
Certificates representing Shares which are issued after the Record Time but
prior to the earlier of the Separation Time and the Expiration Time, shall also
evidence one Right for each Share represented thereby until the earlier of the
Separation Time or the Expiration Time and shall have impressed on, printed on,
written on or otherwise affixed to them the following legend: 

  
    
      Until the earlier of the Separation
        Time or the Expiration Time (as both terms are defined in the Shareholder Rights
        Agreement referred to below), this certificate also evidences and entitles the
        holder hereof to certain Rights as set forth in the Shareholder Rights Plan Agreement
        dated as of May 17, 2013, as may be amended or supplemented from time to time
        (the “Shareholder Rights Agreement”), between Northern Dynasty Minerals
        Ltd. (the “Company”) and Computershare Investor Services Inc., as Rights
        Agent, the terms of which are incorporated herein by reference and a copy of
        which is on file at the principal executive offices of the Company. Under
        certain circumstances set out in the Shareholder Rights Agreement, the rights
        may be amended or redeemed, may expire or may become void (if, in certain cases
        they are “Beneficially Owned” by an “Acquiring Person” as such
        terms are defined in the Shareholder Rights Agreement, whether currently held by
        or on behalf of such Person or a subsequent holder) or may be evidenced by
        separate certificates and no longer evidenced by this certificate. The Company
        will mail or arrange for the mailing of a copy of the Shareholder Rights
        Agreement to the holder of this certificate without charge as soon as
        practicable after the receipt of a written request therefor. 

    

  

16 

Certificates representing Shares that are issued and
outstanding at the Record Time shall also evidence one Right for each Share
represented thereby notwithstanding the absence of the foregoing legend, until
the earlier of the Separation Time and the Expiration Time. 

2.2                         Initial
Exercise Price; Exercise of Rights; Detachment of Rights 

(a)            
Subject to adjustment as herein set forth, each Right will entitle the holder
thereof, from and after the Separation Time and prior to the Expiration Time, to
purchase one Share for the Exercise Price as at the Business Day immediately
preceding the day of exercise of the Right (which Exercise Price and number of
Shares are subject to adjustment as set forth below). Notwithstanding any other
provision of this Agreement, any Rights held by the Company or any of its
Subsidiaries shall be void. 

(b)             Until
the Separation Time, 

(i)            
 the Rights shall not be exercisable and no Right may be exercised; and

(ii)             each
Right will be evidenced by the certificate for the associated Voting Share
registered in the name of the holder thereof (which certificate shall also be
deemed to represent a Rights Certificate) and will be transferable only together
with, and will be transferred by a transfer of, such associated Voting
Share.

(c)             From
and after the Separation Time and prior to the Expiration Time: 

(i)            
 the Rights shall be exercisable; and 

(ii)            
the registration and transfer of Rights shall be separate from and independent
of Voting Shares. 

Promptly following the Separation Time,
the Company will prepare or cause to be prepared and the Rights Agent will mail
to each holder of record of Voting Shares as of the Separation Time and, in respect of
each Convertible Security converted into Voting Shares after the Separation Time
and prior to the Expiration Time, promptly after such conversion, the Company
will prepare or cause to be prepared and the Rights Agent will mail to the
holder so converting (other than in either case an Acquiring Person and any
Transferee whose rights are or become null and void pursuant to Section 3.1(b)
and, in respect of any Rights Beneficially Owned by such Acquiring Person or
Transferee which are not held of record by such Acquiring Person or Transferee,
the holder of record of such Rights (a “Nominee”)), at such holder’s
address as shown by the records of the Company (the Company hereby agreeing to
furnish copies of such records to the Rights Agent for this purpose): 

17 

(x)             a
Rights Certificate appropriately completed, representing the number of Rights
held by such holder at the Separation Time or at the time of conversion, as
applicable, and having such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law, rule or regulation or judicial or
administrative order made pursuant thereto or with any rule or regulation of any
self-regulatory organization, stock exchange or quotation system on which the
Rights may from time to time be listed or traded, or to conform to usage; and

(y)            
disclosure statement describing the Rights, 

provided that a Nominee shall be sent
the materials provided for in (x) and (y) only in respect of all Shares held of
record by it which are not Beneficially Owned by an Acquiring Person. In order
for the Company to determine whether any Person is holding Shares which are
Beneficially Owned by another Person, the Company may require such first Person
to furnish such information and documentation as the Company deems necessary.

(d)             Rights
may be exercised, in whole or in part, on any Business Day after the Separation
Time and prior to the Expiration Time by submitting to the Rights Agent at its
office in Vancouver, Canada or any other office of the Rights Agent in cities
designated from time to time for that purpose by the Company with the approval
of the Rights Agent: 

(i)              
the Rights Certificate evidencing such Rights; 

(ii)             
an election to exercise such Rights (an “Election to Exercise”)
substantially in the form attached to the Rights Certificate appropriately
completed and duly executed by the holder or such holder’s executors or
administrators or other personal representatives or such holder’s or their legal
attorney duly appointed by an instrument in writing in form and executed in a
manner satisfactory to the Rights Agent; and 

(iii)            
payment by certified cheque, banker’s draft, money order or wire transfer
payable to the order of the Rights Agent, of a sum equal to the Exercise Price
multiplied by the number of Rights
being exercised and a sum sufficient to cover any transfer tax or charge which
may be payable in respect of any transfer involved in the transfer or delivery
of Rights Certificates or the issuance or delivery of certificates for Shares in
a name other than that of the holder of the Rights being exercised. 

18 

(e)             Upon
receipt of a Rights Certificate, together with a completed Election to Exercise
executed in accordance with Clause 2.2(d)(ii), which does not indicate that such
Right is null and void as provided by Subsection 3.1(b), and payment as set
forth in Clause 2.2(d)(iii), the Rights Agent (unless otherwise instructed by
the Company in the event that the Company is of the opinion that the Rights
cannot be exercised in accordance with this Agreement) will thereupon as soon as
practicable: 

(i)              
requisition from the transfer agent certificates representing the number of such
Shares to be purchased (the Company hereby irrevocably authorizing its transfer
agent to comply with all such requisitions); 

(ii)            
 when appropriate, requisition from the Company the amount of cash to be
paid in lieu of issuing fractional Shares; 

(iii)             after
receipt of the certificates referred to in Clause 2.2(e)(i), deliver the same to
or upon the order of the registered holder of such Rights Certificates,
registered in such name or names as may be designated by such holder; 

(iv)            
when appropriate, after receipt, deliver the cash referred to in Clause
2.2(e)(ii) to or to the order of the registered holder of such Rights
Certificate; and 

(v)             
remit to the Company all payments received on the exercise of Rights. 

(f)            
In case the holder of any Rights shall exercise less than all the Rights
evidenced by such holder’s Rights Certificate, a new Rights Certificate
evidencing the Rights remaining unexercised (subject to the provisions of
Subsection 5.5(a)) will be issued by the Rights Agent to such holder or to such
holder’s duly authorized assigns. 

(g)             The
Company covenants and agrees that it will: 

(i)              
take all such action as may be necessary and within its power to ensure that all
Shares delivered upon exercise of Rights shall, at the time of delivery of the
certificates for such Shares (subject to payment of the Exercise Price), be duly
and validly authorized, executed, issued and delivered as fully paid and
non-assessable; 

(ii)            
take all such action as may be necessary and within its power to comply with the
requirements of the British Columbia Business Corporations Act, the Securities
Act and the securities laws or comparable legislation of each of the provinces
of Canada, and any other applicable law, rule or regulation, in connection with
the issuance and delivery of the Rights Certificates and the issuance of any
Shares upon exercise of Rights; 

19 

(iii)             use
reasonable efforts to cause all Shares issued upon exercise of Rights to be
listed on the stock exchanges and markets on which such Shares were traded
immediately prior to the Separation Time; 

(iv)            
pay when due and payable, if applicable, any and all federal, provincial and
municipal transfer taxes and charges (not including any income or capital taxes
of the holder or exercising holder or any liability of the Company to withhold
tax) which may be payable in respect of the original issuance or delivery of the
Rights Certificates, or certificates for Shares to be issued upon exercise of
any Rights, provided that the Company shall not be required to pay any transfer
tax or charge which may be payable in respect of any transfer involved in the
transfer or delivery of Rights Certificates or the issuance or delivery of
certificates for Shares in a name other than that of the holder of the Rights
being transferred or exercised; and 

(v)             
after the Separation Time, except as permitted by Sections 5.1 and 5.4, not take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights. 

2.3                        
Adjustments to Exercise Price; Number of Rights 

The Exercise Price, the number and kind of securities subject
to purchase upon exercise of each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 2.3. 

(a)            
In the event the Company shall at any time after the Record Time and prior to
the Expiration Time: 

(i)            
declare or pay a dividend on Shares payable in Shares or Convertible Securities
in respect thereof other than pursuant to any Dividend Reinvestment Plan; 

(ii)             subdivide
or change the then outstanding Shares into a greater number of Shares; 

(iii)             consolidate
or change the then outstanding Shares into a smaller number of Shares; or 

(iv)            
issue any Shares (or Convertible Securities in respect thereof) in respect of,
in lieu of or in exchange for existing Shares except as otherwise provided in
this Section 2.3, 

then the Exercise Price and the number
of Rights outstanding (or, if the payment or effective date therefor shall occur
after the Separation Time, the securities purchasable upon exercise of Rights)
shall be adjusted as of the payment or effective date in the manner set forth
below. 

20 

If the Exercise Price and number of
Rights outstanding are to be adjusted: 

(x)             the
Exercise Price in effect after such adjustment will be equal to the Exercise
Price in effect immediately prior to such adjustment divided by the number of
Shares (or other capital stock) (the “Expansion Factor”) that a holder of
one Share immediately prior to such distribution, subdivision, change,
consolidation or issuance would hold thereafter as a result thereof; and 

(y)            
each Right held prior to such adjustment will become that number of Rights equal
to the Expansion Factor, 

and the adjusted number of Rights will
be deemed to be distributed among the Shares with respect to which the original
Rights were associated (if they remain outstanding) and the Shares issued in
respect of such dividend, subdivision, change, consolidation or issuance, so
that each such Share (or other capital stock) will have exactly one Right
associated with it. 

For greater certainty, if the
securities purchasable upon exercise of Rights are to be adjusted, the
securities purchasable upon exercise of each Right after such adjustment will be
the securities that a holder of the securities purchasable upon exercise of one
Right immediately prior to such dividend, subdivision, change, consolidation or
issuance would hold thereafter as a result of such dividend, subdivision,
change, consolidation or issuance. 

If, after the Record Time and prior to
the Expiration Time, the Company shall issue any shares of capital stock other
than Shares in a transaction of a type described in Clause 2.3(a)(i) or (iv),
such shares of capital stock shall be treated herein as nearly equivalent to
Shares as may be practicable and appropriate under the circumstances and the
Company and the Rights Agent agree to amend this Agreement in order to effect
such treatment. 

If an event occurs which would require
an adjustment under both this Section 2.3 and Section 3.1, the adjustment
provided for in this Section 2.3 shall be in addition to, and shall be made
prior to, any adjustment required under Section 3.1. 

In the event the Company shall at any
time after the Record Time and prior to the Separation Time issue any Shares
otherwise than in a transaction referred to in this Subsection 2.3(a), each such
Share so issued shall automatically have one new Right associated with it, which
Right shall be evidenced by the certificate representing such associated Share.

(b)            
In the event the Company shall at any time after the Record Time and prior to
the Separation Time fix a record date for the issuance of rights, options or
warrants to all holders of Shares entitling them (for a period expiring within
45 calendar days after such record date) to subscribe for or purchase Shares (or
Convertible Securities in respect of Shares) at a price per Share (or, in the
case of a Convertible Security, having a conversion, exchange or exercise price
per share, including the price required to be paid to purchase such Convertible
Security) less than the Market Price per Share on such record date, the Exercise
Price to be in effect after such record date shall be determined by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction: 

21 

(i)             
the numerator of which shall be the number of Shares outstanding on such record
date plus the number of Shares that the aggregate offering price of the total
number of Shares so to be offered (and/or the aggregate initial conversion,
exchange or exercise price of the Convertible Securities, including the price
required to be paid to purchase such Convertible Securities) would purchase at
such Market Price per Share; and 

(ii)             the
denominator of which shall be the number of Shares outstanding on such record
date plus the number of additional Shares to be offered for subscription or
purchase (or into which the Convertible Securities so to be offered are
initially convertible, exchangeable or exercisable). 

In case such subscription price may be
paid by delivery of consideration, part or all of which may be in a form other
than cash, the value of such consideration shall be as determined in good faith
by the Board of Directors, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of Rights. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights, options or warrants are
not so issued, or if issued, are not exercised prior to the expiration thereof,
the Exercise Price shall be readjusted to the Exercise Price which would then be
in effect if such record date had not been fixed, or to the Exercise Price which
would be in effect based upon the number of Shares (or securities convertible
into, or exchangeable or exercisable for Shares) actually issued upon the
exercise of such rights, options or warrants, as the case may be. 

For purposes of this Agreement, the
granting of the right to purchase Shares (whether from treasury or otherwise)
pursuant to any Dividend Reinvestment Plan or any employee benefit plan, stock
option plan or any similar plan shall be deemed not to constitute an issue of
rights, options or warrants by the Company; provided, however, that, in the case
of any Dividend Reinvestment Plan or share purchase plan, the right to purchase
Shares is at a price per Share of not less than 90% of the current market price
per share (determined as provided in such plans) of the Shares. 

(c)            
In the event the Company shall at any time after the Record Time and prior to
the Separation Time fix a record date for the making of a distribution to all
holders of Shares (including any such distribution made in connection with a
merger or amalgamation) of evidences of indebtedness, cash (other than an annual
cash dividend or a dividend paid in Common Shares, but including any dividend
payable in securities other than Common Shares), assets or rights, options or
warrants (excluding rights, options or warrants expiring within 45 calendar days
after such record date) to purchase Shares or Convertible Securities in respect
of Shares, the Exercise Price in effect after such record date shall be equal to
the Exercise Price in effect immediately prior to such record date less the fair
market value (as determined in good faith by the Board of Directors) of the portion of the evidences of
indebtedness, cash, assets, rights, options or warrants so to be distributed
applicable to the securities purchasable upon exercise of one Right. 

22 

(d)            
Notwithstanding anything herein to the contrary, no adjustment in the Exercise
Price shall be required unless such adjustment would require an increase or
decrease of at least one per cent in the Exercise Price; provided, however, that
any adjustments which by reason of this Subsection 2.3(d) are not required to be
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under Section 2.3 shall be made to the nearest cent
or to the nearest ten-thousandth of a Share. Any adjustment required by Section
2.3 shall be made as of: 

(i)             
the payment or effective date for the applicable dividend, subdivision, change,
combination or issuance, in the case of an adjustment made pursuant to
Subsection 2.3(a); or 

(ii)            
the record date for the applicable dividend or distribution, in the case of an
adjustment made pursuant to Subsection 2.3(b) or (c), subject to readjustment to
reverse the same if such dividend or distribution shall not be made. 

(e)            
In the event the Company shall at any time after the Record Time and prior to
the Separation Time issue any shares (other than Shares), or rights, options or
warrants to subscribe for or purchase any such shares, or securities convertible
into or exchangeable for any such shares, in a transaction referred to in Clause
2.3(a)(i) or (iv) or Subsections 2.3(b) or (c), if the Board of Directors acting
in good faith determines that the adjustments contemplated by Subsections
2.3(a), (b) and (c) in connection with such transaction will not appropriately
protect the interests of the holders of Rights, the Board of Directors may
determine what other adjustments to the Exercise Price, number of Rights and/or
securities purchasable upon exercise of Rights would be appropriate and,
notwithstanding Subsections 2.3(a), (b) and (c), such adjustments, rather than
the adjustments contemplated by Subsections 2.3(a), (b) and (c), shall be made.
Subject to Subsection 5.4(b) and (c), the Company and the Rights Agent may, with
the prior approval of the holders of the Shares amend this Agreement as
appropriate to provide for such adjustments. 

(f)             Each
Right originally issued by the Company subsequent to any adjustment made to the
Exercise Price hereunder shall evidence the right to purchase, at the adjusted
Exercise Price, the number of Shares purchasable from time to time hereunder
upon exercise of a Right immediately prior to such issue, all subject to further
adjustment as provided herein. 

(g)            
Irrespective of any adjustment or change in the Exercise Price or the number of
Shares issuable upon the exercise of the Rights, the Rights Certificates
theretofore and thereafter issued may continue to express the Exercise Price per
Share and the number of Shares which were expressed in the initial Rights
Certificates issued hereunder. 

(h)            
In any case in which this Section 2.3 shall require that an adjustment in the
Exercise Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence
of such event the issuance to the holder of any Right exercised after such
record date the number of Shares and other securities of the Company, if any,
issuable upon such exercise over and above the number of Shares and other
securities of the Company, if any, issuable upon such exercise on the basis of
the Exercise Price in effect prior to such adjustment; provided, however, that
the Company shall deliver to such holder an appropriate instrument evidencing
such holder’s right to receive such additional shares (fractional or otherwise)
or other securities upon the occurrence of the event requiring such adjustment. 

23 

(i)             Notwithstanding
anything contained in this Section 2.3 to the contrary, the Company shall be
entitled to make such reductions in the Exercise Price, in addition to those
adjustments expressly required by this Section 2.3, as and to the extent that in
their good faith judgment the Board of Directors shall determine to be
advisable, in order that any: 

(i)            
  consolidation or subdivision of Shares; 

(ii)             
 issuance (wholly or in part for cash) of Shares or securities that by
their terms are convertible into or exchangeable for Shares; 

(iii)             stock
dividends; or 

(iv)            
issuance of rights, options or warrants referred to in this Section 2.3, 

hereafter made by the Company to
holders of its Shares, subject to applicable taxation laws, shall not be taxable
to such shareholders or shall subject such shareholders to a lesser amount of
tax. 

(j)             Whenever
an adjustment to the Exercise Price is made pursuant to this Section 2.3, the
Company shall: 

(i)            
 promptly prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment; and 

(ii)            promptly
file with the Rights Agent and with each transfer agent for the Shares a copy of
such certificate and mail a brief summary thereof to each holder of Rights who
requests a copy; 

Failure to file such certificate or to
cause such notice to be given as aforesaid, or any defect therein, shall not
affect the validity of any such adjustment or change. 

2.4                         Date
on Which Exercise Is Effective 

Each Person in whose name any certificate for Shares or other
securities, if applicable, is issued upon the exercise of Rights shall for all
purposes be deemed to have become the absolute holder of record of the Shares or
other securities, if applicable, represented thereon, and such certificate shall
be dated the date upon which the Rights Certificate evidencing such Rights was
duly surrendered in accordance with Subsection 2.2(d) (together with a duly
completed Election to Exercise) and payment of the Exercise Price for such Rights
(and any applicable transfer taxes and other governmental charges payable by the
exercising holder hereunder) was made; provided, however, that if the date of
such surrender and payment is a date upon which the Share transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such Shares on, and such certificate shall be dated, the next succeeding
Business Day on which the Share transfer books of the Company are open. 

24 

2.5                         Execution,
Authentication, Delivery and Dating of Rights Certificates 

(a)             The
Rights Certificates shall be executed on behalf of the Company by any of its
Chairman of the Board, President, Chief Executive Officer and Chief Financial
Officer. The signature of any of these officers on the Rights Certificates may
be manual or facsimile. Rights Certificates bearing the manual or facsimile
signatures of individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices either before or after the
countersignature and delivery of such Rights Certificates. 

(b)             Promptly
after the Company learns of the Separation Time, the Company will notify the
Rights Agent of such Separation Time and will deliver Rights Certificates
executed by the Company to the Rights Agent for countersignature, and the Rights
Agent shall countersign (manually or by facsimile signature in a manner
satisfactory to the Company) and send such Rights Certificates to the holders of
the Rights pursuant to Subsection 2.2(c) hereof. No Rights Certificate shall be
valid for any purpose until countersigned by the Rights Agent as aforesaid. 

(c)             Each
Rights Certificate shall be dated the date of countersignature thereof. 

2.6                        
Registration, Transfer and Exchange 

(a)            
The Company will cause to be kept a register (the “Rights Register”) in
which, subject to such reasonable regulations as it may prescribe, the Company
will provide for the registration and transfer of Rights. The Rights Agent, at
its office in the City of Vancouver, is hereby appointed registrar for the
Rights (the “Rights Registrar”) for the purpose of maintaining the Rights
Register for the Company and registering Rights and transfers of Rights as
herein provided and the Rights Agent hereby accepts such appointment. In the
event that the Rights Agent shall cease to be the Rights Registrar, the Rights
Agent will have the right to examine the Rights Register at all reasonable
times. 

After the Separation Time and prior to
the Expiration Time, upon surrender for registration of transfer or exchange of
any Rights Certificate, and subject to the provisions of Subsection 2.6(c), the
Company will execute, and the Rights Agent will countersign and deliver, in the
name of the holder or the designated transferee or transferees, as required
pursuant to the holder’s instructions, one or more new Rights Certificates
evidencing the same aggregate number of Rights as did the Rights Certificates so
surrendered. 

(b)             All
Rights issued upon any registration of transfer or exchange of Rights
Certificates shall be the valid obligations of the Company, and such Rights
shall be entitled to the same benefits under
this Agreement as the Rights surrendered upon such registration of transfer or
exchange. 

25 

(c)            
Every Rights Certificate surrendered for registration of transfer or exchange
shall be duly endorsed, or be accompanied by a written instrument of transfer in
form satisfactory to the Company or the Rights Agent, as the case may be, duly
executed by the holder thereof or such holder’s attorney duly authorized in
writing. As a condition to the issuance of any new Rights Certificate under this
Section 2.6, the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the reasonable fees and expenses of the Rights
Agent) connected therewith. 

2.7                        
Mutilated, Destroyed, Lost and Stolen Rights Certificates 

(a)            
If any mutilated Rights Certificate is surrendered to the Rights Agent prior to
the Expiration Time, the Company shall execute and the Rights Agent shall
countersign and deliver in exchange therefor a new Rights Certificate evidencing
the same number of Rights as did the Rights Certificate so surrendered. 

(b)            
If there shall be delivered to the Company and the Rights Agent prior to the
Expiration Time: 

(i)             
evidence to their reasonable satisfaction of the destruction, loss or theft of
any Rights Certificate; and 

(ii)             such
security or indemnity as may be reasonably required by them to save each of them
and any of their agents harmless, 

then, in the absence of notice to the
Company or the Rights Agent that such Rights Certificate has been acquired by a
bona fide purchaser, the Company shall execute and upon the Company’s request
the Rights Agent shall countersign and deliver, in lieu of any such destroyed,
lost or stolen Rights Certificate, a new Rights Certificate evidencing the same
number of Rights as did the Rights Certificate so destroyed, lost or stolen.

(c)             As
a condition to the issuance of any new Rights Certificate under this Section
2.7, the Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto and any other
expenses (including the reasonable fees and expenses of the Rights Agent)
connected therewith. 

(d)            
Every new Rights Certificate issued pursuant to this Section 2.7 in lieu of any
destroyed, lost or stolen Rights Certificate shall evidence the contractual
obligation of the Company, whether or not the destroyed, lost or stolen Rights
Certificate shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Agreement equally and proportionately with any and all
other Rights duly issued hereunder. 

26 

2.8                         Persons
Deemed Owners of Rights 

The Company, the Rights Agent and any agent of the Company or
the Rights Agent may deem and treat the Person in whose name a Rights
Certificate (or, prior to the Separation Time, the associated Share certificate)
is registered as the absolute owner thereof and of the Rights evidenced thereby
for all purposes whatsoever. As used in this Agreement, unless the context
otherwise requires, the term “holder” of any Right shall mean the
registered holder of such Right (or, prior to the Separation Time, of the
associated Share). 

2.9                         Delivery
and Cancellation of Certificates 

All Rights Certificates surrendered upon exercise or for
redemption, registration of transfer or exchange shall, if surrendered to any
Person other than the Rights Agent, be delivered to the Rights Agent and, in any
case, shall be promptly cancelled by the Rights Agent. The Company may at any
time deliver to the Rights Agent for cancellation any Rights Certificates
previously countersigned and delivered hereunder which the Company may have
acquired in any manner whatsoever, and all Rights Certificates so delivered
shall be promptly cancelled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates cancelled as
provided in this Section 2.9, except as expressly permitted by this Agreement.
The Rights Agent shall, subject to applicable laws, destroy all cancelled Rights
Certificates and deliver a certificate of destruction to the Company. 

2.10                      Agreement
of Rights Holders 

Every holder of Rights, by accepting the same, consents and
agrees with the Company and the Rights Agent and with every other holder of
Rights: 

(a)             to
be bound by and subject to the provisions of this Agreement, as amended from
time to time in accordance with the terms hereof, in respect of all Rights held;

(b)             that
prior to the Separation Time, each Right will be transferable only together
with, and will be transferred by a transfer of, the associated Voting Share
certificate representing such Right; 

(c)            
that after the Separation Time, the Rights Certificates will be transferable
only on the Rights Register as provided herein; 

(d)            
that prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Voting Share certificate) for registration of
transfer, the Company, the Rights Agent and any agent of the Company or the
Rights Agent may deem and treat the Person in whose name the Rights Certificate
(or, prior to the Separation Time, the associated Voting Share certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on such Rights
Certificate or the associated Voting Share certificate made by anyone other than
the Company or the Rights Agent) for all purposes whatsoever, and neither the
Company nor the Rights Agent shall be affected by any notice to the contrary;

27 

(e)            
that such holder of Rights has waived his right to receive any fractional Rights
or any fractional shares or other securities upon exercise of a Right (except as
provided herein); 

(f)            
that, subject to the provisions of Section 5.4, without the approval of any
holder of Rights or Voting Shares and upon the sole authority of the Board of
Directors, acting in good faith, this Agreement may be supplemented or amended
from time to time pursuant to and as provided herein; and 

(g)             that
notwithstanding anything in this Agreement to the contrary, neither the Company
nor the Rights Agent shall have any liability to any holder of a Right or any
other Person as a result of its inability to perform any of its obligations
under this Agreement by reason of preliminary or permanent injunctions 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, regulations or executive order promulgated or enacted by any governmental
authority prohibiting or otherwise restraining performance of such obligation.

2.11                      Rights
Certificate Holder Not Deemed a Shareholder 

No holder, as such, of any Rights or Rights Certificate shall
be entitled to vote, receive dividends or be deemed for any purpose whatsoever
the holder of any Share or any other share or security of the Company which may
at any time be issuable on the exercise of the Rights represented thereby, nor
shall anything contained herein or in any Rights Certificate be construed or
deemed or confer upon the holder of any Right or Rights Certificate, as such,
any right, title, benefit or privilege of a holder of Shares or any other shares
or securities of the Company or any right to vote at any meeting of shareholders
of the Company whether for the election of directors or otherwise or upon any
matter submitted to holders of Shares or any other shares of the Company at any
meeting thereof, or to give or withhold consent to any action of the Company, or
to receive notice of any meeting or other action affecting any holder of Shares
or any other shares of the Company except as expressly provided herein, or to
receive dividends, distributions or subscription rights, or otherwise, until the
Right or Rights evidenced by Rights Certificates shall have been duly exercised
in accordance with the terms and provisions hereof. 

ARTICLE 3 

ADJUSTMENTS TO THE RIGHTS 

3.1                        
Flip-in Event 

(a)            
Subject to Subsection 3.1(b) and Section 5.1, in the event that prior to the
Expiration Time a Flip-in Event shall occur, each Right shall constitute,
effective at the close of business on the tenth Trading Day after the Share
Acquisition Date, the right to purchase from the Company, upon exercise thereof
in accordance with the terms hereof, that number of Shares having an aggregate
Market Price on the date of consummation or occurrence of such Flip-in Event
equal to twice the Exercise Price for an amount in cash equal to the Exercise
Price (such right to be appropriately adjusted in a manner analogous to the applicable adjustment provided
for in Section 2.3 in the event that after such consummation or occurrence, an
event of a type analogous to any of the events described in Section 2.3 shall
have occurred). 

28 

(b)            
Notwithstanding anything in this Agreement to the contrary, upon the occurrence
of any Flip-in Event, any Rights that are or were Beneficially Owned on or after
the earlier of the Separation Time or the Share Acquisition Date by: 

(i)             
an Acquiring Person (or any Affiliate or Associate of an Acquiring Person or any
other Person acting jointly or in concert with an Acquiring Person or any
Affiliate or Associate of such other Person); or 

(ii)            
a transferee or other successor in title, directly or indirectly, (a
“Transferee”) of Rights held by an Acquiring Person (or any Affiliate or
Associate of an Acquiring Person or any other Person acting jointly or in
concert with an Acquiring Person or any Affiliate or Associate of such other
Person), where such Transferee becomes a transferee concurrently with or
subsequent to the Acquiring Person becoming such in a transfer that the Board of
Directors acting in good faith has determined is part of a plan, arrangement or
scheme of an Acquiring Person (or any Affiliate or Associate of an Acquiring
Person or any other Person acting jointly or in concert with an Acquiring Person
or any Affiliate or Associate of such other Person), that has the purpose or
effect of avoiding Clause 3.1(b)(i), 

shall become null and void without any
further action, and any holder of such Rights (including any Transferee) shall
thereafter have no right to exercise such Rights under any provision of this
Agreement and further shall thereafter not have any other rights whatsoever with
respect to such Rights, whether under any provision of this Agreement or
otherwise. The holder of any Rights represented by a Rights Certificate which is
submitted to the Rights Agent upon exercise or for registration or transfer or
exchange which does not contain the necessary certifications set forth in the
Rights Certificate establishing that such Rights are not null and void under
this Clause 3.1(b) shall be deemed to be an Acquiring Person for the purposes of
this Clause 3.1 and such Rights shall become null and void. 

(c)            
From and after the Separation Time, the Company shall do all such acts and
things as shall be necessary and within its power to ensure compliance with the
provisions of this Section 3.1, including without limitation, all such acts and
things as may be required to satisfy the requirements of the British Columbia
Business Corporations Act, the Securities Act and the securities laws or
comparable legislation of each of the provinces of Canada in respect of the
issue of Shares upon the exercise of Rights in accordance with this Agreement.

(d)             Any
Rights Certificate that represents Rights Beneficially Owned by a Person
described in either Clause 3.1(b)(i) or (ii) or transferred to any nominee of
any such Person, and any Rights Certificate issued upon transfer, exchange,
replacement or adjustment of any other Rights
Certificate referred to in this sentence, shall contain the following legend:

29 

  
    
      “The Rights represented by this Rights Certificate were issued
        to a Person who was an Acquiring Person or an Affiliate or an Associate of an
        Acquiring Person (as such terms are defined in the Shareholder Rights Agreement)
        or a Person who was acting jointly or in concert with an Acquiring Person or an
        Affiliate or Associate of such Person. This Rights Certificate and the Rights
        represented hereby are void or shall become void in the circumstances specified
        in Subsection 3.1(b) of the Shareholder Rights Agreement.” 

    

  

provided, however, that the Rights
Agent shall not be under any responsibility to ascertain the existence of facts
that would require the imposition of such legend but shall impose such legend
only if instructed to do so by the Company in writing or if a holder fails to
certify upon transfer or exchange in the space provided on the Rights
Certificate that such holder is not a Person described in such legend and
provided further that the fact that such legend does not appear on a certificate
is not determinative of whether any Rights represented thereby are void under
this Section. 

ARTICLE 4 

THE RIGHTS AGENT 

4.1                         General

(a)            
The Company hereby appoints the Rights Agent to act as agent for the Company in
accordance with the terms and conditions hereof, and the Rights Agent hereby
accepts such appointment. The Company may from time to time appoint such
co-Rights Agents (“Co-Rights Agents”) as it may deem necessary or
desirable. In the event the Company appoints one or more Co-Rights Agents, the
respective duties of the Rights Agent and Co-Rights Agents shall be as the
Company may determine with the approval of the Rights Agent and the Co-Rights
Agent. The Company agrees to pay to the Rights Agent reasonable compensation for
all services rendered by it hereunder and, from time to time, on demand of the
Rights Agent, its reasonable expenses and counsel fees and other disbursements
incurred in the administration and execution of this Agreement and the exercise
and performance of its duties hereunder (including the fees and disbursements of
any expert or advisor retained by the Rights Agent). The Company also agrees to
indemnify the Rights Agent, and its officers, directors, employees and agents
for, and to hold it and them harmless against, any loss, liability or expense,
incurred without negligence, bad faith or wilful misconduct on the part of the
Rights Agent or such persons, for anything done or omitted by the Rights Agent
or such persons in connection with the acceptance and administration of this
Agreement, including legal costs and expenses, which right to indemnification
will survive the termination of this Agreement and the resignation or removal of
the Rights Agent. 

30 

(b)             The
Rights Agent shall be protected and shall incur no liability for or in respect
of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any certificate for Shares,
Rights Certificate, certificate for other securities of the Company, instrument
of assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where necessary,
verified or acknowledged, by the proper Person or Persons. 

(c)             The
Company shall inform the Rights Agent in a reasonably timely manner of events
which may materially affect the administration of this Agreement by the Rights
Agent and, at any time upon request, shall provide to the Rights Agent an
incumbency certificate certifying the then current officers of the Company. 

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

4.2                         Merger,
Amalgamation or Consolidation or Change of Name of Rights Agent 

(a)             Any
Company into which the Rights Agent may be merged or amalgamated or with which
it may be consolidated, or any Company resulting from any merger, amalgamation,
statutory arrangement or consolidation to which the Rights Agent is a party, or
any Company succeeding to the shareholder or stockholder services business of
the Rights Agent, will be the successor to the Rights Agent under this Agreement
without the execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such Company would be eligible for
appointment as a successor Rights Agent under the provisions of Section 4.4
hereof. In case at the time such successor Rights Agent succeeds to the agency
created by this Agreement any of the Rights Certificates have been countersigned
but not delivered, any successor Rights Agent may adopt the countersignature of
the predecessor Rights Agent and deliver such Rights Certificates so
countersigned; and in case at that time any of the Rights have not been
countersigned, any successor Rights Agent may countersign such Rights
Certificates in the name of the predecessor Rights Agent or in the name of the
successor Rights Agent; and in all such cases such Rights Certificates will have
the full force provided in the Rights Certificates and in this Agreement. 

(b)            
In case at any time the name of the Rights Agent is changed and at such time any
of the Rights Certificates shall have been countersigned but not delivered, the
Rights Agent may adopt the countersignature under its prior name and deliver
Rights Certificates so countersigned; and in case at that time any of the Rights
Certificates shall not have been countersigned, the Rights Agent may countersign
such Rights Certificates either in its prior name or in its changed name; and in
all such cases such Rights Certificates shall have the full force provided in
the Rights Certificates and in this Agreement. 

31 

4.3                         Duties
of Rights Agent 

The Rights Agent undertakes the duties and obligations imposed
by this Agreement upon the following terms and conditions, all of which the
Company and the holders of certificates for Shares and the holders of Rights
Certificates, by their acceptance thereof, shall be bound: 

(a)             the
Rights Agent may retain and consult with legal counsel (who may be legal counsel
for the Company) and the opinion of such counsel will be full and complete
authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion and the Rights
Agent may also consult with such other experts as the Rights Agent may
reasonably consider necessary or appropriate to properly carry out the duties
and obligations imposed under this Agreement (at the expense of the Company) and
the Rights Agent shall be entitled to act and rely in good faith on the advice
of any such expert; 

(b)             whenever
in the performance of its duties under this Agreement, the Rights Agent deems it
necessary or desirable that any fact or matter be proved or established by the
Company prior to taking or suffering any action hereunder, such fact or matter
(unless other evidence in respect thereof be herein specifically prescribed) may
be deemed to be conclusively proved and established by a certificate signed by a
Person believed by the Rights Agent to be the Chairman of the Board, President,
Chief Executive Officer or Chief Financial Officer of the Company and delivered
to the Rights Agent; and such certificate will be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate; 

(c)             the
Rights Agent will be liable hereunder only for its own negligence, bad faith or
willful misconduct; 

(d)            
the Rights Agent will not be liable for or by reason of any of the statements of
fact or recitals contained in this Agreement or in the certificates for Shares,
or the Rights Certificates (except its countersignature thereof) or be required
to verify the same, but all such statements and recitals are and will be deemed
to have been made by the Company only; 

(e)             the
Rights Agent will not be under any responsibility in respect of the validity of
this Agreement or the execution and delivery hereof (except the due
authorization, execution and delivery hereof by the Rights Agent) or in respect
of the validity or execution of any certificate for a Share or Rights
Certificate (except its countersignature thereof); nor will it be responsible
for any breach by the Company of any covenant or condition contained in this
Agreement or in any Rights Certificate; nor will it be responsible for any
change in the exercisability of the Rights (including the Rights becoming void
pursuant to Subsection 3.1(b) hereof) or any adjustment required under the
provisions of Section 2.3 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights after
receipt of the certificate contemplated by Section 2.3 describing any such
adjustment); nor will it by any act hereunder be deemed to make any
representation or warranty as to the authorization of any Shares to be issued
pursuant to this Agreement or any Rights or as to whether any Shares will, when
issued, be duly and validly authorized, executed, issued and delivered and fully
paid and non-assessable;

32 

(f)            
the Company agrees that it will perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such further and
other acts, instruments and assurances as may reasonably be required by the
Rights Agent for the carrying out or performing by the Rights Agent of the
provisions of this Agreement; 

(g)             the
Rights Agent is hereby authorized and directed to accept instructions in writing
with respect to the performance of its duties hereunder from any individual
believed by the Rights Agent to be the Chairman of the Board, President, Chief
Executive Officer or Chief Financial Officer of the Company, and to apply to
such individuals for advice or instructions in connection with its duties, and
it shall not be liable for any action taken or suffered by it in good faith in
accordance with instructions of any such individual. It is understood that
instructions to the Rights Agent shall, except where circumstances make it
impractical or the Rights Agent otherwise agrees, be given in writing and, where
not in writing, such instructions shall be confirmed in writing as soon as
practicable after the giving of such instructions; 

(h)             the
Rights Agent and any shareholder or stockholder, director, officer or employee
of the Rights Agent may buy, sell or deal in Shares, Rights 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 Rights Agent under this
Agreement. Nothing herein shall preclude the Rights Agent from acting in any
other capacity for the Company or for any other legal entity; and 

(i)             the
Rights Agent may execute and exercise any of the rights or powers hereby vested
in it or perform any duty hereunder either itself or by or through its attorneys
or agents, and the Rights Agent will not be answerable or accountable for any
act, default, neglect or misconduct of any such attorneys or agents or for any
loss to the Company resulting from any such act, default, neglect or misconduct,
provided reasonable care was exercised in the selection and continued employment
thereof. 

4.4                         Change
of Rights Agent 

The Rights Agent may resign and be discharged from its duties
under this Agreement upon 60 days notice (or such lesser notice as is acceptable
to the Company) in writing mailed to the Company and to each transfer agent of
Shares by registered or certified mail and to the holders of Rights in
accordance with Section 5.9. The Company may remove the Rights Agent upon 30
days notice in writing, mailed to the Rights Agent and to each transfer agent of
the Shares by registered or certified mail and to the holders of Rights in
accordance with Section 5.9. If the Rights Agent should resign or be removed or
otherwise become incapable of acting, the Company will appoint a successor to
the Rights Agent. If the Company fails to make such appointment within a period
of 30 days after such removal or after it has been notified in writing of such resignation or incapacity by the resigning or
incapacitated Rights Agent, then by prior written notice to the Company the
resigning Rights Agent or the holder of any Rights (which holder shall, with
such notice, submit such holder’s Rights Certificate, if any, for inspection by
the Company), may apply, at the Company’s expense, to any court of competent
jurisdiction for the appointment of a new Rights Agent. Any successor Rights
Agent, whether appointed by the Company or by such a court, shall be a Company
incorporated under the laws of Canada or a province thereof authorized to carry
on the business of a trust company in the Province of British Columbia. After
appointment, the successor Rights Agent will be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as Rights
Agent without further act or deed; but the predecessor Rights Agent shall, upon
payment in full of any outstanding amounts owing by the Company to the Rights
Agent under this Agreement, deliver and transfer to the successor Rights 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. Not later
than the effective date of any such appointment, the Company will file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Shares, and mail a notice thereof in writing to the holders of the Rights in
accordance with Section 5.9. Failure to give any notice provided for in this
Section 4.4, however, or any defect therein, shall not affect the legality or
validity of the resignation or removal of the Rights Agent or the appointment of
any successor Rights Agent, as the case may be. 

33 

ARTICLE 5 

MISCELLANEOUS 

5.1                        
Redemption and Waiver 

(a)            
The Board of Directors acting in good faith may, with the prior approval of the
holders of Voting Shares or of the holders of Rights given in accordance with
Section 5.1(i) or (j), as the case may be, at any time prior to the occurrence
of a Flip-in Event as to which the application of Section 3.1 has not been
waived pursuant to the provisions of this Section 5.1, elect to redeem all but
not less than all of the then outstanding Rights at a redemption price of
$0.00001 per Right appropriately adjusted in a manner analogous to the
applicable adjustment provided for in Section 2.3 in the event that an event of
the type analogous to any of the events described in Section 2.3 shall have
occurred (such redemption price being herein referred to as the “Redemption
Price”). 

(b)            
The Board of Directors acting in good faith may, with the prior approval of the
holders of Voting Shares given in accordance with Section 5.1(i), determine, at
any time prior to the occurrence of a Flip-in Event as to which the application
of Section 3.1 has not been waived pursuant to this Section 5.1, if such Flip-in
Event would occur by reason of an acquisition of Voting Shares otherwise than
pursuant to a Take-over Bid made by means of a take-over bid circular to all
holders of record of Voting Shares and otherwise than in the circumstances set
forth in Subsection 5.1(d), to waive the application of Section 3.1 to such
Flip-in Event. In the event that the Board of Directors proposes such a waiver,
the Board of Directors shall extend the Separation Time to a date subsequent to
and not more than ten Business Days
following the meeting of shareholders called to approve such waiver. 

34 

(c)             The
Board of Directors acting in good faith may, until the occurrence of a Flip-in
Event and upon prior written notice delivered to the Rights Agent, determine to
waive the application of Section 3.1 to such particular Flip-in Event, provided
that the Flip-in Event would occur by reason of a Take-over Bid made by way of
take-over bid circular sent to all holders of Voting Shares (which for greater
certainty shall not include the circumstances described in Subsection 5.1(d));
provided that if the Board of Directors waives the application of Section 3.1 to
a particular Flip-in Event pursuant to this Subsection 5.1(c), the Board of
Directors shall be deemed to have waived the application of Section 3.1 to any
other Flip-in Event subsequently occurring by reason of any Take-over Bid which
is made by means of a take-over bid circular to all holders of Voting Shares
prior to the expiry of any Take-over Bid in respect of which a waiver is, or is
deemed to have been, granted under this Subsection 5.1(c). 

(d)             Notwithstanding
the provisions of Subsections 5.1(b) and (c) hereof, the Board of Directors may
waive the application of Section 3.1 in respect of the occurrence of any Flip-in
Event if the Board of Directors has determined within ten Trading Days following
a Stock Acquisition Date that a Person became an Acquiring Person by
inadvertence and without any intention to become, or knowledge that it would
become, an Acquiring Person under this Agreement, and in the event such waiver
is granted by the Board of Directors, such Stock Acquisition Date shall be
deemed not to have occurred. Any such waiver pursuant to this Subsection 5.1(d)
must be on the condition that such Person, within 14 days after the foregoing
determination by the Board of Directors or such earlier or later date as the
Board of Directors may determine (the “Disposition Date”), has reduced
its Beneficial Ownership of Voting Shares such that the Person is no longer an
Acquiring Person. If the Person remains an Acquiring Person at the close of
business on the Disposition Date, the Disposition Date shall be deemed to be the
date of occurrence of a further Stock Acquisition Date and Section 3.1 shall
apply thereto. 

(e)             The
Board of Directors, shall, without further formality, be deemed to have elected
to redeem the Rights at the Redemption Price on the date that a Person which has
made a Permitted Bid, a Competing Permitted Bid or a Take-Over Bid in respect of
which the Board of Directors has waived, or is deemed to have waived, pursuant
to Subsection 5.1(c) the application of Section 3.1, takes up and pays for
Voting Shares in connection with such Permitted Bid, Competing Permitted Bid or
Take-over bid, as the case may be. 

(f)            
Where a Take-over Bid that is not a Permitted Bid Acquisition is withdrawn or
otherwise terminated after the Separation Time has occurred and prior to the
occurrence of a Flip-in Event, the Board of Directors may elect to redeem all
the outstanding Rights at the Redemption Price. Upon the Rights being redeemed
pursuant to this Subsection 5.1(f), all the provisions of this Agreement shall
continue to apply as if the Separation Time had not occurred and Rights
Certificates representing the number of Rights held by each holder of record of
Shares as of the Separation Time had not been mailed to each such holder and for all purposes of
this Agreement the Separation Time shall be deemed not to have occurred. 

35 

(g)            
If the Board of Directors elects or is deemed to have elected to redeem the
Rights, and, in circumstances in which Subsection 5.1(a) is applicable, such
redemption is approved by the holders of Voting Shares or the holders of Rights
in accordance with Subsection 5.1(i) or (j), as the case may be, the right to
exercise the Rights, will thereupon, without further action and without notice,
terminate and the only right thereafter of the holders of Rights shall be to
receive the Redemption Price. 

(h)            
Within 10 Business Days after the Board of Directors elects or is deemed to
elect, to redeem the Rights or if Subsection 5.1(a) is applicable within 10
Business Days after the holders of Shares of the holders of Rights have approved
a redemption of Rights in accordance with Section 5.1(i) or (j), as the case may
be, the Company shall give notice of redemption to the holders of the then
outstanding Rights by mailing such notice to each such holder at his last
address as it appears upon the registry books of the Rights Agent or, prior to
the Separation Time, on the registry books of the transfer agent for the Voting
Shares. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made. The Company may not redeem, acquire or purchase for value any
Rights at any time in any manner other than specifically set forth in this
Section 5.1 or in connection with the purchase of Shares prior to the Separation
Time. 

(i)             If
a redemption of Rights pursuant to Subsection 5.1(a) or a waiver of a Flip-in
Event pursuant to Section 5.1(b) is proposed at any time prior to the Separation
Time, such redemption or waiver shall be submitted for approval to the holders
of Voting Shares. Such approval shall be deemed to have been given if the
redemption or waiver is approved by the affirmative vote of a majority of the
votes cast by Independent Shareholders represented in person or by proxy at a
meeting of such holders duly held in accordance with applicable laws. 

(j)            
If a redemption of Rights pursuant to Subsection 5.1(a) is proposed at any time
after the Separation Time, such redemption shall be submitted for approval to
the holders of Rights. Such approval shall be deemed to have been given if the
redemption is approved by holders of Rights by a majority of the votes cast by
the holders of Rights represented in person or by proxy at and entitled to vote
at a meeting of such holders. For the purposes hereof, each outstanding Right
(other than Rights which are Beneficially Owned by any Person referred to in
clauses (i) to (v) inclusive of the definition of Independent Shareholders)
shall be entitled to one vote, and the procedures for the calling, holding and
conduct of the meeting shall be those, as nearly as may be, which are provided
in the Company’s by-laws and the British Columbia Business Corporations Act with
respect to meetings of shareholders of the Company. 

36 

5.2                         Expiration

No Person shall have any rights whatsoever pursuant to this
Agreement or in respect of any Right after the Expiration Time, except the
Rights Agent as specified in Section 4.1 of this Agreement. 

5.3                        
Issuance of New Rights Certificates 

Notwithstanding any of the provisions of this Agreement or the
Rights to the contrary, the Company may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by the Board of
Directors to reflect any adjustment or change in the number or kind or class of
securities purchasable upon exercise of Rights made in accordance with the
provisions of this Agreement. 

5.4                         Supplements
and Amendments 

(a)             The
Company may make amendments to this Agreement to correct any clerical or
typographical error or which are required to maintain the validity of this
Agreement as a result of any change in any applicable legislation or regulations
or rules thereunder. The Company may, prior to the date of the shareholders’
meeting to be held prior to the Meeting Deadline Date referred to in Section
5.15(b), supplement, amend, vary, rescind or delete any of the provisions of
this Agreement and the Rights without the approval of any holders of Rights or
Voting Shares in order to make any changes which the Board of Directors acting
in good faith may deem necessary or desirable. Notwithstanding anything in this
Section 5.4 to the contrary, no such supplement or amendment shall be made to
the provisions of Article 4 except with the written concurrence of the Rights
Agent to such supplement or amendment. 

(b)             Subject
to Subsection 5.4(a) and the prior approval of the Toronto Stock Exchange (if
required), the Company may, with the prior approval of the holders of Voting
Shares obtained as set forth below, at any time before the Separation Time,
supplement, amend, vary, rescind or delete any of the provisions of this
Agreement and the Rights (whether or not such action would materially adversely
affect the interests of the holders of Rights generally). Such consent shall be
deemed to have been given if the action requiring such approval is authorized by
the affirmative vote of a majority of the votes cast by Independent Shareholders
present or represented at and entitled to be voted at a meeting of the holders
of Voting Shares duly called and held in compliance with applicable laws and the
articles and by-laws of the Company. 

(c)             Subject
to Subsection 5.4(a), the Company may, with the prior approval of the holders of
Rights, at any time on or after the Separation Time, supplement, amend, vary,
rescind or delete any of the provisions of this Agreement and the Rights
(whether or not such action would materially adversely affect the interests of
the holders of Rights generally), provided that no such amendment, variation or
deletion shall be made to the provisions of Article 4 except with the written
concurrence of the Rights Agent thereto. 

(d)            
Any approval of the holders of Rights shall be deemed to have been given if the
action requiring such approval is authorized by the affirmative votes of the
holders of Rights present or represented at and
entitled to be voted at a meeting of the holders of Rights and representing a
majority of the votes cast in respect thereof. For the purposes hereof, each
outstanding Right (other than Rights which are void pursuant to the provisions
hereof) shall be entitled to one vote, and the procedures for the calling,
holding and conduct of the meeting shall be those, as nearly as may be, which
are provided in the Company’s by-laws with respect to meetings of shareholders
of the Company. 

37 

(e)             Any
amendments made by the Company to this Agreement pursuant to Subsection 5.4(a)
which are required to maintain the validity of this Agreement as a result of any
change in any applicable legislation or regulations or rules thereunder shall: 

(i)            
 if made before the Separation Time, be submitted to the shareholders of
the Company at the next meeting of shareholders and the shareholders may, by the
majority referred to in Subsection 5.4(b), confirm or reject such amendment;

(ii)            
if made after the Separation Time, be submitted to the holders of Rights at a
meeting to be called for on a date not later than immediately following the next
meeting of shareholders of the Company and the holders of Rights may, by
resolution passed by the majority referred to in Subsection 5.4(d), confirm or
reject such amendment. 

Any such amendment shall be effective
from the date of the resolution of the Board of Directors adopting such
amendment, until it is confirmed or rejected or until it ceases to be effective
(as described in the next sentence) and, where such amendment is confirmed, it
continues in effect in the form so confirmed. If such amendment is rejected by
the shareholders or the holders of Rights or is not submitted to the
shareholders or holders of Rights as required, then such amendment shall cease
to be effective from and after the termination of the meeting (or any
adjournment of such meeting) at which it was rejected or to which it should have
been but was not submitted or from and after the date of the meeting of holders
of Rights that should have been but was not held, and no subsequent resolution
of the Board of Directors to amend this Agreement to substantially the same
effect shall be effective until confirmed by the shareholders or holders of
Rights as the case may be. 

5.5                        
Fractional Rights and Fractional Shares 

(a)            
The Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates which evidence fractional Rights. After the Separation Time,
in lieu of issuing fractional Rights, the Company shall pay to the holders of
record of the Rights Certificates (provided the Rights represented by such
Rights Certificates are not void pursuant to the provisions of Subsection
3.1(b), at the time such fractional Rights would otherwise be issuable), an
amount in cash equal to the fraction of the Market Price of one whole Right that
the fraction of a Right that would otherwise be issuable is of one whole Right.

38 

(b)            
The Company shall not be required to issue fractions of Shares upon exercise of
Rights or to distribute certificates which evidence fractional Shares. In lieu
of issuing fractional Shares, the Company shall pay to the registered holders of
Rights Certificates, at the time such Rights are exercised as herein provided,
an amount in cash equal to the fraction of the Market Price of one Share that
the fraction of a Share that would otherwise be issuable upon the exercise of
such Right is of one whole Share at the date of such exercise. 

5.6                         Rights
of Action 

Subject to the terms of this Agreement, all rights of action in
respect of this Agreement, other than rights of action vested solely in the
Rights Agent, are vested in the respective holders of the Rights. Any holder of
Rights, without the consent of the Rights Agent or of the holder of any other
Rights, may, on such holder’s own behalf and for such holder’s own benefit and
the benefit of other holders of Rights enforce, and may institute and maintain
any suit, action or proceeding against the Company to enforce such holder’s
right to exercise such holder’s Rights, or Rights to which such holder is
entitled, in the manner provided in such holder’s Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against actual or threatened violations of the obligations of
any Person subject to, this Agreement. 

5.7                        
Regulatory Approvals 

Any obligation of the Company or action or event contemplated
by this Agreement shall be subject to the receipt of any requisite approval or
consent from any governmental or regulatory authority, including without
limiting the generality of the foregoing, any necessary approvals of The Toronto
Stock Exchange, or any other applicable stock exchange or market. 

5.8                         Notice
of Proposed Actions 

In case the Company shall propose after the Separation Time and
prior to the Expiration Time to effect the liquidation, dissolution or winding
up of the Company or the sale of all or substantially all of the Company’s
assets, then, in each such case, the Company shall give to each holder of a
Right, in accordance with Section 5.9 hereof, a notice of such proposed action,
which shall specify the date on which such Flip-in Event, liquidation,
dissolution, or winding up is to take place, and such notice shall be so given
at least 20 Business Days prior to the date of taking of such proposed action by
the Company. 

5.9                         Notices

(a)             Notices
or demands authorized or required by this Agreement to be given or made by the
Rights Agent or by the holder of any Rights to or on the Company shall be
sufficiently given or made if delivered, sent by registered or certified mail,
postage prepaid (until another address is filed in writing with the Rights
Agent), or sent by facsimile or other form of recorded electronic communication,
charges prepaid and confirmed in writing, as follows: 

39 

Northern Dynasty Minerals Ltd.

15th Floor 
1040 West Georgia Street 
Vancouver, BC V6E 4H1 

Attention:             President
and CEO

Facsimile:            
 (604) 684-6365 

(b)            
Notices or demands authorized or required by this Agreement to be given or made
by the Company or by the holder of any Rights to or on the Rights Agent shall be
sufficiently given or made if delivered, sent by registered or certified mail,
postage prepaid (until another address is filed in writing with the Company), or
sent by facsimile or other form of recorded electronic communication, charges
prepaid and confirmed in writing, as follows: 

Computershare Investor Services Inc.

3rd Floor 
510 Burrard Street 
Vancouver, BC V6C 3B9 

Attention:             General
Manager, Client Services

Facsimile:             
(604) 661-9401 

(c)            
Notices or demands authorized or required by this Agreement to be given or made
by the Company or the Rights Agent to or on the holder of any Rights shall be
sufficiently given or made if delivered or sent by first class mail, postage
prepaid, addressed to such holder at the address of such holder as it appears
upon the register of the Rights Agent or, prior to the Separation Time, on the
register of the Company for its Shares. Any notice which is mailed or sent in
the manner herein provided shall be deemed given, whether or not the holder
receives the notice. 

(d)            
Any notice given or made in accordance with this Section 5.9 shall be deemed to
have been given and to have been received on the day of delivery, if so
delivered, on the third Business Day (excluding each day during which there
exists any general interruption of postal service due to strike, lockout or
other cause) following the mailing thereof, if so mailed, and on the day of
telegraphing, telecopying or sending of the same by other means of recorded
electronic communication (provided such sending is during the normal business
hours of the addressee on a Business Day and if not, on the first Business Day
thereafter). Each of the Company and the Rights Agent may from time to time
change its address for notice by notice to the other given in the manner
aforesaid. 

5.10                      Costs
of Enforcement 

The Company agrees that if the Company fails to fulfil any of
its obligations pursuant to this Agreement, then the Company will reimburse the
holder of any Rights for the costs and expenses (including legal fees) incurred
by such holder, on a solicitor and his own client basis, to enforce his rights
pursuant to any Rights or this Agreement. 

40 

5.11                
      Successors 

All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Rights Agent shall bind and enure to the
benefit of their respective successors and assigns hereunder. 

5.12                 
     Benefits of this Agreement 

Nothing in this Agreement shall be construed to give to any
Person other than the Company, the Rights Agent and the holders of the Rights
any legal or equitable right, remedy or claim under this Agreement; further,
this Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the holders of the Rights. 

5.13          
            Governing
Law 

This Agreement and each Right issued hereunder shall be deemed
to be a contract made under the laws of the Province of British Columbia and for
all purposes shall be governed by and construed in accordance with the laws of
such Province applicable to contracts to be made and performed entirely within
such Province. 

5.14                      
Severability 

If any term or provision hereof or the application thereof to
any circumstance shall, in any jurisdiction and to any extent, be invalid or
unenforceable, such term or provision shall be ineffective only as to such
jurisdiction and to the extent of such invalidity or unenforceability in such
jurisdiction without invalidating or rendering unenforceable or ineffective the
remaining terms and provisions hereof in such jurisdiction or the application of
such term or provision in any other jurisdiction or to circumstances other than
those as to which it is specifically held invalid or unenforceable. 

5.15                        
Effective Date 

(a)             Subject
to Section 5.15(b), this Agreement: 

(i)        
     shall be effective and in full force and effect in
accordance with its terms from and after the Effective Date, and shall
constitute the entire agreement between the parties pertaining to the subject
matter hereof, as of such time on the Effective Date; and (ii) shall expire and
be of no further force or effect from and after the earlier of (the
“Expiration Time”): (i) the Termination Time, and 

(ii)            
the time at which the annual meeting of shareholders of the Company held in 2016
terminates. 

(b)             Notwithstanding
Section 5.15(a), if this Agreement is not confirmed by a resolution passed by a
majority of the votes cast by Independent Shareholders who vote in respect of
approval of this Agreement and the Rights Plan at a meeting of shareholders to
be held not later than the Meeting Deadline Date, then this Plan and all
outstanding Rights shall terminate and be null and
void and of no further force and effect from and after the Close of Business on
the Meeting Deadline Date. 

41 

5.16                       Determinations
and Actions by the Board of Directors 

All actions, calculations and determinations (including all
omissions with respect to the foregoing) which are done or made or approved by
the Board of Directors in connection herewith, in good faith, shall not subject
the Board of Directors or any director of the Company to any liability to the
holders of the Rights. 

5.17                       Compliance
With Money Laundering Legislation 

The Rights Agent shall retain the right not to act and shall
not be liable for refusing to act if, due to a lack of information or for any
other reason whatsoever, the Rights Agent reasonably determines that such an act
might cause it to be in non-compliance with any applicable anti-money laundering
or anti-terrorist legislation, regulation or guideline. Further, should the
Rights Agent reasonably determine at any time that its acting under this
Agreement has resulted in it being in non-compliance with any applicable
anti-money laundering or anti-terrorist legislation, regulation or guideline,
then it shall have the right to resign on 10 days’ written notice to the
Company, provided: (i) that the Rights Agent’s written notice shall describe the
circumstances of such non-compliance; and (ii) that if such circumstances are
rectified to the Rights Agent’s satisfaction within such 10-day period, then
such resignation shall not be effective. 

5.18                       Privacy
Provision 

The parties acknowledge that federal and/or provincial
legislation that addresses the protection of individual’s personal information
(collectively, “Privacy Laws”) may apply to obligations and activities
under this Agreement. Despite any other provision of this Agreement, neither
party will take or direct any action that would contravene, or cause the other
to contravene, applicable Privacy Laws. The Company will, prior to transferring
or causing to be transferred personal information to the Rights Agent, obtain
and retain required consents of the relevant individuals to the collection, use
and disclosure of their personal information, or will have determined that such
consents either have previously been given upon which the parties can rely or
are not required under applicable Privacy Laws. 

5.19                       Declaration
as to Non-Canadian Holders 

If in the opinion of the Board of Directors (who may rely upon
the advice of counsel) any action or event contemplated by this Agreement would
require compliance by the Company with the securities laws or comparable
legislation of a jurisdiction outside Canada or the United States, the Board of
Directors acting in good faith shall take such actions as it may deem
appropriate to ensure such compliance. In no event shall the Company or the
Rights Agent be required to issue or deliver Rights or securities issuable on
exercise of Rights to persons who are citizens, residents or nationals of any
jurisdiction other than Canada or the United States, in which such issue or
delivery would be unlawful without registration of the relevant Persons or
securities for such purposes. 

42 

5.20                       Time
of the Essence 

Time shall be of the essence in this Agreement. 

5.21                       Execution
in 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 one and the same
instrument. 

IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of May 17, 2013. 

NORTHERN DYNASTY MINERALS LTD. 

 

	Per:   ________________________________________     
    
	         Authorized
      Signatory 
	  
	  
	Per:   ________________________________________
	               
         Authorized Signatory 

COMPUTERSHARE INVESTOR SERVICES INC. 

 

	Per:   ________________________________________
	         
      Account Manager 
	  
	  
	Per:   ________________________________________
	         
      Account Manager 

43 

ATTACHMENT 1 

NORTHERN DYNASTY MINERALS LTD. 

SHAREHOLDER RIGHTS AGREEMENT (as defined below) 

[Form of Rights Certificate] 

	Certificate No. 	Rights 

THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
TRUST, AND AMENDMENT OR TERMINATION ON THE TERMS SET FORTH IN THE SHAREHOLDER
RIGHTS AGREEMENT (AS DEFINED BELOW). UNDER CERTAIN CIRCUMSTANCES (SPECIFIED IN
SUBSECTION 3.1(b) OF THE SHAREHOLDER RIGHTS AGREEMENT (AS DEFINED BELOW)),
RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR CERTAIN RELATED PARTIES, OR
TRANSFEREES OF AN ACQUIRING PERSON OR CERTAIN RELATED PARTIES, MAY BECOME VOID.

Rights Certificate 

This certifies that , or registered assigns, is the registered
holder of the number of Rights set forth above, each of which entitles the
registered holder thereof, subject to the terms, provisions and conditions of
the Shareholder Rights Plan Agreement, dated as of May 17, 2013 as the same may
be amended or supplemented from time to time (the “Shareholder Rights
Agreement”), between Northern Dynasty Minerals Ltd., a Company incorporated
under the British Columbia Business Corporations Act, (the “Company”) and
Computershare Investor Services Inc., a trust company incorporated under the
laws of Canada (the “Rights Agent”) (which term shall include any
successor Rights Agent under the Shareholder Rights Agreement), to purchase from
the Company at any time after the Separation Time (as such term is defined in
the Shareholder Rights Agreement) and prior to the Expiration Time (as such term
is defined in the Shareholder Rights Agreement), one fully paid common share of
the Company (a “Share”) at the Exercise Price referred to below, upon
presentation and surrender of this Rights Certificate with the Form of Election
to Exercise (in the form provided hereinafter) duly executed and submitted to
the Rights Agent at its principal office in any of the cities of Vancouver and
Toronto. Until adjustment thereof in certain events as provided in the
Shareholder Rights Agreement, the Exercise Price shall be: 

(a)            
until the Separation Time, an amount equal to three times the Market Price (as
such term is defined in the Shareholder Rights Agreement), from time to time,
per Share; and 

(b)            
from and after the Separation Time, an amount equal to three times the Market
Price, as at the Separation Time, per Share. 

In certain circumstances described in the Shareholder Rights
Agreement, each Right evidenced hereby may entitle the registered holder thereof
to purchase or receive assets, debt securities or shares of the Company other than Shares, or more or less than
one Share, all as provided in the Shareholder Rights Agreement. 

1 

This Rights Certificate is subject to all of the terms and
provisions of the Shareholder Rights Agreement, which terms and provisions are
incorporated herein by reference and made a part hereof and to which Shareholder
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Rights Agent, the Company and the holders of the Rights Certificates. Copies of
the Shareholder Rights Agreement are on file at the registered office of the
Company and are available upon request. 

This Rights Certificate, with or without other Rights
Certificates, upon surrender at any of the offices of the Rights Agent
designated for such purpose, may be exchanged for another Rights Certificate or
Rights Certificates of like tenor and date evidencing an aggregate number of
Rights equal to the aggregate number of Rights evidenced by the Rights
Certificate or Rights Certificates surrendered. If this Rights Certificate shall
be exercised in part, the registered holder shall be entitled to receive, upon
surrender hereof, another Rights Certificate or Rights Certificates for the
number of whole Rights not exercised. 

Subject to the provisions of the Shareholder Rights Agreement,
the Rights evidenced by this Rights Certificate may be, and under certain
circumstances are required to be, redeemed by the Company at a redemption price
of $0.00001 per Right. 

No fractional Shares will be issued upon the exercise of any
Right or Rights evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Shareholder Rights Agreement. 

No holder of this Rights Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose the holder of
Shares or of any other securities which may at any time be issuable upon the
exercise hereof, nor shall anything contained in the Shareholder Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the Rights of a shareholder of the Company or any right to vote for the
election of directors or upon any matter submitted to shareholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting shareholders (except as
provided in the Shareholder Rights Agreement), or to receive dividends or
subscription rights, or otherwise, until the Rights evidenced by this Rights
Certificate shall have been exercised as provided in the Shareholder Rights
Agreement. 

2 

This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent. 

WITNESS the facsimile signature of the proper officer of the
Company and its corporate seal. 

 

Date: ____________________________________

NORTHERN DYNASTY MINERALS LTD. 

 

	Per:   ________________________________________
	         
      Authorized Signatory 
	  
	  
	Per:   ________________________________________
	         
      Authorized Signatory 

 

Countersigned: 

 

COMPUTERSHARE INVESTOR SERVICES INC. 

 

	Per:   ________________________________________
	         
      Account Manager 
	  
	  
	Per:   ________________________________________
	         
      Account Manager 

3 

FORM OF ASSIGNMENT 

(To be executed by the registered holder if such holder desires
to transfer the Rights Certificate.) 

FOR VALUE RECEIVED
_____________________________________________ hereby sells, assigns and
transfers unto 

__________________________________
____________________________________________________________________________________________________________

                                                                                                            
(Please print name and address of transferee.) 

the Rights represented by this Rights Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint _______________________________________________, as
attorney, to transfer the within Rights on the books of the Company, with full
power of substitution. 

	Dated:  _________________________________________	  
	 	Signature 
	 	  
	 	  
	 	(Please print name of Signatory)

Signature Guaranteed: (Signature must correspond to name as
written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.) Signature must be
guaranteed by a Canadian chartered bank or trust company, a member firm of a
recognized stock exchange in Canada, a registered national securities exchange
in the United States, a member of the Investment Dealers Association of Canada
or National Association of Securities Dealers, Inc. or a commercial bank or
trust company having an office or correspondent in Canada or the United States
or a member of the Securities Transfer Association Medallion (Stamp) Program.

.....................................................................................................................................................................................................................

CERTIFICATE 
(To be completed if true.) 

The undersigned party transferring Rights hereunder, hereby
represents, for the benefit of all holders of Rights and Shares, that the Rights
evidenced by this Rights Certificate are not, and, to the knowledge of the
undersigned, have never been, Beneficially Owned by an Acquiring Person or an
Affiliate or Associate thereof or a Person acting jointly or in concert with any
of the foregoing. Capitalized terms shall have the meaning ascribed thereto in
the Shareholder Rights Agreement. 

	 	 
	 	Signature 
	 	 
	 	 
	 	(Please print name of Signatory)

.....................................................................................................................................................................................................................

(To be attached to each Rights Certificate.) 

4 

FORM OF ELECTION TO EXERCISE 

(To be executed by the registered holder if such holder desires
to exercise the Rights Certificate.) 

TO:
_________________________________________________________

The undersigned hereby irrevocably elects to exercise
_____________________ whole Rights represented by the attached Rights
Certificate to purchase the Shares or other securities, if applicable, issuable
upon the exercise of such Rights and requests that certificates for such
securities be issued in the name of: 

	 
	(Name) 
	 
	 
	(Address) 
	 
	 
	(City and Province) 
	 
	 
	Social Insurance Number or other taxpayer identification
      number. 

	Dated:  
    ________________________________________	 
    
	 	Signature 
	 	 
	 	  
	 	(Please print name of Signatory)

If such number of Rights shall not be all the Rights evidenced
by this Rights Certificate, a new Rights Certificate for the balance of such
Rights shall be registered in the name of and delivered to: 

	 
	(Name) 
	 
	 
	(Address) 
	 
	 
	(City and Province) 
	 
	 
	Social Insurance Number or other taxpayer identification
      number. 

	Dated:  
    _________________________________________	 
	 	Signature 
	 	 
	 	  
	 	(Please print name of Signatory)

Signature Guaranteed: (Signature must correspond to name as
written upon the face of this Rights Certificate in every particular, without
alteration or enlargement or any change whatsoever.) 

Signature must be guaranteed by a Canadian chartered bank or
trust company, a member firm of a recognized stock exchange in Canada a
registered national securities exchange in the United States, a member of the
Investment Dealers Association of Canada or National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in Canada or the United States or a member of the Securities
Transfer Association Medallion (Stamp) Program. 

5 

CERTIFICATE 
(To be completed if true.) 

The undersigned party exercising Rights hereunder, hereby
represents, for the benefit of all holders of Rights and Shares, that the Rights
evidenced by this Rights Certificate are not, and, to the knowledge of the
undersigned, have never been, Beneficially Owned by an Acquiring Person or an
Affiliate or Associate thereof or a Person acting jointly or in concert with any
of the foregoing. Capitalized terms shall have the meaning ascribed thereto in
the Shareholder Rights Agreement. 

	 	 
	 	Signature 
	 	 
	 	 
	 	(Please print name of Signatory)

.....................................................................................................................................................................................................................

(To be attached to each Rights Certificate.) 

6 

NOTICE 

In the event the certification set forth above in the Forms of
Assignment and Election to Exercise is not completed, the Company will deem the
Beneficial Owner of the Rights evidenced by this Rights Certificate to be an
Acquiring Person or an Affiliate or Associate thereof (as defined in the
Shareholder Rights Agreement). No Rights Certificates shall be issued in
exchange for a Rights Certificate owned or deemed to have been owned by an
Acquiring Person or an Affiliate or Associate thereof, or by a Person acting
jointly or in concert with an Acquiring Person or an Affiliate or Associate
thereof. 

7

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