Document:

ex412form20f.htm

Execution Version

EPM MINING VENTURES INC.

and

GUSIUTE HOLDINGS (UK) LIMITED

	  

RELATIONSHIP AGREEMENT

September 2, 2011

	  

 

 

  

  

  

 

 

 

 

TABLE OF CONTENTS

 

	  	  	
Page

	  	  	  
	
ARTICLE 1

	
INTERPRETATION

	
1

	
Section 1.1

	
Definitions

	
1

	
Section 1.2

	
Time of the Essence

	
3

	
Section 1.3

	
Calculation of Time

	
3

	
Section 1.4

	
Business Days

	
3

	
Section 1.5

	
Headings

	
3

	
Section 1.6

	
Plurals and Gender

	
3

	
Section 1.7

	
Statutory References

	
4

	
Section 1.8

	
Other References

	
4

	
ARTICLE 2

	
CORPORATE GOVERNANCE

	
4

	
Section 2.1

	
Composition of the Board of Directors

	
4

	
Section 2.2

	
Nominating Procedure

	
5

	
Section 2.3

	
Conditions

	
6

	
Section 2.4

	
Director Indemnification and Insurance

	
6

	
ARTICLE 3

	
PRE-EMPTIVE RIGHTS

	
6

	
Section 3.1

	
Anti-Dilution Right

	
6

	
Section 3.2

	
Limitation

	
8

	
ARTICLE 4

	
STANDSTILL AND CHANGE OF CONTROL

	
8

	
Section 4.1

	
Standstill

	
 8

	
Section 4.2

	
Change of Control Transaction

	
 9

	
Section 4.3

	
Affiliates

	
 9

	
Section 4.4

	
No Frustration

	
 10

	
Section 4.5

	
Fiduciary Duties

	
 10

	
Section 4.6

	
Other Actions

	
 10

	
ARTICLE 5

	
TRANSFER OF SECURITIES

	
10

	
Section 5.1

	
Restriction on Transfer

	
 10

	
Section 5.2

	
Affiliates

	
 11

	
ARTICLE 6

	
REPRESENTATIONS AND WARRANTIES

	
11

	
Section 6.1

	
Representations and Warranties of the Investor

	
 11

	
Section 6.2

	
Representations and Warranties of the Corporation

	
 11

	
ARTICLE 7

	
GENERAL

	
12

	
Section 7.1

	
Termination

	
 12

	
Section 7.2

	
Application of this Agreement

	
12

	
Section 7.3

	
No Partnership

	
12

	
Section 7.4

	
Public Filing

	
 12

	
Section 7.5

	
Expenses

	
13

	
Section 7.6

	
Further Assurances

	
13

	
Section 7.7

	
Assignment and Enurement

	
13

	
Section 7.8

	
Entire Agreement

	
13

	
Section 7.9

	
Waiver

	
13

	
Section 7.10

	
Notices

	
 13

	
Section 7.11

	
Severability

	
 14

	
Section 7.12

	
Counterparts; Facsimile and Electronic Signatures

	
15

	
Section 7.13

	
Governing Law and Jurisdiction for Disputes

	
 15

	
Section 7.14

	
Third-Party Beneficiaries

	
 15

	
Section 7.15

	
Remedies

	
15

 

 

  

  

  

 

 

RELATIONSHIP AGREEMENT

This Relationship Agreement (the “Agreement”) is made as of the 2nd day of September, 2011, between EPM Mining Ventures Inc., a corporation governed by the laws of the Yukon Territory (the “Corporation”), and Gusiute Holdings (UK) Limited, a company incorporated in England and Wales with registered number 6445043 (the “Investor”).

AND WHEREAS, pursuant to the terms of the Subscription Agreement dated August 23, 2011, between the Corporation and the Investor (the “Subscription Agreement”), the Corporation has issued to the Investor on a private placement basis one unit of the Corporation (the “Unit”), such Unit comprised of 8,000,000 common shares in the capital of the Corporation (each, a “Common Share”) and 8,000,000 common share purchase warrants (each, a “Warrant”) entitling the Investor to acquire up to an additional 8,000,000 Common Shares on the terms and conditions thereof;

AND WHEREAS, the Parties desire to enter into this Agreement to provide the Investor with certain rights in respect of its security holdings in the Corporation;

NOW THEREFORE, in consideration of the mutual covenants in this Agreement and for other consideration (the receipt and sufficiency of which are acknowledged), the Parties agree as follows:

ARTICLE 1

INTERPRETATION

Section 1.1                      Definitions

In this Agreement:

“Affiliate” of any Person (other than the Investor or an Affiliate of the Investor) means another Person that would be considered to be affiliate of such first mentioned Person for the purposes of National Instrument 45-106 — Prospectus and Registration Exemptions and with respect to the Investor or an Affiliate of the Investor means any of Tata Chemicals Limited and its subsidiaries (within the meaning of National Instrument 45-106 — Prospectus and Registration Exemptions);

“Agreement,” “this Agreement,” “the Agreement,” “hereof,” “herein,” “hereto,” “hereby,” “hereunder,” and similar expressions mean this Agreement, including all of its schedules and all instruments supplementing, amending, or confirming this Agreement.  All references to “Articles” or “Sections” refer to the specified Article or Section of this Agreement;

“Board” means the board of directors of the Corporation;

“Business Day” means any day which is not a Saturday, a Sunday, or a day on which the principal commercial banks located in the City of Toronto, Ontario, are not open for business during normal banking hours;

“Change of Control Transaction” means: (i) a transaction that would result in the acquisition or purchase, directly or indirectly, of: (A) assets of the Corporation and/or one or more of its subsidiaries, the fair market value of which assets, in the aggregate, constitutes 45% or more of the fair market value of the consolidated assets of the Corporation and its subsidiaries, taken as a whole; (B) voting or equity securities of the Corporation where those securities, together with the offeror’s securities, constitute, in the aggregate, 45% or more of the outstanding voting or equity securities of the Corporation; or (C) 45% or more of the outstanding voting or equity securities of one or more of the Corporation’s subsidiaries, the fair market value of whose assets, in the aggregate, constitute 45% or more of the fair market value of the consolidated assets of the Corporation and its subsidiaries, taken as a whole; or (ii) a plan of arrangement, merger, amalgamation, consolidation, share exchange, business combination, reorganization, recapitalization, liquidation, dissolution, or other transaction involving the Corporation or any of its subsidiaries and an arm’s-length third party that, if consummated, would result in the Corporation not being the surviving entity or Persons that do not own more than 45% of the outstanding voting or equity securities of the Corporation immediately prior to that transaction owning 45% or more of the outstanding voting or equity securities of the surviving entity;

 

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“Common Shares” has the meaning ascribed thereto in the recitals;

“Conditions” has the meaning ascribed thereto in Section 2.3(1);

“Corporation” has the meaning ascribed thereto in the recitals;

“Cure Period” has the meaning ascribed thereto in Section 7.1;

“Directors Election Meeting” means a meeting of shareholders of the Corporation at which directors of the Corporation are to be elected;

“Equity and Voting Interest of the Investor” means at any particular time, the quotient that is obtained by dividing: (i) the aggregate number of Common Shares beneficially owned by the Investor and its Affiliates at such time as disclosed on www.sedi.ca at such time; by (ii) the aggregate number of Common Shares issued and outstanding at such time, in the case of each of (i) and (ii) assuming conversion of any outstanding Non-Voting Shares, but otherwise on a non-diluted basis;

“Extension” has the meaning ascribed thereto in Section 7.1;

“Extraordinary Transaction” has the meaning ascribed thereto in Section 4.1(1);

“Fundamental Change” means the occurrence of any of the following: (i) a liquidation, dissolution, or winding up of the Corporation; (ii) the delisting of the Common Shares from the TSX Venture Exchange or TSX or the Company ceasing to be a reporting issuer in Canada; and (iii) the completion of a Change of Control Transaction;

“Investor” has the meaning ascribed thereto in the recitals;

“Investor Acquisition Proposal” has the meaning ascribed thereto in Section 4.2(1);

“Investor Nominee” has the meaning ascribed thereto in Section 2.1(2);

“Issue Price” has the meaning ascribed thereto in Section 3.1(2);

“Nomination Letter” has the meaning ascribed thereto in Section 2.2(1);

“Non-Voting Shares” means the non-voting common shares in the capital of the Corporation;

“Offered Securities” has the meaning ascribed thereto in Section 3.1(1);

“Parties” means the parties to this Agreement and “Party” means any of them;

“Person” means an individual, body corporate with or without share capital, partnership, joint venture, entity, unincorporated association, syndicate, firm, sole proprietorship, trust, pension fund, union, board, tribunal, governmental or quasi-governmental authority, and the heirs, beneficiaries, executors, legal representatives, or administrators of an individual;

“Pre-Emptive Offer” has the meaning ascribed thereto in Section 3.1(1);

“Pre-Emptive Securities” has the meaning ascribed thereto in Section 3.1(1);

“Proposal Period” has the meaning ascribed thereto in Section 4.2(1);

“Registration Rights Agreement” means the registration rights agreement dated September 2, 2011, between the Corporation and the Investor;

 

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“Release Date” has the meaning ascribed thereto in Section 4.2(1);

“Securities Act” means the Securities Act (Ontario), as it may be amended from time to time, and any successor legislation;

“Standstill Period” has the meaning ascribed thereto in Section 4.1(1);

“Standstill Restrictions” has the meaning ascribed thereto in Section 4.1(1);

“Standstill Termination Date” means the date that is five years from the date of this Agreement;

“Subscription Agreement” has the meaning ascribed thereto in the recitals;

“Subscription Notice” has the meaning ascribed thereto in Section 3.1(3);

“Transaction Agreements” means this Agreement, the Subscription Agreement, the Registration Rights Agreement, and the Warrant Agreement governing the Warrants;

“Transfer” has the meaning ascribed to that term in Section 5.1(1);

“Unit” has the meaning ascribed thereto in the recitals;

“Warrant” has the meaning ascribed thereto in the recitals; and

“Yukon BCA” means the Business Corporations Act (Yukon).

Section 1.2                      Time of the Essence

Time shall be of the essence of each provision of this Agreement.  Any extension, waiver, or variation of any provision of this Agreement shall not be deemed to affect this provision and there shall be no implied waiver of this provision.

Section 1.3                      Calculation of Time

Unless otherwise specified, time periods within or following which any act is to be done shall be calculated by excluding the day on which the period commences and including the day on which the period ends.

Section 1.4                      Business Days

Whenever any action to be taken pursuant to this Agreement would otherwise be required to be taken or made on a day that is not a Business Day, such action shall be taken on the first Business Day following such day.

Section 1.5                      Headings

The descriptive headings preceding Articles and Sections of this Agreement are inserted solely for convenience of reference and are not intended as complete or accurate descriptions of the content of such Articles or Sections.  The division of this Agreement into Articles and Sections shall not affect the interpretation of this Agreement.

Section 1.6                      Plurals and Gender

Words in the singular include the plural and vice versa and words in one gender include all genders.

 

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Section 1.7                      Statutory References

Any reference to a statute shall mean the statute in force as at the date of this Agreement (together with all regulations promulgated thereunder) as the same may be amended, re-enacted, consolidated, or replaced from time to time, and any successor statute thereto, unless otherwise stated.

Section 1.8                      Other References

“Include,” “includes,” and “including” shall be deemed to be followed by “without limitation” whether or not they are in fact followed by such words or words of like import.

ARTICLE 2

CORPORATE GOVERNANCE

Section 2.1                      Composition of the Board of Directors

	
(1)

	
During the term of this Agreement, the size of the Board shall be fixed at nine directors.

	
(2)

	
Subject to Section 2.1(3), the Investor will be entitled to designate a number of individuals (each, an “Investor Nominee”) that is equal to the number of Investor Nominees determined in accordance with Section 2.1(3) to be nominated by the Corporation for election as directors of the Corporation and to be presented to the shareholders of the Corporation as part of the management proposed list of directors.

	
(3)

	
Subject to Section 2.1(5):

	
  

	
(a)

	
so long as the Equity and Voting Interest of the Investor is greater than or equal to 99.9%, the Corporation will include nine Investor Nominees among the Corporation’s nominees for election as directors of the Corporation at each Directors Election Meeting;

	
  

	
(b)

	
if the Equity and Voting Interest of the Investor is less than 99.9% but greater than or equal to 15%, the Corporation will include no less than that number of Investor Nominees as is set out in the table below among the Corporation’s nominees for election as directors of the Corporation at each Directors Election Meeting:

	
Equity and Voting Interest of Investor

	
Number of Investor Nominees

	  	  
	
less than 99.9% but not less than 88.8%

	
8

	
less than 88.8% but not less than 77.7%

	
7

	
less than 77.7% but not less than 66.6%

	
6

	
less than 66.6% but not less than 55.5%

	
5

	
less than 55.5% but not less than 44.4%

	
4

	
less than 44.4% but not less than 33.3%

	
3

	
less than 33.3% but not less than 22.2%

	
2

	
less than 22.2% but not less than 15%

	
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(c)

	
without derogating from Section 2.1(1) and notwithstanding Sections 2.1(3)(a) and (b), if the Board does not consist of nine members at any time then the Corporation will include among the Corporation’s nominees for election as directors of the Corporation at any Directors Election Meeting no less than that number of Investor Nominees that represents the same percentage of the number of board members (rounded down to the next whole number) that is equal to the percentage of the board members as the Investor would be entitled to under this Agreement based on the assumption that the Board consists of nine members.

 

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(4)

	
For greater certainty, the Corporation shall: (i) include all of the Investor Nominees in the management information circular and form of proxy relating to the applicable Directors Election Meeting as nominees of the Corporation for election to the Board; (ii) solicit proxies from shareholders of the Corporation in favour of the election of such Investor Nominees as directors of the Corporation; and (iii) recommend to shareholders of the Corporation that they vote in favour of the election of such Investor Nominees as directors of the Corporation.

	
(5)

	
Notwithstanding Section 2.1(3) and commencing on the day following the first Directors Election Meeting that is held following the expiration or termination of the Warrants (and the issuance of shares thereunder) at which the number of nominees for election as directors of the Corporation that may be designated by the Investor reflect the number of nominees to which the Investor is entitled under Section 2.1(3), the Corporation shall not be required to include more than one additional Investor Nominee as part of the Corporation’s nominees for election as directors of the Corporation at a Directors Election Meeting in addition to the number of Investor Nominees that the Corporation was required in the preceding calendar year to include among the Corporation’s nominees for election as directors of the Corporation at the Directors Election Meeting in such calendar year.

	
(6)

	
So long as the Equity and Voting Interest of the Investor is less than 50%, the Investor shall, and shall cause its Affiliates to: (a) vote or cause to be voted any Common Shares that are beneficially owned by the Investor or its Affiliates, as the case may be, in favour of the Corporation’s nominees for election as directors of the Corporation at each Directors Election Meeting, provided that such slate of director nominees of the Corporation includes no less than the number of Investor Nominees required pursuant to Section 2.1(3); or (b) upon the written direction of the Corporation delivered no later than two Business Days before a Directors Election Meeting, in lieu of voting in accordance with subsection (a), not vote or cause not to be voted any Common Shares that are beneficially owned by the Investor or its Affiliates, as the case may be, in favour of any nominees for election as directors of the Corporation at such Directors Election Meeting other than nominees of the Corporation, provided that the Corporation has nominated a slate of director nominees at such meeting and such slate includes no less than the number of Investor Nominees required pursuant to Section 2.1(3) and provided further that this subsection (b) shall not prevent the Investor and its Affiliates from voting in favour of the election of the Investor Nominees as directors of the Corporation.

	
(7)

	
If at any time a vacancy on the Board is created as a result of the death, resignation, disqualification, or removal of an Investor Nominee, then the Investor and the Corporation (acting through the Board) shall work together in good faith to promptly fill such vacancy or replace such nominee with an individual designated by the Investor in its sole discretion who meets the Conditions below, and thereafter such individual shall serve and/or be nominated as one of the “Investor Nominees” under this Agreement.

	
(8)

	
Prior to the execution of this Agreement, the Investor has proposed De Lyle Bloomquist and Ramakrishnan Mukundan as the initial Investor Nominees to be elected to the Board at the next Directors Election Meeting.  The Corporation has received each Investor Nominee’s consent to serve as a director and covenants that if the Corporation amends its articles to give effect to Section 2.1(1) prior to such Directors Election Meeting, it shall appoint each Investor Nominee to the Board as promptly as possible.

	
Section 2.2

	
Nominating Procedure.

	
(1)

	
The Corporation shall provide written notice to the Investor not less than 45 days or more than 55 days prior to the record date for shareholders to receive notice of a Directors Election Meeting.  Such notice will include a reasonably detailed request for information regarding any Investor Nominees that the Investor may be entitled to designated under Article 2 that is required to be included in an information circular of the Corporation in respect of the Directors Election Meeting.  At least 30 days before a Directors Election Meeting, the Investor will deliver to the Corporation in writing the names of the Investor Nominees together with the information regarding such Investor Nominees requested by the Corporation in accordance with the preceding sentence (the “Nomination Letter”).

 

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(2)

	
If the Investor fails to deliver the Nomination Letter to the Corporation at least 30 days before the Directors Election Meeting, the Investor shall be deemed to have nominated the same Investor Nominees that serve as directors of the Corporation at such time (and only such individuals), subject to reduction in accordance with Section 2.1(3).

Section 2.3                      Conditions

Each Investor Nominee shall, at the time of election or appointment to the Board for the first time, meet the qualification requirements to serve as a director under the Yukon BCA, applicable Canadian securities laws, and the rules of any stock exchange on which the Common Shares are then listed, provided that for purposes of this Agreement the fact that a stock exchange of competent jurisdiction has not yet accepted for purposes of the rules of such stock exchange an Investor Nominee shall not be considered to be a failure to meet such qualification requirements unless such stock exchange has rejected an Investor Nominee and such decision or determination is not or is no longer appealable (the “Conditions”).  The Corporation agrees to allow the Investor Nominees to provide input on any documents or correspondence which the Corporation is required to submit to the relevant stock exchange and will cooperate with the Investor Nominees with respect to any communications with such stock exchange, in each case with respect to the Investor Nominees meeting the qualification requirements of such stock exchange.

Section 2.4                      Director Indemnification and Insurance

The Corporation shall indemnify all of its directors and former directors who served as directors at any time following the date hereof and their respective heirs and legal representatives to the fullest extent permitted by the Yukon BCA against all costs, charges, and expenses, including any amount paid to settle an action or satisfy a judgment, reasonably incurred by him or her in respect of any civil, criminal, administrative, investigative, or other proceeding in which the individual is involved because of that association with the Corporation.  The Corporation will use commercially reasonable efforts to maintain directors and officers insurance coverage and the Investor Nominees shall be entitled to the same directors and officers insurance coverage as all other directors of the Corporation, as such coverage may be obtained at the direction of the board of directors of the Corporation.

ARTICLE 3

PRE-EMPTIVE RIGHTS

Section 3.1                      Anti-Dilution Right

	
(1)

	
During the period of time ending on the date 24 months from the date hereof and subject to Section 3.2, the Corporation shall not issue, or offer or agree to issue (an “Offering”), any shares or other equity securities (or any securities exercisable for, or convertible or exchangeable into, shares or equity securities) (the “Offered Securities”), to any Person unless the Corporation first makes an irrevocable offer (the “Pre-Emptive Offer”), by written notice to the Investor, to sell to the Investor such proportion of the Offered Securities (the “Pre-Emptive Securities”) as would allow the Investor and its Affiliates to maintain, following the issuance of the Offered Securities, its Equity and Voting Interest of the Investor that existed immediately prior to such issuance.

	
(2)

	
The Pre-Emptive Offer will specify the issue price (which shall be the cash equivalent of the issue price under the Offering) (the “Issue Price”), if determined at that time, of the Offered Securities, the terms and conditions of the Offered Securities, the number of Offered Securities proposed to be issued to Persons other than the Investor, the number of Offered Securities available to the Investor pursuant to Section 3.1(1), the proposed use of proceeds (if any) and the proposed completion date of the Offering.  In the case of a “bought deal” with a bona fide underwriter, the Pre-Emptive Offer will specify all such information as is available at the time the Corporation becomes aware of such proposed “bought deal” Offering.

 

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(3)

	
The Pre-Emptive Offer will specify the time within which the Pre-Emptive Offer, if not accepted in whole or in part, will be deemed to be declined, which time shall be no earlier than the earlier of: (i) ten Business Days after the date on which such Pre-Emptive Offer is given; and (ii) if the Offering is by way of a “bought deal” with a bona fide underwriter, five days after the date on which such Pre-Emptive Offer is given, provided that if the Issue Price of the Offered Securities has not been determined at the time of the Pre-Emptive Offer, the Pre-Emptive Offer shall specify that the Issue Price will be determined in connection with the applicable private placement or public offering, and the Corporation will provide notice to the Investor of the Issue Price forthwith upon such price being set by the Corporation and/or the lead agent or underwriter, as applicable, in which case the Investor shall have a further two Business Days from the time that such notice is delivered to the Investor to accept, in whole or in part, the Pre-Emptive Offer.  In the case of a “bought deal” in which the Issue Price of the Offered Securities or other information has not been determined at the time of the Pre-Emptive Offer, the Corporation will provide notice to the Investor of the Issue Price and other information forthwith upon such price being set by the Corporation and/or the lead agent or underwriter, as applicable, in which case the Investor shall accept, in whole or in part, the Pre-Emptive Offer by 7:30 a.m. on the day following such notice.  The Investor may only subscribe for Pre-Emptive Securities, if in addition to accepting the Pre-Emptive Offer within the periods set out in this Article 3, such acceptance is in writing, irrevocable and unconditional and shall specify the number of Pre-Emptive Securities that are being subscribed for (a “Subscription Notice”).  The Subscription Notice (which shall represent the acceptance of the Corporation’s Pre-Emptive Offer) shall constitute a binding agreement by the Investor to subscribe for and purchase, and by the Corporation to issue and sell to the Investor, on the terms and conditions in the Pre-Emptive Offer, the number or amount of Pre-emptive Securities as are to be issued to the Investor therein.

	
(4)

	
The Issue Price for any non-cash consideration received by or to be received by the Corporation shall be the fair market value as at the date of the Pre-Emptive Offer determined as follows.  The Board shall promptly and in good faith estimate the fair market value for such non-cash consideration at the date of the Pre-Emptive Offer.  For purposes of this paragraph: (i) the fair market value of publicly traded securities will be determined by reference to the weighted average trading price at which such securities have traded during the period of 20 consecutive trading days ending on the trading day immediately prior to such date on the principal securities exchange on which such securities are then traded (the weighted average price per security being determined by dividing the aggregate sale price of all such securities sold on such exchange during such 20 consecutive trading days by the total number of such securities so sold); and (ii) the fair market value of non-publicly traded securities or other property shall be determined with reference to the cash price which would be obtained at the relevant time upon a sale of all of such securities or property of the issuer in a single transaction determined in an open and unrestricted market between prudent parties, acting at arm’s-length and under no compulsion to act, and having reasonable knowledge of all relevant facts concerning the issuer and such property.  The Board shall promptly notify the Investor of its estimate of the fair market value of the non-cash consideration.  To the extent that the Investor disagrees with the Board’s determination of such fair market value it may object in writing within ten Business Days of delivery of the determination, therein stating its determination.  If the Parties have not agreed upon the fair market value within ten Business Days thereafter, the fair market value shall be finally resolved by arbitration pursuant to the Simplified Arbitration Rules of the ADR Institute of Canada, Inc.  The arbitrator shall be chosen by the Investor and Corporation within ten Business Days of the date on which a Party notifies the other of a dispute with respect to the valuation pursuant to this Section 3.1(4).  In the event that the Parties fail or neglect to appoint an arbitrator, then that appointment shall be made by the ADR Institute of Canada, Inc. within ten days after being requested by any Party to make such appointment.  The arbitrator shall conduct the arbitration and issue an award as soon as possible and in any event within 30 days of his or her appointment.  The award shall be final and binding on the Corporation and the Investor, with no right of appeal, even on a question of law.

	
(5)

	
The Pre-Emptive Securities subscribed for by the Investor shall be issued to the Investor on a private placement basis; provided that the Corporation shall allow the Investor to participate directly in any public offering of Offered Securities.

 

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(6)

	
All of the Pre-Emptive Securities not subscribed for by the Investor within the time limit specified in the Pre-Emptive Offer will be available for issuance, and may be issued, together with the other Offered Securities under the Offering, by the Corporation to any Person (and in the case of an underwritten offering, to the underwriter or underwriters) at not less than the Issue Price set forth in the Pre-Emptive Offer or any supplemental notice contemplated in Section 3.1(3).

	
(7)

	
The completion of the Pre-Emptive Offer is subject to compliance with all applicable laws, including the rules of any stock exchange on which the securities of the Corporation are listed.

Section 3.2                      Limitation

Section 3.1 shall not apply to any issuance of shares issued: (i) for compensatory purposes to officers, employees, directors, and consultants of the Corporation or of shares issued pursuant to the exercise of the Warrants; (ii) pursuant to the terms of convertible or exchangeable securities issued by the Corporation, if the Corporation had made a Pre-Emptive Offer to the Investor and otherwise complied with Section 3.1 in connection with the issuance of such convertible or exchangeable securities; or (iii) pursuant to convertible or exchangeable securities or contractual obligation outstanding or in existence prior to the date hereof and that are set out in Schedule 3.2 hereto.

ARTICLE 4

STANDSTILL AND CHANGE OF CONTROL

Section 4.1                      Standstill

	
(1)

	
Except as otherwise set forth in this Article 4 or Article 5, from the date of this Agreement until the earlier of: (i) the Standstill Termination Date; and (ii) the occurrence of a Fundamental Change (the “Standstill Period”), the Investor shall not, without the prior written consent of the Board ((a) through (e) are collectively referred to herein as the “Standstill Restrictions”):

	
  

	
(a)

	
acquire or agree to acquire or make any proposal to acquire any securities or any material assets of the Corporation, other than: (i) securities acquired pursuant to any stock option or similar plan of the Corporation or stock split, stock dividend, securities distribution, rights offering, recapitalization, or similar corporate action by the Corporation with respect to any securities beneficially owned by the Investor or its Affiliates; (ii) pursuant to any Transaction Agreement or other securities or rights of the Corporation beneficially owned by the Investor or its Affiliates; or (iii) any assets of the Corporation being sold in the ordinary course of its business (an “Acquisition Transaction”);

	
  

	
(b)

	
propose to the Corporation, the shareholders of the Corporation, the Board, or any other Person, or effect or seek to effect, any amalgamation, merger, arrangement, business combination, reorganization, or restructuring or liquidation with respect to the Corporation (each, an “Extraordinary Transaction”);

	
  

	
(c)

	
solicit, or participate in any solicitation of, proxies from the Corporation’s shareholders with respect to the voting of any securities of the Corporation in respect of any Acquisition Transaction or Extraordinary Transaction;

	
  

	
(d)

	
assist, advise, or encourage any other persons to effect any Acquisition Transaction or Extraordinary Transaction; or

	
  

	
(e)

	
make any public announcement with respect to the foregoing, except as may be required by applicable law, regulatory authorities, or stock exchanges.

	
(2)

	
Notwithstanding anything to the contrary herein, this Agreement shall in no way limit, restrict, or prohibit the Investor or any of its Affiliates or Persons with whom the Investor is acting jointly or in concert during the Standstill Period from:

 

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(a)

	
making one or more confidential proposal(s) to or communications with the Board and/or management of the Corporation relating to any Acquisition Transaction, Extraordinary Transaction, or other transaction or matter; or

	
  

	
(b)

	
after the date that is one year following the date on which all of the Warrants have been duly exercised or expired, acquiring securities of the Corporation in compliance with the relevant provisions of s. 100 of the Securities Act (such compliance to be required for purposes of this Agreement notwithstanding that the Investor may not be subject to the Securities Act).

Section 4.2                      Change of Control Transaction

	
(1)

	
Notwithstanding Section 4.1(1), on and after the earliest to occur during the Standstill Period of the following dates:

	
  

	
(a)

	
the date that the Corporation has entered into an agreement that provides for a Change of Control Transaction or an Extraordinary Transaction or has publicly announced its support for or recommendation of a Change of Control Transaction or Extraordinary Transaction;

	
  

	
(b)

	
the date that a Person or Persons acting jointly or in concert (other than the Investor, an Affiliate of the Investor, or a Person acting jointly or in concert with the Investor) has publicly announced its intention to commence or has proposed, commenced, announced, pursued, made, or completed a Change of Control Transaction or Extraordinary Transaction or has requisitioned a meeting of shareholders of the Corporation to consider a Change of Control Transaction or Extraordinary Transaction;

the Investor shall be immediately released from and no longer be subject to the Standstill Restrictions (and the Investor shall not be prohibited from taking any actions prohibited under Section 4.1(1)) (such date, the “Release Date”) for the limited purpose of permitting the Investor or an Affiliate or a joint actor to propose an alternative Change of Control Transaction (an “Investor Acquisition Proposal”) and announce, pursue, make, and complete same, as it may be changed or amended from time to time.

	
(2)

	
If the Investor or any Affiliate or any joint actor has not commenced an Investor Acquisition Proposal within the 75-day period following the Release Date (the “Proposal Period”), the Standstill Restrictions shall be re-imposed on the first Business Day following the expiry of the Proposal Period.

	
(3)

	
If the Investor or any Affiliate or any joint actor has proposed an Investor Acquisition Proposal within the Proposal Period, the Standstill Restrictions will not be re-imposed until the later of such time as the Investor has advised the Corporation in writing or has publicly announced that it has abandoned the Investor Acquisition Proposal, as it may have been changed or amended from time to time.

	
(4)

	
Each change or amendment to a Change of Control Transaction shall be deemed to be a new and separate Change of Control Transaction for the purposes of this Article 4 and shall result in the provisions in this Article 4 relating to the Investor’s release from, and not being subject to, the Standstill Restrictions becoming applicable and initiate the commencement of a new 75-day Proposal Period.

 

9

  

  

  

 

Section 4.3                      Affiliates

The Investor shall cause each of its Affiliates to comply with this Article 4 on the same basis as the Investor.

Section 4.4                      No Frustration

The Corporation shall not adopt a shareholders rights plan or “poison pill” or adopt or impose provisions or arrangements with similar effect or take any other action that would effectively prohibit, frustrate, restrict, limit, adversely affect, or otherwise make it cost-prohibitive for the Investor, any of its Affiliates, or any of its joint actors to acquire securities of the Corporation in compliance with this Article 4, except with the prior written consent of the Investor.

Section 4.5                      Fiduciary Duties

Notwithstanding any provision herein to the contrary, the Parties hereto agree that the Investor is bound hereunder solely in its capacity as a shareholder and its obligations to cause other Persons to do or not do certain matters is limited to such Persons in their capacities as shareholders of the Corporation, and nothing in this Article 4 or this Agreement shall limit or restrict in any way or otherwise bind the Investor Nominees from or in exercising their fiduciary duties or otherwise acting in their capacities as members of the Board.

Section 4.6                      Other Actions

Notwithstanding any provision herein to the contrary, nothing in this Article 4 or this Agreement shall limit, restrict, or prohibit in any way the right of the Investor or any of its Affiliates to vote their securities of the Corporation in their sole discretion on any matter, subject to compliance with Section 2.1 and Section 4.1.  For greater certainty, nothing in this Article 4 shall limit, restrict, or prohibit the Investor or any of its Affiliates from selling or disposing of any of their securities of the Corporation in compliance with Article 5.

ARTICLE 5

TRANSFER OF SECURITIES

Section 5.1                      Restriction on Transfer

	
(1)

	
Subject to Section 5.2, until the date that is two years from the date hereof, the Investor shall not sell or transfer any securities of the Corporation that it beneficially owns (a “Transfer”) except:

	
  

	
(a)

	
to an Affiliate of the Investor, who agrees in writing to be bound by the terms of this Agreement to the same extent as the Investor, and for as long as the Corporation is not subject to the reporting obligations under U.S. securities laws, who is not a U.S. person for the purposes of U.S. securities laws and that is resident outside of the United States;

	
  

	
(b)

	
to a Person or Person acting jointly or in concert who is or are at arm’s length to Investor or any Affiliate of the Investor and who has or have made, or has or have agreed to make, an offer to all other holders of securities of the Corporation of the same class of securities proposed to be sold by the Investor to acquire such securities for the same amount and type of consideration and on the same terms and conditions as the proposed sale or transfer of the Investor’s securities;

	
  

	
(c)

	
under a prospectus offering that is marketed and sold to the public in Canada, provided that no one purchaser under such prospectus, together with its Affiliates and Persons acting jointly or in concert with such purchaser, holds more than 10% of the issued and outstanding Common Shares thereafter (assuming conversion of all Non-Voting Shares);

	
  

	
(d)

	
for trades of such securities through the facilities of a stock exchange, where such trades are not prearranged;

	
  

	
(e)

	
pursuant to a Change of Control Transaction or Extraordinary Transaction or a take-over bid involving the Corporation; or

	
  

	
(f)

	
with the prior written consent of the Corporation.

 

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(2)

	
The Investor will promptly inform the Corporation of any Transfer made pursuant to this Section 5.1.

Section 5.2                      Affiliates

The Investor shall cause each of its Affiliates that own securities of the Corporation to comply with this Article 5 on the same basis as the Investor.

ARTICLE 6

REPRESENTATIONS AND WARRANTIES

Section 6.1                      Representations and Warranties of the Investor

The Investor represents and warrants to the Corporation, and acknowledges that the Corporation is relying on such representations and warranties in completing the transactions contemplated by this Agreement, that:

	
  

	
(a)

	
the Investor is duly organized, validly existing, and in good standing under the laws of its jurisdiction of organization and has all requisite power and authority to execute and deliver this Agreement;

	
  

	
(b)

	
this Agreement has been duly executed and delivered by the Investor;

	
  

	
(c)

	
this Agreement constitutes the valid and binding agreement of the Investor, enforceable against the Investor in accordance with its terms, except as may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law), in each case now or hereafter in effect; and

	
  

	
(d)

	
each initial Investor Nominee satisfies the Conditions.

Section 6.2                      Representations and Warranties of the Corporation

The Corporation represents and warrants to the Investor, and acknowledges that the Investor is relying on such representations and warranties in completing the transactions contemplated by this Agreement, that:

	
  

	
(a)

	
the Corporation is duly incorporated, validly existing, and in good standing under the laws of Yukon and has all requisite corporate power and authority to execute and deliver this Agreement;

	
  

	
(b)

	
this Agreement has been duly executed and delivered by the Corporation;

	
  

	
(c)

	
this Agreement constitutes the valid and binding agreement of the Corporation, enforceable against the Corporation in accordance with its terms, except as may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium, and similar laws relating to or affecting creditors’ rights generally and general equitable principles (whether considered in a proceeding in equity or at law), in each case now or hereafter in effect; and

	
  

	
(d)

	
the nomination for election of the initial Investor Nominees contemplated by Section 2.1 of this Agreement at the next Directors Election Meeting has been duly and validly authorized by all necessary corporate action and expressly approved by the Board.

 

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ARTICLE 7

GENERAL

Section 7.1                      Termination

	
  

	
(a)

	
This Agreement may be terminated at any time by mutual consent of the Parties and shall terminate automatically on the earlier of: (a) the date that is five years following the date of this Agreement; and (b) the date on which the Equity and Voting Interest of the Investor is less than 15%, provided that the Corporation has not breached its obligations under Article 3.  If the Corporation has breached its obligations under Article 3 and the Equity and Voting Interest of the Investor is less than 15%, then this Agreement may be terminated by the Investor by delivering to the Corporation written notice of such termination, provided that prior to such termination the Investor has delivered to the Corporation written notice of such breach and such breach is incapable of being cured or is not cured by the Corporation to the satisfaction of the Investor, acting reasonably, within 14 days (the “Cure Period”) following delivery by the Investor of such notice of such breach, provided further that if such breach is not cured within such 14-day period due solely to the Corporation being incapable of satisfying a requirement of applicable law or a regulatory authority of competent jurisdiction within such 14-day period which is capable of being satisfied within a further 50-day period and the Corporation irrevocably covenants in writing to the Investor that the Corporation shall use its commercially reasonable efforts to cure such breach and satisfy all such requirements before the expiry of such 50-day period, then the Cure Period in respect of such requirement of applicable law or a regulatory authority shall be extended to the expiry of such 50 day period (the “Extension”).  For greater certainty, if such breach that is entitled to an Extension is not cured within 64 days of the Investor’s delivery to the Corporation of notice of such breach, the Investor shall be entitled to terminate this Agreement.

	
  

	
(b)

	
In the event of termination of this Agreement as provided in Section 7.1(a), this Agreement shall forthwith become void and there shall be no liability or obligation on the part of the Corporation or the Investor; provided, however, that each party hereto shall remain liable for any breach of this Agreement prior to its termination; and provided further, that the provisions of Section 2.4, this Section 7.1, and the other provisions of this Article 7 shall remain in full force and effect and survive any termination of this Agreement.

Section 7.2                      Application of this Agreement

The terms of this Agreement shall apply mutatis mutandis to any shares or other securities:

	
  

	
(a)

	
resulting from the conversion, reclassification, redesignation, subdivision, consolidation of other change to any of the shares of the Corporation held by the Investor; or

	
  

	
(b)

	
of the Corporation or any successor body corporate that may be received by the Investor on a merger, amalgamation, arrangement, or other reorganization of or including the Corporation; and

and prior to any action referred to in (a) or (b) above being taken, the Parties shall give due consideration to any changes that may be required to this Agreement in order to give effect to the intent of this Section 7.2.

Section 7.3                      No Partnership

Nothing in this Agreement will be deemed to constitute a partnership, agency, or similar relationship between the Investor and the Corporation or to authorize either Party to bind the other.

Section 7.4                      Public Filing

The Parties hereby consent to the public filing of this Agreement if any Party is required to do so by law or by applicable regulations or policies of any regulatory agency of competent jurisdiction or any stock exchange.

 

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Section 7.5                      Expenses

Each Party to this Agreement shall pay its respective legal, accounting, and other professional advisory fees, costs, and expenses incurred in connection with the negotiation, preparation, or execution of this Agreement and all documents and instruments executed or delivered pursuant to this Agreement.

Section 7.6                      Further Assurances

Each Party shall provide such further documents or instruments required by any other Party as may be reasonably necessary or desirable to effect the purpose of this Agreement and carry out its provisions.

Section 7.7                      Assignment and Enurement

Neither this Agreement nor any rights, benefits, duties, or obligations under this Agreement shall be assignable by any Party other than by the Investor (or an Affiliate thereof) to an Affiliate of the Investor or such Affiliate (in which case no consent to such an assignment shall be required of the Corporation).  Subject to the foregoing, this Agreement shall enure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns.

Section 7.8                      Entire Agreement

This Agreement and, to the extent party thereto, any agreement or document delivered in connection with this Agreement, constitutes the entire agreement between the Parties with respect to the matters herein and supersedes all prior agreements, understandings, negotiations, and discussions relating to the subject matter hereof.  There are no other covenants, agreements, representations, warranties, conditions, whether direct or collateral, express or implied, that form part of or affect this Agreement except as otherwise provided this Agreement.  This Agreement shall not be amended, added to, or qualified except by written agreement signed by the Parties.

Section 7.9                      Waiver

Except as otherwise expressly set out herein, no waiver of any provision of this Agreement shall be binding unless it is in writing.  No indulgence or forbearance by a Party shall constitute a waiver of such Party’s right to insist on performance in full and in a timely manner of all covenants in this Agreement.  Waiver of any provision shall not be deemed to waive the same provision thereafter, or any other provision of this Agreement, at any other time.

Section 7.10                      Notices

All notices, requests, demands, or other communications required or permitted to be given by one Party to another under this Agreement shall be given in writing and delivered by personal delivery or delivery by recognized commercial courier, sent by facsimile or delivered by registered mail or postage prepaid, addressed as follows:

(a)           to the Corporation:

EPM Mining Ventures Inc.

2150 South 1300 East, Suite 350

Salt Lake City, Utah

84106

Attention:  Lance D’Ambrosio, Chief Executive Officer

Facsimile No.: (867) 667-7600

email: lance@emeraldpeakminerals.com

 

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

Cassels Brock and Blackwell LLP

2100 Scotia Plaza

40 King Street West

Toronto, ON M5H 3C2

Attention:  Paul Stein

Facsimile No.: (416) 350-6949

email: pstein@casselsbrock.com

(b)           to the Investor:

Gusiute Holdings (UK) Limited

120 Eagle Rock Avenue

East Hanover, New Jersey U.S.A. 07936

Attention:  De Lyle Bloomquist

Facsimile No.: (973) 599-5501

email: dbloomquist@tatachemicals.com

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

Blake, Cassels & Graydon LLP

199 Bay Street, Suite 4000

Toronto, ON M5L 1A9

Canada

Attention:  Bliss White

Facsimile No.: 416 863-2653

email: bliss.white@blakes.com

or at such other address or fax number of which the addressee may from time to time may notify the addressor.  Any notice delivered by personal delivery or by courier to the Party to whom it is addressed as provided above must be accompanied by the sending of an email to the addresses set out above and shall not considered to have been so delivered for the purposes hereof unless and until such email has been so sent and shall be deemed to have been given and received on the day it is so delivered at such address.  If such day is not a Business Day, or if the notice is received after 4:00 p.m. (addressee’s local time), then the notice shall be deemed to have been given and received on the next Business Day.  Any notice transmitted by facsimile must be accompanied by the sending of an email to the addresses set out above and shall not considered to have been transmitted for the purposes hereof unless and until such email has been so sent and shall be deemed to have been given and received on the day in which transmission is confirmed.  If such day is not a Business Day or if the transmission of the facsimile is received after 4:00 p.m. (addressee’s local time), then the notice shall be deemed to have been given and received on the first Business Day after its transmission.

Section 7.11                      Severability

If, in any jurisdiction, any provision of this Agreement or portion thereof or the application thereof to any Person or circumstance shall to any extent be restricted, invalid, or unenforceable: (a) the remainder of this Agreement or the application of such provision or portion thereof to any other Person or circumstance shall not be affected thereby; and (b) the Parties will negotiate in good faith to amend this Agreement to implement the intentions set forth herein.  Each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

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Section 7.12                      Counterparts; Facsimile and Electronic Signatures

This Agreement may be signed in one or more counterparts, each of which once signed shall be deemed to be an original.  All such counterparts together shall constitute one and the same instrument.  Notwithstanding the date of execution of any counterpart, each counterpart shall be deemed to bear the effective date first written above.  This Agreement, any and all agreements and instruments executed and delivered in accordance herewith, along with any amendments hereto or thereto, to the extent signed and delivered by means of a facsimile machine, scanned email or internet transmission copy or other means of electronic transmission, shall be treated in all manner and respects and for all purposes as an original signature, agreement, or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person.

Section 7.13                      Governing Law and Jurisdiction for Disputes

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and shall be treated, in all respects, as an Ontario contract.  The Parties irrevocably submit to the nonexclusive jurisdiction of the courts of the Province of Ontario.

Section 7.14                      Third-Party Beneficiaries

The terms and provisions of this Agreement are intended solely for the benefit of the Parties and their respective successors and permitted assigns (other than directors or former directors of the Corporation pursuant to Section 2.4), and it is not the intention of the Parties to confer any third-party beneficiary rights and this Agreement does not confer any such rights, upon any Person (other than such directors or former directors).

Section 7.15                      Remedies

Each Party agrees that an award of monetary damages would not be an adequate remedy for any loss incurred by reason of any breach of this Agreement and that, in the event of any breach or threatened breach pursuant to Article 2, Article 3, or Article 4 of this Agreement by a Party, the other Parties will be entitled to equitable relief, including injunctive relief and specific performance.  Such remedies will not be the exclusive remedies for any breach or threatened breach pursuant to Article 2, Article 3, or Article 4 of this Agreement but will be in addition to all other remedies available at law or in equity.

[Remainder of page intentionally blank.  Signature page follows.]

 

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IN WITNESS WHEREOF the Parties have hereunto duly executed this Agreement on the date first above written.

	  	
EPM MINING VENTURES INC.

	  	  
	  	
By: /s/ Lance D’Ambrosio

	  	
Name: Lance D’Ambrosio

	  	
Title: CEO

	  	  
	  	
GUSIUTE HOLDINGS (UK) LIMITED

	  	  
	  	
By: /s/ De Lyle Bloomquist

	  	
Name: De Lyle Bloomquist

	  	
Title: Authorized Signatory

	  	  
	  	  

 

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SCHEDULE 3.2

Cormark Securities Inc. holds an aggregate of 1,428,420 Common Share purchase warrants dated May 26, 2011, each warrant exercisable to purchase one Common Share at a price of $0.67 per share until May 26, 2013.

 

17ex413form20f.htm

Execution Version

EPM MINING VENTURES INC.

and

GUSIUTE HOLDINGS (UK) LIMITED

	  

WARRANT AGREEMENT

	  

September 2, 2011

 

 

 

 

 

  

  

  

TABLE OF CONTENTS

	  	  	
Page

	
ARTICLE 1

	
INTERPRETATION

	
1

	
1.1

	
Definitions

	
1

	
1.2

	
Interpretation Not Affecting by Headings, etc

	
3

	
1.3

	
Day not a Business Day

	
3

	
1.4

	
Applicable Law

	
3

	
1.5

	
Severability

	
3

	
1.6

	
Currency

	
4

	
ARTICLE 2

	
ISSUE OF WARRANTS

	
4

	
2.1

	
Issue and Term of Warrants

	
4

	
2.2

	
Form of Warrant Certificate

	
4

	
2.3

	
Warrantholder not Shareholder

	
4

	
2.4

	
Issue and Substitution for Lost Warrant Certificates

	
4

	
2.5

	
Exchange of Warrant Certificates

	
4

	
2.6

	
Legending

	
4

	
ARTICLE 3

	
EXERCISE OF WARRANTS

	
5

	
3.1

	
Method of Exercise of Warrants

	
5

	
3.2

	
Effect of Exercise of Warrants

	
5

	
3.3

	
Subscription for Less than Entitlement

	
5

	
3.4

	
Legending

	
5

	
3.5

	
Payment of Taxes and Duties

	
6

	
3.6

	
Fractional Shares

	
6

	
ARTICLE 4

	
ADJUSTMENTS OF SUBSCRIPTION RIGHTS

	
6

	
4.1

	
Adjustment of Exercise Proceeds

	
6

	
4.2

	
Share Reorganization

	
6

	
4.3

	
Rights Offering

	
7

	
4.4

	
Special Distribution

	
8

	
4.5

	
Corporate Reorganization

	
8

	
4.6

	
Necessary Corporate Action

	
9

	
4.7

	
Adjustments to Numbers of Common Shares Issuable on Exercise of

	  
	  	
Warrants

	
9

	
4.8

	
Alterations to Adjustment Provisions

	
10

	
4.9

	
Adjustment Rules

	
10

	
4.10

	
Other Actions

	
11

	
4.11

	
Postponement of Issue of Shares, etc

	
11

	
4.12

	
Notice of Certain Events

	
11

	
4.13

	
Amendments to Rights Offerings etc

	
11

	
ARTICLE 5

	
OWNERSHIP

	
11

	
5.1

	
Ownership and Transfer of Warrants

	
11

	
5.2

	
Register

	
12

	
5.3

	
Assignment Rights

	
12

	
ARTICLE 6

	
COVENANTS

	
12

	
6.1

	
General Covenants

	
12

	
ARTICLE 7

	
GENERAL PROVISIONS

	
14

	
7.1

	
Notices, etc

	
14

	
7.2

	
Time of Essence

	
15

	
7.3

	
Amendment

	
15

	
7.4

	
Binding Effect

	
15

	
7.5

	
Determination of Holders

	
15

 

 

  

  

  

 

THIS WARRANT AGREEMENT (this “Agreement”) dated as of September 2, 2011,

AMONG:

EPM MINING VENTURES INC., a corporation existing under the laws of the Yukon Territory

(hereinafter called the “Corporation”)

- and –

GUSIUTE HOLDINGS (UK) LIMITED, a company incorporated in England and Wales with registered number 6445043

(hereinafter called the “Investor”)

RECITALS:

A.           The parties have entered into a subscription agreement dated August 23, 2011 (the “Subscription Agreement”) providing for the purchase by the Investor of one unit consisting of 8,000,000 Common Shares (as defined herein) and 8,000,000 warrants of the Corporation, each such warrant entitling the holder thereof to purchase one Common Share (together with such additional Exercise Proceeds as such holder is entitled to acquire pursuant to Article 4 hereof) at a price of $2.00 per Common Share and on the terms and conditions herein set out.

B.           The Corporation is duly authorized to create and issue the warrants to be issued as herein provided.

NOW THEREFORE THIS AGREEMENT WITNESSETH that for good and valuable consideration mutually given and received, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed and declared as follows:

ARTICLE 1

INTERPRETATION

1.1           Definitions

In this Agreement, unless there is something in the subject matter or context inconsistent therewith:

“Affiliate” of any Person means another Person that would be considered to be affiliate of such first mentioned Person for the purposes of National Instrument 45- 106 — Prospectus and Registration Exemptions; provided that the term “Affiliate” shall include entities that are advised and/or managed by a common entity or by entities that are Affiliates of each other;

“Agreement,” “this Agreement,” “the Agreement,” “hereof,” “herein,” “hereto,” “hereby,” “hereunder,” and similar expressions mean this Agreement, including all of its schedules and all instruments supplementing, amending or confirming this Agreement.  All references to “Articles” or “Sections” refer to the specified Article or Section of this Agreement unless otherwise specified;

“Associate” has the meaning ascribed to that term by the Business Corporations Act (Yukon), as amended or replaced from time to time;

“Business Day” means any day which is not a Saturday, a Sunday or a day on which the principal commercial banks located in the City of Toronto, Ontario are not open for business during normal banking hours;

“Common Shares” means the common shares in the capital of the Corporation as such shares exist at the close of business as of the date of this Agreement and, in the event that there shall occur a change in respect of or affecting the common shares referred to in Article 4 (whether or not such change shall result in an adjustment in the Exercise Price), the term “Common Shares” shall mean the shares, other securities or other property which a Warrantholder is entitled to purchase resulting from such change;

 

 

  

  

  

 

2

 

“Compensation Arrangement” means any issuance or grant, as the case may be, of Common Shares or securities exchangeable for, convertible into or otherwise exercisable to acquire, Common Shares and any agreement, to or with any employee, officer or director of the Corporation or any Affiliate thereof obliging the Corporation to issue any such securities;

“Equity Shares” means the Common Shares and any other securities which fully participate in the earnings of the Corporation and upon the liquidation or winding-up of or other similar distribution of assets by the Corporation;

“Exercise Date” means, with respect to each exercise of Warrants, the date on which the surrender of the Warrants for exercise and the delivery by the Holder to the Corporation of the consideration payable to the Corporation in respect of such exercise have been effected by the Holder in accordance with the provisions of Article 3;

“Exercise Notice” has the meaning given thereto in Section 3.1(a);

“Exercise Price Per Warrant” means $2.00 for each Common Share, subject to adjustment from time to time in accordance with the provisions of Article 4;

“Exercise Proceeds” means the shares or other securities or property that a Warrantholder has the right to acquire on the exercise of Warrants, subject to adjustment from time to time as provided in and otherwise in accordance with the provisions of Article 4;

“Fair Market Value” or “Fair Market Value Per Share” of any Equity Share at any date means:

	
  

	
(i)

	
if the Equity Shares are not listed on any National Securities Exchange, the cash price which would be obtained at the relevant time upon a sale of all of the issued and outstanding securities of the Corporation in a single transaction determined in an open and unrestricted market between prudent parties, acting at arm’s length and under no compulsion to act, and having reasonable knowledge of all relevant facts concerning the Corporation; or

	
  

	
(ii)

	
if the Equity Shares are listed on any National Securities Exchange or, if the Common Shares are not listed on any National Securities Exchange, then on such other stock exchange on which the Common Shares are then listed as may be selected by the Board of Directors of the Corporation or, if the Common Shares are not then listed on a stock exchange, on the over-the-counter market, the weighted average trading price at which the Equity Shares have traded during the period of 20 consecutive trading days ending on the trading day immediately prior to such date on the principal securities exchange on which the Equity Shares are then traded (the weighted average price per share being determined by dividing the aggregate sale price of all such shares sold on such exchange during such 20 consecutive trading days by the total number of such shares so sold);

“Free Trade Date” has the meaning given thereto in Section 2.6;

“Fully-Diluted Shares” means the number of outstanding Common Shares together with the number of Common Shares underlying any securities exchangeable for, convertible into or otherwise exercisable to acquire Common Shares and any Common Shares issuable pursuant to obligations of the Corporation;

“Majority Holders” means the holders of over 60% of the Warrants at the time of any determination to be made hereunder;

“National Securities Exchange” means any of the TSX Venture Exchange and The Toronto Stock Exchange;

“Participating Security” means, in respect of any Person, a security of such Person which fully participates in the earnings of such Person and, upon the liquidation, winding-up or other similar distribution of assets by such Person, in its assets;

“Per Share Cost” has the meaning given thereto in Section 4.3;

 

 

  

  

  

 

3

 

“Person” means an individual, body corporate with or without share capital, partnership, joint venture, entity, unincorporated association, syndicate, firm, sole proprietorship, trust, pension fund, union, board, tribunal, governmental or quasi-governmental authority and the heirs, beneficiaries, executors, legal representatives or administrators of an individual;

“Rights Offering” has the meaning given thereto in Section 4.3;

“Rights Period” has the meaning given thereto in Section 4.3;

“Share Reorganization” has the meaning given thereto in Section 4.2;

“Term” means the period of time commencing on the date of execution and delivery hereof (namely September 2, 2011) and expiring at the Time of Expiry; provided that if the Holder delivers an Exercise Notice to the Corporation prior to the Time of Expiry (together with payment of the Exercise Price Per Warrant when required by the terms hereof), but the acquisition by the Holder of, and the issuance by the Corporation to the Holder of, Common Shares pursuant to such exercise of the Warrants has not been completed by such time, the Term and the Time of Expiry shall be extended to such date as is necessary to permit such issuance and acquisition to be completed;

“Time of Expiry” means 5:00 p.m. (Toronto time) on September 2, 2012;

“Valuator” means a Member of the Canadian Institute of Business Valuators;

“Warrant Certificate(s)” means the certificate(s) evidencing the Warrants issued or to be issued hereunder and outstanding;

“Warrantholders” or “Holders” means the Persons for the time being who are holders of Warrant Certificates; and

“Warrants” means the common share purchase warrants of the Corporation issued pursuant to Section 2.1 hereof;

and unless elsewhere herein otherwise expressly provided or unless the context otherwise requires, words importing the singular include the plural and vice versa.

1.2           Interpretation Not Affecting by Headings, etc.

The descriptive headings preceding Articles and Sections of this Agreement are inserted solely for convenience of reference and are not intended as complete or accurate descriptions of the content of such Articles or Sections.  The division of this Agreement into Articles and Sections shall not affect the interpretation of this Agreement or the Warrant Certificate.

1.3           Day not a Business Day

Whenever any action to be taken pursuant to this Agreement would otherwise be required to be taken or made on a day that is not a Business Day, such action shall be taken on the first Business Day following such day.

1.4           Applicable Law

This Agreement shall be governed by and construed in accordance with the laws of the Province of Ontario and the federal laws of Canada applicable therein and shall be treated, in all respects, as an Ontario contract.  The parties irrevocably submit to the non-exclusive jurisdiction of the courts of the Province of Ontario.

1.5           Severability

If, in any jurisdiction, any provision of this Agreement or portion thereof or the application thereof to any Person or circumstance shall to any extent be restricted, invalid or unenforceable the parties will negotiate in good faith to amend this Agreement to implement the intentions set forth herein and the remainder of the terms, provisions, covenants and restrictions contained in this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated.  Each provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

 

  

  

  

 

4

 

1.6           Currency

All references to dollar amounts herein shall be deemed to be references to Canadian Dollars.

ARTICLE 2

ISSUE OF WARRANTS

2.1           Issue and Term of Warrants

An aggregate of 8,000,000 warrants (the “Warrants”) entitling the registered holder thereof to acquire an aggregate of 8,000,000 Common Shares are hereby created and authorized to be issued hereunder upon the terms and conditions herein set forth.  Each whole Warrant issued hereunder shall entitle the Holder thereof to purchase one Common Share (or such Exercise Proceeds as the Corporation may be required to issue or convey pursuant to the adjustments referred to in Article 4), representing in aggregate approximately 6.49% of the Fully-Diluted Shares at the date hereof, at a price per Common Share equal to the Exercise Price Per Warrant.  The Warrants are exercisable, in whole or in part, at any time or times after the date hereof for such Warrants and during the Term, and such Warrants that have not been exercised at the Time of Expiry shall then expire and terminate.

2.2           Form of Warrant Certificate

Warrant Certificates in definitive form evidencing the Warrants issued pursuant to Section 2.1 shall be executed by the Corporation and delivered to the Investor or to its order on the date hereof Warrant Certificates shall be in the form annexed hereto as Schedule “A” and shall be signed as indicated on Schedule “A.”  If required by applicable law, the Warrant Certificates and certificates representing the Exercise Proceeds shall be legended to comply therewith.

2.3           Warrantholder not Shareholder

Nothing in this Agreement nor the holding of a Warrant evidenced by a Warrant Certificate or otherwise shall be construed as conferring upon a Warrantholder any right or interest whatsoever as a shareholder of the Corporation.

2.4           Issue and Substitution for Lost Warrant Certificates

In case any of the Warrant Certificates shall be mutilated or be lost, destroyed or stolen, the Corporation shall issue a new Warrant Certificate of like tenor as the one mutilated, lost, destroyed or stolen in exchange for and in place of and upon cancellation of the mutilated Warrant Certificate, or in lieu of and in substitution for such lost, destroyed or stolen Warrant Certificate.  In the case of loss, destruction or theft of a Warrant Certificate, the applicant for a new Warrant Certificate shall furnish to the Corporation evidence of ownership and of the loss, destruction or theft of the Warrant Certificate and the applicant may also be required to furnish an indemnity, bond or security in amount and form reasonably satisfactory to the Corporation.

2.5           Exchange of Warrant Certificates

Warrant Certificates may be exchanged for another Warrant Certificate or Warrant Certificates entitling the Holder thereof to purchase in the aggregate the same number of Common Shares as are purchasable under the Warrant Certificate or Warrant Certificates so exchanged.

2.6           Legending

All Warrant Certificates, unless issued on or subsequent to January 3, 2012 (the “Free Trade Date”) shall bear the following legends:

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JANUARY 3, 2012.”

 

 

  

  

  

 

5

 

“THE SECURITIES DELIVERABLE ON EXERCISE HEREOF ARE LISTED ON THE TSX VENTURE EXCHANGE (“TSXV”), HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSXV SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT ‘GOOD DELIVERY’ IN SETTLEMENT OF TRANSACTIONS ON THE TSXV.”

provided that at any time subsequent to the Free Trade Date any certificate representing such Warrants may be exchanged for a certificate or certificates bearing no such legends.  The Corporation hereby covenants and agrees that it will use its reasonable efforts to deliver or cause to be delivered a certificate or certificates representing such Warrants bearing no such legends within five Business Days after receipt of the legended certificates.

ARTICLE 3

EXERCISE OF WARRANTS

3.1           Method of Exercise of Warrants

	
  

	
(a)

	
The Holder of any Warrant may exercise the right (the “Exercise Right”) thereby conferred on such Holder to acquire the Common Shares in accordance with this Agreement, in whole or in part, by surrendering, on any Business Day during the Term, to the Corporation at the address for notice to the Corporation set out in Section 7.1 hereof, or at any other address which from time to time is the principal place of business of the Corporation, the Warrant Certificate, with a duly completed exercise notice in substantially the form set out as part of the Warrant Certificate (the “Exercise Notice”).  Each such Exercise Notice shall be signed by the Holder, and shall specify the number of Warrants the Holder has elected to exercise and the aggregate purchase price for the Common Shares to be purchased.  The Common Shares will be issued in the name of the Holder.

	
  

	
(b)

	
On the date on which the Holder exercises Warrants pursuant to paragraph 3.1(a) hereof the Holder shall pay to the Corporation an amount equal to the Exercise Price Per Warrant multiplied by the number of Warrants being exercised, by delivering to the Corporation cash or a certified cheque, bank draft or money order in Canadian Dollars in such amount.

3.2           Effect of Exercise of Warrants

Upon compliance by the Holder of any Warrant Certificate with the provisions of Section 3.1, the number of Common Shares subscribed for shall be deemed to have been issued and the person to whom such Common Shares are to be issued shall be deemed to have become the holder of record of such Common Shares on the Exercise Date.  Within two Business Days of the Exercise Date, the Corporation shall deliver to the person in whose name the Common Shares so subscribed for are to be issued share certificates (or, in the case of other Exercise Proceeds, other evidences of entitlement) for the appropriate number of Common Shares to which the Warrantholder is entitled.

3.3           Subscription for Less than Entitlement

The Holder of any Warrant Certificate may subscribe for and purchase a number of Common Shares less than the number or amount which the Holder is entitled to purchase pursuant to the surrendered Warrant Certificate.  In the event of any purchase of a number of Common Shares less than the number or amount which the Holder is entitled to purchase, the Holder of the Warrant Certificate upon the exercise thereof shall, in addition, be entitled to receive, without charge therefor, a new Warrant Certificate in respect of the balance of the Common Shares which the Holder was entitled to purchase pursuant to the surrendered Warrant Certificate and which were not then purchased.

3.4           Legending

In the event that the Warrants are exercised by the holder prior to the Free Trade Date, the certificates evidencing the Common Shares issuable upon exercise shall bear the following legends:

“UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JANUARY 3, 2012.”

 

 

  

  

  

 

6

 

“THE SECURITIES DELIVERABLE ON EXERCISE HEREOF ARE LISTED ON THE TSX VENTURE EXCHANGE (“TSXV”), HOWEVER, THE , SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSXV SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT ‘GOOD DELIVERY’ IN SETTLEMENT OF TRANSACTIONS ON THE TSXV.”

provided that at any time subsequent to the Free Trade Date any certificate representing such Common Shares may be exchanged for a certificate or certificates bearing no such legends.  The Corporation hereby covenants and agrees that it will use its reasonable efforts to deliver or cause to be delivered a certificate or certificates representing such Common Shares bearing no such legends within five Business Days after receipt of the legended certificates.

3.5           Payment of Taxes and Duties

The Corporation shall pay all expenses in connection with, and all taxes including all applicable stamp, registration, bank transaction and Other Taxes (as hereinafter defined) (other than income tax and capital gains tax exigible on the income of the Holder) and other governmental charges that may be imposed in respect of, the issue or delivery of Common Shares issuable upon the exercise of a Warrant.  For the purposes hereof, “Other Taxes” means any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies.

3.6           Fractional Shares

The Corporation will not be obligated to issue any fraction of a share on the exercise of Warrants.  If the Holder would, on the exercise of Warrants, otherwise have acquired a total number of Common Shares that includes a fraction of a Common Share, the Corporation will pay to the Holder, by cheque, in lieu of and in satisfaction for any right to such fractional share, an amount equal to the equivalent fraction of such price as is the equivalent of the Fair Market Value Per Share.

ARTICLE 4

ADJUSTMENTS OF SUBSCRIPTION RIGHTS

4.1           Adjustment of Exercise Proceeds

The Exercise Price Per Warrant and number of Common Shares or, after adjustment, the number or amount of other Exercise Proceeds to be acquired by a Warrantholder on exercise of a Warrant, is subject to adjustment from time to time upon the occurrence of the events and in the manner provided for in this Article 4.

4.2           Share Reorganization

Whenever the Corporation:

	
  

	
(a)

	
issues Common Shares or securities exchangeable for or convertible into Common Shares to holders of all or substantially all Common Shares by way of a stock dividend or other distribution;

	
  

	
(b)

	
subdivides the outstanding Common Shares into a greater number of shares; or

	
  

	
(c)

	
combines or consolidates the outstanding Common Shares into a lesser number of shares,

(each of such events being herein called a “Share Reorganization”), then the Exercise Price Per Warrant will be adjusted effective immediately after the record date for such dividend or other distribution or, in the case of a subdivision, combination or consolidation, effective immediately after the record date or the effective date thereof if no record date is fixed, as the case may be, by multiplying the Exercise Price Per Warrant in effect immediately before the record date or effective date by a fraction of which:

	
  

	
(i)

	
the numerator is the number of Common Shares outstanding on that record date or effective date before giving effect to the Share Reorganization; and

 

 

  

  

  

 

7

 

	
  

	
(ii)

	
the denominator is the number of Common Shares that are or would be outstanding immediately after giving effect to the Share Reorganization (including, in the case where securities exchangeable for or convertible into Common Shares are distributed, the number of Common Shares that would have been outstanding had such securities been exchanged for or converted into Common Shares on such record date or effective date).

4.3           Rights Offering

Whenever the Corporation issues rights, options or warrants to holders of all or substantially all Common Shares pursuant to which such holders are entitled, during a period ending not more than 60 days after the record date as at which holders so entitled are determined (the “Rights Period”), to subscribe for, purchase or otherwise acquire Common Shares or securities convertible into or exchangeable for one or more Common Shares or fractions thereof, at a price per share (the “Per Share Cost”) that is less than the Fair Market Value Per Share on that record date (any such issuance not so excepted being herein called a “Rights Offering”), then the Exercise Price Per Warrant will be adjusted, effective immediately after that record date, by multiplying the Exercise Price Per Warrant in effect immediately prior to such record date by the fraction of which:

	
  

	
(a)

	
the numerator is the sum of:

	
  

	
(i)

	
the number of Common Shares outstanding on that record date; and

	
  

	
(ii)

	
a number determined by dividing the product of the Per Share Cost and

	
  

	
(A)

	
where the event giving rise to the application of this Section 4.3 was the issue of rights, options or warrants to the holders of Common Shares under which such holders are entitled to subscribe for or purchase additional Common Shares, the maximum number of Common Shares that may be so subscribed for or purchased under the Rights Offering;

	
  

	
(B)

	
where the event giving rise to the application of this Section 4.3 was the issue of rights, options or warrants to the holders of Common Shares under which such holders are entitled to subscribe for or purchase securities exchangeable for or convertible into Common Shares, the number of Common Shares for which the maximum number of securities that may be so subscribed for or purchased under the Rights Offering could have been exchanged or into which they could have been converted;

	
  

	
by the Fair Market Value Per Share; and

	
  

	
(b)

	
the denominator is the sum of:

	
  

	
(i)

	
the number of Common Shares outstanding on that record date; and

	
  

	
(ii)

	
the total number of additional Common Shares offered for subscription or purchase (or into which the convertible securities so offered are convertible or exchangeable) pursuant to the Rights Offering.

The adjustment will be made successively whenever a record date in respect of a rights offering is fixed, provided that if two or more such record dates or record dates referred to in this Section 4.3 are fixed within a period of 30 days, the adjustment will be made successively as if each of such record dates or dates occurred on the earliest of such record dates or dates.  To the extent that any rights, options or warrants are not so issued or any of the rights, options or warrants so issued are not exercised before the expiration thereof, or any convertible securities are not so converted into or exchanged for Common Shares before the expiration of the right to do so, the Exercise Price Per Warrant will be readjusted to the Exercise Price Per Warrant in effect immediately before the record date, and the Exercise Price Per Warrant will be further adjusted based upon the number of additional Common Shares actually delivered upon the exercise of the rights, options or warrants, or issued upon the conversion or exchange of the convertible securities, as the case may be.

 

 

  

  

  

 

8

 

4.4           Special Distribution

Whenever the Corporation issues by way of a dividend or otherwise distributes to holders of all or substantially all Common Shares:

	
  

	
(a)

	
shares of the Corporation;

	
  

	
(b)

	
evidences of indebtedness;

	
  

	
(c)

	
cash or other assets; or

	
  

	
(d)

	
rights, options or warrants to acquire shares or other securities of the Corporation, cash or other assets,

	
  

	
and such issuance or distribution does not constitute

	
  

	
(e)

	
a Share Reorganization; or

	
  

	
(f)

	
a Rights Offering,

(any of such non-excluded events being herein called a “Special Distribution”), the Exercise Price Per Warrant will be adjusted, in each case effective immediately after the record date at which holders of Common Shares on which the Special Distribution is paid are determined, to a price determined by multiplying the Exercise Price Per Warrant in effect on such record date by a fraction of which

	
  

	
(g)

	
the numerator is:

	
  

	
(i)

	
the product of the number of Common Shares outstanding on such record date, and the Fair Market Value Per Share on such record date; less

	
  

	
(ii)

	
the amount by which the aggregate fair market value (as determined in good faith by the Board of Directors of the Corporation) to the holders of Common Shares of such securities or property or other assets so issued or distributed in the Special Distribution exceeds the fair market value of any consideration received therefor by the Corporation from the holders of Common Shares (as determined in good faith by the Board of Directors of the Corporation); and

	
  

	
(h)

	
the denominator is the product of the number of Common Shares outstanding on such record date multiplied by the Fair Market Value Per Share on such record date.

4.5           Corporate Reorganization

Whenever there is:

	
  

	
(a)

	
a reclassification of any class or series of shares comprising all or any part of the Exercise Proceeds, a change of any such shares into other shares or securities, any other capital reorganization of the Corporation affecting Common Shares, or an additional issuance of securities, to which none of Sections 4.2, 4.3 and 4.4 applies;

	
  

	
(b)

	
a consolidation, merger or amalgamation of the Corporation with or into another body corporate or plan of arrangement to which the Corporation is a party, in each case resulting in a reclassification of Common Shares or a change of Common Shares into other shares or securities; or

	
  

	
(c)

	
a transaction whereby all or substantially all of the Corporation’s undertaking and assets become the property of another corporation,

 

 

 

  

  

  

 

9

 

(any such event being herein called a “Corporate Reorganization”), a Holder who thereafter exercises one or more Warrants will acquire and will accept, for the same aggregate consideration, in lieu of the Exercise Proceeds to which such Holder would otherwise have been entitled, the number or amount and class, series or kind of shares or other securities or property that such Holder would have been entitled to receive as a result of the Corporate Reorganization if, on the effective date thereof, such Holder had been the holder of the number or amount of each class, series or kind of Exercise Proceeds that such Holder would have acquired by the exercise of such Warrant or Warrants immediately before the Corporate Reorganization.

4.6           Necessary Corporate Action

As a condition precedent to taking any action that would constitute a Corporate Reorganization, the Corporation will take all action that, in the opinion of counsel to the Corporation, is necessary in order that:

	
  

	
(a)

	
the Corporation, any successor to the Corporation, or any successor to its assets and undertaking, may validly and legally issue as fully paid and non-assessable all the Exercise Proceeds to which Warrantholders would be entitled on the exercise of Warrants thereafter; and

	
  

	
(b)

	
each Holder of a Warrant that has not been exercised will thereafter be entitled to receive such shares, other securities, property and cash to which such Holder is entitled under Section 4.5, subject to adjustment thereafter in accordance with provisions the same, as nearly as may be possible, as those contained in this Article 4.

4.7           Adjustments to Numbers of Common Shares Issuable on Exercise of Warrants

If and whenever, pursuant hereto, any adjustment in the Exercise Price Per Warrant occurs as a result of the fixing by the Corporation of a record date for:

	
  

	
(a)

	
a Share Reorganization;

	
  

	
(b)

	
a Rights Offering;

	
  

	
(c)

	
a Special Distribution, if such event constitutes the issue or distribution of:

	
  

	
(i)

	
Common Shares; or

	
  

	
(ii)

	
securities exchangeable for or convertible into Common Shares; or

	
  

	
(iii)

	
rights, options or warrants to acquire Common Shares;

then the number of Common Shares purchasable upon the subsequent exercise of Warrants shall be simultaneously adjusted by multiplying the number of Common Shares purchasable upon the exercise of the Warrants immediately prior to such adjustment by a fraction which shall be the reciprocal of the fraction employed in the applicable adjustment of the Exercise Price Per Warrant.

To the extent that any adjustment in subscription rights occurs pursuant to this Section 4.7 as a result of a distribution of exchangeable or convertible securities referred to in Section 4.2 or as a result of the fixing by the Corporation of a record date for the distribution of rights, options or warrants referred to in Section 4.3, the number of Common Shares issuable upon exercise of the Warrants will be readjusted immediately after the expiration of any relevant exchange, conversion or exercise right to the number of Common Shares which would be issuable based upon the number of Common Shares actually issued and remaining issuable immediately after such expiration, and will be further readjusted in such manner upon expiration of any further such right.

 

  

  

  

 

10

 

To the extent that any adjustment in subscription rights occurs pursuant to this Section 4.7 as a result of the fixing by the Corporation of a record date for the distribution of exchangeable or convertible securities or rights, options or warrants referred to in Section 4.4 and based on an expected fair market value of such securities or such rights, options or warrants and expected number of such securities or such rights, options or warrants issued and remaining issuable immediately after expiration, the number of Common Shares issuable upon exercise of the Warrants will be readjusted immediately after the expiration of any relevant exchange, conversion or exercise right based upon the number of Common Shares actually issued and remaining issuable immediately after such expiration, and will be further readjusted in such manner upon expiration of any further such right.

4.8           Alterations to Adjustment Provisions

If necessary as a result of any Corporate Reorganization, such appropriate alterations as the Board of Directors of the Corporation may determine, acting reasonably and in good faith, will be made to the provisions set forth in this Article 4 with respect to the rights and interests of Warrantholders to the end that such provisions will thereafter correspondingly be made applicable as nearly as may reasonably be in relation to any Exercise Proceeds thereafter deliverable on the exercise of a Warrant, and any such adjustment will be made by and set forth in an amendment hereto and will for all purposes be conclusively deemed to be an appropriate adjustment, absent manifest error.

4.9           Adjustment Rules

The following rules and procedures will be applicable to adjustments made pursuant to this Article 4:

	
  

	
(a)

	
the adjustments and readjustments provided for in this Article 4 are cumulative and, subject to Section 4.9(b), will apply (without duplication) to successive issues, subdivisions, combinations, consolidations, distributions and other events that require such an adjustment;

	
  

	
(b)

	
no adjustment in the Exercise Price Per Warrant will be made unless it would result in a change of at least 1% in the then applicable Exercise Price Per Warrant and no adjustment in the Exercise Proceeds will be made unless it will result in a change of the kind of, or of at least 1% in the number of, securities to be delivered as Exercise Proceeds on exercise of a Warrant and any adjustment that, except for the provisions of this paragraph, would have been required to be made, will be carried forward and taken into account in the next adjustment;

	
  

	
(c)

	
no such adjustment will be made in respect of an event described in Subsections 4.2(a), 4.3 or 4.4 if Warrantholders are entitled to participate in the event on the same terms, mutatis mutandis, as if they had exercised their Warrants immediately before the effective date of or record date for the event;

	
  

	
(d)

	
any dispute that arises at any time with respect to any adjustment or determination made pursuant to this Article 4 (including without limiting the generality of the foregoing, a determination under Section 4.10 as to whether any action taken by the Corporation requires that an adjustment be made) shall be finally resolved by arbitration pursuant to the Simplified Arbitration Rules of the ADR Institute of Canada, Inc.  The arbitrator shall be a Valuator as defined in this Agreement, chosen by the Majority Holders and the Corporation within ten Business Days of the date on which a party notifies the other of a dispute with respect to any adjustment, or requirement for an adjustment, pursuant to this Article 4.  In the event that the parties fail or neglect to appoint a Valuator to act as arbitrator, then that appointment shall be made by the ADR Institute of Canada, Inc. within ten days after being requested by any party to make such appointment.  The Valuator shall conduct the arbitration and issue an award as soon as possible and in any event within 30 days of his or her appointment.  The award shall be final and binding on the Corporation and all Holders, with no right of appeal, even on a question of law; and

	
  

	
(e)

	
in the absence of a resolution of the Board of Directors of the Corporation fixing the record date for an event referred to in Sections 4.2, 4.3, 4.4, or 4.5, and except as otherwise required by law, the Corporation will be deemed to have fixed as the record date therefor the date on which the event is effected.

 

 

  

  

  

 

11

 

4.10           Other Actions

If the Corporation shall take any action of the nature of those described in Sections 4.2, 4.3, 4.4, or 4.5 affecting the Common Shares, other than actions described in those Sections, which would affect the rights of the Holder to acquire Exercise Proceeds hereunder, the Exercise Proceeds will be adjusted, subject to the prior written consent of any National Securities Exchange on which the Common Shares are listed, where required, in such manner, and at such time, as the Board of Directors of the Corporation determines, acting reasonably and in good faith, will result in an adjustment to the rights of the Holder to receive Exercise Proceeds and/or an adjustment to the Exercise Price Per Warrant that is consistent in principle with the principles governing the basis on which such adjustment is to be made in the event that the Corporation takes one or more of the actions specifically referred to in Section 4.2, 4.3, 4.4, or 4.5.

4.11           Postponement of Issue of Shares, etc.

In any case in which this Article 4 shall require an adjustment to take effect immediately after the effective date of or record date for an event, and a Warrant is exercised after that date and before the consummation of the event, the Corporation may postpone until such consummation:

	
  

	
(a)

	
issuing to the Holder such of the Exercise Proceeds to which the Holder is entitled pursuant to such exercise as exceeds those to which the Holder would have been entitled if the Warrant had been exercised immediately before that date; and

	
  

	
(b)

	
delivering to the Holder any distributions declared with respect to such additional Exercise Proceeds,

provided, however, that the Corporation shall deliver to the Holder an appropriate instrument evidencing the Holder’s right, upon the occurrence of the event requiring the adjustment, to an adjustment in the Exercise Price Per Warrant or the number of Common Shares issuable on the exercise of the Warrants and to such distributions declared with respect to any additional Exercise Proceeds issuable on the exercise of the Warrant.

4.12           Notice of Certain Events

At least 30 days (or, if such period is not practicable, as soon as is practicable) before the effective date of or record date for an event referred to in Sections 4.2, 4.3, 4.4, or 4.5 that requires or might require an adjustment in the Exercise Price Per Warrant or Exercise Proceeds which the Holder is entitled to acquire on the exercise hereof, the Corporation will give notice to the Warrantholders of the particulars of the event and, to the extent determinable, any adjustment required.

If any adjustment for which a notice pursuant to this Section 4.12 is given is not then determinable, the Corporation will promptly after the adjustment is determinable give notice to the Warrantholders of the adjustment.

4.13           Amendments to Rights Offerings etc.

If the purchase price provided for in any rights, warrants or options issued or to be issued in connection with a Rights Offering or a Special Distribution is decreased, the Exercise Price Per Warrant will forthwith be decreased, and the Exercise Proceeds will forthwith be increased to the Exercise Price Per Warrant that would have been applicable and such Exercise Proceeds as the Warrantholder would have obtained if the adjustment in the Exercise Price Per Warrant and Exercise Proceeds made in connection with the issuance of such rights, warrants or options had been made on the basis of such purchase price as so decreased.

ARTICLE 5

OWNERSHIP

5.1           Ownership and Transfer of Warrants

	
  

	
(a)

	
Transfers of the Warrants are subject to the Relationship Agreement.

 

 

  

  

  

 

12

 

	
  

	
(b)

	
Subject to compliance with the Relationship Agreement, and with Sections 5.2 and 5.3, the Corporation agrees to register any transfer of Warrants and Common Shares (or other Exercise Proceeds) acquired on the exercise of any Warrant on the books of the Corporation, provided that such transfer is made by the Holder of the applicable Warrant Certificate or its attorney duly appointed by an instrument in writing in the form of the Transfer Form attached to the Warrant Certificate.  A Warrantholder shall be entitled to the rights evidenced by such Warrant Certificate free from all equities or rights of set-off or counterclaim between the Corporation and the original or any intermediate Holder thereof and all persons may act accordingly and a receipt by any such Warrantholder of Common Shares (or other Exercise Proceeds) purchasable pursuant thereto shall be a good discharge to the Corporation for the same and the Corporation shall not be bound to enquire into the title of any such Holder except where the Corporation is required to take notice by statute or by order of a court of competent jurisdiction.

5.2           Register

	
  

	
(a)

	
The Corporation agrees to maintain or cause to be maintained a register in which will be entered with respect to each Holder its name, address, facsimile number, contact person and number of Warrants held.

	
  

	
(b)

	
The Corporation and Holders may deem and treat the person in whose name any Warrant shall be registered for all purposes of this Agreement to be the owner thereof and such person shall be entitled to the rights, privileges, and obligations contained in the Warrant Certificate and in this Agreement.

5.3           Assignment Rights

	
  

	
(a)

	
In the event of such transfer of the Warrants in compliance with the Relationship Agreement, the transferee (the “Assignee Holder”) shall, without further act or formality upon such assignment and notice thereof by the Holder to the Corporation and upon the Assignee Holder signing an instrument in writing in the form attached as Schedule “B” hereto in which the Assignee Holder agrees to be bound by the obligations of the Holder hereunder, be a Holder for the purposes hereof and have the same rights and obligations hereunder as if it were an original signatory hereto. Upon request by the Assignee Holder to the Corporation and delivery by the Holder of the Warrant Certificates to be replaced (or affidavit of loss and an appropriate indemnity in respect thereof), the Corporation shall issue to the Assignee Holder replacement Warrant Certificate(s) entitling the Assignee Holder to purchase the number of Common Shares to which it is entitled and as are purchasable under the Warrant Certificate or Warrant Certificates so exchanged, and to the extent the Holder has not transferred all its Warrants, a Warrant Certificate to the Holder for such reduced number of Warrants as the Holder retains.  Any assignment by a Holder pursuant to this Section 5.3 shall be made in compliance by the Holder with all applicable securities laws.  The Corporation may prior to registering any transfer require such declarations, certificates or other evidence as it, acting reasonably, considers necessary in the circumstances to ensure compliance with such laws.

	
  

	
(b)

	
Notwithstanding the foregoing paragraph 5.3(a), and provided that the Corporation is not in default of any of its obligations under this Agreement or the Subscription Agreement, no Holder may transfer any Warrants held by it or its rights under this Agreement to any Person that is, at the time of the proposed transfer, a significant competitor to the Corporation, as determined by the Corporation, acting reasonably.

ARTICLE 6

COVENANTS

6.1           General Covenants

The Corporation covenants with the Investor and all other Holders that so long as any Warrants remain outstanding, the Corporation will:

 

 

  

  

  

 

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(a)

	
maintain its corporate existence and carry on and conduct its business in a proper, efficient and business-like manner and cause to be kept proper books of account in accordance with generally accepted accounting principles;

	
  

	
(b)

	
cause the Warrants and any Warrant Certificates, when issued and countersigned as herein provided, to be legal, valid and binding upon the Corporation with the benefits and subject to the terms of such Warrant Certificates, keep a register of Warrantholders and transfers and not take any action which might reasonably be expected to deprive the Warrantholders of their right to purchase pursuant to the Warrants held by them;

	
  

	
(c)

	
cause the Common Shares or other securities and the certificates representing the Common Shares from time to time subscribed and paid for pursuant to the exercise of the Warrants to be duly issued and delivered as fully paid and non-assessable shares, free and clear of all charges, liens and encumbrances, and in accordance with the Warrant Certificates and the terms hereof;

	
  

	
(d)

	
at all times keep available, and reserve if necessary under applicable law, out of its authorized Common Shares, solely for the purpose of issue upon the exercise of the Warrants, such maximum number of Common Shares or other securities as shall then be issuable upon the exercise of all Warrants;

	
  

	
(e)

	
use its reasonable efforts to maintain its status as a reporting issuer not in default (or equivalent status) under the provincial securities legislation of Alberta, British Columbia and Ontario;

	
  

	
(f)

	
use its reasonable efforts to maintain the listing of Common Shares on a National Securities Exchange and to have the Common Shares issued pursuant to the exercise of the Warrants listed and posted for trading on such National Securities Exchange as expeditiously as possible;

	
  

	
(g)

	
if, in the opinion of counsel to the Corporation, any instrument is required to be filed with, or any permission, order or ruling is required to be obtained from, any applicable securities commission or similar regulatory authority in the provinces and territories of Canada or any other step is required under any federal or provincial law of Canada before the Common Shares may be issued or delivered to the holder or resold by such holder, use its reasonable efforts to file such instrument, obtain such permission, order or ruling or take all such other actions, at its expense, as is required or appropriate in the circumstances;

	
  

	
(h)

	
upon the issue of the Warrants and the Common Shares to be issued upon the exercise of Warrants, pay all requisite fees with the National Securities Exchange and any applicable securities commission or similar regulatory authority in the provinces and territories of Canada;

	
  

	
(i)

	
promptly notify the Warrantholders in writing of any material default under the terms of this Agreement;

	
  

	
(j)

	
if the Corporation is a party to any transaction in which the Corporation is not the continuing corporation, the Corporation will obtain all consents which may be necessary or appropriate under applicable laws to enable the continuing or successor corporation to give effect to the Warrants;

	
  

	
(k)

	
in the event that materials are not publicly filed pursuant to applicable securities laws, make available to the Warrantholder on an annual basis, its year-end audited financial statements and on a quarterly basis, its unaudited financial statements for the quarter and portion of the fiscal year then ended, with a reasonable period of time for the preparation thereof;

	
  

	
(l)

	
generally, perform and carry out all of the acts or things to be done by it as provided in this Agreement; and

	
  

	
(m)

	
do, execute, acknowledge and deliver or cause to be done, executed, acknowledged and delivered, all other acts, deeds and assurances in law as may be reasonably required for the better accomplishing and effecting the intentions and provisions of this Agreement.

 

 

  

  

  

 

14

 

 

ARTICLE 7

GENERAL PROVISIONS

7.1           Notices, etc.

All notices, requests, demands or other communications required or permitted to be given by one party to another under this Agreement shall be given in writing and delivered by personal delivery or delivery by recognized commercial courier, sent by facsimile or delivered by registered mail or postage prepaid, addressed as follows:

(a)           to the Corporation:

EPM Mining Ventures Inc.

2150 South 1300 East, Suite 350

Salt Lake City, Utah

84106

Attention:  Lance D’Ambrosio, Chief Executive Officer

Facsimile No.: (867) 667-7600

email:  lance@emeraldpeakminerals.com

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

Cassels Brock and Blackwell LLP

2100 Scotia Plaza

40 King Street West

Toronto, ON  M5H 3C2

Attention:  Paul Stein

Facsimile No.: (416) 350-6949

email:  pstein@casselsbrock.com

(b)           to the Investor:

Gusiute Holdings (UK) Limited

120 Eagle Rock Avenue

East Hanover, New Jersey

U.S.A. 07936

Attention:  DeLyle Bloomquist

Facsimile No.: (973) 599-5501

email:  dbloomquist@tatachemicals.com

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

Blake, Cassels & Graydon LLP

199 Bay Street, Suite 4000

Toronto, ON  M5L 1A9

Canada

Attention:  Bliss A. White

Facsimile No.: 416-863-2653

email:  bliss.white@blakes.com

 

 

  

  

  

 

15

 

or at such other address or fax number of which the addressee may from time to time may notify the addressor.  Any communication so given to a party or its counsel must be accompanied by the sending of an email to the addresses set out above and shall not considered to have been given for the purposes hereof unless and until such email has been so sent.  Any notice delivered by personal delivery or by courier to the party to whom it is addressed as provided above shall be deemed to have been given and received on the day it is so delivered at such address.  If such day is not a Business Day, or if the notice is received after 4:00 p.m. (addressee’s local time), then the notice shall be deemed to have been given and received on the next Business Day.  Any notice transmitted by facsimile shall be deemed to have been given and received on the day in which transmission is confirmed.  If such day is not a Business Day or if the transmission of the facsimile is received after 4:00 p.m. (addressee’s local time), then the notice shall be deemed to have been given and received on the first Business Day after its transmission.

7.2           Time of Essence

Time shall be of the essence of each provision of this Agreement.  Any extension, waiver or variation of any provision of this Agreement shall not be deemed to affect this provision and there shall be no implied waiver of this provision.

7.3           Amendment

This Agreement may not be amended or modified in any respect except by written instrument signed by the parties hereto.

7.4           Binding Effect

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

7.5           Determination of Holders

Any determination to be made by the Majority Holders hereunder may be made by instrument in writing and shall not require a meeting of the Holders.

IN WITNESS WHEREOF the Parties have hereunto duly executed this Agreement as of the date first above written.

	  	
EPM MINING VENTURES INC.

	  	  
	  	
By: /s/ Lance D’Ambrosio

	  	
Name: Lance D’Ambrosio

	  	
Title: CEO

	  	  
	  	
GUSIUTE HOLDINGS (UK) LIMITED

	  	  
	  	
By: /s/ De Lyle Bloomquist

	  	
Name: De Lyle Bloomquist

	  	
Title: Authorized Signatory

	  	  
	  	  

Signature Page to Warrant Agreement

 

 

  

  

  

 

SCHEDULE “A”

WARRANT CERTIFICATE

 

 

 

UNLESS PERMITTED UNDER SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THE SECURITY BEFORE JANUARY 3, 2012.

THE SECURITIES DELIVERABLE ON EXERCISE HEREOF ARE LISTED ON THE TSX VENTURE EXCHANGE (“TSXV”), HOWEVER, THE SAID SECURITIES CANNOT BE TRADED THROUGH THE FACILITIES OF THE TSXV SINCE THEY ARE NOT FREELY TRANSFERABLE, AND CONSEQUENTLY ANY CERTIFICATE REPRESENTING SUCH SECURITIES IS NOT ‘GOOD DELIVERY’ IN SETTLEMENT OF TRANSACTIONS ON THE TSXV.

WARRANT CERTIFICATE

Warrants to Purchase Common Shares of

EPM MINING VENTURES INC.

This certifies that, for value received, GUSIUTE HOLDINGS (UK) LIMITED has acquired and is the registered holder of 8,000,000 (EIGHT MILLION) warrants (the “Warrants”) of EPM Mining Ventures Inc. (the “Corporation”), as issued to such holder in accordance with the provisions of a warrant agreement dated as of September 2, 2011, between the Corporation and Gusiute Holdings (UK) Limited (as amended from time to time, the “Warrant Agreement”).

Each Warrant entitles the registered holder thereof (the “Holder”) to acquire one Common Share of the Corporation at a price equal to the Exercise Price Per Warrant, in accordance with the provisions of the Warrant Agreement.

This Warrant Certificate represents Warrants of the Corporation issued or issuable under the provisions of the Warrant Agreement, to which Warrant Agreement reference is hereby made for particulars of the rights of the Holder of the Warrants and the Corporation. The terms and conditions upon which the Warrants are exercised, as set out in the Warrant Agreement, shall be and have the same effect as if the provisions of the Warrant Agreement were herein set forth and the Holder of this Warrant by acceptance hereof consents to such provisions.

Terms used and not defined in this Warrant Certificate have the respective meanings ascribed thereto in the Warrant Agreement.

Each Warrant is exercisable during the Term, subject to the provisions of the Warrant Agreement.

The Holder of any Warrant may exercise the right thereby conferred on such Holder to purchase Common Shares by surrendering to the Corporation at the address for notice to the Corporation set forth in the Warrant Agreement, or at any other address which from time to time is the principal place of business of the Corporation, the Warrant Certificate, with a duly completed and executed Notice of Exercise of Warrant in the form attached hereto as Schedule “1,” together with such other items as are required to be delivered to the Corporation as set forth in the Warrant Agreement, at the times contemplated therein.

Upon the exercise of the Warrants, the number of Common Shares subscribed for shall be deemed to have been issued and the person to whom such Common Shares are to be issued shall be deemed to have become the Holder of record of such Common Shares on the Exercise Date applicable to such exercise.

 

1

  

  

  

The Holder shall be entitled to sell, assign or transfer all or any part of the Warrants as permitted in and subject to the provisions of the Warrant Agreement. The Holder acknowledges that any transfer of the Warrants and the Common Shares acquired upon exercise of the Warrants is subject to applicable securities laws and the applicable By-laws and policies of the TSX Venture Exchange.

The Warrants evidenced by this Certificate may only be transferred on the register to be kept at the principal office of the ‘Corporation, in Toronto, by the Holder or its attorney to be appointed by an instrument in writing in form and execution satisfactory to the Corporation in compliance with such reasonable requirements as the Corporation may prescribe.

In certain circumstances, the Corporation is required to purchase the Warrants.

In the event of a conflict between the terms of this Certificate and the Warrant Agreement, the terms of the Warrant Agreement shall prevail.

The Warrants and the Warrant Agreement shall be governed by, performed, construed and enforced in accordance with the laws of Ontario and shall be treated in all respects as Ontario contracts. Time shall be of the essence hereof and of the Warrant Agreement.

IN WITNESS WHEREOF the Corporation has cause this Warrant Certificate to be signed by its duly authorized officer as of the 2nd day of September, 2011.

 

	 	
EPM MINING VENTURES INC.

 

  

By: /s/ Lance D’Ambrosio

Name: Lance D’Ambrosio

Title: Chief Executive Officer

 

2

  

  

  

TRANSFER FORM

FOR VALUE RECEIVED, the undersigned hereby sells, transfers and assigns to __________ Warrants represented by the within Warrant Certificate and appoints __________ attorney to transfer the said Warrants on the books of the within-named corporation with full power of substitution in the premises.

DATED __________, 20_.

In the presence of:

	 	
___________________________

(Signature of Registered Holder)

 

  

Gusiute Holdings (UK) Limited

(Name of Registered Holder)

NOTICE: The signature of this assignment must correspond with the name as written upon the face of the Warrant Certificate in every particular without alteration or enlargement or any change whatsoever.

All endorsements or assignments of these Warrants must be signature guaranteed by a bank or trust company or by a member of a stock exchange in Canada whose signature is known to the Corporation.

 

3

  

  

  

SCHEDULE “1”

NOTICE OF EXERCISE OF WARRANT FORM

(To be executed only upon exercise of Warrants)

Capitalized terms referred to but not defined herein have such meanings herein as are given thereto in the Warrant Agreement referred to in the accompanying Warrant Certificate.

The undersigned registered owner of the accompanying Warrant Certificate hereby elects to exercise __________ of the Warrants represented thereby on and subject to the terms and conditions incorporated by reference in the accompanying Warrant Certificate, and agrees to pay the aggregate purchase price of $__________ in connection with such exercise.

The undersigned hereby directs that the Exercise Proceeds acquired by it as a result of such exercise be registered as follows: __________

Dated:

	 	
___________________________

(Signature of Registered Holder)

  

___________________________

___________________________

Address

4

  

  

  

 

 

 

SCHEDULE “B”

FORM OF ASSUMPTION AGREEMENT

	
TO:

	
The parties to the Warrant Agreement (the “Warrant Agreement”) made as of the 2nd day of September, 2011 between EPM Mining Ventures Inc. and Gusiute Holdings (UK) Limited and any subsequent or replacement parties thereto.

WHEREAS the undersigned (the “Transferee”) proposed to acquire __________ Warrants (the “Subject Warrants”) from __________ (the “Transferor”) pursuant to the provisions of the Warrant Agreement, as amended, and, as a condition precedent to such acquisition, is required to execute and deliver this Assumption Agreement.

NOW THEREFORE this agreement witnesses that, in consideration of the provisions set out below, the acquisition of the Subject Warrants, other good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the Transferee hereby agrees with each of you as follows:

	
1.

	
Any expression capitalized herein for other than grammatical purposes and not defined herein shall have the meaning set out in the Warrant Agreement.

	
2.

	
The Transferee hereby consents to the terms and conditions of the Warrant Agreement and agrees with each of you to assume all of the obligations of the Transferor thereunder and to be subject to all of the restrictions to which the Transferor is subject thereunder, in each case as though the Transferee was the Transferor and had been an original signatory to the Warrant Agreement.

	
3.

	
The Transferee hereby acknowledges receipt of a copy of the Warrant Agreement.

	
4.

	
The Transferee hereby advises that its address, facsimile number and contact person for purposes of Section 7.1 of the Warrant Agreement is as follows:

_____________________________________

_____________________________________

	
5.

	
This agreement shall enure to the benefit of the parties and their respective heirs, executors, administrators, legal personal representatives, successors (including, without limitation, any successor by reason of amalgamation of any party) and permitted assigns.  Neither this agreement nor any rights or obligations hereunder shall be assignable by any party except pursuant to the provisions of the Warrant Agreement.

DATED the _____ day of __________, _____.

	  	  	  
	
(Witness)

	  	
(Transferee)

	  	  	
By:

	  	  	
(Name)

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